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Five Star Quality Care, Inc. Reports Second Quarter 2013 Results And Announces Intention To Sell 11 Senior Living Communities With 753 Living Units That Receive The Majority Of Their Revenues From Medicaid/Medicare

Five Star Quality Care, Inc. (NYSE: FVE) today announced its financial results for the quarter and six months ended June 30, 2013.

Second Quarter 2013 Financial Highlights:

  • Total revenues for the second quarter of 2013 increased 9.0% to $351.9 million from $322.8 million for the same period in 2012.
  • Earnings before interest, taxes, depreciation and amortization, or EBITDA, for the second quarter of 2013 were $12.3 million compared to $17.1 million for the same period in 2012. EBITDA for the second quarter of 2012 included a gain on settlement of our litigation with Sunrise Senior Living, Inc., or Sunrise, which increased EBITDA by $3.4 million. EBITDA excluding that gain and certain other items was $12.5 million and $13.7 million for the second quarters of 2013 and 2012, 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 June 30, 2013 and 2012 appears later in this press release.
  • Income from continuing operations for the second quarter of 2013 was $2.7 million, or $0.06 per basic and diluted share, compared to $5.3 million, or $0.10 per basic and diluted share for the same period in 2012. Income from continuing operations for the second quarter of 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.
  • Net income for the second quarter of 2013 was $825,000, or $0.02 per basic and diluted share, compared to $4.6 million, or $0.09 per basic and diluted share for the same period in 2012. Net income in the 2013 period included a loss from discontinued operations of $1.8 million. Net income in the 2012 period included a gain on settlement of our litigation with Sunrise of $1.9 million (net of taxes) and a loss from discontinued operations of 674,000.

Second Quarter 2013 Operating Highlights:

  • Occupancy at our owned and leased senior living communities for the second quarter of 2013 was 85.5% compared to 86.0% for the same period in 2012.
  • The average monthly rate at our owned and leased senior living communities for the second quarter of 2013 increased by 0.8% to $4,443 from $4,406 for the same period in 2012.
  • The percentage of revenues derived from residents’ private resources for the second quarter of 2013 at our owned and leased senior living communities increased 90 basis points to 76.7% from 75.8% for the same period in 2012.
  • Our fee revenues from managed senior living communities in the second quarter of 2013 increased to $2.3 million compared to $1.3 million for the same period in 2012.

Year to Date Financial Highlights:

  • Total revenues for the six months ended June 30, 2013 increased 9.7% to $703.1 million from $640.8 million for the same period in 2012.
  • EBITDA for the six months ended June 30, 2013 was $22.5 million compared to $26.3 million for the same period in 2012. EBITDA for the six months ended June 30, 2012 included a gain on settlement of our litigation with Sunrise that increased EBITDA by $3.4 million. EBITDA excluding that gain and certain other items was $22.5 million and $22.9 million for the six months ended June 30, 2013 and 2012, respectively. A reconciliation of income from continuing operations determined in accordance with GAAP to EBITDA and EBITDA excluding certain items for the six months ended June 30, 2013 and 2012 appears later in this press release.
  • Income from continuing operations for the six months ended June 30, 2013 was $6.1 million, or $0.13 per basic and diluted share, compared to $6.5 million, or $0.14 per basic and diluted share for the same period in 2012. Income from continuing operations for the six months ended June 30, 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. Income from continuing operations for the six months ended June 30, 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.
  • Net income for the six months ended June 30, 2013 was $2.8 million, or $0.06 per basic and diluted share, compared to $5.0 million, or $0.11 per basic and diluted share for the same period in 2012. Net income in the 2013 period included a loss from discontinued operations of $3.4 million. Net income in the 2012 period included a gain on settlement of our litigation with Sunrise of $1.9 million (net of taxes) and a loss from discontinued operations of $1.5 million.

Intention to Sell 11 Senior Living Communities with 753 Living Units that Receive the Majority of Their Revenues from Medicaid/Medicare:

In June 2013, we and Senior Housing Properties Trust, or SNH, agreed that SNH will offer for sale 10 senior living communities with 721 living units, which we lease from SNH. Seven of these 10 communities with 578 living units are skilled nursing facilities, or SNFs, and three of these communities with 143 living units are assisted living communities. Also in June 2013, we decided to offer for sale one assisted living community we own with 32 living units. In aggregate, these communities receive the majority of their revenues from Medicare/Medicaid reimbursements. We are in the process of offering these communities for sale, but we can provide no assurance that sales of these communities will occur. With regard to the 10 communities that we lease from SNH, our rent payable to SNH will be reduced if and as these sales may occur pursuant to our lease terms with SNH. The operating results of these 11 communities are included in our discontinued operations and they generated net losses of $1.8 million during the second quarter of 2013.

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