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Brookdale Senior Living (NYSE:BKD)

Q1 2012 Earnings Call

May 03, 2012 9:30 am ET

Executives

Ross Roadman

W. E. Sheriff - Chief Executive Officer and Director

Mark W. Ohlendorf - Co-President, Chief Financial Officer and Principal Accounting Officer

Analysts

Bryan Sekino - Barclays Capital, Research Division

Kristina Blaschek

Kevin M. Fischbeck - BofA Merrill Lynch, Research Division

Frank G. Morgan - RBC Capital Markets, LLC, Research Division

Daniel Bernstein - Stifel, Nicolaus & Co., Inc., Research Division

Operator

Good morning. My name is Kimberly, and I will be your conference operator today. At this time, I would like to welcome everyone to the Brookdale Senior Living First Quarter Earnings Call. [Operator Instructions] Thank you. I would now like to turn the conference over to Mr. Ross Roadman, Senior Vice President, Investor Relations. Please go ahead, sir.

Ross Roadman

Thank you, Kimberly. Good morning, everyone. I'd like to welcome you all to the first quarter 2012 earnings call for Brookdale Senior Living. Joining us today are Bill Sheriff, our Chief Executive Officer; Mark Ohlendorf, our Co-President and Chief Financial Officer; and Andy Smith, our Executive Vice President and General Counsel. This call is being recorded. A replay will be available through May 10, and the details on how to access that replay are in the earnings release. This call is also available via webcast on our website, www.brookdaleliving.com, for 3 months following the call.

I would also like to point out that today's -- 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 those factors that cause actual results to differ materially from Brookdale Senior Living's expectations are detailed in the earnings release we issued yesterday and in the reports we file with the SEC from time to time. I direct you to Brookdale Senior Living's earnings release for the full Safe Harbor statement.

With that, I'd like to turn the call over to Bill Sheriff. Bill?

W. E. Sheriff

Good morning, and welcome to our first quarter earnings call. The company performed well in the first quarter. While the macro environment for us was marked by mild weather and a mild flu season, the economy remained pretty uneven. And we did see the enactment of government reimbursement changes though the financial impact was as we had anticipated.

First, looking at occupancy. We increased quarter average occupancy by 60 basis points for the consolidated portfolio over the prior year. Significantly, our sequential average occupancy was flat with last quarter's 87.8%. During the first quarter, our attrition rate did tick up as historically happens, but we produced higher move-ins to offset the losses. While the number of leads actually held pretty steady with 2011, we were able to produce a better inquiry to move-in close ratio than we've seen in the past couple of year -- first quarters. This was fairly uniform across all of our segments with loss holding steady from the prior quarter.

We continue to be focused on our sales execution. We talked previously about the impact of technology on the leads part of our business. In 2011, we saw a 72% increase in leads coming through the Internet, either from our website or others that carry our information such that it became almost half of our inquiry base. The conventional wisdom for internet inquiries is that those who have speed and persistence win the race. We feel we continue to lead with our efforts with technology, whether it is website design, Internet optimization, social media usage. We even have apps that can be downloaded on iPhones and Android platforms. We are working hard in continuing to innovate how we build our leads and execute closing them.

Looking at pricing, the pricing environment remained pretty consistent with the last several quarters. It is still competitive in a fair number of our markets, and so the increases in the peak rates remain muted. While we did raise in-place rents on all of our freestanding assisted living communities in the first quarter at a level that approximate our expense increases. The revenue per unit increases in the quarter were in line with our expectations.

The first quarter Independent Living entry fee sales were good, given the quarter is typically the lowest of the year. We produced $15 million of gross entrance fee proceeds. Our refunds were, again, higher than normal but we still produced almost $7 million of net entry fee cash flow.

With the success we have had at Freedom Pointe at The Villages, the CCRC we opened in Q4 of 2009, we are now past the need to separately report the first-generation sales and refunds. Freedom Pointe reached stabilization, with total occupancy of over 90% for the first quarter, up from 76% a year ago. We have had 240 sales in a community of 240 IL units, including a few second generation sales.

Our ancillary services remain a vital part of the incremental cash flow we produce from providing services to our residents and more importantly, to our overall product strategy. We have successfully accelerated our plans to roll out ancillary services to the Horizon Bay communities. We now have generated revenue at communities representing 5,000 formerly Horizon Bay units for home health and over 4,000 units for outpatient therapy. This gets us to approximately 50% of our expected coverage of the Horizon Bay units with one of our services. Not only was the split trend expansion quite an accomplishment, but the total economic impact of all of these locations was close to breakeven. It will take several quarters, of course, to mature the results of these locations.

This quarter, we acquired 2 more home health agencies in difficult to acquire CON states. In our hospice initiative, while never going to approach the size of our other ancillary services, did produce almost $1 million in revenue this quarter and was slightly above breakeven from an NOI perspective. All in all, we produced approximately $101 million of EBITDA and approximately $59 million of CFFO in the quarter, excluding the integration and transaction-related costs largely related to Horizon Bay.

I'll now turn the call over to Mark to provide more details on the quarter.

Mark W. Ohlendorf

Thanks, Bill. Our reported CFFO in the first quarter was $0.45 per share. Excluding $3.9 million of integration and transaction-related costs, our CFFO was $58.5 million, or $0.48 a share. The impact of the Medicare changes on the first quarter results were a reduction in revenue of $7.2 million in skilled nursing and home health and a $1.6 million increase in skilled nursing therapy cost. In total, the $8.8 million impact was equal to approximately $0.07 per share of CFFO.

First quarter resident revenue increased 5.1% versus last year, driven by a 60 basis point increase in occupancy, a 1.6% increase in revenue per unit and a 2.7% increase in operated units. The revenue per unit increases in the quarter were in line with our own expectations. Our full year expectations for revenue per unit growth remained that revenue per unit in senior housing, in other words, excluding ancillary services, will increase by 1% to 1.5%, consisting of a 2% to 2.5% average increase, less an approximate 1% impact of the RUGs-IV reimbursement change. For same-store communities, we produced a 1.1% increase on revenue per unit excluding the ancillary services.

When we exclude the RUGs-IV SIP reimbursement change, the revenue per unit growth was approximately 2%. The ancillary services added another 40 basis points to revenue per unit growth to make our total same-store revenue per unit growth 1.5%. This was a good achievement, given the headwinds of reimbursement reduction in home health, and should increase over the year as we roll out the ancillary services to more of the Horizon Bay communities.

Comparing same community results for the quarter, including ancillary services, same total community revenue increased 2.1% with average revenue per unit up 1.5% and occupancy up 50 basis points. Expenses increased 4.4%. NOI decreased by 2.4%. Though adjusting for the Medicare skilled nursing and home health reimbursement changes, it would've been an increase in NOI of 1.8%.

Breaking the same community data down further and now excluding ancillary services, our senior housing revenue grew by 1.7% with revenue per unit increasing by 1.1%. Excluding ancillary services, senior housing expenses grew by 2.9%. This is largely in line with our expectations and includes the impact of the extra leap year day as well as the added therapy expense in skilled nursing from the elimination of group therapy, somewhat offset by modestly lower utility costs. Same community senior housing facility operating income, or FOI, decreased by 50 basis points in the quarter. Of course, the reduction in Medicare skilled nursing reimbursement rates impacted the first quarter's revenue and FOI growth. Adjusting the Medicare rate reduction impact out of the calculations, senior housing revenue grew by 2.5%, average rate grew by 1.9% and FOI would have increased by 2.7%.

General and administrative expense, excluding noncash stock-based comp and integration and transaction-related costs, was approximately $34.6 million, which was 6% as a percentage of total revenue under management compared to $29 million for the first quarter of 2011. Much of the increase in absolute dollars is of course related to the addition of the Horizon Bay communities.

Turning to the balance sheet, we continue to be in a strong position. We do not have any debt maturities until 2013 except for normal scheduled principal amortization. Our 2013 maturities without extension rates total around $300 million, a roughly amount that we will refinance annually if we achieved 8-year level laddering of our roughly $2.5 billion of total debt.

During the quarter, we refinanced a $64 million mortgage loan that was due in 2013. We ended the quarter with $42 million of unrestricted cash. At quarter end, we had $85 million of outstanding borrowings on our line of credit. As a result, at the end of the quarter, we had cash and available borrowings under our line of over $150 million. Looking at CapEx, our spending in Q1 for maintenance CapEx, which we include in our CFFO calculation, was $8.1 million. Our corporate CapEx totaled $6.7 million in the first quarter. $3.7 million of this is related to home health acquisitions. The majority of the balance was spent on systems development. Particularly, we continue to progress well on our electronic medical records initiative. Given the breadth of our services, we've gone with a best-of-breed approach in our EMR system selections. Our timetable is to be fully deployed with EMR in home health by August, with outpatient therapy, skilled nursing and assisted living achieving initial functionality by the end of 2013. We expect to increase productivity, improve clinical outcomes, better document our regulatory compliance, reduce our accounts receivable and enhance our risk management with this EMR implementation. We continue to prioritize capital deployment in those areas with the highest returns with expansions, redevelopment and repositions at the top of the list.

We've completed 8 Program Max projects during the last 9 months, which encompassed almost 1,800 units and added 159 new units. We currently have 17 projects ongoing which encompasses approximately 1,700 units, and we'll add 400 new units over roughly the next year. Another 19 projects are in the process of being ready for approval, touching another 4,000 existing units and 800 additional units.

During the first quarter, we spent $13 million of cash equity and continue to expand to invest in the range of $60 million to $70 million this year on Program Max activities. We've also completed 25 EBITDA-enhancing projects in the last 12 months, encompassing over 2,500 units. As a reminder, these are less expansive projects than Program Max but enhance the communities such that we expect higher financial performance through better occupancy and rate growth. During the quarter, we made no purchases under the share repurchase program and ended the quarter with $82 million of authorized capacity remaining.

I'll turn the call back to Bill for closing comments.

W. E. Sheriff

Thanks, Mark. While the first quarter is not the best quarter to look at as a benchmark, we do see reasons to be encouraged about the general environment. Maintaining occupancy, better entry fee sales, consistent pricing all hint that perhaps the first quarter results were a manifestation of more than better weather or a mild flu season. For 2012, we will continue to expect that with a slow, steady, growing economy, we will see an increase in occupancy, a steady environment for rate growth, ancillary contribution continuing to show good growth as we expand our footprint. Revenue growth of 5.5% to 6% from occupancy growth, same community revenue per unit growth in the range of 1% to 1.5%. Horizon Bay an incremental economics from our reinvestment program, expense growth in the range of 5.5% to 6% including the new Horizon Bay communities and the impact of increased therapy cost in our skilled nursing, routine maintenance CapEx of $40 million to $45 million and approximately $35 million of net entry fee cash flow.

We are focused on growing occupancy, partly from slight improvement in the environment, partly from market share, partly from reinvestment in our portfolio and partly from our innovative work. We will be diligent about market rates, but don't really expect to see much pricing acceleration this year. Of course, the Medicare rate reductions will be a drag on total revenue growth. So it does look like the skilled world will not see another draconian decrease later this year. We expect that the relationship between senior housing units growth -- revenue growth and unit expense growth will remain similar to the last several years, where they both were running at similar rates, resulting in relatively stable margins. For the longer term, it is still hard not to be bullish. Underlying the relatively solid performance of the industry over the last 5 years has been the reality of aging; that people are living longer and with that increased longevity comes an increase in functional limitations where seniors need more assistance. Also, as recent studies have shown, seniors are showing not only an increased awareness of senior living, but more are expressing that they see it as a desirable option. Increasing product familiarity and acceptance together with the increasing acuity certainly bodes well to senior living, should achieve a higher penetration, all at the same time of limited new supply. We are focused on creating the optimal aging experience for seniors and their families and are committed to becoming the most widely recognized and trusted senior living brand. We will now turn the call back to the operator to begin the question-and-answer session. Operator?

Question-and-Answer Session

Operator

[Operator Instructions] Your first question comes from the line of Bryan Sekino of Barclays.

Bryan Sekino - Barclays Capital, Research Division

Just a question on, in the past, I know you said that you had to use some pricing incentives to maintain occupancy. Can you give us some color on your use of pricing to maintain the flat sequential occupancy in the quarter?

Mark W. Ohlendorf

Brian, I'd say that the mix of incentives this quarter is very similar to what we've seen for the last couple of quarters.

Bryan Sekino - Barclays Capital, Research Division

Okay. And maybe if you can remind us when will kind of anniversary that you're implementing some of those incentives?

Mark W. Ohlendorf

Well, as you may recall, we had gotten a bit more rigid with our pricing structure in the early part of last year, probably through April, perhaps into May. And then, at that point, we went back to what we had been using from a pricing standpoint through 2010, really; that was probably in about May of last year. So sometime in second quarter would be the anniversary of our resumption of that pricing approach.

Bryan Sekino - Barclays Capital, Research Division

Okay, great. And then just one on the Program Max. I know you've mentioned in past some of the constraints that could keep you from ramping up the expansion units, can you give us an update on whether there's been any availability of financing to help you, kind of, go back to that 1,000 per year expansion goal?

W. E. Sheriff

Yes, a couple of points on that. One, we have made some good progress in the first quarter and through April on reaching some understandings with, particularly, the REITs to move things along on Program Max. The second thing I think I would note is, as we look at the project opportunities, I think we're finding larger early opportunities related to repositioning the Retirement Centers. The economic returns will still be very solid for us. But we likely won't generate quite as many incremental new units in the process as it looks right now. We certainly will over time, but I think the early projects are going to be more focused in the Retirement Centers.

Operator

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

Kristina Blaschek

It's Kristina for Ryan today. On the expense front, anything of note during the quarter, for example, were utility expenses lower than usual given the mild winter season and record-low natural gas prices?

W. E. Sheriff

Yes, really 2 things on expenses in the quarter. One, the expenses were up roughly 1% if you look at the dollars year-to-year because this year is a leap year, right, one more day this year than there was last year. Some of that was offset by the fact that utility costs and snow removal costs were lower. But our NOI operating expenses are roughly $400 million. So the impact of that one day is in the neighborhood of $4 million.

Kristina Blaschek

Okay, great. That's good color. And then also a quick question on your IT systems investments that you talked about. Who's providing that system right now?

Mark W. Ohlendorf

Actually, as I've said, we're using the best-of-breed approach. So we're actually making different system selections in 3 or 4 different areas.

Kristina Blaschek

Okay. And then one last question relating to Program Max as well, what are you seeing in the updated units relating to price and occupancy upticks? If there's anything you could share with us.

Mark W. Ohlendorf

We're seeing some pretty strong performance now. Generally, in the Program Max repositionings and even in the expansions, the product that is coming into the investment profile tends to be a higher acuity product. There's a fair concentration there of adding assisted living where we only have Independent Living, adding dementia care where we only have assisted living, adding skilled nursing in markets. So the rates are going to be higher in any case. But the returns, I think, are at or above what we had expected; low to mid-teens are looking like good numbers.

W. E. Sheriff

In Retirement Centers, where we've taken and converted such as the community to Independent Living -- I mean from Independent Living to assisted living into Memory Care. We have seen as high as a almost 20% increase in the Independent Living rates, once that project is completed of the non-converted basis based on the strength of that repositioning in addition to getting the higher revenue and gross margin dollars out of the assisted living and Memory Care. So it -- we are seeing positive effects in that regard as well.

Operator

Your next question comes from the line of Kevin Fischbeck of Bank of America.

Kevin M. Fischbeck - BofA Merrill Lynch, Research Division

Just want to confirm something. The impact of this quarter from the rate cuts, I think you highlighted is $7.2 million which, I guess, implies a higher annualized impact than the guidance before which was $25 million to $26 million. Is the delta just that the SNF cuts are in Q4 or is this coming in higher than you had thought?

Mark W. Ohlendorf

No. When we made the original estimates that we talked about last summer on the impact of the home health rate change, I think we articulated that as $8 million to $9 million. That was based on the case load that we had in home health probably in the second quarter of last year. That business has grown since then. So the actual impact in the first quarter was about $2.4 million from home health rate change, largely because we have a larger caseload now than we did early last year. I think that's the primary change.

Kevin M. Fischbeck - BofA Merrill Lynch, Research Division

Okay. So it's higher but net it's a positive because you got more home health revenue?

Mark W. Ohlendorf

That's right.

Kevin M. Fischbeck - BofA Merrill Lynch, Research Division

And then I missed it, did you say that your outlook includes revenue growth assumption of 5.5% to 6%?

Mark W. Ohlendorf

You're talking about total?

Kevin M. Fischbeck - BofA Merrill Lynch, Research Division

Total.

Mark W. Ohlendorf

That's right because that includes not only the same-store growth but a full year of operation of the Horizon Bay properties.

Kevin M. Fischbeck - BofA Merrill Lynch, Research Division

Okay. And expense growth equal to that. I guess, the -- maybe I'll have it right back. I thought in last quarter, the number was more like 6% to 6.5% for both revenue and expense growth. Is there something that changed in there?

W. E. Sheriff

There's no intention to change anything.

Kevin M. Fischbeck - BofA Merrill Lynch, Research Division

Okay. All right, maybe I have it wrong. And then if you could just kind of walk me through what happened on the entrance fees this quarter. It was actually, obviously, a good number given the number of entrance fee resales but the amount per resale was a bit lower, how do we think about that number going forward?

W. E. Sheriff

It is a matter of debate across our -- the communities there. We have a fair spectrum from some very high end to some that are more middle market. And we got some particularly good attraction which is very good positive in delta communities that are on the lower spectrums of the mix of sales in this particular quarter. We had a little stronger mix of sales in that. I don't -- I think that you'll see that -- a little bit of that this year, but that was on, I think, probably average of the quarter down a little bit more than you'll normally see them.

Kevin M. Fischbeck - BofA Merrill Lynch, Research Division

In the last few quarters, it's been in the 150 to 160 range, so something between what you did in Q1 and that range, is the way to think about it?

W. E. Sheriff

Yes.

Kevin M. Fischbeck - BofA Merrill Lynch, Research Division

And then The Villages, I just want to make sure that I understand that, that is now a stabilized business, right? So there's no longer -- any entrance fees you got from The Villages would be on the consolidated CFFO number now, it's not backed out anymore?

W. E. Sheriff

That's correct.

Mark W. Ohlendorf

That's right.

Operator

Your next question comes from the line of Frank Morgan of RBC Capital Markets.

Frank G. Morgan - RBC Capital Markets, LLC, Research Division

Obviously, a lot going on with these project expansions but you didn't talk so much about acquisitions. I'm just curious, can you give us an update on what you see in the acquisition environment and really what's your appetite for taking on a big acquisition and going through another integration in today's environment?

W. E. Sheriff

Well, we are certainly going to continue to be active in the market and certainly being opportunistic. We do think that over the year, there -- it'll end up being in a year with a fair amount of transactions. And we will still be looking at what really strategically makes a real difference in our company.

Frank G. Morgan - RBC Capital Markets, LLC, Research Division

Any commentary around what you're seeing on the deal flow with regard to where valuations are? Just directionally, are they about the same? Do you see any change at all to maybe what cap rates look like?

W. E. Sheriff

About the same. I mean, there's certainly has been an increase that goes back into last year, people testing the market and not being quite fulfilled when they find a B product that doesn't quite get an A cap rate. But it's about the same.

Frank G. Morgan - RBC Capital Markets, LLC, Research Division

And as you look, and maybe Mark can jump in on this one as well, between all these options today, when you look between the project expansions, acquisitions and even share repurchases, what's, kind of right here right now, how do you prioritize those in terms of what are most attractive?

Mark W. Ohlendorf

Well, obviously, you look at the financial returns and history will show our highest absolute financial returns are first, in the ancillary business; second in repositioning and expanding our locations, and then acquisitions. But at the same time, acquisition opportunities are somewhat blocky. They don't come to the market in an even way. And particularly larger portfolio acquisition opportunities are relatively rare because the industry is so fragmented. So because there's an opportunity to deploy a fair amount of capital and create fairly significant changes in our market concentrations, you certainly look at those. So it's really kind of the classic balance between the financial returns and the business opportunity.

Frank G. Morgan - RBC Capital Markets, LLC, Research Division

Where would you put share repurchases in that pecking order?

Mark W. Ohlendorf

It certainly depends on the price of the stock, where the stock is trading, how we view that in terms of the growth profile of the company and so forth. So it certainly is one of the factors that we look at.

Operator

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

Daniel Bernstein - Stifel, Nicolaus & Co., Inc., Research Division

I think I might have missed it, what is the G&A -- what are you calling for G&A for 2012 and G&A seemed a little bit higher or elevated in the first quarter. Was that related to the Horizon Bay ancillary rollout? Just want to go over that again if you can.

Mark W. Ohlendorf

Sure, well, the G&A as a percentage of revenue under management in the first quarter was 4.6%. And was 4.8%, I believe, in the first quarter of 2011. So from the standpoint of kind of overhead efficiency, we're actually a little better this year. Obviously, the first quarter of this year includes the full effect of operating Horizon Bay. There is some modest uptick in that G&A related to the ancillary rollout but it's honestly pretty modest. That's primarily driven around the senior housing business. Our guidance for the year for G&A is about $130 million. So if it were absolutely level on a quarterly basis, that would be about $32.5 million a quarter. So this year -- or this quarter was a couple of million dollars above that even run rate. The G&A cost are not necessarily completely linear in the way they lay out during the year. There are number of factors that can cause them to be a little higher or lower in a particular quarter. We're still anticipating that annual number to be about $130 million. Is that responsive to your question?

Daniel Bernstein - Stifel, Nicolaus & Co., Inc., Research Division

Yes. There wasn't anything unusual like workers' comp or [indiscernible] or anything like that?

Mark W. Ohlendorf

No, no.

Daniel Bernstein - Stifel, Nicolaus & Co., Inc., Research Division

All right. And then I don't know if maybe you want to take off-line, but I just wanted to also find out where you're getting the information on consumer preferences and your -- that lead you to believe that penetration rates in the industry will increase. And if somebody can go ahead and e-mail me or call me about that information, that would be great. And then just related to that, does the industry have to change the fiscal plan at all? Or what does industry have to do to increase the penetration rates with the consumer? I mean, penetration rates have been really pretty flattish over the last decade, if you even out early decade increase and then recent [indiscernible] you've seen decrease. What does the industry have to do and what do you have to due to increase penetration rates?

W. E. Sheriff

Well, again, if we go back basically with what's happening and what are the realities of aging. And the fact that people are living longer, but they are living longer with multiple chronic conditions and an increasing element of physical limitations as well as increasing incidence with that longer lifespan and increasing incidence of dementia and Alzheimer's related disorders. So with people living extended years in frail condition and basis, and the industry research surveys have shown -- go back too many years when there was relatively few people in Independent Living, dining rooms and stuff with walkers or wheelchairs; today, 51% of people across the industry moving into Independent Living have either a walker or wheelchair. And so with that, you're going to have an increasing element of need base across a larger -- the oldest cohort of our society. And we do have to modify our units, do have to modify some of the common areas to also update for the preferences of what the next generation of elderly coming in to our market do have some different expectations. And so a lot of the assets that were developed and built in this industry were built some time ago. And without the full visibility of what all was going to happen in aging and all the realities of it. So there is a real need. At the same time, the fantastic news is the fact of the incredible returns we get when we do that work.

Daniel Bernstein - Stifel, Nicolaus & Co., Inc., Research Division

And the other question I had, just also I guess, related to the acquisition side. Would you then be more inclined to buy more higher acuity-type facilities if those came to market rather than more Independent Living and CCRCs? And then also another related question on the pipeline, do you have any leases that are expiring that have purchase options that are exercisable so that we might see any additional property buy-outs from the REITs this year or next year?

Mark W. Ohlendorf

Second question first, we do have a couple of purchase options becoming exercisable over the next 12 months. We would intend to exercise them. They are not dramatic in their size, but we will very likely exercise those in due course. Your first question related to product preference and acquisitions, I think what we're saying, more than anything is, the service demand in senior housing now is more service-intensive. So that relates somewhat to the type of property, but relates more so to a need to have a broader range of service available. So our ancillary service platform for example is critical in positioning yourself properly in the market today. Today's Independent Living customer is dramatically different than it was 10 years ago or 20 years ago. So certainly, there may be some differences in terms of the optimal physical plan, for example, for Independent Living residents. It doesn't necessarily make that product less attractive or more attractive.

W. E. Sheriff

Yes. But in some cases, it does make it more attractive. And just the one illustration of one isolated case anyway or but not totally atypical as where we took a Retirement Center, and di conversions of assisted living and Memory Care. It strengthened the IL product component. And in many acquisition opportunities out there, they're with assets that have that kind of opportunity with them to make that whole product more attractive; make Independent Living more attractive because it has the assisted living and Memory Care available to it, has the continuum for the residents moved in and then not have to move out as they go to the next level of care as well as the higher gross margin dollar and return factors we get also the assisted living, Memory Care component of a campus setting. So we like the perspective of looking at products all the way across the spectrum.

Operator

Your final question comes from the line of Peter Lux [ph], private investor.

Unknown Shareholder

I've been following you guys forever and it seems to me we've been growing bigger, shuffling a lot of paper, adjusting measurements but ultimately, we're not returning enough to the stockholder in the form of real nominal gains. What we have seen when you guys first started was you were on a track to return in the form of dividends, et cetera. Now you've put a lot of money into share buybacks. I think you'll get significant more bang for your buck in today's environment if some of that money was came back to the shareholders in the form of dividends as the original game plan established when Brookdale went public.

Mark W. Ohlendorf

Okay. Well, we appreciate your counsel. Obviously, there's a number of things in terms of managing the capital structure that we're weighing, including the investment opportunities, but we appreciate the thoughts.

Operator

Ladies and gentlemen, this concludes today's Q&A portion. I would now like to turn the call back over to Ross Roadman for closing comments.

Ross Roadman

Thank you, Kimberly. With that, we'll close. Management will be around all day for follow-up questions if you have them. Just want to remind folks, we're going to be at the Deutsche Bank conference next week in Boston, we'll be, May 16, at the BofA Healthcare conference in Las Vegas and then June 4, at the Jefferies conference in New York. With that, thank you very much for your participation.

Operator

Ladies and gentlemen, this concludes today's conference. You may now disconnect.

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