8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 OR 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported) March 13, 2007 (March 13, 2007)

Brookdale Senior Living Inc.

(Exact name of registrant as specified in its charter)

Delaware	001-32641	20-3068069
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

330 North Wabash Avenue, Suite 1400, Chicago, Illinois	60611
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code (312) 977-3700

(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Section 2 — Financial Information

Item 2.02    Results of Operations and Financial Condition.

          On March 13, 2007, Brookdale Senior Living Inc. (the “Company”) issued a press release announcing its fourth quarter and full year 2006 financial results and announcing a conference call to review these results. A copy of the press release is furnished herewith as Exhibit 99.

          The information furnished pursuant to this Current Report on Form 8-K (including the exhibit hereto) shall not be considered “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section, nor shall it be incorporated by reference into any filing by the Company under the Securities Act of 1933, as amended, or under the Securities Exchange Act of 1934, as amended, unless the Company expressly sets forth by specific reference in such filing that such information is to be considered ‘‘filed’’ or incorporated by reference therein.

Section 9 — Financial Statements and Exhibits

Item 9.01    Financial Statements and Exhibits.

(d)     Exhibits

99      Press Release dated March 13, 2007

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SIGNATURE

          Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	BROOKDALE SENIOR LIVING INC.
Date:  March 13, 2007	By:	/s/ T. Andrew Smith
	Name:	T. Andrew Smith
	Title:	Executive Vice President, General Counsel and Secretary

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EXHIBIT INDEX

Exhibit No.	Exhibit
99	Press Release dated March 13, 2007.

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EX-99

Exhibit 99

Contact:		FOR IMMEDIATE RELEASE
Brookdale Senior Living Inc.
Francie Nagy, New York	1-212-515-4625;
Or Ross Roadman, Nashville	1-615-376-2412

Brookdale Announces Fourth Quarter and Full Year 2006 Results

Declares First Quarter 2007 Dividend

Fourth Quarter 2006 Highlights

• Revenue for the fourth quarter increased to $432.3 million, Facility Operating Income increased to $148.7 million and Adjusted EBITDA increased to $66.5 million.

• Average occupancy for the quarter was 91.0% and average revenue per month per unit increased to $3,402 per month.

• Cash From Facility Operations for the quarter was $33.7 million, or $0.33 per outstanding common share.  Fourth quarter Cash From Facility Operations includes integration and acquisition-related costs of $6.5 million, or approximately $0.06 per outstanding common share.

• For the twelve months ended December 31, 2006, same store revenue growth of 6.6% and Facility Operating Income growth of 11% over the same period in 2005, including the effect of the historical results of American Retirement’s facilities for both periods.

• Net loss of $(37.4) million, or $(.37) per diluted common share, including non-cash expenses of $96.9 million for depreciation and amortization, non-cash compensation expense and straight-line lease expense, net of deferred gain amortization.

Subsequent Events to Fourth Quarter 2006

• Entered into an agreement to purchase two retirement centers with 675 units/beds, which are currently leased by us, for $101 million.  The transaction is expected to close in April 2007.  Also, purchased a joint venture partners’ 62% interest in a 114 unit/bed assisted living facility located in Michigan in January 2007 for $3.9 million.

• Obtained $130 million of first mortgage financing in connection with the November 2006 acquisition of facilities previously leased or owned with a joint venture partner.

• Declared a dividend of $0.45 per share of common stock for the quarter ended March 31, 2007.

Chicago, IL.  March 13, 2007 – Brookdale Senior Living Inc. (NYSE: BKD) today reported financial results for the fourth quarter of 2006.  Net loss for the quarter and twelve months ended December 31, 2006 was $(37.4) million and $(108.1) million, respectively, or $(.37) and $(1.34) per diluted common share. The losses include non-cash items for depreciation and amortization, non-cash compensation expense and straight-line rent expense, net of deferred gain amortization, which totaled $96.9 million and $240.2 million, respectively.

Bill Doniger, Brookdale’s Vice Chairman said, “Brookdale had an exceptional year with strong growth coming from both the existing business as well as through acquisitions.  We have realized double digit growth in same-store Facility Operating Income over the last year and have invested over $1.6 billion of equity accretively since our November 2005 IPO, including the acquisition of American Retirement in July 2006.  The continued success of our strategy is reflected in the 80% increase in our dividend since the fourth quarter of 2005, and we believe that Brookdale is well positioned to realize substantial growth in our dividend over the next few years through the combination of strong organic growth, new products like ancillary services, a facility expansion and development program, and the continued accretive deployment of capital through acquisitions.’’

As a dividend-paying company, Brookdale’s management utilizes Adjusted EBITDA and Cash From Facility Operations to evaluate the Company’s performance and liquidity because these metrics exclude non-cash expenses such as depreciation and amortization, non-cash compensation expense and straight-line rent expense, net of deferred gain amortization.  Brookdale also uses Facility Operating Income to assess the performance of its facilities.

For the fourth quarter and the twelve months ended December 31, 2006, Adjusted EBITDA was $66.5 million and $200.6 million, respectively.  Facility Operating Income for the fourth quarter and twelve months ended December 31, 2006 was $148.7 million and $476.3 million, respectively.

For the fourth quarter and the twelve months ended December 31, 2006, Cash From Facility Operations was $33.7 million and $90.9 million, respectively, or $0.33 and $0.90 per common share outstanding at December 31, 2006. 

Fourth quarter Adjusted EBITDA and Cash From Facility Operations included integration and acquisition-related expenses of $6.5 million.  The majority of those expenses were expenses related to systems integration, implementing procedures for Sarbanes-Oxley compliance and acquisition integration costs.

Same store revenues grew 6.6% for the twelve months ended December 31, 2006 over the same period in 2005 and Facility Operating Income grew 11.0% when compared to 2005, including the effect of the historical results of the American Retirement facilities.

Bill Sheriff, Co-CEO of Brookdale commented, “The roll-out of our ancillary services program to the pre-merger Brookdale facilities is going well. We have completed the roll-out to approximately 4,000 units/beds in 39 locations and expect to add another 8,000 units/beds this year. The pre-merger American Retirement facilities continue to show strong results from the ancillary services business, producing $158 of monthly Facility Operating Income per occupied unit for the fourth quarter of 2006.  On the entrance fee side of our business, we had a strong fourth quarter with $11.7 million of net entrance fee cash flow.  Fourth quarter entrance-fee results underscore our optimism about this element of our business, which is subject to occasional variability in quarterly entrance fee cash flow as we saw in the third quarter of 2006.”

Acquisitions

In November 2006, Brookdale closed on the acquisition of 30 communities with 1,476 units for $148.6 million.  These properties were leased and operated by Brookdale and owned by Nationwide Health Properties, Inc. (“NHP”).  In addition, the Company purchased an independent and assisted living community in Tampa, Florida with 163 units, which the Company managed, for approximately $22 million in November 2006. 

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During January 2007, Brookdale purchased a venture partners’ interest in a 114 unit assisted living community located in Flint, Michigan.  Brookdale also entered into an agreement to purchase two retirement communities with 675 units/beds, which are currently leased by the company for $101 million.  This transaction is expected to close in April 2007.

During 2006, Brookdale purchased, or committed to purchase, $3.3 billion in senior housing assets, including the acquisition of American Retirement Corporation.  These acquisitions represent 206 facilities with approximately 25,000 units/beds.  Brookdale has invested approximately $1.6 billion of equity during 2006.  Since the IPO in November 2005, the Company has purchased or committed to purchase approximately $3.6 billion of assets, representing $1.6 billion of equity investment in 222 facilities and 27,500 units/beds.

Development

The Company has currently identified 60 facilities in its portfolio at which it plans to add over 2,000 units over the next three years, as well as a new development of a CCRC with over 250 units.  The total project costs for this initial expansion and development program are expected to be approximately $500 million on a mix of leased and owned properties.

Mark J. Schulte, Brookdale’s Co-CEO, commented, “The facilities we are targeting are high occupancy facilities in core Brookdale markets where the addition of new units will either add a new level of care to an existing product type or will allow us to take advantage of the existing strong demand in these local communities for our services.  We expect to generate a mid-teens unlevered return on total cost for these expansions when they are stabilized. We are very excited about this new initiative and believe that these expansions are the next big growth opportunity for Brookdale.”

Dividend

For the quarter ending March 31, 2007, the Brookdale Board of Directors has declared a quarterly cash dividend on its common stock of $0.45 per share.  The $0.45 per share dividend is payable on April 13, 2007 to holders of record of Brookdale’s common stock on March 30, 2007. 

Business Strategy

Brookdale’s business strategy is to focus on increasing its earnings and dividends to shareholders by growing Adjusted EBITDA and Cash From Facility Operations primarily through:

• Internal growth in its existing portfolio of facilities through occupancy improvements, increases in annual rental rates, and operational savings due to economies of scale;

• Growth in its therapy and home health ancillary services business;

• Development activities, including the expansion of existing facilities; and

• Accretive acquisitions of senior housing facilities and operators in a highly fragmented industry.

Earnings Conference Call

Brookdale’s management will conduct a conference call on Tuesday, March 13, 2007 to review the financial results for the three and twelve months ended December 31, 2006.  The conference call is scheduled for 11:00 AM EDT.  All interested parties are welcome to participate in the live conference call.  The conference call can be accessed by dialing (877) 704-5386 (from within the U.S.) or (913) 312-1302 (from outside of the U.S.) ten minutes prior to the scheduled start and referencing “Brookdale Senior Living Fourth Quarter Earnings.” 

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A webcast of the conference call will be available to the public on a listen-only basis at http://www.brookdaleliving.com.  Please allow extra time prior to the call to visit the site and download the necessary software required to listen to the internet broadcast.  A replay of the webcast will be available on the Company’s website for three months following the call. 

A replay will also be available until 11:59 PM EDT on March 20, 2007 by dialing (888) 203-1112 (from within the U.S.) or (719) 457-0820 (from outside of the U.S.).  Please reference access code “843-5976.” A copy of this earnings release is posted on the Investor Relations page of the Brookdale website (www.brookdaleliving.com).   

About Brookdale Senior Living

Brookdale Senior Living Inc. is a leading owner and operator of senior living facilities throughout the United States.  The Company is committed to providing an exceptional living experience through properties that are designed, purpose-built and operated to provide the highest-quality service, care and living accommodations for residents.  Currently the Company owns and operates independent living, assisted living, dementia-care facilities and continuing care retirement centers, with over 540 facilities in 35 states and the ability to serve over 51,000 residents.

Safe Harbor

Certain items in this press release and the associated earnings conference call may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Those forward-looking statements are subject to various risks and uncertainties and include all statements that are not historical statements of fact and those regarding our intent, belief or expectations, including, but not limited to, statements relating to our ability to close the previously announced acquisition of two retirement centers; our ability to pay and grow dividends and earnings, Adjusted EBITDA and Cash From Facility Operations; our ability to generate growth organically through occupancy improvements and increases in annual rental rates, achieve operating efficiencies, expand our offering of ancillary services, expand existing facilities and develop new facilities, and deploy capital accretively in acquisitions; and the expected project costs for our expansion and development program and the expected return on such transactions.  Forward-looking statements are generally identifiable by use of forward-looking terminology such as “may,” “will,” “should,” “potential,” “intend,” “expect,” “endeavor,” “seek,” “anticipate,” “estimate,” “overestimate,” “underestimate,” “believe,” “could,” “would,” “project,” “predict,” “continue” or other similar words or expressions. Forward-looking statements are based on certain assumptions or estimates, discuss future expectations, describe future plans and strategies, contain projections of results of operations or of financial condition, or state other forward-looking information. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Although we believe that the expectations reflected in such forward-looking statements are based on reasonable assumptions, actual results and performance could differ materially from those set forth in the forward-looking statements. Factors which could have a material adverse effect on our operations and future prospects or which could cause events or circumstances to differ from the forward-looking statements include, but are not limited to, our limited operating history on a combined basis, our ability to generate sufficient cash flow to cover required interest and long-term operating lease payments, the effect of our indebtedness and long-term operating leases on our liquidity, the risk of loss of property pursuant to our mortgage debt and long-term lease obligations, our ability to effectively manage our growth, our ability to integrate acquisitions, our ability to maintain consistent quality control, unforeseen costs associated with the acquisition of new facilities, competition for the acquisition of assets, our ability to obtain additional capital on terms acceptable to us, events which adversely affect the ability of seniors to afford our monthly resident fees, changes in governmental reimbursement programs, our vulnerability to economic downturns, regulatory changes or acts of nature in certain geographic areas, terminations of our resident agreements and vacancies in the living spaces we lease, early termination or non-renewal of our management agreements, increased competition for skilled personnel, departure of our key officers, increases in market interest rates, environmental contamination at any of our facilities, failure to comply with existing environmental laws, an adverse determination or resolution in recent complaints filed against us, the cost and difficulty of complying with increasing and evolving regulation, and other risks detailed from time to time in Brookdale’s SEC reports, including its Annual Report on Form 10-K filed with the SEC on March 31, 2006.  When considering forward-looking statements, you should keep in mind the risk factors and other cautionary statements in such SEC filings. Readers are cautioned not to place undue reliance on any of these forward-looking statements, which reflect our management’s views as of the date of this press release and/or the associated earnings conference call. The factors discussed above and the other factors noted in our SEC filings from time to time could cause our actual results to differ significantly from those contained in any forward-looking statement. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements and we expressly disclaim any obligation to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in our expectations with regard thereto or change in events, conditions or circumstances on which any statement is based.

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Condensed Consolidated and Combined Statements of Operations
(in thousands, except for per share data)

	Three Months Ended December 31,						Twelve Months Ended December 31,
	2006			2005			2006			2005(1)(2)
Revenue
Resident fees	$	429,801		$	211,860		$	1,304,296		$	786,715
Management fees		2,459			1,187			5,617			3,862
Total revenue		432,260			213,047			1,309,913			790,577
Expenses
Facility operating (excluding depreciation and amortization of $69,692, $17,644, $179,850 and $12,408, respectively)		276,383			127,105			819,801			493,887
General and administrative (including non-cash stock compensation expense of $13,987, $11,534, $26,612 and $22,680, respectively)		44,439			27,690			117,897			81,696
Facility lease expense		72,799			48,487			228,779			189,339
Depreciation and amortization		74,000			19,009			188,129			47,048
Total operating expenses		467,621			222,291			1,354,606			811,970
Loss from operations		(35,361	)		(9,244	)		(44,693	)		(21,393	)
Interest income		3,101			1,588			6,810			3,788
Interest expense:
Debt		(29,173	)		(12,809	)		(97,694	)		(46,248	)
Amortization of deferred financing costs		(1,882	)		(13	)		(5,061	)		(2,835	)
Change in fair value of derivatives		1,384			(88	)		(38	)		3,992
Gain (loss) on extinguishment of debt		1,222			(3,543	)		(1,526	)		(3,996	)
Equity in loss of unconsolidated venture		(1,419	)		(197	)		(3,705	)		(838	)
Loss before income taxes		(62,128	)		(24,306	)		(145,907	)		(67,530	)
Benefit for income taxes		25,004			(150	)		38,491			97
Loss before minority interest		(37,124	)		(24,456	)		(107,416	)		(67,433	)
Minority interest		(233	)		—			(671	)		16,575
Loss before discontinued operations		(37,357	)		(24,456	)		(108,087	)		(50,858	)
Discontinued operations		—			—			—			(128	)
Net loss	$	(37,357	)	$	(24,456	)	$	(108,087	)	$	(50,986	)
Basic and diluted loss per share	$	(0.37	)	$	(0.41	)	$	(1.34	)
Weighted average shares used in computing basic and diluted loss per share		101,205			59,710			80,842
Dividends declared per share at the end of the period	$	0.45		$	0.25		$	1.55		$	0.50

(1)	Brookdale Senior Living Inc. was formed on September 30, 2005.  Results prior to that date represent the combined operations of the predecessor entities.
(2)	We excluded the loss per share for the full year ended December 31, 2005.  We believe this calculation is not meaningful to investors due to the different ownership and legal structures (e.g., corporation and limited liability companies) of the various entities prior to the formation transactions on September 30, 2005.

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Condensed Consolidated Balance Sheets
(in thousands)

	December 31, 2006		December 31, 2005
Cash and cash equivalents	$	68,034	$	77,682
Cash and investments — restricted		61,116		37,314
Other current assets		141,082		30,881
Total current assets		270,232		145,877
Property, plant and equipment and leasehold intangibles, net		3,658,788		1,408,732
Other long term assets		813,435		143,202
Total assets	$	4,742,455	$	1,697,811
Current liabilities	$	508,905	$	171,443
Long-term debt, less current portion		1,688,974		754,169
Other long term liabilities		775,963		141,760
Total liabilities		2,973,842		1,067,372
Minority interests		4,601		36
Stockholders’ equity		1,764,012		630,403
Total liabilities and stockholders’ equity	$	4,742,455	$	1,697,811

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Condensed Consolidated and Combined Statements of Cash Flow
(in thousands)

	Twelve Months Ended December 31,
	2006			2005 (1)
Cash Flows from Operating Activities
Net loss	$	(108,087	)	$	(50,986	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Loss on extinguishment of debt		1,526			3,996
Depreciation and amortization		193,190			49,883
Minority interest		671			(16,575	)
Loss on sale of assets		123			—
Equity in loss of unconsolidated ventures		3,705			838
Distributions from joint ventures		336			—
Loss on discontinued operations		—			128
Amortization of deferred gain		(4,345	)		(7,938	)
Amortization of entrance fees		(8,149	)		(33	)
Proceeds from deferred entrance fee revenue		12,796			1,186
Deferred income taxes provision (benefit)		(39,267	)		(97	)
Change in deferred lease liability		24,699			23,752
Change in fair value of derivatives		38			(3,992	)
Compensation expenses related to restricted stock grants		26,612			22,680
Changes in operating assets and liabilities:
Accounts receivable, net		(23,022	)		(2,561	)
Prepaid expenses and other assets, net		6,598			(3,122	)
Accounts payable and accrued expenses and other		(4,156	)		(2,082	)
Tenant refundable fees and security deposits		2,644			1,823
Net cash provided by operating activities		85,912			16,900
Cash Flows from Investing Activities
Decrease in lease security deposits and lease acquisition deposits, net		9,144			745
Decrease (increase) in cash and investments — restricted		35,555			(1,537	)
Net proceeds from sale of property, plant and equipment		—			15,446
Additions to property, plant and equipment, and leasehold intangibles net		(68,313	)		(23,842	)
Acquisition of assets, net of related payables and cash received		(1,968,391	)		(571,215	)
Issuance of notes receivable, net		(9,850	)		—
Investment in joint venture		(2,071	)		—
Distributions received from investments		1,240			—
Net cash used in investing activities		(2,002,686	)		(580,403	)
Cash Flows from Financing Activities
Proceeds from debt		743,190			522,756
Repayment of debt		(230,177	)		(260,017	)
Proceeds from line of credit		378,500			—
Repayment of line of credit		(215,000	)		—
Payment of dividends		(104,183	)		(34,355	)
Payment of financing costs, net of related payables		(22,404	)		(3,425	)
Refundable entrance fees:
Proceeds from refundable entrance fees		14,760			4,043
Refunds of entrance fees		(9,188	)		(2,735	)
Payment of swap termination		—			(14,065	)
Proceeds from issuance of common stock, net		1,354,063			151,769
Costs incurred related to follow-on equity offering		(2,435	)		(6,434	)
Capital contributions from controlling shareholder		—			196,790
Net cash provided by financing activities		1,907,126			554,327
Net decrease in cash and cash equivalents		(9,648	)		(9,176	)
Cash and cash equivalents at beginning of year		77,682			86,858
Cash and cash equivalents at end of year	$	68,034		$	77,682

(1) Brookdale Senior Living Inc. was formed on September 30, 2005.  Results prior to that date represent the combined operations of the Predecessor entities.

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Non-GAAP Financial Measures

Adjusted EBITDA

Adjusted EBITDA is a measure of operating performance that is not calculated in accordance with U.S. generally accepted accounting principles (“GAAP”).  Adjusted EBITDA should not be considered in isolation or as a substitute for net income, income from operations or cash flows provided by or used in operations, as determined in accordance with GAAP.  Adjusted EBITDA is a key measure of the Company’s operating performance used by management to focus on operating performance and management without mixing in items of income and expense that relate to long-term contracts and the financing and capitalization of the business.  We define Adjusted EBITDA as net income (loss) before provision (benefit) for income taxes, non-operating income (loss) items, depreciation and amortization, straight-line lease expense (income), amortization of deferred gain, amortization of deferred entrance fees, and non-cash compensation expense and including entrance fee receipts and refunds.

We believe Adjusted EBITDA is useful to investors in evaluating our performance, results of operations and financial position for the following reasons:

• It is helpful in identifying trends in our day-to-day performance because the items excluded have little or no significance to our day-to-day operations;

• It provides an assessment of controllable expenses and affords management the ability to make decisions that facilitate meeting current financial goals as well as achieve optimal financial performance; and

• It is an indication to determine if adjustments to current spending decisions are needed.

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The table below reconciles Adjusted EBITDA from net loss for the three and twelve months ended December 31, 2006 and 2005 (in thousands):

	Three Months Ended December 31,						Twelve Months Ended December 31,
	2006(1)			2005(1)			2006(1)			2005(1)(2)
Net loss	$	(37,357	)	$	(24,456	)	$	(108,087	)	$	(50,986	)
Loss on discontinued operations		—			—			—			128
Minority interest		233			—			671			(16,575	)
Benefit for income taxes		(25,004	)		150			(38,491	)		(97	)
Equity in loss of unconsolidated ventures		1,419			197			3,705			838
Loss on extinguishment of debt		(1,222	)		3,543			1,526			3,996
Interest Expense:
Debt		22,439			10,485			74,133			37,049
Capitalized lease obligation		6,734			2,324			23,561			9,199
Amortization of deferred financing costs		1,882			13			5,061			2,835
Change in fair value of derivatives		(1,384	)		88			38			(3,992	)
Interest income		(3,101	)		(1,588	)		(6,810	)		(3,788	)
Loss from operations		(35,361	)		(9,244	)		(44,693	)		(21,393	)
Depreciation and amortization		74,000			19,009			188,129			47,048
Straight-line lease expense		8,077			5,895			24,699			23,752
Amortization of deferred gain		(1,086	)		(1,152	)		(4,345	)		(7,938	)
Amortization of entrance fees		(4,751	)		(15	)		(8,149	)		(33	)
Non-cash compensation expense		13,987			11,534			26,612			22,680
Entrance fee receipts		16,327			1,999			27,556			5,229
Entrance fee disbursements		(4,648	)		(1,065	)		(9,188	)		(2,735	)
Adjusted EBITDA	$	66,545		$	26,961		$	200,621		$	66,610

(1)	Includes integration and acquisition-related costs of $6.5 million and $3.4 million for the three months ended December 31, 2006 and 2005, respectively, and $16.8 million and $12.5 million for the twelve months ended December 31, 2006 and 2005, respectively.
(2)	Brookdale Senior Living Inc. was formed on September 30, 2005.  Results prior to that date represent the combined operations of the Predecessor entities.

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Cash From Facility Operations

Cash From Facility Operations is a measurement of liquidity that is not calculated in accordance with GAAP and should not be considered in isolation as a substitute for cash flows provided by or used in operations, as determined in accordance with GAAP.  We define Cash From Facility Operations as cash flows provided by (used in) operations adjusted for changes in operating assets and liabilities, refundable entrance fees received, entrance fee refunds disbursed, other and recurring capital expenditures. Recurring capital expenditures include expenditures capitalized in accordance with GAAP that are funded from Cash From Facility Operations. Amounts excluded from recurring capital expenditures consist primarily of unusual or non-recurring capital items, facility purchases and/or major renovations that are funded using financing proceeds and/or proceeds from the sale of facilities.

We believe Cash From Facility Operations is useful to investors in evaluating our liquidity for the following reasons:

•	It provides an assessment of our ability to facilitate meeting current financial and liquidity goals.
•	To assess our ability to:
	(i)	service our outstanding indebtedness;
	(ii)	pay dividends; and
	(iii)	make regular recurring capital expenditures to maintain and improve our facilities.

The table below reconciles Cash From Facility Operations from net cash provided by operating activities for the three and twelve months ended December 31, 2006 and 2005 (in thousands):

	Three Months Ended December 31,						Twelve Months Ended December 31,
	2006(1)			2005(1)			2006(1)			2005(1) (2)
Net cash provided by operating activities	$	32,235		$	9,093		$	85,912		$	16,900
Changes in operating assets and liabilities		5,556			6,199			17,936			5,942
Refundable entrance fees received		7,860			1,513			14,760			4,043
Entrance fee refunds disbursed		(4,648	)		(1,065	)		(9,188	)		(2,735	)
Reimbursement of operating expenses		1,150			—			5,000			—
Recurring capital expenditures, net		(8,500	)		(4,868	)		(23,518	)		(17,508	)
Cash From Facility Operations	$	33,653		$	10,872		$	90,902		$	6,642

(1)	Includes integration and acquisition-related costs of $6.5 million and $3.4 million for the three months ended December 31, 2006 and 2005, respectively, and $16.8 million and $12.5 million for the twelve months ended December 31, 2006 and 2005, respectively.
(2)	Brookdale Senior Living Inc. was formed on September 30, 2005.  Results prior to that date represent the combined operations of the Predecessor entities.

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Facility Operating Income

Facility Operating Income is not a measurement of operating performance calculated in accordance with GAAP and should not be considered in isolation as a substitute for net income, income from operations, or cash flows provided by or used in operations, as determined in accordance with GAAP.  We define Facility Operating Income as net income (loss) before provision (benefit) for income taxes, non-operating income (loss) items, depreciation and amortization, facility lease expense, general and administrative expense, including compensation expense, amortization of deferred entrance fee revenue and management fees.

We believe Facility Operating Income is useful to investors in evaluating our facility operating performance for the following reasons:   

• It is helpful in identifying trends in our day-to-day facility performance;

• It provides an assessment of our revenue generation and expense management; and

• It provides an indicator to determine if adjustments to current spending decisions are needed.

The table below reconciles Facility Operating Income from net loss for the three and twelve months ended December 31, 2006 and 2005 (in thousands):

	Three Months Ended December 31,						Twelve Months Ended December 31,
	2006			2005(1)			2006			2005(1)
Net loss	$	(37,357	)	$	(24,456	)	$	(108,087	)	$	(50,986	)
Loss on discontinued operations		—			—			—			128
Minority interest		233			—			671			(16,575	)
Benefit for income taxes		(25,004	)		150			(38,491	)		(97	)
Equity in loss of unconsolidated ventures		1,419			197			3,705			838
Loss on extinguishment of debt		(1,222	)		3,543			1,526			3,996
Interest expense:
Debt		22,439			10,485			74,133			37,049
Capitalized lease obligation		6,734			2,324			23,561			9,199
Amortization of deferred financing costs		1,882			13			5,061			2,835
Change in fair value of derivatives		(1,384	)		88			38			(3,992	)
Interest income		(3,101	)		(1,588	)		(6,810	)		(3,788	)
Loss from operations		(35,361	)		(9,244	)		(44,693	)		(21,393	)
Depreciation and amortization		74,000			19,009			188,129			47,048
Facility lease expense		72,799			48,487			228,779			189,339
General and administrative (including non-cash stock compensation expense)		44,439			27,690			117,897			81,696
Amortization of entrance fees(2)		(4,751	)		(15	)		(8,149	)		(33	)
Management fees		(2,459	)		(1,187	)		(5,617	)		(3,862	)
Facility Operating Income	$	148,667		$	84,740		$	476,346		$	292,795

(1)	Brookdale Senior Living Inc. was formed on September 30, 2005.  Results prior to that date represent the combined operations of the Predecessor entities.
(2)	Entrance fee sales, net of refunds paid, provided $11.7 million and $0.9 million of cash for the three months ended December 31, 2006 and 2005, respectively and $18.4 million and $2.5 million of cash for the three periods ended December 31, 2006 and 2005, respectively.

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Our facility breakdown at December 31, 2006, was as follows:

	Number of Facilities		Number of Units/Beds		Percentage of Q4 2006 Revenue
Ownership Type
Owned		161		16,562		37.0	%
Leased		361		30,161		62.4	%
Managed		24		4,548		0.6	%
Total		546		51,271		100.0	%
Operating Type
Independent Living		66		11,986		23.8	%
Assisted Living		408		20,974		42.8	%
Retirement Centers/CCRC		48		13,763		32.8	%
Managed		24		4,548		0.6	%
Total		546		51,271		100.0	%

Our quarterly financial data for the three months ended December 31, 2006 and September 30, 2006 was as follows (in thousands, except occupancy, margin and average rate):

	For the Three Months Ended						Increase (Decrease)			Percentage
	December 31, 2006			September 30, 2006
Average Occupancy		91.0	%		91.1	%		(0.1	)%		(0.1	)%
Average rate ($)	$	3,402		$	3,319		$	83			2.5	%
Resident Fees(1)	$	425,050		$	382,364		$	42,686			11.2	%
Facility Operating Expenses		276,383			245,192			31,191			12.7	%
Facility Operating Income	$	148,667		$	137,172		$	11,495			8.4	%
Facility Operating Income Margin		35.0	%		35.9	%

(1) Excluding amortization of entrance fees of $4,751 and $3,253, respectively.

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 Our capital expenditures for the three and twelve months ended December 31, 2006 and 2005 were as follows (in thousands):

	Three Months Ended December 31,						Twelve Months Ended December 31,
	2006			2005			2006			2005
Type
Recurring	$	9,181		$	5,539		$	26,272		$	19,521
Reimbursements		(681	)		(671	)		(2,754	)		(2,013	)
Net recurring		8,500			4,868			23,518			17,508
Other/Corporate(1)		—			1,992			4,579			2,115
EBITDA enhancing(2)		10,836			1,208			19,905			2,206
Development		9,002			—			17,557			—
Gross Total Capital Expenditures	$	28,338		$	8,068		$	65,559		$	21,829

(1)	Corporate primarily includes capital expenditures for information technology systems and equipment.
(2)	EBITDA-enhancing capital expenditures generally represent unusual or non-recurring capital items and/or major renovations.

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