Omega Healthcare Investors CEO Discusses Q3 2010 Results - Earnings Call Transcript
Omega Healthcare Investors (
)
Q3 2010
Earnings Call
November 4, 2010 10:00 a.m. ET
Executives
Michelle Reiber – Investor Relations
Taylor Pickett – Chief Executive Officer
Bob Stephenson – Chief Financial Officer
Dan Booth – Chief Operating Officer
Analysts
Tayo Okusanaya - Jefferies & Co.
Kirk Streckfus – Stifel Nicolaus
Presentation
Operator
Compare to:
Previous Statements by OHI
»
Omega Healthcare Investors Inc. Q2 2010 Earnings Call Transcript
»
Omega HealthCare Investors, Inc. Q1 2010 Earnings Call Transcript
»
Omega Healthcare Investors, Inc. Q4 2008 Earnings Call Transcript
»
Omega Healthcare Investors, Inc. Q3 2008 Earnings Call Transcript
Good day ladies and gentlemen, and welcome to the Omega Healthcare Investors Incorporated Third Quarter Earnings Call for 2010. [Operator Instructions.] I would now like to turn the conference over to Ms. Michelle Reiber.
Michelle Reiber
Thank you and good morning. Comments made during this conference call that are not historical facts may be forward-looking statements, such as statements regarding our financial and FFO projections, dividend policy, portfolio restructurings, rent payments, financial condition or prospects of our operators, contemplated acquisitions, and our business and portfolio outlook generally. These forward-looking statements involve risks and uncertainties which may cause actual results to differ materially.
Please see our press releases and our filings with the Securities and Exchange Commission including, without limitation, our most recent report on Form 10-K which identifies specific factors that may cause actual results or events to differ materially from those described in forward-looking statements.
During the call today we will refer to some non-GAAP financial measures such as FFO, adjusted FFO and EBITDA. Reconciliations of these non-GAAP measures to the most comparable measure under generally accepted accounting principles, as well as an explanation of the usefulness of the non-GAAP measures, are available under the financial information section of our website at www.omegahealthcare.com, and in the case of FFO and adjusted FFO, in our press release issued today.
I will now turn the call over to our CEO, Taylor Pickett.
Taylor Pickett
Thanks Michele, and good morning. Adjusted FFO for the third quarter is $0.45 per share. We increased our common dividend by $0.01 per share, up to $0.37 per share. This reflects a payout ratio within our historical policy range of 80% to 85%.
We have narrowed our quarterly adjusted FFO guidance range to $0.43 to $0.44 per share. This run rate reflects the full impact of the Capital Source closing, the equity issuances during the third quarter, and in October, the sale of our 2022 bonds.
Our balance sheet and liquidity are in excellent shape. We have nearly all of our $320 million line of credit available for acquisitions, our first bond maturity is 2014, and we've repaid the secured GE term loan that had a 2014 maturity. In addition, our debt to EBITDA leverage is back under 4.5 times.
In recognition of our prudent asset and debt management, Moody's upgraded Omega to Ba2 on September 13. The Capital Source assets have been fully transitioned into Omega, and as expected we're seeing new opportunities from these operators in addition to our normal transaction sources.
Bob Stephenson, our chief financial officer, will now review our third quarter financial results.
Bob Stephenson
Thank you Taylor, and good morning. Our reportable FFO on a diluted basis is $42.5 million, or $0.44 per share for the quarter, as compared to $30 million, or $0.36 per diluted share in the third quarter of 2009.
Our adjusted FFO was $43.5 million, or $0.45 per share for the quarter, and excludes non-cash restricted stock, compensation expense of $450,000, $78,000 of acquisition-related expenses, and it also excludes a $480,000 net loss associated with the runoff of expenses from our former owned and operated assets. Further information regarding the calculation of FFO is included in our earnings release and on our website.
Operating revenue for the quarter, when excluding owned and operated nursing home revenues, was $69.7 million, which is $45 million for the third quarter of 2009. The increase was primarily the result of $25 million of revenue associated with the Capital Source acquisitions completed in December of 2009, and June of 2010, and incremental revenue associated with our capital improvements made to our facilities throughout 2009 and in 2010. This was partially offset by a $1 million quarterly decrease in Formation's rent, based on their amended first quarter 2010 contract. The $69.7 million of revenue for the quarter was composed of $65.7 million of cash revenue and $4 million of non-cash revenue.
Operating expense for the third quarter of 2010, when excluding nursing home expenses, provision for impairments, and acquisition deal-related expenses, increased by $18.4 million as compared to the third quarter of 2009. The increase was primarily the result of additional depreciation expense associated with nearly $900 million of Capital Source assets acquired in December 2009 and June 2010, as well as additional G&A, primarily related to the acquisitions. We believe our G&A run rate should be approximately $13.5 million annually, assuming no extraordinary transactions or unusual debts.
Interest expense for the quarter, when excluding non-cash deferred financing costs, was $19 million versus $9.2 million for the same period in 2009. The increase of $9.8 million in interest expense resulted from higher debt balances associated with a full-quarter of interest related to the $200 million 7.5% bonds due 2020 that were issued in February of 2010 and a full quarter of interest related to the $202 million of debt we assumed to partially finance the Capital Source acquisitions.
Turning to the balance sheet, we completed a number of transactions in 2010 which had, and will have, a significant impact on our balance sheet. In February, we issued and sold 200 million 7.5% senior unsecured notes due 2020. In April, we entered into a new $320 million revolving senior secured credit facility, which matures in April 2014.
Read the rest of this transcript for free on seekingalpha.com
