NASHVILLE, Tenn., May 8, 2023
/PRNewswire/ -- Brookdale Senior Living Inc. (NYSE: BKD)
("Brookdale" or the "Company") announced results for the quarter
ended March 31, 2023.
HIGHLIGHTS
- Delivered first quarter 2023 financial results above
expectations.
- Revenue per available unit (RevPAR) and revenue per occupied
unit (RevPOR) increased year-over-year 12.9% and 8.6%,
respectively, on a consolidated basis.
- No mortgage debt maturities until September 2024 through proactive financing
management.
"Thanks to our passionate community of associates and strong
leadership teams, we delivered a meaningful improvement in first
quarter Adjusted EBITDA over the prior year. We are firmly on the
path to continued recovery, and with these results, we have gained
momentum," said Lucinda ("Cindy") Baier, Brookdale's President and
CEO. "Our scale, clinical expertise, and innovative healthcare
services set us apart from our competitors, and we plan to leverage
our strengths and maximize compelling demographic tailwinds to
create significant value for our shareholders. I am grateful for
the trust that our residents place in Brookdale and look forward to
serving a growing number of residents in the second quarter and
years to come."
SUMMARY OF FIRST QUARTER FINANCIAL RESULTS
Consolidated summary of operating results and metrics:
|
|
Year-Over-Year
Increase /
(Decrease)
|
|
|
Sequential
Increase /
(Decrease)
|
($ in millions,
except RevPAR and RevPOR)
|
1Q
2023
|
1Q
2022
|
Amount
|
Percent
|
|
4Q
2022
|
Amount
|
Percent
|
Resident fee
revenue
|
$
713.4
|
$
637.0
|
$ 76.4
|
12.0 %
|
|
$
657.9
|
$ 55.5
|
8.4 %
|
Facility operating
expense
|
530.8
|
512.8
|
18.0
|
3.5 %
|
|
531.7
|
(0.9)
|
(0.2) %
|
General and
administrative expense
|
48.6
|
45.1
|
3.5
|
7.8 %
|
|
40.4
|
8.2
|
20.3 %
|
Net income
(loss)
|
(44.6)
|
(100.0)
|
(55.4)
|
(55.4) %
|
|
(25.7)
|
18.9
|
73.5 %
|
Adjusted EBITDA
(1)
|
88.6
|
37.2
|
51.4
|
138.2 %
|
|
46.6
|
42.0
|
90.1 %
|
|
|
|
|
|
|
|
|
|
RevPAR
|
$
4,551
|
$
4,032
|
$ 519
|
12.9 %
|
|
$
4,199
|
$ 352
|
8.4 %
|
Weighted average
occupancy
|
76.3 %
|
73.4 %
|
290 bps
|
n/a
|
|
77.1 %
|
(80) bps
|
n/a
|
RevPOR
|
$
5,963
|
$
5,493
|
$ 470
|
8.6 %
|
|
$
5,446
|
$ 517
|
9.5 %
|
|
|
(1)
|
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.
|
Same community(2) summary of operating results and
metrics:
|
|
|
Year-Over-Year
Increase /
(Decrease)
|
|
Sequential
Increase
/ (Decrease)
|
($ in millions,
except RevPAR and RevPOR)
|
1Q
2023
|
1Q
2022
|
Amount
|
Percent
|
4Q
2022
|
Amount
|
Percent
|
Resident fee
revenue
|
$
698.6
|
$
617.8
|
$ 80.8
|
13.1 %
|
$
644.1
|
$ 54.5
|
8.5 %
|
Facility operating
expense
|
$
516.0
|
$
496.4
|
$ 19.6
|
3.9 %
|
$
509.4
|
$
6.6
|
1.3 %
|
RevPAR
|
$
4,551
|
$
4,025
|
$ 526
|
13.1 %
|
$
4,196
|
$ 355
|
8.5 %
|
Weighted average
occupancy
|
76.5 %
|
73.4 %
|
310 bps
|
n/a
|
77.3 %
|
(80) bps
|
n/a
|
RevPOR
|
$
5,949
|
$
5,481
|
$ 468
|
8.5 %
|
$
5,431
|
$ 518
|
9.5 %
|
|
|
(2)
|
The same community
senior housing portfolio includes operating results and data for
635 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.
|
Recent consolidated occupancy trend:
|
2022
|
|
Jan
|
Feb
|
Mar
|
Apr
|
May
|
Jun
|
Jul
|
Aug
|
Sep
|
Oct
|
Nov
|
Dec
|
Weighted
average
|
73.4 %
|
73.3 %
|
73.6 %
|
73.9 %
|
74.6 %
|
75.2 %
|
75.9 %
|
76.4 %
|
76.9 %
|
77.2 %
|
77.0 %
|
77.0 %
|
Month end
|
74.2 %
|
74.4 %
|
75.0 %
|
75.3 %
|
76.2 %
|
76.6 %
|
77.1 %
|
77.9 %
|
78.4 %
|
78.2 %
|
78.1 %
|
78.1 %
|
|
2023
|
|
Jan
|
Feb
|
Mar
|
Apr
|
Weighted
average
|
76.6 %
|
76.3 %
|
76.1 %
|
76.2 %
|
Month end
|
77.6 %
|
77.4 %
|
77.6 %
|
77.6 %
|
OVERVIEW OF FIRST QUARTER RESULTS
- Resident fee revenue.
-
- 1Q 2023 vs 1Q 2022:
-
- Resident fees increased primarily due to the increases in
RevPOR and occupancy.
- The increase in RevPOR was primarily the result of in-place
rate increases.
- 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.
- 1Q 2023 vs 4Q 2022: Resident fees increased
primarily due to the increase in RevPOR, reflecting in-place
rate increases, partially offset by an 80 basis point decrease in
weighted average occupancy consistent with historical seasonal
trends.
- Facility operating expense.
-
- 1Q 2023 vs 1Q 2022: The increase was
primarily due to broad inflationary pressure, partially offset by a
decrease in the use of premium labor, primarily contract
labor.
- 1Q 2023 vs 4Q 2022: The decrease in facility
operating expense was primarily due to a decrease in natural
disaster expense as a result of expenses incurred in the prior
period for Hurricane Ian and Winter Storm
Elliott, partially offset by a 1.3% increase in same
community facility operating expense.
- General and administrative expense.
-
- 1Q 2023 vs 1Q 2022: The increase was
primarily attributable to an increase in organizational
restructuring costs primarily for severance costs for the Company's
senior leadership changes.
- 1Q 2023 vs 4Q 2022: The increase was
primarily attributable to an increase in estimated incentive
compensation costs and the increase in organizational restructuring
costs previously discussed.
- Net income (loss).
-
- 1Q 2023 vs 1Q 2022: The decrease in net
loss was primarily attributable to the net impact of the
revenue and facility operating expense factors previously discussed
and a decrease in asset impairment expense compared to the prior
year period. These changes were partially offset by an increase in
debt interest expense compared to the prior year period.
- 1Q 2023 vs 4Q 2022: The increase in net
loss was primarily attributable to the $73.9
million non-cash gain on sale of communities recognized in
the fourth quarter of 2022 for the amendment of leases for 16
communities offset by the net impact of the resident fee revenue
and facility operating expense factors previously discussed.
- Adjusted EBITDA.
-
- 1Q 2023 vs 1Q 2022: The increase in
Adjusted EBITDA was primarily attributable to the net impact of the
resident fee revenue and facility operating expense factors
previously discussed, partially offset by an increase in cash
facility operating lease payments primarily due to the
reclassification of lease costs for 16 communities from financing
leases to operating leases as a result of a lease amendment
subsequent to the prior year period.
- 1Q 2023 vs 4Q 2022: The increase in
Adjusted EBITDA was primarily attributable to the increase in
resident fee revenue. These amounts were partially offset by a
$6.5 million increase in cash
facility operating lease payments primarily due to the
reclassification of lease costs and the increase in general and
administrative expense previously discussed.
LIQUIDITY
The table below presents a summary of the Company's net cash
provided by (used in) operating activities, non-development capital
expenditures, net, and Adjusted Free Cash Flow.
|
|
Year-Over-Year
Increase /
(Decrease)
|
|
Sequential
Increase /
(Decrease)
|
($ in
millions)
|
1Q
2023
|
1Q
2022
|
Amount
|
4Q
2022
|
Amount
|
Net cash provided by
(used in) operating activities
|
$
24.0
|
$
(23.3)
|
$
47.3
|
$
(48.6)
|
$
72.6
|
Non-development capital
expenditures, net
|
62.9
|
39.3
|
23.6
|
39.3
|
23.6
|
Adjusted Free Cash Flow
(3)
|
(21.2)
|
(53.5)
|
32.3
|
(103.6)
|
82.4
|
|
|
(3)
|
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.
-
- 1Q 2023 vs 1Q 2022: The change in net cash
provided by (used in) operating activities was
primarily attributable to an increase in resident fee revenue
compared to the prior year period, partially offset by an increase
in facility operating expense and an increase in debt interest
expense compared to the prior year period.
- 1Q 2023 vs 4Q 2022: The change in net cash
provided by (used in) operating activities was primarily
attributable to an increase in resident fee revenue compared
to the prior period and $31.6 million
paid during the fourth quarter of 2022 for previously deferred
payroll taxes for 2020, partially offset by an increase in
insurance premium payments due to the timing of annual
payments.
- Non-development capital expenditures, net. The increase
in non-development capital expenditures, net of lessor
reimbursements, was primarily attributable to an increase in
remediation costs at the Company's communities resulting from
natural disasters primarily from the impact of Winter Storm Elliott and a decrease in
reimbursements from lessors.
- Adjusted Free Cash Flow.
-
- 1Q 2023 vs 1Q 2022: The $32.3 million change in Adjusted Free Cash Flow
was primarily attributable to the change in net cash provided by
(used in) operating activities and an increase in reimbursement
from the Company's property and casualty insurance policies,
partially offset by the increase in non-development capital
expenditures, net.
- 1Q 2023 vs 4Q 2022: The $82.4 million change in Adjusted Free Cash Flow
was attributable to the change in net cash provided by (used in)
operating activities, excluding $24.9
million of changes in prepaid insurance premiums financed
with notes payable, and an increase in reimbursement from the
Company's property and casualty insurance policies. These amounts
were partially offset by the increase in non-development capital
expenditures, net.
- Total liquidity. Total liquidity of $438.6 million as of March 31, 2023 included
$362.2 million of unrestricted cash
and cash equivalents, $69.0 million
of marketable securities, and $7.4
million of availability on the Company's secured credit
facility. Total liquidity as of March 31, 2023 decreased
$14.0 million from December 31, 2022, primarily attributable to
negative $21.2 million of Adjusted
Free Cash Flow.
TRANSACTION AND FINANCING UPDATE
The Company completed the sale of its one remaining entrance fee
community (306 units) on May 1, 2023.
The Company received cash proceeds of $12.3 million, net of $29.6 million in mortgage debt repaid and
transaction costs, at closing.
Subsequent to the three months ended March 31, 2023, the Company and Welltower Inc.
("Welltower") entered into amendments to the Company's existing
lease arrangements pursuant to which the Company continues to lease
74 communities. In connection with the amendments, the Company
extended the maturity of one lease involving 39 communities from
December 31, 2026 until June 30, 2032. As a result, the Company's amended
lease arrangements provide that the current term for 69 of the
communities will expire on June 30,
2032 and the current term for five of the communities will
expire on December 31, 2024. The
amendments did not change the amount of required lease payments
over the previous term of the leases or the annual lease
escalators. In addition, Welltower agreed to make available a
pool in the aggregate amount of up to $17.0
million to fund costs associated with certain capital
expenditure projects for 69 of the communities. Upon reimbursement
of such expenditures, the annual minimum rent under the lease will
prospectively increase by the amount of the reimbursement
multiplied by the sum of the then current SOFR (subject to a floor
of 3.0%) and a margin of 4.0%, and such amount will escalate
annually consistent with the minimum rent escalation provisions of
the 39 community lease.
The Company expects the amended leases for 35 of such
communities to be prospectively reclassified as operating leases
subsequent to the amendment. The Company expects the
reclassification of such lease costs to operating lease
classification will result in an approximately $19.0 million increase in cash paid for operating
leases for the remainder of 2023 and an offsetting decrease in cash
paid for financing leases.
The amendments replaced the net worth covenant provisions
requiring the Company to maintain at least $400.0 million of stockholders' equity with a
consolidated tangible net worth covenant requiring the Company to
maintain at least $2.0 billion of
tangible net worth, generally calculated as stockholders' equity
plus accumulated depreciation and amortization less intangible
assets and further adjusted for certain other items. Such
calculation is generally similar to the tangible net worth
covenants within certain of the Company's long-term debt documents.
So long as it maintains tangible net worth as defined in the leases
of at least $1.5 billion, the Company
will also be able to cure any breach by posting collateral with
Welltower. As of March 31, 2023, the
Company had tangible net worth of approximately $4.4 billion using the definition in the
leases.
2023 OUTLOOK
For the second quarter 2023, the Company is providing the
following guidance:
|
Second Quarter 2023
Guidance
|
RevPAR year-over-year
growth
|
11.5% -
12.0%
|
Adjusted
EBITDA
|
$72 million - $77
million
|
In the aggregate, the Company expects its full-year 2023
non-development capital expenditures, net of anticipated lessor
reimbursements, to be approximately $200.0
million, excluding reimbursable remediation costs at the
Company's communities resulting from 2022 natural disasters. The
Company anticipates up to an additional $20.0 million in remediation costs at the
Company's communities resulting from recent natural disasters, and
such costs are expected to be reimbursed from the Company's
property and casualty insurance policies in 2023 or 2024.
This guidance gives effect to the estimated impact of the lease
accounting change associated with the lease amendment and the sale
of the entrance fee community, both described in the Transaction
and Financing Update herein, and excludes 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 brookdaleinvestors.com
supplemental information relating to the Company's first quarter
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 first quarter on May 9, 2023 at
9:00 AM ET. The conference call can
be accessed by dialing (833) 470-1428 (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 "049343".
A webcast of the conference call will be available to the public
on a listen-only basis at 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 May 16, 2023 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 "653070".
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, through its
affiliates, 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, through
its affiliates, operates and manages 673 communities in 41
states as of March 31, 2023, with the ability to serve more
than 60,000 residents. Brookdale's stock trades on the New York
Stock Exchange under the ticker symbol BKD. For more information,
visit brookdale.com or connect with Brookdale on Facebook or
Twitter.
DEFINITIONS OF REVPAR AND REVPOR
RevPAR, or average monthly senior housing resident fee revenue
per available unit, is defined by the Company as resident fee
revenue for the corresponding portfolio for the period (excluding
revenue 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 for private duty services provided to seniors living
outside of the Company's communities and entrance fee
amortization), divided by the weighted average number of occupied
units in the corresponding portfolio for the period, divided by the
number of months in the period.
SAFE HARBOR
Certain statements in this press release and the associated
earnings call may constitute forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995.
These forward-looking statements are subject to various risks and
uncertainties and include all statements that are not historical
statements of fact and those regarding the Company's intent, belief
or expectations. Forward-looking statements are generally
identifiable by use of forward-looking terminology such as "may,"
"will," "should," "could," "would," "potential," "intend,"
"expect," "endeavor," "seek," "anticipate," "estimate," "believe,"
"project," "predict," "continue," "plan," "target," or other
similar words or expressions. These forward-looking statements are
based on certain assumptions and expectations, and the Company's
ability to predict results or the actual effect of future plans or
strategies is inherently uncertain. Although the Company believes
that expectations reflected in any forward-looking statements are
based on reasonable assumptions, it can give no assurance that its
assumptions or expectations will be attained and actual results and
performance could differ materially from those projected. Factors
which could have a material adverse effect on the Company's
operations and future prospects or which could cause events or
circumstances to differ from the forward-looking statements
include, but are not limited to, the impacts of the COVID-19
pandemic, including the response efforts of federal, state, and
local government authorities, businesses, individuals, and the
Company on the Company's business, results of operations, cash
flow, revenue, expenses, liquidity, and its strategic initiatives,
including plans for future growth, which will depend on many
factors, some of which cannot be foreseen, including the duration,
severity, and breadth of the pandemic and any resurgence or
variants of the disease, the impact of COVID-19 on the nation's
economy and debt and equity markets and the local economies in the
Company's markets, the development, availability, utilization, and
efficacy of COVID-19 testing, therapeutic agents, and vaccines and
the prioritization of such resources among businesses and
demographic groups, government financial and regulatory relief
efforts that may become available to business and individuals,
including the Company's ability to qualify for and satisfy the
terms and conditions of financial relief, perceptions regarding the
safety of senior living communities during and after the pandemic,
changes in demand for senior living communities and the Company's
ability to adapt its sales and marketing efforts to meet that
demand, the impact of COVID-19 on the Company's residents' and
their families' ability to afford its resident fees, including due
to changes in unemployment rates, consumer confidence, housing
markets, and equity markets caused by COVID-19, changes in the
acuity levels of the Company's new residents, the disproportionate
impact of COVID-19 on seniors generally and those residing in the
Company's communities, the duration and costs of the Company's
response efforts, including increased equipment, supplies, labor,
litigation, testing, vaccination clinic, health plan, and other
expenses, greater use of contract labor, overtime, and other
premium labor 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
any non-compliance with any of the Company's debt or lease
agreements (including the financial or other 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; costs to
respond to, and adverse determinations resulting from, government
reviews, audits and investigations; the cost and difficulty of
complying with increasing and evolving regulation; changes in, or
its failure to comply with, employment-related laws and
regulations; unanticipated costs to comply with legislative or
regulatory developments; the risks associated with current global
economic conditions and general economic factors such as inflation,
the consumer price index, commodity costs, fuel and other energy
costs, competition in the labor market, costs of salaries, wages,
benefits, and insurance, interest rates, and tax rates; the impact
of seasonal contagious illness or an outbreak of COVID-19 or other
contagious disease in the markets in which the Company operates;
actions of activist stockholders, including a proxy contest; as
well as other risks detailed from time to time in the Company's
filings with the Securities and Exchange Commission, including
those set forth in the Company's Annual Report on Form 10-K and
Quarterly Reports on Form 10-Q. When considering forward-looking
statements, you should keep in mind the risk factors and other
cautionary statements in such SEC filings. Readers are cautioned
not to place undue reliance on any of these forward-looking
statements, which reflect management's views as of the date of this
press release and/or associated earnings call. The Company cannot
guarantee future results, levels of activity, performance or
achievements, and, except as required by law, it expressly
disclaims any obligation to release publicly any updates or
revisions to any forward-looking statements contained in this press
release and/or associated earnings call to reflect any change in
the Company's expectations with regard thereto or change in events,
conditions, or circumstances on which any statement is based.
Condensed
Consolidated Statements of Operations
|
|
|
Three Months
Ended
March
31,
|
(in thousands,
except per share data)
|
2023
|
|
2022
|
Resident
fees
|
$
713,404
|
|
$
636,974
|
Management
fees
|
2,577
|
|
3,329
|
Reimbursed costs
incurred on behalf of managed communities
|
34,954
|
|
37,141
|
Other operating
income
|
2,328
|
|
376
|
Total revenue and
other operating income
|
753,263
|
|
677,820
|
|
|
|
|
Facility operating
expense (excluding facility depreciation and amortization of
$79,317 and
$79,932,
respectively)
|
530,807
|
|
512,764
|
General and
administrative expense (including non-cash stock-based compensation
expense of
$3,104 and
$3,885, respectively)
|
48,619
|
|
45,126
|
Facility operating
lease expense
|
46,127
|
|
41,564
|
Depreciation and
amortization
|
84,934
|
|
85,684
|
Asset
impairment
|
—
|
|
9,075
|
Costs incurred on
behalf of managed communities
|
34,954
|
|
37,141
|
Income (loss) from
operations
|
7,822
|
|
(53,534)
|
|
|
|
|
Interest
income
|
5,326
|
|
95
|
Interest
expense:
|
|
|
|
Debt
|
(50,315)
|
|
(33,157)
|
Financing lease
obligations
|
(6,552)
|
|
(12,058)
|
Amortization of
deferred financing costs
|
(1,940)
|
|
(1,542)
|
Change in fair value of
derivatives
|
(904)
|
|
3,403
|
Equity in earnings
(loss) of unconsolidated ventures
|
(577)
|
|
(4,894)
|
Non-operating gain
(loss) on sale of assets, net
|
—
|
|
(294)
|
Other non-operating
income (loss)
|
3,149
|
|
(27)
|
Income (loss) before
income taxes
|
(43,991)
|
|
(102,008)
|
Benefit (provision) for
income taxes
|
(572)
|
|
1,976
|
Net income
(loss)
|
(44,563)
|
|
(100,032)
|
Net (income) loss
attributable to noncontrolling interest
|
14
|
|
19
|
Net income (loss)
attributable to Brookdale Senior Living Inc. common
stockholders
|
$
(44,549)
|
|
$ (100,013)
|
|
|
|
|
Basic and diluted net
income (loss) per share attributable to Brookdale Senior Living
Inc. common stockholders
|
$
(0.20)
|
|
$
(0.54)
|
|
|
|
|
Weighted average shares
used in computing basic and diluted net income (loss) per
share
|
224,578
|
|
185,916
|
Condensed
Consolidated Balance Sheets
|
|
(in
thousands)
|
March 31,
2023
|
|
December 31,
2022
|
Cash and cash
equivalents
|
$
362,235
|
|
$
398,850
|
Marketable
securities
|
69,009
|
|
48,680
|
Restricted
cash
|
29,374
|
|
27,735
|
Accounts receivable,
net
|
52,618
|
|
55,761
|
Assets held for
sale
|
23,555
|
|
—
|
Prepaid expenses and
other current assets, net
|
129,640
|
|
106,067
|
Total current
assets
|
666,431
|
|
637,093
|
Property, plant and
equipment and leasehold intangibles, net
|
4,493,002
|
|
4,535,702
|
Operating lease
right-of-use assets
|
565,641
|
|
597,130
|
Other assets,
net
|
160,785
|
|
167,137
|
Total
assets
|
$
5,885,859
|
|
$
5,937,062
|
|
|
|
|
Current portion of
long-term debt
|
$
87,711
|
|
$
66,043
|
Current portion of
financing lease obligations
|
24,683
|
|
24,059
|
Current portion of
operating lease obligations
|
177,894
|
|
176,758
|
Liabilities held for
sale
|
19,455
|
|
—
|
Other current
liabilities
|
397,533
|
|
374,345
|
Total current
liabilities
|
707,276
|
|
641,205
|
Long-term debt, less
current portion
|
3,772,254
|
|
3,784,099
|
Financing lease
obligations, less current portion
|
218,349
|
|
224,801
|
Operating lease
obligations, less current portion
|
575,603
|
|
616,973
|
Other
liabilities
|
71,523
|
|
85,831
|
Total
liabilities
|
5,345,005
|
|
5,352,909
|
Total Brookdale Senior
Living Inc. stockholders' equity
|
539,320
|
|
582,605
|
Noncontrolling
interest
|
1,534
|
|
1,548
|
Total
equity
|
540,854
|
|
584,153
|
Total liabilities and
equity
|
$
5,885,859
|
|
$
5,937,062
|
Condensed
Consolidated Statements of Cash Flows
|
|
|
Three Months Ended
March 31,
|
(in
thousands)
|
2023
|
|
2022
|
Cash Flows from
Operating Activities
|
|
|
|
Net income
(loss)
|
$
(44,563)
|
|
$
(100,032)
|
Adjustments to
reconcile net income (loss) to net cash provided by (used in)
operating activities:
|
|
|
|
Depreciation and
amortization, net
|
86,874
|
|
87,226
|
Asset
impairment
|
—
|
|
9,075
|
Equity in (earnings)
loss of unconsolidated ventures
|
577
|
|
4,894
|
Distributions from
unconsolidated ventures from cumulative share of net
earnings
|
—
|
|
561
|
Amortization of
entrance fees
|
(508)
|
|
(726)
|
Proceeds from deferred
entrance fee revenue
|
324
|
|
1,036
|
Deferred income tax
(benefit) provision
|
244
|
|
(2,304)
|
Operating lease
expense adjustment
|
(10,805)
|
|
(8,307)
|
Change in fair value
of derivatives
|
904
|
|
(3,403)
|
Loss (gain) on sale of
assets, net
|
—
|
|
294
|
Non-cash stock-based
compensation expense
|
3,104
|
|
3,885
|
Property and casualty
insurance income
|
(3,295)
|
|
(43)
|
Changes in operating
assets and liabilities:
|
|
|
|
Accounts receivable,
net
|
3,143
|
|
1,185
|
Prepaid expenses and
other assets, net
|
(7,602)
|
|
(4,734)
|
Prepaid insurance
premiums financed with notes payable
|
(19,305)
|
|
(16,629)
|
Trade accounts payable
and accrued expenses
|
(1,386)
|
|
(2,630)
|
Refundable fees and
deferred revenue
|
14,092
|
|
5,907
|
Operating lease assets
and liabilities for lessor capital expenditure
reimbursements
|
2,244
|
|
1,490
|
Net cash provided by
(used in) operating activities
|
24,042
|
|
(23,255)
|
Cash Flows from
Investing Activities
|
|
|
|
Purchase of marketable
securities
|
(49,674)
|
|
(125,990)
|
Sale and maturities of
marketable securities
|
30,000
|
|
129,000
|
Capital expenditures,
net of related payables
|
(49,700)
|
|
(39,956)
|
Investment in
unconsolidated ventures
|
—
|
|
(82)
|
Proceeds from sale of
assets, net
|
—
|
|
710
|
Property and casualty
insurance proceeds
|
6,422
|
|
—
|
Other
|
933
|
|
155
|
Net cash provided by
(used in) investing activities
|
(62,019)
|
|
(36,163)
|
Cash Flows from
Financing Activities
|
|
|
|
Proceeds from
debt
|
25,519
|
|
25,258
|
Repayment of debt and
financing lease obligations
|
(23,322)
|
|
(21,440)
|
Payment of financing
costs, net of related payables
|
(346)
|
|
(76)
|
Payments of employee
taxes for withheld shares
|
(1,680)
|
|
(4,145)
|
Net cash provided by
(used in) financing activities
|
171
|
|
(403)
|
Net increase
(decrease) in cash, cash equivalents, and restricted
cash
|
(37,806)
|
|
(59,821)
|
Cash, cash
equivalents, and restricted cash at beginning of period
|
474,548
|
|
438,314
|
Cash, cash
equivalents, and restricted cash at end of period
|
$
436,742
|
|
$
378,493
|
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, gain/loss on sale of communities,
and transaction and organizational restructuring costs. Transaction
costs include those directly related to acquisition, disposition,
financing, and leasing activity, and are primarily comprised of
legal, finance, consulting, professional fees, and other
third-party costs. Organizational restructuring costs include those
related to the Company's efforts to reduce general and
administrative expense and its senior leadership changes, including
severance.
The Company believes that presentation of Adjusted EBITDA as a
performance measure is useful to investors because (i) it is one of
the metrics used by the Company's management for budgeting and
other planning purposes, to review the Company's historic and
prospective core operating performance, and to make day-to-day
operating decisions; (ii) it provides an assessment of operational
factors that management can impact in the short-term, namely
revenues and the controllable cost structure of the organization,
by eliminating items related to the Company's financing and capital
structure and other items that management does not consider as part
of the Company's underlying core operating performance and that
management believes impact the comparability of performance between
periods; and (iii) the Company believes that this measure is used
by research analysts and investors to evaluate the Company's
operating results and to value companies in its industry.
Adjusted EBITDA has material limitations as a performance
measure, including: (i) excluded interest and income tax are
necessary to operate the Company's business under its current
financing and capital structure; (ii) excluded depreciation,
amortization, and impairment charges may represent the wear and
tear and/or reduction in value of the Company's communities,
goodwill, and other assets and may be indicative of future needs
for capital expenditures; and (iii) the Company may incur
income/expense similar to those for which adjustments are made,
such as gain/loss on sale of assets, facility operating lease
termination, or debt modification and extinguishment, non-cash
stock-based compensation expense, and transaction and other costs,
and such income/expense may significantly affect the Company's
operating results.
The table below reconciles the Company's Adjusted EBITDA from
net income (loss).
|
Three Months
Ended
|
(in
thousands)
|
March 31,
2023
|
|
December 31,
2022
|
|
March 31,
2022
|
Net income
(loss)
|
$
(44,563)
|
|
$
(25,651)
|
|
$
(100,032)
|
Provision (benefit) for
income taxes
|
572
|
|
(473)
|
|
(1,976)
|
Equity in (earnings)
loss of unconsolidated ventures
|
577
|
|
1,429
|
|
4,894
|
Loss (gain) on debt
modification and extinguishment, net
|
—
|
|
1,357
|
|
—
|
Non-operating loss
(gain) on sale of assets, net
|
—
|
|
16
|
|
294
|
Other non-operating
(income) loss
|
(3,149)
|
|
(10,375)
|
|
27
|
Interest
expense
|
59,711
|
|
63,256
|
|
43,354
|
Interest
income
|
(5,326)
|
|
(3,870)
|
|
(95)
|
Income (loss) from
operations
|
7,822
|
|
25,689
|
|
(53,534)
|
Depreciation and
amortization
|
84,934
|
|
88,215
|
|
85,684
|
Asset
impairment
|
—
|
|
12,256
|
|
9,075
|
Loss (gain) on sale of
communities, net
|
—
|
|
(73,850)
|
|
—
|
Operating lease expense
adjustment
|
(10,805)
|
|
(9,567)
|
|
(8,307)
|
Non-cash stock-based
compensation expense
|
3,104
|
|
3,559
|
|
3,885
|
Transaction and
organizational restructuring costs
|
3,568
|
|
262
|
|
373
|
Adjusted
EBITDA(4)
|
$
88,623
|
|
$
46,564
|
|
$
37,176
|
|
|
(4)
|
Adjusted EBITDA
includes a $2.3 million, $4.9 million, and $0.4 million benefit for
the three months ended March 31, 2023, December 31, 2022, and
March 31, 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 and casualty 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. Additionally, Adjusted Free
Cash Flow excludes cash used to purchase interest rate cap
instruments, as well as any cash provided by settlements of
interest rate cap instruments.
The table below reconciles Adjusted Free Cash Flow from net cash
provided by (used in) operating activities.
|
Three Months
Ended
|
(in
thousands)
|
March 31,
2023
|
|
December 31,
2022
|
|
March 31,
2022
|
Net cash provided by
(used in) operating activities
|
$
24,042
|
|
$
(48,562)
|
|
$
(23,255)
|
Net cash provided by
(used in) investing activities
|
(62,019)
|
|
(9,936)
|
|
(36,163)
|
Net cash provided by
(used in) financing activities
|
171
|
|
138,229
|
|
(403)
|
Net increase
(decrease) in cash, cash equivalents,
and
restricted cash
|
$
(37,806)
|
|
$
79,731
|
|
$
(59,821)
|
|
|
|
|
|
|
Net cash provided by
(used in) operating activities
|
$
24,042
|
|
$
(48,562)
|
|
$
(23,255)
|
Distributions from
unconsolidated ventures from cumulative share of net
earnings
|
—
|
|
—
|
|
(561)
|
Changes in prepaid
insurance premiums financed with notes payable
|
19,305
|
|
(5,552)
|
|
16,629
|
Changes in assets and
liabilities for lessor capital expenditure reimbursements under
operating leases
|
(2,244)
|
|
(4,494)
|
|
(1,490)
|
Non-development capital
expenditures, net
|
(62,912)
|
|
(39,335)
|
|
(39,326)
|
Property and casualty
insurance proceeds
|
6,422
|
|
—
|
|
—
|
Payment of financing
lease obligations
|
(5,852)
|
|
(5,615)
|
|
(5,490)
|
Adjusted Free Cash
Flow (5)
|
$
(21,239)
|
|
$
(103,558)
|
|
$
(53,493)
|
|
|
(5)
|
Adjusted Free Cash Flow
includes:
|
•
|
$13.4 million, $1.4
million, and $0.8 million benefit for the three months ended March
31, 2023, December 31, 2022, and March 31, 2022, respectively, from
government grants and credits received.
|
•
|
$1.8 million recoupment
for the three months ended March 31, 2022 of accelerated/advanced
Medicare payments.
|
•
|
$31.6 million paid
during the three months ended December 31, 2022 for deferred
payroll taxes for the year ended December 31, 2020.
|
•
|
$3.6 million, $0.3
million, and $0.4 million for the three months ended March 31,
2023, December 31, 2022, and March 31, 2022, respectively, for
transaction and organizational restructuring costs
|
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SOURCE Brookdale Senior Living Inc.