PRESS RELEASE - FOR IMMEDIATE RELEASE
OMEGA ANNOUNCES 2003 FINANCIAL RESULTS AND
FFO OF $0.20 PER SHARE FOR THE FOURTH QUARTER
TIMONIUM, MARYLAND - JANUARY 29, 2004 - Omega Healthcare Investors, Inc.
(NYSE:OHI) today announced its results of operations for the quarter and fiscal
year ended December 31, 2003. The Company also reported Funds From Operations
("FFO") on a diluted basis for the three months ended December 31, 2003 of $11.0
million or $0.20 per common share and $43.9 million or $0.80 per common share,
respectively. The $43.9 million of FFO for the year excludes the impact of $8.9
million of non-cash impairment charges in accordance with the guidelines for the
calculation and reporting of FFO issued by the National Association of Real
Estate Investment Trusts ("NAREIT"). At December 31, 2003, the Company had 55.5
million diluted shares outstanding.
GAAP NET INCOME
After adjusting for the loss from discontinued operations of ($2.1) million
for the three months ended December 31, 2003, the Company reported net income
available to common stockholders of $154 thousand or $0.00 per fully diluted
common share on revenues of $20.8 million. This compares to a net loss of
($15.7) million or ($0.42) per fully diluted common share for the same period in
2002. A breakout of discontinued operations is included in a schedule attached
to this Press Release.
After adjusting for the loss from discontinued operations of ($0.3) million
for the twelve months ended December 31, 2003, the Company reported net income
available to common stockholders of $2.9 million or $0.08 per diluted common
share on revenues of $86.3 million. This compares to a net loss of ($34.8)
million or ($1.00) per diluted common share in 2002.
FOURTH QUARTER AND YEAR END RESULTS
Revenues, excluding nursing home revenues of owned and operated assets and
one-time revenue items, for the three- and twelve-month periods ended December
31, 2003, totaled $20.8 million and $84.1 million, respectively, a decrease of
$3.1 million over the same periods in 2002. The decreases were primarily the
result of operator restructurings during 2003, slightly offset by contractual
lease escalations.
Expenses for the three and twelve months ended December 31, 2003 were $12.7
million and $63.6 million, respectively, versus $29.6 million and $139.9 million
for the same periods in 2002. When excluding nursing home expenses of owned and
operated assets, expenses were $12.7 million and $62.1 million, respectively,
for the three and twelve months ended December 31, 2003 versus $20.7 million and
$76.1 million for the same periods in 2002. The $8.0 million favorable decrease
in expenses for the three-month period resulted from a $7.0 million refinancing
expense and a $1.0 million provision for impairment, both taken in the fourth
quarter of 2002. The $14.0 million favorable annual decrease for 2003 primarily
resulted from $4.0 million in reduced interest expense, $0.9 million in reduced
general, administrative and legal expenses, as well as the $7.0 million
refinancing expense and the $8.8 million provisions for uncollectible notes and
accounts receivable recorded in 2002. This favorable annual decrease was
partially offset by $8.9 million of impairment provisions taken in the first
quarter and third quarter of 2003.
Nursing home expenses, net of nursing home revenues, for owned and operated
assets for the three and twelve months ended December 31, 2003 were $9 thousand
and $1.5 million, a decrease of $5.4 million and $18.0 million from the same
periods in 2002. The decrease was primarily a result of the decrease in the
number of owned and operated facilities from 33 at December 31, 2001, three at
December 31, 2002 to one at December 31, 2003.
For the twelve months ended December 31, 2003, the Company recorded
provisions for impairment totaling $8.9 million. The provisions were taken in
the first quarter and third quarter of 2003. The provisions reduced the carrying
value of two facilities in the process of being closed to their estimated fair
value less costs to dispose. The buildings are being actively marketed for sale;
however, there can be no assurance if, or when, such sales will be completed or
whether such sales will be completed on terms that allow the Company to realize
the carrying value of the assets.
During the three-month period ended December 31, 2003, the Company sold one
leased facility, four closed facilities and the remaining facility which was
classified as asset held for sale in six separate transactions. The Company
realized proceeds of approximately $10.7 million, net of closing costs and other
expenses, resulting in a loss of approximately $3.0 million. The Company also
sold its investment in Principal Healthcare Finance Trust realizing proceeds of
approximately $1.5 million, net of closing costs, resulting in a gain of
approximately $0.1 million.
The Company believes that presentation of the Company's revenues and
expenses, excluding nursing home owned and operated assets, provides a useful
measure of the operating performance of the Company's core portfolio as a Real
Estate Investment Trust ("REIT") in view of the disposition of all but one of
the Company's owned and operated assets. For 2003, nursing home revenues,
nursing home expenses, operating assets and operating liabilities for the
Company's owned and operated properties are shown on a net basis on the face of
the Company's consolidated financial statements. For 2002, nursing home
revenues, nursing home expenses, operating assets and operating liabilities for
the Company's owned and operated properties are shown separately on a gross
basis on the face of the Company's consolidated financial statements.
FFO RESULTS
For the three and twelve months ended December 31, 2003, reportable diluted
FFO was $11.0 million or $0.20 per share and $43.9 million or $0.80 per share,
respectively, compared to $2.0 million (diluted loss of $0.02 per share) and
$8.9 million (diluted loss of $0.05 per share) for the same periods in 2002 due
to the factors mentioned above. The $43.9 million of FFO excludes the impact of
$8.9 million of non-cash impairment charges in accordance with the guidelines
for the calculation and reporting of FFO issued by NAREIT. For further
information, see the attached "Funds From Operations" schedule and notes.
PORTFOLIO DEVELOPMENTS
Sun Healthcare Group, Inc. ("Sun"). Effective January 1, 2004, the Company
re-leased five skilled nursing facilities ("SNFs") to an existing operator under
a new Master Lease, which has a five-year term and has an initial annual lease
rate of $0.75 million. Four SNFs formerly leased by Sun, three located in
Illinois and one located in Indiana, representing 449 total beds, were part of
this transaction. The fifth SNF in the transaction, located in Illinois,
representing 128 beds, was the last remaining owned and operated facility in the
Company's portfolio.
Also on December 1, 2003 the Company re-leased one SNF, formerly leased by
Sun, located in California and representing 59 beds, to a new operator under a
lease, which has a ten-year term and has an initial annual lease rate of $0.12
million.
As a result of the above-mentioned transitions of the five former Sun
facilities, Sun now operates 35 of the Company's facilities, down from 51
facilities one year ago. On January 26, 2004, Sun and the Company jointly
announced that they have reached an agreement in principle regarding the 51
properties owned by the Company that were leased to various affiliates of Sun.
The agreement in principle has been memorialized in a non-binding term sheet,
pursuant to which, among other things, Sun will continue to operate and occupy
23 long-term care facilities, five behavioral properties and two hospital
properties. One property in the State of Washington, formerly operated by a Sun
affiliate, has already been closed and the lease relating to that property will
be terminated. With respect to the remaining 20 facilities, 15 have already been
transitioned to new operators and five are in the process of being transferred
to new operators. The non-binding term sheet executed by Sun and Omega
anticipates execution and delivery of a new Master Lease with the following
general terms:
o Term: Through December 31, 2013
o Base Rent: Commencing February 1, 2004, monthly base rent will be
$1,560,190, subject to annual increases not to exceed 2.5% per year.
o Deferred Base Rent: $7,761,000, representing a portion of the Base
Rent that has not and will not be paid by Sun under the current leases
(the "Deferred Base Rent"), will be deferred and shall bear interest
at a floating rate with a floor of 6% per annum. That interest shall
accrue but shall not be payable to Omega through January 3, 2008.
Interest thereafter accruing shall be paid monthly. Omega is releasing
all other claims for Base Rent which otherwise would be due under the
current leases.
o Conversion of Deferred Base Rent: Omega will have the right at any
time to convert the Deferred Base Rent into 800,000 shares of Sun's
common stock, subject to certain non-dilution provisions and the right
of Sun to pay cash in an amount equal to the value of that stock in
lieu of issuing stock to Omega. If the value of the common stock
exceeds 140% of the Deferred Base Rent, Sun may require Omega to
convert the Deferred Base Rent.
Claremont Healthcare Holdings, Inc. ("Claremont"). Effective December 1, 2003,
the Company sold one SNF formerly leased by Claremont, located in Illinois and
representing 150 beds, for $9.0 million. The Company received net proceeds of
approximately $6.0 million in cash and a $3.0 million, five-year, 10.5% secured
note for the balance. This transaction results in a non-cash, non-FFO accounting
loss of approximately $3.8 million, which was recorded in the fourth quarter of
2003.
On November 7, 2003, the Company re-leased two SNFs formerly leased by
Claremont, located in Ohio and representing 270 beds, to a new operator under a
Master Lease, which has a ten-year term and has an initial annual lease rate of
$1.2 million.
Separately, the Company continues its ongoing restructuring discussions
with Claremont regarding the five facilities Claremont currently leases from the
Company. At the time of this press release, the Company cannot determine the
timing or outcome of these discussions. Claremont failed to pay base rent due
during the fourth quarter of 2003 in the amount of $1.5 million. During the
fourth quarter of 2003, the Company applied security deposits in the amount of
$1.0 million to pay Claremont's rent payments and the Company demanded that
Claremont restore the $1.5 million security deposit. As of the date of this
press release, the Company has no additional security deposits with Claremont.
The Company is recognizing revenue from Claremont on a cash-basis as it is
received.
ACQUISITION LINE
Effective December 31, 2003, the Company closed on a four-year, $50 million
revolving acquisition line of credit arranged by GE Healthcare Financial
Services. The acquisition line of credit will be secured by first liens on
potential facilities acquired or assignments of mortgages made on new
acquisitions. The interest rate of LIBOR plus 3.75% with a 6% floor on the
revolving acquisition line of credit is identical to the Company's existing
Credit Facility also arranged by GE Healthcare Financial Services.
DIVIDEND POLICY
On January 21, 2004, the Company's Board of Directors declared a common
stock dividend of $0.17 per share, increasing the quarterly common dividend by
$0.02 per share or 13%. The common stock dividend will be paid on February 13,
2004 to common stockholders of record on February 2, 2004. At the date of this
press release, the Company had approximately 37.5 million outstanding common
shares.
The Company's Board of Directors also declared its regular quarterly
dividends for all classes of preferred stock, payable February 13, 2004 to
preferred stockholders of record on February 2, 2004. Series A and Series B
preferred stockholders of record on February 2, 2004 will be paid dividends in
the amount of approximately $0.578 and $0.539, per preferred share,
respectively, on February 13, 2004. The Company's Series C preferred stockholder
will be paid a dividend of $2.72 per Series C preferred share on February 13,
2004. The liquidation preference for the Company's Series A, B and C preferred
stock is $25.00, $25.00 and $100.00 per share, respectively. Regular quarterly
preferred dividends represent dividends for the period November 1, 2003 through
January 31, 2004. Total dividend payments for all classes of preferred stock are
approximately $5.2 million.
TAX TREATMENT FOR 2003 DIVIDENDS
On August 15, 2003 the Company paid dividends to the Preferred A, B and C
stockholders in the approximate per share amounts of $6.359, $5.930 and $27.307,
respectively, for stockholders of record on August 5, 2003. Also, on November
17, 2003 the Company paid dividends to the Preferred A, B and C stockholders in
the approximate per share amounts of $0.578, $0.539 and $2.50, respectively, for
stockholders of record on October 31, 2003. The Company has determined that
84.66% of all preferred dividends in 2003 should be treated for tax purposes as
a return of capital, with the balance, 15.34%, treated as an ordinary dividend.
On November 17, 2003 the Company paid a common dividend in the amount of $0.15
per share to stockholders of record on October 31, 2003. The Company has
determined that 100% of the common dividends paid in 2003 should be treated for
tax purposes as a return of capital.
CONFERENCE CALL
The Company will be conducting a conference call on Thursday, January 29,
2004, at 10 a.m. EST to review the Company's 2003 fourth quarter and year end
results and current developments. 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 investing in and providing
financing to the long-term care industry. At December 31, 2003, the Company
owned or held mortgages on 211 skilled nursing and assisted living facilities
with approximately 21,500 beds located in 28 states and operated by 39
third-party healthcare operating companies.
FOR FURTHER INFORMATION, CONTACT
Bob Stephenson, CFO at (410) 427-1722
------------------------
This announcement includes forward-looking statements. All forward-looking
statements included herein are based on information available to the Company on
the date hereof. Such statements only speak as of the date hereof and the
Company assumes no obligation to update such forward-looking statements. 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) uncertainties relating to
the restructuring of Sun's remaining obligations and payment of contractual
rents, including without limitation the ability of the parties to execute and
perform under definitive agreements reflecting the non-binding term sheet, and
the potential that definitive agreements, if executed, may differ materially
from the non-binding term sheet, (iii), regulatory and other changes in the
healthcare sector, including without limitation, changes in Medicare
reimbursement; (iv) changes in the financial position of the Company's
operators; (v) the ability of 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;
(vi) the availability and cost of capital; (vii) competition in the financing of
healthcare facilities; and (viii) other factors identified in the Company's
filings with the Securities and Exchange Commission.
OMEGA HEALTHCARE INVESTORS, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
DECEMBER 31,
2003 2002
--------------------------------
ASSETS
Real estate properties
Land and buildings at cost.................................................... $ 692,454 $ 669,188
Less accumulated depreciation................................................. (134,477) (117,986)
--------------------------------
Real estate properties--net................................................. 557,977 551,202
Mortgage notes receivable--net................................................ 119,815 173,914
--------------------------------
677,792 725,116
Other investments--net.......................................................... 29,787 36,887
--------------------------------
707,579 762,003
Assets held for sale--net....................................................... -- 2,324
--------------------------------
Total investments............................................................. 707,579 764,327
Cash and cash equivalents....................................................... 3,094 14,340
Accounts receivable--net........................................................ 1,893 2,766
Interest rate cap............................................................... 5,537 7,258
Other assets.................................................................... 6,951 5,597
Operating assets for owned properties........................................... -- 9,721
--------------------------------
Total assets.................................................................. $ 725,054 $ 804,009
================================
LIABILITIES AND STOCKHOLDERS EQUITY
Revolving lines of credit....................................................... $ 177,074 $ 177,000
Unsecured borrowings............................................................ 100,000 100,000
Other long--term borrowings..................................................... 3,520 29,462
Accrued expenses and other liabilities.......................................... 6,583 13,234
Operating liabilities for owned properties...................................... -- 4,612
Operating assets and liabilities for owned properties--net...................... 1,642 --
--------------------------------
Total liabilities............................................................ 288,819 324,308
--------------------------------
Stockholders equity:
Preferred stock $1.00 par value; authorized--10,000 shares:
Issued and outstanding--2,300 shares Class A with an
aggregate liquidation preference of $57,500............................... 57,500 57,500
Issued and outstanding--2,000 shares Class B with an
aggregate liquidation preference of $50,000............................... 50,000 50,000
Issued and outstanding--1,048 shares Class C with an
aggregate liquidation preference of $104,842.............................. 104,842 104,842
Common stock $.10 par value; authorized--100,000 shares
Issued and outstanding--37,291 shares in 2003 and 37,141
shares in 2002............................................................ 3,729 3,714
Additional paid-in capital.................................................... 481,467 481,052
Cumulative net earnings....................................................... 174,275 151,245
Cumulative dividends paid..................................................... (431,123) (365,654)
Unamortized restricted stock awards........................................... -- (116)
Accumulated other comprehensive loss.......................................... (4,455) (2,882)
--------------------------------
Total stockholders equity.................................................. 436,235 479,701
--------------------------------
Total liabilities and stockholders equity.................................. $ 725,054 $ 804,009
================================
OMEGA HEALTHCARE INVESTORS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
THREE MONTHS ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
2003 2002 2003 2002
--------------------- ---------------------
REVENUES
Rental income.................................................................$ 16,536 $ 16,755 $65,121 $ 61,346
Mortgage interest income...................................................... 3,401 5,056 14,747 20,922
Other investment income - net................................................. 576 1,075 2,982 5,302
Nursing home revenues of owned and operated assets............................ -- 3,521 -- 44,277
Litigation settlement......................................................... -- -- 2,187 --
Miscellaneous................................................................. 240 998 1,230 1,757
--------------------- ---------------------
20,753 27,405 86,267 133,604
--------------------- ---------------------
EXPENSES
Nursing home expenses of owned and operated assets............................ -- 8,884 -- 63,778
Nursing home revenues and expenses of owned and operated assets - net......... 9 -- 1,466 --
Depreciation and amortization................................................. 5,234 5,125 20,985 20,538
Interest...................................................................... 5,425 5,613 23,388 27,381
General and administrative.................................................... 1,518 1,220 5,943 6,285
Legal......................................................................... 421 606 2,301 2,869
State taxes................................................................... 141 220 614 490
Refinancing expenses.......................................................... -- 7,000 -- 7,000
Provisions for impairment..................................................... -- 1,000 8,894 3,657
Provisions for uncollectible mortgages, notes and accounts receivable......... -- (54) -- 8,844
Adjustment of derivatives to fair value....................................... -- -- -- (946)
--------------------- ---------------------
12,748 29,614 63,591 139,896
--------------------- ---------------------
Income (loss) before (loss) gain on assets sold................................. 8,005 (2,209) 22,676 (6,292)
(Loss) gain on assets sold - net................................................ (764) 693 665 2,548
--------------------- ---------------------
Income (loss) from continuing operations........................................ 7,241 (1,516) 23,341 (3,744)
Loss from discontinued operations............................................... (2,058) (9,185) (311) (10,902)
--------------------- ---------------------
Net income (loss)............................................................... 5,183 (10,701) 23,030 (14,646)
Preferred stock dividends....................................................... (5,029) (5,029) (20,115) (20,115)
--------------------- ---------------------
Net income (loss) available to common...........................................$ 154 $(15,730) $ 2,915 $(34,761)
===================== =====================
Income (loss) per common share:
Basic:
Income (loss) from continuing operations....................................$ 0.06 $ (0.18) $ 0.09 $ (0.69)
===================== =====================
Net income (loss)...........................................................$ -- $ (0.42) $ 0.08 $ (1.00)
===================== =====================
Diluted:
Income (loss) from continuing operations....................................$ 0.06 $ (0.18) $ 0.08 $ (0.69)
===================== =====================
Net income (loss)...........................................................$ -- $ (0.42) $ 0.08 $ (1.00)
===================== =====================
Dividends declared per common share.............................................$ 0.15 $ -- $ 0.15 $ --
===================== =====================
Weighted-average shares outstanding, basic...................................... 37,264 37,140 37,189 34,739
===================== =====================
Weighted-average shares outstanding, diluted.................................... 38,699 37,140 38,154 34,739
===================== =====================
Components of other comprehensive income:
Unrealized gain on Omega Worldwide, Inc.......................................$ -- $ -- $ -- $ 969
===================== =====================
Unrealized gain (loss) on hedging contracts...................................$ 362 $ (1,081) $(1,572) $ (2,033)
===================== =====================
Total comprehensive income (loss)...............................................$ 5,545 $(11,782) $21,458 $(15,710)
===================== =====================
OMEGA HEALTHCARE INVESTORS, INC.
FUNDS FROM OPERATIONS
UNAUDITED
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
THREE MONTHS ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
2003 2002 2003 2002
--------------------- ---------------------
NET INCOME (LOSS) AVAILABLE TO COMMON...........................................$ 154 $(15,730) $ 2,915 $(34,761)
Add back loss (deduct gain) from real estate dispositions..................... 2,927 (693) 149 (2,548)
Add back impairment charges................................................... -- 10,513 8,894 15,366
--------------------- ---------------------
Sub-total................................................................... 3,081 (5,910) 11,958 (21,943)
Elimination of non-cash items included in net income (loss):
Depreciation................................................................ 5,269 5,248 21,264 21,092
Amortization................................................................ 39 46 162 178
Adjustment of derivatives to fair value..................................... -- -- -- (946)
--------------------- ---------------------
FUNDS FROM OPERATIONS, BASIC.................................................... 8,389 (616) 33,384 (1,619)
Series C Preferred Dividends.................................................... 2,621 2,621 10,484 10,484
--------------------- ---------------------
FUNDS FROM OPERATIONS, DILUTED..................................................$ 11,010 $ 2,005 $43,868 $ 8,865
--------------------- ---------------------
Weighted-average common shares outstanding, basic............................... 37,264 37,140 37,189 34,739
Assumed conversion of Series C Preferred Stock................................ 16,775 16,775 16,775 16,775
Assumed exercise of stock options............................................. 1,435 726 965 1,062
--------------------- ---------------------
Weighted-average common shares outstanding, diluted............................. 55,474 54,641 54,929 52,576
--------------------- ---------------------
FFO PER SHARE, BASIC............................................................$ 0.23 $ (0.02) $ 0.90 $ (0.05)
FFO PER SHARE, DILUTED *........................................................$ 0.20 $ (0.02) $ 0.80 $ (0.05)
ADJUSTED FUNDS FROM OPERATIONS:
Funds from operations, diluted................................................$ 11,010 $ 2,005 $43,868 $ 8,865
Deduct legal settlement....................................................... -- -- (2,187) --
Deduct nursing home revenues.................................................. (939) (3,521) (4,601) (44,277)
Deduct one-time revenue and other adjustments................................. -- (1,239) -- (3,037)
Add back one-time refinancing expense......................................... -- 7,000 -- 7,000
Add back nursing home expenses................................................ 948 8,884 6,067 65,746
Add back provisions for uncollectible mortgages, notes and
accounts receivable......................................................... -- (54) -- 8,844
Add back write-off of deferred financing cost................................. -- -- 2,586 --
--------------------- ---------------------
ADJUSTED FUNDS FROM OPERATIONS..................................................$ 11,019 $ 13,075 $45,733 $ 43,141
--------------------- ---------------------
* Lower of basic or diluted FFO per share.
The Company believes that Funds From Operations ("FFO") is an important
supplemental measure of the Company's 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. 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"). The Company defines FFO as net income available to
common stockholders, adjusted for the effects of asset dispositions and
impairments and certain non-cash items, primarily depreciation and amortization.
NAREIT's implementation guidance provides that impairment write-downs associated
with previously depreciable operators' property should be added back to GAAP net
income to calculate FFO. FFO herein is not necessarily comparable to FFO of
other REITs that do not use the same definition or implementation guidelines or
interpret the standards differently from the Company. Diluted FFO is adjusted
for the assumed conversion of Series C preferred stock and the exercise of
in-the-money stock options.
Adjusted FFO is calculated as diluted FFO less revenues and expenses
related to nursing home operations and one-time revenue or expense items. The
Company believes that adjusted FFO provides an enhanced measure of the operating
performance of the Company's core portfolio as a REIT in view of the disposition
of all but one of the Company's owned and operated assets.
Neither FFO nor adjusted FFO represents cash generated from operating
activities in accordance with GAAP, and therefore, should not be considered
alternatives to net income as indications of operating performance or to net
cash flow from operating activities, as determined by GAAP, as a measure of
liquidity, and such measures are not necessarily indicative of cash available to
fund cash needs or dividends. The Company believes that in order to facilitate a
clear understanding of the consolidated historical operating results of the
Company, FFO and adjusted FFO should be examined in conjunction with net income
as presented elsewhere in this press release.
In October 2003, NAREIT informed its member companies that the Securities
and Exchange Commission ("SEC") has taken the position that asset impairment
charges should not be excluded in calculating FFO. The SEC's interpretation is
that recurring impairments on real property are not an appropriate adjustment.
If the Company adopted the SEC's interpretation of FFO and did not adjust for
asset impairment charges, the Company's basic FFO, diluted FFO and FFO per
diluted share for historical periods would be different than the amounts
reported in this release and in previous disclosures. According to NAREIT, there
is inconsistency among NAREIT member companies as to the adoption of the SEC's
interpretation of FFO. Therefore, a comparison of the Company's FFO results to
another company's FFO results may not be meaningful.
The following table presents the Company's FFO results reflecting the
impact of asset impairment charges (the SEC's interpretation) for the quarters
and years ended December 31, 2003 and 2002:
THREE MONTHS ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
2003 2002 2003 2002
--------------------- ---------------------
FUNDS FROM OPERATIONS, BASIC....................................................$..8,389 $ (616) $33,384 $ (1,619)
Impairment charges.............................................................. -- (10,513) (8,894) (15,366)
--------------------- ---------------------
FUNDS FROM OPERATIONS, BASIC INCLUDING IMPAIRMENT CHARGES....................... 8,389 (11,129) 24,490 (16,985)
Series C Preferred Dividends.................................................... 2,621 2,621 10,484 10,484
--------------------- ---------------------
FUNDS FROM OPERATIONS, DILUTED INCLUDING IMPAIRMENT CHARGES.....................$ 11,010 $ (8,508) $34,974 $ (6,501)
===================== =====================
Weighted-average common shares outstanding, basic............................... 37,264 37,140 37,189 34,739
Assumed conversion of Series C Preferred Stock................................ 16,775 16,775 16,775 16,775
Assumed exercise of stock options............................................. 1,435 726 965 1,062
--------------------- ---------------------
Weighted-average common shares outstanding, diluted............................. 55,474 54,641 54,929 52,576
===================== =====================
FFO PER SHARE, BASIC INCLUDING IMPAIRMENT CHARGES...............................$ 0.23 $ (0.30) $ 0.66 $ (0.49)
===================== =====================
FFO PER SHARE, DILUTED INCLUDING IMPAIRMENT CHARGES *...........................$ 0.20 $ (0.30) $ 0.64 $ (0.49)
===================== =====================
ADJUSTED FUNDS FROM OPERATIONS INCLUDING IMPAIRMENT CHARGES:
Funds from operations, diluted including impairment charges...................$ 11,010 $ (8,508) $34,974 $ (6,501)
Deduct legal settlement....................................................... -- -- (2,187) --
Deduct nursing home revenues.................................................. (939) (3,521) (4,601) (44,277)
Deduct one-time revenue and other adjustments................................. -- (1,239) -- (3,037)
Add back one-time refinancing expense......................................... -- 7,000 -- 7,000
Add back nursing home expenses................................................ 948 8,884 6,067 65,746
Add back provisions for uncollectible mortgages, notes and
accounts receivable......................................................... -- (54) -- 8,844
Add back write-off of deferred financing...................................... -- -- 2,586 --
--------------------- ---------------------
ADJUSTED FUNDS FROM OPERATIONS INCLUDING IMPAIRMENT CHARGES.....................$ 11,019 $ 2,562 $36,839 $ 27,775
===================== =====================
* Lower of basic or diluted FFO per share.
Nursing home revenues and nursing home expenses in the Company's
consolidated financial statements which relate to the Company's owned and
operated assets are as follows:
THREE MONTHS ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
------------------ ------------------
2003 2002 2003 2002
------------------ ------------------
(IN THOUSANDS) (IN THOUSANDS)
NURSING HOME REVENUES (1)
Medicaid............................. $ 551 $ 2,048 $ 2,624 $26,947
Medicare............................. 101 645 747 9,307
Private & other...................... 287 828 1,230 8,023
------------------ ------------------
Total nursing home revenues (2).... 939 3,521 4,601 44,277
------------------ ------------------
NURSING HOME EXPENSES
Patient care expenses................ 546 2,223 2,566 31,219
Administration....................... 293 1,250 2,245 13,463
Property & related................... 61 316 389 3,861
Leasehold buyout expense............. -- 2,672 582 4,342
Management fees...................... 48 173 257 2,465
Rent................................. -- 579 28 2,536
Provision for uncollectible accounts. -- 1,671 -- 5,892
------------------ ------------------
Total nursing home expenses (2).... 948 8,884 6,067 63,778
------------------ ------------------
Nursing home revenues and expenses of
owned and operated assets - net (2).. $ (9) $ -- $(1,466) $ --
================== ==================
(1) Nursing home revenues from these owned and operated assets are
recognized as services are provided.
(2) Nursing home revenues and expenses of owned and operated assets for
the three and twelve months ended December 31, 2003 are shown on a net
basis on the face of the Company's Consolidated Statements of
Operations and are shown on a gross basis for the three and twelve
months ended December 31, 2002.
The table below reconciles reported revenues and expenses to revenues and
expenses excluding nursing home revenues and expenses of owned and operated
assets. Nursing home revenues and expenses of owned and operated assets for the
three and twelve months ended December 31, 2003 are shown on a net basis on the
face of the Company's Consolidated Statements of Operations and are shown on a
gross basis for the three and twelve months ended December 31, 2002. Since
nursing home revenues are not included in reported revenues for the three and
twelve months ended December 31, 2003, no adjustment is necessary to exclude
nursing home revenues.
THREE MONTHS ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
------------------ -------------------
2003 2002 2003 2002
------------------ -------------------
(IN THOUSANDS) (IN THOUSANDS)
Total revenues......................... $20,753 $27,405 $86,267 $133,604
Nursing home revenues of owned
and operated assets.................. -- 3,521 -- 44,277
------------------ -------------------
REVENUES EXCLUDING NURSING HOME
REVENUES OF OWNED AND OPERATED
ASSETS............................. $20,753 $23,884 $86,267 $ 89,327
================== ===================
Total expenses......................... $12,748 $29,614 $63,591 $139,896
Nursing home expenses of owned
and operated assets.................. -- 8,884 -- 63,778
Nursing home revenues and expenses of
owned and operated assets - net...... 9 -- 1,466 --
------------------ -------------------
EXPENSES EXCLUDING NURSING HOME
EXPENSES OF OWNED AND OPERATED
ASSETS............................. $12,739 $20,730 $62,125 $ 76,118
================== ===================
The assets and liabilities in the Company's financial statements which
relate to the Company's owned and operated assets are as follows:
DECEMBER 31,
2003 2002
-----------------------------
(IN THOUSANDS)
ASSETS
Cash ......................................... $ 624 $ 838
Accounts receivable - net..................... 1,412 7,491
Other current assets.......................... 253 1,207
-----------------------------
Total current assets (1)................... 2,289 9,536
-----------------------------
Investment in leasehold - net (1)............. -- 185
Land and buildings............................ 5,295 5,571
Less accumulated depreciation................. (681) (675)
-----------------------------
Land and buildings - net...................... 4,614 4,896
-----------------------------
Assets held for sale - net.................... -- 2,324
-----------------------------
Total assets.............................. $ 6,903 $16,941
=============================
LIABILITIES
Accounts payable.............................. $ 98 $ 389
Other current liabilities..................... 3,833 4,223
-----------------------------
Total current liabilities.................. 3,931 4,612
-----------------------------
Total liabilities (1)..................... $ 3,931 4,612
=============================
Operating assets and liabilities for
owned properties - net (1).................. $(1,642) $ --
=============================
(1) Operating assets and liabilities for owned properties as of December
31, 2003 are shown on a net basis on the face of our Consolidated
Balance Sheet and are shown on a gross basis as of December 31, 2002.
The following table summarizes the results of operations of the sold and
held for sale facilities during the three and twelve months ended December 31,
2003 and 2002, respectively.
THREE MONTHS ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
------------------- ------------------
2003 2002 2003 2002
------------------- ------------------
(IN THOUSANDS) (IN THOUSANDS)
REVENUES
Rental income....................... $ 179 $ 496 $ 944 $ 3,474
Mortgage interest income............ -- -- -- 33
------------------- ------------------
179 496 944 3,507
------------------- ------------------
EXPENSES
Operating........................... -- -- -- (1,968)
Depreciation and amortization....... (74) (169) (441) (732)
Provision for impairment............ -- (9,512) -- (11,709)
------------------- ------------------
(74) (9,681) (441) (14,409)
------------------- ------------------
Income (loss) before loss on sale of
assets.............................. 105 (9,185) 503 (10,902)
Loss on assets sold - net.............. (2,163) -- (814) --
------------------- ------------------
LOSS FROM DISCONTINUED OPERATIONS...... $(2,058) $(9,185) $(311) $(10,902)
=================== ==================
The table below summarizes the Company's number of properties and
investment by category for the quarter ended December 31, 2003:
ASSETS
TOTAL HELD
PURCHASE / MORTGAGES OWNED & Closed Healthcare FOR
FACILITY COUNT LEASEBACK RECEIVABLE OPERATED FACILITIES FACILITIES SALE TOTAL
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at September 30, 2003.......... 155 51 1 9 216 1 217
Properties closed...................... (1) - - 1 - - -
Properties sold/mortgages paid......... (1) - - (4) (5) (1) (6)
Transition leasehold interest.......... - - - - - - -
Properties leased/mortgages placed..... - - - - - - -
Properties transferred to
purchase/leaseback................... - - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 2003........... 153 51 1 6 211 - 211
====================================================================================================================================
INVESTMENT ($000'S)
- ---------------------------------------
Balance at September 30, 2003.......... $698,362 $120,314 $ 5,295 $ 6,168 $830,139 $ 2,091 $832,230
Properties transferred to assets
held for sale........................ - - - - - - -
Properties closed...................... (1,297) - - 1,297 - - -
Properties sold/mortgages paid......... (14,700) - - (2,868) (17,568) (2,091) (19,659)
Transition leasehold interest.......... - - - - - - -
Properties leased/mortgages placed..... - - - - - - -
Properties transferred to
purchase/leaseback................... - - - - - - -
Impairment on properties............... - - - - - - -
Capex and other........................ 197 (499) - - (302) - (302)
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 2003........... $682,562 $119,815 $ 5,295 $ 4,597 $812,269 $ - $812,269
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