Business Context and Reporting Period
Capital Senior Living Corporation, the registrant named in this filing (the request metadata identifies Sonida Senior Living, Inc.), filed this unaudited Form 10-Q for the quarter ended March 31, 2020. It operated 124 senior housing communities in 23 states, with capacity for approximately 15,600 residents: 79 owned, 39 leased and six managed for a third party. The filing was delayed because of COVID-19-related disruptions.
Key Financial Metrics
Amounts below are in millions, except per-share data, percentages and occupancy.
| Metric | Q1 2020 / March 31, 2020 | Q1 2019 / December 31, 2019 |
|---|---|---|
| Total revenue | $106.1 | $114.2 |
| Net loss | $(47.2); $(1.55) per share | $(13.0); $(0.43) per share |
| Net loss as a share of revenue | 44.5% | 11.4% |
| Cash used in operations | $(5.0) | $(1.1) |
| Capital expenditures | $5.4 | $3.4 |
| Cash and cash equivalents | $17.7 | $24.0 |
| Cash plus restricted cash | $27.9 | $37.1 |
| Total assets | $978.8 | $1,267.7 |
| Notes payable, net of deferred loan costs | $917.0 | $921.5 |
| Shareholders’ equity (deficit) | $(32.2) | $14.4 |
Operating expenses were $75.4 million, approximately 71.1% of revenue, versus $75.4 million, or 66.0%, a year earlier. Facility lease expense was $10.8 million versus $14.2 million. Interest expense was $11.7 million versus $12.6 million. Current assets were $47.4 million against current liabilities of $108.0 million.
Material Changes Versus the Prior Comparable Period
- Revenue declined 7.1% year over year. Resident revenue fell about $8.6 million; the filing attributes the decline to portfolio transitions and dispositions, as well as lower occupancy at continuing communities.
- First-quarter average financial occupancy was 80.0%, down from 83.1%; average monthly rental rates increased 1.6%. The filing reports occupancy of 79.9% at March 31 and 78.7% at April 30, excluding the community sold at quarter-end.
- Net loss widened to $47.2 million, primarily reflecting $36.0 million in non-cash long-lived asset impairments and a $7.4 million loss on the Merrillville community sale. Lease restructuring gains of $11.2 million partly offset these charges.
- Operating cash use increased to $5.0 million from $1.1 million. Cash and restricted cash together decreased $9.2 million during the quarter.
Outlook, Risks and Unusual Items
- Going concern: Management concluded substantial doubt existed about the company’s ability to continue as a going concern for the twelve months after issuance of the financial statements. Management’s plans included expense and capital-spending reductions, asset sales, lease changes, debt and rent forbearance, and possible financing. It stated that effective implementation was not probable, and that the plans might not be sufficient.
- COVID-19: Restrictions on tours and, in some cases, admissions, along with fewer leads and move-ins, were expected to pressure occupancy and resident revenue. The company reported COVID-19 cases at certain communities and expected substantial continuing costs for protective equipment, cleaning, staffing and testing. It said the full financial impact could not be reasonably predicted. No quantified earnings or revenue guidance was provided.
- Lease restructuring: Agreements with Ventas and Welltower reduced monthly rent through December 2020 and provided forbearance from certain lease covenants; communities could transition to management agreements or successor operators. The Healthpeak arrangement converted six leased communities to management. These transactions materially changed lease balances and generated reported gains and losses.
- Subsequent debt and rent relief: In May, the company arranged temporary payment deferrals on certain Fannie Mae, BBVA and Protective Life loans. Deferred amounts generally remain payable or are added to principal. It also reached an agreement to pay reduced rent to Healthpeak for eight communities, with the balance deferred under a note due by November 2023.
- NYSE listing: The company disclosed that it was below NYSE minimum market capitalization/equity and share-price standards and had submitted a compliance plan. Failure to regain compliance could lead to delisting.
- Unusual reporting item: The filing says post-release updates to accounting for the Ventas and Welltower agreements reduced reported quarterly comprehensive loss from $48.4 million to $47.2 million and loss per share from $1.59 to $1.55.
Important Facts for Investors to Verify
- Whether debt and landlord forbearance, lease conversions, asset sales or other financing were sufficient to address the disclosed going-concern uncertainty, and the repayment terms of deferred amounts.
- Subsequent occupancy, move-ins, resident revenue and pandemic-related costs; the filing provides only limited post-quarter occupancy data and no quantified forecast.
- The status of the NYSE compliance plan and any potential delisting or capital-raising effects.
- Valuations underlying the $36.0 million impairment charge and whether further impairments or disposition losses occurred.
- The difference between the company identified in the request metadata and the registrant named in this filing, Capital Senior Living Corporation.