Brookdale Senior Living Inc. 10-Q

Item 1. Financial Statements BROOKDALE SENIOR LIVING INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except stock amounts) June 30, 2021 December 31, 2020 Assets (Unaudited) Current assets Cash and cash equivalents $ 280,675 $ 380,420 Marketable securities 99,977 172,905 Restricted cash 30,766 28,059 Accounts receivable, net 52,906 109,221 Assets held for sale 238,357 16,061 Prepaid expenses and other current assets, net 78,250 66,937 Total current assets 780,931 773,603 Property, plant and equipment and leasehold intangibles, net 4,984,864 5,068,060 Operating lease right-of-use assets 706,357 788,138 Restricted cash 74,461 56,669 Investment in unconsolidated ventures 8,190 4,898 Goodwill 27,321 154,131 Other assets, net 20,825 56,259 Total assets $ 6,602,949 $ 6,901,758 Liabilities and Equity Current liabilities Current portion of long-term debt $ 218,332 $ 68,885 Current portion of financing lease obligations 21,055 19,543 Current portion of operating lease obligations 143,053 146,226 Trade accounts payable 74,558 71,233 Liabilities held for sale 102,545 — Accrued expenses 269,926 287,851 Refundable fees and deferred revenue 67,853 96,995 Total current liabilities 897,322 690,733 Long-term debt, less current portion 3,655,441 3,847,103 Financing lease obligations, less current portion 536,720 543,764 Operating lease obligations, less current portion 761,587 819,429 Deferred tax liability 8,853 9,557 Other liabilities 126,891 188,443 Total liabilities 5,986,814 6,099,029 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 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 1,977 1,983 Additional paid-in-capital 4,217,728 4,212,409 Treasury stock, at cost; 10,527,525 shares at June 30, 2021 and December 31, 2020 ( 102,774 ) ( 102,774 ) Accumulated deficit ( 3,503,054 ) ( 3,311,184 ) Total Brookdale Senior Living Inc. stockholders' equity 613,877 800,434 Noncontrolling interest 2,258 2,295 Total equity 616,135 802,729 Total liabilities and equity $ 6,602,949 $ 6,901,758 See accompanying notes to condensed consolidated financial statements. 4 BROOKDALE SENIOR LIVING INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited, in thousands, except per share data) Three Months Ended June 30, Six Months Ended June 30, 2021 2020 2021 2020 Revenue Resident fees $ 673,978 $ 731,629 $ 1,338,328 $ 1,514,336 Management fees 4,998 6,076 13,564 114,791 Reimbursed costs incurred on behalf of managed communities 43,008 101,511 108,802 224,228 Other operating income 1,308 26,693 12,043 26,693 Total revenue and other operating income 723,292 865,909 1,472,737 1,880,048 Expense Facility operating expense (excluding facility depreciation and amortization of $ 77,921 , $ 86,971 , $ 155,195 , and $ 171,272 , respectively) 550,846 606,034 1,107,158 1,194,516 General and administrative expense (including non-cash stock-based compensation expense of $ 4,527 , $ 6,119 , $ 9,310 , and $ 12,076 , respectively) 52,400 52,518 102,343 107,113 Facility operating lease expense 43,864 62,379 88,282 126,860 Depreciation and amortization 83,591 93,154 167,482 183,892 Asset impairment 2,078 10,290 12,755 88,516 Costs incurred on behalf of managed communities 43,008 101,511 108,802 224,228 Total operating expense 775,787 925,886 1,586,822 1,925,125 Income (loss) from operations ( 52,495 ) ( 59,977 ) ( 114,085 ) ( 45,077 ) Interest income 341 2,243 762 3,698 Interest expense: Debt ( 35,425 ) ( 38,974 ) ( 70,776 ) ( 80,737 ) Financing lease obligations ( 11,492 ) ( 11,892 ) ( 22,875 ) ( 25,174 ) Amortization of deferred financing costs and debt discount ( 2,140 ) ( 1,556 ) ( 4,013 ) ( 2,871 ) Gain (loss) on debt modification and extinguishment, net — ( 157 ) — 19,024 Equity in earnings (loss) of unconsolidated ventures 13,946 438 13,415 ( 570 ) Gain (loss) on sale of assets, net ( 79 ) ( 1,029 ) 1,033 371,810 Other non-operating income (loss) 2,948 988 4,592 3,650 Income (loss) before income taxes ( 84,396 ) ( 109,916 ) ( 191,947 ) 243,753 Benefit (provision) for income taxes 792 ( 8,504 ) 40 7,324 Net income (loss) ( 83,604 ) ( 118,420 ) ( 191,907 ) 251,077 Net (income) loss attributable to noncontrolling interest 19 19 37 37 Net income (loss) attributable to Brookdale Senior Living Inc. common stockholders $ ( 83,585 ) $ ( 118,401 ) $ ( 191,870 ) $ 251,114 Net income (loss) per share attributable to Brookdale Senior Living Inc. common stockholders: Basic $ ( 0.45 ) $ ( 0.65 ) $ ( 1.04 ) $ 1.37 Diluted $ ( 0.45 ) $ ( 0.65 ) $ ( 1.04 ) $ 1.37 Weighted average common shares outstanding: Basic 185,182 183,178 184,600 183,682 Diluted 185,182 183,178 184,600 183,862 See accompanying notes to condensed consolidated financial statements. 5 BROOKDALE SENIOR LIVING INC. CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (Unaudited, in thousands) Three Months Ended June 30, Six Months Ended June 30, 2021 2020 2021 2020 Total equity, balance at beginning of period $ 695,107 $ 1,052,230 $ 802,729 $ 698,725 Common stock: Balance at beginning of period $ 1,978 $ 1,985 $ 1,983 $ 1,996 Issuance of common stock under Associate Stock Purchase Plan — — — 1 Restricted stock and restricted stock units, net ( 1 ) ( 1 ) 1 ( 7 ) Shares withheld for employee taxes — — ( 7 ) ( 6 ) Balance at end of period $ 1,977 $ 1,984 $ 1,977 $ 1,984 Additional paid-in-capital: Balance at beginning of period $ 4,213,095 $ 4,174,356 $ 4,212,409 $ 4,172,099 Non-cash stock-based compensation expense 4,527 6,119 9,310 12,076 Issuance of common stock under Associate Stock Purchase Plan 213 — 437 168 Restricted stock and restricted stock units, net 1 1 ( 1 ) 7 Shares withheld for employee taxes ( 115 ) ( 59 ) ( 4,437 ) ( 3,951 ) Other, net 7 19 10 37 Balance at end of period $ 4,217,728 $ 4,180,436 $ 4,217,728 $ 4,180,436 Treasury stock: Balance at beginning of period $ ( 102,774 ) $ ( 102,774 ) $ ( 102,774 ) $ ( 84,651 ) Purchase of treasury stock — — — ( 18,123 ) Balance at end of period $ ( 102,774 ) $ ( 102,774 ) $ ( 102,774 ) $ ( 102,774 ) Accumulated deficit: Balance at beginning of period $ ( 3,419,469 ) $ ( 3,023,688 ) $ ( 3,311,184 ) $ ( 3,393,088 ) Cumulative effect of change in accounting principle — — — ( 115 ) Net income (loss) ( 83,585 ) ( 118,401 ) ( 191,870 ) 251,114 Balance at end of period $ ( 3,503,054 ) $ ( 3,142,089 ) $ ( 3,503,054 ) $ ( 3,142,089 ) Noncontrolling interest: Balance at beginning of period $ 2,277 $ 2,351 $ 2,295 $ 2,369 Net income (loss) attributable to noncontrolling interest ( 19 ) ( 19 ) ( 37 ) ( 37 ) Balance at end of period $ 2,258 $ 2,332 $ 2,258 $ 2,332 Total equity, balance at end of period $ 616,135 $ 939,889 $ 616,135 $ 939,889 Common stock share activity Outstanding shares of common stock: Balance at beginning of period 187,230 188,012 187,804 192,129 Issuance of common stock under Associate Stock Purchase Plan 30 — 73 61 Restricted stock and restricted stock units, net ( 104 ) ( 75 ) 23 ( 579 ) Shares withheld for employee taxes ( 17 ) ( 17 ) ( 761 ) ( 628 ) Purchase of treasury stock — — — ( 3,063 ) Balance at end of period 187,139 187,920 187,139 187,920 See accompanying notes to condensed consolidated financial statements. 6 BROOKDALE SENIOR LIVING INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited, in thousands) Six Months Ended June 30, 2021 2020 Cash Flows from Operating Activities Net income (loss) $ ( 191,907 ) $ 251,077 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Loss (gain) on debt modification and extinguishment, net — ( 19,024 ) Depreciation and amortization, net 171,495 186,763 Asset impairment 12,755 88,516 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 ) Proceeds from deferred entrance fee revenue 2,298 85 Deferred income tax (benefit) provision ( 704 ) ( 15,253 ) Operating lease expense adjustment ( 9,990 ) ( 14,954 ) Loss (gain) on sale of assets, net ( 1,033 ) ( 371,810 ) Non-cash stock-based compensation expense 9,310 12,076 Other ( 4,007 ) ( 1,800 ) Changes in operating assets and liabilities: Accounts receivable, net ( 1,267 ) 12,995 Prepaid expenses and other assets, net 1,605 20,162 Prepaid insurance premiums financed with notes payable ( 8,785 ) ( 11,664 ) Trade accounts payable and accrued expenses 2,131 ( 18,692 ) Refundable fees and deferred revenue ( 8,918 ) 80,688 Operating lease assets and liabilities for lessor capital expenditure reimbursements 15,506 10,509 Net cash provided by (used in) operating activities ( 20,447 ) 209,319 Cash Flows from Investing Activities Change in lease security deposits and lease acquisition deposits, net ( 75 ) 3,304 Purchase of marketable securities ( 119,914 ) ( 149,236 ) Sale and maturities of marketable securities 192,995 108,750 Capital expenditures, net of related payables ( 79,538 ) ( 112,863 ) Acquisition of assets, net of related payables and cash received — ( 446,688 ) Investment in unconsolidated ventures ( 5,359 ) ( 356 ) 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 ) Cash Flows from Financing Activities Proceeds from debt 21,022 473,460 Repayment of debt and financing lease obligations ( 72,970 ) ( 303,920 ) Proceeds from line of credit — 166,381 Purchase of treasury stock, net of related payables — ( 18,123 ) Payment of financing costs, net of related payables ( 172 ) ( 7,469 ) Payments of employee taxes for withheld shares ( 4,444 ) ( 3,951 ) Other 10 146 Net cash provided by (used in) financing activities ( 56,554 ) 306,524 Net increase (decrease) in cash, cash equivalents, and restricted cash ( 79,246 ) 220,433 Cash, cash equivalents, and restricted cash at beginning of period 465,148 301,697 Cash, cash equivalents, and restricted cash at end of period $ 385,902 $ 522,130 See accompanying notes to condensed consolidated financial statements. 7 BROOKDALE SENIOR LIVING INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. Description of Business Brookdale Senior Living Inc. ("Brookdale" or the "Company") is an operator of 685 senior living communities throughout the United States. 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'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: Independent Living; Assisted Living and Memory Care; CCRCs; Health Care Services; and Management Services. 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. 2. Summary of Significant Accounting Policies Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States ("GAAP") and pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC") for quarterly reports on Form 10-Q. In the opinion of management, these financial statements include all adjustments, which are of a normal and recurring nature, necessary to present fairly the financial position, results of operations, and cash flows of the Company for all periods presented. Certain information and footnote disclosures included in annual financial statements have been condensed or omitted. The Company believes that the disclosures included are adequate and provide a fair presentation of interim period results. Interim financial statements are not necessarily indicative of the financial position or operating results for an entire year. These interim financial statements should be read in conjunction with the audited financial statements and the notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2020 filed with the SEC on February 25, 2021. Principles of Consolidation The condensed consolidated financial statements include the accounts of Brookdale and its consolidated subsidiaries. The ownership interest of consolidated entities not wholly-owned by the Company are presented as noncontrolling interests in the accompanying condensed consolidated financial statements. Intercompany balances and transactions have been eliminated in consolidation, and net income (loss) is reduced by the portion of net income (loss) attributable to noncontrolling interests. 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. Use of Estimates The preparation of the condensed consolidated financial statements and related disclosures in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. 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. Lease Accounting 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 8 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 Company recognizes lease expense as incurred for additional variable payments. For the Company's leases that do not contain an implicit rate, the Company utilizes its estimated incremental borrowing rate to determine the present value of lease payments based on information available at commencement of the lease. The Company's estimated incremental borrowing rate reflects the fixed rate at which the Company could borrow a similar amount for the same term on a collateralized basis. The Company elected the short-term lease exception policy which permits leases with an initial term of 12 months or less to not be recorded on the Company's condensed consolidated balance sheet and instead to be recognized as lease expense as incurred. The Company, as lessee, makes a determination with respect to each of its community, office, and equipment leases as to whether each should be accounted for as an operating lease or financing lease. The classification criteria is based on estimates regarding the fair value of the leased asset, minimum lease payments, effective cost of funds, economic life of the asset, and certain other terms in the lease agreements. Lease right-of-use assets are reviewed for impairment whenever changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of right-of-use assets are assessed by a comparison of the carrying amount of the asset to the estimated future undiscounted net cash flows expected to be generated by the asset, calculated utilizing the lowest level of identifiable cash flows. 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 asset to its carrying amount, with any amount in excess of fair value recognized as an expense in the current period. Undiscounted cash flow projections and estimates of fair value amounts are based on a number of assumptions such as revenue and expense growth rates and estimated lease coverage ratios (Level 3). Operating Leases The Company recognizes operating lease expense for actual rent paid, generally plus or minus a straight-line adjustment for estimated minimum lease escalators if applicable. The right-of-use asset is generally reduced each period by an amount equal to the difference between the operating lease expense and the amount of expense on the lease liability utilizing the effective interest method. Subsequent to the impairment of an operating lease right-of-use asset, the Company recognizes operating lease expense consisting of the reduction of the right-of-use asset on a straight-line basis over the remaining lease term and the amount of expense on the lease liability utilizing the effective interest method. Financing Leases Financing lease right-of-use assets are recognized within property, plant and equipment and leasehold intangibles, net on the Company's condensed consolidated balance sheets. The Company recognizes interest expense on the financing lease liabilities utilizing the effective interest method. The right-of-use asset is generally amortized to depreciation and amortization expense on a straight-line basis over the lease term unless the lease contains an option to purchase the underlying asset that the Company is reasonably certain to exercise. If the Company is reasonably certain to exercise the purchase option, the asset is amortized over the useful life. Sale-Leaseback Transactions For transactions in which an owned community is sold and leased back from the buyer (sale-leaseback transactions), the Company recognizes an asset sale and lease accounting is applied if the Company has transferred control of the community. For such transactions, the Company removes the transferred assets from the condensed consolidated balance sheet and a gain or loss on the sale is recognized for the difference between the carrying amount of the asset and the transaction price for the sale transaction. 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 recognizes the underlying assets within assets under financing leases as a component of property, plant and equipment and leasehold intangibles, net on the condensed consolidated balance sheets and continues to depreciate the assets over their useful lives. 9 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. Property, Plant and Equipment and Leasehold Intangibles, Net Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset group may not be recoverable. Recoverability of an asset group is assessed by comparing its carrying amount to the estimated future undiscounted net cash flows expected to be generated by the asset group through operation or disposition, calculated utilizing the lowest level of identifiable cash flows. If this comparison indicates that the carrying amount of an asset group is not recoverable, the Company is required to recognize an impairment loss. The impairment loss is measured by the amount by which the carrying amount of the asset exceeds its estimated fair value, with any amount in excess of fair value recognized as an expense in the current period. Undiscounted cash flow projections and estimates of fair value amounts are based on a number of assumptions such as revenue and expense growth rates, estimated holding periods, and estimated capitalization rates (Level 3). Goodwill The Company tests goodwill for impairment annually during the fourth quarter or more frequently if indicators of impairment arise. Factors the Company considers important in its analysis of whether an indicator of impairment exists include a significant decline in the Company's stock price or market capitalization for a sustained period since the last testing date, significant underperformance relative to historical or projected future operating results, and significant negative industry or economic trends. The Company first assesses qualitative factors to determine if it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If so, the Company performs a quantitative goodwill impairment test based upon a comparison of the estimated fair value of the reporting unit to which the goodwill has been assigned with the reporting unit's carrying amount. The fair values used in the quantitative goodwill impairment test are estimated using Level 3 inputs based upon discounted future cash flow projections for the reporting unit. These cash flow projections are based upon a number of estimates and assumptions such as revenue and expense growth rates, capitalization rates, and discount rates. The Company also considers market-based measures such as earnings multiples in its analysis of estimated fair values of its reporting units. 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. 3. COVID-19 Pandemic 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 . 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; 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. 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. Liquidity . 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 10 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 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 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 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. The Company intends to pursue additional funding that may become available. 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 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. 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 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. • The Company is eligible to claim the employee retention credit for certain of its associates under the CARES Act. 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 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 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. 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 11 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; 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 the Company's 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 the Company's 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 the Company's new residents; the disproportionate impact of COVID-19 on seniors generally and those residing in the Company's communities; the duration and costs of the Company's response efforts, including increased equipment, supplies, labor, litigation, testing, vaccination clinic, and other expenses; 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; increased enforcement actions resulting from COVID-19; government action that may limit the Company's 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 the Company's response efforts. 4. Acquisitions, Dispositions and Other Transactions 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 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 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 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. 12 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 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. 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 June 30, 2021. 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) Accounts receivable, net $ 57,582 Property, plant and equipment and leasehold intangibles, net 1,806 Operating lease right-of-use assets 8,145 Goodwill 126,810 Prepaid expenses and other assets, net 35,888 Assets held for sale $ 230,231 Trade accounts payable $ 1,387 Accrued expenses 29,402 Refundable fees and deferred revenue 63,611 Operating lease obligations 8,145 Liabilities held for sale $ 102,545 Refer to Note 16 for selected financial data for the Health Care Services segment. 5. Fair Value Measurements Marketable Securities 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. Debt 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 June 30, 2021 and December 31, 2020. 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. 13 Asset Impairment Expense The following is a summary of asset impairment expense. Three Months Ended June 30, Six Months Ended June 30, (in millions) 2021 2020 2021 2020 Operating lease right-of-use assets $ 1.5 $ 6.6 $ 10.5 $ 72.3 Property, plant and equipment and leasehold intangibles, net 0.6 3.7 2.3 14.7 Investment in unconsolidated ventures — — — 1.5 Asset impairment $ 2.1 $ 10.3 $ 12.8 $ 88.5 6. Revenue 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: Three Months Ended June 30, 2021 (in thousands) Independent Living Assisted Living and Memory Care CCRCs Health Care Services Total Private pay $ 117,537 $ 374,688 $ 53,526 $ 264 $ 546,015 Government reimbursement 468 17,030 14,426 66,618 98,542 Other third-party payor programs — — 8,990 20,431 29,421 Total resident fee revenue $ 118,005 $ 391,718 $ 76,942 $ 87,313 $ 673,978 Three Months Ended June 30, 2020 (in thousands) Independent Living Assisted Living and Memory Care CCRCs Health Care Services Total Private pay $ 129,678 $ 414,276 $ 59,980 $ 258 $ 604,192 Government reimbursement 600 17,880 13,744 70,566 102,790 Other third-party payor programs — — 5,301 19,346 24,647 Total resident fee revenue $ 130,278 $ 432,156 $ 79,025 $ 90,170 $ 731,629 14 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 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, 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 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. 15 7. Property, Plant and Equipment and Leasehold Intangibles, Net 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 Buildings and improvements 5,241,059 5,215,460 Furniture and equipment 964,407 945,783 Resident and leasehold operating intangibles 305,857 307,071 Construction in progress 56,610 61,491 Assets under financing leases and leasehold improvements 1,561,285 1,523,055 Property, plant and equipment and leasehold intangibles 8,633,916 8,558,158 Accumulated depreciation and amortization ( 3,649,052 ) ( 3,490,098 ) Property, plant and equipment and leasehold intangibles, net $ 4,984,864 $ 5,068,060 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 $ 83.6 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. 8. Goodwill 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. 9. Debt Long-term debt consists of the following: (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 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 2.45 % 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 8.29 % and 8.98 % as of June 30, 2021 and December 31, 2020, respectively 51,408 46,557 Debt discount and deferred financing costs, net ( 25,121 ) ( 27,500 ) Total long-term debt 3,873,773 3,915,988 Current portion 218,332 68,885 Total long-term debt, less current portion $ 3,655,441 $ 3,847,103 16 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 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, 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 and 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 June 30, 2021, the Company is in compliance with the financial covenants of its debt agreements. 10. Leases 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. Under a master lease, numerous communities are leased through an indivisible lease. The Company typically guarantees the performance and lease payment obligations of its subsidiary lessees under the master leases. An event of default related to an individual property or limited number of properties within a master lease portfolio may result in a default on the entire master lease portfolio. The leases relating to these communities are generally fixed rate leases with annual escalators that are either fixed or based upon changes in the consumer price index or the leased property revenue. The Company is responsible for all operating costs, including repairs, property taxes, and insurance. The leases generally provide for renewal or extension options from 5 to 20 years and in some instances, purchase options. 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 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. 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 June 30, 2021, the Company is in compliance with the financial covenants of its long-term leases. 17 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 June 30, Operating Leases (in thousands) 2021 2020 2021 2020 Facility operating expense $ 4,520 $ 4,935 $ 9,362 $ 9,785 Facility lease expense 43,864 62,379 88,282 126,860 Operating lease expense 48,384 67,314 97,644 136,645 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 ) Operating net cash outflows from operating leases $ 45,767 $ 69,114 $ 92,128 $ 141,090 (1) Represents the difference between the amount of cash operating lease payments and the amount of operating lease expense recognized in accordance with Accounting Standards Codification 842, Leases ("ASC 842"). Three Months Ended June 30, Six Months Ended June 30, Financing Leases (in thousands) 2021 2020 2021 2020 Depreciation and amortization $ 7,594 $ 8,037 $ 15,224 $ 17,181 Interest expense: financing lease obligations 11,492 11,892 22,875 25,174 Financing lease expense $ 19,086 $ 19,929 $ 38,099 $ 42,355 Operating cash flows from financing leases $ 11,492 $ 11,892 $ 22,875 $ 25,174 Financing cash flows from financing leases 4,864 4,677 9,653 9,764 Changes in financing lease assets and liabilities for lessor capital expenditure reimbursement ( 2,057 ) ( 1,675 ) ( 3,446 ) ( 3,414 ) 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 $ 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 (six months) $ 101,163 $ 32,833 2022 204,469 66,225 2023 193,071 66,942 2024 193,820 68,138 2025 191,576 58,163 Thereafter 282,806 110,239 Total lease payments 1,166,905 402,540 Purchase option liability and non-cash gain on future sale of property — 414,442 Imputed interest and variable lease payments ( 262,265 ) ( 259,207 ) Total lease obligations $ 904,640 $ 557,775 11. Litigation 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 18 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. 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. 12. Stock-Based Compensation Grants of restricted stock and restricted stock units under the Company's 2014 Omnibus Incentive Plan were as follows: (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 13. 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, restricted stock units, and warrants. 19 The following table summarizes the computation of basic and diluted earnings (loss) per share amounts presented in the condensed consolidated statement of operations: Three Months Ended June 30, Six Months Ended June 30, (in thousands, except for per share amounts) 2021 2020 2021 2020 Income attributable to common stockholders: Net income (loss) $ ( 83,585 ) $ ( 118,401 ) $ ( 191,870 ) $ 251,114 Weighted average shares outstanding - basic 185,182 183,178 184,600 183,682 Effect of dilutive securities - Unvested restricted stock, restricted stock units, and warrants — — — 180 Weighted average shares outstanding - diluted 185,182 183,178 184,600 183,862 Basic earnings (loss) per common share: Net income (loss) per share attributable to common stockholders $ ( 0.45 ) $ ( 0.65 ) $ ( 1.04 ) $ 1.37 Diluted earnings (loss) per common share: Net income (loss) per share attributable to common stockholders $ ( 0.45 ) $ ( 0.65 ) $ ( 1.04 ) $ 1.37 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: Three Months Ended June 30, Six Months Ended June 30, (in millions) 2021 (1) 2020 (1) 2021 (1) 2020 Non-performance-based restricted stock and restricted stock units 5.8 7.3 5.8 7.1 Performance-based restricted stock and restricted stock units 0.3 1.8 0.3 1.8 Warrants 16.3 — 16.3 — (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. 14. Income Taxes 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 $ 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. 20 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 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. 15. Supplemental Disclosure of Cash Flow Information Six Months Ended June 30, (in thousands) 2021 2020 Supplemental Disclosure of Cash Flow Information: Interest paid $ 94,683 $ 107,854 Income taxes paid, net of refunds 2,963 1,388 Capital expenditures, net of related payables: Capital expenditures - non-development, net $ 63,245 $ 82,077 Capital expenditures - development, net 2,118 6,823 Capital expenditures - non-development - reimbursable 18,952 13,923 Trade accounts payable ( 4,777 ) 10,040 Net cash paid $ 79,538 $ 112,863 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 Acquisition of other assets, net of related payables and cash received: Property, plant and equipment and leasehold intangibles, net $ — $ 179 Financing lease obligations — 39,260 Net cash paid $ — $ 39,439 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 ) 21 Proceeds from sale of other assets, net: Prepaid expenses and other assets, net $ — $ ( 1,261 ) Assets held for sale ( 8,040 ) ( 5,274 ) Property, plant and equipment and leasehold intangibles, net ( 568 ) ( 938 ) Other liabilities ( 5 ) ( 1,862 ) Loss (gain) on sale of assets, net ( 1,033 ) ( 1,979 ) Net cash received $ ( 9,646 ) $ ( 11,314 ) Supplemental Schedule of Non-cash Operating, Investing, and Financing Activities: 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: Property, plant and equipment and leasehold intangibles, net $ 2,534 $ 13,548 Operating lease right-of-use assets 16,733 1,350 Financing lease obligations ( 2,534 ) ( 15,483 ) Operating lease obligations ( 16,733 ) 606 Other liabilities — ( 21 ) Net $ — $ — Restricted cash consists principally of deposits for letters of credit, 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 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) June 30, 2021 December 31, 2020 Reconciliation of cash, cash equivalents, and restricted cash: Cash and cash equivalents $ 280,675 $ 380,420 Restricted cash 30,766 28,059 Long-term restricted cash 74,461 56,669 Total cash, cash equivalents, and restricted cash $ 385,902 $ 465,148 16. Segment Information The Company has five reportable segments: Independent Living; Assisted Living and Memory Care; CCRCs; Health Care Services; and Management Services. Operating segments are defined as components of an enterprise that engage in business activities from which it may earn revenues and incur expenses; for which separate financial information is available; and whose operating results are regularly reviewed by the chief operating decision maker to assess the performance of the individual segment and make decisions about resources to be allocated to the segment. 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 to live in a residential setting that feels like home, without the efforts of ownership. 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 to accommodate their changing needs. 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 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 22 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. CCRCs. 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 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. On July 1, 2021, the Company sold 80 % of its equity in its Health Care Services segment, as described in Note 4. 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. Management Services. The Company's Management Services segment includes communities operated by the Company pursuant to management agreements. 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. 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 following table sets forth selected segment financial data: Three Months Ended June 30, Six Months Ended June 30, (in thousands) 2021 2020 2021 2020 Revenue and other operating income (1) : Independent Living (2) $ 118,116 $ 130,278 $ 238,262 $ 266,140 Assisted Living and Memory Care (2) 392,347 432,308 784,389 889,787 CCRCs (2) 76,988 88,571 150,451 183,118 Health Care Services (2) 87,835 107,165 177,269 201,984 Management Services (3) 48,006 107,587 122,366 339,019 Total revenue and other operating income $ 723,292 $ 865,909 $ 1,472,737 $ 1,880,048 Segment operating income: (4) Independent Living $ 35,292 $ 41,038 $ 72,621 $ 92,452 Assisted Living and Memory Care 77,062 87,708 148,495 219,709 CCRCs 8,673 13,850 16,281 33,781 Health Care Services 3,413 9,692 5,816 571 Management Services 4,998 6,076 13,564 114,791 Total segment operating income 129,438 158,364 256,777 461,304 General and administrative expense (including non-cash stock-based compensation expense) 52,400 52,518 102,343 107,113 Facility operating lease expense 43,864 62,379 88,282 126,860 Depreciation and amortization 83,591 93,154 167,482 183,892 Asset impairment: Independent Living 1,364 — 1,884 31,317 Assisted Living and Memory Care 479 10,290 10,121 43,088 CCRCs 235 — 750 12,173 Corporate and Management Services — — — 1,938 Income (loss) from operations $ ( 52,495 ) $ ( 59,977 ) $ ( 114,085 ) $ ( 45,077 ) 23 As of (in thousands) June 30, 2021 December 31, 2020 Total assets: Independent Living $ 1,382,619 $ 1,419,838 Assisted Living and Memory Care 3,692,143 3,787,611 CCRCs 723,942 738,121 Health Care Services 230,231 233,178 Corporate and Management Services 574,014 723,010 Total assets $ 6,602,949 $ 6,901,758 (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 June 30, (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. (4) Segment operating income is defined as segment revenues and other operating income less segment facility operating expenses (excluding facility depreciation and amortization) and costs incurred on behalf of managed communities. 24