• Capital Senior Living Corporation Reports First Quarter 2018 Results

    Source: Nasdaq GlobeNewswire / 01 May 2018 21:15:19   Europe/London

    DALLAS, May 01, 2018 (GLOBE NEWSWIRE) -- 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 first quarter 2018. 

    “Focused execution on our key initiatives resulted in year-over-year growth in same-community revenue and net operating income in the first quarter,” said Lawrence A. Cohen, Chief Executive Officer of the Company.  “Despite the effect of seasonal attrition on occupancy, which was in line with our projections, we stayed focused on our residents, maintained a disciplined approach to our cost structure and delivered solid financial results.  By building on our 2017 cost control initiatives with further improvements in the first quarter, we had lower than anticipated expenses and our CFFO exceeded our internal projections.  We are pleased to reaffirm our full year guidance for 2018.”

    Mr. Cohen continued, “We are executing our comprehensive strategy to deliver higher revenues, enhance cash flow and maximize the value of our owned real estate.  With a disciplined focus on our growth strategy and driving operational improvements, we are well positioned to capitalize on our competitive advantages as a leading pure-play private-pay senior housing owner/operator and enhance shareholder value.”

    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.) 

    • Revenue in the first quarter of 2018, including all communities, was $114.6 million, a $1.3 million, or 1.2%, decrease from the first quarter of 2017.  The first quarter of 2018 includes no revenue from the Company’s two communities impacted by Hurricane Harvey in late August 2017.  Revenue for these two communities was $2.4 million in the first quarter of 2017. 

      -- Revenue for consolidated and same communities, which exclude two communities undergoing lease-up or significant renovation and conversion and the Company’s two communities impacted by Hurricane Harvey, was $113.3 million in the first quarter of 2018, an increase of 1.0% as compared to the first quarter of 2017. 

      -- Occupancy for consolidated and same communities was 86.1% in the first quarter of 2018, a decrease of 100 basis points from the fourth quarter of 2017 and a decrease of 130 basis points from the first quarter of 2017.

      -- Average monthly rent for consolidated and same communities was $3,592, an increase of $60 per occupied unit, or 1.7%, as compared to the first quarter of 2017.
       
    • Income from operations, including all communities, was $5.4 million in the first quarter of 2018 compared to a loss of $9.6 million in the first quarter of 2017, which included a non-cash lease termination charge of $12.9 million associated with the Company’s purchase in January 2017 of four communities it previously leased.
       
    • The Company’s Net Loss for the first quarter of 2018, including all communities, was $7.2 million.  

      -- Excluding items noted and reconciled on the final page of this release, the Company’s adjusted net loss was $4.7 million in the first quarter of 2018.

      -- Adjusted EBITDAR was $37.9 million in the first quarter of 2018 compared to $37.7 million in the first quarter of 2017. Adjusted EBITDAR is a financial valuation measure, rather than a financial performance measure, used by management and others to evaluate the value of companies in the senior living industry.  

      -- Adjusted Cash From Facility Operations (“CFFO”) was $10.4 million in the first quarter of 2018 compared to $11.0 million in the first quarter of 2017. 

    Financial Results - First Quarter

    For the first quarter of 2018, the Company reported revenue of $114.6 million, compared to revenue of $116.0 million in the first 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 1.0% in the first quarter of 2018 as compared to the first quarter of 2017. 

    Operating expenses for the first quarter of 2018 were $71.7 million, a decrease of $1.1 million from the first 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 first 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 first quarter of 2018 were $6.0 million.  This compares to general and administrative expenses of $6.2 million in the first quarter of 2017.  Excluding transaction and conversion costs in both periods, general and administrative expenses decreased $0.3 million in the first quarter of 2018 as compared to the first quarter of 2017.  As a percentage of revenues under management, general and administrative expenses, excluding transaction and conversion costs, were 5.1% in the first quarter of 2018 compared to 4.9% in the first quarter of 2017. 

    Income from operations for the first quarter of 2018 was $5.4 million.  The Company recorded a net loss on a GAAP basis of $7.2 million in the first quarter of 2018.  Excluding items noted and reconciled on the final page of this release, the Company’s adjusted net loss was $4.7 million in the first 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 first 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 first quarter of 2018 was $37.9 million as compared to $37.7 million in the first quarter of 2017.  Adjusted CFFO was $10.4 million in the first quarter of 2018, as compared to $11.0 million in the first 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 first quarter of 2018 increased 1.0% versus the first quarter of 2017. 

    Same-community operating expenses increased 1.0% from the first quarter of the prior year, excluding conversion costs in both periods.  On the same basis, labor costs, including benefits, increased 1.3% and utilities increased 8.3%, while food costs decreased 4.4%, all as compared to the first quarter of 2017.  At communities that have not converted units to higher levels of care, labor costs increased 0.5% compared to the first quarter of 2017.  Same-community net operating income increased 0.9% in the first quarter of 2018 as compared to the first quarter of 2017. 

    Capital expenditures for the first quarter of 2018 were $5.6 million, representing approximately $4.2 million of investment spending and approximately $1.2 million of recurring capital expenditures.

    Balance Sheet

    The Company ended the quarter with $23.3 million of cash and cash equivalents, including restricted cash.  As of March 31, 2018, the Company financed its owned communities with mortgages totaling $958.8 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 $76.4 million at March 31, 2018, 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.

    Q1 2018 Conference Call Information

    The Company will host a conference call with senior management to discuss the Company’s first quarter 2018 financial results.  The call will be held on Tuesday, May 1, 2018, at 5:00 p.m. Eastern Time.  The call-in number is 323-701-0225, confirmation code 2087338.  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 May 1, 2018 at 8:00 p.m. Eastern Time, until May 9, 2018 at 8:00 p.m. Eastern Time.  To access the conference call replay, call 719-457-0820, confirmation code 2087338.  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 (loss) income to Adjusted Net Income/(Loss) and Adjusted CFFO, along with the Company’s consolidated balance sheets, statements of operations, and statements of cash flows.

    About the Company

    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.

    Safe Harbor

    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) 
      
     March 31,
    2018
      December 31,
    2017
     
    ASSETS       
    Current assets:       
    Cash and cash equivalents$9,938  $17,646 
    Restricted cash 13,387   13,378 
    Accounts receivable, net 13,594   12,307 
    Property tax and insurance deposits 9,361   14,386 
    Prepaid expenses and other 6,124   6,332 
    Total current assets 52,404   64,049 
    Property and equipment, net 1,090,067   1,099,786 
    Other assets, net 18,079   18,836 
    Total assets$1,160,550  $1,182,671 
    LIABILITIES AND SHAREHOLDERS’ EQUITY       
    Current liabilities:       
    Accounts payable$3,544  $7,801 
    Accrued expenses 34,046   40,751 
    Current portion of notes payable, net of deferred loan costs 18,525   19,728 
    Current portion of deferred income 14,237   13,840 
    Current portion of capital lease and financing obligations 2,876   3,106 
    Federal and state income taxes payable 573   383 
    Customer deposits 1,332   1,394 
    Total current liabilities 75,133   87,003 
    Deferred income 9,563   10,033 
    Capital lease and financing obligations, net of current portion 48,272   48,805 
    Deferred taxes 1,941   1,941 
    Other long-term liabilities 16,343   16,250 
    Notes payable, net of deferred loan costs and current portion 934,072   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 – 31,133 and 30,505 in 2018 and 2017, respectively
     316   310 
    Additional paid-in capital 181,402   179,459 
    Retained deficit (103,062)  (95,906)
    Treasury stock, at cost – 494 shares in 2018 and 2017 (3,430)  (3,430)
    Total shareholders’ equity 75,226   80,433 
    Total liabilities and shareholders’ equity$1,160,550  $1,182,671 



      
    CAPITAL SENIOR LIVING CORPORATION 
    CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS 
    (unaudited, in thousands, except per share data) 
      
     Three Months Ended
    March 31,
     
     2018  2017 
    Revenues:       
    Resident revenue$114,643  $115,990 
    Expenses:       
    Operating expenses (exclusive of facility lease expense and
    depreciation and amortization expense shown below)
     71,700   72,778 
    General and administrative expenses 6,022   6,234 
    Facility lease expense 14,214   14,587 
    Loss on facility lease termination    12,858 
    Stock-based compensation expense 1,949   1,930 
    Depreciation and amortization expense 15,372   17,213 
    Total expenses 109,257   125,600 
    Income (Loss) from operations 5,386   (9,610)
    Other income (expense):       
    Interest income 37   18 
    Interest expense (12,451)  (12,005)
    Gain (Loss) on disposition of assets, net 3   (125)
    Other income 1   3 
    Loss before provision for income taxes (7,024)  (21,719)
    Provision for income taxes (132)  (123)
    Net loss$(7,156) $(21,842)
    Per share data:       
    Basic net loss per share$(0.24) $(0.75)
    Diluted net loss per share$(0.24) $(0.75)
    Weighted average shares outstanding — basic 29,627   29,288 
    Weighted average shares outstanding — diluted 29,627   29,288 
    Comprehensive loss$(7,156) $(21,842)



      
    CAPITAL SENIOR LIVING CORPORATION 
    CONSOLIDATED STATEMENTS OF CASH FLOWS 
    (unaudited, in thousands) 
      
     Three Months Ended
    March 31,
     
     2018  2017 
    Operating Activities       
    Net loss$(7,156) $(21,842)
    Adjustments to reconcile net loss to net cash provided by operating activities:       
    Depreciation and amortization 15,372   17,213 
    Amortization of deferred financing charges 428   388 
    Amortization of deferred lease costs and lease intangibles 212   223 
    Amortization of lease incentives (433)  (295)
    Deferred income (61)  (99)
    Lease incentives    2,258 
    Loss on facility lease termination    12,858 
    (Gain) Loss on disposition of assets, net (3)  125 
    Provision for bad debts 459   443 
    Stock-based compensation expense 1,949   1,930 
    Changes in operating assets and liabilities:       
    Accounts receivable (1,746)  (799)
    Property tax and insurance deposits 5,025   4,425 
    Prepaid expenses and other 208   1,097 
    Other assets 508   4,730 
    Accounts payable (4,257)  2,114 
    Accrued expenses (6,705)  (7,829)
    Other liabilities 526   1,446 
    Federal and state income taxes receivable/payable 190   142 
    Deferred resident revenue (12)  (357)
    Customer deposits (62)  (38)
    Net cash provided by operating activities 4,442   18,133 
    Investing Activities       
    Capital expenditures (5,616)  (12,713)
    Cash paid for acquisitions    (85,000)
    Proceeds from disposition of assets 3   12 
    Net cash used in investing activities (5,613)  (97,701)
    Financing Activities       
    Proceeds from notes payable    65,000 
    Repayments of notes payable (5,723)  (5,286)
    Cash payments for capital lease and financing obligations (763)  (667)
    Deferred financing charges paid (42)  (889)
    Net cash (used in) provided by financing activities (6,528)  58,158 
    Decrease in cash and cash equivalents (7,699)  (21,410)
    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$23,325  $25,913 
    Supplemental Disclosures       
    Cash paid during the period for:       
    Interest$11,897  $11,056 
    Income taxes$15  $12 


                 
    Capital Senior Living Corporation            
    Supplemental Information       
                    
             Average    
         Communities Resident Capacity Average Units
         Q1 18 Q1 17 Q1 18 Q1 17 Q1 18 Q1 17
    Portfolio Data            
     I. Community Ownership / Management          
      Consolidated communities            
       Owned 83  83  10,767  10,767  7,978  7,990 
       Leased 46  46  5,756  5,756  4,414  4,556 
       Total 129  129  16,523  16,523  12,392  12,546 
                   
      Independent living     6,879  6,879  4,911  5,285 
      Assisted living     9,644  9,644  7,481  7,261 
       Total     16,523  16,523  12,392  12,546 
                    
                  
     II. Percentage of Operating Portfolio            
      Consolidated communities            
       Owned 64.3% 64.3% 65.2% 65.2% 64.4% 63.7%
       Leased 35.7% 35.7% 34.8% 34.8% 35.6% 36.3%
       Total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
                    
      Independent living     41.6% 41.6% 39.6% 42.1%
      Assisted living     58.4% 58.4% 60.4% 57.9%
       Total     100.0% 100.0% 100.0% 100.0%


        
    Capital Senior Living Corporation 
    Supplemental Information (excludes two communities being repositioned/leased up and two communities impacted by Hurricane Harvey) 
    Selected Operating Results
      Q1 18 Q1 17
     I. Owned communities   
      Number of communities  79    79 
      Resident capacity  10,248    10,248 
      Unit capacity (1)  7,791    7,596 
      Financial occupancy (2)87.6% 88.2%
      Revenue (in millions)71.7  68.9 
      Operating expenses (in millions) (3)46.0  44.5 
      Operating margin (3)36% 35%
      Average monthly rent  3,501    3,430 
     II. Leased communities   
      Number of communities  46    46 
      Resident capacity  5,756    5,756 
      Unit capacity (1)  4,414    4,520 
      Financial occupancy (2)83.5% 86.0%
      Revenue (in millions)41.6  43.3 
      Operating expenses (in millions) (3)24.3  25.1 
      Operating margin (3)42% 42%
      Average monthly rent  3,760    3,708 
     III. Consolidated and Same communities (4)   
      Number of communities  125    125 
      Resident capacity  16,004    16,004 
      Unit capacity  12,204    12,116 
      Financial occupancy (2)86.1% 87.4%
      Revenue (in millions)113.3  112.2 
      Operating expenses (in millions) (3)70.3  69.6 
      Operating margin (3)38% 38%
      Average monthly rent  3,592    3,532 
     IV. General and Administrative expenses as a percent of Total Revenues under Management   
      First quarter (5)5.1% 4.9%
     V. Consolidated Mortgage Debt Information (in thousands, except interest rates)     
       (excludes insurance premium financing)    
      Total fixed rate mortgage debt  882,317    891,405 
      Total variable rate mortgage debt  76,442    76,682 
      Weighted average interest rate4.74% 4.63%
          
        
     (1) Due to conversion and refurbishment projects completed at certain communities, unit capacity is higher in Q1 18 than Q1 17 for same communities under management, which affects all groupings of communities. 
     (2) Financial occupancy represents actual days occupied divided by total number of available days during the month of the quarter. 
     (3) Excludes management fees, provision for bad debts and transaction and conversion costs.    
     (4) Since the Company has not completed any new acquisitions of communities, other than the four communities which were acquired during the first quarter of fiscal 2017 that were previously leased and already included in the Company’s consolidated operating results, consolidated and same communities are equivalent for the comparable periods and no longer require separate reporting by the Company. 
     (5) Excludes transaction and conversion costs. 


     
    CAPITAL SENIOR LIVING CORPORATION
    NON-GAAP RECONCILIATIONS
    (In thousands, except per share data)
         
      Three Months Ended March 31, 
       2018   2017 
    Adjusted EBITDAR   
     Net loss$  (7,156) $   (21,842)
     Depreciation and amortization expense   15,372     17,213 
     Stock-based compensation expense   1,949     1,930 
     Facility lease expense   14,214     14,587 
     Loss on facility lease termination   -      12,858 
     Provision for bad debts   459     443 
     Interest income   (37)    (18)
     Interest expense   12,451     12,005 
     Loss (Gain) on disposition of assets, net   (3)    125 
     Other income   (1)    (3)
     Provision for income taxes   132     123 
     Casualty losses   214     312 
     Transaction and conversion costs    249     715 
     Communities excluded due to repositioning/lease-up   62     (701)
     Adjusted EBITDAR$  37,905  $  37,747 
         
    Adjusted Revenues   
     Total revenues$  114,643  $  115,990 
     Communities excluded due to repositioning/lease-up   (1,354)    (4,641)
     Adjusted revenues$  113,289  $  111,349 
         
    Adjusted net loss and Adjusted net loss per share   
     Net loss$  (7,156) $  (21,842)
     Casualty losses   214     312 
     Transaction and conversion costs   262      1,104 
     Resident lease amortization   -      3,238 
     Loss on facility lease termination   -      12,858 
     Loss (Gain) on disposition of assets    (3)    125 
     Tax impact of Non-GAAP adjustments (25% in 2018 and 37% in 2017)   (118)    (6,526)
     Deferred tax asset valuation allowance   1,409      8,166 
     Communities excluded due to repositioning/lease-up   672     585 
     Adjusted net loss$  (4,720) $  (1,980)
         
     Diluted shares outstanding 29,627   29,288 
         
     Adjusted net loss per share$  (0.16) $  (0.07)
         
    Adjusted CFFO   
     Net loss$  (7,156) $  (21,842)
     Non-cash charges, net   17,923     35,044 
     Lease incentives   -      (2,258)
     Recurring capital expenditures   (1,186)    (1,186)
     Casualty losses   214     312 
     Transaction and conversion costs   262     879 
     Communities excluded due to repositioning/lease-up   389     79 
     Adjusted CFFO$  10,446  $   11,028 
             

    PRESS CONTACT:
    Carey Hendrickson, Chief Financial Officer
    Phone: 1-972-770-5600      

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