Full Press Release Details
CAPITAL SENIOR LIVING CORPORATION REPORTS
FIRST QUARTER 2020 RESULTS
Provides Update Related to COVID-19
DALLAS May 21, 2020 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 first quarter ended March 31, 2020.
The sequential improvement in key financial metrics in the first quarter, along with lower lease and debt payments,
has enabled us to focus our efforts on meeting the incremental challenges posed by the COVID-19 pandemic, said Kimberly S. Lody, President and Chief Executive Officer. During these last eight
weeks, our community-level and central support teams have steadfastly cared for our residents physical, cognitive, and emotional well-being, and I am so proud of their dedication and heroism during this unprecedented time. While our
financial results will be impacted by the pandemic for the next several months, we look forward to continuing our operational turnaround as market conditions stabilize.
Financial Results - First Quarter
quarter of 2020, the Company reported revenue of $106.1 million, compared with revenue of $114.2 million in the first quarter of 2019. The disposition of four communities since the first quarter of 2019 accounted for $3.5 million of
the decrease, and the conversion of six formerly leased communities to management agreements effective March 1, 2020, accounted for $1.1 million of the decrease. Total occupancy in the first quarter of 2020 was
80.0%, a decrease of 310 basis points as compared to the first quarter of 2019, and monthly average rent was $3,674, an increase of 1.6% as compared to the first quarter of 2019.
Operating expenses for the first quarter of 2020 were $75.4 million, the same as in the first quarter of 2019. The first quarter of 2019 included
$1.9 million of operating expenses related to four communities disposed of since the first quarter of 2019 and $0.7 million for the six formerly leased communities that were converted to management agreements effective March 1, 2020.
Also, the Company had $1.2 million in business interruption credits related to the Company s two communities previously impacted by Hurricane Harvey in the first quarter of 2019 but did not have any such credits in the first quarter of
General and administrative expenses for the first quarter of 2020 were $6.7 million versus
$7.6 million in the first quarter of 2019. Excluding transaction and conversion costs in both periods, general and administrative expenses decreased $0.6 million in the first quarter of 2020 versus the first quarter of 2019 due to lower
healthcare claims under the Company s self-insured healthcare plan. As a percentage of revenues under management, general and administrative expenses, excluding transaction and conversion costs, were 4.9% in the first quarter of 2020.
The first quarter of 2020 includes an $11.0 million non-cash gain and a $36.5 million non-cash long-lived asset impairment charge, both of which are related to the leased communities and the associated agreements executed with Healthpeak, Ventas and Welltower. The Company also recorded a
$7.4 million non-cash loss on the sale of a non-core community in the first quarter of 2020.
Loss from operations for the first quarter of 2020 was $3.7 million. Net loss was $48.4 million for the first quarter of 2020.
Adjusted EBITDAR for the first quarter of 2020 was $26.3 million. The Company incurred approximately $0.3 million of
COVID-19 expenses in March 2020. Adjusted EBITDAR excluding COVID-19 expenses was $26.6 million, a sequential increase of $0.9 million from Adjusted EBITDAR in
the fourth quarter of 2019. Adjusted CFFO was $0.2 million. Adjusted CFFO excluding COVID-19 expenses was $0.5 million, a sequential increase of $1.9 million from Adjusted CFFO in the fourth
quarter of 2019. (See Non-GAAP Financial Measures below).
Same Community Results
Same community results exclude the four non-core communities the Company has disposed of since the first quarter of
2019 and the six Healthpeak communities converted to management agreements effective March 1, 2020. Same-community results also exclude approximately $0.3 million of expenses incurred in March 2020 related to
COVID-19 preparedness.
Same-community revenue in the first quarter of 2020 decreased 2.6% versus the first
quarter of 2019. Same-community occupancy in the first quarter was 79.9%, a decrease of 280 basis points as compared to the first quarter of 2019 and average monthly rent was $3,772, an increase of 0.9% as compared to the first quarter of 2019.
Same-community operating expenses increased 2.4% in the first quarter of 2020 versus the first quarter of 2019. Same store labor costs, including benefits,
increased 5.9%, food costs decreased 1.0%, and utilities decreased 5.5%. Including contract labor, which decreased $0.3 million in the first quarter of 2020, same store total labor costs increased 5.0% when compared with the first quarter of
2019. Same-community net operating income decreased 12.3% in the first quarter of 2020 when compared with the first quarter of 2019. Same-community NOI increased $2.7 million, or 9.4%, in the first quarter of 2020 as compared to the fourth quarter
Sale of Senior Living Community
previously announced, the Company closed on the sale of a non-core community in Merrillville, Indiana, on March 31, 2020, at a purchase price of $7.0 million. The transaction resulted in
approximately $6.9 million in net cash proceeds. The community consisted of 213 assisted living and memory care units, and had CFFO contribution of approximately $0.2 million in 2019.
The safety and wellbeing of the Company s residents, employees and caregivers is and has been the Company s highest priority. At the onset of the COVID-19 pandemic, the Company s operations team swiftly implemented comprehensive protocols and best practices across the portfolio based on guidance from the Centers for Disease Control as well as federal,
state and local authorities. All communities have executed risk-mitigation actions, such as restricting access and assessing the health status of every person entering the communities, including the Company s employees, all visitors, and all
outside service providers. Tours are limited to only the prospect and one family member in most communities, with certain communities only providing virtual tours. New residents and residents returning from a hospital stay are required to isolate in
their apartment for fourteen days. All employees are required to adhere to personal protection protocols, including wearing masks at all times. The Company s communities are cleaned and disinfected at least twice daily. Certain communities with
COVID-positive residents have received a specialized disinfecting and decontamination treatment. In most cases, the Company has implemented in-room only dining and activities programming. Due to the vulnerable
nature of the Company s residents, many of these restrictions may continue at its communities even when federal, state, and local stay-at-home and social distancing
orders and recommendations are relaxed.
The Company delivered results in line with its expectations in March 2020. New resident leads, visits, and move-in activity declined significantly in April compared to typical levels, adversely impacting occupancy. Consolidated occupancy, excluding the non-core community sold in
the first quarter, decreased from 79.8% for the month of March to 78.7% for the month of April. Revenue on the same basis decreased approximately $0.5 million from March to April. We expect further deterioration of occupancy and revenue
resulting from fewer move-ins due to the impacts of COVID-19. Lower than normal controllable move-out activity during the COVID-19 pandemic may partially offset future adverse revenue impacts.
The Company has recognized and continues to
recognize increases in supplies costs related primarily to personal protection equipment and paper goods required for in-room dining, labor, specialized cleaning and disinfecting costs, and testing of
residents and employees. To mitigate the impact of the COVID-related expenditures, the Company has reduced spending on non-essential supplies, travel costs and certain other discretionary items, and has ceased
all non-critical capital expenditure projects.
The Company is utilizing the payroll tax deferral program under
the Coronavirus Aid, Relief, and Economic Security Act of 2020 (CARES Act) to defer the employer portion of payroll taxes from April 2020 through December 2020, which it estimates will accumulate to approximately $7.0 million. One-half of the deferred payroll taxes will be due by December 2021, with the other half due by December 2022. The Company has also entered into short-term debt forbearance agreements with certain of its lenders
effective April 1, 2020, some of which will require repayment of the forbearance over a twelve-month period following the end of the forbearance period.
Balance Sheet and Liquidity
The Company ended the
first quarter with $27.9 million of cash and cash equivalents, including restricted cash. As of March 31, 2020, the Company financed its owned communities with mortgages totaling $923.0 million at interest rates averaging 4.7%. The
majority of the Company s debt is at fixed interest rates excluding three bridge loans totaling approximately $82.9 million, all with maturities in the first quarter of 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.
As described above, COVID-19 has caused, and management expects will continue to cause, a
decline in the occupancy levels at the Company s communities that will negatively impact revenues. Also as described above, the recent outbreak of COVID-19 has required the Company to incur, and
management expects will require the Company to continue to incur, significant additional operating costs and expenses in order to care for its residents. Further, residents at certain of its senior housing communities have tested positive for COVID-19, which has increased the costs of caring for the residents at such communities and has resulted in reduced occupancies at such communities.
ASC 205-40, Disclosure of Uncertainties about an Entity s
Ability to Continue as a Going Concern, requires an evaluation of whether there are conditions or events, considered in the aggregate, that raise substantial doubt about an entity s ability to continue as a going concern in the
twelve-month period following the date its financial statements are issued. In complying with the requirements under U.S. GAAP to complete an evaluation without considering mitigating factors, the Company considered several conditions or events
including (1) uncertainty around the impact of COVID-19 on the Company s financial results, and (2) anticipated operating losses and negative cash flows from operations for fiscal year 2020.
These conditions raise substantial doubt about the Company s ability to continue as a going concern for the twelve-month period following the issuance of its financial statements in its Form 10-Q for the
quarterly period ended March 31, 2020.
The Company has taken or intends to take certain actions to improve its liquidity position and address
uncertainty about its ability to continue as a going concern, including:
Q1 2020 Conference Call Information
will host a conference call with senior management to discuss the Company s first quarter 2020 financial results on Thursday, May 21, 2020, at 10:00 a.m. Eastern Time. To participate, dial 323-994-2082, and use confirmation code 9553593. A link to a simultaneous webcast of the teleconference will be available at www.capitalsenior.com through Windows Media Player or RealPlayer.
For the convenience of the Company s shareholders and the public, the conference call will be recorded and available for replay starting May 21,
2020 at 1:00 p.m. Eastern Time, until May 29, 2020 at 1:00 p.m. Eastern Time. To access the conference call replay, call 719-457-0820, confirmation code 9553593.
The conference call will also be made available for playback via the Company s corporate website, 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 with GAAP.
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 124 communities are home to more than 11,000 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 continued spread of
COVID-19, including the speed, depth, geographic reach and duration of such spread, new information that may emerge concerning the severity of COVID-19, the actions
taken to prevent or contain the spread of COVID-19 or treat its impact, the legal, regulatory and administrative developments that occur at the federal, state and local levels in response to the COVID-19 pandemic, and the frequency and magnitude of legal actions and liability claims that may arise due to COVID-19 or the Company s response efforts; the impact of COVID-19 on the Company s ability to continue as a going concern, 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