Brookdale Announces Second Quarter 2015 Results

August 3, 2015

NASHVILLE, Tenn., Brookdale Senior Living Inc. (NYSE: BKD) (“Brookdale” or the “Company”) today reported financial and operating results for the second quarter of 2015. Highlights included:

• Cash From Facility Operations (“CFFO”) of $0.60 per share for the second quarter of 2015, a decline from $0.63 per share in the first quarter of 2015, excluding integration, transaction, transaction-related and electronic medical records (“EMR”) roll-out costs in both periods.
• Adjusted EBITDA of $230.1 million in the second quarter of 2015, a 0.3% decrease from the first quarter of 2015, excluding integration, transaction, transaction-related and EMR roll-out costs in both periods.
• Same Community average monthly revenue per unit growth of 2.8% compared with the second quarter of 2014, led by 3.8% growth in the legacy Brookdale portfolio.
• Average occupancy for all consolidated communities in the second quarter of 2015 of 86.5%, a decline of 90 basis points from the first quarter of 2015.

Andy Smith, Brookdale’s CEO, said, “Our second quarter experience underscored our belief in the long-term growth potential of our company; however, our near-term operating performance was below our expectations. Our typical seasonal increase in occupancy occurred late in the quarter and was more muted than usual. This lower than expected occupancy was only partly offset by solid rate performance, effective expense management and growing cost synergies. Given our lower than expected occupancy level entering the third quarter, we are revising our 2015 CFFO guidance to a range of $2.35 to $2.45 per share, excluding integration, transaction, transaction-related and EMR roll-out costs.”

Mr. Smith continued, “We have made solid progress integrating Emeritus into our platform over the past year. We remain very confident that we will achieve our longer-term expectations for the Emeritus merger. Nevertheless, the integration effort has been more challenging in certain respects than we originally anticipated. Our occupancy decline reflected an industry-wide trend and the consequences of these integration challenges. As we complete the fourth and final stage of our systems and process cutovers, we expect our sales and marketing efforts to continue to normalize as our teams focus less on integration and more on their day-to-day responsibilities. We also expect to begin to realize growing and higher-than-anticipated cost synergies as we move forward.”

Financial Results
The second quarter of 2015 represents the third full quarter of results that include the operations of Emeritus, which the Company acquired on July 31, 2014, as well as the impact from the transactions with HCP, Inc., which closed on August 29, 2014. Results beginning with the fourth quarter of 2014 reflect the full impact of those transactions, and results from the first and second quarters of 2014 reflect legacy Brookdale on a stand-alone basis (except for our Same Community results, which include results for the Emeritus Same Community group on a proforma basis).

Total revenue of $1.2 billion for the second quarter of 2015 was relatively flat compared with the first quarter of 2015, with resident fees declining $8.3 million. Average monthly revenue per unit for the consolidated senior housing portfolio was $4,331 in the second quarter of 2015, an increase of $26, or 0.6%, over the first quarter of 2015. Average occupancy for all consolidated communities for the second quarter of 2015 was 86.5%, compared to 87.4% for the first quarter of 2015. Total revenue for the second quarter of 2015 increased $489.8 million, or 65.4%, from the second quarter of 2014, primarily due to the acquisition of Emeritus and new units added to existing communities, partially offset by the effect of the Company’s contribution of entry fee CCRCs to a venture with HCP on August 29, 2014.

Facility operating expenses for the second quarter of 2015 were $695.0 million, an increase of $259.6 million, or 59.6%, from the second quarter of 2014, primarily due to the acquisition of Emeritus. Excluding management services in all periods, operating margin was 33.4% for the second quarter of 2015 versus 33.8% for the first quarter of 2015 and 33.4% for the second quarter of 2014. Net loss attributable to Brookdale common stockholders for the second quarter of 2015 was $(84.5) million, or $(0.46) per share, versus net loss attributable to Brookdale common stockholders of $(3.3) million, or $(0.03) per share, 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 (loss) on facility lease termination and straight-line lease expense, net of deferred gain amortization. Adjusted EBITDA and CFFO included integration, transaction, transaction-related and EMR roll-out costs for the three months endedJune 30, 2015, March 31, 2015 and June 30, 2014 of $29.0 million, $27.3 million and $11.9 million, respectively. Brookdale also uses Facility Operating Income to assess the performance of its communities.

Facility Operating Income was $348.1 million in the second quarter of 2015, a decline of $6.5 million, or 1.8%, over the first quarter of 2015 and an increase of $137.5 million, or 65.3%, over the second quarter of 2014. Adjusted EBITDA, excluding integration, transaction, transaction-related and EMR roll-out costs, was $230.1 million for the second quarter of 2015, a decrease of $0.7 million, or 0.3%, over the first quarter of 2015 and an increase of $98.8 million, or 75.3%, over the second quarter of 2014.

CFFO was $80.9 million in the second quarter of 2015, or $0.44 per share. Excluding integration, transaction, transaction-related and EMR roll-out costs, CFFO was $109.9 million for the second quarter of 2015, a decline of $5.5 million, or 4.7%, compared with the first quarter of 2015, and an increase of $21.4 million, or 24.1%, compared with the second quarter of 2014.

Liquidity and Transactions
Brookdale had $78.5 million of unrestricted cash and cash equivalents and $85.0 million of restricted cash and escrow deposits as ofJune 30, 2015.

On June 30, 2015, Brookdale and HCP entered into a RIDEA joint venture, which acquired 35 senior housing communities for $847 million. The Company contributed $30.3 million in cash to the RIDEA joint venture. Brookdale owns a 10% ownership interest, and HCP owns a 90% ownership interest. The Company had operated these communities since its acquisition of Horizon Bay in 2011 and will continue to manage the communities under a long-term management agreement.

Outlook
For the full year 2015, the Company now expects CFFO per share in a range of $2.35 to $2.45, excluding integration, transaction, transaction-related and EMR roll-out costs. This guidance excludes the potential impact of any future acquisition or disposition activity.

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 2015 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, 2015 onTuesday, August 4, 2015 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 17, 2015 by dialing (855) 859-2056 (from within the U.S.) or (404) 537-3406 (from outside of the U.S.) and referencing access code “94707286”. 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 the leading operator of senior living communities throughout the United States. The Company is committed to providing senior living solutions primarily 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 1,135 communities in 47 states and the ability to serve approximately 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.