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| FVE > SEC Filings for FVE > Form 10-Q on 30-Oct-2012 | All Recent SEC Filings |
30-Oct-2012
Quarterly Report
RESULTS OF OPERATIONS
We have one reportable segment which consists of our senior living community business. In the senior living community segment, we operate for our own account and manage for the account of SNH independent living communities, assisted living communities and SNFs that are subject to centralized oversight and provide housing and services to elderly residents. We do not consider our rehabilitation hospital operations to be a material, separately reportable segment of our business. Consequently, we report our rehabilitation hospital operations within our corporate and other activities. All of our operations and assets are located in the United States, except for the operations of our captive insurance company subsidiary, which participates in our workers' compensation, professional liability and automobile insurance programs and is organized in the Cayman Islands.
We use segment operating profit as a means to evaluate our performance and for our business decision making purposes. Segment operating profit for our one reportable segment excludes certain interest and other income, certain interest and other expense, provision for income taxes, equity in earnings of AIC, gain on settlement of litigation, sales of securities, and corporate income and expenses.
Key Statistical Data For the Three Months Ended September 30, 2012 and 2011:
The following tables present a summary of our operations for the three months ended September 30, 2012 and 2011:
Senior living communities:
Three months ended September 30,
(dollars in thousands, except average daily rate) 2012 2011 $ Change % Change
Senior living revenue $ 277,568 $ 275,605 $ 1,963 0.7 %
Management fee revenue 1,277 359 918 255.6 %
Reimbursed costs incurred on behalf of managed
communities 27,247 8,324 18,923 227.3 %
Total revenue 306,092 284,288 21,804 7.7 %
Senior living wages and benefits (137,816 ) (136,135 ) (1,681 ) (1.2 )%
Other senior living operating expenses (66,858 ) (68,669 ) 1,811 2.6 %
Costs incurred on behalf of managed communities (27,247 ) (8,324 ) (18,923 ) (227.3 )%
Rent expense (47,844 ) (47,541 ) (303 ) (0.6 )%
Depreciation and amortization expense (5,741 ) (4,923 ) (818 ) (16.6 )%
Interest and other expense (601 ) (294 ) (307 ) (104.4 )%
Interest and other income 22 19 3 (15.8 )%
Senior living income from continuing operations $ 20,007 $ 18,421 $ 1,586 8.6 %
Total number of communities (end of period):
Owned and leased communities 222 222 - -
Managed communities 30 14 16 114.3 %
Number of total communities 252 236 16 6.8 %
Total number of living units (end of period):
Owned and leased living units 23,764 23,764 - -
Managed living units 4,498 1,415 3,083 217.9 %
Number of total living units 28,262 25,179 3,083 12.2 %
Owned and leased communities:
Occupancy % 85.7 % 86.0 % n/a (0.3 )%
Average daily rate $ 145.56 $ 147.46 $ (1.90 ) (1.3 )%
Percent of senior living revenue from Medicaid 12.4 % 12.3 % n/a 0.1 %
Percent of senior living revenue from Medicare 12.6 % 14.7 % n/a (2.1 )%
Percent of senior living revenue from private and
other sources 75.0 % 73.0 % n/a 2.0 %
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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Comparable senior living communities (senior living communities that we have
owned, leased or managed and operated continuously since July 1, 2011):
Three months ended September 30,
(dollars in thousands, except average daily rate) 2012 2011 $ Change % Change
Senior living revenue $ 274,414 $ 275,054 $ (640 ) (0.2 )%
Management fee revenue 259 245 14 5.7 %
Senior living wages and benefits (136,887 ) (135,821 ) (1,066 ) (0.8 )%
Other senior living operating expenses (65,880 ) (68,437 ) 2,557 3.7 %
No. of communities (end of period)
Owned and leased communities 218 218 - -
Managed communities 10 10 - -
Number of total communities 228 228 - -
No. of living units (end of period)
Owned and leased living units 23,278 23,278 - -
Managed living units 934 934 - -
Number of total living units 24,212 24,212 - -
Occupancy % 85.7 % 86.0 % n/a (0.3 )%
Average daily rate $ 146.88 $ 147.65 $ (0.77 ) (0.5 )%
Percent of senior living revenue from Medicaid 12.6 % 12.4 % n/a 0.2 %
Percent of senior living revenue from Medicare 12.7 % 14.7 % n/a (2.0 )%
Percent of senior living revenue from private and
other sources 74.7 % 72.9 % n/a 1.8 %
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Corporate and Other:(1)
Three months ended September 30,
(dollars in thousands) 2012 2011 $ Change % Change
Rehabilitation hospital
revenues $ 26,328 $ 26,273 $ 55 0.2 %
Rehabilitation hospital
expenses (23,734 ) (23,300 ) (434 ) (1.9 )%
Rehabilitation hospital rent
expense (2,679 ) (2,597 ) (82 ) (3.2 )%
Depreciation and amortization
expense (583 ) (574 ) (9 ) (1.6 )%
General and administrative
expense(2) (14,602 ) (14,418 ) (184 ) (1.3 )%
Equity in earnings of
Affiliates Insurance Company 115 28 87 310.7 %
Gain on sale of available for
sale securities 63 529 (466 ) (88.1 )%
Interest and other income 177 336 (159 ) (47.3 )%
Interest and other expense (1,161 ) (740 ) (421 ) (56.9 )%
Acquisition related costs (100 ) (226 ) 126 55.8 %
Provision for income taxes (426 ) (186 ) (240 ) (129.0 )%
Corporate and Other loss from
continuing operations $ (16,602 ) $ (14,875 ) $ (1,727 ) (11.6 )%
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(2) General and administrative expenses are not attributable to a specific reportable segment and include items such as corporate payroll and benefits and expenses of our home office activities.
Consolidated:
Three months ended September 30,
(dollars in thousands) 2012 2011 $ Change % Change
Summary of revenue:
Senior living communities $ 306,092 $ 284,288 $ 21,804 7.7 %
Corporate and other 26,328 26,273 55 0.2 %
Total revenue $ 332,420 $ 310,561 $ 21,859 7.0 %
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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Summary of income (loss) from continuing operations: Senior living communities $ 20,007 $ 18,421 $ 1,586 8.6 % Corporate and other (16,602 ) (14,875 ) (1,727 ) (11.6 )% Income from continuing operations $ 3,405 $ 3,546 $ (141 ) (4.0 )% |
Three Months Ended September 30, 2012 Compared to Three Months Ended September 30, 2011
Senior living communities:
Our senior living revenue increased by 0.7% for the three months ended September 30, 2012 compared to the same period in 2011 primarily due to an increase from 218 to 222 in the number of communities that we owned and leased since July 1, 2011, partially offset by a 7.5% reduction in aggregate Medicare payment rates for SNFs. Our senior living revenue at the communities that we operated continuously since July 1, 2011, or our current quarter comparable communities, decreased 0.2% for the three months ended September 30, 2012 compared to the same period in 2011, primarily due to decreased per diem charges to residents and a 7.5% reduction in aggregate Medicare payment rates for our SNFs, partially offset by an increase in Medicaid payment rates in certain states.
In the third quarter of 2011, we began managing four senior living communities for SNH's account and for the account of another owner pending SNH's acquisition of that other owner's community. These four managed senior living communities were in addition to the 10 we began managing in the second quarter of 2011 for SNH. Our management fee revenue and reimbursed costs incurred at these communities increased significantly during the three months ended September 30, 2012 compared to the same period in the previous year due to an increase from 14 to 30 in the number of communities we manage and because we managed these communities for the full quarter in 2012 and began managing four of them in the third quarter of 2011.
Our senior living wages and benefits increased 1.2% for the three months ended September 30, 2012 compared to the same period in 2011 primarily due to an increase from 218 to 222 in the number of communities that we owned and leased during these periods, respectively, and to wage increases at our current quarter comparable communities. Our other senior living operating expenses, which include utilities, housekeeping, dietary, maintenance, insurance and community level administrative costs, decreased by 2.6% due to net decreased charges for purchased services and decreased utility and various medical supply expenses at our current quarter comparable communities, partially offset by an increase in the number of communities that we owned and leased from 218 to 222, plus increased service provider fees at our current quarter comparable communities. Our senior living wages and benefits at our current quarter comparable communities increased by 0.8% primarily due to wage increases. Our other senior living operating expenses at our current quarter comparable communities decreased by 3.7% primarily due to net decreased charges for purchased services and decreased utility and various medical supplies, partially offset by increased service provider fees. Our senior living rent expense increased by 0.6% compared to the same period in 2011 primarily due to our payment of additional rent for senior living community capital improvements purchased by SNH at our request since July 1, 2011.
Our senior living depreciation and amortization expense increased by 16.6% for the three months ended September 30, 2012 compared to the same period in 2011 primarily due to additional depreciation and amortization resulting from the three owned senior living communities that we acquired in the third quarter of 2011 and capital expenditures (net of sales of capital improvements to SNH), including depreciation costs arising from our purchase of furniture and fixtures for our owned communities.
Interest and other expense attributable to our senior living communities increased by 104.4% for the three months ended September 30, 2012 compared to the same period in 2011 primarily due to our assumption of three mortgage notes in connection with our acquisition of three of the Indiana Communities during the third quarter of 2011.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Corporate and Other:
Our rehabilitation hospital revenues increased by 0.2% for the three months ended September 30, 2012 compared to the same period in 2011 primarily due to higher Medicare rates and an increase in occupancy, partially offset by a decrease in managed care revenue.
Our rehabilitation hospital expenses increased by 1.9% for the three months ended September 30, 2012 compared to the same period in 2011 primarily due to increases in labor and benefit costs.
Our rehabilitation hospital rent expense increased by 3.2% for the three months ended September 30, 2012 compared to the same period in 2011 due to our payment of additional rent for rehabilitation hospital capital improvements purchased by SNH at our request since July 1, 2011.
General and administrative expenses increased by 1.3% for the three months ended September 30, 2012 compared to the same period in 2011 primarily due to increased personnel and information technology costs resulting from our acquisitions of additional communities during 2011 and wage increases.
Our interest and other income decreased by 47.3% for the three months ended September 30, 2012 compared to the same period in 2011 due to less investable cash and lower yields realized on our investments.
Our interest and other expense increased by 56.9% for the three months ended September 30, 2012 compared to the same period in 2011 primarily due to interest paid on the New Credit Facility, partially offset by our purchase and retirement of $12.4 million par value of the outstanding Notes since September 30, 2011.
For the three months ended September 30, 2012, we recognized tax expense from continuing operations of $426,000. Our effective income tax rate increased during the three months ended September 30, 2012 to 32.7% compared to 8.4% in the prior year period primarily because our previous rate had been reduced from the statutory rate due to our previous valuation allowance for our deferred tax asset relating to our NOL carry forwards which we reversed as of December 31, 2011. During the fourth quarter of 2011 we evaluated the realizability of certain of our deferred tax assets, which include, among other things, our NOLs and tax credits, and determined that it was more likely than not that we will realize the benefit of such deferred tax assets. As of December 31, 2011, our federal NOL carry forward, which will begin to expire in 2025 if unused, was approximately $97.8 million, and our tax credit carry forward, which will begin to expire in 2022 if unused, was approximately $8.8 million.
Discontinued operations:
Income from discontinued operations for the three months ended September 30, 2012 increased $17.1 million to $13.0 million, compared to a loss of $4.1 million for the three months ended September 30, 2011. Income from discontinued operations for the three months ended September 30, 2012 is primarily due to the $23.3 million gain on sale, before income tax expense of $7.6 million, we recorded relating to the sale of our pharmacy business, partially offset by losses we incurred at assisted living communities and SNFs that we have sold or expect to sell. The loss from discontinued operations for the three months ended September 30, 2011 is primarily due to an impairment charge of $3.9 million to reduce the carrying value of two SNFs we own to their estimated fair value.
Key Statistical Data For the Nine Months Ended September 30, 2012 and 2011:
The following tables present a summary of our operations for the nine months ended September 30, 2012 and 2011:
Senior living communities:
Nine months ended September 30,
(dollars in thousands, except average daily rate) 2012 2011 $ Change % Change
Senior living revenue $ 831,864 $ 803,647 $ 28,217 3.5 %
Management fee revenue 3,666 383 3,283 857.2 %
Reimbursed costs incurred on behalf of managed
communities 76,750 8,887 67,863 763.6 %
Total revenue 912,280 812,917 99,363 12.2 %
Senior living wages and benefits (412,808 ) (398,975 ) (13,833 ) (3.5 )%
Other senior living operating expenses (200,062 ) (193,123 ) (6,939 ) (3.6 )%
Costs incurred on behalf of managed communities (76,750 ) (8,887 ) (67,863 ) (763.6 )%
Rent expense (143,092 ) (137,716 ) (5,376 ) (3.9 )%
Depreciation and amortization expense (16,893 ) (12,159 ) (4,734 ) (38.9 )%
Interest and other expense (1,807 ) (509 ) (1,298 ) (255.0 )%
Interest and other income 61 100 (39 ) (39.0 )%
Senior living income from continuing operations $ 60,929 $ 61,648 $ (719 ) (1.2 )%
Total number of communities (end of period):
Owned and leased communities 222 222 - -
Managed communities 30 14 16 114.3 %
Number of total communities 252 236 16 6.8 %
Number of living units:
Owned and leased living units 23,764 23,764 - -
Managed living units 4,498 1,415 3,083 217.9 %
Number of total living units 28,262 25,179 3,083 12.2 %
Owned and leased communities:
Occupancy % 85.7 % 85.6 % n/a 0.1 %
Average daily rate $ 146.64 $ 150.15 $ (3.51 ) (2.3 )%
Percent of senior living revenue from Medicaid 12.7 % 12.6 % n/a 0.1 %
Percent of senior living revenue from Medicare 12.8 % 15.4 % n/a (2.6 )%
Percent of senior living revenue from private and
other sources 74.5 % 72.0 % n/a 2.5 %
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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Comparable senior living communities (senior living communities that we have
owned or leased and operated continuously since January 1, 2011):
Nine months ended September 30,
(dollars in thousands, except average daily rate) 2012 2011 $ Change % Change
Senior living revenue $ 794,096 $ 791,717 $ 2,379 0.3 %
Senior living wages and benefits (400,310 ) (394,724 ) (5,586 ) (1.4 )%
Other senior living operating expenses (190,316 ) (190,096 ) (220 ) (0.1 )%
No. of communities (end of period) 209 209 - -
No. of living units (end of period) 22,175 22,175 - -
Occupancy % 85.4 % 85.5 % - (0.1 )%
Average daily rate $ 150.79 $ 151.48 $ (0.69 ) (0.5 )%
Percent of senior living revenue from Medicaid 13.2 % 12.7 % n/a 0.5 %
Percent of senior living revenue from Medicare 13.4 % 15.6 % n/a (2.2 )%
Percent of senior living revenue from private and
other sources 73.4 % 71.7 % n/a 1.7 %
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Corporate and other:(1)
Nine months ended September 30,
(dollars in thousands) 2012 2011 $ Change % Change
Rehabilitation hospital
revenues $ 79,501 $ 78,235 $ 1,266 1.6 %
Rehabilitation hospital
expenses (71,725 ) (70,798 ) (927 ) (1.3 )%
Rehabilitation hospital rent
expense (7,951 ) (7,758 ) (193 ) (2.5 )%
Depreciation and amortization
expense (1,738 ) (1,546 ) (192 ) (12.4 )%
General and administrative(2) (45,445 ) (42,242 ) (3,203 ) (7.6 )%
Equity in earnings of
Affiliates Insurance Company 236 111 125 112.6 %
Gain on settlement 3,365 - 3,365 100.0 %
Gain on early extinguishment of
debt 45 1 44 4,400.0 %
Gain on sale of available for
sale securities 62 656 (594 ) (90.5 )%
Interest and other income 577 875 (298 ) (34.1 )%
Interest and other expense (2,986 ) (1,896 ) (1,090 ) (57.5 )%
Acquisition related costs (100 ) (1,530 ) 1,430 93.5 %
Provision for income taxes (4,835 ) (1,006 ) (3,829 ) (380.6 )%
Corporate and Other loss from
continuing operations $ (50,994 ) $ (46,898 ) $ (4,096 ) (8.7 )%
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(2) General and administrative expenses are not attributable to a specific reportable segment and include items such as corporate payroll and benefits and expenses of our home office activities.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Consolidated:
Nine months ended September 30,
(dollars in thousands) 2012 2011 $ Change % Change
Summary of revenue:
Senior living communities $ 912,280 $ 812,917 $ 99,363 12.2 %
Corporate and Other 79,501 78,235 1,266 1.6 %
Total revenue $ 991,781 $ 891,152 $ 100,629 11.3 %
Summary of income (loss) from
continuing operations:
Senior living communities $ 60,929 $ 61,648 $ (719 ) (1.2 )%
Corporate and Other (50,994 ) (46,898 ) (4,096 ) (8.7 )%
Income from continuing
operations $ 9,935 $ 14,750 $ (4,815 ) (32.6 )%
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Nine Months Ended September 30, 2012 Compared to Nine Months Ended September 30, 2011
Senior living communities:
Our senior living revenue increased by 3.5% for the nine months ended September 30, 2012 compared to the same period in 2011 primarily due to an increase from 209 to 222 in the number of communities that we owned and leased during these periods, respectively, partially offset by a 7.5% reduction in aggregate Medicare payment rates for SNFs. Our senior living revenue at the communities that we operated continuously since January 1, 2011, or our comparable communities, increased 0.3% for the nine months ended September 30, 2012 compared to the same period in 2011, primarily due to an increase in Medicaid payment rates in certain states, partially offset by a 7.5% reduction in aggregate Medicare payment rates for our SNFs.
In June 2011, we began managing 10 senior living communities for SNH. In the third quarter of 2011 we began managing four additional senior living communities for SNH's account and for the account of another owner pending SNH's acquisition of that other owner's community. Our management fee revenue and reimbursed costs incurred at these communities increased significantly during the nine months ended September 30, 2012 due to an increase from 14 to 30 in the number of communities we manage and because we managed these communities for the full nine months in 2012 versus our beginning to manage 10 of them in June 2011 and four in the third quarter of 2011.
Our senior living wages and benefits increased 3.5% for the nine months ended September 30, 2012 compared to the same period in 2011 primarily due to an increase from 209 to 222 in the number of communities that we owned and leased during these periods, respectively, and to wage increases at our comparable communities. Our other senior living operating expenses, which include utilities, housekeeping, dietary, maintenance, insurance and community level administrative costs, increased by 3.6% due to an increase in the number of . . .
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