Five Star Quality Care, Inc. Reports Fourth Quarter and Year End 2012 Results

  Five Star Quality Care, Inc. Reports Fourth Quarter and Year End 2012
  Results

Business Wire

NEWTON, Mass. -- February 15, 2013

Five Star Quality Care, Inc. (NYSE: FVE) today announced its financial results
for the quarter and year ended December 31, 2012.

Fourth Quarter 2012 Financial Highlights:

  *Total revenues for the fourth quarter of 2012 increased 14.4% to $359.1
    million from $314.0 million for the same period in the previous year.
  *Earnings before interest, taxes, depreciation and amortization, or EBITDA,
    for the fourth quarter of 2012 were $12.0 million compared to $8.4 million
    for the same period in the previous year. EBITDA for the fourth quarter of
    2011 included impairment of long-lived assets of $3.5 million and
    acquisition related costs of $229,000, partially offset by a gain on sale
    of available for sale securities of $3.5 million. EBITDA excluding these
    and certain other items was $12.1 million and $8.7 million in the fourth
    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 December 31, 2012 and 2011 appears
    later in this press release.
  *Income from continuing operations for the fourth quarter of 2012 was $3.5
    million, or $0.07 per basic and diluted share, compared to $52.7 million,
    or $1.11 and $1.05 per share, basic and diluted, respectively, for the
    same period in the previous year. Income from continuing operations for
    the fourth quarter of 2011 included certain items that, in aggregate,
    increased our earnings by $51.8 million, or $1.09 and $1.03 per share,
    basic and diluted, respectively. These items were a $50.7 million income
    tax benefit related to the reversal of our valuation allowance, a $1.4
    million income tax benefit related to impairment of long-lived assets and
    a $3.5 million gain on sale of available for sale securities, partially
    offset by impairment of long-lived assets of $3.5 million and acquisition
    related costs of $229,000.
  *Net income for the fourth quarter of 2012 was $3.5 million, or $0.07 per
    basic and diluted share, compared to $55.4 million, or $1.16 and $1.10 per
    share, basic and diluted, respectively, for the same period in the
    previous year. Net income in the 2012 period included income from
    discontinued operations of $6,000 compared to $2.7 million of income from
    discontinued operations in the 2011 period.

Fourth Quarter 2012 Operating Highlights:

  *Occupancy at our owned and leased senior living communities for the fourth
    quarter of 2012 was 85.7% compared to 86.2% for the same period in the
    previous year.
  *The average monthly rate at our owned and leased senior living communities
    for the fourth quarter of 2012 increased by 2.5% to $4,516 from $4,408 for
    the same period in the previous year.
  *The percentage of revenues derived from residents’ private resources for
    the fourth quarter of 2012 at our owned and leased senior living
    communities modestly decreased to 74.5% from 74.7% for the same period in
    the previous year.
  *Our fee revenues from managed senior living communities in the fourth
    quarter of 2012 were $2.2 million compared to $515,000 in the fourth
    quarter of 2011.

Fiscal Year Financial Highlights:

  *Total revenues for the year ended December 31, 2012 increased 12.1% to
    $1.4 billion from $1.2 billion for the year ended December 31, 2011.
  *EBITDA for the year ended December 31, 2012 was $49.5 million compared to
    $39.3 million for the year ended December 31, 2011. EBITDA for the year
    ended December 31, 2012 included a gain on settlement of our litigation
    with Sunrise Senior Living, Inc., or Sunrise, which increased EBITDA by
    $3.4 million. EBITDA for the year ended December 31, 2011 included
    impairment of long-lived assets of $3.5 million and acquisition related
    costs of $1.8 million, partially offset by a gain on sale of available for
    sale securities of $4.1 million. EBITDA excluding these and certain other
    items was $46.2 million and $40.4 million for the year ended December 31,
    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 years ended December 31, 2012 and 2011
    appears later in this press release.
  *Income from continuing operations for the year ended December 31, 2012 was
    $13.4 million, or $0.28 per basic and diluted share, compared to $67.5
    million, or $1.60 and $1.52 per share, basic and diluted, respectively,
    for the year ended December 31, 2011. Income from continuing operations
    for the year ended December 31, 2012 included a gain on settlement of our
    litigation with Sunrise of $1.9 million (net of taxes), or $0.04 per basic
    and diluted share. Income from continuing operations for the year ended
    December 31, 2011 included certain items that, in aggregate, increased our
    earnings by $51.0 million, or $1.21 and $1.13 per share, basic and
    diluted, respectively. These items were a $50.7 million income tax benefit
    related to the reversal of our valuation allowance, a $1.4 million income
    tax benefit related to impairment of long-lived assets, a $4.1 million
    gain on sale of available for sale securities and a $1,000 gain on early
    extinguishment of debt, partially offset by impairment of long-lived
    assets of $3.5 million and acquisition related costs of $1.8 million.
  *Net income for the year ended December 31, 2012 was $24.9 million, or
    $0.52 per basic and diluted share, compared to $64.2 million, or $1.52 and
    $1.45 per share, basic and diluted, respectively, for the year ended
    December 31, 2011. Net income for the 2012 period included income from
    discontinued operations, including the sale of our pharmacy business, of
    $11.5 million. Net income for the 2011 period included a loss from
    discontinued operations of $(3.3) million.

Other Highlights:

During the fourth quarter of 2012, we began to manage nine senior living
communities with a combined 2,233 living units for Senior Housing Properties
Trust (NYSE: SNH). 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.

  *As previously reported, in May 2012 we reached agreement with SNH and
    Sunrise whereby Sunrise would terminate its leases for 10 senior living
    communities owned by SNH and we would begin to manage the 10 communities
    for SNH’s account. These 10 communities include 2,472 living units and are
    located in six states. Prior to the fourth quarter of 2012, we began to
    manage three of these senior living communities with a combined 407 living
    units. During the fourth quarter of 2012, we began to manage the remaining
    seven of these senior living communities with a combined 2,065 living
    units.
  *In December 2012, we began to manage two senior living communities with a
    combined 168 living units located in Tennessee and Texas.

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 $8.0 million, including the assumption by the buyer of
$7.5 million of United States Department of Housing and Urban Development
mortgage debt. These SNFs receive the majority of their revenues from
Medicare/Medicaid reimbursements. The losses generated at these facilities are
included in our discontinued operations. We expect the sale of these SNFs to
occur before the end of 2013, but completion of this sale is subject to
customary closing conditions, including regulatory approvals, and we can
provide no assurance that a sale of these SNFs will occur before the end of
2013 or will be completed at all.

Bruce Mackey, President & CEO, made the following statement regarding the
fourth quarter results of operations and recent activities:

“Although our occupancy rate for our owned and leased senior living
communities declined year over year, this was primarily because of declines in
occupancy from high acuity residents at our continuing care retirement
communities, or CCRC’s, and SNFs. Occupancy rates at our owned and leased
independent and assisted living communities, which combined represent the
largest number of units we operate, improved on a year over year basis.
Furthermore, our average monthly rate increased in all property types on a
year over year basis.

Through external growth, a focus on cost control and growth in our private pay
senior living business, we achieved meaningful year over year EBITDA growth.
EBITDA excluding certain items for the fourth quarter of 2012 was 39% higher
than the fourth quarter of 2011.

During the fourth quarter we completed the transition of 10 senior living
communities with 2,472 living units into our management business that were
formerly operated by Sunrise and leased from SNH. In addition, during the
fourth quarter we began to manage two other senior living communities for SNH
with a total of 168 living units. We are now managing a total of 39 senior
living communities that we expect may generate annual management fee revenues
in 2013 of approximately $9.0 million based on the current operating
performance at the communities. We continue to look for opportunities to grow
our private pay senior living business through managing, owning and leasing
communities and have ample capacity on our balance sheet with $184.4 million
available under our revolving credit facilities.”

Conference Call:

Later today, February 15, 2013, at 10:00 a.m. Eastern Time, we will host a
conference call to discuss the fourth quarter and year end financial results.
Following management’s presentation, there will be a question and answer
period.

The conference call telephone number is (800) 553-0288. Participants calling
from outside the United States and Canada should dial (612) 332-0530. 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,
February 22, 2013. To hear the replay, dial (320) 365-3844. The replay pass
code is 279877.

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 fourth 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 December 31, 2012, we operated 261 senior living communities
with 30,454 living units located in 31 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 39 communities (6,690 living units) that we
manage. These communities include independent living, assisted living,
continuing care and skilled nursing communities. We also operate two leased
rehabilitation hospitals. We are headquartered in Newton, Massachusetts.

                WARNING CONCERNING 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. ALSO, 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 CONTINUE TO LOOK FOR OPPORTUNITIES TO
    GROW OUR PRIVATE PAY SENIOR LIVING BUSINESS THROUGH MANAGING, OWNING AND
    LEASING COMMUNITIES. THERE CAN BE NO ASSURANCE THAT WE WILL BE SUCCESSFUL
    IN IDENTIFYING OR OBTAINING SUCH OPPORTUNITIES AND WE MAY DEPEND ON
    ENTITIES WITH WHICH WE CURRENTLY HAVE COMMERCIAL RELATIONS, INCLUDING AS A
    TENANT OR MANAGER, ACQUIRING ADDITIONAL SENIOR LIVING COMMUNITIES WITH
    SUBSTANTIAL PRIVATE PAY BUSINESS AND LEASING THOSE COMMUNITIES TO US OR
    CONTRACTING WITH US TO MANAGE THOSE COMMUNITIES.
  *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 WE HAVE ENTERED AN AGREEMENT TO SELL TWO
    SNFS LOCATED IN MICHIGAN THAT WE OWN AND THAT WE EXPECT THE SALE TO OCCUR
    PRIOR TO THE END OF 2013. THIS SALE IS SUBJECT TO VARIOUS TERMS AND
    CONDITIONS TYPICAL OF SUCH TRANSACTIONS, INCLUDING REGULATORY APPROVALS.
    THESE TERMS AND CONDITIONS MAY NOT BE MET. AS A RESULT, THIS TRANSACTION
    MAY BE DELAYED OR MAY NOT OCCUR OR ITS TERMS MAY CHANGE.
  *THIS PRESS RELEASE STATES THAT WE EXPECT THAT THE 39 SENIOR LIVING
    COMMUNITIES WE NOW MANAGE WILL GENERATE APPROXIMATELY $9.0 MILLION
    ANNUALLY IN MANAGEMENT FEE REVENUES IN 2013, BASED ON CURRENT OPERATING
    PERFORMANCE. HOWEVER, ACTUAL ANNUAL MANAGEMENT FEE REVENUES MAY BE LESS
    THAN $9.0 MILLION IN 2013 IF OPERATING PERFORMANCE AT THE COMMUNITIES
    DECLINES OR FOR OTHER REASONS.
  *THIS PRESS RELEASE STATES THAT WE HAVE AMPLE CAPACITY ON OUR BALANCE SHEET
    WITH $184.4 MILLION AVAILABLE UNDER OUR REVOLVING CREDIT FACILITIES.
    HOWEVER, OUR $35.0 MILLION REVOLVING CREDIT FACILITY EXPIRES ON MARCH 18,
    2013, AND WE MAY NOT BE SUCCESSFUL IN RENEWING OR REFINANCING THAT
    FACILITY ON TERMS ACCEPTABLE TO US OR OTHERWISE. IN ADDITION, WE MUST
    SATISFY CERTAIN CONDITIONS, INCLUDING FINANCIAL COVENANTS, IN ORDER TO
    BORROW UNDER OUR REVOLVING CREDIT FACILITIES. FURTHER, OUR OPERATIONS AND
    BUSINESS REQUIRE SIGNIFICANT AMOUNTS OF WORKING CASH AND REQUIRE US TO
    MAKE SIGNIFICANT CAPITAL EXPENDITURES TO MAINTAIN OUR COMPETITIVENESS.
    ACCORDINGLY, WE MAY NOT HAVE SUFFICIENT CASH LIQUIDITY.

THE INFORMATION CONTAINED IN OUR FILINGS WITH THE SECURITIES AND EXCHANGE
COMMISSION, OR SEC, INCLUDING UNDER THE CAPTION “RISK FACTORS” IN OUR PERIODIC
REPORTS, OR INCORPORATED THEREIN, IDENTIFIES OTHER IMPORTANT FACTORS THAT
COULD CAUSE DIFFERENCES FROM OUR FORWARD LOOKING STATEMENTS. OUR FILINGS WITH
THE SEC ARE AVAILABLE ON THE SEC’S WEBSITE AT 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.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
(unaudited)
                                                              
                   Three months ended                  Twelve months ended
                   December 31,                        December 31,
                   2012            2011                2012              2011
Revenues:
Senior living      $ 279,154       $ 274,733           $ 1,111,018       $ 1,078,380
revenue
Rehabilitation
hospital             27,547          27,085              107,048           105,320
revenue
Management fee       2,151           515                 5,817             898
revenue
Reimbursed
costs incurred
on behalf of        50,245        11,665            126,995         20,552    
managed
communities
Total revenues      359,097       313,998           1,350,878       1,205,150 
                                                                           
Operating
expenses:
Senior living
wages and            135,356         137,411             548,164           536,386
benefits
Other senior
living               70,007          66,532              270,069           259,655
operating
expenses
Costs incurred
on behalf of         50,245          11,665              126,995           20,552
managed
communities
Rehabilitation
hospital             24,763          24,507              96,488            95,305
expenses
Rent expense         50,598          49,933              201,641           195,407
General and          16,154          15,298              61,599            57,540
administrative
Depreciation
and                  6,433           5,989               25,064            19,694
amortization
Impairment of
long-lived          -             3,500             -               3,500     
assets
Total
operating           353,556       314,835           1,330,020       1,188,039 
expenses
                                                                           
Operating            5,541           (837    )           20,858            17,111
income
                                                                           
Interest and         243             265                 881               1,240
other income
Interest and         (1,475  )       (1,512  )           (6,268    )       (3,917    )
other expense
Acquisition          (8      )       (229    )           (108      )       (1,759    )
related costs
Gain on              -               -                   3,365             -
settlement
Gain on early
extinguishment       -               -                   45                1
of debt
Equity in
earnings of
Affiliates           80              28                  316               139
Insurance
Company
(Loss) gain on
sale of
available for
sale
securities          (81     )      3,460             (19       )      4,116     
reclassified
from other
comprehensive
income
                                                                           
Income from
continuing
operations           4,300           1,175               19,070            16,931
before income
taxes
(Provision)
benefit for         (807    )      51,560            (5,642    )      50,554    
income taxes
Income from
continuing           3,493           52,735              13,428            67,485
operations
Income (loss)
from                6             2,666             11,517          (3,284    )
discontinued
operations
                                                                           
Net income         $ 3,499        $ 55,401           $ 24,945         $ 64,201    
                                                                           
                                                                           
Weighted
average shares      48,066        47,702            47,952          42,161    
outstanding -
basic
                                                                           
Weighted
average shares      48,066        50,570            47,952          45,034    
outstanding -
diluted
                                                                           
Basic income
per share
from:
Continuing         $ 0.07          $ 1.11              $ 0.28            $ 1.60
operations
Discontinued        -             0.05              0.24            (0.08     )
operations
Net income per     $ 0.07         $ 1.16             $ 0.52           $ 1.52      
share - basic
                                                                           
Diluted income
per share
from:
Continuing         $ 0.07          $ 1.05              $ 0.28            $ 1.52
operations
Discontinued        -             0.05              0.24            (0.07     )
operations
Net income per
share -            $ 0.07         $ 1.10             $ 0.52           $ 1.45      
diluted
                                                                                     

FIVE STAR QUALITY CARE, INC.
CONSOLIDATED BALANCE SHEETS DATA
(in thousands)
(unaudited)
                                                             
                                                 December 31,     December 31,
                                                 2012             2011
Assets
Current assets:
Cash and cash equivalents                        $   24,638       $   28,374
Accounts receivable, net of allowance                53,134           56,509
Investments in available for sale securities         12,920           9,114
Restricted cash                                      6,548            4,838
Prepaid expenses and other current assets            29,644           20,395
Assets of discontinued operations                   10,430          29,022
Total current assets                                 137,314          148,252
                                                                      
Property and equipment, net                          335,612          332,185
Restricted cash                                      12,166           4,092
Restricted investments in available for sale         10,580           13,115
securities
Goodwill, equity investment and other long          75,684          85,833
term assets
Total assets                                     $   571,356      $   583,477
                                                                      
Liabilities and Shareholders' Equity
Current liabilities:
Bridge loan from Senior Housing Properties       $   -            $   38,000
Trust (or SNH)
Current portion of convertible senior notes          24,872           -
Other current liabilities                            159,088          151,331
Total current liabilities                            183,960          189,331
                                                                      
Mortgage notes payable                               37,621           38,714
Convertible senior notes                             -                37,282
Other long term liabilities                          42,970           37,956
Shareholders' equity                                306,805         280,194
Total liabilities and shareholders’ equity       $   571,356      $   583,477
                                                                      

FIVE STAR QUALITY CARE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
                                                             
                   Three months ended December           Twelve months ended December
                   31,                                   31,
                   2012             2011                2012            2011
                                                                           
Cash flows
from operating
activities:
Net income         $ 3,499           $ 55,401            $ 24,945        $ 64,201
Adjustments to
reconcile net
income to cash
provided by
operating
activities:
Depreciation
and                  6,433             5,989               25,064          19,694
amortization
Gain on early
extinguishment       -                 -                   (45     )       (1       )
of debt
(Gain) loss
from                 (6      )         (2,666  )           (11,517 )       3,284
discontinued
operations
Loss (gain) on
sale of
available for        81                (3,460  )           19              (4,116   )
sale
securities
Impairment of
long-lived           -                 3,500               -               3,500
assets
Equity in
earnings of
Affiliates           (80     )         (28     )           (316    )       (139     )
Insurance
Company
Stock-based          618               321                 1,267           1,271
compensation
Deferred             359               (54,330 )           10,556          (54,699  )
income taxes
Provision for
losses on            1,779             1,461               5,296           5,257
receivables
Changes in
assets and
liabilities:
Accounts             (33     )         (5,842  )           (1,921  )       (6,578   )
receivable
Prepaid
expenses and         (3,482  )         1,333               (11,270 )       (1,025   )
other assets
Accounts
payable and          14,576            (3,490  )           15,482          3,537
accrued
expenses
Accrued
compensation         (7,131  )         (4,172  )           2,011           1,924
and benefits
Due to related       (1,076  )         2,353               (6,944  )       818
persons
Other current
and long term       (2,017  )        (2,040  )          4,128         3,367    
liabilities
Cash provided
by (used in)        13,520          (5,670  )          56,755        40,295   
operating
activities
                                                                           
Net cash
provided by
(used in)           2,298           2,673             (6,018  )      3,417    
discontinued
operations
                                                                           
Cash flows
from investing
activities:
(Payments
from) deposits
into
restricted           (3,548  )         547                 (9,784  )       (2,570   )
cash and
investment
accounts, net
Acquisition of
property and         (17,134 )         (16,419 )           (57,386 )       (60,380  )
equipment
Acquisition of
senior living
communities,         -                 -                   -               (107,765 )
net of working
capital
assumed
Purchase of
available for        -                 -                   (5,076  )       (206     )
sale
securities
Proceeds from
sale of              -                 -                   34,298          -
pharmacy
Proceeds from
disposition of
property and         12,271            7,393               30,520          33,269
equipment held
for sale
Proceeds from
sale of
available for       3,235           8,187             4,163         10,896   
sale
securities
Cash used in
investing           (5,176  )        (292    )          (3,265  )      (126,756 )
activities
                                                                           
Cash flows
from financing
activities:
Net proceeds
from issuance        -                 -                   -               53,953
of common
stock
Proceeds from
borrowings on        15,000            -                   62,500          12,000
credit
facilities
Repayments of
borrowings on        (15,000 )         -                   (62,500 )       (12,000  )
credit
facilities
Proceeds from
borrowing on
the bridge
loan from            -                 -                   -               80,000
Senior Housing
Properties
Trust
Repayments of
borrowing on
the bridge
loan from            -                 (10,000 )           (38,000 )       (42,000  )
Senior Housing
Properties
Trust
Purchase and
retirement of        -                 -                   (12,038 )       (622     )
convertible
senior notes
Repayments of
mortgage notes      (299    )        (283    )          (1,170  )      (683     )
payable
Cash (used in)
provided by         (299    )        (10,283 )          (51,208 )      90,648   
financing
activities
                                                                           
Change in cash
and cash
equivalents          10,343            (13,572 )           (3,736  )       7,604
during the
period
Cash and cash
equivalents at      14,295          41,946            28,374        20,770   
beginning of
period
Cash and cash
equivalents at     $ 24,638         $ 28,374           $ 24,638       $ 28,374   
end of period
                                                                           
Supplemental
cash flow
information:
Cash paid for      $ 1,210           $ 2,086             $ 4,921         $ 3,540
interest
Cash paid for      $ 580             $ 79                $ 2,132         $ 1,336
income taxes
                                                                           
Non-cash
activities:
Real estate        $ -               $ -                 $ -             $ (40,289  )
acquisition
Assumption of
mortgage notes     $ -               $ -                 $ -             $ 40,289
payable
                                                                                    

FIVE STAR QUALITY CARE, INC.
SENIOR LIVING COMMUNITY FINANCIAL DATA^(1)
(dollars in thousands, except average monthly rate)
                                                            
                 Three months ended                  Twelve months ended
                 December 31,                        December 31,
                 2012            2011                2012              2011
                                                                         
Senior
living
communities:
Number of
communities        222             222                 222               222
(end of
period)
Number of
units (end         23,764          23,764              23,764            23,764
of period)
Occupancy          85.7    %       86.2    %           85.7      %       85.8      %
Avg. monthly     $ 4,516         $ 4,408             $ 4,477           $ 4,516
rate
                                                                         
Senior
living
revenue:
Independent
and assisted
living           $ 124,690       $ 122,230           $ 494,553         $ 457,149
community
revenue
Continuing
care
retirement         97,784          96,586              388,981           394,642
community
revenue
Skilled
nursing            52,976          53,037              213,895           216,617
facility
revenue
Other^(2)         3,704         2,880             13,589          9,972     
                                                                         
Total senior
living           $ 279,154      $ 274,733          $ 1,111,018      $ 1,078,380 
revenue
                                                                         
Senior
living wages
and
benefits:
Independent
and assisted
living           $ 52,628        $ 52,852            $ 213,950         $ 200,803
community
wages and
benefits
Continuing
care
retirement         47,539          48,071              191,648           191,187
community
wages and
benefits
Skilled
nursing
facility           33,794          34,505              136,405           138,285
wages and
benefits
Other^(2)         1,395         1,983             6,161           6,111     
                                                                         
Total senior
living wages     $ 135,356      $ 137,411          $ 548,164        $ 536,386   
and benefits
                                                                         
Senior
living other
operating
expenses:
Independent
and assisted
living
community        $ 30,427        $ 28,648            $ 118,759         $ 107,188
other
operating
expenses
Continuing
care
retirement
community          25,736          24,349              96,837            97,699
other
operating
expenses
Skilled
nursing
facility           14,414          13,002              53,530            52,956
other
operating
expenses
Other^(2)         (570    )      533               943             1,812     
                                                                         
Total senior
living other     $ 70,007       $ 66,532           $ 270,069        $ 259,655   
operating
expenses
                                                                         

(1) Excludes data for managed communities, rehabilitation hospitals and
discontinued senior living operations.
(2) Other senior living relates primarily to rehabilitation and other
specialty service revenues and expenses provided at our residential facilities
and does not include revenues and expenses from our rehabilitation hospital
operations.

FIVE STAR QUALITY CARE, INC.
COMPARABLE SENIOR LIVING COMMUNITY FINANCIAL DATA^(1)
(dollars in thousands, except average monthly rate)
                                                            
                 Three months ended                  Twelve months ended
                 December 31,^(2)                    December 31,^(3)
                 2012            2011                2012              2011
                                                                         
Senior
living
communities:
Number of
communities        222             222                 209               209
(end of
period)
Number of
units (end         23,764          23,764              22,175            22,175
of period)
Occupancy          85.7    %       86.2    %           85.4      %       85.6      %
Avg. monthly     $ 4,516         $ 4,408             $ 4,605           $ 4,580
rate
                                                                         
Senior
living
revenue:
Independent
and assisted
living           $ 124,690       $ 122,230           $ 443,992         $ 432,788
community
revenue
Continuing
care
retirement         97,784          96,586              388,981           394,642
community
revenue
Skilled
nursing            52,976          53,037              213,895           216,617
facility
revenue
Other^(4)         3,704         2,880             13,589          9,972     
                                                                         
Total senior
living           $ 279,154      $ 274,733          $ 1,060,457      $ 1,054,019 
revenue
                                                                         
Senior
living wages
and
benefits:
Independent
and assisted
living           $ 52,628        $ 52,852            $ 197,355         $ 192,364
community
wages and
benefits
Continuing
care
retirement         47,539          48,071              191,648           191,187
community
wages and
benefits
Skilled
nursing
facility           33,794          34,505              136,405           138,285
wages and
benefits
Other^(4)         1,395         1,983             6,161           6,111     
                                                                         
Total senior
living wages     $ 135,356      $ 137,411          $ 531,569        $ 527,947   
and benefits
                                                                         
Senior
living other
operating
expenses:
Independent
and assisted
living
community        $ 30,427        $ 28,648            $ 105,578         $ 100,934
other
operating
expenses
Continuing
care
retirement
community          25,736          24,349              96,837            97,699
other
operating
expenses
Skilled
nursing
facility           14,414          13,002              53,530            52,956
other
operating
expenses
Other^(4)         (570    )      533               943             1,812     
                                                                         
Total senior
living other     $ 70,007       $ 66,532           $ 256,888        $ 253,401   
operating
expenses
                                                                         

(1) Excludes data for managed communities, rehabilitation hospitals and
discontinued senior living operations.
(2) Communities that we have operated continuously since October 1, 2011.
(3) Communities that we have operated continuously since January 1, 2011.
(4) Other senior living relates primarily to rehabilitation and other
specialty service revenues and expenses provided at our residential facilities
and does not include revenues and expenses from our rehabilitation hospital
operations.

FIVE STAR QUALITY CARE, INC.
PERCENT BREAKDOWN OF SENIOR LIVING COMMUNITY REVENUES^(1)
                                                         
                                                                        
                           Three months ended            Twelve months ended
                           December 31,                  December 31,
                           2012         2011             2012         2011
Independent and
assisted living
communities:
Private and other            98.9%        98.9%            98.9%        98.9%
sources
Medicaid                    1.1%        1.1%            1.1%        1.1%
Total                       100.0%      100.0%          100.0%      100.0%
                                                                        
Continuing care
retirement
communities:
Private and other            70.4%        71.4%            70.7%        68.9%
sources
Medicare                     22.7%        21.8%            22.6%        24.8%
Medicaid                    6.9%        6.8%            6.7%        6.3%
Total                       100.0%      100.0%          100.0%      100.0%
                                                                        
Skilled nursing
facilities:
Private and other            25.8%        25.2%            25.4%        24.6%
sources
Medicare                     23.5%        24.2%            24.3%        26.9%
Medicaid                    50.7%       50.6%           50.3%       48.5%
Total                       100.0%      100.0%          100.0%      100.0%
                                                                        
Total senior living
communities:
Private and other            74.5%        74.7%            74.5%        72.7%
sources
Medicare                     12.6%        12.5%            12.8%        14.6%
Medicaid                    12.9%       12.8%           12.7%       12.7%
Total                       100.0%      100.0%          100.0%      100.0%
                                                                        

(1) Excludes data for managed communities, rehabilitation hospitals and
discontinued senior living operations.

FIVE STAR QUALITY CARE, INC.
SENIOR LIVING OTHER OPERATING DATA^(1)
(dollars in thousands, except average monthly rate)
                                                             
                   Three months ended
                   December     September     June 30,     March        December
                   31,          30,                        31,          31,
                   2012       2012        2012       2012       2011
                                                                          
Independent
and assisted
living
communities
(owned):
Number of
communities          31            31           31           31           31
(end of
period)
Number of
units (end of        2,952         2,952        2,952        2,952        2,952
period)
Occupancy            88.2%         86.7%        85.7%        85.4%        85.3%
Avg. monthly       $ 3,360      $  3,373      $ 3,364      $ 3,329      $ 3,309
rate
                                                                          
Independent
and assisted
living
communities
(leased):
Number of
communities          122           122          122          122          122
(end of
period)
Number of
units (end of        10,053        10,053       10,053       10,053       10,053
period)
Occupancy            88.6%         88.3%        88.2%        88.4%        89.2%
Avg. monthly       $ 3,664      $  3,659      $ 3,637      $ 3,620      $ 3,584
rate
                                                                          
CCRC
communities
(leased):
Number of
communities          31            31           31           31           31
(end of
period)
Number of
units (end of        7,336         7,336        7,336        7,336        7,336
period)^(2)
Occupancy            83.5%         84.1%        84.0%        84.8%        84.9%
Avg. monthly       $ 5,320      $  5,231      $ 5,242      $ 5,224      $ 5,171
rate
                                                                          
Skilled
nursing
facilities
(leased):
Number of
communities          38            38           38           38           38
(end of
period)
Number of
units (end of        3,423         3,423        3,423        3,423        3,423
period)^(3)
Occupancy            79.8%         80.2%        80.9%        81.6%        81.4%
Avg. monthly       $ 6,597      $  6,359      $ 6,546      $ 6,335      $ 6,346
rate
                                                      
Total senior
living
communities
(owned and
leased):
Number of
communities          222           222          222          222          222
(end of
period)
Number of
units (end of        23,764        23,764       23,764       23,764       23,764
period)
Occupancy            85.7%         85.7%        85.5%        85.9%        86.2%
Avg. monthly     $ 4,516    $  4,464    $ 4,486    $ 4,444    $ 4,408
rate
                                                                          
Managed
communities:
Number of
communities          39            30           25           25           23
(end of
period)
Number of
units (end of        6,690         4,498        3,738        3,738        3,393
period)^(4)
Occupancy            87.5%         87.4%        87.6%        87.3%        85.4%
Avg. monthly       $ 4,236      $  4,051      $ 4,045      $ 4,004      $ 3,696
rate
                                                                          
Rehabilitation
hospitals
(leased):
Number of
hospitals (end       2             2            2            2            2
of period)
Number of
units (end of        321           321          321          321          321
period)
Occupancy            60.2%         60.7%        59.8%        60.4%        61.4%
                                                                          
Other
ancillary
services:
Rehabilitation
and wellness
inpatient            50            50           48           47           47
clinics (end
of period)
Rehabilitation
and wellness
outpatient           49            46           44           41           39
clinics (end
of period)
Home health
communities          6             6            6            6            6
served (end of
period)
                                                                          

(1) Excludes data for discontinued operations.
(2) Includes 2,020 skilled nursing units in communities where assisted living
and independent living services are the predominant services provided.
(3) Includes 87 assisted living and independent living units in communities
where skilled nursing services are the predominant services provided.
(4) Includes 478 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, or 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, cash flows from operating
activities or any other financial operating or performance or liquidity
measure established by GAAP. The following table includes the reconciliation
of these Non-GAAP Financial Measures to income from continuing operations, the
most directly comparable financial measure under GAAP reported in our
consolidated financial statements, for the three and twelve months ended
December 31, 2012 and 2011.

                 For the three months           For the twelve months
                   ended December 31,                 ended December 31,
                   2012         2011                2012         2011
Income from
continuing         $ 3,493        $ 52,735            $ 13,428       $ 67,485
operations
Add: interest
and other            1,475          1,512               6,268          3,917
expense
Add: income          807            -                   5,642          157
tax expense
Add:
depreciation         6,433          5,989               25,064         19,694
and
amortization
Less: income         -              (51,560 )           -              (50,711 )
tax benefit
Less:
interest,           (243   )      (265    )          (881   )      (1,240  )
dividend and
other income
EBITDA               11,965         8,411               49,521         39,302
Add:
impairment of        -              3,500               -              3,500
long-lived
assets
Add:
acquisition          8              229                 108            1,759
related costs
Add: loss on
sale of
investments in       81             -                   19             -
available for
sale
securities
Less: gain on
sale of
investments in       -              (3,460  )           -              (4,116  )
available for
sale
securities
Less: gain on
early                -              -                   (45    )       (1      )
extinguishment
of debt
Less: gain on       -            -                 (3,365 )      -       
settlement
EBITDA
excluding          $ 12,054      $ 8,680            $ 46,238      $ 40,444  
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