Brookdale’s Net Loss Deepens 64% in Q4, New Branding Initiative Announced

Despite growing revenues and an increase in occupancy, Brookdale Senior Living (NYSE:BKD) realized a net loss of $24.5 million, or $0.20 per diluted common share, for the fourth quarter ended Dec. 31, 2012, compared to a net loss of $14.9 million, or $0.12 per diluted share, in the same period of 2011.

Total revenue for the fourth quarter was $699.7 million, up 4.1% from the same period in 2011. Full-year revenue was $2.8 billion, a 12.7% increase from the previous year.

Brookdale reported fourth quarter revenue of $553.1 million from its senior housing portfolio, encompassing retirement centers, assisted living, and both rental and entry-fee model CCRCs, representing a 4.2% increase from the same period in 2011.


While revenue was positively impacted by a 90 basis point increase in occupancy and a 2.9% increase in rates compared to the fourth quarter of 2011, operating income decreased by $0.2 million.

Community operating expenses rose 7% to $417.2 million in the fourth quarter, primarily due to additional expense related to occupancy increases, inflationary cost increases, and increases in health and property insurance expenses.

“We saw occupancy increases in 16 of our top 20 markets during the quarter,” said Mark Ohlendorf, co-president and CFO of Brookdale. “The strong occupancy increases were a result of improving fundamentals, focused execution and the benefit of the capital we have invested and continue to spend on our portfolio.”


Ohlendorf attributed occupancy increases to a rise in inquiry activity and good conversion rates, “probably driven” by the severity of the flu season.

Entry Fee CCRCs completed 121 independent living entry fee unit closings and produced $15.1 million of net cash flow—up $5.7 million compared to the fourth quarter of 2011.

Andy Smith, who was recently announced as Brookdale’s new CEO following the retirement of Bill Sheriff, announced a new branding initiative during the company’s fourth quarter earnings call with analysts.

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“In an industry as fragmented as ours, we believe that we have a huge opportunity to differentiate Brookdale and our communities in a marketplace that does not have a strong national brand,” Smith said.

Part of that includes continuing to invest in communities through its ongoing cap-ex strategy along with its Program Max development program, and Ohlendorf said Brookdale plans to accelerate its Program Max projects and invest $75-85 million net cash on these activities.

Additionally, Brookdale plans to continue expanding its ancillary service offerings, including hospice services and private pay home care both in communities and to the community at large. Revenue for Brookdale’s Innovative Senior Care (ISC) segment increased 4.2% to $56.1 million primarily due to the company’s roll-out of its ancillary services programs to additional units.

Compared to the fourth quarter of 2011, a volume increase in home health was partially offset by a reduction in volume in outpatient therapy and a reduction in Medicare reimbursement rates. Operating expenses for the ISC segment increased 11.7% to $4.7 million, which Brookdale attributed to an increase in expenses incurred in connection with the continued expansion of its ancillary services programs and an increase in home health direct labor expenses. As a result, says Brookdale, ISC operating income fell 18.3% to $11.1 million versus the fourth quarter of 2011.

Brookdale expects pricing to improve slightly during 2013 as occupancy continues to build in more markets. For the full year 2013, Brookdale expects Cash from Facility Operations to range between $2.30 and $2.40 per share, excluding integration, transaction-related and EMR roll-out costs.

The guidance assumes that a 2% reduction in Medicare reimbursement rates occurs on March 1 as a result of the upcoming sequestration.
Written by Alyssa Gerace

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