Five Star Quality Care, Inc. (FVE)

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Five Star Quality Care, Inc. (FVE)

UBS Global Healthcare Services Conference Transcript

February 7, 2012 4:00 PM ET

Executives

Paul Hoagland – Treasurer and CFO

Bruce Mackey – President and CEO

Analysts

Louis Friend – UBS Investment Bank

Presentation

Louis Friend – UBS Investment Bank

Good afternoon. And thank you for coming to the 2012 UBS Global Healthcare Services Conference. My name is Louis Friend, and I’ll be your host for this session. I’d like to introduce Paul Hoagland, Treasurer and CFO; and Bruce Mackey, President and CEO of Five Star Quality Care. Following the presentation there will be a breakout session in the Broadway Room. Thank you.

Bruce Mackey

Great. Thank you, Louis. Five Star is a strong and growing force in the senior living industry. We operate 245 senior living communities with about 27,000 living units. According to data that was released last year by the American Senior Housing Association, Five Star is the sixth largest operator of senior living units in the United States.

I think the pie charts here on the slide help to tell our story. Looking at the pie chart on the left, as you can see 86% of our total company revenues come from senior living business, skilled nursing at 17% and independent and assisted living at 69%, only 14% of our revenues come from our pharmacies and rehab hospital business.

Moving to the pie chart in the middle, 73% of our senior living revenues come from residence private resources, when Five Star began operations over decade ago that was 21%, since coming public Five Star has a focused on acquiring high-end independent senior living communities for the majority of revenues are paid for with residence private resources. We significantly decrease substantially from Medicaid and Medicare over the last decade. And then the chart in the right shows our revenues by state. We currently operate in 30 states and no state makes up more than 10% of our total senior living revenue.

By many measures Five Star makes a strong case as a solid investment opportunity. With the national platform of senior living communities, as of year end we operated 245 properties in 30 states with 27,000 living units.

We generate annual revenues in excess of $1.3 billion and we employee over 25,000 people. Our communities are predominantly private pay. Our properties are not dependent upon government sources, Medicaid and Medicare and that’s been a hallmark to Five Star to coming public decade ago.

Demographics are clearly in our favor, demand is really strong and new supply will be extremely limited over the next several years. Five Star is a great operator, we are the only company among the four largest public senior living operators has been profitable over the last eight quarters. We’ve achieved this by pushing rate and maintaining very tight expense controls, Paul will detail that in a little bit.

And last, but certainly not least, Five Star is a consolidator in this market. We closed on several deals last year that made 2011 a pretty exciting year for us on the acquisition front. We took on about 40 communities, almost 5000 units that are almost all private pay.

Five Star offers an [excellent] solution for seniors. At year end we operated 207 independent and assisted living communities. We also operated 38 skilled nursing facilities. Our communities range from large to small and from high-end to moderate. The average number of community units per community is 107 and our average monthly rent is $4,500.

The chart on the right shows our breakdown of units by type, we’re about 30% independent living, 50% assisted living and 20% skilled nursing. About 2000 of our AL units offer Alzheimer or dimension care also above 35% of our skilled nursing units, I mean, continuing care retirement communities or CCRCs. CCRC is a campus like setting, that is independent living, assisted living and skilled nursing, all in one property.

As you can see from the photo at the bottom of the page here, we operate some high-end communities. The photo on the left is the shot of the community is the café that we operate at Minnesota, the middle shot of the property at the inside entrance of one of our communities that we operate in Naples and then the photo on the right is continuing care retirement community that we operate on the East Coast of Florida.

Five Star is a large national footprint. We operate properties in 30 states. Our independent and assisted living communities are organized in three divisions and each division has five regions. We also have one division at overseas our skilled nursing services.

Five Star’s capacity to take on additional communities without need to add additional resources, we did that in 2000 when we took on 40 communities, we plugged in an existing regions without really adding incrementally much overhead.

We’ve build a very scalable infrastructure in our home office, about Five Star to take on additional communities again without need additional resources in our home office, as you will see in a minute that Five Star’s general administrative cost of the lost among all our peers.

The senior living industry an exciting industry right now and have lot of potential for investors over the next several years. For us the senior living market is a large and fragmented market. The top 10 public and private operators controlled above 25% of the units in 2011. Five Star has been and will continue to be a consolidator in this fragmented market.

Read the rest of this transcript for free on seekingalpha.com