Brookdale Senior Living (BKD) Offers Prelim. Q4 CFFO Results; Trims FY14 Outlook

Brookdale Senior Living (NYSE: BKD) announced that, for the fourth quarter of 2014, it expects to report Cash From Facility Operations ("CFFO"), excluding integration, transaction-related and electronic medical records ("EMR") roll-out costs, of $0.53 per share. (The Street is looking for $0.64.) As a result, Brookdale has adjusted its 2015 guidance for CFFO per share, excluding integration, transaction-related and EMR roll-out costs, to a range of $2.60 to $2.75, replacing its previously announced preliminary range of $2.95 to $3.10. Brookdale plans to issue its fourth quarter and full year 2014 financial results after the market closes on Wednesday, February 4, 2015, with a conference call to discuss the results on Thursday, February 5, 2015. The preliminary financial information in this release is based on management's estimates derived from the information available at this time and is subject to revision upon finalization of the Company's quarterly accounting and financial reporting procedures and completion of the annual audit.

Andy Smith, Brookdale's CEO, said, "Brookdale's preliminary fourth quarter CFFO was impacted by a combination of lower than expected occupancy and approximately $11 million, or $0.06 per share, of certain higher-than-anticipated insurance reserve adjustments. We are pleased, however, that the timing of our integration of Emeritus is proceeding more quickly than planned. We anticipate the business will be on a common systems and infrastructure platform by mid-2015."

Mr. Smith continued, "The reduced guidance for the year is largely a reflection of the lower starting point for occupancy for 2015. We remain confident in Brookdale's 2015 growth trajectory and in our ability to achieve our previously disclosed third year revenue and CFFO synergy projections arising from the Emeritus transaction."

Mr. Smith concluded, "The lower than expected occupancy rates were mostly concentrated in legacy Emeritus communities. While move-out rates were in line with historical averages, we did not capture our normal level of move-ins as we continued to acclimate to new systems and procedures, and new organizational structures. We are encouraged by our December metrics, as lead generation, health care referrals and sales activity improved. We have also accelerated our spending on deferred maintenance to provide our sales force, and more importantly, our residents, a more attractive product. We currently plan to fully or partially renovate more than 150 former Emeritus communities in 2015."

Brookdale's Fourth Quarter Performance

For the fourth quarter of 2014, the Company estimates consolidated total revenue was approximately $1,253 million with consolidated senior housing revenue of approximately $929 million. Brookdale expects to report consolidated senior housing average occupancy of 88.3%, a sequential quarter decline of 20 basis points, and consolidated senior housing average monthly revenue per unit of $4,220. The third quarter occupancy rate represents one month of legacy Brookdale standalone in July, and one month's deconsolidation of the ventures with HCP, Inc. ("HCP") in September, versus a fourth quarter reflecting the full impact of the Emeritus and HCP transactions. Assuming all transactions had occurred on July 1, 2014, the sequential quarter change in the consolidated senior housing average occupancy would have been a decline of 40 basis points for all consolidated communities, a decline of 80 basis points for the legacy Emeritus portfolio and a decline of 10 basis points for the legacy Brookdale portfolio.

Fourth quarter 2014 consolidated same-store senior housing revenue increased by an estimated 1.5% from a year ago, driven by a 2.5% increase in rates and partially offset by a 90 basis point decline in occupancy. Excluding the impact of year-end insurance reserve adjustments, compared with the fourth quarter of 2013, same store facility expenses increased approximately 3.9% and same store Facility Operating Income declined 2.6%. Including the impact of these year-end insurance reserve adjustments, compared with the fourth quarter of 2013, same store facility expenses increased 5.9% and same store Facility Operating Income decreased by 6.0%.

Assumptions Supporting Adjusted Guidance for 2015 CFFO

For the full year 2015, the Company expects CFFO per share in a range of $2.60 to $2.75 per share, excluding integration, transaction-related and EMR roll-out costs. This guidance excludes the potential impact of any future acquisition or disposition activity (other than planned purchases of currently leased communities). Due to the Emeritus merger and the transactions with HCP that closed in July and August 2014, respectively, comparability between years is, for some metrics, less meaningful. Additional assumptions underlying this guidance include, but are not limited to:

• an increase in average annual occupancy for the consolidated portfolio of zero to 50 basis points, including an increase of 130 to 180 basis points for the fourth quarter of 2015 from the fourth quarter of 2014;
• a flat to slight decrease in year over year average monthly revenue per unit, including a 3.5% to 3.75% increase for the fourth quarter of 2015 from the fourth quarter of 2014;
• senior housing margin expansion from 34.0% to 34.5%;
• cash G&A expense, which excludes non-cash stock compensation, integration, transaction-related and EMR roll-out costs, of approximately $235 million to $245 million;
• Adjusted EBITDA of $930 million to $960 million;
• an updated forecast that Brookdale will not pay federal cash income taxes until 2017, at the earliest; and
• total capital expenditures of $355 million to $375 million, of which $225 million to $235 million are major EBITDA-enhancing and Program Max projects.

Stifel 2015 Seniors Housing & Healthcare Real Estate Conference

Company management will participate at the Stifel 2015 Seniors Housing & Healthcare Real Estate Conference on January 27, 2015 at the St. Regis Monarch Beach in Dana Point, CA.

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