Brookdale Announces Fourth Quarter and Full Year 2020 Results
Brookdale Announces Fourth Quarter and Full Year 2020 Results
PR Newswire
NASHVILLE, Tenn., Feb. 24, 2021
NASHVILLE, Tenn., Feb. 24, 2021 /PRNewswire/ -- Brookdale Senior Living Inc. (NYSE: BKD) ("Brookdale" or the "Company") announced results for the quarter and full year ended December 31, 2020.
HIGHLIGHTS
- 100% of first dose and approximately 85% of second dose COVID-19 vaccine clinics had been completed for residents and associates at the Company's communities as of February 22, 2021.
- Liquidity increased to $575.5 million at December 31, 2020, which includes the impact of cash received from government funding.
- Fourth quarter revenue per occupied unit (RevPOR) increased by 3.9% year-over-year on a same community basis and the sequential occupancy decline moderated in the fourth quarter on a same community basis.
Subsequent to the end of the fourth quarter, the Company entered into definitive agreements with affiliates of HCA Healthcare, Inc., providing for the sale of 80% of the Company's equity in its Health Care Services segment, as further described in the press release issued on February 24, 2021.
"With best-in-class clinical and cross-functional response team leadership, we helped our residents, patients and associates navigate through this unprecedented and evolving pandemic," said Lucinda ("Cindy") Baier, Brookdale's President and CEO. "As an industry leader, we used our strong voice to advocate for senior living funding and then once again for top vaccine priority later in the year. Our efforts culminated in our vaccine clinics starting in mid-December and we are incredibly proud that 100% of our more than 700 communities across 43 states have already completed their first vaccine clinic and over 600 communities have completed their second dose vaccine clinics. I am extremely grateful for our associates' unity and dedication in providing our beloved seniors with high quality services. We are all working tirelessly to accelerate our path safely and emerge from the pandemic a stronger company."
SUMMARY OF FOURTH QUARTER RESULTS
Consolidated
The table below presents a summary of consolidated operating results for the fourth quarter.
Year-Over-Year | Change Attributable To: | |||||||||||||||||||||
($ in millions) | 4Q 2020 | 4Q 2019 | Amount | Percent | COVID-19 | Transactions | Lease Standard | |||||||||||||||
Resident fee revenue | $ | 677.5 | $ | 797.4 | $ | (119.9) | (15.0) | % | See note (1) | $ | (19.9) | $ | (10.4) | |||||||||
Management fee revenue | $ | 10.2 | $ | 12.4 | $ | (2.2) | (17.7) | % | — | $ | (1.2) | — | ||||||||||
Other operating income | $ | 78.3 | — | $ | 78.3 | NM | $ | 78.3 | — | — | ||||||||||||
Facility operating expense | $ | 576.8 | $ | 598.4 | $ | (21.6) | (3.6) | % | $ | 30.5 | $ | (18.1) | $ | (14.5) | ||||||||
General and administrative | $ | 45.3 | $ | 49.0 | $ | (3.7) | (7.6) | % | — | — | — | |||||||||||
Net income (loss) | $ | (44.1) | $ | (91.3) | $ | (47.2) | (51.7) | % | See note (1) | See note (1) | $ | 4.1 | (1) | |||||||||
Adjusted EBITDA (2) | $ | 98.6 | $ | 100.1 | $ | (1.5) | (1.5) | % | See note (1) | $ | 22.0 | $ | 4.1 | |||||||||
(1) | Estimated lost resident fee revenue attributable to COVID-19 was $120.1 million for the fourth quarter of 2020. The change in net income (loss) attributable to COVID-19 and transactions and the change in Adjusted EBITDA attributable to COVID-19 are not presented as certain impacts are not available without unreasonable effort. The change attributable to the lease standard represents the 2019 impact of the timing of the revenue and cost recognition associated with residency agreements related to the adoption of ASC 842. |
(2) | Adjusted EBITDA is a financial measure that is not calculated in accordance with GAAP. See "Reconciliations of Non-GAAP Financial Measures" for the Company's definition of such measure, reconciliations to the most comparable GAAP financial measures, and other important information regarding the use of the Company's non-GAAP financial measures. |
- Resident fee revenue.
- Excluding the impact of transactions and the lease accounting standard, consolidated resident fee revenue decreased 11.7% over the prior year quarter.
- Consolidated RevPAR decreased $443, or 10.8%, to $3,673 compared to the prior year fourth quarter as a result of a decrease in consolidated weighted average occupancy of 1,180 basis points, offset by an increase in consolidated RevPOR of $181, or 3.7%, to $5,052.
- Consolidated senior housing occupancy was 71.5% as of December 31, 2020 compared to 75.0% as of September 30, 2020. The Company estimates that the COVID-19 pandemic resulted in $100.5 million and $19.6 million of lost resident fee revenue for its consolidated senior housing and Health Care Services segments, respectively, for the fourth quarter of 2020. Estimated lost resident fee revenue represents the difference between the actual revenue for the period and our expectations prior to estimating the effects of COVID-19.
- Management fee revenue. The decrease was primarily due to the transition of management arrangements on 48 net communities since October 1, 2019, generally for management arrangements on certain former unconsolidated ventures in which the Company sold its interest and interim management arrangements on formerly leased communities. The Company received an $8.6 million management termination fee payment during the fourth quarter of 2020, of which $5.0 million of management fee revenue was recognized during the fourth quarter of 2020.
- Other operating income.
- During the fourth quarter of 2020, the Company accepted $73.7 million of cash for grants from the Provider Relief Fund, including $67.5 million pursuant to the Phase 2 General Distribution and $5.3 million pursuant to the Phase 3 General Distribution. The grants are subject to the terms and conditions of the program, including that such funds may only be used to prevent, prepare for, and respond to COVID-19 and will reimburse only for healthcare related expenses or lost revenues that are attributable to COVID-19.
- The Company recognized $74.9 million of grants from the Provider Relief Fund and $3.4 million from other government grants as other operating income during the fourth quarter of 2020.
- Facility operating expense.
- Excluding the impact of transactions, the lease accounting standard, and incremental direct COVID-19 costs, facility operating expense decreased $19.4 million, or 3.4%, primarily due to a decrease in labor costs for home health services as a result of the lower census and as the Company adjusted its home health services operational structure, to better align its facility operating expenses and business model with the new Patient-Driven Grouping Model ("PDGM").
- The Company incurred $30.5 million of incremental direct costs during the fourth quarter of 2020 to address the COVID-19 pandemic, including costs for: acquisition of personal protective equipment ("PPE"), medical equipment, and cleaning and disposable food service supplies; enhanced cleaning and environmental sanitation; increased employee-related costs, including labor, workers compensation, and health plan expense; increased expense for general liability claims; and COVID-19 testing of residents and associates where not otherwise covered by government payor or third-party insurance sources.
- General and administrative expense. The decrease in general and administrative expense was primarily attributable to a $3.2 million decrease in transaction and organizational restructuring costs compared to the prior year quarter, a reduction in the Company's travel costs due to the pandemic, and a reduction in the Company's corporate headcount, as it scaled its general and administrative costs in connection with community dispositions.
- Net income (loss). The decrease in net loss compared to the prior year quarter was primarily attributable to a $32.4 million decrease in asset impairment expense and a $20.5 million decrease in facility operating lease expense, partially offset by the net impact of the revenue, other operating income, and facility operating expense factors previously discussed.
- Adjusted EBITDA. The decrease in Adjusted EBITDA compared to the prior year quarter was primarily attributable to the net impact of the revenue, other operating income, and facility operating expense factors previously discussed, partially offset by a $22.3 million decrease in cash facility operating lease payments, primarily reflecting reduced cash lease payments as a result of the lease restructuring transaction with Ventas, Inc. ("Ventas") on July 26, 2020.
- COVID-19 Impact.
- In December 2020, two COVID-19 vaccines received emergency use authorization from the U.S. Food and Drug Administration. The Company elected to work with CVS Health Corporation, with whom it has a longstanding relationship to provide flu shot clinics in the Company's communities, to administer vaccinations on site to its eligible residents and associates through the Pharmacy Partnership for Long-Term Care Program offered through the U.S. Centers for Disease Control and Prevention. The Company's work to prepare for and host vaccine clinics includes extensive planning, gathering insurance information, obtaining consents, scheduling appointments, holding educational sessions with residents, families, and associates and detailed coordination of traffic flow and observation areas. The Company hosted its first clinics on December 18, 2020 and by January 22, 2021 it hosted vaccine clinics at over 500 of its communities. As of February 22, 2021, first dose vaccine clinics had been completed for residents and associates at 100% of the Company's communities, and approximately 85% of its communities had second dose vaccine clinics.
- The Company has continued testing residents and associates at many of its communities, after completing baseline testing at all of its communities in July 2020. The Company's testing program has accumulated approximately 320,000 test results. Approximately 1.2% of the Company's residents were known to have current COVID-19 positive test results on February 22, 2021.
- During the fourth quarter, the Company continued evaluating restrictions on its communities on a community-by-community basis, including based on regulatory requirements and guidance, completion of baseline testing at the community, and the presence of current confirmed positive COVID-19 cases. Although the Company is hopeful that administration of the vaccine to its residents and associates will enable further easing of community restrictions, they may continue for some time, and the Company may revert to more restrictive measures if the pandemic worsens, as necessary to comply with regulatory requirements, or at the direction of state or local health authorities. Restrictions on move-ins escalated throughout the fourth quarter of 2020 due to the resurgence of the virus. At the end of the fourth quarter of 2020, 89% of the Company's communities were accepting new move-ins compared to 98% at the end of the third quarter of 2020. As of February 22, 2021, 97% of the Company's communities were accepting new move-ins.
- The year-over-year decrease in monthly move-ins of the Company's same community portfolio has moderated from 64.2% in April 2020 to 26.5% in December 2020.
- The Company's weighted average occupancy and month-end weighted average occupancy for the months of March 2020 to January 2021 were as follows:
Mar | Apr | May | Jun | Jul | Aug | Sep | Oct | Nov | Dec | Jan | ||||||||||||
Consolidated weighted average occupancy | 82.7 | % | 80.4 | % | 78.4 | % | 77.4 | % | 76.4 | % | 75.2 | % | 74.3 | % | 73.8 | % | 72.8 | % | 71.5 | % | 70.0 | % |
Consolidated month-end occupancy | 82.2 | % | 80.0 | % | 78.5 | % | 77.8 | % | 76.6 | % | 75.5 | % | 75.0 | % | 74.1 | % | 73.1 | % | 71.5 | % | 70.4 | % |
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 and RevPOR) | 4Q 2020 | 4Q 2019 | Amount | Percent | 3Q 2020 | Amount | Percent | ||||||||||
RevPAR | $ | 3,692 | $ | 4,151 | $ | (459) | (11.1)% | $ | 3,826 | $ | (134) | (3.5)% | |||||
Weighted average occupancy | 72.9 | % | 85.1 | % | (1,220) | bps | n/a | 75.6 | % | (270) | bps | n/a | |||||
RevPOR | $ | 5,067 | $ | 4,878 | $ | 189 | 3.9% | $ | 5,060 | $ | 7 | 0.1% | |||||
Facility operating expense | $ | 447.4 | $ | 422.7 | $ | 24.7 | 5.8% | $ | 434.2 | $ | 13.2 | 3.0% | |||||
(3) | The same community portfolio includes operating results and data for 629 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 (i) hurricane and other natural disaster expense of $1.6 million, $2.3 million, and $1.6 million for the fourth and third quarters of 2020 and fourth quarter of 2019, respectively, and (ii) for the 2019 period the additional resident fee revenue and facility operating expense recognized as a result of the application of the lease accounting standard ASC 842 of approximately $9.5 million and $13.4 million, respectively. As presented herein, same community facility operating expense includes the direct costs incurred to respond to the COVID-19 pandemic. |
- Resident fees. Same community resident fees decreased $67.8 million to $545.4 million attributable to the decrease in occupancy, partially offset by the increase in RevPOR.
- Facility operating expense. The year-over-year increase was primarily due to $26.0 million of incremental direct costs incurred during the fourth quarter of 2020 to respond to the COVID-19 pandemic.
Health Care Services
Increase / (Decrease) | |||||||||||
($ in millions) | 4Q 2020 | 4Q 2019 | Amount | Percent | |||||||
Resident fee revenue | $ | 91.9 | $ | 109.5 | $ | (17.6) | (16.1) | % | |||
Facility operating expense | 92.1 | 106.6 | (14.5) | (13.6) | % | ||||||
- Resident fee revenue. Health Care Services revenue decreased primarily due to a decline of 13.5% in home health average daily census year-over-year for the fourth quarter of 2020 as a result of lower occupancy in the Company's communities.
- Facility operating expense.
- The year-over-year decrease in facility operating expense was primarily attributable to a decrease in labor costs for home health services as a result of the lower census and as the Company adjusted its home health services operational structure, to better align its facility operating expenses and business model in connection with PDGM.
- The decrease in facility operating expenses was partially offset by $2.3 million of incremental direct costs to respond to the COVID-19 pandemic incurred during the fourth quarter of 2020.
LIQUIDITY
The table below presents a summary of the Company's net cash provided by (used in) operating activities, Adjusted Free Cash Flow, and liquidity.
Increase / (Decrease) | |||||||||||
($ in millions) | 4Q 2020 | 4Q 2019 | Amount | Percent | |||||||
Net cash provided by (used in) operating activities | $ | 73.5 | $ | 88.1 | $ | (14.6) | (16.6) | % | |||
Adjusted Free Cash Flow (4) | 19.9 | 0.5 | 19.4 | NM | |||||||
Increase / (Decrease) | |||||||||||
($ in millions) | December 31, 2020 | September 30, 2020 | Amount | Percent | |||||||
Unrestricted cash and cash equivalents | $ | 380.4 | $ | 354.6 | $ | 25.8 | 7.3 | % | |||
Marketable securities | 172.9 | 136.1 | 36.8 | 27.0 | % | ||||||
Availability on secured credit facility | 22.2 | — | 22.2 | NM | |||||||
Total Liquidity | $ | 575.5 | $ | 490.7 | $ | 84.8 | 17.3 | % | |||
(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. The year-over-year decrease in net cash provided by operating activities was primarily attributable to a decrease in same community revenue compared to the prior year period and $30.5 million of incremental direct costs to respond to the COVID-19 pandemic during the current year period, partially offset by $77.2 million of government grants accepted.
- Adjusted Free Cash Flow. The $19.4 million increase in Adjusted Free Cash Flow compared to the prior year fourth quarter was attributable to a $21.0 million decrease in non-development capital expenditures, net and a $10.7 million decrease in reimbursed non-development capital expenditures partially offset by the $14.6 million decrease in net cash provided by operating activities.
- Total Liquidity. Total liquidity as of December 31, 2020, increased $84.8 million from September 30, 2020, primarily attributable to the release of restricted cash, availability on the Company's new secured credit facility, and the Adjusted Free Cash Flow, which includes $77.2 million of government grants accepted during the period.
TRANSACTION AND FINANCING UPDATE
- Secured Credit Facility: On December 11, 2020, the Company entered into a revolving credit agreement with Capital One, National Association, as administrative agent and lender and the other lenders from time to time parties thereto. The agreement provides a commitment amount of $80 million which can be drawn in cash or as letters of credit. The agreement matures on January 15, 2024. Amounts drawn under the facility will bear interest at 30-day LIBOR plus an applicable margin which was 2.75% as of December 31, 2020. Additionally, a quarterly commitment fee of 0.25% per annum was applicable on the unused portion of the facility as of December 31, 2020. The revolving credit facility is currently secured by first priority mortgages and negative pledges on certain of the Company's communities. Available capacity under the facility will vary from time to time based upon borrowing base calculations related to the appraised value and performance of the communities securing the credit facility. As of December 31, 2020, no borrowings were outstanding on the revolving credit facility, $40.4 million of letters of credit were outstanding, and the revolving credit facility had $22.2 million of remaining availability. As a result of the refinancing of the Company's letters of credit, $41.0 million of restricted cash that previously collateralized letters of credit was released to the Company as unrestricted cash in December 2020.
- Community Disposition: During the fourth quarter of 2020, the Company's triple-net lease obligation on one community (159 units) was terminated. As a result, the Company's operating lease obligations were reduced by $24.5 million and the Company recognized a $2.3 million gain on lease termination during the fourth quarter of 2020 for the amount by which the lease obligations exceeded the net carrying amount of the Company's assets under the operating lease as of the lease termination date.
FULL YEAR RESULTS
Consolidated
The table below presents a summary of consolidated operating results for the full year.
Year-Over-Year | Change Attributable To: | |||||||||||||||||||||
($ in millions) | 2020 | 2019 | Amount | Percent | COVID-19 | Transactions | Lease Standard | |||||||||||||||
Resident fee revenue | $ | 2,892.6 | $ | 3,209.9 | $ | (317.3) | (9.9) | % | See note (5) | $ | (81.0) | $ | (26.4) | |||||||||
Management fee revenue | $ | 130.7 | $ | 57.1 | $ | 73.6 | 128.9 | % | — | $ | 75.9 | — | ||||||||||
Other operating income | $ | 115.7 | $ | — | $ | 115.7 | NM | $ | 115.7 | — | — | |||||||||||
Facility operating expense | $ | 2,341.9 | $ | 2,390.5 | $ | (48.6) | (2.0) | % | $ | 125.5 | $ | (69.7) | $ | (49.5) | ||||||||
General and administrative | $ | 206.6 | $ | 219.3 | $ | (12.7) | (5.8) | % | — | — | — | |||||||||||
Net income (loss) | $ | 81.9 | $ | (268.5) | $ | 350.4 | NM | See note (5) | See note (5) | $ | 23.1 | (5) | ||||||||||
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