Senior Living Operators Q2 Earnings at a Glance: Sunrise, Five Star Quality Care, AdCare, Brookdale

Here’s a roundup of earnings reports for some senior housing and care providers for the second quarter of 2012. All four companies experienced a growth in revenue, but only two out of four saw their income from operations increase, while two saw their net income decrease in the quarter. Most of the operators reported being negatively impacted by the Medicare reimbursement cuts to skilled nursing facilities that went into effect in October 2011. 

Sunrise Senior Living’s Q2 Income Shoots Up to $9.6 Million On Portfolio Sale

Sunrise Senior Living (NYSE:SRZ) saw its second quarter net income increase by more than seven times compared to last year, to $9.6 million or $0.16 per fully diluted share in the quarter ended June 30, 2012, up from $1.3 million or $0.02 per share.


The growth is attributed to Sunrise’s $21.7 million return on investment resulting from the sale of 16 venture-owned communities to real estate investment trust Ventas, Inc., (NYSE:VTR), but was tempered by $15.6 million in impairment charges relating to ten communities with leases that are being terminated early. 

“Our quarter’s results were strong thanks to solid occupancy and rate along with reduced overhead. We also continue to invest in our future through increasing investments in care and information systems,” said Mark Ordan, Sunrise’s CEO.

Stabilized occupancy increased 90 basis points to 88.1% quarter-over-quarter, remaining flat from the first quarter. Net operating income from stabilized properties rose about 1.6% to $150.9 million. 


Total operating revenues increased 5.1% to $337.7 million in the second quarter, up from $321.4 million, nearly matching analyst’s expectations of 5.7% growth. 

AdCare’s Aggressive M&A Campaign Boosts Revenues by 60% in Q2

AdCare Health Systems saw its revenues increase 60% to a record $55 million in the second quarter ended June 30, 2012, compared to $34.4 million in the same period last year, attributed to acquisitions completed since April 2011 as part of its aggressive M&A program. 

Income from operations rose 398% in the second quarter to $4 million compared to 2011’s second quarter. “The increase in income from operations was primarily due to acquisitions, as well as revenue optimization and expense controls with newly acquired facilities and same-facilities,” notes the senior care provider. 

Despite the huge year-over-year increase in revenues and income from operations, net income was a more modest $0.7 million, or $0.05 per share, which still represented an increase from last year’s net loss of $4.4 million, or $(0.50) per basic and diluted share.

“Our second quarter results reflect the successful execution of our ongoing acquisition and integration program, resulting in record revenue and operating profit that has exceeded all expectations,” said AdCare’s president and CEO, Boyd P. Gentry, in the earnings report. “Moreover, these results demonstrate our proven ability to grow revenues organically through facility optimization, as evidenced especially in the improved performance of facilities we have held for more than 12 months.”

In the second quarter, AdCare completed more than $19 million worth of acquisitions in estimated annualized revenue run-rate. 

AdCare’s strategy begins with acquiring underperforming skilled nursing properties, then coming in and helping the local facility leadership in improving the level of care, increasing post-acute census, and realigning payment rate, Gentry noted. Doing this resulted in increasing the company’s second quarter ‘same-facility’ revenues by 9% compared to the same quarter in 2011. 

Additionally, AdCare has implemented a number of cost containment measures across all of its facilities. Combined with its other strategies, AdCare says it expects further margin improvement to continue throughout the year. 

The company’s not done its M&A program, either—it plans to continue pursuing an “aggressive” acquisition campaign throughout the second half of 2012, according to Chris Brogdon, the company’s chief acquisition officer. 

Five Star Quality Care’s Net Income Drops 10.7% in Q2

Five Star Quality Care, Inc. (NYSE:FVE) saw its net income drop 10.7% to $4.6 million, or $0.09 per diluted share, in the second quarter ended June 30, 2012, compared to last year’s $5.2 million, or $0.14 per diluted share.

Total revenues increased 11.9% to $349.1 million, up from $311.9 million in the second quarter of last year. Total operating expenses rose 13% in the quarter to $342.5 million. 

Income from continuing operations dropped 18% to $4.9 million, compared to $6 million during the same period in 2011. Income from continuing operations included a gain on settlement of Five Star’s litigation with Sunrise Senior Living (NYSE:SRZ) of $1.9 million (net of taxes), or $0.04 per basic and diluted share. Comparatively, net income from continuing operations in the second quarter of 2011 included acquisition costs of $1.2 million, or $0.03 per basic and diluted share.

“These improvements were largely driven by improved community expense margin management and a sequential improvement in ADR,” said Bruce Mackey, Five Star’s president and CEO. “Although increasing occupancy continues to be a challenge for the company, we believe our consolidated senior living occupancy is equal to the industry average and our same store senior living occupancy remained essentially unchanged year over year.”

During the second quarter, Five Star began managing (or agreed to manage) a portfolio of 12 senior living communities with a total of 2,763 units for Senior Housing Properties Trust (NYSE:SNH). 

In the last few months, the operator has continued to focus on the independent and assisted living industry’s private pay market.

In July, Five Star agreed to sell its pharmacy business to Omnicare, Inc. for $39.9 million, excluding third-party transaction costs. The senior living operators expects the sale to result in a capital gain of approximately $23.5 million. 

Brookdale Senior Living’s Revenue Up 18.4% in Q2, But CCRCs Hit By Medicare Reductions

Brookdale Senior Living (NYSE:BKD) reported a net loss of $18.8 million, or $(0.15) per basic and diluted share, for the second quarter ended June 30, 2012, compared to a loss of nearly $34 million, or $(0.28) per basic and diluted share in the same period of 2011. 

Income from operations fell nearly 35% to $18.9 million, down from last year’s $28.9 million. 

The company’s total revenue for the second quarter rose 18.4% to $690.8 million compared to 2011’s second quarter. The increase in revenue came in part from resident fee revenue, which rose 6.8% in the quarter.

Revenue from senior housing was $544.7 million, up 6.1% from the second quarter in 2011. The revenue growth was attributed to an increase in occupancy, rate, and the addition of 12 former Horizon Bay communities. Operating income for the senior housing portfolio increased by $3.7 million in the second quarter compared to the same period last year. 

Brookdale saw average monthly revenue per senior housing unit of $4,266 in the second quarter, up 1.5% from the same period in 2011. Average occupancy for all consolidated communities was 87.7%, up from last year’s 86.6% but down 10 basis points from the first quarter of 2012. 

However, Brookdale’s two continuing care retirement community (CCRC) segments (rental and entry-fee) were negatively impacted by a reduction in Medicare reimbursement rates to skilled nursing, and a change in the allowable method of how therapy services are delivered to skilled nursing patients. The combined negative financial impact of these changes was approximately $5.4 million, coming from an approximately $4.4 million in reduced revenue from the Medicare rate reduction, and about $1 million of additional expense relating to increased therapy labor. 

“During the quarter we saw signs of improvement in our businesses,” said Bill Sheriff, Brookdale’s CEO, in the earnings statement. “We are very pleased with the performance this quarter of our entry fee communities;  strength in the underlying local home resale activity in most markets in which we operate translated into record quarterly sales and net cash flow for that segment. Our senior housing pricing improved with same community revenue per unit, excluding skilled nursing and ancillary services, increasing 2.5% versus the prior year period.  We have seen these key revenue driver trends continue through July and with continued progress in our ancillary services business we remain encouraged about Brookdale’s outlook for the remainder of 2012.”

2012 Outlook: Brookdale affirmed its guidance that cash from facility operations will range between $2.10 and $2.20 per share, not including the impact on operating results from possible future acquisitions or dispositions. 

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