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Five Star Quality Care, Inc. Announces Filing of Restated Financial Statements

  Five Star Quality Care, Inc. Announces Filing of Restated Financial
  Statements

      Company Is Now Current With its Filings through September 30, 2013

Business Wire

NEWTON, Mass. -- April 16, 2014

Five Star Quality Care, Inc. (NYSE: FVE) today announced that it has filed
restated financial results for 2011, 2012 and the first and second quarters of
2013. In addition, Five Star has filed its Quarterly Report on Form 10-Q for
the quarter ended September 30, 2013.

“Five Star and our Audit Committee have concluded a thorough review and are
satisfied that Five Star has appropriately addressed matters related to the
restatement,” stated Bruce Mackey, President and Chief Executive Officer. “We
are very pleased to have completed the restatement process as it is an
important step in becoming current with our financial reporting. We can now
turn our attention to completing our delayed Annual Report for 2013, which we
expect to file as soon as reasonably possible.”

The net effects of correcting errors during the restatement process compared
to the previously published financial statements are as follows:

  *Increases to shareholders’ equity of $6.7 million and $8.1 million at
    December 31, 2012 and 2011, respectively.
  *A decrease to net income of $1.4 million (approximately $0.04 per share)
    for the year ended December 31, 2012 and an increase to net income of $6.6
    million (approximately $0.14 per share) for the year ended December 31,
    2011.
  *An increase to shareholders’ equity of $6.9 million at March 31, 2013.
  *An increase to net income of $205,000 (less than $0.01 per share) and
    $103,000 (less than $0.01 per share) for the three months ended March 31,
    2013 and 2012, respectively.
  *An increase to shareholders’ equity of $7.0 million at June 30, 2013.
  *A decrease to net income of $27,000 (less than $0.01 per share) and an
    increase to net income of $178,000 (less than $0.01 per share) for the
    three and six months ended June 30, 2013, respectively.
  *Increases to net income of $272,000 (less than $0.01 per share) and
    $375,000 (less than $0.01 per share) for the three month and six months
    ended June 30, 2012, respectively.

The quarterly report on Form 10-Q for the quarter ended September 30, 2013,
was filed by Five Star today. A balance sheet and income statement as of, and
for the period ended, September 30, 2013, are attached. Five Star expects to
schedule a conference call during which management will discuss, and take
questions, regarding the restatements and updated financial results after its
public reporting becomes current.

Five Star Quality Care, Inc. is a senior living and healthcare services
company which owns, leases and manages senior living communities, including
primarily private pay independent and assisted living communities located
throughout the U.S. Five Star is 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. 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, ALTHOUGH FIVE STAR
EXPECTS TO FILE ITS ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31,
2013 AS SOON AS REASONABLY POSSIBLE, THE AUDIT OF THE ANNUAL FINANCIAL
STATEMENTS WHICH ARE TO BE INCLUDED IN THE 2013 FORM 10-K IS NOT FINISHED AND
WILL REQUIRE ADDITIONAL TIME TO COMPLETE AND THERE CAN BE NO ASSURANCE AS TO
WHEN THE 2013 FORM 10-K WILL BE COMPLETED AND FILED. IN ADDITION, THIS PRESS
RELEASE MAY IMPLY THAT WE WILL BE CURRENT WITH OUR FINANCIAL REPORTING UPON
FILING OUR 2013 FORM 10-K AND THAT WE WILL MAINTAIN CURRENT FILING STATUS.
HOWEVER, IN LIGHT OF THE TIME AND EFFORT INVOLVED WITH COMPLETING OUR RESTATED
FINANCIAL STATEMENTS AND TO COMPLETE OUR 2013 FORM 10-K, WE MAY BE DELAYED IN
COMPLETING FUTURE FILINGS, INCLUDING OUR QUARTERLY REPORT ON FORM 10-Q FOR THE
QUARTERLY PERIOD ENDING MARCH 31, 2014, WHICH IS CURRENTLY DUE ON MAY 12,
2014. YOU SHOULD NOT PLACE UNDUE RELIANCE UPON OUR FORWARD LOOKING STATEMENTS.
EXCEPT AS REQUIRED BY LAW, WE DO NOT INTEND TO UPDATE OR CHANGE ANY FORWARD
LOOKING STATEMENTS AS A RESULT OF NEW INFORMATION, FUTURE EVENTS OR OTHERWISE.

                                                            
                                                                             
FIVE STAR QUALITY CARE,INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
(unaudited)
                                                                             
                                              September 30,     December 31,
                                              2013              2012
                                                                (Restated)
ASSETS
                                                                             
Current assets:
Cash and cash equivalents                     $   19,580        $   24,638
Accounts receivable, net of allowance of
$4,308 and $2,792 at September 30, 2013       38,226            39,205
and December 31, 2012, respectively
Due from related persons                      6,884             6,881
Investments in available for sale
securities, of which $5,100 and $3,684        19,042            12,920
are restricted at September 30, 2013 and
December 31, 2012, respectively
Restricted cash                               8,913             6,548
Prepaid expenses and other current assets     34,534            38,318
Assets of discontinued operations             21,499            30,100
Total current assets                          148,678           158,610
                                                                             
Property and equipment, net                   331,108           337,494
Equity investment in Affiliates Insurance     5,781             5,629
Company
Restricted cash                               8,184             12,166
Restricted investments in available for       11,597            10,580
sale securities
Goodwill and other intangible assets          26,829            27,708
Other long term assets                        40,548            40,382
                                              $   572,725       $   592,569
LIABILITIES AND SHAREHOLDERS’ EQUITY
                                                                             
Current liabilities:
Revolving credit facility, secured,           $   10,000        $   —
principally by real estate
Revolving credit facility, secured,           —                 —
principally by accounts receivable
Convertible senior notes                      —                 24,872
Accounts payable                              30,743            38,035
Accrued expenses                              26,780            28,010
Accrued compensation and benefits             39,302            35,302
Due to related persons                        21,227            19,484
Mortgage notes payable                        1,142             1,092
Accrued real estate taxes                     14,058            10,723
Security deposit liability                    8,493             9,057
Other current liabilities                     15,675            14,775
Liabilities of discontinued operations,
of which $0 and $7,547 relate to mortgage     9,232             16,977
notes payable at September 30, 2013 and
December 31, 2012, respectively
Total current liabilities                     176,652           198,327
                                                                             
Long term liabilities:
Mortgage notes payable                        36,758            37,621
Continuing care contracts                     1,635             1,708
Accrued self-insurance obligations            35,148            34,647
Other long term liabilities                   5,583             6,712
Total long term liabilities                   79,124            80,688
                                                                             
Commitments and contingencies
                                                                             
Shareholders’ equity:
Common stock, par value $.01; 75,000,000
shares authorized, 48,271,522 and
48,234,022 shares issued and outstanding      482               482
at September 30, 2013 and December 31,
2012, respectively
Additional paid in capital                    354,956           354,164
Accumulated deficit                           (41,715       )   (44,455      )
Accumulated other comprehensive income        3,226             3,363
Total shareholders’ equity                    316,949           313,554
                                              $   572,725       $   592,569
                                                                             
                                                                             

FIVE STAR QUALITY CARE,INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
                                              
                    Three months ended              Nine months ended
                    September 30,                   September 30,
                    2013            2012           2013         2012
                                     (Restated)                   (Restated)
Revenues:
Senior living       $  269,839       $  268,645     $ 807,906     $  804,543
revenue
Management fee      2,290            1,277          6,873         3,667
revenue
Reimbursed
costs incurred
on behalf of        51,983           27,247         156,194       76,750
managed
communities
Total revenues      324,112          297,169        970,973       884,960
                                                                             
Operating
expenses:
Senior living
wages and           130,824          131,384        393,641       393,446
benefits
Other senior
living              68,227           64,579         200,317       192,636
operating
expenses
Costs incurred
on behalf of        51,983           27,247         156,194       76,750
managed
communities
Rent expense        48,743           47,659         145,035       142,451
General and         15,081           14,647         45,664        45,580
administrative
Depreciation
and                 6,736            6,175          19,691        18,196
amortization
Gain on             —                —              —             (3,365     )
settlement
Total operating     321,594          291,691        960,542       865,694
expenses
                                                                             
Operating           2,518            5,478          10,431        19,266
income
                                                                             
Interest,
dividend and        191              199            599           638
other income
Interest and        (1,179      )    (1,762       ) (3,990      ) (4,793     )
other expense
Acquisition         (78         )    (100         ) (119        ) (100       )
related costs
(Loss) gain on
early               (599        )    —              (599        ) 45
extinguishment
of debt
Gain on sale of
available for
sale securities
reclassified        36               63             6             62
from other
comprehensive
income
                                                                             
Income from
continuing
operations
before income
taxes and           889              3,878          6,328         15,118
equity in
earnings of
Affiliates
Insurance
Company
Provision for       (226        )    (905         ) (582        ) (5,523     )
income taxes
Equity in
earnings of
Affiliates          64               115            219           236
Insurance
Company
Income from
continuing          727              3,088          5,965         9,831
operations
(Loss) income
from                (925        )    13,125         (3,225      ) 11,764
discontinued
operations
                                                                             
Net income          $  (198     )    $  16,213      $ 2,740       $  21,595
(loss)
                                                                             
Weighted
average shares      48,272           47,927         48,253        47,913
outstanding -
basic
                                                                             
Weighted
average shares      48,417           49,840         49,571        50,185
outstanding -
diluted
                                                    .
Basic income
per share from:
Continuing          $  0.02          $  0.06        $ 0.12        $  0.21
operations
Discontinued        (0.02       )    0.28           (0.06       ) 0.24
operations
Net income per      $  —             $  0.34        $ 0.06        $  0.45
share - basic
                                                                             
Diluted income
per share from:
Continuing          $  0.02          $  0.06        $ 0.12        $  0.21
operations
Discontinued        (0.02       )    0.27           (0.06       ) 0.23
operations
Net income per      $  —             $  0.33        $ 0.06        $  0.44
share - diluted
                                                                             
                                                                             

Contact:

Five Star Quality Care, Inc.
Kimberly Brown, 617-796-8245
Director, Investor Relations
www.fivestarseniorliving.com
 
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