Document/ExhibitDescriptionPagesSize
1: 8-K Current Report HTML 41K
2: EX-99.1 Miscellaneous Exhibit HTML 377K
3: EX-99.2 Miscellaneous Exhibit HTML 66K
7: R1 Document and Entity Information Document HTML 47K
10: XML IDEA XML File -- Filing Summary XML 12K
8: XML XBRL Instance -- bkd-20220808_htm XML 23K
9: EXCEL IDEA Workbook of Financial Reports XLSX 8K
5: EX-101.LAB XBRL Labels -- bkd-20220808_lab XML 70K
6: EX-101.PRE XBRL Presentations -- bkd-20220808_pre XML 34K
4: EX-101.SCH XBRL Schema -- bkd-20220808 XSD 10K
11: JSON XBRL Instance as JSON Data -- MetaLinks 12± 18K
12: ZIP XBRL Zipped Folder -- 0001332349-22-000071-xbrl Zip 74K
Nashville, Tenn., August 8, 2022 - Brookdale Senior Living Inc. (NYSE: BKD) ("Brookdale" or the "Company") announced results for the quarter ended June 30, 2022.
HIGHLIGHTS
•Second
quarter consolidated revenue per available unit (RevPAR) increased 10.3% year-over-year.
•Sequentially, net hires were more than 2.5 times higher and the use of contract labor decreased.
•The Company accepted approximately $60.0 million in Phase 4 Provider Relief Fund grants on August 5, 2022.
“For the second quarter, we were pleased to have outperformed
the industry in sequential occupancy growth,” said Lucinda (“Cindy”) Baier, Brookdale’s President and CEO. “With our strong occupancy performance, we continue to make significant progress toward accelerating our recovery, even as we continue to navigate the challenging labor environment. To that end, I’m also pleased with the progress we have made in our net hire initiative, which has increased our workforce by 10% since the start of the year. We recently received Phase 4 Provider Relief Fund grants and have updated our guidance to reflect this income and our labor expectations. I want to thank our team members for their extraordinary efforts and dedication to help our residents live their best lives. With greater demographic demand and lower new supply, I’m very excited about the compelling growth trajectory for Brookdale.”
SUMMARY
OF SECOND QUARTER RESULTS
Same Community Senior Housing (Independent Living (IL), Assisted Living and Memory Care (AL/MC), and CCRCs)
The table below presents a summary of operating results and metrics of the Company's same community senior housing portfolio.(1)
Year-Over-Year Increase
/ (Decrease)
Sequential Increase / (Decrease)
($ in millions, except RevPAR and RevPOR)
2Q 2022
2Q 2021
Amount
Percent
1Q 2022
Amount
Percent
Senior housing resident fee revenue
$
617.7
$
559.7
$
58.0
10.4%
$
612.6
$
5.1
0.8%
Senior
housing facility operating expense
$
492.9
$
440.9
$
52.0
11.8%
$
491.3
$
1.6
0.3%
RevPAR
$
4,070
$
3,688
$
382
10.4%
$
4,036
$
34
0.8%
Weighted
average occupancy
74.6%
70.4%
420 bps
n/a
73.4%
120 bps
n/a
RevPOR
$
5,456
$
5,236
$
220
4.2%
$
5,498
$
(42)
(0.8)%
(1) The
same community senior housing portfolio includes operating results and data for 633 communities consolidated and operational for the full period in both comparison years. Consolidated communities excluded from the same community portfolio include communities acquired or disposed of since the beginning of the prior year, communities classified as assets held for sale, certain communities planned for disposition, certain communities that have undergone or are undergoing expansion, redevelopment, and repositioning projects, and certain communities that have experienced a casualty event that significantly impacts their operations. To aid in comparability, same community operating results exclude natural disaster expense.
•Resident fees.
•2Q 2022 vs 2Q 2021:
◦Same
community resident fees increased due to the increases in occupancy and RevPOR.
◦The increase in occupancy primarily reflects the impact of the Company's execution on key initiatives to rebuild occupancy lost due to the COVID-19 pandemic.
◦The increase in RevPOR was primarily the result of in-place rate increases.
•2Q 2022 vs 1Q 2022:
◦Same community resident fees increased due to the increase in occupancy, partially offset by lower RevPOR due to discounting and lower resident acuity.
◦Same community weighted average occupancy
increased 120 basis points, representing the Company's best second quarter sequential occupancy growth in more than ten years.
Page 1
•Facility operating expense.
•2Q 2022 vs 2Q 2021:
◦The increase was primarily due to higher labor expense primarily resulting from an increase in the use of contract labor and overtime as well as merit and market wage
rate adjustments.
◦An increase in food costs due to increased occupancy and higher prices during the period and an increase in repairs and maintenance costs also contributed to the increase in same community facility operating expense.
•2Q 2022 vs 1Q 2022:
◦The increase in same community facility operating expense was primarily due to an increase in food costs resulting from increased occupancy and higher prices during the period, as well as an increase in marketing costs due to seasonal spending.
◦Same community labor expense was nearly flat sequentially as increases in costs from hours worked by associates, recent wage rate adjustments, and an additional day of expense during the
second quarter of 2022 were offset by a decreased use of contract labor and a moderation of COVID-19 related labor costs.
•The Company's same community senior housing portfolio incurred $1.9 million, $10.0 million, and $8.3 million of incremental direct costs during the second quarter of 2022, first quarter of 2022, and second quarter of 2021, respectively, to respond to the COVID-19 pandemic.
Consolidated
The table below presents a summary of consolidated
operating results.
Year-Over-Year Increase / (Decrease)
Sequential Increase / (Decrease)
($ in millions, except RevPAR and RevPOR)
2Q
2022
2Q 2021
Amount
Percent
1Q 2022
Amount
Percent
Senior housing resident fee revenue
$
640.4
$
586.7
$
53.7
9.2%
$
637.0
$
3.4
0.5%
Health
Care Services resident fee revenue (2)
—
87.3
(87.3)
n/a
—
—
n/a
Total resident fee revenue
640.4
674.0
(33.6)
(5.0)%
637.0
3.4
0.5%
Management
fee revenue
3.3
5.0
(1.7)
(34.0)%
3.3
—
—
Other operating income
8.4
1.3
7.1
NM
0.4
8.0
NM
Senior
housing facility operating expense
513.7
466.4
47.3
10.1%
512.8
0.9
0.2%
Health Care Services facility operating
expense (2)
—
84.4
(84.4)
n/a
—
—
n/a
Total
facility operating expense
513.7
550.8
(37.1)
(6.7)%
512.8
0.9
0.2%
General and administrative expense
41.8
52.4
(10.6)
(20.2)%
45.1
(3.3)
(7.3)%
Net
income (loss)
(84.3)
(83.6)
0.7
0.8%
(100.0)
(15.7)
(15.7)%
Adjusted EBITDA (3)
50.7
33.1
17.6
53.2%
37.2
13.5
36.3%
RevPAR
$
4,071
$
3,692
$
379
10.3%
$
4,032
$
39
1.0%
Weighted
average occupancy
74.6%
70.5%
410 bps
n/a
73.4%
120 bps
n/a
RevPOR
$
5,459
$
5,237
$
222
4.2%
$
5,493
$
(34)
(0.6)%
(2) The
Company sold 80% of its equity in its Health Care Services segment (the "HCS Sale") on July 1, 2021. For periods beginning July 1, 2021, the results and financial position of the Health Care Services segment were deconsolidated from the Company's consolidated financial statements.
(3) Adjusted EBITDA is a financial measure that is not calculated in accordance with GAAP. See "Reconciliations of Non-GAAP Financial Measures" for the Company's definition of such measure, reconciliations to the most comparable GAAP financial measure, and other important information regarding the use of the
Company's non-GAAP financial measures.
Page 2
•Senior housing resident fee revenue.
•The changes in senior housing resident fee revenue were primarily due to the same community operating results discussed above.
•The disposition of nine communities through sales of owned communities and lease terminations since the beginning of the second quarter of 2021 resulted in $5.8 million less in resident fees during the second quarter of 2022 compared to the second quarter of 2021.
•The
disposition of five communities since the beginning of the first quarter of 2022 resulted in $1.8 million less in resident fees during the second quarter of 2022 compared to the first quarter of 2022.
The table below sets forth the Company's recent consolidated occupancy trend.
2021
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Weighted
average
70.0
%
69.4
%
69.4
%
69.9
%
70.5
%
71.2
%
72.0
%
72.5
%
73.0
%
73.3
%
73.5
%
73.6
%
Month
end
70.4
%
70.1
%
70.6
%
71.1
%
71.6
%
72.6
%
73.3
%
73.7
%
74.2
%
74.5
%
74.3
%
74.5
%
2022
Jan
Feb
Mar
Apr
May
Jun
Jul
Weighted
average
73.4
%
73.3
%
73.6
%
73.9
%
74.6
%
75.2
%
75.9
%
Month
end
74.2
%
74.4
%
75.0
%
75.3
%
76.2
%
76.6
%
77.1
%
•Other
operating income. The Company recognized $8.4 million of government grants and employee retention credits as other operating income during the second quarter of 2022, compared to $0.4 million of government grants during the first quarter of 2022 and $1.3 million of government grants and credits during the second quarter of 2021.
•Senior housing facility operating expense.
•The changes in senior housing facility operating expense were primarily due to the same community operating results discussed above.
•The disposition of nine communities resulted in $5.8 million less in facility operating expenses during the second quarter
of 2022 compared to the second quarter of 2021.
•The disposition of five communities resulted in $1.8 million less in facility operating expenses during the second quarter of 2022 compared to the first quarter of 2022.
•Net income (loss).
•2Q 2022 vs 2Q 2021: The increase in net loss was primarily attributable to a decrease in equity in earnings of unconsolidated ventures compared to the prior year period. The increase was partially offset by a decrease in general and administrative expense primarily attributable to a decrease in compensation costs primarily as a result of reductions in the Company's corporate headcount related
to the HCS Sale and in estimated incentive compensation costs compared to the prior year period as well as the net impact of the revenue, other operating income, and facility operating expense factors previously discussed.
•2Q 2022 vs 1Q 2022: The decrease in net loss was primarily attributable to the net impact of the revenue, other operating income, and facility operating expense previously discussed and decreases in asset impairment expense and general and administrative expense as a result of a decrease in estimated incentive compensation costs compared to the prior period.
•Adjusted EBITDA.
•2Q 2022 vs 2Q 2021: The increase in Adjusted EBITDA was primarily attributable to the increases
in senior housing resident fee revenue and other operating income and the decrease in general and administrative expense due to a decrease in compensation costs primarily as a result of reductions in the Company's corporate headcount related to the HCS Sale and in estimated incentive compensation costs compared to the prior year period. These items were partially offset by the increase in senior housing facility operating expense.
•2Q 2022 vs 1Q 2022: The increase in Adjusted EBITDA was primarily attributable to the increases in other operating income and resident fee revenue and the decrease in general and administrative expense, partially offset by the increase in facility operating expense.
Page
3
LIQUIDITY
The table below presents a summary of the Company’s net cash provided by (used in) operating activities, non-development capital expenditures, net, and Adjusted Free Cash Flow.
Year-Over-Year
Increase
/ (Decrease)
Sequential
Increase / (Decrease)
($ in millions)
2Q 2022
2Q 2021
Amount
Percent
1Q 2022
Amount
Percent
Net cash provided by (used in) operating activities
$
11.6
$
3.4
$
8.2
NM
$
(23.3)
$
34.9
NM
Non-development
capital expenditures, net
45.7
35.8
9.9
27.7%
39.3
6.4
16.3%
Adjusted Free Cash Flow (4)
(48.5)
(54.7)
6.2
11.3%
(53.5)
5.0
9.3%
(4) Adjusted
Free Cash Flow is a financial measure that is not calculated in accordance with GAAP. See "Reconciliations of Non-GAAP Financial Measures" for the Company's definition of such measure, reconciliations to the most comparable GAAP financial measure and other important information regarding the use of the Company's non-GAAP financial measures.
•Net cash provided by (used in) operating activities.
•2Q 2022 vs 2Q 2021: The increase in net cash provided by operating activities was primarily attributable to an increase in same community revenue and a decrease in general and administrative
expense compared to the prior year period. These changes were partially offset by an increase in same community facility operating expense and a decrease in distributions from unconsolidated ventures compared to the prior year period.
•2Q 2022 vs 1Q 2022: The change in net cash provided by (used in) operating activities was primarily attributable to a decrease in insurance premium payments due to the timing of annual payments, an increase in same community revenue, and an increase in government grants received compared to the prior period.
•Non-development capital expenditures, net. The increase in non-development capital expenditures, net was primarily attributable to increased investment in the
Company's communities due to unit upgrades as the Company increases move-ins and routine maintenance expenditures.
•Adjusted Free Cash Flow.
•2Q 2022 vs 2Q 2021: The $6.2 million change in Adjusted Free Cash Flow was primarily attributable to the increase in net cash provided by operating activities, excluding a decrease in distributions from unconsolidated ventures compared to the prior year period. The change was partially offset by the increase in non-development capital expenditures, net compared to the prior year period.
•2Q 2022 vs 1Q 2022: The $5.0 million
change in Adjusted Free Cash Flow was primarily attributable to the change in net cash provided by (used in) operating activities, excluding $22.0 million of changes in prepaid insurance premiums financed with notes payable. The change was partially offset by the increase in non-development capital expenditures, net compared to the prior period.
•Total Liquidity.
•Total liquidity of $411.7 million as of June 30, 2022 included $238.8 million of unrestricted cash and cash equivalents, $165.5 million of marketable securities, and $7.4 million of availability on the Company's secured credit facility. Total liquidity as of June 30,
2022 decreased $64.2 million from March 31, 2022, primarily attributable to negative $48.5 million of Adjusted Free Cash Flow, $9.6 million of payments of mortgage debt, and $6.0 million of cash paid for the acquisition of a previously leased community.
•On August 5, 2022, the Company accepted approximately $60.0 million of Phase 4 grants from the general distribution of the Public Health and Social Services Emergency Fund ("Provider Relief Fund") administered by the U.S. Department of Health and Human Services ("HHS"), under which grants have been made available to eligible healthcare providers for healthcare related expenses or lost revenues attributable to COVID-19. The
Company expects to recognize the Phase 4 grants in income during the third quarter of 2022.
Page 4
2022 OUTLOOK
The Company updated its full year 2022 Adjusted EBITDA guidance to include approximately $60.0 million in Phase 4 Provider Relief Fund grants accepted on August 5, 2022, which it expects to recognize in income during the third quarter of 2022, and to incorporate year-to-date
results and revised expectations for the remainder of 2022. The Company maintains its full year 2022 RevPAR growth guidance.
Full Year 2022 Guidance
RevPAR growth
10% - 12%
Adjusted EBITDA
$270 million - $290 million
This
guidance excludes the potential impact of any future acquisition or disposition activity. Reconciliation of the non-GAAP financial measure included in the foregoing guidance to the most comparable GAAP financial measure is not available without unreasonable effort due to the inherent difficulty in forecasting the timing or amounts of items required to reconcile Adjusted EBITDA from the Company's net income (loss). Variability in the timing or amounts of items required to reconcile the measure may have a significant impact on the Company's future GAAP results.
SUPPLEMENTAL INFORMATION
The
Company will post on its website at www.brookdaleinvestors.com supplemental information relating to the Company's second quarter 2022 results, an updated investor presentation, and a copy of this earnings release. The supplemental information and a copy of this earnings release will also be furnished in a Form 8-K to be filed with the SEC.
EARNINGS CONFERENCE CALL
Brookdale's
management will conduct a conference call to discuss the financial results for the second quarter 2022 on August 9, 2022 at 9:00 AM ET. The conference call can be accessed by dialing (844) 200-6205 (from within the U.S.) or (929) 526-1599 (from outside of the U.S.) ten minutes prior to the scheduled start and referencing the access code "332634".
A webcast of the conference call will be available to the public on a listen-only basis at www.brookdaleinvestors.com. Please allow extra
time before the call to download the necessary software required to listen to the internet broadcast. A replay of the webcast will be available through the website following the call.
For those who cannot listen to the live call, a replay of the webcast will be available until 11:59 PM ET on August 16, 2022 by dialing (866) 813-9403 (from within the U.S.) or +44 (204) 525-0658 (from outside of the U.S.) and referencing access code "027713".
ABOUT
BROOKDALE SENIOR LIVING
Brookdale Senior Living Inc. is the nation’s premier operator of senior living communities. The Company is committed to its mission of enriching the lives of the people it serves with compassion, respect, excellence, and integrity. The Company operates independent living, assisted living, memory care, and continuing care retirement communities. Through its comprehensive network, Brookdale helps to provide seniors with care and services in an environment that feels like home. The Company’s expertise in healthcare, hospitality, and real estate provides residents with opportunities to improve wellness, pursue passions
and stay connected with friends and loved ones. Brookdale operates and manages 674 communities in 41 states as of June 30, 2022, with the ability to serve more than 60,000 residents. Brookdale's stock trades on the New York Stock Exchange under the ticker symbol BKD. For more information, visit brookdale.com or connect with Brookdale on Facebook at facebook.com/brookdaleseniorliving or Twitter at twitter.com/brookdaleliving.
DEFINITIONS OF REVPAR AND REVPOR
RevPAR, or average monthly senior housing resident fee revenue per available unit, is defined by the Company as resident fee
revenue for the corresponding portfolio for the period (excluding revenue from the former Health Care Services segment, revenue for private duty services provided to seniors living outside of the Company's communities, and entrance fee amortization), divided by the weighted average number of available units in the corresponding portfolio for the period, divided by the number of months in the period.
RevPOR, or average monthly senior housing resident fee revenue per occupied unit, is defined by the Company as resident fee revenue for the corresponding portfolio for the period (excluding revenue from the former Health Care Services segment, revenue for private duty services provided to seniors living outside of the
Company's communities, and entrance fee amortization), divided by the weighted average number of occupied units in the corresponding portfolio for the period, divided by the number of months in the period.
Page 5
SAFE HARBOR
Certain statements in this press release and the associated earnings call may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking
statements are subject to various risks and uncertainties and include all statements that are not historical statements of fact and those regarding the Company's intent, belief or expectations. Forward-looking statements are generally identifiable by use of forward-looking terminology such as "may,""will,""should,""could,""would,""potential,""intend,""expect,""endeavor,""seek,""anticipate,""estimate,""believe,""project,""predict,""continue,""plan,""target," or other similar words or expressions. These forward-looking statements are based on certain assumptions and expectations, and the Company's ability to predict results or the actual effect of future plans
or strategies is inherently uncertain. Although the Company believes that expectations reflected in any forward-looking statements are based on reasonable assumptions, it can give no assurance that its assumptions or expectations will be attained and actual results and performance could differ materially from those projected. Factors which could have a material adverse effect on the Company's operations and future prospects or which could cause events or circumstances to differ from the forward-looking statements include, but are not limited to, the impacts of the COVID-19 pandemic, including the response efforts of federal, state, and local government authorities, businesses, individuals, and the Company on the
Company's business, results of operations, cash flow, revenue, expenses, liquidity, and its strategic initiatives, including plans for future growth, which will depend on many factors, some of which cannot be foreseen, including the duration, severity, and breadth of the pandemic and any resurgence or variants of the disease, the impact of COVID-19 on the nation’s economy and debt and equity markets and the local economies in the Company's markets, the development, availability, utilization, and efficacy of COVID-19 testing, therapeutic agents, and vaccines and the prioritization of such resources among businesses and demographic groups, government financial and regulatory relief efforts that may become available to business and individuals, including the Company's ability to qualify for and
satisfy the terms and conditions of financial relief, perceptions regarding the safety of senior living communities during and after the pandemic, changes in demand for senior living communities and the Company's ability to adapt its sales and marketing efforts to meet that demand, the impact of COVID-19 on the Company's residents’ and their families’ ability to afford its resident fees, including due to changes in unemployment rates, consumer confidence, housing markets, and equity markets caused by COVID-19, changes in the acuity levels of the Company's new residents, the disproportionate impact of COVID-19 on seniors generally and those residing in the
Company's communities, the duration and costs of the Company's response efforts, including increased equipment, supplies, labor, litigation, testing, vaccination clinic, health plan, and other expenses, potentially greater use of contract labor and overtime due to COVID-19 and general labor market conditions, the impact of COVID-19 on the Company's ability to complete financings and refinancings of various assets, or other transactions or to generate sufficient cash flow to cover required debt, interest, and lease payments and to satisfy financial and other covenants in its debt and lease documents, increased regulatory requirements, including the costs of unfunded, mandatory testing of residents and associates
and provision of test kits to the Company's health plan participants, increased enforcement actions resulting from COVID-19, government action that may limit the Company's collection or discharge efforts for delinquent accounts, and the frequency and magnitude of legal actions and liability claims that may arise due to COVID-19 or the Company's response efforts; events which adversely affect the ability of seniors to afford resident fees, including downturns in the economy, housing market, consumer confidence, or the equity markets and unemployment among resident family members; changes in reimbursement rates, methods, or timing under governmental reimbursement programs including the Medicare and Medicaid programs;
the effects of senior housing construction and development, lower industry occupancy (including due to the pandemic), and increased competition; conditions of housing markets, regulatory changes, acts of nature, and the effects of climate change in geographic areas where the Company is concentrated; terminations of the Company's resident agreements and vacancies in the living spaces it leases, including due to the pandemic; failure to maintain the security and functionality of the Company's information systems, to prevent a cybersecurity attack or breach, or to comply with applicable privacy and consumer protection laws, including HIPAA; the
Company's ability to complete its capital expenditures in accordance with its plans; the Company's ability to identify and pursue development, investment, and acquisition opportunities and its ability to successfully integrate acquisitions; competition for the acquisition of assets; the Company's ability to complete pending or expected disposition, acquisition, or other transactions on agreed upon terms or at all, including in respect of the satisfaction of closing conditions, the risk that regulatory approvals are not obtained or are subject to unanticipated conditions, and uncertainties as to the timing of closing, and the Company's ability to identify and pursue any such opportunities in the future; risks
related to the implementation of the Company's strategy, including initiatives undertaken to execute on the Company's strategic priorities and their effect on its results; limits on the Company's ability to use net operating loss carryovers to reduce future tax payments; delays in obtaining regulatory approvals; disruptions in the financial markets or decreases in the appraised values or performance of the Company's communities that affect the Company's ability to obtain financing or extend or refinance debt as it matures and the
Company's financing costs; the Company's ability to generate sufficient cash flow to cover required interest, principal, and long-term lease payments and to fund its planned capital projects; the effect of the Company's non-compliance with any of its debt or lease agreements (including the financial covenants contained therein), including the risk of lenders or lessors declaring a cross default in the event of the Company's non-compliance with any such agreements and the risk of loss of the Company's property securing leases and indebtedness due to any resulting lease terminations and foreclosure actions; the effect of the
Company's indebtedness and long-term leases on the Company's liquidity and its ability to operate its business; increases in market interest rates that increase the costs of the Company's debt obligations; the Company's ability to obtain additional capital on terms acceptable to it; departures of key officers and potential disruption caused by changes in management; increased competition for, or a shortage of, associates (including due to the pandemic or general labor market conditions), wage pressures resulting from increased competition, low unemployment levels, minimum wage increases and changes in overtime laws, and union activity; environmental contamination at any of the
Company's communities; failure to comply with existing environmental laws; an adverse determination or resolution of complaints filed against the Company, including putative class action complaints; the
Page 6
cost and difficulty of complying with increasing and evolving regulation; costs to respond to, and adverse determinations resulting from, government reviews, audits and investigations; changes in, or its failure to comply with, employment-related laws and regulations; unanticipated costs to comply with legislative or regulatory developments; the risks associated with current global economic conditions and general economic factors such as inflation, the
consumer price index, commodity costs, fuel and other energy costs, competition in the labor market, costs of salaries, wages, benefits, and insurance, interest rates, and tax rates; the impact of seasonal contagious illness or an outbreak of COVID-19 or other contagious disease in the markets in which the Company operates; actions of activist stockholders, including a proxy contest; as well as other risks detailed from time to time in the Company's filings with the Securities and Exchange Commission, including those set forth in the Company's Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. When considering forward-looking statements, you should keep in mind the risk factors and other cautionary
statements in such SEC filings. Readers are cautioned not to place undue reliance on any of these forward-looking statements, which reflect management's views as of the date of this press release and/or associated earnings call. The Company cannot guarantee future results, levels of activity, performance or achievements, and, except as required by law, it expressly disclaims any obligation to release publicly any updates or revisions to any forward-looking statements contained in this press release and/or associated earnings call to reflect any change in the Company's expectations with regard thereto or change in events,
conditions, or circumstances on which any statement is based.
Page 7
Condensed Consolidated Statements of Operations
Three
Months Ended June 30,
Six Months Ended June 30,
(in thousands, except per share data)
2022
2021
2022
2021
Revenue
Resident fees
$
640,388
$
673,978
$
1,277,362
$
1,338,328
Management
fees
3,329
4,998
6,658
13,564
Reimbursed costs incurred on behalf of managed communities
37,388
43,008
74,529
108,802
Other
operating income
8,411
1,308
8,787
12,043
Total revenue and other operating income
689,516
723,292
1,367,336
1,472,737
Expense
Facility
operating expense (excluding facility depreciation and amortization of $80,944, $77,921, $160,876, and $155,195 respectively)
513,664
550,846
1,026,428
1,107,158
General and administrative expense (including non-cash stock-based compensation expense of $3,619, $4,527, $7,504, and $9,310 respectively)
41,752
52,400
86,878
102,343
Facility
operating lease expense
41,538
43,864
83,102
88,282
Depreciation and amortization
86,623
83,591
172,307
167,482
Asset
impairment
2,599
2,078
11,674
12,755
Costs incurred on behalf of managed communities
37,388
43,008
74,529
108,802
Total
operating expense
723,564
775,787
1,454,918
1,586,822
Income (loss) from operations
(34,048)
(52,495)
(87,582)
(114,085)
Interest
income
778
341
873
762
Interest expense:
Debt
(35,693)
(35,425)
(68,850)
(70,776)
Financing
lease obligations
(11,994)
(11,492)
(24,052)
(22,875)
Amortization of deferred financing costs
(1,520)
(1,907)
(3,062)
(3,822)
Change
in fair value of derivatives
973
(233)
4,376
(191)
Equity in earnings (loss) of unconsolidated ventures
(2,439)
13,946
(7,333)
13,415
Gain
(loss) on sale of assets, net
961
(79)
667
1,033
Other non-operating income (loss)
(111)
2,948
(138)
4,592
Income
(loss) before income taxes
(83,093)
(84,396)
(185,101)
(191,947)
Benefit (provision) for income taxes
(1,190)
792
786
40
Net
income (loss)
(84,283)
(83,604)
(184,315)
(191,907)
Net (income) loss attributable to noncontrolling interest
(135)
19
(116)
37
Net
income (loss) attributable to Brookdale Senior Living Inc. common stockholders
$
(84,418)
$
(83,585)
$
(184,431)
$
(191,870)
Basic and diluted net income
(loss) per share attributable to Brookdale Senior Living Inc. common stockholders
$
(0.45)
$
(0.45)
$
(0.99)
$
(1.04)
Weighted
average shares used in computing basic and diluted net income (loss) per share
Property, plant and equipment and leasehold intangibles, net
4,839,643
4,904,292
Operating
lease right-of-use assets
572,191
630,423
Other assets, net
168,996
176,758
Total assets
$
6,168,296
$
6,410,467
Current
portion of long-term debt
$
268,341
$
63,125
Current portion of financing lease obligations
22,996
22,151
Current portion of operating lease obligations
154,455
148,642
Other current liabilities
408,221
398,036
Total
current liabilities
854,013
631,954
Long-term debt, less current portion
3,565,819
3,778,087
Financing lease obligations, less current portion
526,601
532,136
Operating lease obligations, less current portion
620,035
681,876
Other
liabilities
83,261
86,791
Total liabilities
5,649,729
5,710,844
Total Brookdale Senior Living Inc. stockholders' equity
516,230
697,402
Noncontrolling interest
2,337
2,221
Total
equity
518,567
699,623
Total liabilities and equity
$
6,168,296
$
6,410,467
Page 9
Condensed Consolidated Statements of Cash Flows
Six
Months Ended June 30,
(in thousands)
2022
2021
Cash Flows from Operating Activities
Net income (loss)
$
(184,315)
$
(191,907)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation
and amortization, net
175,369
171,304
Asset impairment
11,674
12,755
Equity in (earnings) loss of unconsolidated ventures
7,333
(13,415)
Distributions from unconsolidated ventures from cumulative share of net earnings
561
5,355
Amortization
of entrance fees
(1,267)
(876)
Proceeds from deferred entrance fee revenue
1,959
2,298
Deferred income tax (benefit) provision
(1,438)
(704)
Operating lease expense adjustment
(16,615)
(9,990)
Change
in fair value of derivatives
(4,376)
191
Loss (gain) on sale of assets, net
(667)
(1,033)
Non-cash stock-based compensation expense
7,504
9,310
Other
(181)
(4,007)
Changes
in operating assets and liabilities:
Accounts receivable, net
1,592
(1,267)
Prepaid expenses and other assets, net
(5,550)
1,605
Prepaid insurance premiums financed with notes payable
(11,252)
(8,785)
Trade
accounts payable and accrued expenses
(822)
2,131
Refundable fees and deferred revenue
3,956
(8,918)
Operating lease assets and liabilities for lessor capital expenditure
reimbursements
4,857
15,506
Net
cash provided by (used in) operating activities
(11,678)
(20,447)
Cash Flows from Investing Activities
Change in lease security deposits and lease acquisition deposits, net
155
(75)
Purchase of marketable securities
(205,373)
(119,914)
Sale
and maturities of marketable securities
222,500
192,995
Capital expenditures, net of related payables
(96,851)
(79,538)
Acquisition of assets
(6,004)
—
Investment in unconsolidated ventures
(167)
(5,359)
Proceeds
from sale of assets, net
5,739
9,646
Net cash provided by (used in) investing activities
(80,001)
(2,245)
Cash Flows from Financing Activities
Proceeds from debt
29,302
21,022
Repayment
of debt and financing lease obligations
(43,084)
(72,970)
Payment of financing costs, net of related payables
(116)
(172)
Payments
of employee taxes for withheld shares
(4,195)
(4,444)
Other
—
10
Net cash provided by (used in) financing activities
(18,093)
(56,554)
Net increase (decrease) in cash, cash equivalents, and restricted cash
(109,772)
(79,246)
Cash,
cash equivalents, and restricted cash at beginning of period
438,314
465,148
Cash, cash equivalents, and restricted cash at end of period
$
328,542
$
385,902
Page 10
Non-GAAP
Financial Measures
This earnings release contains the financial measures Adjusted EBITDA and Adjusted Free Cash Flow, which are not calculated in accordance with U.S. generally accepted accounting principles ("GAAP"). Presentations of these non-GAAP financial measures are intended to aid investors in better understanding the factors and trends affecting the Company’s performance and liquidity. However, investors should not consider these non-GAAP financial measures as a substitute for financial measures determined in accordance with GAAP, including net income (loss), income (loss) from operations, or net cash provided by (used in) operating activities. The Company cautions investors that amounts presented in accordance
with the Company’s definitions of these non-GAAP financial measures may not be comparable to similar measures disclosed by other companies because not all companies calculate non-GAAP measures in the same manner. The Company urges investors to review the following reconciliations of these non-GAAP financial measures from the most comparable financial measures determined in accordance with GAAP.
Adjusted EBITDA
Adjusted EBITDA is a non-GAAP performance measure that the Company defines as net income (loss) excluding: benefit/provision for income taxes, non-operating income/expense
items, and depreciation and amortization; and further adjusted to exclude income/expense associated with non-cash, non-operational, transactional, cost reduction, or organizational restructuring items that management does not consider as part of the Company’s underlying core operating performance and that management believes impact the comparability of performance between periods. For the periods presented herein, such other items include non-cash impairment charges, gain/loss on facility operating lease termination, operating lease expense adjustment, non-cash stock-based compensation expense, and transaction and organizational restructuring costs. Transaction costs include those directly related to acquisition, disposition, financing, and leasing activity, and are primarily comprised of legal, finance, consulting, professional fees, and
other third-party costs. Organizational restructuring costs include those related to the Company’s efforts to reduce general and administrative expense and its senior leadership changes, including severance.
The Company believes that presentation of Adjusted EBITDA as a performance measure is useful to investors because (i) it is one of the metrics used by the Company’s management for budgeting and other planning purposes, to review the Company’s historic and prospective core operating performance, and to make day-to-day operating decisions; (ii)
it provides an assessment of operational factors that management can impact in the short-term, namely revenues and the controllable cost structure of the organization, by eliminating items related to the Company’s financing and capital structure and other items that management does not consider as part of the Company’s underlying core operating performance and that management believes impact the comparability of performance between periods; and (iii) the Company believes that this measure is used by research analysts and investors to evaluate the Company’s operating results and to value companies in its industry.
Adjusted
EBITDA has material limitations as a performance measure, including: (i) excluded interest and income tax are necessary to operate the Company’s business under its current financing and capital structure; (ii) excluded depreciation, amortization and impairment charges may represent the wear and tear and/or reduction in value of the Company’s communities, goodwill, and other assets and may be indicative of future needs for capital expenditures; and (iii) the Company may incur income/expense similar to those for which adjustments are made, such as gain/loss on sale of assets, facility operating lease termination, or debt modification and extinguishment, non-cash stock-based compensation expense, and transaction and
other costs, and such income/expense may significantly affect the Company’s operating results.
Page 11
The table below reconciles the Company's Adjusted EBITDA from net income (loss).
Equity
in (earnings) loss of unconsolidated ventures
2,439
4,894
(13,946)
7,333
Loss
(gain) on sale of assets, net
(961)
294
79
(667)
Other non-operating (income) loss
111
27
(2,948)
138
Interest
expense
48,234
43,354
49,057
91,588
Interest income
(778)
(95)
(341)
(873)
Income
(loss) from operations
(34,048)
(53,534)
(52,495)
(87,582)
Depreciation and amortization
86,623
85,684
83,591
172,307
Asset
impairment
2,599
9,075
2,078
11,674
Operating lease
expense adjustment
(8,308)
(8,307)
(5,326)
(16,615)
Non-cash stock-based compensation expense
3,619
3,885
4,527
7,504
Transaction
and organizational restructuring costs
229
373
689
602
Adjusted EBITDA(5)
$
50,714
$
37,176
$
33,064
$
87,890
(5) Adjusted
EBITDA includes an $8.4 million, $0.4 million, $1.3 million, and $8.8 million benefit for the three months ended June 30, 2022, March 31, 2022, and June 30, 2021, and six months ended June 30, 2022, respectively, of government grants and credits recognized in other operating income.
Adjusted Free Cash Flow
Adjusted Free Cash Flow is a non-GAAP liquidity measure that the Company defines as net cash provided by (used in) operating activities before: distributions from unconsolidated ventures from cumulative share of net earnings,
changes in prepaid insurance premiums financed with notes payable, changes in operating lease assets and liabilities for lease termination, cash paid/received for gain/loss on facility operating lease termination, and lessor capital expenditure reimbursements under operating leases; plus: property insurance proceeds and proceeds from refundable entrance fees, net of refunds; less: non-development capital expenditures and payment of financing lease obligations. Non-development capital expenditures are comprised of corporate and community-level capital expenditures, including those related to maintenance, renovations, upgrades, and other major building infrastructure projects for the Company’s communities and is presented net of lessor reimbursements. Non-development capital expenditures do not include capital expenditures for: community expansions, major community redevelopment and
repositioning projects, and the development of new communities.
The Company believes that presentation of Adjusted Free Cash Flow as a liquidity measure is useful to investors because (i) it is one of the metrics used by the Company’s management for budgeting and other planning purposes, to review the Company’s historic and prospective sources of operating liquidity, and to review the Company’s ability to service its outstanding indebtedness, pay dividends to stockholders, engage in share repurchases, and make capital expenditures, including development
capital expenditures; and (ii) it provides an indicator to management to determine if adjustments to current spending decisions are needed.
Adjusted Free Cash Flow has material limitations as a liquidity measure, including: (i) it does not represent cash available for dividends, share repurchases, or discretionary expenditures since certain non-discretionary expenditures, including mandatory debt principal payments, are not reflected in this measure; (ii) the cash portion of non-recurring charges related to gain/loss on facility lease termination generally represent charges/gains that may significantly affect the Company’s liquidity; and (iii) the impact of timing of cash expenditures, including the timing of non-development capital expenditures, limits the usefulness of the measure for short-term comparisons.
Page 12
The table below reconciles Adjusted Free Cash Flow from net cash provided by (used in) operating activities.
Net cash provided by (used in) operating activities
$
11,577
$
(23,255)
$
3,410
Net
cash provided by (used in) investing activities
(43,838)
(36,163)
1,561
Net cash provided by (used in) financing activities
(17,690)
(403)
(20,992)
Net
increase (decrease) in cash, cash equivalents, and restricted cash
$
(49,951)
$
(59,821)
$
(16,021)
Net
cash provided by (used in) operating activities
$
11,577
$
(23,255)
$
3,410
Distributions from unconsolidated ventures from cumulative share of net earnings
—
(561)
(5,355)
Changes
in prepaid insurance premiums financed with notes payable
(5,377)
16,629
(4,200)
Changes
in assets and liabilities for lessor capital expenditure reimbursements under operating leases
(3,367)
(1,490)
(7,943)
Non-development capital expenditures, net
(45,686)
(39,326)
(35,795)
Payment
of financing lease obligations
(5,610)
(5,490)
(4,864)
Adjusted Free Cash Flow (6)
$
(48,463)
$
(53,493)
$
(54,747)
(6)
Adjusted Free Cash Flow includes:
•$4.6 million, $0.8 million, and $0.4 million benefit for the three months ended June 30, 2022, March 31, 2022, and June 30, 2021, respectively, from government grants and credits received.
•$1.2 million, $1.8 million, and $14.3 million recoupment of accelerated/advanced Medicare payments for the three months ended June 30, 2022, March 31, 2022, and June 30, 2021 respectively.
