Part I [Business](index=6&type=section&id=Item%201.%20Business) National Health Investors, Inc. (NHI) is a self-managed REIT operating through two segments: Real Estate Investments and a Senior Housing Operating Portfolio (SHOP), primarily deriving revenue from rental income, SHOP resident fees, and interest income. - NHI is a self-managed REIT specializing in senior housing and medical facility investments, operating through two main segments: Real Estate Investments and the Senior Housing Operating Portfolio (SHOP)[22](index=22&type=chunk) Portfolio Overview as of December 31, 2022 | Segment | Investment Value | Property Count | Description | | :--- | :--- | :--- | :--- | | **Real Estate Investments** | ~$2.4 billion | 160 properties | 94 senior housing, 65 skilled nursing, 1 hospital under triple-net leases | | **Mortgage/Notes Receivable** | $248.5 million | 17 mortgages | Secured loans to healthcare operators | | **SHOP Segment** | ~$338.1 million | 15 properties | Independent living facilities with 1,732 units | Revenue Sources for Fiscal Year 2022 | Revenue Source | Amount (Millions) | Percentage of Total | | :--- | :--- | :--- | | Rental Income | $217.7 | 78.3% | | SHOP Revenue | $35.8 | 12.9% | | Interest Income | $24.7 | 8.9% | | **Total Revenue** | **$278.2** | **100.0%** | - The company's revenue is highly dependent on the operational success of its tenants, borrowers, and managers, whose income is influenced by occupancy rates, patient mix (private pay, Medicare, Medicaid), and reimbursement rates[27](index=27&type=chunk) [Classification of Properties](index=7&type=section&id=Item%201.%20Business%20-%20Classification%20of%20Properties) The company's property portfolio is classified into Real Estate Investments and the Senior Housing Operating Portfolio (SHOP), encompassing various senior housing and medical facility types. - The portfolio is classified into two main segments: Real Estate Investments and the Senior Housing Operating Portfolio (SHOP)[28](index=28&type=chunk) - Within Real Estate Investments, properties are categorized as Senior Housing or Medical, with Senior Housing further divided into 'Need-Driven' (Assisted Living, Senior Living Campuses) and 'Discretionary' (Independent Living, Entrance-Fee Communities)[28](index=28&type=chunk)[29](index=29&type=chunk) - As of December 31, 2022, the portfolio included 66 assisted living facilities, 10 senior living campuses, 7 independent living facilities, 11 entrance-fee communities, 65 skilled nursing facilities, and one hospital[30](index=30&type=chunk)[31](index=31&type=chunk)[32](index=32&type=chunk)[33](index=33&type=chunk)[36](index=36&type=chunk)[37](index=37&type=chunk) - The SHOP segment consists of 15 independent living facilities with 1,732 units, which are considered discretionary senior housing[39](index=39&type=chunk) [Nature of Investments](index=8&type=section&id=Item%201.%20Business%20-%20Nature%20of%20Investments) Investments are structured through purchase-leasebacks, property acquisitions, various loan types, and RIDEA-compliant operations, primarily under triple-net leases. - Investments are structured as purchase-leasebacks, property acquisitions, loans, or RIDEA-compliant operations[40](index=40&type=chunk) - Leases are typically triple-net with initial terms of 10-15 years, requiring tenants to cover all property-related expenses, including taxes, insurance, and repairs[41](index=41&type=chunk) - The company provides various types of loans, including mortgage, mezzanine, and construction loans, with interest rates ranging from **7.0% to 9.5% in 2022**[41](index=41&type=chunk)[44](index=44&type=chunk)[45](index=45&type=chunk)[46](index=46&type=chunk) - The SHOP segment was formed on April 1, 2022, by transitioning 15 properties from a triple-net lease into two ventures where NHI holds a majority interest and third-party managers operate the communities[49](index=49&type=chunk) [Tenant Concentration](index=10&type=section&id=Item%201.%20Business%20-%20Tenant%20Concentration) The company faces significant tenant concentration, with Senior Living Communities and NHC accounting for 18% and 13% of total 2022 revenues, respectively. Tenant Concentration by Revenue (2022) | Tenant | Asset Class | Gross Real Estate Investment | Notes Receivable | 2022 Revenue | % of Total Revenue | | :--- | :--- | :--- | :--- | :--- | :--- | | Senior Living | EFC | $573.6 million | $48.5 million | $51.2 million | 18% | | NHC | SNF | $133.8 million | - | $36.9 million | 13% | - In 2022, NHI converted its tenant Bickford to a cash basis of accounting due to substantial doubt about its ability to continue as a going concern, resulting in a write-off of **$18.1 million** in straight-line rents and **$7.1 million** in lease incentives[60](index=60&type=chunk) - The legacy Holiday portfolio was restructured on April 1, 2022, following a dispute with Welltower, involving a **$6.9 million** settlement payment to NHI and the transition of 15 properties into the new SHOP segment[65](index=65&type=chunk)[70](index=70&type=chunk) [Government and Tax Regulation](index=15&type=section&id=Item%201.%20Business%20-%20Government%20and%20Tax%20Regulation) The company's operations and REIT status are subject to extensive government healthcare regulations and complex tax rules, including Medicare/Medicaid reimbursement and distribution requirements. - NHI's tenants and borrowers are subject to extensive healthcare regulations, including licensure, certification, Medicare/Medicaid reimbursement rules, and fraud and abuse laws, which can significantly impact their financial condition[79](index=79&type=chunk)[80](index=80&type=chunk) - A significant portion of revenue for SNF tenants comes from Medicare and Medicaid, which are subject to frequent changes, with CMS estimating a **2.7% increase** in payments to SNFs for fiscal year 2023[82](index=82&type=chunk)[83](index=83&type=chunk) - NHI has elected to be taxed as a REIT and must continuously meet complex requirements related to income sources, asset composition, distributions, and stock ownership to maintain this status and avoid corporate income taxes[105](index=105&type=chunk)[106](index=106&type=chunk)[107](index=107&type=chunk) - To qualify as a REIT, NHI must distribute at least **90% of its REIT taxable income** to stockholders annually[112](index=112&type=chunk) [Risk Factors](index=22&type=section&id=Item%201A.%20Risk%20Factors) The company identifies significant risks primarily related to its tenants' and borrowers' financial health, which is susceptible to public health crises, regulatory changes, and rising operating costs, alongside substantial tenant concentration, real estate illiquidity, and REIT status adherence. - **Tenant & Borrower Risks:** The company's financial performance is highly dependent on the operating success of its tenants, with public health crises (like COVID-19), declining occupancy, increased labor costs, and changes to Medicare/Medicaid reimbursement adversely affecting tenants' ability to pay rent[126](index=126&type=chunk)[128](index=128&type=chunk)[131](index=131&type=chunk) - **Concentration Risk:** A significant percentage of revenue comes from a small number of tenants, with Senior Living and NHC generating approximately **30% of total revenue** for the year ended December 31, 2022[137](index=137&type=chunk) - **Business & Operational Risks:** The company is exposed to risks from the illiquidity of its specialized real estate assets, potential impairment charges (**$51.6 million in 2022**), and cybersecurity breaches[147](index=147&type=chunk)[160](index=160&type=chunk)[173](index=173&type=chunk)[174](index=174&type=chunk) - **Debt & Capital Risks:** The company relies on external capital for growth and refinancing, facing increased costs on variable-rate debt from rising interest rates and potential adverse impacts from credit rating downgrades on capital availability[179](index=179&type=chunk)[181](index=181&type=chunk)[182](index=182&type=chunk) - **REIT Status Risks:** Failure to continuously qualify as a REIT would result in significant adverse tax consequences, including being subject to corporate income tax and the inability to deduct distributions to stockholders[185](index=185&type=chunk) [Properties](index=37&type=section&id=Item%202.%20Properties) As of December 31, 2022, NHI's portfolio is geographically concentrated in South Carolina and Texas, with lease expirations staggered, including significant maturities in 2029 and after 2032, and a master lease with NHC expiring in 2026. Top 5 States by Gross Investment as of Dec 31, 2022 | Location | Gross Investment ($ thousands) | | :--- | :--- | | South Carolina | $336,291 | | Texas | $298,599 | | Florida | $224,378 | | Washington | $200,530 | | Illinois | $196,481 | Lease Expiration Schedule by Annualized Gross Rent | Year | Percentage of Annualized Gross Rent | | :--- | :--- | | 2023 | 1.5% | | 2026 | 17.8% | | 2029 | 33.2% | | Thereafter | 30.4% | [Legal Proceedings](index=38&type=section&id=Item%203.%20Legal%20Proceedings) The company was involved in significant litigation with Welltower, Inc. regarding unpaid rent on the legacy Holiday portfolio, which was settled effective April 1, 2022, resulting in NHI receiving $6.9 million and the properties transitioning into its new SHOP segment. - NHI filed a lawsuit against Welltower, Inc. and its subsidiaries on December 20, 2021, in the Delaware Court of Chancery, alleging failure to pay rent and honor obligations after acquiring the Holiday portfolio[208](index=208&type=chunk) - A settlement was reached and formalized on March 31, 2022, as part of which NHI received **$6.9 million** in escrowed funds, recognized as rental income[209](index=209&type=chunk)[211](index=211&type=chunk) - Effective April 1, 2022, the master lease with the Welltower affiliate was terminated, and the 15 remaining properties were transitioned into two new SHOP partnership ventures[210](index=210&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=40&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) NHI's common stock trades on the NYSE under the symbol "NHI", subject to ownership limits to protect its REIT status, which requires distributing at least 90% of its taxable income annually, and has underperformed relevant market indices over the past five years. - The company's common stock is traded on the New York Stock Exchange under the symbol "NHI"[216](index=216&type=chunk) - To protect its REIT status, the company's charter limits stock ownership to approximately **7.5%** for most stockholders[214](index=214&type=chunk) 5-Year Cumulative Total Return Comparison | Year | NHI | MSCI US REIT Index | S&P 500 | | :--- | :--- | :--- | :--- | | 2017 | $100.00 | $100.00 | $100.00 | | 2018 | $105.71 | $95.43 | $95.62 | | 2019 | $120.04 | $120.09 | $125.72 | | 2020 | $109.20 | $110.99 | $148.85 | | 2021 | $96.51 | $158.79 | $191.58 | | 2022 | $94.79 | $119.87 | $156.88 | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=43&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) In 2022, NHI's financial performance was significantly impacted by portfolio restructuring, leading to a 6.9% decrease in total revenue to $278.2 million and a 41.5% drop in net income to $65.5 million, driven by lower rental income, property impairment charges, and credit loss provisions, despite maintaining strong liquidity. - The company established a new reportable segment, the Senior Housing Operating Portfolio (SHOP), effective April 1, 2022, by transitioning 15 former Holiday properties from a triple-net lease structure[232](index=232&type=chunk) - During 2022, the company granted **$9.3 million** in pandemic-related rent deferrals and forgave **$4.1 million**, with aggregate concessions totaling **$44.3 million** since the pandemic began[241](index=241&type=chunk) Key Financial Results Comparison (FY 2022 vs FY 2021) | Metric | 2022 ($ in thousands) | 2021 ($ in thousands) | Change (%) | | :--- | :--- | :--- | :--- | | Total Revenue | $278,194 | $298,715 | (6.9)% | | Rental Income | $217,700 | $271,049 | (19.7)% | | Net Income | $65,501 | $111,967 | (41.5)% | | Loan and realty losses | $61,911 | $52,766 | 17.3% | - The decrease in rental income was driven by the Holiday portfolio transition, disposition of 22 properties, and approximately **$33.1 million** in write-offs of straight-line rents and lease incentives for tenants placed on a cash basis[292](index=292&type=chunk) - The company repurchased **2.5 million shares** of common stock for an average price of **$61.56 per share** during 2022[258](index=258&type=chunk) [Liquidity and Capital Resources](index=59&type=section&id=Item%207.%20MD%26A%20-%20Liquidity%20and%20Capital%20Resources) The company maintains strong liquidity through cash, a revolving credit facility, and an ATM program, managing debt maturities and interest payments. - As of December 31, 2022, NHI had **$19.3 million** in unrestricted cash, **$658.0 million** available on its revolving credit facility, and **$415.7 million** available under its ATM program[295](index=295&type=chunk) - In March 2022, the company entered into a new **$700.0 million** unsecured revolving credit facility, replacing its previous **$550.0 million** facility[301](index=301&type=chunk) Debt Metrics as of December 31, 2022 | Metric | Value | | :--- | :--- | | Consolidated Net Debt | $1.128 billion | | Adjusted EBITDA | $242.3 million | | Consolidated Net Debt to Adjusted EBITDA | 4.7x | | Fixed Charge Coverage Ratio | 5.9x | - The company has material cash requirements of **$487.5 million** for the next twelve months, primarily for debt maturities (**$415.4 million**) and interest payments (**$37.7 million**)[328](index=328&type=chunk) [FFO & FAD](index=66&type=section&id=Item%207.%20MD%26A%20-%20FFO%20%26%20FAD) Funds From Operations (FFO) and Funds Available for Distribution (FAD) per share decreased in 2022 due to write-offs, increased credit loss reserves, and property dispositions. - NAREIT FFO per diluted share decreased **23.2%** from **$4.62 in 2021** to **$3.55 in 2022**, primarily due to write-offs of straight-line rents and lease incentives, increased credit loss reserves, and property dispositions[340](index=340&type=chunk)[346](index=346&type=chunk) - Normalized FFO per diluted share decreased **6.5%** from **$4.60 in 2021** to **$4.30 in 2022**[341](index=341&type=chunk)[346](index=346&type=chunk) - Normalized FAD, a measure of dividend-paying ability, decreased **4.0%** from **$209.5 million in 2021** to **$201.0 million in 2022**[343](index=343&type=chunk)[346](index=346&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=71&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is interest rate risk from its variable-rate debt, with a hypothetical 50 basis-point change impacting annual net interest expense by approximately $1.4 million, while inflation risk is partially mitigated by CPI-based rent escalators and triple-net leases. - As of December 31, 2022, the company had **$282.0 million** of variable-rate debt, exposing it to interest rate fluctuations[351](index=351&type=chunk) - A **50 basis-point (0.50%)** increase or decrease in interest rates would change annual net interest expense by approximately **$1.4 million**[352](index=352&type=chunk) - Inflation risk is mitigated through contractual rent increases, some of which are tied to the CPI, and triple-net leases that require tenants to pay all property operating expenses[358](index=358&type=chunk) [Financial Statements and Supplementary Data](index=73&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) The consolidated financial statements for 2020-2022 were audited by BDO USA, LLP, receiving an unqualified opinion, with critical audit matters including property impairment assessment and SHOP venture consolidation, while the balance sheet shows decreases in total assets and liabilities due to dispositions, impairments, and debt repayments. - The independent registered public accounting firm, BDO USA, LLP, issued an unqualified opinion on the consolidated financial statements[361](index=361&type=chunk) - Critical audit matters included management's identification and assessment of indicators for potential impairment of real estate properties and the accounting for the consolidation of the SHOP ventures[368](index=368&type=chunk)[370](index=370&type=chunk) Consolidated Balance Sheet Summary ($ in thousands) | Account | Dec 31, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Total Real estate properties, net | $2,118,210 | $2,317,880 | | Total Assets | $2,507,424 | $2,838,876 | | Total Debt | $1,147,511 | $1,242,883 | | Total Liabilities | $1,217,518 | $1,321,893 | | Total Equity | $1,280,081 | $1,516,983 | Consolidated Statement of Income Summary ($ in thousands) | Account | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Total Revenues | $278,194 | $298,715 | $332,811 | | Total Expenses | $241,856 | $216,139 | $161,766 | | Net Income | $65,501 | $111,967 | $185,311 | [Controls and Procedures](index=113&type=section&id=Item%209A.%20Controls%20and%20Procedures) Company management, including the CEO and CFO, concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2022, an assessment affirmed by the independent auditor, with no significant changes to internal controls during the fourth quarter of 2022. - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of December 31, 2022[586](index=586&type=chunk) - Management's assessment concluded that the company's internal control over financial reporting was effective as of December 31, 2022[591](index=591&type=chunk) - No significant changes were made to internal controls over financial reporting during the fourth quarter of 2022 that materially affected, or are reasonably likely to materially affect, internal controls[588](index=588&type=chunk) Part III [Directors, Executive Officers, Corporate Governance, Compensation, and Principal Accountant Fees](index=117&type=section&id=Items%2010-14) Information required for Items 10 through 14, covering directors, executive officers, corporate governance, executive compensation, security ownership, related transactions, director independence, and principal accountant fees and services, is incorporated by reference from the company's definitive proxy statement for its 2023 annual meeting of stockholders. - Information for Items 10, 11, 12, 13, and 14 is incorporated by reference from the Registrant's definitive proxy statement for its 2023 annual meeting of stockholders[603](index=603&type=chunk)[604](index=604&type=chunk)[605](index=605&type=chunk)[606](index=606&type=chunk)[607](index=607&type=chunk) Part IV [Exhibits and Financial Statement Schedules](index=117&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists the financial statements, financial statement schedules, and exhibits filed as part of the Form 10-K report, including consolidated financial statements, real estate and mortgage loan schedules, and various corporate documents and material contracts. - This part of the report contains the list of all financial statements, schedules, and exhibits filed with the Form 10-K[609](index=609&type=chunk)

Portfolio Optimization & Dispositions - Since Q2 2021, the company completed approximately $296.4 million in senior housing dispositions at a NOI cap rate of approximately 2.7% and EBITDARM coverage of 0.47x[5] - The company is targeting additional asset sales of $50 - $60 million, which is expected to have an annualized cash rent impact of approximately $4.6 million[5] - Since 1Q21, the company has completed the sale of 9 Bickford properties for approximately $65.9 million[10] Bickford & Holiday Portfolio Repositioning - The Bickford lease was restructured effective April 1st to approximately $28 million annual cash rent with a FMV reset after two years; TTM pro forma EBITDARM coverage through 2Q 2022 was 1.32x[5] - The company transitioned 15 former Holiday properties to a new senior housing operating portfolio ("SHOP") effective April 1, 2022, to Discovery Senior Living and Merrill Gardens[5] - SHOP contributed $2.8 million to adjusted NOI during 3Q 2022 and $5.7 million YTD[5] Financial Performance & Balance Sheet - The company has maintained leverage within its stated goal of 4.0x – 5.0x net debt-to-adjusted EBITDA despite significant deferrals and asset dispositions[5] - The company completed $152 million in share repurchases year-to-date[5] - The company expects incremental SHOP long-term opportunity of $6 million - $8 million as the industry recovers[5] - The company has reduced debt by $434 million since the pandemic began and has $690 million available on the $700 million revolver at September 30, 2022[17]

National Health Investors, Inc. (NYSE:NHI) Q3 2022 Earnings Conference Call November 9, 2022 12:00 PM ET Company Participants Dana Hambly - VP, Finance & IR Eric Mendelsohn - President & CEO John Spaid - CFO Kevin Pascoe - Chief Investment Officer Conference Call Participants John Kim - BMO Capital Markets Operator Greetings, and welcome to the National Health Investors Third Quarter 2022 Conference Call. At the start of the presentation, all lines will be in a listen-mode. Afterwards, we will conduct a que ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) Commission File Number 001-10822 National Health Investors Inc (Exact name of registrant as specified in its charter) Maryland 62-1470956 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) 222 Robert Rose Drive Murfreesboro Tennessee 37129 (Address of principal executive offices) (Zip Code) (615) 890-9100 (Registrant's telephone number, including area code) Securities ...

Financial Data and Key Metrics Changes - The net income per diluted common share for Q2 2022 was $0.47, down from $0.85 in Q2 2021, but up $0.29 from Q1 2022 [17] - NAREIT FFO per diluted common share decreased to $0.71 from $1.05 sequentially, impacted by Bickford write-offs [26] - Normalized FFO increased to $1.26 from $1.10 sequentially, with funds available for distribution rising to $56.3 million [27][28] - The balance sheet showed a reduction in debt by over $330 million in the last 12 months, with leverage at 4.0x, at the low end of the targeted range [15][30] Business Line Data and Key Metrics Changes - The senior housing operating portfolio (SHOP) contributed over $3 million of NOI, excluding non-recurring transition costs, aligning with forecasts [11] - Senior housing coverage improved to 1.11x in Q1 2022 from 0.98x in Q4 2021, while total company coverage improved to 1.68x from 1.54x [14] - The SHOP portfolio's NOI for Q2 was $3.2 million, with expectations for annualized contributions in the low-to-mid teens [44][75] Market Data and Key Metrics Changes - The company completed over $356 million in asset sales, including $288.2 million in senior housing sales with low EBITDARM coverage [13] - The average occupancy in the current portfolio improved by 190 basis points to 84.5% since recent asset sales [42] Company Strategy and Development Direction - The company is focused on portfolio optimization, having completed significant dispositions and lease restructurings, particularly with Bickford [8][13] - Future growth is anticipated through the SHOP segment and operational improvements, with a focus on stabilizing occupancy before pursuing RevPOR growth [50][72] Management's Comments on Operating Environment and Future Outlook - Management acknowledged ongoing challenges in the industry, including elevated operating costs and labor constraints, but expressed optimism about recovery and growth potential [9][21] - The company is in excellent financial health, with significant capital available for deployment without the need for equity issuance [53] Other Important Information - The second quarter dividend of $0.90 per share was declared, representing a payout ratio of 69.5% for normalized FFO [29] - The company has approximately $416 million available under its ATM program, with no equity issuance expected in the near term [31] Q&A Session Summary Question: Why move Bickford to cash basis now? - Management cited multiple factors, including external debts and auditor concerns, leading to the decision to convert to cash accounting [57][58] Question: What options exist if Bickford does not remain a going concern? - Management indicated potential for restructuring or transitioning to new operators, emphasizing the portfolio's strong cash flow [59][60] Question: What are the expectations for SHOP portfolio RevPOR growth? - Management focused on improving occupancy first, with expectations for gradual margin improvements over time [68][70] Question: What is the outlook for the deferral balance? - Management acknowledged ongoing deferrals but expressed confidence in minimizing them and improving overall portfolio health [76][78]

Part I. Financial Information [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) The company's financial statements show decreased net income and total assets in H1 2022, impacted by portfolio restructuring and the new SHOP segment Financial Metrics (Unaudited) | Financial Metric | June 30, 2022 (unaudited) | December 31, 2021 | | :--- | :--- | :--- | | Total Assets | $2,587,291 | $2,838,876 | | Total Liabilities | $1,174,303 | $1,321,893 | | Total Equity | $1,401,501 | $1,516,983 | Income Statement Summary | Income Statement Item | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $59,899 | $74,330 | $131,227 | $155,215 | | Net Income | $21,466 | $39,231 | $29,712 | $74,613 | | Net Income Attributable to Common Stockholders | $21,673 | $39,183 | $30,073 | $74,513 | | Diluted EPS | $0.47 | $0.85 | $0.66 | $1.63 | Cash Flow Activities | Cash Flow Activity (Six Months Ended June 30) | 2022 | 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $95,448 | $108,512 | | Net cash provided by investing activities | $192,223 | $5,229 | | Net cash used in financing activities | ($281,096) | ($125,359) | - The company established a new Senior Housing Operating Portfolio (SHOP) segment effective April 1, 2022, comprising 15 independent living facilities. This new segment generated **$12.0 million** in resident fees and services revenue in Q2 2022[29](index=29&type=chunk)[54](index=54&type=chunk)[153](index=153&type=chunk) - During Q2 2022, the company placed tenant Bickford Senior Living on a cash basis for revenue recognition, resulting in write-offs of **$18.1 million** in straight-line rents receivable and **$7.1 million** in lease incentives[49](index=49&type=chunk)[71](index=71&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=34&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations.) MD&A details portfolio shifts, new SHOP segment, asset dispositions, and Bickford's financial distress impacting FFO per share - Effective April 1, 2022, **15 senior housing facilities** were transferred from a triple-net lease into two new ventures, forming the SHOP reportable segment. This followed the settlement of litigation with Welltower, which included NHI receiving **$6.9 million** in escrowed funds[171](index=171&type=chunk)[191](index=191&type=chunk) - In Q2 2022, NHI restructured its master lease agreements with Bickford Senior Living, extending maturities and reducing near-term rent. This was prompted by Bickford's financial condition, which led NHI to write off **$18.1 million** of straight-line rents receivable and **$7.1 million** of lease incentives[204](index=204&type=chunk)[205](index=205&type=chunk) Tenant Revenue Contribution | Tenant | Revenue (Six Months Ended June 30, 2022) | % of Total Revenue | | :--- | :--- | :--- | | Senior Living Communities | $25,549 | 19% | | National HealthCare Corporation (NHC) | $18,597 | 14% | | Holiday | $16,680 | 13% | Non-GAAP Performance Metrics | Performance Metric (Six Months Ended June 30) | 2022 | 2021 | | :--- | :--- | :--- | | NAREIT FFO attributable to common stockholders | $80,762 | $109,073 | | NAREIT FFO per diluted share | $1.76 | $2.39 | | Normalized FFO attributable to common stockholders | $108,539 | $109,524 | | Normalized FFO per diluted share | $2.37 | $2.40 | | Normalized FAD attributable to common stockholders | $108,951 | $112,389 | - The company repurchased **1,196,175 shares** of its common stock for an average price of **$58.52 per share** during Q2 2022 under a new **$240 million** share repurchase plan. As of June 30, 2022, approximately **$170.4 million** remained available under the plan[245](index=245&type=chunk)[246](index=246&type=chunk)[247](index=247&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=58&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk.) Primary market risk is interest rate fluctuations on **$240 million** variable-rate debt, with derivative instruments matured Debt Composition as of June 30, 2022 | Debt Type (as of June 30, 2022) | Balance | % of Total | Weighted Avg. Rate | | :--- | :--- | :--- | :--- | | Fixed Rate | $876,845 | 78.5% | 3.65% (calculated) | | Variable Rate | $240,000 | 21.5% | 3.04% | | **Total** | **$1,116,845** | **100.0%** | **3.49%** | - A **50 basis-point (0.50%)** increase or decrease in interest rates on the company's variable-rate debt would result in an annual change to net interest expense of approximately **$1.2 million**[284](index=284&type=chunk) - The company's interest rate swap agreements, which were used to hedge against variable interest rate fluctuations, matured on December 31, 2021, and were not replaced as of the reporting date[285](index=285&type=chunk) [Controls and Procedures](index=59&type=section&id=Item%204.%20Controls%20and%20Procedures.) Management concluded disclosure controls were effective, with expanded internal controls implemented for the new SHOP segment - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of June 30, 2022[289](index=289&type=chunk) - During the second quarter of 2022, the company expanded its internal controls to address the new SHOP business segment, focusing on revenue, operating costs, and oversight of third-party managers[292](index=292&type=chunk) Part II. Other Information [Legal Proceedings](index=60&type=section&id=Item%201.%20Legal%20Proceedings) Welltower litigation over unpaid rent for 17 senior living facilities settled, leading to a strategic shift to new SHOP ventures - NHI filed a lawsuit against Welltower, Inc. on December 20, 2021, alleging failure to pay rent and fraudulent inducement related to the assignment of leases for **17 senior living facilities**[297](index=297&type=chunk) - The litigation was settled effective April 1, 2022. As part of the settlement, NHI received approximately **$8.8 million** from a lease deposit and an additional **$6.9 million** from escrow, both recognized as rental income[298](index=298&type=chunk)[300](index=300&type=chunk) - The settlement resulted in the termination of the master lease and the transition of **15 properties** into two new SHOP partnership ventures, marking a significant strategic shift for the company[299](index=299&type=chunk) [Risk Factors](index=60&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors, except for a new risk on retaining key management personnel - A new risk factor was added concerning the company's dependence on retaining its management team and key personnel, whose departure could jeopardize business relationships and operations[301](index=301&type=chunk)[302](index=302&type=chunk)[303](index=303&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=61&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Company initiated a **$240 million** stock repurchase plan, buying **1.2 million shares** in Q2 2022, with **$170.4 million** remaining - The Board of Directors approved a new stock repurchase plan on April 15, 2022, for up to **$240.0 million** of common stock, expiring April 15, 2023[304](index=304&type=chunk) Common Stock Repurchases (Q2 2022) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | May 2022 | 465,507 | $59.70 | | June 2022 | 730,668 | $57.28 | | **Total Q2 2022** | **1,196,175** | **$58.52** | - As of June 30, 2022, approximately **$170.4 million** remained available for repurchase under the plan[304](index=304&type=chunk) [Exhibits](index=62&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with Form 10-Q, including corporate governance, debt agreements, and CEO/CFO certifications

National Health Investors, Inc. (NYSE:NHI) Q1 2022 Results Conference Call May 10, 2022 12:00 PM ET Company Participants Dana Hambly - VP, IR Eric Mendelsohn - President and CEO Kevin Pascoe - Chief Investment Officer John Spaid - CFO David Travis - Chief Accounting Officer Conference Call Participants Rich Anderson - SMBC Austin Wurschmidt - KeyBanc Capital Markets Omotayo Okusanya - Mizuho Operator Greetings and welcome to the National Health Investors First Quarter 2022 Conference Call. During the presen ...

Q1 2022 NATIONAL HEALTH INVESTORS Q1 2022 SUPPLEMENTAL TABLE OF CONTENTS 1 Q1 2022 National Health Investors | --- | --- | |---------------------------------------------|-------| | COMPANY \n COMPANY INFORMATION & LEADERSHIP | 02 | | PORTFOLIO | | | PORTFOLIO OVERVIEW | 03 | | PORTFOLIO SUMMARY | 04 | | OPERATING PARTNERS | 05 | | EBITDARM LEASE COVERAGE | 06 | | PURCHASE OPTIONS & LEASE MATURITIES | 07 | | INVESTMENTS | | | INVESTMENT RATIONALE | 08 | | RECENT INVESTMENTS | 09 | | CAPITALIZATION | | | CAPI ...

Part I [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) For the first quarter of 2022, National Health Investors, Inc. reported a significant decrease in net income to $8.4 million from $35.3 million in the prior-year period, primarily driven by $24.5 million in loan and realty losses and lower rental income, with total assets slightly decreasing to $2.80 billion and cash flow from operations declining to $38.7 million from $56.9 million year-over-year as the company managed its portfolio through dispositions and addressed tenant challenges Condensed Consolidated Statements of Income (Q1 2022 vs Q1 2021, in thousands) | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | **Total Revenues** | $71,327 | $80,885 | | **Total Expenses** | $66,208 | $44,242 | | **Net Income** | $8,246 | $35,384 | | **Net Income Attributable to Common Stockholders** | $8,399 | $35,332 | | **Diluted EPS** | $0.18 | $0.78 | Condensed Consolidated Balance Sheets (As of March 31, 2022, in thousands) | Metric | March 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | **Total Assets** | $2,802,503 | $2,838,876 | | Real estate properties, net | $2,201,084 | $2,317,880 | | Assets held for sale, net | $131,988 | $66,398 | | **Total Liabilities** | $1,313,706 | $1,321,893 | | Debt | $1,249,044 | $1,242,883 | | **Total Equity** | $1,488,797 | $1,516,983 | Condensed Consolidated Statements of Cash Flows (Q1 2022 vs Q1 2021, in thousands) | Cash Flow Activity | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | **Net cash provided by operating activities** | $38,680 | $56,912 | | **Net cash used in investing activities** | ($2,060) | ($9,133) | | **Net cash (used in) provided by financing activities** | ($36,177) | $22,106 | [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes detail the company's portfolio composition, significant accounting policies, and key financial events during the quarter, including real estate dispositions generating $13.2 million in proceeds, recognition of $24.6 million in impairment charges, and ongoing rent concessions related to the COVID-19 pandemic totaling $7.8 million, alongside the settlement of litigation with Welltower and restructuring of master lease agreements with Bickford Senior Living, and the establishment of a new $700 million unsecured revolving credit facility - As of March 31, 2022, the company's portfolio consisted of investments in 186 healthcare properties (120 senior housing, 65 skilled nursing, 1 hospital) and 15 mortgages, with a total investment value of approximately **$2.8 billion**[24](index=24&type=chunk) - Completed real estate dispositions of a medical office building and a senior living community for net proceeds of **$13.2 million**, resulting in a net gain of **$3.0 million**[42](index=42&type=chunk) - Recognized impairment charges of **$24.6 million**, included in "Loan and realty losses (gains)". **20 properties** with a net balance of **$132.0 million** were classified as assets held for sale[39](index=39&type=chunk)[45](index=45&type=chunk)[46](index=46&type=chunk) - Provided **$7.8 million** in lease concessions related to the COVID-19 pandemic during Q1 2022, accounted for as variable lease payments[41](index=41&type=chunk)[106](index=106&type=chunk) - Settled litigation with Welltower, Inc. regarding the Holiday portfolio, involving applying an **$8.8 million** lease deposit to past due rents and transitioning the properties to new operators and joint ventures effective April 1, 2022[112](index=112&type=chunk)[113](index=113&type=chunk)[114](index=114&type=chunk) - Entered into a new **$700 million** unsecured revolving credit agreement, replacing the previous **$550 million** facility, with the new agreement maturing in March 2026[85](index=85&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=26&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations.) Management attributes the 13.6% decrease in quarterly rental income primarily to increased rent concessions and property dispositions, with the period marked by significant portfolio management activities including the settlement with Welltower over the Holiday portfolio and a lease restructuring with Bickford Senior Living, alongside a $24.6 million impairment charge on real estate assets, while maintaining a strong balance sheet with $615 million available on its new credit facility and a consolidated net debt to Annualized Adjusted EBITDA ratio of 4.9x, and announcing a $240 million stock repurchase plan [Portfolio and Tenant Analysis](index=31&type=section&id=MD%26A%20-%20Portfolio%20and%20Tenant%20Analysis) As of Q1 2022, the portfolio comprised 201 facilities, with 72% of total revenues concentrated among nine operators, including key tenants Senior Living Communities, Holiday, NHC, and Bickford each accounting for over 10% of revenues, as the company actively managed tenant relationships through the transition of 15 Holiday properties into new SHOP joint ventures and a lease restructure with Bickford to set rent at approximately $28 million annually until April 2024, despite declining portfolio coverage ratios with total portfolio EBITDARM coverage dropping from 1.78x to 1.54x due to occupancy and expense pressures Top Tenant Revenue Concentration (Q1 2022, in thousands) | Tenant | Revenue (in thousands) | % of Total Revenue | | :--- | :--- | :--- | | Senior Living Communities | $12,751 | 18% | | Holiday Retirement | $9,797 | 14% | | National HealthCare Corporation (NHC) | $9,189 | 13% | | Bickford Senior Living | $7,038 | 10% | - Effective April 1, 2022, **15 former Holiday properties** were transitioned into two new Senior Housing Operating Portfolio (SHOP) joint ventures where NHI holds majority interests[138](index=138&type=chunk)[166](index=166&type=chunk) - Bickford's four master leases were restructured effective April 1, 2022, setting annual rent at approximately **$28.0 million** through April 1, 2024, with lease extensions[169](index=169&type=chunk) Total Portfolio EBITDARM Coverage Ratio (Trailing 12-Months) | Period | Coverage Ratio | | :--- | :--- | | 4Q20 | 1.78x | | 4Q21 | 1.54x | [Results of Operations](index=42&type=section&id=MD%26A%20-%20Results%20of%20Operations) For Q1 2022 compared to Q1 2021, total revenues decreased by 11.8% to $71.3 million, while total expenses increased by 49.6% to $66.2 million, driven by a $10.2 million drop in rental income due to rent concessions and property dispositions, and a $24.6 million charge for loan and realty losses (impairments) and a $1.7 million increase in legal costs, leading to a 76.7% decrease in net income to $8.2 million - Rental income decreased by **$10.2 million** (**13.6%**), mainly from **$3.6 million** in additional rent concessions and **$6.3 million** from properties disposed of since April 1, 2021[190](index=190&type=chunk) - Loan and realty losses increased by **$24.6 million** due to impairment charges on three real estate properties during the quarter[190](index=190&type=chunk) - Interest expense decreased by **$2.8 million** (**21.4%**) following the expiration of interest rate swap agreements and repayment of debt[190](index=190&type=chunk) - A gain on sale of real estate of **$3.0 million** was recognized, primarily from the disposition of a medical office building[190](index=190&type=chunk) [Liquidity and Capital Resources](index=46&type=section&id=MD%26A%20-%20Liquidity%20and%20Capital%20Resources) As of March 31, 2022, the company had strong liquidity with $36.1 million in cash and $615.0 million available on its new $700.0 million revolving credit facility, with total debt at $1.2 billion and a consolidated net debt to Annualized Adjusted EBITDA ratio of 4.9x, following key financing activities including entering the new credit facility and repaying a $75.0 million term loan, and expects cash from operations to be adequate to fund dividends at the current rate - Primary sources of liquidity include **$36.1 million** in cash and cash equivalents and **$615.0 million** available on the revolving credit facility[191](index=191&type=chunk) - On March 31, 2022, the company entered into a new **$700.0 million** unsecured revolving credit facility maturing in March 2026, replacing its previous **$550.0 million** facility[197](index=197&type=chunk) - The consolidated net debt to Annualized Adjusted EBITDA ratio was **4.9x** for the three months ended March 31, 2022[207](index=207&type=chunk) - On April 15, 2022, the Board approved a new stock repurchase plan for up to **$240 million** of common stock over one year[215](index=215&type=chunk) [Funds From Operations (FFO) & Funds Available for Distribution (FAD)](index=53&type=section&id=MD%26A%20-%20FFO%20%26%20FAD) For Q1 2022, Normalized FFO per diluted share decreased 11.3% to $1.10 from $1.24 in Q1 2021, attributed to the impacts of the COVID-19 pandemic and increased legal fees, partially offset by the recognition of the Holiday lease deposit and lower interest expense, while Normalized FAD for the quarter was $52.7 million, a decrease of 11.5% from $59.6 million in the prior-year period FFO & FAD Reconciliation Summary (Q1 2022 vs Q1 2021, in thousands) | Metric (in thousands) | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Net income attributable to common stockholders | $8,399 | $35,332 | | NAREIT FFO attributable to common stockholders | $48,084 | $55,928 | | Normalized FFO attributable to common stockholders | $50,374 | $56,379 | | Normalized FAD attributable to common stockholders | $52,669 | $59,551 | | **Normalized FFO per diluted share** | **$1.10** | **$1.24** | [Quantitative and Qualitative Disclosures About Market Risk](index=50&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk.) The company's primary market risk is interest rate risk on its $385.0 million of variable-rate debt and the unused portion of its $700 million revolving credit facility, where a hypothetical 50 basis-point (0.50%) change in interest rates would result in an approximate $1.9 million annual change in net interest expense, following the maturity of its interest rate swap agreements on December 31, 2021 - As of March 31, 2022, the company had **$385.0 million** of variable-rate debt outstanding, representing approximately **30.5%** of its total debt[243](index=243&type=chunk)[246](index=246&type=chunk) - A **50 basis-point** increase or decrease in interest rates on variable-rate debt would change annual net interest expense by approximately **$1.9 million**[244](index=244&type=chunk) [Controls and Procedures](index=51&type=section&id=Item%204.%20Controls%20and%20Procedures.) Based on an evaluation as of March 31, 2022, the company's Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective, with no significant changes in internal control over financial reporting during the quarter that have materially affected, or are reasonably likely to materially affect, these controls - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of March 31, 2022[249](index=249&type=chunk) - No changes in internal control over financial reporting were identified during the quarter that have materially affected or are reasonably likely to materially affect internal controls[251](index=251&type=chunk) Part II. Other Information [Legal Proceedings](index=52&type=section&id=Item%201.%20Legal%20Proceedings) The company was involved in litigation with Welltower, Inc. regarding a master lease for 17 senior living facilities formerly operated by Holiday, with NHI filing suit in December 2021 alleging default and fraudulent inducement, which was settled effective April 1, 2022, resulting in NHI receiving escrowed funds and the properties being transitioned to new operators or sold - NHI filed suit against Welltower, Inc. and its subsidiaries on December 20, 2021, in the Delaware Court of Chancery for failure to pay rent and other obligations related to the Holiday portfolio[256](index=256&type=chunk) - A settlement agreement was reached on March 31, 2022, applying an **$8.8 million** lease deposit to past due rents, and releasing **$6.9 million** in escrowed funds to NHI[257](index=257&type=chunk)[259](index=259&type=chunk) - Effective April 1, 2022, the master lease was terminated, the lawsuit was dismissed, and the properties were transitioned into new SHOP ventures, leased to another operator, or sold[258](index=258&type=chunk)[259](index=259&type=chunk) [Risk Factors](index=52&type=section&id=Item%201A.%20Risk%20Factors) There were no material changes to the risk factors disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2021 - No material changes to risk factors were reported for the three months ended March 31, 2022[260](index=260&type=chunk) [Other Information](index=52&type=section&id=Item%205.%20Other%20Information) On May 6, 2022, the Compensation Committee of the Board of Directors approved an adjusted annual salary of $275,000 for David L. Travis, the company's Senior Vice President/Chief Accounting Officer - The company's Chief Accounting Officer, David L. Travis, received an adjusted annual salary of **$275,000**, effective May 6, 2022[261](index=261&type=chunk) [Exhibits](index=53&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including the new Credit Agreement, the Settlement Agreement with Welltower, and various officer certifications

Financial Data and Key Metrics Changes - For Q4 2021, net income per diluted common share was $0.14, down from $0.83 in Q4 2020. For the full year, it was $2.44 compared to $4.14 in 2020, primarily due to $51.8 million in impairment charges and $28 million in rent concessions [16][19] - Funds from Operations (FFO) per diluted common share decreased to $1.07 from $1.28 year-over-year, while normalized FFO decreased to $1.06 from $1.37 [17] - Normalized Funds Available for Distribution (FAD) declined by $13.1 million year-over-year to $45.9 million [18] Business Line Data and Key Metrics Changes - The skilled nursing and Continuing Care Retirement Communities (CCRC) portfolios, which account for nearly two-thirds of cash revenue, are performing well despite challenges [13] - The needs-driven senior housing portfolio, accounting for approximately 29% of annualized cash revenue, experienced occupancy gains but slowed towards the end of the quarter due to seasonality and COVID-19 [25] - Independent living communities, representing only 2% of annualized cash revenue, did not pay rent during the quarter, with significant declines in NOI margins [29] Market Data and Key Metrics Changes - The average occupancy for senior living communities was 81.7%, up 130 basis points from the previous quarter, remaining above pre-pandemic levels [24] - EBITDARM coverage for non-SLC properties improved to 1.75 times from 1.66 times year-over-year [24] - The skilled nursing portfolio's same-store EBITDARM coverage was 2.85 times, with NHC and Ensign Group contributing significantly to cash revenue [30] Company Strategy and Development Direction - The company is focused on transforming into a stronger healthcare REIT by selling underperforming assets and venturing into new revenue streams [7] - The board has approved the sale of additional underperforming properties, targeting 16 housing property dispositions with estimated net proceeds of $125 million [9] - The company aims to complete its portfolio optimization efforts in the next couple of quarters, expecting steady progress towards growth [35] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the restructuring efforts with Bickford, despite the slow pace due to Omicron-related challenges [10] - The company believes it is at an earnings trough and anticipates better days ahead as the pandemic's effects wane [14] - Management did not provide guidance due to uncertainties surrounding the Welltower litigation and holiday portfolio [19] Other Important Information - The company reduced debt by over $250 million during 2021 and maintained leverage within its target range [13] - The fourth quarter dividend of $0.90 per share was declared, representing a payout ratio of 84.8% for normalized FFO [20] - The company has unfunded commitments totaling approximately $109 million with an average yield of 8.5% expected to be funded during 2022 [20] Q&A Session Summary Question: Lack of guidance and its implications - Management indicated that the uncertainty surrounding the holiday portfolio makes it difficult to provide guidance [39][40] Question: Investment activity outlook - Management expects to fulfill over $100 million in commitments and aims to return to growth, viewing last year's $121 million as a lower watermark [48][49] Question: Bickford's performance and future - Management considers Bickford a partner and is working to lessen exposure while helping them stabilize [51][52] Question: Transition timeline for legacy holiday assets - Management hopes to transition assets within 30 days of a favorable hearing outcome [78] Question: Potential outcomes of the hearing - A positive outcome would allow control over the transition of buildings, while a negative outcome would prolong the process [60][67]