Five Star Senior Living Inc. Announces its Second Quarter 2019 Results

August 07, 2019

Second Quarter Revenues of $274.5 million

Second Quarter Net Income of $4.2 million

Second Quarter Adjusted EBITDA of $8.6 million

Occupancy Increased 160 Basis Points in Second Quarter Compared to Last Year

NEWTON, Mass.--(BUSINESS WIRE)-- (Nasdaq: FVE) today announced its financial results for the quarter and six months ended June 30, 2019.

“We are excited to report substantial progress during the quarter, our first profitable period since the second quarter of 2013,” stated Katie Potter, President and Chief Executive Officer of Five Star Senior Living Inc. “Notably, we are very pleased that there no longer exists a substantial doubt about our continuing as a going concern. Additionally, we are pleased that we generated Adjusted EBITDA of $8.6 million this quarter and occupancy at owned and leased communities has increased, or remained flat, for the last five consecutive quarters, increasing 160 basis points this quarter compared to last year. We remain on track regarding the restructuring of our business arrangements with Senior Housing Properties Trust and we made significant strides regarding this effort during the quarter, including receiving stockholder approval to move forward with the restructuring and closing on our new $65.0 million secured revolving credit facility.”

Financial Results for the quarter ended June 30, 2019:

  • Senior living revenue for the second quarter of 2019 increased 1.3% to $274.5 million from $270.9 million for the same period in 2018, primarily due to increases in occupancy and average monthly rates for residents who pay privately for services, as well as increases in revenues attributable to ancillary services, such as rehabilitation and wellness services. These increases were partially offset by Five Star's sales during the first half of 2018 of four senior living communities to Senior Housing Properties Trust (Nasdaq: SNH), which communities Five Star now manages for SNH’s account, as well as a skilled nursing facility, or SNF, to a third party, and the sale during the second quarter of 2019 of three SNFs to a third party. Management fee revenue for the second quarter of 2019 increased 6.5% to $4.0 million from $3.8 million for the same period in 2018, primarily due to an increase in the number of managed communities to 77 from 75 for the same period in 2018.
  • Net income for the second quarter of 2019 was $4.2 million, or $0.08 per share, compared to a net loss of $20.9 million, or $0.42 per share, for the same period in 2018. Net income for the second quarter of 2019 included $1.1 million, or $0.02 per share, of costs related to the transaction agreement Five Star entered into with SNH on April 1, 2019, or the Transaction Agreement, and $0.4 million, or $0.01 per diluted share, of net severance costs incurred during the second quarter of 2019 related to payments owed to a former Five Star executive officer. Net loss for the second quarter of 2018 included a gain on sale of senior living communities of $1.5 million, or $0.03 per share, primarily due to Five Star's sale in June 2018 of two senior living communities to SNH, which communities Five Star now manages for SNH's account. Net income for the second quarter of 2019 increased approximately $25.0 million primarily due to a decrease in rent expense of $18.9 million attributable to the reduction in our minimum monthly rent payable to SNH pursuant to the Transaction Agreement.
  • Earnings before interest, taxes, depreciation and amortization, or EBITDA, for the second quarter of 2019 was $6.9 million compared to $(11.3) million for the same period in 2018. EBITDA excluding certain items, or Adjusted EBITDA, for the second quarter of 2019 was $8.6 million compared to $(12.2) million for the same period in 2018. A reconciliation of net income (loss) determined in accordance with U.S. generally accepted accounting principles, or GAAP, to EBITDA and Adjusted EBITDA for the quarters ended June 30, 2019 and 2018 appears later in this press release.

Operating Results for the quarter ended June 30, 2019:

  • Occupancy at owned and leased senior living communities for the second quarter of 2019 increased 160 basis points to 83.0% compared to 81.4% for the same period in 2018.
  • Average monthly rates at owned and leased senior living communities for the second quarter of 2019 increased 0.8% to $4,745 from $4,709 for the same period in 2018.
  • The percentage of revenue derived from residents’ private resources at owned and leased senior living communities for the second quarter of 2019 was 79.1% compared to 78.0% for the same period in 2018.

Financial Results for the six months ended June 30, 2019:

  • Senior living revenue for the six months ended June 30, 2019 increased 1.1% to $551.4 million from $545.4 million for the same period in 2018, primarily due to increases in occupancy and average monthly rates for residents who pay privately for services, as well as increases in revenues attributable to ancillary services, such as rehabilitation and wellness services. These increases were partially offset by Five Star's sales during the first half of 2018 of four senior living communities to SNH, which communities Five Star now manages for SNH's account, as well as a SNF to a third party, and the sale during the second quarter of 2019 of three SNFs to a third party. Management fee revenue for the six months ended June 30, 2019 increased 8.2% to $8.0 million from $7.4 million for the same period in 2018, primarily due to an increase in the number of managed communities to 77 from 75 for the same period in 2018.
  • Net loss for the six months ended June 30, 2019 was $29.0 million, or $0.58 per share, compared to a net loss of $28.8 million, or $0.58 per share, for the same period in 2018. Net loss for the six months ended June 30, 2019 included $8.8 million, or $0.18 per share, of costs related to the Transaction Agreement, $3.3 million, or $0.07 per share, related to long lived impairment charges recorded by Five Star to reduce the carrying value of certain long lived assets to their estimated fair values and $0.4 million, or $0.01 per share, of net severance costs incurred during the second quarter of 2019 related to payments owed to a former Five Star executive officer. Net loss for the six months ended June 30, 2018 included a gain on sale of senior living communities of $7.2 million, or $0.14 per share, primarily due to Five Star's sale during the first half of 2018 of four senior living communities to SNH, which communities Five Star now manages for SNH’s account.
  • EBITDA for the six months ended June 30, 2019 was $(15.9) million compared to $(9.5) million for the same period in 2018. Adjusted EBITDA was $(3.3) million for the six months ended June 30, 2019 and $(15.9) million for the same period 2018. A reconciliation of net loss determined in accordance with GAAP to EBITDA and Adjusted EBITDA for the six months ended June 30, 2019 and 2018 appears later in this press release.

Restructuring of Business Arrangements with SNH:

As previously disclosed, in April 2019, Five Star entered into the Transaction Agreement with SNH, pursuant to which Five Star and SNH agreed to restructure their existing business arrangements, subject to certain conditions and the receipt of various approvals.

  • Effective January 1, 2020 (or January 1, 2021 if extended under the Transaction Agreement), or the Conversion Time, Five Star’s existing five master leases with SNH for SNH’s senior living communities leased to Five Star, as well as Five Star’s existing management agreements and pooling agreements with SNH for SNH’s senior living communities managed by Five Star for SNH’s account, will be terminated and replaced with new management agreements between Five Star and SNH for all of these senior living communities.
  • At the Conversion Time, Five Star will issue to SNH such number of Five Star common shares as is necessary to cause SNH to own, when considered together with Five Star common shares then owned by SNH, approximately 34% of Five Star's then outstanding common shares, and SNH will declare a pro rata distribution to the holders of its common shares of beneficial interest of the right to receive, and Five Star will issue on a pro rata basis to such holders, a number of Five Star common shares which equals approximately 51% of Five Star’s then outstanding common shares, or, together, the Share Issuances; the noted percentage ownership amounts are post-issuance, giving effect to the Share Issuances. On June 11, 2019, Five Star's stockholders approved the Share Issuances in satisfaction of one of the conditions to the restructuring of Five Star’s business arrangements with SNH.
  • At the Conversion Time, as consideration for the Share Issuances, SNH will provide to Five Star $75.0 million of additional consideration.
  • Commencing February 1, 2019 through December 31, 2019, the aggregate amount of monthly minimum rent payable to SNH by Five Star under Five Star's master leases with SNH is $11.0 million, subject to adjustment and extension, and no additional rent is payable to SNH by Five Star from such date to the Conversion Time.
  • On April 1, 2019, SNH purchased from Five Star approximately $50.0 million of unencumbered fixed assets and improvements related to SNH's senior living communities leased to and operated by Five Star, which amount was subsequently reduced to $49.2 million.
  • In connection with the Transaction Agreement, Five Star entered into a credit agreement with SNH pursuant to which SNH extended to Five Star a $25.0 million line of credit, which is secured by six senior living communities owned by Five Star. This line of credit matures at the Conversion Time, and there are currently no amounts outstanding under this line of credit.

Financing Activities:

In June 2019, Five Star entered into a new $65.0 million secured revolving credit facility, which replaced its previously existing secured revolving credit facility. At the time it entered into the new credit facility, Five Star had borrowings of approximately $51.5 million outstanding under its previous credit facility, which amount remained outstanding under the new credit facility until Five Star fully repaid that amount later in June 2019. The new credit facility matures in June 2021, and, subject to Five Star's payment of extension fees and meeting other conditions, Five Star has the option to extend the stated maturity date of the new credit facility for a one year period. Five Star is required to pay interest at an annual rate of LIBOR plus 250 basis points per annum, or at a base rate, as defined in the agreement governing the credit facility, plus 150 basis points per annum, on borrowings under the new credit facility. Other terms of the new credit facility are substantially similar to those of Five Star’s previously existing credit facility.

Other:

  • In April 2019, Five Star and SNH entered into an agreement to sell to a third party two SNFs located in Wisconsin that SNH owns and leases to Five Star. Following completion of these sales, Five Star is not expected to operate those facilities.
  • Also in April 2019, Five Star began managing for SNH's account a senior living community located in Oregon with 318 living units pursuant to a management agreement with SNH on terms substantially similar to those of existing management agreements between Five Star and SNH.
  • In May 2019, Five Star and SNH sold to a third party three SNFs located in California that SNH owned and leased to Five Star, and Five Star no longer operates those facilities.
  • Also in May 2019, Five Star and SNH entered into an agreement to sell to a third party 15 SNFs located in Iowa, Nebraska and Kansas that SNH owns and leases to Five Star. Following completion of these sales, Five Star is not expected to operate those facilities.
  • On June 12, 2019, Five Star announced its intention to effect a 1:10 reverse stock split of its issued and outstanding shares of common stock on or before September 30, 2019. Five Star expects that, as a result of the reverse stock split, Five Star will regain compliance with Nasdaq listing standards.
  • On August 6, 2019, Five Star announced the appointment of Margaret Wigglesworth as Senior Vice President and Chief Operating Officer. Ms. Wigglesworth will lead Five Star's operations and direct various aspects of its administrative functions. Ms. Wigglesworth joins Five Star with extensive management experience spanning nearly three decades, including previously held leadership roles at the International Council of Shopping Centers, Cresa and Colliers International Group Inc.

Conference Call:

At 10:00 a.m. Eastern Time this morning, President and Chief Executive Officer, Katherine Potter, and Executive Vice President, Chief Financial Officer and Treasurer, Jeffrey Leer, will host a conference call to discuss Five Star's second quarter 2019 results.

The conference call telephone number is (877) 329-4332. Participants calling from outside the United States and Canada should dial (412) 317-5436. 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 Time on Wednesday, August 14, 2019. To access the replay, dial (412) 317-0088. The replay pass code is 10132499.

A live audio webcast of the conference call will also be available in a listen-only mode on Five Star’s website, www.fivestarseniorliving.com. Participants wanting to access the webcast should visit Five Star's website about five minutes before the call. The archived webcast will be available for replay on Five Star's website following the call for about a week. The transcription, recording and retransmission in any way ofFive Star’ssecond quarter2019conference callarestrictly prohibited without the prior written consent ofFive Star. Five Star’s website is not incorporated as part of this press release.

About Five Star Senior Living Inc.:

Five Star Senior Living Inc. is a senior living and healthcare services company. As of June 30, 2019, Five Star operated 282 senior living communities with 31,996 living units located in 33 states, including 205 communities (21,912 living units) that it owned or leased and 77 communities (10,084 living units) that it managed. These communities include independent living, assisted living, continuing care retirement and skilled nursing communities. Five Star is headquartered in Newton, Massachusetts.

 

FIVE STAR SENIOR LIVING INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)

 

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

2019

 

2018

 

2019

 

2018

Revenues:

 

 

 

 

 

 

 

 

Senior living revenue

 

$

 

274,496

 

 

$

 

270,882

 

 

$

 

551,431

 

 

$

 

545,407

 

Management fee revenue

 

 

4,024

 

 

 

3,777

 

 

 

8,007

 

 

 

7,399

 

Reimbursed costs incurred on behalf of managed communities

 

 

77,219

 

 

 

68,439

 

 

 

151,824

 

 

 

135,809

 

Total revenues

 

 

355,739

 

 

 

343,098

 

 

 

711,262

 

 

 

688,615

 

Operating expenses:

 

 

 

 

 

 

 

 

Senior living wages and benefits

 

 

145,249

 

 

 

140,713

 

 

 

288,879

 

 

 

276,882

 

Other senior living operating expenses

 

 

72,576

 

 

 

75,764

 

 

 

149,344

 

 

 

149,541

 

Costs incurred on behalf of managed communities

 

 

77,219

 

 

 

68,439

 

 

 

151,824

 

 

 

135,809

 

Rent expense

 

 

33,262

 

 

 

52,113

 

 

 

87,804

 

 

 

104,358

 

General and administrative expenses

 

 

20,548

 

 

 

18,477

 

 

 

47,050

 

 

 

38,440

 

Depreciation and amortization expense

 

 

2,941

 

 

 

8,977

 

 

 

11,106

 

 

 

17,837

 

Loss (gain) on sale of senior living communities

 

 

101

 

 

 

(1,509

)

 

 

101

 

 

 

(7,193

)

Long lived asset impairment

 

 

112

 

 

 

365

 

 

 

3,260

 

 

 

365

 

Total operating expenses

 

 

352,008

 

 

 

363,339

 

 

 

739,368

 

 

 

716,039

 

 

 

 

 

 

 

 

 

 

Operating income (loss)

 

 

3,731

 

 

 

(20,241

)

 

 

(28,106

)

 

 

(27,424

)

 

 

 

 

 

 

 

 

 

Interest, dividend and other income

 

 

415

 

 

 

218

 

 

 

571

 

 

 

385

 

Interest and other expense

 

 

(906

)

 

 

(604

)

 

 

(1,812

)

 

 

(1,307

)

Unrealized (loss) gain on equity investments

 

 

(38

)

 

 

44

 

 

 

328

 

 

 

(6

)

Realized gain (loss) on sale of debt and equity investments, net of tax

 

 

144

 

 

 

(42

)

 

 

236

 

 

 

(10

)

 

 

 

 

 

 

 

 

 

Income (loss) before income taxes and equity in earnings of an investee

 

 

3,346

 

 

 

(20,625

)

 

 

(28,783

)

 

 

(28,362

)

Benefit (provision) for income taxes

 

 

705

 

 

 

(281

)

 

 

(785

)

 

 

(537

)

Equity in earnings of an investee, net of tax

 

 

130

 

 

 

12

 

 

 

534

 

 

 

56

 

Net income (loss)

 

$

 

4,181

 

 

$

 

(20,894

)

 

$

 

(29,034

)

 

$

 

(28,843

)

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding—basic

 

 

50,067

 

 

 

49,653

 

 

 

50,054

 

 

 

49,624

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding—diluted

 

 

51,422

 

 

 

49,653

 

 

 

50,054

 

 

 

49,624

 

 

 

 

 

 

 

 

 

 

Net income (loss) per share—basic

 

$

 

0.08

 

 

$

 

(0.42

)

 

$

 

(0.58

)

 

$

 

(0.58

)

 

 

 

 

 

 

 

 

 

Net income (loss) per share—diluted

 

$

 

0.08

 

 

$

 

(0.42

)

 

$

 

(0.58

)

 

$

 

(0.58

)

 

FIVE STAR SENIOR LIVING INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
(unaudited)

 

 

 

June 30,

 

December 31,

 

 

2019

 

2018

Assets

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

 

35,500

 

 

$

 

29,512

 

Accounts receivable, net of allowance

 

 

36,619

 

 

 

37,758

 

Due from related persons

 

 

3,698

 

 

 

7,855

 

Investments

 

 

21,275

 

 

 

20,179

 

Restricted cash

 

 

23,880

 

 

 

19,720

 

Prepaid expenses and other current assets

 

 

20,844

 

 

 

23,029

 

Assets held for sale

 

 

11,218

 

 

Total current assets

 

 

153,034

 

 

 

138,053

 

 

 

 

 

 

Property and equipment, net

 

 

165,382

 

 

 

243,873

 

Equity investment of an investee

 

 

9,303

 

 

 

8,633

 

Restricted cash

 

 

1,029

 

 

 

923

 

Restricted investments

 

 

6,267

 

 

 

8,073

 

Right of use assets

 

 

909,267

 

 

Other long term assets

 

 

5,739

 

 

 

6,069

 

Total assets

 

$

 

1,250,021

 

 

$

 

405,624

 

 

 

 

 

 

Liabilities and Shareholders’ Equity

 

 

 

 

Current liabilities:

 

 

 

 

Revolving credit facility

 

$

 

 

$

 

51,484

 

Accounts payable and accrued expenses

 

 

65,961

 

 

 

69,667

 

Current portion of lease liabilities

 

 

94,368

 

 

Accrued compensation and benefits

 

 

41,810

 

 

 

35,421

 

Due to related persons

 

 

18,359

 

 

 

18,883

 

Mortgage notes payable

 

 

350

 

 

 

339

 

Accrued real estate taxes

 

 

1,777

 

 

 

12,959

 

Security deposits and current portion of continuing care contracts

 

 

766

 

 

 

3,468

 

Other current liabilities

 

 

34,089

 

 

 

37,472

 

Liabilities held for sale

 

 

12,615

 

 

Total current liabilities

 

 

270,095

 

 

 

229,693

 

 

 

 

 

 

Long term liabilities:

 

 

 

 

Mortgage notes payable

 

 

7,355

 

 

 

7,533

 

Long term portion of lease liabilities

 

 

829,956

 

 

Accrued self insurance obligations

 

 

31,148

 

 

 

33,030

 

Deferred gain on sale and leaseback transaction

 

 

 

59,478

 

Other long term liabilities

 

 

1,721

 

 

 

4,721

 

Total long term liabilities

 

 

870,180

 

 

 

104,762

 

 

 

 

 

 

Shareholders’ equity:

 

 

 

 

Common stock, par value $.01: 75,000,000 shares authorized, 50,865,892 and 50,853,452 shares issued and outstanding at June 30, 2019 and December 31, 2018, respectively

 

 

508

 

 

 

508

 

Additional paid in capital

 

 

361,777

 

 

 

361,555

 

Accumulated deficit

 

 

(254,197

)

 

 

(292,636

)

Accumulated other comprehensive income

 

 

1,658

 

 

 

1,742

 

Total shareholders’ equity

 

 

109,746

 

 

 

71,169

 

Total liabilities and shareholders’ equity

 

$

 

1,250,021

 

 

$

 

405,624

 

 

FIVE STAR SENIOR LIVING INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)

 

 

 

Six Months Ended June 30,

 

 

2019

 

2018

Cash flows from operating activities:

 

 

 

 

Net loss

 

$

 

(29,034

)

 

$

 

(28,843

)

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

 

 

 

 

Depreciation and amortization expense

 

 

11,106

 

 

 

17,837

 

Loss (gain) on sale of senior living communities

 

 

101

 

 

 

(7,193

)

Unrealized (gain) loss on equity securities

 

 

(328

)

 

 

6

 

Realized (gain) loss on sale of debt and equity investments

 

 

(236

)

 

 

10

 

Loss on disposal of property and equipment

 

 

86

 

 

 

209

 

Long lived asset impairment

 

 

3,260

 

 

 

365

 

Equity in earnings of an investee, net of tax

 

 

(534

)

 

 

(56

)

Stock based compensation

 

 

222

 

 

 

491

 

Provision for losses on receivables

 

 

2,092

 

 

 

2,637

 

Amortization of non-cash rent adjustments

 

 

(472

)

 

 

(3,305

)

Other noncash expense (income) adjustments, net

 

 

62

 

 

 

96

 

Changes in assets and liabilities:

 

 

 

 

Accounts receivable

 

 

(953

)

 

 

187

 

Prepaid expenses and other assets

 

 

3,110

 

 

 

4,766

 

Accounts payable and accrued expenses

 

 

(5,123

)

 

 

(11,165

)

Accrued compensation and benefits

 

 

6,389

 

 

 

2,742

 

Due from (to) related persons, net

 

 

16,486

 

 

 

(1,798

)

Other current and long term liabilities

 

 

293

 

 

 

(302

)

Cash provided by (used in) operating activities

 

 

6,527

 

 

 

(23,316

)

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

Acquisition of property and equipment

 

 

(24,427

)

 

 

(23,680

)

Purchases of investments

 

 

(2,234

)

 

 

(2,682

)

Proceeds from sale of property and equipment

 

 

78,920

 

 

 

8,529

 

Proceeds from sale of communities

 

 

 

31,853

 

Proceeds from sale of investments

 

 

4,446

 

 

 

4,981

 

Cash provided by investing activities

 

 

56,705

 

 

 

19,001

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

Proceeds from borrowings on revolving credit facility

 

 

 

5,000

 

Repayments of borrowings on revolving credit facility

 

 

(51,484

)

 

 

(5,000

)

Repayments of mortgage notes payable

 

 

(181

)

 

 

(343

)

Payment of deferred financing fees

 

 

(1,271

)

 

Cash used in financing activities

 

 

(52,936

)

 

 

(343

)

 

 

 

 

 

Change in cash and cash equivalents and restricted cash

 

 

10,296

 

 

 

(4,658

)

Cash and cash equivalents and restricted cash at beginning of period

 

 

50,155

 

 

 

48,478

 

Cash and cash equivalents and restricted cash at end of period

 

$

 

60,451

 

 

$

 

43,820

 

 

 

 

 

 

Reconciliation of cash and cash equivalents and restricted cash:

 

 

 

 

Cash and cash equivalents

 

$

 

35,500

 

 

$

 

22,137

 

Restricted cash

 

 

24,909

 

 

 

21,683

 

Restricted cash presented in assets held for sale

 

 

42

 

 

Cash and cash equivalents and restricted cash at end of period

 

$

 

60,451

 

 

$

 

43,820

 

 

 

 

 

 

Supplemental cash flow information:

 

 

 

 

Cash paid for interest

 

$

 

1,565

 

 

$

 

1,002

 

Cash (received) paid for income taxes, net

 

$

 

(1,491

)

 

$

 

348

 

 

 

 

 

 

Non-cash activities:

 

 

 

 

Initial recognition of right of use assets

 

$

 

1,478,958

 

 

$

 

Initial recognition of lease liabilities

 

$

 

1,478,958

 

 

$

 

Real estate sale

 

$

 

 

$

 

33,364

 

Mortgage notes assumed by purchaser in real estate sale

 

$

 

 

$

 

33,364

 

 

FIVE STAR SENIOR LIVING INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(in thousands)
(unaudited)

Non-GAAP financial measures are financial measures that are not determined in accordance with GAAP. Five Star believes the non-GAAP financial measures presented in the table below are meaningful supplemental disclosures because they may help investors gain a better understanding of changes in Five Star’s operating results and its ability to pay rent or service debt, make capital expenditures and expand its business. These non-GAAP financial measures also may help investors make comparisons between Five Star and other companies on both a GAAP and a non-GAAP basis. Five Star believes that EBITDA and Adjusted EBITDA are meaningful financial measures that may help investors better understand its financial performance, including by allowing investors to compare Five Star’s performance between periods and to the performance of other companies. EBITDA and Adjusted EBITDA are used by management to evaluate Five Star’s financial performance and compare Five Star’s performance over time and to the performance of other companies. Five Star calculates EBITDA and Adjusted EBITDA as shown below. These measures should not be considered as alternatives to net income (loss) or operating income (loss), as indicators of Five Star’s operating performance or as measures of Five Star’s liquidity. Also, EBITDA and Adjusted EBITDA as presented may not be comparable to similarly titled amounts calculated by other companies.

Five Star believes that net income (loss) is the most directly comparable financial measure, determined according to GAAP, to Five Star’s presentation of EBITDA and Adjusted EBITDA. The following table presents the reconciliation of these non-GAAP financial measures to net loss for each of the three and six months ended June 30, 2019 and 2018.

 

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

2019

 

2018

 

2019

 

2018

Net income (loss)

 

$

 

4,181

 

 

$

 

(20,894

)

 

$

 

(29,034

)

 

$

 

(28,843

)

Add (less):

 

 

 

 

 

 

 

 

Interest and other expense

 

 

906

 

 

 

604

 

 

 

1,812

 

 

 

1,307

 

Provision for income taxes

 

 

(705

)

 

 

281

 

 

 

785

 

 

 

537

 

Depreciation and amortization expense

 

 

2,941

 

 

 

8,977

 

 

 

11,106

 

 

 

17,837

 

Interest, dividend and other income

 

 

(415

)

 

 

(218

)

 

 

(571

)

 

 

(385

)

EBITDA

 

 

6,908

 

 

 

(11,250

)

 

 

(15,902

)

 

 

(9,547

)

Add (less):

 

 

 

 

 

 

 

 

Long lived asset impairment

 

 

112

 

 

 

365

 

 

 

3,260

 

 

 

365

 

Costs related to compliance assessment

 

 

 

20

 

 

 

 

(118

)

Employee litigation matter

 

 

 

224

 

 

 

 

605

 

Loss (gain) on sale of senior living communities

 

 

101

 

 

 

(1,509

)

 

 

101

 

 

 

(7,193

)

Severance, net

 

 

393

 

 

 

 

393

 

 

Transaction costs (1)

 

 

1,133

 

 

 

 

8,808

 

 

Adjusted EBITDA

 

$

 

8,647

 

 

$

 

(12,150

)

 

$

 

(3,340

)

 

$

 

(15,888

 

 

(1) Costs incurred by Five Star related to the Transaction Agreement.

 

FIVE STAR SENIOR LIVING INC.
SENIOR LIVING COMMUNITY FINANCIAL DATA(1)
(in thousands)
(unaudited)

 

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

2019

 

2018

 

2019

 

2018

Senior living revenue:

 

 

 

 

 

 

 

 

Independent and assisted living community revenue (owned)

 

$

 

18,593

 

 

$

 

19,331

 

 

$

 

36,869

 

 

$

 

39,049

 

Independent and assisted living community revenue (leased)

 

 

109,445

 

 

 

107,380

 

 

 

217,421

 

 

 

214,674

 

Continuing care retirement community revenue (leased)

 

 

97,186

 

 

 

95,070

 

 

 

194,681

 

 

 

192,848

 

Skilled nursing facility revenue (leased)

 

 

38,169

 

 

 

40,365

 

 

 

80,952

 

 

 

81,449

 

Ageility physical therapy revenue

 

 

11,103

 

 

 

8,736

 

 

 

21,508

 

 

 

17,387

 

Total senior living revenue

 

$

 

274,496

 

 

$

 

270,882

 

 

$

 

551,431

 

 

$

 

545,407

 

 

 

 

 

 

 

 

 

 

Senior living wages and benefits:

 

 

 

 

 

 

 

 

Independent and assisted living community wages and benefits (owned)

 

$

 

9,109

 

 

$

 

8,781

 

 

$

 

17,825

 

 

$

 

17,163

 

Independent and assisted living community wages and benefits (leased)

 

 

51,264

 

 

 

47,850

 

 

 

100,909

 

 

 

94,300

 

Continuing care retirement community wages and benefits (leased)

 

 

51,020

 

 

 

50,787

 

 

 

101,277

 

 

 

100,729

 

Skilled nursing facility wages and benefits (leased)

 

 

27,100

 

 

 

27,690

 

 

 

55,888

 

 

 

54,496

 

Ageility physical therapy wages and benefits

 

 

7,567

 

 

 

5,894

 

 

 

14,355

 

 

 

11,568

 

Insurance and other (2)

 

 

(811

)

 

 

(289

)

 

 

(1,375

)

 

 

(1,374

)

Total senior living wages and benefits

 

$

 

145,249

 

 

$

 

140,713

 

 

$

 

288,879

 

 

$

 

276,882

 

 

 

 

 

 

 

 

 

 

Other senior living operating expenses:

 

 

 

 

 

 

 

 

Independent and assisted living community other operating expenses (owned)

 

$

 

5,593

 

 

$

 

5,844

 

 

$

 

11,319

 

 

$

 

11,519

 

Independent and assisted living community other operating expenses (leased)

 

 

28,561

 

 

 

29,048

 

 

 

58,187

 

 

 

57,256

 

Continuing care retirement community other operating expenses (leased)

 

 

26,098

 

 

 

27,273

 

 

 

53,644

 

 

 

53,712

 

Skilled nursing facility other operating expenses (leased)

 

 

10,595

 

 

 

12,038

 

 

 

23,469

 

 

 

25,010

 

Ageility physical therapy other operating expenses

 

 

1,253

 

 

 

633

 

 

 

2,284

 

 

 

1,101

 

Insurance and other (2)

 

 

476

 

 

 

928

 

 

 

441

 

 

 

943

 

Total other senior living operating expenses

 

$

 

72,576

 

 

$

 

75,764

 

 

$

 

149,344

 

 

$

 

149,541

 

 

(1) Excludes data for managed communities.
(2) Insurance and other expenses primarily relate to Five Star's captive insurance company subsidiary, which mainly participates in Five Star's workers' compensation and professional and general liability insurance programs. Credit balances in senior living wages and benefits for insurance and other represent premiums earned by Five Star's captive insurance company subsidiary in excess of expenses recorded during the applicable period.

 

FIVE STAR SENIOR LIVING INC.
COMPARABLE SENIOR LIVING COMMUNITY FINANCIAL DATA(1)
(in thousands)
(unaudited)

 

 

 

Three Months Ended
June 30, (2)

 

Six Months Ended
June 30, (3)

 

 

2019

 

2018

 

2019

 

2018

Senior living revenue:

 

 

 

 

 

 

 

 

Independent and assisted living community revenue (owned)

 

$

 

18,593

 

 

$

 

18,391

 

 

$

 

36,869

 

 

$

 

36,576

 

Independent and assisted living community revenue (leased)

 

 

109,445

 

 

 

107,380

 

 

 

217,421

 

 

 

214,674

 

Continuing care retirement community revenue (leased)

 

 

97,186

 

 

 

95,070

 

 

 

194,681

 

 

 

192,848

 

Skilled nursing facility revenue (leased)

 

 

36,183

 

 

 

33,348

 

 

 

72,497

 

 

 

66,768

 

Ageility physical therapy revenue

 

 

9,703

 

 

 

8,536

 

 

 

18,112

 

 

 

16,801

 

Total senior living revenue

 

$

 

271,110

 

 

$

 

262,725

 

 

$

 

539,580

 

 

$

 

527,667

 

 

 

 

 

 

 

 

 

 

Senior living wages and benefits:

 

 

 

 

 

 

 

 

Independent and assisted living community wages and benefits (owned)

 

$

 

9,109

 

 

$

 

8,375

 

 

$

 

17,825

 

 

$

 

16,260

 

Independent and assisted living community wages and benefits (leased)

 

 

51,264

 

 

 

47,850

 

 

 

100,909

 

 

 

94,300

 

Continuing care retirement community wages and benefits (leased)

 

 

51,020

 

 

 

50,787

 

 

 

101,277

 

 

 

100,729

 

Skilled nursing facility wages and benefits (leased)

 

 

25,654

 

 

 

23,179

 

 

 

50,333

 

 

 

45,256

 

Ageility physical therapy wages and benefits

 

 

6,652

 

 

 

5,754

 

 

 

12,133

 

 

 

11,101

 

Insurance and other (4)

 

 

(811

)

 

 

(289

)

 

 

(1,375

)

 

 

(1,374

)

Total senior living wages and benefits

 

$

 

142,888

 

 

$

 

135,656

 

 

$

 

281,102

 

 

$

 

266,272

 

 

 

 

 

 

 

 

 

 

Other senior living operating expenses:

 

 

 

 

 

 

 

 

Independent and assisted living community other operating expenses (owned)

 

$

 

5,593

 

 

$

 

5,460

 

 

$

 

11,319

 

 

$

 

10,607

 

Independent and assisted living community other operating expenses (leased)

 

 

28,561

 

 

 

29,048

 

 

 

58,187

 

 

 

57,256

 

Continuing care retirement community other operating expenses (leased)

 

 

26,098

 

 

 

27,273

 

 

 

53,644

 

 

 

53,712

 

Skilled nursing facility other operating expenses (leased)

 

 

9,982

 

 

 

9,868

 

 

 

21,019

 

 

 

20,443

 

Ageility physical therapy other operating expenses

 

 

1,098

 

 

 

(12

)

 

 

1,893

 

 

 

998

 

Insurance and other (4)

 

 

476

 

 

 

928

 

 

 

441

 

 

 

943

 

Total other senior living operating expenses

 

$

 

71,808

 

 

$

 

72,565

 

 

$

 

146,503

 

 

$

 

143,959

 

(1) Excludes data for managed communities.
(2) Includes data for senior living communities that Five Star has owned or leased continuously since April 1, 2018.
(3) Includes data for senior living communities that Five Star has owned or leased continuously since January 1, 2018.
(4) Insurance and other expenses primarily relate to Five Star's captive insurance company subsidiary, which mainly participates in Five Star's workers' compensation and professional and general liability insurance programs. Credit balances in senior living wages and benefits for insurance and other represent premiums earned by Five Star's captive insurance company subsidiary in excess of expenses recorded during the applicable period.

 

FIVE STAR SENIOR LIVING INC.
SENIOR LIVING OTHER OPERATING DATA
(unaudited)

 

 

 

Three Months Ended

 

 

June 30,

 

March 31,

 

December 31,

 

September 30,

 

June 30,

 

 

2019

 

2019

 

2018

 

2018

 

2018

Independent and assisted living communities (owned): (1)

 

 

 

 

 

 

 

 

 

 

Number of communities (end of period)

 

 

20

 

 

20

 

 

20

 

 

20

 

 

20

Number of units (end of period)

 

 

2,108

 

 

2,108

 

 

2,108

 

 

2,108

 

 

2,108

Occupancy(2)

 

 

81.4

%

 

 

81.5

%

 

 

82.3

%

 

 

81.5

%

 

 

81.1

%

Avg. monthly rate(3)

 

$

 

3,554

 

$

 

3,527

 

$

 

3,458

 

$

 

3,442

 

$

 

3,392

 

 

 

 

 

 

 

 

 

 

 

Independent and assisted living communities (leased):

 

 

 

 

 

 

 

 

 

 

Number of communities (end of period)

 

 

128

 

 

128

 

 

128

 

 

128

 

 

128

Number of units (end of period)

 

 

10,506

 

 

10,506

 

 

10,520

 

 

10,520

 

 

10,519

Occupancy(2)

 

 

84.3

%

 

 

83.8

%

 

 

84.2

%

 

 

83.7

%

 

 

83.6

%

Avg. monthly rate(3)

 

$

 

4,065

 

$

 

4,077

 

$

 

3,991

 

$

 

3,991

 

$

 

4,024

 

 

 

 

 

 

 

 

 

 

 

Continuing care retirement communities (leased):

 

 

 

 

 

 

 

 

 

 

Number of communities (end of period)

 

 

31

 

 

31

 

 

31

 

 

31

 

 

31

Number of units (end of period)(4)

 

 

7,070

 

 

7,070

 

 

7,117

 

 

7,157

 

 

7,158

Occupancy(2)

 

 

83.7

%

 

 

83.7

%

 

 

82.9

%

 

 

81.3

%

 

 

80.6

%

Avg. monthly rate(3)

 

$

 

5,415

 

$

 

5,484

 

$

 

5,383

 

$

 

5,427

 

$

 

5,433

 

 

 

 

 

 

 

 

 

 

 

Skilled nursing facilities (leased):

 

 

 

 

 

 

 

 

 

 

Number of communities (end of period)

 

 

26

 

 

29

 

 

29

 

 

29

 

 

29

Number of units (end of period)(5)

 

 

2,228

 

 

2,506

 

 

2,505

 

 

2,505

 

 

2,505

Occupancy(2)

 

 

77.1

%

 

 

78.4

%

 

 

77.9

%

 

 

76.9

%

 

 

74.7

%

Avg. monthly rate(3)

 

$

 

7,037

 

$

 

7,258

 

$

 

7,049

 

$

 

6,874

 

$

 

6,926

 

 

 

 

 

 

 

 

 

 

 

Total senior living communities (owned and leased):

 

 

 

 

 

 

 

 

 

 

Number of communities (end of period)

 

 

205

 

 

208

 

 

208

 

 

208

 

 

208

Number of units (end of period)

 

 

21,912

 

 

22,190

 

 

22,250

 

 

22,290

 

 

22,290

Occupancy(2)

 

 

83.0

%

 

 

82.9

%

 

 

82.9

%

 

 

82.0

%

 

 

81.4

%

Avg. monthly rate(3)

 

$

 

4,745

 

$

 

4,818

 

$

 

4,710

 

$

 

4,701

 

$

 

4,709

 

 

 

 

 

 

 

 

 

 

 

Managed communities: (1)

 

 

 

 

 

 

 

 

 

 

Number of communities (end of period)

 

 

77

 

 

76

 

 

76

 

 

75

 

 

75

Number of units (end of period)(6)

 

 

10,084

 

 

9,766

 

 

9,766

 

 

9,515

 

 

9,510

Occupancy(2)

 

 

85.4

%

 

 

86.3

%

 

 

86.5

%

 

 

86.7

%

 

 

86.1

%

Avg. monthly rate(3)

 

$

 

4,171

 

$

 

4,275

 

$

 

4,149

 

$

 

4,164

 

$

 

4,242

 

 

 

 

 

 

 

 

 

 

 

Other ancillary services:

 

 

 

 

 

 

 

 

 

 

Number of ageility physical therapy inpatient clinics (end of period)

 

 

45

 

 

46

 

 

47

 

 

47

 

 

47

Number of ageility physical therapy outpatient clinics (end of period)

 

 

142

 

 

137

 

 

128

 

 

120

 

 

111

Number of home health communities served (end of period)

 

 

10

 

 

12

 

 

10

 

 

12

 

 

12

 

(1) Occupancy and average monthly rate for the three months ended June 30, 2018 include data for the senior living communities that were sold to SNH during that period as owned until the time of sale and as managed from the time of sale through the end of such period.
(2) Includes living units categorized as in service. As a result, the number of living units may vary from period to period for reasons other than the acquisition or sale of senior living communities.|
(3) Average monthly rate is calculated by taking the average daily rate, which is defined as total operating revenues for senior living services divided by occupied units during the period, and multiplying it by 30 days.
(4) Includes 1,813 skilled nursing units in communities where assisted living and independent living services are the predominant services provided.
(5) Includes 76 assisted living and independent living units in communities where skilled nursing services are the predominant services provided.
(6) Includes 427 skilled nursing units in communities where assisted living and independent living services are the predominant services provided.

 

FIVE STAR SENIOR LIVING INC.
PERCENT BREAKDOWN OF SENIOR LIVING COMMUNITY REVENUE(1)
(unaudited)

 

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

2019

 

2018

 

2019

 

2018

Independent and assisted living communities (owned):

 

 

 

 

 

 

 

 

Private and other sources

 

98.2

%

 

98.8

%

 

98.5

%

 

98.8

%

Medicaid

 

1.8

%

 

1.2

%

 

1.5

%

 

1.2

%

Total

 

100.0

%

 

100.0

%

 

100.0

%

 

100.0

%

 

 

 

 

 

 

 

 

 

Independent and assisted living communities (leased):

 

 

 

 

 

 

 

 

Private and other sources

 

98.8

%

 

98.9

%

 

98.8

%

 

99.0

%

Medicaid

 

1.2

%

 

1.1

%

 

1.2

%

 

1.0

%

Total

 

100.0

%

 

100.0

%

 

100.0

%

 

100.0

%

 

 

 

 

 

 

 

 

 

Continuing care retirement communities (leased):

 

 

 

 

 

 

 

 

Private and other sources

 

75.2

%

 

74.9

%

 

75.0

%

 

73.9

%

Medicare

 

16.8

%

 

17.5

%

 

17.0

%

 

18.5

%

Medicaid

 

8.0

%

 

7.6

%

 

8.0

%

 

7.6

%

Total

 

100.0

%

 

100.0

%

 

100.0

%

 

100.0

%

 

 

 

 

 

 

 

 

 

Skilled nursing facilities (leased):

 

 

 

 

 

 

 

 

Private and other sources

 

23.7

%

 

20.0

%

 

22.7

%

 

20.5

%

Medicare

 

17.2

%

 

19.0

%

 

17.6

%

 

19.3

%

Medicaid

 

59.1

%

 

61.0

%

 

59.7

%

 

60.2

%

Total

 

100.0

%

 

100.0

%

 

100.0

%

 

100.0

%

 

 

 

 

 

 

 

 

 

Total senior living communities (owned and leased):

 

 

 

 

 

 

 

 

Private and other sources

 

79.1

%

 

78.0

%

 

78.4

%

 

77.6

%

Medicare

 

8.7

%

 

9.3

%

 

8.9

%

 

9.8

%

Medicaid

 

12.2

%

 

12.7

%

 

12.7

%

 

12.6

%

Total

 

100.0

%

 

100.0

%

 

100.0

%

 

100.0

%

 

(1) Excludes data for managed communities.

Warning Concerning Forward-Looking Statements

This press release contains statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other securities laws. Also, whenever Five Star uses words such as “believe”, “expect”, “anticipate”, “intend”, “plan”, “estimate”, "will", “may” and negatives or derivatives of these or similar expressions, Five Star is making forward-looking statements. These forward-looking statements are based upon Five Star’s present intent, beliefs or expectations, but forward-looking statements are not guaranteed to occur and may not occur. Actual results may differ materially from those contained in or implied by Five Star’s forward-looking statements. Forward-looking statements involve known and unknown risks, uncertainties and other factors, some of which are beyond Five Star’s control. For example:

  • As described herein, certain of the transactions contemplated by the Transaction Agreement are expected to be effective January 1, 2020. These transactions are subject to conditions, including, among others, the receipt of certain licensing and other regulatory approvals. Five Star cannot be sure that any or all of such conditions will be satisfied. Accordingly, these transactions may not become effective as of January 1, 2020 or at all, or the terms of such transactions may change.
  • Ms. Potter states that Five Star remains on track, and made significant strides, regarding the restructuring of its business arrangements with SNH. The share issuances contemplated by the Transaction Agreement require Five Star to file a registration statement on Form S-1 with the Securities and Exchange Commission, or SEC, to register the Five Star common shares to be issued, and that the Form S-1 be declared effective by the SEC. The process of preparing the Form S-1 is time consuming and the time before the SEC declares the Form S-1 effective is beyond Five Star’s control. Accordingly, Five Star cannot be sure that the Transaction Agreement and the restructuring transactions will be completed within a specified time period or at all.
  • Five Star and SNH have agreed to sell to third parties 17 SNFs that SNH owns and leases to Five Star, and following completion of these sales, Five Star is not expected to operate those facilities. These sales are subject to conditions. These conditions may not be met and these sales may not occur or may be delayed or their terms may change.
  • Ms. Potter notes that there no longer exists a substantial doubt about Five Star continuing as a going concern and this press release indicates various improvements Five Star achieved during the second quarter of 2019, including increased occupancy and generating $8.6 million of Adjusted EBITDA and being profitable for that quarter. These statements may imply that Five Star’s operations will continue to be profitable in the future and that it will continue as a going concern. However, Five Star’s business and operations remain subject to substantial risks, including the risk that the transactions contemplated by the Transaction Agreement will not be completed, and many of these risks are beyond Five Star’s control. As a result, Five Star’s operations may not be profitable in the future and Five Star may realize losses, which could negatively affect its ability to continue as a going concern.
  • Five Star expects to effect a 1:10 reverse stock split on or before September 30, 2019. This reverse stock split is subject to approval by Five Star’s Board of Directors; as a result, this reverse stock split may not occur, may be delayed or accelerated, or its terms may change. Further, the benefits that Five Star expects may be achieved from the reverse stock split, if it occurs, may not be realized, including Five Star’s regaining compliance with Nasdaq listing standards; if Five Star fails to regain and thereafter maintain compliance with Nasdaq listing standards, Nasdaq may initiate proceedings to delist Five Star’s common shares.
  • The appointment of Ms. Wigglesworth as Senior Vice President and Chief Operating Officer of Five Star and the enumeration of her experiences may imply that Five Star’s business and operations will improve as a result of her appointment. However, Five Star’s business and operations are subject to various risks, many of which are beyond its control. As a result, Five Star’s business and operations may not improve despite the appointment of Ms. Wigglesworth.
  • Five Star has a $65 million credit facility. Five Star’s ability to borrow under that facility is subject to it satisfying conditions and the maximum amount available for borrowings is subject to the amount of Five Star’s qualifying collateral. As a result, the amount of borrowings available to Five Star from time to time under that facility may be less than $65 million.

The information contained in Five Star’s filings with the SEC, including under “Risk Factors” in Five Star’s periodic reports, or incorporated therein, identifies other important factors that could cause Five Star’s actual results to differ materially from those stated in or implied by Five Star’s forward-looking statements. Five Star’s filings with the SEC are available on the SEC’s website at www.sec.gov.

You should not place undue reliance upon forward-looking statements.

Except as required by law, Five Star does not intend to update or change any forward-looking statements as a result of new information, future events or otherwise.

Michael Kodesch, Director, Investor Relations
(617) 796-8245

Source: Five Star Senior Living Inc.

Resident Stories

Meet the people who make Five Star great.

Watch The Videos

400 Centre Street • Newton, MA 02458-2076 • Phone: 617­-796­-8387 • Fax: 617­-796­-8385