Form 8-K FIVE STAR QUALITY CARE For: May 04

1-16817

04-3516029

(Commission File Number)

(IRS Employer Identification No.)

400 Centre Street, Newton, Massachusetts

02458

(Address of Principal Executive Offices)

(Zip 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:

☐

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

☐

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

☐

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

☐

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

(d)

Exhibits.

FIVE STAR QUALITY CARE, INC.

By:

/s/ Richard A. Doyle

Richard A. Doyle

Treasurer and Chief Financial Officer

FOR IMMEDIATE RELEASE 

Contact: Brad Shepherd, Director, Investor Relations

(617) 796-8245

§

Senior living revenue for the first quarter of 2016 increased 1.8% to $280.1 million from $275.2 million for the same period in 2015.  Growth in senior living revenue reflects increases in average monthly rates to residents who pay privately for services and in the number of communities owned compared to the 2015 period, as well as a $2.4 million revenue reserve recorded in the 2015 period for historical Medicare payments Five Star received and expects to repay in connection with a Medicare compliance assessment at one of Five Star’s skilled nursing facilities, or the Compliance Assessment.  Management fee revenue for the first quarter of 2016 increased 11.1% to $2.8 million from $2.5 million for the same period in 2015.  Growth in management fees was primarily due to an increase in the number of managed communities compared to the 2015 period and an increase in average monthly rates to private pay residents at our comparable communities.

§

Earnings from continuing operations before interest, taxes, depreciation and amortization, or EBITDA, for the first quarter of 2016 were $8.8 million compared to $4.7 million for the same period in 2015.  EBITDA, excluding certain items described below, or Adjusted EBITDA, was $9.2 million and $9.6 million for the first quarters of 2016 and 2015, respectively.  Adjusted EBITDA excluding rent, or Adjusted EBITDAR, was $59.3 million for each of the first quarters of 2016 and 2015. 

§

Loss from continuing operations for the first quarter of 2016 was $2.3 million, or $0.05 per basic and diluted share, compared to loss from continuing operations of $4.8 million, or $0.10 per basic and diluted share, for the same period in 2015. 

§

Net loss for the first quarter of 2016 was $2.6 million, or $0.06 per basic and diluted share, compared to net loss of $5.3 million, or $0.11 per basic and diluted share, for the same period in 2015.  Net loss for the first quarter of 2016 included a loss from discontinued operations of $0.3 million. Net loss for the first quarter of 2015 included a loss from discontinued operations of $0.5 million. 

§

EBITDA, EBITDAR, loss from continuing operations and net loss for the first quarter of 2016 included $0.3 million of noncash long lived asset impairment charges.  EBITDA, EBITDAR, loss from continuing operations and net loss for the first quarter of 2015 included $2.4 million of reserve for historical Medicare payments Five Star received and expects to repay in connection with the Compliance Assessment and $2.3 million in estimated penalties, compliance costs and professional fees related to the Compliance Assessment.

§

A reconciliation of loss from continuing operations determined in accordance with U.S. generally accepted accounting principles, or GAAP, to EBITDA, Adjusted EBITDA and Adjusted EBITDAR for the quarters ended March 31, 2016 and 2015 appears later in this press release.

§

Occupancy at owned and leased senior living communities for the first quarter of 2016 was 85.1%. For the quarter ended March 31, 2016, the calculation of occupancy includes only living units categorized as in service; prior period occupancy calculations included certain living units categorized as out of service.

§

The average monthly rate at owned and leased senior living communities for the first quarter of 2016 increased 0.7% to $4,654 from $4,623 for the same period in 2015.

§

The percentage of revenues derived from residents’ private resources at owned and leased senior living communities for the first quarter of 2016 increased 80 bps to 78.1% from 77.3% for the same period in 2015.

·

MR. MACKEY, FIVE STAR’S PRESIDENT AND CHIEF EXECUTIVE OFFICER, HAS MADE STATEMENTS IN THIS PRESS RELEASE REGARDING INCREASES IN SENIOR LIVING REVENUE, MANAGEMENT FEE REVENUE AND AVERAGE MONTHLY RATES AND STRONG EXPENSE CONTROLS. THERE CAN BE NO ASSURANCE THAT FIVE STAR WILL HAVE CONTINUED SUCCESS INCREASING SENIOR LIVING REVENUES OR MANAGEMENT FEE REVENUE, THAT AVERAGE MONTHLY RATES WILL CONTINUE TO INCREASE OR THAT EXPENSES WILL CONTINUE TO BE CONTROLLED; AND, AS A RESULT, FIVE STAR’S FINANCIAL RESULTS COULD DECLINE,

·

MR. MACKEY HAS ALSO MADE STATEMENTS IN THIS PRESS RELEASE REGARDING CONTINUED IMPROVEMENT OF FIVE STAR’S COMMUNITIES THROUGH SELECTIVE EXPANSIONS AND RENOVATIONS AND POTENTIAL GROWTH OPPORTUNITIES IN FIVE STAR’S EXISTING BUSINESSES. THERE CAN BE NO ASSURANCE THAT FIVE STAR WILL CONTINUE TO IMPROVE ITS COMMUNITIES THROUGH EXPANSIONS OR RENOVATIONS OR OTHERWISE OR THAT ANY POTENTIAL GROWTH OPPORTUNITIES WILL BE REALIZED,

·

FIVE STAR EXPECTS TO ENTER INTO A MANAGEMENT AGREEMENT WITH SNH IN THE SECOND QUARTER OF 2016 TO MANAGE A SENIOR LIVING COMMUNITY SNH OWNS.  FIVE STAR MAY NOT BE ABLE TO ENTER INTO THIS MANAGEMENT AGREEMENT ON ACCEPTABLE TERMS OR OTHERWISE, AND FIVE STAR’S ENTRY INTO THIS MANAGEMENT AGREEMENT MAY NOT OCCUR, MAY BE DELAYED OR THE TERMS MAY CHANGE, AND

·

FIVE STAR CONTINUES TO MARKET FOR SALE ONE COMMUNITY IT OWNS.  FIVE STAR MAY NOT BE ABLE TO SELL THIS COMMUNITY ON ACCEPTABLE TERMS OR OTHERWISE, AND THE SALE OF THIS COMMUNITY MAY NOT OCCUR.

Three Months Ended March 31,

2016

2015

Revenues:

Senior living revenue

$

$

Management fee revenue

Reimbursed costs incurred on behalf of managed communities

Total revenues

Operating expenses:

Senior living wages and benefits

Other senior living operating expenses

Costs incurred on behalf of managed communities

Rent expense

General and administrative expenses

Depreciation and amortization expense

Long lived asset impairment

 —

Total operating expenses

Operating loss

Interest, dividend and other income

Interest and other expense

(Loss) gain on sale of available for sale securities reclassified from other comprehensive  income

Loss from continuing operations before income taxes and equity in earnings of an investee

Provision for income taxes

Equity in earnings of an investee

Loss from continuing operations

Loss from discontinued operations

Net loss

$

$

Weighted average shares outstanding—basic and diluted

Basic and diluted loss per share from:

Continuing operations

$

$

Discontinued operations

Net loss per share—basic and diluted

$

$

March 31,

December 31,

2016

2015

Assets

Current assets:

Cash and cash equivalents

$

$

Accounts receivable, net of allowance

Due from related persons

Investments in available for sale securities

Restricted cash

Prepaid and other current assets

Assets of discontinued operations

Total current assets

Property and equipment, net

Restricted cash

Restricted investments in available for sale securities

Equity investment and other long term assets

Total assets

$

$

Liabilities and Shareholders’ Equity

Current liabilities:

Revolving credit facility

$

$

Other current liabilities

Total current liabilities

Mortgage notes payable

Other long term liabilities

Shareholders’ equity

Total liabilities and shareholders’ equity

$

$

Three Months Ended March 31,

2016

2015

Cash flows from operating activities:

Net loss

$

$

Adjustments to reconcile net loss to cash (used in) provided by operating activities:

Depreciation and amortization

Loss from discontinued operations before income tax

Loss (gain) on sale of available for sale securities reclassified from other comprehensive income

Loss on disposal of property and equipment

Long lived asset impairment

 —

Equity in earnings of an investee

Stock based compensation

Provision for losses on receivables

Other noncash (income) expense adjustments, net

Changes in assets and liabilities:

Accounts receivable

Prepaid expenses and other assets

Accounts payable and accrued expenses

Accrued compensation and benefits

Due to/from related persons, net

Other current and long term liabilities

Cash (used in) provided by operating activities

Cash flows from investing activities:

(Increase) decrease in restricted cash and investment accounts, net

Acquisition of property and equipment

Purchases of available for sale securities

Proceeds from sale of property and equipment to Senior Housing Properties Trust

Proceeds from sale of available for sale securities

Cash used in investing activities

Cash flows from financing activities:

Proceeds from borrowings on revolving credit facility

 —

Repayments of borrowings on revolving credit facility

Repayments of mortgage notes payable

Cash provided by (used in) financing activities

Cash flows from discontinued operations:

Net cash provided by (used in) operating activities

Net cash used in investing activities

Net cash flows provided by (used in) discontinued operations

Change in cash and cash equivalents

Cash and cash equivalents at beginning of period

Cash and cash equivalents at end of period

$

$

Supplemental cash flow information:

Cash paid for interest

$

$

Cash paid for income taxes, net

$

$

For the three months
ended March 31,

2016

2015

Loss from continuing operations

$

$

Add: interest and other expense

Add: income tax expense

Add: depreciation and amortization

Less: interest, dividend and other income

EBITDA

Add (less):

Long lived asset impairments

 —

Costs related to compliance assessment

 —

(1)

Financial accounting restatement and remediation costs

 —

Acquisition related costs

 —

Loss (gain) on sale of investments in available for sale securities

Adjusted EBITDA

Add: Rent expense

Adjusted EBITDAR

$

$

(1)

Includes a $2.4 million revenue reserve for historical Medicare payments Five Star received and expects to repay in connection with the Compliance Assessment and $2.3 million of estimated penalties, compliance costs and professional fees related to the Compliance Assessment. 

Three months ended March 31, (2)

2016

2015

Senior living revenue:

Independent and assisted living community revenue (owned)

$

$

Independent and assisted living community revenue (leased)

Continuing care retirement community revenue (leased)

Skilled nursing facility revenue (leased)(3)

Other(4)

Total senior living revenue (owned and leased)

$

$

Senior living wages and benefits:

Independent and assisted living community wages and benefits (owned)

$

$

Independent and assisted living community wages and benefits (leased)

Continuing care retirement community wages and benefits (leased)

Skilled nursing facility wages and benefits (leased)

Other(4)

Total senior living wages and benefits (owned and leased)

$

$

Senior living other operating expenses:

Independent and assisted living community other operating expenses (owned)

$

$

Independent and assisted living community other operating expenses (leased)

Continuing care retirement community other operating expenses (leased)

Skilled nursing facility other operating expenses (leased)(5)

Other(4)

Total senior living operating expenses (owned and leased)

$

$

(1)

Excludes data for managed communities and discontinued operations.

(2)

The number of owned and leased communities between January 1, 2015 and March 31, 2016 increased by two due to the acquisition of two senior living communities in November 2015; separate same store comparable senior living community financial data is not presented because the differences between that data and the data for all owned and leased communities are not material.

(3)

Skilled nursing facility revenue for the three months ended March 31, 2015 is net of a $2.4 million reserve for historical Medicare payments Five Star received and expects to repay in connection with the Compliance Assessment.

(4)

Other senior living revenue and expenses relate primarily to rehabilitation and other specialty service revenues and expenses provided at the senior living communities owned and leased by Five Star.

(5)

Skilled nursing facility other operating expenses for the three months ended March 31, 2015 includes $2.3 million of estimated penalties, compliance costs and professional fees related to the Compliance Assessment.

Three months ended 

March 31,

December 31,

September 30,

June 30,

March 31,

2016

2015

2015

2015

2015

Independent and assisted living communities (owned):

Number of communities (end of period)

Number of units (end of period)(2)

Occupancy(2)

Avg. monthly rate(3)

$

$

$

$

$

Independent and assisted living communities (leased):

Number of communities (end of period)

Number of units (end of period)(2)

Occupancy(2)

Avg. monthly rate(3)

$

$

$

$

$

Continuing care retirement communities (leased):

Number of communities (end of period)

Number of units (end of period)(2)(4)

Occupancy(2)

Avg. monthly rate(3)

$

$

$

$

$

Skilled nursing facilities (leased):

Number of communities (end of period)

Number of units (end of period)(2)(5)

Occupancy(2)

Avg. monthly rate(3)

$

$

$

$

$

Total senior living communities (owned and leased):

Number of communities (end of period)

Number of units (end of period)(2)

Occupancy(2)

Avg. monthly rate(3)

$

$

$

$

$

Managed communities:

Number of communities (end of period)

Number of units (end of period)(2)(6)

Occupancy(2)

Avg. monthly rate(3)

$

$

$

$

$

Other ancillary services:

Rehabilitation and wellness inpatient clinics (end of period)

Rehabilitation and wellness outpatient clinics (end of period)

Home health communities served (end of period)

(1)

Excludes data for discontinued operations.

(2)

For the quarter ended March 31, 2016, the calculation of occupancy includes only living units categorized as in service; prior period occupancy calculations included certain living units categorized as out of service.

(3)

Average monthly rate is calculated by taking the average daily rate, which is defined as total operating revenues divided by occupied units during the period, and multiplying it by 30 days.

(4)

Includes 1,949 skilled nursing units in communities where assisted living and independent living services are the predominant services provided.

(5)

Includes 69 assisted living and independent living units in communities where skilled nursing services are the predominant services provided.

(6)

Includes 463 skilled nursing units in communities where assisted living and independent living services are the predominant services provided.

Three Months Ended March 31,

2016

2015

Independent and assisted living communities (owned):

Private and other sources

Medicaid

Total

Independent and assisted living communities (leased):

Private and other sources

Medicaid

Total

Continuing care retirement communities (leased):

Private and other sources

Medicare

Medicaid

Total

Skilled nursing facilities (leased):

Private and other sources

Medicare

Medicaid

Total

Total senior living communities (owned and leased):

Private and other sources

Medicare

Medicaid

Total

(1)

Excludes data for managed communities and discontinued operations.