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) February 27, 2018
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 February 27, 2018, Capital Senior Living Corporation (the Company) announced its financial results for the fourth quarter and fiscal year ended December 31, 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 8.01 | Other Events. |
The 2018 annual meeting of stockholders of the Company (the Annual Meeting) has been scheduled for May 10, 2018. The record date for the Annual Meeting has been set as the close of business on March 26, 2018.
The Company will be filing a proxy statement and other documents regarding the Annual Meeting with the Securities and Exchange Commission (the SEC). The Companys stockholders are urged to read the proxy statement and other relevant materials when they become available, because they will contain important information about the Company, the Annual Meeting and related matters. Stockholders may obtain a free copy of the Companys proxy statement, when available, and other documents filed by the Company with the SEC at the SECs website (www.sec.gov) and in the investor relations section of the Companys website (www.capitalsenior.com).
Item 9.01 | Financial Statements and Exhibits. |
(a) | Not applicable. |
(b) | Not applicable. |
(c) | Not applicable. |
(d) | Exhibits. |
*99.1 | Press Release dated February 27, 2018. | |
*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: February 27, 2018 | Capital Senior Living Corporation | |||||
By: | /s/ Carey P. Hendrickson | |||||
Name: | Carey P. Hendrickson | |||||
Title: | Senior Vice President and | |||||
Chief Financial Officer |
Exhibit 99.1
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PRESS CONTACT: Carey Hendrickson, Chief Financial Officer Phone: 1-972-770-5600 | |||
FOR IMMEDIATE RELEASE |
CAPITAL SENIOR LIVING CORPORATION
REPORTS FOURTH QUARTER AND FULL YEAR 2017 RESULTS
DALLAS (GLOBE NEWSWIRE) February 27, 2018 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 fourth quarter and full year 2017.
Focused execution on our key initiatives resulted in growth in our same-community NOI, Adjusted EBITDAR and Adjusted CFFO in the fourth quarter on both a sequential and year-over-year basis, said Lawrence A. Cohen, Chief Executive Officer of the Company. In 2017, we made a number of broad-based organizational and operational changes to refocus our company-wide culture of high reliability, accountability and operational excellence. We took immediate action to overcome challenges and drive sustainable profitable growth. We also continue to execute our comprehensive strategy to deliver higher revenues, enhance cash flow and maximize the value of our owned real estate. We are particularly pleased that the proactive systems and protocols we implemented to combat the severe flu season greatly minimized its spread throughout our communities.
The initiatives we implemented are expected to produce further improvement in our key metrics in 2018 and beyond, and provide a strong foundation for us to execute our long-term 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.
With a disciplined focus on our growth strategy and driving operational improvements, we are well positioned to enhance shareholder value and capitalize on our competitive advantages as a leading pure-play private-pay senior housing owner/operator.
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.)
CAPITAL/Page 2
| Revenue in the fourth quarter of 2017, including all communities, was $117.0 million, a $1.2 million, or 1.0%, increase from the fourth quarter of 2016. Revenue for full year 2017 was $467.0 million, a $19.5 million, or 4.4%, increase from full year 2016. The fourth quarter of 2017 includes no revenue from the Companys two communities impacted by Hurricane Harvey in late August 2017. Full year 2017 includes almost nine months of revenue related to these communities. |
| Revenue for consolidated communities, and also excluding the Companys two communities impacted by Hurricane Harvey, was $110.9 million in the fourth quarter of 2017, an increase of 2.6% as compared to the fourth quarter of 2016. For full year 2017, revenue on the same basis was $438.0 million, a 5.1% increase as compared to full year 2016. |
| Occupancy for the Companys consolidated communities, and excluding the Companys two communities impacted by Hurricane Harvey, was 87.5% in the fourth quarter of 2017, an increase of 30 basis points from the third quarter of 2017 and a decrease of 110 basis points from the fourth quarter of 2016. Same-community occupancy was 87.4% in the fourth quarter of 2017, a 30 basis point increase from the third quarter of 2017 and a 120 basis point decrease from the fourth quarter of 2016. |
| Average monthly rent for the Companys consolidated communities, and excluding the Companys two communities impacted by Hurricane Harvey, in the fourth quarter of 2017 was $3,613, an increase of $110 per occupied unit, or 3.1%, as compared to the fourth quarter of 2016. Same-community average monthly rent was $3,603, an increase of $107 per occupied unit, or 3.1%, from the fourth quarter of 2016. |
| Income from operations, including all communities, was $8.2 million in the fourth quarter of 2017, which includes the non-cash amortization of resident leases of $0.3 million associated with communities acquired by the Company in the previous 12 months. Income from operations, including all communities, for full year 2017 was $7.8 million, which includes a non-cash lease termination charge of $12.9 million associated with the Companys purchase in January 2017 of four communities it previously leased and the non-cash amortization of resident leases of $7.8 million associated with communities acquired by the Company in the previous 12 months. |
| The Companys Net Loss for the fourth quarter of 2017, including all communities, was $6.4 million, which includes the non-cash amortization of resident leases of $0.3 million associated with communities acquired by the Company in the previous 12 months and a non-cash charge of $1.9 million primarily related to reassessment of the Companys deferred tax assets and liabilities associated with tax reform under the Tax Cuts and Jobs Act enacted by Congress in December 2017. Net loss for full year 2017 was $44.2 million, which includes these previously noted items: $12.9 million non-cash lease termination charge, $7.8 million of non-cash amortization of resident leases and the $1.9 million non-cash tax charge related to tax reform. |
CAPITAL/Page 3
| Excluding items noted and reconciled on the final page of this release, the Companys adjusted net loss was $2.2 million in the fourth quarter of 2017 and $8.7 million for full year 2017. |
| Adjusted EBITDAR was $39.4 million in the fourth quarter of 2017 compared to $38.6 million in the fourth 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 $1.0 million of EBITDAR in the fourth quarter of 2017. Adjusted EBITDAR was $153.4 million for full year 2017. The four communities undergoing repositioning generated an additional $3.7 million for full year 2017. |
| Adjusted Cash From Facility Operations (CFFO) was $12.3 million in the fourth quarter of 2017 compared to $12.2 million in the fourth quarter of 2016. For full year 2017, Adjusted CFFO was $45.9 million. |
| During the fourth quarter of 2017, the Company completed supplemental loans on two communities that resulted in $7.1 million in net cash proceeds. These loans have an average interest rate of 5.6% and mature coterminous with the original loans in 2023 and 2025. |
Financial Results - Fourth Quarter
For the fourth quarter of 2017, the Company reported revenue of $117.0 million, compared to revenue of $115.8 million in the fourth quarter of 2016, an increase of 1.0%. 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 2.6% in the fourth quarter of 2017 as compared to the fourth quarter of 2016.
Operating expenses for the fourth quarter of 2017 were $71.3 million, a decrease of $0.5 million from the fourth quarter of 2016, despite approximately $0.5 million of additional operating expenses in the fourth quarter of 2017 as compared to the fourth quarter of 2016 due to the acquisition of a senior housing community in November 2016. Operating expenses include a $1.5 million business interruption insurance credit related to the Companys two Houston communities impacted by Hurricane Harvey to offset the lost revenues and continuing expenses, and to restore the communities net income for the fourth quarter of 2017 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 fourth quarter of 2017 were $5.9 million. This compares to general and administrative expenses of $6.7 million in the fourth quarter of 2016. Excluding transaction and conversion costs in both periods, general
CAPITAL/Page 4
and administrative expenses increased $0.9 million in the fourth quarter of 2017 as compared to the fourth quarter of 2016, primarily due to a $0.6 million increase in net healthcare expense year over year. As a percentage of revenues under management, general and administrative expenses, excluding transaction and conversion costs, were 4.8% in the fourth quarter of 2017 compared to 4.1% in the fourth quarter of 2016.
Income from operations for the fourth quarter of 2017 was $8.2 million. The Company recorded a net loss on a GAAP basis of $6.4 million in the fourth 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 fourth 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).
Adjusted EBITDAR for the fourth quarter of 2017 was $39.4 million as compared to $38.6 million in the fourth quarter of 2016. The four communities undergoing repositioning, lease-up or significant renovation and conversion not included in Adjusted EBITDAR generated an additional $1.0 million of EBITDAR.
Adjusted CFFO was $12.3 million in the fourth quarter of 2017, as compared to $12.2 million in the fourth quarter of 2016.
Financial Results Full Year
The Company reported 2017 revenue of $467.0 million, compared to revenue of $447.4 million in 2016, an increase of 4.4%. 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 5.1% in 2017 as compared to 2016. Operating expenses were $290.7 million in 2017, an increase of $16.8 million from 2016.
General and administrative expenses were $23.6 million in 2017 compared to $23.7 million in 2016. General and administrative expenses as a percentage of revenues under management, excluding one-time, transaction and conversion costs, were 4.7% in 2017 compared to 4.4% in 2016.
Income from operations for full year 2017 was $7.8 million. The Company recorded a net loss on a GAAP basis of $44.2 million for full year 2017. Excluding non-recurring or non-economic items reconciled on the final page of this release, the Companys adjusted net loss was $8.7 million for full year 2017.
Adjusted EBITDAR was $153.4 million for full year 2017. The four communities undergoing repositioning, lease-up or significant renovation and conversion, not included in Adjusted EBITDAR, generated an additional $3.7 million of EBITDAR in 2017. Adjusted CFFO for 2017 was $45.9 million.
CAPITAL/Page 5
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 one community that was acquired during the fourth quarter of 2016. Same-community results also exclude certain transaction and conversion costs.
Same-community revenue in the fourth quarter of 2017 increased 2.1% versus the fourth quarter of 2016.
Same-community operating expenses increased 1.7% from the fourth quarter of the prior year, excluding conversion costs in both periods. On the same basis, labor costs, including benefits, increased 1.4% and utilities increased 3.0%, while food costs decreased 2.3%, all as compared to the fourth quarter of 2016. At communities that have not converted units to higher levels of care in the last year, labor costs decreased 0.6%. Contract labor costs decreased $0.3 million sequentially from the third quarter of 2017 and were essentially flat with the fourth quarter of 2016. Same-community net operating income increased approximately 3.0% in the fourth quarter of 2017 as compared to the fourth quarter of 2016.
Capital expenditures for the third quarter of 2017 were $9.8 million, representing approximately $8.3 million of investment spending and approximately $1.5 million of recurring capital expenditures.
Balance Sheet
The Company ended the quarter with $31.0 million of cash and cash equivalents, including restricted cash. During the fourth quarter of 2017, the Company spent $9.8 million on capital improvements and received net cash proceeds of $7.1 million related to supplemental loans on two communities. The Company received reimbursements from one of its REIT partners totaling $0.5 million in the fourth 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 December 31, 2017, the Company financed its owned communities with mortgages totaling $963.1 million at interest rates averaging 4.7%. All of the Companys debt is at fixed interest rates, except for two bridge loans totaling approximately $76.5 million at December 31, 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.
CAPITAL/Page 6
Q4 2017 Conference Call Information
The Company will host a conference call with senior management to discuss the Companys fourth quarter and full year 2017 financial results. The call will be held on Tuesday, February 27, 2018, at 5:00 p.m. Eastern Time. The call-in number is 323-701-0230, confirmation code 5306718. 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 February 27, 2018 at 8:00 p.m. Eastern Time, until March 7, 2018 at 8:00 p.m. Eastern Time. To access the conference call replay, call 719-457-0820, confirmation code 5306718. The conference call will also be made available for playback via the Companys corporate website, www.capitalsenior.com.
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.
CAPITAL/Page 7
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 memory care services, to provide residents the opportunity to age in place. The Company operates 129 senior housing communities in geographically concentrated regions with an aggregate capacity of approximately 16,500 residents.
Safe Harbor
The forward-looking statements in this release are subject to certain risks and uncertainties that could cause results to differ materially, including, but not without limitation to, the 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
(audited, in thousands, except per share data)
December 31, | ||||||||
2017 | 2016 | |||||||
(In thousands) | ||||||||
ASSETS | ||||||||
Current assets: |
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Cash and cash equivalents |
$ | 17,646 | $ | 34,026 | ||||
Restricted cash |
13,378 | 13,297 | ||||||
Accounts receivable, net |
12,307 | 13,675 | ||||||
Property tax and insurance deposits |
14,386 | 14,665 | ||||||
Prepaid expenses and other |
6,332 | 6,365 | ||||||
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Total current assets |
64,049 | 82,028 | ||||||
Property and equipment, net |
1,099,786 | 1,032,430 | ||||||
Other assets, net |
18,836 | 31,323 | ||||||
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Total assets |
$ | 1,182,671 | $ | 1,145,781 | ||||
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LIABILITIES AND SHAREHOLDERS EQUITY | ||||||||
Current liabilities: |
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Accounts payable |
$ | 7,801 | $ | 5,051 | ||||
Accrued expenses |
40,751 | 39,064 | ||||||
Current portion of notes payable, net of deferred loan costs |
19,728 | 17,889 | ||||||
Current portion of deferred income |
13,840 | 16,284 | ||||||
Current portion of capital lease and financing obligations |
3,106 | 1,339 | ||||||
Federal and state income taxes payable |
383 | 218 | ||||||
Customer deposits |
1,394 | 1,545 | ||||||
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Total current liabilities |
87,003 | 81,390 | ||||||
Deferred income |
10,033 | 12,205 | ||||||
Capital lease and financing obligations, net of current portion |
48,805 | 37,439 | ||||||
Deferred taxes |
1,941 | | ||||||
Other long-term liabilities |
16,250 | 15,325 | ||||||
Notes payable, net of deferred loan costs and current portion |
938,206 | 882,504 | ||||||
Commitments and contingencies |
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Shareholders equity: |
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Preferred stock, $.01 par value: |
| | ||||||
Authorized shares 15,000; no shares issued or outstanding |
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Common stock, $.01 par value: |
||||||||
Authorized shares 65,000; issued and outstanding shares 30,505 and 30,012 in 2017 and 2016, respectively |
310 | 305 | ||||||
Additional paid-in capital |
179,459 | 171,599 | ||||||
Retained deficit |
(95,906 | ) | (51,556 | ) | ||||
Treasury stock, at cost 494 shares in 2017 and 2016 |
(3,430 | ) | (3,430 | ) | ||||
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Total shareholders equity |
80,433 | 116,918 | ||||||
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Total liabilities and shareholders equity |
$ | 1,182,671 | $ | 1,145,781 | ||||
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CAPITAL/Page 9
CAPITAL SENIOR LIVING CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(audited, in thousands, except per share data)
Three Months Ended December 31, |
Year Ended December 31, |
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2017 | 2016 | 2017 | 2016 | |||||||||||||
Revenues: |
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Resident revenue |
$ | 116,971 | $ | 115,805 | $ | 466,997 | $ | 447,448 | ||||||||
Expenses: |
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Operating expenses (exclusive of facility lease expense and depreciation and amortization expense shown below) |
71,314 | 71,806 | 290,662 | 273,899 | ||||||||||||
General and administrative expenses |
5,896 | 6,702 | 23,574 | 23,671 | ||||||||||||
Facility lease expense |
13,934 | 15,568 | 56,432 | 61,718 | ||||||||||||
Loss on facility lease termination |
| | 12,858 | | ||||||||||||
Provision for bad debt |
393 | 513 | 1,748 | 1,727 | ||||||||||||
Stock-based compensation expense |
1,849 | 4,163 | 7,682 | 11,645 | ||||||||||||
Depreciation and amortization expense |
15,337 | 16,295 | 66,199 | 60,398 | ||||||||||||
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Total expenses |
108,723 | 115,047 | 459,155 | 433,058 | ||||||||||||
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Income from operations |
8,248 | 758 | 7,842 | 14,390 | ||||||||||||
Other income (expense): |
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Interest income |
22 | 17 | 73 | 67 | ||||||||||||
Interest expense |
(12,531 | ) | (11,241 | ) | (49,471 | ) | (42,207 | ) | ||||||||
Gain (Loss) on disposition of assets, net |
3 | (12 | ) | (123 | ) | (65 | ) | |||||||||
Other income |
1 | | 7 | 233 | ||||||||||||
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Loss before provision for income taxes |
(4,257 | ) | (10,478 | ) | (41,672 | ) | (27,582 | ) | ||||||||
Benefit (Provision) for income taxes |
(2,102 | ) | (32 | ) | (2,496 | ) | (435 | ) | ||||||||
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Net loss |
$ | (6,359 | ) | $ | (10,510 | ) | $ | (44,168 | ) | $ | (28,017 | ) | ||||
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Per share data: |
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Basic net loss per share |
$ | (0.22 | ) | $ | (0.36 | ) | $ | (1.50 | ) | $ | (0.97 | ) | ||||
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Diluted net loss per share |
$ | (0.22 | ) | $ | (0.36 | ) | $ | (1.50 | ) | $ | (0.97 | ) | ||||
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Weighted average shares outstanding basic |
29,531 | 29,000 | 29,453 | 28,909 | ||||||||||||
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Weighted average shares outstanding diluted |
29,531 | 29,000 | 29,453 | 28,909 | ||||||||||||
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Comprehensive loss |
$ | (6,359 | ) | $ | (10,510 | ) | $ | (44,168 | ) | $ | (28,017 | ) | ||||
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CAPITAL/Page 10
CAPITAL SENIOR LIVING CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(audited, in thousands)
Year Ended December 31, | ||||||||
2017 | 2016 | |||||||
Operating Activities |
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Net loss |
$ | (44,168 | ) | $ | (28,017 | ) | ||
Adjustments to reconcile net loss to net cash provided by operating activities: |
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Depreciation and amortization |
66,199 | 60,398 | ||||||
Amortization of deferred financing charges |
1,626 | 1,193 | ||||||
Amortization of deferred lease costs and lease intangibles |
859 | 679 | ||||||
Amortization of lease incentives |
(1,336 | ) | (710 | ) | ||||
Deferred income |
(1,397 | ) | (414 | ) | ||||
Deferred taxes |
1,941 | | ||||||
Lease incentives |
5,673 | 7,530 | ||||||
Loss on facility lease termination |
12,858 | | ||||||
Loss on disposition of assets, net |
123 | 65 | ||||||
Provision for bad debts |
1,748 | 1,727 | ||||||
Stock-based compensation expense |
7,682 | 11,645 | ||||||
Changes in operating assets and liabilities: |
||||||||
Accounts receivable |
(8,159 | ) | (14,519 | ) | ||||
Property tax and insurance deposits |
279 | (267 | ) | |||||
Prepaid expenses and other |
33 | (1,995 | ) | |||||
Other assets |
4,061 | (2,228 | ) | |||||
Accounts payable |
2,750 | 1,695 | ||||||
Accrued expenses |
1,689 | 4,798 | ||||||
Other liabilities |
5,017 | 12,014 | ||||||
Federal and state income taxes receivable/payable |
165 | 107 | ||||||
Deferred resident revenue |
(1,898 | ) | (1,148 | ) | ||||
Customer deposits |
(151 | ) | (274 | ) | ||||
|
|
|
|
|||||
Net cash provided by operating activities |
55,594 | 52,279 | ||||||
Investing Activities |
||||||||
Capital expenditures |
(39,959 | ) | (62,371 | ) | ||||
Cash paid for acquisitions |
(85,000 | ) | (138,750 | ) | ||||
Proceeds from disposition of assets |
19 | 72 | ||||||
|
|
|
|
|||||
Net cash used in investing activities |
(124,940 | ) | (201,049 | ) | ||||
Financing Activities |
||||||||
Proceeds from notes payable |
77,197 | 150,798 | ||||||
Repayments of notes payable |
(20,099 | ) | (17,680 | ) | ||||
Cash payments for capital lease and financing obligations |
(2,869 | ) | (1,314 | ) | ||||
Increase in restricted cash |
(81 | ) | (138 | ) | ||||
Cash proceeds from the issuance of common stock |
| 67 | ||||||
Excess tax benefits on stock options exercised |
| (27 | ) | |||||
Purchases of treasury stock |
| (2,496 | ) | |||||
Deferred financing charges paid |
(1,182 | ) | (2,501 | ) | ||||
|
|
|
|
|||||
Net cash provided by financing activities |
52,966 | 126,709 | ||||||
|
|
|
|
|||||
Decrease in cash and cash equivalents |
(16,380 | ) | (22,061 | ) | ||||
Cash and cash equivalents at beginning of period |
34,026 | 56,087 | ||||||
|
|
|
|
|||||
Cash and cash equivalents at end of period |
$ | 17,646 | $ | 34,026 | ||||
|
|
|
|
|||||
Supplemental Disclosures |
||||||||
Cash paid during the period for: |
||||||||
Interest |
$ | 47,022 | $ | 40,585 | ||||
|
|
|
|
|||||
Income taxes |
$ | 543 | $ | 582 | ||||
|
|
|
|
CAPITAL/Page 11
Capital Senior Living Corporation
Supplemental Information
Average | ||||||||||||||||||||||||
Communities | Resident Capacity | Average Units | ||||||||||||||||||||||
Q4 17 | Q4 16 | Q4 17 | Q4 16 | Q4 17 | Q4 16 | |||||||||||||||||||
Portfolio Data |
||||||||||||||||||||||||
I. Community Ownership / Management |
||||||||||||||||||||||||
Consolidated communities |
||||||||||||||||||||||||
Owned |
83 | 79 | 10,767 | 9,971 | 7,970 | 7,616 | ||||||||||||||||||
Leased |
46 | 50 | 5,756 | 6,333 | 4,414 | 4,901 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total |
129 | 129 | 16,523 | 16,304 | 12,384 | 12,517 | ||||||||||||||||||
Independent living |
6,879 | 6,965 | 5,000 | 5,295 | ||||||||||||||||||||
Assisted living |
9,644 | 9,339 | 7,384 | 7,222 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||
Total |
16,523 | 16,304 | 12,384 | 12,517 | ||||||||||||||||||||
II. Percentage of Operating Portfolio |
||||||||||||||||||||||||
Consolidated communities |
||||||||||||||||||||||||
Owned |
64.3 | % | 61.2 | % | 65.2 | % | 61.2 | % | 64.4 | % | 60.8 | % | ||||||||||||
Leased |
35.7 | % | 38.8 | % | 34.8 | % | 38.8 | % | 35.6 | % | 39.2 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total |
100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||||||
Independent living |
41.6 | % | 42.7 | % | 40.4 | % | 42.3 | % | ||||||||||||||||
Assisted living |
58.4 | % | 57.3 | % | 59.6 | % | 57.7 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||
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)
Selected Operating Results | Q4 17 | Q4 16 | ||||||
I. Owned communities |
||||||||
Number of communities |
78 | 74 | ||||||
Resident capacity |
9,841 | 9,045 | ||||||
Unit capacity (1) |
7,472 | 6,891 | ||||||
Financial occupancy (2) |
89.0 | % | 89.8 | % | ||||
Revenue (in millions) |
70.2 | 63.6 | ||||||
Operating expenses (in millions) (3) |
43.8 | 40.1 | ||||||
Operating margin (3) |
38 | % | 37 | % | ||||
Average monthly rent |
3,515 | 3,426 | ||||||
II. Leased communities |
||||||||
Number of communities |
45 | 49 | ||||||
Resident capacity |
5,530 | 6,107 | ||||||
Unit capacity (1) |
4,228 | 4,715 | ||||||
Financial occupancy (2) |
84.7 | % | 86.8 | % | ||||
Revenue (in millions) |
40.8 | 44.5 | ||||||
Operating expenses (in millions) (3) |
23.3 | 25.3 | ||||||
Operating margin (3) |
43 | % | 43 | % | ||||
Average monthly rent |
3,797 | 3,621 | ||||||
III. Consolidated communities |
||||||||
Number of communities |
123 | 123 | ||||||
Resident capacity |
15,371 | 15,152 | ||||||
Unit capacity |
11,699 | 11,606 | ||||||
Financial occupancy (2) |
87.5 | % | 88.6 | % | ||||
Revenue (in millions) |
110.9 | 108.1 | ||||||
Operating expenses (in millions) (3) |
67.0 | 65.4 | ||||||
Operating margin (3) |
40 | % | 40 | % | ||||
Average monthly rent |
3,613 | 3,503 | ||||||
IV. Communities under management |
||||||||
Number of communities |
123 | 123 | ||||||
Resident capacity |
15,371 | 15,152 | ||||||
Unit capacity (1) |
11,699 | 11,606 | ||||||
Financial occupancy (2) |
87.5 | % | 88.6 | % | ||||
Revenue (in millions) |
110.9 | 108.1 | ||||||
Operating expenses (in millions) (3) |
67.0 | 65.4 | ||||||
Operating margin (3) |
40 | % | 40 | % | ||||
Average monthly rent |
3,613 | 3,503 | ||||||
V. Same communities under management |
||||||||
Number of communities |
122 | 122 | ||||||
Resident capacity |
15,171 | 14,952 | ||||||
Unit capacity (1) |
11,577 | 11,524 | ||||||
Financial occupancy (2) |
87.4 | % | 88.6 | % | ||||
Revenue (in millions) |
109.3 | 107.0 | ||||||
Operating expenses (in millions) (3) |
65.9 | 64.8 | ||||||
Operating margin (3) |
40 | % | 39 | % | ||||
Average monthly rent |
3,603 | 3,496 | ||||||
VI. General and Administrative expenses as a percent of Total Revenues under Management |
||||||||
Fourth quarter (4) |
4.8 | % | 4.1 | % | ||||
Year to date (4) |
4.7 | % | 4.4 | % | ||||
VII. Consolidated Mortgage Debt Information (in thousands, except interest rates) (excludes insurance premium financing) |
||||||||
Total fixed rate mortgage debt |
886,597 | 895,469 | ||||||
Total variable rate mortgage debt |
76,505 | 11,742 | ||||||
Weighted average interest rate |
4.68 | % | 4.61 | % |
(1) | Due to conversion and refurbishment projects completed at certain communities, unit capacity is higher in Q4 17 than Q4 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 December 31, | Year Ended December 31, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Adjusted EBITDAR |
||||||||||||||||
Net loss |
$ | (6,359 | ) | $ | (10,510 | ) | $ | (44,168 | ) | $ | (28,017 | ) | ||||
Depreciation and amortization expense |
15,337 | 16,295 | 66,199 | 60,398 | ||||||||||||
Stock-based compensation expense |
1,849 | 4,163 | 7,682 | 11,645 | ||||||||||||
Facility lease expense |
13,934 | 15,568 | 56,432 | 61,718 | ||||||||||||
Loss on facility lease termination |
| | 12,858 | | ||||||||||||
Provision for bad debts |
393 | 513 | 1,748 | 1,727 | ||||||||||||
Interest income |
(22 | ) | (17 | ) | (73 | ) | (67 | ) | ||||||||
Interest expense |
12,531 | 11,241 | 49,471 | 42,207 | ||||||||||||
(Gain) Loss on disposition of assets, net |
(3 | ) | 12 | 123 | 65 | |||||||||||
Other income |
(1 | ) | | (7 | ) | (233 | ) | |||||||||
Provision for income taxes |
2,102 | 32 | 2,496 | 435 | ||||||||||||
Casualty losses |
269 | 202 | 1,996 | 1,271 | ||||||||||||
Transaction and conversion costs |
331 | 1,859 | 2,323 | 4,922 | ||||||||||||
Communities excluded due to repositioning/lease-up |
(976 | ) | (733 | ) | (3,716 | ) | (3,167 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Adjusted EBITDAR |
$ | 39,385 | $ | 38,625 | $ | 153,364 | $ | 152,904 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Adjusted Revenues |
||||||||||||||||
Total revenues |
$ | 116,971 | $ | 115,805 | $ | 466,997 | $ | 447,448 | ||||||||
Communities excluded due to repositioning/lease-up |
(6,017 | ) | (4,532 | ) | (21,178 | ) | (17,730 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Adjusted revenues |
$ | 110,954 | $ | 111,273 | $ | 445,819 | $ | 429,718 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Adjusted net loss and Adjusted net loss per share |
|
|||||||||||||||
Net loss |
$ | (6,359 | ) | $ | (10,510 | ) | $ | (44,168 | ) | $ | (28,017 | ) | ||||
Casualty losses |
269 | 202 | 1,996 | 1,271 | ||||||||||||
Transaction and conversion costs |
352 | 4,888 | 2,906 | 7,719 | ||||||||||||
Resident lease amortization |
236 | 3,401 | 7,643 | 12,993 | ||||||||||||
Loss on facility lease termination |
| | 12,858 | | ||||||||||||
(Gain) Loss on disposition of assets |
(3 | ) | 12 | 122 | 65 | |||||||||||
Tax impact of Non-GAAP adjustments (37%) |
(316 | ) | (3,146 | ) | (9,444 | ) | (8,158 | ) | ||||||||
Deferred tax asset valuation allowance |
2,678 | 2,170 | 16,698 | 8,569 | ||||||||||||
Communities excluded due to repositioning/lease-up |
947 | 700 | 2,735 | 1,694 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Adjusted net (loss) income |
$ | (2,196 | ) | $ | (2,283 | ) | $ | (8,654 | ) | $ | (3,864 | ) | ||||
|
|
|
|
|
|
|
|
|||||||||
Diluted shares outstanding |
29,531 | 29,000 | 29,453 | 28,909 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Adjusted net (loss) income per share |
$ | (0.07 | ) | $ | (0.08 | ) | $ | (0.29 | ) | $ | (0.13 | ) | ||||
|
|
|
|
|
|
|
|
|||||||||
Adjusted CFFO |
||||||||||||||||
Net loss |
$ | (6,359 | ) | $ | (10,510 | ) | $ | (44,168 | ) | $ | (28,017 | ) | ||||
Non-cash charges, net |
19,769 | 22,647 | 95,976 | 82,113 | ||||||||||||
Lease incentives |
(514 | ) | (1,672 | ) | (5,673 | ) | (7,530 | ) | ||||||||
Recurring capital expenditures |
(1,186 | ) | (1,183 | ) | (4,746 | ) | (4,634 | ) | ||||||||
Casualty losses |
269 | 202 | 2,028 | 1,271 | ||||||||||||
Transaction and conversion costs |
352 | 2,737 | 2,681 | 5,568 | ||||||||||||
Tax impact of Spring Meadows Transaction |
| (106 | ) | | (424 | ) | ||||||||||
Communities excluded due to repositioning/lease-up |
(21 | ) | 49 | (226 | ) | (43 | ) | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Adjusted CFFO |
$ | 12,310 | $ | 12,164 | $ | 45,872 | $ | 48,304 | ||||||||
|
|
|
|
|
|
|
|
***
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 fourth quarter and fiscal year 2017 earnings release dated February 27, 2018, 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 Track Record of Strong Growth and Uniquely Positioned for Continued Success Capital Plan Supports Long-Term Growth Initiatives 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 December 31, 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% 2017 Properties Owned 231 152 83 9 369 86 25 26 0 0 2017 Properties Operated 231 194 129 18 1,048 306 141 215 260 166 Source: ASHA 2017 Top 50, company filings and investor presentations. (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 12/31/17) Momentum: ’17/’18 vs. ’15/’16 ’17/’18 Average M-RevPAF (1) Expected Actual & Momentum Source: Green Street Advisors, NIC and NCREIF as of 12/31/17. (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 Constructive Current Operating Environment Source: NIC MAP Data Service as of 12/31/17. Total Senior Housing Occupancy is Stable with IL the Best Performer IL and AL Rents Continue to Grow at ~2.5% Average Stabilized Occupancy YoY Rent Growth Industry Supply is Stabilizing in IL and Senior Housing Construction as % of Inventory Since 4Q 16, overall industry supply has been declining Senior Housing IL AL 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 12/31/2017. Senior Housing Construction vs. Inventory Across the U.S. Top 10 Highest Construction in MSAs Total CSU units in top 10 highest construction MSAs (~1.5% of total CSU units) Over 98% 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 Jacksonville, FL 15.8% Atlanta, GA 15.0% 49 Colorado Springs, CO 15.0% Denver, CO 14.7% The Villages, FL 14.0% Phoenix, AZ 13.6% Austin, TX 13.3% Louisville, KY 12.2% Fort Myers, FL 11.7% Bridgeport, CT 11.7% 150 199
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
Strategic Focus Areas Shift to a consistent operating model Centralize functions to create economies of scale Implement a common electronic information platform Differentiate through quality and customer service Common customer service platform Short-term expense rebasing Restructure growth engine to rebuild occupancy Focus executive directors on NOI and operations Organic growth through improved sales fundamentals and innovative business development
AL is a Lower Cost Alternative for Post-Acute Care Acute Care Post-Acute Care Continuum Hospital $2,271/day Long-Term Care Hospital $1,512/day Inpatient Rehab Facility $1,456/day Skilled Nursing Property $508/day Home w/ Home Health Care $145/day Assisted Living $150/day Sources: 1999 - 2015 AHA Annual Survey, Copyright 2016 by Health Forum, LLC; Medicare Payment Advisory Committee (MedPAC) Data Book, June 2016; NIC Skilled Nursing Data Report, June 2017; MedPAC Report to Congress, March 2016; NIC MAP Data Service 2Q2017 CSU is developing Healthcare Affiliations, which will increase its participation in the post-acute care continuum: Finalizing an Accountable Care Organization (ACO) relationship with a major hospital system Looking to implement additional ACO affiliations
Quality Uphold Highest Quality Standards Reduce Variation/Enhance Safety Service Maintain a Family-Centered Culture Implement Best Practices in Family Experience People Engage Colleagues Cultivate Talent Growth Serve New Residents Cost Move to Centralization/Standardization The Capital Operating System drives all facets of our community operations Upholding Highest Standards of Core Pillars to Improve Resident Experience
J.D. Power, a global marketing information company, recognized Capital Senior Living as one of the top senior living providers in the nation, in their 2018 Senior Living Satisfaction Study The most important factors of satisfaction included: Community staff Convenient location Food and beverage Room, building and grounds Senior service Activities Capital Senior Living scored well above the industry average and ranked third overall among senior living operators nationally The Company’s annual resident satisfaction survey, conducted by an independent third party, resulted in 94.6% satisfaction among all residents across its 129 communities CSU Received Top Scores in Resident Satisfaction
Strategic Accretive Acquisitions have Achieved 16% Average Year 1 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 achieved on average a 42.0% increase in property value over a 3 year period at communities on which it executed supplemental loans in 2015 and 2016, which 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 – 4Q17 vs. 2Q14 (Period prior to Conversions)(1) 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. 2 Three repositioned communities with 628 total available units have been added back to the company’s non-GAAP results effective January 1, 2018 These communities are expected to contribute ~$2.5M to EBITDAR and ~$1.5M to CFFO in 2018 When fully stabilized, these communities are expected to contribute ~$5.0 - $6.0M to EBITDAR and ~$3.5 - $4.5M to CFFO Addition of Units Previously Out of Service
Track Record of Strong Growth and Uniquely Positioned for Continued Success 3
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) 15.3% CAGR 13.1% CAGR 12.0% CAGR ($ In Millions)
Capital Plan Supports Long-Term Growth Initiatives 4
Healthy Balance Sheet to Support Future Initiatives Assets Cash and Securities $ 31.0 Other Current Assets 33.0 Total Current Assets 64.0 Fixed Assets 1,099.8 Other Assets 18.9 Total Assets $ 1,182.7 Liabilities & Equity Current Liabilities $ 87.0 Long-Term Debt 938.2 Other Liabilities 77.0 Total Liabilities 1,102.2 Stockholders’ Equity 80.5 Total Liabilities & Equity $ 1,182.7 As of December 31, 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 6.3 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 Track Record of Strong Growth and Uniquely Positioned for Continued Success Capital Plan Supports Long-Term Growth Initiatives 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