DALLAS, Nov. 06, 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 third quarter 2018.

“Against a difficult industry environment, Capital Senior Living continues to navigate headwinds and address issues head-on,” said Lawrence A. Cohen, Chief Executive Officer of the Company. “We achieved modest growth in occupancy on a sequential basis and average monthly rent, but are disappointed to report decreases in other key financial metrics. We are executing broad-based operational and financial initiatives to further position the Company for long-term success.”

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.)

$37.9 million in the third 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.

“We continue to find ways to reduce costs via our newly-implemented procurement system and the nationalization of contracts,” said Carey P. Hendrickson, Chief Financial Officer of the Company.  “In addition, the full installation of an integrated business information system will provide a higher level of data transparency and analysis throughout the organization.  We expect the implementation to be complete by year end.”

Mr. Hendrickson continued, “We expect market conditions to remain challenging. Consistent with our normal business practices, we continue to seek ways to strengthen our financial foundation and optimize our asset portfolio.  As part of this effort, we expect to close on a Master Credit Facility by late December to address our nearest-term fixed-debt maturities and raise cash proceeds of approximately $20 million.  Concurrently, we are planning to divest a limited number of assets for which we expect to generate strong value. We recognize the challenges ahead, and are focused on building a stronger Capital Senior Living for the benefit of our shareholders and all stakeholders.” 

Recent Investment Activity

Financial Results - Third Quarter

For the third quarter of 2018, the Company reported revenue of $115.7 million, compared to revenue of $117.3 million in the third 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, was $113.6 million, a decrease of 0.8% in the third quarter of 2018 as compared to the third quarter of 2017.

Operating expenses for the third quarter of 2018 were $76.2 million, an increase of $1.6 million, or 2.1%, from the third quarter of 2017. Operating expenses include a $1.3 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 third 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 third quarter of 2018 were $5.6 million. This compares to general and administrative expenses of $5.4 million in the third quarter of 2017. Excluding transaction and conversion costs in both periods, general and administrative expenses decreased $0.4 million in the third quarter of 2018 as compared to the third quarter of 2017. As a percentage of revenues under management, general and administrative expenses, excluding transaction and conversion costs, were 4.0% in the third quarter of 2018 compared to 4.3% in the third quarter of 2017.

Income from operations for the third quarter of 2018 was $1.7 million. The Company recorded a net loss on a GAAP basis of $11.1 million in the third quarter of 2018.
Excluding items noted and reconciled on the final page of this release, the Company’s adjusted net loss was $6.6 million in the third 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). 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 third quarter of 2018 was $36.1 million as compared to $37.9 million in the third quarter of 2017. Adjusted CFFO was $8.1 million in the third quarter of 2018, as compared to $11.1 million in the third 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 third quarter of 2018 decreased 0.8% versus the third quarter of 2017.

Same-community operating expenses increased 3.2% from the third quarter of the prior year, excluding conversion costs in both periods. On the same basis, labor costs, including benefits, increased 2.8%, utilities decreased 1.5%, and food costs decreased 5.0%, all as compared to the third quarter of 2017. Same-community net operating income decreased 7.6% in the third quarter of 2018 as compared to the third quarter of 2017.

Capital expenditures for the third quarter of 2018 were $7.2 million.

Balance Sheet

The Company ended the quarter with $22.7 million of cash and cash equivalents, including restricted cash. As of September 30, 2018, the Company financed its owned communities with mortgages totaling $950.3 million at interest rates averaging 4.8%. All of the Company’s debt is at fixed interest rates, except for two bridge loans totaling approximately $76.3 million at September 30, 2018, one of which matures in the first quarter of 2020 and the other in the fourth quarter of 2021. The earliest maturity date for the Company’s fixed-rate debt is in 2021.

The Company’s cash on hand and cash flow from operations are expected to be sufficient for working capital and to fund the Company’s capital expenditures.

Q3 2018 Conference Call Information

The Company will host a conference call with senior management to discuss the Company’s third quarter 2018 financial results. The call will be held on Tuesday, November 6, 2018, at 5:00 p.m. Eastern Time. The call-in number is 323-994-2093, confirmation code 9869850. 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 November 6, 2018 at 8:00 p.m. Eastern Time, until November 15, 2018 at 8:00 p.m. Eastern Time. To access the conference call replay, call 719-457-0820, confirmation code 9869850.  The conference call will also be made available for playback via the Company’s corporate website, www.capitalsenior.com.

Non-GAAP Financial Measures of Operating Performance

Adjusted EBITDAR is a financial valuation measure and Adjusted Net Income/(Loss) and Adjusted CFFO are financial performance measures that are not calculated in accordance with U.S. generally accepted accounting principles (“GAAP”). Non-GAAP financial measures may have material limitations in that they do not reflect all of the costs associated with our results of operations as determined in accordance with GAAP. As a result, these non-GAAP financial measures should not be considered a substitute for, nor superior to, financial results and measures determined or calculated in accordance with GAAP.

Adjusted EBITDAR is a valuation measure commonly used by our management, research analysts and investors to value companies in the senior living industry. Because Adjusted EBITDAR excludes interest expense and rent expense, it allows our management, research analysts and investors to compare the enterprise values of different companies without regard to differences in capital structures and leasing arrangements.

The Company believes that Adjusted Net Income/(Loss) and Adjusted CFFO are useful as performance measures in identifying trends in day-to-day operations because they exclude the costs associated with acquisitions and conversions and other items that do not ordinarily reflect the ongoing operating results of our primary business.  Adjusted Net Income/(Loss) and Adjusted CFFO provide indicators to management of progress in achieving both consolidated and individual business unit operating performance and are used by research analysts and investors to evaluate the performance of companies in the senior living industry.

The Company strongly urges you to review on the last page of this release the reconciliation of net loss to Adjusted EBITDAR and the reconciliation of net income/(loss) to Adjusted Net Income/(Loss) and Adjusted CFFO, along with the Company’s consolidated balance sheets, statements of operations, and statements of cash flows.

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 the Company’s actual results and financial condition to differ materially, including, but not limited to, the Company’s ability to generate sufficient cash flow to satisfy its debt and lease obligations and to fund the Company’s capital improvement projects to expand, redevelop, and/or reposition its senior living communities; the Company’s ability to obtain additional capital on terms acceptable to it; the Company’s ability to extend or refinance its existing debt as such debt matures; the Company’s compliance with its debt and lease agreements; the Company’s ability to complete acquisitions and dispositions upon favorable terms or at all; the risk of oversupply and increased competition in the markets which the Company operates; the risk of increased competition for skilled workers due to wage pressure and changes in regulatory requirements; the departure of the Company’s key officers and personnel; the cost and difficulty of complying with applicable licensure, legislative oversight, or regulatory changes; the risks associated with a decline in economic conditions generally; the adequacy and continued availability of the Company’s insurance policies and the Company’s ability to recover any losses it sustains under such policies; changes in accounting principles and interpretations; and the other risks and factors identified from time to time in the Company’s 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)

  September 30,
2018		  December 31,
2017		 
ASSETS        
Current assets:        
Cash and cash equivalents $9,245  $17,646 
Restricted cash  13,473   13,378 
Accounts receivable, net  12,129   12,307 
Property tax and insurance deposits  12,451   14,386 
Prepaid expenses and other  4,647   6,332 
Total current assets  51,945   64,049 
Property and equipment, net  1,070,951   1,099,786 
Other assets, net  16,817   18,836 
Total assets $1,139,713  $1,182,671 
LIABILITIES AND SHAREHOLDERS’ EQUITY        
Current liabilities:        
Accounts payable $9,006  $7,801 
Accrued expenses  37,678   40,751 
Current portion of notes payable, net of deferred loan costs  18,016   19,728 
Current portion of deferred income  14,342   13,840 
Current portion of capital lease and financing obligations  3,347   3,106 
Federal and state income taxes payable  299   383 
Customer deposits  1,298   1,394 
Total current liabilities  83,986   87,003 
Deferred income  8,621   10,033 
Capital lease and financing obligations, net of current portion  46,510   48,805 
Deferred taxes  1,941   1,941 
Other long-term liabilities  12,916   16,250 
Notes payable, net of deferred loan costs and current portion  926,008   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 – 31,262 and 30,505 in 2018 and 2017, respectively		  318   310 
Additional paid-in capital  186,054   179,459 
Retained deficit  (123,211)  (95,906)
Treasury stock, at cost – 494 shares in 2018 and 2017  (3,430)  (3,430)
Total shareholders’ equity  59,731   80,433 
Total liabilities and shareholders’ equity $1,139,713  $1,182,671 


CAPITAL SENIOR LIVING CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(unaudited, in thousands, except per share data)

  Three Months Ended
September 30,		  Nine Months Ended
September 30,		 
  2018  2017  2018  2017 
             
Revenues:                
Resident revenue $115,650  $117,318  $344,920  $350,026 
Expenses:                
Operating expenses (exclusive of facility lease expense and depreciation and amortization expense shown below)  76,195   74,636   220,863   220,703 
General and administrative expenses  5,589   5,361   17,323   17,678 
Facility lease expense  14,077   13,943   42,515   42,498 
Loss on facility lease termination  —   —   —   12,858 
Stock-based compensation expense  2,095   1,962   6,603   5,833 
Depreciation and amortization expense  15,998   16,903   46,891   50,862 
Total expenses  113,954   112,805   334,195   350,432 
Income (Loss) from operations  1,696   4,513   10,725   (406)
Other income (expense):                
Interest income  42   19   117   51 
Interest expense  (12,705)  (12,531)  (37,771)  (36,940)
Gain (Loss) on disposition of assets, net  7   (1)  10   (126)
Other income  —   1   2   6 
Loss before provision for income taxes  (10,960)  (7,999)  (26,917)  (37,415)
Provision for income taxes  (129)  (133)  (388)  (394)
Net loss $(11,089) $(8,132) $(27,305) $(37,809)
Per share data:                
Basic net loss per share $(0.37) $(0.28) $(0.92) $(1.28)
Diluted net loss per share $(0.37) $(0.28) $(0.92) $(1.28)
Weighted average shares outstanding — basic  29,877   29,512   29,779   29,427 
Weighted average shares outstanding — diluted  29,877   29,512   29,779   29,427 
Comprehensive loss $(11,089) $(8,132) $(27,305) $(37,809)


CAPITAL SENIOR LIVING CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)

 Nine Months Ended September 30, 
 2018  2017 
Operating Activities       
Net loss$(27,305) $(37,809)
Adjustments to reconcile net loss to net cash provided by operating activities:       
Depreciation and amortization 46,891   50,862 
Amortization of deferred financing charges 1,281   1,216 
Amortization of deferred lease costs and lease intangibles 638   647 
Amortization of lease incentives (1,426)  (950)
Deferred income (712)  (899)
Lease incentives —   5,159 
Loss on facility lease termination —   12,858 
(Gain) Loss on disposition of assets, net (10)  126 
Provision for bad debts 2,254   1,355 
Stock-based compensation expense 6,603   5,833 
Changes in operating assets and liabilities:       
Accounts receivable (2,076)  (3,834)
Property tax and insurance deposits 1,935   1,753 
Prepaid expenses and other 1,685   2,387 
Other assets 1,267   5,149 
Accounts payable 1,205   (1,076)
Accrued expenses (3,073)  (2,400)
Other liabilities (1,908)  3,649 
Federal and state income taxes receivable/payable (84)  (108)
Deferred resident revenue (198)  (1,520)
Customer deposits (96)  (117)
Net cash provided by operating activities 26,871   42,281 
Investing Activities       
Capital expenditures (17,954)  (30,165)
Cash paid for acquisitions —   (85,000)
Proceeds from disposition of assets 22   16 
Net cash used in investing activities (17,932)  (115,149)
Financing Activities       
Proceeds from notes payable 1,740   66,584 
Repayments of notes payable (16,844)  (15,414)
Cash payments for capital lease and financing obligations (2,054)  (2,117)
Deferred financing charges paid (87)  (950)
Net cash (used in) provided by financing activities (17,245)  48,103 
Decrease in cash and cash equivalents (8,306)  (24,765)
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$22,718  $22,558 
Supplemental Disclosures       
Cash paid during the period for:       
Interest$36,345  $35,108 
Income taxes$546  $534 
 
 
Capital Senior Living Corporation           
Supplemental Information       
              
       Average    
   Communities Resident Capacity Average Units
   Q3 18 Q3 17 Q3 18 Q3 17 Q3 18 Q3 17
Portfolio Data           
I. Community Ownership / Management          
Consolidated communities           
 Owned83 83 10,767 10,767 8,224  8,119
 Leased46 46 5,756 5,756 4,413  4,414
 Total129 129 16,523 16,523 12,637  12,533
            
Independent living    6,879 6,879 5,007  5,158
Assisted living    9,644 9,644 7,630  7,375
 Total    16,523 16,523 12,637  12,533
             
            
II. Percentage of Operating Portfolio           
Consolidated communities           
 Owned64.3 64.3 65.2 65.2 65.1% 64.8
 Leased35.7 35.7 34.8 34.8 34.9% 35.2
 Total100.0 100.0 100.0 100.0 100.0% 100.0
             
Independent living    41.6 41.6 39.6% 41.2
Assisted living    58.4 58.4 60.4% 58.8
 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   
  Q3 18 Q3 17
 I. Owned communities   
  Number of communities  79    79
  Resident capacity  10,248    10,248
  Unit capacity (1)  7,779    7,777
  Financial occupancy (2)87.0% 88.2
  Revenue (in millions)71.6  72.2
  Operating expenses (in millions) (3)48.1  46.5
  Operating margin (3)33% 36
  Average monthly rent  3,525    3,510
 II. Leased communities   
  Number of communities  46    46
  Resident capacity  5,756    5,756
  Unit capacity (1)  4,413    4,413
  Financial occupancy (2)83.2% 84.6
  Revenue (in millions)42.0  42.4
  Operating expenses (in millions) (3)25.7  24.9
  Operating margin (3)39% 41
  Average monthly rent  3,817    3,786
 III. Consolidated and Same communities (4)   
  Number of communities  125    125
  Resident capacity  16,004    16,004
  Unit capacity  12,192    12,190
  Financial occupancy (2)85.6% 86.9
  Revenue (in millions)113.6  114.6
  Operating expenses (in millions) (3)73.8  71.4
  Operating margin (3)35% 38
  Average monthly rent  3,628    3,607
 IV. General and Administrative expenses as a percent of Total Revenues under Management   
  Third quarter (5)
Year to Date (5)		4.0%
4.4%		 4.3%
4.6%
 V. Consolidated Mortgage Debt Information (in thousands, except interest rates)   
   (excludes insurance premium financing)   
  Total fixed rate mortgage debt  873,992    883,607
  Total variable rate mortgage debt  76,319    76,566
  Weighted average interest rate4.78% 4.66%
      
   
 (1)Due to conversion and refurbishment projects completed at certain communities, unit capacity is higher in Q3 18 than Q3 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 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.  




NON-GAAP RECONCILIATIONS 
(In thousands, except per share data) 
         
  Three Months Ended September 30,   Nine Months Ended September 30,
   2018   2017   2018   2017 
Adjusted EBITDAR       
 Net loss$  (11,089) $  (8,132) $  (27,305) $  (37,809)
 Depreciation and amortization expense   15,998     16,903     46,891     50,862 
 Stock-based compensation expense   2,095     1,962     6,603     5,833 
 Facility lease expense   14,077     13,943     42,515     42,498 
 Loss on facility lease termination   -      -      -      12,858 
 Provision for bad debts   800     380     2,254     1,355 
 Interest income   (42)    (19)    (117)    (51)
 Interest expense   12,705     12,531     37,771     36,940 
 Loss (Gain) on disposition of assets, net   (7)    1     (10)    126 
 Other income   -      (1)    (2)    (6)
 Provision for income taxes   129     133     388     394 
 Casualty losses   337     704     766     1,727 
 Transaction and conversion costs   1,047     439     1,885     1,992 
 Employee benefit reserve adjustments   -      -      690     -  
 Communities excluded due to repositioning/lease-up   71     (927)    95     (2,740)
 Adjusted EBITDAR$  36,121  $  37,917  $  112,424  $  113,979 
 

Adjusted Revenues		       
 Total revenues$  115,650  $  117,318  $  344,920  $  350,026 
 Communities excluded due to repositioning/lease-up   (1,475)    (5,820)    (4,249)    (15,161)
 Adjusted revenues$  114,175  $  111,498  $  340,671  $  334,865 
 

Adjusted net loss and Adjusted net loss per share		       
 Net loss$  (11,089) $  (8,132) $  (27,305) $  (37,809)
 Casualty losses   337     704     766     1,727 
 Transaction and conversion costs   1,078     517     1,959     2,554 
 Employee benefit reserve adjustments   -      -      690     -  
 Resident lease amortization   -      2,085     -      7,407 
 Loss on facility lease termination   -      -      -      12,859 
 Loss (Gain) on disposition of assets   (7)    1     (10)    126 
 Tax impact of Non-GAAP adjustments (25% in 2018 and 37% in 2017)   (352)    (1,224)    (679)    (9,129)
 Deferred tax asset valuation allowance   2,737     3,086     6,256     14,020 
 Communities excluded due to repositioning/lease-up   702     750     1,996     1,787 
 Adjusted net loss$  (6,594) $  (2,213) $  (16,327) $  (6,458)
  

Diluted shares outstanding		 29,877   29,512   29,779   29,427 
 Adjusted net loss per share$  (0.22) $  (0.07) $  (0.55) $  (0.22)
 

Adjusted CFFO		       
 Net loss$  (11,089) $  (8,132) $  (27,305) $  (37,809)
 Non-cash charges, net   18,584     20,628     55,519     76,207 
 Lease incentives   -      (1,504)    -      (5,159)
 Recurring capital expenditures   (1,186)    (1,186)    (3,559)    (3,559)
 Casualty losses   337     735     766     1,759 
 Transaction and conversion costs   1,078     517     1,959     2,329 
 Employee benefit reserve adjustments   -      -      690     -  
 Communities excluded due to repositioning/lease-up   421     29     1,129     (203)
 Adjusted CFFO$  8,145  $  11,087  $  29,199  $  33,565