Brookdale Provides Update On The Impact Of Natural Disasters; Announces Leadership Change
NASHVILLE–Brookdale Senior Living Inc. (NYSE: BKD) today provided an update on the impact of Hurricanes Harvey and Irma and the Northern California wildfires.
Andy Smith, Brookdale’s President and CEO, said, “With a primary focus on the safety and comfort of all our residents and associates, we were prepared for the hurricanes. Overall, our residents and patients were well-cared for before, during and after these natural disasters. We have many messages of thanks from residents and family members about the quality of care provided. This is a testament to the extraordinary acts of courage, sacrifice and compassion from our associates who in many cases were, themselves, impacted by these natural disasters. I can’t begin to express my appreciation to those associates who put the care and safety of their residents and patients first and foremost during these stressful and exhausting experiences. The wildfires in California continue to be an active situation and we are again focusing the Company’s resources on the safety and comfort of our residents and associates.”
The Company also announced today that Labeed S. Diab, the Company’s Chief Operating Officer, provided notice to the Company that he will resign from his position effective October 28, 2017 to pursue another opportunity.
“Labeed has made many important contributions to Brookdale during his tenure as COO. I want to personally thank him for his leadership and wish him all the best,” said Mr. Smith.
The Company has completed its preliminary assessment of the financial impact of Hurricanes Harvey and Irma. Brookdale operates 171 communities, serving approximately 19,000 residents, in areas impacted by these hurricanes. All but one of the impacted communities have returned to operation, though seven communities will experience some continuing disruption as storm damage is remediated.
As a result of the hurricanes, the Company expects a negative impact to Adjusted EBITDA of approximately $12 million to $13 million for 2017. Adjusted EBITDA for the third quarter of 2017 is expected to reflect a negative impact of approximately $9 million, approximately one-third of which is expected to result from lost revenue in the Company’s home health business in Florida and the remainder of which is expected to result from rent credits and increased operating costs relating to the hurricane response. Adjusted EBITDA for the fourth quarter of 2017 is expected to reflect a negative impact of approximately $3 million to $4 million, split between lower ancillary services revenue and increased operating costs. The Company also estimates that it will incur an additional approximately $13 million to $14 million of capitalized costs for physical plant remediation, approximately $5 million to $6 million of which the Company expects to incur during the fourth quarter of 2017 and the remainder of which it expects to incur in 2018.
The foregoing amounts are presented net of expected reimbursement from the Company’s property and casualty and business interruption insurance policies, are preliminary estimates derived by management from the information available at this time, and are subject to the completion and finalization of the Company’s quarterly accounting and financial reporting procedures. The actual amounts and timing of amounts may differ.
In addition, as a result of Hurricane Irma, Florida issued an emergency order requiring nursing homes and assisted living facilities to obtain generators and the fuel necessary to sustain operations and maintain comfortable temperatures in the event of a power outage. The financial impact of complying with that order is not yet known.
The Company continues to monitor the wildfires in California. Approximately 20 of the Company’s California communities are being affected by the wildfires. The Company evacuated the residents of six communities, two of which have returned to full operation, and others are hosting residents who were evacuated. So far, none of the communities have suffered major damage from the wildfires.
Ongoing Review Process
As previously announced, Brookdale’s Board and management team are working with legal and financial advisors in a process of exploring options and alternatives to create and enhance stockholder value. That process remains ongoing.
Non-GAAP Financial Measure
The Company’s estimates of the financial impact of Hurricanes Harvey and Irma refer to the non-GAAP financial measure Adjusted EBITDA. The Company defines Adjusted EBITDA as net income (loss) before: provision (benefit) for income taxes; non-operating (income) expense items; depreciation and amortization (including non-cash impairment charges); (gain) loss on sale or acquisition of communities (including gain (loss) on facility lease termination); straight-line lease expense (income), net of amortization of (above) below market rents; amortization of deferred gain; non-cash stock-based compensation expense; and change in future service obligation. Reconciliations of Adjusted EBITDA to the most comparable GAAP financial measure for the third and fourth quarters of 2017 are not available without unreasonable effort due to the inherent difficulty in forecasting the timing or amounts of items required to reconcile Adjusted EBITDA from the Company’s net income (loss). Variability in the timing or amounts of items required to reconcile such measures may have a significant impact on the Company’s future GAAP results.