Omega Healthcare Investors, Inc. (NYSE:OHI) today announced its results of operations for the quarter ended September 30, 2009. The Company also reported Funds From Operations (“FFO”) available to common stockholders for the three months ended September 30, 2009 of $30.0 million or $0.36 per common share.
The $30.0 million of FFO available to common stockholders for the third quarter of 2009 includes a net loss of $0.1 million associated with owned and operated assets, $0.5 million of non-cash restricted stock expense and a $0.1 million non-cash provision for impairment on a real estate asset. 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 $0.37 per common share for the three months ended September 30, 2009. FFO and Adjusted FFO are non-GAAP financial measures. Adjusted FFO excludes the impact of certain non-cash items and certain items of revenue or expenses, including: results of operations of owned and operated facilities during the period, a non-cash provision for impairment and restricted stock expense. For more information regarding FFO and Adjusted FFO, see the “Funds From Operations” section below.
GAAP NET INCOME
For the three-month period ended September 30, 2009, the Company reported net income of $21.1 million, net income available to common stockholders of $18.9 million, or $0.22 per diluted common share on operating revenues of $49.8 million. This compares to net income of $28.1 million, net income available to common stockholders of $25.6 million, or $0.33 per diluted common share on operating revenues of $60.0 million for the same period in 2008.
For the nine-month period ended September 30, 2009, the Company reported net income of $65.9 million, net income available to common stockholders of $59.1 million, or $0.71 per diluted common share on operating revenues of $148.1 million. This compares to net income of $62.4 million, net income available to common stockholders of $55.0 million, or $0.76 per diluted common share on operating revenues of $144.6 million for the same period in 2008.
The year-to-date increases in net income and net income available to common stockholders were primarily due to the impact of: i) $4.0 million of net cash flow associated with legal settlements; ii) revenue associated with $60 million of new investments completed since September 2008; iii) a $2.1 million reduction in interest expense; and iv) a $4.3 million expense for uncollectible accounts receivable recorded in 2008 and a net change of $1.5 million provision for impairment charge. This impact was partially offset by: i) increased depreciation expense associated with the new investments and ii) a $0.5 million charge relating to the write-off of deferred financing credit facility costs recorded in the second quarter of 2009.
THIRD QUARTER 2009 RESULTS
Operating Revenues and Expenses – Operating revenues for the three months ended September 30, 2009, excluding nursing home revenues of owned and operated assets and therefore on a non-GAAP basis, were $45.0 million. Operating expenses for the three months ended September 30, 2009, on a non-GAAP basis excluding nursing home expenses for owned and operated assets, totaled $13.9 million, comprised of $11.1 million of depreciation and amortization expense, $2.2 million of general and administrative expenses, $0.5 million of restricted stock expense and a real estate impairment of $0.1 million. A reconciliation of these amounts to revenues and expenses reported in accordance with GAAP is provided at the end of this release.
Other Income and Expense – Other income and expense for the three months ended September 30, 2009 was a net expense of $9.9 million and was primarily comprised of $9.2 million of interest expense and $0.7 million of amortized deferred financing costs.
Funds From Operations – For the three months ended September 30, 2009, reportable FFO available to common stockholders was $30.0 million, or $0.36 per common share on 83.9 million weighted-average common shares outstanding, compared to $23.9 million, or $0.31 per common share on 76.7 million weighted-average common shares outstanding, for the same period in 2008.
The $30.0 million of FFO for the quarter includes the impact of $0.5 million of non-cash restricted stock expense, a $0.1 million net loss associated with owned and operated assets and a real estate impairment of $0.1 million. The $23.9 million of FFO for the three months ended September 30, 2008, 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 real estate impairment; and (iv) $0.1 million reduction in the Company’s provision for income taxes.
When excluding the above mentioned items in 2009 and 2008, Adjusted FFO was $30.7 million, or $0.37 per common share, for the three months ended September 30, 2009, compared to $26.0 million, or $0.34 per common share, for the same period in 2008. The Company had 7.2 million additional weighted-average shares for the three months ended September 30, 2009, compared to the same period in 2008. The increase in weighted-average common shares was primarily a result of: i) a 6.0 million share common stock offering on September 19, 2008; ii) approximately 1.3 million common shares issued under the Company’s Dividend Reinvestment and Common Stock Purchase Plan; and iii) approximately 1.4 million common shares issued under the Company’s Equity Shelf Program. For further information, see the attached “Funds From Operations” schedule and notes.
FINANCING ACTIVITIES
New $200 Million Revolving Credit Facility – On June 30, 2009, the Company entered into a new $200 million revolving senior secured credit facility (the “New Credit Facility”). Banc of America Securities LLC and Deutsche Bank Trust Company Americas were joint lead arrangers for the New Credit Facility. Bank of America, N.A. was the administrative agent and UBS Securities LLC and General Electric Capital Corporation participated in the New Credit Facility in various agent capacities. The New Credit Facility will be used for acquisitions and general corporate purposes.
The New Credit Facility replaces the Company’s previous senior secured credit facility (the “Prior Credit Facility”). The New Credit Facility matures in three years, on June 30, 2012, and includes an “accordion feature” that permits the Company to expand its borrowing capacity to $300 million in certain circumstances during the first two years thereof, and is currently priced at LIBOR plus 400 basis points with a 200 basis point LIBOR floor.
For the nine-month period ended September 30, 2009, the Company recorded a non-recurring, non-cash charge of approximately $0.5 million relating to the write-off of deferred financing costs associated with the replacement of the Prior Credit Facility. At September 30, 2009, the Company had $9.0 million of borrowings outstanding under the New Credit Facility.
Equity Shelf Program – On June 12, 2009, the Company entered into separate Equity Distribution Agreements with each of UBS Securities LLC, Deutsche Bank Securities Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated, each as sales agents and/or principal (the "Managers"). Under the terms of these agreements, the Company may sell shares of its common stock, from time to time, through or to the Managers having an aggregate gross sales price of up to $100,000,000 (the “Equity Shelf Program”). Sales of the shares, if any, will be made by means of ordinary brokers’ transactions on the New York Stock Exchange at market prices, or as otherwise agreed with the applicable Manager. The Company will pay each Manager, compensation for sales of the shares equal to 2% of the gross sales price per share of shares sold through such Manager, as sales agent, under the applicable agreement.
During the third quarter of 2009, the Company issued 1.4 million shares of its common stock under the Equity Shelf Program at an average price of $17.17 per share, resulting in net proceeds of approximately $23.8 million.
DIVIDENDS
Common Dividends – On October 20, 2009, the Company’s Board of Directors announced a common stock dividend of $0.30 per share to be paid November 16, 2009 to common stockholders of record on November 2, 2009. At the date of this release, the Company had approximately 85.1 million outstanding common shares.
Series D Preferred Dividends – On October 20, 2009, 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 November 2, 2009. The stockholders of record of the Series D Preferred Stock on November 2, 2009 will be paid dividends in the amount of $0.52344 per preferred share on November 16, 2009. 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, 2009 through October 30, 2009.
2009 ADJUSTED FFO GUIDANCE AFFIRMATION
The Company affirmed its 2009 Adjusted FFO available to common stockholders guidance of between $1.47 and $1.50 per diluted share, as previously announced on February 6, 2009.
The Company's Adjusted FFO guidance for 2009 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 below may cause actual results to vary materially from our current expectations. There can be no assurance that the Company will achieve its projected results.
CONFERENCE CALL
The Company will be conducting a conference call on Thursday, October 29, 2009, at 10 a.m. EDT to review the Company’s 2009 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” 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.
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