Business context and reporting period
The filing is Capital Senior Living Corporation’s Form 10-K for the fiscal year ended December 31, 2014, including fourth-quarter results. The filing identifies the registrant as Capital Senior Living Corporation (NYSE: CSU), not Sonida Senior Living, Inc. The company operated 117 senior living communities in 26 states, with capacity for approximately 15,200 residents, and one home care agency. It owned 67 communities and leased 50. Approximately 96% of community revenue came from private-pay sources.
Financial and operating performance
| Metric | FY 2014 | FY 2013 |
|---|---|---|
| Revenue | $383.9 million | $350.4 million |
| Income from operations | $13.9 million; 3.6% margin | $11.3 million; 3.2% margin |
| Net loss | $24.1 million; $0.83 per share | $16.5 million; $0.58 per share |
| Cash provided by operating activities | $46.3 million | $42.6 million |
| Cash used in investing activities | $175.4 million | $162.3 million |
| Cash provided by financing activities | $154.7 million | $114.5 million |
| Cash and cash equivalents at year-end | $39.2 million | $13.6 million |
| Notes payable | $646.6 million | $479.3 million |
At December 31, 2014, total assets were $897.7 million, shareholders’ equity was $141.2 million, and working capital was $11.8 million. Restricted cash was an additional $12.2 million. Future operating and capital lease commitments totaled approximately $495.9 million, including $63.5 million due in 2015. The filing reports $492.6 million in future facility lease obligations in its risk and market-risk discussion.
Fourth-quarter 2014 revenue was $100.2 million, operating income was $5.5 million, and net loss was $3.9 million ($0.13 per share). Same-store financial occupancy rose to 86.7% from 85.9%; same-store average monthly rental rates increased 1.4%. Across consolidated communities, occupancy was 87.1%, up from 86.1%, and average monthly rental rates increased 3.2%.
Changes versus the prior comparable period
- Revenue grew 9.6%, mainly reflecting acquisitions and a full year of contributions from communities acquired in 2013. The company said the increase was partly offset by lower revenue after it stopped providing skilled nursing services at two communities being repositioned as assisted living facilities.
- Operating income increased, but the net loss widened. Interest expense rose $7.5 million to $31.3 million, reflecting additional debt and acquired operations. Operating costs, depreciation and stock-based compensation also increased.
- Cash from operations increased by $3.7 million. Investing outflows included $160.1 million for acquisitions and $18.7 million of capital expenditures.
- Debt rose substantially, while the company expanded to 117 owned or leased communities from 109. Total resident capacity increased to 15,149 from 13,939.
Outlook, risks and unusual items
- Management expected cash, operating cash flow, supplemental financing, refinancing proceeds and asset-sale proceeds to cover short-term working-capital needs. Longer-term funding for acquisitions and other initiatives could depend on access to debt and equity markets or joint ventures. No specific earnings or revenue guidance was provided.
- Material risks include substantial debt and lease obligations, refinancing and covenant risk, interest-rate exposure, reliance on private-pay residents, occupancy and resident turnover, labor costs and staffing, competition, regulatory and licensing changes, liability claims, and the availability and cost of insurance.
- Debt was $646.6 million, of which $65.2 million was variable-rate. The company estimated that a one-percentage-point rate increase would add about $0.7 million to annual interest expense. It reported compliance with debt and lease covenants at year-end.
- 2014 included $8.0 million of deferred loan-cost write-offs and prepayment premiums, primarily related to refinancing; a $1.5 million gain on remeasurement of joint-venture interests acquired; and a $0.6 million write-down related to four communities classified as held for sale. Those four communities sold in January 2015 for $36.5 million, generating approximately $18.0 million in net proceeds after debt and transaction costs.
- The company acquired several communities during 2014, including three joint-venture properties for approximately $83.6 million. In January 2015, it also acquired a Green Bay community for approximately $18.3 million. Acquisition-related in-place lease amortization materially affected reported losses; cumulative amortization since the acquisition program began in 2010 was reported as $52.8 million.
- The company paid no common dividends in 2014 or 2013 and did not anticipate paying dividends in the foreseeable future. Management and the auditor reported effective internal control over financial reporting; the auditor issued unqualified opinions on the financial statements and internal controls.
Important facts for investors to verify
- Confirm the issuer and security being analyzed: this filing is for Capital Senior Living Corporation, ticker CSU.
- Review debt maturities, refinancing needs, covenants and the terms of variable-rate and short-term loans alongside the substantial lease commitments.
- Assess how much of revenue and operating improvement came from acquired communities versus same-store occupancy, rental rates and cost performance.
- Reconcile the widening net loss with operating income and cash flow, including interest expense, acquisition-related amortization and refinancing charges.
- Verify the January 2015 asset sale proceeds and Green Bay acquisition financing, and assess their effects on liquidity and subsequent results.