Contact: | FOR IMMEDIATE RELEASE |
Francie Nagy
Investor Relations
Tel: +1-212-515-4625
Brookdale Announces First Quarter 2006 Results
_______________________________________________________________
First Quarter 2006 Highlights
| • | Net loss of $(19.3) million, or $(0.30) per diluted common share, including non-cash expenses of $30.2 for depreciation and amortization, non-cash compensation expense and straight-line lease expense, net of deferred gain amortization. |
| • | Facility Operating Income of $84.0 million and Adjusted EBITDA of $26.9 million. |
| • | Cash From Facility Operations of $13.3 million, or $0.20 per outstanding common share, at March 31, 2006. |
| • | Average occupancy was 89.5%. |
| • | Completed the acquisition of 26 facilities (2,005 units/beds) for a total acquisition cost of $184.6 million. |
| • | Announced first quarter 2006 dividend of $0.35 per common share. Dividend was paid on April 14, 2006. |
Page 1 of 14
Chicago, IL. May 12, 2006 – Brookdale Senior Living Inc. (NYSE: BKD) today reported financial results for the first quarter of 2006. Net loss for the quarter was $(19.3) million or $(0.30) per diluted common share.
As a dividend-paying company, Brookdale’s management utilizes Adjusted EBITDA and Cash From Facility Operations to evaluate the Company’s performance and liquidity because these metrics exclude non-cash expenses such as depreciation and amortization, non-cash compensation expense and straight-line rent expense, net of deferred gain amortization.
For the first quarter 2006, Adjusted EBITDA was $26.9 million versus fourth quarter 2005 Adjusted EBITDA of $27.0 million. Excluding a non-cash benefit of a $4.7 million non-recurring reversal of an accrual in the fourth quarter 2005, Adjusted EBITDA was $22.3 million.
For the first quarter, Cash From Facility Operations was $13.3 million, or $0.20 per common share outstanding at March 31, 2006. This represents an increase of $2.4 million over fourth quarter 2005 Cash From Facility Operations of $10.9 million, or $0.17 per outstanding common share at December 31, 2005.
Same-store revenues, excluding developments, grew 6.4% for the first quarter of 2006 over the first quarter of 2005, and same-store Facility Operating Income grew 14.2% for the same period. The same-store growth in Facility Operating Income is not indicative of normalized growth as the first quarter of 2005 did not benefit from the cost synergies resulting from the combination of Old Brookdale and Alterra in September 2005 which were realized this quarter.
Brookdale generated $84.0 million of Facility Operating Income for the first quarter 2006 versus fourth quarter 2005 Facility Operating Income of $84.7 million. Excluding a non-cash benefit of a $4.7 million non-recurring reversal of an accrual in the fourth quarter of 2005, Facility Operating Income increased $4.0 million, or 5.0%.
Adjusted EBITDA and Cash From Facility Operations also include non-recurring costs of $3.0 million and $3.4 million for the first quarter 2006 and fourth quarter 2005, respectively.
On February 10, 2006, Brookdale closed on a $330.0 million senior secured credit agreement, consisting of a $250.0 million term loan, a $20.0 million revolving loan and a $60.0 million letters of credit commitment.
Mark J. Schulte, Brookdale’s CEO, commented, “I am very proud of the entire Brookdale team for the great job they did this quarter executing in the three key areas of driving revenues, reducing costs and closing acquisitions. I am very pleased with our efforts this quarter as we closed several important acquisitions and continue to see more opportunity in consolidation. Of course, integral to an acquisition program is successful integration. The recent completion of our new IT platform has given us a very powerful tool in successfully assuming operations of the companies and properties we have acquired. As we integrate these operations into the Brookdale platform, we are quickly realizing the benefits and synergies of our scale and expertise.”
Page 2 of 14
Acquisitions
For the first quarter 2006, Brookdale completed the acquisition of 26 facilities (2,005 units/beds) for a total acquisition cost of $184.6 million. Subsequent to March 31, 2006, Brookdale completed the acquisition of the Southern Assisted Living portfolio (41 leased facilities with 2,887 units/beds), the first portion of the AEW portfolio (5 owned facilities with 813 units/beds) and the Southland Portfolio (4 owned facilities with 262 units/beds).
Since Brookdale’s IPO in November 2005, the Company has purchased or committed to purchase $750.8 million in senior housing assets. These acquisitions represent 104 facilities and 9,147 units/beds. Upon closing, Brookdale would invest approximately $315.0 million of cash in these transactions. The Company has and will use its existing cash and its corporate acquisition line to fund the equity component of these acquisitions. To date, $689.0 million of transactions representing 92 facilities and 7,781 units/beds have closed. Brookdale has invested $268.0 million of cash in these acquisitions.
Dividend
For the first quarter of 2006 Brookdale paid a dividend of $0.35 per share of common stock, on April 14, 2006, to holders of record of Brookdale’s common stock on March 31, 2006.
Business Strategy
Brookdale’s business strategy is to focus on increasing its earnings and dividends to shareholders by growing Adjusted EBITDA and Cash From Facility Operations through:
| • | Internal growth at our existing portfolio of facilities through occupancy improvements, increases in annual rental rates and operational savings due to economies of scale; and |
| • | Accretive acquisitions of senior housing facilities and operators in a fragmented industry. |
Earnings Conference Call
Management will conduct a conference call on Monday, May 15, 2006 to review the financial results for the three months ended March 31, 2006. The conference call is scheduled for 11:00 AM EDT. All interested parties are welcome to participate in the live call. The conference call can be accessed by dialing (866) 323-2841 or (706) 643-3330 (from outside of the U.S.) up to ten minutes prior to the scheduled start and referencing “The Brookdale First Quarter 2006 Earnings Call.”
A webcast of the conference call will be available to the public on a listen-only basis at http://www.brookdaleliving.com. Please allow extra time prior to the call to visit the site and download the necessary software required to listen to the internet broadcast. A replay of the webcast will be available for 3 months following the call.
Page 3 of 14
For those who cannot listen to the live call, a replay will be available until 11:59 PM EST on May 22, 2006 by dialing (800) 642-1687 (from within the U.S.) or (706) 645-9291 (from outside of the U.S.) please reference access code “880-8783.” A copy of this earnings release is posted on the Investor Relations page of the Brookdale website.
About Brookdale Senior Living
Brookdale Senior Living Inc. is a leading owner and operator of senior living facilities throughout the United States. The Company is committed to providing an exceptional living experience through properties that are designed, purpose-built and operated to provide the highest-quality service, care and living accommodations for residents. Currently the Company owns and operates independent, assisted and dementia-care facilities, with a total of 454 facilities in 32 states and the ability to serve approximately 34,900 residents.
Safe Harbor
Certain items in this press release and the associated earnings conference call may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, and are subject to various risks and uncertainties, including without limitation, statements relating to commitments to purchase senior housing assets, the amount of cash to be used in such transactions and the continuation of leveraging the Company’s national footprint and operating infrastructure to invest capital accretively in acquisitions. Forward-looking statements are generally identifiable by use of forward-looking terminology such as “may,” “will,” “should,” “potential,” “intend,” “expect,” “endeavor,” “seek,” “anticipate,” “estimate,” “overestimate,” “underestimate,” “believe,” “could,” “would,” “project,” “predict,” “continue” or other similar words or expressions. Forward looking statements are based on certain assumptions or estimates, discuss future expectations, describe future plans and strategies, contain projections of results of operations or of financial condition or state other forward-looking information. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Although we believe that the expectations reflected in such forward looking statements are based on reasonable assumptions, actual results and performance could differ materially from those set forth in the forward-looking statements. Factors which could have a material adverse effect on our operations and future prospects or which could cause events or circumstances to differ from the forward-looking statements include, but are not limited to, our limited operating history on a combined basis, our ability to generate sufficient cash flow to cover required interest and long-term operating lease payments, the effect of our indebtedness and long-term operating leases on our liquidity, our increased risk of loss of property pursuant to our mortgage debt and long-term lease obligations, our ability to effectively manage our growth, our ability to maintain consistent quality control, unforeseen costs associated with the acquisition of new facilities, competition for the acquisition of strategic assets, our ability to obtain additional capital on terms acceptable to us, events which adversely affect the ability of seniors to afford our monthly resident fees, our vulnerability to economic downturns, regulatory changes or acts of nature in certain geographic areas, terminations of our resident agreements and vacancies in the living spaces we lease, early termination or non-renewal of our management agreements, increase competition for skilled personnel, departure of our key officers, increases in market interest rates, environmental contamination at any of our facilities, failure to comply with existing environmental laws, an adverse determination or resolution in recent complaints filed against us, the cost and difficulty of complying with
Page 4 of 14
increasing and evolving regulation, and other risks detailed from time to time in Brookdale’s SEC reports, including its final Prospectus filed with the SEC pursuant to Rule 424(b) on November 23, 2005 . When considering forward-looking statements, you should keep in mind the risk factors and other cautionary statements in such SEC filings. Readers are cautioned not to place undue reliance on any of these forward-looking statements, which reflect our management’s views as of the date of this press release and/or the associated earnings conference call. The factors discussed above and the other factors noted in our SEC filings could cause our actual results to differ significantly from those contained in any forward-looking statement. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements and we expressly disclaim any obligation to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in our expectations with regard thereto or change in events, conditions or circumstances on which any statement is based.
Page 5 of 14
Consolidated and Combined Statements of Operations
(in thousands, except for per share data)
|
| Three Months Ended |
| |||||||
|
| March 31, |
| December 31, |
| March 31, |
| |||
|
|
| (Unaudited) |
|
|
|
|
| (Unaudited) |
|
Revenue |
|
|
|
|
|
|
|
|
|
|
Resident service fees |
| $ | 221,036 |
| $ | 211,860 |
| $ | 174,112 |
|
Management fees |
|
| 1,147 |
|
| 1,187 |
|
| 871 |
|
Total revenue |
|
| 222,183 |
|
| 213,047 |
|
| 174,983 |
|
|
|
|
|
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
|
|
|
|
|
Facility operating, excluding depreciation and amortization of $21,410, $17,567 and $3,540, respectively |
|
| 136,945 |
|
| 127,105 |
|
| 110,349 |
|
General and administrative (including non-cash stock compensation expense of $3,018, $11,534, and $-, respectively) |
|
| 21,085 |
|
| 27,690 |
|
| 11,658 |
|
Facility lease expense |
|
| 45,734 |
|
| 48,487 |
|
| 46,502 |
|
Depreciation and amortization |
|
| 22,299 |
|
| 18,565 |
|
| 5,173 |
|
Total operating expenses |
|
| 226,063 |
|
| 221,847 |
|
| 173,682 |
|
Income (loss) from operations |
|
| (3,880 | ) |
| (8,800 | ) |
| 1,301 |
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
| 1,052 |
|
| 1,588 |
|
| 696 |
|
Interest expense: |
|
|
|
|
|
|
|
|
|
|
Debt |
|
| (13,690 | ) |
| (12,809 | ) |
| (9,125 | ) |
Amortization deferred financing costs |
|
| (703 | ) |
| (457 | ) |
| (423 | ) |
Change in fair value of derivatives |
|
| (101 | ) |
| (88 | ) |
| 4,062 |
|
Loss on extinguishment of debt |
|
| (1,334 | ) |
| (3,543 | ) |
| (453 | ) |
Equity in loss of unconsolidated venture |
|
| (168 | ) |
| (197 | ) |
| (187 | ) |
Loss before income taxes |
|
| (18,824 | ) |
| (24,306 | ) |
| (4,129 | ) |
Provision for income taxes |
|
| (386 | ) |
| (150 | ) |
| (166 | ) |
Loss before minority interest |
|
| (19,210 | ) |
| (24,456 | ) |
| (4,295 | ) |
Minority interest |
|
| (116 | ) |
| — |
|
| 2,532 |
|
Loss before discontinued operations |
|
| (19,326 | ) |
| (24,456 | ) |
| (1,763 | ) |
Discontinued operations |
|
| — |
|
| — |
|
| (35 | ) |
Net loss |
| $ | (19,326 | ) | $ | (24,456 | ) | $ | (1,798 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted loss per common share(3) |
| $ | (0.30 | ) | $ | (0.41 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares used for basic and diluted loss per common share data |
|
| 65,007 |
|
| 59,710 |
|
|
|
|
| (1) | Brookdale Senior Living Inc. was formed on September 30, 2005. Results prior to that date represent the combined operations of the Predecessor entities. |
| (2) | On January 1, 2006 we have consolidated three limited partnerships controlled by us pursuant to EITF 04-5. Resident service fees, facility operating expenses, depreciation and amortization, interest income and interest expense for the entities was $3,048, $2,225, $306, $7 and $391 for the three months ended March 31, 2006, respectively. |
| (3) | We have excluded the loss per share for the period ended March 31, 2005. We believe this calculation is not meaningful to investors due to the different ownership and legal structures (e.g., corporation and limited liability companies) of the various entities prior to the formation transactions on September 30, 2005. |
Page 6 of 14
Condensed Consolidated and Combined Balance Sheets
(in thousands)
|
| March 31, |
| December 31, |
| March 31, |
| |||
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
| $ | 94,096 |
| $ | 77,682 |
| $ | 76,083 |
|
Cash and investments — restricted |
|
| 41,984 |
|
| 37,314 |
|
| 20,490 |
|
Other current assets |
|
| 45,399 |
|
| 30,881 |
|
| 23,538 |
|
Total current assets |
|
| 181,479 |
|
| 145,877 |
|
| 120,111 |
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment |
|
| 1,715,239 |
|
| 1,479,587 |
|
| 558,073 |
|
Accumulated depreciation |
|
| (104,688 | ) |
| (70,855 | ) |
| (34,183 | ) |
Property, plant and equipment, net |
|
| 1,610,551 |
|
| 1,408,732 |
|
| 523,890 |
|
Lease security deposits |
|
| 19,723 |
|
| 25,271 |
|
| 26,478 |
|
Other long term assets |
|
| 113,318 |
|
| 117,931 |
|
| 58,941 |
|
Total assets |
| $ | 1,925,071 |
| $ | 1,697,811 |
| $ | 729,420 |
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
| $ | 280,339 |
| $ | 171,443 |
| $ | 109,512 |
|
Long-term debt, less current portion |
|
| 887,074 |
|
| 754,169 |
|
| 378,669 |
|
Other long term liabilities |
|
| 146,457 |
|
| 141,760 |
|
| 174,598 |
|
Total liabilities |
|
| 1,313,870 |
|
| 1,067,372 |
|
| 662,779 |
|
Minority interests |
|
| 12,267 |
|
| 36 |
|
| 28,637 |
|
Stockholders’ equity |
|
| 598,934 |
|
| 630,403 |
|
| 38,004 |
|
Total liabilities and stockholders’ equity |
| $ | 1,925,071 |
| $ | 1,697,811 |
| $ | 729,420 |
|
| (1) | Brookdale Senior Living Inc. was formed on September 30, 2005. Results prior to that date represent the combined operations of the Predecessor entities. |
Page 7 of 14
Consolidated and Combined Statements of Cash Flow
(in thousands)
|
| Three Months Ended |
| |||||||
|
| March 31, |
| December 31, |
| March 31, |
| |||
|
| (Unaudited) |
|
|
| (Unaudited) |
| |||
Cash Flows from Operating Activities |
|
|
|
|
|
|
|
|
|
|
Net loss |
| $ | (19,326 | ) | $ | (24,456 | ) | $ | (1,798 | ) |
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: |
|
|
|
|
|
|
|
|
|
|
Loss on extinguishment of debt |
|
| 1,334 |
|
| 3,543 |
|
| 453 |
|
Depreciation and amortization |
|
| 23,002 |
|
| 19,022 |
|
| 5,596 |
|
Minority interest |
|
| 116 |
|
| 197 |
|
| (2,532 | ) |
Equity in loss of unconsolidated ventures |
|
| 168 |
|
| — |
|
| 187 |
|
Loss on discontinued operations |
|
| — |
|
| — |
|
| 35 |
|
Amortization of deferred gain |
|
| (1,087 | ) |
| (1,152 | ) |
| (2,296 | ) |
Amortization of entrance fees |
|
| (83 | ) |
| (15 | ) |
| — |
|
Proceeds from deferred entrance fee revenue |
|
| 448 |
|
| 486 |
|
| — |
|
Deferred income taxes provision |
|
| — |
|
| 150 |
|
| 166 |
|
Change in deferred lease liability |
|
| 5,259 |
|
| 5,895 |
|
| 6,094 |
|
Change in fair value of derivatives |
|
| 101 |
|
| 88 |
|
| (4,062 | ) |
Compensation expenses related to restricted stock grants |
|
| 3,018 |
|
| 11,534 |
|
| — |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
Accounts receivable, net |
|
| (1,446 | ) |
| 917 |
|
| 999 |
|
Prepaid expenses and other assets, net |
|
| 827 |
|
| (3,825 | ) |
| 3,202 |
|
Accounts payable and accrued expenses |
|
| (5,104 | ) |
| 8,555 |
|
| (10,383 | ) |
Tenant refundable fees and security deposits |
|
| 602 |
|
| 108 |
|
| 263 |
|
Other |
|
| 4,290 |
|
| (11,954 | ) |
| (352 | ) |
Net cash provided by (used in) operating activities |
|
| 12,119 |
|
| 9,093 |
|
| (4,428 | ) |
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities |
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in lease security deposits and lease acquisition deposits, net |
|
| 5,548 |
|
| 491 |
|
| (67 | ) |
Decrease in cash and investments — restricted |
|
| 13,069 |
|
| 6,729 |
|
| 3,292 |
|
Net proceeds from sale of property, plant and equipment |
|
| — |
|
| — |
|
| 677 |
|
Additions to property, plant and equipment, net of related payables |
|
| (6,737 | ) |
| (25,872 | ) |
| (5,660 | ) |
Acquisition of assets, net of related payables |
|
| (197,863 | ) |
| (79,979 | ) |
| — |
|
Net cash used in investing activities |
|
| (185,983 | ) |
| (98,631 | ) |
| (1,758 | ) |
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities |
|
|
|
|
|
|
|
|
|
|
Proceeds from debt |
|
| 127,847 |
|
| 54,000 |
|
| 192,000 |
|
Proceeds from line of credit |
|
| 87,000 |
|
| — |
|
| — |
|
Repayment of debt |
|
| (3,934 | ) |
| (77,459 | ) |
| (179,762 | ) |
Payment of dividends |
|
| (16,547 | ) |
| (14,355 | ) |
| — |
|
Payment of financing costs, net of related payables |
|
| (5,006 | ) |
| — |
|
| (2,762 | ) |
Refundable entrance fees: |
|
|
|
|
|
|
|
|
|
|
Proceeds from refundable entrance fees |
|
| 1,621 |
|
| 1,513 |
|
| — |
|
Refunds of entrance fees |
|
| (703 | ) |
| (1,065 | ) |
| — |
|
Costs incurred related to initial public offering |
|
| — |
|
| (6,434 | ) |
| — |
|
Payment of swap termination |
|
| — |
|
| — |
|
| (14,065 | ) |
Proceeds from issuance of common stock, net of underwriters discount |
|
| — |
|
| 151,269 |
|
| — |
|
Net cash provided by (used in) financing activities |
|
| 190,278 |
|
| 107,469 |
|
| (4,589 | ) |
Net increase in cash and cash equivalents |
|
| 16,414 |
|
| 17,931 |
|
| (10,775 | ) |
Cash and cash equivalents at beginning of period |
|
| 77,682 |
|
| 59,751 |
|
| 86,858 |
|
Cash and cash equivalents at end of period |
| $ | 94,096 |
| $ | 77,682 |
| $ | 76,083 |
|
| (1) | Brookdale Senior Living Inc. was formed on September 30, 2005. Results prior to that date represent the combined operations of the Predecessor entities. |
Page 8 of 14
Non-GAAP Financial Measures
Adjusted EBITDA
Adjusted EBITDA is a measure of operating performance that is not calculated in accordance with U.S. generally accepted accounting principles (“GAAP”). Adjusted EBITDA should not be considered a substitute for net income, income from operations or cash flows provided by or used in operations, as determined in accordance with GAAP. Adjusted EBITDA is a key measure of the Company’s operating performance used by management and the board of directors to focus on operating performance and management without mixing in items of income and expense that relate to long-term contracts and the financing and capitalization of the business. We define Adjusted EBITDA as net income (loss) before provision (benefit) for income taxes, non-operating income (loss) items, depreciation and amortization, straight-line lease expense (income), amortization of deferred gain, amortization of deferred entrance fees, and non-cash compensation expense and including entrance fee receipts and refunds.
We believe Adjusted EBITDA is useful to investors in evaluating our performance, results of operations and financial position for the following reasons:
| • | It is helpful in identifying trends in our day-to-day performance because the items excluded have little or no significance to our day-to-day operations |
| • | It provides an assessment of controllable expenses and affords management the ability to make decisions that facilitate meeting current financial goals as well as achieve optimal financial performance |
| • | It is an indication to determine if adjustments to current spending decisions are needed |
Page 9 of 14
The table below reconciles Adjusted EBITDA from net loss for the three months ended March 31, 2006, December 31, 2005 and March 31, 2005 (in thousands):
| Three Months Ended | ||||
| March 31, |
| December 31, |
| March 31, |
Net loss | $(19,326) |
| $(24,456) |
| $(1,798) |
Loss on discontinued operations | — |
| — |
| 35 |
Minority interest | 116 |
| — |
| (2,532) |
Provision for income taxes | 386 |
| 150 |
| 166 |
Equity in loss of unconsolidated ventures | 168 |
| 197 |
| 187 |
Loss on extinguishment of debt | 1,334 |
| 3,543 |
| 453 |
Interest expense: |
|
|
|
|
|
Debt | 11,530 |
| 10,485 |
| 6,849 |
Amortization of deferred financing costs | 703 |
| 457 |
| 423 |
Capitalized lease obligation | 2,160 |
| 2,324 |
| 2,276 |
Change in fair value of derivatives | 101 |
| 88 |
| (4,062) |
Interest income | (1,052) |
| (1,588) |
| (696) |
|
|
|
|
|
|
Income (loss) from operations | (3,880) |
| (8,800) |
| 1,301 |
Depreciation and amortization | 22,299 |
| 18,565 |
| 5,173 |
Straight-line lease expense | 5,259 |
| 5,895 |
| 6,094 |
Amortization of deferred gain | (1,087) |
| (1,152) |
| (2,296) |
Non-cash compensation expense | 3,018 |
| 11,534 |
| — |
Entrance fee receipts | 2,069 |
| 1,999 |
| — |
Entrance fee disbursements | (703) |
| (1,065) |
| — |
Amortization of entrance fees | (83) |
| (15) |
| — |
|
|
|
|
|
|
Adjusted EBITDA | $26,892 |
| $26,961 |
| $10,272 |
(1) | Brookdale Senior Living Inc. was formed on September 30, 2005. Results prior to that date represent the combined operations of the Predecessor entities. |
(2) | Three months ended December 31, 2005, includes non-cash benefit of $4.7 million related to the reversal of an accrual established in connection with Alterra’s emergence from bankruptcy. |
Cash From Facility Operations
Cash From Facility Operations is a measurement of liquidity that is not calculated in accordance with GAAP and should not be considered a substitute for cash flows provided by or used in operations, as determined in accordance with GAAP. We define Cash From Facility Operations as cash flows provided by (used in) operations adjusted for changes in operating assets and liabilities, refundable entrance fees received, entrance fees disbursed, other and recurring capital expenditures. Recurring capital expenditures include expenditures capitalized in accordance with GAAP that are funded from Cash From Facility Operations. Amounts excluded from recurring capital expenditures consist primarily of unusual or non-recurring capital items, facility purchases and/or major renovations that are funded using financing proceeds and/or proceeds from the sale of facilities.
We believe Cash From Facility Operations is useful to investors in evaluating our liquidity for the following reasons:
| • | It provides an assessment of our ability to facilitate meeting current financial and liquidity goals |
Page 10 of 14
| • | To assess our ability to: |
| (i) | service our outstanding indebtedness; |
| (ii) | pay dividends; and |
| (iii) | make regular recurring capital expenditures to maintain and improve our facilities |
The table below reconciles Cash From Facility Operations from net cash provided by operating activities for the three months ended March 31, 2006, December 31, 2005, and March 31, 2005 (in thousands):
|
| Three Months Ended |
| |||||||||||
|
| March 31, |
|
|
| December 31, |
|
|
| March 31, |
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
| $ | 12,119 |
|
|
| $ | 9,093 |
|
|
| $ | (4,428 | ) |
Reconciliation of GAAP operating cash |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in operating assets and liabilities |
|
| 831 |
|
|
|
| 6,199 |
|
|
|
| 6,271 |
|
Refundable entrance fees received |
|
| 1,621 |
|
|
|
| 1,513 |
|
|
|
| — |
|
Refundable entrance fees paid |
|
| (703 | ) |
|
|
| (1,065 | ) |
|
|
| — |
|
Reimbursement of operating expenses |
|
| 1,500 |
|
|
|
| — |
|
|
|
| — |
|
Recurring capital expenditures, net |
|
| (2,061 | ) |
|
|
| (4,868 | ) |
|
|
| (3,428 | ) |
Cash From Facility Operations |
| $ | 13,307 |
|
|
| $ | 10,872 |
|
|
| $ | (1,585 | ) |
(1) Brookdale Senior Living Inc. was formed on September 30, 2005. Results prior to that date represent the combined operations of the Predecessor entities.
Page 11 of 14
Facility Operating Income
Facility Operating Income is not a measurement of operating performance calculated in accordance with GAAP and should not be considered a substitute for net income, income from operations, or cash flows provided by or used in operations, as determined in accordance with GAAP. We define Facility Operating Income as net income (loss) before provision (benefit) for income taxes, non-operating income (loss) items, depreciation and amortization, facility lease expense, general and administrative expense, including compensation expense, amortization of deferred entrance fee revenue and management fees.
We believe Facility Operating Income is useful to investors in evaluating our facility operating performance for the following reasons:
| • | It is helpful in identifying trends in our day-to-day facility performance |
| • | It provides an assessment of our revenue generation and expense management |
| • | It provides an indicator to determine if adjustments to current spending decisions are needed. |
The table below reconciles Facility Operating Income from net loss for the three months ended March 31, 2006, December 31, 2005, and March 31, 2005. (in thousands):
|
| Three Months Ended |
| |||||||
|
| March 31, |
| December 31, |
| March 31, |
| |||
Net loss |
| $ | (19,326 | ) | $ | (24,456 | ) | $ | (1,798 | ) |
Loss on discontinued operations |
|
| — |
|
| — |
|
| 35 |
|
Minority interest |
|
| 116 |
|
| — |
|
| (2,532 | ) |
Provision for income taxes |
|
| 386 |
|
| 150 |
|
| 166 |
|
Equity in loss of unconsolidated ventures |
|
| 168 |
|
| 197 |
|
| 187 |
|
Loss on extinguishment of debt |
|
| 1,334 |
|
| 3,543 |
|
| 453 |
|
Interest expense: |
|
|
|
|
|
|
|
|
|
|
Debt |
|
| 11,530 |
|
| 10,485 |
|
| 6,849 |
|
Amortization of deferred financing costs |
|
| 703 |
|
| 457 |
|
| 423 |
|
Capitalized lease obligation |
|
| 2,160 |
|
| 2,324 |
|
| 2,276 |
|
Change in fair value of derivatives |
|
| 101 |
|
| 88 |
|
| (4,062 | ) |
Interest income |
|
| (1,052 | ) |
| (1,588 | ) |
| (696 | ) |
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations |
|
| (3,880 | ) |
| (8,800 | ) |
| 1,301 |
|
Depreciation and amortization |
|
| 22,299 |
|
| 18,565 |
|
| 5,173 |
|
Facility lease expense |
|
| 45,734 |
|
| 48,487 |
|
| 46,502 |
|
General and administrative |
|
| 21,085 |
|
| 27,690 |
|
| 11,658 |
|
Amortization of entrance fees |
|
| (83 | ) |
| (15 | ) |
| — |
|
Management fees |
|
| (1,147 | ) |
| (1,187 | ) |
| (871 | ) |
|
|
|
|
|
|
|
|
|
|
|
Facility Operating Income |
| $ | 84,008 |
| $ | 84,740 |
| $ | 63,763 |
|
| (1) | Brookdale Senior Living Inc. was formed on September 30, 2005. Results prior to that date represent the combined operations of the Predecessor entities. |
| (2) | Three months ended December 31, 2005, includes a non-cash benefit of $4.7 million related to the reversal of an accrual established in connection with Alterra’s emergence from bankruptcy. |
Page 12 of 14
Our facility breakdown at March 31, 2006, was as follows:
|
| Number of |
| Number of |
| Percentage of Q1 2006 | ||
Ownership Type |
|
|
|
|
|
| ||
Owned |
| 94 |
| 10,502 |
|
| 33.7 | % |
Leased |
| 299 |
| 18,304 |
|
| 65.8 | % |
Managed |
| 10 |
| 1,964 |
|
| 0.5 | % |
Total |
| 403 |
| 30,770 |
|
| 100.0 | % |
|
|
|
|
|
|
|
|
|
Segment Type |
|
|
|
|
|
|
|
|
Brookdale Living (IL & CCRC) |
| 69 |
| 14,497 |
|
| 49.0 | % |
Alterra (Assisted Living) |
| 324 |
| 14,309 |
|
| 50.5 | % |
Managed |
| 10 |
| 1,964 |
|
| 0.5 | % |
Total |
| 403 |
| 30,770 |
|
| 100.0 | % |
Our quarterly financial data for the three months ended March 31, 2006 and December 31, 2005 was as follows (in thousands, except occupancy and average rate):
|
| For the Three Months Ended |
|
|
|
|
| |||||
|
| March 31, 2006 |
| December 31, 2005 |
| Increase |
| Percentage |
| |||
Average Occupancy |
|
| 89.5% |
|
| 89.4% |
|
| 0.1% |
| 0.1% |
|
Average rate ($) |
| $ | 3,116 |
| $ | 3,062 |
| $ | 54 |
| 1.8% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Resident Fees(1) |
| $ | 220,953 |
| $ | 211,845 |
| $ | 9,108 |
| 4.3% |
|
Facility Operating Expenses(2) |
|
| 136,945 |
|
| 131,851 |
|
| 5,094 |
| 3.9% |
|
Facility Operating Income |
| $ | 84,008 |
| $ | 79,994 |
| $ | 4,014 |
| 5.0% |
|
Facility Operating Income Margin |
|
| 38.0% |
|
| 37.8% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) | Excluding amortization of entrance fees of $83 and $15, respectively. |
(2) | Three months ended December 31, 2005, excludes non-cash benefit of $4.7 million related to the reversal of an accrual established in connection with Alterra’s emergence from bankruptcy. |
Page 13 of 14
Our capital expenditures for the three months ended March 31, 2006 and December 31, 2005 were as follows (in thousands):
|
| Three Months Ended |
| ||||||
Type |
| March 31, |
|
|
| December 31, |
| ||
Recurring |
| $ | 2,732 |
|
|
| $ | 5,539 |
|
Reimbursements |
|
| (671 | ) |
|
|
| (671 | ) |
Net recurring |
|
| 2,061 |
|
|
|
| 4,868 |
|
EBITDA enhancing(1) |
|
| 1,274 |
|
|
|
| 1,208 |
|
Other/Corporate(2) |
|
| 2,731 |
|
|
|
| 1,992 |
|
Gross Total Capital Expenditures |
| $ | 6,066 |
|
|
| $ | 8,068 |
|
| (1) | EBITDA-enhancing capital expenditures generally represent unusual or non-recurring capital items and/or major renovations. |
| (2) | Corporate primarily includes capital expenditures for information technology systems and equipment. |
The summary of our acquisitions since January 1, 2006 is as follows ($ in millions):
|
|
|
| Units/Beds |
| Purchase |
|
|
|
|
| |||||||
|
| Facilities |
| Total |
| Owned |
| Leased |
| Price |
| Equity |
| Debt(1) |
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Closed as of January 1, 2006 |
| 16 |
| 1,814 |
| 1,814 |
| — |
| $ | 218.0 |
| $ | 64.1 |
| $ | 153.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Closings in Q1 2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pin Oaks Facilities |
| 2 |
| 114 |
| 114 |
| — |
|
| 13.0 |
|
| 4.2 |
|
| 8.8 |
|
Wellington Portfolio |
| 17 |
| 814 |
| 603 |
| 211 |
|
| 79.5 |
|
| 26.9 |
|
| 52.6 |
|
Liberty Owned Portfolio |
| 7 |
| 1,077 |
| 1,077 |
| — |
|
| 92.1 |
|
| 26.9 |
|
| 65.2 |
|
|
| 26 |
| 2,005 |
| 1,794 |
| 211 |
|
| 184.6 |
|
| 58.0 |
|
| 126.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subsequent Closings to Q1 2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
SALI Portfolio |
| 41 |
| 2,887 |
| — |
| 2,887 |
|
| 82.9 |
|
| 82.9 |
|
| — |
|
AEW I Portfolio |
| 5 |
| 813 |
| 813 |
| — |
|
| 179.5 |
|
| 55.0 |
|
| 124.5 |
|
Southland Facilities |
| 4 |
| 262 |
| 262 |
| — |
|
| 24.0 |
|
| 8.0 |
|
| 16.0 | (2) |
|
| 50 |
| 3,962 |
| 1,075 |
| 2,887 |
|
| 286.4 |
|
| 145.9 |
|
| 140.5 |
|
Total closed to date |
| 92 |
| 7,781 |
| 4,683 |
| 3,098 |
|
| 689.0 |
|
| 268.0 |
|
| 421.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Announced, But Not Yet Closed |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Liberty Leased Portfolio |
| 11 |
| 1,162 |
| — |
| 1,162 |
|
| 31.8 |
|
| 28.7 |
|
| 3.1 |
|
AEW II Portfolio |
| 1 |
| 204 |
| 204 |
| — |
|
| 30.0 |
|
| 18.3 |
|
| 11.7 |
|
|
| 12 |
| 1,366 |
| 204 |
| 1,162 |
|
| 61.8 |
|
| 47.0 |
|
| 14.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Closed and Announced |
| 104 |
| 9,147 |
| 4,887 |
| 4,260 |
| $ | 750.8 |
| $ | 315.0 |
| $ | 435.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Excluding capital and financing lease obligations.
(2) Financing expected to close in second quarter of 2006.
Page 14 of 14