Omega Announces Second Quarter 2019 Financial Results

2019 AUG 21 (NewsRx) -- By a News Reporter-Staff News Editor at Health Policy and Law Daily -- Omega Healthcare Investors, Inc. (NYSE:OHI) (the “Company” or “Omega”) 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.

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