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Five Star Senior Living Inc. Announces Third Quarter 2018 Results

November 14, 2018

NEWTON, Mass.--(BUSINESS WIRE)--Nov 14, 2018--Five Star Senior Living Inc. (Nasdaq: FVE) today announced its financial results for the quarter ended September 30, 2018.

Financial Results for the quarter ended September 30, 2018:

Senior living revenue for the third quarter of 2018 decreased 2.5% to $272.7 million from $279.7 million for the same period in 2017, primarily due to Five Star’s sale of six senior living communities in December 2017, January 2018, February 2018 and June 2018 to Senior Housing Properties Trust (Nasdaq: SNH), which Five Star is currently managing for SNH, the sale by Five Star and SNH of one skilled nursing facility to a third party in June 2018 that was previously leased to Five Star and a decrease in occupancy, partially offset by an increase in revenues from ancillary services, such as rehabilitation and wellness services. Management fee revenue for the third quarter of 2018 increased 17.4% to $4.0 million, primarily due to an increase in the number of managed communities compared to the same period in 2017. Net loss for the third quarter of 2018 was $21.6 million, or $0.43 per diluted share, compared to net loss of $6.6 million, or $0.13 per diluted share, for the same period in 2017. Net loss for the third quarter of 2017 included a $0.8 million, or $0.02 per diluted share, payment that Five Star received from its former liability insurer related to a previously disclosed litigation matter, or the litigation recovery. Earnings before interest, taxes, depreciation and amortization, or EBITDA, for the third quarter of 2018 was $(12.4) million compared to $4.1 million for the same period in 2017. EBITDA excluding certain items noted in the supplemental information provided below, or Adjusted EBITDA, was $(12.4) million and $3.3 million for the third quarters of 2018 and 2017, respectively. A reconciliation of net loss determined in accordance with U.S. generally accepted accounting principles, or GAAP, to EBITDA and Adjusted EBITDA for the quarters ended September 30, 2018 and 2017 appears later in this press release.

Operating Results for the quarter ended September 30, 2018:

Occupancy at owned and leased senior living communities for the third quarter of 2018 was 82.0% compared to 83.0% for the same period in 2017. The average monthly rate at owned and leased senior living communities for the third quarter of 2018 increased 1.1% to $4,701 from $4,648 for the same period in 2017. The percentage of revenue derived from residents’ private resources at owned and leased senior living communities for the third quarter of 2018 was 77.8% compared to 78.1% for the same period in 2017.

Financial Results for the nine months ended September 30, 2018:

Senior living revenue for the nine months ended September 30, 2018 decreased 2.9% to $818.1 million from $842.9 million for the same period in 2017, primarily due to Five Star’s sale of six senior living communities in December 2017, January 2018, February 2018 and June 2018 to SNH, which Five Star is currently managing for SNH, the sale by Five Star and SNH of one skilled nursing facility to a third party in June 2018 that was previously leased to Five Star and a decrease in occupancy, partially offset by an increase in revenues from ancillary services, such as rehabilitation and wellness services. Management fee revenue for the nine months ended September 30, 2018 increased 8.3% to $11.4 million, primarily due to an increase in the number of managed communities compared to the same period in 2017. Net loss for the nine months ended September 30, 2018 was $50.4 million, or $1.02 per diluted share, compared to net loss of $19.9 million, or $0.40 per diluted share, for the same period in 2017. Net loss for the nine months ended September 30, 2018 included a gain on sale of senior living communities of $7.1 million, or $0.14 per diluted share, primarily due to Five Star’s sale of four senior living communities in January, February and June 2018 to SNH, which Five Star is currently managing for SNH. Net loss for the nine months ended September 30, 2017 included the $0.8 million, or $0.02 per diluted share, litigation recovery and a benefit for income taxes of $1.3 million, or $0.03 per diluted share, resulting primarily from Five Star’s monetization of alternative minimum tax credits during the second quarter of 2017. EBITDA for the nine months ended September 30, 2018 was $(22.0) million compared to $10.5 million for the same period in 2017. Adjusted EBITDA for the nine months ended September 30, 2018 was $(28.2) million compared to $10.0 million for the same period in 2017. A reconciliation of net loss determined in accordance with GAAP to EBITDA and Adjusted EBITDA for the nine months ended September 30, 2018 and 2017 appears later in this press release.

Other:

Five Star faces challenges that are currently negatively impacting its revenues, expenses, cash flows and results from operations, and Five Star expects these challenges to continue at least through 2019. These conditions raise substantial doubt about Five Star’s ability to continue as a going concern. Based on Five Star’s cash balance at September 30, 2018 and projected cash needs for the next 12 months, Five Star’s management believes that Five Star will need to increase its revenues, reduce its costs and/or pursue other transactions to be able to continue to fund its operating and capital requirements and meet its debt covenant obligations. In November 2018, Five Star began managing for SNH a senior living community located in Colorado with 238 living units pursuant to a management agreement with SNH.

Conference Call:

At 10:00 a.m. Eastern Time this morning, President and Chief Executive Officer, Bruce Mackey, and Executive Vice President, Chief Financial Officer and Treasurer, Richard Doyle, will host a conference call to discuss Five Star’s third quarter 2018 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. on Wednesday, November 21, 2018. To access the replay, dial (412) 317-0088. The replay pass code is 10123764.

A live audio webcast of the conference call will also be available in a listen-only mode on Five Star’s website, which is located at 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 for about one week after the call. The transcription, recording and retransmission in any way ofFive Star’sthird quarter2018conference 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 September 30, 2018, Five Star operated 283 senior living communities with 31,805 living units located in 32 states, including 208 communities (22,290 living units) that it owned or leased and 75 communities (9,515 living units) that it managed. These communities include independent living, assisted living, continuing care retirement communities and skilled nursing communities. Five Star is headquartered in Newton, Massachusetts.

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