The year-to-date increase in net income was primarily due to: (i) additional rental income and mortgage interest income associated with approximately $510 million of new investments made throughout 2012; (ii) $10.1 million in incremental gains on asset sales; (iii) $26.1 million net decrease in real estate impairments; and (iv) $6.4 million net decrease in provision for uncollectible accounts receivable. These increases to net income were partially offset by increased expenses primarily associated with the new investments, including: (i) $12.6 million in increased depreciation expense; (ii) $14.4 million in increased interest expense; and (iii) $2.0 million in incremental general and administrative expenses. In addition, interest refinancing costs increased $4.8 million over 2011. The $4.8 million increase in refinancing costs resulted from a December 2012 $2.5 million charge associated with the termination of the Company’s 2011 credit facility and a March 2012 $7.1 million charge associated with the tender and redemption of all of the Company’s outstanding $175 million of 7% Senior Notes due 2016. These two charges were partially offset by a June 2012 $1.7 million gain related to the write-off of the unamortized premium on four HUD mortgage loans the Company prepaid and an August 2011 $3.1 million write-off of deferred cost associated with the termination of the Company’s 2010 credit facility.

2012 HIGHLIGHTS AND OTHER RECENT DEVELOPMENTS
  • In January 2013, the Company increased its quarterly common stock dividend to $0.45 per share.
  • In Q4 2012, the Company completed $250 million of new investments.
  • In Q4 2012, the Company entered into a new $700 million unsecured credit facility.
  • In Q4 2012, the Company increased its quarterly common stock dividend to $0.44 per share.
  • In Q3 2012, the Company completed $214 million of new investments.
  • In Q3 2012, Fitch Ratings initiated a BBB- rating on the Company’s senior unsecured notes.
  • In Q2 2012, the Company completed $35 million of new investments.
  • In Q2 2012, the Company established a $245 million 2012 Equity Shelf Program for a continuous at-the-market offering of common stock.
  • In Q2 2012, the Company increased its quarterly common dividend per share to $0.42.
  • In Q1 2012, the Company completed $11 million of new investments.
  • In Q1 2012, the Company tendered and/or redeemed all of its $175 million of 7% Senior Notes due 2016.
  • In Q1 2012, the Company issued $400 million aggregate principal amount of its 5.875% Senior Notes due 2024.

FOURTH QUARTER 2012 RESULTS

Operating Revenues and Expenses – Operating revenues for the three-month period ended December 31, 2012 were $95.0 million. Operating expenses for the three-month period ended December 31, 2012 totaled $36.2 million and were comprised of $30.3 million of depreciation and amortization expense, $4.2 million of general and administrative expense, $1.5 million of stock-based compensation expense and $0.2 million of expense associated with acquisitions.

Other Income and Expense – Other income and expense for the three-month period ended December 31, 2012 was a net expense of $27.7 million, which was comprised of $24.5 million of interest expense, $0.7 million of amortized deferred financing costs and $2.5 million of interest refinancing costs.

Funds From Operations – For the three-month period ended December 31, 2012, reportable FFO available to common stockholders was $61.4 million, or $0.55 per common share on 112 million weighted-average common shares outstanding, compared to $46.3 million, or $0.45 per common share on 103 million weighted-average common shares outstanding, for the same period in 2011.

The $61.4 million of FFO for the three-month period ended December 31, 2012 includes $2.5 million of interest refinancing costs, $1.5 million of stock-based compensation expense, $0.8 million of one-time miscellaneous revenue and $0.2 million of expense associated with 2012 acquisitions.

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