Business context and reporting period
Capital Senior Living Corporation (NYSE: CSU) filed this unaudited Form 10-Q for the quarter ended June 30, 2020. The filing describes an operator of senior housing communities, with 124 communities across 23 states and capacity for approximately 15,600 residents. The request identifies Sonida Senior Living, Inc.; the filing itself names Capital Senior Living Corporation, so confirm the intended issuer.
Financial results and liquidity
Amounts below are in millions of dollars except per-share data. The filing presents results for the three and six months ended June 30.
| Metric | Q2 2020 | Q2 2019 | H1 2020 | H1 2019 |
|---|---|---|---|---|
| Total revenue | $101.5 | $113.1 | $207.6 | $227.3 |
| Net loss | $(12.8) | $(12.5) | $(59.9) | $(25.5) |
| Net loss per share | $(0.42) | $(0.41) | $(1.96) | $(0.85) |
| Cash from operating activities | Not separately presented for the quarter | $(0.7) | $0.8 |
Q2 expenses were $103.0 million, exceeding revenue; H1 expenses were $248.3 million, including a $36.0 million non-cash impairment charge. Interest expense was $11.2 million in Q2 and $22.9 million in H1. The filing does not provide a clear standalone operating-margin measure.
At June 30, cash and cash equivalents were $25.5 million, with $3.4 million of restricted cash. Current assets were $51.5 million versus current liabilities of $317.6 million. Notes payable, net of deferred loan costs, totaled approximately $918.1 million on the balance sheet; total debt excluding deferred loan costs was approximately $925.8 million. Shareholders’ equity was a deficit of $44.5 million, compared with positive equity of $14.4 million at year-end 2019.
Material changes versus prior comparable periods
- Q2 revenue declined 10.3% year over year; H1 revenue declined 8.7%. Management attributed the decreases to community dispositions and transitions, lower occupancy, and pandemic-related restrictions on tours and admissions.
- Consolidated financial occupancy was 77.6% in Q2 2020 versus 82.4% in Q2 2019, and fell from 79.9% in Q1 2020. Average monthly rental rates increased 3.3% year over year in Q2.
- Q2 lease expense fell to $6.5 million from $14.2 million, primarily following lease restructurings and community transitions. H1 lease expense fell to $17.3 million from $28.5 million.
- H1 net loss widened, principally reflecting the $36.0 million impairment and a $7.4 million loss on disposition of a community, partly offset by a net $11.2 million gain on lease modifications and terminations.
- Cash and restricted cash together declined by $8.2 million during H1. Operating cash flow turned negative, from $0.8 million provided in H1 2019 to $0.7 million used in H1 2020.
Outlook, risks, contingencies, and unusual items
- Going concern: Management concluded substantial doubt exists about the company’s ability to continue as a going concern for the twelve months after issuance. Management said its proposed plans were not probable of mitigating that doubt. Plans include cost reductions, asset sales, debt and rent forbearance, and possible capital transactions.
- COVID-19: The company reported $3.2 million of incremental pandemic-related costs in H1, including $2.9 million in Q2, and expected such costs to continue. Management expected occupancy and resident revenue pressure to persist; the filing provides no quantified earnings guidance.
- Fannie Mae loans/default: After quarter-end, the company did not pay $3.8 million due July 31 on loans for 18 properties and stated it was in default. It initiated a process intended to transfer those communities to Fannie Mae; if completed, the transfer is expected to reduce debt by $216.3 million and improve annual cash flow by approximately $10 million. Completion and terms were uncertain. The related $216.3 million debt was classified as current at June 30.
- Forbearance and rent arrangements: Several lenders deferred payments. Rent reductions or deferrals with major landlords provided near-term relief but included future payment obligations and lease transitions. Fannie Mae extended its forbearance only through July 31, 2020; the company paid $0.6 million for five properties and did not pay the remaining 18-property amount.
- NYSE listing: The company received notice that it did not meet minimum market capitalization/stockholders’ equity and minimum stock-price standards. NYSE accepted its market-capitalization compliance plan in July 2020; stated deadlines were December 19, 2021 for the market-capitalization standard and December 19, 2020 for the stock-price standard. A reverse split was identified as a possible remedy, subject to shareholder approval.
- Management reported no material off-balance-sheet arrangements and believed ordinary-course legal claims would not materially affect the financial statements if resolved adversely.
Important facts for investors to verify
- Confirm the issuer: the filing is for Capital Senior Living Corporation (CSU), not Sonida Senior Living, Inc.
- Check the status and final terms of the proposed 18-community Fannie Mae transfer, the loan default, and any resulting debt relief.
- Assess liquidity and near-term obligations against the going-concern warning, current debt classification, and availability of further lender and landlord forbearance.
- Track occupancy, move-ins, resident revenue, and pandemic-related costs as operations evolve.
- Confirm progress toward NYSE listing compliance and any subsequent stock-price or corporate actions.