Capital Senior Living Corporation Reports Fourth Quarter and Full Year 2015 Results
DALLAS–(BUSINESS WIRE)–Capital Senior Living Corporation (the “Company”) (NYSE:CSU), one of the
nation’s largest operators of senior living communities, today announced
operating and financial results for the fourth quarter and full year
2015. Company highlights for the fourth quarter and full year 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)
-
Revenue in the fourth quarter of 2015, including all communities, was
$107.5 million, a $7.4 million, or 7.4%, increase from the fourth
quarter of 2014. Revenue for full-year 2015 increased $28.3 million,
or 7.4%, to $412.2 million. -
Occupancy for the Company’s consolidated communities was 89.2% in the
fourth quarter of 2015, an increase of 130 basis points from the
fourth quarter of 2014 and 30 basis points from the third quarter of
2015. Same-community occupancy was 88.9% for the fourth quarter of
2015, a 50 basis point increase from the fourth quarter of 2014 and a
20 basis point increase from the third quarter of 2015. -
Average monthly rent for the Company’s consolidated communities in the
fourth quarter of 2015 was $3,436, an increase of $207 per occupied
unit, or 6.4%, as compared to the fourth quarter of 2014, and a 160
basis point improvement from the third quarter of 2015. Same-community
average monthly rent was $3,393, an increase of $85 per occupied unit,
or 2.6%, from the fourth quarter of 2014. -
Adjusted EBITDAR was $38.2 million in the fourth quarter of 2015, a
6.2% increase from the fourth quarter of 2014. The three communities
undergoing repositioning, lease-up or significant renovation and
conversion generated an additional $1.0 million of EBITDAR. The
Company’s Adjusted EBITDAR margin was 37.1% for the fourth quarter of
2015. Adjusted EBITDAR for full-year 2015 increased $11.9 million, or
8.9%, to $144.5 million. The Company’s Adjusted EBITDAR margin for
full-year 2015 was 36.6%, a record-high annual margin for the Company
and a 70 basis point increase over full-year 2014. -
Adjusted Cash From Facility Operations (“CFFO”) was $12.8 million, or
$0.45 per share, in the fourth quarter of 2015 compared to $0.44 in
the fourth quarter of 2014. Adjusted CFFO for full-year 2015 was
$1.64, a 13.1% increase from $1.45 in full-year 2014. -
The Company’s Net Loss for the fourth quarter of 2015, including all
communities, was $6.0 million, or $0.21 per share, due mostly to
non-cash amortization of resident leases of $3.5 million associated
with communities acquired by the Company in the previous 12 months.
Net Loss for full-year 2015 was $14.3 million, or $0.50 per share.
Adjusted Net Income was $0.8 million, or $0.03 per share, for the
fourth quarter of 2015, and $2.1 million, or $0.07 per share, for
full-year 2015. -
The Company completed the acquisition of one community during the
fourth quarter of 2015 for a purchase price of approximately $38.0
million. This community expands the Company’s operations in Virginia
and is expected to generate incremental annual CFFO of approximately
$0.04 per share. -
The Company announced today that it closed on the acquisition of 5
additional communities during January and February of 2016 for a
combined purchase price of approximately $64.4 million. These
communities expand the Company’s operations in Wisconsin and Florida,
and are expected to generate incremental annual CFFO of approximately
$0.11 per share. With a strong reputation among sellers, the Company
sources the majority of its acquisitions off-market and at attractive
terms. The Company has a strong pipeline of near- to medium-term
targets.
“We continue to demonstrate the advantages of our clear and
differentiated strategy to drive superior shareholder value as we
successfully execute on our multiple avenues of growth,” said Lawrence
A. Cohen, Chief Executive Officer of the Company. “Our focused execution
produced growth in all of our key metrics in the fourth quarter,
including revenue, occupancy, average monthly rent, NOI, Adjusted
EBITDAR and Adjusted CFFO as compared to the prior year. Our conversions
of independent living units to assisted living and memory care units
also continue to show timely progress.
“Complementing this growth is a robust acquisition pipeline that allows
us to increase our ownership of high-quality senior living communities
in geographically concentrated regions and generates meaningful
increases in CFFO, earnings and real estate value. We have closed on
five such communities in the first two months of 2016, and we continue
to pursue additional opportunities.
“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
-
In the fourth quarter of 2015 and thus far in the first quarter of
2016, the Company completed acquisitions of six senior living
communities for a combined purchase price of approximately $102.4
million. These communities expand the Company’s operations in
Virginia, Wisconsin and Florida, and are composed of 428 units
offering independent living, assisted living and memory care services.Combined
highlights of the transactions include:-
Increases annual Adjusted CFFO by approximately $4.1 million, or
$0.15 per share. - Adds approximately $1.8 million to earnings, or $0.06 per share.
- Increases annual revenue by approximately $20.2 million.
- Average monthly rents for the communities are approximately $3,850.
The communities were financed with an aggregate of approximately
$74.3 million of non-recourse 10-year mortgage debt at an average
fixed interest rate of 4.35%.Financial Results – Fourth Quarter
For the fourth quarter of 2015, the Company reported revenue of $107.5
million, compared to revenue of $100.2 million in the fourth quarter of
2014, an increase of 7.4%. Excluding the revenue of the five communities
the Company has sold since the fourth quarter of 2014 from all
appropriate periods, revenues increased $10.3 million, or 11.1%, in the
fourth quarter of 2015 as compared to the fourth quarter of 2014, mostly
due to the acquisition of 9 communities during 2015. Operating expenses
for the fourth quarter of 2015 were $65.1 million, an increase of $5.4
million from the fourth quarter of 2014, also primarily due to the
acquisitions made during 2015.Revenue for consolidated communities excluding the three communities
undergoing repositioning, lease-up or significant renovation and
conversion increased 7.3% in the fourth quarter of 2015 as compared to
the fourth quarter of 2014. Net operating income for these communities
increased 4.7% in the fourth quarter of 2015 as compared to the fourth
quarter of 2014. These increases were achieved with fewer units
available for lease in the fourth quarter of 2015 than the fourth
quarter of 2014 due to conversion and refurbishment projects currently
in progress at certain communities.General and administrative expenses for the fourth quarter of 2015 were
$4.9 million, which includes $0.9 million of transaction and other
one-time costs. Excluding transaction and other one-time costs from both
periods, general and administrative expenses decreased $0.2 million in
the fourth quarter of 2015 as compared to the fourth quarter of 2014. As
a percentage of revenues under management, general and administrative
expenses, excluding transaction and other one-time costs, were 3.7% in
the fourth quarter of 2015 as compared to 4.1% in the fourth quarter of
2014.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). One community excluded in previous quarters reached 90%
stabilized occupancy during the fourth quarter of 2015 and is now
included in the Company’s Non-GAAP financial results. Also, as
previously noted, beginning in 2015, the Company no longer includes the
change in prepaid resident rent as a component of Adjusted CFFO as it is
a non-economic timing item.Adjusted EBITDAR for the fourth quarter of 2015 was approximately $38.2
million, an increase of $2.2 million, or 6.2%, from the fourth quarter
of 2014. This does not include EBITDAR of $1.0 million related to three
communities undergoing repositioning, lease-up or significant renovation
and conversion. The Adjusted EBITDAR margin for the fourth quarter of
2015 was 37.1%.The Company recorded a net loss of $6.0 million, or $0.21 per share, in
the fourth quarter of 2015. Excluding non-recurring or non-economic
items reconciled on the final page of this release, the Company’s
adjusted net income was $0.8 million, or $0.03 per share, in the fourth
quarter of 2015. Adjusted CFFO was $12.8 million, or $0.45 per share, in
the fourth quarter of 2015, a 2.9% increase from the fourth quarter of
the prior year. On a comparable basis, Adjusted CFFO was $12.4 million,
or $0.44 per share, in the fourth quarter of 2014.Financial Results – Full Year
The Company reported 2015 revenue of $412.2 million compared to revenue
of $383.9 million in 2014, an increase of $28.3 million, or 7.4%. 2014
revenue included $3.1 million in community reimbursement revenue and
affiliated management revenue associated with three communities formerly
held as a joint venture. Resident and healthcare revenue increased 8.4%
versus the prior year. Operating expenses were $248.7 million in 2015,
an increase of $18.2 million.General and administrative expenses in 2015 were $20.4 million compared
to $19.6 million in 2014. Excluding transaction and other one-time
costs, general and administrative expenses as a percentage of revenues
under management were approximately 4.3% in 2015 compared to 4.6% in
2014.Adjusted EBITDAR increased 8.9% to $144.5 million in 2015, an increase
of $11.9 million. The Company’s Adjusted EBITDAR margin was 36.6% in
2015, a record-high annual margin for the company and a 70 basis point
improvement from 2014. Adjusted CFFO for 2015 was $47.0 million, or
$1.64 per share, compared to $1.45 per share in 2014. The Company’s net
loss for 2015 was $14.3 million, or $0.50 per share. After adjusting for
the non-recurring or non-economic items reconciled on the final page of
this release, the Company earned adjusted net income of $2.1 million, or
$0.07 per share.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 fourth quarter of 2015 increased 1.8%
versus the fourth quarter of 2014. Due to conversion and refurbishment
projects currently in progress at certain communities, fewer units were
available for rent in the fourth quarter of this year than the fourth
quarter of last year. With a like number of units available in both
years, same-community revenue would have increased approximately 3.2% in
the fourth quarter of 2015 as compared to the fourth quarter of the
prior year.Same-community expenses increased 3.2% from the fourth quarter of the
prior year. Labor costs, including benefits, increased 4.0%, primarily
due to a one-time workers compensation credit in the fourth quarter of
2014 and an increase in the number of employees with healthcare coverage
in the fourth quarter of 2015 as compared to the fourth quarter of 2014
related to the continued implementation of the Affordable Care Act.
Excluding these items, labor costs increased 2.9% and total
same-community expenses increased 2.5%. The Company’s two other
significant expense categories, food and utilities, both decreased in
the fourth quarter of 2015 as compared to the fourth quarter of 2014;
food costs decreased 0.8% and utilities decreased 5.9%. Same-community
net operating income increased 0.3% in the fourth quarter of 2015 as
compared to the fourth quarter of 2014. With a like number of units
available in both years and excluding the unusual labor items noted
above, same-community net operating income would have increased
approximately 3.2% from the fourth quarter of the prior year.Capital expenditures for the fourth quarter of 2015 were $15.1 million,
representing approximately $13.6 million of investment spending and
approximately $1.5 million of recurring capital expenditures. Spending
in 2015 for recurring capital expenditures equaled $5.5 million, or
approximately $475 per unit.Balance Sheet
The Company ended the quarter with $69.2 million of cash and cash
equivalents, including restricted cash, an increase of $21.4 million
since September 30, 2015. During the fourth quarter of 2015, the Company
invested $10.0 million of cash as equity to complete the acquisition of
one community and spent $18.8 million on capital improvements, which
includes $3.7 million related to lease incentives for certain tenant
leasehold improvements for which the Company expects to be reimbursed by
its lessors. The Company received reimbursements totaling $2.5 million
in the fourth quarter and expects to receive the remainder as the
projects are completed.As of December 31, 2015, the Company financed its owned communities with
mortgages totaling $763.4 million at interest rates averaging 4.6%. All
of the Company’s debt is at fixed interest rates, except for one bridge
loan totaling approximately $11.8 million at December 31, 2015, which
was at an average variable rate of approximately 4.65% in the fourth
quarter of 2015.The Company’s cash on hand and cash flow from operations are expected to
be sufficient for working capital, prudent reserves, share repurchases
and the equity needed to fund the Company’s acquisition, conversion and
renovation programs.Q4 2015 Conference Call Information
The Company will host a conference call with senior management to
discuss the Company’s fourth quarter 2015 financial results. The call
will be held on Thursday, February 25, 2016 at 5:00 p.m. Eastern Time.
The call-in number is 913-312-1475, confirmation code 3113420. 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
February 25, 2016 at 8:00 p.m. Eastern Time, until March 5, 2016 at 8:00
p.m. Eastern Time. To access the conference call replay, call
719-457-0820, confirmation code 3113420. The conference call will also
be made available for playback via the Company’s corporate website, www.capitalsenior.com,
beginning February 26, 2016.Non-GAAP Financial Measures
Adjusted EBITDAR, Adjusted EBITDAR Margin, Adjusted Net Income and
Adjusted CFFO are financial measures of operating performance 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 amounts 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. The Company believes
that these non-GAAP measures are useful in identifying trends in
day-to-day performance because they exclude items that are of little or
no significance to operations and provide indicators to management of
progress in achieving optimal operating performance. In addition, these
measures are used by many research analysts and investors to evaluate
the performance and the value of companies in the senior living
industry. The Company strongly urges you to review the reconciliation of
net income from operations to Adjusted EBITDAR and Adjusted EBITDAR
Margin and the reconciliation of net loss to Adjusted Net Income 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 living 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 126 senior living
communities in geographically concentrated regions with an aggregate
capacity of approximately 15,800 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.
CAPITAL SENIOR LIVING CORPORATION CONSOLIDATED BALANCE SHEETS (in thousands, except per share data) December 31, 2015 2014 (In thousands, except per share data) ASSETS Current assets: Cash and cash equivalents $ 56,087 $ 39,209 Restricted cash 13,159 12,241 Accounts receivable, net 9,252 5,903 Accounts receivable from affiliates 2 5 Deferred taxes — 460 Assets held for sale — 35,761 Property tax and insurance deposits 14,398 12,198 Prepaid expenses and other 4,370 6,797 Total current assets 97,268 112,574 Property and equipment, net 890,572 747,613 Other assets, net 31,193 31,183 Total assets $ 1,019,033 $ 891,370 LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities: Accounts payable $ 3,362 $ 2,540 Accounts payable to affiliates — 7 Accrued expenses 34,300 32,154 Notes payable of assets held for sale — 14,847 Current portion of notes payable, net of deferred loan costs 13,634 32,538 Current portion of deferred income 16,059 14,603 Current portion of capital lease and financing obligations 1,257 1,054 Federal and state income taxes payable 111 219 Customer deposits 1,819 1,499 Total current liabilities 70,542 99,461 Deferred income 13,992 15,949 Capital lease and financing obligations, net of current portion 38,835 40,016 Deferred taxes — 460 Other long-term liabilities 4,969 1,426 Notes payable, net of deferred loan costs and current portion 754,949 592,884 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 29,539
and 29,097 in 2015 and 2014, respectively299 294 Additional paid-in capital 159,920 151,069 Retained (deficit) earnings (23,539 ) (9,255 ) Treasury stock, at cost – 350 shares in 2015 and 2014 (934 ) (934 ) Total shareholders’ equity 135,746 141,174 Total liabilities and shareholders’ equity $ 1,019,033 $ 891,370 See accompanying notes to consolidated financial statements. CAPITAL SENIOR LIVING CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(LOSS)(unaudited, in thousands, except per share data) Three Months Ended
December 31,Year Ended
December 31,2015 2014 2015 2014 Revenues: Resident and health care revenue $ 107,529 $ 100,160 $ 412,177 $ 380,400 Affiliated management services revenue — — — 415 Community reimbursement revenue — — — 3,110 Total revenues 107,529 100,160 412,177 383,925 Expenses: Operating expenses (exclusive of facility lease expense and
depreciation and amortization expense shown below)65,122
59,744
248,736
230,495
General and administrative expenses 4,869 4,485 20,351 19,622 Facility lease expense 15,338 14,808 61,213 59,332 Provision for bad debts 319 200 1,192 717 Stock-based compensation expense 2,088 1,586 8,833 7,262 Depreciation and amortization 14,032 13,880 53,017 49,487 Community reimbursement expense — — — 3,110 Total expenses 101,768 94,703 393,342 370,025 Income from operations 5,761 5,457 18,835 13,900 Other income (expense): Interest income 17 12 53 52 Interest expense (9,710 ) (8,476 ) (35,732 ) (31,261 ) Write-off of deferred loan costs and prepayment premiums (1,793 ) (989 ) (2,766 ) (7,968 ) Joint venture equity investment valuation gain — — — 1,519 (Loss) Gain on disposition of assets, net (22 ) 795 6,225 784 Equity in earnings of unconsolidated joint ventures, net — — — 105 Write-down of assets held for sale — (561 ) — (561 ) Other income — 1 1 23 Loss before provision for income taxes (5,747 ) (3,761 ) (13,384 ) (23,407 ) Provision for income taxes (203 ) (140 ) (900 ) (719 ) Net loss $ (5,950 ) $ (3,901 ) $ (14,284 ) $ (24,126 ) Per share data: Basic net loss per share $ (0.21 ) $ (0.13 ) $ (0.50 ) $ (0.83 ) Diluted net loss per share $ (0.21 ) $ (0.13 ) $ (0.50 ) $ (0.83 ) Weighted average shares outstanding — basic 28,749 28,387 28,688 28,301 Weighted average shares outstanding — diluted 28,749 28,387 28,688 28,301 Comprehensive loss $ (5,950 ) $ (3,901 ) $ (14,284 ) $ (24,126 ) CAPITAL SENIOR LIVING CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited, in thousands) Year Ended December 31, 2015 2014 (in thousands) Operating Activities Net loss
$
(14,284
)
$
(24,126
)
Adjustments to reconcile net loss to net cash provided by operating
activities:Depreciation and amortization 53,017 49,487 Amortization of deferred financing charges 1,029 1,361 Amortization of deferred lease costs and lease intangibles 1,421 1,230 Deferred income (677 ) (616 ) Lease incentives 2,464 — Write-off of deferred loan costs and prepayment premiums 2,766 7,968 Joint venture equity investment valuation gain — (1,519 ) Gain on disposition of assets, net (6,225 ) (784 ) Equity in earnings of unconsolidated joint ventures, net — (105 ) Write-down of assets held for sale — 561 Provision for bad debts 1,192 717 Stock-based compensation expense 8,833 7,262 Changes in operating assets and liabilities: Accounts receivable (2,931 ) (2,868 ) Accounts receivable from affiliates 3 411 Property tax and insurance deposits (2,200 ) (1,162 ) Prepaid expenses and other 2,427 (192 ) Other assets (1,289 ) (163 ) Accounts payable 815 (1,267 ) Accrued expenses 2,146 2,833 Federal and state income taxes receivable/payable (108 ) 5,342 Deferred resident revenue 176 1,932 Customer deposits 320 10 Net cash provided by operating activities 48,895 46,312 Investing Activities Capital expenditures
(42,430
)
(18,742
)
Cash paid for acquisitions (162,460 ) (160,105 ) Proceeds from SHPIII/CSL Transaction — 2,532 Proceeds from disposition of assets 43,463 796 Distributions from joint ventures — 102 Net cash used in investing activities (161,427 ) (175,417 ) Financing Activities Proceeds from notes payable
250,944
300,820
Repayments of notes payable (115,896 ) (140,950 ) Cash payments for capital lease and financing obligations (978 ) (971 ) Increase in restricted cash (918 ) (816 ) Cash proceeds from the issuance of common stock 42 170 Excess tax benefits on stock options exercised (19 ) (82 ) Deferred financing charges paid (3,765 ) (3,468 ) Net cash provided by financing activities 129,410 154,703 Increase (Decrease) in cash and cash equivalents 16,878 25,598 Cash and cash equivalents at beginning of year 39,209 13,611 Cash and cash equivalents at end of year $ 56,087 $ 39,209 Supplemental Disclosures Cash paid during the year for: Interest $ 33,642 $ 28,856 Income taxes $ 1,039 $ 724 Non-cash operating, investing, and financing activities: Notes payable assumed by purchaser through disposition of assets $ 6,764 $ — Contacts
Capital Senior Living Corporation
Carey Hendrickson, 1-972-770-5600
Chief
Financial Officer -
Increases annual Adjusted CFFO by approximately $4.1 million, or