Full Press Release Details
CAPITAL SENIOR LIVING CORPORATION
REPORTS FOURTH QUARTER AND FULL
YEAR 2018 RESULTS; ANNOUNCES
CHANGES TO SENIOR LEADERSHIP
Michael C. Fryar Appointed Chief Revenue Officer
DALLAS (GLOBE NEWSWIRE) February 28, 2019 Capital Senior Living Corporation (the Company ) (NYSE: CSU), one of the
nation s largest operators of senior housing communities, today announced operating and financial results for the fourth quarter and full year ended December 31, 2018. The Company also reported its Chief Operating Officer, Brett D. Lee, is
no longer with the organization, effective immediately. In addition, the Company announced that Michael C. Fryar joined as Chief Revenue Officer, a newly created role.
We are very disappointed with the Company s fourth quarter and full year results, and I am fully committed to taking the necessary steps to improve
the Company s execution, operations and financial performance. Since joining Capital Senior Living as CEO in early January, I have been working diligently with the team to set a new path forward that we expect to lead to stabilization of our
operations in 2019 and provide a platform for cash flow generation and profitable growth in the years ahead. We have already implemented several initiatives to stabilize our business, including reorganizing our sales management function, reducing
field labor by approximately 250 positions, establishing community-centered labor utilization targets and business management tools, and aligning our incentive compensation programs to the Company s operating targets, said Kimberly S.
Lody, President and Chief Executive Officer of the Company.
Capital Senior Living has not executed with the precision we need to grow revenue over
the long term and drive shareholder value. I have determined that creating a Chief Revenue Officer role to establish and lead commercial excellence initiatives throughout our organization will enhance our efforts to grow the top-line. Our Chief Revenue Officer will strengthen our use of market and community analytics, lead marketing strategy and execution, develop and execute sales training programs, enhance and differentiate our
resident experience, and further develop relationships with strategic business partners.
In addition to these operating initiatives, we are focused on improving our balance sheet to ensure
that we have a sustainable and disciplined capital structure that will allow us to make the appropriate investments to execute on the initiatives underway and improve our financial results.
In reflecting on the Company s operating performance in 2018 and charting a course for 2019 and beyond, we determined that a change in operational
leadership is necessary at this time. While we search for a new Chief Operating Officer, I will assume this role and lead our operations team. We expect market conditions to remain challenging in 2019, but we are confident that we will make
significant progress towards improving the consistency and predictability of our operating results. We recognize the opportunities ahead, and we are focused on building a stronger Capital Senior Living for the benefit of our shareholders and all
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)
Michael C. Fryar Joins as Chief Revenue Officer
Fryar, who assumed his role as Chief Revenue Officer on February 25, most recently served as Vice President/North America Marketing for GN Hearing, part
of the medical device division of the GN Group, a global leader in intelligent audio solutions for medical, professional, and consumer markets. At GN Hearing, Fryar led marketing strategy, product management, communications, technical support,
consumer support and specialty sales teams for multiple business units across North America, and was an integral part of the leadership team responsible for several consecutive years of above-market growth and market share gains.
Mike s impressive background in consumer marketing, especially in the area of senior-related healthcare products and services, is exactly what is
needed at Capital Senior Living, noted Lody. His deep expertise includes deploying both digital and traditional marketing methods to fuel top-line growth, and he understands how to effectively
support and drive results through the consumer experience and with a geographically dispersed sales organization. We look forward to the contributions Mike will make in this new and vital role.
Recent Investment Activity
Carey P. Hendrickson,
the Company s Chief Financial Officer, said, Consistent with our normal business practices, we continue to seek ways to strengthen our financial foundation and optimize our asset portfolio. In December 2018, we closed on a Master Credit
Facility that addressed our nearest-term fixed-debt maturities and raised cash proceeds of approximately $20 million. We are also marketing a limited number of assets for potential divestiture which we expect to generate strong value.
The Master Credit Facility refinanced the fixed-rate debt on 19 communities, including all of the
Company s 2021 maturities, which were the earliest maturities for the Company s fixed-rate debt, and a majority of the Company s 2022 and 2023 maturities. The new mortgage debt in the Master Credit Facility is $201.0 million,
with approximately $151 million of the debt at a fixed interest rate of 5.13% and the remaining $50 million at a long-term variable interest rate of LIBOR plus 2.14% (the initial variable interest rate was approximately 4.6%). All the debt
in the Master Credit Facility has a 10-year term and debt service is interest only for the first 36 months. As part of the transaction, the Company also repaid the debt of two additional communities being
considered for divestiture that were previously cross-collateralized with communities refinanced under the Master Credit Facility. The Company obtained a $3.5 million bridge loan with an 18-month term for
one of the communities and the other community is unencumbered. As a result of the transaction, the Company recorded a $12.6 million charge related to the extinguishment of the Company s previous debt on the 21 communities and the write-off of certain deferred loan costs. The transaction resulted in net proceeds of approximately $20.3 million.
Financial Results - Fourth Quarter
quarter of 2018, the Company reported revenue of $115.1 million, compared to revenue of $117.0 million in the fourth quarter of 2017. Revenue for consolidated communities excluding the two communities undergoing significant renovation and
conversion, and the two Houston communities impacted by Hurricane Harvey, was $112.9 million, a decrease of 2.3% in the fourth quarter of 2018 when compared with the fourth quarter of 2017.
Operating expenses for the fourth quarter of 2018 were $76.1 million, an increase of $4.7 million, or 6.6%, from the fourth quarter of 2017.
Operating expenses in the fourth quarter of 2018 included a $0.7 million business interruption insurance credit related to the Company s two Houston communities impacted by Hurricane Harvey to offset the lost revenues and continuing
expenses, and to restore the communities net income for the fourth quarter of 2018 based on an approximate average of the communities net income in the seven months of 2017 prior to the hurricane. The business interruption credit was
$1.6 million in the fourth quarter of 2017.
General and administrative expenses for the fourth quarter of 2018 were $9.6 million. This compares
with general and administrative expenses of $5.9 million in the fourth quarter of 2017. Excluding transaction and conversion costs in both periods (including approximately $4.0 million related to the retirement, transition and replacement
of the Company s CEO), general and administrative expenses decreased $0.2 million in the fourth quarter of 2018 versus the fourth quarter of 2017. As a percentage of revenues under management, general and administrative expenses, excluding
transaction and conversion costs, were 4.7% in the fourth quarter of 2018 versus 4.8% in the fourth quarter of 2017.
Loss from operations for the fourth
quarter of 2018 was $3.1 million. The Company recorded a net loss on a GAAP basis of $26.3 million in the fourth quarter of 2018.
items noted and reconciled on the final page of this release, including a $12.6 million charge related to the extinguishment of debt and other costs associated with the Company s refinancing, the Company s adjusted net loss was
$8.5 million in the fourth quarter of 2018.
The Company s Non-GAAP financial measures exclude two
communities that are undergoing significant renovation and conversion (see Non-GAAP Financial Measures below). Three communities that were previously excluded from the Company s Non- GAAP financial measures were added back to such measures beginning in the first quarter of 2018.
for the fourth quarter of 2018 was $35.2 million as compared with $39.4 million in the fourth quarter of 2017. Adjusted CFFO was $6.9 million in the fourth quarter of 2018 and $12.3 million in the fourth quarter of 2017.
Financial Results Full Year
reported 2018 revenue of $460.0 million, compared with revenue of $467.0 million in 2017. Revenue for consolidated communities excluding the two communities undergoing significant renovation and conversion, and the two Houston communities
impacted by Hurricane Harvey, was $453.1 million, a decrease of 0.5% in 2018 as compared with 2017. Operating expenses were $294.7 million in 2018 compared with $290.7 million in 2017.
General and administrative expenses were $27.0 million in 2018 versus $23.6 million in 2017. As a percentage of revenues under management, general
and administrative expenses, excluding transaction and conversion costs, were 4.4% in 2018 compared with 4.7% in 2017.
Income from operations for the
full year of 2018 was $7.6 million. The Company recorded a net loss on a GAAP basis of $53.6 million for full year 2018. Excluding items noted and reconciled on the final page of this release, including a $12.6 million charge related
to the extinguishment of debt and other costs associated with the Company s refinancing, the Company s adjusted net loss was $25.0 million in 2018.
The Company s Non-GAAP financial measures exclude two communities that are undergoing significant renovation and
conversion (see Non-GAAP Financial Measures below). Three communities that were previously excluded from the Company s Non- GAAP financial measures were
added back to such measures beginning in the first quarter of 2018.
Adjusted EBITDAR was $147.7 million for full year 2018 versus
$153.4 million for full year 2017. Adjusted CFFO for 2018 was $36.1 million.
Operating Activities
Same-community results exclude two communities previously noted that are undergoing lease-up or significant renovation
and conversion, and the two Houston communities impacted by Hurricane Harvey. Same-community results also exclude certain conversion costs.
Same-community revenue in the fourth quarter of 2018 decreased 2.3% versus the fourth quarter of 2017. For full year 2018, same-community revenue decreased
0.5% from full year 2017.
Same-community operating expenses increased 3.2% in the fourth quarter of 2018 versus the fourth quarter of 2017, and 2.6% for
full year 2018 versus full year 2017, excluding conversion costs in all periods. On the same basis, labor costs, including benefits, increased 3.9% in the fourth quarter and 2.8% for the full year, utilities increased 2.5% in the fourth quarter and
3.6% for the full year, and food costs decreased 4.2% in the fourth quarter and 5.1% for the full year. Same-community net operating income decreased 10.9% in the fourth quarter of 2018 when compared with the fourth quarter of 2017, and decreased
5.6% for the full year of 2018 versus the full year of 2017.
Capital expenditures were $4.0 million for the fourth quarter of 2018 and
$22.0 million for full year 2018.
The Company ended the year with $44.3 million of cash and cash equivalents, including restricted cash. As of December 31, 2018, the Company financed
its owned communities with mortgages totaling $981.6 million at interest rates averaging 4.8%. The majority of the Company s debt is at fixed interest rates except for three bridge loans totaling approximately $80 million, two of
which mature in 2020 and the other in 2021, and approximately $50 million of long-term variable rate debt under the 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
Q4 and Full Year 2018 Conference Call Information
The Company will host a conference call with senior management to discuss the Company s fourth quarter and full year 2018 financial results on Thursday,
February 28, 2019, at 9:00 a.m. Eastern Time. To participate, dial 323-794-2588, and use confirmation code 6759095. 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 February 28, 2019 at 12:00 p.m. Eastern Time, until March 8, 2019 at 12:00 p.m. Eastern Time. To access the conference call replay, call 719-457-0820, confirmation code 6759095. The conference call will also be made available for playback via the Company s corporate website at
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 our management, research
analysts and investors to value companies in the senior living industry. Because Adjusted EBITDAR excludes interest expense and rent expense, it allows our management, research analysts and investors to compare the enterprise values of different