Alcon Inc.
Q4 2007 Earnings Call Transcript

Published: 27 Feb 2008

[Operator:]

Ladies and gentlemen, thank you for standing by and welcome to Assisted Living Concepts Incorporated report annual and fourth quarter results conference call. At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer secession with instructions given at that time. (Operator Instructions) And as a reminder this conference is being recorded. At this point, I'd like to turn the conference over to our host Mr. John Buono. Please go ahead.

[John Buono:]

Good morning, and welcome to the Assisted Living Concepts investor conference call. I am John Buono, Senior VP and CFO. With me today are Laurie Bebo, our President and CEO, Eric Fonstad, our Senior VP and General Counsel. A replay of this call will be available approximately one hour from its completion until March 27, 2008. You can access the rebroadcast by clicking on the investor relations section of our website at www.alcco.com or by dialing 800-475-6701, or international, 320-365-3844, using the access code of 909438. Ms. Bebo will comment on our fourth quarter operations and our expansion plan, followed by my presentation of the financial results for the quarter. We will then welcome your questions. First, please note that this discussion includes forward-looking statements. Such statements involve risks and uncertainties that may cause actual results to differ materially from those experienced or implied today. These risks include those listed in our public filings with the United States Securities and Exchange Commission. We suggest that you refer to these filings. In addition, our remarks include pro forma and other non-GAAP measures. Please refer to our earnings release issued earlier this morning for reconciliations of these measures to their corresponding GAAP measures. These materials can be found through the investor relations section of our Web site at www.alcco.com. Now I will turn it over to Laurie.

[Laurie Bebo:]

Thank you, John. Good morning, everyone. We are pleased to report that our plans to grow ALC and increase EBITDA remain on track. We completed CaraVita acquisition on January 1, 2008 and we will therefore tend to benefit of their profitable operations for all of 2008. We are happy to report the integration process has proceeded [amicably]. As we previously discussed the CareVita acquisition consists of the operations of eight assisted living residences consisting of 541 leased units in Georgia, Alabama, South Carolina and Florida. Acquiring new operations continue to be a priority for our team. We see this market is offering good opportunities for acquisitions and continue to review acquisition opportunity from our return perspective and well how incident to our portfolio. Turning to our new build program, we have completed the design phase and most of our plant expansion units and are receiving bids on the additions. Construction is expected to begin if spring weather allows in the different geographic areas. Bids continue to be consistent with our original guidance of $125,000 per unit. We expect to occupy first of these units in the fourth quarter of 2008. We will continue to see additions through our existing own buildings as producing strong returns on investments for us. As such, in an ongoing fashion, we are evaluating additional buildings for expansion and potential subsequent projects. Although, we experienced a decline in quarter-over-quarter private pay occupancy in the fourth quarter of 2007, we continue to execute our strategy of improving our private pay mix. Private pay occupancy declined by 43 units in the fourth quarter over reduced our Medicaid units by 189. This brought our overall private pay occupancy percentage to 83.7%, this compares to 72.6% in the fourth quarter of 2006 and 81.4% in the third quarter of 2007. Our percentage of revenues from private pay sources in the 2007 fourth quarter was 88.1% up from 79.5% in the fourth quarter of 2006 and 86.2% in the third quarter of 2007. Our private pay average daily revenue improved $101.75 from $95.87 in the fourth quarter of 2006 and $101.24 in the third quarter of 2007. This is a 6.1% increase in private pay rates year-over--year. More importantly, inclusive of Medicaid, our rates improved to $96.75 in the fourth quarter of 2007, from $87.48 in the fourth quarter of 2006 and $95.60 in the third quarter of 2007. Medicaid rate improvements resulted primarily from existing lower Medicaid programs, less taxes as well as improvement in case mix assessments initiated by management. This is a 10.6% increase in our overall rates per unit year-over-year emphasizing the importance of our move towards 100% private pay occupancy. On a same-store basis, which removes the impact of our purchase of the Dubuque, Iowa and Northwoods Michigan residences in November 2006 and July 2007, respectively, our occupied private pay units in the fourth quarter of 2007 increased by 17 units from the fourth quarter of 2006 and decreased by 56 units from the third quarter of 2007. Although the rate of move-outs in the fourth quarter was lower than the highly experienced in the third quarter of 2007. We also encountered soft holiday season move-ins during the fourth quarter. Our number of move-ins in 2007 improved relative to 2006. Our total occupancy percentage in the fourth quarter of 2007 decreased to 74% from 86.4% in the corresponding 2006 quarter and from 77.6% in the third quarter of 2007. Other important investing activity that took place during the fourth quarter of 2007 was the repurchase of 1.7 million shares of our common stock, bringing the total for the program up to 4.7 million shares at an average price of $8.34 per share, $39.1 million have been spent in total on our share repurchase program. In summary, the operating landscape and regulatory environment continue to change as it relates to Medicaid. We are further encouraged by strategy to exit those programs. There is no doubt we will benefit our shareholders staff and residence in a long run. As we have discussed however, it's not without our inherent challenges and it's not a quick fix and with traditional external economic pressures. We could see further delay in getting the private pay occupancy to national averages. The ALC team has been popular, tireless and its approach to bring in more residents and through its transition and continue to host strong EBITDA margins that offer a growth for the potential and future profitability. Now, I'd like to turns things over to John to review our financials.

[John Buono:]

Thank you, Laurie. Earlier this morning we released our financial results for the fourth quarter and full year ended December 31, 2007. During the comparative periods presented in that press release through November 10, 2006, the date of our separation, we were owned by Extendicare. Our comparative results through the date of separation are presented on a basis consistent with our Form 10 that was filed in connection with our separation from Extendicare in that they include the assisted living operations of Extendicare. Our results after the separation no longer include a total of 270 units retained by Extendicare. In addition, in November 2006 and July 2007, we acquired residences located in Escanaba, Michigan and Dubuque, Iowa, which are included in our results from their respective dates of acquisition. To improve comparability, we have reported certain pro forma financial data in the 2006 periods. In addition, we have reported operating statistics by all continuing residences that eliminate the residences retained by Extendicare and by same-residence basis that eliminate statistics from the acquired properties in Michigan and Iowa. We have not made pro forma adjustments to general and administrative expenses or interest expense in the 2006 data to reflect the ongoing costs of being a public company or to eliminate intercompany debt. My financial discussion will be based upon the pro forma financial data from the 2006 period and all continuing operations for 2007. Revenues of $56.5 million in the fourth quarter of 2007 were a 2.7% decline from $58.1 million in the fourth quarter of 2006 and a 2.4% decline from $57.9 million in the third quarter of 2007. The decline in revenue in the fourth quarter of 2007 from the 2006 fourth quarter resulted from the decrease of 935 units occupied by Medicaid residence partially offset by improvements in private pay rates and an increase of 115 units occupied by private pay residence. The decline in revenues as compared to the 2007 third quarter results from 189 and 43 fewer units occupied by Medicaid and private pay residence respectively partially offset by an increase in overall rates. Residence operations expense decreased by $700,000 in the fourth quarter of 2006 primarily from reduced census and favorable experience in our self-insured insurance programs partially offset by inflationary factors. Residence operations expense decreased by $1.9 million from the third quarter of 2007, primarily from decreased payroll and benefits in other variable expenses associated with reduced census as well as favorable experience in our self-insured program. In the fourth quarter of 2007, general and administrative costs increased by approximately $500,000 over the fourth quarter of 2006 primarily from a full quarter of public company expenses in 2007, including fees associated with the implementation of Sarbanes-Oxley. General and administrative costs increased by approximately $600,000 from the third quarter of 2007 primarily from professional service expenses including the Sarbanes-Oxley 404 implementation, higher bonus accruals, which is (inaudible) non-repetitive reversals which were made in 2006 and the non-repetitive reversal of the non-cash based compensation. In the 2007 fourth quarter adjusted EBITDA was $12.5 million a decline from $13.8 million in the 2006 fourth quarter and down from $12.6 million in the 2007 third quarter. Adjusted EBITDAR was $16 million in the 2007 fourth quarter down from $17.4 million in the 2006 fourth quarter and $16.2 million in the third quarter of 2007. Margins from operations defined as revenues residence operations expenses divided by revenues, a 34.7% in the fourth quarter of 2007, down from 35.1% in the fourth quarter of 2006 and up from 32.9% from the third quarter of 2007. In the 2007 fourth quarter net income from continuing operation was $4.1 million compared to $5 million in the 2006 fourth quarter excluding separation transaction costs and [$4.6 million] in the 2007 third quarter. Earnings per share from continuing operations was $0.06 per share compared to $0.07 per share in the fourth quarter of 2006 after excluding the separation transaction costs and $0.06 per share for the third quarter of 2007. Cash flow from operations for 2007 was $49.1 million compared to $19.1 million in the prior year. Cash flow from operations improved primarily from higher net income and improved working capital mainly improvements in accounts receivable, prepaid expenses and restricting cash. Cash used in investing activities increased from $20.7 million in the 2006 year to $55.7 million in 2007. The increase in cash used in investing activities was primarily from the purchase of the residence in Dubuque, Iowa and the cash flow side of the CaraVita acquisition. Cash used in financing activities was $700,000 in 2007 compared to $15.2 million in 2006. In 2007, we used $39.1 million to purchase our common stock, offset by borrowings under our line of credit of $42 million. In 2006 we had received a $43.7 million capital contribution capital contribution from Extendicare, which was used in part to repay $25.2 million in advances from Extendicare. We will now welcome your questions.

[Operator:]

(Operator Instructions) Our first question comes from Kevin Ellich with RBC Capital Markets. Please go ahead. Mr. Ellich your line is open.

[Kevin Ellich:]

Good morning. Can you hear me now?

[Operator:]

Yes, we can hear you.

[Kevin Ellich:]

Thank you. Thanks for taking the question. First question is residents operations expense look lower than last quarter and John can you remind us, is this a seasonal expense and what's you expectation going forward on this front.

[John Buono:]

No, Kevin, I wouldn't say that it's a seasonal expense. I'd say that this is management's efforts to control the labor as the census declines. And you will see and how effectively controlled our variable expenses here in the fourth quarter and as the census has declined and as far as the rates are concerned that will be largely dependent on our [houses] going forward.

[Kevin Ellich:]

Okay. So, if only managing the personnel cost would you say?

[Laurie Bebo:]

We need to just appropriately staff for the residents in the building and so if there are less residence we can take some right sizing or change into our staffing hires.

[Kevin Ellich:]

Okay, excellent. And then my follow-up question kind of loaded first just kind of basically what with on census, when we think this will bottom and when we think will if you expecting back and then given the strategy to shift and transfer the residence. How many patients -- new [territory] patients are going from discharge plan here and have you know the spending change in referrals [and them]?

[Laurie Bebo:]

Okay. I think I've got most of your questions. So, Kevin if I miss one, remind me here so I can follow-up. For basically outlook on occupancy for us -- we talked about how we saw an increase in discharges and that's really where our issues still lying. So, January was very strong for us to again with a record number of move-ins. So, we know that were a different sales perspective, we know we can continue to move in appropriate people, where in market places. I think last first month about discharge planners those folks are part of our referral network. So, we do get referral from, now continuing to get referrals from them. And as far as what's the bottom, we can't predict exactly, where the private occupancy going to be next, where the following quarter. But we are doing some new things and continue to do other successful things and brining in new people. And so it's difficult to say, as far as what the lowest it's going to be, we feel like, we are in and see that this year and we should be able to lines up for the narrowing and then, be a little bit stronger on growing that private occupancy piece.

[Kevin Ellich:]

Okay, excellent. I'll hop back in Queue.

[Laurie Bebo:]

Thanks Kevin.

[John Buono:]

Thanks Kevin.

[Operator:]

Our next question comes from line of Kevin Fischbeck with Lehman Brothers. Please go ahead.

[Kevin Fischbeck:]

Hey, thank you. Good morning.

[Laurie Bebo:]

Good morning, Kevin.

[Kevin Fischbeck:]

Can you go into a little bit more detail on the private pay census trends in, last quarter you have had the discharge issue and now you're saying there was some improvement there in discharges. Have you worked through that heading into Q1 or is that going to continue to be a drag and if so for how long?

[Laurie Bebo:]

Yeah, the previous question and we are still seeing a large number of discharges than what we saw this time in 2006. We're going to be seeing a couple of different things in Texas during this quarter, obviously you've got challenges from the flu or pneumonia seasons, medical discharges are typically going to be higher about third quarter, but we also know that we're continue to see some move-outs from the existing folks that we're looking to roll over to Medicaid.

[Kevin Fischbeck:]

Okay. And then I guess just a kind of follow-up on that. Tell us more about the seasonality in the business, this quarter you mentioned that weak holiday move-ins is this something more than you normally see. I think last year your private pay census increased about 90 sequentially, so what was going on around the holiday season this year, was that reason for the difference there?

[Laurie Bebo:]

Well, December was lower for us, not this year and so when we say holiday season in the fourth quarter, we're specifically talking about December and it's hard to say, what always impacting that this type of (inaudible) a bit of the economy is it something different with the weather patterns that we seen in that areas. As far as an outlook for move-ins, we continue to be positive about the large number of move-ins that we'll see and as I mentioned January looks very good, but for December it was definitely off as far as move-ins for us.

[Kevin Fischbeck:]

Okay. Thanks

[Laurie Bebo:]

Thanks, Kevin.

[Operator:]

And our next question comes from the line of Frank Morgan with Jefferies & Company. Please go ahead.

[Frank Morgan:]

Almost same line of questioning, could you breakout specifically the private pay move-ins related to the private pay move-outs either in the quarter or over the course of the quarter? And the second question is I think you mentioned last quarter that you would be implementing a system-wide rate increase on January 1. Could you talk a little bit about how successful that was or went into place and then house into (inaudible) questions you had mentioned some qualifiers with regard to rates move-in activity related to the economy. So, I'm just wondering could you kind of expand on what you have seen so far with regard to any kind of concerns about pricing or on the flip side have you seen anything would affect suggest that the overall economy is affecting your move-in rate. I know you mentioned you guys have some new things trying and things you are doing, if you could elaborate on that as well. Thanks

[Laurie Bebo:]

Okay, Frank, I'll try and go over some of that and if you could please try and back in with something that I've missed. As far as move-ins and move-outs for fourth quarter within the fees about a 4% higher rate of move-out than move-in related to private take in the fourth quarter and that's a little bit different by month. But that's the fourth quarter average to give you some idea. As far as private rates, we did do on increases effective for January 1st, and as we talked about that wasn't across the board on average 5% increase on our rates. And Frank can you follow-up that couple of the other questions.

[Frank Morgan:]

Sure. Whether any kind of any negative fall outs, did you lose anybody because of the 5% across the board rate increase on Jan 01?

[Laurie Bebo:]

I think you will [always going to] loose somebody, I couldn't tell you that we didn't have anybody because of our rate increase, but its not any sort of a major factor for us.

[Frank Morgan:]

I got you and with regard to the go back to the move-ins and move-outs ratio the 4% more. Do you have that number in terms of, I mean we know what the net private pay numbers change, but could you give us that the absolute number of move-ins related to drive-outs maybe give us a little additional color.

[Laurie Bebo:]

We are not giving that kind of detail right now, Mr. Frank.

[Frank Morgan:]

Okay.

[Operator:]

Thank you, Mr. Morgan. Our next question comes from line of Derrick Dagnan with Avondale Partners. Please go ahead.

[Derrick Dagnan:]

Thanks. Good morning. I will get off the occupancy. I was wondering news had come a smaller issue for Medicaid; we've had some kind of bad news out of states on Medicaid issues related to state budgets. Do you see any issues there for you in your big states for 2008?

[Laurie Bebo:]

Well, I guess definitely agree with you Derrick and I alluded to that a little bit in my summary commentary. They are going to be further pressures on Medicaid and so it's absolutely been a right decision for us to and begin earlier to reduce the numbers that we are rely on in that area. And you are aware obviously we've got now less than 900 Medicaid residents in our buildings within the company. And so what we see is you can never predict what the increase is going to be. We haven't heard that there will be a decrease in Medicaid rates. Many of the suite three operating would see a change around July of this year. And realistically, we don't part in an increase on Medicaid rates. And we find out about the same count as everybody else what those rates are actually going to be with the changes in July.

[Derrick Dagnan:]

Okay. So, when you look at your internal budget and you're looking at the back half of this year, you're assuming flat Medicaid pricing, if that what I'm hearing?

[Laurie Bebo:]

Yes.

[Derrick Dagnan:]

Okay. And kind of follow-up on G&A expense, a year ago you gave us a view on general administrative cost for 2007 and for various reasons you came in below that level and I guess for 2008 should we think about the fourth quarter there is probably some seasonality here with Sarbanes-Oxley cost, but other than that should we look at it as being similar to 2007 or slightly higher I guess?

[John Buono:]

You should look at it is being slightly higher than 2007 really just inflation matters and the thing is not included in there, of course this year is decides the non-cash based equity, assuming that we have some sort of (inaudible) non-cash based equity. You could see some additional expenses from that. So, we would say and if I have to give you numbers, I'll give you $14 million again for next year.

[Derrick Dagnan:]

Okay.

[Operator:]

Thank you. Our next question comes from the line of Jerry Doctrow with Stifel Nicolaus. Please go ahead.

[Jerry Doctrow:]

Hi, good morning.

[Laurie Bebo:]

Good morning, Jerry.

[Jerry Doctrow:]

Let's see one [kick] on that couple of general things. There was an increase I think in account payables we see it, it was up I think more than double from third quarter. Is there any particular going on there, it doesn't really not affect our CFO because just curious, we've got [going] from make $3.658 million and $7.8 million?

[Laurie Bebo:]

Jerry, can you move on to your next question?

[Jerry Doctrow:]

Okay. And John (inaudible) some one asked a little bit more on the capital side obviously going what's going on capital markets, acquisition opportunities maybe more readily available and you've done a couple and I was just curious about how you might maybe where do you stand on the sort of the capital position and how you feel about either additional stock repurchases versus making acquisitions at this point and whether you'll be willing to do something maybe larger scale -- given kind of the disruptions in the capital markets?

[Laurie Bebo:]

Thanks, Jerry. I think it's a great question and there is something that we've been spent a lot of time analyzing it for as, how do we deploy that on our balance sheet and we have been excited about some acquisition opportunities enhancing rates, cap rates come up and -- just overall some different evaluations as you all know this is -- we've talked even as earliest conference. And so we're interested in acquisitions there, our returns out there for the acquisitions that would be accretive for us and in some instances our returns can be even stronger than the stock repurchase. So, I'd say, as you know we have been repurchasing stock and we do have a $25 million program out there that the Board kind of approved. We've been in a lack of period for well now before we realize, but there is money out there, that the Board has allocated also for stock repurchase. And so we've been at around $6 market and things that, there is an obvious for us in that area as well. There are some larger opportunities that you mentioned I mean and most of the things that we want to make sure we've got (inaudible). We also as you know count several properties that are not monitored at the time that we could end up having opportunities to extract cash from etcetera. So, we feel like we've got -- we're in a good flexible position to take on opportunities that are going to present themselves in this marketplace.

[Jerry Doctrow:]

Okay. That's helpful. And just in terms of the -- you've got a full $25 million available to do purchases that kind of work stands at this point in terms of the outstanding authorizations or how do useful.

[Laurie Bebo:]

Yes.

[Jerry Doctrow:]

Okay.

[Laurie Bebo:]

We haven't used any of that yet.

[Jerry Doctrow:]

Okay.

[Operator:]

Thank you. Our next question comes from the line of

[John Buono:]

Let me come back in for a second.

[Operator:]

Absolutely

[John Buono:]

I just want to answer his question on the accounts receivables.

[Eric Fonstad:]

I think it was payable. Yes.

[John Buono:]

Sorry, we keep the accounts payable and I'll talk a little bit about the accrued liabilities also. There was nothing unusual really in the fourth quarter from an account payable standpoint, its just timing of things and one of the things that we did do in the fourth quarter that we did not do in the third quarter is we reclassified our outstanding checks out of the cash accounts. Its negative cash in the third quarter and in the fourth quarter it's reclassed to accounts payable for any checks that haven't been cashed by the year end. More importantly, I think to look at is, our accrued liabilities. One of the components in there, that we're very happy with is our increased in deferred revenues and that is getting people to pay their bill prior to the beginning of the month. So, we had an increase of almost $5 million from people paying their January bills in the month of December. We have done that through centralization of our accounts receivables program and also installing a lock-box to facilitate a quicker turnaround on our cash.

[Jerry Doctrow:]

Alright thanks. And if I could slip in one more, Laurie just analyze the quarter-to-quarter.

[John Buono:]

Are you taking advantage?

[Jerry Doctrow:]

Alright, sorry that's fine I'll come back.

[John Buono:]

No, Jerry. I was kidding.

[Jerry Doctrow:]

Obviously just on the private pay I mean this is somewhat beaten to death, but if you think out longer-time like a year from now, at that point you would go when bottoms next couple of quarters whatever. You are feeling good enough about program that you think private pay census will be up above where it is just on absolute numbers basis year out.

[Laurie Bebo:]

Yes, and probably for two different reasons and I think the absolute numbers, you're also talked about same-store.

[Jerry Doctrow:]

Yeah. Same-store, yeah.

[Laurie Bebo:]

Yeah, and I again we will continue to work on increase in EBITDA through some good acquisition opportunities as well. But in Europe, we're looking for an increase in private pay. One thing that is hard to predict in this situation though will be any sort of negative fall out with regard to the economy as a whole. And if here is continued dramatic downturn, it's difficult for me to be able to predict what kind of impact that could have.

[Jerry Doctrow:]

Okay. I mean that's same for all of us, so. Right, thanks.

[Laurie Bebo:]

Thanks Jerry

[Operator:]

And our next question comes from line of Stefan Mykytiuk with Pike Place Capital. Please go ahead.

[Stefan Mykytiuk:]

Hi, good morning. Can you just repeat I kind of missed Laurie what you said in response to Frank Morgan's about the move-ins and move-outs. You said something about 4%; I didn't really get what you said so.

[Laurie Bebo:]

Sure, Stefan. Basically what we saw in the fourth quarter was 4% more in the move-out category versus the move-in. And basically previously we've talked about fact that we were seeing easily 10% more in the move-in category prior to Q4 than the move-out category. So, we were just talking about relative percentages.

[Stefan Mykytiuk:]

Okay. So, you are saying before it was move-ins were 10% greater than move-outs and then in the fourth quarter it was move-outs 4% greater than move-ins.

[Laurie Bebo:]

Yes.

[Stefan Mykytiuk:]

Okay. Is that on the average basis or is that on actual basis, because if -- I'd suspect that some of what we are seeing in the fourth quarter is just carry through of because you give average numbers in the fourth quarter we ended up with some carry through for what actually occurred in the third quarter.

[Laurie Bebo:]

That's true. You do see some carry through as far as you, will turn to fourth and four to one as far as where actual numbers reside.

[Stefan Mykytiuk:]

Okay. But that 4% and 10% was that based on average or is that based on actual?

[Laurie Bebo:]

The 4% is based on actual.

[Stefan Mykytiuk:]

Okay. All right I got it. And in terms of you're saying in January you're seeing some better move-ins just from the sales efforts. Is that -- are move-ins on a gross basis running about where they were year ago or?

[Laurie Bebo:]

Yes.

[Stefan Mykytiuk:]

Okay all right.

[Laurie Bebo:]

Yeah, move-ins through all of 2007, were higher than 2006. It's now with January are move-ins are higher than 2007.

[Stefan Mykytiuk:]

Okay, All right.

[Operator:]

Thank you. Go ahead.

[Laurie Bebo:]

Go ahead, Stefan.

[Stefan Mykytiuk:]

Oh I'm sorry. Then what was my other question. Is there any (inaudible) with the your I mean have you been able to sit with residence and go through what their plans are? I mean do you get visibility on this or are you able to get understanding of what the pipeline is of the potential move-outs or the residence kind of if the play across the last you just know why don't have that discussion with them? In other words internally do you have some of view when that pipeline to move out it's kind of runs its course or not?

[Laurie Bebo:]

It's a move-in number. We've drew the conversation with people, but as at different things occur in different marketplaces, it could be a moving number because you cannot market, where right out, but several who others accepting Medicaid and all of the sudden the work could go around that -- this building its only on is going to be accepting Medicaid, we only do for the next six months. So, things like that create a move-in target as far as what the expected discharge rate is going to be in the next six months.

[Stefan Mykytiuk:]

Yeah. Okay. Alright thanks very much.

[Laurie Bebo:]

Thank you, Stefan.

[Operator:]

Thank you. And our next question comes from the line of Amrit Nagpal with Weintraub. Please go ahead.

[Amrit Nagpal:]

Hi, can you hear me?

[Laurie Bebo:]

Yes, Amrit go ahead.

[Amrit Nagpal:]

I just wanted to make sure that I understood clearly. So, with the 541 bed new acquisition closing on January 1st, so we should expect about 500 new sort of a sequential increase of 500 private pay patients based on the 92% occupancy that was out of [12/3/107]?

[Laurie Bebo:]

Well, I think what we actually bring them in January they're at about 90% to 91% occupancy.

[Amrit Nagpal:]

There has been you've talked about the economic impact here, so do you have anecdotal or any other evidence that slow (inaudible) markets have impacted your move-ins rates in terms of potential residence not being able to sell their condominium or their homes is that factor because minus any sometimes that the sale is to used to finance the (inaudible) at stay any perspective on that.

[Laurie Bebo:]

The one way that really we have said we've got to evaluate what's the market, what's the overall economics market impact to us, is by looking at the move-ins. And so at this point I can just probably give that, January move-ins were very strong now if that market was booming as oppose to restricting at this time more move-ins. So, I can't say to you what's the overall impact?

[Amrit Nagpal:]

Okay and just a follow-up.

[Laurie Bebo:]

Go ahead.

[Amrit Nagpal:]

I'm sorry just a follow-up on the last question, the last callers' question about the pipeline or the visibility on the private pay residents that are at risk for leaving because of this Medicaid issue. What kind of timing visibility do you have on that, what is the contractual requirement for them to give you advance notice and can you speak to what do you know about the potential discharge rate for the current quarter?

[Laurie Bebo:]

As far as requirements, so requirements are for us six months prior to just spending now there would be a discussion with us, as far as…

[Amrit Nagpal:]

You require, I'm sorry I interrupted you. You require a six months advance notice from potential discharges, did I hear you correctly?

[Laurie Bebo:]

First spend on purposes, as far as somebody wanting discharge they require to only give us 30 day notice.

[Amrit Nagpal:]

Okay.

[Laurie Bebo:]

From a contractual perspective to be able to move-out and stop paying.

[Amrit Nagpal:]

Is that the people honor that and if so that mean that you would have very good visibility over the next two quarters or I'm might not understanding your comments appropriately.

[Laurie Bebo:]

No, the 30 day notice is certainly honored as far as that people will have to pay us with a 30-day notice. As far as six months piece that doesn't change in fact that, they could decide to move-out right at six months as oppose to staying with us until their last month. So, that visibility is not going to be complete for us choosing to move-out.

[Amrit Nagpal:]

Okay. So, you mentioned that you had a record number of move-ins in the private pay started in January. Would you be willing to give us a perspective on the move-outs because this has been a challenge that you guys have experienced over the last five or six months And I think that would be information that would be helpful to give us shareholders some better perspective.

[Laurie Bebo:]

As far as January goes, we're seeing a high number of move-outs that is going to be pretty close to the number of move-ins that we saw for January. February, we are just wrapping up and as far as where we are headed. We know that we are going to see the high number of move-outs, somewhere between, what we saw in third and fourth quarter.

[Operator:]

Thank you. Our next question comes from line of Adam Comora with EnTrust Capital. Please go ahead.

[Adam Comora:]

Yeah, just a quick follow-up to that last question, so when we look at the net January and February it sounds like we were sort of trending very strong move-ins, very strong move-outs, no appreciable uptick yet in occupancy.

[Laurie Bebo:]

I think that's a fair way to characterize right now Adam and if you know what world margins are going to look like and a lot of changes it happen at the very end of our months. So, it's really hard to predict how all things that will trend in February.

[Adam Comora:]

Its interesting about that is you would think that the impact of move-out will be lessening over time in other words the people that wanted to leave because they won't get grandfather in for Medicaid, you figure that, that would trend lower over time. And it sounds like it may have been -- can you comment on how the trend has been, has it been lessening or it sound like it must have picked up in January are fit that same strong move-in number?

[Laurie Bebo:]

Yeah, we thought if that it's not as high third quarter, so would you see a trending down. Fourth quarter it was less I'm sure part of that have to do it just a holiday season, it's unlikely time for people to make a move-in and have to. And so, as I mentioned I think first quarter we are going to see something between third and fourth as far as move-outs and I do believe that is lessening overtime and it goes, a little bit spread by markets.

[Adam Comora:]

Okay. CapEx expense for '08 what's total CapEx maintenance growth altogether?

[Laurie Bebo:]

CapEx you thought maintenance side of -- CapEx spending is...

[Adam Comora:]

Altogether, yes, if you could break it down in a different bucket and then give a total, that would be great.

[John Buono:]

The CapEx from maintenance side it will still climb about $12 million, and from the new construction side obviously that's somewhere around $50 million.

[Laurie Bebo:]

That acquisition is obviously lot of, we can't really predict for you there.

[Adam Comora:]

Okay. Thanks.

[Laurie Bebo:]

Thank you.

[Operator:]

Thank you. (Operator Instructions) We do have a follow-up question from the line of Kevin Ellich with RBC Capital Markets. Please go ahead.

[Kevin Ellich:]

Yeah. Thanks guys. Just a couple quick follow-ups. First going back to balance sheet and thinking about the capital market, you got just a $0.5 million in short-term investments. John I was wondering if you could tell us what that invested in safe in a lot of discussions about auction rate securities?

[John Buono:]

Well, the investments there are all in equity investments that we just inherited from Extendicare in the past or to us in the acquisition process or rather separation process so no we don’t have any of the issues like you saw at Five Star.

[Kevin Ellich:]

Okay, excellent. Thank you. And then thinking about your overall portfolio and just wondering if you tell us how many facilities or residence you guys have that are pretty lowly occupied like less than 50% census, if you had any discussions or thoughts about maybe get where at some of these lower occupied facilities, where you're having trouble including residence?

[Laurie Bebo:]

A couple of things on that, Kevin and we haven't broken out portfolio just say higher percentage occupied as many are 70% occupied, but as far as evaluating, which buildings continue to fit into our long-term strategy and which one makes sense for us for an operating environment perspective also within a certain state or market. Those are the things that we're considering and I don't have anything to report at this time, but other definite discussions and management is having.

[Kevin Ellich:]

Okay. Thanks.

[Laurie Bebo:]

Thank you.

[Operator:]

Thank you. And you have a follow-up question from the line of Derrick Dagnan with Avondale Partners. Please go ahead.

[Derrick Dagnan:]

Thanks. For your company and for the industry in good times, when you're looking at occupancy growth, we all talk about high fixed operating cost and that it creates significant incremental margins on as new residents move-in. And over the last year we've had significant occupancy decline to your company and you guys have done an excellent job of managing labor to maintain margins. And I guess the question is, do you have more rooms to manage the labor? And can you keep maintaining the margins? Or is there a break point where we may see some margin degradation?

[Laurie Bebo:]

Well, there is always things that we are looking at from an expense perspective, not just labor, although we all know that labor is a large part of our cost structure. We also find ourselves getting feedings in the labor area, just by continuing to reduce turnover and improve stability of our building staff and this health system have a variety of perspectives, not from cost savings perspective. But we think its great experience investment people that are doing a wonderful job with us and have them on board and that actually helps us to deliver better customer service to our residents. As far as what else can we change moving forward, it's a little, it's always different house-by-house and again it is one of those things that we look at on a regular basis, a daily basis along with occupancy. We are always looking to make sure that we are delivering the appropriate care and yet doing it in an efficient manner. So I can assure you these are things we will continue to look at. I can't say for sure that we can continue to impact it, one for a one as we might have a change with our resident population, but it is something that we will continue to focus on.

[Derrick Dagnan:]

Okay. Thank you.

[Laurie Bebo:]

Thanks.

[Operator:]

You have a follow-up question from the line of Frank Morgan with Jefferies and Co. Please go ahead.

[Frank Morgan:]

I really hate to debate on this move-out, moving-in issue but I went back and checked our notes and in the third quarter, you said you have this is on the private base out and you have got 26% move or move-outs than move-ins of private pays. This quarter you said you only had 4% more of private pay move-outs than move-in and what you are saying is, based on what you are seeing so far in the first quarter of '08, there are higher levels of move-ins but they also higher levels of move-outs. But net, net you think it's going to be somewhere in between this 4% more and the 26% more. Am I following you correctly?

[Laurie Bebo:]

I think I followed your commentary, Frank. As far as the discharges maybe, the best way to say is that in third quarter, we had enough move-ins to cover the move-outs with different months in the third quarter. But basically we had enough to cover the move-outs. And in fourth quarter, we had more move-outs than we did move-ins. And so what I would expect for fourth quarter is, it's going to be somewhere in between which would create a negative for us from a move-out perspective. So we should see, with a higher number of move-outs than we would in range for first quarter just giving at length between third and fourth. Does that make sense?

[Frank Morgan:]

Yeah. One follow-up on that and one final question, anything that you need to think about John with regard, with this new acquisition that CaraVita hitting in the first quarter. Anything that we need to consider as we build our models, I know you don't give guidance but any general comments that you've got us about things, we should consider to think about as we build up those numbers? Any special charges, or just anything you need to kind of that we need to be thinking about as we layered in here in this first quarter?

[John Buono:]

Not really Frank, I mean for the first quarter or for the year, we've given you kind of our expectation at the time of the acquisition of the EBITDA and revenue numbers. The only other thing that's still a little bit of the wildcard right now is purchase accounting adjustments and I don't know if you are even all that concern with them, that's part of the EBITDA or EBITDAR. Certainly we need to sort all of the purchase accounting adjustments that's something that we are working on right now.

[Laurie Bebo:]

Everything that you may notice Frank as we do report our property rate, the rate could be a little bit less than ours.

[Frank Morgan:]

Okay.

[Laurie Bebo:]

So, that was on our average.

[Frank Morgan:]

Okay. Thank you.

[John Buono:]

Thank you.

[Laurie Bebo:]

Thanks Frank.

[Operator:]

We do have a follow-up question from the line of Amrit Nagpal with Weintraub. Please go ahead.

[Amrit Nagpal:]

Hi. Just a quick follow-up question. The Dubuque facility that you acquired, I think it was 185 units, when you acquired it, can you remind us what the occupancy was, and can you speak to how -- I think it was in the lower end? And can you speak to how the occupancy has improved, or changed in that particular facility, given its size? And then the other one in fall you had said you were extending Norwalk in Ohio, or that you are going to open those experiences, can you just speak to the progress there?

[Laurie Bebo:]

Okay. Yes. As far as Dubuque, it was at 40% occupancy when we acquired it and we are in the 50% range at the moment as far as percent occupancy, [so there is row]. As far as Wisconsin and Ohio, we opened two additions. And as we talked about before what our other additions, truly a 12 months ramp up. And so at this point in time, we feel like we are on track for basically six months.

[Amrit Nagpal:]

Thank you.

[Laurie Bebo:]

Thanks.

[Operator:]

We do have a follow-up question from the line of Kevin Fischbeck with Lehman Brothers. Please go ahead.

[Kevin Fischbeck:]

Thank you. That last question may have answered it. I was wondering to get a little bit more color on the developments that you guys are opening this year you're still looking for across that whole portfolio kind of 12 month ramp up there's nothing has changed as far the current economic environment or this move-out situation?

[Laurie Bebo:]

Well again at this point I'll first of all -- firstly the move-out situation it really doesn't impact our 12 months of writing occupancy. These are buildings that have been all private pays for quite a while and they remain fully occupied. So, we don't have any move-out issues that we're having to do deal with there. As far as, again, our expectations, yes, we are looking for 12 month fill and I'll assume that if there is some continued pressure on the economy I can't predicted there it could be or couldn't be an impact on us.

[Kevin Fischbeck:]

Okay. And then my last question would be can you just talk about the Medicaid outlook again as far where centers is that I think that you've exited every state but one -- how many Medicaid centers I guess are in that state so still to get a sense of where the numbers are going to attract to ultimately over the next couple of years?

[Laurie Bebo:]

Let me just clarify for you. We still are in sort of taking just one, but you know in the coupled stage we're down to maybe one or two building. So, as an example we're still in with most of our buildings in the Medicaid Specimen in Jersey, Washington or again in Idaho, and Arizona to those seeks you're going to see -- and this information we get for Irwin in the press release information specifically as far as about how many build and still have contracts with.

[Kevin Fischbeck:]

That's again a 10-K

[Laurie Bebo:]

Yeah, it will be in the 10-K. So, 73 buildings, we still have contracts and most of the bulk of the states I just mentioned we'll have one or two here in Iowa, Nebraska or Indiana and then in Texas we've about 13 and only left.

[Kevin Fischbeck:]

Okay.

[Laurie Bebo:]

As you know…

[Kevin Fischbeck:]

I'm sorry have you said that you said, you're still accepting new patients there or those are the states that have facilities where you've have leftover residence?

[Laurie Bebo:]

Leftover residence, so the reduction is currently happening through attrition, where as people they can move on for a variety of reasons that's what reducing our Medicaid numbers.

[Kevin Fischbeck:]

Yeah. But I guess how many states, how many facilities do you have that are actually still accepting new Medicaid patients

[Laurie Bebo:]

No, none.

[Kevin Fischbeck:]

None across the portfolio. Okay.

[Operator:]

We do have a follow-up question from the line of Stefan Mykytiuk with Pike Place Capital. Please go ahead.

[Stefan Mykytiuk:]

Yeah. I was going to ask something else about the move-in and move-outs. But I think we've just killed that horse though? Thank you.

[Laurie Bebo:]

All right thanks, Stefan. We'll follow up with you individually.

[Operator:]

We do have a follow up question from the line of Amrit Nagpal with Weintraub.

[Amrit Nagpal:]

Hi, thanks for allowing me to ask another question I appreciate it. I want to just get a perspective from you on your thoughts on providing guidance, you did a good job on this call of giving us some visibility into the private pay issue for the first quarter, I appreciate that because I think certain expectations has some value. Historically you haven't given guidance since the distant from extended care now that you've got more operating experience under your belt as a standalone business. Can you speak to your philosophy on providing guidance and helping to manage our expectations?

[Laurie Bebo:]

Yeah. I think generally, I mean, our position hasn't changed as far as providing guidance. Realistically, I mean, I can't tell you what the occupancy is going to be in the first quarter of 2008. So, it's not helpful for me to share that with you because there is a variety of things that can happen between now and then. And also obviously as we discussed about the strategy, it is a transition strategy. It's not something that's going to happen for us over a night and so we're also looking for folks to take longer-term view of it not just to be looking quarter-to-quarter exactly what that next number is going to be. So, I think we find our philosophy to be very much similar to what it's been in the past and as we can obviously folks sort of number etcetera, who I'll be able to stress or in some cases as far as what the Medicaid number looks like and I mentioned we're under 900 people now. And if we've got some inclination on the private pay there is going to be -- that some information we can share on the short-term.

[Amrit Nagpal:]

Okay, thank you.

[Laurie Bebo:]

Thanks.

[Operator:]

Thank you. And at this point, we've no further questions in queue. Please continue.

[John Buono:]

Okay, thank you. And once again thank you for taking part in our investor call. A replay of this call will be available in approximately one hour until March 27, 2008 and you can also rebroadcast it on our website at www.alccco.com

[Laurie Bebo:]

Take care, everybody.

[Operator:]

And ladies and gentlemen, as it was mentioned this conference will be available for replay after 12