Sonida Senior Living, Inc. — FY 2021 Form 10-K
Reporting period: Year ended December 31, 2021; this filing reports full-year results, not standalone fourth-quarter results. The company, formerly Capital Senior Living Corporation, operated 75 communities in 18 states, with capacity for approximately 9,500 residents (60 owned and 15 managed).
Financial and operating results
| Metric | FY 2021 | FY 2020 |
|---|---|---|
| Total revenue | $234.7 million | $383.9 million |
| Resident revenue | $190.2 million | $357.1 million |
| Net income (loss) | $125.6 million | $(295.4) million |
| Cash from (used in) operations | $(28.3) million | $(6.8) million |
| Cash capital expenditures | $10.4 million | $15.6 million |
| Cash and cash equivalents at year-end | $78.7 million | $17.9 million |
| Mortgage and other debt, before deferred costs | $687.3 million | $915.8 million |
- Revenue fell about 39%, primarily following property and lease exits and the transfer of communities to other operators or Fannie Mae. These portfolio changes accounted for approximately $150 million of the decline; COVID-related occupancy weakness also weighed on resident revenue.
- Total expenses were $274.9 million, or 117.1% of revenue. The resulting loss before other income and expense was approximately $40.2 million (17.1% of revenue). Community reimbursement revenue and the corresponding expense were both $40.9 million, largely pass-through amounts.
- Reported net income was driven chiefly by a $199.9 million gain on extinguishment of debt after Fannie Mae completed legal ownership transfers for 16 properties. It did not translate into positive operating cash flow. The company also recorded $6.5 million of noncash impairment charges and a $4.6 million loss on settlement of the equity backstop.
- Year-end current assets were $103.6 million and current liabilities were $120.5 million. The balance sheet included $69.8 million of current notes payable, including $32.0 million associated with two remaining Fannie Mae properties. Shareholders’ deficit was $46.8 million; Series A preferred stock was presented separately as $41.3 million of redeemable preferred equity.
Material changes and capital structure
- In November 2021, a private placement and rights offering generated approximately $154.8 million in proceeds before transaction costs; net proceeds were $141.4 million after approximately $13.4 million of costs. The company repaid a $16.0 million interim secured note at closing.
- The financing included $41.25 million of Series A preferred stock, common shares and warrants. Preferred dividends accrue at 11% annually, compound quarterly, and are cumulative. The preferred holders had majority voting power together with their common shares at year-end; warrants cover 1,031,250 common shares at $40 per share.
- The board was reconstituted following the financing, and the company changed its name and ticker from Capital Senior Living/CSU to Sonida Senior Living/SNDA in November.
- Debt declined from $915.8 million to $687.3 million, substantially reflecting the Fannie Mae property transfers and other repayments. The company reported compliance with its debt agreements except for the two remaining Fannie Mae properties.
Liquidity, outlook, and risks
- Management said the November capital raise, other liquidity sources and a March 2022 mortgage refinancing addressed conditions that had previously raised substantial doubt about the company’s ability to continue as a going concern. The subsequent refinancing included an $80 million initial term loan, potential delayed and uncommitted facilities subject to conditions, and financial covenants, including minimum liquidity of $13 million.
- Occupancy recovered from a low of 75.3% in February 2021 to 81.6% in December 2021. The filing gives no quantified occupancy, revenue, earnings or cash-flow guidance. Management expected community refresh and renovation work begun in late 2021 to be largely completed in 2022 and described plans for capital investment and growth.
- COVID-19 remained a material uncertainty. Direct incremental costs were $1.9 million in 2021 versus $9.4 million in 2020. The company recognized $8.7 million of Phase 3 Provider Relief Fund grants as other income in 2021; it accepted another $9.1 million grant in April 2022, subject to program conditions.
- Occupancy and resident affordability, labor availability and wage inflation, future pandemic effects, interest rates, refinancing access, debt maturities and covenant compliance, regulation, competition, and insurance costs are significant risks. The company relies primarily on private-pay residents; approximately 90.4% of 2021 resident revenue was private pay.
- A material weakness in financial-reporting controls remained unremediated at year-end because of accounting staffing challenges. Management concluded disclosure controls and internal control over financial reporting were ineffective and targeted remediation by year-end 2022. The external auditor issued an unqualified opinion on the financial statements but did not opine on internal control effectiveness.
- Management reported no legal claims expected to materially affect the financial statements. No cash dividends were anticipated in the foreseeable future.
Investor verification priorities
- Assess the sustainability of occupancy recovery, resident revenue and operating cash flow, separating continuing-community performance from portfolio exits and reimbursement pass-throughs.
- Review debt maturities, the terms and covenant headroom of the March 2022 refinancing, and the status of the two remaining Fannie Mae properties and related $32.0 million debt.
- Evaluate the preferred stock’s cumulative 11% dividend, redemption and conversion terms, voting control, and potential dilution from warrants and other share issuance.
- Track remediation and independent testing of the material weakness, alongside staffing and financial-reporting capacity.
- Confirm compliance with Provider Relief Fund requirements and evaluate the impact of labor costs, inflation, and any renewed COVID-related restrictions.