CareTrust REIT, Inc. 10-Q

Item 1A. Risk Factors. We have disclosed under the heading “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2019 and in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 risk factors which materially affect our business, financial condition, or results of operations. There have been no material changes from the risk factors previously disclosed other than as set forth below. The ongoing COVID-19 pandemic and measures intended to prevent its spread could have a material adverse effect on our business, results of operations, cash flows and financial condition. In December 2019, COVID-19 was first reported in Wuhan, China, and on March 11, 2020, the World Health Organization declared COVID-19 a pandemic. In recent months, the outbreak has spread globally and has led governments and other authorities around the world, including federal, state and local authorities in the United States, to impose measures intended to reduce its spread, including restrictions on freedom of movement and business operations such as travel bans, border closings, business limitations and closures (subject to exceptions for essential operations and businesses), quarantines and shelter-in-place orders. Although some of these governmental restrictions have since been lifted or scaled back, a recent surge of COVID-19 has resulted in the reimposition of certain restrictions and may lead to other restrictions being implemented in response to efforts to reduce the spread of COVID-19. Given the dynamic nature of these circumstances and the related adverse impact these restrictions have had, and may continue to have, on the economy generally, our business and the business of our tenants, results of operations and financial condition may be adversely impacted by the COVID-19 pandemic. The impact of the COVID-19 pandemic and measures to prevent its spread subject us to various risks and uncertainties that could materially adversely affect our business, results of operations and financial condition, including the following: • the inability of our tenants to pay contractual rent in full, on a timely basis or at all due to increases in operating costs incurred by our tenants or declines in occupancy rates at their facilities, which would adversely impact our rental revenue, and the adverse impact on our rental revenue if we grant rent deferrals to any of our tenants; • the possibility that we may be required to write-off unpaid rental payments, incur lease accounting charges due to the uncollectibility of rental payments and/or modify lease terms that may be unfavorable to us if a tenant is unable to pay contractual rent and/or the possibility that adverse market conditions or declines in the operating performance of our tenants or borrowers may result in asset impairment charges or credit losses on our loans receivable if we determine that the full amount of our investments are not recoverable; • the financial deterioration of one or more of our tenants or borrowers, which may result in such tenant(s) experiencing insolvency or initiating bankruptcy or similar proceedings and adversely affect our ability to collect rent or interest payments from such tenants and result in increased costs to us ; • increased costs or delays that may result if we need to reposition or transition any of our currently-leased properties to another tenant or operator, which could adversely impact our revenues and results of operations ; • the possibility of potential lawsuits related to COVID-19 outbreaks involving us, our tenants, operators or borrowers, which could increase our respective costs of business, result in negative publicity and/or result in further decreases in occupancy at our facilities; • deterioration of state and local economic conditions and job losses, which may decrease demand for and occupancy levels of our properties and cause our rental rates and property values to be negatively impacted; • possible complete or partial closures of, or other operational issues at, one or more of our properties resulting from government actions or directives, which may intensify the risk of rent deferrals or non-payment of contractual obligations by our tenants or operators; 30 Table of Contents • material increases in our insurance costs, including possible increases in insurance premiums and deductibles; • limitations on our access to capital and other sources of funding, which could adversely affect the availability and terms of future borrowings or refinancings or other forms of capital raising, including issuances under our New ATM Program, and which could adversely impact our ability to make new property investments; • our ability to continue to make cash distributions to our stockholders commensurate with historical levels; and • our ability to repay our outstanding debt or maintain compliance with the covenants under our Amended Credit Facility and the indenture governing our Notes. The duration and extent of the COVID-19 pandemic’s effect on our operational and financial performance, and the operational and financial performance of our tenants, will depend on future developments, which are highly uncertain and cannot be predicted at this time, including new information which may emerge concerning the severity of COVID-19, actions taken to contain COVID-19, any future resurgence of COVID-19 that may occur after the initial outbreak subsidies, and how quickly a nd to what extent normal economic and operating conditions can resume. Even after the COVID-19 pandemic has subsided, we may experience adverse impacts to our business, financial condition, results of operations, and prospects as a result of its global economic impact, including any economic downturn or recession that has occurred or may occur in the future. The adverse impact of the COVID-19 pandemic on our business, results of operations and financial condition could be material.