What changed in this filing

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Item 1. Financial Statements

2021-05-04 compared with 2020-11-03 · 405 added, 923 removed, 497 unchanged (73% of the section changed)

3 unchanged sentences

(in thousands, except per share amounts)

September 30,

Real estate properties

22 unchanged sentences

Total liabilities

Common stock $ .10 par value authorized – 350,000 shares, issued and outstanding – 226,980 shares as of September 30, 2020 and 226,631 as of December 31, 2019

Preferred stock $ 1.00 par value authorized – 20,000 shares, issued and outstanding - none

Common stock $ .10 par value authorized – 350,000 shares, issued and outstanding – 233,386 shares as of March 31, 2021 and 231,199 as of December 31, 2020

Common stock – additional paid-in capital

3 unchanged sentences

( 4,916,097 )

Accumulated other comprehensive loss

Accumulated other comprehensive income (loss)

Total stockholders’ equity

6 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

Rental income

3 unchanged sentences

Miscellaneous income

Total operating revenues

Total revenues

Depreciation and amortization

1 unchanged sentence

Real estate taxes

Acquisition and merger related costs

Acquisition, merger and transition related costs

Impairment on real estate properties

(Recovery) impairment on direct financing leases

Provision for credit losses

Total operating expenses

Other operating (loss) income

(Loss) gain on assets sold – net

Operating (loss) income

Other income (expense)

Interest income and other – net

Recovery on direct financing leases

(Recovery) provision for credit losses

Interest expense

Interest – amortization of deferred financing costs

Interest – refinancing costs

Realized gain (loss) on foreign exchange

Total other expense

(Loss) income before income tax expense and income from unconsolidated joint ventures

Total expenses

Other income (expense)

Other income (expense) – net

Loss on debt extinguishment

Gain on assets sold – net

Total other income

Income before income tax expense and income from unconsolidated joint ventures

Income tax expense

Income from unconsolidated joint ventures

Net (loss) income

Net loss (income) attributable to noncontrolling interest

Net (loss) income available to common stockholders

Earnings per common share/unit available to common stockholders:

Net (loss) income available to common stockholders

Net (loss) income

Net income attributable to noncontrolling interest

Net income available to common stockholders

Earnings per common share available to common stockholders:

Net income available to common stockholders

See notes to consolidated financial statements .

OMEGA HEALTHCARE INVESTORS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

Three Months Ended

Nine Months Ended

September 30,

Net (loss) income

Other comprehensive income (loss):

2 unchanged sentences

Total other comprehensive income (loss)

Comprehensive (loss) income

Comprehensive loss (income) attributable to noncontrolling interest

Comprehensive (loss) income attributable to common stockholders

See notes to consolidated financial statements.

OMEGA HEALTHCARE INVESTORS, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

Three Months Ended September 30, 2020 and 2019

(in thousands, except per share amounts)

Comprehensive

Stockholders’

Noncontrolling

Dividends Paid

Balance at June 30, 2020

( 4,610,828 )

Stock-based compensation expense

Vesting/exercising of equity compensation plan, net of tax withholdings

Deferred compensation directors

Equity Program

Vesting/exercising of Omega OP Units

Common dividends declared ($ 0.67 per share)

Conversion and redemption of Omega OP Units to common stock

Omega OP Units distributions

Comprehensive income

Foreign currency translation

Cash flow hedges

Total comprehensive loss

Balance at September 30, 2020

( 4,763,468 )

Balance at June 30, 2019

( 4,013,116 )

Stock-based compensation expense

Vesting/exercising of equity compensation plan, net of tax withholdings

Dividend reinvestment and stock purchase plan

Deferred compensation directors

Equity Shelf Program

Vesting/exercising of Omega OP Units

Common dividends declared ($ 0.66 per share)

Conversion and redemption of Omega OP Units to common stock

Omega OP Units distributions

Comprehensive income:

Foreign currency translation

Cash flow hedges

Total comprehensive income

Balance at September 30, 2019

( 4,156,613 )

Comprehensive income attributable to noncontrolling interest

Comprehensive income attributable to common stockholders

See notes to consolidated financial statements.

1 unchanged sentence

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

Nine Months Ended September 30, 2020 and 2019

Three Months Ended March 31, 2021 and 2020

(in thousands, except per share amounts)

3 unchanged sentences

Dividends Paid

Income (Loss)

Balance at December 31, 2020

( 4,916,097 )

Cumulative effect of accounting change (see Note 1)

( 4,303,546 )

Grant of restricted stock to company directors

Stock-based compensation expense

Stock related compensation

Vesting/exercising of equity compensation plan, net of tax withholdings

Dividend reinvestment and stock purchase plan

Deferred compensation directors

Equity Program

Common dividends declared ($ 2.01 per share)

Equity Shelf Program

Vesting/exercising of Omega OP Units

Common dividends declared ( $ 0.67 per share)

Conversion and redemption of Omega OP Units to common stock

4 unchanged sentences

Total comprehensive income

Balance at September 30, 2020

Balance at March 31, 2021

( 5,074,432 )

2 unchanged sentences

Cumulative effect of accounting change

Balance at March 31, 2019

( 4,303,546 )

Grant of restricted stock to company directors

Stock-based compensation expense

Stock related compensation

Vesting/exercising of equity compensation plan, net of tax withholdings

Dividend reinvestment and stock purchase plan

Deferred compensation directors

Equity Shelf Program

Issuance of common stock - merger related

Common dividends declared ($ 1.98 per share)

Vesting/exercising of Omega OP Units

Common dividends declared ( $ 0.67 per share)

Conversion and redemption of Omega OP Units to common stock

Omega OP Units distributions

Noncontrolling interest - consolidated joint venture

Comprehensive income:

2 unchanged sentences

Total comprehensive income

Balance at September 30, 2019

Balance at March 31, 2020

( 4,458,207 )

3 unchanged sentences

Unaudited (in thousands)

September 30,

Cash flows from operating activities

2 unchanged sentences

Impairment on real estate properties

(Recovery) impairment on direct financing leases

Recovery on direct financing leases

Provision for rental income

Provision for credit losses

Interest – amortization of deferred financing costs

(Recovery) provision for credit losses

Amortization of deferred financing costs and loss on debt extinguishment

Accretion of direct financing leases

2 unchanged sentences

Amortization of acquired in-place leases – net

Effective yield receivable on mortgage notes

Effective yield payable (receivable) on mortgage notes

Interest paid-in-kind

Loss from unconsolidated joint ventures

Loss (income) from unconsolidated joint ventures

Change in operating assets and liabilities – net:

5 unchanged sentences

Cash flows from investing activities

Acquisition of a business, net of cash acquired

Acquisition of real estate

Acquisition deposit

Refund of acquisition deposit

Net proceeds from sale of real estate investments

Investments in construction in progress

Proceeds from direct financing lease and related trust

Proceeds from sale of direct financing lease and related trust

Placement of mortgage loans

6 unchanged sentences

Proceeds from other investments

Net cash (used in) provided by investing activities

Net cash used in investing activities

Cash flows from financing activities

9 unchanged sentences

Dividends paid

Noncontrolling members’ contributions to consolidated joint venture

Distributions to Omega OP Unit Holders

Net cash used in financing activities

Effect of foreign currency translation on cash, cash equivalents and restricted cash

Increase in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash at beginning of period

Cash, cash equivalents and restricted cash at end of period

See notes to consolidated financial statements .

OHI HEALTHCARE PROPERTIES LIMITED PARTNERSHIP

CONSOLIDATED BALANCE SHEETS

(in thousands)

September 30,

Real estate properties

Real estate investments

Less accumulated depreciation

( 1,974,038 )

( 1,787,425 )

Real estate investments – net

Investments in direct financing leases – net

Mortgage notes receivable – net

Other investments – net

Investments in unconsolidated joint ventures

Assets held for sale – net

Total investments

Cash and cash equivalents

Restricted cash

Contractual receivables – net

Other receivables and lease inducements

LIABILITIES AND OWNERS’ EQUITY

Term loan – net

Secured borrowings

Accrued expenses and other liabilities

Deferred income taxes

Intercompany loans payable

Total liabilities

Owners’ Equity:

General partners’ equity

Limited partners’ equity

Total owners’ equity

Noncontrolling interest

Total liabilities and equity

See notes to consolidated financial statements .

OHI HEALTHCARE PROPERTIES LIMITED PARTNERSHIP

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per unit amounts)

Three Months Ended

Nine Months Ended

September 30,

Rental income

Income from direct financing leases

Mortgage interest income

Other investment income

Miscellaneous income

Total operating revenues

Depreciation and amortization

General and administrative

Real estate taxes

Acquisition and merger related costs

Impairment on real estate properties

(Recovery) impairment on direct financing leases

Provision for credit losses

Total operating expenses

Other operating (loss) income

(Loss) gain on assets sold – net

Operating (loss) income

Other income (expense)

Interest income and other – net

Interest expense

Interest – amortization of deferred financing costs

Interest – refinancing costs

Realized gain (loss) on foreign exchange

Total other expense

(Loss) income before income tax expense and income from unconsolidated joint ventures

Income tax expense

Income from unconsolidated joint ventures

Net (loss) income

Net loss attributable to noncontrolling interest

Net (loss) income available to owners

Earnings per unit:

Net (loss) income available to owners’

Net (loss) income

See notes to consolidated financial statements .

OHI HEALTHCARE PROPERTIES LIMITED PARTNERSHIP

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(in thousands)

Three Months Ended

Nine Months Ended

September 30,

Net (loss) income

Other comprehensive income (loss):

Foreign currency translation

Cash flow hedges

Total other comprehensive income (loss)

Comprehensive (loss) income

Comprehensive loss attributable to noncontrolling interest

Comprehensive (loss) income attributable to owners

See notes to consolidated financial statements .

OHI HEALTHCARE PROPERTIES LIMITED PARTNERSHIP

CONSOLIDATED STATEMENTS OF CHANGES IN OWNERS’ EQUITY

Three Months Ended September 30, 2020 and 2019

(in thousands, except per unit amounts)

Total Owners’

Noncontrolling

Balance at June 30, 2020

Contributions from partners

Distributions to partners

Vesting/exercising of Omega OP Units

Omega OP Unit conversions

Comprehensive income

Foreign currency translation

Cash flow hedges

Total comprehensive loss

Balance at September 30, 2020

Balance at June 30, 2019

Contributions from partners

Distributions to partners

Vesting/exercising of Omega OP Units

Omega OP Unit conversions

Comprehensive income

Foreign currency translation

Cash flow hedges

Total comprehensive income

Balance at September 30, 2019

See notes to consolidated financial statements.

OHI HEALTHCARE PROPERTIES LIMITED PARTNERSHIP

CONSOLIDATED STATEMENTS OF CHANGES IN OWNERS’ EQUITY

Nine Months Ended September 30, 2020 and 2019

(in thousands, except per unit amounts)

Noncontrolling

Balance at December 31, 2019

Cumulative effect of accounting change

Contributions from partners

Distributions to partners

Vesting/exercising of Omega OP Units

Omega OP Unit conversions

Comprehensive income

Foreign currency translation

Cash flow hedges

Total comprehensive income

Balance at September 30, 2020

Balance at December 31, 2018

Cumulative effect of accounting change

Balance at March 31, 2019

Contributions from partners

Distributions to partners

Noncontrolling interest - consolidated joint venture

Vesting/exercising of Omega OP Units

Omega OP Unit conversions

Comprehensive income

Foreign currency translation

Cash flow hedges

Total comprehensive income

Balance at September 30, 2019

See notes to consolidated financial statements.

OHI HEALTHCARE PROPERTIES LIMITED PARTNERSHIP

CONSOLIDATED STATEMENTS OF CASH FLOWS

Unaudited (in thousands)

Nine Months Ended

September 30,

Cash flows from operating activities

Adjustment to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

Impairment on real estate properties

(Recovery) impairment loss on direct financing leases

Provision for rental income

Provision for credit losses

Interest – amortization of deferred financing costs

Accretion of direct financing leases

Stock-based compensation expense

Gain on assets sold – net

Amortization of acquired in-place leases – net

Effective yield receivable on mortgage notes

Interest paid-in-kind

Loss from unconsolidated joint ventures

Change in operating assets and liabilities – net:

Contractual receivables

Straight-line rent receivables

Lease inducements

Other operating assets and liabilities

Net cash provided by operating activities

Cash flows from investing activities

Acquisition of a business, net of cash acquired

Acquisition of real estate

Acquisition deposit

Net proceeds from sale of real estate investments

Investments in construction in progress

Proceeds from direct financing lease and related trust

Placement of mortgage loans

Collection of mortgage principal

Investments in unconsolidated joint ventures

Distributions from unconsolidated joint ventures in excess of earnings

Capital improvements to real estate investments

Receipts from insurance proceeds

Investments in other investments

Proceeds from other investments

Net cash (used in) provided by investing activities

Cash flows from financing activities

Repayments of secured borrowing

Proceeds from intercompany loans payable to Omega

Repayment of intercompany loans payable to Omega

( 1,585,100 )

Payment of financing related costs incurred by Omega

Noncontrolling members’ contributions to consolidated joint venture

Equity contributions from general partners

Distributions to general partners

Distributions to limited partners

Net cash used in financing activities

Net cash provided by financing activities

Effect of foreign currency translation on cash, cash equivalents and restricted cash

Increase in cash, cash equivalents and restricted cash

(Decrease) increase in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash at beginning of period

2 unchanged sentences

OMEGA HEALTHCARE INVESTORS, INC.

AND OHI HEALTHCARE PROPERTIES LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020

March 31, 2021

NOTE 1 – BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

3 unchanged sentences

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, OHI Healthcare Properties Limited Partnership (“Omega OP”).

Omega OP was formed as a limited partnership and organized in the State of Delaware on October 24, 2014.

Unless stated otherwise or the context otherwise requires, the terms the “Company,” “we,” “our” and “us” means Omega and Omega OP, collectively.

Unless stated otherwise or the context otherwise requires, the terms “Omega”, the “Company,” “we,” “our” and “us” refer to Omega Healthcare Investors, Inc.

and its consolidated subsidiaries, including Omega OP, references to “Parent” refer to Omega Healthcare Investors, Inc.

without regard to its consolidated subsidiaries, and references to “Omega OP” mean OHI Healthcare Properties Limited Partnership and its consolidated subsidiaries.

Omega has one reportable segment consisting of investments in healthcare-related real estate properties located in the United States (“U.S.”) and the United Kingdom (“U.K.”).

Our core business is to provide financing and capital to the long-term healthcare industry with a particular focus on skilled nursing facilities (“SNFs”), assisted living facilities (“ALFs”), and to a lesser extent, independent living facilities (“ILFs”), rehabilitation and acute care facilities (“specialty facilities”) and medical office buildings (“MOBs”).

Our core portfolio consists of long-term leases and mortgage agreements.

All of our leases are “triple-net” leases, which require the operators (we use the term “operator” to refer to our tenants, mortgagors and their affiliates who manage and/or operate our properties) to pay all property-related expenses.

All of our leases are “triple-net” leases, which require the operators (we use the term “operator” to refer to our tenants and mortgagors and their affiliates who manage and/or operate our properties) to pay all property-related expenses.

Our mortgage revenue derives from fixed rate mortgage loans, which are secured by first mortgage liens on the underlying real estate and personal property of the mortgagor.

1 unchanged sentence

These loans, which may be either unsecured or secured by the collateral of the borrower, are classified as other investments.

Omega OP is governed by the Second Amended and Restated Agreement of Limited Partnership of OHI Healthcare Properties Limited Partnership, dated as of April 1, 2015 (the “Partnership Agreement”).

Omega has exclusive control over Omega OP’s day-to-day management pursuant to the Partnership Agreement.

As of September 30, 2020, Omega owned approximately 97 % of the issued and outstanding units of partnership interest in Omega OP (“Omega OP Units”), and investors owned approximately 3 % of the outstanding Omega OP Units.

Omega has exclusive control over Omega OP’s day-to-day management pursuant to the partnership agreement governing Omega OP.

As of March 31, 2021, Parent owned approximately 97 % of the issued and outstanding units of partnership interest in Omega OP (“Omega OP Units”), and other investors owned approximately 3 % of the outstanding Omega OP Units.

Basis of Presentation

5 unchanged sentences

These unaudited consolidated financial statements should be read in conjunction with the financial statements and the footnotes thereto included in our latest Annual Report on Form 10-K filed with the SEC on February 22, 2021.

Omega’s consolidated financial statements include the accounts of (i) Omega, (ii) Omega OP, (iii) all direct and indirect wholly owned subsidiaries of Omega and (iv) other entities in which Omega or Omega OP has a majority voting interest and control.

Omega’s consolidated financial statements include the accounts of (i) Parent, (ii) Omega OP, (iii) all direct and indirect wholly owned subsidiaries of Omega and (iv) other entities in which Omega or Omega OP has a majority voting interest and control.

All intercompany transactions and balances have been eliminated in consolidation, and Omega’s net earnings are reduced by the portion of net earnings attributable to noncontrolling interests.

Omega OP’s consolidated financial statements include the accounts of (i) Omega OP, (ii) all direct and indirect wholly owned subsidiaries of Omega OP and (iii) other entities in which Omega OP has a majority voting interest and control.

All intercompany transactions and balances have been eliminated in consolidation, and Omega OP’s net earnings are reduced by the portion of net earnings attributable to noncontrolling interests.

Risks and Uncertainties

1 unchanged sentence

Additionally, we are subject to risks and uncertainties as a result of changes affecting operators of nursing home facilities due to the actions of governmental agencies and insurers to limit the rising cost of healthcare services.

The COVID-19 pandemic has led governments and other authorities in the U.S., U.K.

and around the world to impose measures intended to control its spread, including but not limited to, the mandated use of personal protective equipment, restrictions on freedom of movement and business operations such as travel bans, border closings, business closures, quarantines and shelter-in-place orders, etc.

A range of government restrictions remain in place along with continuing uncertainty around the potential duration of the pandemic.

As of October 22, 2020, approximately half of our facilities have reported one or more positive cases of COVID-19 among the residents and/or operator employee populations.

Many of our operators have reported incurring significant cost increases as a result of the COVID-19 pandemic, with dramatic increases for facilities with positive cases.

We believe these increases primarily stem from elevated labor costs, including increased use of overtime and bonus pay, as well as a significant increase in both the cost and usage of personal protective equipment, testing equipment and processes and supplies.

In terms of occupancy levels, many of our operators have reported experiencing declines, in part due to the elimination or suspension of elective hospital procedures, fewer discharges from hospitals to SNFs and higher hospital readmittances from SNFs.

To the extent government support is not sufficient or timely to offset these impacts, or to the extent these trends continue or accelerate and are not offset by additional government relief that is sufficient or timely, the operating results of our operators are likely to be adversely affected, some may be unwilling or unable to pay their contractual obligations to us in full or on a timely basis and we may be unable to restructure such obligations on terms as favorable to us as those currently in place.

The extent of the COVID-19 pandemic’s effect on our and our operators’ operational and financial performance will depend on future developments, including the ultimate duration, spread and intensity of the outbreak, which may depend on factors such as the development and implementation of an effective vaccine and treatments for COVID-19, government funds and other support for the senior care sector and the efficacy of other policies and measures that may mitigate the impact of the pandemic, all of which are uncertain and difficult to predict.

In addition to experiencing outbreaks of positive cases and deaths of residents and employees during the pandemic, our operators have been required to, and continue to, adapt their operations rapidly throughout the pandemic to manage the spread of the COVID-19 virus as well as the implementation of new treatments and vaccines, and to implement new requirements relating to infection control, personal protective equipment (“PPE”), quality of care, visitation protocols, staffing levels, and reporting, among other regulations, throughout the pandemic.

It remains uncertain when and to what extent vaccination programs for COVID-19, which have been implemented in many of our facilities, will continue to mitigate the effects of COVID-19 in our facilities, or how effective existing vaccines will be against variants of the COVID-19 virus;

the impact of these programs will depend in part on the continued speed, distribution, efficacy and delivery of the vaccine in our facilities, as well as participation levels in vaccination programs among the residents and employees of our operators.

In addition to the risks associated with managing the spread of the virus, delivery of the vaccines and care of their patients and residents, many of our operators reported incurring, and may continue to incur, significant cost increases as a result of the COVID-19 pandemic, with dramatic increases for facilities with positive cases.

We believe these increases primarily stem from elevated labor costs, including increased use of overtime and bonus pay, as well as a significant increase in both the cost and usage of PPE, testing equipment and processes and supplies, as well as implementation of new infection control protocols and vaccination programs.

In addition, many of our operators have reported experiencing declines, in some cases that are material, in occupancy levels as a result of the pandemic, which declines on average appear to be stabilizing.

We believe these declines may be in part due to COVID-19 related fatalities at our facilities, the delay of SNF placement and/or utilization of alternative care settings for those with lower level of care needs, the suspension and/or postponement of elective hospital procedures, fewer discharges from hospitals to SNFs and higher hospital readmittances from SNFs.

We continue to monitor the impact of occupancy declines at many of our operators, and it remains uncertain whether and when demand and occupancy levels will return to pre-COVID-19 levels.

While substantial government support has been allocated to SNFs and to a lesser extent to ALFs, further government support will likely be needed to continue to offset these impacts and it is unclear whether and to what extent such government support has been and will continue to be sufficient and timely to offset these impacts.

Further, to the extent the impacts of the pandemic continue or accelerate and are not offset by continued government relief that is sufficient and timely, we anticipate that the operating results of certain of our operators would be materially and adversely affected, some may be unwilling or unable to pay their contractual obligations to us in full or on a timely basis and we may be unable to restructure such obligations on terms as favorable to us as those currently in place.

Even if operators are able to avail themselves of government relief to offset some of these costs, they may face challenges in complying with the terms and conditions of government support and may face longer-term adverse impacts to their personnel and business operations from the COVID-19 pandemic, including potential patient litigation and decreased demand for their services, loss of business due to an interruption in their operations, workforce challenges, new regulatory restrictions, or other liabilities related to gathering restrictions, quarantines, reopening plans, vaccine distribution or delivery, spread of infection or other related factors.

The extent of the COVID-19 pandemic’s effect on our and our operators’ operational and financial performance will depend on future developments, including the ability to control the spread of the outbreak generally and in our facilities and the delivery and efficacy of and participation in vaccination programs and other treatments for COVID-19, government funds and other support for the senior care sector and the efficacy of other policies and measures that may mitigate the impact of the pandemic, as well as the future demand for needs-based skilled nursing care and senior living facilities, all of which are uncertain and difficult to predict.

Due to these uncertainties, we are not able at this time to estimate the effect of these factors on our business, but the adverse impact on our business, results of operations, financial condition and cash flows could be material.

18 unchanged sentences

We perform this analysis on an ongoing basis.

As of September 30, 2020, we have not consolidated any VIEs, as we do not have the power to direct the activities of any VIEs that most significantly impact their economic performance and we do not have the obligation to absorb losses or receive benefits of the VIEs that could be significant to the entity.

As of March 31, 2021, we have not consolidated any VIEs, as we do not have the power to direct the activities of any VIEs that most significantly impact their economic performance and we do not have the obligation to absorb losses or receive benefits of the VIEs that could be significant to the entities.

Real Estate Investments and Depreciation

4 unchanged sentences

Leasehold interests are amortized over the shorter of the estimated useful life or term of the lease.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash on hand and highly liquid investments with a maturity date of three months or less when purchased.

These investments are stated at cost, which approximates fair value.

The majority of our cash, cash equivalents and restricted cash are held at major commercial banks.

Certain cash account balances exceed FDIC insurance limits of $ 250,000 per account and, as a result, there is a concentration of credit risk related to amounts in excess of the insurance limits.

We regularly monitor the financial stability of these financial institutions and believe that we are not exposed to any significant credit risk in cash, cash equivalents or restricted cash.

Restricted Cash

Restricted cash consists primarily of liquidity deposits escrowed for tenant obligations required by us pursuant to certain contractual terms and other deposits required by the U.S.

Department of Housing and Urban Development (“HUD”) in connection with our mortgage borrowings guaranteed by HUD.

Business Combinations

We record the purchase of properties to net tangible and identified intangible assets acquired and liabilities assumed at fair value.

Transaction costs are expensed as incurred as part of a business combination.

In making estimates of fair value for purposes of recording the purchase, we utilize a number of sources, including independent appraisals that may be obtained in connection with the acquisition or financing of the respective property and other market data.

We also consider information obtained about each property as a result of our pre-acquisition due diligence, marketing and leasing activities as well as other critical valuation metrics such as current capitalization rates and discount rates used to estimate the fair value of the tangible and intangible assets acquired (Level 3).

When liabilities are assumed as part of a transaction, we consider information obtained about the liabilities and use similar valuation metrics (Level 3).

In some instances when debt is assumed and an identifiable active market for similar debt is present, we use market interest rates for similar debt to estimate the fair value of the debt assumed (Level 2).

The Company determines fair value as follows:

● Land is determined based on third party appraisals which typically include market comparables.

● Buildings and site improvements acquired are valued using a combination of discounted cash flow projections that assume certain future revenues and costs and consider capitalization and discount rates using current market conditions as well as the residual approach.

● Furniture and fixtures are determined based on third party appraisals which typically utilize a replacement cost approach.

● Mortgages and other investments are valued using a discounted cash flow analysis, using interest rates being offered for similar loans to borrowers with similar credit ratings.

● Investments in joint ventures are valued based on the fair value of the joint ventures’ assets and liabilities.

Differences, if any, between the Company’s basis and the joint venture’s basis are generally amortized over the lives of the related assets and liabilities, and such amortization is included in the Company’s share of earnings of the joint venture.

● Intangible assets and liabilities acquired are valued using a combination of discounted cash flow projections as well as other valuation techniques based on current market conditions for the intangible asset or liability being acquired.

When evaluating below market leases we consider extension options controlled by the lessee in our evaluation.

● Other assets acquired and liabilities assumed are typically valued at stated amounts, which approximate fair value on the date of the acquisition.

● Assumed debt balances are valued by discounting the remaining contractual cash flows using a current market rate of interest.

● Goodwill represents the purchase price in excess of the fair value of assets acquired and liabilities assumed.

Goodwill is not amortized.

Asset Acquisitions

For asset acquisitions, assets acquired and liabilities assumed are recognized by allocating the cost of the acquisition, including transaction costs, to the individual assets acquired and liabilities assumed on a relative fair value basis.

The fair value of the assets acquired and liabilities assumed in an asset acquisition are determined in a consistent manner with the immediately preceding “Business Combinations” section.

Real Estate Investment Impairment

11 unchanged sentences

Management’s impairment evaluation process, and when applicable, impairment calculations involve estimation of the future cash flows from management’s intended use of the property as well as the fair value of the property.

Changes in the facts and circumstances that drive management’s assumptions may result in an impairment to our assets in a future period that could be material to Omega’s results of operations.

For the three months ended September 30, 2020 and 2019, we recognized impairment on real estate properties of approximately $ 28.1 million and $ 3.8 million, respectively.

For the nine months ended September 30, 2020 and 2019, we recognized impairment on real estate properties of approximately $ 43.7 million and $ 9.5 million, respectively.

In July 2020, we executed a Forbearance and Transition Agreement with Daybreak Venture LLC (“Daybreak”) which, among other things, set forth the parties’ plan to sell or re-lease the Daybreak portfolio (which plan contemplated the potential sale of 28 facilities currently leased to Daybreak to a non-Omega party for $ 100 million), and the Company’s agreement to forbear from exercising certain default remedies during the transition period.

During the third quarter of 2020, discussions terminated on the contemplated sale transaction for $ 100 million, and in October 2020 the Forbearance and Transition Agreement was amended and restated to continue the forbearance.

The Company is in negotiations with other third-party operators to re-lease these 28 facilities, along with three additional facilities.

Further, the Company expects to re-lease or sell one additional Daybreak facility with a net book value of $ 0.1 million either in connection with or separate from these transactions.

As of September 30, 2020, the 31 facilities subject to current re-lease negotiations have a net book value of approximately $ 147 million.

We evaluated the facilities for impairment as of September 30, 2020 and concluded that the facilities were not impaired, as we believe that our expected annual nominal cash flows from re-leasing these facilities exceed our current net book value of the 31 facilities.

To the extent certain of these 31 facilities are not re-leased to a third-party operator and are instead identified for sale, we may be required to record an impairment to the extent the sales price for a facility is less than its net book value.

On May 26, 2020, we executed an agreement to sell an acute care hospital located in Nevada to an unrelated third-party for $ 56.5 million.

The agreement provided that the sale was subject to a 60-day due diligence period which expired in July 2020.

During the second quarter of 2020, we recorded an impairment of approximately $ 2.2 million related to this facility to reduce its net book value to its fair value less costs to sell of approximately $ 55.3 million and reclassified the facility to assets held for sale.

In July 2020, we agreed with the third-party buyer to lower the purchase price to approximately $ 49.0 million.

The reduction in the purchase price resulted in an additional impairment of approximately $ 7.4 million in July 2020, and the facility was subsequently sold in September 2020.

Allowance for Losses on Mortgages, Other Investments and Direct Financing Leases

The allowances for losses on mortgage notes receivable, other investments and direct financing leases (collectively, our “loans”) are maintained at a level believed adequate to absorb potential losses.

The determination of the allowances is based on a quarterly evaluation of these loans, including general economic conditions and estimated collectability of loan payments.

We evaluate the collectability of our loans receivable based on a combination of factors, including, but not limited to, delinquency status, financial strength of the borrower and guarantors and the value of the underlying collateral.

If such factors indicate that there is greater risk of loan charge-offs, additional allowances or placement on non-accrual status may be required.

A loan is impaired when, based on current information and events, it is probable that we will be unable to collect all amounts due as scheduled according to the contractual terms of the loan agreements.

Changes in the facts and circumstances that drive management’s assumptions may result in an impairment to our assets in a future period that could be material to our results of operations.

Lease Accounting

Lessor Accounting

As a lessor, our leased real estate properties are leased under provisions of single or master leases with initial terms typically ranging from 5 to 15 years , plus renewal options.

As of March 31, 2021, we have determined that all but one of our leases should be accounted for as operating leases.

One lease is accounted for as a direct financing lease.

Under the terms of the leases, the lessee is responsible for all maintenance, repairs, taxes and insurance on the leased properties.

For leases accounted for as operating leases, we retain ownership of the asset and record depreciation expense (see “Business Combinations”, “Asset Acquisitions” and “Real Estate Investments and Depreciation” above for additional information regarding our investment in real estate leased under operating lease agreements).

Substantially all of our operating leases contain provisions for specified annual increases over the rents of the prior year and are generally computed in one of three methods depending on the specific provisions of each lease as follows:

(i) a specific annual increase over the prior year’s rent, generally between 2.0 % and 3.0 %;

(ii) an increase based on the change in pre-determined formulas from year to year (e.g., increases in the Consumer Price Index);

or (iii) specific dollar increases over prior years.

Rental income from operating leases is generally recognized on a straight-line basis over the lease term when we have determined that the collectibility of substantially all of the lease payments is probable.

We assess the probability of collecting substantially all payments due under our leases on several factors, including, among other things, payment history, the financial strength of the lessee and/or borrower and any guarantors, historical operations and operating trends, current and future economic conditions, and expectations of performance (which includes known substantial doubt about an operator’s ability to continue as a going concern).

If our evaluation of these factors indicates it is probable that we will be unable to collect substantially all rents, we recognize a charge to rental income and limit our rental income to the lesser of lease income on a straight-line basis plus variable rents when they become accruable or cash collected.

If we change our conclusion regarding the probability of collecting rent payments required by a lessee, we may recognize an adjustment to rental income in the period we make a change to our prior conclusion, potentially resulting in increased volatility of rental income.

For leases accounted for as direct financing leases, we record the present value of the future minimum lease payments (utilizing a constant interest rate over the term of the lease agreement) as a receivable and record interest income based on the contractual terms of the lease agreement.

Certain direct financing leases include annual rent escalators, see “Lessor Accounting for Direct Financing Lease Income” below for further discussion regarding the recording of interest income on our direct financing leases.

Lessee Accounting

As a lessee, the Company is party to ground and/or facility leases which are classified as operating leases.

(i) a specific annual increase over the prior year’s rent, generally between 1.0 % and 3.0 %;

(ii) an increase based on the change in pre-determined formulas from year to year (e.g., increases in the Consumer Price Index);

or (iii) specific dollar increases over prior years.

The initial terms of our ground leases range between 10 years and 100 years .

Our office leases have initial terms of approximately 10 years .

Certain leases have options to extend , terminate or purchase the asset and have been considered in our analysis of the lease term and the measurement of the right-of-use assets and lease liabilities.

The discount rate utilized in forming the basis of our right of use assets and lease liabilities approximates our cost of debt.

We have not recognized a right of use asset and/or lease liability for leases with terms of 12 months or less and without an option to purchase the underlying asset.

Our right of use assets and lease liabilities are included in other assets and accrued expenses and other liabilities, respectively, on our Consolidated Balance Sheets.

On a monthly basis, we remeasure our lease liabilities at the present value of the future lease payments using the discount rate determined at lease commencement.

Rental expense from operating leases is generally recognized on a straight-line basis over the lease term.

Mortgages, Other Investments and Direct Financing Leases (collectively, our “loans”) and Allowance for Credit Losses

Mortgage Interest Income and Other Investment Income

Mortgage interest income and other investment income is recognized as earned over the terms of the related mortgage notes or other investment.

Interest income is recorded on an accrual basis to the extent that such amounts are expected to be collected using the effective interest method.

In applying the effective interest method, the effective yield on a loan is determined based on its contractual payment terms, adjusted for prepayment terms.

Lessor Accounting for Direct Financing Lease Income

We record direct financing lease income on a constant interest rate basis over the term of the lease.

Costs related to originating direct financing leases are deferred and amortized on a straight-line basis as a reduction to income from direct financing leases over the term of the direct financing leases.

Allowance for Credit Losses

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments - Credit Losses (“Topic 326”) (“ASU 2016-13”), which changed the impairment model for most financial assets.

The new model uses a forward-looking expected loss method, which will generally result in earlier recognition of allowances for credit losses.

The new approach requires the calculation of expected lifetime credit losses and is applied to financial assets measured at amortized cost, including loans, as well as certain off-balance sheet credit exposures such as unfunded loan commitments.

The allowance for credit loss on the loans is a valuation amount that is deducted from the amortized cost basis of the loans not held at fair value to present the net amount expected to be collected over the contractual term of the loans.

The allowance for credit losses on loans is measured using relevant information about past events, including historical credit loss experience, current conditions, and reasonable and supportable forecasts that affect the collectibility of the remaining cash flows over the contractual term of the loans.

Changes to the allowance for credit losses on loans resulting from quarterly evaluations are recorded through provision for credit losses on the Consolidated Statements of Operations.

The Company’s unfunded lending commitments are calculated using the same as the methodology for the loans over the contractual term of the commitment.

The loss estimate is recorded in accrued expenses and other liabilities on the Consolidated Balance Sheets with quarterly changes to the liability recorded through provision for credit losses on the Consolidated Statements of Operations.

ASU 2016-13 specifically excludes from its scope receivables arising from operating leases accounted for under Topic 842.

We adopted ASU 2016-13 on January 1, 2020 using the modified retrospective approach and we recorded an initial $ 28.8 million allowance for expected credit losses with a corresponding adjustment to equity .

We elected to disaggregate our financial assets within the scope of Topic 326 based on the type of financial instrument.

These segments were further disaggregated based on our internal credit ratings.

We assess our internal credit ratings on a quarterly basis.

Our internal credit ratings consider several factors including the collateral and/or security, the performance of borrowers underlying facilities, if applicable, available credit support (e.g., guarantees), borrowings with third parties, and other ancillary business ventures and real estate operations of the borrower.

Our internal ratings range between 1 and 7.

An internal rating of 1 reflects the lowest likelihood of loss and a 7 reflects the highest likelihood of loss.

We have a limited history of incurred losses and consequently have elected to employ external data to perform our expected credit loss calculation.

We have elected a probability of default (“PD”) and loss given default (“LGD”) methodology.

Our model’s historic inputs consider PD and LGD data for residential care facilities published by the Federal Housing Administration along with Standards & Poor’s one-year global corporate default rates.

Our historical loss rates revert to historical averages after 36 periods.

Our model’s current conditions and supportable forecasts consider internal credit ratings, current and projected U.S.

unemployment rates published by the United States Bureau of Labor Statistics and the Federal Reserve Bank of St.

Louis and the weighted average life to maturity of the underlying financial asset.

As of March 31, 2021, $ 10.4 million of contractual interest receivable is recorded in contractual receivables – net on our Consolidated Balance Sheets.

We have elected the practical expedient to exclude interest receivable from our allowance for credit losses.

We write-off interest receivable to provision for credit losses in the period we determine the interest is no longer considered collectible.

Our assessment of collectibility considers several factors, including, among other things, payment history, the financial strength of the borrower and any guarantors, historical operations and operating trends, current and future economic conditions, expectations of performance (which includes known substantial doubt about an operator’s ability to continue as a going concern) and the value of the underlying collateral of the agreement, if any.

Periodically, the Company may identify an individual loan for impairment.

A loan is considered impaired when, based on current information and events, it is probable that we will be unable to collect all amounts due as scheduled according to the contractual terms of the loan agreements.

Consistent with this definition, all loans on non-accrual status may be deemed impaired.

To the extent circumstances improve and the risk of collectability is diminished, we will return these loans to full accrual status.

When management identifies a loan impairment, the loan is written down to the present value of the expected future cash flows.

To the extent circumstances improve and the risk of collectibility is diminished, we will return these loans to full accrual status.

When we identify a loan impairment, the loan is written down to the present value of the expected future cash flows.

In cases where expected future cash flows are not readily determinable, the loan is written down to the fair value of the underlying collateral.

We may base our valuation on a loan’s observable market price, if any, or the fair value of collateral, net of sales costs, if the repayment of the loan is expected to be provided solely by the sale of the collateral.

We account for impaired loans and direct financing leases using (a) the cost-recovery method, and/or (b) the cash basis method.

We generally utilize the cost-recovery method for impaired loans or direct financing leases for which impairment reserves were recorded.

We utilize the cash basis method for impaired loans or direct financing leases for which no impairment reserves were recorded because the net present value of the discounted cash flows expected under the loan or direct financing lease and/or the underlying collateral supporting the loan or direct financing lease were equal to or exceeded the book value of the loans or direct financing leases.

Under the cost-recovery method, we apply cash received against the outstanding loan balance or direct financing lease prior to recording interest income.

Under the cash basis method, we apply cash received to principal or interest income based on the terms of the agreement.

As of September 30, 2020 and December 31, 2019, we had $ 61.0 million and $ 5.1 million, respectively, of reserves on our loans.

For additional information see “Accounting Pronouncements Adopted in 2020,” Note 3 – Direct Financing Leases, Note 4 – Mortgage Notes Receivable, and Note 5 – Other Investments.

Goodwill Impairment

We assess goodwill for potential impairment during the fourth quarter of each fiscal year, or during the year if an event or other circumstance indicates that we may not be able to recover the carrying amount of the net assets of the reporting unit.

In evaluating goodwill for impairment on an interim basis, we assess qualitative factors such as a significant decline in real estate valuations, current macroeconomic conditions, state of the equity and capital markets and our overall financial and operating performance or a significant decline in the value of our market capitalization, to determine whether it is more likely than not (that is, a likelihood of more than 50 percent) that the fair value of the reporting unit is less than its carrying amount.

On an annual basis during the fourth quarter of each fiscal year, or on an interim basis if we conclude it is more likely than not that the fair value of the reporting unit is less than its carrying value, we perform a two-step goodwill impairment test to identify potential impairment and measure the amount of impairment we will recognize, if any.

Earnings Per Share/Unit

The computation of basic earnings per share/unit (“EPS” or “EPU”) is computed by dividing net (loss) income available to common stockholders/Omega OP Unit holders by the weighted-average number of shares of common stock/Omega OP Units outstanding during the relevant period.

Diluted EPS/EPU is computed using the treasury stock method, which is net (loss) income divided by the total weighted-average number of common outstanding shares/Omega OP Units plus the effect of dilutive common equivalent shares/units during the respective period.

Dilutive common shares/Omega OP Units reflect the assumed issuance of additional common shares pursuant to certain of our share-based compensation plans, including restricted stock and profit interest units, performance restricted stock and profit interest units, the assumed issuance of additional shares related to Omega OP Units held by outside investors.

Dilutive Omega OP Units reflect the assumed issuance of additional Omega OP Units pursuant to certain of our share-based compensation plans, including, restricted stock and profit interest units, performance restricted stock and profit interest units.

To the extent we have a net loss, potential common shares/units are not included in the computation of diluted earnings per share as the effect would be an antidilutive per share amount.

Contractual Receivables and Other Receivables and Lease Inducements

Contractual receivables relate to the amounts currently owed to us under the terms of our lease and loan agreements.

Effective yield interest receivables relate to the difference between the interest income recognized on an effective yield basis over the term of the loan agreement and the interest currently due to us according to the contractual agreement.

Straight-line rent receivables relate to the difference between the rental revenue recognized on a straight-line basis and the amounts currently due to us according to the contractual agreement.

Lease inducements result from value provided by us to the lessee, at the inception, modification, or renewal of the lease, and are amortized as a reduction of rental revenue over the non-cancellable lease term.

A summary of our net receivables by type is as follows:

(in thousands)

Contractual receivables – net

Effective yield interest receivables

Straight-line rent receivables

Lease inducements

Other receivables and lease inducements

During the first quarter of 2021, we wrote-off approximately $ 2.7 million of straight-line rent receivables to rental income as a result of transitioning one facility and placing one operator on a cash basis due to changes in our evaluation of the collectibility of future rent payments due under the lease agreement.

Earnings Per Share

The computation of basic earnings per share (“EPS”) is computed by dividing net income available to common stockholders by the weighted-average number of shares of common stock outstanding during the relevant period.

Diluted EPS is computed using the treasury stock method, which is net income divided by the total weighted-average number of common outstanding shares plus the effect of dilutive common equivalent shares during the respective period.

Dilutive common shares reflect the assumed issuance of additional common shares pursuant to certain of our share-based compensation plans, including restricted stock and profit interest units, performance restricted stock and profit interest units, the assumed issuance of additional shares related to Omega OP Units held by outside investors.

Noncontrolling Interests

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The noncontrolling interest for Omega represents the outstanding Omega OP Units held by outside investors and interests in a consolidated real estate joint venture not fully owned by Omega.

The noncontrolling interest for Omega OP represents outside investors interests in a consolidated real estate joint venture not fully owned by Omega OP.

Foreign Operations

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Revenue and expense accounts are translated using an average exchange rate for the period.

Gains and losses resulting from translation are included in Omega OP’s owners’ equity and Omega’s accumulated other comprehensive loss (“AOCL”), as a separate component of equity and a proportionate amount of gain or loss is allocated to noncontrolling interests, if applicable.

Gains and losses resulting from translation are included in accumulated other comprehensive income (“AOCI”), as a separate component of equity and a proportionate amount of gain or loss is allocated to noncontrolling interests, if applicable.

We and certain of our consolidated subsidiaries may have intercompany and third-party debt that is not denominated in the entity’s functional currency.

When the debt is remeasured against the functional currency of the entity, a gain or loss can result.

The resulting adjustment is reflected in results of operations, unless it is intercompany debt that is deemed to be long-term in nature in which case the adjustments are included in Omega OP’s owners’ equity and Omega’s AOCL and a proportionate amount of gain or loss is allocated to noncontrolling interests, if applicable.

The resulting adjustment is reflected in results of operations, unless it is intercompany debt that is deemed to be long-term in nature in which case the adjustments are included in AOCI and a proportionate amount of gain or loss is allocated to noncontrolling interests, if applicable.

Derivative Instruments

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In addition, at the inception of a qualifying cash flow hedging relationship, the underlying transaction or transactions, must be, and are expected to remain, probable of occurring in accordance with our related assertions.

Omega recognizes all derivative instruments, including embedded derivatives required to be bifurcated, as assets or liabilities in the Consolidated Balance Sheets at their fair value which is determined using a market approach and Level 2 inputs.

The Company recognizes all derivative instruments, including embedded derivatives required to be bifurcated, as assets or liabilities in the Consolidated Balance Sheets at their fair value which is determined using a market approach and Level 2 inputs.

Changes in the fair value of derivative instruments that are not designated in hedging relationships or that do not meet the criteria of hedge accounting are recognized in earnings.

For derivatives designated in qualifying cash flow hedging relationships, the gain or loss on the derivative is recognized in Omega OP’s owners’ equity and Omega’s AOCL as a separate component of equity and a proportionate amount of gain or loss is allocated to noncontrolling interest, if applicable.

For derivatives designated in qualifying cash flow hedging relationships, the gain or loss on the derivative is recognized in AOCI as a separate component of equity and a proportionate amount of gain or loss is allocated to noncontrolling interest, if applicable.

We formally document all relationships between hedging instruments and hedged items, as well as our risk-management objectives and strategy for undertaking various hedge transactions.

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As a matter of policy, we do not use derivatives for trading or speculative purposes.

At September 30, 2020 and December 31, 2019, the fair value of certain qualifying cash flow hedges was $ 12.0 million and $ 3.7 million, respectively, and are included in accrued expenses and other liabilities on our Consolidated Balance Sheets (see Note 19 – Subsequent Events).

At September 30, 2020, the fair value of certain qualifying cash flow hedges was $ 6.6 million and is included in other assets on our Consolidated Balance Sheets (see Note 14 – Borrowing Activities and Arrangements).

At March 31, 2021 and December 31, 2020, $ 0.7 million and $ 1.0 million, respectively, of qualifying cash flow hedges were recorded at fair value in accrued expenses and other liabilities on our Consolidated Balance Sheets.

At March 31, 2021 and December 31, 2020, $ 52.6 and $ 17.0 million, respectively, of qualifying cash flow hedges were recorded at fair value in other assets on our Consolidated Balance Sheets.

Net investment hedge

We are exposed to fluctuations in the GBP against its functional currency, the USD, relating to its investments in healthcare-related investments located in the U.K.

The Company uses a nonderivative, GBP-denominated term loan and line of credit to manage its exposure to fluctuations in the GBP-USD exchange rate.

The foreign currency transaction gain or loss on the nonderivative hedging instrument that is designated and qualifies as a net investment hedge is reported in Omega OP’s owners’ equity and Omega’s AOCL in our Consolidated Balance Sheets.

Contractual Receivables and Other Receivables and Lease Inducements

Contractual receivables relate to the amounts currently owed to us under the terms of our lease and loan agreements.

Straight-line rent receivables relate to the difference between the rental revenue recognized on a straight-line basis and the amounts currently due to us according to the contractual agreement.

We assess the probability of collecting substantially all payments under our leases based on several factors, including, among other things, payment history of the lessee, the financial strength of the lessee and any guarantors, historical operations and operating trends, current and future economic conditions and expectations of performance (which includes known substantial doubt about an operator’s ability to continue as a going concern).

If our evaluation of these factors indicates it is probable that we will be unable to collect substantially all rents, we place that operator on a cash basis and limit our rental income to the lesser of lease income on a straight-line basis plus variable rents when they become accruable or cash collected.

As a result of placing an operator on a cash basis, we may recognize a charge to rental income for any contractual rent receivable, straight-line rent receivable and lease inducements.

On a quarterly basis, and more frequently as appropriate, we review our contractual interest receivables, effective yield interest receivables and direct financing lease receivables to determine their collectability.

The determination of collectability of these assets requires significant judgment and is affected by several factors relating to the credit quality of our operators that we regularly monitor, including (i) payment history, (ii) the age of the contractual receivables, (iii) the current economic conditions and reimbursement environment, (iv) the ability of the tenant to perform under the terms of their lease and/or contractual loan agreements and (v) the value of the underlying collateral of the agreement, if any.

For a loan recognized on an effective yield basis or a direct financing lease, we generally provide an allowance for effective interest or income from direct financing leases when certain conditions or indicators of adverse collectability are present.

If these accounts receivable balances are subsequently deemed uncollectible, the receivable and allowance for doubtful account balance are written off.

A summary of our net receivables by type is as follows:

September 30,

(in thousands)

Contractual receivables – net

Effective yield interest receivables

Straight-line rent receivables

Lease inducements

Other receivables and lease inducements

During the first quarter of 2020, we provided approximately $ 16.0 million of funding to four operators, which was accounted for as lease inducements.

Of the $ 16.0 million, $ 12.9 million was funded to an operator for development and start-up related costs.

During the second quarter of 2020, we provided approximately $ 12.9 million of funding to three operators, which was accounted for as lease inducements.

Of the $ 12.9 million, $ 11.0 million was funded to an operator for development and start-up related costs.

During the third quarter of 2020, we wrote-off approximately $ 142.3 million of contractual receivables, straight-line rent receivables, and lease inducements to rental income as a result of placing three operators on a cash basis resulting from a change in our evaluation of the collectability of future rent payments due under the respective lease agreements as we considered information the Company received from these three operators regarding substantial doubt as to their ability to continue as a going concern.

Of the $ 142.3 million, $ 64.9 million related to Genesis Healthcare, Inc.

(“Genesis”), $ 75.3 million related to Agemo Holdings, LLC (“Agemo”) and $ 2.1 million related to another operator which leases two facilities from the Company.

During the third quarter of 2020, we also wrote-off approximately $ 1.0 million of straight-line rent receivable to rental income as a result of transitioning facilities to another existing operator.

In addition, during the third quarter of 2020, we received a one-time rent payment of approximately $ 55.4 million from Maplewood Real Estate Holdings, LLC (“Maplewood”), in conjunction with the restructuring of its master lease and loans with Omega (see Note 5 – Other Investments).

This payment was accounted for as an adjustment to straight-line rent receivables and is being amortized over the remaining term of the master lease.

Accounting Pronouncements Adopted in 2020

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments - Credit Losses (Topic 326) (“ASU 2016-13”), which changes the impairment model for most financial assets.

The new model uses a forward-looking expected loss method, which will generally result in earlier recognition of allowances for credit losses.

The measurement of expected credit losses is based upon historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount.

ASU 2016-13 specifically excludes from its scope receivables arising from operating leases accounted for under Topic 842.

Transition Impact of Adopting Topic 326

Pre-adoption balance as of

Impact of adopting

Post-adoption balance as of

Financial Statement Line Item

December 31, 2019

January 1, 2020

(in thousands)

Mortgage Notes Receivable

Investment in Direct Financing Leases

Other Investments

Off-Balance Sheet Commitments

We elected to disaggregate our financial assets within the scope of Topic 326 based on the type of financial instrument.

These segments were further disaggregated based on our internal credit ratings.

We assess our internal credit ratings on a quarterly basis.

Our internal ratings range between 1 and 7.

An internal rating of 1 reflects the lowest likelihood of loss and a 7 reflects the highest likelihood of loss.

Amortized Cost Basis By Year of Origination and Credit Quality Indicator

Financial Statement Line Item

Revolving Loans

Balance as of September 30, 2020

(in thousands)

Mortgage Notes Receivable

Investment in Direct Financing Leases

Other Investments

We have a limited history of incurred losses and consequently have elected to employ external data to perform our expected credit loss calculation.

We have elected a probability of default (“PD”) and loss given default (“LGD”) methodology.

Our model’s historic inputs consider PD and LGD data for residential care facilities published by the Federal Housing Administration (“FHA”) along with Standards & Poor’s one-year global corporate default rates.

Our historical loss rates revert to historical averages after 36 periods.

Our model’s current conditions and supportable forecasts consider internal credit ratings, current and projected U.S.

unemployment rates published by the United States Bureau of Labor Statistics and the Federal Reserve Bank of St.

Louis and the weighted average life to maturity of the underlying financial asset.

Allowance for Credit Loss

Financial Statement Line Item

Allowance for Credit Loss at December 31, 2019

Allowance for Credit Loss on January 1, 2020

Provision for Credit Loss for the three months ended September 30, 2020

Provision for Credit Loss for the nine months ended September 30, 2020

Allowance for Credit Loss as of September 30, 2020

(in thousands)

Mortgage Notes Receivable

Investment in Direct Financing Leases

Other Investments

Off-Balance Sheet Mortgage Commitments

Off-Balance Sheet Note Commitments

As of September 30, 2020, $ 10.3 million of contractual interest receivable is recorded in contractual receivables – net on our Consolidated Balance Sheets.

We have elected the practical expedient to exclude interest receivable from our allowance for credit losses.

We write-off interest receivable to provision for credit losses in the period we determine the interest is no longer considered collectible.

During the third quarter of 2020, we determined that interest receivable of $ 3.8 million (related to the Agemo term loans, see Note 5 – Other Investments) was no longer considered collectible.

As such, we reserved approximately $ 3.8 million of interest receivable through the provision for credit losses during the three month period ended September 30, 2020.

The $ 3.8 million reserve for interest receivable is excluded from the table above.

On March 12, 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848).

ASU 2020-04 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts.

The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur.

During the first quarter of 2020, we elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future London Inter-bank Offered Rate (“LIBOR”) indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives.

Application of these expedients preserves the presentation of derivatives consistent with past presentation.

We continue to evaluate the impact of the guidance and may apply other elections as applicable as additional changes in the market occur.

We are exposed to fluctuations in the GBP against its functional currency, the USD, relating to our investments in healthcare-related real estate located in the U.K.

For derivatives that are designated and qualify as net investment hedges, the gain or loss on the derivative is reported in AOCI as a part of the cumulative translation adjustment in our Consolidated Balance Sheets.

For nonderivative financial instruments that are designated and qualify as net investment hedges, the foreign currency transaction gain or loss on the nonderivative financial instrument is reported in AOCI as a part of the cumulative translation adjustment in our Consolidated Balance Sheets.

Amounts are reclassified out of AOCI into earnings when the hedged net investment is either sold or substantially liquidated.

From the issuance date of our GBP borrowings through the prepayment date in March 2021, we used a nonderivative, GBP-denominated term loan and line of credit totaling £ 174 million to hedge a portion of our net investments in foreign operations.

During March 2021 and concurrent with the prepayment of our GBP-denominated term loan and line of credit, we entered into four foreign currency forwards that mature on March 8, 2024 to hedge a portion of our net investments in foreign operations, effectively replacing the terminated net investment hedge.

At March 31, 2021, $ 0.9 million of qualifying net investment hedges were recorded at fair value in other assets on our Consolidated Balance Sheets.

Reclassification

Certain line items on our Consolidated Statements of Operations and Consolidated Statements of Changes in Equity have been reclassified to conform to the current period presentation.

NOTE 2 – PROPERTIES AND INVESTMENTS

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A summary of our investments in real estate properties subject to operating leases is as follows:

September 30,

(in thousands)

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Real estate investments – net

At September 30, 2020, our leased real estate properties included 754 SNFs, 114 ALFs, 28 specialty facilities and two MOBs.

Three Months Ended September 30,

Nine Months Ended September 30,

At March 31, 2021, our leased real estate properties included 734 SNFs, 133 ALFs, 35 specialty facilities and two medical office buildings.

Three Months Ended March 31,

(in thousands)

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Total lease income

The following table summarizes the significant asset acquisitions that occurred during the first nine months of 2020:

Building & Site

The following table summarizes the significant asset acquisitions that occurred during the first three months of 2021:

(in millions)

Cash Yield (1)

AZ, CA, FL, IL, NJ, OR, PA, TN, TX, VA, WA

(1) The initial annual cash yield reflects the initial annual cash rent divided by the purchase price.

During the third quarter of 2020, we acquired one parcel of land (not reflected in the table above) for approximately $ 1.3 million.

MedEquities Merger

On May 17, 2019, Omega and Omega OP completed their merger with MedEquities Realty Trust, Inc.

(“MedEquities”) and its subsidiary operating partnership and the general partner of its subsidiary operating partnership.

Pursuant to the Agreement and Plan of Merger, as amended by the First Amendment to the Agreement and Plan of Merger, dated March 26, 2019, (the “Merger Agreement”) Omega acquired MedEquities and MedEquities was merged with and into Omega (the “Merger”) at the effective time of the Merger with Omega continuing as the surviving company.

In accordance with the Merger Agreement, each share of MedEquities common stock issued and outstanding immediately prior thereto was converted into the right to receive (i) 0.235 of a share of Omega common stock plus the right to receive cash in lieu of any fractional shares of Omega common stock, and (ii) an amount in cash equal to $ 2.00 (the “Cash Consideration”).

In connection with the MedEquities Merger, we issued approximately 7.5 million shares of Omega common stock and paid approximately $ 63.7 million of cash consideration to former MedEquities stockholders.

We borrowed approximately $ 350 million under our existing senior unsecured revolving credit facility to fund the cash consideration and the repayment of MedEquities’ previously outstanding debt.

As a result of the MedEquities Merger, we acquired 33 facilities subject to operating leases, four mortgages, three other investments and an investment in an unconsolidated joint venture.

We also acquired other assets and assumed debt and other liabilities.

Based on the closing price of our common stock on May 16, 2019, the fair value of the consideration exchanged approximated $ 346 million.

Our purchase price allocation was finalized during the second quarter of 2020, with no material adjustments recorded.

The following table highlights the final fair value of the assets acquired and liabilities assumed on May 17, 2019:

(in thousands)

Fair value of net assets acquired:

Real estate investments

Mortgage notes receivable

Other investments

Investment in unconsolidated joint venture

Contractual receivables

Other assets (1)

Total investments

Accrued expenses and other liabilities (2)

Fair value of net assets acquired

(1) Includes approximately $ 2.5 million in above market lease assets.

(2) Includes approximately $ 1.1 million in below market lease liabilities.

Pro Forma Acquisition Results

The following unaudited pro forma information presents consolidated financial information as if the MedEquities Merger occurred on January 1, 2019.

In the opinion of management, all significant, necessary adjustments to reflect the effect of the merger have been made.

Nine Months Ended

September 30,

Pro forma revenues

Pro forma net income

Earnings per share – diluted:

Net income – as reported

Net income – pro forma

(2) On January 20, 2021, we acquired 24 facilities from Healthpeak Properties, Inc.

The acquisition involved the assumption of an in-place master lease with Brookdale Senior Living Inc.

Asset Sales and Impairments

During the first quarter of 2020, we sold six facilities subject to operating leases for approximately $ 18.1 million in net cash proceeds, recognizing a net gain of approximately $ 1.8 million.

In addition, we recorded impairments on three facilities of approximately $ 3.6 million ( one was subsequently reclassified to assets held for sale).

During the second quarter of 2020, we sold 15 facilities (also see Note 4 – Mortgages Notes Receivable) subject to operating leases and one facility subject to a direct financing lease for approximately $ 38.0 million in net cash proceeds, recognizing a net gain of approximately $ 12.8 million.

In addition, we recorded impairments on 10 facilities of approximately $ 12.0 million ( two were subsequently reclassified to assets held for sale).

During the third quarter of 2020, we sold six facilities and a parcel of land subject to operating leases for approximately $ 61.0 million in net cash proceeds, recognizing a net loss of approximately $ 0.7 million.

In addition, we recorded impairments on seven facilities of approximately $ 28.1 million ( six were subsequently reclassified to assets held for sale during the third quarter of 2020).

Our impairments for the third quarter of 2020 were offset by approximately $ 3.5 million of insurance proceeds related to a facility that was previously destroyed and impaired.

During the first quarter of 2021, we sold 24 facilities subject to operating leases for approximately $ 188.3 million in net cash proceeds, recognizing a net gain of approximately $ 100.3 million.

In addition, we recorded impairments on four facilities of approximately $ 28.7 million ( three were subsequently reclassified to assets held for sale).

Our recorded impairments were primarily the result of decisions to exit certain non-strategic facilities and/or operators.

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To estimate the fair value of the facilities, we utilized a market approach which considered binding sale agreements (a Level 1 input) and/or non-binding offers from unrelated third parties and/or broker quotes (a Level 3 input).

NOTE 3 – DIRECT FINANCING LEASES

The components of investments in direct financing leases consist of the following:

September 30,

(in thousands)

Minimum lease payments receivable

Less unearned income

Investment in direct financing leases

Less allowance for credit losses on direct financing leases

Investment in direct financing leases – net

Properties subject to direct financing leases

Number of direct financing leases

In June 2020, we received approximately $ 14.9 million from the Orianna Health Systems Distribution Trust (the “Trust”) as part of its final liquidation.

As of December 31, 2019, our remaining receivable was approximately $ 14.1 million which was recorded in other assets on our Consolidated Balance Sheets.

Approximately $ 0.8 million of the overall proceeds of $ 14.9 million were recorded in recovery (impairment) of direct financing leases.

During the third quarter of 2020, we received additional proceeds of approximately $ 0.3 million from the Trust, which were recorded in recovery (impairment) of direct financing leases on our Consolidated Statements of Operations.

In March 2019, we received updated information from the Trust indicating diminished collectability of the accounts receivable owed to us.

As a result, we recorded an additional $ 7.7 million allowance during the three months ended March 31, 2019.

NOTE 3 – MORTGAGE NOTES RECEIVABLE

As of September 30, 2020, mortgage notes receivable relate to ten fixed rate mortgage notes on 64 facilities.

As of March 31, 2021, mortgage notes receivable relate to nine fixed rate mortgage notes on 63 facilities.

The mortgage notes are secured by first mortgage liens on the borrowers’ underlying real estate and personal property.

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The principal amounts outstanding of mortgage notes receivable, net of allowances, were as follows:

September 30,

(in thousands)

7 unchanged sentences

Total mortgages — net

(1) Approximates the weighted average interest rate on 47 facilities as of September 30, 2020.

(1) Approximates the weighted average interest rate on 47 facilities as of March 31, 2021.

Two notes totaling approximately $ 30.7 million are construction mortgages with maturities in 2021 .

Two mortgage notes totaling $ 43.2 million mature in 2021 and the remaining loan balance matures in 2029 .

(2) Other mortgages outstanding have a weighted average interest rate of 9.40 % per annum as of September 30, 2020 and maturity dates through 2028 .

$ 672 Million Mortgage Notes due 2029

On May 1, 2020, we amended our initial $ 415 million amortizing master mortgage (the “Master Mortgage”) with Ciena Healthcare (“Ciena”) to (i) increase the interest rate on the Master Mortgage to 10.67 % per annum and (ii) add an additional $ 83.5 million mortgage note related to eight SNFs and one ALF located in Michigan.

These nine facilities were formerly leased to Ciena and were sold to Ciena in a noncash transaction that closed on May 1, 2020 and we retained the first mortgage.

In connection with this sale, we recorded a loss of $ 3.6 million related to the write-off of the nine facilities’ straight-line rent receivable.

The mortgage note matures on June 30, 2029 and bears an initial annual interest rate of 10.31 % which increases each year by 2 %.

As of September 30, 2020, the outstanding principal balance of this mortgage note is approximately $ 83.4 million.

In June 2020, we entered into a loan agreement with subsidiaries of Ciena to provide $ 43.2 million of mortgage notes related to two SNFs located in Ohio.

The mortgage notes mature on June 30, 2021 and bear an initial annual interest rate of 9.5 %.

As of September 30, 2020, the outstanding principal balance of these mortgage notes is approximately $ 43.2 million.

As of September 30, 2020, our total outstanding mortgage notes receivable with Ciena total $ 672.4 million.

(2) Other mortgages outstanding have a weighted average interest rate of 9.41 % per annum as of March 31, 2021 and maturity dates through 2028 .

NOTE 4 – OTHER INVESTMENTS

A summary of our other investments is as follows:

September 30,

(in thousands)

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Total other investments - net

(1) Approximate weighted average interest rate as of September 30, 2020.

(2) Other investment notes have a weighted average interest rate of 7.92 % as of September 30, 2020 and maturity dates through 2028 .

Other Investment Notes due 2021

On July 29, 2016, we provided Genesis a $ 48.0 million secured term loan bearing interest at a rate equal to the Eurodollar base rate (determined using reference rates, subject to a floor of 1.0 %) or an alternative base rate (determined using reference rates, subject to a floor of 2.0 %), plus in each case a specified applicable margin.

The initial applicable margin for the Eurodollar base rate loans is 13.0 % per annum and the initial applicable margin for the alternative base rate loans is 12.0 % per annum.

This loan was initially scheduled to mature on July 29, 2020 .

On May 9, 2019, we extended the maturity of this loan to November 30, 2021 .

This term loan (and the 2018 term loan discussed below) is secured by a first priority lien on and security interest in certain collateral of Genesis.

On March 6, 2018, we amended certain terms of the 2016 term loan to Genesis.

Commencing February 22, 2018, the 2016 term loan bears interest at a fixed rate of 14 % per annum, of which 9 % per annum shall be paid-in-kind.

Additionally, the amended term loan does not require monthly payments of principal.

All principal and accrued and unpaid interest will be due at maturity on November 30, 2021.

Prior to the amendment, the term loan had required monthly principal payments of $ 0.25 million through July 2019, and $ 0.5 million from August 2019 through maturity, with a portion of the monthly interest accrued to the outstanding principal balance of the loan.

In addition, in November 2017, we had provided Genesis forbearance through February 2018, which had allowed for the deferral of principal payments and permitted Genesis to accrue all interest due to the outstanding principal balance of the loan.

As of September 30, 2020, approximately $ 63.8 million is outstanding on this term loan.

Also on March 6, 2018, we provided Genesis an additional $ 16.0 million secured term loan bearing interest at a fixed rate of 10 % per annum, of which 5 % per annum is paid-in-kind, that was initially scheduled to mature on July 29, 2020 .

On May 9, 2019, we extended the maturity of this loan to November 30, 2021 .

As of September 30, 2020, approximately $ 18.2 million is outstanding on this term loan.

As of September 30, 2020, our total other investments outstanding with Genesis approximate $ 81.9 million.

We evaluated our loans with Genesis for impairment during the third quarter of 2020, with no incremental provision for credit loss recognized given the underlying collateral value.

Other Investment Notes due 2021-2025

On September 30, 2016, we acquired and amended a term loan of approximately $ 37.0 million with Agemo.

A $ 5.0 million tranche of the term loan that bore interest at 13 % per annum was repaid in August 2017.

The remaining $ 32.0 million tranche of the term loan (the “$ 32.0 million term loan”) bears interest at 9 % per annum and matures on December 31, 2024 .

The $ 32.0 million term loan and the $ 1.7 million term loan (discussed below) are secured by a security interest in certain collateral of Agemo.

On November 5, 2019, we provided Agemo a $ 1.7 million term loan (which was added to the $ 32.0 million term loan) that bears interest at a fixed rate of 9 % per annum and was initially scheduled to mature on March 31, 2020 .

On February 10, 2020, we extended the maturity of this loan to January 1, 2021 .

During the third quarter of 2020, the Company concluded that both the $ 32.0 million term loan and $ 1.7 million term loan were impaired, based in part on our consideration of information the Company received from the operator regarding substantial doubt as to its ability to continue as a going concern.

We recorded a provision for credit loss of $ 24.4 million to reduce the carrying value of these loans to the fair value of the underlying collateral, which was limited to our $ 9.3 million letter of credit (a Level 1 input).

We also fully reserved approximately $ 3.8 million of contractual interest receivable related to the $ 32.0 million term loan (see Note 1 – Basis of Presentation and Significant Accounting Policies).

As of September 30, 2020, approximately $ 9.3 million is outstanding on these term loans.

On September 1, 2020, we placed both the $ 32.0 million and the $ 1.7 million term loans on a cash basis for purposes of revenue recognition.

On May 7, 2018, the Company provided Agemo a $ 25.0 million secured working capital loan bearing interest at 7 % per annum and matures on April 30, 2025 .

The working capital loan is primarily secured by a collateral package that includes a second lien on the accounts receivable of the borrowers.

The proceeds of the working capital loan were used to pay operating expenses, settlement payments, fees, taxes and other costs approved by the Company.

As of September 30, 2020, approximately $ 25.0 million is outstanding on this working capital loan.

During the third quarter of 2020, no incremental provision for credit loss was recorded for this loan given the underlying collateral value.

On February 28, 2020, we provided an affiliate of Agemo a $ 3.5 million term loan bearing interest at a fixed rate of 10 % per annum (with the interest paid-in-kind) and matures on February 28, 2021 .

As of September 30, 2020, $ 3.5 million is outstanding on this term loan.

During the third quarter of 2020, no incremental provision for credit loss was recorded for this loan given the underlying collateral value.

At September 30, 2020, the total carrying value of our loans with Agemo and its affiliates, net of allowances for credit losses, is approximately $ 37.8 million.

(1) Approximate weighted average interest rate as of March 31, 2021.

(2) Other investment notes have a weighted average interest rate of 8.26 % as of March 31, 2021 and maturity dates through 2028 .

Other investment notes due 2024

In 2015 and 2017, we entered into two separate $ 50.0 million and $ 15.0 million secured revolving credit facilities with Maplewood and its subsidiaries.

These revolving credit facilities bore interest at approximately 6.66 % per annum and 9.5 % per annum, respectively, and were initially scheduled to mature in 2023.

As a part of an overall restructuring with this operator, the Company entered into a $ 220.5 million secured revolving credit facility with Maplewood on July 31, 2020, of which $ 132.1 million was drawn at closing.

The funds drawn at closing were used to repay the prior credit facilities with Maplewood, as well as other lease obligations owed to the Company, of which approximately $ 55.4 million was scheduled to be repaid at termination of the master lease.

Loan proceeds under the new credit facility may also be used to fund Maplewood’s working capital needs.

Loans made under this facility bear interest at a fixed rate of 7 % per annum and mature on June 30, 2030 .

As of September 30, 2020, $ 132.1 million remains outstanding on this credit facility to Maplewood.

As a result of entering into the $ 220.5 million secured revolving credit facility in July 2020, the Company reassessed its relationship with Maplewood and concluded that Maplewood was a VIE (see Note 6 – Variable Interest Entities).

Other Investment Notes Outstanding

On April 17, 2020, we provided a $ 17.6 million unsecured loan to a subsidiary of Second Spring Healthcare Investments (an entity in which we have an approximate 15 % ownership interest, see Note 7 – Investment in Joint Ventures).

The loan bears interest at the greater of the prime interest rate or 3-month LIBOR plus 2.75 % per annum and is due on demand.

As of September 30, 2020, the loan bears interest at 3.25 % per annum and has a total outstanding balance of $ 17.6 million.

On March 6, 2018, we amended certain terms of our $ 48.0 million secured term loan with Genesis.

The $ 48.0 million term loan bears interest at a fixed rate of 14 % per annum, of which 9 % per annum is paid-in-kind and was initially scheduled to mature on July 29, 2020 .

The maturity date of this loan was extended during the first quarter of 2021 to January 1, 2024 .

This term loan (and the $ 16.0 million term loan discussed below) is secured by a first priority lien on and security interest in certain collateral of Genesis.

As of March 31, 2021, approximately $ 66.7 million is outstanding on this term loan.

Also on March 6, 2018, we provided Genesis an additional $ 16.0 million secured term loan bearing interest at a fixed rate of 10 % per annum, of which 5 % per annum is paid-in-kind, and was initially scheduled to mature on July 29, 2020 .

The maturity date of this loan was extended during the first quarter of 2021 to January 1, 2024 .

As of March 31, 2021, approximately $ 18.6 million is outstanding on this term loan.

NOTE 5 – ALLOWANCE FOR CREDIT LOSSES

A rollforward of our allowance for credit losses is as follows:

Financial Statement Line Item

Allowance for Credit Loss as of December 31, 2020

(Recovery) Provision for Credit Loss for the period ended March 31, 2021

Write-offs charged against allowance for the period ended March 31, 2021

Allowance for Credit Loss as of March 31, 2021

(in thousands)

Mortgage Notes Receivable

Investment in Direct Financing Leases

Other Investments

Off-Balance Sheet Mortgage Commitments

Off-Balance Sheet Note Commitments

A summary of our amortized cost basis by year of origination and credit quality indicator is as follows:

Financial Statement Line Item

Revolving Loans

Balance as of March 31, 2021

(in thousands)

Mortgage Notes Receivable

Investment in Direct Financing Leases

Other Investments

NOTE 6 – VARIABLE INTEREST ENTITIES

As of September 30, 2020 and December 31, 2019, Agemo is a VIE.

As of September 30, 2020, Maplewood is also a VIE.

Below is a summary of our assets, liabilities and collateral associated with these operators as of September 30, 2020 and December 31, 2019:

September 30, 2020

As of March 31, 2021 and December 31, 2020, Agemo Holdings, LLC (“Agemo”) and Maplewood Real Estate Holdings, LLC (“Maplewood”) are both VIEs.

Below is a summary of our assets, liabilities and collateral associated with these operators as of March 31, 2021 and December 31, 2020:

March 31, 2021

December 31, 2020

2 unchanged sentences

Real estate investments – net

Assets held for sale

Other investments

3 unchanged sentences

Net in-place lease liability

Security deposit

Contingent liability

4 unchanged sentences

In determining our maximum exposure to loss from the VIE, we considered the underlying carrying value of the real estate subject to leases with the operator and other collateral, if any, supporting our other investments, which may include accounts receivable, security deposits, letters of credit or personal guarantees, if any, as well as other liabilities recognized with respect to these operators.

See Note 5 – Other Investments regarding the terms of the other investments with Agemo and Maplewood.

The table below reflects our total revenues from Agemo and Maplewood for the three and nine months ended September 30, 2020 and 2019:

Three Months Ended September 30,

Nine Months Ended September 30,

The table below reflects our total revenues from Agemo and Maplewood for the three months ended March 31, 2021 and 2020:

Three Months Ended March 31, 2021

Three Months Ended March 31, 2020

(in thousands)

1 unchanged sentence

Other investment income

(1) The rental income related to Agemo for the three and nine months ended September 30, 2020, reflects the write-off of approximately $ 75.3 million of contractual rent receivable, straight-line rent receivable and lease inducements (see Note 1 – Basis of Presentation and Significant Accounting Policies).

(2) For the three months ended September 30, 2020 and 2019, we received cash from Agemo of approximately $ 13.4 million and $ 13.5 million, respectively, pursuant to our lease and other investment agreements.

For the nine months ended September 30, 2020 and 2019, we received cash from Agemo of approximately $ 40.1 million and $ 39.7 million, respectively, pursuant to our lease and other investment agreements.

For the three months ended September 30, 2020 and 2019, we received cash rental income and other investment income from Maplewood of approximately $ 17.5 million and $ 11.4 million, respectively.

For the nine months ended September 30, 2020 and 2019, we received cash rental income and other investment income from Maplewood of approximately $ 51.4 million and $ 31.7 million, respectively.

(1) For the three months ended March 31, 2021 and 2020, we received cash from Agemo of approximately $ 14.0 million and $ 13.7 million, respectively, pursuant to our lease and other investment agreements.

For the three months ended March 31, 2021 and 2020, we received cash rental income and other investment income from Maplewood of approximately $ 19.3 million and $ 16.8 million, respectively.

NOTE 7 – INVESTMENTS IN JOINT VENTURES

4 unchanged sentences

Facilities at

September 30,

Investment (2)

Second Spring Healthcare Investments (3)

Second Spring II LLC (4)

Lakeway Realty, L.L.C.

2 unchanged sentences

OMG Senior Housing, LLC

Specialty facility

OH CHS SNP, Inc.

1 unchanged sentence

(2) Our initial investment includes our transaction costs, if any.

(3) The Company made a loan of $ 17.6 million to the venture which is included in other investments.

See Note 5 – Other Investments.

The following table reflects our income (loss) from unconsolidated joint ventures for the three and nine months ended September 30, 2020 and 2019:

Three Months Ended September 30,

Nine Months Ended September 30,

(3) During the first quarter of 2021, this joint venture sold 16 SNFs to an unrelated third party for approximately $ 328 million in net proceeds and recognized a gain on sale of approximately $ 102.2 million ( $ 14.9 million of which represents the Company’s share of the gain) .

During the first quarter of 2021, this joint venture also sold 5 SNFs to Second Spring II LLC for approximately $ 70.8 million in net proceeds.

(4) We acquired approximately a 15 % interest in Second Spring II LLC for approximately $ 10.3 million.

During the first quarter of 2021, this joint venture acquired 5 SNFs from Second Spring Healthcare Investments for approximately $ 70.8 million.

The following table reflects our income (loss) from unconsolidated joint ventures for the three months ended March 31, 2021 and 2020:

Three Months Ended March 31,

(in thousands)

Second Spring Healthcare Investments (1)

Second Spring II LLC

Lakeway Realty, L.L.C.

2 unchanged sentences

OH CHS SNP, Inc.

(1) The income from this unconsolidated joint venture includes a $ 14.9 million gain on sale of real estate investments.

Asset Management Fees

We receive asset management fees from certain joint ventures for services provided.

For the three months ended September 30, 2020 and 2019, we recognized approximately $ 0.3 million and $ 0.2 million, respectively of asset management fees.

For the nine months ended September 30, 2020 and 2019, we recognized approximately $ 1.0 million and $ 0.7 million, respectively of asset management fees.

For each of the three months ended March 31, 2021 and 2020, we recognized approximately $ 0.2 million of asset management fees.

These fees are included in miscellaneous income in the accompanying Consolidated Statements of Operations.

8 unchanged sentences

March 31, 2021 (3)

Properties sold (1)

Properties added (2)

June 30, 2020

Properties sold (1)

Properties added (2)

September 30, 2020 (3)

(1) In the first quarter of 2020, we sold four facilities for approximately $ 4.2 million in net cash proceeds recognizing a net loss on sale of approximately $ 0.5 million.

In the second quarter of 2020, we sold five facilities for approximately $ 38.4 million in net cash proceeds recognizing a net gain on sale of approximately $ 16.7 million.

In the third quarter of 2020, we sold four facilities and a parcel of land for approximately $ 60.7 million in net cash proceeds recognizing a net loss on sale of approximately $ 1.0 million.

During the third quarter of 2020, we recorded a $ 7.4 million impairment on one facility to reduce its net book value to its fair value less cost to sell.

(2) In the first quarter of 2020, we recorded approximately $ 1.9 million of impairment expense to reduce one facility’s book value to its estimated fair value less costs to sell before it was reclassified to assets held for sale.

In the second quarter of 2020, we recorded approximately $ 2.6 million of impairment expense to reduce two facilities’ book value to their estimated fair value less costs to sell before they were reclassified to assets held for sale.

In the third quarter of 2020, we recorded approximately $ 24.2 million of impairment expense to reduce six facilities’ book value to their estimated fair value less costs to sell before they were reclassified to assets held for sale.

(3) We plan to sell the facilities classified as assets held for sale at September 30, 2020 within the next twelve months.

(1) In the first quarter of 2021, we sold 21 facilities for approximately $ 187.6 million in net cash proceeds recognizing a net gain on sale of approximately $ 100.3 million.

(2) In the first quarter of 2021, we recorded approximately $ 16.9 million of impairment expense to reduce three facilities’ book value to their estimated fair value less costs to sell before they were reclassified to assets held for sale.

(3) We plan to sell the facilities classified as assets held for sale at March 31, 2021 within the next twelve months.

NOTE 9 – INTANGIBLES

The following is a summary of our intangibles as of September 30, 2020 and December 31, 2019:

September 30,

The following is a summary of our intangibles as of March 31, 2021 and December 31, 2020:

(in thousands)

1 unchanged sentence

Accumulated amortization

Net intangible assets

Net above market leases

Below market leases

Accumulated amortization

Net intangible liabilities

Net below market leases

Above market leases, net of accumulated amortization, are included in other assets on our Consolidated Balance Sheets.

1 unchanged sentence

The net amortization related to the above and below market leases is included in our Consolidated Statements of Operations as an adjustment to rental income.

For the three months ended September 30, 2020 and 2019, our net amortization related to intangibles was $ 3.7 million and $ 1.3 million, respectively.

For the nine months ended September 30, 2020 and 2019, our net amortization related to intangibles was $ 8.5 million and $ 4.7 million, respectively.

For the three months ended March 31, 2021 and 2020, our net amortization related to intangibles was $ 6.2 million and $ 1.3 million, respectively.

The estimated net amortization related to these intangibles for the remainder of 2021 and the subsequent four years is as follows:

3 unchanged sentences

2024 – $ 3.9 million and 2025 – $ 3.6 million.

As of September 30, 2020, the weighted average remaining amortization period of above market lease assets is nine years and below market lease liabilities is approximately eight years .

The following is a summary of our goodwill as of September 30, 2020:

As of March 31, 2021, the weighted average remaining amortization period of above market lease assets is approximately ten years and below market lease liabilities is approximately eight years .

The following is a summary of our goodwill as of March 31, 2021:

(in thousands)

1 unchanged sentence

foreign currency translation

Balance as of September 30, 2020

Balance as of March 31, 2021

NOTE 10 – CONCENTRATION OF RISK

As of September 30, 2020, our portfolio of real estate investments consisted of 976 healthcare facilities, located in 40 states and the U.K.

As of March 31, 2021, our portfolio of real estate investments consisted of 974 healthcare facilities, located in 42 states and the U.K.

and operated by 70 third-party operators.

Our investment in these facilities, net of impairments and allowances, totaled approximately $ 9.7 billion at September 30, 2020, with approximately 97 % of our real estate investments related to healthcare facilities.

Our portfolio is made up of (i) 755 SNFs, 114 ALFs, 28 specialty facilities, two medical office buildings, (ii) fixed rate mortgages on 57 SNFs, three ALFs and four specialty facilities, and (iii) 13 facilities that are held for sale.

At September 30, 2020, we also held other investments of approximately $ 464.5 million, consisting primarily of secured loans to third-party operators of our facilities and $ 196.2 million of investments in five unconsolidated joint ventures.

At September 30, 2020 we had investments with one operator/or manager that exceeded 10% of our total investments:

Ciena Healthcare (“Ciena”).

Ciena also generated approximately 11 % of our total revenues for the three and nine months ended September 30, 2020.

Ciena generated approximately 11 % of our total revenues for the three and nine months ended September 30, 2019.

At September 30, 2020, the three states in which we had our highest concentration of investments were Florida ( 14 %), Texas ( 9 %) and Michigan ( 7 %).

NOTE 11 – STOCKHOLDERS’/OWNERS’ EQUITY

$ 200 Million Stock Repurchase Program

On March 20, 2020, Omega’s Board of Directors authorized the repurchase of up to $ 200 million of its outstanding common stock from time to time over the twelve months ending March 20, 2021.

We are authorized to repurchase shares of our common stock in open market and privately negotiated transactions or in any other manner as determined by Omega’s management and in accordance with applicable law.

The timing and amount of stock repurchases will be determined, in management’s discretion, based on a variety of factors, including but not limited to market conditions, other capital management needs and opportunities, and corporate and regulatory considerations.

Omega has no obligation to repurchase any amount of its common stock, and such repurchases, if any, may be discontinued at any time.

Omega did no t repurchase any of its outstanding common stock during the nine months ended September 30, 2020.

The Board of Directors has declared common stock dividends as set forth below:

January 31, 2020

Our investment in these facilities, net of impairments and allowances, totaled approximately $ 10.2 billion at March 31, 2021, with approximately 97 % of our real estate investments related to healthcare facilities.

Our portfolio is made up of (i) 735 SNFs, 133 ALFs, 35 specialty facilities, two medical office buildings, (ii) fixed rate mortgages on 57 SNFs, three ALFs and three specialty facilities, and (iii) six facilities that are held for sale.

At March 31, 2021, we also held other investments of approximately $ 444.7 million, consisting primarily of secured loans to third-party operators of our facilities and $ 204.6 million of investments in six unconsolidated joint ventures.

At March 31, 2021 we had investments with one operator/or manager that exceeded 10% of our total investments:

Consulate Health Care (“Consulate”).

Consulate also generated approximately 9 % and 10 % of our total revenues for the three months ended March 31, 2021 and 2020, respectively.

At March 31, 2021, the three states in which we had our highest concentration of investments were Florida ( 15 %), Texas ( 10 %) and Michigan ( 6 %).

NOTE 11 – STOCKHOLDERS’ EQUITY

The Board of Directors has declared cash dividends on common stock as set forth below:

February 8, 2021

April 30, 2020

July 31, 2020

August 14, 2020

November 2, 2020

November 16, 2020

On the same dates listed above, Omega OP Unit holders received the same distributions per unit as those paid to the common stockholders of Omega.

February 16, 2021

$ 500 Million Equity Shelf Program

For the three months ended September 30, 2020, no shares were issued under our $ 500 Million Equity Shelf Program.

For the three months ended September 30, 2019, we issued approximately 0.1 million shares of our common stock at an average price of $ 33.91 per share, net of issuance costs, generating net proceeds of $ 4.2 million under our $ 500 Million Equity Shelf Program.

For the nine months ended September 30, 2020 and 2019, we issued approximately 49 thousand and 3.1 million, respectively, shares of our common stock at an average price of $ 34.64 per share and $ 34.78 per share, respectively, net of issuance costs, generating net proceeds of $ 1.7 million and $ 107.0 million, respectively, under our $ 500 Million Equity Shelf Program.

The table below presents information regarding the shares issued under the Equity Shelf Program for the three months ended March 31, 2020 and 2021:

Shares issued

Average Price

Three Months Ended

(in millions)

March 31, 2020

March 31, 2021

Dividend Reinvestment and Common Stock Purchase Plan

On March 23, 2020, we announced that we suspended our Dividend Reinvestment and Common Stock Purchase Plan.

For the three months ended September 30, 2020, no shares were issued under our Dividend Reinvestment and Common Stock Purchase Plan.

For the three months ended September 30, 2019, we issued approximately 1.0 million shares of our common stock at an average price of $ 37.87 per share through our Dividend Reinvestment and Common Stock Purchase Plan for gross proceeds of approximately $ 37.7 million.

For the nine months ended September 30, 2020 and 2019, we issued approximately 90 thousand and 2.5 million, respectively, shares of our common stock at an average price of $ 41.80 per share and $ 37.06 per share, respectively, through our Dividend Reinvestment and Common Stock Purchase Plan for gross proceeds of approximately $ 3.7 million and $ 91.8 million, respectively.

Accumulated Other Comprehensive Loss

The following is a summary of our accumulated other comprehensive loss, net of tax where applicable:

As of and for the

The table below presents information regarding the shares issued under the Dividend Reinvestment and Common Stock Purchase Plan for the three months ended March 31, 2020 and 2021:

Shares issued

Gross Proceeds

Three Months Ended

(in millions)

March 31, 2020

March 31, 2021

Accumulated Other Comprehensive Income (Loss)

The following is a summary of our accumulated other comprehensive income (loss), net of tax where applicable:

As of and for the

Three Months Ended

Nine Months Ended

September 30,

(in thousands)

1 unchanged sentence

Beginning balance

Translation loss

Translation gain (loss)

Realized gain (loss)

4 unchanged sentences

Unrealized gain (loss)

Realized (loss) gain (1)

Realized gain (loss) (1)

Ending balance

1 unchanged sentence

Beginning balance

Unrealized gain

Unrealized (loss) gain

Ending balance

Total accumulated other comprehensive loss for Omega OP (2)

Total accumulated other comprehensive income (loss) before noncontrolling interest

portion included in noncontrolling interest

Total accumulated other comprehensive loss for Omega

Total accumulated other comprehensive income (loss) for Omega

(1) Recorded in interest expense on the Consolidated Statements of Operations.

(2) These amounts are included in Owners’ Equity.

NOTE 12 – TAXES

Since our inception, Omega has elected to be taxed as a REIT under the applicable provisions of the Internal Revenue Code (“Code”).

A REIT is generally not subject to federal income tax on that portion of its REIT taxable income which is distributed to its stockholders, provided that at least 90 % of such taxable income is distributed each taxable year and certain other requirements are met, including asset and income tests.

So long as we qualify as a REIT under the Code, we generally will not be subject to federal income taxes on the REIT taxable income that we distribute to stockholders, subject to certain exceptions.

Subject to the limitation under the REIT asset test rules, we are permitted to own up to 100 % of the stock of one or more taxable REIT subsidiaries (“TRSs”).

Omega and Omega OP, including their wholly owned subsidiaries were organized, have operated, and intend to continue to operate in a manner that enables Omega to qualify for taxation as a REIT under Sections 856 through 860 of the Code.

On a quarterly and annual basis we perform several analyses to test our compliance within the REIT taxation rules.

If we fail to meet the requirements for qualification as a REIT in any tax year, we will be subject to federal income tax on our taxable income at regular corporate rates and may not be able to qualify as a REIT for the four subsequent years, unless we qualify for certain relief provisions that are available in the event we fail to satisfy any of the requirements.

We are also subject to federal taxation of 100 % of the net income derived from the sale or other disposition of property, other than foreclosure property, that we held primarily for sale to customers in the ordinary course of a trade or business.

We believe that we do not hold assets for sale to customers in the ordinary course of business and that none of the assets currently held for sale or that have been sold would be considered a prohibited transaction within the REIT taxation rules.

As a REIT under the Code, we generally will not be subject to federal income taxes on the REIT taxable income that we distribute to stockholders, subject to certain exceptions.

In 2020, 2019, and 2018, we distributed dividends in excess of our taxable income.

We currently own stock in an entity that has elected to be taxed as a REIT.

This subsidiary entity is required to individually satisfy all of the rules for qualification as a REIT.

We have elected to treat certain of our active subsidiaries as TRSs.

Our domestic TRSs are subject to federal, state and local income taxes at the applicable corporate rates.

Our foreign TSRs are subject to foreign income taxes.

As of September 30, 2020, one of our TRSs that is subject to federal, state and local income taxes at the applicable corporate rates had a net operating loss (“NOL”) carry-forward of approximately $ 5.7 million.

Up to 100 % of the NOL carry-forwards arising in taxable years ending prior to January 1, 2018, may be used to reduce taxable income for any taxable year during the eligible carry-forward period.

Changes made by the Tax Cuts and Jobs Act of 2017 (the “2017 Act”) limited the amount of taxable income that may be offset by a NOL carryforward to 80% of taxable income to the extent the NOL originated in tax years beginning after December 31, 2017 (the “80% Limitation”).

Our NOL carry-forward was fully reserved as of September 30, 2020, with a valuation allowance due to uncertainties regarding realization.

Under current law, our NOL carry-forwards generated up through December 31, 2017 may be carried forward for no more than 20 years, and our NOL carry-forwards generated in our taxable years ended December 31, 2019 and December 31, 2018 may be carried forward indefinitely.

However, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) modified the NOL carryback rules and deferred the application for the NOL carry-forward rules.

The CARES Act, which was signed into law on March 27, 2020, modified the NOL carry-forward rules applicable to certain of the NOL carry-forwards possessed by our TRSs.

First, the CARES Act defers the application of the 80% Limitation to our TRSs until their taxable years ended December 31, 2021, in addition to modifying the computation of the 80% Limitation.

Additionally, the CARES Act permits the carryback of NOLs generated by our TRSs in 2018, 2019, and 2020 for up to five years to offset taxable income reported in any of those prior taxable years and recover income taxes paid in such prior taxable years.

Other provisions of the CARES Act may also impact the computation of taxable income by any of our TRSs or Omega and Omega OP.

The modifications to the NOL carryback rules do not permit the carryback of an NOL by a REIT and, thus, will not impact Omega.

Our foreign TRSs are subject to foreign income taxes.

As of March 31, 2021, one of our TRSs that is subject to income taxes at the applicable corporate rates had a net operating loss (“NOL”) carry-forward of approximately $ 6.5 million.

Our NOL carry-forward was fully reserved as of March 31, 2021, with a valuation allowance due to uncertainties regarding realization.

Under current law, NOL carry-forwards generated up through December 31, 2017 may be carried forward for no more than 20 years, and NOL carry-forwards generated in our taxable years ended December 31, 2018 and after may be carried forward indefinitely.

The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) modified the NOL carryback rules to limit recovery of taxes paid in prior tax periods.

We do not anticipate that such changes will materially impact the computation of Omega’s taxable income, or the taxable income of any Omega entity, including our TRSs.

We also do not expect that Omega or any Omega entity, including our TRSs, will realize a material tax benefit as a result of the changes to the provisions of the Code made by the CARES Act.

For the three months ended September 30, 2020 and 2019, we recorded approximately $ 0.2 million and $ 0.3 million, respectively, of state and local income tax provisions.

For the nine months ended September 30, 2020 and 2019, we recorded approximately $ 0.8 million and $ 0.7 million, respectively, of state and local income tax provisions.

For the three months ended September 30, 2020 and 2019, we recorded approximately $ 0.5 million and $ 0.2 million, respectively, of tax provisions for foreign income taxes.

For the nine months ended September 30, 2020 and 2019, we recorded approximately $ 1.8 million and $ 1.3 million, respectively, of tax provisions for foreign income taxes.

For the three months ended March 31, 2021 and 2020, we recorded approximately $ 0.3 million and $ 0.4 million, respectively, of state and local income tax provisions.

For the three months ended March 31, 2021 and 2020, we recorded approximately $ 0.7 million and $ 0.6 million, respectively, of tax provisions for foreign income taxes.

The expenses were included in income tax expense on our Consolidated Statements of Operations.

NOTE 13 – STOCK-BASED COMPENSATION

The following is a summary of our stock-based compensation expense for the three and nine months ended September 30, 2020 and 2019, respectively.

The following is a summary of our stock-based compensation expense for the three months ended March 31, 2021 and 2020, respectively.

Three Months Ended

Nine Months Ended

September 30,

(in thousands)

Stock-based compensation expense

Time Based Restricted Equity Awards

Restricted stock, restricted stock units (“RSUs”) and profits interest units (“PIUs”) are subject to forfeiture if the holder’s service to us terminates prior to vesting, subject to certain exceptions for certain qualifying terminations of service or a change in control of the Company.

Prior to vesting, ownership of the shares/units cannot be transferred.

The restricted stock has the same dividend and voting rights as our common stock.

RSUs accrue dividend equivalents but have no voting rights.

PIUs accrue distributions, which are equivalent to dividend equivalents, but have no voting rights.

Once vested, each RSU is settled by the issuance of one share of Omega common stock and each PIU is settled by the issuance of one partnership unit in Omega OP (“Omega OP Unit”), subject to certain conditions.

Restricted stock and RSUs are valued at the price of our common stock on the date of grant.

The PIUs are valued using a Monte Carlo model to estimate fair value.

We expense the cost of these awards ratably over their vesting period.

We awarded 20,215 RSUs and 102,565 profit interest units to employees on January 1, 2020.

Performance-Based Restricted Equity Awards

Performance-based restricted equity awards include performance restricted stock units (“PRSUs”) and PIUs.

PRSUs and PIUs are subject to forfeiture if the performance requirements are not achieved or if the holder’s service to us terminates prior to vesting, subject to certain exceptions for certain qualifying terminations of employment or a change in control of the Company.

The PRSUs awarded in March 2016, January 2017, January 2018, and January 2019 and the PIUs awarded in March 2016, January 2017, January 2018, January 2019 and January 2020 have varying degrees of performance requirements to achieve vesting, and each PRSU and PIU award represents the right to a variable number of shares of common stock or partnership units.

Each PIU once earned is convertible into one Omega OP Unit in Omega OP, subject to certain conditions.

The vesting requirements are based on either the (i) total shareholder return (“TSR”) of Omega or (ii) Omega’s TSR relative to other real estate investment trusts in the FTSE NAREIT Equity Health Care Index for awards granted in or after 2016 (both “Relative TSR”).

We expense the cost of these awards ratably over their service period.

Prior to vesting and the distribution of shares or Omega OP Units, ownership of the PRSUs or PIUs cannot be transferred.

Dividends on the PRSUs are accrued and only paid to the extent the applicable performance requirements are met.

While each PIU is unearned, the employee receives a partnership distribution equal to 10 % of the quarterly approved regular periodic distributions per Omega OP Unit.

The remaining partnership distributions (which in the case of normal periodic distributions is equal to the total approved quarterly dividend on Omega’s common stock) on the PIUs accumulate, and if the PIUs are earned, the accumulated distributions are paid.

We used a Monte Carlo model to estimate the fair value for the PRSUs and PIUs granted to the employees.

The number of shares or units earned under the TSR PRSUs or PIUs depends generally on the level of achievement of Omega’s TSR over the indicated performance period.

We awarded 680,038 TSR PIUs to employees on January 1, 2020.

The number of shares or units earned under the Relative TSR PRSUs or PIUs depends generally on the level of achievement of Omega’s TSR relative to other real estate investment trusts in the FTSE NAREIT Equity Health Care Index TSR over the performance period indicated.

We awarded 528,499 Relative TSR PIUs to employees on January 1, 2020.

We granted 22,051 time based restricted stock units (“RSUs”) and 142,719 time based profits interest units (“PIUs”) during the first quarter of 2021 to certain officers and key employees, and those units vest on December 31, 2023 ( three years after the grant date), subject to continued employment and vesting in certain other events.

We also granted 1,232,178 performance based PIUs during the first quarter of 2021 to certain officers and key employees, which are earned based on the level of performance over the performance period (normally three years) and vest quarterly in the fourth year, subject to continued employment and vesting in certain other events.

NOTE 14 – BORROWING ACTIVITIES AND ARRANGEMENTS

1 unchanged sentence

Interest Rate

September 30,

(in millions)

(in thousands)

6 unchanged sentences

Omega OP term loan (7)

2015 term loan

Deferred financing costs – net

Total term loans – net

Senior Notes:

2023 notes (8)

2033 notes (9)

Subordinated debt (2)

4 unchanged sentences

Total secured and unsecured borrowings – net (10)

(1) Reflects the weighted average annual contractual interest rate on the mortgages at September 30, 2020;

secured by real estate assets with a net carrying value of $ 577.6 million as of September 30, 2020.

(1) Reflects the weighted average annual contractual interest rate on the mortgages at March 31, 2021.

Secured by real estate assets with a net carrying value of $ 564.5 million as of March 31, 2021.

(2) Wholly owned subsidiaries of Omega OP are the obligor on these borrowings.

(3) Borrowing is the debt of a consolidated joint venture.

(3) During the first quarter of 2020, we drew approximately $ 300 million on our existing $ 1.25 billion revolving credit facility as a precautionary measure due to the COVID-19 outbreak.

This borrowing was included in cash and cash equivalents on our Consolidated Balance Sheets as of March 31, 2020.

We repaid this $ 300 million borrowing in June 2020.

(4) Actual borrowing in British Pounds Sterling and remeasured to USD.

(5) Omega OP or wholly owned subsidiaries of Omega OP are the obligor on these borrowings.

(6) Includes $ 0.2 million of net deferred financing costs related to the Omega OP term loan as of September 30, 2020.

(7) All borrowings are direct borrowings of Omega unless otherwise noted.

HUD Mortgage Loan Payoffs

On August 26, 2020, we paid approximately $ 13.7 million to retire two mortgage loans guaranteed by HUD.

The loans were assumed as part of an acquisition in 2019, and had an average interest rate of 3.08 % per annum with maturities in 2051 and 2052 .

The payoff included a $ 0.9 million prepayment fee which is included in interest – refinancing costs on our Consolidated Statements of Operations.

Subordinated Debt

In connection with a 2010 acquisition, we assumed five separate $ 4.0 million subordinated notes bearing interest at 9 % per annum that mature on December 21, 2021.

Interest on these notes is due quarterly with the principal balance due at maturity.

These subordinated notes may be prepaid at any time without penalty.

To the extent that the operator of the facilities fails to pay rent when due to us under our existing master lease, we have the right to offset the amounts owed to us against the amounts we owe to the lender under the notes.

In the fourth quarter of 2019, we had recorded a reserve of $ 6.5 million in connection with the operator’s failure to pay rent, and we began offsetting certain interest and principal amounts payable by us against this reserve.

During the second quarter of 2020, expressly subject to our reservation of rights under the terms of the notes and related agreement, we reversed this reserve, and ceased offsetting amounts against our note payments, as a result of the operator’s payment of all current and past due rent.

(4) On April 30, 2021, the Revolving line of credit (which was scheduled to mature on May 25, 2021 ) was terminated and replaced with a new four-year $ 1.45 billion senior unsecured credit facility (“Credit Facility”).

(5) Guaranteed by Omega OP.

(6) Actual borrowing is in British Pounds Sterling and remeasured to USD.

The Sterling term loan was settled in March 2021 using proceeds from the 3.250 % 2033 Senior Notes offering.

(7) Omega OP is the obligor on this borrowing.

On April 30, 2021, the Omega OP term loan facility (which was scheduled to mature on May 25, 2022 ) was terminated and replaced with a new four-year $ 50 million senior unsecured term loan facility (“OP Term Loan Facility”).

(8) In March 2021, we used a portion of the proceeds from the 2033 Senior Notes offering to fund the tender offer to purchase $ 350 million of the 4.375 % Senior Notes due 2023 .

In connection with this transaction, we recorded approximately $ 29.7 million in related fees, premiums, and expenses which were recorded as Loss on debt extinguishment in our Consolidated Statement of Operations.

(9) We used the proceeds from this offering to pay down outstanding borrowings on the Revolving Line of Credit, repay the Sterling term loan, and fund the tender offer to purchase $ 350 million of the 4.375 % Senior Notes due 2023 and the payment of accrued interest and related fees, premiums and expenses.

(10) All borrowings are direct borrowings of Parent unless otherwise noted.

$ 400 Million Forward Starting Swaps

On March 27, 2020 , we entered into five forward starting swaps totaling $ 400 million.

We designated the forward starting swaps as cash flow hedges of interest rate risk associated with interest payments on a forecasted issuance of long-term debt, initially expected to occur within the next five years .

We designated the forward starting swaps as cash flow hedges of interest rate risk associated with interest payments on a forecasted issuance of fixed rate long-term debt, initially expected to occur within the next five years .

The swaps are effective on August 1, 2023 and expire on August 1, 2033 and were issued at a fixed rate of approximately 0.8675 %.

In October 2020, we issued $ 700 million aggregate principal amount of our 3.375 % Senior Notes due 2031 and discontinued hedge accounting.

Amounts reported in accumulated other comprehensive loss related to these discontinued cash flow hedging relationships will be reclassified to interest expense as interest payments are made on the Company’s debt.

In March 2021, in conjunction with the issuance of $ 700 million aggregate principal amount of our 3.25 % Senior Notes due 2033 , we discontinued hedge accounting for these five forward starting swaps.

Amounts reported in Accumulated Other Comprehensive Income related to these discontinued cash flow hedging relationships will be reclassified to interest expense over a ten year term.

Simultaneously, we re-designated these swaps in new cash flow hedging relationships of interest rate risk associated with interest payments on another forecasted issuance of long-term debt.

We are hedging our exposure to the variability in future cash flows for forecasted transactions over a maximum period of 46 months (excluding forecasted transactions related to the payment of variable interest on existing financial instruments).

£ 174 Million Foreign Exchange Forward Starting Swaps

During March 2021 and concurrent with the settlement of our GBP-denominated term loan and repayment of our GBP denominated borrowings under our line of credit, we entered into four foreign currency forwards that mature on March 8, 2024 to hedge a portion of our net investments in foreign operations, effectively replacing the terminated net investment hedge.

For these derivatives that are designated and qualify as net investment hedges, the gain or loss on the derivative is reported in Accumulated Other Comprehensive Income as part of the cumulative translation adjustment.

Amounts are reclassified out of Accumulated Other Comprehensive Income into earnings when the hedged net investment is either sold or substantially liquidated.

Certain of our other secured and unsecured borrowings are subject to customary affirmative and negative covenants, including financial covenants.

As of September 30, 2020 and December 31, 2019, we were in compliance with all affirmative and negative covenants, including financial covenants, for our secured and unsecured borrowings.

Omega OP, the guarantor of Parent’s outstanding senior notes, does not directly own any substantive assets other than its interest in non-guarantor subsidiaries.

As of March 31, 2021 and December 31, 2020, we were in compliance with all affirmative and negative covenants, including financial covenants, for our secured and unsecured borrowings.

NOTE 15 – FINANCIAL INSTRUMENTS

The net carrying amount of cash and cash equivalents, restricted cash, contractual receivables, other assets and accrued expenses and other liabilities reported in the Consolidated Balance Sheets approximates fair value because of the short maturity of these instruments (Level 1).

At September 30, 2020 and December 31, 2019, the net carrying amounts and fair values of our other financial instruments were as follows:

September 30, 2020

At March 31, 2021 and December 31, 2020, the net carrying amounts and fair values of our other financial instruments were as follows:

March 31, 2021

December 31, 2020

6 unchanged sentences

Omega OP term loan

2015 term loan

4.375 % notes due 2023 – net

5 unchanged sentences

3.625 % notes due 2029 – net

3.375 % notes due 2031 – net

3.25 % notes due 2033 – net

HUD mortgages – net

17 unchanged sentences

NOTE 16 – COMMITMENTS AND CONTINGENCIES

On November 16, 2017, a purported securities class action complaint captioned Dror Gronich v.

Omega Healthcare Investors, Inc., C.

Taylor Pickett, Robert O.

Stephenson, and Daniel J.

Booth was filed against the Company and certain of its officers in the United States District Court for the Southern District of New York (the “ District Court”), Case No.

1:17-cv-08983-NRB.

On November 17, 2017, a second purported securities class action complaint captioned Steve Klein v.

Omega Healthcare Investors, Inc., C.

The Company and certain of its officers, C.

Taylor Pickett, Robert O.

Stephenson, and Daniel J.

Booth was filed against the Company and the same officers in the United States District Court for the Southern District of New York, Case No.

1:17-cv-09024-NRB.

Thereafter, the District Court considered a series of applications by various shareholders to be named lead plaintiff, consolidated the two actions and designated Royce Setzer as the lead plaintiff.

Pursuant to a Scheduling Order entered by the District Court, lead plaintiff Setzer and additional plaintiff Earl Holtzman filed a Consolidated Amended Class Action Complaint on May 25, 2018 (the “Securities Class Action”).

The Securities Class Action purports to be a class action brought on behalf of shareholders who acquired the Company’s securities between May 3, 2017 and October 31, 2017.

The Securities Class Action alleges that the defendants violated the Securities Exchange Act of 1934, as amended (the “Exchange Act”), by making materially false and/or misleading statements, and by failing to disclose material adverse facts about the Company’s business, operations, and prospects, including the financial and operating results of one of the Company’s operators, the ability of such operator to make timely rent payments, and the impairment of certain of the Company’s leases and the uncollectibility of certain receivables.

The Securities Class Action, which purports to assert claims for violations of Section 10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder, as well as Section 20(a) of the Exchange Act, seeks an unspecified amount of monetary damages, interest, fees and expenses of attorneys and experts, and other relief.

The Company and the officers named in the Securities Class Action filed a Motion to Dismiss on July 17, 2018.

On March 25, 2019, the District Court entered an order dismissing with prejudice all claims against all defendants.

Plaintiffs appealed the order to the United States Court of Appeals for the Second Circuit and the Court of Appeals heard oral argument on November 13, 2019.

On August 3, 2020, the United States Court of Appeals for the Second Circuit issued a ruling reversing the District Court’s order of dismissal and remanding the case to the District Court for further proceedings.

Pursuant to an agreed upon Stipulation, Plaintiffs filed a second amended complaint on August 28, 2020.

The second amended complaint extends the class period to include shareholders who acquired the Company’s securities between February 8, 2017 and October 31, 2017.

Pursuant to an agreed upon Stipulation and Order, the motion to dismiss the second amended complaint is due to be filed on November 24, 2020.

The Board of Directors received a demand letter, dated April 9, 2018, from an attorney representing Phillip Swan (“Swan”), a purported current shareholder of the Company, relating to the subject matter covered by the Securities Class Action (the “Swan Shareholder Demand”).

The letter demanded that the Board of Directors conduct an investigation into the statements and other matters at issue in the Securities Class Action and commence legal proceedings against each party identified as being responsible for the alleged activities.

After an investigation and due consideration, and in the exercise of its business judgment, the Board determined that it is not in the best interests of the Company to commence litigation against any current or former officers or directors based on the matters raised in the Swan Shareholder Demand.

In November 2018, the Board also received shareholder demands from two additional purported shareholders, Tom Bradley (“Bradley”) and Sarah Smith (“Smith”), each represented by the same counsel as Swan, that were substantively identical to the Swan Shareholder Demand (the “Bradley/Smith Shareholder Demands”).

The Board reached the same conclusion with respect to those demands as it reached with the Swan Shareholder Demand.

On August 22, 2018, Stourbridge Investments LLC, a purported stockholder of the Company, filed a derivative action purportedly on behalf of the Company in the United States District Court for the Southern District of New York against the current directors of the Company as well as certain officers alleging violations of Section 14(a) of the Securities Exchange Act of 1934 and state-law claims including breach of fiduciary duty.

Stourbridge Investments LLC v.

Callen et al., No.

1:18-cv-07638.

The complaint alleges, among other things, that the defendants are responsible for the Company’s failure to disclose the financial condition of Orianna Health Systems, the alleged non-disclosures that are also the subject of the Securities Class Action described above.

The defendants in the action are the three individual defendants named in the Securities Class Action (Messrs.

Pickett, Booth and Stephenson), as well as the Company’s non-management directors.

Booth , are defendants in a purported securities class action lawsuit pending in the U.S.

District Court for the Southern District of New York (the “Securities Class Action”).

Brought by lead plaintiff Royce Setzer and additional plaintiff Earl Holtzman, the Securities Class Action purports to assert claims for violations of Section 10(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and Rule 10b-5 promulgated thereunder, as well as Section 20(a) of the Exchange Act, and seeks an unspecified amount of monetary damages, interest, fees and expenses of attorneys and experts, and other relief.

The Securities Class Action alleges that the defendants violated the Exchange Act by making materially false and/or misleading statements, and by failing to disclose material adverse facts about the Company’s business, operations, and prospects, including the financial and operating results of one of the Company’s operators, the ability of such operator to make timely rent payments, and the impairment of certain of the Company’s leases and the uncollectibility of certain receivables.

The initial complaint was dismissed with prejudice by the U.S.

District Court, but the dismissal was overturned by the U.S Court of Appeals for the Second Circuit in 2020.

Thereafter, the plaintiffs filed a Second Consolidated Amended Complaint in August 2020.

In November 2020, the Company and the officers named in the Securities Class Action filed a Motion to Dismiss the Second Consolidated Amended Complaint, which is fully briefed and pending before the District Court.

Certain derivative actions have also been brought against the officers named in the Securities Class Action, and certain current and former directors of the Company, alleging claims relating to the matters at issue in the Securities Class Action.

These derivative actions are currently stayed pending certain developments in the Securities Class Action.

In 2018, Stourbridge Investments LLC, a purported stockholder of the Company, filed a derivative action purportedly on behalf of the Company in the United States District Court for the Southern District of New York, alleging violations of Section 14(a) of the Exchange Act and state-law claims including breach of fiduciary duty.

The complaint alleges, among other things, that the named defendants are responsible for the Company’s failure to disclose the financial condition of Orianna Health Systems, the alleged non-disclosures that are also the subject of the Securities Class Action described above.

The plaintiff did not make a demand on the Company to bring the action prior to filing it, but rather alleges that demand would have been futile.

The parties have entered into a stipulation in which they agreed to stay the case, including any response by defendants, pending the entry of judgment or a voluntary dismissal with prejudice in the Securities Class Action.

The agreed-upon stipulation and order to stay the case were entered by the Court on October 25, 2018.

On January 30, 2019, Swan filed a derivative action in the Baltimore City Circuit Court of Maryland, purportedly on behalf of the Company against certain current and former directors of the Company as well as certain officers, asserting claims for breach of fiduciary duty, waste of corporate assets and unjust enrichment.

Pickett, et al., No.

24-C-19-000573.

Swan alleges that the Swan Shareholder Demand was wrongfully refused.

On February 21, 2019, Bradley and Smith filed a derivative action in the Baltimore City Circuit Court of Maryland, purportedly on behalf of the Company against certain current and former directors of the Company as well as certain officers, asserting claims for breach of fiduciary duty, abuse of control, gross mismanagement, and unjust enrichment.

Bradley and Smith v.

Callen, et al.

24-c-19-000972.

Bradley and Smith allege that the Bradley/Smith Shareholder Demands were wrongly refused.

The derivative actions brought by Swan and Bradley and Smith have been consolidated under the heading of the Swan action.

The parties in those actions have agreed to a stay of proceedings through the close of factual discovery in the Securities Class Action.

The case has been stayed pending the entry of judgement or a voluntary dismissal with prejudice in the Securities Class Action.

In 2019, purported stockholder Phillip Swan by his counsel, and stockholders Tom Bradley and Sarah Smith by their counsel, filed derivative actions in the Baltimore City Circuit Court of Maryland, purportedly on behalf of the Company, asserting claims for breach of fiduciary duty, waste of corporate assets and unjust enrichment against the named defendants.

Those actions have been consolidated and stayed in the Maryland court pending completion of fact discovery in the Securities Class Action.

Prior to filing suit, each of these stockholders had made demands on the Board of Directors in 2018 that the Company bring such lawsuits.

In addition, in late 2020, Robert Wojcik, a purported shareholder of the Company, filed a derivative action in the U.S.

District Court for the District of Maryland, purportedly on behalf of the Company, asserting violations of Section 14(a) of the Exchange Act, Sections 10(b) and 21D of the Exchange Act, as well as claims for breach of fiduciary duty, unjust enrichment, abuse of control, gross mismanagement, and waste of corporate assets.

Wojcik also did not make a demand on the Company prior to filing suit.

The case has been stayed pending the entry of judgement or a voluntary dismissal with prejudice in the Securities Class Action.

The Company believes that the claims asserted against it in these lawsuits are without merit and intends to vigorously defend against them.

In September 2016, MedEquities received a Civil Investigative Demand (“CID”) from the U.S.

Department of Justice (“DOJ”), which indicates that it is conducting an investigation regarding alleged violations of the False Claims Act, Stark Law and Anti-Kickback Statute in connection with claims that may have been submitted to Medicare and other federal payors for services rendered to patients at Lakeway Regional Medical Center (the “Lakeway Hospital”) or by providers with financial relationships with Lakeway Hospital.

As a result of the acquisition of MedEquities, the Company owns a 51 % interest in an unconsolidated partnership that owns the Lakeway Hospital (Lakeway Realty, L.L.C.).

The CID requested certain documents and information related to the acquisition and ownership of the Lakeway Hospital through Lakeway Realty, L.L.C.

The Company has learned that the DOJ is investigating MedEquities’ conduct in connection with its investigation of financial relationships related to the Lakeway Hospital, including allegations by the DOJ that these relationships violate and continue to violate the Anti-Kickback Statute and, as a result, related claims submitted to federal payors violated and continue to violate the False Claims Act.

Department of Justice (“DOJ”), which indicates that it is conducting an investigation regarding alleged violations of the False Claims Act, Stark Law and Anti-Kickback Statute in connection with claims that may have been submitted to Medicare and other federal payors for services rendered to patients at Lakeway Hospital or by providers with financial relationships with Lakeway Hospital.

As a result of the acquisition of MedEquities, the Company owns a 51 % interest in an unconsolidated partnership that owns Lakeway Hospital (the “Lakeway Realty, L.L.C.”).

The CID requested certain documents and information related to the acquisition and ownership of Lakeway Hospital through Lakeway Realty, L.L.C..

The Company has learned that the DOJ is investigating MedEquities’ conduct in connection with its investigation of financial relationships related to Lakeway Hospital, including allegations by the DOJ that these relationships violate and continue to violate the Anti-Kickback Statute and, as a result, related claims submitted to federal payors violated and continue to violate the False Claims Act.

The Company is cooperating fully with the DOJ in connection with the CID and has produced all of the information that has been requested to date.

1 unchanged sentence

A MedEquities subsidiary was a party to this transaction but was not included in settlement discussions.

As of November 2, 2020, the documents relating to the settlement were not publicly available.

The Company believes that the acquisition, ownership and leasing of the Lakeway Hospital through Lakeway Realty, L.L.C.

was and is in compliance with all applicable laws.

The documents relating to the settlement are not publicly available.

The Company believes that the acquisition, ownership and leasing of Lakeway Hospital through the Lakeway Partnership was and is in compliance with all applicable laws.

However, due to the uncertainties surrounding this matter and its ultimate outcome, we are unable to determine whether it is probable that any loss has been incurred.

3 unchanged sentences

In connection with certain facility transitions, we have agreed to indemnify certain operators in certain events.

As of September 30, 2020, our maximum funding commitment under these indemnification agreements was approximately $ 11.5 million.

As of March 31, 2021, our maximum funding commitment under these indemnification agreements was approximately $ 8.1 million.

Claims under these indemnification agreements may be made within 18 months to 72 months of the transition date.

3 unchanged sentences

We expect the funding of these commitments to be completed over the next several years.

Our remaining commitments at September 30, 2020, are outlined in the table below (in thousands):

Our remaining commitments at March 31, 2021, are outlined in the table below (in thousands):

Total commitments

3 unchanged sentences

(2) This amount excludes our remaining commitments to fund under our other investments of approximately $ 81.0 million.

NOTE 17 – (LOSS) EARNINGS PER SHARE/UNIT

The following tables set forth the computation of basic and diluted earnings per share/unit:

NOTE 17 – EARNINGS PER SHARE

The following tables set forth the computation of basic and diluted earnings per share:

Three Months Ended

Nine Months Ended

September 30,

(in thousands, except per share amounts)

Net (loss) income

net loss (income) attributable to noncontrolling interests

Net (loss) income available to common stockholders/Omega OP Unit holders

net income attributable to noncontrolling interests

Net income available to common stockholders

Denominator for basic earnings per share

1 unchanged sentence

Common stock equivalents

Net forward share contract

Noncontrolling interest – Omega OP Units

Denominator for diluted earnings per share/unit

Earnings per share/unit - basic:

Net (loss) income available to common stockholders/Omega OP Unit holders

Earnings per share/unit – diluted:

Net (loss) income (1)

(1) For the three months ended September 30, 2020, approximately 904 potential common shares/units are not included in the computation of diluted earnings per share as a net loss exists and therefore the effect would be an antidilutive per share amount.

Three Months Ended

Nine Months Ended

September 30,

(in thousands, except per share amounts)

Net (loss) income

net loss attributable to noncontrolling interests

Net (loss) income available to Omega OP Unit holders

Denominator for basic earnings per unit

Effect of dilutive securities:

Omega OP Unit equivalents

Net forward share contract

Denominator for diluted earnings per unit

Earnings per unit - basic:

Net (loss) income available to Omega OP Unit holders

Earnings per unit - diluted:

Net (loss) income (1)

Denominator for diluted earnings per share

Earnings per share - basic:

Net income available to common stockholders

Earnings per share – diluted:

NOTE 18 – SUPPLEMENTAL DISCLOSURE TO CONSOLIDATED STATEMENTS OF CASH FLOWS

The following are supplemental disclosures to the consolidated statements of cash flows for the nine months ended September 30, 2020 and 2019:

Nine Months Ended September 30,

The following are supplemental disclosures to the consolidated statements of cash flows for the three months ended March 31, 2021 and 2020:

Three Months Ended March 31,

(in thousands)

6 unchanged sentences

Taxes paid during the period

Non cash investing activities

Non cash acquisition of a business (see Note 2)

Non cash acquisition of real estate (see Note 2)

Non cash proceeds from sale of real estate investments (see Note 4)

Non cash placement of mortgages (see Note 4)

Non cash collection of mortgage principal

Non cash investment in other investments (see Note 5)

Non cash proceeds from other investments (see Note 5)

Non cash proceeds from direct financing lease

Initial non cash right of use asset - ground leases

Initial non cash lease liability - ground leases

Non cash financing activities

Debt assumed in merger (see Note 2)

Stock exchanged in merger (see Note 2)

Non cash borrowing of other long-term borrowings

Change in fair value of cash flow hedges

1 unchanged sentence

NOTE 19 – SUBSEQUENT EVENTS

On November 1, 2020, we acquired seven facilities from an unrelated third-party for $ 78 million.

The seven facilities consist of six SNFs and one ALF representing 876 operating beds located in Virginia, were simultaneously added to an existing operator’s triple net master lease with initial annual contractual cash rent of $ 7.4 million.

On October 9, 2020, we issued $ 700 million aggregate principal amount of our 3.375 % Senior Notes due 2031 (the “2031 Senior Notes”).

The 2031 Senior Notes mature on February 1, 2031 .

The 2031 Senior Notes were sold at an issue price of 98.249 % of their face value before the underwriters’ discount.

Our net proceeds from the 2031 Senior Notes offering, after deducting underwriting discounts and expenses, were approximately $ 680.5 million.

We used the net proceeds from the 2031 Senior Notes offering to repay the outstanding balance on our U.S.

term loan and 2015 term loan and partially paydown the Omega OP term loan and revolving line of credit .

As a result of the repayment of the 2015 term loan and the partial paydown of the Omega OP term loan, on October 14, 2020, we settled certain interest rate swaps (interest rate swaps originated in 2015 and/or assumed in 2019) with an aggregate notional value of $ 275 million related to the 2015 term loan and the Omega OP term loan and paid our swap counterparties approximately $ 11 million.

On April 30, 2021, the Company closed a new four-year $ 1.45 billion senior unsecured credit facility (“Credit Facility”).

The Credit Facility replaced a $ 1.25 billion senior unsecured credit facility that was scheduled to mature on May 25, 2021 .

On April 30, 2021, the Company closed a new four-year $ 50 million senior unsecured term loan facility (“OP Term Loan Facility”) to its operating partnership subsidiary.

The OP Term Loan Facility replaced a $ 50 million senior unsecured term loan facility that was scheduled to mature on May 25, 2022 .

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements