Capital Senior Living Corporation Reports Second Quarter 2016 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 second quarter 2016. Company
highlights for the second quarter 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 and reconciliation of Non-GAAP measures to
the most directly comparable GAAP measure on the final page of this
release)
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Revenue in the second quarter of 2016, including all communities, was
$111.0 million, a $9.4 million, or 9.3%, increase from the second
quarter of 2015.-
Occupancy for the Company’s consolidated communities was 88.4% in
the second quarter of 2016, an increase of 40 basis points from
the second quarter of 2015 and a decrease of 10 basis points from
the first quarter of 2016. Same-community occupancy was 88.6% for
the second quarter of 2016, a 50 basis point increase from the
second quarter of 2015 and a 10 basis point increase from the
first quarter of 2016. -
Average monthly rent for the Company’s consolidated communities in
the second quarter of 2016 was $3,473, an increase of $110 per
occupied unit, or 3.3%, as compared to the second quarter of 2015.
Same-community average monthly rent was $3,426, an increase of $54
per occupied unit, or 1.6%, from the second quarter of 2015.
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Adjusted EBITDAR was $39.0 million in the second quarter of 2016,
a 9.2% increase from the second quarter of 2015. The Company’s
Adjusted EBITDAR margin was 36.5% for the second quarter of 2016.
The three communities undergoing repositioning, lease-up or
significant renovation and conversion, not included in Adjusted
EBITDAR, generated an additional $0.8 million of EBITDAR.
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Adjusted Cash From Facility Operations (“CFFO”) was $12.9 million,
or $0.45 per share, in the second quarter of 2016 compared to
$11.7 million, or $0.41 per share, in the second quarter of 2015,
an increase of 10.0%.
“The Company once again achieved solid growth in our key performance
metrics despite the heavy rain and flooding in Texas and the Midwest
that impacted our traffic in May and early June. Our performance
continues to demonstrate the advantages of our clear and differentiated
strategy to drive superior shareholder value by successfully executing
on our multiple avenues of growth,” said Lawrence A. Cohen, Chief
Executive Officer of the Company. “We achieved a record number of
move-ins in the last week of June and expect momentum in our occupancy
to continue to build in the second half of the year, as the third and
fourth quarters are seasonally our quarters of greatest occupancy growth.“Complementing our growth is a robust acquisition pipeline that allows
us to increase our ownership of high-quality senior living communities
in geographically concentrated regions and generate meaningful increases
in our key performance metrics and real estate value. We currently
expect to close on the acquisition of three communities during the
second half 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
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During the second quarter of 2016, the Company completed supplemental
loans on seven communities that resulted in $16.9 million in net cash
proceeds, which recognizes the significant value that has been created
in these communities since the date of their primary loan in July
2014. These loans have an interest rate of 4.98% and mature
coterminous with the original loans in July 2024. Also, the Company
completed a supplemental loan on a community that resulted in net cash
proceeds of $2.6 million. The loan has a 4.25% interest rate and
matures coterminous with the original loan in September 2025.
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As noted above, acquisitions of three communities totaling
approximately $74 million are expected to close in the third and
fourth quarters of 2016, subject to completion of due diligence and
customary closing conditions. This will bring the Company’s total
acquisitions in 2016 to approximately $138.4 million.
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The Company has a strong pipeline of near- to medium-term targets.
With a strong reputation among sellers, the Company sources the
majority of its acquisitions off-market and at attractive terms.
Financial Results – Second Quarter
For the second quarter of 2016, the Company reported revenue of $111.0
million, compared to revenue of $101.6 million in the second quarter of
2015, an increase of 9.3%. Excluding the revenue of the community the
Company sold in the third quarter of 2015, revenues increased $10.0
million, or 10.4%, in the second quarter of 2016 as compared to the
second quarter of 2015, mostly due to the acquisition of 12 communities
during or since the second quarter of 2015. Revenue for consolidated
communities excluding the three communities undergoing repositioning,
lease-up or significant renovation and conversion increased 9.4% in the
second quarter of 2016 as compared to the second quarter of 2015. These
increases were achieved with fewer units available for lease in the
second quarter of 2016 than the second quarter of 2015, exclusive of
acquisitions, due to conversion and refurbishment projects currently in
progress at certain communities.Operating expenses for the second quarter of 2016 were $67.2 million, an
increase of $6.5 million from the second quarter of 2015, also primarily
due to the acquisitions of senior living communities made during or
since the second quarter of 2015.General and administrative expenses for the second quarter of 2016 were
$5.0 million compared to $5.7 million in the second quarter of 2015.
Excluding transaction and conversion costs of $0.4 million from the
second quarter of 2016 and $0.8 million from the second quarter of 2015,
general and administrative expenses decreased $0.4 million in the second
quarter of 2016 as compared to the second quarter of 2015. As a
percentage of revenues under management, general and administrative
expenses, excluding transaction and conversion costs, were 4.1% in the
second quarter of 2016 as compared to 4.8% in the second quarter of 2015.Income from operations for the second quarter of 2016 was $5.8 million,
an increase of $2.1 million, or 57.4%, from the second quarter of 2015.
This increase is primarily attributable to the Company’s acquisitions of
senior living communities made during or since the second quarter of
2015 and increases in the Company’s same-community revenues and
occupancies.The Company recorded a net loss on a GAAP basis of $4.4 million, or
$0.15 per share, in the second quarter of 2016. Excluding non-recurring
or non-economic items reconciled on the final page of this release, the
Company’s adjusted net loss was $0.1 million in the second quarter of
2016.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).Adjusted EBITDAR for the second quarter of 2016 was $39.0 million, an
increase of $3.3 million, or 9.2%, from the second quarter of 2015. The
Adjusted EBITDAR margin for the second quarter of 2016 was 36.5%. The
three communities undergoing repositioning, lease-up or significant
renovation and conversion, not included in Adjusted EBITDAR, generated
an additional $0.8 million of EBITDAR.Adjusted CFFO was $12.9 million, or $0.45 per share, in the second
quarter of 2016, a 10.0% increase from $11.7 million, or $0.41 per
share, in the second quarter of the prior year.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 second quarter of 2016 increased 1.8%
versus the second quarter of 2015. Due to conversion and refurbishment
projects currently in progress at certain communities, fewer units were
available for rent in the second quarter of this year than the second
quarter of last year. With a like number of units available in both
years, same-community revenue would have increased approximately 2.2% in
the second quarter of 2016 as compared to the second quarter of the
prior year.Same-community expenses increased 1.7% from the second quarter of the
prior year, excluding a one-time workers compensation credit of $0.4
million from the second quarter of 2015. On the same basis, labor costs,
including benefits, increased 2.1%, food costs increased 0.6% and
utilities increased 0.9%, all as compared to the second quarter of 2015,
and same-community net operating income increased 1.9% in the second
quarter of 2016 as compared to the second quarter of 2015. With a like
number of units available in both years, same-community net operating
income would have increased approximately 2.6% from the second quarter
of the prior year.Capital expenditures for the second quarter of 2016 were $16.0 million,
representing approximately $14.7 million of investment spending and
approximately $1.3 million of recurring capital expenditures. If
annualized, spending for recurring capital expenditures was
approximately $425 per unit.Balance Sheet
The Company ended the quarter with $57.7 million of cash and cash
equivalents, including restricted cash, an increase of $12.7 million
since March 31, 2016. During the second quarter of 2016, the Company
received net cash proceeds of $19.5 million related to supplemental
loans for eight communities and spent $16.0 million on capital
improvements, which includes $3.1 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 $3.0 million in the second quarter for capital improvements and
expects to receive additional reimbursements as the remaining projects
are completed.As of June 30, 2016, the Company financed its owned communities with
mortgages totaling $834.4 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 June 30, 2016, which
matures in the third quarter of 2017. 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 2016 Conference Call Information
The Company will host a conference call with senior management to
discuss the Company’s second quarter 2016 financial results. The call
will be held on Tuesday, August 2, 2016, at 5:00 p.m. Eastern Time. The
call-in number is 913-312-1446, confirmation code 7836246. 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
August 2, 2016 at 8:00 p.m. Eastern Time, until August 11, 2016 at 8:00
p.m. Eastern Time. To access the conference call replay, call
719-457-0820, confirmation code 7836246. The conference call will also
be made available for playback via the Company’s corporate website, www.capitalsenior.com,
beginning August 3, 2016.Non-GAAP Financial Measures of Operating
PerformanceAdjusted 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 of operating
performance 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 of operating performance
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 performance measures are useful
as they are performance measures used by management in identifying
trends in day-to-day performance because they exclude the costs
associated with acquisitions and conversions and items that do not
reflect the ordinary performance of our operations and provide
indicators to management of progress in achieving both consolidated and
business unit 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 on the last page of this release the
reconciliation of 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 (unaudited, in thousands, except per share data) June 30, December 31, 2016 2015 ASSETS Current assets: Cash and cash equivalents $ 44,486 $ 56,087 Restricted cash 13,167 13,159 Accounts receivable, net 10,427 9,254 Federal and state income taxes receivable 95 — Property tax and insurance deposits 11,472 14,398 Prepaid expenses and other 5,386 4,370 Total current assets 85,033 97,268 Property and equipment, net 958,123 890,572 Other assets, net 28,737 31,193 Total assets $ 1,071,893 $ 1,019,033 LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities: Accounts payable $ 1,148 $ 3,362 Accrued expenses 32,559 34,300 Current portion of notes payable, net of deferred loan costs 17,082 13,634 Current portion of deferred income and resident revenue 15,794 16,059 Current portion of capital lease and financing obligations 1,214 1,257 Federal and state income taxes payable — 111 Customer deposits 1,698 1,819 Total current liabilities 69,495 70,542 Deferred income 13,165 13,992 Capital lease and financing obligations, net of current portion 38,295 38,835 Other long-term liabilities 10,372 4,969 Notes payable, net of deferred loan costs and current portion 812,704 754,949 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 – 29,998
and 29,539 in 2016 and 2015, respectively305 299 Additional paid-in capital 164,956 159,920 Retained deficit (33,969 ) (23,539 ) Treasury stock, at cost – 494 and 350 shares in 2016 and 2015,
respectively(3,430 ) (934 ) Total shareholders’ equity 127,862 135,746 Total liabilities and shareholders’ equity $ 1,071,893 $ 1,019,033 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 30,2016 2015 2016 2015 Revenues: Resident revenue $ 111,034 $ 101,588 $ 220,207 $ 200,228 Expenses: Operating expenses (exclusive of facility lease expense and
depreciation and amortization expense shown below)67,162 60,707 133,685 120,838 General and administrative expenses 4,972 5,718 11,220 10,731 Facility lease expense 15,445 15,298 30,650 30,554 Stock-based compensation expense 2,490 2,717 5,003 4,444 Depreciation and amortization 15,172 13,468 29,703 26,263 Total expenses 105,241 97,908 210,261 192,830 Income from operations 5,793 3,680 9,946 7,398 Other income (expense): Interest income 19 11 35 24 Interest expense (10,345 ) (8,673 ) (20,330 ) (17,028 ) Write-off of deferred loan costs and prepayment premiums — — — (871 ) Loss on disposition of assets, net (6 ) (65 ) (37 ) (171 ) Other income 233 — 233 1 Loss before provision for income taxes (4,306 ) (5,047 ) (10,153 ) (10,647 ) Provision for income taxes (140 ) (119 ) (277 ) (558 ) Net loss $ (4,446 ) $ (5,166 ) $ (10,430 ) $ (11,205 ) Per share data: Basic net loss per share $ (0.15 ) $ (0.18 ) $ (0.36 ) $ (0.38 ) Diluted net loss per share $ (0.15 ) $ (0.18 ) $ (0.36 ) $ (0.38 ) Weighted average shares outstanding — basic 28,926 28,705 28,838 28,636 Weighted average shares outstanding — diluted 28,926 28,705 28,838 28,636 Comprehensive loss $ (4,446 ) $ (5,166 ) $ (10,430 ) $ (11,205 ) CAPITAL SENIOR LIVING CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited, in thousands) Six Months Ended
June 30,2016 2015 Operating Activities Net loss $ (10,430 ) $ (11,205 ) Adjustments to reconcile net loss to net cash provided by operating
activities:Depreciation and amortization 29,703 26,263 Amortization of deferred financing charges 567 582 Amortization of deferred lease costs and lease intangibles (184 ) 651 Deferred income 44 (131 ) Lease incentives 3,890 — Write-off of deferred loan costs and prepayment premiums — 871 Loss on disposition of assets, net 37 171 Provision for bad debts 809 544 Stock-based compensation expense 5,003 4,444 Changes in operating assets and liabilities: Accounts receivable (94 ) (2,090 ) Accounts receivable from affiliates — 2 Property tax and insurance deposits 2,926 1,500 Prepaid expenses and other (1,016 ) 1,379 Other assets (566 ) 208 Accounts payable (2,214 ) (492 ) Accrued expenses (1,704 ) (2,220 ) Federal and state income taxes receivable/payable (206 ) (529 ) Deferred resident revenue (1,136 ) (1,581 ) Customer deposits (121 ) (48 ) Net cash provided by operating activities 25,308 18,319 Investing Activities Capital expenditures (29,747 ) (13,540 ) Cash paid for acquisitions (64,750 ) (74,710 ) Proceeds from disposition of assets — 35,807 Net cash used in investing activities (94,497 ) (52,443 ) Financing Activities Proceeds from notes payable 69,892 102,332 Repayments of notes payable (8,183 ) (66,315 ) Increase in restricted cash (8 ) (10 ) Cash payments for capital lease and financing obligations (583 ) (433 ) Cash proceeds from the issuance of common stock 66 42 Excess tax benefits on stock options exercised (27 ) 49 Purchases of treasury stock (2,496 ) — Deferred financing charges paid (1,073 ) (1,347 ) Net cash provided by financing activities 57,588 34,318 (Decrease) Increase in cash and cash equivalents (11,601 ) 194 Cash and cash equivalents at beginning of period 56,087 39,209 Cash and cash equivalents at end of period $ 44,486 $ 39,403 Supplemental Disclosures Cash paid during the period for: Interest $ 19,627 $ 16,112 Income taxes $ 546 $ 1,020 Capital Senior Living Corporation Supplemental Information Average Communities Resident Capacity Average Units Q2 16 Q2 15 Q2 16 Q2 15 Q2 16 Q2 15 Portfolio Data I. Community Ownership / Management Consolidated communities Owned 76 68 9,436 8,744 7,251 6,608 Leased 50 50 6,333 6,333 4,918 4,907 Total 126 118 15,769 15,077 12,169 11,515 Independent living 6,792 7,090 5,294 5,512 Assisted living 8,977 7,987 6,875 6,003 Total 15,769 15,077 12,169 11,515 II. Percentage of Operating Portfolio Consolidated communities Owned 60.3 % 57.6 % 59.8 % 58.0 % 59.6 % 57.4 % Leased 39.7 % 42.4 % 40.2 % 42.0 % 40.4 % 42.6 % Total 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % Independent living 43.1 % 47.0 % 43.5 % 47.9 % Assisted living 56.9 % 53.0 % 56.5 % 52.1 % Total 100.0 % 100.0 % 100.0 % 100.0 % Capital Senior Living Corporation
Supplemental Information (excludes communities being
repositioned/leased up)Selected Operating Results Q2 16 Q2 15 I. Owned communities Number of communities 74 66 Resident capacity 8,891 8,199 Unit capacity (1) 6,845 6,208 Financial occupancy (2) 89.2 % 89.1 % Revenue (in millions) 62.2 53.4 Operating expenses (in millions) (3) 38.5 33.1 Operating margin 38 % 38 % Average monthly rent 3,397 3,220 II. Leased communities Number of communities 49 49 Resident capacity 6,107 6,107 Unit capacity (1) 4,731 4,766 Financial occupancy (2) 87.3 % 86.5 % Revenue (in millions) 44.4 44.0 Operating expenses (in millions) (3) 24.6 24.0 Operating margin 45 % 45 % Average monthly rent 3,584 3,555 III. Consolidated communities Number of communities 123 115 Resident capacity 14,998 14,306 Unit capacity (1) 11,576 10,974 Financial occupancy (2) 88.4 % 88.0 % Revenue (in millions) 106.6 97.4 Operating expenses (in millions) (3) 63.1 57.1 Operating margin 41 % 41 % Average monthly rent 3,473 3,363 IV. Communities under management Number of communities 123 115 Resident capacity 14,998 14,306 Unit capacity (1) 11,576 10,974 Financial occupancy (2) 88.4 % 88.0 % Revenue (in millions) 106.6 97.4 Operating expenses (in millions) (3) 63.1 57.1 Operating margin 41 % 41 % Average monthly rent 3,473 3,363 V. Same communities under management Number of communities 110 110 Resident capacity 13,833 13,833 Unit capacity (1) 10,662 10,700 Financial occupancy (2) 88.6 % 88.1 % Revenue (in millions) 97.1 95.4 Operating expenses (in millions) (3) 56.7 55.7 Operating margin 42 % 42 % Average monthly rent 3,426 3,372 VI. General and Administrative expenses as a percent of Total
Revenues under ManagementSecond quarter (4) 4.1 % 4.8 % Year to date (4) 4.5 % 4.7 % VII. Consolidated Mortgage Debt Information (in thousands, except
interest rates)(excludes insurance premium and auto financing) Total fixed rate mortgage debt 822,615 659,485 Total variable rate mortgage debt 11,800 20,272 Weighted average interest rate 4.6 % 4.6 % Contacts
Capital Senior Living Corporation
Carey Hendrickson, 1-972-770-5600
Chief
Financial Officer -
Occupancy for the Company’s consolidated communities was 88.4% in