UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, ~~2021~~2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____________ to _____________

Commission File Number: 001-32641

BROOKDALE SENIOR LIVING INC.

(Exact name of registrant as specified in its charter)


Delaware			20-3068069
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

111 Westwood Place,

Suite 400,

Brentwood,

Tennessee

37027

(Address of principal executive offices)

(Zip Code)

(Registrant's telephone number, including area code) (615) 221-2250

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 Par Value Per Share	BKD	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐☒

Accelerated filer

☒☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)~~.Yes~~. Yes ☐ No ☒

As of May ~~5, 2021, 185,166,149~~4, 2022, 186,752,412 shares of the registrant's common stock, $0.01 par value, were outstanding (excluding restricted stock and restricted stock units).

TABLE OF CONTENTS

BROOKDALE SENIOR LIVING INC.

FORM 10-Q

FOR THE QUARTER ENDED MARCH 31, ~~2021~~2022


		PAGE
PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements

	Condensed Consolidated Balance Sheets -
	As of March 31 ~~2021~~, 202 2 (Unaudited) and December 31, 20 2 0 2021	4

	Condensed Consolidated Statements of Operations -
	Three months ended March 313 1 , 202 12 and 20202 201 (Unaudited)	5

	Condensed Consolidated Statements of Equity -
	Three months ended March 31 ~~2021~~, 202 2 and 20202 201 (Unaudited)	6

	Condensed Consolidated Statements of Cash Flows -
	~~Thre~~eThree months ended March 31 , 202 12 and 20202 201 (Unaudited)	7

	Notes to Condensed Consolidated Financial Statements (Unaudited)	8

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	2418

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4537

Item 4.	Controls and Procedures	4537

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	4638

Item 1A.	Risk Factors	4638

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4638

Item 6.	Exhibits	4739

Signatures		4840

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

BROOKDALE SENIOR LIVING INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except stock amounts)


		March 31, 2021		December 31, 2020			March 31, 2022		December 31, 2021
Assets	Assets	(Unaudited)				Assets	(Unaudited)
Current assets	Current assets					Current assets
Cash and cash equivalents	Cash and cash equivalents	$	303,952	$	380,420	Cash and cash equivalents	$	289,247	$	347,031
Marketable securities	Marketable securities	134,933		172,905		Marketable securities	179,260		182,393
Restricted cash	Restricted cash	26,503		28,059		Restricted cash	24,791		26,845
Accounts receivable, net	Accounts receivable, net	52,588		109,221		Accounts receivable, net	49,952		51,137
Assets held for sale	Assets held for sale	247,627		16,061		Assets held for sale	3,658		3,642
Prepaid expenses and other current assets, net	Prepaid expenses and other current assets, net	90,949		66,937		Prepaid expenses and other current assets, net	107,988		87,946
Total current assets	Total current assets	856,552		773,603		Total current assets	654,896		698,994
Property, plant and equipment and leasehold intangibles, net	Property, plant and equipment and leasehold intangibles, net	5,018,409		5,068,060		Property, plant and equipment and leasehold intangibles, net	4,874,044		4,904,292
Operating lease right-of-use assets	Operating lease right-of-use assets	743,346		788,138		Operating lease right-of-use assets	588,935		630,423
Restricted cash	Restricted cash	71,468		56,669		Restricted cash	64,455		64,438
Investment in unconsolidated ventures	Investment in unconsolidated ventures	4,972		4,898		Investment in unconsolidated ventures	62,050		67,424
Goodwill	Goodwill	27,321		154,131		Goodwill	27,321		27,321

Deferred tax asset						Deferred tax asset	2,584		279
Other assets, net	Other assets, net	24,085		56,259		Other assets, net	20,692		17,296
Total assets	Total assets	$	6,746,153	$	6,901,758	Total assets	$	6,294,977	$	6,410,467
Liabilities and Equity	Liabilities and Equity					Liabilities and Equity
Current liabilities	Current liabilities					Current liabilities
Current portion of long-term debt	Current portion of long-term debt	$	224,890	$	68,885	Current portion of long-term debt	$	207,751	$	63,125
Current portion of financing lease obligations	Current portion of financing lease obligations	20,083		19,543		Current portion of financing lease obligations	28,559		22,151
Current portion of operating lease obligations	Current portion of operating lease obligations	140,339		146,226		Current portion of operating lease obligations	147,831		148,642
Trade accounts payable	Trade accounts payable	65,278		71,233		Trade accounts payable	82,014		76,125
Liabilities held for sale		116,142		0
Accrued expenses	Accrued expenses	264,117		287,851		Accrued expenses	253,475		254,831
Refundable fees and deferred revenue	Refundable fees and deferred revenue	68,113		96,995		Refundable fees and deferred revenue	73,268		67,080
Total current liabilities	Total current liabilities	898,962		690,733		Total current liabilities	792,898		631,954
Long-term debt, less current portion	Long-term debt, less current portion	3,664,901		3,847,103		Long-term debt, less current portion	3,640,784		3,778,087
Financing lease obligations, less current portion	Financing lease obligations, less current portion	539,071		543,764		Financing lease obligations, less current portion	529,681		532,136
Operating lease obligations, less current portion	Operating lease obligations, less current portion	797,311		819,429		Operating lease obligations, less current portion	647,571		681,876

Deferred tax liability		9,876		9,557

Other liabilities	Other liabilities	140,925		188,443		Other liabilities	84,764		86,791
Total liabilities	Total liabilities	6,051,046		6,099,029		Total liabilities	5,695,698		5,710,844
Preferred stock, $0.01 par value, 50,000,000 shares authorized at March 31, 2021 and December 31, 2020; 0 shares issued and outstanding		0		0
Common stock, $0.01 par value, 400,000,000 shares authorized at March 31, 2021 and December 31, 2020; 197,757,065 and 198,331,663 shares issued and 187,229,540 and 187,804,138 shares outstanding (including 2,063,391 and 4,349,421 unvested restricted shares), respectively		1,978		1,983
Preferred stock, $0.01 par value, 50,000,000 shares authorized at March 31, 2022 and December 31, 2021; no shares issued and outstanding						Preferred stock, $0.01 par value, 50,000,000 shares authorized at March 31, 2022 and December 31, 2021; no shares issued and outstanding	—		—
Common stock, $0.01 par value, 400,000,000 shares authorized at March 31, 2022 and December 31, 2021; 197,810,798 and 197,485,318 shares issued and 187,283,273 and 186,957,793 shares outstanding (including 530,861 and 1,549,059 unvested restricted shares), respectively						Common stock, $0.01 par value, 400,000,000 shares authorized at March 31, 2022 and December 31, 2021; 197,810,798 and 197,485,318 shares issued and 187,283,273 and 186,957,793 shares outstanding (including 530,861 and 1,549,059 unvested restricted shares), respectively	1,978		1,975
Additional paid-in-capital	Additional paid-in-capital	4,213,095		4,212,409		Additional paid-in-capital	4,208,360		4,208,675
Treasury stock, at cost; 10,527,525 shares at March 31, 2021 and December 31, 2020		(102,774)		(102,774)
Treasury stock, at cost; 10,527,525 shares at March 31, 2022 and December 31, 2021						Treasury stock, at cost; 10,527,525 shares at March 31, 2022 and December 31, 2021	(102,774)		(102,774)
Accumulated deficit	Accumulated deficit	(3,419,469)		(3,311,184)		Accumulated deficit	(3,510,487)		(3,410,474)
Total Brookdale Senior Living Inc. stockholders' equity	Total Brookdale Senior Living Inc. stockholders' equity	692,830		800,434		Total Brookdale Senior Living Inc. stockholders' equity	597,077		697,402
Noncontrolling interest	Noncontrolling interest	2,277		2,295		Noncontrolling interest	2,202		2,221
Total equity	Total equity	695,107		802,729		Total equity	599,279		699,623
Total liabilities and equity	Total liabilities and equity	$	6,746,153	$	6,901,758	Total liabilities and equity	$	6,294,977	$	6,410,467

See accompanying notes to condensed consolidated financial statements.

BROOKDALE SENIOR LIVING INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited, in thousands, except per share data)


		Three Months Ended March 31,				Three Months Ended March 31,
		2021		2020				2022		2021
Revenue	Revenue						Revenue
Resident fees	Resident fees	$	664,350	$	782,707		Resident fees	$	636,974	$	664,350
Management fees	Management fees	8,566		108,715			Management fees	3,329		8,566
Reimbursed costs incurred on behalf of managed communities	Reimbursed costs incurred on behalf of managed communities	65,794		122,717			Reimbursed costs incurred on behalf of managed communities	37,141		65,794
Other operating income	Other operating income	10,735		0			Other operating income	376		10,735
Total revenue and other operating income	Total revenue and other operating income	749,445		1,014,139			Total revenue and other operating income	677,820		749,445

Expense	Expense						Expense
Facility operating expense (excluding facility depreciation and amortization of $77,274 and $84,301, respectively)		556,312		588,482
Facility operating expense (excluding facility depreciation and amortization of $79,932 and $77,274, respectively)							Facility operating expense (excluding facility depreciation and amortization of $79,932 and $77,274, respectively)	512,764		556,312

General and administrative expense (including non-cash stock-based compensation expense of $4,783 and $5,957, respectively)		49,943		54,595
General and administrative expense (including non-cash stock-based compensation expense of $3,885 and $4,783, respectively)							General and administrative expense (including non-cash stock-based compensation expense of $3,885 and $4,783, respectively)	45,126		49,943

Facility operating lease expense	Facility operating lease expense	44,418		64,481			Facility operating lease expense	41,564		44,418
Depreciation and amortization	Depreciation and amortization	83,891		90,738			Depreciation and amortization	85,684		83,891
Asset impairment	Asset impairment	10,677		78,226			Asset impairment	9,075		10,677

Costs incurred on behalf of managed communities	Costs incurred on behalf of managed communities	65,794		122,717			Costs incurred on behalf of managed communities	37,141		65,794
Total operating expense	Total operating expense	811,035		999,239			Total operating expense	731,354		811,035
Income (loss) from operations	Income (loss) from operations	(61,590)		14,900			Income (loss) from operations	(53,534)		(61,590)

Interest income	Interest income	421		1,455			Interest income	95		421
Interest expense:	Interest expense:						Interest expense:
Debt	Debt	(35,351)		(41,763)			Debt	(33,157)		(35,351)
Financing lease obligations	Financing lease obligations	(11,383)		(13,282)			Financing lease obligations	(12,058)		(11,383)
Amortization of deferred financing costs and debt discount		(1,873)		(1,315)
Gain (loss) on debt modification and extinguishment, net		0		19,181
Amortization of deferred financing costs							Amortization of deferred financing costs	(1,542)		(1,915)
Change in fair value of derivatives							Change in fair value of derivatives	3,403		42

Equity in earnings (loss) of unconsolidated ventures	Equity in earnings (loss) of unconsolidated ventures	(531)		(1,008)			Equity in earnings (loss) of unconsolidated ventures	(4,894)		(531)
Gain (loss) on sale of assets, net	Gain (loss) on sale of assets, net	1,112		372,839			Gain (loss) on sale of assets, net	(294)		1,112
Other non-operating income (loss)	Other non-operating income (loss)	1,644		2,662			Other non-operating income (loss)	(27)		1,644
Income (loss) before income taxes	Income (loss) before income taxes	(107,551)		353,669			Income (loss) before income taxes	(102,008)		(107,551)
Benefit (provision) for income taxes	Benefit (provision) for income taxes	(752)		15,828			Benefit (provision) for income taxes	1,976		(752)
Net income (loss)	Net income (loss)	(108,303)		369,497			Net income (loss)	(100,032)		(108,303)
Net (income) loss attributable to noncontrolling interest	Net (income) loss attributable to noncontrolling interest	18		18			Net (income) loss attributable to noncontrolling interest	19		18
Net income (loss) attributable to Brookdale Senior Living Inc. common stockholders	Net income (loss) attributable to Brookdale Senior Living Inc. common stockholders	$	(108,285)	$	369,515		Net income (loss) attributable to Brookdale Senior Living Inc. common stockholders	$	(100,013)	$	(108,285)

Net income (loss) per share attributable to Brookdale Senior Living Inc. common stockholders:
Basic		$	(0.59)	$	2.01
Diluted		$	(0.59)	$	2.00
Basic and diluted net income (loss) per share attributable to Brookdale Senior Living Inc. common stockholders							Basic and diluted net income (loss) per share attributable to Brookdale Senior Living Inc. common stockholders	$	(0.54)	$	(0.59)

Weighted average common shares outstanding:
Basic		184,011		184,186
Diluted		184,011		184,522

Weighted average shares used in computing basic and diluted net income (loss) per share							Weighted average shares used in computing basic and diluted net income (loss) per share	185,916		184,011

See accompanying notes to condensed consolidated financial statements.

BROOKDALE SENIOR LIVING INC.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited, in thousands)


		Three Months Ended March 31,				Three Months Ended March 31,
		2021		2020				2022		2021
Total equity, balance at beginning of period	Total equity, balance at beginning of period	$	802,729	$	698,725		Total equity, balance at beginning of period	$	699,623	$	802,729

Common stock:	Common stock:						Common stock:
Balance at beginning of period	Balance at beginning of period	$	1,983	$	1,996		Balance at beginning of period	$	1,975	$	1,983
Issuance of common stock under Associate Stock Purchase Plan		—		1

Restricted stock and restricted stock units, net	Restricted stock and restricted stock units, net	2		(6)			Restricted stock and restricted stock units, net	9		2
Shares withheld for employee taxes	Shares withheld for employee taxes	(7)		(6)			Shares withheld for employee taxes	(6)		(7)

Balance at end of period	Balance at end of period	$	1,978	$	1,985		Balance at end of period	$	1,978	$	1,978
Additional paid-in-capital:	Additional paid-in-capital:						Additional paid-in-capital:
Balance at beginning of period	Balance at beginning of period	$	4,212,409	$	4,172,099		Balance at beginning of period	$	4,208,675	$	4,212,409
Non-cash stock-based compensation expense	Non-cash stock-based compensation expense	4,783		5,957			Non-cash stock-based compensation expense	3,885		4,783
Issuance of common stock under Associate Stock Purchase Plan	Issuance of common stock under Associate Stock Purchase Plan	224		168			Issuance of common stock under Associate Stock Purchase Plan	—		224

Restricted stock and restricted stock units, net	Restricted stock and restricted stock units, net	(2)		6			Restricted stock and restricted stock units, net	(9)		(2)
Shares withheld for employee taxes	Shares withheld for employee taxes	(4,322)		(3,892)			Shares withheld for employee taxes	(4,191)		(4,322)
Other, net	Other, net	3		18			Other, net	—		3
Balance at end of period	Balance at end of period	$	4,213,095	$	4,174,356		Balance at end of period	$	4,208,360	$	4,213,095
Treasury stock:	Treasury stock:						Treasury stock:
Balance at beginning of period		$	(102,774)	$	(84,651)
Purchase of treasury stock		—		(18,123)
Balance at end of period		$	(102,774)	$	(102,774)
Balance at beginning and end of period							Balance at beginning and end of period	$	(102,774)	$	(102,774)

Accumulated deficit:	Accumulated deficit:						Accumulated deficit:
Balance at beginning of period	Balance at beginning of period	$	(3,311,184)	$	(3,393,088)		Balance at beginning of period	$	(3,410,474)	$	(3,311,184)
Cumulative effect of change in accounting principle		—		(115)

Net income (loss)	Net income (loss)	(108,285)		369,515			Net income (loss)	(100,013)		(108,285)

Balance at end of period	Balance at end of period	$	(3,419,469)	$	(3,023,688)		Balance at end of period	$	(3,510,487)	$	(3,419,469)
Noncontrolling interest:	Noncontrolling interest:						Noncontrolling interest:
Balance at beginning of period	Balance at beginning of period	$	2,295	$	2,369		Balance at beginning of period	$	2,221	$	2,295
Net income (loss) attributable to noncontrolling interest	Net income (loss) attributable to noncontrolling interest	(18)		(18)			Net income (loss) attributable to noncontrolling interest	(19)		(18)

Balance at end of period	Balance at end of period	$	2,277	$	2,351		Balance at end of period	$	2,202	$	2,277
Total equity, balance at end of period	Total equity, balance at end of period	$	695,107	$	1,052,230		Total equity, balance at end of period	$	599,279	$	695,107

Common stock share activity	Common stock share activity						Common stock share activity
Outstanding shares of common stock:	Outstanding shares of common stock:						Outstanding shares of common stock:
Balance at beginning of period	Balance at beginning of period	187,804		192,129			Balance at beginning of period	186,958		187,804
Issuance of common stock under Associate Stock Purchase Plan	Issuance of common stock under Associate Stock Purchase Plan	43		61			Issuance of common stock under Associate Stock Purchase Plan	—		43
Restricted stock and restricted stock units, net	Restricted stock and restricted stock units, net	127		(504)			Restricted stock and restricted stock units, net	925		127
Shares withheld for employee taxes	Shares withheld for employee taxes	(744)		(611)			Shares withheld for employee taxes	(600)		(744)
Purchase of treasury stock		—		(3,063)

Balance at end of period	Balance at end of period	187,230		188,012			Balance at end of period	187,283		187,230

See accompanying notes to condensed consolidated financial statements.

BROOKDALE SENIOR LIVING INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, in thousands)


		Three Months Ended March 31,					Three Months Ended March 31,
		2021		2020			2022		2021
Cash Flows from Operating Activities	Cash Flows from Operating Activities					Cash Flows from Operating Activities
Net income (loss)	Net income (loss)	$	(108,303)	$	369,497	Net income (loss)	$	(100,032)	$	(108,303)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:	Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:					Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Loss (gain) on debt modification and extinguishment, net		0		(19,181)

Depreciation and amortization, net	Depreciation and amortization, net	85,764		92,053		Depreciation and amortization, net	87,226		85,806
Asset impairment	Asset impairment	10,677		78,226		Asset impairment	9,075		10,677
Equity in (earnings) loss of unconsolidated ventures	Equity in (earnings) loss of unconsolidated ventures	531		1,008		Equity in (earnings) loss of unconsolidated ventures	4,894		531

Distributions from unconsolidated ventures from cumulative share of net earnings						Distributions from unconsolidated ventures from cumulative share of net earnings	561		—
Amortization of entrance fees	Amortization of entrance fees	(364)		(377)		Amortization of entrance fees	(726)		(364)
Proceeds from deferred entrance fee revenue	Proceeds from deferred entrance fee revenue	670		343		Proceeds from deferred entrance fee revenue	1,036		670
Deferred income tax (benefit) provision	Deferred income tax (benefit) provision	319		(21,767)		Deferred income tax (benefit) provision	(2,304)		319
Operating lease expense adjustment	Operating lease expense adjustment	(4,664)		(6,733)		Operating lease expense adjustment	(8,307)		(4,664)
Change in fair value of derivatives						Change in fair value of derivatives	(3,403)		(42)
Loss (gain) on sale of assets, net	Loss (gain) on sale of assets, net	(1,112)		(372,839)		Loss (gain) on sale of assets, net	294		(1,112)

Non-cash stock-based compensation expense	Non-cash stock-based compensation expense	4,783		5,957		Non-cash stock-based compensation expense	3,885		4,783

Other	Other	(1,416)		(1,460)		Other	(43)		(1,416)
Changes in operating assets and liabilities:	Changes in operating assets and liabilities:					Changes in operating assets and liabilities:
Accounts receivable, net	Accounts receivable, net	(5,768)		(2,033)		Accounts receivable, net	1,185		(5,768)
Prepaid expenses and other assets, net	Prepaid expenses and other assets, net	(6,769)		(1,696)		Prepaid expenses and other assets, net	(4,734)		(6,769)
Prepaid insurance premiums financed with notes payable	Prepaid insurance premiums financed with notes payable	(12,985)		(17,434)		Prepaid insurance premiums financed with notes payable	(16,629)		(12,985)
Trade accounts payable and accrued expenses	Trade accounts payable and accrued expenses	(500)		(47,919)		Trade accounts payable and accrued expenses	(2,630)		(500)
Refundable fees and deferred revenue	Refundable fees and deferred revenue	7,717		(2,254)		Refundable fees and deferred revenue	5,907		7,717
Operating lease assets and liabilities for lessor capital expenditure reimbursements	Operating lease assets and liabilities for lessor capital expenditure reimbursements	7,563		4,088		Operating lease assets and liabilities for lessor capital expenditure reimbursements	1,490		7,563

Net cash provided by (used in) operating activities	Net cash provided by (used in) operating activities	(23,857)		57,479		Net cash provided by (used in) operating activities	(23,255)		(23,857)
Cash Flows from Investing Activities	Cash Flows from Investing Activities					Cash Flows from Investing Activities
Change in lease security deposits and lease acquisition deposits, net	Change in lease security deposits and lease acquisition deposits, net	(62)		3,211		Change in lease security deposits and lease acquisition deposits, net	155		(62)
Purchase of marketable securities	Purchase of marketable securities	(79,932)		(89,414)		Purchase of marketable securities	(125,990)		(79,932)
Sale and maturities of marketable securities	Sale and maturities of marketable securities	117,995		50,000		Sale and maturities of marketable securities	129,000		117,995
Capital expenditures, net of related payables	Capital expenditures, net of related payables	(40,361)		(69,385)		Capital expenditures, net of related payables	(39,956)		(40,361)
Acquisition of assets, net of related payables and cash received		0		(446,688)

Investment in unconsolidated ventures	Investment in unconsolidated ventures	(5,206)		(268)		Investment in unconsolidated ventures	(82)		(5,206)

Proceeds from sale of assets, net	Proceeds from sale of assets, net	3,760		304,617		Proceeds from sale of assets, net	710		3,760

Net cash provided by (used in) investing activities	Net cash provided by (used in) investing activities	(3,806)		(247,927)		Net cash provided by (used in) investing activities	(36,163)		(3,806)
Cash Flows from Financing Activities	Cash Flows from Financing Activities					Cash Flows from Financing Activities
Proceeds from debt	Proceeds from debt	18,575		471,785		Proceeds from debt	25,258		18,575
Repayment of debt and financing lease obligations	Repayment of debt and financing lease obligations	(49,924)		(263,226)		Repayment of debt and financing lease obligations	(21,440)		(49,924)
Proceeds from line of credit		0		166,381

Purchase of treasury stock, net of related payables		0		(18,123)

Payment of financing costs, net of related payables	Payment of financing costs, net of related payables	(87)		(5,815)		Payment of financing costs, net of related payables	(76)		(87)
Payments of employee taxes for withheld shares	Payments of employee taxes for withheld shares	(4,329)		(3,898)		Payments of employee taxes for withheld shares	(4,145)		(4,329)
Other	Other	203		146		Other	—		203
Net cash provided by (used in) financing activities	Net cash provided by (used in) financing activities	(35,562)		347,250		Net cash provided by (used in) financing activities	(403)		(35,562)
Net increase (decrease) in cash, cash equivalents, and restricted cash	Net increase (decrease) in cash, cash equivalents, and restricted cash	(63,225)		156,802		Net increase (decrease) in cash, cash equivalents, and restricted cash	(59,821)		(63,225)
Cash, cash equivalents, and restricted cash at beginning of period	Cash, cash equivalents, and restricted cash at beginning of period	465,148		301,697		Cash, cash equivalents, and restricted cash at beginning of period	438,314		465,148
Cash, cash equivalents, and restricted cash at end of period	Cash, cash equivalents, and restricted cash at end of period	$	401,923	$	458,499	Cash, cash equivalents, and restricted cash at end of period	$	378,493	$	401,923

See accompanying notes to condensed consolidated financial statements.

BROOKDALE SENIOR LIVING INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Description of Business

Brookdale Senior Living Inc. ("Brookdale" or the "Company") is an operator of 678 senior living communities throughout the United States. The Company is committed to ~~providing senior living solutions primarily within properties that are designed, purpose-built,~~its mission of enriching the lives of the people it serves with compassion, respect, excellence, and ~~operated to provide quality service, care, and living accommodations for residents.~~integrity. The Company operates and manages independent living, assisted living, memory care, and continuing care retirement communities ("CCRCs"). The ~~Company also offers a range of home health, hospice, and outpatient therapy services to residents of many of its~~Company's senior living communities and its comprehensive network help to provide seniors ~~living outside~~with care and services in an environment that feels like home. As of ~~its~~March 31, 2022, the Company owned 347 communities, representing a majority of the Company's consolidated community portfolio, leased 298 communities, and managed 33 communities.

~~The~~On July 1, 2021, the Company ~~has 5 reportable segments: Independent Living; Assisted Living and Memory Care; CCRCs; Health Care Services; and Management Services. The Company expects to sell~~sold 80% of its equity in its Health Care Services segment. The accompanying unaudited condensed consolidated financial statements include the results of operations and cash flows of the Health Care Services segment ~~as described~~for the three months ended March 31, 2021. For periods beginning July 1, 2021, the results and financial position of the Health Care Services segment were deconsolidated from the Company's consolidated financial statements and its 20% equity interest in ~~Note 4.~~the Health Care Services venture (the "HCS Venture") is accounted for under the equity method of accounting.

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, ~~2020~~2021 filed with the SEC on February ~~25, 2021.~~15, 2022.

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. The Company reports investments in unconsolidated entities over whose operating and financial policies it has the ability to exercise significant influence under the equity method of accounting.

The Company continually evaluates its potential variable interest entity ("VIE") relationships under certain criteria as provided for in Financial Accounting Standards Board Accounting Standards Codification 810, Consolidation ("ASC 810"). ASC 810 broadly defines a VIE as an entity with one or more of the following characteristics: (a) the total equity investment at risk is insufficient to finance the entity's activities without additional subordinated financial support; (b) as a group, the holders of the equity investment at risk lack (i) the ability to make decisions about the entity's activities through voting or similar rights, (ii) the obligation to absorb the expected losses of the entity, or (iii) the right to receive the expected residual returns of the entity; or (c) the equity investors have voting rights that are not proportional to their economic interests, and substantially all of the entity's activities either involve, or are conducted on behalf of, an investor that has disproportionately few voting rights. The Company performs this analysis on an ongoing basis and consolidates any VIEs for which the Company is determined to be the primary beneficiary, as determined by the Company's power to direct the VIE's activities and the obligation to absorb its losses or the right to receive its benefits, which are potentially significant to the VIE.

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, other operating income, asset impairments, self-insurance reserves, performance-based compensation, the 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.

~~Lease Accounting~~Reclassifications

~~The Company, as lessee, recognizes a right-of-use asset and a lease liability~~Certain prior period amounts have been reclassified to conform to the current financial statement presentation, with no effect on the Company's condensed consolidated ~~balance sheet for its community, office, and equipment leases. As~~financial position or results of the commencement date of a lease, a lease liability and corresponding right-of-use asset is established on the Company's condensed consolidated balance sheet at the present value of future minimum lease payments. The Company's community leases generally contain fixed annual rent escalators or annual rent escalators based on an index, such as the consumer price index. The future minimum lease payments recognized on the condensed consolidated balance sheet include fixed payments (including in-substance fixed payments) and variable payments

estimated utilizing the index or rate on the lease commencement date. The Company recognizes lease expense as incurred for additional variable payments. For the Company's leases that do not contain an implicit rate, the Company utilizes its estimated incremental borrowing rate to determine the present value of lease payments based on information available at commencement of the lease. The Company's estimated incremental borrowing rate reflects the fixed rate at which the Company could borrow a similar amount for the same term on a collateralized basis. The Company elected the short-term lease exception policy which permits leases with an initial term of 12 months or less to not be recorded on the Company's condensed consolidated balance sheet and instead to be recognized as lease expense as incurred.

The Company, as lessee, makes a determination with respect to each of its community, office, and equipment leases as to whether each should be accounted for as an operating lease or financing lease. The classification criteria is based on estimates regarding the fair value of the leased asset, minimum lease payments, effective cost of funds, economic life of the asset, and certain other terms in the lease agreements.

Lease right-of-use assets are reviewed for impairment whenever changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of right-of-use assets are assessed by a comparison of the carrying amount of the asset to the estimated future undiscounted net cash flows expected to be generated by the asset, calculated utilizing the lowest level of identifiable cash flows. If estimated future undiscounted net cash flows are less than the carrying amount of the asset then the fair value of the asset is estimated. The impairment expense is determined by comparing the estimated fair value of the asset to its carrying amount, with any amount in excess of fair value recognized as an expense in the current period. Undiscounted cash flow projections and estimates of fair value amounts are based on a number of assumptions such as revenue and expense growth rates and estimated lease coverage ratios (Level 3).

~~Operating Leases~~

The Company recognizes operating lease expense for actual rent paid, generally plus or minus a straight-line adjustment for estimated minimum lease escalators if applicable. The right-of-use asset is generally reduced each period by an amount equal to the difference between the operating lease expense and the amount of expense on the lease liability utilizing the effective interest method. Subsequent to the impairment of an operating lease right-of-use asset, the Company recognizes operating lease expense consisting of the reduction of the right-of-use asset on a straight-line basis over the remaining lease term and the amount of expense on the lease liability utilizing the effective interest method.

~~Financing Leases~~

Financing lease right-of-use assets are recognized within property, plant and equipment and leasehold intangibles, net on the Company's condensed consolidated balance sheets. The Company recognizes interest expense on the financing lease liabilities utilizing the effective interest method. The right-of-use asset is generally amortized to depreciation and amortization expense on a straight-line basis over the lease term unless the lease contains an option to purchase the underlying asset that the Company is reasonably certain to exercise. If the Company is reasonably certain to exercise the purchase option, the asset is amortized over the useful life.

~~Sale-Leaseback Transactions~~

For transactions in which an owned community is sold and leased back from the buyer (sale-leaseback transactions), the Company recognizes an asset sale and lease accounting is applied if the Company has transferred control of the community. For such transactions, the Company removes the transferred assets from the condensed consolidated balance sheet and a gain or loss on the sale is recognized for the difference between the carrying amount of the asset and the transaction price for the sale transaction.

For sale‑leaseback transactions in which the Company has not transferred control of the underlying asset, the Company does not recognize an asset sale or derecognize the underlying asset until control is transferred. For such transactions, the Company recognizes the underlying assets within assets under financing leases as a component of property, plant and equipment and leasehold intangibles, net on the condensed consolidated balance sheets and continues to depreciate the assets over their useful lives.

Additionally, the Company accounts for any amounts received as a financing lease liability and the Company recognizes interest expense on the financing lease liability utilizing the effective interest method with the interest expense limited to an amount that is not greater than the cash payments on the financing lease liability over the term of the lease.

~~Property, Plant and Equipment and Leasehold Intangibles, Net~~

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset group may not be recoverable. Recoverability of an asset group is assessed by comparing its carrying amount to the estimated future undiscounted net cash flows expected to be generated by the asset group through operation or disposition, calculated utilizing the lowest level of identifiable cash flows. If this comparison indicates that the carrying amount of an asset group is not recoverable, the Company is required to recognize an impairment loss. The impairment loss is measured by the amount by which the carrying amount of the asset exceeds its estimated fair value, with any amount in excess of fair value recognized as an expense in the current period. Undiscounted cash flow projections and estimates of fair value amounts are based on a number of assumptions such as revenue and expense growth rates, estimated holding periods, and estimated capitalization rates (Level 3).

~~Goodwill~~

The Company tests goodwill for impairment annually during the fourth quarter or more frequently if indicators of impairment arise. Factors the Company considers important in its analysis of whether an indicator of impairment exists include a significant decline in the Company's stock price or market capitalization for a sustained period since the last testing date, significant underperformance relative to historical or projected future operating results, and significant negative industry or economic trends. The Company first assesses qualitative factors to determine if it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If so, the Company performs a quantitative goodwill impairment test based upon a comparison of the estimated fair value of the reporting unit to which the goodwill has been assigned with the reporting unit's carrying amount. The fair values used in the quantitative goodwill impairment test are estimated using Level 3 inputs based upon discounted future cash flow projections for the reporting unit. These cash flow projections are based upon a number of estimates and assumptions such as revenue and expense growth rates, capitalization rates, and discount rates. The Company also considers market-based measures such as earnings multiples in its analysis of estimated fair values of its reporting units. If the quantitative goodwill impairment test results in a reporting unit's carrying amount exceeding its estimated fair value, an impairment charge will be recorded based on the difference, with the impairment charge limited to the amount of goodwill allocated to the reporting unit.operations.

3. COVID-19 Pandemic

The ~~United States broadly continues to experience the~~ COVID-19 pandemic ~~which~~ has ~~significantly disrupted, and likely will continue to significantly disrupt for some period, the senior living industry and~~adversely impacted the Company's ~~business. Due to the average age~~occupancy and prevalence of chronic medical conditions among the Company's residents and patients, they generally are at disproportionately higher risk of hospitalization and adverse outcomes if they contract COVID-19. The health and wellbeing of the Company's residents, patients, and associates is and has been its highest priority as it continues to serve and care for seniors through the pandemic.

~~Community Restrictions. To help protect the Company's residents, patients, and associates from contracting COVID-19, the Company imposed significant restrictions at its communities~~resident fee revenue beginning in March 2020 ~~including closing its communities to visitors~~ and ~~prospective residents, and~~resulted in some cases restricting new resident move-ins, suspending group outings, modifying communal dining and programming to comply with social distancing and other regulatory guidelines and, in most cases, implementing in-room only dining and activities programming, requesting that residents refrain from leaving the community unless medically necessary, and requiring new residents and residents returning from a hospital or nursing home to isolate in their apartment for fourteen days. The Company has adopted a framework for determining when to ease restrictions at each of its communities based on several criteria, including regulatory requirements and guidance, completion of baseline testing at the community, and the presence of current confirmed COVID-19 positive cases. The Company may revert to more restrictive measures if the pandemic worsens, as necessary to comply with regulatory requirements, or at the direction of state or local health authorities. As of April 30, 2021, 100% of the Company's communities have opened for visitors and new prospects.

~~Pandemic-Related Expenses. The Company incurred $27.3 million of facility operating expense during the first quarter of 2021 for~~ incremental direct costs to respond to the pandemic. Such costs include those for: acquisition of additional PPE, medical equipment, and cleaning and disposable food service supplies; enhanced cleaning and environmental sanitation; increased employee-related costs, including labor, workers compensation, and health plan expense; increased expense for general liability claims; and COVID-19 testing of residents and associates where not otherwise covered by government payor or third-party insurance sources. On a cumulative basis, the Company has incurred $152.9 million of pandemic related facility operating expense since the beginning of fiscal 2020. The Company recorded non-cash impairment charges in its operating results of $9.0 million for the three months ended March 31, 2021, for its operating lease right-of-use assets, primarily due to the COVID-19 pandemic and ~~lower than expected operating performance at communities with impaired assets.~~

~~Liquidity~~. As of March 31, 2021, the Company's total liquidity was $438.9 million, consisting of $304.0 million of unrestricted cash and cash equivalents and $134.9 million of marketable securities. The Company's cash flows from operations, excluding management agreement termination fees and the impact of the Coronavirus Aid, Relief, and Economic Security Act of 2020 ("CARES Act") funding, have been insufficient to cover its operating expenses, capital expenditures, and required interest and lease payments during the pandemic. However, the Company was able to satisfy its liquidity needs over such period utilizing a portion of its preexisting liquidity, together with CARES Act funding. The Company currently estimates that its cash flows from operations, together with cash balances on hand, cash equivalents, marketable securities, and proceeds from the pending sale of 80% of the equity in its Health Care Services segment will be sufficient to fund its liquidity needs for at least the next 12 months. The Company continues to seek opportunities to enhance and preserve its liquidity, including through maintaining expense discipline and increasing occupancy, continuing to evaluate its financing structure and the state of debt markets, and seeking further government-sponsored financial relief related to the pandemic. There is no assurance that debt financing will continue to be available on terms consistent with the Company's expectations or at all, that its efforts will be successful in seeking further government-sponsored financial relief or regarding the amount of, or conditions required to qualify for, any such relief, or that the closing of the pending transaction will be completed in accordance with the Company's expectations, or at all, or generate cash proceeds to the Company in the amount it anticipates.

~~Financial Relief~~. The CARES Act, signed into law on March 27, 2020, and Paycheck Protection Program and Health Care Enhancement Act, signed into law on April 24, 2020, provide liquidity and financial relief to certain businesses, among other things. Certain impacts of such programs are provided below.

•During the first quarter of 2021, the Company accepted $0.8 million of cash from grants from the Public Health and Social Services Emergency Fund ("Provider Relief Fund") administered by the U.S. Department of Health and Human Services ("HHS"), under which grants have been made available to eligible healthcare providers for healthcare related expenses or lost revenues attributable to COVID-19. The grants represented incentive payments made pursuant to the Nursing Home Infection Control Distribution, which related to the Company's skilled nursing care provided through its CCRCs. HHS continues to evaluate future allocations under the Provider Relief Fund and the regulation and guidance regarding grants made under the Provider Relief Fund. The Company intends to pursue additional funding that may become available. There can be no assurance that the Company will qualify for, or receive, such future grants in the amount it expects, that additional restrictions on the permissible uses or terms and conditions of the grants will not be imposed by HHS, or that future funding programs will be made available for which it qualifies.

•During the year ended December 31, 2020, the Company received $87.5 million under the Accelerated and Advance Payment Program administered by CMS, $75.2 million of which related to its Health Care Services segment and $12.3 million related to its CCRCs segment. Recoupment of advanced payments will begin one year after payments were issued at a rate of 25% of Medicare payments for the first eleven months following the anniversary of issuance and at a rate of 50% of Medicare payments for the next six months. Any outstanding balance of advanced payments will be due following such recoupment period. Pursuant to the Purchase Agreement providing for the sale of 80% of the Company's equity in its Health Care Services segment (as described below), its net cash ~~proceeds at closing will include a reduction for the then outstanding balance of such advanced payments related to its Health Care Services segment.~~

•During fiscal 2020, the Company deferred payment of $72.7 million of the employer portion of social security payroll taxes incurred from March 27, 2020 through December 31, 2020 pursuant to the CARES Act. One-half of such deferral amount will become due on each of December 31, 2021 and December 31, 2022. Pursuant to the Purchase Agreement providing for the sale of 80% of the Company's equityused in its Health Care Services segment, its net cash proceeds at closing will include a reduction for the $8.9 million of deferred payroll tax payments related to its Health Care Services segment. The Company expects to pay approximately $32 million of the deferred payments in both December 2021 and 2022.

•The Company is eligible to claim the employee retention credit for certain of its associates under the CARES Act. The credit for 2020 is available to employers that fully or partially suspended operations during any calendar quarter in 2020 due to orders from an appropriate governmental authority limiting commerce, travel, or group meetings due to COVID-19, and is equal to 50% of qualified wages paid after March 12, 2020 through December 31, 2020 to qualified employees, with a maximum credit of $5,000 per employee. During the first quarter of 2021, the Company recognized $9.0 million of employee retention credits on wages paid from March 12, 2020 through September 30, 2020 within other operating income. The credit was modified and extended by subsequent legislation for wages paid from January 1, 2021 through December 31, 2021, and the Company is assessing its eligibility to claim such credit. There can be no assurance that the Company will qualify for, or receive, credits in the amount or on the timing it expects.

In addition to the grants described above, during the three months ended March 31, 2021, the Company has received and recognized $0.9 million of other operating income from grants from other government sources.activities.

The Company cannot predict with reasonable certainty the impacts that COVID-19 ultimately will have on its business, results of operations, cash flow, and liquidity, and its response efforts may continue to delay or negatively impact its strategic initiatives, including plans for future growth. 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; 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; potentially greater use of contract labor and overtime 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 ~~(including dispositions and the pending sale of 80% of the equity in the Company's Health Care Services segment)~~ 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;~~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.

~~4. Acquisitions, Dispositions and Other Transactions~~

During the period from January 1, 2020 through March 31, 2021, the Company acquired 27 communities that the Company formerly leased, disposed of 8 owned communities (including the conveyance of 5 communities to Ventas, Inc. ("Ventas")), and sold its ownership interest in its unconsolidated entry fee CCRC Venture (the "CCRC Venture") with Healthpeak Properties, Inc. ("Healthpeak"), and the Company's triple-net lease obligations on 5 communities were terminated.

The Company expects to sell 80% of its equity in its Health Care Services segment, as described below. Additionally, 1 unencumbered community in the Assisted Living and Memory Care segment and 1 unencumbered community in the CCRCs segment were classified as held for sale, resulting in $14.0 million being recorded as assets held for sale within the condensed consolidated balance sheet for senior housing communities as of March 31, 2021.

The closings of the various pending and expected transactions described within this note are, or will be, subject to the satisfaction of various closing conditions, including (where applicable) the receipt of regulatory approvals. There can be no assurance that the transactions will close or, if they do, when the actual closings will occur.

~~Completed Dispositions of Owned Communities~~

During the three months ended March 31, 2021, the Company completed the sale of 1 owned community for cash proceeds of $2.7 million, net of transaction costs, and recognized a net gain on sale of assets of $0.5 million.

In addition to the conveyance of 5 communities to Ventas, during the year ended December 31, 2020, the Company completed the sale of 2 owned communities for cash proceeds of $38.1 million, net of transaction costs, and recognized a net gain on sale of assets of $2.7 million. These dispositions included the sale of 1 owned community during the three months ended March 31, 2020 for which the Company received cash proceeds of $5.5 million, net of transaction costs, and recognized a net gain on sale of assets of $0.2 million.

~~Pending Sale of Health Care Services~~

On February 24, 2021, the Company entered into a Securities Purchase Agreement (the "Purchase Agreement") with affiliates of HCA Healthcare, Inc., providing for the sale of 80% of the Company’s equity in its Health Care Services segment for a purchase price of $400 million in cash, subject to certain adjustments set forth in the Purchase Agreement, including a reduction

for the remaining outstanding balance as of the closing of Medicare advance payments and deferred payroll tax payments related to the Health Care Services segment, which were $75.2 million and $8.9 million respectively, as of March 31, 2021. The Purchase Agreement also contains certain agreed upon indemnities for the benefit of the purchaser. The closing of the sale transaction is anticipated to occur in the early second half of 2021, subject to receipt of applicable regulatory approvals and satisfaction of other customary closing conditions set forth in the Purchase Agreement. Pursuant to the Purchase Agreement, at closing of the transaction, the Company will retain a 20% equity interest in the business.

The assets and liabilities of the Health Care Services segment are included within assets held for sale and liabilities held for sale, respectively, within the Company’s condensed consolidated balance sheet as of March 31, 2021. As of March 31, 2021, assets held for sale and liabilities held for sale of the Health Care Services segment consisted of the following:

~~(in thousands)~~

~~Accounts receivable, net~~

~~62,401~~

~~Property, plant and equipment and leasehold intangibles, net~~

~~1,964~~

~~Operating lease right-of-use assets~~

~~9,688~~

~~Goodwill~~

~~126,810~~

~~Prepaid expenses and other assets, net~~

~~32,722~~

~~Assets held for sale~~

~~233,585~~

~~Trade accounts payable~~

~~1,201~~

~~Accrued expenses~~

~~30,030~~

~~Refundable fees and deferred revenue~~

~~75,223~~

~~Operating lease obligations~~

~~9,688~~

~~Liabilities held for sale~~

~~116,142~~

~~Refer to Note 16 for selected financial data for the Health Care Services segment.~~

5.4. Fair Value Measurements

Marketable Securities

As of March 31, 2022 and December 31, 2021, marketable securities of ~~$134.9~~$179.3 million and $182.4 million, respectively, are stated at fair value based on valuations provided by third-party pricing services and are classified within Level 2 of the valuation hierarchy.

Debt

The Company estimates the fair value of its debt using a discounted cash flow analysis based upon the Company's current borrowing rate for debt with similar maturities and collateral securing the indebtedness. The Company had outstanding long-term debt with a carrying amount of approximately ~~$3.9~~$3.8 billion as of both March 31, ~~2021~~2022 and December 31, ~~2020.~~2021. Fair value of the long-term debt is approximately $3.6 billion as of March 31, 2022 and approximates the carrying amount ~~in all periods presented.~~as of December

31, 2021. The Company's fair value of long-term debt disclosure is classified within Level 2 of the valuation hierarchy.

~~Asset Impairment Expense~~

~~The following is a summary of asset impairment expense.~~

Three Months Ended
March 31,
(in millions) 2021 2020
Operating lease right-of-use assets $ 9.0 $ 65.7
Property, plant and equipment and leasehold intangibles, net 1.7 11.0
Investment in unconsolidated ventures 0 1.5
Asset impairment $ 10.7 $ 78.2

6.5. Revenue

~~Disaggregation~~For the three months ended March 31, 2022, the Company generated 93.4% of ~~Revenue~~

its resident fee revenue from private pay customers, 5.2% from government reimbursement programs, and 1.4% from other payor sources. For the three months ended March 31, 2021, the Company generated 81.5% of its resident fee revenue from private pay customers, 14.6% from government reimbursement programs (primarily Medicare), and 3.9% from other payor sources. The ~~Company disaggregates~~sale of 80% of the Company’s equity in its Health Care Services segment on July 1, 2021 reduced its revenue from ~~contracts with customers by payor source as the Company believes it best depicts how the nature, amount, timing, and uncertainty~~government reimbursement programs. Refer to Note 15 for disaggregation of ~~its revenue and cash flows are affected by economic factors. Resident fee~~ revenue by ~~payor source and~~ reportable ~~segment is as follows:~~

Three Months Ended March 31, 2021
(in thousands) Independent Living Assisted Living and Memory Care CCRCs Health Care Services Total
Private pay $ 118,322 $ 370,494 $ 52,213 $ 337 $ 541,366
Government reimbursement 460 16,444 12,487 67,465 96,856
Other third-party payor programs 0 0 7,079 19,049 26,128
Total resident fee revenue $ 118,782 $ 386,938 $ 71,779 $ 86,851 $ 664,350
Three Months Ended March 31, 2020
(in thousands) Independent Living Assisted Living and Memory Care CCRCs Health Care Services Total
Private pay $ 135,290 $ 440,613 $ 64,703 $ 170 $ 640,776
Government reimbursement 572 16,866 19,405 73,689 110,532
Other third-party payor programs 0 0 10,439 20,960 31,399
Total resident fee revenue $ 135,862 $ 457,479 $ 94,547 $ 94,819 $ 782,707

~~Contract Balances~~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. A portion of the Company's reimbursement from Medicare for certain healthcare services is billed near the start of each period of care, and cash is generally received before all services are rendered. The amount of revenue recognized for periods of care which are incomplete at period end is based on the Company's historical average percentage of days complete on each period of care and any unearned amounts are deferred and recognized when the service is performed. Additionally, non-refundable community fees 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 ~~liabilities held for sale,~~ and other liabilities within the condensed consolidated balance sheets) of ~~$146.0~~$73.6 million and ~~$138.3~~$67.5 million, including ~~$30.1~~

$34.2 million and ~~$21.1~~$27.5 million of monthly resident fees billed and received in advance, as of March 31, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively. Such amount of total deferred revenue as of both March 31, 2021 and December 31, 2020 also included $87.5 million received in the year ended December 31, 2020 under a temporary expansion of the Accelerated and Advance Payment Program administered by CMS. Refer to Note 3 for additional information on such program. For the three months ended March 31, ~~2021~~2022 and ~~2020,~~2021, the Company recognized ~~$30.8~~$40.1 million and ~~$48.3~~$30.8 million, respectively, of revenue that was included in the deferred revenue balance as of January 1, ~~2021~~2022 and ~~2020,~~2021, respectively.

7.6. Property, Plant and Equipment and Leasehold Intangibles, Net

As of March 31, ~~2021~~2022 and December 31, ~~2020,~~2021, net property, plant and equipment and leasehold intangibles, which include assets under financing leases, consisted of the ~~following:~~following.


(in thousands)	(in thousands)	March 31, 2021		December 31, 2020		(in thousands)	March 31, 2022		December 31, 2021
Land	Land	$	504,698	$	505,298	Land	$	502,610	$	502,610
Buildings and improvements	Buildings and improvements	5,222,741		5,215,460		Buildings and improvements	5,274,249		5,262,136
Furniture and equipment	Furniture and equipment	953,773		945,783		Furniture and equipment	1,002,550		990,006
Resident and leasehold operating intangibles	Resident and leasehold operating intangibles	305,960		307,071		Resident and leasehold operating intangibles	302,995		303,737
Construction in progress	Construction in progress	64,003		61,491		Construction in progress	53,099		51,037
Assets under financing leases and leasehold improvements	Assets under financing leases and leasehold improvements	1,534,468		1,523,055		Assets under financing leases and leasehold improvements	1,636,738		1,609,217
Property, plant and equipment and leasehold intangibles	Property, plant and equipment and leasehold intangibles	8,585,643		8,558,158		Property, plant and equipment and leasehold intangibles	8,772,241		8,718,743
Accumulated depreciation and amortization	Accumulated depreciation and amortization	(3,567,234)		(3,490,098)		Accumulated depreciation and amortization	(3,898,197)		(3,814,451)
Property, plant and equipment and leasehold intangibles, net	Property, plant and equipment and leasehold intangibles, net	$	5,018,409	$	5,068,060	Property, plant and equipment and leasehold intangibles, net	$	4,874,044	$	4,904,292

Assets under financing leases and leasehold improvements includes ~~$0.4 billion~~$335.6 million and $332.3 million of financing lease right-of-use assets, net of accumulated amortization, as of ~~both~~ March 31, ~~2021~~2022 and December 31, ~~2020.~~2021, respectively. Refer to Note 108 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 impairment arise. ~~The~~For the three months ended March 31, 2022 and 2021, the Company recognized depreciation and amortization expense on its property, plant and equipment and leasehold intangibles of $85.7 million and $83.9 million, ~~and $90.7 million for the three months ended March 31, 2021 and 2020,~~ respectively.

~~8. Goodwill~~

The Company's Independent Living and Health Care Services segments had a carrying value of goodwill of $27.3 million and $126.8 million, respectively, as of both March 31, 2021 and December 31, 2020. The goodwill of the Health Care Services segment is included within assets held for sale within the Company’s condensed consolidated balance sheet as of March 31, 2021.

1510

9.7. Debt

Long-term debt consists of the following:


(in thousands)	(in thousands)	March 31, 2021		December 31, 2020		(in thousands)	March 31, 2022		December 31, 2021
Fixed mortgage notes payable due 2022 through 2047; weighted average interest rate of 4.17% and 4.18% as of March 31, 2021 and December 31, 2020, respectively		$	2,334,151	$	2,366,996
Variable mortgage notes payable due 2022 through 2030, weighted average interest rate of 2.46% and 2.49% as of March 31, 2021 and December 31, 2020, respectively		1,524,496		1,529,935
Other notes payable due 2021 to 2025; weighted average interest rate of 7.79% and 8.98% as of March 31, 2021 and December 31, 2020, respectively		57,468		46,557
Debt discount and deferred financing costs, net		(26,324)		(27,500)
Fixed rate mortgage notes payable due 2023 through 2047; weighted average interest rate of 4.14% as of both March 31, 2022 and December 31, 2021						Fixed rate mortgage notes payable due 2023 through 2047; weighted average interest rate of 4.14% as of both March 31, 2022 and December 31, 2021	$	2,158,942	$	2,164,115
Variable rate mortgage notes payable due 2023 through 2030; weighted average interest rate of 2.76% and 2.44% as of March 31, 2022 and December 31, 2021, respectively						Variable rate mortgage notes payable due 2023 through 2030; weighted average interest rate of 2.76% and 2.44% as of March 31, 2022 and December 31, 2021, respectively	1,472,438		1,476,943
Convertible notes payable due October 2026; interest rate of 2.00% as of both March 31, 2022 and December 31, 2021						Convertible notes payable due October 2026; interest rate of 2.00% as of both March 31, 2022 and December 31, 2021	230,000		230,000
Other notes payable due 2022, interest rate of 2.10% as of March 31, 2022						Other notes payable due 2022, interest rate of 2.10% as of March 31, 2022	15,780		—
Deferred financing costs, net						Deferred financing costs, net	(28,625)		(29,846)
Total long-term debt	Total long-term debt	3,889,791		3,915,988		Total long-term debt	3,848,535		3,841,212
Current portion	Current portion	224,890		68,885		Current portion	207,751		63,125
Total long-term debt, less current portion	Total long-term debt, less current portion	$	3,664,901	$	3,847,103	Total long-term debt, less current portion	$	3,640,784	$	3,778,087

As of March 31, ~~2021, 97.9%~~2022, 93.7%, or ~~$3.8~~$3.6 billion, of the Company's total debt obligations represented non-recourse property-level mortgage financings.

As of March 31, ~~2021, $69.9~~2022, $72.6 million of letters of credit and no cash borrowings were outstanding under the Company's $80.0 million secured credit facility. 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, ~~2021~~2022 under which $13.6 million had been issued as of that date.

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). 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, ~~2021,~~2022, the Company is in compliance with the financial covenants of its debt agreements.

~~10.~~8. Leases

As of March 31, ~~2021,~~2022, the Company operated ~~301~~298 communities under long-term leases ~~(235~~(231 operating leases and 6667 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. 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, property taxes, and insurance. The leases generally provide for renewal or extension options from 5 to 20 years and in some instances, purchase options.

1611

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 March 31, ~~2021,~~2022, 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. For the three months ended March 31, 2022 and 2021, the Company recognized $8.6 million and $9.0 million, respectively, of non-cash impairment charges in its operating results for its operating lease right-of-use assets, primarily due to the COVID-19 pandemic and lower than expected operating performance 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:~~follows.


		Three Months Ended March 31,				Three Months Ended March 31,
Operating Leases (in thousands)	Operating Leases (in thousands)	2021		2020			Operating Leases (in thousands)	2022		2021
Facility operating expense	Facility operating expense	$	4,842	$	4,850		Facility operating expense	$	1,523	$	4,842
Facility lease expense	Facility lease expense	44,418		64,481			Facility lease expense	41,564		44,418
Operating lease expense	Operating lease expense	49,260		69,331			Operating lease expense	43,087		49,260
Operating lease expense adjustment (1)	Operating lease expense adjustment (1)	4,664		6,733			Operating lease expense adjustment (1)	8,307		4,664
Changes in operating lease assets and liabilities for lessor capital expenditure reimbursements	Changes in operating lease assets and liabilities for lessor capital expenditure reimbursements	(7,563)		(4,088)			Changes in operating lease assets and liabilities for lessor capital expenditure reimbursements	(1,490)		(7,563)
Operating net cash outflows from operating leases	Operating net cash outflows from operating leases	$	46,361	$	71,976		Operating net cash outflows from operating leases	$	49,904	$	46,361

(1)Represents the difference between the amount of cash operating lease payments and the amount of operating lease ~~expense recognized in accordance with Accounting Standards Codification 842,~~ ~~Leases~~ ~~("ASC 842").~~expense.


		Three Months Ended March 31,				Three Months Ended March 31,
Financing Leases (in thousands)	Financing Leases (in thousands)	2021		2020			Financing Leases (in thousands)	2022		2021
Depreciation and amortization	Depreciation and amortization	$	7,630	$	9,144		Depreciation and amortization	$	7,665	$	7,630
Interest expense: financing lease obligations	Interest expense: financing lease obligations	11,383		13,282			Interest expense: financing lease obligations	12,058		11,383
Financing lease expense	Financing lease expense	$	19,013	$	22,426		Financing lease expense	$	19,723	$	19,013

Operating cash flows from financing leases		$	11,383	$	13,282
Financing cash flows from financing leases		4,789		5,087
Operating cash outflows from financing leases							Operating cash outflows from financing leases	$	12,058	$	11,383
Financing cash outflows from financing leases							Financing cash outflows from financing leases	5,490		4,789
Changes in financing lease assets and liabilities for lessor capital expenditure reimbursement	Changes in financing lease assets and liabilities for lessor capital expenditure reimbursement	(1,389)		(1,739)			Changes in financing lease assets and liabilities for lessor capital expenditure reimbursement	(3,207)		(1,389)
Total net cash outflows from financing leases	Total net cash outflows from financing leases	$	14,783	$	16,630		Total net cash outflows from financing leases	$	14,341	$	14,783

1712

The aggregate amounts of future minimum lease payments, including community, office, and equipment leases ~~(excluding minimum lease payments related to $9.7 million of operating lease obligations included within liabilities held for sale)~~ recognized on the condensed consolidated balance sheet as of March 31, ~~2021~~2022 are as follows (in thousands):.


Year Ending December 31,	Year Ending December 31,	Operating Leases		Financing Leases		Year Ending December 31,	Operating Leases		Financing Leases
2021 (nine months)		$	151,681	$	48,807
2022		203,946		65,609
2022 (nine months)						2022 (nine months)	$	153,184	$	51,412
2023	2023	192,625		66,341		2023	193,406		69,225
2024	2024	193,377		67,553		2024	194,140		70,438
2025	2025	191,131		57,595		2025	191,848		59,815
2026						2026	76,588		61,069
Thereafter	Thereafter	280,960		109,684		Thereafter	206,501		53,286
Total lease payments	Total lease payments	1,213,720		415,589		Total lease payments	1,015,667		365,245
Purchase option liability and non-cash gain on future sale of property	Purchase option liability and non-cash gain on future sale of property	0		413,617		Purchase option liability and non-cash gain on future sale of property	—		427,749
Imputed interest and variable lease payments	Imputed interest and variable lease payments	(276,070)		(270,052)		Imputed interest and variable lease payments	(220,265)		(234,754)
Total lease obligations	Total lease obligations	$	937,650	$	559,154	Total lease obligations	$	795,402	$	558,240

~~11.~~9. Investment in Unconsolidated Ventures

As of March 31, 2022, the Company holds a 20% equity interest, and affiliates of HCA Healthcare Inc. own an 80% interest, in the HCS Venture, and the Company has determined the HCS Venture is a VIE. The HCS Venture operates home health, hospice, and outpatient therapy agencies in the United States. The Company does not consolidate this VIE because it does not have the ability to control the activities that most significantly impact this VIE's economic performance. The Company's interest in the HCS Venture is accounted for under the equity method of accounting. The carrying amount of the Company's investment in the unconsolidated venture and maximum exposure to loss as a result of the Company's ownership interest in the HCS Venture was $57.2 million, which is included in investment in unconsolidated ventures on the accompanying unaudited condensed consolidated balance sheet as of March 31, 2022. As of March 31, 2022, the Company is not required to provide financial support, through a liquidity arrangement or otherwise, to the HCS Venture.

10. 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, including, but not limited to, putative class action claims from time to time regarding staffing at the ~~Company’s~~Company's communities and compliance with consumer protection laws and the Americans with Disabilities Act. Certain claims and lawsuits allege large damage amounts and may require significant costs to defend and resolve. As a result, the Company maintains general liability, professional 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. Accordingly, the Company is, in effect, self-insured for claims that are less than the deductible amounts and for claims or portions of claims that are not covered by such policies and/or exceed the policy limits.

~~Similarly, the~~The senior living and healthcare industries are continuously subject to scrutiny by governmental regulators, which could result in reviews, audits, investigations, enforcement ~~activities~~actions, or litigation related to regulatory compliance matters. In addition, ~~as a result of the Company's participation in the Medicare and Medicaid programs,~~ the Company is subject to various ~~governmental~~government reviews, audits, and investigations ~~including but not limited~~ to ~~audits under various~~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 programs, such as the Recovery Audit Contractors (RAC), Zone Program Integrity Contractors (ZPIC), and Unified Program Integrity Contractors (UPIC) programs. The costs to respond to and defend such reviews, audits, and investigationsauthorities. An adverse outcome of government scrutiny may ~~be significant, and an adverse determination could~~ result in citations, sanctions, ~~and~~ other criminal or civil fines and penalties, the refund of overpayments, payment suspensions, termination of participation in Medicare and Medicaid programs, ~~and/or~~and damage to the ~~Company's~~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 ~~asserts~~asserted that the defendants made material misstatements and omissions concerning the Company's business, operational and compliance policies that caused the Company's stock price to be artificially inflated between August 2016 and April 2020. ~~While~~The district court dismissed the ~~Company cannot predict with certainty~~lawsuit and entered judgment in favor of the ~~result of this or any other legal proceedings,~~defendants in September 2021, and the ~~Company believes the allegations in the suit are without merit and does~~plaintiffs did not ~~expect this matter to have a material adverse effect on the Company's financial condition, results of operations, or cash flows. In~~file an appeal. Between October 2020 and ~~April~~June 2021, alleged stockholders of the Company filed ~~separate~~ several

stockholder derivative lawsuits in the federal ~~court~~courts for the Middle District of Tennessee ~~asserting~~and the District of Delaware, which was subsequently transferred to the Middle District of Tennessee. The derivative lawsuits are currently pending and assert claims on behalf of the Company against certain current and former officers and directors for alleged breaches of duties owed to the Company. The complaints refer to the securities lawsuit described above and incorporate substantively similar allegations.

~~12.~~11. Stock-Based Compensation

Grants of restricted stock units and ~~restricted~~ stock ~~units~~awards under the Company's 2014 Omnibus Incentive Plan were as ~~follows:~~follows.

(in thousands, except for per share and unit amounts) Restricted Stock and Restricted Stock Unit Grants Weighted Average Grant Date Fair Value Total Grant Date Fair Value
Three months ended March 31, 2021 1,961 $ 5.09 $ 9,988


(in thousands, except weighted average amount)	Restricted Stock Unit and Stock Award Grants	Weighted Average Grant Date Fair Value		Total Grant Date Fair Value
Three months ended March 31, 2022	2,862	$	5.50	$	15,743

~~13.~~12. Earnings Per Share

~~Basic earnings per share ("EPS") is calculated by dividing~~During the three months ended March 31, 2022 and 2021, the Company reported a consolidated net income (loss) by the weighted average number of shares of common stock outstanding. Diluted EPS includes the components of basic EPS and also gives effect to dilutive common stock equivalents. Under the treasury stock method, diluted EPS reflects the potential dilution that could occur if securities or other instruments that are convertible into common stock were exercised or could result in the issuance of common stock. Potentially dilutive common stock equivalents include unvested restricted stock, restricted stock units, and warrants.

~~The following table summarizes the computation of basic and diluted earnings (loss) per share amounts presented in the condensed consolidated statement of operations:~~

Three Months Ended
March 31,
(in thousands, except for per share amounts) 2021 2020
Income attributable to common stockholders:
Net income (loss) $ (108,285) $ 369,515
Weighted average shares outstanding - basic 184,011 184,186
Effect of dilutive securities - Unvested restricted stock, restricted stock units, and warrants 0 336
Weighted average shares outstanding - diluted 184,011 184,522
Basic earnings (loss) per common share:
Net income (loss) per share attributable to common stockholders $ (0.59) $ 2.01
Diluted earnings (loss) per common share:
Net income (loss) per share attributable to common stockholders $ (0.59) $ 2.00

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, and performance-based equity awards are included based on the attainment of the applicable performance metrics as of the end of the reporting period. The following potentially dilutive securities were excluded from the computation of diluted EPS:

Three Months Ended
March 31,
(in millions)
2021(1)
2020
Non-performance-based restricted stock and restricted stock units 6.2 6.9
Performance-based restricted stock and restricted stock units 0.4 1.8
Warrants 16.3 0

~~(1)~~loss. As a result of the net loss reported for the ~~period,~~periods, all unvested restricted stock, restricted stock units, and potential shares issuable under warrants and convertible senior notes were antidilutive for the ~~period~~periods and as such were not included in the computation of diluted weighted average shares outstanding. The following potentially outstanding shares of common stock were excluded from the computation of diluted net income (loss) per share attributable to common stockholders because including the shares would have been antidilutive.


	As of March 31,
(in millions)	2022	2021
Restricted stock and restricted stock units	5.7	6.6


Warrants	16.3	16.3
Convertible senior notes	38.3	—
Total	60.3	22.9

19On 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.

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

~~14.~~

13. Income Taxes

The difference between the Company's effective tax rate for the three months ended March 31, 2022 and 2021 ~~and 2020~~ was ~~primarily~~ due to the increase in the net deferred tax ~~impact~~benefit recognized on operational losses and an increase in the tax benefit recognized on the vesting of restricted stock units and restricted stock awards due to an increase in the ~~multi-part transaction with Healthpeak that occurred in~~Company's stock price during the three months ended March 31, 2020. The impact represented the tax expense recorded on the gain of the sale of the Company's interest in the CCRC Venture offset by a decrease in the valuation allowance that was a direct result of the multi-part transaction with Healthpeak.2022.

The Company recorded an aggregate deferred federal, state, and local tax benefit of $24.9 million for the three months ended March 31, 2022, which was offset by an increase to the valuation allowance of $22.6 million. The Company recorded an aggregate deferred federal, state, and local tax benefit of $25.2 million ~~as a result of the operating loss~~ for the three months ended March 31, 2021, which was offset by ~~a proportionate increase in the~~additional valuation allowance of $25.5 million. The Company recorded an aggregate deferred federal, state, and local tax expense of $90.9 million for the three months ended March 31, 2020. The expense included $93.1 million as a result of the gain on the sale of the Company's interest in the CCRC Venture offset by a benefit of $2.2 million as a result of the operating losses (exclusive of the CCRC Venture sale) for the three months ended March 31, 2020. The expense for the three months ended March 31, 2020 was offset by a reduction in the valuation allowance of $112.6 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, ~~2021~~2022 and December 31, ~~2020~~2021 was ~~$406.5~~$390.6 million and ~~$381.0~~$368.0 million, respectively.

The increase in the valuation allowance for the three months ended March 31, 2022 is the result of current operating losses during the three months ended March 31, 2022 and by the anticipated reversal of future tax liabilities offset by future tax deductions. The increase in the valuation allowance for the three months ended March 31, 2021 is the result of current operating losses during the three months ended March 31, 2021. The change in the valuation allowance for the three months ended March 31, 2020 was primarily the result of a reduction in the Company’s valuation allowance of $117.6 million as a result of the Healthpeak transaction offset 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, ~~2021~~2022 and ~~2020~~2021 which are included in income tax expense or benefit for the period. As of March 31, ~~2021,~~2022, tax returns for years ~~2017~~2018 through ~~2019~~2020 are subject to future examination by tax authorities. In addition, the net operating losses from prior years are subject to adjustment under examination.

~~15.~~14. Supplemental Disclosure of Cash Flow Information

Three Months Ended
March 31,
(in thousands) 2021 2020
Supplemental Disclosure of Cash Flow Information:
Interest paid $ 47,129 $ 59,479
Income taxes paid, net of refunds 904 957
Capital expenditures, net of related payables:
Capital expenditures - non-development, net $ 27,450 $ 60,556
Capital expenditures - development, net 1,521 3,900
Capital expenditures - non-development - reimbursable 8,951 5,827
Trade accounts payable 2,439 (898)
Net cash paid $ 40,361 $ 69,385
Acquisition of communities from Healthpeak:
Property, plant and equipment and leasehold intangibles, net $ 0 $ 286,734
Operating lease right-of-use assets 0 (63,285)
Financing lease obligations 0 129,196
Operating lease obligations 0 74,335
Loss (gain) on debt modification and extinguishment, net 0 (19,731)
Net cash paid $ 0 $ 407,249
Acquisition of other assets, net of related payables and cash received:
Property, plant and equipment and leasehold intangibles, net $ 0 $ 179
Financing lease obligations 0 39,260
Net cash paid $ 0 $ 39,439

Proceeds from sale of CCRC Venture, net:
Investments in unconsolidated ventures $ 0 $ (14,848)
Current portion of long-term debt 0 34,706
Accrued expenses 0 (5,025)
Other liabilities 0 60,748
Loss (gain) on sale of assets, net 0 (370,745)
Net cash received $ 0 $ (295,164)
Proceeds from sale of other assets, net:
Prepaid expenses and other assets, net $ 0 $ (1,261)
Assets held for sale (2,125) (5,274)
Property, plant and equipment and leasehold intangibles, net (597) 0
Other liabilities 74 (824)
Loss (gain) on sale of assets, net (1,112) (2,094)
Net cash received $ (3,760) $ (9,453)
Supplemental Schedule of Non-cash Operating, Investing, and Financing Activities:
Healthpeak master lease modification:
Property, plant and equipment and leasehold intangibles, net $ 0 $ (57,462)
Operating lease right-of-use assets 0 88,044
Financing lease obligations 0 70,874
Operating lease obligations 0 (101,456)
Net $ 0 $ 0
Other non-cash lease transactions, net:
Property, plant and equipment and leasehold intangibles, net $ 0 $ (9,441)
Operating lease right-of-use assets 16,721 0
Financing lease obligations 0 9,516
Operating lease obligations (16,721) 0
Other liabilities 0 (75)
Net $ 0 $ 0


	Three Months Ended March 31,
(in thousands)	2022		2021
Supplemental Disclosure of Cash Flow Information:
Interest paid	$	43,927	$	47,129
Income taxes paid, net of refunds	$	341	$	904

Capital expenditures, net of related payables:
Capital expenditures - non-development, net	$	39,326	$	27,450
Capital expenditures - development, net	861		1,521
Capital expenditures - non-development - reimbursable	4,697		8,951
Trade accounts payable	(4,928)		2,439
Net cash paid	$	39,956	$	40,361








































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







Non-cash lease transactions, net:

Property, plant and equipment and leasehold intangibles, net	$	10,997	$	��

Operating lease right-of-use assets	(4,003)		16,721
Financing lease obligations	(6,237)		—
Operating lease obligations	(757)		(16,721)




Net	$	—	$	—

Restricted cash consists principally of deposits for letters of credit, escrow deposits for real estate taxes, property insurance, and capital expenditures, debt service reserve accounts required by certain lenders under mortgage debt agreements, and deposits as security for self-insured retention risk under workers' compensation programs and property insurance ~~programs.~~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, 2021 December 31, 2020
Reconciliation of cash, cash equivalents, and restricted cash:
Cash and cash equivalents $ 303,952 $ 380,420
Restricted cash 26,503 28,059
Long-term restricted cash 71,468 56,669
Total cash, cash equivalents, and restricted cash $ 401,923 $ 465,148


(in thousands)	March 31, 2022		December 31, 2021
Reconciliation of cash, cash equivalents, and restricted cash:
Cash and cash equivalents	$	289,247	$	347,031
Restricted cash	24,791		26,845
Long-term restricted cash	64,455		64,438
Total cash, cash equivalents, and restricted cash	$	378,493	$	438,314

~~16.~~15

15. Segment Information

~~The~~As of March 31, 2022, the Company has 53 reportable segments: Independent Living; Assisted Living and Memory Care; ~~CCRCs; Health Care Services;~~ and ~~Management Services.~~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. Prior to July 1, 2021, the Company had an additional reportable segment, Health Care Services. On July 1, 2021, the Company sold 80% of its equity in its Health Care Services segment. For periods beginning July 1, 2021, the results and financial position of its Health Care Services segment were deconsolidated from the Company's consolidated financial statements and its 20% equity interest in the HCS Venture is accounted for under the equity method of accounting as of that date.

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 ~~mid-acuity and frail elderly~~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 or within~~campus.

All Other. All Other includes communities operated by the ~~immediate area.~~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.

Health Care Services. The Company's former Health Care Services segment ~~includes~~included the home health, hospice, and outpatient therapy services provided to residents of many of its communities and to seniors living outside its communities. The Health Care Services segment ~~does~~did not include the skilled nursing and inpatient healthcare services provided in the Company's skilled nursing units, which are included in the Company's CCRCs segment.

~~Management Services.~~ The Company's Management Services segment includes communities operated by the Company pursuant to management agreements. In some of the cases, the controlling financial interest in the community is held by third parties and, in other cases, the community is owned in a venture structure in which the Company has an ownership interest. Under the management agreements for these communities, the Company receives management fees as well as reimbursed expenses, which represent the reimbursement of expenses it incurs on behalf of the owners.

The following ~~table sets~~tables set forth selected segment financial ~~data:~~data.

Three Months Ended
March 31,
(in thousands) 2021 2020
Revenue and other operating income:
Independent Living(1)(2)
$ 120,146 $ 135,862
Assisted Living and Memory Care(1)(2)
392,042 457,479
CCRCs(1)(2)
73,463 94,547
Health Care Services(1)(2)
89,434 94,819
Management Services(3)
74,360 231,432
Total revenue and other operating income $ 749,445 $ 1,014,139
Segment operating income:(4)
Independent Living $ 37,329 $ 51,414
Assisted Living and Memory Care 71,433 132,001
CCRCs 7,608 19,931
Health Care Services 2,403 (9,121)
Management Services 8,566 108,715
Total segment operating income 127,339 302,940
General and administrative expense (including non-cash stock-based compensation expense) 49,943 54,595
Facility operating lease expense 44,418 64,481
Depreciation and amortization 83,891 90,738


	Three Months Ended March 31,
(in thousands)	2022		2021
Revenue and other operating income:
Independent Living(1)(2)	$	124,406	$	120,146
Assisted Living and Memory Care(1)(2)	432,488		392,042
CCRCs(1)(2)	80,456		73,463
All Other	40,470		74,360
Health Care Services(1)(2)	—		89,434
Total revenue and other operating income	$	677,820	$	749,445

2216


Asset impairment:
							Three Months Ended March 31,
(in thousands)						(in thousands)	2022		2021
Segment operating income:(3)						Segment operating income:(3)
Independent Living	Independent Living	520		31,317		Independent Living	$	37,684	$	37,329
Assisted Living and Memory Care	Assisted Living and Memory Care	9,642		32,798		Assisted Living and Memory Care	76,863		71,433
CCRCs	CCRCs	515		12,173		CCRCs	10,039		7,608
All Other						All Other	3,329		8,566
Health Care Services						Health Care Services	—		2,403
Total segment operating income						Total segment operating income	127,915		127,339
General and administrative expense (including non-cash stock-based compensation expense)						General and administrative expense (including non-cash stock-based compensation expense)	45,126		49,943
Facility operating lease expense						Facility operating lease expense	41,564		44,418
Depreciation and amortization						Depreciation and amortization	85,684		83,891
Asset impairment						Asset impairment	9,075		10,677

Corporate and Management Services		0		1,938

Income (loss) from operations	Income (loss) from operations	$	(61,590)	$	14,900	Income (loss) from operations	$	(53,534)	$	(61,590)


		As of					As of
(in thousands)	(in thousands)	March 31, 2021		December 31, 2020		(in thousands)	March 31, 2022		December 31, 2021
Total assets:	Total assets:					Total assets:
Independent Living(4)	Independent Living(4)	$	1,399,489	$	1,419,838	Independent Living(4)	$	1,324,425	$	1,349,341
Assisted Living and Memory Care	Assisted Living and Memory Care	3,740,476		3,787,611		Assisted Living and Memory Care	3,573,911		3,601,144
CCRCs	CCRCs	728,621		738,121		CCRCs	686,480		693,386
Health Care Services		233,585		233,178
Corporate and Management Services		643,982		723,010
Corporate and All Other						Corporate and All Other	710,161		766,596
Total assets	Total assets	$	6,746,153	$	6,901,758	Total assets	$	6,294,977	$	6,410,467

(1)All revenue and other operating income is earned from external third parties in the United States.

(2)The Independent Living, Assisted Living and Memory Care, CCRCs, and Health Care Services segments include $1.4 million, $5.1 million, $1.7 million, and $2.6 million respectively, for the three months ended March 31, 2021 ofIncludes other operating income recognized for the credits or grants pursuant to the ~~Employee Retention Credit, Provider Relief Fund,~~employee retention credit and other government ~~sources, as described in Note 3.~~sources. Allocations to the applicable segment generally reflect the credits earned by the segment, the segment’s receipt and acceptance of the grant, or the segment’s proportional utilization of the grant. Other operating income by segment is as follows.


	Three Months Ended March 31,
(in thousands)	2022		2021
Other operating income:
Independent Living	$	2	$	1,364
Assisted Living and Memory Care	356		5,104
CCRCs	18		1,684
Health Care Services	—		2,583
Total other operating income	$	376	$	10,735

(3)~~Management services segment revenue includes management fees and reimbursements of costs incurred on behalf of managed communities.~~

~~(4)~~Segment operating income is defined as segment revenues and other operating income less segment facility operating expenses (excluding facility depreciation and amortization) and costs incurred on behalf of managed communities.

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

2317

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

Certain statements in this Quarterly Report on Form 10-Q may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to various risks and uncertainties and include all statements that are not historical statements of fact and those regarding our intent, belief or expectations. Forward-looking statements are generally identifiable by use of forward-looking terminology such as "may," "will," "should," "could," "would," "potential," "intend," "expect," "endeavor," "seek," "anticipate," "estimate," "believe," "project," "predict," "continue," "plan," "target," or other similar words or expressions. These forward-looking statements are based on certain assumptions and expectations, and our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Although we believe that expectations reflected in any forward-looking statements are based on reasonable assumptions, we can give no assurance that our assumptions or expectations will be attained and actual results and performance could differ materially from those projected. Factors which could have a material adverse effect on our operations and future prospects or which could cause events or circumstances to differ from the forward-looking statements include, but are not limited to, the impacts of the COVID-19 pandemic, including the response efforts of federal, state, and local government authorities, businesses, individuals, and us on our business, results of operations, cash flow, revenue, expenses, liquidity, and our strategic initiatives, including plans for future growth, which 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 our 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 our ability to qualify for and satisfy the terms and conditions of financial relief, perceptions regarding the safety of senior living communities during and after the pandemic, changes in demand for senior living communities and our ability to adapt our sales and marketing efforts to meet that demand, the impact of COVID-19 on our residents’ and their families’ ability to afford our 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 our new residents, the disproportionate impact of COVID-19 on seniors generally and those residing in our communities, the duration and costs of our response efforts, including increased equipment, supplies, labor, litigation, testing, vaccination clinic, health plan, and other expenses, potentially greater use of contract labor and overtime due to COVID-19 and general labor market conditions, the impact of COVID-19 on our ability to complete financings and refinancings of various assets, or other transactions ~~(including dispositions and our pending Health Care Services transaction)~~ or to generate sufficient cash flow to cover required debt, interest, and lease payments and to satisfy financial and other covenants in our debt and lease documents, increased regulatory requirements, including the costs of unfunded, mandatory testing of residents and associates and provision of test kits to our health plan participants, increased enforcement actions resulting from COVID-19, government action that may limit our 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 our response efforts; events which adversely affect the ability of seniors to afford resident fees, including downturns in the economy, housing market, consumer confidence, or the equity markets and unemployment among resident family members; changes in reimbursement rates, methods, or timing under governmental reimbursement programs including the Medicare and Medicaid programs; the ~~impact of ongoing healthcare reform efforts; the~~ effects of senior housing construction and development, lower industry occupancy (including due to the pandemic), and increased competition; conditions of housing markets, regulatory changes, acts of nature, and the effects of climate change in geographic areas where we are concentrated; terminations of our resident agreements and vacancies in the living spaces we lease, including due to the pandemic; ~~limits on our ability to use net operating loss carryovers to reduce future tax payments;~~ failure to maintain the security and functionality of our information systems, to prevent a cybersecurity attack or breach, or to comply with applicable privacy and consumer protection laws, including HIPAA; our ability to complete our capital expenditures in accordance with our plans; our ability to identify and pursue development, investment, and acquisition opportunities and our ability to successfully integrate acquisitions; competition for the acquisition of assets; our ability to complete pending or expected disposition, acquisition, or other transactions ~~(including our pending Health Care Services transaction)~~ on agreed upon terms or at all, including in respect of the satisfaction of closing conditions, the risk that regulatory approvals are not obtained or are subject to unanticipated conditions, and uncertainties as to the timing of closing, and our ability to identify and pursue any such opportunities in the future; risks related to the implementation of our strategy, including initiatives undertaken to execute on our strategic priorities and their effect on our results; limits on our ability to use net operating loss carryovers to reduce future tax payments; delays in obtaining regulatory approvals; disruptions in the financial markets or decreases in the appraised values or performance of our communities that affect our ability to obtain financing or extend or refinance debt as it matures and our financing costs; our ability to generate sufficient cash flow to cover required interest, principal, and long-term lease payments and to fund our planned capital projects; the effect of our non-compliance with any of our debt or lease agreements (including the financial covenants contained therein), including the risk of lenders or lessors declaring a cross default in the event of our non-compliance with any such agreements and the risk of loss of our property securing leases and indebtedness due to any resulting lease terminations and foreclosure actions; the effect of our indebtedness and long-term leases on our ~~liquidity; the potential phasing out of LIBOR which may~~liquidity and our ability to operate our business; increases in market interest rates that increase the

costs of our debt obligations; our ability to obtain additional capital on terms acceptable to us; departures of key officers and

potential disruption caused by changes in management; increased competition for, or a shortage of, ~~personnel~~associates (including due to the ~~pandemic)~~pandemic or general labor market conditions), wage pressures resulting from increased competition, low unemployment levels, minimum wage increases and changes in overtime laws, and union activity; environmental contamination at any of our communities; failure to comply with existing environmental laws; an adverse determination or resolution of complaints filed against us, including putative class action ~~and stockholder derivative~~ complaints; the cost and difficulty of complying with increasing and evolving regulation; costs to respond to, and adverse determinations resulting from, government reviews, audits and investigations; changes in, or our failure to comply with, employment-related laws and regulations; unanticipated costs to comply with legislative or regulatory developments; the risks associated with current global economic conditions and general economic factors such as inflation, the consumer price index, commodity costs, fuel and other energy costs, competition in the labor market, costs of salaries, wages, benefits, and insurance, interest rates, and tax rates; the impact of seasonal contagious illness or an outbreak of COVID-19 or other contagious disease in the markets in which we operate; actions of activist stockholders, including a proxy contest; as well as other risks detailed from time to time in our filings with the Securities and Exchange Commission, including those set forth under "Item 1A. Risk Factors" contained in our Annual Report on Form 10-K for the year ended December 31, ~~2020~~2021 and Part II, "Item 1A. Risk Factors" and elsewhere in this Quarterly Report on Form 10-Q. When considering forward-looking statements, you should keep in mind the risk factors and other cautionary statements in such SEC filings. Readers are cautioned not to place undue reliance on any of these forward-looking statements, which reflect management's views as of the date of this Quarterly Report on Form 10-Q. We cannot guarantee future results, levels of activity, performance or achievements, and, except as required by law, we expressly disclaim any obligation to release publicly any updates or revisions to any forward-looking statements contained in this Quarterly Report on Form 10-Q to reflect any change in our expectations with regard thereto or change in events, conditions, or circumstances on which any statement is based.

2519

Overview

~~As of March 31, 2021, we~~We are the ~~largest~~nation's premier operator of senior living communities, ~~in the United States based on total capacity,~~ ~~with 695~~operating and managing 678 communities in 4241 states ~~and~~as of March 31, 2022, with the ability to serve ~~approximately~~more than 60,000 residents. We offer our residents access to a broad continuum of services across the most attractive sectors of the senior living industry. WeWe operate and manage independent living, assisted living, memory care, and co~~ntinuing~~continuing care retirement communities ("CCRCs"). ~~We also offer a range of home health, hospice, and outpatient therapy services to more than 16,000 patients as of that date.~~

Our goal is to be the first choice in senior living by being the nation's most trusted and effective senior living provider and employer. Our ~~community and service offerings combine housing with hospitality and healthcare services. Our~~ senior living communities ~~offer~~and our comprehensive network help to provide seniors with care and services in an environment that feels like home. Our expertise in healthcare, hospitality, and real estate provides residents ~~a supportive home-like setting, assistance~~ with ~~activities of daily living such as eating, bathing, dressing, toileting, transferring/walking,~~opportunities to improve wellness, pursue passions, and ~~in certain communities, licensed skilled nursing services. We also provide home health, hospice,~~stay connected with friends and ~~outpatient therapy services to residents of many of our communities and to seniors living outside of our communities.~~loved ones. By providing residents with a range of service options as their needs change, we provide greater continuity of care, enabling seniors to age-in-place, which we believe enables them to maintain residency with us for a longer period of time. The ability of residents to age-in-place is also beneficial to our ~~residents and their~~residents' families who are concerned with care decisions for their elderly relatives.

COVID-19 Pandemic Update

The ~~United States broadly continues to experience the~~ COVID-19 pandemic ~~which has~~ significantly disrupted ~~and likely will continue to significantly disrupt for some period,~~ the senior living industry and our ~~business. Due~~business beginning in March 2020. We expect the impact of this disruption to continue into 2023 as we continue to make progress to rebuild occupancy lost due to the average age and prevalence of chronic medical conditions among our residents and patients, they generally are at disproportionately higher risk of hospitalization and adverse outcomes if they contract COVID-19.pandemic. The health and wellbeing of our residents ~~patients,~~ and associates ~~is and~~ has been and continues to be our highest priority as we continue to serve and care for seniors through the pandemic. In addition to the updates below, readers are directed to the "COVID-19 Pandemic" section of Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2020 filed with the SEC on February 25, 2021 for more information about the impact of the pandemic and our response efforts on our business, results of operations, and financial condition.priority.

~~Vaccine Clinics Completed~~Rebuilding Occupancy. We continue to execute on key initiatives to rebuild occupancy lost due to the pandemic while maintaining rate discipline. From March 2020 through February 2021, we lost 1,330 basis points of weighted average consolidated senior housing occupancy. From February 2021 through March 2022, we increased our weighted average consolidated senior housing occupancy by 420 basis points to 73.6%. We ~~elected~~typically experience a seasonal occupancy decline in winter months. Despite our typical seasonal pattern, sequentially from the fourth quarter of 2021, our weighted average consolidated senior housing occupancy decreased slightly by 10 basis points to ~~work with CVS Health Corporation ("CVS")~~73.4%, which represented the best first quarter sequential occupancy change in ten years. The table below sets forth our recent consolidated occupancy trend.


	Q1 2021		Q2 2021		Q3 2021		Q4 2021		Q1 2022
Weighted average	69.6	%	70.5	%	72.5	%	73.5	%	73.4	%
Quarter end	70.6	%	72.6	%	74.2	%	74.5	%	75.0	%


	Jan 2022		Feb 2022		Mar 2022		Apr 2022
Weighted average	73.4	%	73.3	%	73.6	%	73.9	%
Month end	74.2	%	74.4	%	75.0	%	75.3	%

During the three months ended March 31, 2022, various communities experienced restrictions on new resident move-ins due to ~~administer vaccinations on site to our residents and associates through~~ the Pharmacy Partnership for Long-Term Care Program offered through the U.S. Centers for Disease Control and Prevention ("CDC"). We worked extensively to prepare for and host CVS clinics as quickly as possible among our approximately 700 communities, which included extensive planning, gathering insurance information, obtaining consents, scheduling appointments, holding educational sessions with residents, families, and associates, detailed coordinationpandemic. As of ~~traffic flow, and staffing observation areas. We hosted our first clinics on December 18, 2020 and had completed at least three vaccine clinics at~~April 30, 2022, all of our communities by April 9, 2021. Through April 30, 2021, our resident vaccine acceptance rate was 93%, and our COVID-19 positive resident caseload had decreased by 97% since the peak in mid-December 2020. We continue to promote vaccine acceptance among our residents and associates and to work with state and local resources, including local health departments and pharmacies, to ensure our residents and associates can access the vaccine.

~~Community Restrictions~~. To help protect our residents, patients, and associates from contracting COVID-19, we imposed significant restrictions at our communities beginning in March 2020, including closing our communities to visitors and prospective residents, and in some cases restrictingwere open for new resident move-ins, suspending group outings, modifying communal dining and programming to comply with social distancing and other regulatory guidelines and, in most cases, implementing in-room only dining and activities programming, requesting that residents refrain from leaving the community unless medically necessary, and requiring new residents and residents returning from a hospital or nursing home to isolate in their apartment for fourteen days. We have adopted a framework for determining when to ease restrictions at each of our communities based on several criteria, including regulatory requirements and guidance, completion of baseline testing at the community, and the presence of current confirmed COVID-19 positive cases.move-ins. We may revert to more restrictive measures at our communities, including restrictions on visitors and move-ins, if the pandemic worsens, as a result of infections at a community, as necessary to comply with regulatory requirements, or at the direction of state or local health authorities. As of December 31, 2020, 89% of our communities were accepting new move-ins. With lower caseloads, restrictions on visits have been relaxed, and as of April 30, 2021, 100% of our communities have opened for visitors and new prospects.

~~Occupancy and Demand.~~ According to data from the National Investment Center for the Seniors Housing & Care Industry ("NIC"), seniors housing occupancy again decreased to a record low for the first quarter of 2021. In our consolidated seniors housing portfolio, our monthly net move-ins and move-outs turned positive in March 2021 for the first time since the pandemic began. Move-ins increased sequentially each month during the first quarter of 2021 and increased 29% for the first quarter of 2021 compared to the fourth quarter of 2020. Our consolidated senior housing portfolio’s weighted average occupancy

decreased 310 basis points for the first quarter of 2021 from the fourth quarter of 2020. Weighted average occupancy for March 2021 increased slightly sequentially and for April 2021 increased 50 basis points sequentially, afterauthorities having ~~declined sequentially each month from March 2020 through February 2021. The table below sets forth our consolidated occupancy trend during the pandemic.~~

Q1
2020 Q2
2020 Q3
2020 Q4
2020 Q1
2021 January
2021 February
2021 March
2021 April
2021
Weighted average occupancy 83.2 % 78.7 % 75.3 % 72.7 % 69.6 % 70.0 % 69.4 % 69.4 % 69.9 %
Month-end occupancy 82.2 % 77.8 % 75.0 % 71.5 % 70.6 % 70.4 % 70.1 % 70.6 % 71.1 %

jurisdiction. We cannot predict with reasonable certainty ~~whether or~~ when ~~demand for senior living communities~~our occupancy will return to pre-COVID-19 ~~levels or the extent to which the pandemic’s effect on demand may adversely affect the amount of resident fees we are able to collect from our residents.~~pandemic levels.

~~Lost Revenue~~Pandemic Expenses.~~. Compared to our pre-pandemic expectations for fiscal 2020,~~ For the three months ended March 31, 2022 and 2021, we ~~estimate that the pandemic, including the related restrictions at our communities, resulted in $117.5~~recognized $10.4 million ~~of lost resident fee revenue for the first quarter of 2021. Estimated lost resident fee revenue for the first quarter of 2021 includes $94.2 million in our consolidated senior housing portfolio~~ and $23.3 million for our Health Care Services segment. On a cumulative basis, we estimate that the pandemic has resulted in approximately $400 million of lost resident fee revenue compared to our pre-pandemic expectations for fiscal 2020.

~~Pandemic-Related Expenses. We incurred~~ $27.3 million, respectively, of facility operating expense ~~during the first quarter of 2021~~ for incremental direct costs to respond to the pandemic. ~~Such~~The direct costs include those for: acquisition of additional ~~PPE,~~personal protective equipment, medical equipment, and cleaning and disposable food service supplies; enhanced cleaning and environmental sanitation; increased employee-related costs, including labor, ~~workers~~workers' compensation, and health plan expense; ~~increased expense for general liability claims;~~ and COVID-19 testing of residents and associates where not otherwise covered by government payor or third-party insurance sources. On a cumulative basis ~~we have incurred $152.9 million of pandemic-related facility operating expense~~ since the beginning of fiscal ~~2020. We also~~2020 through March 31, 2022, we have incurred $183.6 million of pandemic related facility operating expense. For the three months ended March 31, 2022 and 2021, we recorded $9.1 million and $10.7 million, respectively, of non-cash impairment charges in our operating results ~~of $9.0 million for the three months ended March 31, 2021,~~ for our operating lease right-of-use assets and property, plant and equipment and leasehold intangibles, primarily due to the COVID-19 pandemic and lower than expected operating performance at ~~communities with impaired assets.~~certain communities.

~~Liquidity~~. As of March 31, 2021, our total liquidity was $438.9 million, consisting of $304.0 million of unrestricted cash and cash equivalents and $134.9 million of marketable securities. Our cash flows from operations, excluding management agreement termination fees and the impact of the Coronavirus Aid, Relief, and Economic Security Act of 2020 ("CARES Act") funding, have been insufficient to cover our operating expenses, capital expenditures, and required interest and lease payments during the pandemic. However, we were able to satisfy our liquidity needs over such period utilizing a portion of our preexisting liquidity, together with CARES Act funding. We currently estimate that our cash flows from operations, together with cash balances on hand, cash equivalents, marketable securities, and proceeds from the pending sale of 80% of the equity in our Health Care Services segment will be sufficient to fund our liquidity needs for at least the next 12 months. We continue to seek opportunities to enhance and preserve our liquidity, including through maintaining expense discipline and increasing occupancy, continuing to evaluate our financing structure and the state of debt markets, and seeking further government-sponsored financial relief related to the pandemic. There is no assurance that debt financing will continue to be available on terms consistent with our expectations or at all, that our efforts will be successful in seeking further government-sponsored financial relief or regarding the amount of, or conditions required to qualify for, any such relief, or that the closing of the pending transaction will be completed in accordance with our expectations, or at all, or generate cash proceeds to us in the amount we anticipate.

•Phase 4 Provider Relief Fund Grants. During the ~~first quarter of~~three months ended December 31, 2021, we ~~accepted $0.8 million of cash from grants~~applied for the Phase 4 general distribution from the Public Health and Social Services Emergency Fund ("Provider Relief Fund") administered by the U.S. Department of Health and Human Services ("HHS"), under which grants have been made available to eligible healthcare providers for healthcare related expenses or lost revenues attributable to COVID-19. ~~The grants represented incentive payments made pursuant~~We expect to receive the ~~Nursing Home Infection Control Distribution, which related to our skilled nursing care provided through our CCRCs. HHS continues to evaluate future allocations under~~Phase 4 general distribution during the ~~Provider Relief Fund and the regulation and guidance regarding grants made under the Provider Relief Fund. We intend to pursue additional funding that may become available.~~second quarter of 2022. There can be no assurance that we will qualify for, or receive, such future grants in the amount we expect or that additional restrictions on the permissible

uses or terms and conditions of the grants will not be imposed by ~~HHS, or that future funding programs will be made available for which we qualify.~~

•During the year ended December 31, 2020, we received $87.5 million under the Accelerated and Advance Payment Program administered by CMS, $75.2 million of which related to our Health Care Services segment and $12.3 million related to our CCRCs segment. Recoupment of advanced payments will begin one year after payments were issued at a rate of 25% of Medicare payments for the first eleven months following the anniversary of issuance and at a rate of 50% of Medicare payments for the next six months. Any outstanding balance of advanced payments will be due following such recoupment period. Pursuant to the Purchase Agreement providing for the sale of 80% of our equity in our Health Care Services segment (as described below), our net cash proceeds at closing will include a reduction for the then outstanding balance of such advanced payments related to our Health Care Services segment. We expect recoupment of approximately $6 million of advanced payments related to our CCRCs segment during 2021, beginning in the second quarter.HHS.

•During fiscal 2020, we deferred payment of $72.7 million of the employer portion of social security payroll taxes incurred from March 27, 2020 through December 31, 2020 pursuant to the CARES Act. One-half of such deferral amount will become due on each of December 31, 2021 and December 31, 2022. Pursuant to the Purchase Agreement providing for the sale of 80% of our equity in our Health Care Services segment, our net cash proceeds at closing will include a reduction for the $8.9 million of deferred payroll tax payments related to our Health Care Services segment. We expect to pay approximately $32 million of the deferred payments in both December 2021 and 2022.

•Employee Retention Credit. We ~~are~~were eligible to claim the employee retention credit for certain of our associates under the Coronavirus Aid, Relief, and Economic Security Act of 2020 ("CARES Act. The credit for 2020 is available to employers that fully or partially suspended operations during any calendar quarter in 2020 due to orders from an appropriate governmental authority limiting commerce, travel, or group meetings due to COVID-19, and is equal to 50% of qualified wages paid after March 12, 2020 throughAct"). During the year ended December 31, ~~2020 to qualified employees, with a maximum credit of $5,000 per employee. During the first quarter of~~ 2021, we recognized $9.9 million, including $9.0 million for the three months ended March 31, 2021, of employee retention credits on wages paid from March 12, 2020 to ~~September 30,~~December 31, 2020 within other operating ~~income.~~income, for which we have received $4.6 million in cash as of March 31, 2022. We recognized a receivable for the remaining $5.3 million within prepaid expenses and other current assets, net on the condensed consolidated balance sheet as of March 31, 2022. The credit was modified and extended by subsequent legislation for wages paid from January 1, 2021 through December 31, 2021, and we are assessing our eligibility to claim such credit. There can be no assurance that we will qualify for, or receive, credits in the amount or on the timing we expect.

Vaccine Update.In ~~addition~~March 2022, the U.S. Centers for Disease Control and Prevention updated its recommendations to allow people over the ~~grants described above, during the three~~age of 50 who received an initial COVID-19 booster dose at least four months ~~ended March 31, 2021, we received and recognized $0.9 million of other operating income~~ago to be eligible for another mRNA booster to increase their protection against severe disease from ~~grants from other government sources.~~COVID-19. We are working to complete second vaccine booster clinics for our communities.

We cannot predict with reasonable certainty the impacts that COVID-19 ultimately will have on our business, results of operations, cash flow, and liquidity, and our response efforts may continue to delay or negatively impact our 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~~nation's economy and debt and equity markets and the local economies in our 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 our ability to qualify for and satisfy the terms and conditions of financial relief; perceptions regarding the safety of senior living communities during and after the pandemic; changes in demand for senior living communities and our ability to adapt our sales and marketing efforts to meet that demand; the impact of COVID-19 on our ~~residents’~~residents' and their ~~families’~~families' ability to afford our 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 our new residents; the disproportionate impact of COVID-19 on seniors generally and those residing in our communities; the duration and costs of our response efforts, including increased equipment, supplies, labor, litigation, testing, vaccination clinic, health plan, and other expenses; potentially greater use of contract labor and overtime due to COVID-19 and general labor market conditions; the impact of COVID-19 on our ability to complete financings and refinancings of various assets or other transactions ~~(including dispositions and the pending sale of 80% of the equity in our Health Care Services segment)~~ or to generate sufficient cash flow to cover required debt, interest, and lease payments and to satisfy financial and other covenants in our debt and lease documents; increased regulatory requirements, including the costs of unfunded, mandatory ~~testing;~~testing of residents and associates and provision of test kits to our health plan participants; increased enforcement actions resulting from COVID-19; government action that may limit our 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 our response efforts.

Community Labor

We continue to experience pressures associated with the intensely competitive labor environment. During 2021 and the three months ended March 31, 2022, the pressures included increased associate turnover, difficulty in timely filling open positions, and increasing wages. Continued increased competition for, or a shortage of, nurses or other associates, including due to the COVID-19 pandemic, general labor market conditions, low levels of unemployment, or general inflationary pressures, have required and may require that we enhance our pay and benefits package to compete effectively for such associates. We have increased our recruiting efforts to fill open positions. We have reviewed wage rates in all of our markets and made appropriate adjustments, and we will monitor to remain competitive. We seek to ensure that our communities are staffed with full and part-time associates. To cover open positions, we have increased our use of more expensive contract labor and overtime. Third-party staffing agencies from which we source contract labor have increased the rates they charge which has resulted in increases in the cost of contract labor. Our labor expense in our same community portfolio for the three months ended March 31, 2022 increased 4.4% sequentially from the three months ended December 31, 2021 and 13.2% year-over-year from the three months ended March 31, 2021. The year-over-year increase in our same community labor expense primarily resulted from our

2821

~~Transaction Activity~~increased use of contract labor and overtime to cover open positions as well as merit and market wage rate adjustments initiated in 2021. We expect to continue to experience labor cost pressure as a result of merit wage rate adjustments made in March 2022, an anticipated increase in hours worked as our occupancy levels grow, and the labor environment conditions described above. As we fill more full and part-time positions, we expect to use less contract labor and overtime.

During the period from January 1, 2020 through March 31, 2021, we terminated triple-net obligations on an aggregate of 32 communities (2,890 units), including through the acquisition of 27 formerly leased communities (2,453 units), we sold three owned communities (417 units), and we sold our ownership interest in our unconsolidated entry fee CCRC venture (the "CCRC Venture") with Healthpeak Properties, Inc. ("Healthpeak"). On July 26, 2020, we entered into definitive agreements with Ventas, Inc. ("Ventas") to restructure our 120 community (10,174 units) triple-net master lease arrangements. In addition, we conveyed to Ventas five communities (471 units) and manage the communities following the closing. See Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the year ended December 31, 2020 filed with the SEC on February 25, 2021 for more details regarding the terms of significant transactions that occurred prior to 2021.Resident Fee Rates

~~During~~The rates charged at communities are highly dependent on local market conditions and the competitive environment in which the communities operate. Substantially all of our private pay senior housing residency agreements allow for adjustments in the monthly rate on 90 or fewer days' notice which enables us to seek increases in monthly rates due to inflation or other factors. Increases for level of care changes or additional services are typically allowed immediately upon notice of the change. Generally, we have increased our monthly rates, including rates for care and other services, for private pay residents on an annual basis beginning January 1 each year. We made the annual rate adjustment effective January 1, 2022 for our in-place private pay residents, which was higher than our typical annual rate adjustment and resulted in a 5.1% net increase in same community RevPOR for the three months ended March 31, ~~2021, we completed~~2022 compared to the ~~sale~~three months ended March 31, 2021. Such adjustment reflects our increased costs associated with additional efforts to serve and care for our residents during the pandemic, the current inflationary environment, and the intensely competitive labor environment. The rate adjustment could result in a decrease in occupancy in our communities, and any use of ~~one owned community (42 units) for cash proceeds~~promotional or other discounting would offset a portion of ~~$2.7 million, net of transaction costs,~~such rate adjustments in our RevPAR and ~~for which we recognized a net gain on sale of assets of $0.5 million.~~RevPOR results. In addition, the rate adjustment may not be sufficient to offset our increased costs.

During the next twelve months, we expect to sell 80% of our equity in our Health Care Services segment and to close on the disposition of two owned unencumbered communities (207 units) classified as held for sale as of March 31, 2021. We also anticipate terminations of certain of our management arrangements with third parties as we transition to new operators our management on certain communities.

The closings of the various pending and expected transactions described herein are, or will be, subject to the satisfaction of various closing conditions, including (where applicable) the receipt of regulatory approvals. However, there can be no assurance that the transactions will close or, if they do, when the actual closings will occur.

~~Pending~~ Sale of Health Care Services

On ~~February 24,~~July 1, 2021, we ~~entered into a Securities Purchase Agreement (the "Purchase Agreement") with affiliates of HCA Healthcare, Inc. ("HCA Healthcare"), providing for~~completed the sale of 80% of our equity in our Health Care Services segment to affiliates of HCA Healthcare, Inc. ("HCA Healthcare") for a purchase price of ~~$400~~$400.0 million in cash, subject to certain adjustments set forth in the Securities Purchase Agreement (the "Purchase Agreement") dated February 24, 2021, including a reduction for the remaining outstanding balance as of the closing of Medicare advance payments and deferred payroll tax payments related to the Health Care Services segment ~~which were $75.2 million and $8.9 million, respectively, as of March 31, 2021.~~(the "HCS Sale"). We ~~expect our~~received net cash proceeds of $312.6 million, including $305.8 million at closing on July 1, 2021 and $6.8 million upon completion of the ~~closing will be approximately $300 million, subject to the timing of closing with respect to the adjustments set forth~~post-closing net working capital adjustment in ~~the Purchase Agreement.~~October 2021. The Purchase Agreement also ~~contains~~contained certain agreed upon indemnities for the benefit of the purchaser. The closing of the sale transaction is anticipated to occur in the early second half of 2021, subject to receipt of applicable regulatory approvals and satisfaction of other customary closing conditions set forth in the Purchase Agreement. Pursuant to the Purchase Agreement, atAt closing of the transaction, we ~~will retain~~retained a 20% equity interest in the ~~business. Upon closing, we expect that the~~venture with HCA Healthcare ("HCS Venture").

The results and financial position of ~~our~~the Health Care Services segment ~~will be~~were deconsolidated from our consolidated financial statements as of July 1, 2021 and ~~that~~ our 20% equity interest in the ~~joint venture will be~~HCS Venture is accounted for under the equity method of ~~accounting. We anticipate~~accounting subsequent to that date. As of July 1, 2021, we recognized a $100.0 million asset within investment in unconsolidated ventures on our consolidated balance sheet for the ~~sale transaction will utilize a portion~~estimated fair value of our ~~federal net operating loss carryforwards to offset~~retained 20% noncontrolling interest in the ~~expected taxable~~HCS Venture. We recognized a $286.5 million gain on ~~such transaction.~~sale, net of transaction costs, within our consolidated statement of operations for the year ended December 31, 2021 for the HCS Sale. Refer to Note 15 to the condensed consolidated financial statements contained in "Item 1. Financial Statements” for selected financial data for the Health Care Services segment for the three months ended March 31, 2021.

On November 1, 2021, the HCS Venture sold certain home health, hospice, and outpatient therapy agencies in areas not served by HCA Healthcare to LHC Group Inc. Upon the completion of the sale, we received $35.0 million of cash distributions from the HCS Venture from the net sale proceeds, which decreased our investment in unconsolidated ventures. We continue to own a 20% equity interest in the remaining HCS Venture, which continues to operate home health, hospice, and outpatient therapy agencies in areas served by HCA Healthcare.

Results of Operations

As of March 31, ~~2021,~~2022, our total operations included ~~695~~678 communities with a capacity to serve ~~approximately~~over 60,000 residents. As of that date, we owned ~~349~~347 communities ~~(31,819~~(31,635 units), leased ~~301~~298 communities ~~(21,127~~(20,846 units), and managed 4533 communities ~~(6,652~~(4,842 units). The following discussion should be read in conjunction with our condensed consolidated financial statements and the related notes, which are included in "Item 1. Financial Statements" of this Quarterly Report on Form 10-Q. The results of operations for any particular period are not necessarily indicative of results for any future period. Transactions completed during the period of January 1, ~~2020~~2021 to March 31, ~~2021~~2022 affect the comparability of our results of operations.

We use the operating measures described below in connection with operating and managing our business and reporting our results of operations.

•Senior housing operating results and data presented on a same community basis reflect results and data of a consistent population of communities by excluding the impact of changes in the composition of our portfolio of communities. The operating results exclude natural disaster expense and related insurance recoveries. We define our same community portfolio as communities consolidated and operational for the full period in both comparison years. Consolidated communities excluded from the same community portfolio include communities acquired or disposed of since the

beginning of the prior year, communities classified as assets held for sale, certain communities planned for disposition, certain communities that have undergone or are undergoing expansion, redevelopment, and repositioning projects, and certain communities that have experienced a casualty event that significantly impacts their operations. Our management uses same community operating results and data for decision making, and we believe such results and data provide useful information to investors, because it enables comparisons of revenue, expense, and other operating measures for a consistent portfolio over time without giving effect to the impacts of communities that were not consolidated and operational for the comparison periods, communities acquired or disposed during the comparison periods (or planned for disposition), and communities with results that are or likely will be impacted by completed or in-process development-related capital expenditure projects. ~~As presented herein, same community results include the direct costs incurred to respond to the COVID-19 pandemic.~~

•RevPAR, or average monthly senior housing resident fee revenue per available unit, is defined as resident fee revenue for the corresponding portfolio for the period (excluding revenue from our former Health Care Services segment, revenue ~~revenue from~~for private duty services provided to seniors living outside of our communities, and entrance fee amortization), divided by the weighted average number of available units in the corresponding portfolio for the period, divided by the number of months in the period. We measure RevPAR at the consolidated level, as well as at the segment level with respect to our Independent Living, Assisted Living and Memory Care, and CCRCs segments. Our management uses RevPAR for decision making, and we believe the measure provides useful information to investors, because the measure is an indicator of senior housing resident fee revenue performance that reflects the impact of both senior housing occupancy and rate.

•RevPOR, or average monthly senior housing resident fee revenue per occupied unit, is defined as resident fee revenue for the corresponding portfolio for the period (excluding revenue from our former Health Care Services segment, revenue ~~revenue from~~for private duty services provided to seniors living outside of our communities, and entrance fee amortization), divided by the weighted average number of occupied units in the corresponding portfolio for the period, divided by the number of months in the period. We measure RevPOR at the consolidated level, as well as at the segment level with respect to our Independent Living, Assisted Living and Memory Care, and CCRCs segments. Our management uses RevPOR for decision making, and we believe the measure provides useful information to investors, because it reflects the average amount of senior housing resident fee revenue we derive from an occupied unit per month without factoring occupancy rates. RevPOR is a significant driver of our senior housing revenue performance.

•Weighted average occupancy rate reflects the percentage of units at our owned and leased communities being utilized by residents over a reporting period. We measure occupancy rates with respect to our Independent Living, Assisted Living and Memory Care, and CCRCs segments, and also measure this metric both on a consolidated senior housing and a same community basis. Our management uses weighted average occupancy, and we believe the measure provides useful information to investors, because it is a significant driver of our senior housing revenue performance.

This section includes the non-GAAP performance measure Adjusted EBITDA. See "Non-GAAP Financial Measures" below for our definition of the measure and other important information regarding such measure, including reconciliations to the most comparable GAAP measure.

Comparison of Three Months Ended March 31, ~~2021~~2022 and ~~2020~~2021

Summary Operating Results

The following table summarizes our overall operating results for the three months ended March 31, ~~2021~~2022 and ~~2020.~~2021.


		Three Months Ended March 31,				Increase (Decrease)					Three Months Ended March 31,				Increase (Decrease)
(in thousands)	(in thousands)	2021		2020		Amount		Percent		(in thousands)	2022		2021		Amount		Percent
Total resident fees and management fees revenue	Total resident fees and management fees revenue	$	672,916	$	891,422	$	(218,506)	(24.5)	%	Total resident fees and management fees revenue	$	640,303	$	672,916	$	(32,613)	(4.8)	%
Other operating income	Other operating income	10,735		—		10,735		NM		Other operating income	376		10,735		(10,359)		(96.5)	%
Facility operating expense	Facility operating expense	556,312		588,482		(32,170)		(5.5)	%	Facility operating expense	512,764		556,312		(43,548)		(7.8)	%
Net income (loss)	Net income (loss)	(108,303)		369,497		(477,800)		NM		Net income (loss)	(100,032)		(108,303)		8,271		7.6	%
Adjusted EBITDA	Adjusted EBITDA	34,981		185,069		(150,088)		(81.1)	%	Adjusted EBITDA	37,176		34,981		2,195		6.3	%

The decrease in total resident fees and management fees revenue was primarily attributable to deconsolidation of results of the Health Care Services segment effective July 1, 2021, which resulted in a ~~$118.4~~decrease of $86.9 million of resident fees compared to the prior year period. The decrease in resident fees ~~including a 14.3% decrease~~was partially offset by an 11.0% increase in same community RevPAR, comprised of a ~~1,390~~390 basis point ~~decrease~~increase in same

community weighted average occupancy and a ~~2.9%~~5.1% increase in same community RevPOR. ~~Revenue for home health services~~Management fee revenue decreased ~~$9.6~~$5.2 million ~~as our home health average daily census decreased 16.9% compared to the prior year period~~ primarily due to the ~~COVID-19 pandemic and lower occupancy in our communities. Additionally, the disposition~~transition of 13management agreements on 42 net communities ~~through sales and conveyances of owned communities and lease terminations~~ since the beginning of the prior year ~~period resulted in $15.3 million less in resident fees during the three months ended March 31, 2021 compared to the prior year~~ period. Management fee revenue decreased $100.1 million primarily due to $100.0 million of management agreement termination fees recognized for the three months ended March 31, 2020 for the management agreement termination fee payment received from Healthpeak in connection with the sale of our ownership interest in the CCRC Venture.

During the three months ended March 31, 2022 and 2021, we recognized ~~$9.0~~$0.4 million and $10.7 million, respectively, of government grants and employee retention credits ~~and $1.7 million of government grants~~ as other operating income based on our estimates of our satisfaction of the conditions of the ~~credits~~grants and ~~grants~~credits during the period.

The decrease in facility operating expense was primarily attributable to adeconsolidation of results of the Health Care Services segment effective July 1, 2021, which resulted in an $87.0 million decrease in ~~labor costs for home health services as a result of lower census and as we adjusted our home health services operational structure to better align our~~ facility operating expenses and business model with the new Patient-Driven Grouping Model ("PDGM"), an alternate home health case-mix adjustment methodology with a 30-day unit of payment, which became effective beginning January 1, 2020. Additionally, the disposition of communities since the beginning of the prior year period resulted in $13.6 million lessexpenses. The decrease in facility operating expense ~~during the three months ended March 31, 2021 compared to the prior year period. Same~~was partially offset by a 10.7% increase in same community facility operating expense, ~~decreased 1.0%~~including a $38.8 million, or 13.2%, ~~which was~~increase in our same community labor expense primarily ~~due~~resulting from an increase in the use of contract labor and overtime to ~~decreases~~cover open positions as well as merit and market wage rate adjustments, partially offset by a decrease in incremental direct labor costs to respond to the COVID-19 pandemic. Additionally, an increase in food ~~and supplies~~ costs due to ~~reduced~~increased occupancy during the period ~~partially offset by~~and an increase in ~~labor costs.~~repairs and maintenance costs contributed to the increase in our same community facility operating expense. Facility operating expense for the three months ended March 31, 2022 and 2021 ~~and 2020~~ includes ~~$27.3~~$10.4 million and ~~$10.0~~$27.3 million, respectively, of incremental direct costs to respond to the COVID-19 pandemic.

The ~~change~~decrease in net ~~income (loss)~~loss was primarily attributable to ~~a $371.7 million decrease~~decreases in ~~net gain on sale of assets, primarily resulting from~~interest expense, general and administrative expense, and facility operating lease expense compared to the ~~sale of our interest in the CCRC Venture,~~prior year period, as well as the net impact of the revenue, other operating income, and facility operating expense factors previously ~~discussed, partially offset by a decrease in asset impairment expense compared to the prior year period.~~discussed.

The ~~decrease~~increase in Adjusted EBITDA was primarily attributable to a decrease in general and administrative expense (excluding non-cash stock based compensation expense and transaction and organizational restructuring costs) compared to the prior year period as a result of the sale of 80% of our equity in our Health Care Services segment, as well as the net impact of the revenue, ~~(including the $100.0 million management agreement termination fee payment received from Healthpeak),~~ other operating income, and facility operating expense factors previously ~~discussed, partially offset by decreases in cash facility operating lease payments and general and administrative expense.~~discussed.

3124

Operating Results - Senior Housing Segments

The following table summarizes the operating results and data of our three senior housing segments (Independent Living, Assisted Living and Memory Care, and CCRCs) on a combined basis for the three months ended March 31, ~~2021~~2022 and ~~2020,~~2021, including operating results and data on a same community basis. See management's discussion and analysis of the operating results on an individual segment basis on the following pages.


														Three Months Ended March 31,						Increase (Decrease)
(in thousands, except communities, units, occupancy, RevPAR, and RevPOR)	(in thousands, except communities, units, occupancy, RevPAR, and RevPOR)	Three Months Ended March 31,						Increase (Decrease)					(in thousands, except communities, units, occupancy, RevPAR, and RevPOR)	2022			2021			Amount			Percent
		2021			2020			Amount			Percent
Resident fees	Resident fees	$	577,499		$	687,888		$	(110,389)		(16.0)	%	Resident fees	$	636,974		$	577,499		$	59,475		10.3	%
Other operating income	Other operating income	$	8,152		$	—		$	8,152		NM		Other operating income	$	376		$	8,152		$	(7,776)		(95.4)	%
Facility operating expense	Facility operating expense	$	469,281		$	484,542		$	(15,261)		(3.1)	%	Facility operating expense	$	512,764		$	469,281		$	43,483		9.3	%

Number of communities (period end)	Number of communities (period end)	650			661			(11)			(1.7)	%	Number of communities (period end)	645			650			(5)			(0.8)	%
Number of units (period end)		52,946			54,037			(1,091)			(2.0)	%

Total average units	Total average units	52,971			54,184			(1,213)			(2.2)	%	Total average units	52,586			52,971			(385)			(0.7)	%
RevPAR	RevPAR	$	3,631		$	4,229		$	(598)		(14.1)	%	RevPAR	$	4,032		$	3,631		$	401		11.0	%
Occupancy rate (weighted average)	Occupancy rate (weighted average)	69.6		%	83.2		%	(1,360)		bps	n/a		Occupancy rate (weighted average)	73.4		%	69.6		%	380		bps	n/a

RevPOR	RevPOR	$	5,219		$	5,085		$	134		2.6	%	RevPOR	$	5,493		$	5,219		$	274		5.3	%

Same Community Operating Results and Data	Same Community Operating Results and Data												Same Community Operating Results and Data
Resident fees	Resident fees	$	551,467		$	643,232		$	(91,765)		(14.3)	%	Resident fees	$	614,441		$	553,761		$	60,680		11.0	%
Other operating income	Other operating income	$	7,554		$	—		$	7,554		NM		Other operating income	$	358		$	7,355		$	(6,997)		(95.1)	%
Facility operating expense	Facility operating expense	$	446,339		$	450,680		$	(4,341)		(1.0)	%	Facility operating expense	$	493,284		$	445,519		$	47,765		10.7	%

Number of communities	Number of communities	637			637			—			—		Number of communities	635			635			—			—
Total average units	Total average units	50,455			50,458			(3)			—		Total average units	50,737			50,734			3			—
RevPAR	RevPAR	$	3,643		$	4,249		$	(606)		(14.3)	%	RevPAR	$	4,037		$	3,638		$	399		11.0	%
Occupancy rate (weighted average)	Occupancy rate (weighted average)	69.5		%	83.4		%	(1,390)		bps	n/a		Occupancy rate (weighted average)	73.4		%	69.5		%	390		bps	n/a
RevPOR	RevPOR	$	5,244		$	5,097		$	147		2.9	%	RevPOR	$	5,502		$	5,235		$	267		5.1	%

3225

Independent Living Segment

The following table summarizes the operating results and data for our Independent Living segment for the three months ended March 31, ~~2021~~2022 and ~~2020,~~2021, including operating results and data on a same community basis.


														Three Months Ended March 31,						Increase (Decrease)
(in thousands, except communities, units, occupancy, RevPAR, and RevPOR)	(in thousands, except communities, units, occupancy, RevPAR, and RevPOR)	Three Months Ended March 31,						Increase (Decrease)					(in thousands, except communities, units, occupancy, RevPAR, and RevPOR)	2022			2021			Amount			Percent
		2021			2020			Amount			Percent
Resident fees	Resident fees	$	118,782		$	135,862		$	(17,080)		(12.6)	%	Resident fees	$	124,404		$	118,782		$	5,622		4.7	%

Other operating income	Other operating income	$	1,364		$	—		$	1,364		NM		Other operating income	$	2		$	1,364		$	(1,362)		(99.9)	%
Facility operating expense	Facility operating expense	$	82,817		$	84,448		$	(1,631)		(1.9)	%	Facility operating expense	$	86,722		$	82,817		$	3,905		4.7	%

Number of communities (period end)	Number of communities (period end)	68			68			—			—		Number of communities (period end)	68			68			—			—
Number of units (period end)		12,542			12,537			5			—

Total average units	Total average units	12,539			12,529			10			0.1	%	Total average units	12,568			12,539			29			0.2	%
RevPAR	RevPAR	$	3,158		$	3,615		$	(457)		(12.6)	%	RevPAR	$	3,299		$	3,158		$	141		4.5	%
Occupancy rate (weighted average)	Occupancy rate (weighted average)	73.6		%	87.1		%	(1,350)		bps	n/a		Occupancy rate (weighted average)	74.6		%	73.6		%	100		bps	n/a

RevPOR	RevPOR	$	4,290		$	4,151		$	139		3.3	%	RevPOR	$	4,423		$	4,290		$	133		3.1	%

Same Community Operating Results and Data	Same Community Operating Results and Data												Same Community Operating Results and Data
Resident fees	Resident fees	$	115,625		$	132,556		$	(16,931)		(12.8)	%	Resident fees	$	122,846		$	117,572		$	5,274		4.5	%
Other operating income	Other operating income	$	1,327		$	—		$	1,327		NM		Other operating income	$	2		$	1,345		$	(1,343)		(99.9)	%
Facility operating expense	Facility operating expense	$	80,367		$	82,172		$	(1,805)		(2.2)	%	Facility operating expense	$	85,685		$	81,867		$	3,818		4.7	%

Number of communities	Number of communities	66			66			—			—		Number of communities	67			67			—			—
Total average units	Total average units	12,161			12,159			2			—		Total average units	12,378			12,373			5			—
RevPAR	RevPAR	$	3,169		$	3,634		$	(465)		(12.8)	%	RevPAR	$	3,308		$	3,167		$	141		4.5	%
Occupancy rate (weighted average)	Occupancy rate (weighted average)	73.6		%	87.1		%	(1,350)		bps	n/a		Occupancy rate (weighted average)	74.6		%	73.5		%	110		bps	n/a
RevPOR	RevPOR	$	4,307		$	4,174		$	133		3.2	%	RevPOR	$	4,435		$	4,310		$	125		2.9	%

The ~~decrease~~increase in the segment's resident fees was primarily attributable to ~~a decrease~~an increase in the segment's same community RevPAR, comprised of a ~~1,350~~2.9% increase in same community RevPOR and a 110 basis point ~~decrease~~increase in same community weighted average occupancy and a 3.2% increase in same community RevPOR. The decrease in the segment's same community weighted average occupancy primarily reflects the impact of reduced move-in activity related to the COVID-19 pandemic, including the related restrictions at our communities.occupancy. The increase in the segment's same community RevPOR was primarily the result of in-place ~~rent~~rate increases. The increase in the segment's same community weighted average occupancy primarily reflects the impact of our execution on key initiatives to rebuild occupancy lost due to the pandemic.

The ~~decrease~~increase in the segment's facility operating expense was primarily attributable to ~~a decrease~~an increase in the segment's same community facility operating expense, including ~~decreases~~a $2.0 million, or 4.1%, increase in ~~food~~the segment's same community labor expense primarily resulting from an increase in the use of contract labor and ~~supplies~~overtime to cover open positions, partially offset by a decrease in incremental direct labor costs ~~due~~ to ~~reduced occupancy during~~respond to the ~~period.~~COVID-19 pandemic. The segment's facility operating expense for the three months ended March 31, 2022 and 2021 ~~and 2020~~ includes ~~$3.0~~$1.3 million and ~~$1.2~~$3.0 million, respectively, of incremental direct costs to respond to the COVID-19 pandemic.

3326

Assisted Living and Memory Care Segment

The following table summarizes the operating results and data for our Assisted Living and Memory Care segment for the three months ended March 31, ~~2021~~2022 and ~~2020,~~2021, including operating results and data on a same community basis.


														Three Months Ended March 31,						Increase (Decrease)
(in thousands, except communities, units, occupancy, RevPAR, and RevPOR)	(in thousands, except communities, units, occupancy, RevPAR, and RevPOR)	Three Months Ended March 31,						Increase (Decrease)					(in thousands, except communities, units, occupancy, RevPAR, and RevPOR)	2022			2021			Amount			Percent
		2021			2020			Amount			Percent
Resident fees	Resident fees	$	386,938		$	457,479		$	(70,541)		(15.4)	%	Resident fees	$	432,132		$	386,938		$	45,194		11.7	%
Other operating income	Other operating income	$	5,104		$	—		$	5,104		NM		Other operating income	$	356		$	5,104		$	(4,748)		(93.0)	%
Facility operating expense	Facility operating expense	$	320,609		$	325,478		$	(4,869)		(1.5)	%	Facility operating expense	$	355,625		$	320,609		$	35,016		10.9	%

Number of communities (period end)	Number of communities (period end)	562			571			(9)			(1.6)	%	Number of communities (period end)	558			562			(4)			(0.7)	%
Number of units (period end)		35,082			35,789			(707)			(2.0)	%

Total average units	Total average units	35,110			35,944			(834)			(2.3)	%	Total average units	34,817			35,110			(293)			(0.8)	%
RevPAR	RevPAR	$	3,673		$	4,242		$	(569)		(13.4)	%	RevPAR	$	4,136		$	3,673		$	463		12.6	%
Occupancy rate (weighted average)	Occupancy rate (weighted average)	68.3		%	81.9		%	(1,360)		bps	n/a		Occupancy rate (weighted average)	73.0		%	68.3		%	470		bps	n/a

RevPOR	RevPOR	$	5,376		$	5,178		$	198		3.8	%	RevPOR	$	5,665		$	5,376		$	289		5.4	%

Same Community Operating Results and Data	Same Community Operating Results and Data												Same Community Operating Results and Data
Resident fees	Resident fees	$	381,448		$	444,269		$	(62,821)		(14.1)	%	Resident fees	$	427,733		$	380,616		$	47,117		12.4	%
Other operating income	Other operating income	$	4,967		$	—		$	4,967		NM		Other operating income	$	356		$	4,930		$	(4,574)		(92.8)	%
Facility operating expense	Facility operating expense	$	315,009		$	316,338		$	(1,329)		(0.4)	%	Facility operating expense	$	352,338		$	313,580		$	38,758		12.4	%

Number of communities	Number of communities	556			556			—			—		Number of communities	553			553			—			—
Total average units	Total average units	34,508			34,513			(5)			—		Total average units	34,384			34,386			(2)			—
RevPAR	RevPAR	$	3,685		$	4,291		$	(606)		(14.1)	%	RevPAR	$	4,147		$	3,690		$	457		12.4	%
Occupancy rate (weighted average)	Occupancy rate (weighted average)	68.3		%	82.2		%	(1,390)		bps	n/a		Occupancy rate (weighted average)	72.9		%	68.2		%	470		bps	n/a
RevPOR	RevPOR	$	5,396		$	5,221		$	175		3.4	%	RevPOR	$	5,689		$	5,409		$	280		5.2	%

The ~~decrease~~increase in the segment's resident fees was primarily attributable to ~~a decrease~~an increase in the segment's same community RevPAR, comprised of a ~~1,390~~470 basis point ~~decrease~~increase in same community weighted average occupancy and a ~~3.4%~~5.2% increase in same community RevPOR. The ~~decrease~~increase in the segment's same community weighted average occupancy primarily reflects the impact of ~~reduced move-in activity related~~our execution on key initiatives to rebuild occupancy lost due to the ~~COVID-19 pandemic, including the related restrictions at our communities.~~pandemic. The increase in the segment's same community RevPOR was primarily the result of in-place ~~rent~~rate increases. ~~Additionally,~~The increase in the segment's resident fees was partially offset by the disposition of 11five communities ~~(869~~(399 units) since the beginning of the prior year period, which resulted in ~~$7.3~~$2.3 million less in resident fees during the three months ended March 31, ~~2021~~2022 compared to the prior year period.

The ~~decrease~~increase in the segment's facility operating expense was primarily attributable to an increase in the segment's same community facility operating expense, including a $32.2 million, or 15.3%, increase in the segment's same community labor expense primarily resulting from an increase in the use of contract labor and overtime to cover open positions as well as merit and market wage rate adjustments, partially offset by a decrease in incremental direct labor costs to respond to the COVID-19 pandemic. Additionally, an increase in food costs due to increased occupancy during the period and an increase in repairs and maintenance costs contributed to the increase in the segment's same community facility operating expense. The increase in the segment's facility operating expense was partially offset by the disposition of communities since the beginning of the prior year period, which resulted in ~~$7.0~~$2.2 million less in facility operating expense during the three months ended March 31, ~~2021~~2022 compared to the prior year period. The decrease in the segment's same community facility operating expense was primarily attributable to decreases in food and supplies costs due to reduced occupancy during the period, partially offset by an increase in labor costs. The segment's facility operating expense for the three months ended March 31, 2022 and 2021 ~~and 2020~~ includes ~~$18.9~~$7.6 million and ~~$7.7~~$18.9 million, respectively, of incremental direct costs to respond to the COVID-19 pandemic.

3427

CCRCs Segment

The following table summarizes the operating results and data for our CCRCs segment for the three months ended March 31, ~~2021~~2022 and ~~2020,~~2021, including operating results and data on a same community basis.


														Three Months Ended March 31,						Increase (Decrease)
(in thousands, except communities, units, occupancy, RevPAR, and RevPOR)	(in thousands, except communities, units, occupancy, RevPAR, and RevPOR)	Three Months Ended March 31,						Increase (Decrease)					(in thousands, except communities, units, occupancy, RevPAR, and RevPOR)	2022			2021			Amount			Percent
		2021			2020			Amount			Percent
Resident fees	Resident fees	$	71,779		$	94,547		$	(22,768)		(24.1)	%	Resident fees	$	80,438		$	71,779		$	8,659		12.1	%
Other operating income	Other operating income	$	1,684		$	—		$	1,684		NM		Other operating income	$	18		$	1,684		$	(1,666)		(98.9)	%
Facility operating expense	Facility operating expense	$	65,855		$	74,616		$	(8,761)		(11.7)	%	Facility operating expense	$	70,417		$	65,855		$	4,562		6.9	%

Number of communities (period end)	Number of communities (period end)	20			22			(2)			(9.1)	%	Number of communities (period end)	19			20			(1)			(5.0)	%
Number of units (period end)		5,322			5,711			(389)			(6.8)	%

Total average units	Total average units	5,322			5,711			(389)			(6.8)	%	Total average units	5,201			5,322			(121)			(2.3)	%
RevPAR	RevPAR	$	4,473		$	5,496		$	(1,023)		(18.6)	%	RevPAR	$	5,109		$	4,473		$	636		14.2	%
Occupancy rate (weighted average)	Occupancy rate (weighted average)	68.5		%	82.4		%	(1,390)		bps	n/a		Occupancy rate (weighted average)	73.2		%	68.5		%	470		bps	n/a

RevPOR	RevPOR	$	6,534		$	6,669		$	(135)		(2.0)	%	RevPOR	$	6,976		$	6,534		$	442		6.8	%

Same Community Operating Results and Data	Same Community Operating Results and Data												Same Community Operating Results and Data
Resident fees	Resident fees	$	54,394		$	66,407		$	(12,013)		(18.1)	%	Resident fees	$	63,862		$	55,573		$	8,289		14.9	%
Other operating income	Other operating income	$	1,260		$	—		$	1,260		NM		Other operating income	$	—		$	1,080		$	(1,080)		(100.0)	%
Facility operating expense	Facility operating expense	$	50,963		$	52,170		$	(1,207)		(2.3)	%	Facility operating expense	$	55,261		$	50,072		$	5,189		10.4	%

Number of communities	Number of communities	15			15			—			—		Number of communities	15			15			—			—
Total average units	Total average units	3,786			3,786			—			—		Total average units	3,975			3,975			—			—
RevPAR	RevPAR	$	4,789		$	5,847		$	(1,058)		(18.1)	%	RevPAR	$	5,355		$	4,660		$	695		14.9	%
Occupancy rate (weighted average)	Occupancy rate (weighted average)	67.1		%	82.4		%	(1,530)		bps	n/a		Occupancy rate (weighted average)	73.7		%	68.2		%	550		bps	n/a
RevPOR	RevPOR	$	7,133		$	7,093		$	40		0.6	%	RevPOR	$	7,267		$	6,833		$	434		6.4	%

The ~~decrease~~increase in the segment's resident fees was primarily attributable to ~~a decrease~~an increase in the segment's same community RevPAR, comprised of a ~~1,530~~550 basis point ~~decrease~~increase in same community weighted average occupancy and a ~~0.6%~~6.4% increase in same community RevPOR. The ~~decrease~~increase in the segment's same community weighted average occupancy primarily reflects the impact of ~~reduced move-in activity related~~our execution on key initiatives to rebuild occupancy lost due to the ~~COVID-19 pandemic, including the related restrictions at our communities.~~pandemic. The increase in the segment's same community RevPOR was primarily the result of ~~in-place rent increases, partially offset by a~~an occupancy mix shift ~~from less~~to more skilled nursing services within the ~~segment. Additionally,~~segment and in-place rate increases. The increase in resident fees was partially offset by the disposition of ~~two communities (456~~one community (120 units) since the beginning of the prior year period, which resulted in ~~$8.0~~$1.6 million less in resident fees during the three months ended March 31, ~~2021~~2022 compared to the prior year period.

The ~~decrease~~increase in the segment's facility operating expense was primarily attributable to an increase in the segment's same community facility operating expense, including a $4.7 million, or 13.8%, increase in the segment's same community labor expense primarily resulting from an increase in the use of contract labor and overtime to cover open positions, partially offset by a decrease in incremental direct labor costs to respond to the COVID-19 pandemic. The increase in the segment's facility operating expense was partially offset by the disposition of ~~communities~~one community since the beginning of the prior year period, which resulted in ~~$6.6~~$2.0 million less in facility operating expense during the three months ended March 31, ~~2021~~2022 compared to the prior year period and a decrease in the segment's same community facility operating expense. The decrease in the segment's same community facility operating expense was primarily attributable to decreases in healthcare supplies and food costs due to the reduced occupancy during the period and decreases in labor expense arising from fewer hours worked.period. The segment's facility operating expense for the three months ended March 31, 2022 and 2021 ~~and 2020~~ includes ~~$4.0~~$1.5 million and ~~$0.7~~$4.0 million, respectively, of incremental direct costs to respond to the COVID-19 pandemic.

3528

Operating Results - ~~Health Care Services Segment~~Other Income and Expense Items

The following table summarizes ~~the~~other income and expense items in our operating results ~~and data for our Health Care Services segment~~ for the three months ended March 31, ~~2021~~2022 and ~~2020.~~2021.

(in thousands, except census) Three Months Ended
March 31, Increase (Decrease)
2021 2020 Amount Percent
Resident fees $ 86,851 $ 94,819 $ (7,968) (8.4) %
Other operating income $ 2,583 $ — $ 2,583 NM
Facility operating expense $ 87,031 $ 103,940 $ (16,909) (16.3) %
Home health average daily census 11,647 14,020 (2,373) (16.9) %
Hospice average daily census 1,509 1,698 (189) (11.1) %


	Three Months Ended March 31,				Increase (Decrease)
(in thousands)	2022		2021		Amount		Percent
Management fees	$	3,329	$	8,566	$	(5,237)	(61.1)	%
Reimbursed costs incurred on behalf of managed communities	37,141		65,794		(28,653)		(43.5)	%
Costs incurred on behalf of managed communities	37,141		65,794		(28,653)		(43.5)	%
General and administrative expense	45,126		49,943		(4,817)		(9.6)	%
Facility operating lease expense	41,564		44,418		(2,854)		(6.4)	%
Depreciation and amortization	85,684		83,891		1,793		2.1	%
Asset impairment	9,075		10,677		(1,602)		(15.0)	%

Interest income	95		421		(326)		(77.4)	%
Interest expense	43,354		48,607		(5,253)		(10.8)	%

Equity in earnings (loss) of unconsolidated ventures	(4,894)		(531)		(4,363)		NM
Gain (loss) on sale of assets, net	(294)		1,112		(1,406)		NM
Other non-operating income (loss)	(27)		1,644		(1,671)		NM
Benefit (provision) for income taxes	1,976		(752)		2,728		NM

The decrease in the segment's resident fees was primarily attributable to a decrease in revenue for home health services, as our home health average daily census decreased compared to the prior year period primarily due to the COVID-19 pandemic and lower occupancy in our communities.

The decrease in the segment's facility operating expense was primarily attributable to a decrease in labor costs for home health services as a result of the lower census and as we adjusted our home health services operational structure to better align our facility operating expenses and business model with the new payment model. The decrease in the segment's facility operating expense was partially offset by a $1.0 million increase in incremental direct costs to respond to the COVID-19 pandemic. The segment's facility operating expense for the three months ended March 31, 2021 and 2020 includes $1.4 million and $0.4 million, respectively, of incremental direct costs to respond to the COVID-19 pandemic.

As described above, we expect to sell 80% of our equity in our Health Care Services segment pursuant to the Purchase Agreement with HCA Healthcare, which transaction is expected to occur in the early second half of 2021. Upon closing, we expect that the results and financial position of our Health Care Services segment will be deconsolidated from our financial statements.

~~Operating Results -~~ Management ~~Services Segment~~

Fees.

~~The following table summarizes the operating results and data for our Management Services segment for the three months ended March 31, 2021 and 2020.~~

(in thousands, except communities and units) Three Months Ended
March 31, Increase (Decrease)
2021 2020 Amount Percent
Management fees $ 8,566 $ 108,715 $ (100,149) (92.1) %
Reimbursed costs incurred on behalf of managed communities $ 65,794 $ 122,717 $ (56,923) (46.4) %
Costs incurred on behalf of managed communities $ 65,794 $ 122,717 $ (56,923) (46.4) %
Number of communities (period end) 45 80 (35) (43.8) %
Number of units (period end) 6,652 11,033 (4,381) (39.7) %
Total average units 8,258 13,325 (5,067) (38.0) %

The decrease in management fees was primarily attributable to $100.0 million of management agreement termination fees recognized for the three months ended March 31, 2020 for the management agreement termination fee payment received from Healthpeak in connection with the sale of our ownership interest in the CCRC Venture. As of March 31, 2021, we have completed the transition of management arrangements on 5542 net communities since the beginning of the prior year period, generally for management arrangements on certain former unconsolidated ventures in which we sold our interest and interim management arrangements on formerly leased communities. ~~Management fees of $8.6 million for the three months ended March 31, 2021 include $4.6 million of management agreement termination fees and $2.0 million of other management fees~~

attributable to communities for which our management agreements were terminated during such period, or we expect the terminations of our management agreements to occur in the next approximately 12 months.

Reimbursed Costs Incurred on Behalf of Managed Communities and Costs Incurred on Behalf of Managed Communities. The decrease in reimbursed costs and costs incurred on behalf of managed communities was primarily attributable to terminations of management agreements subsequent to the beginning of the prior year period.

~~Operating Results - Other Income and Expense Items~~

~~The following table summarizes other income and expense items in our operating results for the three months ended March 31, 2021 and 2020.~~

(in thousands) Three Months Ended
March 31, Increase (Decrease)
2021 2020 Amount Percent
General and administrative expense $ 49,943 $ 54,595 $ (4,652) (8.5) %
Facility operating lease expense 44,418 64,481 (20,063) (31.1) %
Depreciation and amortization 83,891 90,738 (6,847) (7.5) %
Asset impairment 10,677 78,226 (67,549) (86.4) %
Interest income 421 1,455 (1,034) (71.1) %
Interest expense (48,607) (56,360) (7,753) (13.8) %
Gain (loss) on debt modification and extinguishment, net — 19,181 (19,181) NM
Equity in earnings (loss) of unconsolidated ventures (531) (1,008) 477 47.3 %
Gain (loss) on sale of assets, net 1,112 372,839 (371,727) (99.7) %
Other non-operating income (loss) 1,644 2,662 (1,018) (38.2) %
Benefit (provision) for income taxes (752) 15,828 (16,580) NM

General and Administrative Expense. The decrease in general and administrative expense was primarily attributable to decreases in compensation costs as a ~~reduction~~result of reductions in our corporate headcount ~~as we scaled our general~~related to the HCS Sale, transaction and ~~administrative~~organizational restructuring costs, ~~in connection with community dispositions~~ and ~~a reduction in our travel costs as we intentionally scaled back such activities.~~non-cash stock-based compensation expense. General and administrative expense includes transaction and organizational restructuring costs of ~~$1.9~~$0.4 million and ~~$2.0~~$1.9 million for the three months ended March 31, ~~2021~~2022 and ~~2020,~~2021, respectively. Transaction costs include those directly related to acquisition, disposition, financing and leasing activity, and ~~stockholder relations advisory matters, and~~ are primarily comprised of legal, finance, consulting, professional fees, and other ~~third party~~third-party costs. Organizational restructuring costs include those related to our efforts to reduce general and administrative expense and our senior leadership changes, including severance costs.

Facility Operating Lease Expense.The decrease in facility operating lease expense was primarily due to expense reductions for lease incentives received for capital expenditures since the ~~Ventas lease portfolio restructuring during~~beginning of the prior year period, expense reductions subsequent to the recognition of impairment of operating lease right-of-use assets since the beginning of the prior year period, and lease termination activity since the beginning of the prior year period.

Depreciation and Amortization. The ~~decrease~~increase in depreciation and amortization expense was primarily due to ~~disposition activity since~~ the ~~beginning~~completion of ~~the prior year period~~community renovations, apartment upgrades, and ~~leasehold improvements~~other major building infrastructure projects for ~~certain~~ leased communities ~~becoming fully depreciated~~ since the beginning of the prior year period.

Asset Impairment. During the ~~current year period,~~three months ended March 31, 2022 and 2021, we recorded $9.1 million and $10.7 million, respectively, of non-cash impairment charges, primarily for right-of-use assets for certain leased communities with decreased future cash flow estimates as a result of the COVID-19 pandemic and ~~for natural disaster related~~ property damage ~~sustained~~ at certain communities during the period. During the prior year period, we recorded $78.2 million of non-cash impairment charges, primarily for right-of-use assets for certain leased communities with decreased future cash flow estimates as a result of the COVID-19 pandemic.communities.

Interest ~~Expense.~~ Expense. The decrease in interest expense was primarily due to increases in the fair value of interest rate derivatives, reflecting the impact of increases in forward interest rates, and a decrease in interest expense on long-term debt, reflecting the impact of a lower weighted average interest ~~rates, and the acquisition~~rate for our fixed interest rate debt obligations as a result of ~~communities previously subject to~~ financing ~~leases~~activities since the beginning of the prior year period.

~~Gain (Loss) on Sale of Assets, Net.~~ The decrease in gain on sale of assets, net was primarily due to a $370.7 million gain on sale of assets recognized for the sale of our ownership interest in the CCRC Venture during the prior year period.

3729

Equity in Earnings (Loss) of Unconsolidated Ventures. The increase in equity in loss of unconsolidated ventures was primarily for our share of the operating results of the new HCS Venture, including the impact of organizational restructuring costs for adjustments to its operational structure.

Benefit (Provision) for Income Taxes. The difference between our effective tax rate for the three months ended March 31, 2022 and 2021 ~~and 2020~~ was ~~primarily~~ due to the increase in the net deferred tax ~~impact~~benefit recognized on operational losses and an increase in the tax benefit recognized on the vesting of restricted stock units and restricted stock awards due to an increase in our stock price during the ~~multi-part transaction with Healthpeak that occurred~~three months ended March 31, 2022.

We recorded an aggregate deferred federal, state, and local tax benefit of $24.9 million, which was offset by an increase in the valuation allowance of $22.6 million in the three months ended March 31, 2020. The impact represented the tax expense recorded on the gain of the sale of our interest in the CCRC Venture offset by a decrease in the valuation allowance that was a direct result of the multi-part transaction with Healthpeak.

2022. We recorded an aggregate deferred federal, state, and local tax benefit of $25.2 million as a result of the operating loss for the three months ended March 31, 2021, which was offset by an increase in the valuation allowance of $25.5 million. We recorded an aggregate deferred federal, state, and local tax expense of $90.9 million, of which, $2.2 million was a result of the benefit on our operating loss for the three months ended March 31, 2020. The benefit was offset by $93.1 million of tax expense that was recorded on the sale of our interest in the CCRC Venture. The tax expense was offset by a decrease in the valuation allowance of $112.6 million.

We evaluate our 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. Our valuation allowance as of March 31, ~~2021~~2022 and December 31, ~~2020~~2021 was ~~$406.5~~$390.6 million and ~~$381.0~~$368.0 million, respectively.

Liquidity and Capital Resources

This section includes the non-GAAP liquidity measure Adjusted Free Cash Flow. See "Non-GAAP Financial Measures" below for our definition of the measure and other important information regarding such measure, including reconciliations to the most comparable GAAP measure.

Liquidity ~~and Indebtedness~~

The following is a summary of cash flows from operating, investing, and financing activities, as reflected in the condensed consolidated statements of cash flows, and our Adjusted Free Cash Flow:


		Three Months Ended March 31,				Increase (Decrease)					Three Months Ended March 31,				Increase (Decrease)
(in thousands)	(in thousands)	2021		2020		Amount		Percent		(in thousands)	2022		2021		Amount		Percent
Net cash provided by (used in) operating activities	Net cash provided by (used in) operating activities	$	(23,857)	$	57,479	$	(81,336)	NM		Net cash provided by (used in) operating activities	$	(23,255)	$	(23,857)	$	(602)	(2.5)	%
Net cash provided by (used in) investing activities	Net cash provided by (used in) investing activities	(3,806)		(247,927)		(244,121)		(98.5)	%	Net cash provided by (used in) investing activities	(36,163)		(3,806)		32,357		NM
Net cash provided by (used in) financing activities	Net cash provided by (used in) financing activities	(35,562)		347,250		(382,812)		NM		Net cash provided by (used in) financing activities	(403)		(35,562)		(35,159)		(98.9)	%
Net increase (decrease) in cash, cash equivalents, and restricted cash	Net increase (decrease) in cash, cash equivalents, and restricted cash	(63,225)		156,802		(220,027)		NM		Net increase (decrease) in cash, cash equivalents, and restricted cash	(59,821)		(63,225)		(3,404)		(5.4)	%
Cash, cash equivalents, and restricted cash at beginning of period	Cash, cash equivalents, and restricted cash at beginning of period	465,148		301,697		163,451		54.2	%	Cash, cash equivalents, and restricted cash at beginning of period	438,314		465,148		(26,834)		(5.8)	%
Cash, cash equivalents, and restricted cash at end of period	Cash, cash equivalents, and restricted cash at end of period	$	401,923	$	458,499	$	(56,576)	(12.3)	%	Cash, cash equivalents, and restricted cash at end of period	$	378,493	$	401,923	$	(23,430)	(5.8)	%
Adjusted Free Cash Flow	Adjusted Free Cash Flow	$	(50,674)	$	5,182	$	(55,856)	NM		Adjusted Free Cash Flow	$	(53,493)	$	(50,674)	$	(2,819)	(5.6)	%

The ~~change~~decrease in net cash ~~provided by (used in)~~used in operating activities was attributable primarily to ~~the $100.0 million management agreement termination fee payment received from Healthpeak~~an increase in ~~connection with the sale of our ownership interest in the CCRC Venture in the prior year period~~same community revenue and a decrease in ~~same community revenue~~general and administrative expense compared to the prior year period. These changes were partially offset by an increase in same community facility operating expense and a decrease in lessor reimbursements for capital expenditures for operating leases.

The increase in net cash ~~payments for accounts payable~~used in investing activities was primarily attributable to a $46.1 million increase in purchases of marketable securities and ~~accrued expenses~~a $3.1 million decrease in net proceeds from the sale of assets compared to the prior year period. These changes were partially offset by an $11.0 million increase in proceeds from sales and maturities of marketable securities and a $5.1 million decrease in investments in unconsolidated ventures compared to the prior year period.

The decrease in net cash used in ~~investing~~financing activities was primarily attributable to ~~$446.7~~a $28.5 million decrease in repayment of ~~cash paid for the acquisition of communities during the prior year period,~~debt and financing lease obligations and a ~~$68.0~~$6.7 million increase in debt proceeds from sales and maturities of marketable securities, a $29.0 million decrease in cash paid for capital expenditures, and a $9.5 million decrease in purchases of marketable securities compared to the prior year period. These changes were partially offset by a $300.9 million decrease in net proceeds from the sale of assets compared to the prior year period.

The change in net cash provided by (used in) financing activities was primarily attributable to a $453.2 million decrease in debt proceeds compared to the prior year period and $166.4 million of draws on our former secured credit facility during the prior year period. These changes were partially offset by a $213.3 million decrease in repayment of debt and financing lease

~~obligations, an $18.1 million decrease in cash paid for share repurchases, and a $5.7 million decrease in cash paid for financing costs compared to the prior year period.~~

~~The decrease in~~ Adjusted Free Cash Flow was primarily attributable to ~~the change in net cash provided by (used in) operating activities, partially offset by a $33.1~~an $11.9 million ~~decrease~~increase in non-development capital expenditures, net and an increase in same community facility operating expense compared to the prior year period. These

changes were partially offset by an increase in same community revenue and a decrease in general and administrative expense compared to the prior year period.

Our principal sources of liquidity have historically been from:

•cash balances on hand, cash equivalents, and marketable securities;

•cash flows from operations;

•proceeds from our credit facilities;

•funds generated through unconsolidated venture arrangements;

•proceeds from mortgage financing or refinancing of various assets;

•funds raised in the debt or equity markets; and

•proceeds from the disposition of assets.

Over the longer-term, we expect to continue to fund our business through these principal sources of liquidity. ~~During 2020, we~~We also have received pandemic-related government relief, including cash grants and advanced Medicare payments, ~~under programs expanded or created under the CARES Act,~~ and we have elected to utilize the ~~CARES Act~~pandemic-related payroll tax deferral program, each as described above. As described above, we expect to sell 80% of our equity in our Health Care Services segment pursuant to the Purchase Agreement with HCA Healthcare, which transaction is expected to occur in the early second half of 2021, for expected net cash proceeds of approximately $300 million, subject to the timing of closing with respect to the adjustments set forth in the Purchase Agreement described above. We are evaluating the use of the net proceeds from the pending Health Care Services transaction.program.

Our liquidity requirements have historically arisen from:

•working capital;

•operating costs such as ~~employee compensation and related benefits,~~labor costs, severance costs, general and administrative expense, and supply costs;

•debt, interest, and lease payments;

•acquisition consideration, lease termination and restructuring costs, and transaction and integration costs;

•capital expenditures and improvements, including the expansion, ~~renovation, redevelopment,~~repositioning, redeveloping, and ~~repositioning~~major renovation of our current communities and the development of new communities;

•cash collateral required to be posted in connection with our financial instruments and insurance programs;

•purchases of common stock under our share repurchase authorizations;

•other corporate initiatives (including integration, information systems, branding, and other strategic projects); and

•prior to 2009, dividend payments.

Over the near-term, we expect that our liquidity requirements will primarily arise from:

•working capital;

•operating costs such as ~~employee compensation and related benefits, severance~~labor costs, general and administrative expense, and supply costs, including those related to the COVID-19 pandemic;

•debt, interest, and lease payments;

•payment of deferred payroll taxes under the CARES Act;

•~~recoupment of payments received under the Accelerated and Advance Payment Program;~~

•acquisition consideration;

•transaction costs and ~~expansion of~~investment in our healthcare ~~services;~~and wellness initiatives;

•capital expenditures and improvements, including the expansion, renovation, redevelopment, and repositioning of our existing communities;

•cash collateral required to be posted in connection with our financial instruments and insurance programs; and

•other corporate initiatives (including information systems and other strategic projects).

We are highly leveraged and have significant debt and lease obligations. As of March 31, ~~2021,~~2022, we have three principal corporate-level debt obligations and credit facilities:

•$230.0 million principal amount of 2.00% convertible senior notes due 2026.

•$80.0 million secured credit facility maturing January 2024, under which $72.6 million of letters of credit and no cash borrowings have been issued as of such date.

•Separate secured letter of credit facility providing for up to $15.0 million of letters of credit as of March 31, 2022, under which $13.6 million had been issued as of that date.

As of March 31, 2022, we had ~~$3.9~~$3.8 billion of debt outstanding, at a weighted average interest rate of ~~3.6%~~3.5%. As of such date, ~~97.9%~~93.7%, or ~~$3.8~~$3.6 billion, of our total debt obligations represented non-recourse property-level mortgage financings. As of March 31, ~~2021, $1.4~~2022, $1.2 billion of our long-term debt is variable rate debt subject to interest rate cap agreements. The remaining ~~$128.0~~$226.9 million of our long-term variable rate debt is not subject to any interest rate cap agreements. ~~As of March 31, 2021, $69.9 million of letters of~~We are subject to market risks from changes in interest rates charged on our credit facilities and ~~no cash borrowings~~other variable rate indebtedness. Refer to “Item 3. Quantitative and Qualitative Disclosures About Market Risk” for further information on our interest rate risk.

3931

were outstanding under our $80.0 million secured credit facility. We also had a separate secured letter of credit facility providing up to $15.0 million of letters of credit as of March 31, 2021 under which $13.6 million had been issued as of that date.

As of March 31, ~~2021,~~2022, we had ~~$1.5~~$1.4 billion of operating and financing lease obligations. For the twelve months ending March 31, ~~2022,~~2023, we will be required to make approximately ~~$268.2~~$273.7 million of cash lease payments in connection with our existing operating and financing ~~leases (excluding minimum lease payments related to $9.7 million of operating lease obligations included within liabilities held for sale).~~leases.

Total liquidity of ~~$438.9~~$475.9 million as of March 31, ~~2021~~2022 included ~~$304.0~~$289.2 million of unrestricted cash and cash equivalents (excluding restricted cash ~~and lease security deposits~~ of ~~$100.7 million in the aggregate) and $134.9~~$89.2 million), $179.3 million of marketable ~~securities.~~securities, and $7.4 million of availability on our secured credit facility. Total liquidity as of March 31, ~~2021~~2022 decreased ~~$136.6~~$60.9 million from total liquidity of ~~$575.5~~$536.8 million as of December 31, ~~2020.~~2021. The decrease was primarily attributable to ~~the~~ negative ~~$50.7~~$53.5 million of Adjusted Free Cash Flow and ~~$38.3~~$9.7 million of payments of mortgage ~~debt during the three months ended March 31, 2021.~~debt.

As of March 31, ~~2021,~~2022, our current liabilities exceeded current assets by ~~$42.4~~$138.0 million. Included in our current liabilities is ~~$224.9~~$207.8 million of the current portion of ~~long term debt which we have historically refinanced in the normal course.~~long-term debt. Our current liabilities also include ~~$160.4~~$176.4 million of the current portion of operating and financing lease obligations, for which the associated right-of-use assets are excluded from current assets on our condensed consolidated balance sheets.

We currently estimate ~~that~~our historical principal sources of liquidity, primarily our cash flows from operations, together with cash balances on hand, cash equivalents, and marketable securities ~~and proceeds from the pending sale of 80% of our equity in our Health Care Services segment~~ will be sufficient to fund our liquidity needs for at least the next 12 months.

We continue to seek opportunities to ~~enhance~~preserve and ~~preserve~~enhance our liquidity, including through increasing our RevPAR, maintaining expense discipline, ~~and increasing occupancy,~~ continuing to evaluate our financing structure and the state of debt markets, monetizing non-strategic or underperforming owned assets, and seeking further government-sponsored financial relief related to the ~~COVID-19~~ pandemic. There is no assurance that debt financing will continue to be available on terms consistent with our expectations or at all, or that our efforts will be successful in seeking further government-sponsored financial relief or regarding the amount of, or conditions required to qualify for, any such ~~relief, or that the closing of the pending transaction will be completed in accordance with our expectations, or at all, or generate cash proceeds to us in the amount we anticipate.~~relief.

Our actual liquidity and capital funding requirements depend on numerous factors, including our operating results, our actual level of capital expenditures, general economic conditions, and the cost of capital, as well as other factors described in "Item 1A. Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, ~~2020~~2021 filed with the SEC on February ~~25, 2021. Disruptions in the financial markets may have an adverse impact on our liquidity by making it more difficult for us to obtain financing or refinancing of various assets. Since the~~15, 2022. The amount of mortgage financing available for our communities is generally dependent on their appraised values and performance. In addition, our inability to satisfy underwriting criteria for individual communities may limit our access to our historical lending sources for such communities, including Fannie Mae and Freddie Mac. Due to lower operating performance ~~decreases in their appraised values, including due~~of our communities, generally, resulting from the COVID-19 pandemic, during 2021 we sought and obtained non-agency mortgage financings to ~~adverse changes in real estate market conditions, or their~~partially refinance maturing Freddie Mac and Fannie Mae indebtedness. Until our communities' performance ~~could result in available~~recovers, we plan to refinance maturities using non-agency financing, and we expect our loan proceeds from such financing generally will be insufficient to fully cover maturing mortgage ~~refinancing amounts that are less than the communities’ maturing~~ indebtedness. IfAs of March 31, 2022, we ~~are unable~~have no remaining 2022 mortgage debt maturities. Our inability to obtain refinancing proceeds sufficient to cover 2023 and later maturing indebtedness could adversely impact our liquidity, ~~could be adversely impacted~~ and we may cause us to seek additional alternative sources of financing, which may be less attractive or unavailable. Increases in market interest rates may increase our future borrowing costs for any new financing. Shortfalls in cash flows from estimated operating results or other principal sources of liquidity may have an adverse impact on our ability to fund our planned capital expenditures, or to pursue any acquisition, investment, development, or potential lease restructuring opportunities that we identify, or to fund investments to support our strategy. In order to continue some of these activities at historical or planned levels, we may incur additional indebtedness or lease financing to provide additional funding. There can be no assurance that any such additional financing will be available or on terms that are acceptable to us.

Capital Expenditures

Our capital expenditures are comprised of community-level, corporate, and development capital expenditures. Community-level capital expenditures include recurring expenditures (routine maintenance of communities over $1,500 per occurrence and for unit turnovers over $500 per unit) and community renovations, apartment upgrades, and other major building infrastructure projects. Corporate capital expenditures include those for information technology systems and equipment, the expansion of our support platform ~~and healthcare services programs,~~ and the remediation or replacement of assets as a result of casualty losses. Development capital expenditures include community expansions, major community redevelopment and repositioning projects, and the development of new communities.

With our development capital expenditures program, we intend to expand, renovate, redevelop, and reposition certain of our communities where economically advantageous. Certain of our communities may benefit from additions and expansions or

from adding a new level of service for residents to meet the evolving needs of our customers. These development projects include converting space from one level of care to another, reconfiguration of existing units, the addition of services that are not currently present, or physical plant modifications.

The following table summarizes our capital expenditures for the three months ended March 31, ~~2021~~2022 for our consolidated ~~business:~~business.


(in millions)
Community-level capital expenditures, net(1)	$	~~21.9~~33.5
Corporate capital expenditures, net(2)	~~5.6~~5.8
Non-development capital expenditures, net(3)	~~27.5~~39.3
Development capital expenditures, net	~~1.5~~0.9
Total capital expenditures, net	$	~~29.0~~40.2

(1)Reflects the amount invested, net of lessor reimbursements of ~~$9.0~~$4.7 million.

(2)Includes ~~$2.7~~$0.3 million of remediation costs at our communities resulting from natural disasters.

(3)Amount is included in Adjusted Free Cash Flow.

In the aggregate, we expect our full-year ~~2021~~2022 non-development capital expenditures, net of anticipated lessor reimbursements, to be approximately ~~$140~~$160.0 million. In addition, we expect our full-year ~~2021~~2022 development capital expenditures to be approximately ~~$10~~$20.0 million, net of anticipated lessor reimbursements, and such projects include those for expansion, repositioning, redeveloping, and major renovation of selected existing senior living communities. We anticipate that our ~~2021~~2022 capital expenditures will be funded from cash on hand, cash equivalents, marketable securities, cash flows from operations, and reimbursements from lessors.

Funding our planned capital expenditures, pursuing any acquisition, investment, development, or potential lease restructuring opportunities that we identify, or funding investments to support our strategy may require additional capital. We expect to continue to assess our financing alternatives periodically and access the capital markets opportunistically. If our existing resources are insufficient to satisfy our liquidity requirements, we may need to sell additional equity or debt securities. Any such sale of additional equity securities will dilute the percentage ownership of our existing stockholders, and we cannot be certain that additional public or private financing will be available in amounts or on terms acceptable to us, if at all. Any newly issued equity securities may have rights, preferences, or privileges senior to those of our common stock. If we are unable to raise additional funds or obtain them on terms acceptable to us, we may have to delay or abandon our plans.

Credit Facilities

On December 11, 2020, we entered into a revolving credit agreement with Capital One, National Association, as administrative agent and lender and the other lenders from time to time parties thereto. The agreement provides a commitment amount of ~~$80~~up to $80.0 million which can be drawn in cash or as letters of credit. The agreement matures on January 15, 2024. Amounts drawn under the facility will bear interest at 30-day ~~LIBOR~~London Interbank Offer Rate ("LIBOR") plus an applicable margin which was 2.75% as of March 31, ~~2021.~~2022. Additionally, a quarterly commitment fee of 0.25% per annum was applicable on the unused portion of the facility as of March 31, ~~2021.~~2022. The revolving credit facility is currently secured by first priority mortgages and negative pledges on certain of our ~~communities and restricted cash deposits.~~communities. Available capacity under the facility will vary from time to time based upon borrowing base calculations related to the appraised value and performance of the communities securing the credit facility and the variable interest rate of the credit facility.

As of March 31, ~~2021, $69.9~~2022, $72.6 million of letters of credit and no cash borrowings were outstanding under our $80.0 million secured credit ~~facility.~~facility and the facility had $7.4 million of availability. We also had a separate secured letter of credit facility providing up to $15.0 million of letters of credit as of March 31, ~~2021~~2022 under which $13.6 million had been issued as of that date.

Long-Term Leases

As of March 31, ~~2021,~~2022, we operated ~~301~~298 communities under long-term leases ~~(235~~(231 operating leases and 6667 financing leases). The substantial majority of our lease arrangements are structured as master leases. Under a master lease, numerous communities are leased through an indivisible lease. We typically guarantee the performance and lease payment obligations of our subsidiary lessees under the master leases. Due to the nature of such master leases, it is difficult to restructure the composition of our

leased portfolios or economic terms of the leases without the consent of the applicable landlord. In addition, 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 leased property revenue. We are responsible for all operating costs, including repairs, property taxes, and insurance. The lease terms 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 us to maintain prescribed minimum liquidity, net worth, and stockholders' equity levels and lease coverage ratios. ~~In addition, our~~Our lease documents generally contain non-financial covenants, such as those requiring us to comply with Medicare or Medicaid provider requirements and maintain insurance coverage. Certain leases contain cure provisions, which generally allow us to post an additional lease security deposit if the required covenant is not met.

~~In addition, certain~~Certain of our master leases contain radius restrictions, which limit our ability to own, develop, or acquire new communities within a specified distance from certain existing communities covered by such agreements. These radius restrictions could negatively affect our ability to expand, develop, or acquire senior housing communities and operating companies.

For the three months ended March 31, ~~2021,~~2022, our cash lease payments for our operating leases and financing leases were ~~$53.9~~$51.4 million and ~~$16.2~~$17.5 million, respectively. For the twelve months ending March 31, ~~2022,~~2023, we will be required to make ~~$268.2~~$273.7 million of cash lease payments in connection with our existing operating and financing leases (excluding minimum lease payments related to $9.7 million of operating lease obligations included within liabilities held for sale). Our capital expenditure plans for 2021 include required minimum spend of approximately $18 million for capital expenditures under certain of our community leases. Additionally, we are required to spend an average of approximately $26 million per year for each of the following four years and approximately $17 million thereafter under the initial lease terms of such leases.

Debt and Lease Covenants

Certain of our debt and lease documents contain restrictions and financial covenants, such as those requiring us to maintain prescribed minimum liquidity, net worth, and stockholders' equity levels and debt service and lease coverage ratios, and requiring us not to exceed prescribed leverage ratios, in each case on a consolidated, portfolio-wide, multi-community, single-community, and/or entity basis. Net worth is generally calculated as stockholders' equity as calculated in accordance with GAAP, and in certain circumstances, reduced by intangible assets or liabilities or increased by deferred gains from sale-leaseback transactions and deferred entrance fee revenue. The debt service and lease coverage ratios are generally calculated as revenues less operating expenses, including an implied management fee and a reserve for capital expenditures, divided by the debt (principal and interest) or lease payment. In addition, our debt and lease documents generally contain non-financial covenants, such as those requiring us to comply with Medicare or Medicaid provider requirements and maintain insurance coverage.

Our failure to comply with applicable covenants could constitute an event of default under the applicable debt or lease documents. Many of our 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).

Furthermore, our debt and leases are secured by our communities and, in certain cases, a guaranty by us and/or one or more of our subsidiaries. Therefore, if an event of default has occurred under any of our debt or lease documents, subject to cure provisions in certain instances, the respective lender or lessor would have the right to declare all the related outstanding amounts of indebtedness or cash lease obligations immediately due and payable, to foreclose on our mortgaged communities, to terminate our leasehold interests, to foreclose on other collateral securing the indebtedness and leases, to discontinue our operation of leased communities, and/or to pursue other remedies available to such lender or lessor. Further, an event of default could trigger cross-default provisions in our other debt and lease documents (including documents with other lenders or lessors). We cannot provide assurance that we would be able to pay the debt or lease obligations if they became due upon acceleration following an event of default.

As of March 31, ~~2021,~~2022, we are in compliance with the financial covenants of our debt agreements and long-term leases.

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~~Contractual Commitments~~

Significant ongoing commitments consist primarily of leases, debt, and certain other long-term liabilities. For a summary and complete presentation and description of our ongoing commitments and contractual obligations, see the "Contractual Commitments" section of Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2020 filed with the SEC on February 25, 2021. There have been no material changes outside the ordinary course of business in our contractual commitments during the three months ended March 31, 2021.

~~Off-Balance Sheet Arrangements~~

As of March 31, 2021, we do not have an interest in any off-balance sheet arrangements as defined in Item 303(a)(4) of Regulation S-K that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources that is material to investors.

Non-GAAP Financial Measures

This Quarterly Report on Form 10-Q contains the financial measures Adjusted EBITDA and Adjusted Free Cash Flow, which are not calculated in accordance with U.S. generally accepted accounting principles ("GAAP"). Presentations of these non-GAAP financial measures are intended to aid investors in better understanding the factors and trends affecting our performance and liquidity. However, investors should not consider these non-GAAP financial measures as a substitute for financial measures determined in accordance with GAAP, including net income (loss), income (loss) from operations, or net cash provided by (used in) operating activities. We caution investors that amounts presented in accordance with our definitions of these non-GAAP financial measures may not be comparable to similar measures disclosed by other companies because not all companies calculate non-GAAP measures in the same manner. We urge investors to review the following reconciliations of these non-GAAP financial measures from the most comparable financial measures determined in accordance with GAAP.

Adjusted EBITDA

Adjusted EBITDA is a non-GAAP performance measure that we define as net income (loss) excluding: benefit/provision for income taxes, non-operating income/expense items, and depreciation and amortization; and further adjusted to exclude income/expense associated with non-cash, non-operational, transactional, cost reduction, or organizational restructuring items that management does not consider as part of our underlying core operating performance and that management believes impact the comparability of performance between periods. For the periods presented herein, such other items include non-cash impairment charges, gain/loss on facility operating lease termination, ~~and modification,~~ operating lease expense adjustment, ~~amortization of deferred gain, change in future service obligation,~~ non-cash stock-based compensation expense, and transaction and organizational restructuring costs. Transaction costs include those directly related to acquisition, disposition, financing, and leasing activity, and ~~stockholder relations advisory matters, and~~ are primarily comprised of legal, finance, consulting, professional fees, and other ~~third party~~third-party costs. Organizational restructuring costs include those related to our efforts to reduce general and administrative expense and our senior leadership changes, including severance.

We believe that presentation of Adjusted EBITDA as a performance measure is useful to investors because (i) it is one of the metrics used by our management for budgeting and other planning purposes, to review our historic and prospective core operating performance, and to make day-to-day operating decisions; (ii) it provides an assessment of operational factors that management can impact in the short-term, namely revenues and the controllable cost structure of the organization, by eliminating items related to our financing and capital structure and other items that management does not consider as part of our underlying core operating performance and that management believes impact the comparability of performance between periods; and (iii) we believe that this measure is used by research analysts and investors to evaluate our operating results and to value companies in our industry.

Adjusted EBITDA has material limitations as a performance measure, including: (i) excluded interest and income tax are necessary to operate our business under our current financing and capital structure; (ii) excluded depreciation, amortization, and impairment charges may represent the wear and tear and/or reduction in value of our communities, goodwill, and other assets and may be indicative of future needs for capital expenditures; and (iii) we may incur income/expense similar to those for which adjustments are made, such as gain/loss on sale of assets, facility operating lease termination, ~~and modification,~~ or debt modification and extinguishment, non-cash stock-based compensation expense, and transaction and other costs, and such income/expense may significantly affect our operating results.

4335

The table below reconciles Adjusted EBITDA from net income (loss).


		Three Months Ended March 31,				Three Months Ended March 31,
(in thousands)	(in thousands)	2021		2020			(in thousands)	2022		2021
Net income (loss)	Net income (loss)	$	(108,303)	$	369,497		Net income (loss)	$	(100,032)	$	(108,303)
Provision (benefit) for income taxes	Provision (benefit) for income taxes	752		(15,828)			Provision (benefit) for income taxes	(1,976)		752
Equity in (earnings) loss of unconsolidated ventures	Equity in (earnings) loss of unconsolidated ventures	531		1,008			Equity in (earnings) loss of unconsolidated ventures	4,894		531
Loss (gain) on debt modification and extinguishment, net		—		(19,181)

Loss (gain) on sale of assets, net	Loss (gain) on sale of assets, net	(1,112)		(372,839)			Loss (gain) on sale of assets, net	294		(1,112)
Other non-operating (income) loss	Other non-operating (income) loss	(1,644)		(2,662)			Other non-operating (income) loss	27		(1,644)
Interest expense	Interest expense	48,607		56,360			Interest expense	43,354		48,607
Interest income	Interest income	(421)		(1,455)			Interest income	(95)		(421)
Income (loss) from operations	Income (loss) from operations	(61,590)		14,900			Income (loss) from operations	(53,534)		(61,590)
Depreciation and amortization	Depreciation and amortization	83,891		90,738			Depreciation and amortization	85,684		83,891
Asset impairment	Asset impairment	10,677		78,226			Asset impairment	9,075		10,677

Operating lease expense adjustment	Operating lease expense adjustment	(4,664)		(6,733)			Operating lease expense adjustment	(8,307)		(4,664)
Non-cash stock-based compensation expense	Non-cash stock-based compensation expense	4,783		5,957			Non-cash stock-based compensation expense	3,885		4,783
Transaction and organizational restructuring costs	Transaction and organizational restructuring costs	1,884		1,981			Transaction and organizational restructuring costs	373		1,884
Adjusted EBITDA(1)	Adjusted EBITDA(1)	$	34,981	$	185,069		Adjusted EBITDA(1)	$	37,176	$	34,981

(1) Adjusted EBITDA ~~includes:~~

•~~$10.7~~includes $0.4 million and $10.7 million benefit for the three months ended March 31, 2022 and 2021, respectively, of government grants and credits recognized in other operating ~~income~~

•$100.0 million benefit for the three months ended March 31, 2020 for the management agreement termination fee payment received from Healthpeak in connection with the sale of our ownership interest in the CCRC Ventureincome.

Adjusted Free Cash Flow

Adjusted Free Cash Flow is a non-GAAP liquidity measure that we define as net cash provided by (used in) operating activities before: distributions from unconsolidated ventures from cumulative share of net earnings, changes in prepaid insurance premiums financed with notes payable, changes in operating lease ~~liability~~assets and liabilities for lease termination, cash paid/received for gain/loss on facility operating lease termination, ~~and modification,~~ and lessor capital expenditure reimbursements under operating leases; plus: property insurance proceeds and proceeds from refundable entrance fees, net of refunds; less: non-development capital expenditures and payment of financing lease obligations. Non-development capital expenditures are comprised of corporate and community-level capital expenditures, including those related to maintenance, renovations, upgrades, and other major building infrastructure projects for our communities and is presented net of lessor reimbursements. Non-development capital expenditures do not include capital expenditures for: community expansions, major community redevelopment and repositioning projects, and the development of new communities.

We believe that presentation of Adjusted Free Cash Flow as a liquidity measure is useful to investors because (i) it is one of the metrics used by our management for budgeting and other planning purposes, to review our historic and prospective sources of operating liquidity, and to review our ability to service our outstanding indebtedness, pay dividends to stockholders, engage in share repurchases, and make capital expenditures, including development capital expenditures; and (ii) it provides an indicator to management to determine if adjustments to current spending decisions are needed.

Adjusted Free Cash Flow has material limitations as a liquidity measure, including: (i) it does not represent cash available for dividends, share repurchases, or discretionary expenditures since certain non-discretionary expenditures, including mandatory debt principal payments, are not reflected in this measure; (ii) the cash portion of non-recurring charges related to gain/loss on facility lease termination generally represent charges/gains that may significantly affect our liquidity; and (iii) the impact of timing of cash expenditures, including the timing of non-development capital expenditures, limits the usefulness of the measure for short-term comparisons.

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The table below reconciles Adjusted Free Cash Flow from net cash provided by (used in) operating activities.


		Three Months Ended March 31,				Three Months Ended March 31,
(in thousands)	(in thousands)	2021		2020			(in thousands)	2022		2021
Net cash provided by (used in) operating activities	Net cash provided by (used in) operating activities	$	(23,857)	$	57,479		Net cash provided by (used in) operating activities	$	(23,255)	$	(23,857)
Net cash provided by (used in) investing activities	Net cash provided by (used in) investing activities	(3,806)		(247,927)			Net cash provided by (used in) investing activities	(36,163)		(3,806)
Net cash provided by (used in) financing activities	Net cash provided by (used in) financing activities	(35,562)		347,250			Net cash provided by (used in) financing activities	(403)		(35,562)
Net increase (decrease) in cash, cash equivalents, and restricted cash	Net increase (decrease) in cash, cash equivalents, and restricted cash	$	(63,225)	$	156,802		Net increase (decrease) in cash, cash equivalents, and restricted cash	$	(59,821)	$	(63,225)

Net cash provided by (used in) operating activities	Net cash provided by (used in) operating activities	$	(23,857)	$	57,479		Net cash provided by (used in) operating activities	$	(23,255)	$	(23,857)

Distributions from unconsolidated ventures from cumulative share of net earnings							Distributions from unconsolidated ventures from cumulative share of net earnings	(561)		—
Changes in prepaid insurance premiums financed with notes payable	Changes in prepaid insurance premiums financed with notes payable	12,985		17,434			Changes in prepaid insurance premiums financed with notes payable	16,629		12,985

Changes in assets and liabilities for lessor capital expenditure reimbursements under operating leases	Changes in assets and liabilities for lessor capital expenditure reimbursements under operating leases	(7,563)		(4,088)			Changes in assets and liabilities for lessor capital expenditure reimbursements under operating leases	(1,490)		(7,563)
Non-development capital expenditures, net	Non-development capital expenditures, net	(27,450)		(60,556)			Non-development capital expenditures, net	(39,326)		(27,450)
Payment of financing lease obligations	Payment of financing lease obligations	(4,789)		(5,087)			Payment of financing lease obligations	(5,490)		(4,789)
Adjusted Free Cash Flow(1)	Adjusted Free Cash Flow(1)	$	(50,674)	$	5,182		Adjusted Free Cash Flow(1)	$	(53,493)	$	(50,674)

(1) Adjusted Free Cash Flow ~~includes transaction and organizational restructuring costs of $1.9 million and $2.0 million for the three months ended March 31, 2021 and 2020, respectively. Additionally, Adjusted Free Cash Flow~~ includes:

•$~~1.7~~0.8 million and $1.7 million benefit for the three months ended March 31, 2022 and 2021, respectively, from ~~Provider Relief Funds and other~~ government grants ~~accepted~~and credits received

•$~~100.0~~1.8 million ~~benefit~~recoupment of accelerated/advanced Medicare payments for the three months ended March 31, ~~2020 for the management agreement termination fee payment received from Healthpeak in connection with the sale of our ownership interest in the CCRC Venture~~2022

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are subject to market risks from changes in interest rates charged on our credit facilities and other ~~variable-rate~~variable rate indebtedness. The impact on earnings and the value of our long-term debt are subject to change as a result of movements in market rates and prices. As of March 31, ~~2021, we had~~2022, 62.0%, or $2.4 billion, of our long-term debt had a weighted average fixed interest rate ~~debt and~~of 3.93%. As of March 31, 2022, we had $1.5 billion of long-term variable rate ~~debt. As of March 31, 2021, our total fixed-rate~~ debt, ~~and variable-rate debt outstanding had~~at a weighted average interest rate of ~~3.6%~~2.76%.

In the normal course of business, we enter into certain interest rate cap agreements with major financial institutions to manage our risk above certain interest rates on variable rate debt. As of March 31, ~~2021, $1.4~~2022, $1.2 billion, or ~~35.6%~~32.1%, of our long-term debt is variable rate debt subject to interest rate cap agreements, at a weighted-average interest rate of 2.81%, and ~~$128.0~~$226.9 million, or ~~3.3%~~5.9%, of our long-term debt is variable rate debt not subject to any interest rate cap agreements. ~~Our~~Approximately 91% of our outstanding variable rate debt is indexed to LIBOR and approximately 9% of our outstanding variable rate debt is indexed to the Secured Overnight Financing Rate ("SOFR"), and accordingly our annual interest expense related to variable rate debt is directly affected by movements in ~~LIBOR.~~LIBOR or SOFR. After consideration of hedging instruments currently in place, increases in LIBOR and SOFR of 100, 200, and 500 basis points would have resulted in additional annual interest expense of ~~$15.5~~$14.9 million, ~~$30.9~~$29.9 million, and ~~$66.3~~$59.2 million, respectively. Certain of our variable rate debt instruments include springing provisions that obligate us to acquire additional interest rate caps in the event that LIBOR or SOFR increases above certain levels, and the implementation of those provisions would result in additional mitigation of interest costs.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, under the supervision of and with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined under Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this report. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer each concluded that, as of March 31, ~~2021,~~2022, our disclosure controls and procedures were effective.

4537

Changes in Internal Control over Financial Reporting

There has not been any change in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended March 31, ~~2021~~2022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

The information contained in Note 1110 to the condensed consolidated financial statements contained in Part I, Item 1 of this Quarterly Report on Form 10-Q is incorporated herein by this reference.

Item 1A. Risk Factors

There have been no material changes to the risk factors set forth in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

~~(a)Not applicable.~~

~~(b)Not applicable.~~

~~(c)~~The following table contains information regarding purchases of our common stock made during the quarter ended March 31, ~~2021~~2022 by or on behalf of the Company or any ''affiliated purchaser,'' as defined by Rule 10b-18(a)(3) of the Exchange ~~Act:~~Act.

Period
Total
Number of
Shares
Purchased (1)
Average
Price Paid
per Share Total Number of
Shares Purchased as
Part of Publicly
Announced Plans
or Programs
Approximate Dollar Value of
Shares that May Yet Be
Purchased Under the
Plans or Programs ($ in thousands) (2)
1/1/2021 - 1/31/2021 2,442 $ 5.29 — $ 44,026
2/1/2021 - 2/28/2021 741,479 5.82 — 44,026
3/1/2021 - 3/31/2021 — — — 44,026
Total 743,921 $ 5.82 —


Period	Total Number of Shares Purchased (1)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs ($ in thousands) (2)
1/1/2022 - 1/31/2022	—	$	—	—	$	44,026
2/1/2022 - 2/28/2022	594,939	6.99		—	44,026
3/1/2022 - 3/31/2022	4,817	7.05		—	44,026
Total	599,756	$	7.00	—

(1)Consists entirely of shares withheld to satisfy tax liabilities due upon the vesting of restricted stock and restricted stock units. The average price paid per share for such share withholding is based on the closing price per share on the vesting date of the restricted stock and restricted stock units or, if such date is not a trading day, the trading day immediately prior to such vesting date.

(2)On November 1, 2016, we announced that our Board of Directors had approved a share repurchase program that authorizes us to purchase up to $100.0 million in the aggregate of our common stock. The share repurchase program is intended to be implemented through purchases made from time to time using a variety of methods, which may include open market purchases, privately negotiated transactions or block trades, or by any combination of such methods, in accordance with applicable insider trading and other securities laws and regulations. The size, scope and timing of any purchases will be based on business, market and other conditions and factors, including price, regulatory and contractual requirements, and capital availability. The repurchase program does not obligate us to acquire any particular amount of common stock and the program may be suspended, modified or discontinued at any time at our discretion without prior notice. Shares of stock repurchased under the program will be held as treasury shares. As of March 31, ~~2021,~~2022, $44.0 million remained available under the repurchase program.

4638

Item 6. Exhibits


Exhibit No.						Description

2.1						Securities Purchase Agreement dated as of February 24, 2021, by and among the Company and certain of its subsidiaries and certain subsidiaries of HCA Healthcare, Inc. (incorporated by reference to Exhibit 2.1 to the Company's Current Report on Form 8-K filed on February 24, 2021 (File No. 001-32641)).*
3.1						Amended and Restated Certificate of Incorporation of the Company, as amended (incorporated by reference to Exhibit 3.1 to the Company's Quarterly Report on Form 10-Q filed on November 5, 2019 (File No. 001-32641)).
3.2						Amended and Restated Bylaws of the Company dated October 29, 2019 (incorporated by reference to Exhibit 3.3 to the Company's Current Report on Form 8-K filed on October 29, 2019 (File No. 001-32641)).
4.1						Form of Certificate for common stock (incorporated by reference to Exhibit 4.1 to the Company's Registration Statement on Form S-1 (Amendment No. 3) filed on November 7, 2005 (File No. 333-127372)).
4.2						Description of the Company's common stock (incorporated by reference to Exhibit 4.2 to the Company's Annual Report on Form 10-K filed on February 19, 2020 (File No. 001-32641)).
4.3						Indenture, dated as of October 1, 2021, by and among the Company and American Stock Transfer & Trust Company, LLC, as trustee, governing the 2.00% Convertible Senior Notes due 2026 (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on October 1, 2021 (File No. 001-32641)).
4.4


						Form of 2.00% Convertible Senior Notes due 2026 (included in Exhibit 4.3).
10.1						Amendment No. ~~1 dated effective April 15, 2021~~2 to Amended and Restated ~~Master Lease and Security Agreement~~Brookdale Senior Living Inc. 2014 Omnibus Incentive Plan (“Omnibus Incentive Plan”) effective January 26, 2022 (incorporated by ~~and between certain affiliates of~~reference to Exhibit 10.4.3 to the Company as Tenant and certain subsidiaries of Ventas as Landlord.*Company's Annual Report on Form 10-K filed on February 15, 2022 (File No. 001-32641)).
10.2						Amended and Restated Tier I Severance Pay Policy dated February 10, 2022 (incorporated by reference to Exhibit 10.17 to the Company's Annual Report on Form 10-K filed on February 15, 2022 (File No. 001-32641)).
10.3						Form of Severance Letter Under Amended and Restated Tier I Severance Pay Policy dated August 6, 2010 (applicable to Todd Kaestner)(incorporated by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q filed on August 6, 2010 (File No. 001-32641)).
10.4						Form of Restricted Stock Unit Agreement under the ~~Amended and Restated Brookdale Senior Living Inc. 2014~~ Omnibus Incentive Plan ~~(the "Omnibus Incentive Plan") (2021~~(2022 Time-Based Form for Executive Officers).
~~10.3~~						~~Form of Performance-Based Cash Award Agreement under the Omnibus Incentive Plan (2021 Performance-Based Form for Executive Officers other than CEO).~~
~~10.4~~						~~Performance-Based Cash Award Agreement dated as of February 22, 2021, by and between the Company and Lucinda M. Baier.~~
10.5						Form of ~~Letter~~Restricted Stock Unit Agreement ~~dated February 22, 2021 Providing~~under the Omnibus Incentive Plan (2022 Performance-Based Form for ~~Voluntary Forfeiture of Certain 2019 and 2020 Long-Term Incentive Awards.~~Executive Officers).
31.1						Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2						Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32						Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.SCH						Inline XBRL Taxonomy Extension Schema Document.
101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB						Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104						The cover page from the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, ~~2021,~~2022, formatted in Inline XBRL (included in Exhibit 101).
*						Schedules and exhibits have been omitted pursuant to Item 601 of Regulation S-K. The Company hereby undertakes to furnish supplementally a copy of any of the omitted schedules and exhibits upon request by the Securities and Exchange Commission.

4739

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


			BROOKDALE SENIOR LIVING INC.
			(Registrant)

			By:			/s/ Steven E. Swain
			Name:			Steven E. Swain
			Title:			Executive Vice President and Chief Financial Officer (Principal Financial Officer)
			Date:			May ~~7, 2021~~6, 2022

4840


	Three Months Ended March 31, 2021
(in thousands)	Independent Living		Assisted Living and Memory Care		CCRCs		Health Care Services		Total
Private pay	$	118,322	$	370,494	$	52,213	$	337	$	541,366
Government reimbursement	460		16,444		12,487		67,465		96,856
Other third-party payor programs	0		0		7,079		19,049		26,128
Total resident fee revenue	$	118,782	$	386,938	$	71,779	$	86,851	$	664,350

	Three Months Ended March 31, 2020
(in thousands)	Independent Living		Assisted Living and Memory Care		CCRCs		Health Care Services		Total
Private pay	$	135,290	$	440,613	$	64,703	$	170	$	640,776
Government reimbursement	572		16,866		19,405		73,689		110,532
Other third-party payor programs	0		0		10,439		20,960		31,399
Total resident fee revenue	$	135,862	$	457,479	$	94,547	$	94,819	$	782,707


	Three Months Ended March 31,
(in thousands, except for per share amounts)	2021		2020
Income attributable to common stockholders:
Net income (loss)	$	(108,285)	$	369,515

Weighted average shares outstanding - basic	184,011		184,186
Effect of dilutive securities - Unvested restricted stock, restricted stock units, and warrants	0		336
Weighted average shares outstanding - diluted	184,011		184,522

Basic earnings (loss) per common share:
Net income (loss) per share attributable to common stockholders	$	(0.59)	$	2.01

Diluted earnings (loss) per common share:
Net income (loss) per share attributable to common stockholders	$	(0.59)	$	2.00


	Three Months Ended March 31,
(in millions)	2021(1)	2020
Non-performance-based restricted stock and restricted stock units	6.2	6.9
Performance-based restricted stock and restricted stock units	0.4	1.8
Warrants	16.3	0


Proceeds from sale of CCRC Venture, net:
Investments in unconsolidated ventures	$	0	$	(14,848)
Current portion of long-term debt	0		34,706
Accrued expenses	0		(5,025)
Other liabilities	0		60,748
Loss (gain) on sale of assets, net	0		(370,745)
Net cash received	$	0	$	(295,164)


Proceeds from sale of other assets, net:
Prepaid expenses and other assets, net	$	0	$	(1,261)
Assets held for sale	(2,125)		(5,274)
Property, plant and equipment and leasehold intangibles, net	(597)		0





Other liabilities	74		(824)
Loss (gain) on sale of assets, net	(1,112)		(2,094)

Net cash received	$	(3,760)	$	(9,453)









































Supplemental Schedule of Non-cash Operating, Investing, and Financing Activities:
Healthpeak master lease modification:
Property, plant and equipment and leasehold intangibles, net	$	0	$	(57,462)
Operating lease right-of-use assets	0		88,044
Financing lease obligations	0		70,874
Operating lease obligations	0		(101,456)
Net	$	0	$	0
Other non-cash lease transactions, net:

Property, plant and equipment and leasehold intangibles, net	$	0	$	(9,441)

Operating lease right-of-use assets	16,721		0
Financing lease obligations	0		9,516
Operating lease obligations	(16,721)		0

Other liabilities	0		(75)


Net	$	0	$	0


	Q1 2020		Q2 2020		Q3 2020		Q4 2020		Q1 2021		January 2021		February 2021		March 2021		April 2021
Weighted average occupancy	83.2	%	78.7	%	75.3	%	72.7	%	69.6	%	70.0	%	69.4	%	69.4	%	69.9	%
Month-end occupancy	82.2	%	77.8	%	75.0	%	71.5	%	70.6	%	70.4	%	70.1	%	70.6	%	71.1	%


(in thousands, except census)	Three Months Ended March 31,				Increase (Decrease)
	2021		2020		Amount		Percent
Resident fees	$	86,851	$	94,819	$	(7,968)	(8.4)	%
Other operating income	$	2,583	$	—	$	2,583	NM
Facility operating expense	$	87,031	$	103,940	$	(16,909)	(16.3)	%

Home health average daily census	11,647		14,020		(2,373)		(16.9)	%
Hospice average daily census	1,509		1,698		(189)		(11.1)	%