Sunrise Senior Living 8-K Entry into a Material Definitive Agreement

Exhibit 99.1

SUNRISE SENIOR LIVING, INC.

UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET

(In thousands, except per share and share amounts)	Historical September 30, 2010			Pro Forma Adjustments			Pro Forma September 30, 2010
ASSETS
Current Assets:
Cash and cash equivalents	$	41,518			24,648	(5)	$	66,166
Accounts receivable, net		38,794						38,794
Income taxes receivable		4,561						4,561
Due from unconsolidated communities		27,824						27,824
Deferred income taxes, net		10,904						10,904
Restricted cash		35,835						35,835
Assets held for sale		2,195						2,195
German assets held for sale		11,871						11,871
German assets held in escrow		65,972						65,972
Prepaid expenses and other current assets		15,115						15,115
Total current assets		254,589			24,648			279,237
Property and equipment, net		236,132						236,132
Due from unconsolidated communities		4,724						4,724
Intangible assets, net		45,725						45,725
Investments in unconsolidated communities		57,967			(5,423	) (1)		52,544
Restricted cash		105,503			8,125	(4)		113,628
Restricted investments in marketable securities		14,264						14,264
Assets held in the liquidating trust		51,872						51,872
Other assets, net		10,061						10,061
Total assets	$	780,837		$	27,350		$	808,187
LIABILITIES AND EQUITY
Current Liabilities:
Current maturities of debt	$	59,006			(9,000	) (3)	$	50,006
Debt relating to German assets held in escrow and at fair value as of September 30, 2010		65,961						65,961
Debt relating to German assets held for sale and at fair value as of September 30, 2010		11,296						11,296
Accounts payable and accrued expenses		152,545						152,545
Liabilities associated with German assets held for sale		397						397
Deferred revenue		5,438						5,438
Entrance fees		31,303						31,303
Self-insurance liabilities		31,286						31,286
Total current liabilities		357,232			(9,000	)		348,232
Debt, less current maturities		80,525						80,525
Outstanding draws on bank credit facility		8,125						8,125
Liquidating trust note payable, at fair value		42,280						42,280
Self-insurance liabilities		56,516						56,516
Deferred gains on the sale of real estate and deferred revenues		21,053			10,200	(2)		31,253
Deferred income tax liabilities		10,904						10,904
Other long-term liabilities, net		117,026						117,026
Total liabilities		693,661			1,200			694,861
Equity:
Preferred stock, $0.01 par value, 10,000,000 shares authorized, no shares issued and outstanding		—						—
Common stock, $0.01 par value, 120,000,000 shares authorized, 55,955,813 shares issued and outstanding, net of 428,026 treasury shares,		560						560
Additional paid-in capital		477,585						477,585
Retained loss		(411,917	)		26,150	(6)		(385,767	)
Accumulated other comprehensive income		16,540						16,540
Total stockholders’ equity		82,768			26,150			108,918
Noncontrolling interests		4,408						4,408
Total equity		87,176			26,150			113,326
Total liabilities and equity	$	780,837		$	27,350		$	808,187

See accompanying notes to the unaudited pro forma consolidated financial statements.

SUNRISE SENIOR LIVING, INC.

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2010

(In thousands, except per share amounts)	Historical Nine Months Ended September 30, 2010			Proforma Adjustments			Proforma Nine Months Ended September 30, 2010
Operating revenue:
Management fees	$	81,433					$	81,433
Buyout fees		53,471						53,471
Resident fees for consolidated communities		268,254						268,254
Ancillary fees		32,535						32,535
Professional fees from development, marketing and other		3,539						3,539
Reimbursed costs incurred on behalf of managed communities		648,479						648,479
Total operating revenues		1,087,711			—			1,087,711
Operating expenses:
Community expense for consolidated communities		199,641						199,641
Community lease expense		45,023						45,023
Depreciation and amortization		29,218						29,218
Ancillary expenses		30,504						30,504
General and administrative		94,111						94,111
Development expense		3,415						3,415
Accounting Restatement, Special Independent Committee inquiry, SEC investigation and stockholder litigation		673						673
Restructuring costs		11,247						11,247
Provision for doubtful accounts		3,386						3,386
Loss on financial guarantees and other contracts		477						477
Impairment of long-lived assets		4,633						4,633
Costs incurred on behalf of managed communities		651,854						651,854
Total operating expenses		1,074,182			—			1,074,182
Loss from operations		13,529			—			13,529
Other non-operating income (expense):
Interest income		949						949
Interest expense		(6,131	)					(6,131	)
Gain on investments		1,310						1,310
Gain on fair value of liquidating trust note		1,221						1,221
Other expense		(1,132	)					(1,132	)
Total other non-operating expense		(3,783	)		—			(3,783	)
Gain on the sale and development of real estate and equity interests		2,863						2,863
Sunrise’s share of loss and return on investment in unconsolidated communities		(3,189	)		(5,142	) (7)		(8,331	)
Loss from investments accounted for under the profit-sharing method		(10,469	)					(10,469	)
Loss before provision for income taxes		(1,049	)		(5,142	)		(6,191	)
Provision for income taxes		(1,197	)					(1,197	)
Loss from continuing operations	$	(2,246	)	$	(5,142	)	$	(7,388	)
Earnings per share data:
Basic and diluted net loss per common share
Loss from continuing operations	$	(0.06	)	$	(0.09	)	$	(0.15	)
Weighted-average shares outstanding – basic and diluted		55,757						55,757

See accompanying notes to the unaudited pro forma consolidated financial statements.

SUNRISE SENIOR LIVING, INC.

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS

FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2009

(In thousands, except per share amounts)	Historical Twelve Months Ended December 31, 2009			Proforma Adjustments			Elimination of Other Dispositions after Statement Date			Pro Forma Twelve Months Ended December 31, 2009
Operating revenue:
Management fees	$	112,467								$	112,467
Resident fees for consolidated communities		350,278						(5,265	) (9)		345,013
Ancillary fees		45,397									45,397
Professional fees from development, marketing and other		13,193									13,193
Reimbursed costs incurred on behalf of managed communities		942,809									942,809
Total operating revenues		1,464,144			—			(5,265	)		1,458,879
Operating expenses:
Community expense for consolidated communities		268,319						(4,263	) (9)		264,056
Community lease expense		59,344									59,344
Depreciation and amortization		46,629						(203	) (9)		46,426
Ancillary expenses		42,457						(67	) (9)		42,390
General and administrative		119,905									119,905
Development expense		12,501									12,501
Write-off of capitalized project costs		14,879									14,879
Accounting Restatement, Special Independent Committee inquiry, SEC investigation and stockholder litigation		3,887									3,887
Restructuring costs		33,313									33,313
Provision for doubtful accounts		13,625						(54	) (9)		13,571
Loss on financial guarantees and other contracts		2,053									2,053
Impairment of long-lived assets		31,685									31,685
Costs incurred on behalf of managed communities		947,566									947,566
Total operating expenses		1,596,163			—			(4,587	)		1,591,576
Loss from operations		(132,019	)		—			(678	)		(132,697	)
Other non-operating income (expense):
Interest income		1,351									1,351
Interest expense		(10,301	)								(10,301	)
Gain on investments		3,556									3,556
Other income		5,773						3	(9)		5,776
Total other non-operating income		379			—			3			382
Gain on the sale and development of real estate and equity interests		21,651									21,651
Sunrise’s share of earnings and return on investment in unconsolidated communities		5,673			(5,366	) (7)					307
Loss from investments accounted for under the profit-sharing method		(12,808	)								(12,808	)
Loss from continuing operations before benefit from income taxes		(117,124	)		(5,366	)		(675	)		(123,165	)
Benefit from income taxes		3,880									3,880
Loss from continuing operations	$	(113,244	)	$	(5,366	)	$	(675	)	$	(119,285	)
Earnings per share data:
Basic and diluted net loss per common share
Loss from continuing operations	$	(2.22	)	$	(0.10	)	$	(0.01	) (10)	$	(2.33	)
Weighted-average shares outstanding – basic and diluted		51,391									51,391

See accompanying notes to the unaudited pro forma consolidated financial statements.

SUNRISE SENIOR LIVING, INC.

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS

FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2008

(In thousands, except per share amounts)	Historical Twelve Months Ended December 31, 2008			Proforma Adjustments			Elimination of Other Dispositions after Statement Date			Pro Forma Twelve Months Ended December 31, 2008
Operating revenue:
Management fees	$	131,586								$	131,586
Resident fees for consolidated communities		340,975						(4,987	) (9)		335,988
Ancillary fees		42,535									42,535
Professional fees from development, marketing and other		44,447									44,447
Reimbursed costs incurred on behalf of managed communities		1,011,431									1,011,431
Total operating revenues		1,570,974			—			(4,987	)		1,565,987
Operating expenses:
Community expense for consolidated communities		257,555						(4,387	) (9)		253,168
Community lease expense		59,843									59,843
Depreciation and amortization		39,497						(196	) (9)		39,301
Ancillary expenses		40,202						(71	) (9)		40,131
General and administrative		157,509									157,509
Development expense		34,134									34,134
Write-off of capitalized project costs		95,763									95,763
Accounting Restatement, Special Independent Committee inquiry, SEC investigation and stockholder litigation		30,224									30,224
Restructuring costs		24,178									24,178
Provision for doubtful accounts		20,077						(8	) (9)		20,069
Loss on financial guarantees and other contracts		5,022									5,022
Impairment of long-lived assets		149,644									149,644
Costs incurred on behalf of managed communities		1,004,974									1,004,974
Total operating expenses		1,918,622			—			(4,662	)		1,913,960
Loss from operations		(347,648	)		—			(325	)		(347,973	)
Other non-operating income (expense):
Interest income		6,267									6,267
Interest expense		(6,709	)								(6,709	)
Loss on investments		(7,770	)								(7,770	)
Other expense		(20,066	)					1	(9)		(20,065	)
Total other non-operating expense		(28,278	)		—			1			(28,277	)
Gain on the sale and development of real estate and equity interests		17,374									17,374
Sunrise’s share of loss and return on investment in unconsolidated communities		(13,846	)		(13,710	) (7)					(27,556	)
Loss from investments accounted for under the profit-sharing method		(1,329	)								(1,329	)
Loss from continuing operations before benefit from income taxes		(373,727	)		(13,710	)		(324	)		(387,761	)
Benefit from income taxes		47,137			4,661	(8)					51,798
Loss from continuing operations	$	(326,590	)	$	(9,049	)	$	(324	)	$	(335,963	)
Earnings per share data:
Basic and diluted net loss per common share
Loss from continuing operations	$	(6.48	)	$	(0.18	)	$	(0.01	) (10)	$	(6.67	)
Weighted-average shares outstanding – basic and diluted		50,345									50,345

See accompanying notes to the unaudited pro forma consolidated financial statements.

SUNRISE SENIOR LIVING, INC.

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS

FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2007

(In thousands, except per share amounts)	Historical Twelve Months Ended December 31, 2007			Proforma Adjustments			Elimination of Other Dispositions after Statement Date			Pro Forma Twelve Months Ended December 31, 2007
Operating revenue:
Management fees	$	122,293								$	122,293
Resident fees for consolidated communities		323,007						(4,383	) (9)		318,624
Ancillary fees		51,127									51,127
Professional fees from development, marketing and other		29,546									29,546
Reimbursed costs incurred on behalf of managed communities		956,047									956,047
Total operating revenues		1,482,020			—			(4,383	)		1,477,637
Operating expenses:
Community expense for consolidated communities		231,780						(3,832	) (9)		227,948
Community lease expense		62,307									62,307
Depreciation and amortization		42,601						(196	) (9)		42,405
Ancillary expenses		53,294						(51	) (9)		53,243
General and administrative		183,546									183,546
Development expense		35,076									35,076
Write-off of capitalized project costs		28,430									28,430
Accounting Restatement, Special Independent Committee inquiry, SEC investigation and stockholder litigation		51,707									51,707
Provision for doubtful accounts		7,709						(22	) (9)		7,687
Loss on financial guarantees and other contracts		22,005									22,005
Impairment of owned communities and land parcels		7,641									7,641
Costs incurred on behalf of managed communities		956,047									956,047
Total operating expenses		1,682,143			—			(4,101	)		1,678,042
Loss from operations		(200,123	)		—			(282	)		(200,405	)
Other non-operating income (expense):
Interest income		9,492									9,492
Interest expense		(5,179	)								(5,179	)
Other expense		(5,792	)					2	(9)		(5,790	)
Total other non-operating expense		(1,479	)		—			2			(1,477	)
Gain on the sale and development of real estate and equity interests		105,081									105,081
Sunrise’s share of earnings and return on investment in unconsolidated communities		107,347			(4,628	) (7)					102,719
Income from investments accounted for under the profit-sharing method		22									22
Income from continuing operations before provision for income taxes		10,848			(4,628	)		(280	)		5,940
Provision for income taxes		(13,323	)		1,574	(8)					(11,749	)
Loss from continuing operations	$	(2,475	)	$	(3,054	)	$	(280	)	$	(5,809	)
Earnings per share data:
Basic and diluted net loss per common share
Loss from continuing operations	$	(0.05	)	$	(0.06	)	$	(0.01	) (10)	$	(0.12	)
Weighted-average shares outstanding – basic and diluted		49,851									49,851

See accompanying notes to the unaudited pro forma consolidated financial statements.

SUNRISE SENIOR LIVING INC.

NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

Note 1 – Basis of Presentation

Effective December 1, 2010, we completed the sale of our joint venture interests in nine limited liability companies in the U.S. and two limited partnerships in Canada (“Joint Venture Interest”), which collectively own 58 communities managed by us, to Ventas, Inc. and certain of its affiliates, pursuant to two purchase and sale agreements, each dated October 1, 2010. The unaudited pro forma financial information is presented to illustrate the effect of the sale of our Joint Venture Interests on our historical financial position and operating results. The unaudited pro forma consolidated balance sheet is as of September 30, 2010 and is based on our historical statements after giving effect to the transaction as if it had occurred on September 30, 2010. The unaudited pro forma consolidated statements of operations for the nine months ended September 30, 2010 and the twelve months ended December 31, 2009, 2008 and 2007 are based on our historical statements for such periods after giving effect to the transaction as if it had occurred on January 1 of the earliest period presented. The unaudited pro forma financial information should be read in conjunction with our historical consolidated financial statements and notes thereto contained in our 2009 Annual Report on Form 10-K, as amended, filed on March 31, 2010 and our Form 10-Q for the quarter ended September 30, 2010 filed on November 4, 2010.

The preparation of the unaudited pro forma consolidated financial information is based on financial statements prepared in accordance with accounting principles generally accepted in the United States of America. These principles require the use of estimates that affect the reported amounts of assets, liabilities, revenues and expenses. Actual results could differ from those estimates.

The unaudited pro forma consolidated financial information is provided for illustrative purposes only and does not purport to represent what the actual results of our operations or financial position would have been had the transaction occurred on the respective dates assumed, nor is it necessarily indicative of our future operating results or financial position. However, the pro forma adjustments reflected in the accompanying unaudited pro forma consolidated financial information reflect estimates and assumptions that our management believes to be reasonable.

Note 2 – Pro Forma Adjustments

The unaudited pro forma consolidated balance sheet at September 30, 2010 reflects the following adjustments:

1) Adjustment to remove our investment in unconsolidated communities.

2) Reflects deferred management fee revenue arising from the temporary reduction in management fees in 2010 and 2011.

3) Pay down of debt with proceeds from the transaction.

4) Proceeds from the transaction used to collateralize letters of credit.

5) Net cash received from transaction after giving effect to the pay down of debt, the cash collateralization of letters of credit and payment of transaction costs at September 30, 2010.

6) Reflects the approximate gain on the transaction.

The unaudited pro forma consolidated statements of operations for the twelve months ended December 31, 2009, 2008 and 2007 and for the nine months ended September 30, 2010 reflect the following adjustments:

7) The elimination of Sunrise’s share of earnings and return on investment in unconsolidated communities sold in the current transaction.

8) Tax benefit (expense) associated with Sunrise’s share of earnings and return on investment in unconsolidated communities except for 2009 and the nine months ended September 30, 2010 for which we have a full valuation allowance.

9) The elimination of dispositions classified as discontinued operations at September 30, 2010 but included in continuing operations in historical statements.

10) The elimination of per share income of dispositions classified as discontinued operations at September 30, 2010 but included in continuing operations in historical statements.