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) May 1, 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 May 1, 2018, Capital Senior Living Corporation (the Company) announced its financial results for the first quarter ended March 31, 2018 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/(Loss) 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/(Loss) and Adjusted CFFO are useful as performance measures in identifying trends in day-to-day operations because they exclude the costs associated with acquisitions and conversions and other items that do not ordinarily reflect the ongoing operating results of the Companys primary business. Adjusted Net Income/(Loss) and Adjusted CFFO provide indicators to management of progress in achieving both consolidated and individual business unit operating performance and are used by research analysts and investors to evaluate the performance of companies in the senior living industry. The Company strongly urges 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 Income/(Loss) 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 May 1, 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: May 1, 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
![]() |
PRESS CONTACT: Carey Hendrickson, Chief Financial Officer Phone: 1-972-770-5600 | |
FOR IMMEDIATE RELEASE |
CAPITAL SENIOR LIVING CORPORATION
REPORTS FIRST QUARTER 2018 RESULTS
DALLAS (GLOBE NEWSWIRE) May 1, 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 first quarter 2018.
Focused execution on our key initiatives resulted in year-over-year growth in same-community revenue and net operating income in the first quarter, said Lawrence A. Cohen, Chief Executive Officer of the Company. Despite the effect of seasonal attrition on occupancy, which was in line with our projections, we stayed focused on our residents, maintained a disciplined approach to our cost structure and delivered solid financial results. By building on our 2017 cost control initiatives with further improvements in the first quarter, we had lower than anticipated expenses and our CFFO exceeded our internal projections. We are pleased to reaffirm our full year guidance for 2018.
Mr. Cohen continued, We are executing our comprehensive strategy to deliver higher revenues, enhance cash flow and maximize the value of our owned real estate. With a disciplined focus on our growth strategy and driving operational improvements, we are well positioned to capitalize on our competitive advantages as a leading pure-play private-pay senior housing owner/operator and enhance shareholder value.
Operating and Financial Summary (all amounts in this operating and financial summary exclude two communities that are undergoing lease-up or significant renovation and conversion, unless otherwise noted; also, see Non-GAAP Financial Measures below and reconciliation of Non-GAAP measures to the most directly comparable GAAP measure on the final page of this release.)
| Revenue in the first quarter of 2018, including all communities, was $114.6 million, a $1.3 million, or 1.2%, decrease from the first quarter of 2017. The first quarter of 2018 includes no revenue from the Companys two communities impacted by Hurricane Harvey in late August 2017. Revenue for these two communities was $2.4 million in the first quarter of 2017. |
| Revenue for consolidated and same communities, which exclude two communities undergoing lease-up or significant renovation and conversion and the Companys two communities impacted by Hurricane Harvey, was $113.3 million in the first quarter of 2018, an increase of 1.0% as compared to the first quarter of 2017. |
CAPITAL/Page 2
| Occupancy for consolidated and same communities was 86.1% in the first quarter of 2018, a decrease of 100 basis points from the fourth quarter of 2017 and a decrease of 130 basis points from the first quarter of 2017. |
| Average monthly rent for consolidated and same communities was $3,592, an increase of $60 per occupied unit, or 1.7%, as compared to the first quarter of 2017. |
| Income from operations, including all communities, was $5.4 million in the first quarter of 2018 compared to a loss of $9.6 million in the first quarter of 2017, which included a non-cash lease termination charge of $12.9 million associated with the Companys purchase in January 2017 of four communities it previously leased. |
| The Companys Net Loss for the first quarter of 2018, including all communities, was $7.2 million. |
| Excluding items noted and reconciled on the final page of this release, the Companys adjusted net loss was $4.7 million in the first quarter of 2018. |
| Adjusted EBITDAR was $37.9 million in the first quarter of 2018 compared to $37.7 million in the first quarter of 2017. Adjusted EBITDAR is a financial valuation measure, rather than a financial performance measure, used by management and others to evaluate the value of companies in the senior living industry. |
| Adjusted Cash From Facility Operations (CFFO) was $10.4 million in the first quarter of 2018 compared to $11.0 million in the first quarter of 2017. |
Financial Results - First Quarter
For the first quarter of 2018, the Company reported revenue of $114.6 million, compared to revenue of $116.0 million in the first quarter of 2017. Revenue for consolidated communities excluding the two communities undergoing significant renovation and conversion, and the two Houston communities impacted by Hurricane Harvey, increased 1.0% in the first quarter of 2018 as compared to the first quarter of 2017.
Operating expenses for the first quarter of 2018 were $71.7 million, a decrease of $1.1 million from the first quarter of 2017. Operating expenses include a $1.6 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 first quarter of 2018 based on an approximate average of the communities net income in the seven months of 2017 prior to the hurricane.
CAPITAL/Page 3
General and administrative expenses for the first quarter of 2018 were $6.0 million. This compares to general and administrative expenses of $6.2 million in the first quarter of 2017. Excluding transaction and conversion costs in both periods, general and administrative expenses decreased $0.3 million in the first quarter of 2018 as compared to the first quarter of 2017. As a percentage of revenues under management, general and administrative expenses, excluding transaction and conversion costs, were 5.1% in the first quarter of 2018 compared to 4.9% in the first quarter of 2017.
Income from operations for the first quarter of 2018 was $5.4 million. The Company recorded a net loss on a GAAP basis of $7.2 million in the first quarter of 2018. Excluding items noted and reconciled on the final page of this release, the Companys adjusted net loss was $4.7 million in the first quarter of 2018.
The Companys Non-GAAP financial measures exclude two communities that are undergoing significant renovation and conversion (see Non-GAAP Financial Measures below), including a community in Indiana that recently completed a significant renovation and conversion and is now in lease-up that was excluded beginning in the first quarter of 2018. Three communities that were previously excluded from the Companys Non-GAAP financial measures were added back to such measures beginning in the first quarter of 2018.
Adjusted EBITDAR for the first quarter of 2018 was $37.9 million as compared to $37.7 million in the first quarter of 2017. Adjusted CFFO was $10.4 million in the first quarter of 2018, as compared to $11.0 million in the first quarter of 2017.
Operating Activities
Same-community results exclude two communities previously noted that are undergoing lease-up or significant renovation and conversion, and the two Houston communities impacted by Hurricane Harvey. Same-community results also exclude certain conversion costs.
Same-community revenue in the first quarter of 2018 increased 1.0% versus the first quarter of 2017.
Same-community operating expenses increased 1.0% from the first quarter of the prior year, excluding conversion costs in both periods. On the same basis, labor costs, including benefits, increased 1.3% and utilities increased 8.3%, while food costs decreased 4.4%, all as compared to the first quarter of 2017. At communities that have not converted units to higher levels of care, labor costs increased 0.5%
compared to the first quarter of 2017. Same-community net operating income increased 0.9% in the first quarter of 2018 as compared to the first quarter of 2017.
CAPITAL/Page 4
Capital expenditures for the first quarter of 2018 were $5.6 million, representing approximately $4.2 million of investment spending and approximately $1.2 million of recurring capital expenditures.
Balance Sheet
The Company ended the quarter with $23.3 million of cash and cash equivalents, including restricted cash. As of March 31, 2018, the Company financed its owned communities with mortgages totaling $958.8 million at interest rates averaging 4.7%. All of the Companys debt is at fixed interest rates, except for two bridge loans totaling approximately $76.4 million at March 31, 2018, 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.
Q1 2018 Conference Call Information
The Company will host a conference call with senior management to discuss the Companys first quarter 2018 financial results. The call will be held on Tuesday, May 1, 2018, at 5:00 p.m. Eastern Time. The call-in number is 323-701-0225, confirmation code 2087338. 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 May 1, 2018 at 8:00 p.m. Eastern Time, until May 9, 2018 at 8:00 p.m. Eastern Time. To access the conference call replay, call 719-457-0820, confirmation code 2087338. 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/(Loss) and Adjusted CFFO are financial performance measures that are not calculated in accordance with U.S. generally accepted accounting principles (GAAP). Non-GAAP financial measures may have material limitations in that they do not reflect all of the costs associated with our results of operations as determined in accordance with GAAP. As a result, these non-GAAP financial measures should not be considered a substitute for, nor superior to, financial results and measures determined or calculated in accordance with GAAP.
CAPITAL/Page 5
Adjusted EBITDAR is a valuation measure commonly used by our management, research analysts and investors to value companies in the senior living industry. Because Adjusted EBITDAR excludes interest expense and rent expense, it allows our management, research analysts and investors to compare the enterprise values of different companies without regard to differences in capital structures and leasing arrangements.
The Company believes that Adjusted Net Income/(Loss) and Adjusted CFFO are useful as performance measures in identifying trends in day-to-day operations because they exclude the costs associated with acquisitions and conversions and other items that do not ordinarily reflect the ongoing operating results of our primary business. Adjusted Net Income/(Loss) and Adjusted CFFO provide indicators to management of progress in achieving both consolidated and individual business unit operating performance and are used by research analysts and investors to evaluate the performance of companies in the senior living industry.
The Company strongly urges you to review on the last page of this release the reconciliation of net loss to Adjusted EBITDAR and the reconciliation of net (loss) income to Adjusted Net Income/(Loss) 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 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 6
CAPITAL SENIOR LIVING CORPORATION
CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands, except per share data)
March 31, 2018 |
December 31, 2017 |
|||||||
ASSETS | ||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 9,938 | $ | 17,646 | ||||
Restricted cash |
13,387 | 13,378 | ||||||
Accounts receivable, net |
13,594 | 12,307 | ||||||
Property tax and insurance deposits |
9,361 | 14,386 | ||||||
Prepaid expenses and other |
6,124 | 6,332 | ||||||
|
|
|
|
|||||
Total current assets |
52,404 | 64,049 | ||||||
Property and equipment, net |
1,090,067 | 1,099,786 | ||||||
Other assets, net |
18,079 | 18,836 | ||||||
|
|
|
|
|||||
Total assets |
$ | 1,160,550 | $ | 1,182,671 | ||||
|
|
|
|
|||||
LIABILITIES AND SHAREHOLDERS EQUITY | ||||||||
Current liabilities: |
||||||||
Accounts payable |
$ | 3,544 | $ | 7,801 | ||||
Accrued expenses |
34,046 | 40,751 | ||||||
Current portion of notes payable, net of deferred loan costs |
18,525 | 19,728 | ||||||
Current portion of deferred income |
14,237 | 13,840 | ||||||
Current portion of capital lease and financing obligations |
2,876 | 3,106 | ||||||
Federal and state income taxes payable |
573 | 383 | ||||||
Customer deposits |
1,332 | 1,394 | ||||||
|
|
|
|
|||||
Total current liabilities |
75,133 | 87,003 | ||||||
Deferred income |
9,563 | 10,033 | ||||||
Capital lease and financing obligations, net of current portion |
48,272 | 48,805 | ||||||
Deferred taxes |
1,941 | 1,941 | ||||||
Other long-term liabilities |
16,343 | 16,250 | ||||||
Notes payable, net of deferred loan costs and current portion |
934,072 | 938,206 | ||||||
Commitments and contingencies |
||||||||
Shareholders equity: |
||||||||
Preferred stock, $.01 par value: |
||||||||
Authorized shares 15,000; no shares issued or outstanding |
| | ||||||
Common stock, $.01 par value: |
||||||||
Authorized shares 65,000; issued and outstanding shares 31,133 and 30,505 in 2018 and 2017, respectively |
316 | 310 | ||||||
Additional paid-in capital |
181,402 | 179,459 | ||||||
Retained deficit |
(103,062 | ) | (95,906 | ) | ||||
Treasury stock, at cost 494 shares in 2018 and 2017 |
(3,430 | ) | (3,430 | ) | ||||
|
|
|
|
|||||
Total shareholders equity |
75,226 | 80,433 | ||||||
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|
|||||
Total liabilities and shareholders equity |
$ | 1,160,550 | $ | 1,182,671 | ||||
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CAPITAL/Page 7
CAPITAL SENIOR LIVING CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(unaudited, in thousands, except per share data)
Three Months Ended March 31, |
||||||||
2018 | 2017 | |||||||
Revenues: |
||||||||
Resident revenue |
$ | 114,643 | $ | 115,990 | ||||
Expenses: |
||||||||
Operating expenses (exclusive of facility lease expense and depreciation and amortization expense shown below) |
71,700 | 72,778 | ||||||
General and administrative expenses |
6,022 | 6,234 | ||||||
Facility lease expense |
14,214 | 14,587 | ||||||
Loss on facility lease termination |
| 12,858 | ||||||
Stock-based compensation expense |
1,949 | 1,930 | ||||||
Depreciation and amortization expense |
15,372 | 17,213 | ||||||
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|
|
|
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Total expenses |
109,257 | 125,600 | ||||||
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|
|
|
|||||
Income (Loss) from operations |
5,386 | (9,610 | ) | |||||
Other income (expense): |
||||||||
Interest income |
37 | 18 | ||||||
Interest expense |
(12,451 | ) | (12,005 | ) | ||||
Gain (Loss) on disposition of assets, net |
3 | (125 | ) | |||||
Other income |
1 | 3 | ||||||
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|
|
|
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Loss before provision for income taxes |
(7,024 | ) | (21,719 | ) | ||||
Provision for income taxes |
(132 | ) | (123 | ) | ||||
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|
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Net loss |
$ | (7,156 | ) | $ | (21,842 | ) | ||
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Per share data: |
||||||||
Basic net loss per share |
$ | (0.24 | ) | $ | (0.75 | ) | ||
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Diluted net loss per share |
$ | (0.24 | ) | $ | (0.75 | ) | ||
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Weighted average shares outstanding basic |
29,627 | 29,288 | ||||||
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Weighted average shares outstanding diluted |
29,627 | 29,288 | ||||||
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Comprehensive loss |
$ | (7,156 | ) | $ | (21,842 | ) | ||
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CAPITAL/Page 8
CAPITAL SENIOR LIVING CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
Three Months Ended March 31, |
||||||||
2018 | 2017 | |||||||
Operating Activities |
||||||||
Net loss |
$ | (7,156 | ) | $ | (21,842 | ) | ||
Adjustments to reconcile net loss to net cash provided by operating activities: |
||||||||
Depreciation and amortization |
15,372 | 17,213 | ||||||
Amortization of deferred financing charges |
428 | 388 | ||||||
Amortization of deferred lease costs and lease intangibles |
212 | 223 | ||||||
Amortization of lease incentives |
(433 | ) | (295 | ) | ||||
Deferred income |
(61 | ) | (99 | ) | ||||
Lease incentives |
| 2,258 | ||||||
Loss on facility lease termination |
| 12,858 | ||||||
(Gain) Loss on disposition of assets, net |
(3 | ) | 125 | |||||
Provision for bad debts |
459 | 443 | ||||||
Stock-based compensation expense |
1,949 | 1,930 | ||||||
Changes in operating assets and liabilities: |
||||||||
Accounts receivable |
(1,746 | ) | (799 | ) | ||||
Property tax and insurance deposits |
5,025 | 4,425 | ||||||
Prepaid expenses and other |
208 | 1,097 | ||||||
Other assets |
508 | 4,730 | ||||||
Accounts payable |
(4,257 | ) | 2,114 | |||||
Accrued expenses |
(6,705 | ) | (7,829 | ) | ||||
Other liabilities |
526 | 1,446 | ||||||
Federal and state income taxes receivable/payable |
190 | 142 | ||||||
Deferred resident revenue |
(12 | ) | (357 | ) | ||||
Customer deposits |
(62 | ) | (38 | ) | ||||
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|
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|
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Net cash provided by operating activities |
4,442 | 18,133 | ||||||
Investing Activities |
||||||||
Capital expenditures |
(5,616 | ) | (12,713 | ) | ||||
Cash paid for acquisitions |
| (85,000 | ) | |||||
Proceeds from disposition of assets |
3 | 12 | ||||||
|
|
|
|
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Net cash used in investing activities |
(5,613 | ) | (97,701 | ) | ||||
Financing Activities |
||||||||
Proceeds from notes payable |
| 65,000 | ||||||
Repayments of notes payable |
(5,723 | ) | (5,286 | ) | ||||
Cash payments for capital lease and financing obligations |
(763 | ) | (667 | ) | ||||
Deferred financing charges paid |
(42 | ) | (889 | ) | ||||
|
|
|
|
|||||
Net cash (used in) provided by financing activities |
(6,528 | ) | 58,158 | |||||
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|
|
|
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Decrease in cash and cash equivalents |
(7,699 | ) | (21,410 | ) | ||||
Cash and cash equivalents and restricted cash at beginning of period |
31,024 | 47,323 | ||||||
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|
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Cash and cash equivalents and restricted cash at end of period |
$ | 23,325 | $ | 25,913 | ||||
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Supplemental Disclosures |
||||||||
Cash paid during the period for: |
||||||||
Interest |
$ | 11,897 | $ | 11,056 | ||||
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Income taxes |
$ | 15 | $ | 12 | ||||
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CAPITAL/Page 9
Capital Senior Living Corporation
Supplemental Information
Average | ||||||||||||||||||||||||
Communities | Resident Capacity | Average Units | ||||||||||||||||||||||
Q1 18 | Q1 17 | Q1 18 | Q1 17 | Q1 18 | Q1 17 | |||||||||||||||||||
Portfolio Data |
||||||||||||||||||||||||
I. Community Ownership / Management |
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Consolidated communities |
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Owned |
83 | 83 | 10,767 | 10,767 | 7,978 | 7,990 | ||||||||||||||||||
Leased |
46 | 46 | 5,756 | 5,756 | 4,414 | 4,556 | ||||||||||||||||||
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Total |
129 | 129 | 16,523 | 16,523 | 12,392 | 12,546 | ||||||||||||||||||
Independent living |
6,879 | 6,879 | 4,911 | 5,285 | ||||||||||||||||||||
Assisted living |
9,644 | 9,644 | 7,481 | 7,261 | ||||||||||||||||||||
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Total |
16,523 | 16,523 | 12,392 | 12,546 | ||||||||||||||||||||
II. Percentage of Operating Portfolio |
||||||||||||||||||||||||
Consolidated communities |
||||||||||||||||||||||||
Owned |
64.3 | % | 64.3 | % | 65.2 | % | 65.2 | % | 64.4 | % | 63.7 | % | ||||||||||||
Leased |
35.7 | % | 35.7 | % | 34.8 | % | 34.8 | % | 35.6 | % | 36.3 | % | ||||||||||||
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Total |
100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||||||
Independent living |
41.6 | % | 41.6 | % | 39.6 | % | 42.1 | % | ||||||||||||||||
Assisted living |
58.4 | % | 58.4 | % | 60.4 | % | 57.9 | % | ||||||||||||||||
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Total |
100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % |
CAPITAL/Page 10
Capital Senior Living Corporation
Supplemental Information (excludes two communities being repositioned/leased up and two communities impacted by Hurricane Harvey)
Selected Operating Results
Q1 18 | Q1 17 | |||||||
I. Owned communities |
||||||||
Number of communities |
79 | 79 | ||||||
Resident capacity |
10,248 | 10,248 | ||||||
Unit capacity (1) |
7,791 | 7,596 | ||||||
Financial occupancy (2) |
87.6 | % | 88.2 | % | ||||
Revenue (in millions) |
71.7 | 68.9 | ||||||
Operating expenses (in millions) (3) |
46.0 | 44.5 | ||||||
Operating margin (3) |
36 | % | 35 | % | ||||
Average monthly rent |
3,501 | 3,430 | ||||||
II. Leased communities |
||||||||
Number of communities |
46 | 46 | ||||||
Resident capacity |
5,756 | 5,756 | ||||||
Unit capacity (1) |
4,414 | 4,520 | ||||||
Financial occupancy (2) |
83.5 | % | 86.0 | % | ||||
Revenue (in millions) |
41.6 | 43.3 | ||||||
Operating expenses (in millions) (3) |
24.3 | 25.1 | ||||||
Operating margin (3) |
42 | % | 42 | % | ||||
Average monthly rent |
3,760 | 3,708 | ||||||
III. Consolidated and Same communities (4) |
||||||||
Number of communities |
125 | 125 | ||||||
Resident capacity |
16,004 | 16,004 | ||||||
Unit capacity |
12,204 | 12,116 | ||||||
Financial occupancy (2) |
86.1 | % | 87.4 | % | ||||
Revenue (in millions) |
113.3 | 112.2 | ||||||
Operating expenses (in millions) (3) |
70.3 | 69.6 | ||||||
Operating margin (3) |
38 | % | 38 | % | ||||
Average monthly rent |
3,592 | 3,532 | ||||||
IV. General and Administrative expenses as a percent of Total Revenues under Management |
||||||||
First quarter (5) |
5.1 | % | 4.9 | % | ||||
V. Consolidated Mortgage Debt Information (in thousands, except interest rates) (excludes insurance premium financing) |
||||||||
Total fixed rate mortgage debt |
882,317 | 891,405 | ||||||
Total variable rate mortgage debt |
76,442 | 76,682 | ||||||
Weighted average interest rate |
4.74 | % | 4.63 | % |
(1) | Due to conversion and refurbishment projects completed at certain communities, unit capacity is higher in Q1 18 than Q1 17 for same communities under management, which affects all groupings of communities. |
(2) | Financial occupancy represents actual days occupied divided by total number of available days during the month of the quarter. |
(3) | Excludes management fees, provision for bad debts and transaction and conversion costs. |
(4) | Since the Company has not completed any new acquisitions of communities, other than the four communities which were acquired during the first quarter of fiscal 2017 that were previously leased and already included in the Companys consolidated operating results, consolidated and same communities are equivalent for the comparable periods and no longer require separate reporting by the Company. |
(5) | Excludes transaction and conversion costs. |
CAPITAL/Page 11
CAPITAL SENIOR LIVING CORPORATION
NON-GAAP RECONCILIATIONS
(In thousands, except per share data)
Three Months Ended March 31, | ||||||||
2018 | 2017 | |||||||
Adjusted EBITDAR |
||||||||
Net loss |
$ | (7,156 | ) | $ | (21,842 | ) | ||
Depreciation and amortization expense |
15,372 | 17,213 | ||||||
Stock-based compensation expense |
1,949 | 1,930 | ||||||
Facility lease expense |
14,214 | 14,587 | ||||||
Loss on facility lease termination |
| 12,858 | ||||||
Provision for bad debts |
459 | 443 | ||||||
Interest income |
(37 | ) | (18 | ) | ||||
Interest expense |
12,451 | 12,005 | ||||||
Loss (Gain) on disposition of assets, net |
(3 | ) | 125 | |||||
Other income |
(1 | ) | (3 | ) | ||||
Provision for income taxes |
132 | 123 | ||||||
Casualty losses |
214 | 312 | ||||||
Transaction and conversion costs |
249 | 715 | ||||||
Communities excluded due to repositioning/lease-up |
62 | (701 | ) | |||||
|
|
|
|
|||||
Adjusted EBITDAR |
$ | 37,905 | $ | 37,747 | ||||
|
|
|
|
|||||
Adjusted Revenues |
||||||||
Total revenues |
$ | 114,643 | $ | 115,990 | ||||
Communities excluded due to repositioning/lease-up |
(1,354 | ) | (4,641 | ) | ||||
|
|
|
|
|||||
Adjusted revenues |
$ | 113,289 | $ | 111,349 | ||||
|
|
|
|
|||||
Adjusted net loss and Adjusted net loss per share |
||||||||
Net loss |
$ | (7,156 | ) | $ | (21,842 | ) | ||
Casualty losses |
214 | 312 | ||||||
Transaction and conversion costs |
262 | 1,104 | ||||||
Resident lease amortization |
| 3,238 | ||||||
Loss on facility lease termination |
| 12,858 | ||||||
Loss (Gain) on disposition of assets |
(3 | ) | 125 | |||||
Tax impact of Non-GAAP adjustments (25% in 2018 and 37% in 2017) |
(118 | ) | (6,526 | ) | ||||
Deferred tax asset valuation allowance |
1,409 | 8,166 | ||||||
Communities excluded due to repositioning/lease-up |
672 | 585 | ||||||
|
|
|
|
|||||
Adjusted net loss |
$ | (4,720 | ) | $ | (1,980 | ) | ||
|
|
|
|
|||||
Diluted shares outstanding |
29,627 | 29,288 | ||||||
|
|
|
|
|||||
Adjusted net loss per share |
$ | (0.16 | ) | $ | (0.07 | ) | ||
|
|
|
|
|||||
Adjusted CFFO |
||||||||
Net loss |
$ | (7,156 | ) | $ | (21,842 | ) | ||
Non-cash charges, net |
17,923 | 35,044 | ||||||
Lease incentives |
| (2,258 | ) | |||||
Recurring capital expenditures |
(1,186 | ) | (1,186 | ) | ||||
Casualty losses |
214 | 312 | ||||||
Transaction and conversion costs |
262 | 879 | ||||||
Communities excluded due to repositioning/lease-up |
389 | 79 | ||||||
|
|
|
|
|||||
Adjusted CFFO |
$ | 10,446 | $ | 11,028 | ||||
|
|
|
|
***
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/(Loss) and Adjusted CFFO are financial performance measures that are not calculated in accordance with U.S. generally accepted accounting principles (“GAAP”). Non-GAAP financial measures may have material limitations in that they do not reflect all of the costs associated with our results of operations as determined in accordance with GAAP. As a result, these non-GAAP financial measures should not be considered a substitute for, nor superior to, financial results and measures determined or calculated in accordance with GAAP. Adjusted EBITDAR is a valuation measure commonly used by our management, research analysts and investors to value companies in the senior living industry. Because Adjusted EBITDAR excludes interest expense and rent expense, it allows our management, research analysts and investors to compare the enterprise values of different companies without regard to differences in capital structures and leasing arrangements. The Company believes that Adjusted Net Income/(Loss) and Adjusted CFFO are useful as performance measures in identifying trends in day-to-day operations because they exclude the costs associated with acquisitions and conversions and other items that do not ordinarily reflect the ongoing operating results of our primary business. Adjusted Net Income/(Loss) and Adjusted CFFO provide indicators to management of progress in achieving both consolidated and individual business unit operating performance and are used by research analysts and investors to evaluate the performance of companies in the senior living industry. The Company strongly urges you to review the reconciliation of net loss to Adjusted EBITDAR and the reconciliation of net (loss) income to Adjusted Net Income/(Loss) and Adjusted CFFO, on the last page of the Company’s first quarter 2018 earnings release dated May 1, 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 and competitive advantages 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 March 31, 2018 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 Value derived from owned real estate and capture full benefit from operations Stronger margin profile Financed with attractive non-recourse, fixed-rate mortgages with strong coverage ratios 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 3/31/18. 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 3/31/2018. Senior Housing Construction vs. Inventory Across the U.S. Top 10 Highest Construction in MSAs Total CSU communities in top 10 highest construction MSAs (~3.0% of total CSU communities) Over 97% of CSU communities are located outside of the top 10 highest construction MSAs Capital Senior Living Community 0 – 2% Construction vs. Inventory > 24% Metro Construction vs Inventory Number of CSU Communities Austin, TX 16.8% Bridgeport, CT 16.6% 1 Phoenix, AZ 16.5% Atlanta, GA 16.2% 1 Raleigh, NC 15.5% 1 Fort Myers, FL 15.3% Colorado Springs, CO 15.0% Columbia, SC 14.0% 1 Denver, CO 13.1% Nashville, TN 11.8% 4
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 %
Action Plans 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 Implemented a front-end procurement platform to reduce costs and centralize certain Account Payable functions Negotiating national contracts across several cost categories 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 43.0% increase in property value over a 3 year period at communities on which it executed supplemental loans in 2015 through 2017, which provided financial flexibility through $73.4mm of proceeds for re-deployment to growth initiatives 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 – 1Q18 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 $ 23.3 Other Current Assets 29.1 Total Current Assets 52.4 Fixed Assets 1,090.1 Other Assets 18.1 Total Assets $ 1,160.6 Liabilities & Equity Current Liabilities $ 75.1 Long-Term Debt 934.1 Other Liabilities 76.2 Total Liabilities 1,085.4 Stockholders’ Equity 75.2 Total Liabilities & Equity $ 1,160.6 As of March 31, 2018 (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 6.1 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