Full Press Release Details
CAPITAL SENIOR LIVING CORPORATION
REPORTS 2019 THIRD QUARTER RESULTS
Announces Transactions to Strengthen Financial Foundation and Improve Performance
DALLAS (GLOBE NEWSWIRE) November 7, 2019 Capital Senior Living Corporation (the Company ) (NYSE: CSU), one of the
nation s largest operators of senior housing communities, announced today operating and financial results for the third quarter ended September 30, 2019.
Third Quarter 2019 Highlights
During the third quarter, we continued to transform Capital Senior Living by investing in our product, people and value
proposition. While our third quarter results reflect these investments and lower revenue from longstanding negative occupancy trends, we firmly believe that we are exiting the trough period and our turnaround plan has taken hold as occupancy trends
are now improving. We achieved 7% growth in sequential move-ins and, for the first time since mid-2018, move-ins are outpacing move-outs. We expect to build on these improvements as we continue executing our plan, said Kimberly S. Lody,
President and Chief Executive Officer.
We also welcomed Brandon Ribar as our Chief Operating Officer during the quarter. Brandon s
impressive operational and financial track record in the senior housing and skilled nursing sectors will be instrumental to the continued execution of our turnaround plan. Our strategy is centered on establishing a foundation for long-term value
creation. We are confident that the transformative changes to improve the quality of our people, processes and product have established the fundamentals necessary for improved performance in 2020 and beyond, Lody concluded.
Operating and Financial Summary (all amounts in this operating and financial summary exclude two communities undergoing lease-up or significant
renovation and conversion, unless otherwise noted; also, see Non-GAAP Financial Measures below and reconciliation of Non-GAAP measures to the most directly comparable GAAP measure on the final page of this release):
Carey P. Hendrickson, the Company s Chief Financial Officer, said: We are strengthening our financial foundation through the sale of two non-core
communities and an accretive early termination of a master lease. We believe that together these transactions work to optimize our asset portfolio and improve our financial position. Consistent with our normal business practices, the Company
continues to be engaged in various similar activities, including the marketing of a limited number of additional assets for potential divestiture and the refinancing of existing owned assets.
Sale of Senior Living Communities
2019, the Company closed on the sale of two non-core communities located in Springfield, Missouri, and Peoria, Illinois, at a purchase price of $64.8 million. The transaction resulted in approximately $14.8 million in net cash proceeds. The two
communities consisted of 316 independent living units and had CFFO contribution of $2.5 million in 2019 year-to-date. With the sale of these two communities, the Company also eliminated $44.4 million of mortgage debt and avoided significant
near-term capital expenditures.
Transition of Lease Portfolio
On October 22, 2019, the Company entered into an agreement for the early termination of an underperforming nine-property master lease with HCP. The nine
communities are part of a triple net master lease scheduled to mature in October 2020. Four of the communities will transition to new operators as early as January 15, 2020, and five communities will be marketed for sale with closings expected
in the first half of 2020. These nine communities currently have approximately $13.8 million of annual cash lease expense that will be eliminated upon completion of the transitions and sales, with annual CFFO improvement of approximately $3.1
million. The Company will pay an early termination fee of $1.0 million to HCP upon the completion of the transitions. The Company will have one remaining six-property master lease with HCP that matures in 2026 which is unaffected by this
Financial Results Third Quarter
For the third quarter of 2019, the Company reported revenue of $111.1 million, compared with revenue of $115.7 million in the third quarter of 2018. Revenue
for consolidated communities excluding the two communities undergoing significant renovation and conversion, was $109.8 million, a decrease of 3.9%, in the third quarter of 2019 when compared with the third quarter of 2018.
Operating expenses for the third quarter of 2019 were $80.4 million, an increase of $4.2 million, or 5.5%,
from the third quarter of 2018. Operating expenses in the third quarter of 2019 included a $0.1 million business interruption insurance credit related to the Company s two Houston communities impacted by Hurricane Harvey compared to a $1.3
million credit in the third quarter of 2018. Business interruption coverage ended in July 2019. The third quarter of 2019 also includes a $1.0 million insurance charge related to certain casualty claims.
General and administrative expenses for the third quarter of 2019 were $7.6 million versus $5.6 million in the third quarter of 2018. Excluding transaction
and conversion costs in both periods (including $0.7 million related to separation and placement costs associated with the Company s CEO and COO positions), general and administrative expenses increased $1.6 million in the third quarter of 2019
versus the third quarter of 2018, mostly related to higher healthcare claims expense. As a percentage of revenues under management, general and administrative expenses, excluding transaction and conversion costs, were 5.6% in the third quarter of
Loss from operations for the third quarter of 2019 was $8.1 million. This compares with income from operations of $1.7 million in the third quarter
The Company s Non-GAAP financial measures exclude two communities that are undergoing significant renovation and conversion (see
Non-GAAP Financial Measures below).
Adjusted EBITDAR for the third quarter of 2019 was $27.3 million, compared with $36.1 million in the
third quarter of 2018. Adjusted CFFO was $(1.2) million in the third quarter of 2019 and $8.1 million in the third quarter of 2018. CFFO for the third quarter of 2019 includes a negative net impact of $0.5 million related to the Company s
adoption of the new lease accounting standard ( ASC 842 ) effective January 1, 2019. There was no impact on Adjusted EBITDAR related to the adoption of the new lease standard.
Operating Activities
Same community results
exclude two previously noted communities undergoing lease-up or significant renovation and conversion, as well as the two Houston communities impacted by Hurricane Harvey which are also in lease-up. Same-community results also exclude certain
Same-community revenue in the third quarter of 2019 decreased 3.8% versus the third quarter of 2018.
Same-community operating expenses increased 2.4% in the third quarter of 2019 versus the third quarter of 2018. Same store labor costs, including benefits,
increased 0.2% in the third quarter, food costs decreased 1.1% and utilities decreased 0.1%. Same-community net operating income decreased 15.1% in the third quarter of 2019 when compared with the same period a year ago.
Capital expenditures were $6.5 million for the third quarter of 2019.
The Company ended the third quarter
with $20.8 million of cash and cash equivalents, including restricted cash. As of September 30, 2019, the Company financed its owned communities with mortgages totaling $967.4 million, at interest rates averaging 4.8%. The majority of the
Company s debt is at fixed interest rates excluding two bridge loans totaling approximately $76 million, one of which matures in July 2020 and the other in October 2021, and approximately $50 million of long-term variable rate debt under the
Company s Master Credit Facility. The earliest maturity date for the Company s fixed-rate debt is in 2022.
The Company s cash on hand and
cash flow from operations are expected to be sufficient for working capital and to fund the Company s capital expenditures.
The Company will host a conference call with senior management to discuss the Company s 2019 third quarter financial results
on Thursday, November 7, 2019, at 10:00 a.m. Eastern Time. To participate, dial 323-794-2093, and use confirmation code 4150059. A link to a simultaneous webcast of the teleconference will be available at www.capitalsenior.com.
For the convenience of the Company s shareholders and the public, the conference call will be recorded and available for replay starting November 7,
2019 at 1:00 p.m. Eastern Time, until November 15, 2018 at 1:00 p.m. Eastern Time. To access the conference call replay, call 719-457-0820, confirmation code 4150059. The conference call will also be made available for playback via the
Company s corporate website at https://www.capitalsenior.com/investor-relations/conference-calls/.
Non-GAAP Financial Measures of
Operating Performance
Adjusted EBITDAR is a financial valuation measure and Adjusted Net Income/(Loss) and Adjusted CFFO are financial
performance measures that are not calculated in accordance with U.S. generally accepted accounting principles ( GAAP ). Non-GAAP financial measures may have material limitations in that they do not reflect all of the costs associated with
our results of operations as determined in accordance with GAAP. As a result, these non-GAAP financial measures should not be considered a substitute for, nor superior to, financial results and measures determined or calculated in accordance
Adjusted EBITDAR is a valuation measure commonly used by Company management,
research analysts and investors to value companies in the senior living industry. Since Adjusted EBITDAR excludes interest expense and rent expense, it allows Company management, research
analysts and investors to compare the enterprise values of different companies without regard to differences in capital structures and leasing arrangements.
The Company believes that Adjusted Net Income/(Loss) and Adjusted CFFO are useful as performance measures in identifying trends in day-to-day operations
because they exclude the costs associated with acquisitions and conversions and other items that do not ordinarily reflect the ongoing operating results of our primary business. Adjusted Net Income/(Loss) and Adjusted CFFO provide indicators to
management of progress in achieving both consolidated and individual business unit operating performance and are used by research analysts and investors to evaluate the performance of companies in the senior living industry.
The Company strongly urges you to review the reconciliation of net loss to Adjusted EBITDAR and the reconciliation of net income/(loss) to Adjusted Net
Income/(Loss) and Adjusted CFFO, along with the Company s consolidated balance sheets, statements of operations, and statements of cash flows. This is included on the last page of this press release.
Dallas-based Capital Senior
Living Corporation is one of the nation s largest operators of independent living, assisted living and memory care communities for senior adults. The Company s 128 communities are home to nearly 11,800 residents across 23 states and
provide compassionate, resident-centric service and care as well as engaging programming. Capital Senior Living offers seniors the freedom and opportunity to successfully, comfortably and happily age in place. For more information, visit
www.capitalsenior.com or connect with the Company on Facebook.
The forward-looking statements in this release are subject to certain risks and uncertainties that could cause the Company s actual results and
financial condition to differ materially, including, but not limited to, the Company s ability to generate sufficient cash flows from operations, additional proceeds from debt refinancings, and proceeds from the sale of assets to satisfy its
short and long-term debt and lease obligations and to fund the Company s capital improvement projects to expand, redevelop, and/or reposition its senior living communities; the Company s ability to obtain additional capital on terms
acceptable to it; the Company s ability to extend or refinance its existing debt as such debt matures; the Company s compliance with its debt and lease agreements, including certain financial covenants, and the risk of cross-default in the
event such non-compliance occurs; the Company s ability to complete acquisitions and dispositions upon favorable terms or at all; the risk of oversupply and increased competition in the markets which the Company operates; the risk of increased
competition for skilled workers due to wage pressure and changes in regulatory requirements; the departure of the Company s key officers and personnel; the cost and difficulty of complying with applicable licensure, legislative oversight, or
regulatory changes; the risks associated with a decline in economic conditions generally; the adequacy and continued availability of the Company s insurance policies and the Company s ability to recover any losses it sustains under such
policies; changes in accounting principles and interpretations; and the other risks and factors identified from time to time in the Company s reports filed with the Securities and Exchange Commission.
For information about Capital Senior Living, visit www.capitalsenior.com.
Investor Contact Carey P. Hendrickson, Chief Financial Officer, at 972-770-5600 or chendrickson@capitalsenior.com.
Press Contact Susan J. Turkell at 303-766-4343 or sturkell@capitalsenior.com.
CAPITAL SENIOR LIVING CORPORATION
CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands)
| September 30, 2019 | December 31, 2018 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 7,703 | $ | 31,309 | ||||
| Restricted cash | 13,073 | 13,011 | ||||||
| Accounts receivable, net | 8,785 | 10,581 | ||||||
| Federal and state income taxes receivable | 152 | 152 | ||||||
| Assets held for sale | 24,366 | |||||||
| Property tax and insurance deposits | 12,482 | 13,173 | ||||||
| Prepaid expenses and other | 5,970 | 5,232 | ||||||
| Total current assets | 72,531 | 73,458 | ||||||
| Property and equipment, net | 978,224 | 1,059,049 | ||||||
| Operating lease right-of-use assets, net | 231,910 | |||||||
| Deferred taxes, net | 152 | 152 | ||||||
| Other assets, net | 11,383 | 16,485 | ||||||
| Total assets | $ | 1,294,200 | $ | 1,149,144 | ||||
| LIABILITIES AND SHAREHOLDERS EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 4,413 | $ | 9,095 | ||||
| Accrued expenses | 42,311 | 41,880 | ||||||
| Current portion of notes payable, net of deferred loan costs | 126,179 | 14,342 | ||||||
| Current portion of deferred income | 6,329 | 14,892 | ||||||
| Current portion of financing obligations | 1,718 | 3,113 | ||||||
| Current portion of operating lease liabilities | 46,801 | |||||||
| Federal and state income taxes payable | 303 | 406 | ||||||
| Customer deposits | 1,265 | 1,302 | ||||||
| Total current liabilities | 229,319 | 85,030 | ||||||
| Deferred income | 8,151 | |||||||
| Financing obligations, net of current portion | 10,132 | 45,647 | ||||||
| Operating lease liabilities, net of current portion | 214,950 | |||||||
| Other long-term liabilities | 15,643 | |||||||
| Notes payable, net of deferred loan costs and current portion | 836,589 | 959,408 | ||||||
| Commitments and contingencies | ||||||||
| Shareholders equity: | ||||||||
| Preferred stock, $.01 par value: | ||||||||
| Authorized shares 15,000; no shares issued or outstanding | ||||||||
| Common stock, $.01 par value: | ||||||||
| Authorized shares 65,000; issued and outstanding shares 31,486 and 31,273 in 2019 and 2018, respectively | 320 | 318 | ||||||
| Additional paid-in capital | 189,435 | 187,879 | ||||||
| Retained deficit | (183,115 | ) | (149,502 | ) | ||||
| Treasury stock, at cost 494 shares in 2019 and 2018 | (3,430 | ) | (3,430 | ) | ||||
| Total shareholders equity | 3,210 | 35,265 | ||||||
| Total liabilities and shareholders equity | $ | 1,294,200 | $ | 1,149,144 |
CAPITAL SENIOR LIVING CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(unaudited, in thousands, except per share data)
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2019 | 2018 | 2019 | 2018 | |||||||||||||
| Revenues: | ||||||||||||||||
| Resident revenue | $ | 111,110 | $ | 115,650 | $ | 338,412 | $ | 344,920 | ||||||||
| Expenses: | ||||||||||||||||
| Operating expenses (exclusive of facility lease expense and depreciation and amortization expense shown below) | 80,394 | 76,195 | 230,229 | 220,863 | ||||||||||||
| General and administrative expenses | 7,554 | 5,589 | 21,766 | 17,323 | ||||||||||||
| Facility lease expense | 14,233 | 14,077 | 42,706 | 42,515 | ||||||||||||
| Stock-based compensation expense | 898 | 2,095 | 1,558 | 6,603 | ||||||||||||
| Depreciation and amortization expense | 16,136 | 15,998 | 48,085 | 46,891 | ||||||||||||
| Total expenses | 119,215 | 113,954 | 344,344 | 334,195 | ||||||||||||
| Income (loss) from operations | (8,105 | ) | 1,696 | (5,932 | ) | 10,725 | ||||||||||
| Other income (expense): | ||||||||||||||||
| Interest income | 59 | 42 | 173 | 117 | ||||||||||||
| Interest expense | (12,562 | ) | (12,705 | ) | (37,728 | ) | (37,771 | ) | ||||||||
| Write-off of deferred loan costs | (97 | ) | ||||||||||||||
| Write-down of assets held for sale | (2,340 | ) | ||||||||||||||
| Gain on disposition of assets, net | 38 | 10 | ||||||||||||||
| Other income | 1 | 7 | 8 | 2 | ||||||||||||
| Loss before provision for income taxes | (20,607 | ) | (10,960 | ) | (45,878 | ) | (26,917 | ) | ||||||||
| Provision for income taxes | (124 | ) | (129 | ) | (371 | ) | (388 | ) | ||||||||
| Net loss | $ | (20,731 | ) | $ | (11,089 | ) | $ | (46,249 | ) | $ | (27,305 | ) | ||||
| Per share data: | ||||||||||||||||
| Basic net loss per share | $ | (0.68 | ) | $ | (0.37 | ) | $ | (1.53 | ) | $ | (0.92 | ) | ||||
| Diluted net loss per share | $ | (0.68 | ) | $ | (0.37 | ) | $ | (1.53 | ) | $ | (0.92 | ) | ||||
| Weighted average shares outstanding basic | 30,324 | 29,877 | 30,236 | 29,779 | ||||||||||||
| Weighted average shares outstanding diluted | 30,324 | 29,877 | 30,236 | 29,779 | ||||||||||||
| Comprehensive loss | $ | (20,731 | ) | $ | (11,089 | ) | $ | (46,249 | ) | $ | (27,305 | ) |
CAPITAL SENIOR LIVING CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
(unaudited, in thousands)
| Common Stock | Additional Paid-In Capital | Retained Deficit | Treasury Stock | Total | ||||||||||||||||||||
| Shares | Amount | |||||||||||||||||||||||
| Balance at December 31, 2017 | 30,505 | $ | 310 | $ | 179,459 | $ | (95,906 | ) | $ | (3,430 | ) | $ | 80,433 | |||||||||||
| Restricted stock awards (cancellations), net | 628 | 6 | (6 | ) | ||||||||||||||||||||
| Stock-based compensation | 1,949 | 1,949 | ||||||||||||||||||||||
| Net loss | (7,156 | ) | (7,156 | ) | ||||||||||||||||||||
| Balance at March 31, 2018 | 31,133 | $ | 316 | $ | 181,402 | $ | (103,062 | ) | $ | (3,430 | ) | $ | 75,226 | |||||||||||
| Restricted stock awards (cancellations), net | 45 | 1 | (1 | ) | ||||||||||||||||||||
| Stock-based compensation | 2,559 | 2,559 | ||||||||||||||||||||||
| Net loss | (9,060 | ) | (9,060 | ) | ||||||||||||||||||||
| Balance at June 30, 2018 | 31,178 | $ | 317 | $ | 183,960 | $ | (112,122 | ) | $ | (3,430 | ) | $ | 68,725 | |||||||||||
| Restricted stock awards (cancellations), net | 1 | 1 | (1 | ) | ||||||||||||||||||||
| Stock-based compensation | 2,095 | 2,095 | ||||||||||||||||||||||
| Net loss | (11,089 | ) | (11,089 | ) | ||||||||||||||||||||
| Balance at September 30, 2018 | 31,179 | $ | 318 | $ | 186,054 | $ | (123,211 | ) | $ | (3,430 | ) | $ | 59,731 | |||||||||||
| Balance at December 31, 2018 | 31,273 | $ | 318 | $ | 187,879 | $ | (149,502 | ) | $ | (3,430 | ) | $ | 35,265 | |||||||||||
| Adoption of ASC 842 | 12,636 | 12,636 | ||||||||||||||||||||||
| Restricted stock awards (cancellations), net | (150 | ) | (2 | ) | 2 | |||||||||||||||||||
| Stock-based compensation | (978 | ) | (978 | ) | ||||||||||||||||||||
| Net loss | (12,984 | ) | (12,984 | ) | ||||||||||||||||||||
| Balance at March 31, 2019 | 31,123 | $ | 316 | $ | 186,903 | $ | (149,850 | ) | $ | (3,430 | ) | $ | 33,939 | |||||||||||
| Restricted stock awards (cancellations), net | 346 | 4 | (4 | ) | ||||||||||||||||||||
| Stock-based compensation | 1,638 | 1,638 | ||||||||||||||||||||||
| Net loss | (12,534 | ) | (12,534 | ) | ||||||||||||||||||||
| Balance at June 30, 2019 | 31,469 | $ | 320 | $ | 188,537 | $ | (162,384 | ) | $ | (3,430 | ) | $ | 23,043 | |||||||||||
| Restricted stock awards, net | 17 | |||||||||||||||||||||||
| Stock-based compensation | 898 | 898 | ||||||||||||||||||||||
| Net loss | (20,731 | ) | (20,731 | ) | ||||||||||||||||||||
| Balance at September 30, 2019 | 31,486 | $ | 320 | $ | 189,435 | $ | (183,115 | ) | $ | (3,430 | ) | $ | 3,210 |