UNITED STATES
SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549


Form 10-Q
☒
xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2017March 31, 2024
or
☐
¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


For the transition period from _____________ to _____________


Commission File Number: 001-32641


BROOKDALE SENIOR LIVING INC.
(Exact name of registrant as specified in its charter)
Delaware20-3068069
Delaware20-3068069
(State or other jurisdiction

of incorporation or organization)
(I.R.S. Employer Identification No.)
111 Westwood Place,Suite 400, Brentwood, TennesseeBrentwood,Tennessee37027
(Address of principal executive offices)(Zip Code)
(615) 221-2250
(Registrant's telephone number, including area code)(615) 221-2250


Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.01 Par Value Per ShareBKDNew York Stock Exchange
7.00% Tangible Equity UnitsBKDTNew York Stock Exchange

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


Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x☒ No ¨☐


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

Large accelerated filerx☒Accelerated filer¨☐
Non-accelerated filer¨☐(Do not check if a smaller reporting company)Smaller reporting company¨☐
Emerging growth company¨☐




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


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


As of November 3, 2017, 186,391,101May 6, 2024, 193,012,561 shares of the registrant's common stock, $0.01 par value, were outstanding (excluding unvested restricted shares)stock units).



2

TABLE OF CONTENTS
BROOKDALE SENIOR LIVING INC.


FORM 10-Q


FOR THE QUARTER ENDED SEPTEMBER 30, 2017
MARCH 31, 2024
PAGE
PART I.
PAGE
PART I.FINANCIAL INFORMATION
Item 1.
As of September 30, 2017March 31, 2024 (Unaudited) and December 31, 20162023
34
Three and nine months ended September 30, 2017March 31, 2024 and 20162023 (Unaudited)
45
NineThree months ended September 30, 2017March 31, 2024 and 2023 (Unaudited)
56
NineThree months ended September 30, 2017March 31, 2024 and 20162023 (Unaudited)
67
78
Item 2.
2617
Item 3.
5531
Item 4.
5532
PART II.
Item 1.
5632
Item 1A.
5632
Item 2.
5633
Item 5.
5633
Item 6.
5834
5935





3

PART I.  FINANCIAL INFORMATION


Item 1.  Financial Statements

BROOKDALE SENIOR LIVING INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except stock amounts)
March 31,
2024		December 31,
2023
Assets(Unaudited)
Current assets
Cash and cash equivalents$318,549 $277,971 
Marketable securities— 29,755 
Restricted cash45,673 41,341 
Accounts receivable, net49,645 48,393 
Prepaid expenses and other current assets, net101,869 80,908 
Total current assets515,736 478,368 
Property, plant and equipment and leasehold intangibles, net4,293,925 4,330,629 
Operating lease right-of-use assets639,359 670,907 
Restricted cash31,444 30,356 
Goodwill27,321 27,321 
Other assets, net34,539 35,854 
Total assets$5,542,324 $5,573,435 
Liabilities and Equity
Current liabilities
Current portion of long-term debt$65,681 $41,463 
Current portion of financing lease obligations1,095 1,075 
Current portion of operating lease obligations196,560 192,631 
Trade accounts payable74,497 66,526 
Accrued expenses217,941 242,668 
Refundable fees and deferred revenue58,477 55,753 
Total current liabilities614,251 600,116 
Long-term debt, less current portion3,692,132 3,655,850 
Financing lease obligations, less current portion150,495 150,774 
Operating lease obligations, less current portion635,378 683,876 
Deferred tax liability5,562 5,987 
Other liabilities69,058 71,679 
Total liabilities5,166,876 5,168,282 
Preferred stock, $0.01 par value, 50,000,000 shares authorized at March 31, 2024 and December 31, 2023; no shares issued and outstanding— — 
Common stock, $0.01 par value, 400,000,000 shares authorized at March 31, 2024 and December 31, 2023; 203,540,086 and 198,780,826 shares issued and 193,012,561 and 188,253,301 shares outstanding, respectively2,035 1,988 
Additional paid-in-capital4,342,191 4,342,362 
Treasury stock, at cost; 10,527,525 shares at March 31, 2024 and December 31, 2023(102,774)(102,774)
Accumulated deficit(3,867,478)(3,837,912)
Total Brookdale Senior Living Inc. stockholders' equity373,974 403,664 
Noncontrolling interest1,474 1,489 
Total equity375,448 405,153 
Total liabilities and equity$5,542,324 $5,573,435 
 September 30,
2017		 December 31,
2016
Assets(Unaudited)  
Current assets   
Cash and cash equivalents$291,554
 $216,397
Marketable securities246,376
 —
Cash and escrow deposits – restricted43,724
 32,864
Accounts receivable, net130,943
 141,705
Assets held for sale106,435
 97,843
Prepaid expenses and other current assets, net116,820
 130,695
Total current assets935,852
 619,504
Property, plant and equipment and leasehold intangibles, net6,180,376
 7,379,305
Cash and escrow deposits – restricted23,541
 28,061
Investment in unconsolidated ventures185,880
 167,826
Goodwill505,783
 705,476
Other intangible assets, net64,877
 83,007
Other assets, net195,857
 234,508
Total assets$8,092,166
 $9,217,687
Liabilities and Equity 
  
Current liabilities 
  
Current portion of long-term debt$553,567
 $145,649
Current portion of capital and financing lease obligations92,937
 69,606
Trade accounts payable76,977
 77,356
Accrued expenses317,927
 328,037
Refundable entrance fees and deferred revenue83,672
 106,946
Tenant security deposits3,316
 3,548
Total current liabilities1,128,396
 731,142
Long-term debt, less current portion3,384,211
 3,413,998
Capital and financing lease obligations, less current portion1,484,652
 2,415,914
Deferred liabilities236,901
 267,364
Deferred tax liability134,622
 80,646
Other liabilities213,698
 230,891
Total liabilities6,582,480
 7,139,955
Preferred stock, $0.01 par value, 50,000,000 shares authorized at September 30, 2017 and December 31, 2016; no shares issued and outstanding—
 —
Common stock, $0.01 par value, 400,000,000 shares authorized at September 30, 2017 and December 31, 2016; 194,716,651 and 193,224,082 shares issued and 191,538,250 and 190,045,681 shares outstanding (including 5,147,149 and 4,608,187 unvested restricted shares), respectively1,915
 1,900
Additional paid-in-capital4,120,963
 4,102,397
Treasury stock, at cost; 3,178,401 shares at September 30, 2017 and December 31, 2016(56,440) (56,440)
Accumulated deficit(2,556,351) (1,969,875)
Total Brookdale Senior Living Inc. stockholders' equity1,510,087
 2,077,982
Noncontrolling interest(401) (250)
Total equity1,509,686
 2,077,732
Total liabilities and equity$8,092,166
 $9,217,687


See accompanying notes to condensed consolidated financial statements.



4

BROOKDALE SENIOR LIVING INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands, except per share data)
Three Months Ended
March 31,
Three Months Ended
March 31,
Three Months Ended
March 31,
2024
2024
2024
Resident fees
Resident fees
Resident fees
Management fees
Management fees
Management fees
Reimbursed costs incurred on behalf of managed communities
Reimbursed costs incurred on behalf of managed communities
Reimbursed costs incurred on behalf of managed communities
Other operating income
Other operating income
Other operating income
Total revenue and other operating income
Total revenue and other operating income
Total revenue and other operating income
Expense
Expense
Expense
Facility operating expense (excluding facility depreciation and amortization of $79,904 and $79,317, respectively)
Facility operating expense (excluding facility depreciation and amortization of $79,904 and $79,317, respectively)
Facility operating expense (excluding facility depreciation and amortization of $79,904 and $79,317, respectively)
General and administrative expense (including non-cash stock-based compensation expense of $3,273 and $3,104, respectively)
General and administrative expense (including non-cash stock-based compensation expense of $3,273 and $3,104, respectively)
General and administrative expense (including non-cash stock-based compensation expense of $3,273 and $3,104, respectively)
Facility operating lease expense
Facility operating lease expense
Facility operating lease expense
Depreciation and amortization
Depreciation and amortization
Depreciation and amortization
Asset impairment
Asset impairment
Asset impairment
Costs incurred on behalf of managed communities
Costs incurred on behalf of managed communities
Costs incurred on behalf of managed communities
Income (loss) from operations
Income (loss) from operations
Income (loss) from operations
Interest income
Interest income
Interest income
Interest expense:
Interest expense:
Interest expense:
Debt
Debt
Debt
Financing lease obligations
Financing lease obligations
Financing lease obligations
Amortization of deferred financing costs
Amortization of deferred financing costs
Amortization of deferred financing costs
Change in fair value of derivatives
Change in fair value of derivatives
Change in fair value of derivatives
Equity in earnings (loss) of unconsolidated ventures
Equity in earnings (loss) of unconsolidated ventures
Equity in earnings (loss) of unconsolidated ventures
Non-operating gain (loss) on sale of assets, net
Non-operating gain (loss) on sale of assets, net
Non-operating gain (loss) on sale of assets, net
Other non-operating income (loss)
Other non-operating income (loss)
Other non-operating income (loss)
Income (loss) before income taxes
Income (loss) before income taxes
Income (loss) before income taxes
Benefit (provision) for income taxes
Benefit (provision) for income taxes
Benefit (provision) for income taxes
Net income (loss)
Net income (loss)
Net income (loss)
Net (income) loss attributable to noncontrolling interest
Net (income) loss attributable to noncontrolling interest
Net (income) loss attributable to noncontrolling interest
Net income (loss) attributable to Brookdale Senior Living Inc. common stockholders
Net income (loss) attributable to Brookdale Senior Living Inc. common stockholders
Net income (loss) attributable to Brookdale Senior Living Inc. common stockholders
Basic and diluted net income (loss) per share attributable to Brookdale Senior Living Inc. common stockholders
Basic and diluted net income (loss) per share attributable to Brookdale Senior Living Inc. common stockholders
Basic and diluted net income (loss) per share attributable to Brookdale Senior Living Inc. common stockholders
Three Months Ended
September 30,		 Nine Months Ended
September 30,
2017 2016 2017 2016
Revenue       
Resident fees$922,892
 $1,042,831
 $2,873,889
 $3,158,547
Management fees18,138
 15,532
 56,474
 50,498
Reimbursed costs incurred on behalf of managed communities236,958
 187,763
 650,863
 559,067
Total revenue1,177,988
 1,246,126
 3,581,226
 3,768,112
Weighted average shares used in computing basic and diluted net income (loss) per share
       
Expense 
  
  
  
Facility operating expense (excluding depreciation and amortization of $105,424, $118,756, $325,976, and $351,667, respectively)650,654
 704,221
 1,967,601
 2,113,226
General and administrative expense (including non-cash stock-based compensation expense of $7,527, $8,455, $22,547 and $27,218, respectively)63,779
 63,425
 196,429
 246,741
Transaction costs1,992
 659
 12,924
 1,950
Facility lease expense84,437
 92,519
 257,934
 281,890
Depreciation and amortization117,649
 130,783
 366,023
 391,314
Goodwill and asset impairment368,551
 19,111
 390,816
 26,638
Loss on facility lease termination4,938
 —
 11,306
 —
Costs incurred on behalf of managed communities236,958
 187,763
 650,863
 559,067
Total operating expense1,528,958
 1,198,481
 3,853,896
 3,620,826
Income (loss) from operations(350,970) 47,645
 (272,670) 147,286
       
Interest income1,285
 809
 2,720
 2,239
Interest expense: 
  
  
  
Debt(44,382) (43,701) (126,472) (131,422)
Capital and financing lease obligations(31,999) (50,401) (114,086) (151,561)
Amortization of deferred financing costs and debt premium (discount)(3,544) (2,380) (8,827) (6,978)
Change in fair value of derivatives(74) —
 (159) (28)
Debt modification and extinguishment costs(11,129) (1,944) (11,883) (3,240)
Equity in (loss) earnings of unconsolidated ventures(6,722) (878) (10,311) 478
(Loss) gain on sale of assets, net(233) (425) (1,383) 2,126
Other non-operating income2,621
 3,706
 6,519
 11,011
Income (loss) before income taxes(445,147) (47,569) (536,552) (130,089)
Benefit (provision) for income taxes31,218
 (4,159) (50,075) (5,947)
Net income (loss)(413,929) (51,728) (586,627) (136,036)
Net (income) loss attributable to noncontrolling interest44
 43
 151
 126
Net income (loss) attributable to Brookdale Senior Living Inc. common stockholders$(413,885) $(51,685) $(586,476) $(135,910)
       
Basic and diluted net income (loss) per share attributable to Brookdale Senior Living Inc. common stockholders$(2.22) $(0.28) $(3.15) $(0.73)
       
Weighted average shares used in computing basic and diluted net income (loss) per share186,298
 185,946
 186,068
 185,641
Weighted average shares used in computing basic and diluted net income (loss) per share
See accompanying notes to condensed consolidated financial statements.



5

BROOKDALE SENIOR LIVING INC.
CONDENSED CONSOLIDATED STATEMENTSTATEMENTS OF EQUITY
Nine Months Ended September 30, 2017
(Unaudited, in thousands)
 Common Stock            
 Shares Amount 
Additional
Paid-In-
Capital
 
Treasury
Stock
 
Accumulated
Deficit
 
Stockholders'
Equity
 
Noncontrolling
Interest
 Total Equity
Balances at January 1, 2017190,046
 $1,900
 $4,102,397
 $(56,440) $(1,969,875) $2,077,982
 $(250) $2,077,732
Compensation expense related to restricted stock grants—
 —
 22,547
 —
 —
 22,547
 —
 22,547
Net income (loss)—
 —
 —
 —
 (586,476) (586,476) (151) (586,627)
Issuance of common stock under Associate Stock Purchase Plan130
 1
 1,585
 —
 —
 1,586
 —
 1,586
Restricted stock, net1,755
 18
 (18) —
 —
 —
 —
 —
Shares withheld for employee taxes(393) (4) (5,662) —
 —
 (5,666) —
 (5,666)
Other—
 —
 114
 —
 —
 114
 —
 114
Balances at September 30, 2017191,538
 $1,915
 $4,120,963
 $(56,440) $(2,556,351) $1,510,087
 $(401) $1,509,686

Three Months Ended
March 31,
20242023
Total equity, balance at beginning of period$405,153 $584,153 
Common stock:
Balance at beginning of period$1,988 $1,978 
Shares issued for settlement of prepaid stock purchase contracts35 — 
Restricted stock and restricted stock units, net18 16 
Shares withheld for employee taxes(6)(6)
Balance at end of period$2,035 $1,988 
Additional paid-in-capital:
Balance at beginning of period$4,342,362 $4,332,302 
Compensation expense related to restricted stock grants3,273 3,104 
Shares issued for settlement of prepaid stock purchase contracts(35)— 
Restricted stock and restricted stock units, net(18)(16)
Shares withheld for employee taxes(3,391)(1,834)
Balance at end of period$4,342,191 $4,333,556 
Treasury stock:
Balance at beginning and end of period$(102,774)$(102,774)
Accumulated deficit:
Balance at beginning of period$(3,837,912)$(3,648,901)
Net income (loss) attributable to Brookdale Senior Living Inc. common stockholders(29,566)(44,549)
Balance at end of period$(3,867,478)$(3,693,450)
Noncontrolling interest:
Balance at beginning of period$1,489 $1,548 
Net income (loss) attributable to noncontrolling interest(15)(14)
Balance at end of period$1,474 $1,534 
Total equity, balance at end of period$375,448 $540,854 
Common stock share activity
Outstanding shares of common stock:
Balance at beginning of period188,253 187,249 
Shares issued for settlement of prepaid stock purchase contracts3,557 — 
Restricted stock and restricted stock units, net1,778 1,545 
Shares withheld for employee taxes(575)(559)
Balance at end of period193,013 188,235 
See accompanying notes to condensed consolidated financial statements.



6

BROOKDALE SENIOR LIVING INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
 Nine Months Ended
September 30,
 2017 2016
Cash Flows from Operating Activities   
Net income (loss)$(586,627) $(136,036)
Adjustments to reconcile net income (loss) to net cash provided by operating activities: 
  
Loss on extinguishment of debt, net669
 375
Depreciation and amortization, net374,850
 398,292
Goodwill and asset impairment390,816
 26,638
Equity in loss (earnings) of unconsolidated ventures10,311
 (478)
Distributions from unconsolidated ventures from cumulative share of net earnings1,365
 6,400
Amortization of deferred gain(3,277) (3,279)
Amortization of entrance fees(2,457) (3,111)
Proceeds from deferred entrance fee revenue4,519
 11,327
Deferred income tax provision48,669
 3,804
Change in deferred lease liability(9,204) 2,553
Change in fair value of derivatives159
 28
Loss (gain) on sale of assets, net1,383
 (2,126)
Loss on facility lease termination11,306
 —
Non-cash stock-based compensation22,547
 27,218
Non-cash interest expense on financing lease obligations13,960
 19,728
Amortization of (above) below market lease, net(5,091) (5,165)
Other(4,699) (6,360)
Changes in operating assets and liabilities: 
  
Accounts receivable, net10,765
 8,183
Prepaid expenses and other assets, net23,323
 (7,338)
Accounts payable and accrued expenses(21,459) (73,892)
Tenant refundable fees and security deposits(232) (693)
Deferred revenue1,513
 11,213
Net cash provided by operating activities283,109
 277,281
    
Cash Flows from Investing Activities 
  
Change in lease security deposits and lease acquisition deposits, net(411) (1,776)
Change in cash and escrow deposits — restricted(6,340) (1,810)
Purchase of marketable securities(246,376) —
Additions to property, plant and equipment and leasehold intangibles, net(140,044) (263,950)
Acquisition of assets, net of related payables and cash received(400) (12,157)
Investment in unconsolidated ventures(187,600) (6,071)
Distributions received from unconsolidated ventures11,491
 4,836
Proceeds from sale of assets, net34,570
 219,471
Property insurance proceeds4,430
 6,360
Other962
 723
Net cash used in investing activities(529,718) (54,374)
    
Cash Flows from Financing Activities 
  
Proceeds from debt1,293,047
 202,132
Repayment of debt and capital and financing lease obligations(958,703) (217,696)
Proceeds from line of credit100,000
 1,276,500
Repayment of line of credit(100,000) (1,486,500)
Payment of financing costs, net of related payables(5,705) (1,414)
Proceeds from refundable entrance fees, net of refunds(2,241) (907)
Payment on lease termination(552) (9,250)
Payments of employee taxes for withheld shares(5,666) (1,435)
Other1,586
 1,818
Net cash provided by (used in) financing activities321,766
 (236,752)
Net increase (decrease) in cash and cash equivalents75,157
 (13,845)
Cash and cash equivalents at beginning of period216,397
 88,029
Cash and cash equivalents at end of period$291,554
 $74,184
Three Months Ended March 31,
20242023
Cash Flows from Operating Activities
Net income (loss)$(29,581)$(44,563)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization, net88,384 86,874 
Asset impairment1,708 — 
Equity in (earnings) loss of unconsolidated ventures— 577 
Amortization of entrance fees— (508)
Proceeds from deferred entrance fee revenue— 324 
Deferred income tax (benefit) provision(425)244 
Operating lease expense adjustment(13,089)(10,805)
Change in fair value of derivatives(3,087)904 
Loss (gain) on sale of assets, net(704)— 
Non-cash stock-based compensation expense3,273 3,104 
Property and casualty insurance income(2,626)(3,295)
Changes in operating assets and liabilities:
Accounts receivable, net(1,253)3,143 
Prepaid expenses and other assets, net1,708 (7,602)
Prepaid insurance premiums financed with notes payable(23,319)(19,305)
Trade accounts payable and accrued expenses(25,109)(1,386)
Refundable fees and deferred revenue2,725 14,092 
Operating lease assets and liabilities for lessor capital expenditure reimbursements249 2,244 
Net cash provided by (used in) operating activities(1,146)24,042 
Cash Flows from Investing Activities
Purchase of marketable securities— (49,674)
Sale and maturities of marketable securities30,000 30,000 
Capital expenditures, net of related payables(44,399)(49,700)
Proceeds from sale of assets, net849 — 
Property and casualty insurance proceeds2,642 6,422 
Purchase of interest rate cap instruments(629)(212)
Proceeds from interest rate cap instruments4,659 1,212 
Other(68)(67)
Net cash provided by (used in) investing activities(6,946)(62,019)
Cash Flows from Financing Activities
Proceeds from debt80,923 25,519 
Repayment of debt and financing lease obligations(20,502)(23,322)
Payment of financing costs, net of related payables(2,934)(346)
Payments of employee taxes for withheld shares(3,397)(1,680)
Net cash provided by (used in) financing activities54,090 171 
Net increase (decrease) in cash, cash equivalents, and restricted cash45,998 (37,806)
Cash, cash equivalents, and restricted cash at beginning of period349,668 474,548 
Cash, cash equivalents, and restricted cash at end of period$395,666 $436,742 


See accompanying notes to condensed consolidated financial statements.



7

BROOKDALE SENIOR LIVING INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


1. Description of Business


Brookdale Senior Living Inc. together with its consolidated subsidiaries ("Brookdale" or the "Company") is the leadingan operator of 652 senior living communities throughout the United States. The Company is committed to providing senior living solutions primarily within properties that are designed, purpose-builtits mission of enriching the lives of the people it serves with compassion, respect, excellence, and operated to provide the highest quality service, care and living accommodations for residents.integrity. The Company operates and manages independent living, assisted living, and dementia-care communitiesmemory care, and continuing care retirement centerscommunities ("CCRCs"). ThroughThe Company's senior living communities and its ancillarycomprehensive network help to provide seniors with care, connection, and services programs,in an environment that feels like home. As of March 31, 2024, the Company also offersowned 345 communities, representing a rangemajority of outpatient therapy, home health and hospice services to residents of many of itsthe Company's community portfolio, leased 277 communities, and to seniors living outside itsmanaged 30 communities.


2. Summary of Significant Accounting Policies


Basis of Presentation

The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States ("GAAP") and pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC") for quarterly reports on Form 10-Q. In the opinion of management, these financial statements include all adjustments, which are of a normal and recurring nature, necessary to present fairly the financial position, results of operations, and cash flows of the Company as of September 30, 2017, and for all periods presented. The condensed consolidated financial statements are prepared on the accrual basis of accounting. All adjustments made have been of a normal and recurring nature. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. The Company believes that the disclosures included are adequate and provide a fair presentation of interim period results. Interim financial statements are not necessarily indicative of the financial position or operating results for an entire year. It is suggested that theseThese interim financial statements should be read in conjunction with the audited financial statements and the notes thereto together with management's discussion and analysis of financial condition and results of operations, included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 20162023 filed with the SEC on February 15, 2017.21, 2024.


Principles of Consolidation


The condensed consolidated financial statements include the accounts of Brookdale and its wholly-ownedconsolidated subsidiaries. All significant intercompany balances and transactions have been eliminated. Investments in affiliated companies that the Company does not control, but has the ability to exercise significant influence over governance and operation, are accounted for by the equity method. The ownership interest of consolidated entities not wholly-owned by the Company are presented as noncontrolling interests in the accompanying consolidated financial statements. Noncontrolling interest represents the share of consolidated entities owned by third parties. Noncontrolling interest is adjusted for the noncontrolling holder's share of additional contributions, distributions and the proportionate share of the net income or loss of each respective entity.

The Company continually evaluates its potential variable interest entity ("VIE") relationships under certain criteria as provided for in Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 810, Consolidation ("ASC 810"). ASC 810 broadly defines a VIE as an entity with one or more of the following characteristics: (a) the total equity investment at risk is insufficient to finance the entity's activities without additional subordinated financial support; (b) as a group, the holders of the equity investment at risk lack (i) the ability to make decisions about the entity's activities through voting or similar rights, (ii) the obligation to absorb the expected losses of the entity, or (iii) the right to receive the expected residual returns of the entity; or (c) the equity investors have voting rights that are not proportional to their economic interests, and substantially all of the entity's activities either involve, or are conducted on behalf of, an investor that has disproportionately few voting rights. The Company performs this analysis on an ongoing basis and consolidates any VIEs for which the Company is determined to be the primary beneficiary, as determined by the Company's power to direct the VIE's activities and the obligation to absorb its losses or the right to receive its benefits, which are potentially significant to the VIE. Refer to Note 13 for more information about the Company's VIE relationships.



Revenue Recognition

Resident Fees

Resident fee revenue is recorded when services are rendered and consists of fees for basic housing and certain support services and fees associated with additional services such as assisted living care, skilled nursing care, ancillary services and personalized health services. Residency agreements are generally for a term of 30 days to one year, with resident fees billed monthly in advance. Revenue for certain skilled nursing services and ancillary services is recognized as services are provided, and such fees are billed monthly in arrears.

Management Fees

The Company manages certain communities under contracts which provide periodic management fee payments to the Company. Management fees are generally determined by an agreed upon percentage of gross revenues (as defined) and are recorded monthly. Certain management contracts also provide for an annual incentive fee to be paid to the Company upon achievement of certain metrics identified in the contract. Incentive fee revenue is recorded at the conclusion of the contract year at the amount due pursuant to the contractual arrangements.

Reimbursed Costs Incurred on Behalf of Managed Communities

The Company manages certain communities under contracts which provide periodic management fee payments to the Company plus reimbursements of certain operating expenses. Where the Company is the primary obligor with respect to any such operating expenses, the Company recognizes revenue when the goods have been delivered or the service has been rendered and the Company is due reimbursement. Such revenue is included in "reimbursed costs incurred on behalf of managed communities" on the condensed consolidated statements of operations. The related costs are included in "costs incurred on behalf of managed communities" on the condensed consolidated statements of operations.

Deferred Financing Costs

Third-party fees and costs incurred to obtain long-term debt are recorded as a direct adjustment to the carrying value of debt and amortized on a straight-line basis, which approximates the effective yield method, over the term of the related debt. Unamortized deferred financing fees are written-off if the associated debt is retired before the maturity date. Upon the refinancing of mortgage debt or amendment of the line of credit, unamortized deferred financing fees and additional financing costs incurred are accounted for in accordance with ASC 470-50, Debt Modifications and Extinguishments.

Income Taxes

Income taxes are accounted for under the asset and liability approach which requires recognition of deferred tax assets and liabilities for the differences between the financial reporting and tax basis of assets and liabilities. A valuation allowance reduces deferred tax assets when it is more likely than not that some portion or all of the deferred tax assets will not be realized.

Marketable Securities
Investments in commercial paper instruments with original maturities of greater than three months and remaining maturities of less than one year are classified as marketable securities.

Fair Value of Financial Instruments

ASC 820, Fair Value Measurements and Disclosures establishes a three-level valuation hierarchy for disclosure of fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. Categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The three levels are defined as follows:

Level 1 – Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2 – Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
Level 3 – Inputs to the valuation methodology are unobservable and significant to the fair value measurement.



Cash and cash equivalents, marketable securities, and cash and escrow deposits – restricted are reflected in the accompanying condensed consolidated balance sheets at amounts considered by management to reasonably approximate fair value due to the short maturity.

The Company estimates the fair value of its debt using a discounted cash flow analysis based upon the Company's current borrowing rate for debt with similar maturities and collateral securing the indebtedness. The Company had outstanding debt (excluding capital and financing lease obligations) with a carrying value of approximately $3.9 billion and $3.6 billion as of September 30, 2017 and December 31, 2016, respectively. Fair value of the debt approximates carrying value in all periods. The Company's fair value of debt disclosure is classified within Level 2 of the valuation hierarchy.

Stock-Based Compensation

The Company follows ASC 718, Compensation – Stock Compensation (“ASC 718”)in accounting for its share-based payments. This guidance requires measurement of the cost of employee services received in exchange for stock compensation based on the grant-date fair value of the employee stock awards. This cost is recognized as compensation expense ratably over the employee’s requisite service period. Incremental compensation costs arising from subsequent modifications of awards after the grant date are recognized when incurred.

Certain of the Company’s employee stock awards vest only upon the achievement of performance targets. ASC 718 requires recognition of compensation cost only when achievement of performance conditions is considered probable. Consequently, the Company’s determination of the amount of stock compensation expense requires a significant level of judgment in estimating the probability of achievement of these performance targets.

For all share-based awards with graded vesting other than awards with performance-based vesting conditions, the Company records compensation expense for the entire award on a straight-line basis (or, if applicable, on the accelerated method) over the requisite service period. For graded-vesting awards with performance-based vesting conditions, total compensation expense is recognized over the requisite service period for each separately vesting tranche of the award as if the award is, in substance, multiple awards once the performance target is deemed probable of achievement. Performance goals are evaluated quarterly. If such goals are not ultimately met or it is not probable the goals will be achieved, no compensation expense is recognized and any previously recognized compensation expense is reversed.

On January 1, 2017, the Company adopted Accounting Standards Update ("ASU") 2016-09, Compensation – Stock Compensation: Improvements to Employee Share-Based Payment Accounting ("ASU 2016-09")and changed its policy from estimating forfeitures to recording forfeitures when they occur. The Company’s adoption of ASU 2016-09 did not have a material impact on itsunaudited condensed consolidated financial statements. Intercompany balances and transactions have been eliminated in consolidation, and net income (loss) is reduced by the portion of net income (loss) attributable to noncontrolling interests.


Self-Insurance Liability AccrualsUse of Estimates


The Company is subject to various legal proceedings and claims that arise in the ordinary course of its business. Although the Company maintains general liability and professional liability insurance policies for its owned, leased and managed communities under a master insurance program, the Company's current policies provide for deductibles for each and every claim. As a result, the Company is, in effect, self-insured for claims that are less than the deductible amounts. In addition, the Company maintains a high deductible workers compensation program and a self-insured employee medical program.

The Company reviews the adequacy of its accruals related to these liabilities on an ongoing basis, using historical claims, actuarial valuations, third-party administrator estimates, consultants, advice from legal counsel and industry data, and adjusts accruals periodically. Estimated costs related to these self-insurance programs are accrued based on known claims and projected claims incurred but not yet reported. Subsequent changes in actual experience are monitored, and estimates are updated as information becomes available.

During the nine months ended September 30, 2017 and September 30, 2016, the Company reduced its estimate for the amount of expected losses for general liability and professional liability and workers compensation claims, based on recent historical claims experience. The reduction in these accrued reserves decreased facility operating expense by $3.7 million and $9.3 million for the three and nine months ended September 30, 2017, respectively, and by $13.9 million and $27.6 million for the three and nine months ended September 30, 2016, respectively.



Lease Accounting

The Company, as lessee, makes a determination with respect to each of its community leases as to whether each should be accounted for as an operating lease or capital lease. The classification criteria is based on estimates regarding the fair valuepreparation of the leased community, minimum lease payments, effective cost of funds, the economic life of the community and certain other terms in the lease agreements. In a business combination, the Company assumes the lease classification previously determined by the prior lessee absent a modification, as determined by ASC 840, Leases ("ASC 840"), in the assumed lease agreement. Payments made under operating leases are accounted for in the Company's condensed consolidated statements of operations as lease expense for actual rent paid plus or minus a straight-line adjustment for estimated minimum lease escalators and amortization of deferred gains in situations where sale-leaseback transactions have occurred.

For capital and financing lease obligation arrangements, a liability is established on the Company's condensed consolidated balance sheet representing the present value of the future minimum lease payments and a residual value for financing leases and a corresponding long-term asset is recorded in property, plant and equipment and leasehold intangibles in the condensed consolidated balance sheet. For capital lease assets, the asset is depreciated over the remaining lease term unless there is a bargain purchase option in which case the asset is depreciated over the useful life. For financing lease assets, the asset is depreciated over the useful life of the asset. Leasehold improvements purchased during the term of the lease are amortized over the shorter of their economic life or the lease term.

All of the Company's leases contain fixed or formula-based rent escalators. To the extent that the escalator increases are tied to a fixed index or rate, lease payments are accounted for on a straight-line basis over the life of the lease. In addition, all rent-free or rent holiday periods are recognized in lease expense on a straight-line basis over the lease term, including the rent holiday period.

The community leases contain customary terms, which may include assignment and change of control restrictions, maintenance and capital expenditure obligations, termination provisions and financial performance covenants, such as net worth and minimum lease coverage ratios. Failure to comply with these covenants could result in an event of default and/or trigger cross-default provisions in our outstanding debt and other lease documents. Further, an event of default related to an individual property or limited number of properties within a master lease portfolio would result in a default on the entire master lease portfolio and could trigger cross-default provisions in our other outstanding debt and lease documents. Certain leases contain cure provisions generally requiring the posting of an additional lease security deposit if the required covenant is not met.

Sale-leaseback accounting is applied to transactions in which an owned community is sold and leased back from the buyer if certain continuing involvement criteria are met. Under sale-leaseback accounting, the Company removes the community and related liabilities from the condensed consolidated balance sheet. Gain on the sale is deferred and recognized as a reduction of facility lease expense for operating leases and a reduction of interest expense for capital leases.

For leases in which the Company is involved with the construction of a building, the Company accounts for the leases during the construction period under the provisions of ASC 840. If the Company concludes that it has substantively all of the risks of ownership during construction of a leased property and therefore is deemed the owner of the project for accounting purposes, it records an asset and related financing obligation for the amount of total project costs related to construction in progress. Once construction is complete, the Company considers the requirements under ASC Subtopic 840-40. If the arrangement qualifies for sale-leaseback accounting, the Company removes the assets and related liabilities from the condensed consolidated balance sheet. If the arrangement does not qualify for sale-leaseback accounting, the Company continues to amortize the financing obligation and depreciate the assets over the lease term.

New Accounting Pronouncements

In January 2017, the FASB issued ASU 2017-04, Intangibles – Goodwill and Other: Simplifying the Test for Goodwill Impairment ("ASU 2017-04"). ASU 2017-04 removes Step 2 from the goodwill impairment test. Under ASU 2017-04, if a reporting unit's carrying amount exceeds its fair value, an impairment charge will be recorded based on the difference, with the impairment charge limited to the amount of goodwill allocated to the reporting unit. The Company adopted ASU 2017-04 on a prospective basis on January 1, 2017. The Company applied the adoption of ASU 2017-04 to its goodwill analysis performed in the three months ended September 30, 2017.

In January 2017, the FASB issued ASU 2017-01, Business Combinations: Clarifying the Definition of a Business ("ASU 2017-01"). ASU 2017-01 clarifies the definition of a business to assist companies in determining whether transactions should be accounted for as an asset acquisition or a business combination. Under ASU 2017-01, if substantially all of the fair value of the assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not a business and the transaction is accounted for as an asset acquisition. Transaction costs associated with asset acquisitions are capitalized while those associated


with business combinations are expensed as incurred. The amendments are effective on a prospective basis for the Company's fiscal year beginning January 1, 2018 and early adoption is permitted, including within interim periods. Upon adoption, the Company anticipates that the changes to the definition of a business may result in acquisitions of real estate, communities or senior housing operating companies being accounted for as asset acquisitions.

In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows: Restricted Cash, a consensus of the FASB Emerging Issues Task Force ("ASU 2016-18"). ASU 2016-18 intends to address the diversity in practice that exists in the classification and presentation of changes in restricted cash on the statement of cash flows. The amendments require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. The amendments are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017, and early adoption is permitted. Upon adoption, the changes required by ASU 2016-18 must be applied retrospectively to all periods presented. The Company plans to adopt ASU 2016-18 on January 1, 2018. The Company anticipates that the inclusion of the change in cash and escrow deposits restricted within the retrospective presentation of the statements of cash flows will result in a $6.3 million decrease to the amount of net cash used in investing activities for the nine months ended September 30, 2017.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows – Classification of Certain Cash Receipts and Cash Payments ("ASU 2016-15"). ASU 2016-15 clarifies how cash receipts and cash payments in certain transactions are presented in the statement of cash flows. Among other clarifications on the classification of certain transactions within the statement of cash flows, the amendments in ASU 2016-15 provide that debt prepayment and debt extinguishment costs will be classified within financing activities within the statement of cash flows. ASU 2016-15 is effective for the Company for the fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017, and early adoption is permitted. The Company plans to adopt ASU 2016-15 on January 1, 2018. Upon adoption, the changes in classification within the statement of cash flows must be applied retrospectively to all periods presented. The Company has identified $11.2 million and $2.9 million of cash paid for debt modification and extinguishment costs for the nine months ended September 30, 2017 and 2016, respectively, that the Company anticipates will be retrospectively classified as cash flows from financing activities upon adoption of ASU 2016-15. The Company anticipates that the retrospective application will result in an $11.2 million increase to the amount of net cash provided by operating activities and an $11.2 million decrease to the amount of net cash provided by financing activities for the nine months ended September 30, 2017. The Company anticipates that the retrospective application will result in a $2.9 million increase to the amount of net cash provided by operating activities and a $2.9 million increase to the amount of amount net cash used in financing activities for the nine months ended September 30, 2016.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments ("ASU 2016-13"). ASU 2016-13 replaces the current incurred loss impairment methodology for credit losses with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. ASU 2016-13 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted for fiscal years beginning after December 15, 2018. The Company is currently evaluating the impact the adoption of ASU 2016-13 will have on its condensed consolidated financial statements and disclosures.

In March 2016,related disclosures in conformity with GAAP requires management to make estimates and assumptions that affect the FASB issued ASU 2016-09, which is intended to simplify the accounting for share-based payment transactions, including the accounting for income taxes and forfeitures, as well as the classification of awards and classification on the statement of cash flows. The Company adopted ASU 2016-09 on January 1, 2017 and changed its accounting policy from estimating forfeitures to recording forfeitures when they occur. The Company’s adoption of ASU 2016-09 did not have a material impact on its condensed consolidated financial statements. There was no current impact on the Company’s condensed consolidated statement of operations for the three and nine months ended September 30, 2017 from the adoption of ASU 2016-09 as the Company is in a net operating loss position and any excess tax benefits require a full valuation allowance. See Note 12 for more information about the Company's deferred income taxes. The changes have been applied using a modified retrospective approach in accordance with ASU 2016-09 and prior periods have not been adjusted.

In February 2016, the FASB issued ASU 2016-02, Leases ("ASU 2016-02"). ASU 2016-02 amends the existing accounting principles for the recognition, measurement, presentation and disclosure of leases for both lessees and lessors. ASU 2016-02 requires a lessee to recognize a right-of-use asset and a lease liability on the balance sheet for most leases. Additionally, ASU 2016-02 makes targeted changes to lessor accounting. ASU 2016-02 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018, and early adoption is permitted. For the nine months ended September 30, 2017, the Company made cash lease payments of $275.5 million for long-term community leases accounted for as operating leases under ASC 840. The Company anticipates that the adoption of ASU 2016-02 will resultamounts reported in the recognition of material lease liabilities and right-of use assets on the condensed consolidated balance sheet for these community operating leases. The Company continues


to evaluate the impact that the adoption of ASU 2016-02 will have on its condensed consolidated financial statements and disclosures.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers ("ASU 2014-09"). ASU 2014-09 affects any entityaccompanying notes. Estimates are used for, but not limited to, revenue, asset impairments, self-insurance reserves, performance-based compensation, allowance for credit losses, depreciation and amortization, leasing transactions, income taxes, and other contingencies. Although these estimates are based on management's best knowledge of current events and actions that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets. The five step model defined by ASU 2014-09 requires the Company to (i) identify the contracts with the customer, (ii) identify the performance obligationsmay undertake in the contact, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract and (v) recognize revenue when each performance obligation is satisfied. Revenue will be recognized when promised goods or services are transferred to the customer in an amount that reflects the consideration expected in exchange for those goods or services. ASU 2014-09future, actual results may be applied retrospectively to each prior period (full retrospective) or retrospectively with the cumulative effect recognized as of the date of initial application (modified retrospective). ASU 2014-09, as amended, is effective for the Company's fiscal year beginning January 1, 2018, and, at that time, the Company expects to adopt the new standard under the modified retrospective approach for contracts with customers. Under the modified retrospective approach, the guidance is applied to the most current period presented, recognizing the cumulative effect of the adoption change as an adjustment to beginning retained earnings. The Company continues to evaluate the impact the adoption of ASU 2014-09 will have on its condensed consolidated financial statements and disclosures. The evaluation includes identifying revenue streams by like contracts to allow for ease of implementation. In addition, the Company is monitoring specific developments for the senior living industry and evaluating potential changes to our business processes, systems and controls to support the recognition and disclosure under the new standard. Preliminary conclusions based upon procedures to-date include the following:

Resident Fees: The Company does not anticipate that the adoption of ASU 2014-09 will result in a significant change to the amount and timing of the recognition of resident fee revenue.

Management Fees and Reimbursed Costs Incurred on Behalf of Managed Communities: The Company manages certain communities under contracts which provide for payment to the Company of a periodic management fee plus reimbursement of certain operating expenses. The Company does not anticipate that there will be any significant change to the amount and timing of revenue recognized for these periodic management fees. Certain management contracts also provide for an annual incentive fee to be paid to the Company upon achievement of certain metrics identified in the contract. Upon adoption of ASU 2014-09, the Company anticipates that incentive fee revenue may be recognized earlier during the annual contract period. The Company continues to evaluate the performance obligations and assessing the transfer of control for each operating service identified in the contracts, which may impact the amount of revenue recognized for reimbursed costs incurred on behalf of managed communities with no net impact to the amount of income from operations.

Equity in Earnings (Loss) of Unconsolidated Ventures: Certain of the Company's unconsolidated ventures accounted for under the equity method have residency agreements which require the resident to pay an upfront entrance fee prior to moving into the community and a portion of the upfront entrance fee is non-refundable. The Company's unconsolidated ventures continue to evaluate the impact of the adoption of ASU 2014-09, which may impact the recognition of equity in earnings of unconsolidated ventures.

Additionally, real estate sales are within the scope of ASU 2014-09, as amended by ASU 2017-05, Other Income – Gains and Lossesdiffer from the Derecognition of Nonfinancial Assets ("ASU 2017-05"). ASU 2017-05 clarifies the scope of subtopic 610-20, Other Income - Gains and Losses from Derecognition of Nonfinancial Assets, and adds guidance for partial sales of nonfinancial assets. Under ASU 2014-09 and ASU 2017-05 the income recognition for real estate sales is largely based on the transfer of control versus continuing involvement under the current guidance. As a result, more transactions may qualify as sales of real estate and gains or losses may be recognized sooner. Upon adoption, the Company will apply the five step revenue model to all future sales of real estate. The Company may elect to adopt ASU 2014-09 and ASU 2017-05 for contracts with noncustomers utilizing either a full retrospective approach or a modified retrospective approach. The Company has deferred gains related to sales of real estate which may be recognized as a cumulative adjustment to retained earnings upon adoption if the full retrospective approach is elected for contracts with noncustomers. The Company continues to evaluate the impact the adoption of ASU 2014-09 and ASU 2017-05 will have on its condensed consolidated financial statements and disclosures.original estimates.


Reclassifications


Certain prior period amounts have been reclassified to conform to the current financial statement presentation, with no effect on the Company's condensed consolidated financial position or results of operations.




3. Earnings Per ShareFair Value Measurements


Basic earnings per share ("EPS") is calculated by dividing net income by the weighted average number of shares of common stock outstanding.  Diluted EPS includes the components of basic EPSInterest Rate Derivatives

The Company's derivative assets include interest rate cap and also gives effect to dilutive common stock equivalents.  For purposes of calculating basic and diluted earnings per share, vested restricted stock awards are considered outstanding. Under the treasury stock method, diluted EPS reflects the potential dilution that could occur if securities or otherswap instruments that are convertible into common stock were exercised or could result ineffectively manage the issuance of common stock.  Potentially dilutive common stock equivalents include unvested restricted stock, restricted stock units and convertible debt instruments and warrants.

During the three and nine months ended September 30, 2017 and September 30, 2016, the Company reportedrisk above certain interest rates for a consolidated net loss.  As a result of the net loss, unvested restricted stock, restricted stock units and convertible debt instruments and warrants were antidilutive for each period and were not included in the computation of diluted weighted average shares.  The weighted average restricted stock and restricted stock units excluded from the calculations of diluted net loss per share were 5.3 million for each of the three and nine months ended September 30, 2017, and 4.7 million and 4.6 million for the three and nine months ended September 30, 2016, respectively.

The calculation of diluted weighted average shares excludes the impact of conversion of the outstanding principal amount of $316.3 millionportion of the Company's 2.75% convertible senior notes due June 15, 2018. As of September 30, 2017 and September 30, 2016, the maximum number of shares issuable upon conversion of the notes is approximately 13.8 million (after giving effect to additional make-whole shares issuable upon conversion in connection with the occurrence of certain events); however it is the Company's current intent and policy to settle the principal amount of the notes in cash upon conversion. The maximum number of shares issuable upon conversion of the notes in excess of the amount of principal that would be settled in cash is approximately 3.0 million. In addition, the calculation of diluted weighted average shares excludes the impact of the exercise of warrants to acquire the Company's common stock. As of September 30, 2017 and September 30, 2016, the number of shares issuable upon exercise of the warrants was approximately 10.8 million.

4.  Acquisitions, Dispositions and Other Significant Transactions

long-term variable rate debt. The Company completed dispositions, through saleshas not designated the interest rate cap and lease terminations, of 139 communities during the period from January 1, 2016 through September 30, 2017, including three communities disposed of prior to June 30, 2016. The Company's condensed consolidated financial statements include resident fee revenue of $4.0 millionswap instruments as hedging instruments and $115.1 million, facility operating expenses of $3.3 million and $87.4 million, and cash lease payments of $0.9 million and $27.5 million for the 136 communities for the three months ended September 30, 2017 and September 30, 2016, respectively. The Company's condensed consolidated financial statements include resident fee revenue of $96.6 million and $361.1 million, facility operating expenses of $74.4 million and $272.6 million, and cash lease payments of $26.8 million and $82.4 million for the 139 communities for the nine months ended September 30, 2017 and September 30, 2016, respectively.

The foregoing transactions, and the Company's assets held for sale as of September 30, 2017, are described below.

Dispositions and Restructurings of Communities Leased from HCP

On November 1, 2016, the Company announced that it had entered into agreements to, among other things, terminate triple-net leases with respect to 97 communities, four of which were contributed to an existing unconsolidated venture in which the Company holds an equity interest and 64 of which were acquired by the Blackstone Venture described below. In addition to the formation of the Blackstone Venture, the transactions included the following components with respect to 33 communities:

The Company and HCP, Inc. ("HCP") agreed to terminate triple-net leases with respect to eight communities. HCP agreed to contribute immediately thereafter four of such, communities, to an existing unconsolidated venture with HCP in which the Company has a 10% equity interest. During the three months ended December 31, 2016, the triple-net leases with respect to seven communities were terminated and HCP contributed four of the communities to the existing unconsolidated venture. The triple-net lease with respect to the remaining community was terminated during January 2017. The results of operations of the eight communities are reportedchanges in the following segments within the condensed consolidated financial statements through the respective disposition dates: Assisted Living (six communities), Retirement Centers (one community) and CCRCs-Rental (one community).

The Company and HCP agreed to terminate triple-net leases with respect to 25 communities. During the three months ended September 30, 2017, the triple-net leases with respect to two communities were terminated. The Company’s triple net lease obligations with respect to the remaining 23 communities either have been terminated, or are expected to be terminated, during the three months ended December 31, 2017.  Following the termination of the Company’s triple net


lease obligations for these communities, the Company will continue to operate certain of these communities on an interim basis, and such communities will be reported in the Management Services segment from and after termination of such triple net lease obligations.  The Company's condensed consolidated financial statements include resident fee revenue of $18.0 million and $18.1 million, facility operating expenses of $14.8 million and $14.6 million, and cash lease payments of $2.6 million and $4.9 million for the 25 communities for the three months ended September 30, 2017 and September 30, 2016, respectively. The Company's condensed consolidated financial statements include resident fee revenue of $54.9 million and $54.6 million, facility operating expenses of $44.7 million and $44.0 million, and cash lease payments of $8.1 million and $14.7 million for the 25 communities for the nine months ended September 30, 2017 and September 30, 2016, respectively.

Formation of Venture with Blackstone

On March 29, 2017, the Company and affiliates of Blackstone Real Estate Advisors VIII L.P. (collectively, "Blackstone") formed a venture (the “Blackstone Venture”) that acquired 64 senior housing communities for a purchase price of $1.1 billion. The Company had previously leased the 64 communities from HCP under long-term lease agreements with a remaining average lease term of approximately 12 years. At the closing, the Blackstone Venture purchased the 64-community portfolio from HCP subject to the existing leases, and the Company contributed its leasehold interests for 62 communities and a total of $179.2 million in cash to purchase a 15% equity interest in the Blackstone Venture, terminate leases, and fund its share of closing costs. As of the formation date, the Company continued to operate two of the communities under lease agreements and began managing 60 of the communities on behalf of the venture under a management agreement with the venture. The two remaining leases will be terminated, pending certain regulatory and other conditions, at which point the Company will manage the communities; however, there can be no assurance that the terminations will occur or, if they do, when the actual terminations will occur. Two of the communities are managed by a third party for the venture.

The results and financial position of the 62 communities for which leases were terminated were deconsolidated from the Company prospectively upon formation of the Blackstone Venture. The results of operations of the 62 communities for which leases were terminated were reported in the following segments within the condensed consolidated financial statements through the formation date: Assisted Living (47 communities), Retirement Centers (eight communities) and CCRCs-Rental (seven communities). The Company's interest in the venture is accounted for under the equity method of accounting. Under the terms of the venture agreement, the Company may be entitled to distributions which are less than or in excess of the Company's 15% equity interest based upon specified performance criteria.

Initially, the Company determined that the contributed carryingfair value of the Company's investment was $66.8 million, representinginstruments are recognized in earnings in the amount by which the $179.2 million cash contribution exceeded the carrying valueperiod of the Company's liabilities under operating, capital and financing leases contributedchange. The interest rate derivative positions are valued using models developed by the Company netrespective

8

counterparty that use as their basis readily available observable market parameters (such as forward yield curves) and are classified within Level 2 of the carrying valuevaluation hierarchy. The Company considers the credit risk of the assets under such operating, capital and financing leases. However, the Company estimatedits counterparties when evaluating the fair value of its 15% equityderivatives.

The following table summarizes the Company's Secured Overnight Financing Rate ("SOFR") interest rate cap instruments as of March 31, 2024.

($ in millions)
Current notional balance$1,281.9 
Weighted average fixed cap rate4.05 %
Weighted average remaining term0.6 years
Estimated asset fair value (included in other assets, net)$11.8 

As of December 31, 2023, the Blackstone Venture at inception to be $47.1estimated fair value of the interest rate cap instruments was $13.3 million.

The following table summarizes the Company's SOFR interest rate swap instrument as of March 31, 2024.

($ in millions)
Current notional balance$220.0 
Fixed interest rate3.00 %
Remaining term0.1 years
Estimated asset fair value (included in other assets, net)$0.9 

As of December 31, 2023, the estimated fair value of the interest rate swap instrument was $1.6 million.

Long-term debt

The Company estimates the fair value of its debt primarily using a result,discounted cash flow analysis based upon the Company's current borrowing rate for debt with similar maturities and collateral securing the indebtedness. The Company recordedestimates the fair value of its convertible senior notes based on valuations provided by third-party pricing services. The Company had outstanding long-term debt with a $19.7 million chargecarrying amount of approximately $3.8 billion and $3.7 billion as of March 31, 2024 and December 31, 2023, respectively. Fair value of the long-term debt is approximately $3.5 billion and $3.4 billion as of March 31, 2024 and December 31, 2023, respectively. The Company's fair value of long-term debt disclosure is classified within asset impairment expense forLevel 2 of the valuation hierarchy.

4. Revenue

For the three months ended March 31, 20172024 and 2023, the Company generated 93.9% and 93.6%, respectively, of its resident fee revenue from private pay customers and the remainder from government reimbursement programs and other payor sources. Refer to Note 13 for disaggregation of revenue by reportable segment.

The payment terms and conditions within the amount ofCompany's revenue-generating contracts vary by contract type and payor source, although terms generally include payment to be made within 30 days. Resident fee revenue for recurring and routine monthly services is generally billed monthly in advance under the contributed carrying valueCompany's independent living, assisted living, and memory care residency agreements. Resident fee revenue for standalone or certain healthcare services is generally billed monthly in excess of the estimated fair valuearrears. Additionally, certain of the Company's investment.

Additionally, these transactions related to the Blackstone Venture required the Company to recordrevenue-generating contracts include non-refundable fees that are generally billed and collected in advance or upon move-in of a significant increase toresident under the Company's existing tax valuation allowance, after consideringindependent living, assisted living, and memory care residency agreements. Amounts of revenue that are collected from residents in advance are recognized as deferred revenue until the changeperformance obligations are satisfied.

The Company had total deferred revenue (included within refundable fees and deferred revenue and other liabilities within the condensed consolidated balance sheets) of $51.3 million and $48.3 million, including $27.1 million and $24.1 million of monthly resident fees billed and received in the Company's future reversaladvance, as of estimated timing differences resulting from these transactions, primarily due to removing the deferred positions related to the contributed leases. DuringMarch 31, 2024 and December 31, 2023, respectively. For the three months ended March 31, 2017,2024 and 2023, the Company recorded a provision for income taxes to establish an additional $85.0recognized $35.2 million and $36.9 million, respectively, of valuation allowance against its federal and state net operating loss carryforwards and tax credits as the Company anticipates these carryforwards and credits will not be utilized prior to expiration. See Note 12 for more information about the Company's deferred income taxes.

Dispositions of Owned Communities and Assets Held for Sale

The Company began 2017 with 16 of its owned communities classified as held for sale as of December 31, 2016. During the nine months ended September 30, 2017, the Company completed the sale of three communities, and during the three months ended September 30, 2017, the Company entered into an agreement to sell an additional community, which is classified as held for sale as of September 30, 2017. As of September 30, 2017, 15 communities were classified as held for sale.

As of September 30, 2017, $106.4 million was recorded as assets held for sale and $50.4 million of mortgage debtrevenue that was included in the current portiondeferred revenue balance as of long-term debt within the condensed consolidated balance sheet with respect to the 15 communities held for sale. This debt will either be repaid with the proceeds from the sales or be assumed by the prospective purchasers. The results of operations of the 15 communities are reported in the following segments within the condensed consolidated financial statements:


Assisted Living (12 communities)January 1, 2024 and CCRCs-Rental (three communities). The 15 communities had resident fee revenue of $12.2 million and $12.8 million and facility operating expenses of $10.9 million and $11.0 million for the three months ended September 30, 2017 and September 30, 2016,2023, respectively. The 15 communities had resident fee revenueCompany applies the

9

practical expedient in ASC 606-10-50-14 and does not disclose amounts for remaining performance obligations that have original expected durations of $37.6 million and $39.0 million and facility operating expenses of $33.2 million and $33.7 million for the nine months ended September 30, 2017 and September 30, 2016, respectively.one year or less.


The closings of the sales of the unsold communities classified as held for sale are subject to receipt of regulatory approvals and satisfaction of other customary closing conditions and are expected to occur during the next 12 months; however, there can be no assurance that the transactions will close or, if they do, when the actual closings will occur.

Other Lease Terminations

During the nine months ended September 30, 2017, the Company terminated leases for 14 communities otherwise than in connection with the transactions with Blackstone and HCP described above. The Company recognized $4.9 million and $11.3 million net loss on facility lease termination for the three and nine months ended September 30, 2017, respectively, primarily from the write-off of assets subject to terminated lease agreements. The results of operations of the 14 communities are reported in the following segments with the condensed consolidated financial statements through the respective termination dates: Retirement Centers (one community), Assisted Living (12 communities), and CCRCs-Rental (one community).

5.  Stock-Based Compensation

Current year grants of restricted stock under the Company's 2014 Omnibus Incentive Plan were as follows (amounts in thousands except for value per share):
 Shares Granted Value Per Share Total Value
Three months ended March 31, 20172,392
 $14.84
 $35,497
Three months ended June 30, 201771
 $13.11
 $937
Three months ended September 30, 201767
 $13.19
 $889

6.  Goodwill and Other Intangible Assets, Net

The following is a summary of the carrying amount of goodwill as of September 30, 2017 and December 31, 2016 presented on an operating segment basis (in thousands):
 September 30, 2017 December 31, 2016
 
Gross
Carrying
Amount
 
Dispositions and Other
Reductions
 Net 
Gross
Carrying
Amount
 
Dispositions and Other
Reductions
 Net
Retirement Centers$28,141
 $(820) $27,321
 $28,141
 $(820) $27,321
Assisted Living605,469
 (253,817) 351,652
 600,162
 (48,817) 551,345
Brookdale Ancillary Services126,810
 —
 126,810
 126,810
 —
 126,810
Total$760,420
 $(254,637) $505,783
 $755,113
 $(49,637) $705,476

The Company follows ASC 350, Goodwill and Other Intangible Assets, and tests goodwill for impairment annually during the fourth quarter or whenever indicators of impairment arise. Factors the Company considers important in its analysis of whether an indicator of impairment exists include a significant decline in the Company's stock price or market capitalization for a sustained period since the last testing date, significant underperformance relative to historical or projected future operating results and significant negative industry or economic trends. The Company first assesses qualitative factors to determine whether it is necessary to perform a quantitative goodwill impairment test. The quantitative goodwill impairment test is based upon a comparison of the estimated fair value of the reporting unit to which the goodwill has been assigned with the reporting unit's carrying value. The Company is not required to calculate the fair value of a reporting unit unless the Company determines, based on a qualitative assessment, that it is more likely than not that its fair value of a reporting unit is less than its carrying amount. The fair values used in the quantitative goodwill impairment test are estimated based upon discounted future cash flow projections for the reporting unit. These cash flow projections are based upon a number of estimates and assumptions such as revenue and expense growth rates, capitalization rates and discount rates. If the quantitative goodwill impairment test results in a reporting unit's carrying amount exceeding its estimated fair value, an impairment charge will be recorded based on the difference in accordance with ASU 2017-04, with the impairment charge limited to the amount of goodwill allocated to the reporting unit.



During the third quarter of 2017, the Company identified qualitative indicators of impairment, including a significant decline in the Company's stock price and market capitalization for a sustained period since the last testing date, significant underperformance relative to historical and projected operating results, and an increased competitive environment in the senior living industry. Based upon the Company's qualitative assessment, the Company performed a quantitative goodwill impairment test as of September 30, 2017, which included a comparison of the estimated fair value of each reporting unit to which the goodwill has been assigned with the reporting unit's carrying value.

In estimating the fair value of the reporting units for purposes of the quantitative goodwill impairment test, the Company utilized an income approach, which included future cash flow projections that are developed internally. Any estimates of future cash flow projections necessarily involve predicting unknown future circumstances and events and require significant management judgments and estimates. In arriving at the cash flow projections, the Company considered its historic operating results, approved budgets and business plans, future demographic factors, expected growth rates, and other factors. In using the income approach to estimate the fair value of reporting units for purposes of its goodwill impairment test, the Company made certain key assumptions. Those assumptions include future revenues, facility operating expenses, and cash flows, including sales proceeds that the Company would receive upon a sale of the communities using estimated capitalization rates, all of which are considered Level 3 inputs in accordance with ASC 820. The Company corroborated the estimated capitalization rates used in these calculations with capitalization rates observable from recent market transactions. Future cash flows are discounted at a rate that is consistent with a weighted average cost of capital from a market participant perspective. The weighted average cost of capital is an estimate of the overall after-tax rate of return required by equity and debt holders of a business enterprise.

Based on the results of the Company's quantitative goodwill impairment test, the Company determined that the carrying amount of the Company's Assisted Living reporting unit exceeded its estimated fair value by $205.0 million as of September 30, 2017. As a result, the Company recorded a non-cash impairment charge of $205.0 million to goodwill recorded on the Assisted Living operating segment for the three months ended September 30, 2017. Based on the results of the Company's quantitative goodwill impairment test, the Company determined that the estimated fair value of both the Company's Retirement Centers and Brookdale Ancillary Services reporting units exceeded their respective carrying values as of September 30, 2017.

Determining the fair value of the Company’s reporting units involves the use of significant estimates and assumptions, which the Company believes to be reasonable, that are unpredictable and inherently uncertain. These estimates and assumptions include revenue growth rates and operating margins used to calculate projected future cash flows and risk-adjusted discount rates. Future events may indicate differences from management's current judgments and estimates which could, in turn, result in future impairments. Future events that may result in impairment charges include increases in interest rates, which could impact capitalization and discount rates, differences in the projected occupancy rates and changes in the cost structure of existing communities. Significant adverse changes in the Company’s future revenues and/or operating margins, significant changes in the market for senior housing or the valuation of the real estate of senior living communities, as well as other events and circumstances, including but not limited to increased competition and changing economic or market conditions, including market control premiums, could result in changes in fair value and the determination that additional goodwill is impaired.

The following is a summary of other intangible assets as of September 30, 2017 and December 31, 2016 (in thousands):
 September 30, 2017 December 31, 2016
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 Net 
Gross
Carrying
Amount
 
Accumulated
Amortization
 Net
Community purchase options$4,738
 $—
 $4,738
 $4,738
 $—
 $4,738
Health care licenses51,825
 —
 51,825
 65,126
 —
 65,126
Trade names27,800
 (23,070) 4,730
 27,800
 (21,135) 6,665
Management contracts13,531
 (9,947) 3,584
 13,531
 (7,053) 6,478
Total$97,894
 $(33,017) $64,877
 $111,195
 $(28,188) $83,007

Amortization expense related to definite-lived intangible assets for the three months ended September 30, 2017 and September 30, 2016 was $0.9 million and $1.5 million, respectively, and for the nine months ended September 30, 2017 and September 30, 2016 was $4.8 million and $8.3 million, respectively. The community purchase options are not currently amortized, but will be added to the cost basis of the related communities if the option is exercised, and will then be depreciated over the estimated useful life of the community.



Indefinite-lived intangible assets are tested for impairment annually during the fourth quarter or whenever indicators of impairment arise. The impairment test consists of a comparison of the estimated fair value of the indefinite-lived intangible asset with its carrying value. If the carrying amount exceeds its fair value, an impairment loss is recognized for that difference. Health care licenses were determined to be indefinite-lived intangible assets and are not subject to amortization.

During the third quarter of 2017, the Company identified indicators of impairment for the Company’s home health care licenses in Florida, including significant underperformance relative to historical and projected operating results, decreases in reimbursement rates from Medicare for home health care services, an increased competitive environment in the home health care industry, and disruption from the impact of Hurricane Irma. The Company performed a quantitative impairment test as of September 30, 2017, which included a comparison of the estimated fair value of the Company’s home health care licenses to the carrying value. In estimating the fair value of the home health licenses for purposes of the quantitative impairment test, the Company utilized an income approach, which included future cash flow projections that are developed internally. Any estimates of future cash flow projections necessarily involve predicting unknown future circumstances and events and require significant management judgments and estimates. In arriving at the cash flow projections, the Company considered its historic operating results, approved budgets and business plans, future demographic factors, expected growth rates, and other factors, all of which are considered Level 3 inputs in accordance with ASC 820.

Based on the results of the Company's quantitative impairment test, the Company determined that the carrying amount of certain of the Company's home health care licenses in Florida exceeded their estimated fair value by $13.7 million as of September 30, 2017. As a result, the Company recorded a non-cash impairment charge of $13.7 million to intangible assets within the Brookdale Ancillary Services segment for the three months ended September 30, 2017.

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


As of September 30, 2017March 31, 2024 and December 31, 2016,2023, net property, plant and equipment and leasehold intangibles, which include assets under capital and financing leases, consisted of the following (in thousands):following.

September 30, 2017 December 31, 2016
(in thousands)(in thousands)March 31, 2024December 31, 2023
Land$449,295
 $455,307
Buildings and improvements4,911,597
 5,053,204
Leasehold improvements126,185
 126,325
Furniture and equipment995,975
 974,516
Resident and leasehold operating intangibles609,518
 705,000
Resident in-place lease intangibles
Construction in progress52,003
 69,803
Assets under capital and financing leases2,038,476
 2,879,996
9,183,049
 10,264,151
Assets under financing leases and leasehold improvements
Property, plant and equipment and leasehold intangibles
Accumulated depreciation and amortization(3,002,673) (2,884,846)
Property, plant and equipment and leasehold intangibles, net$6,180,376
 $7,379,305


Long-lived assets with definite useful lives are depreciated or amortized on a straight-line basis over their estimated useful lives (or, in certain cases, the shorter of their estimated useful lives or the lease term) and are tested for impairment whenever indicators of impairment arise. During the nine months ended September 30, 2017, theThe Company evaluatedrecognized depreciation and amortization expense on its property, plant and equipment and leasehold intangibles of $86.1 million and $84.9 million for impairmentthe three months ended March 31, 2024 and identified properties with a carrying amount of the assets in excess of the estimated future undiscounted net cash flows expected to be generated by the assets.2023, respectively. The Company compared the estimated fair value of the assets to their carrying value for these identified properties and recorded an impairment chargerecognized $1.7 million for the excessthree months ended March 31, 2024 of carrying value over fair value. The Company recordednon-cash impairment charges in its operating results for its property, plant and equipment and leasehold intangibles non-cash impairment charges in its operating results of $149.9 million and $152.4 million for the three and nine months ended September 30, 2017, respectively. The non-cash impairment charges reduced the carrying values of assets, within the Assisted Living, CCRCs - Rental, and Retirement Centers segments by $133.7 million, $16.2 million, and $2.5 million, respectively. The fair values of the property, plant and equipment of these communities were determined utilizing a direct capitalization method considering stabilized facility operating income and market capitalization rates. These fair value measurements are considered Level 3 measurements within the fair value hierarchy. The range of capitalization rates utilized was 6.5% to 9.0%, depending upon the property type, geographical location, and the quality of the respective community. The Company corroborated the estimated fair values with a sales comparison approach with information observable from recent market transactions. These impairment charges are primarily due to lower than expectedproperty damage sustained at certain communities.



operating performance at these properties and reflect the amount by which the carrying values of the assets exceeded their estimated fair value.

8.6. Debt

Long-term Debt and Capital and Financing Lease Obligations


Long-term debt and capital and financing lease obligations consistconsists of the following (in thousands):following.

 September 30, 2017 December 31, 2016
Mortgage notes payable due 2017 through 2047; weighted average interest rate of 4.58% for the nine months ended September 30, 2017, less debt discount and deferred financing costs of $15.6 million and $4.5 million as of September 30, 2017 and December 31, 2016, respectively (weighted average interest rate of 4.50% in 2016)$3,550,927
 $3,184,229
Capital and financing lease obligations payable through 2032; weighted average interest rate of 7.95% for the nine months ended September 30, 2017 (weighted average interest rate of 8.08% in 2016)1,577,589
 2,485,520
Convertible notes payable in aggregate principal amount of $316.3 million, less debt discount and deferred financing costs of $10.1 million and $20.9 million as of September 30, 2017 and December 31, 2016, respectively, interest at 2.75% per annum, due June 15, 2018306,145
 295,397
Construction financing (weighted average interest rate of 8.00% in 2016)—
 3,644
Notes payable issued to finance insurance premiums, weighted average interest rate of 2.94% for the nine months ended September 30, 2017, due 20174,347
 —
Other notes payable, weighted average interest rate of 5.80% for the nine months ended September 30, 2017 (weighted average interest rate of 5.33% in 2016) and maturity dates ranging from 2018 to 202176,359
 76,377
Total long-term debt and capital and financing lease obligations5,515,367
 6,045,167
Less current portion646,504
 215,255
Total long-term debt and capital and financing lease obligations, less current portion$4,868,863
 $5,829,912
(in thousands)March 31, 2024December 31, 2023
Fixed rate mortgage notes payable due 2025 through 2047; weighted average interest rate of 4.26% as of both March 31, 2024 and December 31, 2023$1,947,548 $1,953,414 
Variable rate mortgage notes payable due 2025 through 2030; weighted average interest rate of 7.75% and 7.74% as of March 31, 2024 and December 31, 2023, respectively1,570,918 1,524,907 
Convertible notes payable due October 2026; interest rate of 2.00% as of both March 31, 2024 and December 31, 2023230,000 230,000 
Tangible equity units senior amortizing notes due November 2025; interest rate of 10.25% as of both March 31, 2024 and December 31, 202315,935 17,990 
Notes payable for insurance premium financing due 2024; interest rate of 7.40% as of March 31, 202422,592 — 
Deferred financing costs, net(29,180)(28,998)
Total long-term debt3,757,813 3,697,313 
Current portion65,681 41,463 
Total long-term debt, less current portion$3,692,132 $3,655,850 

Credit Facilities

On December 19, 2014,As of March 31, 2024, the long-term debt, less current portion within the Company's condensed consolidated balance sheet includes $100.0 million of mortgage notes payable scheduled to mature in January 2025 with two one-year extension options, exercisable by the Company entered into a Fourth Amended and Restated Credit Agreement with General Electric Capital Corporation (which has since assigned its interest to Capital One Financial Corporation), as administrative agent, lender and swingline lender, and the other lenders from time to time parties thereto. The agreement currently provides for a total commitment amount of $400.0 million, comprised of a $400.0 million revolving credit facility (with a $50.0 million sublimit for letters of credit and a $50.0 million swingline feature to permit same day borrowing) and an option to increase the revolving credit facility by an additional $250.0 million, subject to obtaining commitments for the amountsatisfaction of such increase from acceptable lenders. The maturity date is January 3, 2020, and amounts drawn under the facility bear interest at 90-day LIBOR plus an applicable margin from a rangecertain conditions.

As of 2.50% to 3.50%. The applicable margin varies based on the percentage of the total commitment drawn, with a 2.50% margin at utilization equal toMarch 31, 2024, 91.1%, or lower than 35%, a 3.25% margin at utilization greater than 35% but less than or equal to 50%, and a 3.50% margin at utilization greater than 50%. The quarterly commitment fee on the unused portion of the facility is 0.25% per annum when the outstanding amount of obligations (including revolving credit, swingline and term loans and letter of credit obligations) is greater than or equal to 50% of the total commitment amount or 0.35% per annum when such outstanding amount is less than 50% of the total commitment amount.

Amounts drawn on the facility may be used to finance acquisitions, fund working capital and capital expenditures and for other general corporate purposes.

The facility is secured by a first priority mortgage on certain$3.4 billion, of the Company's communities. In addition, the agreement permits the Company to pledge the equity interests in subsidiaries that own other communities (rather than mortgaging such communities), provided that loan availability from pledged assets cannot exceed 10% of loan availability from mortgaged assets. The availability under the line will vary from time to time as it is based on borrowing base calculations related to the appraised value and performance of the communities securing the facility.total debt obligations represented non-recourse property-level mortgage financings.


The agreement contains typical affirmative and negative covenants, including financial covenants with respect to minimum consolidated fixed charge coverage and minimum consolidated tangible net worth. A violation of any of these covenants could10



result in a default under the credit agreement, which would result in termination of all commitments under the agreement and all amounts owing under the agreement becoming immediately due and payable and/or could trigger cross default provisions in our other outstanding debt and lease agreements.

As of September 30, 2017, no borrowings were outstanding on the revolving credit facility and $38.5March 31, 2024, $63.5 million of letters of credit and no cash borrowings were outstanding under thisthe Company's $100.0 million secured credit facility. The Company also had a separate secured letter of credit facilities offacility providing up to $64.5$15.0 million in the aggregateof letters of credit as of September 30, 2017. Letters of credit totaling $64.4March 31, 2024 under which $14.5 million had been issued under these separate facilities as of September 30, 2017.that date.


2017 Financings2024 Mortgage Financing


In June 2017,February 2024, the Company obtained a $54.7 million non-recourse addition and borrow-up loan, secured by first mortgages on seven communities. The loan bears interest at a fixed rate of 4.69% and matures on March 1, 2022. Proceeds from the loan added to the Company's liquidity.

In July 2017, the Company completed the refinancing of two existing loan portfolios secured by the non-recourse first mortgages on 22 communities. The $221.3 million of proceeds from the refinancing were primarily utilized to repay $188.1 million and $13.6 million of mortgage debt maturing in April 2018 and January 2021, respectively. The mortgage facility has a 10 year term, and 70% of the principal amount bears interest at a fixed rate of 4.81% and the remaining 30% of the principal amount bears interest at a variable rate of 30-day LIBOR plus a margin of 244 basis points.

In August 2017, the Company obtained $975.0$50.0 million of debt secured by the non-recourse first priority mortgages on 5111 communities. Sixty percent of the principal amount bears interest at a fixed rate, with one half of such amount bearing interest at 4.43% and maturing in 2024 and the other one half bearing interest at 4.47% and maturing in 2027. Forty percent of the principal amountThe loan bears interest at a variable rate equal to the 30-day LIBORSOFR plus a margin of 241.5350 basis points andpoints. The debt matures in 2027. February 2027 with two one-year extension options, exercisable subject to certain performance criteria.

Financial Covenants

Certain of the Company's debt documents contain restrictions and financial covenants, such as those requiring the Company to maintain prescribed minimum liquidity, net worth, and stockholders' equity levels and debt service ratios, and requiring the Company not to exceed prescribed leverage ratios, in each case on a consolidated, portfolio-wide, multi-community, single-community, and/or entity basis. In addition, the Company's debt documents generally contain non-financial covenants, such as those requiring the Company to comply with Medicare or Medicaid provider requirements and maintain insurance coverage.

The $975.0 millionCompany's failure to comply with applicable covenants could constitute an event of proceeds fromdefault under the refinancing were primarily utilized to repay $389.9 millionapplicable debt documents. Many of the Company's debt documents contain cross-default provisions so that a default under one of these instruments could cause a default under other debt and $228.9 million of outstandinglease documents (including documents with other lenders and lessors). Furthermore, the Company's mortgage debt scheduled to matureis secured by its communities and, in August 2018 and May 2023, respectively. The net proceeds from the refinancing activity added to the Company's liquidity.

The Company plans to repay debt maturing in the upcoming year, including the $316.3 million outstanding principal amount of convertible senior notes due June 15, 2018, through current liquidity, future operating cash flows, and normal-course refinancings.

Convertible Debt

In June 2011,certain cases, a guaranty by the Company completed a registered offeringand/or one or more of $316.3 million aggregate principal amount of 2.75% convertible senior notes due June 15, 2018 (the "Notes"). As of September 30, 2017, the $306.1 million carrying value of the Notes was included in the current portion of long-term debt within the condensed consolidated balance sheet. It is the Company’s current intent and policy to settle the principal amount of the Notes (or, if less, the amount of the conversion obligation) in cash upon conversion.its subsidiaries.


As of September 30, 2017,March 31, 2024, the Company is in compliance with the financial covenants of its outstandingdebt agreements.

7. Leases

As of March 31, 2024, the Company operated 277 communities under long-term leases (263 operating leases and 14 financing leases). The substantial majority of the Company's lease arrangements are structured as master leases. Under a master lease, numerous communities are leased through an indivisible lease. In certain cases, the Company guarantees the performance and lease payment obligations of its subsidiary lessees under the master leases. An event of default related to an individual property or limited number of properties within a master lease portfolio may result in a default on the entire master lease portfolio.

The leases relating to these communities are generally fixed rate leases with annual escalators that are either fixed or based upon changes in the consumer price index or the leased property revenue. The Company is responsible for all operating costs, including repairs and maintenance, property taxes, and insurance. The leases generally provide for renewal or extension options from 5 to 20 years and in some instances, purchase options.

The community leases contain other customary terms, which may include assignment and change of control restrictions, maintenance and capital expenditure obligations, termination provisions and financial covenants, such as those requiring the Company to maintain prescribed minimum liquidity, net worth, and stockholders' equity levels and lease coverage ratios, in each case on a consolidated, portfolio-wide, multi-community, single-community and/or entity basis. In addition, the Company's lease documents generally contain non-financial covenants, such as those requiring the Company to comply with Medicare or Medicaid provider requirements and maintain insurance coverage.

The Company's failure to comply with applicable covenants could constitute an event of default under the applicable lease documents. Many of the Company's debt and lease agreements.documents contain cross-default provisions so that a default under one of these instruments could cause a default under other debt and lease documents (including documents with other lenders and lessors). Certain leases contain cure provisions, which generally allow the Company to post an additional lease security deposit if the required covenant is not met. Furthermore, the Company's leases are secured by its communities and, in certain cases, a guaranty by the Company and/or one or more of its subsidiaries.


As of March 31, 2024, the Company is in compliance with the financial covenants of its long-term leases.
9.
Lease right-of-use assets are reviewed for impairment whenever changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company did not recognize any such impairment charges for the three months ended March 31, 2024 and 2023.


11

A summary of operating and financing lease expense (including the respective presentation on the condensed consolidated statements of operations) and net cash outflows from leases is as follows.

Three Months Ended
March 31,
Operating Leases (in thousands)
20242023
Facility operating expense$1,920 $1,626 
Facility lease expense51,496 46,127 
Operating lease expense53,416 47,753 
Operating lease expense adjustment (1)
13,089 10,805 
Changes in operating lease assets and liabilities for lessor capital expenditure reimbursements(249)(2,244)
Operating net cash outflows from operating leases$66,256 $56,314 

(1)Represents the difference between the amount of cash operating lease payments and the amount of operating lease expense.

Three Months Ended
March 31,
Financing Leases (in thousands)
20242023
Depreciation and amortization$2,872 $6,655 
Interest expense: financing lease obligations5,061 6,552 
Financing lease expense$7,933 $13,207 
Operating cash outflows from financing leases$5,061 $6,552 
Financing cash outflows from financing leases262 5,852 
Total net cash outflows from financing leases$5,323 $12,404 

The aggregate amounts of future minimum lease payments, including community, office, and equipment leases, recognized on the condensed consolidated balance sheet as of March 31, 2024 are as follows (in thousands).

Year Ending December 31,Operating LeasesFinancing Leases
2024 (nine months)$196,034 $15,198 
2025262,030 6,850 
2026147,485 6,834 
2027149,317 6,083 
202886,181 5,917 
Thereafter251,474 20,626 
Total lease payments1,092,521 61,508 
Purchase option liability and non-cash gain on future sale of property— 145,136 
Imputed interest and variable lease payments(260,583)(55,054)
Total lease obligations$831,938 $151,590 

8. Litigation


The Company has been and is currently involved in litigation and claims including putative class action claims from time to time, incidental to the conduct of its business, which it believes are generally comparable to other companies in the senior living industry.and healthcare industries, including, but not limited to, putative class action claims from time to time regarding staffing at the Company's communities and compliance with consumer protection laws and the Americans with Disabilities Act. Certain claims and lawsuits allege large damage amounts and may require significant costs to defend and resolve. As a result, the Company maintains general liability, and professional liability, and other insurance policies in amounts and with coverage and deductibles the Company believes are adequate,appropriate, based on the nature and risks of its business, historical experience, availability, and industry standards. The Company's current

12

policies provide for deductibles for each claim.claim and contain various exclusions from coverage. The Company uses its wholly-owned captive insurance company for the purpose of insuring certain portions of its risk retention under its general and professional liability insurance programs. Accordingly, the Company is, in effect, self-insured for claims that are less than the deductible amounts, for claims that exceed the funding level of the Company's wholly-owned captive insurance company, and for claims or portions of claims that are not covered by such policies.policies and/or exceed the policy limits.


Similarly, theThe senior living industry isand healthcare industries are continuously subject to scrutiny by governmental regulators, which could result in reviews, audits, investigations, enforcement actions, or litigation related to regulatory compliance matters. In addition, as a result of the Company's participation in the Medicare and Medicaid programs, the Company is subject to various governmentalgovernment reviews, audits, and investigations including but not limited to audits under variousverify compliance with Medicare and Medicaid programs and other applicable laws and regulations. The Centers for Medicare & Medicaid Services ("CMS") has engaged third-party firms to review claims data to evaluate appropriateness of billings. In addition to identifying overpayments, audit contractors can refer suspected violations to government authorities. In addition, states' Attorneys General vigorously enforce consumer protection laws as those laws relate to the senior living industry. An adverse outcome of government scrutiny may result in citations, sanctions, other criminal or civil fines and penalties, the refund of overpayments, payment suspensions, termination of participation in Medicare and Medicaid programs, such asand damage to the Recovery Act Contractors (RAC) and Zone Program Integrity Contractors (ZPIC) programs.Company's business reputation. The Company's costs to respond to and defend any such audits, reviews, audits and investigations may be significant,significant.

In June 2020, the Company and several current and former executive officers were named as defendants in a putative class action lawsuit alleging violations of the federal securities laws filed in the federal court for the Middle District of Tennessee. The lawsuit asserted that the defendants made material misstatements and omissions concerning the Company's business, operational and compliance policies, compliance with applicable regulations and statutes, and staffing practices that caused the Company's stock price to be artificially inflated between August 2016 and April 2020. The district court dismissed the lawsuit and entered judgment in favor of the defendants in September 2021, and the plaintiffs did not file an adverse determinationappeal. Between October 2020 and June 2021, alleged stockholders of the Company filed several stockholder derivative lawsuits in the federal courts for the Middle District of Tennessee and the District of Delaware, which were subsequently transferred to the Middle District of Tennessee and consolidated into two lawsuits. In January 2024, the court dismissed one of the two derivative lawsuits. Plaintiffs have appealed the dismissal to the United States Court of Appeals for the Sixth Circuit. The other derivative lawsuit remains pending with the Middle District of Tennessee and asserts claims on behalf of the Company against certain current and former officers and directors for alleged breaches of duties owed to the Company. The complaint incorporates substantively similar allegations to the securities lawsuit previously described.

9. Stock-Based Compensation

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

(in thousands, except for weighted average amounts)Restricted Stock Unit and Stock Award GrantsWeighted Average Grant Date Fair ValueTotal Grant Date Fair Value
Three months ended March 31, 20242,224 $6.36 $14,148 

10. Earnings Per Share

Potentially dilutive common stock equivalents for the Company include convertible senior notes, warrants, unvested restricted stock, restricted stock units, and prepaid stock purchase contracts.

On October 1, 2021, the Company issued $230.0 million principal amount of 2.00% convertible senior notes due 2026 (the "Notes"). As of March 31, 2024, the maximum number of shares issuable upon settlement of the Notes is 38.3 million (after giving effect to additional shares that would be issuable upon conversion in connection with the occurrence of certain corporate or other events).

On July 26, 2020, the Company issued to Ventas, Inc. ("Ventas") a warrant (the "Warrant") to purchase 16.3 million shares of the Company’s common stock, $0.01 par value per share, at a price per share of $3.00. The Warrant is exercisable at Ventas' option at any time and from time to time, in whole or in part, until December 31, 2025. The exercise price and the number of shares issuable on exercise of the Warrant are subject to certain anti-dilution adjustments, including for cash dividends, stock dividends, stock splits, reclassifications, non-cash distributions, certain repurchases of common stock, and business combination transactions.


13

During the three months ended December 31, 2022, the Company issued 2,875,000 of its 7.00% tangible equity units (the "Units") at a public offering price of $50.00 per Unit for an aggregate offering of $143.8 million. Each Unit is comprised of a prepaid stock purchase contract and a senior amortizing note with an initial principal amount of $8.8996. Unless settled early in accordance with the terms of the instruments, under each purchase contract, the Company is obligated to deliver to the holder on November 15, 2025 a minimum of 12.9341, and a maximum of 15.1976, shares of the Company's common stock depending on the daily volume-weighted average price of its common stock for the 20 trading days preceding the settlement date. During the three months ended March 31, 2024, 275,000 of the Units were separated at the election of the holders into the two components, prepaid stock purchase contracts and senior amortizing notes, and the Company delivered 3,556,877 shares of the Company’s common stock upon settlement of such prepaid stock purchase contracts. As of March 31, 2024, 2,600,000 prepaid stock purchase contracts remain outstanding, and the maximum number of shares issuable upon settlement of the Units' prepaid stock purchase contracts is 39.5 million.

Basic earnings per share ("EPS") is calculated by dividing net income (loss) by the weighted average number of shares of common stock outstanding, after giving effect to the minimum number of shares issuable upon settlement of the prepaid stock purchase contract component of the Units. The following table summarizes the computation of basic weighted average shares presented in the condensed consolidated statements of operations.

Three Months Ended March 31,
(in thousands)20242023
Weighted average common shares outstanding190,062 187,392 
Weighted average minimum shares issuable under purchase contracts35,828 37,186 
Weighted average shares outstanding - basic225,890 224,578 

Diluted EPS includes the components of basic EPS and also gives effect to dilutive common stock equivalents. Diluted EPS reflects the potential dilution that could occur if securities or other instruments that are convertible into common stock were exercised or could result in the Company's refunding amountsissuance of common stock. For the purposes of computing diluted EPS, weighted average shares outstanding do not include potentially dilutive securities that are anti-dilutive under the treasury stock method or if-converted method, and performance-based equity awards are included based on the attainment of the applicable performance metrics as of the end of the reporting period. The Company has been paid under such programs, the impositionfollowing potentially outstanding shares of common stock, which were excluded from the computation of diluted net income (loss) per share attributable to common stockholders in both periods as a result of the net loss.



As of March 31,
(in millions)20242023
Convertible senior notes38.3 38.3 
Warrants16.3 16.3 
Restricted stock and restricted stock units6.5 6.6 
Incremental shares issuable under purchase contracts5.9 6.5 
Total67.0 67.7 
of fines, penalties and other sanctions (including payment suspensions) on the Company, the Company's loss of its right to participate in government reimbursement programs and/or damage to the Company's business and reputation.

10.  Supplemental Disclosure of Cash Flow Information
 Nine Months Ended
September 30,
 (in thousands)2017 2016
Supplemental Disclosure of Cash Flow Information:   
Interest paid$223,929
 $260,504
Income taxes paid, net of refunds$1,595
 $2,195
Additions to property, plant and equipment and leasehold intangibles, net: 
  
Property, plant and equipment and leasehold intangibles, net$139,734
 $230,837
Accounts payable310
 33,113
Net cash paid$140,044
 $263,950
Acquisition of assets, net of related payables: 
  
Property, plant and equipment and leasehold intangibles, net$—
 $19,457
Other intangible assets, net400
 (7,300)
Net cash paid$400
 $12,157
Proceeds from sale of assets, net: 
  
Prepaid expenses and other assets$(14,387) $(1,036)
Assets held for sale(20,952) (218,343)
Property, plant and equipment and leasehold intangibles, net(19,184) —
Investments in unconsolidated ventures(26,301) —
Long-term debt7,552
 —
Capital and financing lease obligations7,646
 —
Refundable entrance fees and deferred revenue30,771
 —
Other liabilities39
 2,034
Loss (gain) on sale of assets, net1,408
 —
(Gain) loss on lease termination(1,162) (2,126)
Net cash received$(34,570) $(219,471)
Formation of the Blackstone Venture:   
Prepaid expenses and other assets$(8,173) $—
Property, plant and equipment and leasehold intangibles, net(768,897) —
Investments in unconsolidated ventures66,816
 —
Capital and financing lease obligations879,959
 —
Deferred liabilities7,504
 —
Other liabilities1,998
 —
Net cash paid$179,207
 $—
Supplemental Schedule of Non-cash Operating, Investing and Financing Activities: 
  
Assets designated as held for sale: 
  
Prepaid expenses and other assets$199
 $(2,130)
Assets held for sale(29,544) 280,604
Property, plant and equipment and leasehold intangibles, net29,345
 (261,639)
Goodwill—
 (28,568)
Asset impairment—
 11,733
Net$—
 $—



11.  Facility Operating Leases

A summary of facility lease expense and the impact of straight-line adjustment and amortization of (above) below market rents and deferred gains are as follows (in thousands):
 Three Months Ended
September 30,		 Nine Months Ended
September 30,
 2017 2016 2017 2016
Cash basis payment$90,303
 $96,170
 $275,506
 $287,781
Straight-line (income) expense(3,078) (859) (9,204) 2,553
Amortization of (above) below market lease, net(1,697) (1,699) (5,091) (5,165)
Amortization of deferred gain(1,091) (1,093) (3,277) (3,279)
Facility lease expense$84,437
 $92,519
 $257,934
 $281,890

12. Income Taxes


The difference between the tax statutory rate and the Company's effective tax ratesrate for the three and nine months ended September 30, 2017March 31, 2024 and September 30, 20162023 was primarily due to an increase in the impacttax benefit on the vesting of the change in income tax valuation allowance in each periodrestricted stock units and the non-deductibilityrestricted stock awards for income tax purposes of the goodwill impairment charge in 2017.

The valuation allowance during the three months ended September 30, 2017 reflects an additional allowance of $59.6 million established againstMarch 31, 2024 as compared to the current period operating loss and is reflective of the Company's quarterly calculation of the reversal of existing tax assets and liabilities and the impact of the Company's acquisitions, dispositions, and other significant transactions.

The increase in the valuation allowance during the ninethree months ended September 30, 2017 is comprised of multiple components. The increase includes $85.0 million related to the removal of future timing differences as a result of the formation of the Blackstone Venture and termination of leases associated therewith. In addition, the Company increased its valuation allowance by $48.5 million upon the adoption of ASU 2016-09. The $48.5 million offsets the increase to the Company's net operating loss carryforward position previously reflected in an additional paid-in capital pool, and accordingly, does not impact the current period income tax position. The remaining change of approximately $86.6 million for the nine months ended September 30, 2017 reflects the allowance established against the current period operating loss.March 31, 2023.


The Company recorded an aggregate deferred federal, state, and local tax benefit of $91.3$7.6 million and $123.0 million as a result of the operating loss for the three and nine months ended September 30, 2017, respectively, which was offset by an increase in the valuation allowance of $59.6 million and $86.6 million, respectively. The excess of the deferred federal, state and local tax benefit over the increase in the valuation allowance for the three months ended September 30, 2017 is the result of the anticipated reversal of future tax liabilitiesMarch 31, 2024, which was partially offset by future tax deductions. In addition,an increase to the Company wrote down a deferred tax liability relating to an indefinite life intangible that was established in purchase accounting.valuation allowance of $7.2 million. The Company recorded an aggregate deferred federal, state, and local tax benefit of $18.9$9.4 million and $37.5 million as a result of the operating loss for the three and nine months ended September 30, 2016, respectively,March 31, 2023, which was offset by an increase into the valuation allowance of $22.3 million and $39.5 million, respectively.$9.7 million.


The Company evaluates its deferred tax assets each quarter to determine if a valuation allowance is required based on whether it is more likely than not that some portion of the deferred tax asset would not be realized. The Company's valuation allowance as of September 30, 2017March 31, 2024 and December 31, 2016 is $484.52023 was $481.4 million and $264.3$474.2 million, respectively.



14

The increase in the valuation allowance for both the three months ended March 31, 2024 and 2023 is the result of current operating losses during the periods and the anticipated reversal of future tax liabilities offset by future tax deductions.

The Company recorded interest charges related to its tax contingency reserve for cash tax positions for the ninethree months ended September 30, 2017March 31, 2024 and September 30, 20162023 which are included in income tax expense or benefit for the period. TaxAs of March 31, 2024, tax returns for years 20122019 through 20162022 are subject to future examination by tax authorities. In addition, the net operating losses from prior years are subject to adjustment under examination.




12. Supplemental Disclosure of Cash Flow Information

Three Months Ended
March 31,
(in thousands)20242023
Supplemental Disclosure of Cash Flow Information:
Interest paid$56,271 $55,110 
Income taxes paid, net of (refunds)$3 $(1,346)
Capital expenditures, net of related payables:
Capital expenditures - non-development, net$50,591 $62,912 
Capital expenditures - development, net218 519 
Capital expenditures - non-development - reimbursable from lessor249 2,244 
Trade accounts payable(6,659)(15,975)
Net cash paid$44,399 $49,700 

Restricted cash consists principally of escrow deposits for interest rate caps, real estate taxes, property insurance, capital expenditures, and debt service reserves required by certain lenders under mortgage debt agreements, deposits as security for self-insured retention risk under workers' compensation programs and property insurance programs, and regulatory reserves for certain CCRCs. The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the condensed consolidated balance sheets that sums to the total of the same such amounts shown in the condensed consolidated statements of cash flows.

(in thousands)March 31, 2024December 31, 2023
Reconciliation of cash, cash equivalents, and restricted cash:
Cash and cash equivalents$318,549 $277,971 
Restricted cash45,673 41,341 
Long-term restricted cash31,444 30,356 
Total cash, cash equivalents, and restricted cash$395,666 $349,668 

13. Variable Interest EntitiesSegment Information


As of September 30, 2017, the Company has equity interests in unconsolidated VIEs. The Company has determined that it does not have the power to direct the activities of the VIEs that most significantly impact the VIEs' economic performance and is not the primary beneficiary of these VIEs in accordance with ASC 810. The Company's interests in the VIEs are, therefore, accounted for under the equity method of accounting.

The Company holds a 51% equity interest, and HCP owns a 49% interest, in a venture that owns and operates entry fee CCRCs (the "CCRC Venture"). The CCRC Venture's opco has been identified as a VIE. The equity members of the CCRC Venture's opco share certain operating rights, and the Company acts as manager to the CCRC Venture opco. However, the Company does not consolidate this VIE because it does not have the ability to control the activities that most significantly impact this VIE's economic performance. The assets of the CCRC Venture opco primarily consist of the CCRCs that it owns and leases, resident fees receivable, notes receivable and cash and cash equivalents. The obligations of the CCRC Venture opco primarily consist of community lease obligations, mortgage debt, accounts payable, accrued expenses and refundable entrance fees.

The Company holds an equity ownership interest in each of the propco and opco of three ventures ("RIDEA Ventures") that operate senior housing communities in a RIDEA structure. As of September 30, 2017, the Company's equity ownership interest is 10% for each of the RIDEA Ventures. The RIDEA Ventures have been identified as VIEs. The equity members of the RIDEA Ventures share certain operating rights, and the Company acts as manager to the opcos of the RIDEA Ventures. However, the Company does not consolidate these VIEs because it does not have the ability to control the activities that most significantly impact the economic performance of these VIEs. The assets of the RIDEA Ventures primarily consist of the senior housing communities that the RIDEA Ventures own, resident fees receivable, and cash and cash equivalents. The obligations of the RIDEA Ventures primarily consist of notes payable, accounts payable and accrued expenses.

The Company holds a 15% equity ownership interest in the Blackstone Venture. The Blackstone Venture has been identified as a VIE due to the Company lacking substantive participation rights in the management of the venture and the Company lacking kick-out rights over the managing member. The equity members of the Blackstone Venture share certain operating rights and the Company acts as manager to 60 communities owned by the Blackstone Venture. However, the Company does not consolidate this VIE because it does not have the ability to control the activities that most significantly impact the economic performance of the VIE. The assets of the Blackstone Venture primarily consist of senior housing communities, resident fees receivable and cash and cash equivalents. The obligations of the Blackstone Venture primarily consist of long-term mortgage debt, accounts payable and accrued expenses. In addition to $636.2 million of long-term mortgage debt, the Blackstone Venture initially obtained $66.8 million of mortgage debt that was payable in 2017. In the event that refinancing proceeds for the $66.8 million of mortgage debt were insufficient to repay the debt principal amount, the Company may have been required to lend the amount of the shortfall, up to $12.0 million, to the Blackstone Venture. In June 2017, the Blackstone Venture completed the refinancing of the $66.8 million mortgage debt payable in 2017 and the Company was not required to lend any amounts to the Blackstone Venture. As of September 30, 2017, the Company leases two communities from the Blackstone Venture with annual lease payments of approximately $2.5 million. Under the terms of the lease agreements, the Company may be required to purchase the two leased communities for an amount equal to the greater of the fair market value of the communities or $33.8 million if there is an event of default under the lease agreement. See Note 4 for more information about the Company's entry into the Blackstone Venture.

The carrying value and classification of the related assets, liabilities and maximum exposure to loss as a result of the Company's involvement with these VIEs are summarized below as of September 30, 2017 (in millions):
VIE TypeAsset Type
Maximum Exposure
to Loss
 Carrying Amount
CCRC Venture opcoInvestment in unconsolidated ventures$47.2
 $47.2
RIDEA VenturesInvestment in unconsolidated ventures$73.9
 $73.9
Blackstone VentureInvestment in unconsolidated ventures$40.4
 $40.4

As of September 30, 2017, the Company is not required to provide financial support, through a liquidity arrangement or otherwise, to its unconsolidated VIEs.



14.  Segment Information

As of September 30, 2017, the Company has five reportable segments: Retirement Centers;Independent Living; Assisted Living; CCRCs-Rental; Brookdale Ancillary Services;Living and Management Services.Memory Care; and CCRCs. Operating segments are defined as components of an enterprise that engage in business activities from which it may earn revenues and incur expenses; for which separate financial information is available; and whose operating results are regularly reviewed by the chief operating decision maker to assess the performance of the individual segment and make decisions about resources to be allocated to the segment.


During the three months ended March 31, 2017, one community moved from the CCRCs-Rental segment to the Retirement Centers segment to more accurately reflect the underlying product offering of the community in the current period given changes to the community. The movement did not change the Company's reportable segments, but it did impact the revenues, expenses and assets reported within the two segments.  Revenue and expenses for the three and nine months ended September 30, 2016 and total assets for the period ended December 31, 2016 have not been recast.

Retirement CentersIndependent Living. The Company's Retirement CentersIndependent Living segment includes owned or leased communities that are primarily designed for middle to upper income seniors generally age 75 and older who desire an upscaleto live in a residential environment providingsetting that feels like home, without the highest qualityefforts of service.ownership. The majority of the Company's retirement centerindependent living communities consist of both independent living and assisted living units in a single community, which allows residents to "age-in-place"age-in-place by providing them with a broad continuum of senior independent and assisted living services.services to accommodate their changing needs.


Assisted Living.Living and Memory Care. The Company's Assisted Living and Memory Care segment includes owned or leased communities that offer housing and 24-hour assistance with activities of daily life to mid-acuity frailliving for the Company's residents. The

15

Company's assisted living and elderly residents. Assisted livingmemory care communities include both freestanding, multi-story communities, andas well as smaller, freestanding, single story communities. The Company also operatesprovides memory care services at freestanding memory care communities whichthat are freestanding assisted living communities specially designed for residents with Alzheimer's disease and other dementias.


CCRCs-Rental.CCRCs. The Company's CCRCs-RentalCCRCs segment includes large owned or leased communities that offer a variety of living arrangements and services to accommodate all levelsa broad spectrum of physical ability and health.healthcare needs. Most of the Company's CCRCs have independent living, assisted living, memory care, and skilled nursing available on one campus or within the immediate market, and some also include memory care and Alzheimer's units.campus.


Brookdale Ancillary Services. The Company's Brookdale Ancillary Services segment includes outpatient therapy, home health and hospice services, as well as education and wellness programs, provided to residents of many of the Company's communities and to seniors living outside of the Company's communities. The Brookdale Ancillary Services segment does not include the inpatient therapy services provided in the Company's skilled nursing units, which are included in the Company's CCRCs-Rental segment.

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

The accounting policies of the Company's reportable segments are the same as those described in the summary of significant accounting policies in Note 2.




The following table setstables set forth selected segment financial data.

Three Months Ended
March 31,
(in thousands)20242023
Revenue and other operating income:
Independent Living(1)
$148,948 $140,656 
Assisted Living and Memory Care(1)
510,872 488,804 
CCRCs(1)
84,421 86,272 
All Other38,590 37,531 
Total revenue and other operating income$782,831 $753,263 
Segment operating income:(2)
Independent Living$48,643 $46,833 
Assisted Living and Memory Care137,458 124,593 
CCRCs15,590 13,499 
All Other2,618 2,577 
Total segment operating income204,309 187,502 
General and administrative expense (including non-cash stock-based compensation expense)45,732 48,619 
Facility operating lease expense51,496 46,127 
Depreciation and amortization86,127 84,934 
Asset impairment1,708 — 
Income (loss) from operations$19,246 $7,822 

As of
(in thousands)March 31, 2024December 31, 2023
Total assets:
Independent Living(3)
$1,192,142 $1,206,021 
Assisted Living and Memory Care3,279,194 3,315,921 
CCRCs607,107 612,521 
Corporate and All Other463,881 438,972 
Total assets$5,542,324 $5,573,435 

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

 Three Months Ended
September 30,		 Nine Months Ended
September 30,
 2017 2016 2017 2016
Revenue       
Retirement Centers (1)
$161,986
 $170,706
 $496,854
 $510,122
Assisted Living (1)
542,227
 607,345
 1,680,194
 1,837,632
CCRCs-Rental (1)
108,075
 147,517
 364,075
 448,002
Brookdale Ancillary Services (1)
110,604
 117,263
 332,766
 362,791
Management Services (2)
255,096
 203,295
 707,337
 609,565
 $1,177,988
 $1,246,126
 $3,581,226
 $3,768,112
Segment Operating Income (3)
 
  
  
  
Retirement Centers$65,907
 $73,112
 $207,206
 $222,315
Assisted Living173,576
 217,878
 577,936
 672,773
CCRCs-Rental22,932
 32,996
 82,591
 102,059
Brookdale Ancillary Services9,823
 14,624
 38,555
 48,174
Management Services18,138
 15,532
 56,474
 50,498
 290,376
 354,142
 962,762
 1,095,819
General and administrative (including non-cash stock-based compensation expense)63,779
 63,425
 196,429
 246,741
Transaction costs1,992
 659
 12,924
 1,950
Facility lease expense84,437
 92,519
 257,934
 281,890
Depreciation and amortization117,649
 130,783
 366,023
 391,314
Goodwill and asset impairment368,551
 19,111
 390,816
 26,638
Loss on facility lease termination4,938
 —
 11,306
 —
Income (loss) from operations$(350,970) $47,645
 $(272,670) $147,286

 As of
 September 30, 2017 December 31, 2016
Total assets   
Retirement Centers$1,275,250
 $1,452,546
Assisted Living4,830,074
 5,831,434
CCRCs-Rental696,964
 935,389
Brookdale Ancillary Services261,919
 280,530
Corporate and Management Services1,027,959
 717,788
Total assets$8,092,166
 $9,217,687

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

(2)Management services segment revenue includes reimbursements for which the Company is the primary obligor of costs incurred on behalf of managed communities.

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



15.  Impact From Hurricanes

During the three months ended September 30, 2017, the Company’s operations in Texas and Florida were impacted by Hurricanes Harvey and Irma. The Company recorded $5.3 million of operating costs within facility operating expense on the condensed consolidated statements of operations for the three and nine months ended September 30, 2017, which include incremental costs related to evacuations, repairs and maintenance, and security.

16.  Subsequent Event

HCP Master Lease Transaction and RIDEA Ventures Restructuring
On November 2, 2017, the Company announced that it had entered into a definitive agreement for a multi-part transaction with HCP. As part of such transaction, the Company entered into an Amended and Restated Master Lease and Security Agreement (“Master Lease”) with HCP effective as of November 1, 2017. The components of the multi-part transaction include:
Master Lease Transactions. The Company and HCP amended and restated triple-net leases covering substantially all of the communities it leases from HCP into the Master Lease. The Company will acquire two communities for an aggregate purchase price of $35 million, upon which time the two communities will be removed from the Master Lease. In addition, 32 communities will be removed from the Master Lease on or before November 1, 2018. However, if HCP has not transitioned operations and/or management of such communities to a third party prior to such date, the Company will continue to operate such 32 communities on an interim basis and such communities will, from and after such time, be reported in the Management Services segment. In addition to the foregoing 34 communities, the Company continues to lease 44 communities pursuant to the terms of the Master Lease, which have the same lease rates and expiration and renewal terms as the applicable prior instruments, except that effective January 1, 2018, the Company will receive a $5 million annual rent reduction for three communities. The Master Lease also provides that the Company may engage in certain change in control and other transactions without the need to obtain HCP's consent, subject to the satisfaction of certain conditions.

RIDEA Ventures Restructuring. Pursuant to the Company's agreement with HCP, HCP will acquire the Company's 10% ownership interest in two of the Company's existing RIDEA Ventures with HCP for $99 million. The Company provides management services to 59 communities on behalf of the two RIDEA Ventures. managed communities.

(3)The Company will acquire fourCompany's total carrying amount of such communities for an aggregate purchase price of $239 million and will retain management of 18 of such communities. The amended and restated management agreements for such 18 communities have a term set to expire in 2030, subject to certain early termination rights. In addition, HCP will be entitled to sell or transition operations and/or management of 37 of such communities.

The Company expects to fund its acquisition of the six communities with the proceeds from the sale of its RIDEA Venture interests, cash on hand and non-recourse mortgage financinggoodwill is included on the acquired communities.Independent Living segment and was $27.3 million as of both March 31, 2024 and December 31, 2023.
The Company expects the disposition of its ownership interest in the two RIDEA Ventures and its acquisition of the six communities to occur in the next three to six months, and expects the terminations of its triple net leases and management agreements on 69 communities to occur in stages throughout 2018.

The closings of the various transactions referenced above are subject to the satisfaction of various closing conditions, including (where applicable) the receipt of regulatory approvals. However, there can be no assurance that the transactions will close or, if they do, when the actual closings will occur.16
The results of operations for the 32 communities to be disposed through lease terminations are reported within the following segments within the condensed consolidated financial statements: Retirement Centers (five communities) and Assisted Living (27 communities). With respect to such 32 communities and the 37 managed communities for which the Company's management will be terminated, the Company's condensed consolidated financial statements include resident fee revenue of $33.2 million and $35.0 million, management fees of $2.5 million and $2.6 million, facility operating expenses of $22.4 million and $21.0 million, and cash lease payments of $11.1 million and $10.3 million for the three months ended September 30, 2017 and September 30, 2016, respectively; and include resident fee revenue of $101.3 million and $105.5 million, management fees of $7.6 million and $8.2 million, facility operating expenses of $64.6 million and $62.9 million, and cash lease payments of $33.2 million and $30.7 million for the nine months ended September 30, 2017 and September 30, 2016.






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


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


Certain statements in this Quarterly Report on Form 10-Q may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to various risks and uncertainties and include all statements that are not historical statements of fact and those regarding our intent, belief or expectations, including, but not limited to, statements relating to the creation and enhancement of stockholder value, the evaluation of options and alternatives to create and enhance stockholder value, our strategy, our operational, sales, marketing and branding initiatives, our portfolio optimization and growth initiatives and our expectations regarding their effect on our results; our expectations regarding the economy, the senior living industry, senior housing construction, supply and competition, occupancy and pricing and the demand for senior housing; our expectations regarding our revenue, cash flow, operating income, expenses, capital expenditures, including expected levels and reimbursements and the timing thereof, development, expansion, renovation, redevelopment and repositioning opportunities, including Program Max opportunities, and their projected costs, cost savings and synergies, and our liquidity and leverage; our plans and expectations with respect to disposition, lease restructuring, financing, re-financing and venture transactions and opportunities (including assets currently held for sale and the pending transactions with HCP, Inc.), including the timing thereof and their effects on our results; our expectations regarding taxes, capital deployment and returns on invested capital, Adjusted EBITDA and Adjusted Free Cash Flow (as those terms are defined in this Quarterly Report on Form 10-Q); our expectations regarding returns to stockholders, our share repurchase program and the payment of dividends; 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 changes in government reimbursement programs and their effect on our results; our plans to expand our offering of ancillary services (therapy, home health and hospice); our plans to acquire additional operating companies, senior housing communities and ancillary services companies (including home health agencies); our expectations relating to the amount and timing of the financial impact of Hurricanes Harvey and Irma and the California wildfires; and our ability to anticipate, manage and address industry trends and their effect on our business.expectations. Forward-looking statements are generally identifiable by use of forward-looking terminology such as "may," "will," "should," "could," "would," "potential," "intend," "expect," "endeavor," "seek," "anticipate," "estimate," "overestimate," "underestimate," "believe," "project," "predict," "continue," "plan," "target""target," or other similar words or expressions.expressions, and include statements regarding our expected financial and operational results. These forward lookingforward-looking statements are based on certain assumptions and expectations, and our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Although we believe that expectations reflected in any forward-looking statements are based on reasonable assumptions, we can give no assurance that our assumptions or expectations will be attained and actual results and performance could differ materially from those projected. Factors which could have a material adverse effect on our operations and future prospects or which could cause events or circumstances to differ from the forward-looking statements include, but are not limited to, the risk associated with the current global economic situation and its impact upon capital markets and liquidity; changes in governmental reimbursement programs; the risk of overbuilding and new supply; our inability to extend (or refinance) debt (including our credit and letter of credit facilities and our outstanding convertible notes) 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, including downturns in the economy, housing market, consumer confidence, or entrance fees; the equity markets and unemployment among resident family members; changes in reimbursement rates, methods, or timing under governmental reimbursement programs including the Medicare and Medicaid programs; the effects of senior housing construction and development, lower industry occupancy, and increased competition; conditions of housing markets, regulatory changes, acts of nature, and the effects of climate change in certain geographic areas;areas where we are concentrated; terminations of our resident agreements and vacancies in the living spaces we lease; failure to maintain the security and functionality of our information systems, to prevent a cybersecurity attack or breach, or to comply with applicable privacy and consumer protection laws, including HIPAA; our ability to generate sufficient cash flow to cover required interest and long-term lease payments; the effect ofcomplete our indebtedness and long-term 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 our share 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 communitiesexpenditures in accordance with our plans; our ability to identify and pursue development, investment, and acquisition opportunities and our ability to successfully integrate acquisitions; competition for the acquisition of assets; our ability to complete pending or expected disposition, acquisition, disposition, lease restructuring, financing, re-financing and ventureor other transactions (including assets currently held for sale and the pending transactions with HCP, Inc.) on agreed upon terms or at all, including in respect of the satisfaction of closing conditions, the risk that regulatory approvals are not obtained or are subject to unanticipated conditions, and uncertainties as to the timing of closing;closing, and our ability to successfully integrate acquisitions; competitionidentify and pursue any such opportunities in the future; risks related to the implementation of our strategy, including initiatives undertaken to execute on our strategic priorities and their effect on our results; the impacts of the COVID-19 pandemic, including on the nation's economy and debt and equity markets and the local economies in our markets, and on us and our business, results of operations, cash flow, revenue, expenses, liquidity, and our strategic initiatives, including plans for future growth, which will depend on many factors, some of which cannot be foreseen, including the acquisitionpace and consistency of assets;recovery from the pandemic and any resurgence or variants of the disease; limits on our ability to use net operating loss carryovers to reduce future tax payments; delays in obtaining regulatory approvals; disruptions in the financial markets or decreases in the appraised values or performance of our communities that affect our ability to obtain financing or extend or refinance debt as it matures and our financing costs; our ability to generate sufficient cash flow to cover required interest, principal, and long-term lease payments and to fund our planned capital projects; the effect of any non-compliance with any of our debt or lease agreements (including the financial or other covenants contained therein), including the risk of lenders or lessors declaring a cross default in the event of our non-compliance with any such agreements and the risk of loss of our property securing leases and indebtedness due to any resulting lease terminations and foreclosure actions; the inability to renew, restructure, or extend leases, or exercise purchase options at or prior to the end of any existing lease term; the effect of our indebtedness and long-term leases on our liquidity and our ability to operate our business; increases in market interest rates that increase the costs of our debt obligations; our ability to obtain additional capital on terms acceptable to us; a decreasedepartures of key officers and potential disruption caused by changes 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;management; increased competition for, skilled personnel;or a shortage of, associates, wage pressures resulting from increased competition, low unemployment levels, minimum wage pressureincreases and changes in overtime laws, and 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;us, including putative class action complaints, and the frequency and magnitude of legal actions and liability claims that may arise due to COVID-19 or our response efforts; negative publicity with respect to any lawsuits, claims, or other legal or regulatory proceedings; costs to respond to, and adverse determinations resulting from, government inquiries, reviews, audits, and investigations; the cost and difficulty of complying with increasing and evolving regulation;regulation, including new disclosure obligations; changes in, or our failure to comply with, employment-related laws and regulations; the risk thatrisks associated with current global economic conditions and general economic factors on us and our business partners such as inflation, commodity costs, fuel and other energy costs, competition in the labor market, costs of salaries, wages, benefits, and insurance, interest rates, tax rates, geopolitical tensions or conflicts, and uncertainty surrounding federal elections; the impact of seasonal contagious illness or an outbreak of COVID-19 or other contagious disease in the markets in which we could incur additional costs and experience other financial impacts related to Hurricanes Harvey and Irma and the California wildfires;operate; actions of activist stockholders, including a proxy contest; as well as other risks detailed from time to time in our filings with the Securities and Exchange Commission ("SEC"), including those set forth under "Item 1A. Risk Factors" contained in our Annual Report on Form 10-K for the year ended

17

December 31, 2016 and Part II, "Item 1A. Risk Factors" and elsewhere in this Quarterly Report on Form 10-Q.2023. 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 Quarterly Report on Form 10-Q. We cannot guarantee future results, levels of activity, performance or achievements, and, except as required by law, we expressly disclaim any obligation to release publicly any updates or revisions to any forward-looking statements contained in this Quarterly Report on Form 10-Q to reflect any change in our expectations with regard thereto or change in events, conditions, or circumstances on which any statement is based.


Executive Unless otherwise specified, references to "Brookdale," "we," "us," "our," or "the Company" in this Quarterly Report on Form 10-Q mean Brookdale Senior Living Inc. together with its consolidated subsidiaries.

Overview


As of September 30, 2017, weWe are the largestnation's premier operator of senior living communities, in the United States based on total capacity, with 1,031operating and managing 652 communities in 4641 states andas of March 31, 2024, with the ability to serve approximately 101,00059,000 residents. We offer our residents access to a fullbroad continuum of services across the most attractive sectors of the senior living industry. We operate and manage independent living, assisted living, and dementia-care communitiesmemory care, and continuing care retirement centerscommunities ("CCRCs"). Through our ancillary services programs, we also offer a range of outpatient therapy, home health and hospice services to residents of many of our communities and to seniors living outside of our communities.


We intend to be the leading provider of senior living solutions, and we believe that we are positioned to take advantage of favorable demographic trends over time. We also believe that we operate in the most attractive sectors of the senior living industry with opportunities to increase our revenues through providing a combination of housing, hospitality services, ancillary services and health care services. Our senior living communities offerand our comprehensive network help to provide seniors with care, connection, and services in an environment that feels like home. Our expertise in healthcare, hospitality, and real estate provides residents a supportive home-like setting, assistance with activities of daily living (such as eating, bathing, dressing, toiletingopportunities to improve wellness, pursue passions, make new friends, and transferring/walking) and, in certain communities, licensed skilled nursing services. We also provide ancillary services, including outpatient therapy, home health services and hospice services, to our residents.stay connected with loved ones. By providing residents with a range of service options as their needs change, we provide greater continuity of care, enabling seniors to "age-in-place" and therebyage-in-place, which we believe enables them to maintain residency with us for a longer period of time. The ability of residents to age-in-place is also beneficial to our residents and theirresidents' families who are concerned with care decisions for their elderly relatives.


Our strategy is to achieve consistent operational excellence in our core businesses. Execution on our strategy is intended to maximize the value of our existing platform and to build the foundation for further growth. We have identified five key priorities for which we have developed initiatives and are developing initiatives to support our strategy and have created a transformation process to develop cross-functional initiatives directly tied to key priorities. These five priorities include enhancing our customer and associate experience, improving our marketing and sales processes, simplifying our organization, optimizing our portfolio and leveraging our scale, and innovating for growth. While our focus will be on executing on this strategy, we plan to continue to evaluate and, where opportunities arise, selectively purchase existing operating companies, senior living communities, including those that we currently lease or manage, and ancillary services companies. Such acquisitions may be pursued on our own, or through our investments in ventures. We believe that successful execution upon our strategy and the initiatives supporting our strategy will enable us to grow stockholder value and better fulfill our mission by satisfying more customers, building improved relationships between us, our associates and our customers, and by improving our occupancy, revenue, expenses, and liquidity, by increasing the quality and durability of our cash flow, and by reducing our debt and lease leverage.

Portfolio Optimization Update

We continue to actively explore opportunities to optimize our portfolio through disposing of owned and leased communities, restructuring leases and investing in our Program Max initiative. As of September 30, 2017, we owned 360 communities (32,721 units), leased 460 communities (36,954 units) and provided management services with respect to 211 communities (31,527 units) for third parties or unconsolidated ventures in which we have an ownership interest.

We completed dispositions, through sales and lease terminations, of 139 communities during the period from January 1, 2016 through September 30, 2017, including three communities disposed of prior to June 30, 2016. Our condensed consolidated financial statements include resident fee revenue of $4.0 million and $115.1 million, facility operating expenses of $3.3 million and $87.4 million, and cash lease payments of $0.9 million and $27.5 million for the 136 communities for the three months ended September 30, 2017 and September 30, 2016, respectively. Our condensed consolidated financial statements include resident fee revenue of $96.6 million and $361.1 million, facility operating expenses of $74.4 million and $272.6 million, and cash lease payments of $26.8 million and $82.4 million for the 139 communities for the nine months ended September 30, 2017 and September 30, 2016, respectively.

The foregoing transactions, and updates on our pending transactions and assets held for sale as of September 30, 2017, are described below.



HCP Master Lease Transaction and RIDEA Ventures Restructuring
On November 2, 2017, we announced that we had entered into a definitive agreement for a multi-part transaction with HCP, Inc. (“HCP”). As part of such transaction, we entered into an Amended and Restated Master Lease and Security Agreement (“Master Lease”) with HCP effective as of November 1, 2017. The components of the multi-part transaction include:
Master Lease Transactions. We and HCP amended and restated triple-net leases covering substantially all of the communities we lease from HCP into the Master Lease. We will acquire two communities (208 units) for an aggregate purchase price of $35 million, upon which time the two communities will be removed from the Master Lease. In addition, 32 communities (2,962 units) will be removed from the Master Lease on or before November 1, 2018. However, if HCP has not transitioned operations and/or management of such communities to a third party prior to such date, we will continue to operate the foregoing 32 communities on an interim basis and such communities will, from and after such time, be reported in the Management Services segment. In addition to such 34 communities, we continue to lease 44 communities pursuant to the terms of the Master Lease, which have the same lease rates and expiration and renewal terms as the applicable prior instruments, except that effective January 1, 2018, we will receive a $5 million annual rent reduction for three communities. The Master Lease also provides that we may engage in certain change in control and other transactions without the need to obtain HCP's consent, subject to the satisfaction of certain conditions.

RIDEA Ventures Restructuring. Pursuant to the Company's agreement with HCP, HCP will acquire our 10% ownership interest in two of our existing RIDEA Ventures with HCP for $99 million. We provide management services to 59 communities (9,585 units) on behalf of the two RIDEA Ventures. We will acquire four of such communities (787 units) for an aggregate purchase price of $239 million and will retain management of 18 of such communities (3,276 units). The amended and restated management agreements for such 18 communities have a term set to expire in 2030, subject to certain early termination rights. In addition, HCP will be entitled to sell or transition operations and/or management of 37 of such communities (5,522 units).

We expect to fund our acquisition of the six communities with the proceeds from the sale of our RIDEA Venture interests, cash on hand and non-recourse mortgage financing on the acquired communities.
We expect the disposition of our ownership interest in the two RIDEA Ventures and our acquisition of the six communities to occur in the next three to six months, and expect the terminations of our triple net leases and management agreements on 69 communities to occur in stages throughout 2018.
The closings of the various transactions referenced above are subject to the satisfaction of various closing conditions, including (where applicable) the receipt of regulatory approvals. However, there can be no assurance that the transactions will close or, if they do, when the actual closings will occur.
The results of operations for the 32 communities to be disposed through lease terminations are reported within the following segments within the condensed consolidated financial statements: Retirement Centers (five communities; 783 units) and Assisted Living (27 communities; 2,179 units). With respect to such 32 communities and the 37 managed communities for which our management will be terminated, our condensed consolidated financial statements include resident fee revenue of $33.2 million and $35.0 million, management fees of $2.5 million and $2.6 million, facility operating expenses of $22.4 million and $21.0 million, and cash lease payments of $11.1 million and $10.3 million for the three months ended September 30, 2017 and September 30, 2016, respectively; and include resident fee revenue of $101.3 million and $105.5 million, management fees of $7.6 million and $8.2 million, facility operating expenses of $64.6 million and $62.9 million, and cash lease payments of $33.2 million and $30.7 million for the nine months ended September 30, 2017 and September 30, 2016.

Dispositions and Restructurings of Communities Leased from HCP

On November 1, 2016, we announced that we had entered into agreements to, among other things, terminate triple-net leases with respect to 97 communities, four of which were contributed to an existing unconsolidated venture in which we hold an equity interest and 64 of which were acquired by the Blackstone Venture described below. In addition to the formation of the Blackstone Venture, the transactions included the following components with respect to 33 communities:

We and HCP agreed to terminate triple-net leases with respect to eight communities (867 units). HCP agreed to contribute immediately thereafter four of such communities, consisting of 527 units, to an existing unconsolidated venture with HCP in which we have a 10% equity interest. During the three months ended December 31, 2016, the triple-net leases with respect to seven communities (773 units) were terminated and HCP contributed four of the communities to the existing unconsolidated venture. The triple-net lease with respect to the remaining community was terminated during January 2017. The results of operations of the eight communities are reported in the following segments within the


condensed consolidated financial statements through the respective disposition dates: Assisted Living (six communities; 514 units), Retirement Centers (one community; 109 units) and CCRCs-Rental (one community; 244 units).

We and HCP agreed to terminate triple-net leases with respect to 25 communities (2,031 units). During the three months ended September 30, 2017, the triple-net leases with respect to two communities were terminated. Our triple net lease obligations with respect to the remaining 23 communities either have been terminated, or are expected to be terminated, during the three months ended December 31, 2017.  Following the termination of our triple net lease obligations for these communities, we will continue to operate certain of these communities on an interim basis, and such communities will be reported in the Management Services segment from and after termination of such triple net lease obligations. Our condensed consolidated financial statements include resident fee revenue of $18.0 million and $18.1 million, facility operating expenses of $14.8 million and $14.6 million, and cash lease payments of $2.6 million and $4.9 million for the 25 communities for the three months ended September 30, 2017 and September 30, 2016, respectively. Our condensed consolidated financial statements include resident fee revenue of $54.9 million and $54.6 million, facility operating expenses of $44.7 million and $44.0 million, and cash lease payments of $8.1 million and $14.7 million for the 25 communities for the nine months ended September 30, 2017 and September 30, 2016, respectively.

Formation of Venture with Blackstone

On March 29, 2017, we and affiliates of Blackstone Real Estate Advisors VIII L.P. (collectively, "Blackstone") formed a venture (the "Blackstone Venture") that acquired 64 senior housing communities for a purchase price of $1.1 billion. We had previously leased the 64 communities from HCP under long-term lease agreements with a remaining average lease term of approximately 12 years. At the closing, the Blackstone Venture purchased the 64-community portfolio from HCP subject to the existing leases, and we contributed our leasehold interests for 62 communities and a total of $179.2 million in cash to purchase a 15% equity interest in the Blackstone Venture, terminate leases, and fund our share of closing costs. As of the formation date, we continued to operate two of the communities under lease agreements and began managing 60 of the communities on behalf of the venture under a management agreement with the venture. The two remaining leases will be terminated, pending certain regulatory and other conditions, at which point we will manage the communities; however, there can be no assurance that the terminations will occur or, if they do, when the actual terminations will occur. Two of the communities are managed by a third party for the venture.

The results and financial position of the 62 communities for which leases were terminated were deconsolidated from our financial statements prospectively upon formation of the Blackstone Venture. The results of operations of the 62 communities for which leases were terminated were reported in the following segments within the condensed consolidated financial statements through the formation date: Assisted Living (47 communities; 3,322 units), Retirement Centers (eight communities; 1,072 units) and CCRCs-Rental (seven communities; 1,416 units). Our interest in the venture is accounted for under the equity method of accounting.

As a result of this transaction, our total payment obligations for capital and financing leases and operating leases due during the twelve months ending March 31, 2018 decreased by $75.4 million and $16.6 million, respectively. Additionally, our capital and financing lease obligations within the condensed consolidated balance sheet were reduced by $880.0 million on the closing date. See Note 4 and Note 10 to the condensed consolidated financial statements for more information about the formation of the Blackstone Venture.

Dispositions of Owned Communities and Assets Held for Sale

We began 2017 with 16 of our owned communities (1,423 units) classified as held for sale as of December 31, 2016. During the nine months ended September 30, 2017, we completed the sale of three communities and during the three months ended September 30, 2017, we entered into an agreement to sell one additional community, which is classified as held for sale as of September 30, 2017. As of September 30, 2017, 15 communities were classified as held for sale.

As of September 30, 2017, $106.4 million was recorded as assets held for sale and $50.4 million of mortgage debt was included in the current portion of long-term debt within the condensed consolidated balance sheet with respect to the 15 communities held for sale as of such date. This debt will either be repaid with the proceeds from the sales or be assumed by the prospective purchasers. The results of operations of the 15 communities are reported in the following segments within the condensed consolidated financial statements: Assisted Living (12 communities; 1,050 units) and CCRCs-Rental (three communities; 458 units). The 15 communities had resident fee revenue of $12.2 million and $12.8 million and facility operating expenses of $10.9 million and $11.0 million for the three months ended September 30, 2017 and September 30, 2016, respectively. The 15 communities had resident fee revenue of $37.6 million and $39.0 million and facility operating expenses of $33.2 million and $33.7 million for the nine months ended September 30, 2017 and September 30, 2016, respectively.



The closings of the sales of the unsold communities classified as held for sale are subject to receipt of regulatory approvals and satisfaction of other customary closing conditions and are expected to occur during the next 12 months; however, there can be no assurance that the transactions will close or, if they do, when the actual closings will occur.

Other Lease Terminations

During the nine months ended September 30, 2017, we terminated leases for 14 communities otherwise than in connection with the transactions with Blackstone and HCP described above. The results of operations of the 14 communities are reported in the following segments within the condensed consolidated financial statements through the respective disposition dates: Retirement Centers (one community; 103 units), Assisted Living (12 communities; 556 units), and CCRCs-Rental (one community; 466 units).

Program Max Initiative

During the nine months ended September 30, 2017, we also made progress on our Program Max initiative under which we expand, renovate, redevelop and reposition certain of our existing communities where economically advantageous. For the nine months ended September 30, 2017, we invested $7.2 million on Program Max projects, net of $5.7 million of third party lessor reimbursements. We currently have 8 Program Max projects that have been approved, most of which have begun construction and are expected to generate 27 new units.

Competitive Developments

In the third quarter of fiscal 2016, we began experiencing an elevated rate of new openings, with significant new competition opening in several of our markets. We continue to address such competition through more sophisticated pricing tools and pricing initiatives based on the competitive market, current in-place rents and occupancy; focusing on operations, including ensuring high customer satisfaction, protecting key leadership positions and actively engaging district and regional management in community operations; additional marketing efforts, including leveraging our industry leading name through enhanced digital, direct mail and local community outreach; and community segmentation through which we evaluate current community position relative to competition and reposition if necessary (e.g., price, services, amenities and programming). We expect the elevated rate of new openings and pressures on our occupancy and rate growth to continue through 2018.

Impacts of Hurricanes Harvey and Irma

During the three months ended September 30, 2017, Hurricanes Harvey and Irma made landfall in Texas and Florida, respectively.  We operate 171 communities, serving approximately 19,000 residents, in areas impacted by these hurricanes.  All but one of the impacted communities have returned to operation, though seven communities will experience some continuing disruption as storm damage is remediated.  During the three months ended September 30, 2017, we incurred $5.3 million of operating expenses related to hurricane response and issued $0.4 million in rent credits.  In addition, based on our preliminary assessments, we expect additional operating expense related to the hurricane response of $1.5 million for the three months ended December 31, 2017.  We also estimate that our ancillary services revenue was negatively impacted by approximately $3.4 million during the three months ended September 30, 2017 and will be negatively impacted by approximately $1.5 million during the three months ended December 31, 2017.  We estimate that we will incur an additional approximately $13.0 million to $14.0 million of capitalized costs for physical plant remediation, approximately $5.0 million to $6.0 million of which we expect to incur during the three months ended December 31, 2017 and the remainder of which we expect to incur during 2018.  In addition, as a result of Hurricane Irma, the State of Florida issued an emergency order requiring skilled nursing homes and assisted living communities to obtain generators and fuel necessary to sustain operations and maintain comfortable temperatures in the event of a power outage.  The emergency order has been overturned, and that decision has been appealed. There are legislative and regulatory rulemaking actions in process to address generator requirements.  We estimate we will incur $2.0 million to $3.0 million of costs during the three months ended December 31, 2017 as a result of the emergency order, and we are closely monitoring developments to determine what additional costs may be incurred to meet any new generator requirements. The foregoing estimates are presented net of expected reimbursement from our property and casualty and business interruption insurance policies and are preliminary estimates derived by management from the information available at this time. The actual amounts and timing of amounts may differ. 

Impact of Wildfires

The Company continues to monitor the wildfires in California. Approximately 20 of the Company's California communities have been affected by the wildfires. The Company evacuated the residents of six communities, all of which have returned to full operation, and others hosted residents who were evacuated. So far, none of the communities have suffered major structural damage from the wildfires.



Summary of Operating Results

The tables below present a summary of our operating results and certain other financial metrics for the three and nine months ended September 30, 2017 and September 30, 2016 and the amount and percentage of increase or decrease of each applicable item (dollars in millions).

 Three Months Ended
September 30,		 Increase
(Decrease)
 2017 2016 Amount 
Percent (2)
Total revenues$1,178.0
 $1,246.1
 $(68.1) (5.5)%
Facility operating expense$650.7
 $704.2
 $(53.6) (7.6)%
Net income (loss)$(413.9) $(51.7) $362.2
 NM
Net income (loss) attributable to Brookdale Senior Living Inc. common stockholders$(413.9) $(51.7) $362.2
 NM
Adjusted EBITDA(1)
$141.8
 $202.3
 $(60.5) (29.9)%
Net cash provided by operating activities$83.2
 $99.4
 $(16.2) (16.3)%
Adjusted Free Cash Flow(1)
$5.8
 $47.8
 $(42.0) (87.9)%

 Nine Months Ended
September 30,		 
Increase
(Decrease)
 2017 2016 Amount 
Percent (2)
Total revenues$3,581.2
 $3,768.1
 $(186.9) (5.0)%
Facility operating expense$1,967.6
 $2,113.2
 $(145.6) (6.9)%
Net income (loss)$(586.6) $(136.0) $450.6
 NM
Net income (loss) attributable to Brookdale Senior Living Inc. common stockholders$(586.5) $(135.9) $450.6
 NM
Adjusted EBITDA(1)
$500.5
 $586.6
 $(86.1) (14.7)%
Net cash provided by operating activities$283.1
 $277.3
 $5.8
 2.1 %
Adjusted Free Cash Flow(1)
$109.2
 $120.6
 $(11.4) (9.4)%

(1)Adjusted EBITDA and Adjusted Free Cash Flow are non-GAAP financial measures we use to assess our operating performance and liquidity. We changed our definition and calculation of Adjusted EBITDA when we reported results for the second quarter of 2016. Prior period amounts of Adjusted EBITDA included in this Quarterly Report on Form 10-Q have been recast to conform to the new definition. See "Non-GAAP Financial Measures" below for important information regarding both measures, including a description of the changes to the definition of Adjusted EBITDA.

(2)NM - Not meaningful

During the nine months ended September 30, 2017, total revenues were $3.6 billion, a decrease of $186.9 million, or 5.0%, over our total revenues for the nine months ended September 30, 2016. Resident fees for the nine months ended September 30, 2017 decreased $284.7 million, or 9.0%, from the nine months ended September 30, 2016. Management fees increased $6.0 million, or 11.8%, from the nine months ended September 30, 2016, and reimbursed costs incurred on behalf of managed communities increased $91.8 million, or 16.4%. The decrease in resident fees during the nine months ended September 30, 2017 was primarily due to disposition activity, through sales and lease terminations, since the beginning of the prior year period. Weighted average occupancy at the 800 communities we owned or leased during both full nine-month periods decreased 130 basis points. The decrease in resident fees at the 800 communities we owned or leased during both full nine-month periods was partially offset by a 1.8% increase in senior housing average monthly revenue per occupied unit (RevPOR) compared to the prior year nine-month period.

During the nine months ended September 30, 2017, facility operating expenses were $2.0 billion, a decrease of $145.6 million, or 6.9%, compared to the nine months ended September 30, 2016. The decrease in facility operating expenses was primarily due to the impact of disposition activity, through sales and lease terminations, since the beginning of the prior year period. Facility operating expenses increased $51.0 million, or 3.5%, at the 800 communities we owned or leased during both full nine-month


periods. The increase in facility operating expenses was primarily due to an increase in salaries and wages arising from wage rate increases and an increase in insurance expense related to positive changes in the nine months ended September 30, 2016 to estimates in general liability and professional liability and workers compensation expenses.

Net income (loss) attributable to Brookdale Senior Living Inc. common stockholders for the nine months ended September 30, 2017 was $(586.5) million, compared to net income (loss) attributable to Brookdale Senior Living Inc. common stockholders of $(135.9) million for the nine months ended September 30, 2016. Net income (loss) for the nine months ended September 30, 2017 was $(586.6) million as compared to net income (loss) of ($136.0) million for the nine months ended September 30, 2016. During the nine months ended September 30, 2017, our Adjusted EBITDA was $500.5 million, a decrease of 14.7% compared to the nine months ended September 30, 2016. The decrease in Adjusted EBITDA is primarily due to disposition activity, through asset sales and lease terminations, since the beginning of the prior year period. Additionally, increases in community labor expenses and insurance expense at the communities operated during both full periods contributed to the decline in Adjusted EBITDA. Adjusted EBITDA includes transaction and strategic project costs of $14.5 million for the nine months ended September 30, 2017 and integration, transaction, transaction-related and strategic project costs of $44.2 million for the nine months ended September 30, 2016.

During the nine months ended September 30, 2017, net cash provided by operating activities was $283.1 million, an increase of $5.8 million, or 2.1%, over our net cash provided by operating activities for the nine months ended September 30, 2016. During the nine months ended September 30, 2017, our Adjusted Free Cash Flow was $109.2 million, a decrease of 9.4% when compared to the nine months ended September 30, 2016. The decrease in Adjusted Free Cash Flow is primarily due to increases in community labor expenses and insurance expense at the communities operated during both full periods. The decrease was partially offset by a decrease in non-development capital expenditures, net of lessor reimbursements, of $56.8 million and a decrease in integration, transaction, transaction-related and strategic project costs of $21.3 million compared to the prior year period.

Consolidated Results of Operations


ComparisonAs of Three Months Ended SeptemberMarch 31, 2024, our total operations included 652 communities with a capacity to serve approximately 59,000 residents. As of that date, we owned 345 communities (31,169 units), leased 277 communities (19,844 units), and managed 30 2017 to September 30, 2016

communities (4,579 units). The following table sets forth, for the periods indicated, statement of operations items and the amount and percentage of change of these items. The results of operations for any particular period are not necessarily indicative of results for any future period. The following datadiscussion should be read in conjunction with our condensed consolidated financial statements and the related notes, which are included in Part I, Item 1"Item 1. Financial Statements" of this Quarterly Report on Form 10-Q. The results of operations for any particular period are not necessarily indicative of results for any future period.


DuringWe use the three months ended March 31, 2017, oneoperating measures described below in connection with operating and managing our business and reporting our results of operations.

•Senior housing operating results and data presented on a same community movedbasis reflect results and data of a consistent population of communities by excluding the impact of changes in the composition of our portfolio of communities. The operating results exclude natural disaster expense and related insurance recoveries. We define our same community portfolio as communities consolidated and operational for the full period in both comparison years. Consolidated communities excluded from the CCRCs-Rental segment to the Retirement Centers segment to more accurately reflect the underlying product offeringsame community portfolio include communities acquired or disposed of the community given changes to the community. The movement did not change our reportable segments, but it did impact the revenues, expenses and operating data reported within the two segments.  Revenue, expenses and operating data for the three months ended September 30, 2016 have not been recast.



As of September 30, 2017 our total operations included 1,031 communities with a capacity to serve 101,202 residents.

(dollars in thousands, except Total RevPAR, RevPAR and RevPOR)Three Months Ended
September 30,		 Increase (Decrease)
 2017 2016 Amount 
Percent (6)
Statement of Operations Data:       
Revenue       
Resident fees       
Retirement Centers$161,986
 $170,706
 $(8,720) (5.1)%
Assisted Living542,227
 607,345
 (65,118) (10.7)%
CCRCs-Rental108,075
 147,517
 (39,442) (26.7)%
Brookdale Ancillary Services110,604
 117,263
 (6,659) (5.7)%
Total resident fees922,892
 1,042,831
 (119,939) (11.5)%
Management services (1)
255,096
 203,295
 51,801
 25.5 %
Total revenue1,177,988
 1,246,126
 (68,138) (5.5)%
Expense 
  
  
  
Facility operating expense 
  
  
  
Retirement Centers96,079
 97,594
 (1,515) (1.6)%
Assisted Living368,651
 389,467
 (20,816) (5.3)%
CCRCs-Rental85,143
 114,521
 (29,378) (25.7)%
Brookdale Ancillary Services100,781
 102,639
 (1,858) (1.8)%
Total facility operating expense650,654
 704,221
 (53,567) (7.6)%
General and administrative expense63,779
 63,425
 354
 0.6 %
Transaction costs1,992
 659
 1,333
 NM
Facility lease expense84,437
 92,519
 (8,082) (8.7)%
Depreciation and amortization117,649
 130,783
 (13,134) (10.0)%
Goodwill and asset impairment368,551
 19,111
 349,440
 NM
Loss on facility lease termination4,938
 —
 4,938
 NM
Costs incurred on behalf of managed communities236,958
 187,763
 49,195
 26.2 %
Total operating expense1,528,958
 1,198,481
 330,477
 27.6 %
Income from operations(350,970) 47,645
 (398,615) NM
Interest income1,285
 809
 476
 58.8 %
Interest expense(79,999) (96,482) (16,483) (17.1)%
Debt modification and extinguishment costs(11,129) (1,944) 9,185
 NM
Equity in (loss) earnings of unconsolidated ventures(6,722) (878) 5,844
 NM
(Loss) gain on sale of assets, net(233) (425) (192) (45.2)%
Other non-operating income2,621
 3,706
 (1,085) (29.3)%
Income (loss) before income taxes(445,147) (47,569) 397,578
 NM
Benefit (provision) for income taxes31,218
 (4,159) 35,377
 NM
Net income (loss)(413,929) (51,728) 362,201
 NM
Net (income) loss attributable to noncontrolling interest44
 43
 1
 2.3 %
Net income (loss) attributable to Brookdale Senior Living Inc. common stockholders$(413,885) $(51,685) $362,200
 NM






 Three Months Ended
September 30,		 Increase (Decrease)
 2017 2016 Amount 
Percent (6)
Selected Operating and Other Data:       
Total number of communities (period end)1,031
 1,077
 (46) (4.3)%
Total units operated (2)
   
  
  
Period end101,202
 104,545
 (3,343) (3.2)%
Weighted average101,529
 106,147
 (4,618) (4.4)%
Owned/leased communities units (2)
   
  
  
Period end69,675
 78,562
 (8,887) (11.3)%
Weighted average70,112
 80,059
 (9,947) (12.4)%
Total RevPAR (3)
$4,386
 $4,337
 $49
 1.1 %
RevPAR (4)
$3,860
 $3,849
 $11
 0.3 %
Owned/leased communities occupancy rate (weighted average)84.8% 86.2% (1.4)% (1.6)%
RevPOR (5)
$4,552
 $4,465
 $87
 1.9 %
        
Selected Segment Operating and Other Data: 
  
  
  
Retirement Centers   
  
  
Number of communities (period end)85
 95
 (10) (10.5)%
Total units (2)
   
  
  
Period end15,961
 17,105
 (1,144) (6.7)%
Weighted average16,061
 17,105
 (1,044) (6.1)%
RevPAR (4)
$3,362
 $3,327
 $35
 1.1 %
Occupancy rate (weighted average)87.6% 89.3% (1.7)% (1.9)%
RevPOR (5)
$3,836
 $3,727
 $109
 2.9 %
Assisted Living 
  
  
  
Number of communities (period end)705
 783
 (78) (10.0)%
Total units (2)
   
  
  
Period end46,520
 51,494
 (4,974) (9.7)%
Weighted average46,858
 52,991
 (6,133) (11.6)%
RevPAR (4)
$3,857
 $3,820
 $37
 1.0 %
Occupancy rate (weighted average)84.2% 85.6% (1.4)% (1.6)%
RevPOR (5)
$4,582
 $4,461
 $121
 2.7 %
CCRCs-Rental   
  
  
Number of communities (period end)30
 43
 (13) (30.2)%
Total units (2)
   
  
  
Period end7,194
 9,963
 (2,769) (27.8)%
Weighted average7,193
 9,963
 (2,770) (27.8)%
RevPAR (4)
$4,989
 $4,896
 $93
 1.9 %
Occupancy rate (weighted average)82.6% 84.0% (1.4)% (1.7)%
RevPOR (5)
$6,046
 $5,833
 $213
 3.7 %
Management Services   
  
  
Number of communities (period end)211
 156
 55
 35.3 %
Total units (2)
   
  
  
Period end31,527
 25,983
 5,544
 21.3 %
Weighted average31,417
 26,088
 5,329
 20.4 %
Occupancy rate (weighted average)84.5% 87.2% (2.7)% (3.1)%


        
Brookdale Ancillary Services 
  
  
  
Outpatient Therapy treatment codes178,851
 419,619
 (240,768) (57.4)%
Home Health average daily census14,844
 14,457
 387
 2.7 %
Hospice average daily census1,169
 813
 356
 43.8 %

(1)Management services segment revenue includes management fees and reimbursements for which we are the primary obligor of costs incurred on behalf of managed communities.

(2)Weighted average units operated represents the average units operated during the period.

(3)Total RevPAR, or average monthly resident fee revenues per available unit, is defined by the Company as resident fee revenues, excluding entrance fee amortization, for the corresponding portfolio for the period, divided by the weighted average number of available units in the corresponding portfolio for the period, divided by the number of months in the period.

(4)RevPAR, or average monthly senior housing resident fee revenues per available unit, is defined by the Company as resident fee revenues, excluding Brookdale Ancillary Services segment revenue and entrance fee amortization, for the corresponding portfolio for the period, divided by the weighted average number of available units in the corresponding portfolio for the period, divided by the number of months in the period.

(5)RevPOR, or average monthly senior housing resident fee revenues per occupied unit, is defined by the Company as resident fee revenues, excluding Brookdale Ancillary Services segment revenue and entrance fee amortization, for the corresponding portfolio for the period, divided by the weighted average number of occupied units in the corresponding portfolio for the period, divided by the number of months in the period.

(6)NM - Not meaningful

Resident Fees

Resident fee revenue decreased $119.9 million, or 11.5%, compared to the prior year period primarily due to disposition activity, through sales and lease terminations, since the beginning of the prior year, communities classified as assets held for sale, certain communities planned for disposition, certain communities that have undergone or are undergoing expansion, redevelopment, and repositioning projects, and certain communities that have experienced a casualty event that significantly impacts their operations. Our management uses same community operating results and data for decision making and components of executive compensation, and we believe such results and data provide useful information to investors, because it enables comparisons of revenue, expense, and other operating measures for a consistent portfolio over time without giving effect to the impacts of communities that were not consolidated and operational for the comparison periods, communities acquired or disposed during the comparison periods (or planned for disposition), and communities with results that are or likely will be impacted by completed or in-process development-related capital expenditure projects.

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

18

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

•Weighted average occupancy decreased 160 basis pointsrate reflects the percentage of units at our owned and leased communities being utilized by residents over a reporting period. We measure occupancy rates with respect to our Independent Living, Assisted Living and Memory Care, and CCRCs segments, and also measure this metric both on a consolidated senior housing and a same community basis. Our management uses weighted average occupancy, and we believe the 809 communities we owned or leased during both full periods, primarily duemeasure provides useful information to investors, because it is a significant driver of our senior housing revenue performance.

This section includes the non-GAAP performance measure Adjusted EBITDA. See "Non-GAAP Financial Measures" below for our definition of the measure and other important information regarding such measure, including reconciliations to the impactmost comparable measure in accordance with generally accepted accounting principles in the United States ("GAAP").

Comparison of new competitionThree Months Ended March 31, 2024 and 2023

Summary Operating Results

The following table summarizes our overall operating results for the three months ended March 31, 2024 and 2023.

Three Months Ended
March 31,		Increase (Decrease)
(in thousands)20242023AmountPercent
Resident fees$744,241 $713,404 $30,837 4.3 %
Facility operating expense542,550 530,807 11,743 2.2 %
Net income (loss)(29,581)(44,563)(14,982)(33.6)%
Adjusted EBITDA97,616 88,623 8,993 10.1 %

The increase in our markets. Additionally, Brookdale Ancillary Services segment revenue decreased $6.7 million, or 5.7%,resident fees was primarily dueattributable to a decrease6.3% increase in volume for outpatient therapy servicessame community RevPAR, comprised of a 4.3% increase in same community RevPOR and a decrease150 basis point increase in reimbursement rates for home health services.same community weighted average occupancy. The 136 communities disposed of subsequent to the beginning of the prior year period (including the 62 communities for which the financial results were deconsolidated from our financial statements prospectively upon formation of the Blackstone Venture on March 29, 2017) generated $4.0 million of revenue during the current year period compared to $115.1 million of revenue in the prior year period. The decrease in resident fee revenueincrease was partially offset by a 1.4% increase in RevPOR at the 809 communities we owned or operated during both full periods compared to the prior year period. Total RevPAR for the consolidated portfolio also increased by 1.1% compared to the prior year period.

Retirement Centers segment revenue decreased $8.7 million, or 5.1%, primarily due to the impactdisposition of dispositions of 11 communities since the beginning of the prior year period, which generated $0.7resulted in $16.3 million of revenueless in resident fees during the current year periodthree months ended March 31, 2024 compared to $11.1 million of revenue in the prior year period. This

The increase in facility operating expense was primarily attributable to a 4.3% increase in same community facility operating expense primarily resulting from broad inflationary pressure, an additional day of expense due to the leap year, and an increase in property repair expense primarily as a result of severe weather events, partially offset by a decrease in the use of premium labor, primarily contract labor. The increase was partially offset by the impactdisposition of the reclassification of one community from the CCRCs-Rental segment into this segment subsequent to the prior year period. Retirement Centers segment revenue at the communities we operated during both full periods was $154.2 million during the current year period, a decrease of $0.2 million, or 0.1%, over the prior year period, primarily due to a 140 basis point decrease in occupancy at these communities, partially offset by a 1.6% increase in RevPOR at these communities.

Assisted Living segment revenue decreased $65.1 million, or 10.7%, primarily due to the impact of dispositions of 113 communities since the beginning of the prior year period, which generated $3.3resulted in $13.7 million of revenueless in facility operating expense during the current year periodthree months ended March 31, 2024 compared to $66.2 million of revenue in the prior year period. Assisted Living segment revenue at

The decrease in net loss was primarily attributable to the increase in resident fees, partially offset by the increase in facility operating expense.

The increase in Adjusted EBITDA was primarily attributable to the increase in resident fees, partially offset by the increase in facility operating expense and the change in classification of $7.4 million of lease payments for 35 communities we operated during both full periods was $530.3 million during the current year period,as cash facility operating lease payments as a decreaseresult of $2.5 million, or 0.5%, overlease amendments subsequent to the prior year period,period.


19

Operating Results - Senior Housing Segments

The following table summarizes the consolidated operating results and data of our three senior housing segments (Independent Living, Assisted Living and Memory Care, and CCRCs) for the three months ended March 31, 2024 and 2023, including operating results and data on a same community basis. See management's discussion and analysis of the operating results on an individual segment basis on the following pages.

Three Months Ended
March 31,		Increase (Decrease)
(in thousands, except communities, units, occupancy, RevPAR, and RevPOR)20242023AmountPercent
Resident fees$744,241 $713,404 $30,837 4.3 %
Other operating income$— $2,328 $(2,328)(100.0)%
Facility operating expense$542,550 $530,807 $11,743 2.2 %
Number of communities (period end)622 641 (19)(3.0)%
Total average units51,039 52,177 (1,138)(2.2)%
RevPAR$4,854 $4,551 $303 6.7 %
Occupancy rate (weighted average)77.9 %76.3 %160  bpsn/a
RevPOR$6,228 $5,963 $265 4.4 %
Same Community Operating Results and Data
Resident fees$729,127 $685,944 $43,183 6.3 %
Other operating income$— $2,215 $(2,215)(100.0)%
Facility operating expense$527,696 $506,111 $21,585 4.3 %
Number of communities611 611 — — %
Total average units50,120 50,124 (4)— %
RevPAR$4,849 $4,562 $287 6.3 %
Occupancy rate (weighted average)78.0 %76.5 %150  bpsn/a
RevPOR$6,218 $5,960 $258 4.3 %


20

Independent Living Segment

The following table summarizes the operating results and data for our Independent Living segment for the three months ended March 31, 2024 and 2023. All 68 of the communities in our Independent Living segment are included within our same community portfolio.

Three Months Ended
March 31,		Increase (Decrease)
(in thousands, except communities, units, occupancy, RevPAR, and RevPOR)20242023AmountPercent
Resident fees$148,948 $140,602 $8,346 5.9 %
Other operating income$— $54 $(54)(100.0)%
Facility operating expense$100,305 $93,823 $6,482 6.9 %
Number of communities (period end)68 68 — — %
Total average units12,564 12,571 (7)(0.1)%
RevPAR$3,952 $3,728 $224 6.0 %
Occupancy rate (weighted average)79.6 %78.6 %100  bpsn/a
RevPOR$4,963 $4,741 $222 4.7 %

The increase in the segment's resident fees was primarily attributable to an increase in the segment's RevPAR, comprised of a 4.7% increase in RevPOR and a 100 basis point increase in weighted average occupancy. The increase in the segment's RevPOR was primarily the result of annual in-place rate increases effective January 1, 2024. The increase in the segment's weighted average occupancy primarily reflects the impact of our execution on key initiatives to rebuild occupancy lost due to the pandemic.

The increase in the segment's facility operating expense was primarily attributable to broad inflationary pressure, an additional day of expense due to the leap year, an increase in property repair expense primarily as a result of severe weather events, and increased wireless internet access provided for residents, partially offset by a decrease in the use of premium labor. The segment's same community facility operating expense for the three months ended March 31, 2024 and 2023 excludes $0.4 million and $0.2 million, respectively, of natural disaster expense.


21

Assisted Living and Memory Care Segment

The following table summarizes the operating results and data for our Assisted Living and Memory Care segment for the three months ended March 31, 2024 and 2023, including operating results and data on a same community basis.

Three Months Ended
March 31,		Increase (Decrease)
(in thousands, except communities, units, occupancy, RevPAR, and RevPOR)20242023AmountPercent
Resident fees$510,872 $486,777 $24,095 4.9 %
Other operating income$— $2,027 $(2,027)(100.0)%
Facility operating expense$373,414 $364,211 $9,203 2.5 %
Number of communities (period end)537 554 (17)(3.1)%
Total average units33,744 34,414 (670)(1.9)%
RevPAR$5,036 $4,710 $326 6.9 %
Occupancy rate (weighted average)77.5 %75.9 %160  bpsn/a
RevPOR$6,494 $6,204 $290 4.7 %
Same Community Operating Results and Data
Resident fees$502,495 $471,659 $30,836 6.5 %
Other operating income$— $1,952 $(1,952)(100.0)%
Facility operating expense$364,650 $351,368 $13,282 3.8 %
Number of communities527 527 — — %
Total average units33,241 33,239 2 — %
RevPAR$5,039 $4,730 $309 6.5 %
Occupancy rate (weighted average)77.5 %76.0 %150  bpsn/a
RevPOR$6,498 $6,223 $275 4.4 %
The increase in the segment's resident fees was primarily attributable to an increase in the segment's same community RevPAR, comprised of a 4.4% increase in same community RevPOR and a 150 basis point decreaseincrease in same community weighted average occupancy. The increase in the segment's same community RevPOR was primarily the result of annual in-place rate increases effective January 1, 2024. The increase in the segment's same community weighted average occupancy at these communities,primarily reflects the impact of our execution on key initiatives to rebuild occupancy lost due to the pandemic. The increase in the segment's resident fees was partially offset by a 1.4% increase in RevPOR at these communities.



CCRCs-Rental segment revenue decreased $39.4 million, or 26.7%, primarily due to the impactdisposition of dispositions of 12 communities since the beginning of the prior year period, which generated $0.1resulted in $9.5 million of revenueless in resident fees during the current year period compared to $37.8 million of revenue in the prior year period. Additionally, revenue decreased due to the impact of the reclassification of one community out of this segment and into the Retirement Centers segment subsequent to the prior year period. CCRCs-Rental segment revenue at the communities we operated during both full periods was $108.0 million during the current year period, a decrease of $0.4 million, or 0.4%, over the prior year period, primarily due to a 180 basis point decrease in occupancy at these communities, partially offset by a 1.8% increase in RevPOR at these communities.

Brookdale Ancillary Services segment revenue decreased $6.7 million, or 5.7%, primarily due to a decrease in volume for outpatient therapy services and a decrease in reimbursement rates for home health services. During the three months ended DecemberMarch 31, 2016, we significantly reduced the number of outpatient therapy clinics located in our communities as lower reimbursement rates and lower utilization made the business less attractive. For home health in 2017, CMS has implemented a net 0.7% reimbursement reduction, consisting of a 2.8% market basket inflation increase, less a 0.3% productivity reduction, a 2.3% rebasing adjustment, and a 0.9% reduction to account for industry wide case-mix growth. As a result, our home health reimbursement has been reduced by approximately 3.0%2024 compared to the prior year period, which is consistent with our expectations for the remainder of 2017. These decreases were partially offset by an increase in volume for hospice services.

Management Services Revenue

Management Services segment revenue, including management fees and reimbursed costs incurred on behalf of managed communities, increased $51.8 million, or 25.5%, over the prior year period primarily due to our entry into management agreements with the Blackstone Venture subsequent to the prior year period.


Facility Operating Expense

Facility operating expense decreased $53.6 million, or 7.6%, overThe increase in the prior year period. For the three months ended September 30, 2017,segment's facility operating expense includes $5.3 million of costs relatedwas primarily attributable to our response to Hurricanes Harvey and Irma. The decreasean increase in the segment's same community facility operating expense is primarily attributable to broad inflationary pressure, an additional day of expense due to the leap year, and an increase in property repair expense primarily as a result of severe weather events, partially offset by a decrease in the use of premium labor, primarily contract labor and a decrease in credit losses. The increase in the segment's facility operating expense was partially offset by the disposition activity, through sales and lease terminations, of 136 communities since the beginning of the prior year period, which incurred $3.3resulted in $7.4 million ofless in facility operating expensesexpense during the current year periodthree months ended March 31, 2024 compared to $87.4 million of facility operating expenses in the prior year period. Additionally, Brookdale Ancillary Services segmentThe segment's same community facility operating expenses decreased $1.9 million, or 1.8%, primarily due to a decrease in volumeexpense for outpatient therapy services. These decreases were partially offset by an increase in salaries and wages arising from wage rate increases at the communities we operated during both full periods and an $8.1 million increase in insurance expense related to positive changes in the three months ended September 30, 2016 to estimatesMarch 31, 2024 and 2023 excludes $2.4 million and $0.3 million, respectively, of natural disaster expense, consisting primarily of remediation of winter storm damage.




22

CCRCs Segment

The following table summarizes the operating results and data for our CCRCs segment for the three months ended March 31, 2024 and 2023, including operating results and data on a same community basis.

Three Months Ended
March 31,		Increase (Decrease)
(in thousands, except communities, units, occupancy, RevPAR, and RevPOR)20242023AmountPercent
Resident fees$84,421 $86,025 $(1,604)(1.9)%
Other operating income$— $247 $(247)(100.0)%
Facility operating expense$68,831 $72,773 $(3,942)(5.4)%
Number of communities (period end)17 19 (2)(10.5)%
Total average units4,731 5,192 (461)(8.9)%
RevPAR$5,948 $5,490 $458 8.3 %
Occupancy rate (weighted average)76.1 %73.4 %270  bpsn/a
RevPOR$7,815 $7,482 $333 4.5 %
Same Community Operating Results and Data
Resident fees$77,684 $73,683 $4,001 5.4 %
Other operating income$— $209 $(209)(100.0)%
Facility operating expense$63,090 $61,119 $1,971 3.2 %
Number of communities16 16 — — %
Total average units4,315 4,314 1 — %
RevPAR$6,001 $5,693 $308 5.4 %
Occupancy rate (weighted average)76.5 %74.5 %200  bpsn/a
RevPOR$7,842 $7,638 $204 2.7 %
The decrease in general liability and professional liability and workers compensation expenses.

Retirement Centers segment facility operating expenses decreased $1.5 million, or 1.6%,the segment's resident fees was primarily dueattributable to the impactdisposition of dispositions of 11 communities since the beginning of the prior year period, which incurred $0.5resulted in $6.8 million of expensesless in resident fees during the current year periodthree months ended March 31, 2024 compared to $6.8 million in the prior year period. ThisThe decrease was partially offset by an increase in salariesthe segment's same community RevPAR, comprised of a 200 basis point increase in same community weighted average occupancy and wages arising from wage rate increases ata 2.7% increase in the communities we operated during both full periods andsegment's same community RevPOR. The increase in the segment's same community weighted average occupancy primarily reflects the impact of the reclassification of one community from the CCRCs-Rental segment into this segment subsequentour execution on key initiatives to rebuild occupancy lost due to the prior year period. Retirement Centers segmentpandemic. The increase in the segment's same community RevPOR was primarily the result of annual in-place rate increases effective January 1, 2024, partially offset by an occupancy mix shift to more independent living residents.

The decrease in the segment's facility operating expenses, excluding costs relatedexpense was primarily attributable to hurricanes, at the communities we operated during both full periods were $89.6 million, an increasedisposition of $2.2 million, or 2.5%, over the prior year period.

Assisted Living segment facility operating expenses decreased $20.8 million, or 5.3%, primarily driven by the impact of dispositions of 113 communities since the beginning of the prior year period, which incurred $2.8resulted in $6.3 million of expensesless in facility operating expense during the current year periodthree months ended March 31, 2024 compared to $49.1 million in the prior year period. ThisThe decrease in the segment's facility operating expense was partially offset by an increase in salariesthe segment's same community facility operating expense primarily attributable to broad inflationary pressure and wages arising from wage rate increases atan additional day of expense due to the communities we operated during both full periodsleap year.








23

Operating Results - Other Income and a $6.9 million increaseExpense Items

The following table summarizes other income and expense items in insurance expense related to positive changes inour operating results for the three months ended September 30, 2016 to estimates in general liabilityMarch 31, 2024 and professional liability and workers compensation expenses. Assisted Living segment facility operating expenses, excluding costs related to hurricanes, at the communities we operated during both full periods were $354.9 million, an increase of $19.5 million, or 5.8%, over the prior year period.2023.


CCRCs-Rental segment facility operating expenses decreased $29.4 million, or 25.7%, primarily driven by the impact of dispositions of 12 communities since the beginning of the prior year period, which incurred $0.1 million of expenses during the current year period compared to $31.5 million in the prior year period. Additionally, facility operating expenses decreased due to the impact of the reclassification of one community out of this segment and into the Retirement Centers segment subsequent to the prior year period. CCRCs-Rental segment facility operating expenses, excluding costs related to hurricanes, at the
Three Months Ended
March 31,		Increase (Decrease)
(in thousands)20242023AmountPercent
Management fees$2,618 $2,577 $41 1.6 %
Reimbursed costs incurred on behalf of managed communities35,972 34,954 1,018 2.9 %
Costs incurred on behalf of managed communities35,972 34,954 1,018 2.9 %
General and administrative expense45,732 48,619 (2,887)(5.9)%
Facility operating lease expense51,496 46,127 5,369 11.6 %
Depreciation and amortization86,127 84,934 1,193 1.4 %
Asset impairment1,708 — 1,708 NM
Interest income4,778 5,326 (548)(10.3)%
Interest expense57,687 59,711 (2,024)(3.4)%
Equity in earnings (loss) of unconsolidated ventures— (577)(577)(100.0)%
Non-operating gain (loss) on sale of assets, net704 — 704 NM
Other non-operating income (loss)3,338 3,149 189 6.0 %
Benefit (provision) for income taxes40 (572)612 NM



communities we operated during both full periods were $83.9 million, an increase of $1.6 million, or 2.0%, over the prior year period.

Brookdale Ancillary Services segment operating expenses decreased $1.9 million, or 1.8%, primarily due to decreases in volume for outpatient therapy services. During the three months ended December 31, 2016, we significantly reduced the number of outpatient therapy clinics located in our communities as lower reimbursement rates and lower utilization made the business less attractive.

General and Administrative Expense

GeneralExpense. The decrease in general and administrative expense increased $0.4 million, or 0.6%, overwas primarily attributable to a decrease in organizational restructuring costs compared to the prior year period, primarily due to increased legal fees. This increase was partially offset by a $5.6 million decrease in integration, transaction-related and strategic project costs. Integration, transaction-related and strategic projectfor severance costs were $0.8 millionfor our senior leadership changes during the current period compared to $6.4 million in the prior year period. Integration costs for 2016 include transition costs associated withthree months ended March 31, 2023. General and administrative expense includes transaction and organizational restructuring (such as severancecosts of $0.4 million and retention payments$3.6 million for the three months ended March 31, 2024 and recruiting expenses), third party consulting expenses directly related to the integration of acquired communities (in areas such as cost savings and synergy realization, branding and technology and systems work), and internal2023, respectively. Transaction costs such as training, travel and labor, reflecting time spent by Company personnel on integration activities and projects. Transaction-related costs for 2016 include third party coststhose directly related to acquisition, and disposition, activity, community financing and leasing activity, and corporate capital structure assessment activities (including shareholder relations advisory matters), and are primarily comprised of legal, finance, consulting, professional fees, and other third partythird-party costs. Strategic projectOrganizational restructuring costs for 2016 include costs associated with strategic projects related to refining our strategy, building out enterprise-wide capabilities (including EMR roll-out project) and reducing costs and achieving synergies by capitalizing on scale.

Transaction Costs

Transaction costs increased $1.3 million to $2.0 million. Transaction costs in the current year period were primarily related to direct coststhose related to our ongoing assessmentefforts to reduce general and administrative expense and our senior leadership changes, including severance costs.

Facility Operating Lease Expense. The increase in facility operating lease expense was primarily due to the change in classification of options and alternativeslease costs from financing leases to enhance stockholder value. Transaction costs inoperating leases as a result of lease amendments subsequent to the prior year period were primarily related to direct costs related to community disposition activity.period.


Facility Lease Expense

Facility leaseDepreciation and Amortization. The increase in depreciation and amortization expense decreased $8.1 million, or 8.7%,was primarily due to lease termination activitythe completion of community renovations, apartment upgrades, and other major building infrastructure projects since the beginning of the prior year period.

Depreciation and Amortization

Depreciation and amortization expense decreased $13.1 million, or 10.0%, primarily due to disposition activity, through sales and lease terminations, since the beginning of the prior year period.

Goodwill and Asset Impairment

During the current year period, we recorded $368.6 million of non-cash impairment charges. The impairment charges consisted of $205.0 million of goodwill within the Assisted Living segment, $149.9 million of property, plant and equipment and leasehold intangibles for certain communities, primarily in the Assisted Living segment, and $13.7 million of intangible assets for health care licenses within the Brookdale Ancillary Services segment. Asset impairment expense in the prior year period was primarily related to decreases in the estimated selling price of assets held for sale during the prior year period.

During the third quarter of 2017, we identified qualitative indicators of impairment of our goodwill, including a significant decline in our stock price and market capitalization for a sustained period since the last testing date, significant underperformance relative to historical and projected operating results, and an increased competitive environment in the senior living industry. As a result, we performed an interim quantitative goodwill impairment test as of September 30, 2017, which included a comparison of the estimated fair value of each reporting unit to which the goodwill has been assigned with the reporting unit's carrying value. In estimating the fair value of the reporting units for purposes of the quantitative goodwill impairment test, we utilized an income approach, which included future cash flow projections that are developed internally. Based on the results of the quantitative goodwill impairment test, we determined that the carrying amount of our Assisted Living segment exceeded its estimated fair value by $205.0 million as of September 30, 2017. As a result, we recorded a non-cash impairment charge of $205.0 million to goodwill within the Assisted Living segment for the three months ended September 30, 2017.



During the three months ended September 30, 2017, we evaluated property, plant and equipment and leasehold intangibles for impairment and identified properties with a carrying amount of the assets in excess of the estimated future undiscounted net cash flows expected to be generatedpartially offset by the assets. We compared the estimated fair valuechange in classification of the assetslease costs from financing leases to their carrying value for these identified properties and recorded an impairment charge for the excess of carrying value over fair value. As a result, we recorded property, plant and equipment and leasehold intangibles non-cash impairment charges of $149.9 million for the three months ended September 30, 2017, including $131.2 million within the Assisted Living segment.

Additionally, during the third quarter of 2017, we identified indicators of impairment for our home health care licenses in Florida, including significant underperformance relative to historical and projected operating results, decreases in reimbursement rates from Medicare for home health care services, an increased competitive environment in the home health care industry, and disruption from the impact of Hurricane Irma. We performed an interim quantitative impairment test as of September 30, 2017 on the health care licenses. Based on the results of the quantitative impairment test, we determined that the carrying amount of certain of our home health care licenses in Florida exceeded their estimated fair value by $13.7 million as of September 30, 2017. As a result, we recorded $13.7 million of impairment charges for health care licenses within the Brookdale Ancillary Services segment for the three months ended September 30, 2017.

Estimating the fair values of our goodwill and other assets requires management to use significant estimates, assumptions and judgments regarding future circumstances and events that are unpredictable and inherently uncertain.  Future circumstances and events may result in outcomes that are different from these estimates, assumptions and judgments, which could result in future impairments to our goodwill and other assets.  See Note 6 and Note 7 to the condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for more information about our evaluations of goodwill and other assets for impairment and the related impairment charges.

Loss on Facility Lease Termination

A loss on facility lease termination of $4.9 million was recognized during the current year period for lease termination activity.
Costs Incurred on Behalf of Managed Communities

Costs incurred on behalf of managed communities increased $49.2 million, or 26.2%, primarily due to our entry into management agreements with the Blackstone Venture.

Interest Expense

Interest expense decreased by $16.5 million, or 17.1%, primarily due to lease termination activity since the beginning of the prior year period.

Equity in Loss of Unconsolidated Ventures

Equity in loss of unconsolidated ventures increased by $5.8 million over the prior year period. Equity in loss of unconsolidated ventures of $6.7 million in the current year period includes losses for the Blackstone Venture, which was formed subsequent to the prior year period, and the impact of additional interest expense incurredleases as a result of non-recourse mortgage financing obtained by the CCRC Venturelease amendments subsequent to the prior year period.

Asset Impairment. During the three months ended March 31, 2024, we recorded $1.7 million of non-cash impairment charges, primarily due to property damage sustained at certain communities.

Interest Expense. The decrease in interest expense was primarily due to an increase in the fair value of interest rate derivatives in the current period and a decrease in interest expense on financing lease obligations primarily due to the change in classification of lease costs from financing leases to operating leases as a result of lease amendments subsequent to the prior year period. These changes were partially offset by an increase in interest expense on long-term debt primarily as a result of increases in variable interest rate indices.

Benefit (Provision) for Income Taxes

Taxes.The difference between our effective tax ratesrate for the three months ended September 30, 2017March 31, 2024 and September 30, 20162023 was primarily due to an increase in the valuation allowance against our deferred tax assetsbenefit on the vesting of restricted stock units and restricted stock awards for the non-deductible write-off of goodwill duringthree months ended March 31, 2024 as compared to the quarterthree months ended September 30, 2017. March 31, 2023.


24

We recorded an aggregate deferred federal, state, and local tax benefit of $91.3$7.6 million as a result of the operating loss for the three months ended September 30, 2017,March 31, 2024, which was partially offset by an increase in the valuation allowance of $59.6$7.2 million. The excess of the deferred federal, state and local benefit over the increase in the valuation allowance for the three months ended September 30, 2017 is the result of the reversal of future tax liabilities offset by future tax deductions.

We evaluate our deferred tax assets each quarter to determine if a valuation allowance is required based on whether it is more likely than not that some portion of the deferred tax asset would not be realized. Our valuation allowance as of September 30, 2017March 31, 2024 and December 31, 20162023 was $484.5$481.4 million and $264.3$474.2 million, respectively. As described in Note 4 to the condensed consolidated financial statements, we recorded a significant increase to the valuation allowance in connection with the transactions related to the formation of the Blackstone Venture. We do not expect that we will become a federal cash taxpayer until 2021, at the earliest.




We recorded interest charges related to our tax contingency reserve for cash tax positions for the three months ended September 30, 2017 and September 30, 2016 which are included in provision for income tax for the period. Tax returns for years 2012 through 2016 are subject to future examination by tax authorities. In addition, the net operating losses from prior years are subject to adjustment under examination.

Comparison of Nine Months Ended September 30, 2017 to September 30, 2016

The following table sets forth, for the periods indicated, statement of operations items and the amount and percentage of change of these items. The results of operations for any particular period are not necessarily indicative of results for any future period. The following data should be read in conjunction with our condensed consolidated financial statements and the related notes, which are included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

During the three months ended March 31, 2017, one community moved from the CCRCs-Rental segment to the Retirement Centers segment to more accurately reflect the underlying product offering of the community in the current period given changes to the community. The movement did not change our reportable segments, but it did impact the revenues, expenses and operating data reported within the two segments.  Revenue, expenses and operating data for the nine months ended September 30, 2016 have not been recast.



As of September 30, 2017 our total operations included 1,031 communities with a capacity to serve 101,202 residents.

(dollars in thousands, except Total RevPAR, RevPAR and RevPOR)Nine Months Ended
September 30,		 Increase (Decrease)
 2017 2016 Amount 
Percent (6)
Statement of Operations Data:       
Revenue       
Resident fees       
Retirement Centers$496,854
 $510,122
 $(13,268) (2.6)%
Assisted Living1,680,194
 1,837,632
 (157,438) (8.6)%
CCRCs-Rental364,075
 448,002
 (83,927) (18.7)%
Brookdale Ancillary Services332,766
 362,791
 (30,025) (8.3)%
Total resident fees2,873,889
 3,158,547
 (284,658) (9.0)%
Management services (1)
707,337
 609,565
 97,772
 16.0 %
Total revenue3,581,226
 3,768,112
 (186,886) (5.0)%
Expense 
  
  
  
Facility operating expense 
  
  
  
Retirement Centers289,648
 287,807
 1,841
 0.6 %
Assisted Living1,102,258
 1,164,859
 (62,601) (5.4)%
CCRCs-Rental281,484
 345,943
 (64,459) (18.6)%
Brookdale Ancillary Services294,211
 314,617
 (20,406) (6.5)%
Total facility operating expense1,967,601
 2,113,226
 (145,625) (6.9)%
General and administrative expense196,429
 246,741
 (50,312) (20.4)%
Transaction costs12,924
 1,950
 10,974
 NM
Facility lease expense257,934
 281,890
 (23,956) (8.5)%
Depreciation and amortization366,023
 391,314
 (25,291) (6.5)%
Goodwill and asset impairment390,816
 26,638
 364,178
 NM
Loss on facility lease termination11,306
 —
 11,306
 NM
Costs incurred on behalf of managed communities650,863
 559,067
 91,796
 16.4 %
Total operating expense3,853,896
 3,620,826
 233,070
 6.4 %
Income (loss) from operations(272,670) 147,286
 (419,956) NM
Interest income2,720
 2,239
 481
 21.5 %
Interest expense(249,544) (289,989) (40,445) (13.9)%
Debt modification and extinguishment costs(11,883) (3,240) 8,643
 NM
Equity in (loss) earnings of unconsolidated ventures(10,311) 478
 (10,789) NM
(Loss) gain on sale of assets, net(1,383) 2,126
 (3,509) NM
Other non-operating income6,519
 11,011
 (4,492) (40.8)%
Income (loss) before income taxes(536,552) (130,089) 406,463
 NM
Provision for income taxes(50,075) (5,947) 44,128
 NM
Net income (loss)(586,627) (136,036) 450,591
 NM
Net (income) loss attributable to noncontrolling interest151
 126
 25
 19.8 %
Net income (loss) attributable to Brookdale Senior Living Inc. common stockholders$(586,476) $(135,910) $450,616
 NM






 Nine Months Ended
September 30,		 Increase (Decrease)
 2017 2016 Amount 
Percent (6)
Selected Operating and Other Data:       
Total number of communities (period end)1,031
 1,077
 (46) (4.3)%
Total units operated (2)
   
  
  
Period end101,202
 104,545
 (3,343) (3.2)%
Weighted average102,096
 106,945
 (4,849) (4.5)%
Owned/leased communities units (2)
   
  
  
Period end69,675
 78,562
 (8,887) (11.3)%
Weighted average72,603
 80,566
 (7,963) (9.9)%
Total RevPAR (3)
$4,394
 $4,352
 $42
 1.0 %
RevPAR (4)
$3,885
 $3,851
 $34
 0.9 %
Owned/leased communities occupancy rate (weighted average)84.9% 86.1% (1.2)% (1.4)%
RevPOR (5)
$4,577
 $4,475
 $102
 2.3 %
        
Selected Segment Operating and Other Data:     
  
Retirement Centers     
  
Number of communities (period end)85
 95
 (10) (10.5)%
Total units (2)
   
  
  
Period end15,961
 17,105
 (1,144) (6.7)%
Weighted average16,413
 17,099
 (686) (4.0)%
RevPAR (4)
$3,364
 $3,315
 $49
 1.5 %
Occupancy rate (weighted average)87.6% 89.0% (1.4)% (1.6)%
RevPOR (5)
$3,838
 $3,723
 $115
 3.1 %
Assisted Living 
  
  
  
Number of communities (period end)705
 783
 (78) (10.0)%
Total units (2)
   
  
  
Period end46,520
 51,494
 (4,974) (9.7)%
Weighted average48,215
 53,340
 (5,125) (9.6)%
RevPAR (4)
$3,872
 $3,828
 $44
 1.1 %
Occupancy rate (weighted average)84.3% 85.5% (1.2)% (1.4)%
RevPOR (5)
$4,595
 $4,477
 $118
 2.6 %
CCRCs-Rental   
  
  
Number of communities (period end)30
 43
 (13) (30.2)%
Total units (2)
   
  
  
Period end7,194
 9,963
 (2,769) (27.8)%
Weighted average7,975
 10,127
 (2,152) (21.3)%
RevPAR (4)
$5,038
 $4,881
 $157
 3.2 %
Occupancy rate (weighted average)83.1% 84.0% (0.9)% (1.1)%
RevPOR (5)
$6,069
 $5,812
 $257
 4.4 %
Management Services     
  
Number of communities (period end)211
 156
 55
 35.3 %
Total units (2)
   
  
  
Period end31,527
 25,983
 5,544
 21.3 %
Weighted average29,493
 26,379
 3,114
 11.8 %
Occupancy rate (weighted average)85.1% 87.0% (1.9)% (2.2)%


        
Brookdale Ancillary Services 
  
  
  
Outpatient Therapy treatment codes563,322
 1,405,800
 (842,478) (59.9)%
Home Health average daily census15,010
 15,223
 (213) (1.4)%
Hospice average daily census1,042
 735
 307
 41.8 %

(1)Management services segment revenue includes management fees and reimbursements for which we are the primary obligor of costs incurred on behalf of managed communities.

(2)Weighted average units operated represents the average units operated during the period.

(3)Total RevPAR, or average monthly resident fee revenues per available unit, is defined by the Company as resident fee revenues, excluding entrance fee amortization, for the corresponding portfolio for the period, divided by the weighted average number of available units in the corresponding portfolio for the period, divided by the number of months in the period.

(4)RevPAR, or average monthly senior housing resident fee revenues per available unit, is defined by the Company as resident fee revenues, excluding Brookdale Ancillary Services segment revenue and entrance fee amortization, for the corresponding portfolio for the period, divided by the weighted average number of available units in the corresponding portfolio for the period, divided by the number of months in the period.

(5)RevPOR, or average monthly senior housing resident fee revenues per occupied unit, is defined by the Company as resident fee revenues, excluding Brookdale Ancillary Services segment revenue and entrance fee amortization, for the corresponding portfolio for the period, divided by the weighted average number of occupied units in the corresponding portfolio for the period, divided by the number of months in the period.

(6)NM - Not meaningful

Resident Fees

Resident fee revenue decreased $284.7 million, or 9.0%, compared to the prior year period primarily due to disposition activity, through sales and lease terminations, since the beginning of the prior year period. Weighted average occupancy decreased 130 basis points at the 800 communities we owned or leased during both full periods, primarily due to the impact of new competition in our markets. Additionally, Brookdale Ancillary Services segment revenue decreased $30.0 million, or 8.3%, primarily due to a decrease in volume for outpatient therapy services and a decrease in reimbursement rates for home health services. The 139 communities disposed of subsequent to the beginning of the prior year period (including the 62 communities for which the financial results were deconsolidated from our financial statements prospectively upon formation of the Blackstone Venture on March 29, 2017) generated $96.6 million of revenue during the current year period compared to $361.1 million of revenue in the prior year period. The decrease in resident fee revenue was partially offset by a 1.8% increase in RevPOR at the 800 communities we owned or operated during both full periods compared to the prior year period. Total RevPAR for the consolidated portfolio also increased by 1.0% compared to the prior year period.

Retirement Centers segment revenue decreased $13.3 million, or 2.6%, primarily due to the impact of dispositions of 11 communities since the beginning of the prior year period, which generated $10.1 million of revenue during the current year period compared to $33.1 million of revenue in the prior year period. This decrease was partially offset by the impact of the reclassification of one community from the CCRCs-Rental segment into this segment during the current period. Retirement Centers segment revenue at the communities we operated during both full periods was $446.9 million during the current year period, an increase of $2.1 million, or 0.5%, over the prior year period, primarily due to a 2.0% increase in RevPOR at these communities, partially offset by a 130 basis point decrease in occupancy at these communities.

Assisted Living segment revenue decreased $157.4 million, or 8.6%, primarily due to the impact of dispositions of 115 communities since the beginning of the prior year period, which generated $51.1 million of revenue during the current year period compared to $209.5 million of revenue in the prior year period. Assisted Living segment revenue at the communities we operated during both full periods was $1,588.5 million during the current year period, a decrease of $3.2 million, or 0.2%, over the prior year period, primarily due to a 140 basis point decrease in occupancy at these communities, partially offset by a 1.7% increase in RevPOR at these communities.



CCRCs-Rental segment revenue decreased $83.9 million, or 18.7%, primarily due to the impact of dispositions of 13 communities since the beginning of the prior year period, which generated $35.5 million of revenue during the current year period compared to $118.5 million of revenue in the prior year period. Additionally, revenue decreased due to the impact of the reclassification of one community out of this segment and into the Retirement Centers segment during the current period. CCRCs-Rental segment revenue at the communities we operated during both full periods was $320.5 million during the current year period, an increase of $2.9 million, or 0.9%, over the prior year period, primarily due to a 2.1% increase in RevPOR at these communities, partially offset by a 110 basis point decrease in occupancy at these communities.

Brookdale Ancillary Services segment revenue decreased $30.0 million, or 8.3%, primarily due to a decrease in volume for outpatient therapy services and a decrease in reimbursement rates for home health services. During the three months ended December 31, 2016, we significantly reduced the number of outpatient therapy clinics located in our communities as lower reimbursement rates and lower utilization made the business less attractive. For home health in 2017, CMS has implemented a net 0.7% reimbursement reduction, consisting of a 2.8% market basket inflation increase, less a 0.3% productivity reduction, a 2.3% rebasing adjustment, and a 0.9% reduction to account for industry wide case-mix growth. As a result, our home health reimbursement has been reduced by approximately 3.0% compared to the prior year period, which is consistent with our expectations for the remainder of 2017. These decreases were partially offset by an increase in volume for hospice services.

Management Services Revenue

Management Services segment revenue, including management fees and reimbursed costs incurred on behalf of managed communities, increased $97.8 million, or 16.0%, over the prior year period primarily due to our entry into management agreements with the Blackstone Venture.

Facility Operating Expense

Facility operating expense decreased $145.6 million, or 6.9%, over the prior year period. For the nine months ended September 30, 2017, facility operating expense includes $5.3 million of costs related to our response to Hurricanes Harvey and Irma. The decrease in facility operating expense is primarily due to disposition activity, through sales and lease terminations, of 139 communities since the beginning of the prior year period, which incurred $74.4 million of facility operating expenses during the current year period compared to $272.6 million of facility operating expenses in prior year period. Additionally, Brookdale Ancillary Services segment facility operating expenses decreased $20.4 million, or 6.5%, primarily due to a decrease in volume for outpatient therapy services. These decreases were partially offset by an increase in salaries and wages arising from wage rate increases at the communities we operated during both full periods and a $19.2 million increase in insurance expense related to positive changes in the nine months ended September 30, 2016 to estimates in general liability and professional liability and workers compensation expenses.

Retirement Centers segment facility operating expenses increased $1.8 million, or 0.6%, primarily driven by an increase in salaries and wages arising from wage rate increases and the impact of the reclassification of one community from the CCRCs-Rental segment into this segment during the current year period. The increase was partially offset by dispositions of 11 communities since the beginning of the prior year period, which incurred $6.5 million of expenses during the current year period compared to $20.1 million in the prior year period. Retirement Centers segment facility operating expenses, excluding costs related to hurricanes, at the communities we operated during both full periods were $257.2 million, an increase of $7.8 million, or 3.1%, over the prior year period.

Assisted Living segment facility operating expenses decreased $62.6 million, or 5.4%, primarily driven by the impact of dispositions of 115 communities since the beginning of the prior year period, which incurred $38.6 million of expenses during the current year period compared to $154.4 million in the prior year period. This decrease was partially offset by an increase in salaries and wages arising from wage rate increases at the communities we operated during both full periods and a $17.6 million increase in insurance expense related to positive changes in the nine months ended September 30, 2016 to estimates in general liability and professional liability and workers compensation expenses. Assisted Living segment facility operating expenses, excluding costs related to hurricanes, at the communities we operated during both full periods were $1,030.5 million, an increase of $39.6 million, or 4.0%, over the prior year period.

CCRCs-Rental segment facility operating expenses decreased $64.5 million, or 18.6%, primarily driven by the impact of dispositions of 13 communities since the beginning of the prior year period, which incurred $29.2 million of expenses during the current year period compared to $98.1 million in the prior year period. Additionally, facility operating expenses decreased due to the impact of the reclassification of one community out of this segment and into the Retirement Centers segment during the current year period. CCRCs-Rental segment facility operating expenses, excluding costs related to hurricanes, at the communities we operated during both full periods were $242.6 million, an increase of $3.6 million, or 1.5%, over the prior year period.



Brookdale Ancillary Services segment operating expenses decreased $20.4 million, or 6.5%, primarily due to a decrease in volume for outpatient therapy services. During the three months ended December 31, 2016, we significantly reduced the number of outpatient therapy clinics located in our communities as lower reimbursement rates and lower utilization made the business less attractive.

General and Administrative Expense

General and administrative expense decreased $50.3 million, or 20.4%, over the prior year period primarily due to a $40.7 million decrease in integration, transaction-related and strategic project costs. Integration, transaction-related and strategic project costs were $1.6 million during the current period compared to $42.2 million in the prior year period. Integration costs for 2016 include transition costs associated with organizational restructuring (such as severance and retention payments and recruiting expenses), third party consulting expenses directly related to the integration of acquired communities (in areas such as cost savings and synergy realization, branding and technology and systems work), and internal costs such as training, travel and labor, reflecting time spent by Company personnel on integration activities and projects. Transaction-related costs for 2016 include third party costs directly related to acquisition and disposition activity, community financing and leasing activity and corporate capital structure assessment activities (including shareholder relations advisory matters), and are primarily comprised of legal, finance, consulting, professional fees and other third party costs. Strategic project costs for 2016 include costs associated with strategic projects related to refining our strategy, building out enterprise-wide capabilities (including EMR roll-out project) and reducing costs and achieving synergies by capitalizing on scale. Additionally, a reduction in corporate associate headcount resulted in decreased salaries and wages for the nine months ended September 30, 2017.

Transaction Costs

Transaction costs increased $11.0 million to $12.9 million. Transaction costs in the current year period were primarily related to direct costs related to the formation of the Blackstone Venture and our ongoing assessment of options and alternatives to enhance stockholder value. Transaction costs in the prior year period were primarily related to direct costs related to community disposition activity.

Facility Lease Expense

Facility lease expense decreased $24.0 million, or 8.5%, primarily due to lease termination activity since the beginning of the prior year period.

Depreciation and Amortization

Depreciation and amortization expense decreased $25.3 million, or 6.5%, primarily due to disposition activity, through sales and lease terminations, since the beginning of the prior year period.

Goodwill and Asset Impairment

During the current year period, we recorded $390.8 million of non-cash impairment charges. The impairment charges consisted of $205.0 million of goodwill within the Assisted Living segment, $152.4 million of property, plant and equipment and leasehold intangibles for certain communities, primarily in the Assisted Living segment, $19.7 million related to the formation of the Blackstone Venture and termination of leases related thereto, and $13.7 million of intangible assets for health care licenses within the Brookdale Ancillary Services segment. Asset impairment expense in the prior year period was primarily related to decreases in the estimated selling price of assets held for sale during the prior year period.

During the third quarter of 2017, we identified qualitative indicators of impairment of our goodwill, including a significant decline in our stock price and market capitalization for a sustained period since the last testing date, significant underperformance relative to historical and projected operating results, and an increased competitive environment in the senior living industry. As a result, we performed an interim quantitative goodwill impairment test as of September 30, 2017, which included a comparison of the estimated fair value of each reporting unit to which the goodwill has been assigned with the reporting unit's carrying value. In estimating the fair value of the reporting units for purposes of the quantitative goodwill impairment test, we utilized an income approach, which included future cash flow projections that are developed internally. Based on the results of the quantitative goodwill impairment test, we determined that the carrying amount of our Assisted Living segment exceeded its estimated fair value by $205.0 million as of September 30, 2017. As a result, we recorded a non-cash impairment charge of $205.0 million to goodwill within the Assisted Living segment for the nine months ended September 30, 2017.



During the nine months ended September 30, 2017, we evaluated property, plant and equipment and leasehold intangibles for impairment and identified properties with a carrying amount of the assets in excess of the estimated future undiscounted net cash flows expected to be generated by the assets. We compared the estimated fair value of the assets to their carrying value for these identified properties and recorded an impairment charge for the excess of carrying value over fair value. As a result, we recorded property, plant and equipment and leasehold intangibles non-cash impairment charges of $152.4 million for the nine months ended September 30, 2017, including $133.7 million within the Assisted Living segment.

Additionally, during the third quarter of 2017, we identified indicators of impairment for our home health care licenses in Florida, including significant underperformance relative to historical and projected operating results, decreases in reimbursement rates from Medicare for home health care services, an increased competitive environment in the home health care industry, and disruption from the impact of Hurricane Irma. We performed an interim quantitative impairment test as of September 30, 2017 on the health care licenses. Based on the results of the quantitative impairment test, we determined that the carrying amount of certain of our home health care licenses in Florida exceeded their estimated fair value by $13.7 million as of September 30, 2017. As a result, we recorded $13.7 million of impairment charges for health care licenses within the Brookdale Ancillary Services segment for the three months ended September 30, 2017.

Estimating the fair values of our goodwill and other assets requires management to use significant estimates, assumptions and judgments regarding future circumstances and events that are unpredictable and inherently uncertain.  Future circumstances and events may result in outcomes that are different from these estimates, assumptions and judgments, which could result in future impairments to our goodwill and other assets.  See Note 6 and Note 7 to the condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for more information about our evaluations of goodwill and other assets for impairment and the related impairment charges.

Loss on Facility Lease Termination

A loss on facility lease termination of $11.3 million was recognized during the current year period for lease termination activity.

Costs Incurred on Behalf of Managed Communities

Costs incurred on behalf of managed communities increased $91.8 million, or 16.4%, primarily due to our entry into management agreements with the Blackstone Venture subsequent to the prior year period.

Interest Expense

Interest expense decreased by $40.4 million, or 13.9%, primarily due to lease termination activity and the repayment of long-term debt and our secured credit facility since the beginning of the prior year period.

Equity in Earnings (Loss) of Unconsolidated Ventures

Equity in earnings (loss) of unconsolidated ventures decreased by $10.8 million over the prior year period. Equity in loss of unconsolidated ventures of $10.3 million in the current year period includes losses for the Blackstone Venture, which was formed subsequent to the prior year period, and the impact of additional interest expense incurred as a result of non-recourse mortgage financing obtained by the CCRC Venture subsequent to the prior year period.

Income Taxes
The difference between our effective tax rates for the nine months ended September 30, 2017 and September 30, 2016 was primarily due to recording an additional valuation allowance against our deferred tax assets and an increase in the non-deductible write-off of goodwill during the nine months ended September 30, 2017. We recorded an aggregate deferred federal, state and local tax benefit of $123.0 million as a result of the operating loss for the nine months ended September 30, 2017, which was offset by an increase in the valuation allowance of $171.6 million, of which $85.0 million was recorded as a result of the Blackstone Venture. We evaluate our deferred tax assets each quarter to determine if a valuation allowance is required based on whether it is more likely than not that some portion of the deferred tax asset would not be realized. Our valuation allowance as of September 30, 2017 and December 31, 2016 was $484.5 million and $264.3 million, respectively. As described in Note 4 to the condensed consolidated financial statements, we recorded a significant increase to the valuation allowance in connection with the transactions related to the formation of the Blackstone Venture. We do not expect that we will become a federal cash taxpayer until 2021, at the earliest.



We recorded interest charges related to our tax contingency reserve for cash tax positions for the nine months ended September 30, 2017 and September 30, 2016 which are included in provision for income tax for the period. Tax returns for years 2012 through 2016 are subject to future examination by tax authorities. In addition, the net operating losses from prior years are subject to adjustment under examination.

Liquidity and Capital Resources


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

Liquidity

The following is a summary of cash flows from operating, investing, and financing activities, as reflected in the Condensed Consolidated Statementscondensed consolidated statements of cash flows, and our Adjusted Free Cash Flows (in thousands):Flow.

 Nine Months Ended
September 30,		   
 2017 2016Increase (Decrease) % Increase (Decrease)
Net cash provided by operating activities$283,109
 $277,281
$5,828
 2.1%
Net cash used in investing activities(529,718) (54,374)475,344
 874.2%
Net cash provided by (used in) financing activities321,766
 (236,752)558,518
 235.9%
Net increase (decrease) in cash and cash equivalents75,157
 (13,845)89,002
 642.8%
Cash and cash equivalents at beginning of period216,397
 88,029
128,368
 145.8%
Cash and cash equivalents at end of period$291,554
 $74,184
$217,370
 293.0%
Three Months Ended
March 31,		Increase (Decrease)
(in thousands)20242023AmountPercent
Net cash provided by (used in) operating activities$(1,146)$24,042 $(25,188)NM
Net cash provided by (used in) investing activities(6,946)(62,019)(55,073)(88.8)%
Net cash provided by (used in) financing activities54,090 171 53,919 NM
Net increase (decrease) in cash, cash equivalents, and restricted cash45,998 (37,806)83,804 NM
Cash, cash equivalents, and restricted cash at beginning of period349,668 474,548 (124,880)(26.3)%
Cash, cash equivalents, and restricted cash at end of period$395,666 $436,742 $(41,076)(9.4)%
Adjusted Free Cash Flow$(26,287)$(21,239)$(5,048)(23.8)%

The increase in net cash provided by operating activities of $5.8 million was attributable primarily to a $21.3 million decrease in integration, transaction, transaction-related and strategic project costs compared to the prior year period. The increase was partially offset by the impact of disposition activity, through sales and lease terminations, since the beginning of the prior year period and an increase in facility operating expenses at the communities operated during both full periods.

The increase in net cash used in investing activities of $475.3 million was primarily attributable to purchases of marketable of securities during the current year period, our contribution of $179.2 million in connection with the formation of the Blackstone Venture during the current year period, and a decrease in net proceeds from the sale of assets. These increases were partially offset by reduced acquisition and capital expenditure activity.


The change in net cash provided by (used in) operating activities was primarily attributable to an increase in incentive compensation payments, a decrease in cash received associated with government grants and credits, and an increase in facility operating expense compared to the prior year period, partially offset by increases in resident fees compared to the prior year period. Net cash used in operating activities of $1.1 million for the three months ended March 31, 2024 primarily reflects the impact of $45.0 million of net cash used for changes in operating assets and liabilities, including payments under our annual and long-term incentive compensation programs and annual insurance premium payments made during the period. We expect that net cash provided by (used in) changes in operating assets and liabilities may fluctuate in future periods as a result of a number of factors, including the timing of collection of resident fees and the timing of payments for employee compensation and other expenditures. Changes in operating assets and liabilities are generally neutral over an entire annual period.

The decrease in net cash used in investing activities was primarily attributable to a $49.7 million decrease in purchases of marketable securities and a $5.3 million decrease in cash paid for capital expenditures compared to the prior year period.

The increase in net cash provided by financing activities was primarily attributable to $430.4$50.0 million of net proceeds from refinancing activities completeddebt secured by first priority mortgages on 11 communities during the currentthree months ended March 31, 2024.

The change in Adjusted Free Cash Flow was primarily attributable to the change in net cash provided by (used in) operating activities, partially offset by a $12.3 million decrease in non-development capital expenditures, net compared to the prior year period. Additionally, cash used in financing activities for the nine months ended September 30, 2016 included $210.0 million of net repayments on our secured credit facility.


Our principal sources of liquidity have historically been from:


•cash balances on hand, cash equivalents, and marketable securities;
•cash flows from operations;
•proceeds from our credit facilities;

25

•funds generated through unconsolidated venture arrangements;
•proceeds from mortgage financing or refinancing of various assets or sale-leaseback transactions;assets;
•funds raised in the debt or equity markets; and
•proceeds from the disposition of assets.


Over the longer-term, we expect to continue to fund our business through these principal sources of liquidity.


OurOver the near-term, we expect that our liquidity requirements have historically arisenwill primarily arise from:


•working capital;
•operating costs such as employee compensation and related benefits,labor costs, severance costs, general and administrative expense, and supply costs;
•debt, serviceinterest, and lease payments;
acquisition•investment in our healthcare and wellness initiatives;
•transaction consideration and transaction and integration costs;related expenses;
•capital expenditures and improvements, including the expansion, renovation, redevelopment and repositioning of our current communities and the development of new communities;improvements;
•cash collateral required to be posted in connection with our financial instruments and insurance programs; and


purchases of common stock under our share repurchase authorizations;
other corporate initiatives (including integration, information systems, branding and other strategic projects); and
prior to 2009, dividend payments.

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

working capital;
operating costs such as employee compensation and related benefits, general and administrative expense and supply costs;
debt service, including repayment of the $316.3 million outstanding principal amount of our 2.75% convertible senior notes due June 15, 2018, and lease payments;
capital expenditures and improvements, including the expansion, renovation, redevelopment and repositioning of our existing communities;
acquisition consideration and transaction costs;
cash funding needs of our unconsolidated ventures for operating, capital expenditure and financing needs;
cash collateral required to be posted in connection with our financial instruments and insurance programs;
purchases of common stock under our share repurchase authorization; and
•other corporate initiatives (including information systems and other strategic projects).


In addition, we may use liquidity to the extent that we identify potential lease restructuring opportunities or exercise available lease purchase options.

We are highly leveraged and have significant debt and lease obligations. As of September 30, 2017, we have three principal corporate-level debt obligations: our $400.0 million secured credit facility, our $316.3 million outstanding principal amount of 2.75% convertible senior notes due June 15, 2018, and our separate letter of credit facilities providing for up to $64.5 million of letters of credit in the aggregate. The remainder of our indebtedness is generally comprised of approximately $3.6 billion of non-recourse property-level mortgage financings as of September 30, 2017.

As of September 30, 2017,March 31, 2024, we had $3.9$3.8 billion of debt outstanding excluding capital and financing lease obligations, at a weighted-averageweighted average interest rate of 4.8% (calculated using an imputed interest rate of 7.5% for our 2.75% convertible senior notes due June 15, 2018)5.62%. No balance was drawn on our secured credit facility as of September 30, 2017. As of September 30, 2017,such date, 91.1%, or $3.4 billion, of our total debt obligations represented non-recourse property-level mortgage financings.

As of March 31, 2024, we had $1.6$1.0 billion of capitaloperating and financing lease obligations, and $102.9 million of letters of credit had been issued under our secured credit facility and separate letter of credit facilities. Forfor the twelve months ending September 30, 2018March 31, 2025, we will be required to make approximately $164.2 million and $366.2$278.4 million of cash lease payments in connection with our existing capitaloperating and financing leases and our operating leases, respectively.leases.


Total liquidity of $899.4$355.1 million as of September 30, 2017March 31, 2024 included $291.6$318.5 million of unrestricted cash and cash equivalents (excluding restricted cash of $77.1 million) and escrow deposits-restricted and lease security deposits of $67.3 million in the aggregate), $246.4 million of marketable securities, and $361.5$36.5 million of availability on our secured credit facility.

In June 2017, we obtained a $54.7 Total liquidity as of March 31, 2024 increased $14.4 million non-recourse addition and borrow-up loan, secured by first mortgages on seven communities.from total liquidity of $340.7 million as of December 31, 2023. The loan bears interest at a fixed rate of 4.69% and matures on March 1, 2022. Proceeds from the loan addedincrease was primarily attributable to our liquidity.

In July 2017, we completed the refinancing of two existing loan portfolios secured by the non-recourse first mortgage on 22 communities. The $221.3 million of proceeds from the refinancing were primarily utilized to repay $188.1 million and $13.6$50.0 million of mortgage debt maturing in April 2018proceeds, partially offset by negative $26.3 million of Adjusted Free Cash Flow and January 2021, respectively. Therepayments of mortgage facility has a 10 year term,debt.

Our actual liquidity and 70%capital funding requirements depend on numerous factors, including our operating results, our actual level of the principal amount bears interest at a fixed rate of 4.81%capital expenditures, general economic conditions, and the remaining 30%cost of the principal amount bears interest at a variable rate of 30-day LIBOR plus a margin of 244 basis points.

In August 2017, we obtained $975.0 million of loans secured by the non-recourse first mortgages on 51 communities. Sixty percent of the principal amount bears interest at a fixed rate, with one half of such amount bearing interest at 4.43% and maturing in 2024 and the other one half bearing interest at 4.47% and maturing in 2027. Forty percent of the principal amount bears interest at a variable rate equal to the 30-day LIBOR plus a margin of 241.5 basis points and matures in 2027. The $975.0 million of proceeds from the refinancing were primarily utilized to repay $389.9 million and $228.9 million of outstanding mortgage debt scheduled to mature in August 2018 and May 2023, respectively. The net proceeds from the refinancing activity added to our liquidity.

As of September 30, 2017, we had $192.5 million of negative working capital. Due to the nature of our business, it is not unusual to operate in the position of negative working capital, because we collect revenues much more quickly, often in advance, than we are required to pay obligations, and we have historically refinanced or extended maturities of debt obligations as they become current liabilities. Our operations result in a very low level of current assets primarily stemming from our deployment of cash to pay down long-term liabilities in connection with our ongoing portfolio optimization initiative, and to pursue strategic business


development opportunities. As of September 30, 2017, the current portion of long-term debt was $553.6 million, which includes the carrying amount of our 2.75% convertible senior notes due June 15, 2018, the carrying amount of $67.2 million of mortgage debt due in May 2018 and $50.4 million of mortgage debt related to 15 communities classified as held for sale as of September 30, 2017. We estimate that we will have sufficient liquidity to settle the outstanding principal amount of $316.3 million of the convertible notes in cash at maturity.

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

Through our Program Max initiative, we intend to expand, renovate, redevelop and reposition certain of our communities where economically advantageous. Certain of our communities may benefit from additions and expansions or from adding a new level of service for residents to meet the evolving needs of our customers. These Program Max projects include converting space from one level of care to another, reconfiguration of existing units, the addition of services that are not currently present or physical plant modifications. We currently have 8 Program Max projects that have been approved, most of which have begun construction and are expected to generate 27 net new units.

The following table summarizes our actual capital expenditures for the nine months ended September 30, 2017 as well as other factors described in "Item 1A. Risk Factors" in our anticipated capital expendituresAnnual Report on Form 10-K for the year ended December 31, 20172023 filed with the Securities and Exchange Commission ("SEC") on February 21, 2024. Since the amount of mortgage financing available for our communities is generally dependent on their appraised values and performance, decreases in their appraised values, including due to adverse changes in real estate market conditions, or their performance, could result in available mortgage refinancing amounts that are less than the communities’ maturing indebtedness. In addition, our inability to satisfy underwriting criteria for individual communities may limit our access to our historical lending sources for such communities, including Fannie Mae and Freddie Mac. As of March 31, 2024, 10% of our owned communities were unencumbered by mortgage debt.

As of March 31, 2024, our current liabilities exceeded current assets by $98.5 million. Included in our current liabilities is $197.7 million of the current portion of operating and financing lease obligations, for which the associated right-of-use assets are excluded from current assets on our condensed consolidated communities (in millions):
 
Actual Nine Months Ended
September 30, 2017
 Anticipated 2017 Range
   Community-level capital expenditures, net (1)
$93.1
 $140.0 - 145.0
   Corporate (2)
21.5
  40.0 - 45.0
Non-development capital expenditures, net (3)
114.6
  180.0 - 190.0
   Development capital expenditures, net (4)
7.2
  10.0 - 20.0
Total capital expenditures, net$121.8
 $190.0 - 210.0

(1)Amount shown for the nine months ended September 30, 2017 is the amount invested, net of lessor reimbursements of $12.3 million. Anticipated amounts shown for 2017 are amounts invested or anticipated to be invested, net of approximately $14.0 million of lessor reimbursements received or anticipated to be received.

(2)Amount includes capitalized costs for physical plant remediation and acquisition of generators resulting from the impact of the hurricanes. Anticipated total additional costs of approximately $10.0 million to $12.0 million are expected to be incurred during the fourth quarter of 2017. Amounts exclude the impact of expected reimbursement frombalance sheets. We currently estimate our historical principal sources of liquidity, primarily our property and casualty insurance policies of approximately $2.0 million to $3.0 million for the fourth quarter of 2017.

(3)Amounts are included in Adjusted Free Cash Flow.

(4)Amount shown for the nine months ended September 30, 2017 is the amount invested, net of lessor reimbursements of $5.7 million. Anticipated amounts shown for 2017 are amounts invested or anticipated to be invested, net of approximately $7.0 million to $9.0 million of lessor reimbursements received or anticipated to be received.

For the three months ended December 31, 2017, we anticipate that our capital expenditures will be funded from cash on hand, cash flows from operations, together with cash balances on hand and lessor reimbursementscash equivalents, and proceeds from financings and refinancings of various assets will be sufficient to fund our liquidity needs for at least the next 12 months. We continue to seek opportunities to preserve and enhance our liquidity, including through increasing our RevPAR, maintaining appropriate expense discipline, continuing to refinance or exercise available extension options for maturing debt, continuing to evaluate our capital structure and the state of debt and equity markets, and monetizing non-strategic or underperforming owned assets. There is no assurance that financing will continue to be available on terms consistent with our expectations or at all, or that our efforts will be successful in monetizing certain assets or exercising extension options.

We have completed the amountrefinancing of approximately $3.0 millionall of our mortgage debt maturities due in 2024. Our inability to $5.0 million.exercise available extension options or obtain refinancing proceeds sufficient to cover 2025 and later maturing indebtedness could adversely impact our liquidity, and may cause us to seek additional alternative sources of financing, which may be less attractive or


Execution26

unavailable. Shortfalls in cash flows from estimated operating results or other principal sources of liquidity may have an adverse impact on our portfolio optimization and growth initiativesability to fund our planned capital expenditures or to fund investments to support our strategy. In order to continue some of these activities at historical or planned levels, we may incur additional indebtedness or lease financing to provide additional funding. There can be no assurance that any such additional financing will be available or on terms that are acceptable to us.

Funding our planned capital expenditures or investments to support our strategy may require additional capital, particularly if we were to accelerate our lease restructuring, development and acquisition plans.capital. We expect to continue to assess our financing alternatives periodically and access the capital markets opportunistically. If our existing resources are insufficient to satisfy our liquidity requirements, or if we enter into an acquisition or strategic arrangement with another company, we may need to sell additional equity or debt securities. Any such sale of additional equity securities will dilute the percentage ownership of our existing stockholders, and we cannot be certain that additional public or private financing will be available in amounts or on terms acceptable to us, if at all.


Any newly issued equity securities may have rights, preferences, or privileges senior to those of our common stock. If we are unable to raise additional funds or obtain them on terms acceptable to us, we may have to delay or abandon someour plans.

Capital Expenditures

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

The following table summarizes our plans to restructure leases and growcapital expenditures for the three months ended March 31, 2024 for our consolidated business.


(in thousands)
Community-level capital expenditures, net(1)
$40,374 
Corporate capital expenditures, net10,217 
Non-development capital expenditures, net(2)
50,591 
Development capital expenditures, net218 
Total capital expenditures, net$50,809 

(1)Reflects the amount invested, net of lessor reimbursements of $0.2 million.

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

In the aggregate, we expect our full-year 2024 non-development capital expenditures, net of anticipated lessor reimbursements, to be approximately $180.0 million. We currently estimateanticipate that our existing2024 capital expenditures will be funded from cash on hand, cash equivalents, cash flows from operations, together with cash on hand, amounts available underreimbursements from lessors, and reimbursement from our secured credit facilityproperty and to a lesser extent, proceeds from anticipated dispositions of owned communities and financings and refinancings of various assets, will be sufficient to fund our liquidity needs for at least the next 12 months, assuming a relatively stable macroeconomic environment.casualty insurance policies.

Our actual liquidity and capital funding requirements depend on numerous factors, including our operating results, the actual level of capital expenditures, our portfolio optimization efforts, development and acquisition activity, general economic conditions and the cost of capital. Shortfalls in cash flows from operating results or other principal sources of liquidity may have an adverse impact on our ability to execute our business and growth strategies. Volatility in the credit and financial markets may also have an adverse impact on our liquidity by making it more difficult for us to obtain financing or refinancing. As a result, this may impact our ability to execute on our portfolio optimization and growth initiatives, maintain capital spending levels, or execute other aspects of our business strategy. In order to continue some of these activities at historical or planned levels, we may incur additional indebtedness or lease financing to provide additional funding. There can be no assurance that any such additional financing will be available or on terms that are acceptable to us.


Credit Facilities


OnIn December 19, 2014,2023, we entered into a Fourth Amended and Restated Credit Agreementamended our revolving credit agreement with General Electric Capital Corporation (which has since assigned its interest to Capital One, Financial Corporation),National Association, as administrative agent lender and swingline lender and the other lenders from time to time parties thereto. The amended agreement currently provides for a totalan expanded commitment amount of $400.0up to $100.0 million comprisedwhich can be drawn in cash or as letters of a $400.0 million revolvingcredit. The credit facility (with a $50.0 million sublimit for letters of creditmatures in January 2027, and a $50.0 million swingline feature to permit same day borrowing) and anwe have the option to increaseextend the revolving credit facility by anfor two additional $250.0 million,terms of approximately one year each subject to obtaining commitments for the amountsatisfaction of such increase from acceptable lenders. The maturity date is January 3, 2020 and amountscertain conditions. Amounts drawn under the facility will bear interest at 90-day LIBORthe Secured Overnight Financing Rate ("SOFR") plus an applicable margin ranging from a range of 2.50%2.5% to 3.50%. The applicable margin varies3.0% based onupon the percentage of the total commitment drawn, withdrawn. Additionally, a 2.50% margin at utilization equal to or lower than 35%, a 3.25% margin at utilization greater than 35% but less than or equal to 50%, and a 3.50% margin at utilization greater than 50%. The quarterly commitment fee of 0.25% per annum was applicable on the unused portion of the facility is 0.25% per annum when the outstanding amountas of obligations (includingMarch 31, 2024. The revolving credit swingline and term loans and letter of credit obligations)facility is greater than or equal to 50% of the total commitment amount or 0.35% per annum when such outstanding amount is less than 50% of the total commitment amount.

Amounts drawn on the facility may be used to finance acquisitions, fund working capital and capital expenditures and for other general corporate purposes.

The facility iscurrently secured by first priority mortgages and negative pledges on certain of our communities. In addition, the agreement permits us to pledge the equity interests in subsidiaries that own other communities (rather than mortgaging such communities), provided that loan availability from pledged assets cannot exceed 10% of loan availability from mortgaged assets. The availabilityAvailable capacity under the linefacility will vary from time to time as it is based on borrowing baseupon certain calculations related to the appraised value and performance of the communities securing the credit facility and the variable interest rate of the credit facility.


The agreement contains typical affirmative and negative covenants, including financial covenants with respect to minimum consolidated fixed charge coverage and minimum consolidated tangible net worth. A violation of any of these covenants could result in a default under the amended credit agreement, which would result in termination of all commitments under the agreement and all amounts owing under the agreement becoming immediately due and payable and/or could trigger cross-default provisions in our other outstanding debt and lease documents.


27

As of September 30, 2017, no borrowings were outstanding on the revolving credit facility and $38.5March 31, 2024, $63.5 million of letters of credit and no cash borrowings were outstanding resulting in $361.5under our $100.0 million secured credit facility and the facility had $36.5 million of availability on our secured credit facility.availability. We also had a separate secured letter of credit facilities offacility providing up to $64.5$15.0 million in the aggregateof letters of credit as of September 30, 2017. Letters of credit totaling $64.4March 31, 2024 under which $14.5 million had been issued under these separate facilities as of that date.

As of September 30, 2017, we are in compliance with the financial covenants of our outstanding debt agreements.


Long-Term Leases




As of September 30, 2017,March 31, 2024, we have 460operated 277 communities operated under long-term leases.leases (263 operating leases and 14 financing leases). The substantial majority of our lease arrangements are structured as master leases. Under a master lease, numerous communities are leased through an indivisible lease. The Company typically guarantees itsIn certain cases, we guarantee the performance and the lease paymentspayment obligations of our subsidiary lessees under the master lease.leases. Due to the nature of such master leases, it is difficult to restructure the composition of our leased portfolios or economic terms of the leases without the consent of the applicable landlord. In addition, an event of default related to an individual property or limited number of properties within a master lease portfolio may result in a default on the entire master lease portfolio.


The leases relating to these communities are generally fixed rate leases with annual escalators that are either fixed or based upon changes in the consumer price index or leased property revenue. Approximately 88% of our community lease payments for the three months ended March 31, 2024 are subject to a weighted average maximum annual increase of 2.7% for community leases subject to fixed annual escalators or variable annual escalators based on the consumer price index subject to a cap. The remaining community lease payments are subject to variable annual escalators primarily based upon the change in the consumer price index. We are responsible for all operating costs, including repairs and maintenance, property taxes, and insurance. The lease terms generally provide for renewal or extension options from 5 to 20 years, and, in some instances, purchase options.

The community leases contain other customary terms, which may include assignment and change of control restrictions, maintenance and capital expenditure obligations, termination provisions, and financial performance covenants, such as those requiring us to maintain prescribed minimum liquidity, net worth, and minimumstockholders' equity levels and lease coverage ratios. FailureOur lease documents generally contain non-financial covenants, such as those requiring us to comply with these covenants could result in an event of default and/Medicare or trigger cross-default provisions in our outstanding debtMedicaid provider requirements and other lease documents. Further, an event of default related to an individual property or limited number of properties within a master lease portfolio would result in a default on the entire master lease portfolio and could trigger cross-default provisions in our other outstanding debt and lease documents.maintain insurance coverage. Certain leases contain cure provisions, which generally requiring the posting ofallow us to post an additional lease security deposit if the required covenant is not met.


TheCertain of our master leases relatingcontain radius restrictions, which limit our ability to theseown, develop, or acquire new communities are generally fixed rate leases with annual escalators that are either fixedwithin a specified distance from certain existing communities covered by such agreements. These radius restrictions could negatively affect our ability to expand, develop, or tied to changes in leased property revenue or the consumer price index. We are responsible for allacquire senior housing communities and operating costs, including repairs, property taxes and insurance. The initial lease terms primarily vary from 10 to 20 years and generally include renewal options ranging from 5 to 20 years. The remaining base lease terms vary from less than one year to 15 years and generally provide for renewal or extension options and in some instances, purchase options.companies.


For the three months ended September 30, 2017,March 31, 2024 and 2023, our cash lease payments for our capital and financing leases and our operating leases were $42.7$66.5 million and $90.3$58.6 million, respectively. For the nine months ended September 30, 2017, our cash lease paymentsrespectively, and for our capital and financing leases and our operating leases were $146.4$5.3 million and $275.5$12.4 million, respectively. For the twelve months ending September 30, 2018,March 31, 2025, we will be required to make approximately $164.2 million and $366.2$278.4 million of cash lease payments in connection with our existing capitaloperating and financing leases.

Debt and Lease Covenants

Certain of our long-term debt and lease documents contain restrictions and financial covenants, such as those requiring us to maintain prescribed minimum liquidity, net worth, and stockholders' equity levels and debt service and lease coverage ratios, and requiring us not to exceed prescribed leverage ratios, in each case on a consolidated, portfolio-wide, multi-community, single-community, and/or entity basis. Net worth is generally calculated as stockholders' equity as calculated in accordance with GAAP, and in certain circumstances, reduced by intangible assets or liabilities and/or increased by accumulated depreciation and amortization, and/or further adjusted for certain other specified adjustments. The debt service and lease coverage ratios are generally calculated as revenues less operating expenses, including an implied management fee and a reserve for capital expenditures, divided by the debt (principal and interest) or lease payment. These covenants include a requirement contained in certain of our long-term debt documents for us to maintain liquidity of at least $130.0 million at each quarter-end determination date. As of March 31, 2024, our liquidity was $355.1 million.

In addition, our debt and lease documents generally contain non-financial covenants, such as those requiring us to comply with Medicare or Medicaid provider requirements and maintain insurance coverage. Our failure to comply with applicable covenants could constitute an event of default under the applicable debt or lease documents. Many of our debt and lease documents contain cross-default provisions so that a default under one of these instruments could cause a default under other debt and lease documents (including documents with other lenders and lessors).


28

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


As of September 30, 2017,March 31, 2024, we are in compliance with the financial covenants of our debt agreements and long-term leases.


Contractual Commitments

Significant ongoing commitments consist primarily of leases, debt, purchase commitments and certain other long-term liabilities. For a summary and complete presentation and description of our ongoing commitments and contractual obligations, see the "Contractual Commitments" section of Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016 filed with the SEC on February 15, 2017.

In connection with forming the Blackstone Venture on March 29, 2017, operating and capital and financing leases of 62 communities were terminated. As a result of the terminations, our total payment obligations for capital and financing leases due during the twelve months ending March 31, 2018 decreased by $75.4 million, and our total future payment obligations for capital and financing leases decreased by $1,713.2 million, in each case including interest and lease payments and the residual value for financing lease obligations, as applicable. Additionally, our total payment obligations for operating leases for the twelve months ending March 31, 2018 decreased by $16.6 million, and our total future payment obligations for operating leases decreased by $128.2 million as a result of these completed transactions. See Note 4 to the condensed consolidated financial statements for more information about our formation of the Blackstone Venture.

As described in Note 8 to the condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q, during the second quarter of 2017 we obtained a $54.7 million non-recourse addition and borrow-up loan, and during the third quarter of 2017 we completed the refinancings of several existing loan portfolios. The aggregate $1,196.3 million of proceeds from these refinancings were primarily utilized to repay outstanding principal amounts of mortgage debt of $188.1 million scheduled to mature in April 2018, $389.9 million scheduled to mature in August 2018, $13.6 million scheduled to mature in January 2021 and $228.9 million scheduled to mature in May 2023. As a result of the foregoing loan and refinancing activity, our total payment obligations for our mortgage debt during the twelve months ending September 30, 2018 decreased by $133.7 million, and our total future payment obligations for mortgage debt increased by $810.5 million, in each case including interest and principal payments. For purposes of the foregoing, interest is calculated using contractual interest for all fixed-rate obligations and is calculated at the September 30, 2017 rate for all variable rate instruments.

There have been no other material changes outside the ordinary course of business in our contractual commitments during the nine months ended September 30, 2017.




Off-Balance Sheet Arrangements

As of September 30, 2017, we do not have an interest in any "off-balance sheet arrangements" (as defined in Item 303(a)(4) of Regulation S-K) that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

We own interests in certain unconsolidated ventures as described under Note 13 to the condensed consolidated financial statements. Except in limited circumstances, our risk of loss is limited to our investment in each venture. We also own interests in certain other unconsolidated ventures that are not considered variable interest entities. The equity method of accounting has been applied in the accompanying financial statements with respect to our investment in unconsolidated ventures.

Non-GAAP Financial Measures


This Quarterly Report on Form 10-Q contains the financial measures utilized by management to evaluate our operating performance and liquidity that are not calculated in accordance with U.S. generally accepted accounting principles ("GAAP"). Each of these measures Adjusted EBITDA and Adjusted Free Cash Flow, which are not calculated in accordance with GAAP. Presentations of these non-GAAP financial measures are intended to aid investors in better understanding the factors and trends affecting our performance and liquidity. However, investors should not be considered in isolation from or as superior to orconsider these non-GAAP financial measures as a substitute for financial measures determined in accordance with GAAP, including net income (loss), income (loss) from operations, or net cash provided by (used in) operating activities, or other financial measures determined in accordance with GAAP. We use these non-GAAP financial measures to supplement our GAAP results in order to provide a more complete understanding of the factors and trends affecting our business.

We strongly urge you to review the reconciliations of Adjusted EBITDA from our net income (loss), our Adjusted Free Cash Flow from our net cash provided by (used in) operating activities, and our proportionate share of Adjusted Free Cash Flow of unconsolidated ventures from such ventures' net cash provided by (used in) operating activities, along with our consolidated financial statements included herein. We also strongly urge you not to rely on any single financial measure to evaluate our business.activities. We caution investors that amounts presented in accordance with our definitions of Adjusted EBITDA and Adjusted Free Cash Flowthese non-GAAP financial measures may not be comparable to similar measures disclosed by other companies because not all companies calculate these non-GAAP measures in the same manner. We urge investors to review the following reconciliations of these non-GAAP financial measures from the most comparable financial measures determined in accordance with GAAP.


Adjusted EBITDA


Definition of Adjusted EBITDA

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


We changed our definition and calculationbelieve that presentation of Adjusted EBITDA when we reported results for the second quarter of 2016, including our Quarterly Report on Form 10-Q filed on August 9, 2016. Prior period amounts of Adjusted EBITDA presented herein have been recastas a performance measure is useful to conform to the new definition. The current definition of Adjusted EBITDA reflects the removalinvestors because (i) it is one of the following adjustmentsmetrics used by our management for budgeting and other planning purposes, to review our net income (loss) that were used in the former definition: the addition of our proportionate share of CFFO of unconsolidated ventureshistoric and our entrance fee receipts, net of refunds,prospective core operating performance, and the subtraction of our amortization of entrance fees.

Management's Use of Adjusted EBITDA

We use Adjusted EBITDA to assess our overallmake day-to-day operating performance. We believe this non-GAAP measure, as we have defineddecisions; (ii) it is helpful in identifying trends in our day-to-day performance because the items excluded have little or no significance on our day-to-day operations. This measure provides an assessment of controllable expenses and affords management the ability to make decisions which are expected to facilitate meeting current operating goals as well as achieve optimal operating performance. It provides an indicator for management to determine if adjustments to current spending decisions are needed.

Adjusted EBITDA provides us with a measure of operating performance, independent of items that are beyond the control of management in the short-term, such as the change in the liability for the obligation to provide future services under existing lifecare contracts, depreciation and amortization (including non-cash impairment charges), straight-line lease expense (income), taxation and interest expense associated with our capital structure. This metric measures our operating performance based on operational factors that management can impact in the short-term, namely revenues and the controllable cost structure or expenses of the organization. Adjusted EBITDA is oneorganization, by eliminating items related to our financing and capital structure and other items that management does not consider as part of the metrics used by senior management and the board of directors to review theour underlying core operating performance and that management believes impact the comparability of the business on a regular basis. Weperformance between periods; (iii) we believe that Adjusted EBITDAthis measure is also used by research analysts and investors to evaluate the performance ofour operating results and to value companies in our industry.industry; and (iv) we use the measure for components of executive compensation.



Limitations of Adjusted EBITDA


Adjusted EBITDA has material limitations as an analytical tool. Material limitations in making the adjustments to our net income (loss) to calculate Adjusted EBITDA,a performance measure, including: (i) excluded interest and using this non-GAAP financial measure as compared to GAAP net income (loss), include:

the cash portion of interest expense, income tax (benefit) provisionare necessary to operate our business under our current financing and non-recurring charges related to gain (loss) on sale of communities (or facility lease termination) and extinguishment of debt activities generally represent charges (gains), which may significantly affect our operating results; and

capital structure; (ii) excluded depreciation, and amortization, and asset impairment charges may represent the wear and tear and/or reduction in value of our communities, goodwill, and other assets which affects the services we provide to residents and may be indicative of future needs for capital expenditures.

We believe Adjusted EBITDA is usefulexpenditures; and (iii) we may incur income/expense similar to investors in evaluatingthose for which adjustments are made, such as gain/loss on sale of assets, facility operating lease termination, or debt modification and extinguishment, non-cash stock-based compensation expense, and transaction and other costs, and such income/expense may significantly affect our operating performance because it is helpful in identifying trends in our day-to-day performance since the items excluded have little or no significance to our day-to-day operations and it provides an assessment of our revenue and expense management.results.



29

The table below reconciles Adjusted EBITDA from net income (loss) for the three and nine months ended September 30, 2017 and September 30, 2016 (in thousands):.

 
Three Months Ended
September 30, (1)
 
Nine Months Ended
September 30, (1)
 2017 2016 2017 2016
Net income (loss)$(413,929) $(51,728) $(586,627) $(136,036)
(Benefit) provision for income taxes(31,218) 4,159
 50,075
 5,947
Equity in loss (earnings) of unconsolidated ventures6,722
 878
 10,311
 (478)
Debt modification and extinguishment costs11,129
 1,944
 11,883
 3,240
Loss (gain) on sale of assets, net233
 425
 1,383
 (2,126)
Other non-operating income(2,621) (3,706) (6,519) (11,011)
Interest expense79,999
 96,482
 249,544
 289,989
Interest income(1,285) (809) (2,720) (2,239)
Income (loss) from operations(350,970) 47,645
 (272,670) 147,286
Depreciation and amortization117,649
 130,783
 366,023
 391,314
Goodwill and asset impairment368,551
 19,111
 390,816
 26,638
Loss on facility lease termination4,938
 —
 11,306
 —
Straight-line lease (income) expense(3,078) (859) (9,204) 2,553
Amortization of (above) below market lease, net(1,697) (1,699) (5,091) (5,165)
Amortization of deferred gain(1,091) (1,093) (3,277) (3,279)
Non-cash stock-based compensation7,527
 8,455
 22,547
 27,218
Adjusted EBITDA$141,829
 $202,343
 $500,450
 $586,565
Three Months Ended
March 31,
(in thousands)20242023
Net income (loss)$(29,581)$(44,563)
Provision (benefit) for income taxes(40)572 
Equity in (earnings) loss of unconsolidated ventures— 577 
Non-operating loss (gain) on sale of assets, net(704)— 
Other non-operating (income) loss(3,338)(3,149)
Interest expense57,687 59,711 
Interest income(4,778)(5,326)
Income (loss) from operations19,246 7,822 
Depreciation and amortization86,127 84,934 
Asset impairment1,708 — 
Operating lease expense adjustment(13,089)(10,805)
Non-cash stock-based compensation expense3,273 3,104 
Transaction and organizational restructuring costs351 3,568 
Adjusted EBITDA$97,616 $88,623 

(1)For the three and nine months ended September 30, 2017, the calculation of Adjusted EBITDA includes $2.8 million and $14.5 million of transaction and strategic project costs, respectively. For the three and nine months ended September 30, 2016, the calculation of Adjusted EBITDA includes $7.1 million and $44.2 million of integration, transaction, transaction-related and strategic project costs, respectively. Integration costs include transition costs associated with organizational restructuring (such as severance and retention payments and recruiting expenses), third party consulting expenses directly related to the integration of acquired communities (in areas such as cost savings and synergy realization, branding and technology and systems work), and internal costs such as training, travel and labor, reflecting time spent by Company personnel on integration activities and projects. Transaction and transaction-related costs include third party costs directly related to acquisition and disposition activity, community financing and leasing activity, our ongoing assessment of options and alternatives to enhance stockholder value, and corporate capital structure assessment activities (including stockholder relations advisory matters), and are primarily comprised of legal, finance, consulting, professional fees and other third party costs. Strategic project costs


include costs associated with certain strategic projects related to refining our strategy, building out enterprise-wide capabilities (including the EMR roll-out project) and reducing costs and achieving synergies by capitalizing on scale.


Adjusted Free Cash Flow


Definition of Adjusted Free Cash Flow

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


Our proportionate shareWe believe that presentation of Adjusted Free Cash Flow of unconsolidated venturesas a liquidity measure is calculated based on our equity ownership percentage and in a manner consistent with the definition of Adjusted Free Cash Flow for our consolidated entities. Our investments in our unconsolidated ventures are accounted for under the equity method of accounting and, therefore, our proportionate share of Adjusted Free Cash Flow of unconsolidated ventures does not represent cash availableuseful to our consolidated business except to the extentinvestors because (i) it is distributedone of the metrics used by our management for budgeting and other planning purposes, to us.

We planreview our historic and prospective sources of operating liquidity, and to adopt ASU 2016-15, Statement of Cash Flows - Classification of Certain Cash Receipts and Cash Payments ("ASU 2016-15") on January 1, 2018, which will be applied retrospectively for all periods presented. Among other things, ASU 2016-15 provides that debt prepayment and debt extinguishment costs, which are currently classified within operating activities, will be classified within financing activities. We have identified cash paid for debt modification and extinguishment costs of $11.2 million and $2.9 million for the nine months ended September 30, 2017 and September 30, 2016, respectively, included in net cash provided by operating activities that we anticipate will be retrospectively classified as cash flows from financing activities upon adoption of ASU 2016-15. We do not anticipate changingreview our definition of Adjusted Free Cash Flow upon our adoption of ASU 2016-15. Following our adoption of ASU 2016-15, we expect the amount of Adjusted Free Cash Flow for the nine months ended September 30, 2017 and September 30, 2016 to reflect an increase of $11.2 million and $2.9 million, respectively. See Note 2 to the condensed consolidated financial statements contained in Part I, Item 1 of this Quarterly Report on Form 10-Q for more information about ASU 2016-15.

Management's Use of Adjusted Free Cash Flow

We use Adjusted Free Cash Flow to assess our overall liquidity. This measure provides an assessment of controllable expenses and affords management the ability to service our outstanding indebtedness, pay dividends to stockholders, engage in share repurchases, and make decisions which are expected to facilitate meeting current financialcapital expenditures, including development capital expenditures; and liquidity goals as well as to achieve optimal financial performance. It(ii) it provides an indicator forto management to determine if adjustments to current spending decisions are needed.

Adjusted Free Cash Flow measures our liquidity based on operational factors that management can impact in the short-term, namely the cost structure or expenses of the organization. Adjusted Free Cash Flow is one of the metrics used by our senior management and board of directors (i) to review our ability to service our outstanding indebtedness, including our credit facilities, (ii) to review our ability to pay dividends to stockholders or engage in share repurchases, (iii) to review our ability to make capital expenditures, (iv) for other corporate planning purposes and/or (v) in making compensation determinations for certain of our associates (including our named executive officers).

Limitations of Adjusted Free Cash Flow


Adjusted Free Cash Flow has material limitations as an analytical tool. Material limitations in making the adjustments to our net cash provided by (used in) operating activities to calculate Adjusted Free Cash Flow, and using this non-GAAP financiala liquidity measure, as compared to GAAP net cash provided by (used in) operating activities, include:

Adjusted Free Cash Flowincluding: (i) it does not represent cash available for dividends, share repurchases, or discretionary expenditures since we havecertain non-discretionary expenditures, including mandatory debt service requirements and other non-discretionary expendituresprincipal payments, are not reflected in this measure; and



(ii) the cash portion of non-recurring charges related to gain (loss)gain/loss on facility lease termination and extinguishment of debt activities generally represent charges (gains), whichcharges/gains that may significantly affect our financial results.

In addition, our proportionate shareliquidity; and (iii) the impact of Adjusted Free Cash Flowtiming of unconsolidated ventures has limitations as an analytical tool because such measure does not represent cash available directly for use by our consolidated business except to the extent actually distributed to us, and we do not have control, or we share control in determining,expenditures, including the timing and amount of distributions from our unconsolidated ventures and, therefore, we may never receive such cash.

We believe Adjusted Free Cash Flow is useful to investors because it assists their ability to meaningfully evaluate (1) our ability to service our outstanding indebtedness, including our credit facilities and capital and financing leases, (2) our ability to pay dividends to stockholders or engage in share repurchases, (3) our ability to makenon-development capital expenditures, and (4)limits the underlying value of our assets, including our interests in real estate.

We believe presentation of our proportionate share of Adjusted Free Cash Flow of unconsolidated ventures is useful to investors since such measure reflects the cash generated by the operating activitiesusefulness of the unconsolidated venturesmeasure for the reporting period and, to the extent such cash is not distributed to us, it generally represents cash used or to be used by the ventures for the repayment of debt, investing in expansions or acquisitions, reserve requirements, or other corporate uses by such ventures, and such uses reduce our potential need to make capital contributions to the ventures of our proportionate share of cash needed for such items.short-term comparisons.



30

The table below reconciles our Adjusted Free Cash Flow from our net cash provided by (used in) operating activities for the three and nine months ended September 30, 2017 and September 30, 2016 (in thousands):
 Three Months Ended
September 30,		 Nine Months Ended
September 30,
 2017 2016 2017 2016
Net cash provided by operating activities$83,235
 $99,442
 $283,109
 $277,281
Net cash (used in) provided by investing activities(268,503) 102,362
 (529,718) (54,374)
Net cash provided by (used in) financing activities325,294
 (166,673) 321,766
 (236,752)
Net increase (decrease) in cash and cash equivalents$140,026
 $35,131
 $75,157
 $(13,845)
        
Net cash provided by operating activities$83,235
 $99,442
 $283,109
 $277,281
Changes in operating assets and liabilities(22,101) 23,967
 (13,910) 62,527
Proceeds from refundable entrance fees, net of refunds(687) (308) (2,241) (907)
Lease financing debt amortization(14,626) (16,024) (46,256) (46,858)
Distributions from unconsolidated ventures from cumulative share of net earnings(473) (6,400) (1,365) (6,400)
Non-development capital expenditures, net(41,005) (55,611) (114,559) (171,404)
Property insurance proceeds1,461
 2,763
 4,430
 6,360
Adjusted Free Cash Flow$5,804
 $47,829
 $109,208
 $120,599

The table below reconciles our proportionate share of Adjusted Free Cash Flow of unconsolidated ventures from net cash provided by (used in) operating activities of such unconsolidated ventures for the three and nine months ended September 30, 2017 and September 30, 2016 (in thousands). For purposes of this presentation, amounts for each line item represent the aggregate amounts of such line items for all of our unconsolidated ventures.activities.



Three Months Ended
March 31,
(in thousands)20242023
Net cash provided by (used in) operating activities$(1,146)$24,042 
Net cash provided by (used in) investing activities(6,946)(62,019)
Net cash provided by (used in) financing activities54,090 171 
Net increase (decrease) in cash, cash equivalents, and restricted cash$45,998 $(37,806)
Net cash provided by (used in) operating activities$(1,146)$24,042 
Changes in prepaid insurance premiums financed with notes payable23,319 19,305 
Changes in assets and liabilities for lessor capital expenditure reimbursements under operating leases(249)(2,244)
Non-development capital expenditures, net(50,591)(62,912)
Property and casualty insurance proceeds2,642 6,422 
Payment of financing lease obligations(262)(5,852)
Adjusted Free Cash Flow$(26,287)$(21,239)
 Three Months Ended
September 30,		 Nine Months Ended
September 30,
 2017 2016 2017 2016
Net cash provided by operating activities$62,054
 $47,095
 $207,845
 $157,530
Net cash used in investing activities(20,267) (40,885) (1,238,932) (124,491)
Net cash (used in) provided by financing activities(32,514) (12,073) 1,083,379
 (32,708)
Net increase in cash and cash equivalents$9,273
 $(5,863) $52,292
 $331
        
Net cash provided by operating activities$62,054
 $47,095
 $207,845
 $157,530
Changes in operating assets and liabilities(5,615) (3,600) (20,088) (11,125)
Proceeds from refundable entrance fees, net of refunds(6,309) 32
 (15,702) (2,744)
Non-development capital expenditures, net(28,659) (25,761) (69,425) (72,073)
Property insurance proceeds614
 —
 1,841
 —
Adjusted Free Cash Flow of unconsolidated ventures$22,085
 $17,766
 $104,471
 $71,588
        
Brookdale weighted average ownership percentage30.4% 42.2% 22.4% 36.1%
Brookdale's proportionate share of Adjusted Free Cash Flow of unconsolidated ventures$6,709
 $7,502
 $23,379
 $25,867

Item 3.  Quantitative and Qualitative Disclosures About Market Risk


We are subject to market risks from changes in interest rates charged on our credit facilities and other floating-rate indebtedness and lease payments subject to floating rates.variable rate indebtedness. The impact on earnings and the value of our long-term debt and lease payments are subject to change as a result of movements in market rates and prices. As of September 30, 2017,March 31, 2024, 58.5%, or $2.2 billion, of our long-term debt had a weighted average fixed interest rate of 4.10%. As of March 31, 2024, we had approximately $2.6 billion of long-term fixed rate debt, $1.4$1.6 billion of long-term variable rate debt, including our secured credit facility, and $1.6 billion of capital and financing lease obligations. As of September 30, 2017, our total fixed-rate debt and variable-rate debt outstanding hadat a weighted-averageweighted average interest rate of 4.83% (calculated using an imputed interest rate7.75%.

In the normal course of 7.5% for our $316.3 million outstanding principal amount of 2.75% convertible senior notes due June 15, 2018).

Webusiness, we enter into certain interest rate cap and swap agreements with major financial institutions to effectively manage our risk above certain interest rates on variable rate debt. As of September 30, 2017, $2.6March 31, 2024, our $1.6 billion of outstanding long-term variable rate debt is indexed to SOFR plus a weighted average margin of 242 basis points. Accordingly, our annual interest expense related to long-term variable rate debt is directly affected by movements in SOFR. As of March 31, 2024, $1.5 billion, or 65.1%94%, of our long-term variable rate debt excluding our capital and financing lease obligations, has fixed rates. As of September 30, 2017, $543.8 million, or 13.8%, of our long-term debt, excluding capital and financing lease obligations, is subject to interest rate cap agreements. The remaining $828.6 million, or 21.1%,swap agreements and $0.1 billion of our debt is variable rate debt is not subject to any interest rate cap or swap agreements. A change inFor our SOFR interest rates would have impactedrate cap and swap agreements as of March 31, 2024, the weighted average fixed interest rate is 3.90%, and the weighted average remaining term is 0.5 years. Many of our annual interest expense related to all outstandinglong-term variable rate debt excludinginstruments include provisions that obligate us to obtain additional interest rate cap agreements upon the maturity of the existing interest rate cap agreements. The costs of obtaining additional interest rate cap agreements may offset the benefits of our capital and financing lease obligations,existing interest rate cap agreements.

The table below reflects the additional annual debt interest expense that would have resulted for the respective basis point increases in SOFR as follows (afterof March 31, 2024.

Increase in Index
(in basis points)
Annual Interest Expense Increase (1)
(in millions)
100$1.5 
2002.9 
5006.4 
1,00011.5 

(1)Amounts are after consideration of hedging instruments currentlyinterest rate cap and swap agreements in place): a 100 basis point increase in interest rates would have an impactplace as of $14.1 million, a 500 basis point increase in interest rates would have an impact of $60.8 million and a 1,000 basis point increase in interest rates would have an impact of $103.6 million.March 31, 2024.



31

Item 4.  Controls and Procedures


Evaluation of Disclosure Controls and Procedures


Our management, under the supervision of and with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined under Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this report. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer each concluded that, as of September 30, 2017,March 31, 2024, our disclosure controls and procedures were effective.


Changes in Internal Control over Financial Reporting


There has not been any change in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter ended September 30, 2017March 31, 2024 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.




PART II.  OTHER INFORMATION


Item 1.  Legal Proceedings


The information contained in Note 98 to the Condensed Consolidated Financial Statementscondensed consolidated financial statements contained in Part I, Item 1 of this Quarterly Report on Form 10-Q is incorporated herein by this reference.


Item 1A.  Risk Factors


There have been no material changes to the risk factors set forth in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2016.2023.



32

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


(a)Not applicable.
(b)Not applicable.
(c)The following table contains information regarding purchases of our common stock made during the three months ended September 30, 2017 by or on behalf of the Company or any ''affiliated purchaser,'' as defined by Rule 10b-18(a)(3) of the Exchange Act:
The following table contains information regarding purchases of our common stock made during the quarter ended March 31, 2024 by or on behalf of the Company or any ''affiliated purchaser,'' as defined by Rule 10b-18(a)(3) of the Exchange Act.

Period
Total
Number of
Shares
Purchased (1)
Average
Price Paid
per Share		Total Number of
Shares Purchased as Part of Publicly
Announced Plans
or Programs
Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs ($ in thousands) (2)
1/1/2024 - 1/31/2024— $— — $44,026 
2/1/2024 - 2/29/2024573,062 5.91 — 44,026 
3/1/2024 - 3/31/20241,911 5.57 — 44,026 
Total574,973 $5.91 — 

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

(2)In 2016, our Board of Directors approved a share repurchase program that authorizes us to purchase up to $100.0 million in the aggregate of our common stock. The share repurchase program is intended to be implemented through purchases made from time to time using a variety of methods, which may include open market purchases, privately negotiated transactions or block trades, or by any combination of such methods, in accordance with applicable insider trading and other securities laws and regulations. The size, scope and timing of any purchases will be based on business, market and other conditions and factors, including price, regulatory and contractual requirements, and capital availability. The repurchase program does not obligate us to acquire any particular amount of common stock and the program may be suspended, modified or discontinued at any time at our discretion without prior notice. Shares of stock repurchased under the program will be held as treasury shares. As of March 31, 2024, $44.0 million remained available under the repurchase program.

PeriodTotal
Number of
Shares
Purchased (1)		 Average
Price Paid
per Share		 Total Number of
Shares Purchased as
Part of Publicly
Announced Plans
or Programs		 Approximate Dollar Value of
Shares that May Yet Be
Purchased Under the
Plans or Programs ($ in thousands) (2)
7/1/2017 - 7/31/201781
 13.08
 —
 90,360
8/1/2017 - 8/31/201719,706
 $12.00
 —
 90,360
9/1/2017 - 9/30/20179,305
 11.71
 —
 90,360
Total29,092
 $11.97
 —
  
(1)Consists entirely of shares withheld to satisfy tax liabilities due upon the vesting of restricted stock. The average price paid per share for such share withholding is based on the closing price per share on the vesting date of the restricted stock or, if such date is not a trading day, the trading day immediately prior to such vesting date.
(2)On November 1, 2016, the Company announced that its Board of Directors had approved a share repurchase program that authorizes the Company to purchase up to $100.0 million in the aggregate of its common stock. The share repurchase program is intended to be implemented through purchases made from time to time using a variety of methods, which may include open market purchases, privately negotiated transactions or block trades, or by any combination of such methods, in accordance with applicable insider trading and other securities laws and regulations. The size, scope and timing of any purchases will be based on business, market and other conditions and factors, including price, regulatory and contractual requirements, and capital availability. The repurchase program does not obligate the Company to acquire any particular amount of common stock and the program may be suspended, modified or discontinued at any time at the Company's discretion without prior notice. Shares of stock repurchased under the program will be held as treasury shares. No shares were purchased pursuant to the repurchase program during the three months ended September 30, 2017, and approximately $90.4 million remained available under the repurchase program as of September 30, 2017.

Item 5.  Other Information


On November 1, 2017,Insider Adoption or Termination of Trading Arrangements

During the Company entered intofiscal quarter ended March 31, 2024, none of our directors or officers adopted or terminated a definitive agreement for a multi-part transaction with HCP, Inc. (“HCP”). As part"Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement," as each term is defined in Item 408(a) of such transaction, the Company and certain of its affiliates and HCP and certain of its affiliates entered into an AmendedRegulation S-K.




and Restated Master Lease and Security Agreement (“Master Lease”) effective as of November 1, 2017. The Master Lease amended and restated leases covering substantially all of the communities that were subject to triple-net leases between the Company and HCP. 33

Pursuant to the Master Lease, two communities will be removed from the Master Lease upon the Company’s purchase of such communities.  In addition, 32 communities will be removed from the Master Lease on or before November 1, 2018.  However, if HCP has not transitioned operations and/or management of such 32 communities to a third party prior to such date, the Company will continue to operate such communities on an interim basis and such communities will, from and after such time, be reported in the Company’s Management Services segment.  In addition to the foregoing 34 communities, the Company will continue to lease 44 communities pursuant to the terms of the Master Lease, which have the same lease rates and expiration and renewal terms as the applicable prior instruments, except that effective January 1, 2018, the Company will receive a $5 million annual rent reduction for three communities. The Master Lease also provides that the Company may engage in certain change in control and other transactions without the need to obtain HCP's consent, subject to the satisfaction of certain conditions. 


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



Item 6.  Exhibits
Exhibit No.Description
Exhibit No.3.1Description
3.1
Amended and Restated Certificate of Incorporation of the Company, as amended (incorporated by reference to Exhibit 3.1 to the Company's AnnualQuarterly Report on Form 10-K10-Q filed on February 26, 2010November 5, 2019 (File No. 001-32641)).
3.2
Certificate of Amendment to the Amended and Restated Certificate of IncorporationBylaws of the Company dated July 30, 2014October 29, 2019 (incorporated by reference to Exhibit 3.13.3 to the Company's Current Report on Form 8-K filed on August 5, 2014October 29, 2019 (File No. 001-32641)).
3.34.1
Amended and Restated Bylaws of the Company (incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K filed on March 6, 2017 (File No. 001-32641)).
4.1
Form of Certificate for common stock (incorporated by reference to Exhibit 4.1 to the Company's Registration Statement on Form S-1 (Amendment No. 3) filed on November 7, 2005 (File No. 333-127372)).
4.2
Description of the Company's securities(incorporated by reference to Exhibit 4.2 to the Company's Quarterly Report on Form 10-Q filed on May 9, 2023 (File No. 001-32641)).
4.3
Indenture, dated as of June 14, 2011,October 1, 2021, by and among the Company and American Stock Transfer & Trust Company, LLC, as trustee, governing the 2.00% Convertible Senior Notes due 2026 (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on October 1, 2021 (File No. 001-32641)).
4.4
4.5
4.34.6
4.4
Form of 2.75% Convertible Senior Note due 2018 (included as part of Exhibit 4.3).
10.1
Agreement dated as of July 25, 2017 by and among the Company, Land & Buildings Investment Management, LLC, Land & Buildings Capital Growth Fund LP and Jonathan Litt (incorporated by reference to Exhibit 10.14.5 to the Company’s Current Report on Form 8-K filed on July 26, 2017November 22, 2022 (File No. 001-32641)).
10.24.7
4.8
4.9
4.10
10.1
Restricted Stock Unit Agreement under the Amended and Restated Brookdale Senior Living Inc. 2014 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on September 28, 2017 (File No. 001-32641)(the "Omnibus Incentive Plan").
10.3
Master Credit Facility Agreement (Senior Housing) dated as of August 31, 2017,February 15, 2024, by and between Jones Lang LaSalle Multifamily, LLCthe Company and the Company's subsidiaries named as borrowers therein.Lucinda M. Baier.
31.110.2
Form of Restricted Stock Unit Agreement under the Omnibus Incentive Plan (2024 Time-Based Form for Executive Officers other than CEO).
10.3
Performance-Based Restricted Stock Unit Agreement under the Omnibus Incentive Plan dated as of February 15, 2024, by and between the Company and Lucinda M. Baier.†
10.4
Form of Restricted Stock Unit Agreement under the Omnibus Incentive Plan (2024 Performance-Based Form for Executive Officers other than CEO).†
31.1
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32
Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS101.SCHXBRL Instance Document.
101.SCHInline XBRL Taxonomy Extension Schema Document.
101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEFInline XBRL Taxonomy Extension Definition Linkbase Document.
101.LABInline XBRL Taxonomy Extension Label Linkbase Document.
101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document.
104The cover page from the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2024, formatted in Inline XBRL (included in Exhibit 101).

†    Portions of this exhibit have been omitted pursuant to Item 601(b)(10)(iv) of Regulation S-K.


34

SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
BROOKDALE SENIOR LIVING INC.
(Registrant)(Registrant)
By:By:/s/ Lucinda M. BaierDawn L. Kussow
Name:Name:Dawn L. KussowLucinda M. Baier
Title:Title:
Executive Vice President and Chief Financial Officer

(Authorized Officer and Principal Financial Officer)
Date:Date:May 8, 2024November 7, 2017



59

35