Good morning. My name is Jody and I will be your conference operator today. At this time, I would like to welcome everyone to the Brookdale Senior Living second quarter earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks there will be a question-and-answer session. (Operator Instructions) Thank you. I would now like to turn the conference over to Mr. Ross Roadman, Senior Vice President of Investor Relations. Please go ahead, sir.

Thank you, Jody, and good morning, everyone. I would also like to welcome you all to the second quarter 2012 earnings call for Brookdale Senior Living. Joining us today are Bill Sheriff, our Chief Executive Officer; and Mark Ohlendorf, our Co-President and Chief Financial Officer. Also present is Andy Smith, our Executive Vice President and General Counsel. As Jody mentioned, this call is being recorded. A replay will be available through August 14, and the details of how to access that replay are in the earnings release. This call will also be available via the webcast on our website, www.brookdaleliving.com for three months following the call. I would also like to point out that all statements today which are not historical facts may be deemed to be forward-looking statements within the meaning of the Federal securities laws. Actual results may differ materially from the estimates or expectations expressed in those statements. Certain of the factors that could cause actual results to differ materially from Brookdale Senior Living's expectations are detailed in the earning release we issued yesterday, and in the reports we file with the SEC from time-to-time. I direct you to Brookdale Senior Living's earning release for the full Safe Harbor statement. With that, I would like to turn the call over to Bill Sheriff. Bill?

Good morning and welcome to our second quarter earnings call. Today, I am pleased to share an overview of our second quarter results. Mark will review our financial results in more detail. After our remarks, we would be happy to take your questions. During the second quarter, more evidence confirmed that we maybe experiencing gradual improvement in our industry's fundamentals. While the global macro economic environment certainly remains unsettled, we see signs of improvements in our markets. We have continued to see improving demand in independent living and as I will talk about in a moment, we saw that improvement particularly in the second quarter in our independent living entry fee unit sales where we saw record results. That specific product is more sensitive than the others to local existing market of home re-sales. There has been expressed some sentiment that 2012 is marking the beginning of a true existing home re-sale market recovery. There is a bullish new forecast and supporting analysis release by Harvard's Joint Center for Housing Studies which suggest that the net result of maturing echo boomers and aging baby boomers likely downsizing could result in a near doubling in household formation rates. They also observe the fact that multi-family apartment rents are rising which is helping to stabilize home prices. Now this should bode well for the existing home resale market. The recent (inaudible) of pricing data also was encouraging. The aging acuity trends translates into an increasing need for senior services and an improving existing home resale market will assist in the decision making process as people sort through the affordability of senior housing and the various options available to them. For the quarter, we achieved CFFO of $69.2 million or $0.57 per share, an 11% increase over the second period of 2011. The…

Thanks, Bill. Let me begin by describing in more detail the expanded segment reporting that you will see in both our data supplement that we posted to our website and in the second quarter 10-Q that we will file in the next several days. Beginning this quarter, we have expanded the original four segments by breaking out the former CCRC segment into separate rental and entry fee segments and by adding the ISC segment. Looking at the performance of the six segments, first the retirement centers which showed an occupancy increase of 150 basis points since the second quarter of last year, also increased revenue per unit by 3.7% over the prior year second quarter. This segment has shown good progress since the beginning of last year. The assisted living segment increased occupancy by 120 basis points versus last year's second quarter and 10 basis points sequentially over the first quarter of 2012. Revenue per unit increased by 2.4% over the prior year second quarter. This segment saw a strong rebound in occupancy in 201 and has been largely steady over the course of the last year. The redefined rental CCRC segment is composed of rental campuses as well as some skilled nursing communities that are part of a market continuum. Approximately 30% of the units in these segments are skilled nursing, making it more susceptible to swings in skilled occupancy and rate. The occupancy of this segment decreased by 70 basis points sequentially from the first quarter of 2012 with the entire decrease centered in the segment skilled nursing units. In fact, the occupancy of the other care levels in this segment which represents 70% of the units actually increased by 20 basis points sequentially over the first quarter. To add to what Bill said, skilled nursing occupancy in…

Thanks, Mark. As we move into the second half of the year, we are encouraged by what we are seeing in our markets. Certainly the predictive slow economic recovery is in the tailwind but elements like the local existing home resale markets continue to improve, it will certainly help. Second half of the year is usually our strongest period of growing occupancy. We have seen independent living gaining traction over the last year and entry fee independent living has also been growing stronger since mid-2011. Taking aside the newly acquired skilled nursing building, our occupancy grew each month during the second quarter and in July. We have also seen strong activity in entry fee sales in July as well as an increase in the in skilled nursing census. We have been pleased with the consistency of our pricing in independent living and assisted living. We have one more quarter of difficult comps for skilled nursing as a result of the RUG-IV changes, but now we know we would get 1.8% increase in the fourth quarter in our Medicare skilled nursing rates. The 2% sequestration cut is currently scheduled to take effect January 1, 2013. Going forward, we will be mindful of expenses. The third quarter is our most difficult expense quarter with the number of days affecting labor cost and seasonal cost like utilities. The extended hot weather will also have an impact. Food cost will increase due to the drought, but with our purchasing contracts and menu management disciplines, it will be more of a 2013 issue. We did have a hit to our medical benefit cost this quarter due to some high cost cases and higher utilization. Over the last two years, our medical benefit inflation has been 3.5%, much lower than the national average for corporate plans…

(Operator Instructions). Your first question comes from the line of Kevin Fischbeck from Bank of America.

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

Again, the EMR implementation costs were being broken out on a separate line. The primary drivers of the margin performance in the segments will be the insurance reserve adjustments, which impact all the segments, but the modest decline you see in the Assisted Living and Retirement Center segments would relate to that. The CCRC segment you would have the insurance reserve adjustments more significantly though, you have the change in medical reimbursement rates in those two segments. Then again, ISC was impacted with the change in homecare rates effective at the beginning of this year.

So, is it right to say that kind of on a more normalized basis you think the margins were flat to up a little bit? That's the way to think about it?

For independent living and assisted living, that would be the case. Again, adjusted for the change in Medicare rates and the CCRC segments, I think that's fair.

Okay, and so EMR costs are in G&A number on your consolidated P&L?

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

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

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

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

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

Okay. That's fine. Would you expect something similar next year?

Probably would. Again, we are in the planning process for next year, and from an actual cash investment standpoint, some of this is affected by whether we are doing the work related to leased communities or owned communities. So again it's difficult for us to give a general answer to that question and so we provide the guidance for 2013.

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

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

Okay. All right Great. Thanks.

Your next question comes from the line of Ryan Denials from William Blair.

Good morning, guys. Thanks for all the information. Mark, I want to go back to the EMR rollout. You may have given this, and if so, I apologize, but do you have the exact number or rough number for the EMR implementation cost in the quarter?

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

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

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

Okay. I know that's for the home health. You indicated that would be kind of rolling on around the August timeframe. What about the other two best-of-breed systems. Are they going to be a similar type of deployment where you are paying a large implementation fee and then a monthly fee going forward?

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

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

As I said last year, there is still a little bit of an uncertainty but a lot of us going on the market is certainly heavily influenced by the focus of the hospital systems as well as the Medicare advantage program elements and stuff to get far more focused and who they work with and how they work with those providers and we do think our programs are positioning very well to end up in provider list as well as preferred relationships. We do have a higher (inaudible) percentage of our census than most any of the major health systems out there, hospice systems and we are very encouraged with what we are getting in terms of the response and activity and working relationships we are building with the parties with measurable outcomes and the quality measures are boding well for us.

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

Certainly the latter part of that in terms of working through the REITs and also then whatever underlying finance they had and it kind of extends it out a bit. I think we are making measurable progress. Significant progress with these other partners in that regard and these end up being fairly complex projects which require everything from drawing licensing issues, waivers, different things that. They are not easy to conceive and so it does take time and so there is, we have pretty good bandwidth in that regard but still it is not something that you can go out and do 50 or 60 all at a time. Also, with a number of those, we have got a number of units offline. Floors or buildings that are waiting for the work process. So that also impacts this a little bit. So there is a limit to how much you want to take on at a time in that regard.

Okay, that’s helpful color. Thanks again, guys.

Your next question comes from the line of Daniel Bernstein from Stifel, Nicolaus.

Just wanted to go over the SNF occupancy again in the second quarter. I am just trying to understand the SNF asset that you purchased as completely unoccupied. How many units was that SNF property? If my understanding is correct, you are going to use those licenses to expand the property or taking back from the REIT. Is that a correct assessment?

That’s correct and 66 beds.

Okay, and if I backed that out and based on your comments, is it safe to assume that you are up something like 10 bips or so on the private pay occupancy? If I was thinking of it as a same store private pay occupancy, is that the right range or is it something higher than that?

I think you got it.

Okay, and just also trying to understand the trends in the quarter in occupancy. Was ending occupancy above your average 87.7%?

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

Is it? And it is above that today as well? If I read your July comments correctly.

That would be correct.

Okay. Do you have an exact number to give us or is that?

No, we don’t.

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

Well, we have commented on both of that over the last two quarters that we had unusually high spike and unusual high move outs which are refunds rather, which we didn’t expect that to be continuing. So this is more close to returning to a more normalized number than not.

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

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

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

Again, a modest number, the lion's share of our unit additions out of Program Max, first the repositioning, comes into next year.

Okay. I think I have got for now. I will jump off. Thanks.

Your next question comes from the line of Greg Kuhl from Brookfield Investment.

Just wanted to ask a question on how you are looking at the valuation of your stock. I know that in November of last year, on your investor day, you talked about your estimated NAV being the low to mid $30 range. I am curious, obviously, you are trading at a large discount to that and you look at some of your peers or partners on the healthcare REIT side who are trading at very large premiums to any of these. I am just curious what you guys have thought about doing to close that gap aside from just kind of running the business.

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

Okay, thanks.

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

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

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