Brookdale Announces Second Quarter 2020 Results
PR Newswire
NASHVILLE, Tenn., Aug. 10, 2020
NASHVILLE, Tenn., Aug. 10, 2020 /PRNewswire/ -- Brookdale Senior Living Inc. (NYSE: BKD) ("Brookdale" or the "Company") announced results for the quarter ended June 30, 2020.
SECOND QUARTER 2020 HIGHLIGHTS
Lucinda ("Cindy") Baier, Brookdale's President and CEO, said, "I'm proud of the outstanding efforts of our team to help protect our residents, patients and associates. It was a monumental effort to have over 100,000 tests performed for our communities' residents and associates and as of the end of July less than 1% of our residents currently have COVID-19 positive results. We are pleased with the recently announced Ventas transaction, which delivers significant improvement in long-term cash flow. Through operational and transactional enhancements we've made since the beginning of our turnaround, we are proving the strength and durability of Brookdale."
SUMMARY OF SECOND QUARTER RESULTS
Consolidated
The table below presents a summary of consolidated operating results.
Year-Over-Year Increase / (Decrease) | Change Attributable To: | |||||||||||||||||||||
($ in millions) | 2Q 2020 | 2Q 2019 | Amount | Percent | COVID-19 | Transactions | Lease Standard | |||||||||||||||
Resident fee revenue | $ | 731.6 | $ | 801.9 | $ | (70.3) | (8.8) | % | See note (1) | $ | (15.2) | $ | (5.3) | |||||||||
Management fee revenue | $ | 6.1 | $ | 15.4 | $ | (9.3) | (60.4) | % | — | $ | (8.6) | — | ||||||||||
Other operating income | $ | 26.7 | — | $ | 26.7 | NM | $ | 26.7 | — | — | ||||||||||||
Facility operating expense | $ | 606.0 | $ | 590.2 | $ | 15.8 | 2.7 | % | $ | 60.6 | $ | (14.4) | $ | (11.8) | ||||||||
General and administrative expense | $ | 52.5 | $ | 57.6 | $ | (5.1) | (8.9) | % | — | — | — | |||||||||||
Net income (loss) | $ | (118.4) | $ | (56.1) | $ | 62.3 | 111.1 | % | See note (1) | See note (1) | $ | 6.5 | (1) | |||||||||
Adjusted EBITDA (2) | $ | 44.7 | $ | 104.0 | $ | (59.3) | (57.0) | % | See note (1) | $ | (12.4) | $ | 6.5 |
(1) | Estimated lost resident fee revenue attributable to COVID-19 was $63.6 million for the second quarter of 2020. The change in net income |
(2) | Adjusted EBITDA is a financial measure that is not calculated in accordance with GAAP. See "Reconciliations of Non-GAAP Financial |
Same Community Senior Housing (Independent Living (IL), Assisted Living and Memory Care (AL/MC), and CCRCs)
The table below presents a summary of same community operating results and metrics of the Company's consolidated senior housing portfolio. (3)
Year-Over-Year | Sequential | ||||||||||||||||
($ in millions, except RevPAR | 2Q 2020 | 2Q 2019 | Amount | Percent | 1Q 2020 | Amount | Percent | ||||||||||
RevPAR | $ | 3,975 | $ | 4,120 | $ | (145) | (3.5)% | $ | 4,237 | $ | (262) | (6.2)% | |||||
Weighted average occupancy | 79.2% | 84.0% | (480) bps | n/a | 83.5% | (430) bps | n/a | ||||||||||
RevPOR | $ | 5,020 | $ | 4,905 | $ | 115 | 2.3% | $ | 5,073 | $ | (53) | (1.0)% | |||||
Facility operating expense | $ | 468.0 | $ | 420.6 | $ | 47.4 | 11.3% | $ | 445.6 | $ | 22.4 | 5.0% |
(3) | The same community portfolio includes operating results and data for 638 communities utilizing the Company's methodology for determining |
Health Care Services
Increase / (Decrease) | |||||||||||
($ in millions) | 2Q 2020 | 2Q 2019 | Amount | Percent | |||||||
Resident fee revenue | $ | 90.1 | $ | 114.4 | $ | (24.3) | (21.2) | % | |||
Other operating income | 17.0 | — | 17.0 | NM | |||||||
Facility operating expense | 97.5 | 105.3 | (7.8) | (7.4) | % |
LIQUIDITY
The table below presents a summary of the Company's net cash provided by (used in) operating activities, Adjusted Free Cash Flow, and liquidity.
Increase / (Decrease) | |||||||||||
($ in millions) | 2Q 2020 | 2Q 2019 | Amount | Percent | |||||||
Net cash provided by (used in) operating activities | $ | 151.8 | $ | 64.1 | $ | 87.7 | 136.8 | % | |||
Adjusted Free Cash Flow (4) | 113.5 | (16.4) | 129.9 | NM |
Increase / (Decrease) | |||||||||||
($ in millions) | June 30, 2020 | March 31, 2020 | Amount | Percent | |||||||
Unrestricted cash and cash equivalents | $ | 452.4 | $ | 392.7 | $ | 59.7 | 15.2 | % | |||
Marketable securities | 109.9 | 108.0 | 1.9 | 1.8 | % | ||||||
Availability on secured credit facility | 37.9 | 35.3 | 2.6 | 7.4 | % | ||||||
Total Liquidity | $ | 600.2 | $ | 536.0 | $ | 64.2 | 12.0 | % |
(4) | Adjusted Free Cash Flow is a financial measure that is not calculated in accordance with GAAP. See "Reconciliations of Non-GAAP Financial |
TRANSACTION UPDATE
Subsequent to the end of the quarter, the Company entered into definitive agreements with Ventas to restructure its 120 community (10,174 units) triple-net master lease arrangements, as further described in the press release issued on July 27, 2020. In addition, the Company conveyed to Ventas five communities in full satisfaction of $78 million principal amount of indebtedness secured by the communities, and will manage the communities following the closing. Pursuant to the multi-part transaction, the Company paid a $119.2 million one-time cash payment to Ventas on July 27, 2020 and reduced the Company's annual rent under the amended and restated master lease.
OUTLOOK
Given the unprecedented nature of COVID-19 and rapidly changing developments, the Company will continue to be agile and adjust its local community response to help protect its residents, associates, and patients. As the Company cannot predict the ultimate impact of the duration, severity, and breadth of the pandemic for the United States, key factors that may impact the Company's financial performance and liquidity for the second half of 2020 include:
Senior Housing
Health Care Services
Adjusted Free Cash Flow
SUPPLEMENTAL INFORMATION
The Company will post on its website at www.brookdale.com/investor supplemental information relating to the Company's second quarter 2020 results, an updated investor presentation, and a copy of this earnings release. The supplemental information and a copy of this earnings release will also be furnished in a Form 8-K to be filed with the SEC.
EARNINGS CONFERENCE CALL
Brookdale's management will conduct a conference call to review the financial results for the second quarter of 2020 on August 11, 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 August 25, 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 "5398575".
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 737 communities in 44 states and the ability to serve approximately 65,000 residents as of June 30, 2020. The Company also offers a range of home health, hospice, and outpatient therapy services to over 17,000 patients as of that date. Brookdale's stock is traded on the New York Stock Exchange under the ticker symbol BKD.
DEFINITIONS OF RevPAR AND RevPOR
RevPAR, or average monthly senior housing resident fee revenue per available unit, is defined by the Company as resident fee revenue for the corresponding portfolio for the period (excluding Health Care Services segment revenue and entrance fee amortization, and, for the 2019 periods, the additional resident fee revenue recognized as a result of the application of the lease accounting standard ASC 842), divided by the weighted average number of available units in the corresponding portfolio for the period, divided by the number of months in the period.
RevPOR, or average monthly senior housing resident fee revenue per occupied unit, is defined by the Company as resident fee revenue for the corresponding portfolio for the period (excluding Health Care Services segment revenue and entrance fee amortization, and, for the 2019 periods, the additional resident fee revenue recognized as a result of the application of the lease accounting standard ASC 842), divided by the weighted average number of occupied units in the corresponding portfolio for the period, divided by the number of months in the period.
SAFE HARBOR
Certain statements in this press release and the associated earnings conference call may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to various risks and uncertainties and include all statements that are not historical statements of fact and those regarding the Company's intent, belief or expectations, including those related to the COVID-19 pandemic. 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, liquidity, and 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 of the disease, the impact of COVID-19 on the nation's economy and debt and equity markets and the local economies in the Company's markets, the development and availability of COVID-19 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 our 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, 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, and other expenses, the impact of COVID-19 on the Company's ability to complete financings, refinancings, or other transactions (including dispositions) or to generate sufficient cash flow to cover required interest and lease payments and to satisfy financial and other covenants in the Company's debt and lease documents, increased regulatory requirements, including unfunded mandatory testing, increased enforcement actions resulting from COVID-19, including those that may limit the Company's collection efforts for delinquent accounts and the frequency and magnitude of legal actions and liability claims that may arise due to COVID-19 or the Company's response efforts; events which adversely affect the ability of seniors to afford resident fees, including downturns in the economy, housing markets, consumer confidence or the equity markets and unemployment among family members, which may be adversely impacted by the pandemic; changes in reimbursement rates, methods or timing under governmental reimbursement programs including the Medicare and Medicaid programs; the impact of ongoing healthcare reform efforts; the effects of senior housing construction and development, oversupply and increased competition; disruptions in the financial markets, including those related to the pandemic, that affect the Company's ability to obtain financing or extend or refinance debt as it matures and the Company's financing costs; the risks associated with current global economic conditions, including changes related to the pandemic, and general economic factors such as inflation, the consumer price index, commodity costs, fuel and other energy costs, costs of salaries, wages, benefits, and insurance, interest rates, and tax rates; the impact of seasonal contagious illness or an outbreak of COVID-19 or other contagious disease in the markets in which the Company operates; the Company's ability to generate sufficient cash flow to cover required interest and long-term lease payments and to fund its planned capital projects, which may be adversely affected by the pandemic; the effect of the Company's indebtedness and long-term leases on its liquidity; the effect of the Company's non-compliance with any of its debt or lease agreements (including the financial covenants contained therein), including the risk of lenders or lessors declaring a cross default in the event of 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 its consolidated fixed charge coverage ratio on availability under the Company's revolving credit facility; the potential phasing out of LIBOR which may increase the costs of the Company's debt obligations; increased competition for or a shortage of personnel or 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 the Company; 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 its living spaces, which may be adversely impacted by the pandemic; departures of key officers and potential disruption caused by changes in management; risks related to the implementation of the Company's strategy, including initiatives undertaken to execute on its strategic priorities and their effect the Company's results; actions of activist stockholders, including a proxy contest; market conditions and capital allocation decisions that may influence the Company's determination from time to time whether to purchase any shares under its existing share repurchase program and the Company's ability to fund any repurchases; the Company's ability to maintain consistent quality control; a decrease in the overall demand for senior housing, which may be adversely impacted by the pandemic; environmental contamination at any of the Company's communities; failure to comply with existing environmental laws; costs to defend against, or an adverse determination or resolution of, complaints filed against the Company; the cost and difficulty of complying with increasing and evolving regulation; costs to respond to, and adverse determinations resulting from, government reviews, audits and investigations; unanticipated costs to comply with legislative or regulatory developments; as well as other risks detailed from time to time in the Company's filings with the Securities and Exchange Commission ("SEC"), 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, ex