DALLAS, Nov. 05, 2020 (GLOBE NEWSWIRE) -- Capital Senior Living Corporation (NYSE: CSU), one of the nation’s largest operators of senior housing communities, announced today operating and financial results for the third quarter ended September 30, 2020.

Recent Highlights

• Move-ins for the third quarter of 2020 improved to approximately 88% of third quarter 2019 move-ins, up from 75% for second quarter 2020 move-ins as compared to the second quarter of 2019.
• Consolidated occupancy declined 150 bps in the third quarter of 2020 as compared to the second quarter of 2020 due primarily to the impacts of COVID-19.
• The Company initiated the transfer of 18 communities that were either underperforming or were in underperforming loan pools to Fannie Mae, the holder of non-recourse debt on such communities, effective August 1, 2020. The transfer will reduce the Company’s debt by $216.3 million and improve annual cash flow by approximately $10 million. For GAAP purposes, a loss of $191.0 million related to the transfer was recorded in the third quarter, with a subsequent substantial gain to be recorded when the transfer is complete and the debt relieved, which is currently expected to occur in the fourth quarter of 2020.
• The Company enhanced and extended a short-term forbearance agreement related to 10 loans with one of its lenders, providing $2.8 million of additional debt service relief from October 2020 through September 2021.
• In connection with the successful restructuring of the Company’s leased portfolio, 20 formerly-leased communities were transitioned to other operators in mid-September through early November, with additional transitions expected to occur before year-end.
• The Company and Ventas have agreed in principle that, commencing January 2021, the Company will manage all seven communities currently subject to a modified master lease between the companies, under a management agreement. This arrangement is consistent with the Company’s March 10, 2020 agreement regarding those seven communities and remains subject to completion of documentation and other conditions.

“During the third quarter, resident wellness and safety remained our highest priority. We continued to operate with enhanced infection control protocols to limit and manage incidents of COVID-19. I’m pleased that all of our communities are accepting new residents and have returned to more normalized operations while also diligently following state and federal guidelines,” said Kimberly S. Lody, President and Chief Executive Officer. “Our community teams have done an excellent job responding to changes in the operating model while keeping resident care as our highest priority throughout the pandemic. I am extremely proud of their dedication and diligence.”

Ms. Lody continued, “We have also continued to make significant progress on important elements of our strategic plan to improve our operating performance and reduce our long-term debt and lease obligations. We initiated the transfer of 18 Fannie communities in August which will substantially reduce our debt and has already improved monthly cash flow. Also, the transfer of our leased communities to other operators is on schedule, with 20 formerly-leased communities now transferred and most of the remaining communities scheduled for transfer during the remainder of 2020. This successful restructuring of our leased portfolio will result in the termination of all of our lease obligations by year-end and significantly improve our operating performance and cash flow.”

Financial Results - Third Quarter

For the third quarter of 2020, the Company reported revenue of $96.3 million, compared with revenue of $111.1 million in the third quarter of 2019. The majority of the decrease is related to the transfer of 18 communities to Fannie Mae effective August 1, 2020 ($9.8 million), dispositions of three communities since the third quarter of 2019 ($4.1 million), transfers of six formerly-leased communities to new operators ($2.9 million) and the conversion of six formerly-leased communities to management agreements in February 2020 ($3.2 million), partially offset by $9.6 million of community reimbursement revenue associated with the management of certain communities in the third quarter. Total occupancy in the third quarter of 2020 was 76.1%, a decrease of 520 basis points as compared to the third quarter of 2019, largely due to the impacts of COVID-19. Monthly average rent was $3,727 as compared to $3,628 in the third quarter of 2019. As compared to the second quarter of 2020, total occupancy declined 150 basis points in the third quarter.

Operating expenses for the third quarter of 2020 were $65.2 million, a decrease of $15.2 million as compared to the third quarter of 2019. The majority of the decrease is related to the transfer of 18 communities to Fannie Mae effective August 1, 2020 ($7.8 million), dispositions of three communities since the third quarter of 2019 ($2.4 million), transfers of six formerly-leased communities to new operators ($2.0 million) and the conversion of six formerly-leased communities to management agreements in February 2020 ($2.1 million). Operating expenses for the third quarter of 2020 included $1.4 million of costs directly related to COVID-19, primarily for employee hero pay, specialized sterilization services and personal protective equipment.

General and administrative expenses for the third quarter of 2020 were $8.1 million versus $7.6 million in the third quarter of 2019. Excluding transaction and conversion costs in both periods, general and administrative expenses decreased $0.3 million in the third quarter of 2020 versus the third quarter of 2019 due to lower healthcare claims under the Company’s self-insured healthcare plan. As a percentage of revenues under management, general and administrative expenses, excluding transaction and conversion costs, were 6.2% in the third quarter of 2020.

Net loss for the third quarter of 2020 was $215.0 million, largely due to a GAAP loss of $191.0 million associated with the transfer of the 18 communities to Fannie Mae in August 2020, as compared to $20.7 million for the third quarter of 2019.

Adjusted EBITDAR for the third quarter of 2020 was $15.7 million. Adjusted EBITDAR excluding COVID-19 expenses was $17.2 million. Adjusted CFFO for the third quarter of 2020 was $(5.2) million. Adjusted CFFO excluding COVID-19 relief and expenses was $(3.8) million. (See “Non-GAAP Financial Measures” below).

Same Community Results

Same community results exclude three non-core communities the Company has disposed of since the third quarter of 2019, six communities converted to management agreements effective March 1, 2020, six formerly-leased communities transitioned to other operators, and 18 communities to be transferred to Fannie Mae that are no longer included in the Company’s consolidated operating results effective August 1, 2020. Same-community results also exclude COVID-19 expenses of $1.3 million in the third quarter of 2020.

Same-community revenue in the third quarter of 2020 was $77.8 million, a decrease of 4.8% versus the third quarter of 2019, primarily due to the impact of COVID-19 on the Company’s occupancy since March 2020. Same-community occupancy in the third quarter was 78.0%, a decrease of 460 basis points as compared to the third quarter of 2019 and average monthly rent was $3,731, an increase of 0.6% as compared to the third quarter of 2019. As compared to the second quarter of 2020, same-community occupancy declined 190 basis points in the third quarter.

Same-community operating expenses increased $0.1 million, or 0.1%, in the third quarter of 2020 versus the third quarter of 2019. Same store labor costs, including benefits, increased $0.5 million, or 1.4%, while all other expense categories declined $0.4 million on a combined basis, or 1.9%, with decreases in food costs of $0.3 million, or 6.5%, and utilities of $0.1 million, or 1.5%. Same-community net operating income decreased 15.2% in the third quarter of 2020 when compared with the third quarter of 2019.

Community Transitions Update

On July 31, 2020, the Company initiated the process to transfer the operations and ownership of 18 communities that were either underperforming or were in underperforming loan pools to Fannie Mae. The Company currently expects most if not all of these communities to transition by December 31, 2020. In accordance with GAAP, revenues and operating expenses of these communities were no longer included in the Company’s operating results beginning August 1, 2020; however, the debt and certain other obligations associated with these communities will remain on the Company’s balance sheet until the transfers are completed. The Company recorded a GAAP loss of $191.0 million from the write-off of assets associated with these communities in the third quarter of 2020. A substantial gain will be recorded when the debt and other remaining obligations are relieved, most likely in the fourth quarter of 2020.

In connection with the successful restructuring of the Company’s lease agreements with its three REIT partners in October 2019 and March 2020, the Company transitioned 5 formerly-leased communities to new operators in September and 15 additional formerly-leased communities in October and early November. The Company currently expects to transition an additional 18 communities to new operators in the fourth quarter of 2020 or the first quarter of 2021.

The Company and Ventas have agreed in principle that, commencing January 2021, the Company will manage all seven communities currently subject to a modified master lease between the companies, under a management agreement. This arrangement is consistent with the Company’s March 10, 2020 agreement regarding those seven communities and remains subject to completion of documentation and other conditions.

COVID-19 Update

Since the onset of COVID-19, the Company has responded swiftly, thoughtfully and aggressively to the unprecedented challenges raised by the pandemic. The Company continues to be relentlessly focused on the safety and wellbeing of its residents, employees and caregivers. In an effort to protect its residents and employees and slow the spread of COVID-19, and in response to quarantines, shelter-in-place orders and other limitations imposed by federal, state and local governments, the Company has restricted or limited access to its communities, including limitations on in-person prospective resident tours and, in certain cases, new resident admissions.

Access restrictions have resulted in declines in the occupancy levels at the Company’s communities, which has, and will continue to, negatively impact revenues and operating results in the near- to mid-term. The number of move-ins in the third quarter of 2020 as compared to the third quarter of 2019 improved to 88%, up from second quarter 2020 move-ins of 75% as compared to the second quarter of 2019.

During the COVID crisis, the Company has incurred significant additional operating costs and expenses in order to implement enhanced infection control protocols and otherwise care for its residents. In the third quarter of 2020, the Company incurred substantial costs for procurement of additional PPE, cleaning and disposable food service supplies, enhanced cleaning, infection control, environmental sanitation costs, and increased labor expenses for hazard pay at certain communities with COVID-19 positive residents. CSL has also incurred costs for COVID-19 testing of residents and employees. In total, the Company incurred approximately $1.4 million in incremental COVID costs in the third quarter and has incurred $4.6 million in incremental COVID costs through the first nine months of 2020. The Company expects to continue to incur such incremental costs until the pandemic subsides. To mitigate these new expenses, the Company has reduced spending on non-essential supplies, travel, and other discretionary items.

The Company received $0.1 million of COVID-19 relief funds from state relief programs in Wisconsin and Ohio in the third quarter of 2020 to offset COVID-19 costs incurred by communities in those states. The Company has also been approved for relief from a CARES Act provider relief fund for eligible Medicaid providers, and expects to receive approximately $8 million in such relief in the fourth quarter. The Company is utilizing the payroll tax deferral program under the Coronavirus Aid, Relief, and Economic Security Act of 2020 (CARES Act) to defer the employer portion of payroll taxes from April 2020 through December 2020. One-half of the deferred payroll taxes will be due by December 2021, with the other half due by December 2022. In the third quarter of 2020, the Company deferred $2.3 million of payroll taxes under such program and has deferred $5.0 million through the first nine months of 2020.

Balance Sheet and Liquidity

The Company ended the third quarter with $18.3 million of cash and cash equivalents, including restricted cash. As of September 30, 2020, the Company financed its owned communities with mortgages totaling $919.7 million, of which $216.3 million was associated with the 18 communities effectively transferred to Fannie on August 1, 2020 and included in current liabilities, at interest rates averaging 4.5%. The majority of the Company’s debt is at fixed interest rates excluding three bridge loans totaling approximately $81.5 million, all with maturities in the fourth quarter of 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 debt associated with the 18 communities to be transferred to Fannie Mae is classified as current. Also, $31.5 million of debt associated with one of the Company’s bridge loans is classified as current due to non-compliance with a financial covenant, which the Company intends to cure, due to the impact of COVID-19 on one of the communities included in such bridge loan.

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 operates 119 communities that are home to more than 9,000 residents across 22 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.