EX-99.1 2 ex99-1.htm EX99-1 ex99-1.htm
 
  400 Centre Street, Newton, MA 02458-2076
tel: (617) 796-8350      fax: (617) 796-8385
 
Exhibit 99.1

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

Newton, MA (August 6, 2008).  Five Star Quality Care, Inc. (AMEX: FVE) today announced its financial results for the quarter and six months ended June 30, 2008.

Second Quarter 2008 Financial Highlights:

 
§
Total revenues for the second quarter of 2008 increased 12.9% to $271.1 million from $240.1 million for the same period last year.
 
 
§
Net income per share from continuing operations for the second quarter of 2008 was $0.13, basic and diluted, compared to $0.16 and $0.15, basic and diluted, respectively, for the same period last year.
 
 
§
During the three months ended June 30, 2008, we recognized a $1.1 million loss, or $0.03 per share, basic and diluted, as a result of an unrealized loss on our holdings in auction rate securities. Without this loss, we would have reported net income per share from continuing operations, basic and diluted, in the three months ended June 30, 2008 of $0.16. 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 June 30, 2008. Page 6 of the attached Supplemental Information contains a Reconciliation of Non-GAAP Financial Measures for all adjusted earnings per share amounts presented in this release.
 
 
§
Net income per share from continuing operations in the three months ended June 30, 2007 included a gain from extinguishment of debt of $934,000, or $0.03 and $0.02 per share, basic and diluted, respectively.  Without this gain, we would have reported net income per share from continuing operations for the second quarter of 2007 of $0.13, 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 June 30, 2007.
 
Second Quarter 2008 Operating Highlights (senior living communities):

 
§
Senior living occupancy for the second quarter of 2008 was 88.6% compared with 90.0% for the same period a year ago.
 
 
§
Senior living average daily rate for the second quarter of 2008 increased by 7.1% to $145.75, from $136.11 in the same period a year ago.
 
 
§
The percentage of senior living revenue derived from residents’ private resources for the second quarter of 2008 increased to 68% from 66% for the same period a year ago.
 

 
 
 

 
§
Wages and benefits as a percentage of senior living revenues for the second quarter of 2008 were 48.9% compared with 51.8% for the second quarter of 2007.  
 
 
§
For those senior living communities that we have operated continuously since April 1, 2007 (comparable communities), occupancy for the second quarter of 2008 was 88.7% compared with 90.0% in the second quarter of 2007. 
 
 
§
Comparable communities average daily rate for the second quarter of 2008 increased by 5.8%, to $144.09, from $136.21 in the same period a year ago.
 

First Half 2008 Financial Highlights:

 
§
Total revenues for the six months ended June 30, 2008 increased 11.1% to $530.0 million from $477.2 million for the same period last year.
 
 
§
Net income per share from continuing operations for the six months ended June 30, 2008 was $0.27 and $0.26, basic and diluted, respectively, compared to $0.34 and $0.32, basic and diluted, respectively, for the same period last year.
 
 
§
During the six months ended June 30, 2008, we recognized a $4.4 million loss, or $0.14 and $0.11 per share, basic and diluted, respectively, as a result of an unrealized loss on our holdings in auction rate securities. Without this loss, we would have reported net income per share from continuing operations, basic and diluted, in the six months ended June 30, 2008 of $0.41 and $0.37, respectively. 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 six months ended June 30, 2008.
 
 
§
Net income per share from continuing operations in the six months ended June 30, 2007 included a gain from extinguishment of debt of $4.5 million, or $0.15 and $0.11 per share, basic and diluted, respectively.  Without this gain, we would have reported net income per share from continuing operations for the six months ended June 30, 2007 of $0.19 and $0.21, basic and diluted, respectively.  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 six months ended June 30, 2007.
 
Conference Call:

On August 6, 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 second quarter 2008 financial results.  Following the company’s remarks, there will be a question and answer period.

The conference call telephone number is (888) 218-8176.  Participants calling from outside the United States and Canada should dial (913) 312-0640. 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 Standard Time Wednesday, August 13, 2008. To hear the replay, dial (719) 457-0820.  The replay pass code is 4007398.

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.  As of today, Five Star owns, leases or operates 194 senior living communities with over 20,800 living units located in 30 states.  These communities include independent living, assisted living and skilled nursing communities.  Five Star also operates six institutional pharmacies, one of which provides mail order pharmaceuticals to the general public, and two rehabilitation hospitals.  Five Star is headquartered in Newton, Massachusetts.

 
 
Supplemental Information, page 1 of 6
FIVE STAR QUALITY CARE, INC.
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(in thousands, except share data)

    
Three months ended
 June 30,
      
Six months ended
June 30,
 
   
2008
    
2007
        
2008
  
2007
  
 
Revenues:
                    
    Senior living revenue
   $ 228,442     $ 200,601     $ 445,369     $ 397,664  
    Hospital revenue
     24,421       25,219       49,165       51,348  
    Pharmacy revenue
     18,281       14,318       35,487       28,153  
Total revenues
     271,144       240,138       530,021       477,165  
                                   
Operating expenses:
                                  
Senior living wages and benefits
     111,795       103,901       220,889       205,836  
Other senior living operating expenses
     58,668       48,501       112,089       98,412  
Hospital expenses
     22,615       23,373       45,207       46,997  
Pharmacy expenses
     17,347       13,524       33,550       27,115  
Rent expense
     39,275       31,963       74,719       64,228  
General and administrative expenses
     11,722       10,887       22,855       20,946  
Depreciation and amortization
     3,647       3,238       7,282       6,389  
Total operating expenses
     265,069       235,387       516,591       469,923  
                                   
Operating income
     6,075       4,751       13,430       7,242  
Interest and other income
     1,302       1,410       3,796       2,830  
Interest expense
     (1,600 )     (1,677 )     (3,194 )     (3,455 )
Unrealized loss on investments in trading securities
     (1,096 )     -       (4,366 )     -  
Gain on extinguishment of debt
     -       934       -       4,491  
                                   
Income from continuing operations before income taxes
     4,681       5,418       9,666       11,108  
Provision for income taxes
     (444 )     (275 )     (1,010 )     (483 )
Income from continuing operations
     4,237       5,143       8,656       10,625  
Loss from discontinued operations
     (748 )     (1,063 )     (3,550 )     (1,781 )
                                   
Net income
   $ 3,489     $ 4,080     $ 5,106     $ 8,844  
                                   
Weighted average shares outstanding  - basic
     31,831       31,694       31,825       31,689  
                                   
Weighted average shares outstanding  - diluted
     41,562       41,425       41,556       41,420  
                                   
Basic income per share from:
                                  
Continuing operations
   $ 0.13     $ 0.16     $ 0.27     $ 0.34  
Discontinued operations
     (0.02 )     (0.03 )     (0.11 )     (0.06 )
Net income per share
   $ 0.11     $ 0.13     $ 0.16     $ 0.28  
                                   
Diluted income per share from:
                                  
Continuing operations
   $ 0.13     $ 0.15     $ 0.26     $ 0.32  
Discontinued operations
     (0.02 )     (0.02 )     (0.09 )     (0.04 )
Net income per share
   $ 0.11     $ 0.13     $ 0.17     $ 0.28  
                                   
EBITDA(1):
                                  
Income from continuing operations:
   $ 4,237     $ 5,143     $ 8,656     $ 10,625  
Add: income taxes
     444       275       1,010       483  
Add: depreciation and amortization
     3,647       3,238       7,282       6,389  
Add: interest expense
     1,600       1,677       3,194       3,455  
Less: interest and other income
     (1,302 )     (1,410 )     (3,796 )     (2,830 )
EBITDA
   $ 8,626     $ 8,923     $ 16,346     $ 18,122  

(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 better understand our financial performance, including comparing our performance to similar numbers reported by other companies, however, EBITDA as presented may not always be 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 generally accepted accounting principles (GAAP) in the United States.  We have not made any adjustments to reported EBITDA for the three and six months ended June 30, 2008 and 2007, respectively, relating to the unrealized loss on investments in trading securities or the gain on extinguishment of debt shown in the reconciliations discussed on page 6 of the supplemental information in this earnings release.

Supplemental Information, page 2 of 6

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

       
   
June 30,
    
December 31,
  
   
2008
    
2007
  
Assets
            
Current assets:
            
  Cash and cash equivalents
   $ 45,884     $ 30,999  
  Accounts receivable, net of reserve
     60,998       58,803  
  Prepaid expenses and other current assets
     21,641       23,782  
  Investment securities:
                
  Investments in trading securities
     -       61,800  
  Investments in available for sale securities
     6,892       7,455  
 Assets of discontinued operations
     2,040       3,178  
Total current assets
     137,455       186,017  
                 
Long term assets:
                
Property and equipment, net
     132,444       131,705  
Investments in trading securities
     70,484       -  
Other long term assets
     40,462       42,732  
Total assets
   $ 380,845     $ 360,454  
                 
Liabilities and Shareholders’ Equity
                
Current liabilities
   $ 116,315     $ 104,063  
Long term liabilities
     30,774       27,259  
Mortgage notes payable, long term
     15,706       15,810  
Convertible senior notes
     126,500       126,500  
Shareholders’ equity (31,844,394 and 31,818,144 shares
   issued and outstanding at June 30, 2008 and
   December 31, 2007)
       91,550          86,822  
Total liabilities and shareholders’ equity
   $ 380,845     $ 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
June 30,
    
Six months ended
June 30,
  
   
2008
    
2007
    
2008
    
2007
  
                         
Number of communities (end of period)
     182       161       182       161  
Number of living units (end of period)
     19,814       18,007       19,814       18,007  
                                 
Occupancy
     88.6 %     90.0 %     89.2 %     90.1 %
Average daily rate (ADR)
   $ 145.75     $ 136.11     $ 143.23     $ 135.80  
ADR % growth
     7.1 %     2.6 %     5.5 %     2.5 %
                                 
Percent breakdown of net senior living revenues:
                                
Medicare
     15 %     16 %     16 %     16 %
Medicaid
     17 %     18 %     17 %     18 %
Private
     68 %     66 %     67 %     66 %
   Total
     100 %     100 %     100 %     100 %
                                 
Net senior living revenues
   $ 228,442     $ 200,601     $ 445,369     $ 397,664  
Net senior living revenues % growth
     13.9 %     9.8 %     12.0 %     9.4 %
                                 
Community expenses (2)
   $ 170,463     $ 152,402     $ 332,978     $ 304,248  
Community expenses (2) as a % of net senior living revenues
     74.6 %     76.0 %     74.8 %     76.5 %
Community expenses (2) % growth
     11.9 %     8.6 %     9.4 %     8.8 %



(1)
 
Excludes data for pharmacy and hospital operations and senior living discontinued operations (except for the number of communities and living units).
(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
June 30, (2)
    
Six months ended
June 30, (3)
  
   
2008
    
2007
    
2008
    
2007
  
                         
Number of communities (end of period)
     162       162       162       162  
Number of living units (end of period)
     18,016       18,016       18,016       18,016  
                                 
Occupancy
     88.7 %     90.0 %     89.2 %     90.1 %
Average daily rate (ADR)
   $ 144.09     $ 136.21     $ 143.83     $ 135.85  
ADR % growth
     5.8 %     n/a       5.9 %     n/a  
                                 
Percent breakdown of net senior living revenues:
                                
Medicare
     16 %     16 %     16 %     16 %
Medicaid
     18 %     18 %     18 %     18 %
Private
     66 %     66 %     66 %     66 %
   Total
     100 %     100 %     100 %     100 %
                                 
Senior living revenues
   $ 207,586     $ 200,329     $ 416,690     $ 397,392  
Senior living revenues  % growth
     3.6 %     n/a       4.9 %     n/a  
                                 
Community expenses (4)
   $ 155,451     $ 152,207     $ 311,522     $ 304,053  
Community expenses (4) as a % of net senior living revenues
     74.9 %     76.0 %     74.8 %     76.5 %
Community expenses (4) % growth
     2.1 %     n/a       2.5 %     n/a  




 
(1)
Excludes data for pharmacy and hospital operations and senior living discontinued operations (except for the number of communities and living units).
 
(2)
Communities that we operated continuously since April 1, 2007.
 
(3)
Communities that we operated continuously since January 1, 2007.
 
(4)
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 5 of 6

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

   
Three months ended
June 30,
    
Six months ended
June 30,
  
   
2008
    
2007
    
2008
    
2007
  
Number of communities (2) (end of period):
                        
Assisted and independent living communities, owned
     13       13       13       13  
Assisted and independent living communities, leased
     120       99       120       99  
   Total number of assisted and independent living communities
     133       112       133       112  
                                 
Skilled nursing communities, owned
     2       2       2       2  
Skilled nursing communities, leased
     47       47       47       47  
   Total number of skilled nursing communities
     49       49       49       49  
                                 
        Total number of communities
     182       161       182       161  
                                 
Number of living units (end of period):
                                
Assisted and independent living communities, owned
     1,061       1,070       1,061       1,070  
Assisted and independent living communities, leased (3)
     14,344       12,527       14,344       12,527  
   Total number of assisted and independent living units
     15,405       13,597       15,405       13,597  
                                 
Skilled nursing communities, owned
     271       273       271       273  
Skilled nursing communities, leased (4)
     4,138       4,137       4,138       4,137  
   Total number of skilled nursing units
     4,409       4,410       4,409       4,410  
                                 
         Total number of living units
     19,814       18,007       19,814       18,007  
                                 
Rehabilitation hospital units
     321       321       321       321  
                                 
Senior living revenues:
                                
Assisted and independent living communities
   $ 160,836     $ 136,491     $ 310,158     $ 270,640  
Skilled nursing communities
     66,037       63,014       131,633       124,502  
Other (5)
     1,569       1,096       3,578       2,522  
   Total senior living revenues
   $ 228,442     $ 200,601     $ 445,369     $ 397,664  
                                 
 
Assisted and independent living communities occupancy
     89.1 %     90.9 %     89.9 %     90.9 %
Assisted and independent living communities ADR
   $ 131.92     $ 121.55     $ 128.61     $ 121.52  
Assisted and independent living communities ADR % growth
     8.5 %     1.3 %     5.8 %     1.6 %
                                 
Skilled nursing communities occupancy
     86.8 %     87.4 %     87.0 %     87.6 %
Skilled nursing communities ADR
   $ 189.70     $ 179.59     $ 188.64     $ 178.13  
Skilled nursing communities ADR % growth
     5.6 %     6.7 %     5.9 %     5.8 %
                                 
Rehabilitation hospital occupancy
     61.9 %     62.8 %     63.8 %     64.0 %
 
 
 
(1)
Excludes data for pharmacy operations and senior living discontinued operations (except for the number of communities and living units).
(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 1,867 and 1,654 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, 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 and six months ended June 30, 2008 and 2007, respectively.
(5)
Other senior living revenues relates primarily to rehabilitation and other specialty service revenues provided at residential facilities and does not include revenues from pharmacy or hospital operations.


 

 
 
 

Supplemental Information, page 6 of 6

FIVE STAR QUALITY CARE, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
 (in thousands, except per share data)


Reconciliation of Income from Continuing Operations to Income from Continuing Operations Excluding the Unrealized Loss on Investments in Trading Securities for the three and six months ended June 30, 2008:

   
For the three months ended
    
For the six months ended
  
   
June 30, 2008
    
June 30, 2008
  
     
Amount
      
Per Share
Basic
      
Per Share
Diluted
      
Amount
      
Per Share
Basic
      
Per Share
Diluted
  
Income from continuing operations
   $ 4,237     $ 0.13     $ 0.13     $ 8,656     $ 0.27     $ 0.26  
  Add: Unrealized loss on investments in trading securities
     1,096       0.03       0.03       4,366       0.14       0.11  
                                                 
Income from continuing operations excluding the unrealized loss on investments in trading securities(1)
   $ 5,333     $ 0.16     $ 0.16     $ 13,022     $ 0.41     $ 0.37  

 

______________________________________________________________________________________

Reconciliation of Income from Continuing Operations to Income from Continuing Operations Excluding Gain on Extinguishment of Debt for the three and six months ended June 30, 2007:
 
 
   
For the three months ended
    
For the six months ended
  
   
June 30, 2007
    
June 30, 2007
  
     
Amount 
      
Per Share
Basic 
      
Per Share
Diluted 
      
Amount 
      
Per Share
Basic 
      
Per Share
Diluted 
  
Income from continuing operations
   $ 5,143     $ 0.16     $ 0.15     $ 10,625     $ 0.34     $ 0.32  
  Less: Gain on extinguishment of debt
     (934 )     (0.03 )     (0.02 )     (4,491 )     (0.15 )     (0.11 )
                                                 
Income from continuing operations excluding gain on extinguishment of debt (1)
   $ 4,209     $ 0.13     $ 0.13     $ 6,134     $ 0.19     $ 0.21  


(1)
We believe this adjusted amount is a meaningful disclosure that may help shareholders to better understand our results of operations for the three and six months ended June 30, 2008 and 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 GAAP.