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

The conference call telephone number is (877) 209-9920. Participants calling from outside the United States and Canada should dial (612) 332-1210. 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, August 8, 2012. To hear the replay, dial (320) 365-3844. The replay pass code is 252610.

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 second 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 June 30, 2012, we operated 247 senior living communities with 27,497 living units located in 30 states, including 31 communities (2,954 living units) that we own and operate, 191 communities (20,805 living units) that we lease and operate, and 25 communities (3,738 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 WHICH 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 AND THEIR IMPLICATIONS ARE BASED UPON OUR CURRENT INTENT, BELIEFS OR EXPECTATIONS, BUT THEY ARE NOT GUARANTEED TO OCCUR AND MAY NOT OCCUR AS A RESULT OF VARIOUS FACTORS. FOR EXAMPLE:

  • CONTINUED AVAILABILITY OF BORROWINGS UNDER OUR CREDIT FACILITIES IS SUBJECT TO OUR SATISFYING CERTAIN FINANCIAL COVENANTS AND MEETING OTHER CUSTOMARY CONDITIONS.
  • ACTUAL ANNUAL COSTS UNDER OUR CREDIT FACILITIES WILL BE HIGHER THAN LIBOR PLUS A PREMIUM ON DRAWINGS BECAUSE OF OTHER FEES AND EXPENSES ASSOCIATED WITH THE FACILITIES.
  • THE AMOUNT OF AVAILABLE BORROWINGS UNDER OUR CREDIT FACILITIES IS SUBJECT TO OUR HAVING QUALIFIED COLLATERAL, WHICH IS PRIMARILY BASED ON THE VALUE OF THE PROPERTIES SECURING THE $150.0 MILLION CREDIT FACILITY AND THE VALUE OF OUR ACCOUNTS RECEIVABLES AND INVENTORY SECURING THE $35.0 MILLION CREDIT FACILITY. ACCORDINGLY, THE AVAILABILITY OF BORROWINGS UNDER THESE CREDIT FACILITIES AT ANY TIME MAY BE LESS THAN $150.0 MILLION AND $35.0 MILLION, RESPECTIVELY.
  • THIS PRESS RELEASE STATES THAT WE EXPECT TO BEGIN MANAGING THE 10 COMMUNITIES OWNED BY SNH AND CURRENTLY MANAGED BY SUNRISE BEFORE YEAR END 2012 AND AFTER ALL APPROPRIATE REGULATORY APPROVALS ARE OBTAINED. THE TRANSFER OF OPERATING CONTROL OF EACH OF THE 10 COMMUNITIES IS SUBJECT TO REGULATORY APPROVALS IN THE STATE WHERE EACH COMMUNITY IS LOCATED AS WELL AS CERTAIN APPROVALS FROM THIRD PARTY PAYORS AT CERTAIN COMMUNITIES. 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 STATES THAT WE HAVE ENTERED AN AGREEMENT TO SELL OUR PHARMACY BUSINESS TO OMNICARE FOR CURRENTLY EXPECTED EFFECTIVE NET CASH RECEIPTS OF $39.9 MILLION, BEFORE THIRD PARTY TRANSACTION COSTS, AND WE EXPECT THIS SALE TO CLOSE DURING THE SECOND HALF OF 2012. THE AGREEMENT FOR, AND TIMING OF, THIS SALE IS SUBJECT TO VARIOUS CLOSING CONDITIONS, INCLUDING OMNICARE’S OBTAINING LICENSING TO OPERATE THE PHARMACY BUSINESS. SOME OF THESE CONDITIONS MAY NOT BE MET, THE SALE MAY NOT OCCUR OR THE SALE MAY BE DELAYED. ALSO, AS A RESULT OF ANY FAILURE OF CERTAIN CONDITIONS, THE FINAL SALE PRICE MAY BE REDUCED. FOR EXAMPLE, THE FINAL SALE PRICE MAY BE REDUCED BY AS MUCH AS $2.45 MILLION IF CERTAIN THIRD PARTY CONSENTS ARE NOT OBTAINED; ANY REDUCTION OF THE SALE PRICE WOULD REDUCE THE AMOUNT OF OUR EXPECTED CASH PROCEEDS AND GAIN ON THIS SALE.
  • THIS PRESS RELEASE STATES THAT WE HAD $23.6 MILLION OF CASH AND CASH EQUIVALENTS AT JUNE 30, 2012, AND $145.6 MILLION OF AVAILABILITY UNDER OUR CREDIT FACILITIES, WHICH MAY IMPLY THAT WE HAVE ABUNDANT CASH LIQUIDITY. HOWEVER, 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.
  • 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.

FOR THESE REASONS, AMONG OTHERS, INVESTORS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE UPON FORWARD LOOKING STATEMENTS IN THIS PRESS RELEASE.

 

Supplemental Information, page 1 of 8

 
FIVE STAR QUALITY CARE, INC.
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(in thousands, except share data)
(unaudited)
       

Three months ended June 30,

Six months ended June 30,

2012   2011   2012   2011  
Revenues:
Senior living revenue $ 278,076 $ 265,387 $ 554,296 $ 528,041
Rehabilitation hospital revenue 26,386 26,337 53,173 51,962
Institutional pharmacy revenue 17,232 19,573 35,853 38,910
Management fee revenue 1,302 25 2,390 25

Reimbursed costs incurred on behalf of managed communities

  26,098     562     49,503     562  
Total revenues   349,094     311,884     695,215     619,500  
 
Operating expenses:
Senior living wages and benefits 136,618 133,079 274,992 262,840
Other senior living operating expenses 66,242 61,473 133,204 124,453

Costs incurred on behalf of managed communities

26,098 562 49,503 562
Rehabilitation hospital expenses 23,872 23,445 47,991 47,498
Institutional pharmacy expenses 17,258 18,642 36,008 37,531
Rent expense 50,297 47,841 100,524 95,340
General and administrative 15,389 14,154 30,844 27,824
Depreciation and amortization   6,709     4,616     13,025     8,921  
Total operating expenses   342,483     303,812     686,091     604,969  
 
Operating income 6,611 8,072 9,124 14,531
 
Interest and other income 246 331 463 649
Interest and other expense (1,605 ) (870 ) (3,031 ) (1,371 )
Acquisition related costs - (1,202 ) - (1,304 )

Equity in income of Affiliates Insurance Company

76 46 121 83
Gain on settlement 3,365 - 3,365 -
Gain on early extinguishment of debt 45 - 45 1

Gain (loss) on sale of available for sale securities reclassified from other comprehensive income

  -     51     (1 )   127  
 

Income from continuing operations before income taxes

8,738 6,428 10,086 12,716
Provision for income taxes   (3,807 )   (441 )   (4,409 )   (820 )
Income from continuing operations 4,931 5,987 5,677 11,896
Loss from discontinued operations   (293 )   (791 )   (670 )   (2,567 )
 
Net income $ 4,638   $ 5,196   $ 5,007   $ 9,329  
 
 
Weighted average shares outstanding - basic   47,914     37,179     47,906     36,602  
 
Weighted average shares outstanding - diluted   49,953     40,046     47,906     39,481  
 
Basic income per share from:
Continuing operations $ 0.10 $ 0.16 $ 0.12 $ 0.33
Discontinued operations   (0.01 )   (0.02 )   (0.01 )   (0.07 )
Net income per share - basic $ 0.09   $ 0.14   $ 0.11   $ 0.26  
 
Diluted income per share from:
Continuing operations $ 0.10 $ 0.16 $ 0.12 $ 0.32
Discontinued operations   (0.01 )   (0.02 )   (0.01 )   (0.07 )
Net income per share - diluted $ 0.09   $ 0.14   $ 0.11   $ 0.25  
 
 

Supplemental Information, page 2 of 8

 
FIVE STAR QUALITY CARE, INC.
CONDENSED CONSOLIDATED BALANCE SHEET DATA
(in thousands)
(unaudited)
   

June 30, 2012

December 31, 2011

Assets
Current assets:
Cash and cash equivalents $ 23,635 $ 28,374
Accounts receivable, net of allowance 63,130 64,265
Investments in available for sale securities 14,993 9,114
Restricted cash 6,507 4,838
Prepaid expenses and other current assets 22,073 26,250
Assets of discontinued operations   8,401   8,675
Total current assets 138,739 141,516
 
Property and equipment, net 337,836 335,256
Restricted cash 6,313 4,092
Restricted investments in available for sale securities 11,299 13,115
Goodwill, equity investment and other long term assets   87,498   89,498
Total assets $ 581,685 $ 583,477
 
Liabilities and Shareholders' Equity
Current liabilities:
Revolving credit facility, secured, principally by real estate $ 37,500 $ -
Revolving credit facility, secured, principally by accounts receivable - -
Bridge loan from Senior Housing Properties Trust - 38,000
Other current liabilities   158,235   151,331
Total current liabilities 195,735 189,331
 
Mortgage notes payable 38,175 38,714
Convertible senior notes 24,872 37,282
Other long term liabilities 36,934 37,956
Shareholders’ equity   285,969   280,194
Total liabilities and shareholders' equity $ 581,685 $ 583,477
 
 

Supplemental Information, page 3 of 8

 
FIVE STAR QUALITY CARE, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
(unaudited)
       
Three months ended June 30, Six months ended June 30,
2012   2011   2012   2011  
 
Cash flows from operating activities:
Net income $ 4,638 $ 5,196 $ 5,007 $ 9,329

Adjustments to reconcile net income to cash provided by operating activities:

Depreciation and amortization 6,709 4,614 13,025 8,921
Gain on early extinguishment of debt (45 ) (1 ) (45 ) (1 )
Loss from discontinued operations 293 793 670 2,567
Loss (gain) on sale of available for sale securities - (51 ) 1 (127 )

Equity in income of Affiliates Insurance Company

(76 ) (46 ) (121 ) (83 )
Stock-based compensation 273 271 490 464
Provision for losses on receivables 1,243 1,578 2,651 4,266
Changes in assets and liabilities:
Accounts receivable 733 (150 ) (1,516 ) (2,451 )
Prepaid expenses and other assets 4,629 2,785 4,747 172
Accounts payable and accrued expenses 1,650 (7,388 ) 2,904 (789 )
Accrued compensation and benefits 756 1,497 5,684 9,099
Due to related persons 2,489 (406 ) (2,703 ) (424 )
Other current and long term liabilities   127     1,919     (46 )   502  
Cash provided by operating activities   23,419     10,611     30,748     31,445  
 
Net cash provided by (used in) discontinued operations   (585 )   (970 )   (316 )   (2,365 )
 
Cash flows from investing activities:
Acquisition of property and equipment (15,483 ) (14,963 ) (28,478 ) (30,052 )

Acquisition of senior living communities, net of working capital assumed

- (40,486 ) - (53,486 )
Payments from restricted cash and investment accounts, net (754 ) (934 ) (3,890 ) (2,419 )
Purchase of available for sale securities (4,554 ) - (4,554 ) -

Proceeds from disposition of property and equipment held for sale

7,775 4,485 14,093 15,322
Proceeds from sale of available for sale securities   -     1,108     772     1,281  
Cash used in investing activities   (13,016 )   (50,790 )   (22,057 )   (69,354 )
 
Cash flows from financing activities:
Net proceeds from issuance of common stock - 54,350 - 54,350
Proceeds from borrowings on credit facilities 47,500 7,000 47,500 12,000
Repayments of borrowings on credit facilities (10,000 ) (12,000 ) (10,000 ) (12,000 )

Proceeds from borrowing on the bridge loan from Senior Housing Properties Trust

41,000 - 41,000

Repayments of borrowing on the bridge loan from Senior Housing Properties Trust

(38,000 ) (32,000 ) (38,000 ) (32,000 )
Purchase and retirement of convertible senior notes (12,038 ) - (12,038 ) (604 )
Repayments of mortgage notes payable   (290 )   (51 )   (576 )   (84 )
Cash (used in) provided by financing activities   (12,828 )   58,299     (13,114 )   62,662  
 
Change in cash and cash equivalents during the period (3,010 ) 17,150 (4,739 ) 22,388
Cash and cash equivalents at beginning of period   26,645     26,008     28,374     20,770  
Cash and cash equivalents at end of period $ 23,635   $ 43,158   $ 23,635   $ 43,158  
 
Supplemental cash flow information:
Cash paid for interest $ 1,749 $ 119 $ 2,751 $ 1,195
Cash paid for income taxes $ 1,113 $ 139 $ 1,235 $ 1,042
 
Non-cash activities:
Issuance of common stock $ 114 $ 298 $ 114 $ 298
Real estate acquisition $ - $ (19,952 ) $ - $ (19,952 )
Assumption of mortgage notes payable $ - $ 19,952 $ - $ 19,952
 
 

Supplemental Information, page 4 of 8

 
FIVE STAR QUALITY CARE, INC.
SENIOR LIVING COMMUNITY OPERATING DATA (1)
(dollars in thousands, except average daily rate)
       
 
Three months ended Six months ended
  June 30, June 30,
  2012   2011 2012 2011
 

Number of owned and leased communities (end of period)

222 217 222 217

Number of owned and leased living units (end of period)

23,759 23,122 23,759 23,122
Number of living units % growth 2.8% 2.8%
 
Occupancy 85.6% 85.2% 85.7% 85.4%
Average daily rate (ADR) $ 147.89 $ 150.93 $ 147.19 $ 151.60
ADR % change -2.0% -2.9%
 
Percent breakdown of senior living revenues:
Medicaid 12.9% 12.6% 12.7% 12.7%
Medicare 12.9% 15.4% 13.0% 15.7%
Private and other sources   74.2%   72.0%   74.3%   71.6%
Total   100.0%   100.0%   100.0%   100.0%
 
Senior living revenues $ 278,076 $ 265,387 $ 554,296 $ 528,041
Senior living revenues % growth 4.8% 5.0%
 
Senior living wages and benefits $ 136,618 $ 133,079 $ 274,992 $ 262,840

Senior living wages and benefits as a % of senior living revenues

49.1% 50.1% 49.6% 49.8%
Other senior living operating expenses $ 66,242 $ 61,473 $ 133,204 $ 124,453

Other senior living operating expenses as a % of senior living revenues

23.8% 23.2% 24.0% 23.6%
Community expenses (2) % growth 4.3% 5.4%
 
(1) Excludes data for managed communities and discontinued senior living operations.
(2) Community expenses consist of senior living wages and benefits and other senior living operating expenses as shown on our condensed consolidated statement of income.

Supplemental Information, page 5 of 8

 
FIVE STAR QUALITY CARE, INC.
COMPARABLE SENIOR LIVING COMMUNITY OPERATING DATA (1)
(dollars in thousands, except average daily rate)
       
Three months ended Six months ended
June 30, (2) June 30, (3)
2012 2011 2012 2011
 
Number of owned and leased communities (end of period) 209 209 209 209
Number of owned and leased living units (end of period) 22,170 22,170 22,170 22,170
 
Occupancy 85.2% 85.2% 85.4% 85.4%
Average daily rate (ADR) $ 152.05 $ 151.55 $ 151.34 $ 151.91
ADR % change 0.3% -0.4%
 
Percent breakdown of senior living revenues:
Medicaid 13.5% 12.7% 13.2% 12.8%
Medicare 13.5% 15.6% 13.6% 15.8%
Private and other sources   73.0%   71.7%   73.2%   71.4%
Total   100.0%   100.0%   100.0%   100.0%
 
Senior living revenues $ 265,480 $ 263,095 $ 529,087 $ 525,749
Senior living revenues % growth 0.9% 0.6%
 
Senior living wages and benefits $ 132,498 $ 132,215 $ 266,641 $ 261,976
Senior living wages and benefits as a % of senior living revenues 49.9% 50.3% 50.4% 49.8%
Other senior living operating expenses $ 63,030 $ 60,940 $ 126,827 $ 123,920
Other senior living operating expenses as a % of senior living revenues 23.7% 23.2% 24.0% 23.6%
Community expenses (4) % growth 1.2% 2.0%
 
 
(1) Excludes data for managed communities and discontinued senior living operations.
(2) Communities that we have operated continuously since April 1, 2011.
(3) Communities that we have operated continuously since January 1, 2011.
(4) Community expenses consist of senior living wages and benefits and other senior living operating expenses as shown on our condensed consolidated

statement of income.

 
 

Supplemental Information, page 6 of 8

 
FIVE STAR QUALITY CARE, INC.
SENIOR LIVING COMMUNITY FINANCIAL DATA (1)
(in thousands)
       
Three months ended Six months ended
  June 30, June 30,
  2012   2011 2012 2011
 
Independent and assisted living community revenue $ 223,326 $ 211,576 $ 446,437 $ 419,207
Skilled nursing facility revenue   54,750   53,811   107,859   108,834
Total senior living revenue $ 278,076 $ 265,387 $ 554,296 $ 528,041
 
Independent and assisted living community wages and benefits $ 102,467 $ 98,393 $ 206,379 $ 193,638
Skilled nursing facility wages and benefits   34,151   34,686   68,613   69,202
Total senior living wages and benefits $ 136,618 $ 133,079 $ 274,992 $ 262,840
 
Independent and assisted living community operating expenses $ 53,005 $ 48,650 $ 107,144 $ 98,317
Skilled nursing facility operating expenses   13,237   12,823   26,060   26,136
Total other senior living operating expenses $ 66,242 $ 61,473 $ 133,204 $ 124,453
 
(1) Excludes data for managed communities and discontinued senior living operations.
                         
 
COMPARABLE SENIOR LIVING COMMUNITY FINANCIAL DATA (1)
 
Three months ended Six months ended
  June 30, (2) June 30, (3)
  2012   2011 2012 2011
 
Independent and assisted living community revenue $ 210,730 $ 209,284 $ 421,228 $ 416,915
Skilled nursing facility revenue   54,750   53,811   107,859   108,834
Total senior living revenue $ 265,480 $ 263,095 $ 529,087 $ 525,749
 
Independent and assisted living community wages and benefits $ 98,347 $ 97,529 $ 198,028 $ 192,774
Skilled nursing facility wages and benefits   34,151   34,686   68,613   69,202
Total senior living wages and benefits $ 132,498 $ 132,215 $ 266,641 $ 261,976
 
Independent and assisted living community operating expenses $ 49,793 $ 48,117 $ 100,767 $ 97,784
Skilled nursing facility operating expenses   13,237   12,823   26,060   26,136
Total other senior living operating expenses $ 63,030 $ 60,940 $ 126,827 $ 123,920
 
(1) Excludes data for managed communities and discontinued senior living operations.
(2) Communities that we have operated continuously since April 1, 2011.
(3) Communities that we have operated continuously since January 1, 2011.
 
 

Supplemental Information, page 7 of 8

 
FIVE STAR QUALITY CARE, INC.
OTHER OPERATING DATA (1)
(dollars in thousands, except average daily rate)
       
Three months ended Six months ended
June 30, June 30,
2012 2011 2012 2011
Number of senior living communities (2) (end of period):
Assisted and independent living communities, owned 31 27 31 27
Assisted and independent living communities, leased 153 152 153 152
Assisted and independent living communities, managed   25   10   25   10
Total number of assisted and independent living communities   209   189   209   189
 
 
Skilled nursing communities, leased   38   38   38   38
 
Total number of senior living communities   247   227   247   227
 
Number of senior living units (end of period):
Assisted and independent living communities, owned 2,954 2,413 2,954 2,413
Assisted and independent living communities, leased (3) 17,382 17,286 17,382 17,286
Assisted and independent living communities, managed (4)   3,738   934   3,738   934
Total number of assisted and independent living units   24,074   20,633   24,074   20,633
 
Skilled nursing communities, leased (5)   3,423   3,423   3,423   3,423
 
Total number of senior living units   27,497   24,056   27,497   24,056
 
Senior living revenues:
Assisted and independent living communities $ 219,961 $ 209,189 $ 439,863 $ 414,608
Skilled nursing communities 54,750 53,811 107,859 108,834
Other (6)   3,365   2,387   6,574   4,599
Total senior living revenues $ 278,076 $ 265,387 $ 554,296 $ 528,041
 
 

Senior living data (7) :

 

Assisted and independent living communities occupancy 86.3% 85.8% 86.5% 85.9%
Assisted and independent living communities ADR $ 137.19 $ 140.65 $ 136.90 $ 141.05
Assisted and independent living communities ADR % change -2.5% -2.9%
 
Skilled nursing communities occupancy 80.9% 82.0% 81.2% 82.9%
Skilled nursing communities ADR $ 215.79 $ 210.72 $ 212.30 $ 211.88
Skilled nursing communities ADR % change 2.4% 0.2%
 
Rehabilitation hospital data:
Rehabilitation hospital units 321 321 321 321
Rehabilitation hospital occupancy 59.8% 61.8% 60.1% 61.3%
 
(1) Excludes data for institutional pharmacy operations and discontinued senior living operations.
(2) Communities are categorized by the type of living units which constitute a majority of the total living units at the community.

(3) Includes 2,046 skilled nursing units in communities where assisted living and independent living services are the predominant services provided for the three and six months ended June 30, 2012 and 2011.

(4) Includes 71 skilled nursing units in communities where assisted and independent living services are the predominant services provided for the three and six months ended June 30, 2012 and 2011.

(5) Includes 77 assisted living and independent living units in communities where skilled nursing services are the predominant services provided for the three and six months ended June 30, 2012 and 2011.

(6) Other senior living revenues 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.

(7) Excludes data for managed communities.
 
 

Supplemental Information, page 8 of 8

 

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 are not financial measures determined according to U.S. generally accepted accounting principles, or GAAP. We consider EBITDA and EBITDA excluding certain items 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 to the performance of our competitors. EBITDA and EBITDA excluding certain items 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 or any other financial operating or performance measure established by GAAP. The reconciliation of income from continuing operations to EBITDA and EBITDA excluding certain items is as follows:

   
Three months ended Six months ended
June 30, June 30,
  2012       2011     2012       2011  
Income from continuing operations $ 4,931 $ 5,987 $ 5,677 $ 11,896
Add: interest and other expense 1,605 870 3,031 1,371
Add: income tax expense 3,807 441 4,409 820
Add: depreciation and amortization 6,709 4,616 13,025 8,921
Less: interest and other income   (246 )   (331 )   (463 )   (649 )
EBITDA 16,806 11,583 25,679 22,359
Add: acquisition related costs - 1,202 - 1,304
Less: gain on settlement (3,365 ) - (3,365 ) -

Less or Add: gain, or loss, as applicable on sale of investments in available for sale securities

  -     (51 )   1     (127 )
EBITDA excluding certain items $ 13,441   $ 12,734   $ 22,315   $ 23,536  




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