10-Q: Quarterly report pursuant to Section 13 or 15(d)
Published on May 3, 2022
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or |
(Commission file number) |
(IRS Employer Identification No.) |
(Address of principal executive offices)
(
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
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.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Accelerated filer ◻ |
Non-accelerated filer ◻ |
Smaller reporting company |
Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes |
No ☒ |
As of April 28, 2022, there were
OMEGA HEALTHCARE INVESTORS, INC.
FORM 10-Q
March 31, 2022
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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PART I – FINANCIAL INFORMATION
Item 1 - Financial Statements
OMEGA HEALTHCARE INVESTORS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
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March 31, |
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December 31, |
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2022 |
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2021 |
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(Unaudited) |
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ASSETS |
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Real estate assets |
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Buildings and improvements |
$ |
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$ |
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Land |
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Furniture and equipment |
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Construction in progress |
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Total real estate assets |
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Less accumulated depreciation |
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( |
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( |
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Real estate assets – net |
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Investments in direct financing leases – net |
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Mortgage notes receivable – net |
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Other investments – net |
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Investments in unconsolidated joint ventures |
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Assets held for sale |
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Total investments |
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Cash and cash equivalents |
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Restricted cash |
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Contractual receivables – net |
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Other receivables and lease inducements |
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Goodwill |
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Other assets |
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Total assets |
$ |
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$ |
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LIABILITIES AND EQUITY |
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Revolving credit facility |
$ |
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$ |
— |
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Secured borrowings |
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Senior notes and other unsecured borrowings – net |
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Accrued expenses and other liabilities |
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Total liabilities |
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Equity: |
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Preferred stock $ |
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Common stock $ |
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Additional paid-in capital |
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Cumulative net earnings |
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Cumulative dividends paid |
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( |
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( |
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Accumulated other comprehensive income (loss) |
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( |
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Total stockholders’ equity |
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Noncontrolling interest |
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Total equity |
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Total liabilities and equity |
$ |
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$ |
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See notes to consolidated financial statements.
2
OMEGA HEALTHCARE INVESTORS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Unaudited
(in thousands, except per share amounts)
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Three Months Ended |
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March 31, |
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2022 |
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2021 |
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Revenues |
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Rental income |
$ |
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$ |
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Income from direct financing leases |
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Mortgage interest income |
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Other investment income |
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Miscellaneous income |
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Total revenues |
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Expenses |
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Depreciation and amortization |
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General and administrative |
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Real estate taxes |
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Acquisition, merger and transition related costs |
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Impairment on real estate properties |
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Recovery on direct financing leases |
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— |
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( |
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Provision (recovery) for credit losses |
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( |
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Interest expense |
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Total expenses |
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Other income (expense) |
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Other (expense) income – net |
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( |
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Loss on debt extinguishment |
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( |
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( |
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Gain on assets sold – net |
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Total other income |
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Income before income tax expense and income from unconsolidated joint ventures |
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Income tax expense |
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( |
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( |
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Income from unconsolidated joint ventures |
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Net income |
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Net income attributable to noncontrolling interest |
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( |
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( |
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Net income available to common stockholders |
$ |
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$ |
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Earnings per common share available to common stockholders: |
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Basic: |
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Net income available to common stockholders |
$ |
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$ |
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Diluted: |
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Net income |
$ |
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$ |
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See notes to consolidated financial statements.
3
OMEGA HEALTHCARE INVESTORS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Unaudited
(in thousands)
Three Months Ended |
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March 31, |
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2022 |
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2021 |
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Net income |
$ |
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$ |
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Other comprehensive income (loss): |
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Foreign currency translation |
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( |
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Cash flow hedges |
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Total other comprehensive income |
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Comprehensive income |
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Comprehensive income attributable to noncontrolling interest |
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( |
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( |
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Comprehensive income attributable to common stockholders |
$ |
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$ |
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See notes to consolidated financial statements.
4
OMEGA HEALTHCARE INVESTORS, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Three Months Ended March 31, 2022 and 2021
Unaudited
(in thousands, except per share amounts)
Accumulated |
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Common |
Additional |
Cumulative |
Cumulative |
Other |
Total |
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Stock |
Paid-in |
Net |
Dividends |
Comprehensive |
Stockholders’ |
Noncontrolling |
Total |
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Par Value |
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Capital |
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Earnings |
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Paid |
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Income (Loss) |
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Equity |
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Interest |
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Equity |
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Balance at December 31, 2021 |
$ |
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$ |
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$ |
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$ |
( |
$ |
( |
$ |
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$ |
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$ |
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Stock related compensation |
— |
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— |
— |
— |
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— |
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Issuance of common stock |
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— |
— |
— |
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— |
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Repurchase of common stock |
( |
( |
— |
— |
— |
( |
— |
( |
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Common dividends declared ($ |
— |
— |
— |
( |
— |
( |
— |
( |
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Vesting/exercising of Omega OP Units |
— |
( |
— |
— |
— |
( |
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— |
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Omega OP Units distributions |
— |
— |
— |
— |
— |
— |
( |
( |
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Capital contribution from noncontrolling interest holder in consolidated JV |
— |
— |
— |
— |
— |
— |
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Other comprehensive income |
— |
— |
— |
— |
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Net income |
— |
— |
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— |
— |
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Balance at March 31, 2022 |
$ |
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$ |
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$ |
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$ |
( |
$ |
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$ |
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$ |
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$ |
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Balance at December 31, 2020 |
$ |
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$ |
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$ |
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$ |
( |
$ |
( |
$ |
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$ |
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$ |
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Stock related compensation |
— |
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— |
— |
— |
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— |
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Issuance of common stock |
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— |
— |
— |
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— |
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Common dividends declared ($ |
— |
— |
— |
( |
— |
( |
— |
( |
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Vesting/exercising of Omega OP Units |
— |
( |
— |
— |
— |
( |
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— |
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Conversion and redemption of Omega OP Units to common stock |
— |
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— |
— |
— |
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( |
— |
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Omega OP Units distributions |
— |
— |
— |
— |
— |
— |
( |
( |
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Other comprehensive income |
— |
— |
— |
— |
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Net income |
— |
— |
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— |
— |
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Balance at March 31, 2021 |
$ |
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$ |
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$ |
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$ |
( |
$ |
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$ |
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$ |
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$ |
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See notes to consolidated financial statements.
5
OMEGA HEALTHCARE INVESTORS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited (in thousands)
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Three Months Ended March 31, |
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2022 |
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2021 |
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Cash flows from operating activities |
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Net income |
$ |
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$ |
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Adjustment to reconcile net income to net cash provided by operating activities: |
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Depreciation and amortization |
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Impairment on real estate properties |
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Recovery on direct financing leases |
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— |
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( |
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Provision for rental income |
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Provision (recovery) for credit losses |
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( |
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Amortization of deferred financing costs and loss on debt extinguishment |
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Accretion of direct financing leases |
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Stock-based compensation expense |
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Gain on assets sold – net |
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( |
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( |
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Amortization of acquired in-place leases – net |
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( |
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( |
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Effective yield payable on mortgage notes |
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Interest paid-in-kind |
( |
( |
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(Income) loss from unconsolidated joint ventures |
( |
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Change in operating assets and liabilities – net: |
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Contractual receivables |
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( |
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( |
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Straight-line rent receivables |
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( |
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( |
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Lease inducements |
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Other operating assets and liabilities |
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( |
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( |
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Net cash provided by operating activities |
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Cash flows from investing activities |
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Acquisition of real estate |
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( |
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( |
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Acquisition deposit - net |
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— |
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Net proceeds from sale of real estate investments |
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Investments in construction in progress |
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( |
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( |
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Proceeds from sale of direct financing lease and related trust |
— |
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Placement of mortgage loans |
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( |
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( |
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Collection of mortgage principal |
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Investments in unconsolidated joint ventures |
— |
( |
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Distributions from unconsolidated joint ventures in excess of earnings |
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Capital improvements to real estate investments |
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( |
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( |
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Receipts from insurance proceeds |
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Investments in other investments |
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( |
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( |
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Proceeds from other investments |
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Net cash provided by (used in) investing activities |
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( |
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Cash flows from financing activities |
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Proceeds from long-term borrowings |
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Payments of long-term borrowings |
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( |
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( |
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Payments of financing related costs |
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( |
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( |
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Net proceeds from issuance of common stock |
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Repurchase of common stock |
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( |
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— |
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Dividends paid |
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( |
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( |
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Noncontrolling members’ contributions to consolidated joint venture |
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— |
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Distributions to Omega OP Unit Holders |
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( |
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( |
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Net cash provided by financing activities |
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Effect of foreign currency translation on cash, cash equivalents and restricted cash |
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( |
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Increase (decrease) in cash, cash equivalents and restricted cash |
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( |
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Cash, cash equivalents and restricted cash at beginning of period |
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Cash, cash equivalents and restricted cash at end of period |
$ |
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$ |
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See notes to consolidated financial statements.
6
OMEGA HEALTHCARE INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Unaudited
March 31, 2022
NOTE 1 – BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
Business Overview and Organization
Omega Healthcare Investors, Inc. (“Parent”) is a Maryland corporation that, together with its consolidated subsidiaries (collectively, “Omega,” the “Company,” “we,” “our,” or “us”) invests in healthcare-related real estate properties located in the United States (“U.S.”) and the United Kingdom (“U.K.”). Our core business is to provide financing and capital to the long-term healthcare industry with a particular focus on skilled nursing facilities (“SNFs”), assisted living facilities (“ALFs”), and to a lesser extent, independent living facilities (“ILFs”), rehabilitation and acute care facilities (“specialty facilities”) and medical office buildings. Our core portfolio consists of long-term “triple net” leases and mortgage loans with healthcare operating companies and affiliates (collectively, our “operators”). In addition to our core investments, we selectively make loans to operators for working capital and capital expenditures. From time to time, we also acquire equity interests in joint ventures or entities that support the long-term healthcare industry and our operators.
Omega has elected to be taxed as a real estate investment trust (“REIT”) for federal income tax purposes and is structured as an umbrella partnership REIT (“UPREIT”) under which all of Omega’s assets are owned directly or indirectly by, and all of Omega’s operations are conducted directly or indirectly through, its operating partnership subsidiary, OHI Healthcare Properties Limited Partnership (collectively with its subsidiaries, “Omega OP”). Omega has exclusive control over Omega OP’s day-to-day management pursuant to the partnership agreement governing Omega OP. As of March 31, 2022, Parent owned approximately
Basis of Presentation and Principles of Consolidation
The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all the information and notes required by U.S. generally accepted accounting principles (“GAAP”) for complete financial statements. In our opinion, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The results of operations for the interim periods reported herein are not necessarily indicative of results to be expected for the full year. These unaudited consolidated financial statements should be read in conjunction with the financial statements and the footnotes thereto included in our latest Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 17, 2022.
Omega’s consolidated financial statements include the accounts of (i) Parent, (ii) Omega OP, (iii) all direct and indirect wholly owned subsidiaries of Omega and (iv) other entities in which Omega or Omega OP has a majority voting interest and control. All intercompany transactions and balances have been eliminated in consolidation, and Omega’s net earnings are reduced by the portion of net earnings attributable to noncontrolling interests.
Segments
We conduct our operations and report financial results as
7
Reclassification
Certain line items on our Consolidated Statements of Changes in Equity, Consolidated Balance Sheets and Consolidated Statements of Cash Flows have been reclassified to conform to the current period presentation.
Risks and Uncertainties including COVID-19
The Company is subject to certain risks and uncertainties affecting the healthcare industry, including those stemming from the novel coronavirus (“COVID-19”) global pandemic described below, which has disproportionately impacted the senior care sector, as well as those stemming from healthcare legislation and changing regulation by federal, state and local governments. Additionally, we are subject to risks and uncertainties as a result of changes affecting operators of nursing home facilities due to the actions of governmental agencies and insurers to limit the rising cost of healthcare services.
Recent Accounting Pronouncements
ASU – 2022-02, Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures
On March 31, 2022, the FASB issued ASU 2022-02, which eliminates the recognition and measurement guidance for troubled debt restructurings (“TDRs”) and requires additional disclosures for certain loan modifications. ASU 2022-02 also requires entities to disclose gross write-offs of financing receivables and net investments in leases by year of origination. The TDR guidance can be adopted using either a prospective or modified retrospective transition approach and the additional disclosure requirements are made prospectively. ASU 2022-02 would be effective for Omega’s first quarter of 2023, and early adoption is permitted. We are still evaluating the impact that adopting ASU 2022-02 will have on our consolidated financial statements.
ASU – 2020-04, Financial Instruments – Reference Rate Reform (Topic 848)
On March 12, 2020, the FASB issued ASU 2020-04, which contains optional practical expedients for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting for contracts, hedging relationships, and other transactions that reference the London Interbank Offered Rate (“LIBOR”). The guidance may be elected over time until December 31, 2022, as reference rate reform activities occur. The Company has several derivative instruments (See Note 16 – Derivatives and Hedging), a $
8