What changed in this filing

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Item 1. Financial Statements

2023-08-08 compared with 2023-05-09 · 136 added, 102 removed, 417 unchanged (36% of the section changed)

10 unchanged sentences

Accounts receivable, net 48,222 55,761

Assets held for sale 23,555 —

Prepaid expenses and other current assets, net 101,294 106,067

14 unchanged sentences

Trade accounts payable 94,539 71,000

Liabilities held for sale 19,455 —

Accrued expenses 242,043 237,148

6 unchanged sentences

Total liabilities 5,365,459 5,352,909

Preferred stock, $ 0.01 par value, 50,000,000 shares authorized at March 31, 2023 and December 31, 2022;

Preferred stock, $ 0.01 par value, 50,000,000 shares authorized at June 30, 2023 and December 31, 2022;

no shares issued and outstanding

Common stock, $ 0.01 par value, 400,000,000 shares authorized at March 31, 2023 and December 31, 2022;

Common stock, $ 0.01 par value, 400,000,000 shares authorized at June 30, 2023 and December 31, 2022;

198,762,649 and 197,776,991 shares issued and 188,235,124 and 187,249,466 shares outstanding (including 10,797 and 422,542 unvested restricted shares), respectively

1 unchanged sentence

Treasury stock, at cost;

10,527,525 shares at March 31, 2023 and December 31, 2022

10,527,525 shares at June 30, 2023 and December 31, 2022

( 102,774 ) ( 102,774 )

10 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2023 2022 2023 2022

Resident fees $ 710,161 $ 640,388 $ 1,423,565 $ 1,277,362

10 unchanged sentences

Asset impairment 520 2,599 520 11,674

Loss (gain) on sale of communities, net ( 36,296 ) — ( 36,296 ) —

Costs incurred on behalf of managed communities 33,999 37,388 68,953 74,529

17 unchanged sentences

common stockholders $ ( 0.02 ) $ ( 0.45 ) $ ( 0.22 ) $ ( 0.99 )

Weighted average shares used in computing basic and diluted net income (loss) per share 224,578 185,916

Weighted average shares used in computing basic and diluted

net income (loss) per share 225,404 186,761 224,994 186,341

See accompanying notes to condensed consolidated financial statements.

3 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2023 2022 2023 2022

Total equity, balance at beginning of period $ 540,854 $ 599,279 $ 584,153 $ 699,623

32 unchanged sentences

(Unaudited, in thousands)

Three Months Ended March 31,

Six Months Ended June 30,

Cash Flows from Operating Activities

13 unchanged sentences

Property and casualty insurance income ( 3,927 ) ( 181 )

Other non-operating (income) loss ( 2,542 ) —

Changes in operating assets and liabilities:

11 unchanged sentences

Capital expenditures, net of related payables ( 109,825 ) ( 96,851 )

Acquisition of assets, net of cash acquired ( 574 ) ( 6,004 )

Investment in unconsolidated ventures — ( 167 )

21 unchanged sentences

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 March 31, 2023, the Company owned 346 communities, representing a majority of the Company's community portfolio, leased 295 communities, and managed 32 communities.

As of June 30, 2023, the Company owned 346 communities, representing a majority of the Company's community portfolio, leased 295 communities, and managed 31 communities.

Summary of Significant Accounting Policies

17 unchanged sentences

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

COVID-19 Pandemic

The COVID-19 pandemic has adversely impacted the Company's occupancy and resident fee revenue beginning in March 2020 and resulted in incremental direct costs to respond to the pandemic.

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;

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 its 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;

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

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

changes in the acuity levels of the Company's new residents;

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

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

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;

increased regulatory requirements, including the costs of unfunded, mandatory testing of residents and associates and provision of test kits to the Company's health plan participants;

increased enforcement actions resulting from COVID-19;

government action that may limit the Company's collection or discharge efforts for delinquent accounts;

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

Employee Retention Credit.

The Company was eligible to claim the employee retention credit for certain of its associates under the Coronavirus Aid, Relief, and Economic Security Act of 2020 ("CARES Act") and subsequent legislation.

During the years ended December 31, 2022 and 2021, the Company recognized $ 9.4 million and $ 9.9 million, respectively, of employee retention credits on wages paid from March 12, 2020 to December 31, 2021 within other operating income, for which the Company has received $ 9.9 million in cash as of March 31, 2023.

The Company has a receivable for the remaining $ 9.4 million included within prepaid expenses and other current assets, net on the condensed consolidated balance sheet as of March 31, 2023.

Fair Value Measurements

Marketable Securities

As of March 31, 2023 and December 31, 2022, marketable securities of $ 69.0 million and $ 48.7 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.

As of June 30, 2023 and December 31, 2022, marketable securities of $ 96.2 million and $ 48.7 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.

Interest Rate Derivatives

3 unchanged sentences

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

The following table summarizes the Company's London Interbank Offer Rate ("LIBOR") and Secured Overnight Financing Rate ("SOFR") interest rate cap instruments as of March 31, 2023.

The following table summarizes the Company's London Interbank Offer Rate ("LIBOR") and Secured Overnight Financing Rate ("SOFR") interest rate cap instruments as of June 30, 2023.

($ in thousands)

1 unchanged sentence

Weighted average fixed cap rate 4.34 %

Weighted average remaining term 1.1 years

Estimated asset fair value (included in other assets, net) at March 31, 2023 $ 9,125

Weighted average remaining term 1.0 year

Estimated asset fair value (included in other assets, net) at June 30, 2023 $ 13,416

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

The following table summarizes the Company's SOFR interest rate swap instrument as of March 31, 2023.

The following table summarizes the Company's SOFR interest rate swap instrument as of June 30, 2023.

($ in thousands)

2 unchanged sentences

Remaining term 0.8 years

Estimated asset fair value (included in other assets, net) at March 31, 2023 $ 3,692

Estimated asset fair value (included in other assets, net) at June 30, 2023 $ 4,148

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

The Company's remaining LIBOR interest rate cap instruments were modified to reference SOFR rather than LIBOR prospectively after the discontinuance of LIBOR in July 2023.

Subsequent to the transition, the Company's SOFR interest rate cap instruments had an aggregate notional amount of $ 1.2 billion and a weighted average fixed cap rate of 4.29 %.

Long-term debt

1 unchanged sentence

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 as of both March 31, 2023 and December 31, 2022.

Fair value of the long-term debt is approximately $ 3.4 billion as of both March 31, 2023 and December 31, 2022.

The Company had outstanding long-term debt with a carrying amount of approximately $ 3.8 billion and $ 3.9 billion as of June 30, 2023 and December 31, 2022, respectively.

Fair value of the long-term debt is approximately $ 3.4 billion as of both June 30, 2023 and December 31, 2022.

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

For the three months ended March 31, 2023 and 2022, the Company generated 93.6 % and 93.4 %, respectively, of its resident fee revenue from private pay customers and the remainder from government reimbursement programs and other payor sources.

The Company disaggregates its revenue from contracts with customers by payor source as the Company believes it best depicts how the nature, amount, timing, and uncertainty of its revenue and cash flows are affected by economic factors.

Resident fee revenue by payor source is as follows.

Three Months Ended June 30, Six Months Ended June 30,

2023 2022 2023 2022

Private pay 93.8 % 93.6 % 93.7 % 93.5 %

Government reimbursement 4.8 % 5.1 % 4.9 % 5.1 %

Other third-party payor programs 1.4 % 1.3 % 1.4 % 1.4 %

Refer to Note 14 for disaggregation of revenue by reportable segment.

4 unchanged sentences

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

The Company had total deferred revenue (included within refundable fees and deferred revenue, liabilities held for sale, and other liabilities within the condensed consolidated balance sheets) of $ 80.9 million and $ 67.3 million, including $ 35.3 million and $ 25.2 million of monthly resident fees billed and received in advance, as of March 31, 2023 and December 31, 2022, respectively.

For the three months ended March 31, 2023 and 2022, the Company recognized $ 36.9 million and $ 40.1 million, respectively, of revenue that was included in the deferred revenue balance as of January 1, 2023 and 2022, respectively.

The Company had total deferred revenue (included within refundable fees and deferred revenue and other liabilities within the condensed consolidated balance sheets) of $ 62.7 million and $ 67.3 million, including $ 34.5 million and $ 25.2 million of monthly resident fees billed and received in advance, as of June 30, 2023 and December 31, 2022, respectively.

For the six months ended June 30, 2023 and 2022, the Company recognized $ 44.9 million and $ 48.6 million, respectively, of revenue that was included in the deferred revenue balance as of January 1, 2023 and 2022, respectively.

Property, Plant and Equipment and Leasehold Intangibles, Net

As of March 31, 2023 and December 31, 2022, net property, plant and equipment and leasehold intangibles, which include assets under financing leases, consisted of the following.

(in thousands) March 31, 2023 December 31, 2022

As of June 30, 2023 and December 31, 2022, net property, plant and equipment and leasehold intangibles, which include assets under financing leases, consisted of the following.

(in thousands) June 30, 2023 December 31, 2022

Land $ 504,178 $ 506,968

7 unchanged sentences

Property, plant and equipment and leasehold intangibles, net $ 4,428,238 $ 4,535,702

Assets under financing leases and leasehold improvements includes $ 93.2 million and $ 98.4 million of financing lease right-of-use assets, net of accumulated amortization, as of March 31, 2023 and December 31, 2022, respectively.

Assets under financing leases and leasehold improvements includes $ 31.0 million and $ 98.4 million of financing lease right-of-use assets, net of accumulated amortization, as of June 30, 2023 and December 31, 2022, respectively.

Refer to Note 7 for further information on the Company's financing leases.

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

For the three months ended March 31, 2023 and 2022, the Company recognized depreciation and amortization expense on its property, plant and equipment and leasehold intangibles of $ 84.9 million and $ 85.7 million, respectively.

The Company recognized depreciation and amortization expense on its property, plant and equipment and leasehold intangibles of $ 84.4 million and $ 86.6 million for the three months ended June 30, 2023 and 2022, respectively, and $ 169.4 million and $ 172.3 million for the six months ended June 30, 2023 and 2022, respectively.

The Company recognized $ 0.5 million for the three and six months ended June 30, 2023 of non-cash impairment charges in its

operating results for its property, plant and equipment and leasehold intangibles assets, primarily due to property damage sustained at certain communities.

The Company recognized $ 1.6 million and $ 2.1 million for the three and six months ended June 30, 2022, respectively, of non-cash impairment charges in its operating results for its property, plant and equipment and leasehold intangibles assets, primarily due to property damage sustained at certain communities and decreased occupancy and future cash flow estimates at certain communities as a result of the continued impacts of the COVID-19 pandemic.

Long-term debt consists of the following.

(in thousands) March 31, 2023 December 31, 2022

(in thousands) June 30, 2023 December 31, 2022

Fixed rate mortgage notes payable due 2024 through 2047;

weighted average interest rate of 4.14 % as of both March 31, 2023 and December 31, 2022

weighted average interest rate of 4.14 % as of both June 30, 2023 and December 31, 2022

$ 2,045,952 $ 2,055,867

Variable rate mortgage notes payable due 2025 through 2030;

weighted average interest rate of 7.15 % and 6.68 % as of March 31, 2023 and December 31, 2022, respectively

weighted average interest rate of 7.50 % and 6.68 % as of June 30, 2023 and December 31, 2022, respectively

1,532,286 1,568,555

Convertible notes payable due October 2026;

interest rate of 2.00 % as of both March 31, 2023 and December 31, 2022

interest rate of 2.00 % as of both June 30, 2023 and December 31, 2022

230,000 230,000

Tangible equity units senior amortizing notes due November 2025;

interest rate of 10.25 % as of both March 31, 2023 and December 31, 2022

interest rate of 10.25 % as of both June 30, 2023 and December 31, 2022

21,946 25,586

Other notes payable due 2023;

interest rate of 5.90 % as of March 31, 2023

interest rate of 5.90 % as of June 30, 2023

Deferred financing costs, net ( 26,311 ) ( 29,866 )

2 unchanged sentences

Total long-term debt, less current portion $ 3,760,560 $ 3,784,099

As of March 31, 2023, 91.6 %, or $ 3.5 billion, of the Company's total debt obligations represented non-recourse property-level mortgage financings.

As of March 31, 2023, $ 72.6 million of letters of credit and no cash borrowings were outstanding under the Company's $ 80.0 million secured credit facility maturing January 2024.

The Company also had a separate secured letter of credit facility providing up to $ 15.0 million of letters of credit as of March 31, 2023 under which $ 13.9 million had been issued as of that date.

As of June 30, 2023, 91.8 %, or $ 3.5 billion, of the Company's total debt obligations represented non-recourse property-level mortgage financings.

As of June 30, 2023, $ 1.2 billion of the Company's variable rate mortgage notes payable were indexed to LIBOR plus a weighted average margin of approximately 228 basis points and $ 0.3 billion of the Company's variable rate mortgage notes payable were indexed to SOFR plus a weighted average margin of approximately 237 basis points.

The Company's remaining variable rate mortgage notes payable arrangements indexed to LIBOR were modified to reference SOFR plus an 11 basis point spread adjustment to reflect historical spreads between LIBOR and SOFR rather than LIBOR prospectively after the discontinuance of LIBOR in July 2023.

The Company applied the optional expedient provided by Accounting Standards Codification 848, Reference Rate Reform , for debt contract modifications related to the discontinuation of reference rates to ease the potential burden in accounting for reference rate reform.

As of June 30, 2023, $ 72.6 million of letters of credit and no cash borrowings were outstanding under the Company's $ 80.0 million secured credit facility.

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 Company also had a separate secured letter of credit facility providing up to $ 15.0 million of letters of credit as of June 30, 2023 under which $ 14.5 million had been issued as of that date.

Financial Covenants

3 unchanged sentences

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

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

As of March 31, 2023, the Company is in compliance with the financial covenants of its debt agreements.

As of March 31, 2023, the Company operated 295 communities under long-term leases ( 246 operating leases and 49 financing leases).

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

As of June 30, 2023, the Company is in compliance with the financial covenants of its debt agreements.

As of June 30, 2023, the Company operated 295 communities under long-term leases ( 281 operating leases and 14 financing leases).

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

Under a master lease, numerous communities are leased through an indivisible lease.

The Company typically guarantees the performance and lease payment obligations of its subsidiary lessees under the master leases.

In certain cases, the Company guarantees the performance and lease payment obligations of its subsidiary lessees under the master leases.

An event of default related to an individual property or limited number of properties within a master lease portfolio may result in a default on the entire master lease portfolio.

7 unchanged sentences

Certain leases contain cure provisions, which generally allow the Company to post an additional lease security deposit if the required covenant is not met.

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

As of March 31, 2023, the Company is in compliance with the financial covenants of its long-term leases.

As of June 30, 2023, the Company is in compliance with the financial covenants of its long-term leases.

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.

The Company recognized $ 8.6 million for the three months ended March 31, 2022 of non-cash impairment charges in its operating results for its operating lease right-of-use assets, primarily for certain leased communities with decreased future cash flow estimates as a result of the COVID-19 pandemic.

The Company did not recognize any impairment charges for the three months ended March 31, 2023.

The Company recognized $ 1.0 million and $ 9.6 million for the three and six months ended June 30, 2022, of non-cash impairment charges in its operating results for its operating lease right-of-use assets, primarily due to decreased occupancy and future cash flow estimates at certain communities as a result of the continued impacts of the COVID-19 pandemic.

The Company did not recognize any impairment charges for its operating lease right-of-use assets for the three or six months ended June 30, 2023.

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

Three Months Ended

June 30, Six Months Ended

Operating Leases (in thousands)

2023 2022 2023 2022

Facility operating expense $ 1,732 $ 1,561 $ 3,358 $ 3,084

2 unchanged sentences

Operating lease expense adjustment (1)

11,557 8,308 22,362 16,615

Changes in operating lease assets and liabilities for lessor capital expenditure reimbursements — ( 3,367 ) ( 2,244 ) ( 4,857 )

2 unchanged sentences

Three Months Ended

June 30, Six Months Ended

Financing Leases (in thousands)

2023 2022 2023 2022

Depreciation and amortization $ 2,515 $ 7,607 $ 7,743 $ 15,273

6 unchanged sentences

Total net cash outflows from financing leases $ 7,579 $ 13,834 $ 19,983 $ 28,175

The aggregate amounts of future minimum lease payments, including community, office, and equipment leases recognized on the condensed consolidated balance sheet as of March 31, 2023 are as follows (in thousands).

The aggregate amounts of future minimum lease payments, including community, office, and equipment leases, recognized on the condensed consolidated balance sheet as of June 30, 2023 are as follows (in thousands).

Year Ending December 31, Operating Leases Financing Leases

2023 (nine months) $ 174,844 $ 36,463

2023 (six months) $ 132,021 $ 9,862

2024 249,943 19,724

3 unchanged sentences

Thereafter 311,146 25,604

Total lease payments 945,802 190,890

Total 1,213,546 74,312

Purchase option liability and non-cash gain on future sale of property — 145,136

1 unchanged sentence

Total lease obligations $ 921,544 $ 151,995

Subsequent to the three months ended March 31, 2023, the Company and Welltower Inc.

("Welltower") entered into amendments to the Company’s existing lease arrangements pursuant to which the Company continues to lease 74 communities.

Welltower Lease Amendments

During the three months ended June 30, 2023, the Company entered into amendments to its existing lease arrangements with Welltower Inc.

("Welltower") pursuant to which the Company continues to lease 74 communities.

In connection with the amendments, the Company extended the maturity of one lease involving 39 communities from December 31, 2026 until June 30, 2032.

3 unchanged sentences

Upon reimbursement of such expenditures, the annual minimum rent under the lease will prospectively increase by the amount of the reimbursement multiplied by the sum of the then current SOFR (subject to a floor of 3.0 %) and a margin of 4.0 %, and such amount will escalate annually consistent with the minimum rent escalation provisions of the 39 community lease.

The Company preliminarily estimates that the amendment to the lease arrangements will increase the right-of-use assets and lease obligations recognized on its condensed consolidated balance sheet each by approximately $ 125.0 million.

The amendments replaced the net worth covenant provisions requiring the Company to maintain at least $ 400.0 million of stockholders' equity with a consolidated tangible net worth covenant requiring the Company to maintain at least $ 2.0 billion of tangible net worth, generally calculated as stockholders' equity plus accumulated depreciation and amortization less intangible assets and further adjusted for certain other items.

The amended leases for 35 of such communities were prospectively classified as operating leases subsequent to the amendment.

The prospective change in classification of such lease costs to operating lease expense will result in a $ 19.3 million increase in cash lease payments for operating leases for 2023 and an offsetting decrease in cash lease payments for financing leases.

For the three and six months ended June 30, 2023, the classification of such lease costs as operating lease expense resulted in a $ 4.8 million increase in cash lease payments for operating leases and an offsetting decrease in cash lease payments for financing leases.

The amendment to the lease arrangements increased the right-of-use assets and lease obligations recognized on the Company's condensed consolidated balance sheet each by $ 122.3 million.

tangible net worth, generally calculated as stockholders' equity plus accumulated depreciation and amortization less intangible assets and further adjusted for certain other items.

Such calculation is generally similar to the tangible net worth covenants within certain of the Company’s long-term debt documents.

1 unchanged sentence

Investment in Unconsolidated Ventures

As of March 31, 2023, the Company owns a 20 % equity interest, and affiliates of HCA Healthcare Inc.

As of June 30, 2023, the Company owns a 20 % equity interest, and affiliates of HCA Healthcare Inc.

own an 80 % interest, in a health care services venture (the "HCS Venture"), which operates home health and hospice agencies in the United States.

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 is $ 49.1 million, which is included in investment in unconsolidated ventures on the accompanying unaudited condensed consolidated balance sheet as of March 31, 2023.

As of March 31, 2023, the Company is not required to provide financial support, through a liquidity arrangement or otherwise, to the HCS Venture.

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 is $ 48.0 million, which is included in investment in unconsolidated ventures on the accompanying unaudited condensed consolidated balance sheet as of June 30, 2023.

As of June 30, 2023, the Company is not required to provide financial support, through a liquidity arrangement or otherwise, to the HCS Venture.

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

21 unchanged sentences

Three months ended March 31, 2023 3,959 $ 2.97 $ 11,778

Three months ended June 30, 2023 10 $ 2.95 $ 29

Earnings Per Share

1 unchanged sentence

On October 1, 2021, the Company issued $ 230.0 million principal amount of 2.00 % convertible senior notes due 2026 (the "Notes").

As of March 31, 2023, the maximum number of shares issuable upon settlement 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).

As of June 30, 2023, the maximum number of shares issuable upon settlement 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).

On July 26, 2020, the Company issued to Ventas, Inc.

3 unchanged sentences

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 .

Unless settled early in accordance with the terms of the instruments, 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.

As of March 31, 2023, the maximum number of shares issuable upon settlement of the Units' prepaid stock purchase contracts is 43.7 million.

Unless settled early in accordance with the terms of the instruments, 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 of its common stock for the 20 trading days preceding the settlement date.

As of June 30, 2023, the maximum number of shares issuable upon settlement of the Units' prepaid stock purchase contracts is 43.7 million.

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.

For the three months ended March 31, 2023, 37.2 million shares are included in weighted average basic shares outstanding for the minimum number of shares issuable upon settlement of the Units' prepaid stock purchase contracts.

Three Months Ended March 31,

For both the three and six months ended June 30, 2023, 37.2 million shares are included in weighted average basic shares outstanding for the minimum number of shares issuable upon settlement of the Units' prepaid stock purchase contracts.

Three Months Ended June 30, Six Months Ended June 30,

(in thousands) 2023 2022 2023 2022

Weighted average common shares outstanding 188,218 186,761 187,808 186,341

5 unchanged sentences

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 both periods as a result of the net loss.

As of March 31,

As of June 30,

(in millions) 2023 2022

4 unchanged sentences

Total 67.6 60.1

The difference between the Company's effective tax rate for the three months ended March 31, 2023 and 2022 was primarily due to an increase in the valuation allowance recorded during the three months ended March 31, 2023, as well as a decrease in the tax benefit on the vesting of restricted stock units and restricted stock awards due to a lower market price for the Company’s stock for the three months ended March 31, 2023 as compared to the three months ended March 31, 2022.

The Company recorded an aggregate deferred federal, state, and local tax benefit of $ 9.4 million for the three months ended March 31, 2023, which was offset by an increase to the valuation allowance of $ 9.7 million.

The Company recorded an aggregate deferred federal, state, and local tax expense of $ 24.9 million for the three months ended March 31, 2022, which was partially offset by a reduction to the valuation allowance of $ 22.6 million.

The difference between the Company's effective tax rate for the three months ended June 30, 2023 and 2022 was primarily due to an increase in the valuation allowance recorded on operating losses during the three months ended June 30, 2023 as compared to the three months ended June 30, 2022.

The difference between the Company's effective tax rate for the six months ended June 30, 2023 and 2022 was primarily due to a decrease in the tax benefit on the vesting of restricted stock units and restricted stock awards due to a lower market price for the Company's stock for the three months ended March 31, 2023 as compared to the three months ended March 31, 2022.

The Company recorded an aggregate deferred federal, state, and local tax benefit of $ 1.4 million for the three months ended June 30, 2023, which was partially offset by an increase to the valuation allowance of $ 1.3 million.

The Company recorded an aggregate deferred federal, state, and local tax benefit of $ 10.8 million for the six months ended June 30, 2023, which was offset by an increase to the valuation allowance of $ 11.0 million.

The Company recorded an aggregate deferred federal, state, and local tax expense of $ 20.6 million for the three months ended June 30, 2022, which was offset by a reduction to the valuation allowance of $ 21.4 million.

The Company recorded an aggregate deferred federal, state, and local tax expense of $ 45.5 million for the six months ended June 30, 2022, which was partially offset by a reduction to the valuation allowance of $ 44.0 million.

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

The Company's valuation allowance as of March 31, 2023 and December 31, 2022 was $ 434.7 million and $ 425.0 million, respectively.

The increase in the valuation allowance for the three months ended March 31, 2023 and 2022 is the result of current operating losses during the three months ended March 31, 2023 and 2022 and by the anticipated reversal of future tax liabilities offset by future tax deductions.

The Company recorded interest charges related to its tax contingency reserve for cash tax positions for the three months ended March 31, 2023 and 2022 which are included in income tax expense or benefit for the period.

As of March 31, 2023, tax returns for years 2018 through 2021 are subject to future examination by tax authorities.

The Company's valuation allowance as of June 30, 2023 and December 31, 2022 was $ 436.0 million and $ 425.0 million, respectively.

The increase in the valuation allowance for both the six months ended June 30, 2023 and 2022 is the result of current operating losses during the periods and by the anticipated reversal of future tax liabilities offset by future tax deductions.

The Company recorded interest charges related to its tax contingency reserve for cash tax positions for the three and six months ended June 30, 2023 and 2022 which are included in income tax expense or benefit for the period.

As of June 30, 2023, tax returns for years 2018 through 2021 are subject to future examination by tax authorities.

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

Supplemental Disclosure of Cash Flow Information

During the period from January 1, 2022 through March 31, 2023, the Company disposed of two owned communities and the Company's triple-net lease obligations on four communities were terminated (including through the acquisition of one formerly leased community).

The Company completed the sale of its one remaining entrance fee community on May 1, 2023.

The Company received cash proceeds of $ 12.3 million, net of $ 29.6 million in mortgage debt repaid and transaction costs, at closing.

As of March 31, 2023, the community was classified as held for sale in the CCRCs segment, resulting in $ 23.6 million being recorded as assets held for sale and $ 19.5 million, representing primarily refundable fees and deferred revenue from entrance fee residency agreements, recorded as liabilities held for sale within the condensed consolidated balance sheets.

Three Months Ended

During the period from January 1, 2022 through June 30, 2023, the Company disposed of three owned communities, the Company's triple-net lease obligations on four communities were terminated (including through the acquisition of one formerly leased community), and the Company acquired the remaining 50 % equity interest in one community.

On May 1, 2023, the Company completed the sale of its one remaining entrance fee community, which was included within the Company's CCRCs segment.

The Company received cash proceeds of $ 12.5 million, net of $ 29.6 million in mortgage debt repaid and transaction costs, and recognized a net gain on sale of communities of $ 36.3 million.

During the six months ended June 30, 2023 and 2022, the Company received cash of $ 13.9 million and $ 1.2 million, respectively, for such employee retention credits.

The Company has a receivable for the remaining $ 0.8 million included within prepaid expenses and other current assets, net on the condensed consolidated balance sheet as of June 30, 2023.

Six Months Ended

(in thousands) 2023 2022

5 unchanged sentences

Capital expenditures - development, net 904 2,690

Capital expenditures - non-development - reimbursable 2,244 4,697

Capital expenditures - non-development - reimbursable from lessor 2,244 11,833

Trade accounts payable ( 21,050 ) ( 2,684 )

Net cash paid $ 109,825 $ 96,851

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

Assets designated as held for sale:

Acquisition of assets, net of cash acquired:

Prepaid expenses and other assets, net $ 23 $ —

Property, plant and equipment and leasehold intangibles, net 6,872 4

Investment in unconsolidated ventures ( 3,395 ) —

Financing lease obligations — 6,000

Other liabilities ( 384 ) —

Other non-operating loss (income) ( 2,542 ) —

Net cash paid $ 574 $ 6,004

Proceeds from sale of assets, net:

Prepaid expenses and other assets, net $ ( 1,538 ) $ ( 1,264 )

Assets held for sale — ( 3,668 )

Property, plant and equipment and leasehold intangibles, net ( 23,733 ) —

Liabilities held for sale ( 19,455 ) —

Refundable fees and deferred revenue 9,347 —

Other liabilities 10,021 ( 140 )

Non-operating (gain) loss on sale of assets, net ( 860 ) ( 667 )

Loss (gain) on sale of communities, net ( 36,296 ) —

Net cash received $ ( 43,059 ) $ ( 5,739 )

Six Months Ended

(in thousands) 2023 2022

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

Non-cash lease transactions, net:

Property, plant and equipment and leasehold intangibles, net $ ( 51,584 ) $ 11,056

Operating lease right-of-use assets 178,409 10,780

Financing lease obligations 88,886 ( 6,296 )

Operating lease obligations ( 215,711 ) ( 15,540 )

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.

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

(in thousands) March 31, 2023 December 31, 2022

(in thousands) June 30, 2023 December 31, 2022

Reconciliation of cash, cash equivalents, and restricted cash:

4 unchanged sentences

Segment Information

As of March 31, 2023, the Company has three reportable segments:

As of June 30, 2023, the Company has three reportable segments:

Independent Living;

16 unchanged sentences

Three Months Ended

June 30, Six Months Ended

(in thousands) 2023 2022 2023 2022

8 unchanged sentences

Three Months Ended

June 30, Six Months Ended

(in thousands) 2023 2022 2023 2022

9 unchanged sentences

Asset impairment 520 2,599 520 11,674

Loss (gain) on sale of communities, net ( 36,296 ) — ( 36,296 ) —

Income (loss) from operations $ 41,165 $ ( 34,048 ) $ 48,987 $ ( 87,582 )

(in thousands) March 31, 2023 December 31, 2022

(in thousands) June 30, 2023 December 31, 2022

Total assets:

7 unchanged sentences

(2) 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.

(3) The Company's Independent Living segment had a carrying amount of goodwill of $ 27.3 million as of both March 31, 2023 and December 31, 2022.

(3) The Company's Independent Living segment had a carrying amount of goodwill of $ 27.3 million as of both June 30, 2023 and December 31, 2022.

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

What changed 10-Q

Item 1. Financial Statements