NASHVILLE, Tenn., Feb. 18, 2020 /PRNewswire/ -- Brookdale Senior
Living Inc. (NYSE: BKD) ("Brookdale" or the "Company") announced
results for the quarter and year ended December 31,
2019.
FOURTH QUARTER AND FULL YEAR HIGHLIGHTS
- Achieved full year 2019 financial results within or better than
original 2019 guidance ranges.
- Same community fourth quarter revenue increased 2.1%
year-over-year.
- Same community fourth quarter weighted average occupancy
improved 30 basis points on a sequential basis, better than the
industry.
- In January 2020, acquired 26
previously leased communities, increasing the size of the Company's
owned real estate portfolio.
Lucinda ("Cindy") Baier, Brookdale's President and CEO, said, "I
am pleased that we delivered financial results within or better
than our 2019 guidance ranges. We are making great progress on the
strategic plan we introduced in 2018. We achieved our goal of
selling assets to generate $250
million of net proceeds. In addition, we recently completed
significant transactions with Healthpeak to unlock the value of the
unconsolidated CCRC venture. With another quarter of positive
leading indicators and industry leading sequential occupancy
growth, we are building momentum and are well positioned to achieve
our five-year financial goal and create long-term shareholder
value."
FULL YEAR RESULTS
The Company reported net loss of $268.5
million and net cash provided by operating activities of
$216.4 million for the year ended
December 31, 2019. The Company's full
year 2019 results compared to the Company's 2019 guidance were:
($ in
millions)
|
|
Full Year 2019
Guidance
|
Actual 2019
Results
|
Adjusted
EBITDA(1)
|
|
$400 -
$425
|
$401
|
Adjusted Free Cash
Flow(1)
|
|
($100) -
($80)
|
($76)
|
Non-development
capital expenditures
|
|
Approx.
$250
|
$236
|
The Company's
proportionate share of Adjusted EBITDA of
unconsolidated ventures
|
|
$30 - $40
|
$43
|
The Company's
proportionate share of Adjusted Free Cash Flow
of unconsolidated ventures
|
|
$10 - $20
|
$18
|
(1) Adjusted EBITDA and Adjusted Free Cash Flow
are financial measures that are not calculated in accordance with
GAAP. See "Reconciliations of Non-GAAP Financial Measures" for the
Company's definition of such measures, reconciliations to the most
comparable GAAP financial measures, and other important information
regarding the use of the Company's non-GAAP financial measures.
During the first quarter of 2019, the Company modified its
definition of Adjusted EBITDA to exclude transaction and
organizational restructuring costs and its definition of Adjusted
Free Cash Flow to no longer adjust net cash provided by (used in)
operating activities for changes in working capital items other
than changes in prepaid insurance premiums financed with notes
payable and lease liability for lease termination and modification.
Amounts for all periods herein reflect application of the modified
definitions.
The Company adopted the new lease accounting standard (ASC 842)
effective January 1, 2019. Adoption
of the new lease standard and its application to residency
agreements and costs related thereto resulted in the recognition of
additional resident fees and facility operating expense for the
full year 2019, which were non-cash and non-recurring in future
years. The result was a non-cash net impact to net loss and
Adjusted EBITDA of negative $23.1
million, with no impact to the 2019 amounts of net cash
provided by operating activities and Adjusted Free Cash Flow.
SUMMARY OF FOURTH QUARTER RESULTS
Same Community Senior Housing (Independent Living (IL),
Assisted Living and Memory Care (AL/MC), and CCRCs)
The table below presents a summary of same community operating
results and metrics of the Company's consolidated senior housing
portfolio and excludes the impact of transactions and the new lease
accounting standard.(2)
($ in millions,
except RevPAR
and RevPOR)
|
|
Year-Over-Year
Increase /
(Decrease)
|
|
Sequential
Increase /
(Decrease)
|
4Q
2019
|
4Q
2018
|
Amount
|
Percent
|
3Q
2019
|
Amount
|
Percent
|
Resident
fees
|
$
|
620.4
|
|
$
|
607.8
|
|
$
|
12.6
|
|
2.1%
|
$
|
619.1
|
|
$
|
1.3
|
|
0.2%
|
Facility operating
expense
|
$
|
429.3
|
|
$
|
413.9
|
|
$
|
15.4
|
|
3.7%
|
$
|
440.6
|
|
$
|
(11.3)
|
|
(2.6)%
|
RevPAR
|
$
|
4,151
|
|
$
|
4,065
|
|
$
|
86
|
|
2.1%
|
$
|
4,143
|
|
$
|
8
|
|
0.2%
|
Weighted average
occupancy
|
85.0%
|
|
85.2%
|
|
(20) bps
|
n/a
|
84.7%
|
|
30bps
|
n/a
|
RevPOR
|
$
|
4,885
|
|
$
|
4,768
|
|
$
|
117
|
|
2.5%
|
$
|
4,893
|
|
$
|
(8)
|
|
(0.2)%
|
|
|
|
|
|
|
|
|
(2) The same community portfolio includes 637
communities utilizing the Company's methodology for determining
same store communities which generally excludes assets held for
sale, communities acquired or disposed since the beginning of the
prior year, and certain communities that have undergone or are
undergoing expansion, redevelopment, and repositioning projects.
Operating results and data presented on a same community basis
reflect results and data of the same store communities and, for the
2019 periods, exclude the additional resident fee revenue and
facility operating expense recognized as a result of application of
the new lease accounting standard under ASC 842 of approximately
$7.2 million and $12.7 million, respectively, for the third
quarter and approximately $9.5
million and $13.4 million,
respectively, for the fourth quarter.
- Resident fees:
-
- The year-over-year increase was primarily attributable to the
increase in RevPAR, comprised of the increase in RevPOR, primarily
the result of in-place rent increases compared to the prior year
quarter, partially offset by the 20 basis point decrease in same
community weighted average occupancy.
- Weighted average occupancy improved 30 basis points on a
sequential basis, 10 basis points better than the industry.
- Facility operating expense: The year-over-year increase
was primarily due to a 6.3% increase in labor expense arising from
increases in wage rates and in employee benefits expense.
Consolidated
The table below presents a summary of consolidated operating
results.
|
|
Year-Over-Year
Increase /
(Decrease)
|
Change
Attributable To:
|
($ in
millions)
|
4Q
2019
|
4Q
2018
|
Amount
|
Percent
|
|
Transactions
|
New Lease
Standard
|
Resident fee and
management fee revenue
|
$
|
809.7
|
|
$
|
824.5
|
|
$
|
(14.8)
|
|
(1.8)
|
%
|
|
$
|
(41.2)
|
|
$
|
10.4
|
|
Facility operating
expense
|
598.4
|
|
586.9
|
|
11.5
|
|
2.0
|
%
|
|
(27.8)
|
|
14.5
|
|
Net income
(loss)
|
(91.3)
|
|
131.5
|
|
(222.8)
|
|
NM
|
|
|
See note
(3)
|
|
(4.1)(3)
|
Adjusted
EBITDA
|
100.1
|
|
115.2
|
|
(15.1)
|
|
(13.1)
|
%
|
|
(10.1)
|
|
(4.1)
|
|
(3) The change in net income (loss) attributable
to transactions is not presented as certain impacts are not
available without unreasonable effort. The change attributable to
the new lease standard represents the impact of the timing of the
revenue and cost recognition associated with residency agreements
related to the adoption of the new lease standard.
- Transactions and lease standard impact:
-
- Since October 1, 2018, the
Company completed dispositions, through sales and lease
terminations, of 66 communities (5,932 units).
- The Company transitioned management arrangements on 132 net
communities since October 1, 2018,
generally for interim management arrangements on formerly leased or
owned communities and management arrangements on certain former
unconsolidated ventures in which it sold its interest.
- Adoption of the new lease standard and its application to
residency agreements and costs related thereto resulted in the
recognition of additional non-cash resident fees and facility
operating expense for the fourth quarter 2019, for a non-cash net
impact of negative $4.1 million to
net income (loss) and Adjusted EBITDA.
- To aid in comparability between periods, presentations in this
press release of the Company's results on a same community basis
and RevPAR and RevPOR exclude the impact of the adoption of the new
lease accounting standard and its application to the Company's
residency agreements and costs related thereto.
- Resident fee and management fee revenue:
-
- Excluding the impact of transactions and the new lease
accounting standard, resident fee and management fee revenue
increased 2.1% over the prior year quarter primarily due to a 2.5%
increase in same community RevPOR, partially offset by a 20 basis
point decrease in same community weighted average occupancy.
- Fourth quarter 2019 consolidated RevPAR increased $132, or 3.3%, to $4,116 compared to the fourth quarter of the
prior year as a result of an increase in consolidated RevPOR of
$150, or 3.2%, to $4,871. Benefits from dispositions, same
community in-place rate increases, and an increase in consolidated
occupancy of 10 basis points contributed to the increases in
consolidated RevPAR and RevPOR.
- Facility operating expense: Excluding the impact of
transactions and the new lease accounting standard, facility
operating expense increased $24.8
million, or 4.5%, primarily due to an increase in community
labor expense attributable to planned wage rate increases and an
increase in employee benefits expense.
- Net income (loss):
-
- The change in net income (loss) compared to the prior year
quarter was primarily attributable to the revenue and facility
operating expense factors noted above, a $30.0 million decrease in benefit for income
taxes, and a $212.1 million decrease
in net gain on sale of assets. The prior year period includes a
$216.7 million net gain on sale of
assets.
- General and administrative expense of $49.0 million for the fourth quarter of 2019
represents a $7.3 million, or 13.0%,
decrease from the prior year quarter, primarily due to lower
compensation and professional fees, offset by a $2.3 million increase in transaction and
organizational restructuring costs incurred in the current
quarter.
- Adjusted EBITDA: The decrease compared to the prior
year quarter was primarily attributable to the impact of
transactions completed since the beginning of the prior year period
and application of the new lease standard effective January 1, 2019.
Health Care Services
|
|
Increase /
(Decrease)
|
($ in
millions)
|
4Q
2019
|
4Q
2018
|
Amount
|
Percent
|
Resident fee
revenue
|
|
|
|
|
Home
health
|
$
|
77.4
|
|
$
|
81.0
|
|
$
|
(3.6)
|
|
(4.4)
|
%
|
Hospice
|
26.1
|
|
21.3
|
|
4.8
|
|
22.5
|
%
|
Outpatient
therapy
|
6.0
|
|
6.0
|
|
—
|
|
—
|
|
Total resident fee
revenue
|
109.5
|
|
108.3
|
|
1.2
|
|
1.1
|
%
|
Facility operating
expense
|
106.6
|
|
102.3
|
|
4.3
|
|
4.2
|
%
|
|
|
|
|
|
- Resident fee revenue: Health Care Services revenue
improved due to an increase in volume for hospice services,
partially offset by a decrease in revenue for home health services
primarily attributable to sales force turnover, customer relations
issues related to the centralized intake initiative, unfavorable
case-mix, and community dispositions.
- Facility operating expense: The year-over-year increase
in facility operating expense was primarily attributable to an
increase in labor costs arising from wage rate increases, the
expansion of the Company's hospice services, and an increase in
employee benefits expense.
Management Services
|
|
Increase /
(Decrease)
|
($ in
millions)
|
4Q
2019
|
4Q
2018
|
Amount
|
Percent
|
Management
fees
|
$
|
12.4
|
|
$
|
17.7
|
|
$
|
(5.3)
|
|
(29.9)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
- Management fees: The year-over-year decrease in
management fees was primarily attributable to the transition of
management arrangements on 132 net communities since October 1, 2018, generally for interim management
arrangements on formerly leased or owned communities and management
arrangements on certain former unconsolidated ventures in which the
Company sold its interest.
LIQUIDITY
The table below presents a summary of the Company's net cash
provided by (used in) operating activities and Adjusted Free Cash
Flow.
|
|
Increase /
(Decrease)
|
($ in
millions)
|
4Q
2019
|
4Q
2018
|
Amount
|
Percent
|
Net cash provided by
(used in) operating activities
|
$
|
88.1
|
|
$
|
33.5
|
|
$
|
54.6
|
|
163.0
|
%
|
Adjusted Free Cash
Flow
|
0.5
|
|
(33.0)
|
|
33.5
|
|
NM
|
|
|
|
|
|
|
- Net cash provided by (used in) operating activities: The
year-over-year increase in net cash provided by operating
activities was primarily attributable to $8.0 million of cash paid to terminate community
operating leases during the prior year period, an $8.9 million increase in capital expenditure
reimbursements from lessors for operating leases during the fourth
quarter of 2019, an increase in accounts receivable collections
during the fourth quarter of 2019, and higher accrued insurance
liabilities during the fourth quarter of 2019.
- Adjusted Free Cash Flow:
-
- The increase in Adjusted Free Cash Flow compared to the prior
year fourth quarter was attributable to the Adjusted EBITDA factors
noted previously, as well as:
-
- A $49.1 million increase in cash
provided by operating activities for changes in operating assets
and liabilities, including the impacts of an increase in accounts
receivable collections and higher accrued insurance liabilities
during the fourth quarter of 2019.
- The change was offset by a $4.1
million year-over-year increase in non-development capital
expenditures, net. Fourth quarter 2019 non-development capital
expenditures, net were $55.6
million.
- Total Liquidity:
-
- Total liquidity for the Company was $481.3 million as of December 31, 2019, an
increase from total liquidity of $455.4
million as of September 30,
2019. The $25.9 million
increase was primarily attributable to net cash proceeds from asset
sales.
- Total liquidity as of December 31, 2019 included
$240.2 million of unrestricted cash
and cash equivalents, $68.6 million
of marketable securities, and $172.5
million of availability on the Company's secured credit
facility.
- Share Repurchases: In the fourth quarter of 2019,
the Company repurchased $5.6 million
of shares of common stock in open market transactions pursuant to
the repurchase program publicly announced on November 1, 2016 (approximately 0.8 million
shares at an average purchase price of $6.99 per share). As of December 31, 2019, approximately $62.1 million remained available under the
repurchase program.
TRANSACTION UPDATE
The closings of the various pending and expected transactions
described below are, or will be, subject to the satisfaction of
various closing conditions, including (where applicable) the
receipt of regulatory approvals. However, there can be no assurance
that the transactions will close or, if they do, when the actual
closings will occur.
- Community Dispositions: During the fourth quarter of
2019, the Company completed the sale of six owned communities (914
units) for cash proceeds of $41.3
million, net of transaction costs, and terminated the lease
on two communities (52 units). The Company completed its real
estate strategy announced in 2018, and has received more than
$250 million of net proceeds from the
sale of owned communities.
- Management Transitions: The Company transitioned
management on 23 communities to new operators during the fourth
quarter of 2019, most of which were managed under management
arrangements on certain former unconsolidated ventures in which the
Company sold its interest. Management fees for the fourth quarter
of 2019 include approximately $7.5
million of management fees attributable to communities for
which the Company's management agreements were terminated since
October 1, 2019 or are expected to
terminate in 2020, including management agreements on communities
owned by the CCRC venture, management arrangements on certain
former unconsolidated ventures in which the Company sold its
interest, and interim management arrangements on formerly leased
communities.
- Leased Community Acquisitions: On January 22, 2020, the Company acquired eight
leased communities (336 units) from National Health Investors, Inc.
("NHI") pursuant to the exercise of a purchase option for a
purchase price of $39.3 million. The
Company funded the community acquisitions with cash on hand and
expects to obtain approximately $28
million of non-recourse mortgage financing on the
communities.
- CCRC Venture and Healthpeak Properties Inc. ("Healthpeak")
(f/k/a HCP, Inc.) Master Lease Transactions: On January 31, 2020, the Company completed three
previously announced transactions with Healthpeak, including: (i)
the Company's sale of its 51% equity interest in 14 unconsolidated
entry fee CCRC communities for cash proceeds of $295.2 million, Healthpeak's payment of a
$100.0 million management termination
fee to the Company, and transition of operations for the
communities to a new operator; (ii) the Company's acquisition of 18
communities formerly-leased from Healthpeak for a total purchase
price of $405.5 million, which the
Company financed with $192.6 million
of non-recourse mortgage financings; and (iii) the parties'
amendment and restatement of the master lease for 25 communities
(one of which Healthpeak has agreed to transition to a successor
operator). The Company expects to obtain approximately $30.0 million of additional non-recourse mortgage
financing on the communities. The parties are jointly marketing for
sale the remaining two unconsolidated entry fee CCRC communities.
Subsequent to these transactions, the Company will have exited
substantially all of its entry fee CCRC operations. The net
proceeds from the foregoing transactions improve the Company's
capital structure flexibility and may be used, among other uses,
for opportunistic share repurchases, to pursue potential lease
restructuring opportunities that it identifies, and to fund
investments to support its strategy.
- Assets Held for Sale: As of December 31, 2019, three communities were
classified as held for sale, resulting in $42.7 million being recorded as assets held for
sale and $28.9 million of mortgage
debt being included in the current portion of long-term debt within
the condensed consolidated balance sheet with respect to such
communities. This debt is expected to be repaid with the proceeds
from the sales.
2020 OUTLOOK
For the full year 2020, the Company is providing the following
guidance, including and excluding the $100.0 million management termination fee
received from Healthpeak on January 31,
2020:
($ in
millions)
|
|
Including
$100.0M
Management
Termination Fee
|
Excluding
$100.0M
Management
Termination Fee
|
Adjusted
EBITDA
|
|
$510 -
$540
|
$410 -
$440
|
Adjusted Free Cash
Flow
|
|
$70 - $90
|
($30) -
($10)
|
Key Guidance Assumptions:
- Includes the impact of transactions closed prior to the date
hereof and the expected impact of the Company's planned financing
activity and plans to dispose of three communities classified as
assets held for sale as of December 31,
2019, termination of lease obligations on three communities
for which the Company has provided notice of non-renewal, and
anticipated terminations of certain management agreements with
third parties as the Company transitions to new operators its
management on certain former unconsolidated ventures in which the
Company sold its interest and interim management on formerly leased
communities.
- Except for the foregoing transactions, the Company's guidance
excludes the impact of any future acquisition, disposition,
financing, or other transaction activity.
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 and Adjusted Free Cash Flow
from the Company's net income (loss) and the Company's 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 its website at
www.brookdale.com/investor supplemental information relating to the
Company's fourth quarter and full year 2019 results, an updated
investor presentation, and a copy of this earnings release. The
supplemental information and a copy of this earnings release will
also be furnished in a Form 8-K to be filed with the SEC.
EARNINGS CONFERENCE CALL
Brookdale's management will conduct a conference call to review
the financial results of its fourth quarter and full year ended
December 31, 2019 on February 19, 2020 at 9:00 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 "Brookdale".
A webcast of the conference call will be available to the public
on a listen-only basis at www.brookdale.com/investor. 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
following the call.
For those who cannot listen to the live call, a replay will be
available until 11:59 PM ET on
March 4, 2020 by dialing (855)
859-2056 (from within the U.S.) or (404) 537-3406 (from
outside of the U.S.) and referencing access code "3488808".
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
and manages independent living, assisted living, memory care, and
continuing care retirement communities, with 743 communities in 45
states and the ability to serve approximately 65,000 residents as
of February 1, 2020. The Company also
offers a range of home health, hospice, and outpatient therapy
services to over 20,000 patients as of that date. Brookdale's stock
is traded on the New York Stock Exchange under the ticker symbol
BKD.
DEFINITIONS OF RevPAR AND RevPOR
RevPAR, or average monthly senior housing resident fee revenue
per available unit, is defined by the Company as resident fee
revenue for the corresponding portfolio for the period (excluding
Health Care Services segment revenue and entrance fee amortization,
and, for the 2019 periods, the additional resident fee revenue
recognized as a result of the application of the new lease
accounting standard under ASC 842), divided by the weighted average
number of available units in the corresponding portfolio for the
period, divided by the number of months in the period.
RevPOR, or average monthly senior housing resident fee revenue
per occupied unit, is defined by the Company as resident fee
revenue for the corresponding portfolio for the period (excluding
Health Care Services segment revenue and entrance fee amortization,
and, for the 2019 periods, the additional resident fee revenue
recognized as a result of the application of the new lease
accounting standard under ASC 842), 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 conference 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 regarding the
Company's guidance and any other 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, the Company 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, 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 family members; changes
in reimbursement rates, methods or timing under governmental
reimbursement programs including the Medicare and Medicaid
programs; the impact of ongoing healthcare reform efforts; the
effects of senior housing construction and development, oversupply
and increased competition; disruptions in the financial markets
that affect the Company's ability to obtain financing or extend or
refinance debt as it matures and the Company's financing costs; the
risks associated with current global economic conditions and
general economic factors such as inflation, the consumer price
index, commodity costs, fuel and other energy costs, costs of
salaries, wages, benefits, and insurance, interest rates and tax
rates; the impact of seasonal contagious illness or an outbreak of
other contagious disease in the markets in which the Company
operates; the Company's ability to generate sufficient cash flow to
cover required interest and long-term lease payments and to fund
its planned capital projects; the effect of the Company's
indebtedness and long-term leases on its liquidity; 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 borrowing base
calculations and the Company's consolidated fixed charge coverage
ratio on availability under its revolving credit facility; the
potential phasing out of LIBOR which may increase the costs of our
debt obligations; increased competition for or a shortage of
personnel, wage pressures resulting from increased competition, low
unemployment levels, minimum wage increases and changes in overtime
laws, and union activity; 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 inability to achieve or maintain profitability; 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; the Company's ability to obtain
additional capital on terms acceptable to it; 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; delays in obtaining regulatory approvals;
terminations, early or otherwise, or non-renewal of management
agreements; 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;
departures of key officers and potential disruption caused by
changes in management; risks related to the implementation of the
Company's strategy, including initiatives undertaken to execute on
its strategic priorities and their effect on the Company's results;
actions of activist stockholders, including a proxy contest; market
conditions and capital allocation decisions that may influence the
Company's determination from time to time whether to purchase any
shares under its existing share repurchase program and the
Company's ability to fund any repurchases; the Company's ability to
maintain consistent quality control; a decrease in the overall
demand for senior housing; 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; the cost and difficulty of
complying with increasing and evolving regulation; costs to respond
to, and adverse determinations resulting from, government reviews,
audits and investigations; unanticipated costs to comply with
legislative or regulatory developments; as well as other risks
detailed from time to time in the Company's filings with the
Securities and Exchange Commission, including those contained 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 to reflect any change in its 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
December 31,
|
|
Years Ended
December 31,
|
(in thousands,
except per share data)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Revenue
|
|
|
|
|
|
|
|
Resident
fees
|
$
|
797,352
|
|
|
$
|
806,797
|
|
|
$
|
3,209,931
|
|
|
$
|
3,449,211
|
|
Management
fees
|
12,352
|
|
|
17,706
|
|
|
57,108
|
|
|
71,986
|
|
Reimbursed costs
incurred on behalf of managed communities
|
176,934
|
|
|
244,427
|
|
|
790,049
|
|
|
1,010,229
|
|
Total
revenue
|
986,638
|
|
|
1,068,930
|
|
|
4,057,088
|
|
|
4,531,426
|
|
|
|
|
|
|
|
|
|
Expense
|
|
|
|
|
|
|
|
Facility operating
expense (excluding facility depreciation and
amortization of $88,105, $97,416, $349,215, and
$407,427,
respectively)
|
598,438
|
|
|
586,851
|
|
|
2,390,495
|
|
|
2,453,328
|
|
General and
administrative expense (including non-cash stock-
based compensation expense of $4,711, $5,357,
$23,026,
and $26,067, respectively)
|
48,993
|
|
|
56,337
|
|
|
219,289
|
|
|
259,475
|
|
Facility operating
lease expense
|
66,056
|
|
|
70,542
|
|
|
269,666
|
|
|
303,294
|
|
Depreciation and
amortization
|
94,971
|
|
|
106,104
|
|
|
379,433
|
|
|
447,455
|
|
Goodwill and asset
impairment
|
43,012
|
|
|
37,927
|
|
|
49,266
|
|
|
489,893
|
|
Loss (gain) on
facility lease termination and modification, net
|
1,382
|
|
|
13,197
|
|
|
3,388
|
|
|
162,001
|
|
Costs incurred on
behalf of managed communities
|
176,934
|
|
|
244,427
|
|
|
790,049
|
|
|
1,010,229
|
|
Total operating
expense
|
1,029,786
|
|
|
1,115,385
|
|
|
4,101,586
|
|
|
5,125,675
|
|
Income (loss) from
operations
|
(43,148)
|
|
|
(46,455)
|
|
|
(44,498)
|
|
|
(594,249)
|
|
|
|
|
|
|
|
|
|
Interest
income
|
1,800
|
|
|
2,268
|
|
|
9,859
|
|
|
9,846
|
|
Interest
expense:
|
|
|
|
|
|
|
|
Debt
|
(42,538)
|
|
|
(46,920)
|
|
|
(177,718)
|
|
|
(188,505)
|
|
Financing lease
obligations
|
(16,394)
|
|
|
(17,388)
|
|
|
(66,353)
|
|
|
(83,604)
|
|
Amortization of
deferred financing costs and debt discount
|
(1,137)
|
|
|
(644)
|
|
|
(4,057)
|
|
|
(7,757)
|
|
Change in fair value
of derivatives
|
(1)
|
|
|
(250)
|
|
|
(213)
|
|
|
(403)
|
|
Debt modification and
extinguishment costs
|
(53)
|
|
|
(11,600)
|
|
|
(5,247)
|
|
|
(11,677)
|
|
Equity in earnings
(loss) of unconsolidated ventures
|
(970)
|
|
|
(1,897)
|
|
|
(4,544)
|
|
|
(8,804)
|
|
Gain (loss) on sale
of assets, net
|
4,522
|
|
|
216,660
|
|
|
7,245
|
|
|
293,246
|
|
Other non-operating
income (loss)
|
4,815
|
|
|
6,025
|
|
|
14,765
|
|
|
14,099
|
|
Income (loss) before
income taxes
|
(93,104)
|
|
|
99,799
|
|
|
(270,761)
|
|
|
(577,808)
|
|
Benefit (provision)
for income taxes
|
1,781
|
|
|
31,732
|
|
|
2,269
|
|
|
49,456
|
|
Net income
(loss)
|
(91,323)
|
|
|
131,531
|
|
|
(268,492)
|
|
|
(528,352)
|
|
Net (income) loss
attributable to noncontrolling interest
|
(85)
|
|
|
8
|
|
|
561
|
|
|
94
|
|
Net income (loss)
attributable to Brookdale Senior Living Inc.
common
stockholders
|
$
|
(91,408)
|
|
|
$
|
131,539
|
|
|
$
|
(267,931)
|
|
|
$
|
(528,258)
|
|
|
|
|
|
|
|
|
|
Basic and diluted net
income (loss) per share attributable to
Brookdale Senior Living Inc. common
stockholders
|
$
|
(0.49)
|
|
|
$
|
0.70
|
|
|
$
|
(1.44)
|
|
|
$
|
(2.82)
|
|
|
|
|
|
|
|
|
|
Weighted average
shares used in computing basic and diluted
net income (loss) per share
|
185,245
|
|
|
187,721
|
|
|
185,907
|
|
|
187,468
|
|
Condensed
Consolidated Balance Sheets
|
|
(in
thousands)
|
December 31,
2019
|
|
December 31,
2018
|
Cash and cash
equivalents
|
$
|
240,227
|
|
|
$
|
398,267
|
|
Marketable
securities
|
68,567
|
|
|
14,855
|
|
Restricted
cash
|
26,856
|
|
|
27,683
|
|
Accounts receivable,
net
|
133,613
|
|
|
133,905
|
|
Assets held for
sale
|
42,671
|
|
|
93,117
|
|
Prepaid expenses and
other current assets, net
|
84,241
|
|
|
106,189
|
|
Total current
assets
|
596,175
|
|
|
774,016
|
|
Property, plant and
equipment and leasehold intangibles, net
|
5,109,834
|
|
|
5,275,427
|
|
Operating lease
right-of-use assets
|
1,159,738
|
|
|
—
|
|
Other assets,
net
|
328,686
|
|
|
417,817
|
|
Total
assets
|
$
|
7,194,433
|
|
|
$
|
6,467,260
|
|
|
|
|
|
Current
liabilities
|
$
|
1,046,972
|
|
|
$
|
773,331
|
|
Long-term debt, less
current portion
|
3,215,710
|
|
|
3,345,754
|
|
Financing lease
obligations, less current portion
|
771,434
|
|
|
851,341
|
|
Operating lease
obligations, less current portion
|
1,277,178
|
|
|
—
|
|
Other
liabilities
|
184,414
|
|
|
478,421
|
|
Total
liabilities
|
6,495,708
|
|
|
5,448,847
|
|
Total Brookdale
Senior Living Inc. stockholders' equity
|
696,356
|
|
|
1,018,903
|
|
Noncontrolling
interest
|
2,369
|
|
|
(490)
|
|
Total
equity
|
698,725
|
|
|
1,018,413
|
|
Total liabilities and
equity
|
$
|
7,194,433
|
|
|
$
|
6,467,260
|
|
Condensed
Consolidated Statements of Cash Flows
|
|
|
Years Ended
December 31,
|
(in
thousands)
|
2019
|
|
2018
|
Cash Flows from
Operating Activities
|
|
|
|
Net income
(loss)
|
$
|
(268,492)
|
|
|
$
|
(528,352)
|
|
Adjustments to
reconcile net income (loss) to net cash provided by (used in)
operating
activities:
|
|
|
|
Debt modification and
extinguishment costs
|
5,247
|
|
|
11,677
|
|
Depreciation and
amortization, net
|
383,490
|
|
|
455,212
|
|
Goodwill and asset
impairment
|
49,266
|
|
|
489,893
|
|
Equity in (earnings)
loss of unconsolidated ventures
|
4,544
|
|
|
8,804
|
|
Distributions from
unconsolidated ventures from cumulative share of net
earnings
|
3,472
|
|
|
2,896
|
|
Amortization of
deferred gain
|
—
|
|
|
(4,358)
|
|
Amortization of
entrance fees
|
(1,634)
|
|
|
(1,670)
|
|
Proceeds from
deferred entrance fee revenue
|
3,544
|
|
|
3,218
|
|
Deferred income tax
(benefit) provision
|
(2,654)
|
|
|
(52,367)
|
|
Operating lease
expense adjustment
|
(19,453)
|
|
|
(17,218)
|
|
Change in fair value
of derivatives
|
213
|
|
|
403
|
|
Loss (gain) on sale
of assets, net
|
(7,245)
|
|
|
(293,246)
|
|
Loss (gain) on
facility lease termination and modification, net
|
3,388
|
|
|
140,957
|
|
Non-cash stock-based
compensation expense
|
23,026
|
|
|
26,067
|
|
Non-cash interest
expense on financing lease obligations
|
—
|
|
|
10,894
|
|
Non-cash management
contract termination gain
|
(969)
|
|
|
(8,724)
|
|
Other
|
(8,700)
|
|
|
(1,292)
|
|
Changes in operating
assets and liabilities:
|
|
|
|
Accounts receivable,
net
|
292
|
|
|
(4,964)
|
|
Prepaid expenses and
other assets, net
|
55,873
|
|
|
26,762
|
|
Trade accounts
payable and accrued expenses
|
(12,984)
|
|
|
(37,307)
|
|
Refundable fees and
deferred revenue
|
(25,117)
|
|
|
(128)
|
|
Operating lease
assets and liabilities for lessor capital expenditure
reimbursements
|
31,305
|
|
|
10,400
|
|
Operating lease
assets and liabilities for lease termination
|
—
|
|
|
(33,596)
|
|
Net cash provided by
(used in) operating activities
|
216,412
|
|
|
203,961
|
|
Cash Flows from
Investing Activities
|
|
|
|
Change in lease
security deposits and lease acquisition deposits, net
|
(859)
|
|
|
1,163
|
|
Purchase of
marketable securities
|
(186,224)
|
|
|
(14,823)
|
|
Sale and maturities
of marketable securities
|
134,000
|
|
|
293,273
|
|
Capital expenditures,
net of related payables
|
(304,092)
|
|
|
(225,473)
|
|
Acquisition of
assets, net of related payables and cash received
|
(497)
|
|
|
(271,771)
|
|
Investment in
unconsolidated ventures
|
(4,346)
|
|
|
(9,124)
|
|
Distributions
received from unconsolidated ventures
|
9,635
|
|
|
12,850
|
|
Proceeds from sale of
assets, net
|
92,735
|
|
|
499,807
|
|
Proceeds from notes
receivable
|
34,109
|
|
|
1,580
|
|
Property insurance
proceeds
|
—
|
|
|
1,292
|
|
Net cash provided by
(used in) investing activities
|
(225,539)
|
|
|
288,774
|
|
Cash Flows from
Financing Activities
|
|
|
|
Proceeds from
debt
|
321,996
|
|
|
606,921
|
|
Repayment of debt and
financing lease obligations
|
(427,923)
|
|
|
(896,744)
|
|
Proceeds from line of
credit
|
—
|
|
|
200,000
|
|
Repayment of line of
credit
|
—
|
|
|
(200,000)
|
|
Purchase of treasury
stock, net of related payables
|
(23,955)
|
|
|
(4,256)
|
|
Payment of financing
costs, net of related payables
|
(7,309)
|
|
|
(16,317)
|
|
Proceeds from
refundable entrance fees, net of refunds
|
—
|
|
|
(422)
|
|
Payments for lease
termination
|
—
|
|
|
(12,548)
|
|
Payments of employee
taxes for withheld shares
|
(3,313)
|
|
|
(3,061)
|
|
Other
|
1,110
|
|
|
1,364
|
|
Net cash provided by
(used in) financing activities
|
(139,394)
|
|
|
(325,063)
|
|
Net increase
(decrease) in cash, cash equivalents, and restricted
cash
|
(148,521)
|
|
|
167,672
|
|
Cash, cash
equivalents, and restricted cash at beginning of period
|
450,218
|
|
|
282,546
|
|
Cash, cash
equivalents, and restricted cash at end of period
|
$
|
301,697
|
|
|
$
|
450,218
|
|
Reconciliations of Non-GAAP Financial
Measures
This earnings release contains the financial measures Adjusted
EBITDA and Adjusted Free Cash Flow, which are not calculated in
accordance with U.S. generally accepted accounting principles
("GAAP"). Presentations of these non-GAAP financial measures are
intended to aid investors in better understanding the factors and
trends affecting the Company's performance and liquidity. However,
investors should not consider these non-GAAP financial measures as
a substitute for financial measures determined in accordance with
GAAP, including net income (loss), income (loss) from operations,
or net cash provided by (used in) operating activities. Investors
are cautioned that amounts presented in accordance with the
Company's definitions of these non-GAAP financial measures may not
be comparable to similar measures disclosed by other companies
because not all companies calculate non-GAAP measures in the same
manner. Investors are urged to review the reconciliations included
below of these non-GAAP financial measures from the most comparable
financial measures determined in accordance with GAAP.
Adjusted EBITDA
Adjusted EBITDA is a non-GAAP performance measure that the
Company defines as net income (loss) excluding: benefit/provision
for income taxes, non-operating income/expense items, and
depreciation and amortization; and further adjusted to exclude
income/expense associated with non-cash, non-operational,
transactional, cost reduction, or organizational restructuring
items that management does not consider as part of the Company's
underlying core operating performance and that management believes
impact the comparability of performance between periods. For the
periods presented herein, such other items include non-cash
impairment charges, gain/loss on facility lease termination and
modification, operating lease expense adjustment, amortization of
deferred gain, change in future service obligation, non-cash
stock-based compensation expense, and transaction and
organizational restructuring costs. Transaction costs include those
directly related to acquisition, disposition, financing, and
leasing activity, the Company's assessment of options and
alternatives to enhance stockholder value, and stockholder
relations advisory matters, and are primarily comprised of legal,
finance, consulting, professional fees, and other third party
costs. Organizational restructuring costs include those related to
the Company's efforts to reduce general and administrative expense
and its senior leadership changes, including severance and
retention costs. During the first quarter of 2019, the Company
modified its definition of Adjusted EBITDA to exclude transaction
and organizational restructuring costs, and amounts for all periods
herein reflect application of the modified definition.
The Company's proportionate share of Adjusted EBITDA of
unconsolidated ventures is calculated based on its equity ownership
percentage and in a manner consistent with the Company's definition
of Adjusted EBITDA for its consolidated entities. The Company's
investments in unconsolidated ventures are accounted for under the
equity method of accounting and, therefore, the Company's
proportionate share of Adjusted EBITDA of unconsolidated ventures
does not represent the Company's equity in earnings or loss of
unconsolidated ventures on its consolidated statement of
operations.
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. The
Company believes that presentation of its proportionate share of
Adjusted EBITDA of unconsolidated ventures is useful to investors
for similar reasons with respect to the unconsolidated
ventures.
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 or facility lease termination and modification,
debt modification and extinguishment costs, non-cash stock-based
compensation expense, and transaction and other costs, and such
income/expense may significantly affect the Company's operating
results.
The table below reconciles the Company's Adjusted EBITDA from
its net income (loss).
|
Three Months
Ended
December 31,
|
|
Years Ended
December 31,
|
(in
thousands)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Net income
(loss)
|
$
|
(91,323)
|
|
|
$
|
131,531
|
|
|
$
|
(268,492)
|
|
|
$
|
(528,352)
|
|
Provision (benefit)
for income taxes
|
(1,781)
|
|
|
(31,732)
|
|
|
(2,269)
|
|
|
(49,456)
|
|
Equity in (earnings)
loss of unconsolidated ventures
|
970
|
|
|
1,897
|
|
|
4,544
|
|
|
8,804
|
|
Debt modification and
extinguishment costs
|
53
|
|
|
11,600
|
|
|
5,247
|
|
|
11,677
|
|
Loss (gain) on sale
of assets, net
|
(4,522)
|
|
|
(216,660)
|
|
|
(7,245)
|
|
|
(293,246)
|
|
Other non-operating
(income) loss
|
(4,815)
|
|
|
(6,025)
|
|
|
(14,765)
|
|
|
(14,099)
|
|
Interest
expense
|
60,070
|
|
|
65,202
|
|
|
248,341
|
|
|
280,269
|
|
Interest
income
|
(1,800)
|
|
|
(2,268)
|
|
|
(9,859)
|
|
|
(9,846)
|
|
Income (loss) from
operations
|
(43,148)
|
|
|
(46,455)
|
|
|
(44,498)
|
|
|
(594,249)
|
|
Depreciation and
amortization
|
94,971
|
|
|
106,104
|
|
|
379,433
|
|
|
447,455
|
|
Goodwill and asset
impairment
|
43,012
|
|
|
37,927
|
|
|
49,266
|
|
|
489,893
|
|
Loss (gain) on
facility lease termination and modification,
net
|
1,382
|
|
|
13,197
|
|
|
3,388
|
|
|
162,001
|
|
Operating lease
expense adjustment
|
(5,827)
|
|
|
(2,562)
|
|
|
(19,453)
|
|
|
(17,218)
|
|
Amortization of
deferred gain
|
—
|
|
|
(1,089)
|
|
|
—
|
|
|
(4,358)
|
|
Non-cash stock-based
compensation expense
|
4,711
|
|
|
5,357
|
|
|
23,026
|
|
|
26,067
|
|
Transaction and
organizational restructuring costs
|
5,002
|
|
|
2,707
|
|
|
10,007
|
|
|
28,090
|
|
Adjusted
EBITDA(1)
|
$
|
100,103
|
|
|
$
|
115,186
|
|
|
$
|
401,169
|
|
|
$
|
537,681
|
|
(1) Adoption of the new lease accounting standard
effective January 1, 2019 had a
non-recurring impact on the Company's full-year 2019 Adjusted
EBITDA. Adjusted EBITDA for the three and twelve months ended
December 31, 2019 includes a negative net impact of
$4.1 million and $23.1 million, respectively, from such
adoption.
The table below reconciles the Company's proportionate share of
Adjusted EBITDA of unconsolidated ventures from net income (loss)
of such unconsolidated ventures. For purposes of this presentation,
amounts for each line item represent the aggregate amounts of such
line items for all of the Company's unconsolidated ventures.
|
Three Months
Ended
December 31,
|
|
Years Ended
December 31,
|
(in
thousands)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Net income
(loss)
|
$
|
(1,906)
|
|
|
$
|
(3,810)
|
|
|
$
|
(9,095)
|
|
|
$
|
(46,563)
|
|
Provision (benefit)
for income taxes
|
(8)
|
|
|
6
|
|
|
57
|
|
|
513
|
|
Debt modification and
extinguishment costs
|
5
|
|
|
1
|
|
|
26
|
|
|
132
|
|
Loss (gain) on sale
of assets, net
|
—
|
|
|
—
|
|
|
—
|
|
|
2,840
|
|
Other non-operating
(income) loss
|
(19)
|
|
|
—
|
|
|
59
|
|
|
(1,875)
|
|
Interest
expense
|
6,812
|
|
|
7,555
|
|
|
28,582
|
|
|
70,413
|
|
Interest
income
|
(832)
|
|
|
(949)
|
|
|
(3,406)
|
|
|
(3,345)
|
|
Income (loss) from
operations
|
4,052
|
|
|
2,803
|
|
|
16,223
|
|
|
22,115
|
|
Depreciation and
amortization
|
17,141
|
|
|
16,532
|
|
|
68,078
|
|
|
139,789
|
|
Asset
impairment
|
42
|
|
|
1,445
|
|
|
344
|
|
|
1,781
|
|
Operating lease
expense adjustment
|
—
|
|
|
—
|
|
|
—
|
|
|
8
|
|
Adjusted EBITDA of
unconsolidated ventures
|
$
|
21,235
|
|
|
$
|
20,780
|
|
|
$
|
84,645
|
|
|
$
|
163,693
|
|
|
|
|
|
|
|
|
|
Brookdale's
proportionate share of Adjusted EBITDA
of unconsolidated ventures
|
$
|
10,830
|
|
|
$
|
10,419
|
|
|
$
|
42,827
|
|
|
$
|
52,559
|
|
Adjusted Free Cash Flow
Adjusted Free Cash Flow is a non-GAAP liquidity measure that the
Company defines as net cash provided by (used in) operating
activities before: distributions from unconsolidated ventures from
cumulative share of net earnings, changes in prepaid insurance
premiums financed with notes payable, changes in operating lease
liability for lease termination and modification, cash
paid/received for gain/loss on facility lease termination and
modification, and lessor capital expenditure reimbursements under
operating leases; plus: property insurance proceeds and
proceeds from refundable entrance fees, net of refunds; less:
non-development capital expenditures and payment of financing lease
obligations. Non-development capital expenditures are comprised of
corporate and community-level capital expenditures, including those
related to maintenance, renovations, upgrades, and other major
building infrastructure projects for the Company's communities and
is presented net of lessor reimbursements. Non-development capital
expenditures do not include capital expenditures for community
expansions, major community redevelopment and repositioning
projects, and the development of new communities. During the first
quarter of 2019, the Company modified its definition of Adjusted
Free Cash Flow to no longer adjust net cash provided by (used in)
operating activities for changes in working capital items other
than prepaid insurance premiums financed with notes payable and
lease liability for lease termination and modification, and amounts
for all periods herein reflect application of the modified
definition.
The Company's proportionate share of Adjusted Free Cash Flow of
unconsolidated ventures is calculated based on the Company's equity
ownership percentage and in a manner consistent with the Company's
definition of Adjusted Free Cash Flow for its consolidated
entities. The Company's investments in its unconsolidated ventures
are accounted for under the equity method of accounting and,
therefore, the Company's proportionate share of Adjusted Free Cash
Flow of unconsolidated ventures does not represent cash available
to the Company's consolidated business except to the extent it is
distributed to the Company.
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; (ii) it is used as a metric in the Company's
performance-based compensation programs; and (iii) it provides an
indicator to management to determine if adjustments to current
spending decisions are needed. The Company believes that
presentation of its proportionate share of Adjusted Free Cash Flow
of unconsolidated ventures is useful to investors for similar
reasons with respect to the unconsolidated ventures and, to the
extent such cash is not distributed to the Company, 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 the Company's potential need to make capital
contributions to the ventures of the Company's proportionate share
of cash needed for such items.
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 and modification 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. In
addition, the Company's proportionate share of Adjusted Free Cash
Flow of unconsolidated ventures has material limitations as a
liquidity measure because it does not represent cash available
directly for use by the Company's consolidated business except to
the extent actually distributed to the Company, and the Company
does not have control, or the Company shares control in
determining, the timing and amount of distributions from the
Company's unconsolidated ventures and, therefore, the Company may
never receive such cash.
The table below reconciles the Company's Adjusted Free Cash Flow
from its net cash provided by (used in) operating activities.
|
Three Months
Ended
December 31,
|
|
Years Ended
December 31,
|
(in
thousands)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Net cash provided
by (used in) operating activities
|
$
|
88,082
|
|
|
$
|
33,453
|
|
|
$
|
216,412
|
|
|
$
|
203,961
|
|
Net cash provided by
(used in) investing activities
|
(75,184)
|
|
|
301,801
|
|
|
(225,539)
|
|
|
288,774
|
|
Net cash provided by
(used in) financing activities
|
(26,560)
|
|
|
(85,134)
|
|
|
(139,394)
|
|
|
(325,063)
|
|
Net increase
(decrease) in cash, cash equivalents, and
restricted cash
|
$
|
(13,662)
|
|
|
$
|
250,120
|
|
|
$
|
(148,521)
|
|
|
$
|
167,672
|
|
|
|
|
|
|
|
|
|
Net cash provided
by (used in) operating activities
|
$
|
88,082
|
|
|
$
|
33,453
|
|
|
$
|
216,412
|
|
|
$
|
203,961
|
|
Distributions from
unconsolidated ventures
from cumulative share of net earnings
|
(1,084)
|
|
|
(737)
|
|
|
(3,472)
|
|
|
(2,896)
|
|
Changes in prepaid
insurance premiums financed with
notes payable
|
(5,875)
|
|
|
(6,244)
|
|
|
—
|
|
|
—
|
|
Changes in operating
lease liability related to lease
termination
|
—
|
|
|
—
|
|
|
—
|
|
|
33,596
|
|
Cash paid for loss on
facility operating lease termination
and modification, net
|
—
|
|
|
8,000
|
|
|
—
|
|
|
21,044
|
|
Changes in assets and
liabilities for lessor capital
expenditure reimbursements under operating
leases
|
(19,262)
|
|
|
(10,400)
|
|
|
(31,305)
|
|
|
(10,400)
|
|
Non-development
capital expenditures, net
|
(55,610)
|
|
|
(51,557)
|
|
|
(235,797)
|
|
|
(182,249)
|
|
Property insurance
proceeds
|
—
|
|
|
1,136
|
|
|
—
|
|
|
1,292
|
|
Payment of financing
lease obligations
|
(5,740)
|
|
|
(6,537)
|
|
|
(22,242)
|
|
|
(59,808)
|
|
Proceeds from
refundable entrance fees, net of refunds
|
—
|
|
|
(106)
|
|
|
—
|
|
|
(422)
|
|
Adjusted Free Cash
Flow (1)
|
$
|
511
|
|
|
$
|
(32,992)
|
|
|
$
|
(76,404)
|
|
|
$
|
4,118
|
|
(1) The calculation of Adjusted Free Cash Flow includes
transaction and organizational restructuring costs of $5.0 million and $10.0
million for the three and twelve months ended
December 31, 2019, respectively, and transaction and
organizational restructuring costs of $2.7
million and $28.1 million for
the three and twelve months ended December 31, 2018,
respectively.
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 purposes of this presentation, amounts for each line
item represent the aggregate amounts of such line items for all of
the Company's unconsolidated ventures.
|
Three Months
Ended
December 31,
|
|
Years Ended
December 31,
|
(in
thousands)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Net cash provided
by (used in) operating activities
|
$
|
19,868
|
|
|
$
|
22,818
|
|
|
$
|
104,646
|
|
|
$
|
145,087
|
|
Net cash provided by
(used in) investing activities
|
(14,451)
|
|
|
(15,478)
|
|
|
(43,978)
|
|
|
(60,489)
|
|
Net cash provided by
(used in) financing activities
|
(16,102)
|
|
|
(15,625)
|
|
|
(55,877)
|
|
|
(77,986)
|
|
Net increase
(decrease) in cash, cash equivalents, and
restricted cash
|
$
|
(10,685)
|
|
|
$
|
(8,285)
|
|
|
$
|
4,791
|
|
|
$
|
6,612
|
|
|
|
|
|
|
|
|
|
Net cash provided
by (used in) operating activities
|
$
|
19,868
|
|
|
$
|
22,818
|
|
|
$
|
104,646
|
|
|
$
|
145,087
|
|
Non-development
capital expenditures, net
|
(14,471)
|
|
|
(15,430)
|
|
|
(44,145)
|
|
|
(69,180)
|
|
Property insurance
proceeds
|
—
|
|
|
—
|
|
|
—
|
|
|
1,535
|
|
Proceeds from
refundable entrance fees, net of refunds
|
(6,790)
|
|
|
(7,448)
|
|
|
(26,186)
|
|
|
(19,983)
|
|
Adjusted Free Cash
Flow of unconsolidated ventures
|
$
|
(1,393)
|
|
|
$
|
(60)
|
|
|
$
|
34,315
|
|
|
$
|
57,459
|
|
|
|
|
|
|
|
|
|
Brookdale's
proportionate share of Adjusted Free
Cash Flow of unconsolidated ventures
|
$
|
(710)
|
|
|
$
|
(183)
|
|
|
$
|
17,570
|
|
|
$
|
19,821
|
|
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SOURCE Brookdale Senior Living Inc.