NASHVILLE, Tenn., May 8, 2017 /PRNewswire/ --
FIRST QUARTER 2017 AND RECENT HIGHLIGHTS:
- GAAP net loss increased to $126.4
million for the first quarter of 2017 compared to
$48.8 million for the first quarter
of 2016.
- Adjusted EBITDA (1) increased 8.5% to $198.3 million for the first quarter of 2017
compared to $182.7 million for the
first quarter of 2016. Excluding transaction and strategic project
costs of $7.7 million, Adjusted
EBITDA for the first quarter of 2017 was $206.0 million.
- First quarter 2017 net cash provided by operating activities
decreased 5.1% from the first quarter of 2016, to $66.8 million.
- Adjusted Free Cash Flow for the first quarter of 2017 increased
$35.6 million to $63.4 million, compared to the first quarter of
2016. Brookdale's proportionate share of Adjusted Free Cash Flow of
unconsolidated ventures for the first quarter of 2017 increased
$0.2 million to $8.8 million, compared to the first quarter of
2016.
(1) Adjusted EBITDA and Adjusted Free Cash
Flow are financial measures not calculated in accordance with
GAAP. See "Reconciliation of Non-GAAP Financial Measures"
below for the Company's definitions of its non-GAAP financial
measures, reconciliations of such measures to their most comparable
GAAP financial measures and other important information regarding
the use of the Company's non-GAAP financial measures.
Brookdale Senior Living Inc. (NYSE: BKD) ("Brookdale" or the
"Company") announced results for the quarter ended March 31,
2017.
Andy Smith, Brookdale's President
and CEO, said, "Our focused efforts on improving operational
execution led to meaningful year over year growth in our first
quarter Adjusted EBITDA and Adjusted Free Cash Flow. In spite
of a highly competitive environment, we produced reasonable rate
growth and strong expense control to achieve same community
operating income growth in a seasonally weak occupancy
quarter."
"We remain committed to creating shareholder value. Our
previously announced review process remains ongoing. At the same
time, we are continuing to pursue portfolio optimization
opportunities, as evidenced by our recently closed venture with
Blackstone. This transaction and potentially others will strengthen
our financial position and add further to free cash flow."
First Quarter Financial Results
Total revenue for the first quarter of 2017 was $1.22 billion compared to $1.26 billion for the prior year
period. Resident fees were $1.0
billion for the first quarter of 2017, a decrease of 4.2%
from the first quarter of 2016. The decrease in resident fees
was primarily a result of disposition activity, through asset sales
and lease terminations, since the beginning of the prior year
period. First quarter monthly RevPAR (2) for the
consolidated senior housing portfolio was $3,919, an increase of 1.4% from the first
quarter of 2016, driven by a year-over-year increase in RevPOR
(2) of 2.5% and a decrease in weighted average unit
occupancy of 80 basis points. The sequential decline in weighted
average unit occupancy was 70 basis points.
(2) RevPAR, or average monthly senior
housing resident fee revenues per available unit, is defined by the
Company as resident fee revenues, excluding Brookdale Ancillary
Services segment revenue and entrance fee amortization, for the
corresponding portfolio for the period, 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 revenues per occupied unit, is defined by the Company as
resident fee revenues, excluding Brookdale Ancillary Services
segment revenue and entrance fee amortization, for the
corresponding portfolio for the period, 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.
Facility operating expenses for the first quarter of 2017 were
$674.5 million, a decrease of 5.8%
from the first quarter of 2016. Combined segment operating
margin was 34.7% for the first quarter of 2017 versus 33.6% for the
first quarter of 2016. The decrease in facility operating
expenses was due to disposition activity, through asset sales and
lease terminations, together with strong expense control.
GAAP net loss for the first quarter of 2017 was $126.4 million, versus a net loss of $48.8 million for the first quarter of
2016. The increase in the GAAP net loss for the first quarter
of 2017 was primarily due to $20.7
million of impairment charges (mostly related to the
transaction with Blackstone) and an additional $96.8 million charge to the Company's valuation
allowances against its federal and state net operating tax loss
carryforwards and tax credits (also primarily related to the
transaction with Blackstone).
Net cash provided by operating activities for the first quarter
of 2017 was $66.8 million, a decrease
of $3.6 million, or 5.1%, compared
with the first quarter of 2016, also driven primarily by
disposition activity.
Weighted average shares outstanding were 185.7 million for the
first quarter of 2017 compared with weighted average shares
outstanding of 185.2 million for the prior year quarter.
Non-GAAP Financial Measures
Adjusted EBITDA and Adjusted Free Cash Flow are financial
measures that are not calculated in accordance with GAAP. The
Company strongly urges you to review the information under
"Reconciliation of Non-GAAP Financial Measures" below for the
Company's definitions of each of these non-GAAP financial measures,
a detailed description of why the Company believes such measures
are useful, the limitations of each measure, and a reconciliation
of Adjusted EBITDA from the Company's net income (loss), a
reconciliation of the Company's Adjusted Free Cash Flow from the
Company's net cash provided by (used in) operating activities, and
a reconciliation of the Company's proportionate share of Adjusted
Free Cash Flow of unconsolidated ventures from such ventures' net
cash provided by (used in) operating activities. The Company
changed its definition and calculation of Adjusted EBITDA when it
reported results for the second quarter of 2016. Prior period
amounts of Adjusted EBITDA presented herein have been recast to
conform to the new definition. See "Reconciliation of
Non-GAAP Financial Measures" below for a description of such
changes to the definition of Adjusted EBITDA.
Adjusted EBITDA increased 8.5% to $198.3
million in the first quarter of 2017, compared to
$182.7 million for the first quarter
of 2016. Adjusted EBITDA, excluding integration, transaction,
transaction-related and strategic projects costs increased
$3.3 million to $206.0 million in the first quarter of 2017,
compared to $202.7 million for the
first quarter of 2016.
The Company's Adjusted Free Cash Flow for the first quarter of
2017 increased $35.6 million to
$63.4 million compared to
$27.9 million for the first quarter
of 2016. The Company's proportionate share of Adjusted Free
Cash Flow of unconsolidated ventures was $8.8 million for the first quarter of 2017
compared with $8.5 million for the
prior year period.
Operating Activities
The Company reports information on five segments. Three
segments (Retirement Centers, Assisted Living and CCRCs – Rental)
constitute the Company's consolidated senior housing
portfolio. The Ancillary Services segment includes the
Company's outpatient therapy, home health and hospice
services. The Management Services segment includes the
services provided to unconsolidated communities that are operated
under management agreements.
Senior Housing
Revenue for the consolidated senior housing portfolio was
$905.0 million for the first quarter
of 2017, a decrease of 3.6% from the first quarter of
2016. Facility operating expenses were $578.2 million for the first quarter of 2017, a
decrease of 4.9% from the first quarter of 2016. Operating
income for the consolidated senior housing portfolio decreased by
1.2% from the first quarter of 2016, to $326.8 million for the first quarter of
2017. The decreases in resident fees and operating expenses
during the three months ended March 31,
2017 were primarily due to disposition activity, through
asset sales and lease terminations, of 121 communities (10,018
units) since the beginning of the prior year period.
Same community revenue for the consolidated senior housing
portfolio for the three months ended March
31, 2017 increased 0.8% over the corresponding period in
2016. Same community RevPAR increased 0.8% in the first
quarter of 2017 from the first quarter of 2016, driven by an
increase in same community RevPOR of 2.0% and a decline in weighted
average unit occupancy of 100 basis points.
Consolidated same community facility operating expenses for the
first quarter of 2017 increased by 0.1% over the first quarter of
2016, evidencing strong cost controls. As a result, same
community operating income for the consolidated senior housing
portfolio for the first quarter of 2017 increased by 2.0% from the
first quarter of 2016, to $298.0
million.
Brookdale Ancillary Services
During the quarter, the ancillary services margin improved due
to the reduction of outpatient therapy clinics in the fourth
quarter of 2016. While revenue for the Company's ancillary services
segment decreased $10.2 million, or
8.4%, to $112.0 million for the first
quarter of 2017 versus the prior year first quarter, facility
operating expenses for the first quarter of 2017 decreased
$11.3 million, or 10.5%, over the
first quarter of 2016. As a result, ancillary services
operating income for the first quarter of 2017 was $15.6 million, an increase of 7.7% versus the
first quarter of 2016, with operating margin increasing to 14.0%
from an 11.9% margin for the first quarter of 2016.
Liquidity
Total liquidity for the Company was $426.7 million at March 31, 2017, an
increase of $124.8 million from
March 31, 2016. Liquidity at March 31, 2017
included $59.2 million of
unrestricted cash and cash equivalents and $367.5 million of availability on the Company's
secured credit facility and was reduced by the Company's
contribution of $179.2 million in
connection with the formation of the new venture with Blackstone on
March 29, 2017.
Portfolio Optimization Activities
The Company continues to actively explore opportunities to
optimize its portfolio through disposing of owned and leased
communities and restructuring leases in order to simplify and
streamline its business, to increase the quality and durability of
cash flow, and to reduce debt and lease leverage.
Dispositions of Owned Communities/Termination of
Leases
The Company began the first quarter of 2017 with 16 communities
(1,423 units) classified as assets held for sale with a carrying
value totaling $97.8 million, and
$60.5 million of associated mortgage
debt was included in the current portion of the Company's long-term
debt. During the first quarter of 2017, the Company completed
the disposition of one of these communities (75 units), and entered
into an agreement to sell an additional community (160 units).
As of March 31, 2017, 16 communities (1,508 units) were
classified as assets held for sale with a carrying value of
$106.3 million, and $60.5 million of associated mortgage debt, which
is included in the current portion of long-term debt. The
closings of the sales of the 16 remaining communities held for sale
are subject to receipt of regulatory approvals and satisfaction of
other customary closing conditions, and are expected to occur in
2017; however, there can be no assurance that the transactions will
close or, if they do, when the actual closings will occur.
During the quarter, the Company terminated the lease on a 94
unit assisted living community as part of a previously disclosed
agreement with HCP, Inc. Pursuant to that agreement, the
Company continues to expect to terminate the leases on an
additional 25 communities during 2017. In addition, during
the quarter the Company entered into an agreement to terminate the
lease on one unrelated community (466 units), which is expected to
occur in the second quarter.
Blackstone Transaction
During the quarter, the Company and affiliates of Blackstone
Real Estate Advisors VIII L.P. (collectively, "Blackstone") entered
into a venture, which acquired 64 senior housing communities for a
purchase price of $1.1 billion. The
Company had previously leased the 64 communities under long-term
lease agreements with a remaining average lease term of
approximately 12 years. The Company contributed a total of
$179.2 million in cash to purchase a
15% equity interest, terminate leases for 62 communities, and fund
its share of closing costs. As of the formation date, the
Company began managing 60 of the communities on behalf of the
venture and continued to operate two of the communities under lease
agreements. Upon satisfaction of certain regulatory and other
conditions, those two leases will terminate and the communities
will be managed by the Company.
2017 Outlook
Based on results year-to-date, the Company reiterates its full
year 2017 guidance as follows:
- Adjusted EBITDA, excluding transaction and strategic project
costs in the range of $670 million to $710
million.
- Adjusted Free Cash Flow in the range of $140 million to $170 million.
- The Company's proportionate share of Adjusted Free Cash Flow of
unconsolidated ventures in the range of $25
million to $35 million.
The foregoing guidance excludes the potential impact of any
future acquisition, disposition, portfolio optimization activity or
refinancing, including debt modification costs, other than the
pending portfolio optimization transactions described above.
Reconciliations of the non-GAAP financial measures included in the
foregoing guidance to the most comparable GAAP financial measures
are not available without unreasonable effort due to the inherent
difficulty in forecasting the timing or amounts of items required
to reconcile Adjusted EBITDA, Adjusted Free Cash Flow and the
Company's proportionate share of Adjusted Free Cash Flow of
unconsolidated ventures from the Company's net income (loss), the
Company's net cash provided by (used in) operating activities and
the unconsolidated ventures' net cash provided by (used in)
operating activities, as applicable. Variability in the
timing or amounts of items required to reconcile each measure may
have a significant impact on the Company's future GAAP results.
Supplemental Information
The Company will post on the Investor Relations section of the
Company's website at www.brookdale.com supplemental information
relating to the Company's first quarter 2017 results. This
information will also be furnished in a Form 8-K to be filed with
the SEC. An updated Investor Presentation also will be posted.
Earnings Conference Call
Brookdale's management will conduct a conference call to review
the financial results of its first quarter ended March 31,
2017 on Tuesday, May 9, 2017 at
10:00 AM ET. The conference
call can be accessed by dialing (866) 900-2996 (from within the
U.S.) or (706) 643-2685 (from outside of the U.S.) ten minutes
prior to the scheduled start and referencing the "Brookdale Senior
Living First Quarter Earnings Call."
A webcast of the conference call will be available to the public
on a listen-only basis at www.brookdale.com. Please allow
extra time prior to the call to visit the site and download the
necessary software required to listen to the internet
broadcast. A replay of the webcast will be available through
the website for three months following the call.
For those who cannot listen to the live call, a replay will be
available until 11:59 PM ET on
May 22, 2017 by dialing (855)
859-2056 (from within the U.S.) or (404) 537-3406 (from
outside of the U.S.) and referencing access code "13556893".
A copy of this earnings release is posted on the Investor Relations
page of the Brookdale website (www.brookdale.com).
About Brookdale Senior Living
Brookdale Senior Living Inc. is the leading operator of senior
living communities throughout the United States. The Company
is committed to providing senior living solutions primarily within
properties that are designed, purpose-built and operated to provide
the highest-quality service, care and living accommodations for
residents. Brookdale operates independent living, assisted
living, and dementia-care communities and continuing care
retirement centers, with approximately 1,052 communities in 47
states and the ability to serve approximately 103,000 residents as
of March 31, 2017. Through its ancillary services
program, the Company also offers a range of outpatient therapy,
home health and hospice services. Brookdale's stock is traded
on the New York Stock Exchange under the ticker symbol BKD.
Safe Harbor
Certain statements in this press release and the associated
earnings conference call may constitute forward-looking statements
within the meaning of the Private Securities Litigation Reform Act
of 1995. Those forward-looking statements are subject to various
risks and uncertainties and include all statements that are not
historical statements of fact and those regarding our intent,
belief or expectations, including, but not limited to, statements
relating to the creation and enhancement of shareholder value, our
strategy, our operational, sales, marketing and branding
initiatives, our portfolio optimization and growth initiatives and
our expectations regarding their effect on our results; our
expectations regarding the economy, the senior living industry,
senior housing construction, supply and competition, occupancy and
pricing and the demand for senior housing; our expectations
regarding our revenue, cash flow, operating income, expenses,
capital expenditures, including expected levels and reimbursements
and the timing thereof, development, expansion, renovation,
redevelopment and repositioning opportunities, including Program
Max opportunities, and their projected costs, cost savings and
synergies, and our liquidity and leverage; our plans and
expectations with respect to disposition, lease restructuring,
financing, re-financing and venture transactions and opportunities
(including assets currently held for sale and the pending
transactions with HCP, Inc.), including the timing thereof and
their effects on our results; our expectations regarding taxes,
capital deployment and returns on invested capital, Adjusted EBITDA
and Adjusted Free Cash Flow (as those terms are defined herein);
our expectations regarding returns to shareholders, our share
repurchase program and the payment of dividends; our ability to
secure financing or repay, replace or extend existing debt at or
prior to maturity; our ability to remain in compliance with all of
our debt and lease agreements (including the financial covenants
contained therein); our expectations regarding changes in
government reimbursement programs and their effect on our results;
our plans to expand our offering of ancillary services (therapy,
home health and hospice); our plans to acquire additional operating
companies, senior housing communities and ancillary services
companies (including home health agencies); and our ability to
anticipate, manage and address industry trends and their effect on
our business. 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," "overestimate,"
"underestimate," "believe," "project," "predict," "continue,"
"plan," "target" or other similar words or expressions. Although we
believe that expectations reflected in any forward-looking
statements are based on reasonable assumptions, we can give no
assurance that our expectations will be attained and actual results
and performance could differ materially from those projected.
Factors which could have a material adverse effect on our
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 risk associated with the
current global economic situation and its impact upon capital
markets and liquidity; changes in governmental reimbursement
programs; the risk of overbuilding and new supply; our inability to
extend (or refinance) debt (including our credit and letter of
credit facilities and our outstanding convertible notes) as it
matures; the risk that we may not be able to satisfy the conditions
precedent to exercising the extension options associated with
certain of our debt agreements; events which adversely affect the
ability of seniors to afford our monthly resident fees or entrance
fees; the conditions of housing markets in certain geographic
areas; our ability to generate sufficient cash flow to cover
required interest and long-term lease payments; the effect of our
indebtedness and long-term leases on our liquidity; the risk of
loss of property pursuant to our mortgage debt and long-term lease
obligations; the possibilities that changes in the capital markets,
including changes in interest rates and/or credit spreads, or other
factors could make financing more expensive or unavailable to us;
our determination from time to time to purchase any shares under
our share repurchase program; our ability to fund any repurchases;
our ability to effectively manage our growth; our ability to
maintain consistent quality control; delays in obtaining regulatory
approvals; the risk that we may not be able to expand, redevelop
and reposition our communities in accordance with our plans; our
ability to complete acquisition, disposition, lease restructuring,
financing, re-financing and venture transactions (including assets
currently held for sale and the pending transactions with HCP,
Inc.) 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; our
ability to successfully integrate acquisitions; competition for the
acquisition of assets; our ability to obtain additional capital on
terms acceptable to us; a decrease in the overall demand for senior
housing; our vulnerability to economic downturns; acts of nature in
certain geographic areas; terminations of our resident agreements
and vacancies in the living spaces we lease; early terminations or
non-renewal of management agreements; increased competition for
skilled personnel; increased wage pressure and union activity;
departure of our key officers; increases in market interest rates;
environmental contamination at any of our communities; failure to
comply with existing environmental laws; an adverse determination
or resolution of complaints filed against us; the cost and
difficulty of complying with increasing and evolving regulation; as
well as other risks detailed from time to time in our filings with
the Securities and Exchange Commission, including our 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 our management's views as
of the date of this press release and/or associated earnings
conference call. We cannot guarantee future results, levels of
activity, performance or achievements, and we expressly disclaim
any obligation to release publicly any updates or revisions to any
of these forward-looking statements to reflect any change in our
expectations with regard thereto or change in events, conditions or
circumstances on which any statement is based.
Condensed
Consolidated Statements of Operations
|
(in thousands,
except per share data)
|
|
|
|
Three Months Ended
March 31,
|
|
|
2017
|
|
2016
|
Revenue
|
|
|
|
|
Resident
fees
|
|
$
|
1,016,927
|
|
$
|
1,061,148
|
Management
fees
|
|
15,894
|
|
16,780
|
Reimbursed costs
incurred on behalf of managed communities
|
|
183,945
|
|
185,228
|
Total
revenue
|
|
1,216,766
|
|
1,263,156
|
|
|
|
|
|
Expense
|
|
|
|
|
Facility operating
expense (excluding depreciation and amortization of
$114,879
and $114,103,
respectively)
|
|
674,542
|
|
715,902
|
General and
administrative expense (including non-cash stock-based
compensation
expense of $7,774 and $9,769,
respectively)
|
|
65,560
|
|
92,621
|
Transaction
costs
|
|
7,593
|
|
850
|
Facility lease
expense
|
|
88,807
|
|
96,689
|
Depreciation and
amortization
|
|
127,487
|
|
127,137
|
Asset
impairment
|
|
20,706
|
|
3,375
|
Costs incurred on
behalf of managed communities
|
|
183,945
|
|
185,228
|
Total operating
expense
|
|
1,168,640
|
|
1,221,802
|
Income from
operations
|
|
48,126
|
|
41,354
|
|
|
|
|
|
Interest
income
|
|
631
|
|
702
|
Interest
expense:
|
|
|
|
|
Debt
|
|
(40,573)
|
|
(43,990)
|
Capital and financing
lease obligations
|
|
(49,859)
|
|
(50,579)
|
Amortization of
deferred financing costs and debt premium (discount)
|
|
(2,591)
|
|
(2,310)
|
Change in fair value
of derivatives
|
|
(46)
|
|
(24)
|
Debt modification and
extinguishment costs
|
|
(61)
|
|
(1,110)
|
Equity in earnings of
unconsolidated ventures
|
|
981
|
|
1,018
|
(Loss) gain on sale
of assets, net
|
|
(603)
|
|
2,749
|
Other non-operating
income
|
|
1,662
|
|
5,038
|
Income (loss) before
income taxes
|
|
(42,333)
|
|
(47,152)
|
Provision for income
taxes
|
|
(84,028)
|
|
(1,665)
|
Net income
(loss)
|
|
(126,361)
|
|
(48,817)
|
Net (income) loss
attributable to noncontrolling interest
|
|
57
|
|
42
|
Net income (loss)
attributable to Brookdale Senior Living Inc. common
stockholders
|
|
$
|
(126,304)
|
|
$
|
(48,775)
|
|
|
|
|
|
Basic and diluted net
income (loss) per share attributable to Brookdale Senior
Living Inc. common stockholders
|
|
$
|
(0.68)
|
|
$
|
(0.26)
|
|
|
|
|
|
Weighted average
shares used in computing basic and diluted net income (loss)
per
share
|
|
185,689
|
|
185,153
|
Condensed
Consolidated Balance Sheets
|
(in
thousands)
|
|
|
|
March 31,
2017
|
|
December 31,
2016
|
Cash and cash
equivalents
|
|
$
|
59,237
|
|
$
|
216,397
|
Cash and escrow
deposits – restricted
|
|
30,070
|
|
32,864
|
Accounts receivable,
net
|
|
138,149
|
|
141,705
|
Assets held for
sale
|
|
106,344
|
|
97,843
|
Prepaid expenses and
other current assets, net
|
|
139,917
|
|
130,695
|
Total current
assets
|
|
473,717
|
|
619,504
|
Property, plant and
equipment and leasehold intangibles, net
|
|
6,512,179
|
|
7,379,305
|
Other assets,
net
|
|
1,252,192
|
|
1,218,878
|
Total
assets
|
|
$
|
8,238,088
|
|
$
|
9,217,687
|
|
|
|
|
|
Current
liabilities
|
|
$
|
706,328
|
|
$
|
731,142
|
Long-term debt, less
current portion
|
|
3,389,339
|
|
3,413,998
|
Capital and financing
lease obligations, less current portion
|
|
1,544,316
|
|
2,415,914
|
Other
liabilities
|
|
643,473
|
|
578,901
|
Total
liabilities
|
|
6,283,456
|
|
7,139,955
|
Total Brookdale
Senior Living Inc. stockholders' equity
|
|
1,954,939
|
|
2,077,982
|
Noncontrolling
interest
|
|
(307)
|
|
(250)
|
Total
equity
|
|
1,954,632
|
|
2,077,732
|
Total liabilities and
equity
|
|
$
|
8,238,088
|
|
$
|
9,217,687
|
Condensed
Consolidated Statements of Cash Flows
|
(in
thousands)
|
|
|
|
Three Months Ended
March 31,
|
|
|
2017
|
|
2016
|
Cash Flows from
Operating Activities
|
|
|
|
|
Net income
(loss)
|
|
$
|
(126,361)
|
|
$
|
(48,817)
|
Adjustments to
reconcile net income (loss) to net cash provided by operating
activities:
|
|
|
|
|
Loss on
extinguishment of debt, net
|
|
54
|
|
139
|
Depreciation and
amortization, net
|
|
130,078
|
|
129,447
|
Asset
impairment
|
|
20,706
|
|
3,375
|
Equity in earnings of
unconsolidated ventures
|
|
(981)
|
|
(1,018)
|
Distributions from
unconsolidated ventures from cumulative share of net
earnings
|
|
439
|
|
—
|
Amortization of
deferred gain
|
|
(1,093)
|
|
(1,093)
|
Amortization of
entrance fees
|
|
(1,198)
|
|
(926)
|
Proceeds from
deferred entrance fee revenue
|
|
1,927
|
|
3,087
|
Deferred income tax
provision
|
|
83,310
|
|
934
|
Change in deferred
lease liability
|
|
(3,007)
|
|
3,935
|
Change in fair value
of derivatives
|
|
46
|
|
24
|
Loss (gain) on sale
of assets, net
|
|
603
|
|
(2,749)
|
Non-cash stock-based
compensation
|
|
7,774
|
|
9,769
|
Non-cash interest
expense on financing lease obligations
|
|
6,156
|
|
6,439
|
Amortization of
(above) below market lease, net
|
|
(1,697)
|
|
(1,733)
|
Other
|
|
(1,398)
|
|
(2,330)
|
Changes in operating
assets and liabilities:
|
|
|
|
|
Accounts receivable,
net
|
|
3,556
|
|
(2,738)
|
Prepaid expenses and
other assets, net
|
|
(8,630)
|
|
(36,554)
|
Accounts payable and
accrued expenses
|
|
(51,627)
|
|
(1,388)
|
Tenant refundable
fees and security deposits
|
|
(297)
|
|
(226)
|
Deferred
revenue
|
|
8,406
|
|
12,766
|
Net cash provided by
operating activities
|
|
66,766
|
|
70,343
|
Cash Flows from
Investing Activities
|
|
|
|
|
Increase in lease
security deposits and lease acquisition deposits, net
|
|
(420)
|
|
(1,210)
|
(Increase) decrease
in cash and escrow deposits — restricted
|
|
(629)
|
|
72
|
Additions to
property, plant and equipment and leasehold intangibles,
net
|
|
(48,928)
|
|
(108,510)
|
Acquisition of
assets, net of related payables and cash received
|
|
—
|
|
(12,157)
|
Investment in
unconsolidated ventures
|
|
(185,971)
|
|
(2,365)
|
Distributions
received from unconsolidated ventures
|
|
1,807
|
|
1,724
|
Proceeds from sale of
assets, net
|
|
31,675
|
|
45,584
|
Property insurance
proceeds
|
|
1,398
|
|
2,330
|
Other
|
|
696
|
|
84
|
Net cash used in
investing activities
|
|
(200,372)
|
|
(74,448)
|
Cash Flows from
Financing Activities
|
|
|
|
|
Proceeds from
debt
|
|
34,455
|
|
177,370
|
Repayment of debt and
capital and financing lease obligations
|
|
(52,273)
|
|
(84,016)
|
Proceeds from line of
credit
|
|
—
|
|
448,500
|
Repayment of line of
credit
|
|
—
|
|
(548,500)
|
Payment of financing
costs, net of related payables
|
|
(321)
|
|
(818)
|
Proceeds from
refundable entrance fees, net of refunds
|
|
(902)
|
|
(593)
|
Payment on lease
termination
|
|
—
|
|
(4,625)
|
Payments of employee
taxes for withheld shares
|
|
(5,112)
|
|
(965)
|
Other
|
|
599
|
|
585
|
Net cash used in
financing activities
|
|
(23,554)
|
|
(13,062)
|
Net decrease in cash
and cash equivalents
|
|
(157,160)
|
|
(17,167)
|
Cash and cash
equivalents at beginning of period
|
|
216,397
|
|
88,029
|
Cash and cash
equivalents at end of period
|
|
$
|
59,237
|
|
$
|
70,862
|
Reconciliation of Non-GAAP Financial
Measures
This earnings release contains financial measures utilized by
management to evaluate our operating performance and liquidity that
are not calculated in accordance with U.S. generally accepted
accounting principles ("GAAP"). Each of these measures,
Adjusted EBITDA and Adjusted Free Cash Flow should not be
considered in isolation from or as superior to or as a substitute
for net income (loss), income (loss) from operations, net cash
provided by (used in) operating activities, or other financial
measures determined in accordance with GAAP. We use these
non-GAAP financial measures to supplement our GAAP results in order
to provide a more complete understanding of the factors and trends
affecting our business. We strongly urge you to review the
reconciliations of Adjusted EBITDA from the Company's net income
(loss), the Company's Adjusted Free Cash Flow from the Company's
net cash provided by (used in) operating activities, and the
Company's proportionate share of Adjusted Free Cash Flow of
unconsolidated ventures from such ventures' net cash provided by
(used in) operating activities, along with our consolidated
financial statements included herein. We also strongly urge
you not to rely on any single financial measure to evaluate our
business. We caution investors that amounts presented in
accordance with our definitions of Adjusted EBITDA and Adjusted
Free Cash Flow may not be comparable to similar measures disclosed
by other companies, because not all companies calculate these
non-GAAP measures in the same manner.
Adjusted EBITDA
We changed our definition and calculation of Adjusted EBITDA
when we reported results for the second quarter of 2016.
Prior period amounts of Adjusted EBITDA presented herein have been
recast to conform to the new definition. The current definition of
Adjusted EBITDA reflects the removal of the following adjustments
to our net income (loss) that were used in the former definition:
the addition of our proportionate share of Cash From Facility
Operations of unconsolidated ventures and our entrance fee
receipts, net of refunds, and the subtraction of our amortization
of entrance fees.
We define Adjusted EBITDA as net income (loss) before:
provision (benefit) for income taxes; non-operating (income)
expense items; depreciation and amortization (including non-cash
impairment charges); (gain) loss on sale or acquisition of
communities (including gain (loss) on facility lease termination);
straight-line lease expense (income), net of amortization of
(above) below market rents; amortization of deferred gain; non-cash
stock-based compensation expense; and change in future service
obligation.
We use Adjusted EBITDA to assess our overall operating
performance. We believe this non-GAAP measure, as we have defined
it, is helpful in identifying trends in our day-to-day performance
because the items excluded have little or no significance on our
day-to-day operations. This measure provides an assessment of
controllable expenses and affords management the ability to make
decisions which are expected to facilitate meeting current
operating goals as well as achieve optimal operating performance.
It provides an indicator for management to determine if adjustments
to current spending decisions are needed.
Adjusted EBITDA provides us with a measure of operating
performance, independent of items that are beyond the control of
management in the short-term, such as the change in the liability
for the obligation to provide future services under existing
lifecare contracts, depreciation and amortization (including
non-cash impairment charges), straight-line lease expense (income),
taxation and interest expense associated with our capital
structure. This metric measures our operating performance based on
operational factors that management can impact in the short-term,
namely revenues and the cost structure or expenses of the
organization. Adjusted EBITDA is one of the metrics used by senior
management and the board of directors to review the operating
performance of the business on a regular basis. We believe that
Adjusted EBITDA is also used by research analysts and investors to
evaluate the performance of and value companies in our
industry.
Adjusted EBITDA has limitations as an analytical tool. Material
limitations in making the adjustments to our net income (loss) to
calculate Adjusted EBITDA, and using this non-GAAP financial
measure as compared to GAAP net income (loss), include:
- the cash portion of interest expense, income tax (benefit)
provision and non-recurring charges related to gain (loss) on sale
of communities (or facility lease termination) and extinguishment
of debt activities generally represent charges (gains), which may
significantly affect our operating results; and
- depreciation and amortization and asset impairment represent
the wear and tear and/or reduction in value of our communities and
other assets, which affects the services we provide to residents
and may be indicative of future needs for capital
expenditures.
We believe Adjusted EBITDA is useful to investors in evaluating
our operating performance because it is helpful in identifying
trends in our day-to-day performance since the items excluded have
little or no significance to our day-to-day operations and it
provides an assessment of our revenue and expense management.
The table below reconciles Adjusted EBITDA from net income
(loss) for the three months ended March 31, 2017 and
March 31, 2016 (in thousands):
|
Three Months Ended
March 31,
|
|
2017
|
|
2016
|
Net income
(loss)
|
$
|
(126,361)
|
|
$
|
(48,817)
|
Provision for income
taxes
|
84,028
|
|
1,665
|
Equity in earnings of
unconsolidated ventures
|
(981)
|
|
(1,018)
|
Debt modification and
extinguishment costs
|
61
|
|
1,110
|
(Loss) gain on sale
of assets, net
|
603
|
|
(2,749)
|
Other non-operating
income
|
(1,662)
|
|
(5,038)
|
Interest
expense
|
93,069
|
|
96,903
|
Interest
income
|
(631)
|
|
(702)
|
Income from
operations
|
48,126
|
|
41,354
|
Depreciation and
amortization
|
127,487
|
|
127,137
|
Asset
impairment
|
20,706
|
|
3,375
|
Straight-line lease
expense (income)
|
(3,007)
|
|
3,935
|
Amortization of
(above) below market lease, net
|
(1,697)
|
|
(1,733)
|
Amortization of
deferred gain
|
(1,093)
|
|
(1,093)
|
Non-cash stock-based
compensation
|
7,774
|
|
9,769
|
Adjusted
EBITDA
|
$
|
198,296
|
|
$
|
182,744
|
|
|
|
|
(1)
|
For the three months
ended March 31, 2017, the calculation of Adjusted EBITDA includes
$7.6 million and $0.2 million of transaction and strategic project
costs, respectively. For the three months ended March 31, 2016, the
calculation of Adjusted EBITDA includes $10.0 million, $0.9 million
and $9.1 million of integration, transaction and
transaction-related and strategic project costs, respectively.
Integration costs include transition costs associated with the
Emeritus merger and organizational restructuring (such as severance
and retention payments and recruiting expenses), third party
consulting expenses directly related to the integration of Emeritus
(in areas such as cost savings and synergy realization, branding
and technology and systems work), and internal costs such as
training, travel and labor, reflecting time spent by Company
personnel on integration activities and projects. Transaction and
transaction-related costs include third party costs directly
related to the acquisition of Emeritus, other acquisition and
disposition activity, community financing and leasing activity and
corporate capital structure assessment activities (including
shareholder relations advisory matters), and are primarily
comprised of legal, finance, consulting, professional fees and
other third party costs. Strategic project costs include costs
associated with certain strategic projects related to refining the
Company's strategy, building out enterprise-wide capabilities for
the post-merger platform (including the EMR roll-out project) and
reducing costs and achieving synergies by capitalizing on
scale.
|
Adjusted Free Cash Flow
We define Adjusted Free Cash Flow as net cash provided by (used
in) operating activities before: changes in operating assets
and liabilities; gain (loss) on facility lease termination; and
distributions from unconsolidated ventures from cumulative share of
net earnings; plus: proceeds from refundable entrance fees,
net of refunds; and property insurance proceeds; less: lease
financing debt amortization and Non-Development CapEx.
Non-Development CapEx is comprised of corporate and community-level
capital expenditures, including those related to maintenance,
renovations, upgrades and other major building infrastructure
projects for our communities. Non-Development CapEx does not
include capital expenditures for community expansions and major
community redevelopment and repositioning projects, including our
Program Max initiative, and the development of new
communities. Amounts of Non-Development CapEx are presented
net of lessor reimbursements received or anticipated to be received
in the calculation of Adjusted Free Cash Flow.
Our proportionate share of Adjusted Free Cash Flow of
unconsolidated ventures is calculated based on our equity ownership
percentage and in a manner consistent with the definition of
Adjusted Free Cash Flow for our consolidated entities. Our
investments in our unconsolidated ventures are accounted for under
the equity method of accounting and, therefore, our proportionate
share of Adjusted Free Cash Flow of unconsolidated ventures does
not represent cash available to our consolidated business except to
the extent it is distributed to us.
We use Adjusted Free Cash Flow to assess our overall liquidity.
This measure provides an assessment of controllable expenses and
affords management the ability to make decisions which are expected
to facilitate meeting current financial and liquidity goals as well
as to achieve optimal financial performance. It provides an
indicator for management to determine if adjustments to current
spending decisions are needed. Adjusted Free Cash Flow measures our
liquidity based on operational factors that management can impact
in the short-term, namely the cost structure or expenses of the
organization. Adjusted Free Cash Flow is one of the metrics used by
our senior management and board of directors (i) to review our
ability to service our outstanding indebtedness, including our
credit facilities, (ii) to review our ability to pay dividends to
stockholders or engage in share repurchases, (iii) to review our
ability to make capital expenditures, (iv) for other corporate
planning purposes and/or (v) in making compensation determinations
for certain of our associates (including our named executive
officers).
Adjusted Free Cash Flow has limitations as an analytical tool.
Material limitations in making the adjustments to our net cash
provided by (used in) operating activities to calculate Adjusted
Free Cash Flow, and using this non-GAAP financial measure as
compared to GAAP net cash provided by (used in) operating
activities, include:
- Adjusted Free Cash Flow does not represent cash available for
dividends or discretionary expenditures, since we have mandatory
debt service requirements and other non-discretionary expenditures
not reflected in this measure; and
- the cash portion of non-recurring charges related to gain
(loss) on lease termination and extinguishment of debt activities
generally represent charges (gains), which may significantly affect
our financial results.
In addition, our proportionate share of Adjusted Free Cash Flow
of unconsolidated ventures has limitations as an analytical tool
because such measure does not represent cash available directly for
use by our consolidated business except to the extent actually
distributed to us, and we do not have control, or we share control
in determining, the timing and amount of distributions from our
unconsolidated ventures and, therefore, we may never receive such
cash.
We believe Adjusted Free Cash Flow is useful to investors
because it assists their ability to meaningfully evaluate (1) our
ability to service our outstanding indebtedness, including our
credit facilities and capital and financing leases, (2) our ability
to pay dividends to stockholders or engage in share repurchases,
(3) our ability to make capital expenditures, and (4) the
underlying value of our assets, including our interests in real
estate.
We believe presentation of our proportionate share of Adjusted
Free Cash Flow of unconsolidated ventures is useful to investors
since such measure reflects the cash generated by the operating
activities of the unconsolidated ventures for the reporting period
and, to the extent such cash is not distributed to us, it generally
represents cash used or to be used by the ventures for the
repayment of debt, investing in expansions or acquisitions, reserve
requirements, or other corporate uses by such ventures, and such
uses reduce our potential need to make capital contributions to the
ventures of our proportionate share of cash needed for such
items.
The table below reconciles the Company's Adjusted Free Cash Flow
from our net cash provided by (used in) operating activities for
the three months ended March 31, 2017 and March 31, 2016
(in thousands):
|
|
Three Months Ended
March 31,
|
|
|
2017
|
|
2016
|
Net cash provided by
operating activities
|
|
$
|
66,766
|
|
$
|
70,343
|
Net cash used in
investing activities
|
|
(200,372)
|
|
(74,448)
|
Net cash used in
financing activities
|
|
(23,554)
|
|
(13,062)
|
Net decrease in cash
and cash equivalents
|
|
$
|
(157,160)
|
|
$
|
(17,167)
|
|
|
|
|
|
Net cash provided by
operating activities
|
|
$
|
66,766
|
|
$
|
70,343
|
Changes in operating
assets and liabilities
|
|
48,592
|
|
28,140
|
Proceeds from
refundable entrance fees, net of refunds
|
|
(902)
|
|
(593)
|
Lease financing debt
amortization
|
|
(17,248)
|
|
(15,302)
|
Distributions from
unconsolidated ventures from cumulative share of net
earnings
|
|
(439)
|
|
—
|
Non-development
capital expenditures, net
|
|
(34,722)
|
|
(57,034)
|
Property insurance
proceeds
|
|
1,398
|
|
2,330
|
Adjusted Free Cash
Flow
|
|
$
|
63,445
|
|
$
|
27,884
|
|
|
|
|
(1)
|
For the three months
ended March 31, 2017, the calculation of Adjusted Free Cash Flow
includes $7.6 million and $0.2 million of transaction and strategic
project costs, respectively. For the three months ended March 31,
2016, the calculation of Adjusted Free Cash Flow includes $10.0
million, $1.8 million and $9.1 million of integration costs,
transaction and transaction-related costs and strategic project
costs, respectively (including $1.0 million of debt modification
costs excluded from Adjusted EBITDA). Integration costs include
transition costs associated with the Emeritus merger and
organizational restructuring (such as severance and retention
payments and recruiting expenses), third party consulting expenses
directly related to the integration of Emeritus (in areas such as
cost savings and synergy realization, branding and technology and
systems work), and internal costs such as training, travel and
labor, reflecting time spent by Company personnel on integration
activities and projects. Transaction and transaction-related costs
include third party costs directly related to the acquisition of
Emeritus, other acquisition and disposition activity, community
financing and leasing activity and corporate capital structure
assessment activities (including shareholder relations advisory
matters), and are primarily comprised of legal, finance,
consulting, professional fees and other third party costs.
Strategic project costs include costs associated with certain
strategic projects related to refining the Company's strategy,
building out enterprise-wide capabilities for the post-merger
platform (including the EMR roll-out project) and reducing costs
and achieving synergies by capitalizing on scale.
|
The table below reconciles the Company's proportionate share of
Adjusted Free Cash Flow of unconsolidated ventures from net cash
provided by (used in) operating activities of such unconsolidated
ventures for the three months ended March 31, 2017 and
March 31, 2016 (in thousands). For purposes of
this presentation, amounts for each line item represent the
aggregate amounts of such line items for all of our unconsolidated
ventures.
|
|
Three Months Ended
March 31,
|
|
|
2017
|
|
2016
|
Net cash provided by
operating activities
|
|
$
|
59,924
|
|
$
|
54,593
|
Net cash used in
investing activities
|
|
(1,150,080)
|
|
(37,924)
|
Net cash provided by
(used in) financing activities
|
|
1,145,059
|
|
(5,851)
|
Net increase in cash
and cash equivalents
|
|
$
|
54,903
|
|
$
|
10,818
|
|
|
|
|
|
Net cash provided by
operating activities
|
|
$
|
59,924
|
|
$
|
54,593
|
Changes in operating
assets and liabilities
|
|
2,086
|
|
(2,320)
|
Proceeds from
refundable entrance fees, net of refunds
|
|
(4,365)
|
|
(2,099)
|
Non-development
capital expenditures, net
|
|
(17,027)
|
|
(21,805)
|
Property Insurance
Proceeds
|
|
393
|
|
—
|
Adjusted Free Cash
Flow of unconsolidated ventures
|
|
$
|
41,011
|
|
$
|
28,369
|
|
|
|
|
|
Brookdale weighted
average ownership percentage
|
|
21.3%
|
|
30.0%
|
|
|
|
|
|
Brookdale's
proportionate share of Adjusted Free Cash Flow of
unconsolidated
ventures
|
|
$
|
8,750
|
|
$
|
8,505
|
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/brookdale-announces-first-quarter-2017-results-300453460.html
SOURCE Brookdale Senior Living Inc.