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Capital Senior Living Corporation Reports First Quarter 2018 Results

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 rate 4.74 %   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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