Brookdale Announces Second Quarter 2014 Results

               Brookdale Announces Second Quarter 2014 Results

Provides Preliminary 2015 CFFO Guidance in a Range of $2.95 to $3.10 per Share

PR Newswire

NASHVILLE, Tenn., Aug. 6, 2014

NASHVILLE, Tenn., Aug. 6, 2014 /PRNewswire/ -- Brookdale Senior Living Inc.
(NYSE: BKD) ("Brookdale" or the "Company") today reported financial and
operating results for the second quarter of 2014. Highlights were:

  oCash From Facility Operations ("CFFO") per share increased by 16.4% to
    $0.71 per share, versus the second quarter of 2013, excluding integration,
    transaction-related and electronic medical records ("EMR") roll-out costs
    in both periods.
  oAdjusted EBITDA for the second quarter was $129.3 million, a 10.1%
    increase from the second quarter of 2013, excluding integration,
    transaction-related and EMR roll-out costs in both periods.
  oSecond quarter senior housing same community Facility Operating Income
    grew by 6.4% over the second quarter of 2013, as same community revenue
    grew by 3.2% and same community expenses grew by 1.7%.
  oSecond quarter average monthly revenue per unit for the senior housing
    portfolio improved by 3.3% from the prior year quarter, while average
    occupancy decreased 20 basis points from the second quarter of 2013.
  oGross entry fee sales receipts reached a second quarter record $25.9
    million on 146 sales.
  oThe transformational merger with Emeritus Corporation was completed on
    July 31, 2014.

Andy Smith, Brookdale's CEO, said, "Despite a slight dip in occupancy, our
strong rate growth and CFFO performance in the second quarter was driven by
Brookdale's solid market position, disciplined pricing and cost control.
These results, delivered during the period prior to the closing of the
Emeritus merger, were evidence of Brookdale's operational expertise and
investment thesis. Having now closed the Emeritus merger, we are confident
that integration activities will proceed on or ahead of schedule. In the
third quarter, we are expecting to close the previously announced HCP
transactions. We continue to believe that our business and these recent and
future transactions present significant prospects for creating value for all
our stakeholders through opportunity, growth and synergies."

Financial Results

Total revenue for the second quarter was $748.4 million, an increase of $31.9
million, or 4.5%, from the second quarter of 2013. Second quarter 2014 total
revenue is comprised of resident fee revenue of $653.5 million, which
increased $32.6 million, or 5.2%, from the second quarter of 2013, management
fee revenue of $7.5 million, which decreased $0.3 million, or 3.3%, from the
second quarter of 2013, and managed community reimbursed costs of $87.4
million, which decreased $0.4 million, or 0.5%.

Resident fee revenue for the second quarter increased primarily as a result of
an increase in the average monthly revenue per unit compared to the prior year
period, as well as the inclusion of revenue from communities acquired since
the end of the second quarter of 2013 and new units added to existing
communities. Average monthly revenue per unit for the senior housing
portfolio was $4,518 in the second quarter, an increase of $145, or 3.3%, over
the second quarter of 2013. Average occupancy for all consolidated
communities for the second quarter of 2014 was 88.1%, compared to 88.3% for
the second quarter of 2013 and 88.6% for the first quarter of 2014. For the
managed community portfolio, which includes a number of pre-stabilized
communities in the initial fill-up phase, average occupancy for the second
quarter was 86.8%, compared to 84.9% for the second quarter of 2013 and 86.3%
for the first quarter of 2014. 

Facility operating expenses for the second quarter were $435.4 million, an
increase of $19.4 million, or 4.7%, from the second quarter of 2013.
Operating margins were 33.4% for the second quarter of 2014, an increase from
33.0% for the second quarter of 2013.

General and administrative expenses for the second quarter were $53.8
million. Excluding integration, transaction-related and EMR roll-out costs of
$11.9 million and $3.6 million in the second quarters of 2014 and 2013,
respectively, and non-cash stock-based compensation expense from both periods,
general and administrative expenses were $34.1 million in the second quarter
of 2014 versus $35.4 million for the prior year same period. General and
administrative expenses, excluding these items, were 4.2% of resident fee
revenue (including resident fee revenues under management of $167.5 million)
in the second quarter of 2014.

Non-GAAP Financial Measures

Brookdale's management utilizes Adjusted EBITDA and CFFO to evaluate the
Company's performance and liquidity because these metrics exclude non-cash
items such as depreciation and amortization, asset impairment charges,
non-cash stock-based compensation expense, gain on facility lease termination
and straight-line lease expense, net of deferred gain amortization. Adjusted
EBITDA and CFFO include integration, transaction-related and EMR roll-out
costs of $11.9 million and $23.7 million for the three and six months ended
June 30, 2014, respectively, and $3.6 million and $5.7 million for the three
and six months ended June 30, 2013, respectively. Brookdale also uses Facility
Operating Income to assess the performance of its communities.

For the quarter ended June 30, 2014, Facility Operating Income was $210.6
million, an increase of $12.7 million, or 6.4%, over the second quarter of
2013, and Adjusted EBITDA, excluding integration, transaction-related and EMR
roll-out costs in 2014 and 2013, was $129.3 million, an increase of $11.8
million, or 10.1%, over the second quarter of 2013. For the six months ended
June 30, 2014, Facility Operating Income was $423.8 million, an increase of
$21.7 million, or 5.4%, over the first half of 2013, and Adjusted EBITDA,
excluding integration, transaction-related and EMR roll-out costs in 2014 and
2013, was $249.1 million, an increase of $19.2 million, or 8.4%, over the
first half of 2013.

CFFO was $76.7 million in the second quarter of 2014, or $0.61 per share.
Excluding integration, transaction-related and EMR roll-out costs for both
periods, CFFO was $88.6 million for the second quarter of 2014, an increase of
$13.8 million, or 18.5%, compared with the second quarter of 2013. This
translated to $0.71 per share in the most recent quarter, which is an increase
of $0.10 per share, or 16.4%, from a year ago. CFFO, excluding integration,
transaction-related and EMR roll-out costs for both periods, was $167.8
million for the six months ended June 30, 2014, an increase of $23.1 million,
or 16.0%, compared with the same period in 2013. This translated to $1.35 per
share in the first six months of 2014, which is an increase of $0.17 per
share, or 14.4%, from a year ago.

Net Loss

Net loss for the second quarter of 2014 was $(3.3) million, or $(0.03) per
share, versus net loss of $(5.2) million, or $(0.04) per share, in the second
quarter of 2013.

Operating Activities

The Company reports information on six segments. Four segments (Retirement
Centers, Assisted Living, CCRCs – Rental and CCRCs – Entry Fee) constitute the
Company's consolidated senior housing portfolio. The fifth segment, Brookdale
Ancillary Services, includes the Company's outpatient therapy, home health and
hospice services. The sixth segment, Management Services, includes the
services provided to unconsolidated communities that are operated under
management agreements.

Senior Housing

Revenue for the consolidated senior housing portfolio was $588.0 million for
the second quarter of 2014, an increase of 4.6% from the second quarter of
2013. Our revenue growth reflects a 3.3% increase in rate over the second
quarter of 2013 and the addition of approximately 700 units since the second
quarter last year through organic growth and acquisition. Facility operating
expenses were $382.8 million for the second quarter of 2014, an increase of
3.9% from the second quarter of 2013. Operating income for the senior housing
portfolio for the second quarter of 2014 increased by $11.5 million, or 5.9%,
to $205.2 million from the second quarter of 2013.

Same community results for the consolidated senior housing portfolio for the
three months ended June 30, 2014 showed revenues grew 3.2% over the
corresponding period in 2013, as revenue per unit increased by 3.4% and
occupancy decreased by 10 basis points. Same community expenses increased by
1.7% over the second quarter of 2013. Same community Facility Operating
Income for the senior housing portfolio increased by 6.4% over the second
quarter of 2013 as facility operating margin improved by 110 basis points. 

Brookdale Ancillary Services

Revenue for the Company's ancillary services segment increased $6.8 million,
or 11.7%, to $65.5 million for the second quarter of 2014 versus the prior
year second quarter. The revenue increase was driven primarily by a volume
increase in home health and hospice. The average home health census increased
20% for the quarter, and hospice continues to expand, both geographically and
as its existing markets continue to develop new business. Ancillary services
operating expenses increased $5.2 million, or 10.8%, primarily due to an
increase in expenses related to expansion of the business. As a result,
ancillary services operating income for the second quarter of 2014 was $12.9
million, an increase of $1.7 million, or 15.1%, versus the second quarter of
2013.

By the end of the second quarter, the Company's ancillary services programs
provided outpatient therapy services to approximately 38,300 units and the
Company's home health agencies were serving approximately 35,000 units across
the consolidated Brookdale portfolio. Including non-consolidated
communities, the Company's outpatient therapy and home health operations serve
approximately 52,300 and 47,400 units, respectively. The Company added
hospice services in three markets during the second quarter, ending the
quarter with hospice services in 14 markets, with three more markets in
start-up.

Emeritus Merger

On July 31, 2014, the Company completed the previously announced merger
transaction with Emeritus Corporation ("Emeritus"), and Emeritus became a
wholly-owned subsidiary of Brookdale. The results of Emeritus' operations will
be included in the condensed consolidated financial statements subsequent to
that date. A summary of Emeritus' second quarter operating results are
included in a table at the end of this release.

As of July 31, 2014, Emeritus owned 182 communities, leased 311 communities
and managed 14 communities. The transaction expands Brookdale's unit capacity
by more than two-thirds to a total of approximately 112,800 units in 1,149
communities in 46 states. The portfolio is located in 330 markets, where 80%
of the U. S. population is located. Emeritus also hasoutpatient therapy and
home health services operations in Florida, Arizona and Texas.

Liquidity

Brookdale had $50.9 million of unrestricted cash and cash equivalents and
$95.2 million of restricted cash on its balance sheet at the end of the second
quarter. As of June 30, 2014, the Company had $250.0 million of availability
on its secured line of credit (of which $12.0 million had been drawn as of
that date). The Company also had secured and unsecured letter of credit
facilities of up to $84.5 million in the aggregate as of June 30, 2014.
Letters of credit totaling $71.6 million had been issued under these
facilities as of that date.

Outlook

Brookdale today is establishing preliminary guidance for 2015 Cash From
Facility Operations in a range of $2.95 to $3.10 per share. This guidance
includes the impact of the Emeritus merger and HCP transactions, but excludes
integration, transaction-related and EMR roll-out costs and the impact of
possible future acquisitions or dispositions.

Mark Ohlendorf, Brookdale's President and Chief Financial Officer, added, "The
Company's financial results for the second quarter and first half of 2014 met
our expectations related to the Company's previous CFFO guidance. The
Company's prior 2014 guidance was provided on a stand-alone basis. We expect
that the next several months will be transitional in nature given our
integration efforts and the anticipated HCP transactions, and we will not be
providing guidance for the combined company for the balance of 2014. We
remain confident about attaining our previously discussed accretion
expectations for the Emeritus and HCP transactions."

Supplemental Information

The Company will shortly post on the Investor Relations section of the
Company's website at www.brookdale.com supplemental information relating to
the Company's second quarter 2014 results. This information will also be
furnished in a Form 8-K to be filed with the SEC.

Earnings Conference Call

Brookdale's management will conduct a conference call to review the financial
results of its second quarter ended June 30, 2014 on Thursday, August 7, 2014
at 9:00 AM ET. The conference call can be accessed by dialing (866) 900-2996
(from within the U.S.) or (706) 643-2685 (from outside of the U.S.) ten
minutes prior to the scheduled start and referencing the "Brookdale Senior
Living Second Quarter Earnings Call."

A webcast of the conference call will be available to the public on a
listen-only basis at www.brookdale.com. Please allow extra time prior to the
call to visit the site and download the necessary software required to listen
to the internet broadcast. A replay of the webcast will be available through
the website for three months following the call.

For those who cannot listen to the live call, a replay will be available until
11:59 PM ET on August 20, 2014 by dialing (855) 859-2056 (from within the
U.S.) or (404) 537-3406 (from outside of the U.S.) and referencing access code
"82115531". A copy of this earnings release is posted on the Investor
Relations page of the Brookdale website (www.brookdale.com).

About Brookdale Senior Living

Brookdale Senior Living Inc. is a leading owner and operator of senior living
communities throughout the United States. The Company is committed to
providing senior living solutions within properties that are designed,
purpose-built and operated to provide the highest-quality service, care and
living accommodations for residents. Currently Brookdale operates independent
living, assisted living, and dementia-care communities and continuing care
retirement centers, with approximately 1,150 communities in 46 states and the
ability to serve over 110,000 residents. Through its ancillary services
program, the Company also offers a range of outpatient therapy, home health,
personalized living and hospice services. Brookdale's stock is traded on the
New York Stock Exchange under the ticker symbol BKD.

Safe Harbor

Certain items in this press release and the associated earnings conference
call (including statements with respect to the integration of Emeritus and the
transactions with HCP) may constitute forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. Those
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, including, but not limited to,
statements relating to our operational initiatives and growth strategies and
our expectations regarding their effect on our results; our expectations
regarding the economy, the senior living industry, occupancy, revenue, cash
flow, operating income, expenses, capital expenditures, Program Max
opportunities, cost savings, the demand for senior housing, the home resale
market, expansion, development and construction activity, acquisition
opportunities, asset dispositions, our share repurchase program, taxes,
capital deployment, returns on invested capital and CFFO; our expectations
regarding returns to shareholders and our growth prospects; our expectations
concerning the future performance of recently acquired communities and the
effects of acquisitions on our financial results; our ability to secure
financing or repay, replace or extend existing debt at or prior to maturity;
our ability to remain in compliance with all of our debt and lease agreements
(including the financial covenants contained therein); our expectations
regarding liquidity and leverage; our expectations regarding financings and
refinancings of assets (including the timing thereof) and their effect on our
results; our expectations regarding changes in government reimbursement
programs and their effect on our results; our plans to generate growth
organically through occupancy improvements, increases in annual rental rates
and the achievement of operating efficiencies and cost savings; our plans to
expand our offering of ancillary services (therapy, home health and hospice);
our plans to expand, renovate, redevelop and reposition existing communities;
our plans to acquire additional communities, asset portfolios, operating
companies and home health agencies; the expected project costs for our
expansion, redevelopment and repositioning program; our expected levels of
expenditures and reimbursements (and the timing thereof); our expectations
regarding our sales, marketing and branding initiatives and their impact on
our results; our expectations for the performance of our entrance fee
communities; our ability to anticipate, manage and address industry trends and
their effect on our business; our expectations regarding the payment of
dividends; our ability to increase revenues, earnings, Adjusted EBITDA, Cash
From Facility Operations, and/or Facility Operating Income (as such terms are
defined herein); and our expectations regarding the integration of Emeritus
and the transactions with HCP. Forward-looking statements are generally
identifiable by use of forward-looking terminology such as "may," "will,"
"should," "potential," "intend," "expect," "endeavor," "seek," "anticipate,"
"estimate," "overestimate," "underestimate," "believe," "could," "would,"
"project," "predict," "continue," "plan" or other similar words or
expressions. Forward-looking statements are based on certain assumptions or
estimates, discuss future expectations, describe future plans and strategies,
contain projections of results of operations or of financial condition, or
state other forward-looking information. 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 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 risk associated with the current global economic
situation and its impact upon capital markets and liquidity; changes in
governmental reimbursement programs; our inability to extend (or refinance)
debt (including our credit and letter of credit facilities) as it matures; the
risk that we may not be able to satisfy the conditions precedent to exercising
the extension options associated with certain of our debt agreements; events
which adversely affect the ability of seniors to afford our monthly resident
fees or entrance fees; the conditions of housing markets in certain geographic
areas; our ability to generate sufficient cash flow to cover required interest
and long-term operating lease payments; the effect of our indebtedness and
long-term operating leases on our liquidity; the risk of loss of property
pursuant to our mortgage debt and long-term lease obligations; the
possibilities that changes in the capital markets, including changes in
interest rates and/or credit spreads, or other factors could make financing
more expensive or unavailable to us; our determination from time to time to
purchase any shares under the repurchase program; our ability to fund any
repurchases; our ability to effectively manage our growth; our ability to
maintain consistent quality control; delays in obtaining regulatory approvals;
the risk that we may not be able to expand, redevelop and reposition our
communities in accordance with our plans; our ability to complete acquisitions
and integrate them into our operations; competition for the acquisition of
assets; our ability to obtain additional capital on terms acceptable to us; a
decrease in the overall demand for senior housing; our vulnerability to
economic downturns; acts of nature in certain geographic areas; terminations
of our resident agreements and vacancies in the living spaces we lease; early
terminations or non-renewal of management agreements; increased competition
for skilled personnel; increased union activity; departure of our key
officers; increases in market interest rates; environmental contamination at
any of our communities; failure to comply with existing environmental laws; an
adverse determination or resolution of complaints filed against us; the cost
and difficulty of complying with increasing and evolving regulation; risks
relating to the integration of Emeritus and the transactions with HCP,
including in respect of the satisfaction of closing conditions to the
transactions with HCP; unanticipated difficulties and/or expenditures relating
to such transactions; the risk that regulatory approvals required for the
transactions with HCP are not obtained or are obtained subject to conditions
that are not anticipated; uncertainties as to the timing of such transactions;
litigation relating to such transactions; the impact of such transactions on
each company's relationships with residents, employees and third parties; and
the inability to obtain, or delays in obtaining, cost savings and synergies
from such transactions; as well as other risks detailed from time to time in
our filings with the Securities and Exchange Commission, including our Annual
Report on Form 10-K and Quarterly Reports 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 our
management's views as of the date of this press release and/or the associated
earnings conference call. The factors discussed above and the other factors
noted in our SEC filings from time to time could cause our actual results to
differ significantly from those contained in any forward-looking statement.
We cannot guarantee future results, levels of activity, performance or
achievements and we expressly disclaim any obligation to release publicly any
updates or revisions to any forward-looking statements contained herein to
reflect any change in our expectations with regard thereto or change in
events, conditions or circumstances on which any statement is based.





Condensed Consolidated Statements of Operations
(in thousands, except per share data)
                            Three Months Ended        Six Months Ended
                            June 30,                  June 30,
                            2014         2013         2014         2013
Revenue
Resident fees              $         $         $          $  
                            653,517     620,938     1,303,827    1,245,308
Management fees            7,489        7,744        14,891       15,353
Reimbursed costs incurred
on behalf of managed        87,387       87,786       176,950      168,073
communities
Total revenue              748,393      716,468      1,495,668    1,428,734
Expense
Facility operating expense
(excluding depreciation
and                         435,415      416,027      865,285      829,030
amortization of $64,067,
$59,444, $126,728 and
$116,699, respectively)
General and administrative
expense (including
non-cash stock-based        53,816       46,035       109,325      92,646
compensation expense of
$7,729, $6,988, $15,301
and $13,882, respectively)
Facility lease expense     70,030       68,777       139,899      137,796
Depreciation and            71,088       67,254       141,404      131,913
amortization
Asset impairment            -            2,154        -            2,154
Costs incurred on behalf    87,387       87,786       176,950      168,073
of managed communities
Total operating expense     717,736      688,033      1,432,863    1,361,612
Income from operations     30,657       28,435       62,805       67,122
Interest income            285          252          606          555
Interest expense:
Debt                       (29,657)     (29,843)     (59,655)     (60,814)
Amortization of deferred
financing costs and debt    (4,078)      (4,348)      (8,096)      (8,917)
discount
Change in fair value of     (1,322)      1,836        (2,169)      1,971
derivatives
Loss on extinguishment of   (3,197)      (893)        (3,197)      (893)
debt
Equity in earnings of       1,523        445          2,159        560
unconsolidated ventures
Other non-operating income  3,456        80           3,921        1,086
(Loss) income before        (2,333)      (4,036)      (3,626)      670
income taxes
Provision for income        (962)        (1,164)      (1,968)      (2,312)
taxes
Net loss                    $        $        $        $    
                            (3,295)     (5,200)     (5,594)     (1,642)
Basic and diluted net loss  $       $       $       $     
per share                  (0.03)      (0.04)      (0.04)      (0.01)
Weighted average shares
used in computing basic     125,058      123,405      124,770      123,114
and diluted net loss per
share





Condensed Consolidated Balance Sheets
(in thousands)
                                June 30, 2014          December 31, 2013
Cash and cash equivalents      $            $           
                                   50,934               58,511
Cash and escrow deposits -      36,279                 38,191
restricted
Accounts receivable, net        103,365                104,262
Other current assets           98,115                 93,898
Total current assets           288,693                294,862
Property, plant, and equipment
and
 leasehold intangibles,     3,911,338              3,895,475
net
Other assets, net              550,745                547,420
Total assets                   $            $           
                                 4,750,776              4,737,757
Current liabilities             $            $           
                                  717,938               870,844
Long-term debt, less current    2,583,460              2,434,624
portion
Other liabilities              417,755                411,352
Total liabilities              3,719,153              3,716,820
Stockholders' equity           1,031,623              1,020,937
Total liabilities and           $            $           
stockholders' equity            4,750,776              4,737,757





Condensed Consolidated Statements of Cash Flows
(in thousands)
                                      Six Months Ended June 30,
                                      2014                 2013
Cash Flows from Operating Activities
Net loss                              $           $         
                                       (5,594)            (1,642)
Adjustments to reconcile net loss to
net cash provided by operating
activities:
Loss on extinguishment of debt        3,197                893
Depreciation and amortization        149,500              140,830
Asset impairment                      -                    2,154
Equity in earnings of unconsolidated  (2,159)              (560)
ventures
Distributions from unconsolidated
ventures from cumulative share of
net
 earnings                      615                  1,441
Amortization of deferred gain        (2,186)              (2,186)
Amortization of entrance fees        (14,749)             (14,165)
Proceeds from deferred entrance fee   23,941               21,361
revenue
Deferred income tax provision         593                  -
Change in deferred lease liability   (440)                1,432
Change in fair value of derivatives   2,169                (1,971)
Loss (gain) on sale of assets         115                  (902)
Non-cash stock-based compensation     15,301               13,882
Changes in operating assets and
liabilities:
Accounts receivable, net             1,415                (7,328)
Prepaid expenses and other assets,    (14,185)             (3,539)
net
Accounts payable and accrued          (13,316)             2,055
expenses
Tenant refundable fees and security   (477)                (593)
deposits
Deferred revenue                      474                  (6,334)
Net cash provided by operating        144,214              144,828
activities
Cash Flows from Investing Activities
Increase in lease security deposits   (66)                 (3,018)
and lease acquisition deposits, net
Decrease in cash and escrow deposits  588                  3,021
— restricted
Additions to property, plant, and
equipment and leasehold intangibles,  (133,429)            (100,291)
net
Acquisition of assets, net of         (515)                (4,835)
related payables and cash received
Payments on (issuance of) notes       2,640                (64)
receivable, net
Investment in unconsolidated          -                    (7,992)
ventures
Distributions received from           2,643                -
unconsolidated ventures
Proceeds from sale of assets, net     -                    7,554
Net cash used in investing            (128,139)            (105,625)
activities
Cash Flows from Financing Activities
Proceeds from debt                   180,154              427,622
Repayment of debt and capital lease   (181,813)            (488,532)
obligations
Proceeds from line of credit         82,000               190,000
Repayment of line of credit          (100,000)            (200,000)
Payment of financing costs, net of    (818)                (7,895)
related payables
Refundable entrance fees:
 Proceeds from refundable entrance  16,942               19,390
fees
 Refunds of entrance fees          (17,659)             (16,776)
Cash portion of loss on               (3,180)              (453)
extinguishment of debt
Purchase of derivatives               -                    (1,489)
Other                                 722                  636
 Net cash used in financing         (23,652)             (77,497)
activities
 Net decrease in cash and  (7,577)              (38,294)
cash equivalents
 Cash and cash             58,511               69,240
equivalents at beginning of period
 Cash and cash             $           $         
equivalents at end of period           50,934              30,946



Non-GAAP Financial Measures

Adjusted EBITDA

Adjusted EBITDA is a measure of operating performance that is not calculated
in accordance with U.S. generally accepted accounting principles ("GAAP").
Adjusted EBITDA should not be considered in isolation or as a substitute for
net income, income from operations or cash flows provided by or used in
operations, as determined in accordance with GAAP. Adjusted EBITDA is a key
measure of the Company's operating performance used by management to focus on
operating performance and management without mixing in items of income and
expense that relate to long-term contracts and the financing and
capitalization of the business. We define Adjusted EBITDA as net income
(loss) before provision (benefit) for income taxes, non-operating (income)
expense items, (gain) loss on sale or acquisition of communities (including
gain (loss) on facility lease termination), depreciation and amortization
(including non-cash impairment charges), straight-line lease expense (income),
amortization of deferred gain, amortization of deferred entrance fees,
non-cash stock-based compensation expense, and change in future service
obligation and including entrance fee receipts and refunds (excluding (i)
first generation entrance fee receipts from the sale of units at a recently
opened entrance fee CCRC prior to stabilization and (ii) first generation
entrance fee refunds not replaced by second generation entrance fee receipts
at the recently opened community prior to stabilization).

We believe Adjusted EBITDA is useful to investors in evaluating our
performance, results of operations and financial position for the following
reasons:

  oIt is helpful in identifying trends in our day-to-day performance because
    the items excluded have little or no significance to our day-to-day
    operations;
  oIt provides an assessment of controllable expenses and affords management
    the ability to make decisions which are expected to facilitate meeting
    current financial goals as well as achieve optimal financial performance;
    and
  oIt is an indication to determine if adjustments to current spending
    decisions are needed.

The table below reconciles Adjusted EBITDA from net loss for the three and six
months ended June 30, 2014 and 2013 (in thousands):

                        Three Months Ended June       Six Months Ended June
                        30^(1),                      30^(1),
                        2014           2013           2014         2013
                        $         $         $        $     
Net loss                                                   
                        (3,295)       (5,200)       (5,594)     (1,642)
Provision for income    962            1,164          1,968        2,312
taxes
Equity in earnings of
unconsolidated          (1,523)        (445)          (2,159)      (560)
ventures
Loss on
extinguishment of       3,197          893            3,197        893
debt
Other non-operating     (3,456)        (80)           (3,921)      (1,086)
income
Interest expense:
 Debt               23,602         23,376         47,446       47,824
 Capitalized lease   6,055          6,467          12,209       12,990
obligation
 Amortization of
deferred financing      4,078          4,348          8,096        8,917
costs and debt
discount
 Change in fair      1,322          (1,836)        2,169        (1,971)
value of derivatives
Interest income        (285)          (252)          (606)        (555)
Income from             30,657         28,435         62,805       67,122
operations
Depreciation and        71,088         67,254         141,404      131,913
amortization
Asset impairment        -              2,154          -            2,154
Straight-line lease     (217)          684            (440)        1,432
expense
Amortization of         (1,093)        (1,093)        (2,186)      (2,186)
deferred gain
Amortization of         (7,547)        (7,032)        (14,749)     (14,165)
entrance fees
Non-cash stock-based    7,729          6,988          15,301       13,882
compensation expense
Entrance fee            25,924         23,878         40,883       40,751
receipts^(2)
Entrance fee            (9,213)        (7,456)        (17,659)     (16,776)
disbursements
                        $         $         $        $     
Adjusted EBITDA           117,328                            
                                       113,812       225,359     224,127
(1) The calculation of Adjusted EBITDA includes integration,
transaction-related and EMR roll-out costs of $11.9 million and $23.7 million
for the three and six months ended June 30, 2014, respectively. The
calculation of Adjusted EBITDA includes integration, transaction-related and
EMR roll-out costs of $3.6 million and $5.7 million for the three and six
months ended June 30, 2013, respectively.
(2) Includes the receipt of refundable and non-refundable entrance fees.



Cash From Facility Operations

CFFO is a measurement of liquidity that is not calculated in accordance with
GAAP and should not be considered in isolation as a substitute for cash flows
provided by or used in operations, as determined in accordance with GAAP. We
define CFFO as net cash provided by (used in) operating activities adjusted
for changes in operating assets and liabilities, deferred interest and fees
added to principal, refundable entrance fees received, first generation
entrance fee receipts at a recently opened entrance fee CCRC prior to
stabilization, entrance fee refunds disbursed adjusted for first generation
entrance fee refunds not replaced by second generation entrance fee receipts
at the recently opened community prior to stabilization, lease financing debt
amortization with fair market value or no purchase options, gain (loss) on
facility lease termination, recurring capital expenditures (net),
distributions from unconsolidated ventures from cumulative share of net
earnings, CFFO from unconsolidated ventures, and other. Recurring capital
expenditures include routine expenditures capitalized in accordance with GAAP
that are funded from current operations. Amounts excluded from recurring
capital expenditures consist primarily of major projects, renovations,
community repositionings, expansions, systems projects or other non-recurring
or unusual capital items (including integration capital expenditures) or
community purchases that are funded using lease or financing proceeds,
available cash and/or proceeds from the sale of communities.

We believe CFFO is useful to investors in evaluating our liquidity for the
following reasons:

  oIt provides an assessment of our ability to facilitate meeting current
    financial and liquidity goals.
  oTo assess our ability to:

    (i) service our outstanding indebtedness;
    (ii)pay dividends; and
    (iii)make regular recurring capital expenditures to maintain and improve
    our facilities.

The table below reconciles CFFO from net cash provided by operating activities
for the three and six months ended June 30, 2014 and 2013 (in thousands):



                         Three Months Ended June      Six Months Ended June
                         30^(1),                     30^(1),
                         2014            2013         2014          2013
Net cash provided by     $         $        $        $    
operating activities       91,518                         
                                         80,343       144,214      144,828
Changes in operating
assets and               (2,469)         (707)        26,089        15,739
liabilities
Refundable entrance      11,018          11,754       16,942        19,390
fees received^(2)
Entrance fee refunds     (9,213)         (7,456)      (17,659)      (16,776)
disbursed
Recurring capital        (11,841)        (10,664)     (21,210)      (19,988)
expenditures, net
Lease financing debt
amortization with fair   (3,983)         (3,444)      (7,880)       (6,815)
market value or no
purchase options
Distributions from
unconsolidated
ventures from            (370)           (773)        (615)         (1,441)
cumulative share of
net earnings
CFFO from
unconsolidated           1,996           2,099        4,237         4,057
ventures
Cash From Facility       $         $        $        $    
Operations                  76,656                         
                                         71,152       144,118      138,994
(1) The calculation of Cash From Facility Operations includes integration,
transaction-related and EMR roll-out costs of $11.9 million and $23.7 million
for the three and six months ended June 30, 2014, respectively. The
calculation of Cash From Facility Operations includes integration,
transaction-related and EMR roll-out costs of $3.6 million and $5.7 million
for the three and six months ended June 30, 2013, respectively.
(2) Total entrance fee receipts for the three months ended June 30, 2014 and
2013 were $25.9 million and $23.9 million, respectively, including $14.9
million and $12.1 million, respectively, of non-refundable entrance fee
receipts included in net cash provided by operating activities. Total entrance
fee receipts for the six months ended June 30, 2014 and 2013 were $40.9
million and $40.8 million, respectively, including $23.9 million and $21.4
million, respectively, of non-refundable entrance fee receipts included in net
cash provided by operating activities.



The calculation of CFFO per share is based on weighted average outstanding
common shares for the period, excluding any unvested restricted shares.
Annual CFFO per share for all periods is calculated as the sum of the
quarterly amounts for the year.

Facility Operating Income

Facility Operating Income is not a measurement of operating performance
calculated in accordance with GAAP and should not be considered in isolation
as a substitute for net income, income from operations, or cash flows provided
by or used in operations, as determined in accordance with GAAP. We define
Facility Operating Income as net income (loss) before provision (benefit) for
income taxes, non-operating (income) expense items, (gain) loss on sale or
acquisition of communities (including gain (loss) on facility lease
termination), depreciation and amortization (including non-cash impairment
charges), facility lease expense, general and administrative expense,
including non-cash stock-based compensation expense, change in future service
obligation, amortization of deferred entrance fee revenue and management fees.

We believe Facility Operating Income is useful to investors in evaluating our
facility operating performance for the following reasons:

  oIt is helpful in identifying trends in our day-to-day facility
    performance;
  oIt provides an assessment of our revenue generation and expense
    management; and
  oIt provides an indicator to determine if adjustments to current spending
    decisions are needed.

The table below reconciles Facility Operating Income from net loss for the
three and six months ended June 30, 2014 and 2013 (in thousands):

                          Three Months Ended June  Six Months Ended June 30,
                         30,
                         2014          2013         2014           2013
                         $        $       $        $     
Net loss                                               
                         (3,295)       (5,200)     (5,594)        (1,642)
Provision for income     962           1,164        1,968          2,312
taxes
Equity in earnings of
unconsolidated           (1,523)       (445)        (2,159)        (560)
ventures
Loss on extinguishment   3,197         893          3,197          893
of debt
Other non-operating      (3,456)       (80)         (3,921)        (1,086)
income
Interest expense:
 Debt                23,602        23,376       47,446         47,824
 Capitalized lease    6,055         6,467        12,209         12,990
obligation
 Amortization of
deferred financing       4,078         4,348        8,096          8,917
costs and debt discount
 Change in fair       1,322         (1,836)      2,169          (1,971)
value of derivatives
Interest income         (285)         (252)        (606)          (555)
Income from operations   30,657        28,435       62,805         67,122
Depreciation and         71,088        67,254       141,404        131,913
amortization
Asset impairment         -             2,154        -              2,154
Facility lease expense  70,030        68,777       139,899        137,796
General and
administrative
(including non-cash
 stock-based         53,816        46,035       109,325        92,646
compensation expense)
Amortization of          (7,547)       (7,032)      (14,749)       (14,165)
entrance fees
Management fees         (7,489)       (7,744)      (14,891)       (15,353)
Facility Operating       $        $       $        $     
Income                                                  
                         210,555       197,879      423,793        402,113



Summary Emeritus Operating Results
Emeritus Corporation
Selected Consolidated and Same Community Information
For the Quarters Ended
(unaudited)
(Community and ancillary revenue and operating expense in thousands)
                                 FY 2013           FY 2014
                                 Q2                Q1          Q2
Consolidated:
Average consolidated communities 465               496         494
Community and ancillary revenue  $    467,810  $        $   516,682
                                                   513,817
Community and ancillary          $    319,848  $        $   353,572
operating expense                                  351,716
Average occupancy                86.7%             88.0%       87.9%
Average monthly revenue per unit $            $      $    
                                 4,014            3,986      4,009
Operating income margin          31.6%             31.5%       31.6%
Consolidated Same Community:
Average consolidated communities 448               448         448
Community revenue                $    415,542  $        $   422,127
                                                   420,002
Community operating expense      $    273,791  $        $   284,253
                                                   284,720
Average occupancy                86.9%             87.6%       87.4%
Average monthly revenue per unit $            $      $    
                                 4,045            4,058      4,086
Operating income margin          34.1%             32.2%       32.7%
Note: Presented consistent with Emeritus prior period reporting



SOURCE Brookdale Senior Living Inc.

Website: http://www.brookdale.com
Contact: Brookdale Senior Living Inc., Ross Roadman, 615-564-8104
 
Press spacebar to pause and continue. Press esc to stop.