Unassociated Document
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
|
|
T |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2009
or
|
|
£ |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _____________ to _____________
Commission File Number: 001-32641
BROOKDALE SENIOR LIVING INC.
(Exact name of registrant as specified in its charter)
|
Delaware |
20-3068069 |
|
(State or other jurisdiction
of incorporation or organization) |
(I.R.S. Employer Identification No.) |
|
111 Westwood Place, Suite 200, Brentwood, Tennessee |
37027 |
|
|
(Address of principal executive offices) |
(Zip Code) |
|
(615) 221-2250
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90
days. Yes T No £
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was
required to submit and post such files). Yes £ No £
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange
Act.
| |
Large accelerated filer T |
Accelerated filer £ |
| |
Non-accelerated filer £ (Do not check if a smaller reporting company) |
Smaller reporting company £ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes £ No T
As of July 30, 2009, 118,288,643 shares of the registrant’s common stock, $0.01 par value, were outstanding (excluding unvested restricted shares).
BROOKDALE SENIOR LIVING INC.
FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 2009
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
BROOKDALE SENIOR LIVING INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except stock amounts)
| |
|
June 30,
|
|
|
December 31,
|
|
|
Assets |
|
(Unaudited) |
|
|
|
|
|
Current assets |
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
95,611 |
|
|
$ |
53,973 |
|
|
Cash and escrow deposits — restricted |
|
|
97,899 |
|
|
|
86,723 |
|
|
Accounts receivable, net |
|
|
95,341 |
|
|
|
91,646 |
|
|
Deferred tax asset |
|
|
14,677 |
|
|
|
14,677 |
|
|
Prepaid expenses and other current assets, net |
|
|
39,587 |
|
|
|
33,766 |
|
|
Total current assets |
|
|
343,115 |
|
|
|
280,785 |
|
|
Property, plant and equipment and leasehold intangibles, net |
|
|
3,652,076 |
|
|
|
3,697,834 |
|
|
Cash and escrow deposits — restricted |
|
|
72,679 |
|
|
|
29,988 |
|
|
Investment in unconsolidated ventures |
|
|
23,133 |
|
|
|
28,420 |
|
|
Goodwill |
|
|
109,967 |
|
|
|
109,967 |
|
|
Other intangible assets, net |
|
|
214,116 |
|
|
|
231,589 |
|
|
Other assets, net |
|
|
72,963 |
|
|
|
70,675 |
|
|
Total assets |
|
$ |
4,488,049 |
|
|
$ |
4,449,258 |
|
| |
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders’ Equity |
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
|
Current portion of long-term debt |
|
$ |
154,492 |
|
|
$ |
158,476 |
|
|
Current portion of line of credit |
|
|
— |
|
|
|
4,453 |
|
|
Trade accounts payable |
|
|
40,388 |
|
|
|
29,105 |
|
|
Accrued expenses |
|
|
170,680 |
|
|
|
170,366 |
|
|
Refundable entrance fees and deferred revenue |
|
|
258,511 |
|
|
|
253,647 |
|
|
Tenant security deposits |
|
|
18,099 |
|
|
|
29,965 |
|
|
Total current liabilities |
|
|
642,170 |
|
|
|
646,012 |
|
|
Long-term debt, less current portion |
|
|
2,292,547 |
|
|
|
2,235,000 |
|
|
Line of credit, less current portion |
|
|
— |
|
|
|
155,000 |
|
|
Deferred entrance fee revenue |
|
|
74,665 |
|
|
|
76,410 |
|
|
Deferred liabilities |
|
|
142,056 |
|
|
|
135,947 |
|
|
Deferred tax liability |
|
|
167,299 |
|
|
|
178,647 |
|
|
Other liabilities |
|
|
54,543 |
|
|
|
61,641 |
|
|
Total liabilities |
|
|
3,373,280 |
|
|
|
3,488,657 |
|
|
Commitments and contingencies |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
Stockholders’ Equity |
|
|
|
|
|
|
|
|
|
Preferred stock, $0.01 par value, 50,000,000 shares authorized at June 30, 2009 and December 31, 2008; no shares issued and outstanding |
|
|
— |
|
|
|
— |
|
|
Common stock, $0.01 par value, 200,000,000 shares authorized at June 30, 2009 and December 31, 2008; 124,409,544 and 106,467,764 shares issued and 123,198,243 and 105,256,463 shares outstanding (including 4,912,862 and 3,542,801 unvested restricted shares), respectively |
|
|
1,232 |
|
|
|
1,053 |
|
|
Additional paid-in-capital |
|
|
1,868,741 |
|
|
|
1,690,851 |
|
|
Treasury stock, at cost; 1,211,301 shares at June 30, 2009 and December 31, 2008 |
|
|
(29,187 |
) |
|
|
(29,187 |
) |
|
Accumulated deficit |
|
|
(724,886 |
) |
|
|
(700,720 |
) |
|
Accumulated other comprehensive loss |
|
|
(1,131 |
) |
|
|
(1,396 |
) |
|
Total stockholders’ equity |
|
|
1,114,769 |
|
|
|
960,601 |
|
|
Total liabilities and stockholders’ equity |
|
$ |
4,488,049 |
|
|
$ |
4,449,258 |
|
See accompanying notes to condensed consolidated financial statements.
BROOKDALE SENIOR LIVING INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands, except per share data)
| |
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
Resident fees |
|
$ |
499,459 |
|
|
$ |
475,937 |
|
|
$ |
995,688 |
|
|
$ |
954,772 |
|
|
Management fees |
|
|
1,298 |
|
|
|
2,264 |
|
|
|
3,015 |
|
|
|
4,077 |
|
|
Total revenue |
|
|
500,757 |
|
|
|
478,201 |
|
|
|
998,703 |
|
|
|
958,849 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Facility operating expense (excluding depreciation and amortization of $45,558, $47,204, $91,251 and $98,094, respectively) |
|
|
316,586 |
|
|
|
306,526 |
|
|
|
634,698 |
|
|
|
611,585 |
|
|
General and administrative expense (including non-cash stock-based compensation expense of $6,871, $8,621, $13,680 and $16,631, respectively) |
|
|
31,721 |
|
|
|
40,297 |
|
|
|
65,428 |
|
|
|
76,685 |
|
|
Facility lease expense |
|
|
68,434 |
|
|
|
67,199 |
|
|
|
136,175 |
|
|
|
135,011 |
|
|
Depreciation and amortization |
|
|
67,262 |
|
|
|
68,876 |
|
|
|
135,395 |
|
|
|
140,816 |
|
|
Total operating expense |
|
|
484,003 |
|
|
|
482,898 |
|
|
|
971,696 |
|
|
|
964,097 |
|
|
Income (loss) from operations |
|
|
16,754 |
|
|
|
(4,697 |
) |
|
|
27,007 |
|
|
|
(5,248 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
|
328 |
|
|
|
3,160 |
|
|
|
1,148 |
|
|
|
4,786 |
|
|
Interest expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt |
|
|
(33,450 |
) |
|
|
(37,424 |
) |
|
|
(66,271 |
) |
|
|
(73,295 |
) |
|
Amortization of deferred financing costs |
|
|
(3,390 |
) |
|
|
(2,379 |
) |
|
|
(4,932 |
) |
|
|
(3,936 |
) |
|
Change in fair value of derivatives and amortization |
|
|
7,900 |
|
|
|
36,743 |
|
|
|
3,615 |
|
|
|
(8,890 |
) |
|
Loss on extinguishment of debt |
|
|
(1,740 |
) |
|
|
(231 |
) |
|
|
(1,740 |
) |
|
|
(3,052 |
) |
|
Equity in earnings (loss) of unconsolidated ventures |
|
|
581 |
|
|
|
(935 |
) |
|
|
1,176 |
|
|
|
(1,108 |
) |
|
Other non-operating (loss) income |
|
|
(8 |
) |
|
|
(493 |
) |
|
|
4,224 |
|
|
|
(493 |
) |
|
Loss before income taxes |
|
|
(13,025 |
) |
|
|
(6,256 |
) |
|
|
(35,773 |
) |
|
|
(91,236 |
) |
|
Benefit for income taxes |
|
|
2,495 |
|
|
|
2,771 |
|
|
|
11,607 |
|
|
|
32,658 |
|
|
Net loss |
|
$ |
(10,530 |
) |
|
$ |
(3,485 |
) |
|
$ |
(24,166 |
) |
|
$ |
(58,578 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted loss per share |
|
$ |
(0.10 |
) |
|
$ |
(0.03 |
) |
|
$ |
(0.23 |
) |
|
$ |
(0.57 |
) |
|
Weighted average shares used in computing basic and diluted loss per share |
|
|
106,042 |
|
|
|
101,856 |
|
|
|
103,902 |
|
|
|
101,925 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends declared per share |
|
$ |
― |
|
|
$ |
0.25 |
|
|
$ |
― |
|
|
$ |
0.50 |
|
See accompanying notes to condensed consolidated financial statements.
BROOKDALE SENIOR LIVING INC.
CONDENSED CONSOLIDATED STATEMENT OF EQUITY
(Unaudited, in thousands)
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
Additional
Paid-In-
Capital |
|
|
|
|
|
|
|
|
Accumulated Other Comprehensive Loss |
|
|
|
|
|
Balances at January 1, 2009 |
|
|
105,256 |
|
|
$ |
1,053 |
|
|
$ |
1,690,851 |
|
|
$ |
(29,187 |
) |
|
$ |
(700,720 |
) |
|
$ |
(1,396 |
) |
|
$ |
960,601 |
|
|
Compensation expense related to restricted stock and restricted stock unit grants |
|
|
— |
|
|
|
— |
|
|
|
13,680 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
13,680 |
|
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(24,166 |
) |
|
|
— |
|
|
|
(24,166 |
) |
|
Issuance of common stock under Associate Stock Purchase Plan |
|
|
76 |
|
|
|
1 |
|
|
|
490 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
491 |
|
|
Restricted stock, net |
|
|
1,819 |
|
|
|
18 |
|
|
|
(18 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
― |
|
|
Reclassification of net loss on derivatives into earnings |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
246 |
|
|
|
246 |
|
|
Amortization of payments from settlement of forward interest rate swaps |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
188 |
|
|
|
188 |
|
|
Issuance of common stock from equity offering, net |
|
|
16,047 |
|
|
|
160 |
|
|
|
163,748 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
163,908 |
|
|
Other |
|
|
― |
|
|
|
― |
|
|
|
(10 |
) |
|
|
— |
|
|
|
|
|
|
|
(169 |
) |
|
|
(179 |
) |
|
Balances at June 30, 2009 |
|
|
123,198 |
|
|
$ |
1,232 |
|
|
$ |
1,868,741 |
|
|
$ |
(29,187 |
) |
|
$ |
(724,886 |
) |
|
$ |
(1,131 |
) |
|
$ |
1,114,769 |
|
See accompanying notes to condensed consolidated financial statements.
BROOKDALE SENIOR LIVING INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
| |
|
Six Months Ended June 30, |
|
| |
|
|
|
|
|
|
|
Cash Flows from Operating Activities |
|
|
|
|
|
|
|
Net loss |
|
$ |
(24,166 |
) |
|
$ |
(58,578 |
) |
|
Adjustments to reconcile net loss to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
Loss on extinguishment of debt |
|
|
1,740 |
|
|
|
3,052 |
|
|
Depreciation and amortization |
|
|
140,327 |
|
|
|
144,752 |
|
|
Equity in (earnings) loss of unconsolidated ventures |
|
|
(1,176 |
) |
|
|
1,108 |
|
|
Distributions from unconsolidated ventures from cumulative share of net earnings |
|
|
11 |
|
|
|
1,372 |
|
|
Amortization of deferred gain |
|
|
(2,171 |
) |
|
|
(2,171 |
) |
|
Amortization of entrance fees |
|
|
(10,342 |
) |
|
|
(11,820 |
) |
|
Proceeds from deferred entrance fee revenue |
|
|
10,590 |
|
|
|
7,957 |
|
|
Deferred income tax benefit |
|
|
(11,517 |
) |
|
|
(34,194 |
) |
|
Change in deferred lease liability |
|
|
8,280 |
|
|
|
10,966 |
|
|
Change in fair value of derivatives and amortization |
|
|
(3,615 |
) |
|
|
8,890 |
|
|
Gain on sale of assets |
|
|
(4,352 |
) |
|
|
― |
|
|
Non-cash stock-based compensation |
|
|
13,680 |
|
|
|
16,631 |
|
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
Accounts receivable, net |
|
|
(3,039 |
) |
|
|
(8,459 |
) |
|
Prepaid expenses and other assets, net |
|
|
(4,484 |
) |
|
|
2,248 |
|
|
Accounts payable and accrued expenses |
|
|
11,813 |
|
|
|
(16,163 |
) |
|
Tenant refundable fees and security deposits |
|
|
(12,076 |
) |
|
|
1,368 |
|
|
Deferred revenue |
|
|
8,310 |
|
|
|
(2,666 |
) |
|
Other |
|
|
(4,741 |
) |
|
|
12,431 |
|
|
Net cash provided by operating activities |
|
|
113,072 |
|
|
|
76,724 |
|
| |
|
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities |
|
|
|
|
|
|
|
|
|
Decrease in lease security deposits and lease acquisition deposits, net |
|
|
1,480 |
|
|
|
1,872 |
|
|
Increase in cash and escrow deposits — restricted |
|
|
(53,867 |
) |
|
|
(3,833 |
) |
|
Net proceeds from the sale of property, plant and equipment |
|
|
210 |
|
|
|
― |
|
|
Additions to property, plant and equipment and leasehold intangibles, net of related payables |
|
|
(62,934 |
) |
|
|
(87,668 |
) |
|
Acquisition of assets, net of related payables and cash received |
|
|
(190 |
) |
|
|
(1,207 |
) |
|
(Issuance of) payment on notes receivable, net |
|
|
(795 |
) |
|
|
39,661 |
|
|
Investment in unconsolidated ventures |
|
|
(1,106 |
) |
|
|
(493 |
) |
|
Distributions received from unconsolidated ventures |
|
|
790 |
|
|
|
154 |
|
|
Proceeds from sale leaseback transaction |
|
|
9,166 |
|
|
|
― |
|
|
Proceeds from sale of unconsolidated venture |
|
|
8,831 |
|
|
|
― |
|
|
Net cash used in investing activities |
|
|
(98,415 |
) |
|
|
(51,514 |
) |
| |
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities |
|
|
|
|
|
|
|
|
|
Proceeds from debt |
|
|
50,519 |
|
|
|
444,347 |
|
|
Repayment of debt and capital lease obligation |
|
|
(15,733 |
) |
|
|
(224,192 |
) |
|
Proceeds from line of credit |
|
|
60,446 |
|
|
|
170,000 |
|
|
Repayment of line of credit |
|
|
(219,899 |
) |
|
|
(318,000 |
) |
|
Payment of dividends |
|
|
― |
|
|
|
(77,852 |
) |
|
Purchase of treasury stock |
|
|
― |
|
|
|
(20,020 |
) |
|
Payment of financing costs, net of related payables |
|
|
(7,327 |
) |
|
|
(13,424 |
) |
|
Proceeds from public equity offering, net |
|
|
163,908 |
|
|
|
― |
|
|
Other |
|
|
(476 |
) |
|
|
(803 |
) |
|
Refundable entrance fees: |
|
|
|
|
|
|
|
|
|
Proceeds from refundable entrance fees |
|
|
7,736 |
|
|
|
10,912 |
|
|
Refunds of entrance fees |
|
|
(12,193 |
) |
|
|
(8,475 |
) |
|
Recouponing and payment of swap termination |
|
|
― |
|
|
|
(27,122 |
) |
|
Cash portion of loss on extinguishment of debt |
|
|
― |
|
|
|
(1,043 |
) |
|
Net cash provided by (used in) financing activities |
|
|
26,981 |
|
|
|
(65,672 |
) |
|
Net increase (decrease) in cash and cash equivalents |
|
|
41,638 |
|
|
|
(40,462 |
) |
|
Cash and cash equivalents at beginning of period |
|
|
53,973 |
|
|
|
100,904 |
|
|
Cash and cash equivalents at end of period |
|
$ |
95,611 |
|
|
$ |
60,442 |
|
See accompanying notes to condensed consolidated financial statements.
BROOKDALE SENIOR LIVING INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Description of Business
Brookdale Senior Living Inc. (“Brookdale”, “BSL” or the “Company”) is a leading owner and operator of senior living communities throughout the United States. The Company provides 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. The Company owns, leases and operates retirement centers, assisted living and dementia-care communities and continuing care retirement centers (“CCRCs”).
2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited interim condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission for quarterly reports on Form 10-Q. In the opinion of management, these financial statements include all adjustments necessary to present fairly the financial position,
results of operations and cash flows of the Company as of June 30, 2009, and for all periods presented. The condensed consolidated financial statements are prepared on the accrual basis of accounting. All adjustments made have been of a normal and recurring nature. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. The Company believes that the disclosures included are
adequate and provide a fair presentation of interim period results. Interim financial statements are not necessarily indicative of the financial position or operating results for an entire year. It is suggested that these interim financial statements be read in conjunction with the audited financial statements and the notes thereto, together with management’s discussion and analysis of financial condition and results of operations, included in the Company’s Annual Report on Form 10-K for the fiscal
year ended December 31, 2008, as filed with the Securities and Exchange Commission.
Revenue Recognition
Resident Fees
Resident fee revenue is recorded when services are rendered and consist of fees for basic housing, support services and fees associated with additional services such as personalized health and assisted living care. Residency agreements are generally for a term of 30 days to one year, with resident fees billed monthly in advance. Revenue for
certain skilled nursing services and ancillary charges is recognized as services are provided and is billed monthly in arrears.
Entrance Fees
Certain of the Company’s communities have residency agreements which require the resident to pay an upfront fee prior to occupying the community. In addition, in connection with the Company’s MyChoice program, new and existing residents are allowed to pay additional entrance fee amounts in return for a reduced monthly
service fee. The non-refundable portion of the entrance fee is recorded as deferred revenue and amortized over the estimated stay of the resident based on an actuarial valuation. The refundable portion of a resident’s entrance fee is generally refundable within a certain number of months or days following contract termination or in certain agreements, upon the resale of the resident’s unit or a comparable unit or 12 months after the resident vacates the unit. In such
instances the refundable portion of the fee is not amortized and included in refundable entrance fees and deferred revenue.
Certain contracts require the refundable portion of the entrance fee plus a percentage of the appreciation of the unit, if any, to be refunded only upon resale of a comparable unit (“contingently refundable”). Upon resale the Company may receive reoccupancy proceeds in the form of additional contingently refundable fees,
refundable fees, or non-refundable fees. The Company estimates the amount of reoccupancy proceeds to be received from additional
contingently refundable fees or non-refundable fees and records such amount as deferred revenue. The deferred revenue is amortized over the life of the community and was approximately $62.6 million and $63.4 million at June 30, 2009 and December 31, 2008, respectively. All remaining contingently refundable fees not recorded
as deferred revenue and amortized are included in refundable entrance fees and deferred revenue.
All refundable amounts due to residents at any time in the future, including those recorded as deferred revenue, are classified as current liabilities.
The non-refundable portion of entrance fees expected to be earned and recognized in revenue in one year is recorded as a current liability. The balance of the non-refundable portion is recorded as a long-term liability.
Community Fees
Substantially all community fees received are non-refundable and are recorded initially as deferred revenue. The deferred amounts, including both the deferred revenue and the related direct resident lease origination costs, are amortized over the estimated stay of the resident which is consistent with the implied contractual terms
of the resident lease.
Management Fees
Management fee revenue is recorded as services are provided to the owners of the communities. Revenues are determined by an agreed upon percentage of gross revenues (as defined).
Fair Value Measurements
Cash and cash equivalents, cash and escrow deposits-restricted and derivative financial instruments are reflected in the accompanying condensed consolidated balance sheets at amounts considered by management to reasonably approximate fair value. Management estimates the fair value of its long-term debt using a discounted cash flow
analysis based upon the Company’s current borrowing rate for debt with similar maturities and collateral securing the indebtedness. The Company had outstanding debt with a carrying value of $2.4 billion and $2.6 billion as of June 30, 2009 and December 31, 2008, respectively. The fair value of debt as of June 30, 2009 and December 31, 2008 was $2.3 billion and $2.4 billion, respectively.
FASB Statement No. 157, Fair Value Measurement (“SFAS 157”) establishes a three-level valuation hierarchy for
disclosure of fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The three levels are defined as follows:
Level 1 – Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2 – Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
Level 3 – Inputs to the valuation methodology are unobservable and significant to the fair value measurement.
The Company’s derivative positions are valued using models developed internally by the respective counterparty that use as their basis readily observable market parameters (such as forward yield curves) and are classified within Level 2 of the valuation hierarchy.
The Company considers its own credit risk as well as the credit risk of its counterparties when evaluating the fair value of its derivatives. Any adjustments resulting from credit risk are recorded as a change in fair value of derivatives and amortization in the current period statement of operations (Note 15).
Self-Insurance Liability Accruals
The Company is subject to various legal proceedings and claims that arise in the ordinary course of its business. Although the Company maintains general liability and professional liability insurance policies for its owned, leased and managed communities under a master insurance program, the Company’s current policies provide for deductibles
for each claim ($3.0 million on or prior to December 31, 2008 and $250,000 effective January 1, 2009). As a result, the Company is, in effect, self-insured for most claims. In addition, the Company maintains a self-insured workers compensation program and a self-insured employee medical program for amounts below excess loss coverage amounts, as defined. The Company reviews the adequacy of its accruals related to these liabilities on an ongoing basis, using historical claims, actuarial valuations, third party
administrator estimates, consultants, advice from legal counsel and industry data, and adjusts accruals periodically. Estimated costs related to these self-insurance programs are accrued based on known claims and projected claims incurred but not yet reported. Subsequent changes in actual experience are monitored and estimates are updated as information is available.
Treasury Stock
The Company accounts for treasury stock under the cost method and includes treasury stock as a component of stockholders’ equity.
Subsequent Events
The Company has evaluated all events subsequent to June 30, 2009 through the time of filing on August 4, 2009 and determined that no events have occurred which would require additional disclosure.
New Accounting Pronouncements
In December 2007, the FASB issued FASB Statement No. 141 (revised 2007), Business Combinations (“SFAS 141R”). SFAS
141R was issued to improve the relevance, representational faithfulness, and comparability of the information that a reporting entity provides in its financial reports about a business combination and its effects. SFAS 141Restablishes principles and requirements for how the acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree, recognizes and measures the goodwill acquired in the business combination
or a gain from a bargain purchase and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. SFAS 141R is to be applied prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. As of June 30, 2009, SFAS 141R has not had a material impact on the condensed consolidated financial
statements.
In December 2007, the FASB issued FASB Statement No. 160, Noncontrolling Interests in Consolidated Financial Statements - An Amendment of ARB No. 51 (“SFAS 160”). SFAS 160 was issued to improve the relevance, comparability, and transparency of the financial information
that a reporting entity provides in its consolidated financial statements by establishing accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. SFAS 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. The Company adopted SFAS 160 in January 2009. Other than the required
disclosures, the adoption had no impact on the condensed consolidated financial statements.
In February 2008, the FASB issued FASB Staff Position (“FSP”) FAS 157-2, Effective Date of FASB Statement No. 157 (“SFAS 157-2”), which delays the effective date of SFAS 157 for all nonfinancial assets and liabilities, except those that are recognized or disclosed
at fair value in the financial statements on a recurring basis (at least annually). SFAS 157-2 partially defers the effective date of SFAS 157 to fiscal years beginning after November 15, 2008 and as a result was effective for the Company beginning January 1, 2009. The Company adopted SFAS 157-2 in January 2009. The adoption of SFAS 157-2 had no impact on the condensed consolidated financial statements.
In March 2008, the FASB issued FASB Statement No. 161, Disclosures about Derivative Instruments and Hedging Activities – An Amendment of FASB Statement No. 133 (“SFAS 161”). SFAS 161 amends and expands the disclosure requirements of Statement 133 with the
intent to provide users of financial statements with an enhanced
understanding of how and why an entity uses derivative instruments, how derivative instruments and related hedged items are accounted for under Statement 133 and its related interpretations, and how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. SFAS
161 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after November 15, 2008. The Company adopted SFAS 161 in January 2009 and other than the required disclosures, the adoption had no impact on the condensed consolidated financial statements.
In April 2008, the FASB issued FSP FAS 142-3, Determination of the Useful Life of Intangible Assets (“SFAS 142-3”). SFAS 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized
intangible asset and provides for enhanced disclosures regarding intangible assets. The intent of this FSP is to improve the consistency between the useful life of a recognized intangible asset and the period of expected cash flows used to measure the fair value of the asset. The disclosure provisions are effective as of the adoption date and the guidance for determining the useful life applies prospectively to all intangible assets acquired after the effective date. The
Company adopted SFAS 142-3 in January 2009. The adoption had no impact on the condensed consolidated financial statements.
In May 2008, the FASB issued FASB Statement No. 162, The Hierarchy of Generally Accepted Accounting Principles (“SFAS 162”). SFAS 162 identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of
financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles (“GAAP”) in the United States. SFAS 162 will be effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board’s amendments to AU Section 411, The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles. The Company does
not expect that SFAS 162 will result in a change in current practice.
In June 2008, the FASB issued EITF 03-06-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities ("EITF 03-06-1"). EITF 03-06-1 provides that unvested share-based payment awards that contain nonforfeitable rights to dividends
or dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the computation of earnings per share pursuant to the two-class method in SFAS No. 128, Earnings per Share. EITF 03-06-1 is effective for fiscal years beginning after December 15, 2008, and interim periods within those years, and requires all prior-period earnings per share data to be adjusted retrospectively. The Company adopted
EITF 03-06-1 in January 2009. The adoption did not have a material impact on the condensed consolidated financial statements.
In December 2008, the FASB issued FSP FAS 140-4 and FASB Interpretation (“FIN”) 46(R)-8, Disclosures by Public Entities (Enterprises) about Transfers of Financial Assets and Interests in Variable Interest Entities (“SFAS 140-4 and FIN 46(R)-8”). This
disclosure-only FSP improves the transparency of transfers of financial assets and an enterprise’s involvement with variable interest entities, including qualifying special-purpose entities. The Company does not have any unconsolidated FIN No. 46 assets. SFAS 140-4 and FIN 46(R)-8 were effective for the Company for the year ended December 31, 2008. The adoption of SFAS 140-4 and FIN 46(R)-8 had no impact on the condensed consolidated financial statements.
In April 2009, the FASB issued FSP FAS 107-1 and Accounting Principles Board Opinion (“APB”) No. 28-1, Interim Disclosures about Fair Value of Financial Instruments (“FAS 107-1 and APB 28-1”). FAS 107-1 and APB 28-1 amend FASB Statement No. 107, Disclosures
about Fair Value of Financial Instruments, and APB No. 28, Interim Financial Reporting, to require disclosures about fair value of financial instruments for interim periods of publicly traded companies as well as in annual financial statements. The Company adopted FAS 107-1 and APB 28-1 in June 2009 and other than the required disclosures, the adoption had no impact on the condensed consolidated financial statements.
In April 2009, the FASB issued FSP FAS 141(R)-1, Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies (“FAS 141(R)-1”), which amends and clarifies SFAS No. 141(R) to address application issues on initial recognition and measurement, subsequent measurement and accounting,
and disclosure of assets and liabilities arising from contingencies in a business combination. FAS 141(R)-1 has been applied prospectively to business combinations for which the acquisition date is on or after January 1, 2009. The Company had no acquisitions during the six months ended June 30, 2009; therefore, the adoption of FAS 141(R)-1 had no impact on the condensed consolidated financial statements.
In May 2009, the FASB issued SFAS No. 165, Subsequent Events (“SFAS 165”). SFAS 165 establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before
the financial statements are issued or are available to be issued. Although the standard is based on the same principles as those that currently exist in the auditing standards, it includes a new required disclosure of the date through which an entity has evaluated subsequent events. The Company adopted SFAS 165 in June 2009 and other than the required disclosures, the adoption had no impact on the condensed consolidated financial statements.
In June 2009, the FASB issued SFAS No. 166, Accounting for Transfers of Financial Assets, an Amendment of FASB Statement No. 140 (“SFAS 166”). The provisions of SFAS 166 amend FASB Statement No. 140, Accounting
for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities (“SFAS 140”), by removing the concept of a qualifying special-purpose entity and removing the exception from applying FIN 46 (revised December 2003), Consolidation of Variable Interest Entities (“FIN 46”), to variable interest entities that were previously considered qualifying
special-purpose entities. SFAS 166 will become effective for the Company beginning January 1, 2010. The Company is currently evaluating the impact the provisions of SFAS 166 will have on its condensed consolidated financial statements.
In June 2009, the FASB issued SFAS No. 167, Amendments to FASB Interpretation No. 46(R) (“SFAS 167”). This statement changes how a company determines when an entity that is insufficiently capitalized or is not controlled through voting (or similar
rights) should be consolidated. The determination of whether a company is required to consolidate an entity is based on, among other things, an entity’s purpose and design and a company’s ability to direct the activities of the entity that most significantly impacts the entity’s economic performance. SFAS 167 is effective for the Company beginning January 1, 2010. The Company is currently evaluating the impact the provisions of SFAS 167 will have on its condensed
consolidated financial statements.
In June 2009, the FASB issued FASB Statement No. 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles, a replacement of FASB Statement No. 162 (“SFAS 168”). SFAS 168 identifies the sources of accepted
accounting principles and the framework for selecting the principles used in the preparation of financial statements of nongovernmental entities that are presented in conformity with GAAP in the United States (the GAAP hierarchy). The Codification will supersede all then-existing non-SEC accounting and reporting standards and is effective for the Company for the quarterly period ending September 30, 2009. The adoption of this standard will change how the Company references various elements of
GAAP when preparing its financial statement disclosures, but will have no impact on the Company’s condensed consolidated financial statements.
Dividends
On December 30, 2008, the Company’s board of directors voted to suspend the Company’s quarterly cash dividend indefinitely.
Reclassifications
Certain prior period amounts have been reclassified to conform to the current financial statement presentation, with no effect on the Company’s consolidated financial position or results of operations.
3. Stock-Based Compensation
$6.9 million and $8.6 million of compensation expense in connection with grants of restricted stock and restricted stock units was recorded for the three months ended June 30, 2009 and 2008, respectively, and $13.7 million and $16.6 million of such expense was recorded for the six months ended June 30, 2009 and 2008, respectively. For
the three months ended June 30, 2009 and 2008, compensation expense was calculated net of forfeitures estimated from 0% - 6% of the shares granted.
For all awards with graded vesting other than awards with performance-based vesting conditions, the Company records compensation expense for the entire award on a straight-line basis over the requisite service period. For graded-vesting awards with performance-based vesting conditions, total compensation expense is recognized over
the requisite service period for each separately vesting tranche of the award as if the award is, in substance, multiple awards once the performance target is deemed probable of achievement. Performance goals are evaluated quarterly.
If such goals are not ultimately met or it is not probable the goals will be achieved, no compensation expense is recognized and any previously recognized compensation expense is reversed.
During the current period, the Company issued restricted stock units to its Chief Executive Officer. Under the terms of the award agreement, upon vesting, each restricted stock unit represents the right to receive one share of the Company’s common stock.
Current year grants of restricted shares and restricted stock units under the Company’s Omnibus Stock Incentive Plan were as follows (amounts in thousands except for value per share):
| |
|
Shares / Restricted Stock Units Granted |
|
|
|
|
|
|
|
|
Three months ended March 31, 2009 |
|
84 |
|
|
$3.48 – $6.15 |
|
|
$301 |
|
|
Three months ended June 30, 2009 |
|
2,562 |
|
|
$5.14 – $9.39 |
|
|
$24,030 |
|
The Company has an employee stock purchase plan for all eligible employees. The plan became effective on October 1, 2008. Under the plan, eligible employees of the Company can purchase shares of the Company’s common stock on a quarterly basis at a discounted price through accumulated payroll deductions. Each
eligible employee may elect to deduct up to 15% of his or her base pay each quarter. Subject to certain limitations specified in the plan, on the last trading date of each calendar quarter, the amount deducted from each participant’s pay over the course of the quarter will be used to purchase whole shares of the Company’s common stock at a purchase price equal to 90% of the closing market price on the New York Stock Exchange on such date. Initially, the Company has reserved 1,000,000
shares of common stock for issuance under the plan. The employee stock purchase plan also contains an “evergreen” provision that automatically increases the number of shares reserved for issuance under the plan by 200,000 shares on the first day of each calendar year beginning January 1, 2010. The impact on the Company’s current year condensed consolidated financial statements is not material.
4. Goodwill and Other Intangible Assets, Net
There were no changes in the carrying amount of goodwill for the six months ended June 30, 2009. Goodwill by operating segment as of June 30, 2009 and December 31, 2008 was as follows (dollars in thousands):
| |
|
|
|
|
|
|
|
|
|
|
Goodwill |
|
$ |
7,155 |
|
|
$ |
102,812 |
|
|
$ |
109,967 |
|
Goodwill is tested for impairment annually with a test date of October 1 or sooner if indicators of impairment are present. No indicators of impairment were present during the six months ended June 30, 2009.
Intangible assets with definite useful lives are amortized over their estimated lives and are tested for impairment whenever indicators of impairment arise. The following is a summary of other intangible assets at June 30, 2009 and December 31, 2008 (dollars in thousands):
| |
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Community purchase options |
|
$ |
147,682 |
|
|
$ |
(8,306 |
) |
|
$ |
139,376 |
|
|
$ |
147,682 |
|
|
$ |
(6,457 |
) |
|
$ |
141,225 |
|
|
Management contracts and other |
|
|
158,041 |
|
|
|
(93,767 |
) |
|
|
64,274 |
|
|
|
158,041 |
|
|
|
(77,807 |
) |
|
|
80,234 |
|
|
Home health licenses |
|
|
10,466 |
|
|
|
— |
|
|
|
10,466 |
|
|
|
10,130 |
|
|
|
— |
|
|
|
10,130 |
|
|
Total |
|
$ |
316,189 |
|
|
$ |
(102,073 |
) |
|
$ |
214,116 |
|
|
$ |
315,853 |
|
|
$ |
(84,264 |
) |
|
$ |
231,589 |
|
Amortization expense related to definite-lived intangible assets for both the three months ended June 30, 2009 and 2008 was $8.9 million, and $17.8 million of such expense was recorded for both the six months ended June 30, 2009
and 2008. Home health licenses were determined to be indefinite-lived intangible assets and are not subject to amortization.
5. Property, Plant and Equipment and Leasehold Intangibles, Net
Property, plant and equipment and leasehold intangibles, net, which include assets under capital leases, consist of the following (dollars in thousands):
| |
|
|
|
|
|
|
|
Land |
|
$ |
252,349 |
|
|
$ |
253,453 |
|
|
Buildings and improvements |
|
|
2,648,705 |
|
|
|
2,626,079 |
|
|
Furniture and equipment |
|
|
290,953 |
|
|
|
277,680 |
|
|
Resident and operating lease intangibles |
|
|
600,925 |
|
|
|
607,256 |
|
|
Construction in progress |
|
|
113,621 |
|
|
|
98,418 |
|
|
Assets under capital and financing leases |
|
|
574,846 |
|
|
|
555,872 |
|
| |
|
|
4,481,399 |
|
|
|
4,418,758 |
|
|
Accumulated depreciation and amortization |
|
|
(829,323 |
) |
|
|
(720,924 |
) |
|
Property, plant and equipment and leasehold intangibles, net |
|
$ |
3,652,076 |
|
|
$ |
3,697,834 |
|
6. Sale-Leaseback Transaction
On March 2, 2009, the Company entered into a sale-leaseback transaction with a third party lessor for the sale and leaseback of one of its skilled nursing facilities. The Company sold the facility for a total of $10.0 million and immediately leased the facility back. Under the terms of the lease agreement, the Company
will continue to operate the facility until December 31, 2019. The lease is accounted for as an operating lease.
7. Debt
Long-term Debt, Capital Leases and Financing Obligations
Long-term debt, capital leases and financing obligations consist of the following (dollars in thousands):
| |
|
|
|
|
|
|
|
Mortgage notes payable due 2009 through 2039; weighted average interest rate of 4.68% for the six months ended June 30, 2009 (weighted average interest rate of 5.33% in 2008) |
|
$ |
1,239,307 |
|
|
$ |
1,246,204 |
|
|
$150,000 Series A notes payable, secured by five communities and by a $3.0 million letter of credit, bearing interest at LIBOR plus 0.88%, payable in monthly installments of interest only until August 2011 and payable in monthly installments of principal and interest through maturity in August 2013 |
|
|
150,000 |
|
|
|
150,000 |
|
|
Mortgages payable due 2012; weighted average interest rate of 5.64% for the six months ended June 30, 2009 (weighted average interest rate of 5.64% in 2008), payable interest only through July 2010 and payable in monthly installments of principal and interest through maturity in July 2012, secured by the underlying assets of the portfolio |
|
|
212,407 |
|
|
|
212,407 |
|
|
Variable rate tax-exempt bonds credit-enhanced by Fannie Mae; weighted average interest rate of 2.07% for the six months ended June 30, 2009 (weighted average interest rate of 4.40% in 2008), due 2032, payable interest only until maturity, secured by the underlying assets of the portfolio |
|
|
100,841 |
|
|
|
100,841 |
|
|
Capital and financing lease obligations payable through 2020; weighted average interest rate of 8.81% for the six months ended June 30, 2009 (weighted average interest rate of 8.84% in 2008) |
|
|
327,852 |
|
|
|
318,440 |
|
|
Mortgage note, bearing interest at a variable rate of LIBOR plus 0.70%, payable interest only through maturity in August 2012. The note is secured by 15 of the Company’s communities and an $11.5 million guaranty by the Company |
|
|
315,180 |
|
|
|
315,180 |
|
|
Construction financing due 2011 through 2023; weighted average interest rate of 4.68% for the six months ended June 30, 2009 (weighted average interest rate of 6.02% in 2008) |
|
|
101,452 |
|
|
|
50,404 |
|
|
Total debt |
|
|
2,447,039 |
|
|
|
2,393,476 |
|
|
Less current portion |
|
|
154,492 |
|
|
|
158,476 |
|
|
Total long-term debt |
|
$ |
2,292,547 |
|
|
$ |
2,235,000 |
|
Although certain debt obligations are scheduled to mature on or prior to June 30, 2010, the Company has the option, subject to the satisfaction of customary conditions (such as the absence of a material adverse change), to extend the maturity of approximately $131.0 million of certain non-recourse mortgages payable included in such debt until
2011, as the instruments associated with these mortgages payable provide that the Company can extend the respective maturity dates for one 12 month term each from the existing maturity dates.
Credit Facilities
On February 27, 2009, the Company entered into a Second Amended and Restated Credit Agreement with Bank of America, N.A., as administrative agent, Banc of America Securities LLC, as sole lead arranger and book manager, and the several lenders from time to time parties thereto. The amended credit agreement amended and restated the Company’s
$245.0 million secured line of credit and terminated the associated $80.0 million letter of credit facility.
The amended credit agreement initially consisted of a $230.0 million revolving loan facility with a $25.0 million letter of credit sublimit and is scheduled to mature on August 31, 2010.
Pursuant to the terms of the amended credit agreement, certain of the Company’s subsidiaries, as guarantors, will guarantee obligations under the amended credit agreement and the other loan documents. Further, in connection with the amended credit agreement, (i) the Company and certain guarantors executed and delivered a Pledge
Agreement in favor of the administrative agent for the banks and other financial institutions from time to time parties to the amended credit agreement, pursuant to which such guarantors pledged certain assets for the benefit of the secured parties as collateral security for the payment and performance of the Company’s obligations under the amended credit agreement and the other loan documents and (ii) certain guarantors granted mortgages and executed and delivered a Security Agreement, in each case, in
favor of the administrative agent for the banks and other financial institutions from time to time parties to the amended credit agreement encumbering certain real and personal property of such guarantors. The collateral includes, among other things, certain real property and related personal property owned by the guarantors, equity interests in certain of the Company’s subsidiaries, all related books and records and, to the extent not otherwise included, all proceeds and products of any and
all of the foregoing.
At the option of the Company, amounts drawn under the revolving loan facility initially bore interest at either (i) LIBOR plus a margin of 7.0% or (ii) the greater of (a) the Bank of America prime rate or (b) the Federal Funds rate plus 0.5%, plus a margin of 7.0%. For purposes of determining the interest rate, in no event shall
the base rate or LIBOR be less than 3.0%. In connection with the loan commitments, the Company will pay a quarterly commitment fee of 1.0% per annum on the average daily amount of undrawn funds. The Company was initially required to pay a fee equal to 7.0% of the amount of any issued and outstanding letters of credit; provided, with
respect to drawable amounts that have been cash collateralized, the letter of credit fee shall be payable at a rate per annum equal to 2.0%.
The amended credit agreement contains typical representations and covenants for loans of this type, including restrictions on the Company’s ability to pay dividends, make distributions, make acquisitions, incur capital expenditures, incur new liens or repurchase shares of the Company’s common stock. The amended credit agreement
also contains financial covenants, including covenants with respect to maximum consolidated adjusted leverage, minimum consolidated fixed charge coverage, minimum tangible net worth, and maximum total capital expenditures. A violation of any of these covenants (including any failure to remain in compliance with any financial covenants contained therein) could result in a default under the amended credit agreement, which would result in termination of all commitments and loans under the amended credit
agreement and all other amounts owing under the amended credit agreement and certain other loan agreements becoming immediately due and payable.
On June 1, 2009, in connection with the equity offering described in Note 14, the Company entered into the First Amendment to the Second Amended and Restated Credit Agreement (the “First Amendment”) pursuant to which the maximum revolving loans that can be outstanding at any time under the amended credit agreement was reduced to
$75.0 million. In addition, the interest rate margin on loans, as well as fees on letters of credit, as a result of the maximum amount of the facility having been reduced to $75.0 million, was reduced to 6.0%.
Pursuant to the First Amendment, the Company has been given greater flexibility to make acquisitions by increasing aggregate permitted cash consideration from $10.0 million to $100.0 million, to make capital expenditures up to $30.0 million per quarter and to incur an additional $20.0 million in liens and letters of credit.
As of June 30, 2009, the Company has an available secured line of credit of $75.0 million (including a $25.0 million letter of credit sublimit) and separate unsecured letter of credit facilities of up to $48.5 million in the aggregate. As of June 30, 2009, there were no borrowings under the revolving loan facility, $23.6 million
of letters of credit had been issued under the amended credit facility, and $48.5 million of letters of credit had been issued under the separate unsecured letter of credit facilities.
In late 2008, the Company began replacing some of its outstanding letters of credit with restricted cash in order to reduce the Company’s letter of credit needs.
On January 30, 2009, the Company amended and restated a $52.6 million first mortgage loan, secured by the underlying properties, which was payable interest only through maturity in March 2009. Pursuant to the amendment, the maturity date has been extended to March 31, 2011. The amended and restated loan bears interest
at LIBOR plus 4.0% and requires principal amortization. In connection with the amendment, the Company made a $3.0 million payment to reduce the outstanding principal amount of the loan.
On February 25, 2009, the Company amended a $41.0 million first mortgage loan, secured by the underlying properties, which was payable interest only through maturity in June 2009. Pursuant to the amendment, the maturity date has been extended to June 2011. The amended loan is evidenced by two promissory notes, the first
of which is in the principal amount of $26.0 million and bears interest at LIBOR plus 3.0%. The second promissory note is in the amount of $15.0 million and bears interest at LIBOR plus 5.6%. Both notes require principal amortization. In connection with the amendment, the Company made a $2.0 million payment to reduce the outstanding principal amount of the $26.0 million loan.
Effective May 11, 2009, the Company exercised its option to extend the maturity date of $131.0 million of mortgage notes from May 11, 2009 to May 11, 2010. No other terms of the notes were changed in connection with the extension.
As of June 30, 2009, the Company is in compliance with the financial covenants of its outstanding debt and lease agreements.
Interest Rate Swaps and Caps
In the normal course of business, a variety of financial instruments are used to manage or hedge interest rate risk. Interest rate protection and swap agreements were entered into to effectively cap or convert floating rate debt to a fixed rate basis, as well as to hedge anticipated future financing transactions. Pursuant
to the hedge agreements, the Company is required to secure its obligation to the counterparty if the fair value liability exceeds a specified threshold. Cash collateral pledged to the Company’s counterparties was $16.4 million and $13.9 million as of June 30, 2009 and December 31, 2008, respectively.
All derivative instruments are recognized as either assets or liabilities in the condensed consolidated balance sheets at fair value. The change in mark-to-market of the value of the derivative is recorded as an adjustment to income or other comprehensive loss depending on whether it has been designated and qualifies as an accounting
hedge.
Derivative contracts are not entered into for trading or speculative purposes. Furthermore, the Company has a policy of only entering into contracts with major financial institutions based upon their credit rating and other factors. Under certain circumstances, the Company may be required to replace a counterparty in
the event that the counterparty does not maintain a specified credit rating.
The following table summarizes the Company’s swap instruments at June 30, 2009 (dollars in thousands):
|
Current notional balance |
|
$ |
351,840 |
|
|
Highest possible notional |
|
$ |
351,840 |
|
|
Lowest interest rate |
|
|
3.24 |
% |
|
Highest interest rate |
|
|
4.47 |
% |
|
Average fixed rate |
|
|
3.74 |
% |
|
Earliest maturity date |
|
|
2011 |
|
|
Latest maturity date |
|
|
2014 |
|
|
Weighted average original maturity |
|
4.7 years |
|
|
Estimated liability fair value (included in other liabilities at June 30, 2009) |
|
$ |
(17,488 |
) |
|
Estimated asset fair value (included in other assets, net at June 30, 2009) |
|
$ |
— |
|
The following table summarizes the Company’s cap instruments at June 30, 2009 (dollars in thousands):
|
Current notional balance |
|
$ |
734,621 |
|
|
Highest possible notional |
|
$ |
734,621 |
|
|
Lowest interest rate |
|
|
4.96 |
% |
|
Highest interest rate |
|
|
6.50 |
% |
|
Average fixed rate |
|
|
5.97 |
% |
|
Earliest maturity date |
|
|
2011 |
|
|
Latest maturity date |
|
|
2012 |
|
|
Weighted average original maturity |
|
3.8 years |
|
|
Estimated liability fair value (included in other liabilities at June 30, 2009) |
|
$ |
— |
|
|
Estimated asset fair value (included in other assets, net at June 30, 2009) |
|
$ |
1,118 |
|
During the three and six months ended June 30, 2009, the fair value of the Company’s interest rate swaps and caps increased $7.9 million and $3.6 million, respectively. During the three and six months ended June 30, 2008, the fair value of the Company’s interest rate swaps and caps increased $36.7 million and decreased
$8.9 million, respectively. This is included as a component of interest expense in the condensed consolidated statements of operations.
8. Litigation
The Company has settled the litigation specifically described below.
In connection with the sale of certain communities to Ventas Realty Limited Partnership (“Ventas”) in 2004, two legal actions have been filed. The first action was filed on September 15, 2005, by current and former limited partners in 36 investing partnerships in the United States District Court for the Eastern
District of New York captioned David T. Atkins et al. v. Apollo Real Estate Advisors, L.P., et al. (the “Action”). On March 17, 2006, a
third amended complaint was filed in the Action. The third amended complaint was brought on behalf of current and former limited partners in 14 investing partnerships. It names as defendants, among others, the Company, Brookdale Living Communities, Inc. (“BLC”), a subsidiary of the Company, GFB-AS Investors, LLC (“GFB-AS”),
a subsidiary of BLC, the general partners of the 14 investing partnerships, which are alleged to be subsidiaries of GFB-AS, Fortress Investment Group LLC (“Fortress”), an affiliate of the Company’s largest stockholder, and R. Stanley Young, the Company’s former Chief Financial Officer. The nine count third amended complaint alleged, among other things, (i) that the defendants converted for their own use the property of the limited partners of 11 partnerships, including through the failure
to obtain consents the plaintiffs contend were required for the sale of communities indirectly owned by those partnerships to Ventas; (ii) that the defendants fraudulently persuaded the limited partners of three partnerships to give up a valuable property right based upon incomplete, false and misleading statements in connection with certain consent solicitations; (iii) that certain defendants, including GFB-AS, the general partners, and the Company’s former Chief Financial Officer, but not including the
Company, BLC, or Fortress, committed mail fraud in connection with the sale of communities indirectly owned by the 14 partnerships at issue in the Action to Ventas; (iv) that certain defendants, including GFB-AS and the Company’s former Chief Financial Officer, but not including the Company, BLC, the general partners, or Fortress, committed wire fraud in connection with certain communications with plaintiffs in the Action and another investor in a limited partnership; (v) that the defendants, with the exception
of the Company, committed substantive violations of the Racketeer Influenced and Corrupt Organizations Act (“RICO”); (vi) that the defendants conspired to violate RICO; (vii) that GFB-AS and the general partners violated the partnership agreements of the 14 investing partnerships; (viii) that GFB-AS, the general partners, and the Company’s former Chief Financial Officer breached fiduciary duties to the plaintiffs; and (ix) that the defendants were unjustly enriched. The plaintiffs asked for
damages in excess of $100.0 million on each of the counts described above, including treble damages for the RICO claims. On April 18, 2006, the Company filed a motion to dismiss the claims with prejudice. On April 30, 2008, the court granted the Company’s motion to dismiss the third amended complaint, but granted the plaintiffs’ motion for leave to amend. Subsequently, the parties agreed to settle the case and the case was formally dismissed by the court on November 3, 2008.
A putative class action lawsuit was also filed on March 22, 2006 by certain limited partners in four of the same partnerships involved in the Action in the Court of Chancery for the State of Delaware captioned Edith Zimmerman et al. v. GFB-AS Investors, LLC and Brookdale Living Communities,
Inc. (the “Second Action”). On November 21, 2006, an amended complaint was filed in the Second Action. The putative class in the Second Action consists only of those limited partners in the four investing partnerships who were not plaintiffs in the Action. The Second Action names as defendants BLC and GFB-AS. The complaint alleges a claim for breach of fiduciary duty arising out of the sale of communities indirectly owned by the investing partnerships to Ventas and the subsequent lease of those
communities by Ventas to subsidiaries of BLC. The plaintiffs seek, among other relief, an accounting, damages in an unspecified amount, and disgorgement of unspecified amounts by which the defendants were allegedly unjustly enriched. On December 12, 2006, the Company filed an answer denying the claim asserted in the amended complaint and providing affirmative defenses. On December 27, 2006, the plaintiffs moved to certify the Second Action as a class action. During the three months ended March 31,
2009, the parties agreed to settle the case and the case was formally dismissed by the court on June 15, 2009.
In addition, the Company has been and is currently involved in other litigation and claims incidental to the conduct of its business which are comparable to other companies in the senior living industry. Certain claims and lawsuits allege large damage amounts and may require significant costs to defend and resolve. Similarly, the senior
living industry is continuously subject to scrutiny by governmental regulators, which could result in litigation related to regulatory compliance matters. As a result, the Company maintains insurance policies in amounts and with coverage and deductibles the Company believes are adequate, based on the nature and risks of its business, historical experience and industry standards. Effective January 1, 2009, the Company’s current policies provide for deductibles of $250,000 for each claim. Accordingly,
the Company is, in effect, self-insured for most claims.
9. Supplemental Disclosure of Cash Flow Information
(dollars in thousands):
| |
|
Six Months Ended June 30, |
|
| |
|
|
|
|
|
|
|
Supplemental Disclosure of Cash Flow Information: |
|
|
|
|
|
|
|
Interest paid |
|
$ |
67,850 |
|
|
$ |
73,086 |
|
|
Income taxes paid |
|
$ |
1,419 |
|
|
$ |
1,298 |
|
|
Write-off of deferred costs |
|
$ |
1,740 |
|
|
$ |
2,009 |
|
| |
|
|
|
|
|
|
|
|
|
Supplemental Schedule of Non-cash Operating, Investing and Financing Activities: |
|
|
|
|
|
|
|
|
|
Capital leases: |
|
|
|
|
|
|
|
|
|
Property, plant and equipment and leasehold intangibles, net |
|
$ |
18,236 |
|
|
$ |
35,508 |
|
|
Long-term debt |
|
|
(18,236 |
) |
|
|
(35,508 |
) |
|
Net |
|
$ |
— |
|
|
$ |
— |
|
|
Acquisition of assets, net of related payables and cash received: |
|
|
|
|
|
|
|
|
|
Other intangible assets, net |
|
$ |
190 |
|
|
$ |
1,207 |
|
|
Reclassification of other intangibles, net |
|
$ |
146 |
|
|
$ |
— |
|
10. Facility Operating Leases
A summary of facility lease expense and the impact of straight-line adjustment and amortization of deferred gains are as follows (dollars in thousands):
| |
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash basis payment |
|
$ |
65,487 |
|
|
$ |
63,070 |
|
|
$ |
130,066 |
|
|
$ |
126,216 |
|
|
Straight-line expense |
|
|
4,032 |
|
|
|
5,215 |
|
|
|
8,280 |
|
|
|
10,966 |
|
|
Amortization of deferred gain |
|
|
(1,085 |
) |
|
|
(1,086 |
) |
|
|
(2,171 |
) |
|
|
(2,171 |
) |
|
Facility lease expense |
|
$ |
68,434 |
|
|
$ |
67,199 |
|
|
$ |
136,175 |
|
|
$ |
135,011 |
|
11. Other Comprehensive Loss, Net
The following table presents the after-tax components of the Company’s other comprehensive loss for the periods presented (dollars in thousands):
| |
|
Three Months Ended
June 30, |
|
|
Six Months Ended
June 30, |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(10,530 |
) |
|
$ |
(3,485 |
) |
|
$ |
(24,166 |
) |
|
$ |
(58,578 |
) |
|
Reclassification of net loss (gains) on derivatives out of (into) earnings |
|
|
123 |
|
|
|
123 |
|
|
|
246 |
|
|
|
(616 |
) |
|
Amortization of payments from settlement of forward interest swaps |
|
|
94 |
|
|
|
94 |
|
|
|
188 |
|
|
|
188 |
|
|
Other |
|
|
(254 |
) |
|
|
85 |
|
|
|
(169 |
) |
|
|
337 |
|
|
Total comprehensive loss |
|
$ |
(10,567 |
) |
|
$ |
(3,183 |
) |
|
$ |
(23,901 |
) |
|
$ |
(58,669 |
) |
12. Income Taxes
The Company’s effective tax rates for the three months ended June 30, 2009 and 2008 are 19.2% and 44.3%, respectively, and for the six months ended June 30, 2009 and 2008 are 32.4% and 35.8%, respectively. The difference in the effective rate between these periods is primarily due to the period over period movement in the
annualized effective rate recorded in 2008. The rate was also impacted by the Company’s stock based compensation deduction as calculated under FASB Statement No. 123 (revised 2004), Share-Based Payment (“SFAS 123(R)”) for 2009 due to the decrease in the stock price between June 30, 2008 and June 30, 2009.
The Company recorded additional interest charges related to its FIN 48 reserve for the six months ended June 30, 2009, and added an additional reserve for a new uncertain tax position. Tax returns for years 2005 through 2007 are subject to future examination by tax authorities. In addition, tax returns are open from
1999 through 2004 to the extent of the net operating losses generated during those periods.
13. Share Repurchase Program
On March 19, 2008, the Company’s board of directors approved a share repurchase program that authorized the Company to purchase up to $150.0 million in the aggregate of the Company’s common stock. Purchases could be made from time to time using a variety of methods, which could include open market purchases, privately
negotiated transactions or block trades, or by any combination of such methods, in accordance with applicable insider trading and other securities laws and regulations. The size, scope and timing of any purchases was to be based on business, market and other conditions and factors, including price, regulatory and contractual requirements or consents, and capital availability. The repurchase program did not obligate the Company to acquire any particular amount of common stock and the program
could be suspended, modified or discontinued at any time at the Company’s discretion without prior notice. Shares of stock repurchased under the program were to be held as treasury shares.
On February 25, 2009, the Company’s board of directors terminated this share repurchase authorization. In addition, the Company’s amended credit facility effectively prohibits the Company from repurchasing shares of its common stock, paying dividends or making distributions.
14. Stockholders’ Equity
On June 8, 2009, the Company completed a public equity offering of 16,046,512 shares of common stock. The offering yielded net proceeds of approximately $163.9 million which was used to repay the $125.0 million of indebtedness which was outstanding under the Company’s amended credit facility.
15. Fair Value Measurements
The following table provides the Company’s derivative assets and liabilities carried at fair value as measured on a recurring basis as of June 30, 2009 (dollars in thousands):
| |
|
Total Carrying Value at
June 30, 2009 |
|
|
Quoted prices in active markets
(Level 1) |
|
|
Significant other observable inputs
(Level 2) |
|
|
Significant unobservable inputs
(Level 3) |
|
|
Derivative assets |
|
$ |
1,118 |
|
|
$ |
— |
|
|
$ |
1,118 |
|
|
$ |
— |
|
|
Derivative liabilities |
|
|
(17,488 |
) |
|
|
— |
|
|
|
(17,488 |
) |
|
|
— |
|
| |
|
$ |
(16,370 |
) |
|
$ |
— |
|
|
$ |
(16,730 |
) |
|
$ |
— |
|
The Company’s derivative assets and liabilities include interest rate swaps and caps that effectively convert a portion of the Company’s variable rate debt to fixed rate debt. The derivative positions are valued using models developed internally by the
respective counterparty that use as their basis readily observable market parameters (such as forward yield curves) and are classified within Level 2 of the valuation hierarchy.
The Company considers its own credit risk as well as the credit risk of its counterparties when evaluating the fair value of its derivatives. Any adjustments resulting from credit risk are recorded as a change in fair value of derivatives and amortization in the current period statement of operations.
16. Segment Results
The Company currently has four reportable segments: retirement centers; assisted living; CCRCs; and management services. These segments were determined based on the way that the Company’s chief operating decision makers organize the Company’s business activities for making operating decisions and assessing performance.
During the fourth quarter of 2008, five communities moved between segments to more accurately reflect their current underlying product offering. The movement did not change the Company’s reportable segments, but it did impact the revenues and cost reported within each segment. The net impact of the change was
a decrease of one community to the CCRCs segment.
Retirement Centers. Retirement center communities are primarily designed for middle to upper income senior citizens age 70 and older who desire an upscale residential environment providing the highest quality of service. The majority of the Company’s retirement
center communities consist of both independent living and assisted living units in a single community, which allows residents to “age-in-place” by providing them with a continuum of senior independent and assisted living services.
Assisted Living. Assisted living communities offer housing and 24-hour assistance with activities of daily life to mid-acuity frail and elderly residents. The Company’s assisted living communities include both freestanding, multi-story communities and freestanding
single story communities. The Company also operates memory care communities, which are freestanding assisted living communities specially designed for residents with Alzheimer’s disease and other dementias.
CCRCs. CCRCs are large communities that offer a variety of living arrangements and services to accommodate all levels of physical ability and health. Most of the Company’s CCRCs have retirement centers, assisted living and skilled nursing available on one
campus, and some also include memory care and Alzheimer’s units.
Management Services. The Company’s management services segment includes communities owned by others and operated by the Company pursuant to management agreements. Under the management agreements for these communities, the Company receives management fees as
well as reimbursed expenses, which represent the reimbursement of certain expenses it incurs on behalf of the owners.
The accounting policies of reportable segments are the same as those described in the summary of significant accounting policies.
The following table sets forth certain segment financial and operating data (dollars in thousands):
| |
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Retirement Centers |
|
$ |
135,308 |
|
|
$ |
135,198 |
|
|
$ |
269,843 |
|
|
$ |
270,773 |
|
|
Assisted Living |
|
|
217,426 |
|
|
|
209,156 |
|
|
|
435,209 |
|
|
|
419,794 |
|
|
CCRCs |
|
|
146,725 |
|
|
|
131,583 |
|
|
|
290,636 |
|
|
|
264,205 |
|
|
Management Services |
|
|
1,298 |
|
|
|
2,264 |
|
|
|
3,015 |
|
|
|
4,077 |
|
| |
|
$ |
500,757 |
|
|
$ |
478,201 |
|
|
$ |
998,703 |
|
|
$ |
958,849 |
|
|
Segment operating income(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retirement Centers |
|
$ |
58,467 |
|
|
$ |
58,447 |
|
|
$ |
115,248 |
|
|
$ |
116,675 |
|
|
Assisted Living |
|
|
79,408 |
|
|
|
74,399 |
|
|
|
158,058 |
|
|
|
148,926 |
|
|
CCRCs |
|
|
44,998 |
|
|
|
36,565 |
|
|
|
87,684 |
|
|
|
77,586 |
|
|
Management Services |
|
|
909 |
|
|
|
1,585 |
|
|
|
2,110 |
|
|
|
2,854 |
|
| |
|
$ |
183,782 |
|
|
$ |
170,996 |
|
|
$ |
363,100 |
|
|
$ |
346,041 |
|
|
General and administrative (including non-cash stock-based compensation expense)(3) |
|
$ |
31,332 |
|
|
$ |
39,618 |
|
|
$ |
64,523 |
|
|
$ |
75,462 |
|
|
Facility lease expense |
|
|
68,434 |
|
|
|
67,199 |
|
|
|
136,175 |
|
|
|
135,011 |
|
|
Deprecation and amortization |
|
|
67,262 |
|
|
|
68,876 |
|
|
|
135,395 |
|
|
|
140,816 |
|
|
Income (loss) from operations |
|
$ |
16,754 |
|
|
$ |
(4,697 |
) |
|
$ |
27,007 |
|
|
$ |
(5,248 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
June 30,
2009 |
|
|
|
|
|
Total assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retirement Centers |
|
|
|
|
|
|
|
|
|
$ |
1,209,006 |
|
|
$ |
1,233,268 |
|
|
Assisted Living |
|
|
|
|
|
|
|
|
|
|
1,293,198 |
|
|
|
1,393,223 |
|
|
CCRCs |
|
|
|
|
|
|
|
|
|
|
1,638,059 |
|
|
|
1,476,206 |
|
|
Corporate and Management Services |
|
|
|
|
|
|
|
|
|
|
347,756 |
|
|
|
346,561 |
|
| |
|
|
|
|
|
|
|
|
|
$ |
4,488,049 |
|
|
$ |
4,449,258 |
|
|
(1) |
All revenue is earned from external third parties in the United States. |
|
(2) |
Segment operating income is defined as segment revenues less segment operating expenses (excluding depreciation and amortization). |
|
(3) |
Net of general and administrative costs allocated to management services reporting segment. |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Certain statements in this Quarterly Report on Form 10-Q and other information we provide from time to time may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Those forward-looking statements 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, expense levels, the demand for senior housing, 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; 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; 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; our expectations regarding the payment of dividends; and our ability to increase revenues, earnings, Adjusted EBITDA, Cash From Facility Operations, and/or Facility Operating Income (as such terms are defined herein). Words such
as “anticipate(s)”, “expect(s)”, “intend(s)”, “plan(s)”, “target(s)”, “project(s)”, “predict(s)”, “believe(s)”, “may”, “will”, “would”, “could”, “should”, “seek(s)”, “estimate(s)” and similar expressions are intended to identify such forward-looking statements. These statements are based on management’s current expectations and
beliefs and are subject to a number of risks and uncertainties that could lead to actual results differing materially from those projected, forecasted or expected. Although we believe that the assumptions underlying the forward-looking statements are reasonable, we can give no assurance that our expectations will be attained. Factors which could have a material adverse effect on our operations and future prospects or which could cause actual results to differ materially from our expectations include, but are
not limited to, the risk associated with the current global economic crisis and its impact upon capital markets and liquidity; our inability to extend (or refinance) debt as it matures or replace our amended credit facility when 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 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 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, press releases and other communications, including those set forth under “Risk Factors” included in our Annual Report on Form 10-K for the year ended December
31, 2008 and in this Quarterly Report. Such forward-looking statements speak only as of the date of this Quarterly Report. 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.
Executive Overview
During the second quarter of 2009, we continued to make progress in implementing the long-term growth objectives outlined in our most recent Annual Report on Form 10-K, in spite of the difficult operating environment. The following is a summary discussion of our progress during the three and six months ended June 30, 2009.
Our primary long-term growth objectives are to grow our revenues, Adjusted EBITDA, Cash From Facility Operations and Facility Operating Income primarily through a combination of: (i) organic growth in our core business, including expense control and the realization of economies of scale; (ii) continued expansion of our ancillary services programs
(including therapy and home health services); and (iii) expansion of our existing communities.
Our operating results for the three and six months ended June 30, 2009 were favorably impacted by an increase in our total revenues (primarily driven by an increase in average monthly revenue per unit/bed and an increase in our ancillary services revenue) and by the significant cost control measures that were implemented in recent periods. Although
we made progress in certain areas of our business, our recent operating results have been negatively impacted by unfavorable conditions in the housing, credit and financial markets, resulting in slightly lower occupancy and diminished growth in the rates we charge our residents. We have responded by controlling our expenses and capital spending, and by increasing the reach of our ancillary services programs. We also continue to aggressively focus on maintaining and increasing occupancy.
We have also taken steps to preserve our liquidity and increase our financial flexibility during 2009. For example, during the second quarter, we completed a public equity offering which yielded $163.9 million of net proceeds, which were primarily used to repay the $125.0 million of indebtedness which was outstanding under
our credit facility. Furthermore, we have extended the maturity of a number of mortgage loans and, factoring in contractual extension options, have no mortgage debt maturities until 2011 (other than periodic, scheduled principal payments). Finally, we have taken steps to reduce materially our exposure to collateralization requirements associated with interest rate swaps. As a result of these steps and our operating performance during the six months ended June 30, 2009, we ended
the second quarter with $95.6 million of unrestricted cash and cash equivalents on our condensed consolidated balance sheet.
The tables below present a summary of our operating results and certain other financial metrics for the three and six months ended June 30, 2009 and 2008 and the amount and percentage of increase or decrease of each applicable item (dollars in millions).
| |
|
Three Months Ended
June 30, |
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
$ |
500.8 |
|
|
$ |
478.2 |
|
|
$ |
22.6 |
|
|
|
4.7 |
% |
|
Net loss |
|
$ |
(10.5 |
) |
|
$ |
(3.5 |
) |
|
$ |
7.0 |
|
|
|
200.0 |
% |
|
Adjusted EBITDA |
|
$ |
92.1 |
|
|
$ |
79.6 |
|
|
$ |
12.5 |
|
|
|
15.7 |
% |
|
Cash From Facility Operations |
|
$ |
52.5 |
|
|
$ |
36.7 |
|
|
$ |
15.8 |
|
|
|
43.1 |
% |
|
Facility Operating Income |
|
$ |
177.6 |
|
|
$ |
164.3 |
|
|
$ |
13.3 |
|
|
|
8.1 |
% |
| |
|
Six Months Ended
June 30, |
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
$ |
998.7 |
|
|
$ |
958.8 |
|
|
$ |
39.9 |
|
|
|
4.2 |
% |
|
Net loss |
|
$ |
(24.2 |
) |
|
$ |
(58.6 |
) |
|
$ |
(34.4 |
) |
|
|
(58.7 |
)% |
|
Adjusted EBITDA |
|
$ |
178.0 |
|
|
$ |
159.6 |
|
|
$ |
18.4 |
|
|
|
11.5 |
% |
|
Cash From Facility Operations |
|
$ |
102.7 |
|
|
$ |
75.3 |
|
|
$ |
27.4 |
|
|
|
36.4 |
% |
|
Facility Operating Income |
|
$ |
350.6 |
|
|
$ |
331.4 |
|
|
$ |
19.2 |
|
|
|
5.8 |
% |
Adjusted EBITDA and Facility Operating Income are non-GAAP financial measures we use in evaluating our operating performance. Cash From Facility Operations is a non-GAAP financial measure we use in evaluating our liquidity. See “Non-GAAP Financial Measures” below for an explanation of how we define each of these measures,
a detailed description of why we believe such measures are useful and the limitations of each measure, a reconciliation of net loss to each of Adjusted EBITDA and Facility Operating Income and a reconciliation of net cash provided by operating activities to Cash From Facility Operations.
Our revenues for the three months ended June 30, 2009 increased to $500.8 million, an increase of $22.6 million, or approximately 4.7%, over our revenues for the three months ended June 30, 2008. For the six months ended June 30, 2009, our revenues increased $39.9 million, or approximately 4.2%, to $998.7 million over the six months
ended June 30, 2008. The increase in revenues in the current year period was primarily a result of an increase in the average revenue per unit/bed compared to the prior year period and growing revenues from our ancillary services programs, partially offset by a decline in occupancy from the prior year period. Our weighted average occupancy rate for the second quarter of 2009 was 88.5%, compared to 88.9% for the second quarter of 2008.
During the three months ended June 30, 2009, our Adjusted EBITDA, Cash From Facility Operations and Facility Operating Income increased by 15.7%, 43.1% and 8.1%, respectively, when compared to the three months ended June 30, 2008. During the six months ended June 30, 2009, our Adjusted EBITDA, Cash From Facility Operations, and
Facility Operating Income increased by 11.5%, 36.4% and 5.8%, respectively.
During the three months ended June 30, 2009, we continued to expand our ancillary services offerings. As of June 30, 2009, we offered therapy services to approximately 35,000 of our units and home health services to approximately 17,000 of our units. We continue to see positive results from the maturation of previously-opened
therapy and home health clinics. We also expect to continue to expand our ancillary services programs to additional units and to open or acquire additional home health agencies.
During the second quarter of 2009, we completed an expansion at one community (with a total of 26 units). Our expansion program currently has four projects under construction with a total of 615 units, which are expected to open later this year.
We believe that the deteriorating housing market, credit crisis and general economic uncertainty have caused some potential customers (or their adult children) to delay or reconsider moving into our communities, resulting in a decrease in occupancy rates and occupancy levels when compared to the prior year period. We remain cautious
about the economy and the adverse credit and financial markets and their effect on our customers and our business. In addition, we continue to experience volatility in the entrance fee portion of our business. The timing of entrance fee sales is subject to a number of different factors (including the ability of potential customers to sell their existing homes) and is also inherently subject to variability (positively or negatively) when measured over the short-term. These factors
also impact our potential independent living customers to a significant extent. We expect occupancy and entrance fee sales to normalize over the longer term.
Consolidated Results of Operations
Three Months Ended June 30, 2009 and 2008
The following table sets forth, for the periods indicated, statements of operations items and the amount and percentage of increase or decrease of these items. The results of operations for any particular period are not necessarily indicative of results for any future period. The following data should be read in conjunction with our condensed
consolidated financial statements and the notes thereto, which are included herein.
(dollars in thousands, except average monthly revenue per unit/bed)
| |
|
Three Months Ended
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Statement of Operations Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
Resident fees |
|
|
|
|
|
|
|
|
|
|
|
|
|
Retirement Centers |
|
$ |
135,308 |
|
|
$ |
135,198 |
|
|
$ |
110 |
|
|
|
0.1 |
% |
|
Assisted Living |
|
|
217,426 |
|
|
|
209,156 |
|
|
|
8,270 |
|
|
|
4.0 |
% |
|
CCRCs |
|
|
146,725 |
|
|
|
131,583 |
|
|
|
15,142 |
|
|
|
11.5 |
% |
|
Total resident fees |
|
|
499,459 |
|
|
|
475,937 |
|
|
|
23,522 |
|
|
|
4.9 |
% |
|
Management fees |
|
|
1,298 |
|
|
|
2,264 |
|
|
|
(966 |
) |
|
|
(42.7 |
)% |
|
Total revenue |
|
|
500,757 |
|
|
|
478,201 |
|
|
|
22,556 |
|
|
|
4.7 |
% |
|
Expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Facility operating expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retirement Centers |
|
|
76,841 |
|
|
|
76,751 |
|
|
|
90 |
|
|
|
0.1 |
% |
|
Assisted Living |
|
|
138,018 |
|
|
|
134,757 |
|
|
|
3,261 |
|
|
|
2.4 |
% |
|
CCRCs |
|
|
101,727 |
|
|
|
95,018 |
|
|
|
6,709 |
|
|
|
7.1 |
% |
|
Total facility operating expense |
|
|
316,586 |
|
|
|
306,526 |
|
|
|
10,060 |
|
|
|
3.3 |
% |
|
General and administrative expense |
|
|
31,721 |
|
|
|
40,297 |
|
|
|
(8,576 |
) |
|
|
(21.3 |
)% |
|
Facility lease expense |
|
|
68,434 |
|
|
|
67,199 |
|
|
|
1,235 |
|
|
|
1.8 |
% |
|
Depreciation and amortization |
|
|
67,262 |
|
|
|
68,876 |
|
|
|
(1,614 |
) |
|
|
(2.3 |
)% |
|
Total operating expense |
|
|
484,003 |
|
|
|
482,898 |
|
|
|
1,105 |
|
|
|
0.2 |
% |
|
Income (loss) from operations |
|
|
16,754 |
|
|
|
(4,697 |
) |
|
|
21,451 |
|
|
|
456.7 |
% |
|
Interest income |
|
|
328 |
|
|
|
3,160 |
|
|
|
(2,832 |
) |
|
|
(89.6 |
)% |
|
Interest expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt |
|
|
(33,450 |
) |
|
|
(37,424 |
) |
|
|
3,974 |
|
|
|
10.6 |
% |
|
Amortization of deferred financing costs |
|
|
(3,390 |
) |
|
|
(2,379 |
) |
|
|
(1,011 |
) |
|
|
(42.5 |
)% |
|
Change in fair value of derivatives and amortization |
|
|
7,900 |
|
|
|
36,743 |
|
|
|
(28,843 |
) |
|
|
(78.5 |
)% |
|
Equity in earnings (loss) of unconsolidated ventures |
|
|
581 |
|
|
|
(935 |
) |
|
|
1,516 |
|
|
|
162.1 |
% |
|
Loss on extinguishment of debt |
|
|
(1,740 |
) |
|
|
(231 |
) |
|
|
(1,509 |
) |
|
|
(653.2 |
)% |
|
Other non-operating loss |
|
|
(8 |
) |
|
|
(493 |
) |
|
|
485 |
|
|
|
98.4 |
% |
|
Loss before income taxes |
|
|
(13,025 |
) |
|
|
(6,256 |
) |
|
|
(6,769 |
) |
|
|
(108.2 |
)% |
|
Benefit for income taxes |
|
|
2,495 |
|
|
|
2,771 |
|
|
|
276 |
|
|
|
10.0 |
% |
|
Net loss |
|
$ |
(10,530 |
) |
|
$ |
(3,485 |
) |
|
$ |
(7,045 |
) |
|
|
(202.2 |
)% |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected Operating and Other Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total number of communities (at end of period) |
|
|
546 |
|
|
|
550 |
|
|
|
(4 |
) |
|
|
(0.7 |
)% |
|
Total units/beds operated(1) |
|
|
51,844 |
|
|
|
51,847 |
|
|
|
(3 |
) |
|
|
(0.0 |
)% |
|
Owned/leased communities units/beds |
|
|
47,535 |
|
|
|
47,551 |
|
|
|
(16 |
) |
|
|
(0.0 |
)% |
|
Owned/leased communities occupancy rate (weighted average) |
|
|
88.5 |
% |
|
|
88.9 |
% |
|
|
(0.4 |
)% |
|
|
(0.4 |
)% |
|
Average monthly revenue per unit/bed(2) |
|
$ |
3,990 |
|
|
$ |
3,791 |
|
|
$ |
199 |
|
|
|
5.2 |
% |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected Segment Operating and Other Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retirement Centers |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of communities (period end) |
|
|
85 |
|
|
|
87 |
|
|
|
(2 |
) |
|
|
(2.3 |
)% |
|
Total units/beds(1) |
|
|
15,258 |
|
|
|
15,693 |
|
|
|
(435 |
) |
|
|
(2.8 |
)% |
|
Occupancy rate (weighted average) |
|
|
88.7 |
% |
|
|
89.6 |
% |
|
|
(0.9 |
)% |
|
|
(1.0 |
)% |
|
Average monthly revenue per unit/bed(2) |
|
$ |
3,355 |
|
|
$ |
3,225 |
|
|
$ |
130 |
|
|
|
4.0 |
% |
|
Assisted Living |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of communities (period end) |
|
|
405 |
|
|
|
410 |
|
|
|
(5 |
) |
|
|
(1.2 |
)% |
|
Total units/beds(1) |
|
|
20,807 |
|
|
|
21,020 |
|
|
|
(213 |
) |
|
|
(1.0 |
)% |
|
Occupancy rate (weighted average) |
|
|
89.6 |
% |
|
|
88.9 |
% |
|
|
0.7 |
% |
|
|
0.8 |
% |
|
Average monthly revenue per unit/bed(2) |
|
$ |
3,887 |
|
|
$ |
3,751 |
|
|
$ |
136 |
|
|
|
3.6 |
% |
|
CCRCs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of communities (period end) |
|
|
35 |
|
|
|
32 |
|
|
|
3 |
|
|
|
9.4 |
% |
|
Total units/beds(1) |
|
|
11,470 |
|
|
|
10,838 |
|
|
|
632 |
|
|
|
5.8 |
% |
|
Occupancy rate (weighted average) |
|
|
86.2 |
% |
|
|
88.1 |
% |
|
|
(1.9 |
)% |
|
|
(2.2 |
)% |
|
Average monthly revenue per unit/bed(2) |
|
$ |
5,128 |
|
|
$ |
4,767 |
|
|
$ |
361 |
|
|
|
7.6 |
% |
|
Management Services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of communities (period end) |
|
|
21 |
|
|
|
21 |
|
|
|
― |
|
|
|
― |
|
|
Total units/beds(1) |
|
|
4,309 |
|
|
|
4,296 |
|
|
|
13 |
|
|
|
0.3 |
% |
|
Occupancy rate (weighted average) |
|
|
84.6 |
% |
|
|
83.7 |
% |
|
|
0.9 |
% |
|
|
1.1 |
% |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected Entrance Fee Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-refundable entrance fees sales |
|
$ |
5,718 |
|
|
$ |
5,177 |
|
|
|
|
|
|
|
|
|
|
Refundable entrance fees sales(3) |
|
|
4,098 |
|
|
|
7,420 |
|
|
|
|
|
|
|
|
|
|
Total entrance fee receipts |
|
|
9,816 |
|
|
|
12,597 |
|
|
|
|
|
|
|
|
|
|
Refunds |
|
|
(6,357 |
) |
|
|
(4,843 |
) |
|
|
|
|
|
|
|
|
|
Net entrance fees |
|
$ |
3,459 |
|
|
$ |
7,754 |
|
|
|
|
|
|
|
|
|
__________
|
(1) |
Total units/beds operated represent the total units/beds operated as of the end of the period. |
|
(2) |
Average monthly revenue per unit/bed represents the average of the total monthly revenues, excluding amortization of entrance fees, divided by average occupied units/beds. |
|
(3) |
Refundable entrance fee sales for the three months ended June 30, 2009 and 2008 include amounts received from residents participating in the MyChoice program, which allows new and existing residents the option to pay additional refundable entrance fee amounts in return for a reduced monthly service fee. MyChoice amounts received from residents totaled $0.02 million and $0.8 million for the three months ended
June 30, 2009 and 2008, respectively. |
As of June 30, 2009, our total operations included 546 communities with a capacity to serve 51,844 residents. Our resident capacity decreased by 44 units from March 31, 2009 as a result of the sale of one community and the termination of a management agreement with another community. This decrease was partially offset
by the completion of a number of community renovation and expansion projects.
Resident Fees
The increase in resident fees occurred primarily in the Assisted Living and CCRC segments. Resident fees increased over the prior-year second quarter mainly due to an increase in average monthly revenue per unit/bed during the current period as well as an increase in our ancillary services revenue as we continue to roll out therapy
and home health services to many of our communities. This increase was partially offset by a decrease in
occupancy for our same-store communities in the Retirement Centers and CCRCs segments. During the current period, same-store revenues grew 4.8% at the 518 properties we operated in both periods with a 5.3% increase in the average monthly revenue per unit/bed and a 0.3% decrease in occupancy.
Retirement Centers revenue remained relatively flat, primarily due to an increase in the average monthly revenue per unit/bed at the same-store communities period over period partially offset by a decrease in occupancy at the same-store communities.
Assisted Living revenue increased $8.3 million, or 4.0%, due to an increase in the average monthly revenue per unit/bed and an increase in occupancy at the communities we operated during both periods.
CCRCs revenue increased $15.1 million, or 11.5%, primarily due to an increase in the average monthly revenue per unit/bed at the communities we operated during both periods partially offset by a decrease in occupancy at these same-store communities period over period. Revenue growth was also positively impacted by an increase
in revenue related to the rollout of our ancillary services business to these communities during 2008 and 2009.
Management Fees
Management fees decreased $1.0 million, or 42.7%, primarily due to a one-time fee paid by one of the managed communities during the second quarter of 2008.
Facility Operating Expense
Facility operating expense increased over the prior-year period primarily due to an increase in salaries and wages from wage increases in late 2008, increased insurance expense, higher deferred community fee expense recognition, and additional current year expense incurred in connection with the continued expansion of our ancillary services
programs during the second quarter of 2009. These increases were partially offset by significant cost control measures that were implemented in recent periods.
Retirement Centers operating expenses remained relatively flat period over period, primarily due to increases in salaries and wages along with increased insurance expense and expense incurred in connection with the continued expansion of our ancillary services programs, partially offset by decreased public relations and advertising expenses,
as well as significant cost control measures that were implemented in recent periods.
Assisted Living operating expenses increased $3.3 million, or 2.4%, primarily due to an increase in insurance expenses period over period, higher deferred community fee expense recognition, as well as an increase in expense incurred in connection with the continued expansion of our ancillary services programs. These increases were
partially offset by significant cost control measures that were implemented in recent periods.
CCRCs operating expenses increased $6.7 million, or 7.1%, primarily due to an increase in salaries and wages in late 2008, increased insurance expense and an increase in expense incurred in connection with the continued expansion of our ancillary services programs. These increases were partially offset by significant cost control
measures that were implemented in recent periods.
General and Administrative Expense
General and administrative expense decreased $8.6 million, or 21.3%, primarily as a result of a decrease in non-controllable expenses period over period related to an $8.0 million reserve established for certain litigation during the three months ended June 30, 2008, as well as decreases in non-cash stock-based compensation expense in the
current period in connection with restricted stock grants, employee benefits expenses and travel and entertainment expenses. General and administrative expense as a percentage of total revenue, including revenue generated by the communities we manage and excluding non-cash compensation, integration and other non-recurring expense, was 4.6% and 4.1% for the three months ended June 30, 2009 and 2008, respectively, calculated as follows (dollars in thousands):
| |
|
Three Months Ended June 30, |
|
| |
|
2009 |
|
|
2008 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Resident fee revenues |
|
$ |
499,459 |
|
|
|
92.7 |
% |
|
$ |
475,937 |
|
|
|
92.6 |
% |
|
Resident fee revenues under management |
|
|
39,247 |
|
|
|
7.3 |
% |
|
|
38,269 |
|
|
|
7.4 |
% |
|
Total |
|
$ |
538,706 |
|
|
|
100.0 |
% |
|
$ |
514,206 |
|
|
|
100.0 |
% |
|
General and administrative expenses (excluding non-cash compensation, integration and other non-recurring expense) |
|
$ |
24,850 |
|
|
|
4.6 |
% |
|
$ |
21,229 |
|
|
|
4.1 |
% |
|
Non-cash compensation expense |
|
|
6,871 |
|
|
|
1.3 |
% |
|
|
8,621 |
|
|
|
1.7 |
% |
|
Integration and other non-recurring expense |
|
|
- |
|
|
|
- |
|
|
|
10,447 |
|
|
|
2.0 |
% |
|
General and administrative expenses (including non-cash compensation, integration and other non-recurring expense) |
|
$ |
31,721 |
|
|
|
5.9 |
% |
|
$ |
40,297 |
|
|
|
7.8 |
% |
Facility Lease Expense
Lease expense remained relatively constant period over period.
Depreciation and Amortization
Depreciation and amortization expense decreased by $1.6 million, or 2.3%, primarily as a result of resident in-place lease intangibles becoming fully amortized during late 2008.
Interest Income
Interest income decreased $2.8 million, or 89.6%, primarily due to the recognition of interest income upon collection of a long-term note receivable, which interest income had been deferred as the interest was accumulating unpaid, during the three months ended June 30, 2008.
Interest Expense
Interest expense increased $25.9 million primarily due to the change in fair value of our interest rate swaps and caps. During the three months ended June 30, 2009, we recognized approximately $7.9 million of interest income on our interest rate swaps and caps due to favorable changes in the LIBOR yield curve which resulted in a
change in the fair value of the swaps and caps, as compared to approximately $36.7 million of interest income on our interest rate swaps for the three months ended June 30, 2008, representing a $28.8 million increase in interest expense period over period. This was offset by a decrease in interest expense on our mortgage debt due to a decline in interest rates period over period.
Income Taxes
Our effective tax rates for the three months ended June 30, 2009 and 2008 are 19.2% and 44.3%, respectively. The difference in the effective rate between these periods is primarily due to the period over period movement in the annualized effective rate recorded in 2008. The rate was also impacted by our stock-based
compensation deduction as calculated under SFAS 123(R) for 2009 due to the decrease in the stock price between June 30, 2008 and June 30, 2009.
An additional interest charge related to our FIN 48 reserve as well as a new uncertain tax position was recorded during the three months ended June 30, 2009. Tax returns for years 2005 through 2007 are subject to future examination by tax authorities. In addition, tax returns are open from 1999 through 2004 to the extent
of the net operating losses generated during those periods.
Six Months Ended June 30, 2009 and 2008
The following table sets forth, for the periods indicated, statements of operations items and the amount and percentage of increase or decrease of these items. The results of operations for any particular period are not necessarily indicative of results for any future period. The following data should be read in conjunction with our condensed
consolidated financial statements and the notes thereto, which are included herein.
(dollars in thousands, except average monthly revenue per unit/bed)
| |
|
Six Months Ended
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Statement of Operations Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
Resident fees |
|
|
|
|
|
|
|
|
|
|
|
|
|
Retirement Centers |
|
$ |
269,843 |
|
|
$ |
270,773 |
|
|
$ |
(930 |
) |
|
|
(0.3 |
)% |
|
Assisted Living |
|
|
435,209 |
|
|
|
419,794 |
|
|
|
15,415 |
|
|
|
3.7 |
% |
|
CCRCs |
|
|
290,636 |
|
|
|
264,205 |
|
|
|
26,431 |
|
|
|
10.0 |
% |
|
Total resident fees |
|
|
995,688 |
|
|
|
954,772 |
|
|
|
40,916 |
|
|
|
4.3 |
% |
|
Management fees |
|
|
3,015 |
|
|
|
4,077 |
|
|
|
(1,062 |
) |
|
|
(26.0 |
)% |
|
Total revenue |
|
|
998,703 |
|
|
|
958,849 |
|
|
|
39,854 |
|
|
|
4.2 |
% |
|
Expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Facility operating expense |
|
|
|
|
|
|
|
|
|
|
|
|
|