Attached files
| file | filename |
|---|---|
| 8-K - FORM 8-K - Brookdale Senior Living Inc. | form8-k.htm |
| EX-99.2 - SUPPLEMENTAL INFORMATION - Brookdale Senior Living Inc. | exhibit99_2.htm |
FOR IMMEDIATE
RELEASE
Contact:
Brookdale
Senior Living Inc.
Ross
Roadman 615-564-8104
Brookdale
Announces Fourth Quarter 2009 and Full Year Results; CFFO Per Share Increases
20%
Highlights
|
·
|
Cash
From Facility Operations (“CFFO”) was $49.5 million, or $0.42 per share,
in the fourth quarter, excluding transaction-related costs, a 20% increase
from $0.35 per share for the fourth quarter of 2008 (excluding integration
and storm-related costs in Q4
2008).
|
|
·
|
Improved
average monthly revenue per unit by 4.5% to $4,001 from $3,830 for the
fourth quarter of 2008.
|
|
·
|
Average
occupancy, excluding acquisitions and expansions from the third and fourth
quarter of 2009, was 89.4%, a 20 basis point increase from 89.2% in the
third quarter of 2009. Average occupancy for all consolidated
communities for the fourth quarter of 2009 was 88.9% compared to 89.7% for
the fourth quarter of 2008.
|
|
·
|
Revenue
increased over the fourth quarter of 2008 by $31.6 million, or 6.5%, to
$518.5 million.
|
|
·
|
Adjusted
EBITDA improved over the fourth quarter of 2008 by $9.4 million, or 12.4%,
to $84.9 million.
|
|
·
|
Completed
acquisition of 18 communities from Sunrise Senior Living and three
communities from a joint venture
partner.
|
|
·
|
Entered
into a new 3 ½ year revolving credit facility with a commitment of $100
million.
|
Nashville, TN. February
23, 2010 – Brookdale Senior Living Inc. (NYSE: BKD) (the “Company”) today
reported financial and operating results for the fourth quarter and full year
2009.
Bill
Sheriff, Brookdale’s CEO, said, “During 2009, the Company reached several
significant milestones, including exceeding $2 billion of revenue and $200
million of CFFO for the first time. Operating in the third year of a
difficult environment was not easy and required our team to execute
well. For example, our sales and marketing initiatives produced
approximately 18,000 move-ins (excluding skilled nursing), which exceeded
move-outs by over 600 over the course of the year. And the field
organization was extraordinarily effective in controlling
Page 1 of
14
expenses
without sacrificing quality. The business model we have built, and have
continued to improve, worked well in a difficult environment. We are
excited about its long-term growth prospects and our ability to capitalize on
the opportunities which we believe we will be presented in the
future.”
Mark
Ohlendorf, Co-President and CFO of Brookdale, commented, “Our fourth quarter
continued our 2009 trends of increasing occupancy, strengthening ancillary
services, maintaining positive rate growth, controlling expenses below normal
unit-cost inflation, expanding margin and growing cash flow. We
opened several large expansions and completed two portfolio
acquisitions. In spite of a difficult financial market, we effected a
successful equity raise in the middle of the year, materially reduced leverage
and, in the fourth quarter, completed some attractive mortgage financings in
support of our acquisitions. Just today, we entered into a new 3 ½
year line of credit with greater flexibility and capacity. We
continue to retain solid liquidity and maintain good coverage overall on our
debt and leases. The strength of our platform and the solid financial
profile positions us well for long-term growth.”
Financial
Results
Total
revenue for the fourth quarter was $518.5 million, an increase of $31.6 million,
or 6.5%, from the fourth quarter of 2008. Revenue for the full year 2009
was $2.0 billion, a 4.9% increase from $1.9 billion for the full year
2008. The increase in revenue was primarily driven by an increase in
average monthly revenue per unit, including growing revenues from ancillary
services, and an increase in capacity through expansions and acquisitions,
partially offset by a small decline in occupancy.
Average
monthly revenue per unit was $4,001 in the fourth quarter, an increase of $171,
or 4.5%, over the fourth quarter of 2008, and $3,985 for the full year of 2009,
a 5.1% increase over the same period of 2008. Excluding expansions
and acquisitions from the third and fourth quarter of 2009, average occupancy
for the fourth quarter was 89.4%, compared to 89.2% for the third quarter of
2009. Average occupancy for all consolidated communities for the fourth
quarter of 2009 was 88.9% compared to 89.7% for the fourth quarter of
2008.
Facility
operating expenses for the fourth quarter were $340.7 million, an increase of
$16.9 million, or 5.2%, from the fourth quarter of 2008. The increase
over the prior year’s quarter was primarily driven by the growth of ancillary
services and expenses associated with expansions and
acquisitions. With the positive impact of the Company’s cost control
initiatives, facility operating expenses, excluding the impact of ancillary
services and acquisitions, increased by 1.5% from the fourth quarter of
2008. Operating contribution margin for the Company during the fourth
quarter of 2009 was 34.1%, up from 33.3% in the fourth quarter of
2008. For the twelve months ended December 31, 2009, operating
contribution margin was 35.3%, up from 34.3% for full year 2008.
General
and administrative expenses for the fourth quarter were $34.7 million, up from
$31.3 million in the fourth quarter of 2008. Excluding non-cash
compensation, integration and transaction-related costs from both periods,
general and administrative expenses were $25.8 million in the fourth quarter of
2009 versus $23.4 million for the prior year same
period. Demonstrating the Company’s efficient platform, this was 4.6%
of revenue (including revenues under management) in the fourth quarter of
2009.
Page 2 of
14
Brookdale’s
management utilizes Adjusted EBITDA and Cash From Facility Operations to
evaluate the Company’s performance and liquidity because these metrics exclude
non-cash expenses such as depreciation and amortization, non-cash stock-based
compensation expense and straight-line lease expense, net of deferred gain
amortization. Brookdale also uses Facility Operating Income to assess
the performance of its facilities.
For the
three and twelve months ended December 31, 2009, Adjusted EBITDA and Cash From
Facility Operations included transaction-related costs of $3.6 million and $5.8
million, respectively. For the three and twelve months ended December
31, 2008, Adjusted EBITDA and Cash From Facility Operations included expenses
related to integration and severance costs and hurricanes and other named
tropical storms of $3.5 million and $24.3 million, respectively. The
amounts for the twelve months ended December 31, 2008 include the effect of the
$8.0 million reserve established for certain litigation.
For the
quarter ended December 31, 2009, Facility Operating Income was $170.2 million,
an increase of $14.0 million from the fourth quarter of 2008, and Adjusted
EBITDA was $84.9 million, a $9.4 million increase over the fourth quarter of
2008. For the twelve months ended December 31, 2009, Adjusted EBITDA
was $348.6 million and Facility Operating Income was $690.1
million.
Cash From
Facility Operations was $45.9 million for the fourth quarter of 2009, or $0.39
per share. Excluding the $3.6 million of transaction-related costs,
CFFO for the fourth quarter was $49.5 million, or $0.42 per
share. This was an increase of $13.6 million over the fourth quarter
of 2008, excluding the integration and storm-related expenses in
2008.
For the
twelve months ended December 31, 2009, reported CFFO was $196.8 million, or
$1.79 per share. Excluding the $5.8 million of transaction-related costs, CFFO
for the twelve months ended December 31, 2009 was $202.6 million, or $1.84 per
share. This was an increase of $48.1 million over full year 2008, excluding the
non-recurring, integration and storm-related expenses in 2008.
Net loss
for the fourth quarter of 2009 was $(20.8) million, or $(0.18) per diluted
common share. The loss for the quarter includes non-cash items for depreciation
and amortization, goodwill and asset impairment, non-cash stock-based
compensation expense and straight-line lease expense, net of deferred gain
amortization.
Operating
Activities
For the
quarter ended December 31, 2009, same community revenues grew 3.1% over the same
period in 2008 as revenue per unit increased by 3.8% and occupancy fell by
0.7%. Same community Facility Operating Income for the quarter
increased by 5.9% when compared to the fourth quarter of 2008 as expenses grew
by 1.7%.
For the
twelve months ended December 31, 2009, same community revenues grew 4.1% over
the corresponding period ending in 2008, and same community Facility Operating
Income increased by 7.8% over the corresponding period ending in
2008. The twelve month same community data excludes hurricane and
named tropical storms expenses of $4.8 million in the last two quarters of
2008.
Page 3 of
14
By the
end of the fourth quarter, the Company’s ancillary services programs provided
therapy services to approximately 36,000 Brookdale units. At the end
of the quarter, the Company’s home health agencies were serving almost 23,000
units across the total consolidated Brookdale portfolio, up from approximately
16,700 units served a year ago. Therapy and home health services
produced $229 of monthly Facility Operating Income per occupied unit in the
fourth quarter across all units served, up from $146 per month a year ago,
driven primarily by maturation of existing clinics and the acquisition of home
health agencies.
During
the quarter, the Company opened two expansions with a total of 112
units. Additionally, near the end of the third quarter the Company
opened the 240-unit independent living component of its new entry fee CCRC in
the Villages, Florida. The 72-bed skilled nursing unit at the
Villages opened late in the fourth quarter. The start-up losses for
expansions were $2.4 million in the fourth quarter and were comprised of
operating expenses, additional interest and lease expense.
Balance
Sheet
Brookdale
had $66.4 million of unrestricted cash and cash equivalents and $183.1 million
of restricted cash on its balance sheet at the end of the fourth
quarter. The Company had no cash borrowings outstanding against its
Line of Credit.
During
the first half of 2009, Brookdale extended the maturity of all of its mortgage
debt initially due in 2009. The Company currently has no mortgage
debt maturities before 2011 that do not contain contractual extension options
other than periodic, scheduled principal payments.
Acquisitions
On
November 18, 2009, the Company acquired 18 senior living communities in an asset
acquisition from affiliates of Sunrise Senior Living, Inc.
(“Sunrise”). The aggregate net purchase price for the 18 communities
acquired was $190.0 million. The portfolio of 18 communities is
comprised of a total of 1,197 units, including 92 independent living units, 746
assisted living units and 359 Alzheimer’s units. In connection with
the acquisition, the Company assumed approximately $98.8 million of mortgage
debt, currently at a weighted average rate of less than 2.5%, with the balance
of the purchase price paid from cash on hand. The Company has a
commitment to finance five of the acquired communities and is expected to close
the financing within a week.
Effective
December 17, 2009, the Company acquired the remaining interest in three
retirement center communities that were previously managed by the Company and in
which the Company previously had a non-controlling interest. The
aggregate purchase price for the communities was $102.0 million. The
portfolio of three communities is comprised of 642 total units, including 506
independent living units and 136 assisted living units. The Company
financed the transaction by obtaining a $75.4 million mortgage loan with the
balance of the purchase price paid from cash on hand. The mortgage
debt has a ten year term and bears interest at a fixed rate of
6.1%.
During
the year ended December 31, 2009, the Company purchased three home health
agencies as part of its growth strategy for an aggregate purchase price of
approximately $1.5 million. The entire
purchase price of the acquisitions has been ascribed to an indefinite useful
life intangible and recorded on the consolidated balance sheet under other
intangible assets, net.
Page 4 of
14
Subsequent
Events
The
Company announced today that it has entered into a new revolving credit
facility. The new facility has a commitment of $100 million, with an option to
increase the commitment to $120 million. The new facility replaces the Company's
existing $75 million revolving credit agreement that was scheduled to expire in
August 2010. The revolving line of credit may be used to finance
acquisitions and fund working capital, capital expenditures and other general
corporate purposes. GE Capital, Healthcare Financial Services,
acts as administrative agent as well as a lender under the new
line.
The new
facility matures on June 30, 2013 and is secured by a first priority security
interest in certain of the Company’s properties. The commitment will be limited
to $80 million pending finalization of documentation for the remaining $20
million commitment, which is expected within the next week. The availability
under the line may vary from time to time as it is based on borrowing base
calculations related to the value and performance of collateral securing
the facility.
Supplemental
Information
The
Company will shortly post on the Investor Relations section of the Company’s
website at www.brookdaleliving.com
supplemental information relating to the Company’s fourth quarter and full year
2009 results. This information 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 on Wednesday, February 24, 2010 to
review the financial results of its fourth quarter ended December 31,
2009. The conference call is scheduled for 9:00 AM ET. All
interested parties are welcome to participate in the live conference
call. The conference call can be accessed by dialing (866) 845-7252
(from within the U.S.) or (706) 634-9069 (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.brookdaleliving.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 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 5 by dialing (800) 642-1687 (from within the U.S.) or (706) 645-9291
(from outside of the U.S.) and referencing access code “58624232.” A
copy of this earnings release is posted on the Investor Relations page of the
Brookdale website (www.brookdaleliving.com).
About Brookdale Senior
Living
Brookdale
Senior Living Inc. is a leading owner and operator of senior living communities
throughout the United States. The Company is committed to providing
an exceptional living experience through properties that are designed,
purpose-built and operated to provide the highest-quality service, care and
living accommodations for residents. Currently the Company owns and
operates independent living, assisted living, and dementia-care communities
and
Page 5 of
14
continuing
care retirement centers, with 565 communities in 35 states and the ability to
serve over 53,000 residents.
Safe
Harbor
Certain
items 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. Those 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 operational initiatives and our expectations regarding their
effect on our results; our expectations regarding occupancy, revenue, cash flow,
expense levels, the demand for senior housing, expansion activity, acquisition
opportunities and asset dispositions; our belief regarding our growth prospects;
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 liquidity; our plans to deleverage; our expectations
regarding financings and refinancings of assets (including the timing thereof);
our plans to generate growth organically through occupancy improvements,
increases in annual rental rates and the achievement of operating efficiencies
and cost savings; our plans to expand our offering of ancillary services
(therapy and home health); our plans to expand existing communities; our plans
to acquire additional communities, asset portfolios, operating companies and
home health agencies; the expected project costs for our expansion program; our
expected levels of expenditures and reimbursements (and the timing thereof); our
expectations for the performance of our entrance fee communities; our ability to
anticipate, manage and address industry trends and their effect on our business;
and our ability to increase revenues, earnings, Adjusted EBITDA, Cash From
Facility Operations, and/or Facility Operating
Income. Forward-looking statements are generally identifiable by use
of forward-looking terminology such as "may," "will," "should," "potential,"
"intend," "expect," "endeavor," "seek," "anticipate," "estimate,"
"overestimate," "underestimate," "believe," "could," "would," "project,"
"predict," "continue," "plan" or other similar words or
expressions. Forward-looking statements are based on certain
assumptions or estimates, discuss future expectations, describe future plans and
strategies, contain projections of results of operations or of financial
condition, or state other forward-looking information. Our ability to
predict results or the actual effect of future plans or strategies is inherently
uncertain. Although we believe that the expectations reflected in
such forward-looking statements are based on reasonable assumptions, actual
results and performance could differ materially from those set forth in the
forward-looking statements. Factors which could have a material adverse effect
on our operations and future prospects or which could cause events or
circumstances to differ from these forward-looking statements include, but are
not limited to, our ability consummate the financing for recently acquired
communities; the risk associated with the current global economic crisis and its
impact upon capital markets and liquidity; our inability to extend (or
refinance) debt (including our credit and letter of credit facilities) 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;
the risk that therapy
caps exceptions are not reinstated; events which adversely affect the ability of
seniors to afford our monthly 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 operating lease payments; the
effect of our indebtedness and long-term operating leases on our liquidity; the
risk of loss of property pursuant to our mortgage debt and long-term
lease
Page 6 of
14
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; the risk that we may be required to post
additional cash collateral in connection with our interest rate swaps; the risk
that continued market deterioration could jeopardize the performance of certain
of our counterparties’ obligations; changes in governmental reimbursement
programs; our limited operating history on a combined basis; our ability to
effectively manage our growth; our ability to maintain consistent quality
control; delays in obtaining regulatory approvals; our ability to integrate
acquisitions into our operations; 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; increased competition
for skilled personnel; increased union activity; departure of our key officers;
increases in market interest rates; environmental contamination at any of our
facilities; 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; and other risks
detailed from time to time in our filings with the Securities and Exchange
Commission, including 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 the associated earnings conference
call. The factors discussed above and the other factors noted in our
SEC filings from time to time could cause our actual results to differ
significantly from those contained in any forward-looking
statement. 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 forward-looking statements contained
herein to reflect any change in our expectations with regard thereto or change
in events, conditions or circumstances on which any statement is
based.
Page 7 of
14
Consolidated
Statements of Operations
(Audited, in thousands, except for per share
data)
|
Three
Months Ended
|
Twelve
Months Ended
|
|||||||||||||||
|
December
31,
|
December
31,
|
|||||||||||||||
|
2009
|
2008
|
2009
|
2008
|
|||||||||||||
|
Revenue
|
||||||||||||||||
|
Resident
fees
|
$ | 516,805 | $ | 485,538 | $ | 2,016,349 | $ | 1,921,060 | ||||||||
|
Management
fees
|
1,717 | 1,390 | 6,719 | 6,994 | ||||||||||||
|
Total
revenue
|
518,522 | 486,928 | 2,023,068 | 1,928,054 | ||||||||||||
|
Expense
|
||||||||||||||||
|
Facility
operating expense (excluding depreciation and amortization of $46,746,
$51,752, $183,813 and $195,517, respectively)
|
338,640 | 322,595 | 1,302,277 | 1,256,781 | ||||||||||||
|
General
and administrative expense (including non-cash stock-based compensation
expense of $5,386, $5,569, $26,935 and $28,937,
respectively)
|
34,716 | 31,286 | 134,864 | 140,919 | ||||||||||||
|
Hurricane
and named tropical storms expense
|
- | 1,187 | - | 4,800 | ||||||||||||
|
Facility
lease expense
|
67,885 | 67,441 | 272,096 | 269,469 | ||||||||||||
|
Depreciation
and amortization
|
69,557 | 68,320 | 271,935 | 276,202 | ||||||||||||
|
Loss
on sale of communities, net
|
2,043 | - | 2,043 | - | ||||||||||||
|
Goodwill
and asset impairment
|
10,073 | 220,026 | 10,073 | 220,026 | ||||||||||||
|
Total
operating expense
|
522,914 | 710,855 | 1,993,288 | 2,168,197 | ||||||||||||
|
(Loss) income from
operations
|
(4,392 | ) | (223,927 | ) | 29,780 | (240,143 | ) | |||||||||
|
Interest
income
|
583 | 1,449 | 2,354 | 7,618 | ||||||||||||
|
Interest
expense:
|
||||||||||||||||
|
Debt
|
(32,024 | ) | (36,495 | ) | (128,869 | ) | (147,389 | ) | ||||||||
|
Amortization
of deferred financing costs and debt discount
|
(2,406 | ) | (2,767 | ) | (9,505 | ) | (9,707 | ) | ||||||||
|
Change
in fair value of derivatives and amortization
|
2,628 | (50,802 | ) | 3,765 | (68,146 | ) | ||||||||||
|
Gain
(loss) on extinguishment of debt
|
1,626 | - | (1,292 | ) | (3,052 | ) | ||||||||||
|
Equity
in (loss) earnings of unconsolidated ventures
|
(778 | ) | (111 | ) | 440 | (861 | ) | |||||||||
|
Other
non-operating (expense) income
|
(26 | ) | 2,132 | 4,146 | 1,708 | |||||||||||
|
Loss before income
taxes
|
(34,789 | ) | (310,521 | ) | (99,181 | ) | (459,972 | ) | ||||||||
|
Benefit
for income taxes
|
13,990 | 31,735 | 32,926 | 86,731 | ||||||||||||
|
Net loss
|
(20,799 | ) | (278,786 | ) | (66,255 | ) | (373,241 | ) | ||||||||
|
Basic
and diluted loss per share
|
$ | (0.18 | ) | $ | (2.75 | ) | $ | (0.60 | ) | $ | (3.67 | ) | ||||
|
Weighted
average shares used in
|
||||||||||||||||
|
computing
basic and diluted loss per share
|
118,653 | 101,424 | 111,288 | 101,667 | ||||||||||||
|
Dividends
declared per share
|
$ | - | $ | - | $ | - | $ | 0.75 | ||||||||
Page 8 of
14
Consolidated
Balance Sheets
(Audited, in
thousands)
|
December
31, 2009
|
December
31, 2008
|
|||||||
|
Cash
and cash equivalents
|
$ | 66,370 | $ | 53,973 | ||||
|
Cash
and escrow deposits - restricted
|
109,977 | 86,723 | ||||||
|
Accounts
receivable, net
|
82,604 | 91,646 | ||||||
|
Other
current assets
|
58,470 | 48,443 | ||||||
|
Total
current assets
|
317,421 | 280,785 | ||||||
|
Property,
plant, and equipment and
|
||||||||
|
leasehold
intangibles, net
|
3,857,774 | 3,697,834 | ||||||
|
Other
assets, net
|
470,748 | 470,639 | ||||||
|
Total
assets
|
$ | 4,645,943 | $ | 4,449,258 | ||||
|
Current
liabilities
|
$ | 689,309 | $ | 648,445 | ||||
|
Long-term
debt, less current portion
|
2,459,341 | 2,235,000 | ||||||
|
Other
liabilities
|
410,711 | 605,212 | ||||||
|
Total
liabilities
|
3,559,361 | 3,488,657 | ||||||
|
Stockholders’
equity
|
1,086,582 | 960,601 | ||||||
|
Total
liabilities and stockholders’ equity
|
$ | 4,645,943 | $ | 4,449,258 | ||||
Page 9 of
14
Consolidated
Statements of Cash Flows
(Audited, in thousands)
|
Twelve
Months Ended December 31,
|
||||||||
|
2009
|
2008
|
|||||||
|
Cash
Flows from Operating Activities
|
||||||||
|
Net
loss
|
$ | (66,255 | ) | $ | (373,241 | ) | ||
|
Adjustments
to reconcile net loss to net cash provided by operating
activities:
|
||||||||
|
Non-cash
portion of loss on extinguishment of debt
|
1,292 | 3,052 | ||||||
|
Depreciation
and amortization
|
281,440 | 285,909 | ||||||
|
Goodwill
and asset impairment
|
10,073 | 220,026 | ||||||
|
Gain
on sale of assets
|
(2,241 | ) | (2,131 | ) | ||||
|
Equity
in (earnings) loss of unconsolidated ventures
|
(440 | ) | 861 | |||||
|
Distributions
from unconsolidated ventures from cumulative share of net
earnings
|
405 | 3,752 | ||||||
|
Amortization
of deferred gain
|
(4,345 | ) | (4,342 | ) | ||||
|
Amortization
of entrance fees
|
(21,661 | ) | (22,025 | ) | ||||
|
Proceeds
from deferred entrance fee revenue
|
38,489 | 22,601 | ||||||
|
Deferred
income tax benefit
|
(31,684 | ) | (89,498 | ) | ||||
|
Change
in deferred lease liability
|
15,851 | 20,585 | ||||||
|
Change
in fair value of derivatives and amortization
|
(3,765 | ) | 68,146 | |||||
|
Change
in future service obligation
|
(2,342 | ) | - | |||||
|
Non-cash
stock-based compensation
|
26,935 | 28,937 | ||||||
|
Changes
in operating assets and liabilities:
|
||||||||
|
Accounts
receivable, net
|
11,784 | (25,150 | ) | |||||
|
Prepaid
expenses and other assets, net
|
(28,426 | ) | (12,664 | ) | ||||
|
Accounts
payable and accrued expenses
|
21,287 | 15,428 | ||||||
|
Tenant
refundable fees and security deposits
|
(16,770 | ) | (1,293 | ) | ||||
|
Deferred
revenue
|
7,593 | (2,186 | ) | |||||
|
Net
cash provided by operating activities
|
237,220 | 136,767 | ||||||
|
Cash
Flows from Investing Activities
|
||||||||
|
Decrease
in lease security deposits and lease acquisition deposits,
net
|
2,441 | 3,481 | ||||||
|
Increase
in cash and escrow deposits — restricted
|
(64,540 | ) | (21,760 | ) | ||||
|
Net
proceeds from sale of assets
|
14,941 | 2,935 | ||||||
|
Distributions
received from unconsolidated ventures
|
1,061 | 3,916 | ||||||
|
Additions
to property, plant, and equipment and leasehold
intangibles,
|
||||||||
|
net
of related payables
|
(117,453 | ) | (189,028 | ) | ||||
|
Acquisition
of assets, net of related payables and cash received
|
(204,137 | ) | (6,731 | ) | ||||
|
(Issuance
of) payment on notes receivable, net
|
(508 | ) | 39,362 | |||||
|
Investment
in unconsolidated ventures
|
(1,246 | ) | (2,779 | ) | ||||
|
Proceeds
from sale leaseback transaction
|
9,166 | - | ||||||
|
Proceeds
from sale of unconsolidated venture
|
8,843 | 4,165 | ||||||
|
Net
cash used in investing activities
|
(351,432 | ) | (166,439 | ) | ||||
|
Cash
Flows from Financing Activities
|
||||||||
|
Proceeds
from debt
|
157,039 | 511,344 | ||||||
|
Repayment
of debt and capital lease obligations
|
(32,587 | ) | (255,489 | ) | ||||
|
Proceeds
from line of credit
|
60,446 | 339,453 | ||||||
|
Repayment
of line of credit
|
(219,899 | ) | (378,000 | ) | ||||
|
Payment
of dividends
|
- | (129,455 | ) | |||||
|
Payment
of financing costs, net of related payables
|
(8,700 | ) | (14,292 | ) | ||||
|
Proceeds
from public equity offering, net
|
163,771 | - | ||||||
|
Cash
portion of loss on extinguishment of debt
|
- | (1,240 | ) | |||||
|
Other
|
(931 | ) | (2,974 | ) | ||||
|
Refundable
entrance fees:
|
||||||||
|
Proceeds
from refundable entrance fees
|
30,386 | 19,871 | ||||||
|
Refunds
of entrance fees
|
(22,916 | ) | (19,150 | ) | ||||
|
Recouponing
and payment of swap termination
|
- | (58,140 | ) | |||||
|
Purchase
of treasury stock
|
- | (29,187 | ) | |||||
|
Net
cash provided by (used in) financing activities
|
126,609 | (17,259 | ) | |||||
|
Net
increase (decrease) in cash and cash equivalents
|
12,397 | (46,931 | ) | |||||
|
Cash
and cash equivalents at beginning of year
|
53,973 | 100,904 | ||||||
|
Cash
and cash equivalents at end of year
|
$ | 66,370 | $ | 53,973 | ||||
Page 10
of 14
Non-GAAP Financial
Measures
Adjusted
EBITDA
Adjusted
EBITDA is a measure of operating performance that is not calculated in
accordance with U.S. generally accepted accounting principles
(“GAAP”). Adjusted EBITDA should not be considered in isolation or as
a substitute for net income, income from operations or cash flows provided by or
used in operations, as determined in accordance with GAAP. Adjusted
EBITDA is a key measure of the Company's operating performance used by
management to focus on operating performance and management without mixing in
items of income and expense that relate to long-term contracts and the financing
and capitalization of the business. We define Adjusted EBITDA as net
income (loss) before provision (benefit) for income taxes, non-operating
(income) expense items, loss on sale of communities, depreciation and
amortization (including non-cash impairment charges), straight-line lease
expense (income), amortization of deferred gain, amortization of deferred
entrance fees, non-cash compensation expense, and change in future service
obligation and including entrance fee receipts and refunds (excluding first
generation entrance fee receipts on a newly opened entrance fee
CCRC).
In 2009,
we clarified the definition of Adjusted EBITDA to exclude (a) initial entrance
fees received from the sale of units at a newly opened entrance fee CCRC where
the Company is required to apply such entrance fee proceeds to satisfy debt, (b)
the change in the liability for the obligation to provide future services under
existing lifecare contracts and (c) loss on sale of communities.
We
believe Adjusted EBITDA is useful to investors in evaluating our performance,
results of operations and financial position for the following
reasons:
|
·
|
It
is helpful in identifying trends in our day-to-day performance because the
items excluded have little or no significance to our day-to-day
operations;
|
|
·
|
It
provides an assessment of controllable expenses and affords management the
ability to make decisions which are expected to facilitate meeting current
financial goals as well as achieve optimal financial performance;
and
|
|
·
|
It
is an indication to determine if adjustments to current spending decisions
are needed.
|
Page 11
of 14
The table
below reconciles Adjusted EBITDA from net loss for the three and twelve months
ended December 31, 2009 and 2008 (in thousands):
|
Three
Months Ended December 31,
|
Twelve
Months Ended December 31,
|
|||||||||||||||
|
2009(1)
|
2008(1)
|
2009(1)
|
2008(1)
|
|||||||||||||
|
Net
loss
|
$ | (20,799 | ) | $ | (278,786 | ) | $ | (66,255 | ) | $ | (373,241 | ) | ||||
|
Benefit
for income taxes
|
(13,990 | ) | (31,735 | ) | (32,926 | ) | (86,731 | ) | ||||||||
|
Other
non-operating expense (income)
|
26 | (2,132 | ) | (4,146 | ) | (1,708 | ) | |||||||||
|
Equity
in loss (earnings) of unconsolidated ventures
|
778 | 111 | (440 | ) | 861 | |||||||||||
|
(Gain)
loss on extinguishment of debt, net
|
(1,626 | ) | - | 1,292 | 3,052 | |||||||||||
|
Interest
expense:
|
||||||||||||||||
|
Debt
|
24,582 | 29,488 | 99,653 | 119,853 | ||||||||||||
|
Capitalized
lease obligation
|
7,442 | 7,007 | 29,216 | 27,536 | ||||||||||||
|
Amortization
of deferred financing costs and debt discount
|
2,406 | 2,767 | 9,505 | 9,707 | ||||||||||||
|
Change
in fair value of derivatives and amortization
|
(2,628 | ) | 50,802 | (3,765 | ) | 68,146 | ||||||||||
|
Interest
income
|
(583 | ) | (1,449 | ) | (2,354 | ) | (7,618 | ) | ||||||||
|
(Loss)
income from operations
|
(4,392 | ) | (223,927 | ) | 29,780 | (240,143 | ) | |||||||||
|
Loss
on sale of communities, net
|
2,043 | - | 2,043 | - | ||||||||||||
|
Depreciation
and amortization
|
69,557 | 68,320 | 271,935 | 276,202 | ||||||||||||
|
Goodwill
and asset impairment
|
10,073 | 220,026 | 10,073 | 220,026 | ||||||||||||
|
Straight-line
lease expense
|
3,778 | 4,910 | 15,851 | 20,585 | ||||||||||||
|
Amortization
of deferred gain
|
(1,086 | ) | (1,085 | ) | (4,345 | ) | (4,342 | ) | ||||||||
|
Amortization
of entrance fees
|
(5,577 | ) | (5,498 | ) | (21,661 | ) | (22,025 | ) | ||||||||
|
Non-cash
compensation expense
|
5,386 | 5,569 | 26,935 | 28,937 | ||||||||||||
|
Change
in future service obligation
|
(2,342 | ) | - | (2,342 | ) | - | ||||||||||
|
Entrance
fee receipts(2)
|
28,618 | 12,077 | 68,875 | 42,472 | ||||||||||||
|
First
generation entrance fees received (3)
|
(15,047 | ) | - | (25,673 | ) | - | ||||||||||
|
Entrance
fee disbursements
|
(6,074 | ) | (4,819 | ) | (22,916 | ) | (19,150 | ) | ||||||||
|
Adjusted
EBITDA
|
$ | 84,937 | $ | 75,573 | $ | 348,555 | $ | 302,562 | ||||||||
|
|
(1)
|
The
calculation of Adjusted EBITDA includes transaction-related costs for the
three and twelve months ended December 31, 2009 of $3.6 million and $5.8
million, respectively. Integration and hurricane and named
tropical storms expense as well as other non-recurring costs were $3.5
million for the three months ended December 31, 2008 and $24.3 million for
the twelve months ended December 31, 2008. The amount for the
twelve months ended December 31, 2008 includes the effect of an $8.0
million reserve established for certain
litigation.
|
|
|
(2)
|
Includes
the receipt of refundable and nonrefundable entrance
fees.
|
|
|
(3)
|
First
generation entrance fees received represents initial entrance fees
received from the sale of units at a newly opened entrance fee CCRC where
the Company is required to apply such entrance fee proceeds to satisfy
debt.
|
Cash
From Facility Operations
Cash From
Facility Operations (CFFO) is a measurement of liquidity that is not calculated
in accordance with GAAP and should not be considered in isolation as a
substitute for cash flows provided by or used in operations, as determined in
accordance with GAAP. We define CFFO as net cash provided by (used
in) operating activities adjusted for changes in operating assets and
liabilities, deferred interest and fees added to principal, refundable entrance
fees received, first generation entrance fee receipts on a newly opened entrance
fee CCRC, entrance fee refunds disbursed, lease financing debt amortization with
fair market value or no purchase options, other, and recurring capital
expenditures. In 2009, we clarified the definition of CFFO to exclude
initial entrance fees received from the sale of units at a newly opened entrance
fee CCRC where the Company is required to apply such entrance fee proceeds to
satisfy debt. Recurring capital expenditures include expenditures
capitalized in accordance with GAAP that are funded from CFFO. Amounts excluded
from recurring capital expenditures consist primarily of unusual or
non-recurring capital items (including integration capital expenditures),
facility purchases and/or major projects or renovations that are funded using
financing proceeds and/or proceeds from the sale of facilities that are held for
sale.
Page 12
of 14
We
believe CFFO is useful to investors in evaluating our liquidity for the
following reasons:
|
·
|
It
provides an assessment of our ability to facilitate meeting current
financial and liquidity goals.
|
|
·
|
To
assess our ability to:
|
|
(i)
|
service
our outstanding indebtedness;
|
|
(ii)
|
pay
dividends; and
|
|
(iii)
|
make
regular recurring capital expenditures to maintain and improve our
facilities.
|
The table
below reconciles CFFO from net cash provided by operating activities for the
three and twelve months ended December 31, 2009 and 2008 (in thousands):
|
Three
Months Ended December 31,
|
Twelve
Months Ended December 31,
|
|||||||||||||||
|
2009(1)
|
2008(1)
|
2009(1)
|
2008(1)
|
|||||||||||||
|
Net
cash provided by operating activities
|
$ | 51,248 | $ | 29,413 | $ | 237,220 | $ | 136,767 | ||||||||
|
Changes
in operating assets and liabilities
|
11,753 | 12,562 | 4,532 | 25,865 | ||||||||||||
|
Refundable
entrance fees received(2)
|
13,354 | 4,686 | 30,386 | 19,871 | ||||||||||||
|
First
generation entrance fees received (3)
|
(15,047 | ) | - | (25,673 | ) | - | ||||||||||
|
Entrance
fee refunds disbursed
|
(6,074 | ) | (4,819 | ) | (22,916 | ) | (19,150 | ) | ||||||||
|
Recurring
capital expenditures
|
(7,484 | ) | (7,696 | ) | (19,522 | ) | (27,312 | ) | ||||||||
|
Lease
financing debt amortization with fair market value or no purchase
options
|
(1,824 | ) | (1,716 | ) | (7,195 | ) | (6,691 | ) | ||||||||
|
Reimbursement
of operating expenses and other
|
- | - | - | 794 | ||||||||||||
|
Cash
From Facility Operations
|
$ | 45,926 | $ | 32,430 | $ | 196,832 | $ | 130,144 | ||||||||
|
|
(1)
|
The calculation of CFFO includes transaction-related costs for the three and twelve months ended December 31, 2009 of $3.6 million and $5.8 million, respectively. Integration and hurricane and named tropical storms expense as well as other non-recurring costs were $3.5 million for the three months ended December 31, 2008 and $24.3 million for the twelve months ended December 31, 2008. The amount for the twelve months ended December 31, 2008 includes the effect of an $8.0 million reserve established for certain litigation. |
|
|
(2)
|
Total
entrance fee receipts for the three months ended December 31, 2009 and
2008 were $28.6 million and $12.1 million, respectively, including $15.3
million and $7.4 million, respectively, of nonrefundable entrance fee
receipts included in net cash provided by operating
activities. Total entrance fee receipts for the years ended
December 31, 2009 and 2008 were $68.9 million and $42.5 million,
respectively, including $38.5 million and $22.6 million, respectively, of
nonrefundable entrance fee receipts included in net cash provided by
operating activities
|
|
(3)
|
First
generation entrance fees received represents initial entrance fees
received from the sale of units at a newly opened entrance fee CCRC where
the Company is required to apply such entrance fee proceeds to satisfy
debt.
|
Beginning
in the third quarter of 2009, the calculation of CFFO per share is based on
weighted average outstanding common shares for the period, excluding any
unvested restricted shares. Previously, the calculation of CFFO per
outstanding common share was based on outstanding shares at the end of the
period, excluding any unvested restricted shares. The change in
methodology does not change any historically reported CFFO
numbers. Annual CFFO per share for all periods is calculated as the
sum of the quarterly amounts for the year.
Facility
Operating Income
Facility
Operating Income is not a measurement of operating performance calculated in
accordance with GAAP and should not be considered in isolation as a substitute
for net income, income from operations, or cash flows provided by or used in
operations, as determined in accordance with GAAP. We define Facility
Operating Income as net income (loss) before
Page 13
of 14
provision
(benefit) for income taxes, non-operating (income) expense items, loss on sale
of communities, depreciation and amortization (including non-cash impairment
charges), facility lease expense, general and administrative expense, including
non-cash stock compensation expense, change in future service obligation,
amortization of deferred entrance fee revenue and management fees.
In 2009,
we clarified the definition of Facility Operating Income to exclude (a) the
change in the liability for the obligation to provide future services under
existing lifecare contracts and (b) loss on sale of communities.
We
believe Facility Operating Income is useful to investors in evaluating our
facility operating performance for the following reasons:
|
·
|
It
is helpful in identifying trends in our day-to-day facility
performance;
|
|
·
|
It
provides an assessment of our revenue generation and expense management;
and
|
|
·
|
It
provides an indicator to determine if adjustments to current spending
decisions are needed.
|
The table
below reconciles Facility Operating Income from net loss for the three and
twelve months ended December 31, 2009 and 2008 (in thousands):
|
Three
Months Ended December 31,
|
Twelve
Months Ended December 31,
|
|||||||||||||||
|
2009
|
2008
|
2009
|
2008
|
|||||||||||||
|
Net loss
|
$ | (20,799 | ) | $ | (278,786 | ) | $ | (66,255 | ) | $ | (373,241 | ) | ||||
|
Benefit
for income taxes
|
(13,990 | ) | (31,735 | ) | (32,926 | ) | (86,731 | ) | ||||||||
|
Other
non-operating expense (income)
|
26 | (2,132 | ) | (4,146 | ) | (1,708 | ) | |||||||||
|
Equity
in loss (earnings) of unconsolidated ventures
|
778 | 111 | (440 | ) | 861 | |||||||||||
|
(Gain)
loss on extinguishment of debt
|
(1,626 | ) | - | 1,292 | 3,052 | |||||||||||
|
Interest
expense:
|
||||||||||||||||
|
Debt
|
24,582 | 29,488 | 99,653 | 119,853 | ||||||||||||
|
Capitalized
lease obligation
|
7,442 | 7,007 | 29,216 | 27,536 | ||||||||||||
|
Amortization
of deferred financing costs and debt discount
|
2,406 | 2,767 | 9,505 | 9,707 | ||||||||||||
|
Change
in fair value of derivatives and amortization
|
(2,628 | ) | 50,802 | (3,765 | ) | 68,146 | ||||||||||
|
Interest
income
|
(583 | ) | (1,449 | ) | (2,354 | ) | (7,618 | ) | ||||||||
|
(Loss)
income from operations
|
(4,392 | ) | (223,927 | ) | 29,780 | (240,143 | ) | |||||||||
|
Loss
on sale of communities, net
|
2,043 | - | 2,043 | - | ||||||||||||
|
Depreciation
and amortization
|
69,557 | 68,320 | 271,935 | 276,202 | ||||||||||||
|
Goodwill
and asset impairment
|
10,073 | 220,026 | 10,073 | 220,026 | ||||||||||||
|
Facility
lease expense
|
67,885 | 67,441 | 272,096 | 269,469 | ||||||||||||
|
General
and administrative (including non-cash stock compensation
expense)
|
34,716 | 31,286 | 134,864 | 140,919 | ||||||||||||
|
Change
in future service obligation
|
(2,342 | ) | - | (2,342 | ) | - | ||||||||||
|
Amortization
of entrance fees
|
(5,577 | ) | (5,498 | ) | (21,661 | ) | (22,025 | ) | ||||||||
|
Management
fees
|
(1,717 | ) | (1,390 | ) | (6,719 | ) | (6,994 | ) | ||||||||
|
Facility Operating
Income
|
$ | 170,246 | $ | 156,258 | $ | 690,069 | $ | 637,454 | ||||||||
Page 14 of 14