EX-99.1 2 tv526810_ex99-1.htm EXHIBIT 99.1

 

Exhibit 99.1

 

303 International Circle

Suite 200

Hunt Valley, MD 21030

P: 410.427.1700

F: 410.427.8800

 

PRESS RELEASE – FOR IMMEDIATE RELEASE

 

OMEGA ANNOUNCES SECOND QUARTER 2019 FINANCIAL RESULTS

Completed $678 Million of New Investments in Q2

Agrees to Acquire $735 Million of New Investments

 

HUNT VALLEY, MARYLAND – August 6, 2019 – Omega Healthcare Investors, Inc. (NYSE:OHI) (the “Company” or “Omega”) today announced its results of operations for the quarter ended June 30, 2019. The Company reported net income of $75.7 million or $0.34 per common share. The Company also reported Funds From Operations (“FFO”) for the quarter of $157.2 million or $0.71 per common share, Adjusted Funds From Operations (“AFFO” or “Adjusted FFO”) of $169.2 million or $0.77 per common share, and Funds Available For Distribution (“FAD”) of $150.6 million.

 

Adjusted FFO excludes a few one-time non-cash revenue and expense items from FFO. FFO, AFFO and FAD are non-GAAP financial measures. For more information regarding these non-GAAP measures, see the “Funds From Operations” schedule below and the Company’s website at www.omegahealthcare.com.

 

GAAP NET INCOME

 

For the quarter ended June 30, 2019, the Company reported net income of $75.7 million, or $0.34 per common share, on operating revenues of $225.3 million. This compares to net income of $82.0 million, or $0.39 per common share, on operating revenues of $219.9 million, for the same period in 2018.

 

For the six-month period ended June 30, 2019, the Company reported net income of $147.9 million, or $0.68 per common share, on operating revenues of $449.0 million. This compares to net income of $169.9 million, or $0.82 per common share, on operating revenues of $440.1 million, for the same period in 2018.

 

The year-to-date decrease in net income compared to the prior year was primarily due to (i) a $14.9 million reduction in gains on the sale of assets, (ii) an increase of $9.6 million of impairments on direct financing leases and real estate properties and (iii) $4.2 million of costs related to the acquisition of MedEquities Realty Trust, Inc. (“MedEquities”). The decrease in net income was partially offset by incremental revenue from new investments made since the second quarter of 2018.

 

CEO COMMENTS

 

Taylor Pickett, Omega’s Chief Executive Officer, stated, “We are excited about our recent capital allocation activity. We seamlessly closed and integrated the MedEquities acquisition in May and on July 26th we signed a $735 million purchase agreement to acquire 60 facilities as described in more detail below. In addition, we continue to source smaller, attractively priced acquisitions and new development projects with our existing tenants, while opportunistically divesting of certain non-core holdings.”

 

Mr. Pickett continued, “During the quarter, the Texas State Legislature failed to pass any form of skilled nursing Medicaid rate relief, meaning that operators in the State will have to deal with the same Medicaid reimbursement rates which are one of the lowest in the country. As a result, we do not envision Daybreak reverting to their contractual rent for the foreseeable future and are actively working with Daybreak’s management team and third party consultants to maximize future Daybreak cash flows.”

 

   

 

 

Mr. Pickett concluded, “We remain excited about the new Medicare reimbursement model, the Patient Driven Payment Model or PDPM, which begins on October 1st. We believe this new revenue-neutral payment model more accurately aligns quality of care and patient outcomes with operator reimbursement and our operators are well prepared for the change. We believe the combination of PDPM and the recently confirmed 2.4% increase in Medicare reimbursement will augment the improving census, driven by the multi-decade demographic tailwind.”

 

2019 RECENT DEVELOPMENTS AND SECOND QUARTER HIGHLIGHTS

 

In Q3 2019, the Company

 

·signed a Purchase and Sale Agreement to acquire $735 million of skilled nursing and assisted living facilities.
·completed a $25 million acquisition in July.
·declared a $0.66 per share quarterly common stock dividend.

 

In Q2 2019, the Company

 

·completed the $623 million acquisition by merger of MedEquities.
·invested $55 million in capital renovation and construction-in-progress projects.
·paid a $0.66 per share quarterly common stock dividend.

 

In Q1 2019, the Company

 

·entered into a definitive merger agreement to acquire MedEquities.
·finalized the Orianna portfolio restructuring.
·invested $42 million in capital renovation and construction-in-progress projects.
·paid a $0.66 per share quarterly common stock dividend.

 

SECOND QUARTER 2019 RESULTS

 

Operating Revenues and Expenses – Operating revenues for the quarter ended June 30, 2019 totaled $225.3 million, which included $17.0 million of non-cash revenue, $3.0 million of real estate tax and ground rents, and a write-off of $6.7 million in uncollectible accounts primarily related to straight-line revenue.

  

Operating expenses for the quarter ended June 30, 2019 totaled $98.5 million, consisting of $73.6 million of depreciation and amortization expense, $9.5 million of general and administrative (“G&A”) expense, $5.7 million of impairment on real estate properties, $4.3 million of real estate tax and ground lease expense, $4.0 million of stock-based compensation expense and $1.2 million of acquisition (merger) related costs. For more information on impairment charges, see the “2019 Second Quarter and Recent Portfolio Activity – Asset Impairments and Dispositions” section below.

 

Other Income and Expense – Other income and expense for the quarter ended June 30, 2019 was a net expense of $51.0 million, primarily consisting of $48.4 million of interest expense and $2.2 million of amortized deferred financing costs.

 

Funds From Operations – For the quarter ended June 30, 2019, FFO was $157.2 million, or $0.71 per common share, on 220 million weighted-average common shares outstanding, compared to $154.5 million, or $0.74 per common share on 208 million weighted-average common shares outstanding, for the same period in 2018.

 

   

 

 

The $157.2 million of FFO for the quarter ended June 30, 2019 includes a $6.7 million write-off of non-cash revenue (primarily straight-line revenue), $4.0 million of non-cash stock-based compensation expense and $1.2 million of acquisition costs.

 

The $154.5 million of FFO for the quarter ended June 30, 2018 includes the impact of $4.1 million of non-cash stock-based compensation expense and $0.6 million in provisions for uncollectible accounts.

 

Adjusted FFO was $169.2 million, or $0.77 per common share, for the quarter ended June 30, 2019, compared to $159.1 million, or $0.76 per common share, for the same quarter in 2018. For further information see the “Funds From Operations” schedule below and the Company’s website.

 

FINANCING ACTIVITIES

 

Equity Shelf Program and Dividend Reinvestment and Common Stock Purchase Plan – During the quarter ended June 30, 2019, the Company sold 1.3 million shares of its common stock, generating $48.8 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:

 

   Equity Shelf (At-the-Market) Program for 2019 
   (in thousands, except price per share) 
   Q1   Q2   Year To Date 
Number of shares    2,221    733    2,954 
Average price per share  $35.26   $36.81   $35.65 
Gross proceeds  $78,325   $26,993   $105,318 
     
   Dividend Reinvestment and Common Stock Purchase Plan for 2019 
   (in thousands, except price per share) 
   Q1   Q2   Year To Date 
Number of shares    892    589    1,481 
Average price per share  $36.19   $37.02   $36.52 
Gross proceeds  $32,286   $21,817   $54,103 

 

2019 SECOND QUARTER AND RECENT PORTFOLIO ACTIVITY

 

Q2 Portfolio Activity:

 

$678 Million of New Investments in Q2 2019 – In Q2 2019, the Company completed approximately $623 million of new investments and $55 million in capital renovations and new construction consisting of the following:

 

$623 Million Acquisition – On May 17, 2019, the Company completed its acquisition by merger of MedEquities and acquired $622.6 million of investments. The Company repaid $285.1 million of MedEquities secured borrowings at closing with borrowings under its unsecured credit facility. The investments include 35 properties located in eight states and operated by 12 third-party operators.

 

Under the terms of the merger agreement, each outstanding share of MedEquities common stock automatically was converted into 0.235 of a share of Omega common stock plus $2.00 in cash, which represents a value of $10.85 per MedEquities share based on the $37.67 closing price for Omega common stock on May 16, 2019. The Company issued approximately 7.5 million shares of its common stock in this transaction.

 

   

 

 

$55 Million of New Investments – In the second quarter of 2019, the Company invested $55.5 million under its capital renovation and construction-in-progress programs.

 

Post Q2 Portfolio Activity:

 

$735 Million Purchase and Sale Agreement – On July 26, 2019, the Company entered into an agreement to purchase 60 facilities for $735 million consisting of approximately $345 million of cash and the assumption of approximately $390 million (as of August 1, 2019) in mortgage loans guaranteed by the U.S. Department of Housing and Urban Development (“HUD”). These loans have a blended “all-in” rate (including Mortgage Insurance Premiums) of 3.66% per annum with maturities between September 2046 and December 2051.

 

The 60 facilities consist of 58 skilled nursing facilities (“SNFs”) and two assisted living facilities (“ALFs”) representing 6,590 operating beds, located in eight states and are leased to two operators in three triple net leases generating approximately $64 million in 2020 annual contractual cash rent.

 

Completion of the transaction is subject to consent by HUD as well as the satisfaction of customary closing conditions. No assurance can be given as to when or if (i) HUD’s consent will be obtained, (ii) the closing conditions will be satisfied, and (iii) the acquisition will be completed.

 

$25 Million of New Investments – On July 1, 2019, the Company acquired three SNFs for approximately $24.9 million from an unrelated third party. The Virginia and North Carolina facilities with approximately 320 beds were added to an existing operator’s master lease with an initial cash yield of 9.5% and 2% annual escalators.

 

Asset Impairments and Dispositions:

 

During the second quarter of 2019, four properties were sold for $8.7 million in cash, recognizing a loss of approximately $0.3 million. The Company also received $11.4 million for final payment on a mortgage loan. The Company recorded impairment charges of $5.7 million primarily related to reducing the net book values on two properties to their estimated fair values or expected selling prices.

 

Also during the second quarter, the Company reached an agreement with Diversicare Healthcare Services, Inc. (NASDAQ: DVCR) to amend its master lease to terminate operations of ten nursing facilities located in Kentucky. Omega will concurrently sell the facilities to an unrelated third party for approximately $84.5 million. The transaction is subject to closing conditions, including but not limited to, state licensure and regulatory approval. The transaction is expected to become effective in the third quarter of 2019; however, no assurance can be given as to when or if the closing conditions are satisfied and the sale completed.

 

As of June 30, 2019, the Company had four properties classified as assets held for sale totaling approximately $4.6 million. The Company expects to sell these properties over the next few quarters.

 

DIVIDENDS

 

On July 15, 2019, the Board of Directors declared a common stock dividend of $0.66 per share, to be paid August 15, 2019 to common stockholders of record as of the close of business on July 31, 2019.

 

   

 

  

2019 GUIDANCE TIGHTENED

  

The Company tightened its 2019 annual guidance range to be between $1.44 and $1.48 of Net Income per diluted share and between $3.03 and $3.07 of Adjusted FFO per diluted share. The Company also adjusted its 2019 Q4 guidance range to be between $0.39 and $0.42 of Net Income per diluted share and between $0.76 and $0.79 of Adjusted FFO per diluted share.

 

Bob Stephenson, Omega’s CFO commented, “We have tightened our 2019 year-end guidance and adjusted our fourth quarter guidance primarily as a result of the pending sale of ten Diversicare assets, continuing Daybreak on a cash basis at approximately $3 to $5 million per quarter and to a lesser extent, shares issued under our equity programs.” Mr. Stephenson continued, “As I stated in February and again in May, we may continue to issue equity under our ATM to further de-lever, which may significantly impact our guidance.”

 

The following table presents a reconciliation of Omega’s guidance regarding Adjusted FFO to projected GAAP earnings.

 

   2019 Q4     
   Guidance   2019 Annual 
   Range   Guidance Range 
   (per diluted common   (per diluted common 
   share)   share) 
Net Income  $0.39 - $0.42   $1.44 - $1.48 
Depreciation   0.35    1.36 
Depreciation – unconsolidated joint venture   —    0.03 
Provision for real estate impairment   —    0.03 
Unrealized gain on warrants   —    — 
Gain on assets sold – net   —    — 
FFO  $0.74 - $0.77   $2.86 - $2.90 
Adjustments:          
One-time revenue items   —    (0.00)
One-time termination payment   —    0.00 
Acquisition deal costs   —    0.02 
Restructuring expenses   —    0.01 
Provision or write-off of uncollectible accounts   —    0.04 
Impairment on direct financing leases   —    0.03 
Stock-based compensation expense   0.02    0.07 
Adjusted FFO  $0.76 - $0.79   $3.03 - $3.07 

 

Note: All per share numbers rounded to 2 decimals.

 

The Company's Adjusted FFO guidance for 2019 assumes over $75 million of planned capital renovation projects with 2019 estimated in-service dates or spending that generates cash in 2019 and the sale of the ten Diversicare assets. It excludes additional acquisitions and asset sales, 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'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 of collection of rental obligations from operators on a cash basis, 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. The Company may, from time to time, update its publicly announced Adjusted FFO guidance, but it is not obligated to do so.

 

   

 

  

CONFERENCE CALL

 

The Company will be conducting a conference call on Wednesday, August 7, 2019 at 11 a.m. Eastern to review the Company’s 2019 second 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 Second Quarter 2019 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.

 

FOR FURTHER INFORMATION, CONTACT

 

Matthew Gourmand, SVP, Investor Relations

or

Bob Stephenson, CFO at (410) 427-1700

 

 

 

Forward-Looking Statements

 

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’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)the impact of healthcare reform and regulation, including cost containment measures and changes in reimbursement policies, procedures and rates; (iii) the ability of operators and borrowers to maintain the financial strength and liquidity necessary to satisfy their respective rent and debt obligations; (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, and other costs and uncertainties associated with operator bankruptcies; (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 and the impact of changes in tax laws and regulations affecting REITs; (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 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; and (xiv) other factors identified in Omega’s filings with the SEC. 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.

 

We caution you that the foregoing list of important factors may not contain all of the material factors that are important to you. Accordingly, readers should not place undue reliance on those statements. All forward-looking statements are based upon information available to us on the date of this release. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law.

 

   

 

 

OMEGA HEALTHCARE INVESTORS, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share amounts)

 

   June 30,   December 31, 
   2019   2018 
   (Unaudited)     
         
ASSETS          
Real estate properties          
Real estate investments  $8,373,540   $7,746,410 
Less accumulated depreciation   (1,689,438)   (1,562,619)
Real estate investments – net   6,684,102    6,183,791 
Investments in direct financing leases – net   11,709    132,262 
Mortgage notes receivable – net   774,327    710,858 
    7,470,138    7,026,911 
Other investments – net   367,233    504,626 
Investments in unconsolidated joint ventures   102,838    31,045 
Assets held for sale – net   4,606    989 
Total investments   7,944,815    7,563,571 
           
Cash and cash equivalents   32,766    10,300 
Restricted cash   1,372    1,371 
Contractual receivables – net   25,903    33,826 
Other receivables and lease inducements   342,030    313,551 
Goodwill   643,875    643,950 
Other assets   107,659    24,308 
Total assets  $9,098,420   $8,590,877 
           
LIABILITIES AND EQUITY          
Revolving line of credit  $500,000   $313,000 
Term loans – net   898,604    898,726 
Secured borrowing   2,275    — 
Senior notes and other unsecured borrowings – net   3,331,905    3,328,896 
Accrued expenses and other liabilities   300,303    272,172 
Deferred income taxes   12,827    13,599 
Total liabilities   5,045,914    4,826,393 
           
Equity:          
Common stock $.10 par value authorized – 350,000 shares, issued and outstanding – 216,089 shares as of June 30, 2019 and 202,346 as of December 31, 2018   21,608    20,235 
Common stock – additional paid-in capital   5,580,042    5,074,544 
Cumulative net earnings   2,265,156    2,130,511 
Cumulative dividends paid   (4,013,116)   (3,739,197)
Accumulated other comprehensive loss   (50,719)   (41,652)
Total stockholders’ equity   3,802,971    3,444,441 
Noncontrolling interest   249,535    320,043 
Total equity   4,052,506    3,764,484 
Total liabilities and equity  $9,098,420   $8,590,877 

 

   

 

 

OMEGA HEALTHCARE INVESTORS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

Unaudited

(in thousands, except per share amounts)

 

   Three Months Ended   Six Months Ended 
   June 30,   June 30, 
   2019   2018   2019   2018 
Revenue                    
Rental income  $191,812   $192,850   $380,016   $386,799 
Real estate tax and ground lease income   3,005    —    6,978    — 
Income from direct financing leases   259    497    519    1,110 
Mortgage interest income   18,832    16,834    36,966    33,413 
Other investment income   11,133    9,097    23,047    17,624 
Miscellaneous income   238    603    1,441    1,134 
Total operating revenues   225,279    219,881    448,967    440,080 
                     
Expenses                    
Depreciation and amortization   73,637    69,609    144,489    139,970 
General and administrative   9,548    11,148    21,374    23,567 
Real estate tax and ground lease expense   4,317    —    8,436    — 
Stock-based compensation   4,040    4,089    8,110    8,145 
Acquisition costs   1,236    —    4,185    — 
Impairment (recovery) on real estate properties   5,709    (1,097)   5,709    3,817 
Impairment on direct financing leases   —    —    7,700    — 
Provision for uncollectible accounts   —    564    —    8,378 
Total operating expenses   98,487    84,313    200,003    183,877 
                     
Other operating (loss) income                    
(Loss) gain on assets sold – net   (267)   (2,891)   (264)   14,609 
Operating income   126,525    132,677    248,700    270,812 
                     
Other income (expense)                    
Interest income and other – net   (191)   1,125    146    1,710 
Interest expense   (48,380)   (48,082)   (96,480)   (96,093)
Interest – amortization of deferred financing costs   (2,238)   (2,242)   (4,476)   (4,485)
Realized loss on foreign exchange   (195)   (66)   (169)   (7)
Total other expense   (51,004)   (49,265)   (100,979)   (98,875)
                     
Income from continuing operations   75,521    83,412    147,721    171,937 
Income tax expense   (793)   (838)   (1,468)   (1,381)
Income (loss) from unconsolidated joint ventures   943    (588)   1,600    (637)
Net income   75,671    81,986    147,853    169,919 
Net income attributable to noncontrolling interest   (2,530)   (3,450)   (5,010)   (7,163)
Net income available to common stockholders  $73,141   $78,536   $142,843   $162,756 
                     
Earnings per common share available to common stockholders:                    
Basic:                    
Net income available to common stockholders  $0.35   $0.39   $0.69   $0.82 
Diluted:                    
Net income  $0.34   $0.39   $0.68   $0.82 
Dividends declared per common share  $0.66   $0.66   $1.32   $1.32 
Weighted-average shares outstanding, basic   211,569    199,497    208,064    199,204 
Weighted-average shares outstanding, diluted   220,479    208,460    217,002    208,139 

 

   

 

 

OMEGA HEALTHCARE INVESTORS, INC.

FUNDS FROM OPERATIONS

Unaudited

(in thousands, except per share amounts)

 

   Three Months Ended   Six Months Ended 
   June 30,   June 30, 
   2019   2018   2019   2018 
                 
Net income  $75,671   $81,986   $147,853   $169,919 
Add back loss (deduct gain) from real estate dispositions   267    2,891    264    (14,609)
Add back loss from real estate dispositions of unconsolidated joint ventures   —    640    —    640 
Sub-total   75,938    85,517    148,117    155,950 
Elimination of non-cash items included in net income:                    
Depreciation and amortization   73,637    69,609    144,489    139,970 
Depreciation - unconsolidated joint ventures   1,675    1,466    3,047    3,123 
Add back (deduct) non-cash provision (recovery) for impairments on real estate properties   5,709    (1,097)   5,709    3,817 
Add back non-cash provision for impairments on real estate properties of unconsolidated joint ventures   —    —    —    608 
Add back (deduct) unrealized loss (gain) on warrants   270    (1,021)   (14)   (1,602)
Funds from operations (“FFO”)  $157,229   $154,474   $301,348   $301,866 
                     
Weighted-average common shares outstanding, basic   211,569    199,497    208,064    199,204 
Restricted stock and PRSUs   1,592    197    1,640    167 
Omega OP Units   7,318    8,766    7,298    8,768 
Weighted-average common shares outstanding, diluted   220,479    208,460    217,002    208,139 
                     
Funds from operations available per share  $0.71   $0.74   $1.39   $1.45 
                     
Adjustments to calculate adjusted funds from operations:                    
Funds from operations  $157,229   $154,474   $301,348   $301,866 
Deduct one-time revenue   —    —    (972)   — 
Add back acquisition costs   1,236    —    4,185    — 
Add back one-time buy-out of purchase option   —   —    —    2,000 
Add back one-time termination payment   —    —    1,118    — 
Add back impairment for direct financing leases   —    —    7,700    — 
Add back uncollectible accounts(1)   6,730    564    7,959    8,378 
Add back restructuring costs   —    —    1,040    — 
Add back non-cash stock-based compensation expense   4,040    4,089    8,110    8,145 
Adjusted funds from operations (“AFFO”)  $169,235   $159,127   $330,488   $320,389 
                     
Adjustments to calculate funds available for distribution:                    
Non-cash interest expense  $2,213   $2,215   $4,426   $4,431 
Capitalized interest   (3,801)   (2,608)   (7,254)   (4,904)
Non-cash revenues   (17,036)   (18,432)   (31,809)   (35,812)
Funds available for distribution (“FAD”)  $150,611   $140,302   $295,851   $284,104 

 

(1) 2019 provision or charges for uncollectible rental revenue accounts (straight-line and contractual) are recorded through rental income.

 

   

 

 

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 income statement, 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 and changes in the fair value of warrants. 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 FAD 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 lease and loan maturities:

 

   As of June 30, 2019   As of June 30, 2019 
       Total       # of   # of 
Balance Sheet Data  Total # of   Investment   % of   Operating   Operating 
   Properties   ($000’s)   Investment   Properties (1)   Beds (1) 
Real Estate Investments   892   $8,373,540    92%   879    87,346 
Direct Financing Leases   2    11,709    —%   2    135 
Mortgage Notes Receivable   51    774,327    8%   49    5,357 
    945   $9,159,576    100%   930    92,838 
Assets Held For Sale   4    4,606                
Total Investments   949   $9,164,182                

 

       Total       # of   # of   Investment 
Investment Data  Total # of   Investment   % of   Operating   Operating   per Bed 
   Properties   ($000’s)   Investment   Properties (1)   Beds (1)   ($000’s) 
Skilled Nursing Facilities/Transitional Care   813   $7,586,504    83%   803    84,846   $89 
Senior Housing (2)   132    1,573,072    17%   127    7,992   $197 
    945   $9,159,576    100%   930    92,838   $99 
Assets Held For Sale   4    4,606                     
Total Investments   949   $9,164,182                     

 

 

(1) Excludes properties which are non-operating, closed and/or not currently providing patient services.

(2) Includes ALFs, memory care and independent living properties.

 

Revenue Composition ($000's)

 

Revenue by Investment Type  Three Months Ended   Six Months Ended 
   June 30, 2019   June 30, 2019 
Rental Property  $191,812    85%  $380,016    85%
Real Estate Tax and Ground Lease Income   3,005    2%   6,978    2%
Direct Financing Leases   259    —%   519    —%
Mortgage Notes   18,832    8%   36,966    8%
Other Investment Income and Miscellaneous Income - net   11,371    5%   24,488    5%
   $225,279    100%  $448,967    100%
         
Revenue by Facility Type  Three Months Ended   Six Months Ended 
   June 30, 2019   June 30, 2019 
Skilled Nursing Facilities/Transitional Care  $183,196    81%  $362,578    81%
Senior Housing   27,707    12%   54,923    12%
Real Estate Tax and Ground Lease Income   3,005    2%   6,978    2%
Other   11,371    5%   24,488    5%
   $225,279    100%  $448,967    100%

 

   

 

  

       2019 Q2   % of Total 
       Annualized   Annualized 
   # of   Contractual   Contractual 
Rent/Interest Concentration by Operator ($000’s)  Properties (1)   Rent/Interest (1)(2)   Rent/Interest 
Ciena   69   $93,253    11.0%
Genesis   60    62,888    7.4%
Communicare   43    59,438    7.0%
Signature   58    51,304    6.0%
Saber   45    45,581    5.4%
HHC   44    35,939    4.2%
Guardian   35    35,074    4.1%
Maplewood   14    31,584    3.7%
Diversicare   34    29,232    3.4%
Airamid   33    28,069    3.3%
Remaining Operators (3)    493    378,158    44.5%
    928   $850,520    100.0%

 

 

(1) Excludes properties which are non-operating, closed and/or not currently providing patient services.

(2) Includes mezzanine and term loan interest.

(3) Excludes one multi-tenant medical office building and one property due to its bankruptcy status which is expected to be transitioned or sold.

 

   Total # of   Total   % of Total 
Geographic Concentration by Investment ($000’s)  Properties (1)   Investment (1)   Investment 
Texas   132   $1,074,142    11.7%
Florida   94    858,440    9.4%
Michigan   48    667,946    7.3%
Indiana   69    634,327    6.9%
California   61    615,552    6.7%
Pennsylvania   56    590,797    6.5%
Ohio   55    583,587    6.4%
Virginia   20    311,897    3.4%
Connecticut   7    292,548    3.2%
Tennessee   35    287,374    3.1%
Remaining 31 states (2)   313    2,848,913    31.1%
    890    8,765,523    95.7%
United Kingdom   55    394,053    4.3%
    945   $9,159,576    100.0%

 

 

(1) Excludes four properties with total investment of $4.6 million classified as assets held for sale.

(2) Includes Inspīr Carnegie Hill (f/k/a 2nd Avenue) development project.

 

   

 

  

   As of June 30, 2019 
Operating Lease Expirations & Loan
Maturities ($000’s) (1)		  Year   Lease Rent   Interest  

Lease and

Interest Rent

  

% of Total

Annualized

Contractual

Rent/Interest

 
  2019   $—   $825   $825    0.1%
   2020    5,459    —    5,459    0.6%
   2021    4,862    5,574    10,436    1.2%
   2022    37,012    —    37,012    4.4%
   2023    16,138    —    16,138    1.9%

 

(1) Based on annualized 2nd quarter 2019 contractual rent and interest.

 

The following tables present operator revenue mix, census and coverage data based on information provided by our operators for the indicated periods ended:

 

       Medicare /     
Operator Revenue Mix (1)  Medicaid   Insurance   Private / Other 
Three-months ended March 31, 2019   53.7%   34.0%   12.3%
Three-months ended December 31, 2018   54.8%   33.3%   11.9%
Three-months ended September 30, 2018   53.9%   33.7%   12.4%
Three-months ended June 30, 2018   52.7%   34.8%   12.5%
Three-months ended March 31, 2018   51.3%   36.4%   12.3%

 

 

(1) Excludes all properties considered non-core.

 

Operator Census and Coverage (1)  Coverage Data 
       Before   After 
       Management   Management 
   Occupancy (2)   Fees   Fees 
             
Twelve-months ended March 31, 2019   82.7%   1.67x   1.31x
Twelve-months ended December 31, 2018   82.8%   1.67x   1.32x
Twelve-months ended September 30, 2018   82.3%   1.67x   1.32x
Twelve-months ended June 30, 2018   82.5%   1.70x   1.34x
Twelve-months ended March 31, 2018   82.4%   1.69x   1.33x

 

 

(1) Excludes all properties considered non-core.

(2) Based on available (operating) beds.

 

   

 

  

The following table presents a debt maturity schedule as of June 30, 2019:

 

Debt Maturities ($000’s)  Unsecured Debt         
Year 

Line of Credit and

Term Loans (1)

  

Senior

Notes/Other (2)

   Sub Notes (3)   Secured
Debt		  

Total Debt

Maturities

 
2019  $—   $—   $—   $—   $— 
2020   —    —    —    —    — 
2021   500,000    —    20,000    2,275    522,275 
2022   902,270    —    —    —    902,270 
2023   —    700,000    —    —    700,000 
2024   —    400,000    —    —    400,000 
Thereafter   —    2,250,000    —    —    2,250,000 
   $1,402,270   $3,350,000   $20,000   $2,275   $4,774,545 

 

 

(1) The $500 million Line of Credit borrowings exclude $3.1 million net deferred financing costs and can be extended into 2022. The $902 million is comprised of a: $425 million term loan, £100 million term loan (equivalent to $127 million), $100 million term loan to Omega’s operating partnership and $250 million term loan (excludes $3.7 million net deferred financing costs related to the term loans).

(2) Excludes net discounts and deferred financing costs.

(3) Excludes $0.2 million of fair market valuation adjustments.

 

The following table presents investment activity:

 

Investment Activity ($000's)  Three Months Ended   Six Months Ended 
   June 30, 2019   June 30, 2019 
Funding by Investment Type  $ Amount   %   $ Amount   % 
Real Property  $—    —%  $—    —%
Construction-in-Progress   40,250    5.9    67,475    9.3 
Capital Expenditures   15,297    2.3    29,842    4.1 
Investment in Direct Financing Leases   —    —    —    — 
Mortgages   —    —    —    — 
Other   622,644    91.8    628,443    86.6 
Total  $678,191    100.0%  $725,760    100.0%