What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-02-22 compared with 2022-02-15 · 265 added, 324 removed, 1090 unchanged (35% of the section changed)

9 unchanged sentences

Notes to Consolidated Financial Statements

Schedule II — Valuation and Qualifying Accounts

Report of Independent Registered Public Accounting Firm

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We have audited the accompanying consolidated balance sheets of Brookdale Senior Living Inc.

(the Company) as of December 31, 2021 and 2020, the related consolidated statements of operations, equity, and cash flows for each of the three years in the period ended December 31, 2021, and the related notes and financial statement schedule included in the Index at Item 15 (collectively referred to as the "consolidated financial statements").

(the Company) as of December 31, 2022 and 2021, the related consolidated statements of operations, equity, and cash flows for each of the three years in the period ended December 31, 2022, and the related notes (collectively referred to as the "consolidated financial statements").

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with U.S.

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(the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2021 and 2020, the related consolidated statements of operations, equity, and cash flows for each of the three years in the period ended December 31, 2021, and the related notes and financial statement schedule included in the Index at Item 15 and our report dated February 15, 2022 expressed an unqualified opinion thereon.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2022 and 2021, the related consolidated statements of operations, equity, and cash flows for each of the three years in the period ended December 31, 2022, and the related notes and our report dated February 22, 2023 expressed an unqualified opinion thereon.

Basis for Opinion

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Operating lease obligations, less current portion 616,973 681,876

Deferred tax liability — 9,557

Other liabilities 85,831 86,791

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Asset impairment 29,618 23,003 107,308

Loss (gain) on sale of communities, net ( 73,850 ) — —

Loss (gain) on facility operating lease termination, net — ( 2,003 ) ( 2,303 )

Costs incurred on behalf of managed communities 147,361 181,445 401,189

Total operating expense 2,975,195 3,637,887 4,101,586

Income (loss) from operations ( 42,687 ) ( 216,936 ) ( 97,692 )

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Amortization of deferred financing costs ( 6,446 ) ( 7,297 ) ( 6,203 )

Change in fair value of derivatives 7,659 ( 152 ) ( 225 )

Gain (loss) on debt modification and extinguishment, net ( 1,357 ) ( 1,932 ) 10,896

Equity in earnings (loss) of unconsolidated ventures ( 10,782 ) 10,394 ( 2,107 )

Gain (loss) on sale of assets, net 288,835 374,532 7,245

Non-operating gain (loss) on sale of assets, net 595 288,835 374,532

Other non-operating income (loss) 12,114 5,903 5,648

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Issuance of common stock under Associate Stock Purchase Plan — 699 638

Issuance of tangible equity units, net of issuance costs 113,457 — —

Purchase of capped call transactions — ( 15,916 ) —

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Net income (loss) attributable to noncontrolling interest 87 ( 74 ) ( 74 )

Noncontrolling interest contribution — — 6,566

Noncontrolling interest distribution ( 760 ) — —

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Operating lease expense adjustment ( 34,896 ) ( 23,280 ) ( 136,276 )

Change in fair value of derivatives ( 7,659 ) 152 225

Loss (gain) on sale of assets, net ( 74,445 ) ( 288,835 ) ( 374,532 )

1 unchanged sentence

Non-cash stock-based compensation expense 14,466 16,270 20,747

Non-cash management contract termination gain — — ( 969 )

Other ( 4,689 ) ( 2,777 ) ( 8,700 )

Property and casualty insurance income ( 11,379 ) ( 4,689 ) ( 2,777 )

Changes in operating assets and liabilities:

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Capital expenditures, net of related payables ( 196,924 ) ( 176,657 ) ( 185,871 )

Acquisition of assets, net of related payables and cash received — ( 472,193 ) ( 497 )

Acquisition of assets ( 6,004 ) — ( 472,193 )

Investment in unconsolidated ventures ( 218 ) ( 5,436 ) ( 4,082 )

2 unchanged sentences

Proceeds from notes receivable — 1,800 5,419

Other ( 5,340 ) — —

Net cash provided by (used in) investing activities ( 67,429 ) 181,457 ( 425,111 )

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Repayment of line of credit — — ( 166,381 )

Proceeds from issuance of tangible equity units 139,438 — —

Purchase of treasury stock, net of related payables — — ( 18,123 )

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Brookdale Senior Living Inc.

("Brookdale" or the "Company") is an operator of 679 senior living communities throughout the United States.

together with its consolidated subsidiaries ("Brookdale" or the "Company") is an operator of 673 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.

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

As of December 31, 2021, the Company owned 347 communities, representing a majority of the Company's consolidated community portfolio, leased 299 communities, and managed 33 communities.

As of such date, the Company has three reportable segments:

Independent Living;

Assisted Living and Memory Care;

On July 1, 2021, the Company sold 80 % of its equity in its Health Care Services segment, an additional reportable segment prior to that date, as described in Note 4.

The accompanying consolidated financial statements include the financial position, results of operations, and cash flows of the Health Care Services segment through June 30, 2021.

As of December 31, 2022, the Company owned 346 communities, representing a majority of the Company's community portfolio, leased 295 communities, and managed 32 communities.

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

The accompanying consolidated financial statements include the results of operations and cash flows of the Health Care Services segment through June 30, 2021.

For periods beginning July 1, 2021, the results and financial position of the Health Care Services segment were deconsolidated from the Company's consolidated financial statements and its 20 % equity interest in the Health Care Services venture (the "HCS Venture") is accounted for under the equity method of accounting.

Summary of Significant Accounting Policies

The consolidated financial statements have been prepared on the accrual basis of accounting in accordance with U.S.

The consolidated financial statements have been prepared in accordance with U.S.

generally accepted accounting principles ("GAAP").

Except for the changes for the impact of the recently adopted accounting pronouncements discussed in this Note, the Company has consistently applied its accounting policies to all periods presented in these consolidated financial statements.

The significant accounting policies are summarized below:

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Lease Accounting

Refer to the Company's revenue recognition policy for discussion of the accounting policy for residency agreements, which include a lease component.

The Company, as lessee, recognizes a right-of-use asset and a lease liability on the Company's 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 consolidated balance sheet at the present value of future minimum lease payments.

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

As of the commencement date of a lease, a lease liability and corresponding right-of-use asset is established

on the Company's consolidated balance sheet at the estimated 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.

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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 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.

For accounting purposes, renewal or extension options are included in the lease term at lease inception or modification when it is reasonably certain that the Company will exercise the option.

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 consolidated balance sheet.

The Company, as lessee, makes a determination with respect to each of its 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.

Lease right-of-use assets are reviewed for impairment whenever changes in circumstances indicate that the carrying amount of an asset group may not be recoverable.

Recoverability of right-of-use assets are assessed by a comparison of the carrying amount of the asset group to the estimated future undiscounted net cash flows expected to be generated by the asset group, 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 group then the fair value of the asset is estimated.

The impairment loss 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 impairment loss 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).

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

Additionally, the Company accounts for any amounts received as a financing lease liability and the Company recognizes

interest expense on the financing lease liability utilizing the effective interest method with the interest expense limited to an amount that is not greater than the cash payments on the financing lease liability over the term of the lease.

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.

The Company reviews for sale accounting whenever events or changes in circumstances indicate that control may have been transferred and

the Company recognizes an asset sale and lease accounting is applied if the Company has transferred control of the underlying asset.

When an asset sale is recognized for such transactions, the Company removes the transferred assets and financing lease liability from the 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 financing lease liability.

Gain (Loss) on Sale of Assets

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Deferred Financing Costs

Fees paid to lenders and third-party costs incurred to obtain debt are recorded as a direct adjustment to the carrying amount of debt and amortized on a straight-line basis, which approximates the effective yield method, over the term of the related debt.

Unamortized deferred financing costs are written-off if the associated debt is retired before the maturity date.

Upon the refinancing of mortgage debt or amendment of the line of credit, unamortized deferred financing costs and additional financing costs incurred are accounted for in accordance with ASC 470-50, Debt Modifications and Extinguishments.

Costs and fees incurred with third parties that directly relate to obtaining new long-term debt (excluding the Company's line-of-credit discussed further below) are recorded as a direct adjustment to the carrying amount of long-term debt.

The Company amortizes deferred financing costs on a straight-line basis, which approximates the effective yield method over the term of the related debt.

The Company presents deferred financing costs related to line-of-credit facilities as an asset on the consolidated balance sheet, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement.

Stock-Based Compensation

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The Company evaluates if grant-date fair value adjustments are necessary based on whether the Company is in possession of material non-public information at the grant date and the changes in the Company’s stock price subsequent to the release of such information and no adjustments were made.

Generally, the cost is recognized as compensation expense ratably over the employee's requisite service period.

The Company recognizes forfeitures of stock-based awards as they occur and any previously recognized compensation expense is reversed for forfeited awards.

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The number of shares that ultimately vest can range from 0 % to 150 % of the stock-based awards granted depending on the level of achievement of the performance criteria.

stockholder return relative to the percentage appreciation of a specified index of companies for the respective three-year measurement period.

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

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

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

Assets Held for Sale

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

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

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

The Company evaluates the fair value of the assets held for sale each period to determine if it has changed.

The long-lived assets are not depreciated while classified as held for sale.

Property, Plant and Equipment and Leasehold Intangibles, Net

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Investment in Unconsolidated Ventures

The initial carrying amount of investments in unconsolidated ventures is based on the amount paid to purchase the investment or its fair value in the case of a retained noncontrolling interest upon deconsolidation of a former subsidiary.

The initial carrying amount of investment in unconsolidated ventures is based on the amount paid to purchase the investment or its fair value in the case of a retained noncontrolling interest upon deconsolidation of a former subsidiary.

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

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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.

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.

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Although the Company maintains general liability and professional liability insurance policies for its owned, leased, and managed communities under a master insurance program, the Company's current policies provide for deductibles for each claim and contain various exclusions from coverage.

As a result, the Company is, in effect, self-insured for claims that are less than the deductible amounts, for claims that exceed the funding level of the Company’s wholly-owned captive insurance company, and for claims or portions of claims that are not covered by such policies and/or exceed the policy limits.

The Company uses its wholly-owned captive insurance company for the purpose of insuring certain portions of its risk retention under its general and professional liability insurance programs.

Accordingly, the Company is, in effect, self-insured for claims that are less than the deductible amounts, for claims that exceed the funding level of the Company’s wholly-owned captive insurance company, and for claims or portions of claims that are not covered by such policies and/or exceed the policy limits.

In addition, the Company maintains a high deductible workers' compensation program and a self-insured employee medical program.

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

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

ASU 2016-02 requires a lessee to recognize a right-of-use asset and a lease liability on the consolidated balance sheet for most leases.

Additionally, ASU 2016-02 made targeted changes to lessor accounting, including changes to align certain aspects with the revenue recognition model, and enhanced disclosure of lease arrangements.

In July 2018, the FASB issued ASU 2018-11, Leases, Targeted Improvements ("ASU 2018-11"), which provides entities with a transition method option to not restate comparative periods presented, but to recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption, and a practical expedient allowing lessors to not separate nonlease components from the associated lease components when certain criteria are met.

The Company adopted these lease accounting standards effective January 1, 2019 and utilized the modified retrospective transition method with no adjustments to comparative periods presented.

Additionally, the Company elected the package of practical expedients within ASU 2016-02

that allows an entity to not reassess, as of January 1, 2019, its prior conclusions on whether an existing contract contains a lease, lease classification for existing leases, and whether costs incurred for existing leases qualify as initial direct costs.

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

The Company's adoption of ASU 2016-02 resulted in the recognition of operating lease liabilities of $ 1.6 billion and right-of-use assets of $ 1.3 billion on the consolidated balance sheet for its existing community, office, and equipment operating leases based on the remaining present value of the minimum lease payments as of January 1, 2019.

The future minimum lease payments recognized on the consolidated balance sheet included fixed payments (including in-substance fixed payments) and variable payments estimated utilizing the index or rate as of January 1, 2019.

Such right-of-use asset amounts were recognized based upon the amount of the recognized lease liabilities, adjusted for accrued lease payments, intangible assets, and the recognition of right-of-use asset impairments.

As of December 31, 2018, the Company had a net liability of $ 231.4 million recognized on its consolidated balance sheet for accrued lease payments and intangible assets for operating leases.

Additionally, $ 58.1 million of previously unrecognized right-of-use asset impairments were recognized as a cumulative effect adjustment to beginning accumulated deficit as of January 1, 2019.

In addition to the previously unrecognized right-of-use asset impairment of $ 58.1 million, the Company recognized cumulative effect adjustments to beginning accumulated deficit as of January 1, 2019 for the impact of the adoption of accounting standards by its equity method investees and the deferred tax impact of these adjustments.

The recognition of the right-of-use assets and corresponding liabilities and the removal of the deferred tax position related to these leases as of December 31, 2018 had a $ 0.3 million impact on the Company's net deferred tax position.

A deferred tax asset of $ 14.1 million and an increase to the valuation allowance of $ 13.8 million was recorded against accumulated deficit reflecting the tax impact of the previously unrecognized right-of-use asset impairments.

The adoption of the new accounting standards resulted in the following adjustments to the Company's consolidated balance sheet as of January 1, 2019.

(in millions)

Property, plant and equipment and leasehold intangibles, net $ ( 11 )

Operating lease right-of-use assets 1,329

Investment in unconsolidated ventures ( 2 )

Other intangible assets, net ( 5 )

Other assets, net ( 6 )

Total assets $ 1,305

Liabilities and Equity

Operating lease obligations $ 1,618

Deferred liabilities ( 257 )

Total liabilities 1,361

Total equity ( 56 )

Total liabilities and equity $ 1,305

In March 2020, the FASB issued ASU 2020-04, Facilitation of the Effects of Reference Rate Reform on Financial Reporting ("ASU 2020-04"), which provides optional guidance for a limited period of time through December 31, 2022 to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on contracts, hedging relationships, and other transactions that reference the London Inter-Bank Offered Rate ("LIBOR") or other reference rates expected to be discontinued.

In December 2022, the FASB issued ASU 2022-06, Reference Rate Reform (Topic 848):

Deferral of the Sunset Date of Topic 848) , which deferred the sunset date of this guidance to December 31, 2024.

The guidance may be elected over time and the Company elected the optional practical expedient provided by ASU 2020-04 for debt contract modifications related to the discontinuation of reference rates.

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This guidance also eliminates the treasury stock method to calculate diluted earnings per share for convertible instruments and requires the use of the if-converted method.

Company early adopted ASU 2020-06 effective January 1, 2021 using the modified retrospective method of adoption.

Subsequent to the Company's adoption of ASU 2020-06, the Company's issuance of $ 230.0 million principal amount of 2.00 % convertible senior notes due 2026 (the "Notes") on October 1, 2021 was recognized as a single liability presented as long-term debt measured at its amortized cost within the Company’s consolidated balance sheet rather than separate presentation of the embedded conversion feature at fair value within stockholders’ equity.

The Company early adopted ASU 2020-06 effective January 1, 2021 using the modified retrospective method of adoption.

debt measured at its amortized cost within the Company’s consolidated balance sheet rather than separate presentation of the embedded conversion feature at fair value within stockholders’ equity.

Reclassifications

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COVID-19 Pandemic

The COVID-19 pandemic significantly disrupted the senior living industry and the Company's business beginning in March 2020.

The COVID-19 pandemic has adversely impacted the Company's occupancy and resident fee revenue beginning in March 2020, resulted in incremental direct costs to respond to the pandemic, and for the year ended December, 31, 2021, resulted in net cash used in operating activities.

The health and wellbeing of the Company's residents and associates has been and continues to be its highest priority.

As of January 31, 2022, substantially all of the Company’s communities were open for new resident move-ins.

The Company may revert to more restrictive measures at its communities, including restrictions on visitors and move-ins, if the pandemic worsens, as a result of infections at a community, as necessary to comply with regulatory requirements, or at the direction of authorities having jurisdiction.

Pandemic-Related Expenses .

In the aggregate, for the years ended December 31, 2021 and 2020, the Company has incurred $ 173.2 million of facility operating expense for incremental direct costs to respond to the pandemic, including $ 47.7 million and $ 125.5 million, for the years ended December 31, 2021 and 2020, respectively.

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;

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

For the years ended December 31, 2021 and 2020, the Company recorded $ 23.0 million and $ 105.6 million, respectively, of non-cash impairment charges in its operating results for its operating lease right-of-use assets and property, plant, and equipment and leasehold intangibles, primarily due to the COVID-19 pandemic and lower than expected operating performance at certain communities.

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.

Government Provided 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, provided liquidity and financial relief to certain businesses, among other things.

Certain impacts of such programs are provided below.

• During the years ended December 31, 2021 and 2020, the Company accepted $ 0.8 million and $ 109.8 million, respectively, of cash from grants from the Public Health and Social Services Emergency Fund ("Provider Relief Fund") administered by 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.

During the three months ended December 31, 2021, the Company applied for the Phase 4 general distribution from the Provider Relief Fund.

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 years ended December 31, 2022, 2021, and 2020, the Company accepted $ 61.1 million, $ 0.8 million, and $ 109.8 million, respectively, of cash from grants from the Public Health and Social Services Emergency Fund ("Provider Relief Fund") administered by U.S.

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

• 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 former Health Care Services segment and $ 12.3 million of which related to its CCRCs segment.

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 the year ended December 31, 2021, $ 20.8 million of the advanced payments were recouped.

During the years ended December 31, 2022 and 2021, $ 3.1 million and $ 20.8 million, respectively, of the advanced payments were recouped per the terms of the program.

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 former Health Care Services segment were retained by the unconsolidated HCS Venture.

As of December 31, 2021, the outstanding balance of advanced payments related to the CCRCs segment was $ 3.1 million.

As of December 31, 2022, the Company has no remaining obligations under the program.

• 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.

Pursuant to the sale of 80 % of the Company's equity in its Health Care Services segment, $ 9.6 million of such obligations related to its former Health Care Services segment were retained by the unconsolidated HCS Venture.

In December 2021,

the Company paid $ 31.6 million of its retained deferred amount and the remaining deferred amount of $ 31.6 million is due December 31, 2022.

• The Company was eligible to claim the employee retention credit for certain of its associates under the CARES Act.

The credit for 2020 was 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 was 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.

In both December 2021 and 2022, the Company paid $ 31.6 million of its retained deferred amount.

As of December 31, 2022, the Company has no remaining obligations for the deferred payroll tax program.

• The Company was eligible to claim the employee retention credit on wages paid from March 12, 2020 to December 31, 2021 for certain of its associates under the CARES Act and subsequent legislation.

During the year ended December 31, 2021, the Company recognized $ 9.9 million of employee retention credits on wages paid from March 12, 2020 to December 31, 2020 within other operating income, for which the Company has received $ 4.6 million in cash as of December 31, 2022.

The Company recognized a receivable for the remaining $ 6.5 million within prepaid expenses and other current assets, net on the consolidated balance sheet as of December 31, 2021.

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 years ended December 31, 2021 and 2020, the Company received and recognized $ 1.7 million and $ 5.9 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 initiatives, including plans for future growth.

During the year ended December 31, 2022, the Company recognized $ 9.4 million of employee retention credits on wages paid in 2021 within other operating income.

The Company has a receivable for $ 14.7 million and $ 6.5 million included within prepaid expenses and other current assets, net on the consolidated balance sheets as of December 31, 2022 and 2021, respectively.

In addition to the grants previously described, during the years ended December 31, 2022, 2021, and 2020, the Company recognized $ 10.0 million, $ 1.7 million, and $ 5.9 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 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 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;

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;

restrictions on visitors and move-ins at the Company's communities as a result of infections at a community or as necessary to comply with regulatory requirements or at the direction of authorities having jurisdiction;

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

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

potentially greater use of contract labor and overtime due to COVID-19 and general labor market conditions;

greater use of contract labor and other premium labor due to COVID-19 and general labor market conditions;

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;

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

Acquisitions, Dispositions, and Other Significant Transactions

Acquisitions, Dispositions, and Other Significant Leasing Transactions

Sale of Health Care Services

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As of July 1, 2021, the Company recognized a $ 100.0 million asset within investment in unconsolidated ventures on its consolidated balance sheet for the estimated fair value of its retained 20 % noncontrolling interest in the HCS Venture.

The Company recognized a $ 286.5 million gain on sale, net of transaction costs, within its consolidated

statement of operations for the year ended December 31, 2021 for the HCS Sale.

The Company recognized a $ 286.5 million gain on sale, net of transaction costs, within its consolidated statement of operations for the year ended December 31, 2021 for the HCS Sale.

Refer to Note 21 for selected financial data for the Health Care Services segment through June 30, 2021.

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Upon the completion of the sale, the Company received $ 35.0 million of cash distributions from the HCS Venture from the net sale proceeds, which decreased its investment in unconsolidated ventures.

The Company continues to own a 20 % equity interest in the remaining HCS Venture, which continues to operate home health, hospice, and outpatient therapy agencies in areas served by HCA Healthcare.

The Company continues to own a 20 % equity interest in the remaining HCS Venture, which continues to operate home health and hospice agencies in areas served by HCA Healthcare.

Community Transactions

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("Healthpeak"), announced on October 1, 2019, which together restructured a significant portion of the Company's triple-net lease obligations.

As a result of the transactions with Healthpeak, as well as other community transactions, the Company acquired 27 communities that the Company formerly leased or managed and sold substantially all of its ownership interests in unconsolidated senior housing ventures during 2019 through 2021.

Additionally, the Company disposed of an aggregate of 24 owned communities (including the conveyance of five communities to Ventas) and the Company's triple-net lease obligations on 17 communities were terminated from 2019 to 2021 ( ten in 2019, five in 2020, and two in 2021).

As a result of the transactions with Healthpeak, as well as other community transactions, the Company acquired 28 communities that the Company formerly leased and sold substantially all of its ownership interests in unconsolidated senior housing ventures during 2020 through 2022.

Additionally, the Company completed the disposition of 22 communities from 2020 to 2022 through the sale of seven owned communities, the conveyance of five communities to Ventas, and the termination of the Company's triple-net lease obligations on 10 communities ( five in 2020, two in 2021, and three in 2022).

The following table sets forth the amounts included within the Company's consolidated financial statements for the 22 communities that it disposed of through sales, conveyances, and lease terminations for the years ended December 31, 2022, 2021, and 2020 through the respective disposition dates.

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Senior housing facility operating expense $ 6,408 $ 27,913 $ 67,601

Cash lease payments $ 1,726 $ 6,752 $ 11,014

As of December 31, 2021, two communities in the Assisted Living and Memory Care segment were classified as held for sale, resulting in $ 3.6 million being recorded as assets held for sale within the consolidated balance sheet.

The closings of the sales of the communities are subject to the satisfaction of various closing conditions, including (where applicable) the receipt of regulatory approvals.

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

Completed Dispositions of Owned Communities

During the year ended December 31, 2021, the Company completed the sale of three owned communities for cash proceeds of $ 16.5 million, net of transaction costs, and recognized a net gain on sale of assets of $ 0.3 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.

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

During the year ended December 31, 2022, the Company completed the sale of two owned communities for cash proceeds of $ 4.4 million, net of transaction costs.

During the year ended December 31, 2021, the Company completed the sale of three owned communities for cash proceeds of $ 16.5 million, net of transaction costs.

Ventas Lease Restructuring

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

Pursuant to the terms of the Guaranty, the Company may consummate a change of control transaction without the need for consent of Ventas so long as certain objective conditions are satisfied, including the post-transaction guarantor’s maintaining a minimum tangible net worth of at least $ 600.0 million, having minimum levels of operational experience and reputation in the senior living industry, and paying a change of control fee of $ 25.0 million to Ventas.

senior living industry, and paying a change of control fee of $ 25.0 million to Ventas.

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

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

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

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

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

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

The Warrant and the shares issuable upon exercise thereof were issued in a private placement pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended.

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

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

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

The Company’s net cash provided by operating activities for the year ended December 31, 2020 includes the $ 119.2 million one-time cash lease

payment made to Ventas in connection with its lease restructuring transaction effective July 26, 2020.

See Note 20 for more information regarding the adjustments to the Company’s consolidated balance sheet as a result of this transaction.

Healthpeak CCRC Venture and Master Lease Transactions

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

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

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

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• CCRC Venture Transaction.

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

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

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

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

(i) has an initial term to expire on December 31, 2027, subject to two extension options at the Company's election for ten years each, which must be exercised with respect to the entire pool of leased communities;

(i) has an initial term to expire on December 31, 2027;

(ii) the initial annual base rent for the 24 communities is $ 41.7 million and is subject to an escalator of 2.4 % per annum on April 1st of each year;

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

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

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

During the year ended December 31, 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.

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Marketable Securities

As of December 31, 2021, marketable securities of $ 182.4 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 December 31, 2022 and 2021, marketable securities of $ 48.7 million and $ 182.4 million, respectively, are stated at fair value based on valuations provided by third-party pricing services and are classified within Level 2 of the valuation hierarchy.

Investment in Unconsolidated Ventures

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Interest Rate Derivatives

The Company's derivative assets include interest rate caps that effectively manage the risk above certain interest rates for a portion of the Company's variable rate debt.

The derivative positions are valued using models developed internally by the respective counterparty that use as their basis readily available observable market parameters (such as forward yield curves) and

are classified within Level 2 of the valuation hierarchy.

The Company's derivative assets include interest rate cap and swap instruments that effectively manage the risk above certain interest rates for a portion of the Company's long-term variable rate debt.

The Company has not designated the interest rate cap and swap instruments as hedging instruments and as such, changes in the fair value of the instruments are recognized in earnings in the period of the change.

The interest rate derivative positions are valued using models developed by the respective counterparty that use as their basis readily available observable market parameters (such as forward yield curves) and are classified within Level 2 of the valuation hierarchy.

The Company considers the credit risk of its counterparties when evaluating the fair value of its derivatives.

The following table summarizes the Company's interest rate cap instruments as of December 31, 2021.

The following table summarizes the Company's LIBOR and Secured Overnight Financing Rate ("SOFR") interest rate cap instruments as of December 31, 2022.

($ in thousands)

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Latest maturity date 2025

Weighted average remaining term 1.2 years

Estimated asset fair value (included in other assets, net) at December 31, 2022 $ 10,599

Estimated asset fair value (included in other assets, net) at December 31, 2021 $ 313

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 following table summarizes the Company's SOFR interest rate swap instrument, purchased in November 2022, as of December 31, 2022.

($ in thousands)

Current notional balance $ 220,000

Fixed interest rate 3.00 %

Remaining term 1.3 years

Estimated asset fair value (included in other assets, net) at December 31, 2022 $ 4,834

Long-term debt

The Company estimates the fair value of its debt primarily 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 estimates the fair value of its convertible senior notes based on valuations provided by third-party pricing services.

The Company had outstanding long-term debt with a carrying amount of approximately $ 3.9 billion and $ 3.8 billion as of December 31, 2022 and 2021, respectively.

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

Fair value of the long-term debt is approximately $ 3.4 billion as of December 31, 2022 and approximates the carrying amount as of December 31, 2021.

The Company's fair value of long-term debt disclosure is classified within Level 2 of the valuation hierarchy.

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Assets held for sale — — 0.2

Other assets, net — — 10.6

Asset impairment $ 29.6 $ 23.0 $ 107.3

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

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

In estimating the recoverability of asset groups for purposes of the Company’s long-lived asset impairment testing, the Company utilizes future cash flow projections that are developed internally.

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

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

As of December 31, 2021 and 2020 there was a wide range of possible outcomes as a result of the pandemic, as there was a high degree of uncertainty about its ultimate impact.

Management’s estimates of the impact of the pandemic are highly

dependent on variables that are difficult to predict, as further described in Note 3.

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

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

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

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

During the year ended December 31, 2022, the Company recognized the right-of-use assets for the operating leases for eight communities on the consolidated balance sheet at the estimated fair value of $ 30.9 million.

During the year ended December 31, 2021, the Company recognized the right-of-use assets for the operating leases for 11 communities on the consolidated balance sheet at the estimated fair value of $ 31.0 million.

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

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

During the three months ended September 30, 2020, the Company recognized the right-of-use assets for the operating leases for two communities on the consolidated balance sheets at the estimated fair value of $ 3.0 million.

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

During the year ended December 31, 2020, the Company recognized the right-of-use assets for the operating leases for 42 communities on the consolidated balance sheet at the estimated fair value of $ 117.9 million.

In the aggregate, the Company recorded a non-cash impairment charge of $ 13.7 million, $ 16.6 million, and $ 76.3 million for the years ended December 31, 2022, 2021, and 2020, respectively, to operating lease right-of-use assets.

These impairment charges in 2021 and 2020 are primarily due to the COVID-19 pandemic and the lower than expected operating performance at these communities and reflect the amount by which the carrying amounts of the assets exceeded their estimated fair value.

The Company's adoption of ASU 2016-02 resulted in the recognition of the right-of-use assets for the operating leases for 25 communities on the consolidated balance sheet as of January 1, 2019 at the estimated fair value of $ 56.6 million, and $ 58.1 million of previously unrecognized right-of-use asset impairments were recognized as a cumulative effect adjustment to accumulated deficit as the Company determined that the long-lived assets of such communities were not recoverable as of such date.

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

These impairment charges are primarily due to decreased occupancy and cash flow estimates at these

communities as a result of the COVID-19 pandemic and the lower than expected operating performance at these communities and reflect the amount by which the carrying amounts of the assets exceeded their estimated fair value.

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

The estimated future cash flows were discounted at a rate that is consistent with a weighted average cost of capital from a market participant perspective.

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

Property, Plant and Equipment and Leasehold Intangibles, Net

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

The range of capitalization rates utilized was 7.0 % to 9.0 %, depending upon the property type, geographical location, and the quality of the respective community.

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

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

Disaggregation of Revenue

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

Year Ended December 31, 2021

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

Private pay $ 473,740 $ 1,521,588 $ 212,981 $ 601 $ 2,208,910

Government reimbursement 1,798 68,133 57,362 134,083 261,376

Other third-party payor programs — — 34,082 39,480 73,562

Total resident fee revenue $ 475,538 $ 1,589,721 $ 304,425 $ 174,164 $ 2,543,848

Year Ended December 31, 2020

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

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

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

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

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

Year Ended December 31, 2019

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

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

Resident fee revenue by payor source is as follows.

For the Years Ended December 31,

2022 2021 2020

Private pay 93.5 % 86.8 % 81.9 %

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Other third-party payor programs 1.4 % 2.9 % 3.6 %

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

Contract Balances

The sale of 80 % of the Company's equity in its Health Care Services segment on July 1, 2021 reduced its revenue from government reimbursement programs.

Government reimbursements represented 18.0 %, 18.8 %, and 18.5 % of resident fee revenue for the CCRCs segment for the years ended December 31, 2022, 2021, and 2020, respectively.

Refer to Note 21 for disaggregation of revenue by reportable segment.

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.

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The Company had total deferred revenue (included within refundable fees and deferred revenue, and other liabilities within the consolidated balance sheets) of $ 67.3 million and $ 67.5 million, including $ 25.2 million and $ 27.5 million of monthly resident fees billed and received in advance, as of December 31, 2022 and 2021, respectively.

During the year ended December 31, 2020, the Company received $ 87.5 million under the Accelerated and Advance Payment Program administered by CMS, of which $ 3.1 million and $ 87.5 million was included in such total deferred revenue as of December 31, 2021 and 2020, respectively.

Refer to Note 3 for additional information on such program.

Pursuant to the HCS Sale, $ 63.6 million of such obligations related to the Company's Health Care Services segment were retained by the HCS Venture and therefore derecognized from the Company's consolidated balance sheet.

For the years ended December 31, 2022, 2021, and 2020 the Company recognized $ 54.5 million, $ 60.2 million, and $ 60.6 million respectively, of revenue that was included in the deferred revenue balance as of January 1, 2022, 2021, and 2020, respectively.

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For the years ended December 31, 2022, 2021, and 2020, the Company recognized depreciation and amortization expense on its property, plant and equipment and leasehold intangibles of $ 347.4 million, $ 337.6 million, and $ 359.2 million, respectively.

The following is a summary of the carrying amount of goodwill presented on a reportable segment basis.

December 31, 2021

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

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

Assisted Living and Memory Care 605,469 ( 48,817 ) ( 556,652 ) —

Total $ 633,610 $ ( 49,637 ) $ ( 556,652 ) $ 27,321

December 31, 2020

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

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

Assisted Living and Memory Care 605,469 ( 48,817 ) ( 556,652 ) —

Health Care Services 126,810 — — 126,810

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

The Company's Health Care Services segment had a carrying amount of goodwill of $ 126.8 million as of December 31, 2020, which was derecognized upon completion of the HCS Sale on July 1, 2021.

Long-term debt consists of the following.

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Fixed mortgage notes payable due 2024 through 2047;

weighted average interest rate of 4.14 % and 4.18 % as of December 31, 2021 and 2020, respectively.

weighted average interest rate of 4.14 % as of both December 31, 2022 and 2021.

$ 2,055,867 $ 2,164,115

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Convertible notes payable due October 2026;

weighted average interest rate of 2.00 % as of December 31, 2021.

Other notes payable;

weighted average interest rate of 8.98 % as of December 31, 2020.

interest rate of 2.00 % as of both December 31, 2022 and 2021.

230,000 230,000

Tangible equity units senior amortizing notes due November 2025;

interest rate of 10.25 % as of December 31, 2022.

Deferred financing costs, net ( 29,866 ) ( 29,846 )

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The Notes bear interest at 2.00 % per year, payable semi-annually in arrears in cash on April 15 and October 15 of each year, beginning on April 15, 2022.

The Notes will mature on October 15, 2026, unless earlier converted, redeemed, or repurchased in accordance with their terms.

The Notes will mature on October 15, 2026, unless earlier converted, redeemed, or repurchased in

accordance with their terms.

Holders of the Notes may convert all or any portion of their Notes at their option at any time prior to the close of business on the business day immediately preceding July 15, 2026, only under the following circumstances:

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The agreement provides a commitment amount of up to $ 80.0 million which can be drawn in cash or as letters of credit.

The agreement matures on January 15, 2024.

Amounts drawn under the facility will bear interest at 30-day LIBOR plus an applicable margin which was 2.75 % as of December 31, 2021.

The credit facility matures on January 15, 2024 and the Company has the option to extend the facility for two additional terms of one year each subject to the satisfaction of certain conditions.

The revolving credit agreement was amended in 2022 to reference SOFR rather than LIBOR due to the expected discontinuance of LIBOR.

Amounts drawn under the facility will bear interest at SOFR plus an applicable margin which was 2.75 % as of December 31, 2022.

Additionally, a quarterly commitment fee of 0.25 % per annum was applicable on the unused portion of the facility as of December 31, 2022.

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

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

As of December 31, 2022, $ 72.6 million of letters of credit and no cash borrowings were outstanding under the Company's $ 80.0 million secured credit facility.

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2022 Financings

On December 17, 2021, the Company obtained $ 100.0 million of debt secured by the non-recourse first mortgages on 11 communities.

The loan bears interest at a variable rate equal to the 30-day Secured Overnight Financing Rate ("SOFR") plus a margin of 215 basis points and matures in January 2025, with the option to extend for two additional terms of one year each.

On October 13, 2022, the Company obtained $ 220.0 million of debt secured by first priority mortgages on 24 communities.

The loan bears interest at a variable rate equal to SOFR plus a margin of 245 basis points and is interest only for the first three years .

The debt matures in October 2025 with two one-year renewal options, exercisable by the Company subject to the satisfaction of certain conditions.

The debt documents contain a requirement for the Company to maintain liquidity of at least $ 130.0 million and 25 % of the loan amount is subject to a guaranty by the Company.

The proceeds from the financing were primarily utilized to repay $ 199.6 million of outstanding mortgage debt previously scheduled to mature in 2023 and to purchase a SOFR interest rate swap instrument for $ 6.1 million.

The interest rate swap instrument has a $ 220.0 million notional amount, a fixed interest rate of 3.0 %, and a term of eighteen months .

2021 Financings

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

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

The debt matures in February 2030.

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

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

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

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

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

The loan bears interest at a variable rate equal to the 30-day LIBOR plus a margin of 250 basis points and matures in March 2022, with the option to extend for one year subject to certain financial covenants.

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

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

The debt matures in April 2030.

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

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

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

The debt matures in September 2030.

The $ 266.9 million of proceeds from the financing were primarily utilized to repay the outstanding principal amount under the Credit Agreement and to cash collateralize letters of credit.

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

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

The debt matures in October 2030.

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

On December 17, 2021, the Company obtained $ 100.0 million of debt secured by the non-recourse first mortgages on 11 communities.

The loan bears interest at a variable rate equal to SOFR plus a margin of 215 basis points and matures in January 2025, with the option to extend for two additional terms of one year each.

Financial Covenants

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The leases generally provide for renewal or extension options from 5 to 20 years and in some instances, purchase options.

For accounting purposes, renewal or extension options are included in the lease term at lease inception or modification when it is reasonably certain that the Company will exercise the option.

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

As of December 31, 2022, none of the Company's renewal or extension option periods are included in the lease term for accounting purposes.

The community leases contain other customary terms, which may include assignment and change of control restrictions, maintenance and capital expenditure obligations, termination provisions, and financial covenants, such as those requiring the Company to maintain prescribed minimum 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.

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As of December 31, 2022, the weighted average discount rate of the Company's operating and financing leases was 7.6 % and 8.3 %, respectively.

In the three months ended December 31, 2022, the Company and a lessor entered into an amendment to the Company’s existing master lease pursuant to which the Company continues to lease 24 communities.

The amendment removed certain asset repurchase clauses and adjusted the extension option provisions.

The amendment did not change the amount of required lease payments or the initial term of the lease.

The leases for 16 of these communities were previously accounted for as failed sale-leaseback transactions as the Company had not previously transferred control of the underlying assets for accounting purposes.

The Company determined that the adjustment of the extension option provisions and the removal of the asset repurchase clauses in December 2022 resulted in the transfer of control of the assets of the 16 communities for accounting purposes and resulted in qualification as a sale.

The Company recognized a $ 73.9 million non-cash gain on sale of communities for the transaction in the three months ended December 31, 2022.

In addition, the amended leases for such communities are prospectively classified as operating leases as of December 31, 2022, the effective date of the amendment.

The prospective reclassification of such lease costs to operating lease expense resulted in a $ 22.2 million increase in minimum lease payments due for operating leases in 2023 and an offsetting decrease in minimum lease payments due for financing leases in 2023.

See Note 20 for more information regarding the impact to the Company’s consolidated balance sheet as a result of this transaction.

The aggregate amounts of future minimum lease payments, including community, office, and equipment leases, recognized on the consolidated balance sheet as of December 31, 2022 (after giving effect to the change in lease classification for the lease amendment previously described) are as follows (in thousands).

Year Ending December 31, Operating Leases Financing Leases

9 unchanged sentences

Total lease obligations $ 793,731 $ 248,860

Tangible Equity Units

During the three months ended December 31, 2022, the Company issued 2,875,000 of its 7.00 % tangible equity units (the “Units”) at a public offering price of $ 50.00 per Unit for an aggregate offering of $ 143.8 million.

The Company received proceeds of $ 139.4 million after the deduction of the underwriters’ discount.

Each Unit is comprised of a prepaid stock purchase contract and a senior amortizing note with an initial principal amount of $ 8.8996 .

Under each purchase contract, the Company is obligated to deliver to the holder on November 15, 2025 a minimum of 12.9341 , and a maximum of 15.1976 , shares of the Company’s common stock depending on the daily volume-weighted average price ("VWAPs") of its common stock for the 20 trading days preceding the settlement date.

Each amortizing note bears interest at the rate of 10.25 % per annum, requires quarterly installment payments of principal and interest, and has a final installment payment date of November 15, 2025.

The cash installment payments will be equivalent to 7.00 % per year with respect to each $ 50.00 stated amount of Unit.

The Units, purchase contracts, and amortizing notes are subject to the terms and conditions set forth in the Purchase Contract Agreement dated November 21, 2022 between the Company and American Stock Transfer & Trust Company, LLC ("AST") as purchase contract agent, and the Indenture and First Supplemental Indenture, each dated November 21, 2022, between the Company and AST as trustee, including certain early settlement, repurchase, and adjustment events as set forth therein.

Subsequent to issuance, each Unit may be legally separated into the two components, both of which are freestanding instruments and separate units of account.

The Company allocated the proceeds from the issuance of the Units to the purchase contracts and amortizing notes based on the relative fair values of the respective components, determined as of the date of issuance of the Units.

The Company recognized the issuance of the purchase contract portion of the Units, net of issuance costs, as additional paid-in-capital on the consolidated balance sheet.

The Company separately recognized the amortizing notes portion of the Units, net of issuance costs, as long-term debt on the consolidated balance sheet.

The proceeds from the issuance of the Units were allocated to equity and debt based on the relative fair value of the respective components of each Unit as follows:

(in thousands, except value per unit) Equity Component Debt Component Total

Value per unit $ 41.10 $ 8.90 $ 50.00

Gross proceeds $ 118,164 $ 25,586 $ 143,750

underwriters' discount ( 3,544 ) ( 768 ) ( 4,312 )

Proceeds from issuance of Units $ 114,620 $ 24,818 $ 139,438

issuance costs ( 1,163 ) ( 252 ) ( 1,415 )

Net proceeds $ 113,457 $ 24,566 $ 138,023

Unless settled early in accordance with the terms of the instruments, each prepaid stock purchase contract will automatically settle on November 15, 2025 (the mandatory settlement date) for a number of shares of the Company’s common stock based on the arithmetic average of the VWAPs of the Company’s common stock on each of the 20 consecutive trading days beginning on, and including, the 21st scheduled trading day immediately preceding November 15, 2025 (applicable market value) with reference to the following settlement rates:

Applicable Market Value Common Stock Issued

Equal to or greater than the threshold appreciation price 12.9341 shares (minimum settlement rate)

Less than the threshold appreciation price, but greater than the reference price $ 50 divided by applicable market value

Less than or equal to the reference price 15.1976 shares (maximum settlement rate)

The threshold appreciation price is initially approximately equal to $ 3.87 and the reference price is initially approximately equal to $ 3.29 .

Accrued Expenses

2 unchanged sentences

(in thousands) 2022 2021

Salaries and wages $ 60,601 $ 65,310

Insurance reserves $ 65,757 $ 55,309

Deferred payroll taxes (Note 3)

31,553 36,336

Paid time off 26,821 37,848

Employee compensation 64,838 60,601

Real estate taxes 26,661 25,826

Paid time off 20,772 26,821

Interest 17,569 11,239

Utilities 8,533 7,430

Taxes payable 1,978 3,806

Income taxes payable 2,081 1,978

Deferred payroll taxes (Note 3) — 31,553

Other 30,937 34,074

2 unchanged sentences

As of December 31, 2022, the Company holds a 20 % equity interest, and HCA Healthcare owns an 80 % interest, in the HCS Venture, and the Company has determined the HCS Venture is a VIE.

The HCS Venture operates home health and hospice agencies in the United States.

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

The Company's interest in the HCS Venture is accounted for under the equity method of accounting.

The carrying amount of the Company's investment in the unconsolidated venture and maximum exposure to loss as a result of the Company's ownership interest in the HCS Venture was $ 62.5 million, which is included in investments in unconsolidated ventures on the accompanying consolidated balance sheet, as of December 31, 2021.

As of December 31, 2021, the Company is not required to provide financial support, through a liquidity arrangement or otherwise, to its unconsolidated VIE.

The carrying amount of the Company's investment in the unconsolidated venture and maximum exposure to loss as a result of the Company's ownership interest in the HCS Venture was $ 49.8 million, which is included in investment in unconsolidated ventures on the accompanying consolidated balance sheet, as of December 31, 2022.

As of December 31, 2022, the Company is not required to provide financial support, through a liquidity arrangement or otherwise, to the HCS Venture.

Refer to Note 4 for information on the formation of the HCS Venture.

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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.

The Company uses its wholly-owned captive insurance company for the purpose of insuring certain portions of its risk retention under its general and professional liability insurance programs.

Accordingly, the Company is, in effect, self-insured for claims that are less than the deductible amounts, for claims that exceed the funding level of the Company's wholly-owned captive insurance company, and for claims or portions of claims that are not covered by such policies and/or exceed the policy limits.

The senior living and healthcare industries are continuously subject to scrutiny by governmental regulators, which could result in reviews, audits, investigations, enforcement actions, or litigation related to regulatory compliance matters.

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In addition to identifying overpayments, audit contractors can refer suspected violations to government authorities.

In addition, states' Attorneys General vigorously enforce consumer protection laws as those laws relate to the senior living industry.

An adverse outcome of government scrutiny may result in citations, sanctions, other criminal or civil fines and penalties, the refund of overpayments, payment suspensions, termination of participation in Medicare and Medicaid programs, and damage to the Company’s business reputation.

1 unchanged sentence

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 asserted 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.

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

The district court dismissed the lawsuit and entered judgment in favor of the defendants in September 2021, and the plaintiffs did not file an appeal.

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, which was subsequently transferred to the Middle District of Tennessee.

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, which were subsequently transferred to the Middle District of Tennessee.

The derivative lawsuits are currently pending and assert 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.

The complaints incorporate substantively similar allegations to the securities lawsuit previously described.

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

1 unchanged sentence

The Company obtains various insurance coverages, including general and professional liability and workers' compensation programs, from commercial carriers at stated amounts as defined in the applicable policy.

The Company's current general and

professional liability policies provide for deductibles for each claim and contain various exclusions from coverage.

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

The Company uses its wholly-owned captive insurance company for the purpose of insuring certain portions of its risk retention under its general and professional liability insurance programs.

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

1 unchanged sentence

As of December 31, 2022 and 2021, the Company accrued $ 9.9 million and $ 14.3 million, respectively, of estimated amounts receivable from the insurance companies under these insurance programs.

The Company has secured self-insured retention risk under its primary workers' compensation programs with restricted cash deposits of $ 15.8 million as of both December 31, 2021 and 2020.

Letters of credit securing the programs aggregated to $ 62.1 million and $ 61.3 million as of December 31, 2021 and 2020, respectively.

In addition, the Company also had deposits of $ 6.5 million and $ 7.7 million, as of December 31, 2021 and 2020, respectively, to fund claims paid under a high deductible, collateralized insurance policy.

The Company has secured self-insured retention risk under its primary workers' compensation programs with restricted cash deposits of $ 8.4 million and $ 15.8 million as of December 31, 2022 and 2021, respectively.

Letters of credit securing the programs aggregated to $ 62.1 million as of both December 31, 2022 and 2021.

In addition, the Company also had deposits of $ 6.1 million and $ 6.5 million as of December 31, 2022 and 2021, respectively, to fund claims paid under a high deductible, collateralized workers' compensation insurance policy.

Additionally, the Company’s wholly-owned captive insurance company had restricted cash and other deposits of $ 6.0 million and $ 3.1 million as of December 31, 2022 and 2021, respectively.

Stock-Based Compensation

23 unchanged sentences

Three months ended December 31, 2022 26 $ 4.50 $ 115

Through December 31, 2021, the Company had an employee stock purchase plan for all eligible employees.

Under the plan, eligible employees of the Company could purchase shares of the Company's common stock on a quarterly basis at a discounted price through accumulated payroll deductions.

Each participating employee could elect to deduct up to 15 % of his or her base pay each quarter and no more than 200 shares could be purchased by a participating employee each quarter.

Subject to certain limitations specified in the plan, on the last trading date of each calendar quarter, the amount deducted from each participant's pay over the course of the quarter was used to purchase whole shares of the Company's common stock at a purchase price equal to 90 % of the closing market price on the New York Stock Exchange on that date.

This plan was terminated effective December 31, 2021.

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.

Basic earnings per share ("EPS") is calculated by dividing net income (loss) by the weighted average number of shares of common stock outstanding, after giving effect to the minimum number of shares issuable upon settlement of the prepaid stock purchase contract component of the Units.

Diluted EPS includes the components of basic EPS and also gives effect to dilutive common stock equivalents.

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, the Warrant, and the Notes.

Refer to Note 4 for information on the Warrant.

Refer to Note 9 for information on the issuance of the Notes on October 1, 2021.

Potentially dilutive common stock equivalents include unvested restricted stock, restricted stock units, the Warrant, the Notes, and the prepaid stock purchase contract component of the Units.

Refer to Notes 4, 8, and 10 for more information on the Warrant, Notes, and Units, respectively.

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

1 unchanged sentence

(in thousands, except for per share amounts) 2022 2021 2020

Income attributable to common stockholders:

Net income (loss) $ ( 99,290 ) $ 82,019 $ ( 267,931 )

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

stockholders $ ( 238,427 ) $ ( 99,290 ) $ 82,019

Weighted average common shares outstanding 186,574 184,975 183,498

Weighted average minimum shares issuable under purchase contracts 3,889 — —

Weighted average shares outstanding - basic 190,463 184,975 183,498

Effect of dilutive securities

Restricted stock and restricted stock units — — 137

Warrants — — 751

Weighted average shares outstanding - diluted 190,463 184,975 184,386

Net income (loss) per share attributable to common stockholders - basic $ ( 0.54 ) $ 0.45 $ ( 1.44 )

Net income (loss) per share attributable to common stockholders - diluted $ ( 0.54 ) $ 0.44 $ ( 1.44 )

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

common stockholders - basic $ ( 1.25 ) $ ( 0.54 ) $ 0.45

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

common stockholders - diluted $ ( 1.25 ) $ ( 0.54 ) $ 0.44

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 or if-converted 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 outstanding shares of common stock were excluded from the computation of diluted net income (loss) per share attributable to common stockholders because including them would have been antidilutive.

The Company has the following potentially outstanding shares of common stock, which were excluded from the computation of diluted net income (loss) per share attributable to common stockholders in periods in which including them would have been antidilutive.

As of December 31,

(in millions) 2022 (1)

2020 2019 (1)

Non-performance-based restricted stock and restricted stock units 4.7 6.8 6.4

Performance-based restricted stock and restricted stock units 0.3 1.6 1.1

Warrant 16.3 — —

Restricted stock and restricted stock units 5.4 5.0 8.4

Warrants 16.3 16.3 —

Incremental shares issuable under purchase contracts 6.5 — —

Convertible senior notes 38.3 38.3 —

Total 66.5 59.6 8.4

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

As of December 31, 2021, the maximum number of shares issuable upon conversion of the Notes is 38.3 million (after giving effect to additional shares that would be issuable upon conversion in connection with the occurrence of certain corporate or other events).

(1) As a result of the net loss reported for the period, the potentially dilutive common stock equivalents were antidilutive for the period and as such were not included in the computation of diluted weighted average shares outstanding.

As of December 31, 2022, the maximum number of shares issuable upon conversion of convertible senior notes is 38.3 million (after giving effect to additional shares that would be issuable upon conversion in connection with the occurrence of certain corporate or other events).

As of December 31, 2022, the maximum number of shares issuable upon settlement of the Units' prepaid stock purchase contracts is 43.7 million, of which 37.2 million are included in the computation of weighted average basic shares outstanding for 2022.

Share Repurchase Program

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The Company temporarily suspended purchases under the share repurchase plan in March 2020 in response to the COVID-19 pandemic.

Repurchases under the share repurchase program were as follows.

For the Years Ended December 31,

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

Total number of shares repurchased 3,063 3,005

Average price paid per share $ 5.92 $ 6.56

Aggregate purchase price $ 18,123 $ 19,710

There were no repurchases under the share repurchase program in 2021.

There were no repurchases under the share repurchase program in either 2022 or 2021.

For the year ended December 31, 2020, 3.1 million shares were repurchased for an aggregate purchase price of $ 18.1 million at an average price of $ 5.92 per share.

As of December 31, 2022, approximately $ 44.0 million remains available under the share repurchase program.

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Stock compensation ( 181 ) ( 1,856 ) ( 2,118 )

Officer compensation ( 1,107 ) ( 280 ) ( 204 )

Meals and entertainment ( 146 ) ( 169 ) ( 416 )

Other ( 2,388 ) ( 1,417 ) ( 890 )

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Operating lease obligations 199,226 208,460

Financing lease obligations 87,992 90,011

Tax credits 50,415 50,415

Accrued expenses 42,828 56,151

Intangible assets 39,360 50,576

Tax credits 50,415 50,356

Investment in unconsolidated ventures — 5,105

Financing lease obligations 12,749 87,992

Capital loss carryforward 2,140 2,205

4 unchanged sentences

Deferred income tax liabilities:

Property, plant and equipment ( 202,103 ) ( 223,703 )

Operating lease right-of-use assets ( 149,881 ) ( 158,237 )

Property, plant and equipment ( 122,377 ) ( 202,103 )

Investment in unconsolidated ventures ( 12,064 ) ( 15,051 )

1 unchanged sentence

Net deferred tax asset (liability) $ 1,604 $ 279

A reconciliation of the beginning and ending amounts of the deferred tax valuation allowance is as follows:

Year Ended Balance at beginning of period Charged to costs and expenses Charged to other accounts Deductions Balance at end of period

December 31, 2020 $ 408,903 $ ( 27,913 ) (1) $ — $ — $ 380,990

December 31, 2021 $ 380,990 $ ( 13,027 ) (2) $ — $ — $ 367,963

December 31, 2022 $ 367,963 $ 57,080 (3) $ — $ — $ 425,043

(1) Reduction of valuation allowance for federal and state net operating losses.

(2) Reduction of valuation allowance for federal and state net operating losses and credits.

(3) Increase to valuation allowance for federal and state net operating losses and credits.

As of December 31, 2022 and 2021, the Company had federal net operating loss carryforwards generated in 2017 and prior of approximately $ 802.2 million and $ 808.7 million, respectively, which are available to offset future taxable income from 2023 through 2037.

Additionally, as of December 31, 2022 and 2021, the Company had federal net operating loss carryforwards generated after 2017 of $ 659.7 million and $ 335.8 million, respectively, which have an indefinite life, but with usage limited to 80% of taxable income in any given year.

The Company had state capital loss carryforwards of $ 2.2 million and $ 2.3 million as of December 31, 2021 and 2020, respectively, which are available to offset future capital gains through 2023.

The Company had state capital loss carryforwards of $ 2.1 million and $ 2.2 million as of December 31, 2022 and 2021, respectively, which are available to offset future capital gains through 2023, and are fully offset by a valuation allowance.

The Company determined that a valuation allowance was required after consideration of the Company's estimated future reversal of existing timing differences as of December 31, 2022 and 2021.

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

For the years ended December 31, 2021 and 2020, the Company recorded a reduction to the valuation allowance of approximately $ 13.0 million and $ 27.9 million, respectively, to reflect the required valuation allowance of $ 368.0 million and $ 381.0 million as of December 31, 2021 and 2020, respectively.

The required valuation allowance as of December 31, 2022 and 2021 was $ 425.0 million and $ 368.0 million, respectively.

The Company has recorded valuation allowances of $ 372.5 million and $ 315.3 million against its federal and state net operating losses as of December 31, 2022 and 2021, respectively.

The Company has recorded a valuation allowance against its state capital loss carryforward of $ 2.2 million as of December 31, 2021.

The Company has recorded a valuation allowance against its state capital loss carryforward of $ 2.1 million and $ 2.2 million as of December 31, 2022 and 2021, respectively.

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

The Company recorded a decrease in the valuation allowance of $ 95.2 million for the year ended December 31, 2021 as a result of the HCS Sale that occurred on July 1, 2021, offset by an increase in the valuation allowance of $ 82.2 million established against current operating losses during the year ended December 31, 2021.

The Company also recorded a valuation allowance against federal and state credits of $ 50.4 million and $ 50.3 million as of December 31, 2021 and 2020, respectively.

As of December 31, 2021 and 2020, the Company had gross tax affected unrecognized tax benefits of $ 18.1 million and $ 18.4 million, respectively, of which, if recognized, would result in an income tax benefit recorded in the consolidated statement of operations.

The Company recorded a decrease in the valuation allowance of $ 95.2 million for the year

ended December 31, 2021 as a result of the HCS Sale that occurred on July 1, 2021, partially offset by an increase in the valuation allowance of $ 82.2 million established against current operating losses during the year ended December 31, 2021.

The Company also recorded a valuation allowance against federal and state credits of $ 50.4 million as of both December 31, 2022 and 2021.

As of both December 31, 2022 and 2021, the Company had gross tax affected unrecognized tax benefits of $ 18.1 million, which, if recognized, would result in an income tax benefit recorded in the consolidated statement of operations.

Interest and penalties related to these tax positions are classified as tax expense in the Company's consolidated financial statements.

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Additions for tax positions related to the current year — —

Additions (reductions) for tax positions related to prior years ( 296 ) 59

Reductions for tax positions related to prior years ( 1 ) ( 296 )

Balance at end of period $ 18,088 $ 18,089

18 unchanged sentences

Net cash paid $ — $ — $ 407,249

Master Agreement with Ventas:

For the Years Ended December 31,

(in thousands) 2022

Acquisition of other assets:

Property, plant and equipment and leasehold intangibles, net $ 4 $ — $ 684

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

Other assets, net — ( 42,354 ) —

Long-term debt — 34,053 —

Financing lease obligations 6,000 — 64,260

Operating lease obligations — 362,944 —

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

Net cash paid $ 6,004 $ — $ 64,944

3 unchanged sentences

Operating lease right-of-use assets — ( 8,145 ) —

Investments in unconsolidated ventures 100,000 — —

Investment in unconsolidated ventures — 100,000 —

Goodwill — ( 126,810 ) —

5 unchanged sentences

Other liabilities — 9,165 —

Loss (gain) on sale of assets, net ( 286,489 ) — —

Non-operating loss (gain) on sale of assets, net — ( 286,489 ) —

Net cash received $ — $ ( 312,558 ) $ —

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

Property, plant and equipment and leasehold intangibles, net $ — $ 684 $ 44

Other intangible assets, net — — 453

Financing lease obligations — 64,260 —

Net cash paid $ — $ 64,944 $ 497

Proceeds from sale of CCRC Venture, net:

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

Investment 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 ) —

Non-operating loss (gain) on sale of assets, net — — ( 369,831 )

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

3 unchanged sentences

Property, plant and equipment and leasehold intangibles, net ( 107 ) ( 878 ) ( 938 )

Investments in unconsolidated ventures — — ( 156 )

Other liabilities 1,025 ( 75 ) ( 786 )

Loss (gain) on sale of assets, net ( 2,346 ) ( 4,701 ) ( 7,245 )

Non-operating loss (gain) on sale of assets, net ( 595 ) ( 2,346 ) ( 4,701 )

Net cash received $ ( 4,653 ) $ ( 21,448 ) $ ( 42,091 )

Master Agreement with Ventas:

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

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

Other assets, net — — ( 42,354 )

Long-term debt — — 34,053

Financing lease obligations — — 7,077

Operating lease obligations — — 362,944

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

Net cash paid $ — $ — $ 119,180

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

For the Years Ended December 31,

(in thousands) 2022

Assets designated as held for sale:

8 unchanged sentences

Net $ — $ — $ —

Gain on sale for master lease amendment:

Property, plant and equipment and leasehold intangibles, net $ ( 220,477 ) $ — $ —

Operating lease right-of-use assets 91,641 — —

Financing lease obligations 294,327 — —

Operating lease obligations ( 91,641 ) — —

Loss (gain) on sale of communities, net ( 73,850 ) — —

Net $ — $ — $ —

Other non-cash lease transactions, net:

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

Property, plant and equipment and leasehold intangibles, net 11,098 4,056 10,707

5 unchanged sentences

Net $ — $ — $ —

During 2019, the Company and its venture partner contributed cash in an aggregate amount of $ 13.3 million to a consolidated venture which owns two senior housing communities as of December 31, 2021.

The Company obtained a $ 6.6 million promissory note receivable from its venture partner secured by a 50 % equity interest in the venture in a non-cash exchange for the Company funding the $ 13.3 million aggregate contribution in cash.

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

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

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

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

The components of restricted cash are as follows.

2 unchanged sentences

Replacement reserve escrows 7,999 9,756

Resident deposits 93 253

Interest rate cap escrows 3,797 585

Other 217 232

1 unchanged sentence

Insurance deposits 18,230 30,932

Debt service reserve 18,053 17,784

CCRCs escrows 15,847 15,346

Debt service reserve 13,779 18,053

Letters of credit collateral 107 107

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For periods beginning July 1, 2021, the results and financial position of its Health Care Services segment were deconsolidated from the Company's consolidated financial statements and its 20 % equity interest in the HCS Venture is accounted for under the equity method of accounting as of that date.

As of December 31, 2021, the Company's Management Services operating segment is no longer identified as a reportable segment as a result of the reduction in the number of communities it manages, which has reduced the operating segment's revenue, operating income, and assets below the reporting threshold.

Management services operations are reported within the All Other category.

All prior period segment disclosures reflect this reportable segment change.

Independent Living .

3 unchanged sentences

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 the Company's 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.

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.

Most of the Company's CCRCs have independent living, assisted living, memory care, and skilled nursing available on one campus.

All Other includes communities operated by the Company pursuant to management agreements.

4 unchanged sentences

The accounting policies of the Company's reportable segments are the same as those described in the summary of significant accounting policies in Note 2.

The following table sets forth selected segment financial data.

The following tables set forth selected segment financial data.

For the Years Ended December 31,

35 unchanged sentences

Corporate and All Other 1,142 346 1,938

Health Care Services — — 7,578

Loss (gain) on sale of communities, net ( 73,850 ) — —

Loss (gain) on facility operating lease termination, net — ( 2,003 ) ( 2,303 )

17 unchanged sentences

Independent Living (5)

$ 1,267,825 $ 1,349,341

Assisted Living and Memory Care 3,329,516 3,601,144

1 unchanged sentence

Corporate and All Other 675,219 766,596

Health Care Services — 233,178

Total assets (5)

$ 5,937,062 $ 6,410,467

(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.

(2) Includes other operating income recognized for the credits or grants pursuant to the Provider Relief Fund, employee retention credit, 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.

10 unchanged sentences

(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.

VALUATION AND QUALIFYING ACCOUNTS

December 31, 2021

(In thousands)

Description Balance at beginning of period Charged to costs and expenses Charged to other accounts Deductions Balance at end of period

Deferred Tax Valuation Allowance:

Year ended December 31, 2019 $ 336,417 $ 60,376 (1) $ 13,790 (2) $ ( 1,680 ) $ 408,903

Year ended December 31, 2020 $ 408,903 $ ( 27,913 ) (3) $ — $ — $ 380,990

Year ended December 31, 2021 $ 380,990 $ ( 13,027 ) (4) $ — $ — $ 367,963

(1) Additional valuation allowance for federal and state net operating losses.

(2) Additional valuation allowance charged to accumulated deficit upon the adoption of ASC 842.

(3) Reduction of valuation allowance for federal and state net operating losses.

(4) Reduction of valuation allowance for federal and state net operating losses and credits.

(5) The Company's total carrying amount of goodwill was $ 27.3 million, $ 27.3 million, and $ 154.1 million as of December 31, 2022, December 31, 2021, and December 31, 2020, respectively.

The Company's Health Care Services segment had a carrying amount of goodwill of $ 126.8 million as of December 31, 2020, which was derecognized upon completion of the HCS Sale on July 1, 2021 and accounted for the reduction in total goodwill for the year ended December 31, 2021.

The Company's Independent Living segment had a carrying amount of goodwill of $ 27.3 million as of December 31, 2022, December 31, 2021, and December 31, 2020.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data