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Capital Senior Living Corporation Reports 2019 Second Quarter Results

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DALLAS, Aug. 08, 2019 (GLOBE NEWSWIRE) -- Capital Senior Living Corporation (the "Company") (NYSE:CSU), one of the nation's largest operators of senior housing communities, announced today operating and financial results for the second quarter ended June 30, 2019.

"In the second quarter, we continued to focus on initiatives to stabilize and invest in our operations to build a platform for sustainable, profitable growth.  We have assembled a strong, experienced team to lead operations, we have improved our business processes and we are experiencing positive momentum in several metrics, including higher average rents, well-managed operating costs and higher employee retention," said Kimberly S. Lody, President and Chief Executive Officer.  "Although conditions remain difficult and the impact of our actions will take time to result in improved financial performance, we are confident our strategy will establish a solid foundation for long-term value creation."

Operating and Financial Summary (all amounts in this operating and financial summary exclude two communities 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 second quarter of 2019, including all communities, was $113.1 million, a $1.5 million, or 1.3%, decrease, from the second quarter of 2018.  
     
    • Revenue for same communities, which excludes two communities undergoing lease-up or significant renovation and conversion and the Company's two communities impacted by Hurricane Harvey, was $110.5 million in the second quarter of 2019, a decrease of 1.7%, versus the second quarter of 2018.
       
    • Occupancy for all communities was 82.4% for the second quarter of 2019, a decline of 70 basis points from the first quarter of 2019, and a decrease of 280 basis points from the second quarter of 2018 due in part to the re-opening of our two communities impacted by Hurricane Harvey in the third quarter of 2018.  Occupancy for same communities was 83.6% in the second quarter of 2019, a decrease of 80 basis points from the first quarter of 2019, and a decrease of 190 basis points, when compared with the second quarter of 2018.
       
    • Average monthly rent for all communities was $3,629 in the second quarter of 2019, an increase of $11, or 0.3%, from the second quarter of 2018. Average monthly rent for same communities was $3,632 in the second quarter of 2019, an increase of $15 per occupied unit, or 0.4%, from the second quarter of 2018.  Average monthly rent increased 0.4% for all communities and 0.5% for same communities in the second quarter of 2019 when compared with the first quarter of 2019.
       
  • Income from operations, including all communities, was $0.2 million in the second quarter of 2019, versus $3.6 million in the second quarter of 2018. 
     
  • The Company's Net Loss for the second quarter of 2019, including all communities, was $12.5 million.
     
    • Excluding items noted and reconciled on the final page of this release, the Company's adjusted net loss was $8.3 million in the second quarter of 2019.
       
    • Adjusted EBITDAR was $34.0 million in the second quarter of 2019 compared with $38.4 million in the comparable period last year. 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 $5.2 million in the second quarter of 2019, compared with $10.6 million in the second quarter of 2018.                        

Recent Investment Activity

As previously reported, the Company closed on the sale of its community in Kokomo, Indiana, on May 1, 2019, at a price of $5.0 million.  The transaction resulted in approximately $1.4 million in net cash proceeds.  The community had a negative CFFO contribution of approximately $0.2 million in 2018. 

Carey P. Hendrickson, the Company's Chief Financial Officer, said: "Consistent with our normal business practices, the Company is engaged in various activities, including the marketing of a limited number of additional owned communities for potential divestiture and the refinancing of existing owned communities. Against a challenging operating environment, we are taking these proactive steps to strengthen our financial foundation, optimize our asset portfolio, and ultimately, enhance shareholder value."

Financial Results - Second Quarter

For the second quarter of 2019, the Company reported revenue of $113.1 million, compared with revenue of $114.6 million in the second quarter of 2018. Revenue for consolidated communities excluding the two communities undergoing significant renovation and conversion, was $111.9 million, a decrease of 1.2%, in the second quarter of 2019 when compared with the second quarter of 2018.

Operating expenses for the second quarter of 2019 were $74.4 million, an increase of $1.5 million, or 2.0%, from the second quarter of 2018.  Operating expenses in the second quarter of 2019 included a $1.2 million business interruption insurance credit related to the Company's two Houston communities impacted by Hurricane Harvey to offset the lost revenues and continuing expenses, and to restore the communities' net income for the second quarter of 2019 based on an approximate average of the communities' net income in the seven months of 2017 prior to the hurricane.  The business interruption credit was $1.6 million in the comparable period a year ago.

General and administrative expenses for the second quarter of 2019 were $6.6 million versus $5.7 million in the second quarter of 2018. Excluding transaction and conversion costs in both periods (including approximately $0.5 million related to separation and placement costs associated with the Company's former CEO and COO), general and administrative expenses increased $1.3 million in the second quarter of 2019 versus the second quarter of 2018.  As a percentage of revenues under management, general and administrative expenses, excluding transaction and conversion costs, were 5.1% in the second quarter of 2019.

Income from operations for the second quarter of 2019 was $0.2 million.  This compares with $3.6 million in the second quarter of 2018.

The Company's Non-GAAP financial measures exclude two communities that are undergoing significant renovation and conversion (see "Non-GAAP Financial Measures" below).

Adjusted EBITDAR for the second quarter of 2019 was $34.0 million, compared with $38.4 million in the second quarter of 2018. Adjusted CFFO was $5.2 million in the second quarter of 2019 compared to $10.6 million in the second quarter of 2018.  CFFO for the second quarter of 2019 includes a negative net impact of $0.5 million related to the Company's adoption of the new lease accounting standard ("ASC 842") effective January 1, 2019.  There was no impact on Adjusted EBITDAR related to the adoption of the new lease standard.

Operating Activities

Same community results exclude two previously noted communities undergoing lease-up or significant renovation and conversion, the two Houston communities impacted by Hurricane Harvey, and the Kokomo community sold on May 1, 2019. Same-community results also exclude certain conversion costs.

Same-community revenue in the second quarter of 2019 decreased 1.7% versus the second quarter of 2018.

Same-community operating expenses increased 1.9% in the second quarter of 2019 versus the second quarter of 2018, excluding conversion costs in all periods. On the same basis, labor costs, including benefits, increased 0.4% in the second quarter, food costs increased 0.7% and utilities decreased 3.2%, respectively.  Same-community net operating income decreased 7.7% in the second quarter of 2019 when compared with the same period a year ago.

Capital expenditures were $4.5 million for the second quarter of 2019.

Balance Sheet

The Company ended the second quarter with $34.8 million of cash and cash equivalents, including restricted cash. As of June 30, 2019, the Company financed its owned communities with mortgages totaling $971.0 million, at interest rates averaging 4.9%. The majority of the Company's debt is at fixed interest rates excluding a $65 million bridge loan that matures in 2020, an $11 million bridge loan that matures in 2021, and approximately $50 million of long-term variable rate debt under the Company's Master Credit Facility. The earliest maturity date for the Company's fixed-rate debt is in 2022.

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

Q2 2019 Conference Call Information

The Company will host a conference call with senior management to discuss the Company's 2019 second quarter financial results on Thursday, August 8, 2019, at 10:00 a.m. Eastern Time. To participate, dial 323-794-2597, and use confirmation code 4040867. A link to a simultaneous webcast of the teleconference will be available at www.capitalsenior.com.

For the convenience of the Company's shareholders and the public, the conference call will be recorded and available for replay starting August 8, 2019 at 12:00 p.m. Eastern Time, until August 16, 2019 at 12:00 p.m. Eastern Time.  To access the conference call replay, call 719-457-0820, and use confirmation code 4040867.  The conference call will also be made available for playback via the Company's corporate website at https://www.capitalsenior.com/investor-relations/conference-calls/

Non-GAAP Financial Measures of Operating Performance

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

Adjusted EBITDAR is a valuation measure commonly used by Company management, research analysts and investors to value companies in the senior living industry. Since Adjusted EBITDAR excludes interest expense and rent expense, it allows Company 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 income/(loss) to Adjusted Net Income/(Loss) and Adjusted CFFO, along with the Company's consolidated balance sheets, statements of operations, and statements of cash flows. This is included on the last page of this press release.

About the Company

Dallas-based Capital Senior Living Corporation is one of the nation's largest operators of independent living, assisted living and memory care communities for senior adults. The Company's 128 communities are home to nearly 12,000 residents across 23 states and provide compassionate, resident-centric service and care as well as engaging programming.  Capital Senior Living offers seniors the freedom and opportunity to successfully, comfortably and happily age in place.  For more information, visit www.capitalsenior.com or connect with the Company on Facebook.

Safe Harbor

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

For information about Capital Senior Living, visit www.capitalsenior.com.

Investor Contact Carey P. Hendrickson, Chief Financial Officer, at 972-770-5600 or chendrickson@capitalsenior.com.

Press Contact Susan J. Turkell at 303-766-4343 or sturkell@capitalsenior.com.

CAPITAL SENIOR LIVING CORPORATION
CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands, except per share data)

    June 30,
2019 
  December 31,
2018 
ASSETS                
Current assets:                
Cash and cash equivalents   $ 21,698     $ 31,309  
Restricted cash     13,053       13,011  
Accounts receivable, net     10,710       10,581  
Federal and state income taxes receivable     152       152  
Property tax and insurance deposits     10,940       13,173  
Prepaid expenses and other     6,404       5,232  
Total current assets     62,957       73,458  
Property and equipment, net     1,012,229       1,059,049  
Operating lease right-of-use assets, net     241,231        
Deferred taxes, net     152       152  
Other assets, net     11,467       16,485  
Total assets   $ 1,328,036     $ 1,149,144  
LIABILITIES AND SHAREHOLDERS' EQUITY                
Current liabilities:                
Accounts payable   $ 2,012     $ 9,095  
Accrued expenses     43,087       41,880  
Current portion of notes payable, net of deferred loan costs     17,973       14,342  
Current portion of deferred income     5,418       14,892  
Current portion of financing obligations     1,695      
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