Attached files
| file | filename |
|---|---|
| EX-99.1 - EXHIBIT 99.1 - Brookdale Senior Living Inc. | bkdq12020pressrelease.htm |
| 8-K - 8-K - Brookdale Senior Living Inc. | bkdq12020form-8k.htm |
Exhibit 99.2 Supplemental Information 1st Quarter 2020
Table of Contents Overview 4 Senior Housing 7 Health Care Services 11 G&A Expense 12 Capital Expenditures 13 Cash Facility Lease Payments 14 Capital Structure 15 Definitions 16 Appendices: Pro-Forma Financial Information 19 2019 Lease Accounting Standard (ASC 842) Impact 22 Non-GAAP Financial Measures 23 2
SAFE HARBOR Certain statements in this Supplemental Information may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to various risks and uncertainties and include all statements regarding the Company’s intent, expectations and assumptions related to the various pending and expected transactions outlined herein and any other statements that are not historical statements of fact. Forward- looking statements are generally identifiable by use of forward-looking terminology such as "may," "will," "should," "could," "would," "potential," "intend," "expect," "endeavor," "seek," "anticipate," "estimate," "believe," "project," "predict," "continue," "plan," "target," or other similar words or expressions. These forward-looking statements are based on certain assumptions and expectations, and the Company's ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Although the Company believes that expectations reflected in any forward-looking statements are based on reasonable assumptions, the Company can give no assurance that its assumptions or expectations will be attained, and actual results and performance could differ materially from those projected. Factors which could cause events or circumstances to differ from the forward-looking statements include, but are not limited to: the impacts of the COVID-19 pandemic, including the response efforts of federal, state, and local government authorities, businesses, individuals and the Company, on the Company's business, results of operations, cash flow, and liquidity, and strategic initiatives; the Company’s ability to complete pending or expected disposition, acquisition or other transactions on agreed upon terms or at all, including in respect of the satisfaction of closing conditions, the risk that regulatory approvals are not obtained or are subject to unanticipated conditions, and uncertainties as to the timing of closing, and the Company’s ability to identify and pursue any such opportunities in the future; delays in obtaining regulatory approvals; terminations, early or otherwise, or non-renewal of management agreements; regulatory changes in geographic areas where the Company is concentrated; disruptions in the financial markets, including those related to the pandemic, that affect the Company’s ability to obtain financing or extend or refinance debt as it matures and the Company’s financing costs; a decrease in the overall demand for senior housing, which may be adversely impacted by the pandemic; environmental contamination at any of the Company’s communities; failure to comply with existing environmental laws; unanticipated costs to comply with legislative or regulatory developments; as well as other risks detailed from time to time in the Company’s filings with the Securities and Exchange Commission, including those contained in the Company’s Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. 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 management's views as of the date of this Supplemental Information. The Company cannot guarantee future results, levels of activity, performance or achievements, and, except as required by law, it expressly disclaims any obligation to release publicly any updates or revisions to any of these forward-looking statements to reflect any change in its expectations with regard thereto or change in events, conditions or circumstances on which any statement is based. 3
Overview 1Q20 vs. 2019 2020 1Q19 Better (B)/ ($ in 000s) 1Q 2Q 3Q 4Q Full Year 1Q (Worse) (W) Resident fee and management fee revenue (1) $ 825,222 $ 817,312 $ 814,801 $ 809,704 $3,267,039 $ 891,422 8.0 % Net income (loss) (1) $ (42,606) $ (56,055) $ (78,508) $ (91,323) $ (268,492) $ 369,497 NM Net cash provided by (used in) operating activities $ (5,009) $ 64,128 $ 69,211 $ 88,082 $ 216,412 $ 57,479 NM Adjusted EBITDA(1) (2) $ 116,583 $ 104,036 $ 80,447 $ 100,103 $ 401,169 $ 185,069 58.7 % Adjusted EBITDA, excluding $100.0 million management termination fee and COVID-19 expense $ 116,583 $ 104,036 $ 80,447 $ 100,103 $ 401,169 $ 95,069 (18.5)% Adjusted Free Cash Flow $ (46,971) $ (16,369) $ (13,575) $ 511 $ (76,404) $ 5,182 NM Period end consolidated number of units 55,948 55,209 55,262 54,181 54,181 54,037 (3.4)% Consolidated: As of March 31, 2020 Consolidated: 661 54,037 1Q 2020 weighted average occupancy (consolidated communities) Community % of Period End Leased: Occupancy Band Count Communities Leased: 21,582 Greater than 95% 115 17% Owned: 306 90% > 95% 118 18% 741 Owned: 65,070 355 85% > 90% 97 15% communities 32,455 units 80% > 85% 95 14% Less than 80% 236 36% Total 661 100% Consolidated Portfolio Average ~ 23 years (3) Asset Age Managed: 80 (3) Managed: 11,033 (1) The 2019 periods presented include the non-recurring, non-cash revenue and expense associated with the Company's adoption of the new lease accounting standard effective January 1, 2019. See page 22 for additional information. (2) Adjusted EBITDA for the first quarter of 2020 includes the $100.0 million management agreement termination fee payment received from Healthpeak Properties Inc. ("Healthpeak") related to the sale of Brookdale’s interest in the entry fee CCRC venture, which closed on January 31, 2020, and $10.0 million of direct costs, primarily consisting of acquisition of personal protective equipment (PPE), medical equipment, cleaning and disposable food service supplies, enhanced cleaning and environmental sanitation costs, and increased labor expense, incurred to prepare for and respond to the COVID-19 pandemic. Additionally, Adjusted EBITDA for the first quarter of 2020 includes a negative impact to resident fees as a result of the COVID-19 pandemic. (3) Includes three communities (925 units) managed for unconsolidated ventures the Company has an equity interest in and 77 communities (10,108 units) managed on behalf of third parties. Important Note Regarding Non-GAAP Financial Measures • Adjusted EBITDA and Adjusted Free Cash Flow are financial measures that are not calculated in accordance with GAAP. See “Definitions” and “Non-GAAP Financial Measures” for the definitions of such measures and other important information regarding such measures, including reconciliations to the most comparable GAAP measures. 4
Adjusted EBITDA and Adjusted Free Cash Flow 1Q20 vs. 2019 2020 1Q19 ($ in 000s) 1Q 2Q 3Q 4Q Full Year 1Q B(W) Resident fee and management fee revenue $ 825,222 $ 817,312 $ 814,801 $809,704 $3,267,039 $ 891,422 8.0 % Facility operating expense (586,094) (590,246) (615,717) (598,438) (2,390,495) (588,482) (0.4)% Combined Segment Operating Income 239,128 227,066 199,084 211,266 876,544 302,940 26.7 % General and administrative expense (1) (49,494) (50,912) (46,570) (39,280) (186,256) (46,657) 5.7 % Cash facility operating lease payments (see page 14) (73,051) (72,118) (72,067) (71,883) (289,119) (71,214) 2.5 % Adjusted EBITDA (2) 116,583 104,036 80,447 100,103 401,169 185,069 58.7 % $100.0 million management termination fee — — — — — (100,000) NM COVID-19 expense — — — — — 10,000 NM Adjusted EBITDA, excluding $100.0 million management termination fee and COVID-19 expense 116,583 104,036 80,447 100,103 401,169 95,069 (18.5)% $100.0 million management termination fee — — — — — 100,000 NM COVID-19 expense — — — — — (10,000) NM Transaction and Organizational Restructuring Costs (461) (634) (3,910) (5,002) (10,007) (1,981) NM Interest expense, net (see page 14) (59,302) (59,029) (58,749) (57,132) (234,212) (53,590) 9.6 % Payment of financing lease obligations (5,453) (5,500) (5,549) (5,740) (22,242) (5,087) 6.7 % Changes in working capital (3) (43,405) 9,620 31,439 20,410 18,064 (53,902) (24.2)% Other (4) (331) 1,602 1,868 3,482 6,621 (4,771) NM Non-Development Capital Expenditures, net (see page 13) (54,602) (66,464) (59,121) (55,610) (235,797) (60,556) (10.9)% Adjusted Free Cash Flow (46,971) (16,369) (13,575) 511 (76,404) 5,182 NM (1) Excluding non-cash stock-based compensation expense and Transaction and Organizational Restructuring Costs, see page 12. (2) Adjusted EBITDA for the first quarter of 2020 includes the $100.0 million management agreement termination fee payment received from Healthpeak related to the sale of Brookdale’s interest in the entry fee CCRC venture, which closed on January 31, 2020, and $10.0 million of direct costs, primarily consisting of acquisition of personal protective equipment (PPE), medical equipment, cleaning and disposable food service supplies, enhanced cleaning and environmental sanitation costs, and increased labor expense, incurred to prepare for and respond to the COVID-19 pandemic. Additionally, Adjusted EBITDA for the first quarter of 2020 includes a negative impact to resident fees as a result of the COVID-19 pandemic. (3) Excludes changes in prepaid insurance premiums financed with notes payable, changes in operating lease liability for lease termination and modification, and lessor capital expenditure reimbursements under operating leases. (4) Primarily consists of proceeds from property insurance and cash paid for state income taxes. 5
Adjusted EBITDA and Adjusted Free Cash Flow Distribution 1Q 2020 Senior Senior Housing Housing Owned Leased Health Care Management ($ in 000s) Total Portfolio Portfolio Services Services Other (1) Resident fee and management fee revenue $ 891,422 $ 402,397 $ 285,491 $ 94,819 $ 108,715 $ — Facility operating expense (588,482) (290,116) (194,426) (103,940) — — Combined Segment Operating Income 302,940 112,281 91,065 (9,121) 108,715 — General and administrative expense (excluding non-cash stock-based compensation expense and transaction costs) (46,657) (18,635) (13,221) (6,953) (7,848) — Cash facility operating lease payments (71,214) — (70,311) — — (903) Adjusted EBITDA (2) 185,069 93,646 7,533 (16,074) 100,867 (903) $100.0 million management termination fee (100,000) — — — (100,000) — COVID-19 expense 10,000 5,550 4,047 403 — — Adjusted EBITDA, excluding $100.0 million management termination fee and COVID-19 expense 95,069 99,196 11,580 (15,671) 867 (903) $100.0 million management termination fee 100,000 — — — 100,000 — COVID-19 expense (10,000) (5,550) (4,047) (403) — — Transaction and Organizational Restructuring Costs (1,981) — — — — (1,981) Interest expense, net (53,590) (41,763) (13,282) — — 1,455 Payment of financing lease obligations (5,087) — (4,910) — — (177) Changes in working capital (3) (53,902) — — — — (53,902) Other (4,771) — (34) — — (4,737) Non-Development Capital Expenditures, net (60,556) (36,735) (18,413) — — (5,408) Adjusted Free Cash Flow $ 5,182 $ 15,148 $ (29,106) $ (16,074) $ 100,867 $ (65,653) (1) Primarily consists of changes in working capital, transaction costs, corporate capital expenditures, cash paid for state income taxes, Transaction and Organizational Restructuring Costs, interest income, and lease payments for corporate offices and information technology systems and equipment. (2) Adjusted EBITDA for the first quarter of 2020 includes the $100.0 million management agreement termination fee payment received from Healthpeak related to the sale of Brookdale’s interest in the entry fee CCRC venture, which closed on January 31, 2020, and $10.0 million of direct costs, primarily consisting of acquisition of personal protective equipment (PPE), medical equipment, cleaning and disposable food service supplies, enhanced cleaning and environmental sanitation costs, and increased labor expense, incurred to prepare for and respond to the COVID-19 pandemic. Additionally, Adjusted EBITDA for the first quarter of 2020 includes a negative impact to resident fees as a result of the COVID-19 pandemic. (3) Excludes changes in prepaid insurance premiums financed with notes payable and lessor capital expenditure reimbursements under operating leases. 6
Senior Housing: Same Community(1) 1Q20 vs. 2019 2020 1Q19 ($ in 000s, except RevPAR and RevPOR) 1Q 2Q 3Q 4Q Full Year 1Q B(W) Revenue $ 626,156 $ 621,261 $ 623,449 $ 624,028 $2,494,894 $ 638,984 2.0 % Community Labor Expenses (273,229) (276,286) (290,100) (288,803) (1,128,418) (288,960) (5.8) % Other facility operating expenses (144,025) (145,854) (151,127) (141,734) (582,740) (149,128) (3.5) % Facility operating expenses (2) (417,254) (422,140) (441,227) (430,537) (1,711,158) (438,088) (5.0) % Same Community Operating Income $208,902 $199,121 $182,222 $193,491 $ 783,736 $200,896 (3.8) % Same Community Operating Margin 33.4% 32.1% 29.2% 31.0% 31.4% 31.4% (200) bps Total Average Units 50,314 50,323 50,333 50,336 50,327 50,336 — RevPAR $ 4,148 $ 4,115 $ 4,129 $ 4,132 $ 4,131 $ 4,231 2.0 % Weighted average unit occupancy 84.3% 83.9% 84.7% 85.0% 84.5% 83.5% (80) bps RevPOR $ 4,919 $ 4,902 $ 4,873 $ 4,863 $ 4,889 $ 5,070 3.1 % Same Community Operating Income(2)/ Weighted Average Occupancy Same Community RevPAR 85.3% 85.0% $4,231 84.7% 84.3% 83.9% 83.5% $4,148 $4,129 $4,132 $208,902 $4,115 $199,121 $200,896 $196,564 $193,491 $182,222 $4,044 4Q 2018 1Q 2019 2Q 2019 3Q 2019 4Q 2019 1Q 2020 4Q 2018 1Q 2019 2Q 2019 3Q 2019 4Q 2019 1Q 2020 (1) Same Community portfolio reflects 641 communities. (2) Excludes direct costs incurred to prepare for and respond to the COVID-19 pandemic of $9.1 million for the first quarter of 2020, and hurricane and natural disaster expense of $2.6 million for the full year 2019 and $1.4 million of related insurance recoveries for the first quarter of 2020. 7
Senior Housing Segments: Same Community (1) 1Q20 vs. 2019 2020 1Q19 ($ in 000s, except RevPAR and RevPOR) 1Q 2Q 3Q 4Q Full Year 1Q B(W) Independent Living Revenue $126,822 $126,563 $126,823 $125,521 $ 505,729 $127,943 0.9 % Community Labor Expense (44,502) (45,749) (46,499) (46,552) (183,302) (46,297) (4.0 )% Other Facility operating expense (30,823) (31,047) (31,947) (30,672) (124,489) (31,749) (3.0 )% Facility operating expense (75,325) (76,796) (78,446) (77,224) (307,791) (78,046) (3.6 )% Same Community Operating Income $ 51,497 $ 49,767 $ 48,377 $ 48,297 $ 197,938 $ 49,897 (3.1 )% Same Community Operating Margin 40.6% 39.3% 38.1% 38.5% 39.1% 39.0% (160) bps Total Average Units 11,680 11,690 11,703 11,706 11,695 11,706 0.2 % RevPAR $ 3,619 $ 3,609 $ 3,612 $ 3,574 $ 3,604 $ 3,643 0.7 % Weighted average unit occupancy 89.5% 88.8% 89.4% 88.9% 89.2% 87.3% (220) bps RevPOR $ 4,043 $ 4,063 $ 4,043 $ 4,020 $ 4,042 $ 4,174 3.2 % Assisted Living and Memory Care Revenue $437,624 $435,187 $437,602 $438,616 $1,749,029 $449,538 2.7 % Community Labor Expense (197,275) (199,026) (211,775) (210,751) (818,827) (210,556) (6.7) % Other Facility operating expense (98,116) (99,892) (103,864) (96,033) (397,905) (102,038) (4.0) % Facility operating expense (295,391) (298,918) (315,639) (306,784) (1,216,732) (312,594) (5.8) % Same Community Operating Income $142,233 $136,269 $121,963 $131,832 $ 532,297 $136,944 (3.7) % Same Community Operating Margin 32.5% 31.3% 27.9% 30.1% 30.4% 30.5% (200) bps Total Average Units 35,022 35,021 35,018 35,018 35,020 35,018 — RevPAR $ 4,165 $ 4,142 $ 4,165 $ 4,175 $ 4,162 $ 4,279 2.7 % Weighted average unit occupancy 82.6% 82.5% 83.5% 83.9% 83.1% 82.3% (30) bps RevPOR $ 5,043 $ 5,019 $ 4,989 $ 4,974 $ 5,006 $ 5,198 3.1 % CCRCs Revenue $ 61,710 $ 59,511 $ 59,024 $ 59,891 $ 240,136 $ 61,503 (0.3) % Community Labor Expense (31,452) (31,511) (31,826) (31,500) (126,289) (32,107) (2.1) % Other Facility operating expense (15,086) (14,915) (15,316) (15,029) (60,346) (15,341) (1.7) % Facility operating expense (46,538) (46,426) (47,142) (46,529) (186,635) (47,448) (2.0) % Same Community Operating Income $ 15,172 $ 13,085 $ 11,882 $ 13,362 $ 53,501 $ 14,055 (7.4) % Same Community Operating Margin 24.6% 22.0% 20.1% 22.3% 22.3% 22.9% (170) bps Total Average Units 3,612 3,612 3,612 3,612 3,612 3,612 — RevPAR $ 5,695 $ 5,492 $ 5,447 $ 5,527 $ 5,540 $ 5,676 (0.3) % Weighted average unit occupancy 84.4% 82.0% 81.8% 82.4% 82.7% 82.1% (230) bps RevPOR $ 6,749 $ 6,701 $ 6,659 $ 6,707 $ 6,704 $ 6,913 2.4 % (1) Same Community portfolio reflects 64 Independent Living communities, 563 Assisted Living and Memory Care communities, and 14 CCRC communities. 8
Senior Housing Owned Portfolio(1) 1Q20 vs. 2019 2020 1Q19 ($ in 000s, except RevPAR and RevPOR) 1Q 2Q 3Q 4Q Full Year 1Q B(W) Resident fee revenue $ 380,691 $ 375,900 $377,451 $373,793 $1,507,835 $402,397 5.7 % Facility operating expense (269,078) (271,222) (285,422) (273,557) (1,099,279) (290,116) (7.8)% Owned Portfolio Operating Income 111,613 104,678 92,029 100,236 408,556 112,281 0.6 % Additional Information Interest expense: property level and corporate debt $ (45,643) $ (45,193) $ (44,344) $ (42,538) $ (177,718) $ (41,763) 8.5 % Community level capital expenditures, net (see page 13) $ (24,967) $ (33,828) $ (33,144) $ (32,055) $ (123,994) $ (36,735) (47.1)% Number of communities (period end) 338 336 336 330 330 355 5.0 % Period end number of units 31,397 31,165 31,226 30,160 30,160 32,455 3.4 % Total Average Units 31,840 31,262 31,222 30,784 31,277 32,513 2.1 % RevPAR $ 3,969 $ 3,976 $ 3,982 $ 3,984 $ 3,978 $ 4,125 3.9 % Weighted average occupancy 82.4% 82.6% 83.2% 83.6% 83.0% 82.6% 20 bps RevPOR $ 4,815 $ 4,812 $ 4,783 $ 4,764 $ 4,794 $ 4,997 3.8 % As of March 31, 2020 Interest Coverage 1.9x Net Debt (see page 15) $ 3,392,012 (1) The Company acquired 26 communities that were previously leased during the first quarter of 2020. The results of operations of the previously leased communities are included within the Senior Housing Owned Portfolio beginning in the first quarter of 2020. Prior quarters have not been recast. 9
Senior Housing Leased Portfolio(1) 1Q20 vs. 2019 2020 1Q19 ($ in 000s, except RevPAR and RevPOR) 1Q 2Q 3Q 4Q Full Year 1Q B(W) Resident fee revenue $ 317,256 $ 311,529 $ 312,001 $ 314,050 $1,254,836 $ 285,491 (10.0)% Facility operating expense (213,657) (213,757) (223,288) (218,241) (868,943) (194,426) 9.0 % Leased Portfolio Operating Income 103,599 97,772 88,713 95,809 385,893 91,065 (12.1)% Additional Information Total cash facility lease payments on leased portfolio (see page 14) $ (93,129) $ (92,337) $ (92,337) $ (92,810) $(370,613) $ (88,503) 5.0 % Community level capital expenditures, net (see page 13) $ (18,419) $ (25,934) $ (22,162) $ (13,347) $ (79,862) $ (18,413) — % Number of communities (period end) 342 335 335 333 333 306 (10.5)% Period end number of units 24,551 24,044 24,036 24,021 24,021 21,582 (12.1)% Total Average Units 24,620 24,203 24,036 24,037 24,224 21,671 (12.0)% RevPAR $ 4,274 $ 4,254 $ 4,273 $ 4,286 $ 4,271 $ 4,384 2.6 % Weighted average unit occupancy 85.0% 84.5% 85.4% 85.6% 85.1% 84.1% (90) bps RevPOR $ 5,028 $ 5,032 $ 5,004 $ 5,005 $ 5,017 $ 5,215 3.7 % Lease Coverage as of March 31, 2020 0.87x Total operating and financing lease obligations (2) $1,961,037 (A) Total operating and financing lease obligations divided by total cash facility lease payments for the trailing twelve months ended March 31, 2020 5.8 (A/B) Trailing twelve months ended Facility Lease Maturity Information as of March 31, 2020 March 31, 2020 Initial lease maturities Community count Total units Total cash facility lease payments 2020 37 1,625 16,082 2021 2 169 1,268 2022 4 386 3,638 2023 1 103 2,092 2024 7 904 13,746 2025 122 10,323 179,276 Thereafter 133 8,072 119,426 Total 306 21,582 $ 335,528 (B) (1) The Company acquired 26 communities that were previously leased during the first quarter of 2020. The results of operations of the previously leased communities are included within the Senior Housing Owned Portfolio beginning in the first quarter of 2020. Prior quarters have not been recast. (2) Amount recognized on consolidated balance sheet reflects discounted future minimum lease payments and the residual value for financing lease obligations. Excludes operating lease obligations related to certain non-facility leases for which the related lease expense is included in Adjusted EBITDAR and corporate office and information technology leases. 10
Health Care Services 1Q20 vs. 2019 2020 1Q19 ($ in 000s) 1Q 2Q 3Q 4Q Full Year 1Q B(W) Resident fee revenue Home health $ 84,185 $ 85,233 $ 80,632 $ 77,440 $ 327,490 $ 65,948 (21.7)% Hospice 21,722 23,184 25,258 26,062 96,226 23,182 6.7 % Outpatient Therapy 5,625 6,017 5,895 6,007 23,544 5,689 1.1 % Segment resident fee revenue 111,532 114,434 111,785 109,509 447,260 94,819 (15.0)% Facility operating expense (103,359) (105,267) (107,007) (106,640) (422,273) (103,940) (0.6)% Segment Operating Income (Loss) $ 8,173 $ 9,167 $ 4,778 $ 2,869 $ 24,987 $ (9,121) NM Segment Operating Margin 7.3% 8.0% 4.3 % 2.6 % 5.6 % (9.6)% NM Additional Information Home health average daily census 15,904 15,966 15,357 14,618 15,457 14,020 (11.8)% Hospice average daily census 1,428 1,540 1,642 1,704 1,580 1,698 18.9 % 11
G&A Expense 1Q20 vs. Consolidated, unless otherwise noted 2019 2020 1Q19 ($ in 000s) 1Q 2Q 3Q 4Q Full Year 1Q B(W) G&A expense allocations (1) Senior Housing Owned Portfolio allocation $ 15,693 $ 16,875 $ 15,759 $ 13,553 $ 61,880 $ 18,635 (18.7)% Senior Housing Leased Portfolio allocation 13,078 13,986 13,027 11,387 51,478 13,221 (1.1%) Health Care Services allocation 7,077 6,730 6,385 5,439 25,631 6,953 1.8% Management Services allocation 13,646 13,321 11,399 8,901 47,267 7,848 42.5% Subtotal G&A expense allocations 49,494 50,912 46,570 39,280 186,256 46,657 5.7% Non-cash stock-based compensation expense 6,356 6,030 5,929 4,711 23,026 5,957 6.3% Transaction and Organizational Restructuring Costs 461 634 3,910 5,002 10,007 1,981 NM General and administrative expense $ 56,311 $ 57,576 $ 56,409 $ 48,993 $ 219,289 $ 54,595 3.0 % 1Q20 vs. 2019 2020 1Q19 1Q 2Q 3Q 4Q Full Year 1Q B(W) Resident fee revenue $ 809,479 $ 801,863 $ 801,237 $ 797,352 $3,209,931 $ 782,707 (3.3)% Resident fee revenue under management (2) 321,952 294,114 275,796 259,437 1,151,299 184,145 (42.8)% Total (consolidated and under management) $1,131,431 $1,095,977 $1,077,033 $1,056,789 $4,361,230 $ 966,852 (14.5)% Allocated G&A Expense as a Percentage of Resident Fee Revenue (Consolidated and Under Management) G&A expense (excluding non-cash stock- based compensation expense and Transaction and Organizational Restructuring Costs) 4.4 % 4.6 % 4.3 % 3.7 % 4.3 % 4.8 % (40) bps Non-cash stock-based compensation expense 0.6 % 0.6 % 0.6 % 0.4 % 0.5 % 0.6 % - G&A expense (excluding Transaction and Organizational Restructuring Costs) 5.0 % 5.2 % 4.9 % 4.1 % 4.8 % 5.5 % (50) bps Transaction and Organizational Restructuring Costs — % 0.1 % 0.4 % 0.5 % 0.2 % 0.2 % (20) bps G&A expense (including non-cash stock- based compensation expense and Transaction and Organizational Restructuring Costs) 5.0% 5.3% 5.2% 4.6% 5.0% 5.6% (60) bps (1) G&A allocations are calculated using a methodology which the Company believes 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 Transaction and Organizational Restructuring Costs. (2) Not included in consolidated reported amounts. 12
Capital Expenditures 1Q20 vs. 2019 2020 1Q19 ($ in 000s, except for community level capital expenditures, net, per weighted average unit) 1Q 2Q 3Q 4Q Full Year 1Q B(W) Community level capital expenditures, including allocations Senior Housing Owned Portfolio $ 24,967 $ 33,828 $ 33,144 $ 32,055 $ 123,994 $ 36,735 (47.1) % Senior Housing Leased Portfolio 18,419 25,934 22,162 13,347 79,862 18,413 — % Community level capital expenditures, net (A) 43,386 59,762 55,306 45,402 203,856 55,148 (27.1) % Corporate capital expenditures (includes Health Care Services) 11,216 6,702 3,815 10,208 31,941 5,408 51.8 % Non-Development Capital Expenditures, net 54,602 66,464 59,121 55,610 235,797 60,556 (10.9) % Development Capital Expenditures, net 5,269 5,354 8,054 5,918 24,595 3,900 26.0 % Total capital expenditures, net $ 59,871 $ 71,818 $ 67,175 $ 61,528 $260,392 $64,456 (7.7) % Lessor reimbursements: non-development capital expenditures — 1,000 11,043 22,766 34,809 5,827 Change in related payables 184 (10,576) 5,870 13,413 8,891 (898) Total cash paid for capital expenditures $ 60,055 $ 62,242 $ 84,088 $ 97,707 $304,092 $69,385 (15.5) % Senior Housing Total Average Units (B) 56,460 55,465 55,258 54,821 55,501 54,184 (4.0) % Community level capital expenditures, net, per weighted average unit (A/B) $ 768 $ 1,077 $ 1,001 $ 828 $ 3,673 $ 1,018 (32.6) % 13
Cash Facility Lease Payments 1Q20 vs. 2019 2020 1Q19 ($ in 000s) 1Q 2Q 3Q 4Q Full Year 1Q B(W) Operating Lease Obligations Facility lease expense $ 68,668 $ 67,689 $ 67,253 $ 66,056 $ 269,666 $ 64,481 Operating lease expense adjustment 4,383 4,429 4,814 5,827 19,453 6,733 Cash facility operating lease payments $ 73,051 $ 72,118 $ 72,067 $ 71,883 $ 289,119 $ 71,214 2.5 % Financing Lease Obligations Interest expense: financing lease obligations $ 16,743 $ 16,649 $ 16,567 $ 16,394 $ 66,353 $ 13,282 Payment of financing lease obligations 5,453 5,500 5,549 5,740 22,242 5,087 Cash financing lease payments $ 22,196 $ 22,149 $ 22,116 $ 22,134 $ 88,595 $ 18,369 17.2 % Total cash facility lease payments (1) $ 95,247 $ 94,267 $ 94,183 $ 94,017 $377,714 $ 89,583 5.9 % Interest Expense Reconciliation to Income Statement Interest expense: financing lease obligations $ 16,743 $ 16,649 $ 16,567 $ 16,394 $ 66,353 $ 13,282 20.7 % Interest income (3,084) (2,813) (2,162) (1,800) (9,859) (1,455) (52.8)% Interest expense: debt $ 45,643 $ 45,193 $ 44,344 $ 42,538 $ 177,718 $ 41,763 8.5 % Interest expense, net $ 59,302 $ 59,029 $ 58,749 $ 57,132 $ 234,212 $ 53,590 9.6 % Amortization of deferred financing costs and debt premium (discount) 979 986 1,167 1,138 4,270 1,315 Interest income 3,084 2,813 2,162 1,800 9,859 1,455 Interest expense per income statement $ 63,365 $ 62,828 $ 62,078 $ 60,070 $248,341 $ 56,360 11.1 % (1) Includes cash lease payments for leases of corporate offices and information technology systems and equipment. 14
Capital Structure Total Liquidity Debt Structure (1) Debt ($ in millions) ($ in millions) ($ in millions) Maturity Weighted Rate Variable rate debt with 2020 $ 70 4.45% interest rate caps 2021 333 5.98% $600 $530 $536 Fixed rate 2022 350 4.14% $479 $481 $455 debt $1,266 2023 230 4.19% ) s n $400 o $2,330 i l 34% l $340 i 2024 295 4.40% $309 M $315 ( $291 $501 63% $ Thereafter 2,450 4.05% $200 Total $ 3,728 4.28% $190 $164 $164 $172 $132 Variable rate (1) Includes the carrying value of mortgage debt and $0 $35 3% debt - unhedged other notes payable of which 96.7%, or $3.6 billion, 03/31/2019 06/30/2019 09/30/2019 12/31/2019 03/31/2020 represented non-recourse property-level mortgage As of March 31, 2020 financings. Excludes the Company's line of credit balance of $166.4 million as of March 31, 2020. Line of credit available to draw Weighted Rate Fixed rate debt 4.61% (2) Reflects market rates as of March 31, 2020 and (2) applicable cap rates for hedged debt. Cash and cash equivalents and marketable securities Variable rate debt 3.72% Total debt 4.28% (3) Leverage ratios include results of operations of communities disposed of through the disposition date. (3) Leverage Ratios (4) Excludes $16.7 million of the non-recurring, non-cash ($ in 000s) impact of ASC 842 for 2019 periods (see page 22), and includes $100.0 million management agreement Annualized termination fee and $10.0 million of direct costs Trailing Twelve Months Ended March 31, 2020 Leverage incurred to prepare for and respond to the COVID-19 pandemic. Adjusted EBITDAR (4) (A) $ 773,611 Cash facility operating lease payments (see page 14) (287,282) (5) Excludes operating lease obligations related to (4) certain non-facility leases for which the related lease Adjusted EBITDA 486,329 expense is included in Adjusted EBITDAR. Cash financing lease payments (see page 14) (84,768) Important Note Regarding Non-GAAP Financial (4) Adjusted EBITDA after cash financing lease payments (B) $ 401,561 Measures. Adjusted EBITDAR, Adjusted EBITDA, Adjusted EBITDA after cash financing lease payments, Net Debt, and As of March 31, 2020 Adjusted Net Debt are financial measures that are not Debt $ 3,727,556 calculated in accordance with GAAP. See “Definitions” and “Non-GAAP Financial Measures” for the definitions of such Line of credit 166,381 measures and other important information regarding such Cash and cash equivalents (392,674) measures, including reconciliations to the most Marketable securities (108,039) comparable GAAP measures. Restricted cash held as collateral against existing debt (1,212) Net Debt (C) 3,392,012 8.4x (C/B) Operating and financing lease obligations (5) 1,990,362 Adjusted Net Debt (D) $ 5,382,374 7.0x (D/A) 15
Definitions Adjusted EBITDA is a non-GAAP performance measure that the Company defines as net Lease Coverage is calculated based on the trailing-twelve months Leased Portfolio income (loss) excluding: benefit/provision for income taxes, non-operating income/ Operating Income, excluding resident fee revenue and facility operating expense of expense items, and depreciation and amortization; and further adjusted to exclude communities disposed during such period adjusted for an implied 5% management fee income/expense associated with non-cash, non-operational, transactional, cost and capital expenditures at $350/unit, divided by the trailing-twelve months cash facility reduction or organizational restructuring items that management does not consider as lease payments for both operating leases and financing leases, excluding cash lease part of the Company’s underlying core operating performance and that management payments for leases of communities disposed during such period, corporate offices, and believes impact the comparability of performance between periods. For the periods information technology systems and equipment, vehicles and other equipment. For any presented herein, such other items include non-cash impairment charges, gain/loss on trailing-twelve month period that includes one or more periods from 2019, an adjustment facility lease termination and modification, operating lease expense adjustment, was made to exclude the 2019 impact of applying the lease accounting standard under amortization of deferred gain, change in future service obligation, non-cash stock-based ASC 842 for residency agreements. compensation expense, and Transaction and Organizational Restructuring Costs. Leased Portfolio Operating Income is defined by the Company as resident fee revenue Adjusted EBITDAR is a non-GAAP financial measure that the Company defines as (excluding Health Care Services segment revenue), less facility operating expense for the Adjusted EBITDA before cash facility operating lease payments. Company’s Senior Housing Leased Portfolio. Leased Portfolio Operating Income does not include general and administrative expense (unless otherwise noted) or depreciation Adjusted Free Cash Flow is a non-GAAP liquidity measure that the Company defines as and amortization. net cash provided by (used in) operating activities before: distributions from unconsolidated ventures from cumulative share of net earnings, changes in prepaid Net Debt is a non-GAAP financial measure that the Company defines as the total of its insurance premiums financed with notes payable, changes in operating lease liability for debt (mortgage debt and other notes payable) and the outstanding balance on the line lease termination and modification, cash paid/received for gain/loss on facility lease of credit, less unrestricted cash, marketable securities, and cash held as collateral against termination and modification, and lessor capital expenditure reimbursements under existing debt. operating leases; plus: property insurance proceeds and proceeds from refundable entrance fees, net of refunds; less: Non-Development Capital Expenditures and payment NM means not meaningful. of financing lease obligations. Non-Development Capital Expenditures is comprised of corporate and community- Adjusted Net Debt is a non-GAAP financial measure that the Company defines as Net level capital expenditures, including those related to maintenance, renovations, Debt, plus operating and financing lease obligations. Operating and financing lease upgrades, and other major building infrastructure projects for the Company’s obligations exclude operating lease obligations related to certain non-facility leases for communities. Non-Development Capital Expenditures does not include capital which the related lease expense is included in Adjusted EBITDAR. expenditures for community expansions, major community redevelopment and repositioning projects, and the development of new communities (i.e., Development Combined Segment Operating Income is defined by the Company as resident fee and Capital Expenditures). Amounts of Non-Development Capital Expenditures are presented management fee revenue of the Company, less facility operating expense. Combined net of lessor reimbursements. Segment Operating Income does not include general and administrative expense or depreciation and amortization. Owned Portfolio Operating Income is defined by the Company as resident fee revenue (excluding Health Care Services segment revenue), less facility operating expense for the Community Labor Expense is a component of facility operating expense that includes Company’s Senior Housing Owned Portfolio. Owned Portfolio Operating Income does regular and overtime salaries and wages, bonuses, paid-time-off and holiday wages, not include general and administrative expense or depreciation and amortization. payroll taxes, contract labor, employee benefits, and workers compensation. Development Capital Expenditures means capital expenditures for community RevPAR, or average monthly senior housing resident fee revenue per available unit, is expansions, major community redevelopment and repositioning projects, and the defined by the Company as resident fee revenue for the corresponding portfolio for the development of new communities. Amounts of Development Capital Expenditures are period (excluding Health Care Services segment revenue and entrance fee amortization, presented net of lessor reimbursements. and, for the 2019 periods, the additional resident fee revenue recognized as a result of Interest Coverage is calculated based on the trailing-twelve months Owned Portfolio the application of the lease accounting standard under ASC 842), divided by the weighted Operating Income adjusted for an implied 5% management fee and capital expenditures average number of available units in the corresponding portfolio for the period, divided at $350/unit, divided by the trailing-twelve months property level and corporate debt by the number of months in the period. interest expense. For any trailing-twelve month period that includes one or more periods from 2019, an adjustment was made to exclude the 2019 impact of applying the lease accounting standard under ASC 842 for residency agreements. 16
Definitions RevPOR, or average monthly senior housing resident fee revenue per occupied unit, is Segment Operating Income (Loss) is defined by the Company as segment revenue less defined by the Company as resident fee revenue for the corresponding portfolio for the segment facility operating expense. Segment Operating Income (Loss) does not include period (excluding Health Care Services segment revenue and entrance fee amortization, general and administrative expense or depreciation and amortization. Management and, for the 2019 periods, the additional resident fee revenue recognized as a result of Services Segment Operating Income excludes revenue for reimbursements for which the the application of the lease accounting standard under ASC 842), divided by the weighted Company is the primary obligor of costs incurred on behalf of managed communities, average number of occupied units in the corresponding portfolio for the period, divided and there is no facility operating expense associated with the Management Services by the number of months in the period. segment. See the Segment Information note to the Company’s consolidated financial statements for more information regarding the Company’s segments. Same Community information reflects operating results and data of a consistent population of communities by excluding the impact of changes in the composition of Senior Housing Leased Portfolio represents Brookdale leased communities and does our portfolio of communities. The operating results exclude hurricane and natural disaster not include owned or managed communities. expense and related insurance recoveries, exclude direct costs incurred to prepare for and respond to the COVID-19 pandemic, and for the 2019 periods, exclude the additional Senior Housing Operating Income is defined by the Company as segment revenue less resident fee revenue and facility operating expense recognized as a result of the segment facility operating expense for the Company’s Independent Living, Assisted application of the lease accounting standard ASC 842. We define our same community Living and Memory Care, and CCRCs segments on an aggregate basis. Senior Housing portfolio as communities consolidated and operational for the full period in both Operating Income does not include general and administrative expense or depreciation comparison years. Consolidated communities excluded from the same community and amortization. portfolio include communities acquired or disposed of since the beginning of the prior year, communities classified as assets held for sale, certain communities planned for Senior Housing Owned Portfolio represents Brookdale owned communities and does disposition, certain communities that have undergone or are undergoing expansion, not include leased or managed communities. redevelopment, and repositioning projects, certain communities that have expansion, Total Average Units represents the average number of units operated during the period. redevelopment, and repositioning projects that are anticipated to be under construction in the current year, and certain communities that have experienced a casualty event that Transaction and Organizational Restructuring Costs are general and administrative significantly impacts their operations. expenses. Transaction costs include those directly related to acquisition, disposition, financing, and leasing activity, the Company’s assessment of options and alternatives to Same Community Operating Income is defined by the Company as resident fee revenue enhance stockholder value, and stockholder relations advisory matters, and are primarily (excluding Health Care Services segment revenue and, for the 2019 periods, the additional comprised of legal, finance, consulting, professional fees, and other third party costs. resident fee revenue recognized as a result of application of the lease accounting standard Organizational restructuring costs include those related to the Company’s efforts to under ASC 842), less facility operating expense (excluding hurricane and natural disaster reduce general and administrative expense and its senior leadership changes, including expense and related insurance recoveries, direct costs incurred to prepare for and severance and retention costs. respond to the COVID-19 pandemic, and for the 2019 periods, the additional facility operating expense recognized as a result of application of the lease accounting standard under ASC 842) for the Company's Same Community portfolio. Same Community Operating Income does not include general and administrative expense or depreciation and amortization. 17
Appendices Pro-Forma Financial Information 19 Lease Accounting Standard (ASC 842) Impact 22 Non-GAAP Financial Measures 23 18
Pro-Forma Financial Information During the period of April 1, 2019 to March 31, 2020, the Company acquired 26 formerly leased communities and financed the acquisitions with $251.9 million of non-recourse mortgage debt, modified the terms of the amended and restated master lease with Healthpeak, sold its equity interest in the unconsolidated entrance fee CCRC Venture, disposed of an aggregate of nine owned communities, terminated triple-net lease obligations on an aggregate of ten communities, and transitioned management agreements on 84 net communities. During the next approximately 12 months, the Company additionally expects: • to close on the dispositions of two owned communities classified as held for sale as of March 31, 2020 • termination of its triple-net lease obligations on two communities for which it has provided notice of nonrenewal • termination of certain of its management arrangements, including management arrangements on certain former unconsolidated ventures in which the Company sold its interest, management arrangements on communities owned by unconsolidated ventures, and interim management arrangements on formerly leased communities. The pro-forma results on the following pages summarize the Company’s actual consolidated results excluding the impact of the lease standard adopted in 2019 and the impact of transactions as follows: • The pro-forma table for the twelve months ended March 31, 2020 on page 20 reflects the Company’s actual consolidated results excluding the non-recurring, non-cash impact of the lease standard adopted in 2019 for the nine months ended December 31, 2019 and the impact on those results assuming that the foregoing completed and expected transactions had closed on March 31, 2019. • The pro-forma table for the first quarter of 2020 table on page 21 reflects the Company’s actual consolidated results excluding the impact on those results assuming that the foregoing completed and expected transactions had closed on December 31, 2019. The pro-forma results on the following pages do not include adjustments for: • Communities for which the Company has exercised its right to direct Ventas Inc. ("Ventas") to market for sale and, subject to Ventas' receipt of an agreed upon sale price on or before December 31, 2020 and the other customary closing conditions, would be removed from the Master Lease and Security Agreement between the Company and Ventas. • The Company's option to cause terminations of leases upon the sale by Welltower Inc. of communities with an aggregate of base rent of up to $5 million. The closings of the various pending and expected transactions described above are, or will be, subject to the satisfaction of various conditions, including (where applicable) the receipt of regulatory approvals; however, there can be no assurance that the transactions will close or, if they do, when the actual closings will occur. 19
Pro-Forma Trailing Twelve Months Amounts Attributable Actual Results Amounts Attributable Less: Impact of Actual Results Trailing Twelve to Transactions Net of Amounts to Transactions Lease Standard Net of Amounts Months Ended Completed on Attributable to Completed or Expected Adopted on Attributable to the Lease March 31, 2020 or before Completed to be Completed after January 1, 2019 on Standard and Completed Consolidated Actual Results March 31, 2020 Transactions March 31, 2020 Actual Results(1) and Pending Transactions ($ in 000s) (A) (B) (A+B) (C) (D) (A+B+C+D=E) Senior Housing weighted average units operated 54,932 (947) 53,985 (536) — 53,449 Senior Housing revenue $ 2,752,612 $ (37,085) $ 2,715,527 $ (30,241) $ (23,640) $ 2,661,646 Health Care Services revenue 430,547 — 430,547 — — 430,547 Management fee revenue 150,080 (122,884) 27,196 (7,547) — 19,649 Resident fee and management fee revenue 3,333,239 (159,969) 3,173,270 (37,788) (23,640) 3,111,842 Facility operating expense (2,392,883) 37,518 (2,355,365) 33,363 40,314 (2,281,688) General and administrative expense (2) (183,419) 3,750 (179,669) — — (179,669) Cash facility operating lease payments (287,282) 9,772 (277,510) 2,309 — (275,201) Adjusted EBITDA (3) 469,655 (108,929) 360,726 (2,116) 16,674 375,284 $100.0 million management termination fee (100,000) 100,000 — — — — COVID-19 expense 10,000 — 10,000 — — 10,000 Adjusted EBITDA, excluding $100.0 million management termination fee and COVID-19 expense 379,655 (8,929) 370,726 (2,116) 16,674 385,284 $100.0 million management termination fee 100,000 (100,000) — — — — COVID-19 expense (10,000) — (10,000) — — (10,000) Transaction and Organizational Restructuring Costs (11,527) — (11,527) — — (11,527) Interest expense, net (228,500) 10,188 (218,312) 913 — (217,399) Payment of financing lease obligations (21,876) 4,025 (17,851) — — (17,851) Changes in working capital (4) 7,567 — 7,567 — (16,674) (9,107) Other 2,181 (230) 1,951 — — 1,951 Non-Development Capital Expenditures, net (241,751) 7,225 (234,526) 5,934 — (228,592) Adjusted Free Cash Flow $ (24,251) $ (87,721) $ (111,972) $ 4,731 $ — $ (107,241) Cash facility operating and financing lease payments $ 372,050 $ (30,432) $ 341,618 $ (2,309) $ — $ 339,309 (1) See page 22 for more information on the non-recurring, non-cash impact of the lease standard adopted on January 1, 2019. Actual results include the impact of the lease accounting standard effective January 1, 2019. (2) Excludes non-cash stock-based compensation expense and Transaction and Organizational Restructuring Costs. Brookdale scales general and administrative expense following disposal of communities. This is reflected in actual results as they occur, with the exception of an estimate of the scaling as a result of the transactions with Healthpeak which is included in column B. (3) Adjusted EBITDA for the first quarter of 2020 includes the $100.0 million management agreement termination fee payment received from Healthpeak related to the sale of Brookdale’s interest in the entry fee CCRC venture, which closed on January 31, 2020, and $10.0 million of direct costs, primarily consisting of acquisition of personal protective equipment (PPE), medical equipment, cleaning and disposable food service supplies, enhanced cleaning and environmental sanitation costs, and increased labor expense, incurred to prepare for and respond to the COVID-19 pandemic. Additionally, Adjusted EBITDA for the first quarter of 2020 includes a negative impact to resident fees as a result of the COVID-19 pandemic. (4) The pro-forma adjustments do not include assumptions on the impact to changes in working capital. Actual Results Less Amounts Attributable Pro-forma (from column E above) Senior Housing Owned Senior Housing Leased Health Care Services and to Completed and Pending Transactions Owned and Leased Specifically Identifiable Information, and Other Portfolio Portfolio Other (from column E above) Weighted average units operated 32,014 21,435 — 53,449 Senior Housing and Health Care Services revenue $ 1,549,951 $ 1,111,695 $ 430,547 $ 3,092,193 Facility operating expense $ (1,103,967) $ (754,867) $ (422,854) $ (2,281,688) Total cash facility lease payments and interest expense, net $ (179,372) $ (333,246) $ 2,167 $ (510,451) Non-Development Capital Expenditures, net $ (141,076) $ (61,383) $ (26,133) $ (228,592) 20
Pro-Forma First Quarter 2020 Actual Results Amounts Net of Amounts Amounts Attributable Attributable to Attributable to Actual Results Transactions the Lease Transactions Net of Amounts Completed or Standard and Completed Attributable to Expected to be Completed and 1Q 2020 Actual during Completed Completed after Pending Consolidated Results 1Q20 Transactions March 31, 2020 Transactions ($ in 000s) (A) (B) (A+B) (C) (A+B+C) Senior Housing weighted average units operated 54,184 (154) 54,030 (574) 53,456 Senior Housing revenue $ 687,888 $ (1,208) $ 686,680 $ (7,490) $ 679,190 Health Care Services revenue 94,819 — 94,819 — 94,819 Management fee revenue 108,715 (101,820) 6,895 (1,900) 4,995 Resident fee and management fee revenue 891,422 (103,028) 788,394 (9,390) 779,004 Facility operating expense (588,482) 1,191 (587,291) 8,296 (578,995) General and administrative expense (1) (46,657) — (46,657) — (46,657) Cash facility operating lease payments (71,214) 939 (70,275) 451 (69,824) Adjusted EBITDA (2) (3) 185,069 (100,898) 84,171 (643) 83,528 $100.0 million management termination fee (100,000) 100,000 — — — COVID-19 expense 10,000 — 10,000 — 10,000 Adjusted EBITDA, excluding $100.0 million management termination fee and COVID-19 expense 95,069 (898) 94,171 (643) 93,528 $100.0 million management termination fee 100,000 (100,000) — — — COVID-19 expense (10,000) — (10,000) — (10,000) Transaction and Organizational Restructuring Costs (1,981) — (1,981) — (1,981) Interest expense, net (53,590) 661 (52,929) 228 (52,701) Payment of financing lease obligations (5,087) 458 (4,629) — (4,629) Changes in working capital (3) (53,902) — (53,902) — (53,902) Other (4,771) — (4,771) — (4,771) Non-Development Capital Expenditures, net (60,556) 58 (60,498) 1,082 (59,416) Adjusted Free Cash Flow $ 5,182 $ (99,721) $ (94,539) $ 667 $ (93,872) (1) Excludes non-cash stock-based compensation expense and Transaction and Organizational Restructuring Costs. Brookdale scales general and administrative expense following disposal of communities. This is reflected in actual results as they occur. (2) Adjusted EBITDA for the first quarter of 2020 includes the $100.0 million management agreement termination fee payment received from Healthpeak related to the sale of Brookdale’s interest in the entry fee CCRC venture, which closed on January 31, 2020, and $10.0 million of direct costs, primarily consisting of acquisition of personal protective equipment (PPE), medical equipment, cleaning and disposable food service supplies, enhanced cleaning and environmental sanitation costs, and increased labor expense, incurred to prepare for and respond to the COVID-19 pandemic. Additionally, Adjusted EBITDA for the first quarter of 2020 includes a negative impact to resident fees as a result of the COVID-19 pandemic. (3) The pro-forma adjustments do not include assumptions on the impact to changes in working capital. 21
2019 Lease Accounting Standard (ASC 842) Impact The Company’s adoption of the lease accounting standard, effective January 1, 2019, impacted the timing of the revenue and cost recognition associated with its residency agreements. For the full year 2019, the impact of the adoption and application to its residency agreements had a negative, non-recurring net impact of $23.1 million to net income (loss) and Adjusted EBITDA, with no impact to net cash provided by (used in) operating activities or Adjusted Free Cash Flow. To aid in comparability between periods, the following presentations in this Supplement exclude the negative, non-recurring net impact of adoption of the lease accounting standard: (i) the Company’s results on a Same Community basis, (ii) RevPAR and RevPOR (other than as noted on this page), (iii) Interest Coverage, (iv) Lease Coverage, and (v) annualized leverage. All other presentations of the Company's 2019 results in this Supplement include the impact of the lease accounting standard effective January 1, 2019. The following table presents the impact of adoption of the lease accounting standard to the Company’s quarterly and full year 2019 results from its application to the Company's residency agreements and costs related thereto for the senior housing portfolio. For the quarterly impact of the adoption for each senior housing segment, see the supplemental information furnished as Exhibit 99.2 to the Current Reports on Form 8-K filed with the SEC on May 6, 2019, August 5, 2019, November 5, 2019, and February 18, 2020. 1Q 2019 2Q 2019 Q3 2019 4Q 2019 Full Year 2019 Assisted Total Senior Total Senior Total Senior Total Senior Total Senior Independent Living and ($ in 000s, except RevPAR and RevPOR) Housing Housing Housing Housing Housing Living Memory Care CCRCs Resident fee revenue $ 2,780 $ 5,299 $ 7,958 $ 10,383 $ 26,420 $ 8,725 $ 14,686 $ 3,009 Facility operating expense 9,210 11,826 13,955 14,533 49,524 12,661 31,560 5,303 Net income (loss) and Adjusted EBITDA (6,430) (6,527) (5,997) (4,150) (23,104) (3,936) (16,874) (2,294) Foregoing impact is offset within working capital 6,430 6,527 5,997 4,150 23,104 3,936 16,874 2,294 Adjusted Free Cash Flow $ — $ — $ — $ — $ — $ — $ — $ — RevPAR - Including impact of ASC 842 $ 4,118 $ 4,129 $ 4,157 $ 4,180 $ 4,146 $ 3,638 $ 4,139 $ 5,161 RevPAR - Excluding impact of ASC 842 4,102 4,097 4,109 4,116 4,106 3,580 4,106 5,123 RevPOR - Including impact of ASC 842 $ 4,929 $ 4,948 $ 4,937 $ 4,946 $ 4,940 $ 4,080 $ 5,012 $ 6,346 RevPOR - Excluding impact of ASC 842 4,909 4,909 4,880 4,871 4,893 4,014 4,971 6,298 22
Non-GAAP Financial Measures This Supplemental Information contains the financial measures Adjusted EBITDA, Adjusted EBITDAR, Adjusted EBITDA after cash financing lease payments, Adjusted Free Cash Flow, Net Debt, and Adjusted Net Debt (each as defined in the “Definitions” section), which are not calculated in accordance with U.S. GAAP ("GAAP"). Presentations of these non-GAAP financial measures are intended to aid investors in better understanding the factors and trends affecting the Company’s performance and liquidity. However, investors should not consider these non-GAAP financial measures as a substitute for financial measures determined in accordance with GAAP, including net income (loss), income (loss) from operations, net cash provided by (used in) operating activities, short-term debt, long-term debt less current portion, or current portion of long-term debt. Investors are cautioned that amounts presented in accordance with the Company’s definitions of these non-GAAP financial measures may not be comparable to similar measures disclosed by other companies because not all companies calculate non-GAAP measures in the same manner. Investors are urged to review the reconciliations set forth in this Appendix of these non-GAAP financial measures from the most comparable financial measures determined in accordance with GAAP and to review the information under “Reconciliations of Non-GAAP Financial Measures” in the Company’s earnings release dated May 5, 2020 for additional information regarding the Company’s use and the limitations of such non-GAAP financial measures. 23
Non-GAAP Financial Measures (continued) Adjusted EBITDA Reconciliation 2019 2020 Trailing Twelve Months Ended ($ in 000s) 1Q 2Q 3Q 4Q Full Year 1Q March 31, 2020 Net income (loss) $ (42,606) $ (56,055) $ (78,508) $ (91,323) $(268,492) $369,497 $ 143,611 Provision (benefit) for income taxes 679 633 (1,800) (1,781) (2,269) (15,828) (18,776) Equity in (earnings) loss of unconsolidated ventures 526 991 2,057 970 4,544 1,008 5,026 Loss (gain) on debt modification and extinguishment, net 67 2,672 2,455 53 5,247 (19,181) (14,001) Loss (gain) on sale of assets, net 702 (2,846) (579) (4,522) (7,245) (372,839) (380,786) Other non-operating (income) loss (2,988) (3,199) (3,763) (4,815) (14,765) (2,662) (14,439) Interest expense 63,365 62,828 62,078 60,070 248,341 56,360 241,336 Interest income (3,084) (2,813) (2,162) (1,800) (9,859) (1,455) (8,230) Income (loss) from operations 16,661 2,211 (20,222) (43,148) (44,498) 14,900 (46,259) Depreciation and amortization 96,888 94,024 93,550 94,971 379,433 90,738 373,283 Asset impairment 391 3,769 2,094 43,012 49,266 78,226 127,101 Loss (gain) on facility lease termination and modification, net 209 1,797 — 1,382 3,388 — 3,179 Operating lease expense adjustment (4,383) (4,429) (4,814) (5,827) (19,453) (6,733) (21,803) Non-cash stock-based compensation expense 6,356 6,030 5,929 4,711 23,026 5,957 22,627 Transaction and Organizational Restructuring Costs 461 634 3,910 5,002 10,007 1,981 11,527 Adjusted EBITDA (1) (2) $ 116,583 $ 104,036 $ 80,447 $ 100,103 $ 401,169 $ 185,069 $ 469,655 $100.0 million management termination fee — — — — — (100,000) (100,000) COVID-19 expense — — — — — 10,000 10,000 Adjusted EBITDA, excluding $100.0 million management termination fee and COVID-19 expense $ 116,583 $ 104,036 $ 80,447 $ 100,103 $ 401,169 $ 95,069 $ 379,655 (1) The 2019 periods presented include the non-recurring, non-cash impact of the adoption of the lease accounting standard effective January 1, 2019. See page 22 for additional information. (2) Adjusted EBITDA for the first quarter of 2020 includes the $100.0 million management agreement termination fee payment received from Healthpeak related to the sale of Brookdale’s interest in the entry fee CCRC venture, which closed on January 31, 2020, and $10.0 million of direct costs, primarily consisting of acquisition of personal protective equipment (PPE), medical equipment, cleaning and disposable food service supplies, enhanced cleaning and environmental sanitation costs, and increased labor expense, incurred to prepare for and respond to the COVID-19 pandemic. Additionally, Adjusted EBITDA for the first quarter of 2020 includes a negative impact to resident fees as a result of the COVID-19 pandemic. 24
Non-GAAP Financial Measures (continued) Adjusted EBITDAR; Adjusted EBITDA; and Adjusted EBITDA after Cash Financing Lease Payments Reconciliations (1) Trailing Twelve Months Ended ($ in 000s) March 31, 2020 Net income (loss) $ 143,611 Provision (benefit) for income taxes (18,776) Equity in (earnings) loss of unconsolidated ventures 5,026 Loss (gain) on debt modification and extinguishment, net (14,001) Loss (gain) on sale of assets, net (380,786) Other non-operating (income) loss (14,439) Interest expense 241,336 Interest income (8,230) Income (loss) from operations (46,259) Depreciation and amortization 373,283 Asset impairment 127,101 Loss (gain) on facility lease termination and modification, net 3,179 Facility lease expense 265,479 Non-cash stock-based compensation expense 22,627 Transaction and Organizational Restructuring Costs 11,527 Impact from lease standard 16,674 Adjusted EBITDAR (excluding the lease standard impact) $ 773,611 Facility lease expense (265,479) Straight-line lease expense (income) (21,803) Adjusted EBITDA (excluding the lease standard impact) $ 486,329 Interest expense: financing lease obligations (62,892) Payment of financing lease obligations (21,876) Adjusted EBITDA after cash financing lease payments (excluding the lease standard impact) $ 401,561 (1) Excludes $16.7 million of the non-cash, non-recurring impact of the adoption of the lease accounting standard effective January 1, 2019 for the period from April 1, 2019 through December 31, 2019. See page 22 for additional information. 25
Non-GAAP Financial Measures (continued) Net Debt and Adjusted Net Debt Reconciliations ($ in 000s) As of March 31, 2020 Long-term debt (including current portion) $ 3,727,556 Line of credit 166,381 Cash and cash equivalents (392,674) Marketable securities (108,039) Cash held as collateral against existing debt (1,212) Net Debt 3,392,012 Operating and financing lease obligations 2,038,198 Operating lease obligations related to certain non-facility leases for which the related lease expense is included in Adjusted EBITDAR (47,836) Adjusted Net Debt $ 5,382,374 Adjusted Net Debt to Adjusted EBITDAR 7.0x Net Debt to Adjusted EBITDA after cash financing lease payments 8.4x Operating and financing lease obligations $ 2,038,198 Operating lease obligations related to certain non-facility leases for which the related lease expense is included in Adjusted EBITDAR (47,836) Operating lease obligations related to corporate office and information technology leases $ (29,325) Operating and financing lease obligations for Senior Housing Leased Portfolio $ 1,961,037 26
Non-GAAP Financial Measures (continued) Adjusted Free Cash Flow Reconciliation 2019 2020 Trailing Twelve Months Ended ($ in 000s) 1Q 2Q 3Q 4Q Full Year 1Q March 31, 2019 Net cash provided by (used in) operating activities $ (5,009) $ 64,128 $ 69,211 $ 88,082 $ 216,412 $ 57,479 $ 278,900 Net cash provided by (used in) investing activities (100,073) 19,774 (70,056) (75,184) (225,539) (247,927) (373,393) Net cash provided by (used in) financing activities (16,636) (87,443) (8,755) (26,560) (139,394) 347,250 224,492 Net increase (decrease) in cash, cash equivalents and restricted cash $ (121,718) $ (3,541) $ (9,600) $ (13,662) $ (148,521) $ 156,802 $ 129,999 Net cash provided by (used in) operating activities $ (5,009) $ 64,128 $ 69,211 $ 88,082 $ 216,412 $ 57,479 $ 278,900 Distributions from unconsolidated ventures from cumulative share of net earnings (749) (781) (858) (1,084) (3,472) — (2,723) Changes in prepaid insurance premiums financed with notes payable 18,842 (6,752) (6,215) (5,875) — 17,434 (1,408) Changes in liabilities for lessor capital expenditure reimbursements under operating leases — (1,000) (11,043) (19,262) (31,305) (4,088) (35,393) Non-development capital expenditures, net (54,602) (66,464) (59,121) (55,610) (235,797) (60,556) (241,751) Payment of financing lease obligations (5,453) (5,500) (5,549) (5,740) (22,242) (5,087) (21,876) Adjusted Free Cash Flow (1) $ (46,971) $ (16,369) $ (13,575) $ 511 $ (76,404) $ 5,182 $ (24,251) (1) The first quarter of 2020 includes the $100.0 million management agreement termination fee payment received from Healthpeak related to the sale of Brookdale’s interest in the entry fee CCRC venture, which closed on January 31, 2020, and $10.0 million of direct costs, primarily consisting of acquisition of personal protective equipment (PPE), medical equipment, cleaning and disposable food service supplies, enhanced cleaning and environmental sanitation costs, and increased labor expense, incurred to prepare for and respond to the COVID-19 pandemic. Brookdale Senior Living Inc. 111 Westwood Place, Suite 400 Brentwood, TN 37027 (615) 221-2250 www.brookdale.com 27