NASHVILLE, Tenn., May 5,
2020 /PRNewswire/ -- Brookdale Senior Living Inc. (NYSE: BKD)
("Brookdale" or the "Company") announced results for the quarter
ended March 31, 2020.
FIRST QUARTER 2020 HIGHLIGHTS
- Same community revenue grew 2.0% year over year and 2.4%
sequentially.
- Completed the sale of the Company's interest in 14
unconsolidated Entry Fee CCRC communities and received $100.0 million of income from the termination of
the related management agreements.
- Ended the quarter with $500.7
million of cash and cash equivalents and marketable
securities on hand and, in the regular course of business,
refinanced the majority of the Company's 2020 debt maturities.
- Restricted community access to help protect residents resulting
in fewer move-ins in the second half of March, partially offset by
fewer move-outs.
Lucinda ("Cindy") Baier, Brookdale's President and CEO, said,
"Our top priority is the health and safety of our residents,
patients and associates. During this pandemic, we moved swiftly to
update our strong and well-established infectious disease protocols
for COVID-19 and to increase communication and training on these
protocols. As public health officials' knowledge rapidly and
continuously expanded, we took the unprecedented actions of
implementing a non-essential, no-visitor directive across all our
communities nationwide. We also started to incur additional
expenses to help limit the spread of the virus. We recognize these
measures will continue to have a near-term financial impact. Even
so, these steps were necessary, given the critical role we play
within the healthcare system to care for the most vulnerable
segment of the population. We believe our efforts will ultimately
strengthen our long-term growth opportunity. I am immensely proud
of our dedicated Brookdale associates and their outstanding efforts
to serve on the front line, taking actions to care for our
residents and patients and to help protect them."
SUMMARY OF FIRST QUARTER RESULTS
Same Community Senior Housing (Independent Living (IL),
Assisted Living and Memory Care (AL/MC), and CCRCs)
The
table below presents a summary of same community operating results
and metrics of the Company's consolidated senior housing
portfolio.(1)
($ in millions,
except RevPAR
and RevPOR)
|
|
Year-Over-Year
Increase /
(Decrease)
|
|
Sequential
Increase /
(Decrease)
|
1Q
2020
|
1Q
2019
|
Amount
|
Percent
|
4Q
2019
|
Amount
|
Percent
|
Resident
fees
|
$
|
639.0
|
|
$
|
626.2
|
|
$
|
12.8
|
|
2.0%
|
$
|
624.0
|
|
$
|
15.0
|
|
2.4%
|
Facility operating
expense
|
$
|
438.1
|
|
$
|
417.3
|
|
$
|
20.8
|
|
5.0%
|
$
|
430.5
|
|
$
|
7.6
|
|
1.8%
|
RevPAR
|
$
|
4,231
|
|
$
|
4,148
|
|
$
|
83
|
|
2.0%
|
$
|
4,132
|
|
$
|
99
|
|
2.4%
|
Weighted average
occupancy
|
83.5%
|
|
84.3%
|
|
(80)
|
bps
|
n/a
|
85.0%
|
|
(150)
|
bps
|
n/a
|
RevPOR
|
$
|
5,070
|
|
$
|
4,919
|
|
$
|
151
|
|
3.1%
|
$
|
4,863
|
|
$
|
207
|
|
4.3%
|
|
|
|
|
|
|
|
|
Consolidated
The table below presents a summary of
consolidated operating results.
|
|
Year-Over-Year
Increase /
(Decrease)
|
|
Change
Attributable To:
|
($ in
millions)
|
1Q
2020
|
1Q
2019
|
Amount
|
Percent
|
|
Transactions
|
Lease
Standard
|
Resident fee and
management fee revenue
|
$
|
891.4
|
|
$
|
825.2
|
|
$
|
66.2
|
|
8.0%
|
|
|
$
|
70.5
|
|
$
|
(2.8)
|
|
|
Facility operating
expense
|
588.5
|
|
586.1
|
|
2.4
|
|
0.4%
|
|
|
(20.2)
|
|
(9.2)
|
|
|
Net income
(loss)
|
369.5
|
|
(42.6)
|
|
412.1
|
|
NM
|
|
|
See note
(2)
|
6.4
|
(2)
|
|
Adjusted EBITDA
(3)
|
185.1
|
|
116.6
|
|
68.5
|
|
58.7%
|
|
|
87.8
|
|
6.4
|
|
|
Adjusted EBITDA,
excluding $100.0 million management termination fee and COVID-19
expense
|
95.1
|
|
116.6
|
|
(21.5)
|
|
(18.4)%
|
|
|
(12.2)
|
|
6.4
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
The same community
portfolio includes operating results and data for 641 communities
utilizing the Company's methodology for determining same store
communities, which excludes communities acquired or disposed of
since the beginning of the prior year, communities classified as
assets held for sale, certain communities planned for disposition,
certain communities that have undergone or are undergoing
expansion, redevelopment, and repositioning projects, certain
communities that have expansion, redevelopment, and repositioning
projects that are anticipated to be under construction in the
current year, and certain communities that have experienced a
casualty event that significantly impacts their operations. Same
community operating results exclude (i) hurricane and natural
disaster expense of $0.1 million for the first quarter ended 2019
and insurance recoveries of $1.4 million for the first quarter of
2020, (ii) direct costs incurred to prepare for and respond to the
COVID-19 pandemic of $9.1 million for the first quarter 2020, and
(iii) for the 2019 periods, the additional resident fee revenue and
facility operating expense recognized as a result of the
application of the lease accounting standard ASC 842 of
approximately $2.5 million and $8.5 million, respectively, for the
first quarter of 2019 and $9.7 million and $13.7 million,
respectively, for the fourth quarter of 2019.
|
|
|
(2)
|
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 lease standard represents the 2019
impact of the timing of the revenue and cost recognition associated
with residency agreements related to the adoption of the lease
standard.
|
|
|
(3)
|
Adjusted EBITDA is a
financial measure that is not calculated in accordance with GAAP.
See "Reconciliations of Non-GAAP Financial Measures" for the
Company's definition of such measure, reconciliations to the most
comparable GAAP financial measures, and other important information
regarding the use of the Company's non-GAAP financial measures.
Unless otherwise indicated, Adjusted EBITDA for the first quarter
of 2020 includes the $100.0 million management agreement
termination fee payment received from Healthpeak Properties, Inc.
("Healthpeak") related to the sale of Brookdale's interest in the
entry fee CCRC venture, which closed on January 31, 2020, and $10.0
million of direct costs, primarily consisting of acquisition of
personal protective equipment ("PPE"), medical equipment, cleaning
and disposable food service supplies, enhanced cleaning and
environmental sanitation costs, and increased labor expense,
incurred to prepare for and respond to the COVID-19 pandemic.
Additionally, Adjusted EBITDA for the first quarter of 2020
includes a negative impact to resident fees as a result of the
COVID-19 pandemic.
|
Summary of First Quarter Results - Consolidated
- Impacts of Transactions, COVID-19, and Lease Accounting
Changes on Comparability:
-
- Since January 1, 2019, the
Company completed dispositions, through sales and lease
terminations, of 26 communities (2,455 units), which resulted in
$22.4 million and $20.2 million less resident fee revenue and
facility operating expense, respectively, for the first quarter of
2020 compared to the first quarter of 2019. Net income for the
first quarter of 2020 includes $370.7
million of net gain on sale of assets resulting from the
sale of the Company's interest in the CCRC Venture.
- The Company transitioned management arrangements on 125 net
communities since January 1, 2019,
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. Reduced
management fees for the first quarter of 2020 resulting from these
transitions were offset by the Company's receipt of the
$100.0 million management termination
fee payment from Healthpeak, resulting in a net increase of
$93.0 million of management fee
revenue compared to the first quarter of 2019.
- The Company recognized $10.0
million of facility operating expenses during the first
quarter of 2020 for direct costs to prepare for, and respond to,
the COVID-19 pandemic, primarily consisting of acquisition of PPE,
medical equipment, cleaning and disposable food service supplies,
enhanced cleaning and environmental sanitation costs, and increased
labor expense. Additionally, resident fee revenue was negatively
impacted as a result of the COVID-19 pandemic in the first quarter
of 2020.
- Consolidated results for the first quarter of 2019 include
$2.8 million and $9.2 million of non-cash resident fees and
facility operating expense, respectively, resulting from the
Company's adoption of the new lease standard and its application to
residency agreements and costs related thereto beginning
January 1, 2019, resulting in a
non-cash net impact of negative $6.4
million to net income (loss) and Adjusted EBITDA,
respectively, for the prior year quarter.
- Resident fee and management fee revenue:
-
- Excluding the impact of transactions and the lease accounting
standard, consolidated resident fee and management fee revenue
decreased 0.2% over the prior year quarter primarily due to a
decrease in revenue for home health services. The decrease was
partially offset by a 2.0% increase in same community RevPAR,
comprised of a 3.1% increase in same community RevPOR and an 80
basis point decrease in same community weighted average
occupancy.
- First quarter 2020 consolidated RevPAR increased $127, or 3.1%, to $4,229 compared to the first quarter of the prior
year.
- Facility operating expense: Excluding the impact of
transactions and the lease accounting standard, facility operating
expense increased $31.8 million, or
5.7%, primarily due to an increase in community labor expense
attributable to wage rate increases, an extra day of expense due to
the leap year, and an increase in employee benefits expense.
- Net income (loss):
-
- The increase in net income compared to the prior year quarter
was primarily attributable to a $373.5
million increase in net gain on sale of assets, primarily
resulting from the sale of the Company's interest in the CCRC
Venture, partially offset by a $77.8
million increase in asset impairment, as well as the revenue
and facility operating expense factors noted above.
- General and administrative expense of $54.6 million for the first quarter of 2020
represents a $1.7 million, or 3.0%,
decrease from the prior year quarter, primarily due to a reduction
in the Company's corporate headcount, as it scaled general and
administrative costs in connection with community dispositions, and
a reduction in travel costs. The decrease was partially offset by a
$1.5 million increase in transaction
and organizational restructuring costs incurred in the current
quarter.
- Adjusted EBITDA: The increase compared to the prior year
quarter was primarily attributable to the $100.0 million management termination fee
proceeds, as well as the other revenue and expense factors
previously discussed.
Same Community Senior Housing (IL, AL/MC, and CCRCs)
- Resident fees:
-
- The year-over-year increase was attributable to the increase in
RevPOR, primarily the result of in-place rent increases, partially
offset by the 80 basis point decrease in same community weighted
average occupancy.
- The decrease in the same community weighted average occupancy
reflects the impacts of reduced move-in activity in the second half
of March 2020 as the Company
restricted access to its communities in response to the COVID-19
pandemic and an increase in non-controllable move outs for the
quarter.
- Facility operating expense: The year-over-year increase
was primarily due to a 5.8% increase in labor expense arising from
increases in wage rates, an extra day of expense due to the leap
year, and an increase in employee benefits expense.
Health Care Services
|
|
Increase /
(Decrease)
|
($ in
millions)
|
1Q
2020
|
1Q
2019
|
Amount
|
Percent
|
Resident fee
revenue
|
|
|
|
|
Home
health
|
$
|
65.9
|
|
$
|
84.2
|
|
$
|
(18.3)
|
|
(21.7)%
|
|
Hospice
|
23.2
|
|
21.7
|
|
1.5
|
|
6.9%
|
|
Outpatient
therapy
|
5.7
|
|
5.6
|
|
0.1
|
|
1.8
|
|
Total resident fee
revenue
|
94.8
|
|
111.5
|
|
(16.7)
|
|
(15.0)%
|
|
Facility operating
expense
|
103.9
|
|
103.4
|
|
0.5
|
|
0.5%
|
|
|
|
|
|
|
- Resident fee revenue: Health Care Services revenue
declined due primarily to a decrease in revenue for home health
services, which reflects the implementation of the Patient-Driven
Grouping Model ("PDGM"), an alternate home health case mix
adjustment methodology with a 30-day unit of payment, which became
effective beginning January 1, 2020,
a decrease in home health average daily census, and a significant
decrease in key medical referrals in the later part of the quarter,
due to the pandemic. The decrease in resident fees was partially
offset by an increase in volume for hospice services.
- 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 and the
expansion of hospice services throughout 2019. The increase in
facility operating expenses was partially offset by a decrease in
labor costs for home health services.
Management Services
|
|
Increase /
(Decrease)
|
($ in
millions)
|
1Q
2020
|
1Q
2019
|
Amount
|
Percent
|
Management
fees
|
$
|
108.7
|
|
$
|
15.7
|
|
$
|
93.0
|
|
NM
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Management fees: The year-over-year increase in
management fees was primarily attributable to the $100.0 million management termination fee payment
from Healthpeak, recognized during the first quarter of 2020.
Excluding the termination fee payment, management fees decreased
$7.0 million from first quarter of
2019 due to the transition of management arrangements on 125 net
communities since January 1, 2019,
generally for management arrangements on certain former
unconsolidated ventures in which the Company sold its interest and
interim management arrangements on formerly leased or owned
communities.
LIQUIDITY
The table below presents a summary of the Company's net cash
provided by (used in) operating activities and Adjusted Free Cash
Flow.
|
|
Increase /
(Decrease)
|
($ in
millions)
|
1Q
2020
|
1Q
2019
|
Amount
|
Percent
|
Net cash provided by
(used in) operating activities
|
$
|
57.5
|
|
$
|
(5.0)
|
|
$
|
62.5
|
|
NM
|
Adjusted Free Cash
Flow (4)
|
5.2
|
|
(47.0)
|
|
52.2
|
|
NM
|
|
|
|
|
|
(4)
|
Adjusted Free Cash
Flow is a financial measure that is not calculated in accordance
with GAAP. See "Reconciliations of Non-GAAP Financial Measures" for
the Company's definition of such measure, reconciliations to the
most comparable GAAP financial measure and other important
information regarding the use of the Company's non-GAAP financial
measures.
|
- Net cash provided by (used in) operating activities: The
year-over-year increase in net cash provided by operating
activities was primarily attributable to the $100.0 million management termination fee payment
from Healthpeak received during the current year period. This
change was partially offset by the $18.3
million decrease in revenue for home health services and the
$20.8 million increase in same
community facility operating expense during the current year
period.
- Adjusted Free Cash Flow:
-
- The increase in Adjusted Free Cash Flow compared to the prior
year first quarter was attributable to the Adjusted EBITDA factors
noted previously, partially offset by:
-
- A $10.5 million decrease in cash
provided by operating activities for changes in operating assets
and liabilities, including the impacts of an increase in cash paid
for accounts payable during the first quarter of 2020.
- A $6.0 million increase in
non-development capital expenditures, net. First quarter 2020
non-development capital expenditures, net were $60.6 million.
- Total Liquidity:
-
- Total liquidity for the Company was $536.0 million as of March 31, 2020, an
increase of $54.7 million from total
liquidity of $481.3 million as of
December 31, 2019, which was
primarily attributable to the transactions with Healthpeak
completed during the current period.
- Total liquidity as of March 31, 2020 included $392.7 million of unrestricted cash and cash
equivalents, $108.0 million of
marketable securities, and $35.3
million of availability on the Company's secured credit
facility.
- Share Repurchases: Out of an abundance of caution
during the pandemic, in mid-March, the Company suspended share
repurchases under its existing share repurchase authorization.
Prior to that, the Company repurchased $18.1
million of shares of common stock in open market
transactions during the quarter pursuant to the repurchase program
(approximately 3.1 million shares at an average purchase price of
$5.92 per share). As of
March 31, 2020, approximately $44.0
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.
- CCRC Venture and Healthpeak 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 (6,383 units),
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 (2,014 units)
formerly leased from Healthpeak for a total purchase price of
$405.5 million; and (iii) the
parties' amendment and restatement of the master lease for 25
communities (2,711 units). As a result of the transactions, the
Company recognized a $370.7 million
gain on the sale of the equity interest in the entry fee CCRC
communities and a $19.7 million gain
on debt extinguishment. The Company obtained $192.6 million of debt secured by the
non-recourse first mortgages on 13 of the acquired communities.
Seventy percent of the principal amount bears interest at a fixed
rate of 3.62%, and the remaining thirty percent of the principal
amount bears interest at a variable rate equal to 30-day LIBOR plus
a margin of 209 basis points. The debt matures in February 2030. On March
20, 2020, the Company obtained $30.0
million of debt secured by the non-recourse first mortgage
on one additional acquired community. The loan bears interest at a
variable rate equal to the 30-day LIBOR plus a margin of 250 basis
points and matures in March
2022.
- 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. On
March 19, 2020, the Company obtained
$29.2 million of debt secured by the
non-recourse first mortgages on seven communities. The loan bears
interest at a variable rate equal to the 30-day LIBOR plus a margin
of 225 basis points and matures in April
2030.
- Community Dispositions and Assets Held for Sale: During
the first quarter of 2020, the Company completed the sale of one
owned community (78 units) for cash proceeds of $5.5 million, net of transaction costs, and
terminated the lease on one community (89 units). As of
March 31, 2020, two unencumbered
communities were classified as held for sale, resulting in
$37.4 million being recorded as
assets held for sale.
- Management Transitions: The Company transitioned
management on 20 communities to new operators during the first
quarter of 2020, most of which were managed under management
arrangements on certain former unconsolidated ventures in which the
Company sold its interest. Management fees for the first quarter of
2020 include approximately $103.7
million of management fees attributable to communities for
which the Company's management agreements were terminated since
January 1, 2020 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.
- Refinancing Activity: On March
31, 2020, the Company obtained $149.3
million of debt secured by the non-recourse first mortgages
on 18 communities. Of the total principal, $73.1 million bears interest at a fixed rate of
3.55% and the remaining $76.2 million
bears interest at a variable rate equal to the 30-day LIBOR plus a
margin of 210 basis points. The debt matures in April 2030. The $149.3
million of proceeds from the financing were utilized to
repay $136.3 million of outstanding
mortgage debt maturing in 2020.
COVID-19 Impact and Outlook for Full Year 2020
On March 17, 2020, the Company
withdrew its previously provided full-year 2020 guidance due to the
uncertainties associated with the COVID-19 pandemic. Observations
regarding the Company's experience are provided below. The ultimate
impacts of the pandemic will depend on many factors, and it remains
too early to estimate the effects of COVID-19 on the Company's
future results. As those factors become clearer, the Company will
provide further updates as appropriate.
- Operations and Sales. The Company continues to serve and
care for seniors through the pandemic, as its residential and
healthcare services are considered essential services under
stay-at-home orders and recommendations that were adopted by
federal, state, and local governments beginning in March 2020. The health and safety of the
Company's residents, patients, and associates is and has been the
Company's highest priority. The Company's preparation and response
efforts center on infection prevention and control protocols.
Seeking to prevent the introduction of COVID-19 into communities,
and to help control further exposure to infections within
communities, in March 2020 the
Company began restricting visitors at all its communities to
essential healthcare personnel and certain compassionate care
situations, screening associates and permitted visitors, suspending
group outings, modifying communal dining and programming to comply
with social distancing guidelines and, in most cases, implementing
in-room only dining and activities programming, requesting that
residents refrain from leaving the community unless medically
necessary, and requiring new residents and residents returning from
a hospital or nursing home to isolate in their apartment for
fourteen days. In certain communities, upon confirmation of
positive COVID-19 exposure, the Company follows government guidance
regarding minimizing further exposure, including associates'
adhering to personal protection protocols, restricting new resident
admissions, and in some cases isolating residents. Due to the
vulnerable nature of the Company's residents, it expects many of
these restrictions will continue at its communities for some time,
even as federal, state, and local stay-at-home and social
distancing orders and recommendations are relaxed. The Company has
commenced a resident and associate testing program, which will be
undertaken at substantially all its communities using a phased
approach over the near term, due to the apparent ability of
asymptomatic individuals to transmit the virus.
The pandemic and related infection prevention and control protocols
within senior living communities have significantly disrupted
demand for senior living communities and the sales process, which
typically includes in-person prospective resident visits at
communities. The Company believes potential residents and their
families are more cautious regarding moving into senior living
communities while the pandemic continues, and such caution may
persist for some time. In response to these developments, the
Company has redesigned its sales process to engage in virtual tours
and video engagement, enhanced and adapted its marketing programs
to address the stay-at-home environment, and sought to strengthen
its relationships with referral partners.
- Occupancy and Revenue. The pandemic and the Company's
response efforts began to adversely impact occupancy and resident
fee revenue during the first quarter of 2020, primarily during the
second half of March as new resident leads, visits (including
virtual visits), and move-in activity declined significantly
compared to typical levels. This trend continued through
April 2020, resulting in the
Company's consolidated senior housing occupancy decreasing from
82.2% as of March 31, 2020 to 80.0%
as of April 30, 2020. The Company's
home health average daily census also began to decrease in
March 2020 as referrals declined
significantly due to suspension of elective medical procedures and
discharges increasing as a result of stay-at-home orders and
recommendations, resulting in home health census of 13,306 patients
as of March 31, 2020. The Company
expects further deterioration in its resident fee revenue resulting
from fewer move-ins and resident attrition inherent in its
business, which may increase due to the impacts of COVID-19. Lower
than normal controllable move-out activity during the pandemic may
continue to partially offset future adverse revenue impacts.
- Expense. Facility operating expense for the three months
ended March 31, 2020 includes
$10.0 million of incremental direct
costs to prepare for and respond to the pandemic, including costs
for acquisition of additional PPE, medical equipment, and cleaning
and disposable food service supplies, enhanced cleaning and
environmental sanitation costs, and increased labor expense. Such
costs have escalated following March 31,
2020, and the Company expects such costs to further include
increased workers compensation expense, health plan expense,
insurance premiums and retention, and consulting and professional
services costs, as well as costs for COVID-19 testing of residents
and associates where not otherwise covered by government payor or
third-party insurance sources. The Company is not able to
reasonably predict the total amount of costs it will incur related
to the pandemic, and such costs are likely to be substantial.
- Government Assistance. During April 2020, the Company received $29.5 million of grants and $85.0 million of accelerated/advanced Medicare
payments pursuant to programs created or expanded under the
Coronavirus Aid, Relief, and Economic Security Act of 2020 (CARES
Act). The Company also intends to utilize the CARES Act payroll tax
deferral program to delay payment of approximately $76 million of the employer portion of payroll
taxes estimated to be incurred between March
27, 2020 and December 31,
2020. The grants received are subject to the terms and
conditions of the program, including that such funds may only be
used to prevent, prepare for, and respond to COVID-19 and will
reimburse only for health care related expenses or lost revenues
that are attributable to COVID-19. The amount of the grants was
based primarily on the Company's relative share of aggregate 2019
Medicare fee-for-service reimbursements, primarily related to home
health, hospice, outpatient therapy, and skilled nursing care
provided through the Health Care Services and CCRCs segments. The
Company continues to evaluate the terms, conditions, and permitted
uses associated with the grants, including requirements of the
Department of Health and Human Services, and is in the process of
determining what portions of these grants that the Company will be
able to retain and use. Repayments of the accelerated/advanced
Medicare payments are required to begin 120 days after their
issuance through offsets of new Medicare claims, and all
accelerated/advanced payments are due 210 days following their
issuance. One-half of the payroll tax deferral amount will become
due on each of December 31, 2021 and
December 31, 2022. The Company
continues to seek further government-sponsored financial
relief.
- Liquidity. The Company has taken, and continues to take,
actions to enhance and preserve liquidity in response to the
pandemic. As of March 17, 2020, the
Company drew the full available balance of $166.4 million on the revolving credit facility.
Additionally, the Company suspended repurchases under its existing
share repurchase program. The Company has also delayed or canceled
a number of elective capital expenditure projects resulting in an
approximate $50 million reduction to
expected full-year 2020 capital expenditures. The Company believes
that its cash flows from operations, together with cash on hand,
amounts available under its secured credit facility, and proceeds
from anticipated dispositions of owned communities and financings,
and refinancings of various assets, will be sufficient to fund its
liquidity needs for at least the next 12 months, assuming continued
access to credit markets and the impacts of the pandemic on the
economy and the industry begin to moderate in the near term. As of
March 31, 2020, the Company's
remaining 2020 and 2021 maturities are $69.7
million and $333.1 million,
respectively. The Company has commenced efforts to refinance those
and other maturities with non-recourse mortgage debt.
The ultimate impacts of COVID-19 will depend on many factors,
some of which cannot be foreseen, including the duration, severity,
and geographic concentrations of the pandemic and any resurgence of
the disease; the impact of COVID-19 on the nation's economy and
debt and equity markets and the local economies in the Company's
markets; the development and availability of COVID-19 infection and
antibody testing, therapeutic agents, and vaccines and the
prioritization of such resources among businesses and demographic
groups; government financial and regulatory relief efforts that may
become available to business and individuals; perceptions regarding
the safety of senior living communities during and after the
pandemic; changes in demand for senior living communities and the
Company's ability to adapt its sales and marketing efforts to meet
that demand; the impact of COVID-19 on the Company's residents' and
their families' ability to afford resident fees, including due to
changes in unemployment rates, consumer confidence, and equity
markets caused by COVID-19; changes in the acuity levels of the
Company's new residents; the disproportionate impact of COVID-19 on
seniors generally and those residing in the Company's communities;
the duration and costs of the Company's preparation and response
efforts, including increased equipment, supplies, labor,
litigation, and other expenses; the impact of COVID-19 on the
Company's ability to complete financings, refinancings, or other
transactions (including dispositions) or to generate sufficient
cash flow to cover required interest and lease payments and to
satisfy financial and other covenants in the Company's debt and
lease documents; increased regulatory requirements and enforcement
actions resulting from COVID-19, including those that may limit the
Company's collection efforts for delinquent accounts; and the
frequency and magnitude of legal actions and liability claims that
may arise due to COVID-19 or the Company's response efforts.
SUPPLEMENTAL INFORMATION
The Company will post on its website at
www.brookdale.com/investor supplemental information relating to the
Company's first quarter 2020 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 first quarter ended March 31,
2020 on May 6, 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
May 20, 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 "8098920".
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 741 communities in 45
states and the ability to serve approximately 65,000 residents as
of March 31, 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 lease accounting
standard 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 lease accounting
standard 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 that are not
historical statements of fact and those regarding the Company's
intent, belief or expectations, including those related to the
COVID-19 pandemic and the Company's outlook. 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: the impacts of the COVID-19
pandemic, including the response efforts of federal, state, and
local government authorities, businesses, individuals and the
Company, on the Company's business, results of operations, cash
flow, liquidity, and strategic initiatives, including plans for
future growth, which will depend on many factors, some of which
cannot be foreseen, and which are described above in this press
release; events which adversely affect the ability of seniors to
afford resident fees, including downturns in the economy, housing
markets, consumer confidence or the equity markets and unemployment
among family members, which may be adversely impacted by the
pandemic; 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, including those related to the pandemic, 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, including
changes related to the pandemic, and general economic factors such
as inflation, the consumer price index, commodity costs, fuel and
other energy costs, costs of salaries, wages, benefits, and
insurance, interest rates and tax rates; the impact of seasonal
contagious illness or an outbreak of COVID-19 or other contagious
disease in the markets in which the Company operates; 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, which may be adversely affected by the pandemic; 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 the Company's 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, which may be adversely
impacted by the pandemic; 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, which
may be adversely impacted by the pandemic; environmental
contamination at any of the Company's communities; failure to
comply with existing environmental laws; costs to defend against,
or 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
March 31,
|
(in thousands,
except per share data)
|
2020
|
|
2019
|
Revenue
|
|
|
|
Resident
fees
|
$
|
782,707
|
|
|
$
|
809,479
|
|
Management
fees
|
108,715
|
|
|
15,743
|
|
Reimbursed costs
incurred on behalf of managed communities
|
122,717
|
|
|
216,822
|
|
Total
revenue
|
1,014,139
|
|
|
1,042,044
|
|
|
|
|
|
Expense
|
|
|
|
Facility operating
expense (excluding facility depreciation and amortization of
$84,301 and $88,827, respectively)
|
588,482
|
|
|
586,094
|
|
General and
administrative expense (including non-cash stock-based compensation
expense of $5,957 and $6,356, respectively)
|
54,595
|
|
|
56,311
|
|
Facility operating
lease expense
|
64,481
|
|
|
68,668
|
|
Depreciation and
amortization
|
90,738
|
|
|
96,888
|
|
Asset
impairment
|
78,226
|
|
|
391
|
|
Loss (gain) on
facility lease termination and modification, net
|
—
|
|
|
209
|
|
Costs incurred on
behalf of managed communities
|
122,717
|
|
|
216,822
|
|
Total operating
expense
|
999,239
|
|
|
1,025,383
|
|
Income (loss) from
operations
|
14,900
|
|
|
16,661
|
|
|
|
|
|
Interest
income
|
1,455
|
|
|
3,084
|
|
Interest
expense:
|
|
|
|
Debt
|
(41,763)
|
|
|
(45,643)
|
|
Financing lease
obligations
|
(13,282)
|
|
|
(16,743)
|
|
Amortization of
deferred financing costs and debt discount
|
(1,315)
|
|
|
(979)
|
|
Gain (loss) on debt
modification and extinguishment, net
|
19,181
|
|
|
(67)
|
|
Equity in earnings
(loss) of unconsolidated ventures
|
(1,008)
|
|
|
(526)
|
|
Gain (loss) on sale
of assets, net
|
372,839
|
|
|
(702)
|
|
Other non-operating
income (loss)
|
2,662
|
|
|
2,988
|
|
Income (loss) before
income taxes
|
353,669
|
|
|
(41,927)
|
|
Benefit (provision)
for income taxes
|
15,828
|
|
|
(679)
|
|
Net income
(loss)
|
369,497
|
|
|
(42,606)
|
|
Net (income) loss
attributable to noncontrolling interest
|
18
|
|
|
11
|
|
Net income (loss)
attributable to Brookdale Senior Living Inc. common
stockholders
|
$
|
369,515
|
|
|
$
|
(42,595)
|
|
|
|
|
|
Net income (loss) per
share attributable to Brookdale Senior Living Inc. common
stockholders:
|
|
|
|
Basic
|
$
|
2.01
|
|
|
$
|
(0.23)
|
|
Diluted
|
$
|
2.00
|
|
|
$
|
(0.23)
|
|
|
|
|
|
Weighted average
common shares outstanding:
|
|
|
|
Basic
|
184,186
|
|
|
186,747
|
|
Diluted
|
184,522
|
|
|
186,747
|
|
Condensed
Consolidated Balance Sheets
|
|
(in
thousands)
|
March 31,
2020
|
|
December 31,
2019
|
Cash and cash
equivalents
|
$
|
392,674
|
|
|
$
|
240,227
|
|
Marketable
securities
|
108,039
|
|
|
68,567
|
|
Restricted
cash
|
23,908
|
|
|
26,856
|
|
Accounts receivable,
net
|
135,531
|
|
|
133,613
|
|
Assets held for
sale
|
37,397
|
|
|
42,671
|
|
Prepaid expenses and
other current assets, net
|
104,432
|
|
|
84,241
|
|
Total current
assets
|
801,981
|
|
|
596,175
|
|
Property, plant and
equipment and leasehold intangibles, net
|
5,298,910
|
|
|
5,109,834
|
|
Operating lease
right-of-use assets
|
1,080,304
|
|
|
1,159,738
|
|
Other assets,
net
|
320,500
|
|
|
328,686
|
|
Total
assets
|
$
|
7,501,695
|
|
|
$
|
7,194,433
|
|
|
|
|
|
Current
liabilities
|
$
|
686,100
|
|
|
$
|
1,046,972
|
|
Long-term debt, less
current portion
|
3,644,542
|
|
|
3,215,710
|
|
Financing lease
obligations, less current portion
|
562,348
|
|
|
771,434
|
|
Operating lease
obligations, less current portion
|
1,272,448
|
|
|
1,277,178
|
|
Line of
credit
|
166,381
|
|
|
—
|
|
Other
liabilities
|
117,646
|
|
|
184,414
|
|
Total
liabilities
|
6,449,465
|
|
|
6,495,708
|
|
Total Brookdale
Senior Living Inc. stockholders' equity
|
1,049,879
|
|
|
696,356
|
|
Noncontrolling
interest
|
2,351
|
|
|
2,369
|
|
Total
equity
|
1,052,230
|
|
|
698,725
|
|
Total liabilities and
equity
|
$
|
7,501,695
|
|
|
$
|
7,194,433
|
|
Condensed
Consolidated Statements of Cash Flows
|
|
|
Three Months Ended
March 31,
|
(in
thousands)
|
2020
|
|
2019
|
Cash Flows from
Operating Activities
|
|
|
|
Net income
(loss)
|
$
|
369,497
|
|
|
$
|
(42,606)
|
|
Adjustments to
reconcile net income (loss) to net cash provided by (used in)
operating activities:
|
|
|
|
Loss (gain) on debt
modification and extinguishment, net
|
(19,181)
|
|
|
67
|
|
Depreciation and
amortization, net
|
92,053
|
|
|
97,867
|
|
Asset
impairment
|
78,226
|
|
|
391
|
|
Equity in (earnings)
loss of unconsolidated ventures
|
1,008
|
|
|
526
|
|
Distributions from
unconsolidated ventures from cumulative share of net
earnings
|
—
|
|
|
749
|
|
Amortization of
entrance fees
|
(377)
|
|
|
(398)
|
|
Proceeds from
deferred entrance fee revenue
|
343
|
|
|
436
|
|
Deferred income tax
(benefit) provision
|
(21,767)
|
|
|
170
|
|
Operating lease
expense adjustment
|
(6,733)
|
|
|
(4,383)
|
|
Loss (gain) on sale
of assets, net
|
(372,839)
|
|
|
702
|
|
Loss (gain) on
facility lease termination and modification, net
|
—
|
|
|
209
|
|
Non-cash stock-based
compensation expense
|
5,957
|
|
|
6,356
|
|
Non-cash management
contract termination gain
|
—
|
|
|
(353)
|
|
Other
|
(1,460)
|
|
|
(2,495)
|
|
Changes in operating
assets and liabilities:
|
|
|
|
Accounts receivable,
net
|
(2,033)
|
|
|
(4,550)
|
|
Prepaid expenses and
other assets, net
|
(1,696)
|
|
|
12,358
|
|
Prepaid insurance
premiums financed with notes payable
|
(17,434)
|
|
|
(18,842)
|
|
Trade accounts
payable and accrued expenses
|
(47,919)
|
|
|
(41,358)
|
|
Refundable fees and
deferred revenue
|
(2,254)
|
|
|
(9,855)
|
|
Operating lease
assets and liabilities for lessor capital expenditure
reimbursements
|
4,088
|
|
|
—
|
|
Net cash provided by
(used in) operating activities
|
57,479
|
|
|
(5,009)
|
|
Cash Flows from
Investing Activities
|
|
|
|
Change in lease
security deposits and lease acquisition deposits, net
|
3,211
|
|
|
(320)
|
|
Purchase of
marketable securities
|
(89,414)
|
|
|
(68,348)
|
|
Sale and maturities
of marketable securities
|
50,000
|
|
|
—
|
|
Capital expenditures,
net of related payables
|
(69,385)
|
|
|
(60,055)
|
|
Acquisition of
assets, net of related payables and cash received
|
(446,688)
|
|
|
—
|
|
Investment in
unconsolidated ventures
|
(268)
|
|
|
(3,986)
|
|
Distributions
received from unconsolidated ventures
|
—
|
|
|
3,178
|
|
Proceeds from sale of
assets, net
|
304,617
|
|
|
29,458
|
|
Net cash provided by
(used in) investing activities
|
(247,927)
|
|
|
(100,073)
|
|
Cash Flows from
Financing Activities
|
|
|
|
Proceeds from
debt
|
471,785
|
|
|
25,178
|
|
Repayment of debt and
financing lease obligations
|
(263,226)
|
|
|
(28,400)
|
|
Proceeds from line of
credit
|
166,381
|
|
|
—
|
|
Purchase of treasury
stock, net of related payables
|
(18,123)
|
|
|
(9,956)
|
|
Payment of financing
costs, net of related payables
|
(5,815)
|
|
|
(759)
|
|
Payments of employee
taxes for withheld shares
|
(3,898)
|
|
|
(2,997)
|
|
Other
|
146
|
|
|
298
|
|
Net cash provided by
(used in) financing activities
|
347,250
|
|
|
(16,636)
|
|
Net increase
(decrease) in cash, cash equivalents, and restricted
cash
|
156,802
|
|
|
(121,718)
|
|
Cash, cash
equivalents, and restricted cash at beginning of period
|
301,697
|
|
|
450,218
|
|
Cash, cash
equivalents, and restricted cash at end of period
|
$
|
458,499
|
|
|
$
|
328,500
|
|
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, 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.
The Company believes that presentation of Adjusted EBITDA as a
performance measure is useful to investors because (i) it is one of
the metrics used by the Company's management for budgeting and
other planning purposes, to review the Company's historic and
prospective core operating performance, and to make day-to-day
operating decisions; (ii) it provides an assessment of operational
factors that management can impact in the short-term, namely
revenues and the controllable cost structure of the organization,
by eliminating items related to the Company's financing and capital
structure and other items that management does not consider as part
of the Company's underlying core operating performance and that
management believes impact the comparability of performance between
periods; and (iii) the Company believes that this measure is used
by research analysts and investors to evaluate the Company's
operating results and to value companies in its industry.
Adjusted EBITDA has material limitations as a performance
measure, including: (i) excluded interest and income tax are
necessary to operate the Company's business under its current
financing and capital structure; (ii) excluded depreciation,
amortization and impairment charges may represent the wear and tear
and/or reduction in value of the Company's communities, goodwill
and other assets and may be indicative of future needs for capital
expenditures; and (iii) the Company may incur income/expense
similar to those for which adjustments are made, such as gain/loss
on sale of assets, facility lease termination and modification, or
debt modification and extinguishment, non-cash stock-based
compensation expense, and transaction and other costs, and such
income/expense may significantly affect the Company's operating
results.
The table below reconciles the Company's Adjusted EBITDA from
its net income (loss).
|
Three Months
Ended
March 31,
|
(in
thousands)
|
2020
|
|
2019
|
Net income
(loss)
|
$
|
369,497
|
|
|
$
|
(42,606)
|
|
Provision (benefit)
for income taxes
|
(15,828)
|
|
|
679
|
|
Equity in (earnings)
loss of unconsolidated ventures
|
1,008
|
|
|
526
|
|
Loss (gain) on debt
modification and extinguishment, net
|
(19,181)
|
|
|
67
|
|
Loss (gain) on sale
of assets, net
|
(372,839)
|
|
|
702
|
|
Other non-operating
(income) loss
|
(2,662)
|
|
|
(2,988)
|
|
Interest
expense
|
56,360
|
|
|
63,365
|
|
Interest
income
|
(1,455)
|
|
|
(3,084)
|
|
Income (loss) from
operations
|
14,900
|
|
|
16,661
|
|
Depreciation and
amortization
|
90,738
|
|
|
96,888
|
|
Asset
impairment
|
78,226
|
|
|
391
|
|
Loss (gain) on
facility lease termination and modification, net
|
—
|
|
|
209
|
|
Operating lease
expense adjustment
|
(6,733)
|
|
|
(4,383)
|
|
Non-cash stock-based
compensation expense
|
5,957
|
|
|
6,356
|
|
Transaction and
organizational restructuring costs
|
1,981
|
|
|
461
|
|
Adjusted
EBITDA(1) (2)
|
$
|
185,069
|
|
|
$
|
116,583
|
|
$100.0 million
management termination fee
|
(100,000)
|
|
|
—
|
|
COVID-19
expense
|
10,000
|
|
|
—
|
|
Adjusted EBITDA,
excluding $100.0 million management termination fee and COVID-19
expense
|
$
|
95,069
|
|
|
$
|
116,583
|
|
|
|
(1)
|
Adjusted EBITDA for
the three months ended March 31, 2019 includes a negative
non-recurring net impact of $6.4 million from the application of
the lease accounting standard effective January 1, 2019.
|
|
|
(2)
|
Adjusted EBITDA for
the first quarter of 2020 includes the $100.0 million management
agreement termination fee received from Healthpeak related to the
sale of Brookdale's interest in the entry fee CCRC venture, which
closed on January 31, 2020, and $10.0 million of direct costs,
primarily consisting of acquisition of PPE, medical equipment,
cleaning and disposable food service supplies, enhanced cleaning
and environmental sanitation costs, and increased labor expense,
incurred to prepare for and respond to the COVID-19 pandemic.
Additionally, Adjusted EBITDA for the first quarter of 2020
includes a negative impact to resident fees as a result of the
COVID-19 pandemic.
|
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.
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.
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.
The table below reconciles the Company's Adjusted Free Cash Flow
from its net cash provided by (used in) operating activities.
|
Three Months
Ended
March 31,
|
(in
thousands)
|
2020
|
|
2019
|
Net cash provided
by (used in) operating activities
|
$
|
57,479
|
|
|
$
|
(5,009)
|
|
Net cash provided by
(used in) investing activities
|
(247,927)
|
|
|
(100,073)
|
|
Net cash provided by
(used in) financing activities
|
347,250
|
|
|
(16,636)
|
|
Net increase
(decrease) in cash, cash equivalents, and restricted
cash
|
$
|
156,802
|
|
|
$
|
(121,718)
|
|
|
|
|
|
Net cash provided
by (used in) operating activities
|
$
|
57,479
|
|
|
$
|
(5,009)
|
|
Distributions from
unconsolidated ventures from cumulative share of net
earnings
|
—
|
|
|
(749)
|
|
Changes in prepaid
insurance premiums financed with notes payable
|
17,434
|
|
|
18,842
|
|
Changes in assets and
liabilities for lessor capital expenditure reimbursements under
operating leases
|
(4,088)
|
|
|
—
|
|
Non-development
capital expenditures, net
|
(60,556)
|
|
|
(54,602)
|
|
Payment of financing
lease obligations
|
(5,087)
|
|
|
(5,453)
|
|
Adjusted Free Cash
Flow (1) (2)
|
$
|
5,182
|
|
|
$
|
(46,971)
|
|
|
|
(1)
|
Adjusted Free Cash
Flow includes transaction and organizational restructuring costs of
$2.0 million and $0.5 million for the three months ended
March 31, 2020 and 2019, respectively.
|
|
|
(2)
|
Adjusted Free Cash
Flow for the first quarter of 2020 includes the $100.0 million
management agreement termination fee received from Healthpeak
related to the sale of Brookdale's interest in the entry fee CCRC
venture, which closed on January 31, 2020, and $10.0 million of
direct costs, primarily consisting of acquisition of PPE, medical
equipment, cleaning and disposable food service supplies, enhanced
cleaning and environmental sanitation costs, and increased labor
expense, incurred to prepare for and respond to the COVID-19
pandemic.
|
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SOURCE Brookdale Senior Living Inc.