Omega Healthcare Investors(OHI) - 2020 Q1 - Quarterly Report

PART I Financial Information Item 1. Financial Statements The report presents unaudited consolidated financial statements for the quarter ended March 31, 2020 Omega Healthcare Investors, Inc. - Key Financial Highlights (Q1 2020 vs Q1 2019) | Metric | Q1 2020 (in thousands) | Q1 2019 (in thousands) | Change | | :--- | :--- | :--- | :--- | | Total Operating Revenues | $253,024 | $223,688 | +13.1% | | Operating Income | $147,730 | $122,175 | +21.0% | | Net Income | $92,279 | $72,182 | +27.8% | | Net Income available to common stockholders | $89,915 | $69,702 | +29.0% | | Diluted EPS | $0.39 | $0.34 | +14.7% | Omega Healthcare Investors, Inc. - Consolidated Balance Sheet Summary | Metric | March 31, 2020 (in thousands) | December 31, 2019 (in thousands) | | :--- | :--- | :--- | | Total Assets | $10,037,231 | $9,796,124 | | Total Liabilities | $5,818,586 | $5,459,530 | | Total Equity | $4,218,645 | $4,336,594 | Omega Healthcare Investors, Inc. - Consolidated Cash Flow Summary (Q1 2020) | Cash Flow Activity | Amount (in thousands) | | :--- | :--- | | Net cash provided by operating activities | $139,068 | | Net cash used in investing activities | ($55,154) | | Net cash provided by financing activities | $235,157 | | Increase in cash, cash equivalents and restricted cash | $318,642 | - The company adopted ASU 2016-13 (Credit Losses) on January 1, 2020, recording an initial $28.8 million allowance for expected credit losses with a corresponding adjustment to equity[77] Notes to Consolidated Financial Statements Notes detail accounting policies, business overview, and the financial impact of the COVID-19 pandemic - Omega's core business is providing financing and capital to the long-term healthcare industry, primarily through triple-net leases and mortgage agreements for skilled nursing facilities (SNFs) and assisted living facilities (ALFs) in the U.S. and U.K[38] - The COVID-19 pandemic is causing significant cost increases and occupancy declines for many of the company's operators, which could materially impact their ability to pay rent[45] - As of March 31, 2020, investments with one operator, Ciena Healthcare, exceeded 10% of total investments and generated approximately 10% of total revenues for the quarter[120] - On March 20, 2020, the Board authorized a $200 million stock repurchase program and the company suspended its Dividend Reinvestment and Common Stock Purchase Plan on March 23, 2020[121][125] Management's Discussion and Analysis of Financial Condition and Results of Operations Management analyzes a Q1 2020 revenue increase, the impact of COVID-19, and the company's capital strategy - Operating revenues for Q1 2020 increased by $29.3 million compared to Q1 2019, primarily due to rental income from the MedEquities Merger ($10.3 million) and the Encore Portfolio Acquisition ($18.1 million)[228] - In response to COVID-19 uncertainty, the company took precautionary measures to enhance its capital position, including drawing $300 million on its revolving credit facility and entering into $400 million of forward-starting interest rate swaps[179][247] - The company is actively restructuring its portfolio with operator Daybreak, which did not pay rent in Q1 2020, with an expected annual rent or equivalent of $15 million to $20 million post-restructuring[242][244] Nareit FFO Reconciliation (in thousands) | Description | Q1 2020 | Q1 2019 | | :--- | :--- | :--- | | Net income | $92,279 | $72,182 | | Adjustments (Depreciation, Impairments, etc.) | $88,734 | $71,937 | | Nareit FFO | $181,013 | $144,119 | Quantitative and Qualitative Disclosures About Market Risk The company reports no material changes to its primary market risk exposures during the first quarter of 2020 - There were no material changes in primary market risk exposures or how those exposures are managed during the quarter ended March 31, 2020[261] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of the quarter-end - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of March 31, 2020[263] - No changes in internal control over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal controls[264] PART II Other Information Legal Proceedings The company details ongoing legal matters, including a securities class action lawsuit and related actions - The company is a defendant in a consolidated securities class action lawsuit alleging violations of the Securities Exchange Act of 1934 related to disclosures about an operator's financial condition[151] - Several related shareholder derivative actions have been filed, which are currently stayed pending the outcome of the securities class action appeal[153][154] Risk Factors A new risk factor highlights the potential material adverse effects of the COVID-19 pandemic on operations - A new risk factor highlights that the COVID-19 pandemic could have a material adverse effect on the company's business, results of operations, cash flows, and financial condition[267] - Operators are experiencing significant cost increases and declining occupancy due to the pandemic, which could affect their ability to pay rent and other contractual obligations to Omega[268] - The pandemic has caused severe economic and market disruptions, which could constrain Omega's access to capital and affect the availability and terms of future financing[270] Unregistered Sales of Equity Securities and Use of Proceeds The company discloses the issuance of unregistered shares and the authorization of a stock repurchase program - In Q1 2020, Omega issued 8,060 shares of common stock in exchange for an equal number of Omega OP Units tendered for redemption, in a transaction exempt from registration[272] - On March 20, 2020, the company authorized a stock repurchase program for up to $200 million of its common stock over twelve months, with no shares repurchased through March 31, 2020[273] Exhibits This section lists all exhibits filed with the report, including credit agreements and CEO/CFO certifications - The report includes several exhibits, such as amendments to credit agreements, CEO/CFO certifications pursuant to SEC rules, and XBRL data files for interactive data[274]