Five Star Quality Care second quarter total revenues increase 3.4% to $312.6 million

Five Star Quality Care, Inc. (NYSE: FVE) today announced its financial results for the quarter and six months ended June 30, 2011.

Second Quarter 2011 Financial Highlights:

• Total revenues for the second quarter of 2011 increased 3.4% to $312.6 million from $302.3 million for the same period in the previous year.
• Income from continuing operations for the second quarter of 2011 was $6.3 million compared to $8.0 million for the same period in the previous year.
• Income per share from continuing operations for the second quarter of 2011 was $0.17 per share, basic and diluted, compared to $0.22 and $0.21 per share, basic and diluted, respectively for the same period in the previous year.
• Income from continuing operations for the second quarter of 2011 includes acquisition costs of $1.2 million, or $0.03 per share, basic and diluted. Income from continuing operations for the second quarter of 2010 included certain items that, in aggregate, increased our earnings by $561,000, or $0.02 and $0.01 per share, basic and diluted, respectively. These items were a $418,000 gain on early extinguishment of debt and a $143,000 net gain on our UBS put right related to auction rate securities.
• Earnings before interest, taxes, depreciation and amortization, or EBITDA, for the second quarter of 2011 was $11.9 million compared to $12.7 million for the same period in the previous year. As discussed above, EBITDA for the second quarter of 2011 included acquisition costs of $1.2 million and EBITDA for the second quarter of 2010 included items that, in aggregate, increased our earnings by $561,000. EBITDA excluding these items was $13.1 million and $12.1 million in the second quarter of 2011 and 2010, respectively. A reconciliation of income from continuing operations determined in accordance with U.S. generally accepted accounting principles, or GAAP, to EBITDA for the quarters ended June 30, 2011 and 2010 appears later in this press release.

Second Quarter 2011 Operating Highlights (Senior Living Communities):

• Senior living occupancy for the second quarter of 2011 was 85.2% compared to 86.3% for the same period in the previous year.
• Senior living average daily rate for the second quarter of 2011 increased by 2.9% to $150.73 from $146.54 in the same period in the previous year.
• The percentage of senior living revenues derived from residents' private resources for the second quarter of 2011 decreased to 72.0% from 72.6% for the same period in the previous year.
• For those senior living communities that we operated continuously since April 1, 2010 (comparable communities), occupancy for the second quarter of 2011 was 85.1% compared to 86.3% for the same period in the previous year.
• The average daily rate at comparable communities for the second quarter of 2011 increased by 3.5% to $151.65 from $146.54 in the same period in the previous year.

Year to Date Financial Highlights:

• Total revenues for the six months ended June 30, 2011 increased 3.3% to $620.9 million from $601.2 million for the same period in the previous year.
• Income from continuing operations for the six months ended June 30, 2011 was $12.0 million compared to income from continuing operations of $12.6 million for the same period in the previous year.
• Income per share from continuing operations for the six months ended June 30, 2011 was $0.33 and $0.32 per share, basic and diluted, respectively, compared to $0.35 and $0.34 per share, basic and diluted, respectively, for the same period in the previous year.
• Income from continuing operations for the six months ended June 30, 2011 includes acquisition costs of $1.3 million or $0.03 per share, basic and diluted. Income from continuing operations for the six months ended June 30, 2010 included certain items that, in aggregate, increased our earnings by $560,000, or $0.02 and $0.01 per share, basic and diluted, respectively. These items were a $418,000 gain on early extinguishment of debt and a $142,000 net gain on our UBS put right related to auction rate securities.
• EBITDA for the six months ended June 30, 2011 was $22.4 million compared to $21.6 million for the same period in the previous year. As discussed above EBITDA for the six months ended June 30, 2011 included acquisition costs of $1.3 million and EBITDA for the six months ended June 30, 2010 included certain items that, in aggregate, increased our earnings by $560,000. EBITDA excluding these items was $23.6 million and $21.1 million in the six months ended June 30, 2011 and 2010, respectively. A reconciliation of income from continuing operations determined in accordance with GAAP to EBITDA for the six months ended June 30, 2011 and 2010 appears later in this press release.

Other Highlights:

During the second quarter of 2011, we acquired two senior living communities containing 197 living units located in Indiana for $40.4 million, excluding closing costs, and one senior living community containing 116 living units located in Arizona for $25.6 million, excluding closing costs.

During the second quarter of 2011, we commenced leasing five senior living communities from Senior Housing Properties Trust [NYSE: SNH] with a total of 596 living units located in three states. We also began to manage 10 senior living communities for the account of SNH with a total of 824 living units located in three states.

On June 21, 2011, we issued 11,500,000 of our shares of common stock, par value $0.01 per share, in a public offering, raising net proceeds of approximately $54.1 million. We used the proceeds from this offering to repay outstanding borrowings under a bridge loan that SNH had extended to us to fund a portion of the cash purchase price of the Indiana communities.