Form: 8-K

Current report filing

July 26, 2017

8-K: Current report filing

Published on July 26, 2017

 

 

PRESS RELEASE – FOR IMMEDIATE RELEASE
OMEGA ANNOUNCES SECOND QUARTER 2017 FINANCIAL RESULTS
INCREASED DIVIDEND RATE FOR 20TH CONSECUTIVE QUARTER
 
HUNT VALLEY, MARYLAND – July 26, 2017 – Omega Healthcare Investors, Inc. (NYSE:OHI) (the "Company" or "Omega") today announced its results of operations for the three-month period ended June 30, 2017.  The Company reported for the three-month period ended June 30, 2017 net income of $68.2 million, or $0.33 per common share, Funds From Operations ("FFO") of $150.9 million or $0.73 per common share, and Funds Available For Distribution ("FAD") of $162.0 million.
FFO for the second quarter of 2017 includes $23.5 million of interest refinancing costs, $3.7 million of non-cash stock-based compensation expense, $2.7 million in provisions for uncollectible accounts and $1.9 million of one-time revenue.  Adjusted FFO is $0.87 per common share for the three-month period ended June 30, 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.
GAAP NET INCOME
For the three-month period ended June 30, 2017, the Company reported net income of $68.2 million, or $0.33 per common share, on operating revenues of $235.8 million.  This compares to net income of $113.2 million, or $0.57 per common share, on operating revenues of $228.8 million, for the same period in 2016.
For the six-month period ended June 30, 2017, the Company reported net income of $177.3 million, or $0.86 per common share, on operating revenues of $467.5 million.  This compares to net income of $171.4 million, or $0.86 per common share, on operating revenues of $441.7 million, for the same period in 2016.
The year-to-date increase in net income compared to the prior year was primarily due to revenue associated with new investments completed in 2016 and 2017, a one-time contractual settlement in the first quarter of 2017 and the reduction of impairments on real estate assets and acquisition costs.  This increase in net income was partially offset by an increase in interest refinancing costs of $21.7 million, $12.4 million in increased depreciation and amortization expense, $8.0 million decrease in gains on the sale of assets, an increase of $1.1 million in provisions for uncollectible accounts, $1.0 million in increased stock-based compensation expense and $0.7 million in incremental general and administrative expenses.
2017 RECENT DEVELOPMENTS AND SECOND QUARTER HIGHLIGHTS
In Q3 2017, the Company
·
increased its quarterly common stock dividend rate to $0.64 per share.



In Q2 2017, the Company
·
entered into new and amended senior unsecured credit facilities to replace the Company's prior unsecured revolving credit and term loan credit facilities.
·
completed $134 million in new investments.
·
invested $48 million in capital renovation and construction-in-progress projects.
·
redeemed $400 million of its 5.875% Senior Notes due 2024.
·
prepaid a $200 million senior unsecured term loan.
·
issued $550 million aggregate principal amount of its 4.75% Senior Notes due 2028.
·
issued $150 million aggregate principal amount of its 4.50% Senior Notes due 2025.
·
increased its quarterly common stock dividend rate to $0.63 per share.

In Q1 2017, the Company
·
completed $8 million in new investments.
·
invested $30 million in capital renovation and construction-in-progress projects.
·
increased its quarterly common stock dividend rate to $0.62 per share.

SECOND QUARTER 2017 RESULTS

Operating Revenues and Expenses – Operating revenues for the three-month period ended June 30, 2017 totaled $235.8 million which included $18.0 million of non-cash revenue and $1.9 million of one-time revenue related to two operator's contingent payments that were not earned.
Operating expenses for the three-month period ended June 30, 2017 totaled $94.7 million and consisted of $70.4 million of depreciation and amortization expense, $10.1 million of impairment on real estate properties, $7.8 million of general and administrative expense, $3.7 million of stock-based compensation expense and $2.7 million in provision for uncollectible accounts.  The $10.1 million and $2.7 million charges were primarily the result of the Company's continued effort to exit certain non-strategic facilities and/or operators.
Other Income and Expense – Other income and expense for the three-month period ended June 30, 2017 was a net expense of $72.3 million, primarily consisting of $48.1 million of interest expense, $22.0 million of interest refinancing costs and $2.5 million of amortized deferred financing costs.
Funds From Operations – For the three-month period ended June 30, 2017, FFO was $150.9 million, or $0.73 per common share on 207 million weighted-average common shares outstanding, compared to $172.3 million, or $0.87 per common share on 199 million weighted-average common shares outstanding, for the same period in 2016.
The $150.9 million of FFO for the three-month period ended June 30, 2017 includes the impact of $23.5 million of one-time interest refinancing costs, $3.7 million of non-cash stock-based compensation expense and $2.7 million in provision for uncollectible accounts, offset by $1.9 million of one-time revenue.
The $172.3 million of FFO for the three-month period ended June 30, 2016 includes the impact of a $5.4 million cash receipt related to early termination of mortgages, $3.7 million of non-cash stock-based compensation expense, $3.5 million of acquisition costs and a $1.2 million adjustment (recovery) related to the provision for uncollectible accounts.
Adjusted FFO was $179.0 million, or $0.87 per common share, for the three months ended June 30, 2017, compared to $173.0 million, or $0.87 per common share, for the same period in 2016.  For further information see the "Funds From Operations" schedule.


FINANCING ACTIVITIES
New and Amended Credit Facilities – As previously announced, effective May 25, 2017 Omega entered into (a) a new $1.8 billion senior unsecured revolving and term loan credit facility, consisting of a $1.25 billion senior unsecured multicurrency revolving credit facility (the "Revolving Credit Facility"), a $425 million U.S. Dollar senior unsecured term loan facility (the "U.S. Dollar Term Loan Facility"), and a £100 million British Pound Sterling senior unsecured term loan facility (the "Sterling Term Loan Facility" and, together with the Revolving Credit Facility and the U.S. Dollar Term Loan Facility, collectively, the "REIT Credit Facilities") and (b) an amended and restated $250 million senior unsecured term loan facility (the "2017 Restated Term Loan Facility").
The REIT Credit Facilities replace Omega's previous $2 billion senior unsecured revolving credit and term loan credit facility (the "2014 Credit Facility"), part of which (a $200 million term loan due June 27, 2017) was previously repaid from proceeds of Omega's $700 million senior notes offering in April 2017, prior to that term loan's scheduled maturity of June 27, 2017.
The Revolving Credit Facility matures in four years, on May 25, 2021, with two options by the Company to extend the maturity six additional months for each option.  At June 30, 2017, the Company had $155 million in borrowings outstanding under the Revolving Credit Facility.  The Sterling Term Loan Facility and the U.S. Dollar Term Loan Facility, which were each fully drawn as of June 30, 2017, mature on May 25, 2022.  For the three months ended June 30, 2017, the Company recorded approximately $5.5 million relating to the write-off of deferred financing costs associated with the termination of the 2014 Credit Facility.
$550 Million Senior Notes and $150 Million Senior NotesAs previously announced, on April 4, 2017 the Company issued (i) $550 million aggregate principal amount of its 4.75% Senior Notes due 2028 (the "2028 Notes") and (ii) an additional $150 million aggregate principal amount of its existing 4.50% 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 were used to (i) redeem all of the Company's outstanding $400 million aggregate principal amount of 5.875% Senior Notes due 2024 (the "5.875% Notes") on April 28, 2017, (ii) prepay a $200 million senior unsecured incremental term loan facility on April 5, 2017 that otherwise would have become due on June 27, 2017, and (iii) repay outstanding borrowings under the 2014 Credit Facility.

$400 Million Senior Notes Redemption – On April 28, 2017, the Company redeemed all of its outstanding 5.875% Notes.  As a result of the redemption, during the second quarter of 2017, the Company recorded 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 June 30, 2017, the Company sold 0.4 million shares of its common stock generating $12.4 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:

Equity Shelf (At-the-Market) Program for 2017
 
   
(in thousands, except price per share)
 
                   
     
Q1
     
Q2
   
Year To Date
 
Number of shares 
   
228
     
-
     
228
 
Average price per share 
 
$
31.12
   
$
-
   
$
31.12
 
Gross proceeds 
 
$
7,079
   
$
-
   
$
7,079
 

Dividend Reinvestment and Common Stock Purchase Program for 2017
 
   
(in thousands, except price per share)
 
                   
     
Q1
     
Q2
   
Year To Date
 
Number of shares 
   
239
     
375
     
614
 
Average price per share 
 
$
30.67
   
$
33.02
   
$
32.11
 
Gross proceeds 
 
$
7,335
   
$
12,386
   
$
19,721
 

2017 SECOND QUARTER PORTFOLIO ACTIVITY

$182 Million of New Investments in Q2 2017 – In Q2 2017, the Company completed approximately $134 million of new investments and $48 million in capital renovations and new construction consisting of the following:
$115 Million Acquisition – On May 11, 2017, the Company acquired 18 care homes in the United Kingdom ("UK") (similar to ALFs in the United States) from Gold Care Homes, an unrelated third party, for $114.8 million, including acquisition costs.  The 18 care homes with 992 registered beds were leased back to the seller under a 12-year master lease with an initial annual cash yield of 8.5% with 2.5% annual escalators.
$9 Million Acquisition On June 22, 2017, the Company acquired a skilled nursing facility ("SNF") for $8.6 million.  The 100 bed SNF, located in North Carolina, was added to the existing operator's master lease with an initial annual cash yield of 9.5% with 2.5% annual escalators.
$11 Million Mortgage Loan On June 30, 2017, the Company entered into an $11.0 million first mortgage loan with an existing operator of the Company.  The loan is secured by three SNFs with approximately 271 beds located in Michigan.  The loan is cross-defaulted and cross-collateralized with the Company's existing master lease with the operator.  The loan bears an initial annual interest rate of 9.5% with 2.25% annual escalators.
$48 Million Capital Renovation Projects – In addition to the new investments outlined above, in Q2 2017, the Company invested $47.7 million under its capital renovation and construction-in-progress programs.


ASSET DISPOSITIONS AND IMPAIRMENTS

During the second quarter of 2017, the Company sold eight facilities for approximately $45.5 million in net cash proceeds recognizing a loss of approximately $0.6 million.  Five of the sold facilities were previously classified as investment in direct financing leases and two were classified as assets held for sale.  In addition, during the second quarter, the Company recorded approximately $10.1 million of impairments on six facilities to reduce the net book value of these facilities to their estimated fair value or selling price.
As of June 30, 2017, the Company had seven facilities, totaling $18.9 million, classified as assets held for sale.  The Company expects to sell these facilities over the next few quarters.

DIVIDENDS

On July 13, 2017, the Board of Directors declared a common stock dividend of $0.64 per share, increasing the quarterly common dividend by $0.01 per share over the prior quarter, to be paid August 15, 2017 to common stockholders of record as of the close of business on August 1, 2017.



2017 ADJUSTED FFO GUIDANCE REVISED
The Company has revised its 2017 annual Adjusted FFO available to common stockholders to be between $3.42 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 Second 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.
   
2017 Annual Adjusted FFO
Guidance Range
(per diluted common share)
 
   
Full Year
 
Net Income
 
$
1.82 - $1.84
 
Depreciation
   
1.40
 
Gain on assets sold
   
(0.03
)
Real estate impairment
   
0.09
 
FFO
 
$
3.28 - $3.30
 
Adjustments:
       
Contractual settlement
   
(0.05
)
Provision for uncollectible accounts
   
0.02
 
Transaction costs
   
0.00
 
Interest – refinancing costs
   
0.11
 
One-time revenue
   
(0.01
)
Stock-based compensation expense
   
0.07
 
Adjusted FFO
 
$
3.42 - $3.44
 

Note: All per share numbers rounded to 2 decimals.

The Company's Adjusted FFO guidance for 2017 includes approximately $219 million of actual new investments completed to date and approximately $50 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.


CONFERENCE CALL
The Company will be conducting a conference call on Thursday, July 27, 2017 at 10 a.m. Eastern to review the Company's 2017 second 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 Second 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 June 30, 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)

   
June 30,
   
December 31,
 
   
2017
   
2016
 
   
(Unaudited)
       
ASSETS
           
Real estate properties
           
Real estate investments 
 
$
7,730,199
   
$
7,566,358
 
Less accumulated depreciation 
   
(1,366,376
)
   
(1,240,336
)
Real estate investments – net 
   
6,363,823
     
6,326,022
 
Investments in direct financing leases – net 
   
582,307
     
601,938
 
Mortgage notes receivable – net 
   
662,709
     
639,343
 
     
7,608,839
     
7,567,303
 
Other investments – net 
   
278,985
     
256,846
 
Investment in unconsolidated joint venture 
   
38,968
     
48,776
 
Assets held for sale – net 
   
18,889
     
52,868
 
Total investments 
   
7,945,681
     
7,925,793
 
                 
Cash and cash equivalents 
   
21,031
     
93,687
 
Restricted cash 
   
12,203
     
13,589
 
Accounts receivable – net 
   
288,686
     
240,035
 
Goodwill 
   
644,184
     
643,474
 
Other assets 
   
34,869
     
32,682
 
Total assets 
 
$
8,946,654
   
$
8,949,260
 
                 
LIABILITIES AND EQUITY
               
Revolving line of credit 
 
$
155,000
   
$
190,000
 
Term loans – net 
   
899,292
     
1,094,343
 
Secured borrowings – net 
   
53,737
     
54,365
 
Unsecured borrowings – net 
   
3,321,858
     
3,028,146
 
Accrued expenses and other liabilities 
   
323,543
     
360,514
 
Deferred income taxes 
   
17,714
     
9,906
 
Total liabilities 
   
4,771,144
     
4,737,274
 
                 
Equity:
               
Common stock $.10 par value authorized – 350,000 shares, issued and outstanding – 197,224 shares as of June 30, 2017 and 196,142 as of December 31, 2016
   
19,722
     
19,614
 
Common stock – additional paid-in capital 
   
4,896,076
     
4,861,408
 
Cumulative net earnings 
   
1,908,634
     
1,738,937
 
Cumulative dividends paid 
   
(2,954,230
)
   
(2,707,387
)
Accumulated other comprehensive loss 
   
(41,903
)
   
(53,827
)
Total stockholders' equity 
   
3,828,299
     
3,858,745
 
Noncontrolling interest 
   
347,211
     
353,241
 
Total equity 
   
4,175,510
     
4,211,986
 
Total liabilities and equity 
 
$
8,946,654
   
$
8,949,260
 




OMEGA HEALTHCARE INVESTORS, INC.
CONSOLIDATED STATEMENTS OF INCOME
Unaudited
(in thousands, except per share amounts)

   
Three Months Ended
   
Six Months Ended
   
June 30,
   
June 30,
 
   
2017
   
2016
   
2017
   
2016
 
Revenue
                       
Rental income 
 
$
193,997
   
$
186,454
   
$
386,534
   
$
363,157
 
Income from direct financing leases
   
15,462
     
15,521
     
31,108
     
30,963
 
Mortgage interest income 
   
16,297
     
21,371
     
32,253
     
37,977
 
Other investment income – net
   
7,278
     
4,982
     
14,192
     
8,413
 
Miscellaneous income 
   
2,763
     
496
     
3,454
     
1,193
 
Total operating revenues 
   
235,797
     
228,824
     
467,541
     
441,703
 
                                 
Expenses
                               
Depreciation and amortization 
   
70,350
     
65,505
     
140,343
     
127,938
 
General and administrative 
   
7,807
     
8,167
     
16,587
     
15,844
 
Stock-based compensation 
   
3,734
     
3,665
     
7,478
     
6,443
 
Acquisition costs 
   
19
     
3,504
     
(22
)
   
7,275
 
Impairment loss on real estate properties
   
10,135
     
6,893
     
17,773
     
41,451
 
Provision for uncollectible accounts
   
2,673
     
(1,154
)
   
5,077
     
3,970
 
Total operating expenses 
   
94,718
     
86,580
     
187,236
     
202,921
 
                                 
Income before other income and expense
   
141,079
     
142,244
     
280,305
     
238,782
 
Other income (expense)
                               
Interest income 
   
254
     
4
     
258
     
12
 
Interest expense 
   
(48,085
)
   
(39,651
)
   
(93,126
)
   
(76,873
)
Interest – amortization of deferred financing costs
   
(2,543
)
   
(2,210
)
   
(5,045
)
   
(4,342
)
Interest – refinancing costs 
   
(21,965
)
   
-
     
(21,965
)
   
(298
)
Contractual settlement 
   
-
     
-
     
10,412
     
-
 
Realized gain (loss) on foreign exchange
   
79
     
-
     
140
     
(22
)
Total other expense 
   
(72,260
)
   
(41,857
)
   
(109,326
)
   
(81,523
)
                                 
Income before (loss) gain on assets sold
   
68,819
     
100,387
     
170,979
     
157,259
 
(Loss) gain on assets sold – net 
   
(622
)
   
13,221
     
6,798
     
14,792
 
Income from continuing operations
   
68,197
     
113,608
     
177,777
     
172,051
 
Income tax expense 
   
(591
)
   
(454
)
   
(1,691
)
   
(701
)
Income from unconsolidated joint venture
   
551
     
-
     
1,183
     
-
 
Net income 
   
68,157
     
113,154
     
177,269
     
171,350
 
Net income attributable to noncontrolling interest
   
(2,900
)
   
(5,102
)
   
(7,572
)
   
(7,743
)
Net income available to common stockholders
 
$
65,257
   
$
108,052
   
$
169,697
   
$
163,607
 
                                 
Income per common share available to common stockholders:
                               
Basic:
                               
Net income available to common stockholders
 
$
0.33
   
$
0.57
   
$
0.86
   
$
0.87
 
Diluted:
                               
Net income 
 
$
0.33
   
$
0.57
   
$
0.86
   
$
0.86
 
                                 
Dividends declared per common share
 
$
0.63
   
$
0.58
   
$
1.25
   
$
1.15
 
                                 
Weighted-average shares outstanding, basic
   
197,433
     
188,981
     
197,223
     
188,604
 
Weighted-average shares outstanding, diluted
   
206,672
     
199,157
     
206,423
     
198,754
 
                                 


OMEGA HEALTHCARE INVESTORS, INC.
FUNDS FROM OPERATIONS
Unaudited
(in thousands, except per share amounts)

   
Three Months Ended
   
Six Months Ended
 
   
June 30,
   
June 30,
 
   
2017
   
2016
   
2017
   
2016
 
                         
Net income 
 
$
68,157
   
$
113,154
   
$
177,269
   
$
171,350
 
Add back loss (deduct gain) from real estate dispositions
   
622
     
(13,221
)
   
(6,798
)
   
(14,792
)
Sub – total 
   
68,779
     
99,933
     
170,471
     
156,558
 
Elimination of non-cash items included in net income:
                               
Depreciation and amortization 
   
70,350
     
65,505
     
140,343
     
127,938
 
Depreciation - unconsolidated joint venture
   
1,658
     
     
3,316
     
 
Add back non-cash provision for impairments on real estate properties
   
10,135
     
6,893
     
17,773
     
41,451
 
Funds from operations ("FFO") 
 
$
150,922
   
$
172,331
   
$
331,903
   
$
325,947
 
                                 
Weighted-average common shares outstanding, basic
   
197,433
     
188,981
     
197,223
     
188,604
 
Restricted stock and PRSUs 
   
467
     
1,254
     
407
     
1,215
 
Omega OP Units 
   
8,772
     
8,922
     
8,793
     
8,935
 
Weighted-average common shares outstanding, diluted
   
206,672
     
199,157
     
206,423
     
198,754
 
                                 
Funds from operations available per share
 
$
0.73
   
$
0.87
   
$
1.61
   
$
1.64
 
                                 
Adjustments to calculate adjusted funds from operations:
                               
Funds from operations available to common stockholders
 
$
150,922
   
$
172,331
   
$
331,903
   
$
325,947
 
Deduct one-time revenue 
   
(1,881
)
   
     
(1,881
)
   
(235
)
Deduct prepayment fee income from early termination of mortgages
   
     
(5,390
)
   
     
(5,390
)
Deduct contractual settlement 
   
     
     
(10,412
)
   
 
Add back (deduct) provision for uncollectible accounts
   
2,673
     
(1,154
)
   
5,077
     
3,970
 
Add back (deduct) acquisition costs 
   
19
     
3,504
     
(22
)
   
7,275
 
Add back interest refinancing expense 
   
23,539
     
     
23,539
     
298
 
Add back non-cash stock-based compensation expense
   
3,734
     
3,665
     
7,478
     
6,443
 
Adjusted funds from operations ("AFFO")
 
$
179,006
   
$
172,956
   
$
355,682
   
$
338,308
 
                                 
Adjustments to calculate funds available for distribution:
                               
Non-cash interest expense 
   
2,851
     
2,179
     
5,661
     
4,279
 
Capitalized interest 
   
(1,906
)
   
(1,405
)
   
(3,895
)
   
(3,125
)
Non-cash revenues 
   
(17,956
)
   
(19,766
)
   
(36,085
)
   
(36,975
)
Funds available for distribution ("FAD") 
 
$
161,995
   
$
153,964
   
$
321,363
   
$
302,487
 
                                 

Funds From Operations ("FFO"), Adjusted FFO and Funds Available for Distribution ("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 June 30, 2017:
   
As of June 30, 2017
   
As of June 30, 2017
 
Balance Sheet Data
 
Total # of Properties (2)
   
Total Investment ($000's)
   
% of Investment
   
# of Operating Properties(4)
   
# of Operating Beds
 
Real Estate Investments (1)
   
887
   
$
7,749,399
     
86
%
   
883
     
88,265
 
Direct Financing Leases
   
53
     
582,307
     
7
%
   
52
     
5,187
 
Mortgage Notes Receivable
   
52
     
659,514
     
7
%
   
51
     
5,366
 
Total Investments
   
992
   
$
8,991,220
     
100
%
   
986
     
98,818
 
                                         

Investment Data
 
Total # of Properties (2)
   
Total Investment ($000's)
   
% of Investment
   
# of Operating Properties(4)
   
# of Operating Beds
   
Investment per Bed ($000's)
 
Skilled Nursing Facilities/Transitional Care (1)
   
859
   
$
7,542,468
     
84
%
   
858
     
90,841
   
$
83
 
Senior Housing (1) (3)
   
133
     
1,448,752
     
16
%
   
128
     
7,977
   
$
182
 
     
992
   
$
8,991,220
     
100
%
   
986
     
98,818
   
$
91
 
                                                 
(1) Total Investment includes a $19.2 million lease inducement and excludes $18.9 million (seven properties) classified as assets held for sale.
(2) Total # of Properties excludes seven properties classified as assets held for sale.
(3) Includes ALFs, memory care and independent living facilities.
(4) Total # of Operating Properties excludes facilities which are non-operating, closed and/or not currently providing patient services.
 

Revenue Composition ($000's)
                       
                         
Revenue by Investment Type
 
Three Months Ended
   
Six Months Ended
 
   
June 30, 2017
   
June 30, 2017
 
Rental Property
 
$
193,997
     
82
%
 
$
386,534
     
83
%
Direct Financing Leases
   
15,462
     
7
%
   
31,108
     
7
%
Mortgage Notes
   
16,297
     
7
%
   
32,253
     
7
%
Other Investment Income and Miscellaneous Income - net
   
10,041
     
4
%
   
17,646
     
3
%
   
$
235,797
     
100
%
 
$
467,541
     
100
%

Revenue by Facility Type
 
Three Months Ended
   
Six Months Ended
 
   
June 30, 2017
   
June 30, 2017
 
Skilled Nursing Facilities/Transitional Care
 
$
199,258
     
85
%
 
$
398,722
     
85
%
Senior Housing
   
26,498
     
11
%
   
51,173
     
11
%
Other
   
10,041
     
4
%
   
17,646
     
4
%
   
$
235,797
     
100
%
 
$
467,541
     
100
%
                                 
 

Operator Concentration by Investment ($000's)
 
As of June 30, 2017
 
   
Total # of Properties (1)
   
Total Investment (2)
   
% of Investment
 
Ciena Healthcare
   
71
   
$
930,434
     
10.3
%
New Ark Investment, Inc.
   
54
     
599,691
     
6.7
%
Maplewood Real Estate Holdings, LLC
   
13
     
556,769
     
6.1
%
Signature Holdings II, LLC
   
62
     
551,011
     
6.1
%
Saber Health Group
   
45
     
491,466
     
5.5
%
CommuniCare Health Services, Inc.
   
35
     
393,156
     
4.4
%
Daybreak Venture, LLC
   
48
     
337,565
     
3.8
%
Genesis Healthcare
   
50
     
337,545
     
3.8
%
Health & Hospital Corporation
   
44
     
304,711
     
3.4
%
Diversicare Healthcare Services
   
35
     
277,980
     
3.1
%
Remaining 67 Operators
   
535
     
4,210,892
     
46.8
%
     
992
   
$
8,991,220
     
100.0
%
                         
(1) Total # of Properties excludes seven properties classified as assets held for sale.
(2) Total Investment includes a $19.2 million lease inducement and excludes $18.9 million (seven properties) classified as assets held for sale.
 
 
Geographic Concentration by Investment ($000's)
 
Total # of Properties (1)
   
Total Investment (2)
   
% of Investment
 
Ohio
   
87
   
$
845,682
     
9.4
%
Florida
   
95
     
792,506
     
8.8
%
Texas
   
109
     
787,328
     
8.8
%
Michigan
   
49
     
620,621
     
6.9
%
California
   
54
     
496,420
     
5.5
%
Pennsylvania
   
43
     
469,185
     
5.2
%
Indiana
   
59
     
406,510
     
4.5
%
Tennessee
   
41
     
345,478
     
3.8
%
Virginia
   
17
     
305,770
     
3.4
%
South Carolina
   
23
     
272,966
     
3.0
%
Remaining 32 states (3)
   
362
     
3,256,048
     
36.3
%
     
939
     
8,598,514
     
95.6
%
United Kingdom
   
53
     
392,706
     
4.4
%
     
992
   
$
8,991,220
     
100.0
%
(1) Total # of Properties excludes seven properties classified as assets held for sale.
(2) Total Investment includes a $19.2 million lease inducement and excludes $18.9 million (seven properties) classified as assets held for sale.
(3) # of states and Total Investment includes New York City 2nd Avenue development project.
         


 
Revenue Maturities ($000's)
   
As of June 30, 2017
 
Operating Lease Expirations
& Loan Maturities
   
Year
   
2017 Lease Revenue
   
2017 Interest Revenue
   
2017 Lease and Interest Revenue
   
%
 
 
 
     
2017
   
$
7,377
   
$
415
   
$
7,792
     
0.9
%
         
2018
     
28,357
     
1,649
     
30,006
     
3.5
%
         
2019
     
2,990
     
664
     
3,654
     
0.4
%
         
2020
     
5,596
     
8,171
     
13,767
     
1.6
%
         
2021
     
10,607
     
956
     
11,563
     
1.4
%
         
2022
     
64,466
     
2,943
     
67,409
     
7.9
%
   
Note: Based on annualized 2nd quarter 2017 contractual revenues.
 

The following tables present operator revenue mix, census and coverage data based on information provided by our operators as of March 31, 2017:

Operator Revenue Mix
 
As of March 31, 2017
 
   
Medicaid
   
Medicare / Insurance
   
Private / Other
 
                   
Three-months ended March 31, 2017
   
51.0
%
   
37.3
%
   
11.7
%
Three-months ended December 31, 2016
   
52.6
%
   
35.8
%
   
11.6
%
Three-months ended September 30, 2016
   
53.0
%
   
35.8
%
   
11.2
%
Three-months ended June 30, 2016
   
51.8
%
   
37.5
%
   
10.7
%
Three-months ended March 31, 2016
   
51.8
%
   
38.6
%
   
9.6
%
                         
   

Operator Census and Coverage
       
Coverage Data
 
   
Occupancy (1)
   
Before
Management Fees
   
After
Management Fees
 
                   
Twelve-months ended March 31, 2017
   
82.5
%
   
1.69
x
   
1.33
x
Twelve-months ended December 31, 2016
   
82.2
%
   
1.69
x
   
1.33
x
Twelve-months ended September 30, 2016
   
82.1
%
   
1.68
x
   
1.31
x
Twelve-months ended June 30, 2016
   
82.1
%
   
1.72
x
   
1.34
x
Twelve-months ended March 31, 2016
   
82.2
%
   
1.75
x
   
1.37
x

(1) Based on available (operating) beds.


The following table presents a debt maturity schedule as of June 30, 2017:
Debt Maturities ($000's)
 
Secured Debt
   
Unsecured Debt
       
Year
 
HUD Mortgages (1)
   
Line of Credit and Term Loans (2)(3)
   
Senior Notes/Other
(4)
   
Sub Notes
(5)
   
Total Debt
Maturities
 
2017
 
$
-
   
$
-
   
$
-
   
$
-
   
$
-
 
2018
   
-
     
-
     
-
     
-
     
-
 
2019
   
-
     
-
     
-
     
-
     
-
 
2020
   
-
     
-
     
-
     
-
     
-
 
2021
   
-
     
1,250,000
     
-
     
20,000
     
1,270,000
 
2022
   
-
     
905,250
     
-
     
-
     
905,250
 
Thereafter
   
54,316
     
-
     
3,350,000
     
-
     
3,404,316
 
   
$
54,316
   
$
2,155,250
   
$
3,350,000
   
$
20,000
   
$
5,579,566
 
                                         
(1) Mortgages guaranteed by HUD (excluding net deferred financing costs of $0.6 million).
(2) Reflected at 100% borrowing capacity.
(3) $1.25 billion excludes a $700 million accordion feature and $6.2 million net deferred financing costs. The $905 million is comprised of a: $425 million U.S. Dollar term loan, £100 million term loan (equivalent to $130.3 million in US dollars), $100 million term loan to Omega's operating partnership and $250 million 2015 term loan (excludes $6.0 million net deferred financing costs) assuming the exercise of existing extension rights.
(4) Excludes net discounts, deferred financing costs and a $1.5 million promissory note.
(5) Excludes $0.4 million of fair market valuation adjustments.
 

The following table presents investment activity for the three– and six– month period ended June 30, 2017:

Investment Activity ($000's)
 
Three Months Ended
   
Six Months Ended
 
   
June 30, 2017
   
June 30, 2017
 
Funding by Investment Type
 
$ Amount
   
%
   
$ Amount
   
%
 
Real Property
 
$
123,403
     
67.8
%
 
$
130,977
     
59.6
%
 Construction-in-Progress
   
28,423
     
15.6
%
   
42,096
     
19.2
%
Capital Expenditures
   
16,784
     
9.2
%
   
30,649
     
14.0
%
Investment in Direct Financing Leases
   
2,538
     
1.4
%
   
4,767
     
2.2
%
Mortgages
   
11,000
     
6.0
%
   
11,000
     
5.0
%
Total
 
$
182,148
     
100.0
%
 
$
219,489
     
100.0
%