What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2021-02-25 compared with 2020-02-19 · 649 added, 537 removed, 909 unchanged (57% of the section changed)

37 unchanged sentences

Evaluation of Goodwill for Impairment

Description of the Matter

As of December 31, 2019, the Company's consolidated balance sheet included goodwill of $154.1 million.

Description of the Matter As of December 31, 2020, the Company's consolidated balance sheet included goodwill of $154.1 million.

As discussed in Notes 2 and 5 to the consolidated financial statements, goodwill is qualitatively, and when necessary quantitatively, tested for impairment at least annually during the fourth quarter at the reporting unit level.

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In particular, the fair value estimate was sensitive to significant assumptions including the estimation of revenue and expense growth rates, discount rates, and earnings multiples, which are affected by expectations about future market or economic conditions.

How We Addressed the Matter in Our Audit

We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls over the Company's goodwill impairment review process, including controls over management's review of the significant assumptions described above.

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls over the Company's goodwill impairment review process, including controls over management's review of the significant assumptions described above.

To test the estimated fair value of the Company's health care services reporting unit, we performed audit procedures that included, among others, assessing the methodologies used to estimate fair value, testing the significant assumptions used to develop the fair value estimate, and testing the underlying data used by the Company in its analysis for completeness and accuracy.

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Evaluation of Property, Plant and Equipment and Leasehold Intangibles, Net and Operating Lease Right-of-Use Assets for Impairment

Description of the Matter

As of December 31, 2019, the Company's consolidated balance sheet included property, plant and equipment and leasehold intangibles, net and operating lease right-of-use assets of $5.1 billion and $1.2 billion, respectively.

Description of the Matter As of December 31, 2020, the Company's consolidated balance sheet included property, plant and equipment and leasehold intangibles, net and operating lease right-of-use assets of $5.1 billion and $0.8 billion, respectively.

As discussed in Notes 2 and 5 to the consolidated financial statements, property, plant and equipment and leasehold intangibles, net and operating lease right-of-use assets are routinely evaluated for indicators of impairment.

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In particular, the future cash flows and fair value estimates were sensitive to significant assumptions including the estimation of revenue and expense growth rates and capitalization rates, which are affected by expectations about future market or economic conditions.

How We Addressed the Matter in Our Audit

We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company's process to evaluate property, plant and equipment and leasehold intangibles, net and operating lease right-of-use assets for impairment, including controls over management's review of the significant assumptions described above.

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company's process to evaluate property, plant and equipment and leasehold intangibles, net and operating lease right-of-use assets for impairment, including controls over management's review of the significant assumptions described above.

To test the Company's evaluation of long-lived asset groups for impairment, we performed audit procedures that included, among others, assessing the methodologies used to estimate future cash flows and estimate fair values, testing the significant assumptions used to develop the estimates of future cash flows and fair values, and testing the completeness and accuracy of the underlying data used by the Company in its analysis.

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Investment in unconsolidated ventures 4,898 21,210

Other intangible assets, net

Goodwill 154,131 154,131

Other assets, net 56,259 118,731

Total assets $ 6,901,758 $ 7,194,433

Liabilities and Equity

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Operating lease obligations, less current portion 819,429 1,277,178

Deferred liabilities

Deferred tax liability 9,557 15,397

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Total liabilities 6,099,029 6,495,708

Preferred stock, $0.01 par value, 50,000,000 shares authorized at December 31, 2019 and December 31, 2018;

Preferred stock, $ 0.01 par value, 50,000,000 shares authorized at December 31, 2020 and 2019;

no shares issued and outstanding

Common stock, $0.01 par value, 400,000,000 shares authorized at December 31, 2019 and December 31, 2018;

Common stock, $ 0.01 par value, 400,000,000 shares authorized at December 31, 2020 and 2019;

198,331,663 and 199,593,343 shares issued and 187,804,138 and 192,128,586 shares outstanding (including 4,349,421 and 7,252,459 unvested restricted shares), respectively

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Treasury stock, at cost;

7,464,757 and 4,459,203 shares at December 31, 2019 and December 31, 2018, respectively

10,527,525 and 7,464,757 shares at December 31, 2020 and 2019, respectively

( 102,774 ) ( 84,651 )

Accumulated deficit ( 3,311,184 ) ( 3,393,088 )

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Noncontrolling interest 2,295 2,369

Total equity 802,729 698,725

Total liabilities and equity $ 6,901,758 $ 7,194,433

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For the Years Ended December 31,

2020 2019 2018

Resident fees $ 2,892,567 $ 3,209,931 $ 3,449,211

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Reimbursed costs incurred on behalf of managed communities 401,189 790,049 1,010,229

Total revenue

Other operating income 115,749 — —

Total revenue and other operating income 3,540,195 4,057,088 4,531,426

Facility operating expense (excluding facility depreciation and amortization of $ 334,768 , $ 349,215 , and $ 407,427 , respectively)

2,341,859 2,390,495 2,453,328

General and administrative expense (including non-cash stock-based compensation expense of $ 20,747 , $ 23,026 , and $ 26,067 , respectively)

206,575 219,289 259,475

Facility operating lease expense 224,033 269,666 303,294

Depreciation and amortization 359,226 379,433 447,455

Goodwill and asset impairment

Asset impairment 107,308 49,266 489,893

Loss (gain) on facility lease termination and modification, net ( 2,303 ) 3,388 162,001

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Interest expense:

Debt ( 153,817 ) ( 177,718 ) ( 188,505 )

Financing lease obligations ( 48,534 ) ( 66,353 ) ( 83,604 )

Amortization of deferred financing costs and debt discount ( 6,428 ) ( 4,270 ) ( 8,160 )

Change in fair value of derivatives

Debt modification and extinguishment costs

Gain (loss) on debt modification and extinguishment, net 10,896 ( 5,247 ) ( 11,677 )

Equity in earnings (loss) of unconsolidated ventures ( 2,107 ) ( 4,544 ) ( 8,804 )

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common stockholders $ 82,019 $ ( 267,931 ) $ ( 528,258 )

Basic and diluted net income (loss) per share attributable to Brookdale Senior Living Inc.

Net income (loss) per share attributable to Brookdale Senior Living Inc.

common stockholders:

Weighted average shares used in computing basic and diluted net loss per share

Basic $ 0.45 $ ( 1.44 ) $ ( 2.82 )

Diluted $ 0.44 $ ( 1.44 ) $ ( 2.82 )

Weighted average common shares outstanding:

Basic 183,498 185,907 187,468

Diluted 184,386 185,907 187,468

See accompanying notes to consolidated financial statements.

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For the Years Ended December 31,

2020 2019 2018

Total equity, balance at beginning of period $ 698,725 $ 1,018,413 $ 1,530,291

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Shares withheld for employee taxes ( 6 ) ( 5 ) ( 4 )

Other, net — — 32

Balance at end of period $ 1,983 $ 1,996 $ 1,968

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Issuance of common stock under Associate Stock Purchase Plan 638 1,160 1,468

Issuance of warrants 22,883 — —

Restricted stock, net 9 ( 31 ) ( 26 )

Shares withheld for employee taxes ( 4,037 ) ( 3,308 ) ( 3,057 )

Other, net 70 105 146

Balance at end of period $ 4,212,409 $ 4,172,099 $ 4,151,147

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Net income (loss) 82,019 ( 267,931 ) ( 528,258 )

Other, net — — 280

Balance at end of period $ ( 3,311,184 ) $ ( 3,393,088 ) $ ( 3,069,272 )

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For the Years Ended December 31,

2020 2019 2018

Cash Flows from Operating Activities

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Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

Debt modification and extinguishment costs

Loss (gain) on debt modification and extinguishment, net ( 10,896 ) 5,247 11,677

Depreciation and amortization, net 365,654 383,703 455,615

Goodwill and asset impairment

Asset impairment 107,308 49,266 489,893

Equity in (earnings) loss of unconsolidated ventures 2,107 4,544 8,804

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Operating lease expense adjustment ( 136,276 ) ( 19,453 ) ( 17,218 )

Change in fair value of derivatives

Loss (gain) on sale of assets, net ( 374,532 ) ( 7,245 ) ( 293,246 )

3 unchanged sentences

Non-cash management contract termination gain — ( 969 ) ( 8,724 )

Other ( 2,777 ) ( 8,700 ) ( 1,292 )

Changes in operating assets and liabilities:

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Payments of employee taxes for withheld shares ( 4,037 ) ( 3,313 ) ( 3,061 )

Other 482 1,110 1,364

Net cash provided by (used in) financing activities 382,913 ( 139,394 ) ( 325,063 )

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The Company reports investments in unconsolidated entities over whose operating and financial policies it has the ability to exercise significant influence under the equity method of accounting.

The Company continually evaluates its potential variable interest entity ("VIE") relationships under certain criteria as provided for in Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 810, Consolidation ("ASC 810").

The Company evaluates its potential variable interest entity ("VIE") relationships under certain criteria as provided for in Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 810, Consolidation ("ASC 810").

ASC 810 broadly defines a VIE as an entity with one or more of the following characteristics:

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or (c) the equity investors have voting rights that are not proportional to their economic interests, and substantially all of the entity's activities either involve, or are conducted on behalf of, an investor that has disproportionately few voting rights.

The Company performs this analysis on an ongoing basis and consolidates any VIEs for which the Company is determined to be the primary beneficiary, as determined by the Company's power to direct the VIE's activities and the obligation to absorb its losses or the right to receive its benefits, which are potentially significant to the VIE.

Refer to Note 6 for more information about the Company's VIE relationships.

The Company performs this evaluation on an ongoing basis and consolidates any VIEs for which the Company is determined to be the primary beneficiary, as determined by the Company's power to direct the VIE's activities and the obligation to absorb its losses or the right to receive its benefits, which are potentially significant to the VIE.

Use of Estimates

The preparation of the consolidated financial statements and related disclosures in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes.

Estimates are used for, but not limited to, revenue, goodwill and asset impairments, self-insurance reserves, performance-based compensation, the allowance for credit losses, depreciation and amortization, leasing transactions, income taxes, and other contingencies.

Estimates are used for, but not limited to, revenue, other operating income, asset impairments, self-insurance reserves, performance-based compensation, the allowance for credit losses, depreciation and amortization, leasing transactions, income taxes, and other contingencies.

Although these estimates are based on management's best knowledge of current events and actions that the Company may undertake in the future, actual results may differ from the original estimates.

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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 from estimated reimbursements, if any, under reimbursement programs.

Performance obligations are determined based on the nature of the services provided.

These amounts are due from residents or third-party payors and include variable consideration for retroactive adjustments from estimated reimbursements, 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.

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Changes to these estimates for retroactive adjustments are recognized in the period the change or adjustment becomes known or when final settlements are determined.

Billings for services under third-party payor programs are recorded net of estimated retroactive adjustments, if any.

Retroactive adjustments are accrued on an estimated basis in the period the related services are rendered and adjusted in future periods or as final settlements are determined.

Contractual or cost related adjustments from Medicare or Medicaid are accrued when assessed (without regard to when the assessment is paid or withheld).

Subsequent adjustments to these accrued amounts are recorded in net revenues when known.

Management Services

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The related costs are included in "costs incurred on behalf of managed communities" on the consolidated statements of operations.

Government Grants

The Company recognizes income for government grants on a systematic and rational basis over the periods in which the Company recognizes the related expenses or loss of revenue for which the grants are intended to compensate when there is reasonable assurance that the Company will comply with the applicable terms and conditions of the grant and there is reasonable assurance that the grant will be received.

Lease Accounting

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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 recognize the assets within property, plant and equipment and leasehold intangibles, net and continues to depreciate the asset over its useful life.

For such transactions, the Company recognizes the underlying assets within assets under financing leases as a component of property, plant and equipment and leasehold intangibles, net on the consolidated balance sheets and continues to depreciate the assets over their useful lives.

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.

Gain (Loss) 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 regularly enters into real estate transactions which may include the disposition of certain communities, including the associated real estate.

The Company recognizes gain or loss from real estate sales when the transfer of control is complete.

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Transaction costs associated with business combinations are expensed as incurred.

See "Recently Adopted Accounting Pronouncements" within this footnote for more information related to the adoption of ASU 2017-01, Business Combinations:

Clarifying the Definition of a Business ("ASU 2017-01").

Deferred Financing Costs

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Certain of the Company's employee stock awards vest only upon the achievement of a market condition where the measurement period is three years and vesting of the awards is based on the Company's level of attainment of a specified total stockholder return relative to the percentage appreciation of a specified index of companies for the respective three-year measurement period.

Compensation expense for awards with market conditions is recognized over the service period, which is generally four years, and the actual achievement of the market condition does not impact expense recognition.

Compensation expense for awards with market conditions is recognized over the service period, which is generally four

years, and the actual achievement of the market condition does not impact expense recognition.

The Company uses a Monte Carlo valuation model to estimate the grant date fair value of such awards.

Depending on the results achieved during the three-year measurement period, the number of shares that ultimately vest may range from 0 % to 150 % of the stock awards granted.

The expected volatility of the Company's common stock at the date of grant was estimated based on a historical average volatility rate for the approximate three-year performance period and for awards granted in 2019, the expected weighted average volatility was 45.2 % .

The risk-free interest rate assumption was based on observed interest rates consistent with the approximate three-year measurement period, and for awards granted in 2019 the weighted average risk free interest rate was 2.4 % .

The expected volatility of the Company's common stock at the date of grant was estimated based on a historical average volatility rate for the approximate three-year performance period and the estimated expected weighted average volatility was 42.5 % and 45.2 % for awards granted in 2020 and 2019, respectively.

The risk-free interest rate assumption was based on observed interest rates consistent with the approximate three-year measurement period and the estimated weighted average risk free interest rate was 1.4 % and 2.4 % for awards granted in 2020 and 2019, respectively.

For all share-based awards with graded vesting other than performance conditioned awards, the Company records compensation expense for the entire award on a straight-line basis (or, if applicable, on the accelerated method) over the requisite service period.

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Level 3 – fair value measurements derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

Cash, Cash Equivalents, and Restricted Cash

Cash, cash equivalents, and restricted cash are reflected in the accompanying consolidated balance sheets at amounts considered by management to reasonably approximate fair value due to their short maturity of 90 days or less.

Restricted cash consists principally of deposits required by certain lenders and lessors pursuant to the applicable agreement and consists of the following:

(in thousands)

Real estate tax and property insurance escrows

Replacement reserve escrows

Resident deposits

Insurance deposits

CCRCs escrows

Debt service reserve

Marketable Securities

1 unchanged sentence

Accounts Receivable, Net

Accounts receivable are reported net of an allowance for credit losses to represent the Company's estimate of inherent losses at the balance sheet date.

The allowance for credit losses was $ 7.8 million and $ 7.9 million as of December 31, 2019 and 2018 ,

respectively.

The adequacy of the Company's allowance for credit losses is reviewed on an ongoing basis, using historical payment trends, write-off experience, analyses of receivable portfolios by payor source and aging of receivables, as well as a review of specific accounts, and adjustments are made to the allowance as necessary.

Billings for services under third-party payor programs are recorded net of estimated retroactive adjustments, if any.

Retroactive adjustments are accrued on an estimated basis in the period the related services are rendered and adjusted in future periods or as final settlements are determined.

Contractual or cost related adjustments from Medicare or Medicaid are accrued when assessed (without regard to when the assessment is paid or withheld).

Subsequent adjustments to these accrued amounts are recorded in net revenues when known.

A reserve for estimated retroactive adjustments was $ 17.9 million and $ 16.9 million as of December 31, 2019 and 2018, respectively.

Accounts receivable are reported net of an allowance for credit losses to represent the Company's estimate of expected losses at the balance sheet date.

The adequacy of the Company's allowance for credit losses is reviewed on an ongoing basis, using historical payment trends, write-off experience, analyses of receivable portfolios by payor source and aging of receivables, a review of specific accounts, as well as expected future economic conditions and market trends, and adjustments are made to the allowance as necessary.

Assets Held for Sale

The Company designates communities as held for sale when certain criteria are met, including when management has committed to a plan to sell the community and the sale is probable within one year of the reporting date.

The Company records these assets on the consolidated balance sheet at the lesser of the carrying amount and fair value less estimated selling costs.

The Company records

these assets on the consolidated balance sheet at the lesser of the carrying amount and fair value less estimated selling costs.

If the carrying amount is greater than the fair value less the estimated selling costs, the Company records an impairment charge.

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Depreciation and amortization is computed using the straight-line method over the estimated useful lives of the assets, which are as follows:

Asset Category

Asset Category Estimated

Buildings and improvements 40

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The initial carrying amount of investments in unconsolidated ventures is based on the amount paid to purchase the investment interest contributed to the unconsolidated ventures.

The Company's reported share of earnings of an unconsolidated venture is

adjusted for the impact, if any, of basis differences between its carrying amount of the equity investment and its share of the venture's underlying assets.

The Company's reported share of earnings of an unconsolidated venture is adjusted for the impact, if any, of basis differences between its carrying amount of the equity investment and its share of the venture's underlying assets.

Distributions received from an investee are recognized as a reduction in the carrying amount of the investment.

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A current fair value of an investment that is less than its carrying amount may indicate a loss in value of the investment.

If the Company determines that an equity method investment is other than temporarily impaired, it is recorded at its fair value with an impairment charge recognized in asset impairment expense for the difference between its carrying amount and fair value based on Level 3 inputs.

Goodwill and Intangible Assets

If the Company determines that an equity method investment

is other than temporarily impaired, it is recorded at its fair value with an impairment charge recognized in asset impairment expense for the difference between its carrying amount and fair value based on Level 3 inputs.

The Company tests goodwill for impairment annually during the fourth quarter or more frequently if indicators of impairment arise.

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If the quantitative goodwill impairment test results in a reporting unit's carrying amount exceeding its estimated fair value, an impairment charge will be recorded based on the difference, with the impairment charge limited to the amount of goodwill allocated to the reporting unit.

Acquired intangible assets are initially valued at fair market value using generally accepted valuation methods appropriate for the type of intangible asset.

Intangible assets with definite lives are amortized over their estimated useful lives and all intangible assets are reviewed for impairment if indicators of impairment arise.

The evaluation of impairment for definite-lived intangibles is based upon a comparison of the carrying amount of the asset to the estimated future undiscounted net cash flows expected to be generated by the asset (Level 3 input).

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 intangible asset to its carrying amount, with any shortfall from fair value recognized as an expense in the current period.

Indefinite-lived intangible assets are not amortized but are tested for impairment annually during the fourth quarter or more frequently if indicators of impairment arise.

The impairment test consists of a comparison of the estimated fair value using Level 3 inputs of the indefinite-lived intangible asset with its carrying amount.

If the carrying amount exceeds its fair value, an impairment charge is recognized for that difference.

Self-Insurance Liability Accruals

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Recently Adopted Accounting Pronouncements

In June 2016, the FASB issued Accounting Standards Update ("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.

The Company adopted this standard effective January 1, 2020 and recognized the cumulative effect of the adoption as an immaterial adjustment to beginning accumulated deficit as of January 1, 2020.

In February 2016, the FASB issued ASU 2016-02, Leases ("ASU 2016-02"), which amends the former accounting principles for the recognition, measurement, presentation, and disclosure of leases for both lessees and lessors.

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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.

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 did not elect the hindsight practical expedient which would have allowed it to revisit key assumptions, such as lease term, that were made when it originally entered into the lease.

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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 ("ADLs"), 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.

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.

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 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.

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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 a $ 0.3 million impact on the Company's net deferred tax position.

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 a $ 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.

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Total liabilities and equity

In January 2017, the FASB issued ASU 2017-01, Business Combinations:

Clarifying the Definition of a Business ("ASU 2017-01"), which clarifies the definition of a business to assist companies in determining whether transactions should be accounted for as an asset acquisition or a business combination.

Under ASU 2017-01, if substantially all of the fair value of the assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not a business and the transaction is accounted for as an asset acquisition.

Transaction costs associated with asset acquisitions are capitalized while those associated with business combinations are expensed as incurred.

The Company adopted ASU 2017-01 on a prospective basis on January 1, 2018.

The changes to the definition of a business may result in certain future acquisitions of real estate, communities, or senior housing operating companies being accounted for as asset acquisitions.

In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows:

Restricted Cash, a consensus of the FASB Emerging Issues Task Force ("ASU 2016-18"), which intends to address the diversity in practice that exists in the classification and presentation

of changes in restricted cash on the statement of cash flows.

The amendments require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents.

The amendments are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017.

The Company adopted ASU 2016-18 on January 1, 2018 and the changes required by ASU 2016-18 were applied retrospectively to all periods presented.

The Company has identified that the inclusion of the change in restricted cash within the retrospective presentation of the statements of cash flows resulted in a $ 1.0 million increase to the amount of net cash used in investing activities for the year ended December 31, 2017.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows – Classification of Certain Cash Receipts and Cash Payments ("ASU 2016-15"), which clarifies how cash receipts and cash payments in certain transactions are presented in the statement of cash flows.

Among other clarifications on the classification of certain transactions within the statement of cash flows, the amendments in ASU 2016-15 provide that debt prepayment and extinguishment costs will be classified within financing activities within the statement of cash flows.

ASU 2016-15 is effective for the Company for the fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017.

The Company adopted ASU 2016-15 on January 1, 2018 and the changes in classification within the statement of cash flows were applied retrospectively to all periods presented.

The Company's retrospective application resulted in an $ 11.7 million increase to the amount of net cash provided by operating activities and an $ 11.7 million decrease to the amount of net cash provided by financing activities for the year ended December 31, 2017.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers ("ASU 2014-09"), which affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets.

The five step model defined by ASU 2014-09 requires the Company to (i) identify the contracts with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract, and (v) recognize revenue when each performance obligation is satisfied.

Revenue is recognized when promised goods or services are transferred to the customer in an amount that reflects the consideration expected in exchange for those goods or services.

Additionally, ASU 2014-09 requires enhanced disclosure of revenue arrangements.

ASU 2014-09 may be applied retrospectively to each prior period (full retrospective) or retrospectively with the cumulative effect recognized as of the date of initial application (modified retrospective).

ASU 2014-09, as amended, was effective for the Company's fiscal year beginning January 1, 2018, and the Company adopted the new standard under the modified retrospective approach.

Under the modified retrospective approach, the guidance is applied to the most current period presented, recognizing the cumulative effect of the adoption change as an adjustment to beginning retained earnings.

The Company has determined that the adoption of ASU 2014-09 did not result in an adjustment to retained earnings as of January 1, 2018.

The Company has determined that the application of ASU 2014-09 resulted in a change to the amounts of resident fee revenue and facility operating expense with no net impact to the amount of income from operations, for the impact of implicit price concessions on the estimation of the transaction price.

The Company recognized $ 3.4 billion of resident fee revenue and $ 2.5 billion of facility operating expense for the year ended December 31, 2018.

The impact to resident fee revenue and facility operating expense as a result of applying ASC 606 was a decrease of $ 8.4 million for the year ended December 31, 2018.

The Company has determined that the application of ASU 2014-09 resulted in no significant change to the annual amount of revenue recognized for management fees under the Company's community management agreements;

however, the Company recognizes an estimated amount of incentive fee revenue earlier during the annual contract period.

The Company has determined that the application of ASU 2014-09 resulted in a change to the amounts presented for revenue recognized for reimbursed costs incurred on behalf of managed communities and reimbursed costs incurred on behalf of managed communities with no net impact to the amount of income from operations, as a result of the combination of all community operations management activities as a single performance obligation for each contract.

The Company recognized $ 1.0 billion of revenue for reimbursed costs incurred on behalf of managed communities and $ 1.0 billion of reimbursed costs incurred on behalf of managed communities for the year ended December 31, 2018, in accordance with ASU 2014-09.

The impact to revenue for reimbursed costs incurred on behalf of managed communities and reimbursed costs incurred on behalf of managed communities as a result of applying ASC 606 was an increase of $ 46.1 million for the year ended December 31, 2018.

Additionally, real estate sales are within the scope of ASU 2014-09, as amended by ASU 2017-05, Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets ("ASU 2017-05"), which clarifies the scope of subtopic 610-20 and adds guidance for partial sales of nonfinancial assets.

Under ASU 2014-09 and ASU 2017-05, the income recognition for real estate sales is largely based on the transfer of control versus continuing involvement under the former guidance.

As a result, more transactions may qualify as sales of real estate and gains or losses may be recognized sooner.

The Company adopted ASU 2014-09, as amended by ASU 2017-05, under the modified retrospective approach as of January 1, 2018 and now applies the five step revenue model to all subsequent sales of real estate.

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"), which 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.

The Company will be required to use a forward-looking expected credit loss model for accounts receivable and other financial instruments.

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 adopted ASU 2016-13 effective January 1, 2020 and will recognize any cumulative effect of the adoption as an adjustment to beginning retained earnings with no adjustments to comparative periods presented.

The impact of the adoption of ASU 2016-13 did not have a material effect to its consolidated financial statements and disclosures.

In March 2020, the FASB issued ASU 2020-04, Facilitation of the Effects of Reference Rate Reform on Financial Reporting , which provides optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on contracts, hedging relationships, and other transactions that reference the London Inter-Bank Offered Rate ("LIBOR").

The provisions of this standard are available for election through December 31, 2022.

The Company is currently evaluating its contracts and the optional expedients provided by this update.

Reclassifications

Certain prior period amounts have been reclassified to conform to the current financial statement presentation, with no effect on the Company's consolidated financial position or results of operations.

Earnings Per Share

Basic earnings per share ("EPS") is calculated by dividing net income (loss) 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, vested and unvested restricted stock units, and convertible debt instruments and warrants.

During the years ended December 31, 2019 , 2018 , and 2017 , 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 year 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 7.5 million , 6.4 million , and 5.2 million for the years ended December 31, 2019 , 2018 , and 2017 , respectively.

For the years ended December 31, 2018 and 2017, 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 .

Refer to Note 9 for more information about the Company's former convertible notes.

As of December 31, 2017, 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 December 31, 2017, 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 December 31, 2018 and 2017, the number of shares issuable upon exercise of the warrants was approximately 0.5 million and 10.8 million , respectively.

The option to exercise the remaining outstanding warrants expired unexercised during 2019.

COVID-19 Pandemic

The COVID-19 pandemic has adversely impacted, and likely will continue to adversely impact the senior living industry and the Company's business.

Due to the average age and prevalence of chronic medical conditions among the Company's residents and patients, they generally are at disproportionately higher risk of hospitalization and adverse outcomes if they contract COVID-19.

The Company continues to serve and care for seniors at its communities and their homes through the pandemic.

Upon confirmation of positive COVID-19 exposure at a community, the Company takes actions intended to minimize further exposure, including associates’ adhering to personal protection protocols, isolating residents or finding placement in an alternate care setting to best address their care needs, and in some cases, restricting new resident admissions as directed by local health authorities.

Seeking to prevent the introduction of COVID-19 into the Company's communities, and to help control further exposure to infections within communities, in March 2020 the Company began restricting visitors at all its communities to essential healthcare personnel and certain compassionate care situations, screening associates and permitted visitors, suspending group outings, modifying communal dining and programming to comply with social distancing guidelines and, in most cases, implementing in-room only dining and activities programming, requesting that residents refrain from leaving the community unless medically necessary, and requiring new residents and residents returning from a hospital or nursing home to

isolate in their apartment for fourteen days.

The Company began easing restrictions on a community-by-community basis in July 2020.

These restrictions may continue for some time, and the Company may revert to more restrictive measures if the pandemic worsens, as necessary to comply with regulatory requirements, or at the direction of local health authorities.

The pandemic, including the related restrictions at the Company's communities, have significantly disrupted demand for senior living communities and the sales process, which typically includes in-person prospective resident visits within communities.

The pandemic began to adversely impact the Company's occupancy and resident fee revenue during March 2020, as new resident leads, visits (including virtual visits), and move-in activity declined significantly compared to typical levels.

Further deterioration of the Company's resident fee revenue will result from lower move-in activity and the resident attrition inherent in its business, which may increase due to the impacts of COVID-19.

The Company's home health average daily census also began to decrease in March 2020 due to lower occupancy in its communities and fewer elective medical procedures and hospital discharges.

Facility operating expense for the year ended December 31, 2020 includes $ 125.5 million of incremental direct costs to prepare for and respond to the pandemic, including costs for:

acquisition of additional personal protective equipment ("PPE"), medical equipment, and cleaning and disposable food service supplies;

enhanced cleaning and environmental sanitation;

increased employee-related costs, including labor, workers compensation, and health plan expense;

increased expense for general liability claims;

and COVID-19 testing of residents and associates where not otherwise covered by government payor or third-party insurance sources.

The Company is not able to reasonably predict the total amount of costs it will incur related to the pandemic, and such costs may continue to be substantial.

The Company also recorded non-cash impairment charges in its operating results of $ 105.6 million for the year ended December 31, 2020 for its operating lease right-of-use assets and property, plant and equipment and leasehold intangibles, primarily due to the COVID-19 pandemic and lower than expected operating performance at communities with impaired assets.

The Company has taken, and continues to take, actions to enhance and preserve its liquidity in response to the pandemic.

During the year ended December 31, 2020, the Company completed its financing plans in the regular course of business, including refinancing substantially all of its 2020 and 2021 maturities.

In addition, on August 31, 2020, the Company terminated its $ 250 million revolving credit facility and obtained $ 266.9 million of non-recourse mortgage financing on 16 communities, most of which had secured the credit facility prior to its termination.

See Note 9 for further information regarding the Company's financings.

During the year ended December 31, 2020, the Company accepted $ 109.8 million of cash for grants under the Public Health and Social Services Emergency Fund ("Provider Relief Fund") and $ 87.5 million of accelerated/advanced Medicare payments, and it deferred $ 72.7 million of the employer portion of social security payroll taxes.

These programs were created or expanded under the Coronavirus Aid, Relief, and Economic Security Act of 2020 ("CARES Act"), as described below.

The Company also delayed or canceled a number of elective capital expenditure projects and suspended repurchases under its existing share repurchase program.

On July 26, 2020, the Company restructured its 120 community triple-net master lease with Ventas, Inc.

("Ventas") in a multipart transaction.

The components included, among other things, reducing the Company's initial annual minimum rent to $ 100 million, representing a reduction of approximately $ 86 million over the twelve months ending June 30, 2021, and removal of the prior requirements that the Company satisfy financial covenants and maintain a security deposit with Ventas.

The Company paid a $ 119.2 million one-time cash lease payment to Ventas in connection with the Company's lease restructuring transaction effective July 26, 2020.

See Note 4 for more information about the Ventas lease restructuring.

As of December 31, 2020, the Company's total liquidity was $ 575.5 million, consisting of $ 380.4 million of unrestricted cash and cash equivalents, $ 172.9 million of marketable securities, and $ 22.2 million of availability on its secured credit facility.

The Company continues to seek opportunities to enhance and preserve its liquidity, including through maintaining expense discipline, continuing to evaluate its financing structure and the state of debt markets, and seeking further government-sponsored financial relief related to the COVID-19 pandemic.

There is no assurance that debt financing will continue to be available on terms consistent with the Company's expectations or at all, or that the Company's efforts will be successful in seeking further government-sponsored financial relief or regarding the amount of, or conditions required to qualify for, any such relief.

The CARES Act, signed into law on March 27, 2020, and Paycheck Protection Program and Health Care Enhancement Act, signed into law on April 24, 2020, provide liquidity and financial relief to certain businesses, among other things.

The impacts to the Company of certain provisions of the CARES Act are summarized below.

• During the year ended December 31, 2020, the Company accepted $ 109.8 million of cash for grants from the Provider Relief Fund, under which grants have been made available to eligible healthcare providers for healthcare related expenses or

lost revenues attributable to COVID-19.

The accepted grants were made available pursuant to the following distributions from the Provider Relief Fund:

• $ 101.7 million pursuant to General Distributions, with the aggregate amount ultimately determined based on a percentage of the Company's year-over-year changes in patient care revenue and certain operating and other expenses for the first and second quarters of 2020.

• $ 4.6 million pursuant to the Skilled Nursing Facility Targeted Distribution, which generally related to the Company's certified skilled nursing facilities.

• $ 3.5 million pursuant to the Nursing Home Infection Control Distribution, including incentive payments, which related to the Company's skilled nursing care provided through its CCRCs.

Grants received from the Provider Relief Fund are subject to the terms and conditions of the program, including that such funds may only be used to prevent, prepare for, and respond to COVID-19 and will reimburse only for healthcare related expenses or lost revenues that are attributable to COVID-19 and have not been reimbursed from other sources or that other sources are not obligated to reimburse.

The permissible uses of grants from the Nursing Home Infection Control Distribution are further limited to certain infection control expenses.

The program requires the Company to report to the U.S.

Department of Health and Human Services ("HHS") on its use of the grants, and its reporting is subject to audit.

During the year ended December 31, 2020, the Company recognized $ 109.8 million of the grants as other operating income based upon its estimates of its satisfaction of the conditions of the grants during such period and the cash received for grants has been presented within net cash provided by operating activities within the Company's consolidated statement of cash flows.

• During the year ended December 31, 2020, the Company received $ 87.5 million under the Accelerated and Advance Payment Program administered by CMS, which was temporarily expanded by the CARES Act.

Approximately $ 75.2 million related to the Company's Health Care Services segment and the remainder related to the Company's CCRCs segment.

Under the program, the Company requested acceleration/advancement of 100 % of its Medicare payment amount for a three-month period.

The Continuing Appropriations Act, 2021 and Other Extensions Act, enacted on October 1, 2020, amended the repayment terms for accelerated/advanced payments.

As amended, recoupment of accelerated/advanced payments will begin one year after payments were issued.

Payments will be recouped at a rate of 25 % of Medicare payments for the first eleven months following the anniversary of issuance and at a rate of 50 % of Medicare payments for the next six months .

Any outstanding balance of accelerated/advanced payments will be due following such recoupment period.

As of December 31, 2020, $ 44.6 million was included in refundable fees and deferred revenue and $ 42.9 million was included in other liabilities within the Company's consolidated balance sheets.

The $ 87.5 million received has been presented within net cash provided by operating activities within the Company's consolidated statement of cash flows.

• Under the CARES Act, the Company has elected to defer payment of the employer portion of social security payroll taxes incurred from March 27, 2020 through December 31, 2020.

One-half of such deferral amount will become due on each of December 31, 2021 and December 31, 2022.

As of December 31, 2020, the Company has deferred payment of $ 72.7 million under the program and has presented $ 36.3 million of this amount in accrued expenses and the remainder in other liabilities within the Company's consolidated balance sheets.

• The CARES Act temporarily suspended the 2% Medicare sequestration for the period May 1, 2020 to December 31, 2020, which primarily benefited the Company's Health Care Services segment.

The Consolidated Appropriations Act, 2021, enacted on December 27, 2020, extended the sequestration suspension through March 31, 2021.

In addition to the grants described above, the Company has received and recognized $ 5.9 million of other operating income from grants from other government sources.

The Company cannot predict with reasonable certainty the impacts that COVID-19 ultimately will have on its business, results of operations, cash flow, and liquidity, and its response efforts may continue to delay or negatively impact its strategic initiatives, including plans for future growth.

The ultimate impacts of COVID-19 will depend on many factors, some of which cannot be foreseen, including the duration, severity, and breadth of the pandemic and any resurgence of the disease;

the impact of COVID-19 on the nation’s economy and debt and equity markets and the local economies in its markets;

the development, availability, utilization, and efficacy of COVID-19 testing, therapeutic agents, and vaccines and the prioritization of such resources among businesses and demographic groups;

government financial and regulatory relief efforts that may become

available to business and individuals, including its ability to qualify for and satisfy the terms and conditions of financial relief;

perceptions regarding the safety of senior living communities during and after the pandemic;

changes in demand for senior living communities and the Company's ability to adapt its sales and marketing efforts to meet that demand;

the impact of COVID-19 on its residents’ and their families’ ability to afford its resident fees, including due to changes in unemployment rates, consumer confidence, housing markets, and equity markets caused by COVID-19;

changes in the acuity levels of its residents;

the disproportionate impact of COVID-19 on seniors generally and those residing in its communities;

the duration and costs of its response efforts, including increased equipment, supplies, labor, litigation, testing, vaccination clinic, and other expenses;

the impact of COVID-19 on its ability to complete financings, refinancings, or other transactions (including dispositions) or to generate sufficient cash flow to cover required interest and lease payments and to satisfy financial and other covenants in its debt and lease documents;

increased regulatory requirements, including unfunded, mandatory testing;

increased enforcement actions resulting from COVID-19;

government action that may limit its collection or discharge efforts for delinquent accounts;

and the frequency and magnitude of legal actions and liability claims that may arise due to COVID-19 or its response efforts.

Acquisitions, Dispositions, and Other Significant Transactions

During 2017 through 2019 , the Company disposed of an aggregate of 39 owned communities ( 3 in 2017 , 22 in 2018 , and 14 in 2019 ).

The Company also entered into agreements with Welltower Inc.

("Welltower") and Ventas, Inc.

("Ventas") in 2018 and continued to execute on the transactions with Healthpeak Properties Inc.

("Healthpeak") (f/k/a HCP, Inc.) announced in 2016 and 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 204 communities were terminated from 2017 to 2019 ( 105 in 2017 , 89 in 2018 , and 10 in 2019 ).

During this period the Company also sold its ownership interests in eight unconsolidated ventures and acquired six communities that it previously leased or managed.

As of December 31, 2019 , the Company owned 330 communities, leased 333 communities, managed 17 communities for which the Company had an equity interest, and managed 83 communities on behalf of third parties.

The following table sets forth the amounts included within the Company's consolidated financial statements for the 243 communities that it disposed through sales and lease terminations for the years ended December 31, 2019 , 2018 , and 2017 through the respective disposition dates:

During 2018 through 2020, the Company acquired 33 communities that the Company formerly leased or managed, disposed of an aggregate of 43 owned communities (including the conveyance of five communities to Ventas), and sold substantially all of its ownership interests in unconsolidated ventures.

The Company also entered into transactions with Ventas, announced on July 27, 2020, Healthpeak Properties, Inc.

("Healthpeak") announced on October 1, 2019, and Welltower Inc.

("Welltower") announced during 2018, 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 104 communities were terminated from 2018 to 2020 ( 89 in 2018, ten in 2019, and five in 2020).

As of December 31, 2020, the Company owned 350 communities, leased 301 communities, and managed 75 communities.

The following table sets forth the amounts included within the Company's consolidated financial statements for the 147 communities that it disposed through sales, conveyances, and lease terminations for the years ended December 31, 2020, 2019, and 2018 through the respective disposition dates:

Year Ended December 31,

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Assisted Living and Memory Care 14,080 50,775 284,627

CCRCs 20,495 64,791 84,186

Senior housing resident fees $ 34,575 $ 115,566 $ 450,092

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Assisted Living and Memory Care 13,008 43,880 211,546

CCRCs 19,997 58,813 74,898

Senior housing facility operating expense $ 33,005 $ 102,693 $ 334,605

Cash lease payments $ 4,696 $ 9,011 $ 91,169

As of December 31, 2019 , three owned communities were classified as held for sale, resulting in $ 42.7 million being recorded as assets held for sale and $ 28.9 million of mortgage debt being included in the current portion of long-term debt within the consolidated balance sheet with respect to such communities.

Two of such communities are in the CCRCs segment and one is in the Assisted Living and Memory Care segment.

The closings of the various pending and expected transactions described below 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.

As of December 31, 2020, three communities were classified as held for sale, resulting in $ 16.1 million being recorded as assets held for sale within the consolidated balance sheet.

Two of such communities are in the Assisted Living and Memory Care segment and one is in the CCRCs segment.

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.

There can be no assurance that the transactions will close or, if they do, when the actual closings will occur.

Completed Dispositions of Owned Communities

In addition to the conveyance of five communities to Ventas, during the year ended December 31, 2020, the Company completed the sale of two owned communities for cash proceeds of $ 38.1 million, net of transaction costs, and recognized a net gain on sale of assets of $ 2.7 million.

During the year ended December 31, 2019, the Company completed the sale of 14 owned communities for cash proceeds of $ 85.4 million, net of transaction costs, and recognized a net gain on sale of assets of $ 5.5 million.

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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.

During the year ended December 31, 2017 , the Company completed the sale of three owned communities for cash proceeds of $ 8.2 million , net of transaction costs.

2020 Ventas Lease Restructuring

On July 26, 2020 (the "Effective Date"), the Company entered into definitive agreements with Ventas in connection with the restructuring of the Company’s lease arrangements with Ventas, including a Master Transaction Letter Agreement (the "Master Agreement").

Pursuant to the Master Agreement:

• On the Effective Date the parties entered into the Amended and Restated Master Lease and Security Agreement (the "Master Lease") and Amended and Restated Guaranty (the "Guaranty"), which amended and restated the prior Master Lease and Security Agreement and prior Guaranty, each dated as of April 26, 2018 and as amended from time to time.

Pursuant to the Master Lease, the Company continues to lease 120 communities for an aggregate initial annual minimum rent of approximately $ 100 million, which reflects a reduction of approximately $ 83 million of annual minimum rent in effect prior to the transaction.

Effective on January 1 of each lease year, beginning January 1, 2022, the annual minimum rent will be subject to a 3 % escalator.

The initial term of the Master Lease ends December 31, 2025, with two 10 -year extension options available to the Company.

The annual minimum rent for the initial lease year of any such renewal term will be the greater of the fair market rental of the communities or the increased annual minimum rent for such lease year applying the foregoing 3 % escalator.

The Master Lease removed the prior provision that would have automatically extended the initial term in the event of the consummation of a change of control transaction by the Company.

The Master Lease requires the Company to spend (or escrow with Ventas) a minimum of $ 1,500 per unit on a community-level basis and $ 3,600 per unit on an aggregate basis of all communities, in each case per 24 -month period ending December 31 during the lease term, commencing with the 24 -month period ending December 31, 2021.

In addition, Ventas has agreed to fund costs associated with certain pre-approved capital expenditure projects in the aggregate amount of up to $ 37.8 million.

Upon disbursement of such expenditures, the annual minimum rent under the Master Lease will increase by the amount of the disbursement multiplied by 50 % of the sum of the then current 10-year treasury note rate and 4.5 %.

The transaction agreements with Ventas further provide that the Master Lease and certain other agreements between the parties will be cross-defaulted.

The Company’s subsidiaries’ obligations under the Master Lease are guaranteed at the parent level pursuant to the Guaranty.

The Guaranty removed the prior requirements that the Company satisfy, at the parent level, financial covenants and that the Company maintain a security deposit with Ventas.

The Guaranty also removed the prior right of Ventas to terminate the Master Lease on the basis of parent level financial covenants.

Pursuant to the terms of the Guaranty, the Company 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 maintaining a minimum tangible net worth of at least $ 600.0 million, 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.

The Guaranty removed the prior provisions that would have required that such post-transaction guarantor satisfy a maximum leverage ratio level, that the Company fund additional capital expenditures, and that the Company extend the term upon the occurrence of the change in control transaction.

Under the terms of the Guaranty, commencing January 1, 2024 (and until such time (if any) as the Company exercises its lease term extension option with respect to the Master Lease), Ventas shall have the right to terminate the Master Lease (with respect to one or more communities), provided that the trailing twelve month coverage ratio of each such community is less than 0.9x and provided further that the removal and termination of any such communities does not result in a portfolio coverage ratio with respect to the remaining communities in the Master Lease that is less than the portfolio coverage ratio prior to such removal and termination.

• On the Effective Date, the Company entered into a Second Amended and Restated Omnibus Agreement with Ventas, which provides that if a default occurs and is continuing under certain other material leases or under certain material financings and if the same continues beyond the permitted cure period or the applicable landlord or lender exercises any material remedies, Ventas shall have the right to transition all or a portion of the communities from the Master Lease to a management arrangement with the Company pursuant to a market management agreement (which is

terminable by either party).

Notwithstanding the foregoing, Ventas may only transition one or more communities from the Master Lease to a management arrangement if such transition does not result in a portfolio coverage ratio with respect to the remaining communities in the Master Lease that is less than the portfolio coverage ratio prior to such transition.

• On the Effective Date, the Company conveyed five owned communities to Ventas in full release and satisfaction of $ 78.4 million principal amount of indebtedness secured by the communities.

Upon closing, the parties entered into new terminable, market rate management agreements pursuant to which the Company manages the communities.

The Company also paid to Ventas $ 115.0 million in cash, released all security deposits to Ventas under the former guaranty (which included the release of a $ 42.4 million deposit held by Ventas and the payment of $ 4.2 million in cash as settlement of the amount of letters of credit), and issued a $ 45.0 million unsecured interest-only promissory note to Ventas.

The initial interest rate of the promissory note is 9.0 % per annum and will increase by 0.50 % on each anniversary of the date of issuance.

The Company may prepay the outstanding principal amount in whole or in part at any time without premium or penalty.

The promissory note matures on the earlier of December 31, 2025 or the occurrence of a change of control transaction (as defined in the Guaranty).

• On the Effective Date, the Company issued to Ventas a warrant (the "Warrant") to purchase 16.3 million shares of the Company’s common stock, $ 0.01 par value per share, at a price per share of $ 3.00 .

The Warrant is exercisable at Ventas' option at any time and from time to time, in whole or in part, until December 31, 2025.

The exercise price and the number of shares issuable on exercise of the Warrant are subject to certain anti-dilution adjustments, including for cash dividends, stock dividends, stock splits, reclassifications, non-cash distributions, certain repurchases of common stock and business combination transactions.

To the extent that the number of shares owned by Ventas (including shares underlying the Warrant) would be more than 9.6 % of the total combined voting power of all the Company’s classes of capital stock or of the total value of shares of all the Company’s classes of capital stock (the "Ownership Cap") (other than as a result of actions taken by Ventas), the Company would generally be required to repurchase the number of shares necessary to avoid Ventas exceeding the Ownership Cap unless Ventas makes an election to require the Company to pay Ventas cash in lieu of issuing shares pursuant to the Warrant in excess of the Ownership Cap.

The Warrant and the shares issuable upon exercise thereof have not been registered under the Securities Act of 1933, as amended, and were issued in a private placement pursuant to Section 4(a)(2) thereof.

On the Effective Date, the parties entered into a Registration Rights Agreement, pursuant to which Ventas and its permitted transferees are entitled to certain registration rights.

Pursuant to the terms of the agreement, the Company filed a shelf registration statement with the SEC with respect to the shares of common stock underlying the Warrant, which was declared effective on August 17, 2020.

Ventas is entitled to customary underwritten offering, piggyback, and additional demand registration rights with respect to the shares underlying the Warrant.

As a result of the modification of the community leases with Ventas, the Company reduced the carrying amount of lease obligations and assets under leases by $ 370.0 million and $ 159.5 million, respectively, in the three months ended September 30, 2020.

As the Company's community leases do not contain an implicit rate, the Company utilized its incremental borrowing rate based on information available on the Effective Date to determine the present value of remaining lease payments for the community leases with Ventas.

Additionally, the results and financial position of the five communities conveyed to Ventas were deconsolidated from the Company's financial statements prospectively as of the Effective Date.

As of the Effective Date, the Warrant was recognized as a component of stockholders’ equity at its estimated fair value of $ 22.9 million.

The Company’s net cash provided by operating activities for the year ended December 31, 2020 includes the $ 119.2 million one-time cash lease payment made to Ventas in connection with its lease restructuring transaction effective July 26, 2020.

See Note 19 for more information regarding the adjustments to the Company’s consolidated balance sheet as a result of this transaction.

2019 Healthpeak CCRC Venture and Master Lease Transactions

On October 1, 2019, the Company entered into definitive agreements, including a Master Transactions and Cooperation Agreement (the "MTCA") and an Equity Interest Purchase Agreement (the "Purchase Agreement"), providing for a multi-part transaction with Healthpeak.

The parties subsequently amended the agreements to include one additional entry fee CCRC community as part of the sale of the Company's interest in its unconsolidated entry fee CCRC Venture with Healthpeak (the "CCRC Venture") (rather than removing the CCRC from the CCRC Venture for joint marketing and sale).

The parties subsequently amended the agreements to include one additional entry fee CCRC community as part of the sale of the Company's interest in its unconsolidated entry fee CCRC venture with Healthpeak (the "CCRC Venture") (rather than removing the community from the CCRC Venture for joint marketing and sale).

The components of the multi-part transaction include:

• CCRC Venture Transaction.

Pursuant to the Purchase Agreement, on January 31, 2020, Healthpeak acquired the Company's 51 % ownership interest in the CCRC venture, which held 14 entry fee CCRCs for a total purchase price of $ 295.2 million (representing an aggregate valuation of $ 1.06 billion less portfolio debt, subject to a net working capital adjustment), which remains subject to a post-closing net working capital adjustment.

Pursuant to the Purchase Agreement, on January 31, 2020, Healthpeak acquired the Company's 51 % ownership interest in the CCRC Venture, which held 14 entry fee CCRCs, for a total purchase price of $ 289.2 million, net of a $ 5.9 million post-closing net working capital adjustment paid to Healthpeak during the three months ended June 30, 2020 (representing an aggregate valuation of $ 1.06 billion less portfolio debt, subject to a

net working capital adjustment).

The $ 289.2 million of cash received from Healthpeak is presented within net cash used in investing activities for the year ended December 31, 2020.

The Company recognized a $ 369.8 million gain on sale of assets for the year ended December 31, 2020, and the Company derecognized the net equity method liability for the sale of the ownership interest in the CCRC Venture.

At the closing, the parties terminated the Company's existing management agreements with the 14 entry fee CCRCs, Healthpeak paid the Company a $ 100.0 million management agreement termination fee, and the Company transitioned operations of the entry fee CCRCs to a new operator.

Prior to the January 31, 2020 closing, the parties moved two entry fee CCRCs into a new unconsolidated

venture on substantially the same terms as the CCRC Venture to accommodate the sale of such two communities at a future date.

The Company recognized $ 100.0 million of management fee revenue for the three months ended March 31, 2020 for the management termination fee.

Prior to the January 31, 2020 closing, the parties moved the remaining two entry fee CCRCs into a new unconsolidated venture on substantially the same terms as the CCRC Venture to accommodate the sale of such two communities.

Subsequent to these transactions, the Company will have exited substantially all of its entry fee CCRC operations.

• Master Lease Transactions.

Pursuant to the MTCA, on January 31, 2020, the parties amended and restated the existing master lease pursuant to which the Company continues to lease 25 communities from Healthpeak, and the Company acquired 18 communities from Healthpeak, at which time the 18 communities were removed from the master lease.

Pursuant to the MTCA, on January 31, 2020, the parties amended and restated the existing master lease pursuant to which the Company continued to lease 25 communities from Healthpeak, and the Company acquired 18 formerly leased communities from Healthpeak, at which time the 18 communities were removed from the master lease.

At the closing, the Company paid $ 405.5 million to acquire such communities and to reduce its annual rent under the amended and restated master lease.

The $ 405.5 million of cash paid to Healthpeak and $ 1.7 million of direct acquisition costs are presented within net cash used in investing activities for the year ended December 31, 2020.

The Company funded the community acquisitions with $ 192.6 million of non-recourse mortgage financing and the proceeds from the multi-part transaction.

In addition, Healthpeak has agreed to transition one leased community to a successor operator.

In addition, Healthpeak agreed to terminate the lease for one leased community and the Company's triple-net lease obligation with respect to such community was terminated during December 2020.

As a result of the lease termination, the Company recognized a $ 2.3 million gain on lease termination during the year ended December 31, 2020 for the amount by which the lease obligations exceeded the net carrying amount of the Company's assets under the operating lease as of the lease termination date.

With respect to the continuing 24 communities, the Company's amended and restated master lease:

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and (iii) Healthpeak has agreed to make available up to $ 35.0 million for capital expenditures for a five-year period related to the 24 communities at an initial lease rate of 7.0 %.

The Company expects the sales of the two remaining entry fee CCRCs to occur over the next 15 months;

however, there can be no assurance that the transactions will close or, if they do, when the actual closings will occur.

Subsequent to these transactions, the Company will have exited substantially all of its entry fee CCRC operations.

As a result of the community acquisition transaction, the Company recognized a $ 19.7 million gain on debt extinguishment during the year ended December 31, 2020 and derecognized the $ 105.1 million carrying amount of financing lease obligations for eight communities which were previously subject to sale-leaseback transactions in which the Company was deemed to have continuing involvement.

During March 2020, the Company obtained $ 30.0 million of additional non-recourse mortgage financing on the acquired communities.

2018 Welltower Lease and RIDEA Venture Restructuring

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• RIDEA Restructuring.

The Company sold its 20 % equity interest in its existing 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.

The Company sold its 20 % equity interest in its existing 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 were transitioned to new managers, and such communities were reported in the Management Services segment during such interim period.

The Company also elected not to renew two master leases with Welltower which matured on September 30, 2018 ( 11 communities).

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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, 18 of which have been and three will be combined into the Ventas Master Lease.

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 are subject to cross-default provisions.

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 of the consummation of a change of control transaction of the Company 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 has received or 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 of the Company 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 ended 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 a change of control of the Company occurs, 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.

Pursuant to the Ventas Master lease, the Company has exercised its right to direct Ventas to market for sale certain communities.

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 % .

During 2019, seven of such communities were sold by Ventas and removed from the Ventas Master Lease, and the annual minimum rent under the Ventas Master Lease was prospectively reduced by $ 1.7 million .

The Former Ventas Master Lease amended and restated prior leases comprising an aggregate portfolio of 107 communities into the Former Ventas Master Lease, and the Company and Ventas agreed to observe, perform, and enforce separate leases for 21 additional communities as if they had been combined into the Former 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 provided that the Former Ventas Master Lease and certain other agreements between the Company and Ventas were subject to cross-default provisions.

The Former Ventas Master Lease had an initial term ending December 31, 2025 and provided the Company with two 10 -year extension options.

The transaction agreements provided that if the Company had consummated a change of control transaction on or before December 31, 2025, the initial term of the Former Ventas Master Lease would be extended automatically through December 31, 2029.

The Former Ventas Master Lease and separate lease agreements with Ventas, which were 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 received an annual rent credit of $ 8.0 million in 2019 and an annual rent credit of $ 7.0 million in 2020 prior to giving effect to the reduction from the agreements on July 26, 2020 as described above.

The annual minimum rent was 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 Former Ventas Master Lease required 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 ended 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), and provided that if the Company had consummated a change of control transaction, it would have been required within 36 months 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, was required to satisfy certain financial covenants (including tangible net worth and leverage ratios) and may have consummated a change of control transaction without the need for consent of Ventas so long as certain objective conditions were 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.

Pursuant to the Former Ventas Master Lease, the Company exercised its right to direct Ventas to use its commercially reasonable, diligent efforts to market for sale certain communities.

During 2019, seven communities were sold by Ventas and removed from the Former Ventas Master Lease, and the annual minimum rent was prospectively reduced by $ 1.7 million.

During 2020, one community was sold by Ventas and removed from the Former Ventas Master Lease, and the annual minimum rent was prospectively reduced by $ 0.1 million.

The Company estimated the fair value of each of the elements of the restructuring transactions.

The fair value of the future lease payments is based upon historical and forecasted community cash flows and market data, including a 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 year ended December 31, 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.

The fair value of the future lease payments was based upon historical and forecasted community cash flows and market data, including a 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 during the year ended December 31, 2018, primarily for the extensions of the triple-net lease obligations for communities with lease terms that are unfavorable to the Company given 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 Healthpeak Multi-Part Transaction

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During the year ended December 31, 2018, the Company acquired two communities formerly leased for an aggregate purchase price of $ 35.4 million and leases with respect to 33 communities were terminated, and such communities were removed from the Former Healthpeak Master Lease, which completed the terminations of leases as provided in the Former Healthpeak Master Lease.

The Company agreed to manage communities for which leases were terminated on an interim basis until the communities were transitioned to new managers, and such communities are

reported in the Management Services segment during such interim period.

The Company agreed to manage communities for which leases were terminated on an interim basis until the communities were transitioned to new managers, and such communities are reported in the Management Services segment during such interim period.

As of December 31, 2019, the Company continued to lease 43 communities pursuant to the terms of the Former Healthpeak Master Lease, which had 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.

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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 amount of the Company's assets and liabilities under operating and financing leases at the lease termination date.

Blackstone Venture

On March 29, 2017, the Company and affiliates of Blackstone Real Estate Advisors VIII L.P.

(collectively, "Blackstone") formed a venture (the "Blackstone Venture") that acquired 64 senior housing communities for a purchase price of $ 1.1 billion .

The Company had previously leased the 64 communities from Healthpeak under long-term lease agreements with a remaining average lease term of approximately 12 years.

At the closing, the Blackstone Venture purchased the 64 -community portfolio from Healthpeak subject to the existing leases, and the Company contributed its leasehold interests for 62 communities and a total of $ 179.2 million in cash to purchase a 15 % equity interest in the Blackstone Venture, terminate leases, and fund its share of closing costs.

As of the formation date, the Company continued to operate two of the communities under lease agreements and began managing 60 of the communities on behalf of the venture under a management agreement with the venture.

Two of the communities were managed by a third party for the venture.

The results and financial position of the 62 communities for which leases were terminated were deconsolidated from the Company prospectively upon formation of the Blackstone Venture.

The Company accounted for the venture under the equity method of accounting.

Initially, the Company determined that the contributed carrying amount of the Company's investment was $ 66.8 million , representing the amount by which the $ 179.2 million cash contribution exceeded the carrying amount of the Company's liabilities under operating and financing leases contributed by the Company net of the carrying amount of the assets under such operating and financing leases.

However, the Company estimated the fair value of its 15 % equity interest in the Blackstone Venture at inception to be $ 47.1 million (using Level 3 inputs).

As a result, the Company recorded a $ 19.7 million charge within goodwill

and asset impairment expense for the three months ended March 31, 2017 for the amount of the contributed carrying amount in excess of the estimated fair value of the Company's investment.

During 2018, the Company recorded a $ 33.4 million non-cash impairment charge within goodwill and asset impairment expense to reflect the amount by which the carrying amount of the investment exceeded the estimated fair value (using Level 3 inputs).

Additionally, these transactions related to the Blackstone Venture required the Company to record a significant increase to the Company's existing tax valuation allowance, after considering the change in the Company's future reversal of estimated timing differences resulting from these transactions, primarily due to removing the deferred positions related to the contributed leases.

During 2017, the Company recorded a provision for income taxes to establish an additional $ 85.0 million of valuation allowance against its federal and state net operating loss carryforwards and tax credits as the Company anticipates these carryforwards and credits will not be utilized prior to expiration.

See Note 16 for more information about the Company's deferred income taxes.

During 2018, leases for the two communities owned by the Blackstone Venture were terminated and the Company sold its 15 % equity interest in the Blackstone Venture to Blackstone.

The Company paid Blackstone an aggregate fee of $ 2.0 million to complete the multi-part transaction and recognized a $ 3.8 million gain on sale of assets for the amount by which the net carrying amount of the Company's assets and liabilities disposed of exceeded the aggregate transaction cost.

Additional Healthpeak Lease Terminations

During the year ended December 31, 2017, triple-net leases with respect to 26 communities were terminated pursuant to agreements we entered into with Healthpeak on November 1, 2016.

As a result of such lease terminations, during 2017 the Company derecognized the $ 145.3 million carrying value of the assets under financing leases and the $ 156.7 million carrying value of financing lease obligations for 21 communities which were previously subject to sale-leaseback transactions in which the Company was deemed to have continuing involvement for accounting purposes, and recorded an $ 11.4 million gain on sale of assets.

Fair Value Measurements

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The Company estimates the fair value of its 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 amount of approximately $ 3.6 billion as of both December 31, 2019 and 2018 .

The Company had outstanding long-term debt with a carrying amount of approximately $ 3.9 billion and $ 3.6 billion as of December 31, 2020 and 2019, respectively.

Fair value of the long-term debt approximates carrying amount in all periods presented.

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.

On July 26, 2020, the Company issued to Ventas a warrant to purchase up to 16.3 million shares of the Company’s common stock, at a price per share of $ 3.00 .

The fair value of this warrant of $ 22.9 million as of July 26, 2020 was estimated using the Black-Scholes option-pricing model utilizing a stock price volatility assumption of 65 % which is considered a Level 2 input of the valuation hierarchy.

Asset Impairment Expense

The following is a summary of asset impairment expense.

For the Years Ended December 31,

(in millions) 2020 2019 2018

Goodwill (Note 8)

Property, plant and equipment and leasehold intangibles, net (Note 7)

Operating lease right-of-use assets (Note 11)

Investment in unconsolidated ventures (Note 6)

Other intangible assets, net (Note 8)

Assets held for sale (Note 4)

Goodwill and asset impairment

During the three months ended September 30, 2017, the Company identified qualitative indicators of impairment of goodwill, including a significant decline in the Company's stock price and market capitalization for a sustained period since the last testing date, significant underperformance relative to historical and projected operating results, and an increased competitive environment in the senior living industry.

Based upon the Company's qualitative assessment, the Company performed an interim quantitative goodwill impairment test as of September 30, 2017, 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 amount.

Goodwill $ — $ — $ 351.7

Property, plant and equipment and leasehold intangibles, net 29.3 27.2 78.0

Operating lease right-of-use assets 76.3 10.2 —

Investment in unconsolidated ventures 1.5 — 33.4

Assets held for sale 0.2 1.3 15.6

Other assets, net — 10.6 11.2

Asset impairment $ 107.3 $ 49.3 $ 489.9

Although the Company cannot predict with reasonable certainty the ultimate impacts of the COVID-19 pandemic, the Company concluded that the impacts of the pandemic have adversely affected the Company’s projections of revenue, expense, and cash flow for its senior housing community long-lived assets and constitute an indicator of potential impairment.

Accordingly, the Company assessed its long-lived assets for recoverability.

Refer to Note 3 for additional information on the COVID-19 pandemic.

In estimating the recoverability of asset groups for purposes of the Company’s long-lived asset impairment testing during the year ended December 31, 2020, the Company utilized future cash flow projections that are developed internally.

Any estimates of future cash flow projections necessarily involve predicting unknown future circumstances and events and require significant management judgments and estimates.

In arriving at the cash flow projections, the Company considers its estimates of the impacts of the pandemic, historic operating results, approved budgets and business plans, future demographic factors, expected growth rates, estimated asset holding periods, and other factors.

As of December 31, 2020 there was a wide range of possible outcomes as a result of the pandemic, as there was a high degree of uncertainty about its ultimate impact.

Management’s estimates of the impact of the pandemic are highly dependent on variables that are difficult to predict, as further described in Note 3.

Future events may indicate differences from management's current judgments and estimates which could, in turn, result in future impairments.

During the three months ended March 31, 2018, the Company identified qualitative indicators of impairment of goodwill, 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.

As a result, the Company performed an interim 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 amount.

In estimating the fair value of the reporting units for purposes of the quantitative goodwill impairment test, the Company utilized an income approach, which included future cash flow projections that are developed internally.

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The Company also considered market based measures such as earnings multiples in its analysis of estimated fair values of its reporting units.

Based on the results of the Company's quantitative goodwill impairment test, the Company determined that the carrying amount of the Company's Assisted Living and Memory Care reporting unit exceeded its estimated fair value by $ 205.0 million as of September 30, 2017.

As a result, the Company recorded a non-cash impairment charge of $ 205.0 million to goodwill within the Assisted Living and Memory Care segment for the three months ended September 30, 2017.

The Company concluded that the remaining goodwill for all reporting units was not impaired as of October 1, 2017 (the Company's annual measurement date) and as of December 31, 2017.

As a result, the Company performed an interim 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 amount.

million carrying amount as of March 31, 2018.

As a result, the Company recorded a non-cash impairment charge of $ 351.7 million to goodwill within the Assisted Living and Memory Care segment for the three months ended March 31, 2018.

During 2020, the Company identified indicators of impairment of goodwill, including the COVID-19 pandemic and a significant decline in the Company's stock price and market capitalization for a sustained period.

Refer to Note 3 for additional information on the COVID-19 pandemic.

As a result, the Company performed an interim quantitative goodwill impairment test as of March 31, 2020.

The Company’s quantitative goodwill impairment test as of March 31, 2020 included reduced estimates of projected future cash flows as a result of changes to significant assumptions using information known or knowable about the COVID-19 pandemic, including current industry and economic trends, changes in business plans, and changes in expected revenue and facility operating expense growth rates.

Additionally, the Company considered the additional risk within the future cash flow estimates when selecting risk-adjusted discount rates.

As of December 31, 2020, the Company also considered that the estimated Health Care Services reporting unit fair value, based upon the transaction price for the Health Care Services segment as described in Note 21, exceeds its carrying amount.

The Company concluded that the remaining goodwill for all reporting units was not impaired as of October 1, 2020 and 2019 (the Company's annual measurement date) and as of December 31, 2020 and 2019.

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Future events that may result in impairment charges include differences in the projected occupancy rates or monthly service fee rates, changes in the cost structure of existing communities, changes in reimbursement rates from Medicare for healthcare services, and changes in healthcare reform.

Significant adverse changes in the Company's future revenues and/or operating margins, significant changes in the market for senior housing or the valuation of the real estate of senior living communities, as well as other events and circumstances, including, but not limited to, increased competition, changes in reimbursement rates from Medicare for healthcare services, and changing economic or market conditions, including market control premiums, could result in changes in fair value and the determination that additional goodwill is impaired.

Significant adverse changes in the Company's future revenues and/or operating margins, significant changes in the market for healthcare services, senior housing or the valuation of the real estate of senior living communities, as well as other events and circumstances, including, but not limited to, increased competition, changes in reimbursement rates from Medicare for healthcare services, and changing economic or market conditions, including market control premiums, could result in changes in fair value and the determination that additional goodwill is impaired.

Property, Plant and Equipment and Leasehold Intangibles, Net

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The Company compared the estimated fair value of the assets to their carrying amount for these identified properties and recorded an impairment charge for the excess of carrying amount over fair value.

The Company recorded property, plant and equipment and leasehold intangibles non-cash impairment charges in its operating results of $ 27.2 million , $ 78.0 million , and $ 164.4 million for the years ended December 31, 2019 , 2018 , and 2017 , respectively, primarily within the Assisted Living and Memory Care segment.

The fair values of the property, plant and equipment of these communities were primarily determined utilizing a direct capitalization method considering stabilized facility operating income and market capitalization rates.

The Company recorded property, plant and equipment and leasehold intangibles non-cash impairment charges in its operating results of $ 29.3 million, $ 27.2 million, and $ 78.0 million for the years ended December 31, 2020, 2019, and 2018, respectively.

The fair values of the assets of these communities were primarily determined utilizing a discounted cash flow approach or direct capitalization method considering stabilized facility operating income and market capitalization rates.

These fair value measurements are considered Level 3 measurements within the valuation hierarchy.

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The Company corroborated the estimated fair values with a sales comparison approach with information observable from recent market transactions.

These impairment charges are primarily due to lower than expected operating performance at these properties or the Company's decision to dispose of assets, either through sales or lease terminations, and reflect the amount by which the carrying amounts of the assets exceeded their estimated fair value.

These impairment charges are primarily due to the COVID-19 pandemic, lower than expected operating performance at these properties, or the Company's decision to dispose of assets and reflect the amount by which the carrying amounts of the assets exceeded their estimated fair value.

Operating Lease Right-of-Use Assets

During the years ended December 31, 2020 and 2019, the Company evaluated operating lease right-of-use assets for impairment and identified communities with a carrying amount of the assets in excess of the estimated future undiscounted net cash flows expected to be generated by the assets.

The Company compared the estimated fair value of the assets to their carrying amount for these identified communities and recorded an impairment charge for the excess of carrying amount over fair value.

The Company recognized the right-of-use assets for the operating leases for 35 communities on the consolidated balance sheet as of March 31, 2020 at the estimated fair value of $ 106.7 million.

During the three months ended June 30, 2020, the Company recognized the right-of-use assets for the operating leases for nine communities on the consolidated balance sheet at the estimated fair value of $ 10.3 million.

During the three months ended September 30, 2020, the Company recognized the right-of-use assets for the operating leases for two communities on the consolidated balance sheets as of September 30, 2020 at

the estimated fair value of $ 3.0 million.

During the three months ended December 31, 2020, the Company recognized the right-of-use assets for the operating leases for five communities on the consolidated balance sheet at the estimated fair value of $ 2.3 million.

In the aggregate, the Company recorded a non-cash impairment charge of $ 76.3 million and $ 10.2 million for the years ended December 31, 2020 and 2019, respectively, to operating lease right-of-use assets.

These 2020 impairment charges are primarily due to the COVID-19 pandemic and the lower than expected operating performance at these communities and reflect the amount by which the carrying amounts of the assets exceeded their estimated fair value.

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 consolidated balance sheet as of January 1, 2019 at the estimated fair value of $ 56.6 million, and $ 58.1 million of previously unrecognized right-of-use asset impairments were recognized as a cumulative effect adjustment to accumulated deficit as the Company determined that the long-lived assets of such communities were not recoverable as of such date.

See Note 2 for more information regarding the recognition of right-of-use assets for operating leases upon the adoption of ASU 2016-02.

The fair values of the operating lease right-of-use assets were estimated utilizing a discounted cash flow approach based upon projected community cash flows and market data, including management fees and a market supported lease coverage ratio, all of which are considered Level 3 inputs within the valuation hierarchy.

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.

The range of discount rates utilized was 9.0 % to 12.3 %, depending upon the property type, geographical location, and the quality of the respective community.

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 years ended December 31, 2018 and 2017 , the Company recorded $ 33.4 million and $ 25.8 million , respectively, of non-cash impairment charges related to investments in unconsolidated ventures.

During the years ended December 31, 2020 and 2018 the Company recorded $ 1.5 million and $ 33.4 million, respectively, of non-cash impairment charges for investments in unconsolidated ventures.

These impairment charges are primarily due to lower than expected operating performance at the communities owned by the unconsolidated ventures and reflect the amount by which the carrying amounts of the investments exceeded their estimated fair value.

Refer to Note 4 for more information about the impairment of the Blackstone Venture.

During the year ended December 31, 2019, the Company did not record impairment expense related to its investment in unconsolidated ventures.

Other Intangible Assets

During the years ended December 31, 2019 , 2018 , and 2017 , the Company identified indicators of impairment for the Company's home health care licenses, primarily due to significant underperformance relative to historical and projected operating results, the

impact of lower reimbursement rates from Medicare for home health care services, and an increased competitive environment in the home health care industry.

During the year ended December 31, 2019, the Company did not record impairment expense for its investment in unconsolidated ventures.

Assets Held for Sale

During the years ended December 31, 2020, 2019, and 2018, the Company recognized $ 0.2 million, $ 1.3 million, and $ 15.6 million, respectively, of impairment charges for assets held for sale.

These impairment charges are primarily due to the excess of carrying amount over the estimated selling price less costs to dispose.

The Company determines the fair value of the communities based primarily on purchase and sale agreements from prospective purchasers (Level 2 input).

Refer to Note 4 for more information about the Company's community dispositions and assets held for sale.

During the years ended December 31, 2019 and 2018, the Company identified indicators of impairment for the Company's home health care licenses, primarily due to significant underperformance relative to historical and projected operating results, the impact of lower reimbursement rates from Medicare for home health care services, and an increased competitive environment in the home health care industry.

The Company performed a quantitative impairment test, which included a comparison of the estimated fair value of the Company's home health care licenses to the carrying amount.

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Based on the results of the Company's quantitative impairment test, the Company determined that the carrying amount of certain of the Company's home health care licenses exceeded their estimated fair value.

As a result, the Company recorded a non-cash impairment charge of $ 7.6 million , $ 9.1 million , and $ 14.6 million for the years ended December 31, 2019 , 2018 , and 2017 , respectively, to intangible assets within the Health Care Services segment.

Assets Held for Sale

During the years ended December 31, 2019 and 2018 , the Company recognized $ 1.3 million and $ 15.6 million , respectively, of impairment charges related to assets held for sale.

These impairment charges are primarily due to the excess of carrying amount over the estimated selling price less costs to dispose.

The Company determines the fair value of the communities based primarily on purchase and sale agreements from prospective purchasers (Level 2 input).

Refer to Note 4 for more information about the Company's community dispositions and assets held for sale.

Operating Lease Right-of-Use Assets

During the year ended December 31, 2019 , the Company evaluated operating lease right-of-use assets for impairment and identified communities with a carrying amount of the assets in excess of the estimated future undiscounted net cash flows expected to be generated by the assets.

As a result, the Company recorded a non-cash impairment charge of $ 10.2 million for the year ended December 31, 2019 to operating lease right-of-use assets, primarily within the Assisted Living and Memory Care segment.

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 consolidated balance sheet as of January 1, 2019 at the estimated fair value of $ 56.6 million , and $ 58.1 million of previously unrecognized right-of-use asset impairments were recognized as a cumulative effect adjustment to accumulated deficit 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 was 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, all of which are considered Level 3 inputs.

The Company corroborated the estimated management fee rates and lease coverage ratios used in these estimates with management fee rates and 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.

See Note 2 for more information regarding the recognition of right-of-use assets for operating leases upon the adoption of ASU 2016-02.

Investment in Unconsolidated Ventures

As of December 31, 2019 , the Company held a 51 % equity interest, and Healthpeak owned a 49 % interest, in the CCRC Venture, which owned and operated sixteen entry fee CCRCs.

The Company's interests in the CCRC Venture were accounted for under the equity method of accounting.

Refer to Note 4 for information on the Company's sale of the equity interest in the CCRC Venture on January 31, 2020.

Summarized financial information of all unconsolidated ventures accounted for under the equity method was as follows (reflecting the period of the Company's ownership of an equity interest):

(in millions)

As a result, the Company recorded a non-cash impairment charge of $ 7.6 million and $ 9.1 million for the years ended December 31, 2019 and 2018, respectively, to intangible assets within the Health Care Services segment.

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.

Resident fee revenue by payor source and reportable segment is as follows:

Year Ended December 31, 2020

(in thousands) Independent Living Assisted Living and Memory Care CCRCs Health Care Services Total

Private pay $ 510,254 $ 1,622,117 $ 235,018 $ 906 $ 2,368,295

Government reimbursement 2,344 69,159 59,614 287,512 418,629

Other third-party payor programs — — 27,251 78,392 105,643

Total resident fee revenue $ 512,598 $ 1,691,276 $ 321,883 $ 366,810 $ 2,892,567

Year Ended December 31, 2019

(in thousands) Independent Living Assisted Living and Memory Care CCRCs Health Care Services Total

Private pay $ 542,112 $ 1,748,364 $ 281,197 $ 753 $ 2,572,426

Government reimbursement 2,446 67,574 81,054 357,963 509,037

Other third-party payor programs — — 39,924 88,544 128,468

Total resident fee revenue $ 544,558 $ 1,815,938 $ 402,175 $ 447,260 $ 3,209,931

Year Ended December 31, 2018

(in thousands) Independent Living Assisted Living and Memory Care CCRCs Health Care Services Total

Private pay $ 596,852 $ 1,923,676 $ 288,682 $ 693 $ 2,809,903

Government reimbursement 3,125 72,175 87,028 359,881 522,209

Other third-party payor programs — — 40,698 76,401 117,099

Total resident fee revenue $ 599,977 $ 1,995,851 $ 416,408 $ 436,975 $ 3,449,211

Contract Balances

The payment terms and conditions within the Company's revenue-generating contracts vary by contract type and payor source, although terms generally include payment to be made within 30 days.

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 healthcare services is generally billed monthly in arrears.

A portion of the Company's reimbursement from Medicare for certain healthcare services is billed near the start of each period of care, and cash is generally received before all services are rendered.

The amount of revenue recognized for periods of care which are incomplete at period end is based on the Company's historical average percentage of days complete on each period of care and any unearned amounts are deferred and recognized when the service is performed.

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 and other liabilities within the consolidated balance sheets) of $ 138.3 million and $ 72.5 million, including $ 21.1 million and $ 38.9 million of monthly resident fees billed and received in advance, as of December 31, 2020 and 2019, respectively.

Such amount of total deferred revenue as of December 31, 2020 also includes $ 87.5 million received during the year ended December 31, 2020 under a temporary expansion of the Accelerated and Advance Payment Program administered by CMS.

Refer to Note 3 for additional information on such program.

For the years ended December 31, 2020, 2019, and 2018 the Company recognized $ 60.6 million, $ 94.6 million, and $ 82.1 million respectively, of revenue that was included in the deferred revenue balance as of January 1,

2020, 2019, and 2018, respectively.

The Company applies the practical expedient in ASC 606-10-50-14 and does not disclose amounts for remaining performance obligations that have original expected durations of one year or less.

The following table presents the changes in allowance for credit losses on accounts receivable for the periods indicated:

For the Years Ended December 31,

Statement of Operations Information

Resident fee revenue

Facility operating expense

Net income (loss)

(in millions) 2020 2019 2018

As of December 31,

Balance Sheet Information

Current assets

Noncurrent assets

Current liabilities

Noncurrent liabilities

During the year ended December 31, 2016, the CCRC Venture obtained non-recourse mortgage financing on certain communities and received proceeds of $ 434.5 million .

The CCRC Venture distributed the net proceeds to its investors and the Company received proceeds of $ 221.6 million .

As a result of the distribution, the Company's carrying amount of its equity method investment in the CCRC Venture property company was reduced below zero and the Company has recorded a $ 66.2 million and $ 56.6 million equity method liability within other liabilities within the consolidated balance sheets as of December 31, 2019 and 2018 , respectively.

As of December 31, 2019 , the CCRC Venture's operating company ("Opco") was identified as a VIE.

As of December 31, 2019 , the equity members of the CCRC Venture's Opco shared certain operating rights, and the Company acted as manager to the CCRC Venture Opco.

However, the Company did not consolidate this VIE because it did not have the ability to control the activities that most significantly impact this VIE's economic performance.

The assets of the CCRC Venture Opco primarily consisted of the CCRCs that it owned and leased, resident fees receivable, notes receivable, and cash and cash equivalents.

The obligations of the CCRC Venture Opco primarily consisted of community lease obligations, mortgage debt, accounts payable, accrued expenses, and refundable entrance fees.

The carrying amount of the Company's investment in unconsolidated venture and maximum exposure to loss as a result of the Company's involvement with the CCRC Venture's Opco was $ 14.3 million as of December 31, 2019.

The Company is not required to provide financial support, through a liquidity arrangement or otherwise, to the CCRC Venture's Opco.

Refer to Note 5 for information on impairment expense for investments in unconsolidated ventures.

Balance at beginning of period $ 7.8 $ 7.9 $ 9.8

Provision within facility operating expense 16.7 15.2 17.6

Write-offs ( 16.2 ) ( 19.5 ) ( 22.3 )

Recoveries and other 1.5 4.2 2.8

Balance at end of period $ 9.8 $ 7.8 $ 7.9

Property, Plant and Equipment and Leasehold Intangibles, Net

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(in thousands) 2020 2019

Land $ 505,298 $ 450,894

Buildings and improvements 5,215,460 4,790,769

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For the years ended December 31, 2020, 2019, and 2018, the Company recognized depreciation and amortization expense on its property, plant and equipment and leasehold intangibles of $ 359.2 million, $ 377.6 million, and $ 444.3 million, respectively.

Goodwill and Other Intangible Assets, Net

The following is a summary of the carrying amount of goodwill presented on a reportable segment basis as of both December 31, 2020 and 2019.

(in thousands)

Gross Carrying Amount

Dispositions and Other Reductions

Accumulated Impairment

(in thousands) Gross Carrying Amount Dispositions and Other Reductions Accumulated Impairment Net

Independent Living $ 28,141 $ ( 820 ) $ — $ 27,321

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Health Care Services 126,810 — — 126,810

Refer to Note 5 for information on impairment expense for goodwill in 2018 and 2017.

The following is a summary of other intangible assets.

December 31, 2019

(in thousands)

Health care licenses

December 31, 2018

(in thousands)

Community purchase options

Health care licenses

Management contracts

Amortization expense related to definite-lived intangible assets for the years ended December 31, 2019 , 2018 , and 2017 was $ 1.8 million , $ 3.1 million , and $ 5.6 million , respectively.

Health care licenses are indefinite-lived intangible assets and are not subject to amortization.

Upon the adoption of ASC 842, the community purchase options were included within operating lease right-of-use assets in the consolidated balance sheets.

Refer to Note 5 for information on impairment expense for other intangible assets.

Total $ 760,420 $ ( 49,637 ) $ ( 556,652 ) $ 154,131

Refer to Note 5 for information on impairment expense for goodwill in 2018.

Long-term debt consists of the following:

(in thousands) 2020 2019

Mortgage notes payable due 2020 through 2047;

weighted average interest rate of 4.72% in 2019, less debt discount and deferred financing costs of $17.0 million and $18.6 million as of December 31, 2019 and 2018, respectively (weighted average interest rate of 4.75% in 2018)

Other notes payable, weighted average interest rate of 5.77% for the year ended December 31, 2019 (weighted average interest rate of 5.85% in 2018) and maturity dates ranging from 2020 to 2021

Fixed mortgage notes payable due 2021 through 2047;

weighted average interest rate of 4.18 % and 4.80 % as of December 31, 2020 and 2019, respectively.

$ 2,366,996 $ 2,270,811

Variable mortgage notes payable due 2022 through 2030, weighted average interest rate of 2.49 % and 4.10 % as of December 31, 2020 and 2019, respectively.

1,529,935 1,242,921

Other notes payable due 2021 to 2025;

weighted average interest rate of 8.98 % and 5.77 % as of December 31, 2020 and 2019, respectively.

46,557 58,388

Debt discount and deferred financing costs, net ( 27,500 ) ( 16,997 )

Total long-term debt 3,915,988 3,555,123

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Total long-term debt, less current portion $ 3,847,103 $ 3,215,710

As of December 31, 2019 and 2018 , the current portion of long-term debt within the Company's consolidated financial statements includes $ 28.9 million and $ 31.2 million , respectively, of mortgage notes payable secured by communities classified as 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.

As of December 31, 2020, 98.2 %, or $ 3.8 billion of the Company's total debt obligations represented non-recourse property-level mortgage financings.

The annual aggregate scheduled maturities of long-term debt outstanding as of December 31, 2020 are as follows (in thousands):

Year Ending December 31,

Debt Weighted Rate

2021 $ 73,673 4.26 %

2022 352,366 3.57 %

2023 234,448 3.51 %

2024 304,239 4.29 %

2025 292,972 3.99 %

Thereafter 2,685,790 3.45 %

Total obligations 3,943,488 3.59 %

Less amount representing debt discount and deferred financing costs, net ( 27,500 )

Total $ 3,915,988

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 "Credit Agreement").

The Credit 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 Credit 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 Credit 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 Credit Agreement matures on January 3, 2024.

Amounts drawn under the facility will bear interest at 90-day LIBOR plus an applicable margin.

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 is 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 Credit 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.

During 2019, the Company entered into an amendment to the Credit Agreement that provides for availability calculations to be made at additional consolidated fixed charge coverage ratio thresholds.

The Credit 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.

On August 31, 2020, the Company terminated its 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 (as amended, the ("Credit Agreement").

The Credit Agreement had a maturity date of January 3, 2024.

Amounts drawn under the facility bore interest at 90-day LIBOR plus an applicable margin.

The applicable margin varied 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%.

The Credit Agreement had provided commitments for a $ 250.0 million revolving credit facility with a $ 60.0 million sublimit for letters of credit and a $ 50.0 million swingline feature.

The credit facility was secured by first priority mortgages on certain of the Company's communities, and availability varied 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 Credit Agreement was terminated in connection with the Company obtaining approximately $ 266.9 million of non-recourse mortgage financing on 16 communities on August 31, 2020, most of which had secured the Credit Agreement prior to its termination.

At the closing, the Company repaid the $ 166.4 million outstanding principal amount under the Credit Agreement, together with accumulated interest, and without payment of any termination fee or penalty.

On December 11, 2020, the Company entered into a revolving credit agreement with Capital One, National Association, as administrative agent and lender and the other lenders from time to time parties thereto.

The agreement provides a commitment amount of $ 80 million which can be drawn in cash or as letters of credit.

The agreement matures on January 15, 2024.

Amounts drawn under the facility will bear interest at 30-day LIBOR plus an applicable margin which was 2.75 % as of December 31, 2020.

Additionally, a quarterly commitment fee of 0.25 % per annum was applicable on the unused portion of the facility as of December 31, 2020.

The revolving credit facility is currently secured by first priority mortgages and negative pledges on certain of the Company’s communities.

Available capacity under the facility will vary from time to time based upon borrowing base calculations related to the appraised value and performance of the communities securing the credit facility.

As of December 31, 2020, no borrowings were outstanding on the revolving credit facility, $ 40.4 million of letters of credit were outstanding, and the revolving credit facility had $ 22.2 million of availability.

The Company also had a separate unsecured letter of credit facility providing for up to $ 47.5 million of letters of credit as of December 31, 2019 under which $ 47.5 million had been issued as of that date.

The Company also had separate secured and unsecured letter of credit facilities of up to $ 51.6 million of letters of credit as of December 31, 2020 under which $ 40.3 million had been issued as of that date.

2020 Financings

On January 31, 2020, the Company obtained $ 238.2 million of debt secured by the non-recourse first mortgages on 14 communities, including $ 192.6 million of non-recourse first mortgage financing on 13 communities acquired from Healthpeak on such date.

Seventy percent of the principal amount bears interest at a fixed rate of 3.62 %, and the remaining thirty percent of the principal amount bears interest at a variable rate equal to 30-day LIBOR plus a margin of 209 basis points.

The debt matures in February 2030.

The proceeds from the financing were utilized to fund the acquisition of communities from Healthpeak and repay $ 33.1 million of outstanding mortgage debt maturing in 2020.

Refer to Note 4 for more information about the Company's acquisition of communities from Healthpeak.

On March 19, 2020, the Company obtained $ 29.2 million of debt secured by the non-recourse first mortgages on seven communities, primarily communities acquired during the three months ended March 31, 2020.

The loan bears interest at a variable rate equal to the 30-day LIBOR plus a margin of 225 basis points and matures in April 2030.

On March 20, 2020, the Company obtained $ 30.0 million of debt secured by the non-recourse first mortgage on one community acquired from Healthpeak on January 31, 2020.

The loan bears interest at a variable rate equal to the 30-day LIBOR plus a margin of 250 basis points and matures in March 2022.

On March 31, 2020, the Company obtained $ 149.3 million of debt secured by the non-recourse first mortgages on 18 communities.

Of the total principal, $ 73.1 million bears interest at a fixed rate of 3.55 %, and the remaining $ 76.2 million bears interest at a variable rate equal to the 30-day LIBOR plus a margin of 210 basis points.

The debt matures in April 2030.

The $ 149.3 million of proceeds from the financing were primarily utilized to repay $ 136.3 million of outstanding mortgage debt maturing in 2020.

On August 31, 2020, the Company obtained $ 266.9 million of debt secured by the non-recourse first mortgages on 16 communities, most of which secured the credit facility prior to its termination.

Of the total principal, $ 191.3 million bears interest at a fixed rate of 2.89 %, and the remaining $ 75.6 million bears interest at a variable rate equal to the 30-day LIBOR plus a margin of 249 basis points.

The debt matures in September 2030.

The $ 266.9 million of proceeds from the financing

were primarily utilized to repay the outstanding principal amount under the Credit Agreement and to cash collateralize letters of credit.

On September 9, 2020, the Company obtained $ 220.5 million of debt secured by the non-recourse first mortgages on 27 communities.

Of the total principal, $ 156.5 million bears interest at a fixed rate of 3.18 %, and the remaining $ 64.0 million bears interest at a variable rate equal to the 30-day LIBOR plus a margin of 254 basis points.

The debt matures in October 2030.

The $ 220.5 million of proceeds from the financing were primarily utilized to repay outstanding mortgage debt maturing in 2020 and 2021.

2019 Financings

During the second quarter of 2019, the Company obtained $ 111.1 million of debt secured by the non-recourse first mortgages on 14 communities.

7 unchanged sentences

During the year ended December 31, 2019, the Company recorded $ 5.2 million of debt modification and extinguishment costs on the consolidated statement of operations, primarily related to third party fees directly related to debt modifications.

2018 Financings

During the second quarter of 2018, the Company obtained $ 247.6 million of debt secured by the non-recourse first mortgages on 11 communities.

Sixty percent of the principal amount bears interest at a fixed rate of 4.55 % , 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 189 basis points.

The debt matures in May 2028 .

The $ 247.6 million of proceeds from the financing were primarily utilized to fund the acquisition of five communities from Healthpeak and to repay $ 43.0 million of outstanding mortgage debt scheduled to mature in May 2018.

See Note 4 for more information regarding the acquisitions of communities from Healthpeak.

During the fourth quarter of 2018, the Company obtained $ 327.0 million of debt secured by the non-recourse first mortgages on 28 communities.

Sixty-five percent of the principal amount bears interest at a fixed rate of 5.08 % , and the remaining thirty-five percent of the principal amount bears interest at a variable rate equal to the 30-day LIBOR plus a margin of 216 basis points.

The debt matures in December 2028 .

The $ 327.0 million of proceeds from the financing were utilized to repay $ 60.4 million of outstanding mortgage debt scheduled to mature on January 1, 2019.

During the fourth quarter of 2018, the Company repaid $ 307.4 million of outstanding principal balance on 11 existing loan portfolios.

The Company repaid $ 171.4 million to facilitate the sale of communities classified as assets held for sale and the remaining repayments were primarily to facilitate the release of communities from their existing loan portfolios so that they could be added to the collateral pool for the Company's credit facility which was refinanced in December 2018.

During the year ended December 31, 2018, the Company recorded $ 11.7 million of debt modification and extinguishment costs on the consolidated statement of operations, primarily related to third party fees directly related to debt modifications.

Convertible Debt

In June 2011, the Company completed a registered offering of $ 316.3 million aggregate principal amount of 2.75 % convertible senior notes due June 15, 2018 (the "Notes").

The Company repaid $ 316.3 million in cash to settle the Notes at their maturity on June 15, 2018 .

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.

Certain of the Company's debt documents contain restrictions and financial covenants, such as those requiring the Company to maintain prescribed minimum liquidity, 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 and maintain insurance coverage.

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 or 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 December 31, 2019 , the Company is in compliance with the financial covenants of its outstanding debt agreements.

Accrued Expenses

Accrued expenses consist of the following:

As of December 31,

(in thousands)

Salaries and wages

Insurance reserves

Real estate taxes

Accrued utilities

Taxes payable

As of December 31, 2020, the Company is in compliance with the financial covenants of its debt agreements.

As of December 31, 2020, the Company operated 301 communities under long-term leases ( 235 operating leases and 66 financing leases).

9 unchanged sentences

Generally, renewal or extension options are not included in the lease term for accounting purposes.

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 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 liquidity, net worth, and stockholders' equity levels and lease coverage 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 and maintain insurance coverage.

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 lease documents contain cross-default provisions so that a default under one of these instruments could cause a default under other lease and debt documents (including documents with other lenders and lessors).

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.

1 unchanged sentence

As of December 31, 2020, 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 consolidated statements of operations) and cash flows from leasing transactions is as follows:

A summary of operating and financing lease expense (including the respective presentation on the consolidated statements of operations) and net cash paid from leasing transactions is as follows:

Years Ended December 31,

Operating Leases (in thousands)

December 31, 2019

Facility operating expense $ 19,241 $ 18,677

2 unchanged sentences

Operating lease expense adjustment (1)

136,276 19,453

Changes in operating lease assets and liabilities for lessor capital expenditure reimbursements ( 22,242 ) ( 31,305 )

Operating cash flows from operating leases $ 357,308 $ 276,491

Non-cash recognition of right-of-use assets obtained in exchange for new operating lease obligations

(1) Represents the difference between cash paid and expense recognized.

See Note 2 for the Company's accounting policy on the recognition of lease expense.

(1) Represents the difference between the amount of cash operating lease payments and the amount of operating lease expense recognized in accordance with ASC 842.

Operating cash flows from operating leases for the year ended December 31, 2020 includes the $ 119.2 million one-time cash lease payment made to Ventas in connection with the Company's lease restructuring transaction effective July 26, 2020.

Years Ended December 31,

Financing Leases (in thousands)

December 31, 2019

Depreciation and amortization $ 32,647 $ 46,646

7 unchanged sentences

A summary of facility lease expense and the impact of operating lease expense adjustment, under ASC 840, and deferred gains are as follows:

For the Years Ended December 31,

(in thousands)

(in thousands) Year Ended December 31, 2018

Cash basis payment - operating leases $ 324,870

3 unchanged sentences

As of December 31, 2020, the weighted average discount rate of the Company's operating and financing leases was 7.2 % and 8.0 %, 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 (the date of the adoption of ASC 842) 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 consolidated balance sheet as of December 31, 2020 are as follows (in thousands):

Year Ending December 31,

Operating Leases

Financing Leases

Year Ending December 31, Operating Leases Financing Leases

2021 $ 209,787 $ 64,914

2022 192,771 65,521

2023 192,381 66,250

2024 191,991 67,460

2025 189,961 57,499

Thereafter 280,233 109,590

Total lease payments 1,257,124 431,234

2 unchanged sentences

Total lease obligations $ 965,655 $ 563,307

The aggregate amounts of future minimum operating lease payments, including community, office, and equipment leases, not recognized on the consolidated balance sheet under ASC 840 as of December 31, 2018 are as follows (in thousands):

Year Ending December 31,

Operating Leases

Total lease payments

Supplemental Balance Sheet Information

Accrued expenses reflected within current liabilities on the Company’s consolidated balance sheets consist of the following:

As of December 31,

(in thousands) 2020 2019

Salaries and wages $ 65,310 $ 86,476

Insurance reserves 64,633 63,230

Paid time off 37,848 37,415

Deferred payroll taxes (Note 3)

Real estate taxes 25,495 25,979

Interest 11,453 16,196

Accrued utilities 7,507 7,601

Taxes payable 3,806 1,360

Other 35,463 28,446

Total $ 287,851 $ 266,703

Other assets, net reflected on the Company's consolidated balance sheets consist of the following:

As of December 31,

(in thousands) 2020 2019

Health care licenses (1)

$ 34,060 $ 35,198

Lease security deposit 3,180 49,102

Other 19,019 34,431

Total $ 56,259 $ 118,731

(1) Health care licenses are indefinite-lived intangible assets and are not subject to amortization.

Investment in Unconsolidated Ventures

As of December 31, 2019, the Company held a 51 % equity interest, and Healthpeak owned a 49 % interest, in the CCRC Venture, which owned and operated 16 entry fee CCRCs.

The Company's ownership interests in the CCRC Venture were accounted for under the equity method of accounting.

Refer to Note 4 for information on the Company's sale of the equity interest in the CCRC Venture on January 31, 2020 and movement of the remaining two entry fee CCRCs into a new unconsolidated venture.

As a result of the recognition of the Company’s investment basis at the carrying amounts of the net assets contributed upon formation of the CCRC Venture and subsequent cash distributions, the Company's carrying amount of its equity method investment in the CCRC Venture property company was reduced below zero and the Company had recorded a $ 66.2 million equity method liability within other liabilities within the consolidated balance sheet as of December 31, 2019.

As of December 31, 2020, other liabilities within the consolidated balance sheet included a $ 10.1 million equity method liability for the new unconsolidated venture which owns the remaining two entry fee CCRCs.

Commitments and Contingencies

The Company has been and is currently involved in litigation and claims incidental to the conduct of its business, which it believes are generally comparable to other companies in the senior living and healthcare industries, including, but not limited to, putative class action claims from time to time regarding staffing at the Company’s communities and compliance with consumer protection laws and the Americans with Disabilities Act.

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, professional liability, and other insurance policies in amounts and with coverage and deductibles the Company believes are appropriate, based on the nature and risks of its business, historical experience, availability, and industry standards.

The Company's current policies provide for deductibles for each claim and contain various exclusions from coverage.

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 and/or exceed the policy limits.

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.

In June 2020, the Company and several current and former executive officers were named as defendants in a putative class action lawsuit alleging violations of the federal securities laws filed in the federal court for the Middle District of Tennessee.

The lawsuit asserts that the defendants made material misstatements and omissions concerning the Company's business, operational and compliance policies that caused the Company's stock price to be artificially inflated between August 2016 and April 2020.

While the Company cannot predict with certainty the result of this or any other legal proceedings, the Company believes the allegations in the suit are without merit and does not expect this matter to have a material adverse effect on the Company's financial condition, results of operations, or cash flows.

In October 2020, an alleged stockholder of the Company filed a stockholder derivative lawsuit in the federal court for the Middle District of Tennessee, asserting claims on behalf of the Company against certain current and former officers and directors for alleged breaches of duties owed to the Company.

The complaint refers to the securities lawsuit described above and incorporates substantively similar allegations.

The Company has employment or letter agreements with certain officers of the Company and has adopted policies to which certain officers of the Company are eligible to participate, which grant these employees the right to receive a portion or multiple of their base salary, pro-rata bonus, bonus, and/or continuation of certain benefits, for a defined period of time, in the event of certain terminations of the officers' employment, as described in those agreements and policies.

Self-Insurance

1 unchanged sentence

Losses related to deductible amounts are accrued based on the Company's estimate of expected losses plus incurred but not reported claims.

As of December 31, 2019 and 2018 , the Company accrued reserves of $ 155.8 million and $ 155.6 million , respectively, for these programs, of which $ 92.5 million and $ 94.5 million is classified as long-term liabilities as of December 31, 2019 and 2018 , respectively.

As of December 31, 2020 and 2019, the Company accrued reserves of $ 153.0 million and $ 155.8 million, respectively, under the Company's insurance programs, of which $ 88.4 million and $ 92.5 million is classified as long-term liabilities as of December 31, 2020 and 2019, respectively.

As of December 31, 2020 and 2019, the Company accrued $ 18.0 million and $ 22.7 million, respectively, of estimated amounts receivable from the insurance companies under these insurance programs.

During the years ended December 31, 2019 , 2018 , and 2017 , the Company reduced its estimate of the amount of accrued liabilities for these programs based on recent claims experience.

The reduction in these accrued reserves decreased operating expenses by $ 11.3 million , $ 14.6 million , and $ 9.9 million , for the years ended December 31, 2019 , 2018 , and 2017 , respectively.

The Company has secured self-insured retention risk under workers' compensation programs with restricted cash deposits of $ 21.9 million and $ 24.0 million as of December 31, 2020 and 2019, respectively.

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In addition, the Company also had deposits of $ 7.7 million and $ 12.3 million, as of December 31, 2020 and 2019, respectively, to fund claims paid under a high deductible, collateralized insurance policy.

Retirement Plans

The Company maintains a 401(k) retirement savings plan for all employees that meet minimum employment criteria.

Such plan provides that the participants may defer eligible compensation subject to certain Internal Revenue Code maximum amounts.

The Company makes matching contributions in amounts equal to 25.0 % of the employee's contribution to such plan, for contributions up to a maximum of 4.0 % of compensation.

An additional matching contribution of 12.5 % , subject to the same limit on compensation, may be made at the discretion of the Company based upon the Company's performance.

For the years ended December 31, 2019 , 2018 , and 2017 , the Company's expense for such plan was $ 8.0 million , $ 8.3 million , and $ 10.1 million , respectively.

Effective December 31, 2020, the Company began using its wholly-owned captive insurance company for the purpose of insuring certain portions of its risk retention under its general and professional liability insurance programs.

Stock-Based Compensation

The following table sets forth information about the Company's restricted stock awards (excluding restricted stock units):

(share amounts in thousands, except value per share)

Number of Shares

The following table sets forth information about the Company's restricted stock awards and restricted stock units:

(in thousands, except value per share and unit) Number of Restricted Stock Units and Stock Awards Weighted

Grant Date Fair Value

Outstanding on January 1, 2018 4,770 17.13

Granted 3,880 9.39

Vested ( 1,579 ) 19.12

Cancelled/forfeited ( 1,315 ) 13.19

Outstanding on December 31, 2018 5,756 11.78

Granted 4,381 7.81

Vested ( 1,571 ) 13.71

Cancelled/forfeited ( 1,314 ) 11.18

Outstanding on December 31, 2019 7,252 9.08

Granted 4,603 6.92

Vested ( 2,073 ) 10.19

Cancelled/forfeited ( 1,277 ) 8.83

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That cost is expected to be recognized over a weighted average period of 2.4 years and is based on grant date fair value.

During 2019 , grants of restricted shares under the Company's 2014 Omnibus Incentive Plan were as follows:

(share amounts in thousands, except value per share)

Shares Granted

Value Per Share

During 2020, grants of restricted stock units and stock awards under the Company's 2014 Omnibus Incentive Plan were as follows:

(in thousands, except for per share and unit amounts) Restricted Stock Unit and Stock Award Grants Weighted Average Grant Date Fair Value Total Grant Date Fair Value

Three months ended March 31, 2020 4,438 $ 7.06 $ 31,341

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The Company reserved 1,800,000 shares of common stock for issuance under the plan.

The impact on the Company's consolidated financial statements is not material.

Earnings Per Share

Basic earnings per share ("EPS") is calculated by dividing net income (loss) 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.

Potentially dilutive common stock equivalents include unvested restricted stock, restricted stock units, and convertible debt instruments and warrants.

The following table summarizes the computation of basic and diluted earnings (loss) per share amounts presented in the consolidated financial statements.

Years Ended December 31,

(in thousands, except for per share amounts) 2020 2019 2018

Income attributable to common stockholders:

Net income (loss) $ 82,019 $ ( 267,931 ) $ ( 528,258 )

Weighted average shares outstanding - basic 183,498 185,907 187,468

Effect of dilutive securities - Unvested restricted stock, restricted stock units, and warrants 888 — —

Weighted average shares outstanding - diluted 184,386 185,907 187,468

Basic earnings (loss) per common share:

Net income (loss) per share attributable to common stockholders $ 0.45 $ ( 1.44 ) $ ( 2.82 )

Diluted earnings (loss) per common share:

Net income (loss) per share attributable to common stockholders $ 0.44 $ ( 1.44 ) $ ( 2.82 )

For the purposes of computing diluted EPS, weighted average shares outstanding do not include potentially dilutive securities that are anti-dilutive under the treasury stock method and performance-based equity awards are included based on the attainment of the applicable performance metrics as of the end of the reporting period.

The following potentially dilutive securities were excluded from the computation of diluted EPS:

Years Ended December 31,

(in millions) 2020 2019 (1)

Non-performance-based restricted stock and restricted stock units 6.8 6.4 5.6

Performance-based restricted stock and restricted stock units 1.6 1.1 0.8

(1) As a result of the net loss reported for the period, all unvested restricted stock, restricted stock units, convertible debt instruments, and potential shares issuable under warrants were antidilutive for the period and as such were not included in the computation of diluted weighted average shares outstanding.

(2) The option to exercise the warrants to acquire the Company's common stock outstanding at December 31, 2018 expired unexercised in 2019.

For the year ended December 31, 2018, the calculation of diluted weighted average shares outstanding 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.

Share Repurchase Program

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Shares of stock repurchased under the program will be held as treasury shares.

During the year ended December 31, 2019 , the Company repurchased 3,005,554 shares at an average price paid per share of $ 6.56 , for an aggregate purchase price of approximately $ 19.7 million .

During the year ended December 31, 2018 , the Company repurchased 1,280,802 shares at an average price paid per share of $ 6.64 , for an aggregate purchase price of approximately $ 8.5 million .

No shares were purchased pursuant to this authorization during the year ended December 31, 2017 .

As a precautionary measure in light of the COVID-19 pandemic, the Company temporarily suspended purchases under the share repurchase plan in March 2020.

Repurchases under the share repurchase program were as follows:

For the Years Ended December 31,

(amounts in thousands, except per share amounts) 2020 2019 2018

Total number of shares repurchased 3,063 3,005 1,281

Average price paid per share $ 5.92 $ 6.56 $ 6.64

Aggregate purchase price $ 18,123 $ 19,710 $ 8,500

As of December 31, 2020, approximately $ 44.0 million remains available under the share repurchase program.

Retirement Plans

The Company maintains a 401(k) retirement savings plan for all employees that meet minimum employment criteria.

Such plan provides that the participants may defer eligible compensation subject to certain Internal Revenue Code maximum amounts.

The Company makes matching contributions in amounts equal to 25.0 % of the employee's contribution to such plan, for contributions up to a maximum of 4.0 % of compensation.

An additional matching contribution of 12.5 %, subject to the same limit on compensation, may be made at the discretion of the Company based upon the Company's performance.

For the years ended December 31, 2020, 2019, and 2018, the Company's expense for such plan was $ 6.2 million, $ 8.0 million, and $ 8.3 million, respectively.

The benefit (provision) for income taxes is comprised of the following:

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(in thousands) 2020 2019 2018

Current $ 55 $ 64 $ ( 113 )

Deferred 5,840 2,654 52,367

Total federal 5,895 2,718 52,254

Current ( 11,247 ) ( 449 ) ( 2,798 )

Deferred (included in federal above) — — —

Total state ( 11,247 ) ( 449 ) ( 2,798 )

Total $ ( 5,352 ) $ 2,269 $ 49,456

A reconciliation of the benefit (provision) for income taxes to the amount computed at the U.S.

Federal statutory rate of 21 % for the years ended December 31, 2019 and 2018 and 35 % for the year ended December 31, 2017, is as follows:

Federal statutory rate of 21 % is as follows:

For the Years Ended December 31,

(in thousands) 2020 2019 2018

Tax benefit at U.S.

Tax benefit (provision) at U.S.

statutory rate $ ( 18,348 ) $ 56,742 $ 121,320

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Goodwill impairment — — ( 88,265 )

Impact of the Tax Act

Impact of the Tax Cuts and Jobs Act — — ( 6,042 )

Stock compensation ( 2,118 ) ( 2,639 ) ( 4,717 )

Meals and entertainment ( 169 ) ( 416 ) ( 493 )

Tax credits — ( 106 ) 688

Other ( 721 ) ( 1,359 ) ( 324 )

Total $ ( 5,352 ) $ 2,269 $ 49,456

Significant components of the Company's deferred tax assets and liabilities are as follows:

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Deferred income tax assets:

Financing lease obligations

Operating lease obligations $ 322,122 $ 406,172

Financing lease obligations 90,011 156,913

Operating loss carryforwards 237,728 330,983

Deferred lease liability

Accrued expenses 96,410 54,154

Capital loss carryforward

Intangible assets 60,069 11,160

Tax credits 50,356 50,356

Investment in unconsolidated ventures 5,105 —

Capital loss carryforward 2,263 40,723

Other 8,561 8,098

Total gross deferred income tax asset 872,625 1,058,559

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Deferred income tax liabilities:

Property, plant and equipment

Operating lease right-of-use assets ( 277,489 ) ( 328,100 )

Property, plant and equipment ( 223,703 ) ( 303,853 )

Investment in unconsolidated ventures — ( 33,100 )

Total gross deferred income tax liability ( 501,192 ) ( 665,053 )

Net deferred tax liability

On December 22, 2017, the President signed into law the Tax Cuts and Jobs Act ("Tax Act").

The Tax Act reformed the United States corporate income tax code, including a reduction to the federal corporate income tax rate from 35 % to 21 % effective January 1, 2018.

The Tax Act also eliminated alternative minimum tax ("AMT") and the 20-year carryforward limitation for net operating losses incurred after December 31, 2017, and imposes a limit on the usage of net operating losses incurred after such date equal to 80% of taxable income in any given year.

The 80% usage limit will not have an economic impact on the Company until its current net operating losses are either utilized or expired.

In addition, 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 elected the real property trade or business exception with the 2018 tax return.

As such, the Company will be 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.

A summary of the effect of the Tax Act is as follows:

(in thousands)

For the Year Ended December 31, 2017

Rate change - decrease in net deferred tax assets

Rate change - decrease in valuation allowance

Impact on net operating loss usage

Reduction of deferred tax asset - AMT credits

Total impact of the Tax Act on the Company's deferred taxes position

Realization of AMT credits

Net impact of the Tax Act on the Company's effective tax rate

As of both December 31, 2019 and 2018 , the Company had federal net operating loss carryforwards generated in 2017 and prior of approximately $ 1.2 billion which are available to offset future taxable income from 2020 through 2037 .

Net deferred tax asset (liability) $ ( 9,557 ) $ ( 15,397 )

As of December 31, 2020 and 2019, the Company had federal net operating loss carryforwards generated in 2017 and prior of approximately $ 812.0 million and $ 1.2 billion, respectively which are available to offset future taxable income from 2021 through 2037.

Additionally, as of December 31, 2020 and 2019, the Company had federal net operating loss carryforwards generated after 2017 of $ 181.1 million and $ 174.9 million, respectively, which have an indefinite life, but with usage limited to 80% of taxable income in any given year.

The Company had capital loss carryforwards of $ 161.6 million as of December 31, 2019 , which is available to offset future capital gains through 2023 .

The Company had state capital loss carryforwards as of December 31, 2020, which are available to offset future capital gains through 2023.

The Company determined that a valuation allowance was required after consideration of the Company's estimated future reversal of existing timing differences as of December 31, 2020 and 2019.

The Company does not consider estimates of future taxable income in its determination due to the existence of cumulative historical operating losses.

For the year ended December 31, 2019 , the Company recorded a provision of approximately $ 60.4 million from operations to reflect the required valuation allowance of $ 408.9 million as of December 31, 2019 .

For the year ended December 31, 2020, the Company recorded a reduction of approximately $ 27.9 million to reflect the required valuation allowance of $ 381.0 million as of December 31, 2020.

A summary of the change in the Company's valuation allowance is as follows:

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(in thousands) 2020 2019

Increase in valuation allowance before consideration of the Tax Act

Increase (decrease) before consideration of adoption of ASC 842 $ ( 27,913 ) $ 60,376

Increase due to the adoption of ASC 842 — 13,790

Other decrease during the year — ( 1,680 )

Total increase (decrease) in valuation allowance before consideration of the Tax Act

Impact of the Tax Act on net operating loss usage

Total increase (decrease) in valuation allowance $ ( 27,913 ) $ 72,486

The Company has recorded valuation allowances of $ 318.4 million and $ 245.3 million as of December 31, 2019 and 2018 , respectively, against its federal and state net operating losses.

The Company has recorded a valuation allowance against its capital loss carryforward of $ 40.7 million and $ 41.4 million as of December 31, 2019 and 2018 , respectively.

In accordance with ASC 740, Income Taxes , the Company has not considered the impact of the multi-part transaction with Healthpeak, including the sale of the Company's equity interest in the CCRC Venture, when determining the amount of valuation allowance to record against its net operating losses and capital loss carryforward as of December 31, 2019 .

The Company anticipates that the sale of its CCRC Venture will utilize all or a portion of the capital loss carryforward and a portion of its net operating losses.

The Company has recorded valuation allowances of $ 328.4 million and $ 318.4 million against its federal and state net operating losses as of December 31, 2020 and 2019, respectively.

The Company has recorded a valuation allowance against its state capital loss carryforward of $ 2.3 million as of December 31, 2020.

The Company had recorded a valuation allowance against its federal and state capital loss carryforwards of $ 40.7 million as of December 31, 2019.

The Company's sale of its ownership interest in the CCRC Venture in 2020 utilized all of the capital loss carryforward for federal tax purposes and a portion of its net operating losses.

The Company recorded a decrease in the valuation allowance of $ 117.6 million for the year ended December 31, 2020 as a result of the Healthpeak transaction.

The Company also recorded a valuation allowance against federal and state credits of $ 50.3 million as of both December 31, 2020 and 2019.

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(in thousands) 2020 2019

Balance at January 1,

Balance at beginning of period $ 18,326 $ 18,507

Additions for tax positions related to the current year — —

Reductions for tax positions related to prior years

Balance at December 31,

Additions (reductions) for tax positions related to prior years 59 ( 181 )

Balance at end of period $ 18,385 $ 18,326

Supplemental Disclosure of Cash Flow Information

(in thousands)

For the Years Ended December 31,

(in thousands) For the Years Ended December 31,

Supplemental Disclosure of Cash Flow Information:

2020 2019 2018

Interest paid $ 204,696 $ 244,469 $ 260,706

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Net cash paid $ 185,871 $ 304,092 $ 225,473

Acquisition of assets, net of related payables and cash received:

Acquisition of communities from Healthpeak:

Property, plant and equipment and leasehold intangibles, net $ 286,734 $ — $ —

Operating lease right-of-use assets ( 63,285 ) — —

Financing lease obligations 129,196 — —

Operating lease obligations 74,335 — —

Loss (gain) on debt modification and extinguishment, net ( 19,731 ) — —

Net cash paid $ 407,249 $ — $ —

Master Agreement with Ventas:

Property, plant and equipment and leasehold intangibles, net $ ( 66,444 ) $ — $ —

Operating lease right-of-use assets ( 153,213 ) — —

Other assets, net ( 42,354 ) — —

Long-term debt 34,053 — —

Financing lease obligations 7,077 — —

Operating lease obligations 362,944 — —

Additional paid-in-capital ( 22,883 ) — —

Net cash paid $ 119,180 $ — $ —

For the Years Ended December 31,

2020 2019 2018

Acquisition of other assets, net of related payables and cash received:

Property, plant and equipment and leasehold intangibles, net $ 684 $ 44 $ 237,563

Other intangible assets, net — 453 ( 4,345 )

2 unchanged sentences

Net cash paid $ 64,944 $ 497 $ 271,771

Proceeds from sale of assets, net:

Proceeds from sale of CCRC Venture, net:

Investments in unconsolidated ventures $ ( 14,848 ) $ — $ —

Current portion of long-term debt 34,706 — —

Other liabilities 60,748 — —

Loss (gain) on sale of assets, net ( 369,831 ) — —

Net cash received $ ( 289,225 ) $ — $ —

Proceeds from sale of other assets, net:

Prepaid expenses and other assets, net $ ( 1,318 ) $ ( 4,422 ) $ ( 4,950 )

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Investments in unconsolidated ventures — ( 156 ) ( 58,179 )

Long-term debt

Financing lease obligations — — 93,514

2 unchanged sentences

Loss (gain) on sale of assets, net ( 4,701 ) ( 7,245 ) ( 249,754 )

Loss (gain) on facility lease termination and modification, net

Net cash received $ ( 42,091 ) $ ( 92,735 ) $ ( 499,807 )

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Net cash paid (1)

Formation of the Blackstone Venture:

Prepaid expenses and other assets

Property, plant and equipment and leasehold intangibles, net

Investments in unconsolidated ventures

Financing lease obligations

Deferred liabilities

Other liabilities

Net cash paid

$ — $ — $ 67,188

Supplemental Schedule of Non-cash Operating, Investing and Financing Activities:

2 unchanged sentences

Accounts payable — — ( 4,244 )

Net $ — $ — $ —

Assets designated as held for sale:

2 unchanged sentences

Property, plant and equipment and leasehold intangibles, net ( 7,935 ) ( 28,608 ) ( 197,928 )

Lease termination and modification, net:

Prepaid expenses and other assets, net

Net $ — $ — $ —

Healthpeak master lease modification:

Property, plant and equipment and leasehold intangibles, net $ ( 57,462 ) $ — $ —

Operating lease right-of-use assets 88,044 — —

Financing lease obligations 70,874 — —

Operating lease obligations ( 101,456 ) — —

Net $ — $ — $ —

Other non-cash lease transactions, net:

Prepaid expenses and other assets, net $ — $ ( 636 ) $ ( 248 )

Property, plant and equipment and leasehold intangibles, net 10,707 ( 1,963 ) ( 132,733 )

Operating lease right-of-use assets ( 7,941 ) 18,148 —

Operating lease obligations 15,126 ( 18,206 ) —

Financing lease obligations ( 15,483 ) — 165,918

Deferred liabilities — — ( 122,304 )

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Loss (gain) on facility lease termination and modification, net ( 2,332 ) 3,388 127,718

Net $ — $ — $ —

(1) The net cash paid to terminate community leases is presented within the consolidated statements of cash flows based upon the lease classification of the terminated leases.

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At the closing of the sale of a senior housing community during 2019 by the consolidated venture, the consolidated venture distributed $ 6.3 million to the partners with the Company receiving a $ 3.1 million repayment on the promissory note in a non-cash exchange.

Refer to Note 2 for a schedule of the non-cash adjustments to the Company's consolidated balance sheet as of January 1, 2019 as a result of the adoption of new accounting standards and Note 11 for a schedule of the non-cash recognition of right-of-use assets obtained in exchange for new operating lease obligations.

Restricted cash consists principally of escrow deposits for real estate taxes, property insurance, and capital expenditures required by certain lenders under mortgage debt agreements and deposits as security for self-insured retention risk under workers' compensation programs and property insurance programs.

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the consolidated statement of cash flows that sums to the total of the same such amounts shown in the consolidated statement of cash flows.

Refer to Note 2 for a schedule of the non-cash adjustments to the Company's consolidated balance sheet as of January 1, 2019 as a result of the adoption of new accounting standards.

Restricted cash consists principally of escrow deposits for real estate taxes, property insurance, and capital expenditures, debt service reserve accounts required by certain lenders under mortgage debt agreements, and deposits as security for self-insured retention risk under workers' compensation programs and property insurance programs.

The components of restricted cash are as follows:

(in thousands) 2020 2019

December 31, 2019

December 31, 2018

Real estate tax and property insurance escrows $ 17,465 $ 16,299

Replacement reserve escrows 9,465 9,071

Resident deposits 253 475

Other 876 1,011

Subtotal 28,059 26,856

Insurance deposits 21,903 23,692

Debt service reserve 17,784 281

CCRCs escrows 15,329 10,641

Letters of credit collateral 1,653 —

Subtotal 56,669 34,614

Total $ 84,728 $ 61,470

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the consolidated balance sheets that sums to the total of the same such amounts shown in the consolidated statements of cash flows.

(in thousands) 2020 2019

Reconciliation of cash, cash equivalents, and restricted cash:

2 unchanged sentences

Long-term restricted cash 56,669 34,614

Total cash, cash equivalents, and restricted cash shown in the consolidated statements of cash flows

Commitments and Contingencies

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.

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.

Resident fee revenue by payor source and reportable segment is as follows:

Year Ended December 31, 2019

(in thousands)

Independent Living

Assisted Living and Memory Care

Health Care Services

Government reimbursement

Other third-party payor programs

Total resident fee revenue

Year Ended December 31, 2018

(in thousands)

Independent Living

Assisted Living and Memory Care

Health Care Services

Government reimbursement

Other third-party payor programs

Total resident fee revenue

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

The payment terms and conditions within the Company's revenue-generating contracts vary by contract type and payor source, although terms generally include payment to be made within 30 days.

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 healthcare 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 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 consolidated balance sheets) of $ 72.5 million and $ 106.4 million , including $ 38.9 million and $ 50.6 million of monthly resident fees billed and received in advance, as of December 31, 2019 and 2018 , respectively.

For the years ended December 31, 2019 and 2018 , the Company recognized $ 94.6 million and $ 82.1 million , respectively, of revenue that was included in the deferred revenue balance as of January 1, 2019 and 2018, respectively.

The Company applies the practical expedient in ASC 606-10-50-14 and does not disclose amounts for remaining performance obligations that have original expected durations of one year or less.

For the years ended December 31, 2019 and 2018 , the Company recognized $ 15.2 million and $ 17.6 million , respectively, of charges within facility operating expense within the consolidated statements of operations for additions to the allowance for credit losses.

Total cash, cash equivalents, and restricted cash $ 465,148 $ 301,697

Segment Information

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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 broad continuum of senior independent and assisted living services.

The Company's Independent Living segment includes owned or leased communities are primarily designed for middle to upper income seniors who desire to live in a residential setting that feels like home, without the efforts of ownership.

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 ADLs 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's Assisted Living and Memory Care segment includes owned or leased communities that offer housing and 24-hour assistance with ADLs for mid-acuity and frail elderly residents.

The Company's assisted living and memory care communities include both freestanding, multi-story communities, as well as smaller, 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 disease and other dementias.

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 services.

The Company's CCRCs segment includes large owned or leased communities that offer a variety of living arrangements and services to accommodate a broad spectrum of physical ability and healthcare needs.

Most of the Company's

CCRCs have independent living, assisted living, memory care, and skilled nursing available on one campus or within the immediate area.

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 Company's Health Care Services segment includes the home health, hospice, and outpatient therapy services provided to residents of many of its communities and to seniors living outside its 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.

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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.

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.

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.

2 unchanged sentences

(in thousands) 2020 2019 2018

Revenue and other operating income:

Independent Living (1)(2)

$ 524,421 $ 544,558 $ 599,977

Assisted Living and Memory Care (1)(2)

1,753,861 1,815,938 1,995,851

340,337 402,175 416,408

Health Care Services (1)(2)

389,697 447,260 436,975

Management Services (3)

Total revenue

531,879 847,157 1,082,215

Total revenue and other operating income $ 3,540,195 $ 4,057,088 $ 4,531,426

Segment operating income:

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Assisted Living and Memory Care 428,601 518,636 628,982

CCRCs 53,180 72,072 92,212

Health Care Services 1,863 24,987 34,080

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General and administrative (including non-cash stock-based compensation expense) 206,575 219,289 259,475

Facility lease expense:

Facility operating lease expense:

Independent Living 60,445 81,680 93,496

Assisted Living and Memory Care 137,900 157,823 178,716

CCRCs 20,406 24,248 24,856

Corporate and Management Services 5,282 5,915 6,226

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Assisted Living and Memory Care 224,790 222,574 261,365

CCRCs 38,426 44,163 53,551

Health Care Services 749 2,247 3,201

Corporate and Management Services 24,458 28,704 37,439

Goodwill and asset impairment:

For the Years Ended December 31,

(in thousands) 2020 2019 2018

Asset impairment:

Independent Living 31,317 1,812 2,013

Assisted Living and Memory Care 61,640 32,229 436,892

CCRCs 12,413 4,983 6,669

Health Care Services — 7,578 9,055

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Assisted Living and Memory Care 134,015 166,097 174,459

Health Care Services

CCRCs 19,928 27,426 26,746

Corporate and Management Services 10,154 8,105 20,281

$ 208,779 $ 248,341 $ 280,269

Total capital expenditures for property, plant and equipment, and leasehold intangibles:

1 unchanged sentence

Assisted Living and Memory Care 90,354 157,845 125,750

CCRCs 18,709 33,535 26,615

Health Care Services 515 484 902

Corporate and Management Services 23,638 24,506 16,033

$ 181,105 $ 295,201 $ 220,810

As of December 31,

3 unchanged sentences

Assisted Living and Memory Care 3,787,611 4,157,610

CCRCs 738,121 742,809

Health Care Services 233,178 256,715

Corporate and Management Services 723,010 595,647

Total assets $ 6,901,758 $ 7,194,433

(1) All revenue is earned from external third parties in the United States.

(2) The Independent Living, Assisted Living and Memory Care, CCRCs, and Health Care Services segments include $ 11.8 million, $ 62.6 million, $ 18.5 million, and $ 22.9 million, respectively, for the year ended December 31, 2020 of other operating income recognized for grants pursuant to the Provider Relief Fund described in Note 3 and other government sources.

Allocations to the applicable segment generally reflect the segment's receipt and acceptance of the amounts or the segment's proportional utilization of the grant.

(3) Management services segment revenue includes reimbursements for which the Company is the primary obligor of costs incurred on behalf of managed communities.

(4) Segment operating income is defined as segment revenues less segment facility operating expenses (excluding facility depreciation and amortization) and costs incurred on behalf of managed communities.

Quarterly Results of Operations (Unaudited)

The following is a summary of quarterly results of operations for each of the fiscal quarters in 2019 and 2018 :

For the Quarters Ended

(in thousands, except per share amounts)

September 30,

Goodwill and asset impairment

Loss (gain) on facility lease termination and modification, net

Income (loss) from operations

Gain (loss) on sale of assets, net

Income (loss) before income taxes

Net income (loss)

Net income (loss) attributable to Brookdale Senior Living Inc.

common stockholders

Weighted average basic and diluted income (loss) per share

For the Quarters Ended

(in thousands, except per share amounts)

September 30,

Goodwill and asset impairment

Loss (gain) on facility lease termination and modification, net

Income (loss) from operations

Gain (loss) on sale of assets, net

Income (loss) before income taxes

Net income (loss)

Net income (loss) attributable to Brookdale Senior Living Inc.

common stockholders

Weighted average basic and diluted income (loss) per share

Subsequent Events

On February 24, 2021, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with affiliates of HCA Healthcare, Inc., providing for the sale of 80 % of the Company’s equity in its Health Care Services segment for a purchase price of $ 400 million in cash, subject to certain adjustments set forth in the Purchase Agreement, including a reduction for the remaining outstanding balance as of the closing of Medicare advance payments and deferred payroll tax payments related to the Health Care Services segment, which were $ 75.2 million and $ 8.2 million, respectively, as of December 31, 2020.

The Purchase Agreement also contains certain agreed upon indemnities for the benefit of the purchaser.

The closing of the sale transaction is anticipated to occur in the late first half or early second half of 2021, subject to receipt of applicable regulatory approvals and satisfaction of other customary closing conditions set forth in the Purchase Agreement.

Pursuant to the Purchase Agreement, at closing of the transaction, the Company will retain a 20 % equity interest in the business.

There can be no assurance that the transaction will close or, if it does, when the actual closing will occur.

VALUATION AND QUALIFYING ACCOUNTS

1 unchanged sentence

(In thousands)

Accounts Receivable Allowance:

Year ended December 31, 2017

Year ended December 31, 2018 (1)

Year ended December 31, 2019

Description Balance at beginning of period Charged to costs and expenses Charged to other accounts Deductions Balance at end of period

Deferred Tax Valuation Allowance:

2 unchanged sentences

Year ended December 31, 2020 $ 408,903 $ ( 27,913 ) (4) $ — $ — $ 380,990

(1) As a result of the Company's adoption of ASC 606 as of January 1, 2018, the revenue and related estimated uncollectible amounts owed to us by third-party payors that were historically classified as an allowance for doubtful accounts are now considered a price concession in determining net resident fees.

Accordingly, the Company reports uncollectible balances due from third-party payors as a reduction of the transaction price and therefore, as a reduction in net resident fees.

Historically these amounts were classified as allowances for doubtful accounts and charged to facility operating expense within the Company's consolidated statements of operations.

This change in presentation resulted in a $ 13.3 million reduction in the balance as of the beginning of the period for the year ended December 31, 2018.

(2) Adjustment to valuation allowance for federal and state net operating losses of $ 294,568 partially offset by a reduction of $ 222,786 resulting from the Tax Act.

(3) Reduction of valuation allowance for federal and state net operating losses and federal credits of $ 5,919 partially offset by additional valuation allowance for federal credits of $ 207 and adjustments resulting from the Tax Act of $ 6,042 .

(4) Additional valuation allowance for federal and state net operating losses of $ 60,376 .

(5) Additional valuation allowance of $ 13,790 charged to accumulated deficit upon the adoption of ASC 842.

(1) Additional valuation allowance for the Tax Cuts and Jobs Act of $ 6,042 and federal credits of $ 207 , partially offset by reduction of valuation allowance for federal and state net operating losses and federal credits of $ 5,919 .

(2) Additional valuation allowance for federal and state net operating losses.

(3) Additional valuation allowance charged to accumulated deficit upon the adoption of ASC 842.

(4) Reduction of valuation allowance for federal and state net operating losses.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data