Omega Announces Third Quarter 2012 Financial Results; Adjusted FFO of $0.54 Per Share for the Third

Omega Announces Third Quarter 2012 Financial Results; Adjusted FFO of $0.54 Per Share for the Third Quarter

HUNT VALLEY, Md.--(BUSINESS WIRE)-- Omega Healthcare Investors, Inc. (NYS: OHI) (the "Company" or "Omega") today announced its results of operations for the three- and nine-month period ended September 30, 2012. The Company also reported Funds From Operations ("FFO") available to common stockholders for the three-month period ended September 30, 2012 of $56.7 million or $0.52 per common share. The $56.7 million of FFO available to common stockholders for the third quarter of 2012 includes $1.5 million of non-cash stock-based compensation expense and $0.5 million of acquisition related costs. 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"). Normalized or Adjusted FFO was $0.54 per common share for the three-month period ended September 30, 2012. FFO and Adjusted FFO are non-GAAP financial measures. Adjusted FFO is calculated as FFO available to common stockholders excluding the impact of certain non-cash items and certain items of revenue or expense, including, but not limited to: acquisitions and stock-based compensation expense. For more information regarding FFO and Adjusted FFO, see the "Third Quarter 2012 Results - Funds From Operations" section below.


GAAP NET INCOME

For the three-month period ended September 30, 2012, the Company reported net income and net income available to common stockholders of $30.1 million, or $0.27 per diluted common share, on operating revenues of $87.1 million. This compares to net income and net income available to common stockholders of $21.4 million, or $0.21 per diluted common share, on operating revenues of $72.8 million, for the same period in 2011.

For the nine-month period ended September 30, 2012, the Company reported net income and net income available to common stockholders of $86.8 million, or $0.81 per diluted common share, on operating revenues of $255.4 million. This compares to net income of $33.3 million and net income available to common stockholders of $28.2 million, or $0.28 per diluted common share, on operating revenues of $215.9 million, for the same period in 2011.

The year-to-date increase in net income was primarily due to the impact of: (i) additional rental income and mortgage interest income associated with approximately $575 million of new investments made since October 1, 2011; (ii) $7.2 million in incremental gains on asset sales; (iii) $24.7 million net decrease in real estate impairments; and (iv) $4.1 million net decrease in provision for uncollectible accounts receivable. These increases were partially offset by: (i) $7.8 million in increased depreciation expense associated with the new investments; (ii) $10.9 million in increased interest expense primarily associated with financing the new investments; and (iii) $2.3 million in increased interest refinancing costs relating to a $7.1 million charge associated with the tender and redemption of all of the Company's outstanding $175 million of 7% Senior Notes due 2016 in March 2012, partially offset by (a) a $1.7 million interest refinancing expense adjustment (gain) related to the write-off of the unamortized premium on four HUD mortgage loans that the Company paid off in June 2012 and (b) a $3.1 million write-off of deferred cost associated with the termination of the Company's 2010 credit facility in August 2011.

THIRD QUARTER 2012 HIGHLIGHTS AND OTHER RECENT DEVELOPMENTS

  • In October 2012,the Company increased its quarterly common stock dividend to $0.44 per share.

  • In August 2012, the Company completed $206 million of new investments with an existing operator.

  • In July 2012, the Company declared its quarterly common dividend of $0.42 per share.

  • In July 2012, Fitch Ratings initiated a BBB- rating on the Company's senior unsecured notes.

THIRD QUARTER 2012 RESULTS

Operating Revenues and Expenses - Operating revenues for the three-month period ended September 30, 2012 were $87.1 million. Operating expenses for the three-month period ended September 30, 2012 totaled $34.0 million and were composed of $28.3 million of depreciation and amortization expense, $3.7 million of general and administrative expense, $1.5 million of stock-based compensation expense and $0.5 million of expense associated with acquisitions.

Other Income and Expense - Other income and expense for the three-month period ended September 30, 2012 was a net expense of $24.7 million, which was composed of $24.1 million of interest expense and $0.7 million of amortized deferred financing costs.

Funds From Operations - For the three-month period ended September 30, 2012, reportable FFO available to common stockholders was $56.7 million, or $0.52 per common share on 110 million weighted-average common shares outstanding, compared to $44.5 million, or $0.43 per common share on 103 million weighted-average common shares outstanding, for the same period in 2011.

The $56.7 million of FFO for the three-month period ended September 30, 2012 includes the impact of $1.5 million of stock-based compensation expense and $0.5 million of expense associated with acquisitions.

The $44.5 million of FFO for the three-month period ended September 30, 2011 includes the impact of the $3.1 million write-off of deferred financing costs, approximately $1.5 million of non-cash stock-based compensation expense and a $148 thousand net loss associated with owned and operated assets.

Adjusted FFO was $58.7 million, or $0.54 per common share, for the three months ended September 30, 2012, compared to $49.2 million, or $0.48 per common share, for the same period in 2011. The Company had 6 million additional weighted-average shares for the three months ended September 30, 2012 compared to the same period in 2011. For further information see "Funds From Operations" below.

FINANCING ACTIVITIES

$400 Million 5.875% Senior Notes Exchange Offer - On August 15, 2012, the Company commenced an offer to exchange $400 million of its 5.875% Senior Notes due 2024 that have been registered under the Securities Act of 1933 for $400 million of its outstanding 5.875% Senior Notes due 2024, which were issued on March 19, 2012 in a private placement.

All $400 million outstanding aggregate principal amount of the initial notes were validly tendered and not withdrawn prior to the expiration of the exchange offer, and were exchanged for exchange notes as of September 20, 2012, pursuant to the terms of the exchange offer. The Exchange Notes are identical in all material respects to the Initial Notes, except that the Exchange Notes were registered under the Securities Act of 1933 and the provisions of the Initial Notes relating to transfer restrictions, registration rights and additional interest will not apply to the Exchange Notes.

Equity Shelf Program and the Dividend Reinvestment and Common Stock Purchase Plan- During the nine-month period ended September 30, 2012, the Company sold the following shares of its common stock under its Equity Shelf Program and its Dividend Reinvestment and Common Stock Purchase Plan:

Equity Shelf (At-The-Market) Program for 2012

(in thousands, except price per share)

Q1

Q2

Q3

Year

Total

Total

Total

To Date

Number of shares

249

510

2,639

3,398

Average price per share

$

21.38

$

21.21

$

24.10

$

23.47

Gross Proceeds

$

5,318

$

10,818

$

63,614

$

79,750

Dividend Reinvestment and direct Common Stock Purchase Program for 2012

(in thousands, except price per share)

Q1

Q2

Q3

Year

Total

Total

Total

To Date

Number of shares

665

2,541

1,585

4,791

Average price per share

$

21.42

$

21.54

$

23.46

$

22.16

Gross Proceeds

$

14,242

$

54,754

$

37,161

$

106,157

2012 PORTFOLIO AND RECENT DEVELOPMENTS

Health and Hospital Corporation - On August 31, 2012, the Company purchased 27 facilities (17 skilled nursing, 4 assisted living and 6 independent living facilities) from an unrelated third party for $203 million. Simultaneous with the transaction, the Company also purchased one parcel of land for $2.8 million. The 27 facilities and land parcel were added to an existing master lease with Health and Hospital Corporation. The 27 facilities located in Indiana total 2,892 beds (2,340 skilled nursing, 293 assisted living and 259 independent living).

Facility Sales - For the three month period ended September 30, 2012, the Company sold one held-for-sale facility for total cash proceeds of $2.3 million, generating approximately a $1.7 million accounting gain.

DIVIDENDS

Common Dividends - On October 17, 2012, the Company's Board of Directors declared a common stock dividend of $0.44 per share, increasing the quarterly common dividend by $0.02 per share, or 4.8%, over the previous quarter. The common stock dividend is payable November 15, 2012 to common stockholders of record as of the close of business on October 31, 2012. At the date of this release, the Company had approximately 112 million common shares outstanding.

2012 ADJUSTED FFO GUIDANCE

The Company revised its 2012 Adjusted FFO available to common stockholders to be between $2.15 and $2.17 per diluted share versus its previous range of $2.12 to $2.15 per share.

The Company's Adjusted FFO guidance for 2012 excludes the impact of gains and losses from the sale of assets, additional divestitures, certain revenue and expense items, interest refinancing expense, 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 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 restricted stock amortization 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 Friday, October 26, 2012, at 10 a.m. Eastern to review the Company's 2012 third quarter results and current developments. Analysts and investors interested in participating are invited to call (877) 317-6789 from within the United States or (412) 317-6789 from outside the United States and ask the operator to be connected to the "Omega Healthcare Third Quarter 2012 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.

The Company is a real estate investment trust investing in and providing financing to the long-term care industry. At September 30, 2012, the Company owned or held mortgages on 460 skilled nursing facilities, assisted living facilities and other specialty hospitals with approximately 53,269 licensed beds (51,117 available beds) located in 33 states and operated by 47 third-party healthcare operating companies.

This announcement includes forward-looking statements, including without limitation the information under the heading "2012 Adjusted FFO Guidance."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 the Company'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 the Company's operators; (iv) the ability of any of the Company's operators in bankruptcy to reject unexpired lease obligations, modify the terms of the Company's mortgages and impede the ability of the Company 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 the Company's credit ratings and the ratings of its debt securities; (vii) competition in the financing of healthcare facilities; (viii) the Company's ability to maintain its status as a real estate investment trust; (ix) the Company's ability to manage, re-leaseor sell any owned and operated facilities; (x) the Company's ability to sell closed or foreclosed assets on a timely basis and on terms that allow the Company to realize the carrying value of these assets; (xi) the effect of economic and market conditions generally, and particularly in the healthcare industry; and (xii) other factors identified in the Company's filings with the Securities and Exchange Commission. Statements regarding future events and developments and the Company's future performance, as well as management's expectations, beliefs, plans, estimates or projections relating to the future, are forward-looking statements.The Company undertakes no obligation to update any forward-looking statements contained in this announcement.

OMEGA HEALTHCARE INVESTORS, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands)

September 30,

December 31,

2012

2011

(Unaudited)

ASSETS

Real estate properties

Land and buildings

$

2,786,213

$

2,537,039

Less accumulated depreciation

(550,381

)

(470,420

)

Real estate properties - net

2,235,832

2,066,619

Mortgage notes receivable - net

245,550

238,675

2,481,382

2,305,294

Other investments - net

45,807

52,957

2,527,189

2,358,251

Assets held for sale - net

1,620

2,461

Total investments

2,528,809

2,360,712

Cash and cash equivalents

6,951

351

Restricted cash

32,923

34,112

Accounts receivable - net

119,361

100,664

Other assets

71,396

61,473

Total assets

$

2,759,440

$

2,557,312

LIABILITIES AND STOCKHOLDERS' EQUITY

Revolving line of credit

$

102,000

$

272,500

Secured borrowings

286,016

303,610

Unsecured borrowings - net

1,200,523

975,290

Accrued expenses and other liabilities

149,981

127,428

Total liabilities

1,738,520

1,678,828

Stockholders' equity:

Common stock $.10 par value authorized - 200,000 shares issued and outstanding 112,046 shares as of September 30, 2012 and 103,410 as of December 31, 2011

11,205

10,341

Common stock - additional paid-in-capital

1,658,882

1,471,381

Cumulative net earnings

720,205

633,430

Cumulative dividends paid

(1,369,372

)

(1,236,668

)

Total stockholders' equity

1,020,920

878,484

Total liabilities and stockholders' equity

$

2,759,440

$

2,557,312

OMEGA HEALTHCARE INVESTORS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

Unaudited

(in thousands, except per share amounts)

Three Months Ended

Nine Months Ended

September 30,

September 30,

2012

2011

2012

2011

Revenue

Rental income

$

78,170

$

68,622

$

229,373

$

203,446

Mortgage interest income

7,677

3,617

22,417

10,548

Other investment income - net

1,238

383

3,533

1,641

Miscellaneous

23

196

125

265

Total operating revenues

87,108

72,818

255,448

215,900

Expenses

Depreciation and amortization

28,305

24,871

82,651

74,848

General and administrative

3,688

2,873

11,197

10,031

Stock-based compensation expense

1,485

1,520

4,456

4,518

Acquisition costs

483

-

686

45

Impairment loss on real estate properties

-

-

272

24,971

Provisions for uncollectible mortgages, notes and accounts receivable

-

-

-

4,139

Nursing home expenses of owned and operated assets

-

148

-

603

Total operating expenses

33,961

29,412

99,262

119,155

Income before other income and expense

53,147

43,406

156,186

96,745

Other income (expense)

Interest income

6

12

22

35

Interest expense

(24,050

)

(20,101

)

(71,026

)

(60,173

)

Interest - amortization of deferred financing costs

(673

)

(629

)

(1,970

)

(2,026

)

Interest - refinancing costs

-

(3,055

)

(5,410

)

(3,071

)

Total other expense

(24,717

)

(23,773

)

(78,384

)

(65,235

)

Income before gain on assets sold

28,430

19,633

77,802

31,510

Gain on assets sold - net

1,689

1,803

8,973

1,803

Net income

30,119

21,436

86,775

33,313

Preferred stock dividends

-

-

-

(1,691

)

Preferred stock redemption

-

-

-