LTC Properties(LTC) - 2020 Q2 - Quarterly Report

PART I -- Financial Information Financial Statements This section presents the unaudited consolidated financial statements for the quarterly period ended June 30, 2020, encompassing balance sheets, income, equity, and cash flow statements with detailed notes Consolidated Balance Sheets As of June 30, 2020, total assets slightly decreased to $1.510 billion, driven by reduced real property investments, while liabilities and equity remained stable Consolidated Balance Sheet Highlights (in thousands of USD) | Account | June 30, 2020 (unaudited) | December 31, 2019 (audited) | | :--- | :--- | :--- | | Total Assets | $1,510,172 | $1,514,209 | | Real property investments, net | $1,115,593 | $1,136,816 | | Cash and cash equivalents | $50,370 | $4,244 | | Total Liabilities | $722,867 | $728,783 | | Bank borrowings | $89,900 | $93,900 | | Senior unsecured notes, net | $599,565 | $599,488 | | Total Equity | $787,305 | $785,426 | Consolidated Statements of Income and Comprehensive Income Q2 2020 net income attributable to LTC significantly decreased to $1.87 million due to a $17.7 million write-off, while six-month net income increased to $65.5 million from real estate sales Income Statement Highlights (in thousands of USD, except per share) | Metric | Q2 2020 | Q2 2019 | Six Months 2020 | Six Months 2019 | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $28,481 | $46,266 | $74,891 | $91,722 | | Rental Income | $20,275 | $38,277 | $58,310 | $75,901 | | Gain on sale of real estate, net | $189 | $500 | $44,043 | $500 | | Net Income Attributable to LTC | $1,870 | $20,446 | $65,503 | $40,792 | | Diluted EPS | $0.05 | $0.51 | $1.66 | $1.02 | Consolidated Statements of Cash Flows For the six months ended June 30, 2020, operating cash flow decreased to $55.6 million, investing activities provided $61.8 million from real estate sales, and financing used $71.4 million Six Months Ended June 30 Cash Flow Summary (in thousands of USD) | Activity | 2020 | 2019 | | :--- | :--- | :--- | | Net cash provided by operating activities | $55,647 | $61,672 | | Net cash provided by (used in) investing activities | $61,848 | $(44,075) | | Net cash used in financing activities | $(71,369) | $(17,046) | | Increase in cash | $46,126 | $551 | Notes to Consolidated Financial Statements The notes detail significant accounting policies, including a $17.7 million straight-line rent write-off, a $44.0 million gain from property sales, COVID-19 rent deferrals, and operator concentrations - Due to payment failures by Senior Lifestyle Corporation, LTC wrote off $17.7 million of straight-line rent receivable and lease incentives and placed the operator on a cash basis effective July 2020[33][40] - The company sold 21 properties from the former Preferred Care portfolio in Q1 2020 for net proceeds of approximately $72.1 million, resulting in a gain on sale of $44.0 million[37][47] - In response to the COVID-19 pandemic, the company agreed to rent deferrals for certain operators totaling $930,000 for April through June 2020[42] - The company's Board of Directors authorized a stock repurchase plan in Q1 2020 and purchased 615,827 shares for $18.0 million before terminating the plan on March 25, 2020, due to market uncertainty from COVID-19[62] - As of June 30, 2020, two operators, Prestige Healthcare and Senior Lifestyle Corporation, accounted for 19.9% and 11.4% of total revenue, respectively, representing a significant concentration[76] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses performance, highlighting a $17.7 million write-off, a $44.0 million gain from property sales, COVID-19 rent deferrals, and a Q2 2020 FFO of $0.31 per share - The COVID-19 pandemic has adversely impacted operators through increased costs and potential occupancy declines, leading LTC to grant rent deferrals totaling $0.9 million for April-June 2020[93] - Senior Lifestyle Corporation's failure to pay full rent for May and June 2020 led LTC to write off $17.7 million in straight-line rent and lease incentives, placing the operator on a cash basis[103] - The company completed the sale of the 24-property Preferred Care portfolio, generating combined net proceeds of $77.9 million and a total gain of approximately $44.0 million[106] Comparison of Operating Results (in thousands of USD) | Line Item | Q2 2020 | Q2 2019 | Difference | Reason for Change | | :--- | :--- | :--- | :--- | :--- | | Rental income | $20,275 | $38,277 | $(18,002) | $17.7M write-off of straight-line rent & sale of Preferred Care portfolio | | Gain on sale of real estate, net | $189 | $500 | $(311) | N/A | | Net income | $1,952 | $20,534 | $(18,582) | Primarily driven by the decrease in rental income | NAREIT FFO Reconciliation (in thousands of USD, except per share) | Metric | Q2 2020 | Q2 2019 | Six Months 2020 | Six Months 2019 | | :--- | :--- | :--- | :--- | :--- | | GAAP net income available to common stockholders | $1,773 | $20,352 | $65,225 | $40,606 | | NAREIT FFO attributable to common stockholders | $12,001 | $29,712 | $41,268 | $59,573 | | Diluted FFO per share | $0.31 | $0.75 | $1.05 | $1.50 | Quantitative and Qualitative Disclosures about Market Risk No material changes in market risk occurred during the first six months of 2020, though the COVID-19 pandemic may negatively impact business and operations - There were no material changes in market risk during the first six months of 2020[169] - The company acknowledges that the COVID-19 pandemic may negatively impact its business and results of operations, introducing a new risk factor[169] Controls and Procedures Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of June 30, 2020, with no material changes to internal controls - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the period[170] - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, the company's internal controls[171] PART II -- Other Information Legal Proceedings The company is involved in various ordinary course legal proceedings, which management does not expect to materially impact its financial condition or operations - The company is involved in various claims and lawsuits arising from the ordinary course of business, but does not expect them to be material[174] - LTC believes that liability for claims related to property operations rests with its lessees and borrowers, per legal principles and lease/mortgage agreements[174] Risk Factors A new risk factor details the adverse impact of the COVID-19 pandemic on business, particularly through increased operator costs, reduced occupancy, and potential rent collection difficulties - A new risk factor has been added detailing the adverse effects of the COVID-19 pandemic on the company's business, financial condition, and results of operations[175] - The pandemic impacts operators by increasing their costs and potentially reducing occupancy, which could harm their ability to meet financial obligations to LTC, including rent payments[177] - The company has already provided rent deferrals and acknowledges that local, state, or federal initiatives could further affect its ability to collect rent or enforce remedies[177] Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities during the reporting period - None Exhibits This section lists exhibits filed with the Form 10-Q, including corporate governance documents, CEO/CFO certifications, and XBRL financial data - The filing includes CEO and CFO certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act[184] - Corporate governance documents, such as bylaws, and financial data in XBRL format are included as exhibits[184]