Brookdale Announces Third Quarter 2009 Results; CFFO per Share Increases 43%

Highlights

NASHVILLE, Tenn., Nov. 2 /PRNewswire-FirstCall/ -- Brookdale Senior Living
Inc. (NYSE: BKD) (the "Company") today reported financial and operating
results for the third quarter of 2009.

Bill Sheriff, Brookdale's CEO, said, "We are happy with our strong results
this quarter which build on the success of the first two quarters this year.
We believe our platform is operating effectively in today's difficult
environment as evidenced by our results, and is well positioned to take
advantage of growth opportunities. Without being unduly aggressive, we are
evaluating and deploying capital in long-term growth opportunities, including
both acquisitions and expansions, especially those that fit well within our
ancillary services footprint. Last month, we announced our first acquisition
since 2007 and one which fits firmly within this strategy."

Mark Ohlendorf, Co-President and CFO of Brookdale, commented, "Our business
continues to perform well with recurring CFFO per share increasing
dramatically to $0.43 from $0.30 in the third quarter last year. This growth
includes over $1.5 million of start-up losses related to the opening of new
expansions this quarter. Same-community Facility Operating Income ("FOI")
results also showed substantial improvement of 11.7% aided by both revenue
growth and strong expense management. We have continued the roll-out of
ancillary services, materially increasing our ancillary profitability per
unit, from $128 of monthly FOI per occupied unit last year to $206 this
quarter. Our operating stability combined with our strong liquidity profile
positions us well for long-term value creation."

Financial Results

Total revenue for the third quarter was a record $505.8 million, an increase
of $23.6 million, or 4.9%, from the third quarter of 2008. The increase in
revenue was primarily driven by an increase in average monthly revenue per
unit, including growing revenues from ancillary services, partially offset by
a small decline in occupancy. Average monthly revenue per unit was $3,987 in
the third quarter, an increase of $201, or 5.3%, over the third quarter of
2008. Average occupancy for the third quarter was 89.0%, compared to 88.5%
for the second quarter of 2009 and 89.7% for the third quarter of 2008.

Facility operating expenses for the third quarter were $328.9 million, an
increase of $2.7 million, or 0.8%, from the third quarter of 2008. The
increase over the prior year's quarter was primarily driven by the growth of
ancillary services and expenses associated with expansions. With the positive
impact of the Company's cost control initiatives, facility operating expenses,
excluding the impact of ancillary services, decreased by 0.2% from the third
quarter of 2008. Operating contribution margin for the total company during
the third quarter of 2009 was 34.7%, a 260 basis point improvement over the
third quarter of 2008.

General and administrative expenses for the third quarter were $34.7 million,
up from $32.9 million in the third quarter of 2008. Excluding non-cash
compensation, integration and acquisition-related costs from both periods,
general and administrative expenses were $24.7 million in the third quarter of
2009 versus $22.3 million for the prior year same period. Demonstrating the
Company's efficient platform, this was 4.5% as a percentage of revenue
(including revenues under management) in the third quarter of 2009.

Brookdale's management utilizes Adjusted EBITDA and Cash From Facility
Operations to evaluate the Company's performance and liquidity because these
metrics exclude non-cash expenses such as depreciation and amortization,
non-cash stock-based compensation expense and straight-line lease expense, net
of deferred gain amortization. Brookdale also uses Facility Operating Income
to assess the performance of its facilities.

In the third quarter of 2009, Adjusted EBITDA and Cash From Facility
Operations included $2.2 million of acquisition-related costs. Third quarter
2008 Adjusted EBITDA and Cash From Facility Operations included $3.6 million
of hurricane and named tropical storms expense and integration costs of $3.9
million.

For the quarter ended September 30, 2009, Facility Operating Income was $169.2
million, an increase of $19.3 million from the third quarter of 2008, and
Adjusted EBITDA was $85.6 million, an $18.2 million increase over the third
quarter of 2008.

Cash From Facility Operations was $48.2 million for the third quarter of 2009,
or $0.41 per share. Excluding the $2.2 million of acquisition-related costs,
CFFO for the third quarter was $50.4 million, or $0.43 per share. This was an
increase of $20.4 million over the third quarter of 2008, excluding the
non-recurring and integration expenses in 2008. Excluding the 2008 hurricane
and named tropical storms and integration expenses, the Company reported CFFO
of $0.30 per share in the third quarter of 2008. For the nine months ended
September 30, 2009, reported CFFO was $150.9 million, or $1.40 per share.

Net loss for the third quarter of 2009 was $(21.3) million, or $(0.18) per
diluted common share. The loss for the quarter includes non-cash items for
depreciation and amortization, non-cash stock-based compensation expense and
straight-line lease expense, net of deferred gain amortization, which totaled
$79.7 million.

Operating Activities

For the quarter ended September 30, 2009, same community revenues grew 4.4%
over the same period in 2008 as revenue per unit increased by 5.0% and
occupancy fell by 0.5%. Same community Facility Operating Income for the
quarter increased by 11.7% when compared to the third quarter of 2008 as
expenses grew by 0.9%.

For the twelve months ended September 30, 2009, same community revenues grew
4.4% over the corresponding period ending in 2008, and same community Facility
Operating Income increased by 6.0% over the corresponding period ending in
2008. The twelve month same community data excludes $7.0 million of charges
in the fourth quarter of 2007 relating to integration-related accounting items
and hurricane and named tropical storms expenses of $4.8 million in the last
three quarters of 2008.

By the end of the third quarter, the Company's ancillary services programs
provided therapy services to approximately 35,000 Brookdale units. At the end
of the quarter, the Company's home health agencies were serving almost 18,800
units across the total consolidated Brookdale portfolio, up from approximately
11,400 units served a year ago. The therapy and home health services produced
$206 of monthly Facility Operating Income per occupied unit in the third
quarter across all units served, up from $128 per month a year ago, driven
primarily by maturation of existing clinics and the acquisition of home health
agencies.

During the quarter, the Company opened two expansions with a total of 156
units. There are currently two expansion projects under construction with an
additional 205 units which will open in the fourth quarter of 2009. The two
projects currently under construction are leased and require no additional
equity from the Company. Additionally, near the end of the quarter the
Company opened the 240-unit independent living component of its new entry fee
CCRC in the Villages, Florida. The 72-bed skilled nursing unit at the
Villages will open in the fourth quarter. The start-up losses for expansions
were $1.5 million in the third quarter and were comprised of operating
expenses, additional interest and lease expense.

Balance Sheet

Brookdale had $159.3 million of unrestricted cash and cash equivalents and
$171.4 million of restricted cash on its balance sheet at the end of the third
quarter. The Company had no cash borrowings outstanding against its Line of
Credit.

During the first half of 2009, Brookdale extended the maturity of all of its
mortgage debt initially due in 2009. Therefore, the Company currently has no
mortgage debt maturities before 2011 that do not contain contractual extension
options other than periodic, scheduled principal payments.

Subsequent Events

The Company recently announced that it entered into a definitive asset
purchase agreement with affiliates of Sunrise Senior Living, Inc. (NYSE: SRZ)
to acquire 21 senior living communities that are currently owned by those
affiliates for an aggregate purchase price of $204 million plus customary
transaction expenses. The portfolio has a total of 1,389 units, comprised of
92 independent living units, 876 assisted living units and 421 Alzheimer's
units. The Company expects to finance the transaction with approximately
$134.0 million of mortgage debt (substantially through the assumption of
existing debt), with the balance of the purchase price to be paid from cash on
hand. The consummation of the transaction is subject to the satisfaction of
certain closing conditions and contingencies and the receipt of certain lender
approvals. The transaction is expected to close in November 2009.

Additional Filings

The Company will file on or about November 2, 2009 a Form 8-K with the SEC
which includes supplemental information relating to the Company's third
quarter 2009 results. This filing will also be available through the Investor
Relations section of the Company's website upon filing -
www.brookdaleliving.com.

Earnings Conference Call

Brookdale's management will conduct a conference call on Tuesday, November 3,
2009 to review the financial results of its third quarter ended September 30,
2009. The conference call is scheduled for 9:00 AM ET. All interested
parties are welcome to participate in the live conference call. The
conference call can be accessed by dialing (866) 845-7252 (from within the
U.S.) or (706) 634-9069 (from outside of the U.S.) ten minutes prior to the
scheduled start and referencing the "Brookdale Senior Living Third Quarter
Earnings Call."

A webcast of the conference call will be available to the public on a
listen-only basis at www.brookdaleliving.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
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 November 10, 2009 by dialing (800) 642-1687 (from within the
U.S.) or (706) 645-9291 (from outside of the U.S.) and referencing access code
"35964524." A copy of this earnings release is posted on the Investor
Relations page of the Brookdale website (www.brookdaleliving.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 an exceptional living experience through properties that are
designed, purpose-built and operated to provide the highest-quality service,
care and living accommodations for residents. Currently the Company owns and
operates independent living, assisted living, and dementia-care communities
and continuing care retirement centers, with 547 communities in 35 states and
the ability to serve approximately 52,000 residents.

Safe Harbor

Certain items in this press release and the associated earnings conference
call 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
regarding the consummation of the Sunrise portfolio acquisition and the
related financing and our expectations regarding the future performance of the
acquired communities and their effect on our financial results; statements
relating to our operational initiatives and our expectations regarding their
effect on our results; our expectations regarding occupancy, revenue, expense
levels, the demand for senior housing, expansion activity, acquisition
opportunities and asset dispositions; our belief regarding our growth
prospects; 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; our plans to
deleverage; our expectations regarding financings and refinancings of assets;
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 and home health); our plans to expand existing communities; the
expected project costs for our expansion program; our expected levels of
expenditures and reimbursements (and the timing thereof); 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; and our
ability to increase revenues, earnings, Adjusted EBITDA, Cash From Facility
Operations, and/or Facility Operating Income. 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 the expectations reflected in such forward-looking
statements are based on reasonable assumptions, actual results and performance
could differ materially from those set forth in the forward-looking
statements. Factors which could have a material adverse effect on our
operations and future prospects or which could cause events or circumstances
to differ from these forward-looking statements include, but are not limited
to, our ability to satisfy the closing conditions and successfully complete
the Sunrise portfolio acquisition; our ability to assume and obtain the
mortgage debt financing for the Sunrise portfolio acquisition; the risk
associated with the current global economic crisis and its impact upon capital
markets and liquidity; our inability to extend (or refinance) debt as it
matures or replace our amended credit facility when 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; the risk that we may be required to post
additional cash collateral in connection with our interest rate swaps; the
risk that continued market deterioration could jeopardize the performance of
certain of our counterparties' obligations; changes in governmental
reimbursement programs; our limited operating history on a combined basis; our
ability to effectively manage our growth; our ability to maintain consistent
quality control; delays in obtaining regulatory approvals; our ability to
integrate acquisitions 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;
increased competition for skilled personnel; increased union activity;
departure of our key officers; increases in market interest rates;
environmental contamination at any of our facilities; 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; and 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
(Unaudited, in thousands, except for per share data)

Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
2009 2008 2009 2008
---- ---- ---- ----
Revenue
Resident fees $503,856 $480,750 $1,499,544 $1,435,522
Management fees 1,987 1,527 5,002 5,604
----- ----- ----- -----
Total revenue 505,843 482,277 1,504,546 1,441,126
------- ------- --------- ---------

Expense
Facility operating
expense (excluding
depreciation and
amortization of
$45,851, $45,670,
$137,102 and $143,765,
respectively) 328,939 322,601 963,637 934,186
General and
administrative expense
(including non-cash
stock-based
compensation expense of
$7,869, $6,737, $21,549
and $23,368,
respectively) 34,720 32,948 100,148 109,633
Hurricane and named
tropical storms expense
- 3,613 - 3,613
Facility lease expense 68,036 67,017 204,211 202,028
Depreciation and
amortization 66,983 67,066 202,378 207,882
------ ------ ------- -------
Total operating
expense 498,678 493,245 1,470,374 1,457,342
------- ------- --------- ---------
Income (loss) from
operations 7,165 (10,968) 34,172 (16,216)

Interest income 623 1,383 1,771 6,169
Interest expense:
Debt (30,574) (37,599) (96,845) (110,894)
Amortization of
deferred financing
costs (2,167) (3,004) (7,099) (6,940)
Change in fair value of
derivatives and
amortization (2,478) (8,454) 1,137 (17,344)
Loss on extinguishment of
debt (1,178) - (2,918) (3,052)
Equity in earnings (loss)
of unconsolidated
ventures 42 358 1,218 (750)
Other non-operating
(expense) income (52) 69 4,172 (424)
--- -- ----- ----
Loss before income taxes (28,619) (58,215) (64,392) (149,451)
Benefit for income taxes 7,329 22,338 18,936 54,996
----- ------ ------ ------
Net loss $(21,290) $(35,877) $(45,456) $(94,455)
======== ======== ======== ========

Basic and diluted
loss per share $(0.18) $(0.36) $(0.42) $(0.93)
====== ====== ====== ======

Weighted average shares
used in computing basic
and diluted loss per
share 118,455 101,398 108,807 101,748
======= ======= ======= =======

Dividends declared
per share $- $0.25 $- $0.75
== ===== == =====

Condensed Consolidated Balance Sheets
(in thousands)

September 30, 2009 December 31, 2008
------------------ -----------------
(unaudited)

Cash and cash equivalents $159,313 $53,973
Cash and escrow deposits -
restricted 104,434 86,723
Accounts receivable, net 81,583 91,646
Other current assets 60,872 48,443
------ ------
Total current assets 406,202 280,785
Property, plant, and equipment and
leasehold intangibles, net 3,620,469 3,697,834
Other assets, net 475,011 470,639
------- -------
Total assets $4,501,682 $4,449,258
========== ==========

Current liabilities $653,792 $646,012
Long-term debt, less current
portion 2,304,168 2,235,000
Other liabilities 442,068 607,645
------- -------
Total liabilities 3,400,028 3,488,657
Stockholders' equity 1,101,654 960,601
--------- -------
Total liabilities and
stockholders' equity $4,501,682 $4,449,258
========== ==========

Condensed Consolidated Statements of Cash Flows
(Unaudited, in thousands)

Nine Months Ended
September 30,
-----------------
2009 2008
---- ----
Cash Flows from Operating Activities
Net loss $(45,456) $(94,455)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Loss on extinguishment of debt 2,918 3,052
Depreciation and amortization 209,477 214,822
Equity in (earnings) loss of unconsolidated
ventures (1,218) 750
Distributions from unconsolidated ventures
from cumulative share of net earnings 455 1,918
Amortization of deferred gain (3,259) (3,257)
Amortization of entrance fees (16,084) (16,527)
Proceeds from deferred entrance fee revenue 23,225 15,210
Deferred income tax benefit (19,440) (57,243)
Change in deferred lease liability 12,073 15,675
Change in fair value of derivatives and
amortization (1,137) 17,344
Gain on sale of assets (4,352) -
Non-cash stock-based compensation 21,549 23,368
Changes in operating assets and liabilities:
Accounts receivable, net 11,234 (18,165)
Prepaid expenses and other assets, net (10,734) 1,263
Accounts payable and accrued expenses 29,557 3,051
Tenant refundable fees and security deposits (14,297) (439)
Deferred revenue 1,811 (3,392)
Other (10,350) 4,379
------- -----
Net cash provided by operating activities 185,972 107,354
------- -------
Cash Flows from Investing Activities
Decrease in lease security deposits and
lease acquisition deposits, net 2,071 2,416
Increase in cash and escrow deposits -
restricted (54,694) (7,795)
Net proceeds from sale of property, plant
and equipment 210 -
Additions to property, plant, and equipment
and leasehold intangibles, net of related
payables (87,507) (134,179)
Acquisition of assets, net of related
payables and cash received (1,227) (5,105)
(Issuance of) payment on notes receivable,
net (590) 39,661
Investment in unconsolidated ventures (1,246) (1,163)
Distributions received from unconsolidated
ventures 969 300
Proceeds from sale leaseback transaction 9,166 -
Proceeds from sale of unconsolidated venture 8,831 4,165
----- -----
Net cash used in investing activities (124,017) (101,700)
-------- --------
Cash Flows from Financing Activities
Proceeds from debt 67,986 467,769
Repayment of debt and capital lease
obligations (21,194) (229,210)
Proceeds from line of credit 60,446 264,757
Repayment of line of credit (219,899) (378,000)
Payment of dividends - (103,696)
Purchase of treasury stock - (29,187)
Payment of financing costs, net of related
payables (7,258) (13,720)
Proceeds from equity offering, net 163,827 -
Other (713) (1,373)
Refundable entrance fees:
Proceeds from refundable entrance fees 17,032 15,185
Refunds of entrance fees (16,842) (14,331)
Recouponing and payment of swap termination - (27,627)
Cash portion of loss on extinguishment of
debt - (1,240)
- ------
Net cash provided by (used in) financing
activities 43,385 (50,673)
------ -------
Net increase (decrease) in cash
and cash equivalents 105,340 (45,019)
Cash and cash equivalents at
beginning of period 53,973 100,904
------ -------
Cash and cash equivalents at end
of period $159,313 $55,885
======== =======

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, depreciation and
amortization (including non-cash impairment charges), straight-line lease
expense (income), amortization of deferred gain, amortization of deferred
entrance fees, and non-cash compensation expense and including entrance
fee receipts and refunds (excluding certain first generation entrance fee
receipts on newly opened entrance fee CCRCs).

In the current period, we clarified the definition of Adjusted EBITDA to
exclude initial entrance fees received from the sale of units at newly
opened entrance fee CCRCs where the Company is required to apply such
entrance fee proceeds to satisfy debt.

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

- It 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;
- It 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
- It 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
nine months ended September 30, 2009 and 2008 (in thousands):

Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
2009(1) 2008(1) 2009(1) 2008(1)
------- -------- ------- --------
Net loss $(21,290) $(35,877) $(45,456) $(94,455)
Benefit for income taxes (7,329) (22,338) (18,936) (54,996)
Equity in (earnings) loss of
unconsolidated ventures (42) (358) (1,218) 750
Loss on extinguishment of debt 1,178 - 2,918 3,052
Other non-operating expense
(income) 52 (69) (4,172) 424
Interest expense:
Debt 23,276 30,743 75,071 90,365
Capitalized lease obligation 7,298 6,856 21,774 20,529
Amortization of deferred
financing costs 2,167 3,004 7,099 6,940
Change in fair value of
derivatives and amortization 2,478 8,454 (1,137) 17,344
Interest income (623) (1,383) (1,771) (6,169)
---- ------ ------ ------
Income (loss) from operations 7,165 (10,968) 34,172 (16,216)
Depreciation and amortization 66,983 67,066 202,378 207,882
Straight-line lease expense 3,793 4,709 12,073 15,675
Amortization of deferred gain (1,088) (1,086) (3,259) (3,257)
Amortization of entrance fees (5,742) (4,707) (16,084) (16,527)
Non-cash compensation expense 7,869 6,737 21,549 23,368
Entrance fee receipts(2) 21,931 11,526 40,257 30,395
First generation entrance fees
received (3) (10,626) - (10,626) -
Entrance fee disbursements (4,649) (5,856) (16,842) (14,331)
------ ------ ------- -------
Adjusted EBITDA $85,636 $67,421 $263,618 $226,989
======= ======= ======== ========

(1) The calculation of Adjusted EBITDA includes integration and
acquisition-related costs for the three and nine months ended
September 30, 2009 of $2.2 million and $2.7 million, respectively.
Integration and hurricane and named tropical storms expense as well
as other non-recurring costs were $7.5 million for the three months
ended September 30, 2008 and $20.8 million for the nine months ended
September 30, 2008. The amount for the nine months ended September
30, 2008 includes the effect of an $8.0 million reserve established
for certain litigation.
(2) Includes the receipt of refundable and nonrefundable entrance fees.
(3) First generation entrance fees received represents initial entrance
fees received from the sale of units at a newly opened entrance fee
CCRC where the Company is required to apply such entrance fee
proceeds to satisfy debt.

Cash From Facility Operations

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, certain first generation
entrance fee receipts on newly opened entrance fee CCRCs, entrance fee
refunds disbursed, lease financing debt amortization with fair market
value or no purchase options, other, and recurring capital expenditures.
In the current period, we clarified the definition of CFFO to exclude
initial entrance fees received from the sale of units at newly opened
entrance fee CCRCs where the Company is required to apply such entrance
fee proceeds to satisfy debt. Recurring capital expenditures include
expenditures capitalized in accordance with GAAP that are funded from
CFFO. Amounts excluded from recurring capital expenditures consist
primarily of unusual or non-recurring capital items (including integration
capital expenditures), facility purchases and/or major projects or
renovations that are funded using financing proceeds and/or proceeds from
the sale of facilities that are held for sale.

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

- It provides an assessment of our ability to facilitate meeting
current financial and liquidity goals.

- To 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 nine months ended September 30, 2009 and
2008 (in thousands):

Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
2009(1) 2008(1) 2009(1) 2008(1)
------- ------- ------- -------

Net cash provided by operating
activities $72,900 $30,630 $185,972 $107,354
Changes in operating assets and
liabilities (11,438) 2,062 (7,221) 13,303
Refundable entrance fees
received(2) 9,296 4,273 17,032 15,185
First generation entrance fees
received (3) (10,626) - (10,626) -
Entrance fee refunds disbursed (4,649) (5,856) (16,842) (14,331)
Recurring capital expenditures,
net (5,495) (6,965) (12,038) (19,616)
Lease financing debt
amortization with fair market
value or no purchase options (1,793) (1,688) (5,371) (4,975)
Reimbursement of operating
expenses and other - - - 794
- - - ---
Cash From Facility Operations $48,195 $22,456 $150,906 $97,714
======= ======= ======== =======

(1) The calculation of CFFO includes integration and acquisition-related
costs for the three and nine months ended September 30, 2009 of $2.2
million and $2.7 million, respectively. Integration and hurricane
and named tropical storms expense as well as other non-recurring
costs were $7.5 million for the three months ended September 30, 2008
and $20.8 million for the nine months ended September 30, 2008. The
amount for the nine months ended September 30, 2008 includes the
effect of an $8.0 million reserve established for certain litigation.
(2) Total entrance fee receipts for the three months ended September 30,
2009 and 2008 were $21.9 million and $11.5 million, respectively,
including $12.6 million and $7.3 million, respectively, of
nonrefundable entrance fee receipts included in net cash provided by
operating activities. Total entrance fee receipts for the nine
months ended September 30, 2009 and 2008 were $40.3 million and $30.4
million, respectively, including $23.2 million and $15.2 million,
respectively, of nonrefundable entrance fee receipts included in net
cash provided by operating activities.
(3) First generation entrance fees received represents initial entrance
fees received from the sale of units at a newly opened entrance fee
CCRC where the Company is required to apply such entrance fee
proceeds to satisfy debt.

Beginning in the second quarter of 2009, the calculation of CFFO per share
is based on weighted average outstanding common shares for the period,
excluding any unvested restricted shares. Previously, the calculation of
CFFO per outstanding common share was based on outstanding shares at the
end of the period, excluding any unvested restricted shares. The change
in methodology does not change any historically reported CFFO numbers.

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, depreciation and amortization (including non-cash impairment
charges), facility lease expense, general and administrative expense,
including non-cash stock compensation expense, 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:

- It is helpful in identifying trends in our day-to-day facility
performance;
- It provides an assessment of our revenue generation and expense
management; and
- It 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 nine months ended September 30, 2009 and 2008 (in thousands):

Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
2009 2008 2009 2008
---- ---- ---- ----

Net loss $(21,290) $(35,877) $(45,456) $(94,455)
Benefit for income taxes (7,329) (22,338) (18,936) (54,996)
Equity in (earnings) loss of
unconsolidated ventures (42) (358) (1,218) 750
Loss on extinguishment of debt 1,178 - 2,918 3,052
Other non-operating expense
(income) 52 (69) (4,172) 424
Interest expense:
Debt 23,276 30,743 75,071 90,365
Capitalized lease obligation 7,298 6,856 21,774 20,529
Amortization of deferred
financing costs 2,167 3,004 7,099 6,940
Change in fair value of
derivatives and amortization 2,478 8,454 (1,137) 17,344
Interest income (623) (1,383) (1,771) (6,169)
---- ------ ------ ------
Income (loss) from operations 7,165 (10,968) 34,172 (16,216)
Depreciation and amortization 66,983 67,066 202,378 207,882
Facility lease expense 68,036 67,017 204,211 202,028
General and administrative
(including non-cash
stock compensation expense) 34,720 32,948 100,148 109,633
Amortization of entrance fees (5,742) (4,707) (16,084) (16,527)
Management fees (1,987) (1,527) (5,002) (5,604)
------ ------ ------ ------
Facility Operating Income $169,175 $149,829 $519,823 $481,196
======== ======== ======== ========

SOURCE Brookdale Senior Living Inc.

Ross Roadman of Brookdale Senior Living Inc., +1-615-376-2412