Alerislife Inc (ALR) 2011 Q2 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the Five Star Quality Care's Second Quarter Conference Call. At this time, all lines are in a listen-only mode. (Operator Instructions) And as a remainder, this conference is being recorded.

I'll now turn the conference over to Tim Bonang, Vice President, Investor Relations. Please go ahead, sir.

Thank you and good morning, everyone. Joining me on today's call are Bruce Mackey, Five Star's President and CEO, and Paul Hoagland, Five Star's CFO.

The agenda for today's call includes a presentation by management, followed by a question-and-answer session. I would also note that the recording and retransmission of today's conference call is strictly prohibited without the prior written consent of Five Star.

Before we begin today's call, I would like to state that today's conference call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and Federal Securities Laws. These forward-looking statements are based on Five Star's present beliefs and expectations as of today, July 28, 2011.

The Company undertakes no obligation to revise or publicly release the results of any revision to the forward-looking statements made in today's conference call other than through filings with the Securities and Exchange Commission regarding this reporting period.

Actual results may differ materially from those projected in any forward-looking statements. Additional information concerning factors that could cause those differences is contained in our filings with the SEC. Investors are cautioned not to place undue reliance upon any forward-looking statements.

And now, I would like to turn the call over to Bruce Mackey.

Great, thanks, Tim. And thanks to everyone for joining us today. Earlier this morning, we reported net income from continuing operations of $0.17 per basic and diluted share for the three months ended June 30, 2011.

Our results for the quarter were impacted by $0.03 per diluted share of acquisition costs. Taking that into account, our adjusted income from continuing operations was $0.20 per basic and diluted share. This compares with $0.22 per basic and $0.21 per diluted share that we reported for the same period a year ago.

Results for the second quarter of 2010 included non-recurring items that are positive, totaling $0.02 per basic and $0.01 per diluted share. Paul will review those details later. For the trailing four quarters, our diluted net income from continuing operations was $0.66 per share, proving the strength of our profitability.

Before we get into the financial highlights in the quarter, I would like to review some exciting acquisition and disposition activity that transpired during the second quarter and beginning of the third quarter this year.

To recap what we discussed last quarter, in early March, Senior Housing Properties Trust announced that they were acquiring a 20 community portfolio in the Southeast for $304 million. In late June, we began to manage 10 of those communities and lease four of those communities.

Subsequent to quarter end, in July, we began to manage an additional two communities and to lease one additional community. The acquisition of the remaining three managed communities is contingent upon customary closing conditions and lender consent and will likely close later in 2011 or early 2012.

These properties fit nicely into our existing footprint of operations in the Southeast. We see opportunities to increase occupancy and discover cost efficiencies by adding some of our ancillary services such as rehab and wellness program and pharmacy services.

In May, we began to lease a 73 unit community in Rockford, Illinois. The community was built in 1999 and is 76% occupied. We are leasing this community from Senior Housing.

Five Star has purchased several properties using our own balance sheet. The first acquisition is the property in Prescott, Arizona that we purchased in May for $25.6 million. It is a 127 unit community that is 90% occupied. That property was built in 1996 and remodeled in 2006. It has 10 acres of land for possible expansion. We assumed $18.7 million of Fannie Mae debt, which is a fair market value of $20 million that is due in 2023 and has an interest rate of 6.6%.

The second acquisition is a group of six communities that we agreed to purchase in Indiana, containing 738 units for approximately $123 million. These communities primarily offer independent and assisted living services, which are paid for by residents from their private resources.

In June, we purchased two of the six communities with 197 units for $40.4 million. Subsequent to quarter-end, in July, we purchased one additional community for $29.5 million.

We expect to purchase the remaining three communities in the third quarter. We will assume $19.5 million of mortgage debt in connection with this purchase, which has a weighted average rate of approximately 7%. We will fund the balance of the purchase price with cash on hand and borrowings under our bridge loan with Senior Housing.

In the second quarter, we also sold three skilled nursing facilities located in Georgia, which were leased from Senior Housing. These dispositions will reduce our rent payable to Senior Housing by $1.8 million a year. Additionally, we are still working to sell two skilled nursing facilities, owned by Five Star, located in Michigan.

Currently, skilled nursing represents 17% of our total revenues and we expect this percentage to decline over time. Our focus and priority continues to be to acquire and operate high-quality private pay communities.

On June 21, 2011, we issued 11.5 million shares of common stock in a public offering, raising net proceeds of approximately $54 million. We used the proceeds from this offering to repay outstanding borrowings under our bridge loans that Senior Housing had extended to us to fund a portion of the purchase of its six Indiana communities.

We have discussed before that our growth strategy consists of growing the Company through traditional net leases, management arrangements, or by purchasing communities using our own balance sheet. With this offering, we have positioned the Company for future growth and are acquiring or leasing high-quality private pay communities ahead of the anticipated rising occupancy stemming from the positive demand demographics we are all familiar with.

Through a combination of excess cash, mortgage debt, and equity, we are funding our recent purchases. Even so, our balance sheet remains conservative today with $55 million of debt, $30 million of cash available in an untapped revolving credit facility. We are confident in our ability to grow revenues at our properties and in turn to grow our earnings over time.

I would now like to review the highlights from the second quarter. Senior living occupancy for the second quarter of 2011 was 85.2% compared with 85.5% a quarter ago and 86.3% a year ago. Same store occupancy for the second quarter was 85.1% compared with 86.3% a year ago. However, occupancy at our independent and assisted living communities remained stable at 85.8%, relatively flat with last quarter.

We continue to experience occupancy challenges in our skilled nursing business. Occupancy at skilled nursing communities was down significantly from last year. Subsequent to quarter end, we are seeing positive trends in our occupancy. Occupancy, as of yesterday, was 85.5%.

We've discussed on several previous calls our increased efforts in the marketing field, which we expect to aid in increasing occupancy across the business. We have several initiatives currently underway. We are increasing our marketing budget to some extent and are focusing on reallocating resources to more efficient avenues. For example, we are relocating -- reallocating marketing dollars, which were previously being spent on Yellowbook Advertising, clearly a more out-of-date approach to more efficient online tactics.

Our new Vice President of Sales and Marketing is on board and we have already seen positive trends, which we're attributing to her and her team's efforts. Compared to last year, move-ins in our independent and assisted living communities are up 10% and we had almost 200 more move-ins this quarter than the same period last year. Even better, move-ins compared to last quarter are up 7% on average.

We continue to push our private pay rates when possible. Our senior living average daily rate increased 2.9% compared to last year, more importantly 3.5% on a same-store basis. Looking forward, we still expect our private pay rate to increase on average 3% to 4% in 2011.

Moving onto other metrics, wages and benefits, as a percent of senior living revenues, were 50.2% during the quarter, up slightly from last year, which was 49.8%. G&A, as a percentage of revenues, was within our stated goal at 4.5%. We continue to maintain the leanest operations in the industry.

Our core senior living business continues to be profitable. Just over 85% of our total Company revenues come from this business. 72% of our senior living revenues are derived from residents' private pay sources.

In the second quarter of 2011, Five Star senior living produced $71 million of EBITDAM, what we refer to as EBITDA, excluding rent and G&A expenses, which was essentially flat with last year, but up 2.4% from last quarter. Looking at just our independent and assisted living businesses, we grew EBITDAM by 2.7% compared to last year and 4% compared to last quarter.

The rehabilitation hospitals, which account for 8% of total revenues, made $2.9 million of EBITDAM during the second quarter, compared to a $2.1 million last year. This is an 84% increase from the $1.6 million of EBITDAM made last quarter. We experienced an increase in the revenues at the hospitals due to a higher quality patient case mix and slight increase in occupancy. We also did a better job of managing our variable expenses.

The pharmacy operations, which make up 6% of our total revenues, made $931,000 on an EBITDAM basis during the second quarter. This is about a $502,000 improvement from the second quarter of 2010 and an improvement of $483,000 from last quarter. Currently, we have about 12,340 customers and expect to add over 1,500 customers during the remainder of 2011.

Our balance sheet remained strong. We ended the quarter with approximately $43 million in cash and had in excess of $270 million of book value, not fair market value, in net property and equipment. This includes 27 of the properties we own, 26 of which are unencumbered with debt.

The second quarter was another excellent operating quarter for Five Star. The private pay senior living business continued to perform well and our pharmacy and rehabilitation hospital business saw increased profitability this quarter.

Our key to success remain the same, increased occupancy and average daily rate, while holding labor, operating expenses, and G&A costs in check. Our solid results have tested the strength of Five Star and the opportunistic position we are in as we wait for the overall industry to improve.

At this point, I would like to turn the call over to Paul Hoagland, our Chief Financial Officer.

Thank you, Bruce, and good morning, everyone. For the second quarter, senior living revenues increased $8.8 million or 3.4% to $266.1 million compared with the second quarter of 2010. This increase was due primarily to revenues from nine communities we acquired or leased since last year, which contributed $3.2 million, plus increased per diem charges to residents of 2.9% or $7.5 million, offset by a decrease in occupancy, which decreased from 86.3% to 85.2%. At the communities we have operated continuously since April 1, 2010, per diem charges to residents increased 3.5%.

Although total occupancy decreased [to 110] basis points, AL/IL occupancy was 85.8%, a decrease of 80 basis points versus 86.6% in the prior-year quarter, while skilled nursing was 82% versus 85.1% or 310 basis point decline.

Our income from continuing operations for the second quarter of 2011 was negatively impacted by $0.03 per basic and diluted share due to [$1.3] million of acquisition cost, giving us adjusted net income from continuing operations of $0.20 per basic and diluted share.

Income from continuing operations for the second quarter of 2010 also included certain non-recurring items that in total positively impacted our earnings by $0.02 per basic and $0.01 per diluted share. Therefore, adjusted net income from continuing operations was (inaudible).

Senior living wages and benefit expense increased $5.5 million or 4.3% to $133.6 million compared with last year. $1.3 million of this increase was due to the nine communities we acquired or leased since last year and $2.1 million was from health insurance.

We had an unusually high increase in large claims during the first two quarters of 2011. With approximately 12,000 claims, we had 74 in excess of $50,000, but our healthcare provider expects this number will moderate during the remainder of 2011.

Senior living wages and benefits, as a percentage of revenues, were up 40 basis points or 50.2%. However, controllable payroll was 37.5% of revenues, which was a 30 basis point improvement from last year. Health insurance [rebounded for a] 70 basis point increase, which went from 3.1% to 3.8% of revenues.

Other senior living operating expenses increased $2.5 million or 4.3% compared to last year. Senior living operating expenses as a percentage of revenues increased 20 basis points from 22.8% to 23%. This increase was due to the nine communities we acquired or leased since the second quarter of 2010, which had expenses of $2 million, plus increased purchase service expense, general maintenance expenses, and property and professional liability insurance. This was offset by a decrease in utilities, which declined 20 basis points from 3.6% to 3.4% of revenues.

We are starting to see the benefits of our lighting retrofit program and utilities outsourcing arrangement as our year-to-date utility expenses, as a percentage of revenues, have decreased 20 basis points to 3.9% versus the prior year of 4.1%.

Turning to our ancillary businesses, the rehabilitation hospitals generated second quarter EBITDAM of $2.9 million. Hospital revenues were up $1.2 million or 4.9% compared to last year, primarily due to higher quality patient case mix and an increase in occupancy, which increased 140 basis points from 54.8% to 56.2%. Although overall hospital expenses increased 2.1% due to increases in labor and benefit expenses resulting from higher occupancy, overall margins improved 2.4% as variable spending and expenses decreased.

Our pharmacy operations achieved a $931,000 margin in the quarter and pharmacy revenues were down 1.7% compared with last year, plus total pharmacy expenses decreased 4.3% from the previous year. During the second quarter, general and administrative expenses were virtually flat, increasing by only $77,000 or 0.5%. As a percentage of revenues, they came in at 4.5% versus 4.7% last year or 20 basis points reduction.

Rent expense increased $1 million or 2.2% compared to last year, mainly due to capital improvements made by Five Star purchased by Senior Housing. However, rent expense decreased 10 basis points from the previous year. Our income tax expense was $441,000 for the quarter.

Now, let me review our liquidity, cash flow, and selected balance sheet items. Cash provided by operating activities for the second quarter 2011 was $11 million. During the quarter, we invested $5.5 million in acquisition deposits. At June 30, 2011, we had cash and cash equivalents of $43.2 million and our $35 million revolving credit facility was undrawn and remained still today.

Consolidated EBITDA, excluding certain items, increased 8.1% to $13.1 million from $12.1 million last year. We made $15 million of capital investments during the quarter and sold $4.5 million of capital improvement to Senior Housing. Our accounts receivable management remained strong as the number of days sales outstanding for our consolidated operations was 19.5 days as of June 30; this remains very low and well controlled.

At the end of the second quarter, we had $273 million of net property and equipment, which includes the 27 properties directly owned by Five Star, 26 of which were unencumbered by debt. We had [$37.2 million] of convertible senior notes and $19.9 million of mortgage notes payable. We believe we are in compliance with all material terms of our credit, note, and mortgage agreements.

In closing, we remain focused on increasing our occupancy and controlling our expenses. We continue to invest significantly in the capital upkeep of our properties and have been rewarded with an average comparable community rate increase of approximately 3.3% over the last eight quarters. We are well positioned to capture strong margins and flow through as we increase our occupancy and we are well positioned to make profitable acquisitions.

With that I would like to open it up for questions for Bruce and I. Thank you.

Thank you. (Operator Instructions) Art Henderson, Jefferies & Company.

Hi, good morning. Thanks for taking the question. Bruce, in your prepared remarks, you talked about sort of a change in the approach to sales and marketing and moving from, sort of, traditional maybe outdated as maybe the way you characterize it to sort of some newer approaches. Can you kind of talk a little bit about that? I think that's an interesting area that you guys are moving into and the kind of success that you maybe seeing already with that.

Yes, sure. We are in the early stages of it, but I think I gave that example of the Yellow Page Advertising, like I said, clearly more outdated approach. What we're focusing on doing is reallocating some of those dollars to online tactics, such as search engine optimization. Another thing we're looking at is social media, helping to create design ways to enhance our web traffic, which will just increase the number of increase and lead we get, which will then increase the number of (inaudible) deposit and et cetera and hopefully lead to more moving. So I think those are kind of some of the ideas that we're talking about, reallocating some of those dollars.

Another approach, I talk about this on all -- other calls, was we've increased our number of Regional Directors of Sales and Marketing. And again, within -- on this reallocation, Paul will be able to identify some efficiencies in G&A and we took some of those savings and we've increased the headcount that we have. So for example, our Regional Director of Sales and Marketing historically oversaw 20 to 25 properties and now overseeing 15 to 20 properties, allowing them to spend more time training our sales folks and helping out with troubled communities.

Okay. That's helpful. And you also talked about, I guess, SNF representing about 17% of revenue and expecting that to decline over time. Do you have any -- I mean can you give us some guidance on kind of where you think you will maybe end up, what percentage that will be, let's just say at the end of this year? And then also would be interested in your commentary about occupancy there and any views on this SNF final rule, which I know maybe coming out tomorrow night?

Sure. A few questions there. I wouldn't pick a number, we expect our skilled nursing percentage of revenues to go over time, I do expect it to go down though. We're selectively looking at getting out some of our skilled nursing assets and we've been doing that over the years.

When we started this business, we were at 56 skilled nursing assets, we are down to 38 today. I see that continuing along, but right now, we only have two for sale. We don't have any identified, although I do look at poor performing communities from time to time, not only on our skilled nursing, but we also do with our AL/IL as well. But for the most part, those are performing well and we don't have any sales coming up in that area.

The decline will come really because we continue to acquire more independent and assisted living communities. So that percentage will shrink. Over time, it will never go to zero, because we've got a number of skilled nursing assets that perform very well for us, we don't want to get out of them. For example, skilled nursing in (inaudible) we think is a great model and it's a model that we'll continue to acquire when and if opportunities arise.

So with the final rule tomorrow, I believe based on the most things I've read that it's going to be somewhere potentially 6% to 8% decrease on the Medicare rate, but we shall see tomorrow.

Do you expect something like that to get phased in?

Again, yes, I think that's probably carrying about a two year phase in period too.

Okay. Great.

And I also think just by way of statistics, if you look at the acquisitions that we've been working on, be it Basic American, Granite Gate, and the Bell Properties, in total, with all of those properties even including the managed properties, there is call it 2,850 units they were acquiring. Of the 2,850 units, only 47 of them represent skilled nursing. So, again, as we grow the Company, as we look at acquisitions, we're looking at that private pay, we're looking at IL/AL, some memory care, but just through that type of growth alone, 17% becomes 16.5%.

That's right. I think the last point I made, when you talk about the Medicare cut, well that will be a killer for a lot of companies out there, if you look at Five Star's strategy over the last 10 years, slowly decreasing our exposure to Medicare and Medicaid. That's really why we are buying in the IL/AL space, because we think over time that Medicaid and Medicare will have to straighten out their books.

Yes, makes sense. If you don't mind if I have one more just to throw in here. Obviously, I'd love to get your take on sort of this whole debt ceiling issue and what the impact may be just to your business, in terms of maybe -- if there might be any occupancy implications from this at all, anything that you can comment on that and maybe how things look so far in the third quarter?

Sure. I think that's a good question. I think the debt [ceiling], if that is to default and the downgraded debt, I think is going to cost all of us more and [lead to the] rise of interest rates that will include our seniors in their ability to pay the bills. If the US Treasury does shut down, I think they've already said they'll continue to fund Social Security, so at least the vast majority of our residents' income will be there to pay their rent. So I don't expect any big issue there. But I think it could have potential issue on potential occupancy going forward.

Okay. Great. Thank you so much.

Okay.

(Operator Instructions) Jerry Doctrow, Stifel, Nicolaus.

Thanks. Good morning. Couple things, I guess, Bruce maybe just to start there. You threw out an -- I'm interested in sort of isolating the private pay senior housing performance and you threw out a couple of different numbers, I think some were comparable store on occupancy and rate and some were maybe just year-over-year sort of numbers. Can you just kind of go over those? I'm just trying to understand, sort of, how the occupancy and rate moved, particularly same-store?

Sure, IL/AL portfolio, same store, very marginal, if not any change, if we look back quarter-over-quarter. I think a lot of that data is in our press release, Jerry, so you can easily see that there.

In term of -- I think the new metric we, kind of, gave out this quarter is we did break out our EBITDAM from our independent and assisted living business, which we hadn't done in quarters past. But again, I think, as I pointed out, that portfolio continues to perform and the issues we saw in the second quarter primarily related to our skilled nursing business, which was down both in terms of occupancy and EBITDAM quarter-over-quarter and from our first quarter of 2011 to second quarter of 2011.

Okay. So just on private pay, basically, occupancy was flat on pirate pay and what was the same-stores rate growth?

Probably in the 3% range.

Yeah, the same store for comparable communities in senior living was 3.5%.

But when you say senior living, doesn't that include -- that includes the skilled as well?

Yeah, that includes the entire senior living portfolio, correct.

What I was trying to get is just isolating the -- strictly the private -- the AL/IL portion of that same store, what was year-over-year occupancy? What was your year-over-year change? I didn't see that in the release and I was just trying to isolate that from the --

Yeah, we're looking into that, Jerry.

All right, Let me move. So you started doing management in the quarter. I'm just trying to clarify, I guess, maybe just for Paul, normally the way we've seen that done is you include all the revenue from the properties and you expense out the reimbursable expenses and end up with kind of a net, which is the management fee. So I'm trying to understand whether your revenue and expenses sort of include that kind of just an offset (multiple speakers).

Well, Jerry, good question. In the second quarter, we had roughly 10 days of managed properties under contract and you'll see in our filings that we did show a net management fee attributable to that. And again, it wasn't 10 days of all the communities as they all hadn't closed yet, but it was negligible; it was $25,000. You'll also see in there what we call reimbursed cost or management revenues, which are the total amount of things like payroll and other expenses that in fact we pay, but then we ultimately charge that to the taxable REIT subsidiary, and that number was $560,000. But that number in effect zeros itself out. The only number that really nets out in our financials is the management fee, again, 10 days $25,000.

I guess what you're trying to do is when we -- I mean, one, I would certainly advocate for separating that out on the basic income statement so that we can --?

It is there, Jerry, it is. If you look at the press release we filed this morning, you'll see it.

Okay, okay, all right. And so in terms of just the basic revenue line, it's just the revenue of the properties, the management stuff is not included in there, that's -- and on the expense side as well?

Correct.

Okay, okay. Just wanted a couple other things, when -- on the expense side, I think, Paul, you had talked about the fact that you had this jump in healthcare expenses and basically, I think you had more -- if I understood what you were saying, you had more claims in the first quarter, but that resulted in sort of a second quarter increase in healthcare expenses for you. It went up whatever it was, 40 basis points in terms of revenue, more than that, 3.8 versus --

Yeah, it was actually 70 basis points, yes.

Should we expect that coming down in third quarter? I mean that's I think what you're saying your provider or contract manager was telling you, so what should we assume in, sort of on a better run rate for expense maybe third --

Yeah. I mean, I wish I could give you full clarity, but I can tell you that our healthcare provider, a very well known group, has been studying that for us both in Q1 and Q2. I think it's probably safe to assume that of that 70 basis point increase year-on-year, I'm expecting it'll pop back 20, perhaps 30 basis points going into Q3. We've seen a little bit of moderation, but it's too early to predict whether or not it'll go back to the previous year.

Okay. And any other little sort of hiccups or movements on the expense side that we might think about there?

No, not really. We've seen a little bit of increase in our property insurance that has happened, but utility is actually is more than offsetting it and we expect that that utility 20 basis point reduction hopefully will accelerate and become 30 or 40. Again, we're just getting into all the new outsourcing and all the implications of it around the country and finding opportunities to save money.

The other good news too is that in spite of pretty sizable inflation on food, we've been able to manage to keep our food flat with previous year through just better management. So, again, those middle lines of operating expenses, we continue to find efficiencies, the same as we find with the actual controllable labor. We picked up 30 basis points on controllable labor in Q2 versus previous year Q2. So, again, our field operations continues to refine that through systems and guidance.

And one thing, Jerry, I wanted to just jump on your question about utilities, we love the seasonality as we enter into Q3. And Paul, [of the cost] in terms of basis point.

Yeas, well, last year, just by way of example, last year utilities increased by about 70 basis points going from Q2 into Q3. It's too early for me to predict that exact same trend, but certainly there is some seasonality there. You pay more to electricity in the summer, but we do have some offsets coming into that because of the changes we made.

Okay. And then just on, I guess, the rehab hospital and pharmacy, obviously you did much better this quarter. If we were thinking about sort of third quarter, fourth quarter, should we assume something like the current profitability? I know you're adding the -- one, I guess the ancillary -- it's not an ancillary, but satellite hospital and that sort of thing. I don't where that stands, but just any color you can give us on where that -- where those two business lines might move?

Yeah, I mean, I think on the pharmacy side, we're cautiously optimistic that the performance in Q2 will continue, primarily because we're adding beds. We were bringing new beds in, a combination of new beds that were already in motion to be brought in, as well as bringing new beds into the acquired communities. So, again, we're cautiously optimistic.

On the rehab hospitals, we saw some nice spending reductions in Q2, but it was combined with 140 basis point increase in occupancy. So, I think if we can continue to grow occupancy in the rehab hospitals and we've been absolutely trying to renegotiate our contracts with third-party to certainly reflect the underlying economics and there is reason to believe that we can also move that forward. But that one is really -- is more contingent on our abilities to keep the occupancy growing.

One thing with our pharmacy too, Jerry, you will see in my prepared remarks, I talked about 1,500 customers for the remainder of 2011, which is more ambitious than I said in previous quarters, so that does take into account those new acquisitions of senior living communities that became on board on our pharmacy services fairly rapidly.

Right, so that you might ramp up a bit, too. And then just last one from me and I'll jump off, sorry. Was there any increase in cost in the quarter to sort of gear up for the management business that we might see offset by higher management fees as you get into that on a full year run -- full quarter run rate basis?

There's a little in there, Jerry, but it's pretty negligible. When we took on the operations of those 20 communities in the Southeast, that combined with what we did in Indiana, the one in Arizona, so we're looking at an additional 28 communities right now that we're in the process of closing on. We'll add about one more region. So, if I look my G&A costs overall, while they will go up as a percentage of revenue, especially [independent] revenue and managed revenue, I do expect those to go down actually over time. We can take on a fair amount [opportunity] and incorporate that, we added maybe one or two bodies overall, so real small.

And I think the biggest piece of evidence here, Jerry, that we manage that reasonably well. We're seeing G&A virtually flat, year-on-year, decreased 20 basis points as revenue increased. So, again, we get good leverage in efficiency with our management control of G&A.

And we only expect to continue with acquisitions.

All right. Last one, if I could. So, Bruce, I just want to make sure, so you still sound pretty optimistic about occupancy and rate on again the core AL/IL business going forward. And given that everybody has been very nervous about those issues given the economy and all of that sort of stuff, is that sort of the -- do I sort of I understand you correctly in terms of just you outlook go-forward?

Sure. I think so, Jerry. I'm too nervous about the economy and the impact they can have, but I think we are doing more than our fair share at Five Star to make sure we capture what we think we can capture. We're obviously investing a lot in our marketing and sales initiatives. We expect those to bear fruit. We're very bullish on the demographics in the industry and we continue to reinvest a lot of capital on our assets to make sure that they are some of the nicest assets that are out there in the senior living market. So a big driver in our occupancy growth will be the economy and if that goes down, you know, we might not get as much as I would have liked, but I still expect that we'll be in a positive area.

All right. Thanks a lot.

All right. Thank you.

Thank you. And gentlemen we have no further questions in queue. Please go ahead with any closing remarks.

Great. Thank you all for joining in today's call. We'll be at the JMP Securities Conference in New York City and the Stifel Healthcare Conference in Boston, both in September. We hope to see some of you at one or more of these events. Thank you. Bye-bye now.

Ladies and gentlemen, that does conclude our conference for today. Thank you for your participation and for using AT&T Executive Teleconference. You may now disconnect.