Full Press Release Details
CAPITAL SENIOR LIVING CORPORATION
REPORTS SECOND QUARTER 2018 RESULTS
DALLAS (GLOBE NEWSWIRE) July 31, 2018 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 2018.
financial results for the second quarter were impacted by a challenging operating environment and higher than anticipated attrition rates, especially towards the end of April and early May, which resulted in lower than expected occupancy and average
rents, said Lawrence A. Cohen, Chief Executive Officer of the Company. To address this, we implemented one-month specials in certain locations as well as targeted discounts, which successfully
stabilized occupancy but had a resulting negative impact on our reported results. We expect the challenging competitive environment and its associated impacts on our results to continue through the balance of the year. As a result, we are reducing
our full year guidance for 2018.
Mr. Cohen continued, We are disappointed with our second quarter results, and have put in place
immediate action plans to increase revenues and reduce expenses. Beyond these immediate steps, we continue to implement a number of broad-based operational improvements to strengthen our platform and processes. The seniors housing industry is in the
midst of a timing gap between the growth of the senior population and a decline in construction starts. Fundamentally, Capital Senior Living is well positioned to take advantage of the expected improvement in supply/demand dynamics. With real estate
ownership a core element of our differentiated strategy, we believe that the intrinisic value of our real estate will ultimately provide a multiplier effect when a recovery in the market and the impact from our operational initiatives take hold. In
the meantime, we are moving forward with a focus on executing our comprehensive strategy, controlling costs and maximizing the value of our owned real estate.
Operating and Financial Summary (all amounts in this operating and financial summary exclude two communities that are 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.)
Financial Results - Second Quarter
For the second quarter of 2018, the Company reported revenue of $114.6 million, compared to revenue of $116.7 million in the second 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, increased 0.1% in the second quarter of 2018 as compared to the second
Operating expenses for the second quarter of 2018 were $73.0 million, a decrease of $0.3 million
from the second quarter of 2017. Operating expenses include a $1.6 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 second quarter of 2018 based on an approximate average of the communities net income in the seven months of 2017 prior to the hurricane.
General and administrative expenses for the second quarter of 2018 were $5.7 million. This compares to general and administrative expenses of
$6.1 million in the second quarter of 2017. Excluding transaction and conversion costs in both periods and a benefit reserve adjustment related to the Affordable Care Act in 2018, general and administrative expenses decreased $1.1 million
in the second quarter of 2018 as compared to the second quarter of 2017. As a percentage of revenues under management, general and administrative expenses, excluding transaction and conversion costs, were 3.9% in the second quarter of 2018 compared
to 4.8% in the second quarter of 2017.
Income from operations for the second quarter of 2018 was $3.6 million. The Company recorded a net loss on a
GAAP basis of $9.1 million in the second quarter of 2018. Excluding items noted and reconciled on the final page of this release, the Company s adjusted net loss was $5.0 million in the second 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), including a community in Indiana that recently completed a significant renovation and conversion and is now in
lease-up that was excluded beginning in the second quarter of 2018. 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 for the second quarter of 2018 was $38.4 million as
compared to $38.3 million in the second quarter of 2017. Adjusted CFFO was $10.6 million in the second quarter of 2018, as compared to $11.5 million in the second quarter of 2017.
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 second quarter of 2018 increased 0.1% versus the second quarter of 2017.
Same-community operating expenses increased 2.8% from the second quarter of the prior year, excluding
conversion costs in both periods. On the same basis, labor costs, including benefits, increased 3.4% and utilities increased 6.6%, while food costs decreased 6.9%, all as compared to the second quarter of 2017. At communities that have not converted
units to higher levels of care, labor costs increased 2.5% compared to the second quarter of 2017. Same-community net operating income decreased 4.3% in the second quarter of 2018 as compared to the second quarter of 2017.
Capital expenditures for the second quarter of 2018 were $5.2 million, representing approximately $4.0 million of investment spending and
approximately $1.2 million of recurring capital expenditures.
The Company expects the operating environment to remain challenging through 2018 and for the lower average monthly rents that resulted from the pricing actions
taken in the first half of 2018 to impact the remainder of the year. As such, the Company currently expects its full-year 2018 Adjusted CFFO to be in the range of $38 million to $41 million. Immediate recovery plans have been implemented
across the portfolio to increase revenues and reduce expenses. The sales and operational improvements the Company has been implementing throughout 2018 continue to progress. Furthermore, the Company is currently conducting a comprehensive review of
operations to determine additional steps that can be taken to improve performance going forward. The Company believes these proactive actions will position it to deliver improved results beginning in 2019, particularly as the 80+ senior population
growth accelerates in the next 18 months and beyond.
The Company ended the quarter with
$24.3 million of cash and cash equivalents, including restricted cash. As of June 30, 2018, the Company financed its owned communities with mortgages totaling $954.6 million at interest rates averaging 4.8%. All of the Company s
debt is at fixed interest rates, except for two bridge loans totaling approximately $76.4 million at June 30, 2018, one of which matures in the first quarter of 2020 and the other in the fourth quarter of 2021. 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.
Q2 2018 Conference Call Information
The Company will host a conference call with senior management to discuss the Company s second quarter 2018 financial results. The call will be held on
Tuesday, July 31, 2018, at 5:00 p.m. Eastern Time. The call-in number is 323-994-2093, confirmation code 7656713. A link to
a simultaneous webcast of the teleconference will be available at www.capitalsenior.com through Windows Media Player or RealPlayer.
convenience of the Company s shareholders and the public, the conference call will be recorded and available for replay starting July 31, 2018 at 8:00 p.m. Eastern Time, until August 8, 2018 at 8:00 p.m. Eastern Time. To access the
conference call replay, call 719-457-0820, confirmation code 7656713. 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/(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 companies
without regard to differences in capital structures and leasing arrangements.
The Company believes that Adjusted Net Income/(Loss) 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/(Loss) 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 income (loss) to Adjusted Net Income/(Loss) 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 memory 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
CAPITAL SENIOR LIVING CORPORATION
CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands, except per share data)
| June 30, 2018 | December 31, 2017 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 10,870 | $ | 17,646 | ||||
| Restricted cash | 13,457 | 13,378 | ||||||
| Accounts receivable, net | 13,933 | 12,307 | ||||||
| Property tax and insurance deposits | 11,054 | 14,386 | ||||||
| Prepaid expenses and other | 6,626 | 6,332 | ||||||
| Total current assets | 55,940 | 64,049 | ||||||
| Property and equipment, net | 1,079,770 | 1,099,786 | ||||||
| Other assets, net | 17,929 | 18,836 | ||||||
| Total assets | $ | 1,153,639 | $ | 1,182,671 | ||||
| LIABILITIES AND SHAREHOLDERS EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 6,534 | $ | 7,801 | ||||
| Accrued expenses | 38,347 | 40,751 | ||||||
| Current portion of notes payable, net of deferred loan costs | 19,278 | 19,728 | ||||||
| Current portion of deferred income | 14,340 | 13,840 | ||||||
| Current portion of capital lease and financing obligations | 2,912 | 3,106 | ||||||
| Federal and state income taxes payable | 172 | 383 | ||||||
| Customer deposits | 1,305 | 1,394 | ||||||
| Total current liabilities | 82,888 | 87,003 | ||||||
| Deferred income | 9,092 | 10,033 | ||||||
| Capital lease and financing obligations, net of current portion | 47,465 | 48,805 | ||||||
| Deferred taxes | 1,941 | 1,941 | ||||||
| Other long-term liabilities | 13,486 | 16,250 | ||||||
| Notes payable, net of deferred loan costs and current portion | 930,042 | 938,206 | ||||||
| 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 31,178 and 30,505 in 2018 and 2017, respectively | 317 | 310 | ||||||
| Additional paid-in capital | 183,960 | 179,459 | ||||||
| Retained deficit | (112,122 | ) | (95,906 | ) | ||||
| Treasury stock, at cost 494 shares in 2018 and 2017 | (3,430 | ) | (3,430 | ) | ||||
| Total shareholders equity | 68,725 | 80,433 | ||||||
| Total liabilities and shareholders equity | $ | 1,153,639 | $ | 1,182,671 |
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, | |||||||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||||||
| Revenues: | ||||||||||||||||
| Resident revenue | $ | 114,627 | $ | 116,718 | $ | 229,270 | $ | 232,708 | ||||||||
| Expenses: | ||||||||||||||||
| Operating expenses (exclusive of facility lease expense and depreciation and amortization expense shown below) | 72,968 | 73,289 | 144,668 | 146,067 | ||||||||||||
| General and administrative expenses | 5,712 | 6,083 | 11,734 | 12,317 | ||||||||||||
| Facility lease expense | 14,224 | 13,968 | 28,438 | 28,555 | ||||||||||||
| Loss on facility lease termination | 12,858 | |||||||||||||||
| Stock-based compensation expense | 2,559 | 1,941 | 4,508 | 3,871 | ||||||||||||
| Depreciation and amortization expense | 15,521 | 16,746 | 30,893 | 33,959 | ||||||||||||
| Total expenses | 110,984 | 112,027 | 220,241 | 237,627 | ||||||||||||
| Income (Loss) from operations | 3,643 | 4,691 | 9,029 | (4,919 | ) | |||||||||||
| Other income (expense): | ||||||||||||||||
| Interest income | 38 | 14 | 75 | 32 | ||||||||||||
| Interest expense | (12,615 | ) | (12,404 | ) | (25,066 | ) | (24,409 | ) | ||||||||
| Gain (Loss) on disposition of assets, net | 3 | (125 | ) | |||||||||||||
| Other income | 1 | 2 | 2 | 5 | ||||||||||||
| Loss before provision for income taxes | (8,933 | ) | (7,697 | ) | (15,957 | ) | (29,416 | ) | ||||||||
| Provision for income taxes | (127 | ) | (138 | ) | (259 | ) | (261 | ) | ||||||||
| Net loss | $ | (9,060 | ) | $ | (7,835 | ) | $ | (16,216 | ) | $ | (29,677 | ) | ||||
| Per share data: | ||||||||||||||||
| Basic net loss per share | $ | (0.30 | ) | $ | (0.27 | ) | $ | (0.55 | ) | $ | (1.01 | ) | ||||
| Diluted net loss per share | $ | (0.30 | ) | $ | (0.27 | ) | $ | (0.55 | ) | $ | (1.01 | ) | ||||
| Weighted average shares outstanding basic | 29,831 | 29,478 | 29,730 | 29,384 | ||||||||||||
| Weighted average shares outstanding diluted | 29,831 | 29,478 | 29,730 | 29,384 | ||||||||||||
| Comprehensive loss | $ | (9,060 | ) | $ | (7,835 | ) | $ | (16,216 | ) | $ | (29,677 | ) |
CAPITAL SENIOR LIVING CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
| Six Months Ended June 30, | ||||||||
| 2018 | 2017 | |||||||
| Operating Activities | ||||||||
| Net loss | $ | (16,216 | ) | $ | (29,677 | ) | ||
| Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | 30,893 | 33,959 | ||||||
| Amortization of deferred financing charges | 859 | 800 | ||||||
| Amortization of deferred lease costs and lease intangibles | 424 | 435 | ||||||
| Amortization of lease incentives | (856 | ) | (597 | ) | ||||
| Deferred income | (344 | ) | (502 | ) | ||||
| Lease incentives | 3,655 | |||||||
| Loss on facility lease termination | 12,858 | |||||||
| (Gain) Loss on disposition of assets, net | (3 | ) | 125 | |||||
| Provision for bad debts | 1,454 | 975 | ||||||
| Stock-based compensation expense | 4,508 | 3,871 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | (3,080 | ) | (3,828 | ) | ||||
| Property tax and insurance deposits | 3,332 | 3,586 | ||||||
| Prepaid expenses and other | (294 | ) | 1,974 | |||||
| Other assets | 407 | 5,380 | ||||||
| Accounts payable | (1,267 | ) | 2,944 | |||||
| Accrued expenses | (2,404 | ) | (2,907 | ) | ||||
| Other liabilities | (1,908 | ) | 2,750 | |||||
| Federal and state income taxes receivable/payable | (211 | ) | (235 | ) | ||||
| Deferred resident revenue | (97 | ) | (517 | ) | ||||
| Customer deposits | (89 | ) | (65 | ) | ||||
| Net cash provided by operating activities | 15,108 | 34,984 | ||||||
| Investing Activities | ||||||||
| Capital expenditures | (10,802 | ) | (21,942 | ) | ||||
| Cash paid for acquisitions | (85,000 | ) | ||||||
| Proceeds from disposition of assets | 4 | 13 | ||||||
| Net cash used in investing activities | (10,798 | ) | (106,929 | ) | ||||
| Financing Activities | ||||||||
| Proceeds from notes payable | 1,740 | 66,584 | ||||||
| Repayments of notes payable | (11,167 | ) | (10,302 | ) | ||||
| Cash payments for capital lease and financing obligations | (1,534 | ) | (1,161 | ) | ||||
| Deferred financing charges paid | (46 | ) | (914 | ) | ||||
| Net cash (used in) provided by financing activities | (11,007 | ) | 54,207 | |||||
| Decrease in cash and cash equivalents | (6,697 | ) | (17,738 | ) | ||||
| Cash and cash equivalents and restricted cash at beginning of period | 31,024 | 47,323 | ||||||
| Cash and cash equivalents and restricted cash at end of period | $ | 24,327 | $ | 29,585 | ||||
| Supplemental Disclosures | ||||||||
| Cash paid during the period for: | ||||||||
| Interest | $ | 24,121 | $ | 23,265 | ||||
| Income taxes | $ | 543 | $ | 529 |
Capital Senior Living Corporation
Supplemental Information
| Average | ||||||||||||||||||||||||
| Communities | Resident Capacity | Average Units | ||||||||||||||||||||||
| Q2 18 | Q2 17 | Q2 18 | Q2 17 | Q2 18 | Q2 17 | |||||||||||||||||||
| Portfolio Data | ||||||||||||||||||||||||
| I. Community Ownership / Management | ||||||||||||||||||||||||
| Consolidated communities | ||||||||||||||||||||||||
| Owned | 83 | 83 | 10,767 | 10,767 | 7,971 | 8,179 | ||||||||||||||||||
| Leased | 46 | 46 | 5,756 | 5,756 | 4,420 | 4,409 | ||||||||||||||||||
| Total | 129 | 129 | 16,523 | 16,523 | 12,391 | 12,588 | ||||||||||||||||||
| Independent living | 6,879 | 6,879 | 4,898 | 5,245 | ||||||||||||||||||||
| Assisted living | 9,644 | 9,644 | 7,493 | 7,343 | ||||||||||||||||||||
| Total | 16,523 | 16,523 | 12,391 | 12,588 | ||||||||||||||||||||
| II. Percentage of Operating Portfolio | ||||||||||||||||||||||||
| Consolidated communities | ||||||||||||||||||||||||
| Owned | 64.3 | % | 64.3 | % | 65.2 | % | 65.2 | % | 64.3 | % | 65.0 | % | ||||||||||||
| Leased | 35.7 | % | 35.7 | % | 34.8 | % | 34.8 | % | 35.7 | % | 35.0 | % | ||||||||||||
| Total | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||||||
| Independent living | 41.6 | % | 41.6 | % | 39.5 | % | 41.7 | % | ||||||||||||||||
| Assisted living | 58.4 | % | 58.4 | % | 60.5 | % | 58.3 | % | ||||||||||||||||
| Total | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % |
Capital Senior Living Corporation