Exhibit 99.1
FOR IMMEDIATE RELEASE | | Contacts: Timothy A. Bonang, Vice President, Investor Relations
Elisabeth A. Heiss, Manager, Investor Relations
(617) 796-8245
www.fivestarseniorliving.com |
Five Star Quality Care, Inc. Reports Third Quarter 2012 Results
Newton, MA (October 29, 2012). Five Star Quality Care, Inc. (NYSE: FVE) today announced its financial results for the quarter and nine months ended September 30, 2012.
Third Quarter 2012 Financial Highlights:
· Total revenues for the third quarter of 2012 increased 7.0% to $332.4 million from $310.6 million for the same period in the previous year.
· Net income for the third quarter of 2012 was $16.4 million, or $0.34 and $0.33 per share, basic and diluted, respectively, compared to a loss in the third quarter of 2011 of $(528,000), or $(0.01) per basic and diluted share. Net income in the 2012 period included a gain from discontinued operations, including the sale of FVE’s pharmacy business, of $13.0 million. Net income in the 2011 period included a loss from discontinued operations of $(4.1) million.
· Income from continuing operations for the third quarter of 2012 was $3.4 million, or $0.07 per basic and diluted share, compared to $3.5 million, or $0.08 per basic and diluted share, for the same period in the previous year. Income from continuing operations for the third quarter of 2011 included a gain on sale of available for sale securities of $529,000, or $0.01 per basic and diluted share.
· Earnings before interest, taxes, depreciation and amortization, or EBITDA, for the third quarter of 2012 were $11.7 million compared to $9.9 million for the same period in the previous year. EBITDA for the third quarter of 2011 included a gain on sale of available for sale securities of $529,000. EBITDA excluding these and certain other items was $11.8 million and $9.6 million in the third quarters of 2012 and 2011, respectively. A reconciliation of income from continuing operations determined in accordance with U.S. generally accepted accounting principles, or GAAP, to EBITDA and EBITDA excluding certain items for the quarters ended September 30, 2012 and 2011 appears later in this press release.
Third Quarter 2012 Operating Highlights:
· Senior living occupancy at our owned and leased senior living communities for the third quarter of 2012 was 85.7% compared to 86.0% for the same period in the previous year.
· Senior living average daily rate, or ADR, at our owned and leased senior living communities for the third quarter of 2012 decreased by 1.3% to $145.56 from $147.46 for the same period in the previous year. This decrease resulted primarily from lower rates at certain acquired communities.
· The percentage of senior living revenues derived from residents’ private resources for the third quarter of 2012 at our owned and leased senior living communities increased to 75.0% from 73.0% for the same period in the previous year.
· For those owned and leased senior living communities that we operated continuously since July 1, 2011, or comparable communities, occupancy in the third quarter of 2012 decreased to 85.7% from 86.0% for the same period in the previous year.
· The ADR at comparable communities for the third quarter of 2012 decreased by 0.5% to $146.88 from $147.65 for the same period in the previous year.
· Our fee revenues from managed senior living communities in the third quarter of 2012 were $1.3 million compared to $359,000 in the third quarter of 2011.
Year to Date Financial Highlights:
· Total revenues for the nine months ended September 30, 2012 increased 11.3% to $991.8 million from $891.2 million for the same period in the previous year.
· Net income for the nine months ended September 30, 2012 was $21.4 million, or $0.45 per basic and diluted share, compared to $8.8 million, or $0.22 per basic and diluted share, for the same period in the previous year. Net income in the 2012 period included a gain from discontinued operations, including the sale of FVE’s pharmacy business, of $11.5 million. Net income for the 2011 period included a loss from discontinued operations of $(6.0) million.
· Income from continuing operations for the nine months ended September 30, 2012 was $9.9 million, or $0.21 per basic and diluted share, compared to $14.8 million, or $0.37 and $0.36 per share, basic and diluted, respectively, for the same period in the previous year. Income from continuing operations for the nine months ended September 30, 2012 included a gain on settlement of our litigation with Sunrise Senior Living, Inc., or Sunrise, of $1.9 million (net of taxes), or $0.04 per basic and diluted share. Income from continuing operations for the nine months ended September 30, 2011 included acquisition costs of $1.5 million, or $0.04 per basic and diluted share, and a gain on sale of available for sale securities of $656,000, or $0.02 per basic and diluted share.
· EBITDA for the nine months ended September 30, 2012 was $37.6 million compared to $30.9 million for the same period in the previous year. EBITDA for the nine months ended September 30, 2012 included a gain on settlement of our litigation with Sunrise that increased EBITDA by $3.4 million and EBITDA for the nine months ended September 30, 2011 included a gain on sale of available for sale securities of $656,000, which was offset by acquisition costs of $1.5 million. EBITDA excluding these and certain other items was $34.2 million and $31.8 million in the nine months ended September 30, 2012 and 2011, respectively. A reconciliation of income from continuing operations determined in accordance with GAAP to EBITDA and EBITDA excluding certain items for the nine months ended September 30, 2012 and 2011 appears later in this press release.
Other Highlights:
Since May 2012, we have either begun to manage or agreed to manage 14 senior living communities with a combined 3,159 living units for Senior Housing Properties Trust (NYSE: SNH) and its affiliates. All of these communities are focused on providing independent and/or assisted living services and generate a large majority of their revenues from residents’ private resources, not from Medicare or Medicaid government funded programs.
· In May 2012, we reached agreement with SNH and Sunrise whereby Sunrise will terminate its leases for 10 senior living communities owned by SNH and we will begin to manage the 10 communities for SNH’s account. These 10 communities include 2,472 living units and are located in six states. In September 2012, we began to manage three of these senior living communities with a combined 407 living units. In October 2012, we began managing an additional five of these senior living communities with 1,308 living units. We currently expect to begin managing the remaining two of these communities with a combined 757 living units in the fourth quarter of 2012 after all appropriate regulatory approvals are obtained.
· Also in May 2012, we began to manage a senior living community with 59 living units located in South Carolina, and we began to manage an adjacent South Carolina senior living community with 232 living units in July 2012.
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· In August 2012, we began to manage two senior living communities with a combined 396 living units located in New York and Missouri.
In September 2012, we completed the previously announced sale of our pharmacy business to Omnicare, Inc., or Omnicare. We received $34.3 million in sale proceeds from Omnicare, which included $3.8 million in working capital. Further, we retained certain additional items of net working capital invested in the pharmacy business of $3.5 million. Accordingly, we expect to receive a total of $37.8 million (before taxes and transaction costs) in net cash receipts resulting from the sale. We recorded a pre-tax capital gain on sale of the pharmacy business of approximately $23.3 million. The operating results for our pharmacy business prior to the sale, as well as the gain on sale, net of taxes, are included in our discontinued operations.
In October 2012, we entered an agreement to sell two skilled nursing facilities, or SNFs, with a total of 271 living units that we own which are located in Michigan for a sale price of $8.0 million, including the transfer of $7.6 million of HUD mortgage debt to the buyer. These two SNFs receive the majority of their revenues from Medicare/Medicaid reimbursements. The losses generated at these facilities are included in our discontinued operations. Completion of this sale is subject to customary closing conditions and we can provide no assurance that a sale of these SNFs will be completed.
Bruce Mackey, President & CEO, made the following statement regarding the third quarter results of operations and recent activities:
“For the third quarter of 2012, Five Star grew EBITDA excluding certain items by approximately 22% compared to last year’s third quarter. This improvement was largely driven by improved community expense margin management. Sequentially, our occupancy increased 20 basis points to 85.7% from 85.5% between the second and third quarters of 2012 for our owned and leased senior living communities, which was primarily driven by increases in occupancy at our independent and assisted living communities. Also, the amount of senior living revenue from private sources increased to 75% from 73% between the third quarters of 2012 and 2011, respectively.
During the last several months, we made substantial progress towards further focusing our operations on the private pay independent and assisted living business. Since May 2012, we have either begun to manage or agreed to manage 14 senior living communities with a combined 3,159 living units which are primarily providing independent and/or assisted living services and generate a large majority of their revenues from residents’ private resources. In September 2012, we completed the sale of our institutional pharmacy business, which is primarily dependent upon Medicare Part D revenues, for an effective total expected cash receipts of $37.8 million and recognized a pre-tax gain of $23.3 million. In October 2012, we reached an agreement to sell two Medicare/Medicaid dependent skilled nursing facilities located in Michigan with a total of 271 living units for a sale price of $8.0 million.”
Conference Call:
Later today, October 29, 2012, at 10:00 a.m. Eastern Time, we will host a conference call to discuss the third quarter financial results. Following management’s presentation, there will be a question and answer period.
The conference call telephone number is (800) 230-1074. Participants calling from outside the United States and Canada should dial (612) 234-9959. 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 11:59 p.m. Eastern Time, November 5, 2012. To hear the replay, dial (320) 365-3844. The replay pass code is 260111.
A live audio webcast of the conference call will also be available in a listen only mode on the Company’s website at www.fivestarseniorliving.com. Participants wanting to access the webcast should visit the Company’s website about five minutes before the call. The archived webcast will be available for replay on the Company’s website for about one week after the call. The recording and retransmission in any way of the Company’s third quarter 2012 conference call is strictly prohibited without the prior written consent of the Company. The Company’s website is not incorporated as part of this press release.
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About Five Star Quality Care, Inc.:
Five Star Quality Care, Inc. is a senior living and healthcare services company. As of September 30, 2012, we operated 252 senior living communities with 28,262 living units located in 30 states, including 31 communities (2,952 living units) that we own and operate, 191 communities (20,812 living units) that we lease and operate, and 30 communities (4,498 living units) that we manage. These communities include independent living, assisted living and skilled nursing communities. We also operate two leased rehabilitation hospitals. We are headquartered in Newton, Massachusetts.
WARNING REGARDING FORWARD LOOKING STATEMENTS
THIS PRESS RELEASE CONTAINS STATEMENTS THAT CONSTITUTE FORWARD LOOKING STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 AND OTHER SECURITIES LAWS. WHENEVER WE USE WORDS SUCH AS “BELIEVE”, “EXPECT”, “ANTICIPATE”, “INTEND”, “PLAN”, “ESTIMATE”, OR SIMILAR EXPRESSIONS, WE ARE MAKING FORWARD LOOKING STATEMENTS. THESE FORWARD LOOKING STATEMENTS ARE BASED UPON OUR PRESENT INTENT, BELIEFS OR EXPECTATIONS, BUT FORWARD LOOKING STATEMENTS ARE NOT GUARANTEED TO OCCUR AND MAY NOT OCCUR. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE CONTAINED IN OR IMPLIED BY THESE FORWARD LOOKING STATEMENTS AS A RESULT OF VARIOUS FACTORS. FOR EXAMPLE:
· THIS PRESS RELEASE STATES THAT WE EXPECT TO BEGIN MANAGING THE REMAINING TWO COMMUNITIES OWNED BY SNH AND CURRENTLY LEASED BY SUNRISE BEFORE YEAR END 2012 AND AFTER ALL APPROPRIATE REGULATORY APPROVALS ARE OBTAINED. THE TRANSFER OF OPERATING CONTROL OF THESE TWO COMMUNITIES IS SUBJECT TO REGULATORY APPROVALS IN THE STATE WHERE EACH COMMUNITY IS LOCATED. WE CANNOT CONTROL THE RESULTS OR TIMING OF THESE APPROVAL PROCESSES. ACCORDINGLY, SOME OF THESE APPROVALS MAY BE DELAYED OR NOT OCCUR AND OUR BEGINNING TO MANAGE THESE COMMUNITIES MAY BE DELAYED OR MAY NOT OCCUR.
· THIS PRESS RELEASE REFERS TO OUR FOCUSING OPERATIONS ON THE PRIVATE PAY INDEPENDENT AND ASSISTED LIVING BUSINESS. OUR ABILITY TO SUCCESSFULLY OPERATE INDEPENDENT AND ASSISTED LIVING BUSINESSES DEPENDS ON A NUMBER OF FACTORS, INCLUDING OUR RESIDENTS’ CONTINUED ABILITY TO PAY FOR SERVICES WITH PRIVATE RESOURCES, OUR ABILITY TO MAINTAIN AND INCREASE OCCUPANCY AND RATES FOR THESE SERVICES, OUR ABILITY TO SUCCESSFULLY ADD ADDITIONAL INDEPENDENT AND ASSISTED LIVING UNITS BY ACQUISITION OR OTHERWISE, GOVERNMENT REGULATION IMPACTING THESE BUSINESSES AND OTHER MATTERS. AS SUCH, THERE CAN BE NO ASSURANCE THAT WE WILL BE ABLE TO SUCCESSFULLY INCREASE OR MAINTAIN OUR FOCUS ON THESE OPERATIONS.
· RESIDENTS AND PATIENTS WHO PAY FOR OUR SERVICES WITH THEIR PRIVATE RESOURCES MAY BECOME UNABLE TO AFFORD OUR SERVICES WHICH COULD RESULT IN DECREASED OCCUPANCY AND REVENUES AT OUR SENIOR LIVING COMMUNITIES AND REHABILITATION HOSPITALS AND INCREASED RELIANCE ON GOVERNMENT AND OTHER PAYERS.
· THIS PRESS RELEASE STATES THAT OUR EXPECTED EFFECTIVE NET CASH RECEIPTS RESULTING FROM THE SALE OF OUR PHARMACY BUSINESS ARE $37.8 MILLION, BEFORE TAXES AND TRANSACTION COSTS. THESE NET CASH RECEIPTS INCLUDE ACCOUNTS RECEIVABLE THAT WE RETAINED. FURTHER, THE PURCHASE AGREEMENT INCLUDES CUSTOMARY INDEMNIFICATION OBLIGATIONS AND REQUIRED US TO ESCROW A PORTION OF THE PURCHASE PRICE IN CONNECTION WITH THE INDEMNIFICATION OBLIGATIONS. IF WE ARE UNABLE TO COLLECT ACCOUNTS RECEIVABLE THAT WE HAVE RETAINED OR ARE REQUIRED TO PAY AMOUNTS (INCLUDING WITH ESCROWED PROCEEDS) TO SATISFY INDEMNIFICATION OBLIGATIONS IN THE FUTURE, THE ACTUAL NET CASH RECEIPTS WE MAY REALIZE FROM THE SALE, AND ANY CORRESPONDING CAPITAL GAIN, MAY BE REDUCED.
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· THIS PRESS RELEASE STATES THAT WE HAVE ENTERED INTO AN AGREEMENT TO SELL TWO SNFs THAT WE OWN LOCATED IN MICHIGAN. THIS SALE IS SUBJECT TO CUSTOMARY CLOSING CONDITIONS. SOME OF THESE CONDITIONS MAY NOT BE MET, THE SALE MAY NOT OCCUR OR THE SALE MAY BE DELAYED.
RESULTS THAT DIFFER FROM THOSE STATED OR IMPLIED BY OUR FORWARD LOOKING STATEMENTS MAY ALSO BE CAUSED BY VARIOUS CHANGES IN OUR BUSINESS OR MARKET CONDITIONS, AS DESCRIBED MORE FULLY IN OUR ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2011, UNDER “WARNING CONCERNING FORWARD LOOKING STATEMENTS,” AND “RISK FACTORS” AND UNDER “WARNING CONCERNING FORWARD LOOKING STATEMENTS” AND ELSEWHERE IN OUR QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2012. COPIES OF THAT ANNUAL REPORT AND QUARTERLY REPORT ARE AVAILABLE AT THE WEBSITE OF THE U.S. SECURITIES AND EXCHANGE COMMISSION: WWW.SEC.GOV.
FOR THESE REASONS, AMONG OTHERS, INVESTORS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE UPON FORWARD LOOKING STATEMENTS IN THIS PRESS RELEASE.
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Supplemental Information, page 1 of 7
FIVE STAR QUALITY CARE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except share data)
(unaudited)
| | Three months ended
September 30, | | Nine months ended
September 30, | |
| | 2012 | | 2011 | | 2012 | | 2011 | |
Revenues: | | | | | | | | | |
Senior living revenue | | $ | 277,568 | | $ | 275,605 | | $ | 831,864 | | $ | 803,647 | |
Rehabilitation hospital revenue | | 26,328 | | 26,273 | | 79,501 | | 78,235 | |
Management fee revenue | | 1,277 | | 359 | | 3,666 | | 383 | |
Reimbursed costs incurred on behalf of managed communities | | 27,247 | | 8,324 | | 76,750 | | 8,887 | |
Total revenues | | 332,420 | | 310,561 | | 991,781 | | 891,152 | |
| | | | | | | | | |
Operating expenses: | | | | | | | | | |
Senior living wages and benefits | | 137,816 | | 136,135 | | 412,808 | | 398,975 | |
Other senior living operating expenses | | 66,858 | | 68,669 | | 200,062 | | 193,123 | |
Costs incurred on behalf of managed communities | | 27,247 | | 8,324 | | 76,750 | | 8,887 | |
Rehabilitation hospital expenses | | 23,734 | | 23,300 | | 71,725 | | 70,798 | |
Rent expense | | 50,523 | | 50,138 | | 151,043 | | 145,474 | |
General and administrative | | 14,602 | | 14,418 | | 45,445 | | 42,242 | |
Depreciation and amortization | | 6,324 | | 5,497 | | 18,631 | | 13,705 | |
Total operating expenses | | 327,104 | | 306,481 | | 976,464 | | 873,204 | |
| | | | | | | | | |
Operating income | | 5,316 | | 4,080 | | 15,317 | | 17,948 | |
| | | | | | | | | |
Interest and other income | | 199 | | 355 | | 638 | | 975 | |
Interest and other expense | | (1,762 | ) | (1,034 | ) | (4,793 | ) | (2,405 | ) |
Acquisition related costs | | (100 | ) | (226 | ) | (100 | ) | (1,530 | ) |
Gain on settlement | | — | | — | | 3,365 | | — | |
Gain on early extinguishment of debt | | — | | — | | 45 | | 1 | |
Equity in earnings of Affiliates Insurance Company | | 115 | | 28 | | 236 | | 111 | |
Gain on sale of available for sale securities reclassified from other comprehensive income | | 63 | | 529 | | 62 | | 656 | |
| | | | | | | | | |
Income from continuing operations before income taxes | | 3,831 | | 3,732 | | 14,770 | | 15,756 | |
Provision for income taxes | | (426 | ) | (186 | ) | (4,835 | ) | (1,006 | ) |
Income from continuing operations | | 3,405 | | 3,546 | | 9,935 | | 14,750 | |
Income (loss) from discontinued operations | | 13,034 | | (4,074 | ) | 11,511 | | (5,950 | ) |
| | | | | | | | | |
Net income (loss) | | $ | 16,439 | | $ | (528 | ) | $ | 21,446 | | $ | 8,800 | |
| | | | | | | | | |
Weighted average shares outstanding - basic | | 47,927 | | 47,557 | | 47,913 | | 40,294 | |
| | | | | | | | | |
Weighted average shares outstanding - diluted | | 50,388 | | 47,557 | | 47,913 | | 43,169 | |
| | | | | | | | | |
Basic income (loss) per share from: | | | | | | | | | |
Continuing operations | | $ | 0.07 | | $ | 0.08 | | $ | 0.21 | | $ | 0.37 | |
Discontinued operations | | 0.27 | | (0.09 | ) | 0.24 | | (0.15 | ) |
Net income (loss) per share - basic | | $ | 0.34 | | $ | (0.01 | ) | $ | 0.45 | | $ | 0.22 | |
| | | | | | | | | |
Diluted income (loss) per share from: | | | | | | | | | |
Continuing operations | | $ | 0.07 | | $ | 0.08 | | $ | 0.21 | | $ | 0.36 | |
Discontinued operations | | 0.26 | | (0.09 | ) | 0.24 | | (0.14 | ) |
Net income (loss) per share - diluted | | $ | 0.33 | | $ | (0.01 | ) | $ | 0.45 | | $ | 0.22 | |
Supplemental Information, page 2 of 7
FIVE STAR QUALITY CARE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS DATA
(in thousands)
(unaudited)
| | September 30,
2012 | | December 31,
2011 | |
Assets | | | | | |
Current assets: | | | | | |
Cash and cash equivalents | | $ | 14,295 | | $ | 28,374 | |
Accounts receivable, net of allowance | | 54,880 | | 56,509 | |
Investments in available for sale securities | | 14,942 | | 9,114 | |
Restricted cash | | 5,904 | | 4,838 | |
Prepaid expenses and other current assets | | 25,441 | | 20,395 | |
Assets of discontinued operations | | 13,003 | | 29,022 | |
Total current assets | | 128,465 | | 148,252 | |
| | | | | |
Property and equipment, net | | 336,889 | | 332,185 | |
Restricted cash | | 9,262 | | 4,092 | |
Restricted investments in available for sale securities | | 11,904 | | 13,115 | |
Goodwill, equity investment and other long term assets | | 76,986 | | 85,833 | |
Total assets | | $ | 563,506 | | $ | 583,477 | |
| | | | | |
Liabilities and Shareholders’ Equity | | | | | |
Current liabilities: | | | | | |
Bridge loan from Senior Housing Properties Trust | | $ | — | | $ | 38,000 | |
Other current liabilities | | 157,904 | | 151,331 | |
Total current liabilities | | 157,904 | | 189,331 | |
| | | | | |
Mortgage notes payable | | 37,900 | | 38,714 | |
Convertible senior notes | | 24,872 | | 37,282 | |
Other long term liabilities | | 40,103 | | 37,956 | |
Shareholders’ equity | | 302,727 | | 280,194 | |
Total liabilities and shareholders’ equity | | $ | 563,506 | | $ | 583,477 | |
Supplemental Information, page 3 of 7
FIVE STAR QUALITY CARE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
| | Three months ended September 30, | | Nine months ended September 30, | |
| | 2012 | | 2011 | | 2012 | | 2011 | |
| | | | | | | | | |
Cash flows from operating activities: | | | | | | | | | |
Net income (loss) | | $ | 16,439 | | $ | (528 | ) | $ | 21,446 | | $ | 8,800 | |
Adjustments to reconcile net income to cash provided by operating activities: | | | | | | | | | |
Depreciation and amortization | | 6,324 | | 5,497 | | 18,631 | | 13,705 | |
Gain on early extinguishment of debt | | — | | — | | (45 | ) | (1 | ) |
(Gain) loss from discontinued operations | | (13,034 | ) | 4,074 | | (11,511 | ) | 5,950 | |
Gain on sale of available for sale securities | | (63 | ) | (529 | ) | (62 | ) | (656 | ) |
Equity in earnings of Affiliates Insurance Company | | (115 | ) | (28 | ) | (236 | ) | (111 | ) |
Stock-based compensation | | 159 | | 87 | | 649 | | 949 | |
Provision for losses on receivables | | 1,470 | | 1,143 | | 3,949 | | 5,178 | |
Changes in assets and liabilities: | | | | | | | | | |
Accounts receivable | | (520 | ) | 1,441 | | (2,320 | ) | (2,118 | ) |
Prepaid expenses and other assets | | (1,240 | ) | (3,031 | ) | 2,408 | | (2,735 | ) |
Accounts payable and accrued expenses | | (2,198 | ) | 7,665 | | 906 | | 7,028 | |
Accrued compensation and benefits | | 3,650 | | (2,643 | ) | 9,143 | | 6,096 | |
Due to related persons | | (3,165 | ) | (1,111 | ) | (5,868 | ) | (1,535 | ) |
Other current and long term liabilities | | 6,200 | | 4,598 | | 6,145 | | 5,407 | |
Cash provided by operating activities | | 13,907 | | 16,635 | | 43,235 | | 45,957 | |
| | | | | | | | | |
Net cash (used in) provided by discontinued operations | | (9,259 | ) | 514 | | (8,317 | ) | 652 | |
| | | | | | | | | |
Cash flows from investing activities: | | | | | | | | | |
Acquisition of property and equipment | | (11,933 | ) | (14,786 | ) | (40,251 | ) | (44,562 | ) |
Acquisition of senior living communities, net of working capital assumed | | — | | (53,426 | ) | — | | (107,165 | ) |
Payments from restricted cash and investment accounts, net | | (2,346 | ) | (698 | ) | (6,236 | ) | (3,117 | ) |
Purchase of available for sale securities | | (522 | ) | — | | (5,076 | ) | — | |
Proceeds from sale of pharmacy | | 34,298 | | — | | 34,298 | | — | |
Proceeds from disposition of property and equipment held for sale | | 4,156 | | 10,554 | | 18,249 | | 25,877 | |
Proceeds from sale of available for sale securities | | 156 | | 1,223 | | 928 | | 2,504 | |
Cash provided by (used in) investing activities | | 23,809 | | (57,133 | ) | 1,912 | | (126,463 | ) |
| | | | | | | | | |
Cash flows from financing activities: | | | | | | | | | |
Net proceeds from issuance of common stock | | — | | — | | — | | 53,953 | |
Proceeds from borrowings on credit facilities | | — | | — | | 47,500 | | 12,000 | |
Repayments of borrowings on credit facilities | | (37,500 | ) | — | | (47,500 | ) | (12,000 | ) |
Proceeds from borrowing on the bridge loan from Senior Housing Properties Trust | | — | | 39,000 | | — | | 80,000 | |
Repayments of borrowing on the bridge loan from Senior Housing Properties Trust | | — | | — | | (38,000 | ) | (32,000 | ) |
Purchase and retirement of convertible senior notes | | — | | — | | (12,038 | ) | (623 | ) |
Repayments of mortgage notes payable | | (297 | ) | (228 | ) | (871 | ) | (300 | ) |
Cash (used in) provided by financing activities | | (37,797 | ) | 38,772 | | (50,909 | ) | 101,030 | |
| | | | | | | | | |
Change in cash and cash equivalents during the period | | (9,340 | ) | (1,212 | ) | (14,079 | ) | 21,176 | |
Cash and cash equivalents at beginning of period | | 23,635 | | 43,158 | | 28,374 | | 20,770 | |
Cash and cash equivalents at end of period | | $ | 14,295 | | $ | 41,946 | | $ | 14,295 | | $ | 41,946 | |
| | | | | | | | | |
Cash paid for interest | | $ | 960 | | $ | 259 | | $ | 3,711 | | $ | 1,454 | |
Cash paid for income taxes | | $ | 317 | | $ | 215 | | $ | 1,552 | | $ | 1,257 | |
| | | | | | | | | |
Non-cash activities: | | | | | | | | | |
Issuance of common stock | | $ | — | | $ | — | | $ | 114 | | $ | 298 | |
Real estate acquisition | | $ | — | | $ | (20,337 | ) | $ | — | | $ | (40,289 | ) |
Assumption of mortgage notes payable | | $ | — | | $ | 20,337 | | $ | — | | $ | 40,289 | |
Supplemental Information, page 4 of 7
FIVE STAR QUALITY CARE, INC.
SENIOR LIVING COMMUNITY FINANCIAL DATA(1)
(dollars in thousands, except average daily rate)
| | Three months ended | | Nine months ended | |
| | September 30, | | September 30, | |
| | 2012 | | 2011 | | 2012 | | 2011 | |
Senior living communities owned and leased:(2) | | | | | | | | | |
Number of communities | | 222 | | 222 | | 222 | | 222 | |
Number of units | | 23,764 | | 23,764 | | 23,764 | | 23,764 | |
Occupancy | | 85.7 | % | 86.0 | % | 85.7 | % | 85.6 | % |
ADR | | $ | 145.56 | | $ | 147.46 | | $ | 146.64 | | $ | 150.15 | |
| | | | | | | | | |
Senior living revenue: | | | | | | | | | |
Independent and assisted living community revenue | | $ | 124,387 | | $ | 119,082 | | $ | 369,864 | | $ | 334,919 | |
Continuing care retirement communities revenue | | 96,810 | | 99,285 | | 291,197 | | 298,056 | |
Skilled nursing facility revenue | | 53,060 | | 54,745 | | 160,919 | | 163,580 | |
Other(3) | | 3,311 | | 2,493 | | 9,884 | | 7,092 | |
Total senior living revenue | | $ | 277,568 | | $ | 275,605 | | $ | 831,864 | | $ | 803,647 | |
| | | | | | | | | |
Senior living wages and benefits: | | | | | | | | | |
Independent and assisted living community wages and benefits | | $ | 53,803 | | $ | 52,144 | | $ | 161,321 | | $ | 147,951 | |
Continuing care retirement communities wages and benefits | | 47,889 | | 48,358 | | 144,109 | | 143,116 | |
Skilled nursing facility wages and benefits | | 33,998 | | 34,579 | | 102,611 | | 103,780 | |
Other(3) | | 2,126 | | 1,054 | | 4,767 | | 4,128 | |
Total senior living wages and benefits | | $ | 137,816 | | $ | 136,135 | | $ | 412,808 | | $ | 398,975 | |
| | | | | | | | | |
Senior living other operating expenses: | | | | | | | | | |
Independent and assisted living community other operating expenses | | $ | 29,651 | | $ | 29,019 | | $ | 88,332 | | $ | 78,540 | |
Continuing care retirement communities other operating expenses | | 23,829 | | 25,283 | | 71,101 | | 73,351 | |
Skilled nursing facility other operating expenses | | 13,056 | | 13,816 | | 39,116 | | 39,954 | |
Other(3) | | 322 | | 551 | | 1,513 | | 1,278 | |
Total other senior living operating expenses | | $ | 66,858 | | $ | 68,669 | | $ | 200,062 | | $ | 193,123 | |
| | | | | | | | | |
Percent breakdown of independent and assisted living community revenues: | | | | | | | | | |
Private and other sources | | 98.8 | % | 98.9 | % | 98.9 | % | 98.9 | % |
Medicaid | | 1.2 | % | 1.1 | % | 1.1 | % | 1.1 | % |
Total | | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % |
| | | | | | | | | |
Percent breakdown of continuing care retirement community revenues: | | | | | | | | | |
Private and other sources | | 71.1 | % | 68.7 | % | 70.8 | % | 68.1 | % |
Medicare | | 22.3 | % | 24.8 | % | 22.6 | % | 25.8 | % |
Medicaid | | 6.6 | % | 6.5 | % | 6.6 | % | 6.1 | % |
Total | | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % |
| | | | | | | | | |
Percent breakdown of skilled nursing facility revenues: | | | | | | | | | |
Private and other sources | | 25.9 | % | 24.7 | % | 25.3 | % | 24.4 | % |
Medicare | | 24.2 | % | 27.9 | % | 24.6 | % | 27.8 | % |
Medicaid | | 49.9 | % | 47.4 | % | 50.1 | % | 47.8 | % |
Total | | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % |
| | | | | | | | | |
Percent breakdown of total senior living revenues: | | | | | | | | | |
Private and other sources | | 75.0 | % | 73.0 | % | 74.5 | % | 72.0 | % |
Medicare | | 12.6 | % | 14.7 | % | 12.8 | % | 15.4 | % |
Medicaid | | 12.4 | % | 12.3 | % | 12.7 | % | 12.6 | % |
Total | | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % |
(1) Excludes data for managed communities and discontinued senior living operations.
(2) Includes independent and assisted living communities, continuing care communities and skilled nursing facilities.
(3) Other senior living relates primarily to rehabilitation and other specialty service revenues provided at residential facilities and does not include revenues from institutional pharmacy or rehabilitation hospital operations.
Supplemental Information, page 5 of 7
FIVE STAR QUALITY CARE, INC.
COMPARABLE SENIOR LIVING COMMUNITY FINANCIAL DATA(1)
(dollars in thousands, except average daily rate)
| | Three months ended | | Nine months ended | |
| | September 30,(2) | | September 30,(3) | |
| | 2012 | | 2011 | | 2012 | | 2011 | |
Senior living communities owned and leased:(4) | | | | | | | | | |
Number of communities | | 218 | | 218 | | 209 | | 209 | |
Number of units | | 23,278 | | 23,278 | | 22,175 | | 22,175 | |
Occupancy | | 85.7 | % | 86.0 | % | 85.4 | % | 85.5 | % |
ADR | | $ | 146.88 | | $ | 147.65 | | $ | 150.79 | | $ | 151.48 | |
| | | | | | | | | |
Senior living revenue: | | | | | | | | | |
Independent and assisted living community revenue | | $ | 121,233 | | $ | 118,531 | | $ | 332,096 | | $ | 322,989 | |
Continuing care retirement communities revenue | | 96,810 | | 99,285 | | 291,197 | | 298,056 | |
Skilled nursing facility revenue | | 53,060 | | 54,745 | | 160,919 | | 163,580 | |
Other(5) | | 3,311 | | 2,493 | | 9,884 | | 7,092 | |
Total senior living revenue | | $ | 274,414 | | $ | 275,054 | | $ | 794,096 | | $ | 791,717 | |
| | | | | | | | | |
Senior living wages and benefits: | | | | | | | | | |
Independent and assisted living community wages and benefits | | $ | 52,874 | | $ | 51,830 | | $ | 148,823 | | $ | 143,700 | |
Continuing care retirement communities wages and benefits | | 47,889 | | 48,358 | | 144,109 | | 143,116 | |
Skilled nursing facility wages and benefits | | 33,998 | | 34,579 | | 102,611 | | 103,780 | |
Other(5) | | 2,126 | | 1,054 | | 4,767 | | 4,128 | |
Total senior living wages and benefits | | $ | 136,887 | | $ | 135,821 | | $ | 400,310 | | $ | 394,724 | |
| | | | | | | | | |
Senior living other operating expenses: | | | | | | | | | |
Independent and assisted living community other operating expenses | | $ | 28,673 | | $ | 28,787 | | $ | 78,586 | | $ | 75,513 | |
Continuing care retirement communities other operating expenses | | 23,829 | | 25,283 | | 71,101 | | 73,351 | |
Skilled nursing facility other operating expenses | | 13,056 | | 13,816 | | 39,116 | | 39,954 | |
Other(5) | | 322 | | 551 | | 1,513 | | 1,278 | |
Total other senior living operating expenses | | $ | 65,880 | | $ | 68,437 | | $ | 190,316 | | $ | 190,096 | |
| | | | | | | | | |
Percent breakdown of independent and assisted living community revenues: | | | | | | | | | |
Private and other sources | | 98.9 | % | 98.9 | % | 99.0 | % | 98.9 | % |
Medicaid | | 1.1 | % | 1.1 | % | 1.0 | % | 1.1 | % |
Total | | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % |
| | | | | | | | | |
Percent breakdown of continuing care retirement community revenues: | | | | | | | | | |
Private and other sources | | 71.1 | % | 68.7 | % | 70.8 | % | 68.1 | % |
Medicare | | 22.3 | % | 24.8 | % | 22.6 | % | 25.8 | % |
Medicaid | | 6.6 | % | 6.5 | % | 6.6 | % | 6.1 | % |
Total | | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % |
| | | | | | | | | |
Percent breakdown of skilled nursing facility revenues: | | | | | | | | | |
Private and other sources | | 25.9 | % | 24.7 | % | 25.3 | % | 24.4 | % |
Medicare | | 24.2 | % | 27.9 | % | 24.6 | % | 27.8 | % |
Medicaid | | 49.9 | % | 47.4 | % | 50.1 | % | 47.8 | % |
Total | | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % |
| | | | | | | | | |
Percent breakdown of total senior living revenues: | | | | | | | | | |
Private and other sources | | 74.7 | % | 72.9 | % | 73.4 | % | 71.7 | % |
Medicare | | 12.7 | % | 14.7 | % | 13.4 | % | 15.6 | % |
Medicaid | | 12.6 | % | 12.4 | % | 13.2 | % | 12.7 | % |
Total | | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % |
(1) Excludes data for managed communities and discontinued senior living operations.
(2) Communities that we have operated continuously since July 1, 2011.
(3) Communities that we have operated continuously since January 1, 2011.
(4) Includes independent and assisted living communities, continuing care communities and skilled nursing facilities.
(5) Other senior living relates primarily to rehabilitation and other specialty service revenues provided at residential facilities and does not include revenues from institutional pharmacy or rehabilitation hospital operations.
Supplemental Information, page 6 of 7
FIVE STAR QUALITY CARE, INC.
SENIOR LIVING OTHER OPERATING DATA(1)
(dollars in thousands, except average daily rate)
| | Three months ended | |
| | September 30, | | June 30, | | March 31, | | December 31, | | September 30, | |
| | 2012 | | 2012 | | 2012 | | 2011 | | 2011 | |
Number of senior living communities (end of period) | | | | | | | | | | | |
Senior living communities, owned | | 31 | | 31 | | 31 | | 31 | | 31 | |
Senior living communities, leased | | 191 | | 191 | | 191 | | 191 | | 191 | |
Senior living communities, managed | | 30 | | 25 | | 25 | | 23 | | 14 | |
Total number of senior living communities | | 252 | | 247 | | 247 | | 245 | | 236 | |
| | | | | | | | | | | |
Number of senior living units (end of period): | | | | | | | | | | | |
Senior living communities, owned | | 2,952 | | 2,952 | | 2,952 | | 2,952 | | 2,952 | |
Senior living communities, leased | | 20,812 | | 20,812 | | 20,812 | | 20,812 | | 20,812 | |
Senior living communities, managed | | 4,498 | | 3,738 | | 3,738 | | 3,393 | | 1,415 | |
Total number of senior living units | | 28,262 | | 27,502 | | 27,502 | | 27,157 | | 25,179 | |
| | | | | | | | | | | |
Independent and assisted living communities:(2) | | | | | | | | | | | |
Number of communities | | 153 | | 153 | | 153 | | 153 | | 153 | |
Number of units | | 13,005 | | 13,005 | | 13,005 | | 13,005 | | 13,005 | |
Occupancy | | 88.0 | % | 87.6 | % | 87.7 | % | 88.3 | % | 88.2 | % |
ADR | | $ | 117.24 | | $ | 117.90 | | $ | 117.21 | | $ | 114.90 | | $ | 115.87 | |
| | | | | | | | | | | |
CCRC communities:(2) | | | | | | | | | | | |
Number of communities | | 31 | | 31 | | 31 | | 31 | | 31 | |
Number of units(3) | | 7,336 | | 7,336 | | 7,336 | | 7,336 | | 7,336 | |
Occupancy | | 84.1 | % | 84.0 | % | 84.8 | % | 84.9 | % | 84.2 | % |
ADR | | $ | 170.57 | | $ | 172.83 | | $ | 172.20 | | $ | 168.63 | | $ | 174.73 | |
| | | | | | | | | | | |
Skilled nursing facilities:(2) | | | | | | | | | | | |
Number of communities | | 38 | | 38 | | 38 | | 38 | | 38 | |
Number of units(4) | | 3,423 | | 3,423 | | 3,423 | | 3,423 | | 3,423 | |
Occupancy | | 80.2 | % | 80.9 | % | 81.6 | % | 81.4 | % | 81.7 | % |
ADR | | $ | 207.35 | | $ | 215.79 | | $ | 208.85 | | $ | 206.94 | | $ | 212.82 | |
| | | | | | | | | | | |
Senior living communities owned and leased:(2) | | | | | | | | | | | |
Number of communities | | 222 | | 222 | | 222 | | 222 | | 222 | |
Number of units | | 23,764 | | 23,764 | | 23,764 | | 23,764 | | 23,764 | |
Occupancy | | 85.7 | % | 85.5 | % | 85.9 | % | 86.2 | % | 86.0 | % |
ADR | | $ | 145.56 | | $ | 147.89 | | $ | 146.50 | | $ | 143.73 | | $ | 147.46 | |
| | | | | | | | | | | |
Managed communities: | | | | | | | | | | | |
Number of communities | | 30 | | 25 | | 25 | | 23 | | 14 | |
Number of units(5) | | 4,498 | | 3,738 | | 3,738 | | 3,393 | | 1,415 | |
Occupancy | | 87.4 | % | 87.6 | % | 87.3 | % | 85.4 | % | 83.0 | % |
ADR | | $ | 132.08 | | $ | 133.34 | | $ | 132.01 | | $ | 120.51 | | $ | 114.68 | |
| | | | | | | | | | | |
Rehabilitation hospital data: | | | | | | | | | | | |
Rehabilitation hospital units | | 321 | | 321 | | 321 | | 321 | | 321 | |
Rehabilitation hospital occupancy | | 60.7 | % | 59.8 | % | 60.4 | % | 61.4 | % | 59.7 | % |
| | | | | | | | | | | |
Other ancillary services: | | | | | | | | | | | |
Rehabilitation and wellness inpatient clinics | | 50 | | 48 | | 47 | | 47 | | 47 | |
Rehabilitation and wellness outpatient clinics | | 46 | | 44 | | 41 | | 39 | | 30 | |
Home health communities served | | 6 | | 6 | | 6 | | 6 | | 6 | |
(1) Excludes data for discontinued operations.
(2) Excludes data for managed communities.
(3) Includes 2,020 skilled nursing units in communities where assisted living and independent living services are the predominant services provided.
(4) Includes 87 assisted living and independent living units in communities where skilled nursing services are the predominant services provided.
(5) Includes 71 skilled nursing units in communities where assisted living and independent living services are the predominant services provided.
Supplemental Information, page 7 of 7
FIVE STAR QUALITY CARE, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(in thousands, except per share data)
Earnings before interest, taxes, depreciation and amortization, or EBITDA, and EBITDA excluding certain items (collectively, Non-GAAP Financial Measures) are not financial measures determined according to U.S. generally accepted accounting principles, or GAAP. We consider these Non-GAAP Financial Measures to be meaningful disclosures because we believe that the presentation of these Non-GAAP Financial Measures may help investors to gain a better understanding of changes in our operating results, and may also help investors who wish to make comparisons between us and other companies on both a GAAP and a non-GAAP basis. These Non-GAAP Financial Measures are used by management to evaluate our financial performance and for comparing our performance over time and to the performance of our competitors. These Non-GAAP Financial Measures as presented may not, however, be comparable to amounts calculated by other companies. This information should not be considered as an alternative to income from continuing operations, net income from continuing operations, net income, cash flows from operating activities or any other financial operating or performance or liquidity measure established by GAAP. The reconciliation of income from continuing operations to these Non-GAAP Financial Measures is as follows:
| | Three months ended | | Nine months ended | |
| | September 30, | | September 30, | | September 30, | | September 30, | |
| | 2012 | | 2011 | | 2012 | | 2011 | |
Income from continuing operations | | $ | 3,405 | | $ | 3,546 | | $ | 9,935 | | $ | 14,750 | |
Add: interest and other expense | | 1,762 | | 1,034 | | 4,793 | | 2,405 | |
Add: income tax expense | | 426 | | 186 | | 4,835 | | 1,006 | |
Add: depreciation and amortization | | 6,324 | | 5,497 | | 18,631 | | 13,705 | |
Less: interest, dividend and other income | | (199 | ) | (355 | ) | (638 | ) | (975 | ) |
EBITDA | | 11,718 | | 9,908 | | 37,556 | | 30,891 | |
Add: acquisition related costs | | 100 | | 226 | | 100 | | 1,530 | |
Less: gain on sale of investments in available for sale securities | | (63 | ) | (529 | ) | (62 | ) | (656 | ) |
Less: gain on early extinguishment of debt | | — | | — | | (45 | ) | (1 | ) |
Less: gain on settlement | | — | | — | | (3,365 | ) | — | |
EBITDA excluding certain items | | $ | 11,755 | | $ | 9,605 | | $ | 34,184 | | $ | 31,764 | |
