NASHVILLE, Tenn., Nov. 4,
2021 /PRNewswire/ -- Brookdale Senior Living Inc. (NYSE: BKD)
("Brookdale" or the "Company") announced results for the quarter
ended September 30, 2021.
HIGHLIGHTS
- Third quarter weighted average occupancy grew 200 basis points
sequentially.
- Liquidity increased $258 million
to $646 million at September 30, 2021, which reflects the impact of
the successful completion of the sale of 80% of the Company's
equity in its Health Care Services segment.
- On October 1, 2021, the Company
issued $230 million principal amount
of 2.00% convertible senior notes due 2026.
"We are winning the recovery, with eight consecutive months of
occupancy growth through October," said Lucinda ("Cindy") Baier,
Brookdale's President and CEO. "Throughout the pandemic, we've made
great progress from a business and liquidity perspective. Our scale
allows us to help protect and prioritize our residents and
associates, like with our recent and rapid hosting of vaccine
booster clinics in the vast majority of our communities.
Additionally, this quarter we successfully closed a convertible
notes offering that demonstrates the interest in Brookdale's
current and long-term growth opportunities."
SUMMARY OF THIRD QUARTER RESULTS
Consolidated
The table below presents a summary of consolidated operating
results.
|
|
Year-Over-Year
Increase /
(Decrease)
|
|
|
Sequential
Increase /
(Decrease)
|
($ in
millions)
|
3Q
2021
|
3Q
2020
|
Amount
|
Percent
|
|
2Q
2021
|
Amount
|
Percent
|
Senior housing
resident fee revenue
|
$
|
600.1
|
|
$
|
610.9
|
$
|
(10.8)
|
(1.8)%
|
|
$
|
586.7
|
$
|
13.4
|
2.3%
|
Health Care Services
resident fee revenue (1)
|
—
|
|
89.9
|
(89.9)
|
n/a
|
|
87.3
|
(87.3)
|
n/a
|
Total resident fee
revenue
|
600.1
|
|
700.8
|
(100.7)
|
(14.4)%
|
|
674.0
|
(73.9)
|
(11.0)%
|
Management fee
revenue
|
3.6
|
|
5.7
|
(2.1)
|
(36.8)%
|
|
5.0
|
(1.4)
|
(28.0)%
|
Senior housing
facility operating expense
|
480.4
|
|
476.2
|
4.2
|
0.9%
|
|
466.4
|
14.0
|
3.0%
|
Health Care Services
facility operating
expense
(1)
|
—
|
|
94.3
|
(94.3)
|
n/a
|
|
84.4
|
(84.4)
|
n/a
|
Total facility
operating expense
|
480.4
|
|
570.5
|
(90.1)
|
(15.8)%
|
|
550.8
|
(70.4)
|
(12.8)%
|
General and
administrative expense
|
43.8
|
|
54.1
|
(10.3)
|
(19.0)%
|
|
52.4
|
(8.6)
|
(16.4)%
|
Net income (loss)
(1)
|
174.3
|
|
(125.0)
|
299.3
|
NM
|
|
(83.6)
|
257.9
|
NM
|
Adjusted EBITDA
(2)
|
34.6
|
|
(64.0)
|
98.6
|
NM
|
|
33.1
|
1.5
|
4.5%
|
One-time cash lease
payment
|
—
|
|
119.2
|
(119.2)
|
NM
|
|
—
|
—
|
—
|
Adjusted EBITDA,
excluding one-time cash
lease
payment
|
34.6
|
|
55.2
|
(20.6)
|
(37.3)%
|
|
33.1
|
1.5
|
4.5%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
On July 1, 2021, the
Company sold 80% of its equity in its Health Care Services segment
(the "HCS Sale") and recognized a $288.2 million gain on the
sale. For periods beginning July 1, 2021, the results and financial
position of the Health Care Services segment are deconsolidated
from the Company's consolidated financial statements. Refer to the
Transaction and Financing Update below for further
information.
|
(2)
|
Adjusted EBITDA is a
financial measure that is not calculated in accordance with GAAP.
See "Reconciliations of Non-GAAP Financial Measures" for the
Company's definition of such measure, reconciliations to the most
comparable GAAP financial measure, and other important information
regarding the use of the Company's non-GAAP financial measures.
Unless otherwise indicated, Adjusted EBITDA for the third quarter
of 2020 includes the $119.2 million one-time cash lease payment
made to Ventas, Inc. ("Ventas") in connection with the Company's
lease restructuring transaction effective July 26, 2020 ("one-time
cash lease payment").
|
- Senior housing resident fee revenue.
-
- The Company estimates that the COVID-19 pandemic resulted in
$76.4 million, $81.8 million, and $76.5
million of lost resident fee revenue in the consolidated
senior housing portfolio for the third quarter of 2021, second
quarter of 2021, and third quarter of 2020, respectively. The
estimated lost resident fee revenue represents the difference
between the actual resident fee revenue for the period and the
Company's pre-pandemic expectations for the 2020 period.
- 3Q 2021 vs 3Q 2020:
-
- Consolidated RevPAR decreased $22, or 0.6%, to $3,784 as a result of a decrease in consolidated
weighted average occupancy of 280 basis points to 72.5%, offset by
an increase in consolidated RevPOR of $163, or 3.2%, to $5,219. The increase in RevPOR was primarily the
result of in-place rent increases and an occupancy mix shift to
more memory care and skilled nursing services.
- The disposition of 12 communities through sales and conveyances
of owned communities and lease terminations since the beginning of
the third quarter of 2020 resulted in $7.4
million less in resident fees during the third quarter of
2021 compared to the third quarter of 2020.
- 3Q 2021 vs 2Q 2021: Consolidated RevPAR increased
$92, or 2.5%, to $3,784 as a result of an increase in consolidated
weighted average occupancy of 200 basis points to 72.5%, partially
offset by a decrease in consolidated RevPOR of $18, or 0.3%, to $5,219.
- Management fee revenue.
-
- The decrease was primarily due to the transition of management
arrangements on certain former unconsolidated ventures in which the
Company sold its interest and interim management agreements on
formerly leased communities.
- Senior housing facility operating expense.
-
- 3Q 2021 vs 3Q 2020:
-
- Senior housing facility operating expense increased
$4.2 million, or 0.9%, primarily due
to an increase in labor expense arising from increased contract
labor and overtime costs due to the intensely competitive labor
market, partially offset by a decrease in incremental costs to
respond to the COVID-19 pandemic.
- The disposition of communities resulted in $7.7 million less in facility operating expenses
during the third quarter of 2021 compared to the third quarter of
2020.
- 3Q 2021 vs 2Q 2021: Senior housing facility operating
expense increased $14.0 million, or
3.0%, primarily due to an increase in labor expense arising from
increased contract labor and overtime costs due to the intensely
competitive labor market and an additional day of expense during
the third quarter. Additionally, there was a seasonal increase in
utility costs.
- The Company incurred $7.2
million, $8.9 million, and
$22.1 million of incremental direct
costs in the consolidated senior housing portfolio during the third
quarter of 2021, second quarter of 2021, and third quarter of 2020,
respectively, to respond to the COVID-19 pandemic, including costs
for: acquisition of personal protective equipment ("PPE"), medical
equipment, and cleaning and disposable food service supplies;
enhanced cleaning and environmental sanitation; increased
employee-related costs, including labor, workers compensation, and
health plan expense; increased expense for general liability
claims; and COVID-19 testing of residents and associates where not
otherwise covered by government payor or third-party insurance
sources.
- General and administrative expense.
-
- 3Q 2021 vs 3Q 2020: The decrease in general and
administrative expense was primarily attributable to decreases in
transaction costs, compensation costs as a result of a reduction in
the Company's corporate headcount related to the HCS Sale, and
non-cash stock-based compensation expense.
- 3Q 2021 vs 2Q 2021: The decrease in general and
administrative expense was primarily attributable to a decrease in
compensation costs as a result of a reduction in the Company's
corporate headcount related to the HCS Sale and a decrease in
estimated incentive compensation costs.
- Net income (loss).
-
- 3Q 2021 vs 3Q 2020: The increase in net income (loss)
was primarily attributable to gain on sale of assets of
$288.2 million from the HCS Sale and
decreases in facility operating lease expense, depreciation and
amortization expense, non-cash asset impairment expense, and
general and administrative expense, partially offset by the net
impact of the revenue and facility operating expense factors
previously discussed and a $10.7
million decrease in other operating income.
- 3Q 2021 vs 2Q 2021: The increase in net income (loss)
was primarily attributable to gain on sale of assets of
$288.2 million from the HCS Sale and
the general and administrative factors previously discussed,
partially offset by a decrease in equity in earnings of
unconsolidated ventures.
- Adjusted EBITDA.
-
- 3Q 2021 vs 3Q 2020: The increase in Adjusted EBITDA was
primarily attributable to the $119.2
million one-time cash lease payment made to Ventas in
connection with the Company's lease restructuring transaction
effective July 26, 2020 and the
decrease in general and administrative expense (excluding non-cash
stock based compensation expense and transaction and organizational
restructuring costs), partially offset by the net impact of the
revenue, other operating income, and facility operating expense
factors previously discussed.
- 3Q 2021 vs 2Q 2021: The increase in Adjusted EBITDA was
primarily attributable to the decrease in general and
administrative expense (excluding non-cash stock based compensation
expense and transaction and organizational restructuring costs),
partially offset by the deconsolidation of the operating results of
the Health Care Services segment and decreases in management fee
revenue and other operating income.
- COVID-19 Impact.
-
- Vaccine Update: As of October 31,
2021, the Company's resident vaccine acceptance rate was
95%. The U.S. Centers for Disease Control and Prevention ("CDC")
has recently recommended that certain populations, including
residents in long-term care settings, should receive a COVID-19
booster dose. The Company has completed booster vaccine clinics in
the vast majority of its communities. The Company has adopted a
policy requiring its associates to be vaccinated against COVID-19,
subject to limited exceptions, which the Company is implementing in
a phased approach beginning with its corporate associates and field
and community leadership.
- Rebuilding Occupancy. The Company continues to execute
on key initiatives to rebuild occupancy lost due to the pandemic.
Beginning in March 2021, the Company
has achieved eight consecutive months of weighted average
consolidated senior housing occupancy growth on a sequential basis.
According to data from the National Investment Center for the
Seniors Housing & Care Industry ("NIC"), seniors housing
occupancy increased 120 basis points from the second quarter to the
third quarter of 2021 for stabilized portfolios. The Company's
weighted average consolidated senior housing occupancy increased
200 basis points sequentially for the third quarter of 2021
compared to the second quarter of 2021. During the third quarter of
2021, the nationwide spread of the Delta variant caused some
moderation in the Company's sequential monthly occupancy growth
rate. The table below sets forth the Company's consolidated
occupancy trend during 2021.
|
Jan
2021
|
Feb
2021
|
Mar
2021
|
Apr
2021
|
May
2021
|
Jun
2021
|
Jul
2021
|
Aug
2021
|
Sep
2021
|
Oct
2021
|
Weighted
average
|
70.0
|
%
|
69.4
|
%
|
69.4
|
%
|
69.9
|
%
|
70.5
|
%
|
71.2
|
%
|
72.0
|
%
|
72.5
|
%
|
73.0
|
%
|
73.3
|
%
|
Month end
|
70.4
|
%
|
70.1
|
%
|
70.6
|
%
|
71.1
|
%
|
71.6
|
%
|
72.6
|
%
|
73.3
|
%
|
73.7
|
%
|
74.2
|
%
|
74.5
|
%
|
- Community Restrictions. As of July 31, 2021, all of the Company's communities
were open for visitors, new resident move-ins, and prospective
residents. During the third quarter of 2021, several of the
Company's communities experienced restrictions on visitors, new
resident move-ins, and prospective residents, with a peak of such
restrictions occurring in mid-September
2021. As of October 31, 2021,
substantially all of the Company's communities were open for
visitors, new resident move-ins, and prospective residents. The
Company may revert to more restrictive measures at its communities,
including restrictions on visitors and move-ins, if the pandemic
worsens, as necessary to comply with regulatory requirements, or at
the direction of state or local health authorities.
- Financial Relief. In September
2021, the U.S. Department of Health and Human Services
("HHS") announced that it has allocated $17.0 billion for a Phase 4 general distribution
from the Provider Relief Fund. HHS will determine the exact amount
of the payments after analyzing data from all the applications
received. The Company applied for the Phase 4 general distribution
and intends to pursue any additional funding that may become
available. There can be no assurance that the Company will qualify
for, or receive, such future grants in the amount it expects, that
additional restrictions on the permissible uses or terms and
conditions of the grants will not be imposed by HHS, or that future
funding programs will be made available for which it
qualifies.
Same Community Senior Housing (Independent Living (IL),
Assisted Living and Memory Care (AL/MC), and CCRCs)
The table below presents a summary of same community operating
results and metrics of the Company's consolidated senior housing
portfolio.(3)
|
|
|
Year-Over-Year
Increase /
(Decrease)
|
|
Sequential
Increase /
(Decrease)
|
($ in millions,
except RevPAR and RevPOR)
|
3Q
2021
|
3Q
2020
|
Amount
|
Percent
|
2Q
2021
|
Amount
|
Percent
|
RevPAR
|
$
|
3,786
|
|
$
|
3,822
|
|
$
|
(36)
|
|
(0.9)%
|
$
|
3,693
|
|
$
|
93
|
|
2.5%
|
Weighted average
occupancy
|
72.5
|
%
|
75.5
|
%
|
(300) bps
|
n/a
|
70.4
|
%
|
210 bps
|
n/a
|
RevPOR
|
$
|
5,222
|
|
$
|
5,064
|
|
$
|
158
|
|
3.1%
|
$
|
5,247
|
|
$
|
(25)
|
|
(0.5)%
|
Facility operating
expense
|
$
|
453.6
|
|
$
|
441.0
|
|
$
|
12.6
|
|
2.9%
|
$
|
439.5
|
|
$
|
14.1
|
|
3.2%
|
|
|
(3)
|
The same community
portfolio includes operating results and data for 634 communities
consolidated and operational for the full period in both comparison
years. Consolidated communities excluded from the same community
portfolio include communities acquired or disposed of since the
beginning of the prior year, communities classified as assets held
for sale, certain communities planned for disposition, certain
communities that have undergone or are undergoing expansion,
redevelopment, and repositioning projects, and certain communities
that have experienced a casualty event that significantly impacts
their operations. To aid in comparability, same community operating
results exclude natural disaster expense.
|
- Resident fees.
-
- The Company estimates that the COVID-19 pandemic resulted in
$74.4 million, $79.9 million, and $72.4
million of lost resident fee revenue for the Company's same
community senior housing portfolio for the third quarter of 2021,
second quarter of 2021, and third quarter of 2020,
respectively.
- 3Q 2021 vs 3Q 2020: Same community resident fees decreased
$5.3 million to $569.6 million attributable to the decrease in
occupancy, partially offset by the increase in RevPOR. The increase
in RevPOR was primarily the result of in-place rent increases and
an occupancy mix shift to more memory care and skilled nursing
services.
- 3Q 2021 vs 2Q 2021: Same community resident fees
increased $14.0 million to
$569.6 million attributable to the
increase in occupancy, partially offset by the decrease in
RevPOR.
- Facility operating expense.
-
- 3Q 2021 vs 3Q 2020: The year-over-year increase was
primarily due to an increase in labor expense arising from
increased contract labor and overtime costs due to the intensely
competitive labor market, partially offset by a decrease in
incremental costs to respond to the COVID-19 pandemic.
- 3Q 2021 vs 2Q 2021: The increase was primarily due to an
increase in labor expense arising from increased contract labor and
overtime costs due to the intensely competitive labor market and an
additional day of expense during the third quarter. Additionally,
there was a seasonal increase in utility costs.
- The Company's same community senior housing portfolio incurred
$6.5 million, $8.3 million, and $20.5
million of incremental direct costs during the third quarter
of 2021, second quarter of 2021, and third quarter of 2020,
respectively, to respond to the COVID-19 pandemic.
LIQUIDITY
The table below presents a summary of the Company's net cash
provided by (used in) operating activities and Adjusted Free Cash
Flow.
|
|
Year-Over-Year
Increase /
(Decrease)
|
|
Sequential
Increase /
(Decrease)
|
($ in
millions)
|
3Q
2021
|
3Q
2020
|
Amount
|
Percent
|
2Q
2021
|
Amount
|
Percent
|
Net cash provided by
(used in) operating activities
|
$
|
7.2
|
|
$
|
(77.2)
|
|
$
|
84.4
|
|
NM
|
$
|
3.4
|
|
$
|
3.8
|
|
111.8%
|
Adjusted Free Cash
Flow (4)
|
(42.6)
|
|
(114.3)
|
|
71.7
|
|
62.7%
|
(54.7)
|
|
12.1
|
|
22.1%
|
|
|
(4)
|
Adjusted Free Cash
Flow is a financial measure that is not calculated in accordance
with GAAP. See "Reconciliations of Non-GAAP Financial Measures" for
the Company's definition of such measure, reconciliations to the
most comparable GAAP financial measure and other important
information regarding the use of the Company's non-GAAP financial
measures. Adjusted Free Cash Flow for the third quarter of 2020
includes the $119.2 million one-time cash lease payment.
|
- Net cash provided by (used in) operating
activities.
-
- 3Q 2021 vs 3Q 2020: The change in net cash provided by
(used in) operating activities was primarily attributable to the
$119.2 million one-time cash lease
payment made to Ventas in connection with the Company's lease
restructuring transaction with Ventas effective July 26, 2020. This change was partially offset
by $23.6 million of the employer
portion of social security payroll taxes deferred during the prior
year period and an increase in same community facility operating
expenses compared to the prior year period.
- 3Q 2021 vs 2Q 2021: The increase in net cash provided by
(used in) operating activities was primarily attributable to a
decrease in recoupment of accelerated/advanced Medicare payments
compared to the prior period as a result of the HCS Sale, and a
decrease in distributions from unconsolidated ventures compared to
the prior period.
- Adjusted Free Cash Flow.
-
- 3Q 2021 vs 3Q 2020: The $71.7
million change in Adjusted Free Cash Flow was primarily
attributable to the change in net cash provided by operating
activities, excluding an $8.4 million
increase in lessor capital expenditure reimbursements, partially
offset by a $5.3 million increase in
non-development capital expenditures, net.
- 3Q 2021 vs 2Q 2021: The $12.1
million change in Adjusted Free Cash Flow was primarily
attributable to a decrease in recoupment of accelerated/advanced
Medicare payments compared to the prior period as a result of the
HCS Sale, and a $7.6 million decrease
in non-development capital expenditures, net, compared to the prior
period.
- Total Liquidity. Total liquidity of $645.8 million as of September 30, 2021 included $478.5 million of unrestricted cash and cash
equivalents, $157.9 million of
marketable securities, and $9.4
million of availability on the Company's secured credit
facility. Total liquidity as of September
30, 2021 increased $258.0
million from June 30, 2021,
primarily attributable to the HCS Sale on July 1, 2021, for net cash proceeds of
$305.8 million at closing, partially
offset by the negative $42.6 million
of Adjusted Free Cash Flow during the third quarter of 2021.
TRANSACTION AND FINANCING UPDATE
- Sale of Health Care Services: On July 1, 2021, the Company completed the sale of
80% of its equity in its Health Care Services segment to affiliates
of HCA Healthcare, Inc. ("HCA Healthcare") for a purchase price of
$400.0 million in cash, subject to
certain adjustments set forth in the Securities Purchase Agreement
(the "Purchase Agreement") dated February
24, 2021, including a reduction for the remaining
outstanding balance as of the closing of Medicare advance payments
and deferred payroll tax payments related to the Health Care
Services segment (the "HCS Sale"). The Company received net cash
proceeds of $305.8 million at closing
on July 1, 2021 and $6.8 million upon completion of the post-closing
net working capital adjustment in October
2021. Pursuant to the Purchase Agreement, at closing of the
transaction, the Company retained a 20% equity interest in the
Health Care Services venture.
The results and financial position of the Company's Health Care
Services segment were deconsolidated from its consolidated
financial statements as of July 1,
2021 and its 20% equity interest in the Health Care Services
venture is accounted for under the equity method of accounting
subsequent to that date. As of July 1,
2021, the Company recognized a $100.0
million asset within investment in unconsolidated ventures
on its condensed consolidated balance sheet for the estimated fair
value of its retained 20% noncontrolling interest in the Health
Care Services venture. The Company recognized a $288.2 million gain on sale, net of transaction
costs, for the HCS Sale for the three months ended September 30, 2021.
In September 2021, the Health Care
Services venture entered into a Securities Purchase Agreement with
LHC Group Inc., providing for the sale of home health, hospice, and
outpatient therapy agencies in areas not served by HCA Healthcare.
Upon the completion of the sale on November
1, 2021, the Company received $35.0
million of cash distributions from the HCS Venture from the
net sale proceeds, which further enhanced its liquidity. The
Company continues to retain a 20% equity interest in the remaining
Health Care Services venture, which continues to operate home
health, hospice, and outpatient therapy agencies in areas served by
HCA Healthcare.
- Convertible Debt Issuance: On October 1, 2021, the Company issued $230.0 million principal amount of 2.00%
convertible senior notes due 2026. The Company received net
proceeds of $224.3 million after the
deduction of the initial purchasers' discount. The Company used
$15.9 million of the net proceeds to
pay the Company's cost of capped call transactions entered into in
connection with the issuance, which are expected generally to
reduce or offset potential dilution to holders of the Company's
common stock. Additionally, the Company used a portion of the net
proceeds to repay a $45.0 million
note payable and $29.2 million of
mortgage debt and intends to use the remaining net proceeds for
general corporate purposes, including refinancing or repaying
maturing debt.
OUTLOOK
The Company expects Adjusted EBITDA for the fourth quarter of
2021 to be in the range of $35
million to $40 million.
This guidance excludes the potential impact of any government
financial relief including distributions from the Provider Relief
Fund or future acquisition or disposition activity other than the
planned disposition of three communities classified as held for
sale. Reconciliation of the non-GAAP financial measure included in
the foregoing guidance to the most comparable GAAP financial
measure is not available without unreasonable effort due to the
inherent difficulty in forecasting the timing or amounts of items
required to reconcile Adjusted EBITDA from the Company's net income
(loss). Variability in the timing or amounts of items required to
reconcile the measure may have a significant impact on the
Company's future GAAP results.
SUPPLEMENTAL INFORMATION
The Company will post on its website at
www.brookdaleinvestors.com supplemental information relating
to the Company's third quarter 2021 results, an updated investor
presentation, and a copy of this earnings release. The supplemental
information and a copy of this earnings release will also be
furnished in a Form 8-K to be filed with the SEC.
EARNINGS CONFERENCE CALL
Brookdale's management will conduct a conference call to review
the financial results for the third quarter 2021 on
November 5, 2021 at 9:00 AM ET.
The conference call can be accessed by dialing (844) 200-6205 (from
within the U.S.) or (929) 526-1599 (from outside of the U.S.) ten
minutes prior to the scheduled start and referencing the access
code "519846".
A webcast of the conference call will be available to the public
on a listen-only basis at www.brookdaleinvestors.com. Please
allow extra time prior to the call to download the necessary
software required to listen to the internet broadcast. A replay of
the webcast will be available through the website following the
call.
For those who cannot listen to the live call, a replay of the
webcast will be available until 11:59 PM
ET on November 12, 2021 by
dialing (866) 813-9403 (from within the U.S.) or +44 (204) 525-0658
(from outside of the U.S.) and referencing access code
"221605".
ABOUT BROOKDALE SENIOR LIVING
Brookdale Senior Living Inc. is the nation's premier operator of
senior living communities. The Company is committed to its mission
of enriching the lives of the people it serves with compassion,
respect, excellence and integrity. The Company operates independent
living, assisted living, and Alzheimer's and dementia care
communities. Through its comprehensive network, Brookdale helps to
provide seniors with care and services in an environment that feels
like home. The Company's expertise in healthcare, hospitality and
real estate provides residents with opportunities to improve
wellness, pursue passions and stay connected with friends and loved
ones. Brookdale operates and manages 682 communities in 41 states
as of September 30, 2021, with the ability to serve more than
60,000 residents. Brookdale's stock trades on the New York Stock
Exchange under the ticker symbol BKD. For more information, visit
brookdale.com or connect with Brookdale on Facebook or Twitter.
DEFINITIONS OF RevPAR AND RevPOR
RevPAR, or average monthly senior housing resident fee revenue
per available unit, is defined by the Company as resident fee
revenue for the corresponding portfolio for the period (excluding
Health Care Services segment revenue, revenue for private duty
services provided to seniors living outside of the Company's
communities, and entrance fee amortization), divided by the
weighted average number of available units in the corresponding
portfolio for the period, divided by the number of months in the
period.
RevPOR, or average monthly senior housing resident fee revenue
per occupied unit, is defined by the Company as resident fee
revenue for the corresponding portfolio for the period (excluding
Health Care Services segment revenue, revenue for private duty
services provided to seniors living outside of the Company's
communities, and entrance fee amortization), divided by the
weighted average number of occupied units in the corresponding
portfolio for the period, divided by the number of months in the
period.
SAFE HARBOR
Certain statements in this press release and the associated
earnings call may constitute forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995.
These forward-looking statements are subject to various risks and
uncertainties and include all statements that are not historical
statements of fact and those regarding the Company's intent, belief
or expectations. Forward-looking statements are generally
identifiable by use of forward-looking terminology such as "may,"
"will," "should," "could," "would," "potential," "intend,"
"expect," "endeavor," "seek," "anticipate," "estimate," "believe,"
"project," "predict," "continue," "plan," "target," or other
similar words or expressions. These forward-looking statements are
based on certain assumptions and expectations, and the Company's
ability to predict results or the actual effect of future plans or
strategies is inherently uncertain. Although the Company believes
that expectations reflected in any forward-looking statements are
based on reasonable assumptions, it can give no assurance that its
assumptions or expectations will be attained and actual results and
performance could differ materially from those projected. Factors
which could have a material adverse effect on the Company's
operations and future prospects or which could cause events or
circumstances to differ from the forward-looking statements
include, but are not limited to, the impacts of the COVID-19
pandemic, including the response efforts of federal, state, and
local government authorities, businesses, individuals, and the
Company on the Company's business, results of operations, cash
flow, revenue, expenses, liquidity, and its strategic initiatives,
including plans for future growth, which will depend on many
factors, some of which cannot be foreseen, including the duration,
severity, and breadth of the pandemic and any resurgence or
variants of the disease, including the Delta variant, the impact of
COVID-19 on the nation's economy and debt and equity markets and
the local economies in the Company's markets, the development,
availability, utilization, and efficacy of COVID-19 testing,
therapeutic agents, and vaccines and the prioritization of such
resources among businesses and demographic groups, government
financial and regulatory relief efforts that may become available
to business and individuals, including the Company's ability to
qualify for and satisfy the terms and conditions of financial
relief, perceptions regarding the safety of senior living
communities during and after the pandemic, changes in demand for
senior living communities and the Company's ability to adapt its
sales and marketing efforts to meet that demand, the impact of
COVID-19 on the Company's residents' and their families' ability to
afford its resident fees, including due to changes in unemployment
rates, consumer confidence, housing markets, and equity markets
caused by COVID-19, changes in the acuity levels of the Company's
new residents, the disproportionate impact of COVID-19 on seniors
generally and those residing in the Company's communities, the
duration and costs of the Company's response efforts, including
increased equipment, supplies, labor, litigation, testing,
vaccination clinic, and other expenses, potentially greater
associate attrition and use of contract labor due to the Company's
associate vaccine mandate, the impact of COVID-19 on the Company's
ability to complete financings, and refinancings of various assets,
or other transactions or to generate sufficient cash flow to cover
required interest and lease payments and to satisfy financial and
other covenants in its debt and lease documents, increased
regulatory requirements, including unfunded, mandatory testing,
increased enforcement actions resulting from COVID-19, government
action that may limit the Company's collection or discharge efforts
for delinquent accounts, and the frequency and magnitude of legal
actions and liability claims that may arise due to COVID-19 or the
Company's response efforts; events which adversely affect the
ability of seniors to afford resident fees, including downturns in
the economy, housing market, consumer confidence, or the equity
markets and unemployment among resident family members; changes in
reimbursement rates, methods, or timing under governmental
reimbursement programs including the Medicare and Medicaid
programs; the impact of ongoing healthcare reform efforts; the
effects of senior housing construction and development, lower
industry occupancy (including due to the pandemic), and increased
competition; conditions of housing markets, regulatory changes,
acts of nature, and the effects of climate change in geographic
areas where the Company is concentrated; terminations of the
Company's resident agreements and vacancies in the living spaces it
leases, including due to the pandemic; limits on the Company's
ability to use net operating loss carryovers to reduce future tax
payments; failure to maintain the security and functionality of the
Company's information systems, to prevent a cybersecurity attack or
breach, or to comply with applicable privacy and consumer
protection laws, including HIPAA; the Company's ability to complete
its capital expenditures in accordance with its plans; the
Company's ability to identify and pursue development, investment
and acquisition opportunities and its ability to successfully
integrate acquisitions; competition for the acquisition of assets;
the Company's ability to complete pending or expected disposition,
acquisition, or other transactions on agreed upon terms or at all,
including in respect of the satisfaction of closing conditions, the
risk that regulatory approvals are not obtained or are subject to
unanticipated conditions, and uncertainties as to the timing of
closing, and the Company's ability to identify and pursue any such
opportunities in the future; risks related to the implementation of
the Company's strategy, including initiatives undertaken to execute
on the Company's strategic priorities and their effect on its
results; delays in obtaining regulatory approvals; disruptions in
the financial markets or decreases in the appraised values,
performance, or occupancy of the Company's communities that affect
the Company's ability to obtain financing or extend or refinance
debt as it matures and the Company's financing costs; the Company's
ability to generate sufficient cash flow to cover required interest
and long-term lease payments and to fund its planned capital
projects; the effect of the Company's non-compliance with any of
its debt or lease agreements (including the financial covenants
contained therein), including the risk of lenders or lessors
declaring a cross default in the event of the Company's
non-compliance with any such agreements and the risk of loss of the
Company's property securing leases and indebtedness due to any
resulting lease terminations and foreclosure actions; the effect of
the Company's indebtedness and long-term leases on the Company's
liquidity; the potential phasing out of LIBOR which may increase
the costs of the Company's debt obligations; the Company's ability
to obtain additional capital on terms acceptable to it; departures
of key officers and potential disruption caused by changes in
management; increased competition for or a shortage of personnel
(including due to the pandemic or general labor market conditions),
wage pressures resulting from increased competition, low
unemployment levels, minimum wage increases and changes in overtime
laws, and union activity; environmental contamination at any of the
Company's communities; failure to comply with existing
environmental laws; an adverse determination or resolution of
complaints filed against the Company, including class action and
stockholder derivative complaints; the cost and difficulty of
complying with increasing and evolving regulation; costs to respond
to, and adverse determinations resulting from, government reviews,
audits and investigations; unanticipated costs to comply with
legislative or regulatory developments; the risks associated with
current global economic conditions and general economic factors
such as inflation, the consumer price index, commodity costs, fuel
and other energy costs, costs of salaries, wages, benefits, and
insurance, interest rates, and tax rates; the impact of seasonal
contagious illness or an outbreak of COVID-19 or other contagious
disease in the markets in which the Company operates; actions of
activist stockholders, including a proxy contest; as well as other
risks detailed from time to time in the Company's filings with the
Securities and Exchange Commission, including those set forth under
"Item 1A. Risk Factors" contained in the Company's Annual Report on
Form 10-K for the year ended December 31,
2020 and Part II, "Item 1A. Risk Factors" and elsewhere in
Quarterly Reports on Form 10-Q. When considering forward-looking
statements, you should keep in mind the risk factors and other
cautionary statements in such SEC filings. Readers are cautioned
not to place undue reliance on any of these forward-looking
statements, which reflect management's views as of the date of this
press release and/or associated earnings call. The Company cannot
guarantee future results, levels of activity, performance or
achievements, and, except as required by law, it expressly
disclaims any obligation to release publicly any updates or
revisions to any forward-looking statements contained in this press
release and/or associated earnings call to reflect any change in
the Company's expectations with regard thereto or change in events,
conditions, or circumstances on which any statement is based.
Condensed
Consolidated Statements of Operations
|
|
|
Three Months
Ended
September
30,
|
|
Nine Months
Ended
September
30,
|
(in thousands,
except per share data)
|
2021
|
|
2020
|
|
2021
|
|
2020
|
Revenue
|
|
|
|
|
|
|
|
Resident
fees
|
$
|
600,095
|
|
|
$
|
700,771
|
|
|
$
|
1,938,423
|
|
|
$
|
2,215,107
|
|
Management
fees
|
3,621
|
|
|
5,669
|
|
|
17,185
|
|
|
120,460
|
|
Reimbursed costs
incurred on behalf of managed communities
|
37,849
|
|
|
90,775
|
|
|
146,651
|
|
|
315,003
|
|
Other operating
income
|
89
|
|
|
10,765
|
|
|
12,132
|
|
|
37,458
|
|
Total revenue and
other operating income
|
641,654
|
|
|
807,980
|
|
|
2,114,391
|
|
|
2,688,028
|
|
|
|
|
|
|
|
|
|
Expense
|
|
|
|
|
|
|
|
Facility operating
expense (excluding facility depreciation and amortization of
$78,756, $81,854, $233,951, and $253,126, respectively)
|
480,423
|
|
|
570,530
|
|
|
1,587,581
|
|
|
1,765,046
|
|
General and
administrative expense (including non-cash stock-based compensation
expense of $3,568, $6,136, $12,878, and $18,212,
respectively)
|
43,812
|
|
|
54,138
|
|
|
146,155
|
|
|
161,251
|
|
Facility operating
lease expense
|
43,226
|
|
|
51,620
|
|
|
131,508
|
|
|
178,480
|
|
Depreciation and
amortization
|
84,560
|
|
|
87,821
|
|
|
252,042
|
|
|
271,713
|
|
Asset
impairment
|
639
|
|
|
8,213
|
|
|
13,394
|
|
|
96,729
|
|
Costs incurred on
behalf of managed communities
|
37,849
|
|
|
90,775
|
|
|
146,651
|
|
|
315,003
|
|
Total operating
expense
|
690,509
|
|
|
863,097
|
|
|
2,277,331
|
|
|
2,788,222
|
|
Income (loss) from
operations
|
(48,855)
|
|
|
(55,117)
|
|
|
(162,940)
|
|
|
(100,194)
|
|
|
|
|
|
|
|
|
|
Interest
income
|
286
|
|
|
607
|
|
|
1,048
|
|
|
4,305
|
|
Interest
expense:
|
|
|
|
|
|
|
|
Debt
|
(35,708)
|
|
|
(36,908)
|
|
|
(106,484)
|
|
|
(117,645)
|
|
Financing lease
obligations
|
(11,674)
|
|
|
(11,908)
|
|
|
(34,549)
|
|
|
(37,082)
|
|
Amortization of
deferred financing costs and debt discount
|
(1,979)
|
|
|
(1,730)
|
|
|
(5,992)
|
|
|
(4,601)
|
|
Gain (loss) on debt
modification and extinguishment, net
|
—
|
|
|
(7,917)
|
|
|
—
|
|
|
11,107
|
|
Equity in earnings
(loss) of unconsolidated ventures
|
(1,474)
|
|
|
(293)
|
|
|
11,941
|
|
|
(863)
|
|
Gain (loss) on sale
of assets, net
|
288,375
|
|
|
2,209
|
|
|
289,408
|
|
|
374,019
|
|
Other non-operating
income (loss)
|
571
|
|
|
948
|
|
|
5,163
|
|
|
4,598
|
|
Income (loss) before
income taxes
|
189,542
|
|
|
(110,109)
|
|
|
(2,405)
|
|
|
133,644
|
|
Benefit (provision)
for income taxes
|
(15,279)
|
|
|
(14,884)
|
|
|
(15,239)
|
|
|
(7,560)
|
|
Net income
(loss)
|
174,263
|
|
|
(124,993)
|
|
|
(17,644)
|
|
|
126,084
|
|
Net (income) loss
attributable to noncontrolling interest
|
19
|
|
|
18
|
|
|
56
|
|
|
55
|
|
Net income (loss)
attributable to Brookdale Senior Living Inc. common
stockholders
|
$
|
174,282
|
|
|
$
|
(124,975)
|
|
|
$
|
(17,588)
|
|
|
$
|
126,139
|
|
|
|
|
|
|
|
|
|
Net income (loss) per
share attributable to Brookdale Senior Living Inc. common
stockholders:
|
|
|
|
|
|
|
|
Basic
|
$
|
0.94
|
|
|
$
|
(0.68)
|
|
|
$
|
(0.10)
|
|
|
$
|
0.69
|
|
Diluted
|
$
|
0.89
|
|
|
$
|
(0.68)
|
|
|
$
|
(0.10)
|
|
|
$
|
0.69
|
|
|
|
|
|
|
|
|
|
Weighted average
common shares outstanding:
|
|
|
|
|
|
|
|
Basic
|
185,317
|
|
|
183,244
|
|
|
184,841
|
|
|
183,535
|
|
Diluted
|
196,230
|
|
|
183,244
|
|
|
184,841
|
|
|
183,668
|
|
Condensed
Consolidated Balance Sheets
|
|
(in
thousands)
|
September 30,
2021
|
|
December 31,
2020
|
Cash and cash
equivalents
|
$
|
478,509
|
|
|
$
|
380,420
|
|
Marketable
securities
|
157,936
|
|
|
172,905
|
|
Restricted
cash
|
37,722
|
|
|
28,059
|
|
Accounts receivable,
net
|
52,223
|
|
|
109,221
|
|
Assets held for
sale
|
11,739
|
|
|
16,061
|
|
Prepaid expenses and
other current assets, net
|
94,984
|
|
|
66,937
|
|
Total current
assets
|
833,113
|
|
|
773,603
|
|
Property, plant and
equipment and leasehold intangibles, net
|
4,940,553
|
|
|
5,068,060
|
|
Operating lease
right-of-use assets
|
669,158
|
|
|
788,138
|
|
Other assets,
net
|
211,509
|
|
|
271,957
|
|
Total
assets
|
$
|
6,654,333
|
|
|
$
|
6,901,758
|
|
|
|
|
|
Current portion of
long-term debt
|
$
|
219,323
|
|
|
$
|
68,885
|
|
Current portion of
financing lease obligations
|
21,634
|
|
|
19,543
|
|
Current portion of
operating lease obligations
|
146,451
|
|
|
146,226
|
|
Other current
liabilities
|
434,508
|
|
|
456,079
|
|
Total current
liabilities
|
821,916
|
|
|
690,733
|
|
Long-term debt, less
current portion
|
3,638,136
|
|
|
3,847,103
|
|
Financing lease
obligations, less current portion
|
534,853
|
|
|
543,764
|
|
Operating lease
obligations, less current portion
|
726,086
|
|
|
819,429
|
|
Other
liabilities
|
139,562
|
|
|
198,000
|
|
Total
liabilities
|
5,860,553
|
|
|
6,099,029
|
|
Total Brookdale
Senior Living Inc. stockholders' equity
|
791,541
|
|
|
800,434
|
|
Noncontrolling
interest
|
2,239
|
|
|
2,295
|
|
Total
equity
|
793,780
|
|
|
802,729
|
|
Total liabilities and
equity
|
$
|
6,654,333
|
|
|
$
|
6,901,758
|
|
Condensed
Consolidated Statements of Cash Flows
|
|
|
Nine Months Ended
September 30,
|
(in
thousands)
|
2021
|
|
2020
|
Cash Flows from
Operating Activities
|
|
|
|
Net income
(loss)
|
$
|
(17,644)
|
|
|
$
|
126,084
|
|
Adjustments to
reconcile net income (loss) to net cash provided by (used in)
operating activities:
|
|
|
|
Loss (gain) on debt
modification and extinguishment, net
|
—
|
|
|
(11,107)
|
|
Depreciation and
amortization, net
|
258,034
|
|
|
276,314
|
|
Asset
impairment
|
13,394
|
|
|
96,729
|
|
Equity in (earnings)
loss of unconsolidated ventures
|
(11,941)
|
|
|
863
|
|
Distributions from
unconsolidated ventures from cumulative share of net
earnings
|
6,191
|
|
|
766
|
|
Amortization of
entrance fees
|
(1,320)
|
|
|
(1,606)
|
|
Proceeds from deferred
entrance fee revenue
|
2,981
|
|
|
118
|
|
Deferred income tax
(benefit) provision
|
8,512
|
|
|
(2,727)
|
|
Operating lease
expense adjustment
|
(16,263)
|
|
|
(132,276)
|
|
Loss (gain) on sale of
assets, net
|
(289,408)
|
|
|
(374,019)
|
|
Non-cash stock-based
compensation expense
|
12,878
|
|
|
18,212
|
|
Other
|
(4,399)
|
|
|
(1,965)
|
|
Changes in operating
assets and liabilities:
|
|
|
|
Accounts receivable,
net
|
(584)
|
|
|
19,678
|
|
Prepaid expenses and
other assets, net
|
(7,487)
|
|
|
27,504
|
|
Prepaid insurance
premiums financed with notes payable
|
(4,634)
|
|
|
(5,823)
|
|
Trade accounts payable
and accrued expenses
|
21,878
|
|
|
17,002
|
|
Refundable fees and
deferred revenue
|
(10,492)
|
|
|
64,763
|
|
Operating lease assets
and liabilities for lessor capital expenditure
reimbursements
|
27,057
|
|
|
13,640
|
|
Net cash provided by
(used in) operating activities
|
(13,247)
|
|
|
132,150
|
|
Cash Flows from
Investing Activities
|
|
|
|
Change in lease
security deposits and lease acquisition deposits, net
|
19
|
|
|
3,399
|
|
Purchase of marketable
securities
|
(247,847)
|
|
|
(255,373)
|
|
Sale and maturities of
marketable securities
|
262,995
|
|
|
188,750
|
|
Capital expenditures,
net of related payables
|
(125,817)
|
|
|
(140,690)
|
|
Acquisition of assets,
net of related payables and cash received
|
—
|
|
|
(472,193)
|
|
Investment in
unconsolidated ventures
|
(5,359)
|
|
|
(1,809)
|
|
Distributions received
from unconsolidated ventures
|
2,155
|
|
|
—
|
|
Proceeds from sale of
assets, net
|
315,583
|
|
|
331,103
|
|
Proceeds from notes
receivable
|
—
|
|
|
2,849
|
|
Net cash provided by
(used in) investing activities
|
201,729
|
|
|
(343,964)
|
|
Cash Flows from
Financing Activities
|
|
|
|
Proceeds from
debt
|
25,158
|
|
|
961,833
|
|
Repayment of debt and
financing lease obligations
|
(96,065)
|
|
|
(518,700)
|
|
Proceeds from line of
credit
|
—
|
|
|
166,381
|
|
Repayment of line of
credit
|
—
|
|
|
(166,381)
|
|
Purchase of treasury
stock, net of related payables
|
—
|
|
|
(18,123)
|
|
Payment of financing
costs, net of related payables
|
(196)
|
|
|
(18,141)
|
|
Payments of employee
taxes for withheld shares
|
(4,772)
|
|
|
(4,012)
|
|
Other
|
144
|
|
|
335
|
|
Net cash provided by
(used in) financing activities
|
(75,731)
|
|
|
403,192
|
|
Net increase
(decrease) in cash, cash equivalents, and restricted
cash
|
112,751
|
|
|
191,378
|
|
Cash, cash
equivalents, and restricted cash at beginning of period
|
465,148
|
|
|
301,697
|
|
Cash, cash
equivalents, and restricted cash at end of period
|
$
|
577,899
|
|
|
$
|
493,075
|
|
Reconciliations of Non-GAAP Financial
Measures
This earnings release contains the financial measures Adjusted
EBITDA and Adjusted Free Cash Flow, which are not calculated in
accordance with U.S. generally accepted accounting principles
("GAAP"). Presentations of these non-GAAP financial measures are
intended to aid investors in better understanding the factors and
trends affecting the Company's performance and liquidity. However,
investors should not consider these non-GAAP financial measures as
a substitute for financial measures determined in accordance with
GAAP, including net income (loss), income (loss) from operations,
or net cash provided by (used in) operating activities. Investors
are cautioned that amounts presented in accordance with the
Company's definitions of these non-GAAP financial measures may not
be comparable to similar measures disclosed by other companies
because not all companies calculate non-GAAP measures in the same
manner. Investors are urged to review the following reconciliations
of these non-GAAP financial measures from the most comparable
financial measures determined in accordance with GAAP.
Adjusted EBITDA
Adjusted EBITDA is a non-GAAP performance measure that the
Company defines as net income (loss) excluding: benefit/provision
for income taxes, non-operating income/expense items, and
depreciation and amortization; and further adjusted to exclude
income/expense associated with non-cash, non-operational,
transactional, cost reduction, or organizational restructuring
items that management does not consider as part of the Company's
underlying core operating performance and that management believes
impact the comparability of performance between periods. For the
periods presented herein, such other items include non-cash
impairment charges, gain/loss on facility lease termination and
modification, operating lease expense adjustment, amortization of
deferred gain, change in future service obligation, non-cash
stock-based compensation expense, and transaction and
organizational restructuring costs. Transaction costs include those
directly related to acquisition, disposition, financing, and
leasing activity, and stockholder relations advisory matters, and
are primarily comprised of legal, finance, consulting, professional
fees, and other third-party costs. Organizational restructuring
costs include those related to the Company's efforts to reduce
general and administrative expense and its senior leadership
changes, including severance.
The Company believes that presentation of Adjusted EBITDA as a
performance measure is useful to investors because (i) it is one of
the metrics used by the Company's management for budgeting and
other planning purposes, to review the Company's historic and
prospective core operating performance, and to make day-to-day
operating decisions; (ii) it provides an assessment of operational
factors that management can impact in the short-term, namely
revenues and the controllable cost structure of the organization,
by eliminating items related to the Company's financing and capital
structure and other items that management does not consider as part
of the Company's underlying core operating performance and that
management believes impact the comparability of performance between
periods; and (iii) the Company believes that this measure is used
by research analysts and investors to evaluate the Company's
operating results and to value companies in its industry.
Adjusted EBITDA has material limitations as a performance
measure, including: (i) excluded interest and income tax are
necessary to operate the Company's business under its current
financing and capital structure; (ii) excluded depreciation,
amortization and impairment charges may represent the wear and tear
and/or reduction in value of the Company's communities, goodwill,
and other assets and may be indicative of future needs for capital
expenditures; and (iii) the Company may incur income/expense
similar to those for which adjustments are made, such as gain/loss
on sale of assets, facility lease termination and modification, or
debt modification and extinguishment, non-cash stock-based
compensation expense, and transaction and other costs, and such
income/expense may significantly affect the Company's operating
results.
The table below reconciles the Company's Adjusted EBITDA from
its net income (loss).
|
Three Months
Ended
|
(in
thousands)
|
September 30,
2021
|
|
June 30,
2021
|
|
September 30,
2020
|
Net income
(loss)
|
$
|
174,263
|
|
|
$
|
(83,604)
|
|
|
$
|
(124,993)
|
|
Provision (benefit)
for income taxes
|
15,279
|
|
|
(792)
|
|
|
14,884
|
|
Equity in (earnings)
loss of unconsolidated ventures
|
1,474
|
|
|
(13,946)
|
|
|
293
|
|
Loss (gain) on debt
modification and extinguishment, net
|
—
|
|
|
—
|
|
|
7,917
|
|
Loss (gain) on sale
of assets, net
|
(288,375)
|
|
|
79
|
|
|
(2,209)
|
|
Other non-operating
(income) loss
|
(571)
|
|
|
(2,948)
|
|
|
(948)
|
|
Interest
expense
|
49,361
|
|
|
49,057
|
|
|
50,546
|
|
Interest
income
|
(286)
|
|
|
(341)
|
|
|
(607)
|
|
Income (loss) from
operations
|
(48,855)
|
|
|
(52,495)
|
|
|
(55,117)
|
|
Depreciation and
amortization
|
84,560
|
|
|
83,591
|
|
|
87,821
|
|
Asset
impairment
|
639
|
|
|
2,078
|
|
|
8,213
|
|
Operating lease
expense adjustment
|
(6,273)
|
|
|
(5,326)
|
|
|
(117,322)
|
|
Non-cash stock-based
compensation expense
|
3,568
|
|
|
4,527
|
|
|
6,136
|
|
Transaction and
organizational restructuring costs
|
943
|
|
|
689
|
|
|
6,250
|
|
Adjusted
EBITDA(5)
|
$
|
34,582
|
|
|
$
|
33,064
|
|
|
$
|
(64,019)
|
|
One-time cash lease
payment
|
—
|
|
|
—
|
|
|
119,180
|
|
Adjusted EBITDA,
excluding one-time cash lease payment
|
$
|
34,582
|
|
|
$
|
33,064
|
|
|
$
|
55,161
|
|
|
|
(5)
|
Adjusted EBITDA
includes $0.1 million, $1.3 million, and $10.8 million benefit for
the three months ended September 30, 2021, June 30, 2021, and
September 30, 2020, respectively, of Provider Relief Funds and
other government grants and credits recognized in other operating
income. Adjusted EBITDA for the three months ended September 30,
2020 includes the $119.2 million one-time cash lease
payment.
|
Adjusted Free Cash Flow
Adjusted Free Cash Flow is a non-GAAP liquidity measure that the
Company defines as net cash provided by (used in) operating
activities before: distributions from unconsolidated ventures from
cumulative share of net earnings, changes in prepaid insurance
premiums financed with notes payable, changes in operating lease
liability for lease termination, cash paid/received for gain/loss
on facility lease termination and modification, and lessor capital
expenditure reimbursements under operating leases;
plus: property insurance proceeds and proceeds from refundable
entrance fees, net of refunds; less: non-development capital
expenditures and payment of financing lease obligations.
Non-development capital expenditures are comprised of corporate and
community-level capital expenditures, including those related to
maintenance, renovations, upgrades, and other major building
infrastructure projects for the Company's communities and is
presented net of lessor reimbursements. Non-development capital
expenditures do not include capital expenditures for: community
expansions, major community redevelopment and repositioning
projects, and the development of new communities.
The Company believes that presentation of Adjusted Free Cash
Flow as a liquidity measure is useful to investors because (i) it
is one of the metrics used by the Company's management for
budgeting and other planning purposes, to review the Company's
historic and prospective sources of operating liquidity, and to
review the Company's ability to service its outstanding
indebtedness, pay dividends to stockholders, engage in share
repurchases, and make capital expenditures, including development
capital expenditures; and (ii) it provides an indicator to
management to determine if adjustments to current spending
decisions are needed.
Adjusted Free Cash Flow has material limitations as a liquidity
measure, including: (i) it does not represent cash available for
dividends, share repurchases, or discretionary expenditures since
certain non-discretionary expenditures, including mandatory debt
principal payments, are not reflected in this measure; (ii) the
cash portion of non-recurring charges related to gain/loss on
facility lease termination generally represent charges/gains that
may significantly affect the Company's liquidity; and (iii) the
impact of timing of cash expenditures, including the timing of
non-development capital expenditures, limits the usefulness of the
measure for short-term comparisons.
The table below reconciles the Company's Adjusted Free Cash Flow
from its net cash provided by (used in) operating activities.
|
Three Months
Ended
|
(in
thousands)
|
September 30,
2021
|
|
June 30,
2021
|
|
September 30,
2020
|
Net cash provided
by (used in) operating activities
|
$
|
7,200
|
|
|
$
|
3,410
|
|
|
$
|
(77,169)
|
|
Net cash provided by
(used in) investing activities
|
203,974
|
|
|
1,561
|
|
|
(48,554)
|
|
Net cash provided by
(used in) financing activities
|
(19,177)
|
|
|
(20,992)
|
|
|
96,668
|
|
Net increase
(decrease) in cash, cash equivalents, and restricted cash
|
$
|
191,997
|
|
|
$
|
(16,021)
|
|
|
$
|
(29,055)
|
|
|
|
|
|
|
|
Net cash provided
by (used in) operating activities
|
$
|
7,200
|
|
|
$
|
3,410
|
|
|
$
|
(77,169)
|
|
Distributions from
unconsolidated ventures from cumulative share of net
earnings
|
(836)
|
|
|
(5,355)
|
|
|
(766)
|
|
Changes in prepaid
insurance premiums financed with notes payable
|
(4,151)
|
|
|
(4,200)
|
|
|
(5,841)
|
|
Changes in assets and
liabilities for lessor capital expenditure reimbursements under
operating leases
|
(11,551)
|
|
|
(7,943)
|
|
|
(3,131)
|
|
Non-development
capital expenditures, net
|
(28,193)
|
|
|
(35,795)
|
|
|
(22,872)
|
|
Payment of financing
lease obligations
|
(5,039)
|
|
|
(4,864)
|
|
|
(4,548)
|
|
Adjusted Free Cash
Flow (6)
|
$
|
(42,570)
|
|
|
$
|
(54,747)
|
|
|
$
|
(114,327)
|
|
|
(6)
|
Adjusted Free Cash
Flow includes transaction and organizational restructuring costs of
$0.9 million, $0.7 million, and $6.3 million for the three months
ended September 30, 2021, June 30, 2021, and September 30,
2020, respectively. Additionally, Adjusted Free Cash Flow
includes:
|
|
- $1.1 million, $0.4 million, and $4.4 million
benefit for the three months ended September 30, 2021, June 30,
2021, and September 30, 2020, respectively, from Provider
Relief Funds and other government grants and credits accepted or
received
|
|
- $3.5 million and $14.3 million recoupment of
accelerated/advanced Medicare payments for the three months ended
September 30, 2021 and June 30, 2021, respectively
|
|
- $2.5 million benefit from
accelerated/advanced Medicare payments received for the three
months ended September 30, 2020
|
|
- $23.6 million benefit from payroll taxes
deferred for the three months ended September 30, 2020
|
|
- $119.2 million one-time cash lease payment
for the three months ended September 30, 2020
|
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SOURCE Brookdale Senior Living Inc.