BKD presentation 7 21-2014 2

Seamus Sullivan

(BKD)

The Company

Recommendation: Buy Price Target - $53.00

Current Price $35.40

52-week range $35.54 – $24.42

Shares outstanding 125MM

Market Cap $4,428MM

P/E (2015) 42.0x

EV/EBITDA (2015) 12.8x

• Company overview

• Investment thesis & Drivers

• Catalysts

• Risks

• Price Target and range

• Summary

• Appendix

– IS, BS, CFS, WACC

Presentation Overview

Company Profile • Founded 1978

• Headquarters: Union, New Jersey

• CEO: Steven H. Temares

• Operates 1,496 stores in all 50 states

• 58,000 employees

• Sector: Retail Home & Other

Brookdale Senior Living communities have provided exceptional senior living since 1978. Today, Brookdale Senior Living Inc.

is the nation’s largest owner and operator of senior living communities throughout the United States and a leading national

provider of senior-related services. It owns and operates senior living communities in the United States and operates in six

segments:

• Retirement Centers

• Assisted Living

• CCRC – Rental

• CCRCs – Fee

• Ancillary Services

The Retirement Centers segment owns or leases communities comprising independent living and assisted living units in a

single community that are primarily designed for middle to upper income senior citizens. The Assisted Living segment owns

or leases communities consisting of freestanding, multi-story communities, and freestanding single story communities, which

offer housing and 24-hour assistance with activities of daily life to mid-acuity frail and elderly residents. This segment also

operates memory care communities for residents with Alzheimer's disease and other dementias. The CCRCs-Rental

segment owns or leases communities that offer various living arrangements and services to accommodate various levels of

physical ability and health. The CCRCs-Entry Fee segment allows residents in the independent living apartment units to pay

a one-time upfront entrance fee to use certain amenities and services. The Brookdale Ancillary Services segment provides

outpatient therapy, home health, and hospice services to residents of its communities, as well as to other senior living

communities. The Management Services segment operates communities under the management agreements.

Investment Thesis

• Merger Synergies

– Cost savings

– Revenue growth

• Industry Leader

• Strong Sustained Growth in Customer Demographic

• Differentiator – Continuum of Care

• Durable Competitive Advantage

• Occupancy Growth

– Program Max 2.0

• Moderate Capacity Growth

• Resilient Pricing Power

• Some of the Parts (SOTP)

Merger Synergies

• Overhead cuts

• Operating leverage G&A

consolidation

– Reduction in operating expenses

by $45MM annually

• Greater purchasing power

Cost Savings

• Expanding BKDs ancillary services

• REIT HCP purchase options

– $160 (~$.90 per share of

incremental EV) if exercised

• EF CCRC new revenue drivers

• Program Max 2.0

– Every $100MM CapEx spent on

ESC facilities should yield $.04 to

$.05 of incremental CFFO

Revenue

Management guided CFFO per share accretion of $.50 by year three

Merger Synergies

Industry Leader

Source: ALFA and Senior Living Executive – March/April 2014

BKD Business Mix by Property Type ESC Business Mix by Property Type BKD-ESC Combined

Portfolio – Units by Type

Strong Sustained Customer Growth

• Seniors are living longer and need care for longer periods of time

• Children & grandchildren are increasingly unable to provide

necessary care do to two-worker households

• 75+ of age is the fastest growing demographic

• Little to no exposure to Medicaid cuts

• Seniors are highly exposed to interest rate income

Secular tail-winds in a favorable pricing power environment

Differentiator – Continuum of Care

BKD is the only national player in the Sector

Durable Competitive Advantage

• Nonresidential construction costs have been increasing

• With the combination of BKD and ESC scale, it will be hard for

builders to come into the market and match price as well as services

– “the costs or the rent that the new developer needs to charge to justify

the development risk that he or she has undertaken, generally speaking,

is going to he higher than our rent, which ultimately gives us an

opportunity to updraft our rent”1

• Time to get something out of the ground for new competitions, get it

entitled, licensed, and opened takes at least 2 years and for larger

communities three plus years

• Establishment of a strong brand name in senior care living will also

grow the moat

1: 2014-06-05 BKD Jefferies Global Health Care Conference

Occupancy Growth

Stabilized Occupancy: Based on Top 31 MSAs (“Primary Markets”)

Model Occupancy Assumptions Retirement Centers FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014E FY 2015E FY 2016E FY 2017E

Occupancy rate (weighted average) 87.2% 87.2% 88.0% 89.1% 89.8% 90.1% 90.9% 91.3% 91.8%

Average monthly revenue per unit $3,358 $3,445 $3,163 $3,263 $3,381 $3,523 $3,629 $3,747 $3,869

YoY % change in average monthly rev per unit 4.0% 2.6% N/A 3.2% 3.6% 4.2% 3.0% 3.3% 3.3%

Assisted Living



YoY % change in average monthly rev per unit 17.7% 3.9% N/A 2.7% 2.7% 2.5% 3.0% 3.3% 3.2%

CCRCs - Combined



YoY % change in average monthly rev per unit 8.6% 6.8% N/A -8.8% 1.7% 1.9% 1.9% 2.5% 2.5%

Management Services



YoY % change in average monthly rev per unit 3.6% 2.4% -1.4% -6.3% 3.9% 4.4% 2.8% 3.0% 3.0%

Moderate Capacity Growth Annual Inventory and Absorption Growth: Based on Top 31 MSAs

Not all new inventory is directly competing with BKD existing and new locations

Source: NIC MAP® Data and Analysis Service

Resilient Pricing Power

Annual Rent Growth: Based on Top 31 MSAs (“Primary Markets”)

• BKD has had average rate growth in the low to mid 3%.

However, as their marketing/branding campaign begins to take

affect I believe rate growth could increase further

Source: NIC MAP® Data and Analysis Service

SOTP Proforma 2015 Analysis HI (marketed sale of company) Mid (REIT/opco split) Low (interest / cap rates rise)

Net SOTP per share, ex corporate G&A $44 $33 $24

Value of Owned Properties

Owned Lease Revs, does not include

bargin purchase options 1,871,888 1,871,888 1,871,888

Entry Fee Amortization (1,971) (1,971) (1,971)

Expenses 1,272,884 1,272,884 1,272,884

Facility Operating Margin 32.0% 32.0% 32.0%

Gross Property NOI 597,033 597,033 597,033

Subtract 1st Generation EF 0 0 0

Less imputed revenue mgmt fee -93,594 -93,594 -93,594

Net Property NOI, pre-capex 503,439 503,439 503,439

Capitalization Rate 5.50% 6.25% 7.00%

Gross Real Estate bf entrance fee value 9,153,432 8,055,020 7,191,982

Net Entrance Fees 7,400 7,400 7,400

Cap Rate 8.00% 9.50% 11.00%

Gross Value EF Cash Flows 92,500 77,895 67,273

Gross Value of Real Estate incl EF Value 9,245,932 8,132,915 7,259,255

Gross Value Per Share $53.46 $47.03 $41.97

Owned units 34,545 34,545 34,545

Estimated Value Per Unit 267,649 235,430 210,139

Net R/E Per Share 31.72 25.28 20.23

Valued of Leased Property Cash Flow

Lease revs, incl bargain purchase options 2,650,501 2,650,501 2,650,501

Expenses 1,802,341 1,802,341 1,802,341

Op Margin 32.0% 32.0% 32.0%

NOI leased assets 848,160 848,160 848,160

Less Cash Lease Rents, does not incl

rents on cap leases (400,292) (400,292) (400,292)

Less G&A allocation (132,525) (132,525) (132,525)

GAAP EF amortization - - -

Net Cash EF - - -

EBITDA 315,343 315,343 315,343

EBITDA Multiple 11.0 9.50 8.0

Value Per Share $20.06 $17.32 $14.59

PV of bargin purchase options $160,000 $150,000 $140,000

PV/sh of bargain purchase options $0.93 $0.87 $0.81

PV/sh (at beg of 2015) of rent reduction

in 2016 and 2017 $0.50 $0.32 $0.24

Ancillary Business Value

NOI 82,090 82,090 82,090

Multiple 9.0 7.5 6

Value Per Share 4.27 3.56 2.85

Management Business

(assumes real estate / opco split)

Management Fee Revenue 161,853 161,853 161,853

Estimated Operating Margin, incl. G&A 35.0% 30.0% 25.0%

Net Management Income 56,649 48,556 40,463

Assumed Multiple 7.0 6.0 5.0


Construction in Progress

Assumed Value $0 $0 $0

Value Per Share $0.00 $0.00 $0.00

Tangible Assets

Cash - -

Current Assets, incl cash 525,667 525,667 525,667

Investments in Unconsolidated JV 326,991 326,991 326,991

Other tangible assets 293,354 293,354 293,354

Subtotal Assets $1,146,012 $1,146,012 $1,146,012

Liabilities

Mortgage Debt 3,760,391 3,760,391 3,760,391

Capital lease obligations 2,567,316 2,567,316 2,567,316

Credit Line draws 90,550 90,550 90,550

Current Liabilities, excluding debt 398,367 398,367 398,367

Deferred Lease Liability

Other tangible liabilities 849,206 849,206 849,206

Subtotal Adjusted Liabilities $7,665,830 $7,665,830 $7,665,830

NAV Balance Sheet ($37.70) ($37.70) ($37.70)

Average Diluted Shares Outstanding 172,945

HI (marketed sale of company) Mid (REIT/opco split) Low (interest / cap rates rise)



Owned Lease Revs, does not include

bargin purchase options 1,871,888 1,871,888 1,871,888


Expenses 1,272,884 1,272,884 1,272,884









Cap Rate 8.00% 9.50% 11.00%




Owned units 34,545 34,545 34,545


Net R/E Per Share 31.72 25.28 20.23

$38.46 $28.91 $20.98

Discounted back 1.75yrs, 8%




Owned Lease Revs, does not include bargin

purchase options 1,962,791 1,962,791 1,962,791


Expenses 1,315,070 1,315,070 1,315,070









Cap Rate 8.00% 9.50% 11.00%




Owned units 34,545 34,545 34,545


Net R/E Per Share 37.85 30.93 25.50



Expenses 1,862,073 1,862,073 1,862,073

Op Margin 33.0% 33.0% 33.0%


Less Cash Lease Rents, does not incl rents on

cap leases (404,902) (404,902) (404,902)



Net Cash EF - - -

EBITDA 373,277 373,277 373,277


Value Per Share $23.51 $20.30 $17.09



PV/sh of rent reduction in 2016 and 2017

(calculation below) $0.56 $0.34 $0.25


NOI 89,540 89,540 89,540

Multiple 9.0 7.5 6


Management Business









Value Per Share $0.00 $0.00 $0.00

Tangible Assets

Cash - - -

Current Assets, incl cash 881,550 881,550 881,550



Subtotal Assets $1,501,895 $1,501,895 $1,501,895

Liabilities

Mortgage Debt, assumes 2016 cash flow

repays debt 3,432,394 3,432,394 3,432,394















Expenses 1,315,070 1,315,070 1,315,070









Cap Rate 8.00% 9.50% 11.00%




Owned units 34,545 34,545 34,545


Net R/E Per Share 37.85 30.93 25.50

$45.32 $35.61 $27.51








Expenses 1,361,349 1,361,349 1,361,349









Cap Rate 8.00% 9.50% 11.00%




Owned units 34,545 34,545 34,545


Net R/E Per Share 44.37 36.92 31.07



Expenses 1,927,603 1,927,603 1,927,603

Op Margin 34.0% 34.0% 34.0%


Less Cash Lease Rents, does not incl rents

on cap leases (407,318) (407,318) (407,318)



Net Cash EF - - -

EBITDA 439,659 439,659 439,659


Value Per Share $27.41 $23.67 $19.94



PV/sh of rent reduction in 2016 and 2017

(calculation below) $0.00 $0.00 $0.00


NOI 95,693 95,693 95,693

Multiple 9.0 7.5 6


Management Business









Value Per Share $0.00 $0.00 $0.00

Tangible Assets

Cash - - -

Current Assets, incl cash 1,270,998 882 882



Subtotal Assets $1,891,343 $621,227 $621,227

Liabilities

Mortgage Debt, assumes 2016 and 2017

cash flow repay debt 3,095,721 3,095,721 3,095,721















Expenses 1,361,349 1,361,349 1,361,349









Cap Rate 8.00% 9.50% 11.00%




Owned units 34,545 34,545 34,545


Net R/E Per Share 44.37 36.92 31.07

$51.40 $36.48 $28.24


SOTP Proforma 2018 Analysis



Value of Owned Properties $53.92 $38.69 $30.20




Expenses 1,433,905 1,433,905 1,433,905









Cap Rate 8.00% 9.50% 11.00%




Owned units 34,545 34,545 34,545


Net R/E Per Share 47.66 39.81 33.66

$53.92 $38.69 $30.20

• Several bidders tends to result in a “winners curse” scenario

Timeline of BKD-ESC deal

Source: BKD-ESC S-4 filing

BKD Paid Up For ESC

BofA ESC BKD CSU FVE Avg. Low High Low High

2014E EV/EBITDA 11.8x 12.3x 15.2x NA 13.7x $14.75 $31.50 $24.50 $32.75

2014E Price/adjusted CFFO 8.5x 10.9x 14.0x NA 12.4x $20.75 $27.00 $25.50 $33.00

2014E Adj EV/GAAP EBITDAR 11.3x 11.6x 12.9x NA 12.2x $18.50 $41.75 $26.25 $38.25

Cash EBITDA CAGR (2013E-2015) 17.9% 10.6% 21.1% NA 15.8%

CSCA ESC BKD CSU FVE Avg. Low High Low High

2014E EV/cash EBITDA 10.1x 13.1x 15.2x NA 13.0x

9.5x 10.9x 14.0x NA 11.5x

Average $22.21 $31.53 $22.05 $33.01

BKD per share range

BKD per share rangeESC per share range

ESC per share range

Wells Fargo

Avg.

(ESC, BKD,

CSU, FVE)

Avg.

(ESC selected

comp only)

Avg.

(BKD selected

comp only) Low High Low High

2014E EV/EBITDAR 11.5x 11.6x 11.3x

2014E EV/EBITDAR 11.8x 11.7x 11.4x

2014E EV/cash EBITDA 10.7x 11.0x 10.1x

2014E Price/CFFO 11.4x 12.6x 11.6x

2015E EV/EBITDAR 10.9x 10.7x 10.9x

2015E EV/EBITDAR 10.6x 10.2x 10.0x

2015E EV/cash EBITDA 9.6x 9.7x 8.9x

2015E Price/CFFO 10.2x 11.2x 10.2x

Average $19.50 $27.00 $24.00 $28.75

ESC per share range BKD per share range

Moelis Low High Low High

2013A EV adj EBITDA $21.80 $29.33 $26.97 $30.59

2013A adj EV/adj EBITDAR $19.84 $30.17 $22.34 $27.71

2013A Price/adj CFFO $20.94 $24.60 $26.57 $31.40

2014A EV adj EBITDA $16.89 $25.11 $26.63 $30.70

2014A adj EV/adj EBITDAR $16.43 $28.25 $21.92 $27.78

2014A Price/adj CFFO $20.20 $24.51 $24.27 $29.669.0x to 11.0x

13.0x to 14.0x

12.0x to 13.0x

11.0x to 13.0x

11.5x to 12.5x

11.0x to 12.0x

ESC per share range BKD per share rangeAvg.

(ESC, BKD, CSU, FVE)

BKD Paid Up For ESC

Balance Sheet Brookdale - Debt Schedule - assumes debt maturity extensions, includes capital leases

Per 1Q14 Supplement

Mortgage Debt + Line Rate % debt Capital Lease Rate Total Debt Rate % debt

2014 24,630 3.85% 1.1% 24,906 7.99% 49,536 5.9% 1.9%

2015 28,176 4.09% 1.2% 34,491 8.08% 62,667 6.3% 2.4%

2016 60,124 4.60% 2.6% 29,861 8.32% 89,985 5.8% 3.4%

2017 359,729 5.30% 15.5% 61,256 8.15% 420,985 5.7% 16.1%

2018 785,062 3.41% 33.9% 24,172 8.48% 809,234 3.6% 31.0%

Thereafter 1,058,659 3.95% 45.7% 118,341 7.98% 1,177,000 4.4% 45.1%

2,316,380 3.99% 100.0% 293,027 8.10% 2,609,407 4.5% 100.0%

• ~40% of BKD debt is floating rate

– Most is capped, some swapped

Interest Coverage

Memo Items: Interest expense $159.6 $149.9 $134.5 $209.2 $409.3 $409.3 $409.3 $409.3

Capital expenditures 160.1 208.4 257.5 243.6 344.8 361.1 378.9 398.3

EBIT / Interest expense 0.7x 0.7x 1.1x 1.1x 1.4x 1.6x 1.7x 1.7x

EBITDA / Interest expense 2.3x 2.3x 3.1x 2.7x 2.4x 2.7x 2.9x 3.0x

EBITDA - Capital expenditures / Interest expense 1.3x 1.0x 1.2x 1.5x 1.6x 1.8x 2.0x 2.0x

Capitalization*

Total debt $2,536.1 $2,758.4 $2,723.4 $6,674.1 $6,655.1 $6,655.1 $6,655.1 $6,655.1

Total stockholders' equity 1,040.2 1,002.7 1,040.0 2,638.5 2,850.1 3,114.0 3,391.8 3,650.8

Total capitalization 3,576.3 3,761.1 3,763.4 9,312.6 9,505.3 9,769.2 10,046.9 10,306.0

Return on Invested Capital 3.0% 2.7% 3.9% 2.4% 6.0% 6.3% 6.3% 5.9%

Brookdale – Debt Schedule – includes capital leases

Leverage*

Total debt / Total capitalization 0.7x 0.7x 0.7x 0.7x 0.7x 0.7x 0.7x 0.6x

Total debt / EBITDA 6.8x 7.8x 6.6x 12.0x 6.7x 6.0x 5.6x 5.5x

*all recorded at book value

• Management synergy targets are on the conservative side and could

exceed the guided $.50

• Program Max 2.0

– Longer time horizon but may produce better CFFO results than forecasted

• Demand continues to outstrip supply

• Brand awareness campaign yields better than expected results

• Any hint that management may return to paying a dividend in the future

Catalysts

Adjusted EBITDA 557.9 991.7 1,101.0 1,186.3 1,208.9

Less: Recurring capital expenditures, net (45.4) (72.0) (76.0) (80.0) (84.0)

Less: Interest expense, net (209.2) (409.3) (409.3) (409.3) (409.3)

Less: Lease financing debt amortization with fair market value or no purchase options (15.8) (15.8) (15.8) (15.8) (15.8)

Less: Distributions from unconsolidated ventures from cumulative share of net earnings 0.0 0.0 0.0 0.0 0.0

Add: Cash from Facility Operations from unconsolidated ventures 9.0 10.0 14.0 18.0 20.0

Less: Other 0.5 0.5 0.5 0.5 0.5

Less taxes (2.4) 8.9 (28.6) (78.6) (96.5)

Reported CFFO 294.5 514.0 585.8 621.1 623.9

Add: integration and transaction-related costs 24.0 13.0 13.0 13.0 13.0

Adjusted CFFO 318.5 527.0 598.8 634.1 636.9

Adjusted CFFO/share $2.33 $3.05 $3.43 $3.63 $3.65

• Integration of ESC

– Potential cultural fit for the new ESC

employees

– Largest integration BKD has

undertaken

– ESC DOJ investigation

Risks

• Reduction in occupancy

– Low in 2009 was 86.2% for BKD

• Significant increase in new

construction/capacity

• Increased competition and

reduction in pricing power

• Significant rise in interest rates

EBITDA Multiple Method

Weighted average cost of capital: 7.0%

Net present value of free cash flow (b) $4,053.3

Exit multiple 13.0x

Terminal value $15,715.6

Present value of the terminal value (c) 11,205.0

Enterprise Value $15,258.3

LESS: Net Debt (d) (e) (6,514.3)

Equity Value $8,744.0

Diluted shares: 171.000

Equity Value Per Share (e) $51.13

Weighted average cost of capital

$51.13 7.00% 7.25% 7.50% 7.75% 8.00% 8.25% 8.50% 8.75% 9.00%

10.0x $36.01 $35.25 $34.50 $33.76 $33.03 $32.31 $31.60 $30.90 $30.21

10.5x $38.53 $37.74 $36.97 $36.20 $35.44 $34.69 $33.95 $33.22 $32.50

11.0x $41.05 $40.24 $39.43 $38.63 $37.84 $37.07 $36.30 $35.55 $34.80

11.5x $43.57 $42.73 $41.89 $41.06 $40.25 $39.45 $38.65 $37.87 $37.10

12.0x $46.09 $45.22 $44.35 $43.50 $42.66 $41.83 $41.00 $40.20 $39.40

EBITDA 12.5x $48.61 $47.71 $46.81 $45.93 $45.06 $44.20 $43.36 $42.52 $41.69

exit 13.0x $51.13 $50.20 $49.28 $48.37 $47.47 $46.58 $45.71 $44.84 $43.99

multiple 13.5x $53.65 $52.69 $51.74 $50.80 $49.87 $48.96 $48.06 $47.17 $46.29

14.0x $56.17 $55.18 $54.20 $53.23 $52.28 $51.34 $50.41 $49.49 $48.59

14.5x $58.69 $57.67 $56.66 $55.67 $54.68 $53.72 $52.76 $51.81 $50.88

15.0x $61.22 $60.16 $59.13 $58.10 $57.09 $56.09 $55.11 $54.14 $53.18

15.5x $63.74 $62.65 $61.59 $60.53 $59.50 $58.47 $57.46 $56.46 $55.48

16.0x $66.26 $65.15 $64.05 $62.97 $61.90 $60.85 $59.81 $58.79 $57.78

16.5x $68.78 $67.64 $66.51 $65.40 $64.31 $63.23 $62.16 $61.11 $60.07

Supply-Demand in Top 10 Majority Assisted Living Markets

vs. Senior Living Operators’ Share

0

5

10

15

20

25

30

35

40

45

50

55

60

65

70

7/22/2010 7/22/2011 7/22/2012 7/22/2013 7/22/2014 7/22/2015

Sto

ck P

rice

BKD Risk Reward

Close

Price Target

$65.00 (+86%)

$25.00 (-28.0%)

$53.00 (+51.4%)

Summary

• Merger Synergies

– Cost savings

– Revenue growth

• Industry Leader

• Strong Sustained Growth in Customer Demographic

• Differentiator – Continuum of Care

• Durable Competitive Advantage

• Occupancy Growth – Program Max 2.0

• Moderate Capacity Growth

• Resilient Pricing Power

• Some of the Parts (SOTP)

Appendix

Income Statement Income Statement for Brookdale Senior Living IncDollars in millions, except per share

2013 - 2018

Historical Year Ending December 31, Projected Year Ending December 31, CAGR

2011 2012 2013 2014 2015 2016 2017 2018

Sales

Retirement Centers $473.8 $503.9 $526.3 $542.1 $569.2 $597.6 $627.5 $658.9

Assisted Living 964.6 1,013.3 1,051.9 1,451.6 2,903.2 3,019.3 3,146.1 3,284.5

CCRCs -rental (combined with enry fee before Q1'2011) 364.1 385.5 397.0 416.8 479.3 498.5 518.5 539.2

CCRCs - entry fee 283.5 287.0 297.8 303.7 60.7 65.6 74.1 87.5

ISC and other Ancillary services 205.8 224.5 242.2 314.8 510.0 561.0 617.1 678.8

Resident Fees 2,291.8 2,414.3 2,515.0 3,029.0 4,522.4 4,742.0 4,983.3 5,248.9 15.9%

Management Fees 13.6 31.3 31.1 39.8 64.5 67.1 69.8 72.6

Reimbursed Costs incured on behalf of managed communities 152.6 325.0 345.8 442.6 717.1 745.8 775.6 806.6 18.5%

Total Revenue $2,457.9 $2,770.6 $2,892.0 $3,511.5 $5,304.0 $5,554.9 $5,828.6 $6,128.1 16.2%

Cost of sales

Retirement centers 275.4 298.3 304.0 309.0 313.0 328.1 338.9 355.1

Assisted Living 624.7 652.2 662.2 914.5 1,727.4 1,781.4 1,840.5 1,970.7

CCRCs - rental (combined with entry fee before Q1'2011) 247.2 279.4 287.9 302.2 335.5 344.0 352.6 361.3

CCRCs - entry fee 213.5 224.3 221.4 228.7 43.1 46.6 52.6 62.1

ISC & other ancillary services 147.8 176.7 196.4 258.1 397.8 415.1 456.6 502.3

Facility operating expense 1,508.6 1,630.9 1,671.9 2,012.5 2,816.9 2,915.1 3,041.1 3,251.5

General & administrative expense 148.3 178.8 184.5 214.2 291.7 300.0 308.9 318.7

Facility lease expense/Rent 274.9 284.0 276.7 305.5 403.1 422.2 443.0 465.7

Depreciation & Amortization 268.5 252.3 268.8 328.8 434.4 454.9 477.4 501.9

Asset Impairment 16.9 27.7 12.9 0.0 0.0 0.0 0.0 0.0

Loss (gain) on acquisition (2.0) 0.6 0.0 0.0 0.0 0.0 0.0 0.0

Costs incurred on behalf of managed communities 152.6 325.0 345.8 421.4 800.6 816.6 849.3 883.3 12.0%

Facility Lease termination expense 0.0 (11.6) 0.0 0.0 0.0 0.0 0.0 0.0

Other expenses 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Total operating expenses $2,367.7 $2,687.8 $2,760.7 $3,282.4 $4,746.7 $4,908.9 $5,119.7 $5,421.1 14.4%

Income from Operations 90.2 82.8 131.3 229.1 557.3 646.0 709.0 707.0

General & administrative expense 148.3 178.8 184.5 214.2 291.7 300.0 308.9 318.7

Costs incurred on behalf of managed communities 152.6 325.0 345.8 421.4 800.6 816.6 849.3 883.3

EBITDAR 648.5 635.8 689.7 863.4 1,394.8 1,523.1 1,629.3 1,674.6

Facility lease expense/Rent 274.9 284.0 276.7 305.5 403.1 422.2 443.0 465.7

EBITDA 373.6 351.8 412.9 557.9 991.7 1,101.0 1,186.3 1,208.9 24.0%

Depreciation & Amortization 268.5 252.3 268.8 328.8 434.4 454.9 477.4 501.9

EBIT 105.1 99.5 144.2 229.1 557.3 646.0 709.0 707.0 37.4%

Interest expense (5) 159.6 149.9 134.5 209.2 409.3 409.3 409.3 409.3

Interest (income) (3.5) (4.0) (1.3) (0.3) (0.7) (1.8) (2.7) (3.8)

Pretax Income (65.8) (63.1) (1.8) 20.2 148.7 238.5 302.4 301.5

Income taxes (1) (2) (3) (4) (5) (6) (2.3) (2.0) (1.8) 2.4 (8.9) 28.6 78.6 96.5

Net Income ($68.1) ($65.2) ($3.6) $17.8 $157.6 $209.9 $223.8 $205.0

Diluted weighted average shares (in millions) 121.160 121.991 123.671 136.945 172.945 174.685 174.685 174.685 7.2%

Earnings Per Share ($0.56) ($0.53) ($0.03) $0.13 $0.91 $1.20 $1.28 $1.17

2014 Consensus EPS $.17

Income Statement Assumptions

Ratios & Assumptions

Sales growth rate 12.7% 4.4% 21.4% 51.0% 4.7% 4.9% 5.1%

Gross margin 61.4% 58.9% 57.8% 57.3% 53.1% 52.5% 52.2% 53.1%

SG&A expenses (as a % of sales) 6.0% 6.5% 6.4% 6.0% 6.0% 6.0% 6.0% 6.0%

Other operating (income) / expense (amount) $648.5 $635.8 $689.7 $863.4 $1,394.8 $1,523.1 $1,629.3 $1,674.6

Effective tax rate 3.5% 3.2% 96.1% 12.0% (6.0%) 12.0% 26.0% 32.0%

Income statement ratios (as a % of reveune)

Retirement Centers (as a % of retirement center revenue) 58.1% 59.2% 57.8% 57.0% 55.0% 54.9% 54.0% 53.9%

Assisted Living (as a % of assisted living revenue) 64.8% 64.4% 63.0% 63.0% 59.5% 59.0% 58.5% 60.0%

CCRCs - rental (as a % of CCRCs-rental revenue) 67.9% 72.5% 72.5% 72.5% 70.0% 69.0% 68.0% 67.0%

CCRCs - entry fee (as a % of CCRCs-entyr fee revnue) 75.3% 78.1% 74.3% 75.3% 71.0% 71.0% 71.0% 71.0%

ISC and other ancillary services (as a % of ISC - revenue) 71.8% 78.7% 81.1% 82.0% 78.0% 74.0% 74.0% 74.0%

Facility operating expense (as % of revenue) 61.4% 58.9% 57.8% 57.3% 53.1% 52.5% 52.2% 53.1%

General and admisistrative expense (as a % of revenue) 6.0% 6.5% 6.4% 6.1% 5.5% 5.4% 5.3% 5.2%

Facility lease expense (as a % of revenue) 11.2% 10.3% 9.6% 8.7% 7.6% 7.6% 7.6% 7.6%

Depreciation and amortization ( as % of reveune) 10.9% 9.1% 9.3% 9.4% 8.2% 8.2% 8.2% 8.2%

(Provision) benefit for income taxes 3.5% 3.2% 96.1% 7.5% 7.5% 7.5% 7.5% 7.5%

Ratios (as a % of sales)

Retirement Centers 19.3% 18.2% 18.2% 15.4% 10.7% 10.8% 10.8% 10.8%

YOY Growth 3.0% 5.0% 5.0% 5.0% 5.0%

Assisted Living 39.2% 36.6% 36.4% 41.3% 54.7% 54.4% 54.0% 53.6%

YOY Growth 38.0% 100.0% 4.0% 4.2% 4.4%

CCRCs -rental (combined with enry fee before Q1'2011) 14.8% 13.9% 13.7% 11.9% 9.0% 9.0% 8.9% 8.8%

YOY Growth 5.0% 15.0% 4.0% 4.0% 4.0%

CCRCs - entry fee 11.5% 10.4% 10.3% 8.6% 1.1% 1.2% 1.3% 1.4%

YOY Growth 2.0% (80.0%) 8.0% 13.0% 18.0%

ISC and other Ancillary services 8.4% 8.1% 8.4% 9.0% 9.6% 10.1% 10.6% 11.1%

YOY Growth 30.0% 62.0% 10.0% 10.0% 10.0%

Resident Fees 93.2% 87.1% 87.0% 86.3% 85.3% 85.4% 85.5% 85.7%

YOY Growth 28.0% 62.0% 4.0% 4.0% 4.0%

Management Fees 0.6% 1.1% 1.1% 1.1% 1.2% 1.2% 1.2% 1.2%

YOY Growth 28.0% 62.0% 4.0% 4.0% 4.0%

Reimbursed Costs incured on behalf of managed communities 6.2% 11.7% 12.0% 12.6% 13.5% 13.4% 13.3% 13.2%

YOY Growth 28.0% 62.0% 4.0% 4.0% 4.0%

Balance Sheet Balance Sheet for Brookdale Senior Living IncDollars in millions, except per share

Historical Year Ending December 31, Projected Year Ending December 31,

2011 2012 2013 2014 2015 2016 2017 2018

Cash $76.7 $112.3 $96.7 $50.0 $518.1 $896.5 $1,302.3 $1,724.3

Accounts receivables, net 98.7 100.4 104.3 136.6 206.3 216.0 226.7 238.3

Inventories 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Other current assets 105.4 96.3 93.9 87.8 132.6 138.9 145.7 153.2

Total Current Assets: 280.9 309.0 294.9 274.3 856.9 1,251.4 1,674.7 2,115.8

PP&E, net 3,694.1 3,880.0 3,895.5 9,309.6 9,220.0 9,126.1 9,027.6 8,924.0

Ristricted cash & investments 84.7 62.8 57.6 57.6 57.6 57.6 57.6 57.6

Indefinite life intangibles 0.0 0.0 0.0 8.5 24.6 30.3 31.6 14.9

Goodwill 263.7 269.5 268.3 442.0 442.0 442.0 442.0 442.0

Other long-term assets 142.7 144.7 221.5 221.5 221.5 221.5 221.5 221.5

Total Assets: $4,466.1 $4,666.0 $4,737.8 $10,313.6 $10,822.6 $11,128.8 $11,455.0 $11,775.9

Accounts payable $54.1 $43.2 $65.8 $67.1 $93.9 $97.2 $101.4 $108.4

Accrued liabilities 183.6 200.9 209.5 221.4 309.9 320.7 334.5 357.7

Other current liabilities 7.7 6.5 5.2 0.0 201.1 229.4 259.7 291.4

Refund. Entry Fees & Deferred Rev. 327.8 361.4 388.4 407.4 407.4 407.4 407.4 407.4

Total Current Liabilities: 573.3 612.0 668.9 695.9 1,012.3 1,054.6 1,103.0 1,164.9

Long-term debt deferred entry fee revenue 72.5 79.0 86.9 19.0 0.0 0.0 0.0 0.0

Long-term debt 2,463.6 2,679.4 2,636.6 6,655.1 6,655.1 6,655.1 6,655.1 6,655.1

Other long-term liabilities 316.4 292.9 305.5 305.0 305.0 305.0 305.0 305.0

Total Liabilities: 3,425.9 3,663.3 3,697.8 7,675.0 7,972.5 8,014.8 8,063.2 8,125.0

Total equity 1,040.2 1,002.7 1,040.0 2,638.5 2,850.1 3,114.0 3,391.8 3,650.8

Total Liabilities and Equity: $4,466.1 $4,666.0 $4,737.8 $10,313.6 $10,822.6 $11,128.8 $11,455.0 $11,775.9

Parity check (A = L+E) 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000

Cash Flow Projected Cash Flow Statement for Brookdale Senior Living IncDollars in millions, except per share

Projected Year Ending December 31,

2014 2015 2016 2017 2018

Operating Activities

Net Income $17.8 $157.6 $209.9 $223.8 $205.0

Stock-based compensation expense 36.1 54.0 54.0 54.0 54.0

Depreciation 328.8 434.4 454.9 477.4 501.9

Amortization 0.0 0.0 0.0 0.0 0.0

(Increase)/decrease in working capital 56.3 185.8 20.7 29.5 59.4

(Increase)/decrease in other long-term assets and liabilities (174.1) 0.0 0.0 0.0 0.0

Cash Flow from Operating Activities: 264.9 831.8 739.5 784.7 820.3

Investing Activities

Capital expenditures (243.6) (344.8) (361.1) (378.9) (398.3)

Acquisition (4,018.6) 0.0 0.0 0.0 0.0

Cash Flow from Investing Activities: (4,262.2) (344.8) (361.1) (378.9) (398.3)

CASH FLOW AVAILABLE FOR FINANCING ACTIVITIES (3,997.4) 487.0 378.4 405.8 422.0

Financing Activities

Issuance / (repayment) of revolver (67.9) (19.0) 0.0 0.0 0.0

Issuance of long-term debt 4,018.6 0.0 0.0 0.0 0.0

(Repayment) of long-term debt 0.0 0.0 0.0 0.0 0.0

Repurchase of equity 0.0 0.0 0.0 0.0 0.0

Dividends 0.0 0.0 0.0 0.0 0.0

Option proceeds 0.0 0.0 0.0 0.0 0.0

Cash Flow from Financing Activities: 3,950.7 (19.0) 0.0 0.0 0.0

Net Change in Cash (46.7) 468.1 378.4 405.8 422.0

Beginning cash balance 96.7 50.0 518.1 896.5 1,302.3

Ending cash balance $50.0 $518.1 $896.5 $1,302.3 $1,724.3

NWC Working Capital Schedule for Brookdale Senior Living IncDollars in millions, except per share

Historical Year Ending December 31, Projected Year Ending December 31,

2011 2012 2013 2014 2015 2016 2017 2018

Sales $2,457.9 $2,770.6 $2,892.0 $3,511.5 $5,304.0 $5,554.9 $5,828.6 $6,128.1

Cost of sales 1,508.6 1,630.9 1,671.9 2,012.5 2,816.9 2,915.1 3,041.1 3,251.5

Working Capital Balances

Accounts receivables, net $98.7 $100.4 $104.3 $136.6 $206.3 $216.0 $226.7 $238.3

Inventories 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Other current assets 105.4 96.3 93.9 87.8 132.6 138.9 145.7 153.2

Total Non-Cash Current Assets: $204.1 $196.7 $198.2 $224.3 $338.9 $354.9 $372.4 $391.5


Accrued liabilities 183.6 200.9 209.5 221.4 309.9 320.7 334.5 357.7

Other current liabilities 335.5 367.9 393.6 462.9 647.9 670.5 699.5 747.8

Total Non-Debt Current Liabilities: $573.3 $612.0 $668.9 $751.3 $1,051.6 $1,088.3 $1,135.4 $1,213.9

NET WORKING CAPITAL / (DEFICIT) ($369.2) ($415.3) ($470.7) ($527.0) ($712.8) ($733.4) ($763.0) ($822.4)

(Increase)/Decrease in Working Capital $46.1 $55.5 $56.3 $185.8 $20.7 $29.5 $59.4

Ratios and Assumptions

Numbers of days in the period 360 cell is named "Days"

Accounts receivables, net (collection period in days) 14.5 13.0 13.0 14.0 14.0 14.0 14.0 14.0

Inventories (days outstanding) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Other current assets (as % of sales) 4.3% 3.5% 3.2% 2.5% 2.5% 2.5% 2.5% 2.5%

Accounts payable (days outstanding) 12.9 9.5 14.2 12.0 12.0 12.0 12.0 12.0

Accrued liabilities (as % of cost of sales) 12.2% 12.3% 12.5% 11.0% 11.0% 11.0% 11.0% 11.0%

Other current liabilities (as % of cost of sales) 22.2% 22.6% 23.5% 23.0% 23.0% 23.0% 23.0% 23.0%

Brookdale Senior Living IncDollars in millions, except per share

Historical Year Ending December 31, Projected Year Ending December 31, 2013 - 2018

2011 2012 2013 2014 2015 2016 2017 2018 CAGR

Profitability Ratios

Sales $2,457.9 $2,770.6 $2,892.0 $3,511.5 $5,304.0 $5,554.9 $5,828.6 $6,128.1 16.2%

% growth 12.7% 4.4% 21.4% 51.0% 4.7% 4.9% 5.1%

Gross profit $949.3 $1,139.6 $1,220.0 $1,499.0 $2,487.1 $2,639.7 $2,787.5 $2,876.5 18.7%

% margin 38.6% 41.1% 42.2% 42.7% 46.9% 47.5% 47.8% 46.9%

EBITDA $373.6 $351.8 $412.9 $557.9 $991.7 $1,101.0 $1,186.3 $1,208.9 24.0%

% margin 15.2% 12.7% 14.3% 15.9% 18.7% 19.8% 20.4% 19.7%

% growth (5.8%) 17.4% 35.1% 77.8% 11.0% 7.8% 1.9%

EBIT $105.1 $99.5 $144.2 $229.1 $557.3 $646.0 $709.0 $707.0 37.4%

% margin 4.3% 3.6% 5.0% 6.5% 10.5% 11.6% 12.2% 11.5%

% growth (5.3%) 44.9% 58.9% 143.3% 15.9% 9.7% (0.3%)

Net income ($68.1) ($65.2) ($3.6) $17.8 $157.6 $209.9 $223.8 $205.0 #NUM!

% margin (2.8%) (2.4%) (0.1%) 0.5% 3.0% 3.8% 3.8% 3.3%

% growth (4.4%) (94.5%) (596.4%) 785.9% 33.2% 6.6% (8.4%)

Interest Coverage

Memo Items: Interest expense $159.6 $149.9 $134.5 $209.2 $409.3 $409.3 $409.3 $409.3

Capital expenditures 160.1 208.4 257.5 243.6 344.8 361.1 378.9 398.3

EBIT / Interest expense 0.7x 0.7x 1.1x 1.1x 1.4x 1.6x 1.7x 1.7x

EBITDA / Interest expense 2.3x 2.3x 3.1x 2.7x 2.4x 2.7x 2.9x 3.0x

EBITDA - Capital expenditures / Interest expense 1.3x 1.0x 1.2x 1.5x 1.6x 1.8x 2.0x 2.0x

Capitalization*

Total debt $2,536.1 $2,758.4 $2,723.4 $6,674.1 $6,655.1 $6,655.1 $6,655.1 $6,655.1

Total stockholders' equity 1,040.2 1,002.7 1,040.0 2,638.5 2,850.1 3,114.0 3,391.8 3,650.8

Total capitalization 3,576.3 3,761.1 3,763.4 9,312.6 9,505.3 9,769.2 10,046.9 10,306.0

Return on Invested Capital 3.0% 2.7% 3.9% 2.4% 6.0% 6.3% 6.3% 5.9%

Profitability Ratio & Interest Coverage

Liquidity & DuPont Analysis Liquidity

Memo Items: Cash $76.7 $112.3 $96.7 $50.0 $518.1 $896.5 $1,302.3 $1,724.3

Accounts receivable 98.7 100.4 104.3 136.6 206.3 216.0 226.7 238.3

Quick assets 175.4 212.7 201.0 186.6 724.3 1,112.5 1,529.0 1,962.6

Inventory $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0

Current assets 280.9 309.0 294.9 274.3 856.9 1,251.4 1,674.7 2,115.8

PP&E, net $3,694.1 $3,880.0 $3,895.5 $9,309.6 $9,220.0 $9,126.1 $9,027.6 $8,924.0

Total assets 4,466.1 4,666.0 4,737.8 10,313.6 10,822.6 11,128.8 11,455.0 11,775.9


Current liabilities 573.3 612.0 668.9 695.9 1,012.3 1,054.6 1,103.0 1,164.9

Working capital ($292.4) ($302.9) ($374.0) ($421.6) ($155.4) $196.7 $571.7 $951.0

Current ratio 0.5x 0.5x 0.4x 0.4x 0.8x 1.2x 1.5x 1.8x

Quick ratio 0.3x 0.3x 0.3x 0.3x 0.7x 1.1x 1.4x 1.7x

Activity

Accounts receivable (collection period) 14.5 13.0 13.0 14.0 14.0 14.0 14.0 14.0

Inventories (days outstanding) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Accounts payable (days outstanding) 12.9 9.5 14.2 12.0 12.0 12.0 12.0 12.0

Net fixed asset turnover 0.7x 0.7x 0.7x 0.4x 0.6x 0.6x 0.6x 0.7x

Asset turnover 0.6x 0.6x 0.6x 0.3x 0.5x 0.5x 0.5x 0.5x

DuPont Analysis

Return on sales (2.8%) (2.4%) (0.1%) 0.5% 3.0% 3.8% 3.8% 3.3%

Asset turnover 0.6x 0.6x 0.6x 0.3x 0.5x 0.5x 0.5x 0.5x

Asset leverage 4.3x 4.7x 4.6x 3.9x 3.8x 3.6x 3.4x 3.2x

Return on equity (6.6%) (6.5%) (0.3%) 0.7% 5.5% 6.7% 6.6% 5.6%

BKD presentation 7 21-2014 2

Business

Transcript of BKD presentation 7 21-2014 2