Chad Keetch - EVP and Secretary Christopher Christensen - President, Chief Executive Officer Suzanne Snapper - Chief Financial Officer

Chad Vanacore - Stifel Frank Morgan - RBC Capital Markets Dana Hambly - Stephens

Good day, ladies and gentlemen, and welcome to the Ensign Group’s Fourth Quarter Fiscal Year 2017 Conference Call. At this time all, participants are in listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions] As a reminder, this conference may be recorded. I would now like to turn the conference over to Chad Keetch, Executive Vice President. Sir, you may begin.

Thank you, Ashley. Welcome everyone and thank you for joining us today. We filed our earnings press release yesterday. This announcement is available on the Investor Relations section of our website at www.ensigngroup.net. A replay of this call will also be available on our website until 5:00 p.m. on Friday, March 2, 2018. We want to remind any listeners that may be listening to a replay of this call that all statements made are as of today February 9, 2018, and these statements have not been nor will be updated subsequent to today’s call. Also any forward-looking statements made today are based on management’s current expectations, assumptions and beliefs about our business and the environment in which we operate. These statements are subject to risks and uncertainties that could cause our actual results to materially differ from those expressed or implied on today’s call. Listeners should not place undue reliance on forward-looking statements and are encouraged to review our SEC filings for a more complete discussion of factors that could impact our results. Except as required by federal securities laws, Ensign and its affiliates do not undertake to publicly update or revise any forward-looking statements where changes arise as a result of new information, future events, changing circumstances or for any other reason. In addition, The Ensign Group, Inc. is a holding company with no direct operating assets, employees or revenues. Certain of our wholly-owned independent subsidiaries, collectively referred to as the Service Center, provide accounting, payroll, human resources, information technology, legal, risk management and other services to other operating subsidiaries through contractual relationships with such subsidiaries. In addition, our wholly-owned captive insurance company, which we refer to as the captive, provides certain claims-made coverage to our operating subsidiaries for general and professional liability as well as for workers’ compensation insurance. The words Ensign, company, we, our and us refer to the Ensign Group Inc. and its consolidated subsidiaries. All our operating subsidiaries, the Service Center and our captive are operated by separate, wholly-owned independent companies that have their own management, employees and assets. References herein to the consolidated company and its assets and activities, as well as the use of terms we, us, our and similar terms used today, are not meant to imply, nor should it be construed as meaning that The Ensign Group Inc. has direct operating assets, employees or revenue or that any of the subsidiaries are operated by The Ensign Group. Also, we supplement our GAAP reporting with non-GAAP metrics. When viewed together with our GAAP results, we believe that these measures can provide a more complete understanding of our business, but they should not be relied upon to the exclusion of GAAP reports. A GAAP to non-GAAP reconciliation is available in yesterday’s press release and is available on our Form 10-Q. And with that, I’ll turn the call over to Christopher Christensen, our President and CEO. Christopher?

Thanks, Chad, and good morning, everyone. We're proud to report that we achieved the highest adjusted earnings per share in our history. The momentum we experienced in the third quarter continued into the fourth quarter and we’ve just started scratching the surface of the significant organic growth potential within our portfolio. As those who have been following us know, we're coming off some of our largest acquisition years. Over the last several quarters our talented local leaders have been tirelessly integrating 116 skilled nursing and assisted living operations into the organization. In our 17-year history we've established a track record of both top and bottom line organic growth. It often takes several years to truly transition a healthcare operation as the clinical reputational culture transitions take time to transform. We still have pockets of weakness in some of the transitioning operations, but we've made great progress in the vast majority of them including in Texas. Of course some transitions are quicker than others, but over the period of 18 years and 232 acquisitions, this pathway to progress has been proven over and over again. We're very excited to see this multiyear process beginning to bear fruit in spite of some challenging circumstances. Over the next several years as the wave of baby boomers arrives and networks continue to narrow, we're positioned to capitalize on the enormous organic growth potential. During the quarter we experienced a dramatic improvement in our transitional and skilled services segment income of 40.2% over the prior year quarter. We also experienced positive trends in occupancy with an increase of 289 basis points in our transitional operations and 109 basis points in our same-store operations, both over the prior year quarter. Our GAAP earnings per share for the quarter was $0.21 per diluted share and adjusted earnings per share was up 33.3% to a record $0.40. With a focus on strengthening outcomes, lowering readmission rates and extending our capabilities to care for more complex patients across the post-acute continuum we've continued to invest in the best leaders and clinical programs in post-acute care. As a result we're seeing significant improvements in all the key indicators related to outcomes and patient satisfaction both of which will drive occupancy and skilled mix. During the year 14 more of our skilled nursing operations achieved four and five star ratings and with those additions 100 of our skilled nursing operations carry that designation at quarter end. The other operations, most of which were one or two star operations at the time of acquisition continue to make the improvements necessary to gradually increase their star ratings. We're also pleased to report that we continue to quietly build significant value in our other lines of business, including assisted living, home health and hospice, nonemergency medical transportation and other post-acute care services. Under the direction of key leaders and the dedicated service center resources these operations have achieved consistent clinical and financial results while simultaneously bolstering our core skilled nursing operations. Our assisted living and independent living portfolio company which consists of 51 stand-alone operations and 21 campuses in 12 states grew its segment revenue and income by 13.7% and 66.3% over the prior year quarter respectively. Similarly Cornerstone Healthcare, our Home Health and Hospice portfolio subsidiary grew its segment revenue and income by 27.5% and 27.7% over the prior year quarter respectively. Collectively these two business segments along with other new healthcare ventures within the portfolio are quickly approaching the size of Ensign when it completed its initial public offering in 2007 and each and every one of these ventures are independently profitable and self-sustaining. The income growth, each of these business ventures has achieved is further evidence of our ability to apply its operating principles in several healthcare services. We expect to see each of these segments grow by acquiring underperforming operations in driving organic growth. As they apply proven Ensign principles we believe that sometimes forgotten underlying value will become increasingly more difficult to ignore. We continue to methodically add value to our real estate portfolio by improving the operating results in our owned operations and by acquiring additional real estate assets. Since we spun out, all but one of our real estate assets to CareTrust REIT in 2014 we've added 145 operations and acquired 64 real estate assets. Historically our shareholders have received a little to no credit for an incredible amount of underlying value in our real estate and that value is again being overlooked. As an operationally driven organization we will continue to focus on creating value through solid operational performance, but we also believe it's important to recognize the growing underlying value in our own real estate and that there are many options available to us to unlock this value for the benefit of our shareholders. We announced yesterday that we're increasing our 2018 annual earnings per share guidance to between $1.80 and $1.87 per diluted share. This increases due to the recent tax reform that reduced the company's effective income tax rate from 35.5% to an estimated 25% for 2018. We intend to invest these tax savings to strengthen the balance sheet, to fund growth and to share a portion of the savings with employees. Overall, this adjustment represents a 31.1% increase from the midpoint over our annual earnings for 2017. Even without the tax savings, the midpoint of our guidance represents a 15.7% increase over 2017 results. We're very excited about the coming year and look forward to continue to drive quality healthcare outcomes and corresponding financial results. And with that, I'll ask Chad to give us an update on our recent investment activity and growth. Chad?

Thank you, Christopher. During the quarter we paid a quarterly cash dividend of $0.045 per share representing an increase of 5.9% over the prior year. This is the fifteenth consecutive year we have increased our dividend which we hope shows our continued confidence in our operating model and our ability to return long-term value to shareholders. We have been a dividend paying company since 2002 and have increased our dividend every year since. Also during the quarter and since the company's subsidiaries made the following acquisitions. On October 19, 2017 we opened Pointe Meadows Health and Rehabilitation, a newly constructed 99-bed skilled nursing facility located in Lehigh, Utah. This one also happens be the last outstanding new build commitment for the time being. On November 1, 2017 Cornerstone acquired the assets of Excell Home Care and Hospice and Excell Private Care Services in Oklahoma City, Oklahoma. And on February 1, 2018 Bridgestone acquired the real estate and operations of Cedar Hills Senior Living a 37-unit assisted living facility in Cedar Hill, Texas and Deer Creek Senior Living a 37- unit assisted living facility in DeSoto, Texas. These additions bring our growing portfolio to 181 skilled nursing operations, 21 of which also include assisted living operations, 51 assisted and independent living operations, 22 hospice agencies, 20 Home Help agencies and four Home Care businesses across 15 states. On December 27, 2017 we completed a 112 million portfolio financing with low fixed-rate loans amortized over 30 to 35-year terms and secured by mortgages on 17 of our 65 owned properties. These new long term fixed-rate borrowings represent an important piece of our capital structure providing us liquidity on a portion of our own real estate during a period of historically low interest rates. In addition to paying down previously drawn amounts on our revolving line of credit, the proceeds of our insured debt will be used to fund acquisitions to renovate and upgrade existing and future facilities and to cover working capital needs. This is just one of the many levers real estate ownership provides us. And as we've said many times before, this is one of the reasons we continue to purchase underperforming real estate. We continue to see a steady flow of acquisition opportunities across all our business segments. These potential transactions come from a variety of sources and different types of sellers, ranging from smaller operators and nonprofits that are exiting the business to large regional operators that are selling non-core or turnaround assets. Almost all of the transactions we completed in 2017 fit one of these two categories and we're completed 1, 2, and 3 at a time. We have also seen an increase in the number of larger well-known portfolios of skilled nursing assets. As we've said before, these types of opportunities generally attract interest from financial or real estate buyers. As a result, these deals generally trade at a premium and too often lead to purchase prices and lease coverages that leave the operations very vulnerable to rent escalators. In our view several of the recently announced transactions have traded at overly aggressive cap rates and lease coverages. All of this in the face of news reports indicating that large historically strong operators are defaulting on rents as a result of poorly structured capital market transactions, owners leases and unhealthy leverage. We continue to believe that the dynamics in our industry, while sometimes challenging, are not nearly as difficult as many are led to believe as a result of these self-imposed challenges follow creative, financial and engineering. When we evaluate each opportunity there are many factors we use to evaluate our level of interest, including the availability of locally driven clinical and operational leaders, the building's reputation and the estimated return on our investment. All of this is with the long-term health of the operation as a top priority. We take our commitment to each healthcare community and the team of caregivers very personally and will only do a deal if we can see a pathway to continued and sustained health over the long run. One of the keys to our success has been with very few exceptions to structure our transactions in such a way to ensure the long-term health of the operation. We constantly remind each other to remain disciplined and true to our operations driven acquisition strategy. More often than not that means that we pass on transactions that push the envelope in terms of valuations and lease coverages. With all that said, the pipeline for typical turnaround opportunities remain strong we remain confident that there are and will be many, many opportunities to be had at the right prices. We expect to continue to find and acquire more and more of these types of operations in 2018 and are already working on a handful transactions that we expect to close in the first and second quarters of this year. And with that, I will turn the call back over to Christopher.

Thanks Chad. Before Suzanne runs through the numbers, we'd like to share a few examples that represent some of the vast improvements that have been made over the quarter. Osborn Health & Rehab located in Scottsdale, Arizona has seen remarkable growth under the leadership of CEO, Karl Cooper and Director of Nursing Mary [indiscernible]. Osborne is a great location across the street from a major hospital but they literally sure properly in line with two direct competitors making it a highly contested market. Even in this highly competitive environment, Osborne has proven to be the facility of choice growing census and boosting Medicare days by over 24% for the quarter. In coordination with their local hospitals and physician partners, they've developed specialized services to meet targeted patient needs. They also boast lower length of stay and very hospital readmission rate which is remarkable given the complex patients they serve. As a result they have leveraged these outcomes to become the trusted partner to their ACL partners and physician groups, all while achieving outstanding survey outcomes. Because of the demand for their services, Osborne has boosted to their EBIT performance by more than 100% over the prior year. Bridgestone Healthcare our assisted and independent living company has been a critical part of our success in the quarter. Over the past three years Bridgestone has grown from 24 operations to 75 as of today. As an example of their operational success on the social living front we've seen some impressive performance from the team at Desert Springs Senior Living in Las Vegas, Nevada. CEO Simona [ph] and Wellness Director Erica Tindall have taken on an already high performing operation and made it even better during the year. Desert Springs has a long tenured staff, some of the most consistent regulatory outcomes and very high resident and employee satisfaction scores. Because of the longevity and consistency desert Springs continues to get better every year. There is such a demand for their community that they are now consistently bumping up against 100% occupancy due to their stellar reputation in the very competitive Las Vegas market. Accordingly occupancy improved by nearly 500 basis points to an average of 99% for the quarter. Net income also improved dramatically for the quarter by an incredible 42.4% on a revenue improvement of 9%, all compared to the same quarter last year. Namaste Home Help and Hospice which serves the Denver Colorado market was a key driver of our Home Help and Hospice success in the fourth quarter and throughout 2017. CEO, Richard Lewis, and Director of Nursing, Allison Collins have led the chain to become a provider of choice in the Denver market. For the fourth quarter, Namaste saw revenue increase by 27% over the same period in 2016 and EBIT increased by 98%. Their growing reputation in the community was reflected in a 60% increase in days of hospice service provided during that time and their home health operation earned a four star rating during the quarter. For the year revenues were up 27.1% and EBIT improved by 99.7% as the agency's hospice days grew by 49.8%. These are both more seasoned operations in our portfolio and both come from the same-store bucket. There are many more such examples across the organization. We appreciate you allowing us to share them, send them to us. There is no more important information well offer today than to tell you that Ensign is literally full of extraordinary leaders with stories like these. These few examples show what makes us different and they illustrate that the opportunities for organic growth in all parts of the company's expanding portfolio remain more compelling than ever with that I'll turn the time over to Suzanne to provide more detail on the company's financial performance and our updated guidance and then we'll open it up for questions. Suzanne?

Thank you, Christopher and good morning everyone. Detailed financials for the year are contained in our 10-K and press release filed yesterday. Highlights for the quarter included, GAAP earnings was $0.21 per diluted share. Adjusted earnings per share was up 33% over the prior year quarter to a record $0.40. GAAP net income was $11.2 million adjusted net income was $21.1 million an increase of 35% over the prior year quarter. Transitional skilled occupancy was 74.7% an increase of 289 basis points over the prior quarter and same-store occupancy was 78.7% an increase of 109 basis points over the prior year quarter. Skilled segment income was $39.9 million an increase of 40% over the prior year quarter and an increase of 8% sequentially over the third quarter. Assisted and Independent Living segment income was up 66% to $4.3 million and Home Health & Hospice segment income was up 27.7% to $5.8 million. Other key metrics include cash and cash equivalents of $42.3 million at December 31st and $100 million of availability on our revolving line of credit. We expect our lease adjusted net-debt-EBITDAR ratio which was 4.2 times at quarter end did decrease in 2018 as the EBITDA from transitioning and newly acquired operations continue to grow. We also wanted to address some of the weak [ph] items that impacted our 2017 GAAP results, including class action settlement, the impact of the natural disasters and the adoption of the new tax laws. Each of these events are unusual and are not expected to occur in the near future. We also anticipate the results related to some of our constructed operations will no longer be included in our adjustments. As a result we expect that the elimination of these items will significantly reduce the number of non-GAAP adjustments in 2018. As Christopher mentioned, we are updating our guidance for 2018. We are projecting revenues at $2 billion to $2.06 billion and adjusted earnings of $1.88 to a $1.87 per diluted share. The 2018 guidance is based on diluted weighted average common shares outstanding of approximately $54.3 million. The exclusion of transaction related cost and amortization costs related to patient base intangibles, exclusion of losses associated with startup operations which are not yet stabilized. The inclusion of anticipated Medicare and Medicaid reimbursement rate increases net of provider tax, a tax rate of approximately 25%, the exclusion of stock based compensation, and the inclusion of acquisitions closed or anticipated to be closed in the first half of 2018. Additionally, other factors contributing to our asymmetrical quarters include variation in reimbursement systems, delays and changes in state budgets, seasonality in occupancy and skilled mix, the influence of the general economy and our business staffing, the short term impact of our acquisition activity, variation in insurance accruals and other factors. And with that, I'll turn the call back over to Christopher. Christopher?

Thanks, Suzanne. Just to clarify something. I think, I said we had $100 million of availability on our revolving line of credit. We have $170 million of available on our revolving line of credit, I just wanted to clarify that from my part. We want to again thank you for joining us today and express our appreciation to our shareholders for their confidence and support. We're very appreciative we have colleagues in the field and the service center for making us better every day and for the improvement that we are making currently in our current organization. I guess I'll turn the time over to Ashley to conduct the Q&A portion of our call and Ashley if you would instruct I guess everyone on the call how to proceed.

Of course. [Operator Instructions] And our first question comes from Chad Vanacore of Stifel. Your line is open.

Hi, good morning all.

Good morning.

Good morning Chad.

All right, so just thinking about occupancy in the quarter, it was relatively strong while the industry has been struggling. So what drove that occupancy improvement at Ensign versus the rest of the industry?

I think part of it, because you saw it was in same-store and in the other buckets, but part of it was because we saw great strength in some of the transitioning facilities that were starting to get healthy, but on the same store front, I think it's kind of what we've been talking about for a while that sort of was more delayed that I sort of sheepishly kept referring to Chad, we finally saw the strength in Texas. We finally saw some strengthening in Utah. We finally saw some strengthening in some of those markets where there had been some delay in some of the narrowing of networks. They probably had the biggest influence on that and that we feel like that's going to continue into the distant future.

All right, so Christopher you've mentioned a couple times the strengthening in the Texas portfolio and what's really driving that improvement there? Is it operating expense improvement, payer mix, better occupancy, some combination of them?

Yes, I mean I think it's all of it. You're probably tired of hearing this too Chad and we really took a little bit of a step backwards when we took that acquisition on and we weren't strong enough in Texas to be taking on an acquisition like that, slowly last year our same-store stuff got much, much healthier and as they got much healthier, they were able to help in a much bigger way with the transition that the healthier transition of the Legend portfolio. And so all of that and I mean to be candid we did take a step backwards first in Texas before we started taking leaps forward and those leaps are more pronounced now, partially because we took a step backwards.

So it's fair to say that situation looks like it's stabilized now?

It's much. much better. Look, there's always room for improvement. We - there's plenty of opportunity for growth still in Texas and we expect - we actually expect the growth in ‘18 in Texas to be much bigger than it was from ’16 to ’17 but because most of the impact happened late third quarter and early fourth quarter. So we're really excited about the track that Texas is on, it's a good question though and I'm glad you noticed that.

Well, then just thinking about revenues were stronger and then that looks to be occupancy and mix, but that margin profile still little weaker than historical average, so what's driving that and what kind of assumptions are you making in 2018?

You’re talking about EBIT margins?

EBIT, EBITDA, all the way down excluding taxes.

Chad, I mean if you’re looking for the year, I mean as you've heard us talk about the health care, I mean obviously plagued us the entire year, so if you're looking at the overall year amount I would say that that's an accurate statement, we continue to be having that higher amount coming into through Q4 and like we projected and like we brought down guidance. But as we continue to look at what ‘18 is going to be, we think that will be in good shape on the margin and overall it's kind of exactly where we thought it would be and very consistent and a little bit down, a little bit up from where 2000, Q3 was.

Yes, so the margin is actually strengthening, but Chad you are right, if you compare all of ‘16 to all of ’17 it did decline a little bit, but if you look at the momentum and what we see in the fourth quarter as compared to prior quarters, we feel like those margins are getting stronger, but yes it was - I don't think we hit it at all. We did have some struggles in early ’17.

So, when do you think about 2018, do we get back to those 2016 margins, do you want to hazard a guess on that?

I hate hazarding a guess, but I do feel like the momentum is there and whether it happens, I think we should run past ‘16’s margins, I just don't know, I don't know if it will happen in ’18 or ’19, but the momentum is there and I'd be surprised if our margins didn't strengthen throughout the year.

All right. And then just one last one from me, I know it’s average Medicaid rate per day was elevated in the quarter, is there some year-end bonuses in there and where do you think the average of Medicaid rates for 2018 shake out?

Yes, I mean I think what – you'll continue to see us participate in the supplemental programs, so we had our first full quarter of the Texas [clip] [ph] program and so I think that that elevated rate is a consistent rate that we expect to continue in 2018.

So, just to clarify that that fourth quarter Medicaid average rate you think would be average for 2018 something there or better?

Yes.

Okay, that’s it from me, thanks.

Thank you, Chad.

And our next question comes from Frank Morgan of RBC Capital Markets. Your line is open.

Good, I guess good morning here. How - I have to think about there for a second. Could you talk a little bit, you made some comments in your prepared remarks about the likelihood of some M&A activity in the first part of the year. Could you share with us maybe your thoughts on sort of the level that you're thinking about for the year and what you're talking about here today is that represents a larger part of what you may be thinking about for the year? That will be my first question.

It’s a good question and I think you know better than anybody does that it depends on a lot of things. We are probably not going to see us participating in a lot of those big deals. Chad mentioned in his remarks that we just don't think the pricing is right, right now, but we do have some - we see some off market stuff that looks very intriguing to us and yes, it's hard for us to tell you exactly what that volume will be, but we do expect some volume, but not crazy volumes. Chad what?

Yes, I would agree with that, I mean I think you the onesie-twosies and the smaller deals are definitely there and like I said we have a handful of those that we can see in the short run that we're going to do. We expect that to kind of continue on a steady basis throughout the year. As far as more than that, I think we're just - we don't have artificial growth goals and we don't set targets that we're trying to achieve at the outset. We're just very opportunistic about it and when we think the opportunity is right and we have the leadership in place we’ll be ready. And I think that's our focus, Frank is we're just wanting to be prepared for what we think will be an attractive acquisition market in the near future.

Got it. And I suppose, I think Suzanne referenced leverage coming down in your press release came down, do you have any kind of targets of where you want to see that optimal leverage particularly in a year where it sounds like you're not going to do anything big?

Well, again Frank as the deals come forward and they come out of nowhere off and we don't want to say we won't, we will do that, but you're right, if none of the right deals come forward, we expect that number to go down in the three to three and a half times and that's where we ought to be. But if some additional deals that make sense to us are attractive, then that number might stay above that for a little while. But that’s kind of where - I mean our ideal number is probably between three and three and a half times.

Got it. And then maybe one more kind of high level, you referenced the value in the SaaS or some of your other assets and your other ancillary assets. I guess what would it take for you to seriously consider doing something one of those, maybe as a spinoff or I mean obviously there's a lot of interest back payers with Humana buying Kindred at Home [ph] in a JV. So given the kind of the appetite and acknowledgement with our payers and the value of some of those other businesses, I guess what are you looking for?

Well, I'm not ever allowed to say that we'd never do something, but I think that there is ample reason if the market doesn't give us credit for what's happening there in a growing part of our portfolio, then it may make sense for us, both functionally and on behalf of our shareholders to do something else. Selling them off is not or anything that we would be interested in. But creating a separate entity that functions alongside us, but where people can see in detail, what's happening with our Home Health and Hospice and Assisted Living that are both functioning very, very well. That’s something that we certainly have the obligation to look at and constantly consider.

Got you.

Yes, Frank I would just add. We have added more disclosure as well with our different business segments and so we're hoping to kind of shine more of a light on those businesses as well through that disclosure.

Got it. Maybe one more technical question, I'll get back in the queue, but just looking at the transitioning portfolio, certainly the occupancy as you pointed out is improved nicely, but it looks like the skilled days, the percentage of skilled days in the skill revenue is kind of going down year-over kind of trended down, really since I guess you had that big pop going from the fourth quarter of ’16 to the first quarter of ’17 where the size of that transitioning portfolio went up to I guess $40 billion. So can you remind me what happened with those $40 million and why that seems to be kind of trending where skill mix is lower? Thanks.

Yes, so one of the things there is you're looking at a percentage Frank and so, what it does is it skews. We have a significantly higher growth and our Medicaid days or non skilled days, you actually have that percentage, look a little skewed. So we did have just a really significant growth in our Medicaid days making the percentage go down.

So in other words, the days still went up, but because the Medicaid days went up alongside it, because remember how many empty beds we have in our total portfolio of 116 that we've taken just in the last couple of years that are - that have a lower occupancy than our standard occupancy. So as those fill up even if we increase our skilled days, you're still diluting them in that part of the portfolio.

Okay, got you. All right, thank you very much.

Thank you, Frank.

Our next question comes from Dana Hambly of Stephens. Your line is open.

Thanks to followup on Frank's questions on the ancillary services, how integral is Home Health and Assisted Living to your core skilled nursing operations and if you did something would you be able to do that without a lot of disruption to existing operations?

Yes, I think there - just because of the way we function as an organization there probably wouldn't be a whole lot of functional change. They help us a lot, we help them a lot. But they are very independent. They have their own service center. They provide almost all of their own resources, except for some legal and accounting stuff, but other than that they are very independent. But I should state in their behalf and the behalf of the whole organization, there's an interdependency. I mean, we on the skilled side there are a lot of pushing and pulling of Home Health and Hospice and vice versa. So, but I don't think that if we did something like that that would change at all Dana. I think we would – it wouldn't be like the other transaction we did where we were mandated to be very, very separate and then not sit on each other's boards or things like that, it would be, and there'll still be a lot of interdependence.

Okay, all right helpful. And then on the Medicaid pricing environment, you know states are going through their budgeting processes right now, are there any states that particularly concern you on the Medicaid pricing right now, future Medicaids?

In skilled nursing you're talking about?

Correct, yes.

Yes, no nothing that is concerning.

Okay and then on Medicare, I guess the potential big changes to the reimbursement in Medicare I don't think it's probably this year, but maybe next year, anything that particularly concerns you there with potential changes?

No, not that it's really just things that we've seen proposed are not things that we aren't already addressing or can't address quickly and even for next year. So we did see the increase reduce slightly in the latest proposal, but - if you know it's still healthy, about 2.4%, 2.5%. So that's what we've been accustomed to. In fact we've been accustomed to less than that a few years, so it's it not something that any of it's concerning.

Okay, then lastly Suzanne, do you have a targeted CapEx number for the year and within that are there any special projects that need to be done and system overhauls or implementation that could cause disruption?

No, our targeted is about $60 million. We don't have any system overhauls or other things that could cause disruption plan for the current year.

Great, thanks very much.

Thank you.

And I'm showing no further questions in queue at this time. I will now like to turn the call back to Christopher Christensen for closing remarks.

Thanks, Ashley. And thanks for everyone for giving us your time this morning. We'll look forward to talking you again next quarter.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may all disconnect. Everyone have a great day.