Brookdale Announces Fourth Quarter and Full Year 2007 Results

Fourth Quarter 2007 And Full Year 2007 Highlights

CHICAGO, Feb. 27 /PRNewswire-FirstCall/ -- Brookdale Senior Living Inc.
(NYSE: BKD) (the "Company") today reported financial results for the fourth
quarter of 2007. Net loss for the quarter and twelve months ended December
31, 2007 was $(49.2) million and $(162.0) million, respectively, or $(0.49)
and $(1.60) per diluted common share. The losses include non-cash items for
depreciation and amortization, non-cash compensation expense and straight-line
lease expense, net of deferred gain amortization, which totaled $66.9 million
and $348.2 million, respectively.
Bill Sheriff, Brookdale's CEO, said, "Despite the difficult economic
environment, we grew our reported 2007 CFFO per share greater than 35% over
2006. We believe that the fundamentals of our business remain solid with
demand from an aging population growing faster than supply of new senior
housing units. We maintained our overall occupancy throughout the year, and we
remain positive given our new initiatives, particularly in sales and
marketing. In addition, our new integrated operating platform puts us in a
much stronger position for 2008. We are confident in the strength of our
business. Given the current economic conditions, with the strong industry
dynamics and the growth of our ancillary services business, we believe
Brookdale can continue to grow CFFO per share by 15-20% in 2008 and beyond."
Mark Ohlendorf, Co-President and CFO of Brookdale, commented, "During the
fourth quarter, we substantially completed the integration of our multiple
legacy platforms. We continue to report strong same store results. Excluding
the impact of integration-related accounting items, our fourth quarter same
store Facility Operating Income grew 8.9% over 2006. The ancillary services
business is also maturing - we started providing therapy services to over
12,000 legacy Brookdale units in 2007. We continue to see strength in our
same store operating metrics and are well positioned to achieve our growth
objectives in 2008."
As a dividend-paying company, 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 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.
For the quarter and twelve months ended December 31, 2007, Adjusted EBITDA
was $69.4 million and $306.4 million, respectively. Facility Operating Income
was $153.2 million and $642.3 million for the quarter and twelve month period
ended December 31, 2007, respectively.
For the quarter and twelve months ended December 31, 2007, Cash From
Facility Operations was $28.7 million and $148.8 million, respectively, or
$0.28 and $1.46 per common share outstanding at December 31, 2007.
Fourth quarter Adjusted EBITDA and Cash From Facility Operations included
integration and acquisition-related costs of $8.1 million and charges of $7.0
million relating to the Company's desire to conform its policies across all of
its platforms, including $5.9 million of estimated uncollectible accounts and
$1.1 million of accounting conformity adjustments pertaining to inventory and
certain accrual policies, or a total of $0.15 per outstanding common share,
and excluded amortization related to capital leases and debt of $4.1 million,
or $0.04 per outstanding common share.
Same store revenues grew 6.9% for the twelve months ended December 31,
2007 over the corresponding period ending in 2006, and same store Facility
Operating Income grew 9.0% when compared to the same prior year period.
Similarly, same store revenues grew 7.3% for the quarter ended December 31,
2007 over the same period in 2006, and same store Facility Operating Income
grew 8.9% when compared to the fourth quarter of 2006. Both cases include the
effect of the historical results of the ARC facilities and exclude the $7.0
million of charges relating to integration-related accounting items.
Schedules are presented later in the release with more detail.
The Company's ancillary services business commenced providing therapy
services to over 12,000 additional Brookdale units in 2007, well ahead of the
original schedule, while maintaining the strength of the legacy business at
$197 of monthly facility operating income per occupied unit in the fourth
quarter. During the year, the Company increased the units served by its home
health agencies from 300 to 7,400, including the acquisition of 5 agencies in
Florida.
During the year, the Company opened expansions at six communities with a
total of 217 units representing $36 million of project costs. Four of the
expansions achieved 95% occupancy in December and are on average yielding
approximately 17% unlevered returns. The other two projects are in lease-up
and achieved 60% occupancy in the fourth quarter and are performing on budget.
The Company currently has twelve expansion projects under construction with
approximately 400 units.
In 2007, Brookdale completed $360.9 million in mortgage financings,
producing incremental proceeds of $294 million. Subsequent to the end of the
quarter, Brookdale completed $83.6 million in mortgage financing, producing
incremental proceeds of $29 million.
Beginning in 2008, the Company intends to modify its definition of CFFO to
subtract principal amortization related to capital leases that do not have a
bargain purchase option. For leases with bargain purchase options, the
Company believes that the amortization related to these leases is similar to
principal amortization of debt and as a result, will be excluded from the
revised CFFO definition. Using the modified 2008 definition, fourth quarter
reported CFFO would have been $0.27 per outstanding common share. Similarly,
full year 2007 reported CFFO would have been $1.41 per outstanding common
share. A table is included later in this release to reconcile CFFO results
since 2006 to this modified definition.
Earnings Conference Call
Brookdale's management will conduct a conference call on Thursday,
February 28, 2008 to review the financial results of its fourth quarter and
full year ended December 31, 2007. The conference call is scheduled for 10:00
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 Fourth 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 March 13, 2008 by dialing (800) 642-1687 (from within the
U.S.) or (706) 645-9291 (from outside of the U.S.) and referencing access code
"34058685." 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 facilities 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 facilities and
continuing care retirement centers, with 550 facilities in 35 states and the
ability to serve over 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
relating to our ability to deploy capital; 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) and our
expectations regarding their effect on our results; our plans to expand
existing facilities and develop new facilities; the expected project costs for
our expansion and development program; our expected levels of expenditures;
our expectations regarding financings and refinancings of assets; our ability
to secure financing; our ability to acquire the fee interest in facilities
that we currently operate at attractive valuations; our ability to close
accretive acquisitions; our ability to close dispositions of underperforming
facilities; 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 ability to pay and grow dividends; 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 generate sufficient cash flow to cover required interest
and long-term operating lease payments; our inability to extend or replace our
credit facility when it expires; 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 we may
not be able to pay or maintain dividends; 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; 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 (including the ARC acquisition) into our
operations; unforeseen costs associated with the acquisition of new
facilities; 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; 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. 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. Although we believe that
the expectations reflected in these forward-looking statements are reasonable,
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 for per share data)

Three Months Ended Twelve Months Ended
December 31, December 31,
2007 2006 2007 2006
Revenue
Resident fees $467,446 $429,801 $1,832,507 $1,304,296
Management fees 2,012 2,459 6,789 5,617
Total revenue 469,458 432,260 1,839,296 1,309,913

Expense
Facility operating (excluding
depreciation and amortization
of $60,746, $69,962, $271,466
and $179,850, respectively) 309,265 276,383 1,170,937 819,801
General and administrative
(including non-cash stock-
based compensation expense of
$(6,037), $13,987, $20,113
and $26,612, respectively) 26,869 44,439 138,013 117,897
Facility lease expense 68,263 72,799 271,628 228,779
Depreciation and amortization 65,235 74,000 299,925 188,129
Total operating expense 469,632 467,621 1,880,503 1,354,606
Loss from operations (174) (35,361) (41,207) (44,693)

Interest income 2,441 3,101 7,519 6,810
Interest expense:
Debt (36,989) (29,173) (143,991) (97,694)
Amortization of deferred
financing costs (2,186) (1,882) (7,064) (5,061)
Change in fair value of
derivatives and amortization (42,329) 1,384 (73,222) (38)
Loss on extinguishment of debt (1,880) 1,222 (2,683) (1,526)
Equity in loss of
unconsolidated ventures (1,023) (1,419) (3,386) (3,705)
Other non-operating income 164 - 402 -
Loss before income taxes (81,976) (62,128) (263,632) (145,907)
Benefit for income taxes 32,852 25,004 101,260 38,491
Loss before minority interest (49,124) (37,124) (162,372) (107,416)
Minority interest (113) (233) 393 (671)
Net loss $(49,237) $(37,357) $(161,979) $(108,087)

Basic and diluted loss per
share $(0.49) $(0.37) $(1.60) $(1.34)

Weighted average shares used
in computing basic and diluted
loss per share 101,656 101,205 101,511 80,842

Dividends declared per share $0.50 $0.45 $1.95 $1.55

Condensed Consolidated Balance Sheets
(in thousands)

December 31, December 31,
2007 2006

Cash and cash equivalents $100,904 $68,034
Cash and escrow deposits - restricted 76,962 61,116
Accounts receivable, net 66,807 58,987
Other current assets 47,162 82,095
Total current assets 291,835 270,232
Property, plant, equipment and
leasehold intangibles, net 3,760,453 3,672,333
Other long-term assets 759,334 813,435
Total assets $4,811,622 $4,756,000

Current liabilities $549,767 $508,905
Long-term debt, less current portion 2,119,217 1,690,570
Other long-term liabilities 723,100 787,912
Total liabilities 3,392,084 2,987,387
Minority interests - 4,601
Stockholders' equity 1,419,538 1,764,012
Total liabilities and stockholders' equity $4,811,622 $4,756,000

Condensed Consolidated Statements of Cash Flow
(in thousands)

Twelve Months Ended December 31,
2007 2006
Cash Flows from Operating Activities
Net loss $(161,979) $(108,087)
Adjustments to reconcile net loss to
net cash provided by operating activities:
Loss on extinguishment of debt 2,683 1,526
Depreciation and amortization 306,989 193,190
Minority interest (393) 671
(Gain) loss on sale of assets (457) 123
Equity in loss of unconsolidated ventures 3,386 3,705
Distributions from uncon. ventures
from cumulative share of net earnings 1,521 336
Amortization of deferred gain (4,342) (4,345)
Amortization of entrance fees (19,241) (8,149)
Proceeds from deferred entrance fee revenue 19,330 12,796
Deferred income tax benefit (103,180) (39,267)
Change in deferred lease liability 25,439 24,699
Change in fair value of derivatives
and amortization 73,222 38
Stock-based compensation 20,113 26,612
Changes in operating assets and liabilities:
Accounts receivable, net (6,134) (23,022)
Prepaid expenses and other assets, net 14,783 6,598
Accounts payable and accrued expenses 21,512 (4,156)
Tenant refundable fees and security deposits 6,410 2,644
Net cash provided by operating
activities 199,662 85,912
Cash Flows from Investing Activities
Decrease in lease security deposits
and lease acquisition deposits, net 2,620 9,144
(Increase) decrease in cash and
escrow deposits - restricted (15,002) 35,555
Net proceeds from sale of property,
plant and equipment 6,700 -
Distributions received from
unconsolidated ventures 2,038 1,240
Additions to property, plant, equipment
and leasehold intangibles, net of related
payables (169,556) (68,313)
Acquisition of assets, net of related
payables and cash received (172,101) (1,968,391)
Issuance of notes receivable, net (11,133) (9,850)
Investment in joint ventures (1,985) (2,071)
Net cash used in investing activities (358,419) (2,002,686)
Cash Flows from Financing Activities
Proceeds from debt 591,524 743,190
Repayment of debt and capital lease
obligations (115,253) (230,177)
Buyout of capital lease obligations (51,114) -
Proceeds from line of credit 671,500 378,500
Repayment of line of credit (637,000) (215,000)
Payment of dividends (196,827) (104,183)
Payment of financing costs, net of
related payables (14,012) (22,404)
Cash portion of loss on extinguishment
of debt (2,040) -
Other (1,010) -
Refundable entrance fees:
Proceeds from refundable entrance fees 25,919 14,760
Refunds of entrance fees (19,557) (9,188)
Recouponing and payment of swap termination (60,503)
Proceeds from issuance of common stock, net - 1,354,063
Costs incurred related to follow-on
equity offering - (2,435)
Net cash provided by financing
activities 191,627 1,907,126
Net increase (decrease) in cash
and cash equivalents 32,870 (9,648)
Cash and cash equivalents at
beginning of period 68,034 77,682
Cash and cash equivalents at end of
period $100,904 $68,034

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)
loss items, depreciation and amortization, 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.
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
twelve months ended December 31, 2007 and 2006 (in thousands):

Three Months Ended Twelve Months Ended
December 31, December 31,
2007(1)(2) 2006(1) 2007(1)(2) 2006(1)

Net loss $(49,237) $(37,357) $(161,979) $(108,087)
Minority interest 113 233 (393) 671
Benefit for income taxes (32,852) (25,004) (101,260) (38,491)
Equity in loss of unconsolidated
ventures 1,024 1,419 3,386 3,705
Loss (gain) on extinguishment of
debt 1,880 (1,222) 2,683 1,526
Other non-operating income (164) - (402) -
Interest Expense:
Debt 30,036 22,439 114,518 74,133
Capitalized lease obligation 6,953 6,734 29,473 23,561
Amortization of deferred
financing costs 2,186 1,882 7,064 5,061
Change in fair value of
derivatives and amortization 42,329 (1,384) 73,222 38
Interest income (2,442) (3,101) (7,519) (6,810)
Loss from operations (174) (35,361) (41,207) (44,693)
Depreciation and amortization 65,235 74,000 299,925 188,129
Straight-line lease expense 6,624 8,077 25,439 24,699
Amortization of deferred gain (1,087) (1,086) (4,342) (4,345)
Amortization of entrance fees (5,019) (4,751) (19,241) (8,149)
Non-cash compensation expense (6,037) 13,987 20,113 26,612
Entrance fee receipts(3) 13,916 16,327 45,249 27,556
Entrance fee disbursements (4,069) (4,648) (19,557) (9,188)
Adjusted EBITDA $69,389 $66,545 $306,379 $200,621

(1) The calculation of Adjusted EBITDA includes merger, integration, and
certain other non-recurring expenses, as well as acquisition
transition costs, totaling $8.1 million and $6.6 million for the three
months ended December 31, 2007 and 2006, respectively, and $19.0
million and $16.8 million for the twelve months ended December 31,
2007 and 2006, respectively.
(2) Adjusted EBITDA for the year ended December 31, 2007 includes $7.0
million of charges to facility operating expenses in the quarter ended
December 31, 2007, which relates to the Company's desire to conform
its policies across all of its platforms including $5.9 million
related to estimated uncollectible accounts and $1.1 million of
accounting conformity adjustments pertaining to inventory and certain
accrual policies.
(3) Includes the receipt of refundable and non-refundable entrance fees.

Cash From Facility Operations
Cash From Facility Operations 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 Cash From Facility Operations
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, entrance fee refunds disbursed,
other and recurring capital expenditures. 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. Through 2007, the portion of capital
expenditures deemed to be recurring capital expenditures in any period has
consisted only of actual cash expenditures. Recent system enhancements will
allow the Company, beginning in 2008, to report as recurring capital
expenditures both amounts paid and accrued in any period. Also beginning in
2008, our calculation of CFFO will be modified to subtract principal
amortization related to our capital leases that do not contain a bargain
purchase option.
We believe Cash From Facility Operations 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 Cash From Facility Operations from net cash
provided by operating activities for the three and twelve months ended
December 31, 2007 and 2006 (in thousands):

Three Months Ended Twelve Months Ended
December 31, December 31,
2007(1)(2) 2006(1) 2007(1)(2) 2006(1)

Net cash provided by operating
activities $61,253 $32,235 $199,662 $85,912
Changes in operating assets and
liabilities (33,117) 5,556 (36,571) 17,936
Refundable entrance fees received(3) 8,901 7,860 25,919 14,760
Entrance fee refunds disbursed (4,069) (4,648) (19,557) (9,188)
Recurring capital expenditures, net (5,561) (8,500) (25,048) (23,518)
Reimbursement of operating expenses
and other 1,320 1,150 4,430 5,000
Cash From Facility Operations $28,727 $33,653 $148,835 $90,902

(1) The calculation of Cash From Facility Operations includes merger,
integration and certain other non-recurring expenses, as well as
acquisition transition costs, totaling $8.1 million and $6.6 million
for the three months ended December 31, 2007 and 2006, respectively,
and $19.0 million and $16.8 million for the twelve months ended
December 31, 2007 and 2006, respectively.
(2) CFFO for the year ended December 31, 2007 includes $7.0 million of
charges to facility operating expenses in the quarter ended December
31, 2007, which relates to the Company's desire to conform its
policies across all of its platforms including $5.9 million of
estimated uncollectible accounts and $1.1 million of accounting
conformity adjustments pertaining to inventory and certain accrual
policies.
(3) Total entrance fee receipts for the three months ended December 31,
2007 and 2006 were $13.9 million and $16.3 million, respectively,
including $5.0 million and $8.5 million, respectively, of non-
refundable entrance fee receipts included in net cash provided by
operating activities. Total entrance fee receipts for the twelve
months ended December 31, 2007 and 2006 were $45.2 million and $27.6
million, respectively, including $19.3 million and $12.8 million,
respectively, of non-refundable entrance fee receipts included in net
cash provided by operating activities.

The calculation of Cash From Facility Operations per outstanding common
share is based on outstanding common shares at the end of the period,
excluding any unvested restricted shares.
Beginning in 2008, reported CFFO will be modified to subtract principal
amortization related to capital leases that do not have a bargain purchase
option. Below is a table that presents the CFFO results since 2006 under this
modified definition of CFFO.

($ per share, 2007 Quarter Ending: Full Full
all items rounded to the March June Sept. Dec. Year Year
nearest penny) 31 30 30 31 2007 2006

Current Reported CFFO 0.33 0.42 0.43 0.28 1.46 1.06
Less: Amortization (0.04) (0.04) (0.04) (0.04) (0.16) (0.08)
Plus: Amort of Leases w/
Below Mkt. Purchase Options
and Debt 0.03 0.02 0.03 0.03 0.10 0.04
Reported CFFO per Revised
Definition 0.32 0.41 0.41 0.27 1.41 1.03

Impact of Integration-related
Accounting Items - - - 0.07 0.07 -
Integration Expenses 0.03 0.04 0.04 0.08 0.19 0.20

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) loss items, depreciation and
amortization, 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 twelve months ended December 31, 2007 and 2006 (in thousands):

Three Months Ended Twelve Months Ended
December 31, December 31,
2007(1) 2006 2007(1) 2006

Net loss $(49,237) $(37,357) $(161,979) $(108,087)
Minority interest 113 233 (393) 671
Benefit for income taxes (32,852) (25,004) (101,260) (38,491)
Equity in loss of unconsolidated
ventures 1,024 1,419 3,386 3,705
Loss (gain) on extinguishment of
debt 1,880 (1,222) 2,683 1,526
Other non-operating loss (164) - (402) -
Interest expense:
Debt 30,036 22,439 114,518 74,133
Capitalized lease obligation 6,953 6,734 29,473 23,561
Amortization of deferred
financing costs 2,186 1,882 7,064 5,061
Change in fair value of
derivatives and amortization 42,329 (1,384) 73,222 38
Interest income (2,442) (3,101) (7,519) (6,810)
Loss from operations (174) (35,361) (41,207) (44,693)
Depreciation and amortization 65,235 74,000 299,925 188,129
Facility lease expense 68,263 72,799 271,628 228,779
General and administrative
(including non-cash stock
compensation expense) 26,869 44,439 138,013 117,897
Amortization of entrance fees(2) (5,019) (4,751) (19,241) (8,149)
Management fees (2,012) (2,459) (6,789) (5,617)
Facility Operating Income $153,162 $148,667 $642,329 $476,346

(1) Facility operating income for the year ended December 31, 2007
includes $7.0 million of charges to facility operating expenses in the
quarter ended December 31, 2007, which relates to the Company's desire
to conform its policies across all of its platforms including $5.9
million of estimated uncollectible accounts and $1.1 million of
accounting conformity adjustments pertaining to inventory and certain
accrual policies.
(2) Entrance fee sales, net of refunds paid, provided $9.8 million and
$11.7 million of cash for the three months ended December 31, 2007 and
2006, respectively, and $25.7 million and $18.4 million for the twelve
months ended December 31, 2007 and 2006, respectively.

Operating Data
The same store data, which includes, in both cases, the effect of the
historical results of the ARC facilities for the three and twelve months ended
December 31, 2007 and 2006 (in thousands) is presented below:

Three months ended December 31,
2007 2006 % Change

Revenue $375,147 $349,609 7.3%
Operating Expense(1) 246,541 225,073 9.5%
Facility Operating Income $128,606 $124,535 3.3%
Facility Operating Margin 34.3% 35.6% -1.3%

# Locations 425 425
Avg. Occupancy 90.8% 91.1% -0.3%
Avg. Mo. Revenue/unit $3,681 $3,419 7.7%

Twelve months ended December 31,
2007 2006 % Change

Revenue $1,469,354 $1,374,912 6.9%
Operating Expense(1) 934,032 877,158 6.5%
Facility Operating Income $535,322 $497,754 7.5%
Facility Operating Margin 36.4% 36.2% 0.2%

# Locations 425 425
Avg. Occupancy 90.9% 90.9% 0.0%
Avg. Mo. Revenue/unit $3,600 $3,369 6.9%

(1) Includes $7.0 million of charges to facility operating expenses in the
quarter ended December 31, 2007, which relates to the Company's desire
to conform its policies across all of its platforms including $5.9
million of estimated uncollectible accounts and $1.1 million of
accounting conformity adjustments pertaining to inventory and certain
accrual policies.

Excluding the $7.0 million of charges relating to integration-related
accounting items, the same store data is as follows:

Three months ended December 31,
2007 2006 % Change

Revenue $375,147 $349,609 7.3%
Operating Expense 239,496 225,073 6.4%
Facility Operating Income $135,651 $124,535 8.9%
Facility Operating Margin 36.2% 35.6% 0.6%

Twelve months ended December 31,
2007 2006 % Change

Revenue $1,469,354 $1,374,912 6.9%
Operating Expense 926,987 877,158 5.7%
Facility Operating Income $542,367 $497,754 9.0%
Facility Operating Margin 36.9% 36.2% 0.7%

Our facility breakdown at December 31, 2007 was as follows:

Percentage of
Number of Number of Q4 2007
Ownership Type Facilities Units/Beds Revenues

Owned 171 18,858 39.5%
Leased 357 28,812 60.1%
Managed 22 4,416 0.4%
Total 550 52,086 100.0%

Operating Type
Retirement Centers 87 15,990 29.8%
Assisted Living 409 21,087 43.0%
CCRCs 32 10,593 26.8%
Managed 22 4,416 0.4%
Total 550 52,086 100.0%

Our capital expenditures for the three and twelve months ended December
31, 2007 and 2006 were as follows (in thousands):

Three Months Ended Twelve Months Ended
December 31, December 31,
2007 2006 2007 2006
Type
Recurring $6,303 $9,181 $27,404 $26,272
Reimbursements (742) (681) (2,356) (2,754)
Net recurring 5,561 8,500 25,048 23,518
Corporate(1) 2,471 - 13,907 4,579
EBITDA-enhancing(2) 12,156 10,836 57,435 19,905
Development(3) 23,869 9,002 59,610 17,557
Other(4) 11,200 - 11,200 -
Net Total Capital Expenditures $55,257 $28,338 $167,200 $65,559

(1) Corporate primarily includes capital expenditures for information
technology systems and equipment.
(2) EBITDA-enhancing capital expenditures generally represent unusual or
non-recurring capital items and/or major renovations.
(3) Development capital expenditures primarily relate to the facility
expansion and de novo development program.
(4) Represents the impact of converting to accrual based reporting for
capital expenditures.

Our debt amortization for the three months and twelve months ended
December 31, 2007 and 2006 was as follows (in thousands):

Three Months Ended Twelve Months Ended
December 31, December 31,
2007 2006 2007 2006
Type
Scheduled Debt Amortization $403 $482 $1,866 $1,111
Lease Financing Debt Amortization -
FMV Purchase Option $1,420 $872 $5,594 $2,212
Lease Financing Debt Amortization -
Bargain Purchase Option 2,287 1,997 8,612 3,279
Total Debt Amortization $4,110 $3,351 $16,072 $6,602

Our ancillary services data for the last five quarters was as follows:

As of:

Dec. Sept. June March Dec.
31, 30, 30, 31, 31,
2007 2007 2007 2007 2006

Units served by therapy staff:
Legacy Brookdale 17,101 15,483 14,245 7,442 3,937
Legacy ARC 12,716 12,716 12,716 12,680 12,422
Total 29,817 28,199 26,961 20,122 16,359

Therapy clinics 335 323 302 260 186
Therapy staff 1,601 1,516 1,377 1,139 935

Units served by Home Health
agencies 7,405 7,405 6,251 1,477 294

SOURCE Brookdale Senior Living Inc.

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