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.