Tom Peterson – Investor Relations Taylor Pickett – Chief Executive Officer Robert Stephenson – Chief Financial Officer Daniel Booth – Chief Operating Officer.

Daniel Bernstein – Stifel Nick Yulico – UBS Jeff Theiler – Green Street Advisors.

Good morning and welcome to the Omega Healthcare Investors' First Quarter Earnings Call for 2014. (Operator Instructions). I would now like to turn the conference over to Tom Peterson. Please go ahead..

Thank you, good morning. With me today are Omega's CEO, Taylor Pickett; CFO, Bob Stephenson; and COO, Dan Booth.

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 restructuring, 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, FAD 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 Taylor..

Thanks, Tom. Good morning and thank you for joining Omega's First Quarter 2014 Earnings Conference Call. Adjusted FFO for the first quarter is $0.71 per share, which is a 13% increase over 2013 first quarter adjusted FFO of $0.63 per share.

Adjusted funds available for distribution, FAD, for the quarter is $0.65 per share, which is a 14% increase over 2013 first quarter FAD of $0.57 per share. We increased our quarterly common dividend to $0.50 per share. This is a 2% increase from the last quarter and a 9% increase from the first quarter of 2013.

We've now increased the dividend, seven consecutive quarters. The dividend payout ratio is 70% of adjusted FFO and 77% of FAD. We've increased our 2014 FAD guidance range to $2.48 to $2.51 per share and our 2014 adjusted FFO guidance range to $2.74 to $2.77 per share. We have not included acquisitions in our guidance.

We estimate that every $100 million in new acquisitions will add approximately $0.025 to our annual FAD run rate and $3.03 to our annual adjusted FFO run rate. As Bob will cover later in the call, we sold $400 million in new tenure bonds. The proceeds were used to pay down comparatively inexpensive variable rate debt.

The higher (inaudible) that increased our adjust expense in the second quarter and beyond we project that our quarterly adjusted FFO run rate will decline by approximately $0.03 per quarter. Bob will now review our first quarter financial results..

Thank you, Taylor, and good morning. Our reportable FFO on a diluted basis was $84.4 million or $0.68 per share per quarter as compared to $70.1 million or $0.62 per share in the first quarter of 2013.

As Taylor mentioned, our adjusted FFO was $88.8 million or $0.71 per share for the quarter and excludes the impact of $2.3 million of non-cash stock-based compensation expense, $2 million of interest refinancing cost, $95,000 of expense associated with acquisitions and $16,000 recovery related to a provision for uncollectible notes receivable.

Further information regarding the calculation of FFO is included in our earnings release and on our website. Operating revenue for the quarter was $121 million versus $101.8 million for the first quarter of 2013.

The increase was primarily a result of incremental revenue from a combination of new investments completed since the first quarter of 2013, capital improvements made to our facilities and lease amendments made during that same time period. The $121 million of revenue for the quarter includes approximately $8.5 million of non-cash revenue.

We expect the non-cash revenue component to be between $7.5 million and $8.5 million per quarter for 2014.

Operating expense for the first quarter of 2014, when excluding acquisition-related costs, stock-based compensation expense, provision for uncollectible accounts receivable and interest refinancing cost were $35.7 and was consistent with the first quarter of 2013.

Our G&A was $4.2 million for the quarter and we project our 2014 annual G&A expense will be between $16.5 million and $17 million with the growth primarily related to new investments completed in 2013. In addition, we expect our 2014 annual non-cash stock-based compensation expense will be approximately $8.5 million.

Interest expense for the quarter, when excluding non-cash deferred financing cost and refinancing cost was $27 million versus $25.8 million for the same period of 2013. The $1.2 million increase in interest expense resulted from higher debt balances associated with financings related to the new investments completed throughout 2013 and ’14.

Turning to the balance sheet, in March, we issued and sold $400 million, 4.95% senior unsecured notes due to 2024. Proceeds of this offering were used to repay and terminate our $200 million, 2013 term loan and pay outstanding balances under our credit facility.

As a result of the termination of our $200 million term loan during the quarter, we reported $2 million of interest refinancing expense to write-off deferred financing costs associated with the interest of the issuance of the term loan.

During the first quarter of 2014, we sold three facilities two of which were closed and classified as held for sale for a total of $3.6 million generating a $2.9 million accounting gain.

For the three month period ended March 31, 2014 on our equity shelf program and under our dividend reimbursement and common stock purchase plan, we issued a combined 1.9 million shares of common stock, generating gross cash proceeds of approximately $60million.

For the three months ended March 31, 2014, our debt to adjusted per forma annualized EBITDA was 4.4x and our adjusted fixed charge coverage ratio was 4.2x.

As Taylor mentioned earlier, our first quarter adjusted FFO and FAD run rate will be reduced by approximately $0.03 due to the completion of our March bond yield and to a lesser extent timing related to first quarter equity issuances. I'll now turn the call over to Dan..

Thanks, Bob, and good morning. As of March 31st, 2014, Omega had a core asset portfolio of 547 facilities with approximately 60,000 operating beds, distributed among 49 third-party operators, located within 37 states.

Trailing 12 month operator EBITDARM coverage remains stable during the fourth quarter of 2013, at 1.9x versus 1.9x as of September 30th. Trailing 12 month operator EBITDAR coverage dipped slightly from 1.5x as of September 30th to 1.4x as of December 31st.

The modest decline is attributable to flat reimbursement rates and a slight dip in occupancy coupled with the slight pickup in operating expenses including rent escalators.

We expect overall portfolio coverage ratios to remain fairly stable over the course of 2014 as rates remained relatively flat and our operators continue to undergo a constant stream of capital expenditure projects. Turning to new investments.

During the first quarter of 2014, Omega completed two separate transactions totaling $117 million of new investments. On January 17, 2014, the company entered into a $112.5 first mortgage loan with an existing operator of the company. The loan is secured by nine skilled nursing facilities, totaling 784 operating beds, located in Pennsylvania and Ohio.

The loan is cross-defaulted and cross-collateralized with the company's existing master lease with the operator. The loan bears an initial annual interest rate of 9.5%. On January 30, 2014, the company acquired an assisted living facility in Arizona from an unrelated third party for approximately $4.7 million.

The 90 bed facility was added to the master lease of an existing operator. In addition to the $117 million of new investments, the company also invested $4 million under its capital renovation program in the first quarter. Omega continues to see a steady pace of investment opportunities.

As of today, Omega has a combination of revolver availability and cash totaling $548 million..

Thanks, Dan. We will now open the call for questions..

(Operator Instructions). And our first question comes from Daniel Bernstein at Stifel..

Hi Guys. Good morning..

Good morning, Dan..

On the acquisition front, I was just, I went to the regional and there were some talk about increasing competition for significant assets shares, so if can you talk about what you are seeing in terms of competition, work out operator heading and may be how you are adjusting your acquisition policy at all to competition if it’s there?.

We are absolutely seeing more competition, more capital chasing product and as a result the type of cap rates and interest returns that we are getting on potential deals has gone down. We are not really seeing 10% deals in the market at all. And we have seen deals did as low as 8% for skilled nursing facility, so that's a little bit of shift.

From our prospective, we continue rely on our existing tenant partners to source deals and deploy the capital and I think that's even more important in an environment that’s become much more competitive..

Are you shifting, also or may be from some of the larger deals like that are transaction back to bread and butter $25 million or $50 million deals that we saw few years. Is it that also perhaps something strategically you are going to do as well..

The Ark acquisition was obviously unique. So to the extent that we are positioned to take on and deal like that we will pursue it but we are going to stick with our netting and our brad and butters deals whether they are small size deals that are fed to us by our existing operators..

Okay and then you just also mentioned the lease coverage impacted by the rent increase, by your rent normal annual bumps, I was just trying to understand today where you stand, if I has to go ahead and model rent bumps through the year, how would I do that as it predominantly in the first quarter, or is it spread out evenly, how should I go ahead and think about when your rent bumps come into play?.

They’ve commented all different times during the course of the year because they usually are tied to whenever the lease was originally done and they have one year anniversary date. So I think that our average bump is 2.5% and that really comes in over the course of the 12 months so I would have to be steady throughout the year..

Then what’s the ratio of fixed to CPI bumps now as well. I am just trying to think back, I probably asked that question a little while ago but you have made a lot of acquisition since that point.

So what’s your mix of CPI versus fixed bumps?.

It’s almost exclusively fixed. We have a little bit of CPI left in the portfolio but frankly from a modeling prospective, I would just assume the whole portfolio is fixed bumps..

Okay and 2.5?.

2.5 is a good number..

Okay, cool. Thanks a lot. Have a good day..

Thanks, Dan..

The next question comes from Nick Yulico at UBS..

Thanks. I just wanted to go to the guidance. What do you say the straight line in DSL adjustments were in this year, is it something about 7.5 million to 8 million a quarter..

For the non-cash revenue, yes..

So is that straight line in the DSL adjustment?.

Yes..

Okay. So I am a bit confused as to how that could be the number since last year guys did for around 27 million and it looks like, you have a with the straight line run impact and soon it has gone up by 5 million this year and it seems like it should be going up more like by 10 million from New York deal alone.

So maybe could you just provide the DFL number for the Ark deal for this year impact?.

For the Ark deal, it’s about 10 million but when you have, as you have a crossover point on your leases where the straight line and your cash is actually higher than your straight line..

So the Ark deal, the impact is about 10 million for the year and then you are saying that the rest of that, so if I just took your straight line year was 27 million you had 10 that's 37 million and you guys are saying it’s going to be somewhere between 30 and 32, what’s the difference there?.

The cash escalators within the leases..

Okay..

If you just had a static environment, forget about acquisitions, over time and it’s really not a long period of time, if we just froze our portfolio within three years, we would eliminate that straight line difference because the cash escalators catch up to the GAAP revenue that is recorded..

Okay. I am trying to understand if its, are you saying its 2.5 is your annual bump, then why is your straight line effect, the straight line is going from 27 last year down to, it shouldn’t be going down by 2.5%. It’s a bigger impact you guys are taking..

You have to 2.5% of the total revenue base which is, just for sake of this discussion is approaching $500 million. So $500 million x 2.5% is $12.5 million. So in very, really broad global terms, you would expect that gap to close at about 12.5 million per year.

Now those escalators come in over the time and you have the impact of as an example the Guardian acquisition in Q1 which has some straight line within that.

So, it really comes down to, that's why I have said when you think about $30 million a straight line, if we froze the portfolio within three years, that straight line, the difference would be zero..

Okay got it and then one another question and it was just on the term loan, I am very confused it looks like it still short up on the balance sheet in the first quarter and I think you guys have paid it..

We actually two had term loans, we had a $700 million of our credit facility which a component of it was a $200 million term loan and that was second term loan placed in December 2013 to had a differed draw on and we did not draw on that until the January and then we paid that off..

Okay, so you paid off the new term loan?.

That's correct..

And you kept the old one?.

That is one part of our overall credit facility that we had in place for few years..

Okay. Got you.

And then was there not enough, sorry I forget here was there not enough on the old -- was there not enough room on the revolver to do the Ark deal? To go back in time, I'm just trying to figure out what was the purpose of getting a new term loan?.

That's exactly right, Nick.

We had a $500,000 revolver and if you think about Ark is a half a billion dollar deal, we wanted to at least make sure that we had flexibility for as an example the transaction we closed in January for $112 million and we knew it was coming, and we knew we had to go to capital markets so we want essentially that $200 million piece of term that was temporary, it was a bridge to make sure that we could get some capital market and to ensure we could get that deal in January closed..

Okay. Got you. And then just one last question going back to the coverage, you guys only report those sort of one decimal point of coverage and so when we look at this it looks like in the 12 months ending December, the coverage after management fees was 1.4, and it was sort of 1.5 going back a year before that.

How should we think about that I mean has coverage been sort of steadily declining and then just got to the point where it rounded to 1.4 or was there something big that kind of happened in fourth quarter operator numbers that drove the coverage down?.

Nothing happened. It just a modest rounding error, not error but just rounding issue going from one 1.5 to 2 form. The actual deep was very-very small..

Okay. Got you. All right, thanks..

Thank you..

(Operator Instructions) And our next questions from Jeff Theiler at Green Street Advisors..

Good morning.

Can you provide a little bit more detail on the revised 2014 AFFO forecast, specifically what changed from last quarter that caused that to increase?.

Which forecast? I'm sorry.....

The 2014 adjusted FFO guidance?.

The principal change from our prospective is when we thought about doing a bond deal which is part of our guidance thinking at the beginning of the year, we thought we are in a catch of rate that was higher than 5%.

We thought we would be looking at five and three quarters and so it’s a fairly significant interest pick up, where we had forecast, we are coming with that bond deal. And so that flows through as a few sense of upside..

Right. Is there anything else on top of that because I mean I assumed that was probably part of it, but it seems like it would be bigger than just that adjustment..

But when you think about three quarters of percent on a $400 million, that's the most of what we are talking about..

Okay. Great. Thank you.

Can you clarify the cap rate on that single ELF acquisition that you just said?.

Yes it was 9.7%..

Okay.

And then I guess what's the rationale for acquiring Alison General, it just seems likes it might have been a one-off but I think you mentioned last call that you would think about doing ELF acquisitions, even with operators that you don't have a current skilled nursing relationship with, when I look at your performance since the end of the recession, you have outperformed the entire peer group pretty meaningfully.

Is it just the cap rates in SNFs have kind of moved past the risk/reward ratio for you? How are you thinking about that?.

Well, I think there are couple of components. One is that a lot of the assisted living that we have done to date fits in with the existing portfolios and markets. Both from leveraging off the management skill sets and to a lesser extent but it still happens from overall prospective.

From our view point, yes we have cap rates skinny down on this side and so the risk assessments in terms of allocating capital changes little bit, that being said we are going to dedicate as much capital as there is product available in the SNF space for us and to the extent that we see opportunities in assisted living whether within our existing tenant partners or outside.

We will look at those a little bit harder..

Okay. Last one from me, can you clarify on this new mortgage loan investment that you made in January, I originally thought they were skilled nursing facilities but it seems that there are maybe two ALFs associated with that.

What's the break out, $112.5 million mortgage loan, in your earnings release it says secured by 7 SNFs and 2 ALFs, but I think you said 9 SNFs just in your remarks?.

Yes, there are some ALF components of some of the facility. So there is, you are going to look at it differently but yes there ALF components but I don’t have the number of units within 784 but there are some ALF units in that acquisition..

Okay.

So it's 7, should I be thinking about that as nine skilled nursing facilities or seven SNFs and two assisted living facilities?.

Seven and two is okay..

Okay, thank you very much..

Thank you..

At this time, we show no further questions. And I would like to turn the conference back over to Mr. Pickett for any closing remarks..

Thank you for joining the call today. Bob Stephenson will be available for any follow-up questions you may have..

The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect..