Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2016 | May. 03, 2016 | |
Document and Entity Information [Abstract] | ||
Entity Registrant Name | FIVE STAR QUALITY CARE INC | |
Entity Central Index Key | 1,159,281 | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2016 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 49,472,011 | |
Document Fiscal Year Focus | 2,016 | |
Document Fiscal Period Focus | Q1 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Mar. 31, 2016 | Dec. 31, 2015 |
Current assets: | ||
Cash and cash equivalents | $ 12,333 | $ 14,672 |
Accounts receivable, net of allowance of $3,479 and $3,592 at March 31, 2016 and December 31, 2015, respectively | 37,398 | 37,829 |
Due from related persons | 13,072 | 9,731 |
Investments in available for sale securities, of which $10,215 and $11,471 are restricted as of March 31, 2016 and December 31, 2015, respectively | 25,486 | 26,417 |
Restricted cash | 3,705 | 3,301 |
Prepaid expenses and other current assets | 19,445 | 19,138 |
Assets of discontinued operations | 586 | 981 |
Total current assets | 112,025 | 112,069 |
Property and equipment, net | 383,943 | 383,858 |
Equity investment of an investee | 6,956 | 6,827 |
Restricted cash | 2,556 | 2,821 |
Restricted investments in available for sale securities | 23,794 | 23,166 |
Other long term assets | 1,450 | 3,029 |
Total assets | 530,724 | 531,770 |
Current liabilities: | ||
Revolving credit facilities | 60,000 | 50,000 |
Accounts payable and accrued expenses | 82,398 | 93,205 |
Accrued compensation and benefits | 42,998 | 32,127 |
Due to related persons | 17,468 | 17,870 |
Mortgage notes payable | 1,831 | 1,807 |
Accrued real estate taxes | 10,027 | 12,207 |
Security deposits and current portion of continuing care contracts | 5,834 | 6,129 |
Other current liabilities | 21,605 | 30,399 |
Liabilities of discontinued operations | 180 | 176 |
Total current liabilities | 242,341 | 243,920 |
Long term liabilities: | ||
Mortgage notes payable | 59,929 | 60,396 |
Continuing care contracts | 1,189 | 1,267 |
Accrued self-insurance obligations | 40,349 | 37,588 |
Other long term liabilities | 3,783 | 4,147 |
Total long term liabilities | $ 105,250 | $ 103,398 |
Commitments and contingencies | ||
Shareholders' equity: | ||
Common stock, par value $.01: 75,000,000 shares authorized, 49,472,011 and 49,476,611 shares issued and outstanding at March 31, 2016 and December 31, 2015, respectively | $ 494 | $ 494 |
Additional paid in capital | 358,883 | 358,665 |
Accumulated deficit | (180,245) | (177,622) |
Accumulated other comprehensive income | 4,001 | 2,915 |
Total shareholders' equity | 183,133 | 184,452 |
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ 530,724 | $ 531,770 |
CONDENSED CONSOLIDATED BALANCE3
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands | Mar. 31, 2016 | Dec. 31, 2015 |
CONDENSED CONSOLIDATED BALANCE SHEETS | ||
Accounts receivable, allowance (in dollars) | $ 3,479 | $ 3,592 |
Investments in available for sale securities, restricted (in dollars) | $ 10,215 | $ 11,471 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 75,000,000 | 75,000,000 |
Common stock, shares issued | 49,472,011 | 49,476,611 |
Common stock, shares outstanding | 49,472,011 | 49,476,611 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Revenues: | ||
Senior living revenue | $ 280,090 | $ 275,173 |
Management fee revenue | 2,804 | 2,523 |
Reimbursed costs incurred on behalf of managed communities | 61,318 | 56,277 |
Total revenues | 344,212 | 333,973 |
Operating expenses: | ||
Senior living wages and benefits | 135,804 | 133,253 |
Other senior living operating expenses | 69,741 | 72,225 |
Costs incurred on behalf of managed communities | 61,318 | 56,277 |
Rent expense | 50,095 | 49,628 |
General and administrative | 18,103 | 17,982 |
Depreciation and amortization expense | 9,599 | 8,095 |
Long-lived asset impairment | 306 | |
Total operating expenses | 344,966 | 337,460 |
Operating loss | (754) | (3,487) |
Interest, dividend and other income | 265 | 220 |
Interest and other expense | (1,501) | (1,354) |
(Loss) gain on sale of available for sale securities reclassified from other comprehensive income | (109) | 20 |
Loss from continuing operations before income taxes and equity in earnings of an investee | (2,099) | (4,601) |
Provision for income taxes | (289) | (304) |
Equity in earnings of an investee | 77 | 72 |
Loss from continuing operations | (2,311) | (4,833) |
Loss from discontinued operations | (312) | (469) |
Net loss | $ (2,623) | $ (5,302) |
Weighted average shares outstanding- basic and diluted | 48,792 | 48,364 |
Basic and diluted (loss) income per share from: | ||
Continuing operations | $ (0.05) | $ (0.10) |
Discontinued operations | (0.01) | (0.01) |
Net loss per share - basic and diluted | $ (0.06) | $ (0.11) |
CONDENSED CONSOLIDATED STATEME5
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) | ||
Net loss | $ (2,623) | $ (5,302) |
Other comprehensive income: | ||
Unrealized gain on investments in available for sale securities, net of tax | 925 | 450 |
Equity in unrealized gain of an investee, net of tax | 52 | 45 |
Realized loss (gain) on investments in available for sale securities reclassified and included in net loss, net of tax | 109 | (20) |
Other comprehensive (loss) income | 1,086 | 475 |
Comprehensive loss | $ (1,537) | $ (4,827) |
CONDENSED CONSOLIDATED STATEME6
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Cash flows from operating activities: | ||
Net loss | $ (2,623) | $ (5,302) |
Adjustments to reconcile net loss to cash (used in) provided by operating activities: | ||
Depreciation and amortization | 9,599 | 8,095 |
Loss from discontinued operations before income tax | 312 | 469 |
Loss (gain) on sale of available for sale securities reclassified from other comprehensive income | 109 | (20) |
Loss on disposal of property and equipment | 11 | 7 |
Long-lived asset impairment | 306 | |
Equity in earnings of an investee | (77) | (72) |
Stock based compensation | 218 | 300 |
Provision for losses on receivables | 793 | 1,696 |
Other noncash (income) expense adjustments, net | (141) | 406 |
Changes in assets and liabilities: | ||
Accounts receivable | (362) | (2,140) |
Prepaid expenses and other assets | 555 | 1,853 |
Accounts payable and accrued expenses | (11,025) | 2,385 |
Accrued compensation and benefits | 10,871 | 6,052 |
Due from related persons, net | (4,331) | 4,175 |
Other current and long term liabilities | (8,877) | (1,916) |
Cash (used in) provided by operating activities | (4,662) | 15,988 |
Cash flows from investing activities: | ||
(Increase) decrease in restricted cash and investment accounts, net | (139) | 174 |
Acquisition of property and equipment | (14,270) | (11,550) |
Purchase of available for sale securities | (2,911) | (234) |
Proceeds from sale of property and equipment to Senior Housing Properties Trust | 5,755 | 4,060 |
Proceeds from sale of available for sale securities | 4,114 | 2,736 |
Cash used in investing activities | (7,451) | (4,814) |
Cash flows from financing activities: | ||
Proceeds from borrowings on revolving credit facility | 15,000 | |
Repayments of borrowings on revolving credit facility | (5,000) | (5,000) |
Repayments of mortgage notes payable | (313) | (438) |
Cash provided by (used in) financing activities | 9,687 | (5,438) |
Cash flows from discontinued operations: | ||
Net cash provided by (used in) operating activities | 95 | (42) |
Net cash used in investing activities | (8) | (12) |
Net cash flows provided by (used in) discontinued operations | 87 | (54) |
Change in cash and cash equivalents | (2,339) | 5,682 |
Cash and cash equivalents at beginning of period | 14,672 | 20,988 |
Cash and cash equivalents at end of period | 12,333 | 26,670 |
Supplemental cash flow information: | ||
Cash paid for interest | 1,517 | 969 |
Cash paid for income taxes, net | $ 208 | $ 182 |
Basis of Presentation and Organ
Basis of Presentation and Organization | 3 Months Ended |
Mar. 31, 2016 | |
Basis of Presentation and Organization | |
Basis of Presentation and Organization | Note 1. Basis of Presentation and Organizatio n General The accompanying condensed consolidated financial statements of Five Star Quality Care, Inc. and its subsidiaries, or we, us or our, are unaudited. Certain information and disclosures required by U.S. generally accepted accounting principles, or GAAP, for complete financial statements have been condensed or omitted. We believe the disclosures made are adequate to make the information presented not misleading. However, the accompanying financial statements should be read in conjunction with the financial statements and notes contained in our Annual Report on Form 10-K for the year ended December 31, 2015, or our Annual Report. In the opinion of our management, all adjustments, which include only normal recurring adjustments, considered necessary for a fair presentation have been included. All intercompany transactions and balances with or among our consolidated subsidiaries have been eliminated. Our operating results for interim periods are not necessarily indicative of the results that may be expected for the full year. Certain reclassifications have been made to the prior years’ condensed consolidated financial statements to conform to the current year’s presentation. We operate senior living communities, including independent living communities, assisted living communities and skilled nursing facilities, or SNFs. As of March 31, 2016, we operated 274 senior living communities located in 32 states with 31,051 living units, including 243 primarily independent and assisted living communities with 28,450 living units and 31 SNFs with 2,601 living units. As of March 31, 2016, we owned and operated 33 communities ( 3,211 living units), we leased and operated 181 communities ( 19,700 living units) and we managed 60 communities ( 8,140 living units). Our 274 senior living communities, as of March 31, 2016, included 10,668 independent living apartments, 15,439 assisted living suites and 4,944 skilled nursing beds. The foregoing numbers exclude one senior living community with 32 living units that we own which is being offered for sale and is classified as a discontinued operation and exclude living units categorized as out of service. Segment Information We have two operating segments: senior living communities and rehabilitation and wellness. In the senior living community segment, we operate for our own account or manage for the account of others independent living communities, assisted living communities and SNFs that are subject to centralized oversight and provide housing and services to elderly residents. Our rehabilitation and wellness operating segment does not meet any of the quantitative thresholds of a reportable segment as prescribed under Financial Accounting Standards Board, or the FASB, Accounting Standards Codification TM , or ASC, Topic 280, Segment Reporting, and therefore we have determined that our business is comprised of one reportable segment, senior living. All of our operations and assets are located in the United States, except for the operations of our Cayman Islands organized captive insurance company subsidiary, which participates in our workers’ compensation and professional and general liability insurance programs. |
Recent Accounting Pronouncement
Recent Accounting Pronouncements | 3 Months Ended |
Mar. 31, 2016 | |
Recent Accounting Pronouncements | |
Recent Accounting Pronouncements | Note 2. Recent Accounting Pronouncements In December 2015, we early adopted FASB Accounting Standards Update, or ASU, No. 2015-17, Balance Sheet Classification of Deferred Taxes , which requires that deferred tax assets and liabilities be classified as noncurrent in a consolidated balance sheet rather than the current presentation of separating deferred tax assets and liabilities into current and noncurrent amounts. We adopted this ASU using prospective application. Since we have recognized a full deferred tax valuation allowance since 2014 and our deferred tax assets and liabilities net to zero, the implementation of this ASU did not have a material impact on our consolidated financial statements. On January 1, 2016, we adopted FASB ASU No. 2015-03, Simplifying the Presentation of Debt Issuance Costs , which requires debt issuance costs to be presented in the balance sheet as a direct deduction from the associated debt liability, and ASU No. 2015-15, Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements – Amendments to SEC Paragraphs Pursuant to Staff Announcement at June 18, 2015 EITF Meeting , which addresses the presentation of debt issuance costs related to line of credit arrangements. The implementation of ASU No. 2015-03 did not have a material impact on our condensed consolidated financial statements. The adoption of ASU No. 2015-15 did not result in any changes in the classification of capitalized debt issuance costs related to our $150,000 secured revolving credit facility. On January 1, 2016, we adopted FASB ASU No. 2015-16, Simplifying the Accounting for Measurement-Period Adjustments , which eliminates the requirement for an acquirer in a business combination to account for measurement-period adjustments retrospectively. Instead, acquirers must recognize measurement-period adjustments during the period in which they determine the amounts, including the effect on earnings of any amounts that would have been recorded in previous periods if the accounting had been completed at the acquisition date. The implementation of this ASU did not have a material impact on our condensed consolidated financial statements. In January 2016, the FASB issued ASU No. 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities, which changes how entities measure certain equity investments and present changes in the fair value of financial liabilities measured under the fair value option that are attributable to their own credit. This ASU is effective for interim and annual periods beginning after December 15, 2017, with early adoption permitted subject to certain conditions. Currently, changes in fair value of these investments are recorded through other comprehensive income. Under this ASU, these changes will be recorded through earnings. We are continuing to evaluate this ASU, but we expect the implementation of this ASU will affect available for sale equity investments that we hold. In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) , which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e., lessees and lessors). ASU No. 2016-02 requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase of the leased asset by the lessee. This classification will determine whether the lease expense is recognized based on an effective interest method or on a straight line basis over the term of the lease. A lessee is also required to record a right of use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases today. The new standard requires lessors to account for leases using an approach that is substantially equivalent to existing guidance for sales type leases, direct financing leases and operating leases. ASU No. 2016-02 is effective for reporting periods beginning after December 15, 2018, with early adoption permitted. We are currently assessing the potential impact the adoption of ASU No. 2016-02 will have on our condensed consolidated financial statements. In March 2016, the FASB issued ASU No. 2016-09, Compensation - Stock Compensation (Topic 718) , which identifies areas for simplification involving several aspects of accounting for share based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, an option to recognize gross stock compensation expense with actual forfeitures recognized as they occur, as well as certain classifications on the statement of cash flows. ASU No. 2016-09 is effective for reporting periods beginning after December 15, 2016. We are currently assessing the potential impact the adoption of ASU No. 2016-09 will have on our condensed consolidated financial statements. In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) , which outlines a comprehensive model for entities to use in accounting for revenue arising from contracts with customers. This ASU clarifies the principles for recognizing revenue by, among other things, removing inconsistencies in revenue requirements, improving comparability of revenue recognition practices across entities and industries and providing improved disclosure requirements. In July 2015, the FASB approved a one year deferral of the effective date for this ASU to interim and annual reporting periods beginning after December 15, 2017; however, early adoption at the original effective date is still permitted. In March 2016, the FASB issued ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net), which clarifies how an entity should identify the unit of accounting for the principal versus agent evaluation and how it should apply the control principle to certain types of arrangements, such as service transactions. We are currently evaluating the impact that the adoption of these ASUs will have on our condensed consolidated financial statements. |
Property and Equipment
Property and Equipment | 3 Months Ended |
Mar. 31, 2016 | |
Property and Equipment | |
Property and Equipment | Note 3. Property and Equipment Property and equipment consists of the following: March 31, December 31, 2016 2015 Land $ $ Buildings and improvements Furniture, fixtures and equipment Property and equipment, at cost Accumulated depreciation Property and equipment, net $ $ We recorded depreciation expense relating to our property and equipment of $8,946 and $7,867 for the three months ended March 31, 2016 and 2015, respectively. We review the carrying value of long lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If there is an indication that the carrying value of an asset is not recoverable, we determine the amount of impairment loss, if any, by comparing the historical carrying value of the asset to its estimated fair value. We determine estimated fair value based on input from market participants, our experience selling similar assets, market conditions and internally developed cash flow models that our assets or asset groups are expected to generate, and we consider these estimates to be a Level 3 fair value measurement. As a result of our long lived assets impairment review, we recorded $306 of impairment charges to certain of our long lived assets in continuing operations for the three months ended March 31, 2016. As of March 31, 2016, we had $8,038 of assets included in our property and equipment that we currently expect to request that Senior Housing Properties Trust, or, together with its subsidiaries, SNH, purchase from us for an increase in future rent; however, SNH is not obligated to purchase such amounts. Please see Note 10 for more information regarding our leases and other arrangements with SNH. |
Accumulated Other Comprehensive
Accumulated Other Comprehensive Income | 3 Months Ended |
Mar. 31, 2016 | |
Accumulated Other Comprehensive Income | |
Accumulated Other Comprehensive Income | Note 4. Accumulated Other Comprehensive Income The following table details the changes in accumulated other comprehensive income, net of tax, for the three months ended March 31, 2016: Equity Investment of an Investee Investments in Available for Sale Securities Accumulated Other Comprehensive Income Balance at January 1, 2016 $ $ $ Unrealized gain on investments, net of tax — Equity in unrealized gain of an investee — Reclassification adjustment: Realized loss on investments, net of tax — Balance at March 31, 2016 $ $ $ Accumulated other comprehensive income represents the unrealized gains and losses of our investments, net of tax, and our share of other comprehensive income of Affiliates Insurance Company, or AIC. |
Income Taxes
Income Taxes | 3 Months Ended |
Mar. 31, 2016 | |
Income Taxes | |
Income Taxes | Note 5. Income Taxes For the three months ended March 31, 2016, we recognized income tax expense from our continuing operations of $289 . We did not recognize any income tax expense or benefit from our discontinued operations for that period. As of December 31, 2015, our federal net operating loss carry forwards, which are scheduled to begin expiring in 2026 if unused, were approximately $125,533 , and our tax credit carry forwards, which begin expiring in 2022 if unused, were approximately $19,426 . We have an additional $427 of federal net operating loss carry forwards not included in the $125,533 , that are attributable to unvested stock grants which will be recorded as an increase to additional paid in capital once they are realized in accordance with FASB ASC Topic 718, Compensation – Stock Compensation . Our net operating loss carry forwards and tax credit carry forwards are subject to possible audit and adjustment by the Internal Revenue Service. During the year ended December 31, 2014, we determined it was more likely than not that our net deferred tax assets would not be realized and concluded that a full valuation allowance was required, which eliminated the amount of our net deferred tax assets recorded in our consolidated balance sheets . In the future, if we believe that we will more likely than not realize the benefit of these deferred tax assets, we will adjust our valuation allowance and recognize an income tax benefit, which may affect our results of operations. |
Earnings Per Share
Earnings Per Share | 3 Months Ended |
Mar. 31, 2016 | |
Earnings Per Share | |
Earnings Per Share | Note 6. Earnings Per Share We calculated basic earnings per common share, or EPS, for the three months ended March 31, 2016 and 2015 using the weighted average number of shares of our common stock, $.01 par value per share, or our common shares, outstanding during the periods. Diluted EPS reflects the more dilutive earnings per common share amount calculated using the two class method or the treasury stock method. The three months ended March 31, 2016 and 2015 had 942,243 and 703,865 , respecti vely, potentially dilutive restricted unvested common shares that were not included in the calculation of diluted EPS because to do so would have been antidilutive. The following table provides a reconciliation of loss from continuing operations and loss from discontinued operations and the number of common shares used in the calculations of diluted EPS: Three Months Ended March 31, 2016 2015 Income Per Income Per (loss) Shares Share (loss) Shares Share Loss from continuing operations $ $ $ $ Dilutive effect of unvested restricted shares — — — — Diluted loss from continuing operations $ $ $ $ Diluted loss from discontinued operations $ $ $ $ |
Fair Values of Assets and Liabi
Fair Values of Assets and Liabilities | 3 Months Ended |
Mar. 31, 2016 | |
Fair Values of Assets and Liabilities | |
Fair Values of Assets and Liabilities | Note 7. Fair Values of Assets and Liabilities Our assets recorded at fair value have been categorized based upon a fair value hierarchy in accordance with FASB ASC Topic 820, Fair Value Measurements and Disclosures . We apply the following fair value hierarchy, which prioritizes the inputs used to measure fair value into three levels. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that we have the ability to access at the measurement date. Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets and liabilities in active markets and quoted prices in inactive markets. Level 3 inputs are unobservable inputs for the asset or liability in which there is little, if any, market activity for the asset or liability at the measurement date. Recurring Fair Value Measures The tables below present the assets measured at fair value at March 31, 2016 and December 31, 2015 categorized by the level of inputs used in the valuation of each asset. As of March 31, 2016 Quoted Prices in Active Markets Significant Other Significant for Identical Observable Unobservable Assets Inputs Inputs Description Total (Level 1) (Level 2) (Level 3) Cash equivalents (1) $ $ $ — $ — Available for sale securities: (2) Equity securities Financial services industry — — REIT industry — — Other — — Total equity securities — — Debt securities International bond fund (3) — — High yield fund (4) — — Industrial bonds — — Government bonds — Financial bonds — — Other — — Total debt securities — Total available for sale securities — Total $ $ $ $ — As of December 31, 2015 Quoted Prices in Active Markets Significant Other Significant for Identical Observable Unobservable Assets Inputs Inputs Description Total (Level 1) (Level 2) (Level 3) Cash equivalents (1) $ $ $ — $ — Available for sale securities: (2) Equity securities Financial services industry — — REIT industry — — Other — — Total equity securities — — Debt securities International bond fund (3) — — High yield fund (4) — — Industrial bonds — — Government bonds — Financial bonds — — Other — — Total debt securities — Total available for sale securities — Total $ $ $ $ — (1) Cash equivalents consist of short term, highly liquid investments and money market funds held principally for obligations arising from our self insurance programs. Cash equivalents are reported on our balance sheet as cash and cash equivalents and current and long term restricted cash. Cash equivalents include $3,467 and $4,027 of balances that are restricted at March 31, 2016 and December 31, 2015, respectively. (2) As of March 31, 2016, our investments in available for sale securities had a fair value of $49,280 with an amortized cost of $46,703 , resulting from unrealized gains of $2,915 , net of unrealized losses of $338 . As of December 31, 2015, our investments in our available for sale securities had a fair value of $49,583 with an amortized cost of $48,040 , resulting from unrealized gains of $2,113 , net of unrealized losses of $570 . At March 31, 2016, 13 of the securities we hold, with a fair value of $2,574 , have been in a loss position for less than 12 months and nine of the securities we hold, with a fair value of $1,351 , have been in a loss position for greater than 12 months. We do not believe these securities are impaired primarily because they have not been in a loss position for an extended period of time, the financial conditions of the issuers of these securities remain strong with solid fundamentals, we intend to hold these securities until recovery, and other factors that support our conclusion that the loss is temporary. During the three months ended March 31, 2016 and 2015, we received gross proceeds of $4,114 and $2,736 , respectively, in connection with the sales of available for sale securities and recorded gross realized gains totaling $24 and $20 , respectively, and gross realized losses totaling $133 and $0 , respectively. We record gains and losses on the sales of our available for sale securities using the specific identification method. (3) The investment strategy of this fund is to invest principally in fixed income securities issued by non-U.S. issuers. The fund invests in such securities or investment vehicles as it considers appropriate to achieve the fund’s investment objective, which is to provide an above average rate of total return while attempting to limit investment risk by investing in a diversified portfolio of U.S. dollar investment grade fixed income securities. There are no unfunded commitments and the investment can be redeemed weekly. (4) The investment strategy of this fund is to invest principally in fixed income securities. The fund invests in such securities or investment vehicles as it considers appropriate to achieve the fund’s investment objective, which is to provide an above average rate of total return while attempting to limit investment risk by investing in a diversified portfolio of primarily fixed income securities issued by companies with below investment grade ratings. There are no unfunded commitments and the investment can be redeemed weekly. During the three months ended March 31, 2016, we did not change the type of inputs used to determine the fair value of any of our assets and liabilities that we measure at fair value. Accordingly, there were no transfers of assets or liabilities between levels of the fair value hierarchy during the three months ended March 31, 2016. The carrying values of accounts receivable and accounts payable approximate fair value as of March 31, 2016 and December 31, 2015. The carrying value and fair value of our mortgage notes payable were $61,760 and $66,156 , respectively, as of March 31, 2016 and $62,203 and $65,999 , respectively, as of December 31, 2015, and are categorized in Level 3 of the fair value hierarchy in their entirety. We estimate the fair values of our mortgage notes payable by using discounted cash flow analyses and currently prevailing market terms as of the measurement date. Non-Recurring Fair Value Measures We review the carrying value of long lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of an asset or asset group may not be recoverable. Please see Note 3 for more information regarding fair value measurements related to impairments of our long lived assets in continuing operations. The fair value of assets held for sale is determined based on the use of appraisals, input from market participants, our experience selling similar assets and/or internally developed cash flow models, all of which are considered to be Level 3 fair value measurements. Please see Note 11 for more information regarding fair value measurements related to impairments of our assets held for sale. |
Indebtedness
Indebtedness | 3 Months Ended |
Mar. 31, 2016 | |
Indebtedness | |
Indebtedness | Note 8. Indebtedness We have a $150,000 secured revolving credit facility, or our Credit Facility, that is available for general business purposes, including acquisitions. In April 2016, we extended the maturity date of our Credit Facility to April 13, 2017, and we paid a fee of $300 in connection with this extension. We are required to pay interest at an annual rate of LIBOR plus a premium of 250 basis points, or 2.94% as of March 31, 2016, on borrowings under our Credit Facility. We are also required to pay a quarterly fee of 0.35% per annum on the unused part of our Credit Facility. We may draw, repay and redraw funds until maturity, and no principal repayment is due until maturity. The weighted average annual interest rate for borrowings under our Credit Facility was 3.54% and 2.74% for the three months ended March 31, 2016 and 2015, respectively. As of March 31, 2016, we had $60,000 outstanding and an additional $89,370 available to borrow under our Credit Facility. We incurred interest expense and other associated costs related to our Credit Facility of $637 and $609 for the three months ended March 31, 2016 and 2015, respectively. We are the borrower under our Credit Facility, and certain of our subsidiaries guarantee our obligations under our Credit Facility, which is secured by real estate mortgages on 15 senior living communities with 1,549 living units owned by our guarantor subsidiaries and our guarantor subsidiaries’ accounts receivable and related collateral. The amount of available borrowings under our Credit Facility is subject to our having qualified collateral, which is primarily based on the value of the properties securing our obligations under our Credit Facility. Accordingly, the availability of borrowings under our Credit Facility at any time may be less than $150,000 . Our Credit Facility provides for acceleration of payment of all amounts outstanding upon the occurrence and continuation of certain events of default, such as a change of control of us. Our Credit Facility contains a number of financial and other covenants, including covenants that restrict our ability to incur indebtedness or to pay dividends or make other distributions under certain circumstances and require us to maintain financial ratios and a minimum net worth. We previously had a $25,000 secured revolving line of credit that matured on March 18, 2016, which we determined not to extend or replace. We made no borrowings under this facility during either the three months ended March 31, 2016 or 2015, and there were no amounts outstanding under this facility on March 18, 2016, the maturity date. We incurred associated costs related to this facility of $45 and $48 for the three months ended March 31, 2016 and 2015, respectively. At March 31, 2016, five of our senior living communities were encumbered by mortgages with a carrying value of $61,760 : (1) two of our communities were encumbered by Federal National Mortgage Association, or FNMA, mortgages; (2) two of our communities were encumbered by Federal Home Loan Mortgage Corporation, or FMCC, mortgages; and (3) one of our communities was encumbered by a mortgage from a commercial lender. These mortgages contain standard mortgage covenants. We recorded a mortgage premium in connection with our assumption of certain of these mortgages as part of our acquisitions of the encumbered communities in order to record the assumed mortgages at their estimated fair value. We are amortizing the mortgage premiums as a reduction of interest expense until the maturity of the respective mortgages. The weighted average annual interest rate on these five mortgages was 6.27% as of March 31, 2016. Payments of principal and interest are due monthly under these mortgages until the maturities at varying dates ranging from June 2018 to September 2032. We incurred mortgage interest expense, including premium amortization, of $817 and $697 for the three months ended March 31, 2016 and 2015, respectively. Our mortgage debts require monthly payments into escrows for taxes, insurance and property replacement funds; withdrawals from escrows for our FNMA and FMCC mortgages require applicable FNMA and FMCC approval. As of March 31, 2016, we believe we were in compliance with all applicable covenants under our Credit Facility and mortgage debts. |
Off Balance Sheet Arrangements
Off Balance Sheet Arrangements | 3 Months Ended |
Mar. 31, 2016 | |
Off Balance Sheet Arrangements | |
Off Balance Sheet Arrangements | Note 9. Off Balance Sheet Arrangements We have pledged our accounts receivable and certain other assets, with a carrying value, as of March 31, 2016, of $14,860 , arising from our operation of 26 communities owned by SNH and leased to us to secure SNH’s borrowings from its lender, FNMA. As of March 31, 2016, we had no other off balance sheet arrangements that have had or that we expect would be reasonably likely to have a material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources. |
Related Person Transactions
Related Person Transactions | 3 Months Ended |
Mar. 31, 2016 | |
Related Person Transactions | |
Related Person Transactions | Note 10. Related Person Transactions We have relationships and historical and continuing transactions with SNH, The RMR Group LLC, or RMR LLC, and others related to them, including other companies to which RMR LLC provides management services and which have trustees, directors and officers who are also our directors or officers. For further information about these and other such relationships and certain other related person transactions, please refer to our Annual Report . SNH: We were a 100% owned subsidiary of SNH until SNH distributed our common shares to its shareholders in 2001. As of March 31, 2016, SNH owned 4,235,000 of our common shares, representing approximately 8.6% of our outstanding common shares. SNH is our largest stockholder. We are SNH’s largest tenant and we manage certain senior living communities owned by SNH. As of March 31, 2016, we leased 177 senior living communities from SNH. Our total annual rent payable to SNH as of March 31, 2016 and 2015 was $192,758 and $191,007 , respectively, excluding percentage rent. Our total rent expense (which includes rent for all communities we lease from SNH, including communities that we have classified as discontinued operations) under all of our leases with SNH, net of lease inducement amortization, was $49,374 and $48,941 for the three months ended March 31, 2016 and 2015, respectively, which amounts included estimated percentage rent of $1,468 and $1,430 for the three months ended March 31, 2016 and 2015, respectively. As of March 31, 2016 and December 31, 2015, we had outstanding rent due and payable to SNH of $17,488 and $17,497 , respectively. During the three months ended March 31, 2016 and 2015, pursuant to the terms of our leases with SNH, we sold to SNH $5,755 and $4,060 , respectively, of improvements to communities leased from SNH, and, as a result, our annual rent payable by us to SNH increased by approximately $462 and $328 , respectively. As of March 31, 2016, our property and equipment included $8,038 for similar improvements to communities leased from SNH that we expected to request SNH to purchase from us for an increase in future rent; however, SNH is not obligated to purchase these improvements. As of March 31, 2016 and 2015, we managed 60 and 46 senior living communities for the account of SNH, respectively. We earned management fees from SNH of $2,804 and $2,523 for the three months ended March 31, 2016 and 2015, respectively. In April 2016, we began managing two senior living communities for the account of SNH. One of those senior living communities is located in North Carolina and has 87 living units. The other senior living community is located in Georgia and has 38 living units. We are managing these two communities pursuant to separate management agreements on terms substantially consistent with our other management agreements with SNH for senior living communities that include assisted living units. We expect to enter into a management agreement with SNH in the second quarter of 2016 to manage a senior living community SNH owns located in Alabama with 163 living units. We expect the management agreement will contain terms substantially consistent with our other management agreements with SNH for senior living communities that include assisted living units. We expect that we may amend certain provisions of our management and pooling agreements with SNH as circumstances affecting the managed communities change and that we may enter into additional management arrangements with SNH for senior living communities that SNH may acquire in the future. D&R Yonkers LLC : In order to accommodate certain requirements of New York healthcare licensing laws, a part of one of the senior living communities owned by SNH that we manage is subleased by a subsidiary of SNH to D&R Yonkers LLC, and D&R Yonkers LLC is owned by SNH’s president and chief operating officer and our Treasurer and Chief Financial Officer. Pursuant to our management agreement with D&R Yonkers LLC, we earned management fees of $64 and $54 for the three months ended March 31, 2016 and 2015, respectively . RMR LLC: Pursuant to our business management agreement with RMR LLC, we recognized business management fees of $2,226 and $2,127 , for the three months ended March 31, 2016 and 2015, respectively; these amounts are included in general and administrative expenses in our condensed consolidated statements of operations. We have historically awarded share grants to certain RMR LLC employees under our equity compensation plans. In addition, under our business management agreement we reimburse RMR LLC for our allocable costs for internal audit services. The amounts recognized as expense for share grants to RMR LLC employees and internal audit costs were $100 and $160 for the three months ended March 31, 2016 and 2015, respectively; these amounts are included in general and administrative expenses in our condensed consolidated statements of operations. We lease our headquarters from ABP Trust, which is owned in part by one of our Managing Directors. Our rent expense for our headquarters was $527 and $411 for the three months ended March 31, 2016 and 2015, respectively. AIC : We a nd six other companies to which RMR LLC provides management services each own in equal amounts AIC. We and the other AIC shareholders participate in a combined property insurance program arranged and reinsured in part by AIC. As of March 31, 2016, our investment in AIC had a carrying value of $6,956 ; this amount is presented as an equity investment on our condensed consolidated balance sheets. We recognized income of $77 and $72 related to our investment in AIC for the three months ended March 31, 2016 and 2015, respectively. Our other comprehensive income includes our proportional part of unrealized gains on securities held for sale which are owned by AIC of $52 and $45 for the three months ended March 31, 2016 and 2015, respectively. |
Discontinued Operations
Discontinued Operations | 3 Months Ended |
Mar. 31, 2016 | |
Discontinued Operations. | |
Discontinued Operations | Note 11. Discontinued Operations In June 2013, we decided to offer for sale an assisted living community we own with 32 living units located in Alabama. We are continuing to market this community for sale. We recorded long lived asset impairment charges of $325 for the first quarter of 2016 to reduce the carrying value of this community to its estimated fair value, less costs to sell. We can provide no assurance that we will be able to sell this senior living community, or what the terms or timing of any sale of this community may be. As of March 31, 2016, this is the only senior living community remaining in discontinued operations. Below is a summary of the operating results of our discontinued operations included in the condensed consolidated financial statements for the three months ended March 31, 2016 and 2015: Three Months Ended March 31, 2016 2015 Revenues $ $ Expenses Impairment on discontinued assets — Loss from discontinued operations $ $ |
Legal Proceedings and Claims
Legal Proceedings and Claims | 3 Months Ended |
Mar. 31, 2016 | |
Legal Proceedings and Claims | |
Legal Proceedings and Claims | Note 12. Legal Proceedings and Claims We have been, are currently, and expect in the future to be involved in claims, lawsuits, and regulatory and other governmental audits, investigations and proceedings arising in the ordinary course of our business, some of which may involve material amounts. Also, the defense and resolution of these claims, lawsuits, and regulatory and other governmental audits, investigations and proceedings may require us to incur significant expense. We account for claims and litigation losses in accordance with FASB ASC Topic 450, Contingencies , or ASC 450. Under ASC 450, loss contingency provisions are recorded for probable and estimable losses at our best estimate of a loss or, when a best estimate cannot be made, at our estimate of the minimum loss. These estimates are often developed prior to knowing the amount of the ultimate loss, require the application of considerable judgment, and are refined as additional information becomes known. Accordingly, we are often initially unable to develop a best estimate of loss and therefore the estimated minimum loss amount, which could be zero , is recorded; and then, as information becomes known, the minimum loss amount is updated, as appropriate. A minimum or best estimate amount may be increased or decreased when events result in a changed expectation. As previously disclosed, as a result of our compliance program to review medical records related to our Medicare billing practices, during 2014 we discovered potentially inadequate documentation and other issues at one of our leased SNFs. This compliance review was not initiated in response to any specific complaint or allegation, but was a review of the type that we periodically undertake to test our own compliance with applicable Medicare billing rules. As a result of these discoveries, in February 2015, we made a voluntary disclosure of deficiencies to the United States Department of Health and Human Services Office of the Inspector General, or the OIG, pursuant to the OIG’s Provider Self-Disclosure Protocol. We completed our investigation and assessment of these matters and submitted a final supplemental disclosure to the OIG in May 2015. In 2014 and 2015, we had accrued a revenue reserve of $6,733 for historical Medicare payments we received and expect to repay as a result of these deficiencies; $2,400 of this reserve was recorded for the quarter ended March 31, 2015. The entire reserve amount remained accrued and unpaid at March 31, 2016. In addition, in 2014 and 2015, we also had accrued expenses for additional costs we incurred, including estimated OIG imposed penalties, as a result of this matter, totaling $8,362 , of which $3,529 remained accrued and unpaid at March 31, 2016; for the quarter ended March 31, 2015, we accrued $2,316 for these expenses. We were defendants in a lawsuit filed in the Superior Court of Maricopa County, Arizona by the estate of a former resident of a senior living community operated by us. The complaint asserted claims against us for pain and suffering as a result of improper treatment constituting violations of the Arizona Adult Protective Services Act and wrongful death. In May 2015, the jury rendered a decision in our favor on the wrongful death claim, and against us on the remaining claims, returning verdicts awarding damages of approximately $19,200 , which consisted of $2,500 for pain and suffering and the remainder in punitive damages. In March 2016, pursuant to a settlement agreement we entered into with the plaintiff, $7,250 was paid to the plaintiff, of which $3,021 was paid by our liability insurer and the balance by us. We believe our liability insurer may be financially responsible for more than $3,021 and we are seeking additional payments from our liability insurer; however, we cannot predict the outcome of our on-going negotiations or potential future litigation with our liability insurer. As a result, we recorded a $4,229 charge for the year ended December 31, 2015, which was included in other senior living operating expenses in our consolidated statements of operations. |
Summary of Significant Accounti
Summary of Significant Accounting Policies (Policies) | 3 Months Ended |
Mar. 31, 2016 | |
Summary of Significant Accounting Policies | |
Recent Accounting Pronouncements | In December 2015, we early adopted FASB Accounting Standards Update, or ASU, No. 2015-17, Balance Sheet Classification of Deferred Taxes , which requires that deferred tax assets and liabilities be classified as noncurrent in a consolidated balance sheet rather than the current presentation of separating deferred tax assets and liabilities into current and noncurrent amounts. We adopted this ASU using prospective application. Since we have recognized a full deferred tax valuation allowance since 2014 and our deferred tax assets and liabilities net to zero, the implementation of this ASU did not have a material impact on our consolidated financial statements. On January 1, 2016, we adopted FASB ASU No. 2015-03, Simplifying the Presentation of Debt Issuance Costs , which requires debt issuance costs to be presented in the balance sheet as a direct deduction from the associated debt liability, and ASU No. 2015-15, Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements – Amendments to SEC Paragraphs Pursuant to Staff Announcement at June 18, 2015 EITF Meeting , which addresses the presentation of debt issuance costs related to line of credit arrangements. The implementation of ASU No. 2015-03 did not have a material impact on our condensed consolidated financial statements. The adoption of ASU No. 2015-15 did not result in any changes in the classification of capitalized debt issuance costs related to our $150,000 secured revolving credit facility. On January 1, 2016, we adopted FASB ASU No. 2015-16, Simplifying the Accounting for Measurement-Period Adjustments , which eliminates the requirement for an acquirer in a business combination to account for measurement-period adjustments retrospectively. Instead, acquirers must recognize measurement-period adjustments during the period in which they determine the amounts, including the effect on earnings of any amounts that would have been recorded in previous periods if the accounting had been completed at the acquisition date. The implementation of this ASU did not have a material impact on our condensed consolidated financial statements. In January 2016, the FASB issued ASU No. 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities, which changes how entities measure certain equity investments and present changes in the fair value of financial liabilities measured under the fair value option that are attributable to their own credit. This ASU is effective for interim and annual periods beginning after December 15, 2017, with early adoption permitted subject to certain conditions. Currently, changes in fair value of these investments are recorded through other comprehensive income. Under this ASU, these changes will be recorded through earnings. We are continuing to evaluate this ASU, but we expect the implementation of this ASU will affect available for sale equity investments that we hold. In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) , which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e., lessees and lessors). ASU No. 2016-02 requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase of the leased asset by the lessee. This classification will determine whether the lease expense is recognized based on an effective interest method or on a straight line basis over the term of the lease. A lessee is also required to record a right of use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases today. The new standard requires lessors to account for leases using an approach that is substantially equivalent to existing guidance for sales type leases, direct financing leases and operating leases. ASU No. 2016-02 is effective for reporting periods beginning after December 15, 2018, with early adoption permitted. We are currently assessing the potential impact the adoption of ASU No. 2016-02 will have on our condensed consolidated financial statements. In March 2016, the FASB issued ASU No. 2016-09, Compensation - Stock Compensation (Topic 718) , which identifies areas for simplification involving several aspects of accounting for share based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, an option to recognize gross stock compensation expense with actual forfeitures recognized as they occur, as well as certain classifications on the statement of cash flows. ASU No. 2016-09 is effective for reporting periods beginning after December 15, 2016. We are currently assessing the potential impact the adoption of ASU No. 2016-09 will have on our condensed consolidated financial statements. In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) , which outlines a comprehensive model for entities to use in accounting for revenue arising from contracts with customers. This ASU clarifies the principles for recognizing revenue by, among other things, removing inconsistencies in revenue requirements, improving comparability of revenue recognition practices across entities and industries and providing improved disclosure requirements. In July 2015, the FASB approved a one year deferral of the effective date for this ASU to interim and annual reporting periods beginning after December 15, 2017; however, early adoption at the original effective date is still permitted. In March 2016, the FASB issued ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net), which clarifies how an entity should identify the unit of accounting for the principal versus agent evaluation and how it should apply the control principle to certain types of arrangements, such as service transactions. We are currently evaluating the impact that the adoption of these ASUs will have on our condensed consolidated financial statements. |
Property and Equipment (Tables)
Property and Equipment (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Property and Equipment | |
Schedule of property and equipment | March 31, December 31, 2016 2015 Land $ $ Buildings and improvements Furniture, fixtures and equipment Property and equipment, at cost Accumulated depreciation Property and equipment, net $ $ |
Accumulated Other Comprehensi21
Accumulated Other Comprehensive Income (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Accumulated Other Comprehensive Income | |
Schedule of changes in accumulated other comprehensive income, net of tax | Equity Investment of an Investee Investments in Available for Sale Securities Accumulated Other Comprehensive Income Balance at January 1, 2016 $ $ $ Unrealized gain on investments, net of tax — Equity in unrealized gain of an investee — Reclassification adjustment: Realized loss on investments, net of tax — Balance at March 31, 2016 $ $ $ |
Earnings Per Share (Tables)
Earnings Per Share (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Earnings Per Share | |
Schedule of reconciliation of income (loss) from continuing and discontinued operations and the number of common shares used in the computations of diluted EPS | Three Months Ended March 31, 2016 2015 Income Per Income Per (loss) Shares Share (loss) Shares Share Loss from continuing operations $ $ $ $ Dilutive effect of unvested restricted shares — — — — Diluted loss from continuing operations $ $ $ $ Diluted loss from discontinued operations $ $ $ $ |
Fair Values of Assets and Lia23
Fair Values of Assets and Liabilities (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Fair Values of Assets and Liabilities | |
Schedule of assets and liabilities measured at fair value on a recurring and non recurring basis, categorized by the level of inputs used in the valuation of each asset | As of March 31, 2016 Quoted Prices in Active Markets Significant Other Significant for Identical Observable Unobservable Assets Inputs Inputs Description Total (Level 1) (Level 2) (Level 3) Cash equivalents (1) $ $ $ — $ — Available for sale securities: (2) Equity securities Financial services industry — — REIT industry — — Other — — Total equity securities — — Debt securities International bond fund (3) — — High yield fund (4) — — Industrial bonds — — Government bonds — Financial bonds — — Other — — Total debt securities — Total available for sale securities — Total $ $ $ $ — As of December 31, 2015 Quoted Prices in Active Markets Significant Other Significant for Identical Observable Unobservable Assets Inputs Inputs Description Total (Level 1) (Level 2) (Level 3) Cash equivalents (1) $ $ $ — $ — Available for sale securities: (2) Equity securities Financial services industry — — REIT industry — — Other — — Total equity securities — — Debt securities International bond fund (3) — — High yield fund (4) — — Industrial bonds — — Government bonds — Financial bonds — — Other — — Total debt securities — Total available for sale securities — Total $ $ $ $ — (1) Cash equivalents consist of short term, highly liquid investments and money market funds held principally for obligations arising from our self insurance programs. Cash equivalents are reported on our balance sheet as cash and cash equivalents and current and long term restricted cash. Cash equivalents include $3,467 and $4,027 of balances that are restricted at March 31, 2016 and December 31, 2015, respectively. (2) As of March 31, 2016, our investments in available for sale securities had a fair value of $49,280 with an amortized cost of $46,703 , resulting from unrealized gains of $2,915 , net of unrealized losses of $338 . As of December 31, 2015, our investments in our available for sale securities had a fair value of $49,583 with an amortized cost of $48,040 , resulting from unrealized gains of $2,113 , net of unrealized losses of $570 . At March 31, 2016, 13 of the securities we hold, with a fair value of $2,574 , have been in a loss position for less than 12 months and nine of the securities we hold, with a fair value of $1,351 , have been in a loss position for greater than 12 months. We do not believe these securities are impaired primarily because they have not been in a loss position for an extended period of time, the financial conditions of the issuers of these securities remain strong with solid fundamentals, we intend to hold these securities until recovery, and other factors that support our conclusion that the loss is temporary. During the three months ended March 31, 2016 and 2015, we received gross proceeds of $4,114 and $2,736 , respectively, in connection with the sales of available for sale securities and recorded gross realized gains totaling $24 and $20 , respectively, and gross realized losses totaling $133 and $0 , respectively. We record gains and losses on the sales of our available for sale securities using the specific identification method. (3) The investment strategy of this fund is to invest principally in fixed income securities issued by non-U.S. issuers. The fund invests in such securities or investment vehicles as it considers appropriate to achieve the fund’s investment objective, which is to provide an above average rate of total return while attempting to limit investment risk by investing in a diversified portfolio of U.S. dollar investment grade fixed income securities. There are no unfunded commitments and the investment can be redeemed weekly. (4) The investment strategy of this fund is to invest principally in fixed income securities. The fund invests in such securities or investment vehicles as it considers appropriate to achieve the fund’s investment objective, which is to provide an above average rate of total return while attempting to limit investment risk by investing in a diversified portfolio of primarily fixed income securities issued by companies with below investment grade ratings. There are no unfunded commitments and the investment can be redeemed weekly. |
Discontinued Operations (Tables
Discontinued Operations (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Discontinued Operations. | |
Summary of the operating results of discontinued operations included in the financial statements | Three Months Ended March 31, 2016 2015 Revenues $ $ Expenses Impairment on discontinued assets — Loss from discontinued operations $ $ |
Basis of Presentation and Org25
Basis of Presentation and Organization (Details) | 3 Months Ended |
Mar. 31, 2016itemstatesegmentproperty | |
Segment Information | |
Number of operating segments | segment | 2 |
Senior living communities | |
Real estate properties | |
Number of properties operated | property | 274 |
Number of states in which real estate properties are located | state | 32 |
Number of living units in properties operated | 31,051 |
Number of properties owned and operated | property | 33 |
Number of living units in properties owned and operated | 3,211 |
Number of properties leased and operated | property | 181 |
Number of units in properties leased and operated | 19,700 |
Number of properties managed | property | 60 |
Number of units in properties managed | 8,140 |
Number of units in real estate property classified as discontinued operations | 32 |
Independent and assisted living communities | |
Real estate properties | |
Number of properties operated | property | 243 |
Number of living units in properties operated | 28,450 |
SNF | |
Real estate properties | |
Number of properties operated | property | 31 |
Number of living units in properties operated | 2,601 |
Independent living apartment | |
Real estate properties | |
Number of living units in properties operated | 10,668 |
Assisted living suites | |
Real estate properties | |
Number of living units in properties operated | 15,439 |
Skilled nursing units | |
Real estate properties | |
Number of living units in properties operated | 4,944 |
Assisted living communities | |
Real estate properties | |
Number of real estate properties classified as discontinued operations | property | 1 |
Property and Equipment (Details
Property and Equipment (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2016 | Mar. 31, 2015 | Dec. 31, 2015 | |
Property and Equipment | |||
Property and equipment, gross | $ 538,422 | $ 529,429 | |
Accumulated depreciation | (154,479) | (145,571) | |
Property and equipment, net | 383,943 | 383,858 | |
Depreciation expense | 8,946 | $ 7,867 | |
Long-lived asset impairment | 306 | ||
SNH | |||
Property and Equipment | |||
Assets held for sale for increased rent pursuant to the terms of leases with SNH | 8,038 | ||
Level 3 | |||
Property and Equipment | |||
Long-lived asset impairment | 306 | ||
Land | |||
Property and Equipment | |||
Property and equipment, gross | 25,410 | 25,410 | |
Building and Improvements | |||
Property and Equipment | |||
Property and equipment, gross | 340,652 | 338,522 | |
Furniture, fixtures and equipment | |||
Property and Equipment | |||
Property and equipment, gross | $ 172,360 | $ 165,497 |
Accumulated Other Comprehensi27
Accumulated Other Comprehensive Income (Details) $ in Thousands | 3 Months Ended |
Mar. 31, 2016USD ($) | |
Changes in accumulated other comprehensive income | |
Balance at the beginning of the period | $ 2,915 |
Unrealized gain (loss) on investments, net of tax | 925 |
Equity interest in an investee's unrealized gain (loss) on investments | 52 |
Realized gain on investments, net of tax | 109 |
Balance at the end of the period | 4,001 |
Equity Investment in Affiliates Insurance Company | |
Changes in accumulated other comprehensive income | |
Balance at the beginning of the period | 30 |
Equity interest in an investee's unrealized gain (loss) on investments | 52 |
Balance at the end of the period | 82 |
Investments in Available for Sale Securities | |
Changes in accumulated other comprehensive income | |
Balance at the beginning of the period | 2,885 |
Unrealized gain (loss) on investments, net of tax | 925 |
Realized gain on investments, net of tax | 109 |
Balance at the end of the period | $ 3,919 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2016 | Mar. 31, 2015 | Dec. 31, 2015 | |
(Provision) benefit for income taxes | $ 289 | $ 304 | |
Tax credit carry forward, which begins to expire in 2022 if unused | $ 19,426 | ||
Federal | |||
Net operating loss carry forward, which begins to expire in 2026 if unused | 125,533 | ||
Net operating losses that are attributable to unvested stock grants | $ 427 |
Earnings Per Share (Details)
Earnings Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | ||
Mar. 31, 2016 | Mar. 31, 2015 | Dec. 31, 2015 | |
Earnings Per Share | |||
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 | $ 0.01 |
Income (loss) | |||
(Loss) income from continuing operations | $ (2,311) | $ (4,833) | |
Diluted (loss) income from continuing operations | (2,311) | (4,833) | |
Diluted income (loss) from discontinued operations | $ (312) | $ (469) | |
Shares | |||
(Loss) income from continuing operations (in shares) | 48,792,000 | 48,364,000 | |
Dilutive effect of unvested restricted shares (in shares) | 942,243 | 703,865 | |
Diluted (loss) income from continuing operations (in shares) | 48,792,000 | 48,364,000 | |
Diluted loss from discontinued operations (in shares) | 48,792,000 | 48,364,000 | |
Per Share | |||
(Loss) income from continuing operations (in dollars per share) | $ (0.05) | $ (0.10) | |
Diluted (loss) income from continuing operations (in dollars per share) | (0.05) | (0.10) | |
Diluted loss from discontinued operations (in dollars per share) | $ (0.01) | $ (0.01) |
Fair Values of Assets and Lia30
Fair Values of Assets and Liabilities - Recurring Measurements (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2016 | Mar. 31, 2015 | Dec. 31, 2015 | |
Fair Values of Assets and Liabilities | |||
Cash equivalents | $ 5,355 | $ 5,936 | |
Available for sale securities | 49,280 | 49,583 | |
Total | 54,635 | 55,519 | |
Restricted cash equivalents | 3,467 | 4,027 | |
Available for sale securities, current | 25,486 | 26,417 | |
Long term investments in available for sale securities | 23,794 | 23,166 | |
Amortized cost of available for sale securities | 46,703 | 48,040 | |
Unrealized gains on available for sale securities | 2,915 | 2,113 | |
Unrealized losses on available for sale securities | 338 | 570 | |
Fair value of securities which are in loss position for less than 12 months | 2,574 | ||
Fair value of securities which are in loss position for greater than 12 months | 1,351 | ||
Gross proceeds from sale of available for sale securities | 4,114 | $ 2,736 | |
Gross realized gains recorded on sale of available for sale securities | 24 | 20 | |
Gross realized losses recorded on sale of available for sale securities | 133 | $ 0 | |
Secured Long-term Debt, Noncurrent | 59,929 | 60,396 | |
Equity securities | |||
Fair Values of Assets and Liabilities | |||
Available for sale securities | 7,946 | 7,823 | |
Financial services industry | |||
Fair Values of Assets and Liabilities | |||
Available for sale securities | 3,850 | 3,746 | |
REIT industry | |||
Fair Values of Assets and Liabilities | |||
Available for sale securities | 297 | 270 | |
Other | |||
Fair Values of Assets and Liabilities | |||
Available for sale securities | 3,799 | 3,807 | |
Debt securities | |||
Fair Values of Assets and Liabilities | |||
Available for sale securities | 41,334 | 41,760 | |
International bond fund | |||
Fair Values of Assets and Liabilities | |||
Available for sale securities | 2,434 | 2,399 | |
High yield fund | |||
Fair Values of Assets and Liabilities | |||
Available for sale securities | 2,311 | 2,245 | |
Industrial bonds | |||
Fair Values of Assets and Liabilities | |||
Available for sale securities | 6,354 | 6,007 | |
Government bonds | |||
Fair Values of Assets and Liabilities | |||
Available for sale securities | 15,526 | 16,612 | |
Financial bonds | |||
Fair Values of Assets and Liabilities | |||
Available for sale securities | 3,206 | 3,157 | |
Other | |||
Fair Values of Assets and Liabilities | |||
Available for sale securities | 11,503 | 11,340 | |
Quoted Prices in Active Markets for Identical Assets (Level 1) | |||
Fair Values of Assets and Liabilities | |||
Cash equivalents | 5,355 | 5,936 | |
Available for sale securities | 15,729 | 16,484 | |
Total | 21,084 | 22,420 | |
Quoted Prices in Active Markets for Identical Assets (Level 1) | Equity securities | |||
Fair Values of Assets and Liabilities | |||
Available for sale securities | 7,946 | 7,823 | |
Quoted Prices in Active Markets for Identical Assets (Level 1) | Financial services industry | |||
Fair Values of Assets and Liabilities | |||
Available for sale securities | 3,850 | 3,746 | |
Quoted Prices in Active Markets for Identical Assets (Level 1) | REIT industry | |||
Fair Values of Assets and Liabilities | |||
Available for sale securities | 297 | 270 | |
Quoted Prices in Active Markets for Identical Assets (Level 1) | Other | |||
Fair Values of Assets and Liabilities | |||
Available for sale securities | 3,799 | 3,807 | |
Quoted Prices in Active Markets for Identical Assets (Level 1) | Debt securities | |||
Fair Values of Assets and Liabilities | |||
Available for sale securities | 7,783 | 8,661 | |
Quoted Prices in Active Markets for Identical Assets (Level 1) | Government bonds | |||
Fair Values of Assets and Liabilities | |||
Available for sale securities | 7,783 | 8,661 | |
Significant Other Observable Inputs (Level 2) | |||
Fair Values of Assets and Liabilities | |||
Available for sale securities | 33,551 | 33,099 | |
Total | 33,551 | 33,099 | |
Significant Other Observable Inputs (Level 2) | Debt securities | |||
Fair Values of Assets and Liabilities | |||
Available for sale securities | 33,551 | 33,099 | |
Significant Other Observable Inputs (Level 2) | International bond fund | |||
Fair Values of Assets and Liabilities | |||
Available for sale securities | 2,434 | 2,399 | |
Significant Other Observable Inputs (Level 2) | High yield fund | |||
Fair Values of Assets and Liabilities | |||
Available for sale securities | 2,311 | 2,245 | |
Significant Other Observable Inputs (Level 2) | Industrial bonds | |||
Fair Values of Assets and Liabilities | |||
Available for sale securities | 6,354 | 6,007 | |
Significant Other Observable Inputs (Level 2) | Government bonds | |||
Fair Values of Assets and Liabilities | |||
Available for sale securities | 7,743 | 7,951 | |
Significant Other Observable Inputs (Level 2) | Financial bonds | |||
Fair Values of Assets and Liabilities | |||
Available for sale securities | 3,206 | 3,157 | |
Significant Other Observable Inputs (Level 2) | Other | |||
Fair Values of Assets and Liabilities | |||
Available for sale securities | $ 11,503 | $ 11,340 |
Fair Values of Assets and Lia31
Fair Values of Assets and Liabilities - Non-recurring Measurements (Details) - USD ($) $ in Thousands | Mar. 31, 2016 | Dec. 31, 2015 |
Carrying value and fair value | ||
Transfers of assets between Level 2 to Level 1 | $ 0 | |
Mortgage notes payable | 59,929 | $ 60,396 |
Level 3 | ||
Carrying value and fair value | ||
Mortgage notes payable | 66,156 | 65,999 |
Carrying value | ||
Carrying value and fair value | ||
Mortgage notes payable | $ 61,760 | $ 62,203 |
Indebtedness - Debt Instruments
Indebtedness - Debt Instruments Summary (Details) $ in Thousands | 1 Months Ended | 3 Months Ended | |||
Apr. 30, 2016USD ($) | Mar. 31, 2016USD ($)agreementitemproperty | Mar. 31, 2015USD ($) | Mar. 18, 2016USD ($) | Dec. 31, 2015USD ($) | |
Indebtedness | |||||
Mortgage notes payable outstanding principal balance | $ 59,929 | $ 60,396 | |||
Extension Fee | $ 300 | ||||
Amount borrowed during the period | $ 15,000 | ||||
Commercial Lender | |||||
Indebtedness | |||||
Number of real estate properties mortgaged | agreement | 1 | ||||
Senior living communities | |||||
Indebtedness | |||||
Number of properties operated | property | 274 | ||||
Credit Agreement | |||||
Indebtedness | |||||
Maximum borrowing capacity | $ 25,000 | ||||
Amount borrowed during the period | $ 0 | $ 0 | |||
Amount outstanding under credit facility | $ 0 | ||||
Interest expense and other associated costs incurred | 45 | $ 48 | |||
Credit Facility | |||||
Indebtedness | |||||
Maximum borrowing capacity | $ 150,000 | ||||
Basis spread (as a percent) | 2.50% | ||||
Interest rate at period end (as a percent) | 2.94% | ||||
Quarterly commitment fee on the unused part of borrowing availability (as a percent) | 0.35% | ||||
Amount outstanding under credit facility | $ 60,000 | ||||
Weighted average interest rate (as a percent) | 3.54% | 2.74% | |||
Interest expense and other associated costs incurred | $ 637 | $ 609 | |||
Remaining borrowing capacity under line of credit | $ 89,370 | ||||
Credit Facility | Senior living communities | |||||
Indebtedness | |||||
Number of real estate properties securing borrowings on the new credit facility | property | 15 | ||||
Number of units in real estate properties securing borrowings on the new credit facility | item | 1,549 | ||||
Credit Facility | LIBOR | |||||
Indebtedness | |||||
Variable rate basis | LIBOR | ||||
Mortgage notes | |||||
Indebtedness | |||||
Number of real estate properties mortgaged | agreement | 5 | ||||
Weighted average interest rate (as a percent) | 6.27% | ||||
Interest expense and other associated costs incurred | $ 817 | $ 697 | |||
Mortgage notes | FNMA | |||||
Indebtedness | |||||
Number of real estate properties mortgaged | property | 2 | ||||
Mortgage notes | FMCC | |||||
Indebtedness | |||||
Number of real estate properties mortgaged | property | 2 | ||||
Mortgage notes | Senior living communities | |||||
Indebtedness | |||||
Mortgage notes payable outstanding principal balance | $ 61,760 | ||||
Number of real estate properties mortgaged | property | 5 |
Off Balance Sheet Arrangements
Off Balance Sheet Arrangements (Details) $ in Thousands | 3 Months Ended |
Mar. 31, 2016USD ($)property | |
Off Balance Sheet Arrangements | |
Carrying value of accounts receivable and other assets pledged | $ 14,860 |
Number of properties leased from SNH on which pledge arises | property | 26 |
Off balance sheet arrangements, liability | $ 0 |
Related Person Transactions - S
Related Person Transactions - SNH (Details) $ in Thousands | 1 Months Ended | 3 Months Ended | ||
Apr. 30, 2016itemcommunity | Mar. 31, 2016USD ($)itempropertyshares | Mar. 31, 2015USD ($)property | Dec. 31, 2015USD ($) | |
Related person transactions | ||||
Number of communities managed | item | 2 | |||
Management fee revenue | $ 2,804 | $ 2,523 | ||
D&R Yonkers LLC | ||||
Related person transactions | ||||
Management fee revenue | $ 64 | 54 | ||
Senior living communities | ||||
Related person transactions | ||||
Number of real estate properties leased | property | 181 | |||
Number of properties managed | property | 60 | |||
SNH | ||||
Related person transactions | ||||
Ownership percentage by former parent | 100.00% | |||
Number of shares owned | shares | 4,235,000 | |||
Percentage of outstanding common shares owned | 8.60% | |||
Assets held for sale for increased rent pursuant to the terms of leases with SNH | $ 8,038 | |||
SNH | Senior living communities | ||||
Related person transactions | ||||
Number of real estate properties leased | property | 177 | |||
Total minimum annual rent payable | $ 192,758 | 191,007 | ||
Rent expense under leases, net of lease inducement amortization | 49,374 | 48,941 | ||
Outstanding rent due and payable | 17,488 | $ 17,497 | ||
Real estate improvements sold | 5,755 | 4,060 | ||
Increase (decrease) in annual lease rent payable | 462 | $ 328 | ||
Assets held for sale for increased rent pursuant to the terms of leases with SNH | $ 8,038 | |||
Number of communities managed | 2 | 60 | 46 | |
Management fee revenue | $ 2,804 | $ 2,523 | ||
Rent expense under leases, estimated percentage rent | $ 1,468 | $ 1,430 | ||
SNH | Senior living communities | Georgia | ||||
Related person transactions | ||||
Number of properties managed | item | 38 | |||
SNH | Senior living communities | NORTH CAROLINA | ||||
Related person transactions | ||||
Number of communities | community | 1 | |||
Number of properties managed | item | 87 | |||
SNH | Senior living communities | Alabama senior living community | ||||
Related person transactions | ||||
Number of properties managed | item | 163 |
Related Person Transactions - R
Related Person Transactions - REITs, for which RMR LLC provides Management Services (Details) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2016USD ($)company | Mar. 31, 2015USD ($) | Dec. 31, 2015USD ($) | |
Related person transactions | |||
Utilities and real estate taxes | $ 50,095 | $ 49,628 | |
Equity investment of an investee | 6,956 | $ 6,827 | |
Income (loss) arising from investment | 77 | 72 | |
Other comprehensive income (loss) | 52 | 45 | |
RMR LLC | |||
Related person transactions | |||
Business management fees | 2,226 | 2,127 | |
Rent expense under leases | 527 | 411 | |
Aggregate amounts accrued for share grants and internal audit costs | 100 | 160 | |
AIC | |||
Related person transactions | |||
Equity investment of an investee | 6,956 | ||
Income (loss) arising from investment | 77 | 72 | |
Other comprehensive income (loss) | $ 52 | $ 45 | |
Number of entities to whom RMR provides management services | company | 6 |
Discontinued Operations (Detail
Discontinued Operations (Details) $ in Thousands | 3 Months Ended | |
Mar. 31, 2016USD ($)item | Mar. 31, 2015USD ($) | |
Summary of the operating results of discontinued operations | ||
Revenues | $ 205 | $ 2,604 |
Expenses | (192) | (3,073) |
Impairment on discontinued assets | (325) | |
(Loss) income from discontinued operations | $ (312) | $ (469) |
Assisted living communities | Discontinued operations, held-for-sale | ||
Discontinued Operations | ||
Number of living units in property to be sold | item | 32 |
Legal Proceedings and Claims (D
Legal Proceedings and Claims (Details) - USD ($) $ in Thousands | 1 Months Ended | 3 Months Ended | ||
May. 31, 2015 | Mar. 31, 2016 | Mar. 31, 2015 | Dec. 31, 2015 | |
Legal Proceedings and Claims | ||||
Estimated minimum loss | $ 0 | |||
Revenue reserve for payment of historical Medicare obligations | 6,733 | $ 2,400 | ||
OIG imposed penalties | 8,362 | $ 2,316 | ||
Accrued costs and penalties expected to incur related to the compliance assessment not yet paid | 3,529 | |||
Damages awarded | $ 19,200 | |||
Damages awarded for pain and suffering | $ 2,500 | |||
Settlement amount | 7,250 | |||
Insurance reimbursement | $ 3,021 | |||
Accrued litigation costs | $ 4,229 |