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The company undertakes no obligation to revise or publicly release the results of any revision to the forward-looking statements made in today’s conference call other than through filings with the Securities and Exchange Commission regarding this reporting period.Actual results may differ materially from those projected in any forward-looking statements. Additional information concerning factors that could cause those differences is contained in our filings with the SEC. Investors are cautioned not to place undue reliance upon any forward-looking statements. And now, I would like to turn the call over to Bruce Mackey. Bruce Mackey Great. Thank you, Tim. And thank you all for joining us today on our second quarter earnings call. Since we last spoke with you in late April, we’ve been very busy working to continuing strengthen Five Star’s position as a premium provider of private pay senior living services. In particular, there were three events that I believe were significant to our long-term private pay focus. The first event occurred in late May when we announced the settlement in our long running litigation with Sunrise Senior Living. This litigation related to excess insurance charges by Sunrise on 31 communities that will managed by Sunrise on behalf of Five Star prior to 2007. As part of this settlement Sunrise agreed to pay us $4 million. The second event also occurred in late May when we reached an agreement with Sunrise, whereby they will terminate their leases for 10 senior living communities’ leased to them by Senior Housing Properties Trust or SNH, and we will be in a managed these communities for SNH’s account. The communities include 2,472 living units and are located across six states. They generate gross revenues of approximately $115 million in 2011. The management contract has similar terms, to the ones, under which we currently managed to SNH, including a minimum annual management fee equal to 3% of gross revenues plus an incentive fee equal to 35% of annual net operating income after SNH receives return equal towards 2011 rents from Sunrise. These communities will initially add approximately $3 million of annual management fee revenues to Five Star.
In addition, all 10 communities fall within our current footprint where we offer rehabilitation and wellness services which should drive additional revenues to Five Star. We expect to begin managing these 10 communities before the end of 2012 after all appropriate regulatory approvals are obtained.The third event took place in July when we announced that we had reached the deal, which is agreement rather to sell our pharmacy business to Omnicare, the net proceeds of $39.9 million. It was a fully marketed transaction by an investment bank Jefferies & Company. We expect this transaction to close in the second half of 2012 after the completion of customary closing conditions, including licensing approvals. As some of you may know, we entered the pharmacy business in 2003 under a very different environment, where we contemplated achieving margins in the 10% range. Changes in Medicare billing put great pressure on our margins, as the switch to using generic scripts. And as a result, despite growing to be one of the 10 largest institutional pharmacies in the United States, our pharmacy has only been marginally profitable over the past few years. However, we expect to generate a gain of approximately $24 million with the sale, which will double our return on investment for our shareholders. We think this is an excellent return on investment for Five Star’s shareholders and set an example of the overall value we believe can be found in Five Star. The sale also simplifies the Five Star story for investors and allows us to increase our focus on our core private pay business. For the second quarter we generated income from continuing operations of $0.06 per share, after excluding a $0.04 per share gain from the Sunrise litigation settlement, which is $0.04 per share better than income from continuing operations last quarter. Second quarter 2012 also marked Five Star’s 14th consecutive quarter of profitability. EBITDA adjusted for non-recurring items also improved over the first quarter of 2012 by over 50%, the $13.4 million. EBITDA is also up 6% from last year. Read the rest of this transcript for free on seekingalpha.com