Full Press Release Details
CAPITAL SENIOR LIVING CORPORATION
REPORTS THIRD QUARTER 2017 RESULTS
(GLOBE NEWSWIRE) November 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 third quarter 2017. Company highlights for the third quarter include:
Operating and Financial Summary (all amounts in this
operating and financial summary exclude four 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.)
For many years I have been proud of Capital Senior Living s track record of operational excellence but have been disappointed by the more recent
operational and sales challenges we have faced, said Lawrence A. Cohen, Chief Executive Officer of the Company. We have made a number of broad-based organizational and operational changes that are restoring and strengthening a culture of
high reliability. We are taking immediate action to overcome challenges, drive sustainable profitable growth and enhance shareholder value as we execute a comprehensive strategy to deliver higher revenues, enhance cash flow and maximize the value of
our owned real estate. I am confident in our key initiatives and am pleased with the improvements that we saw as we progressed through the third quarter, including a 90 basis point improvement in same-community occupancy from June to September and
10% growth in same-community net operating income from June to September.
These initiatives are expected to produce further improvement in our key
metrics for the remainder of 2017 and beyond, and provide a strong foundation on which to execute our long-term growth strategy focused on organic growth, accretive acquisitions, conversion of units to higher levels of care and EBITDAR-enhancing
capital expenditures. By diligently executing this strategy, we expect to increase revenues, reduce operating expenses and increase EBITDAR and CFFO. We do not intend to pursue any new acquisitions until the middle part of 2018 so we can focus on
implementing these intiatives. We are committed to returning Capital Senior Living to operational excellence. With a disciplined focus on our growth strategy and driving operational improvements, we will be well positioned to enhance shareholder
value as well as the value of our owned real estate, and further capitalize on our competitive advantages as a leading pure-play private-pay senior housing owner/operator.
Recent Investment Activity
The Company announced today that it has elected not to purchase the community previously expected to close in
mid-October. Upon the successful implementation of important operating initiatives, the Company expects to resume pursuing accretive acquisitions of high-quality communities.
Two of the Company s
communities in Houston were impacted by Hurricane Harvey. None of its Florida communities were impacted by Hurricane Irma.
The two Houston communities
were proactively evacuated to ensure the safety of their residents. The two communities sustained flood damage that has resulted in the temporary suspension of their operations. Remediation is in progress and both communities are currently expected
to begin admitting residents in early 2018. The Company s property and casualty insurance will cover all damage to the buildings and the Company s business interruption coverage is expected to restore the economic loss related to the
suspension of operations.The Company s deductible for the total claim is $0.1 million.
Financial Results Third Quarter
For the third quarter of 2017, the Company reported revenue of $117.3 million, compared to revenue of $111.4 million in the third quarter of 2016, an
increase of 5.3%. The increase was mostly due to the acquisition of three communities during or since the third 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 four communities undergoing repositioning, lease-up or significant
renovation and conversion, and the two Houston communities impacted by Hurricane Harvey, increased 5.9% in the third quarter of 2017 as compared to the third quarter of 2016.
Operating expenses for the third quarter of 2017 were $74.6 million, an increase of $5.0 million from the third quarter of 2016. The increase was
primarily due to the acquisitions of senior housing communities made during or since the third quarter of 2016 and increased contract labor costs for additional staffing required for newly licensed memory care and assisted living units, which
decreased during the third quarter as permanent staff was hired and is expected to continue to decrease in the fourth quarter of 2017. Operating expenses include a $0.7 million business interruption insurance credit related to the
Company s two Houston communities impacted by Hurricane Harvey to offset the their lost revenues and continuing expenses related to the last seven days of August and the month of September, and to restore the communities net income for
those periods based on an approximate average for the first seven months of 2017.
General and administrative expenses for the third quarter of 2017 were $5.4 million. This compares to
general and administrative expenses of $5.7 million in the third quarter of 2016. Excluding transaction and conversion costs in both periods, general and administrative expenses decreased $0.3 million in the third quarter of 2017 as
compared to the third quarter of 2016, primarily due to a $0.9 million decrease in net healthcare expense year over year. As a percentage of revenues under management, general and administrative expenses, excluding transaction and conversion
costs, were 4.3% in the third quarter of 2017 compared to 4.7% in the third quarter of 2016.
Income from operations for the third quarter of 2017 was
$4.5 million. The Company recorded a net loss on a GAAP basis of $8.1 million in the third quarter of 2017. Excluding items noted and reconciled on the final page of this release, the Company s adjusted net loss was $2.2 million
in the third quarter of 2017.
The Company s Non-GAAP financial measures exclude four communities that are
undergoing repositioning, lease-up of higher-licensed units or significant renovation and conversion (see Non-GAAP Financial Measures below), including a
community in Massachusetts undergoing significant renovation that was excluded beginning in the third quarter of 2017.
Adjusted EBITDAR for the third
quarter of 2017 was $37.9 million as compared to $38.0 million in the third quarter of 2016. The four communities undergoing repositioning, lease-up or significant renovation and conversion not
included in Adjusted EBITDAR generated an additional $0.9 million of EBITDAR.
Adjusted CFFO was $11.1 million in the third quarter of 2017, as
compared to $11.6 million in the third quarter of 2016.
Operating Activities
Same-community results exclude the four communities previously noted that are undergoing repositioning, lease-up or
significant renovation and conversion, the two Houston communities impacted by Hurricane Harvey, and three communities that were acquired during or since the third quarter of 2016. Same-community results also exclude certain transaction and
Same-community revenue in the third quarter of 2017 increased 1.6% versus the third quarter of 2016.
Same-community operating expenses increased 4.2% from the third quarter of the prior year, excluding
conversion costs in both periods. On the same basis, labor costs, including benefits, increased 4.0%, food costs increased 1.1% and utilities increased 0.4%, all as compared to the third quarter of 2016. At communities that have not converted units
to higher levels of care in the last year, labor costs increased 3.5%. 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 decreased throughout the third quarter of 2017 as permanent staff was hired and is expected to continue to decrease in the fourth quarter of 2017. Same-community net operating income decreased 2.4% in the third quarter of 2017 as
compared to the third quarter of 2016. Execution of a number of recovery initiatives during the third quarter improved same-community results as the quarter progressed. In the month of September, same-community revenues increased 2.3%, expenses
decreased 2.3% and net operating income increased 9.1%, all as compared to the prior year.
Capital expenditures for the third quarter of 2017 were
$8.2 million, representing approximately $6.7 million of investment spending and approximately $1.5 million of recurring capital expenditures.
The Company ended the quarter with
$22.6 million of cash and cash equivalents, including restricted cash. During the third quarter of 2017, the Company spent $8.2 million on capital improvements. The Company received reimbursements from one of its REIT partners totaling
$1.5 million in the third 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 September 30, 2017, the Company financed its owned communities with mortgages totaling $960.2 million at interest rates averaging 4.7%. All of
the Company s debt is at fixed interest rates, except for two bridge loans totaling approximately $76.6 million at September 30, 2017, one of which matures in the second quarter of 2019 and the other in the first quarter of 2020. 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 2017 Conference Call Information
will host a conference call with senior management to discuss the Company s third quarter 2017 financial results. The call will be held on Wednesday, November 1, 2017, at 5:00 p.m. Eastern Time. The
call-in number is 323-701-0230, confirmation code 5634307. 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, 2017 at 8:00 p.m. Eastern Time, until November 9, 2017 at 8:00 p.m. Eastern Time. To access the conference call replay, call 719-457-0820, confirmation code 5634307. 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 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