Five Star Quality Care, Inc. Reports Third Quarter 2012 Results

  Five Star Quality Care, Inc. Reports Third Quarter 2012 Results

Business Wire

NEWTON, Mass. -- 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.
  *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.

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.
  *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.

FIVE STAR QUALITY CARE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except share data)
(unaudited)
                                                            
                       Three months ended            Nine months ended

                       September 30,                 September 30,
                       2012         2011           2012         2011      
Revenues:
Senior living          $ 277,568     $ 275,605       $ 831,864     $ 803,647
revenue
Rehabilitation           26,328        26,273          79,501        78,235
hospital revenue
Management fee           1,277         359             3,666         383
revenue
Reimbursed costs
incurred on behalf      27,247      8,324         76,750      8,887   
of managed
communities
Total revenues          332,420     310,561       991,781     891,152 
                                                                     
Operating
expenses:
Senior living            137,816       136,135         412,808       398,975
wages and benefits
Other senior
living operating         66,858        68,669          200,062       193,123
expenses
Costs incurred on
behalf of managed        27,247        8,324           76,750        8,887
communities
Rehabilitation           23,734        23,300          71,725        70,798
hospital expenses
Rent expense             50,523        50,138          151,043       145,474
General and              14,602        14,418          45,445        42,242
administrative
Depreciation and        6,324       5,497         18,631      13,705  
amortization
Total operating         327,104     306,481       976,464     873,204 
expenses
                                                                     
Operating income         5,316         4,080           15,317        17,948
                                                                     
Interest and other       199           355             638           975
income
Interest and other       (1,762  )     (1,034  )       (4,793  )     (2,405  )
expense
Acquisition              (100    )     (226    )       (100    )     (1,530  )
related costs
Gain on settlement       -             -               3,365         -
Gain on early
extinguishment of        -             -               45            1
debt
Equity in earnings
of Affiliates            115           28              236           111
Insurance Company
Gain on sale of
available for sale
securities
reclassified from       63          529           62          656     
other
comprehensive
income
                                                                     
Income from
continuing               3,831         3,732           14,770        15,756
operations before
income taxes
Provision for           (426    )    (186    )      (4,835  )    (1,006  )
income taxes
Income from
continuing               3,405         3,546           9,935         14,750
operations
Income (loss) from
discontinued            13,034      (4,074  )      11,511      (5,950  )
operations
                                                                     
Net income (loss)      $ 16,439     $ (528    )     $ 21,446     $ 8,800   
                                                                     
                                                                     
Weighted average
shares outstanding      47,927      47,557        47,913      40,294  
- basic
                                                                     
Weighted average
shares outstanding      50,388      47,557        47,913      43,169  
- diluted
                                                                     
Basic income
(loss) per share
from:
Continuing             $ 0.07        $ 0.08          $ 0.21        $ 0.37
operations
Discontinued            0.27        (0.09   )      0.24        (0.15   )
operations
Net income (loss)      $ 0.34       $ (0.01   )     $ 0.45       $ 0.22    
per share - basic
                                                                     
Diluted income
(loss) per share
from:
Continuing             $ 0.07        $ 0.08          $ 0.21        $ 0.36
operations
Discontinued            0.26        (0.09   )      0.24        (0.14   )
operations
Net income (loss)
per share -            $ 0.33       $ (0.01   )     $ 0.45       $ 0.22    
diluted
                                                                             

FIVE STAR QUALITY CARE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS DATA
(in thousands)
(unaudited)
                                                             
                                                September 30,     December 31,

                                                2012              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                   14,942            9,114
securities
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             11,904            13,115
sale securities
Goodwill, equity investment and other long         76,986           85,833
term assets
Total assets                                    $   563,506       $   583,477
                                                                      
Liabilities and Shareholders' Equity
Current liabilities:
Bridge loan from Senior Housing Properties      $   -             $   38,000
Trust
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
                                                                      

FIVE STAR QUALITY CARE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
                                                           
                    Three months ended              Nine months ended
                    September 30,                   September 30,
                    2012           2011           2012         2011       
                                                                    
Cash flows from
operating
activities:
Net income          $  16,439       $ (528    )     $ 21,446      $ 8,800
(loss)
Adjustments to
reconcile net
income to cash
provided by
operating
activities:
Depreciation
and                    6,324          5,497           18,631        13,705
amortization
Gain on early
extinguishment         -              -               (45     )     (1       )
of debt
(Gain) loss
from                   (13,034  )     4,074           (11,511 )     5,950
discontinued
operations
Gain on sale of
available for          (63      )     (529    )       (62     )     (656     )
sale securities
Equity in
earnings of
Affiliates             (115     )     (28     )       (236    )     (111     )
Insurance
Company
Stock-based            159            87              649           949
compensation
Provision for
losses on              1,470          1,143           3,949         5,178
receivables
Changes in
assets and
liabilities:
Accounts               (520     )     1,441           (2,320  )     (2,118   )
receivable
Prepaid
expenses and           (1,240   )     (3,031  )       2,408         (2,735   )
other assets
Accounts
payable and            (2,198   )     7,665           906           7,028
accrued
expenses
Accrued
compensation           3,650          (2,643  )       9,143         6,096
and benefits
Due to related         (3,165   )     (1,111  )       (5,868  )     (1,535   )
persons
Other current
and long term         6,200        4,598         6,145       5,407    
liabilities
Cash provided
by operating          13,907       16,635        43,235      45,957   
activities
                                                                    
Net cash (used
in) provided by       (9,259   )    514           (8,317  )    652      
discontinued
operations
                                                                    
Cash flows from
investing
activities:
Acquisition of
property and           (11,933  )     (14,786 )       (40,251 )     (44,562  )
equipment
Acquisition of
senior living
communities,           -              (53,426 )       -             (107,165 )
net of working
capital assumed
Payments from
restricted cash        (2,346   )     (698    )       (6,236  )     (3,117   )
and investment
accounts, net
Purchase of
available for          (522     )     -               (5,076  )     -
sale securities
Proceeds from
sale of                34,298         -               34,298        -
pharmacy
Proceeds from
disposition of
property and           4,156          10,554          18,249        25,877
equipment held
for sale
Proceeds from
sale of               156          1,223         928         2,504    
available for
sale securities
Cash provided
by (used in)          23,809       (57,133 )      1,912       (126,463 )
investing
activities
                                                                    
Cash flows from
financing
activities:
Net proceeds
from issuance          -              -               -             53,953
of common stock
Proceeds from
borrowings on          -              -               47,500        12,000
credit
facilities
Repayments of
borrowings on          (37,500  )     -               (47,500 )     (12,000  )
credit
facilities
Proceeds from
borrowing on
the bridge loan
from Senior            -              39,000          -             80,000
Housing
Properties
Trust
Repayments of
borrowing on
the bridge loan
from Senior            -              -               (38,000 )     (32,000  )
Housing
Properties
Trust
Purchase and
retirement of          -              -               (12,038 )     (623     )
convertible
senior notes
Repayments of
mortgage notes        (297     )    (228    )      (871    )    (300     )
payable
Cash (used in)
provided by           (37,797  )    38,772        (50,909 )    101,030  
financing
activities
                                                                    
Change in cash
and cash
equivalents            (9,340   )     (1,212  )       (14,079 )     21,176
during the
period
Cash and cash
equivalents at        23,635       43,158        28,374      20,770   
beginning of
period
Cash and cash
equivalents at      $  14,295      $ 41,946       $ 14,295     $ 41,946   
end of period
                                                                    
Cash paid for       $  960          $ 259           $ 3,711       $ 1,454
interest
Cash paid for       $  317          $ 215           $ 1,552       $ 1,257
income taxes
                                                                    
Non-cash
activities:
Issuance of         $  -            $ -             $ 114         $ 298
common stock
Real estate         $  -            $ (20,337 )     $ -           $ (40,289  )
acquisition
Assumption of
mortgage notes      $  -            $ 20,337        $ -           $ 40,289
payable
                                                                             

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                222            222            222            222
communities
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       $  124,387     $  119,082     $  369,864     $  334,919
community
revenue
Continuing care
retirement               96,810         99,285         291,197        298,056
communities
revenue
Skilled nursing
facility                 53,060         54,745         160,919        163,580
revenue
Other^(3)               3,311         2,493         9,884         7,092
Total senior          $  277,568     $  275,605     $  831,864     $  803,647
living revenue
                                                                      
Senior living
wages and
benefits:
Independent and
assisted living       $  53,803      $  52,144      $  161,321     $  147,951
community wages
and benefits
Continuing care
retirement
communities              47,889         48,358         144,109        143,116
wages and
benefits
Skilled nursing
facility wages           33,998         34,579         102,611        103,780
and benefits
Other^(3)               2,126         1,054         4,767         4,128
Total senior
living wages          $  137,816     $  136,135     $  412,808     $  398,975
and benefits
                                                                      
Senior living
other operating
expenses:
Independent and
assisted living
community other       $  29,651      $  29,019      $  88,332      $  78,540
operating
expenses
Continuing care
retirement
communities              23,829         25,283         71,101         73,351
other operating
expenses
Skilled nursing
facility other           13,056         13,816         39,116         39,954
operating
expenses
Other^(3)               322           551           1,513         1,278
Total other
senior living         $  66,858      $  68,669      $  200,062     $  193,123
operating
expenses
                                                                      
                                                                      
                                                                      
Percent
breakdown of
independent and
assisted living
community
revenues:
Private and              98.8%          98.9%          98.9%          98.9%
other sources
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              71.1%          68.7%          70.8%          68.1%
other sources
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              25.9%          24.7%          25.3%          24.4%
other sources
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              75.0%          73.0%          74.5%          72.0%
other sources
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.


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                218            218            209            209
communities
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       $  121,233     $  118,531     $  332,096     $  322,989
community revenue
Continuing care
retirement               96,810         99,285         291,197        298,056
communities
revenue
Skilled nursing          53,060         54,745         160,919        163,580
facility revenue
Other^(5)               3,311         2,493         9,884         7,092
Total senior          $  274,414     $  275,054     $  794,096     $  791,717
living revenue
                                                                      
Senior living
wages and
benefits:
Independent and
assisted living       $  52,874      $  51,830      $  148,823     $  143,700
community wages
and benefits
Continuing care
retirement               47,889         48,358         144,109        143,116
communities wages
and benefits
Skilled nursing
facility wages and       33,998         34,579         102,611        103,780
benefits
Other^(5)               2,126         1,054         4,767         4,128
Total senior
living wages and      $  136,887     $  135,821     $  400,310     $  394,724
benefits
                                                                      
Senior living
other operating
expenses:
Independent and
assisted living       $  28,673      $  28,787      $  78,586      $  75,513
community other
operating expenses
Continuing care
retirement               23,829         25,283         71,101         73,351
communities other
operating expenses
Skilled nursing
facility other           13,056         13,816         39,116         39,954
operating expenses
Other^(5)               322           551           1,513         1,278
Total other senior
living operating      $  65,880      $  68,437      $  190,316     $  190,096
expenses
                                                                      
                                                                      
Percent breakdown
of independent and
assisted living
community
revenues:
Private and other        98.9%          98.9%          99.0%          98.9%
sources
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        71.1%          68.7%          70.8%          68.1%
sources
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        25.9%          24.7%          25.3%          24.4%
sources
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        74.7%          72.9%          73.4%          71.7%
sources
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.


FIVE STAR QUALITY CARE, INC.
SENIOR LIVING OTHER OPERATING DATA^(1)
(dollars in thousands, except average daily rate)
                                                               
                      Three months ended
                      September     June 30,   March      December   September
                      30,                      31,        31,        30,
                        2012       2012     2012     2011      2011
Number of senior
living communities
(end of period)
Senior living            31           31         31         31          31
communities, owned
Senior living
communities,             191          191        191        191         191
leased
Senior living
communities,            30         25       25       23        14
managed
Total number of
senior living           252        247      247      245       236
communities
                                                                     
Number of senior
living units (end
of period):
Senior living            2,952        2,952      2,952      2,952       2,952
communities, owned
Senior living
communities,             20,812       20,812     20,812     20,812      20,812
leased
Senior living
communities,            4,498      3,738    3,738    3,393     1,415
managed
Total number of
senior living           28,262     27,502   27,502   27,157    25,179
units
                                                                     
Independent and
assisted living
communities:^(2)
Number of                153          153        153        153         153
communities
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                31           31         31         31          31
communities
Number of                7,336        7,336      7,336      7,336       7,336
units^(3)
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                38           38         38         38          38
communities
Number of                3,423        3,423      3,423      3,423       3,423
units^(4)
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                222          222        222        222         222
communities
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                30           25         25         23          14
communities
Number of                4,498        3,738      3,738      3,393       1,415
units^(5)
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           321          321        321        321         321
hospital units
Rehabilitation           60.7%        59.8%      60.4%      61.4%       59.7%
hospital occupancy
                                                                     
Other ancillary
services:
Rehabilitation and
wellness inpatient       50           48         47         47          47
clinics
Rehabilitation and
wellness                 46           44         41         39          30
outpatient clinics
Home health              6            6          6          6           6
communities served
                                                                     
^(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.


                         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        September     September
                                    30,              30,            30,
                    2012           2011            2012          2011     
Income from
continuing          $  3,405        $  3,546         $  9,935       $ 14,750
operations
Add: interest
and other              1,762           1,034            4,793         2,405
expense
Add: income tax        426             186              4,835         1,006
expense
Add:
depreciation           6,324           5,497            18,631        13,705
and
amortization
Less: interest,
dividend and          (199    )      (355   )        (638    )    (975   )
other income
EBITDA                 11,718          9,908            37,556        30,891
Add:
acquisition            100             226              100           1,530
related costs
Less: gain on
sale of
investments in         (63     )       (529   )         (62     )     (656   )
available for
sale securities
Less: gain on
early                  -               -                (45     )     (1     )
extinguishment
of debt
Less: gain on         -             -              (3,365  )    -      
settlement
EBITDA
excluding           $  11,755      $  9,605        $  34,184     $ 31,764 
certain items

Contact:

Five Star Quality Care, Inc.
Timothy A. Bonang, 617-796-8245
Vice President, Investor Relations
or
Elisabeth A. Heiss, 617-796-8245
Manager, Investor Relations
www.fivestarseniorliving.com
 
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