x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 20-3068069 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
111 Westwood Place, Suite 400, Brentwood, Tennessee | 37027 |
(Address of principal executive offices) | (Zip Code) |
Large accelerated filer | x | Accelerated filer | ¨ | |||
Non-accelerated filer | ¨ | Smaller reporting company | ¨ | |||
Emerging growth company | ¨ |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Common Stock, $0.01 Par Value Per Share | BKD | New York Stock Exchange |
PAGE | ||
PART I. | ||
Item 1. | ||
Item 2. | ||
Item 3. | ||
Item 4. | ||
PART II. | ||
Item 1. | ||
Item 1A. | ||
Item 2. | ||
Item 6. | ||
March 31, 2019 | December 31, 2018 | ||||||
Assets | (Unaudited) | ||||||
Current assets | |||||||
Cash and cash equivalents | $ | 256,501 | $ | 398,267 | |||
Marketable securities | 83,517 | 14,855 | |||||
Restricted cash | 28,811 | 27,683 | |||||
Accounts receivable, net | 138,455 | 133,905 | |||||
Assets held for sale | 58,323 | 93,117 | |||||
Prepaid expenses and other current assets, net | 185,017 | 106,189 | |||||
Total current assets | 750,624 | 774,016 | |||||
Property, plant and equipment and leasehold intangibles, net | 5,236,194 | 5,275,427 | |||||
Operating lease right-of-use assets | 1,291,428 | — | |||||
Restricted cash | 43,188 | 24,268 | |||||
Investment in unconsolidated ventures | 27,747 | 27,528 | |||||
Goodwill | 154,131 | 154,131 | |||||
Other intangible assets, net | 45,930 | 51,472 | |||||
Other assets, net | 81,531 | 160,418 | |||||
Total assets | $ | 7,630,773 | $ | 6,467,260 | |||
Liabilities and Equity | |||||||
Current liabilities | |||||||
Current portion of long-term debt | $ | 454,854 | $ | 294,426 | |||
Current portion of financing lease obligations | 23,311 | 23,135 | |||||
Current portion of operating lease obligations | 180,367 | — | |||||
Trade accounts payable | 85,379 | 95,049 | |||||
Accrued expenses | 262,601 | 298,227 | |||||
Refundable fees and deferred revenue | 95,212 | 62,494 | |||||
Total current liabilities | 1,101,724 | 773,331 | |||||
Long-term debt, less current portion | 3,188,143 | 3,345,754 | |||||
Financing lease obligations, less current portion | 845,776 | 851,341 | |||||
Operating lease obligations, less current portion | 1,396,016 | — | |||||
Deferred liabilities | 6,007 | 262,761 | |||||
Deferred tax liability | 18,220 | 18,371 | |||||
Other liabilities | 157,290 | 197,289 | |||||
Total liabilities | 6,713,176 | 5,448,847 | |||||
Preferred stock, $0.01 par value, 50,000,000 shares authorized at March 31, 2019 and December 31, 2018; no shares issued and outstanding | — | — | |||||
Common stock, $0.01 par value, 400,000,000 shares authorized at March 31, 2019 and December 31, 2018; 199,965,001 and 196,815,254 shares issued and 194,573,086 and 192,356,051 shares outstanding (including 7,881,179 and 5,756,435 unvested restricted shares), respectively | 2,000 | 1,968 | |||||
Additional paid-in-capital | 4,154,790 | 4,151,147 | |||||
Treasury stock, at cost; 5,391,915 and 4,459,203 shares at March 31, 2019 and December 31, 2018, respectively | (70,940 | ) | (64,940 | ) | |||
Accumulated deficit | (3,167,752 | ) | (3,069,272 | ) | |||
Total Brookdale Senior Living Inc. stockholders' equity | 918,098 | 1,018,903 | |||||
Noncontrolling interest | (501 | ) | (490 | ) | |||
Total equity | 917,597 | 1,018,413 | |||||
Total liabilities and equity | $ | 7,630,773 | $ | 6,467,260 |
Three Months Ended March 31, | |||||||
2019 | 2018 | ||||||
Revenue | |||||||
Resident fees | $ | 809,479 | $ | 906,266 | |||
Management fees | 15,743 | 18,681 | |||||
Reimbursed costs incurred on behalf of managed communities | 216,822 | 262,287 | |||||
Total revenue | 1,042,044 | 1,187,234 | |||||
Expense | |||||||
Facility operating expense (excluding depreciation and amortization of $88,827 and $103,168, respectively) | 586,094 | 632,325 | |||||
General and administrative expense (including non-cash stock-based compensation expense of $6,356 and $8,406, respectively) | 56,311 | 81,435 | |||||
Facility operating lease expense | 68,668 | 80,400 | |||||
Depreciation and amortization | 96,888 | 114,255 | |||||
Goodwill and asset impairment | 391 | 430,363 | |||||
Loss on facility lease termination and modification, net | 209 | — | |||||
Costs incurred on behalf of managed communities | 216,822 | 262,287 | |||||
Total operating expense | 1,025,383 | 1,601,065 | |||||
Income (loss) from operations | 16,661 | (413,831 | ) | ||||
Interest income | 3,084 | 2,983 | |||||
Interest expense: | |||||||
Debt | (45,643 | ) | (45,727 | ) | |||
Financing lease obligations | (16,743 | ) | (22,931 | ) | |||
Amortization of deferred financing costs and debt discount | (831 | ) | (3,956 | ) | |||
Change in fair value of derivatives | (148 | ) | 74 | ||||
Debt modification and extinguishment costs | (67 | ) | (35 | ) | |||
Equity in loss of unconsolidated ventures | (526 | ) | (4,243 | ) | |||
Gain (loss) on sale of assets, net | (702 | ) | 43,431 | ||||
Other non-operating income | 2,988 | 2,586 | |||||
Income (loss) before income taxes | (41,927 | ) | (441,649 | ) | |||
Benefit (provision) for income taxes | (679 | ) | (15,585 | ) | |||
Net income (loss) | (42,606 | ) | (457,234 | ) | |||
Net (income) loss attributable to noncontrolling interest | 11 | 46 | |||||
Net income (loss) attributable to Brookdale Senior Living Inc. common stockholders | $ | (42,595 | ) | $ | (457,188 | ) | |
Basic and diluted net income (loss) per share attributable to Brookdale Senior Living Inc. common stockholders | $ | (0.23 | ) | $ | (2.45 | ) | |
Weighted average shares used in computing basic and diluted net income (loss) per share | 186,747 | 186,880 |
Common Stock | Additional Paid-In- Capital | Treasury Stock | Accumulated Deficit | Stockholders' Equity | Noncontrolling Interest | Total Equity | ||||||||||||||||||||||||
Outstanding Shares | Amount | |||||||||||||||||||||||||||||
Balances at December 31, 2018 | 192,356 | $ | 1,968 | $ | 4,151,147 | $ | (64,940 | ) | $ | (3,069,272 | ) | $ | 1,018,903 | $ | (490 | ) | $ | 1,018,413 | ||||||||||||
Cumulative effect of change in accounting principle (Note 2) | — | — | — | — | (55,885 | ) | (55,885 | ) | — | (55,885 | ) | |||||||||||||||||||
Balances at January 1, 2019 | 192,356 | 1,968 | 4,151,147 | (64,940 | ) | (3,125,157 | ) | 963,018 | (490 | ) | 962,528 | |||||||||||||||||||
Compensation expense related to restricted stock grants | — | — | 6,356 | — | — | 6,356 | — | 6,356 | ||||||||||||||||||||||
Net income (loss) | — | — | — | — | (42,595 | ) | (42,595 | ) | (11 | ) | (42,606 | ) | ||||||||||||||||||
Issuance of common stock under Associate Stock Purchase Plan | 50 | 1 | 298 | — | — | 299 | — | 299 | ||||||||||||||||||||||
Restricted stock, net | 3,534 | 35 | (35 | ) | — | — | — | — | — | |||||||||||||||||||||
Purchase of treasury stock | (933 | ) | — | — | (6,000 | ) | — | (6,000 | ) | — | (6,000 | ) | ||||||||||||||||||
Shares withheld for employee taxes | (434 | ) | (4 | ) | (2,993 | ) | — | — | (2,997 | ) | — | (2,997 | ) | |||||||||||||||||
Other, net | — | — | 17 | — | — | 17 | — | 17 | ||||||||||||||||||||||
Balances at March 31, 2019 | 194,573 | $ | 2,000 | $ | 4,154,790 | $ | (70,940 | ) | $ | (3,167,752 | ) | $ | 918,098 | $ | (501 | ) | $ | 917,597 |
Common Stock | Additional Paid-In- Capital | Treasury Stock | Accumulated Deficit | Stockholders' Equity | Noncontrolling Interest | Total Equity | ||||||||||||||||||||||||
Outstanding Shares | Amount | |||||||||||||||||||||||||||||
Balances at December 31, 2017 | 191,276 | $ | 1,913 | $ | 4,126,549 | $ | (56,440 | ) | $ | (2,541,294 | ) | $ | 1,530,728 | $ | (437 | ) | $ | 1,530,291 | ||||||||||||
Compensation expense related to restricted stock grants | — | — | 8,406 | — | — | 8,406 | — | 8,406 | ||||||||||||||||||||||
Net income (loss) | — | — | — | — | (457,188 | ) | (457,188 | ) | (46 | ) | (457,234 | ) | ||||||||||||||||||
Issuance of common stock under Associate Stock Purchase Plan | 62 | 1 | 371 | — | — | 372 | — | 372 | ||||||||||||||||||||||
Restricted stock, net | 2,841 | 28 | (28 | ) | — | — | — | — | — | |||||||||||||||||||||
Shares withheld for employee taxes | (381 | ) | (4 | ) | (2,614 | ) | — | — | (2,618 | ) | — | (2,618 | ) | |||||||||||||||||
Other, net | — | — | 63 | — | 281 | 344 | — | 344 | ||||||||||||||||||||||
Balances at March 31, 2018 | 193,798 | $ | 1,938 | $ | 4,132,747 | $ | (56,440 | ) | $ | (2,998,201 | ) | $ | 1,080,044 | $ | (483 | ) | $ | 1,079,561 |
Three Months Ended March 31, | |||||||
2019 | 2018 | ||||||
Cash Flows from Operating Activities | |||||||
Net income (loss) | $ | (42,606 | ) | $ | (457,234 | ) | |
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | |||||||
Debt modification and extinguishment costs | 67 | 35 | |||||
Depreciation and amortization, net | 97,719 | 118,211 | |||||
Goodwill and asset impairment | 391 | 430,363 | |||||
Equity in loss of unconsolidated ventures | 526 | 4,243 | |||||
Distributions from unconsolidated ventures from cumulative share of net earnings | 749 | 408 | |||||
Amortization of deferred gain | — | (1,090 | ) | ||||
Amortization of entrance fees | (398 | ) | (501 | ) | |||
Proceeds from deferred entrance fee revenue | 436 | 1,109 | |||||
Deferred income tax (benefit) provision | 170 | 15,037 | |||||
Operating lease expense adjustment | (4,383 | ) | (8,103 | ) | |||
Change in fair value of derivatives | 148 | (74 | ) | ||||
(Gain) loss on sale of assets, net | 702 | (43,431 | ) | ||||
Loss on facility lease termination and modification, net | 209 | — | |||||
Non-cash stock-based compensation expense | 6,356 | 8,406 | |||||
Non-cash interest expense on financing lease obligations | — | 3,383 | |||||
Non-cash management contract termination gain | (353 | ) | (2,242 | ) | |||
Other | (2,495 | ) | (156 | ) | |||
Changes in operating assets and liabilities: | |||||||
Accounts receivable, net | (4,550 | ) | 3,488 | ||||
Prepaid expenses and other assets, net | 12,358 | (6,174 | ) | ||||
Prepaid insurance premiums financed with notes payable | (18,842 | ) | (18,633 | ) | |||
Trade accounts payable and accrued expenses | (41,358 | ) | (21,370 | ) | |||
Refundable fees and deferred revenue | (9,855 | ) | 12,289 | ||||
Net cash provided by (used in) operating activities | (5,009 | ) | 37,964 | ||||
Cash Flows from Investing Activities | |||||||
Change in lease security deposits and lease acquisition deposits, net | (320 | ) | (2,015 | ) | |||
Purchase of marketable securities | (68,348 | ) | — | ||||
Sale of marketable securities | — | 118,273 | |||||
Capital expenditures, net of related payables | (60,055 | ) | (66,592 | ) | |||
Acquisition of assets, net of related payables and cash received | — | (27,330 | ) | ||||
Investment in unconsolidated ventures | (3,986 | ) | (8,434 | ) | |||
Distributions received from unconsolidated ventures | 3,178 | 2,037 | |||||
Proceeds from sale of assets, net | 29,458 | 75,060 | |||||
Property insurance proceeds | — | 156 | |||||
Net cash provided by (used in) investing activities | (100,073 | ) | 91,155 | ||||
Cash Flows from Financing Activities | |||||||
Proceeds from debt | 25,178 | 30,168 | |||||
Repayment of debt and financing lease obligations | (28,400 | ) | (44,001 | ) | |||
Purchase of treasury stock, net of related payables | (9,956 | ) | — | ||||
Payment of financing costs, net of related payables | (759 | ) | (248 | ) | |||
Proceeds from refundable entrance fees, net of refunds | — | 223 | |||||
Payments of employee taxes for withheld shares | (2,997 | ) | (2,618 | ) | |||
Other | 298 | 372 | |||||
Net cash provided by (used in) financing activities | (16,636 | ) | (16,104 | ) | |||
Net increase (decrease) in cash, cash equivalents and restricted cash | (121,718 | ) | 113,015 | ||||
Cash, cash equivalents and restricted cash at beginning of period | 450,218 | 282,546 | |||||
Cash, cash equivalents and restricted cash at end of period | $ | 328,500 | $ | 395,561 |
(in millions) | |||
Assets | |||
Prepaid expenses and other current assets, net | $ | 67 | |
Property, plant and equipment and leasehold intangibles, net | (11 | ) | |
Operating lease right-of-use assets | 1,329 | ||
Investment in unconsolidated ventures | (2 | ) | |
Other intangible assets, net | (5 | ) | |
Other assets, net | (73 | ) | |
Total assets | 1,305 | ||
Liabilities and Equity | |||
Refundable fees and deferred revenue | 43 | ||
Operating lease obligations | 1,618 | ||
Deferred liabilities | (257 | ) | |
Other liabilities | (43 | ) | |
Total liabilities | 1,361 | ||
Total equity | $ | (56 | ) |
Three Months Ended March 31, | |||||||
(in thousands) | 2019 | 2018 | |||||
Resident fees | |||||||
Independent Living | $ | — | $ | 31,629 | |||
Assisted Living and Memory Care | 3,718 | 85,448 | |||||
CCRCs | — | 6,493 | |||||
Senior housing resident fees | 3,718 | 123,570 | |||||
Facility operating expense | |||||||
Independent Living | — | 18,653 | |||||
Assisted Living and Memory Care | 3,402 | 59,389 | |||||
CCRCs | — | 6,057 | |||||
Senior housing facility operating expense | 3,402 | 84,099 | |||||
Cash facility lease payments | $ | 192 | $ | 33,500 |
• | Lease Terminations. The Company and Welltower agreed to early termination of the Company's triple-net lease obligations on 37 communities effective June 30, 2018. The communities were part of two lease portfolios due to mature in 2028 (27 communities) and 2020 (10 communities). The Company paid Welltower an aggregate lease termination fee of $58.0 million. The Company agreed to manage the foregoing 37 communities on an interim basis until the communities have been transitioned to new managers, and such communities are reported in the Management Services segment during such interim period. The Company recognized a $22.6 million loss on lease termination during the three months ended June 30, 2018 for the amount by which the aggregate lease termination fee exceeded the net carrying value of the Company's assets and liabilities under operating and capital leases as of the lease termination date. |
• | Future Lease Terminations. The parties separately agreed to allow the Company to terminate leases with respect to, and to remove from the remaining Welltower leased portfolio, a number of communities with annual aggregate base rent up to $5.0 million upon Welltower's sale of such communities, and the Company would receive a corresponding 6.25% rent credit on Welltower's disposition proceeds. |
• | RIDEA Restructuring. The Company sold its 20% equity interest in its Welltower RIDEA venture to Welltower, effective June 30, 2018, for net proceeds of $33.5 million (for which the Company recognized a $14.7 million gain on sale). The Company agreed to continue to manage the communities in the venture on an interim basis until the communities have been transitioned to new managers, and such communities are reported in the Management Services segment during such interim period. |
• | Master Lease Transactions. The Company and HCP amended and restated triple-net leases covering substantially all of the communities the Company leased from HCP as of November 1, 2017 into the HCP Master Lease. During the year ended December 31, 2018, the Company acquired two communities formerly leased for an aggregate purchase price of $35.4 million and during the year ended December 31, 2018 leases with respect to 33 communities were terminated, and such communities were removed from the HCP Master Lease, which completed the terminations of leases as provided in the HCP Master Lease. The Company agreed to manage communities for which leases were terminated on an interim basis until the communities have been transitioned to new managers, and such communities are reported in the Management Services segment during such interim period. The Company continues to lease 43 communities pursuant to the terms of the HCP Master Lease, which have the same lease rates and expiration and renewal terms as the applicable prior instruments, except that effective January 1, 2018, the Company received a $2.5 million annual rent reduction for two communities. The HCP Master Lease also provides that the Company may engage in certain change in control and other transactions without the need to obtain HCP's consent, subject to the satisfaction of certain conditions. |
• | RIDEA Ventures Restructuring. Pursuant to the multi-part transaction agreement, HCP acquired the Company's 10% ownership interest in one of the Company's RIDEA ventures with HCP in December 2017 for $32.1 million and the Company's 10% ownership interest in the remaining RIDEA venture with HCP in March 2018 for $62.3 million (for which the Company recognized a $41.7 million gain on sale during the three months ended March 31, 2018). The Company provided management services to 59 communities on behalf of the two RIDEA ventures as of November 1, 2017. Pursuant to the multi-part transaction agreement, the Company acquired one community for an aggregate purchase price of $32.1 million in January 2018 and three communities for an aggregate purchase price of $207.4 million in April 2018 and retained management of 18 of such communities. The amended and restated management agreements for such 18 communities have a term set to expire in 2030, subject to certain early termination rights. In addition, HCP will be entitled to sell or transition operations and/or management of 37 of such communities. Management agreements for 34 such communities have been terminated by HCP (for which the Company has recognized a $9.1 million non-cash management contract termination gain, of which $0.4 million and $2.2 million was recognized during the three months ended March 31, 2019 and 2018, respectively). The Company expects the termination of management agreements on the remaining three communities to occur during 2019. |
Three Months Ended March 31, | ||||
(in millions) | 2018 | |||
Goodwill | $ | 351.7 | ||
Property, plant and equipment and leasehold intangibles, net | 40.8 | |||
Investment in unconsolidated ventures | 33.4 | |||
Other intangible assets, net | 1.7 | |||
Assets held for sale | 2.8 | |||
Goodwill and asset impairment | $ | 430.4 |
(share amounts in thousands, except for per share amounts) | Shares Granted | Weighted Average Grant Date Fair Value | Total Value | |||||||
Three months ended March 31, 2019 | 4,047 | $ | 7.87 | $ | 31,857 |
March 31, 2019 | |||||||||||
(in thousands) | Gross Carrying Amount | Accumulated Amortization | Net | ||||||||
Health care licenses | $ | 42,323 | $ | — | $ | 42,323 | |||||
Trade names | 27,800 | (26,940 | ) | 860 | |||||||
Management contracts | 9,610 | (6,863 | ) | 2,747 | |||||||
Total | $ | 79,733 | $ | (33,803 | ) | $ | 45,930 |
December 31, 2018 | |||||||||||
(in thousands) | Gross Carrying Amount | Accumulated Amortization | Net | ||||||||
Community purchase options | $ | 4,738 | $ | — | $ | 4,738 | |||||
Health care licenses | 42,323 | — | 42,323 | ||||||||
Trade names | 27,800 | (26,295 | ) | 1,505 | |||||||
Management contracts | 9,610 | (6,704 | ) | 2,906 | |||||||
Total | $ | 84,471 | $ | (32,999 | ) | $ | 51,472 |
(in thousands) | March 31, 2019 | December 31, 2018 | |||||
Land | $ | 455,590 | $ | 456,912 | |||
Buildings and improvements | 4,773,632 | 4,919,789 | |||||
Furniture and equipment | 820,253 | 1,036,113 | |||||
Resident and leasehold operating intangibles | 320,812 | 477,827 | |||||
Construction in progress | 72,241 | 57,636 | |||||
Assets under financing leases and leasehold improvements | 1,792,967 | 1,374,525 | |||||
Property, plant and equipment and leasehold intangibles | 8,235,495 | 8,322,802 | |||||
Accumulated depreciation and amortization | (2,999,301 | ) | (3,047,375 | ) | |||
Property, plant and equipment and leasehold intangibles, net | $ | 5,236,194 | $ | 5,275,427 |
(in thousands) | March 31, 2019 | December 31, 2018 | |||||
Mortgage notes payable due 2019 through 2047; weighted average interest rate of 4.93% for the three months ended March 31, 2019, less debt discount and deferred financing costs of $18.0 million and $18.6 million as of March 31, 2019 and December 31, 2018, respectively (weighted average interest rate of 4.75% in 2018) | $ | 3,566,621 | $ | 3,579,931 | |||
Other notes payable, weighted average interest rate of 5.42% for the three months ended March 31, 2019 (weighted average interest rate of 5.85% in 2018) and maturity dates ranging from 2019 to 2021 | 76,376 | 60,249 | |||||
Total long-term debt | 3,642,997 | 3,640,180 | |||||
Less current portion | 454,854 | 294,426 | |||||
Total long-term debt, less current portion | $ | 3,188,143 | $ | 3,345,754 |
Operating Leases (in thousands) | Three Months Ended March 31, 2019 | ||
Facility operating expense | $ | 4,625 | |
Facility lease expense | 68,668 | ||
Operating lease expense | 73,293 | ||
Operating lease expense adjustment | 4,383 | ||
Operating cash flows from operating leases | $ | 77,676 | |
Non-cash recognition of right-of-use assets obtained in exchange for new operating lease obligations | $ | 1,358 |
Financing Leases (in thousands) | Three Months Ended March 31, 2019 | ||
Depreciation and amortization | $ | 11,678 | |
Interest expense: financing lease obligations | 16,743 | ||
Financing lease expense | $ | 28,421 | |
Operating cash flows from financing leases | $ | 16,743 | |
Financing cash flows from financing leases | 5,453 | ||
Total cash flows from financing leases | $ | 22,196 |
Year Ending December 31, | Operating Leases | Financing Leases | |||||
2019 | $ | 231,489 | $ | 66,190 | |||
2020 | 308,607 | 89,003 | |||||
2021 | 292,531 | 90,243 | |||||
2022 | 289,447 | 91,633 | |||||
2023 | 285,741 | 93,104 | |||||
Thereafter | 786,649 | 428,952 | |||||
Total lease payments | 2,194,464 | 859,125 | |||||
Purchase option liability and non-cash gain on future sale of property | — | 575,276 | |||||
Imputed interest and variable lease payments | (618,081 | ) | (565,314 | ) | |||
Total lease obligations | $ | 1,576,383 | $ | 869,087 |
Year Ending December 31, | Operating Leases | ||
2019 | $ | 310,340 | |
2020 | 307,493 | ||
2021 | 290,661 | ||
2022 | 291,114 | ||
2023 | 285,723 | ||
Thereafter | 786,647 | ||
Total lease payments | $ | 2,271,978 |
Three Months Ended March 31, | |||||||
(in thousands) | 2019 | 2018 | |||||
Supplemental Disclosure of Cash Flow Information: | |||||||
Interest paid | $ | 62,107 | $ | 62,721 | |||
Income taxes paid, net of refunds | $ | 606 | $ | (128 | ) | ||
Capital expenditures, net of related payables | |||||||
Capital expenditures - non-development, net | $ | 54,602 | $ | 41,736 | |||
Capital expenditures - development, net | 5,269 | 5,381 | |||||
Capital expenditures - non-development - reimbursable | — | 1,764 | |||||
Capital expenditures - development - reimbursable | — | 615 | |||||
Trade accounts payable | 184 | 17,096 | |||||
Net cash paid | $ | 60,055 | $ | 66,592 | |||
Acquisition of assets, net of related payables and cash received: | |||||||
Property, plant and equipment and leasehold intangibles, net | $ | — | $ | 32,126 | |||
Other intangible assets, net | — | (4,796 | ) | ||||
Net cash paid | $ | — | $ | 27,330 | |||
Proceeds from sale of assets, net: | |||||||
Prepaid expenses and other assets, net | $ | (231 | ) | $ | (579 | ) | |
Assets held for sale | (29,550 | ) | (18,758 | ) | |||
Property, plant and equipment and leasehold intangibles, net | (457 | ) | (978 | ) | |||
Investments in unconsolidated ventures | — | (20,084 | ) | ||||
Refundable fees and deferred revenue | — | 8,345 | |||||
Other liabilities | 78 | 425 | |||||
Loss (gain) on sale of assets, net | 702 | (43,431 | ) | ||||
Net cash received | $ | (29,458 | ) | $ | (75,060 | ) | |
Supplemental Schedule of Non-cash Operating, Investing and Financing Activities: | |||||||
Purchase of treasury stock | |||||||
Treasury stock | $ | 288 | $ | — | |||
Accounts payable | (288 | ) | — | ||||
Net | $ | — | $ | — | |||
Assets designated as held for sale: | |||||||
Assets held for sale | (5,249 | ) | (3,336 | ) | |||
Property, plant and equipment and leasehold intangibles, net | 5,249 | 3,336 | |||||
Net | $ | — | $ | — | |||
Lease termination and modification, net: | |||||||
Prepaid expenses and other assets, net | $ | (160 | ) | $ | — | ||
Property, plant and equipment and leasehold intangibles, net | 175 | — | |||||
Other liabilities | (224 | ) | — | ||||
Loss on facility lease termination and modification, net | 209 | — | |||||
Net | $ | — | $ | — |
March 31, 2019 | December 31, 2018 | ||||||
Reconciliation of cash, cash equivalents and restricted cash: | |||||||
Cash and cash equivalents | $ | 256,501 | $ | 398,267 | |||
Restricted cash | 28,811 | 27,683 | |||||
Long-term restricted cash | 43,188 | 24,268 | |||||
Total cash, cash equivalents and restricted cash shown in the condensed consolidated statement of cash flows | $ | 328,500 | $ | 450,218 |
Three Months Ended March 31, 2019 | |||||||||||||||||||
(in thousands) | Independent Living | Assisted Living and Memory Care | CCRCs | Health Care Services | Total | ||||||||||||||
Private pay | $ | 135,045 | $ | 441,911 | $ | 71,533 | $ | 190 | $ | 648,679 | |||||||||
Government reimbursement | 649 | 16,615 | 21,487 | 88,657 | 127,408 | ||||||||||||||
Other third-party payor programs | — | — | 10,707 | 22,685 | 33,392 | ||||||||||||||
Total resident fee revenue | $ | 135,694 | $ | 458,526 | $ | 103,727 | $ | 111,532 | $ | 809,479 | |||||||||
Three Months Ended March 31, 2018 | |||||||||||||||||||
(in thousands) | Independent Living | Assisted Living and Memory Care | CCRCs | Health Care Services | Total | ||||||||||||||
Private pay | $ | 157,507 | $ | 514,264 | $ | 70,721 | $ | 269 | $ | 742,761 | |||||||||
Government reimbursement | 890 | 18,016 | 23,706 | 92,627 | 135,239 | ||||||||||||||
Other third-party payor programs | — | — | 10,642 | 17,624 | 28,266 | ||||||||||||||
Total resident fee revenue | $ | 158,397 | $ | 532,280 | $ | 105,069 | $ | 110,520 | $ | 906,266 |
Three Months Ended March 31, | |||||||
(in thousands) | 2019 | 2018 | |||||
Revenue: | |||||||
Independent Living (1) | $ | 135,694 | $ | 158,397 | |||
Assisted Living and Memory Care (1) | 458,526 | 532,280 | |||||
CCRCs (1) | 103,727 | 105,069 | |||||
Health Care Services (1) | 111,532 | 110,520 | |||||
Management Services (2) | 232,565 | 280,968 | |||||
$ | 1,042,044 | $ | 1,187,234 | ||||
Segment Operating Income: (3) | |||||||
Independent Living | $ | 52,876 | $ | 64,422 | |||
Assisted Living and Memory Care | 140,699 | 176,538 | |||||
CCRCs | 21,637 | 24,663 | |||||
Health Care Services | 8,173 | 8,318 | |||||
Management Services | 15,743 | 18,681 | |||||
239,128 | 292,622 | ||||||
General and administrative expense (including non-cash stock-based compensation expense) | 56,311 | 81,435 | |||||
Facility operating lease expense | 68,668 | 80,400 | |||||
Depreciation and amortization | 96,888 | 114,255 | |||||
Goodwill and asset impairment | 391 | 430,363 | |||||
Loss on facility lease termination and modification, net | 209 | — | |||||
Income (loss) from operations | $ | 16,661 | $ | (413,831 | ) |
As of | |||||||
(in thousands) | March 31, 2019 | December 31, 2018 | |||||
Total assets: | |||||||
Independent Living | $ | 1,486,073 | $ | 1,104,774 | |||
Assisted Living and Memory Care | 4,359,760 | 3,684,170 | |||||
CCRCs | 801,120 | 707,819 | |||||
Health Care Services | 275,130 | 254,950 | |||||
Corporate and Management Services | 708,690 | 715,547 | |||||
$ | 7,630,773 | $ | 6,467,260 |
(1) | All revenue is earned from external third parties in the United States. |
(2) | Management services segment revenue includes management fees and reimbursements of costs incurred on behalf of managed communities. |
(3) | Segment operating income is defined as segment revenues less segment facility operating expenses (excluding depreciation and amortization) and costs incurred on behalf of managed communities. |
• | Lease Terminations. We and Welltower agreed to early termination of our triple-net lease obligations on 37 communities (4,095 units) effective June 30, 2018. The communities were part of two lease portfolios due to mature in 2028 (27 communities; 3,175 units) and 2020 (10 communities; 920 units). We paid Welltower an aggregate lease termination fee of $58.0 million. We agreed to manage the foregoing 37 communities on an interim basis until the communities have been transitioned to new managers, and such communities are reported in the Management Services segment during such interim period. We recognized a $22.6 million loss on lease termination during the three months ended June 30, 2018 for the amount by which the aggregate lease termination fee exceeded the net carrying value of our assets and liabilities under operating and capital leases as of the lease termination date. |
• | Future Lease Terminations. The parties separately agreed to allow us to terminate leases with respect to, and to remove from the remaining Welltower leased portfolio, a number of communities with annual aggregate base rent up to $5.0 million upon Welltower's sale of such communities, and we would receive a corresponding 6.25% rent credit on Welltower's disposition proceeds. |
• | RIDEA Restructuring. We sold our 20% equity interest in our Welltower RIDEA venture to Welltower effective June 30, 2018 for net proceeds of $33.5 million and for which we recognized a $14.7 million gain on sale. We agreed to continue to manage the communities of the former venture on an interim basis until the communities have been transitioned to new managers, and such communities are reported in the Management Services segment during such interim period. |
• | Master Lease Transactions. We and HCP amended and restated triple-net leases covering substantially all of the communities we leased from HCP as of November 1, 2017 into the HCP Master Lease. During the year ended December 31, 2018, we acquired two communities formerly leased (208 units) for an aggregate purchase price of $35.4 million and during the year ended December 31, 2018 leases with respect to 33 communities (3,123 units) were terminated, and such communities were removed from the HCP Master Lease which completed the terminations of leases as provided in the HCP Master Lease. We agreed to manage communities for which leases were terminated on an interim basis until the communities have been transitioned to new managers, and such communities are reported in the Management Services segment during such interim period. We continue to lease 43 communities pursuant to the terms of the HCP Master Lease, which have the same lease rates and expiration and renewal terms as the applicable prior instruments, except that effective January 1, 2018, we received a $2.5 million annual rent reduction for two communities. The HCP Master Lease also provides that we may engage in certain change in control and other transactions without the need to obtain HCP's consent, subject to the satisfaction of certain conditions. |
• | RIDEA Ventures Restructuring. Pursuant to the multi-part transaction agreement, HCP acquired our 10% ownership interest in one of our RIDEA ventures with HCP in December 2017 for $32.1 million and our 10% ownership interest in the remaining RIDEA venture with HCP in March 2018 for $62.3 million (for which we recognized a $41.7 million gain on sale). We provided management services to 59 communities (9,585 units) on behalf of the two RIDEA ventures as of November 1, 2017. Pursuant to the multi-part transaction agreement, we acquired one community (137 units) for an aggregate purchase price of $32.1 million in January 2018 and three communities (650 units) for an aggregate purchase price of $207.4 million in April 2018 and retained management of 18 of such communities (3,276 units). The amended and restated management agreements for such 18 communities have a term set to expire in 2030, subject to certain early termination rights. In addition, HCP will be entitled to sell or transition operations and/or management of 37 of such communities. Management agreements for 34 such communities (5,224 units) have been terminated by HCP (for which we recognized a $9.1 million non-cash management contract termination gain), and we expect the termination of management agreements on the remaining three communities (298 units) to occur during 2019. |
Three Months Ended March 31, 2019 | |||||||||||
(in thousands) | Actual Results | Amounts Attributable to Completed Dispositions | Actual Results Less Amounts Attributable to Completed Dispositions | ||||||||
Resident fees | |||||||||||
Independent Living | $ | 135,694 | $ | — | $ | 135,694 | |||||
Assisted Living and Memory Care | 458,526 | 3,718 | 454,808 | ||||||||
CCRCs | 103,727 | — | 103,727 | ||||||||
Senior housing resident fees | $ | 697,947 | $ | 3,718 | $ | 694,229 | |||||
Facility operating expense | |||||||||||
Independent Living | $ | 82,818 | $ | — | $ | 82,818 | |||||
Assisted Living and Memory Care | 317,827 | 3,402 | 314,425 | ||||||||
CCRCs | 82,090 | — | 82,090 | ||||||||
Senior housing facility operating expense | $ | 482,735 | $ | 3,402 | $ | 479,333 | |||||
Cash facility lease payments | $ | 95,247 | $ | 192 | $ | 95,055 |
Three Months Ended March 31, 2018 | |||||||||||
(in thousands) | Actual Results | Amounts Attributable to Completed Dispositions | Actual Results Less Amounts Attributable to Completed Dispositions | ||||||||
Resident fees | |||||||||||
Independent Living | $ | 158,397 | $ | 31,629 | $ | 126,768 | |||||
Assisted Living and Memory Care | 532,280 | 85,448 | 446,832 | ||||||||
CCRCs | 105,069 | 6,493 | 98,576 | ||||||||
Senior housing resident fees | $ | 795,746 | $ | 123,570 | $ | 672,176 | |||||
Facility operating expense | |||||||||||
Independent Living | $ | 93,975 | $ | 18,653 | $ | 75,322 | |||||
Assisted Living and Memory Care | 355,742 | 59,389 | 296,353 | ||||||||
CCRCs | 80,406 | 6,057 | 74,349 | ||||||||
Senior housing facility operating expense | $ | 530,123 | $ | 84,099 | $ | 446,024 | |||||
Cash facility lease payments | $ | 130,255 | $ | 33,500 | $ | 96,755 |
Three Months Ended March 31, | Twelve Months Ended December 31, | ||||
2019 | 2018 | ||||
Number of communities | |||||
Independent Living | — | 17 | |||
Assisted Living and Memory Care | 7 | 91 | |||
CCRCs | — | 3 | |||
Total | 7 | 111 | |||
Total units | |||||
Independent Living | — | 2,864 | |||
Assisted Living and Memory Care | 554 | 7,437 | |||
CCRCs | — | 547 | |||
Total | 554 | 10,848 |
(in thousands) | Three Months Ended March 31, 2019 | ||
Resident fees | |||
Assisted Living and Memory Care | $ | 1,383 | |
CCRCs | 11,141 | ||
Senior housing resident fees | $ | 12,524 | |
Facility operating expense | |||
Assisted Living and Memory Care | $ | 1,314 | |
CCRCs | 10,211 | ||
Senior housing facility operating expense | $ | 11,525 |
• | Operating results and data presented on a same community basis reflect results and data of the same store communities (utilizing our methodology for determining same store communities) and, for the 2019 period, exclude the additional resident fee revenue and facility operating expense recognized as a result of application of the new lease accounting standard under ASC 842. |
• | RevPAR, or average monthly senior housing resident fee revenue per available unit, is defined as resident fee revenue for the corresponding portfolio for the period (excluding Health Care Services segment revenue and entrance fee amortization, and, for the 2019 period, the additional resident fee revenue recognized as a result of the application of the new lease accounting standard under ASC 842), divided by the weighted average number of available units in the corresponding portfolio for the period, divided by the number of months in the period. |
• | RevPOR, or average monthly senior housing resident fee revenue per occupied unit, is defined as resident fee revenue for the corresponding portfolio for the period (excluding Health Care Services segment revenue and entrance fee amortization, and, for the 2019 period, the additional resident fee revenue recognized as a result of the application of the new lease accounting standard under ASC 842), divided by the weighted average number of occupied units in the corresponding portfolio for the period, divided by the number of months in the period. |
Three Months Ended March 31, | Increase (Decrease) | |||||||||||||
(in thousands) | 2019 | 2018 | Amount | Percent | ||||||||||
Total revenue | $ | 1,042,044 | $ | 1,187,234 | $ | (145,190 | ) | (12.2 | )% | |||||
Facility operating expense | 586,094 | 632,325 | (46,231 | ) | (7.3 | )% | ||||||||
Net income (loss) | (42,606 | ) | (457,234 | ) | (414,628 | ) | (90.7 | )% | ||||||
Adjusted EBITDA | $ | 116,583 | $ | 147,156 | $ | (30,573 | ) | (20.8 | )% |
(dollars in thousands, except communities, units, occupancy, RevPAR and RevPOR) | Three Months Ended March 31, | Increase (Decrease) | ||||||||||||
2019 | 2018 | Amount | Percent | |||||||||||
Resident fees | $ | 697,947 | $ | 795,746 | $ | (97,799 | ) | (12.3 | )% | |||||
Facility operating expense | $ | 482,735 | $ | 530,123 | $ | (47,388 | ) | (8.9 | )% | |||||
Number of communities (period end) | 680 | 792 | (112 | ) | (14.1 | )% | ||||||||
Number of units (period end) | 55,948 | 66,355 | (10,407 | ) | (15.7 | )% | ||||||||
Number of units (weighted average) | 56,460 | 66,557 | (10,097 | ) | (15.2 | )% | ||||||||
RevPAR | $ | 4,102 | $ | 3,983 | $ | 119 | 3.0 | % | ||||||
Occupancy rate (weighted average) | 83.6 | % | 84.4 | % | (80 | ) bps | n/a | |||||||
RevPOR | $ | 4,909 | $ | 4,717 | $ | 192 | 4.1 | % | ||||||
Same Community Operating Results and Data | ||||||||||||||
Resident fees | $ | 653,588 | $ | 643,884 | $ | 9,704 | 1.5 | % | ||||||
Facility operating expense | $ | 443,787 | $ | 424,892 | $ | 18,895 | 4.4 | % | ||||||
Number of communities | 658 | 658 | — | — | % | |||||||||
Total average units | 52,492 | 52,527 | (35 | ) | (0.1 | )% | ||||||||
RevPAR | $ | 4,148 | $ | 4,084 | $ | 64 | 1.6 | % | ||||||
Occupancy rate (weighted average) | 84.0 | % | 85.2 | % | (120 | ) bps | n/a | |||||||
RevPOR | $ | 4,939 | $ | 4,791 | $ | 148 | 3.1 | % |
(dollars in thousands, except communities, units, occupancy, RevPAR and RevPOR) | Three Months Ended March 31, | Increase (Decrease) | ||||||||||||
2019 | 2018 | Amount | Percent | |||||||||||
Resident fees | $ | 135,694 | $ | 158,397 | $ | (22,703 | ) | (14.3 | )% | |||||
Facility operating expense | $ | 82,818 | $ | 93,975 | $ | (11,157 | ) | (11.9 | )% | |||||
Number of communities (period end) | 68 | 84 | (16 | ) | (19.0 | )% | ||||||||
Number of units (period end) | 12,430 | 15,045 | (2,615 | ) | (17.4 | )% | ||||||||
Number of units (weighted average) | 12,430 | 15,045 | (2,615 | ) | (17.4 | )% | ||||||||
RevPAR | $ | 3,602 | $ | 3,509 | $ | 93 | 2.7 | % | ||||||
Occupancy rate (weighted average) | 89.8 | % | 87.7 | % | 210 | bps | n/a | |||||||
RevPOR | $ | 4,012 | $ | 4,004 | $ | 8 | 0.2 | % | ||||||
Same Community Operating Results and Data | ||||||||||||||
Resident fees | $ | 122,436 | $ | 118,451 | $ | 3,985 | 3.4 | % | ||||||
Facility operating expense | $ | 72,151 | $ | 69,254 | $ | 2,897 | 4.2 | % | ||||||
Number of communities | 63 | 63 | — | — | % | |||||||||
Total average units | 11,326 | 11,357 | (31 | ) | (0.3 | )% | ||||||||
RevPAR | $ | 3,603 | $ | 3,477 | $ | 126 | 3.6 | % | ||||||
Occupancy rate (weighted average) | 90.2 | % | 88.7 | % | 150 | bps | n/a | |||||||
RevPOR | $ | 3,995 | $ | 3,918 | $ | 77 | 2.0 | % |
(dollars in thousands, except communities, units, occupancy, RevPAR and RevPOR) | Three Months Ended March 31, | Increase (Decrease) | ||||||||||||
2019 | 2018 | Amount | Percent | |||||||||||
Resident fees | $ | 458,526 | $ | 532,280 | $ | (73,754 | ) | (13.9 | )% | |||||
Facility operating expense | $ | 317,827 | $ | 355,742 | $ | (37,915 | ) | (10.7 | )% | |||||
Number of communities (period end) | 586 | 681 | (95 | ) | (14.0 | )% | ||||||||
Number of units (period end) | 36,944 | 44,728 | (7,784 | ) | (17.4 | )% | ||||||||
Number of units (weighted average) | 37,477 | 44,773 | (7,296 | ) | (16.3 | )% | ||||||||
RevPAR | $ | 4,070 | $ | 3,963 | $ | 107 | 2.7 | % | ||||||
Occupancy rate (weighted average) | 81.6 | % | 83.4 | % | (180 | ) bps | n/a | |||||||
RevPOR | $ | 4,988 | $ | 4,750 | $ | 238 | 5.0 | % | ||||||
Same Community Operating Results and Data | ||||||||||||||
Resident fees | $ | 439,445 | $ | 434,639 | $ | 4,806 | 1.1 | % | ||||||
Facility operating expense | $ | 298,269 | $ | 286,295 | $ | 11,974 | 4.2 | % | ||||||
Number of communities | 572 | 572 | — | — | % | |||||||||
Total average units | 35,529 | 35,532 | (3 | ) | — | % | ||||||||
RevPAR | $ | 4,123 | $ | 4,077 | $ | 46 | 1.1 | % | ||||||
Occupancy rate (weighted average) | 82.2 | % | 84.4 | % | (220 | ) bps | n/a | |||||||
RevPOR | $ | 5,014 | $ | 4,834 | $ | 180 | 3.7 | % |
(dollars in thousands, except communities, units, occupancy, RevPAR and RevPOR) | Three Months Ended March 31, | Increase (Decrease) | ||||||||||||
2019 | 2018 | Amount | Percent | |||||||||||
Resident fees | $ | 103,727 | $ | 105,069 | $ | (1,342 | ) | (1.3 | )% | |||||
Facility operating expense | $ | 82,090 | $ | 80,406 | $ | 1,684 | 2.1 | % | ||||||
Number of communities (period end) | 26 | 27 | (1 | ) | (3.7 | )% | ||||||||
Number of units (period end) | 6,574 | 6,582 | (8 | ) | (0.1 | )% | ||||||||
Number of units (weighted average) | 6,553 | 6,739 | (186 | ) | (2.8 | )% | ||||||||
RevPAR | $ | 5,232 | $ | 5,172 | $ | 60 | 1.2 | % | ||||||
Occupancy rate (weighted average) | 82.9 | % | 84.1 | % | (120 | ) bps | n/a | |||||||
RevPOR | $ | 6,312 | $ | 6,160 | $ | 152 | 2.5 | % | ||||||
Same Community Operating Results and Data | ||||||||||||||
Resident fees | $ | 91,707 | $ | 90,794 | $ | 913 | 1.0 | % | ||||||
Facility operating expense | $ | 73,367 | $ | 69,343 | $ | 4,024 | 5.8 | % | ||||||
Number of communities | 23 | 23 | — | — | % | |||||||||
Total average units | 5,637 | 5,638 | (1 | ) | — | % | ||||||||
RevPAR | $ | 5,399 | $ | 5,347 | $ | 52 | 1.0 | % | ||||||
Occupancy rate (weighted average) | 82.6 | % | 83.8 | % | (120 | ) bps | n/a | |||||||
RevPOR | $ | 6,533 | $ | 6,382 | $ | 151 | 2.4 | % |
(dollars in thousands, except communities, units, occupancy, RevPAR and RevPOR) | Three Months Ended March 31, | Increase (Decrease) | ||||||||||||
2019 | 2018 | Amount | Percent | |||||||||||
Resident fees | $ | 111,532 | $ | 110,520 | $ | 1,012 | 0.9 | % | ||||||
Facility operating expense | $ | 103,359 | $ | 102,202 | $ | 1,157 | 1.1 | % | ||||||
Home Health average daily census | 15,904 | 15,497 | 407 | 2.6 | % | |||||||||
Hospice average daily census | 1,428 | 1,302 | 126 | 9.7 | % | |||||||||
Outpatient Therapy treatment codes | 158,543 | 167,170 | (8,627 | ) | (5.2 | )% |
(dollars in thousands, except communities, units and occupancy) | Three Months Ended March 31, | Increase (Decrease) | ||||||||||||
2019 | 2018 | Amount | Percent | |||||||||||
Management fees | $ | 15,743 | $ | 18,681 | $ | (2,938 | ) | (15.7 | )% | |||||
Reimbursed costs incurred on behalf of managed communities | $ | 216,822 | $ | 262,287 | $ | (45,465 | ) | (17.3 | )% | |||||
Number of communities (period end) | 164 | 218 | (54 | ) | (24.8 | )% | ||||||||
Number of units (period end) | 23,742 | 32,754 | (9,012 | ) | (27.5 | )% | ||||||||
Number of units (weighted average) | 25,047 | 33,699 | (8,652 | ) | (25.7 | )% | ||||||||
Occupancy rate (weighted average) | 82.9 | % | 84.2 | % | (130 | ) bps | n/a |
(in thousands) | Three Months Ended March 31, | Increase (Decrease) | ||||||||||||
2019 | 2018 | Amount | Percent | |||||||||||
General and administrative expense | $ | 56,311 | $ | 81,435 | $ | (25,124 | ) | (30.9 | )% | |||||
Facility operating lease expense | 68,668 | 80,400 | (11,732 | ) | (14.6 | )% | ||||||||
Depreciation and amortization | 96,888 | 114,255 | (17,367 | ) | (15.2 | )% | ||||||||
Goodwill and asset impairment | 391 | 430,363 | (429,972 | ) | (99.9 | )% | ||||||||
Loss on facility lease termination and modification, net | 209 | — | 209 | NM | ||||||||||
Costs incurred on behalf of managed communities | 216,822 | 262,287 | (45,465 | ) | (17.3 | )% | ||||||||
Interest income | 3,084 | 2,983 | 101 | 3.4 | % | |||||||||
Interest expense | (63,365 | ) | (72,540 | ) | (9,175 | ) | (12.6 | )% | ||||||
Debt modification and extinguishment costs | (67 | ) | (35 | ) | 32 | 91.4 | % | |||||||
Equity in loss of unconsolidated ventures | (526 | ) | (4,243 | ) | (3,717 | ) | (87.6 | )% | ||||||
Gain (loss) on sale of assets, net | (702 | ) | 43,431 | (44,133 | ) | (101.6 | )% | |||||||
Other non-operating income | 2,988 | 2,586 | 402 | 15.5 | % | |||||||||
Benefit (provision) for income taxes | $ | (679 | ) | $ | (15,585 | ) | $ | (14,906 | ) | (95.6 | )% |
Three Months Ended March 31, | Increase (Decrease) | |||||||||||||
(in thousands) | 2019 | 2018 | Amount | Percent | ||||||||||
Net cash provided by (used in) operating activities | $ | (5,009 | ) | $ | 37,964 | $ | (42,973 | ) | (113.2 | )% | ||||
Net cash provided by (used in) investing activities | (100,073 | ) | 91,155 | (191,228 | ) | (209.8 | )% | |||||||
Net cash provided by (used in) financing activities | (16,636 | ) | (16,104 | ) | (532 | ) | (3.3 | )% | ||||||
Net (decrease) increase in cash, cash equivalents and restricted cash | (121,718 | ) | 113,015 | (234,733 | ) | (207.7 | )% | |||||||
Cash, cash equivalents and restricted cash at beginning of period | 450,218 | 282,546 | 167,672 | 59.3 | % | |||||||||
Cash, cash equivalents and restricted cash at end of period | $ | 328,500 | $ | 395,561 | $ | (67,061 | ) | (17.0 | )% | |||||
Adjusted Free Cash Flow | $ | (46,971 | ) | $ | (6,282 | ) | $ | (40,689 | ) | (647.7 | )% | |||
Brookdale's proportionate share of Adjusted Free Cash Flow of unconsolidated ventures | $ | 5,384 | $ | 6,367 | $ | (983 | ) | (15.4 | )% |
• | cash balances on hand, cash equivalents and marketable securities; |
• | cash flows from operations; |
• | proceeds from our credit facilities; |
• | funds generated through unconsolidated venture arrangements; |
• | proceeds from mortgage financing, refinancing of various assets or sale-leaseback transactions; |
• | funds raised in the debt or equity markets; and |
• | proceeds from the disposition of assets. |
• | working capital; |
• | operating costs such as employee compensation and related benefits, severance costs, general and administrative expense, and supply costs; |
• | debt service and lease payments; |
• | acquisition consideration, lease termination and restructuring costs, and transaction and integration costs; |
• | capital expenditures and improvements, including the expansion, renovation, redevelopment, and repositioning of our current communities, and the development of new communities; |
• | cash collateral required to be posted in connection with our financial instruments and insurance programs; |
• | purchases of common stock under our share repurchase authorizations; |
• | other corporate initiatives (including integration, information systems, branding, and other strategic projects); and |
• | prior to 2009, dividend payments. |
• | working capital; |
• | operating costs such as employee compensation and related benefits, general and administrative expense, and supply costs; |
• | debt service and lease payments; |
• | transaction costs and expansion of our healthcare services; |
• | capital expenditures and improvements, including the expansion, renovation, redevelopment, and repositioning of our existing communities; |
• | cash funding needs of our unconsolidated ventures for operating, capital expenditure, and financing needs; |
• | cash collateral required to be posted in connection with our financial instruments and insurance programs; |
• | purchases of common stock under our share repurchase authorization; and |
• | other corporate initiatives (including information systems and other strategic projects). |
(in millions) | Three Months Ended March 31, 2019 | ||
Community-level capital expenditures, net | $ | 43.4 | |
Corporate (1) | 11.2 | ||
Non-development capital expenditures, net (2) | 54.6 | ||
Development capital expenditures, net | 5.3 | ||
Total capital expenditures, net | $ | 59.9 |
(1) | Includes $6.0 million of remediation costs at our communities resulting from hurricanes and for the acquisition of emergency power generators at our impacted Florida communities. |
(2) | Amount is included in Adjusted Free Cash Flow. |
Three Months Ended March 31, | |||||||
(in thousands) | 2019 | 2018 | |||||
Net income (loss) | $ | (42,606 | ) | $ | (457,234 | ) | |
Provision for income taxes | 679 | 15,585 | |||||
Equity in loss of unconsolidated ventures | 526 | 4,243 | |||||
Debt modification and extinguishment costs | 67 | 35 | |||||
Loss (gain) on sale of assets, net | 702 | (43,431 | ) | ||||
Other non-operating income | (2,988 | ) | (2,586 | ) | |||
Interest expense | 63,365 | 72,540 | |||||
Interest income | (3,084 | ) | (2,983 | ) | |||
Income (loss) from operations | 16,661 | (413,831 | ) | ||||
Depreciation and amortization | 96,888 | 114,255 | |||||
Goodwill and asset impairment | 391 | 430,363 | |||||
Loss on facility lease termination and modification, net | 209 | — | |||||
Operating lease expense adjustment | (4,383 | ) | (8,103 | ) | |||
Amortization of deferred gain | — | (1,090 | ) | ||||
Non-cash stock-based compensation expense | 6,356 | 8,406 | |||||
Transaction and organizational restructuring costs | 461 | 17,156 | |||||
Adjusted EBITDA (1) | $ | 116,583 | $ | 147,156 |
(1) | Adoption of the new lease accounting standard effective January 1, 2019 will have a non-recurring impact on our full-year 2019 Adjusted EBITDA. Adjusted EBITDA for the three months ended March 31, 2019 includes a negative net impact of approximately $6.4 million from the application of the new lease accounting standard. |
Three Months Ended March 31, | |||||||
(in thousands) | 2019 | 2018 | |||||
Net income (loss) | $ | (1,050 | ) | $ | (22,662 | ) | |
Provision (benefit) for income taxes | 24 | 234 | |||||
Debt modification and extinguishment costs | 21 | (17 | ) | ||||
Gain on sale of assets, net | — | (1,045 | ) | ||||
Other non-operating income (loss) | — | (903 | ) | ||||
Interest expense | 7,380 | 26,827 | |||||
Interest income | (812 | ) | (757 | ) | |||
Income (loss) from operations | 5,563 | 1,677 | |||||
Depreciation and amortization | 16,747 | 67,885 | |||||
Asset impairment | 295 | 155 | |||||
Operating lease expense adjustment | — | 4 | |||||
Adjusted EBITDA of unconsolidated ventures | $ | 22,605 | $ | 69,721 | |||
Brookdale's proportionate share of Adjusted EBITDA of unconsolidated ventures | $ | 11,319 | $ | 16,749 |
Three Months Ended March 31, | |||||||
(in thousands) | 2019 | 2018 | |||||
Net cash provided by (used in) operating activities | $ | (5,009 | ) | $ | 37,964 | ||
Net cash provided by (used in) investing activities | (100,073 | ) | 91,155 | ||||
Net cash provided by (used in) financing activities | (16,636 | ) | (16,104 | ) | |||
Net increase (decrease) in cash, cash equivalents and restricted cash | $ | (121,718 | ) | $ | 113,015 | ||
Net cash provided by (used in) operating activities | $ | (5,009 | ) | $ | 37,964 | ||
Distributions from unconsolidated ventures from cumulative share of net earnings | (749 | ) | (408 | ) | |||
Changes in prepaid insurance premiums financed with notes payable | 18,842 | 18,633 | |||||
Non-development capital expenditures, net | (54,602 | ) | (41,736 | ) | |||
Property insurance proceeds | — | 156 | |||||
Payment of financing lease obligations | (5,453 | ) | (21,114 | ) | |||
Proceeds from refundable entrance fees, net of refunds | — | 223 | |||||
Adjusted Free Cash Flow | $ | (46,971 | ) | $ | (6,282 | ) |
(1) | The calculation of Adjusted Free Cash Flow includes transaction costs of $0.5 million and transaction and organizational restructuring costs of $17.2 million for the three months ended March 31, 2019 and 2018, respectively. |
Three Months Ended March 31, | |||||||
(in thousands) | 2019 | 2018 | |||||
Net cash provided by operating activities | $ | 24,122 | $ | 50,262 | |||
Net cash provided by (used in) investing activities | (8,011 | ) | (14,642 | ) | |||
Net cash provided by (used in) financing activities | (8,788 | ) | (23,279 | ) | |||
Net increase in cash, cash equivalents and restricted cash | $ | 7,323 | $ | 12,341 | |||
Net cash provided by operating activities | $ | 24,122 | $ | 50,262 | |||
Non-development capital expenditures, net | (8,000 | ) | (20,061 | ) | |||
Property insurance proceeds | — | 901 | |||||
Proceeds from refundable entrance fees, net of refunds | (5,843 | ) | (6,712 | ) | |||
Adjusted Free Cash Flow of unconsolidated ventures | $ | 10,279 | $ | 24,390 | |||
Brookdale's proportionate share of Adjusted Free Cash Flow of unconsolidated ventures | $ | 5,384 | $ | 6,367 |
(a) | Not applicable. |
(b) | Not applicable. |
(c) | The following table contains information regarding purchases of our common stock made during the quarter ended March 31, 2019 by or on behalf of the Company or any ''affiliated purchaser,'' as defined by Rule 10b-18(a)(3) of the Exchange Act: |
Period | Total Number of Shares Purchased (1) | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs ($ in thousands) (2) | ||||||||
1/1/2019 - 1/31/2019 | — | — | — | 81,860 | ||||||||
2/1/2019 - 2/28/2019 | 433,685 | $ | 6.91 | — | 81,860 | |||||||
3/1/2019 - 3/31/2019 | 932,712 | 6.43 | 932,712 | 75,860 | ||||||||
Total | 1,366,397 | $ | 6.58 | 932,712 |
(1) | Includes 433,685 shares withheld to satisfy tax liabilities due upon the vesting of restricted stock during February 2019 and 932,712 shares purchased in open market transactions during March 2019 pursuant to the publicly announced repurchase program summarized in footnote (2) below. The average price paid per share for such share withholding is based on the closing price per share on the vesting date of the restricted stock or, if such date is not a trading day, the trading day immediately prior to such vesting date. |
(2) | On November 1, 2016, the Company announced that its Board of Directors had approved a share repurchase program that authorizes the Company to purchase up to $100.0 million in the aggregate of its common stock. The share repurchase program is intended to be implemented through purchases made from time to time using a variety of methods, which may 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 will be based on business, market and other conditions and factors, including price, regulatory and contractual requirements, and capital availability. The repurchase program does not obligate the Company to acquire any particular amount of common stock and the program may be suspended, modified or discontinued at any time at the Company's discretion without prior notice. Shares of stock repurchased under the program will be held as treasury shares. As of March 31, 2019, approximately $75.9 million remained available under the repurchase program. |
Exhibit No. | Description | |
3.1 | ||
3.2 | ||
4.1 | ||
10.1 | ||
10.2 | ||
10.3 | ||
31.1 | ||
31.2 | ||
32 | ||
101.INS | XBRL Instance Document. | |
101.SCH | XBRL Taxonomy Extension Schema Document. | |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document. | |
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document. | |
101.LAB | XBRL Taxonomy Extension Label Linkbase Document. | |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document. |
BROOKDALE SENIOR LIVING INC. | |||
(Registrant) | |||
By: | /s/ Steven E. Swain | ||
Name: | Steven E. Swain | ||
Title: | Executive Vice President and Chief Financial Officer (Principal Financial Officer) | ||
Date: | May 7, 2019 | ||
1. | I have reviewed this Quarterly Report on Form 10-Q of Brookdale Senior Living Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: | May 7, 2019 | /s/ Lucinda M. Baier | |
Lucinda M. Baier | |||
President and Chief Executive Officer |
1. | I have reviewed this Quarterly Report on Form 10-Q of Brookdale Senior Living Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: | May 7, 2019 | /s/ Steven E. Swain | |
Steven E. Swain | |||
Executive Vice President and Chief Financial Officer |
Document and Entity Information - shares |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
May 03, 2019 |
|
Document and Entity Information [Abstract] | ||
Entity Registrant Name | Brookdale Senior Living Inc. | |
Entity Central Index Key | 0001332349 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 186,189,888 | |
Document Fiscal Year Focus | 2019 | |
Document Fiscal Period Focus | Q1 | |
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Mar. 31, 2019 | |
Entity Emerging Growth Company | false | |
Entity Small Business | false |
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares |
Mar. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Equity, Number of Shares, Par Value and Other Disclosures [Abstract] | ||
Preferred stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized (in shares) | 50,000,000 | 50,000,000 |
Preferred stock, shares issued (in shares) | 0 | 0 |
Preferred stock, shares outstanding (in shares) | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized (in shares) | 400,000,000 | 400,000,000 |
Common stock, shares issued (in shares) | 199,965,001 | 196,815,254 |
Common stock, shares outstanding (in shares) | 194,573,086 | 192,356,051 |
Treasury stock, shares (in shares) | 5,391,915 | 4,459,203 |
Unvested Restricted Stock | ||
Equity, Number of Shares, Par Value and Other Disclosures [Abstract] | ||
Common stock, shares outstanding (in shares) | 7,881,179 | 5,756,435 |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Parenthetical) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Income Statement [Abstract] | ||
Depreciation and amortization | $ 88,827 | $ 103,168 |
Non-cash stock-based compensation expense | $ 6,356 | $ 8,406 |
Description of Business |
3 Months Ended |
---|---|
Mar. 31, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Description of Business | Description of Business Brookdale Senior Living Inc. ("Brookdale" or the "Company") is an operator of senior living communities throughout the United States. The Company is committed to providing senior living solutions primarily within properties that are designed, purpose-built, and operated to provide quality service, care, and living accommodations for residents. The Company operates and manages independent living, assisted living, memory care, and continuing care retirement communities ("CCRCs"). The Company also offers a range of home health, hospice, and outpatient therapy services to residents of many of its communities and to seniors living outside of its communities. |
Summary of Significant Accounting Policies |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Significant Accounting Policies | Summary of Significant Accounting Policies Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States ("US GAAP") and pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC") for quarterly reports on Form 10-Q. In the opinion of management, these financial statements include all adjustments, which are of a normal and recurring nature, necessary to present fairly the financial position, results of operations, and cash flows of the Company for all periods presented. Certain information and footnote disclosures included in annual financial statements 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 included in the Company's Annual Report on Form 10-K for the year ended December 31, 2018 filed with the SEC on February 14, 2019. Certain prior period amounts have been reclassified to conform to the current financial statement presentation, with no effect on the Company's condensed consolidated financial position or results of operations. Except for the changes for the impact of the recently adopted accounting pronouncements discussed in this Note, the Company has consistently applied its accounting policies to all periods presented in these condensed consolidated financial statements. Principles of Consolidation The condensed consolidated financial statements include the accounts of Brookdale and its consolidated subsidiaries. All significant intercompany balances and transactions have been eliminated. Investments in affiliated companies that the Company does not control, but has the ability to exercise significant influence over governance and operations, are accounted for by the equity method. The ownership interest of consolidated entities not wholly-owned by the Company are presented as noncontrolling interests in the accompanying condensed consolidated financial statements. Noncontrolling interest represents the share of consolidated entities owned by third parties. Noncontrolling interest is adjusted for the noncontrolling holder's share of additional contributions, distributions, and the proportionate share of the net income or loss of each respective entity. Revenue Recognition Resident Fees Resident fee revenue is reported at the amount that reflects the consideration the Company expects to receive in exchange for the services provided. These amounts are due from residents or third-party payors and include variable consideration for retroactive adjustments, if any, under reimbursement programs. Performance obligations are determined based on the nature of the services provided. Resident fee revenue is recognized as performance obligations are satisfied. Under the Company's senior living residency agreements, which are generally for a contractual term of 30 days to one year, the Company provides senior living services to residents for a stated daily or monthly fee. The Company has elected the lessor practical expedient within ASC 842, Leases ("ASC 842") and recognizes, measures, presents, and discloses the revenue for services under the Company's senior living residency agreements based upon the predominant component, either the lease or nonlease component, of the contracts. The Company has determined that the services included under the Company’s independent living, assisted living, and memory care residency agreements have the same timing and pattern of transfer. The Company recognizes revenue under ASC 606, Revenue Recognition from Contracts with Customers ("ASC 606") for its independent living, assisted living, and memory care residency agreements for which it has estimated that the nonlease components of such residency agreements are the predominant component of the contract. The Company enters into contracts to provide home health, hospice, and outpatient therapy services. Each service provided under the contract is capable of being distinct, and thus, the services are considered individual and separate performance obligations. The performance obligations are satisfied and revenue is recognized as services are provided. The Company receives revenue for services under various third-party payor programs which include Medicare, Medicaid, and other third-party payors. Settlements with third-party payors for retroactive adjustments due to audits, reviews, or investigations are included in the determination of the estimated transaction price for providing services. The Company estimates the transaction price based on the terms of the contract with the payor, correspondence with the payor and historical payment trends, and retroactive adjustments are recognized in future periods as final settlements are determined. Management Services The Company manages certain communities under contracts which provide periodic management fee payments to the Company. Management fees are generally determined by an agreed upon percentage of gross revenues (as defined in the management agreement). Certain management contracts also provide for an annual incentive fee to be paid to the Company upon achievement of certain metrics identified in the contract. The Company recognizes revenue for community management services in accordance with the provisions of ASC 606. Although there are various management and operational activities performed by the Company under the contracts, the Company has determined that all community operations management activities are a single performance obligation, which is satisfied over time as the services are rendered. The Company estimates the amount of incentive fee revenue expected to be earned, if any, during the annual contract period and revenue is recognized as services are provided. The Company’s estimate of the transaction price for management services also includes the amount of reimbursement due from the owners of the communities for services provided and related costs incurred. Such revenue is included in "reimbursed costs incurred on behalf of managed communities" on the condensed consolidated statements of operations. The related costs are included in "costs incurred on behalf of managed communities" on the condensed consolidated statements of operations. Gain on Sale of Assets The Company regularly enters into real estate transactions which may include the disposal of certain communities, including the associated real estate. The Company recognizes income from real estate sales under ASC 610-20, Other Income - Gains and Losses from Derecognition of Nonfinancial Assets ("ASC 610-20"). Under ASC 610-20, income is recognized when the transfer of control occurs and the Company applies the five-step model for recognition to determine the amount and timing of income to recognize for all real estate sales. The Company accounts for the sale of equity method investments under ASC 860, Transfers and Servicing ("ASC 860"). Under ASC 860, income is recognized when the transfer of control occurs and the Company has no continuing involvement with the transferred financial assets. Income Taxes Income taxes are accounted for under the asset and liability approach which requires recognition of deferred tax assets and liabilities for the differences between the financial reporting and tax basis of assets and liabilities. A valuation allowance reduces deferred tax assets when it is more likely than not that some portion or all of the deferred tax assets will not be realized. Fair Value of Financial Instruments ASC 820, Fair Value Measurements and Disclosures 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. 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. Cash and cash equivalents, marketable securities, and restricted cash are reflected in the accompanying condensed consolidated balance sheets at amounts considered by management to reasonably approximate fair value due to the short maturity. Goodwill The Company tests goodwill for impairment annually as of October 1 or whenever indicators of impairment arise. Factors the Company considers important in its analysis of whether an indicator of impairment exists include a significant decline in the Company's stock price or market capitalization for a sustained period since the last testing date, significant underperformance relative to historical or projected future operating results and significant negative industry or economic trends. The Company first assesses qualitative factors to determine whether it is necessary to perform a quantitative goodwill impairment test. The quantitative goodwill impairment test is based upon a comparison of the estimated fair value of the reporting unit to which the goodwill has been assigned with the reporting unit's carrying value. The Company is not required to calculate the fair value of a reporting unit unless the Company determines, based on a qualitative assessment, that it is more likely than not that its fair value of a reporting unit is less than its carrying value. The fair values used in the quantitative goodwill impairment test are estimated using Level 3 inputs based upon discounted future cash flow projections for the reporting unit. These cash flow projections are based upon a number of estimates and assumptions such as revenue and expense growth rates, capitalization rates, and discount rates. The Company also considers market based measures such as earnings multiples in its analysis of estimated fair values of its reporting units. If the quantitative goodwill impairment test results in a reporting unit's carrying value exceeding its estimated fair value, an impairment charge will be recorded based on the difference. The impairment charge is limited to the amount of goodwill allocated to the reporting unit. Long-lived Asset Impairment Long-lived assets (including right-of-use assets) are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of long-lived assets held for use are assessed by a comparison of the carrying amount of the asset to the estimated future undiscounted net cash flows expected to be generated by the asset, calculated utilizing the lowest level of identifiable cash flows. If estimated future undiscounted net cash flows are less than the carrying amount of the asset then the fair value of the asset is estimated. The impairment expense is determined by comparing the estimated fair value of the asset to its carrying value, with any amount in excess of fair value recognized as an expense in the current period. Undiscounted cash flow projections and estimates of fair value amounts are based on a number of assumptions such as revenue and expense growth rates, estimated holding periods and estimated capitalization rates (Level 3). 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 and every claim. As a result, the Company is, in effect, self-insured for claims that are less than the deductible amounts. In addition, the Company maintains a high deductible workers compensation program and a self-insured employee medical program. 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 becomes available. Lease Accounting The following is the Company's lease accounting policy under ASC 842 subsequent to the adoption. Refer to Recently Adopted Accounting Pronouncements in this Note 2 for significant changes that resulted from the adoption effective January 1, 2019. The Company, as lessee, recognizes a right-of-use asset and a lease liability on the Company’s condensed consolidated balance sheet for its community, office, and equipment leases. As of the commencement date of a lease, a lease liability and corresponding right-of-use asset is established on the Company’s condensed consolidated balance sheet at the present value of future minimum lease payments. The Company's community leases generally contain fixed annual rent escalators or annual rent escalators based on an index, such as the consumer price index. The future minimum lease payments recognized on the condensed consolidated balance sheet include fixed payments (including in-substance fixed payments) and variable payments estimated utilizing the index or rate on the lease commencement date. The Company recognizes lease expense as incurred for additional variable payments. For the Company’s leases that do not contain an implicit rate, the Company utilizes its estimated incremental borrowing rate in determining the present value of lease payments based on information available at commencement of the lease, which reflects the fixed rate at which the Company could borrow a similar amount for the same term on a collateralized basis. Leases with an initial term of 12 months or less are not recorded on the Company’s condensed consolidated balance sheet and instead are recognized as lease expense as incurred. The Company, as lessee, makes a determination with respect to each of its community, office, and equipment leases as to whether each should be accounted for as an operating lease or financing lease in accordance with the provisions of ASC 842. The classification criteria is based on estimates regarding the fair value of the leased asset, minimum lease payments, effective cost of funds, the economic life of the asset and certain other terms in the lease agreements. For operating leases, payments made under operating lease arrangements are accounted for in the Company's condensed consolidated statements of operations as operating lease expense for actual rent paid, generally plus or minus a straight-line adjustment for estimated minimum lease escalators if applicable. The right-of-use asset is generally reduced each period by an amount equal to the difference between the operating lease expense and the amount of expense on the lease liability utilizing the effective interest method. Subsequent to the impairment of an operating lease right-of-use asset, the Company recognizes operating lease expense consisting of the reduction of the right-of-use asset on a straight-line basis over the remaining lease term and the amount of expense on the lease liability utilizing the effective interest method. For financing leases, the Company recognizes interest expense on the lease liability utilizing the effective interest method. Additionally, the right-of-use asset is generally amortized to depreciation and amortization expense on a straight-line basis over the lease term unless the lease contains an option to purchase the underlying asset that the Company is reasonably certain to exercise in which case the asset is depreciated over the useful life of the underlying asset. For transactions in which an owned community is sold and leased back from the buyer (sale-leaseback transactions), the Company recognizes an asset sale and lease accounting is applied if the Company has transferred control of the community. For such transactions, the Company removes the transferred assets from the consolidated balance sheet and a gain or loss on the sale is recognized for the difference between the carrying value of the asset and the transaction price for the sale transaction. For sale‑leaseback transactions in which the Company has not transferred control of the underlying asset, the Company does not recognize an asset sale or derecognize the underlying asset until control is transferred. For such transactions, the Company continues to depreciate the asset over its useful life. Additionally, the Company accounts for any amounts received as a financing lease liability and the Company recognizes interest expense on the financing lease liability utilizing the effective interest method with the interest expense limited to an amount that is not greater than the cash payments on the financing lease liability over the term of the lease. Refer to the Company’s revenue recognition policy for discussion of the accounting policy for residency agreements, which include the lease of an asset. Recently Adopted Accounting Pronouncements In February 2016, the FASB issued ASU 2016-02, Leases ("ASU 2016-02"). ASU 2016-02 amends the existing accounting principles for the recognition, measurement, presentation and disclosure of leases for both lessees and lessors. ASU 2016-02 requires a lessee to recognize a right-of-use asset and a lease liability on the balance sheet for most leases. Additionally, ASU 2016-02 makes targeted changes to lessor accounting, including changes to align certain aspects with the revenue recognition model, and requires enhanced disclosure of lease arrangements. In July 2018, the FASB issued ASU 2018-11, Leases, Targeted Improvements ("ASU 2018-11"). ASU 2018-11 provides entities with a transition method option to not restate comparative periods presented, but to recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. In addition, ASU 2018-11 provides entities with a practical expedient allowing lessors to not separate nonlease components from the associated lease components when certain criteria are met. The Company adopted these lease accounting standards effective January 1, 2019 and utilized the modified retrospective transition method with no adjustments to comparative periods presented. Additionally, the Company elected the package of practical expedients within ASU 2016-02 that allows an entity to not reassess, as of January 1, 2019, its prior conclusions on whether an existing contract contains a lease, lease classification for existing leases, and whether costs incurred for existing leases qualify as initial direct costs. The Company's adoption of ASU 2016-02 resulted in the recognition of operating lease liabilities of $1.6 billion and right-of-use assets of $1.3 billion on the condensed consolidated balance sheet for its existing community, office, and equipment operating leases based on the remaining present value of the minimum lease payments as of January 1, 2019. The future minimum rental payments recognized on the condensed consolidated balance sheet included fixed payments (including in-substance fixed payments) and variable payments estimated utilizing the index or rate as of January 1, 2019. Such right-of-use asset amounts were recognized based upon the amount of the recognized lease liabilities, adjusted for accrued lease payments, intangible assets, and the recognition of right-of-use asset impairments. As of December 31, 2018, the Company had a net liability of $231.4 million recognized on its consolidated balance sheet for accrued lease payments and intangible assets for operating leases. Additionally, $58.1 million of previously unrecognized right-of-use asset impairments were recognized as a cumulative effect adjustment to beginning accumulated deficit as of January 1, 2019. As a result of the Company’s election of the package of practical expedients within ASU 2016-02, there were no changes to the classification of the Company’s existing operating, capital and financing leases as of January 1, 2019 and there were no changes to the amounts recognized on its balance sheet for its existing capital and financing leases as of January 1, 2019. Subsequent to the adoption of ASU 2016-02, lessors are required to separately recognize and measure the lease component of a contract with a customer utilizing the provisions of ASC 842 and the nonlease components utilizing the provisions of ASC 606. To separately account for the components, the transaction price is allocated among the components based upon the estimated stand alone selling prices of the components. Additionally, certain components of a contract which were previously included within the lease element recognized in accordance with ASC 840, Leases ("ASC 840") prior to the adoption of ASU 2016-02 (such as common area maintenance services, other basic services, and executory costs) are recognized as nonlease components subject to the provisions of ASC 606 subsequent to the adoption of ASU 2016-02. However, entities are permitted to elect the practical expedient under ASU 2018-11 allowing lessors to not separate nonlease components from the associated lease components when certain criteria are met. Entities that elect to utilize the lease/nonlease component combination practical expedient under ASU 2018-11 upon initial application of ASC 842 are required to apply the practical expedient to all new and existing transactions within a class of underlying assets that qualify for the expedient as of the initial application date. For the year ended December 31, 2018, the Company recognized revenue for housing services under independent living, assisted living, and memory care residency agreements in accordance with the provisions of the former lease accounting standard, ASC 840, and the Company recognized revenue for assistance with activities of daily living, memory care services, healthcare, and personalized health services under independent living, assisted living, and memory care residency agreements in accordance with the provisions of ASC 606. Upon adoption of ASU 2016-02 and ASU 2018-11, the Company elected the lessor practical expedient within ASU 2018-11 and recognizes, measures, presents, and discloses the revenue for housing services under the Company's senior living residency agreements based upon the predominant component, either the lease or nonlease component, of the contracts rather than allocating the consideration and separately accounting for it under ASC 842 and ASC 606. The Company has concluded that the nonlease components of the Company’s independent living, assisted living, and memory care residency agreements are the predominant component of the contract for the Company’s existing agreements as of January 1, 2019. As a result of the Company's election of the package of practical expedients within ASU 2016-02, the Company continued to recognize revenue for existing contracts as of December 31, 2018 over the lease term. In addition, ASU 2016-02 has changed the definition of initial direct costs of a lease, with the initial direct costs that are initially deferred and recognized over the term of the lease limited to costs that are both incremental and direct. The Company concluded that the contract origination costs recognized on the balance sheet as of December 31, 2018 were in excess of the initial direct costs that would have been deferred under the provisions of ASU 2016-02. As a result of the Company’s election of the package of practical expedients, the contract origination costs recognized on the balance sheet as of December 31, 2018 continued to be amortized during 2019 over the lease term. Additionally, the Company concluded that certain costs previously deferred upon new contract origination are recognized within facility operating expense in 2019 as incurred. In addition to the previously unrecognized right-of-use asset impairment of $58.1 million, the Company recognized cumulative effect adjustments to beginning accumulated deficit as of January 1, 2019 for the impact of the adoption of accounting standards by its equity method investees and the deferred tax impact of these adjustments. The recognition of the right-of-use assets and corresponding liabilities and the removal of the deferred tax position related to these leases as of December 31, 2018, had an $0.3 million impact on the Company's net deferred tax position. A deferred tax asset of $14.1 million and an increase to the valuation allowance of $13.8 million was recorded against accumulated deficit reflecting the tax impact of the previously unrecognized right-of-use asset impairments. The adoption of the new accounting standards resulted in the following adjustments to the Company's condensed consolidated balance sheet as of January 1, 2019:
Recently Issued Accounting Pronouncements Not Yet Adopted In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments ("ASU 2016-13"). ASU 2016-13 replaces the current incurred loss impairment methodology for credit losses with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. ASU 2016-13 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted for fiscal years beginning after December 15, 2018. The Company is currently evaluating the impact the adoption of ASU 2016-13 will have on its condensed consolidated financial statements and disclosures. |
Earnings Per Share |
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Mar. 31, 2019 | |
Earnings Per Share [Abstract] | |
Earnings Per Share | Earnings Per Share Basic earnings per share ("EPS") is calculated by dividing net income by the weighted average number of shares of common stock outstanding. Diluted EPS includes the components of basic EPS and also gives effect to dilutive common stock equivalents. Under the treasury stock method, diluted EPS reflects the potential dilution that could occur if securities or other instruments that are convertible into common stock were exercised or could result in the issuance of common stock. Potentially dilutive common stock equivalents include unvested restricted stock, unvested and vested restricted stock units, and convertible debt instruments and warrants. During the three months ended March 31, 2019 and 2018, the Company reported a consolidated net loss. As a result of the net loss, unvested restricted stock, restricted stock units, and convertible debt instruments and warrants were antidilutive for each period and were not included in the computation of diluted weighted average shares. The weighted average restricted stock and restricted stock units excluded from the calculations of diluted net loss per share were 7.2 million and 7.0 million for the three months ended March 31, 2019 and 2018, respectively. For the three months ended March 31, 2018, the calculation of diluted weighted average shares excludes the impact of conversion of the principal amount of $316.3 million of the Company's 2.75% convertible senior notes which were repaid in cash at their maturity on June 15, 2018. As of March 31, 2018, the maximum number of shares issuable upon conversion of the notes was approximately 13.8 million (after giving effect to additional make-whole shares issuable upon conversion in connection with the occurrence of certain events). As of March 31, 2018, the maximum number of shares issuable upon conversion of the notes in excess of the amount of principal that would be settled in cash was approximately 3.0 million. In addition, the calculation of diluted weighted average shares excludes the impact of the exercise of warrants to acquire the Company's common stock. As of March 31, 2018, the number of shares issuable upon exercise of the warrants was approximately 10.8 million. During the three months ended March 31, 2019, the option to exercise the remaining outstanding warrants expired unexercised. |
Acquisitions, Dispositions and Other Significant Transactions |
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Acquisitions, Dispositions and Other Significant Transactions | Acquisitions, Dispositions and Other Significant Transactions During the period from January 1, 2018 through March 31, 2019, the Company disposed of 28 owned communities. The Company also entered into agreements with Ventas, Inc. ("Ventas") and Welltower Inc. ("Welltower") and continued to execute on the transactions with HCP, Inc. ("HCP") announced in 2017, which together restructured a significant portion of the Company's triple-net lease obligations with the Company's largest lessors. As a result of such transactions, as well as other lease expirations and terminations, the Company's triple-net lease obligations on 90 communities were terminated during the period from January 1, 2018 to March 31, 2019. During this period, the Company also sold its ownership interests in six unconsolidated ventures and acquired six communities that the Company previously leased or managed. As of March 31, 2019, the Company owned 338 communities, leased 342 communities, managed 18 communities on behalf of unconsolidated ventures, and managed 146 communities on behalf of third parties. The following table sets forth, for the periods indicated, the amounts included within the Company's condensed consolidated financial statements for the 118 communities that it disposed through sales and lease terminations during the period from January 1, 2018 to March 31, 2019 through the respective disposition dates:
The Company expects to close on the dispositions of seven owned communities classified as held for sale as of March 31, 2019 during the next 12 months. The closings of the various pending and expected transactions are, or will be, subject to the satisfaction of various closing conditions, including (where applicable) the receipt of regulatory approvals. However, there can be no assurance that the transactions will close or, if they do, when the actual closings will occur. 2018 Welltower Lease and RIDEA Venture Restructuring On June 27, 2018, the Company announced that it had entered into definitive agreements with Welltower. The components of the agreements include:
The Company also elected not to renew two master leases with Welltower which matured on September 30, 2018 (11 communities). After conclusion of the foregoing lease expirations, the Company continues to operate 74 communities under triple-net leases with Welltower, and the Company's remaining lease agreements with Welltower contain a change of control standard that allows the Company to engage in certain change of control and other transactions without the need to obtain Welltower's consent, subject to the satisfaction of certain conditions. 2018 Ventas Lease Portfolio Restructuring On April 26, 2018, the Company entered into several agreements to restructure a portfolio of 128 communities it leased from Ventas as of such date, including a Master Lease and Security Agreement (the "Ventas Master Lease"). The Ventas Master Lease amended and restated prior leases comprising an aggregate portfolio of 107 communities into the Ventas Master Lease. Under the Ventas Master Lease and other agreements entered into on April 26, 2018, the 21 additional communities leased by the Company from Ventas pursuant to separate lease agreements have been or will be combined automatically into the Ventas Master Lease upon the first to occur of Ventas' election or the repayment of, or receipt of lender consent with respect to, mortgage debt underlying such communities (17 of which have been combined into the Ventas Master Lease as of March 31, 2019). The Company and Ventas agreed to observe, perform, and enforce such separate leases as if they had been combined into the Ventas Master Lease effective April 26, 2018, to the extent not in conflict with any mortgage debt underlying such communities. The transaction agreements with Ventas further provide that the Ventas Master Lease and certain other agreements between the Company and Ventas will be cross-defaulted. The initial term of the Ventas Master Lease ends December 31, 2025, with two 10-year extension options available to the Company. In the event the Company consummates a change of control transaction on or before December 31, 2025, the initial term of the Ventas Master Lease will be extended automatically through December 31, 2029. The Ventas Master Lease and separate lease agreements with Ventas, which are guaranteed at the parent level by the Company, provided for total rent in 2018 of $175.0 million for the 128 communities, including the pro-rata portion of an $8.0 million annual rent credit for 2018. The Company will receive an annual rent credit of $8.0 million in 2019, $7.0 million in 2020 and $5.0 million thereafter; provided, that if a change of control transaction occurs prior to 2021, the annual rent credit will be reduced to $5.0 million. Effective on January 1, 2019 and in succeeding years, the annual minimum rent is subject to an escalator equal to the lesser of 2.25% or four times the Consumer Price Index ("CPI") increase for the prior year (or zero if there was a CPI decrease). The Ventas Master Lease requires the Company to spend (or escrow with Ventas) a minimum of $2,000 per unit per 24-month period commencing with the 24-month period ending December 31, 2019 and thereafter each 24-month period ending December 31 during the lease term, subject to annual increases commensurate with the escalator beginning with the second lease year of the first extension term (if any). If the Company consummates a change of control transaction, the Company will be required within 36 months following the closing of such transaction to invest (or escrow with Ventas) an aggregate of $30.0 million in the communities for revenue-enhancing capital projects. Under the definitive agreements with Ventas, the Company, at the parent level, must satisfy certain financial covenants (including tangible net worth and leverage ratios) and may consummate a change of control transaction without the need for consent of Ventas so long as certain objective conditions are satisfied, including the post-transaction guarantor's satisfying certain enhanced minimum tangible net worth and maximum leverage ratio, having minimum levels of operational experience and reputation in the senior living industry, and paying a change of control fee of $25.0 million to Ventas. Under the Master Lease, the Company had an option, which the Company exercised in part, to provide notice to Ventas of the Company's election to direct Ventas to market for sale one or more communities with up to approximately $30.0 million of annual minimum rent. Ventas is obligated to use commercially reasonable, diligent efforts to sell such communities on or before December 31, 2020 (subject to extension for regulatory purposes); provided, that Ventas' obligation to sell any such community will be subject to Ventas' receiving a purchase price in excess of a mutually agreed upon minimum sale price and to certain other customary closing conditions. Upon any such sale, such communities will be removed from the Ventas Master Lease, and the annual minimum rent under the Ventas Master Lease will be reduced by the amount of the net sale proceeds received by Ventas multiplied by 6.25%. The Company estimated the fair value of each of the elements of the restructuring transactions. The fair value of the future lease payments was based upon historical and forecasted community cash flows and market data, including an implied management fee rate of 5% of revenue and a market supported lease coverage ratio (Level 3 inputs). The Company recognized a $125.7 million non-cash loss on lease modification in the three months ended June 30, 2018, primarily for the extensions of the triple-net lease obligations for communities with lease terms that are unfavorable to the Company given current market conditions on the amendment date in exchange for modifications to the change of control provisions and financial covenant provisions of the community leases. 2017 HCP Master Lease Transaction and RIDEA Ventures Restructuring On November 2, 2017, the Company announced that it had entered into a definitive agreement for a multi-part transaction with HCP. As part of such transaction, the Company entered into an Amended and Restated Master Lease and Security Agreement ("HCP Master Lease") with HCP effective as of November 1, 2017. The components of the multi-part transaction include:
The Company financed the foregoing community acquisitions with non-recourse mortgage financing and proceeds from the sales of its ownership interest in the unconsolidated ventures. During the year ended December 31, 2018, the results and financial position of the 33 communities for which leases were terminated were deconsolidated from the Company prospectively upon termination of the lease obligations. The Company derecognized the $332.8 million carrying value of the assets under financing leases and the $378.3 million carrying value of financing lease obligations for 20 communities which were previously subject to sale-leaseback transactions in which the Company was deemed to have continuing involvement. The Company recognized a sale for these 20 communities and recorded a non-cash gain on sale of assets of $44.2 million for the year ended December 31, 2018. Additionally, the Company recognized a non-cash gain on lease termination of $1.5 million for the year ended December 31, 2018, for the derecognition of the net carrying value of the Company's assets and liabilities under operating and capital leases at the lease termination date. Completed and Planned Dispositions of Owned Communities During the year ended December 31, 2018, the Company completed the sale of 22 owned communities for cash proceeds of $380.7 million, net of transaction costs, and recognized a net gain on sale of assets of $188.6 million. The Company utilized a portion of the cash proceeds from the asset sales to repay approximately $174.0 million of associated mortgage debt and debt prepayment penalties. These dispositions included the sale of three communities during the three months ended March 31, 2018 for which the Company received net cash proceeds of $12.8 million, net of transaction costs, and recognized a net gain on sale of assets of $1.9 million. During the three months ended March 31, 2019, the Company completed the sale of six owned communities (485 units) for cash proceeds of $29.5 million, net of transaction costs. As of March 31, 2019, seven communities were classified as held for sale, resulting in $58.3 million being recorded as assets held for sale and $23.4 million of mortgage debt being included in the current portion of long-term debt within the condensed consolidated balance sheet with respect to such communities. This debt is expected to be repaid with the proceeds from the sales. |
Fair Value Measurements |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements | Fair Value Measurements Marketable Securities As of March 31, 2019, marketable securities of $83.5 million are stated at fair value based on valuation provided by third-party pricing services and are classified within Level 2 of the valuation hierarchy. The Company recognized gains of $0.3 million and $0.6 million for marketable securities within interest income on the Company's condensed consolidated statements of operations for the three months ended March 31, 2019 and 2018, respectively. Debt The Company 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 long-term debt with a carrying value of approximately $3.6 billion as of both March 31, 2019 and December 31, 2018. Fair value of the long-term debt approximates carrying value in all periods. The Company's fair value of long-term debt disclosure is classified within Level 2 of the valuation hierarchy. Goodwill and Asset Impairment Expense The following is a summary of goodwill and asset impairment expense.
Goodwill During the three months ended March 31, 2018, the Company identified qualitative indicators of impairment, including a significant decline in the Company's stock price and market capitalization for a sustained period during the three months ended March 31, 2018. Based upon the Company's qualitative assessment, the Company performed a quantitative goodwill impairment test as of March 31, 2018, which included a comparison of the estimated fair value of each reporting unit to which the goodwill has been assigned with the reporting unit's carrying value. Based on the results of the Company's quantitative goodwill impairment test, the Company recorded a non-cash impairment charge of $351.7 million to goodwill and asset impairment within the Assisted Living operating segment for the three months ended March 31, 2018. See Note 2 for more information regarding the Company's policy for goodwill. Property, Plant and Equipment and Leasehold Intangibles During the three months ended March 31, 2018, the Company evaluated property, plant and equipment and leasehold intangibles for impairment and identified properties with a carrying value of the assets in excess of the estimated future undiscounted net cash flows expected to be generated by the assets primarily due to an expectation that certain communities will be disposed of prior to their previously intended holding periods. As a result of this change in intent, the Company compared the estimated fair value of the assets to their carrying value for these identified properties and recorded an impairment charge for the excess of carrying value over estimated fair value. The estimates of fair values of the property, plant and equipment of these communities were determined based on valuations provided by third-party pricing services and are classified within Level 3 of the valuation hierarchy. The Company recorded property, plant and equipment and leasehold intangibles non-cash impairment charges in its operating results of $40.8 million for the three months ended March 31, 2018, primarily within the Assisted Living segment. Investment in Unconsolidated Ventures The Company evaluates realization of its investment in ventures accounted for using the equity method if circumstances indicate that the Company's investment is other than temporarily impaired. During the three months ended March 31, 2018, the Company recorded non-cash impairment charges related to investments in unconsolidated ventures of $33.4 million. These impairment charges reflect the amount by which the carrying values of the investments exceeded their estimated fair value. Right-of-Use Assets The Company's adoption of ASU 2016-02 resulted in the recognition of the right-of-use assets for the operating leases for 25 communities to be recognized on the condensed consolidated balance sheet as of January 1, 2019 at the estimated fair value of $56.6 million as the Company determined that the long-lived assets of such communities were not recoverable as of such date. The fair value of the right-of-use assets were estimated utilizing a discounted cash flow approach based upon historical and projected community cash flows and market data, including management fees and a market supported lease coverage ratio (Level 3 inputs). The Company corroborated the estimated management fee rates and lease coverage ratios used in these estimates with lease coverage ratios observable from recent market transactions. The estimated future cash flows were discounted at a rate that is consistent with a weighted average cost of capital from a market participant perspective. |
Stock-Based Compensation |
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Stock-Based Compensation | Stock-Based Compensation Grants of restricted shares under the Company's 2014 Omnibus Incentive Plan were as follows:
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Goodwill and Other Intangible Assets, Net |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Other Intangible Assets, Net | Goodwill and Other Intangible Assets, Net The Company's Independent Living and Health Care Services segments had a carrying value of goodwill of $27.3 million and $126.8 million, respectively, as of both March 31, 2019 and December 31, 2018. Goodwill is tested for impairment annually with a test date of October 1 or sooner if indicators of impairment are present. The Company determined no impairment was necessary for the three months ended March 31, 2019. Factors the Company considers important in its analysis, which could trigger an impairment of such assets, include significant underperformance relative to historical or projected future operating results, significant negative industry or economic trends, a significant decline in the Company's stock price for a sustained period and a decline in its market capitalization below net book value. A change in anticipated operating results or the other metrics indicated above could necessitate further analysis of potential impairment at an interval prior to the Company's annual measurement date. Refer to Note 5 for information on impairment expense for goodwill in 2018. Other intangible assets as of March 31, 2019 and December 31, 2018 are summarized in the following tables:
Amortization expense related to definite-lived intangible assets for both the three months ended March 31, 2019 and 2018 was $0.8 million. |
Property, Plant and Equipment and Leasehold Intangibles, Net |
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Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment and Leasehold Intangibles, Net | Property, Plant and Equipment and Leasehold Intangibles, Net As of March 31, 2019 and December 31, 2018, net property, plant and equipment and leasehold intangibles, which include assets under financing leases, consisted of the following:
Assets under financing leases and leasehold improvements includes $0.7 billion of financing lease right-of-use assets as of both March 31, 2019 and December 31, 2018. Refer to Note 10 for further information on the Company’s financing leases. The Company recognized depreciation and amortization expense on its property, plant and equipment and leasehold intangibles of $96.1 million and $113.4 million for the three months ended March 31, 2019 and 2018, respectively. Long-lived assets with definite useful lives are depreciated or amortized on a straight-line basis over their estimated useful lives (or, in certain cases, the shorter of their estimated useful lives or the lease term) and are tested for impairment whenever indicators of impairment arise. Refer to Note 5 for information on impairment expense for property, plant and equipment and leasehold intangibles. |
Debt |
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Debt | Debt Long-term debt as of March 31, 2019 and December 31, 2018 consists of the following:
As of March 31, 2019 and December 31, 2018, the current portion of long-term debt within the Company's condensed consolidated financial statements includes $23.4 million and $31.2 million, respectively, of mortgage notes payable secured by assets held for sale. This debt is expected to be repaid with the proceeds from the sales. Refer to Note 4 for more information about the Company's assets held for sale. Credit Facilities On December 5, 2018, the Company entered into a Fifth Amended and Restated Credit Agreement with Capital One, National Association, as administrative agent, lender and swingline lender and the other lenders from time to time parties thereto (the "Amended Agreement"). The Amended Agreement amended and restated in its entirety the Company's Fourth Amended and Restated Credit Agreement dated as of December 19, 2014 (the "Original Agreement"). The Amended Agreement provides commitments for a $250 million revolving credit facility with a $60 million sublimit for letters of credit and a $50 million swingline feature. The Company has a one-time right under the Amended Agreement to increase commitments on the revolving credit facility by an additional $100 million, subject to obtaining commitments for the amount of such increase from acceptable lenders. The Amended Agreement provides the Company a one-time right to reduce the amount of the revolving credit commitments, and the Company may terminate the revolving credit facility at any time, in each case without payment of a premium or penalty. The Amended Agreement extended the maturity date of the Original Agreement from January 3, 2020 to January 3, 2024 and decreased the interest rate payable on drawn amounts. Amounts drawn under the facility will continue to bear interest at 90-day LIBOR plus an applicable margin; however, the Amended Agreement reduced the applicable margin from a range of 2.50% to 3.50% to a range of 2.25% to 3.25%. The applicable margin varies based on the percentage of the total commitment drawn, with a 2.25% margin at utilization equal to or lower than 35%, a 2.75% margin at utilization greater than 35% but less than or equal to 50%, and a 3.25% margin at utilization greater than 50%. A quarterly commitment fee continues to be payable on the unused portion of the facility at 0.25% per annum when the outstanding amount of obligations (including revolving credit and swingline loans and letter of credit obligations) is greater than or equal to 50% of the revolving credit commitment amount or 0.35% per annum when such outstanding amount is less than 50% of the revolving credit commitment amount. The credit facility is secured by first priority mortgages on certain of the Company's communities. In addition, the Amended Agreement permits the Company to pledge the equity interests in subsidiaries that own other communities and grant negative pledges in connection therewith (rather than mortgaging such communities), provided that not more than 10% of the borrowing base may result from communities subject to negative pledges. Availability under the revolving credit facility will vary from time to time based on borrowing base calculations related to the appraised value and performance of the communities securing the credit facility and the Company’s consolidated fixed charge coverage ratio. The Amended Agreement contains typical affirmative and negative covenants, including financial covenants with respect to minimum consolidated fixed charge coverage and minimum consolidated tangible net worth. Amounts drawn on the credit facility may be used for general corporate purposes. As of March 31, 2019, no borrowings were outstanding on the revolving credit facility, $41.2 million of letters of credit were outstanding, and the revolving credit facility had $190.0 million of availability. The Company also had a separate unsecured letter of credit facility of up to $49.2 million as of March 31, 2019. Letters of credit totaling $49.1 million had been issued under the separate facility as of that date. 2019 Financings On May 7, 2019, the Company obtained $111.1 million of debt secured by the non-recourse first mortgages on 14 communities. Sixty percent of the principal amount bears interest at a fixed rate of 4.52%, and the remaining forty percent of the principal amount bears interest at a variable rate equal to the 30-day LIBOR plus a margin of 223 basis points. The debt matures in 2029. The $111.1 million of proceeds from the financing along with cash on hand were utilized to repay $156 million of outstanding mortgage debt maturing in 2019. Financial Covenants Certain of the Company’s debt documents contain restrictions and financial covenants, such as those requiring the Company to maintain prescribed minimum net worth and stockholders’ equity levels and debt service ratios, and requiring the Company not to exceed prescribed leverage ratios, in each case on a consolidated, portfolio-wide, multi-community, single-community and/or entity basis. In addition, the Company’s debt documents generally contain non-financial covenants, such as those requiring the Company to comply with Medicare or Medicaid provider requirements. The Company’s failure to comply with applicable covenants could constitute an event of default under the applicable debt documents. Many of the Company’s debt documents contain cross-default provisions so that a default under one of these instruments could cause a default under other debt and lease documents (including documents with other lenders and lessors). Furthermore, the Company’s debt is secured by its communities and, in certain cases, a guaranty by the Company and/or one or more of its subsidiaries. As of March 31, 2019, the Company is in compliance with the financial covenants of its debt agreements. |
Leases |
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Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leases | Leases As of March 31, 2019, the Company operated 342 communities under long-term leases (251 operating leases and 91 financing leases). The substantial majority of the Company's lease arrangements are structured as master leases. Under a master lease, numerous communities are leased through an indivisible lease. The Company typically guarantees the performance and lease payment obligations of its subsidiary lessees under the master leases. Due to the nature of such master leases, it is difficult to restructure the composition of such leased portfolios or economic terms of the leases without the consent of the applicable landlord. In addition, an event of default related to an individual property or limited number of properties within a master lease portfolio may result in a default on the entire master lease portfolio. The leases relating to these communities are generally fixed rate leases with annual escalators that are either fixed or based upon changes in the consumer price index or the leased property revenue. The Company is responsible for all operating costs, including repairs, property taxes, and insurance. As of March 31, 2019, the weighted-average remaining lease term of the Company’s operating and financing leases was 7.5 and 9.0 years, respectively. The leases generally provide for renewal or extension options from 5 to 20 years and in some instances, purchase options. Refer to Note 4 for more information about the Company’s options to terminate a limited number of community leases under the terms of the Ventas Master Lease and leases with Welltower. The community leases contain other customary terms, which may include assignment and change of control restrictions, maintenance and capital expenditure obligations, termination provisions and financial covenants, such as those requiring the Company to maintain prescribed minimum net worth and stockholders’ equity levels and lease coverage ratios, and not to exceed prescribed leverage ratios, in each case on a consolidated, portfolio-wide, multi-community, single-community and/or entity basis. In addition, the Company’s lease documents generally contain non-financial covenants, such as those requiring the Company to comply with Medicare or Medicaid provider requirements. The Company’s failure to comply with applicable covenants could constitute an event of default under the applicable lease documents. Many of the Company’s debt and lease documents contain cross-default provisions so that a default under one of these instruments could cause a default under other debt and lease documents (including documents with other lenders and lessors). Certain leases contain cure provisions, which generally allow the Company to post an additional lease security deposit if the required covenant is not met. Furthermore, the Company’s leases are secured by its communities and, in certain cases, a guaranty by the Company and/or one or more of its subsidiaries. As of March 31, 2019, the Company is in compliance with the financial covenants of its long-term leases. A summary of operating and financing lease expense (including the respective presentation on the condensed consolidated statements of operations) and cash flows from leasing transactions is as follows:
As of March 31, 2019, the weighted-average discount rate of the Company’s operating and financing leases was 8.6% and 7.8%, respectively. As the Company's community leases do not contain an implicit rate, the Company utilized its incremental borrowing rate based on information available on January 1, 2019 to determine the present value of lease payments for operating leases that commenced prior to that date. The aggregate amounts of future minimum lease payments, including community, office, and equipment leases recognized on the condensed consolidated balance sheet as of March 31, 2019 are as follows (in thousands):
The aggregate amounts of future minimum operating lease payments, including community, office, and equipment leases not recognized on the condensed consolidated balance sheet under ASC 840 as of December 31, 2018 are as follows (in thousands):
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Leases | Leases As of March 31, 2019, the Company operated 342 communities under long-term leases (251 operating leases and 91 financing leases). The substantial majority of the Company's lease arrangements are structured as master leases. Under a master lease, numerous communities are leased through an indivisible lease. The Company typically guarantees the performance and lease payment obligations of its subsidiary lessees under the master leases. Due to the nature of such master leases, it is difficult to restructure the composition of such leased portfolios or economic terms of the leases without the consent of the applicable landlord. In addition, an event of default related to an individual property or limited number of properties within a master lease portfolio may result in a default on the entire master lease portfolio. The leases relating to these communities are generally fixed rate leases with annual escalators that are either fixed or based upon changes in the consumer price index or the leased property revenue. The Company is responsible for all operating costs, including repairs, property taxes, and insurance. As of March 31, 2019, the weighted-average remaining lease term of the Company’s operating and financing leases was 7.5 and 9.0 years, respectively. The leases generally provide for renewal or extension options from 5 to 20 years and in some instances, purchase options. Refer to Note 4 for more information about the Company’s options to terminate a limited number of community leases under the terms of the Ventas Master Lease and leases with Welltower. The community leases contain other customary terms, which may include assignment and change of control restrictions, maintenance and capital expenditure obligations, termination provisions and financial covenants, such as those requiring the Company to maintain prescribed minimum net worth and stockholders’ equity levels and lease coverage ratios, and not to exceed prescribed leverage ratios, in each case on a consolidated, portfolio-wide, multi-community, single-community and/or entity basis. In addition, the Company’s lease documents generally contain non-financial covenants, such as those requiring the Company to comply with Medicare or Medicaid provider requirements. The Company’s failure to comply with applicable covenants could constitute an event of default under the applicable lease documents. Many of the Company’s debt and lease documents contain cross-default provisions so that a default under one of these instruments could cause a default under other debt and lease documents (including documents with other lenders and lessors). Certain leases contain cure provisions, which generally allow the Company to post an additional lease security deposit if the required covenant is not met. Furthermore, the Company’s leases are secured by its communities and, in certain cases, a guaranty by the Company and/or one or more of its subsidiaries. As of March 31, 2019, the Company is in compliance with the financial covenants of its long-term leases. A summary of operating and financing lease expense (including the respective presentation on the condensed consolidated statements of operations) and cash flows from leasing transactions is as follows:
As of March 31, 2019, the weighted-average discount rate of the Company’s operating and financing leases was 8.6% and 7.8%, respectively. As the Company's community leases do not contain an implicit rate, the Company utilized its incremental borrowing rate based on information available on January 1, 2019 to determine the present value of lease payments for operating leases that commenced prior to that date. The aggregate amounts of future minimum lease payments, including community, office, and equipment leases recognized on the condensed consolidated balance sheet as of March 31, 2019 are as follows (in thousands):
The aggregate amounts of future minimum operating lease payments, including community, office, and equipment leases not recognized on the condensed consolidated balance sheet under ASC 840 as of December 31, 2018 are as follows (in thousands):
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Litigation |
3 Months Ended |
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Mar. 31, 2019 | |
Litigation [Abstract] | |
Litigation | Litigation The Company has been and is currently involved in litigation and claims, including putative class action claims from time to time, incidental to the conduct of its business which are generally comparable to other companies in the senior living and healthcare industries. Certain claims and lawsuits allege large damage amounts and may require significant costs to defend and resolve. As a result, the Company maintains general liability and professional liability 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. The Company's current policies provide for deductibles for each claim. Accordingly, the Company is, in effect, self-insured for claims that are less than the deductible amounts and for claims or portions of claims that are not covered by such policies. Similarly, the senior living and healthcare industries are continuously subject to scrutiny by governmental regulators, which could result in reviews, audits, investigations, enforcement activities or litigation related to regulatory compliance matters. In addition, as a result of the Company's participation in the Medicare and Medicaid programs, the Company is subject to various governmental reviews, audits and investigations, including but not limited to audits under various government programs, such as the Recovery Audit Contractors (RAC), Zone Program Integrity Contractors (ZPIC), and Unified Program Integrity Contractors (UPIC) programs. The costs to respond to and defend such reviews, audits and investigations may be significant, and an adverse determination could result in citations, sanctions and other criminal or civil fines and penalties, the refund of overpayments, payment suspensions, termination of participation in Medicare and Medicaid programs, and/or damage to the Company's business reputation. |
Supplemental Disclosure of Cash Flow Information |
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Supplemental Cash Flow Elements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Supplemental Disclosure of Cash Flow Information | Supplemental Disclosure of Cash Flow Information
Refer to Note 2 for a schedule of the non-cash adjustments to the Company's condensed consolidated balance sheet as of January 1, 2019 as a result of the adoption of new accounting standards. The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the condensed consolidated balance sheets that sums to the total of the same such amounts shown in the condensed consolidated statement of cash flows.
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Income Taxes |
3 Months Ended |
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Mar. 31, 2019 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes The difference between the Company's effective tax rate for the three months ended March 31, 2019 and March 31, 2018 was primarily due to the non-deductible impairment of goodwill that occurred in the three months ended March 31, 2018. The Company recorded an aggregate deferred federal, state and local tax benefit of $6.5 million, of which $8.2 million was a result of the operating loss for the three months ended March 31, 2019. The benefit was reduced by $1.7 million reduction in the deferred tax asset related to employee stock compensation. The benefit for the three months ended March 31, 2019 is offset by an increase in the valuation allowance of $6.6 million. The change in the valuation allowance for the three months ended March 31, 2019 is the result of the anticipated reversal of future tax liabilities offset by future tax deduction. The Company recorded an aggregate deferred federal, state, and local tax benefit of $9.5 million as a result of the operating loss for the three months ended March 31, 2018, which was offset by an increase in the valuation allowance of $24.6 million. The Company evaluates its deferred tax assets each quarter to determine if a valuation allowance is required based on whether it is more likely than not that some portion of the deferred tax asset would not be realized. The Company's valuation allowance as of March 31, 2019 and December 31, 2018 was $356.8 million and $336.4 million, respectively. The increase in the valuation allowance during the three months ended March 31, 2019 is comprised of multiple components. The increase includes $13.8 million resulting from the adoption of ASC 842 and the related addition of future timing differences. An additional $8.3 million of allowance was established against the current period operating loss. Offsetting the increases was a decrease of $1.7 million of allowance as a result of removal of future timing differences related to employee stock compensation. On December 22, 2017, the President signed the Tax Cuts and Jobs Act ("Tax ACT") into law. The Tax Act limits the annual deductibility of a corporation's net interest expense unless it elects to be exempt from such deductibility limitation under the real property trade or business exception. The Company plans to elect the real property trade or business exception with the 2018 tax return. As such, the Company is required to apply the alternative depreciation system ("ADS") to all current and future residential real property and qualified improvement property assets. This change impacts the current and future tax depreciation deductions and impacted the Company's valuation allowance accordingly. Additional information that may affect the Company's provisional amounts would include further clarification and guidance on how the Internal Revenue Service will implement tax reform and further clarification and guidance on how state taxing authorities will implement tax reform and the related effect on the Company's state and local income tax returns, state and local net operating losses and corresponding valuation allowances. The Company recorded interest charges related to its tax contingency reserve for cash tax positions for the three months ended March 31, 2019 and March 31, 2018 which are included in income tax expense or benefit for the period. As of March 31, 2019, tax returns for years 2014 through 2017 are subject to future examination by tax authorities. In addition, the net operating losses from prior years are subject to adjustment under examination. |
Revenue |
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Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue | Revenue Disaggregation of Revenue The Company disaggregates its revenue from contracts with customers by payor source, as the Company believes it best depicts how the nature, amount, timing and uncertainty of its revenue and cash flows are affected by economic factors. See details on a reportable segment basis in the table below.
The Company has not further disaggregated management fee revenues and revenue for reimbursed costs incurred on behalf of managed communities as the economic factors affecting the nature, timing, amount, and uncertainty of revenue and cash flows do not significantly vary within each respective revenue category. Contract Balances Resident fee revenue for recurring and routine monthly services is generally billed monthly in advance under the Company's independent living, assisted living, and memory care residency agreements. Resident fee revenue for standalone or certain ancillary services is generally billed monthly in arrears. Additionally, non-refundable community fees are generally billed and collected in advance or upon move-in of a resident under the Company's independent living, assisted living, and memory care residency agreements. Amounts of revenue that are collected from residents in advance are recognized as deferred revenue until the performance obligations are satisfied. The Company had total deferred revenue (included within refundable fees and deferred revenue, deferred liabilities, and other liabilities within the condensed consolidated balance sheets) of $88.3 million and $106.4 million, including $35.5 million and $50.6 million of monthly resident fees billed and received in advance, as of March 31, 2019 and December 31, 2018, respectively. For the three months ended March 31, 2019 and 2018, the Company recognized $61.7 million and $60.9 million, respectively, of revenue that was included in the deferred revenue balance as of January 1, 2019 and 2018. |
Segment Information |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Information | Segment Information The Company has five reportable segments: Independent Living; Assisted Living and Memory Care; CCRCs; Health Care Services; and Management Services. Operating segments are defined as components of an enterprise that engage in business activities from which it may earn revenues and incur expenses; for which separate financial information is available; and whose operating results are regularly reviewed by the chief operating decision maker to assess the performance of the individual segment and make decisions about resources to be allocated to the segment. Independent Living. The Company's Independent Living segment includes owned or leased communities that are primarily designed for middle to upper income seniors who desire an upscale residential environment providing the highest quality of service. The majority of the Company's independent living communities consist of both independent 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 and Memory Care. The Company's Assisted Living and Memory Care segment includes owned or leased communities that offer housing and 24-hour assistance with activities of daily life to mid-acuity frail and elderly residents. Assisted living and memory care communities include both freestanding, multi-story communities and freestanding, single story communities. The Company also provides memory care services at freestanding memory care communities that are specially designed for residents with Alzheimer's and other dementias. CCRCs. The Company's CCRCs segment includes large owned or leased 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 independent living, assisted living and skilled nursing available on one campus or within the immediate market, and some also include memory care and Alzheimer's services. Health Care Services. The Company's Health Care Services segment includes the home health, hospice, and outpatient therapy services, as well as education and wellness programs, provided to residents of many of the Company's communities and to seniors living outside of the Company's communities. The Health Care Services segment does not include the skilled nursing and inpatient healthcare services provided in the Company's skilled nursing units, which are included in the Company's CCRCs segment. Management Services. The Company's Management Services segment includes communities operated by the Company pursuant to management agreements. In some of the cases, the controlling financial interest in the community is held by third parties and, in other cases, the community is owned in a venture structure in which the Company has an ownership interest. Under the management agreements for these communities, the Company receives management fees as well as reimbursed expenses, which represent the reimbursement of expenses it incurs on behalf of the owners. The accounting policies of the Company's reportable segments are the same as those described in the summary of significant accounting policies in Note 2. The following table sets forth selected segment financial and operating data:
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Summary of Significant Accounting Policies (Policies) |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Basis of Presentation | Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States ("US GAAP") and pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC") for quarterly reports on Form 10-Q. In the opinion of management, these financial statements include all adjustments, which are of a normal and recurring nature, necessary to present fairly the financial position, results of operations, and cash flows of the Company for all periods presented. Certain information and footnote disclosures included in annual financial statements 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 included in the Company's Annual Report on Form 10-K for the year ended December 31, 2018 filed with the SEC on February 14, 2019. Certain prior period amounts have been reclassified to conform to the current financial statement presentation, with no effect on the Company's condensed consolidated financial position or results of operations. Except for the changes for the impact of the recently adopted accounting pronouncements discussed in this Note, the Company has consistently applied its accounting policies to all periods presented in these condensed consolidated financial statements. |
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Principles of Consolidation | Principles of Consolidation The condensed consolidated financial statements include the accounts of Brookdale and its consolidated subsidiaries. All significant intercompany balances and transactions have been eliminated. Investments in affiliated companies that the Company does not control, but has the ability to exercise significant influence over governance and operations, are accounted for by the equity method. The ownership interest of consolidated entities not wholly-owned by the Company are presented as noncontrolling interests in the accompanying condensed consolidated financial statements. Noncontrolling interest represents the share of consolidated entities owned by third parties. Noncontrolling interest is adjusted for the noncontrolling holder's share of additional contributions, distributions, and the proportionate share of the net income or loss of each respective entity. |
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Revenue Recognition | Revenue Recognition Resident Fees Resident fee revenue is reported at the amount that reflects the consideration the Company expects to receive in exchange for the services provided. These amounts are due from residents or third-party payors and include variable consideration for retroactive adjustments, if any, under reimbursement programs. Performance obligations are determined based on the nature of the services provided. Resident fee revenue is recognized as performance obligations are satisfied. Under the Company's senior living residency agreements, which are generally for a contractual term of 30 days to one year, the Company provides senior living services to residents for a stated daily or monthly fee. The Company has elected the lessor practical expedient within ASC 842, Leases ("ASC 842") and recognizes, measures, presents, and discloses the revenue for services under the Company's senior living residency agreements based upon the predominant component, either the lease or nonlease component, of the contracts. The Company has determined that the services included under the Company’s independent living, assisted living, and memory care residency agreements have the same timing and pattern of transfer. The Company recognizes revenue under ASC 606, Revenue Recognition from Contracts with Customers ("ASC 606") for its independent living, assisted living, and memory care residency agreements for which it has estimated that the nonlease components of such residency agreements are the predominant component of the contract. The Company enters into contracts to provide home health, hospice, and outpatient therapy services. Each service provided under the contract is capable of being distinct, and thus, the services are considered individual and separate performance obligations. The performance obligations are satisfied and revenue is recognized as services are provided. The Company receives revenue for services under various third-party payor programs which include Medicare, Medicaid, and other third-party payors. Settlements with third-party payors for retroactive adjustments due to audits, reviews, or investigations are included in the determination of the estimated transaction price for providing services. The Company estimates the transaction price based on the terms of the contract with the payor, correspondence with the payor and historical payment trends, and retroactive adjustments are recognized in future periods as final settlements are determined. Management Services The Company manages certain communities under contracts which provide periodic management fee payments to the Company. Management fees are generally determined by an agreed upon percentage of gross revenues (as defined in the management agreement). Certain management contracts also provide for an annual incentive fee to be paid to the Company upon achievement of certain metrics identified in the contract. The Company recognizes revenue for community management services in accordance with the provisions of ASC 606. Although there are various management and operational activities performed by the Company under the contracts, the Company has determined that all community operations management activities are a single performance obligation, which is satisfied over time as the services are rendered. The Company estimates the amount of incentive fee revenue expected to be earned, if any, during the annual contract period and revenue is recognized as services are provided. The Company’s estimate of the transaction price for management services also includes the amount of reimbursement due from the owners of the communities for services provided and related costs incurred. Such revenue is included in "reimbursed costs incurred on behalf of managed communities" on the condensed consolidated statements of operations. The related costs are included in "costs incurred on behalf of managed communities" on the condensed consolidated statements of operations. |
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Gain on Sale of Assets | Gain on Sale of Assets The Company regularly enters into real estate transactions which may include the disposal of certain communities, including the associated real estate. The Company recognizes income from real estate sales under ASC 610-20, Other Income - Gains and Losses from Derecognition of Nonfinancial Assets ("ASC 610-20"). Under ASC 610-20, income is recognized when the transfer of control occurs and the Company applies the five-step model for recognition to determine the amount and timing of income to recognize for all real estate sales. The Company accounts for the sale of equity method investments under ASC 860, Transfers and Servicing ("ASC 860"). Under ASC 860, income is recognized when the transfer of control occurs and the Company has no continuing involvement with the transferred financial assets. |
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Income Taxes | Income Taxes Income taxes are accounted for under the asset and liability approach which requires recognition of deferred tax assets and liabilities for the differences between the financial reporting and tax basis of assets and liabilities. A valuation allowance reduces deferred tax assets when it is more likely than not that some portion or all of the deferred tax assets will not be realized. |
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Fair Value of Financial Instruments | Fair Value of Financial Instruments ASC 820, Fair Value Measurements and Disclosures 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. 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. Cash and cash equivalents, marketable securities, and restricted cash are reflected in the accompanying condensed consolidated balance sheets at amounts considered by management to reasonably approximate fair value due to the short maturity. |
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Goodwill and Long-lived Asset Impairment | Goodwill The Company tests goodwill for impairment annually as of October 1 or whenever indicators of impairment arise. Factors the Company considers important in its analysis of whether an indicator of impairment exists include a significant decline in the Company's stock price or market capitalization for a sustained period since the last testing date, significant underperformance relative to historical or projected future operating results and significant negative industry or economic trends. The Company first assesses qualitative factors to determine whether it is necessary to perform a quantitative goodwill impairment test. The quantitative goodwill impairment test is based upon a comparison of the estimated fair value of the reporting unit to which the goodwill has been assigned with the reporting unit's carrying value. The Company is not required to calculate the fair value of a reporting unit unless the Company determines, based on a qualitative assessment, that it is more likely than not that its fair value of a reporting unit is less than its carrying value. The fair values used in the quantitative goodwill impairment test are estimated using Level 3 inputs based upon discounted future cash flow projections for the reporting unit. These cash flow projections are based upon a number of estimates and assumptions such as revenue and expense growth rates, capitalization rates, and discount rates. The Company also considers market based measures such as earnings multiples in its analysis of estimated fair values of its reporting units. If the quantitative goodwill impairment test results in a reporting unit's carrying value exceeding its estimated fair value, an impairment charge will be recorded based on the difference. The impairment charge is limited to the amount of goodwill allocated to the reporting unit. Long-lived Asset Impairment Long-lived assets (including right-of-use assets) are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of long-lived assets held for use are assessed by a comparison of the carrying amount of the asset to the estimated future undiscounted net cash flows expected to be generated by the asset, calculated utilizing the lowest level of identifiable cash flows. If estimated future undiscounted net cash flows are less than the carrying amount of the asset then the fair value of the asset is estimated. The impairment expense is determined by comparing the estimated fair value of the asset to its carrying value, with any amount in excess of fair value recognized as an expense in the current period. Undiscounted cash flow projections and estimates of fair value amounts are based on a number of assumptions such as revenue and expense growth rates, estimated holding periods and estimated capitalization rates (Level 3). |
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Self-Insurance Liability Accruals | 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 and every claim. As a result, the Company is, in effect, self-insured for claims that are less than the deductible amounts. In addition, the Company maintains a high deductible workers compensation program and a self-insured employee medical program. 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. |
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Lease Accounting | Lease Accounting The following is the Company's lease accounting policy under ASC 842 subsequent to the adoption. Refer to Recently Adopted Accounting Pronouncements in this Note 2 for significant changes that resulted from the adoption effective January 1, 2019. The Company, as lessee, recognizes a right-of-use asset and a lease liability on the Company’s condensed consolidated balance sheet for its community, office, and equipment leases. As of the commencement date of a lease, a lease liability and corresponding right-of-use asset is established on the Company’s condensed consolidated balance sheet at the present value of future minimum lease payments. The Company's community leases generally contain fixed annual rent escalators or annual rent escalators based on an index, such as the consumer price index. The future minimum lease payments recognized on the condensed consolidated balance sheet include fixed payments (including in-substance fixed payments) and variable payments estimated utilizing the index or rate on the lease commencement date. The Company recognizes lease expense as incurred for additional variable payments. For the Company’s leases that do not contain an implicit rate, the Company utilizes its estimated incremental borrowing rate in determining the present value of lease payments based on information available at commencement of the lease, which reflects the fixed rate at which the Company could borrow a similar amount for the same term on a collateralized basis. Leases with an initial term of 12 months or less are not recorded on the Company’s condensed consolidated balance sheet and instead are recognized as lease expense as incurred. The Company, as lessee, makes a determination with respect to each of its community, office, and equipment leases as to whether each should be accounted for as an operating lease or financing lease in accordance with the provisions of ASC 842. The classification criteria is based on estimates regarding the fair value of the leased asset, minimum lease payments, effective cost of funds, the economic life of the asset and certain other terms in the lease agreements. For operating leases, payments made under operating lease arrangements are accounted for in the Company's condensed consolidated statements of operations as operating lease expense for actual rent paid, generally plus or minus a straight-line adjustment for estimated minimum lease escalators if applicable. The right-of-use asset is generally reduced each period by an amount equal to the difference between the operating lease expense and the amount of expense on the lease liability utilizing the effective interest method. Subsequent to the impairment of an operating lease right-of-use asset, the Company recognizes operating lease expense consisting of the reduction of the right-of-use asset on a straight-line basis over the remaining lease term and the amount of expense on the lease liability utilizing the effective interest method. For financing leases, the Company recognizes interest expense on the lease liability utilizing the effective interest method. Additionally, the right-of-use asset is generally amortized to depreciation and amortization expense on a straight-line basis over the lease term unless the lease contains an option to purchase the underlying asset that the Company is reasonably certain to exercise in which case the asset is depreciated over the useful life of the underlying asset. For transactions in which an owned community is sold and leased back from the buyer (sale-leaseback transactions), the Company recognizes an asset sale and lease accounting is applied if the Company has transferred control of the community. For such transactions, the Company removes the transferred assets from the consolidated balance sheet and a gain or loss on the sale is recognized for the difference between the carrying value of the asset and the transaction price for the sale transaction. For sale‑leaseback transactions in which the Company has not transferred control of the underlying asset, the Company does not recognize an asset sale or derecognize the underlying asset until control is transferred. For such transactions, the Company continues to depreciate the asset over its useful life. Additionally, the Company accounts for any amounts received as a financing lease liability and the Company recognizes interest expense on the financing lease liability utilizing the effective interest method with the interest expense limited to an amount that is not greater than the cash payments on the financing lease liability over the term of the lease. Refer to the Company’s revenue recognition policy for discussion of the accounting policy for residency agreements, which include the lease of an asset. |
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Recently Adopted Accounting Pronouncements/Recently Issued Accounting Pronouncements Not Yet Adopted | Recently Adopted Accounting Pronouncements In February 2016, the FASB issued ASU 2016-02, Leases ("ASU 2016-02"). ASU 2016-02 amends the existing accounting principles for the recognition, measurement, presentation and disclosure of leases for both lessees and lessors. ASU 2016-02 requires a lessee to recognize a right-of-use asset and a lease liability on the balance sheet for most leases. Additionally, ASU 2016-02 makes targeted changes to lessor accounting, including changes to align certain aspects with the revenue recognition model, and requires enhanced disclosure of lease arrangements. In July 2018, the FASB issued ASU 2018-11, Leases, Targeted Improvements ("ASU 2018-11"). ASU 2018-11 provides entities with a transition method option to not restate comparative periods presented, but to recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. In addition, ASU 2018-11 provides entities with a practical expedient allowing lessors to not separate nonlease components from the associated lease components when certain criteria are met. The Company adopted these lease accounting standards effective January 1, 2019 and utilized the modified retrospective transition method with no adjustments to comparative periods presented. Additionally, the Company elected the package of practical expedients within ASU 2016-02 that allows an entity to not reassess, as of January 1, 2019, its prior conclusions on whether an existing contract contains a lease, lease classification for existing leases, and whether costs incurred for existing leases qualify as initial direct costs. The Company's adoption of ASU 2016-02 resulted in the recognition of operating lease liabilities of $1.6 billion and right-of-use assets of $1.3 billion on the condensed consolidated balance sheet for its existing community, office, and equipment operating leases based on the remaining present value of the minimum lease payments as of January 1, 2019. The future minimum rental payments recognized on the condensed consolidated balance sheet included fixed payments (including in-substance fixed payments) and variable payments estimated utilizing the index or rate as of January 1, 2019. Such right-of-use asset amounts were recognized based upon the amount of the recognized lease liabilities, adjusted for accrued lease payments, intangible assets, and the recognition of right-of-use asset impairments. As of December 31, 2018, the Company had a net liability of $231.4 million recognized on its consolidated balance sheet for accrued lease payments and intangible assets for operating leases. Additionally, $58.1 million of previously unrecognized right-of-use asset impairments were recognized as a cumulative effect adjustment to beginning accumulated deficit as of January 1, 2019. As a result of the Company’s election of the package of practical expedients within ASU 2016-02, there were no changes to the classification of the Company’s existing operating, capital and financing leases as of January 1, 2019 and there were no changes to the amounts recognized on its balance sheet for its existing capital and financing leases as of January 1, 2019. Subsequent to the adoption of ASU 2016-02, lessors are required to separately recognize and measure the lease component of a contract with a customer utilizing the provisions of ASC 842 and the nonlease components utilizing the provisions of ASC 606. To separately account for the components, the transaction price is allocated among the components based upon the estimated stand alone selling prices of the components. Additionally, certain components of a contract which were previously included within the lease element recognized in accordance with ASC 840, Leases ("ASC 840") prior to the adoption of ASU 2016-02 (such as common area maintenance services, other basic services, and executory costs) are recognized as nonlease components subject to the provisions of ASC 606 subsequent to the adoption of ASU 2016-02. However, entities are permitted to elect the practical expedient under ASU 2018-11 allowing lessors to not separate nonlease components from the associated lease components when certain criteria are met. Entities that elect to utilize the lease/nonlease component combination practical expedient under ASU 2018-11 upon initial application of ASC 842 are required to apply the practical expedient to all new and existing transactions within a class of underlying assets that qualify for the expedient as of the initial application date. For the year ended December 31, 2018, the Company recognized revenue for housing services under independent living, assisted living, and memory care residency agreements in accordance with the provisions of the former lease accounting standard, ASC 840, and the Company recognized revenue for assistance with activities of daily living, memory care services, healthcare, and personalized health services under independent living, assisted living, and memory care residency agreements in accordance with the provisions of ASC 606. Upon adoption of ASU 2016-02 and ASU 2018-11, the Company elected the lessor practical expedient within ASU 2018-11 and recognizes, measures, presents, and discloses the revenue for housing services under the Company's senior living residency agreements based upon the predominant component, either the lease or nonlease component, of the contracts rather than allocating the consideration and separately accounting for it under ASC 842 and ASC 606. The Company has concluded that the nonlease components of the Company’s independent living, assisted living, and memory care residency agreements are the predominant component of the contract for the Company’s existing agreements as of January 1, 2019. As a result of the Company's election of the package of practical expedients within ASU 2016-02, the Company continued to recognize revenue for existing contracts as of December 31, 2018 over the lease term. In addition, ASU 2016-02 has changed the definition of initial direct costs of a lease, with the initial direct costs that are initially deferred and recognized over the term of the lease limited to costs that are both incremental and direct. The Company concluded that the contract origination costs recognized on the balance sheet as of December 31, 2018 were in excess of the initial direct costs that would have been deferred under the provisions of ASU 2016-02. As a result of the Company’s election of the package of practical expedients, the contract origination costs recognized on the balance sheet as of December 31, 2018 continued to be amortized during 2019 over the lease term. Additionally, the Company concluded that certain costs previously deferred upon new contract origination are recognized within facility operating expense in 2019 as incurred. In addition to the previously unrecognized right-of-use asset impairment of $58.1 million, the Company recognized cumulative effect adjustments to beginning accumulated deficit as of January 1, 2019 for the impact of the adoption of accounting standards by its equity method investees and the deferred tax impact of these adjustments. The recognition of the right-of-use assets and corresponding liabilities and the removal of the deferred tax position related to these leases as of December 31, 2018, had an $0.3 million impact on the Company's net deferred tax position. A deferred tax asset of $14.1 million and an increase to the valuation allowance of $13.8 million was recorded against accumulated deficit reflecting the tax impact of the previously unrecognized right-of-use asset impairments. The adoption of the new accounting standards resulted in the following adjustments to the Company's condensed consolidated balance sheet as of January 1, 2019:
Recently Issued Accounting Pronouncements Not Yet Adopted In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments ("ASU 2016-13"). ASU 2016-13 replaces the current incurred loss impairment methodology for credit losses with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. ASU 2016-13 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted for fiscal years beginning after December 15, 2018. The Company is currently evaluating the impact the adoption of ASU 2016-13 will have on its condensed consolidated financial statements and disclosures. |
Summary of Significant Accounting Policies (Tables) |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of change in accounting principles | The adoption of the new accounting standards resulted in the following adjustments to the Company's condensed consolidated balance sheet as of January 1, 2019:
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Acquisitions, Dispositions and Other Significant Transactions (Tables) |
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Business Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Disposal Groups | The following table sets forth, for the periods indicated, the amounts included within the Company's condensed consolidated financial statements for the 118 communities that it disposed through sales and lease terminations during the period from January 1, 2018 to March 31, 2019 through the respective disposition dates:
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Fair Value Measurements (Tables) |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements, Nonrecurring | The following is a summary of goodwill and asset impairment expense.
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Stock-Based Compensation (Tables) |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||
Current year grants of restricted shares | Grants of restricted shares under the Company's 2014 Omnibus Incentive Plan were as follows:
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Goodwill and Other Intangible Assets, Net (Tables) |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of definite-lived intangible assets | Other intangible assets as of March 31, 2019 and December 31, 2018 are summarized in the following tables:
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Schedule of indefinite-lived intangible assets | ther intangible assets as of March 31, 2019 and December 31, 2018 are summarized in the following tables:
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Property, Plant and Equipment and Leasehold Intangibles, Net (Tables) |
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Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, plant and equipment and leasehold intangibles, net | As of March 31, 2019 and December 31, 2018, net property, plant and equipment and leasehold intangibles, which include assets under financing leases, consisted of the following:
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Debt (Tables) |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of debt | Long-term debt as of March 31, 2019 and December 31, 2018 consists of the following:
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Leases (Tables) |
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Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Lease Costs | A summary of operating and financing lease expense (including the respective presentation on the condensed consolidated statements of operations) and cash flows from leasing transactions is as follows:
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Finance Lease, Liability, Maturity | The aggregate amounts of future minimum lease payments, including community, office, and equipment leases recognized on the condensed consolidated balance sheet as of March 31, 2019 are as follows (in thousands):
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Lessee, Operating Lease, Liability, Maturity | The aggregate amounts of future minimum lease payments, including community, office, and equipment leases recognized on the condensed consolidated balance sheet as of March 31, 2019 are as follows (in thousands):
|
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Schedule of Future Minimum Rental Payments for Operating Leases | The aggregate amounts of future minimum operating lease payments, including community, office, and equipment leases not recognized on the condensed consolidated balance sheet under ASC 840 as of December 31, 2018 are as follows (in thousands):
|
Supplemental Disclosure of Cash Flow Information (Tables) |
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Supplemental Cash Flow Elements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Supplemental cash flow information |
Refer to Note 2 for a schedule of the non-cash adjustments to the Company's condensed consolidated balance sheet as of January 1, 2019 as a result of the adoption of new accounting standards. The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the condensed consolidated balance sheets that sums to the total of the same such amounts shown in the condensed consolidated statement of cash flows.
|
Revenue (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disaggregation of Revenue | The Company disaggregates its revenue from contracts with customers by payor source, as the Company believes it best depicts how the nature, amount, timing and uncertainty of its revenue and cash flows are affected by economic factors. See details on a reportable segment basis in the table below.
|
Segment Information (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of segment reporting information | The following table sets forth selected segment financial and operating data:
|
Summary of Significant Accounting Policies (Details) - USD ($) $ in Thousands |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2019 |
Jan. 01, 2019 |
Dec. 31, 2018 |
|
Revenue Recognition [Abstract] | |||
Term of residency agreements- minimum | 30 days | ||
Term of residency agreements - maximum | 1 year | ||
New Accounting Pronouncements and Changes in Accounting Principles [Abstract] | |||
Total lease obligations | $ 1,576,383 | ||
Operating lease right-of-use assets | 1,291,428 | $ 0 | |
Cumulative effect change in accounting principle | $ (55,885) | ||
Change in valuation allowance | $ 356,800 | 336,400 | |
ASU 2016-02 | |||
New Accounting Pronouncements and Changes in Accounting Principles [Abstract] | |||
Total lease obligations | 1,618,000 | ||
Operating lease right-of-use assets | 1,329,000 | ||
Operating lease assets (liabilities) | (231,400) | ||
Deferred tax assets | 14,100 | $ 300 | |
Change in valuation allowance | 13,800 | ||
ASU 2016-02, Impairment Loss | |||
New Accounting Pronouncements and Changes in Accounting Principles [Abstract] | |||
Cumulative effect change in accounting principle | $ 58,100 |
Earnings Per Share (Details) - USD ($) shares in Millions, $ in Millions |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
Jun. 15, 2018 |
|
Unvested Restricted Stock | |||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | |||
Antidilutive securities (shares) | 7.2 | 7.0 | |
Convertible Debt Securities | |||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | |||
Antidilutive securities (shares) | 13.8 | ||
Warrant | |||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | |||
Antidilutive securities (shares) | 10.8 | ||
Convertible Senior Notes Due June 2018 | Convertible notes payable | |||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | |||
Principal | $ 316.3 | ||
Interest rate | 2.75% | ||
Maximum number of convertible instruments (shares) | 3.0 |
Fair Value Measurements - Goodwill and Asset Impairment (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Property, plant and equipment and leasehold intangibles, net | $ 40,800 | |
Goodwill and asset impairment | $ 391 | 430,363 |
Nonrecurring | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Goodwill | 351,700 | |
Property, plant and equipment and leasehold intangibles, net | 40,800 | |
Investment in unconsolidated ventures | 33,400 | |
Other intangible assets, net | 1,700 | |
Assets held for sale | 2,800 | |
Goodwill and asset impairment | $ 430,400 |
Stock-Based Compensation (Details) - Unvested Restricted Stock $ / shares in Units, shares in Thousands, $ in Thousands |
3 Months Ended |
---|---|
Mar. 31, 2019
USD ($)
$ / shares
shares
| |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Restricted Shares Granted (in shares) | shares | 4,047 |
Value Per Share (in dollars per share) | $ / shares | $ 7.87 |
Total value of restricted shares granted | $ | $ 31,857 |
Goodwill and Other Intangible Assets, Net - Additional Information (Details) - USD ($) $ in Thousands |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
Dec. 31, 2018 |
|
Goodwill [Line Items] | |||
Goodwill | $ 154,131 | $ 154,131 | |
Amortization expense related to definite-lived intangible assets | 800 | $ 800 | |
Independent Living | |||
Goodwill [Line Items] | |||
Goodwill | 27,300 | 27,300 | |
Health Care Services | |||
Goodwill [Line Items] | |||
Goodwill | $ 126,800 | $ 126,800 |
Debt - Schedule of Debt (Details) - USD ($) $ in Thousands |
Mar. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Long-Term Debt, Capital and Financing Leases and Financing Obligations [Line Items] | ||
Total long-term debt | $ 3,642,997 | $ 3,640,180 |
Less current portion | 454,854 | 294,426 |
Total long-term debt, less current portion | 3,188,143 | 3,345,754 |
Mortgage notes payable | ||
Long-Term Debt, Capital and Financing Leases and Financing Obligations [Line Items] | ||
Total long-term debt | 3,566,621 | 3,579,931 |
Unamortized debt discount | $ 18,000 | $ 18,600 |
Weighted average interest rate | 4.93% | 4.75% |
Other notes payable | ||
Long-Term Debt, Capital and Financing Leases and Financing Obligations [Line Items] | ||
Total long-term debt | $ 76,376 | $ 60,249 |
Weighted average interest rate | 5.42% | 5.85% |
Debt - Debt (Details) - Disposal Group, Held-for-sale or Disposed of by Sale, Not Discontinued Operations - Mortgage notes payable - USD ($) $ in Millions |
Mar. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
7 Communities Held For Sale | ||
Debt Instrument [Line Items] | ||
Mortgage debt | $ 23.4 | |
15 Communities Held For Sale | ||
Debt Instrument [Line Items] | ||
Mortgage debt | $ 31.2 |
Debt - 2019 Financings (Details) - Subsequent Event $ in Millions |
May 07, 2019
USD ($)
community
|
---|---|
Mortgage notes payable | |
Debt Instrument [Line Items] | |
Percentage of principal bearing fixed rate | 60.00% |
Fixed rate | 4.52% |
Percentage of principal bearing variable rate | 40.00% |
Mortgage notes payable | Non-Recourse Supplemental Loan | |
Debt Instrument [Line Items] | |
Face amount | $ 111.1 |
Mortgage notes payable | Mortgage Debt Due 2019 | |
Debt Instrument [Line Items] | |
Extinguishment of debt | $ 156.0 |
Secured debt | Non-Recourse First Mortgages | |
Debt Instrument [Line Items] | |
Number of communities securing debt | community | 14 |
LIBOR | Mortgage notes payable | |
Debt Instrument [Line Items] | |
Basis spread on variable rate basis | 2.23% |
Leases (Details) |
3 Months Ended |
---|---|
Mar. 31, 2019
lease
community
| |
Leases [Abstract] | |
Operating and financing leases, number of communities | community | 342 |
Operating leases, number of communities | 251 |
Financing leases, number of communities | 91 |
Operating lease, weighted average remaining lease term | 7 years 6 months |
Finance lease, weighted average remaining lease term | 9 years |
Operating lease, weighted average discount rate, percent | 8.60% |
Finance lease, weighted average discount rate, percent | 7.80% |
Minimum | |
Lessee, Lease, Description [Line Items] | |
Finance and operating lease, renewal term | 5 years |
Maximum | |
Lessee, Lease, Description [Line Items] | |
Finance and operating lease, renewal term | 20 years |
Leases - Lease Costs (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Leases [Abstract] | ||
Facility operating expense | $ 4,625 | |
Facility lease expense | 68,668 | $ 80,400 |
Operating lease expense | 73,293 | |
Operating lease expense adjustment | 4,383 | |
Operating cash flows from operating leases | 77,676 | |
Non-cash recognition of right-of-use assets obtained in exchange for new operating lease obligations | 1,358 | |
Depreciation and amortization | 11,678 | |
Interest expense: financing lease obligations | 16,743 | $ 22,931 |
Financing lease expense | 28,421 | |
Financing cash flows from financing leases | 5,453 | |
Operating cash flows from financing leases | 16,743 | |
Total cash flows from financing leases | $ 22,196 |
Leases - Maturity ASC 842 (Details) $ in Thousands |
Mar. 31, 2019
USD ($)
|
---|---|
Operating Leases | |
2019 | $ 231,489 |
2020 | 308,607 |
2021 | 292,531 |
2022 | 289,447 |
2023 | 285,741 |
Thereafter | 786,649 |
Total lease payments | 2,194,464 |
Imputed interest and variable lease payments | (618,081) |
Total lease obligations | 1,576,383 |
Financing Leases | |
2019 | 66,190 |
2020 | 89,003 |
2021 | 90,243 |
2022 | 91,633 |
2023 | 93,104 |
Thereafter | 428,952 |
Total lease payments | 859,125 |
Purchase option liability and non-cash gain on future sale of property | 575,276 |
Imputed interest and variable lease payments | (565,314) |
Total lease obligations | $ 869,087 |
Leases - Maturity ASC 840 (Details) $ in Thousands |
Dec. 31, 2018
USD ($)
|
---|---|
Leases [Abstract] | |
2019 | $ 310,340 |
2020 | 307,493 |
2021 | 290,661 |
2022 | 291,114 |
2023 | 285,723 |
Thereafter | 786,647 |
Total lease payments | $ 2,271,978 |
Supplemental Disclosure of Cash Flow Information - Cash and Restricted Cash (Details) - USD ($) $ in Thousands |
Mar. 31, 2019 |
Dec. 31, 2018 |
Mar. 31, 2018 |
Dec. 31, 2017 |
---|---|---|---|---|
Supplemental Cash Flow Elements [Abstract] | ||||
Cash and cash equivalents | $ 256,501 | $ 398,267 | ||
Restricted cash | 28,811 | 27,683 | ||
Long-term restricted cash | 43,188 | 24,268 | ||
Total cash, cash equivalents and restricted cash shown in the condensed consolidated statement of cash flows | $ 328,500 | $ 450,218 | $ 395,561 | $ 282,546 |
Income Taxes (Details) - USD ($) $ in Millions |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
Dec. 31, 2018 |
|
Valuation Allowance [Line Items] | |||
Gross deferred federal, state and local tax benefit | $ 6.5 | ||
Deferred federal, state and local tax benefit | 8.2 | ||
Deferred tax assets, tax deferred expense, employee compensation | (1.7) | ||
Change in valuation allowance | 6.6 | ||
Valuation allowance | 356.8 | $ 336.4 | |
Federal and State | |||
Valuation Allowance [Line Items] | |||
Deferred federal, state and local tax benefit | 9.5 | ||
Change in valuation allowance | 8.3 | $ 24.6 | |
ASC 842 | |||
Valuation Allowance [Line Items] | |||
Change in valuation allowance | $ 13.8 |
Revenue - Additional Information (Details) - USD ($) $ in Millions |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
Dec. 31, 2018 |
|
Disaggregation of Revenue [Line Items] | |||
Monthly resident fees | $ 35.5 | $ 50.6 | |
Revenue recognized | 60.9 | $ 61.7 | |
Deferred Revenue and Credits | |||
Disaggregation of Revenue [Line Items] | |||
Contract with customer, liability | $ 88.3 | $ 106.4 |
Label | Element | Value |
---|---|---|
Noncontrolling Interest [Member] | ||
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest | us-gaap_StockholdersEquityIncludingPortionAttributableToNoncontrollingInterest | $ (490,000) |
Parent [Member] | ||
Cumulative Effect of New Accounting Principle in Period of Adoption | us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption | (55,885,000) |
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest | us-gaap_StockholdersEquityIncludingPortionAttributableToNoncontrollingInterest | 963,018,000 |
Retained Earnings [Member] | ||
Cumulative Effect of New Accounting Principle in Period of Adoption | us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption | (55,885,000) |
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest | us-gaap_StockholdersEquityIncludingPortionAttributableToNoncontrollingInterest | (3,125,157,000) |
Additional Paid-in Capital [Member] | ||
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest | us-gaap_StockholdersEquityIncludingPortionAttributableToNoncontrollingInterest | $ 4,151,147,000 |
Common Stock [Member] | ||
Common Stock, Shares, Outstanding | us-gaap_CommonStockSharesOutstanding | 192,356,000 |
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest | us-gaap_StockholdersEquityIncludingPortionAttributableToNoncontrollingInterest | $ 1,968,000 |
Treasury Stock [Member] | ||
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest | us-gaap_StockholdersEquityIncludingPortionAttributableToNoncontrollingInterest | $ (64,940,000) |
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