Brookdale Senior Living Inc (BKDT) 2012 Q2 法說會逐字稿

Good morning. My name is Jody and I will be your conference operator today. At this time, I would like to welcome everyone to the Brookdale Senior Living second quarter earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session.

(Operator Instructions)

Thank you. I would now like to turn the conference over to Mr. Ross Roadman, Senior Vice President of Investor Relations. Please go ahead, sir.

Thank you, Jodi and good morning, everyone. I would also like to welcome you all to the second quarter 2012 earnings call for Brookdale Senior Living. Joining us today are Bill Sheriff, our Chief Executive Officer; Mark Ohlendorf, our Co-President and Chief Financial Officer. Also present is Andy Smith, our Executive Vice President and General Counsel. As Jody mentioned, this call is being recorded. A replay will be available through August 14 and the details of how to access that replay are in the earnings release. This call will also be available via the webcast on our website, www.brookdaleliving.com for three months following the call.

I would also like to point out that all statements today, which are not historical facts may be deemed to be forward-looking statements within the meaning of the Federal Securities Laws. Actual results may differ materially from the estimates or expectations expressed in those statements. Certain of the factors that could cause actual results to differ materially from Brookdale Senior Living's expectations are detailed in the earnings release we issued yesterday, and in the reports we file with the SEC from time to time. I direct you to Brookdale Senior Living's earnings release for the full Safe Harbor statement. With that, I would like to turn the call over to Bill Sheriff. Bill?

Good morning, and welcome to our second quarter earnings call. Today I am pleased to share an overview of our second-quarter results, Mark will review our financial results in more detail. After our remarks, we will be happy to take your questions. During the second quarter, more evidence confirmed that we may be experiencing gradual improvement in our industry's fundamental. While the global macroeconomic environment certainly remains unsettled, we see signs of improvements in our markets.

We have continued to see improving demand in independent living, and as I will talk about in a moment, we saw the improvement particularly in the second quarter in our independent living entry fee unit sales where we saw record results. That specific product is more sensitive than the others to local existing home resales. There has been expressed some sentiment that 2012 is marketing the beginning of a true existing home resale market recovery.

There is a bullish new forecast and supporting analysis released by Harvard's Joint Center for Housing Studies which suggests that the net result of maturing echo boomers and aging baby boomers, likely downsizing, could result in a near doubling in household formation rates. They also observe the fact that multifamily apartment rents are rising, which is helping to stabilize home prices. Now this should bode well for the existing home resale market. The recent Case-Shiller Pricing Data was also encouraging.

The age and acuity trends translates into an increasing need for senior services and an improving existing home resale market will assist in the decision-making process as people sort through the affordability of senior housing and the various options available to them. For the quarter, we achieved CFFO of $69.2 million, or $0.57 per share, an 11% increase over the second period of 2011. The increase was driven by -- key revenue drivers, occupancy, entry fee sales, pricing growth and increased management fees. As Mark will detail, the quarter's results were achieved in spite of some interest reserve adjustments that showed up as operating expenses.

Looking at occupancy, we increased quarter average occupancy by 110 basis points with consolidated portfolio over the prior year. Sequentially, our overall occupancy was essentially flat with the first quarter. Excluding skilled nursing, our occupancy was actually up 10 basis points from the first to the second quarter. Two items to note about our skilled nursing occupancy. First, there is typically a seasonal decline from Q1 to Q2 which we again experienced this year. Second, we acquired a nearly empty skilled nursing community mid quarter which impacted our skilled nursing occupancy percentage. It was a good deal and we acquired this skilled nursing as part of Program Max to ultimately add this service level to one of our larger retirement centers. We are in the process of filling this community.

The story of Q2 was our independent living entry fee sales; our 106 sales and $14.3 million of net entry cash flow were record highs. We have seen improving entry fee sales activities since mid 2011. This improved activity carried through to the first and second quarters of this year. This improvement has been evident across nearly all of our entry fee markets but particularly in Florida, and it has continued through July with a strong number of deposits.

Improving existing home sales in our local markets, seniors adjusting to pricing realities and our focus on making sure that we have a full complement of well-trained sales staff all contributed to these excellent results. Looking at senior housing pricing, performance has remained largely consistent since mid 2011. Pricing remains competitive in most of our markets and the level of promotional activity in those markets remains about the same. During the quarter, our average monthly revenue per unit increase 1.5%. Over the last three quarters, our average monthly revenue per unit increases have been in the 1.5% to 2% range.

As Mark will describe in more detail, we have now expanded from four financial reporting segments to six, and one of those is our Ancillary Services segment. Our trade name for Ancillary Services and therefore what we call that segment is Innovative Senior Care, or ISC. The ISC segment includes our outpatient therapy, Home Health and now a budding Hospice Services. It does not include therapy services provided in our skilled nursing which is included in our CCRC segments. Begun in 2000, ISC has grown into a vital part of the services we provide to our residents as well as well as a key feature that attracts new residents to our communities. Our refined segment reporting, more clearly shows the attractive additional contribution ISC continues to make in spite of governmental rate reductions over the last several years.

ISC is also a key driver in our acquisition strategy and as a unique product positioning in economic performance enhancement to any capacity addition we make, like with the Horizon Bay acquisition. Our rollout of ancillary services to the Horizon Bay communities continues to go well. We have now generated revenue at communities representing 8,800 formerly Horizon Bay units for Home Health and almost 8,000 units for outpatient therapy. We expect to be completed with this rollout before the end of the year. Serving the former Horizon Bay communities with ISC services was a positive contributor to this quarter, but it will take, however, several quarters to mature the results. Now I'll turn the call over to Mark to provide more details on the quarter.

Thanks, Bill. Let me begin by describing in more detail the expanded segment reporting that you'll see in both our data supplement that we posted to our website and in the second quarter 10-Q that we will file in the next several days. Beginning this quarter, we've expanded the original four segments by breaking out the former CCRC segment into separate rental and entry fee segments and by adding the ISC segment. Looking at the performance of the six segments, first the retirement centers, which showed occupancy increase of 150 basis points since the second quarter of last year, also increased revenue per unit by 3.7% over the prior year second quarter. This segment has shown good progress since the beginning of last year.

The Assisted Living segment increased occupancy by 120 basis points versus last year second quarter, and 10 basis points sequentially over the first quarter of 2012. Revenue per unit increased by 2.4% over the prior year second quarter. This segment saw a strong rebound in occupancy in 2010 and has been largely steady over the course of the last year. The redefined Rental CCRC segment is composed of rental campuses as well as some skilled nursing communities that are part of a market continuum. Approximately 30% of the units in this segment are skilled nursing, making it more susceptible to swings in skilled occupancy and rate. The occupancy of this segment decreased by 70 basis points sequentially, and from the first quarter -- by 70 basis points sequentially from the first quarter of 2012, with the entire decrease centered in the segment skilled nursing units.

In fact, the occupancy, the other care levels in this segment, which represent 70% of the units, actually increased by 20 basis points sequentially over the first quarter. To add to what Bill said, skilled nursing occupancy in the second quarter was affected by first, a normal, seasonal decline from Q1 to Q2, which is consistent with what the NIC data shows. Two, the acquisition of a virtually empty skilled nursing community during the quarter; and three, as several skilled operators have discussed, we may be seeing hospitals more aggressively using observation status rather than admittance, and not qualify patients for subsequent Medicare skilled rehab stay. You may have read press accounts that this phenomenon has caught the attention of CMS and to the lesser degree, Congress.

Skilled nursing occupancy can change dramatically period to period, and we expect to increase census over the second half of the year. Beyond sequential improvement, skilled census is the focus of a number of our business development initiatives including electronic medical records and patient care transition programs. The redefined entry fee CCRC segment includes our 14 entry fee campuses. The entry fee segment to occupancy was down 30 basis points from the first quarter of 2012, again, the decline more than accounted for by skilled nursing, which makes up 20% of the entry fee segments units.

The other care levels and entry fee segment were up 10 basis points in the second quarter, over the first quarter of 2012. Of course, given the skilled concentration, the two CCRC segments are where we have also seen the effect on rates from the Medicare skilled rate reductions and corresponding increased therapy costs. The fifth segment under our new segment reporting structure is ISC, our Ancillary Services business. ISC's revenue grew by 14.6% versus last year second quarter, due to an increase in service volume but ISC's operating income dropped by 10.4%. Due in large part to the Medicare rate decreases in Home Health implemented January 1 of this year, which we estimate to have a negative impact of approximately $2.4 million.

In addition, we incurred increased labor costs resulting from the increased volume, a modest decline in outpatient therapy productivity, transitional costs resulting from our business office centralization process and incrementally higher sales and marketing costs. From the first quarter to the second quarter of 2012, ISC's operating income grew by $2 million, primarily due to the growth stemming from the rollout to the former Horizon Bay communities. We expect to see similar improvements over the second half of the year. Our Hospice Services were a positive contributor this quarter and we expect to have hospice services available in seven of our markets by the end of the year.

Our final segment is our Management Services segment, representing the revenues and expenses generated by operating communities, either under minority-owned joint venture arrangements or for third parties. In addition to the refinement of our segment definitions, we've added in our supplemental disclosures and allocation of G&A costs to each of these segments. When subtracted from the operating income for each segment, you can see an approximate fully costed margin for this set of services and/or segments. In conjunction with the changes in our segment reporting, we've also changed the way we report our same community information. We now show the same-store data for senior housing and for ISC separately.

For the quarter ended June 30 compared to the quarter ended June 30 of 2011, our senior housing same-store communities produced a 2.4% increase in revenue due to a 1.1% increase in revenue per unit, and a 110 basis point improvement in occupancy. The senior housing same-store rate growth was negatively impacted by changes in Medicare SNF rates earlier this year. When we exclude these RUG-IV SNF reimbursement and related expense changes from the senior housing same-store comparisons, revenue increased 3.2% with revenue per unit growing by 1.9%. Senior housing same-store expenses grew by 5% and NOI decreased by 2.5% between the second quarters.

Included in these expenses were $3.6 million of insurance reserve adjustments, primarily related to our General and Professional Liability Insurance Program, or GLPL Program, and our Group Medical Insurance Program. We've seen some negative development of prior year GLPL claims which resulted in the reserve adjustments this quarter. In addition, our health insurance program appears to be funding an unusual number of larger claims this year. Without these insurance reserve adjustments, same-store expenses would have increased by 3.9% rather than the reported 5%. We are now separately reporting same-store results for the redefined ISC segment.

Our definition of same-store locations within ISC calls for a location to be stabilized or to produce revenue for the 24-months ending on the reporting day. Because ISC has grown so rapidly over recent years, especially through the acquisition of Home Health operations, only 50% -- or 54% of units served by ISC qualify as same-store. Thus making this information somewhat less useful than the same-store information in the senior housing operations. In any case, same-store revenue for ISC declined 2.2% in the second quarter of 2012 compared to the same period in 2011. Same-store expenses increased 6.9% between these periods, while same-store ISC NOI declined by 22.3% between the quarters. As in the ISC segment, performance was negatively affected by the reduced Home Health rates and increased labor costs.

General and administrative expenses, excluding non-cash stock-based compensation expense and integration transaction related and EMR rollout costs was approximately $31.7 million, which was 4.2% as a percentage of total revenue under management, compared to $28.2 million for the second quarter of 2011. Much of the increase in absolute overhead dollars is, of course, related to the addition of the Horizon Bay communities to Brookdale's operations. I want to comment on the integration transaction in EMR rollout cost this quarter that totaled $7.7 million. A portion of those costs are related to the integration of Horizon Bay, including some costs of rolling out ISC.

The other portion relates to the ongoing effort of installing electronic medical records throughout our business. Some of this integration cost was precipitated by the acceleration of the rollout of ISC into the Horizon Bay communities. More broadly, the implementation of EMR is driven by the need to interface with acute-care providers and physicians, many of whom receive stimulus monies to install their own EMR systems. We've talked previously about increased capital expenditures for our EMR initiative.

However, certain of the software vendors we selected did not sell their systems, but rather charge a large one-time upfront implementation fee and provide a system access under a shared services arrangement. Much of what is in the EMR non-recurring member this quarter relates to that implementation fee for the Home Health EMR system, which is expected -- which is expensed rather than capitalized. We expect to incur $4 million to $5 million of additional non-recurring EMR expense for the balance of this year, added to the tail-off of Horizon Bay integration costs for a total of $4 million to $5 million per quarter for the rest of this year.

Turning to the balance sheet, we continue to be in a strong position. We do not have any debt maturities until 2013, except for normal, scheduled principal amortization. As we've discussed, our 2013 maturities without extension [rights] total around $300 million. We continue to have active, positive dialogue with lenders, on refinancing the various pieces of debt and have a plan in place to refinance these loans to address the maturities. With the low rates on a portion of this debt, we will continue to measure the appropriate time to refinance. Current indications for 10-year mortgage debt would place the interest cost in the range of 4.5% for fixed financing, and LIBOR plus 280 basis points for variable rate debt.

Looking at CapEx, our spending in Q2 for maintenance CapEx, which we include in our CFFO calculation, was $8.6 million, or $16.7 million year-to-date. Our corporate CapEx totaled $6.8 million in the second quarter. We continue to prioritize capital deployment to those areas with the highest returns with expansions, redevelopment and repositionings at the top of the list. During the quarter, we spent $11.2 million on Program Max activities. We also spent $22.6 million on EBITDA-enhancing in major projects during the last quarter. As a reminder, these are less expansive projects than Program Max but enhance the communities such that we expect higher financial performance through better occupancy and rate growth. I'll turn the call back over to Bill for closing comments.

Thanks, Mark. As we move into the second half of the year, we are encouraged by what we are seeing in our markets. Certainly, the predicted slow economic recovery isn't a tailwind but elements like the local existing home resale markets continue to improve, it will certainly help. The second half of the year is usually our strongest period of growing occupancy. We've seen independent living gaining traction over the last year and entry fee independent living have also been growing stronger since mid 2011.

Taking aside the newly acquired skilled nursing building, our occupancy grew each month during the second quarter and in July. We have also seen strong activity in entry fee sales in July as well as an increase in the skilled nursing census. We have been pleased with the consistency of our pricing in independent living and assisted living. We had one more quarter of difficult comps for skilled nursing as a result of the RUG-IV changes but now we know will get a 1.8% increase in the fourth quarter in our Medicare skilled nursing rates. The 2% sequestration cut is currently scheduled to take effect January 1, 2013.

Going forward, we will be mindful of expenses. The third quarter is our most difficult expense quarter with a number of days affecting labor costs and seasonal costs like utilities. The extended hot weather will also have an impact. Food costs will increase due to the drought but with our purchasing contracts and our menu management disciplines, it will be more of a 2013 issue. We did have a hit to our medical benefit costs this quarter due to some high-cost cases and higher utilization. Over the last two years, our medical benefit inflation has been 3.5%, much lower than the national average for corporate plans due to our wellness programs put in place several years ago -- that really do work.

Our plan costs remain below the national average at approximately $15 million per quarter. We will continue to monitor these costs. We're encouraged by the improvements we see in the business, solid occupancy and solid growth, improving entry fee sales and progress in ISC, with some caution regarding selected expenses such as the health insurance. On balance, we remain comfortable with our annual CFFO guidance range of $2.10 to $2.20.

We are constantly reviewing our capital deployment priorities and capital structure in light of the opportunities we're looking at. Considerations include capital required to potentially take advantage of strategic opportunities or significant acquisitions, capital required for Program Max and CapEx and reinvestments -- which can have both short and long term returns, as well as share repurchases and dividends. This remains a high priority of Management and the Board. We are keenly focused on maximizing shareholder returns.

We continue to view the reinvestment in our current portfolio and should continue to be a priority. [Completed] Program Max projects are yielding 15%-plus returns. We currently have 28 projects that are currently approved. Of that, 13 are under construction encompassing approximately 1,900 units and adding 400 new units over roughly the next year with project cost of $65 million. We are working with lessors to commence the other 15 projects. Year-to-date, we have spent $25 million of cash on these projects, with three projects already completed in 2012.

The other area of investment in our portfolio is our EBITDA-enhancing projects, the less expansive projects than Program Max. We have 58 of those projects completed and/or underway. We have now completed 27 projects in the last 12 months encompassing over 2,500 units. Based on the last quarter's annualized performance, the return on those 27 projects is close to 20%. As to acquisitions, we will continue to be very disciplined. It remains an active market.

We have given notice of our intent to exercise purchase options on two set of assets currently leased from REITs. Buying back these assets on favorable terms will be accretive. One of the communities, the retirement center will be expanded into a CCRC using the [CUN] for skilled beds we recently purchased in the second quarter. As we work through the rest of the year, we are intently focused on execution, maximizing our opportunities in the market, deploying our capital judiciously, producing the highest returns and at the same time, exceeding our residents expectations, all key elements for increasing shareholder value. With the improvements we've seen so far this year, we remain encouraged about our outlook for the remainder of 2012. We will now turn the call back to the operator to begin the question-and-answer session. Operator?

(Operator Instructions)

We'll pause for just a moment to compile the Q&A roster. Kevin Fischbeck, Bank of America.

Okay, thank you. Can you talk a little bit more about the margin performance? It looks like the margins were down year-over-year in all 3 segments but I am assuming that the EMR and the insurance costs might have skewed some of those things. How do we think about those costs across those divisions?

Well, again, EMR implementation costs are being broken out on a separate line. I think what's -- the primary drivers of the margin performance in the segments will be the insurance reserve adjustments which impact all the segments. But the modest decline you see in the Assisted Living and Retirement Center segments would relate to that.

The CCRC segment, you would have the insurance reserve adjustments. More significantly though, you have the change in Medicare reimbursement rates in those 2 segments. And then again, ISC was impacted with the change in home care rates effective at the beginning of this year.

So is it fair, it is right to say that on a more normalized basis, you think margins were flat to up a little bit; is that way to think about it?

Sure. For Independent Living and Assisted Living, that would be the case. And again, adjusted for the change in the Medicare rates in the CCRC segments, I think that's fair.

Okay. So the EMR costs are in the G&A number on your consolidated P&L?

They are in our consolidated G&A number on the P&L; that's correct.

Okay. And so the CapEx number was a little bit lighter than we thought. Is that just a timing number or is CapEx being pushed out a little bit?

We're not purposely pushing out the CapEx. I think at this point, I think it would be safest to assume it's timing. It's a timing issue.

Okay. And then I guess given the returns that you're getting is helpful to hear about the spending on both Program Max and the EBITDA enhancing CapEx, although I'm not sure if you mentioned it. But about how much money do you expect to actually spend in the second half of this year on those types of initiatives? Any thoughts around 2013 spending at this point?

The guidance that we had in place at the beginning of the year continues to be in place. I don't have those numbers right in front of me here, Kevin.

Okay, that's fine. (multiple speakers) Would you expect something similar next year?

I'm sorry?

Would you expect something similar next year?

Probably would. Again, we're in the planning process for next year. From an actual cash investment standpoint, some of this is affected by whether we're doing the work related to leased committees, or our own communities. So, again, I -- it's difficult for us to give you a general answer to that question until we provide the guidance for 2013.

Okay. And then last question. It sounds like you guys are feeling like a lot of the data points you're seeing imply that the core fundamentals are starting to improve. I know we've seen over the last couple of years, some ebbs and flows around occupancy. Is there something that makes you feel a little bit more confident about what you're seeing here versus maybe some of the other data points you've seen over the last couple of years?

Again, the ebbs and flows, ups and downs have been heavily influenced by the economic environment, and housing, other things. Right now, if the trends continue as is, we would expect to continue to see improvement but we still have a pretty uncertain economic environment out there.

Ryan Daniels, William Blair.

Hi guys, thanks for all the information. Mark, I wanted to go back to the EMR rollout. You may have given this and if so, I apologize but do you have exact number, rough number for the EMR implementation costs in the quarter?

It is roughly $3.8 million of the $7.7 million that we referenced.

Okay. And then going forward, you'll be paying a monthly fee of software as a service type fee for that which will just appear in your G&A line?

That's right. Obviously, we're in the middle of the rollout process for that system so until we get implemented in all the locations, that cost won't start to be incurred.

Okay. I know that's for the Home Health, you indicated that would be rolling out around the August time frame; what about the other two best-of-breed systems? Is it going to be a similar type of deployment where you're paying a large implementation fee and then a monthly fee going forward?

That is likely the case, yes. And again, we're using largely internal resources to roll these systems out. So it will be sequential to some extent where, once we conclude Home Health, we'll move on to another of the areas of the business and then to another.

Okay. That's helpful color.

And then, just on the SNF occupancy, you indicated you think in the back half of the year, that can pick up and you mentioned that's a focus of your business development team. Does a lot of that revolve around your readmission avoidance programs with CHF and ability to share data with EHRs, et cetera? Is there some assumption in there that the industry will taper back on the observation cases given some of the momentum in Congress to help the seniors resolve that issue?

I think that last area is still a little bit of an uncertainty, but a lot of what's going on the market is certainly heavily influenced by the focus of the hospital systems as well as the Medicare advantage program elements and stuff to get far more focused, and who they work with and how they work with those providers. We do think our programs are positioning very well to end up in preferred provider lists as well as preferred relationships.

We do have a higher Part A percentage of our census than I think most any of the major health systems out there, post-acute systems. We are very encouraged with what we're getting in terms of the response in the activity and working relationships we're building with parties. The measurable outcomes and the quality measures I think are boding well for us.

Okay, that's helpful color. One last one. Just good color on Program Max and the 28 projects. I am curious with the 15 you're still working on, given the returns that you're seeing there and the relatively low risk profile of generating those returns, is it just you staggering it so that your investment is staggered over time? Or the 15 that haven't started, is that just continuing to go through hurdles with some of the REITs to make sure that you can roll this out effectively? What is the gating factor there in those other 15, I guess is --

Certainly, the latter part of that in terms of working through the REITs and also then what are underlying finance they may have in it which extends it out a little bit. I think we are making measurable progress, significant progress with each of our partners in that regard. These end up being fairly complex projects which require everything from zoning and licensing issues, waivers, different things that they're not easy to conceive. So it does take time and so there is -- we have a pretty good bandwidth in that regard but it's still, it's not something that you can go out and do 50, 60 all at one time.

Also, we have with a number of those, we've got a number of units off-line, floors of buildings that are waiting for the work process so that also impacts us a little bit. There's a limit to how much you want to take on at a time in that regard.

Okay. That's helpful color. Thanks again, guys.

Daniel Bernstein, Stifel Nicolaus.

Good morning. Just wanted to go over the SNF occupancy again, just second quarter. And just try to understand the SNF assets that you purchased is completely unoccupied. How many units was that SNF property?

And if my understanding is correct, you're going to use those licenses to expand the property you are taking back from a REIT. Is that the correct assessment?

That's correct. It's 66 beds.

Okay. If I took -- if I back that out, and based on your other comments, it is safe to assume that you're up something like 10 BIPS or so on the private pay occupancy. If I were to think of it as the same-store private pay occupancy; is that the right range? Or is it something higher than that?

I think you got it.

Okay. Also just trying to understand the trends in the quarter on occupancy. Was ending occupancy above your average 87.7%?

Yes. Ending occupancy will almost always be above the average.

And it's above that today as well? If I read your July comments correctly?

That would be correct.

Do have an exact number to give us? Or is that --

No, we don't.

Okay. I also just wanted to go over on the entrance fee side, you had spectacular number of move-ins but also move-outs seemed to be lower than historical. I guess only about 60 move-outs on the entrance fee side. If you could talk about how that average should change going into the third quarter? Do you expect that to come back to something like 80 move-outs of what we've seen in the last several quarters?

Well, we have commented on both of the last two quarters that we had unusually high spike in usually high move-outs which -- or refunds rather, which we didn't expect that to be continuing so this is more closer to returning to a more normalized number than not.

Okay. Okay. And then on the Program Max, if you could go little bit further into if you had any expansion units come online in the second quarter? Maybe a little bit detail on the number of expansion units that might come online in the third and fourth quarter of this year?

Just a second, we're looking. I don't believe we had expansion units open in Q2. If we did, it would've been a very modest number.

Okay. Do you expect that to pick up some in the second half of this year?

Again, a modest number but the lion share of our unit additions out of Program Max (multiple speakers) first a repositioning comes into next year.

Okay. Okay. I think I'm good on my questions for now; I'll jump off. Thanks.

Greg Cole, Brookfield Investments.

Just wanted to ask you a question on how you're looking at the valuation of your stock? I know in November of last year at your Investor Day, you talked about your estimate of NAV being a low- to mid-$30 range. And curious, obviously, you're trading at a large discount to that and you look at some of your peers or partners on the healthcare REIT side who are trading at very large premiums to their NAVs. I'm just curious what you guys have thought about doing to close that gap aside from just running the business?

As I included in my remarks we are very intently focused on evaluating and examining all the elements of that and it is safe to assume that we are very much focused on how do we address that.

Thank you. At this time, there are no further questions. I will now turn it back over to Mr. Ross Roadman for any closing comments.

With that, we want to thank you for your participation. Management will be around all day; give me a call if you would like to have any follow-up conversations. With that, thank you very much.

Thank you. That concludes today's Brookdale Senior Living second-quarter earnings conference call. You may now disconnect.