Sonida Senior Living, Inc. (metadata) — Q1 2021 filing summary
Entity note: The supplied filing is for Capital Senior Living Corporation, not Sonida Senior Living, Inc. It reports the quarter ended March 31, 2021, under ticker CSU. Confirm that this is the intended filing and the correct entity mapping before relying on the summary.
Business context and reporting period
The company owned, operated and managed senior housing communities. At March 31, 2021, it reported 91 communities in 20 states, with capacity for approximately 10,000 residents: 60 owned, 15 in the process of transferring legal ownership to Fannie Mae, and 16 managed for third parties. The quarter is compared with the three months ended March 31, 2020, when the company had a substantially larger operating portfolio.
Financial results and liquidity
| Metric | Q1 2021 | Q1 2020 |
|---|---|---|
| Total revenue | $61.6 million | $106.1 million |
| Net income (loss) | $38.8 million | $(47.2) million |
| Operating cash flow | $3.3 million | $(5.0) million |
| Capital expenditures | $2.1 million | $5.4 million |
| Cash and cash equivalents | $16.8 million | $17.9 million at Dec. 31, 2020 |
| Restricted cash | $5.0 million | $5.0 million at Dec. 31, 2020 |
| Notes payable, net of deferred costs | $863.8 million | $908.9 million at Dec. 31, 2020 |
Expenses exceeded revenue by approximately $7.0 million before other income and expense, equivalent to a negative 11.4% of revenue. Reported net income and its 62.9% net margin were driven chiefly by a $47.0 million gain on debt extinguishment and $8.7 million of Provider Relief Fund income, not by recurring operating profitability. Interest expense was $9.4 million, down from $11.7 million.
Current assets were $35.2 million versus current liabilities of $320.8 million, a working capital deficit of approximately $285.5 million. The balance sheet classified $261.3 million of notes payable as current. Cash, restricted cash and cash equivalents totaled $21.7 million at quarter end; cash and cash equivalents alone were $16.8 million. Cash decreased by $1.1 million during the quarter.
Material changes versus the prior comparable period
- Revenue fell 57% year over year. Management attributed approximately $43.9 million of the decrease to property dispositions, exits from 39 leased communities and Fannie Mae transitions; the remainder was primarily attributed to lower occupancy and modestly lower average monthly rent at remaining communities.
- Operating expenses declined as the portfolio contracted; facility lease expense fell to zero from $10.8 million, and depreciation and impairment charges also declined. Community reimbursement revenue and expense each increased to $15.3 million, largely reflecting management activity, and therefore largely offset one another.
- The company recorded no long-lived asset impairment in Q1 2021, versus $36.0 million in Q1 2020. Q1 2020 also included an $11.2 million net gain on lease modifications and terminations and a $7.4 million loss on asset dispositions.
- Fannie Mae completed legal ownership transfers for three communities during Q1 2021, resulting in the $47.0 million gain. The company still reported $176.1 million of related debt and $8.0 million of accrued interest for properties not yet transferred at quarter end.
Outlook, risks and unusual items
- Going concern: Management disclosed substantial doubt about the company’s ability to continue as a going concern for the 12 months following issuance. Factors included uncertain COVID-19 effects, recurring and projected operating losses through May 2022, working capital deficiency, covenant defaults, $72.5 million of debt maturing and $13.2 million of debt service due during the remainder of 2021. Management could not conclude its plans would probably mitigate the doubt.
- Debt and defaults: The $31.5 million Fifth Third Bank loan and $41.0 million BBVA loan were callable following covenant defaults. Fifth Third issued a notice of default on May 3, 2021. The Fifth Third loan has 25% recourse to the parent if accelerated; the BBVA loan has full recourse. The company was in discussions with both lenders but gave no assurance of a resolution.
- Liquidity plans: Management cited operating cash flow, lender forbearance, refinancing or extensions, spending controls, asset or capital transactions, and continuing operational improvements. These plans depend in part on factors outside the company’s control and may not be available on acceptable terms.
- COVID-19: The pandemic reduced occupancy and increased care costs; related costs were $1.0 million in Q1 2021 versus $0.1 million in Q1 2020. Management reported improved leads and tours and near-zero positive cases after vaccine clinics, but stated that the ultimate effects remained uncertain.
- Other items: The company received $8.7 million in Phase 3 Provider Relief Funds, recorded as other income, subject to program requirements. It had deferred $7.4 million in payroll taxes. No specific full-year financial guidance was provided.
- Controls and contingencies: Management concluded disclosure controls and procedures were ineffective due to a previously identified material weakness; remediation was expected by the end of Q4 2021. The company reported ordinary-course claims, which management did not expect to have a material adverse effect.
Important facts for investors to verify
- Confirm that the Capital Senior Living Corporation filing is the intended document for the Sonida Senior Living metadata.
- Track resolutions, waivers or accelerations involving the callable Fifth Third and BBVA loans, and any cross-default or collateral consequences.
- Assess the company’s actual liquidity runway, upcoming debt maturities and debt-service needs against cash generation and refinancing or asset-sale capacity.
- Separate recurring community operating performance from the nonrecurring debt-extinguishment gain and Provider Relief Fund income.
- Monitor occupancy, move-ins, resident revenue and COVID-related costs as the company operates a reduced portfolio.
- Verify completion of Fannie Mae property transfers and related debt and liability extinguishments, and progress on the material-weakness remediation plan.