Good morning. My name is Jennifer and I will be your conference operator today. At this time, I would like to welcome everyone to the Brookdale Senior Living Third Quarter Earnings Call. [Operator Instructions] Thank you. And I'd like to turn the call over to Ross Roadman. Sir, you may begin.

Thank you, Jennifer, and good morning, everyone. I also would like to welcome you all to the third quarter 2016 earnings call for Brookdale Senior Living. Joining us today are Andy Smith, our President and Chief Executive Officer; Cindy Baier, our Chief Financial Officer; and Dan Decker our Executive Chairman. I would like to point out that all statements today, which are not historical facts including all statements regarding our earnings guidance may be deemed to be forward-looking statements within the meaning of the federal securities laws. These statements are made as of today's date and are subject to various risks and uncertainties. Forward-looking statements are not guarantees of future performance. Actual results and performance may differ materially from the estimates or expectations expressed in those statements. Future events could render the forward-looking statements untrue and we expressly disclaim any obligation update earlier statements. Certain other factors that could cause actual results to differ materially from our expectations are detailed in the earnings release we issued this morning, as well as in the reports we file with the SEC from time to time including our Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. When considering forward-looking statements you should keep in mind those factors and the other risk factors and cautionary statements in such SEC filings. I direct you to Brookdale Senior Living's earnings release for the full Safe Harbor statement. Please also note that during this call we will present both GAAP and non-GAAP financial measures. I direct you to our earnings release which may be found on the Investor Relations page at brookdale.com for more information regarding the company's use of non-GAAP measures including the definitions of each of these non-GAAP measures and a reconciliation of each such measure from the most comparable GAAP measure. With that I'd like to turn the call over to Andy. Andy?

Good morning and thanks for joining us. As always we appreciate your interest in Brookdale. We're disappointed with our results for the quarter and with the fact that we have revised our guidance for the year, while we may progress and occupancy rate, cash generation and on a number of fronts, we misjudged the affect of new competition in certain of our markets and our results were lower than we expected. Our management team and our Board are laser focused on and acting with urgency to improve our operating results and to optimize our portfolio. Before I discuss our results, let me update you on some really important business relating to our portfolio, optimization efforts. With all of the transactions we announced this morning, we have completed or entered into agreements to sell, terminate the leases or change the underlying structure of just shy of 200 communities representing over 15% of our post-merger portfolio. You can think of this in three broad buckets. First, asset dispositions. Prior to the quarter we had already sold or terminated leases on a total of 30 communities. During the quarter we completed the sale of 32 of the 60 assets we had held for sale at the end of last quarter. We expect to complete the sale of the remaining 28 assets over the next few quarters for an ultimate total of 90 communities. The second bucket involve 64 communities that we currently leased from HCP. HCP has been cleared in their public remarks that they wish to reduce their Brookdale concentration following their spin-off. HCP's decision to sell these 64 properties has provided an attractive investment opportunity for us. By terminating the leases for these assets and participating in the Blackstone joint venture purchasing the assets, we expect to improve our return on…

Thank you, Andy, and good morning, everyone. I welcome the opportunity to increase my involvement with Brookdale, a company that I've been keenly interested in since I first began investing in the senior housing industry almost 25 years ago. I continue to be optimistic about Brookdale and our opportunity to drive meaningful value creation for the benefit of our shareholders and other stakeholders. We've made solid progress in a number of areas and I'm especially positive about addition that we've made to the senior leadership of the company, the addition of Cindy Baier. While it simply takes time for our new team to positively impact the business, I and rest of the Board share the disappointment expressed by Andy with our results. I look forward to working with Andy and the management team with the keen sense of urgency to improve in every key area of our business and especially with respect to improving our senior housing and ancillary service operations, optimizing our portfolio through asset disposition and through lease restructuring improved the amounts and quality of our cash flow and capital allocation effectively utilizing our financial resources to drive substantial value creations through initiatives like the $100 million stock buyback program that we announced today. Lastly, I'd not agree to this without my belief that we will make meaningful progress in creating value for shareholders and I'm confident that I can work collaboratively and synergistically with the management team. Andy, I'm going to turn it back to you.

Thanks, Dan. Now turning to our operating results. We always knew that executing our strategy would take time and 2016 is an important rebuilding year. Our plan was based on growing faster than our historical norms by recapturing the occupancy and associated revenue losses that occurred last year during the integration. Although, there is significant evidence of improved execution in progress our results are lower than we expected them to be Our occupancy increased 40 basis points sequentially and our same community revenue per occupied unit increased by 3.2%. Importantly for the third quarter in a row we produced positive cash flow as we look at CFFO less non-development CapEx. In the third quarter of 2016 alone on a year-over-year basis this measure improved by almost $60 million dollars. We improved from a negative $14 million in the third quarter of last year to producing $46 million this quarter. While we've achieved a number of milestones in our turnaround strategy it is taking longer than we expected to generate our plan level of improvement. As the second half of the year has unfolded it has become increasingly clear that there have been several unfavorable developments in the competitive environment that have slowed our progress. During the third quarter, we experienced the highest amount of new competitors opening within 20 minutes of our communities than we've seen in many years. The number of openings in the quarter whose timing can be difficult to predict exceeded our projections. Importantly the market mix of new openings also changed. New openings in our larger metropolitan markets were consistent with recent averages. But new openings in our midsized markets were at the highest level in over a decade. For example, in the third quarter using the market defined by NIC secondary or additional markets, new…

Thank you, Andy. Hello, Dan and thanks everyone for being on the call today. I want to start by building on what we've already shared with you about the existing transaction that we announced this morning. These transactions have important long-term benefit for the business. Andy had already stepped through all of the different buckets of our current portfolio optimization transaction. We are very excited about the transaction involving communities that we currently lease from a HCP as well as our entry fee CCRC joint venture with them. There is additional detail in both the release we issued this morning and in our presentation we have placed out on our website regarding these transactions. These transactions significant milestones in our portfolio optimization effort. When completed they'll have several important benefits. Mostly importantly these transactions were two of our consolidated CFFO less non-development CapEx by approximately $40 million based on the trailing 12 months ended September 30, 2016 through a eliminating the above market triple net lease cash payments and most of the CapEx obligations, and gaining a management fee on the 68 communities. We also expect that the transaction, including our entry fee financing will reduce our consolidated total adjusted net debt-to-adjusted EBITDA or leverage at 0.3 turns. Additionally, we expect that the transactions will provide an extremely attractive return on investment. When all of the transactions are completed, approximately 20% are currently leasing and will have their leases terminated or have been transitioned into a joint venture with an ownership position. Finally, our lease coverage on the remaining triple-net lease portfolio with HCP provides over 1.2 times. As a reminder, we have already made significant progress related to our portfolio optimization throughout asset disposition. During the third quarter, we have 32 communities receiving $177.5 million of gross proceeds, retiring…

Thanks Cindy. Let me close by saying that due to the competitive landscape we have described, our progress while still positive is simply slower than we expected. We believe that this is cyclical and will normalize over the intermediate-term. Our management team along with our board is focused interacting with urgency to improve our operating performance. We are pleased that we have increased our liquidity and that we've made very significant improvements in the cash flow that we generate. We also believe that our portfolio optimization efforts will have a significantly positive impact on the economics of the company as we move forward. We’re happy now to take your questions.

[Operator Instructions] Our first question comes from the line of Frank Morgan with RBC Capital Markets.

Good morning. Certainly a lot to absorb here today but I was hoping maybe both Andy and Dan could kind of step back and give us some high level perspective here. I've always thought the story more is one of company specific turnaround related to the Emeritus acquisition. It looks like its shifting more to a sort of industry macro issue story today. So I was just curious if you all could just kind step back and maybe prioritize some of the - the magnitude of some of the - by the magnitude, some of the issues that you're talking about it today be a competition increase cost, that you haven't seen in the past. And in any thoughts about visibility on timing of improvement of any of these issues. I’ll start there and I have a follow up. Thanks.

Okay, thanks good morning, Frank. Thanks for your question. I'll take, crack that. What we’re seeing in the marketplace first let me be clear and underscore what we are saying is that we’re seeing positive improvement in our business. We just expected the back half of the year to improve more than we were able to generate more to predict that we will improve in the fourth quarter. What happened is we misjudged our ability to improve even more rapidly in the phase of the new competition that we saw mostly in these middle markets during the third quarter. So my perspective on the industry is, we do as an industry have heightened competitive environment which I think is going to persist for the next two quarters or so, I'm sorry for the next two or three quarters and then based on our analysis and our perspective on the industry we believe those competitive openings will begin to abate anticipate. Now I also think the industry and certainly with respect to Brookdale, we've shown good stickiness with our ability to raise rates in spite of that environment and so I would simply underscore that I look at this we're in taste of this competitive challenge as we speak and it is simply holding us back from growing even more rapidly than we were able to do so in the third quarter which as you known we just said, we had a 40 basis points sequential increase in occupancy, that will be my perspective.

Any thoughts from Dan.

Just to say Frank, clearly as I said in my remarks I mean the most important thing we can do is to improve our operating results obviously in the senior housing business, as well as home health business and other ancillary services we happened, we got to be keenly focused on that which have been but we need to be better and I believe we will and its part of that especially we need to be better with respect to our sales and marketing function.

Okay. On the increasing competitive market, I’m curious now that you've seen those in the midsized market I'm sure it's probably sparked you to look around further in other pockets of your portfolio, do you see anything else out there on the horizon that you would say might replicate what you saw in this quarter where you had this influx of openings in the current quarter.

Well what we, what I said in my prepared remarks as we expect this heightened level of competition in these more middle sized markets to continue for another couple to three quarters and then we expect that to abate as we get to the latter half of 2017.

Okay. And then if you bifurcate out the market the once you highlight here, how are the markets that didn't experience the comp this competitive influx of capacity how do those markets perform.

So if you would think about the primary markets as Nick defines just as an example, as I said in my prepared remarks in these pressured markets with heightened despite in new competition we grew just north of 10 basis points. As a company we grew – and that's way below our seasonal norm in those markets. As a company we grew about 40 basis points so obviously the balance of the markets in which we participated were well north of 40 basis points. So we saw good again as I would say, 40 basis points is better than the industry did at least as reported by Nick it was just not quite - it was not what we expected, we expected to do better that that.

And Frank I’d like to add little bit color on the cost part of your question. So as we’ve been talking about we’ve see wage pressure in our skilled clinical areas and that continues. We've also seen wage pressure and some of our executive directors as we have higher group placements and then we do see wagering pressure relates to minimum wage requirement, as well as competitive labor in some regions. As I mentioned in some comments some are geographic, particularly on the cost. And then of course December 1, I think everyone know that we got the minimum wage - hourly wage increase to 47,500 which we reflected in our guidance just an update we think that will affect the 1800 associates primarily in our field about two-third of these people will move from salary to exempt which will cause a wage rate increase and the increase in salary cost is about $1.5 million for that. And then we got sensitivity that we can share with you on overtime for the remainder that on annual basis would add $4.8 million if the people who stay below that have two hours of overtime a week.

Cindy let me as you one and I promise I’ll hop off here, do you have - could you give us any kind of guidance on what the sort of pro forma annualized run rate of CFFO would be for the unconsolidated joint ventures and I’ll hop off. Thank you.

So we're looking at $55 million to $60 million CFFO for the unconsolidated joint ventures and if you look at the supplement on the first page you can see the pacing of that throughout the year. We haven't change that guidance at all but the big difference is that would always included in our consolidated CFFO calculation, now you’ll see on the supplement we just have to show it separately one top of the other. So, you’ll need your calculators to get back to our historical method.

Thanks Frank.

Your next question comes from Joanna Gajuk with Bank of America.

Good morning. Thanks for taking the question here. So just getting back I guess to maybe very detailed question, but about the divestitures that’s been happening in the third quarter and I guess prior to that. So can you talk about that impact of those. Maybe I missed that, in terms of how we should be thinking in terms of the effect to EBITDA for the fourth quarter or pro forma, however you can frame it in terms of the divestitures that have happened already?

So the divestitures that have happened already Joanna, we had in the 2015 or in the quarter ended September 30, 2016 that included $15.1 million of revenue and $1.3 million of adjusted EBITDA. So those are communities that we’ve already disposed of. So that revenue and adjusted EBITDA goes away in the fourth quarter. And then as I mentioned in my remarks, we’re expecting about 2,000 towards 1.11 units in the fourth quarter sequentially.

Okay. So this will be the additional divestitures that are still pending that you expect to complete during the fourth quarter, correct?

To the aggregate of the two, right. So if you think about the first metric I gave you was what is the revenue and adjusted EBITDA for the communities that have already been disposed off. And the second metric I gave you is if you just look at average capacity between Q3 and Q4, the average capacity will be down 2,000 units and that of course includes the 57 communities.

Great. And then just briefly coming back to the topic around new competition and I guess the commentary that now you’re see I guess increased activity in those secondary markets. But can you talk about the experience so far I guess in terms of the private market? I know that you say that things kind of were trending in line with history. But is there any incremental change there or it’s just pretty much you’re saying that now kind of the new construction activity has shifted towards the more secondary market and that’s what’s kind of came as a surprise to you to some degree in the third quarter?

The new competition in the primary markets was basically what we’ve seen in the past and what we would have predicted. It’s been sort of level. And our performance in those primary markets has been pretty positive. Off the top of my head, I think roughly 60 basis points we grew in those markets is my recollection. So the big primary markets where I would say new construction started in those more affluent in those types of markets earlier in this process. But I would say our performance in the primary market and our view of new competition has been pretty consistent. Where we saw the shift was to some of these more middle sized markets where again it’s little difficult to predict exactly when new competition is going to open by what happened there is while we grew, we just didn’t grow, we thought we would do a better job. And we misjudged our ability at least during the short term to deal with those competitive pressures. Now again as I said, we’re confident that we will – that those markets will regain their strength as we get through what we believe is a cyclical and intermediate term period for the next couple of quarters.

Thanks. So you are saying that you kind of saw those assets being planned to be build, but then I guess you just kind of misjudged your ability to kind of spend in that market, right? So I guess is there any color there that you can talk about in terms of like how aggressive you were with incentives and this passing things and such in those markets, how quickly you kind of responded to the new situation in terms of the new assets being offered. Because you would think that there’s some lead time between the times being approved and assets actually being opened. So you would think that there’s some time for the assets to kind of prepare for the new competition company?

Yes, I get the question. Our local operators, our sales managers, our marketing folks, they response to that new competition as it opens or immediately before it opens, usually four or five months beforehand. And I we’ve responded aggressively to that in terms of adjusting our pricing, using incentives et cetera. We were just not quite as successful. Again I want to underscore, we had positive growth in the market. We were just not quite as successful as we would have anticipated using the tools in our tool box as we responded aggressively to that new competition.

Okay, great. Thank you. I go back to the line. Thanks.

Your next question comes from the line of Ryan Halsted with Wells Fargo.

Thanks. Good morning. Just maybe to stick with that last point, since you broke out the occupancy can you breakout the average monthly rent growth in the mid-sized markets versus the other markets?

Ryan, we don’t give out that kind of detail.

Okay. I guess the reason I’m asking the question is you talked about having an ability to price consistently despite the new pressures from the occupancy or from the new supply. So that’s what I’m trying to get at is how come you had to be so aggressive when you’ve generally tried to remain pretty disciplined on the rent growth?

Well I would say again we did show 3.2% same-store rate growth across the company on a same-store basis. As we’ve discussed before, we are constantly assessing on a day-to-day basis, week-to-week based on what’s going on in the local markets. We constantly assess our pricing, what incentive tool boxes that our sales folks need in order to move folks in and we will continue to do that. And of course adjustments are made if the competitive pressures in a particular market are such that we need to even more aggressively respond to that competitive pressure. We’re going to continue to do that. I think as Cindy said, we expect to continue to get the – our rate growth however, was not as high as we would have anticipated when we built our business plan, still 3.2% same-store, 3.8% on a RevPAR basis as we went through the quarter. We’re expecting to do okay in terms of holding price as we go into the fourth quarter.

Okay. That’s helpful. With these latest transactions, what percent of the communities are in these mid-sized markets or is there any research to sort of to make on where you’re looking to reduce your lease exposure as it pertains to the market dynamics that you’ve outlined with the new supply.

I’d say our disposition activity to this point has been around as we’ve discussed previously around disposing of communities that are either underperforming or have outsized capital expenditure requirements or in markets where we do not wish to concentrate our efforts. Again with respect to some of these middle markets, we expect those markets in many cases to be good markets over time. There’s just a cyclical bit of pressure that’s on them right now and we are confident that based on our experience from years and years of doing this that they’ll recover. So we have to battle through that cyclical storm, which we will do and we are confident that these markets will recover and we have well positioned assets in those markets.

And Ryan, this is Cindy. This isn’t exactly on the point with regard to your secondary markets, but if you think about 64 communities that are going into the joint venture with Blackstone they had a 0.8 point coverage ratio pre CapEx and 0.65 after CapEx. So clearly a lot of the transactions are the portfolio that’s not performing well and so just getting those out of our portfolio well allow us to improve.

Okay. And then maybe just sort of looking out longer term you’re revised revenue guidance implies fourth quarter revenue down 5% to 10% even backing out the impact from the dispositions that you’ve announced or that has been close already. How should we think about your long-term expectations for 3% revenue growth, certainly over the next 12 months?

Yes, I think as we look into next year, we certainly are expecting to see heighten competition in the secondary market, certainly for next two or three quarters. As you look at our same-store portfolio, we would expect to see revenue growth, but growth rate is more muted than we previously thought. We’ll continue to see labor pressure in 2017 and I do want to highlight that we did get the benefit of larger than normal of reserve reversal this year, which will create a better headwind for us in terms of growing next year. So when you put all that together, our consolidated revenue and expense growth rate will be lower than our same-store growth rate because of the disposition. And then we’re expecting that our CFFO from our recently announced transactions we’ll have about $27 million of positive impact on CFFO and $40 million positive impact on CFFO less than non-development CapEx and then of course our G&A initiative is ongoing, which should improve our G&A from next year.

All right, thanks for taking my questions.

Your next question comes from the line of Brian Tranquilut with Jefferies.

Hi, good morning, guys. First question for Dan, you looking at where the stock prices right now, what you said and coming in as Executive Chairman, how are you thinking about value creation in terms of prioritizing the moves that guys need to make as a company? And also where the near term opportunities are to create value and then support the shareholder base at this point?

Sure, Brian. I mentioned a couple of time for me. I think our top priority had to obviously be improved operations, when you look at the senior housing business as you probably know. I mean 1% increase in occupancy I think drives about $27 million of additional cash flow for us. So when you look at where we are – it’s hard to compare, it’s hard to understand why it was 350 basis points shy of the mixed average occupancy. I mean I think we got to work ahead of us, but I think there is clearly opportunity there to create meaningful value in our portfolio through improved operation. So I think that’s priority one for us for sure. I would say the next is second and third thing are closely tie to each other. One is obviously the disposition of assets that we can sale smartly for reasons that people outlined, I think some of that I would expect would be done in conjunction with I think is a very important opportunity for us, which is to try to make sense out of some of these leases in the way we did with Blackstone situation. I mean I’m sure we have some other troubling leases, and I think there is opportunities for us to figure out ways to create win-wins with our landlords in those situations. And we are working hard and we’ll have real sense of urgency to working in that why I think hopefully we have in opportunity to not only we believe improvements in our cash flow as a result of these restructured that additionally obviously we hope to reduce our leverage. So I think those are areas of concentration for us Brian.

I appreciate that Dan. Then the follow-up in that, Cindy, you laid out all the headwinds on the P&L, is there a way for us to like discuss on the action plans in terms of especially the things that you already discussed in the past such as synergy realization, G&A cut, all these things we have talked in past like where these stand in terms of updating those expectations? And are there other things with management is laying in terms of initiatives that we should be looking-forward to control both topline and rationalize the expense line to match the headwind on the macro side or the occupancy side related to competition?

Sure, absolutely. As you think about our initiative as you expect we got a pretty detailed action plan. The first and most important thing is to make sure that we set of right leadership in our community. And so we’ve been talking about retention of our Executive Director or Health and Wellness Director and our Sales Director position in our communities. There is nothing that we can do. That is more important to that. And we are pleased that we made progress on reducing our Health and Wellness director turnover during the third quarter. Clearly, our people are very valuable and they are targeted by competition that’s most important thing. We are continuing to work on our service alignment labor model, which helped us make sure that we got the right labor in the communities to match to the acuity of the residents need. And that helps us offset little labor pressure. You got to make sure you are matching labor appropriately to our procurement initiatives are growing and doing really well. We’re very happy with the savings that we’ve seen in cost and supplies have continued to see that as you look forward into our P&L. Our best tool is allowing us to make sure that our communities are operating effectively and we know that the communities that have high debt scores, have higher probabilities, so we will continue to roll that out and that will be important. On our G&A we have reduced a number of physicians throughout the year and made additional physicians – organize additional physicians recently, so we will continue that up for as we streamline and simplify the G&A. And then our Ancillary Services business, we are right sizing our portfolio in the outpatient therapy business, which improves the profitability of that business going forward, probably won’t have a business that on Q4, but it will help us as we go into 2017. I hope that answers your question, Brian?

Yes and just a follow-up and that for Andy. We have talked about the marketing strategy before so as we think about increased competition, where do we stand on reevaluating the marketing strategy or ramping that up and then how do you think about pricing at this point of time to follow-up through Ryan’s question. Do you think that you have the ability to give some basis points on rate to shared occupancy or vice versa to give up some occupancy in exchange for higher rate growth? This is a discussion we’ve had in the past on pricing and occupancy strategy?

Yes, so I’ll take both parts of those questions. On the marketing front, we are currently focusing virtually all of our efforts around marketing on both a local basis and then that market basis. And so we are directing our efforts that they tried true strategies of developing professional referral relationships and those sort of traditional methods. That’s currently where we are focusing our efforts. With respect to pricing, Brian, again it’s a very localized strategy. Our local sales and operating teams adjust their prices and they have incentive tool boxes that allow them to respond to the market to move folks in. What we’re trying to do is to maximize revenue and we are not trying to maximize rate at the expense of occupancy. Again we had good success with that in the second quarter and we had success with it in the third quarter, just not as quite as much as we anticipated as we went into the quarter. So we’re constantly adjusting our pricing strategies by virtue of what’s happening in the local marketplace and we will continue to do that, all again of maximize revenue.

All right, got it. Thanks guys.

And our next question comes from the line of Dana Hambly with Stephens.

Thank you. Andy, as you look out over the next two to three quarters, you are going to be pressured by the unprecedented level of new opening. What kind of line of sight do you have beyond the next two to three quarters of new supply coming online?

I think we have reasonably good both objective analysis that we do. We have industry data that we can look at and then we have anecdotal information. So I would say that we feel reasonably confident that after say the middle of 2017 you will begin to see new competition abate and get back to what I would say more normalized levels as opposed to the spike that we’re seeing – we’re right in the teeth of as we speak.

Okay. And I am trying to, the unprecedented level was it a supply, was it a surprise that it came online or was it just you were surprised by your inability to perform a little bit better than your expectations…?

Yes, I mean obviously we are looking at new competition all of the time.

Right.

So I wouldn’t say that it was a surfacing. So I mean we knew that these buildings were being built. Again it’s a little bit difficult to predict exactly when in total or in totality that you’re going to see all of these new openings happen. But obviously our local teams are mindful of what’s happening in their marketplace and our analytical teams in the corporate office are mindful of what the new competitive environment looks like. So what we misjudged as we came into the year and as we are going through the year is that we thought, again I would say we made progress. We still grew rate, we still grew occupancy, we just didn’t make quite as much progress as we had anticipated in the face of these new openings.

Okay. And Cindy, could you help us out on kind of a pro forma rent expense quarterly or annualized once all of these transactions are completed?

If you look at the investor deck that we have put up on the Web site we try to give you the update for that. So we are looking at a reduction in cash rent expense that is pretty significant $71.7 million for the nine months ended September 30 and it's about $85 million for a full year basis.

Okay. That's helpful. Is the SEC done with you guys for now?

I hope so.

Yeah.

But I will say that, we are not alone, I mean it's hard to be here inside two consecutive quarterly changes in non-GAAP metrics that's certainly not what we expected or wanted to have happened. At the same time it appears that there is a very strong focus across our industry and guidance is evolving. And discussions with the SEC and discussion with our outside advisors, we know that we are not alone, that wasn't I guess some place to be.

Okay. Last one from me. I apologize, just had it scribbled down here I am sure you've detailed it. $200 million to $225 million in proceeds in the fourth quarter, can you tell me where that’s coming from?

I think what you are referring to is we are in the process along with HCP to get nonrecourse mortgage financing on our non-consolidated entrance fees CCRC joint venture and we expect that those financings to produce two Brookdale between $200 million and $220 million for proceeds having attractive rate.

Okay, all right. Thanks very much.

And our final question comes from the line of Chad Vanacore with Stifel.

Hi, guys, thanks for fitting me in, there is a lot going on here today. So I am just thinking you have made significant process in the restructuring, so where would you say we are now in terms of portfolio restructuring, what inning are we in and what do you think has – still has to be done and what's the priority?

Well, I don’t know that I want to characterize it, Chad, and thanks for fitting us in and joining us this morning. I don’t know that I want to characterize where we are in terms of innings or that sort of thing. What I want to underscore is that we intend to as we move forward and into 2017, we intend to aggressively think through additional asset dispositions for assets that we own in order to optimize the portfolio. We are also aggressively going to pursue additional lease restructuring with our landlords and we are - that’s a big effort for us is we move into 2017 but I don't know that it’s appropriate for us to give you any sort of precise calibration of that, or calculation of that but it’s all dependent upon what transactions we can get accomplished and whether that makes sense for us under the circumstances we are in.

We are very happy that we have addressed 20% of our leased portfolio to the transactions that we announced this morning.

Okay. And then just thinking about the wage inflation piece puzzle, you said you expect – you're seeing 10% wage inflation I think last quarter or somewhere early in the year, you had thought maybe 3.5% wage inflation was right, can you talk about the differences in expectations?

If I said 10% wage inflation I misspoke, it’s 10% benefits inflation. Our wage inflation is still within our budget but higher than we have historically seen.

Okay. And then just speaking about the ancillaries, we saw bounce back in Q2 from a weak Q1 and then decline pretty significantly in Q3 and I think last quarter you said you could create another $5 million of revenue in your controlling labor, so what's changed there?

It’s basically the competitive inclusion that we talked about. We have taken action but we had a loss 20 associates from the former Nurse on Call. And we believe that certain of these associates are on behalf of their new employers within our patients referral sources and associates in violation of non-solicitation agreement. We have taken legal action and we have gotten in junction against at least one of these associates, former associates.

Okay. And then just one last question, just thinking about where the stocks trading today, does it make sense to open up a strategic review on the own real estate where we stand today?

We are taking the actions, Chad, that we outlined the board, we are not going to get into that type of discussion again, right now.

All right. Thanks for taking my questions. Andy Smith Okay. Thanks Chad. Thank you for joining us this morning. We appreciate your time. Thank you.

Thank you for your participation. This does conclude today's conference call and you may now disconnect.