Five Star Quality Care, Inc. Reports Fourth Quarter And Year End 2011 Results

Five Star Quality Care, Inc. (NYSE: FVE) today announced its financial results for the quarter and year ended December 31, 2011.

Fourth Quarter 2011 Financial Highlights:
  • Total revenues for the fourth quarter of 2011 increased 7.8% to $332.8 million from $308.8 million for the same period in the previous year.
  • Income from continuing operations for the fourth quarter of 2011 was $52.7 million compared to $6.9 million for the same period in the previous year.
  • Income per share from continuing operations for the fourth quarter of 2011 was $1.11 and $1.05 per share, basic and diluted, respectively, compared to $0.19 per basic and diluted share for the same period in the previous year.
  • Income from continuing operations for the fourth quarter of 2011 included certain items that, in the aggregate, increased our earnings by $51.8 million, or $1.09 and $1.03 per share, basic and diluted, respectively. These items were $50.7 million income tax benefit related to the reversal of our valuation allowance, $1.4 million income tax benefit related to impairment of long lived assets and $3.5 million gain on sale of available for sale securities partially offset by an impairment of long lived assets of $3.5 million and acquisition related costs of $229,000. Income from continuing operations for the fourth quarter of 2010 included certain items that, in aggregate, increased our earnings by $1.0 million, or $0.03 per basic and diluted share. These items were a $933,000 gain on sale of available for sale securities and a $108,000 gain on early extinguishment of debt.
  • Earnings before interest, taxes, depreciation and amortization, or EBITDA, for the fourth quarter of 2011 was $8.8 million compared to $11.9 million for the same period in the previous year. EBITDA for the fourth quarter of 2011 included those items noted above that, in aggregate, decreased our EBITDA by a net amount of $269,000, and EBITDA for the fourth quarter of 2010 included those items noted above that, in aggregate, increased our EBITDA by $1.0 million. EBITDA excluding these items was $9.0 million and $10.9 million in the fourth quarters of 2011 and 2010, 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 December 31, 2011 and 2010 appears later in this press release.

Fourth Quarter 2011 Operating Highlights:
  • Senior living occupancy at our owned and leased senior living communities for the fourth quarter of 2011 was 86.2% 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 fourth quarter of 2011 decreased by 3.3% to $143.73 from $148.56 for the same period in the previous year.
  • The percentage of senior living revenues derived from residents’ private resources at our owned and leased senior living communities for the fourth quarter of 2011 increased to 74.7% from 71.4% for the same period in the previous year.
  • For those owned and leased senior living communities that we operated continuously since October 1, 2010, or comparable communities, occupancy for the fourth quarter of 2011 was 85.9% compared to 86.0% for the same period in the previous year.
  • The ADR at comparable communities for the fourth quarter of 2011 decreased by 0.5% to $147.85 from $148.56 for the same period in the previous year.

Fiscal Year Financial Highlights:
  • Total revenues for the year ended December 31, 2011 increased 5.6% to $1.28 billion from $1.21 billion for the same period in the previous year.
  • Income from continuing operations for the year ended December 31, 2011 was $68.3 million compared to $25.6 million for the same period in the previous year.
  • Income per share from continuing operations for the year ended December 31, 2011 was $1.62 and $1.54 per share, basic and diluted, respectively, compared to $0.72 and $0.69 per share, basic and diluted, respectively, for the same period in the previous year.
  • Income from continuing operations for the year ended December 31, 2011 included certain items that, in aggregate, increased our earnings by $51.0 million, or $1.21 and $1.13 per share, basic and diluted, respectively. These items were a $50.7 million income tax benefit related to the reversal of our valuation allowance, $1.4 million income tax benefit related to impairment of long lived assets, $4.1 million gain on sale of available for sale securities and a $1,000 gain on early extinguishment of debt partially offset by an impairment of long lived assets of $3.5 million and acquisition related costs of $1.8 million. Income from continuing operations for the year ended December 31, 2010 included certain items that, in aggregate, increased our earnings by $1.7 million, or $0.05 and $0.04 per share, basic and diluted, respectively. These items were a $933,000 gain on sale of available for sale securities, a $592,000 gain on early extinguishment of debt and a $142,000 net gain on the divestment of our auction rate securities.
  • EBITDA for the year ended December 31, 2011 was $41.5 million compared to $43.8 million for the same period in the previous year. EBITDA for the year ended December 31, 2011 included those items noted above that, in aggregate, decreased our EBITDA by a net amount of $1.1 million, and EBITDA for the year ended December 31, 2010 included those items noted above that, in aggregate, increased our EBITDA by $1.7 million. EBITDA excluding these items was $42.6 million for 2011 compared with $42.2 million for the same period in the previous year. A reconciliation of income from continuing operations determined in accordance with GAAP to EBITDA and EBITDA excluding certain items for the years ended December 31, 2011 and 2010 appears later in this press release.

Conference Call:

On February 16, 2012 at 10:00 a.m. Eastern Standard Time, we will host a conference call to discuss the fourth quarter and year end financial results. Following management’s presentation, there will be a question and answer period.

The conference call telephone number is (877) 260-8898. Participants calling from outside the United States and Canada should dial (612) 332-0718. 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 Standard Time Thursday, February 23, 2012. To hear the replay, dial (320) 365-3844. The replay pass code is 227509.

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 fourth quarter 2011 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. We operate 245 senior living communities with 27,159 living units located in 30 states, including 31 communities (2,954 living units) that we own and operate, 191 communities (20,811 living units) that we lease and operate and 23 communities (3,394 living units) that we manage. These communities include independent living, assisted living and skilled nursing communities. We also operate five institutional pharmacies and two rehabilitation hospitals. We are headquartered in Newton, Massachusetts.
 
FIVE STAR QUALITY CARE, INC.CONSOLIDATED STATEMENT OF INCOME(in thousands, except per share data)(unaudited)
         
Three months ended

December 31,
Year ended

December 31,
2011 2010 2011 2010
Revenues:
Senior living revenue $ 274,733 $ 263,206 $ 1,078,380 $ 1,033,935
Rehabilitation hospital revenue 27,085 26,124 105,320 100,041
Institutional pharmacy revenue 18,790 19,515 76,614 79,285
Management fee revenue 515 - 898 -

Reimbursed costs incurred on behalf of managed communities
  11,665     -     20,552     -  
Total revenues   332,788     308,845     1,281,764     1,213,261  
 
Operating expenses:
Senior living wages and benefits 137,411 131,367 536,386 513,462
Other senior living operating expenses 66,532 61,318 259,655 244,109
Costs incurred on behalf of managed communities 11,665 - 20,552 -
Rehabilitation hospital expenses 24,507 23,994 95,305 92,190
Institutional pharmacy expenses 18,433 19,329 74,436 77,552
Rent expense 49,935 47,468 195,415 188,304
General and administrative 15,298 14,511 57,540 55,486
Depreciation and amortization   6,348     4,162     21,127     16,034  
Total operating expenses   330,129     302,149     1,260,416     1,187,137  
 
Operating income 2,659 6,696 21,348 26,124
 
Interest, dividend and other income 278 195 1,295 1,816
Interest and other expense (1,512 ) (546 ) (3,917 ) (2,596 )
Acquisition related costs (229 ) - (1,759 ) -
Gain on investments in trading securities - - - 4,856
Loss on UBS put right related to auction rate securities - - - (4,714 )
Equity in income (losses) of Affiliates Insurance Company 28 16 139 (1 )
Gain on early extinguishment of debt - 108 1 592
Gain on sale of available for sale securities 3,460 933 4,116 933
Impairment of long lived assets   (3,500 )   -     (3,500 )   -  
 

Income from continuing operations before income taxes
1,184 7,402 17,723 27,010
Benefit (provision) for income taxes   51,560     (518 )   50,554     (1,448 )
Income from continuing operations 52,744 6,884 68,277 25,562
Income (loss) from discontinued operations   2,657     (788 )   (4,076 )   (2,070 )
 
Net income $ 55,401   $ 6,096   $ 64,201   $ 23,492  
 
 
Weighted average shares outstanding - basic   47,702     35,849     42,161     35,736  
 
Weighted average shares outstanding - diluted   50,570     38,924     45,034     39,207  
 
Basic income per share from:
Continuing operations $ 1.11 $ 0.19 $ 1.62 $ 0.72
Discontinued operations   0.05     (0.02 )   (0.10 )   (0.06 )
Net income per share - basic $ 1.16   $ 0.17   $ 1.52   $ 0.66  
 
Diluted income per share from:
Continuing operations $ 1.05 $ 0.19 $ 1.54 $ 0.69
Discontinued operations   0.05     (0.02 )   (0.09 )   (0.05 )
Net income per share - diluted $ 1.10   $ 0.17   $ 1.45   $ 0.64  
 
 
FIVE STAR QUALITY CARE, INC.
CONDENSED CONSOLIDATED BALANCE SHEET DATA
(in thousands)
(unaudited)
     

December 31,2011

December 31,2010
Assets
Current assets:
Cash and cash equivalents $ 28,374 $ 20,770
Accounts receivable, net of allowance 64,265 64,806
Investments in available for sale securities 9,114 13,854
Restricted cash 4,838 6,594
Prepaid expenses and other current assets 26,250 17,084
Assets of discontinued operations   8,675   12,857
Total current assets   141,516   135,965
 
Property and equipment, net

353,065
201,223
Restricted cash 4,092 14,535
Restricted investments in available for sale securities 13,115 3,259
Goodwill, equity investment and other long term assets  

71,689
  24,812
Total assets $

583,477
$ 379,794
 
Liabilities and Shareholders' Equity
Current liabilities:
Bridge loan from SNH $ 38,000 $ -
Other current liabilities 151,331 137,911
Total current liabilities 189,331 137,911
 
Mortgage notes payable 38,714 -
Convertible senior notes 37,282 37,905
Other long term liabilities 37,956 39,211
Shareholders' equity  

280,194
  164,767
Total liabilities and shareholders’ equity $

583,477
$ 379,794
 
FIVE STAR QUALITY CARE, INC.
SENIOR LIVING COMMUNITY OPERATING DATA(1)
(dollars in thousands, except average daily rate)
     
 
Three months ended Year ended
  December 31,   December 31,
  2011   2010   2011   2010
 
Number of owned and leased communities (end of period) 222 209 222 209
Number of owned and leased units (end of period) 23,765 22,176 23,765 22,176
Number of living units % growth 7.2% - 7.2% -
 
Occupancy 86.2% 86.0% 85.8% 86.2%
Average daily rate (ADR) $ 143.73 $ 148.56 $ 148.47 $ 147.28
ADR % growth -3.3% - 0.8% -
 
Percent breakdown of senior living revenues:
Medicaid 12.8% 13.4% 12.7% 13.3%
Medicare 12.5% 15.2% 14.6% 14.4%
Private and other sources   74.7%   71.4%   72.7%   72.3%
Total   100.0%   100.0%   100.0%   100.0%
 
Senior living revenues $ 274,733 $ 263,206 $ 1,078,380 $ 1,033,935
Senior living revenues % growth 4.4% - 4.3% -
 
Senior living wages and benefits $ 137,411 $ 131,367 $ 536,386 $ 513,462

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

 
50.0% 49.9% 49.7% 49.7%
Other senior living operating expenses $ 66,532 $ 61,318 $ 259,655 $ 244,109

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

 
24.2% 23.3% 24.1% 23.6%
Community expenses % growth(2) 5.8% - 5.1% -
 

 
(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 consolidated statement of income.
 
FIVE STAR QUALITY CARE, INC.
COMPARABLE SENIOR LIVING COMMUNITY OPERATING DATA(1)
(dollars in thousands, except average daily rate)
       
Three months ended Year ended
December 31,(2) December 31,(3)
2011 2010 2011 2010
 
Number of owned and leased communities (end of period) 209 209 208 208
Number of owned and leased living units (end of period) 22,176 22,176 22,066 22,066
 
Occupancy 85.9% 86.0% 85.5% 86.2%
Average daily rate (ADR) $ 147.85 $ 148.56 $ 150.86 $ 147.41
ADR % growth -0.5% - 2.3% -
 
Percent breakdown of senior living revenues:
Medicaid 13.3% 13.4% 12.9% 13.4%
Medicare 13.1% 15.2% 15.1% 14.4%
Private and other sources 73.6% 71.4% 72.0% 72.2%
Total 100.0% 100.0% 100.0% 100.0%
 
Senior living revenues $ 262,302 $ 263,206 $ 1,050,202 $ 1,032,357
Senior living revenues % growth -0.3% - 1.7% -
 
Senior living wages and benefits $ 133,221 $ 131,367 $ 526,256 $ 512,755

Senior living wages and benefits as a % of senior living

  revenues
50.8% 49.9% 50.1% 49.7%
Other senior living operating expenses $ 63,310 $ 61,318 $ 252,546 $ 243,762

Other senior living operating expenses as a % of senior living

  revenues
24.1% 23.3% 24.0% 23.6%
Community expenses % growth(4) 2.0% - 2.9% -
 
 
(1) Excludes data for managed communities and discontinued senior living operations.
(2) Communities that we have operated continuously since October 1, 2010.
(3) Communities that we have operated continuously since January 1, 2010.
(4) Community expenses consist of senior living wages and benefits and other senior living operating expenses as shown on our consolidated statement of income.
 
FIVE STAR QUALITY CARE, INC.
SENIOR LIVING COMMUNITY FINANCIAL DATA(1)
(in thousands)
       
Three months ended Year ended
  December 31, December 31,
  2011   2010 2011 2010
 
Independent and assisted living community revenue $ 221,696 $ 207,142 $ 861,763 $ 814,632
Skilled nursing facility revenue   53,037   56,064   216,617   219,303
Total senior living revenue $ 274,733 $ 263,206 $ 1,078,380 $ 1,033,935
 
Independent and assisted living community wages and benefits $ 102,906 $ 96,315 $ 398,101 $ 374,164
Skilled nursing facility wages and benefits   34,505   35,052   138,285   139,298
Total senior living wages and benefits $ 137,411 $ 131,367 $ 536,386 $ 513,462
 
Independent and assisted living community operating expenses $ 53,530 $ 48,711 $ 206,699 $ 193,715
Skilled nursing facility operating expenses   13,002   12,607   52,956   50,394
Total other senior living operating expenses $ 66,532 $ 61,318 $ 259,655 $ 244,109
 

(1) Excludes data for managed communities and discontinued senior living operations.
                         
 
COMPARABLE SENIOR LIVING COMMUNITY FINANCIAL DATA(1)
(in thousands)
 
Three months ended Year ended
  December 31,(2) December 31,(3)
  2011   2010 2011 2010
 
Independent and assisted living community revenue $ 209,265 $ 207,142 $ 833,585 $ 813,054
Skilled nursing facility revenue   53,037   56,064   216,617   219,303
Total senior living revenue $ 262,302 $ 263,206 $ 1,050,202 $ 1,032,357
 
Independent and assisted living community wages and benefits $ 98,716 $ 96,315 $ 387,971 $ 373,457
Skilled nursing facility wages and benefits   34,505   35,052   138,285   139,298
Total senior living wages and benefits $ 133,221 $ 131,367 $ 526,256 $ 512,755
 
Independent and assisted living community operating expenses $ 50,308 $ 48,711 $ 199,590 $ 193,368
Skilled nursing facility operating expenses   13,002   12,607   52,956   50,394
Total other senior living operating expenses $ 63,310 $ 61,318 $ 252,546 $ 243,762
 

(1) Excludes data for managed communities and discontinued senior living operations.

(2) Communities that we have operated continuously since October 1, 2010.

(3) Communities that we have operated continuously since January 1, 2010.
 
FIVE STAR QUALITY CARE, INC.
OTHER OPERATING DATA(1)
(dollars in thousands, except average daily rate)
         
Three months ended Year ended
December 31, December 31,
2011 2010 2011 2010
Number of senior living communities(2)(end of period):
Assisted and independent living communities, owned 31 24 31 24
Assisted and independent living communities, leased 153 147 153 147
Assisted and independent living communities, managed   23   -   23   -
Total number of assisted and independent living communities   207   171   207   171
 
 
Skilled nursing communities, leased   38   38   38   38
 
Total number of senior living communities   245   209   245   209
 
Number of senior living units (end of period):
Assisted and independent living communities, owned 2,954 2,089 2,954 2,089
Assisted and independent living communities, leased(3) 17,388 16,664 17,388 16,664
Assisted and independent living communities, managed(4)   3,394   -   3,394   -
Total number of assisted and independent living units   23,736   18,753   23,736   18,753
 
Skilled nursing communities, leased(5)   3,423   3,423   3,423   3,423
 
Total number of senior living units   27,159   22,176   27,159   22,176
 
Senior living revenues:
Assisted and independent living communities $ 218,815 $ 204,988 $ 851,790 $ 806,579
Skilled nursing communities 53,037 56,064 216,617 219,303
Other(6)   2,881   2,154   9,973   8,053
Total senior living revenues $ 274,733 $ 263,206 $ 1,078,380 $ 1,033,935
 
 
Senior living data:(7)
Assisted and independent living communities occupancy 87.1% 86.3% 86.4% 86.4%
Assisted and independent living communities ADR $ 133.79 $ 137.48 $ 138.05 $ 136.68
Assisted and independent living communities ADR % growth -2.7% - 1.0% -
 
Skilled nursing communities occupancy 81.4% 84.6% 82.2% 85.2%
Skilled nursing communities ADR $ 206.94 $ 210.52 $ 210.88 $ 205.96
Skilled nursing communities ADR % growth -1.7% - 2.4% -
 
Rehabilitation hospital data:
Rehabilitation hospital units 321 321 321 321
Rehabilitation hospital occupancy 55.3% 52.5% 55.1% 54.2%

 
(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 2,026 skilled nursing units in communities where assisted living and independent living services are the predominant services provided for the three

months and year ended December 31, 2011 and 2010.
(4) Includes 29 skilled nursing units in communities where assisted living and independent living services are the predominant services for the three months and year

ended December 31,2011.
(5) Includes 87 assisted living and independent living units in communities where skilled nursing services are the predominant services provided for the three months and

year ended December 31, 2011 and 2010.
(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.

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 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:
     
For the three months For the year
ended December 31, ended December 31,
2011   2010 2011   2010
Income from continuing operations $

52,744
$ 6,884 $

68,277
$ 25,562
Add: interest and other expense 1,512 546 3,917 2,596
Add: income tax expense

-
518

157
1,448
Add: depreciation and amortization 6,348 4,162 21,127 16,034
Less: income tax benefit

(51,560)
- (50,711) -
Less: interest, dividend and other income   (278)   (195)   (1,295)   (1,816)
EBITDA

8,766

11,915

41,472

43,824

Add: impairment of long lived assets

3500

-

3,500

-
Add: acquisition related costs 229

-
1,759

-

Add: loss on UBS put right related to auction rate securities
- - - 4,714
Less: gain on investments in trading securities - - - (4,856)
Less: gain on sale of investments in available for

sale securities
(3,460) (933) (4,116) (933)
Less: gain on early extinguishment of debt   -   (108)   (1)   (592)
EBITDA excluding certain items $ 9,035 $ 10,874 $ 42,614 $ 42,157

Copyright Business Wire 2010

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