Omega Healthcare Investors, Inc. (NYSE:OHI) (the "Company" or "Omega") today announced its results of operations for the quarter ended September 30, 2010. The Company also reported Funds From Operations ("FFO") available to common stockholders for the three months ended September 30, 2010 of $42.5 million or $0.44 per common share. The $42.5 million of FFO available to common stockholders for the third quarter of 2010 includes $0.5 million of non-cash restricted stock expense, a $0.5 million net loss associated with owned and operated assets and $78 thousand of costs associated with 2010 acquisitions. 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 $0.45 per common share for the three months ended September 30, 2010. FFO and Adjusted FFO are non-GAAP financial measures. Adjusted FFO is calculated as FFO available to common stockholders less certain non-cash items and certain items of revenue or expense, including, but not limited to: results of operations of owned and operated facilities during the period, expenses associated with acquisitions 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, 2010, the Company reported net income of $17.0 million and net income available to common stockholders of $14.7 million, or $0.15 per diluted common share on operating revenues of $69.7 million. This compares to net income of $21.1 million and net income available to common stockholders of $18.9 million, or $0.22 per diluted common share on operating revenues of $49.8 million, for the same period in 2009.
For the nine-month period ended September 30, 2010, the Company reported net income of $53.5 million, net income available to common stockholders of $46.7 million, or $0.50 per diluted common share on operating revenues of $187.2 million. This compares to 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, for the same period in 2009.
The year-to-date decreases in both net income and net income available to common stockholders were primarily due to: (i) increased depreciation expense associated with approximately $900 million of new investments (including capital improvements) made throughout 2009 and 2010; (ii) increased interest expense associated with debt issued and assumed in connection with the CapitalSource Inc. ("CapitalSource") asset acquisitions; (iii) acquisition deal related expenses; (iv) the incremental impact of proceeds received from a 2009 legal settlement versus a second quarter 2010 legal settlement; (v) increase in general and administrative expenses resulting from the new investments; and (vi) a charge relating to the write-off of deferred financing credit facility costs associated with the termination of the Company's 2009 credit facility in the second quarter of 2010. This impact was partially offset by: (i) revenue associated with the new investments completed since September 2009; (ii) a $1.7 million reduction in the net loss associated with owned and operated assets; and (iii) $0.8 million of gain from two mortgage backed securities that were sold in the second quarter of 2010.
RECENT DEVELOPMENTS
- In October 2010, the Company announced an exchange offer for its $200 million, 7½% Senior Notes due 2020 issued in February 2010.
- In October 2010, the Company increased its quarterly common dividend per share from $0.36 to $0.37.
- In October 2010, the Company terminated and repaid its $100 million Credit Agreement with General Electric Capital Corporation.
- In October 2010, the Company issued $225 million aggregate principal amount of its 6¾% senior unsecured notes due 2022.
THIRD QUARTER 2010 RESULTS
Operating Revenues and Expenses - Operating revenues for the three months ended September 30, 2010, excluding nursing home revenues of owned and operated assets and therefore on a non-GAAP basis, were $69.7 million. Operating expenses for the three months ended September 30, 2010, excluding nursing home expenses for owned and operated assets, totaled $32.2 million, comprised of $27.7 million of depreciation and amortization expense, $3.9 million of general and administrative expenses, $0.5 million of restricted stock expense and $78 thousand of expense associated with the CapitalSource asset acquisitions. 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, 2010 was a net expense of $20.0 million and was primarily comprised of $19.1 million of interest expense and $1.0 million of amortized deferred financing costs.
Funds From Operations - For the three months ended September 30, 2010, reportable FFO available to common stockholders was $42.5 million, or $0.44 per common share on 96 million weighted-average common shares outstanding, compared to $30.0 million, or $0.36 per common share on 84 million weighted-average common shares outstanding, for the same period in 2009.
The $42.5 million of FFO for the third quarter of 2010 includes the impact of $78 thousand of costs associated with the CapitalSource asset acquisitions, $0.5 million of non-cash restricted stock expense, and a $0.5 million net loss associated with owned and operated assets.
The $30.0 million of FFO for the three months ended September 30, 2009 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.
Adjusted FFO was $43.5 million, or $0.45 per common share, for the three months ended September 30, 2010, compared to $30.7 million, or $0.37 per common share, for the same period in 2009. The Company had 12.1 million additional weighted-average shares for the three months ended September 30, 2010 compared to the same period in 2009. The increase in weighted-average common shares was primarily a result of: (i) approximately 8.2 million common shares issued under the Company's 2009 and 2010 Equity Shelf Programs; (ii) approximately 3.7 million shares of common stock issued to CapitalSource as part of the December 2009 and June 29, 2010 asset acquisitions; and (iii) approximately 2.8 million common shares issued under the Company's Dividend Reinvestment and Common Stock Purchase Plan. For further information, see "Funds From Operations" below.
FINANCING ACTIVITIES
$200 Million Senior Notes - On October 20, 2010, the Company announced that it commenced an offer to exchange $200 million of its 7½% Senior Notes due 2020 which have been registered under the Securities Act of 1933 in exchange for $200 million of its outstanding 7½% Senior Notes due 2020, which were issued in February of 2010 in a private placement. The exchange offer is being conducted upon the terms and subject to the conditions set forth in the Company's prospectus dated October 20, 2010, and the related letter of transmittal.
$100 Million Term Loan - On October 6, 2010, the Company terminated its Credit Agreement with General Electric Capital Corporation. The Credit Agreement previously provided the Company with a five year $100 million term loan. In connection with the termination, the Company repaid the outstanding principal amount of the loan plus a prepayment premium of $3 million. As a result, for the three month period ending December 31, 2010, the Company will record a non-cash charge of approximately $2.2 million relating to the write-off of deferred financing costs associated with the termination of the Credit Agreement.
$225 Million Senior Notes - On October 4, 2010, the Company sold $225 million aggregate principal amount of its 6¾% Senior Notes due 2022. These notes were sold at an issue price of 98.984% of the principal amount of the notes resulting in gross proceeds to the Company of approximately $223 million.
Sale of 3.0 Million Shares of Common Stock under the $140 Million 2010 Equity Shelf Program - During the three months ended September 30, 2010, the Company sold 3.0 million shares of its common stock available under its $140 million 2010 Equity Shelf Program resulting in net proceeds of approximately $64 million.
Sale of 0.7 Million Shares of Common Stock under the Dividend Reinvestment and Common Stock Purchase Plan - During the three months ended September 30, 2010, the Company sold 0.7 million shares of its common stock available under its Dividend Reinvestment and Common Stock Purchase Plan resulting in net proceeds of approximately $16 million.
PORTFOLIO DEVELOPMENTS
Construction-to-Permanent Mortgage Loans - In August 2010, the Company agreed to extend four construction-to-permanent mortgage loans to affiliates of Ciena Health Care Management Inc. for the purpose of constructing four new skilled nursing facilities in Michigan. Each of the loans will have a ten year maturity from the completion of construction of the applicable facility and will bear interest at an annual rate of 12.5%. As of September 30, 2010, the Company disbursed approximately $2.4 million for the construction of one 120 bed facility in Michigan.
DIVIDENDS
Common Dividends - On October 14, 2010, the Company's Board of Directors announced a common stock dividend of $0.37 per share, increasing the quarterly common dividend by $0.01 per share over the prior quarter. The common dividends are to be paid November 15, 2010 to common stockholders of record on October 29, 2010. At the date of this release, the Company has approximately 98 million common shares outstanding.
Series D Preferred Dividends - On October 14, 2010, the Company's Board of Directors also declared the regular quarterly dividends for Series D preferred stock, payable November 15, 2010 to preferred stockholders of record on October 29, 2010. Series D preferred stockholders of record will be paid dividends in the amount of $0.52344 per preferred share. The liquidation preference for the Company's Series D preferred stock is $25.00 per share. Regular quarterly preferred dividends represent dividends for the period August 1, 2010 through October 31, 2010.
2010 ADJUSTED FFO GUIDANCE
The Company modified its quarterly 2010 Adjusted FFO available to common stockholders guidance to be between $0.43 and $0.44 per diluted share.
The Company's Adjusted FFO guidance for 2010 excludes the impact of all other 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.
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