Full Press Release Details
CAPITAL SENIOR LIVING CORPORATION
REPORTS SECOND QUARTER 2017 RESULTS
DALLAS (GLOBE NEWSWIRE) August 1, 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 second quarter 2017. Company highlights for the second 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
Our occupancy improved in the second quarter following the heavy and prolonged flu season earlier this year and our average monthly rent increased a
robust 2.1% in the first six months of the year, said Lawrence A. Cohen, Chief Executive Officer of the Company. In addition, same-community deposits increased 6.2% and same-community move-ins improved 3.6% compared to the second quarter
of 2016. These strong demand metrics give us excellent momentum for occupancy growth and rate growth going forward.
We continued to make
steady progress on the lease-up of units previously out of service in the second quarter. Importantly, we completed the final phase of renovation and conversion of units at one of our repositioned communities in April. The community has 249 total
units and is expected to make a significant contribution to revenue, EBITDAR and CFFO when occupancy stabilizes and its results are added back to our non-GAAP results.
We expect the execution of our strategic business plan to produce outstanding growth in all of our key metrics going forward. In 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 not included in our results 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 the transaction
For the second quarter of 2017, the Company reported revenue of $116.7 million, compared to revenue of $111.0 million in the
second quarter of 2016, an increase of 5.1%. The increase was mostly due to the acquisition of three communities since the second quarter of 2016, not including the acquisition of the four previously-leased communities in the first quarter of 2017
which increased Adjusted CFFO but did not result in increases to the Company s revenue or expense. Revenue for consolidated communities excluding the three communities undergoing repositioning, lease-up or significant renovation and conversion
increased 5.0% in the second quarter of 2017 as compared to the second quarter of 2016.
Operating expenses for the second quarter of 2017 were $73.3
million, an increase of $6.1 million from the second quarter of 2016. The increase was primarily due to the acquisitions of senior housing communities made during or since the second quarter of 2016 and increased contract labor costs for additional
staffing required for newly licensed memory care and assisted living units, which the Company expects to diminish as permanent staff is hired.
and administrative expenses for the second quarter of 2017 were $6.1 million. This compares to general and administrative expenses of $5.0 million in the second
quarter of 2016. Excluding transaction and conversion costs in both periods, general and administrative expenses increased $1.1 million in the second quarter of 2017 as compared to the second
quarter of 2016, primarily due to a $1.4 million increase in net healthcare expense year over year. May claims expense was unusually high as covered employees accelerated healthcare services before higher out of pocket expenses associated with
changes to the Company s healthcare plans took effect in June. Structural changes in the new program resulted in significantly lower claims expense in June and July as expected. As a percentage of revenues under management, general and
administrative expenses, excluding transaction and conversion costs, were 4.8% in the second quarter of 2017 compared to 4.1% in the second quarter of 2016.
Income from operations for the second quarter of 2017 was $4.7 million. The Company recorded a net loss on a GAAP basis of $7.8 million in the second quarter
of 2017. Excluding items noted and reconciled on the final page of this release, the Company s adjusted net loss was $2.3 million in the second quarter of 2017.
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 second quarter of 2017 was $38.3 million as
compared to $39.0 million in the second quarter of 2016. The three communities undergoing repositioning, lease-up or significant renovation and conversion, not included in Adjusted EBITDAR, generated an additional $1.1 million of EBITDAR.
Adjusted CFFO was $11.5 million in the second quarter of 2017, as compared to $12.9 million in the second quarter of 2016. The three communities undergoing
repositioning, lease-up or significant renovation and conversion, not included in Adjusted CFFO, generated an additional $0.3 million of CFFO.
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 second quarter of 2017 increased 0.8% versus the second quarter of 2016.
Same-community operating expenses increased 3.4% from the second quarter of the prior year, excluding conversion costs in both periods. On the same basis,
labor costs, including benefits, increased 2.6%, food costs increased 0.2% and utilities increased 2.3%, all as compared to the second quarter of 2016. At communities that have not converted units to higher levels of care in the last year, labor
costs increased 2.2%. The most significant expense increase was in contract labor costs, mostly related to additional staffing required for newly licensed memory care and assisted living units. Contract labor is expected to decrease in the third and
fourth quarters of 2017 as permanent staff are hired. Same-community net operating income decreased 2.9% in the second quarter of 2017 as compared to the second quarter of 2016.
Capital expenditures for the second quarter of 2017 were $9.2 million, representing approximately $7.7
million of investment spending and approximately $1.5 million of recurring capital expenditures.
The Company ended the quarter with $29.6 million of cash and cash equivalents, including restricted cash. During the second quarter of 2017, the Company spent
$9.2 million on capital improvements. The Company received reimbursements from one of its REIT partners totaling $1.4 million in the second quarter for capital improvements at certain leased communities and expects to receive additional
reimbursements as the remaining projects at leased communities are completed.
As of June 30, 2017, the Company financed its owned communities with
mortgages totaling $964.1 million at interest rates averaging 4.6%. All of the Company s debt is at fixed interest rates, except for two bridge loans totaling approximately $76.6 million at June 30, 2017, one of which matures in the third
quarter of 2018 and the other in the second quarter of 2020. The earliest maturity date for the Company s fixed-rate debt is in 2021.
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.
Q2 2017 Conference Call Information
will host a conference call with senior management to discuss the Company s second quarter 2017 financial results. The call will be held on Tuesday, August 1, 2017, at 5:00 p.m. Eastern Time. The call-in number is 323-701-0230,
confirmation code 1577957. 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 August 1,
2017 at 8:00 p.m. Eastern Time, until August 9, 2017 at 8:00 p.m. Eastern Time. To access the conference call replay, call 719-457-0820, confirmation code 1577957. 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
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 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 www.capitalsenior.com.
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)
| June 30, 2017 | December 31 2016 , | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 16,218 | $ | 34,026 | ||||
| Restricted cash | 13,367 | 13,297 | ||||||
| Accounts receivable, net | 10,488 | 13,675 | ||||||
| Federal and state income taxes receivable | 17 | |||||||
| Property tax and insurance deposits | 11,079 | 14,665 | ||||||
| Prepaid expenses and other | 4,391 | 6,365 | ||||||
| Total current assets | 55,560 | 82,028 | ||||||
| Property and equipment, net | 1,111,903 | 1,032,430 | ||||||
| Other assets, net | 20,337 | 31,323 | ||||||
| Total assets | $ | 1,187,800 | $ | 1,145,781 | ||||
| LIABILITIES AND SHAREHOLDERS EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 7,995 | $ | 5,051 | ||||
| Accrued expenses | 36,157 | 39,064 | ||||||
| Current portion of notes payable, net of deferred loan costs | 17,371 | 17,889 | ||||||
| Current portion of deferred income | 15,174 | 16,284 | ||||||
| Current portion of capital lease and financing obligations | 2,885 | 1,339 | ||||||
| Federal and state income taxes payable | 218 | |||||||
| Customer deposits | 1,480 | 1,545 | ||||||
| Total current liabilities | 81,062 | 81,390 | ||||||
| Deferred income | 10,975 | 12,205 | ||||||
| Capital lease and financing obligations, net of current portion | 50,734 | 37,439 | ||||||
| Other long-term liabilities | 14,727 | 15,325 | ||||||
| Notes payable, net of deferred loan costs and current portion | 939,187 | 882,504 | ||||||
| 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 30,347 and 30,012 in 2017 and 2016, respectively | 308 | 305 | ||||||
| Additional paid-in capital | 175,652 | 171,599 | ||||||
| Retained deficit | (81,415 | ) | (51,556 | ) | ||||
| Treasury stock, at cost 494 shares in 2017 and 2016 | (3,430 | ) | (3,430 | ) | ||||
| Total shareholders equity | 91,115 | 116,918 | ||||||
| Total liabilities and shareholders equity | $ | 1,187,800 | $ | 1,145,781 |
CAPITAL SENIOR LIVING CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(unaudited, in thousands, except per share data)
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| Revenues: | ||||||||||||||||
| Resident revenue | $ | 116,718 | $ | 111,034 | $ | 232,708 | $ | 220,207 | ||||||||
| Expenses: | ||||||||||||||||
| Operating expenses (exclusive of facility lease expense and depreciation and amortization expense shown below) | 73,289 | 67,162 | 146,067 | 133,685 | ||||||||||||
| General and administrative expenses | 6,083 | 4,972 | 12,317 | 11,220 | ||||||||||||
| Facility lease expense | 13,968 | 15,445 | 28,555 | 30,650 | ||||||||||||
| Loss on facility lease termination | 12,858 | |||||||||||||||
| Stock-based compensation expense | 1,941 | 2,490 | 3,871 | 5,003 | ||||||||||||
| Depreciation and amortization expense | 16,746 | 15,172 | 33,959 | 29,703 | ||||||||||||
| Total expenses | 112,027 | 105,241 | 237,627 | 210,261 | ||||||||||||
| Income (Loss) from operations | 4,691 | 5,793 | (4,919 | ) | 9,946 | |||||||||||
| Other income (expense): | ||||||||||||||||
| Interest income | 14 | 19 | 32 | 35 | ||||||||||||
| Interest expense | (12,404 | ) | (10,345 | ) | (24,409 | ) | (20,330 | ) | ||||||||
| Loss on disposition of assets, net | (6 | ) | (125 | ) | (37 | ) | ||||||||||
| Other income | 2 | 233 | 5 | 233 | ||||||||||||
| Loss before provision for income taxes | (7,697 | ) | (4,306 | ) | (29,416 | ) | (10,153 | ) | ||||||||
| Provision for income taxes | (138 | ) | (140 | ) | (261 | ) | (277 | ) | ||||||||
| Net loss | $ | (7,835 | ) | $ | (4,446 | ) | $ | (29,677 | ) | $ | (10,430 | ) | ||||
| Per share data: | ||||||||||||||||
| Basic net loss per share | $ | (0.27 | ) | $ | (0.15 | ) | $ | (1.01 | ) | $ | (0.36 | ) | ||||
| Diluted net loss per share | $ | (0.27 | ) | $ | (0.15 | ) | $ | (1.01 | ) | $ | (0.36 | ) | ||||
| Weighted average shares outstanding basic | 29,478 | 28,926 | 29,384 | 28,838 | ||||||||||||
| Weighted average shares outstanding diluted | 29,478 | 28,926 | 29,384 | 28,838 | ||||||||||||
| Comprehensive loss | $ | (7,835 | ) | $ | (4,446 | ) | $ | (29,677 | ) | $ | (10,430 | ) |
CAPITAL SENIOR LIVING CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
| Six Months Ended June 30, | ||||||||
| 2017 | 2016 | |||||||
| Operating Activities | ||||||||
| Net loss | $ | (29,677 | ) | $ | (10,430 | ) | ||
| Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | 33,959 | 29,703 | ||||||
| Amortization of deferred financing charges | 800 | 567 | ||||||
| Amortization of deferred lease costs and lease intangibles | 435 | 191 | ||||||
| Amortization of lease incentives | (597 | ) | (375 | ) | ||||
| Deferred income | (502 | ) | 44 | |||||
| Lease incentives | 3,655 | 3,890 | ||||||
| Loss on facility lease termination | 12,858 | |||||||
| Loss on disposition of assets, net | 125 | 37 | ||||||
| Provision for bad debts | 975 | 809 | ||||||
| Stock-based compensation expense | 3,871 | 5,003 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | (3,828 | ) | (5,872 | ) | ||||
| Property tax and insurance deposits | 3,586 | 2,926 | ||||||
| Prepaid expenses and other | 1,974 | (1,016 | ) | |||||
| Other assets | 5,380 | (566 | ) | |||||
| Accounts payable | 2,944 | (2,214 | ) | |||||
| Accrued expenses | (2,907 | ) | (1,704 | ) | ||||
| Other liabilities | 2,750 | 5,778 | ||||||
| Federal and state income taxes receivable/payable | (235 | ) | (206 | ) | ||||
| Deferred resident revenue | (517 | ) | (1,136 | ) | ||||
| Customer deposits | (65 | ) | (121 | ) | ||||
| Net cash provided by operating activities | 34,984 | 25,308 | ||||||
| Investing Activities | ||||||||
| Capital expenditures | (21,942 | ) | (29,747 | ) | ||||
| Cash paid for acquisitions | (85,000 | ) | (64,750 | ) | ||||
| Proceeds from disposition of assets | 13 | |||||||
| Net cash used in investing activities | (106,929 | ) | (94,497 | ) | ||||
| Financing Activities | ||||||||
| Proceeds from notes payable | 66,584 | 69,892 | ||||||
| Repayments of notes payable | (10,302 | ) | (8,183 | ) | ||||
| Increase in restricted cash | (70 | ) | (8 | ) | ||||
| Cash payments for capital lease and financing obligations | (1,161 | ) | (583 | ) | ||||
| Cash proceeds from the issuance of common stock | 3 | 66 | ||||||
| Excess tax benefits on stock options exercised | (27 | ) | ||||||
| Purchases of treasury stock | (2,496 | ) | ||||||
| Deferred financing charges paid | (917 | ) | (1,073 | ) | ||||
| Net cash provided by financing activities | 54,137 | 57,588 | ||||||
| Decrease in cash and cash equivalents | (17,808 | ) | (11,601 | ) | ||||
| Cash and cash equivalents at beginning of period | 34,026 | 56,087 | ||||||
| Cash and cash equivalents at end of period | $ | 16,218 | $ | 44,486 | ||||
| Supplemental Disclosures | ||||||||
| Cash paid during the period for: | ||||||||
| Interest | $ | 23,265 | $ | 19,627 | ||||
| Income taxes | $ | 529 | $ | 546 |
Capital Senior Living Corporation
Supplemental Information
| Communities | Average Resident Capacity | Average Units | ||||||||||||||||||||||
| Q2 17 | Q2 16 | Q2 17 | Q2 16 | Q2 17 | Q2 16 | |||||||||||||||||||
| Portfolio Data | ||||||||||||||||||||||||
| I. Community Ownership / Management | ||||||||||||||||||||||||
| Consolidated communities | ||||||||||||||||||||||||
| Owned | 83 | 76 | 10,767 | 9,436 | 8,179 | 7,251 | ||||||||||||||||||
| Leased | 46 | 50 | 5,756 | 6,333 | 4,409 | 4,918 | ||||||||||||||||||
| Total | 129 | 126 | 16,523 | 15,769 | 12,588 | 12,169 | ||||||||||||||||||
| Independent living | 6,879 | 6,792 | 5,245 | 5,294 | ||||||||||||||||||||
| Assisted living | 9,644 | 8,977 | 7,343 | 6,875 | ||||||||||||||||||||
| Total | 16,523 | 15,769 | 12,588 | 12,169 | ||||||||||||||||||||
| II. Percentage of Operating Portfolio | ||||||||||||||||||||||||
| Consolidated communities | ||||||||||||||||||||||||
| Owned | 64.3 | % | 60.3 | % | 65.2 | % | 59.8 | % | 65.0 | % | 59.6 | % | ||||||||||||
| Leased | 35.7 | % | 39.7 | % | 34.8 | % | 40.2 | % | 35.0 | % | 40.4 | % | ||||||||||||
| Total | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||||||
| Independent living | 41.6 | % | 43.1 | % | 41.7 | % | 43.5 | % | ||||||||||||||||
| Assisted living | 58.4 | % | 56.9 | % | 58.3 | % | 56.5 | % | ||||||||||||||||
| Total | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % |
Capital Senior Living Corporation