Omega Healthcare Earnings 2019-03-31

OHI 10Q Quarterly Report

Balance Sheet	Income Statement	Cash Flow

10-Q 1 ohi-20190331x10q.htm 10-Q ohi_Current_Folio_10Q

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10‑Q

(Mark One)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2019


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

OMEGA HEALTHCARE INVESTORS, INC.

OHI HEALTHCARE PROPERTIES LIMITED PARTNERSHIP

(Exact name of registrant as specified in its charter)


Maryland	1‑11316	38‑3041398
(Omega Healthcare Investors, Inc.)	(Omega Healthcare Investors, Inc.)	(Omega Healthcare Investors, Inc.)
Delaware	333‑203447‑11	36‑4796206
(OHI Healthcare Properties Limited Partnership)	(OHI Healthcare Properties Limited Partnership)	(OHI Healthcare Properties Limited Partnership)
(State or other jurisdiction of incorporation or organization)	(Commission file number)	(IRS Employer Identification No.)

303 International Circle, Suite 200, Hunt Valley, MD 21030

(Address of principal executive offices)

(410) 427‑1700

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $.10 par value	OHI	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.


Omega Healthcare Investors, Inc. Yes ☒ No ☐	OHI Healthcare Properties Limited Partnership Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).


Omega Healthcare Investors, Inc. Yes ☒ No ☐	OHI Healthcare Properties Limited Partnership Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b‑2 of the Exchange Act.

Omega Healthcare Investors, Inc.


Large accelerated filer☒	Accelerated filer ☐	Non-accelerated filer ☐	Smaller reporting company ☐	Emerging growth company ☐

OHI Healthcare Properties Limited Partnership


Large accelerated filer ☐	Accelerated filer ☐	Non-accelerated filer ☒	Smaller reporting company ☐	Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Omega Healthcare Investors, Inc. ☐

OHI Healthcare Properties Limited Partnership ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b‑2 of the Exchange Act).

Omega Healthcare Investors, Inc. Yes ☐

No ☒

OHI Healthcare Properties Limited Partnership Yes ☐

No ☒

Indicate the number of shares outstanding of each of the issuers’ classes of common stock as of May 2, 2019


Omega Healthcare Investors, Inc.
Common Stock, $.10 par value	207,025,691

OHI Healthcare Properties Limited Partnership
N/A	No common stock outstanding
(Class)	(Number of shares)

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EXPLANATORY NOTE

This report combines the quarterly reports on Form 10‑Q for the period ended March 31, 2019 of Omega Healthcare Investors, Inc. and OHI Healthcare Properties Limited Partnership (“Omega OP”). Unless stated otherwise or the context otherwise requires, (i) references to “Omega” or the “Company” means Omega Healthcare Investors, Inc. and its consolidated subsidiaries, (ii) references to “Parent” refer to Omega Healthcare Investors, Inc. without regard to its consolidated subsidiaries, and (iii) references to “Omega OP” means OHI Healthcare Properties Limited Partnership and its consolidated subsidiaries.

Omega is a self-administered real estate investment trust (“REIT”) under the Internal Revenue Code of 1986. Omega is structured as an umbrella partnership REIT (“UPREIT”) under which all of Omega’s assets are owned directly or indirectly by, and all of Omega’s operations are conducted directly or indirectly through, its operating partnership subsidiary, Omega OP.

Parent directly owned approximately 97% of the issued and outstanding partnership units in Omega OP (the “Omega OP Units”) at March 31, 2019. Each Omega OP Unit (other than those owned by Parent) is redeemable at the election of the holder for cash equal to the then-fair market value of one share of common stock of Parent, subject to Parent’s election to exchange the Omega OP Units tendered for redemption for common stock of the Parent on a one-for-one basis in an unregistered transaction, subject to adjustment as set forth in the partnership agreement. The management of Parent consists of the same members as the management of Omega OP.

The financial results of Omega OP are consolidated into the financial statements of Omega. Omega has no significant assets other than its investments in Omega OP. Omega and Omega OP are managed and operated as one entity. Omega OP has no significant assets other than its interests in non-guarantor subsidiaries.

We believe it is important for investors to understand the few differences between Omega and Omega OP in the context of how we operate as a consolidated company. Omega acts as the general partner of Omega OP. Net proceeds from equity issuances by Parent are contributed to Omega OP in exchange for additional partnership units. Parent and Omega OP incur indebtedness. The net proceeds of the Parent’s borrowings are loaned to Omega OP. The outstanding senior notes and certain other debt of Parent is guaranteed by Omega OP.

The presentation of debt and related interest, including amounts accrued, stockholders’ equity, owners’ equity and noncontrolling interests are the main areas of difference between the consolidated financial statements of Omega and Omega OP. The differences between debt, stockholders’ equity and owners’ equity result from differences in the debt or equity issued at the Omega and Omega OP levels. With respect to owners’ equity, the units held by the partners in Omega OP other than the Parent are accounted for as owners’ equity in Omega OP’s financial statements and as noncontrolling interests in Omega’s financial statements. Although classified differently, total debt and equity of Omega and Omega OP are the same.

We believe combining the quarterly reports on Form 10‑Q of Omega and Omega OP into this single report results in the following benefits:

combined reports better reflect how management and the analyst community view the business as a single operating unit;

combined reports enhance investors’ understanding of Omega and Omega OP by enabling them to view the business as a whole and in the same manner as management;

combined reports are more efficient for Omega and Omega OP and result in savings in time, effort and expense; and

combined reports are more efficient for investors by reducing duplicative disclosure and providing a single document for their review.

In order to highlight the differences between Omega and Omega OP, the separate sections in this report for Omega and Omega OP specifically refer to Omega and Omega OP. In the sections that combine disclosure of Omega and Omega OP, this report refers to “we” and “us” actions or holdings as being “our” actions or holdings. Although Omega OP and its subsidiaries hold all of our assets, we believe that reference to “we,” “us” or “our” in this context is appropriate because the business is one enterprise and we operate substantially all of our business through Omega OP.

Table of Contents

OMEGA HEALTHCARE INVESTORS, INC.

OHI HEALTHCARE PROPERTIES LIMITED PARTNERSHIP

FORM 10‑Q

March 31, 2019


TABLE OF CONTENTS
		Page No.
PART I	Financial Information

Item 1.	Financial Statements of Omega Healthcare Investors, Inc.
	Consolidated Balance Sheets
	March 31, 2019 (unaudited) and December 31, 2018	2
	Consolidated Statements of Operations (unaudited)
	Three months ended March 31, 2019 and 2018	3
	Consolidated Statements of Comprehensive Income (unaudited)
	Three months ended March 31, 2019 and 2018	4
	Consolidated Statements of Changes in Equity (unaudited)
	Three months ended March 31, 2019 and 2018	5
	Consolidated Statements of Cash Flows (unaudited)
	Three months ended March 31, 2019 and 2018	6
	Financial Statements of OHI Healthcare Properties Limited Partnership
	Consolidated Balance Sheets
	March 31, 2019 (unaudited) and December 31, 2018	7
	Consolidated Statements of Operations (unaudited)
	Three months ended March 31, 2019 and 2018	8
	Consolidated Statements of Comprehensive Income (unaudited)
	Three months ended March 31, 2019 and 2018	9
	Consolidated Statements of Changes in Owners’ Equity (unaudited)
	Three months ended March 31, 2019 and 2018	10
	Consolidated Statements of Cash Flows (unaudited)
	Three months ended March 31, 2019 and 2018	11
	Notes to Consolidated Financial Statements
	March 31, 2019 (unaudited)	12

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	39

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	53

Item 4.	Controls and Procedures	53

PART II	Other Information

Item 1.	Legal Proceedings	53

Item 1A.	Risk Factors	53

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	53

Item 6.	Exhibits	54

PART I – FINANCIAL INFORMATION

Item 1 - Financial Statements

OMEGA HEALTHCARE INVESTORS, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share amounts)


	March 31,		December 31,
	2019		2018
	(Unaudited)
ASSETS
Real estate properties
Real estate investments	$	7,818,209	$	7,746,410
Less accumulated depreciation		(1,631,673)		(1,562,619)
Real estate investments – net		6,186,536		6,183,791
Investments in direct financing leases – net		11,707		132,262
Mortgage notes receivable – net		703,739		710,858
		6,901,982		7,026,911
Other investments		474,066		504,626
Investment in unconsolidated joint venture		29,919		31,045
Assets held for sale – net		645		989
Total investments		7,406,612		7,563,571

Cash and cash equivalents		40,028		10,300
Restricted cash		1,372		1,371
Contractual receivables – net		33,346		33,826
Other receivables and lease inducements		338,177		313,551
Goodwill		644,190		643,950
Other assets		56,341		24,308
Total assets	$	8,520,066	$	8,590,877

LIABILITIES AND EQUITY
Revolving line of credit	$	195,000	$	313,000
Term loans – net		901,345		898,726
Secured borrowing		2,275		—
Senior notes and other unsecured borrowings – net		3,330,400		3,328,896
Accrued expenses and other liabilities		271,902		272,172
Deferred income taxes		13,502		13,599
Total liabilities		4,714,424		4,826,393

Equity:
Common stock $.10 par value authorized – 350,000 shares, issued and outstanding – 207,001 shares as of March 31, 2019 and 202,346 as of December 31, 2018		20,700		20,235
Common stock – additional paid-in capital		5,240,714		5,074,544
Cumulative net earnings		2,200,213		2,130,511
Cumulative dividends paid		(3,875,884)		(3,739,197)
Accumulated other comprehensive loss		(39,941)		(41,652)
Total stockholders’ equity		3,545,802		3,444,441
Noncontrolling interest		259,840		320,043
Total equity		3,805,642		3,764,484
Total liabilities and equity	$	8,520,066	$	8,590,877

See notes to consolidated financial statements.

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OMEGA HEALTHCARE INVESTORS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

Unaudited

(in thousands, except per share amounts)


	Three Months Ended
	March 31,
	2019		2018
Revenue
Rental income	$	192,177	$	193,949
Income from direct financing leases		260		613
Mortgage interest income		18,134		16,579
Other investment income		11,914		8,527
Miscellaneous income		1,203		531
Total operating revenues		223,688		220,199

Expenses
Depreciation and amortization		70,852		70,361
General and administrative		16,133		16,475
Real estate taxes		3,882		—
Acquisition costs		2,949		—
Impairment on real estate properties		—		4,914
Impairment on direct financing leases		7,700		—
Provision for uncollectible accounts		—		7,814
Total operating expenses		101,516		99,564

Other operating income
Gain on assets sold – net		3		17,500
Operating income		122,175		138,135

Other income (expense)
Interest income and other – net		337		585
Interest expense		(48,100)		(48,011)
Interest – amortization of deferred financing costs		(2,238)		(2,243)
Realized gain on foreign exchange		26		59
Total other expense		(49,975)		(49,610)

Income from continuing operations		72,200		88,525
Income tax expense		(675)		(543)
Income (loss) from unconsolidated joint venture		657		(49)
Net income		72,182		87,933
Net income attributable to noncontrolling interest		(2,480)		(3,713)
Net income available to common stockholders	$	69,702	$	84,220

Earnings per common share available to common stockholders:
Basic:
Net income available to common stockholders	$	0.34	$	0.42
Diluted:
Net income	$	0.34	$	0.42

Weighted-average shares outstanding, basic		204,558		198,911
Weighted-average shares outstanding, diluted		213,523		207,816

See notes to consolidated financial statements.

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OMEGA HEALTHCARE INVESTORS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Unaudited

(in thousands)


	Three Months Ended
		March 31,
	2019		2018
Net income	$	72,182	$	87,933
Other comprehensive income (loss):
Foreign currency translation		4,475		9,869
Cash flow hedges		(2,703)		4,488
Total other comprehensive income		1,772		14,357
Comprehensive income		73,954		102,290
Comprehensive income attributable to noncontrolling interest		(2,541)		(4,319)
Comprehensive income attributable to common stockholders	$	71,413	$	97,971

See notes to consolidated financial statements.

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OMEGA HEALTHCARE INVESTORS, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

Unaudited

(in thousands, except per share amounts)


	Common		Additional		Cumulative				Other		Total
	Stock		Paid-in		Net		Cumulative		Comprehensive		Stockholders’		Noncontrolling		Total
	Par Value		Capital		Earnings		Dividends		Loss		Equity		Interest		Equity
Balance at December 31, 2017 (198,309 common shares & 8,772 Omega OP Units)	$	19,831	$	4,936,302	$	1,839,356	$	(3,210,248)	$	(30,150)	$	3,555,091	$	333,167	$	3,888,258
Cumulative effect of accounting change		—		—		9,577		—		—		9,577		423		10,000
Balance at January 1, 2018 (198,309 common shares & 8,772 Omega OP Units)		19,831		4,936,302		1,848,933		(3,210,248)		(30,150)		3,564,668		333,590		3,898,258

Stock-based compensation expense		—		4,056		—		—		—		4,056		—		4,056
Vesting/exercising of equity compensation plan, net of tax withholdings (89 shares)		9		(1,663)		—		—		—		(1,654)		—		(1,654)
Dividend reinvestment and stock purchase plan (189 shares at an average of $25.87 per share)		19		4,867		—		—		—		4,886		—		4,886
Deferred compensation directors (8 shares at $27.43 per share)		—		67		—		—		—		67		—		67
Equity Shelf Program		—		(29)		—		—		—		(29)		—		(29)
Common dividends declared ($0.66 per share)		—		—		—		(131,517)		—		(131,517)		—		(131,517)
Redemption of Omega OP Units (3 units at $27.06 per share)		—		—		—		—		—		—		(72)		(72)
Omega OP Units distributions		—		—		—		—		—		—		(5,885)		(5,885)
Comprehensive income:
Foreign currency translation		—		—		—		—		9,452		9,452		417		9,869
Cash flow hedges		—		—		—		—		4,299		4,299		189		4,488
Net income		—		—		84,220		—		—		84,220		3,713		87,933
Total comprehensive income																102,290
Balance at March 31, 2018 (198,595 shares & 8,769 Omega OP Units)	$	19,859	$	4,943,600	$	1,933,153	$	(3,341,765)	$	(16,399)	$	3,538,448	$	331,952	$	3,870,400

Balance at December 31, 2018 (202,346 common shares & 8,714 Omega OP Units)	$	20,235	$	5,074,544	$	2,130,511	$	(3,739,197)	$	(41,652)	$	3,444,441	$	320,043	$	3,764,484

Stock-based compensation expense		—		4,070		—		—		—		4,070		—		4,070
Vesting/exercising of equity compensation plan, net of tax withholdings (87 shares)		9		(2,288)		—		—		—		(2,279)		—		(2,279)
Dividend reinvestment and stock purchase plan (892 shares at an average of $36.19 per share)		89		32,196		—		—		—		32,285		—		32,285
Deferred compensation directors (9 shares at $33.95 per share)		—		53		—		—		—		53		—		53
Equity Shelf Program (2,221 shares at $34.46 per share, net of issuance costs)		222		76,325		—		—		—		76,547		—		76,547
Vesting/exercising of Omega OP Units (9 units)		—		(298)		—		—		—		(298)		298		—
Common dividends declared ($0.66 per share)		—		—		—		(136,687)		—		(136,687)		—		(136,687)
Conversion and redemption of Omega OP Units to common stock (1,446 shares at $38.92 per share)		145		56,112		—		—		—		56,257		(56,257)		—
Omega OP Units distributions		—		—		—		—		—		—		(7,013)		(7,013)
Noncontrolling interest - consolidated joint venture		—		—		—		—		—		—		228		228
Comprehensive income:
Foreign currency translation		—		—		—		—		4,321		4,321		154		4,475
Cash flow hedges		—		—		—		—		(2,610)		(2,610)		(93)		(2,703)
Net income		—		—		69,702		—		—		69,702		2,480		72,182
Total comprehensive income																73,954
Balance at March 31, 2019 (207,001 shares & 7,277 Omega OP Units)	$	20,700	$	5,240,714	$	2,200,213	$	(3,875,884)	$	(39,941)	$	3,545,802	$	259,840	$	3,805,642

See notes to consolidated financial statements.

Table of Contents

OMEGA HEALTHCARE INVESTORS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Unaudited (in thousands)


	Three Months Ended
	March 31,
	2019		2018
Cash flows from operating activities
Net income	$	72,182	$	87,933
Adjustment to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		70,852		70,361
Impairment on real estate properties		—		4,914
Impairment on direct financing leases		7,700		—
Provision for uncollectible accounts		—		7,814
Interest - amortization of deferred financing costs		2,238		2,243
Accretion of direct financing leases		10		33
Stock-based compensation expense		4,558		4,056
Gain on assets sold – net		(3)		(17,500)
Amortization of acquired in-place leases – net		(1,826)		(2,687)
Effective yield receivable on mortgage notes		(172)		(354)
Interest paid-in-kind		(1,446)		(1,891)
Change in operating assets and liabilities – net:
Contractual receivables		480		(4,630)
Straight-line rent receivables		(11,292)		(14,497)
Lease inducements		(9,995)		(32,389)
Other operating assets and liabilities		(23,211)		(50,506)
Net cash provided by operating activities		110,075		52,900
Cash flows from investing activities
Acquisition of real estate or other		(5,879)		(29,672)
Net proceeds from sale of real estate investments		356		74,745
Investments in construction in progress		(30,851)		(21,855)
Proceeds from direct financing lease and related trust		86,743		—
Placement of mortgage loans		(5,245)		(6,749)
Collection of mortgage principal		489		24,797
Distributions from unconsolidated joint venture in excess of earnings		1,103		1,880
Capital improvements to real estate investments		(10,199)		(9,596)
Receipts from insurance proceeds		1,376		1,090
Investments in other investments		(8,138)		(89,960)
Proceeds from other investments		42,371		53,873
Net cash provided by (used in) investing activities		72,126		(1,447)
Cash flows from financing activities
Proceeds from credit facility borrowings		171,000		317,000

Closing Price ($)	Shares Out (MM)	Market Cap ($MM)
$36.55	207	$7,570

10-Q	2019-03-31	Quarter: 2019-03-31
10-K	2018-12-31	Annual: 2018-12-31
10-Q	2018-09-30	Quarter: 2018-09-30
10-Q	2018-06-30	Quarter: 2018-06-30
10-Q	2018-03-31	Quarter: 2018-03-31
10-K	2017-12-31	Annual: 2017-12-31
10-Q	2017-09-30	Quarter: 2017-09-30
10-Q	2017-06-30	Quarter: 2017-06-30
10-Q	2017-03-31	Quarter: 2017-03-31
10-K	2016-12-31	Annual: 2016-12-31
10-Q	2016-09-30	Quarter: 2016-09-30
10-Q	2016-06-30	Quarter: 2016-06-30
10-Q	2016-03-31	Quarter: 2016-03-31
10-K	2015-12-31	Annual: 2015-12-31
10-Q	2015-09-30	Quarter: 2015-09-30
10-Q	2015-06-30	Quarter: 2015-06-30
10-Q	2015-03-31	Quarter: 2015-03-31
10-K	2014-12-31	Annual: 2014-12-31
10-Q	2014-09-30	Quarter: 2014-09-30
10-Q	2014-06-30	Quarter: 2014-06-30
10-Q	2014-03-31	Quarter: 2014-03-31
10-K	2013-12-31	Annual: 2013-12-31

8-K	2019-06-07	Shareholder Vote
8-K	2019-05-17	Off-BS Arrangement, Other Events, Exhibits
8-K	2019-05-07	Earnings, Exhibits
8-K	2019-02-11	Earnings, Exhibits
8-K	2019-02-01	Enter Agreement, Exhibits
8-K	2019-01-02	Enter Agreement, Other Events, Exhibits
8-K	2018-12-14	Officers, Exhibits
8-K	2018-11-05	Earnings, Exhibits
8-K	2018-10-31	Officers
8-K	2018-10-23	Officers, Exhibits
8-K	2018-09-07	Other Events, Exhibits
8-K	2018-08-03	Earnings, Exhibits
8-K	2018-06-11	Officers, Shareholder Vote, Exhibits
8-K	2018-05-07	Earnings, Exhibits
8-K	2018-04-27	Officers, Exhibits
8-K	2018-02-13	Earnings, Exhibits

V	Visa	349,250
EXTR	Extreme Networks	749
CRK	Comstock Resources	642
CSTE	Caesarstone	532
SLDB	Solid Biosciences	344
PLSE	Pulse Biosciences	261
MYOS	MYOS RENS	11
OHGI	One Horizon Group	0
GFNL	Genesis Financial	0
MEDD	Medical Imaging	0

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