Omega Healthcare Investors, Inc.
), a real estate investment trust (REIT), reported second quarter
2012 adjusted FFO (funds from operations) of 53 cents per share,
beating the Zacks Consensus Estimate by 2 cents. Moreover, this
compares favorably with adjusted FFO of 47 cents in the
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Adjusted FFO came in at $55.7 million, compared to $48.4 million in
the year-earlier quarter. The reported FFO was $55.8 million, or 53
cents per share, compared to $42.6 million or 42 cents per share in
the year-earlier quarter.
Total operating revenue during the quarter was $83.8 million
compared to $72.6 million in the year-earlier quarter but down by 2
cents from the Zacks Consensus Estimate of $84 million.
Omega Healthcare's net income increased to $30.6 million or 29
cents per share compared with net income of $17.8 million or 17
cents per share for the same period in 2011. The increase was
driven by additional rental income and mortgage interest income
related to new investments, gains on the assets divesture, decrease
in real estate impairments and decrease in provision for
uncollectible accounts receivable, partly offset by increased
depreciation expense, interest expense and interest refinancing
Operating expenses for the quarter totaled $32.3 million, which
includes $27.2 million of depreciation and amortization expenses,
$3.5 million of general and administrative expense, $1.5 million of
stock-based compensation expense and $0.1 million of expense
related to recently completed acquisitions.
Other income and expenses stood at $23.0 million, which includes
$24.0 million in interest expenses and $0.7 million of amortized
deferred financing costs.
The company paid $11.8 million to retreat four mortgage loans
during the quarter, bearing annual interest rate of 6.49% and
having maturity period between October 2029 and September 2042,
guaranteed by the Department of Housing and Urban Development
(HUD). The payoff resulted in a $1.7 million of gain on the
extinguishment of the debt, which included a $0.1 million
The company also entered into separate Equity Distribution
Agreements, collectively called the 2012 Agreements, during the
reported quarter. The 2012 Agreements were signed separately with
BB&T Capital Markets, Credit Agricole Securities (USA) Inc.,
Deutsche Bank Securities Inc., Jefferies & Company, Inc.,
Merrill Lynch, a wealth management division of
Bank of America Corp.
) and others to establish a $245 million Equity Shelf Program
In the reported quarter, the company sold 510,000 shares under the
2010 ESP for net proceeds of approximately $10.8 million.
Consequently, in the month of June, the company terminated its $140
million 2010 ESP.
Acquisitions and Dispositions
In the reported quarter, the company purchased four skilled nursing
facilities (SNFs), totaling 383 beds and located in Indiana, for
$21.7 million and leased them to Health and Hospital Corporation.
The company also purchased one SNF totaling 80 beds and also
located in Indiana, for approximately $3.4 million and
leased it to Mark Ide Limited Liability Company.
The company sold three held-for-sale facilities for $7.9 million,
generating a $2.0 million accounting gain.
Concurrent with the earnings release, Omega Healthcare announced a
common share dividend of 42 cents per share, to be paid on August
15 to common shareholders of record as of July 31. As of this date,
the company will have outstanding common shares of approximately
At the end of the second quarter, the company had cash and cash
equivalents of $2.8 million. It had outstanding balance of $2.0
million under its unsecured revolving credit facility.
The company has revised its 2012 adjusted FFO guidance. Adjusted
FFO is expected to be between $2.12 and $2.15 per share versus its
previous range of $2.09 to $2.12 per share.
Omega Healthcare carries a Zacks #3 Rank, implying a short-term
Hold rating. We also reiterate our long-term Neutral recommendation
on the stock.
Note: FFO, a widely accepted and reported measure of the
performance of REITs, is derived by adding depreciation,
amortization and other non-cash expenses to net income.