National Health Investors(US:NHI)2022-08-08 20:11Part I. Financial Information Financial Statements 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 20222954153 - 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 incentives4971 Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) 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 funds171191 - 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 incentives204205 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 plan245246247 Quantitative and Qualitative Disclosures About Market Risk 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 million284 - 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 date285 Controls and Procedures 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, 2022289 - 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 managers292 Part II. Other Information Legal Proceedings 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 facilities297 - 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 income298300 - 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 company299 Risk Factors 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 operations301302303 Unregistered Sales of Equity Securities and Use of Proceeds 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, 2023304 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 plan304 Exhibits This section lists exhibits filed with Form 10-Q, including corporate governance, debt agreements, and CEO/CFO certifications