EX-99.1 3 ex99-1.htm EX99-1 ex99-1.htm
Exhibit 99.1

 
FOR IMMEDIATE RELEASE
Contact:  Timothy A. Bonang, Manager of Investor Relations, or
 
Katherine L. Johnston, Investor Relations Analyst
 
(617) 796-8245
 
www.fivestarqualitycare.com
 
Five Star Quality Care, Inc. Reports First Quarter 2008 Results
 
____________________________________

Newton, MA (May 7, 2008).  Five Star Quality Care, Inc. (AMEX: FVE) today announced its financial results for the quarter ended March 31, 2008.

First Quarter 2008 Financial Highlights:

 
§
Total revenues for the first quarter of 2008 increased 9.1% to $258.9 million from $237.2 million for the same period last year.
 
 
§
Net income per share from continuing operations for the first quarter of 2008 was $0.14, basic and diluted, compared to $0.18 and $0.17, basic and diluted, respectively, for the same period last year.
 
 
§
Net income per share from continuing operations in the three months ended March 31, 2007 included a gain from early extinguishment of debt of $3.6 million, or $0.11 per share and $0.09 per share, basic and diluted, respectively.  Without the gain related to the early extinguishment of debt, we would have reported net income per share from continuing operations for the first quarter of 2007 of $0.07, basic and diluted.  We believe this adjusted net income per share from continuing operations is a meaningful disclosure that may help shareholders to better understand our results of operations for the three months ended March 31, 2007. (See page 6 of the Supplemental Information attached hereto for a reconciliation of these adjusted amounts.)
 
 
§
During the three months ended March 31, 2008, we recognized a $3.3 million loss, or $0.10 and $0.08 per share, basic and diluted, respectively, as a result of our holdings in auction rate securities.
 
 
§
Without the loss related to the auction rate securities and the gain related to a 2003 sale of property, we would have reported net income per share from continuing operations, basic and diluted, in the three months ended March 31, 2008 of $0.24 and $0.22, respectively. We believe this adjusted net income per share is a meaningful disclosure that may help shareholders to better understand our results of operations for the three months ended March 31, 2008. (See page 6 of the Supplemental Information attached hereto for a reconciliation of these adjusted amounts.)
 
 
§
The weighted average number of basic and diluted common shares outstanding totaled 31,818,144 and 41,548,913, respectively, for the quarter ended March 31, 2008, and 31,683,601 and 41,414,903, respectively, for the quarter ended March 31, 2007.
 

 

 
 
 

First Quarter 2008 Operating Highlights (senior living communities):


 
§
Overall occupancy for the first quarter of 2008 was 89.6% compared with 90.2% for the same period a year ago.
 
 
§
Overall average daily rate for the first quarter of 2008 increased by 5% to $142.30, over the same period a year ago.
 
 
§
For those senior living communities that we have operated continuously since January 1, 2007 (comparable communities), occupancy for the first quarter of 2008 was 89.6% compared with 90.2% in the first quarter of 2007. 
 
 
§
Comparable communities average daily rate for the first quarter of 2008 increased by 6%, to $143.56, over the same period a year ago.
 
 
§
The percentage of revenue derived from residents’ private resources remained unchanged at 66% compared to the first quarter of 2007.
 
 
§
Wages and benefits as a percentage of senior living revenues for the first quarter of 2008 were 50.3% compared with 51.8% for the first quarter of 2007.
 
 
§
In the first quarter of 2008, we leased an additional 22 senior living communities with 1,743 units which Senior Housing acquired from third parties.  Twenty-one of these communities are assisted living communities (one of which offers some skilled nursing services and one of which offers some independent living services) and one is a continuing care retirement community which offers independent living, assisted living and skilled nursing services.  
 

Conference Call:

On May 7, 2008 at 5:00 p.m. Eastern Standard Time, Bruce J. Mackey Jr., President and Chief Executive Officer, and Francis R. Murphy, III, Chief Financial Officer, will host a conference call to discuss the first quarter 2008 financial results.  Following the company’s remarks, there will be a question and answer period.

The conference call telephone number is (866) 550-6338.  Participants calling from outside the United States and Canada should dial (347) 284-6930. 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 8:00 p.m. Eastern Time Wednesday, May 14, 2008. To hear the replay, dial (719) 457-0820.  The replay pass code is 7853746.

A live audio webcast of the conference call will also be available in a listen only mode on the company’s web site at www.fivestarqualitycare.com.  Participants wanting to access the webcast should visit the company’s web site about five minutes before the call.  The archived webcast will be available for replay on the company’s web site for about one week after the call.

About Five Star Quality Care, Inc.:

 Five Star Quality Care, Inc. is a healthcare services company which operates healthcare and senior living communities.  Five Star owns, leases and operates 183 senior living communities with over 19,600 living units located in 30 states.  These communities include independent living, assisted living and skilled nursing communities.  Five Star also operates five institutional pharmacies and two rehabilitation hospitals.  Five Star is headquartered in Newton, Massachusetts.

 
 
 

Supplemental Information, page 1of 6

FIVE STAR QUALITY CARE, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
   
Three months ended
 March 31,
  
   
2008
    
2007
  
Revenues:
            
    Senior living revenue
   $ 216,927     $ 197,222  
    Hospital revenue
     24,744       26,129  
    Pharmacy revenue
     17,206       13,835  
Total revenues
     258,877       237,186  
                 
Operating expenses:
                
Senior living wages and benefits
     109,094       102,092  
Other senior living operating expenses
     53,421       49,910  
Hospital expenses
     22,592       23,624  
Pharmacy expenses
     16,203       13,591  
Rent expense
     35,444       32,171  
General and administrative expenses
     11,133       10,059  
Depreciation and amortization
     3,635       3,151  
Total operating expenses
     251,522       234,598  
                 
Operating income
     7,355       2,588  
Interest and other income
     2,494       1,420  
Interest expense
     (1,594 )     (1,778 )
Unrealized loss on investments in trading securities
     (3,270 )     -  
Gain on extinguishment of debt
     -       3,557  
                 
Income from continuing operations before income taxes
     4,985       5,787  
Provision for income taxes
     566       208  
Income from continuing operations
     4,419       5,579  
Loss from discontinued operations
     (2,802 )     (815 )
                 
Net income
   $ 1,617     $ 4,764  
                 
Weighted average shares outstanding  - basic
     31,818       31,684  
                 
Weighted average shares outstanding  - diluted
     41,549       41,415  
                 
Basic income  per share from:
                
Continuing operations
   $ 0.14     $ 0.18  
Discontinued operations
     (0.09 )     (0.03 )
Net income per share
   $ 0.05     $ 0.15  
                 
Diluted income  per share from:
                
Continuing operations
   $ 0.14     $ 0.17  
Discontinued operations
     (0.07 )     (0.02 )
Net income  per share
   $ 0.07     $ 0.15  
                 
EBITDA(1):
                
Income from continuing operations:
   $ 4,419     $ 5,579  
Add: income taxes
     566       208  
Add: depreciation and amortization
     3,635       3,151  
Add: interest expense
     1,594       1,778  
Less: interest and other income
     (2,494 )     (1,420 )
EBITDA
   $ 7,720     $ 9,296  

 
(1)
We consider earnings before interest, taxes, depreciation and amortization, or EBITDA, to be a meaningful measure of our operating performance because it is useful in measuring our ability to service debt, fund capital expenditures and expand our business.  We believe that EBITDA is a meaningful disclosure that may help shareholders to understand better our financial performance, including comparing our performance to similar numbers reported by other companies; however, EBITDA as presented may be not always comparable to amounts calculated by other companies.  This information should not be considered as an alternative to net income, income from continuing operations, operating income, cash flow from operations, or any other operating performance or liquidity measure established by accounting principles generally accepted in the United States.  We have not made any adjustments to reported EBITDA for the three months ended March 31, 2008 and 2007, respectively, relating to the unrealized loss and gain on extinguishment of debt shown in the reconciliations discussed on page 6 of 6 of the supplemental information in this earnings release.

 
 
 

Supplemental Information, page 2 of 6

FIVE STAR QUALITY CARE, INC.
SELECTED BALANCE SHEET DATA
(in thousands, except share data)

       
   
March 31,
    
December 31,
  
   
2008
    
2007
  
Assets
            
Current assets:
            
  Cash and cash equivalents
   $ 52,029     $ 30,999  
  Accounts receivable, net of reserve
     61,056       58,803  
  Prepaid expenses and other current assets
     23,176       23,782  
  Investment securities:
                
  Investments in trading securities
     -       61,800  
  Investments in available for sale securities
     7,756       7,455  
 Assets of discontinued operations
     2,297       3,178  
Total current assets
     146,314       186,017  
                 
Long term assets:
                
Property and equipment, net
     127,505       131,705  
Investments in trading securities
     71,580       -  
Other long term assets
     41,071       42,732  
Total assets
   $ 386,470     $ 360,454  
                 
Liabilities and Shareholders’ Equity
                
Current liabilities
   $ 124,980     $ 104,063  
Long term liabilities
     29,942       27,259  
Mortgage notes payable, long term
     15,768       15,810  
Convertible Senior notes
     126,500       126,500  
Shareholders’ equity: 31,818,144 shares
   issued and outstanding at March 31, 2008 and
   December 31, 2007
       89,280          86,822  
Total liabilities and shareholders’ equity
   $ 386,470     $ 360,454  



 

 
 
 

Supplemental Information, page 3 of 6


FIVE STAR QUALITY CARE, INC.
SENIOR LIVING COMMUNITY OPERATING DATA (1)
(dollars in thousands, except average daily rate)

   
Three months ended
March 31,
   
2008
  
2007
             
No. of communities (end of period)
     183       160  
No. of living units (end of period)
     19,666       17,909  
                 
Occupancy
     89.6 %     90.2 %
Average daily rate (ADR)
   $ 142.30     $ 135.65  
ADR % growth
     5 %        
                 
Percent breakdown of net senior living revenues:
                
Medicare
     16 %     16 %
Medicaid
     18 %     18 %
Private
     66 %     66 %
   Total
     100 %     100 %
                 
Net senior living revenues
   $ 216,927     $ 197,222  
Net senior living revenues % growth
     10 %        
                 
Community expenses (2)
   $ 162,515     $ 152,002  
Community expenses (2) as a % of net senior living revenues
     75 %     77 %
Community expenses (2) % growth
     7 %        


(1)
Excludes data for discontinued operations and for pharmacy and hospital operations.
(2)
Community expenses equal senior living wages and benefits and other senior living operating expenses as shown on our consolidated statement of income

 
 
 

Supplemental Information, page 4 of 6


FIVE STAR QUALITY CARE, INC.
COMPARABLE SENIOR LIVING COMMUNITY OPERATING DATA (1)
(dollars in thousands, except average daily rate)



   
Three months ended
March 31, (2)
   
2008
  
2007
             
No. of communities (end of period)
     160       160  
No. of living units (end of period)
     17,867       17,867  
                 
Occupancy
     89.6 %     90.2 %
Average daily rate (ADR)
   $ 143.56     $ 135.65  
ADR % growth
     6 %        
                 
Percent breakdown of net senior living revenues:
                
Medicare
     16 %     16 %
Medicaid
     18 %     18 %
Private
     66 %     66 %
   Total
     100 %     100 %
                 
Senior living revenues
   $ 209,102     $ 197,222  
Senior living revenues  % growth
     6 %        
                 
Community expenses (3)
   $ 156,739     $ 152,002  
Community expenses (3) as a % of net senior living revenues
     75 %     77 %
Community expenses (3) % growth
     3 %        

 
(1)
Excludes data for discontinued operations and for pharmacy and hospital operations.
(2)
Communities that we operated continuously since January 1, 2007.
(3)
Community expenses equal senior living wages and benefits and other senior living operating expenses.

 
 
 

Supplemental Information, page 5 of 6

FIVE STAR QUALITY CARE, INC.
OTHER OPERATING DATA (1)
(dollars in thousands, except average daily rate)

   
Three months ended
March 31,
  
   
2008
    
2007
  
No. of communities (2) (end of period):
            
Assisted living & independent living communities, owned
     13       12  
Assisted living & independent living communities, leased
     121       99  
   Total no. of assisted living & independent living communities
     134       111  
                 
Skilled nursing communities, owned
     2       2  
Skilled nursing communities, leased
     47       47  
   Total no. of skilled nursing communities
     49       49  
                 
        Total no. of communities
     183       160  
                 
No. of living units (end of period):
                
Assisted living & independent living communities, owned
     1,060       1,022  
Assisted living & independent living communities, leased (3)
     14,194       12,471  
   Total no. of assisted living & independent living units
     15,254       13,493  
                 
Skilled nursing communities, owned
     271       273  
Skilled nursing communities, leased (4)
     4,141       4,143  
   Total no. of skilled nursing living units
     4,412       4,416  
                 
         Total no. of living units
     19,666       17,909  
                 
Rehabilitation hospital units
     321       321  
                 
Senior living revenues:
                
Assisted living & independent living communities
   $ 149,322     $ 134,420  
Skilled nursing communities
     65,596       61,488  
Other (5)
     2,009       1,314  
   Total senior living revenues
   $ 216,927     $ 197,222  
                 

Assisted living & independent living communities occupancy
     90.4 %     91.1 %
Assisted living & independent living communities ADR
   $ 127.11     $ 121.54  
Assisted living & independent living communities ADR % growth
     5 %        
                 
Skilled nursing communities occupancy
     87.1 %     87.6 %
Skilled nursing communities ADR
   $ 187.58     $ 176.61  
Skilled nursing communities ADR % growth
     6 %        
                 
Rehabilitation hospital occupancy
     65.7 %     65.2 %


(1)
Excludes data for discontinued operations and for pharmacy operations.
(2)
Communities are categorized by the type of living units which constitute a majority (or plurality) of the total living units at the community.
(3)
Includes 1,869 and 1,654 skilled nursing units in communities where assisted living and independent living services are the predominant services provided for the three months and year ended March 31, 2008 and 2007, respectively.
(4)
Includes 66 and 95 assisted living and independent living units in communities where skilled nursing services are the predominant services provided for the three months and year ended March 31, 2008 and 2007, respectively.
(5)
Other senior living revenue relates primarily to rehabilitation and other specialty service revenues provided at residential facilities and does not include pharmacy or hospital operations.

 
 
 

Supplemental Information, page 6 of 6
 
Reconciliation of Income from Continuing Operations to Income from Continuing Operations excluding the unrealized loss related to the auction rate securities for the three months ended March 31, 2008 (in thousands, except per share data):


   
For the three months ended
March 31, 2008
  
   
Amount
    
Per Share Basic
    
Per Share Diluted
  
Income from continuing operations
   $ 4,419     $ 0.14     $ 0.14  
  Add unrealized loss related to the auction rate securities
     3,270       0.10       0.08  
                         
Income from continuing operations excluding the loss related to auction rate securities (1)
   $ 7,689     $ 0.24     $ 0.22  
                         


(1)
We believe this adjusted amount is a meaningful disclosure that may help shareholders to understand better our results of operations for the three months ended March 31, 2008.  This information should not be considered as an alternative to income from continuing operations or income from continuing operations per share or any other operating or performance measure established by accounting principles generally accepted in the United States.


______________________________________________________________________________________

Reconciliation of Income from Continuing Operations to Income from Continuing Operations excluding the gain on extinguishment of debt for the three months ended March 31, 2007 (in thousands, except per share data):


   
For the three months ended
March 31, 2007
  
   
Amount
    
Per Share Basic
    
Per Share Diluted(1)
  
Income from continuing operations
   $ 5,579     $ 0.18     $ 0.17  
  Deduct gain on extinguishment of debt
     (3,557 )     (0.11 )     (0.09 )
                         
Income from continuing operations excluding the gain related to extinguishment of debt (2)
   $ 2,022     $ 0.07     $ 0.07  
                         

(1)
The effect of our 3.75% convertible senior notes on income from continuing operations excluding the gain related to extinguishment of debt is anti-dilutive for the three months ended March 31, 2007.
(2)
We believe this adjusted amount is a meaningful disclosure that may help shareholders to understand better our results of operations for the three months ended March 31, 2007.  This information should not be considered as an alternative to income from continuing operations or income from continuing operations per share or any other operating or performance measure established by accounting principles generally accepted in the United States.