| FOR IMMEDIATE RELEASE | Contact: Timothy A. Bonang, Director of Investor Relations, or Katherine L. Johnston, Manager of Investor Relations (617) 796-8245 www.fivestarqualitycare.com |
Five Star Quality Care, Inc. Reports Third Quarter 2008 Results
____________________________________
Newton, MA (November 5, 2008). Five Star Quality Care, Inc. (NYSE Alternext US: FVE) today announced its financial results for the quarter and nine months ended September 30, 2008.
Third Quarter 2008 Financial Highlights:
| § | Total revenues for the third quarter of 2008 increased 15.3% to $281.9 million from $244.6 million for the same period last year. |
| § | Net loss per share from continuing operations for the third quarter of 2008 was $0.05, basic and diluted, compared to net income per share of $0.27 and $0.24, basic and diluted, respectively, for the same period last year. |
| § | During the three months ended September 30, 2008, we recognized a $1.7 million unrealized loss as a result of our holdings of auction rate securities; a $3.0 million loss due to the impairment of certain investments in marketable securities; and a gain of $743,000 due to the early extinguishment of debt. Without these items, we would have reported diluted earnings per share from continuing operations in the three months ended September 30, 2008 of $0.08. We believe this adjusted net loss per share from continuing operations is a meaningful disclosure that may help shareholders to better understand our results of operations for the three months ended September 30, 2008. Page six and seven of the attached Supplemental Information contain a Reconciliation of Non-GAAP Financial Measures for all adjusted earnings and earnings per share amounts presented in this release. |
Third Quarter 2008 Operating Highlights (Senior Living Communities):
| § | Senior living occupancy for the third quarter of 2008 was 88.2% compared with 90.4% for the same period last year. |
| § | Senior living average daily rate for the third quarter of 2008 increased by 4.4% to $142.77 from $136.75 in the same period last year. |
| § | The percentage of senior living revenue derived from residents’ private resources for the third quarter of 2008 increased to 69.5% from 66.5% for the same period last year. |
| § | Wages and benefits as a percentage of senior living revenues were 50.0% and 49.4% for the third quarters of 2008 and 2007, respectively. |
| § | For those senior living communities that we have operated continuously since July 1, 2007 (comparable communities), occupancy for the third quarter of 2008 was 88.5% compared with 90.4% for the same period last year. |
| § | Comparable communities average daily rate for the third quarter of 2008 increased by 5.3%, to $144.03, from $136.75 in the same period last year. |
| § | In the third quarter of 2008, we acquired three senior living communities with 278 units and began leasing 17 senior living communities with 1,298 units. Twelve of these communities are assisted living communities and eight are independent living communities. |
First Nine Months of 2008 Financial Highlights:
| § | Total revenues for the nine months ended September 30, 2008 increased 12.5% to $812.0 million from $721.8 million for the same period last year. |
| § | Net income per share from continuing operations for the nine months ended September 30, 2008 was $0.22, basic and diluted, compared to $0.61 and $0.55, basic and diluted, respectively, for the same period last year. |
| § | During the nine months ended September 30, 2008, we recognized a $6.1 million unrealized loss as a result of our holdings of auction rate securities; a $3.0 million loss due to the impairment of certain investments in marketable securities; and a gain of $743,000 due to the early extinguishment of debt. Without these items, we would have reported diluted income per share from continuing operations in the nine months ended September 30, 2008 of $0.45. We believe this adjusted net income per share from continuing operations is a meaningful disclosure that may help shareholders to better understand our results of operations for the nine months ended September 30, 2008. |
| § | Net income per share from continuing operations in the nine months ended September 30, 2007 included a gain from extinguishment of debt of $4.5 million. Without this gain, we would have reported diluted income per share from continuing operations for the nine months ended September 30, 2007 of $0.44. We believe this adjusted net income per share from continuing operations is a meaningful disclosure that may help shareholders to better understand our results of operations for the nine months ended September 30, 2007. |
Conference Call:
On November 5, 2008 at 5:00 p.m. Eastern Standard Time, Bruce J. Mackey Jr., President and Chief Executive Officer, and Francis R. Murphy, III, Chief Financial Officer, will host a conference call to discuss the third quarter 2008 financial results. Following the company’s remarks, there will be a question and answer period.
The conference call telephone number is (888) 259-8884. Participants calling from outside the United States and Canada should dial (913) 312-1512. No pass code is necessary to access the call from either number. Participants should dial in about 15 minutes prior to the scheduled start of the call. A replay of the conference call will be available through 8:00 p.m. Eastern Standard Time Wednesday, November 12th. To hear the replay, dial (719) 457-0820. The replay pass code is 4868425.
A live audio webcast of the conference call will also be available in a listen only mode on the company’s web site at www.fivestarqualitycare.com. Participants wanting to access the webcast should visit the company’s web site about five minutes before the call. The archived webcast will be available for replay on the company’s web site for about one week after the call.
About Five Star Quality Care, Inc.:
Five Star Quality Care, Inc. is a healthcare services company which operates healthcare and senior living communities. Five Star owns, leases or operates 203 senior living communities with over 21,550 living units located in 30 states. These communities include independent living, assisted living and skilled nursing communities. Five Star also operates six institutional pharmacies, one of which provides mail order pharmaceuticals to the general public, and two rehabilitation hospitals. Five Star is headquartered in Newton, Massachusetts.
Supplemental Information, page 1of 7
FIVE STAR QUALITY CARE, INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except per share data)
(unaudited)
| | Three months ended September 30, | | Nine months ended September 30, |
| | 2008 | | 2007 | | 2008 | | 2007 |
| Revenues: | | | | | | | |
| Senior living revenue | $ 241,190 | | $ 203,656 | | $ 686,559 | | $ 601,319 |
| Hospital revenue | 23,938 | | 25,361 | | 73,103 | | 76,711 |
| Pharmacy revenue | 16,814 | | 15,581 | | 52,301 | | 43,734 |
| Total revenues | 281,942 | | 244,598 | | 811,963 | | 721,764 |
| | | | | | | | |
| Operating expenses: | | | | | | | |
| Senior living wages and benefits | 120,704 | | 100,659 | | 341,593 | | 306,497 |
| Other senior living operating | 61,228 | | 50,988 | | 173,317 | | 149,399 |
| Hospital expenses | 22,332 | | 22,588 | | 67,539 | | 69,585 |
| Pharmacy expenses | 17,368 | | 14,722 | | 50,918 | | 41,835 |
| Rent expense | 41,745 | | 32,507 | | 116,464 | | 96,737 |
| General and administrative expenses | 11,948 | | 10,757 | | 34,803 | | 31,703 |
| Depreciation and amortization | 3,691 | | 3,551 | | 10,973 | | 9,940 |
| Total operating expenses | 279,016 | | 235,772 | | 795,607 | | 705,696 |
| | | | | | | | |
| Operating income | 2,926 | | 8,826 | | 16,356 | | 16,068 |
| | | | | | | | |
| Interest and other income | 1,071 | | 1,511 | | 4,867 | | 4,343 |
| Interest expense | (1,696) | | (1,464) | | (4,890) | | (4,919) |
| Unrealized loss on investments in trading securities | (1,733) | | - | | (6,099) | | - |
| Impairment on investments in available for sale securities | (3,019) | | - | | (3,019) | | - |
| Gain on extinguishment of debt | 743 | | - | | 743 | | 4,919 |
| | | | | | | | |
| Income (loss) from continuing operations before income taxes | (1,708) | | 8,873 | | 7,958 | | 19,983 |
| (Provision) benefit for income taxes | 90 | | (277) | | (920) | | (760) |
| Income (loss) from continuing operations | (1,618) | | 8,596 | | 7,038 | | 19,223 |
| Loss from discontinued operations | (632) | | (835) | | (4,182) | | (2,619) |
| | | | | | | | |
| Net income (loss) | $ (2,250) | | $ 7,761 | | $ 2,856 | | $ 16,604 |
| | | | | | | | |
| | | | | | | | |
| Weighted average shares outstanding - basic | 31,845 | | 31,705 | | 31,832 | | 31,694 |
| | | | | | | | |
| Weighted average shares outstanding - diluted | 31,845 | | 41,436 | | 31,832 | | 41,425 |
| | | | | | | | |
| Basic income (loss) per share from: | | | | | | | |
| Continuing operations | $ (0.05) | | $ 0.27 | | $ 0.22 | | $ 0.61 |
| Discontinued operations | (0.02) | | (0.03) | | (0.13) | | (0.09) |
| Net income (loss) per share | $ (0.07) | | $ 0.24 | | $ 0.09 | | $ 0.52 |
| | | | | | | | |
| Diluted income (loss) per share from: | | | | | | | |
| Continuing operations | $ (0.05) | | $ 0.24 | | $ 0.22 | | $ 0.55 |
| Discontinued operations | (0.02) | | (0.02) | | (0.13) | | (0.06) |
| Net income (loss) per share | $ (0.07) | | $ 0.22 | | $ 0.09 | | $ 0.49 |
| | | | | | | | |
Supplemental Information, page 2 of 7
FIVE STAR QUALITY CARE, INC.
CONDENSED CONSOLIDATED BALANCE SHEET DATA
(in thousands, except share data)
(unaudited)
| | |
| | September 30, | | December 31, |
| | 2008 | | 2007 |
| Assets | | | |
| Current assets: | | | |
| Cash and cash equivalents | $ 39,972 | | $ 30,999 |
| Accounts receivable, net of allowance | 58,035 | | 58,803 |
| Prepaid expenses and other current assets | 24,256 | | 23,782 |
| Investment securities: | | | |
| Investments in trading securities | - | | 61,800 |
| Investments in available for sale securities | 7,141 | | 7,455 |
| Assets of discontinued operations | 2,020 | | 3,178 |
| Total current assets | 131,424 | | 186,017 |
| | | | |
| Long term assets: | | | |
| Property and equipment, net | 152,047 | | 131,705 |
| Investments in trading securities | 68,751 | | - |
| Other long term assets | 37,298 | | 42,732 |
| Total assets | $ 389,520 | | $ 360,454 |
| | | | |
| Liabilities and Shareholders’ Equity | | | |
| Current liabilities | $ 127,492 | | $ 104,063 |
| Long term liabilities | 36,845 | | 27,259 |
| Mortgage notes payable, long term | 12,479 | | 15,810 |
| Convertible senior notes | 126,500 | | 126,500 |
Shareholders’ equity (31,847,004 and 31,818,144 shares issued and outstanding at September 30, 2008 and December 31, 2007) | 86,204 | | 86,822 |
| Total liabilities and shareholders’ equity | $ 389,520 | | $ 360,454 |
Supplemental Information, page 3 of 7
FIVE STAR QUALITY CARE, INC.
SENIOR LIVING COMMUNITY OPERATING DATA (1)
(dollars in thousands, except average daily rate)
| | Three months ended September 30, | | Nine months ended September 30, |
| | 2008 | | 2007 | | 2008 | | 2007 |
| | | | | | | | |
| Number of communities (end of period) | 202 | | 163 | | 202 | | 163 |
| Number of living units (end of period) | 21,340 | | 18,084 | | 21,340 | | 18,084 |
| | | | | | | | |
| Occupancy | 88.2% | | 90.4% | | 88.9% | | 90.4% |
Average daily rate (ADR) (2) | $ 142.77 | | $ 136.75 | | $ 143.07 | | $ 136.25 |
| ADR % growth | 4.4% | | - | | 5.0% | | - |
| | | | | | | | |
| Percent breakdown of net senior living revenues: | | | | | | | |
| Medicare | 13.8% | | 15.0% | | 15.0% | | 15.3% |
| Medicaid | 16.7% | | 18.5% | | 17.1% | | 18.2% |
| Private | 69.5% | | 66.5% | | 67.9% | | 66.5% |
| Total | 100.0% | | 100.0% | | 100.0% | | 100.0% |
| | | | | | | | |
| Senior living revenues | $ 241,190 | | $ 203,656 | | $ 686,559 | | $ 601,319 |
| Senior living revenues % growth | 18.4% | | - | | 14.2% | | - |
| | | | | | | | |
| Senior living wages and benefits | $ 120,704 | | $ 100,659 | | $ 341,593 | | $ 306,497 |
| Senior living wages and benefits as a % of senior living revenues | 50.0% | | 49.4% | | 49.8% | | 51.0% |
| Other senior living operating expenses | 61,228 | | 50,988 | | 173,317 | | 149,399 |
| Other senior living operating expenses as a % of senior living revenues | 25.4% | | 25.0% | | 25.2% | | 24.8% |
Community expenses (3) % growth | 20.0% | | - | | 12.9% | | - |
(1) | Excludes data for pharmacy and hospital operations and senior living discontinued operations (except for the number of communities and living units). |
| (2) | The ADR for the three months ended September 30, 2008 is slightly lower than the ADR for the nine months ended September 30, 2008 because of communities we began to operate during 2008. |
| (3) | Community expenses equal senior living wages and benefits and other senior living operating expenses as shown on our consolidated statement of operations. |
Supplemental Information, page 4 of 7
FIVE STAR QUALITY CARE, INC.
COMPARABLE SENIOR LIVING COMMUNITY OPERATING DATA (1)
(dollars in thousands, except average daily rate)
| | Three months ended September 30, (2) | | Nine months ended September 30, (3) |
| | 2008 | | 2007 | | 2008 | | 2007 |
| | | | | | | | |
| Number of communities (end of period) | 163 | | 163 | | 162 | | 162 |
| Number of living units (end of period) | 18,041 | | 18,041 | | 17,985 | | 17,985 |
| | | | | | | | |
| Occupancy | 88.5% | | 90.4% | | 89.1% | | 90.4% |
| Average daily rate (ADR) | $ 144.03 | | $ 136.75 | | $ 143.95 | | $ 136.25 |
| ADR % growth | 5.3% | | - | | 5.7% | | - |
| | | | | | | | |
| Percent breakdown of net senior living revenues: | | | | | | | |
| Medicare | 15.5% | | 15.0% | | 16.1% | | 15.3% |
| Medicaid | 18.3% | | 18.5% | | 18.0% | | 18.2% |
| Private | 66.2% | | 66.5% | | 65.9% | | 66.5% |
| Total | 100.0% | | 100.0% | | 100.0% | | 100.0% |
| | | | | | | | |
| Senior living revenues | $ 209,464 | | $ 203,656 | | $ 625,725 | | $ 600,675 |
| Senior living revenues % growth | 2.9% | | - | | 4.2% | | - |
| | | | | | | | |
| Senior living wages and benefits | $ 105,798 | | $ 100,659 | | $ 312,120 | | $ 306,106 |
| Senior living wages and benefits as a % of senior living revenues | 50.5% | | 49.4% | | 49.9% | | 51.0% |
| Other senior living operating expenses | $ 54,254 | | $ 50,988 | | $ 159,759 | | $ 149,228 |
| Other senior living operating expenses as a % of senior living revenues | 25.9% | | 25.0% | | 25.5% | | 24.8% |
Community expenses (4) % growth | 5.5% | | - | | 3.6% | | - |
| (1) | Excludes data for pharmacy and hospital operations and senior living discontinued operations (except for the number of communities and living units). |
| (2) | Communities that we operated continuously since July 1, 2007. |
| (3) | Communities that we operated continuously since January 1, 2007. |
| (4) | Community expenses equal senior living wages and benefits and other senior living operating expenses as shown on our consolidated statement of operations. |
Supplemental Information, page 5 of 7
FIVE STAR QUALITY CARE, INC.
OTHER OPERATING DATA (1)
(dollars in thousands, except average daily rate)
| | Three months ended September 30, | | Nine months ended September 30, |
| | 2008 | | 2007 | | 2008 | | 2007 |
Number of senior living communities (2) (end of period): | | | | | | | |
| Assisted and independent living communities, owned | 16 | | 13 | | 16 | | 13 |
| Assisted and independent living communities, leased | 137 | | 101 | | 137 | | 101 |
| Total number of assisted and independent living communities | 153 | | 114 | | 153 | | 114 |
| | | | | | | | |
| Skilled nursing communities, owned | 2 | | 2 | | 2 | | 2 |
| Skilled nursing communities, leased | 47 | | 47 | | 47 | | 47 |
| Total number of skilled nursing communities | 49 | | 49 | | 49 | | 49 |
| | | | | | | | |
| Total number of senior living communities | 202 | | 163 | | 202 | | 163 |
| | | | | | | | |
| Number of senior living units (end of period): | | | | | | | |
| Assisted and independent living communities, owned | 1,303 | | 1,070 | | 1,303 | | 1,070 |
Assisted and independent living communities, leased (3) | 15,627 | | 12,604 | | 15,627 | | 12,604 |
| Total number of assisted and independent living units | 16,930 | | 13,674 | | 16,930 | | 13,674 |
| | | | | | | | |
| Skilled nursing communities, owned | 271 | | 273 | | 271 | | 273 |
Skilled nursing communities, leased (4) | 4,139 | | 4,137 | | 4,139 | | 4,137 |
| Total number of skilled nursing units | 4,410 | | 4,410 | | 4,410 | | 4,410 |
| | | | | | | | |
| Total number of senior living units | 21,340 | | 18,084 | | 21,340 | | 18,084 |
| | | | | | | | |
| Senior living revenues: | | | | | | | |
| Assisted and independent living communities | $ 173,888 | | $ 138,110 | | $ 483,746 | | $ 408,889 |
| Skilled nursing communities | 65,435 | | 64,051 | | 197,068 | | 188,553 |
Other (5) | 1,867 | | 1,495 | | 5,745 | | 3,877 |
| Total senior living revenues | $ 241,190 | | $ 203,656 | | $ 686,559 | | $ 601,319 |
| | | | | | | | |
| Assisted and independent living communities occupancy | 88.8% | | 91.8% | | 89.6% | | 91.2% |
| Assisted and independent living communities ADR | $ 129.73 | | $ 121.70 | | $ 128.93 | | $ 121.54 |
| Assisted and independent living communities ADR % growth | 6.6% | | - | | 6.1% | | - |
| | | | | | | | |
| Skilled nursing communities occupancy | 86.0% | | 88.8% | | 86.6% | | 87.8% |
| Skilled nursing communities ADR | $ 187.53 | | $ 179.44 | | $ 188.70 | | $ 178.57 |
| Skilled nursing communities ADR % growth | 4.5% | | - | | 5.4% | | - |
| | | | | | | | |
| Rehabilitation hospital units | 321 | | 321 | | 321 | | 321 |
| | | | | | | |
| Rehabilitation hospital occupancy | 61.7% | | 60.0% | | 63.1% | | 60.0% |
| | (1) | Excludes data for pharmacy operations and senior living discontinued operations (except for the number of communities and living units). |
| | (2) | Communities are categorized by the type of living units which constitute a majority of the total living units at the community. |
| | (3) | Includes 1,867 and 1,718 skilled nursing units in communities where assisted living and independent living services are the predominant services provided for the three and nine months ended September 30, 2008 and 2007, respectively. |
| | (4) | Includes 66 and 73 assisted living and independent living units in communities where skilled nursing services are the predominant services provided for the three and nine months ended September 30, 2008 and 2007, respectively. |
| | (5) | Other senior living revenues relates primarily to rehabilitation and other specialty service revenues provided at residential facilities and does not include revenues from pharmacy or hospital operations. |
Supplemental Information, page 6 of 7
FIVE STAR QUALITY CARE, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(in thousands, except per share data)
Reconciliation of income (loss) from continuing operations to earnings before interest, taxes, depreciation and amortization, or EBITDA, for the three and nine months ended September 30, 2008:
| | For the three months ended September 30, | | For the nine months ended September 30, |
| | 2008 | 2007 | | 2008 | 2007 |
| Income (loss) from continuing operations | $ (1,618) | $ 8,596 | | $ 7,038 | $ 19,223 |
| Add: income taxes | (90) | 277 | | 920 | 760 |
| Add: depreciation and amortization | 3,691 | 3,551 | | 10,973 | 9,940 |
| Add: interest expense | 1,696 | 1,464 | | 4,890 | 4,919 |
| Less: interest and other income | (1,071) | (1,511) | | (4,867) | (4,343) |
EBITDA (1) | $ 2,608 | $ 12,377 | | $ 18,954 | $ 30,499 |
Reconciliation of income (loss) from continuing operations to income (loss) from continuing operations excluding certain items(2) for the three and nine months ended September 30, 2008:
| | For the three months ended | | For the nine months ended |
| September 30, 2008 | | September 30, 2008 |
| | Amount | Per Share Basic | Per Share Diluted | | Amount | Per Share Basic | Per Share Diluted |
| Income (loss) from continuing operations | $(1,618) | $(0.05) | $(0.05) | | $7,038 | $0.22 | $0.22 |
| Less: Gain on extinguishment of debt | (743) | (0.02) | (0.02) | | (743) | (0.02) | (0.02) |
| Add: Impairment on investments in available for sale securities | 3,019 | 0.10 | 0.10 | | 3,019 | 0.10 | 0.10 |
| Add: Unrealized loss on investments in trading securities | 1,733 | 0.05 | 0.05 | | 6,099 | 0.18 | 0.15 |
| Income (loss) from continuing operations excluding certain items | $2,391 | $0.08 | $0.08 | | $15,413 | $0.48 | $0.45 |
| (1) | We consider earnings before interest, taxes, depreciation and amortization, or EBITDA, to be a meaningful measure of our operating performance because it is useful in measuring our ability to service debt, fund capital expenditures and expand our business. We believe that EBITDA is a meaningful disclosure that may help shareholders to better understand our financial performance, including comparing our performance to similar numbers reported by other companies; however, EBITDA as presented may not always be comparable to amounts calculated by other companies. This information should not be considered as an alternative to net income, income from continuing operations, operating income, cash flow from operations, or any other operating performance or liquidity measure established by generally accepted accounting principles, or GAAP, in the United States. We have not made any adjustments to reported EBITDA for the three and nine months ended September 30, 2008 and 2007, respectively, relating to the unrealized loss as a result of our holdings of auction rate securities; the impairment of certain investments in marketable securities or the gain on extinguishment of debt shown in the reconciliation below and on supplemental information page 7 of 7. |
| (2) | We believe this adjusted amount is a meaningful disclosure that may help shareholders to better understand our results of operations for the three and nine months ended September 30, 2008. This information should not be considered as an alternative to income from continuing operations or income from continuing operations per share or any other operating or performance measure established by GAAP. |
Supplemental Information, page 7 of 7
FIVE STAR QUALITY CARE, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (continued)
(in thousands, except per share data)
Reconciliation of income from continuing operations to income from continuing operations excluding gain on extinguishment of debt for the nine months ended September 30, 2007:
| | For the nine months ended |
| September 30, 2007 |
| | Amount | Per Share Basic | Per Share Diluted |
| Income from continuing operations | $19,223 | $0.61 | $0.55 |
| Less: Gain on extinguishment of debt | (4,491) | (0.15) | (0.11) |
| | | | |
Income from continuing operations excluding gain on extinguishment of debt (1) | $14,732 | $0.46 | $0.44 |
| (1) | We believe this adjusted amount is a meaningful disclosure that may help shareholders to better understand our results of operations for the nine months ended September 30, 2007. This information should not be considered as an alternative to income from continuing operations or income from continuing operations per share or any other operating or performance measure established by GAAP. |
