Ensign Group Inc (ENSG) 2011 Q3 法說會逐字稿

Good day ladies and gentlemen, and welcome to the Ensign Group Inc. Third Quarter FY '11 Earnings Conference Call. (Operator Instructions). As a reminder today's conference is being recorded. I would now like to turn the conference over to your host today, Greg Stapley, Executive Vice President. Please begin.

Welcome everybody and thanks for joining us today. Yesterday we filed our 10-Q and issued a press release highlighting key financial results and other developments for the quarter. Both are available on the investor relations section of our website at www.ensigngroup.net. A replay of this call will also be available there until 5 PM on Friday, November 25.

First, the housekeeping items. Any forward-looking statements made today are based upon Management's current expectations, assumptions and beliefs about our business and the environment in which we operate. These statements are subject to risk and uncertainties that could cause our actual results to materially differ from those expressed or implied on the call. Participants should not place undue reliance on forward-looking statements and are encouraged to review our SEC filings for a more complete discussion of factors that could impact our results.

Except as required by federal securities laws, Ensign does not undertake to publicly update or revise any forward-looking statements where changes arise as a result of new information, future events, a change in circumstances or for any other reason.

In addition, any Ensign facility or business we may mention today is operated by a separate, wholly owned independent operating subsidiary that has its own management, employees and assets. References to the consolidated company and its assets and activities, as well as the use of the terms we, us, our and similar verbiage is not meant to imply that the Ensign Group Inc. has direct operating assets, employees or revenue or that any of the facilities, the service center, the home health and hospice businesses or our captive insurance subsidiary are operated by the same entity.

Finally, we supplement our GAAP reporting with non-GAAP metrics such as EBITDA, EBITDAR, adjusted net income and so forth. These measures reflect additional ways of looking at our operations which, when viewed together with our GAAP results, provides a more complete understanding of our business. They should not be relied upon to the exclusion of GAAP financial measures. A reconciliation of these non-GAAP measures to GAAP is available in yesterday's press release.

We also customarily take a moment to update you regarding the ongoing DOJ investigation at this point in the call. We have nothing new to report today. The special committee appointed -- of our Board -- appointed last year by the Board continues to work with regulatory counsel to identify and address concerns underlying the DOJ inquiry, and we remain anxious to cooperate with the DOJ to press the matter to conclusion.

With that, Christopher Christensen, our President and CEO, will get the call started. Christopher?

Thanks Greg. Good morning everyone. We are grateful that you are all joining us to hear about our third quarter results. We realize, however, that in the current environment many of you will want to hear more about the future and may be less about the past, so we will spend a lot of time on that today.

But I really don't want to gloss over our third quarter, for a couple of important reasons. First, although Medicare rate cuts and the new therapy rules did not go into effect until October 1, the announcement of those changes in late July required an immediate and highly focused set of responses. This created a ton of extra work and distraction for our leaders and their teams in the quarter as we strove through August and September to craft and implement solutions to the challenges these changes presented.

Nevertheless, in the midst of all that distraction, our teams performed beautifully. And we are happy to be reporting the quarter came in line with expectations, even though we know for certain that it could've been better having not had to deal with the disruptions imposed on us by the changes.

Second, it was another record quarter for us, our teams and our shareholders and we would be remiss if we did not celebrate that. So just to share a few of the highlights, quarter-over-quarter consolidated skilled revenue grew by nearly 24%. Same-store skilled revenue mix grew by 411 basis points to almost 56%.

Same-store Medicare days rose to over 79,000 days or 5.8%, a leading indicator for one of the many things that we can do to cover the shortfall left by the rate cuts.

Consolidated EBITDAR increased 26% to $33.4 million, with margins improving 94 basis points to 17%. Consolidated EBITDA increased nearly 32% to $30.1 million, with margins improving 145 basis points to 15.3%, and adjusted diluted earnings per share were up 32% to $0.62 for the quarter.

With a solid third quarter behind us, we have also increased our earnings guidance for the year. And remember that we did not decrease our guidance following the cuts, although many expected us to do so.

The performance of our teams, the organic up ide in our portfolio and our ability to respond quickly to the changing reimbursement and regulatory landscape allow me to be very confident in telling you that the Medicare rate reduction and therapy changes are not going to impact Ensign newly as severely as many have assumed. More about that in a moment, but first, I will turn the time over to Greg to briefly discuss our recent growth.

Thanks Christopher, and I will keep this brief. As many of you already know, the third quarter mark one of the biggest growth spurts in Ensign history as we took advantage of the turmoil in the market to acquire some very good assets at very attractive prices. We added 13 long-term care facilities and a home health business in five separate transactions during and since the quarter, bringing our total for 2011 to 18 facilities and three businesses acquired.

With the 1146 skilled nursing beds and 833 assisted and independent living units since January 1, our growth this year has taken Ensign to 3 new states; Iowa, Nebraska, and Nevada. And we look forward to further expansion in those new markets.

These acquisitions brought our total portfolio to 100 facilities, three home healths and three hospice businesses in 10 states with 9863 beds, 1657 assisted and independent living units, and almost 1000 home health and hospice patients being served.

We continue to seek compelling opportunities to spread the Ensign operating philosophy across the country, and we remain busy with additional acquisition growth and diversification prospects in the pipeline.

Capital for growth remains readily available. We had almost $26 million in cash on hand at quarter-end. In addition, during the quarter we procured a new $150 million credit facility that we already told you about.

Even with the first half of that facility drawn, we still have an untapped $75 million revolving credit facility at our disposal. And our net debt to EBITDAR ratio still remains at right around 2.1 times.

In addition, we have borrowing capacity to raise additional funds for growth should they be needed, all without overleveraging our balance sheet. All of these resources can be used to drive additional growth and continue the upward climb.

And with that, I will hand it back to you, Christopher.

Thanks, Greg. Suzanne will talk more about the quarter in a minute, but I want to get right to the issue that is at the top of everyone's mind, what we are doing to adjust to the changes brought on to us by the CMS final rule, and why we remain optimistic and continue to grow in the face of the serious headwinds affecting our industry.

When CMS announced an unexpected and unprecedented 11% rate cut on July 29, a number of wheels were quickly set in motion across our organization. These moves were not initiated by anyone on this call. Rather, the leadership teams at each of the individual facilities immediately began evaluating the projected impact of these cuts on their respective operations, and taking steps to close the gap.

They did not wait for direction from any corporate office. As most of you know, we don't have one. Nor did they have to wait for someone in accounting to give them their numbers, because we operate with full transparency. They already had their own numbers in real-time all the time. More importantly, they are accustomed to working with them and being accountable for them every single day.

In addition, because of the way we are structured they had full access to the real-time operating metrics of their various cluster partners and were able to reach out to each other to both give and receive help in addressing the projected shortfalls. Suddenly, there was no longer a gigantic $30 million plus annual chasm to cover. Instead, there was 100 much smaller $90,000, $33,000, $8000, etc. monthly gaps to bridge, each with a talented and motivated leadership team focus squarely upon that immediate challenge.

Having each quantified that challenge and having chopped it into understandable, manageable bites these dedicated teams set about without delay in crafting their individualized local responses and solutions necessary to meet those challenges head-on.

In many cases, as they dug deep into their operations, some of them discovered that they could not only meet them but they could actually do more. The process has been arduous for each of these teams, to be sure, because most of them already ran so lean and efficient that wrenching additional cost from their operations, even where they only needed to find a few thousand dollars here and there, was difficult.

But I'm pleased and proud and grateful to report to you that they are doing a phenomenal job, and that through their discipline and competence we are confident in telling you that we can minimize the bottom-line impact of the Medicare changes here at Ensign.

As we have told you before, Ensign was built exactly for times like these. And we believe that you will soon see that the current upheaval in the industry and our performance in the midst of it will tell that story better than we have ever been able to do ourselves.

I'm also pleased to report that the areas where these gifted and dedicated leaders chose to make adjustments were areas that would not affect direct patient care. The care we provide, its quality and the confidence and spirit of caring with which we provide it is our lifeblood, and these leaders recognize that. It is why they are here, it is why they are so successful, it is why the medical community has beaten a path to so many of their doors and it is why we at Ensign believe we still have plenty of room to run. The evidence of that fact is in our steadily increasing same-store Medicare days which are up again quarter-over-quarter.

We continue to have a tremendous amount of organic upside built into the existing portfolio, both in terms of census and skill mix that allows us to cover these gaps with a combination of meaningful revenue increases as well as disciplined cost efficiencies. We have a very solid balance sheet and we continue to have industry-low occupancy costs that, for us, stand as an additional hedge against the challenges facing our broader industry.

We have other levers to pull as well, as we carefully execute on our very simple business plan to meet the needs and outperform the expectations of our staff, our shareholders and especially those entrusted to our care.

There is no possible way that I could describe to you all the things that are going on across the organization to close the operating gaps of each facility. Some of them are very small. After all, this business has always required rigorous management of the smallest details. But those very small adjustments made in real-time and multiply by 100 facilities add up in big, big ways.

Let me offer just three quick examples of things that we have done this year and in this quarter that illustrate the kind of changes our leaders are making that will offset the reimbursement cuts. At Premier Care in Palm Springs, California, [Judd Jines] and [Darrin Tharp] and their team have improved Medicare revenues 42% by, among other things, cutting admission response times from 25 minutes down to under 7 minutes.

At Heritage Garden Rehab in Carrollton, Texas, [Stacy Stanley and Allison Huttingzer] and their teams have increased their Medicare revenue by 115% by developing specialty programs for isolation and other high acuity and hard to care for patients, which often pay much more than the normal Medicare rate.

At the Orchard in Whittier, California, [Rich Jorgensen] and [Anna Melnikov] and team have increased Medicare revenue by more than 142% this year, simply by inviting local referral sources to actually have a say in the design and execution of the facility's clinical programs and priorities.

And many more of our facilities, including more mature operations that some might have thought to be peaking, have continued to increase their Medicare revenues significantly by making incremental changes over a relatively short period a time. Changes that their communities and referral sources just loved, in other words by slowly, simply, steadily pushing on the flywheel until they had all the right people in the right places doing the right things for their patients and the community.

These are just a few of the great stories coming from all the corners of the Company as we look to the future and the opportunities it will present for us to grow individually and collectively, to do more together and become better clinically, financially and in every other way we can think of for our patients, our staff, our communities and our shareholders. These stories and the extraordinary people who create them are why we believe we can perform and even grow in the current environment.

With that, I will turn the time over to Suzanne to provide more detail on the Company's financial performance last quarter. And then we will open it up for questions.

Thank you Christopher, and good morning everyone. The third quarter produced record operating results with adjusted earnings of $0.62 per diluted share. This excludes the effect of a one-time nonrecurring charge of approximately $0.07, which was associated with the refinancing of some existing mortgage debt under the new credit facility.

Before I run through the key metrics I would like to take a moment to address some of the confusion surrounding the recent CMS approval of the California Special Plan Amendment, or the SPA, which allows the state to defer 10% of the Medi-Cal payments to skilled nursing providers from June 1, 2011, to July 31, 2012. The SPA makes it very clear that the state's proposed action is not a rate reduction, but rather a payment deferral. The SPA also requires that Medi-Cal programs to repay the deferred amount no later than December 31, 2012.

This requirement has some genuine teeth behind it, as it requires Medi-Cal to forego all 2012 and 2013 and future quality assurance fees, along with the corresponding [SMAP] match if it fails to make the payment on time and in full. We believe that the cost of this penalty to the state would exceed the cost of making the supplemental payment. Thus, while the temporary deferral will impact our cash position for the coming year, we are not concerned that the supplemental payment will not be paid.

Moreover, we anticipate that the short-term discomfort we might experience will be magnified for our nondiversified competitors, and may actually present some compelling acquisition opportunities in California that could more than offset the minimal cost of the deferral over time. We are happy to answer further questions about that later if any remain.

Full financials were included in our 10-Q and press release yesterday, so I'm only going to touch upon a few operating metrics that deserve special mention this quarter. Consolidated revenue was $196.3 million, up 19.2% compared to $164.7 million for the prior year quarter.

Part of the revenue increase was due to acquisitions made over the last year. But the real story was our same same-store improvement, where revenue grew by over 8.2% in the quarter. This growth came in part from an increase of 411 basis points in skilled revenue mix to 55.9%. It also came from a solid jump in our same-store Medicare days which increased 5.8% over the prior year quarter to more than 79,000 days.

We believe these metrics speak volumes about the continuing and future success of our strategy of increasing clinical competencies to become the facility of choice in the communities we serve. We are encouraged to see that even our most mature facilities still have significant room for our acuity and performance growth, to say nothing of the even larger organic upside these numbers indicate and are transitioning [in] recently acquired [buckets].

And while we are certainly doing many other things to assure our performance going forward, we believe that our Q3 performance in these two areas alone portend good things for our future as we tackle the current changes.

[Census] was another area where we were pleased this quarter. Census usually drops sequentially in the third quarter each year, but this quarter our same-store occupancy was relatively flat at 82.3%.

We actually expected a larger decline as a number of the skilled facilities in our same-store budget have been undergoing significant full facility renovations and repositioning efforts. These projects have required us to take over 100 beds out of service during the quarter and have created additional challenges for those (inaudible) teams, as it is tough to persuade some patients to do their rehab in a construction zone.

The sequential drop in same-store skilled nursing facility census [power was] only 20 basis points, a very small decline for a traditionally soft season, especially with the renovation. And the overall effect of the decline was actually offset by an increase in skilled days as acuity across our patient base climbed. We are also pleased to report that the same-store assisted living census was strong, growing by 133 basis points sequentially to 84.3%.

Other key metrics for the quarter included overall EBITDAR margins increased 94 basis points to 17%, and overall EBITDA margins increased 145 basis points to 15.3%. These results were achieved despite the downward pull at still-maturing facilities and the transition in recently acquired [buckets].

In reviewing the strength of our financial position for the nine months ended September 30, cash and cash equivalents were approximately $25.7 million. The Company generated net cash from operations of $53.2 million. Net cash used in investing activities was $126.9 million, which is primarily related to business acquisitions and the purchase and renovation of PP&E.

In addition we own the real estate at 73 of our 100 facilities, only 19 of which are encumbered by mortgage debt. We have the ability to leverage a portion of the unencumbered equity in our real estate portfolio to fund further expansion. And we have replaced our old A/R line with a lower-cost, five-year $75 million involving credit facility which remains untapped.

All of this leaves us well-positioned to continue to executing on our disciplined growth strategy in 2011 and 2012.

In light of our growth this year, and in spite of the unusual circumstances surrounding the industry at the time, we are doing something we normally do not do and are again increasing guidance for 2011. As you may recall, we actually increased our revenue guidance from the prior range of $740 million to $756 million to the new range of $755 million to $770 million we reported in August, which was right after the Medicare cuts were announced. We are re-affirming that increase revenue guidance here today.

We are also increasing our earnings guidance for 2011, which again we did not reduce when the Medicare cuts were announced, from the previously announced adjusted diluted earnings per share of $2.15 to $2.25, to the new guidance of $2.25 to $2.30 per share.

This updated guidance takes into account the projected effect of the CMS final rule and our response to it, which are just starting to ramp up in the fourth quarter, as well as corresponding offsets produced by our recent acquisitions, continued acuity shifts across the portfolio, higher occupancy, lower interest rates under our new credit facility, and other improvements we expect to achieve.

The guidance excludes the effect of a one-time non-reoccurring charge associated with the prepayment of the existing mortgage in connection with the new credit facility. And it is based on diluted weighted average common shares outstanding of 21.7 million, no additional acquisitions or disposals beyond those made to date, the exclusion of acquisition-related costs and amortization costs related to the intangible assets required, no material increase in the tax rate, and an aggregate 1% [for] adjusted decline in the overall Medicaid reimbursement rate.

In giving you these numbers, I would like to remind you again that I business can be lumpy from quarter to quarter and year to year. This is largely attributable to variations in reimbursement systems, delays in state budgets, seasonality and occupancy in skilled mix, the influence of the general economy on our census and staffing, the short-term impact of the acquisition activities and other factors.

But as you can see from the results, the Company is performing well at present. And we want our shareholders to know that even though we are pleased with the progress to date, we continue to see ample opportunity for additional improvement across the entire organization in 2011 and 2012.

I will now turn it back to Christopher to wrap up.

Thanks, Suzanne. Thanks to everyone who has been on the call. We hope this discussion is somewhat helpful.

We want you to know that our collective commitment to our customers, patients, residents, staff, communities and shareholders is stronger than ever. And we all remain very optimistic that we will continue to grow and perform both clinically and financially during this time of extraordinary change and opportunity in our industry.

As always I want to conclude by thanking our outstanding leaders and their teams for another record quarter, but more importantly for the love and care they give daily to our residents. I would like to thank our dedicated service center team who work tirelessly in their stewardships, as we all do, to support the field and help Ensign continue to progress. We would also like to thank our shareholders again for your support and confidence.

Sean, do you mind instructing us on how to proceed with Q&A?

(Operator Instructions). James Bellessa, D.A. Davidson.

Your pattern of continuing to have excellent results is to be congratulated. The Company recently made an acquisition in La Jolla. The 10-Q indicates that you paid a little less than $10 million for that property.

When I take the number of beds and divide it into that number, it becomes a very high price per bed. What can you tell us about that property and how we should look at it?

As we have told you, historically a lot of -- most of the time we are acquiring opportunities to (inaudible) sometimes we are acquiring strategically. The La Jolla asset is undoubtedly the most strategic asset we have ever acquired.

It sits in a very unique area of that community where it is close to not one, but two major medical centers that draw patients not just from California but from all over the country. It also is situated literally in the center of our San Diego County cluster, where we have several other facilities around it that we think will all enjoy some operational synergies with it. And so, we felt like this was a flagship facility that we could really add to that San Diego cluster and that it, together with the other facilities, would be much greater than the sum of their parts.

In addition, we bought that property from a lending consortium of 25 banks. It was a difficult transaction to do. It took us a very, very long time.

But the property came with an additional acre so of ground, and right there again in the heart of La Jolla that is very valuable and that we would like to either dispose of, or joint venture or see developed at some point in the future. It is not a great time for that right now, but we are talking to some folks about the possibilities of ramping that property to turn into some real -- a value generator of some kind for us.

It is currently entitled for a fairly substantial development. And so we could not get the facility without the land, so if you just apply the total price to the number of beds, you're going to get a very, very skewed picture of what we think those beds were worth, even though we think they are worth more than probably any bed we have ever bought. Does that answer your question?

Do you have any idea what that adjacent property might be worth?

We have an appraisal, but since we are out actually marketing that property to potential buyers and joint venture partners, we really cannot tell you what that appraisal was, lest we fail to maximize its value.

We could probably give you guidance and say that if you were to factor the cost of the beds, that they would be more than cut in half if that -- now Greg is going to be mad at me for saying that. But I don't want you to think that we are all of a sudden starting to pay an outrageous price for beds. This was a no-brainer.

However, we do have to carry a bit of a load for a little while. And we will still do well while we carry that load, but we will be excited to bring the right person in to help us with that land at the right time.

Yes, I guess the good news is, as Christopher says, we are not worried about the facility being what it is. It is a Medicare, it is not Medi-Cal certified. It's a Medicare-only, private, HMO skilled facility. We are not worried that it will not be able to carry that cost.

Today you repeated the idea that you have not reduced your forecast for revenues for this year based on the changes of Medicare reimbursement rates. And you have not changed them in this quarter after reporting the most recent quarter.

Going forward, although you have not initiated a 2012 estimate, what should we be looking at there? What kind of help can you give us in looking at the next year coming up?

Well, I think you are going to get some idea from the fourth quarter, which you don't have yet, I understand. But you do have some guidance. But I also want us to be a little bit careful because some of the adjustments that we are making will not be fully implemented until after the fourth quarter and any other part of the first quarter.

Simply because they were bigger projects, some that we were already working on that we had to accelerate and others that we became -- we committed to because we felt it was time to become committed to it, given the reimbursement reduction. So I think that to use the fourth quarter as what we will do next year would be awfully disappointing to us, because again, a lot of the changes that we are implementing will not be fully implemented until after the fourth quarter is over.

If I take the low end of your guidance for this year and then annualize -- and what that means for the fourth quarter on the low end, and then annualize that, I'm getting something that approaches $800 million of revenues for next year as you are currently constructed, or as your portfolio currently is organized. Would you be disappointed that you did not reach $800 million of revenues next year?

That would be a disappointing number.

Thank you for your responses.

Jerry Doctrow, Stifel Nicolaus.

I apologize in advance because I had to dial in late because we were on some other calls.

But coming back, Christopher, to your -- I like the phrase "times of extraordinary change and opportunity." Thinking about the opportunity side, how are you thinking about acquisitions both of additional facilities, both skilled and senior housing? Maybe touch on those separately, as well as ancillary businesses.

Do you see that volume maybe picking up, you do more ancillary? Just given where we are in the environment, what -- is it totally opportunistic at this point? Or do some things look better to you than others?

Well, it is partially opportunistic. We have seen across-the-board more opportunity now than maybe ever before. And so we will continue to be selective.

But from home health to hospice to skilled nursing and assisted living, there really are -- and the fact that we are in more markets helps us as well. But we are seeing quite a number of opportunities out there, and we think that pricing will reflect the challenges that are in the industry.

That is why I'm a little cautious in answering Jim's question on the La Jolla acquisition. I don't want anybody to think we are going to start paying that for any deals. It was a very unique and unusual deal.

Any of us who know you don't that is going to be the case. And geographically would you, at this point, again given the environment primarily focus on building out existing markets? Or do you still see yourself growing geographically?

Yes and yes. It would have to be the right opportunity. As we have shared on a call before, I know we have talked before, Jerry, that we have learned some lessons as we go into new markets, some very tough lessons. So we will be careful as we go into new markets to start with the right sort of operations, which we feel like we did in the case of Iowa and Nebraska.

So if we found the right sort of clinical, cultural opportunity to go into new states we will, but most of our focus and effort will be focused on backfilling.

On the backfill [made] a little more emphasis, do you think, on the ancillaries? I mean, a number of your competitors really seem to be focused on building out home health, building out hospice particularly.

Well, when you say more emphasis, I would say it is an equal emphasis. Because we have such a small denominator still on the home health and hospice front, certainly from a percentage standpoint there will be greater growth on that side. But I would say that it's a multifaceted effort. We are going to pursue the opportunities in assisted living, skilled nursing, home health and hospice equally and see what bears out in terms of the deal and how it fits with our existing portfolio.

Okay. And I'm assuming you probably already addressed, but I did not hear the mitigation efforts. So are you feeling more comfortable at this point about ability to mitigate?

I have been pretty excited about how every area of the organization has really pulled together, from the smallest of departments to the largest of departments, even the board and the special committee and all sorts of -- every piece of the organization has taken a hard look at what they can do differently. We feel very comfortable that we will mitigate most of the reduction in reimbursement.

As I have shared once before, I hope I did not speak in code, but we are an organization that is very performance-driven, you know, kind of pay for performance. And performance is not just financial performance. Obviously there are clinical, regulatory, cultural hurdles that must be overcome in order to deserve the higher level of pay. But because of this reimbursement challenge, obviously there will be a reduction in that pay for performance.

So a large percentage of our savings or a large percentage of the mitigation comes from that. And I think we probably, not to compare ourselves to anybody else, but I think we are an unusual organization in that we share very broadly the benefit of extraordinary performance. And so when there are challenges, we also all share in those challenges.

You have said it before. I appreciate it. All right, thanks.

Peter Sicher, Sidoti & Co.

Suzanne mentioned occupancy rates; specifically same-store was essentially flat sequentially and down year-over-year. What do you think it is going to take to get occupancy rates to move meaningfully in the right direction? And what levers can you pull to drive incremental occupancy in mature facilities?

If you don't mind, Peter, I will answer that. It's Christopher. Actually, if you look at the past many, many quarters we have actually had a pretty strong drive upward in that arena.

We did have some disappointments in the third quarter. But as we mentioned in what we said a second ago, we had an unusual circumstance where we had six facilities that at the same time were undergoing major construction or were changing the way that they were doing business, and as a result reduced the number of beds that were available. That was well over 100 beds which obviously, at our size, is over 100 basis points.

And so, getting those back online -- and almost all of them should be back online during the course of the fourth quarter, will help us a lot. But I think part of the slowdown also came from a focus, a dramatic focus, that we had two months to prepare for this change. And so our therapy teams, our clinical teams and our management teams were focused on addressing these issues and got pulled from their focus on marketing and changing reputation and such, and I'm sure that there was a slowdown as a result of that.

I can blame it all entirely on that, just as I can't blame it entirely on the construction. But I think if you look at our history, if you look at the last twelve, sixteen quarters you'll see that we have consistently been in the triple digit growth in terms of our same-store census growth.

Great. And I did not see any mention of it, but what is your current number of owned unencumbered facilities?

Let me just clarify, when I said triple digit I meant triple digit -- you know what I meant, in terms of basis points. Go ahead and ask that question again Peter.

(multiple speakers) So the number of owned unencumbered facilities is 54 after the La Jolla acquisition.

Okay great. Thank you, Suzanne.

(Operator Instructions). I'm not showing any other questions in the queue at this time.

Okay. Well, thank you. We appreciate your help and thanks to everyone for joining us today.

Thank you. Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the conference. You may now disconnect. Good day.