Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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.

As of May 4,November 2, 2018, 187,572,373187,742,979 shares of the registrant's common stock, $0.01 par value, were outstanding (excluding unvested restricted shares).

Brookdale Senior Living Inc. ("Brookdale" or the "Company") is the leading operator of senior living communities throughout the United States. The Company is committed to providing senior living solutions primarily within properties that are designed, purpose-built and operated to provide quality service, care and living accommodations for residents. The Company operates independent living, assisted living and dementia-care communities and continuing care retirement centers ("CCRCs"). Through its ancillary services programs, the Company also offers a range of home health, hospice, and outpatient therapy services to residents of many of its communities and to seniors living outside its communities.

 

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States ("US GAAP") for interim financial information 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 necessary to present fairly the financial position, results of operations and cash flows of the Company as of March 31,September 30, 2018, 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 these interim financial statements 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, 2017 filed with the SEC on February 22, 2018.

Except for the changes for the impact of the recently adopted accounting pronouncements discussed in this Note, the Company has consistently applied its accounting policies to all periods presented in these condensed consolidated financial statements.

The condensed consolidated financial statements include the accounts of Brookdale and its consolidated 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 condensed 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.

Resident fee revenue is reported at the amount that reflects the consideration the Company expects to receive in exchange for the services provided. These amounts are due from residents or third-party payors and include variable consideration for retroactive adjustments, if any, under reimbursement programs. Performance obligations are determined based on the nature of the services provided. Resident fee revenue is recognized as performance obligations are satisfied.

The Company receives revenue for services under various third-party payor programs which include Medicare, Medicaid, and other third-party payors. Settlements with third-party payors for retroactive adjustments due to audits, reviews or investigations are included in the determination of the estimated transaction price for providing services. The Company estimates the transaction price based on the terms of the contract with the payor, correspondence with the payor and historical payment trends, and retroactive adjustments are recognized in future periods as final settlements are determined.

The Company follows ASC 718, Compensation –- Stock Compensation (“("ASC 718”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 judgment in estimating the probability of achievement of these performance targets.

For all share-based awards with graded or cliff 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.

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.

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 restricted 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.

Investments in commercial paper and corporate bond instruments with original maturities of greater than three months are classified as marketable securities.

Acquired intangible assets are initially valued at fair market value using generally accepted valuation methods appropriate for the type of intangible asset. Intangible assets with definite lives are amortized over their estimated useful lives and all intangible assets are reviewed for impairment if indicators of impairment arise. The evaluation of impairment for definite-lived intangibles is based upon a comparison of the carrying value of the asset to the estimated future undiscounted net cash flows expected to be generated by the asset. If estimated future undiscounted net cash flows are less than the carrying value of the asset, then the fair value of the asset is estimated. The impairment expense is determined by comparing the estimated fair value of the intangible asset to its carrying value, with any shortfall from fair value recognized as an expense in the current period.

Indefinite-lived intangible assets are not amortized but are tested for impairment annually during the fourth quarter or more frequently as required. 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 value exceeds its fair value, an impairment loss is recognized for that difference.

Amortization of the Company's definite-lived intangible assets is computed using the straight-line method over the estimated useful lives of the assets, which are as follows:

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 threenine months ended March 31,September 30, 2018 and 2017, 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 $1.2$1.8 million and $3.7$9.3 million for the three and nine months ended March 31,September 30, 2018, respectively, and by $3.7 million and $9.3 million for the three and nine months ended September 30, 2017, respectively.

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.

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. In cases of sale-leaseback transactions in which the Company has continuing involvement, other than normal leasing activities, the Company does not record the sale until such involvement terminates.

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 Subtopicsubtopic 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.

activities and an immateriala $10.6 million and $11.2 million decrease to the amount of net cash used in financing activities for the three and nine months ended March 31, 2017.

The Company has determined that there will be a change to the amounts of resident fee revenue and facility operating expense with no net impact to the amount of income from operations, for the impact of implicit price concessions on the estimation of the transaction price. The Company recognized $906.3$840.2 million and $2,642.4 million of resident fee revenue and $632.3$607.1 million and $1,866.5 million of facility operating expense for the three and nine months ended March 31, 2018.September 30, 2018, respectively. The impact to resident fee revenue and facility operating expensesexpense as a result of applying ASC 606 was a decrease of $1.1$2.1 million and $5.2 million for the three and nine months ended March 31, 2018.September 30, 2018, respectively.

The Company has determined that there will not be any significant change to the annual amount of revenue recognized for management fees under the Company’s community management agreements,agreements; however, the Company will recognize an estimated amount of incentive fee revenue earlier during the annual contract period. The Company has determined that there will be a change to the amounts presented for revenue recognized for reimbursed costs incurred on behalf of managed communities and reimbursed costs incurred on behalf of managed communities with no net impact to the amount of income from operations, as a result of the combination of all community operations management activities as a single performance obligation for each contract. The Company recognized $262.3$261.4 million and $765.8 million of revenue for reimbursed costs incurred on behalf of managed communities and $262.3$261.4 million and $765.8 million of reimbursed costs incurred on behalf of managed communities for the three and nine months ended March 31,September 30, 2018, respectively, in accordance with ASU 2014-09. The impact to revenue for reimbursed costs incurred on behalf of managed communities and reimbursed costs incurred on behalf of managed communities as a result of applying ASC 606 was an increase of $12.4$11.2 million and $34.9 million for the three and nine months ended March 31, 2018.September 30, 2018, respectively.

method option to not restate comparative periods presented, but to recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. In addition, ASU 2018-11 provides entities with a practical expedient allowing lessors to not separate nonlease components from the associated lease components when certain criteria are met. ASU 2016-02 isand ASU 2018-11 are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018, and early adoption is permitted. For the three months ended March 31, 2018, theThe Company made cashplans to adopt these lease payments of $89.6 million for long-term community leases accounted for as operating leases under ASC 840.accounting standards effective January 1, 2019 utilizing a modified retrospective transition method with no adjustments to comparative periods presented. The Company anticipates that the adoption of ASU 2016-02 will result in the recognition of material lease liabilities and right-of use assets on the condensed consolidated balance sheet for theseits community operating leases. leases, and any previously unrecognized right-of use assets will be reviewed for impairment effective January 1, 2019. The Company is unable to reasonably estimate such amounts at this time.

The Company is monitoring recent accounting standard setting activities of the FASB, and the

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.

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 EPS 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 other instruments that are convertible into common stock were exercised or could result in 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 March 31,September 30, 2018 and 2017, the Company reported 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 7.06.2 million and 5.25.3 million for the three months ended March 31,September 30, 2018 and 2017, respectively, and 6.5 million and 5.3 million for the nine months ended September 30, 2018 and 2017, respectively.

TheFor the nine months ended September 30, 2018 and 2017, the calculation of diluted weighted average shares excludes the impact of conversion of the outstanding principal amount of $316.3 million of the Company's 2.75% convertible senior notes duewhich were repaid in cash at their maturity on June 15, 2018. Refer to Note 9 for more information about the Company's former convertible notes. As of March 31, 2018 andSeptember 30, 2017, the maximum number of shares issuable upon conversion of the notes iswas 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. As of September 30, 2017, 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 iswas 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 March 31,September 30, 2018 and 2017, the number of shares issuable upon exercise of the warrants was approximately 9.2 million and 10.8 million.million, respectively.

The Company completed sales of six communities and termination of leases on 105171 communities during the period from January 1, 2017 through March 31,September 30, 2018. TheFor the 104 communities that the Company disposed through sales and lease terminations during the period from July 1, 2017 through September 30, 2018, the Company's condensed consolidated financial statements include resident fee revenue of $2.2$15.0 million and $107.6$106.9 million, and facility operating expenses of $2.1$11.2 million and $81.0$75.6 million, for the communities for the three months ended March 31, 2018 and 2017, respectively, and cash lease payments of $27.8$4.8 million and $30.5 million for the three months ended March 31, 2017.September 30, 2018 and 2017, respectively. For the 177 communities that the Company disposed through sales and lease terminations during the period from January 1, 2017

through September 30, 2018, the Company's condensed consolidated financial statements include resident fee revenue of $164.3 million and $408.8 million, facility operating expenses of $110.7 million and $287.7 million, and cash lease payments of $55.2 million and $115.3 million for the nine months ended September 30, 2018 and 2017, respectively. The results of operations of the 111177 communities were reported in the following segments within the condensed consolidated financial statements prior to their disposition dates: Assisted Living (88(143 communities), Retirement Centers (ten(20 communities) and CCRCs-Rental (13(14 communities). Additionally, the Company completed the acquisition of six communities during the nine months ended September 30, 2018 and the results of operations of these communities are reported in the following segments within the condensed consolidated financial statements: Assisted Living (three communities), Retirement Centers (two communities) and CCRCs-Rental (one community).

The closings of the various pending transactions and expected sales of assets described below are subject to the satisfaction of various 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 Company financed the foregoing community acquisitions with non-recourse mortgage financing and proceeds from the sales of its ownership interest in the unconsolidated ventures. See Note 9 to the condensed consolidated financial statements for more information regarding the non-recourse mortgage financing.

In addition, the Company obtained future annual cash rent reductions and waived management termination fees in the multi-part transaction. As a result of the multi-part transaction, the Company reduced its lease liabilities by $9.7 million for the future annual cash rent reductions and recognized a $9.7 million deferred liability for the consideration received from HCP in advance of the termination of the management agreements for the 37 communities.

As a result of the modification of the remaining lease term for communities subject to capital leases, the Company reduced the carrying value of capital lease obligations and assets under capital leases by $145.6 million in 2017. During the nine months ended September 30, 2018, the results and financial position of the 16 communities for which leases were terminated were deconsolidated from the Company prospectively upon termination of the lease obligations. The Company derecognized the $147.8 million carrying value of the assets under financing leases and the $160.8 million carrying value of financing lease obligations for six communities which were previously subject to sale-leaseback transactions relatedin which the Company was deemed to have continuing involvement. The Company recognized a sale for these six communities and recorded a non-cash gain on sale of assets of $6.1 million and $12.6 million for the three and nine months ended September 30, 2018, respectively. Additionally, the Company recognized a non-cash gain on lease termination of $1.8 million for the nine months ended September 30, 2018, for the derecognition of the net carrying value of the Company's assets and liabilities under operating and capital leases at the lease termination date. The terminations of the leases for 33the 17 communities insubsequent to September 30, 2018 for accounting purposes are anticipated to result in the Company recording a non-cash gain in fiscal 2018 for the amount by which the carrying value of the operating and capital and financing lease obligations for the 3317 communities exceed the carrying value of the Company's assets and liabilities under operating and capital and financing leases at the lease termination date. As of March 31,September 30, 2018, the $389.4$217.9 million carrying value of the lease obligations for the 3317 communities exceed the $341.4$185.1 million carrying value of the assets under operating and capital and financing leases by approximately $48.0$32.8 million, primarily for 2014 communities which were previously subject to sale-leaseback transactions in which the Company was deemed to have continuing involvement for accounting purposes.

The results of operations for the 3317 communities that have been or will bewere disposed through lease terminations subsequent to September 30, 2018

are reported within the following segments within the condensed consolidated financial statements: Retirement Centers (five(three communities), Assisted Living (27(13 communities), and CCRCs-Rental (one community). With respect to such 3317 communities, the Company's condensed consolidated financial statements include resident fee revenue of $35.8$14.8 million and $37.3$15.1 million, facility operating expenses of $24.5$10.7 million and $22.9$10.6 million, and cash lease payments of $11.8$4.9 million and $12.0$5.4 million for the three months ended March 31,September 30, 2018 and 2017, respectively. The Company's condensed consolidated financial statements include resident fee revenue of $44.7 million and $46.0 million, facility operating expenses of $32.1 million and $30.7 million, and cash lease payments of $14.6 million and $16.1 million for the nine months ended September 30, 2018 and 2017, respectively.

For the 2717 managed communities for which the Company's management may be terminated, the Company's condensed consolidated financial statements include management fees of $2.1$1.2 million and $1.1 million for the three months ended September 30, 2018 and 2017, respectively. The Company's condensed consolidated financial statements include management fees of $3.5 million for each of the nine months ended September 30, 2018 and 2017.

On March 29, 2017, the Company and affiliates of Blackstone Real Estate Advisors VIII L.P. (collectively, "Blackstone") formed a venture (the “Blackstone Venture”"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

Initially, the Company determined that the contributed carrying value of the Company's investment was $66.8 million, representing the amount by which the $179.2 million cash contribution exceeded the carrying value of the Company's liabilities under operating, capital and financing leases contributed by the Company net of the carrying value of the assets under such operating, capital and financing leases. However, the Company estimated the fair value of its 15% equity interest in the Blackstone Venture at inception to be $47.1 million. As a result, the Company recorded a $19.7 million charge within goodwill and asset impairment expense for the three months ended March 31, 2017 for the amount of the contributed carrying value in excess of the estimated fair value of the Company's investment. During the three months ended March 31, 2018, the Company recorded a $33.4 million non-cash impairment charge within goodwill and asset impairment expense to reflect the amount by which the carrying value of the investment exceeded the estimated fair value.

Additionally, these transactions related to the Blackstone Venture required the Company to record a significant increase to the Company's existing tax valuation allowance, after considering the change in the Company's future reversal of estimated timing differences resulting from these transactions, primarily due to removing the deferred positions related to the contributed leases. During the three months ended March 31, 2017, the Company recorded a provision for income taxes to establish an additional $85.0 million 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 13 for more information about the Company's deferred income taxes.

The Company began 2018 with 15 of its owned communities classified as held for sale as of December 31, 2017. During the threenine months ended March 31,September 30, 2018, the Company completed the sale of three communities, two of which were not previously included in assets held for sale, for net cash proceeds of $12.8 million and recognized a net gain on sale of assets of $1.9 million. During the three months ended September 30, 2018, the Company entered into agreements to sell 18 additional communities, which are classified as held for sale as of September 30, 2018. The Company completed the disposition of one community on November 1, 2018 and received proceeds of approximately $144 million, net of associated debt and transaction costs. During the

As of March 31,September 30, 2018, 1432 communities were classified as held for sale, resulting in $88.5$241.9 million being recorded as assets held for sale and $30.0$158.6 million of mortgage debt being included in the current portion of long-term debt within the condensed consolidated balance sheet with respect to such communities. 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 1432 communities are reported in the following segments within the condensed consolidated financial statements: Retirement Centers (four communities), Assisted Living (12(26 communities) and CCRCs-Rental (two communities). The 1432 communities had resident fee revenue of $9.1$26.4 million and $9.5$27.0 million and facility operating expenses of $8.0$20.0 million and $7.7$19.1 million for the three months ended March 31,September 30, 2018 and 2017, respectively. The 32 communities had resident fee revenue of $81.1 million and $81.7 million and facility operating expenses of $58.9 million and $56.6 million for the nine months ended September 30, 2018 and 2017, respectively.

During the year ended December 31, 2017, the Company completed the sale of three communities for net cash proceeds of $8.2 million, and the Company terminated leases for 43 communities otherwise than in connection with the transactions with HCP and Blackstone described above (including terminations of leases for 26 communities pursuant to the transactions with HCP announced in November 2016).

AsDuring the nine months ended September 30, 2018, the Company sold $293.3 million of March 31, 2018, marketable securities of $174.6 million are stated at fair value based on valuations provided by third-party pricing services and are classified within Level 2 of the valuation hierarchy.securities. The Company recognized gains of $0.6$0.2 million for marketable securities within interest income on the Company's condensed consolidated statements of operations for the three months ended March 31, 2018.September 30, 2017. The Company recognized gains of $1.4 million and $0.2 million for marketable securities within interest income on the Company's condensed consolidated statements of operations for the nine months ended September 30, 2018 and 2017, respectively.

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 $3.7 billion and $3.9 billion as of March 31,September 30, 2018 and December 31, 2017.2017, 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.

During the three months ended March 31, 2018, the Company identified qualitative indicators of impairment, including a significant decline in the Company's stock price and market capitalization for a sustained period during the three months ended March 31,

2018. Based upon the Company's qualitative assessment, the Company performed a quantitative goodwill impairment test as of March 31, 2018, 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. The Company also considered market based measures such as earnings multiples in its analysis of estimated fair values of its reporting units.

Determining the fair value of the Company’sCompany'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.

During the three and nine months ended March 31,September 30, 2018 and 2017, the Company evaluated property, plant and equipment and leasehold intangibles for impairment and identified properties with a carrying value of the assets in excess of the estimated future undiscounted net cash flows expected to be generated by the assets primarily due to an expectation that certain communities will be disposed of prior to their previously intended holding periods. As a result of this change in intent, the Company 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 estimated fair value. The estimates of fair values of the property, plant and equipment of these communities were determined based on valuations provided by third-party pricing services and are classified within Level 3 of the valuation hierarchy. The Company recorded property, plant and equipment and leasehold intangibles non-cash impairment charges in its operating results of $40.8$2.5 million and $1.0$149.9 million for the three months ended March 31,September 30, 2018 and 2017, respectively. The Company recorded property, plant and equipment and leasehold intangibles non-cash impairment charges in its operating results of $50.2 million and $152.4 million for the nine months ended September 30, 2018 and 2017, respectively, primarily within the Assisted Living segment.

The Company evaluates realization of its investment in ventures accounted for using the equity method if circumstances indicate that the Company's investment is other than temporarily impaired. During the threenine months ended March 31,September 30, 2018 and 2017, the Company recorded $33.4 million and $19.7 million, respectively, of non-cash impairment charges related to investments in unconsolidated ventures.ventures of $33.4 million and $19.7 million, respectively. These impairment charges reflect the amount by which the carrying values of the investments exceeded their

estimated fair value. Refer to Note 4 for more information about the formation and impairment of the Blackstone Venture during 2017.

Grants of restricted shares under the Company's 2014 Omnibus Incentive Plan were as follows:

The following is a summary of other intangible assets.

Amortization expense related to definite-lived intangible assets for the three months ended March 31,September 30, 2018 and 2017 was $0.8$0.6 million and $0.9 million, respectively, and for the nine months ended September 30, 2018 and 2017 was $2.3 million and $4.8 million, respectively.

Health care licenses were determined to be indefinite-lived intangible assets and are not subject to amortization. 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. Refer to Note 5 for information on impairment expense for goodwill.

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. Refer to Note 5 for information on impairment expense for property, plant and equipment and leasehold intangibles.

For the three months ended March 31, 2018 and 2017, theThe Company recognized depreciation and amortization expense on its property, plant and equipment and leasehold intangibles of $113.4$110.4 million and $126.6$116.7 million for the three months ended September 30, 2018 and 2017, respectively, and $339.0 million and $361.2 million for the nine months ended September 30, 2018 and 2017, respectively.

The following table provides a reconciliation of cash, and cash equivalents and restricted cash and escrow deposits reported within the condensed consolidated statement of cash flows that sums to the total of the same such amounts shown in the condensed consolidated statement of cash flows.

As of March 31,September 30, 2018, the Company operated 434366 communities under long-term leases (290(258 operating leases and 144108 capital and 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. The Company typically guarantees the performance and lease payment obligations of its subsidiary leaseslessees under the master leases. Due to the nature of such master leases, it is difficult to restructure the composition of such 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 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 net worth and stockholders’stockholders' equity levels and lease coverage ratios, and 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’sCompany's lease documents generally contain non-financial covenants, such as those requiring the Company to comply with Medicare or Medicaid provider requirements.

The Company’sCompany's failure to comply with applicable covenants could constitute an event of default under the applicable lease documents. Many of the Company’sCompany's 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). 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’sCompany'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,September 30, 2018, the Company is in compliance with the financial covenants of its long-term 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:

The Company recorded an aggregate deferred federal, state and local tax benefit of $9.5$15.4 million and $71.3 million as a result of the operating loss for the three and nine months ended March 31,September 30, 2018, whichrespectively. The benefit for the three months ended September 30, 2018 includes a benefit from a decrease in the valuation allowance of $2.7 million. The benefit for the nine months ended September 30, 2018 was offset by an increase in the valuation allowance of $24.6$52.2 million. The excess of the increasechange in the valuation allowance over the deferred federal, state and local benefit for the three and nine months ended March 31,September 30, 2018 is the result of the anticipated reversal of future tax liabilities offset by future tax deductions. The Company recorded an aggregate deferred federal, state, and local tax benefit of $13.5$91.3 million and $123.0 million as a result of the operating loss for the three and nine months ended March 31,September 30, 2017, respectively, which was offset by an increase in the valuation allowance of $96.8 million.$59.6 million and $86.6 million, respectively.

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 March 31,September 30, 2018 and December 31, 2017 is $360.7$388.3 million and $336.1 million, respectively.

For the year ended December 31, 2017, the Company estimated the impact of the Tax Act on state income taxes reflected in its income tax benefit. Reasonable estimates for the Company’sCompany's state and local provision continue to be made based on the Company's analysis of tax reform. These provisional amounts have not been adjusted for the three and nine months ended March 31,September 30, 2018 but may be adjusted in future periods during 2018 when additional information is obtained. In addition, the Tax Act limits the annual deductibility of a corporation's net interest expense unless it elects to be exempt from such deductibility limitation under the real property trade or business exception. The Company plans to elect the real property trade or business exception in 2018.with the 2018 tax return. As such, the Company will be required to apply the alternative depreciation system ("ADS") to all current and future residential real property and qualified improvement property assets. This change did not have a material effect for the three and nine months ended March 31,September 30, 2018 but will impact future tax depreciation deductions and may impact the Company’sCompany's valuation allowance. The Company is unable to estimate the future impact of this change at this time. Additional information that may affect the Company's provisional amounts would include further clarification and guidance on how the Internal Revenue Service will implement tax reform and further clarification and guidance on how state taxing authorities will implement tax reform and the related effect on the Company's state and local income tax returns, state and local net operating losses and corresponding valuation allowances.

The Company recorded interest charges related to its tax contingency reserve for cash tax positions for the three and nine months ended March 31,September 30, 2018 and March 31,September 30, 2017 which are included in income tax expense or benefit for the period. TaxAs of September 30, 2018, tax returns for years 2013 through 20162017 are subject to future examination by tax authorities. In addition, the net operating losses from prior years are subject to adjustment under examination.

As of March 31,September 30, 2018, the Company has an equity interestsinterest in an unconsolidated VIEs.VIE. The Company has determined that it does not have the power to direct the activities of the VIEsVIE that most significantly impact the VIEs'its economic performance and is not the primary beneficiary of these VIEsthe VIE in accordance with ASC 810. The Company's interests in the VIEsVIE 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.

As of March 31,September 30, 2018, the Company is not required to provide financial support, through a liquidity arrangement or otherwise, to itsthis unconsolidated VIEs.VIE.