Continues Strategic Asset
Repositioning
Omega Healthcare Investors, Inc. (NYSE:OHI) (the “Company” or
“Omega”) today announced its results of operations for the
three-month period ended December 31, 2017. The Company reported
for the three-month period ended December 31, 2017 net income of
$65.2 million or $0.31 per common share. The Company also reported
Funds From Operations (“FFO”) for the quarter of $159.2 million or
$0.77 per common share, Adjusted Funds From Operations (“AFFO” or
“Adjusted FFO”) of $163.7 million or $0.79 per common share, and
Funds Available For Distribution (“FAD”) of $149.0 million.
FFO for the fourth quarter of 2017 includes $3.9 million of
non-cash stock-based compensation expense, $0.9 million in
provisions for uncollectible accounts, $0.5 million of one-time
revenue and $0.2 million in impairments on direct financing leases
(Adjusted FFO excludes those four items). FFO, AFFO and FAD are
non-GAAP financial measures. For more information regarding these
non-GAAP measures, see the “Funds From Operations” schedule.
GAAP NET INCOME
For the three-month period ended December 31, 2017, the Company
reported net income of $65.2 million, or $0.31 per common share, on
operating revenues of $221.2 million. This compares to net income
of $129.9 million, or $0.63 per common share, on operating revenues
of $234.5 million, for the same period in 2016.
For the twelve-month period ended December 31, 2017, the Company
reported net income of $104.9 million, or $0.51 per common share,
on operating revenues of $908.4 million. This compares to net
income of $383.4 million, or $1.90 per common share, on operating
revenues of $900.8 million, for the same period in 2016.
The decrease in annual net income compared to the prior year was
primarily due to $198.2 million in impairments on direct financing
leases related to the Orianna Health Systems (“Orianna” and f/k/a
ARK) portfolio, $40.6 million of reduced revenue resulting from
placing Orianna and Daybreak on a cash basis in 2017, and
incremental increases of $40.3 million in impairments on real
estate assets, $24.7 million in interest expense, $20.5 million in
depreciation and amortization expense, $19.9 million in interest
refinancing costs, $4.7 million in provisions for uncollectible
accounts and $1.8 million in general and administrative expenses.
This decrease in net income was partially offset by $48.2 million
of increased revenue associated with new investments completed in
2016 and 2017, $3.7 million in increased gains on the sale of
assets, a contractual settlement of $10.4 million recorded in the
first quarter of 2017 and a decrease of $9.6 million in acquisition
costs.
CEO COMMENTS
Taylor Pickett, Omega’s Chief Executive Officer stated,
“Healthcare delivery continues to rapidly evolve. In anticipation
of the changing environment, we made significant progress in our
strategic asset repositioning efforts during the fourth quarter. We
disposed of 35 non-strategic assets at favorable cap rates, and we
are evaluating over $300 million of assets to potentially sell or
transition in addition to the identified 22 facilities that are
currently held for sale.” Mr. Pickett continued, “In addition, we
continued to make progress with Orianna and Signature to
cooperatively transition and restructure these portfolios.”
2018 RECENT DEVELOPMENTS AND 2017
HIGHLIGHTS
In Q1 2018, the Company…
- increased its quarterly common stock
dividend rate to $0.66 per share.
- sold 3 facilities and had 3 mortgage
loans paid off totaling $35 million in net cash proceeds.
In Q4 2017, the Company…
- sold 34 facilities and had a mortgage
loan repaid totaling $189 million in net cash proceeds.
- completed $40 million in new
investments.
- invested $31 million in capital
renovation and construction-in-progress projects.
- increased its quarterly common stock
dividend rate to $0.65 per share.
In Q3 2017, the Company…
- completed $203 million in new
investments.
- sold 4 facilities totaling $12 million
in net cash proceeds.
- transitioned Orianna’s Texas portfolio
to an existing operator.
- invested $36 million in capital
renovation and construction-in-progress projects.
- 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.
- sold 8 facilities totaling $45 million
in net cash proceeds.
- 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.
- sold 15 facilities totaling $46 million
in net cash proceeds.
- invested $30 million in capital
renovation and construction-in-progress projects.
- increased its quarterly common stock
dividend rate to $0.62 per share.
FOURTH QUARTER 2017
RESULTS
Operating Revenues and Expenses – Operating revenues for
the three-month period ended December 31, 2017 totaled $221.2
million, which included $14.7 million of non-cash revenue.
Operating expenses for the three-month period ended December 31,
2017 totaled $152.0 million and consisted of $75.3 million of
depreciation and amortization expense, $63.5 million of impairment
on real estate properties, $8.2 million of general and
administrative expense, $3.9 million of stock-based compensation
expense, $0.9 million in provision for uncollectible accounts and
$0.2 million in impairment on direct financing leases. For more
information on impairment and provision charges, see the Asset
Impairment and Disposition section below.
Other Income and Expense – Other income and expense for
the three-month period ended December 31, 2017 was a net expense of
$50.4 million, primarily consisting of $48.3 million of interest
expense and $2.2 million of amortized deferred financing costs.
Funds From Operations – For the three-month period ended
December 31, 2017, FFO was $159.2 million, or $0.77 per common
share on 208 million weighted-average common shares outstanding,
compared to $171.5 million, or $0.84 per common share on 205
million weighted-average common shares outstanding, for the same
period in 2016.
The $159.2 million of FFO for the three-month period ended
December 31, 2017 includes the impact of $3.9 million of non-cash
stock-based compensation expense, $0.9 million in provision for
uncollectible accounts and $0.2 million in impairment on direct
financing leases, offset by $0.5 million in one-time non-cash
revenue.
The $171.5 million of FFO for the three-month period ended
December 31, 2016 includes the impact of $5.9 million in provisions
for uncollectible accounts and $3.7 million of non-cash stock-based
compensation expense, offset by $0.7 million in one-time non-cash
revenue.
Adjusted FFO was $163.7 million, or $0.79 per common share, for
the three-month period ended December 31, 2017, compared to $180.4
million, or $0.88 per common share, for the same period in 2016.
For further information see the “Funds From Operations”
schedule.
2017 ANNUAL RESULTS
Operating Revenues and Expenses – Operating revenues for
the twelve-month period ended December 31, 2017 totaled $908.4
million. Operating expenses for the twelve-month period ended
December 31, 2017 totaled $647.1 million and were comprised of
$287.6 million of depreciation and amortization expense, $198.2
million in impairment on direct financing leases related to the
Orianna portfolio, $99.1 million of impairment on real estate
properties, $32.5 million of general and administrative expense,
$15.2 million of non-cash stock-based compensation expense and
$14.6 million in provision for uncollectible accounts.
Other Income and Expense – Other income and expense for
the twelve-month period ended December 31, 2017 was a net expense
of $209.3 million, which was primarily comprised of $188.8 million
of interest expense, $22.0 million of interest refinancing costs
and $9.5 million of amortized deferred financing costs, 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 twelve-month period ended
December 31, 2017, FFO was $444.3 million, or $2.15 per common
share on 207 million weighted-average common shares outstanding,
compared to $660.1 million, or $3.27 per common share on 202
million weighted-average common shares outstanding, for the same
period in 2016.
The $444.3 million of FFO for the twelve-month period ended
December 31, 2017 includes the impact of $198.2 million in
impairment on direct financing leases related to the Orianna
portfolio, $23.5 million of interest expenses related to debt
refinancing, $15.2 million of non-cash stock-based compensation
expense and $14.6 million in provisions for uncollectible accounts,
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 and $2.4
million of one-time revenue.
The $660.1 million of FFO for the twelve-month period ended
December 31, 2016 includes the impact of $13.8 million of non-cash
stock-based compensation expense, $9.8 million in provisions for
uncollectible accounts, $9.6 million of acquisition costs and $2.1
million of interest refinancing costs, offset by a $5.4 million
cash receipt related to early termination of mortgages and $1.3
million of one-time revenue.
Adjusted FFO was $683.0 million, or $3.30 per common share, for
the twelve months ended December 31, 2017, compared to $688.7
million, or $3.42 per common share, for the same period in 2016.
For further information see the “Funds From Operations”
schedule.
2017 FOURTH QUARTER FINANCING
ACTIVITIES
Equity Shelf Program and Dividend Reinvestment and Common
Stock Purchase Plan – During the three-month period ended
December 31, 2017, the Company sold 0.2 million shares of its
common stock generating $6.6 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
Q3
Q4
Year To
Date
Number of shares 228 - 490 - 718 Average price per share $ 31.12 $
- $ 32.62 $ - $ 32.14 Gross proceeds $ 7,079 $ - $ 15,995 $ - $
23,074
Dividend Reinvestment and Common Stock
Purchase Program for 2017
(in thousands, except price per share) Q1 Q2
Q3
Q4
Year To
Date
Number of shares 239 375 343 242 1,199 Average price per share $
30.67 $ 33.02 $ 30.39 $ 27.25 $ 30.64 Gross proceeds $ 7,335 $
12,386 $ 10,415 $ 6,586 $ 36,722
2017 FOURTH QUARTER PORTFOLIO
ACTIVITY
$71 Million of New Investments in Q4 2017 – In Q4 2017,
the Company completed approximately $40 million of new investments
and $31 million in capital renovations and new construction
consisting of the following:
$40 Million
Acquisition – On November 1, 2017, the Company acquired six
skilled nursing facilities (“SNFs”) for approximately $39.8 million
from an unrelated third party. The six Texas SNFs with
approximately 575 beds were leased to a new operator of the Company
with an initial annual cash yield of 9.25% and 2.5% annual
escalators. On the same date, the Company also transferred one
facility (120 beds) from an existing operator and added it to the
new lessee’s master lease.
$31 Million Capital
Renovation Projects – In addition to the new investments
outlined above, in Q4 2017, the Company invested $31.1 million
under its capital renovation and construction-in-progress
programs.
ASSETS IMPAIRMENTS AND
DISPOSITIONS
During the fourth quarter of 2017, the Company sold 34
facilities for approximately $189.0 million in net cash proceeds
recognizing a gain of approximately $46.4 million. The Company also
received $0.1 million for final payment on one facility mortgage.
In addition, the Company recorded approximately $0.9 million of
provision for uncollectible accounts, related to the write-off of
straight-line receivables, resulting from 2018 expected sales.
In addition, during the fourth quarter, the Company recorded
approximately $63.5 million of impairments on real estate
properties to reduce the net book value of 32 facilities to their
estimated fair value or expected selling price. The fourth quarter
impairments included a charge of $13.2 million related to a
facility destroyed in a fire. The Company expects to receive
insurance proceeds in 2018.
As of December 31, 2017, the Company had 22 facilities, totaling
$86.7 million, classified as assets held for sale. The Company
expects to sell these facilities over the next few quarters. As
part of its ongoing strategic asset repositioning program, the
Company is also evaluating an additional $300+ million of potential
disposition opportunities within its portfolio.
DIVIDENDS
On January 16, 2018, the Board of Directors declared a common
stock dividend of $0.66 per share, increasing the quarterly common
dividend by $0.01 per share over the previous quarter. The common
dividends are to be paid February 15, 2018 to common stockholders
of record on January 31, 2018.
Mr. Pickett commented, “As a result of our strategic
repositioning activities, 2018 will not be a growth year, and
therefore, we do not expect to increase the dividend during 2018.
However, I want to be very clear that we are confident in the
payout percentage coverage and sustainability of our current
quarterly dividend.”
2018 ADJUSTED FFO
GUIDANCE
The Company currently expects its 2018 Adjusted FFO to be
between $2.96 and $3.06 per diluted share.
Bob Stephenson, Omega’s CFO commented, “Our 2018 guidance
reflects the revenue reduction related to our fourth quarter asset
sales, assets held for sale and approximately $300 million of
potential asset dispositions.” Mr. Stephenson continued, “We fully
expect to redeploy most of the capital from the sales by year end;
however, the timing is very unpredictable.” Mr. Stephenson
concluded, “Timing related to the redeployment of capital from
asset sales and the timing related to the final outcome of the
Orianna facilities may significantly impact our guidance and we
have therefore expanded our guidance range versus previous
years.”
The following table presents a reconciliation
of Omega’s guidance regarding Adjusted FFO to projected GAAP
earnings.
2018 Annual Adjusted FFOGuidance Range(per diluted common
share) Full Year Net Income $1.43 - $1.53 Depreciation 1.45 Gain on
assets sold - Real estate impairment - FFO $2.88 - $2.98
Adjustments: Acquisition/transaction costs - Interest – refinancing
costs - Stock-based compensation expense 0.08 Adjusted FFO $2.96 -
$3.06
Note: All per share numbers rounded to 2 decimals.
The Company's Adjusted FFO guidance for 2018 reflects the impact
of approximately $100 million of planned capital renovation
projects, the sale of $87 million of assets held for sale,
approximately $300 million of potential divestitures and the
redeployment of capital from asset sales. It assumes the Company
will not be recording revenue related to its Orianna portfolio for
the majority of 2018. It also excludes the impact of gains and
losses from the sale of assets, certain revenue and expense items,
interest refinancing expense, capital transactions, acquisition
costs, and additional provisions for uncollectible accounts, if
any. 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.
TAX TREATMENT FOR 2017
DIVIDENDS
On February 15, 2017, May 15, 2017, August 15, 2017 and November
15, 2017, the Company paid dividends to its common stockholders in
the per share amounts of $0.62, $0.63, $0.64 and $0.65, for
stockholders of record on January 31, 2017, May 1, 2017, August 1,
2017 and October 31, 2017, respectively. The Company has determined
that 36.70% of the common dividends paid in 2017 should be treated
for tax purposes as a return of capital, 61.85% treated as an
ordinary dividend, with the balance of 1.45% treated as capital
gains.
CONFERENCE CALL
The Company will be conducting a conference call on Wednesday,
February 14, 2018 at 10 a.m. Eastern to review the Company’s 2017
fourth 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 Fourth 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 that invests in the
long-term healthcare industry, primarily in skilled nursing and
assisted living facilities. Its portfolio of assets is operated by
a diverse group of healthcare companies, predominantly in a
triple-net lease structure. The assets span all regions within the
US, as well as in the UK.
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, facility transitions, 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 Omega 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 sell assets held for sale
or complete potential asset sales on a timely basis and on terms
that allow Omega to realize the carrying value of these assets; (x)
Omega’s ability to re-lease, otherwise transition or sell
underperforming 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 assisted living facility (“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;
(xiii) changes in interest rates; (xiv) changes in tax laws and
regulations affecting REITs and (xv) 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)
December 31, 2017
2016 (Unaudited)
ASSETS Real estate
properties Real estate investments $ 7,655,960 $ 7,566,358 Less
accumulated depreciation (1,376,828 )
(1,240,336 ) Real estate investments – net 6,279,132 6,326,022
Investments in direct financing leases – net 364,965 601,938
Mortgage notes receivable – net 671,232
639,343 7,315,329 7,567,303 Other investments – net 276,342
256,846 Investment in unconsolidated joint venture 36,516 48,776
Assets held for sale – net 86,699
52,868 Total investments 7,714,886 7,925,793 Cash and
cash equivalents 85,937 93,687 Restricted cash 10,871 13,589
Accounts receivable – net 279,334 240,035 Goodwill 644,690 643,474
Other assets 37,587 32,682 Total
assets $ 8,773,305 $ 8,949,260
LIABILITIES AND EQUITY Revolving line of credit $ 290,000 $
190,000 Term loans – net 904,670 1,094,343 Secured borrowings – net
53,098 54,365 Unsecured borrowings – net 3,324,390 3,028,146
Accrued expenses and other liabilities 295,142 360,514 Deferred
income taxes 17,747 9,906 Total
liabilities 4,885,047 4,737,274
Equity:
Common stock $.10 par value authorized –
350,000 shares, issued and outstanding – 198,309 shares as of
December 31, 2017 and 196,142 as of December 31, 2016
19,831
19,614
Common stock – additional paid-in capital 4,936,302 4,861,408
Cumulative net earnings 1,839,356 1,738,937 Cumulative dividends
paid (3,210,248 ) (2,707,387 ) Accumulated other comprehensive loss
(30,150 ) (53,827 ) Total stockholders’ equity
3,555,091 3,858,745 Noncontrolling interest 333,167
353,241 Total equity 3,888,258
4,211,986 Total liabilities and equity $
8,773,305 $ 8,949,260
OMEGA
HEALTHCARE INVESTORS, INC. CONSOLIDATED STATEMENTS OF
OPERATIONS Unaudited
(in thousands, except per share
amounts)
Three Months Ended Twelve Months Ended
December 31, December 31, 2017
2016 2017
2016 Revenue Rental
income $ 194,579 $ 194,891 $ 775,176 $ 743,885 Income from direct
financing leases 614 15,724 32,336 62,298 Mortgage interest income
17,029 15,838 66,202 69,811 Other investment income – net 7,788
7,210 29,225 21,852 Miscellaneous income 1,196
823 5,446 2,981 Total operating
revenues 221,206 234,486 908,385 900,827 Expenses
Depreciation and amortization 75,323 70,808 287,591 267,062 General
and administrative 8,218 7,476 32,471 32,077 Stock-based
compensation 3,862 3,674 15,212 13,790 Acquisition costs - - -
9,582 Impairment loss on real estate properties 63,460 - 99,070
58,726 Impairment loss on direct financing leases 231 - 198,199 -
Provision for uncollectible accounts 913 5,878
14,580 9,845 Total operating
expenses 152,007 87,836 647,123 391,082 Income before other
income and expense
69,199 146,650 261,262
509,745 Other income (expense) Interest income 5 4 267 173
Interest expense (48,253 ) (44,375 ) (188,762 ) (164,103 ) Interest
– amortization of deferred financing costs (2,243 ) (2,501 ) (9,516
) (9,345 ) Interest – refinancing costs - - (21,965 ) (2,113 )
Contractual settlement - - 10,412 - Realized gain (loss) on foreign
exchange 76 12 311
(232 ) Total other expense (50,415 ) (46,860 ) (209,253 ) (175,620
) Income before gain on assets sold
18,784
99,790 52,009 334,125 Gain on assets sold –
net 46,421 30,277 53,912
50,208 Income from continuing operations
65,205 130,067 105,921 384,333 Income
tax expense (558 )
(623 ) (3,248 ) (1,405 ) Income from unconsolidated joint venture
509
439 2,237 439 Net income
65,156 129,883 104,910 383,367 Net
income attributable to noncontrolling interest
(2,756
) (5,624 ) (4,491
) (16,952 ) Net income available to
common stockholders
$ 62,400 $
124,259 $ 100,419 $
366,415 Income per common share available to
common stockholders: Basic: Net income available to common
stockholders $ 0.31 $ 0.63 $ 0.51 $ 1.91
Diluted: Net income $ 0.31 $ 0.63 $ 0.51
$ 1.90 Dividends declared per common share $
0.65 $ 0.61 $ 2.54 $ 2.36
Weighted-average shares outstanding, basic 198,614
195,793 197,738 191,781
Weighted-average shares outstanding, diluted 207,646
204,955 206,790 201,635
OMEGA HEALTHCARE INVESTORS, INC. FUNDS FROM
OPERATIONS Unaudited
(in thousands, except per share
amounts)
Three Months Ended Twelve Months Ended
December 31, December 31, 2017
2016 2017
2016 Net income $ 65,156
$ 129,883 $ 104,910 $ 383,367 Deduct gain from real estate
dispositions (46,421 ) (30,277 ) (53,912 )
(50,208 ) Sub – total 18,735 99,606 50,998 333,159
Elimination of non-cash items included in net income: Depreciation
and amortization 75,323 70,808 287,591 267,062 Depreciation -
unconsolidated joint venture 1,657 1,107 6,630 1,107 Add back
non-cash provision for impairments on real estate properties
63,460 — 99,070 58,726
Funds from operations (“FFO”) $ 159,175 $
171,521 $ 444,289 $ 660,054
Weighted-average common shares outstanding, basic 198,614 195,793
197,738 191,781 Restricted stock and PRSUs 260 300 269 956 Omega OP
Units 8,772 8,862 8,783
8,898 Weighted-average common shares outstanding,
diluted 207,646 204,955 206,790
201,635
Funds from operations
available per share $ 0.77 $ 0.84 $ 2.15 $
3.27
Adjustments to calculate adjusted funds from
operations: Funds from operations stockholders $ 159,175 $
171,521 $ 444,289 $ 660,054 Deduct other revenue (513 ) (650 )
(2,394 ) (1,333 ) Deduct prepayment fee income from early
termination of mortgages — — — (5,390 ) Deduct contractual
settlement — — (10,412 ) — (Deduct)/add back acquisition costs — (2
) (22 ) 9,582 Add back impairment for direct financing leases 231 —
198,199 — Add back provision for uncollectible accounts 913 5,878
14,580 9,845 Add back interest refinancing expense — — 23,539 2,113
Add back non-cash stock-based compensation expense 3,862
3,674 15,212 13,790
Adjusted funds from operations (“AFFO”) $ 163,668
$ 180,421 $ 682,991 $ 688,661
Adjustments to calculate funds available for distribution:
Non-cash interest expense 2,215 2,920 10,076 9,754 Capitalized
interest (2,124 )
(1,829 ) (7,991 ) (6,594 ) Non-cash revenues (14,718 )
(18,274 ) (64,117 ) (73,500 )
Funds
available for distribution (“FAD”) $ 149,041 $ 163,238
$ 620,959 $ 618,321
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
December 31, 2017:
As of December 31, 2017 As of
December 31, 2017 Balance Sheet Data
Total # ofProperties
TotalInvestment($000’s)
% ofInvestment
# ofOperatingProperties (1)
# ofOperatingBeds
Real Estate Investments 869 $ 7,655,960 88 % 881
88,007 Direct Financing Leases 41 364,965 4 % 41 4,264
Mortgage Notes Receivable 51 671,232 8 % 51
5,366 961 $ 8,692,157 100 % 973 97,637 Assets held for sale
22 86,699 Total Investments 983 $ 8,778,856
Investment Data
Total #of Properties
TotalInvestment($000’s)
% ofInvestment
# ofOperatingProperties(1)
# ofOperatingBeds
Investmentper Bed($000’s)
Skilled Nursing Facilities/Transitional Care
828
$
7,210,049
83
%
844
89,646
$
80
Senior Housing (2) 133 1,482,108 17 % 129
7,991 $ 185 961 $ 8,692,157 100 % 973 97,637 $ 89 Assets
held for sale 22 86,699 Total Investments 983 $
8,778,856 (1) Total # of Operating Properties excludes
facilities which are non-operating, closed and/or not currently
providing patient services. (2) Includes ALFs, memory care and
independent living facilities.
Revenue Composition ($000's)
Revenue by Investment Type Three
Months Ended Twelve Months Ended December 31, 2017 December
31, 2017 Rental Property $ 194,579 88 % $ 775,176 85 % Direct
Financing Leases 614 0 % 32,336 4 % Mortgage Notes 17,029 8 %
66,202 7 %
Other Investment Income and Miscellaneous
Income - net
8,984 4 % 34,671 4 % $ 221,206
100 % $ 908,385 100 %
Revenue by
Facility Type Three Months Ended Twelve Months Ended December
31, 2017 December 31, 2017
Skilled Nursing Facilities/Transitional
Care
$ 183,480 83 % $ 765,736 84 % Senior Housing 28,742 13 % 107,978 12
% Other 8,984 4 % 34,671 4 % $
221,206 100 % $ 908,385 100 %
Rent/Interest Concentration by Operator
($000’s)
# ofProperties (1)
TotalAnnualizedContractualRent/Interest
(2)
% of
TotalAnnualizedContractualRent/Interest
Ciena Healthcare 70 $ 86,360 10.0 % Genesis
Healthcare 50 59,588 6.9 % Signature Holdings II, LLC 60 56,738 6.6
% CommuniCare Health Services, Inc. 38 54,939 6.4 % Orianna (f/k/a
New Ark Investment, Inc.) 42 46,591 5.4 % Saber Health Group 44
40,741 4.7 % Maplewood Real Estate Holdings, LLC 14 35,831 4.1 %
Health & Hospital Corporation 44 35,234 4.1 % Guardian LTC
Management Inc. 31 29,998 3.5 % Diversicare Healthcare Services 35
28,746 3.3 % Remaining 64 Operators 545 389,771
45.0 % 973 $ 864,537 100.0 % (1) Number of properties
excludes facilities which are non-operating, closed and/or not
currently providing patient services. (2) 4Q 2017 contractual
rent/interest annualized; includes mezzanine and term loan
interest.
Geographic Concentration by Investment ($000’s)
Total # ofProperties (1)
Total Investment (2)
% of TotalInvestment
Texas 115 $ 816,800 9.4 % Florida 94 800,718 9.2 %
Ohio 73 712,614 8.2 % Michigan 49 627,704 7.2 % Indiana 65 582,818
6.7 % California 54 496,985 5.7 % Pennsylvania 43 470,145 5.4 %
Tennessee 40 331,053 3.8 % North Carolina 32 268,975 3.1 % Virginia
17 268,254 3.1 % Remaining 31 states (3) 326
2,908,610 33.5 % 908 8,284,676 95.3 % United Kingdom 53
407,481 4.7 % 961 $ 8,692,157 100.0 % (1)
Total # of Properties excludes 22 properties classified as
assets held for sale. (2) Total Investment excludes $86.7 million
(22 properties) classified as assets held for sale. (3) # of states
and Total Investment includes New York City 2nd Avenue development
project.
Rent and Loan
Maturities ($000's) As of December 31, 2017 Operating Lease
Expirations
& Loan Maturities
Year
2017 Lease
Rent
2017
Interest
2017 Lease
and Interest
Rent
% 2018 $ 8,592 $ 1,866
$ 10,458 1.2 % 2019 3,226 - 3,226 0.4 %
2020 5,647 6,997 12,644 1.5 % 2021 6,199 945 7,144 0.8 % 2022
61,827 2,911 64,738 7.5 % 2023 36,467 - 36,467 4.2 % Note:
Based on annualized 4th quarter 2017 contractual rent and interest.
The following tables present operator
revenue mix, census and coverage data based on information provided
by our operators as of September 30, 2017:
Operator Revenue Mix As of
September, 2017 Medicaid
Medicare /
Insurance
Private / Other
Three-months ended September 30, 2017 52.9% 34.7% 12.4%
Three-months ended June 30, 2017 51.9% 35.9% 12.2% 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%
Operator Census and
Coverage Coverage Data Occupancy (1)
Before
Management
Fees
After
Management
Fees
Twelve-months ended September 30, 2017 82.2% 1.72x 1.35x
Twelve-months ended June 30, 2017 82.4% 1.71x 1.34x Twelve-months
ended March 31, 2017 82.5% 1.69x 1.33x Twelve-months ended December
31, 2016 82.2% 1.69x 1.33x Twelve-months ended September 30, 2016
82.1% 1.68x 1.31x
(1) Based on available (operating)
beds.
The following table presents a debt
maturity schedule as of December 31, 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
2018 $ - $ - $ - $ - $ - 2019 - - - - -
2020 - - - - - 2021 - 1,250,000 - 20,000 1,270,000 2022 - 910,130 -
- 910,130 2023 - - 700,000 - 700,000 Thereafter 53,666
- 2,650,000
- 2,703,666 $ 53,666 $
2,160,130 $ 3,350,000 $ 20,000
$ 5,583,796 (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 $5.6 million net deferred
financing costs. The $910 million is comprised of a: $425 million
U.S. Dollar term loan, £100 million term loan (equivalent to $135
million in US dollars), $100 million term loan to Omega’s operating
partnership and $250 million 2015 term loan (excludes $5.5 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 twelve– month period ended December 31,
2017:
Investment
Activity ($000's) Three Months Ended Twelve
Months Ended December 31, 2017 December 31, 2017
Funding by Investment Type $ Amount % $
Amount % Real Property $ 39,974 56.3 %
$ 364,246 68.7 % Construction-in-Progress 15,061 21.2
% 78,432 14.8 % Capital Expenditures 15,850 22.2 % 59,424 11.2 %
Investment in Direct Financing Leases 232 0.3 % 7,183 1.4 %
Mortgages - 0.0 % 11,000 2.1 % Other - 0.0 %
9,442 1.8 % Total $ 71,117 100.0
% $ 529,727 100.0 %
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version on businesswire.com: http://www.businesswire.com/news/home/20180213006520/en/
Omega Healthcare Investors, Inc.Matthew Gourmand, SVP, Investor
Relations410-427-1700orBob Stephenson, CFO410-427-1700
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