Five Star Quality Care, Inc. Reports First Quarter 2013 Results

  Five Star Quality Care, Inc. Reports First Quarter 2013 Results

Business Wire

NEWTON, Mass. -- April 29, 2013

Five Star Quality Care, Inc. (NYSE: FVE) today announced its financial results
for the quarter ended March 31, 2013.

First Quarter 2013 Financial Highlights:

  *Total revenues for the first quarter of 2013 increased 10.1% to $360.1
    million from $327.2 million for the same period in the previous year.
  *Earnings before interest, taxes, depreciation and amortization, or EBITDA,
    for the first quarter of 2013 were $9.1 million compared to $9.0 million
    for the same period in the previous year. 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 March 31, 2013 and 2012 appears later
    in this press release.
  *Income from continuing operations for the first quarter of 2013 was $2.3
    million, or $0.05 per basic and diluted share, compared to $1.2 million,
    or $0.03 per basic and diluted share for the same period in the previous
    year. Income from continuing operations for the first quarter of 2013
    included an income tax benefit of $1.5 million, or $0.03 per basic and
    diluted share, relating to a work opportunity tax credit program that
    expired in 2012 and which was retroactively reinstated in January 2013.
  *Net income for the first quarter of 2013 was $1.9 million, or $0.04 per
    basic and diluted share, compared to $369,000, or $0.01 per basic and
    diluted share for the same period in the previous year. Net income in the
    2013 period included a loss from discontinued operations of $379,000
    compared to a loss from discontinued operations of $853,000 in the 2012
    period.

First Quarter 2013 Operating Highlights:

  *Occupancy at our owned and leased senior living communities for the first
    quarter of 2013 was 85.4% compared to 85.9% for the same period in the
    previous year.
  *The average monthly rate at our owned and leased senior living communities
    for the first quarter of 2013 increased by 2.5% to $4,507 from $4,395 for
    the same period in the previous year.
  *The percentage of revenues derived from residents’ private resources for
    the first quarter of 2013 at our owned and leased senior living
    communities decreased to 74.3% compared to 74.5% for the same period in
    the previous year.
  *Our fee revenues from managed senior living communities in the first
    quarter of 2013 were $2.3 million compared to $1.1 million for the same
    period in the previous year.

Other Highlights:

  *On March 15, 2013, we entered into an amendment to our $35.0 million
    revolving secured line of credit, or our Credit Agreement, which is
    available for general business purposes, including acquisitions. As a
    result of this amendment, the maturity date of our Credit Agreement was
    extended from March 18, 2013 to March 18, 2016. In addition, the interest
    rate payable on borrowings under our Credit Agreement was reduced from
    LIBOR (with a floor of 200 basis points) plus a premium of 400 basis
    points to LIBOR (with no floor) plus a premium of 250 basis points.

Conference Call:

Later today, April 29, 2013, at 10:00 a.m. Eastern Time, we will host a
conference call to discuss the first quarter financial results. Following
management’s presentation, there will be a question and answer period.

The conference call telephone number is (800) 230-1951. Participants calling
from outside the United States and Canada should dial (612) 332-0342. 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, May 6,
2013. To hear the replay, dial (320) 365-3844. The replay pass code is 290591.

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
transcription, recording and retransmission in any way of the Company’s first
quarter 2013 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 March 31, 2013, we operated 261 senior living communities with
30,450 living units located in 31 states, including 31 communities (2,969
living units) that we own and operate, 191 communities (20,799 living units)
that we lease and operate and 39 communities (6,682 living units) that we
manage. These communities include independent living, assisted living,
continuing care and skilled nursing communities. We also operate two
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:

  *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.
  *THE AMOUNT OF AVAILABLE BORROWINGS UNDER OUR EXTENDED CREDIT AGREEMENT IS
    SUBJECT TO OUR HAVING QUALIFIED COLLATERAL, WHICH IS PRIMARILY BASED ON
    THE VALUE OF OUR ACCOUNTS RECEIVABLE SECURING OUR CREDIT AGREEMENT.
    ACCORDINGLY, THE AVAILABILITY OF BORROWINGS UNDER OUR CREDIT AGREEMENT AT
    ANY TIME MAY BE LESS THAN $35.0 MILLION.
  *ACTUAL COSTS UNDER OUR CREDIT AGREEMENT WILL BE HIGHER THAN LIBOR PLUS A
    PREMIUM BECAUSE OF OTHER FEES AND EXPENSES ASSOCIATED WITH OUR CREDIT
    AGREEMENT.

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.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
(unaudited)
                                                     
                                     Three months ended
                                     March 31,
                                     2013                    2012
Revenues:
Senior living revenue                $       278,211         $       275,870
Rehabilitation hospital                      27,481                  26,787
revenue
Management fee revenue                       2,302                   1,088
Reimbursed costs
incurred on behalf of                    52,058             23,405  
managed communities
Total revenues                           360,052            327,150 
                                                                     
Operating expenses:
Senior living wages and                      139,212                 138,374
benefits
Other senior living                          68,960                  66,612
operating expenses
Costs incurred on behalf                     52,058                  23,405
of managed communities
Rehabilitation hospital                      24,894                  24,119
expenses
Rent expense                                 50,877                  50,225
General and                                  15,132                  15,455
administrative
Depreciation and                         6,514              5,959   
amortization
Total operating expenses                 357,647            324,149 
                                                                     
Operating income                             2,405                   3,001
                                                                     
Interest, dividend and                       197                     205
other income
Interest and other                           (1,456  )               (1,426  )
expense
Equity in earnings of
Affiliates Insurance                         76                      45
Company
Gain (loss) on sale of
available for sale
securities                               87                 (1      )
reclassified from
other comprehensive
income
                                                                     
Income from continuing
operations before income                     1,309                   1,824
taxes
Benefit (provision) for                  1,005              (602    )
income taxes
Income from continuing                       2,314                   1,222
operations
Loss from discontinued                   (379    )           (853    )
operations
                                                                     
Net income                           $    1,935          $    369     
                                                                     
                                                                     
Weighted average shares
outstanding - basic and                  48,234             47,899  
diluted
                                                                     
Basic and diluted income
per share from:
Continuing operations                $       0.05            $       0.03
Discontinued operations                  (0.01   )           (0.02   )
Net income per share -               $    0.04           $    0.01    
basic and diluted
                                                                             


FIVE STAR QUALITY CARE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS DATA
(in thousands)
(unaudited)
                                                     
                                     March 31,               December 31,
                                     2013                    2012
Assets
Current assets:
Cash and cash                        $       15,156         $       24,638  
equivalents
Accounts receivable, net                     56,547                  53,134
of allowance
Due from related persons                     5,581                   6,881
Investments in available                     17,602                  12,920
for sale securities
Restricted cash                              11,502                  6,548
Prepaid expenses and                         21,156                  29,644
other current assets
Assets of discontinued                   12,634             10,430  
operations
Total current assets                         140,178                 144,195
                                                                     
Property and equipment,                      333,773                 335,612
net
Restricted cash                              9,378                   12,166
Restricted investments
in available for sale                        8,472                   10,580
securities
Goodwill, equity
investment and other                     76,852             75,684  
long term assets
Total assets                         $    568,653        $    578,237 
                                                                     
Liabilities and
Shareholders' Equity
Current liabilities:
Convertible senior notes             $       24,872          $       24,872
Other current                            158,134            165,969 
liabilities
Total current                                183,006                 190,841
liabilities
                                                                     
Mortgage notes payable                       37,337                  37,621
Other long term                              39,359                  42,970
liabilities
Shareholders’ equity                     308,951            306,805 
Total liabilities and                $    568,653        $    578,237 
shareholders' equity
                                                                     


FIVE STAR QUALITY CARE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)


                                                     
                                     Three months ended March 31,
                                     2013                    2012
                                                                     
Cash flows from
operating activities:
Net income                           $       1,935           $       369
Adjustments to reconcile
net income to cash
provided by operating

activities:
Depreciation and                             6,514                   5,959
amortization
Loss from discontinued                       379                     853
operations
(Gain) loss on sale of
available for sale                           (87     )               1
securities
Equity in earnings of
Affiliates Insurance                         (76     )               (45     )
Company
Stock-based compensation                     205                     217
Provision for losses on                      1,772                   1,161
receivables
Changes in assets and
liabilities:
Accounts receivable                          (5,185  )               (1,551  )
Prepaid expenses and                         7,102                   (355    )
other assets
Accounts payable and                         (14,018 )               1,356
accrued expenses
Accrued compensation and                     3,705                   4,788
benefits
Due from (to) related                        1,114                   (5,192  )
persons, net
Other current and long                   (1,349  )           (169    )
term liabilities
Cash provided by                         2,011              7,392   
operating activities
                                                                     
Net cash (used in)
provided by discontinued                 (2,161  )           107     
operations
                                                                     
Cash flows from
investing activities:
Payments from restricted
cash and investment                          (2,166  )               (3,136  )
accounts, net
Acquisition of property                      (12,560 )               (12,896 )
and equipment
Purchase of available                        (4,882  )               -
for sale securities
Proceeds from
disposition of property                      8,171                   6,318
and equipment
held for sale
Proceeds from sale of
available for sale                       2,409              772     
securities
Cash used in investing                   (9,028  )           (8,942  )
activities
                                                                     
Cash flows from
financing activities:
Proceeds from borrowings                     20,000                  -
on credit facilities
Repayments of borrowings                     (20,000 )               -
on credit facilities
Repayments of mortgage                   (304    )           (286    )
notes payable
Cash used in financing                   (304    )           (286    )
activities
                                                                     
Change in cash and cash
equivalents during the                       (9,482  )               (1,729  )
period
Cash and cash
equivalents at beginning                 24,638             28,374  
of period
Cash and cash
equivalents at end of                $    15,156         $    26,645  
period
                                                                     
Supplemental cash flow
information:
Cash paid for interest               $       709             $       1,002
Cash paid for income                 $       296             $       122
taxes
                                                                     

                                                                             
FIVE STAR QUALITY CARE, INC.
SENIOR LIVING COMMUNITY FINANCIAL DATA^(1)
(dollars in thousands, except average monthly rate)
                         
                             Three months ended
                             March 31,^(2)
                             2013                   2012
Senior
living                                                          
communities:
Number of
communities                          222                             222
(end of
period)
Number of
units (end                           23,768                          23,768
of period)
Occupancy                            85.4%                           85.9%
Avg.
monthly                      $       4,507                 $         4,395
rate^(3)
                                                                             
Senior
living
revenue:
Independent
and assisted
living                       $       124,099               $         122,470
community
revenue
Continuing
care
retirement                           97,435                          97,433
community
revenue
Skilled
nursing                              53,302                          52,759
facility
revenue
Other ^(4)                           3,375                           3,208
                                                          
Total senior
living                       $    278,211               $     275,870
revenue
                                                                             
Senior
living wages
and
benefits:
Independent
and assisted
living                       $       54,413                $         54,101
community
wages and
benefits
Continuing
care
retirement                           48,977                          48,518
community
wages and
benefits
Skilled
nursing
facility                             34,711                          34,462
wages and
benefits
Other ^(4)                           1,111                           1,293
                                                          
Total senior
living wages                 $139,212                      $138,374
and benefits
                                                                             
Senior
living other
operating
expenses:
Independent
and assisted
living
community                    $       29,831                $         29,722
other
operating
expenses
Continuing
care
retirement
community                            25,093                          23,868
other
operating
expenses
Skilled
nursing
facility                             13,549                          12,474
other
operating
expenses
Other ^(4)                           487                             548
                                                          
Total senior
living other                 $68,960                       $66,612
operating
expenses


     
^(1)   Excludes data for managed communities, rehabilitation hospitals and
       discontinued senior living operations.
       The number of communities operated continuously from January 1, 2012,
^(2)   through March 31, 2013, did not change; as such, there is no separate
       comparable senior living community financial data.
       Average monthly rate is calculated by taking the average daily rate,
^(3)   which is defined as total operating revenue divided by occupied units,
       during the period and multiplying it by 30 days.
       Other senior living relates primarily to rehabilitation and other
^(4)   specialty service revenues and expenses provided at our residential
       facilities and does not include revenue and expenses from our
       rehabilitation hospital operations.
       


FIVE STAR QUALITY CARE, INC.
PERCENT BREAKDOWN OF SENIOR LIVING COMMUNITY REVENUES^(1)

                                                 
                                                   Three months ended
                                                   March 31,
                                                   2013      2012
Independent and assisted living communities:                   
Private and other sources                            99.1%       99.0%
Medicaid                                            0.9%       1.0%
Total                                               100%       100%
                                                                 
Continuing care retirement communities:
Private and other sources                            70.0%       70.7%
Medicare                                             23.5%       22.7%
Medicaid                                            6.5%       6.6%
Total                                               100%       100%
                                                                 
Skilled nursing facilities:
Private and other sources                            25.1%       25.2%
Medicare                                             25.7%       25.1%
Medicaid                                            49.2%      49.7%
Total                                               100%       100%
                                                                 
Total senior living communities:
Private and other sources                            74.3%       74.5%
Medicare                                             13.4%       13.0%
Medicaid                                            12.3%      12.5%
Total                                               100%       100%


     
^(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
                                                                 
                   March31,     December31,     September     June 30,     March
                   2013        2012           30,         2012       31,
                                                  2012                       2012
Independent
and assisted
living                               
communities
(owned):
Number of
communities           31             31              31           31           31
(end of
period)
Number of
units (end of         2,969          2,969           2,969        2,969        2,969
period)
Occupancy             87.4%          88.2%           86.7%        85.7%        85.4%
Avg. monthly       $  3,368      $   3,287        $  3,300      $ 3,327      $ 3,293
rate^(2)
                                                              
Independent
and assisted
living                                               
communities
(leased):
Number of
communities           122            122             122          122          122
(end of
period)
Number of
units (end of         10,046         10,046          10,046       10,046       10,046
period)
Occupancy             88.1%          88.6%           88.3%        88.2%        88.4%
Avg. monthly       $  3,656      $   3,584        $  3,580      $ 3,597      $ 3,580
rate^(2)
                                                              
Continuing
care
retirement
communities
(leased):
Number of
communities           31             31              31           31           31
(end of
period)
Number of
units (end of         7,330          7,330           7,330        7,330        7,330
period)^(3)
Occupancy             83.9%          83.5%           84.1%        84.0%        84.8%
Avg. monthly       $  5,280      $   5,204        $  5,117      $ 5,185      $ 5,166
rate^(2)
                                                              
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)^(4)
Occupancy             79.0%          79.8%           80.2%        80.9%        81.6%
Avg. monthly       $  6,628      $   6,453        $  6,221      $ 6,474      $ 6,265
rate^(2)
                                                           
Total senior
living
communities
(owned and
leased):
Number of
communities           222            222             222          222          222
(end of
period)
Number of
units (end of         23,768         23,768          23,768       23,768       23,768
period)
Occupancy             85.4%          85.7%           85.7%        85.5%        85.9%
Avg. monthly     $  4,507    $   4,418      $  4,367    $ 4,437    $ 4,395
rate^(2)
                                                                               
Managed
communities:
Number of
communities           39             39              30           25           25
(end of
period)
Number of
units (end of         6,682          6,682           4,498        3,736        3,736
period)^(5)
Occupancy             87.1%          87.5%           87.4%        87.6%        87.3%
Avg. monthly       $  4,296      $   4,144        $  3,962      $ 4,000      $ 3,960
rate^(2)
                                                                               
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             63.7%          60.2%           60.7%        59.8%        60.4%
                                                                               
Other
ancillary
services:
Rehabilitation
and wellness
inpatient             53             50              50           48           47
clinics (end
of period)
Rehabilitation
and wellness
outpatient            49             49              46           44           41
clinics (end
of period)
Home health
communities           6              6               6            6            6
served (end of
period)
                                                                         

     
^(1)   Excludes data for discontinued operations.
       Average monthly rate is calculated by taking the average daily rate,
^(2)   which is defined as total operating revenue divided by occupied units,
       during the period and multiplying it by 30 days.
       Includes 2,014 skilled nursing units in communities where assisted
^(3)   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 472 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)

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
condensed consolidated financial statements, for the three months ended March
31, 2013 and 2012.
                                                                   
                        For the three months
                        ended March 31,
                        2013                  2012
Income from
continuing              $    2,314            $    1,222
operations
Add: interest and            1,456                 1,426
other expense
Add: income tax              463                   602
expense
Add: depreciation            6,514                 5,959
and amortization
Less: interest,
dividend and other           (197     )            (205    )
income
Less: income tax        (1,468        )       -            
benefit
EBITDA                       9,082                 9,004
Add: loss on sale
of investments in            -                     1
available for sale
securities
Less: gain on sale
of investments in       (87           )       -            
available for sale
securities
EBITDA excluding        $    8,995           $    9,005   
certain items
                                                                           

Contact:

Five Star Quality Care, Inc.
Timothy A. Bonang, Vice President, Investor Relations
Elisabeth H. Olmsted, Manager, Investor Relations
617-796-8245
 
Press spacebar to pause and continue. Press esc to stop.