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Press Release

Brookdale Announces Fourth Quarter and Full Year 2017 Results

Brookdale
Posted on: 24 Feb 18

NASHVILLE, Tenn., Feb. 22, 2018 /PRNewswire/ -- Brookdale Senior Living Inc. (NYSE: BKD) ("Brookdale" or the "Company") announced results for the quarter and year ended December 31, 2017. 

Fourth Quarter 2017 Highlights:

Average occupancy increased 40 basis points sequentially from the third quarter to the fourth quarter to 85.2%.

Revenue per Occupied Unit (RevPOR) increased 3.1% in the fourth quarter compared to the prior year quarter.

The turnover of its key community leadership declined by 19% in the fourth quarter versus the prior year quarter.

The Company entered into a multi-part agreement with HCP, Inc. ("HCP") to terminate leases, sell joint venture interests, acquire select communities and restructure management rights.

The Company reported net income of $15.0 million for the fourth quarter of 2017 compared to net loss of $268.6 million for the fourth quarter of 2016.  Net income for the fourth quarter of 2017 included a $64.0 million deferred income tax benefit, which included the impact of the Tax Cuts and Jobs Act ("Tax Act").  Fourth quarter 2017 net cash provided by operating activities was $83.6 million compared with $88.5 million for the fourth quarter of 2016.  Adjusted EBITDA was $138.1 million for the fourth quarter of 2017 compared to $184.2 million for the fourth quarter of 2016.  Excluding transaction and strategic project costs of $10.9 million, Adjusted EBITDA for the fourth quarter of 2017 was $149.0 million.  Adjusted Free Cash Flow for the fourth quarter of 2017 was negative $11.7 million compared to positive $33.2 million for the fourth quarter of 2016.  Brookdale's proportionate share of Adjusted Free Cash Flow of unconsolidated ventures for the fourth quarter of 2017 was $12.0 million compared to $6.8 million for the fourth quarter of 2016.  Adjusted EBITDA and Adjusted Free Cash Flow are financial measures not calculated in accordance with GAAP.  See "Reconciliation of Non-GAAP Financial Measures" below for the Company's definitions of such financial measures, reconciliations of such measures to their most comparable GAAP financial measures and other important information regarding the use of the Company's non-GAAP financial measures.

The Company reported a net loss of $571.6 million for the year ended December 31, 2017 compared to a net loss of $404.6 million for the year ended December 31, 2016. Full year 2017 net cash provided by operating activities was $366.7 million compared with $365.7 million for the full year 2016.  Adjusted EBITDA was $638.6 million for 2017 compared to $770.8 million for 2016.  Excluding transaction and strategic project costs of $25.4 million, Adjusted EBITDA for 2017 was $664.0 million.  Adjusted Free Cash Flow for 2017 was $97.6 million compared to $153.8 million for 2016.  Brookdale's proportionate share of Adjusted Free Cash Flow of unconsolidated ventures for 2017 was $35.4 million compared to $32.6 million for 2016.

Fourth Quarter Financial Results

Total revenue for the fourth quarter of 2017 was $1.17 billion compared to $1.21 billion for the prior year period. Resident fees were $906.3 million for the fourth quarter of 2017, a decrease of 10.3% from the fourth quarter of 2016.  The decrease in resident fees was primarily a result of the disposition of 127 communities (11,935 units) through asset sales and lease terminations since the beginning of the prior year period.  Fourth quarter monthly RevPAR for the consolidated senior housing portfolio was $3,904, an increase of 2.1% from the fourth quarter of 2016, driven by a year-over-year increase in RevPOR of 3.1%, which was partially offset by a decrease in weighted average unit occupancy of 80 basis points.  Weighted average unit occupancy for the consolidated senior housing portfolio increased 40 basis points to 85.2% from the third quarter of 2017, and is 60 basis points above its lowpoint in the second quarter of the year. See "Definitions of RevPAR and RevPOR" below for the Company's definitions of such terms.

Facility operating expenses for the fourth quarter of 2017 were $634.6 million, a decrease of 7.5% from the fourth quarter of 2016.  The decrease in facility operating expenses was primarily due to disposition activity, through asset sales and lease terminations.  Combined segment operating margin was 31.4% for the fourth quarter of 2017 versus 33.4% for the fourth quarter of 2016. 

Net income for the fourth quarter of 2017 was $15.0 million, versus a net loss of $268.6 million for the fourth quarter of 2016. Net income for the fourth quarter of 2017 included a deferred income tax benefit of $64.0 million, including a benefit of $112.4 million resulting from the re-measurement of the Company's net deferred tax liability due to the impact of the Tax Act.

Weighted average shares outstanding were 186.4 million for the fourth quarter of 2017 compared with weighted average shares outstanding of 185.7 million for the prior year quarter.

Net cash provided by operating activities for the fourth quarter of 2017 was $83.6 million, a decrease of $4.9 million, or 5.5%, compared with the fourth quarter of 2016, driven primarily by disposition activity, which was partially offset by an increase in facility operating expenses at the communities operated during both full periods.

Annual Financial Results

Total revenue for the full year 2017 was $4.75 billion, a decrease of 4.6% from the prior year.  Net loss for the full year 2017 was $571.6 million, versus a net loss of $404.6 million for the full year 2016.  Full year 2017 net cash provided by operating activities was $366.7 million, an increase of $0.9 million, or 0.3% compared with the prior year.

The Company's full year 2017 results compared to the Company's most recent 2017 full-year guidance were:

(in millions)

 

Full Year 2017
Guidance as of
November 6, 2017

 

Actual Full

Year 2017

Adjusted EBITDA, excluding transaction and strategic project costs

 

$650

to

$670

 

$664







 

Adjusted Free Cash Flow

 

$80

to

$100

 

$98







 

The Company's proportionate share of Adjusted Free Cash Flow of 
     unconsolidated ventures

 

$28

to

$32

 

$35

Non-GAAP Financial Measures

Adjusted EBITDA and Adjusted Free Cash Flow are financial measures that are not calculated in accordance with GAAP.  The Company strongly urges you to review the information under "Reconciliation of Non-GAAP Financial Measures" below for the Company's definitions of each of these non-GAAP financial measures, a detailed description of why the Company believes such measures are useful, the limitations of each measure, and a reconciliation of Adjusted EBITDA from the Company's net income (loss), a reconciliation of the Company's Adjusted Free Cash Flow from the Company's net cash provided by (used in) operating activities, and a reconciliation of the Company's proportionate share of Adjusted Free Cash Flow of unconsolidated ventures from such ventures' net cash provided by (used in) operating activities.  The Company changed its definition and calculation of Adjusted EBITDA when it reported results for the second quarter of 2016. Prior period amounts of Adjusted EBITDA presented herein have been recast to conform to the new definition. See "Reconciliation of Non-GAAP Financial Measures" below for a description of such changes to the definition of Adjusted EBITDA.

Adjusted EBITDA decreased 25.0% to $138.1 million for the fourth quarter of 2017, compared to $184.2 million for the fourth quarter of 2016. Excluding transaction and strategic project costs of $10.9 million for the fourth quarter of 2017 and integration, transaction, transaction-related and strategic project costs of $10.1 million for the fourth quarter of 2016, Adjusted EBITDA for the fourth quarter of 2017 was $149.0 million, compared to $194.2 million for the fourth quarter of 2016. The decrease in Adjusted EBITDA was primarily due to disposition activity, through asset sales and lease terminations, since the beginning of the prior year period.  Additionally, increases in community labor expenses and insurance expense at the communities operated during both full periods contributed to the decline in Adjusted EBITDA. Adjusted EBITDA for the fourth quarter of 2017 includes approximately $1.9 million of facility operating expenses related to the Company's response to Hurricanes Harvey and Irma and wildfires in California. 

The Company's Adjusted Free Cash Flow for the fourth quarter of 2017 decreased $44.8 million to negative $11.7 million compared to positive $33.2 million for the fourth quarter of 2016. Included in fourth quarter 2017 Adjusted Free Cash Flow is $71.9 million of non-development capital expenditures, net of reimbursements and $1.9 million of facility operating expenses related to natural disasters. The Company's proportionate share of Adjusted Free Cash Flow of unconsolidated ventures was $12.0 million for the fourth quarter of 2017 compared with $6.8 million for the prior year period.

Operating Activities

The Company reports information on five segments.  Three segments (Retirement Centers, Assisted Living and CCRCs-Rental) constitute the Company's consolidated senior housing portfolio.  The Ancillary Services segment includes the Company's home health, hospice and outpatient therapy services.  The Management Services segment includes the services provided to unconsolidated communities that are operated under management agreements.

Senior Housing

Revenue for the consolidated senior housing portfolio was $792.8 million for the fourth quarter of 2017, a decrease of 11.5% from the fourth quarter of 2016. Facility operating expenses were $533.9 million for the fourth quarter of 2017, a decrease of 9.3% from the fourth quarter of 2016.  Operating income for the consolidated senior housing portfolio decreased by 15.8% from the fourth quarter of 2016, to $258.9 million for the fourth quarter of 2017.  The decreases in resident fees and facility operating expenses during the three months ended December 31, 2017 were primarily due to disposition activity, through asset sales and lease terminations, of 127 communities (11,935 units) since the beginning of the prior year period.

Same community revenue for the consolidated senior housing portfolio for the fourth quarter of 2017 increased 0.5% from the corresponding period in 2016.  Same community RevPAR increased 0.6% in the fourth quarter of 2017 from the fourth quarter of 2016, driven by an increase in same community RevPOR of 1.9%, which was partially offset by a decline in weighted average unit occupancy of 110 basis points. Consolidated same community facility operating expenses, excluding costs related to natural disasters, for the fourth quarter of 2017 increased by 4.6% over the fourth quarter of 2016, driven primarily by an increase in community labor expenses arising from wage rate increases.  As a result, same community operating income for the consolidated senior housing portfolio for the fourth quarter of 2017 decreased by 6.6% from the fourth quarter of 2016, to $252.7 million. Same community weighted average unit occupancy for the consolidated senior housing portfolio increased 10 basis points to 85.6% sequentially from the third quarter of 2017.

Brookdale Ancillary Services

Revenue for the Company's ancillary services segment decreased $0.5 million, or 0.5%, to $113.5 million for the fourth quarter of 2017 compared to the prior year fourth quarter. Facility operating expenses for the fourth quarter of 2017 increased $3.0 million, or 3.0%, over the fourth quarter of 2016, primarily due to increases in salaries and wages arising from wage rate increases. As a result, ancillary services operating income for the fourth quarter of 2017 was $12.8 million, a decrease of 21.5% versus the fourth quarter of 2016, with operating margin decreasing to 11.3% from 14.3% for the fourth quarter of 2016. The decrease in ancillary services operating income was primarily the result of lower Medicare reimbursement rates for home health services and increases in salaries and wages arising from wage rate increases. Despite an increase over the prior year fourth quarter, the Company's home health average daily census was negatively impacted by interruptions to service by Hurricane Irma in Florida.

Liquidity

Total liquidity for the Company was $872.6 million at December 31, 2017, an increase of $288.6 million from December 31, 2016.  Liquidity at December 31, 2017 included $222.6 million of unrestricted cash and cash equivalents, $291.8 million of marketable securities, and $358.2 million of availability on the Company's secured credit facility.

As of December 31, 2017, the current portion of long-term debt includes the $309.9 million carrying amount of the Company's 2.75% convertible senior notes due June 15, 2018. The Company estimates that it will have sufficient liquidity to settle the outstanding principal amount of $316.3 million of the convertible notes in cash at maturity.

Update on Previously Announced Transactions with HCP

The Company has continued to make progress on transactions with HCP announced in November 2017 and November 2016.

During the quarter, the Company terminated the leases for 26 communities (2,854 units).  These lease terminations included the termination of 23 triple-net leases with HCP, which completed the transactions contemplated by the agreement with HCP announced in November 2016. As a result of these lease terminations, the Company recognized a gain on sale of assets of $11.4 million for the recognition of deferred gains from previous sale-leaseback transactions.

As announced in November 2017, the Company amended and restated triple-net leases covering substantially all of the communities leased from HCP into a Master Lease and entered into a definitive agreement with HCP for a multi-part transaction that includes the following components:

Lease Terminations - The parties agreed to terminate triple-net leases on 35 communities (3,331 units).

Sale of Venture Interests - HCP agreed to acquire Brookdale's 10% ownership interest in two existing unconsolidated RIDEA ventures between the companies, for which Brookdale provided management services to 59 communities (9,585 units).

Acquisition of Six Communities - Brookdale agreed to acquire four of the venture communities (787 units) and to acquire two of the triple-net-leased communities (208 units).

Restructuring of Management Rights - The parties agreed that Brookdale will retain management of 18 of the venture communities (3,276 units) with an extended term to expire in 2030, and will terminate management of 37 of the venture communities (5,522 units).

In December 2017, the Company completed the sale of its 10% ownership interest in one of the RIDEA ventures for $32.1 million and recognized a $7.2 million gain on the sale.  In January 2018, the Company completed the acquisition of one community from HCP.  Brookdale expects the disposition of its ownership interest in the second unconsolidated RIDEA venture and its acquisition of the remaining five communities to occur in the next three months, and expects the terminations of triple net leases on 33 communities and management agreements on 37 communities to occur in stages throughout 2018. The closings of the various transactions are 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.

Assets Held for Sale

As of December 31, 2017, 15 communities (1,508 units) were classified as assets held for sale with a carrying value of $106.4 million, and $30.1 million of associated mortgage debt, which is included in the current portion of long-term debt.  The closings of the sales of the 15 communities held for sale are subject to receipt of regulatory approvals and satisfaction of other customary closing conditions, and are expected to occur during the next 12 months; however, there can be no assurance that the transactions will close or, if they do, when the actual closings will occur.

Supplemental Information

The Company will post on the Investor Relations section of the Company's website at www.brookdale.com supplemental information relating to the Company's fourth quarter 2017 results.  This information will also be furnished in a Form 8-K to be filed with the SEC.  An updated Investor Presentation will also be posted.

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, 2017 on February 22, 2018 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 the "Brookdale Senior Living Fourth Quarter Earnings Call."

A webcast of the conference call will be available to the public on a listen-only basis at www.brookdale.com.  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 for three months following the call.

For those who cannot listen to the live call, a replay will be available until 11:59 PM ET on March 7, 2018 by dialing (855) 859-2056 (from within the U.S.) or (404) 537-3406 (from outside of the U.S.) and referencing access code "9439517".  A copy of this earnings release is posted on the Investor Relations page of the Brookdale website (www.brookdale.com).

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 independent living, assisted living, and dementia-care communities and continuing care retirement centers, with approximately 1,023 communities in 46 states and the ability to serve approximately 101,000 residents as of December 31, 2017.  Through its ancillary services program, the Company also offers a range of home health, hospice and outpatient therapy services.  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 revenues per available unit, is defined by the Company as resident fee revenues, excluding Brookdale Ancillary Services segment revenue and entrance fee amortization, for the corresponding portfolio for the period, 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 revenues per occupied unit, is defined by the Company as resident fee revenues, excluding Brookdale Ancillary Services segment revenue and entrance fee amortization, for the corresponding portfolio for the period, 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 our intent, belief or expectations, including, but not limited to, statements relating to our redefined strategy, including initiatives undertaken to execute on our strategic priorities and their intended effect on our results; our operational, sales, marketing and branding initiatives; our expectations regarding the economy, the senior living industry, senior housing construction, supply and competition, occupancy and pricing and the demand for senior housing; our expectations regarding our revenue, cash flow, operating income, expenses, capital expenditures, including expected levels and reimbursements and the timing thereof, expansion, redevelopment and repositioning opportunities, including Program Max opportunities, and their projected costs, cost savings and synergies, and our liquidity and leverage; our plans and expectations with respect to acquisition, disposition, development, lease restructuring and termination, financing, re-financing and venture transactions and opportunities (including assets held for sale, the pending transactions with HCP, Inc. and our plans to market in 2018 and sell approximately 30 owned communities), including the timing thereof and their effects on our results; our expectations regarding taxes, capital deployment and returns on invested capital, Adjusted EBITDA and Adjusted Free Cash Flow (as those terms are defined herein); our expectations regarding returns to stockholders, our share repurchase program and the payment of dividends; our ability to secure financing or repay, replace or extend existing debt at or prior to maturity; our ability to remain in compliance with all of our debt and lease agreements (including the financial covenants contained therein); our expectations regarding changes in government reimbursement programs and their effect on our results; our plans to expand our offering of ancillary services; and our ability to anticipate, manage and address industry trends and their effect on our business. 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," "overestimate," "underestimate," "believe," "project," "predict," "continue," "plan," "target" or other similar words or expressions. These forward looking statements are based on certain assumptions and expectations, and our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Although we believe that expectations reflected in any forward-looking statements are based on reasonable assumptions, we can give no assurance that our expectations will be attained and actual results and performance could differ materially from those projected. Factors which could have a material adverse effect on our 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 risk associated with the current global economic situation and its impact upon capital markets and liquidity; changes in governmental reimbursement programs; the risk of overbuilding, new supply and new competition; our inability to extend (or refinance) debt (including our credit and letter of credit facilities and our outstanding convertible notes) as it matures; the risk that we may not be able to satisfy the conditions precedent to exercising the extension options associated with certain of our debt agreements; events which adversely affect the ability of seniors to afford our resident fees or entrance fees; the conditions of housing markets in certain geographic areas; our ability to generate sufficient cash flow to cover required interest and long-term lease payments and to fund our planned capital projects; risks related to the implementation of our redefined strategy, including initiatives undertaken to execute on our strategic priorities and their effect on our results; the effect of our indebtedness and long-term leases on our liquidity; the effect of our non-compliance with any of our debt or lease agreements (including the financial covenants contained therein) and the risk of lenders or lessors declaring a cross default in the event of our non-compliance with any such agreements; the risk of loss of property pursuant to our mortgage debt and long-term lease obligations; the possibilities that changes in the capital markets, including changes in interest rates and/or credit spreads, or other factors could make financing more expensive or unavailable to us; our determination from time to time to purchase any shares under our share repurchase program; our ability to fund any repurchases; our ability to effectively manage our growth; our ability to maintain consistent quality control; delays in obtaining regulatory approvals; the risk that we may not be able to expand, redevelop and reposition our communities in accordance with our plans; our ability to complete acquisition, disposition, lease restructuring and termination, financing, re-financing and venture transactions (including assets held for sale, the pending transactions with HCP, Inc. and our plans to market in 2018 and sell approximately 30 owned communities) 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 our ability to identify and pursue any such opportunities in the future; our ability to successfully integrate acquisitions; competition for the acquisition of assets; our ability to obtain additional capital on terms acceptable to us; a decrease in the overall demand for senior housing; our vulnerability to economic downturns; acts of nature in certain geographic areas; terminations of our resident agreements and vacancies in the living spaces we lease; early terminations or non-renewal of management agreements; increased competition for skilled personnel; increased wage pressure and union activity; departure of our key officers and potential disruption caused by changes in management; increases in market interest rates; environmental contamination at any of our communities; failure to comply with existing environmental laws; an adverse determination or resolution of complaints filed against us; the cost and difficulty of complying with increasing and evolving regulation; unanticipated costs to comply with legislative or regulatory developments, including requirements to obtain emergency power generators for our communities; as well as other risks detailed from time to time in our filings with the Securities and Exchange Commission, including those set forth under "Item 1A. Risk Factors" contained in our 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 our management's views as of the date of this press release and/or associated earnings call. We cannot guarantee future results, levels of activity, performance or achievements, and we expressly disclaim any obligation to release publicly any updates or revisions to any of these forward-looking statements to reflect any change in our expectations with regard thereto or change in events, conditions or circumstances on which any statement is based.

For more information:
www.prnewswire.com/news-releases/brookdale-announces-fourth-quarter-and-full-year-2017-results-300602541.html

Editor's Details

Mike Wood
PharmiWeb.com
www.pharmiweb.com
editor@pharmiweb.com

Last updated on: 24/02/2018

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