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 Five Star Quality Care, Inc. Announces Fourth Quarter and Year End 2015 Results
   Wednesday, March 02, 2016 7:00:02 AM ET

Five Star Quality Care, Inc. (FVE ) today announced its financial results for the quarter and year ended December 31, 2015.

Five Star’s President and CEO, Bruce J. Mackey Jr., made the following statement:

"Fourth quarter 2015 Adjusted EBITDA increased by 1.5% over Adjusted EBITDA realized in the same period in 2014. Our improved results were primarily due to average monthly rate increases of 1.6%, management fee revenue increases of 13% over the same period in the prior year and continuing operating expense controls. In the 2015 fourth quarter, we acquired two private pay independent living communities and we and our landlord sold a Medicaid dependent skilled nursing facility, continuing our long term business plan of increasing our exposure to private pay communities and decreasing our dependency on government funded Medicare and Medicaid revenues.



"In addition, we have agreed to settle the lawsuit filed against us in Arizona by the estate of a former resident of one of our senior living communities for an amount well below the jury award."

Financial Results for the quarter ended December 31, 2015:

-- Senior living revenues for the fourth quarter of 2015 increased 2.4% to $281.2 million from $274.6 million for the same period in 2014. Growth in senior living revenues reflects increases in average monthly rates to residents who pay privately for services and the non-recurrence of a $4.3 million revenue reserve recorded in the 2014 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 fourth quarter of 2015 increased 13.0% to $2.8 million from $2.5 million for the same period in 2014. Growth in management fees was primarily due to an increase in the number of managed communities during 2015.

-- Earnings from continuing operations before interest, taxes, depreciation and amortization, or EBITDA, for the fourth quarter of 2015 were $4.2 million compared to $0.2 million for the same period in 2014. EBITDA, excluding certain items described below, or Adjusted EBITDA, was $9.3 million and $9.2 million for the fourth quarters of 2015 and 2014, respectively. Adjusted EBITDA excluding rent, or Adjusted EBITDAR, was $59.4 million for the fourth quarter of 2015 compared to $58.8 million for the same period in 2014.

-- Loss from continuing operations for the fourth quarter of 2015 was $6.3 million, or $0.13 per basic and diluted share, compared to loss from continuing operations of $70.1 million, or $1.46 per basic and diluted share, for the same period in 2014. Loss from continuing operations for the fourth quarter of 2014 included income tax expense of $60.9 million, or $1.27 per basic and diluted share, primarily resulting from a noncash income tax charge recorded to establish a full valuation allowance against the future realization of net deferred tax assets.

-- Net loss for the fourth quarter of 2015 was $6.4 million, or $0.13 per basic and diluted share, compared to net loss of $73.7 million, or $1.53 per basic and diluted share, for the same period in 2014. Net loss for the fourth quarter of 2015 included a loss from discontinued operations of $0.1 million. Net loss for the fourth quarter of 2014 included income tax expense of $62.4 million primarily resulting from a noncash income tax charge recorded to establish a full valuation allowance against the future realization of net deferred tax assets. Net loss for the fourth quarter of 2014 also included a loss from discontinued operations of $3.6 million.

-- EBITDA, EBITDAR, loss from continuing operations and net loss for the fourth quarter of 2015 included the following items: (i) a $4.2 million litigation settlement charge described below; (ii) $0.9 million of employee termination costs primarily relating to severance payments and noncash stock compensation expense incurred in connection with the termination of Five Star’s former Chief Financial Officer, or CFO: and (iii) $0.5 million of acquisition related costs, which were partially offset by a positive adjustment of $0.3 million to correct for an excessive reserve previously accrued in connection with the Compliance Assessment. EBITDA, EBITDAR, loss from continuing operations and net loss for the fourth quarter of 2014 included the following items: (i) a $4.3 million revenue reserve and $3.6 million of compliance costs related to the Compliance Assessment; and (ii) $1.2 million of accounting costs related to the restatement of certain previously issued financial statements and the delayed completion of Five Star’s 2014 financial reporting.

-- 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 December 31, 2015 and 2014 appears later in this press release.

Operating Results for the quarter ended December 31, 2015 (continuing operations):

-- Occupancy at owned and leased senior living communities for the fourth quarter of 2015 decreased by 120 basis points ("bps") to 85.0% from 86.2% for the same period in 2014.

-- The average monthly rate at owned and leased senior living communities for the fourth quarter of 2015 increased by 1.6% to $4,577 from $4,503 for the same period in 2014.

-- The percentage of revenues derived from residents’ private resources at owned and leased senior living communities for the fourth quarter of 2015 increased by 50 bps to 78.0% from 77.5% for the same period in 2014.

Financial Results for the year ended December 31, 2015:

-- Senior living revenues for the year ended December 31, 2015 increased 1.3% to $1.11 billion from $1.10 billion for the same period in 2014. Growth in senior living revenues was the result of increases in average monthly rates to residents who pay privately for services and a $4.3 million revenue reserve recorded in the 2014 period resulting from the Compliance Assessment which did not recur in 2015, partially offset by decreases in occupancy and a $2.4 million revenue reserve recorded in the 2015 period resulting from the Compliance Assessment. Management fee revenue for the year ended December 31, 2015 increased by 9.9% to $10.7 million from $9.8 million for the same period in 2014. Growth in management fees was primarily due to an increase in the number of managed communities and an increase in average monthly rates to residents who pay privately for services.

-- EBITDA for the year ended December 31, 2015 was $(2.3) million compared to $13.1 million for the same period in 2014. Adjusted EBITDA was $35.3 million and $27.2 million for the years ended December 31, 2015 and 2014, respectively. Adjusted EBITDAR was $234.4 million for the year ended December 31, 2015 compared to $224.6 million for the same period in 2014.

-- Loss from continuing operations for the year ended December 31, 2015 was $40.8 million, or $0.84 per basic and diluted share, compared to loss from continuing operations of $79.4 million, or $1.65 per basic and diluted share, for the 2014 year. Loss from continuing operations for the year ended December 31, 2015 included a noncash charge for goodwill impairment of $25.3 million, or $0.52 per basic and diluted share. Loss from continuing operations for the year ended December 31, 2014 included income tax expense of $56.4 million, or $1.17 per basic and diluted share, primarily resulting from a noncash income tax charge recorded to establish a full valuation allowance against the future realization of net deferred tax assets.

-- Net loss for the year ended December 31, 2015 was $43.1 million, or $0.89 per basic and diluted share, compared to net loss of $85.4 million, or $1.78 per basic and diluted share, for the 2014 year. Net loss for the year ended December 31, 2015 included a noncash charge for goodwill impairment of $25.3 million and a loss from discontinued operations of $2.3 million. Net loss for the year ended December 31, 2014 included income tax expense of $56.5 million primarily resulting from a noncash income tax charge recorded to establish a full valuation allowance against the future realization of net deferred tax assets, and a loss from discontinued operations of $6.1 million.

-- EBITDA, EBITDAR, loss from continuing operations and net loss for the year ended December 31, 2015 included the following items: (i) a noncash charge for goodwill impairment of $25.3 million; (ii) a $2.4 million revenue reserve and $4.8 million of estimated penalties, compliance costs and professional fees related to the Compliance Assessment; (iii) a $4.2 million litigation settlement charge described below; (iv) $0.9 million of employee termination costs primarily relating to severance payments and noncash stock compensation expense incurred in connection with the termination of Five Star’s former CFO; and (v) $0.5 million of acquisition related costs; all of which were partially offset by a $0.7 million gain on early extinguishment of debt. EBITDA, EBITDAR, loss from continuing operations and net loss for the year ended December 31, 2014 included the following items: (i) a $4.3 million revenue reserve and $3.6 million of estimated penalties, compliance costs and professional fees related to the Compliance Assessment; (ii) $5.9 million of accounting costs incurred in connection with the restatement of certain previously issued financial statements and the delayed completion of Five Star’s 2014 financial reporting; and (iii) a $0.6 million noncash long lived asset impairment charge.

-- A reconciliation of loss from continuing operations determined in accordance with GAAP to EBITDA, Adjusted EBITDA and Adjusted EBITDAR for the years ended December 31, 2015 and 2014 appears later in this press release.

Expansion and Disposition Activities:

In November 2015, Five Star acquired two private pay independent living communities located in Tennessee with a combined 152 living units for approximately $26.2 million, excluding closing costs. Five Star funded this acquisition with cash on hand and by assuming $17.3 million of mortgage debt.

In December 2015, Five Star and its landlord, Senior Housing Properties Trust, or SNH, sold a skilled nursing facility for $21,000, and as a result of this sale, Five Star’s annual rent payable to SNH decreased by $2,100 in accordance with the terms of the applicable lease. As of the year ended December 31, 2015, Five Star currently does not have any senior living communities that it leases from SNH in discontinued operations.

As of the date of this press release, Five Star continues to market for sale one community it owns with 32 living units that is reported as held for sale and included in discontinued operations in Five Star’s financial statements.

Financing Activities:

In February 2016, Five Star notified the lenders under its $150.0 million revolving credit facility of its intent to exercise its option to extend the maturity date of the credit facility by one year to April 13, 2017. Five Star’s $25.0 million revolving secured line of credit matures in March 2016, and Five Star has determined not to extend or replace this credit facility which is secured primarily by accounts receivable from Medicare and Medicaid.

Loss Contingency:

In the ordinary course of Five Star’s business, Five Star is periodically subject to claims by residents of its senior living communities alleging improper care or inadequate services. Five Star maintains insurance for such claims subject to a self insured retention. As previously disclosed, in May 2015, in an Arizona case, jury verdicts were awarded against Five Star on such a claim for $2.5 million of compensatory damages plus approximately $16.7 million of punitive damages. In February 2016, Five Star entered into a settlement agreement with the plaintiff which requires Five Star to pay approximately $7.3 million, approximately $3.0 million of which Five Star’s liability insurer has agreed to reimburse to Five Star. Five Star believes its liability insurer may be financially responsible for more than $3.0 million and Five Star is seeking additional payments from its liability insurer; however, Five Star cannot predict the outcome of any future negotiations or litigation with its liability insurer. As a result, Five Star recorded an approximately $4.2 million litigation settlement charge for the year ended December 31, 2015, which is included in other senior living operating expenses in its consolidated statements of operations.

Conference Call:

Later this morning, March 2, 2016, at 10:00 a.m. Eastern Time, Five Star will host a conference call to discuss its fourth quarter and full year 2015 results. Following management’s presentation, there will be a question and answer period.

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, March 9, 2016. To hear the replay, dial (412) 317-0088. The replay pass code is 10079060.

A live audio webcast of the conference call will also be available in a listen only mode on Five Star’s website 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 of Five Star’s fourth quarter 2015 conference call are strictly prohibited without the prior written consent of Five Star. Five Star’s website is not incorporated as part of this press release.

About Five Star Quality Care, Inc.:

Five Star Quality Care, Inc. is a senior living and healthcare services company. As of December 31, 2015, Five Star operated 274 senior living communities (excluding one senior living community it has classified as a discontinued operation) with 31,417 living units located in 32 states, including 214 communities (23,227 living units) that it owns or leases and 60 communities (8,190 living units) that it manages. These communities include independent living, assisted living, continuing care retirement communities and skilled nursing communities. Five Star is headquartered in Newton, Massachusetts.

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" 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 AS A RESULT OF VARIOUS FACTORS. FOR EXAMPLE:

-- THIS PRESS RELEASE STATES THAT 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.

-- THIS PRESS RELEASE STATES THAT FIVE STAR BELIEVES THAT ITS LIABILITY INSURER MAY BE FINANCIALLY RESPONSIBLE FOR MORE THAN IT HAS AGREED TO PAY IN CONNECTION WITH THE SETTLEMENT OF THE ARIZONA LITIGATION AND THAT FIVE STAR IS SEEKING ADDITIONAL PAYMENTS FROM ITS LIABILITY INSURER. HOWEVER, FIVE STAR’S LIABILITY INSURER HAS DENIED COVERAGE FOR ANY ADDITIONAL AMOUNTS. FIVE STAR CANNOT PREDICT THE OUTCOME OF ANY FUTURE NEGOTIATIONS OR LITIGATION WITH ITS LIABILITY INSURER, AND ANY POTENTIAL DISPUTE BETWEEN FIVE STAR AND ITS LIABILITY INSURER MAY ITSELF RESULT IN EXPENSIVE LITIGATION.

THE INFORMATION CONTAINED IN FIVE STAR’S FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION, OR SEC, INCLUDING UNDER THE CAPTION "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.

                                                                                                                                                                                                               FIVE STAR QUALITY CARE, INC.
                                                                                                                                                                                                           CONSOLIDATED STATEMENTS OF OPERATIONS
                                                                                                                                                                                                           (in thousands, except per share data)
                                                                                                                                                                                                                        (unaudited)
                                                                                                                                                                                               
                                                                                                                                                                                                 Three Months Ended December 31,                                                                                                                                                      Year Ended December 31,
                                                                                                                                                       ------------------------------------------------------------------------------------------------------------------                                                               -------------------------------------------------------------------------------------------------------------------
                                                                                                                                                                       2015                                                                          2014                                                                                            2015                                                                           2014
                                                                                                                                                       ------------------------------------                                          ------------------------------------                                                               -------------------------------                                          ------------------------------------------
Revenues:
  Senior living revenue                                                                                                                                                   $        281,178                                                              $        274,648                                                                                   $ 1,113,971                                                              $            1,099,228
  Management fee revenue                                                                                                                                                             2,789                                                                         2,469                                                                                        10,728                                                                               9,765
  Reimbursed costs incurred on behalf of managed communities                                                                                                     60,629                                                     55,409                                                                    240,711                                                          219,082
                                                                                                                                                       -------------------- --------------                                           -------------------- --------------                                                                -------------------- ---------                                           -------------------- --------------------
Total revenues                                                                                                                                                  344,596                                                    332,526                                                                  1,365,410                                                        1,328,075
                                                                                                                                                       -------------------- --------------                                           -------------------- --------------                                                                -------------------- ---------                                           -------------------- --------------------
                                                                                                                                                                                                                                                                                                                                                                                                                                       
Operating expenses:
  Senior living wages and benefits                                                                                                                                                 134,349                                                                       131,080                                                                                       539,086                                                                             533,549
  Other senior living operating expenses                                                                                                                                            77,394                                                                        78,089                                                                                       293,501                                                                             292,457
  Costs incurred on behalf of managed communities                                                                                                                                   60,629                                                                        55,409                                                                                       240,711                                                                             219,082
  Rent expense                                                                                                                                                                      50,060                                                                        49,601                                                                                       199,075                                                                             197,359
  General and administrative                                                                                                                                                        18,007                                                                        18,198                                                                                        70,757                                                                              72,385
  Depreciation and amortization                                                                                                                                                      9,178                                                                         8,305                                                                                        33,815                                                                              31,834
  Goodwill impairment                                                                                                                                                       --                                                                --                                                                                        25,344                                                                      --
  Long lived asset impairment                                                                                                                            --                                             --                                                                        145                                                              589
                                                                                                                                                       -------------------- --------------                                           -------------------- --------------                                                                -------------------- ---------                                           -------------------- --------------------
Total operating expenses                                                                                                                                        349,617                                                    340,682                                                                  1,402,434                                                        1,347,255
                                                                                                                                                       -------------------- --------------                                           -------------------- --------------                                                                -------------------- ---------                                           -------------------- --------------------
                                                                                                                                                                                                                                                                                                                                                                                                                                       
Operating loss                                                                                                                                                                     (5,021)                                                                       (8,156)                                                                                      (37,024)                                                                            (19,180)
                                                                                                                                                                                                                                                                                                                                                                                                                                       
Interest, dividend and other income                                                                                                                                                    281                                                                           244                                                                                           982                                                                                 867
Interest and other expense                                                                                                                                                         (1,330)                                                                       (1,328)                                                                                       (4,927)                                                                             (5,131)
Gain on early extinguishment of debt                                                                                                                                        --                                                                --                                                                                           692                                                                      --
Gain on sale of available for sale securities reclassified from                                                                                                     122                                                         43                                                                        160                                                              392
other comprehensive (loss) income
                                                                                                                                                       -------------------- --------------                                           -------------------- --------------                                                                -------------------- ---------                                           -------------------- --------------------
                                                                                                                                                                                                                                                                                                                                                                                                                                       
Loss from continuing operations before income taxes and equity in                                                                                                                  (5,948)                                                                       (9,197)                                                                                      (40,117)                                                                            (23,052)
(loss) earnings of an investee
Provision for income taxes                                                                                                                                                           (314)                                                                      (60,943)                                                                                         (662)                                                                            (56,385)
Equity in (loss) earnings of an investee                                                                                                                           (50)                                                         28                                                                         20                                                               87
                                                                                                                                                       -------------------- --------------                                           -------------------- --------------                                                                -------------------- ---------                                           -------------------- --------------------
Loss from continuing operations                                                                                                                                                    (6,312)                                                                      (70,112)                                                                                      (40,759)                                                                            (79,350)
Loss from discontinued operations                                                                                                                                  (71)                                                    (3,636)                                                                    (2,324)                                                          (6,056)
                                                                                                                                                       -------------------- --------------                                           -------------------- --------------                                                                -------------------- ---------                                           -------------------- --------------------
                                                                                                                                                                                                                                                                                                                                                                                                                                       
Net loss                                                                                                                                                                  $        (6,383)                                                              $       (73,748)                                                                                   $  (43,083)                                                              $             (85,406)
                                                                                                                                                       ==================== ==============                                           ==================== ==============                                                                ==================== =========                                           ==================== ====================
                                                                                                                                                                                                                                                                                                                                                                                                                                       
                                                                                                                                                                                                                                                                                                                                                                                                                                       
Weighted average shares outstanding--basic and diluted                                                                                               48,434                                                     48,076                                                                     48,406                                                           48,028
                                                                                                                                                       ==================== ==============                                           ==================== ==============                                                                ==================== =========                                           ==================== ====================
                                                                                                                                                                                                                                                                                                                                                                                                                                       
Basic and diluted loss per share from:
  Continuing operations                                                                                                                                                   $         (0.13)                                                              $         (1.46)                                                                                   $    (0.84)                                                              $               (1.65)
  Discontinued operations                                                                                                                                        (0.00)                                                     (0.08)                                                                     (0.05)                                                           (0.13)
                                                                                                                                                       -------------------- --------------                                           -------------------- --------------                                                                -------------------- ---------                                           -------------------- --------------------
Net loss per share--basic and diluted                                                                                                                         $         (0.13)                                                              $         (1.53)                                                                                   $    (0.89)                                                              $               (1.78)
                                                                                                                                                       ==================== ==============                                           ==================== ==============                                                                ==================== =========                                           ==================== ====================
                                                                                                             FIVE STAR QUALITY CARE, INC.
                                                                                                           CONSOLIDATED BALANCE SHEETS DATA
                                                                                                                    (in thousands)
                                                                                                                      (unaudited)
                                                                                                            
                                                                                                                                             December 31,                                                                  December 31,
                                                                                                                                                 2015                                                                          2014
                                                                                                                                     -----------------------------                                          ------------------------------------------
Assets
Current assets:
  Cash and cash equivalents                                                                                                                             $  14,672                                                              $               20,988
  Accounts receivable, net of allowance                                                                                                                    37,829                                                                              38,814
  Due from related persons                                                                                                                                  9,731                                                                              12,641
  Investments in available for sale securities                                                                                                             26,417                                                                              23,436
  Restricted cash                                                                                                                                           3,301                                                                               2,945
  Prepaid and other current assets                                                                                                                         19,138                                                                              21,494
  Assets of discontinued operations                                                                                                        981                                                            1,463
                                                                                                                                     -------------------- -------                                           -------------------- --------------------
Total current assets                                                                                                                   112,069                                                          121,781
                                                                                                                                     -------------------- -------                                           -------------------- --------------------
                                                                                                                                                                                                                                  
Property and equipment, net                                                                                                                               383,858                                                                             357,186
Restricted cash                                                                                                                                             2,821                                                                               2,170
Restricted investments in available for sale securities                                                                                                    23,166                                                                              19,835
Goodwill, equity investment and other long term assets                                                                                   9,856                                                           34,001
                                                                                                                                     -------------------- -------                                           -------------------- --------------------
Total assets                                                                                                                                            $ 531,770                                                              $              534,973
                                                                                                                                     ==================== =======                                           ==================== ====================
                                                                                                                                                                                                                                  
Liabilities and Shareholders’ Equity
Current liabilities:
  Revolving credit facilities                                                                                                                           $  50,000                                                              $               35,000
  Other current liabilities                                                                                                            193,920                                                          180,392
                                                                                                                                     -------------------- -------                                           -------------------- --------------------
Total current liabilities                                                                                                              243,920                                                          215,392
                                                                                                                                     -------------------- -------                                           -------------------- --------------------
                                                                                                                                                                                                                                  
Mortgage notes payable                                                                                                                                     60,396                                                                              49,373
Other long term liabilities                                                                                                                                43,002                                                                              43,426
Shareholders’ equity                                                                                        184,452                                                          226,782
                                                                                                                                     -------------------- -------                                           -------------------- --------------------
Total liabilities and shareholders’ equity                                                                                   $ 531,770                                                              $              534,973
                                                                                                                                     ==================== =======                                           ==================== ====================
                                                                                                                 FIVE STAR QUALITY CARE, INC.
                                                                                                             CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                                                                                        (in thousands)
                                                                                                                          (unaudited)
                                                                                                                    
                                                                                                                                                                                       Year Ended December 31,
                                                                                                                                      ------------------------------------------------------------------------------------------------------------------------
                                                                                                                                                      2015                                                                             2014
                                                                                                                                      ------------------------------------                                          ------------------------------------------
Cash flows from operating activities:
  Net loss                                                                                                                                               $       (43,083)                                                              $             (85,406)
  Adjustments to reconcile net loss to cash provided by operating
  activities:
   Depreciation and amortization                                                                                                                                   33,672                                                                              33,470
   Gain on early extinguishment of debt                                                                                                                             (742)                                                                      --
   Loss from discontinued operations before income tax                                                                                                              2,324                                                                               5,977
   Gain on sale of available for sale securities                                                                                                                    (160)                                                                               (392)
   Loss on disposal of property and equipment                                                                                                                         102                                                                      --
   Goodwill impairment                                                                                                                                             25,344                                                                      --
   Long lived asset impairment                                                                                                                                        145                                                                                 589
   Equity in earnings of an investee                                                                                                                                 (20)                                                                                (87)
   Stock-based compensation                                                                                                                                         1,618                                                                               1,485
   Deferred income taxes                                                                                                                                   --                                                                              55,334
   Provision for losses on receivables                                                                                                                              4,646                                                                               4,777
   Changes in assets and liabilities:
    Accounts receivable                                                                                                                                           (3,661)                                                                             (6,651)
    Prepaid expenses and other assets                                                                                                                               2,391                                                                               (279)
    Accounts payable and accrued expenses                                                                                                                           8,582                                                                              13,387
    Accrued compensation and benefits                                                                                                                             (2,044)                                                                               2,283
    Due from (to) related persons, net                                                                                                                                809                                                                             (1,601)
    Other current and long term liabilities                                                                                                     10,617                                                            (549)
                                                                                                                                      -------------------- --------------                                           -------------------- --------------------
   Cash provided by operating activities                                                                                                        40,540                                                           22,337
                                                                                                                                      -------------------- --------------                                           -------------------- --------------------
                                                                                                                                                                                                                                          
Cash flows from investing activities:
  (Increase) decrease in restricted cash and investment accounts, net                                                                                               (737)                                                                              13,683
  Acquisition of property and equipment                                                                                                                          (57,480)                                                                            (49,916)
  Acquisition of senior living communities, net of liabilities assumed                                                                                            (9,200)                                                                             (5,926)
  Purchases of intangible assets                                                                                                                                    (191)                                                                      --
  Purchases of available for sale securities                                                                                                                     (17,870)                                                                            (22,431)
  Investment in an investee                                                                                                                                --                                                                               (825)
  Proceeds from sale of property and equipment to Senior Housing                                                                                                   21,323                                                                              25,804
  Properties Trust
  Proceeds from sale of available for sale securities                                                                                           10,857                                                           10,876
                                                                                                                                      -------------------- --------------                                           -------------------- --------------------
   Cash used in investing activities                                                                                                          (53,298)                                                         (28,735)
                                                                                                                                      -------------------- --------------                                           -------------------- --------------------
                                                                                                                                                                                                                                          
Cash flows from financing activities:
  Proceeds from borrowings on credit facilities                                                                                                                    40,000                                                                              20,000
  Repayments of borrowings on credit facilities                                                                                                                  (25,000)                                                                            (20,000)
  Repayments of mortgage notes payable                                                                                                                            (5,998)                                                                             (1,979)
  Payment of deferred financing fees                                                                                                                                (300)                                                                      --
  Payment of employee tax obligations on withheld shares                                                                                          (90)                                                             (47)
                                                                                                                                      -------------------- --------------                                           -------------------- --------------------
   Cash provided by (used in) financing activities                                                                                               8,612                                                          (2,026)
                                                                                                                                      -------------------- --------------                                           -------------------- --------------------
                                                                                                                                                                                                                                          
Cash flows from discontinued operations:
   Net cash (used in) provided by operating activities                                                                                                            (2,151)                                                                               5,519
   Net cash (used in) provided by investing activities                                                                                            (19)                                                              265
                                                                                                                                      -------------------- --------------                                           -------------------- --------------------
   Net cash flows (used in) provided by discontinued operations                                                                                (2,170)                                                            5,784
                                                                                                                                      -------------------- --------------                                           -------------------- --------------------
                                                                                                                                                                                                                                          
Change in cash and cash equivalents                                                                                                                               (6,316)                                                                             (2,640)
  Cash and cash equivalents at beginning of period                                                                                              20,988                                                           23,628
                                                                                                                                      -------------------- --------------                                           -------------------- --------------------
Cash and cash equivalents at end of period                                                                                                               $         14,672                                                              $               20,988
                                                                                                                                      ==================== ==============                                           ==================== ====================
                                                                                                                                                                                                                                          
Supplemental cash flow information:
  Cash paid for interest                                                                                                                                 $          4,078                                                              $                3,557
  Cash paid for income taxes, net                                                                                                                        $            658                                                              $                1,179
                                                                                                                                                                                                                                          
Noncash activities:
  Real estate acquisition                                                                                                                                $       (18,254)                                                              $             (15,518)
  Assumption of mortgage note payable                                                                                                                    $         18,254                                                              $               15,518
                                                                                                                                                                                                           FIVE STAR QUALITY CARE, INC.
                                                                                                                                                                                                     SENIOR LIVING COMMUNITY FINANCIAL DATA(1)
                                                                                                                                                                                                                  (in thousands)
                                                                                                                                                                                                                    (unaudited)
                                                                                                                                                                                      
                                                                                                                                                                                             Three months ended December 31, (2)                                                                                                                                           Year ended December 31, (3)
                                                                                                                                                            ----------------------------------------------------------------------------------------------------                                                               -------------------------------------------------------------------------------------------------------------------
                                                                                                                                                                        2015                                                                   2014                                                                                         2015                                                                           2014
                                                                                                                                                            -----------------------------                                          -----------------------------                                                               -------------------------------                                          ------------------------------------------
Senior living revenue:
  Independent and assisted living community revenue (owned)                                                                                                                    $  30,193                                                              $  29,602                                                                                   $   118,865                                                              $              114,413
  Independent and assisted living community revenue (leased)                                                                                                                     102,579                                                                101,277                                                                                       405,496                                                                             399,919
  Continuing care retirement community revenue (leased)                                                                                                                           99,557                                                                 99,876                                                                                       398,111                                                                             397,637
  Skilled nursing facility revenue (leased)(4)                                                                                                                                    44,583                                                                 40,133                                                                                       175,030                                                                             173,408
  Other(5)                                                                                                                                                      4,266                                               3,760                                                                     16,469                                                           13,851
                                                                                                                                                            -------------------- -------                                           -------------------- -------                                                                -------------------- ---------                                           -------------------- --------------------
  Total senior living revenue (owned and leased)                                                                                                                               $ 281,178                                                              $ 274,648                                                                                   $ 1,113,971                                                              $            1,099,228
                                                                                                                                                            -------------------- -------                                           -------------------- -------                                                                -------------------- ---------                                           -------------------- --------------------
                                                                                                                                                                                                                                                                                                                                                                                                                              
Senior living wages and benefits:
  Independent and assisted living community wages and benefits (owned)                                                                                                         $  12,573                                                              $  12,137                                                                                   $    49,264                                                              $               48,146
  Independent and assisted living community wages and benefits (leased)                                                                                                           42,957                                                                 42,217                                                                                       171,350                                                                             169,763
  Continuing care retirement community wages and benefits (leased)                                                                                                                49,639                                                                 49,590                                                                                       198,877                                                                             199,304
  Skilled nursing facility wages and benefits (leased)                                                                                                                            27,985                                                                 27,608                                                                                       111,981                                                                             110,717
  Other(5)                                                                                                                                                      1,195                                               (472)                                                                      7,614                                                            5,619
                                                                                                                                                            -------------------- -------                                           -------------------- -------                                                                -------------------- ---------                                           -------------------- --------------------
  Total senior living wages and benefits (owned and leased)                                                                                                                    $ 134,349                                                              $ 131,080                                                                                   $   539,086                                                              $              533,549
                                                                                                                                                            -------------------- -------                                           -------------------- -------                                                                -------------------- ---------                                           -------------------- --------------------
                                                                                                                                                                                                                                                                                                                                                                                                                              
Senior living other operating expenses:
  Independent and assisted living community other operating expenses                                                                                                           $   7,979                                                              $   7,529                                                                                   $    30,023                                                              $               28,357
  (owned)
  Independent and assisted living community other operating expenses                                                                                                              25,470                                                                 26,801                                                                                       100,797                                                                             101,257
  (leased)
  Continuing care retirement community other operating expenses                                                                                                                   30,716                                                                 28,094                                                                                       107,978                                                                             107,515
  (leased)(6)
  Skilled nursing facility other operating expenses (leased)(7)                                                                                                                   12,267                                                                 15,572                                                                                        52,099                                                                              52,442
  Other(5)                                                                                                                                                        962                                                  93                                                                      2,604                                                            2,886
                                                                                                                                                            -------------------- -------                                           -------------------- -------                                                                -------------------- ---------                                           -------------------- --------------------
  Total senior living operating expenses (owned and leased)                                                                                                                    $  77,394                                                              $  78,089                                                                                   $   293,501                                                              $              292,457
                                                                                                                                                            -------------------- -------                                           -------------------- -------                                                                -------------------- ---------                                           -------------------- --------------------

(1) Excludes data for managed communities and discontinued operations.

(2) The number of owned and leased communities between October 1, 2014 and December 31, 2015 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 due to immaterial differences.

(3) The number of owned and leased communities between January 1, 2014 and December 31, 2015 increased by three due to the acquisition of one senior living community in May 2014 and two senior living communities in November 2015; separate same store comparable senior living community financial data is not presented due to immaterial differences.

(4) Skilled nursing facility revenue for the three months ended December 31, 2014 is net of a $4.3 million reserve for estimated Medicare payments Five Star expects to repay. Skilled nursing facility revenue for the years ended December 31, 2015 and 2014 is net of a $2.4 million and $4.3 million reserve, respectively, for historical Medicare payments Five Star received and expects to repay.

(5) 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.

(6) Continuing care retirement community other operating expenses for the three months and year ended December 31, 2015 includes a $4.2 million litigation settlement charge related to the Arizona litigation matter.

(7) Skilled nursing facility other operating expenses for the three months ended December 31, 2015 and 2014 includes $(0.3) million and $3.6 million, respectively, of estimated penalties, compliance costs and professional fees related to the Compliance Assessment. Skilled nursing facility other operating expenses for the years ended December 31, 2015 and 2014 includes $4.2 million and $3.6 million, respectively, of estimated penalties, compliance costs and professional fees related to the Compliance Assessment.

                                                                                                                                                                                               FIVE STAR QUALITY CARE, INC.
                                                                                                                                                                                 PERCENT BREAKDOWN OF SENIOR LIVING COMMUNITY REVENUES(1)
                                                                                                                                                                                                        (unaudited)
                                                                                                        
                                                                                                                                                                            Three Months Ended December 31,                                                                                                                                             Year Ended December 31,
                                                                                                                                          --------------------------------------------------------------------------------------------------                                                               ----------------------------------------------------------------------------------------------------------------
                                                                                                                                                      2015                                                                  2014                                                                                       2015                                                                         2014
                                                                                                                                          ----------------------------                                          ----------------------------                                                               ----------------------------                                          ------------------------------------------
Independent and assisted living communities (owned):
Private and other sources                                                                                                                                       99.5%                                                                 99.1%                                                                                      99.5%                                                                               99.2%
Medicaid                                                                                                                                      0.5%                                               0.9%                                                                                       0.5%                                                             0.8%
                                                                                                                                          -------------------- ------                                           -------------------- ------                                                                                     ------                                           -------------------- --------------------
Total                                                                                                                                       100.0%                                             100.0%                                                                                     100.0%                                                           100.0%
                                                                                                                                          -------------------- ------                                           -------------------- ------                                                                                     ------                                           -------------------- --------------------
                                                                                                                                                                                                                                                                                                                                                                                                       
Independent and assisted living communities (leased):
Private and other sources                                                                                                                                       99.0%                                                                 99.0%                                                                                      99.0%                                                                               99.1%
Medicaid                                                                                                                                      1.0%                                               1.0%                                                                    1.0%                                                             0.9%
                                                                                                                                          -------------------- ------                                           -------------------- ------                                                                -------------------- ------                                           -------------------- --------------------
Total                                                                                                                                       100.0%                                             100.0%                                                                  100.0%                                                           100.0%
                                                                                                                                          -------------------- ------                                           -------------------- ------                                                                -------------------- ------                                           -------------------- --------------------
                                                                                                                                                                                                                                                                                                                                                                                                       
Continuing care retirement communities (leased):
Private and other sources                                                                                                                                       74.1%                                                                 72.4%                                                                                      73.2%                                                                               72.3%
Medicare                                                                                                                                                        19.3%                                                                 21.0%                                                                                      20.2%                                                                               21.6%
Medicaid                                                                                                                                      6.6%                                               6.6%                                                                    6.6%                                                             6.1%
                                                                                                                                          -------------------- ------                                           -------------------- ------                                                                -------------------- ------                                           -------------------- --------------------
Total                                                                                                                                       100.0%                                             100.0%                                                                  100.0%                                                           100.0%
                                                                                                                                          -------------------- ------                                           -------------------- ------                                                                -------------------- ------                                           -------------------- --------------------
                                                                                                                                                                                                                                                                                                                                                                                                       
Skilled nursing facilities (leased):
Private and other sources                                                                                                                                       24.5%                                                                 26.1%                                                                                      25.5%                                                                               25.6%
Medicare                                                                                                                                                        22.1%                                                                 23.7%                                                                                      23.3%                                                                               24.2%
Medicaid                                                                                                                                     53.4%                                              50.2%                                                                   51.2%                                                            50.2%
                                                                                                                                          -------------------- ------                                           -------------------- ------                                                                -------------------- ------                                           -------------------- --------------------
Total                                                                                                                                       100.0%                                             100.0%                                                                  100.0%                                                           100.0%
                                                                                                                                          -------------------- ------                                           -------------------- ------                                                                -------------------- ------                                           -------------------- --------------------
                                                                                                                                                                                                                                                                                                                                                                                                       
Total senior living communities (owned and leased):
Private and other sources                                                                                                                                       78.0%                                                                 77.5%                                                                                      77.7%                                                                               77.2%
Medicare                                                                                                                                                        10.5%                                                                 11.5%                                                                                      11.1%                                                                               11.9%
Medicaid                                                                                                                                     11.5%                                              11.0%                                                                   11.2%                                                            10.9%
                                                                                                                                          -------------------- ------                                           -------------------- ------                                                                -------------------- ------                                           -------------------- --------------------
Total                                                                                                                                       100.0%                                             100.0%                                                                  100.0%                                                           100.0%
                                                                                                                                          -------------------- ------                                           -------------------- ------                                                                -------------------- ------                                           -------------------- --------------------

(1) Excludes data for managed communities and discontinued operations.

                                                                                                                                                                                                                                     FIVE STAR QUALITY CARE, INC.
                                                                                                                                                                                                                                     SENIOR LIVING OTHER OPERATING DATA(1)
                                                                                                                                                                                                                                     (unaudited)
                                                                                                                                                                                                                                                            
                                                                                                                                                                                                                                                                                                                  Three months ended
                                                                                                                              ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                             December 31,                                                                        September 30,                                                                         June 30,                                                                            March 31,                                                                         December 31,
                                                                                                                                                 2015                                                                                2015                                                                                2015                                                                                2015                                                                                2014
                                                                                                                              ------------------------------------------                                          ------------------------------------------                                          ------------------------------------------                                          ------------------------------------------                                          ------------------------------------------
Independent and assisted living communities (owned):
Number of communities (end of period)                                                                                                                                33                                                                                  31                                                                                  31                                                                                  31                                                                                  31
Number of units (end of period)(2)                                                                                                                                3,215                                                                               3,064                                                                               3,064                                                                               3,064                                                                               3,061
Occupancy                                                                                                                                                         85.9%                                                                               86.3%                                                                               87.1%                                                                               87.9%                                                                               88.7%
Avg. monthly rate(3)                                                                                                                             $                3,569                                                              $                3,596                                                              $                3,602                                                              $                3,594                                                              $                3,492
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
Independent and assisted living communities (leased):
Number of communities (end of period)                                                                                                                               119                                                                                 119                                                                                 119                                                                                 119                                                                                 119
Number of units (end of period)(2)                                                                                                                                9,908                                                                               9,909                                                                               9,909                                                                               9,909                                                                               9,896
Occupancy                                                                                                                                                         88.2%                                                                               87.8%                                                                               87.7%                                                                               88.0%                                                                               89.3%
Avg. monthly rate(3)                                                                                                                             $                3,825                                                              $                3,815                                                              $                3,819                                                              $                3,820                                                              $                3,734
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
Continuing care retirement communities (leased):
Number of communities (end of period)                                                                                                                                31                                                                                  31                                                                                  31                                                                                  31                                                                                  31
Number of units (end of period)(2)(4)                                                                                                                             7,297                                                                               7,319                                                                               7,319                                                                               7,319                                                                               7,322
Occupancy                                                                                                                                                         82.9%                                                                               82.8%                                                                               83.3%                                                                               83.8%                                                                               83.6%
Avg. monthly rate(3)                                                                                                                             $                5,368                                                              $                5,313                                                              $                5,384                                                              $                5,450                                                              $                5,317
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
Skilled nursing facilities (leased):
Number of communities (end of period)                                                                                                                                31                                                                                  31                                                                                  31                                                                                  31                                                                                  31
Number of units (end of period)(2)(5)                                                                                                                             2,807                                                                               2,807                                                                               2,807                                                                               2,807                                                                               2,822
Occupancy                                                                                                                                                         78.5%                                                                               79.3%                                                                               78.4%                                                                               78.6%                                                                               79.3%
Avg. monthly rate(3)                                                                                                                             $                6,632                                                              $                6,632                                                              $                6,652                                                              $                6,752                                                              $                6,535
                                                                                     
-------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Total senior living communities (owned and leased):
Number of communities (end of period)                                                                                                                               214                                                                                 212                                                                                 212                                                                                 212                                                                                 212
Number of units (end of period)(2)                                                                                                                               23,227                                                                              23,099                                                                              23,099                                                                              23,099                                                                              23,101
Occupancy                                                                                                                                                         85.0%                                                                               85.0%                                                                               85.1%                                                                               85.5%                                                                               86.2%
Avg. monthly rate(3)                                                                    $                4,577                        $                4,567                        $                4,591                        $                4,623                        $                4,503
-------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
Managed communities:
Number of communities (end of period)                                                                                                                                60                                                                                  60                                                                                  60                                                                                  46                                                                                  46
Number of units (end of period)(2)(6)                                                                                                                             8,190                                                                               8,211                                                                               8,168                                                                               7,290                                                                               7,278
Occupancy                                                                                                                                                         87.5%                                                                               87.5%                                                                               88.1%                                                                               88.0%                                                                               88.4%
Avg. monthly rate(3)                                                                                                                             $                4,174                                                              $                4,151                                                              $                4,215                                                              $                4,300                                                              $                4,162
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
Other ancillary services:
Rehabilitation and wellness inpatient clinics (end of period)                                                                                                        49                                                                                  49                                                                                  48                                                                                  48                                                                                  48
Rehabilitation and wellness outpatient clinics (end of period)                                                                                                       63                                                                                  61                                                                                  60                                                                                  58                                                                                  56
Home health communities served (end of period)                                                                                                                       14                                                                                  15                                                                                  15                                                                                  13                                                                                  13

(1) Excludes data for discontinued operations.

(2) Includes units available for occupancy during the period.

(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 1,954 skilled nursing units in communities where assisted living and independent living services are the predominant services provided.

(5) Includes 68 assisted living and independent living units in communities where skilled nursing services are the predominant services provided.

(6) Includes 472 skilled nursing units in communities where assisted living and independent living services are the predominant services provided.

FIVE STAR QUALITY CARE, INC. RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (in thousands) (unaudited)

Non-GAAP financial measures are financial measures that are not determined in accordance with U.S. generally accepted accounting principles, or GAAP. Five Star considers these Non-GAAP financial measures to be meaningful disclosures because it believes that the presentation of these Non-GAAP financial measures may help investors to gain a better understanding of changes in its operating results, and may also help investors who wish to make comparisons between Five Star and other companies on both a GAAP and a non-GAAP basis. These Non-GAAP financial measures are used by management to evaluate Five Star’s financial performance and for comparing Five Star’s performance over time and to the performance of its competitors. This information should not be considered as an alternative to income (loss) from continuing operations, net income (loss), cash flows from operating activities or any other financial operating or performance or liquidity measure established by GAAP. Non-GAAP financial measures as presented by Five Star may not be comparable to amounts calculated by other companies.

The following table presents the reconciliation of these Non-GAAP financial measures to loss from continuing operations, the most directly comparable financial measure under GAAP reported in Five Star’s consolidated financial statements, for the three months and year ended December 31, 2015 and 2014.

                                                                                                                                                                             
                                                                                                                                                                                           For the three months                                                                                                                           For the year
                                                                                                                                                                                            ended December 31,                                                                                                                         ended December 31,
                                                                                                                                                   -----------------------------------------------------------------------------------------------                                                    -------------------------------------------------------------------------------
                                                                                                                                                               2015                                                                    2014                                                                        2015                                                   2014
                                                                                                                                                   -----------------------------                                          ------------------------------                                              ------------------------------                         ------------------------------
Loss from continuing operations                                                                                                                                       $ (6,312)                                                              $ (70,112)                                                                  $ (40,759)                                             $ (79,350)
  Add: interest and other expense                                                                                                                                         1,330                                                                   1,328                                                                       4,927                                                  5,131
  Add: income tax expense                                                                                                                                                   314                                                                  60,943                                                                         662                                                 56,385
  Add: depreciation and amortization                                                                                                                                      9,178                                                                   8,305                                                                      33,815                                                 31,834
  Less: interest, dividend and other income                                                                                                            (281)                                                (244)                                                    (982)                               (867)
                                                                                                                                                   -------------------- -------                                           -------------------- --------                                               -------------------- --------                          -------------------- --------
EBITDA                                                                                                                                                                    4,229                                                                     220                                                                     (2,337)                                                 13,133
  Add (less):
  Goodwill and other long lived asset impairments                                                                                                                             -                                                                       -                                                                      25,489                                                    589
  Costs (adjustments) related to compliance assessment                                                                                                                    (333)                                                                   7,906                                           (1)                         7,156                      (2)                         7,906 (1)
  Arizona litigation settlement                                                                                                                                           4,230                                                                       -                                                                       4,230                                                      -
  Financial accounting restatement and remediation costs                                                                                                                      -                                                                   1,168                                                                         249                                                  5,910
  Employee termination benefits(3)                                                                                                                                          868                                                                       -                                                                         868                                                      -
  Acquisition related costs (credits)                                                                                                                                       458                                                                    (61)                                                                         499                                                     88
  Gain on sale of investments in available for sale securities                                                                                                            (122)                                                                    (43)                                                                       (160)                                                  (392)
  Gain on early extinguishment of debt                                                                                                                     -                                                    -                                                    (692)                                   -
                                                                                                                                                   -------------------- -------                                           -------------------- --------                                               -------------------- --------                          -------------------- --------
Adjusted EBITDA                                                                                                                                                           9,330                                                                   9,190                                                                      35,302                                                 27,234
  Add: Rent expense                                                                                                                                   50,060                                               49,601                                                  199,075                             197,359
                                                                                                                                                   -------------------- -------                                           -------------------- --------                                               -------------------- --------                          -------------------- --------
Adjusted EBITDAR                                                                                                                                                      $  59,390                                                              $   58,791                                                                  $  234,377                                             $  224,593
                                                                                                                                                   ==================== =======                                           ==================== ========                                               ==================== ========                          ==================== ========

(1) The quarter and year to date periods ending December 31, 2014 include a $4.3 million revenue reserve for the historical Medicare payments Five Star received and expects to repay and $3.6 million of estimated penalties, compliance costs and professional fees related to the Compliance Assessment.

(2) The year ended December 31, 2015 includes a $2.4 million revenue reserve for the estimated Medicare payments Five Star received and expects to repay and $4.8 million of estimated penalties, compliance costs and professional fees related to the Compliance Assessment.

(3) Primarily relates to severance payments and noncash stock compensation expense incurred as a result of the termination of Five Star’s former CFO.

http://cts.businesswire.com/ct/CT?id=bwnews&sty=20160302005381r1&sid=cmtx6&distro=nx&lang=en

View source version on businesswire.com: http://www.businesswire.com/news/home/20160302005381/en/

SOURCE: Five Star Quality Care, Inc.

Five Star Quality Care, Inc. 
Olivia Snyder, 617-796-8245 
Investor Relations Analyst


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