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

Stocks in this article: FVE

Five Star Quality Care, Inc. (NYSE: FVE) today announced its financial results for the quarter and nine months ended September 30, 2012.

Third Quarter 2012 Financial Highlights:

  • Total revenues for the third quarter of 2012 increased 7.0% to $332.4 million from $310.6 million for the same period in the previous year.
  • Net income for the third quarter of 2012 was $16.4 million, or $0.34 and $0.33 per share, basic and diluted, respectively, compared to a loss in the third quarter of 2011 of $(528,000), or $(0.01) per basic and diluted share. Net income in the 2012 period included a gain from discontinued operations, including the sale of FVE’s pharmacy business, of $13.0 million. Net income in the 2011 period included a loss from discontinued operations of $(4.1) million.
  • Income from continuing operations for the third quarter of 2012 was $3.4 million, or $0.07 per basic and diluted share, compared to $3.5 million, or $0.08 per basic and diluted share, for the same period in the previous year. Income from continuing operations for the third quarter of 2011 included a gain on sale of available for sale securities of $529,000, or $0.01 per basic and diluted share.
  • Earnings before interest, taxes, depreciation and amortization, or EBITDA, for the third quarter of 2012 were $11.7 million compared to $9.9 million for the same period in the previous year. EBITDA for the third quarter of 2011 included a gain on sale of available for sale securities of $529,000. EBITDA excluding these and certain other items was $11.8 million and $9.6 million in the third quarters of 2012 and 2011, respectively. A reconciliation of income from continuing operations determined in accordance with U.S. generally accepted accounting principles, or GAAP, to EBITDA and EBITDA excluding certain items for the quarters ended September 30, 2012 and 2011 appears later in this press release.

Third Quarter 2012 Operating Highlights:

  • Senior living occupancy at our owned and leased senior living communities for the third quarter of 2012 was 85.7% compared to 86.0% for the same period in the previous year.
  • Senior living average daily rate, or ADR, at our owned and leased senior living communities for the third quarter of 2012 decreased by 1.3% to $145.56 from $147.46 for the same period in the previous year. This decrease resulted primarily from lower rates at certain acquired communities.
  • The percentage of senior living revenues derived from residents’ private resources for the third quarter of 2012 at our owned and leased senior living communities increased to 75.0% from 73.0% for the same period in the previous year.
  • For those owned and leased senior living communities that we operated continuously since July 1, 2011, or comparable communities, occupancy in the third quarter of 2012 decreased to 85.7% from 86.0% for the same period in the previous year.
  • The ADR at comparable communities for the third quarter of 2012 decreased by 0.5% to $146.88 from $147.65 for the same period in the previous year.
  • Our fee revenues from managed senior living communities in the third quarter of 2012 were $1.3 million compared to $359,000 in the third quarter of 2011.

Year to Date Financial Highlights:

  • Total revenues for the nine months ended September 30, 2012 increased 11.3% to $991.8 million from $891.2 million for the same period in the previous year.
  • Net income for the nine months ended September 30, 2012 was $21.4 million, or $0.45 per basic and diluted share, compared to $8.8 million, or $0.22 per basic and diluted share, for the same period in the previous year. Net income in the 2012 period included a gain from discontinued operations, including the sale of FVE’s pharmacy business, of $11.5 million. Net income for the 2011 period included a loss from discontinued operations of $(6.0) million.
  • Income from continuing operations for the nine months ended September 30, 2012 was $9.9 million, or $0.21 per basic and diluted share, compared to $14.8 million, or $0.37 and $0.36 per share, basic and diluted, respectively, for the same period in the previous year. Income from continuing operations for the nine months ended September 30, 2012 included a gain on settlement of our litigation with Sunrise Senior Living, Inc., or Sunrise, of $1.9 million (net of taxes), or $0.04 per basic and diluted share. Income from continuing operations for the nine months ended September 30, 2011 included acquisition costs of $1.5 million, or $0.04 per basic and diluted share, and a gain on sale of available for sale securities of $656,000, or $0.02 per basic and diluted share.
  • EBITDA for the nine months ended September 30, 2012 was $37.6 million compared to $30.9 million for the same period in the previous year. EBITDA for the nine months ended September 30, 2012 included a gain on settlement of our litigation with Sunrise that increased EBITDA by $3.4 million and EBITDA for the nine months ended September 30, 2011 included a gain on sale of available for sale securities of $656,000, which was offset by acquisition costs of $1.5 million. EBITDA excluding these and certain other items was $34.2 million and $31.8 million in the nine months ended September 30, 2012 and 2011, respectively. A reconciliation of income from continuing operations determined in accordance with GAAP to EBITDA and EBITDA excluding certain items for the nine months ended September 30, 2012 and 2011 appears later in this press release.

Other Highlights:

Since May 2012, we have either begun to manage or agreed to manage 14 senior living communities with a combined 3,159 living units for Senior Housing Properties Trust (NYSE: SNH) and its affiliates. All of these communities are focused on providing independent and/or assisted living services and generate a large majority of their revenues from residents’ private resources, not from Medicare or Medicaid government funded programs.

  • In May 2012, we reached agreement with SNH and Sunrise whereby Sunrise will terminate its leases for 10 senior living communities owned by SNH and we will begin to manage the 10 communities for SNH’s account. These 10 communities include 2,472 living units and are located in six states. In September 2012, we began to manage three of these senior living communities with a combined 407 living units. In October 2012, we began managing an additional five of these senior living communities with 1,308 living units. We currently expect to begin managing the remaining two of these communities with a combined 757 living units in the fourth quarter of 2012 after all appropriate regulatory approvals are obtained.
  • Also in May 2012, we began to manage a senior living community with 59 living units located in South Carolina, and we began to manage an adjacent South Carolina senior living community with 232 living units in July 2012.
  • In August 2012, we began to manage two senior living communities with a combined 396 living units located in New York and Missouri.

In September 2012, we completed the previously announced sale of our pharmacy business to Omnicare, Inc., or Omnicare. We received $34.3 million in sale proceeds from Omnicare, which included $3.8 million in working capital. Further, we retained certain additional items of net working capital invested in the pharmacy business of $3.5 million. Accordingly, we expect to receive a total of $37.8 million (before taxes and transaction costs) in net cash receipts resulting from the sale. We recorded a pre-tax capital gain on sale of the pharmacy business of approximately $23.3 million. The operating results for our pharmacy business prior to the sale, as well as the gain on sale, net of taxes, are included in our discontinued operations.

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