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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM
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COMMISSION FILE NUMBER 000-23953
OMEGA WORLDWIDE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MARYLAND
(State of Incorporation)
38-3382537
(I.R.S. Employer Identification No.)
900 VICTORS WAY, SUITE 345, ANN ARBOR, MI 48108
(Address of principal executive offices)
(734) 887-0300
(Telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
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Indicate the number of shares outstanding of each of the issuer's classes
of common stock as of June 30, 1998
COMMON STOCK, $.10 PAR VALUE
(Class)
12,256,000
(Number of shares)
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OMEGA WORLDWIDE, INC.
FORM 10-Q
JUNE 30, 1998
INDEX
<TABLE>
<CAPTION>
PAGE NO.
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<S> <C> <C>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Balance Sheet
June 30, 1998 (unaudited)................................. 2
Consolidated Statement of Operations (unaudited) --
Period Ended June 30, 1998................................ 3
Consolidated Statement of Cash Flows (unaudited) --
Period Ended June 30, 1998................................ 4
Notes to Consolidated Financial Statements
June 30, 1998 (unaudited)................................. 5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 11
PART II OTHER INFORMATION
Item 5. Other Information........................................... 13
Item 6. Exhibits and Reports on Form 8-K............................ 13
</TABLE>
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PART 1 -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
OMEGA WORLDWIDE, INC.
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30,
1998
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(UNAUDITED)
<S> <C>
ASSETS
Current Assets:
Cash and short-term investments........................... $ 8,381
Restricted cash........................................... 9,330
Secured loan to individual................................ 817
Other..................................................... 93
-------
Total current assets.............................. 18,621
Land and Buildings subject to triple-net lease.............. 27,778
Investments in and temporary advances to Principal
Healthcare Finance Limited................................ 39,748
Other assets................................................ 178
-------
67,704
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Total Assets...................................... $86,325
=======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses..................... $ 894
Accrued income taxes...................................... 317
Non-interest bearing deferred purchase obligation......... 27,778
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Total current liabilities............................ 28,989
Shareholders' Equity:
Preferred Stock $1.00 par value:
Authorized 10,000 shares
Outstanding 260 Class B shares at liquidation
value................................................. 2,600
Common stock $.10 par value
Authorized 50,000 shares
Outstanding 12,256 shares............................ 1,225
Additional paid-in capital................................ 52,847
Retained earnings......................................... 744
Cumulative translation adjustments........................ (80)
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Total shareholders' equity........................ 57,336
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Total Liabilities and Shareholders' Equity........ $86,325
=======
</TABLE>
See notes to consolidated financial statements.
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OMEGA WORLDWIDE, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
UNAUDITED
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PERIOD ENDED
JUNE 30, 1998
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NOTE A
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<S> <C>
Revenues
Advisory fee -- Principal Healthcare Finance Limited...... $ 811
Interest:
Principal Healthcare Finance Limited................... 788
Short-term investments................................. 179
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1,778
Expenses
Direct costs of services provided......................... 524
Allocated expenses from Omega Healthcare Investors,
Inc. .................................................. 151
General and administrative................................ 231
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906
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Earnings before equity earnings and taxes................... 872
Equity in earnings of Principal Healthcare Finance
Limited................................................... 168
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Earnings before federal and foreign income taxes............ 1,040
Provision for federal and foreign income taxes.............. (296)
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Earnings before preferred stock dividends................... 744
Preferred stock dividends................................... (52)
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Net earnings available to common shareholders............... $ 692
=======
Earnings per common share, Basic............................ $0.06
=======
Earnings per common share, Diluted.......................... $0.06
=======
Average Shares Outstanding, Basic........................... 12,256
=======
Average Shares Outstanding, Diluted......................... 12,260
=======
Other comprehensive income, net of taxes:
Foreign currency translation adjustments.................. $ 80
=======
</TABLE>
See notes to consolidated financial statements.
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OMEGA WORLDWIDE, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
UNAUDITED
(IN THOUSANDS)
<TABLE>
<CAPTION>
PERIOD ENDED
JUNE 30, 1998
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NOTE A
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<S> <C>
Operating activities
Net earnings.............................................. $ 744
Adjustment to reconcile net earnings to cash provided by
operating activities:
Equity earnings in Principal Healthcare Finance
Limited............................................... (168)
Depreciation and other non-cash charges................ 37
Net change in operating assets and liabilities............ 241
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Net cash provided by operating activities................... 854
Cash flows from financing activities
Proceeds from issuance of common stock.................... 27,375
Cash in exchange of current liabilities assumed........... 837
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Net cash provided by financing activities................... 28,212
Cash flow from investing activities
Investment in Principal Healthcare Finance Trust,
including restricted cash.............................. (9,376)
Advances to Principal Healthcare Finance Limited.......... (10,477)
Placement of secured loan to individual................... (817)
Other..................................................... (15)
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Net cash used in investing activities....................... (20,685)
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Increase in cash and short-term investments................. $ 8,381
========
Non-cash activity of the Company:
Contribution by Omega Healthcare Investors, Inc.,
excluding cash
Investments............................................ $ 5,296
Notes receivable....................................... 23,805
Other, net of current liabilities assumed.............. (686)
Equity.................................................... 29,252
Non-cash activity of Principal Healthcare Finance Trust:
Investment in real estate................................. $ 27,778
Non-interest bearing deferred purchase obligation......... 27,778
</TABLE>
See notes to consolidated financial statements.
4
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OMEGA WORLDWIDE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
JUNE 30, 1998
NOTE A -- BASIS OF PRESENTATION
Omega Worldwide, Inc. (the Company) was formed on November 13, 1997 in
connection with an anticipated spin off to shareholders of Omega Healthcare
Investors, Inc. (Omega). The Company was created to provide the investment
advisory and management services previously provided by Omega, to hold equity
and debt interests in companies engaged in providing sale/leaseback financing,
and to provide other capital financing to healthcare providers throughout the
world. The unaudited consolidated financial statements do not contain
comparisons to prior periods as the Company did not commence operations or
possess the investment in Principal Healthcare Finance Limited (Principal) until
the contribution by Omega as of April 2, 1998 as described in Note B. There are
no differences in the Company's results of operations between the three-month
period ended June 30, 1998 and the period from the date of incorporation to June
30, 1998. Additionally, except for $1,000 invested by Omega at the date of
formation, there was no difference between cash flows from the three-month
period ended June 30, 1998 and the period from the date of incorporation.
The accompanying consolidated financial statements are unaudited. However,
in the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the three-month period ended June 30, 1998 are not
necessarily indicative of the results that may be expected for the year ending
September 30, 1998.
NOTE B -- ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
On April 2, 1998, Omega contributed substantially all of its investment in
Principal to the Company. Assets contributed by Omega included a $23,805,000
subordinated loan to Principal and common stock of Principal with a carrying
value of $5,296,612. The interest rate on the subordinated loan was 11.83% at
June 30, 1998. The common stock investment represents 33.375% of the outstanding
voting stock of Principal. Omega also assigned to the Company its interest in a
management agreement with Principal in which the Company receives an annual fee
of .9% of Principal's assets for providing certain advisory services. In
exchange for the assets contributed, Omega received 8,500,000 fully paid shares
of Omega Worldwide Common Stock and 260,000 shares of Class B preferred stock.
The Company also received warrants to purchase 10,000,000 ordinary shares
of Principal expiring June 30, 2001 at an exercise price of L1.50 (approximately
$2.40) per share and 554,583 ordinary shares of Principal expiring December 31,
2000 at an exercise price of L1.00 (approximately $1.60) per share. As to the
warrants which expire in December, 2000, no value was assigned at the date of
issuance because the underlying securities were issued at their fair value at
that date. As to the warrants which expire in June, 2001 the coupon rate for the
subordinated debt was the prevailing market rate on the date of the loan, and
therefore the face amount of the subordinated loans approximated its fair value
on the date of issuance. In addition, the exercise price on these warrants
significantly exceeded the fair value of the stock on the date of issuance since
the warrants enabled the purchase of shares at L1.50, while the current value of
the shares at that time was approximately L1.00. Based on these factors at the
date of the loan, no value was ascribed to the warrants when they were issued.
On April 2, 1998, the Company's registration statement became effective and
it offered 3,750,000 shares at $7.50 per share. The Company received gross
proceeds of $28,125,000 prior to issuance costs of $750,000. Shares offered
included 500,000 shares in a primary offering, 2,250,000 shares in a rights
offering, in which
5
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rights were exercisable for an aggregate of 2,250,000 shares, and 1,000,000
shares were issued to underwriters of the rights offering.
CASH AND SHORT-TERM INVESTMENTS
Short-term investments consist of highly liquid investments with a maturity
date of three months or less when purchased. These investments are stated at
cost which approximates fair value.
ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the period.
Actual results could differ from those estimates.
CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its subsidiaries after elimination of intercompany accounts and
transactions. As disclosed in Note C, the Company acquired an Australian
property trust on June 19, 1998. Information for the trust generally will be
consolidated on a one-month lag basis. However, the consolidated balance sheet
at June 30, 1998 reflects the effect of the transaction executed by the property
trust on June 19, 1998. The statement of operations for the three months ended
June 30, 1998 does not include activity of the trust as the trust's operations
are not material for the period from June 19 to June 30, 1998.
NOTE C -- ACQUISITION OF ASSISTED LIVING UNIT TRUST
On June 19, 1998 the Company acquired Assisted Living Unit Trust, an
Australian property trust that owns nursing homes, for an equity investment of
approximately $3 million. Concurrent with the acquisition, the Assisted Living
Unit Trust's name was changed to Principal Healthcare Finance Trust (the Trust).
The Trust has acquired certain assets which requires a deferred purchase payment
of $30 million in June 1999. Such assets and related deferred purchase
obligation have been recorded at $27 million by the Trust to reflect interest at
8% over the period of the deferred payment. Additionally, $9,330,000 has been
provided in cash collateral to secure a $30 million letter of credit obtained by
the Trust to provide funding for such payment. The cash collateral is classified
as restricted cash.
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The Company currently has a 100% ownership in the Trust, but intends to
hold a minority interest on or before the Company's September 30, 1998 fiscal
year end. Under generally accepted accounting principals, consolidation of
majority owned enterprises is required even when control will be temporary. The
following pro forma statement of operations for the three months and nine months
ended June 30, 1998 recognize activity of the Trust on a consolidated basis as
if the transaction occurred on October 1, 1997.
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
THREE MONTHS ENDED NINE MONTHS ENDED
JUNE 30, 1998 JUNE 30, 1998
------------------ -----------------
<S> <C> <C> <C>
Revenues
Rent income........................................ (A) $ 981,250 $2,943,750
Advisory Fees...................................... (B) 811,304 2,359,314
Interest - Subordinated Loan....................... (C) 723,109 2,211,214
Interest on temporary advances to Principal
Healthcare Finance Limited...................... (D) 64,391 64,391
Interest on short-term investments................. 179,408 786,033
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Total Revenues.................................. 2,759,462 8,364,702
Expenses
Imputed interest................................... (A) 555,750 1,667,250
Depreciation....................................... (A) 159,250 477,750
Costs of Services Provided - Omega (UK)............ (E) 523,902 1,348,839
Allocated expenses from Omega Healthcare Investors,
Inc. ........................................... (F) 151,454 498,845
Direct General and Administrative.................. 231,362 663,362
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Total Expenses.................................. 1,621,718 4,656,046
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1,137,744 3,708,656
Equity in income of Principal Healthcare Finance
Limited............................................ (G) 168,788 457,802
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Income before income taxes........................... 1,306,532 4,166,458
Provision for income taxes........................... (H) (392,158) (1,276,918)
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Net income before preferred stock dividends.......... $ 914,374 $2,889,540
Preferred stock dividends............................ (52,000) (156,000)
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Net income applicable to common stock................ $ 862,374 $2,733,540
========== ==========
Average Shares Outstanding - Basic................... 12,256,000 12,256,000
Average Shares Outstanding - Diluted................. 12,260,174 12,260,174
Net income per share - Basic......................... 0.07 0.22
Net income per share - Diluted....................... 0.07 0.22
</TABLE>
- -------------------------
(A) Represents the activity of the Trust from inception of the lease. The 30
year triple-net lease provides for an option to purchase by the Tenant at
the end of 14 years. Initial rent payments of $3,000,000 commence on or
about July 1, 1999, with minimum increases of 2% commencing on the first
anniversary of payment. The purchase option is generally at fair market
value determined by a formula tied to a multiple of annual rent. Imputed
interest is recognized at 8%. Depreciation of buildings and equipment is
recognized over 40 to 50 year periods. The Trust's activities have been
consolidated with the Company as the Company presently has a 100% voting
interest in the Trust. The Trust is seeking other investors to reduce the
Company's interest in the Trust to 50% or less, at which time earnings from
the investment will be accounted for using the equity method.
(B) Represents fees pursuant to Management Agreement at .9% of the Aggregate
Book Value of invested assets.
(C) Represents interest income on the subordinated loan to Principal which
currently bears interest at 11.83%.
(D) Represents interest income on temporary loans to Principal at 9.25%
interest. Outstanding loan balance to Principal at June 30, 1998 is
approximately $10.5 million.
(E) Pro forma amounts represent historical costs of services provided by Omega
(UK) Limited. Omega (UK) Limited is the primary service provider for
activities related to Principal. The reported amounts represent direct costs
incurred in the delivery of the services for which fee income has been
recognized.
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Estimated Costs of Services Provided and other indirect costs of the service
provider in Australia are expected to approximate $450,000. This amount is not
factually supportable and it is presently not determinable when expenses will be
incurred or what the related level of investment activity will be when
expenses are incurred. Management believes the majority of such expenses
will pertain to the placement of additional investments in Australia, and
therefore such expenses have been omitted from the equity in income of the
Trust.
(F) Comprises allocated share of costs of Omega pursuant to the provisions of a
Services Agreement between Omega and the Company. Indirect costs incurred by
Omega are allocated based upon the relationship of assets under the
Company's management to the combined total of those assets and Omega's
assets.
(G) Represents the Company's share (33.375%) of Principal's net income from
operations, less amortization of approximately $19,000 and $56,000 for the
three months and nine months ended May 31, 1998, respectively, related to
the excess of the carrying value of its investment over its proportionate
share of Principal's underlying equity. The carrying value of the investment
in common stock of Principal exceeds the Company's proportionate share of
Principal's equity by approximately $750,000. The Company will amortize this
amount over a period of 10 years. Principal has a fiscal year end of August
31, therefore the equity in earnings of Principal is recognized on a
one-month lag basis.
Prior to April 2, 1998 (the date of the Initial Public Offering), Principal
recognized an extraordinary loss resulting from early extinguishment of debt
and a non-recurring gain from the sale of a 60.1% interest in Baneberry
Healthcare Limited. The pro forma equity in earnings of Principal excludes
these amounts as they occurred prior to the Company's ownership of
Principal.
(H) There are no corporate income taxes in the State of Michigan; there is,
however, a Single Business Tax which is provided for in Direct General and
Administrative expense. Tax provisions for Principal is classified as equity
in earnings.
NOTE D -- PRINCIPAL HEALTHCARE FINANCE LIMITED SUMMARIZED INFORMATION
Principal has a fiscal year end of August 31, and the Company recognizes
its share of Principal's earnings on a one-month lag basis. The following
reflects summarized unaudited operations of Principal for the three months ended
May 31, 1998 (in thousands):
<TABLE>
<S> <C> <C>
Revenues:
Rent Income............................................. $12,584
Interest Income......................................... 1,313
Miscellaneous Income.................................... 64
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Total Revenues....................................... $ 13,961
Costs and Expenses:
Interest................................................ (9,426)
Depreciation and amortization........................... (1,869)
General and Administrative.............................. (1,395)
-------
Total Expenses....................................... (12,690)
--------
Income from operations before income taxes................ 1,271
Provision for income taxes................................ (710)
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Net income from operations................................ $ 561
========
</TABLE>
The effective tax rate differs from the U.S. tax rate primarily because the
provision for depreciation and amortization is not deductible for tax purposes
in the U.K. The Company's share (at 33.375%) of earnings for the quarter ended
May 31, 1998 is approximately $187,000. Additionally, the Company has recorded a
charge against earnings for approximately $19,000, representing amortization
over a ten-year period of the excess of the Company's investment in Principal
over its proportionate share of Principal's underlying equity.
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NOTE E -- INCOME TAXES
Income tax expense differs from the amounts computed by applying the U.S.
federal income tax rate of 34 percent to earnings before taxes as follows (in
thousands):
<TABLE>
<S> <C>
Computed expected tax expense............................... $353
Tax benefit of foreign tax rate differential and credits.... (57)
----
Total.................................................. $296
====
</TABLE>
The equity in earnings of Principal results in a temporary difference in
the carrying amount of the investment for financial reporting and income tax
purposes. No deferred tax liability has been recorded with respect to this
difference because of the related foreign tax credits.
NOTE F -- SECURED LOAN TO INDIVIDUAL
On May 28, 1998, the Company loaned $817,500 to an individual secured by
the individual's interest in a United Kingdom aged care operating company. The
operating company is a tenant of Principal. Interest at 10.5% and principal were
due on June 30, 1998. The Company has not declared a default and is pursuing
collection or extension of the note.
NOTE G -- SHAREHOLDERS' EQUITY
As of April 2, 1998, the Company issued 260,000 shares of 8% Series B
Cumulative Preferred Stock ("Preferred Stock") at $1 par value per share to
Omega in connection with the terms of the contribution agreement. Each share of
Series B Preferred converts to one share of Omega Worldwide Common Stock
immediately after Omega makes a distribution of the Series B Preferred to its
shareholders or otherwise transfers the shares to any unaffiliated third party.
Dividends on the Preferred Stock are payable annually based on a liquidation
value of $10 per share.
As of April 3, 1998, the Compensation Committee of the Board of Directors
of the Company granted options of 503,000 shares at an option price of $7.50.
Since April 3, additional grants of 30,500 shares were made at prices ranging
from $8.37 to $9.12.
NOTE H -- NET EARNINGS PER SHARE
Net earnings per share is computed based on the weighted average number of
common shares outstanding during the period. Diluted earnings per share amounts
reflect the dilutive effect of stock options (4,174 shares at June 30, 1998).
The assumed conversion of shares of preferred stock currently is anti-dilutive.
NOTE I -- TRANSACTIONS WITH AFFILIATES
Pursuant to the provisions of a Services Agreement between Omega and the
Company, indirect costs incurred by Omega, including compensation of shared
executive officers and relations support personnel, and costs incurred by Omega
for rent, insurance, telephone, utilities, supplies, maintenance and travel, are
allocated to the Company based upon the relationship of assets under the
Company's management to the combined total of those assets and Omega's assets.
Assets and costs in the formula are on a one-quarter lag basis. Such allocations
are based on estimates and formulas which management believes to be reasonable.
Allocated expenses for the three-month period ended June 30, 1998 were
approximately $151,000 and the allocation for the three-month period ended
September 30, 1998 will be $152,000. The Company's committee of independent
directors has approved these allocations.
Temporary advances to Principal in the amount of $10,477,143 are
outstanding at June 30, 1998. Interest at 9.25% is paid on a monthly basis.
Included in interest income at June 30, 1998 is $64,391 related to advances to
Principal.
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NOTE J -- SUBSEQUENT EVENTS
In July 1998, the Company acquired 248,750 shares representing 19.9% of the
shares of Baneberry Healthcare Limited (a United Kingdom Company) from Principal
for $1,044,000. Baneberry is a private operator of nursing homes in Northern
Ireland and England. The Company also acquired 56,940 shares representing 47% of
the shares in Essex Healthcare Corporation (a Delaware Corporation) for
$500,000. Essex is an Atlanta-based private operator of skilled nursing
facilities. Both acquisitions will be accounted for using the equity method.
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ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
"Safe Harbor" Statements Under the United States Private Securities
Litigation Reform Act of 1995. Statements contained in this document that are
not based on historical fact are "forward-looking statements" within the meaning
of the Private Securities Litigation Reform Act of 1995. Forward-looking
statements include statements regarding the Company's future development
activities, the future condition and expansion of the Company's markets, the
Company's ability to meet its liquidity requirements and the Company's growth
strategies, as well as other statements which may be identified by the use of
forward-looking terminology such as "may," "will," "expect," "estimate,"
"anticipate," "continue," or similar terms, variations of those terms or the
negative of those terms. Statements that are not historical facts contained in
Management's Discussion and Analysis are forward-looking statements that involve
risks and uncertainties that could cause actual results to differ from projected
results. Some of the factors that could cause actual results to differ
materially include: The financial strength of operators of facilities owned by
companies in which the Company invests as it affects their continuing ability to
meet obligations; the effects of changes in the reimbursement levels under the
government-sponsored reimbursement programs; operators' continued eligibility to
participate in the programs; the effects of changes in reimbursement by insured
companies and other third party payors on operators; the availability and cost
of capital; the strength and financial resources of competitors; and the
Company's ability to make additional investments at attractive yields.
Following is a discussion of the consolidated financial condition and
results of operations of the Company, which should be read in conjunction with
the unaudited consolidated financial statements and accompanying notes.
RESULTS OF OPERATIONS
Revenues for the three-month period ended June 30, 1998 totaled $1.7
million. Revenues consist of advisory fee income from and interest on
subordinated loan and temporary advances to Principal, as well as interest on
short-term investments.
Expenses for the three-month period ended June 30, 1998 totaled
approximately $906,000 and represented approximately 51% of total revenues.
Direct costs of services provided totaled $531,000, representing 59% of total
expenses and 65% of advisory fee income for the three-month period.
LIQUIDITY AND CAPITAL RESOURCES
In April, 1998, the Company received $28,125,000 in gross proceeds from the
sale of 3,750,000 shares of common stock. The Company may, in its discretion,
make additional investments in Principal, the Trust and other companies formed
to acquire healthcare facilities. The Company's decisions with respect to
whether to invest will be based on the capital resources available to the
Company at the time. To the extent funds are not available from retained
earnings to fund operations of the Company, the Company from time to time
intends to raise additional capital from the public markets.
The Company has two forward contracts to hedge currency risks associated
with investments in Principal and the Trust. Pursuant to a ten-year British
pound currency swap agreement, the Company will have the right to exchange
L20,000,000 (approximately $32,000,000) for $31,740,000 on October 15, 2007.
Also, a five-year forward contract to sell A$15,000,000 at the rate of US$.6220
was entered into on June 30, 1998. The swap contracts are solely to reduce the
effect on the Company of fluctuations in currency exchange rates and the Company
may enter into additional hedge transactions with respect to revenues from
operations received in pounds Sterling and Australian dollars. Foreign exchange
contracts mitigate the risk of currency movements because any gain or loss on
the contract offsets any losses or gains, respectively, on the investments in
Principal and the Trust.
The Company presently has no external sources of financing. The Company is
not aware of any known trends or uncertainties which have had or which may
reasonably be expected to have material impact, favorable or unfavorable, on
revenues or income from the operations of its business.
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As of the date of this Form 10-Q, the Company has no commitments to
purchase any assets but may, in its discretion, make additional investments to
maintain its current ownership interest in Principal. The purchase of additional
investments will be contingent upon securing adequate funding on terms
acceptable to the Company. The Company does not anticipate any material
unfavorable trends in either capital resources or the outlook for long-term cash
generation, nor does it presently expect any material changes in the
availability and relative cost of such resources.
The Company continually seeks new investments in companies engaged in
providing sale/leaseback and to provide other capital financing to healthcare
service providers with the objective of profitable growth and diversification of
its investments. Permanent financing for future investments is expected to be
provided through a combination of both private placement and public offerings of
debt and/or equity securities. Management believes the Company's liquidity and
various expected sources of available capital are adequate to finance
operations, fund future investments, and meet future debt service requirements.
YEAR 2000 IMPLICATIONS
The Company has assessed its current computer software for proper
functioning with respect to dates in the year 2000 and thereafter. The year 2000
issue and related costs are not expected to have a material impact on the
operations of the Company.
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PART II -- OTHER INFORMATION
ITEM 5. OTHER INFORMATION
A special meeting of the Board of Directors was held on July 7, 1998 at
which Anil Gupta and Jacques Aigrain were appointed directors of the Company.
Mr. Gupta was appointed a member of the Audit Committee and has a term ending at
the Annual Shareholders Meeting at which Directors are elected in 2000. Mr.
Aigrain was appointed a member of the Compensation Committee with a term ending
at the Annual Shareholders Meeting at which Directors are elected in 2001.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS - THE FOLLOWING EXHIBITS ARE FILED HEREWITH:
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
------- -----------
<C> <S>
27 Financial Data Schedule
</TABLE>
(B) REPORTS ON FORM 8-K:
The following reports on Form 8-K were filed since April 2, 1998:
Current report on Form 8-K dated June 19, 1998 with the following
exhibits:
Mortgage of Deposit
Bill Facility Agreement
Deed of Guarantee and Indemnity
Redemption and Subscription Agreement
Relationship Agreement
Deed of Mortgage
Annexure B to Mortgage
Capital Contribution Agreement
NSW Lease
Lease Guarantee
Indemnity Deed
Procurement Agreement
Mortgage of Shares
Mortgage of Units
13
<PAGE> 15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
OMEGA WORLDWIDE, INC.
Registrant
<TABLE>
<S> <C>
By: /s/ESSEL W. BAILEY, JR.
-----------------------------------------------------
Essel W. Bailey, Jr.
Date: August 14, 1998 President and Chief Executive Officer
By: /s/DAVID A. STOVER
-----------------------------------------------------
David A. Stover
Date: August 14, 1998 Chief Financial Officer
</TABLE>
14
<PAGE> 16
Exhibit Index
-------------
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> APR-02-1998
<PERIOD-END> JUN-30-1998
<CASH> 17,711
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 910
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 86,325
<CURRENT-LIABILITIES> 38,989
<BONDS> 0
0
2,600
<COMMON> 1,225
<OTHER-SE> 53,511
<TOTAL-LIABILITY-AND-EQUITY> 86,325
<SALES> 0
<TOTAL-REVENUES> 1,778
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 906
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,040
<INCOME-TAX> 296
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 744
<EPS-PRIMARY> 0.06
<EPS-DILUTED> 0.06
</TABLE>
