| Restatement | Restatement The restatement of the Company's consolidated financial statements results from the Company's subsequent accounting for goodwill resulting from the Cole II Merger. Previously, the Company did not allocate goodwill to the disposal of real estate assets or held for sale real estate assets that met the definition of a business under GAAP, as required by ASC 350 “Intangibles - Goodwill and Other” in order to determine gain on disposition of assets or impairments, if any, respectively. For the disposal of real estate assets that constituted a business, goodwill and gain on disposition of assets both should have been reduced by the proportionate amount of goodwill allocated to each disposed of real estate asset. The amount of goodwill allocated is derived as the proportionate fair value of the real estate considered to be a business under GAAP at the time of sale to the fair value of the Company’s reporting unit. As a result, the restated consolidated balance sheet includes a reduction to goodwill of $ 22.2 million at September 30, 2015 and the restated consolidated statement of operations includes a reduction to gain on disposition of assets of $ 2.0 million and $15.7 million for the three and nine months ended September 30, 2015, respectively. The restated consolidated balance sheet includes a reduction to goodwill of $ 5.6 million at December 31, 2014 and the restated consolidated statement of operations includes a reduction to gain on disposition of assets of $0.6 million and $0.8 million for the three and nine months ended September 30, 2014, respectively. Further, in evaluating the impairment on held for sale real estate assets considered to be a business under GAAP, the proportionate amount of goodwill attributable to the real estate asset held for sale should be considered in determining the amount of impairment, if any. The amount of goodwill attributed is derived as the proportionate fair value of the real estate asset considered to be a business under GAAP held for sale at measurement date to the fair value of the Company’s reporting unit. As a result, the restated consolidated balance sheet includes a reduction to real estate assets held for sale, net of $ 0.7 million at September 30, 2015 and the restated consolidated statement of operations includes an increase to impairments of $ 0.2 million and $0.8 million for the three and nine months ended September 30, 2015, respectively. The restated consolidated balance sheet includes a reduction to real estate assets held for sale, net of $ 0.9 million at December 31, 2014 and the restated consolidated statement of operations includes an increase to impairments of $ 0.5 million and $1.2 million for the three and nine months ended September 30, 2014, respectively. As part of its restatement, the Company also identified one other immaterial error affecting the consolidated financial statements as of and for the three and nine months ended September 30, 2014. The Company recorded an increase to goodwill of $1.6 million in the restated consolidated balance sheet as of September 30, 2014 and recorded a decrease of $1.6 million to general and administrative expense in the restated consolidated statements of operations for the three and nine months ended September 30, 2014 to correct the presentation of account receivable balances acquired in the Cole II Merger as an increase to goodwill from the merger instead of a bad debt expense included in general and administrative expense based on facts that existed at the acquisition date. The Company has historically presented share repurchases as treasury stock (thereby reducing stockholders’ equity) in the consolidated balance sheets and consolidated statements of stockholders’ equity. However, the Company is incorporated in Maryland and under Maryland law, there is no concept of treasury stock. Therefore, shares repurchased should be considered retired and constitute authorized but unissued shares rather than treasury stock as previously presented. As a result, during the nine months ended September 30, 2015, the Company has corrected the classification error and the amount previously reported as treasury stock of $4.9 million at December 31, 2014 is presented as a reduction to common stock and common stock par value and an increase in accumulated deficit in the restated consolidated balance sheet and consolidated statement of stockholders' equity. In addition, the number of shares previously disclosed as issued have been reduced by the number of shares repurchased of 473,599 at December 31, 2014. This change does not affect previously disclosed shares outstanding, total stockholders’ equity or earnings per share computations. The consolidated financial statements included in this Form 10-Q/A have been restated as of September 30, 2015 and for the three and nine months then ended to reflect the adjustments described above. The consolidated financial statements included in this Form 10-Q/A have been restated as of December 31, 2014 and for the three and nine ended September 30, 2014 to reflect the adjustments described above. The following statements present the effect of the restatement on (i) the Company's consolidated balance sheets at September 30, 2015 and December 31, 2014, (ii) the Company's consolidated statements of operations for the three and nine months ended September 30, 2015 and 2014 and (iii) the Company's consolidated statements of cash flows for the nine months ended September 30, 2015 and 2014. The Company did not present a summary of the effect of the restatement on the consolidated statement of stockholders' equity for any of the above referenced periods because the impact to stockholders' equity is reflected below in the restated consolidated balance sheets. The Company did not present a summary of the effect of the restatement on the consolidated statements of comprehensive income (loss) for any of the above referenced periods because the impact to net income (loss) is reflected below in the restated consolidated statements of operations and the restatement adjustments did not affect any other component of comprehensive income (loss). The following table presents the consolidated balance sheet as previously reported, restatement adjustments and the consolidated balance sheet as restated at September 30, 2015 (in thousands, except per share data): As Previously Reported Restatement Adjustments As Restated Assets Investments: Real estate investments: Land and improvements $ 2,702,922 $ — $ 2,702,922 Buildings and improvements 4,779,228 — 4,779,228 Total real estate investments 7,482,150 — 7,482,150 Less: accumulated depreciation (826,280 ) — (826,280 ) 6,655,870 — 6,655,870 Loans receivable, net 106,944 — 106,944 Intangible lease assets, net 543,620 — 543,620 Real estate assets under direct financing leases, net 44,353 — 44,353 Real estate assets held for sale, net 78,007 (701 ) 77,306 Net investments 7,428,794 (701 ) 7,428,093 Cash and cash equivalents 28,210 — 28,210 Deferred costs and other assets, net 143,808 — 143,808 Goodwill 291,421 (22,209 ) 269,212 Total assets $ 7,892,233 $ (22,910 ) $ 7,869,323 Liabilities and stockholders’ equity Liabilities: Revolving credit facilities $ 75,000 $ — $ 75,000 Mortgages and notes payable, net 3,242,922 — 3,242,922 Convertible Notes, net 687,062 — 687,062 Total debt, net 4,004,984 — 4,004,984 Intangible lease liabilities, net 200,601 — 200,601 Accounts payable, accrued expenses and other liabilities 131,426 — 131,426 Total liabilities 4,337,011 — 4,337,011 Commitments and contingencies (see Note 8) Stockholders’ equity: Common stock, $0.01 par value 4,421 (7 ) 4,414 Capital in excess of par value 4,718,765 — 4,718,765 Accumulated deficit (1,159,685 ) (29,465 ) (1,189,150 ) Accumulated other comprehensive loss (1,717 ) — (1,717 ) Treasury stock, at cost (6,562 ) 6,562 — Total stockholders’ equity 3,555,222 (22,910 ) 3,532,312 Total liabilities and stockholders’ equity $ 7,892,233 $ (22,910 ) $ 7,869,323 The following table presents the consolidated balance sheet as previously reported, restatement adjustments and the consolidated balance sheet as restated at December 31, 2014 (in thousands, except per share data): As Previously Reported Restatement Adjustments As Restated Assets Investments: Real estate investments: Land and improvements $ 2,614,630 $ 2,614,630 Buildings and improvements 4,579,166 4,579,166 Total real estate investments 7,193,796 — 7,193,796 Less: accumulated depreciation (752,210 ) (752,210 ) 6,441,586 — 6,441,586 Loans receivable, net 109,425 109,425 Intangible lease assets, net 590,073 590,073 Real estate assets under direct financing leases, net 56,564 56,564 Real estate assets held for sale, net 119,912 (866 ) 119,046 Net investments 7,317,560 (866 ) 7,316,694 Cash and cash equivalents 176,181 176,181 Deferred costs and other assets, net 185,507 185,507 Goodwill 291,421 (5,573 ) 285,848 Total assets $ 7,970,669 $ (6,439 ) $ 7,964,230 Liabilities and stockholders’ equity Liabilities: Revolving credit facilities $ 15,114 $ 15,114 Mortgages and notes payable, net 3,629,998 3,629,998 Convertible Notes, net 678,190 678,190 Total debt, net 4,323,302 — 4,323,302 Intangible lease liabilities, net 205,968 205,968 Accounts payable, accrued expenses and other liabilities 123,298 123,298 Total liabilities 4,652,568 — 4,652,568 Commitments and contingencies (see Note 8) Stockholders’ equity: Common stock, $0.01 par value 4,118 (5 ) 4,113 Capital in excess of par value 4,361,320 4,361,320 Accumulated deficit (1,041,392 ) (11,296 ) (1,052,688 ) Accumulated other comprehensive loss (1,083 ) (1,083 ) Treasury stock, at cost (4,862 ) 4,862 — Total stockholders’ equity 3,318,101 (6,439 ) 3,311,662 Total liabilities and stockholders’ equity $ 7,970,669 $ (6,439 ) $ 7,964,230 The following table presents the consolidated statement of operations as previously reported, restatement adjustments and the consolidated statement of operations as restated for the three months ended September 30, 2015 (in thousands, except share and per share data): As Previously Reported Restatement Adjustments As Restated Revenues: Rentals $ 159,183 $ — $ 159,183 Interest income on loans receivable 1,764 — 1,764 Earned income from direct financing leases 725 — 725 Tenant reimbursement income 3,780 — 3,780 Other income and interest from real estate transactions 2,973 — 2,973 Total revenues 168,425 — 168,425 Expenses: General and administrative 12,265 — 12,265 Property costs 6,496 — 6,496 Real estate acquisition costs 576 — 576 Interest 54,673 — 54,673 Depreciation and amortization 64,493 — 64,493 Impairments 20,832 195 21,027 Total expenses 159,335 195 159,530 Income from continuing operations before other income and income tax expense 9,090 (195 ) 8,895 Other income: Gain on debt extinguishment 342 — 342 Total other income 342 — 342 Income from continuing operations before income tax expense 9,432 (195 ) 9,237 Income tax expense (184 ) — (184 ) Income from continuing operations 9,248 (195 ) 9,053 Discontinued operations: Loss from discontinued operations (41 ) — (41 ) Income before gain on disposition of assets 9,207 (195 ) 9,012 Gain on disposition of assets 7,960 (1,969 ) 5,991 Net income attributable to common stockholders $ 17,167 $ (2,164 ) $ 15,003 Net income per share of common stock—basic: Continuing operations $ 0.04 $ (0.01 ) $ 0.03 Net income per share attributable to common stockholders—basic $ 0.04 $ (0.01 ) $ 0.03 Net income per share of common stock—diluted: Continuing operations $ 0.04 $ (0.01 ) $ 0.03 Net income per share attributable to common stockholders—diluted $ 0.04 $ (0.01 ) $ 0.03 Weighted average shares of common stock outstanding: Basic 440,205,348 — 440,205,348 Diluted 440,353,965 — 440,353,965 The following table presents the consolidated statement of operations as previously reported, restatement adjustments and the consolidated statement of operations as restated for the three months ended September 30, 2014 (in thousands, except share and per share data): As Previously Reported Restatement Adjustments As Restated Revenues: Rentals $ 145,591 $ — $ 145,591 Interest income on loans receivable 1,805 — 1,805 Earned income from direct financing leases 837 — 837 Tenant reimbursement income 3,308 — 3,308 Other income and interest from real estate transactions 754 — 754 Total revenues 152,295 — 152,295 Expenses: General and administrative 11,995 (1,615 ) 10,380 Finance restructuring costs (11 ) — (11 ) Property costs 5,357 — 5,357 Real estate acquisition costs 865 — 865 Interest 53,535 — 53,535 Depreciation and amortization 62,069 — 62,069 Impairments 12,727 487 13,214 Total expenses 146,537 (1,128 ) 145,409 Income from continuing operations before other income and income tax expense 5,758 1,128 6,886 Other income: Gain on debt extinguishment 212 — 212 Total other income 212 — 212 Income from continuing operations before income tax expense 5,970 1,128 7,098 Income tax expense (242 ) — (242 ) Income from continuing operations 5,728 1,128 6,856 Discontinued operations: Income from discontinued operations 288 — 288 Gain on disposition of assets 403 (163 ) 240 Income from discontinued operations 691 (163 ) 528 Income before gain on disposition of assets 6,419 965 7,384 Gain on disposition of assets 1,251 (410 ) 841 Net income attributable to common stockholders $ 7,670 $ 555 $ 8,225 Net income per share of common stock—basic: Continuing operations $ 0.02 $ — $ 0.02 Net income per share attributable to common stockholders—basic $ 0.02 $ — $ 0.02 Net income per share of common stock—diluted: Continuing operations $ 0.02 $ — $ 0.02 Net income per share attributable to common stockholders—diluted $ 0.02 $ — $ 0.02 Weighted average shares of common stock outstanding: Basic 396,807,656 — 396,807,656 Diluted 397,613,583 — 397,613,583 The following table presents the consolidated statement of operations as previously reported, restatement adjustments and the consolidated statement of operations as restated for the nine months ended September 30, 2015 (in thousands, except share and per share data): As Previously Reported Restatement Adjustments As Restated Revenues: Rentals $ 473,308 $ — $ 473,308 Interest income on loans receivable 5,216 — 5,216 Earned income from direct financing leases 2,299 — 2,299 Tenant reimbursement income 11,903 — 11,903 Other income and interest from real estate transactions 5,920 — 5,920 Total revenues 498,646 — 498,646 Expenses: General and administrative 36,837 — 36,837 Property costs 20,317 — 20,317 Real estate acquisition costs 2,122 — 2,122 Interest 168,754 — 168,754 Depreciation and amortization 195,460 — 195,460 Impairments 56,222 776 56,998 Total expenses 479,712 776 480,488 Income from continuing operations before other income and income tax expense 18,934 (776 ) 18,158 Other income: Gain on debt extinguishment 2,489 — 2,489 Total other income 2,489 — 2,489 Income from continuing operations before income tax expense 21,423 (776 ) 20,647 Income tax expense (707 ) — (707 ) Income from continuing operations 20,716 (776 ) 19,940 Discontinued operations: Income from discontinued operations 90 — 90 Gain on disposition of assets 590 — 590 Income from discontinued operations 680 — 680 Income before gain on disposition of assets 21,396 (776 ) 20,620 Gain on disposition of assets 81,986 (15,695 ) 66,291 Net income attributable to common stockholders $ 103,382 $ (16,471 ) $ 86,911 Net income per share of common stock—basic: Continuing operations $ 0.24 $ (0.04 ) $ 0.20 Discontinued operations — — — Net income per share attributable to common stockholders—basic $ 0.24 $ (0.04 ) $ 0.20 Net income per share of common stock—diluted: Continuing operations $ 0.24 $ (0.04 ) $ 0.20 Discontinued operations — — — Net income per share attributable to common stockholders—diluted $ 0.24 $ (0.04 ) $ 0.20 Weighted average shares of common stock outstanding: Basic 429,387,707 — 429,387,707 Diluted 429,738,776 — 429,738,776 The following table presents the consolidated statement of operations as previously reported, restatement adjustments and the consolidated statement of operations as restated for the nine months ended September 30, 2014 (in thousands, except share and per share data): As Previously Reported Restatement Adjustments As Restated Revenues: Rentals $ 426,212 $ — $ 426,212 Interest income on loans receivable 5,463 — 5,463 Earned income from direct financing leases 2,521 — 2,521 Tenant reimbursement income 9,548 — 9,548 Other income and interest from real estate transactions 4,312 — 4,312 Total revenues 448,056 — 448,056 Expenses: General and administrative 33,496 (1,615 ) 31,881 Finance restructuring costs 13,022 — 13,022 Property costs 17,215 — 17,215 Real estate acquisition costs 2,372 — 2,372 Interest 163,926 — 163,926 Depreciation and amortization 184,586 — 184,586 Impairments 42,061 1,216 43,277 Total expenses 456,678 (399 ) 456,279 Loss from continuing operations before other expense and income tax expense (8,622 ) 399 (8,223 ) Other expense: Loss on debt extinguishment (64,496 ) — (64,496 ) Total other expense (64,496 ) — (64,496 ) Loss from continuing operations before income tax expense (73,118 ) 399 (72,719 ) Income tax expense (586 ) — (586 ) Loss from continuing operations (73,704 ) 399 (73,305 ) Discontinued operations: Income from discontinued operations 3,621 — 3,621 Gain on disposition of assets 488 (163 ) 325 Income from discontinued operations 4,109 (163 ) 3,946 Loss before gain on disposition of assets (69,595 ) 236 (69,359 ) Gain on disposition of assets 1,683 (597 ) 1,086 Net loss attributable to common stockholders $ (67,912 ) $ (361 ) $ (68,273 ) Net (loss) income per share of common stock—basic: Continuing operations $ (0.19 ) $ — $ (0.19 ) Discontinued operations 0.01 — 0.01 Net loss per share attributable to common stockholders—basic $ (0.18 ) $ — $ (0.18 ) Net (loss) income per share of common stock—diluted: Continuing operations $ (0.19 ) $ — $ (0.19 ) Discontinued operations 0.01 — 0.01 Net loss per share attributable to common stockholders—diluted $ (0.18 ) $ — $ (0.18 ) Weighted average shares of common stock outstanding: Basic 382,525,614 — 382,525,614 Diluted 382,525,614 — 382,525,614 The following table presents the consolidated statement of cash flows as previously reported, restatement adjustments and the consolidated statement of cash flows as restated for the nine months ended September 30, 2015 (in thousands): As Previously Reported Restatement Adjustments As Restated Operating activities Net income attributable to common stockholders $ 103,382 $ (16,471 ) $ 86,911 Adjustments to reconcile net income attributable to common stockholders to net cash provided by operating activities: Depreciation and amortization 195,460 — 195,460 Impairments 56,256 776 57,032 Amortization of deferred financing costs 5,893 — 5,893 Derivative net settlements, amortization and other interest rate hedge losses (95 ) — (95 ) Amortization of debt discounts 1,670 — 1,670 Stock-based compensation expense 10,757 — 10,757 Gain on debt extinguishment (2,489 ) — (2,489 ) Debt extinguishment costs (3,760 ) — (3,760 ) Gains on dispositions of real estate and other assets, net (82,576 ) 15,695 (66,881 ) Non-cash revenue (15,947 ) — (15,947 ) Other 165 — 165 Changes in operating assets and liabilities: Deferred costs and other assets, net (4,935 ) — (4,935 ) Accounts payable, accrued expenses and other liabilities 7,433 — 7,433 Net cash provided by operating activities 271,214 — 271,214 Investing activities Acquisitions of real estate (703,106 ) — (703,106 ) Capitalized real estate expenditures (7,449 ) — (7,449 ) Investments in loans receivable (4,020 ) — (4,020 ) Collections of principal on loans receivable and real estate assets under direct financing leases 4,450 — 4,450 Proceeds from dispositions of real estate and other assets 397,325 — 397,325 Transfers of net sales proceeds to restricted accounts pursuant to 1031 Exchanges (2,489 ) — (2,489 ) Transfers of net sales proceeds from Master Trust Release 40,126 — 40,126 Net cash used in investing activities (275,163 ) — (275,163 ) Financing activities Borrowings under Revolving Credit Facilities 535,000 — 535,000 Repayments under Revolving Credit Facilities (475,181 ) — (475,181 ) Repayments under mortgages and notes payable (347,242 ) — (347,242 ) Deferred financing costs (3,782 ) — (3,782 ) Proceeds from issuance of common stock, net of offering costs 347,211 — 347,211 Proceeds from exercise of stock options 46 — 46 Purchase of shares of common stock (1,700 ) — (1,700 ) Dividends paid/distributions to equity owners (216,231 ) — (216,231 ) Transfers from reserve/escrow deposits with lenders 17,857 — 17,857 Net cash used in financing activities (144,022 ) — (144,022 ) Net decrease in cash and cash equivalents (147,971 ) — (147,971 ) Cash and cash equivalents, beginning of period 176,181 — 176,181 Cash and cash equivalents, end of period $ 28,210 $ — $ 28,210 The following table presents the consolidated statement of cash flows as previously reported, restatement adjustments and the consolidated statement of cash flows as restated for the nine months ended September 30, 2014 (in thousands): As Previously Reported Restatement Adjustments As Restated Operating activities Net loss attributable to common stockholders $ (67,912 ) $ (361 ) $ (68,273 ) Adjustments to reconcile net loss attributable to common stockholders to net cash provided by operating activities: Depreciation and amortization 184,586 — 184,586 Impairments 42,061 1,216 43,277 Amortization of deferred financing costs 4,084 — 4,084 Derivative net settlements, amortization and other interest rate hedge losses (83 ) — (83 ) Amortization of debt premiums (821 ) — (821 ) Stock-based compensation expense 8,503 — 8,503 Loss on debt extinguishment 64,496 — 64,496 Debt extinguishment costs (59,069 ) — (59,069 ) Gains on dispositions of real estate and other assets, net (2,171 ) 760 (1,411 ) Non-cash revenue (12,877 ) — (12,877 ) Other 274 (1,615 ) (1,341 ) Changes in operating assets and liabilities: Deferred costs and other assets, net (3,111 ) — (3,111 ) Accounts payable, accrued expenses and other liabilities (3,248 ) — (3,248 ) Net cash provided by operating activities 154,712 — 154,712 Investing activities Acquisitions of real estate (569,806 ) — (569,806 ) Capitalized real estate expenditures (3,244 ) — (3,244 ) Collections of principal on loans receivable and real estate assets under direct financing leases 4,641 — 4,641 Proceeds from dispositions of real estate and other assets 37,886 — 37,886 Transfers of net sales proceeds from restricted accounts pursuant to 1031 Exchanges 20,784 — 20,784 Transfers of net sales proceeds to Master Trust Release (20,240 ) — (20,240 ) Net cash used in investing activities (529,979 ) — (529,979 ) Financing activities Borrowings under Revolving Credit Facilities 515,535 — 515,535 Repayments under Revolving Credit Facilities (425,219 ) — (425,219 ) Borrowings under Convertible Notes 757,500 — 757,500 Repayments under mortgages and notes payable (562,104 ) — (562,104 ) Deferred financing costs (20,011 ) — (20,011 ) Proceeds from issuance of common stock, net of offering costs 287,454 — 287,454 Proceeds from exercise of stock options 183 — 183 Offering costs paid on equity component of Convertible Notes (1,609 ) — (1,609 ) Purchase of shares of common stock (2,920 ) — (2,920 ) Consent fees paid to lenders — — — Dividends paid/distributions to equity owners (189,510 ) — (189,510 ) Transfers to reserve/escrow deposits with lenders (490 ) — (490 ) Net cash provided by financing activities 358,809 — 358,809 Net decrease in cash and cash equivalents (16,458 ) — (16,458 ) Cash and cash equivalents, beginning of period 66,588 — 66,588 Cash and cash equivalents, end of period $ 50,130 $ — $ 50,130 |
