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)	May 8, 2008 (May 7, 2008)

Brookdale Senior Living Inc.

(Exact name of registrant as specified in its charter)

Delaware	001-32641	20-3068069
(State or other jurisdiction	(Commission File Number)	(IRS Employer
of incorporation)		Identification No.)
111 Westwood Place, Suite 200, Brentwood, Tennessee		37027
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code		(615) 221-2250
(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 May 7, 2008, Brookdale Senior Living Inc. (the “Company”) issued a press release announcing its first quarter 2008 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 May 7, 2008

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:	May 8, 2008	By:	/s/ T. Andrew Smith
		Name:	T. Andrew Smith
		Title:	Executive Vice President, General Counsel and Secretary

EXHIBIT INDEX

Exhibit No.	Exhibit
99	Press Release dated May 7, 2008.

EX-99

FOR IMMEDIATE RELEASE

Contact:                                                                             

Brookdale Senior Living Inc.

Ross Roadman  615-376-2412

Brookdale Announces First Quarter 2008 Results

First Quarter 2008 Highlights

·   Revenue for the first quarter was $480.6 million, up 7.6% from the first quarter of 2007.

·   Same store Facility Operating Income (“FOI”) grew 7.2% for the twelve months ended March 31, 2008 over the corresponding period ended in 2007.

·   Cash From Facility Operations for the quarter was $38.6 million, or $0.38 per outstanding common share, a 19% increase over the first period of 2007, and was $0.41 per outstanding common share, excluding integration costs.

·   Average occupancy for the first quarter was 90.0%, versus 90.6% for the fourth quarter of 2007.

·   The Company’s Board of Directors approved a $150 million share repurchase program.

·   The Company declared a quarterly cash dividend on its common stock of $0.25 per share for the quarter ended March 31, 2008.

·   First quarter net loss of $(55.1) million, or $(0.54) per diluted common share, including non-cash expenses of $86.2 million for depreciation and amortization, non-cash compensation expense and straight-line lease expense, net of deferred gain amortization.

Nashville, TN.  May 7, 2008 – Brookdale Senior Living Inc. (NYSE: BKD) (the “Company”) today reported financial results for the first quarter of 2008.  Net loss for the quarter ended March 31, 2008 was $(55.1) million, or $(0.54) per diluted common share.  The loss includes non-cash items for depreciation and amortization, non-cash compensation expense and straight-line lease expense, net of deferred gain amortization, which totaled $86.2 million.

Bill Sheriff, Brookdale’s CEO, said, “We grew our first quarter CFFO per share before integration costs 17% over the first quarter of 2007 consistent with our expectations.  Operationally, we made good progress on our new sales and marketing initiatives, including national branding, increased sales training, expanded referral relationships, a new customer loyalty program and a new website which is driving some impressive new traffic.  Our new website generated over 2,000 qualified leads in March, a significant increase over prior periods. Looking forward, we remain confident in the strength of our business and the platform we continue to build.”

Mark Ohlendorf, Co-President and CFO of Brookdale, commented, “We had strong average revenue per unit growth of over 7% on a same store basis, which mitigated the slight loss in occupancy and resulted in 7% FOI growth.  Our ancillary services business had a terrific quarter.  The roll-out of therapy services remains on track and the expansion of home health services to our residents looks to be quite promising.  To continue improving our operating platform, we made additional investments in sales people and local management, which are key to producing and sustaining high performance at the community level.”

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 lease expense, net of deferred gain amortization.  Brookdale also uses Facility Operating Income to assess the performance of its facilities.

For the quarter ended March 31, 2008, Adjusted EBITDA was $80.0 million, up 13.4% versus the first quarter of 2007.  Facility Operating Income was $167.1 million for the quarter ended March 31, 2008, a 4.3% increase over the same prior year period.

For the quarter ended March 31, 2008, Cash From Facility Operations was $38.6 million, or $0.38 per common share outstanding at March 31, 2008, a 19% increase over the first quarter of 2007.

First quarter Adjusted EBITDA and Cash From Facility Operations included integration costs of $2.9 million, or $0.03 per outstanding common share, and $1 million of start-up losses related to the roll-out of therapy services to Brookdale communities.

Same store revenues grew 6.6% for the twelve months ended March 31, 2008 over the corresponding period ending in 2007, and same store Facility Operating Income grew 7.2% when compared to the same prior year period.  Similarly, same store revenues grew 6.0% for the quarter ended March 31, 2008 over the same period in 2007, and same store Facility Operating Income grew 4.2% when compared to the first quarter of 2007.  The twelve month same store data includes the effect of the historical results of the ARC facilities and excludes $7.0 million of charges in the fourth quarter of 2007 relating to integration-related accounting items.  Schedules are presented later in the release with more detail.

By the end of the quarter, the Company’s ancillary services business provided therapy services to over 31,000 Brookdale units, over 60% of the total portfolio.  For the first time, the therapy and home health services in the legacy ARC portfolio, which has a higher health center mix than the rest of the Brookdale portfolio, reached $213 of monthly Facility Operating Income per occupied unit in the first quarter.  At the end of the quarter, the Company’s home health agencies were serving almost 8,300 units across the total Brookdale portfolio.

The Company currently has twelve expansion projects under construction with approximately 400 units.  In April, two memory care expansions with a total of 60 units opened, adding a new level of care at two communities.

During the first quarter of 2008, Brookdale completed $288 million in mortgage financings, producing incremental proceeds of $111 million.

Earnings Conference Call

Brookdale’s management will conduct a conference call on Thursday, May 8, 2008 to review the financial results of its first quarter ended March 31, 2008.  The conference call is scheduled for 8:00 AM ET.  All interested parties are welcome to participate in the live conference call.  The conference call can be accessed by dialing (866) 845-7252 (from within the U.S.) or (706) 634-9069 (from outside of the U.S.) ten minutes prior to the scheduled start and referencing the “Brookdale Senior Living First Quarter Earnings Call.”

A webcast of the conference call will be available to the public on a listen-only basis at 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 for three months following the call.

For those who cannot listen to the live call, a replay will be available until 11:59 PM ET on May 10, 2008 by dialing (800) 642-1687 (from within the U.S.) or (706) 645-9291 (from outside of the U.S.) and referencing access code “45785738.”  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, and dementia-care facilities and continuing care retirement centers, with 550 facilities in 35 states and the ability to serve approximately 52,000 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 operational initiatives; our ability to deploy capital; our expectations regarding occupancy, the demand for senior housing, and our authorized share repurchase program; our belief regarding the value of our common stock and our growth prospects; our plans to generate growth organically through occupancy improvements, increases in annual rental rates and the achievement of operating efficiencies and cost savings; our plans to expand our offering of ancillary services (therapy and home health) and our expectations regarding their effect on our results; our plans to expand existing facilities and develop new facilities; the expected project costs for our expansion and development program; our expected levels of expenditures; our expectations regarding liquidity; our expectations regarding financings and refinancings of assets; our ability to secure financing; our ability to acquire the fee interest in facilities that we currently operate at attractive valuations; our ability to close accretive acquisitions; our ability to close dispositions of

underperforming facilities; our expectations for the performance of our entrance fee communities; our ability to anticipate, manage and address industry trends and their effect on our business; our ability to pay and grow dividends; and our ability to increase revenues, earnings, Adjusted EBITDA, Cash From Facility Operations, and/or Facility Operating Income.  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," "plan" 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 these forward-looking statements include, but are not limited to, our determination from time to time whether to purchase any shares under the repurchase program; our ability to fund any repurchases; the risk that we may not be able to obtain any consents necessary to effect the repurchase program; our ability to generate sufficient cash flow to cover required interest and long-term operating lease payments; our inability to extend or replace our credit facility when it expires; 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; the possibilities that changes in the capital markets, including changes in interest rates and/or credit spreads, or other factors could make financing more expensive or unavailable to us; the risk that we may be required to post additional cash collateral in connection with our interest rate swaps; the risk that we may not be able to pay or maintain dividends; events which adversely affect the ability of seniors to afford our monthly resident fees or entrance fees; the conditions of housing markets in certain geographic areas; changes in governmental reimbursement programs; our limited operating history on a combined basis; our ability to effectively manage our growth; our ability to maintain consistent quality control; delays in obtaining regulatory approvals; our ability to integrate acquisitions (including the ARC acquisition) into our operations; 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; a decrease in the overall demand for senior housing; our vulnerability to economic downturns; acts of nature in certain geographic areas; terminations of our resident agreements and vacancies in the living spaces we lease; 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 of complaints filed against us; the cost and difficulty of complying with increasing and evolving regulation; and other risks detailed from time to time in our filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K.  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.  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.

Condensed Consolidated Statements of Operations

(unaudited, in thousands, except for per share data)

	Three Months Ended
	March 31,
	2008			2007
Revenue
Resident fees	$	478,835		$	445,338
Management fees		1,813			1,496
Total revenue		480,648			446,834
Expense
Facility operating (excluding depreciation and amortization of $50,890 and $65,569, respectively)		305,059			280,809
General and administrative (including non-cash stock-based compensation expense of $8,010 and $10,820, respectively)		36,388			40,653
Facility lease expense		67,812			68,481
Depreciation and amortization		71,940			72,984
Total operating expense		481,199			462,927
Loss from operations		(551	)		(16,093	)
Interest income		1,626			1,820
Interest expense:
Debt		(35,871	)		(33,452	)
Amortization of deferred financing costs		(1,557	)		(1,618	)
Change in fair value of derivatives and amortization		(45,633	)		(4,781	)
Loss on extinguishment of debt		(2,821	)		-
Equity in loss of unconsolidated ventures		(173	)		(1,453	)
Loss before income taxes		(84,980	)		(55,577	)
Benefit for income taxes		29,887			20,568
Loss before minority interest		(55,093	)		(35,009	)
Minority interest		-			(131	)
Net loss	$	(55,093	)	$	(35,140	)
Basic and diluted loss per share	$	(0.54	)	$	(0.35	)
Weighted average shares used in
computing basic and diluted loss per share		101,995			101,302
Dividends declared per share	$	0.25		$	0.45

Condensed Consolidated Balance Sheets

(in thousands)

	March 31, 2008		December 31, 2007
	(unaudited)
Cash and cash equivalents	$	119,536	$	100,904
Cash and escrow deposits - restricted		76,649		76,962
Accounts receivable, net		72,448		66,807
Other current assets		43,721		47,162
Total current assets		312,354		291,835
Property, plant, and equipment and
leasehold intangibles, net		3,744,647		3,760,453
Other assets, net		756,735		759,334
Total assets	$	4,813,736	$	4,811,622
Current liabilities	$	582,969	$	549,767
Long-term debt, less current portion		2,172,628		2,119,217
Other liabilities		712,023		723,100
Total liabilities		3,467,620		3,392,084
Stockholders’ equity		1,346,116		1,419,538
Total liabilities and stockholders’ equity	$	4,813,736	$	4,811,622

Condensed Consolidated Statements of Cash Flows

(unaudited, in thousands)

	Three Months Ended March 31,
	2008			2007
Cash Flows from Operating Activities
Net loss	$	(55,093	)	$	(35,140	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Loss on extinguishment of debt		2,821			-
Depreciation and amortization		73,497			74,602
Minority interest		-			131
Equity in loss of unconsolidated ventures		173			1,453
Distributions from uncon. ventures from cumulative share of net earnings		190			46
Amortization of deferred gain		(1,085	)		(1,085	)
Amortization of entrance fees		(6,691	)		(4,259	)
Proceeds from deferred entrance fee revenue		2,780			3,916
Deferred income tax benefit		(30,662	)		(20,634	)
Change in deferred lease liability		5,751			6,336
Change in fair value of derivatives and amortization		45,633			4,781
Non-cash stock-based compensation		8,010			10,820
Changes in operating assets and liabilities:
Accounts receivable, net		(6,392	)		(4,796	)
Prepaid expenses and other assets, net		3,179			1,703
Accounts payable and accrued expenses		(5,083	)		(15,756	)
Tenant refundable fees and security deposits		1,184			(1,170	)
Other		2,417			7,880
Net cash provided by operating activities		40,629			28,828
Cash Flows from Investing Activities
Decrease in lease security deposits and lease acquisition deposits, net		1,763			958
Decrease in cash and escrow deposits — restricted		(20,663	)		(3,922	)
Distributions received from unconsolidated ventures		-			943
Additions to property, plant, and equipment and leasehold intangibles,
net of related payables		(46,213	)		(34,331	)
Acquisition of assets, net of related payables and cash received		(745	)		(22,867	)
Acquisition deposit		-			(10,116	)
Payment on (issuance of) notes receivable, net		10,112			(5,431	)
Investment in unconsolidated ventures		(356	)		(785	)
Net cash used in investing activities		(56,102	)		(75,551	)
Cash Flows from Financing Activities
Proceeds from debt		288,479			135,346
Repayment of debt and capital lease obligations		(181,327	)		(11,895	)
Proceeds from line of credit		125,000			106,500
Repayment of line of credit		(120,000	)		(142,000	)
Payment of dividends		(51,897	)		(46,588	)
Payment of financing costs, net of related payables		(853	)		(4,072	)
Cash portion of loss on extinguishment of debt		(812	)		-
Other		(403	)		(624	)
Refundable entrance fees:
Proceeds from refundable entrance fees		3,492			4,258
Refunds of entrance fees		(3,632	)		(6,315	)
Recouponing and payment of swap termination		(23,942	)		-
Net cash provided by financing activities		34,105			34,610
Net increase (decrease) in cash and cash equivalents		18,632			(12,113	)
Cash and cash equivalents at beginning of period		100,904			68,034
Cash and cash equivalents at end of period	$	119,536		$	55,921

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 which are expected to 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.

The table below reconciles Adjusted EBITDA from net loss for the three months ended March 31, 2008 and 2007 (in thousands):

	Three Months Ended March 31,
	2008(1)			2007(1)
Net loss	$	(55,093	)	$	(35,140	)
Minority interest		-			131
Benefit for income taxes		(29,887	)		(20,568	)
Equity in loss of unconsolidated ventures		173			1,453
Loss on extinguishment of debt		2,821			-
Interest expense:
Debt		28,987			25,239
Capitalized lease obligation		6,884			8,213
Amortization of deferred financing costs		1,557			1,618
Change in fair value of derivatives and amortization		45,633			4,781
Interest income		(1,626	)		(1,820	)
Loss from operations		(551	)		(16,093	)
Depreciation and amortization		71,940			72,984
Straight-line lease expense		5,751			6,336
Amortization of deferred gain		(1,085	)		(1,085	)
Amortization of entrance fees		(6,691	)		(4,259	)
Non-cash compensation expense		8,010			10,820
Entrance fee receipts(2)		6,272			8,174
Entrance fee disbursements		(3,632	)		(6,315	)
Adjusted EBITDA	$	80,014		$	70,562

(1)   The calculation of Adjusted EBITDA includes merger, integration, and certain other non-recurring expenses, as well as acquisition transition costs, totaling $2.9 million and $3.1 million for the three months ended March 31, 2008 and 2007, respectively.

(2)    Includes the receipt of refundable and non-refundable entrance fees.

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 net cash provided by (used in) operating activities adjusted for changes in operating assets and liabilities, deferred interest and fees added to principal, refundable entrance fees received, entrance fee refunds disbursed, lease financing debt amortization with fair market value or no purchase options, other, and recurring capital expenditures.  Recurring capital expenditures include expenditures capitalized in accordance with GAAP that are funded from CFFO. Amounts excluded from recurring capital expenditures consist primarily of unusual or non-recurring capital items (including integration capital expenditures), facility purchases and/or major projects or renovations that are funded using financing proceeds and/or proceeds from the sale of facilities that are held for sale.  Beginning in 2008, our calculation of CFFO was modified to subtract principal amortization related to our capital leases that contain fair market value or no purchase options.

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 months ended March 31, 2008 and 2007 (in thousands):

	Three Months Ended March 31,
	2008(1)			2007(1)(2)
Net cash provided by operating activities	$	40,629		$	28,828
Changes in operating assets and liabilities		4,695			12,139
Refundable entrance fees received(3)		3,492			4,258
Entrance fee refunds disbursed		(3,632	)		(6,315	)
Recurring capital expenditures, net		(6,037	)		(6,225	)
Lease financing debt amortization with fair market value or no purchase options		(1,625	)		(1,296	)
Reimbursement of operating expenses and other		1,063			1,130
Cash From Facility Operations	$	38,585		$	32,519

(1)   The calculation of Cash From Facility Operations includes merger, integration and certain other non-recurring expenses, as well as acquisition transition costs, totaling $2.9 million and $3.1 million for the three months ended March 31, 2008 and 2007, respectively.

(2)   The March 31, 2007 amounts have been reclassified to conform to the modified definition of CFFO used for the current period.

(3)   Total entrance fee receipts for the three months ended March 31, 2008 and 2007 were $6.3 million and $8.2 million, respectively, including $2.8 million and $3.9 million, respectively, of non-refundable entrance fee receipts included in net cash provided by operating activities.

The calculation of Cash From Facility Operations per outstanding common share is based on outstanding common shares at the end of the period, excluding any unvested restricted shares.

Beginning in 2008, reported CFFO was modified to subtract principal amortization related to capital leases that do not have a bargain purchase option.  Below is a table that presents the CFFO results since 2006 under this modified definition of CFFO.

								2008 Quarter
		Full Year		2007 Quarter Ended:			Full Year	Ended:
($ per share, all items rounded to the nearest penny)		2006	March 31	June 30	Sept. 30	Dec. 31	2007	March 31
Reported CFFO per Old Definition		1.06	0.33	0.42	0.43	0.28	1.46	0.39
Less: Total Debt Amortization		(0.08)	(0.04)	(0.04)	(0.04)	(0.04)	(0.16)	(0.04)
Plus: Amort of Leases w/ Below Mkt. Purchase Options and Debt		0.04	0.03	0.02	0.03	0.03	0.10	0.02
	Reported CFFO per Current Revised Definition	1.03	0.32	0.41	0.41	0.27	1.41	0.38
Impact of Integration-related Accounting Items		-	-	-	-	0.07	0.07	-
Integration Expenses		0.20	0.03	0.04	0.04	0.08	0.19	0.03

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 non-cash stock 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 months ended March 31, 2008 and 2007 (in thousands):

	Three Months Ended March 31,
	2008			2007
Net loss	$	(55,093	)	$	(35,140	)
Minority interest		-			131
Benefit for income taxes		(29,887	)		(20,568	)
Equity in loss of unconsolidated ventures		173			1,453
Loss on extinguishment of debt		2,821			-
Interest expense:
Debt		28,987			25,239
Capitalized lease obligation		6,884			8,213
Amortization of deferred financing costs		1,557			1,618
Change in fair value of derivatives and amortization		45,633			4,781
Interest income		(1,626	)		(1,820	)
Loss from operations		(551	)		(16,093	)
Depreciation and amortization		71,940			72,984
Facility lease expense		67,812			68,481
General and administrative (including non-cash
stock compensation expense)		36,388			40,653
Amortization of entrance fees(1)		(6,691	)		(4,259	)
Management fees		(1,813	)		(1,496	)
Facility Operating Income	$	167,085		$	160,270

(1)   Entrance fee sales, net of refunds paid, provided $2.6 million and $1.9 million of cash for the three months ended March 31, 2008 and 2007, respectively.

Operating Data

The same store data, which includes for the twelve month period the effect of the historical results of the ARC facilities, for the three and twelve months ended March 31, 2008 and 2007 (in thousands) is presented below:

	Three months ended March 31,									Twelve months ended March 31,
	2008			2007			% Change			2008(1)			2007			% Change
Revenue	$	396,239		$	373,659			6.0	%	$	1,551,678		$	1,454,992			6.6	%
Operating Expense		252,516			235,730			7.1	%		992,351			926,589			7.1	%
Facility Operating Income	$	143,723		$	137,929			4.2	%	$	559,327		$	528,403			5.9	%
Facility Operating Margin		36.3	%		36.9	%		-0.6	%		36.0	%		36.3	%		-0.3	%
# Locations		451			451						451			451
Avg. Occupancy		89.8	%		91.3	%		-1.5	%		90.7	%		91.4	%		-0.7	%
Avg. Mo. Revenue/unit	$	3,763		$	3,489			7.8	%	$	3,646		$	3,393			7.4	%

(1)   Includes $7.0 million of charges to facility operating expenses in the quarter ended December 31, 2007, which relates to the Company’s desire to conform its policies across all of its platforms including $5.9 million of estimated uncollectible accounts and $1.1 million of accounting conformity adjustments pertaining to inventory and certain accrual policies.

Excluding the $7.0 million of charges relating to integration-related accounting items in the fourth quarter of 2007, the same store data is as follows:

	Three months ended March 31,									Twelve months ended March 31,
	2008			2007			% Change			2008			2007			% Change
Revenue	$	396,239		$	373,659			6.0	%	$	1,551,678		$	1,454,992			6.6	%
Operating Expense		252,516			235,730			7.1	%		985,306			926,589			6.3	%
Facility Operating Income	$	143,723		$	137,929			4.2	%	$	566,372		$	528,403			7.2	%
Facility Operating Margin		36.3	%		36.9	%		-0.6	%		36.5	%		36.3	%		0.2	%

Our facility breakdown at March 31, 2008 was as follows:

Ownership Type	Number of Facilities		Number of Units/Beds		Percentage of Q1 2008 Revenues			Percentage of Q1 2008 Facility Operating Income
Owned		171		18,777		39.9	%		38.3	%
Leased		357		28,674		59.8	%		60.7	%
Managed		22		4,406		0.4	%		1.0	%
Total		550		51,857		100.0	%		100.0	%
Operating Type
Retirement Centers		87		15,932		29.0	%		34.3	%
Assisted Living		409		20,981		43.6	%		42.1	%
CCRCs		32		10,538		27.0	%		22.6	%
Managed		22		4,406		0.4	%		1.0	%
Total		550		51,857		100.0	%		100.0	%

Our capital expenditures for the three months ended March 31, 2008 and 2007 were as follows (in thousands):

	Three Months Ended March 31,
	2008			2007
Type
Recurring	$	7,197		$	6,225
Reimbursements		(1,160	)		-
Net recurring		6,037			6,225
Corporate(1)		3,914			5,979
EBITDA-enhancing(2)		13,921			10,391
Development(3)		21,181			11,736
Net Total Capital Expenditures	$	45,053		$	34,331

(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.

(3)   Development capital expenditures primarily relate to the facility expansion and de novo development program.

Our debt amortization for the three months ended March 31, 2008 and 2007 was as follows (in thousands):

	Three Months Ended March 31,
	2008		2007
Type
Scheduled Debt Amortization	$	391	$	574
Lease Financing Debt Amortization - FMV or no Purchase Option	$	1,625	$	1,296
Lease Financing Debt Amortization - Bargain Purchase Option		2,351		2,064
Total Debt Amortization	$	4,367	$	3,934

Our ancillary services data for the last five quarters was as follows:

	March 31, 2008		December 31, 2007		September 30, 2007		June 30, 2007		March 31, 2007
Units served by therapy staff:
Legacy Brookdale		18,565		17,101		15,483		14,245		7,442
Legacy ARC		12,761		12,716		12,716		12,716		12,680
Total		31,326		29,817		28,199		26,961		20,122
Therapy clinics		352		335		323		302		260
Therapy staff		1,741		1,601		1,516		1,377		1,139
Units served by Home Health agencies		8,294		7,405		7,405		6,251		1,477