Alerislife Inc (ALR) 2011 Q4 法說會逐字稿

And ladies and gentlemen, good day and welcome to the Five Star Quality Care fourth quarter and year-end 2011 financial results conference call. This call is being recorded.

At this time, for opening remarks and introductions I would like to turn the call over to the Vice President of Investor Relations, Mr. Tim Bonang. Please go ahead, sir.

Thank you and good morning, everyone. Joining on today's call are Bruce Mackey, Five Star's President and CEO, and Paul Hoagland, Five Star's Treasurer and 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 prior written consent of Five Star.

Before we begin 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 other securities laws. These forward-looking statements are based on Five Star's present beliefs and expectations as of today, February 16, 2012. 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. Thank you, Tim, and thank you everyone for joining us today on our 2011 fourth quarter earnings call. For the quarter ended December 31, 2011 we reported our 12th consecutive quarter of profitability from net income from continuing operations of $1.11 per basic share and $1.05 per diluted share. These results were positively impacted by an approximate $54 million income tax benefit related to the reversal of our tax valuation allowance, a $3.5 million gain on the sale of available-for-sale securities partially offset by an impairment of long-lived assets of $3.5 million and acquisition related costs of $229,000.

Paul will discuss the details of the income tax benefit and the impairment of long-lived assets that we recorded in his prepared remarks. Excluding these items, our adjusted net income for continuing operations was $0.02 per basic and diluted share for the quarter. For the 2011 full year our adjusted diluted net income for continuing operations was $0.40 per share.

As you know, starting on October 1, 2011 Medicare cut its rate to skilled nursing providers by 11% with the impact of Five Star being closer to 12%. We did feel the affect of this loss in revenue in EBITDA during the quarter. However, we maintained our record of consistent profitability and through our recent acquisitions of private pay communities offset a majority of this loss on an annual basis.

Over the past several months we made some changes to our corporate regional structure to help address this loss of Medicare revenue going forward. Historically Five Star has operated with four divisions, East, Central, West, and a fourth division made up of the rehab hospitals and pharmacy operations. Previously our standalone skilled nursing facilities were part of the geographic region in which they were located. We have now segregated our standalone skilled nursing facilities into one region. Through this change we will cut about $500,000 out of our general and administrative expenses, as well as provide a more focused oversight over both segments of our senior living business.

We continue to actively grow the percentage of our revenues derived from private pay senior living by doing the following, leasing properties under long-term leases, managing properties on behalf of owners, and purchasing properties using our own balance sheet. We will further accelerate the process by continuing to sell less profitable skilled nursing facilities.

2011 was a year of transition and growth for Five Star. Five Star's business plan for 2011 was threefold, to increase rate, to maintain and increase occupancy, and to operate efficiently and control costs. We were successful on all fronts for the year. We grew rate. Same-store average daily rate grew by 2.3% for the full year. We increased occupancy. Total senior living occupancy grew by 20 basis points and independent and assisted living occupancy grew by 80 basis points for the full year. We held costs in check, wages and benefits stayed flat at 50% of revenues and G&A remains the lowest in the industry at 4.4% of revenues.

We currently employ over 25,000 employees and have annual revenues in excess of $1.2 billion. With a total of 246 communities containing over 27,000 units, Five Star is one of the largest operators of senior living communities in the country.

On a very positive note I am pleased to announce that we are working with a group of lenders to negotiate a new $150 million senior secured revolving credit facility. We expect that the facility will be secured by approximately half of the 31 senior living properties that we own. I would point out because these negotiations are in the early stages there can be no assurance we will enter into the facility or with the ultimate terms of any such facility may provide, including the amount of borrowing that may be available to us under the facility. However, I believe we're in a position to have this conversation because of the quality of both our balance sheet and the properties we own, which may secure the facility. Needless to say adding an addition $150 million revolving credit facility would provide us with much greater financial flexibility.

In 2011 we took on a total of 37 primarily private pay communities located across the country with over 5,000 units. During the fourth quarter we began to manage nine senior living communities with a total of almost 2,000 units. Eight of the communities are made up part of a portfolio of nine large high-end properties which Senior Housing Properties Trust agreed to purchase from Vi, formerly Classic Residence by Hyatt, early in the year. We expect to begin management in that community located in New York some time later this year. That acquisition is being held up by certain regulatory and licensing approvals in the state.

In addition to those eight communities, we agreed to manage on SNH's behalf another senior living community with 57 units located outside of San Francisco and Walnut Creek, California. The community is 90% occupied and is 100% private pay. In February of this year we begin to manage one additional 92-unit senior living community located in Priceville, Alabama. The community is five years old, 87% occupied and is 100% private pay.

Our profitability was achieved with little or not impact from the properties we began to manage in the fourth quarter. We expect that by beginning to manage these properties and by adding our ancillary services we will add about $1 million of EBITDA per quarter.

Now, I will review some highlights from the quarter. Occupancy during the fourth quarter continued to trend positively both on overall and same-store basis. Total senior living occupancy was 86.2%, a 20 basis point improvement from last quarter and last year. Looking at this by portfolio, independent and assisted living occupancy increased 87.1% up 40 basis points from last quarter and up 80 basis points from a year ago. And within independent and assisted living, excluding any skilled nursing beds within a CCIC, true independent and assistant living occupancy was 88.1%.

Skilled nursing occupancy was 81.4% relatively flat with the third quarter of 2011 but down 320 basis points from last quarter. While about half of our 38 skilled nursing facilities have experienced a decline in their occupancy, the majority of this reduction can be attributed to a handful of facilities.

Looking at our same-store senior living portfolio, occupancy was 85.9% up 30 basis points from last quarter. Total senior living occupancy as of Monday was 86.1%. As a reminder, 100 basis point increase in occupancy equates to a $10 million increase in our revenues, the majority of which falls to our bottom line.

If you compare our results to the relevant industry data produced by the National Investment Center, or NIC, they reported a seventh consecutive quarterly increase in senior living occupancy during the fourth quarter.

Industry occupancy is reported to be 110 basis points higher than its cyclical low in the beginning of 2010. Assisted living occupancy on a national level bounced back more quickly but over the last several quarters independent living has been driving much of the game. However, if you look at the trends in the skilled nursing sector occupancy has been falling over the several quarters and this is very much in line with what Five Star is experiencing at its skilled nursing facilities. I think the overall NIC results speak strongly to the apparent recovery underway in private pay senior housing and the clear potential for even more growth.

New supply continues to be stagnant compared to 2007 levels and we aren't expecting this to pick up in a meaningful way any time soon. Average daily rates suffered this quarter due mainly to the loss of Medicare revenues in our skilled nursing business. Same-store average daily rate decreased 0.5% compared to last year and was down 2% from last quarter, but for the full year same-store ADR increased by 2.3%.

A few quarters ago we discussed our plans to increase our efforts on the marketing front and to create a new and improved sales culture. We hired a vice president of sales and marketing last year and she has led us in the formulation of a plan to improve our systems and training efforts.

First, we have partnered with salesforce.com, the leader in customer relationship management systems, to implement a better sales tracking and reporting platform across the company. This initiative allows us to have all of our communities using one system rather than the multiple systems so we can have on demand consolidated and more transparent reporting on sales metrics. We just rolled this out in the beginning of 2012 and currently about 25% of our communities are using salesforce.com and we expect to have all of our communities on this system by the end of the second quarter.

Second, we've taken a step at the forefront in the industry to start using a call center model to provide perspective residents and families with a better and more consistent sales experience. We recently outsourced this service to a leader in call centers and currently have about 25% of our communities on this model.

Lastly, we are implementing a new sales training initiative with corporate sales level trainers to teach the Five Star way at the community level. We believe that these initiatives and other ones we are [entertaining] have and will help grow our occupancy.

Five Star's core senior living business continues to be profitable, 86% of total company revenues come from this business, 75% of its revenue is derived from our residents private pay sources up from 71% last quarter. In the fourth quarter our senior living business produced $70.8 million of EBITDAM, or referred to as EBITDA, excluding rent and G&A expenses. This is up from the $70.5 million of EBITDAM reported last year.

The two rehabilitation hospitals we operate in the Greater Boston area, which account for only 8% of total revenues, generated $2.6 million of EBITDAM during the quarter, which is almost a $450,000 increase from the fourth quarter of 2010. Occupancy moved up to 55.3%, which is up 280 basis points from a year ago.

Our new traumatic brain injury unit continues to perform well and is in the process of accreditation. Our lull in-patient satellite unit will be moving to its brand new location in March of this year.

The institutional pharmacy operations, which make up less than 6% of total revenues, made $357,000 on an EBITDAM basis during the quarter, which was $171,000 increase from the fourth quarter of 2010. At the end of December our pharmacy serviced 238 communities and 12,424 residents.

Given the apparent recovery of senior housing and its strong national demographics, it is clear that Five Star is a compelling story. Although we experienced some headwinds in 2011 regarding government reimbursement cuts, we were still able to grow the company, maintain financial profitability through the cyclical downturn and keep expenses in line. Every incremental growth point in occupancy greatly benefits our bottom line.

Looking at our current valuations and taking into account our strong balance sheet and private pay focus, it is clear there is more value to unlock. With the market cap well below our book value, it is clear we have a ways to go but so far in 2012 Five Star has led the senior housing operator group with a 27% total return as of Monday. We will continue to operate a solid business and grow occupancy and rate to benefit both Five Star and our shareholders and will reinvest capital into our communities to better service our residents.

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. Thank you for joining us today. During the fourth quarter senior living revenues were approximately $274.7 million, up 4.4% from last year. This increase was due primarily to the revenues from 13 communities we have acquired or leased since last year, which contributed $12.4 million of revenues. For the full year our senior living business generated $1.1 billion in revenues.

Comparable community average daily rate decreased 0.5% during the quarter due primarily to the 11.1% Medicare rate cut to skilled nursing providers that went into effect October 1, 2011. However, for the full year comparable average daily rate increased 2.3%.

I would also like to point out that we earned management fee revenue for the fourth quarter of $515,000 and $898,000 for the full year ended December 31. At year-end we were managing 23 communities and we estimate that our annual management fee revenue from these will be [$4.8 million] or $1.2 million a quarter. Senior living wages and benefits in the fourth quarter were $137.4 million, a 4.6% increase from last year, $4.2 million of this increase was due to the 13 communities we acquired or leased since last year. And total senior living wages and benefits were 50% of senior living revenues, an increase of 10 basis points over the previous year.

Health insurance costs increased 40 basis points but were mostly offset by a 30-basis point improvement in increased labor productivity. Additionally, our workers compensation expense was 10 basis points lower than the previous year and is starting to show the effects of our renewed focus on it.

Other senior living operating expenses during the quarter were $66.5 million, an 8.5% increase from last year, and represented 24.2% of senior living revenues, a 90-basis point increase form last year. The increase in other operating expenses was due to several factors.

First, an additional $3.2 million of expense from the 13 new communities we acquired during 2011. Second, an increase of $1.7 million in both property and professional liability insurances, please keep in mind that in the last quarter of 2010 there was approximately $1 million of non-recurring adjustments in credits made to both of those insurance categories. A $650,000 increase in marketing costs, a $340,000 increase in provider fees and licenses.

However, operating expenses were down $2.1 million from last quarter, mostly due to the normal seasonality we typically experience in our facilities expenses. Our utilities expense was 80 basis points lower this quarter compared to last quarter, and for the full year utility expense was reduced by $2.2 million or 20 basis points due to energy efficiency investments we made and better oversight.

I would like to take a moment to discuss the income tax valuation allowance that we reported during the quarter. Because we have enjoyed continual and sustainable profitability over the last few years, the company's management and our auditor agrees that the company should be able to utilize this tax asset. Therefore, we decreased our income tax valuation allowance by approximately $52 million in the quarter.

Going forward, our cash tax rate will still be approximately 10% but our GAAP tax expense will be closer to 40%. EBITDA will become an even important metric of measuring our performance. In addition, we recorded an impairment charge of $3.5 million related to furniture and equipment that is on our books within our leased communities.

Turning to other ancillary businesses, our two rehabilitation hospitals generated $2.6 million of EBITDAM during the quarter, which is a 21% improvement over last year. And for the full year hospital EBITDAM increased by 27.6% due to our investment and focus on the business. Total hospital revenues were $27 million up 3.7% compared to last year, primarily due to a higher quality patient case mix. Occupancy for the quarter was 55.3%, a 280-basis point improvement from last year.

Our institutional pharmacy operations generated $18.8 million of revenues during the quarter. Compared to last year pharmacy revenues were down 3.7% due to an increase in the mix of generic scripts, but expenses were also down 4.6% for the same reason, which benefited us overall. Resulting EBITDAM margins doubled to $357,000 for the quarter and improved 25.7% for the full year. We serviced 12,424 beds at year-end.

General and administrative expense during the quarter was $15.3 million up 5.4% from last year, which represents 4.6% of total revenue. Rent expense was $49.9 million for the quarter up by 0.2% compared to last year due mainly to the $1.9 million of additional rent from the six communities we began to lease during the year, however, as a percentage of total revenues rent expense actually decreased by 40 basis points.

Income tax benefit as a result to the decrease of the deferred tax valuation allowance was a benefit of approximately $52 million during the quarter. Interest expense increased to $1.5 million due mainly to the interest we paid on the $39 million of mortgage debt that we assumed with acquisitions made during the year. Depreciation and amortization increased to $6.3 million due mainly to acquisitions as well.

Now, I'll review our liquidity, cash flows and selected balance sheet items. Cash flow used by operations and activities during the quarter was $2.6 million, which is typical for the seasonality of our company. However, for the full year the company generated $44.4 million of operating cash flow.

During the quarter we repaid $10 million on our bridge loan from Senior Housing Properties Trust. We invested $16.6 million of capital into our existing communities and we sold $7.4 million of long-term capital improvements to senior housing. For the full year of 2011 we invested a total of approximately $61 million into capital improvements and in conjunction sold back approximately $33 million of long-term improvements to senior housing. At December 31, 2011 we had cash and cash equivalence of $28.4 million and our $35 million revolving credit facility was undrawn and remains so today.

Consolidated EBITDA, excluding certain items, was $9 million during the quarter compared to $10.9 million last year, and for the full year the company generated approximately $43 million of EBITDA. Our accounts receivable management remains strong.

As of December 31 the number of days sales outstanding for our consolidated operations was 18.7 days. At the end of the quarter we had approximately $353 million of net property and equipment, which includes the 31 properties directly owned by Five Star, 27 of which are unencumbered by debt.

We had $37.3 million of convertible senior notes, $38.7 million of mortgage notes payable, and $38 million of outstanding balance on our bridge loan from Senior Housing. Even with the mortgage debt we assumed in 2011 with acquisitions, our leverages are conservative, 33% of book value and 21% of assets, which offers us much financial flexibility. We believe we are in compliance with all material terms of our credit note, mortgage and bridge loan agreement.

In closing, we saw impendent and assisted living occupancy stabilize during 2011 and slowly increase over the last several quarters. Occupancy is 70 basis points of head of where it was as we ended the first quarter of 2011. Although the economic recovery still has a long way to go and we may still face more headwinds with regards to healthcare changes at the government level, it is counterbalanced by the positive supply and demand demographics within the senior housing industry.

In addition, our mix of private pay revenues has increased as a result of our strategy and focus. There is no question that increasing occupancy is the main driver to growing our revenue and increasing our profitability. As we've discussed before, 1% in occupancy generates an additional $10 million of revenue with the majority of it falling to the bottom line.

For 2012 Five Star will remain focused on managing expenses, operating as a lean company while working to grow its private pay business. We are a key player in the senior housing space.

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

(Operator Instructions). Our first question will come from the line of Daniel Bernstein at Stifel. Please go ahead.

Hello, this is Seth Cohen filling in for Dan. I'm just looking forward to 2012, maybe some modeling insights in terms of your acquisition level. You mentioned that you might be selling some of your non-profitable skilled nursing assets and reinvesting it in senior housing, if I got that right. And see if you guys could give us any color in acquisitions for the year, maybe dispositions as well.

And furthermore, second question is really just in terms of capital expenditures. Do you expect it to be the same level as you guys keep on putting money into assets to improve the quality?

I think I'll start and maybe Paul can backup. In terms of what we plan on selling, if anything I don't think it would really move the needle that much. Every incremental little bit helps but, again, we've got no material plans to sell anything significant that should really throw 2012 modeling into question or doubt.

In terms of the acquisition front, the pipeline is still -- we see stuff on a regular basis. There are a few larger deals that are out there that we're looking at and there's also a lot of one-offs that we take a look at. I probably get three or four deals a week we pass on most of what we see. But the stuff that does ride at the top, we've already closed one in 2012. We're looking at another one really close right now, not a large property.

So it's really tough to kind of give guidance on acquisitions. We'd like to do a lot, I can tell you that, but it's really finding the right property that fit our profile, which I think is more important to us. And that's finding properties that are private pay, newer, independent and assisted living, with a good management team in place, in an area that we've got a good strength of operations, I think that's the more important part of what we look at in acquisitions.

Paul, do you want to talk about our capital in 2012?

On capital, we intend to spend approximately what we've spent in the last two years. It'll be somewhere in that $55 million to $60 million range, again, keeping in mind that we are still re-jiggering our company from the standpoint of the change in the Medicare cut. But again, as fourth quarter pretty much shows, we've been able to backfill most if not all of that. So with our EBITDA remaining basically at its previous level in spite of the cut, it would appear as though at this point our (inaudible) will keep capital [links] at the same level.

And if I may just one more follow-up question on acquisitions. Are you seeing the deals coming across your desk more of a one-off variety or portfolios of assets?

I'd say right now it's more of a one-off variety.

All right, thank you.

Thank you.

(Operator Instructions). Our next question will come from the line of Spencer Larson at Moors & Cabot. Please go ahead.

Good morning, two questions. One is last year you had talked about your tax loss carry-forwards. Could you give me an update on how large they are? And the second question is in your most recent investor presentation you talked about the two bond issues, debt issues you have coming up, but what are your plans to roll those over?

The net operating losses as we finished the year approximately $110 million that number obviously does not change with the release of the valuation allowance. So again, that number doesn't change. Obviously it's fully our intent and for that matter prediction based on the fact that we have released the allowance that we will be able to consume those tax assets.

And with regards to upcoming repayments, we do have $37.3 million on convertible debt, which is puttable in 2013. And we have the $38 million of bridge loan from Senior Housing, which is due to be repaid by the end of June in 2012.

Anything further, Mr. Larson?

Yes, still how are you planning to repay the bridge loan to Senior Housing?

I think if you look at our balance sheet right now, Spencer, we've got -- we ended the quarter with $20 million cash. We actually paid $10 million off in the last fourth quarter. We can pay some of it with that cash generated from operations, which we have done in the past.

I also think if you look -- we've got an untapped line of credit right now that could cover almost the entire bridge loan, so that's not really an issue. And then I said in my prepared remarks that we are currently negotiating $150 million revolving credit facility backed by some of our communities. So I think we've got plans well in-hand to handle it. Does that answer your question?

Well, basically. So with the tax loss carry-forwards, a year or two ago you were exploring in the sale of your company on the entirety. So from a corporate strategic direction my real question is given the disappointments of the stock price, the re-issuance of stock, and then the subsequent collapse, and of course we got cuts in Medicaid, why would you be focusing at all on corporate expansion or acquisition of properties as opposed to something that would benefit shareholders, like a corporate repurchase program?

I think I'll start by we were never exploring the sale of the company so I think that's not correct. SNH made overtures to us back in 2009 I think it was, I think our boards had discussed at that time it was a fairly quick discussion. They were fairly far apart. We're looking to grow the company smartly.

I think if you've looked at what we've done over the last -- we did acquire some properties in 2011, which we feel make us a stronger company through the -- taking into account those government cuts in reimbursement. Everything we've added that we talked about the 37 communities two-thirds to three-quarters of them were done with no capital outlaid by Five Star.

So I think you'll look at us doing a mixture of both managing, leasing. And if it does prove right we'll look at acquisitions to put up on our balance sheet, and I think we'll also take into consideration what you said. I mean, we're not -- we don't have a current stock buyback program in place but it's something that if it makes sense in the long-term of our sales we will take a look at it so it's not ruled out.

We'll go next to the line of Mike Petusky at Noble Financial. Please go ahead.

Good morning, guys. I guess a couple questions, around the skilled nursing area I think I heard you guys say that from a division standpoint you made some adjustments that you think will result in roughly $500,000 of savings. But I was just wondering at the facility level if you guys could provide maybe some specifics of some things that you've been able to do that may have mitigated a little bit of the cut you guys had to endure starting October 1.

It hadn't been much yet but some of the things that we're looking at -- we're looking at working with more technology in the facilities and we've been rolling some of those out in terms of how we can actually pull labor dollars out of facilities. One that we've actually had luck I talked in my prepared remarks we've kept labor costs flat at 50% year-over-year. That's in spite of the fact unfortunately that our health insurance went up significantly during that timeframe pausing back some of the exact amount. So we were actually able to operate more efficiently this year than last year, it was just consumed a little bit by the increase in the health insurance.

I think the second thing we're looking at doing in areas is reinvesting some capital into our skilled nursing facilities and converting some of our older units into more modern what we call rehab to home recovery units. We've seen some great success at some of our skilled nursing facilities, both in CCRCs and standalones, where we've invested some capital, made them really high-end the places of choice where Medicare patients want to go for their quick rehab and then go home.

Paul and I were out touring two of our communities in California a few weeks ago and we've actually increased the Medicare census significantly since opening up two of these units at these facilities. So I think that will go a long way as well.

I think the other thing I would add to it, again, the Medicare rate cut of 11.1% is a mandate that certainly we didn't choose, as you well know. But I do think that as we look at the fourth quarter and we look at our skilled nursing's margin before rent, our margin was approximately 10.5% of revenues in Q4 and in Q3 it was 11.5%. So again, it went down but I do think we're doing everything we can between G&A changes and managing margins to mitigate the negative flow-through on that reduction in revenue.

And then the last thing I said in my prepared remarks, we'll continue to look to grow the private pay again through leasing and management and where it makes sense on our own balance sheet, and that's done a lot of -- gone a long way. Vi is a great example of that, Five Star invested no capital in those nine communities. The one in Walnut Creek, California and then Priceville, Alabama, that will add about $4 million of EBITDA to our bottom line. That's more than one-quarter, almost one-quarter of what we saw from the Medicare cuts and we did [Bell] on top of that in 2011 that helped out and go a long way as well. So there are other things that we're doing in addition.

All right, great. I guess switching gears in the institutional pharmacy area, Omnicare and PharMerica's proposed transaction was shot down by the FDC. I was just wondering if all the noise surrounding that since August has provided you guys an opportunity to pick up market share or just any other comments you might have on that?

We've seen maybe a little bit but really not much in all honesty. We've grown -- we've added several hundred customers I think from the last call. We've got the potential to add several hundred more in the next quarter. Most of those are coming from Five Star communities. We did a large one in our Nebraska pharmacy, but for the most part we really haven't seen much noise out of that.

All right. Great job, guys.

Great, thank you.

We'll go next to the line of James Gibson at Punch & Associates. Please go ahead.

Hi, guys. Hoping you could give an update on discontinued operations. Curious why that actually swung to $2.5 million profit this quarter, it had been consistently unprofitable before. And maybe you can provide an update as well on the sale of those properties. Have you had any interest or offers on those?

Yes, James, good question because certainly when you look at that positive number in discontinued operation it begs a question. And the only reason it's positive, by the way, is as we book the -- or drop the reserve on tax valuation allowance we also had to carry that same adjustment through our discontinued operations. So without that adjustment we still would have had a negative quarter.

Obviously, we've got two properties, two skilled nursing facilities in there that are actively being -- having discussions with people. We don't have anything firm yet but, again, I think as Bruce alluded to in his prepared remarks, we are looking at the lower profitability skilled nursing and through selective reduction we'll continue to sell assets as it makes sense. I mean, we sold three in 2011 and we have the two in discontinued operations and, again, selectively we'll continue to look to make that happen.

I think it's our goal for these two specific assets to make sure that they were moved out of our portfolio by the end of the year.

Okay, great. And in terms of acquisitions, I'm just curious in terms of the relationship with SNH how do you guys decide -- if you do a larger deal or even a one-off acquisition how do you decide whether it goes on your balance sheet and you acquire it or you just become a manager and it goes on to SNH's balance sheet?

In all honesty, SNH might give a slightly different answer, but from Five Star's point of view I think the discussions go fairly well with SNH. We take a look at a portfolio or a property we think what makes best for Five Star and we'll approach SNH. And if we buy them -- probably their own balance sheet makes a stronger tenant so they usually provide us a pretty good flexibility in terms of what we want to do. So I think the discussion really starts at Five Star and ends with SNH having the final say, but they usually agree with where we want to go.

Okay. And you mentioned that you're exploring a larger credit facility and I guess I interpret that to mean that would be a primary source of funds for acquisition. Would you rule out doing an additional equity raise, similar to one last year, to fund acquisitions or is that still on the table as well?

Given our current share price at these levels, I would say it's ruled out. I mean, we'll never say never but I think we'd have a tough time selling liquidity where our stock is right now. We're going to do a good job getting that back up.

Right, last year's one didn't work out too well in terms of the stock price, but thank you.

All right, great. Thank you.

There are no further questions in queue at this time. I'll turn it back to Mr. Mackey.

Great, thank you. We thank you all for joining us today. We look forward to updating you on our 2012 first quarter results in the spring. Have a great day.

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