Supplemental Information 1st Quarter 2017 Exhibit 99.2
2 Financial Overview 3 Segment Overview 7 Senior Housing 8 Ancillary Services 13 G&A Expense & Transaction Costs 14 Capital Expenditures 15 Cash Lease Payments 16 Unconsolidated Ventures 17 Debt & Liquidity 18 Net Asset Value Elements 20 Definitions 21 Appendix: Consolidated Statements of Cash Flows 24 Non-GAAP Financial Measures 25 Table of Contents
3 (1) Brookdale’s weighted average unit ownership percentage is 22.9%. Important Note Regarding Non-GAAP Financial Measures. Adjusted EBITDA, Adjusted Free Cash Flow, Brookdale's Proportionate Share of Adjusted EBITDA of Unconsolidated Ventures and Brookdale’s Proportionate Share of Adjusted Free Cash Flow of Unconsolidated Ventures are financial measures that are not calculated in accordance with U.S. generally accepted accounting principles (GAAP). See the definitions of such measures under “Definitions” below and important information regarding such measures, including reconciliations to the most comparable GAAP financial measures, under “Non-GAAP Financial Measures” below. ($ in 000s, except Total RevPAR) FY 2016 FY 2017 YoY Q1 Q2 Q3 Q4 Q1 Q1 Resident fee and management fee revenue $ 1,077,928 $ 1,072,754 $ 1,058,363 $ 1,030,338 $ 1,032,821 (4.2)% Net income (loss) $ (48,817) $ (35,491) $ (51,728) $ (268,600) $ (126,361) 158.8 % Net cash provided by operating activities $ 70,343 $ 107,496 $ 99,442 $ 88,451 $ 66,766 (5.1)% Adjusted EBITDA $ 182,744 $ 201,478 $ 202,343 $ 184,198 $ 198,296 8.5 % Adjusted Free Cash Flow $ 27,884 $ 44,886 $ 47,829 $ 33,156 $ 63,445 127.5 % Brookdale's Proportionate Share of Adjusted EBITDA of Unconsolidated Ventures $ 17,004 $ 16,425 $ 15,353 $ 17,989 $ 17,126 0.7 % Brookdale's Proportionate Share of Adjusted Free Cash Flow of Unconsolidated Ventures $ 8,505 $ 9,860 $ 7,502 $ 6,763 $ 8,750 2.9 % Total RevPAR $ 4,366 $ 4,352 $ 4,337 $ 4,310 $ 4,405 0.9 % Q1 2017 weighted average unit occupancy Community % of Period End Occupancy Band Count Communities Greater than 95% 232 22% 90% < 95% 228 22% 85% < 90% 179 17% 80% < 85% 136 13% Less than 80% 277 26% Total 1,052 Consolidated Portfolio Average Asset Age ~21 years Managed - 3rd Party: 1,070 Managed- Venture : 30,665 Owned: 33,165 Leased: 38,170 103,070 period end number of units Managed - 3rd Party: 9 Managed- Venture: 205 Owned: 362 Leased: 476 1,052 periodend number of communities Overview (1) As of March 31, 2017
4 Segment Overview (1) Senior Housing Segments Re venue (2 ) Segme nt O pe ra ting In come (3 ) (1) Brookdale’s five segments are Retirement Centers, Assisted Living, CCRCs–Rental (which combined are referred to as Senior Housing), Ancillary Services and Management Services. (2) Percentage of revenue is based on Q1 2017 resident fee and management fee revenue. (3) Percentage of segment operating income is based on Q1 2017 results. Brookdale Ancillary Services 11% Management Services 1% Senior Housing 88% Brookdale Ancillary Services 4% Management Services 5% Senior Housing 91% CCRCs - Rental 16% Retirement Centers 19% Assisted Living 65% CCRCs Rental 11% Retirement Centers 23% Assisted Living 66% Consolidated Portfolio Overview
5 (1) Primarily consists of proceeds from property insurance, cash paid for debt modification and extinguishment costs, cash paid for state income taxes, and cash proceeds from litigation insurance. (All amounts in 000s) FY 2016 FY 2017 YoY Q1 Q2 Q3 Q4 Q1 Q1 Resident fee and management fee revenue $ 1,077,928 $ 1,072,754 $ 1,058,363 $ 1,030,338 $1,032,821 Less: Facility operating expenses (715,902) (693,103) (704,221) (686,176) (674,542) Combined Segment Operating Income 362,026 379,651 354,142 344,162 358,279 (1.0)% Less: G&A expense (including non-cash stock-based compensation expense) (92,621) (90,695) (63,425) (66,668) (65,560) Add: Non-cash stock-based compensation expense 9,769 8,994 8,455 5,067 7,774 Less: Transaction costs (850) (441) (659) (2,040) (7,593) Less: Cash operating lease payments (see page 16) (95,580) (96,031) (96,170) (96,323) (94,604) Adjusted EBITDA 182,744 201,478 202,343 184,198 198,296 8.5 % Less: Interest expense, net (87,428) (87,008) (86,581) (85,594) (83,645) Less: Lease financing debt amortization (15,302) (15,532) (16,024) (16,409) (17,248) Add: Proceeds from entrance fees, net of refunds and amortization 1,568 3,352 2,389 1,575 (173) Add/Less: Other (1) 3,336 1,355 1,313 (1,251) 937 Less: Non-Development Capital Expenditures, net (see page 15) (57,034) (58,759) (55,611) (49,363) (34,722) Adjusted Free Cash Flow $ 27,884 $ 44,886 $ 47,829 $ 33,156 $ 63,445 127.5 % Brookdale's Proportionate Share of Unconsolidated Ventures' Adjusted EBITDA $ 17,004 $ 16,245 $ 15,353 $ 17,989 $ 17,126 0.7 % Adjusted Free Cash Flow $ 8,505 $ 9,860 $ 7,502 $ 6,763 $ 8,750 2.9 % Weighted average shares used in computing basic and diluted net income (loss) per share 185,153 185,825 185,946 185,684 185,689 Adjusted EBITDA and Adjusted Free Cash Flow
6 (1) Other is primarily comprised of corporate capital expenditures, unallocated G&A expense (primarily integration, transaction-related and strategic project costs), non-cash stock-based compensation and transaction costs. ($ in 000s) Q1 2017 Total Senior Housing Owned Portfolio Senior Housing Leased Portfolio Ancillary Services Management Services Other (1) Resident fee and management fee revenue $ 1,032,821 $ 388,310 $ 516,645 $ 111,972 $ 15,894 $ — Less: Facility operating expenses (674,542) (252,673) (325,526) (96,343) — — Combined Segment Operating Income 358,279 135,637 191,119 15,629 15,894 — Less: G&A expense (including non-cash stock-based compensation expense) (65,560) (16,808) (22,362) (7,225) (11,238) (7,927) Add: Non-cash stock-based compensation expense 7,774 — — — — 7,774 Less: Transaction costs (7,593) — — — — (7,593) Less: Cash operating lease payments (94,604) — (93,471) — — (1,133) Adjusted EBITDA 198,296 118,829 75,286 8,404 4,656 (8,879) Less: Interest expense, net (83,645) (40,285) (43,703) (288) — 631 Less: Lease financing debt amortization (17,248) — (17,248) — — — Add: Proceeds from entrance fees, net of refunds and amortization (173) — (173) — — — Add/Less: Other 937 — — — — 937 Less: Non-Development Capital Expenditures, net (34,722) (13,909) (14,801) (22) — (5,990) Adjusted Free Cash Flow $ 63,445 $ 64,635 $ (639) $ 8,094 $ 4,656 $ (13,301) Adjusted EBITDA and Adjusted Free Cash Flow Distribution
7(1) Excludes reimbursed costs on behalf of managed communities of $185,228, $186,076, $187,763, $178,530 and $183,945 (in thousands), respectively. ($ in 000s, except RevPAR and RevPOR) FY 2016 FY 2017 YoY Q1 Q2 Q3 Q4 Q1 Q1 Total Senior Housing, Brookdale Ancillary and Management Services (1) Revenue $ 1,077,928 $ 1,072,754 $ 1,058,363 $ 1,030,338 $ 1,032,821 (4.2)% Combined Segment Operating Income $ 362,026 $ 379,651 $ 354,142 $ 344,162 $ 358,279 (1.0)% Combined Segment Operating Margin 33.6% 35.4% 33.5% 33.4% 34.7% 110 bps Senior Housing (see page 8) Revenue $ 938,956 $ 931,232 $ 925,568 $ 896,032 $ 904,955 (3.6)% Senior Housing Operating Income $ 330,728 $ 342,433 $ 323,986 $ 307,609 $ 326,756 (1.2)% Senior Housing Operating Margin 35.2% 36.8% 35.0% 34.3% 36.1% 90 bps Number of communities (period end) 959 956 921 902 838 Period end number of units 80,927 80,519 78,562 77,135 71,186 Total Average Units 80,941 80,700 80,059 78,029 76,862 RevPAR $ 3,863 $ 3,842 $ 3,849 $ 3,823 $ 3,919 1.4 % Weighted average unit occupancy 86.1% 85.8% 86.2% 86.0% 85.3% -80 bps RevPOR $ 4,485 $ 4,476 $ 4,465 $ 4,446 $ 4,597 2.5 % Brookdale Ancillary Services Segment Revenue $ 122,192 $ 123,336 $ 117,263 $ 114,042 $ 111,972 (8.4)% Segment Operating Income $ 14,518 $ 19,032 $ 14,624 $ 16,289 $ 15,629 7.7 % Segment Operating Margin 11.9% 15.4% 12.5% 14.3% 14.0% 210 bps Management Services Segment Segment Operating Income (comprised solely of management fees) $ 16,780 $ 18,186 $ 15,532 $ 20,264 $ 15,894 (5.3)% G&A Allocation (see page 14) $ (11,256) $ (11,200) $ (8,567) $ (9,505) $ (11,238) (0.2)% Segment Operating Income (Adjusted to Include G&A Allocation) $ 5,524 $ 6,986 $ 6,965 $ 10,759 $ 4,656 (15.7)% Segment Operating Margin (Adjusted to Include G&A Allocation) 32.9% 38.4% 44.8% 53.1% 29.3% -360 bps Resident fee revenue under management $ 307,457 $ 304,047 $ 300,750 $ 297,713 $ 310,050 Number of communities (period end) 162 158 156 153 214 Period end number of units 26,647 26,232 25,983 25,633 31,284 Total Average Units 26,613 26,435 26,088 25,623 25,702 RevPAR $ 3,851 $ 3,834 $ 3,843 $ 3,873 $ 3,939 2.3 % Weighted average occupancy 87.1% 86.8% 87.2% 86.8% 86.3% -80 bps RevPOR $ 4,371 $ 4,350 $ 4,322 $ 4,367 $ 4,549 4.1 % Segment Overview
8 Retirement Centers Revenue $ 169,426 $ 169,990 $ 170,706 $ 169,381 $ 172,620 1.9 % Segment Operating Income $ 74,449 $ 74,754 $ 73,112 $ 72,215 $ 74,002 (0.6)% Segment Operating Margin 43.9% 44.0% 42.8% 42.6% 42.9% -100 bps Number of communities (period end) 95 95 95 93 86 Period end number of units 17,096 17,095 17,105 17,017 16,071 Total Average Units 17,096 17,095 17,105 17,115 17,108 RevPAR $ 3,303 $ 3,315 $ 3,327 $ 3,299 $ 3,363 1.8 % Weighted average unit occupancy 88.9% 88.9% 89.3% 88.9% 88.0% -90 bps RevPOR $ 3,715 $ 3,727 $ 3,727 $ 3,711 $ 3,823 2.9 % Assisted Living Revenue $ 617,270 $ 613,017 $ 607,345 $ 581,827 $ 590,537 (4.3)% Segment Operating Income $ 220,810 $ 234,085 $ 217,878 $ 204,044 $ 217,439 (1.5)% Segment Operating Margin 35.8% 38.2% 35.9% 35.1% 36.8% 100 bps Number of communities (period end) 820 818 783 768 720 Period end number of units 53,503 53,459 51,494 50,682 47,296 Total Average Units 53,510 53,521 52,991 51,087 50,540 RevPAR $ 3,845 $ 3,818 $ 3,820 $ 3,796 $ 3,895 1.3 % Weighted average unit occupancy 85.6% 85.3% 85.6% 85.6% 84.7% -90 bps RevPOR $ 4,493 $ 4,478 $ 4,461 $ 4,437 $ 4,600 2.4 % CCRCs - Rental Revenue $ 152,260 $ 148,225 $ 147,517 $ 144,824 $ 141,798 (6.9)% Segment Operating Income $ 35,469 $ 33,594 $ 32,996 $ 31,350 $ 35,315 (0.4)% Segment Operating Margin 23.3% 22.7% 22.4% 21.6% 24.9% 160 bps Number of communities (period end) 44 43 43 41 32 Period end number of units 10,328 9,965 9,963 9,436 7,819 Total Average Units 10,335 10,084 9,963 9,827 9,214 RevPAR $ 4,881 $ 4,866 $ 4,896 $ 4,876 $ 5,086 4.2 % Weighted average unit occupancy 84.3% 83.7% 84.0% 83.2% 83.5% -80 bps RevPOR $ 5,790 $ 5,812 $ 5,833 $ 5,861 $ 6,091 5.2 % ($ in 000s, except RevPAR and RevPOR) FY 2016 FY 2017 YoY Q1 Q2 Q3 Q4 Q1 Q1 Senior Housing Segments
9 Revenue $ 801,832 $ 797,076 $ 797,261 $ 788,884 $ 808,348 0.8% Community Labor Expenses (325,845) (324,848) (325,247) (329,919) (332,802) Other facility operating expenses (183,843) (170,524) (183,617) (180,824) (177,569) Facility operating expenses (509,688) (495,372) (508,864) (510,743) (510,371) Same Community Operating Income $ 292,144 $ 301,704 $ 288,397 $ 278,141 $ 297,977 2.0% Same Community Operating Margin 36.4% 37.9% 36.2% 35.3% 36.9% 50 bps Number of communities (period end) 816 816 816 816 816 Total Average Units 68,558 68,558 68,551 68,552 68,544 RevPAR $ 3,894 $ 3,871 $ 3,871 $ 3,831 $ 3,925 0.8% Weighted average unit occupancy 86.7% 86.4% 86.7% 86.5% 85.7% -100 bps RevPOR $ 4,491 $ 4,479 $ 4,463 $ 4,431 $ 4,580 2.0% ($ in 000s, except RevPAR and RevPOR) FY 2016 FY 2017 YoY Q1 Q2 Q3 Q4 Q1 Q1 Same Community Operating Income/Weighted average unit occupancy Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 86.7% 86.4% 86.7% 86.5% 85.7% $292,144 $301,704 $288,397 $278,141 $297,977 Same Community RevPAR Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 $3,894 $3,871 $3,871 $3,831 $3,925 Senior Housing: Same Community
10 Resident fee revenue $ 415,775 $ 406,908 $ 403,655 $ 383,588 $ 388,310 Less: Facility operating expenses (278,140) (267,901) (271,664) (259,430) (252,673) Owned Portfolio Operating Income 137,635 139,007 131,991 124,158 135,637 (1.5)% Less: G&A Portfolio Allocation (see page 14) (19,715) (20,015) (14,685) (16,163) (16,808) Owned Portfolio Operating Income (Adjusted to Include G&A Allocation) $ 117,920 $ 118,992 $ 117,306 $ 107,995 $ 118,829 0.8 % Additional Information Interest expense: property level and corporate debt $ (43,667) $ (43,408) $ (43,380) $ (42,302) $ (40,285) Community level capital expenditures, net (see page 15) $ (24,008) $ (18,661) $ (19,983) $ (18,668) $ (13,909) Number of communities (period end) 407 407 375 363 362 Period end number of units 35,504 35,541 33,800 33,054 33,016 Total Average Units 36,248 35,615 35,206 33,489 33,041 RevPAR $ 3,823 $ 3,808 $ 3,822 $ 3,818 $ 3,916 2.4 % Weighted average unit occupancy 85.5% 85.1% 85.4% 85.2% 84.4% -110 bps RevPOR $ 4,470 $ 4,474 $ 4,473 $ 4,481 $ 4,641 3.8 % Interest Coverage (as of March 31, 2017) 2.6x Net Debt (as of March 31, 2017; see page 19) $ 3,502,997 ($ in 000s, except RevPAR and RevPOR) FY 2016 FY 2017 YoY Q1 Q2 Q3 Q4 Q1 Q1 Senior Housing: Owned Portfolio
11 Resident fee revenue $ 523,181 $ 524,324 $ 521,913 $ 512,444 $ 516,645 Less: Facility operating expenses (330,088) (320,898) (329,918) (328,993) (325,526) Leased Portfolio Operating Income 193,093 203,426 191,995 183,451 191,119 (1.0)% Less: G&A Portfolio Allocation (see page 14) (24,809) (25,791) (18,987) (21,592) (22,362) Leased Portfolio Operating Income (adjusted to Include G&A Allocation) $ 168,284 $ 177,635 $ 173,008 $ 161,859 $ 168,757 0.3 % Additional Information Total cash lease payments (see page 16) $ (153,888) $ (154,398) $ (154,699) $ (155,255) $ (154,422) Proceeds from entrance fees, net of refunds and amortization $ 1,568 $ 3,352 $ 2,389 $ 1,575 $ (173) Community level capital expenditures, net (see page 15) $ (21,376) $ (23,573) $ (17,360) $ (16,585) $ (14,801) Number of communities (period end) 552 549 546 539 476 Period end number of units 45,423 44,978 44,762 44,081 38,170 Total Average Units 44,693 45,085 44,853 44,540 43,821 RevPAR $ 3,895 $ 3,869 $ 3,870 $ 3,827 $ 3,922 0.7 % Weighted average unit occupancy 86.7% 86.4% 86.8% 86.6% 85.9% -80 bps RevPOR $ 4,495 $ 4,478 $ 4,458 $ 4,420 $ 4,564 1.5 % Lease Coverage (as of March 31, 2017) 1.05x ($ in 000s, except RevPAR and RevPOR) FY 2016 FY 2017 YoY Q1 Q2 Q3 Q4 Q1 Q1 Lease Maturity Information as of March 31, 2017 Trailing twelve months ended December 31, 2016 Leased communities with purchase options Leased communities without purchase options Total leased communities Initial lease maturities Community count Total Average Units Community count Total Average Units Community count Total Average Units Total cash lease payments 2017 1 903 27 2,246 28 3,149 $ 16,613 2018 42 2,169 11 1,501 53 3,670 47,031 2019 3 327 50 2,762 53 3,089 47,164 2020 2 301 89 4,626 91 4,927 57,148 2021 — — 27 1,686 27 1,686 20,844 Thereafter 47 2,556 177 19,093 224 21,649 317,365 Total 95 6,256 381 31,914 476 38,170 $ 506,165 Senior Housing: Leased Portfolio
12 (1) Data reflected is for the consolidated senior housing portfolio only. (2) NIC MAP Supply Set, Q1 2017 "New Construction" properties with projected open dates through Q1 2018. (3) Saturation is equal to units per population Age 75+ with income 50k+. (4) Percentage changes are based on data from Esri for 2016-2021. Brookdale's Largest 20 Markets - Competitive Summary Brookdale in NIC Markets Competition Within 20 Minute Drive Market Community Count Total Average Units (IL/AL/MC) Q1 2017 Weighted Average Unit Occupancy Q1 2017 RevPAR New Const. Properties (2) IL/AL/MC New Const. Units (2) 1 Yr Projected Unit Opens % of Supply (2) Current Saturation (3) 5 Yr Projected Total Pop Growth (4) 5 Yr Projected Age 75 + Pop w/ Inc. $50k + Growth (4) Chicago, IL 17 2,619 90.7% $ 3,974 13 1,662 6.8% 21.9% 1.4% 20.0% Seattle, WA 25 2,449 89.1% 3,780 4 454 2.1% 31.3% 7.1% 32.9% Los Angeles, CA 21 2,258 83.2% 3,842 3 453 1.7% 11.8% 3.6% 22.3% Phoenix, AZ 24 2,210 87.2% 3,982 11 1,443 6.9% 29.5% 7.3% 43.3% Dallas, TX 26 1,748 87.4% 3,548 18 1,405 5.5% 30.1% 8.5% 35.0% Portland, OR 19 1,648 93.4% 3,574 2 398 2.1% 51.6% 6.0% 45.2% Charlotte, NC 19 1,457 90.5% 4,417 2 184 1.9% 38.8% 8.6% 45.7% Denver, CO 11 1,207 83.8% 4,514 15 1,661 13.9% 27.5% 8.6% 34.3% Riverside, CA 12 1,205 83.5% 3,262 3 350 3.3% 17.4% 4.7% 19.9% Austin, TX 10 1,042 86.8% 5,374 7 734 10.6% 28.0% 13.5% 41.3% Miami, FL 7 1,038 81.9% 2,959 4 664 4.7% 18.5% 6.5% 40.4% Jacksonville, FL 9 1,013 88.9% 3,689 7 721 14.7% 28.0% 6.3% 50.6% Houston, TX 12 988 85.5% 4,502 10 1,163 11.2% 18.5% 9.6% 36.7% Richmond, VA 2 981 87.8% 1,963 3 196 2.8% 43.2% 5.6% 8.7% San Antonio, TX 12 971 73.1% 3,039 — — —% 26.1% 8.6% 29.4% Detroit, MI 10 955 87.1% 3,398 9 1,203 7.6% 29.7% 1.4% 42.9% Tampa, FL 8 877 81.5% 3,074 6 677 6.4% 23.1% 5.6% 39.7% Atlanta, GA 9 858 87.0% 3,302 8 905 9.2% 33.6% 8.1% 56.2% Orlando, FL 11 848 83.0% 3,706 3 365 5.6% 22.7% 9.0% 48.5% Cleveland, OH 7 838 84.3% 4,475 1 84 1.0% 25.1% -0.3% 38.0% Top 20 Markets 271 27,210 86.5% $ 3,779 129 14,722 5.4% 23.8% 6.0% 32.9% All Other NIC Markets 327 26,735 85.2% $ 3,928 95 10,748 3.4% 23.8% 4.5% 28.6% New Supply (1)
13 Resident fee revenue Home Health $ 96,903 $ 97,423 $ 91,858 $ 91,199 $ 92,241 Outpatient Therapy 15,380 14,511 12,667 9,320 6,375 Hospice 9,120 10,503 11,766 12,531 13,346 Other ancillary services 789 899 972 992 10 Segment resident fee revenue 122,192 123,336 117,263 114,042 111,972 (8.4)% Segment Operating Income 14,518 19,032 14,624 16,289 15,629 7.7 % Segment Operating Margin 11.9% 15.4% 12.5% 14.3% 14.0% 210 bps G&A Allocation (see page 14) (7,965) (7,998) (6,323) (6,331) (7,225) Segment Operating Income (Adjusted to Include G&A Allocation) $ 6,553 $ 11,034 $ 8,301 $ 9,958 $ 8,404 28.2 % Segment Operating Margin (Adjusted to Include G&A Allocation) 5.4% 8.9% 7.1% 8.7% 7.5% 210 bps Additional Information Interest expense $ (323) $ (323) $ (321) $ (303) $ (288) Community level capital expenditures, net (see page 15) $ (375) $ (77) $ (155) $ (51) $ (22) Home Health average daily census 15,835 15,388 14,456 14,587 15,370 (2.9)% Outpatient Therapy treatment codes 509,651 476,530 419,619 307,933 193,853 (62.0)% Hospice average daily census 654 737 813 863 920 40.7 % ($ in 000s) FY 2016 FY 2017 YoY Q1 Q2 Q3 Q4 Q1 Q1 Ancillary Services
14 (1) G&A allocations are calculated using a methodology which the Company believes best matches the type of general and administrative cost with the community, segment, or portfolio. Some of the allocations are based on direct utilization and some are based on formulas such as unit proportion. G&A allocations presented herein exclude non-cash stock-based compensation expense and integration, transaction, transaction-related and strategic project costs. G&A Expense Allocations (1) Senior Housing Owned Portfolio allocation $ 19,715 $ 20,015 $ 14,685 $ 16,163 $ 16,808 Senior Housing Leased Portfolio allocation 24,809 25,791 18,987 21,592 22,362 Ancillary Services allocation 7,965 7,998 6,323 6,331 7,225 Management Services allocation 11,256 11,200 8,567 9,505 11,238 Total allocations (1) 63,745 65,004 48,562 53,591 57,633 Non-cash stock-based compensation expense 9,769 8,994 8,455 5,067 7,774 Integration, Transaction-Related and Strategic Project Costs 19,107 16,697 6,408 8,010 153 General and administrative expense 92,621 90,695 63,425 66,668 65,560 -29.2% Transaction Costs 850 441 659 2,040 7,593 General and administrative expense and transaction costs $ 93,471 $ 91,136 $ 64,084 $ 68,708 $ 73,153 -21.7% Allocated G&A Expense as a Percentage of Resident Fee Revenue Resident fee revenue $ 1,061,148 $ 1,054,568 $ 1,042,831 $ 1,010,074 $ 1,016,927 Senior Housing Owned Portfolio allocation 19,715 20,015 14,685 16,163 16,808 Senior Housing Leased Portfolio allocation 24,809 25,791 18,987 24,592 22,362 Ancillary Services allocation 7,965 7,998 6,323 6,331 7,225 Non-cash stock-based compensation expense 9,769 8,994 8,455 5,067 7,774 Total $ 62,258 $ 62,798 $ 48,450 $ 49,153 $ 54,169 As a % of resident fee revenue 5.9% 6.0% 4.6% 4.9% 5.3% ($ in 000s) FY 2016 FY 2017 YoY Q1 Q2 Q3 Q4 Q1 Q1 G&A Expense & Transaction Costs
15 (1) Includes net recurring and EBITDA-enhancing projects which were formerly reported separately. (2) Formerly referred to by the Company as corporate, integration and other. Community level capital expenditures, including allocations (1) Senior Housing Owned Portfolio $ 24,008 $ 18,661 $ 19,983 $ 18,668 $ 13,909 Senior Housing Leased Portfolio 21,376 23,573 17,360 16,585 14,801 Ancillary Services 375 77 155 51 22 Community level capital expenditures, net (1) 45,759 42,311 37,499 35,304 28,732 (37.2 )% Corporate capital expenditures (2) 11,275 16,448 18,112 14,059 5,990 (46.9 )% Non-Development Capital Expenditures, net 57,034 58,759 55,611 49,363 34,722 (39.1)% Development Capital Expenditures, net 4,214 6,508 6,000 7,186 1,064 (74.8)% Total capital expenditures, net $ 61,248 $ 65,267 $ 61,611 $ 56,549 $ 35,786 (41.6)% Community level capital expenditures per unit $ 565 $ 524 $ 468 $ 452 $ 374 (33.8 )% Reconciliation to Additions to PP&E Total capital expenditures, net $ 61,248 $ 65,267 $ 61,611 $ 56,549 $ 35,786 Add: Total lessor reimbursements 17,769 14,557 10,385 12,727 8,044 Add: Change in related payables 29,493 1,726 1,894 421 5,098 Additions to property, plant and equipment and leasehold intangibles, net $ 108,510 $ 81,550 $ 73,890 $ 69,697 $ 48,928 ($ in 000s, except for Community level capital expenditures per unit) FY 2016 FY 2017 YoY Q1 Q2 Q3 Q4 Q1 Q1 Capital Expenditures
16(1) Includes corporate lease expense of $1,134, $1,171, $1,182, $1,160 and $1,133 (in thousands), respectively. Operating Leases Facility lease expense $ 96,689 $ 92,682 $ 92,519 $ 91,745 $ 88,807 Less: Straight-line (income) expense, net (3,935) 523 859 1,786 3,007 Less: Amortization of (above) below market lease, net 1,733 1,733 1,699 1,699 1,697 Add: Amortization of deferred gain 1,093 1,093 1,093 1,093 1,093 Cash operating lease payments (1) $ 95,580 $ 96,031 $ 96,170 $ 96,323 $ 94,604 (1.0)% Capital and Financing Leases Interest expense: capital and financing lease obligations $ 50,579 $ 50,581 $ 50,401 $ 50,451 $ 49,859 Less: Non-cash interest expense on financing lease obligations (6,439) (6,575) (6,714) (6,768) (6,156) Add: Lease financing debt amortization 15,302 15,532 16,024 16,409 17,248 Cash capital and financing lease payments $ 59,442 $ 59,538 $ 59,711 $ 60,092 $ 60,951 2.5 % Total cash lease payments (1) $ 155,022 $ 155,569 $ 155,881 $ 156,415 $ 155,555 0.3 % Interest Expense Reconciliation to Income Statement Interest expense: capital and financing lease obligations $ 50,579 $ 50,581 $ 50,401 $ 50,451 $ 49,859 Less: Non-cash interest expense on financing lease obligations (6,439) (6,575) (6,714) (6,768) (6,156) Interest expense: capital and financing lease obligations - cash payments 44,140 44,006 43,687 43,683 43,703 Less: Interest income (702) (728) (809) (694) (631) Interest expense: debt 43,990 43,731 43,701 42,605 40,573 Interest expense, net 87,428 87,009 86,579 85,594 83,645 Add: Amortization of deferred financing costs and debt premium (discount) 2,310 2,288 2,380 2,422 2,591 Add: Change in fair value of derivatives 24 4 — 150 46 Add: Non-cash interest expense on financing lease obligations 6,439 6,575 6,714 6,768 6,156 Add: Interest income 702 728 809 694 631 Interest expense per income statement $ 96,903 $ 96,604 $ 96,482 $ 95,628 $ 93,069 ($ in 000s) FY 2016 FY 2017 YoY Q1 Q2 Q3 Q4 Q1 Q1 Cash Lease Payments
17 ($ in 000s) Q1 2017 Twelve Months Ended March 31, 2017 Total CCRC Venture Other Ventures Total Resident fee revenue $ 295,967 $ 100,021 $ 195,946 $ 1,144,164 Less: Facility operating expenses (199,062) (74,916) (124,146) (784,295) Less: General and administrative expenses including management fees (15,673) (5,459) (10,214) (61,281) Less: Facility lease expense (426) — (426) (1,869) Adjusted EBITDA of Unconsolidated Ventures $ 80,806 $ 19,646 $ 61,160 $ 296,719 Less: Interest expense, net (28,419) (6,047) (22,372) (140,260) Add: Proceeds from entrance fees, net of refunds and amortization 5,517 5,517 — 40,378 Less: Other 134 (13) 147 (632) Less: Community level capital expenditures, net (17,027) (9,072) (7,955) (93,527) Adjusted Free Cash Flow of Unconsolidated Ventures $ 41,011 $ 10,031 $ 30,980 $ 102,678 Statistics Brookdale's weighted average unit ownership percentage 22.9% 51.0% 13.6% 22.9% Non-recourse debt principal of unconsolidated ventures as of March 31, 2017 $ 3,334,255 $ 639,191 $ 2,695,064 $ 3,334,255 Number of communities (period end) 205 16 189 205 Total Average Units 24,445 7,196 17,249 24,487 Weighted average unit occupancy 86.4% 85.7% 86.7% 86.9% RevPOR $ 4,571 $ 5,063 $ 4,367 $ 4,524 Brookdale's Proportionate Share of: Adjusted EBITDA of Unconsolidated Ventures $ 17,126 $ 10,019 $ 7,107 $ 66,713 Adjusted Free Cash Flow of Unconsolidated Ventures $ 8,750 $ 5,116 $ 3,634 $ 32,875 Debt principal of unconsolidated ventures as of March 31, 2017 $ 661,501 $ 325,988 $ 335,513 $ 661,501 Unconsolidated Ventures
18 $2,330,487 $1,233,566 (1) Includes mortgage debt, convertible notes, line of credit and other notes payable, but excludes capital and financing lease obligations. (2) Pertaining to variable rate debt, reflects a) market rates as of March 31, 2017 and b) applicable cap rates for hedged debt. Line of credit available to draw Cash and cash equivalents Total liquidity (available to draw + cash) $600,000 $400,000 $200,000 $0 03/31/16 06/30/16 09/30/16 12/31/16 03/31/17 $231,048 $267,244 $309,576 $367,642 $367,473 $70,862 $39,053 $74,184 $216,397 $59,237 $584,039 $383,760 $306,297$301,910 As of March 31, 2017 Weighted Rate Fixed rate debt 5.05% Variable rate debt (2) 3.42% Total debt and line of credit 4.49% Balance Total debt $ 3,564,053 Total Liquidity ($ in 000s) Debt & Liquidity $426,710 Debt Structure (1) ($ in 000s) Fixed rate debt Variable rate debt with interest rate caps Variable rate debt- unhedged Total variable rate debt $794,100 $439,466
19 Debt $1,400,000 $700,000 $0 2017 2018 2019 2020 2021 Thereafter $148,850 $1,219,195 $135,031 $473,708 $332,015 $1,255,254 (1) Includes carrying value of $298.9 million of convertible notes. (2) Includes mortgage debt, convertible notes and other notes payable, but excludes capital and financing leases and line of credit and recurring principal amortization. (3) Leverage ratios include results of operations of communities disposed of through sale or lease termination through the disposition date. (4) Amounts exclude integration, transaction, transaction-related and strategic project costs of $42.0 million. Important Note Regarding Non-GAAP Financial Measures. Adjusted EBITDAR, Adjusted EBITDA and Adjusted EBITDA after cash capital and financing lease payments (in each case excluding integration, transaction, transaction-related and strategic-project costs), Net debt, and Adjusted net debt are financial measures that are not calculated in accordance with GAAP. See the definitions of such measures under “Definitions” below and important information regarding such measures, including reconciliations to the most comparable GAAP financial measures, under “Non-GAAP Financial Measures” below. (2) (1) Debt Maturity Schedule ($ in 000s) Leverage Ratios (3) ($ in 000s) Twelve months ended March 31, 2017 Annualized Leverage Adjusted EBITDAR (4) (A) $ 1,211,444 Less: Cash operating lease payments (see page 16) (383,128) Adjusted EBITDA (4) 828,316 Less: Cash capital and financing lease payments (see page 16) (240,292) Adjusted EBITDA (4) after cash capital and financing lease payments (B) 588,024 As of March 31, 2017 Debt (2) 3,564,053 Line of credit — Less: Cash and cash equivalents (59,237) Less: Cash and escrow deposits - restricted held as collateral against existing debt (1,819) Net Debt (C) 3,502,997 6.0x (C/B) Plus: Cash operating and capital and financing lease payments (see page 16) multiplied by 8 4,987,360 Adjusted Net Debt (D) $ 8,490,357 7.0x (D/A) Weighted Rate Debt (2) Line of Credit 2017 5.05% — 2018 4.51% — 2019 5.97% — 2020 5.19% — 2021 5.76% — Thereafter 3.66% — Total 4.49% — Total Balance Debt (2) $ 3,564,053 Debt Maturity & Leverage
20 (1) Includes results of operations of communities disposed through sale or lease termination through the disposal date. (2) See page 14. G&A allocations presented on this page exclude non-cash stock-based compensation expense of $30,290 and integration, transaction, transaction-related and strategic project costs of $42,001 for the twelve months ended March 31, 2017. Senior Housing: Owned Portfolio (1) Owned Portfolio Operating Income $ 530,793 Less: G&A Portfolio Allocation (2) (67,671) Owned Portfolio Operating Income (Adjusted to Include G&A Allocation) $ 463,122 Net Debt as of March 31, 2017 (see page 19) $ 3,502,997 Total Average Units 34,338 Senior Housing: Leased Portfolio (1) Leased Portfolio Operating Income (Adjusted to Include G&A Allocation) (2) $ 681,259 Total cash lease payments (see page 16) $ (618,774) Proceeds from entrance fees, net of refunds and amortization $ 7,143 Total Average Units 44,575 Ancillary Services Segment Operating Income (Adjusted to Include G&A Allocation) (2) $ 37,697 Management Services Segment Operating Income (Adjusted to Include G&A Allocation) (2) $ 29,366 Unconsolidated Ventures Brookdale's Proportionate Share of Adjusted EBITDA $ 66,713 Brookdale's Proportionate Share of non-recourse debt principal as of March 31, 2017 $ 661,501 Total Average Units 24,487 Brookdale's weighted average unit ownership percentage 22.9% Shares outstanding (excluding 5,595,620 unvested restricted shares) as of March 31, 2017 186,203,330 ($ in 000s and are for the trailing twelve months ending March 31, 2017 unless otherwise noted) Net Asset Value Elements
21 Adjusted EBITDA is a non-GAAP financial measure that the Company defines as net income (loss) before provision (benefit) for income taxes; non-operating (income) expense items; depreciation and amortization (including non-cash impairment charges); (gain) loss on sale or acquisition of communities (including gain (loss) on facility lease termination); straight-line lease expense (income), net of amortization of (above) below market rents; amortization of deferred gain; non- cash stock-based compensation expense; and change in future service obligation. For purposes of the Company’s leverage ratios presented under “Debt Maturity & Leverage”, Adjusted EBITDA and Adjusted EBITDA after cash capital and financing lease payments exclude integration, transaction, transaction-related and strategic project costs. Adjusted EBITDAR is a non-GAAP financial measure that the Company defines as Adjusted EBITDA less cash operating lease payments. For purposes of the Company’s leverage ratios presented under “Debt Maturity & Leverage”, Adjusted EBITDAR excludes integration, transaction, transaction-related and strategic project costs. Adjusted Free Cash Flow is a non-GAAP financial measure that the Company defines 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; plus: proceeds from refundable entrance fees, net of refunds; and property insurance proceeds; less: lease financing debt amortization and Non- Development Capital Expenditures (next page). Adjusted Net Debt is a non-GAAP financial measure that the Company defines as Net Debt, plus cash operating and capital and financing lease payments for the relevant period multiplied by 8. Brookdale's Proportionate Share of Adjusted EBITDA of Unconsolidated Ventures is a non-GAAP financial measure calculated based on the Company’s equity ownership percentage and in a manner consistent with the Company’s definition of Adjusted EBITDA for its consolidated entities. The Company’s investments in its unconsolidated ventures are accounted for under the equity method of accounting. Brookdale’s Proportionate Share of Adjusted Free Cash Flow of Unconsolidated Ventures is a non-GAAP financial measure calculated based on the Company’s equity ownership percentage and in a manner consistent with the Company’s definition of Adjusted Free Cash Flow for its consolidated entities. The Company’s investments in its unconsolidated ventures are accounted for under the equity method of accounting and, therefore, the Company’s proportionate share of Adjusted Free Cash Flow of unconsolidated ventures does not represent cash available to the Company’s consolidated business except to the extent it is distributed to the Company. Combined Segment Operating Income is defined by the Company as resident fee and management fee revenue of the Company, less facility operating expenses. Combined Segment Operating Income does not include general and administrative expenses, transaction costs or depreciation and amortization. Community Labor Expenses is a component of facility operating expense that includes regular and overtime salaries and wages, bonuses, paid-time-off and holiday wages, payroll taxes, contract labor, employee benefits, and workers compensation. Development Capital Expenditures means capital expenditures for community expansions and major community redevelopment and repositioning projects, including the Company’s Program Max initiative, and the development of new communities. Amounts of Development Capital Expenditures are presented net of lessor reimbursements received or anticipated to be received. Integration, Transaction, Transaction-Related and Strategic Project Costs are general and administrative expenses. Integration costs include transition costs associated with the Emeritus merger and organizational restructuring (such as severance and retention payments and recruiting expenses), third party consulting expenses directly related to the integration of Emeritus (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 the acquisition of Emeritus, other 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 include costs associated with certain strategic projects related to refining the Company's strategy, building out enterprise-wide capabilities for the post-merger platform (including the electronic medical records (“EMR”) roll-out project) and reducing costs and achieving synergies by capitalizing on scale. Interest Coverage is calculated based on the trailing-twelve months Owned Portfolio Operating Income adjusted for 5% management fee and capital expenditures at $350/unit, divided by the trailing-twelve months property level and corporate debt interest expense. Lease Coverage is calculated based on the trailing-twelve months Leased Portfolio Operating Income adjusted for 5% management fee and capital expenditures at $350/unit, divided by the trailing-twelve months cash lease payments for both operating leases and capital and financing leases, excluding corporate lease expense. Definitions
22 Leased Portfolio Operating Income is defined by the Company as resident fee revenues (excluding Brookdale Ancillary Services segment revenue), less facility operating expenses for the Company’s Senior Housing Leased Portfolio. Leased Portfolio Operating Income does not include general and administrative expenses (unless otherwise noted), transaction costs or depreciation and amortization. Net Debt is a non-GAAP financial measure that the Company defines as the total of its debt (mortgage debt, convertible notes and other notes payable) and the outstanding balance on the line of credit, less unrestricted cash and cash held as collateral against existing debt. n/m means not meaningful and is used in the year-over-year variance column if either or both periods being compared have a negative sign. Non-Development Capital Expenditures is comprised of corporate and community-level capital expenditures, including those related to maintenance, renovations, upgrades and other major building infrastructure projects for the Company’s communities. Non-Development Capital Expenditures does not include capital expenditures for community expansions and major community redevelopment and repositioning projects, including the Company’s Program Max initiative, and the development of new communities (i.e., Development Capital Expenditures). Amounts of Non-Development Capital Expenditures are presented net of lessor reimbursements received or anticipated to be received. Owned Portfolio Operating Income is defined by the Company as resident fee revenues (excluding Brookdale Ancillary Services segment revenue), less facility operating expenses for the Company’s Senior Housing Owned Portfolio. Owned Portfolio Operating Income does not include general and administrative expenses (unless otherwise noted), transaction costs or depreciation and amortization. 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. 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. Same Community information reflects historical results from senior housing operations for same store communities (utilizing the Company's methodology for determining same store communities). Segment Operating Income is defined by the Company as segment revenues less segment facility operating expenses. Segment Operating Income does not include general and administrative expenses (unless otherwise noted), transaction costs or depreciation and amortization. Management Services segment operating income excludes revenue for reimbursements for which the Company is the primary obligor of costs incurred on behalf of managed communities, and there are no facility operating expenses associated with the Management Services segment. See the Segment Information note to the Company’s consolidated financial statements for more information regarding the Company’s segments. Senior Housing Leased Portfolio represents Brookdale leased communities and does not include owned, managed – 3rd party, or managed – venture communities. Senior Housing Operating Income is defined by the Company as segment revenues less segment facility operating expenses for the Company’s Retirement Centers, Assisted Living and CCRCs–Rental segments on an aggregate basis. Senior Housing Operating Income does not include general and administrative expenses, transaction costs or depreciation and amortization. Senior Housing Owned Portfolio represents Brookdale owned communities and does not include leased, managed – 3rd party, or managed – venture communities. Total Average Units represents the average number of units operated during the period, excluding equity homes. 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 Company for the period, divided by the weighted average number of available units in the Company’s consolidated portfolio for the period, divided by the number of months in the period. Definitions
23 Brookdale West Hartford West Hartford, CT Consolidated Statements of Cash Flows 24 Non-GAAP Financial Measures 25 Appendix
24 Cash Flows from Operating Activities Net income (loss) $ (48,817) $ (35,491) $ (51,728) $ (268,600) $ (126,361) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Loss on extinguishment of debt, net 139 — 236 876 54 Depreciation and amortization, net 129,447 135,682 133,163 131,510 130,078 Asset impairment 3,375 4,152 19,111 221,877 20,706 Equity in (earnings) loss of unconsolidated ventures (1,018) (338) 878 (1,182) (981) Distributions from unconsolidated ventures from cumulative share of net earnings — — 6,400 17,144 439 Amortization of deferred gain (1,093) (1,093) (1,093) (1,093) (1,093) Amortization of entrance fee revenue (926) (1,013) (1,172) (1,084) (1,198) Proceeds from deferred entrance fee revenue 3,087 4,371 3,869 2,653 1,927 Deferred income tax (benefit) provision 934 (602) 3,472 (556) 83,310 Change in deferred lease liability 3,935 (523) (859) (1,786) (3,007) Change in fair value of derivatives 24 4 — 150 46 (Gain) loss on sale of assets, net (2,749) 198 425 (5,092) 603 Non-cash stock-based compensation 9,769 8,994 8,455 5,067 7,774 Non-cash interest expense on financing lease obligations 6,439 6,575 6,714 6,768 6,156 Amortization of (above) below market rents, net (1,733) (1,733) (1,699) (1,699) (1,697) Other (2,330) (1,267) (2,763) (2,777) (1,398) Changes in operating assets and liabilities: Accounts receivable, net (2,738) 8,177 2,744 (6,602) 3,556 Prepaid expenses and other assets, net (36,554) 19,709 9,507 10,292 (8,630) Accounts payable and accrued expenses (1,388) (21,745) (50,759) (9,356) (51,627) Tenant refundable fees and security deposits (226) 264 (731) (146) (297) Deferred revenue 12,766 (16,825) 15,272 (7,913) 8,406 Net cash provided by operating activities 70,343 107,496 99,442 88,451 66,766 Cash Flows from Investing Activities Decrease (increase) in lease security deposits and lease acquisition deposits, net (1,210) (328) (238) (449) (420) Decrease (increase) in cash and escrow deposits - restricted 72 283 (2,165) 6,837 (629) Additions to property, plant and equipment and leasehold intangibles, net (108,510) (81,550) (73,890) (69,697) (48,928) Acquisition of assets, net of related payables (12,157) — — — — Investment in unconsolidated ventures (2,365) (1,368) (2,338) (7,306) (185,971) Distributions received from unconsolidated ventures 1,724 1,878 1,234 214,137 1,807 Proceeds from sale of assets, net 45,584 — 173,887 78,461 31,675 Property insurance proceeds 2,330 1,267 2,763 2,777 1,398 Other 84 (2,470) 3,109 6,439 696 Net cash (used in) provided by investing activities (74,448) (82,288) 102,362 231,199 (200,372) Cash Flows from Financing Activities Proceeds from debt 177,370 14,758 10,004 185,216 34,455 Repayment of debt and capital and financing lease obligations (84,016) (44,411) (89,269) (251,613) (52,273) Proceeds from line of credit 448,500 446,000 382,000 — — Repayment of line of credit (548,500) (469,500) (468,500) (100,000) — Purchase of treasury stock — — — (9,640) — Payment of financing costs, net of related payables (818) 177 (773) (1,524) (321) Proceeds from refundable entrance fees, net of refunds (593) (6) (308) 6 (902) Payment on lease termination (4,625) (4,625) — — — Payments of employee taxes for withheld shares (965) (3) (467) (205) (5,112) Other 585 593 640 323 599 Net cash provided by (used in) financing activities (13,062) (57,017) (166,673) (177,437) (23,554) Net increase (decrease) in cash and cash equivalents (17,167) (31,809) 35,131 142,213 (157,160) Cash and cash equivalents at beginning of period 88,029 70,862 39,053 74,184 216,397 Cash and cash equivalents at end of period $ 70,862 $ 39,053 $ 74,184 $ 216,397 $ 59,237 ($ in 000s) FY 2016 FY 2017 Q1 Q2 Q3 Q4 Q1 Consolidated Statements of Cash Flows
25 This Supplemental Information contains financial measures utilized by management to evaluate the Company’s operating performance and liquidity that are not calculated in accordance with GAAP, including Adjusted EBITDA; the Company's Proportionate Share of Adjusted EBITDA of Unconsolidated Ventures; Adjusted EBITDAR, Adjusted EBITDA and Adjusted EBITDAR after cash lease payments (in each case excluding integration, transaction, transaction-related and strategic project costs); Net Debt; Adjusted Net Debt; Adjusted Free Cash Flow; and the Company’s Proportionate Share of Adjusted Free Cash Flow of Unconsolidated Ventures, the Company’s definitions for which are included in the “Definitions” section above. In addition, this section contains reconciliations of the Company’s non-GAAP financial measures Cash From Facility Operations (CFFO), Adjusted CFFO and the Company's proportionate share of CFFO of unconsolidated ventures, which the Company historically reported and has included herein for purposes of comparison. These non-GAAP financial measures should not be considered in isolation from or as superior to or as a substitute for net income (loss), income (loss) from operations, net cash provided by (used in) operating activities, short-term debt, long-term debt, less current portion, current portion of long-term debt, or other financial measures determined in accordance with GAAP. Management uses these non-GAAP financial measures to supplement the Company’s GAAP results to provide a more complete understanding of the factors and trends affecting the business. Investors are urged to review the reconciliations set forth in this section of such non-GAAP financial measures to their most comparable GAAP financial measures and to review the information under “Reconciliation of Non-GAAP Financial Measures” in the Company’s earnings release dated May 8, 2017 for additional information regarding the Company’s use, and the limitations of, the Company’s non-GAAP financial measures. Investors are cautioned that amounts presented in accordance with the Company’s definitions of these non-GAAP measures may not be comparable to similar measures disclosed by other companies, because not all companies calculate such measures in the same manner. As noted in the Company’s earnings release dated May 8, 2017, the Company changed its definition and calculation of Adjusted EBITDA when it reported results for the second quarter of 2016. Prior period amounts of Adjusted EBITDA presented herein have been recast to conform to the new definition. See "Reconciliation of Non-GAAP Financial Measures" in the Company’s earnings release dated May 8, 2017 for more information regarding the changes made to the definition and calculation of Adjusted EBITDA. In addition, the Company changed its definition and calculation of CFFO when it reported results for the third quarter of 2016. Prior period amounts of the Company's CFFO and Adjusted CFFO have been recast to reflect the Company's CFFO and Adjusted CFFO separate from, and exclusive of, the Company's proportionate share of CFFO of unconsolidated ventures. Previously, in connection with the Company's reporting results for the second quarter of 2016, the Company began reporting CFFO as a measure of liquidity, and as such the Company changed the definition of CFFO to reflect the reconciliation of such measure from the Company's net cash provided by (used in) operating activities. This previous change had no effect on the amounts of CFFO or Adjusted CFFO presented herein. Non-GAAP Financial Measures
26 Net income (loss) $ (48,817) $ (35,491) $ (51,728) $ (268,600) $ (126,361) Provision (benefit) for income taxes 1,665 123 4,159 (569) 84,028 Equity in loss (earnings) of unconsolidated ventures (1,018) (338) 878 (1,182) (981) Debt modification and extinguishment costs 1,110 186 1,944 5,930 61 (Gain) loss on sale of assets, net (2,749) 198 425 (5,092) 603 Other non-operating income (5,038) (2,267) (3,706) (3,790) (1,662) Interest expense 96,903 96,604 96,482 95,628 93,069 Interest income (702) (728) (809) (694) (631) Income (loss) from operations 41,354 58,287 47,645 (178,369) 48,126 Depreciation and amortization 127,137 133,394 130,783 129,088 127,487 Asset impairment 3,375 4,152 19,111 221,877 20,706 Loss on facility lease termination — — — 11,113 — Straight-line lease expense (income) 3,935 (523) (859) (1,786) (3,007) Amortization of (above) below market lease, net (1,733) (1,733) (1,699) (1,699) (1,697) Amortization of deferred gain (1,093) (1,093) (1,093) (1,093) (1,093) Non-cash stock-based compensation expense 9,769 8,994 8,455 5,067 7,774 Adjusted EBITDA $ 182,744 $ 201,478 $ 202,343 $ 184,198 $ 198,296 ($ in 000s) FY 2016 FY 2017 Q1 Q2 Q3 Q4 Q1 Adjusted EBITDA Reconciliation Non-GAAP Financial Measures (Continued)
27 Adjusted EBITDAR; Adjusted EBITDA; and Adjusted EBITDA after cash capital and financing lease payments Reconciliations (excluding integration, transaction, transaction-related and strategic-project costs) ($ in 000s) Twelve Months Ended March 31, 2016 2017 Net income (loss) $ (376,263) $ (482,180) (Benefit) provision for income taxes (12,256) 87,741 Equity in (loss) earnings of unconsolidated ventures 1,270 (1,623) Debt modification and extinguishment costs 8,086 8,121 Gain on sale of assets, net (4,019) (3,866) Other non-operating income (11,104) (11,425) Interest expense 389,185 381,783 Interest income (1,878) (2,862) Income (loss) from operations (6,979) (24,311) Depreciation and amortization 639,875 520,752 Asset impairment 61,316 265,846 Loss on facility lease termination — 11,113 Facility lease expense 369,792 365,753 Non-cash stock-based compensation expense 32,547 30,290 Change in future service obligation (941) — Integration, transaction, transaction-related and strategic project costs 117,307 48,955 Cash paid for debt modification and extinguishment costs (7,871) (6,954) Adjusted EBITDAR (excluding Integration, Transaction, Transaction-Related and Strategic Project Costs) $ 1,205,046 $ 1,211,444 Facility lease expense $ (369,792) $ (365,753) Straight-line lease expense (income) 8,090 (6,175) Amortization of (above) below market lease, net (6,932) (6,828) Amortization of deferred gain (4,372) (4,372) Adjusted EBITDA (excluding Integration, Transaction, Transaction-Related and Strategic Project Costs) $ 832,040 $ 828,316 Interest expense: capital and financing lease obligations $ (208,508) $ (201,292) Non-cash interest expense on financing lease obligations 24,211 26,213 Lease financing debt amortization (58,657) (65,213) Adjusted EBITDA after cash capital and financing lease payments (excluding Integration, Transaction, Transaction-Related and Strategic Project Costs) $ 589,086 $ 588,024 Non-GAAP Financial Measures (Continued)
28 Net Debt and Adjusted Net Debt Reconciliations ($ in 000s) As of March 31, 2017 2016 Long-term debt (including current portion) $ 3,564,053 $ 3,728,710 Line of credit — 210,000 Less: cash and cash equivalents (59,237) (70,862) Less: cash held as collateral against existing debt (1,819) (4,846) Net Debt 3,502,997 3,863,002 Plus: trailing twelve months cash lease payments multiplied by 8 4,987,360 4,927,680 Adjusted Net Debt $ 8,490,357 $ 8,790,682 Adjusted Net Debt to Adjusted EBITDAR (excluding Integration, Transaction, Transaction- Related and Strategic Project Costs) 7.0x 7.3x Net Debt to Adjusted EBITDA after cash capital and financing lease payments (excluding Integration, Transaction, Transaction-Related and Strategic Project Costs) 6.0x 6.6x Non-GAAP Financial Measures (Continued)
29 Net cash provided by operating activities $ 70,343 $ 107,496 $ 99,442 $ 88,451 $ 66,766 Net cash (used in) provided by investing activities (74,448) (82,288) 102,362 231,199 (200,372) Net cash (used in) provided by financing activities (13,062) (57,017) (166,673) (177,437) (23,554) Net increase (decrease) in cash and cash equivalents $ (17,167) $ (31,809) $ 35,131 $ 142,213 $ (157,160) Net cash provided by operating activities $ 70,343 $ 107,496 $ 99,442 $ 88,451 $ 66,766 Changes in operating assets and liabilities 28,140 10,420 23,967 13,725 48,592 Proceeds from refundable entrance fees, net of refunds (593) (6) (308) 6 (902) Lease financing debt amortization (15,302) (15,532) (16,024) (16,409) (17,248) Loss on facility lease termination — — — 11,113 — Distributions from unconsolidated ventures from cumulative share of net earnings — — (6,400) (17,144) (439) Less: Non-Development Capital Expenditures, net (57,034) (58,759) (55,611) (49,363) (34,722) Add: Property insurance proceeds 2,330 1,267 2,763 2,777 1,398 Adjusted Free Cash Flow $ 27,884 $ 44,886 $ 47,829 $ 33,156 $ 63,445 Add: Non-Development Capital Expenditures, net $ 57,034 $ 58,759 $ 55,611 $ 49,363 $ 34,722 Less: Recurring capital expenditures, net (13,281) (13,668) (16,890) (14,744) (12,774) Less: Property insurance proceeds (2,330) (1,267) (2,763) (2,777) (1,398) Add: Lease financing debt amortization with bargain purchase option 1,493 1,415 1,425 1,432 867 CFFO $ 70,800 $ 90,125 $ 85,212 $ 66,430 $ 84,862 Less: Integration, Transaction, Transaction-Related and Strategic Project Costs $ 20,928 $ 17,324 $ 8,775 $ 15,104 $ 7,753 Adjusted CFFO $ 91,728 $ 107,449 $ 93,987 $ 81,534 $ 92,615 ($ in 000s) FY 2016 FY 2017 Q1 Q2 Q3 Q4 Q1 Adjusted Free Cash Flow; CFFO; and Adjusted CFFO Reconciliations Non-GAAP Financial Measures (Continued)
30 Brookdale's Proportionate Share of Adjusted EBITDA of Unconsolidated Ventures For purposes of this presentation, amounts for each line item represent the aggregate amounts of such line items for all the Company's unconsolidated ventures. ($ in 000s) FY 2016 FY 2017 TTM Q1 Q2 Q3 Q4 Q1 Q1 2017 Net income (loss) $ 1,115 $ (1,232) $ (6,195) $ 1,917 $ 8,118 $ 2,608 Provision (benefit) for income taxes 26 517 224 227 263 1,231 Debt modification and extinguishment costs — — — 131 13 144 Gain on sale of assets, net — — — (724) (372) (1,096) Other non-operating income (loss) (112) (88) — (781) (434) (1,303) Interest expense 28,762 27,979 28,021 27,183 26,391 109,574 Interest income (667) (678) (700) (723) (703) (2,804) Income (loss) from operations 29,124 26,498 21,350 27,230 33,276 108,354 Depreciation and amortization 45,913 45,262 47,085 48,042 47,528 187,917 Asset impairment — 34 — 413 2 449 Adjusted EBITDA of unconsolidated ventures $ 75,037 $ 71,794 $ 68,435 $ 75,685 $ 80,806 $ 296,720 Brookdale's weighted average owernship percentage 22.7% 22.6% 22.4% 23.8% 21.2% 22.5% Brookdale's proportionate share of Adjusted EBITDA of unconsolidated ventures $ 17,004 $ 16,245 $ 15,353 $ 17,989 $ 17,126 $ 66,713 Non-GAAP Financial Measures (Continued)
31 Net cash provided by operating activities $ 54,593 $ 55,842 $ 47,095 $ 40,994 $ 59,924 $ 203,855 Net cash (used in) provided by investing activities (37,924) (45,682) (40,885) 5,556 (1,150,080) (1,231,091) Net cash (used in) provided by financing activities (5,851) (14,784) (12,073) (55,554) 1,145,059 1,062,648 Net increase (decrease) in cash and cash equivalents $ 10,818 $ (4,624) $ (5,863) $ (9,004) $ 54,903 $ 35,412 Net cash provided by operating activities $ 54,593 $ 55,842 $ 47,095 $ 40,994 $ 59,924 $ 203,855 Changes in operating assets and liabilities (2,320) (5,205) (3,600) 8,617 2,086 1,898 Proceeds from refundable entrance fees, net of refunds (2,099) (677) 32 (4,931) (4,365) (9,941) Non-Development Capital Expenditures, net (21,805) (24,507) (25,761) (26,232) (17,027) (93,527) Property Insurance Proceeds — — — — 393 393 Adjusted Free Cash Flow of unconsolidated ventures $ 28,369 $ 25,453 $ 17,766 $ 18,448 $ 41,011 $ 102,678 Brookdale's Weighted Average Ownership percentage 30.0% 38.7% 42.2% 36.7% 21.3% 32.0% Brookdale’s Proportionate Share of Adjusted Free Cash Flow of Unconsolidated Ventures $ 8,505 $ 9,860 $ 7,502 $ 6,763 $ 8,750 $ 32,875 Adjusted Free Cash Flow $ 28,369 $ 25,453 $ 17,766 $ 18,448 $ 41,011 $ 102,678 Add: Non-Development Capital Expenditures, net 21,805 24,507 25,761 26,232 17,027 93,527 Less: Property Insurance Proceeds — — — — (393) (393) Less: Recurring capital expenditures, net (4,316) (5,189) (5,256) (5,075) (4,475) (19,995) CFFO of unconsolidated ventures $ 45,858 $ 44,771 $ 38,271 $ 39,605 $ 53,170 $ 175,817 Brookdale's Weighted Average Ownership percentage 33.5% 35.6% 36.2% 32.5% 24.6% 31.7% Brookdale’s proportionate share of CFFO of unconsolidated ventures $ 15,354 $ 15,939 $ 13,837 $ 12,870 $ 13,057 $ 55,703 ($ in 000s) FY 2016 FY 2017 TTM Q1 Q2 Q3 Q4 Q1 Q1 2017 Brookdale's Proportionate Share of Adjusted Free Cash Flow and CFFO of Unconsolidated Ventures For purposes of this presentation, amounts for each line item represent the aggregate amounts of such line items for all the Company's unconsolidated ventures. Non-GAAP Financial Measures (Continued)
Brookdale Senior Living Inc. 111 Westwood Place, Suite 400 Brentwood, TN 37027 (615) 221-2250 www.brookdale.com
