NASHVILLE, Tenn., Aug. 8, 2022 /PRNewswire/
-- Brookdale Senior Living Inc. (NYSE: BKD) ("Brookdale" or
the "Company") announced results for the quarter ended June 30, 2022.
HIGHLIGHTS
- Second quarter consolidated revenue per available unit (RevPAR)
increased 10.3% year-over-year.
- Second quarter consolidated weighted average occupancy
increased 410 basis points year-over-year.
- Sequentially, net hires were more than 2.5 times higher and the
use of contract labor decreased.
- The Company accepted approximately $60.0
million in Phase 4 Provider Relief Fund grants on
August 5, 2022.
"For the second quarter, we were pleased to have outperformed
the industry in sequential occupancy growth," said Lucinda
("Cindy") Baier, Brookdale's President and CEO. "With our strong
occupancy performance, we continue to make significant progress
toward accelerating our recovery, even as we continue to navigate
the challenging labor environment. To that end, I'm also pleased
with the progress we have made in our net hire initiative, which
has increased our workforce by 10% since the start of the year. We
recently received Phase 4 Provider Relief Fund grants and have
updated our guidance to reflect this income and our labor
expectations. I want to thank our team members for their
extraordinary efforts and dedication to help our residents live
their best lives. With greater demographic demand and lower new
supply, I'm very excited about the compelling growth trajectory for
Brookdale."
SUMMARY OF SECOND QUARTER
RESULTS
Same Community Senior Housing (Independent Living (IL),
Assisted Living and Memory Care (AL/MC), and CCRCs)
The table below presents a summary of operating results and
metrics of the Company's same community senior housing
portfolio.(1)
|
|
|
Year-Over-Year
Increase /
(Decrease)
|
|
Sequential Increase /
(Decrease)
|
($ in millions, except RevPAR and
RevPOR)
|
2Q 2022
|
2Q 2021
|
Amount
|
Percent
|
1Q 2022
|
Amount
|
Percent
|
Senior housing resident
fee revenue
|
$
617.7
|
$
559.7
|
$ 58.0
|
10.4 %
|
$
612.6
|
$
5.1
|
0.8 %
|
Senior housing facility
operating expense
|
$
492.9
|
$
440.9
|
$ 52.0
|
11.8 %
|
$
491.3
|
$
1.6
|
0.3 %
|
RevPAR
|
$
4,070
|
$
3,688
|
$ 382
|
10.4 %
|
$
4,036
|
$
34
|
0.8 %
|
Weighted average
occupancy
|
74.6 %
|
70.4 %
|
420 bps
|
n/a
|
73.4 %
|
120
bps
|
n/a
|
RevPOR
|
$
5,456
|
$
5,236
|
$ 220
|
4.2 %
|
$
5,498
|
$ (42)
|
(0.8) %
|
|
|
(1)
|
The same community
senior housing portfolio includes operating results and data for
633 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.
-
- 2Q 2022 vs 2Q 2021:
-
- Same community resident fees increased due to the increases in
occupancy and RevPOR.
- The increase in occupancy primarily reflects the impact of the
Company's execution on key initiatives to rebuild occupancy lost
due to the COVID-19 pandemic.
- The increase in RevPOR was primarily the result of in-place
rate increases.
- 2Q 2022 vs 1Q 2022:
-
- Same community resident fees increased due to the increase in
occupancy, partially offset by lower RevPOR due to discounting and
lower resident acuity.
- Same community weighted average occupancy increased 120 basis
points, representing the Company's best second quarter sequential
occupancy growth in more than ten years.
- Facility operating expense.
-
- 2Q 2022 vs 2Q 2021:
-
- The increase was primarily due to higher labor expense
primarily resulting from an increase in the use of contract labor
and overtime as well as merit and market wage rate
adjustments.
- An increase in food costs due to increased occupancy and higher
prices during the period and an increase in repairs and maintenance
costs also contributed to the increase in same community facility
operating expense.
- 2Q 2022 vs 1Q 2022:
-
- The increase in same community facility operating expense was
primarily due to an increase in food costs resulting from increased
occupancy and higher prices during the period, as well as an
increase in marketing costs due to seasonal spending.
- Same community labor expense was nearly flat sequentially as
increases in costs from hours worked by associates, recent wage
rate adjustments, and an additional day of expense during the
second quarter of 2022 were offset by a decreased use of contract
labor and a moderation of COVID-19 related labor costs.
- The Company's same community senior housing portfolio incurred
$1.9 million, $10.0 million, and $8.3
million of incremental direct costs during the second
quarter of 2022, first quarter of 2022, and second quarter of 2021,
respectively, to respond to the COVID-19 pandemic.
Consolidated
The table below presents a summary of consolidated operating
results.
|
|
Year-Over-Year
Increase /
(Decrease)
|
|
|
Sequential
Increase /
(Decrease)
|
($ in millions, except RevPAR and
RevPOR)
|
2Q 2022
|
2Q 2021
|
Amount
|
Percent
|
|
1Q 2022
|
Amount
|
Percent
|
Senior housing resident
fee revenue
|
$ 640.4
|
$
586.7
|
$ 53.7
|
9.2 %
|
|
$
637.0
|
$
3.4
|
0.5 %
|
Health Care Services
resident fee revenue (2)
|
—
|
87.3
|
(87.3)
|
n/a
|
|
—
|
—
|
n/a
|
Total resident fee
revenue
|
640.4
|
674.0
|
(33.6)
|
(5.0) %
|
|
637.0
|
3.4
|
0.5 %
|
Management fee
revenue
|
3.3
|
5.0
|
(1.7)
|
(34.0) %
|
|
3.3
|
—
|
—
|
Other operating
income
|
8.4
|
1.3
|
7.1
|
NM
|
|
0.4
|
8.0
|
NM
|
Senior housing facility
operating expense
|
513.7
|
466.4
|
47.3
|
10.1 %
|
|
512.8
|
0.9
|
0.2 %
|
Health Care Services
facility operating
expense
(2)
|
—
|
84.4
|
(84.4)
|
n/a
|
|
—
|
—
|
n/a
|
Total facility
operating expense
|
513.7
|
550.8
|
(37.1)
|
(6.7) %
|
|
512.8
|
0.9
|
0.2 %
|
General and
administrative expense
|
41.8
|
52.4
|
(10.6)
|
(20.2) %
|
|
45.1
|
(3.3)
|
(7.3) %
|
Net income
(loss)
|
(84.3)
|
(83.6)
|
0.7
|
0.8 %
|
|
(100.0)
|
(15.7)
|
(15.7) %
|
Adjusted EBITDA
(3)
|
50.7
|
33.1
|
17.6
|
53.2 %
|
|
37.2
|
13.5
|
36.3 %
|
|
|
|
|
|
|
|
|
|
RevPAR
|
$
4,071
|
$
3,692
|
$ 379
|
10.3 %
|
|
$
4,032
|
$
39
|
1.0 %
|
Weighted average
occupancy
|
74.6 %
|
70.5 %
|
410 bps
|
n/a
|
|
73.4 %
|
120 bps
|
n/a
|
RevPOR
|
$
5,459
|
$
5,237
|
$ 222
|
4.2 %
|
|
$
5,493
|
$ (34)
|
(0.6) %
|
|
|
(2)
|
The Company sold 80% of
its equity in its Health Care Services segment (the "HCS Sale") on
July 1, 2021. For periods beginning July 1, 2021, the results and
financial position of the Health Care Services segment were
deconsolidated from the Company's consolidated financial
statements.
|
(3)
|
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.
|
- Senior housing resident fee revenue.
-
- The changes in senior housing resident fee revenue were
primarily due to the same community operating results discussed
above.
- The disposition of nine communities through sales of owned
communities and lease terminations since the beginning of the
second quarter of 2021 resulted in $5.8
million less in resident fees during the second quarter of
2022 compared to the second quarter of 2021.
- The disposition of five communities since the beginning of the
first quarter of 2022 resulted in $1.8
million less in resident fees during the second quarter of
2022 compared to the first quarter of 2022.
The table below sets forth the Company's recent consolidated
occupancy trend.
2021
|
Jan
|
Feb
|
Mar
|
Apr
|
May
|
Jun
|
Jul
|
Aug
|
Sep
|
Oct
|
Nov
|
Dec
|
Weighted
average
|
70.0 %
|
69.4 %
|
69.4 %
|
69.9 %
|
70.5 %
|
71.2 %
|
72.0 %
|
72.5 %
|
73.0 %
|
73.3 %
|
73.5 %
|
73.6 %
|
Month end
|
70.4 %
|
70.1 %
|
70.6 %
|
71.1 %
|
71.6 %
|
72.6 %
|
73.3 %
|
73.7 %
|
74.2 %
|
74.5 %
|
74.3 %
|
74.5 %
|
2022
|
Jan
|
Feb
|
Mar
|
Apr
|
May
|
Jun
|
Jul
|
Weighted
average
|
73.4 %
|
73.3 %
|
73.6 %
|
73.9 %
|
74.6 %
|
75.2 %
|
75.9 %
|
Month end
|
74.2 %
|
74.4 %
|
75.0 %
|
75.3 %
|
76.2 %
|
76.6 %
|
77.1 %
|
- Other operating income. The Company recognized
$8.4 million of government grants and
employee retention credits as other operating income during the
second quarter of 2022, compared to $0.4
million of government grants during the first quarter of
2022 and $1.3 million of government
grants and credits during the second quarter of 2021.
- Senior housing facility operating expense.
-
- The changes in senior housing facility operating expense were
primarily due to the same community operating results discussed
above.
- The disposition of nine communities resulted in $5.8 million less in facility operating expenses
during the second quarter of 2022 compared to the second quarter of
2021.
- The disposition of five communities resulted in $1.8 million less in facility operating expenses
during the second quarter of 2022 compared to the first quarter of
2022.
- Net income (loss).
-
- 2Q 2022 vs 2Q 2021: The increase in net loss was
primarily attributable to a decrease in equity in earnings of
unconsolidated ventures compared to the prior year period. The
increase was partially offset by a decrease in general and
administrative expense primarily attributable to a decrease in
compensation costs primarily as a result of reductions in the
Company's corporate headcount related to the HCS Sale and in
estimated incentive compensation costs compared to the prior year
period as well as the net impact of the revenue, other operating
income, and facility operating expense factors previously
discussed.
- 2Q 2022 vs 1Q 2022: The decrease in net loss was
primarily attributable to the net impact of the revenue, other
operating income, and facility operating expense previously
discussed and decreases in asset impairment expense and general and
administrative expense as a result of a decrease in estimated
incentive compensation costs compared to the prior period.
- Adjusted EBITDA.
-
- 2Q 2022 vs 2Q 2021: The increase in Adjusted EBITDA was
primarily attributable to the increases in senior housing resident
fee revenue and other operating income and the decrease in general
and administrative expense due to a decrease in compensation costs
primarily as a result of reductions in the Company's corporate
headcount related to the HCS Sale and in estimated incentive
compensation costs compared to the prior year period. These items
were partially offset by the increase in senior housing facility
operating expense.
- 2Q 2022 vs 1Q 2022: The increase in Adjusted EBITDA was
primarily attributable to the increases in other operating income
and resident fee revenue and the decrease in general and
administrative expense, partially offset by the increase in
facility operating expense.
LIQUIDITY
The table below presents a summary of the Company's net cash
provided by (used in) operating activities, non-development capital
expenditures, net, and Adjusted Free Cash Flow.
|
|
Year-Over-Year
Increase /
(Decrease)
|
|
Sequential
Increase /
(Decrease)
|
($ in millions)
|
2Q 2022
|
2Q 2021
|
Amount
|
Percent
|
1Q 2022
|
Amount
|
Percent
|
Net cash provided by
(used in) operating activities
|
$ 11.6
|
$
3.4
|
$
8.2
|
NM
|
$ (23.3)
|
$ 34.9
|
NM
|
Non-development capital
expenditures, net
|
45.7
|
35.8
|
9.9
|
27.7 %
|
39.3
|
6.4
|
16.3 %
|
Adjusted Free Cash Flow
(4)
|
(48.5)
|
(54.7)
|
6.2
|
11.3 %
|
(53.5)
|
5.0
|
9.3 %
|
|
|
(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.
|
- Net cash provided by (used in) operating
activities.
-
- 2Q 2022 vs 2Q 2021: The increase in net cash provided by
operating activities was primarily attributable to an increase in
same community revenue and a decrease in general and administrative
expense compared to the prior year period. These changes were
partially offset by an increase in same community facility
operating expense and a decrease in distributions from
unconsolidated ventures compared to the prior year period.
- 2Q 2022 vs 1Q 2022: The change in net cash provided by
(used in) operating activities was primarily attributable to a
decrease in insurance premium payments due to the timing of annual
payments, an increase in same community revenue, and an increase in
government grants received compared to the prior period.
- Non-development capital expenditures, net. The increase
in non-development capital expenditures, net was primarily
attributable to increased investment in the Company's communities
due to unit upgrades as the Company increases move-ins and routine
maintenance expenditures.
- Adjusted Free Cash Flow.
-
- 2Q 2022 vs 2Q 2021: The $6.2
million change in Adjusted Free Cash Flow was primarily
attributable to the increase in net cash provided by operating
activities, excluding a decrease in distributions from
unconsolidated ventures compared to the prior year period. The
change was partially offset by the increase in non-development
capital expenditures, net compared to the prior year period.
- 2Q 2022 vs 1Q 2022: The $5.0
million change in Adjusted Free Cash Flow was primarily
attributable to the change in net cash provided by (used in)
operating activities, excluding $22.0
million of changes in prepaid insurance premiums financed
with notes payable. The change was partially offset by the increase
in non-development capital expenditures, net compared to the prior
period.
- Total Liquidity.
-
- Total liquidity of $411.7 million
as of June 30, 2022 included
$238.8 million of unrestricted cash
and cash equivalents, $165.5 million
of marketable securities, and $7.4
million of availability on the Company's secured credit
facility. Total liquidity as of June 30,
2022 decreased $64.2 million
from March 31, 2022, primarily
attributable to negative $48.5
million of Adjusted Free Cash Flow, $9.6 million of payments of mortgage debt, and
$6.0 million of cash paid for the
acquisition of a previously leased community.
- On August 5, 2022, the Company
accepted approximately $60.0 million
of Phase 4 grants from the general distribution of the Public
Health and Social Services Emergency Fund ("Provider Relief Fund")
administered by the U.S. Department of Health and Human Services
("HHS"), under which grants have been made available to eligible
healthcare providers for healthcare related expenses or lost
revenues attributable to COVID-19. The Company expects to recognize
the Phase 4 grants in income during the third quarter of 2022.
2022 OUTLOOK
The Company updated its full year 2022 Adjusted EBITDA guidance
to include approximately $60.0
million in Phase 4 Provider Relief Fund grants accepted on
August 5, 2022, which it expects to recognize in income during
the third quarter of 2022, and to incorporate year-to-date results
and revised expectations for the remainder of 2022. The Company
maintains its full year 2022 RevPAR growth guidance.
|
Full Year 2022 Guidance
|
RevPAR
growth
|
10% - 12%
|
Adjusted
EBITDA
|
$270 million - $290
million
|
This guidance excludes the potential impact of any future
acquisition or disposition activity. 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 second quarter 2022 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 discuss
the financial results for the second quarter 2022 on August 9,
2022 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
"332634".
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 before 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 August 16, 2022 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
"027713".
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, memory care, and continuing
care retirement 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 674 communities in 41 states as of June 30, 2022, 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
revenue from the former Health Care Services segment, 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
revenue from the former Health Care Services segment, 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, 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, health plan, and other
expenses, potentially greater use of contract labor and overtime
due to COVID-19 and general labor market conditions, 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 debt, interest, and
lease payments and to satisfy financial and other covenants in its
debt and lease documents, increased regulatory requirements,
including the costs of unfunded, mandatory testing of residents and
associates and provision of test kits to the Company's health plan
participants, 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 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; 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; limits on the Company's ability to use net operating loss
carryovers to reduce future tax payments; delays in obtaining
regulatory approvals; disruptions in the financial markets or
decreases in the appraised values or performance 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, principal, 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 and its ability to
operate its business; increases in market interest rates that
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,
associates (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 putative class
action 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; changes in, or its failure to comply with,
employment-related laws and regulations; 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, competition in the
labor market, 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 in
the Company's Annual Report on Form 10-K and 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
June 30,
|
|
Six Months Ended
June 30,
|
(in thousands, except per share
data)
|
2022
|
|
2021
|
|
2022
|
|
2021
|
Revenue
|
|
|
|
|
|
|
|
Resident
fees
|
$
640,388
|
|
$
673,978
|
|
$
1,277,362
|
|
$
1,338,328
|
Management
fees
|
3,329
|
|
4,998
|
|
6,658
|
|
13,564
|
Reimbursed costs
incurred on behalf of managed communities
|
37,388
|
|
43,008
|
|
74,529
|
|
108,802
|
Other operating
income
|
8,411
|
|
1,308
|
|
8,787
|
|
12,043
|
Total revenue and
other operating income
|
689,516
|
|
723,292
|
|
1,367,336
|
|
1,472,737
|
|
|
|
|
|
|
|
|
Expense
|
|
|
|
|
|
|
|
Facility operating
expense (excluding facility depreciation
and amortization of $80,944, $77,921, $160,876, and $155,195
respectively)
|
513,664
|
|
550,846
|
|
1,026,428
|
|
1,107,158
|
General and
administrative expense (including non-cash stock-
based compensation expense of $3,619, $4,527, $7,504, and
$9,310 respectively)
|
41,752
|
|
52,400
|
|
86,878
|
|
102,343
|
Facility operating
lease expense
|
41,538
|
|
43,864
|
|
83,102
|
|
88,282
|
Depreciation and
amortization
|
86,623
|
|
83,591
|
|
172,307
|
|
167,482
|
Asset
impairment
|
2,599
|
|
2,078
|
|
11,674
|
|
12,755
|
Costs incurred on
behalf of managed communities
|
37,388
|
|
43,008
|
|
74,529
|
|
108,802
|
Total operating
expense
|
723,564
|
|
775,787
|
|
1,454,918
|
|
1,586,822
|
Income (loss) from
operations
|
(34,048)
|
|
(52,495)
|
|
(87,582)
|
|
(114,085)
|
|
|
|
|
|
|
|
|
Interest
income
|
778
|
|
341
|
|
873
|
|
762
|
Interest
expense:
|
|
|
|
|
|
|
|
Debt
|
(35,693)
|
|
(35,425)
|
|
(68,850)
|
|
(70,776)
|
Financing lease
obligations
|
(11,994)
|
|
(11,492)
|
|
(24,052)
|
|
(22,875)
|
Amortization of
deferred financing costs
|
(1,520)
|
|
(1,907)
|
|
(3,062)
|
|
(3,822)
|
Change in fair value of
derivatives
|
973
|
|
(233)
|
|
4,376
|
|
(191)
|
Equity in earnings
(loss) of unconsolidated ventures
|
(2,439)
|
|
13,946
|
|
(7,333)
|
|
13,415
|
Gain (loss) on sale of
assets, net
|
961
|
|
(79)
|
|
667
|
|
1,033
|
Other non-operating
income (loss)
|
(111)
|
|
2,948
|
|
(138)
|
|
4,592
|
Income (loss) before
income taxes
|
(83,093)
|
|
(84,396)
|
|
(185,101)
|
|
(191,947)
|
Benefit (provision) for
income taxes
|
(1,190)
|
|
792
|
|
786
|
|
40
|
Net income
(loss)
|
(84,283)
|
|
(83,604)
|
|
(184,315)
|
|
(191,907)
|
Net (income) loss
attributable to noncontrolling interest
|
(135)
|
|
19
|
|
(116)
|
|
37
|
Net income (loss)
attributable to Brookdale Senior Living Inc.
common stockholders
|
$
(84,418)
|
|
$
(83,585)
|
|
$ (184,431)
|
|
$ (191,870)
|
|
|
|
|
|
|
|
|
Basic and diluted net
income (loss) per share attributable to
Brookdale Senior Living Inc. common stockholders
|
$
(0.45)
|
|
$
(0.45)
|
|
$
(0.99)
|
|
$
(1.04)
|
|
|
|
|
|
|
|
|
Weighted average shares
used in computing basic and diluted
net income (loss) per share
|
186,761
|
|
185,182
|
|
186,341
|
|
184,600
|
Condensed
Consolidated Balance Sheets
|
|
(in thousands)
|
June 30, 2022
|
|
December 31, 2021
|
Cash and cash
equivalents
|
$
238,757
|
|
$
347,031
|
Marketable
securities
|
165,481
|
|
182,393
|
Restricted
cash
|
29,946
|
|
26,845
|
Accounts receivable,
net
|
49,544
|
|
51,137
|
Assets held for
sale
|
—
|
|
3,642
|
Prepaid expenses and
other current assets, net
|
103,738
|
|
87,946
|
Total current
assets
|
587,466
|
|
698,994
|
Property, plant and
equipment and leasehold intangibles, net
|
4,839,643
|
|
4,904,292
|
Operating lease
right-of-use assets
|
572,191
|
|
630,423
|
Other assets,
net
|
168,996
|
|
176,758
|
Total
assets
|
$
6,168,296
|
|
$
6,410,467
|
|
|
|
|
Current portion of
long-term debt
|
$
268,341
|
|
$
63,125
|
Current portion of
financing lease obligations
|
22,996
|
|
22,151
|
Current portion of
operating lease obligations
|
154,455
|
|
148,642
|
Other current
liabilities
|
408,221
|
|
398,036
|
Total current
liabilities
|
854,013
|
|
631,954
|
Long-term debt, less
current portion
|
3,565,819
|
|
3,778,087
|
Financing lease
obligations, less current portion
|
526,601
|
|
532,136
|
Operating lease
obligations, less current portion
|
620,035
|
|
681,876
|
Other
liabilities
|
83,261
|
|
86,791
|
Total
liabilities
|
5,649,729
|
|
5,710,844
|
Total Brookdale Senior
Living Inc. stockholders' equity
|
516,230
|
|
697,402
|
Noncontrolling
interest
|
2,337
|
|
2,221
|
Total
equity
|
518,567
|
|
699,623
|
Total liabilities and
equity
|
$
6,168,296
|
|
$
6,410,467
|
Condensed
Consolidated Statements of Cash Flows
|
|
|
Six Months Ended June 30,
|
(in thousands)
|
2022
|
|
2021
|
Cash Flows from Operating
Activities
|
|
|
|
Net income
(loss)
|
$
(184,315)
|
|
$
(191,907)
|
Adjustments to
reconcile net income (loss) to net cash provided by (used in)
operating
activities:
|
|
|
|
Depreciation and
amortization, net
|
175,369
|
|
171,304
|
Asset
impairment
|
11,674
|
|
12,755
|
Equity in (earnings)
loss of unconsolidated ventures
|
7,333
|
|
(13,415)
|
Distributions from
unconsolidated ventures from cumulative share of net
earnings
|
561
|
|
5,355
|
Amortization of
entrance fees
|
(1,267)
|
|
(876)
|
Proceeds from deferred
entrance fee revenue
|
1,959
|
|
2,298
|
Deferred income tax
(benefit) provision
|
(1,438)
|
|
(704)
|
Operating lease
expense adjustment
|
(16,615)
|
|
(9,990)
|
Change in fair value
of derivatives
|
(4,376)
|
|
191
|
Loss (gain) on sale of
assets, net
|
(667)
|
|
(1,033)
|
Non-cash stock-based
compensation expense
|
7,504
|
|
9,310
|
Other
|
(181)
|
|
(4,007)
|
Changes in operating
assets and liabilities:
|
|
|
|
Accounts receivable,
net
|
1,592
|
|
(1,267)
|
Prepaid expenses and
other assets, net
|
(5,550)
|
|
1,605
|
Prepaid insurance
premiums financed with notes payable
|
(11,252)
|
|
(8,785)
|
Trade accounts payable
and accrued expenses
|
(822)
|
|
2,131
|
Refundable fees and
deferred revenue
|
3,956
|
|
(8,918)
|
Operating lease assets
and liabilities for lessor capital expenditure
reimbursements
|
4,857
|
|
15,506
|
Net cash provided by
(used in) operating activities
|
(11,678)
|
|
(20,447)
|
Cash Flows from Investing
Activities
|
|
|
|
Change in lease
security deposits and lease acquisition deposits, net
|
155
|
|
(75)
|
Purchase of marketable
securities
|
(205,373)
|
|
(119,914)
|
Sale and maturities of
marketable securities
|
222,500
|
|
192,995
|
Capital expenditures,
net of related payables
|
(96,851)
|
|
(79,538)
|
Acquisition of
assets
|
(6,004)
|
|
—
|
Investment in
unconsolidated ventures
|
(167)
|
|
(5,359)
|
Proceeds from sale of
assets, net
|
5,739
|
|
9,646
|
Net cash provided by
(used in) investing activities
|
(80,001)
|
|
(2,245)
|
Cash Flows from Financing
Activities
|
|
|
|
Proceeds from
debt
|
29,302
|
|
21,022
|
Repayment of debt and
financing lease obligations
|
(43,084)
|
|
(72,970)
|
Payment of financing
costs, net of related payables
|
(116)
|
|
(172)
|
Payments of employee
taxes for withheld shares
|
(4,195)
|
|
(4,444)
|
Other
|
—
|
|
10
|
Net cash provided by
(used in) financing activities
|
(18,093)
|
|
(56,554)
|
Net increase
(decrease) in cash, cash equivalents, and restricted
cash
|
(109,772)
|
|
(79,246)
|
Cash, cash
equivalents, and restricted cash at beginning of period
|
438,314
|
|
465,148
|
Cash, cash
equivalents, and restricted cash at end of period
|
$
328,542
|
|
$
385,902
|
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. The Company
cautions investors 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. The Company urges investors 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 operating lease
termination, operating lease expense adjustment, 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 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 operating lease termination, 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
net income (loss).
|
Three Months Ended
|
|
Six Months
Ended
|
(in thousands)
|
June 30, 2022
|
|
March 31, 2022
|
|
June 30, 2021
|
|
June 30, 2022
|
Net income (loss)
|
$
(84,283)
|
|
$
(100,032)
|
|
$
(83,604)
|
|
$
(184,315)
|
Provision (benefit) for
income taxes
|
1,190
|
|
(1,976)
|
|
(792)
|
|
(786)
|
Equity in (earnings)
loss of unconsolidated ventures
|
2,439
|
|
4,894
|
|
(13,946)
|
|
7,333
|
Loss (gain) on sale of
assets, net
|
(961)
|
|
294
|
|
79
|
|
(667)
|
Other non-operating
(income) loss
|
111
|
|
27
|
|
(2,948)
|
|
138
|
Interest
expense
|
48,234
|
|
43,354
|
|
49,057
|
|
91,588
|
Interest
income
|
(778)
|
|
(95)
|
|
(341)
|
|
(873)
|
Income (loss) from
operations
|
(34,048)
|
|
(53,534)
|
|
(52,495)
|
|
(87,582)
|
Depreciation and
amortization
|
86,623
|
|
85,684
|
|
83,591
|
|
172,307
|
Asset
impairment
|
2,599
|
|
9,075
|
|
2,078
|
|
11,674
|
Operating lease expense
adjustment
|
(8,308)
|
|
(8,307)
|
|
(5,326)
|
|
(16,615)
|
Non-cash stock-based
compensation expense
|
3,619
|
|
3,885
|
|
4,527
|
|
7,504
|
Transaction and
organizational restructuring costs
|
229
|
|
373
|
|
689
|
|
602
|
Adjusted EBITDA(5)
|
$
50,714
|
|
$
37,176
|
|
$
33,064
|
|
$
87,890
|
|
|
|
|
(5)
|
Adjusted EBITDA
includes an $8.4 million, $0.4 million, $1.3 million, and $8.8
million benefit for the three months ended June 30, 2022, March 31,
2022, and June 30, 2021, and six months ended June 30, 2022,
respectively, of government grants and credits recognized in other
operating income.
|
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
assets and liabilities for lease termination, cash paid/received
for gain/loss on facility operating lease termination, 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 Adjusted Free Cash Flow from net cash
provided by (used in) operating activities.
|
Three Months Ended
|
(in thousands)
|
June 30, 2022
|
|
March 31, 2022
|
|
June 30, 2021
|
Net cash provided by (used in) operating
activities
|
$
11,577
|
|
$
(23,255)
|
|
$
3,410
|
Net cash provided by
(used in) investing activities
|
(43,838)
|
|
(36,163)
|
|
1,561
|
Net cash provided by
(used in) financing activities
|
(17,690)
|
|
(403)
|
|
(20,992)
|
Net increase
(decrease) in cash, cash equivalents,
and
restricted cash
|
$
(49,951)
|
|
$
(59,821)
|
|
$
(16,021)
|
|
|
|
|
|
|
Net cash provided by (used in) operating
activities
|
$
11,577
|
|
$
(23,255)
|
|
$
3,410
|
Distributions from
unconsolidated ventures from
cumulative share of net earnings
|
—
|
|
(561)
|
|
(5,355)
|
Changes in prepaid
insurance premiums financed with
notes payable
|
(5,377)
|
|
16,629
|
|
(4,200)
|
Changes in assets and
liabilities for lessor capital
expenditure reimbursements under operating leases
|
(3,367)
|
|
(1,490)
|
|
(7,943)
|
Non-development capital
expenditures, net
|
(45,686)
|
|
(39,326)
|
|
(35,795)
|
Payment of financing
lease obligations
|
(5,610)
|
|
(5,490)
|
|
(4,864)
|
Adjusted Free Cash Flow
(6)
|
$
(48,463)
|
|
$
(53,493)
|
|
$
(54,747)
|
|
|
(6)
|
Adjusted Free Cash Flow
includes:
|
|
•
|
$4.6 million, $0.8
million, and $0.4 million benefit for the three months ended June
30, 2022, March 31, 2022, and June 30, 2021, respectively, from
government grants and credits received.
|
|
•
|
$1.2 million, $1.8
million, and $14.3 million recoupment of accelerated/advanced
Medicare payments for the three months ended June 30, 2022, March
31, 2022, and June 30, 2021 respectively.
|
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SOURCE Brookdale Senior Living Inc.