Brookdale fourth quarter total revenue increases 4.1% to $699.7 million

Feb 11 2013

Brookdale Senior Living Inc. (NYSE: BKD) (the "Company") today reported financial and operating results for the fourth quarter and full year 2012. 

• Cash From Facility Operations ("CFFO") was $68.7 million, or $0.56 per share, excluding $7.2 million of integration, transaction-related and electronic medical records ("EMR") roll-out costs in the fourth quarter of 2012. 
• Average occupancy was 88.7%, a 70 basis point sequential increase from the third quarter of 2012 and a 90 basis point increase from the fourth quarter of 2011. 
• Average monthly revenue per unit for the senior housing portfolio improved by 2.9% to $4,282 for the fourth quarter of 2012 from $4,160 for the fourth quarter of 2011.
• Entry Fee CCRCs completed 121 independent living entry fee unit closings and produced $15.1 million of net cash flow, an increase of $5.7 million over the fourth quarter of 2011.
• Adjusted EBITDA was $109.2 million, a 4.7% increase from $104.4 million in the fourth quarter of 2011, excluding integration, transaction-related and EMR roll-out costs in both periods.

Bill Sheriff, Brookdale's CEO, said, "We had a strong finish to the year as evidenced by the fourth quarter's occupancy increases across our segments and another good entry fee sales quarter.  We are seeing some signs of improvements in the general economy that lend themselves to driving demand for our products.  At the same time, we are positioning the Company to maximize its opportunities with an empowered, resident-focused field organization and a sales and marketing organization with the appropriate resources.  With the Company positioned for success, we are excited about our prospects for 2013."

Mark Ohlendorf, Co-President and CFO of Brookdale, commented, "A 70 basis point sequential increase in the fourth quarter occupancy is very strong for a portfolio our size.  We experienced it across all of our segments and across multiple geographies.  In fact, we saw occupancy increases in 16 of our top 20 markets during the quarter.  The strong occupancy increases were a result of improving fundamentals, focused execution and the benefit of the capital we have invested and continue to spend on our portfolio."

Financial Results

Total revenue for the fourth quarter was $699.7 million, an increase of $27.8 million, or 4.1%, from the fourth quarter of 2011.  Revenue for the full year 2012 was $2.8 billion, a 12.7% increase from $2.5 billion for the full year 2011.  Fourth quarter 2012 total revenue is comprised of resident fee revenue of $609.1 million, which increased $24.5 million, or 4.2%, from the fourth quarter of 2011, management fee revenue of $8.4 million, which increased $1.1 million, or 14.8%, from the fourth quarter of 2011, and managed community reimbursed costs of $82.2 million.

Resident fee revenue increased primarily as a result of an increase in the average monthly revenue per unit compared to the prior year period and an increase in occupancy.  Average monthly revenue per unit for the senior housing portfolio was $4,282 in the fourth quarter, an increase of $122, or 2.9%, over the fourth quarter of 2011.   Average occupancy for all consolidated communities for the fourth quarter of 2012 was 88.7%, compared to 87.8% for the fourth quarter of 2011 and 88.0% for the third quarter of 2012.  For the managed community portfolio, which includes a number of pre-stabilized communities in the initial fill-up phase, average occupancy for the fourth quarter was 85.4%, a 110 basis point increase from 84.3% in the third quarter of 2012.  

For the full year of 2012, resident fee revenue increased from $2.3 billion to $2.4 billion. Average monthly revenue per unit increased to $4,271 for the full year of 2012, a 1.9% increase over the full year of 2011.  Average occupancy for all consolidated communities for the full year was 88.0%, compared to 87.3% for the full year of 2011.

Facility operating expenses for the fourth quarter were $417.2 million, an increase of $27.2 million, or 7.0%, from the fourth quarter of 2011, primarily due to additional expense related to occupancy increases, inflationary cost increases and increases in health and property insurance expenses.  Facility operating expenses for the full year 2012 were $1.6 billion, an 8.1% increase from $1.5 billion for the full year 2011. 

General and administrative expenses for the fourth quarter were $44.6 million.  Excluding integration, transaction-related and EMR roll-out costs of $7.2 million and $8.0 million in the fourth quarters of 2012 and 2011, respectively, and non-cash stock-based compensation expense from both periods, general and administrative expenses were $31.0 million in the fourth quarter of 2012 versus $28.8 million for the prior year same period.  Demonstrating the Company's efficient platform, general and administrative expenses were 4.0% of resident fee revenue (including resident fee revenues under management) in the fourth quarter of 2012.

Brookdale's management utilizes Adjusted EBITDA and CFFO to evaluate the Company's performance and liquidity because these metrics exclude non-cash items such as depreciation and amortization, asset impairment charges, non-cash stock-based compensation expense, gain on facility lease termination and straight-line lease expense, net of deferred gain amortization.  Adjusted EBITDA and Cash From Facility Operations include integration, transaction-related and EMR roll-out costs of $7.2 million and $23.5 million for the three months and year ended December 31, 2012, respectively, and $8.0 million and $14.4 million for the three months and year ended December 31, 2011, respectively.  Brookdale also uses Facility Operating Income to assess the performance of its communities.

For the quarter ended December 31, 2012, Facility Operating Income was $187.3 million, a decrease of $0.8 million, or 0.4%, over the fourth quarter of 2011, and Adjusted EBITDA, excluding integration, transaction-related and EMR roll-out costs in 2012 and 2011, was $109.2 million, an increase of $4.9 million, or 4.7%, over the fourth quarter of 2011.  For the year ended December 31, 2012, Facility Operating Income was $758.8 million, an increase of $1.1 million, or 0.1%, over the full year of 2011, and Adjusted EBITDA, excluding integration, transaction-related and EMR roll-out costs in 2012 and 2011, was $433.4 million, an increase of $16.4 million, or 3.9%, over the full year of 2011.  

Cash From Facility Operations was $61.4 million for the fourth quarter of 2012, or $0.50 per share.  CFFO, excluding integration, transaction-related and EMR roll-out costs for both periods, was $68.7 million for the fourth quarter of 2012, or $0.56 per share, an increase of $3.9 million, or 6.0%, over CFFO of $64.8 million, or $0.54 per share, for the fourth quarter of 2011.  CFFO, excluding integration, transaction-related and EMR roll-out costs for both periods, was $262.4 million for the year ended December 31, 2012, or $2.15 per share, an increase of $8.1 million, or 3.2%, over CFFO of $254.3 million, or $2.11 per share, for the full year of 2011.

Net loss for the fourth quarter of 2012 was $(24.5) million, or $(0.20) per diluted common share. The loss for the quarter includes non-cash items for depreciation and amortization, asset impairment, non-cash stock-based compensation expense, gain on facility lease termination and straight-line lease expense, net of deferred gain amortization.

Operating Activities

The Company reports information on six segments.  Four segments (Retirement Centers, Assisted Living, CCRCs – Rental and CCRCs – Entry Fee) constitute the Company's consolidated senior housing portfolio.  The fifth segment, Innovative Senior Care, includes the Company's outpatient therapy, home health and hospice services.  The sixth segment, Management Services, includes the services provided to unconsolidated communities that are operated under management agreements.

Senior Housing

Revenue for the consolidated senior housing portfolio was $553.1 million for the fourth quarter of 2012, an increase of 4.2% from the fourth quarter of 2011.  Revenue was positively impacted by a 90 basis point increase in occupancy and a 2.9% increase in rate over the fourth quarter of 2011.  Operating income for the senior housing portfolio for the fourth quarter of 2012 decreased by $0.2 million from the fourth quarter of 2011.

Same community results for the consolidated senior housing portfolio for the three months ended December 31, 2012 showed revenues grew 3.9% over the corresponding period in 2011 as revenue per unit increased by 2.8% and occupancy grew by 100 basis points.  Same community expenses grew by 5.4% and included a $2.0 million increase in expense related to the Company's employee health insurance programs over the fourth quarter of 2011.  Same community Facility Operating Income for the senior housing portfolio increased by 0.9% over the fourth quarter of 2011.  

Innovative Senior Care

Revenue for the Company's ISC segment increased $2.3 million, or 4.2%, to $56.1 million, for the fourth quarter of 2012, primarily due to the roll-out of the Company's ancillary services programs to additional units.  In comparison to the fourth quarter of 2011, a volume increase in home health was partially offset by a reduction in volume in outpatient therapy and a reduction in Medicare reimbursement rates.  ISC operating expenses increased $4.7 million, or 11.7%, primarily due to an increase in expenses incurred in connection with the continued expansion of the Company's ancillary services programs and an increase in home health direct labor expenses.  As a result, ISC operating income was $11.1 million, a decrease of $2.5 million, or 18.3%, versus the fourth quarter of 2011.

By the end of the fourth quarter, the Company's ancillary services programs provided outpatient therapy services to approximately 38,000 Brookdale units and the Company's home health agencies were serving approximately 32,200 units across the consolidated Brookdale portfolio.   Including non-consolidated communities served by ISC, the Company's outpatient therapy and home health operations serve approximately 51,400 and 45,800 units, respectively.  By the end of the fourth quarter, the Company had reached approximately 12,200 Horizon Bay units for therapy and approximately 11,200 Horizon Bay units for home health.  The Company had four markets where hospice services were provided during the fourth quarter.

Liquidity

Brookdale had $69.2 million of unrestricted cash and cash equivalents and $105.9 million of restricted cash on its balance sheet at the end of the fourth quarter.  As of December 31, 2012, the Company had an available secured line of credit with a $230.0 million commitment and $191.4 million of availability (of which $80.0 million had been drawn as of that date).  The Company also had secured and unsecured letter of credit facilities of up to $92.5 million in the aggregate as of December 31, 2012.  Letters of credit totaling $78.1 million had been issued under these facilities as of that date.

Transactions

During the fourth quarter, the Company acquired the underlying real estate interest in 12 communities that the Company previously leased for an aggregate purchase price of $162.1 million.  The results of operations of the previously leased communities are included in the consolidated financial statements from the effective dates of the respective lease agreements and are reported in the Assisted Living and Retirement Centers segments.

On December 28, 2012, the Company obtained a $171.3 million first mortgage loan secured by nine of the Company's communities, including eight of the recently-acquired communities.  The loan has a ten-year term and bears interest at a variable rate of 30 day LIBOR plus 259 basis points.  In connection with the transaction, the Company repaid $37.4 million of mortgage loans scheduled to mature in 2013.

2013 Outlook

For the full year 2013, the Company expects Cash From Facility Operations to range between $2.30 and $2.40 per share, excluding integration, transaction-related and EMR roll-out costs.  These estimates do not include the impact on operating results from possible future acquisitions or dispositions.

Supplemental Information

The Company will shortly post on the Investor Relations section of the Company's website at www.brookdaleliving.com supplemental information relating to the Company's fourth quarter and full year 2012 results.  This information will also be furnished in a Form 8-K to be filed with the SEC.

SOURCE Brookdale Senior Living Inc.