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 23, 2016
Capital Senior Living Corporation
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation)
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| 1-13445 |
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75-2678809 |
| (Commission
File Number) |
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(IRS Employer
Identification No.) |
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| 14160 Dallas Parkway
Suite 300
Dallas, Texas |
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75254 |
| (Address of principal executive offices) |
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(Zip Code) |
(972) 770-5600
(Registrant’s 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):
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02 Results of Operations and Financial Condition.
On February 25, 2016, Capital Senior Living Corporation (the “Company”) announced its financial results for the fourth quarter and
fiscal year ended December 31, 2015 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
Company’s management utilizes financial measures of operating performance, including adjusted EBITDAR, adjusted EBITDAR margin, adjusted net income and adjusted CFFO, 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 amounts associated with the Company’s 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. The Company believes that these non-GAAP measures are useful in
identifying trends in day-to-day performance because they exclude items that are of little or no significance to operations and provide indicators to management of progress in achieving optimal operating performance. In addition, these measures are
used by many research analysts and investors to evaluate the performance and the value of companies in the senior living industry. The Company strongly urges you to review the reconciliation of net income from operations to adjusted EBITDAR and
adjusted EBITDAR margin and the reconciliation of net loss to adjusted net income and adjusted CFFO, each of which is included at the end of the Company’s press release, along with the Company’s consolidated balance sheets, statements of
operations, and statements of cash flows.
Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain
Officers; Compensatory Arrangement of Certain Officers.
(e) Adoption of Compensatory Plan.
On February 23, 2016, the Compensation Committee of the Company’s Board of Directors (the “Compensation Committee”) approved
the Company’s 2016 Incentive Compensation Plan (the “Plan”). The Plan provides performance bonus opportunities to the Company’s executive management, including certain eligible named executive officers (collectively, the
“Participants”), based upon achievement of corporate and individual goals established by the Compensation Committee for the year ending December 31, 2016.
Pursuant to the Plan, the Company’s Chief Executive Officer, Chief Operating Officer and Chief Financial Officer are eligible to receive
a target cash performance bonus equal to 75%, 53% and 45%, respectively, of their base salaries for 2016 based upon the Company’s achievement of two corporate goals for the year ending December 31, 2016.
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First, of that target cash bonus percentage attributable to the achievement of corporate goals, 41%, 31% and 27% for our Chief Executive Officer, Chief Operating Officer and Chief Financial Officer, respectively, is
based on the Company’s achievement of a Cash Flow From Operations (“CFFO”) per outstanding share target for 2016. Achievement of 80% of the target level of CFFO per share will result in 80% of the portion of the award subject to such
performance target being earned by the Participants. If this 80% threshold level of CFFO per share performance is attained, but the target level is not attained, the earned portion of the award subject to CFFO per share performance will be prorated
between 80% and 100% based upon the actual CFFO per share results reported in 2016. |
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• |
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Second, of that target cash bonus percentage attributable to the achievement of corporate goals, 34%, 22% and 18% for our Chief Executive Officer, Chief Operating Officer and Chief Financial Officer, respectively, is
based on the Company’s achievement of an Adjusted EBITDAR target for 2016. Achievement of 80% of the target level of Adjusted EBITDAR will result in 80% of the portion of the award subject to such performance target being earned by the
Participants. If this 80% threshold level of Adjusted EBITDAR performance is attained, but the target level is not attained, the earned portion of the award subject to Adjusted EBITDAR performance will be prorated between 80% and 100% based upon the
actual Adjusted EBITDAR results reported in 2016. |
In addition, the Company’s Chief Executive Officer, Chief Operating Officer and Chief
Financial Officer are eligible to receive a cash performance bonus of up to 25%, 17% and 15%, respectively, of their base salaries for 2016 based upon the achievement of certain objective individual goals for the year ending December 31, 2016, which
are within such Participant’s sphere of influence.
Under the Plan, the Company’s Chief Executive Officer, Chief Operating
Officer and Chief Financial Officer are also eligible to receive additional cash performance bonuses of up to 50%, 35%, and 30%, respectively, of their base salaries for 2016 if the CFFO per outstanding share target for the year ending December 31,
2016 is exceeded by between 5% and 25%.
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 2016 annual meeting of stockholders of the Company (the “Annual Meeting”) has been scheduled for May 19, 2016. The record date
for the Annual Meeting has been set as the close of business on March 23, 2016.
The Company will be filing a proxy statement and other
documents regarding the Annual Meeting with the Securities and Exchange Commission (the “SEC”). The Company’s 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 Company’s proxy statement, when available, and other documents filed by the Company with the SEC at the
SEC’s website (www.sec.gov) and in the investor relations section of the Company’s website (www.capitalsenior.com).
Item 9.01 Financial
Statements and Exhibits.
(a) Not applicable.
(b) Not applicable.
(c) Not
applicable.
(d) Exhibits.
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| *99.1 |
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Press Release dated February 25, 2016. |
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| *99.2 |
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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.
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| Date: February 25, 2016 |
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Capital Senior Living Corporation |
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By: |
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/s/ Carey P. Hendrickson |
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Name: |
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Carey P. Hendrickson |
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Title: |
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Senior Vice President and Chief Financial Officer |
EXHIBIT INDEX
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| *99.1 |
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Press Release dated February 25, 2016. |
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| *99.2 |
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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. |
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 2015 RESULTS
DALLAS – (BUSINESS WIRE) – February 25, 2016 – Capital Senior Living Corporation (the “Company”) (NYSE:CSU), one of the nation’s
largest operators of senior living communities, today announced operating and financial results for the fourth quarter and full year 2015. Company highlights for the fourth quarter and full year include:
Operating and Financial Summary (all amounts in this operating and financial summary exclude three communities that are undergoing
repositioning, lease-up or significant renovation and conversion, unless otherwise noted; also, see Non-GAAP Financial Measures below)
| • |
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Revenue in the fourth quarter of 2015, including all communities, was $107.5 million, a $7.4 million, or 7.4%, increase from the fourth quarter of 2014. Revenue for full-year 2015 increased $28.3 million, or 7.4%,
to $412.2 million. |
| • |
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Occupancy for the Company’s consolidated communities was 89.2% in the fourth quarter of 2015, an increase of 130 basis points from the fourth quarter of 2014 and 30 basis points from the third quarter of 2015.
Same-community occupancy was 88.9% for the fourth quarter of 2015, a 50 basis point increase from the fourth quarter of 2014 and a 20 basis point increase from the third quarter of 2015. |
| • |
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Average monthly rent for the Company’s consolidated communities in the fourth quarter of 2015 was $3,436, an increase of $207 per occupied unit, or 6.4%, as compared to the fourth quarter of 2014, and a 160 basis
point improvement from the third quarter of 2015. Same-community average monthly rent was $3,393, an increase of $85 per occupied unit, or 2.6%, from the fourth quarter of 2014. |
| • |
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Adjusted EBITDAR was $38.2 million in the fourth quarter of 2015, a 6.2% increase from the fourth quarter of 2014. The three communities undergoing repositioning, lease-up or significant renovation and conversion
generated an additional $1.0 million of EBITDAR. The Company’s Adjusted EBITDAR margin was 37.1% for the fourth quarter of 2015. Adjusted EBITDAR for full-year 2015 increased $11.9 million, or 8.9%, to $144.5 million. The Company’s
Adjusted EBITDAR margin for full-year 2015 was 36.6%, a record-high annual margin for the Company and a 70 basis point increase over full-year 2014. |
CAPITAL/Page
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| • |
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Adjusted Cash From Facility Operations (“CFFO”) was $12.8 million, or $0.45 per share, in the fourth quarter of 2015 compared to $0.44 in the fourth quarter of 2014. Adjusted CFFO for full-year 2015 was $1.64,
a 13.1% increase from $1.45 in full-year 2014. |
| • |
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The Company’s Net Loss for the fourth quarter of 2015, including all communities, was $6.0 million, or $0.21 per share, due mostly to non-cash amortization of resident leases of $3.5 million associated with
communities acquired by the Company in the previous 12 months. Net Loss for full-year 2015 was $14.3 million, or $0.50 per share. Adjusted Net Income was $0.8 million, or $0.03 per share, for the fourth quarter of 2015, and $2.1 million, or $0.07
per share, for full-year 2015. |
| • |
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The Company completed the acquisition of one community during the fourth quarter of 2015 for a purchase price of approximately $38.0 million. This community expands the Company’s operations in Virginia and is
expected to generate incremental annual CFFO of approximately $0.04 per share. |
| • |
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The Company announced today that it closed on the acquisition of 5 additional communities during January and February of 2016 for a combined purchase price of approximately $64.4 million. These communities expand the
Company’s operations in Wisconsin and Florida, and are expected to generate incremental annual CFFO of approximately $0.11 per share. With a strong reputation among sellers, the Company sources the majority of its acquisitions off-market and at
attractive terms. The Company has a strong pipeline of near- to medium-term targets. |
“We continue to demonstrate the advantages of our
clear and differentiated strategy to drive superior shareholder value as we successfully execute on our multiple avenues of growth,” said Lawrence A. Cohen, Chief Executive Officer of the Company. “Our focused execution produced growth in
all of our key metrics in the fourth quarter, including revenue, occupancy, average monthly rent, NOI, Adjusted EBITDAR and Adjusted CFFO as compared to the prior year. Our conversions of independent living units to assisted living and memory care
units also continue to show timely progress.
“Complementing this growth is a robust acquisition pipeline that allows us to increase our ownership of
high-quality senior living communities in geographically concentrated regions and generates meaningful increases in CFFO, earnings and real estate value. We have closed on five such communities in the first two months of 2016, and we continue to
pursue additional opportunities.
“We believe that we are well positioned to create long-term shareholder value as a larger company with scale,
competitive advantages and a substantially all private-pay business model in a highly-fragmented industry that benefits from long-term demographics, need-driven demand, limited competitive new supply in our local markets, a strong housing market and
a growing economy.”
CAPITAL/Page
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Recent Investment Activity
| • |
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In the fourth quarter of 2015 and thus far in the first quarter of 2016, the Company completed acquisitions of six senior living communities for a combined purchase price of approximately $102.4 million. These
communities expand the Company’s operations in Virginia, Wisconsin and Florida, and are composed of 428 units offering independent living, assisted living and memory care services. |
Combined highlights of the transactions include:
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Increases annual Adjusted CFFO by approximately $4.1 million, or $0.15 per share. |
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Adds approximately $1.8 million to earnings, or $0.06 per share. |
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Increases annual revenue by approximately $20.2 million. |
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Average monthly rents for the communities are approximately $3,850. |
The communities were
financed with an aggregate of approximately $74.3 million of non-recourse 10-year mortgage debt at an average fixed interest rate of 4.35%.
| • |
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In November 2015, the Company refinanced a four property loan pool that was due to mature in June 2017. The new mortgages total $52.8 million with a 4.68% interest rate and mature in December 2025. The new
mortgages replaced $31.6 million of debt with a blended interest rate of 5.67%. |
| • |
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During the fourth quarter of 2015, the Company executed supplemental loan financing on five communities, resulting in $19.4 million of cash to the Company. The supplemental loans are coterminous with the underlying
debt and mature at various times between November 2022 and April 2023. The aggregate debt on these five communities has a blended fixed interest rate of 4.72%. |
| • |
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The Company is conducting due diligence on additional acquisitions of high-quality senior living communities in states with extensive existing operations. |
| • |
|
On January 14, 2016, the Company announced that its board of directors approved a continuation of the Company’s stock repurchase program. Since that time, the Company has repurchased 144,315 shares at a weighted
average price per share of $17.29, totaling approximately $2.5 million. The Company has approximately $6.5 million remaining under its share repurchase authorization. |
CAPITAL/Page
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Financial Results - Fourth Quarter
For the fourth quarter of 2015, the Company reported revenue of $107.5 million, compared to revenue of $100.2 million in the fourth quarter of 2014, an
increase of 7.4%. Excluding the revenue of the five communities the Company has sold since the fourth quarter of 2014 from all appropriate periods, revenues increased $10.3 million, or 11.1%, in the fourth quarter of 2015 as compared to the
fourth quarter of 2014, mostly due to the acquisition of 9 communities during 2015. Operating expenses for the fourth quarter of 2015 were $65.1 million, an increase of $5.4 million from the fourth quarter of 2014, also primarily due to the
acquisitions made during 2015.
Revenue for consolidated communities excluding the three communities undergoing repositioning, lease-up or significant
renovation and conversion increased 7.3% in the fourth quarter of 2015 as compared to the fourth quarter of 2014. Net operating income for these communities increased 4.7% in the fourth quarter of 2015 as compared to the fourth quarter of
2014. These increases were achieved with fewer units available for lease in the fourth quarter of 2015 than the fourth quarter of 2014 due to conversion and refurbishment projects currently in progress at certain communities.
General and administrative expenses for the fourth quarter of 2015 were $4.9 million, which includes $0.9 million of transaction and other one-time
costs. Excluding transaction and other one-time costs from both periods, general and administrative expenses decreased $0.2 million in the fourth quarter of 2015 as compared to the fourth quarter of 2014. As a percentage of revenues under
management, general and administrative expenses, excluding transaction and other one-time costs, were 3.7% in the fourth quarter of 2015 as compared to 4.1% in the fourth quarter of 2014.
The Company’s Non-GAAP financial measures exclude three communities that are undergoing repositioning, lease-up of higher-licensed units or significant
renovation and conversion (see “Non-GAAP Financial Measures” below). One community excluded in previous quarters reached 90% stabilized occupancy during the fourth quarter of 2015 and is now included in the Company’s Non-GAAP
financial results. Also, as previously noted, beginning in 2015, the Company no longer includes the change in prepaid resident rent as a component of Adjusted CFFO as it is a non-economic timing item.
Adjusted EBITDAR for the fourth quarter of 2015 was approximately $38.2 million, an increase of $2.2 million, or 6.2%, from the fourth quarter of
2014. This does not include EBITDAR of $1.0 million related to three communities undergoing repositioning, lease-up or significant renovation and conversion. The Adjusted EBITDAR margin for the fourth quarter of 2015 was 37.1%.
The Company recorded a net loss of $6.0 million, or $0.21 per share, in the fourth quarter of 2015. Excluding non-recurring or non-economic items
reconciled on the
CAPITAL/Page
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final page of this release, the Company’s adjusted net income was $0.8 million, or $0.03 per share, in the fourth quarter of 2015. Adjusted CFFO was $12.8 million, or $0.45 per share, in the
fourth quarter of 2015, a 2.9% increase from the fourth quarter of the prior year. On a comparable basis, Adjusted CFFO was $12.4 million, or $0.44 per share, in the fourth quarter of 2014.
Financial Results – Full Year
The Company
reported 2015 revenue of $412.2 million compared to revenue of $383.9 million in 2014, an increase of $28.3 million, or 7.4%. 2014 revenue included $3.1 million in community reimbursement revenue and affiliated management revenue associated
with three communities formerly held as a joint venture. Resident and healthcare revenue increased 8.4% versus the prior year. Operating expenses were $248.7 million in 2015, an increase of $18.2 million.
General and administrative expenses in 2015 were $20.4 million compared to $19.6 million in 2014. Excluding transaction and other one-time costs, general
and administrative expenses as a percentage of revenues under management were approximately 4.3% in 2015 compared to 4.6% in 2014.
Adjusted EBITDAR
increased 8.9% to $144.5 million in 2015, an increase of $11.9 million. The Company’s Adjusted EBITDAR margin was 36.6% in 2015, a record-high annual margin for the company and a 70 basis point improvement from 2014. Adjusted CFFO for 2015 was
$47.0 million, or $1.64 per share, compared to $1.45 per share in 2014. The Company’s net loss for 2015 was $14.3 million, or $0.50 per share. After adjusting for the non-recurring or non-economic items reconciled on the final page of this
release, the Company earned adjusted net income of $2.1 million, or $0.07 per share.
Operating Activities
Same-community results exclude the three communities previously noted that are undergoing repositioning, lease-up or significant renovation and conversion, and
transaction and other one-time costs.
Same-community revenue in the fourth quarter of 2015 increased 1.8% versus the fourth quarter of 2014. Due to
conversion and refurbishment projects currently in progress at certain communities, fewer units were available for rent in the fourth quarter of this year than the fourth quarter of last year. With a like number of units available in both
years, same-community revenue would have increased approximately 3.2% in the fourth quarter of 2015 as compared to the fourth quarter of the prior year.
Same-community expenses increased 3.2% from the fourth quarter of the prior year. Labor costs, including benefits, increased 4.0%, primarily due to a
one-time workers
CAPITAL/Page
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compensation credit in the fourth quarter of 2014 and an increase in the number of employees with healthcare coverage in the fourth quarter of 2015 as compared to the fourth quarter of 2014
related to the continued implementation of the Affordable Care Act. Excluding these items, labor costs increased 2.9% and total same-community expenses increased 2.5%. The Company’s two other significant expense categories, food and utilities,
both decreased in the fourth quarter of 2015 as compared to the fourth quarter of 2014; food costs decreased 0.8% and utilities decreased 5.9%. Same-community net operating income increased 0.3% in the fourth quarter of 2015 as compared to the
fourth quarter of 2014. With a like number of units available in both years and excluding the unusual labor items noted above, same-community net operating income would have increased approximately 3.2% from the fourth quarter of the prior year.
Capital expenditures for the fourth quarter of 2015 were $15.1 million, representing approximately $13.6 million of investment spending and approximately
$1.5 million of recurring capital expenditures. Spending in 2015 for recurring capital expenditures equaled $5.5 million, or approximately $475 per unit.
Balance Sheet
The Company ended the quarter with
$69.2 million of cash and cash equivalents, including restricted cash, an increase of $21.4 million since September 30, 2015. During the fourth quarter of 2015, the Company invested $10.0 million of cash as equity to complete the acquisition of
one community and spent $18.8 million on capital improvements, which includes $3.7 million related to lease incentives for certain tenant leasehold improvements for which the Company expects to be reimbursed by its lessors. The Company received
reimbursements totaling $2.5 million in the fourth quarter and expects to receive the remainder as the projects are completed.
As of December 31, 2015,
the Company financed its owned communities with mortgages totaling $763.4 million at interest rates averaging 4.6%. All of the Company’s debt is at fixed interest rates, except for one bridge loan totaling approximately $11.8 million at
December 31, 2015, which was at an average variable rate of approximately 4.65% in the fourth quarter of 2015.
The Company’s cash on hand and cash
flow from operations are expected to be sufficient for working capital, prudent reserves, share repurchases and the equity needed to fund the Company’s acquisition, conversion and renovation programs.
Q4 2015 Conference Call Information
The Company
will host a conference call with senior management to discuss the Company’s fourth quarter 2015 financial results. The call will be held on Thursday, February 25, 2016 at 5:00 p.m. Eastern Time. The call-in number is 913-312-1475, confirmation
code 3113420. A link to a simultaneous webcast of the teleconference will be available at www.capitalsenior.com through Windows Media Player or RealPlayer.
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For the convenience of the Company’s shareholders and the public, the conference call will be recorded
and available for replay starting February 25, 2016 at 8:00 p.m. Eastern Time, until March 5, 2016 at 8:00 p.m. Eastern Time. To access the conference call replay, call 719-457-0820, confirmation code 3113420. The conference call will also be made
available for playback via the Company’s corporate website, www.capitalsenior.com, beginning February 26, 2016.
Non-GAAP Financial
Measures
Adjusted EBITDAR, Adjusted EBITDAR Margin, Adjusted Net Income and Adjusted CFFO are financial measures of operating performance 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 amounts 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. The Company believes that
these non-GAAP measures are useful in identifying trends in day-to-day performance because they exclude items that are of little or no significance to operations and provide indicators to management of progress in achieving optimal operating
performance. In addition, these measures are used by many research analysts and investors to evaluate the performance and the value of companies in the senior living industry. The Company strongly urges you to review the reconciliation of net income
from operations to Adjusted EBITDAR and Adjusted EBITDAR Margin and the reconciliation of net loss to Adjusted Net Income and Adjusted CFFO, along with the Company’s consolidated balance sheets, statements of operations, and statements of cash
flows.
About the Company
Capital Senior
Living Corporation is one of the nation’s largest operators of residential communities for senior adults. The Company’s operating strategy is to provide value to residents by providing quality senior living services at reasonable prices.
The Company’s communities emphasize a continuum of care, which integrates independent living, assisted living, and home care services, to provide residents the opportunity to age in place. The Company operates 126 senior living communities in
geographically concentrated regions with an aggregate capacity of approximately 15,800 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 Company’s ability to find suitable acquisition properties at favorable terms, financing, refinancing, community sales, licensing, business conditions, risks
CAPITAL/Page
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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
9
CAPITAL SENIOR LIVING CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
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December 31, |
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2015 |
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2014 |
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(In thousands, except per share data) |
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| ASSETS |
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| Current assets: |
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| Cash and cash equivalents |
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$ |
56,087 |
|
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$ |
39,209 |
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| Restricted cash |
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13,159 |
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12,241 |
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| Accounts receivable, net |
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9,252 |
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5,903 |
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| Accounts receivable from affiliates |
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2 |
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5 |
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| Deferred taxes |
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— |
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|
460 |
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| Assets held for sale |
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— |
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35,761 |
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| Property tax and insurance deposits |
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14,398 |
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12,198 |
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| Prepaid expenses and other |
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4,370 |
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6,797 |
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| Total current assets |
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97,268 |
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112,574 |
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| Property and equipment, net |
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890,572 |
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747,613 |
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| Other assets, net |
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31,193 |
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31,183 |
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| Total assets |
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$ |
1,019,033 |
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$ |
891,370 |
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| LIABILITIES AND SHAREHOLDERS’ EQUITY |
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| Current liabilities: |
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| Accounts payable |
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$ |
3,362 |
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$ |
2,540 |
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| Accounts payable to affiliates |
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— |
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7 |
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| Accrued expenses |
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34,300 |
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32,154 |
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| Notes payable of assets held for sale |
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— |
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14,847 |
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| Current portion of notes payable, net of deferred loan costs |
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13,634 |
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32,538 |
|
| Current portion of deferred income |
|
|
16,059 |
|
|
|
14,603 |
|
| Current portion of capital lease and financing obligations |
|
|
1,257 |
|
|
|
1,054 |
|
| Federal and state income taxes payable |
|
|
111 |
|
|
|
219 |
|
| Customer deposits |
|
|
1,819 |
|
|
|
1,499 |
|
|
|
|
|
|
|
|
|
|
| Total current liabilities |
|
|
70,542 |
|
|
|
99,461 |
|
| Deferred income |
|
|
13,992 |
|
|
|
15,949 |
|
| Capital lease and financing obligations, net of current portion |
|
|
38,835 |
|
|
|
40,016 |
|
| Deferred taxes |
|
|
— |
|
|
|
460 |
|
| Other long-term liabilities |
|
|
4,969 |
|
|
|
1,426 |
|
| Notes payable, net of deferred loan costs and current portion |
|
|
754,949 |
|
|
|
592,884 |
|
| 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 29,539 and 29,097 in 2015 and 2014, respectively |
|
|
299 |
|
|
|
294 |
|
| Additional paid-in capital |
|
|
159,920 |
|
|
|
151,069 |
|
| Retained (deficit) earnings |
|
|
(23,539 |
) |
|
|
(9,255 |
) |
| Treasury stock, at cost – 350 shares in 2015 and 2014 |
|
|
(934 |
) |
|
|
(934 |
) |
|
|
|
|
|
|
|
|
|
| Total shareholders’ equity |
|
|
135,746 |
|
|
|
141,174 |
|
|
|
|
|
|
|
|
|
|
| Total liabilities and shareholders’ equity |
|
$ |
1,019,033 |
|
|
$ |
891,370 |
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
CAPITAL/Page
10
CAPITAL SENIOR LIVING CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(unaudited, in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three Months Ended
December 31, |
|
|
Year Ended
December 31, |
|
| |
|
2015 |
|
|
2014 |
|
|
2015 |
|
|
2014 |
|
|
|
|
|
|
| Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Resident and health care revenue |
|
$ |
107,529 |
|
|
$ |
100,160 |
|
|
$ |
412,177 |
|
|
$ |
380,400 |
|
| Affiliated management services revenue |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
415 |
|
| Community reimbursement revenue |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
3,110 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total revenues |
|
|
107,529 |
|
|
|
100,160 |
|
|
|
412,177 |
|
|
|
383,925 |
|
| Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Operating expenses (exclusive of facility lease expense and depreciation and amortization expense shown below) |
|
|
65,122 |
|
|
|
59,744 |
|
|
|
248,736 |
|
|
|
230,495 |
|
| General and administrative expenses |
|
|
4,869 |
|
|
|
4,485 |
|
|
|
20,351 |
|
|
|
19,622 |
|
| Facility lease expense |
|
|
15,338 |
|
|
|
14,808 |
|
|
|
61,213 |
|
|
|
59,332 |
|
| Provision for bad debts |
|
|
319 |
|
|
|
200 |
|
|
|
1,192 |
|
|
|
717 |
|
| Stock-based compensation expense |
|
|
2,088 |
|
|
|
1,586 |
|
|
|
8,833 |
|
|
|
7,262 |
|
| Depreciation and amortization |
|
|
14,032 |
|
|
|
13,880 |
|
|
|
53,017 |
|
|
|
49,487 |
|
| Community reimbursement expense |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
3,110 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total expenses |
|
|
101,768 |
|
|
|
94,703 |
|
|
|
393,342 |
|
|
|
370,025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Income from operations |
|
|
5,761 |
|
|
|
5,457 |
|
|
|
18,835 |
|
|
|
13,900 |
|
| Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Interest income |
|
|
17 |
|
|
|
12 |
|
|
|
53 |
|
|
|
52 |
|
| Interest expense |
|
|
(9,710 |
) |
|
|
(8,476 |
) |
|
|
(35,732 |
) |
|
|
(31,261 |
) |
| Write-off of deferred loan costs and prepayment premiums |
|
|
(1,793 |
) |
|
|
(989 |
) |
|
|
(2,766 |
) |
|
|
(7,968 |
) |
| Joint venture equity investment valuation gain |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,519 |
|
| (Loss) Gain on disposition of assets, net |
|
|
(22 |
) |
|
|
795 |
|
|
|
6,225 |
|
|
|
784 |
|
| Equity in earnings of unconsolidated joint ventures, net |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
105 |
|
| Write-down of assets held for sale |
|
|
— |
|
|
|
(561 |
) |
|
|
— |
|
|
|
(561 |
) |
| Other income |
|
|
— |
|
|
|
1 |
|
|
|
1 |
|
|
|
23 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Loss before provision for income taxes |
|
|
(5,747 |
) |
|
|
(3,761 |
) |
|
|
(13,384 |
) |
|
|
(23,407 |
) |
| Provision for income taxes |
|
|
(203 |
) |
|
|
(140 |
) |
|
|
(900 |
) |
|
|
(719 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net loss |
|
$ |
(5,950 |
) |
|
$ |
(3,901 |
) |
|
$ |
(14,284 |
) |
|
$ |
(24,126 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Per share data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Basic net loss per share |
|
$ |
(0.21 |
) |
|
$ |
(0.13 |
) |
|
$ |
(0.50 |
) |
|
$ |
(0.83 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Diluted net loss per share |
|
$ |
(0.21 |
) |
|
$ |
(0.13 |
) |
|
$ |
(0.50 |
) |
|
$ |
(0.83 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Weighted average shares outstanding — basic |
|
|
28,749 |
|
|
|
28,387 |
|
|
|
28,688 |
|
|
|
28,301 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Weighted average shares outstanding — diluted |
|
|
28,749 |
|
|
|
28,387 |
|
|
|
28,688 |
|
|
|
28,301 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Comprehensive loss |
|
$ |
(5,950 |
) |
|
$ |
(3,901 |
) |
|
$ |
(14,284 |
) |
|
$ |
(24,126 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CAPITAL/Page
11
CAPITAL SENIOR LIVING CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
|
|
|
|
|
|
|
|
|
| |
|
Year Ended December 31, |
|
| |
|
2015 |
|
|
2014 |
|
| |
|
(in thousands) |
|
| Operating Activities |
|
|
|
|
|
|
|
|
| Net loss |
|
$ |
(14,284 |
) |
|
$ |
(24,126 |
) |
| Adjustments to reconcile net loss to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
| Depreciation and amortization |
|
|
53,017 |
|
|
|
49,487 |
|
| Amortization of deferred financing charges |
|
|
1,029 |
|
|
|
1,361 |
|
| Amortization of deferred lease costs and lease intangibles |
|
|
1,421 |
|
|
|
1,230 |
|
| Deferred income |
|
|
(677 |
) |
|
|
(616 |
) |
| Lease incentives |
|
|
2,464 |
|
|
|
— |
|
| Write-off of deferred loan costs and prepayment premiums |
|
|
2,766 |
|
|
|
7,968 |
|
| Joint venture equity investment valuation gain |
|
|
— |
|
|
|
(1,519 |
) |
| Gain on disposition of assets, net |
|
|
(6,225 |
) |
|
|
(784 |
) |
| Equity in earnings of unconsolidated joint ventures, net |
|
|
— |
|
|
|
(105 |
) |
| Write-down of assets held for sale |
|
|
— |
|
|
|
561 |
|
| Provision for bad debts |
|
|
1,192 |
|
|
|
717 |
|
| Stock-based compensation expense |
|
|
8,833 |
|
|
|
7,262 |
|
| Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
| Accounts receivable |
|
|
(2,931 |
) |
|
|
(2,868 |
) |
| Accounts receivable from affiliates |
|
|
3 |
|
|
|
411 |
|
| Property tax and insurance deposits |
|
|
(2,200 |
) |
|
|
(1,162 |
) |
| Prepaid expenses and other |
|
|
2,427 |
|
|
|
(192 |
) |
| Other assets |
|
|
(1,289 |
) |
|
|
(163 |
) |
| Accounts payable |
|
|
815 |
|
|
|
(1,267 |
) |
| Accrued expenses |
|
|
2,146 |
|
|
|
2,833 |
|
| Federal and state income taxes receivable/payable |
|
|
(108 |
) |
|
|
5,342 |
|
| Deferred resident revenue |
|
|
176 |
|
|
|
1,932 |
|
| Customer deposits |
|
|
320 |
|
|
|
10 |
|
|
|
|
|
|
|
|
|
|
| Net cash provided by operating activities |
|
|
48,895 |
|
|
|
46,312 |
|
| Investing Activities |
|
|
|
|
|
|
|
|
| Capital expenditures |
|
|
(42,430 |
) |
|
|
(18,742 |
) |
| Cash paid for acquisitions |
|
|
(162,460 |
) |
|
|
(160,105 |
) |
| Proceeds from SHPIII/CSL Transaction |
|
|
— |
|
|
|
2,532 |
|
| Proceeds from disposition of assets |
|
|
43,463 |
|
|
|
796 |
|
| Distributions from joint ventures |
|
|
— |
|
|
|
102 |
|
|
|
|
|
|
|
|
|
|
| Net cash used in investing activities |
|
|
(161,427 |
) |
|
|
(175,417 |
) |
| Financing Activities |
|
|
|
|
|
|
|
|
| Proceeds from notes payable |
|
|
250,944 |
|
|
|
300,820 |
|
| Repayments of notes payable |
|
|
(115,896 |
) |
|
|
(140,950 |
) |
| Cash payments for capital lease and financing obligations |
|
|
(978 |
) |
|
|
(971 |
) |
| Increase in restricted cash |
|
|
(918 |
) |
|
|
(816 |
) |
| Cash proceeds from the issuance of common stock |
|
|
42 |
|
|
|
170 |
|
| Excess tax benefits on stock options exercised |
|
|
(19 |
) |
|
|
(82 |
) |
| Deferred financing charges paid |
|
|
(3,765 |
) |
|
|
(3,468 |
) |
|
|
|
|
|
|
|
|
|
| Net cash provided by financing activities |
|
|
129,410 |
|
|
|
154,703 |
|
|
|
|
|
|
|
|
|
|
| Increase (Decrease) in cash and cash equivalents |
|
|
16,878 |
|
|
|
25,598 |
|
| Cash and cash equivalents at beginning of year |
|
|
39,209 |
|
|
|
13,611 |
|
|
|
|
|
|
|
|
|
|
| Cash and cash equivalents at end of year |
|
$ |
56,087 |
|
|
$ |
39,209 |
|
|
|
|
|
|
|
|
|
|
| Supplemental Disclosures |
|
|
|
|
|
|
|
|
| Cash paid during the year for: |
|
|
|
|
|
|
|
|
| Interest |
|
$ |
33,642 |
|
|
$ |
28,856 |
|
|
|
|
|
|
|
|
|
|
| Income taxes |
|
$ |
1,039 |
|
|
$ |
724 |
|
|
|
|
|
|
|
|
|
|
| Non-cash operating, investing, and financing activities: |
|
|
|
|
|
|
|
|
| Notes payable assumed by purchaser through disposition of assets |
|
$ |
6,764 |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
CAPITAL/Page
12
Capital Senior Living Corporation
Supplemental Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Communities |
|
|
Average
Resident Capacity |
|
|
Average Units |
|
| |
|
Q4 15 |
|
|
Q4 14 |
|
|
Q4 15 |
|
|
Q4 14 |
|
|
Q4 15 |
|
|
Q4 14 |
|
| Portfolio Data |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| I. Community Ownership / Management |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Consolidated communities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Owned |
|
|
71 |
|
|
|
67 |
|
|
|
9,083 |
|
|
|
8,783 |
|
|
|
6,891 |
|
|
|
6,895 |
|
| Leased |
|
|
50 |
|
|
|
50 |
|
|
|
6,333 |
|
|
|
6,333 |
|
|
|
4,907 |
|
|
|
4,984 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total |
|
|
121 |
|
|
|
117 |
|
|
|
15,416 |
|
|
|
15,116 |
|
|
|
11,798 |
|
|
|
11,879 |
|
|
|
|
|
|
|
|
| Independent living |
|
|
|
|
|
|
|
|
|
|
6,984 |
|
|
|
7,597 |
|
|
|
5,366 |
|
|
|
6,134 |
|
| Assisted living |
|
|
|
|
|
|
|
|
|
|
8,432 |
|
|
|
7,519 |
|
|
|
6,432 |
|
|
|
5,745 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total |
|
|
|
|
|
|
|
|
|
|
15,416 |
|
|
|
15,116 |
|
|
|
11,798 |
|
|
|
11,879 |
|
|
|
|
|
|
|
|
| II. Percentage of Operating Portfolio |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Consolidated communities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Owned |
|
|
58.7 |
% |
|
|
57.3 |
% |
|
|
58.9 |
% |
|
|
58.1 |
% |
|
|
58.4 |
% |
|
|
58.0 |
% |
| Leased |
|
|
41.3 |
% |
|
|
42.7 |
% |
|
|
41.1 |
% |
|
|
41.9 |
% |
|
|
41.6 |
% |
|
|
42.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
|
|
|
|
|
| Independent living |
|
|
|
|
|
|
|
|
|
|
45.3 |
% |
|
|
50.3 |
% |
|
|
45.5 |
% |
|
|
51.6 |
% |
| Assisted living |
|
|
|
|
|
|
|
|
|
|
54.7 |
% |
|
|
49.7 |
% |
|
|
54.5 |
% |
|
|
48.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total |
|
|
|
|
|
|
|
|
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
CAPITAL/Page
13
Capital Senior Living Corporation
Supplemental Information (excludes communities being repositioned/leased up)
Selected Operating Results
|
|
|
|
|
|
|
|
|
| |
|
Q4 15 |
|
|
Q4 14 |
|
| I. Owned communities |
|
|
|
|
|
|
|
|
| Number of communities |
|
|
69 |
|
|
|
65 |
|
| Resident capacity |
|
|
8,538 |
|
|
|
8,238 |
|
| Unit capacity (1) |
|
|
6,492 |
|
|
|
6,446 |
|
| Financial occupancy (2) |
|
|
90.8 |
% |
|
|
88.9 |
% |
| Revenue (in millions) |
|
|
59.0 |
|
|
|
52.1 |
|
| Operating expenses (in millions) (3) |
|
|
33.5 |
|
|
|
29.5 |
|
| Operating margin |
|
|
43 |
% |
|
|
43 |
% |
| Average monthly rent |
|
|
3,338 |
|
|
|
3,031 |
|
| II. Leased communities |
|
|
|
|
|
|
|
|
| Number of communities |
|
|
49 |
|
|
|
49 |
|
| Resident capacity |
|
|
6,107 |
|
|
|
6,107 |
|
| Unit capacity (1) |
|
|
4,720 |
|
|
|
4,843 |
|
| Financial occupancy (2) |
|
|
86.9 |
% |
|
|
86.5 |
% |
| Revenue (in millions) |
|
|
44.0 |
|
|
|
44.0 |
|
| Operating expenses (in millions) (3) |
|
|
22.4 |
|
|
|
21.8 |
|
| Operating margin |
|
|
49 |
% |
|
|
50 |
% |
| Average monthly rent |
|
|
3,577 |
|
|
|
3,499 |
|
| III. Consolidated communities |
|
|
|
|
|
|
|
|
| Number of communities |
|
|
118 |
|
|
|
114 |
|
| Resident capacity |
|
|
14,645 |
|
|
|
14,345 |
|
| Unit capacity (1) |
|
|
11,212 |
|
|
|
11,288 |
|
| Financial occupancy (2) |
|
|
89.2 |
% |
|
|
87.9 |
% |
| Revenue (in millions) |
|
|
103.0 |
|
|
|
96.1 |
|
| Operating expenses (in millions) (3) |
|
|
55.8 |
|
|
|
51.3 |
|
| Operating margin |
|
|
46 |
% |
|
|
47 |
% |
| Average monthly rent |
|
|
3,436 |
|
|
|
3,229 |
|
| IV. Communities under management |
|
|
|
|
|
|
|
|
| Number of communities |
|
|
118 |
|
|
|
114 |
|
| Resident capacity |
|
|
14,645 |
|
|
|
14,345 |
|
| Unit capacity (1) |
|
|
11,212 |
|
|
|
11,288 |
|
| Financial occupancy (2) |
|
|
89.2 |
% |
|
|
87.9 |
% |
| Revenue (in millions) |
|
|
103.0 |
|
|
|
96.1 |
|
| Operating expenses (in millions) (3) |
|
|
55.8 |
|
|
|
51.2 |
|
| Operating margin |
|
|
46 |
% |
|
|
47 |
% |
| Average monthly rent |
|
|
3,436 |
|
|
|
3,229 |
|
| V. Same communities under management |
|
|
|
|
|
|
|
|
| Number of communities |
|
|
107 |
|
|
|
107 |
|
| Resident capacity |
|
|
13,429 |
|
|
|
13,429 |
|
| Unit capacity (1) |
|
|
10,394 |
|
|
|
10,534 |
|
| Financial occupancy (2) |
|
|
88.9 |
% |
|
|
88.4 |
% |
| Revenue (in millions) |
|
|
94.1 |
|
|
|
92.4 |
|
| Operating expenses (in millions) (3) |
|
|
50.4 |
|
|
|
48.9 |
|
| Operating margin |
|
|
46 |
% |
|
|
47 |
% |
| Average monthly rent |
|
|
3,393 |
|
|
|
3,308 |
|
| VI. General and Administrative expenses as a percent of Total Revenues under Management |
|
| Fourth quarter (4) |
|
|
3.6 |
% |
|
|
4.1 |
% |
| Fiscal year (4) |
|
|
4.3 |
% |
|
|
4.6 |
% |
| VII. Consolidated Mortgage Debt Information (in thousands, except interest rates) (excludes insurance premium and auto
financing) |
|
|
|
|
|
|
|
|
| Total fixed rate mortgage debt |
|
|
763,427 |
|
|
|
577,310 |
|
| Total variable rate mortgage debt |
|
|
11,800 |
|
|
|
65,222 |
|
| Weighted average interest rate |
|
|
4.6 |
% |
|
|
4.7 |
% |
| (1) |
Due to conversion and refurbishment projects currently in progress at certain communities, unit capacity is lower in Q4 15 than Q4 14 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, insurance and property taxes. |
| (4) |
Excludes transaction and conversion costs. |
CAPITAL/Page
14
CAPITAL SENIOR LIVING CORPORATION
NON-GAAP RECONCILIATIONS
(In thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three Months Ended December 31, |
|
|
Fiscal Year Ended December 31, |
|
| |
|
2015 |
|
|
2014 |
|
|
2015 |
|
|
2014 |
|
| Adjusted EBITDAR |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net income from operations |
|
$ |
5,761 |
|
|
$ |
5,457 |
|
|
$ |
18,835 |
|
|
$ |
13,900 |
|
| Depreciation and amortization expense |
|
|
14,032 |
|
|
|
13,880 |
|
|
|
53,017 |
|
|
|
49,487 |
|
| Stock-based compensation expense |
|
|
2,088 |
|
|
|
1,586 |
|
|
|
8,833 |
|
|
|
7,262 |
|
| Facility lease expense |
|
|
15,338 |
|
|
|
14,808 |
|
|
|
61,213 |
|
|
|
59,332 |
|
| Provision for bad debts |
|
|
319 |
|
|
|
200 |
|
|
|
1,192 |
|
|
|
717 |
|
| Casualty losses |
|
|
424 |
|
|
|
166 |
|
|
|
1,250 |
|
|
|
748 |
|
| Transaction and conversion costs |
|
|
1,256 |
|
|
|
549 |
|
|
|
3,262 |
|
|
|
2,648 |
|
| Communities being repositioned/leased up |
|
|
(1,015 |
) |
|
|
(683 |
) |
|
|
(3,141 |
) |
|
|
(1,494 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Adjusted EBITDAR |
|
$ |
38,203 |
|
|
$ |
35,963 |
|
|
$ |
144,461 |
|
|
$ |
132,600 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Adjusted EBITDAR Margin |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Adjusted EBITDAR |
|
$ |
38,203 |
|
|
$ |
35,963 |
|
|
$ |
144,461 |
|
|
$ |
132,600 |
|
|
|
|
|
|
| Total revenues |
|
$ |
107,529 |
|
|
$ |
100,160 |
|
|
$ |
412,177 |
|
|
$ |
383,925 |
|
| Communities being repositioned/leased up |
|
|
(4,417 |
) |
|
|
(4,308 |
) |
|
|
(17,848 |
) |
|
|
(14,381 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Adjusted revenues |
|
$ |
103,112 |
|
|
$ |
95,852 |
|
|
$ |
394,329 |
|
|
$ |
369,544 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Adjusted EBITDAR margin |
|
|
37.1 |
% |
|
|
37.5 |
% |
|
|
36.6 |
% |
|
|
35.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Adjusted net income and net income per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net income (loss) |
|
$ |
(5,950 |
) |
|
$ |
(3,901 |
) |
|
$ |
(14,284 |
) |
|
$ |
(24,126 |
) |
| Casualty losses, net of tax |
|
|
267 |
|
|
|
105 |
|
|
|
788 |
|
|
|
471 |
|
| Transaction and conversion costs, net of tax |
|
|
791 |
|
|
|
346 |
|
|
|
2,055 |
|
|
|
1,668 |
|
| Resident lease amortization, net of tax |
|
|
2,221 |
|
|
|
3,013 |
|
|
|
9,048 |
|
|
|
10,460 |
|
| Write-off of deferred loan costs and prepayment premium, net of tax |
|
|
1,130 |
|
|
|
623 |
|
|
|
1,743 |
|
|
|
5,020 |
|
| Write-down of assets held for sale, net of tax |
|
|
— |
|
|
|
353 |
|
|
|
— |
|
|
|
353 |
|
| Joint venture equity investment valuation gain, net of tax |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(957 |
) |
| Loss (Gain) on disposition of assets, net of tax |
|
|
14 |
|
|
|
(501 |
) |
|
|
(3,922 |
) |
|
|
(494 |
) |
| Deferred tax asset valuation allowance |
|
|
1,942 |
|
|
|
993 |
|
|
|
4,986 |
|
|
|
8,456 |
|
| Tax impact of 4 property sale |
|
|
59 |
|
|
|
— |
|
|
|
351 |
|
|
|
— |
|
| Communities being repositioned/leased up, net of tax |
|
|
302 |
|
|
|
429 |
|
|
|
1,298 |
|
|
|
1,578 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Adjusted net income |
|
$ |
776 |
|
|
$ |
1,460 |
|
|
$ |
2,063 |
|
|
$ |
2,429 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Diluted shares outstanding |
|
|
29,158 |
|
|
|
28,390 |
|
|
|
29,001 |
|
|
|
28,305 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Adjusted net income per share |
|
$ |
0.03 |
|
|
$ |
0.05 |
|
|
$ |
0.07 |
|
|
$ |
0.09 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Adjusted CFFO and Adjusted CFFO per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net loss |
|
$ |
(5,950 |
) |
|
$ |
(3,901 |
) |
|
$ |
(14,284 |
) |
|
$ |
(24,126 |
) |
| Non-cash charges, net |
|
|
20,959 |
|
|
|
16,694 |
|
|
|
63,820 |
|
|
|
65,562 |
|
| Lease incentives |
|
|
(2,464 |
) |
|
|
— |
|
|
|
(2,464 |
) |
|
|
— |
|
| Recurring capital expenditures |
|
|
(1,122 |
) |
|
|
(1,101 |
) |
|
|
(4,413 |
) |
|
|
(4,257 |
) |
| Casualty losses |
|
|
424 |
|
|
|
166 |
|
|
|
1,250 |
|
|
|
748 |
|
| Transaction and conversion costs |
|
|
1,256 |
|
|
|
549 |
|
|
|
3,262 |
|
|
|
2,648 |
|
| Tax impact of 4 property sale |
|
|
59 |
|
|
|
— |
|
|
|
351 |
|
|
|
— |
|
| Tax impact of Spring Meadows Transaction |
|
|
(106 |
) |
|
|
(106 |
) |
|
|
(424 |
) |
|
|
(424 |
) |
| Communities being repositioned/leased up, net of tax |
|
|
(243 |
) |
|
|
138 |
|
|
|
(101 |
) |
|
|
746 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Adjusted CFFO |
|
$ |
12,813 |
|
|
$ |
12,439 |
|
|
$ |
46,997 |
|
|
$ |
40,897 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Basic shares outstanding |
|
|
28,749 |
|
|
|
28,387 |
|
|
|
28,688 |
|
|
|
28,301 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Adjusted CFFO per share |
|
$ |
0.45 |
|
|
$ |
0.44 |
|
|
$ |
1.64 |
|
|
$ |
1.45 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
***
Capital Senior Living Executing a
Clear, Differentiated Strategy to Drive Superior Shareholder Value 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, Adjusted EBITDAR Margin, Adjusted Net Income and Adjusted CFFO are financial measures of operating performance 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 amounts 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. The Company believes that these non-GAAP measures are useful in identifying trends in day-to-day performance because they exclude items
that are of little or no significance to operations and provide indicators to management of progress in achieving optimal operating performance. In addition, these measures are used by many research analysts and investors to evaluate the performance
and the value of companies in the senior living industry. The Company strongly urges you to review the reconciliation of net income from operations to Adjusted EBITDAR and Adjusted EBITDAR Margin and the reconciliation of net loss to Adjusted Net
Income and Adjusted CFFO, each of which is included at the end of the Company’s earnings releases, along with the Company’s consolidated balance sheets, statements of operations, and statements of cash flows.
Table of Contents Executive Summary Key
Investment Highlights Attractive Positioning in the Healthcare Real Estate Market Compelling Strategy to Drive Shareholder Value Accomplished Leadership Team Focused on Execution Track Record of Strong Growth and Uniquely Positioned for Continued
Success Conclusion
Executive Summary Need-driven demand,
limited competitive new supply and an improving housing market and economy Highly fragmented industry with significant opportunities for a scale player Operating in metro areas with supportive supply and demand dynamics; protected by barriers to
entry Straight forward private-pay business model with highest percentage of wholly-owned locations and a track record for increasing occupancy and pricing Increase levels of care through conversion to Assisted Living or Memory Care units Capitalize
on market fragmentation to strategically aggregate local and regional operators in geographically concentrated regions Senior management team with an average of 20+ years experience in the industry and a track record of driving shareholder value
Operating team with an average of 32 years senior housing experience Highly engaged and independent Board with experience leading public companies in the healthcare and real estate industries As a group, directors and officers are among the top
beneficial owners of CSU stock and are well aligned with our shareholders Attractive Positioning in the Healthcare Real Estate Market 1 Compelling Strategy to Drive Shareholder Value 2 Accomplished Leadership Team Focused on Execution 3 Well
positioned with the right strategy and leadership team
CSU Key Investment Highlights Value
leader in geographically concentrated regions Highest percentage of wholly-owned communities among top operators Straight-forward private pay business model Need-driven demand, limited competitive new supply and improving housing market and economy
Experienced management team with demonstrated ability to operate, acquire and create shareholder value Larger company competitive advantages in highly-fragmented industry Multiple avenues of growth Strong cash flow generation Solid balance
sheet
CSU Has Significantly Outperformed a
Broad Peer Group, Including Through Recent Market Dislocation Source: FactSet as of February 10, 2016. Note: GEN data begins 5/15/2007 and SEM data begins 9/25/2009. (1)A part of Post-Acute Index. CSU S&P500 HLS SEM KND BKD FVE GEN Total
Shareholder Return (1) (1) (1) (1)
Attractive Positioning in the
Healthcare Real Estate Market 1
The Healthcare Real Estate 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
Observations …and a Highly
Constructive Current Operating Environment Estimated 70% of Americans who reach age 65 will need some form of long-term care in their lives for an average of three years Occupancy across the industry continues to strengthen while rents stabilize
near 5-year highs Source: Wall Street research and NIC data. (1)Reflects same store YoY occupancy change for ESC, BKD and CSU. Occupancy Across the Industry Strengthening Senior Housing Rent Growth Nearing 5 Year Highs Senior Housing IL AL Occupancy
Rate YoY Rent Growth
Best-In-Class Shareholder Returns
and Premium Valuation Last Five Years Total Shareholder Returns AEV / 2016E EBITDAR CSU has delivered a total shareholder return of +123% over the last five years, significantly exceeding returns of the S&P 500 (+40%) and key peers (which
delivered negative returns over the same time period) Despite the fact that only ~50% include acquisitions, Wall Street Analysts expect CSU to deliver leading EBITDAR growth over the coming two years CSU +123% S&P 500 +40% BKD (44%) FVE (70%)
Post-Acute Index 10.2% 4.2% 0.6% 7.6% ‘15E – ‘17E EBITDAR CAGR Source: Company filings and FactSet as of February 10, 2016. Note: Adjusted EV assumes 10x rent expense. Total shareholder return represents stock price appreciation
plus dividend reinvestment. (1)Represents market cap weighted average of HLS, GEN, KND and SEM. (1) 12.1x 10.1x 9.1x 7.5x
Compelling Strategy to Drive
Shareholder Value 2
CSU Benefits from Multiple Avenues
for Growth Core Organic Growth Conversions Accretive Acquisitions Occupancy improvement where opportunity exists Increasing average rents through level of care charges, markets rents and in-house rent increases Proactive expense management Cash flow
enhancing renovations and refurbishments Conversion of selected units to higher levels of care—Assisted Living and Memory Care units Drives notable occupancy, revenue and NOI improvement, and significant impact on CFFO per share The Company
has achieved significant cost synergies and first year cash-on-cash returns in excess of 16% on recent acquisitions With a strong reputation among sellers, CSU sources the majority of acquisitions off market and at attractive terms Strong pipeline
of near- to medium-term targets No need to access public capital markets
Core Organic Growth Driven by
Occupancy, Pricing Improvements and Cost Containment Increasing Occupancy and Average Monthly Rent Trends Rent Management Initiatives Expense Management Initiatives Focus on occupancy improvement through marketing and price initiatives at
communities with occupancy below 90% Increase average rent through level of care charges, market rents and in-house rent increases: Effective Sep 1, 2015, increased market rents by 3% on all communities with occupancies 93% or greater Increased
market level of care charges by 10% on Sep 1, 2015 and in house on Oct 1, 2015 Effective Jan 1, 2016, increased market rents by 3% on all communities; In-house rents increased by 3% on resident one-year anniversary dates The Company maintains
best-in-class operating margins of ~41% Selected initiatives include: Group Purchasing Program discounts through Premier GPO, including US Food program (average savings of 16.5% for past 4.5 years) Fixed discounted electricity rates of $0.05 per KWH
through 2019 in Ohio and 2020 in Texas Spenddown sheet tied to reduction in expenses based on occupancy and billing compared to budget Average Rent Occupancy %
Conversions Drive Significant
Occupancy Improvements and CFFO per Share Accretion History of Driving Significant Occupancy Improvements Through Accretive Conversions Recently Completed an Additional 400 Conversions and Identified 300 Incremented Units for Conversion Occupancy
CFFO per Share Accretion Pre-Conversion 4Q 2015 400 Units Completed by 2Q 2015 100 Units Completed by 4Q 2015 200 Units To Be Converted During 2016 400 units completed by 2Q 2015 CFFO Accretion Due to Conversions +8.5% (1)Based on 2Q 2014 LTM CFFO
per Share of $1.40. (1) Revenue + 15.3% NOI + 16.7% (4Q15 vs. 4Q14)
Track Record of Executing Highly
Accretive Acquisitions and a Robust Pipeline for the Future Year 1 Cash-On-Cash Returns With a positive reputation among sellers and ability to offer certainty of closing, CSU is able to source the majority of its acquisitions on a bilateral basis
Pipeline allows for ~$150 million of highly accretive acquisitions per annum over the near- to medium-term Over the past ~5 years, CSU has capitalized on the fragmented nature of the market to complete the acquisitions of 57 communities for a total
of ~$803 million Due to attractive terms and significant synergies, the Company has realized an average first year cash-on-cash return of approximately 16% 2011 – 2015 Acquisitions by Type (1)Represents January 2011 to 2016 YTD. (1)
Accomplished Leadership Team Focused
on Execution 3
CSU’s Experienced and
Accomplished Management Team has Delivered the Company’s Leading Results… Larry Cohen Chief Executive Officer Served as CEO since May 1999 and CFO from November 1996 to May 1999 From 1991 to 1996, Mr. Cohen was President and CEO of Paine
Webber Properties Inc. Founding member and Chairman of the American Seniors Housing Association A licensed attorney and CPA, Mr. Cohen received an LL.M. in Taxation from NYU School of Law, a JD from St. John’s University School of Law, and a
BBA in Accounting from The George Washington University Name / Title Biography Keith Johannessen President and Chief Operating Officer Served as President since 1994 and COO since 1999. Previously served as EVP from 1993 to 1994 Joined Life Care
Services Corp. in 1978 and then Oxford Retirement Services, Inc. as EVP Served on the State of the Industry and Model Assisted Living Regulations Committees of the American Seniors Housing Association Carey Hendrickson Senior Vice President and
Chief Financial Officer Joined the Company as SVP and CFO in May 2014 Previously served at Belo Corp in various executive positions including as SVP/CFO and Treasurer Mr. Hendrickson graduated cum laude with a BBA in Accounting from Baylor
University. He is an honors graduate of the University of Texas at Arlington, where he earned his MBA David Brickman Senior Vice President, Secretary and General Counsel Has served as VP and General Counsel since 1992 and has served as Secretary
since 2007 From 1989 to 1992, David served as in-house counsel with LifeCo Travel Management Co. David has also earned an MBA and a Masters in Health Administration. He currently serves on the Board of Advisors for the Southern Methodist University
Corporate Counsel Symposium David has either practiced law or performed in-house counsel functions for 28 years
Highly Qualified and Engaged Board
of Directors With Unmatched Industry Experience CSU has best-in-class Board composition Board Member Affiliation Notable Experience Lawrence A. Cohen CEO and Vice Chairman · CEO and Vice Chairman of Capital Senior Living · Founding member
and Chairman of the American Seniors Housing Association Keith N. Johannessen COO and President · COO and President of Capital Senior Living · Experience in operational aspects of senior housing for 24 years Philip A. Brooks Independent
Director · Principal Investor and Managing Partner of Select Living, LLC · O ver 20 years experience in the real estate finance industry Kimberly S. Herman Independent Director · President of GN ReSound · Over 20 years of sales
and marketing experience in the U.S. healthcare industry E. Rodney Hornbake Independent Director · Managing Partner of Essex Internal Medicine · S erves as a Medical Director at Senior Whole Health, LLC and is a Board - certified Internist
Jill M. Krueger Independent Director · CEO and President of Symbria · R esponsible for the oversight of five rehabilitative and fitness companies serving seniors Ronald A. Malone Independent Director · Former Chairman and CEO of
Gentiva · 30 years experience leading healthcare and human capital orgs James A. Moore Chairman / Independent Director · Chairman of CSU and Board Member of Atlantic Shores · O ver 40 years of industry experience and conducted over
1,800 senior living consulting engagements Michael W. Reid Independent Director · Partner at Herald Square Properties · 34 years of investment banking and real estate experience
Track Record of Strong Growth and
Uniquely Positioned for Continued Success
Strategy and Execution Have
Delivered Strong Growth Revenue (1) Adjusted EBITDAR ($ In Millions) ($ In Millions) Adjusted EBITDAR Margin Adjusted CFFO per Share (2) 20.7% CAGR 15.8% CAGR 15.9% CAGR Excludes community reimbursement revenue and management services revenue.
(2)Excludes prepaid resident rent and tax savings related to cost segregation studies of $0.25 in 2012 and $0.14 in 2013.
Healthy Balance Sheet to Support
Future Initiatives Assets Cash and Securities $ 56.1 Other Current Assets 41.2 Total Current Assets 97.3 Fixed Assets 890.6 Other Assets 31.1 Total Assets $ 1,019.0 Liabilities & Equity Current Liabilities $ 70.5 Long-Term Debt 754.9 Other
Liabilities 57.9 Total Liabilities 883.3 Stockholders’ Equity 135.7 Total Liabilities & Equity $ 1,019.0 As of December 31, 2015 (in millions)
Debt Maturities Weighted Average
Interest Rate CSU has ample financial capacity to pursue all initiatives contemplated under its growth strategy No near term debt maturities Acquisitions typically financed at 75% LTV Renewed $10 million share repurchase authorization underscores
commitment to shareholder value creation and offers another avenue to deploy capital Average duration of debt is 8.3 years, with approximately 98% of all debt maturing in 2021 and after (In thousands) Weighted Average Interest Rate has decreased 139
bps since 2010 CSU’s debt is compromised solely of mortgage debt at highly attractive rates and coverages Availability of Attractive Financing for Growth Initiatives
Strategy Poised to Deliver ~50%
EBITDAR Growth and 20%+ CFFO per Share Growth CAGR: 20%+ Note: This chart illustrates the potential financial impact of successful execution of our strategic plan; it is not intended as financial guidance. Please see Capital Senior Living’s
disclosure related to forward-looking statements. Defined path to grow EBITDAR by approximately 50%, or $75 million, through 2018 CFFO per Share
Conclusion
CSU has a Clear and Differentiated
Strategy to Drive Industry-Leading Growth and Superior Shareholder Value Need-driven demand, limited competitive new supply and an improving housing market and economy Highly fragmented industry with significant opportunities for a scale player
Operating in metro areas with supportive supply and demand dynamics; protected by barriers to entry Straight forward private-pay business model with highest percentage of wholly-owned locations and a track record for increasing occupancy and pricing
Increase levels of care through conversion to Assisted Living or Memory Care units Capitalize on market fragmentation to strategically aggregate local and regional operators in geographically concentrated regions Senior management team with an
average of 20+ years experience in the industry and a track record of driving shareholder value Operating team with an average of 32 years senior housing experience Highly engaged and independent Board with experience leading public companies in the
healthcare and real estate industries As a group, directors and officers are among the top beneficial owners of CSU stock and are well aligned with our shareholders Attractive Positioning in the Healthcare Real Estate Market 1 Compelling Strategy to
Drive Shareholder Value 2 Accomplished Leadership Team Focused on Execution 3 Well positioned with the right strategy and leadership team
CSU Key Investment Highlights Value
leader in geographically concentrated regions Highest percentage of wholly-owned communities among top operators Straight-forward private pay business model Need-driven demand, limited new supply and improving housing market and economy Experienced
management team with demonstrated ability to operate, acquire and create shareholder value Larger company competitive advantages in highly-fragmented industry Multiple avenues of growth Strong cash flow generation Solid balance sheet
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