Full Press Release Details
CAPITAL SENIOR LIVING CORPORATION
REPORTS FOURTH QUARTER AND FULL YEAR 2016 RESULTS
DALLAS (BUSINESS WIRE) February 28, 2017 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 2016. Company highlights for the fourth quarter and full year 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.)
The focused execution of our clear and differentiated real-estate strategy yielded solid
results in the fourth quarter, including increases in revenue, occupancy, average monthly rent, EBITDAR and CFFO, as compared to the previous quarter, said Lawrence A. Cohen, Chief Executive Officer of the Company. Attrition and
healthcare claims, which were unusually high in the third quarter, returned to more normal levels in the fourth quarter, and we continue to be well insulated from competitive new supply and wage pressure in most of our markets. We also continued to
increase our real estate ownership with the acquisition of one community in the fourth quarter and the closing of a strategic purchase of four communities we previously leased in January.
As we look forward to 2017 and beyond, we expect the continued execution of our strategic business plan to produce outstanding growth in all of our key
addition to core growth in our operations, our growth will be enhanced by the significant renovations we have
made across our portfolio and even greater by the return of a significant number of units currently out of service due to conversions and repositionings. And, we have a robust acquisition pipeline that will allow us to continue to increase our
ownership of high-quality senior housing communities in geographically concentrated regions. As such, 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
Highlights of this transaction were previously reported in the third quarter earnings release in combination with two third quarter
acquisitions and are shown below for this individual transaction:
The community was financed
with approximately $22.0 million of non-recourse mortgage debt with a term of 10 years at a fixed interest rate of approximately 4.2%.
The communities were financed with a
36-month, interest-only bridge loan for $65.0 million with an initial variable interest rate of approximately 4.8%. Three of the four communities are currently undergoing renovation and conversion. The
Company plans to obtain permanent financing based on the enhanced cash flow of the communities once the renovations and conversions are completed and occupancy reaches stabilization.
Highlights of this transaction include:
Financial Results - Fourth Quarter
quarter of 2016, the Company reported revenue of $115.8 million, compared to revenue of $107.5 million in the fourth quarter of 2015, an increase of 7.7%, mostly due to the acquisition of nine communities during or since the fourth quarter
of 2015. Revenue for consolidated communities excluding the three communities undergoing repositioning, lease-up or significant renovation and conversion increased 7.9% in the fourth quarter of 2016 as
compared to the fourth quarter of 2015.
Operating expenses for the fourth quarter of 2016 were $71.8 million, an increase of $6.7 million from
the fourth quarter of 2015, also primarily due to the acquisitions of senior housing communities made during or since the fourth quarter of 2015.
and administrative expenses for the fourth quarter of 2016 were $6.7 million, which includes approximately $1.1 million in one-time costs associated with the passing of Keith Johannessen, the
Company s former President and Chief Operating Officer. This compares to general and administrative expenses of $4.9 million in the fourth
quarter of 2015. Excluding one-time, transaction and conversion costs of
approximately $2.0 million from the fourth quarter of 2016 and transaction and conversion costs of $0.8 million from the fourth quarter of 2015, general and administrative expenses increased $0.6 million in the fourth quarter of 2016
as compared to the fourth quarter of 2015. As a percentage of revenues under management, general and administrative expenses, excluding one-time, transaction and conversion costs, were 4.1% in the fourth
Income from operations for the fourth quarter of 2016 was $0.8 million. The Company recorded a net loss on a GAAP basis of
$10.5 million in the fourth 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 $2.3 million in the fourth 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
Adjusted EBITDAR for the fourth quarter of 2016 was $38.6 million, an increase of $0.4 million, or 1.1%, from the fourth
quarter of 2015. The three communities undergoing repositioning, lease-up or significant renovation and conversion, not included in Adjusted EBITDAR, generated an additional $0.7 million of EBITDAR.
Adjusted CFFO was $12.2 million in the fourth quarter of 2016, as compared to $12.8 million in the fourth quarter of 2015.
Financial Results Full Year
reported 2016 revenue of $447.4 million, compared to revenue of $412.2 million in 2015, an increase of 8.6%. Revenue for consolidated communities excluding the three communities undergoing repositioning,
lease-up or significant renovation and conversion increased 9.0% in 2016 as compared to 2015. Operating expenses were $273.9 million in 2016, an increase of $25.2 million from 2015.
General and administrative expenses were $23.7 million in 2016 compared to $20.4 million in 2015. General and administrative expenses as a
percentage of revenues under management, excluding one-time, transaction and conversion costs, were 4.4% in 2016 compared to 4.3% in 2015.
Income from operations for full year 2016 was $14.4 million. The Company recorded a net loss on a GAAP basis of $28.0 million for full year 2016.
Excluding non-recurring or non-economic items reconciled on the final page of this release, the Company s adjusted net loss was $3.9 million for full year
Adjusted EBITDAR was $152.9 million for full year 2016, an increase of $8.4 million, or 5.8%, compared to full year 2015. The three
communities undergoing repositioning, lease-up or significant renovation and conversion, not included in Adjusted EBITDAR, generated an additional $3.2 million of EBITDAR in 2016. Adjusted CFFO for 2016
was $48.3 million in 2016, as compared to $47.0 million in 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
fourth quarter of 2016 increased 0.6% versus the fourth quarter of 2015. Due to conversion and refurbishment projects currently in progress at certain communities, fewer units were available for rent in the fourth quarter of this year than the
fourth quarter of last year.
Same-community expenses increased 1.6% from the fourth quarter of the prior year, excluding conversion costs in both
periods. On the same basis, labor costs, including benefits, increased 2.1%, food costs decreased 3.8% and utilities increased 3.3%, all as compared to the fourth quarter of 2015, and same-community net operating income decreased 0.7% in the fourth
quarter of 2016 as compared to the fourth quarter of 2015.
Capital expenditures for the fourth quarter of 2016 were $15.1 million, representing
approximately $13.6 million of investment spending and approximately $1.5 million of recurring capital expenditures. Spending in 2016 for recurring capital expenditures equaled $5.5 million, or approximately $450 per unit.
The Company ended the quarter with
$47.3 million of cash and cash equivalents, including restricted cash. During the fourth quarter of 2016, the Company received net cash proceeds of $15.6 million related to supplemental loans for four communities, invested
$7.0 million in a community acquired during the fourth quarter, and spent $15.1 million on capital improvements. The Company received reimbursements totaling $1.7 million in the fourth quarter for capital improvements and expects to
receive additional reimbursements as the remaining projects are completed.
As of December 31, 2016, the Company financed its owned communities with
mortgages totaling $907.2 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 December 31, 2016, which matures in the
fourth 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.
Q4 2016 Conference Call Information
The Company will host a conference call with senior management to discuss the Company s fourth quarter and full year 2016 financial results. The call will
be held on Tuesday, February 28, 2017, at 5:00 p.m. Eastern Time. The call-in number is 913-312-1453, confirmation code
6535233. 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
February 28, 2017 at 8:00 p.m. Eastern Time, until March 9, 2017 at 8:00 p.m. Eastern Time. To access the conference call replay, call 719-457-0820,
confirmation code 6535233. 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 is a financial valuation measure and Adjusted Net Income 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 companies
without regard to differences in capital structures and leasing arrangements.
The Company believes that Adjusted Net Income 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 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 on the last page of this release the reconciliation of net loss to Adjusted EBITDAR and the reconciliation of net (loss) income to Adjusted Net (Loss) Income and Adjusted CFFO, along with the Company s consolidated balance sheets,
statements of operations, and statements of cash flows.
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 16,500 residents.
The forward-looking statements in