NASHVILLE, Tenn.,– Brookdale Senior Living Inc. (NYSE: BKD) (“Brookdale” or the “Company”) announced results for the quarter and year ended December 31, 2019.
FOURTH QUARTER AND FULL YEAR HIGHLIGHTS
Lucinda (“Cindy”) Baier, Brookdale’s President and CEO, said, “I am pleased that we delivered financial results within or better than our 2019 guidance ranges. We are making great progress on the strategic plan we introduced in 2018. We achieved our goal of selling assets to generate $250 million of net proceeds. In addition, we recently completed significant transactions with Healthpeak to unlock the value of the unconsolidated CCRC venture. With another quarter of positive leading indicators and industry leading sequential occupancy growth, we are building momentum and are well positioned to achieve our five-year financial goal and create long-term shareholder value.”
FULL YEAR RESULTS
The Company reported net loss of $268.5 million and net cash provided by operating activities of $216.4 million for the year ended December 31, 2019. The Company’s full year 2019 results compared to the Company’s 2019 guidance were:
($ in millions) |
Full Year 2019 |
Actual 2019 |
|
Adjusted EBITDA(1) |
$400 – $425 |
$401 |
|
Adjusted Free Cash Flow(1) |
($100) – ($80) |
($76) |
|
Non-development capital expenditures |
Approx. $250 |
$236 |
|
The Company’s proportionate share of Adjusted EBITDA of |
$30 – $40 |
$43 |
|
The Company’s proportionate share of Adjusted Free Cash Flow |
$10 – $20 |
$18 |
(1) Adjusted EBITDA and Adjusted Free Cash Flow are financial measures that are not calculated in accordance with GAAP. See “Reconciliations of Non-GAAP Financial Measures” for the Company’s definition of such measures, reconciliations to the most comparable GAAP financial measures, and other important information regarding the use of the Company’s non-GAAP financial measures. During the first quarter of 2019, the Company modified its definition of Adjusted EBITDA to exclude transaction and organizational restructuring costs and its definition of Adjusted Free Cash Flow to no longer adjust net cash provided by (used in) operating activities for changes in working capital items other than changes in prepaid insurance premiums financed with notes payable and lease liability for lease termination and modification. Amounts for all periods herein reflect application of the modified definitions.
The Company adopted the new lease accounting standard (ASC 842) effective January 1, 2019. Adoption of the new lease standard and its application to residency agreements and costs related thereto resulted in the recognition of additional resident fees and facility operating expense for the full year 2019, which were non-cash and non-recurring in future years. The result was a non-cash net impact to net loss and Adjusted EBITDA of negative $23.1 million, with no impact to the 2019 amounts of net cash provided by operating activities and Adjusted Free Cash Flow.
SUMMARY OF FOURTH QUARTER RESULTS
Same Community Senior Housing (Independent Living (IL), Assisted Living and Memory Care (AL/MC), and CCRCs)
The table below presents a summary of same community operating results and metrics of the Company’s consolidated senior housing portfolio and excludes the impact of transactions and the new lease accounting standard.(2)
($ in millions, except RevPAR |
Year-Over-Year Increase / (Decrease) |
Sequential Increase / (Decrease) |
|||||||||||||||
4Q 2019 |
4Q 2018 |
Amount |
Percent |
3Q 2019 |
Amount |
Percent |
|||||||||||
Resident fees |
$ |
620.4 |
$ |
607.8 |
$ |
12.6 |
2.1% |
$ |
619.1 |
$ |
1.3 |
0.2% |
|||||
Facility operating expense |
$ |
429.3 |
$ |
413.9 |
$ |
15.4 |
3.7% |
$ |
440.6 |
$ |
(11.3) |
(2.6)% |
|||||
RevPAR |
$ |
4,151 |
$ |
4,065 |
$ |
86 |
2.1% |
$ |
4,143 |
$ |
8 |
0.2% |
|||||
Weighted average occupancy |
85.0% |
85.2% |
(20) bps |
n/a |
84.7% |
30bps |
n/a |
||||||||||
RevPOR |
$ |
4,885 |
$ |
4,768 |
$ |
117 |
2.5% |
$ |
4,893 |
$ |
(8) |
(0.2)% |
|||||
(2) The same community portfolio includes 637 communities utilizing the Company’s methodology for determining same store communities which generally excludes assets held for sale, communities acquired or disposed since the beginning of the prior year, and certain communities that have undergone or are undergoing expansion, redevelopment, and repositioning projects. Operating results and data presented on a same community basis reflect results and data of the same store communities and, for the 2019 periods, exclude the additional resident fee revenue and facility operating expense recognized as a result of application of the new lease accounting standard under ASC 842 of approximately $7.2 million and $12.7 million, respectively, for the third quarter and approximately $9.5 million and $13.4 million, respectively, for the fourth quarter.
Consolidated
The table below presents a summary of consolidated operating results.
Year-Over-Year Increase / (Decrease) |
Change Attributable To: |
|||||||||||||||||||
($ in millions) |
4Q 2019 |
4Q 2018 |
Amount |
Percent |
Transactions |
New Lease |
||||||||||||||
Resident fee and |
$ |
809.7 |
$ |
824.5 |
$ |
(14.8) |
(1.8) |
% |
$ |
(41.2) |
$ |
10.4 |
||||||||
Facility operating expense |
598.4 |
586.9 |
11.5 |
2.0 |
% |
(27.8) |
14.5 |
|||||||||||||
Net income (loss) |
(91.3) |
131.5 |
(222.8) |
NM |
See note (3) |
(4.1)(3) |
||||||||||||||
Adjusted EBITDA |
100.1 |
115.2 |
(15.1) |
(13.1) |
% |
(10.1) |
(4.1) |
(3) The change in net income (loss) attributable to transactions is not presented as certain impacts are not available without unreasonable effort. The change attributable to the new lease standard represents the impact of the timing of the revenue and cost recognition associated with residency agreements related to the adoption of the new lease standard.
Health Care Services
Increase / (Decrease) |
|||||||||||
($ in millions) |
4Q 2019 |
4Q 2018 |
Amount |
Percent |
|||||||
Resident fee revenue |
|||||||||||
Home health |
$ |
77.4 |
$ |
81.0 |
$ |
(3.6) |
(4.4) |
% |
|||
Hospice |
26.1 |
21.3 |
4.8 |
22.5 |
% |
||||||
Outpatient therapy |
6.0 |
6.0 |
— |
— |
|||||||
Total resident fee revenue |
109.5 |
108.3 |
1.2 |
1.1 |
% |
||||||
Facility operating expense |
106.6 |
102.3 |
4.3 |
4.2 |
% |
||||||
Management Services
Increase / (Decrease) |
|||||||||||
($ in millions) |
4Q 2019 |
4Q 2018 |
Amount |
Percent |
|||||||
Management fees |
$ |
12.4 |
$ |
17.7 |
$ |
(5.3) |
(29.9) |
% |
|||
LIQUIDITY
The table below presents a summary of the Company’s net cash provided by (used in) operating activities and Adjusted Free Cash Flow.
Increase / (Decrease) |
|||||||||||
($ in millions) |
4Q 2019 |
4Q 2018 |
Amount |
Percent |
|||||||
Net cash provided by (used in) operating activities |
$ |
88.1 |
$ |
33.5 |
$ |
54.6 |
163.0 |
% |
|||
Adjusted Free Cash Flow |
0.5 |
(33.0) |
33.5 |
NM |
|||||||
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.
2020 OUTLOOK
For the full year 2020, the Company is providing the following guidance, including and excluding the $100.0 million management termination fee received from Healthpeak on January 31, 2020:
($ in millions) |
Including $100.0M |
Excluding $100.0M |
|
Adjusted EBITDA |
$510 – $540 |
$410 – $440 |
|
Adjusted Free Cash Flow |
$70 – $90 |
($30) – ($10) |
Key Guidance Assumptions:
Reconciliations of the non-GAAP financial measures included in the foregoing guidance to the most comparable GAAP financial measures are not available without unreasonable effort due to the inherent difficulty in forecasting the timing or amounts of items required to reconcile Adjusted EBITDA and Adjusted Free Cash Flow from the Company’s net income (loss) and the Company’s net cash provided by (used in) operating activities, as applicable. Variability in the timing or amounts of items required to reconcile each measure may have a significant impact on the Company’s future GAAP results.
SUPPLEMENTAL INFORMATION
The Company will post on its website at www.brookdale.com/investor supplemental information relating to the Company’s fourth quarter and full year 2019 results, an updated investor presentation, and a copy of this earnings release. The supplemental information and a copy of this earnings release will also be furnished in a Form 8-K to be filed with the SEC.
EARNINGS CONFERENCE CALL
Brookdale’s management will conduct a conference call to review the financial results of its fourth quarter and full year ended December 31, 2019 on February 19, 2020 at 9:00 AM ET. The conference call can be accessed by dialing (866) 900-2996 (from within the U.S.) or (706) 643-2685 (from outside of the U.S.) ten minutes prior to the scheduled start and referencing “Brookdale”.
A webcast of the conference call will be available to the public on a listen-only basis at www.brookdale.com/investor. Please allow extra time prior to the call to visit the site and download the necessary software required to listen to the internet broadcast. A replay of the webcast will be available through the website following the call.
For those who cannot listen to the live call, a replay will be available until 11:59 PM ET on March 4, 2020 by dialing (855) 859-2056 (from within the U.S.) or (404) 537-3406 (from outside of the U.S.) and referencing access code “3488808”.
ABOUT BROOKDALE SENIOR LIVING
Brookdale Senior Living Inc. is the leading operator of senior living communities throughout the United States. The Company is committed to providing senior living solutions primarily within properties that are designed, purpose-built, and operated to provide the highest-quality service, care, and living accommodations for residents. Brookdale operates and manages independent living, assisted living, memory care, and continuing care retirement communities, with 743 communities in 45 states and the ability to serve approximately 65,000 residents as of February 1, 2020. The Company also offers a range of home health, hospice, and outpatient therapy services to over 20,000 patients as of that date. Brookdale’s stock is traded on the New York Stock Exchange under the ticker symbol BKD.
DEFINITIONS OF RevPAR AND RevPOR
RevPAR, or average monthly senior housing resident fee revenue per available unit, is defined by the Company as resident fee revenue for the corresponding portfolio for the period (excluding Health Care Services segment revenue and entrance fee amortization, and, for the 2019 periods, the additional resident fee revenue recognized as a result of the application of the new lease accounting standard under ASC 842), divided by the weighted average number of available units in the corresponding portfolio for the period, divided by the number of months in the period.
RevPOR, or average monthly senior housing resident fee revenue per occupied unit, is defined by the Company as resident fee revenue for the corresponding portfolio for the period (excluding Health Care Services segment revenue and entrance fee amortization, and, for the 2019 periods, the additional resident fee revenue recognized as a result of the application of the new lease accounting standard under ASC 842), divided by the weighted average number of occupied units in the corresponding portfolio for the period, divided by the number of months in the period.
SAFE HARBOR
Certain statements in this press release and the associated earnings conference call may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to various risks and uncertainties and include all statements regarding the Company’s guidance and any other statements that are not historical statements of fact and those regarding the Company’s intent, belief or expectations. Forward-looking statements are generally identifiable by use of forward-looking terminology such as “may,” “will,” “should,” “could,” “would,” “potential,” “intend,” “expect,” “endeavor,” “seek,” “anticipate,” “estimate,” “believe,” “project,” “predict,” “continue,” “plan,” “target,” or other similar words or expressions. These forward-looking statements are based on certain assumptions and expectations, and the Company’s ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Although the Company believes that expectations reflected in any forward-looking statements are based on reasonable assumptions, the Company can give no assurance that its assumptions or expectations will be attained and actual results and performance could differ materially from those projected. Factors which could have a material adverse effect on the Company’s operations and future prospects or which could cause events or circumstances to differ from the forward-looking statements include, but are not limited to, events which adversely affect the ability of seniors to afford resident fees, including downturns in the economy, housing market, consumer confidence or the equity markets and unemployment among family members; changes in reimbursement rates, methods or timing under governmental reimbursement programs including the Medicare and Medicaid programs; the impact of ongoing healthcare reform efforts; the effects of senior housing construction and development, oversupply and increased competition; disruptions in the financial markets that affect the Company’s ability to obtain financing or extend or refinance debt as it matures and the Company’s financing costs; the risks associated with current global economic conditions and general economic factors such as inflation, the consumer price index, commodity costs, fuel and other energy costs, costs of salaries, wages, benefits, and insurance, interest rates and tax rates; the impact of seasonal contagious illness or an outbreak of other contagious disease in the markets in which the Company operates; the Company’s ability to generate sufficient cash flow to cover required interest and long-term lease payments and to fund its planned capital projects; the effect of the Company’s indebtedness and long-term leases on its liquidity; the effect of the Company’s non-compliance with any of its debt or lease agreements (including the financial covenants contained therein), including the risk of lenders or lessors declaring a cross default in the event of the Company’s non-compliance with any such agreements and the risk of loss of the Company’s property securing leases and indebtedness due to any resulting lease terminations and foreclosure actions; the effect of the Company’s borrowing base calculations and the Company’s consolidated fixed charge coverage ratio on availability under its revolving credit facility; the potential phasing out of LIBOR which may increase the costs of our debt obligations; increased competition for or a shortage of personnel, wage pressures resulting from increased competition, low unemployment levels, minimum wage increases and changes in overtime laws, and union activity; failure to maintain the security and functionality of the Company’s information systems, to prevent a cybersecurity attack or breach, or to comply with applicable privacy and consumer protection laws, including HIPAA; the Company’s inability to achieve or maintain profitability; the Company’s ability to complete pending or expected disposition, acquisition or other transactions on agreed upon terms or at all, including in respect of the satisfaction of closing conditions, the risk that regulatory approvals are not obtained or are subject to unanticipated conditions, and uncertainties as to the timing of closing, and the Company’s ability to identify and pursue any such opportunities in the future; the Company’s ability to obtain additional capital on terms acceptable to it; the Company’s ability to complete its capital expenditures in accordance with its plans; the Company’s ability to identify and pursue development, investment and acquisition opportunities and its ability to successfully integrate acquisitions; competition for the acquisition of assets; delays in obtaining regulatory approvals; terminations, early or otherwise, or non-renewal of management agreements; conditions of housing markets, regulatory changes, acts of nature, and the effects of climate change in geographic areas where the Company is concentrated; terminations of the Company’s resident agreements and vacancies in the living spaces it leases; departures of key officers and potential disruption caused by changes in management; risks related to the implementation of the Company’s strategy, including initiatives undertaken to execute on its strategic priorities and their effect on the Company’s results; actions of activist stockholders, including a proxy contest; market conditions and capital allocation decisions that may influence the Company’s determination from time to time whether to purchase any shares under its existing share repurchase program and the Company’s ability to fund any repurchases; the Company’s ability to maintain consistent quality control; a decrease in the overall demand for senior housing; environmental contamination at any of the Company’s communities; failure to comply with existing environmental laws; an adverse determination or resolution of complaints filed against the Company; the cost and difficulty of complying with increasing and evolving regulation; costs to respond to, and adverse determinations resulting from, government reviews, audits and investigations; unanticipated costs to comply with legislative or regulatory developments; as well as other risks detailed from time to time in the Company’s filings with the Securities and Exchange Commission, including those contained in the Company’s Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. When considering forward-looking statements, you should keep in mind the risk factors and other cautionary statements in such SEC filings. Readers are cautioned not to place undue reliance on any of these forward-looking statements, which reflect management’s views as of the date of this press release and/or associated earnings call. The Company cannot guarantee future results, levels of activity, performance or achievements, and, except as required by law, it expressly disclaims any obligation to release publicly any updates or revisions to any forward-looking statements to reflect any change in its expectations with regard thereto or change in events, conditions or circumstances on which any statement is based.