Year Ended December 31, 2010
		As Reported				Adjustment				As Revised
Reimbursed costs incurred on behalf of managed communities		$	—			$	67,271			$	67,271
Total revenue			2,213,264				67,271				2,280,535
Costs incurred on behalf of managed communities			—				67,271				67,271
Total operating expense			2,147,270				67,271				2,214,541

 

		Year Ended December 31, 2009
		As Reported				Adjustment				As Revised
Reimbursed costs incurred on behalf of managed communities		$	—			$	77,206			$	77,206
Total revenue			2,023,068				77,206				2,100,274
Costs incurred on behalf of managed communities			—				77,206				77,206
Total operating expense			1,993,288				77,206				2,070,494

 

		Year Ended December 31, 2008
		As Reported				Adjustment				As Revised
Reimbursed costs incurred on behalf of managed communities		$	—			$	73,250			$	73,250
Total revenue			1,928,054				73,250				2,001,304
Costs incurred on behalf of managed communities			—				73,250				73,250
Total operating expense			2,168,197				73,250				2,241,447

		Three Months Ended June 30, 2010
		As Reported				Adjustment				As Revised
Reimbursed costs incurred on behalf of managed communities		$	—			$	16,546			$	16,546
Total revenue			548,972				16,546				565,518
Costs incurred on behalf of managed communities			—				16,546				16,546
Total operating expense			525,228				16,546				541,774

		Six Months Ended June 30, 2010
		As Reported				Adjustment				As Revised
Reimbursed costs incurred on behalf of managed communities		$	—			$	33,126			$	33,126
Total revenue			1,093,396				33,126				1,126,522
Costs incurred on behalf of managed communities			—				33,126				33,126
Total operating expense			1,053,814				33,126				1,086,940

		June 30, 2011																December 31, 2010
		Gross Carrying Amount				Adjustments				Accumulated Impairment and Other Charges				Net				Gross Carrying Amount				Adjustments				Accumulated Impairment and Other Charges				Net
Retirement Centers		$	7,642			$	(34	)		$	(487	)		$	7,121			$	7,642			$	—			$	(487	)		$	7,155
Assisted Living			102,680				(106	)			(142	)			102,432				102,680				(142	)			—				102,538
CCRCs			214,999				—				(214,999	)			—				214,999				—				(214,999	)			—
Total		$	325,321			$	(140	)		$	(215,628	)		$	109,553			$	325,321			$	(142	)		$	(215,486	)		$	109,693

		June 30, 2011												December 31, 2010
		Gross Carrying Amount				Accumulated Amortization				Net				Gross Carrying Amount				Accumulated Amortization				Net
Community purchase options		$	147,610			$	(15,716	)		$	131,894			$	147,782			$	(13,867	)		$	133,915
Management contracts and other			158,041				(156,032	)			2,009				158,041				(140,463	)			17,578
Home health licenses			24,006				—				24,006				19,848				—				19,848
Total		$	329,657			$	(171,748	)		$	157,909			$	325,671			$	(154,330	)		$	171,341

		June 30, 2011				December 31, 2010
Land		$	273,306			$	273,214
Buildings and improvements			3,019,657				3,003,788
Furniture and equipment			417,623				382,488
Resident and leasehold operating intangibles			586,254				588,633
Construction in progress			30,287				16,463
Assets under capital and financing leases			653,120				650,174
			4,980,247				4,914,760
Accumulated depreciation and amortization			(1,291,217	)			(1,177,918	)
Property, plant and equipment and leasehold intangibles, net		$	3,689,030			$	3,736,842

Long-Term Debt, Capital Leases and Financing Obligations

Long-term debt, capital leases and financing obligations consist of the following (dollars in thousands):

		June 30, 2011				December 31, 2010
Mortgage notes payable due 2012 through 2020; weighted average interest rate of 5.14% for the six months ended June 30, 2011, net of debt discount of $0.7 million (weighted average interest rate of 5.32% in 2010)		$	1,175,739			$	1,342,931
$150,000 Series A notes payable, secured by five communities and by a $3.0 million letter of credit, bearing interest at LIBOR plus 0.88%, payable in monthly installments of interest only until August 2011 and payable thereafter in monthly installments of principal and interest through maturity in August 2013			150,000				150,000
Mortgages payable due 2012; weighted average interest rate of 5.57% for the six months ended June 30, 2011 (weighted average interest rate of 5.64% in 2010), payable interest only through July 2010 and payable in monthly installments of principal and interest through maturity in July 2012, secured by the underlying assets of the portfolio			—				210,897
Discount mortgage note payable due 2013, weighted average interest rate of 2.51% for the six months ended June 30, 2011, net of debt discount of $3.9 million (weighted average interest rate of 2.55% in 2010)			79,595				79,275

Variable rate tax-exempt bonds credit-enhanced by Fannie Mae; weighted average interest rate of 1.67% for the six months ended June 30, 2011 (weighted average interest rate of 1.73% in 2010), due 2032, payable interest only until maturity, secured by the underlying assets of the portfolio			100,711				100,841
Capital and financing lease obligations payable through 2024; weighted average interest rate of 8.59% for the six months ended June 30, 2011 (weighted average interest rate of 8.60% in 2010)			362,397				371,172
Mortgage note, bearing interest at a variable rate of LIBOR plus 0.70%, payable interest only through maturity in August 2012.  The note is secured by 15 of the Company’s communities and an $11.5 million guaranty by the Company			315,180				315,180
Convertible notes payable in aggregate principal amount of $316.3 million, less debt discount of $78.8 million, interest at 2.75% per annum, due June 2018.			237,444				—
Total debt			2,421,066				2,570,296
Less current portion			33,936				71,676
Total long-term debt		$	2,387,130			$	2,498,620

2010 Credit Facility

Effective February 23, 2010, the Company entered into a credit agreement with General Electric Capital Corporation, as administrative agent and lender, and the other lenders from time to time parties thereto. The facility had an initial commitment of $100.0 million, with an option to increase the commitment to $120.0 million (which the Company exercised on May 5, 2010), and was scheduled to mature on June 30, 2013.

The revolving line of credit could be used to finance acquisitions and fund working capital and capital expenditures and for other general corporate purposes.

The facility was secured by a first priority lien on certain of the Company’s communities.  The availability under the line could vary from time to time as it was based on borrowing base calculations related to the value and performance of the communities securing the facility.

Amounts drawn under the facility bore interest at 90-day LIBOR plus an applicable margin, as described below.  For purposes of determining the interest rate, in no event would LIBOR be less than 2.0%.  The applicable margin varied with the percentage of the total commitment drawn, with a 4.5% margin at 35% or lower utilization, a 5.0% margin at utilization greater than 35% but less than or equal to 50%, and a 5.5% margin at greater than 50% utilization.  The Company was also required to pay a quarterly commitment fee of 1.0% per annum on the unused portion of the facility.

The credit agreement contained typical affirmative and negative covenants, including financial covenants with respect to minimum consolidated fixed charge coverage and minimum consolidated tangible net worth.  A violation of any of these covenants could have resulted in a default under the credit agreement, which would have resulted in termination of all commitments under the credit agreement and all amounts owing under the credit agreement and certain other loan agreements becoming immediately due and payable.

 

2011 Credit Facility

On January 31, 2011, the Company entered into an Amended and Restated Credit Agreement with General Electric Capital Corporation, as administrative agent and lender, and the other lenders from time to time parties thereto. The amended credit agreement amended and restated in its entirety the Company’s previous Credit Agreement dated as of February 23, 2010, as previously amended.  The amended credit agreement increased the commitment under the credit facility from $120.0 million to $200.0 million and extended the maturity date to January 31, 2016.  Other than the expansion of the commitment and the extension of the maturity date, no other material terms of the previous Credit Agreement (as described above) were amended.  Effective February 23, 2011, the commitment under the Amended and Restated Credit Agreement was further increased to $230.0 million.

As of June 30, 2011, the Company had an available secured line of credit with a $230.0 million commitment and separate secured and unsecured letter of credit facilities of up to $82.5 million in the aggregate.  As of June 30, 2011, there were no borrowings under the credit facility and $72.1 million of letters of credit had been issued under the letter of credit facilities.

Convertible Debt Offering

 

In June 2011, the Company completed a registered offering of $316.3 million aggregate principal amount of 2.75% convertible senior notes (the "Notes"). The Company received net proceeds of approximately $308.3 million after the deduction of underwriting commissions and offering expenses.  The Company used a portion of the net proceeds to pay the Company’s cost of the convertible note hedge transactions described below, taking into account the proceeds to the Company of the warrant transactions described below, and used the balance of the net proceeds to repay existing outstanding debt.

 

The Notes are senior unsecured obligations and rank equally in right of payment to all of the Company’s other senior unsecured debt. The Notes will be senior in right of payment to any of the Company’s debt which is subordinated by its terms to the Notes (if any). The Notes are also structurally subordinated to all debt and other liabilities and commitments (including trade payables) of the Company’s subsidiaries. The Notes are also effectively subordinated to the Company’s secured debt to the extent of the assets securing such debt.

 

The Notes bear interest at 2.75% per annum, payable semi-annually in cash.  The Notes are convertible at an initial conversion rate of 34.1006 shares of Company common stock per $1,000 principal amount of Notes (equivalent to an initial conversion price of approximately $29.325 per share), subject to adjustment. Holders may convert their Notes at their option prior to the close of business on the second trading day immediately preceding the stated maturity date only under the following circumstances:  (i) during any fiscal quarter commencing after the fiscal quarter ending September 30, 2011, if the last reported sale price of the Company’s common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the preceding fiscal quarter is greater than or equal to 130% of the applicable conversion price on each applicable trading day; (ii) during the five business day period after any five consecutive trading day period (the “measurement period”), in which the trading price per $1,000 principal amount of notes for each trading day of that measurement period was less than 98% of the product of the last reported sale price of the Company’s common stock and the applicable conversion rate on each such day; or (iii) upon the occurrence of specified corporate events.  On and after March 15, 2018, until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert their Notes at any time, regardless of the foregoing circumstances.  Unconverted Notes mature at par in June 2018.

 

Upon conversion, the Company will satisfy its conversion obligation by paying or delivering, as the case may be, cash, shares of the Company’s common stock or a combination of cash and shares of the Company’s common stock at the Company’s election.  It is the Company’s current intent and policy to settle the principal amount of the Notes (or, if less, the amount of the conversion obligation) in cash upon conversion.

 

In addition, following certain corporate transactions, the Company will increase the conversion rate for a holder who elects to convert in connection with such transaction by a number of additional shares of common stock as set forth in the supplemental indenture governing the Notes.

 

The Notes were issued in an offering registered under the Securities Act of 1933, as amended (Securities Act).

 

In accordance with FASB guidance on the accounting for convertible debt instruments that may be settled in cash upon conversion (including partial settlement), the liability and equity components are separated in a manner that will reflect the entity's non-convertible debt borrowing rate when interest expense is recognized in subsequent periods.

 

The following represents the long-term debt and equity components of the Notes as of June 30, 2011 (dollars in thousands):

 

The Company is accreting the carrying value to the principal amount at maturity using an imputed interest rate of 7.5% (the estimated effective borrowing rate for nonconvertible debt at the time of issuance, Level 2) over its expected life of seven years.

 

As of June 30, 2011, the "if converted" value of the Notes does not exceed its principal amount.

 

The interest expense associated with the Notes (excluding amortization of the associated deferred financing costs) was as follows (dollars in thousands):