Universal Health Realty me Trust(UHT) - 2020 Q2 - Quarterly Report

Real Estate Investments - As of July 31, 2020, the company has 71 real estate investments or commitments located in 20 states, including 7 hospital facilities, 4 free-standing emergency departments, and 56 medical/office buildings [96]. Revenue Sources and Impact of COVID-19 - Approximately 32% of the company's consolidated revenues for the three-month periods ended June 30, 2020, and 2019, were derived from one operator, UHS [100]. - The company anticipates that future operations and financial results will be materially impacted by factors related to COVID-19, including patient volume changes and government regulations [98]. - The company may experience a decrease in prospective tenants due to COVID-19, which could negatively affect new lease volumes and renewal rates [100]. - Recent legislation, including the CARES Act, has provided funding to healthcare providers, but the impact on the company's tenants remains uncertain [100]. - The company is unable to fully quantify the impact of COVID-19 on its financial results for 2020, but expects a material adverse effect [100]. - The company faces risks related to potential declines in future bonus rental revenue from hospital properties leased to UHS due to decreased patient volumes [99]. - The company’s ability to maintain its dividend at current levels may be adversely affected by tenants' inability to make timely rent payments [99]. - The company is subject to risks associated with changes in economic conditions, including increased unemployment and reduced consumer spending, which may impact tenant operations [101]. - The company’s future revenues could decrease if UHS does not renew leases at existing or fair market rates, particularly for three acute care hospitals [100]. Financial Performance - Net income for the three-month period ended June 30, 2020, was $4.7 million, an increase of $439,000 compared to $4.3 million in the same period of 2019 [118]. - For the six-month period ended June 30, 2020, net income was $9.3 million, up by $781,000 from $8.5 million in the comparable period of 2019 [119]. - Total revenues decreased by $45,000, or 0.2%, during the three-month period ended June 30, 2020, compared to the same quarter in 2019, but increased by $50,000, or 0.1%, during the six-month period [119]. - Other operating expenses related to consolidated medical office buildings and two vacant hospital facilities totaled $4.7 million for the three-month period ended June 30, 2020, compared to $4.5 million in 2019 [120]. - For the six-month periods ended June 30, 2020, other operating expenses were $9.4 million, up from $9.0 million in 2019 [120]. - Funds From Operations (FFO) for Q2 2020 increased by $396,000, or $0.03 per diluted share, compared to Q2 2019, totaling $11,374,000 [123]. - FFO for the first six months of 2020 increased by $663,000, or $0.04 per diluted share, compared to the first six months of 2019, totaling $22,594,000 [124]. - The company experienced a $1.25 million unfavorable impact on FFO due to lease expirations at two hospital facilities [124]. Cash Flow and Capital Expenditures - Net cash provided by operating activities was $23.2 million for the six-month period ended June 30, 2020, an increase of $1.8 million from $21.5 million in the same period of 2019 [138]. - Net cash used in investing activities was $11.3 million during the first six months of 2020, compared to $3.0 million in the same period of 2019 [138]. - The company funded $13.3 million in additions to real estate investments, including $10.1 million for a new 108-bed behavioral health care hospital in Clive, Iowa [139]. - The company declared and paid dividends of $18.9 million during the six months ended June 30, 2020, compared to $18.6 million in the same period of 2019, indicating a slight increase in dividend payments [147]. - The company paid $18.9 million in dividends during the first half of 2020, which was approximately $4.3 million less than the net cash provided by operating activities for the same period [147]. Debt and Financing - As of June 30, 2020, the company had $221.3 million of outstanding borrowings and $123.1 million of available borrowing capacity under its $350 million revolving credit agreement [157]. - The company entered into an amendment to its revolving credit agreement in June 2020, increasing the aggregate revolving credit commitment to $350 million from $300 million [154]. - The company is in compliance with all covenants of its credit agreement as of June 30, 2020, and expects to maintain compliance with future borrowings [158]. - Tangible net worth as of June 30, 2020, was $153.3 million, down from $167.2 million as of December 31, 2019 [159]. - Total leverage ratio was 43.6% as of June 30, 2020, compared to 42.3% at the end of 2019, remaining below the 60% covenant limit [159]. - Secured leverage ratio stood at 9.0% as of June 30, 2020, slightly down from 9.1% at December 31, 2019, well below the 30% covenant limit [159]. - The fair value of outstanding mortgages as of June 30, 2020, was approximately $62.4 million, compared to $63.1 million at December 31, 2019 [159]. - The company has $221.3 million in variable rate debt, with an average interest rate of 1.4% [173]. - Each 1% change in interest rates would impact net income by approximately $812,500, based on variable rate debt outstanding as of June 30, 2020 [174]. - The fair value of interest rate swaps was a net liability of $4.9 million as of June 30, 2020 [168]. - The company entered into a $55 million interest rate swap agreement with a fixed interest rate of 0.565%, effective March 25, 2020, maturing on March 25, 2027 [165]. - As of June 30, 2020, the total mortgages notes payable, non-recourse to the company, net was $59.9 million [159]. - The company had outstanding letters of credit totaling $5.6 million as of June 30, 2020, related to Grayson Properties II [161]. Operational Adjustments - Approximately 98% of tenants paid their June rent, indicating a strong recovery in operations post-COVID-19 [131]. - The company has implemented COVID-19 risk mitigation actions across its properties, including enhanced cleaning protocols [133].