Business Context and Reporting Period
Company: Brookdale Senior Living Inc.
Filing Type: Form 10-Q (Quarterly Report)
Period Ended: September 30, 2009
Business Overview: Brookdale is a leading owner and operator of senior living communities in the United States, including retirement centers, assisted living, dementia-care communities, and continuing care retirement centers (CCRCs). As of September 30, 2009, the company operated 547 communities with a capacity of 52,268 units.
Key Financial Metrics
| Metric | Three Months Ended Sep 30, 2009 | Nine Months Ended Sep 30, 2009 |
|---|---|---|
| Total Revenue | $505.8 million | $1,504.5 million |
| Net Loss | $(21.3) million | $(45.5) million |
| Income from Operations | $7.2 million | $34.2 million |
| Adjusted EBITDA (Non-GAAP) | $85.6 million | $263.6 million |
| Cash From Facility Operations (Non-GAAP) | $48.2 million | $150.9 million |
| Operating Cash Flow | $72.9 million | $186.0 million |
| Total Debt (Long-term + Current) | $2.46 billion | $2.46 billion |
| Cash and Cash Equivalents | $159.3 million | $159.3 million |
| Weighted Average Occupancy | 89.0% | 88.7% |
Material Changes vs. Prior Period
- Revenue Growth: Total revenue increased 4.9% ($23.5 million) for the quarter and 4.4% ($63.4 million) for the nine-month period compared to 2008. Growth was driven by a 5.3% increase in average monthly revenue per unit/bed, partially offset by a slight decline in occupancy.
- Profitability Improvement: The company reported a net loss of $21.3 million for the quarter, a significant improvement from the $35.9 million loss in the same period in 2008. Operating income turned positive at $7.2 million, compared to a $11.0 million operating loss in Q3 2008.
- Interest Expense Reduction: Interest expense decreased significantly due to favorable changes in the fair value of interest rate swaps and caps, as well as lower market interest rates. The change in fair value of derivatives resulted in a $6.0 million decrease in interest expense for the quarter compared to 2008.
- Segment Performance:
- CCRCs: Revenue increased 14.1% for the quarter, driven by higher revenue per unit.
- Assisted Living: Revenue increased 2.8% due to higher occupancy and revenue per unit.
- Retirement Centers: Revenue declined slightly (1.0%) due to lower occupancy.
Guidance, Outlook, and Risks
- Capital Markets & Liquidity: Management completed a public equity offering in June 2009, raising $163.7 million in net proceeds, which was primarily used to repay $125.0 million of indebtedness under the credit facility. The company ended the quarter with $159.3 million in unrestricted cash.
- Dividend Suspension: The quarterly cash dividend was suspended indefinitely in December 2008 and remains suspended.
- Acquisition Activity: On October 7, 2009 (subsequent to the period end), the company entered into an agreement to acquire 21 senior living communities for $204.0 million, expected to close in November 2009.
- Debt Maturities: Approximately $155.4 million of debt is due within 12 months. The company has options to extend approximately $131.0 million of non-recourse mortgages until 2011, subject to customary conditions.
- Risk Factors:
- Refinancing Risk: Disruptions in financial markets could impact the ability to refinance maturing debt or extend the credit facility (maturing August 31, 2010).
- Economic Sensitivity: Deteriorating housing markets and economic uncertainty may delay resident moves, impacting occupancy and entrance fee sales.
- Concentrated Ownership: Affiliates of Fortress Investment Group own approximately 51.3% of outstanding common stock, controlling significant corporate decisions.
Key Facts for Investor Verification
- Debt Extension Conditions: Verify the company's ability to satisfy conditions precedent to extend $131.0 million of debt maturing in 2010.
- Acquisition Financing: Confirm the successful closing and financing of the $204.0 million Sunrise portfolio acquisition announced in October 2009.
- Occupancy Trends: Monitor occupancy rates, particularly in Retirement Centers and CCRCs, which showed declines compared to the prior year.
- Entrance Fee Volatility: Assess the timing and volume of entrance fee sales, which are subject to market volatility and housing market conditions.
- Credit Facility Renewal: Track the status of the $75.0 million credit facility maturing in August 2010.