8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT PURSUANT TO SECTION

13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): February 18, 2010

FIVE STAR QUALITY CARE, INC.

(Exact Name of Registrant as Specified in Its Charter)

Maryland

(State or Other Jurisdiction of Incorporation)

1-16817	04-3516029
(Commission File Number)	(IRS Employer Identification No.)
400 Centre Street, Newton, Massachusetts	02458
(Address of Principal Executive Offices)	(Zip Code)

617-796-8387

(Registrant’s Telephone Number, Including Area Code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02.  Results of Operations and Financial Condition.

On February 18, 2010, Five Star Quality Care, Inc., or the Company, issued a press release setting forth the Company’s results of operations and financial condition as of and for the quarter ended December 31, 2009. A copy of the Company’s press release is furnished as Exhibit 99.1 hereto.

Item 9.01.  Financial Statements and Exhibits.

(d)             Exhibits.

The Company hereby furnishes the following exhibit:

99.1           Press Release dated February 18, 2010.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

FIVE STAR QUALITY CARE, INC.

By: /s/ Paul V. Hoagland      

Name: Paul V. Hoagland

Title: Treasurer and Chief Financial Officer

Dated:  February 18, 2010

EX-99.1

EXHIBIT 99.1

 400 Centre Street, Newton, MA 02458-2076   tel: (617) 796-8350    fax: (617) 796-8385

FOR IMMEDIATE RELEASE Contact:  Timothy A. Bonang, Vice President, Investor Relations (617) 796-8245 www.fivestarseniorliving.com

Five Star Quality Care, Inc. Reports Fourth Quarter 2009 Results

____________________________________

Newton, MA (February 18, 2010).  Five Star Quality Care, Inc. (NYSE Amex: FVE) today announced its financial results for the quarter and year ended December 31, 2009.

Fourth Quarter 2009 Financial Highlights:

§	Total revenues for the fourth quarter of 2009 increased 4.8% to $304.8 million from $291.0 million for the same period last year.
§	Net income from continuing operations for the fourth quarter of 2009 was $688,000 compared to a net loss of $6.6 million for the same period last year.
§	Net income per share from continuing operations for the fourth quarter of 2009 was $0.02, basic and diluted, compared to a net loss per share from continuing operations of $0.21, basic and diluted, for the same period last year.
§	Net income from continuing operations for the fourth quarter of 2009 included several items that, in the aggregate, had a positive affect of $412,000, or $0.01 per basic and diluted share, on our earnings.  These items included a $317,000 gain due to the early extinguishment of our convertible senior notes (the Notes), a $73,000 unrealized gain on our UBS put right related to auction rate securities referred to below and a $22,000 unrealized gain on our holdings of auction rate securities. Net loss from continuing operations for the fourth quarter of 2008 included several items that, in aggregate, had a negative affect of $7.9 million, or $0.25 basic and diluted share, on our loss for the quarter.  These items included a $5.4 million loss due to the impairment of our investments in certain marketable securities held by our captive insurance companies, a $5.9 million unrealized loss on our holdings of auction rate securities, a $1.8 million loss due to the impairment of long lived assets and a $5.9 million loss due to impairment of goodwill, offset by a $11.1 million gain resulting from UBS AG’s agreement to repurchase our auction rate securities at par at our election between June 2010 and July 2012 (UBS put right).
§	Earnings before interest, taxes, depreciation and amortization, or EBITDA, for the fourth quarter of 2009 was $5.1 million compared to a loss of $2.0 million for the same period last year.  As discussed above, several items positively affected fourth quarter 2009 EBITDA by $412,000 and several items, in aggregate, negatively affected fourth quarter 2008 EBITDA by $7.9 million.

Fourth Quarter 2009 Operating Highlights (Senior Living Communities):

§	Senior living occupancy for the fourth quarter of 2009 was 86.1% compared to 87.7% for the same period last year.
§	Senior living average daily rate for the fourth quarter of 2009 increased by 1.9% to $144.64 from $141.93 in the same period last year.
§	The percentage of senior living revenue derived from private and other resources for the fourth quarter of 2009 increased to 69.7% from 69.6% for the same period last year.
§	For those senior living communities that we have operated continuously since October 1, 2008 (comparable communities), occupancy for the fourth quarter of 2009 was 86.5% compared to 87.9% for the same period last year.
§	The average daily rate at comparable communities for the fourth quarter of 2009 increased by 2.3% to $145.46 from $142.19 in the same period last year.
§	During the fourth quarter, we also commenced leasing from Senior Housing Properties Trust 11 senior living communities with a total of 952 living units.  Ten of these communities are assisted living communities and one is a continuing care retirement community which offers independent living, assisted living and skilled nursing services.

Fiscal Year Financial Highlights:

§	Total revenues for the year ended December 31, 2009 increased 8.5% to $1.2 billion from $1.1 billion for the same period last year.
§	Net income from continuing operations for the year ended December 31, 2009 was $39.3 million compared to $615,000 for the same period last year.
§	Net income per share from continuing operations for the year ended December 31, 2009 was $1.17 and $1.07, basic and diluted, respectively, compared to $0.02, basic and diluted, for the same period last year.
§	Net income from continuing operations for the year ended December 31, 2009 included several items that, in aggregate, had a positive affect of $33.2 million, or $0.99 and $0.86 per basic and diluted share, respectively, on our earnings.  These items included a $34.6 million gain due to the early extinguishment of the Notes, a $3.5 million unrealized gain on our holdings of auction rate securities and a $795,000 gain on sale of available for sale securities held by our captive insurance companies, offset by a $2.9 million loss due to the impairment of our investments in certain marketable securities held by our captive insurance companies and a $2.8 million unrealized loss on our UBS put right related to auction rate securities.  Net income from continuing operations for the year ended December, 31 2008 included several items that, in aggregate, had a negative affect of $16.3 million, or $0.51 per basic and diluted share, on our loss for the year.  These items included a $12.0 million unrealized loss on our holdings of auction rate securities, an $8.4 million loss due to the impairment of our investments in certain marketable securities held by our captive insurance companies, a $5.9 million loss due to the impairment of goodwill and a $1.8 million loss due to the impairment of long lived assets, offset by an $11.1 million gain resulting from our UBS put right, and a $743,000 gain recognized on the early extinguishment of debt.
§	EBITDA for the year ended December 31, 2009 was $59.2 million compared to $17.1 million for the same period last year.  As discussed above, several items positively affected the year ended December 31, 2009 EBITDA by $33.2 million and several items negatively affected 2008 EBITDA by $16.3 million.

2

Conference Call:

On February 18, 2010 at 10:00 a.m. Eastern Time, Bruce J. Mackey Jr., President and Chief Executive Officer, and Paul V. Hoagland, Chief Financial Officer, will host a conference call to discuss the fourth quarter and year end financial results.  Following the Company’s remarks, there will be a question and answer period.

The conference call telephone number is (800) 768-6544.  Participants calling from outside the United States and Canada should dial (785) 830-7990. 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 1:00 p.m. Eastern Time Thursday, February 25th. To hear the replay, dial (719) 457-0820.  The replay pass code is 9400642.

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.fivestarseniorliving.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.  The recording and retransmission in any way of Five Star’s fourth quarter and year end conference call is strictly prohibited without the prior written consent of Five Star.

About Five Star Quality Care, Inc.:

 Five Star Quality Care, Inc. is a senior living and healthcare services company.  Five Star owns or leases and operates 217 senior living communities with 22,905 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.

3

Supplemental Information, page 1 of 6

FIVE STAR QUALITY CARE, INC.

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

(in thousands, except per share data)

(unaudited)

	Three months ended December 31,						Year ended December 31,
	2009			2008			2009			2008
Revenues:
Senior living revenue	$	260,351		$	247,571		$	1,017,656		$	930,173
Rehabilitation hospital revenue		25,452			25,325			100,460			98,428
Institutional pharmacy revenue		19,029			18,078			74,447			70,379
Total revenues		304,832			290,974			1,192,563			1,098,980
Operating expenses:
Senior living wages and benefits		134,654			124,611			521,732			463,420
Other senior living operating expenses		64,074			61,861			248,294			233,969
Rehabilitation hospital expenses		22,946			23,646			90,957			91,185
Institutional pharmacy expenses		18,989			18,617			73,946			69,535
Rent expense		45,783			43,227			178,869			159,607
General and administrative		13,676			13,026			52,590			47,829
Depreciation and amortization		3,934			3,738			16,379			14,692
Total operating expenses		304,056			288,726			1,182,767			1,080,237
Operating income		776			2,248			9,796			18,743
Interest, dividend and other income		599			1,048			2,993			5,915
Interest and other expense		(975	)		(1,447	)		(4,365	)		(6,337	)
Unrealized gain (loss) on investments in    trading securities		22			(5,868	)		3,495			(11,967	)
Unrealized gain (loss) on UBS put right    related to auction rate securities		73			11,081			(2,759	)		11,081
Equity in losses of Affiliates    Insurance Company		(2	)		-			(134	)		-
Impairment of long lived assets		-			(1,837	)		-			(1,837	)
Impairment of goodwill		-			(5,930	)		-			(5,930	)
Gain on early extinguishment of debt		317			-			34,579			743
Gain on sale of available for sale securities		-			-			795			-
Impairment of investments in available for    sale securities		-			(5,385	)		(2,947	)		(8,404	)
Income (loss) from continuing operations before    income taxes		810			(6,090	)		41,453			2,007
Provision for income taxes		(122	)		(472	)		(2,196	)		(1,392	)
Income (loss) from continuing operations		688			(6,562	)		39,257			615
Loss from discontinued operations		(416	)		(790	)		(927	)		(5,111	)
Net income (loss)	$	272		$	(7,352	)	$	38,330		$	(4,496	)
Weighted average shares outstanding  - basic		35,542			31,991			33,558			31,872
Weighted average shares outstanding - diluted		35,542			31,991			38,775			31,872
Basic income (loss) per share from:
Continuing operations	$	0.02		$	(0.21	)	$	1.17		$	0.02
Discontinued operations		(0.01	)		(0.02	)		(0.03	)		(0.16	)
Net income (loss) per share  - basic	$	0.01		$	(0.23	)	$	1.14		$	(0.14	)
Diluted income (loss) per share from:
Continuing operations	$	0.02		$	(0.21	)	$	1.07		$	0.02
Discontinued operations		(0.01	)		(0.02	)		(0.02	)		(0.16	)
Net income (loss) per share - diluted	$	0.01		$	(0.23	)	$	1.05		$	(0.14	)

Supplemental Information, page 2 of 6

FIVE STAR QUALITY CARE, INC.

CONDENSED CONSOLIDATED BALANCE SHEET DATA

(in thousands, except share data)

(unaudited)

	December 31, 2009		December 31, 2008
Assets
Current assets:
Cash and cash equivalents	$	11,299	$	16,138
Accounts receivable, net of allowance		61,418		66,023
Investments in trading securities		65,961		-
Investments in available for sale securities		9,084		7,232
Restricted cash and investments		7,083		7,518
UBS put right related to auction rate securities		8,322		-
Prepaid expenses and other current assets		20,162		17,350
Total current assets		183,329		114,261
Property and equipment, net		192,742		190,627
Investments in trading securities		-		62,866
Equity investment in Affiliates Insurance Company		5,000		-
UBS put right related to auction rate securities		-		11,081
Restricted cash and investments		11,711		13,368
Goodwill and other long term assets		20,318		20,435
Total assets	$	413,100	$	412,638
Liabilities and Shareholders' Equity
Current liabilities:
UBS secured revolving credit facility related to       auction rate securities	$	39,141	$	-
Other current liabilities		133,615		129,139
Total current liabilities		172,756		129,139
UBS secured revolving credit facility related to    auction rate securities		-		21,875
Other long term liabilities		39,038		37,344
Mortgage notes payable		12,284		12,441
Convertible senior notes		49,707		126,500
Shareholders’ equity (35,668,814 and 32,205,604 shares    issued and outstanding at December 31, 2009 and    2008, respectively)		139,315		85,339
Total liabilities and shareholders’ equity	$	413,100	$	412,638

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						Year ended
	December 31,						December 31,
	2009			2008			2009			2008
Number of communities (end of period)		217			206			217			206
Number of living units (end of period)		22,905			21,953			22,905			21,953
Number of living units % growth		4.3	%		-			4.3	%		-
Occupancy		86.1	%		87.7	%		86.2	%		88.5	%
Average daily rate (ADR)	$	144.64		$	141.93		$	145.11		$	141.87
ADR % growth		1.9	%		-			2.3	%		-
Percent breakdown of net senior living revenues:
Medicare		13.6	%		14.3	%		14.3	%		14.7	%
Medicaid		16.7	%		16.1	%		16.4	%		16.7	%
Private and other sources		69.7	%		69.6	%		69.3	%		68.6	%
Total		100.0	%		100.0	%		100.0	%		100.0	%
Senior living revenues	$	260,351		$	247,571		$	1,017,656		$	930,173
Senior living revenues % growth		5.2	%		-			9.4	%		-
Senior living wages and benefits	$	134,654		$	124,611		$	521,732		$	463,420
Senior living wages and benefits as a %    of senior living revenues		51.7	%		50.3	%		51.3	%		49.8	%
Other senior living operating expenses	$	64,074		$	61,861		$	248,294		$	233,969
Other senior living operating expenses as a %    of senior living revenues		24.6	%		25.0	%		24.4	%		25.2	%
Community expenses(2) % growth		6.6	%		-			10.4	%		-

(1)   Excludes data for institutional pharmacy, rehabilitation hospital operations and discontinued senior living operations.

(2)   Community expenses equal senior living wages and benefits and other senior living operating expenses as shown on our consolidated

         statement of operations.

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						Year ended
	December 31,(2)						December 31,(3)
	2009			2008			2009			2008
Number of communities (end of period)		198			198			164			164
Number of living units (end of period)		21,073			21,073			18,345			18,345
Occupancy		86.5	%		87.9	%		87.1	%		88.9	%
Average daily rate (ADR)	$	145.46		$	142.19		$	147.75		$	142.03
ADR % growth		2.3	%		-			4.0	%		-
Percent breakdown of net senior living revenues:
Medicare		14.0	%		14.4	%		16.2	%		15.8	%
Medicaid		17.2	%		16.3	%		18.6	%		17.9	%
Private and other sources		68.8	%		69.3	%		65.2	%		66.3	%
Total		100.0	%		100.0	%		100.0	%		100.0	%
Senior living revenues	$	245,986		$	244,223		$	869,515		$	855,196
Senior living revenues  % growth		0.7	%		-			1.7	%		-
Senior living wages and benefits	$	126,917		$	122,943		$	449,095		$	427,732
Senior living wages and benefits as a % of senior living    revenues		51.6	%		50.3	%		51.6	%		50.0	%
Other senior living operating expenses	$	60,629		$	61,127		$	214,961		$	216,276
Other senior living operating expenses as a % of senior living    revenues		24.6	%		25.0	%		24.7	%		25.3	%
Community expenses(4) % growth		1.9	%		-			3.1	%		-

(1)   Excludes data for institutional pharmacy, rehabilitation hospital operations and discontinued senior living operations.

(2)   Communities that we have operated continuously since October 1, 2008.

(3)   Communities that we have operated continuously since January 1, 2008.

(4)   Community expenses equal senior living wages and benefits and other senior living operating expenses as shown on our consolidated statement of operations.

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						Year ended
		December 31,						December 31,
	2009			2008			2009			2008
Number of senior living communities(2) (end of period):
Assisted and independent living communities, owned		23			23			23			23
Assisted and independent living communities, leased		147			136			147			136
Total number of assisted and independent living communities		170			159			170			159
Skilled nursing communities, owned		2			2			2			2
Skilled nursing communities, leased		45			45			45			45
Total number of skilled nursing communities		47			47			47			47
Total number of senior living communities		217			206			217			206
Number of senior living units (end of period):
Assisted and independent living communities, owned		1,976			1,976			1,976			1,976
Assisted and independent living communities, leased(3)		16,651			15,699			16,651			15,699
Total number of assisted and independent living units		18,627			17,675			18,627			17,675
Skilled nursing communities, owned		271			271			271			271
Skilled nursing communities, leased(4)		4,007			4,007			4,007			4,007
Total number of skilled nursing units		4,278			4,278			4,278			4,278
Total number of senior living units		22,905			21,953			22,905			21,953
Senior living revenues:
Assisted and independent living communities	$	191,636		$	179,998		$	744,427		$	663,744
Skilled nursing communities		66,598			65,579			265,078			258,689
Other(5)		2,117			1,994			8,151			7,740
Total senior living revenues	$	260,351		$	247,571		$	1,017,656		$	930,173
Senior living data:
Assisted and independent living communities occupancy		86.4	%		88.1	%		86.5	%		89.0	%
Assisted and independent living communities ADR	$	132.09		$	129.37		$	132.34		$	129.05
Assisted and independent living communities ADR % growth		2.1	%		-			2.5	%		-
Skilled nursing communities occupancy		85.0	%		86.1	%		85.3	%		86.8	%
Skilled nursing communities ADR	$	199.08		$	193.49		$	199.04		$	190.40
Skilled nursing communities ADR % growth		2.9	%		-			4.5	%		-
Rehabilitation hospital data:
Rehabilitation hospital units		321			321			321			321
Rehabilitation hospital occupancy		59.8	%		62.3	%		60.3	%		62.9	%

(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 2,048 and 1,908 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, 2009 and 2008, respectively.

(4)   Includes 88 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, 2009 and 2008.

(5)   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.

Supplemental Information, page 6 of 6

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 generally accepted accounting principles, or GAAP.  We consider EBITDA and EBITDA excluding certain items to be a meaningful disclosure because we believe that the inclusion of these non-GAAP financial measures may help investors to gain a better understanding of changes in our core operating results, and can also help investors who wish to make comparisons between us and other companies on both a GAAP and a non-GAAP basis. EBITDA and EBITDA excluding certain items as presented may not, however, always be comparable to amounts calculated by other companies. These non-GAAP financial measures are used by management to evaluate financial performance and resource allocation for our communities and for us as a whole and for comparing such performance to that of prior periods and to the performance of our competitors.  This information should not be considered as an alternative to net income or any other financial operating or performance measure established by GAAP.  Reconciliation of income from continuing operations to EBITDA and EBITDA excluding certain items, for the three months and year ended December 31, 2009 and 2008 is as follows:

	For the three months						For the year
	ended December 31,						ended December 31,
	2009			2008			2009			2008
Income (loss) from continuing operations	$	688		$	(6,562	)	$	39,257		$	615
Add: interest and other expense		975			1,447			4,365			6,337
Add: income tax expense		122			472			2,196			1,392
Add: depreciation and amortization		3,934			3,738			16,379			14,692
Less: interest, dividend and other income		(599	)		(1,048	)		(2,993	)		(5,915	)
EBITDA		5,120			(1,953	)		59,204			17,121
Add: impairment of certain investments		-			5,385			2,947			8,404
Add: unrealized loss on investments in trading       securities		-			5,868			-			11,967
Add: unrealized loss on UBS put right related to       auction rate securities		-			-			2,759			-
Add: impairment of long lived assets		-			1,837			-			1,837
Add: impairment of goodwill		-			5,930			-			5,930
Less: unrealized gain on investments in trading       securities		(22	)		-			(3,495	)		-
Less: unrealized gain on UBS put right related       to auction rate securities		(73	)		(11,081	)		-			(11,081	)
Less: gain on sale of investments in available for       sale securities		-			-			(795	)		-
Less: gain on early extinguishment of debt		(317	)		-			(34,579	)		(743	)
EBITDA excluding certain items	$	4,708		$	5,986		$	26,041		$	33,435