10-Q: Quarterly report pursuant to Section 13 or 15(d)
Published on May 3, 2024
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 30, 2024, there were
OMEGA HEALTHCARE INVESTORS, INC.
FORM 10-Q
March 31, 2024
TABLE OF CONTENTS | ||
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Financial Statements of Omega Healthcare Investors, Inc. (Unaudited): |
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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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2024 |
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2023 |
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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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Real estate loans receivable – net |
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Investments in unconsolidated joint ventures |
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Assets held for sale |
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Total real estate investments |
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Non-real estate loans receivable – net |
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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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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 |
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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)
Three Months Ended |
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March 31, |
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2024 |
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2023 |
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Revenues |
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Rental income |
$ |
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$ |
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Interest 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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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 income – net |
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Loss on debt extinguishment |
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( |
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( |
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(Loss) gain on assets sold – net |
( |
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Total other income |
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Income before income tax (expense) benefit and income from unconsolidated joint ventures |
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Income tax (expense) benefit |
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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 available to common stockholders |
$ |
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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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2024 |
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2023 |
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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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( |
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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 EQUITY
Three Months Ended March 31, 2024 and 2023
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 |
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Equity |
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Interest |
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Equity |
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Balance at December 31, 2023 |
$ |
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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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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, 2024 |
$ |
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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, 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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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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— |
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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, 2023 |
$ |
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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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2024 |
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2023 |
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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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Provision for rental income |
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— |
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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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Loss (gain) on assets sold – net |
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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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Straight-line rent and effective interest receivables |
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( |
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( |
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Interest paid-in-kind |
( |
( |
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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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Lease inducements |
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( |
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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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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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Placement of loan principal |
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( |
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( |
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Collection of loan 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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Proceeds from net investment hedges |
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— |
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Receipts from insurance proceeds |
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Net cash (used in) provided by investing activities |
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( |
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Cash flows from financing activities |
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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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Dividends paid |
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( |
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( |
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Net payments to noncontrolling members of 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 used in financing activities |
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( |
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( |
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Effect of foreign currency translation on cash, cash equivalents and restricted cash |
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Decrease in cash, cash equivalents and restricted cash |
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( |
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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, 2024
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 real estate loans with healthcare operating companies and affiliates (collectively, our “operators”). In addition to our core investments, we make loans to operators and/or their principals. 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, 2024, Parent owned
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 Annual Report on Form 10-K for the year ended December 31, 2023.
Omega’s consolidated financial statements include the accounts of Omega Healthcare Investors, Inc., its wholly-owned subsidiaries and the joint ventures (“JVs”) and variable interest entities (“VIEs”) that it controls, through voting rights or other means. All intercompany transactions and balances have been eliminated in consolidation.
Segments
We conduct our operations and report financial results as
7
Reclassification
Certain amounts in the prior year period have been reclassified to conform to the current period presentation. Income from direct financing leases, which was previously reported separately on our Consolidated Statements of Operations, is now included in Rental Income for all periods presented. In addition, we previously reported assets held for sale of $
NOTE 2 – REAL ESTATE ASSETS
At March 31, 2024, our leased real estate properties included
Three Months Ended March 31, |
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2024 |
2023 |
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(in thousands) |
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Fixed income from operating leases |
$ |
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$ |
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Variable income from operating leases |
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Interest income from direct financing leases |
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Total rental income |
$ |
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$ |
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Our variable income from operating leases primarily represents the reimbursement by operators for real estate taxes that Omega pays directly.
Asset Acquisitions
The following table summarizes the asset acquisitions that occurred during the three months ended March 31, 2024:
Number of |
Total Real Estate |
Initial |
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Facilities |
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Assets Acquired |
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Annual |
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Period |
SNF |
ALF |
Country/State |
(in millions) |
Cash Yield(1) |
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Q1 |
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— |
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WV |
$ |
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% |
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Q1 |
— |
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U.K. |
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% |
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Total |
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$ |
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| (1) | Initial annual cash yield reflects the initial annual contractual cash rent divided by the purchase price. |
Construction in Progress and Capital Expenditure Investments
We invested $
NOTE 3 – ASSETS HELD FOR SALE, DISPOSITIONS AND IMPAIRMENTS
Periodically we sell facilities to reduce our exposure to certain operators, geographies and non-strategic assets or due to the exercise of a tenant purchase option.
8
The following is a summary of our assets held for sale:
March 31, |
December 31, |
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2024 |
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2023 |
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Number of facilities held for sale |
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Amount of assets held for sale (in thousands) |
$ |
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$ |
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In the first quarter of 2024, we reclassified
Asset Sales
During the three months ended March 31, 2024, we sold
During the three months ended March 31, 2023, we sold
During the three months ended March 31, 2024 and 2023, we received interest of $
Real Estate Impairments
During the three months ended March 31, 2024, we recorded impairments of $
During the three months ended March 31, 2023, we recorded impairments of $
To estimate the fair value of the facilities for the impairments noted above, we utilized a market approach that considered binding sale agreements (a Level 1 input) or non-binding offers from unrelated third parties and/or broker quotes (a Level 3 input).
9
NOTE 4 – CONTRACTUAL RECEIVABLES AND OTHER RECEIVABLES AND LEASE INDUCEMENTS
Contractual receivables relate to the amounts currently owed to us under the terms of our lease and loan agreements. Effective yield interest receivables relate to the difference between the interest income recognized on an effective yield basis over the term of the loan agreement and the interest currently due to us according to the contractual agreement. Straight-line rent receivables relate to the difference between the rental revenue recognized on a straight-line basis and the amounts currently due to us according to the contractual agreement. Lease inducements result from value provided by us to the lessee, at the inception, modification or renewal of the lease, and are amortized as a reduction of rental income over the non-cancellable lease term.
A summary of our net receivables and lease inducements by type is as follows: