Good morning my name is Regina, 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. [Operator Instructions] Thank you. I would now like to turn the conference over to Ross Roadman, Senior Vice President of Investor Relations. Sir, you may begin the conference.

Thank you, Regina, and good morning, everyone. I also would like to welcome you, all, to the Second Quarter 2013 Earnings Call for Brookdale Senior Living. Joining us today are Andy Smith, our Chief Executive Officer; and Mark Ohlendorf, our President and Chief Financial Officer. I would 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 filed with the SEC from time to time. I'd direct you to Brookdale Senior Living's earnings release for the full Safe Harbor statement. With that, I'd like to turn the call over to Andy Smith. Andy?

Good morning. I want to add my welcome to all of our shareholders and other participants for our second quarter earnings call. I'll lead off today with some brief comments about the second quarter. I will then turn the call over to Mark to discuss our results in more detail before opening the call to your questions. We are pleased with our second quarter results, which follow a strong first quarter. As a result, we have raised our full year CFFO guidance to between $2.35 and $2.45 per share. During the quarter, we produced $0.61 of adjusted CFFO per share. The $74.8 million of CFFO in the second quarter represents an 8% increase over the second quarter of 2012. We drove this year-over-year improvement for rate growth and occupancy gains, strong entrance fee sales and solid expense management. Like the first quarter, our rate growth moderately exceeded our expectations. Excluding skilled nursing, our senior housing average monthly revenue per unit increased 2.7%, up slightly from last quarter's 2.6%. I exclude skilled nursing because of the impact of sequestration and the sensitivity of skilled rates to the mix between private pay, managed care and Medicare census, all of which can change very quickly. Looking specifically at occupancy, we increased our quarterly average occupancy by 60 basis points for the consolidated portfolio over the second quarter of 2012. Sequentially, our consolidated occupancy was essentially flat with the first quarter when you exclude skilled nursing, which typically declines seasonally from Q1 to Q2. As expected, we saw an improving occupancy trend during the second quarter and ended with June's average occupancy at 88.7%. July followed the trend with average occupancy of 20 basis points to 88.9%. This year's trend in occupancy growth is typical of our historical experience, where occupancy turns mid-second quarter…

Thanks, Andy. Looking at our key non-GAAP financial performance metrics, we saw that excluding certain items from both periods, our cash from facility operations, or CFFO, for the second quarter totaled $74.8 million, an 8.1% increase over the second quarter of 2012. Adjusted EBITDA was $117.4 million, a 4.7% year-over-year increase. For the first 6 months of 2013, CFFO was $114.7 million, again, excluding certain items from both periods or a 13.4% increase for the same period of 2012. Our same-community data for senior housing for the second quarter of 2013 compared to the second quarter of 2012 is illustrative of our solid quarterly performance. We produced a 3.1% increase in same-community revenue due to a 2.2% increase in revenue per unit, which was somewhat muted by sequestration and skilled nursing and an 80 basis point improvement in occupancy. For the second straight quarter, our initiatives to manage same-community costs resulted in modest expense growth at 2.2%. We continue to see progress as we implement new systems and processes to improve the matching of labor required to provide quality services to our residents, with labor resources actually deployed, even as we add associates to accommodate occupancy growth. Our systems and processes assess and document our residents' need and create staffing plans to provide the quality of care required for each resident on an individual basis. These systems then match our staffing to most effectively provide the services. Savings in our employee benefit plans, energy management initiatives and purchasing discipline also contributed to moderate our cost growth. Senior housing same-community operating income grew 4.8% versus the second quarter of 2012 and 3.5% for the full 6 months of 2013 versus the same period of 2012. We drove top line consolidated revenue growth of 3.8% for the second quarter over the second…

[Operator Instructions] Our first question will come from the line of Joshua Raskin with Barclays.

Here with Jack as well. Just wanted to follow up, Andy. I appreciate all the comment on the national marketing. And I'm just curious if there's ways that you guys can measure the success there? I'm curious if there's ways to sort of see how move-in trends compare in specific geographies, where the marketing's been heavier. How are you guys tracking the success on that? And then maybe any thoughts on local brand for your facilities relative to the Brookdale brand? And if you have any comments on that as well?

Yes, sure. The -- ultimately, the branding campaign, it's primary measurement will be, over time, we expect to see greater move-ins, better conversion rates and better occupancy rates. Right now, we are measuring -- on a short-term basis, we are measuring the -- how many leads get to our website, how long they stay on the website, the depth of their review of our website, how many leads come from mobile applications, which, of course, we think is where the world is tending to, where marketing is evolving to. So we're trying to attract all of these shorter-term metrics right now to see if the branding campaign and the branding activation is as effective as we believe it will ultimately be. We'll continue to track those. Again, as I said in my prepared remarks, all of those metrics are up fairly sharply comparing the 90 days before activation of the brand to the 90 days after. Our year-over-year leads on our -- from our mobile applications and from our website are up more than 17%, is my recollection. So all of those things, we think, are contributed -- or contributors to the branding activations. In terms of whether -- how do we think about local branding as compared to the national branding. Over time, we expect the name Brookdale, again, as I said, to be synonymous with the trusted senior living provider in this entire country. We think once this branding activation is actually taken full hold, that it's going to be hard for our competitors to emulate the strategy. So we would expect local brand equity to be diminishing over time as the brand equity and the name Brookdale is further established.

This is Jack. Mark, I appreciate the color on the June, July occupancy. Could you talk just a little bit about the trends you're seeing Independent versus Assisted? And then is there anything at regional that you can point out about that?

Nothing particular will be notable on a regional basis. If you look at kind of the end of the quarter after occupancy did its seasonal bottom and begin to recover, we've actually seen the stronger performance on the Independent Living side. We had a very strong 60- to 90-day run there.

Okay. And then last one for me, for Andy. You mentioned you're evaluating a number of acquisition opportunities. Any sense for the type of scale you're looking at there? And then what sort of leverage you feel comfortable with?

Well, just like in the past, Jack, what we -- we're looking at large acquisitions, we're looking at small acquisitions. Our strategy here is to be opportunistic to find acquisitions that fit with our portfolio either by augmenting what we have, in particular, regional marketplaces or opening up new markets, where we aren't currently provided that we do so in scale. We're big believers in scale in terms of local geography. In terms of the leverage that we would expect, it's about 65% loan-to-value would be our ordinary course expectation.

Your next question will come from the line of Kevin Fischbeck with Bank of America Merrill Lynch.

Just wanted to get a sense, because, I think, the NIC data from Q2 kind of spooked some people. And now that we've seen a few of the company's report numbers, it feels like the number's a little bit better maybe than the NIC data implied. I just want to get a sense from -- obviously, you guys are showing some momentum, I mean, do you feel like -- that, generally, the industry is seeing the flow through from the economy and the housing market? Or do you attribute some of this improvement that your company more to some of the initiatives you mentioned before rather on marketing and everything else?

Well, Kevin, we believe that we're executing better, and we certainly intend to. But I would say that across the entire industry, you're -- what you've seen here is pretty much ordinary course seasonal expectations. First quarter saw often, general speaking, certainly, for us, and, I think, for the balance of the industry, you see occupancy improve over the course of the year. We expect that to continue.

Okay. So you feel like the fundamentals of the other business are really acting well broadly?

Yes, absolutely.

Okay. And then it's been a little while, since there's been a direct comment on a real estate transaction. I mean, everyday that goes by without you guys announcing something, it feels like -- that we should just kind of put that behind us and focus on the core fundamentals. But I don't know if there's anything that you would or could say about your view about unlocking, potentially, the value of the real estate of the company?

Yes. The -- again, I don't think we have much to add to what we've said in the past, Kevin. We think it's part of our job to continually assess our capital structure in order to maximize our shareholders' interest. We're doing that, but there's nothing that we can add at this point to what we've said previously.

Okay. And then last question, on the cost side, and that's been -- some of the best surprises so far this year is that you guys have done a good job on that. I guess how much more runway do you think you have on cost control? Or is it even more about growing the top line and just leveraging that?

Well, it's really both. I mean, our objective here for the next several quarters is to continue to maintain cost growth levels that are under normal inflationary levels. Most of what we're doing on the cost structure side of things is optimizing. So these expense growth rates 2% or a little bit more, 2% to 3%. Our objective is certainly to continue those for a period of time there.

Your next question will come from the line of Ryan Daniels from William Blair.

This is Nick Halen for Ryan Daniels. I was hoping you could talk about the recently announced relationship you formed with HealthStream, maybe in to regards, if you can just discuss how you believe the web-based training initiatives will benefit your workforce and impact costs? And second, any color on future -- on the future model to sell jointly developed training solutions to other entities? Will that have much of a revenue impact?

Good question. The HealthStream partnership that we just forged is all about trying to improve our training techniques, so that we can better empower the 48,000 folks who work here. So we're just trying to develop better web-based systems that more effectively train the folks that work here. It's as simple as that. We're very excited about this partnership. We think it's going to bear huge fruit, and it's really going to give us a big step forward. We've already been -- our learning network has spent a lot of time, a lot of effort and a fair bit of money, trying to make sure that our workforce is appropriately trained on a continuing basis. But do we think this partnership is going to take us to a new level? It's too early to tell right now, right? We are much more concerned internally with Brookdale. We're doing what I just said, in terms of better training our current workforce. So it's too early to predict exactly how much revenue would be associated with exporting these programs to other players. But we'll update you on that as we move through the process.

Okay, great. And could you remind us what you're doing internally to mitigate some of the margin pressures on the ancillary services business, given the rate cuts and the other pressures you mentioned?

Well, certainly, we're doing everything we can to reduce cost and mitigate cost inflation over time. I think our situation in that business is simpler to what you've seen in some of the other larger operators of home care and outpatient therapy. The advantage we have going in is the infrastructure and overhead cost in that business for us is more efficient, because it's bolted on to the big senior housing platform. But it's largely a cost mitigation, cost control strategy as you a go forward.

Okay. And just one quick question. Could you give us an update on the EMR rollout? In what areas you've put that in, and your remaining cost, and if you're starting to see any benefits from that initiative yet?

Sure. We finished the rollout of EMR in our home care business earlier this year. So we're beginning to see -- you kind of have to run out all of your resident activity from the prior system, admit folks on the new system before you begin to see all the benefits. I think we're clearly seeing some significant benefits around the sort of compliance and general efficiency of the home care operation. So that's been successful. We're in the middle of rolling out EMR to our Outpatient Therapy business right now. That activity will continue through the end of this year, and then that transition process of admitting new folks onto the new system and kind of running through the service episode of folks in the prior system will continue as we go into early next year. And then as we go through the second half of this year and into next year, we'll be focused on some further EMR activities on the skilled nursing side and assessing the best course of action with assisted living. So we'll be pretty active with EMR, I suspect, at least through 2014.

You're next question will come from the line of Frank Morgan with RBC Capital Markets.

I was hoping you could give us a little bit of commentary, what you're seeing with regard to the rate environment around the country? I think you commented on occupancies. But I'm just curious what you're seeing from -- on a competitive landscape? What your competitors are doing with rates today?

Yes. The -- I'd say that we think the rate environment -- we think we're doing a little better than our competition in terms of our ability to increase rate. I mean, it's still a competitive marketplace, it's not back where it was in 2006 or so. But as we indicated, we're doing a little bit better than we expected. And we think we're doing a little bit better than the competition. After the balance of the year, we expect a gradual rate improvement, reflecting an improved environment and higher occupancy that we've enjoyed.

Okay. And then my second question on the net entry fee proceeds that you're getting, you, obviously, had a very good quarter. I'm just curious, how should we think about that with the balance of the year? What did you really have modeled in. And the dynamic between the receipts and the payouts. I know, in the past, there've been a period where payouts have been -- you had predicted, at some point, you would see a pickup in the net number, because you had already sort of prefunded, if you will, the payouts. I'm just curious, is this dynamic that we're seeing right now kind of where it should be? Or should anything change there? And how does that affect numbers, going forward?

I'm not sure we would necessarily change our guidance in a meaningful way right now, Frank. We're performing marginally ahead of our internal expectation, which, of course, colored our guidance for the year. We are beginning to fill a lot of vacant units in the entry fee portfolio. So the number of units we have that don't have refund attachments is shrinking over time. In fact, in the quarter, refunds were a little bit higher than we would've expected, but the increase in sales volume more than covered it. So I think the general answer to your question is that the kind of the transactional activity there with sales and refunds, it's probably a relatively normal level right now. And I'd expect the year will be slightly ahead of what we originally guided but not dramatically.

Okay. And then just last one. On the acquisition, you talked about still looking. Is anything changed there? I mean, do you sense that the market is -- that people are more receptive to selling now? Or is that just -- you're just kind of more of the same?

I'd say more of the same, Frank. I mean, there's a lot of opportunity, a lot of activity out there. Obviously, the interest rate environment's changed a little bit here. That may affect pure-spread investors view, a smidge but I don't think there's anything to remark upon. There are plenty of opportunities for us to pursue, and we're doing that.

Your next question will come from the line of Daniel Bernstein with Stifel. Daniel M. Bernstein - Stifel, Nicolaus & Co., Inc., Research Division: Back to the acquisitions. I was trying to think about the trade off between building and acquiring at this point. You built a little bit in the past. Do you find construction development, at all, attractive here versus building? And maybe you can talk a little bit about if you were going to build today what the cost, say, per unit would be for your -- for CCRC and IL or AL replacement cost versus buying?

Well, let me start this off, and we'll kind of pass it around the rim a little bit, Dan. Remember when we're doing expansions and additions to our existing portfolio, we're operating with some knowledge on the markets that you almost can't apply to acquisitions, right? So if we've got a scale of market -- we don't have dementia care in that market, let's say, just as an example. We know how many customers we move around internally that could use Dementia care. We have a pretty good sense of where Dementia care would best be deployed in the market from a geographic standpoint. What the customers in that market like. So not surprisingly, when we do additions and expansions, we see the highest returns of any capital we deploy, because we're operating with the level of understanding on the market that you almost can't apply in other areas. In terms of the numbers on construction cost, that varies a lot depending on the market. If you had to pick an average, it's...

$180,000 to $200,000.

$180,000 to $200,000 is probably a good general average, but that could vary by 30%, 40%, 50%, depending on what market you're in. Daniel M. Bernstein - Stifel, Nicolaus & Co., Inc., Research Division: Okay, but that's not ground up. That's just on the expansions and additions. I was thinking even more in terms of -- you're doing something like you did in the villages, where it's ground-up kind of development?

Yes. That one's a little bit hard to reason from, because that's an entry fee community, which is a different animal than some other product types. That particular development would've been well over $300,000 a unit, but it's a very different kind of project as well. Daniel M. Bernstein - Stifel, Nicolaus & Co., Inc., Research Division: Right, right. And have you looked at the Memory Care product, because that's, obviously, a very -- becoming very popular on the development side, freestanding Memory Care. Do you have a significant number of freestanding Memory Care as you look at that product? And how do you view that competition versus Memory Care within your existing facilities, AL, Memory Care or within your CCRCs? Do you feel freestanding Memory Care is a significant competitor to your product?

There are a lot of questions in there. I'll take a crack at it, and Mark can add in. Yes, we do have a number of freestanding Memory Care communities. Our perspective is that where we can have more elements of the continuum of care on one campus, that's better. So while we think a freestanding Memory Care product is a good one, we would rather have it coupled with assisted living or various levels of Memory Care. That's just part of our fundamental philosophy about how best to position a portfolio. There is a lot of new freestanding Memory Care that's been announced or at least has been talked about in terms of new construction. We're mindful of that, and we keep a close eye on it. We are not terribly concerned about all of that new announced construction, at least at this point. The absorption level is still probably 2 times what the new construction is. And when we look at our local markets, our competitive -- our folks who monitor the competitive landscape, along with our local folks are always watching out for new products. We see very little that are actually in our local submarkets. And in the isolated circumstances where we do see a new competitor that's broken ground and is going to come out of the ground, we develop plans very early to deal with that new competition and actually accelerate our capital expenditure program to make sure that we can compete effectively with that new competitor. But it's really for our local submarkets across the entire country a pretty limited number of new competitors that we see creating new de novo construction. So again, we're mindful and we're watchful, but we're not too terribly concerned right now. Daniel M. Bernstein - Stifel, Nicolaus & Co., Inc., Research Division: Okay. One last question here. If we can go back over the impact of sequestration on -- in the quarter on the private pay senior's housing in terms of the skilled -- in terms of operating margin, you kind of went over that on the year-over-year. And I'm not sure I heard it on the quarter itself. What was the impact on operating margin, if you took skilled nursing sequestration out? And maybe what would be the rate growth -- where might be your average monthly rents if you took the sequestration out for this?

Okay. There's kind of multiple answers to your question there. If you removed skilled nursing from the same-store comps -- all of skilled nursing, our same-store rate growth goes from, I believe, 2.2% to 2.7%, okay? The actual dollar impact in skilled nursing of sequestration in the second quarter is about $650,000, $700,000. Daniel M. Bernstein - Stifel, Nicolaus & Co., Inc., Research Division: Okay. On the revenue side, or the income side?

Well, the same thing.

Your next question will come from the line of Dana Hambly with Stephens.

Mark, I appreciate you giving the July versus March numbers in the Retirement Centers and the AL, obviously, a huge improvement there. But I want to make sure I'm not getting ahead of myself, so I'm assuming that the CCRC occupancy was not more flatfish with where we were at the end of March?

Yes. Actually, the skilled nursing component of the CCRCs accounts for the lion share of the occupancy decline from Q1 to Q2.

Okay, that's fair.

Now, Daniel, what we expect and have begun to see at least early is that the second quarterly is soft for us seasonally in the skilled senses. But it, generally, begins to start to build around June through the balance of the year. And we saw that beginning in June -- I'm sorry, in July, and we expect it to continue through the balance of the year.

Right, okay. So occupancy looks like it continues to improve through the rest of the year. Third quarter, high-expense quarter, so maybe looking at flattish to slightly down on the net CFFO number in the third quarter?

Right.

Okay. And just, Andy, you mentioned that reinvesting in the portfolio is priority #1. I think in the past, you've talked about returns on the Program Max investment. Can you just remind me kind of the level of spending going in the Program Max this year? And maybe you thought about it for next year? And where the returns on those investments are?

Dana, it's Mark. Let me give you kind of the high-level numbers here. Initial guidance for the year was to deploy $60 million to $80 million of net cash in Program Max. Now that's not the same as the project cost, right, because we're working with a fair number of leased assets here. The gross number, I think, is $150 million or so. Now we don't see the returns right away. We have to get the capital deployed, build the assets, open the assets and fill them up. So while we target mid-teens yields on -- based on project costs, you probably don't see that until 3 to 4 quarters after the project opens and has an opportunity to stabilize. So I think, when we do our guidance for next few year, we will do our best to show you what's going on with Program Max. But I wouldn't expect you're going to see a significant economic effect of our new class of projects in the current year.

There are no further questions at this time. I would turn the conference over back to Mr. Roadman for any further remarks.

Thank you, Regina. With that, we, again, thank you for your participation, management will be around all day if you have some follow-up questions. With that, thank you very much.

Ladies and gentlemen, this does conclude today's conference. Thank you, all, for joining and you may now disconnect.