Brookdale Senior Living Inc. 10-Q

Item 1. Financial Statements BROOKDALE SENIOR LIVING INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except stock amounts) September 30, 2024 December 31, 2023 Assets (Unaudited) Current assets Cash and cash equivalents $ 254,711 $ 277,971 Marketable securities 29,701 29,755 Restricted cash 49,067 41,341 Accounts receivable, net 53,002 48,393 Prepaid expenses and other current assets, net 87,236 80,908 Total current assets 473,717 478,368 Property, plant and equipment and leasehold intangibles, net 4,641,255 4,330,629 Operating lease right-of-use assets 732,918 670,907 Restricted cash 28,267 30,356 Goodwill 27,321 27,321 Other assets, net 35,645 35,854 Total assets $ 5,939,123 $ 5,573,435 Liabilities and Equity Current liabilities Current portion of long-term debt $ 51,525 $ 41,463 Current portion of financing lease obligations 1,160 1,075 Current portion of operating lease obligations 150,790 192,631 Trade accounts payable 73,275 66,526 Accrued expenses 248,693 242,668 Refundable fees and deferred revenue 58,541 55,753 Total current liabilities 583,984 600,116 Long-term debt, less current portion 3,654,497 3,655,850 Financing lease obligations, less current portion 602,789 150,774 Operating lease obligations, less current portion 730,402 683,876 Deferred tax liability 5,938 5,987 Other liabilities 67,191 71,679 Total liabilities 5,644,801 5,168,282 Preferred stock, $ 0.01 par value, 50,000,000 shares authorized at September 30, 2024 and December 31, 2023; no shares issued and outstanding — — Common stock, $ 0.01 par value, 400,000,000 shares authorized at September 30, 2024 and December 31, 2023; 209,768,026 and 198,780,826 shares issued and 199,240,501 and 188,253,301 shares outstanding (including 27,972 unvested restricted shares as of September 30, 2024), respectively 2,098 1,988 Additional paid-in-capital 4,349,478 4,342,362 Treasury stock, at cost; 10,527,525 shares at September 30, 2024 and December 31, 2023 ( 102,774 ) ( 102,774 ) Accumulated deficit ( 3,955,925 ) ( 3,837,912 ) Total Brookdale Senior Living Inc. stockholders' equity 292,877 403,664 Noncontrolling interest 1,445 1,489 Total equity 294,322 405,153 Total liabilities and equity $ 5,939,123 $ 5,573,435 See accompanying notes to condensed consolidated financial statements. 4 BROOKDALE SENIOR LIVING INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited, in thousands, except per share data) Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Resident fees $ 743,729 $ 717,123 $ 2,227,679 $ 2,140,688 Management fees 2,676 2,566 7,910 7,653 Reimbursed costs incurred on behalf of managed communities 37,762 34,979 108,950 103,932 Other operating income — 2,623 — 9,073 Total revenue and other operating income 784,167 757,291 2,344,539 2,261,346 Facility operating expense (excluding facility depreciation and amortization of $ 83,479 , $ 79,384 , $ 245,089 , and $ 236,547 , respectively) 548,282 537,411 1,628,339 1,599,336 General and administrative expense (including non-cash stock-based compensation expense of $ 3,403 , $ 2,893 , $ 10,651 , and $ 8,966 , respectively) 44,929 43,076 137,325 137,021 Facility operating lease expense 51,937 53,145 154,397 149,784 Depreciation and amortization 90,064 85,932 264,219 255,314 Asset impairment 934 9,086 2,642 9,606 Loss (gain) on sale of communities, net — — — ( 36,296 ) Costs incurred on behalf of managed communities 37,762 34,979 108,950 103,932 Income (loss) from operations 10,259 ( 6,338 ) 48,667 42,649 Interest income 4,663 6,323 14,155 17,764 Interest expense: Debt ( 54,171 ) ( 53,413 ) ( 161,405 ) ( 155,984 ) Financing lease obligations ( 5,062 ) ( 4,950 ) ( 15,233 ) ( 16,955 ) Amortization of deferred financing costs ( 2,337 ) ( 1,910 ) ( 6,928 ) ( 5,749 ) Change in fair value of derivatives ( 4,746 ) 861 ( 2,004 ) 5,130 Gain (loss) on debt modification and extinguishment, net ( 2,267 ) — ( 2,267 ) — Equity in earnings (loss) of unconsolidated ventures — ( 1,426 ) — ( 3,156 ) Non-operating gain (loss) on sale of assets, net 20 — 923 860 Other non-operating income (loss) 3,584 10,166 7,121 16,512 Income (loss) before income taxes ( 50,057 ) ( 50,687 ) ( 116,971 ) ( 98,929 ) Benefit (provision) for income taxes ( 677 ) 1,876 ( 1,086 ) 1,029 Net income (loss) ( 50,734 ) ( 48,811 ) ( 118,057 ) ( 97,900 ) Net (income) loss attributable to noncontrolling interest 14 15 44 45 Net income (loss) attributable to Brookdale Senior Living Inc. common stockholders $ ( 50,720 ) $ ( 48,796 ) $ ( 118,013 ) $ ( 97,855 ) Basic and diluted net income (loss) per share attributable to Brookdale Senior Living Inc. common stockholders $ ( 0.22 ) $ ( 0.22 ) $ ( 0.52 ) $ ( 0.43 ) Weighted average shares used in computing basic and diluted net income (loss) per share 228,124 225,416 226,939 225,136 See accompanying notes to condensed consolidated financial statements. 5 BROOKDALE SENIOR LIVING INC. CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (Unaudited, in thousands) Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Total equity, balance at beginning of period $ 341,673 $ 539,276 $ 405,153 $ 584,153 Common stock: Balance at beginning of period $ 2,077 $ 1,988 $ 1,988 $ 1,978 Shares issued for settlement of prepaid stock purchase contracts 9 — 76 — Shares issued for warrant exercise 12 — 21 — Restricted stock and restricted stock units, net — — 19 16 Shares withheld for employee taxes — — ( 6 ) ( 6 ) Balance at end of period $ 2,098 $ 1,988 $ 2,098 $ 1,988 Additional paid-in-capital: Balance at beginning of period $ 4,346,116 $ 4,336,504 $ 4,342,362 $ 4,332,302 Compensation expense related to restricted stock grants 3,403 2,893 10,651 8,966 Shares issued for settlement of prepaid stock purchase contracts ( 9 ) — ( 76 ) — Shares issued for warrant exercise ( 12 ) — ( 21 ) — Restricted stock and restricted stock units, net — — ( 19 ) ( 16 ) Shares withheld for employee taxes ( 20 ) ( 19 ) ( 3,419 ) ( 1,874 ) Balance at end of period $ 4,349,478 $ 4,339,378 $ 4,349,478 $ 4,339,378 Treasury stock: Balance at beginning and end of period $ ( 102,774 ) $ ( 102,774 ) $ ( 102,774 ) $ ( 102,774 ) Accumulated deficit: Balance at beginning of period $ ( 3,905,205 ) $ ( 3,697,960 ) $ ( 3,837,912 ) $ ( 3,648,901 ) Net income (loss) attributable to Brookdale Senior Living Inc. common stockholders ( 50,720 ) ( 48,796 ) ( 118,013 ) ( 97,855 ) Balance at end of period $ ( 3,955,925 ) $ ( 3,746,756 ) $ ( 3,955,925 ) $ ( 3,746,756 ) Noncontrolling interest: Balance at beginning of period $ 1,459 $ 1,518 $ 1,489 $ 1,548 Net income (loss) attributable to noncontrolling interest ( 14 ) ( 15 ) ( 44 ) ( 45 ) Balance at end of period $ 1,445 $ 1,503 $ 1,445 $ 1,503 Total equity, balance at end of period $ 294,322 $ 493,339 $ 294,322 $ 493,339 Common stock share activity Outstanding shares of common stock: Balance at beginning of period 197,201 188,235 188,253 187,249 Shares issued for settlement of prepaid stock purchase contracts 841 — 7,550 — Shares issued for warrant exercise 1,163 — 2,105 — Restricted stock and restricted stock units, net 39 10 1,912 1,561 Shares withheld for employee taxes ( 3 ) ( 5 ) ( 579 ) ( 570 ) Balance at end of period 199,241 188,240 199,241 188,240 See accompanying notes to condensed consolidated financial statements. 6 BROOKDALE SENIOR LIVING INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited, in thousands) Nine Months Ended September 30, 2024 2023 Cash Flows from Operating Activities Net income (loss) $ ( 118,057 ) $ ( 97,900 ) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Loss (gain) on debt modification and extinguishment, net 2,267 — Depreciation and amortization, net 271,147 261,063 Asset impairment 2,642 9,606 Equity in (earnings) loss of unconsolidated ventures — 3,156 Distributions from unconsolidated ventures from cumulative share of net earnings — 430 Amortization of entrance fees — ( 732 ) Proceeds from deferred entrance fee revenue — 477 Deferred income tax (benefit) provision ( 48 ) ( 2,015 ) Operating lease expense adjustment ( 39,061 ) ( 33,820 ) Change in fair value of derivatives 2,004 ( 5,130 ) Loss (gain) on sale of assets, net ( 923 ) ( 37,156 ) Non-cash stock-based compensation expense 10,651 8,966 Property and casualty insurance income ( 6,281 ) ( 14,047 ) Other non-operating (income) loss — ( 2,542 ) Changes in operating assets and liabilities: Accounts receivable, net ( 4,610 ) 8,250 Prepaid expenses and other assets, net ( 6,414 ) 9,347 Prepaid insurance premiums financed with notes payable ( 7,930 ) ( 6,530 ) Trade accounts payable and accrued expenses 5,071 21,444 Refundable fees and deferred revenue 2,789 8,518 Operating lease assets and liabilities for lessor capital expenditure reimbursements 7,732 2,244 Net cash provided by (used in) operating activities 120,979 133,629 Cash Flows from Investing Activities Purchase of marketable securities ( 39,191 ) ( 159,811 ) Sale and maturities of marketable securities 40,000 145,100 Capital expenditures, net of related payables ( 150,938 ) ( 174,700 ) Acquisition of assets, net of cash acquired — ( 574 ) Investment in unconsolidated ventures — ( 7,589 ) Proceeds from sale of assets, net 7,017 43,181 Property and casualty insurance proceeds 6,297 19,536 Change in lease acquisition deposits, net ( 2,000 ) — Purchase of interest rate cap instruments ( 9,282 ) ( 7,223 ) Proceeds from interest rate cap instruments 14,816 6,501 Other ( 235 ) ( 168 ) Net cash provided by (used in) investing activities ( 133,516 ) ( 135,747 ) Cash Flows from Financing Activities Proceeds from debt 264,038 25,532 Repayment of debt and financing lease obligations ( 259,390 ) ( 91,866 ) Payment of financing costs, net of related payables ( 6,309 ) ( 940 ) Payments of employee taxes for withheld shares ( 3,425 ) ( 1,880 ) Net cash provided by (used in) financing activities ( 5,086 ) ( 69,154 ) Net increase (decrease) in cash, cash equivalents, and restricted cash ( 17,623 ) ( 71,272 ) Cash, cash equivalents, and restricted cash at beginning of period 349,668 474,548 Cash, cash equivalents, and restricted cash at end of period $ 332,045 $ 403,276 See accompanying notes to condensed consolidated financial statements. 7 BROOKDALE SENIOR LIVING INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. Description of Business Brookdale Senior Living Inc. together with its consolidated subsidiaries ("Brookdale" or the "Company") is an operator of 648 senior living communities throughout the United States. The Company is committed to its mission of enriching the lives of the people it serves with compassion, respect, excellence, and integrity. The Company operates and manages independent living, assisted living, memory care, and continuing care retirement communities ("CCRCs"). The Company's senior living communities and its comprehensive network help to provide seniors with care, connection, and services in an environment that feels like home. As of September 30, 2024, the Company owned 342 communities, representing a majority of the Company's community portfolio, leased 277 communities, and managed 29 communities. 2. Summary of Significant Accounting Policies Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States ("GAAP") and pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC") for quarterly reports on Form 10-Q. In the opinion of management, these financial statements include all adjustments, which are of a normal and recurring nature, necessary to present fairly the financial position, results of operations, and cash flows of the Company for all periods presented. Certain information and footnote disclosures included in annual financial statements have been condensed or omitted. The Company believes that the disclosures included are adequate and provide a fair presentation of interim period results. Interim financial statements are not necessarily indicative of the financial position or operating results for an entire year. These interim financial statements should be read in conjunction with the audited financial statements and the notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on February 21, 2024. Principles of Consolidation The condensed consolidated financial statements include the accounts of Brookdale and its consolidated subsidiaries. The ownership interest of consolidated entities not wholly-owned by the Company are presented as noncontrolling interests in the accompanying unaudited condensed consolidated financial statements. Intercompany balances and transactions have been eliminated in consolidation, and net income (loss) is reduced by the portion of net income (loss) attributable to noncontrolling interests. Use of Estimates The preparation of the condensed consolidated financial statements and related disclosures in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Estimates are used for, but not limited to, revenue, asset impairments, self-insurance reserves, performance-based compensation, allowance for credit losses, depreciation and amortization, leasing transactions, income taxes, and other contingencies. Although these estimates are based on management's best knowledge of current events and actions that the Company may undertake in the future, actual results may differ from the original estimates. Reclassifications 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. Recently Issued Accounting Pronouncements Not Yet Adopted In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (ASU 2023-07), which requires expanded annual and interim disclosures for significant segment expenses. This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The Company is currently evaluating the effect of this pronouncement on its segment disclosures. 8 In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which standardizes categories for the effective tax rate reconciliation, requires disaggregation of income taxes and additional income tax-related disclosures. This ASU is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is evaluating the effect this pronouncement will have on its income tax disclosures. 3. Fair Value Measurements Marketable Securities As of September 30, 2024 and December 31, 2023, marketable securities of $ 29.7 million and $ 29.8 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 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 Secured Overnight Financing Rate ("SOFR") interest rate cap instruments as of September 30, 2024. ($ in millions) Current notional balance $ 1,257.5 Weighted average fixed cap rate 3.90 % Weighted average remaining term 0.5 years Estimated asset fair value (included in other assets, net) $ 7.8 As of December 31, 2023, the estimated fair value of the interest rate cap instruments was $ 13.3 million. The following table summarizes the Company's SOFR interest rate swap instrument as of September 30, 2024. ($ in millions) Current notional balance $ 220.0 Fixed interest rate 4.25 % Remaining term 1.0 year Estimated fair value (included in other liabilities) $ ( 0.9 ) As of December 31, 2023, the estimated fair value of the interest rate swap instrument was $ 1.6 million included in other assets, net. 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 $ 3.7 billion as of both September 30, 2024 and December 31, 2023. Fair value of the long-term debt is approximately $ 3.6 billion and $ 3.4 billion as of September 30, 2024 and December 31, 2023, respectively. The Company's fair value of long-term debt disclosure is classified within Level 2 of the valuation hierarchy. 9 4. Revenue The Company disaggregates its revenue from contracts with customers by payor source as the Company believes it best depicts how the nature, amount, timing, and uncertainty of its revenue and cash flows are affected by economic factors. Resident fee revenue by payor source is as follows. Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Private pay 93.8 % 93.7 % 93.9 % 93.7 % Government reimbursement 4.9 % 4.9 % 4.7 % 4.9 % Other third-party payor programs 1.3 % 1.4 % 1.4 % 1.4 % Refer to Note 13 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. Resident fee revenue for recurring and routine monthly services is generally billed monthly in advance under the Company's independent living, assisted living, and memory care residency agreements. Resident fee revenue for standalone or certain healthcare services is generally billed monthly in arrears. Additionally, certain of the Company's revenue-generating contracts include non-refundable fees that are generally billed and collected in advance or upon move-in of a resident under the Company's independent living, assisted living, and memory care residency agreements. Amounts of revenue that are collected from residents in advance are recognized as deferred revenue until the performance obligations are satisfied. The Company had total deferred revenue (included within refundable fees and deferred revenue and other liabilities within the condensed consolidated balance sheets) of $ 53.6 million and $ 48.3 million, including $ 28.0 million and $ 24.1 million of monthly resident fees billed and received in advance, as of September 30, 2024 and December 31, 2023, respectively. For the nine months ended September 30, 2024 and 2023, the Company recognized $ 47.0 million and $ 49.1 million, respectively, of revenue that was included in the deferred revenue balance as of January 1, 2024 and 2023, respectively. The Company applies the practical expedient in ASC 606-10-50-14 and does not disclose amounts for remaining performance obligations that have original expected durations of one year or less. 5. Property, Plant and Equipment and Leasehold Intangibles, Net As of September 30, 2024 and December 31, 2023, net property, plant and equipment and leasehold intangibles, which include assets under financing leases, consisted of the following. (in thousands) September 30, 2024 December 31, 2023 Land $ 497,829 $ 500,649 Buildings and improvements 5,391,214 5,348,133 Furniture and equipment 1,156,275 1,111,408 Resident in-place lease intangibles 281,041 282,411 Construction in progress 30,077 33,905 Assets under financing leases and leasehold improvements 1,557,995 1,070,900 Property, plant and equipment and leasehold intangibles 8,914,431 8,347,406 Accumulated depreciation and amortization ( 4,273,176 ) ( 4,016,777 ) Property, plant and equipment and leasehold intangibles, net $ 4,641,255 $ 4,330,629 Long-lived assets with definite useful lives are depreciated or amortized on a straight-line basis over their estimated useful lives (or, in certain cases, the shorter of their estimated useful lives or the lease term) and are tested for impairment whenever indicators of impairment arise. The Company recognized depreciation and amortization expense on its property, plant and equipment and leasehold intangibles of $ 90.1 million and $ 85.9 million for the three months ended September 30, 2024 and 2023, respectively, and $ 264.2 million and $ 255.3 million for the nine months ended September 30, 2024 and 2023, respectively. The Company recognized $ 0.9 million and $ 2.6 million for the three and nine months ended September 30, 2024, respectively, of non-cash impairment charges in its operating results for its property, plant and equipment and leasehold 10 intangibles assets due to property damage sustained at certain communities. The Company recognized $ 5.3 million and $ 5.8 million for the three and nine months ended September 30, 2023, respectively, of non-cash impairment charges in its operating results for its property, plant and equipment and leasehold intangibles assets, primarily due to the planned disposition of certain underperforming communities that have since been sold. 6. Debt Long-term debt consists of the following. (in thousands) September 30, 2024 December 31, 2023 Fixed rate mortgage notes payable due 2026 through 2047; weighted average interest rate of 4.37 % and 4.26 % as of September 30, 2024 and December 31, 2023, respectively. $ 2,067,155 $ 1,953,414 Variable rate mortgage notes payable due 2025 through 2030; weighted average interest rate of 7.53 % and 7.74 % as of September 30, 2024 and December 31, 2023, respectively 1,416,783 1,524,907 Convertible notes payable due October 2026; interest rate of 2.00 % as of both September 30, 2024 and December 31, 2023 230,000 230,000 Tangible equity units senior amortizing notes due November 2025; interest rate of 10.25 % as of both September 30, 2024 and December 31, 2023 11,666 17,990 Notes payable for insurance premium financing due 2024; interest rate of 7.40 % as of September 30, 2024 5,872 — Deferred financing costs, net ( 25,454 ) ( 28,998 ) Total long-term debt 3,706,022 3,697,313 Current portion 51,525 41,463 Total long-term debt, less current portion $ 3,654,497 $ 3,655,850 As of September 30, 2024, the long-term debt, less current portion within the Company's condensed consolidated balance sheet includes $ 100.0 million of mortgage notes payable scheduled to mature in January 2025 with two one-year extension options, exercisable by the Company subject to the satisfaction of certain conditions. As of September 30, 2024, 91.5 %, or $ 3.4 billion, of the Company's total debt obligations represented non-recourse property-level mortgage financings. As of September 30, 2024, $ 58.5 million of letters of credit and no cash borrowings were outstanding under the Company's $ 100.0 million secured credit facility. The Company also had a separate secured letter of credit facility providing up to $ 17.0 million of letters of credit as of September 30, 2024 under which $ 15.7 million had been issued as of that date. 2024 Mortgage Financings In February 2024, the Company obtained $ 50.0 million of debt secured by first priority mortgages on 11 communities. The loan bears interest at a variable rate equal to SOFR plus a margin of 350 basis points. The debt matures in February 2027 with two one-year extension options, exercisable subject to certain performance criteria. In September 2024, the Company obtained $ 182.5 million of debt secured by first priority mortgages on 16 communities. The loan bears interest at a fixed rate of 5.67 % and is interest only for the first two years . The debt matures in October 2029. At the closing, the Company repaid $ 197.1 million of outstanding mortgage debt, which was scheduled to mature in September 2025, using proceeds from the $ 182.5 million debt and cash on hand. Convertible Senior Notes On September 30, 2024, the Company entered into privately negotiated exchange and subscription agreements (the “Exchange and Subscription Agreements”) with certain holders (the "Investors") of the Company’s outstanding 2.00 % convertible senior notes due 2026 (the “2026 Notes”), each of whom may have also beneficially owned shares of the Company's common stock as of such date and at closing. On October 3, 2024, pursuant to the Exchange and Subscription Agreements, the Company issued $ 369.4 million aggregate principal amount of its 3.50 % convertible senior notes due 2029 (the “2029 New Notes”). At closing, $ 219.4 million principal amount of the 2029 New Notes were issued in exchange for $ 206.7 million principal amount of the 2026 Notes and $ 150.0 million principal amount of the 2029 New Notes were issued for cash. The 2029 New Notes were 11 issued pursuant to, and are governed by, an Indenture (the “2029 New Notes Indenture”), dated as of October 3, 2024 between the Company and Equiniti Trust Co., as trustee (the “Trustee”). Following the closing, $ 23.3 million in aggregate principal amount of the 2026 Notes remain outstanding with the terms unchanged. The 2029 New Notes are the Company’s senior unsecured obligations and will rank senior in right of payment to any of its indebtedness that is expressly subordinated in right of payment to the 2029 New Notes, and equal in right of payment to any indebtedness that is not so subordinated. The 2029 New Notes are effectively junior in right of payment to any of the Company’s secured indebtedness to the extent of the value of the assets securing such indebtedness and structurally junior to all indebtedness and other liabilities (including trade payables) and any preferred equity of current or future subsidiaries of the Company. Under the terms of the 2029 New Notes Indenture, subject to certain exceptions, the Company may not incur pari passu indebtedness in an aggregate principal amount exceeding $ 500 million. The 2029 New Notes bear interest at a rate of 3.50 % per year, payable semiannually in arrears on April 15 and October 15 of each year, beginning on April 15, 2025. The 2029 New Notes will mature on October 15, 2029, unless earlier converted or repurchased in accordance with their terms. Holders of the 2029 New Notes may convert all or any portion of their 2029 New Notes at their option at any time prior to the close of business on the business day immediately preceding July 15, 2029, only under the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending on December 31, 2024 (and only during such calendar quarter), if the last reported sale price of the common stock of the Company for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130 % of the conversion price on each applicable trading day; (2) during the five business day period after any ten consecutive trading day period (the “measurement period”) in which the trading price per $1,000 principal amount of the 2029 New Notes for each trading day of the measurement period was less than 98 % of the product of the last reported sale price of the common stock of the Company and the conversion rate for the 2029 New Notes on each such trading day; or (3) upon the occurrence of specified corporate events. On or after July 15, 2029, holders may convert all or any portion of their 2029 New Notes at any time prior to the close of business on the second scheduled trading day immediately preceding the maturity date regardless of the foregoing conditions. Upon conversion, the Company will pay or deliver, as the case may be, cash, shares of its common stock or a combination of cash and shares of its common stock, at its election. Under the 2029 New Notes Indenture, the Company will not be obligated to deliver any shares of common stock to any holder upon any conversion of the 2029 New Notes whereby such holder would beneficially own a number of shares of Company common stock in excess of 19.9 % of the total number of shares of Company common stock issued and outstanding immediately following such conversion. The conversion rate for the 2029 New Notes will initially be 111.1111 shares of common stock per $1,000 principal amount of the 2029 New Notes (equivalent to an initial conversion price of approximately $ 9.00 per share of common stock). The conversion rate will be subject to adjustment in some events but will not be adjusted for any accrued and unpaid interest. In addition, following certain corporate events that occur prior to the maturity date, the Company will increase the conversion rate for a holder who elects to convert its 2029 New Notes in connection with such a corporate event. The Company does not have the right to redeem the 2029 New Notes at its election before the maturity date. No sinking fund is provided for the 2029 New Notes. The Company’s net cash proceeds from the exchange and issuance transactions, after subtracting fees, discounts and estimated expenses payable by the Company, were approximately $ 135.0 million. The Company intends to use the proceeds to fund acquisitions and for general corporate purposes. The Company expects to recognize an approximately $ 15.0 million loss on debt extinguishment in the three months ended December 31, 2024 for the completed exchange and issuance transactions. Financial Covenants Certain of the Company's debt documents contain restrictions and financial covenants, such as those requiring the Company to maintain prescribed minimum liquidity, net worth, and stockholders' equity levels and debt service ratios, and requiring the Company not to exceed prescribed leverage ratios, in each case on a consolidated, portfolio-wide, multi-community, single-community, and/or entity basis. In addition, the Company's debt documents generally contain non-financial covenants, such as those requiring the Company to comply with Medicare or Medicaid provider requirements and maintain insurance coverage. The Company's failure to comply with applicable covenants could constitute an event of default under the applicable debt documents. Many of the Company's debt documents contain cross-default provisions so that a default under one of these instruments could cause a default under other debt and lease documents (including documents with other lenders and lessors). 12 Furthermore, the Company's 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 September 30, 2024, the Company is in compliance with the financial covenants of its debt agreements. 7. Leases As of September 30, 2024, the Company operated 277 communities under long-term leases ( 227 operating leases and 50 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. 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. The leases relating to these communities are generally fixed rate leases with annual escalators that are either fixed or based upon changes in the consumer price index or the leased property revenue. The Company is responsible for all operating costs, including repairs and maintenance, property taxes, and insurance. The leases generally provide for renewal or extension options from 5 to 20 years and in some instances, purchase options. The community leases contain other customary terms, which may include assignment and change of control restrictions, maintenance and capital expenditure obligations, termination provisions and financial covenants, such as those requiring the Company to maintain prescribed minimum liquidity, net worth, and stockholders' equity levels and lease coverage ratios, in each case on a consolidated, portfolio-wide, multi-community, single-community and/or entity basis. In addition, the Company's lease documents generally contain non-financial covenants, such as those requiring the Company to comply with Medicare or Medicaid provider requirements and maintain insurance coverage. The Company's failure to comply with applicable covenants could constitute an event of default under the applicable lease documents. Many of the Company's debt and lease documents contain cross-default provisions so that a default under one of these instruments could cause a default under other debt and lease documents (including documents with other lenders and lessors). Certain leases contain cure provisions, which generally allow the Company to post an additional lease security deposit if the required covenant is not met. Furthermore, the Company's leases are secured by its communities and, in certain cases, a guaranty by the Company and/or one or more of its subsidiaries. As of September 30, 2024, the Company is in compliance with the financial covenants of its long-term 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. The Company did not recognize any such impairment charges for the three and nine months ended September 30, 2024. The Company recognized $ 3.8 million for both the three and nine months ended September 30, 2023 of non-cash impairment charges for its operating lease right-of-use assets, primarily due to lower than expected occupancy and decreased future cash flow estimates at certain communities. 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 September 30, Nine Months Ended September 30, Operating Leases (in thousands) 2024 2023 2024 2023 Facility operating expense $ 1,999 $ 1,853 $ 6,095 $ 5,211 Facility lease expense 51,937 53,145 154,397 149,784 Operating lease expense 53,936 54,998 160,492 154,995 Operating lease expense adjustment (1) 12,489 11,458 39,061 33,820 Changes in operating lease assets and liabilities for lessor capital expenditure reimbursements ( 6,432 ) — ( 7,732 ) ( 2,244 ) Operating net cash outflows from operating leases $ 59,993 $ 66,456 $ 191,821 $ 186,571 (1) Represents the difference between the amount of cash operating lease payments and the amount of operating lease expense. 13 Three Months Ended September 30, Nine Months Ended September 30, Financing Leases (in thousands) 2024 2023 2024 2023 Depreciation and amortization $ 2,651 $ 2,843 $ 8,421 $ 13,589 Interest expense: financing lease obligations 5,062 4,950 15,233 16,955 Financing lease expense $ 7,713 $ 7,793 $ 23,654 $ 30,544 Operating cash outflows from financing leases $ 5,062 $ 4,950 $ 15,233 $ 16,955 Financing cash outflows from financing leases 273 244 800 8,222 Total net cash outflows from financing leases $ 5,335 $ 5,194 $ 16,033 $ 25,177 The aggregate amounts of future minimum lease payments, including community, office, and equipment leases, recognized on the condensed consolidated balance sheet as of September 30, 2024 are as follows (in millions). Year Ending December 31, Operating Leases Financing Leases 2024 (three months) $ 56.9 $ 12.8 2025 232.4 7.0 2026 117.4 7.0 2027 118.3 6.3 2028 113.9 6.1 Thereafter 736.1 21.2 Total lease payments 1,375.0 60.4 Purchase price for communities subject to acquisition agreements — 610.0 Reacquisition price in excess of sale-leaseback proceeds — ( 32.8 ) Imputed interest and variable lease payments ( 493.8 ) ( 54.4 ) Other financing obligations — 20.7 Total lease obligations $ 881.2 $ 603.9 Omega Lease Amendment In August 2024, the Company and Omega Healthcare Investors, Inc. ("Omega") amended the existing master lease pursuant to which the Company continues to lease 24 communities from Omega. The Company's amended master lease has an initial term to expire on December 31, 2037. As part of the amendment, Omega agreed to make available up to $ 80.0 million to fund costs associated with capital expenditures for the communities through December 31, 2037. The annual rent under the lease will not be adjusted upon reimbursements for capital expenditures in the aggregate amount of up to $ 30.0 million of the $ 80.0 million pool, which is available in certain tranches through June 30, 2028. With respect to the remaining $ 50.0 million of the $ 80.0 million pool, the annual rent under the lease will prospectively increase by the amount of each reimbursement multiplied by 9.5 %. The $ 50.0 million will be available in certain tranches beginning January 1, 2025, subject to certain annual reimbursement caps specified in the lease. Under the terms of the amendment, rent will escalate annually per the terms of the existing lease escalator, with a potential minor contingent rent adjustment beginning in 2028 depending on lease performance. The amendment to the lease arrangements increased the operating lease right-of-use assets and lease obligations recognized on the Company's condensed consolidated balance sheet each by $ 253.4 million. International JV / Welltower Portfolio Acquisition In September 2024, the Company entered into a definitive agreement to acquire 11 senior living communities that are currently leased by the Company from a joint venture between Welltower Inc. (“Welltower”) and its joint venture partners for a purchase price of $ 300.0 million. As part of this transaction, the Company will assume approximately $ 194.5 million of existing 4.92 % fixed rate agency debt which is scheduled to mature in March 2027. Currently, these communities are held in a triple-net lease with annualized current cash rent payments of $ 22.3 million and a current maturity of August 31, 2028. The Company expects to complete the acquisition transaction in 2024, subject to the satisfaction of customary closing conditions for real estate 14 transactions. The Company expects to fund its acquisition of the 11 communities through the assumption of the existing mortgage debt, a portion of the net cash proceeds from the sale of the 2029 New Notes, and cash on hand. The leases for the 11 communities were previously classified as operating leases and have been prospectively classified as financing leases subsequent to the amendment of the leasing arrangement. The amendment of the leasing arrangement resulted in the following increases to the assets and liabilities recognized on the Company's condensed consolidated balance sheet. (in millions) Property, plant and equipment and leasehold intangibles, net $ 281.0 Operating lease right-of-use assets ( 52.0 ) Total assets $ 229.0 Financing lease obligations $ 300.0 Operating lease obligations ( 71.0 ) Total liabilities $ 229.0 Welltower Portfolio Acquisition In September 2024, the Company entered into a definitive agreement to acquire five senior living communities that are currently leased by the Company from Welltower for a purchase price of $ 175.0 million. Currently, these communities are held in a triple-net lease with annualized current cash rent payments of $ 13.4 million and a current maturity of December 31, 2024. The Company expects to complete the acquisition transaction in 2024, subject to the satisfaction of customary closing conditions for real estate transactions. The Company expects to fund its acquisition of the five communities through a portion of the net cash proceeds from the sale of the 2029 New Notes, proceeds from non-recourse mortgage financing on the assets, and cash on hand. The definitive agreement included the finalization of the purchase price under the provisions of a purchase option arrangement with a variable price component based upon the fair value of the assets. The amendment of the leasing arrangement increased the financing lease right-of-use assets and lease obligations recognized for two of these communities on the Company's consolidated balance sheet each by $ 17.7 million. The leasing arrangements for three of these communities are accounted for as failed sale-leaseback transactions as the Company has not previously transferred control of the underlying assets for accounting purposes under a sale and leaseback arrangement with a purchase option. Diversified Healthcare Trust Portfolio Acquisition In September 2024, the Company entered into a definitive agreement to acquire 25 senior living communities that are currently leased by the Company from Diversified Healthcare Trust for a purchase price of $ 135.0 million. Currently, these communities are held in a triple-net lease with annualized current cash rent payments of $ 10.2 million and a current maturity of December 31, 2032. The Company expects to complete the acquisition transaction in 2024, subject to the satisfaction of customary closing conditions for real estate transactions. The Company expects to fund its acquisition of the 25 communities through a portion of the net cash proceeds from the sale of the 2029 New Notes, proceeds from non-recourse mortgage financing on certain of the assets, and cash on hand. 15 The leases for the 25 communities were previously classified as operating leases and have been prospectively classified as financing leases subsequent to the amendment of the leasing arrangement. The amendment of the leasing arrangement resulted in the following increases to the assets and liabilities recognized on the Company's condensed consolidated balance sheet. (in millions) Property, plant and equipment and leasehold intangibles, net $ 128.6 Operating lease right-of-use assets ( 40.4 ) Total assets $ 88.2 Financing lease obligations $ 135.0 Operating lease obligations ( 46.8 ) Total liabilities $ 88.2 8. Litigation The Company has been and is currently involved in litigation and claims incidental to the conduct of its business, which it believes are generally comparable to other companies in the senior living and healthcare industries. In addition, the Company has been and currently is involved in putative class action litigation regarding staffing at the Company's communities and compliance with consumer protection laws and the Americans with Disabilities Act (and similar state laws). Certain claims and lawsuits allege large damage amounts, seek injunctive relief, and may require (and have required) significant costs to defend and resolve. The Company continues to vigorously defend against the putative class action cases, and an estimate of the possible loss or range of possible loss in connection with any such putative class action cannot be made. As a result, the Company maintains general liability, professional liability, excess liability, and other insurance policies in amounts and with coverage and deductibles the Company believes are appropriate, based on the nature and risks of its business, historical experience, availability, and industry standards. The Company's current policies provide for deductibles for each claim and contain various exclusions from coverage. 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. In addition, the Company is subject to various government reviews, audits, and investigations to verify compliance with Medicare and Medicaid programs and other applicable laws and regulations. The Centers for Medicare & Medicaid Services ("CMS") has engaged third-party firms to review claims data to evaluate appropriateness of billings. 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. The Company's costs to respond to and defend any such audits, reviews, and investigations may be significant. 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, 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 were subsequently transferred to the Middle District of Tennessee and consolidated into two lawsuits. In January 2024, the court dismissed one of the two derivative lawsuits. Plaintiffs have appealed the dismissal to the United States Court of Appeals for the Sixth Circuit. The other derivative lawsuit remains pending with the Middle District of Tennessee and asserts claims on behalf of the Company against certain current and former officers and directors for alleged breaches of duties owed to the Company. The complaint incorporates substantively similar allegations to the securities lawsuit previously described. 16 9. Stock-Based Compensation Grants of restricted stock units and stock awards under the Company's 2014 and 2024 Omnibus Incentive Plan were as follows. (in thousands, except for weighted average amounts) Restricted Stock Unit and Stock Award Grants Weighted Average Grant Date Fair Value Total Grant Date Fair Value Three months ended March 31, 2024 2,224 $ 6.36 $ 14,148 Three months ended June 30, 2024 17 $ 6.86 $ 115 Three months ended September 30, 2024 36 $ 7.15 $ 258 10. Earnings Per Share Potentially dilutive common stock equivalents for the Company include convertible senior notes, warrants, unvested restricted stock, restricted stock units, and prepaid stock purchase contracts. On October 1, 2021, the Company issued $ 230.0 million principal amount of 2.00 % convertible senior notes due 2026. As of September 30, 2024, the maximum number of shares issuable upon settlement of the 2026 Notes is 38.3 million (after giving effect to 9.9 million additional shares that would be issuable upon conversion in connection with the occurrence of certain corporate or other events). After giving effect to the Company's convertible notes exchange and issuance transactions on October 3, 2024, the maximum number of shares issuable upon settlement of the Company’s outstanding convertible senior notes is 58.9 million (after giving effect to 14.9 million additional shares that would be issuable upon conversion in connection with the occurrence of certain corporate or other events). Refer to Note 6 for information on the Company's convertible notes exchange and issuance transactions on October 3, 2024. On July 26, 2020, the Company issued to Ventas, Inc. ("Ventas") a warrant (the "Warrant") to purchase 16.3 million shares of the Company’s common stock, $ 0.01 par value per share, at a price per share of $ 3.00 . The Warrant is exercisable at Ventas' option at any time and from time to time, in whole or in part, until December 31, 2025. The exercise price and the number of shares issuable on exercise of the Warrant are subject to certain anti-dilution adjustments, including for cash dividends, stock dividends, stock splits, reclassifications, non-cash distributions, certain repurchases of common stock, and business combination transactions. During the three and nine months ended September 30, 2024, the Company issued 1,162,946 shares of common stock and 2,105,370 shares of common stock, respectively, upon the partial exercise of the Warrant by Ventas for 2.0 million shares and 3.7 million shares, net of shares withheld to satisfy the aggregate exercise price during the three and nine months ended September 30, 2024, respectively. As of September 30, 2024, the Warrant remains outstanding for the right to purchase 12.6 million shares of the Company's common stock. 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. 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 of its common stock for the 20 trading days preceding the settlement date. During the three and nine months ended September 30, 2024, 65,000 and 583,662 , respectively, of the Units were separated at the election of the holders into the two components, prepaid stock purchase contracts and senior amortizing notes, and the Company delivered 840,716 and 7,549,141 shares of the Company’s common stock upon settlement of such prepaid stock purchase contracts for the three and nine months ended September 30, 2024, respectively. As of September 30, 2024, 2,291,338 prepaid stock purchase contracts remain outstanding, and the maximum number of shares issuable upon settlement of the Units' prepaid stock purchase contracts is 34.8 million. 17 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. The following table summarizes the computation of basic weighted average shares presented in the condensed consolidated statements of operations. Three Months Ended September 30, Nine Months Ended September 30, (in thousands) 2024 2023 2024 2023 Weighted average common shares outstanding 197,894 188,230 194,261 187,950 Weighted average minimum shares issuable under purchase contracts 30,230 37,186 32,678 37,186 Weighted average shares outstanding - basic 228,124 225,416 226,939 225,136 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. 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 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 September 30, (in millions) 2024 2023 Convertible senior notes at initial conversion rate 28.4 28.4 Incremental shares issuable upon certain events for convertible senior notes 9.9 9.9 Warrants 12.6 16.3 Restricted stock and restricted stock units 6.4 6.5 Incremental shares issuable under purchase contracts 5.2 6.5 Total 62.5 67.6 11. Income Taxes The difference between the Company's effective tax rate for the three months ended September 30, 2024 and 2023 was primarily due to an increase in the valuation allowance recorded on operating losses during the three months ended September 30, 2024 as compared to the three months ended September 30, 2023. The difference between the Company's effective tax rate for the nine months ended September 30, 2024 and 2023 was primarily due to an increase in the tax benefit on the vesting of restricted stock units for the three months ended March 31, 2024 as compared to the three months ended March 31, 2023. The Company recorded an aggregate deferred federal, state, and local tax benefit of $ 12.2 million for the three months ended September 30, 2024, which was offset by an increase to the valuation allowance of $ 12.5 million. The Company recorded an aggregate deferred federal, state, and local tax benefit of $ 28.9 million for the nine months ended September 30, 2024, which was partially offset by an increase to the valuation allowance of $ 28.8 million. The Company recorded an aggregate deferred federal, state, and local tax benefit of $ 12.2 million for the three months ended September 30, 2023, which was partially offset by an increase to the valuation allowance of $ 10.0 million. The Company recorded an aggregate deferred federal, state, and local tax benefit of $ 23.0 million for the nine months ended September 30, 2023, which was partially offset by an increase to the valuation allowance of $ 21.0 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 September 30, 2024 and December 31, 2023 was $ 503.0 million and $ 474.2 million, respectively. The increase in the valuation allowance for both the nine months ended September 30, 2024 and 2023 is the result of current operating losses during the periods and the anticipated reversal of future tax liabilities offset by future tax deductions. 18 The Company recorded interest charges related to its tax contingency reserve for cash tax positions for the three and nine months ended September 30, 2024 and 2023, which are included in income tax expense or benefit for the period. As of September 30, 2024, tax returns for years 2020 through 2023 are subject to future examination by tax authorities. In addition, the net operating losses from prior years are subject to adjustment under examination . 12. Supplemental Disclosure of Cash Flow Information Nine Months Ended September 30, (in thousands) 2024 2023 Supplemental Disclosure of Cash Flow Information: Interest paid $ 178,106 $ 171,317 Income taxes paid, net of (refunds) $ 1,212 $ ( 1,233 ) Capital expenditures, net of related payables: Capital expenditures - non-development, net $ 144,634 $ 174,975 Capital expenditures - development, net 624 1,309 Capital expenditures - non-development - reimbursable from lessor 8,014 2,244 Trade accounts payable ( 2,334 ) ( 3,828 ) Net cash paid $ 150,938 $ 174,700 Acquisition of assets, net of cash acquired: Prepaid expenses and other assets, net $ — $ 23 Property, plant and equipment and leasehold intangibles, net — 6,872 Investment in unconsolidated ventures — ( 3,395 ) Other liabilities — ( 384 ) Other non-operating loss (income) — ( 2,542 ) Net cash paid $ — $ 574 Proceeds from sale of assets, net: Prepaid expenses and other assets, net $ ( 362 ) $ ( 1,660 ) Property, plant and equipment and leasehold intangibles, net ( 6,291 ) ( 23,733 ) Refundable fees and deferred revenue — 9,347 Other liabilities 559 10,021 Non-operating loss (gain) on sale of assets, net ( 923 ) ( 860 ) Loss (gain) on sale of communities, net — ( 36,296 ) Net cash received $ ( 7,017 ) $ ( 43,181 ) Supplemental Schedule of Non-cash Operating, Investing, and Financing Activities: Non-cash lease transactions, net: Property, plant and equipment and leasehold intangibles, net $ 427,444 $ ( 51,542 ) Operating lease right-of-use assets 170,867 216,492 Financing lease obligations ( 452,897 ) 88,844 Operating lease obligations ( 145,414 ) ( 253,794 ) Net $ — $ — 19 Restricted cash consists principally of escrow deposits for interest rate caps, real estate taxes, property insurance, capital expenditures, and debt service reserves required by certain lenders under mortgage debt agreements, deposits as security for self-insured retention risk under workers' compensation programs and property insurance programs, and regulatory reserves for certain CCRCs. 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) September 30, 2024 December 31, 2023 Reconciliation of cash, cash equivalents, and restricted cash: Cash and cash equivalents $ 254,711 $ 277,971 Restricted cash - current 49,067 41,341 Restricted cash - non-current 28,267 30,356 Total cash, cash equivalents, and restricted cash $ 332,045 $ 349,668 13. Segment Information The Company has three reportable segments: Independent Living; Assisted Living and Memory Care; and CCRCs. Operating segments are defined as components of an enterprise that engage in business activities from which it may earn revenues and incur expenses; for which separate financial information is available; and whose operating results are regularly reviewed by the chief operating decision maker to assess the performance of the individual segment and make decisions about resources to be allocated to the segment. Independent Living . The Company's Independent Living segment includes owned or leased communities that are primarily designed for middle to upper income seniors who desire to live in a residential setting that feels like home, without the efforts of ownership. The majority of the Company's independent living communities consist of both independent and assisted living units in a single community, which allows residents to age-in-place by providing them with a broad continuum of senior independent and assisted living services to accommodate their changing needs. Assisted Living and Memory Care. The Company's Assisted Living and Memory Care segment includes owned or leased communities that offer housing and 24-hour assistance with activities of daily living for 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 also provides memory care services at freestanding memory care communities that are specially designed for residents with Alzheimer's disease and other dementias. CCRCs. The Company's CCRCs segment includes large owned or leased communities that offer a variety of living arrangements and services to accommodate a broad spectrum of physical ability and healthcare needs. Most of the Company's CCRCs have independent living, assisted living, memory care, and skilled nursing available on one campus. All Other. All Other includes communities operated by the Company pursuant to management agreements. Under the management agreements for these communities, the Company receives management fees as well as reimbursement of expenses it incurs on behalf of the owners. 20 The following tables set forth selected segment financial data. Three Months Ended September 30, Nine Months Ended September 30, (in thousands) 2024 2023 2024 2023 Revenue and other operating income: Independent Living (1) $ 150,380 $ 141,449 $ 448,870 $ 422,993 Assisted Living and Memory Care (1) 510,084 496,232 1,528,147 1,475,322 CCRCs (1) 83,265 82,065 250,662 251,446 All Other 40,438 37,545 116,860 111,585 Total revenue and other operating income $ 784,167 $ 757,291 $ 2,344,539 $ 2,261,346 Segment operating income: (2) Independent Living $ 48,747 $ 44,702 $ 147,724 $ 137,896 Assisted Living and Memory Care 131,768 126,731 405,381 375,940 CCRCs 14,932 10,902 46,235 36,589 All Other 2,676 2,566 7,910 7,653 Total segment operating income 198,123 184,901 607,250 558,078 General and administrative expense (including non-cash stock-based compensation expense) 44,929 43,076 137,325 137,021 Facility operating lease expense 51,937 53,145 154,397 149,784 Depreciation and amortization 90,064 85,932 264,219 255,314 Asset impairment 934 9,086 2,642 9,606 Loss (gain) on sale of communities, net — — — ( 36,296 ) Income (loss) from operations $ 10,259 $ ( 6,338 ) $ 48,667 $ 42,649 As of (in thousands) September 30, 2024 December 31, 2023 Total assets: Independent Living (3) $ 1,226,716 $ 1,206,021 Assisted Living and Memory Care 3,651,503 3,315,921 CCRCs 647,693 612,521 Corporate and All Other 413,211 438,972 Total assets $ 5,939,123 $ 5,573,435 (1) All revenue and other operating income is earned from external third parties in the United States. (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 total carrying amount of goodwill is included within the Independent Living segment and was $ 27.3 million as of both September 30, 2024 and December 31, 2023. 21