Full Press Release Details
CAPITAL SENIOR LIVING CORPORATION
REPORTS THIRD QUARTER 2016 RESULTS
(BUSINESS WIRE) November 1, 2016 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 third quarter 2016. Company highlights for the third quarter include:
Operating and Financial Summary (all amounts in
this operating and financial summary exclude three communities that are undergoing repositioning, 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. Note that following the Securities and Exchange Commission s recent issuance of updated guidance on the use of non-GAAP financial measures,
the Company no longer presents Adjusted CFFO on a per share basis.)
We made steady progress in the third quarter on important operational and corporate objectives related to positioning the Company for sustained solid
growth, including the announcement of the pending strategic purchase of four communities we currently lease, as we look to continue to increase our real estate ownership, said Lawrence A. Cohen, Chief Executive Officer of the
Company. The Company s third quarter results were impacted by two non-controllable items, attrition and healthcare claims. We experienced very strong demand at our communities in the third quarter of 2016, with same community
move-ins increasing 5.4% over the third quarter of 2015; however, same-community attrition increased an unusually high 9.5% during the quarter, which impacted our occupancy and revenue. We also experienced an unusual spike in healthcare claims
in the third quarter, resulting in a significant increase in the Company s G&A expense.
We continue to have a robust acquisition pipeline that allows us to increase our ownership of
high-quality senior housing communities in geographically concentrated regions and generate meaningful increases in our key performance metrics and real estate value. We closed on the acquisitions of two communities during the third quarter and on
the acquisition of an additional community in November. We are also pleased to announce the pending acquisition of four communities that we currently lease, and we continue to pursue additional opportunities.
We believe that we are well positioned to create long-term shareholder value as a larger company with scale, competitive advantages and a substantially
all private-pay business model in a highly-fragmented industry that benefits from long-term demographics, need-driven demand, limited competitive new supply in our local markets, a strong housing market and a growing economy.
Recent Investment Activity
Combined highlights of the transactions include:
The communities were
financed with an aggregate of approximately $55.3 million of non-recourse mortgage debt with terms of 10 and 15 years at an average fixed interest rate of approximately 4.2%.
Financial Results - Third Quarter
quarter of 2016, the Company reported revenue of $111.4 million, compared to revenue of $104.4 million in the third quarter of 2015, an increase of 6.7%, mostly due to the acquisition of 11 communities during or since the third quarter of
2015. Revenue for consolidated communities excluding the three communities undergoing repositioning, lease-up or significant renovation and conversion increased 7.3% in the third quarter of 2016 as compared to the third quarter of
2015. These increases were achieved with fewer units available for lease in the third quarter of 2016 than the third quarter of 2015, exclusive of acquisitions, due to the disposition of one community in the third quarter of 2015 and conversion
and refurbishment projects currently in progress at certain communities.
Operating expenses for the third quarter of 2016 were $69.6 million, an increase
of $6.0 million from the third quarter of 2015, also primarily due to the acquisitions of senior housing communities made during or since the third quarter of 2015.
General and administrative expenses for the third quarter of 2016 were $5.7 million compared to $4.8 million in the third quarter of 2015. Excluding
transaction and conversion costs of approximately $0.5 million from the third quarter of both 2016 and 2015, general and administrative expenses increased $1.0 million in the third quarter of 2016 as compared to the third quarter of 2015, primarily
related to an unusual spike in healthcare claims in the third quarter of 2016. As a percentage of revenues under management, general and administrative expenses, excluding transaction and conversion costs, were 4.7% in the third quarter of
Income from operations for the third quarter of 2016 was $3.7 million. The Company recorded a net loss on a GAAP basis of $7.1 million in the
third quarter of 2016. Excluding non-recurring or non-economic items reconciled on the final page of this release, the Company s adjusted net loss was $0.7 million in the third quarter of 2016.
The Company s Non-GAAP financial measures exclude three communities that are undergoing repositioning,
lease-up of higher-licensed units or significant renovation and conversion (see Non-GAAP Financial Measures below).
Adjusted EBITDAR for the
third quarter of 2016 was $38.0 million, an increase of $1.6 million, or 4.3%, from the third quarter of 2015. The Adjusted EBITDAR margin for the third quarter of 2016 was 35.5%. The three communities undergoing repositioning, lease-up or
significant renovation and conversion, not included in Adjusted EBITDAR, generated an additional $0.8 million of EBITDAR.
Adjusted CFFO was $11.6 million
in the third quarter of 2016, as compared to $12.0 million in the third quarter of 2015.
Operating Activities
Same-community results exclude the three communities previously noted that are undergoing repositioning, lease-up or significant renovation and conversion, and
transaction and other one-time costs.
Same-community revenue in the third quarter of 2016 increased 1.4% versus the third quarter of 2015. Due to
conversion and refurbishment projects currently in progress at certain communities, fewer units were available for rent in the third quarter of this year than the third quarter of last year. With a like number of units available in both years,
same-community revenue would have increased approximately 1.8% in the third quarter of 2016 as compared to the third quarter of the prior year.
Same-community expenses increased 1.7% from the third quarter of the prior year, excluding conversion costs in both periods. On the same basis, labor
costs, including benefits, increased 2.5%, food costs increased 0.7% and utilities increased 0.5%, all as compared to the third quarter of 2015, and same-community net operating income increased 0.8% in the third quarter of 2016 as compared to the
third quarter of 2015.
Capital expenditures for the third quarter of 2016 were $17.6 million, representing approximately $16.2 million of investment
spending and approximately $1.4 million of recurring capital expenditures. If annualized, spending for recurring capital expenditures was approximately $460 per unit.
The Company ended the quarter with
$43.1 million of cash and cash equivalents, including restricted cash. During the third quarter of 2016, the Company received net cash proceeds of $9.3 million related to supplemental loans for three communities, invested $11.8 million in the
two communities acquired during the third quarter, and spent $17.6 million on capital improvements. The Company received reimbursements totaling $2.0 million in the third quarter for capital improvements and expects to receive additional
reimbursements as the remaining projects are completed.
As of September 30, 2016, the Company financed its owned communities with mortgages totaling $873.5 million
at interest rates averaging 4.6%. All of the Company s debt is at fixed interest rates, except for one bridge loan totaling approximately $11.8 million at September 30, 2016, which matures in the third quarter of 2018. The earliest
maturity date for the Company s fixed-rate debt is in 2021.
The Company s cash on hand and cash flow from operations are expected to be
sufficient for working capital, prudent reserves and the equity needed to fund the Company s acquisition, conversion and renovation programs.
Q3 2016 Conference Call Information
will host a conference call with senior management to discuss the Company s third quarter 2016 financial results. The call will be held on Tuesday, November 1, 2016, at 5:00 p.m. Eastern Time. The call-in number is 913-312-1481,
confirmation code 2308411. 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 November 1, 2016
at 8:00 p.m. Eastern Time, until November 10, 2016 at 8:00 p.m. Eastern Time. To access the conference call replay, call 719-457-0820, confirmation code 2308411. The conference call will also be made available for playback via the
Company s corporate website, www.capitalsenior.com.
Non-GAAP Financial Measures of Operating Performance
Adjusted EBITDAR, Adjusted EBITDAR Margin, Adjusted Net Income and Adjusted CFFO are financial measures of operating performance that are not calculated in
accordance with U.S. generally accepted accounting principles ( GAAP ). Non-GAAP financial measures of operating performance may have material limitations in that they do not reflect all of the amounts associated with our results of
operations as determined in accordance with GAAP. As a result, these non-GAAP financial measures of operating performance should not be considered a substitute for, nor superior to, financial results and measures determined or calculated
in accordance with GAAP. The Company believes that these non-GAAP performance measures are useful as they are performance measures used by management in identifying trends in day-to-day performance because they exclude the costs
associated with acquisitions and conversions and items that do not reflect the ordinary performance of our operations and provide indicators to management of progress in achieving both consolidated and business unit operating performance. In
addition, these measures are used by many research analysts and investors to evaluate the performance and the value of companies in the senior living industry. The Company strongly urges you to review on the last page of this release the
reconciliation of income from operations to Adjusted
EBITDAR and Adjusted EBITDAR Margin and the reconciliation of net loss to Adjusted Net Income and Adjusted CFFO, along with the Company s consolidated balance sheets, statements of
operations, and statements of cash flows. Following the SEC s recent issuance of updated guidance on the use of non-GAAP financial measures, the Company no longer presents Adjusted CFFO on a per share basis.
Capital Senior Living
Corporation is one of the nation s largest operators of residential communities for senior adults. The Company s operating strategy is to provide value to residents by providing quality senior housing services at reasonable prices. The
Company s communities emphasize a continuum of care, which integrates independent living, assisted living, and home care services, to provide residents the opportunity to age in place. The Company operates 129 senior housing communities in
geographically concentrated regions with an aggregate capacity of approximately 16,300 residents.
The forward-looking statements in this release are subject to certain risks and uncertainties that could cause results to differ materially, including, but
not without limitation to, the Company s ability to find suitable acquisition properties at favorable terms, financing, refinancing, community sales, licensing, business conditions, risks of downturns in economic conditions generally,
satisfaction of closing conditions such as those pertaining to licensure, availability of insurance at commercially reasonable rates, and changes in accounting principles and interpretations among others, and other risks and factors identified from
time to time in our reports filed with the Securities and Exchange Commission.
For information about Capital Senior Living, visit
Contact Carey P. Hendrickson, Chief Financial Officer, at 972-770-5600 for more information.
CAPITAL SENIOR LIVING CORPORATION
CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands, except per share data)
| September 30, | December 31, | |||||||
| 2016 | 2015 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 29,834 | $ | 56,087 | ||||
| Restricted cash | 13,292 | 13,159 | ||||||
| Accounts receivable, net | 11,065 | 9,254 | ||||||
| Property tax and insurance deposits | 13,209 | 14,398 | ||||||
| Prepaid expenses and other | 6,482 | 4,370 | ||||||
| Total current assets | 73,882 | 97,268 | ||||||
| Property and equipment, net | 1,005,027 | 890,572 | ||||||
| Other assets, net | 29,590 | 31,193 | ||||||
| Total assets | $ | 1,108,499 | $ | 1,019,033 | ||||
| LIABILITIES AND SHAREHOLDERS EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 2,309 | $ | 3,362 | ||||
| Accrued expenses | 32,665 | 34,300 | ||||||
| Current portion of notes payable, net of deferred loan costs | 17,454 | 13,634 | ||||||
| Current portion of deferred income and resident revenue | 16,597 | 16,059 | ||||||
| Current portion of capital lease and financing obligations | 1,211 | 1,257 | ||||||
| Federal and state income taxes payable | 14 | 111 | ||||||
| Customer deposits | 1,570 | 1,819 | ||||||
| Total current liabilities | 71,820 | 70,542 | ||||||
| Deferred income | 12,685 | 13,992 | ||||||
| Capital lease and financing obligations, net of current portion | 37,892 | 38,835 | ||||||
| Other long-term liabilities | 13,058 | 4,969 | ||||||
| Notes payable, net of deferred loan costs and current portion | 849,780 | 754,949 | ||||||
| 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 29,996 and 29,539 in 2016 and 2015, respectively | 305 | 299 | ||||||
| Additional paid-in capital | 167,435 | 159,920 | ||||||
| Retained deficit | (41,046 | ) | (23,539 | ) | ||||
| Treasury stock, at cost 494 and 350 shares in 2016 and 2015, respectively | (3,430 | ) | (934 | ) | ||||
| Total shareholders equity | 123,264 | 135,746 | ||||||
| Total liabilities and shareholders equity | $ | 1,108,499 | $ | 1,019,033 |
CAPITAL SENIOR LIVING CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME
(unaudited, in thousands, except per share data)
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||||||
| Revenues: | ||||||||||||||||
| Resident revenue | $ | 111,436 | $ | 104,420 | $ | 331,643 | $ | 304,648 | ||||||||
| Expenses: | ||||||||||||||||
| Operating expenses (exclusive of facility lease expense and depreciation and amortization expense shown below) | 69,622 | 63,649 | 203,307 | 184,487 | ||||||||||||
| General and administrative expenses | 5,749 | 4,751 | 16,969 | 15,482 | ||||||||||||
| Facility lease expense | 15,500 | 15,321 | 46,150 | 45,875 | ||||||||||||
| Stock-based compensation expense | 2,479 | 2,301 | 7,482 | 6,745 | ||||||||||||
| Depreciation and amortization expense | 14,400 | 12,722 | 44,103 | 38,985 | ||||||||||||
| Total expenses | 107,750 | 98,744 | 318,011 | 291,574 | ||||||||||||
| Income from operations | 3,686 | 5,676 | 13,632 | 13,074 | ||||||||||||
| Other income (expense): | ||||||||||||||||
| Interest income | 15 | 12 | 50 | 36 | ||||||||||||
| Interest expense | (10,636 | ) | (8,994 | ) | (30,966 | ) | (26,022 | ) | ||||||||
| Write-off of deferred loan costs and prepayment premiums | (102 | ) | (973 | ) | ||||||||||||
| (Loss) Gain on disposition of assets, net | (16 | ) | 6,418 | (53 | ) | 6,247 | ||||||||||
| Other income | 233 | 1 | ||||||||||||||
| (Loss) Income before provision for income taxes | (6,951 | ) | 3,010 | (17,104 | ) | (7,637 | ) | |||||||||
| Provision for income taxes | (126 | ) | (139 | ) | (403 | ) | (697 | ) | ||||||||
| Net (loss) income | $ | (7,077 | ) | $ | 2,871 | $ | (17,507 | ) | $ | (8,334 | ) | |||||
| Per share data: | ||||||||||||||||
| Basic net (loss) income per share | $ | (0.24 | ) | $ | 0.10 | $ | (0.61 | ) | $ | (0.28 | ) | |||||
| Diluted net (loss) income per share | $ | (0.24 | ) | $ | 0.10 | $ | (0.61 | ) | $ | (0.28 | ) | |||||
| Weighted average shares outstanding basic | 28,959 | 28,732 | 28,879 | 28,668 | ||||||||||||
| Weighted average shares outstanding diluted | 28,959 | 28,733 | 28,879 | 28,668 | ||||||||||||
| Comprehensive (loss) income | $ | (7,077 | ) | $ | 2,871 | $ | (17,507 | ) | $ | (8,334 | ) |
CAPITAL SENIOR LIVING CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
| Nine Months Ended September 30, | ||||||||
| 2016 | 2015 | |||||||
| Operating Activities | ||||||||
| Net loss | $ | (17,507 | ) | $ | (8,334 | ) | ||
| Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | 44,103 | 38,985 | ||||||
| Amortization of deferred financing charges | 870 | 853 | ||||||
| Amortization of deferred lease costs and lease intangibles | (129 | ) | 987 | |||||
| Deferred income | 15 | (308 | ) | |||||
| Lease incentives | 5,858 | |||||||
| Write-off of deferred loan costs and prepayment premiums | 973 | |||||||
| Loss (Gain) on disposition of assets, net | 53 | (6,247 | ) | |||||
| Provision for bad debts | 1,214 | 873 | ||||||
| Stock-based compensation expense | 7,482 | 6,745 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | (231 | ) | (3,240 | ) | ||||
| Accounts receivable from affiliates | 2 | |||||||
| Property tax and insurance deposits | 1,189 | 35 | ||||||
| Prepaid expenses and other | (2,112 | ) | 2,076 | |||||
| Other assets | (462 | ) | (324 | ) | ||||
| Accounts payable | (1,053 | ) | (1,853 | ) | ||||
| Accrued expenses | (1,586 | ) | 2,683 | |||||
| Federal and state income taxes receivable/payable | (97 | ) | (356 | ) | ||||
| Deferred resident revenue | (784 | ) | (1,526 | ) | ||||
| Customer deposits | (249 | ) | 451 | |||||
| Net cash provided by operating activities | 36,574 | 32,475 | ||||||
| Investing Activities | ||||||||
| Capital expenditures | (47,311 | ) | (23,665 | ) | ||||
| Cash paid for acquisitions | (109,750 | ) | (124,460 | ) | ||||
| Proceeds from disposition of assets | 32 | 43,460 | ||||||
| Net cash used in investing activities | (157,029 | ) | (104,665 | ) | ||||
| Financing Activities | ||||||||
| Proceeds from notes payable | 112,492 | 150,034 | ||||||
| Repayments of notes payable | (12,881 | ) | (78,705 | ) | ||||
| Increase in restricted cash | (133 | ) | (914 | ) | ||||
| Cash payments for capital lease and financing obligations | (989 | ) | (697 | ) | ||||
| Cash proceeds from the issuance of common stock | 66 | 42 | ||||||
| Excess tax benefits on stock options exercised | (27 | ) | 7 | |||||
| Purchases of treasury stock | (2,496 | ) | ||||||
| Deferred financing charges paid | (1,830 | ) | (2,099 | ) | ||||
| Net cash provided by financing activities | 94,202 | 67,668 | ||||||
| Decrease in cash and cash equivalents | (26,253 | ) | (4,522 | ) | ||||
| Cash and cash equivalents at beginning of period | 56,087 | 39,209 | ||||||
| Cash and cash equivalents at end of period | $ | 29,834 | $ | 34,687 | ||||
| Supplemental Disclosures | ||||||||
| Cash paid during the period for: | ||||||||
| Interest | $ | 30,056 | $ | 24,707 | ||||
| Income taxes | $ | 564 | $ | 1,028 | ||||
| Non-cash transactions: | ||||||||
| Assumption of debt related to disposition of assets (Sedgwick Sale Transaction) | $ | $ | 6,764 |