What changed in this filing

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Item 1. Financial Statements

2021-08-06 compared with 2021-05-07 · 158 added, 106 removed, 567 unchanged (32% of the section changed)

36 unchanged sentences

Total liabilities 5,986,814 6,099,029

Preferred stock, $ 0.01 par value, 50,000,000 shares authorized at March 31, 2021 and December 31, 2020;

Preferred stock, $ 0.01 par value, 50,000,000 shares authorized at June 30, 2021 and December 31, 2020;

no shares issued and outstanding

Common stock, $ 0.01 par value, 400,000,000 shares authorized at March 31, 2021 and December 31, 2020;

Common stock, $ 0.01 par value, 400,000,000 shares authorized at June 30, 2021 and December 31, 2020;

197,666,451 and 198,331,663 shares issued and 187,138,926 and 187,804,138 shares outstanding (including 1,907,463 and 4,349,421 unvested restricted shares), respectively

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Treasury stock, at cost;

10,527,525 shares at March 31, 2021 and December 31, 2020

10,527,525 shares at June 30, 2021 and December 31, 2020

( 102,774 ) ( 102,774 )

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Three Months Ended

June 30, Six Months Ended

2021 2020 2021 2020

Resident fees $ 673,978 $ 731,629 $ 1,338,328 $ 1,514,336

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Three Months Ended

June 30, Six Months Ended

2021 2020 2021 2020

Total equity, balance at beginning of period $ 695,107 $ 1,052,230 $ 802,729 $ 698,725

39 unchanged sentences

(Unaudited, in thousands)

Three Months Ended March 31,

Six Months Ended June 30,

Cash Flows from Operating Activities

5 unchanged sentences

Equity in (earnings) loss of unconsolidated ventures ( 13,415 ) 570

Distributions from unconsolidated ventures from cumulative share of net earnings 5,355 —

Amortization of entrance fees ( 876 ) ( 925 )

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Proceeds from sale of assets, net 9,646 300,539

Proceeds from notes receivable — 1,140

Net cash provided by (used in) investing activities ( 2,245 ) ( 295,410 )

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Payments of employee taxes for withheld shares ( 4,444 ) ( 3,951 )

Other 203 146

Net cash provided by (used in) financing activities ( 56,554 ) 306,524

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("Brookdale" or the "Company") is an operator of 685 senior living communities throughout the United States.

The Company is committed to providing senior living solutions primarily within properties that are designed, purpose-built, and operated to provide quality service, care, and living accommodations for residents.

The Company is committed to its mission of enriching the lives of the people it serves with compassion, respect, excellence, and integrity.

The Company operates and manages independent living, assisted living, memory care, and continuing care retirement communities ("CCRCs").

The Company also offers a range of home health, hospice, and outpatient therapy services to residents of many of its communities and to seniors living outside of its communities.

The Company's senior living communities and its comprehensive network of services help to provide seniors with care and services to support their lifestyle in an environment that feels like home.

The Company has five reportable segments:

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and Management Services.

The Company expects to sell 80 % of its equity in its Health Care Services segment, as described in Note 4.

On July 1, 2021, the Company sold 80 % of its equity in its Health Care Services segment, as described in Note 4.

The accompanying unaudited condensed consolidated financial statements include the financial position, results of operations, and cash flows of the Health Care Services segment.

For periods beginning July 1, 2021, the Company expects that the results and financial position of its Health Care Services segment will be deconsolidated from its consolidated financial statements and its 20 % equity interest in the Health Care Services venture will be accounted for under the equity method of accounting.

Summary of Significant Accounting Policies

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The Company, as lessee, recognizes a right-of-use asset and a lease liability on the Company's condensed consolidated balance sheet for its community, office, and equipment leases.

As of the commencement date of a lease, a lease liability and corresponding right-of-use asset is established on the Company's condensed consolidated balance sheet at the present value of future minimum lease payments.

As of the commencement date of a lease, a lease liability and corresponding right-of-use asset is established on the Company's condensed consolidated balance sheet at the present value of

future minimum lease payments.

The Company's community leases generally contain fixed annual rent escalators or annual rent escalators based on an index, such as the consumer price index.

The future minimum lease payments recognized on the condensed consolidated balance sheet include fixed payments (including in-substance fixed payments) and variable payments

estimated utilizing the index or rate on the lease commencement date.

The future minimum lease payments recognized on the condensed consolidated balance sheet include fixed payments (including in-substance fixed payments) and variable payments estimated utilizing the index or rate on the lease commencement date.

The Company recognizes lease expense as incurred for additional variable payments.

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COVID-19 Pandemic

The United States broadly continues to experience the COVID-19 pandemic, which has significantly disrupted, and likely will continue to significantly disrupt for some period, 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 health and wellbeing of the Company's residents, patients, and associates is and has been its highest priority as it continues to serve and care for seniors through the pandemic.

Community Restrictions .

To help protect the Company's residents, patients, and associates from contracting COVID-19, the Company imposed significant restrictions at its communities beginning in March 2020, including closing its communities to visitors and prospective residents, and in some cases restricting new resident move-ins, suspending group outings, modifying communal dining and programming to comply with social distancing and other regulatory 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 has adopted a framework for determining when to ease restrictions at each of its communities based on several criteria, including regulatory requirements and guidance, completion of baseline testing at the community, and the presence of current confirmed COVID-19 positive cases.

The Company may revert to more restrictive measures if the pandemic worsens, as necessary to comply with regulatory requirements, or at the direction of state or local health authorities.

As of April 30, 2021, 100 % of the Company's communities have opened for visitors and new prospects.

The COVID-19 pandemic has significantly disrupted the senior living industry and the Company's business.

The health and wellbeing of the Company's residents, patients, and associates is and has been its highest priority as it continues to serve and care for seniors through the COVID-19 pandemic.

During the second quarter of 2021 substantially all, and as of July 31, 2021 all, of the Company's communities were open for visitors, new resident move-ins, and prospective residents.

The Company may revert to more restrictive measures at its communities, including restrictions on visitors and move-ins, if the pandemic worsens, as necessary to comply with regulatory requirements, or at the direction of state or local health authorities.

Pandemic-Related Expenses .

The Company incurred $ 27.3 million of facility operating expense during the first quarter of 2021 for incremental direct costs to respond to the pandemic.

Such costs include those for:

acquisition of additional PPE, medical equipment, and cleaning and disposable food service supplies;

For the three and six months ended June 30, 2021, the Company recognized $ 9.7 million and $ 37.1 million, respectively, of facility operating expense for incremental direct costs to respond to the pandemic.

For the three and six months ended June 30, 2020, the Company recognized $ 60.6 million and $ 70.6 million, respectively, of such facility operating expense.

The direct costs include those for:

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

enhanced cleaning and environmental sanitation;

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

On a cumulative basis, the Company has incurred $ 152.9 million of pandemic related facility operating expense since the beginning of fiscal 2020.

The Company recorded non-cash impairment charges in its operating results of $ 9.0 million for the three months ended March 31, 2021, for its operating lease right-of-use assets, primarily due to the COVID-19 pandemic and lower than expected operating performance at communities with impaired assets.

As of March 31, 2021, the Company's total liquidity was $ 438.9 million, consisting of $ 304.0 million of unrestricted cash and cash equivalents and $ 134.9 million of marketable securities.

The Company's cash flows from operations, excluding management agreement termination fees and the impact of the Coronavirus Aid, Relief, and Economic Security Act of 2020 ("CARES Act") funding, have been insufficient to cover its operating expenses, capital expenditures, and required interest and lease payments during the pandemic.

However, the Company was able to satisfy its liquidity needs over such period utilizing a portion of its preexisting liquidity, together with CARES Act funding.

The Company currently estimates that its cash flows from operations, together with cash balances on hand, cash equivalents, marketable securities, and proceeds from the pending sale of 80 % of the equity in its Health Care Services segment will be sufficient to fund its liquidity needs for at least the next 12 months.

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

There is no assurance that debt financing will continue to be available on terms consistent with the Company's expectations or at all, that its 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, or that the closing of the pending transaction will be completed in accordance with the Company's expectations, or at all, or generate cash proceeds to the Company in the amount it anticipates.

On a cumulative basis through June 30, 2021, the Company has incurred $ 162.6 million of pandemic related facility operating expense since the beginning of fiscal 2020.

For the three and six months ended June 30, 2021, the Company recorded $ 1.5 million and $ 10.5 million, respectively, of non-cash impairment charges in its operating results for its operating lease right-of-use assets, primarily due to the COVID-19 pandemic and lower than expected operating performance at communities with impaired assets.

For the three and six months ended June 30, 2020, the Company recorded $ 6.6 million and $ 72.3 million, respectively, of such non-cash impairment charges.

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

As of June 30, 2021, the Company's total liquidity was $ 387.8 million, consisting of $ 280.7 million of unrestricted cash and cash equivalents, $ 100.0 million of marketable securities, and $ 7.1 million of availability on its secured credit facility.

As described in Note 4, the Company received net cash proceeds of $ 305.8 million at closing for the sale of 80 % of its equity in

its Health Care Services segment on July 1, 2021, which further enhanced its liquidity.

The Company continues to seek opportunities to enhance and preserve its liquidity, including through increasing occupancy and 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 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 its 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.

Financial 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 Coronavirus Aid, Relief, and Economic Security Act of 2020 ("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.

Certain impacts of such programs are provided below.

• During the first quarter of 2021, the Company accepted $ 0.8 million of cash from grants from the Public Health and Social Services Emergency Fund ("Provider Relief Fund") administered by the U.S.

• During the six months ended June 30, 2021, the Company accepted $ 0.8 million of cash from grants from the Public Health and Social Services Emergency Fund ("Provider Relief Fund") administered by the U.S.

Department of Health and Human Services ("HHS"), under which grants have been made available to eligible healthcare providers for healthcare related expenses or lost revenues attributable to COVID-19.

The grants represented incentive payments made pursuant to the Nursing Home Infection Control Distribution, which related to the Company's skilled nursing care provided through its CCRCs.

The grants received in the six months ended June 30, 2021 represented incentive payments made pursuant to the Nursing Home Infection Control Distribution, which related to the Company's skilled nursing care provided through its CCRCs.

HHS continues to evaluate future allocations under the Provider Relief Fund and the regulation and guidance regarding grants made under the Provider Relief Fund.

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There can be no assurance that the Company will qualify for, or receive, such future grants in the amount it expects, that additional restrictions on the permissible uses or terms and conditions of the grants will not be imposed by HHS, or that future funding programs will be made available for which it qualifies.

• During the year ended December 31, 2020, the Company received $ 87.5 million under the Accelerated and Advance Payment Program administered by CMS, $ 75.2 million of which related to its Health Care Services segment and $ 12.3 million related to its CCRCs segment.

Recoupment of advanced payments will begin one year after payments were issued 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 .

• During the year ended December 31, 2020, the Company received $ 87.5 million under the Accelerated and Advance Payment Program administered by the Centers for Medicare & Medicaid Services ("CMS"), $ 75.2 million of which related to its Health Care Services segment and $ 12.3 million related to its CCRCs segment and of which $ 85.0 million was received in the three and six months ended June 30, 2020.

Recoupment of advanced payments began one year after payments were issued 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 advanced payments will be due following such recoupment period.

Pursuant to the Purchase Agreement providing for the sale of 80 % of the Company's equity in its Health Care Services segment (as described below), its net cash proceeds at closing will include a reduction for the then outstanding balance of such advanced payments related to its Health Care Services segment.

• During fiscal 2020, the Company deferred payment of $ 72.7 million of the employer portion of social security payroll taxes incurred from March 27, 2020 through December 31, 2020 pursuant to the CARES Act.

During both the three and six months ended June 30, 2021, $ 14.3 million of the advanced payments were recouped.

Pursuant to the sale of 80 % of the Company's equity in its Health Care Services segment (as described in Note 4), $ 63.6 million of such obligations related to its Health Care Services segment were retained by the unconsolidated Health Care Services venture.

As of June 30, 2021, the outstanding balance of advanced payments related to its CCRCs segment was $ 9.7 million.

• During the year ended December 31, 2020, the Company deferred payment of $ 72.7 million of the employer portion of social security payroll taxes incurred from March 27, 2020 through December 31, 2020 pursuant to the CARES Act.

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

Pursuant to the Purchase Agreement providing for the sale of 80 % of the Company's equity in its Health Care Services segment, its net cash proceeds at closing will include a reduction for the $ 8.9 million of deferred payroll tax payments related to its Health Care Services segment.

Pursuant to the sale of 80 % the Company's equity in its Health Care Services segment, $ 8.9 million of such obligations related to its Health Care Services segment were retained by the unconsolidated Health Care Services venture.

The Company expects to pay approximately $ 32 million of the deferred payments in both December 2021 and 2022.

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The credit for 2020 is available to employers that fully or partially suspended operations during any calendar quarter in 2020 due to orders from an appropriate governmental authority limiting commerce, travel, or group meetings due to COVID-19, and is equal to 50 % of qualified wages paid after March 12, 2020 through December 31, 2020 to qualified employees, with a maximum credit of $ 5,000 per employee.

During the first quarter of 2021, the Company recognized $ 9.0 million of employee retention credits on wages paid from March 12, 2020 through September 30, 2020 within other operating income.

During the three and six months ended June 30, 2021, the Company recognized $ 0.9 million and $ 9.9 million, respectively, of employee retention credits on wages paid from March 12, 2020 to December 31, 2020 within other operating income.

The credit was modified and extended by subsequent legislation for wages paid from January 1, 2021 through December 31, 2021, and the Company is assessing its eligibility to claim such credit.

There can be no assurance that the Company will qualify for, or receive, credits in the amount or on the timing it expects.

In addition to the grants described above, during the three months ended March 31, 2021, the Company has received and recognized $ 0.9 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;

In addition to the grants described above, during the three and six months ended June 30, 2021, the Company received and recognized $ 0.4 million and $ 1.3 million, respectively, of other operating income from grants from other government sources.

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 or variants of the disease;

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

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

the impact of COVID-19 on the Company's ability to complete financings and refinancings of various assets, or other transactions (including dispositions and the pending sale of 80 % of the equity in the Company's Health Care Services segment) or to generate sufficient cash flow to cover required debt, interest, and lease payments and to satisfy financial and other covenants in its debt and lease documents;

potentially greater associate attrition and use of contract labor due to the Company's associate vaccine mandate;

the impact of COVID-19 on the Company's ability to complete financings and refinancings of various assets or other transactions or to generate sufficient cash flow to cover required debt, interest, and lease payments and to satisfy financial and other covenants in its debt and lease documents;

increased regulatory requirements, including unfunded, mandatory testing;

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Acquisitions, Dispositions and Other Transactions

During the period from January 1, 2020 through March 31, 2021, the Company acquired 27 communities that the Company formerly leased, disposed of eight owned communities (including the conveyance of five communities to Ventas, Inc.

During the period from January 1, 2020 through June 30, 2021, the Company acquired 27 communities that the Company formerly leased, disposed of nine owned communities (including the conveyance of five communities to Ventas, Inc.

("Ventas")), and sold its ownership interest in its unconsolidated entry fee CCRC Venture (the "CCRC Venture") with Healthpeak Properties, Inc.

("Healthpeak"), and the Company's triple-net lease obligations on five communities were terminated.

The Company expects to sell 80 % of its equity in its Health Care Services segment, as described below.

Additionally, one unencumbered community in the Assisted Living and Memory Care segment and one unencumbered community in the CCRCs segment were classified as held for sale, resulting in $ 14.0 million being recorded as assets held for sale within the condensed consolidated balance sheet for senior housing communities as of March 31, 2021.

The closings of the various pending and expected transactions described within this note 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.

("Healthpeak"), and the Company's triple-net lease obligations on six communities were terminated.

Additionally, the Company sold 80 % of its equity in its Health Care Services segment on July 1, 2021, as described below.

One unencumbered community in the CCRCs segment was classified as held for sale, resulting in $ 8.1 million being recorded as assets held for sale for senior housing communities within the condensed consolidated balance sheet as of June 30, 2021.

The closing of the sale of the community is subject to the satisfaction of various closing conditions, including the receipt of regulatory approvals.

There can be no assurance that the transaction will close or, if it does, when the actual closing will occur.

Completed Dispositions of Owned Communities

During the three months ended March 31, 2021, the Company completed the sale of one owned community for cash proceeds of $ 2.7 million, net of transaction costs, and recognized a net gain on sale of assets of $ 0.5 million.

During the six months ended June 30, 2021, the Company completed the sale of two owned communities for cash proceeds of $ 8.5 million, net of transaction costs, and recognized a net gain on sale of assets of $ 0.5 million.

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.

These dispositions included the sale of one owned community during the three months ended March 31, 2020 for which the Company received cash proceeds of $ 5.5 million, net of transaction costs, and recognized a net gain on sale of assets of $ 0.2 million.

Pending Sale of Health Care Services

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 $ 8.9 million respectively, as of March 31, 2021.

These dispositions included the sale of one owned community during the six months ended June 30, 2020 for which the Company received cash proceeds of $ 5.5 million, net of transaction costs, and recognized a net gain on sale of assets of $ 0.2 million.

Completed Dispositions of Entry Fee CCRCs by Unconsolidated Venture

Prior to the January 31, 2020 closing of the Company’s sale of its ownership interest in the CCRC Venture, the Company and Healthpeak moved the remaining two entry fee CCRCs into a new unconsolidated entry fee CCRC venture on substantially the same terms as the CCRC Venture to accommodate the sale of such two communities.

During the three months ended June 30, 2021, the new unconsolidated entry fee CCRC venture completed the sale of the two remaining entry fee CCRCs for cash proceeds of $ 14.0 million, net of associated mortgage debt repayments and transaction costs.

Subsequent to the sale transaction, the new unconsolidated entry fee CCRC venture has no continuing operations.

During the three months ended June 30, 2021, the Company received $ 5.4 million of cash distributions from the new unconsolidated entry fee CCRC venture and recognized $ 13.9 million of equity in earnings of unconsolidated ventures for the Company’s proportionate share of the net income of the new unconsolidated entry fee CCRC venture, which was primarily comprised of a gain on sale of assets for the sale of the two remaining entry fee CCRCs.

Sale of Health Care Services

On February 24, 2021, the Company entered into the 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 $ 63.6 million and $ 8.9 million, respectively, as of June 30, 2021.

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 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.

The assets and liabilities of the Health Care Services segment are included within assets held for sale and liabilities held for sale, respectively, within the Company’s condensed consolidated balance sheet as of March 31, 2021.

As of March 31, 2021, assets held for sale and liabilities held for sale of the Health Care Services segment consisted of the following:

The closing of the sale transaction was completed on July 1, 2021.

The Company received net cash proceeds of $ 305.8 million at closing, which remains subject to a post-closing net working capital adjustment as set forth in the Purchase Agreement.

Additionally, $ 10.0 million of the purchase price was deposited into an escrow account as set forth in the Purchase Agreement, the majority of which is expected to be released to the Company upon completion of the post-closing net working capital adjustment.

Pursuant to the Purchase Agreement, at closing of the transaction, the Company retained a non-controlling 20 % equity interest in the business.

The Company expects that the results and financial position of its Health Care Services segment will be deconsolidated from its consolidated financial statements as of July 1, 2021 and that its 20 % equity interest in the Health Care Services venture will be accounted for under the equity method of accounting.

The Company estimates that it will recognize an approximate $ 288 million gain on sale, net of transaction costs, within its condensed consolidated statement of operations for the three months ended September 30, 2021 for the sale transaction.

As of June 30, 2021, assets held for sale and liabilities held for sale of the Health Care Services segment consisted of the following:

(in thousands)

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Marketable Securities

As of March 31, 2021, marketable securities of $ 134.9 million are stated at fair value based on valuations provided by third-party pricing services and are classified within Level 2 of the valuation hierarchy.

As of June 30, 2021, marketable securities of $ 100.0 million are stated at fair value based on valuations provided by third-party pricing services and are classified within Level 2 of the valuation hierarchy.

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 $ 3.9 billion as of both March 31, 2021 and December 31, 2020.

The Company had outstanding long-term debt with a carrying amount of approximately $ 3.9 billion as of both June 30, 2021 and December 31, 2020.

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

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Three Months Ended

June 30, Six Months Ended

(in millions) 2021 2020 2021 2020

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Property, plant and equipment and leasehold intangibles, net

0.6 3.7 2.3 14.7

Investment in unconsolidated ventures — — — 1.5

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

Three Months Ended March 31, 2021

Three Months Ended June 30, 2021

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

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Total resident fee revenue $ 118,005 $ 391,718 $ 76,942 $ 87,313 $ 673,978

Three Months Ended March 31, 2020

Three Months Ended June 30, 2020

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

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Total resident fee revenue $ 130,278 $ 432,156 $ 79,025 $ 90,170 $ 731,629

Six Months Ended June 30, 2021

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

Private pay $ 235,859 $ 745,182 $ 105,739 $ 601 $ 1,087,381

Government reimbursement 928 33,474 26,913 134,083 195,398

Other third-party payor programs — — 16,069 39,480 55,549

Total resident fee revenue $ 236,787 $ 778,656 $ 148,721 $ 174,164 $ 1,338,328

Six Months Ended June 30, 2020

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

Private pay $ 264,968 $ 854,889 $ 124,683 $ 428 $ 1,244,968

Government reimbursement 1,172 34,746 33,149 144,255 213,322

Other third-party payor programs — — 15,740 40,306 56,046

Total resident fee revenue $ 266,140 $ 889,635 $ 173,572 $ 184,989 $ 1,514,336

Contract Balances

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Amounts of revenue that are collected from residents in advance are recognized as deferred revenue until the performance obligations are satisfied.

million and $ 21.1 million of monthly resident fees billed and received in advance, as of March 31, 2021 and December 31, 2020, respectively.

Such amount of total deferred revenue as of both March 31, 2021 and December 31, 2020 also included $ 87.5 million received in the year ended December 31, 2020 under a temporary expansion of the Accelerated and Advance Payment Program administered by CMS.

The Company had total deferred revenue (included within refundable fees and deferred revenue, liabilities held for sale, and other liabilities within the condensed consolidated balance sheets) of $ 131.8 million and $ 138.3 million, including $ 25.7 million and $ 21.1 million of monthly resident fees billed and received in advance, as of June 30, 2021 and December 31, 2020, respectively.

Such amount of total deferred revenue as of June 30, 2021 and December 31, 2020 also included $ 73.3 million and $ 87.5 million, respectively, received in 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 three months ended March 31, 2021 and 2020, the Company recognized $ 30.8 million and $ 48.3 million, respectively, of revenue that was included in the deferred revenue balance as of January 1, 2021 and 2020, respectively.

For the six months ended June 30, 2021 and 2020, the Company recognized $ 46.2 million and $ 55.2 million, respectively, of revenue that was included in the deferred revenue balance as of January 1, 2021 and 2020, respectively.

Property, Plant and Equipment and Leasehold Intangibles, Net

As of March 31, 2021 and December 31, 2020, net property, plant and equipment and leasehold intangibles, which include assets under financing leases, consisted of the following:

(in thousands) March 31, 2021 December 31, 2020

As of June 30, 2021 and December 31, 2020, net property, plant and equipment and leasehold intangibles, which include assets under financing leases, consisted of the following:

(in thousands) June 30, 2021 December 31, 2020

Land $ 504,698 $ 505,298

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Property, plant and equipment and leasehold intangibles, net $ 4,984,864 $ 5,068,060

Assets under financing leases and leasehold improvements includes $ 0.4 billion of financing lease right-of-use assets, net of accumulated amortization, as of both March 31, 2021 and December 31, 2020.

Assets under financing leases and leasehold improvements includes $ 0.3 billion and $ 0.4 billion of financing lease right-of-use assets, net of accumulated amortization, as of June 30, 2021 and December 31, 2020, respectively.

Refer to Note 10 for further information on the Company's financing leases.

Long-lived assets with definite useful lives are depreciated or amortized on a straight-line basis over their estimated useful lives (or, in certain cases, the shorter of their estimated useful lives or the lease term) and are tested for impairment whenever indicators of impairment arise.

The Company recognized depreciation and amortization expense on its property, plant and equipment and leasehold intangibles of $ 83.9 million and $ 90.7 million for the three months ended March 31, 2021 and 2020, respectively.

The Company's Independent Living and Health Care Services segments had a carrying value of goodwill of $ 27.3 million and $ 126.8 million, respectively, as of both March 31, 2021 and December 31, 2020.

The goodwill of the Health Care Services segment is included within assets held for sale within the Company’s condensed consolidated balance sheet as of March 31, 2021.

The Company recognized depreciation and amortization expense on its property, plant and equipment and leasehold intangibles of $ 83.6 million and $ 93.2 million for the three months ended June 30, 2021 and 2020, respectively, and $ 167.5 million and $ 183.9 million for the six months ended June 30, 2021 and 2020, respectively.

The Company's Independent Living and Health Care Services segments had a carrying value of goodwill of $ 27.3 million and $ 126.8 million, respectively, as of both June 30, 2021 and December 31, 2020.

The goodwill of the Health Care Services segment is included within assets held for sale within the Company’s condensed consolidated balance sheet as of June 30, 2021.

Long-term debt consists of the following:

(in thousands) March 31, 2021 December 31, 2020

(in thousands) June 30, 2021 December 31, 2020

Fixed mortgage notes payable due 2022 through 2047;

weighted average interest rate of 4.17 % and 4.18 % as of March 31, 2021 and December 31, 2020, respectively

weighted average interest rate of 4.17 % and 4.18 % as of June 30, 2021 and December 31, 2020, respectively

$ 2,328,423 $ 2,366,996

Variable mortgage notes payable due 2022 through 2030, weighted average interest rate of 2.46 % and 2.49 % as of March 31, 2021 and December 31, 2020, respectively

Variable mortgage notes payable due 2022 through 2030, weighted average interest rate of 2.45 % and 2.49 % as of June 30, 2021 and December 31, 2020, respectively

1,519,063 1,529,935

Other notes payable due 2021 to 2025;

weighted average interest rate of 7.79 % and 8.98 % as of March 31, 2021 and December 31, 2020, respectively

weighted average interest rate of 8.29 % and 8.98 % as of June 30, 2021 and December 31, 2020, respectively

51,408 46,557

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Total long-term debt, less current portion $ 3,655,441 $ 3,847,103

As of March 31, 2021, 97.9 %, or $ 3.8 billion of the Company's total debt obligations represented non-recourse property-level mortgage financings.

As of March 31, 2021, $ 69.9 million of letters of credit and no cash borrowings were outstanding under the Company's $ 80.0 million secured credit facility.

The Company also had a separate secured letter of credit facility providing up to $ 15.0 million of letters of credit as of March 31, 2021 under which $ 13.6 million had been issued as of that date.

As of June 30, 2021, 98.1 %, or $ 3.8 billion, of the Company's total debt obligations represented non-recourse property-level mortgage financings.

As of June 30, 2021, $ 70.3 million of letters of credit and no cash borrowings were outstanding under the Company's $ 80.0 million secured credit facility.

The Company also had a separate secured letter of credit facility providing up to $ 15.0 million of letters of credit as of June 30, 2021 under which $ 13.6 million had been issued as of that date.

Financial Covenants

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Furthermore, the Company's debt is secured by its communities and, in certain cases, a guaranty by the Company and/or one or more of its subsidiaries.

As of March 31, 2021, the Company is in compliance with the financial covenants of its debt agreements.

As of March 31, 2021, the Company operated 301 communities under long-term leases ( 235 operating leases and 66 financing leases).

As of June 30, 2021, the Company is in compliance with the financial covenants of its debt agreements.

As of June 30, 2021, the Company operated 300 communities under long-term leases ( 234 operating leases and 66 financing leases).

The substantial majority of the Company's lease arrangements are structured as master leases.

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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.

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.

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Furthermore, the Company's leases are secured by its communities and, in certain cases, a guaranty by the Company and/or one or more of its subsidiaries.

As of March 31, 2021, the Company is in compliance with the financial covenants of its long-term leases.

As of June 30, 2021, the Company is in compliance with the financial covenants of its long-term leases.

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

Three Months Ended

June 30, Six Months Ended

Operating Leases (in thousands)

2021 2020 2021 2020

Facility operating expense $ 4,520 $ 4,935 $ 9,362 $ 9,785

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Operating lease expense adjustment (1)

5,326 8,221 9,990 14,954

Changes in operating lease assets and liabilities for lessor capital expenditure reimbursements ( 7,943 ) ( 6,421 ) ( 15,506 ) ( 10,509 )

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Three Months Ended

June 30, Six Months Ended

Financing Leases (in thousands)

2021 2020 2021 2020

Depreciation and amortization $ 7,594 $ 8,037 $ 15,224 $ 17,181

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Total net cash outflows from financing leases $ 14,299 $ 14,894 $ 29,082 $ 31,524

The aggregate amounts of future minimum lease payments, including community, office, and equipment leases (excluding minimum lease payments related to $ 9.7 million of operating lease obligations included within liabilities held for sale) recognized on the condensed consolidated balance sheet as of March 31, 2021 are as follows (in thousands):

The aggregate amounts of future minimum lease payments, including community, office, and equipment leases (excluding minimum lease payments related to $ 8.1 million of operating lease obligations included within liabilities held for sale) recognized on the condensed consolidated balance sheet as of June 30, 2021 are as follows (in thousands):

Year Ending December 31, Operating Leases Financing Leases

2021 (nine months) $ 151,681 $ 48,807

2021 (six months) $ 101,163 $ 32,833

2022 204,469 66,225

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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.

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.

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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 and April 2021, alleged stockholders of the Company filed separate stockholder derivative lawsuits 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.

Between October 2020 and June 2021, alleged stockholders of the Company filed several stockholder derivative lawsuits in the federal courts for the Middle District of Tennessee and the District of Delaware, 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 complaints refer to the securities lawsuit described above and incorporate substantively similar allegations.

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Grants of restricted stock and restricted stock units under the Company's 2014 Omnibus Incentive Plan were as follows:

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

(in thousands, except weighted average amounts) Restricted Stock Unit and Stock Award Grants Weighted Average Grant Date Fair Value Total Grant Date Fair Value

Three months ended March 31, 2021 1,961 $ 5.09 $ 9,988

Three months ended June 30, 2021 20 $ 6.62 $ 130

Earnings Per Share

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Three Months Ended

June 30, Six Months Ended

(in thousands, except for per share amounts) 2021 2020 2021 2020

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Three Months Ended

June 30, Six Months Ended

(in millions) 2021 (1)

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(1) As a result of the net loss reported for the period, all unvested restricted stock, restricted stock units, 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.

The difference between the Company's effective tax rate for the three months ended March 31, 2021 and 2020 was primarily due to the tax impact of the multi-part transaction with Healthpeak that occurred in the three months ended March 31, 2020.

The difference between the Company's effective tax rate for the three and six months ended June 30, 2021 and 2020 was primarily due to the tax impact of the multi-part transaction with Healthpeak that occurred in the three months ended March 31, 2020.

The impact represented the tax expense recorded on the gain of the sale of the Company's interest in the CCRC Venture offset by a decrease in the valuation allowance that was a direct result of the multi-part transaction with Healthpeak.

The Company recorded an aggregate deferred federal, state, and local tax benefit of $ 25.2 million as a result of the operating loss for the three months ended March 31, 2021, which was offset by a proportionate increase in the valuation allowance of $ 25.5 million.

The Company recorded an aggregate deferred federal, state, and local tax expense of $ 90.9 million for the three months ended March 31, 2020.

The expense included $ 93.1 million as a result of the gain on the sale of the Company's interest in the CCRC Venture offset by a benefit of $ 2.2 million as a result of the operating losses (exclusive of the CCRC Venture sale) for the three months ended March 31, 2020.

The expense for the three months ended March 31, 2020 was offset by a reduction in the valuation allowance of $ 112.6 million.

The Company recorded an aggregate deferred federal, state, and local tax benefit of $ 20.8 million as a result of the operating loss for the three months ended June 30, 2021, which was offset by a proportionate increase in the valuation allowance of $ 19.8 million.

The Company recorded an aggregate deferred federal, state, and local tax benefit of $ 46.0 million as a result of the operating loss for the six months ended June 30, 2021, which was offset by a proportionate increase in the valuation allowance of $ 45.3 million.

The Company recorded an aggregate deferred federal, state, and local tax benefit of $ 26.7 million for the three months ended June 30, 2020 and an aggregate deferred federal, state, and local tax expense of $ 64.2 million for the six months ended June 30, 2020.

The expense included $ 93.1 million as a result of the gain on the sale of the Company's interest in the CCRC Venture offset by a benefit of $ 28.9 million as a result of the operating losses (exclusive of the CCRC Venture sale) for the six months ended June 30, 2020.

The benefit for the three months ended June 30, 2020 was offset by additional valuation allowance of $ 33.2 million.

The tax expense for the six months ended June 30, 2020 was offset by a reduction in valuation allowance of $ 79.5 million.

The Company evaluates its deferred tax assets each quarter to determine if a valuation allowance is required based on whether it is more likely than not that some portion of the deferred tax asset would not be realized.

The Company's valuation allowance as of March 31, 2021 and December 31, 2020 was $ 406.5 million and $ 381.0 million, respectively.

The increase in the valuation allowance for the three months ended March 31, 2021 is the result of current operating losses during the three months ended March 31, 2021.

The change in the valuation allowance for the three months ended March 31, 2020 was primarily the result of a reduction in the Company’s valuation allowance of $ 117.6 million as a result of the Healthpeak transaction offset by the anticipated reversal of future tax liabilities offset by future tax deductions.

The Company recorded interest charges related to its tax contingency reserve for cash tax positions for the three months ended March 31, 2021 and 2020 which are included in income tax expense or benefit for the period.

As of March 31, 2021, tax returns for years 2017 through 2019 are subject to future examination by tax authorities.

The Company's valuation allowance as of June 30, 2021 and December 31, 2020 was $ 426.3 million and $ 381.0 million, respectively.

The increase in the valuation allowance for the six months ended June 30, 2021 is the result of current operating losses during the six months ended June 30, 2021.

The change in the valuation allowance for the six months ended June 30, 2020 was primarily the result of a reduction in the Company’s valuation allowance of $ 117.6 million as a result of the Healthpeak transaction offset by the anticipated reversal of future tax liabilities offset by future tax deductions.

The Company recorded interest charges related to its tax contingency reserve for cash tax positions for the three and six months ended June 30, 2021 and 2020 which are included in income tax expense or benefit for the period.

As of June 30, 2021, tax returns for years 2016 through 2019 are subject to future examination by tax authorities.

In addition, the net operating losses from prior years are subject to adjustment under examination.

Supplemental Disclosure of Cash Flow Information

Three Months Ended

Six Months Ended

(in thousands) 2021 2020

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Current portion of long-term debt — 34,706

Accrued expenses — ( 5,025 )

Other liabilities — 60,748

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

(in thousands) March 31, 2021 December 31, 2020

(in thousands) June 30, 2021 December 31, 2020

Reconciliation of cash, cash equivalents, and restricted cash:

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The Company's Assisted Living and Memory Care segment includes owned or leased communities that offer housing and 24-hour assistance with activities of daily living 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'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.

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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.

On July 1, 2021, the Company sold 80 % of its equity in its Health Care Services segment, as described in Note 4.

Management Services.

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Three Months Ended

June 30, Six Months Ended

(in thousands) 2021 2020 2021 2020

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Income (loss) from operations $ ( 52,495 ) $ ( 59,977 ) $ ( 114,085 ) $ ( 45,077 )

(in thousands) March 31, 2021 December 31, 2020

(in thousands) June 30, 2021 December 31, 2020

Total assets:

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Total assets $ 6,602,949 $ 6,901,758

(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 $ 1.4 million, $ 5.1 million, $ 1.7 million, and $ 2.6 million respectively, for the three months ended March 31, 2021 of other operating income recognized for the credits or grants pursuant to the Employee Retention Credit, Provider Relief Fund, and other government sources, as described in Note 3.

(1) All revenue and other operating income is earned from external third parties in the United States.

(2) Includes other operating income recognized for the credits or grants pursuant to the employee retention credit, Provider Relief Fund, and other government sources, as described in Note 3.

Allocations to the applicable segment generally reflect the credits earned by the segment, the segment’s receipt and acceptance of the grant, or the segment’s proportional utilization of the grant.

Other operating income by segment is as follows:

Three Months Ended

June 30, Six Months Ended

(in thousands) 2021 2020 2021 2020

Independent Living $ 111 $ — $ 1,475 $ —

Assisted Living and Memory Care 629 152 5,733 152

CCRCs 46 9,546 1,730 9,546

Health Care Services 522 16,995 3,105 16,995

Total other operating income $ 1,308 $ 26,693 $ 12,043 $ 26,693

(3) Management services segment revenue includes management fees and reimbursements of costs incurred on behalf of managed communities.

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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-Q

Item 1. Financial Statements