UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) November 1, 2017
Capital Senior Living Corporation
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation)
1-13445 | 75-2678809 | |
(Commission File Number) | (IRS Employer Identification No.) | |
14160 Dallas Parkway Suite 300 Dallas, Texas |
75254 | |
(Address of principal executive offices) | (Zip Code) |
(972) 770-5600
(Registrants telephone number, including area code)
Not applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02 Results of Operations and Financial Condition.
On November 1, 2017, Capital Senior Living Corporation (the Company) announced its financial results for the third quarter ended September 30, 2017 by issuing a press release. The full text of the press release issued in connection with the announcement is attached hereto as Exhibit 99.1.
The information being furnished under Item 2.02, Item 7.01, Exhibit 99.1 and Exhibit 99.2 shall not be deemed filed for purposes of the Securities Exchange Act of 1934, as amended (the Exchange Act), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as may be expressly set forth by specific reference in such a filing. The press release and the presentation referenced below contain, and may implicate, forward-looking statements regarding the Company and include cautionary statements identifying important factors that could cause actual results to differ materially from those anticipated.
In the press release and the presentation referenced below, the Companys management utilizes Adjusted EBITDAR as a financial valuation measure and Adjusted Net Income and Adjusted CFFO as 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 the Companys 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 the Companys management, research analysts and investors to value companies in the senior living industry. Because Adjusted EBITDAR excludes interest expense and rent expense, it allows the Companys 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 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 the Companys primary business. Adjusted Net Income 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 investors to review on the last page of the press release the reconciliation of net loss to Adjusted EBITDAR and the reconciliation of net (loss) income to Adjusted Net (Loss) Income and Adjusted CFFO, along with the Companys consolidated balance sheets, statements of operations, and statements of cash flows.
Item 7.01 Regulation FD Disclosure.
Attached hereto as Exhibit 99.2 is an updated slideshow presentation of the Company.
By filing this Current Report on Form 8-K, the Company does not acknowledge that disclosure of this information is required by Regulation FD or that the information was material or non-public before the disclosure. The Company assumes no obligation to update or supplement forward-looking statements in this presentation that become untrue because of new information, subsequent events or otherwise.
Item 9.01 Financial Statements and Exhibits.
(a) Not applicable.
(b) Not applicable.
(c) Not applicable.
(d) Exhibits.
*99.1 Press Release dated November 1, 2017.
*99.2 Capital Senior Living Corporation Updated Slideshow Presentation.
* | These exhibits to this Current Report on Form 8-K are not being filed but are being furnished pursuant to Item 9.01. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Date: November 1, 2017 | Capital Senior Living Corporation | |||||||
By: | /s/ Carey P. Hendrickson | |||||||
Name: | Carey P. Hendrickson | |||||||
Title: | Senior Vice President and | |||||||
Chief Financial Officer |
Exhibit 99.1
PRESS CONTACT: Carey Hendrickson, Chief Financial Officer Phone: 1-972-770-5600 |
FOR IMMEDIATE RELEASE
CAPITAL SENIOR LIVING CORPORATION
REPORTS THIRD QUARTER 2017 RESULTS
DALLAS (GLOBE NEWSWIRE) November 1, 2017 Capital Senior Living Corporation (the Company) (NYSE:CSU), one of the nations largest operators of senior housing communities, today announced operating and financial results for the third quarter 2017. Company highlights for the third quarter include:
Operating and Financial Summary (all amounts in this operating and financial summary exclude four 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.)
| Revenue in the third quarter of 2017, including all communities, was $117.3 million, a $5.9 million, or 5.3%, increase from the third quarter of 2016. |
| Revenue for consolidated communities, and also excluding the Companys two communities impacted by Hurricane Harvey, was $110.1 million in the third quarter of 2017, an increase of 5.9% as compared to the third quarter of 2016. |
| Occupancy for the Companys consolidated communities, and excluding the Companys two communities impacted by Hurricane Harvey, was 87.2% in the third quarter of 2017, an increase of 30 basis points from the second quarter of 2017 and a decrease of 140 basis points from the third quarter of 2016. Same-community occupancy was 87.2% in the third quarter of 2017, a 30 basis point increase from the second quarter of 2017 and a 140 basis point decrease from the third quarter of 2016. |
| Average monthly rent for the Companys consolidated communities, and excluding the Companys two communities impacted by Hurricane Harvey, in the third quarter of 2017 was $3,600, an increase of $118 per occupied unit, or 3.4%, as compared to the third quarter of 2016. Same-community average monthly rent was $3,572, an increase of $91 per occupied unit, or 2.6%, from the third quarter of 2016. |
| Income from operations, including all communities, was $4.5 million in the third quarter of 2017, which includes the non-cash amortization of resident leases of $2.1 million associated with communities acquired by the Company in the previous 12 months. |
CAPITAL/Page 2
| The Companys Net Loss for the third quarter of 2017, including all communities, was $8.1 million, which includes the non-cash amortization of resident leases of $2.1 million associated with communities acquired by the Company in the previous 12 months. |
| Excluding items noted and reconciled on the final page of this release, the Companys adjusted net loss was $2.2 million in the third quarter of 2017. |
| Adjusted EBITDAR was $37.9 million in the third quarter of 2017 compared to $38.0 million in the third quarter of 2016. 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. The four communities undergoing repositioning, lease-up or significant renovation and conversion, not included in Adjusted EBITDAR, generated an additional $0.9 million of EBITDAR in the third quarter of 2017. |
| Adjusted Cash From Facility Operations (CFFO) was $11.1 million in the third quarter of 2017 compared to $11.6 million in the third quarter of 2016. |
For many years I have been proud of Capital Senior Livings track record of operational excellence but have been disappointed by the more recent operational and sales challenges we have faced, said Lawrence A. Cohen, Chief Executive Officer of the Company. We have made a number of broad-based organizational and operational changes that are restoring and strengthening a culture of high reliability. We are taking immediate action to overcome challenges, drive sustainable profitable growth and enhance shareholder value as we execute a comprehensive strategy to deliver higher revenues, enhance cash flow and maximize the value of our owned real estate. I am confident in our key initiatives and am pleased with the improvements that we saw as we progressed through the third quarter, including a 90 basis point improvement in same-community occupancy from June to September and 10% growth in same-community net operating income from June to September.
These initiatives are expected to produce further improvement in our key metrics for the remainder of 2017 and beyond, and provide a strong foundation on which to execute our long-term growth strategy focused on organic growth, accretive acquisitions, conversion of units to higher levels of care and EBITDAR-enhancing capital expenditures. By diligently executing this strategy, we expect to increase revenues, reduce operating expenses and increase EBITDAR and CFFO. We do not intend to pursue any new acquisitions until the middle part of 2018 so we can focus on implementing these intiatives. We are committed to returning Capital Senior Living to operational excellence. With a disciplined focus on our growth strategy and driving operational improvements, we will be well positioned to enhance shareholder value as well as the value of our owned real estate, and further capitalize on our competitive advantages as a leading pure-play private-pay senior housing owner/operator.
CAPITAL/Page 3
Recent Investment Activity
The Company announced today that it has elected not to purchase the community previously expected to close in mid-October. Upon the successful implementation of important operating initiatives, the Company expects to resume pursuing accretive acquisitions of high-quality communities.
Hurricane Harvey
Two of the Companys communities in Houston were impacted by Hurricane Harvey. None of its Florida communities were impacted by Hurricane Irma.
The two Houston communities were proactively evacuated to ensure the safety of their residents. The two communities sustained flood damage that has resulted in the temporary suspension of their operations. Remediation is in progress and both communities are currently expected to begin admitting residents in early 2018. The Companys property and casualty insurance will cover all damage to the buildings and the Companys business interruption coverage is expected to restore the economic loss related to the suspension of operations.The Companys deductible for the total claim is $0.1 million.
Financial ResultsThird Quarter
For the third quarter of 2017, the Company reported revenue of $117.3 million, compared to revenue of $111.4 million in the third quarter of 2016, an increase of 5.3%. The increase was mostly due to the acquisition of three communities during or since the third quarter of 2016, not including the acquisition of the four previously-leased communities in the first quarter of 2017 which increased Adjusted CFFO but did not result in increases to the Companys revenue or expense. Revenue for consolidated communities excluding the four communities undergoing repositioning, lease-up or significant renovation and conversion, and the two Houston communities impacted by Hurricane Harvey, increased 5.9% in the third quarter of 2017 as compared to the third quarter of 2016.
Operating expenses for the third quarter of 2017 were $74.6 million, an increase of $5.0 million from the third quarter of 2016. The increase was primarily due to the acquisitions of senior housing communities made during or since the third quarter of 2016 and increased contract labor costs for additional staffing required for newly licensed memory care and assisted living units, which decreased during the third quarter as permanent staff was hired and is expected to continue to decrease in the fourth quarter of 2017. Operating expenses include a $0.7 million business interruption insurance credit related to the Companys two Houston communities impacted by Hurricane Harvey to offset the their lost revenues and continuing expenses related to the last seven days of August and the month of September, and to restore the communities net income for those periods based on an approximate average for the first seven months of 2017.
CAPITAL/Page 4
General and administrative expenses for the third quarter of 2017 were $5.4 million. This compares to general and administrative expenses of $5.7 million in the third quarter of 2016. Excluding transaction and conversion costs in both periods, general and administrative expenses decreased $0.3 million in the third quarter of 2017 as compared to the third quarter of 2016, primarily due to a $0.9 million decrease in net healthcare expense year over year. As a percentage of revenues under management, general and administrative expenses, excluding transaction and conversion costs, were 4.3% in the third quarter of 2017 compared to 4.7% in the third quarter of 2016.
Income from operations for the third quarter of 2017 was $4.5 million. The Company recorded a net loss on a GAAP basis of $8.1 million in the third quarter of 2017. Excluding items noted and reconciled on the final page of this release, the Companys adjusted net loss was $2.2 million in the third quarter of 2017.
The Companys Non-GAAP financial measures exclude four communities that are undergoing repositioning, lease-up of higher-licensed units or significant renovation and conversion (see Non-GAAP Financial Measures below), including a community in Massachusetts undergoing significant renovation that was excluded beginning in the third quarter of 2017.
Adjusted EBITDAR for the third quarter of 2017 was $37.9 million as compared to $38.0 million in the third quarter of 2016. The four communities undergoing repositioning, lease-up or significant renovation and conversion not included in Adjusted EBITDAR generated an additional $0.9 million of EBITDAR.
Adjusted CFFO was $11.1 million in the third quarter of 2017, as compared to $11.6 million in the third quarter of 2016.
Operating Activities
Same-community results exclude the four communities previously noted that are undergoing repositioning, lease-up or significant renovation and conversion, the two Houston communities impacted by Hurricane Harvey, and three communities that were acquired during or since the third quarter of 2016. Same-community results also exclude certain transaction and conversion costs.
Same-community revenue in the third quarter of 2017 increased 1.6% versus the third quarter of 2016.
CAPITAL/Page 5
Same-community operating expenses increased 4.2% from the third quarter of the prior year, excluding conversion costs in both periods. On the same basis, labor costs, including benefits, increased 4.0%, food costs increased 1.1% and utilities increased 0.4%, all as compared to the third quarter of 2016. At communities that have not converted units to higher levels of care in the last year, labor costs increased 3.5%. The most significant expense increase was in contract labor costs, mostly related to additional staffing required for newly licensed memory care and assisted living units. Contract labor decreased throughout the third quarter of 2017 as permanent staff was hired and is expected to continue to decrease in the fourth quarter of 2017. Same-community net operating income decreased 2.4% in the third quarter of 2017 as compared to the third quarter of 2016. Execution of a number of recovery initiatives during the third quarter improved same-community results as the quarter progressed. In the month of September, same-community revenues increased 2.3%, expenses decreased 2.3% and net operating income increased 9.1%, all as compared to the prior year.
Capital expenditures for the third quarter of 2017 were $8.2 million, representing approximately $6.7 million of investment spending and approximately $1.5 million of recurring capital expenditures.
Balance Sheet
The Company ended the quarter with $22.6 million of cash and cash equivalents, including restricted cash. During the third quarter of 2017, the Company spent $8.2 million on capital improvements. The Company received reimbursements from one of its REIT partners totaling $1.5 million in the third quarter for capital improvements at certain leased communities and expects to receive additional reimbursements as the remaining projects at leased communities are completed.
As of September 30, 2017, the Company financed its owned communities with mortgages totaling $960.2 million at interest rates averaging 4.7%. All of the Companys debt is at fixed interest rates, except for two bridge loans totaling approximately $76.6 million at September 30, 2017, 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 Companys fixed-rate debt is in 2021.
The Companys 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 Companys acquisition, conversion and renovation programs.
Q3 2017 Conference Call Information
The Company will host a conference call with senior management to discuss the Companys third quarter 2017 financial results. The call will be held on Wednesday, November 1, 2017, at 5:00 p.m. Eastern Time. The call-in number is 323-701-0230, confirmation code 5634307. 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 Companys shareholders and the public, the conference call will be recorded and available for replay starting November 1, 2017 at 8:00 p.m. Eastern Time, until November 9, 2017 at 8:00 p.m. Eastern Time. To access the conference call replay, call 719-457-0820, confirmation code 5634307. The conference call will also be made available for playback via the Companys corporate website, www.capitalsenior.com.
CAPITAL/Page 6
Non-GAAP Financial Measures of Operating Performance
Adjusted EBITDAR is a financial valuation measure and Adjusted Net Income 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 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 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 (Loss) Income and Adjusted CFFO, along with the Companys consolidated balance sheets, statements of operations, and statements of cash flows.
About the Company
Capital Senior Living Corporation is one of the nations largest operators of residential communities for senior adults. The Companys operating strategy is to provide value to residents by providing quality senior housing services at reasonable prices. The Companys 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 129 senior housing communities in geographically concentrated regions with an aggregate capacity of approximately 16,500 residents.
CAPITAL/Page 7
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 Companys 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/Page 8
CAPITAL SENIOR LIVING CORPORATION
CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands, except per share data)
September 30, 2017 |
December 31, 2016 |
|||||||
ASSETS | ||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 9,186 | $ | 34,026 | ||||
Restricted cash |
13,372 | 13,297 | ||||||
Accounts receivable, net |
8,680 | 13,675 | ||||||
Property tax and insurance deposits |
12,912 | 14,665 | ||||||
Prepaid expenses and other |
3,978 | 6,365 | ||||||
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|
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Total current assets |
48,128 | 82,028 | ||||||
Property and equipment, net |
1,105,270 | 1,032,430 | ||||||
Other assets, net |
18,233 | 31,323 | ||||||
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Total assets |
$ | 1,171,631 | $ | 1,145,781 | ||||
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LIABILITIES AND SHAREHOLDERS EQUITY | ||||||||
Current liabilities: |
||||||||
Accounts payable |
$ | 3,975 | $ | 5,051 | ||||
Accrued expenses |
36,663 | 39,064 | ||||||
Current portion of notes payable, net of deferred loan costs |
16,482 | 17,889 | ||||||
Current portion of deferred income |
14,245 | 16,284 | ||||||
Current portion of capital lease and financing obligations |
2,806 | 1,339 | ||||||
Federal and state income taxes payable |
110 | 218 | ||||||
Customer deposits |
1,428 | 1,545 | ||||||
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Total current liabilities |
75,709 | 81,390 | ||||||
Deferred income |
10,504 | 12,205 | ||||||
Capital lease and financing obligations, net of current portion |
49,857 | 37,439 | ||||||
Other long-term liabilities |
15,273 | 15,325 | ||||||
Notes payable, net of deferred loan costs and current portion |
935,345 | 882,504 | ||||||
Commitments and contingencies |
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Shareholders equity: |
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Preferred stock, $.01 par value: |
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Authorized shares 15,000; no shares issued or outstanding |
| | ||||||
Common stock, $.01 par value: |
||||||||
Authorized shares 65,000; issued and outstanding shares 30,478 and 30,012 in 2017 and 2016, respectively |
310 | 305 | ||||||
Additional paid-in capital |
177,610 | 171,599 | ||||||
Retained deficit |
(89,547 | ) | (51,556 | ) | ||||
Treasury stock, at cost 494 shares in 2017 and 2016 |
(3,430 | ) | (3,430 | ) | ||||
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Total shareholders equity |
84,943 | 116,918 | ||||||
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Total liabilities and shareholders equity |
$ | 1,171,631 | $ | 1,145,781 | ||||
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CAPITAL/Page 9
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, |
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2017 | 2016 | 2017 | 2016 | |||||||||||||
Revenues: |
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Resident revenue |
$ | 117,318 | $ | 111,436 | $ | 350,026 | $ | 331,643 | ||||||||
Expenses: |
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Operating expenses (exclusive of facility lease expense and depreciation and amortization expense shown below) |
74,636 | 69,622 | 220,703 | 203,307 | ||||||||||||
General and administrative expenses |
5,361 | 5,749 | 17,678 | 16,969 | ||||||||||||
Facility lease expense |
13,943 | 15,500 | 42,498 | 46,150 | ||||||||||||
Loss on facility lease termination |
| | 12,858 | | ||||||||||||
Stock-based compensation expense |
1,962 | 2,479 | 5,833 | 7,482 | ||||||||||||
Depreciation and amortization expense |
16,903 | 14,400 | 50,862 | 44,103 | ||||||||||||
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Total expenses |
112,805 | 107,750 | 350,432 | 318,011 | ||||||||||||
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Income (Loss) from operations |
4,513 | 3,686 | (406 | ) | 13,632 | |||||||||||
Other income (expense): |
||||||||||||||||
Interest income |
19 | 15 | 51 | 50 | ||||||||||||
Interest expense |
(12,531 | ) | (10,636 | ) | (36,940 | ) | (30,966 | ) | ||||||||
Loss on disposition of assets, net |
(1 | ) | (16 | ) | (126 | ) | (53 | ) | ||||||||
Other income |
1 | | 6 | 233 | ||||||||||||
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Loss before provision for income taxes |
(7,999 | ) | (6,951 | ) | (37,415 | ) | (17,104 | ) | ||||||||
Provision for income taxes |
(133 | ) | (126 | ) | (394 | ) | (403 | ) | ||||||||
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Net loss |
$ | (8,132 | ) | $ | (7,077 | ) | $ | (37,809 | ) | $ | (17,507 | ) | ||||
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Per share data: |
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Basic net loss per share |
$ | (0.28 | ) | $ | (0.24 | ) | $ | (1.28 | ) | $ | (0.61 | ) | ||||
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Diluted net loss per share |
$ | (0.28 | ) | $ | (0.24 | ) | $ | (1.28 | ) | $ | (0.61 | ) | ||||
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Weighted average shares outstanding basic |
29,512 | 28,959 | 29,427 | 28,879 | ||||||||||||
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Weighted average shares outstanding diluted |
29,512 | 28,959 | 29,427 | 28,879 | ||||||||||||
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Comprehensive loss |
$ | (8,132 | ) | $ | (7,077 | ) | $ | (37,809 | ) | $ | (17,507 | ) | ||||
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CAPITAL/Page 10
CAPITAL SENIOR LIVING CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
Nine Months Ended September 30, |
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2017 | 2016 | |||||||
Operating Activities |
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Net loss |
$ | (37,809 | ) | $ | (17,507 | ) | ||
Adjustments to reconcile net loss to net cash provided by operating activities: |
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Depreciation and amortization |
50,862 | 44,103 | ||||||
Amortization of deferred financing charges |
1,216 | 870 | ||||||
Amortization of deferred lease costs and lease intangibles |
647 | 434 | ||||||
Amortization of lease incentives |
(950 | ) | (563 | ) | ||||
Deferred income |
(899 | ) | 15 | |||||
Lease incentives |
5,159 | 5,858 | ||||||
Loss on facility lease termination |
12,858 | | ||||||
Loss on disposition of assets, net |
126 | 53 | ||||||
Provision for bad debts |
1,355 | 1,214 | ||||||
Stock-based compensation expense |
5,833 | 7,482 | ||||||
Changes in operating assets and liabilities: |
||||||||
Accounts receivable |
(3,834 | ) | (8,883 | ) | ||||
Property tax and insurance deposits |
1,753 | 1,189 | ||||||
Prepaid expenses and other |
2,387 | (2,112 | ) | |||||
Other assets |
5,149 | (462 | ) | |||||
Accounts payable |
(1,076 | ) | (1,053 | ) | ||||
Accrued expenses |
(2,400 | ) | (1,586 | ) | ||||
Other liabilities |
3,649 | 8,652 | ||||||
Federal and state income taxes receivable/payable |
(108 | ) | (97 | ) | ||||
Deferred resident revenue |
(1,520 | ) | (784 | ) | ||||
Customer deposits |
(117 | ) | (249 | ) | ||||
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Net cash provided by operating activities |
42,281 | 36,574 | ||||||
Investing Activities |
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Capital expenditures |
(30,165 | ) | (47,311 | ) | ||||
Cash paid for acquisitions |
(85,000 | ) | (109,750 | ) | ||||
Proceeds from disposition of assets |
16 | 32 | ||||||
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Net cash used in investing activities |
(115,149 | ) | (157,029 | ) | ||||
Financing Activities |
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Proceeds from notes payable |
66,584 | 112,492 | ||||||
Repayments of notes payable |
(15,414 | ) | (12,881 | ) | ||||
Increase in restricted cash |
(75 | ) | (133 | ) | ||||
Cash payments for capital lease and financing obligations |
(2,117 | ) | (989 | ) | ||||
Cash proceeds from the issuance of common stock |
| 66 | ||||||
Excess tax benefits on stock options exercised |
| (27 | ) | |||||
Purchases of treasury stock |
| (2,496 | ) | |||||
Deferred financing charges paid |
(950 | ) | (1,830 | ) | ||||
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Net cash provided by financing activities |
48,028 | 94,202 | ||||||
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Decrease in cash and cash equivalents |
(24,840 | ) | (26,253 | ) | ||||
Cash and cash equivalents at beginning of period |
34,026 | 56,087 | ||||||
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|
|
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Cash and cash equivalents at end of period |
$ | 9,186 | $ | 29,834 | ||||
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|
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Supplemental Disclosures |
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Cash paid during the period for: |
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Interest |
$ | 35,108 | $ | 30,056 | ||||
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|
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Income taxes |
$ | 534 | $ | 564 | ||||
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CAPITAL/Page 11
Capital Senior Living Corporation
Supplemental Information
Average | ||||||||||||||||||||||||
Communities | Resident Capacity | Average Units | ||||||||||||||||||||||
Q3 17 | Q3 16 | Q3 17 | Q3 16 | Q3 17 | Q3 16 | |||||||||||||||||||
Portfolio Data |
||||||||||||||||||||||||
I. Community Ownership / Management |
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Consolidated communities |
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Owned |
83 | 78 | 10,767 | 9,771 | 8,119 | 7,255 | ||||||||||||||||||
Leased |
46 | 50 | 5,756 | 6,333 | 4,414 | 4,900 | ||||||||||||||||||
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Total |
129 | 128 | 16,523 | 16,104 | 12,533 | 12,155 | ||||||||||||||||||
Independent living |
6,879 | 6,911 | 5,158 | 5,227 | ||||||||||||||||||||
Assisted living |
9,644 | 9,193 | 7,375 | 6,928 | ||||||||||||||||||||
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|
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Total |
16,523 | 16,104 | 12,533 | 12,155 | ||||||||||||||||||||
II. Percentage of Operating Portfolio |
||||||||||||||||||||||||
Consolidated communities |
||||||||||||||||||||||||
Owned |
64.3 | % | 60.9 | % | 65.2 | % | 60.7 | % | 64.8 | % | 59.7 | % | ||||||||||||
Leased |
35.7 | % | 39.1 | % | 34.8 | % | 39.3 | % | 35.2 | % | 40.3 | % | ||||||||||||
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Total |
100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||||||
Independent living |
41.6 | % | 42.9 | % | 41.2 | % | 43.0 | % | ||||||||||||||||
Assisted living |
58.4 | % | 57.1 | % | 58.8 | % | 57.0 | % | ||||||||||||||||
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Total |
100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % |
CAPITAL/Page 12
Capital Senior Living Corporation
Supplemental Information (excludes four communities being repositioned/leased up and two Houston communities impacted by Hurricane Harvey)
Q3 17 | Q3 16 | |||||||
Selected Operating Results |
||||||||
I. Owned communities |
||||||||
Number of communities |
78 | 73 | ||||||
Resident capacity |
9,841 | 8,845 | ||||||
Unit capacity (1) |
7,469 | 6,528 | ||||||
Financial occupancy (2) |
88.7 | % | 89.5 | % | ||||
Revenue (in millions) |
69.6 | 59.4 | ||||||
Operating expenses (in millions) (3) |
44.1 | 37.2 | ||||||
Operating margin (3) |
37 | % | 37 | % | ||||
Average monthly rent |
3,500 | 3,389 | ||||||
II. Leased communities |
||||||||
Number of communities |
45 | 49 | ||||||
Resident capacity |
5,530 | 6,107 | ||||||
Unit capacity (1) |
4,227 | 4,713 | ||||||
Financial occupancy (2) |
84.5 | % | 87.3 | % | ||||
Revenue (in millions) |
40.6 | 44.6 | ||||||
Operating expenses (in millions) (3) |
23.6 | 24.9 | ||||||
Operating margin (3) |
42 | % | 44 | % | ||||
Average monthly rent |
3,785 | 3,612 | ||||||
III. Consolidated communities |
||||||||
Number of communities |
123 | 122 | ||||||
Resident capacity |
15,371 | 14,952 | ||||||
Unit capacity |
11,696 | 11,241 | ||||||
Financial occupancy (2) |
87.2 | % | 88.6 | % | ||||
Revenue (in millions) |
110.1 | 104.0 | ||||||
Operating expenses (in millions) (3) |
67.7 | 62.1 | ||||||
Operating margin (3) |
39 | % | 40 | % | ||||
Average monthly rent |
3,600 | 3,482 | ||||||
IV. Communities under management |
||||||||
Number of communities |
123 | 122 | ||||||
Resident capacity |
15,371 | 14,952 | ||||||
Unit capacity (1) |
11,696 | 11,241 | ||||||
Financial occupancy (2) |
87.2 | % | 88.6 | % | ||||
Revenue (in millions) |
110.1 | 104.0 | ||||||
Operating expenses (in millions) (3) |
67.7 | 62.1 | ||||||
Operating margin (3) |
39 | % | 40 | % | ||||
Average monthly rent |
3,600 | 3,482 | ||||||
V. Same communities under management |
||||||||
Number of communities |
120 | 120 | ||||||
Resident capacity |
14,815 | 14,617 | ||||||
Unit capacity (1) |
11,294 | 11,234 | ||||||
Financial occupancy (2) |
87.2 | % | 88.6 | % | ||||
Revenue (in millions) |
105.5 | 103.9 | ||||||
Operating expenses (in millions) (3) |
64.6 | 62.0 | ||||||
Operating margin (3) |
39 | % | 40 | % | ||||
Average monthly rent |
3,572 | 3,481 | ||||||
VI. General and Administrative expenses as a percent of Total Revenues under Management |
||||||||
Third quarter (4) |
4.3 | % | 4.7 | % | ||||
Year to date (4) |
4.6 | % | 4.6 | % | ||||
VII. Consolidated Mortgage Debt Information (in thousands, except interest
rates) |
||||||||
Total fixed rate mortgage debt |
883,607 | 861,657 | ||||||
Total variable rate mortgage debt |
76,565 | 11,800 | ||||||
Weighted average interest rate |
4.7 | % | 4.6 | % |
(1) | Due to conversion and refurbishment projects completed at certain communities, unit capacity is higher in Q3 17 than Q3 16 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) | Excludes transaction and conversion costs. |
CAPITAL/Page 13
CAPITAL SENIOR LIVING CORPORATION
NON-GAAP RECONCILIATIONS
(In thousands, except per share data)
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Adjusted EBITDAR |
||||||||||||||||
Net loss |
$ | (8,132 | ) | $ | (7,077 | ) | $ | (37,809 | ) | $ | (17,507 | ) | ||||
Depreciation and amortization expense |
16,903 | 14,400 | 50,862 | 44,103 | ||||||||||||
Stock-based compensation expense |
1,962 | 2,479 | 5,833 | 7,482 | ||||||||||||
Facility lease expense |
13,943 | 15,500 | 42,498 | 46,150 | ||||||||||||
Loss on facility lease termination |
| | 12,858 | | ||||||||||||
Provision for bad debts |
380 | 405 | 1,355 | 1,214 | ||||||||||||
Interest income |
(19 | ) | (15 | ) | (51 | ) | (50 | ) | ||||||||
Interest expense |
12,531 | 10,636 | 36,940 | 30,966 | ||||||||||||
Loss (Gain) on disposition of assets, net |
1 | 16 | 126 | 53 | ||||||||||||
Other income |
(1 | ) | | (6 | ) | (233 | ) | |||||||||
Provision for income taxes |
133 | 126 | 394 | 403 | ||||||||||||
Casualty losses |
704 | 634 | 1,727 | 1,069 | ||||||||||||
Transaction and conversion costs |
439 | 1,663 | 1,992 | 3,063 | ||||||||||||
Communities excluded due to repositioning/lease-up |
(927 | ) | (779 | ) | (2,740 | ) | (2,434 | ) | ||||||||
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Adjusted EBITDAR |
$ | 37,917 | $ | 37,988 | $ | 113,979 | $ | 114,279 | ||||||||
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Adjusted Revenues |
||||||||||||||||
Total revenues |
$ | 117,318 | $ | 111,436 | $ | 350,026 | $ | 331,643 | ||||||||
Communities excluded due to repositioning/lease-up |
(5,820 | ) | (4,399 | ) | (15,161 | ) | (13,198 | ) | ||||||||
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|
|
|
|||||||||
Adjusted revenues |
$ | 111,498 | $ | 107,037 | $ | 334,865 | $ | 318,445 | ||||||||
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|
|
|
|
|||||||||
Adjusted net loss and Adjusted net loss per share |
|
|||||||||||||||
Net loss |
$ | (8,132 | ) | $ | (7,077 | ) | $ | (37,809 | ) | $ | (17,507 | ) | ||||
Casualty losses |
704 | 634 | 1,727 | 1,069 | ||||||||||||
Transaction and conversion costs |
517 | 1,663 | 2,554 | 2,831 | ||||||||||||
Resident lease amortization |
2,085 | 2,583 | 7,407 | 9,593 | ||||||||||||
Loss on facility lease termination |
| | 12,859 | | ||||||||||||
Loss (Gain) on disposition of assets |
1 | 16 | 126 | 53 | ||||||||||||
Tax impact of Non-GAAP adjustments (37%) |
(1,224 | ) | (1,812 | ) | (9,129 | ) | (5,012 | ) | ||||||||
Deferred tax asset valuation allowance |
3,086 | 2,976 | 14,020 | 6,398 | ||||||||||||
Communities excluded due to repositioning/lease-up |
750 | 334 | 1,787 | 994 | ||||||||||||
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|
|
|
|
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|
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Adjusted net (loss) income |
$ | (2,213 | ) | $ | (683 | ) | $ | (6,458 | ) | $ | (1,581 | ) | ||||
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Diluted shares outstanding |
29,512 | 28,959 | 29,427 | 28,879 | ||||||||||||
|
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|
|
|
|
|
|||||||||
Adjusted net (loss) income per share |
$ | (0.07 | ) | $ | (0.02 | ) | $ | (0.22 | ) | $ | (0.05 | ) | ||||
|
|
|
|
|
|
|
|
|||||||||
Adjusted CFFO |
||||||||||||||||
Net loss |
$ | (8,132 | ) | $ | (7,077 | ) | $ | (37,809 | ) | $ | (17,507 | ) | ||||
Non-cash charges, net |
20,628 | 19,597 | 76,207 | 59,466 | ||||||||||||
Lease incentives |
(1,504 | ) | (1,968 | ) | (5,159 | ) | (5,858 | ) | ||||||||
Recurring capital expenditures |
(1,186 | ) | (1,155 | ) | (3,559 | ) | (3,451 | ) | ||||||||
Casualty losses |
735 | 634 | 1,759 | 1,069 | ||||||||||||
Transaction and conversion costs |
517 | 1,663 | 2,329 | 2,831 | ||||||||||||
Tax impact of Spring Meadows Transaction |
| (106 | ) | | (318 | ) | ||||||||||
Communities excluded due to repositioning/lease-up |
29 | (1 | ) | (203 | ) | (92 | ) | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Adjusted CFFO |
$ | 11,087 | $ | 11,587 | $ | 33,565 | $ | 36,140 | ||||||||
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***
Capital Senior Living A Leading Pure-Play Senior Housing Owner-Operator Exhibit 99.2
Forward-Looking Statements The forward-looking statements in this presentation 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 complete the refinancing of certain of our wholly owned communities, realize the anticipated savings related to such financing, find suitable acquisition properties at favorable terms, financing, licensing, business conditions, risks of downturns in economic conditions generally, satisfaction of closing conditions such as those pertaining to licensures, 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 The Company assumes no obligation to update or supplement forward-looking statements in this presentation that become untrue because of new information, subsequent events or otherwise.
Non-GAAP Financial Measures Adjusted EBITDAR is a financial valuation measure and Adjusted Net Income 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 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 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 the reconciliation of net loss to Adjusted EBITDAR and the reconciliation of net (loss) income to Adjusted Net (Loss) Income and Adjusted CFFO, on the last page of the Company’s third quarter 2017 earnings release dated November 1, 2017, along with the Company’s consolidated balance sheets, statements of operations, and statements of cash flows, which can be found on the Company’s website at www.capitalsenior.com/investor-relations/press-releases/
Capital Senior Living Investment Rationale Attractively Positioned in the Highly Fragmented Senior Housing Market Executing a Long-Term, Sustainable Growth Strategy with a Focus on Real Estate Ownership Capital Plan Supports Long-Term Growth Initiatives Track Record of Strong Growth and Uniquely Positioned for Continued Success CSU has a clear and differentiated real-estate strategy to drive industry-leading growth and superior shareholder value 1 4 2 3
Attractively Positioned in the Highly Fragmented Senior Housing Market 1
Top-10 Operator and Pure-Play Senior Housing Company Portfolio Mix (Average Units) As of September 30, 2017 AR. 173 AZ. 189 CT. 238 FL. 429 IA. 122 IL. 762 IN. 2,440 MI. 173 MN. 173 MO. 662 MS. 143 NC. 457 SC. 683 NE. 650 NJ. 98 NY. 603 OH. 2,372 TX. 3,990 VA. 455 CA. 408 CA. 408 AZ. 189 Resident Capacity By State Capital Senior Living operates 129 communities in geographically concentrated regions with the capacity to serve 16,500 residents WI. 741 GA. 168 MA. 323 Number of residents by State Greater than 2,000 500 - 2,000 Less than 500 Assisted Living
One of the Largest Senior Housing Owners by Percentage of Ownership Ownership Evolution Advantages to Real Estate Ownership Ownership of 10 Largest US Senior Housing Operators Maximizes cash flow and real estate value by providing valuation support Stronger margin profile Eliminates lease escalators, driving sustainable cash flows Optimizes asset management and financial flexibility Ability to reposition communities Ability to increase loans based on the appreciated value to re-deploy the capital into growth initiatives Owned % 129 Total Properties 77 Total Properties 32.5% 64.3% 2016 Properties Owned 179 161 83 9 407 86 37 26 0 0 2016 Properties Operated 179 213 129 18 1,114 308 140 276 252 156 Source: ASHA 2016 Top 50, company filings and investor presentations. Note: Five Star Senior Living pro forma for property acquisitions and divestitures. (1) Primarily minority interest in joint ventures. (1) NM NM
CSU’s Pure-Play Private-Pay Senior Housing Model has Many Similarities to the Multi-Family and Lodging Sectors, While Historically Providing Investors with Higher Returns Key Housing Sector Drivers Benchmarking the Housing Sector Senior Housing Yields Consistent High Investment Returns NCREIF Annualized Total Investment Returns (1,3,5, 10-Year Periods, as of 12/31/16) Momentum: ’17/’18 vs. ’15/’16 ’17/’18 Average M-RevPAF (1) Expected Actual & Momentum Source: Green Street Advisors and NIC MAP Data Service as of 12/31/16. (1)M-RevPAF is Market Revenue per Available Foot and represents the combined changes in occupancy (demand) and rents (pricing). Strongest Weakest Waning Waxing
The Senior Living Market Offers Attractive Long Term Fundamentals... U.S. population 75+ years old is expected to increase from ~6% of total current population to 12% by 2030 Current penetration rate implies demand growth of ~40K units per annum 75% of the Independent Living market and 63% of the Assisted Living market is comprised of small players operating at a cost structure disadvantage (Population in thousands) 75% Expected Growth from 2014 to 2030 Top 10 Remaining Market Top 25 Clear opportunity for scale players to capture a disproportionate share of growth through organic initiatives and accretive acquisitions Source: 2010 Consensus Summary File 1, U.S. Census Bureau, Population Division, IBISWorld and Wall Street Research. U.S. Seniors Population Trends (75+ years old) Independent Living Companies Assisted Living Companies
...and a Highly Constructive Current Operating Environment Source: NIC MAP Data Service as of 09/30/17. Occupancy Stabilizing Across the Country AL Rent is Stabilizing as IL Experiences Lower Growth Average Stabilized Occupancy YoY Rent Growth Senior Housing IL AL Industry Supply is Stabilizing in IL and Senior Housing Construction as % of Inventory Since 2Q 2016, overall industry supply has relatively remained flat across Senior Housing and IL AL saw a slight uptick in supply in 3Q 2017 Senior Housing IL AL
CSU Has Limited Exposure to the Top 10 MSAs with the Highest Levels of Construction Source: NIC MAP Data Service data as of 09/30/2017. Senior Housing Construction vs. Inventory Across the U.S. Top 10 Highest Construction in MSAs Total CSU units in top 10 highest construction MSAs (~2% of total CSU units) Over ~99% of CSU units are located outside of the top 10 highest construction MSAs Capital Senior Living Community 0 – 2% Construction vs. Inventory > 24% Metro Construction vs Inventory CSU Units CSU Occupancy Trenton, NJ 25.7% Fort Myers, FL 19.7% Colorado Springs, CO 17.7% Orlando, FL 15.6% Charleston, SC 15.3% Columbus, OH 15.2% 111 97.4% Atlanta, GA 14.0% The Villages, FL 14.0% Jacksonville, FL 13.8% Austin, TX 13.4% 111
Executing a Long-Term, Sustainable Growth Strategy with a Focus on Real Estate Ownership 2
Executing a Long-Term, Sustainable Growth Strategy with a Focus on Real Estate Ownership Conversions Accretive Acquisitions Core Organic Growth Increasing Real Estate Ownership
Core Organic Growth Driven by Occupancy, Pricing Improvements and Cost Containment Occupancy improvement where opportunity exists Increasing average rents through increasing market and in-house rents and level of care charges Proactive expense management Cash flow enhancing renovations and refurbishments Core Organic Growth Increasing Occupancy and Average Monthly Rent Trends Average Rent Occupancy %
Taking Immediate Action to Drive Sustainable Profitable Growth and Enhance Shareholder Value Executing comprehensive strategy to drive higher revenues, enhance cash flow and maximize value of real estate portfolio Instituting new operating model and realigning sales team to instill greater accountability and drive operational excellence Strengthened team with the recent appointment of Brett Lee as COO Strong record of operational success within healthcare services sector Experience leading operations within highly complex care delivery environments Building more centralized, robust operating platform to improve all facets of community operations to better serve residents Quality Service People Growth Cost
Moving to Centralized Platform to Improve Community Operations While Serving New Residents Implemented immediate occupancy growth plans and budget recovery goals for each community Leveraging operational scale to optimize supply chain and large expense categories Revised sales and marketing structure to improve performance Evaluating opportunities to enhance care in existing communities Addressing internal structural challenges by implementing: Regional review and approval of all contract labor/premium pay Staffing grid to address variation in labor cost through standardization Expect the continued execution of strategic plan to produce growth in all key metrics for the remainder of 2017 and beyond
Upholding Highest Standards of Core Pillars to Improve Resident Experience Continuously focused on improving resident satisfaction by upholding the highest quality standards for each community through standardized processes, protocols and policies We maintain a family-centered culture so all residents feel as if they are part of the Capital Senior Living family The Capital Operating System drives all facets of our community operations Quality Service People Growth Cost
Strategic Accretive Acquisitions have Achieved 16% Average Cash-On-Cash Returns Year 1 Cash-On-Cash Returns With a strong reputation among sellers, CSU sources the majority of acquisitions off market and at attractive terms, and maintains a robust pipeline of near-to medium-term targets Acquisitions financed with attractive fixed rate non-recourse mortgage loans Weighted average interest rate has decreased 134bps since 2010 Total Purchase Price ($mm) $ 83.4M $ 181.3 $ 150.4 $ 160.2 $ 162.5 $ 138.4 $ 85.0 Communities 7 17 11 8 9 8 4 Units 551 1,367 881 819 791 723 547 Average Borrowing Rate 5.1% 4.5% 5.4% 4.5% 4.3% 4.3% 4.8%* 10-Year Treasury Range 1.7% - 3.2% 1.4% - 2.4% 1.7% - 3.0% 2.1% - 3.0% 1.7% - 2.5% 1.4% - 2.5% 2.2% - 2.6% * Variable Rate
Increasing Owned Portfolio Provides Increased Financial Flexibility CSU has achieved on average a 42.0% increase in property value over a 3 year period at communities on which it has executed supplemental loans in 2015 and 2016, which has provided financial flexibility through $66.3mm of proceeds for re-deployment to growth initiatives $140.9 $296.0 Appreciated Value of Supplemental Loan Properties 32.5% 38.1% 47.5% 52.7% 58.7% 57.3% Capital Senior Living’s Ownership History Owned % 61.2% 64.3%
Conversions Drive Significant Improvements in Key Financial Metrics Revenue and NOI Growth – 3Q17 vs. 2Q14 (Period prior to Conversions)(1) Expected Completion of Units Out of Service (2) 776 total units were out of service at the beginning of 2017; when stabilized, the total 776 units are currently expected to contribute more than $30M of Revenue, $10M of EBITDAR and $7M of CFFO on an annual basis Three communities being repositioned or under significant renovation; all units are out of CSU non-GAAP statistical and financial measures and will be added back when the communities reach stabilization Units Represents the 400 units with conversions completed as of 2Q15. Represents when the units are completed. Actual contributions of Revenue, EBITDAR and CFFO will depend on timing of lease-up. 543 233 2
Capital Plan Supports Long-Term Growth Initiatives 3
Transaction Overview Overview of the Transaction CSU purchased four previously leased properties in January 2017 Purchase Price: $85mm CFFO accretion of $3.0mm in Year 1 Percentage of Owned Real Estate Owned % 129 Total Properties 129 Total Properties 61.2% 64.3% Benefits of the Transaction Maximizes cash flow and real estate value by providing valuation support Stronger margin profile Eliminates lease escalators, driving sustainable cash flows Optimizes asset management and financial flexibility Ability to reposition communities Ability to increase loans based on the appreciated value to re-deploy the capital into growth initiatives Increased owned portfolio from 61.2% to 64.3%
Track Record of Strong Growth and Uniquely Positioned for Continued Success 4
Strategy and Execution Have Delivered Strong Growth Revenue (1) Adjusted EBITDAR Adjusted CFFO (2) Note: $ in millions. Excludes community reimbursement revenue and management services revenue. (2)Excludes prepaid resident rent and tax savings related to cost segregation studies in 2012 and 2013. ($ In Millions) ($ In Millions) 18.9% CAGR 14.7% CAGR 14.2% CAGR ($ In Millions)
Healthy Balance Sheet to Support Future Initiatives Assets Cash and Securities $ 22.6 Other Current Assets 25.5 Total Current Assets 48.1 Fixed Assets 1,105.3 Other Assets 18.2 Total Assets $ 1,171.6 Liabilities & Equity Current Liabilities $ 75.7 Long-Term Debt 935.3 Other Liabilities 75.7 Total Liabilities 1,086.7 Stockholders’ Equity 84.9 Total Liabilities & Equity $ 1,171.6 As of September 30, 2017 (in millions)
Debt Maturities CSU has ample financial capacity to pursue all initiatives contemplated under its growth strategy No near term debt maturities Acquisitions financed with attractive fixed rate non-recourse mortgage loans Average duration of debt is 6.6 years, with approximately 92% of all debt maturing in 2021 and after (In thousands) Ample Financial Capacity to Pursue Growth Initiatives
Capital Senior Living Investment Rationale Attractively Positioned in the Highly Fragmented Senior Housing Market Executing a Long-Term, Sustainable Growth Strategy with a Focus on Real Estate Ownership Capital Plan Supports Long-Term Growth Initiatives Track Record of Strong Growth and Uniquely Positioned for Continued Success CSU has a clear and differentiated real-estate strategy to drive industry-leading growth and superior shareholder value 1 4 2 3 Conversions Accretive Acquisitions Core Organic Growth Increasing Real Estate Ownership
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