CSU Capital Senior Living Corp

Capital Senior Living Corporation (the “Company”) (NYSE:CSU), one of the nation’s largest operators of senior housing communities, today announced operating and financial results for the fourth quarter and full year 2017. 

“Focused execution on our key initiatives resulted in growth in our same-community NOI, Adjusted EBITDAR and Adjusted CFFO in the fourth quarter on both a sequential and year-over-year basis,” said Lawrence A. Cohen, Chief Executive Officer of the Company.  “In 2017, we made a number of broad-based organizational and operational changes to refocus our company-wide culture of high reliability, accountability and operational excellence.  We took immediate action to overcome challenges and drive sustainable profitable growth.  We also continue to execute our comprehensive strategy to deliver higher revenues, enhance cash flow and maximize the value of our owned real estate.  We are particularly pleased that the proactive systems and protocols we implemented to combat the severe flu season greatly minimized its spread throughout our communities.

“The initiatives we implemented are expected to produce further improvement in our key metrics in 2018 and beyond, and provide a strong foundation for us to execute our long-term strategy focused on organic growth, accretive acquisitions, conversion of units to higher levels of care and EBITDAR-enhancing capital expenditures.  By diligently executing this strategy, we expect to increase revenues, reduce operating expenses and increase EBITDAR and CFFO. 

“With a disciplined focus on our growth strategy and driving operational improvements, we are well positioned to enhance shareholder value and capitalize on our competitive advantages as a leading pure-play private-pay senior housing owner/operator.”

Operating and Financial Summary (all amounts in this operating and financial summary exclude four communities that are undergoing repositioning, lease-up or significant renovation and conversion, unless otherwise noted; also, see Non-GAAP Financial Measures below and reconciliation of Non-GAAP measures to the most directly comparable GAAP measure on the final page of this release.)

• Revenue in the fourth quarter of 2017, including all communities, was $117.0 million, a $1.2 million, or 1.0%, increase from the fourth quarter of 2016. Revenue for full year 2017 was $467.0 million, a $19.5 million, or 4.4%, increase from full year 2016.  The fourth quarter of 2017 includes no revenue from the Company’s two communities impacted by Hurricane Harvey in late August 2017.  Full year 2017 includes almost nine months of revenue related to these communities.•  Revenue for consolidated communities, and also excluding the Company’s two communities impacted by Hurricane Harvey, was $110.9 million in the fourth quarter of 2017, an increase of 2.6% as compared to the fourth quarter of 2016. For full year 2017, revenue on the same basis was $438.0 million, a 5.1% increase as compared to full year 2016.•  Occupancy for the Company’s consolidated communities, and excluding the Company’s two communities impacted by Hurricane Harvey, was 87.5% in the fourth quarter of 2017, an increase of 30 basis points from the third quarter of 2017 and a decrease of 110 basis points from the fourth quarter of 2016.  Same-community occupancy was 87.4% in the fourth quarter of 2017, a 30 basis point increase from the third quarter of 2017 and a 120 basis point decrease from the fourth quarter of 2016.•  Average monthly rent for the Company’s consolidated communities, and excluding the Company’s two communities impacted by Hurricane Harvey, in the fourth quarter of 2017 was $3,613, an increase of $110 per occupied unit, or 3.1%, as compared to the fourth quarter of 2016.  Same-community average monthly rent was $3,603, an increase of $107 per occupied unit, or 3.1%, from the fourth quarter of 2016.
• Income from operations, including all communities, was $8.2 million in the fourth quarter of 2017, which includes the non-cash amortization of resident leases of $0.3 million associated with communities acquired by the Company in the previous 12 months.  Income from operations, including all communities, for full year 2017 was $7.8 million, which includes a non-cash lease termination charge of $12.9 million associated with the Company’s purchase in January 2017 of four communities it previously leased and the non-cash amortization of resident leases of $7.8 million associated with communities acquired by the Company in the previous 12 months.
• The Company’s Net Loss for the fourth quarter of 2017, including all communities, was $6.4 million, which includes the non-cash amortization of resident leases of $0.3 million associated with communities acquired by the Company in the previous 12 months and a non-cash charge of $1.9 million primarily related to reassessment of the Company’s deferred tax assets and liabilities associated with tax reform under the Tax Cuts and Jobs Act enacted by Congress in December 2017.  Net loss for full year 2017 was $44.2 million, which includes these previously noted items: $12.9 million non-cash lease termination charge, $7.8 million of non-cash amortization of resident leases and the $1.9 million non-cash tax charge related to tax reform.•  Excluding items noted and reconciled on the final page of this release, the Company’s adjusted net loss was $2.2 million in the fourth quarter of 2017 and $8.7 million for full year 2017.•  Adjusted EBITDAR was $39.4 million in the fourth quarter of 2017 compared to $38.6 million in the fourth quarter of 2016. Adjusted EBITDAR is a financial valuation measure, rather than a financial performance measure, used by management and others to evaluate the value of companies in the senior living industry.  The four communities undergoing repositioning, lease-up or significant renovation and conversion, not included in Adjusted EBITDAR, generated an additional $1.0 million of EBITDAR in the fourth quarter of 2017.  Adjusted EBITDAR was $153.4 million for full year 2017.  The four communities undergoing repositioning generated an additional $3.7 million for full year 2017.•  Adjusted Cash From Facility Operations (“CFFO”) was $12.3 million in the fourth quarter of 2017 compared to $12.2 million in the fourth quarter of 2016.  For full year 2017, Adjusted CFFO was $45.9 million.
• During the fourth quarter of 2017, the Company completed supplemental loans on two communities that resulted in $7.1 million in net cash proceeds.  These loans have an average interest rate of 5.6% and mature coterminous with the original loans in 2023 and 2025.

Financial Results - Fourth Quarter

For the fourth quarter of 2017, the Company reported revenue of $117.0 million, compared to revenue of $115.8 million in the fourth quarter of 2016, an increase of 1.0%.  Revenue for consolidated communities excluding the four communities undergoing repositioning, lease-up or significant renovation and conversion, and the two Houston communities impacted by Hurricane Harvey, increased 2.6% in the fourth quarter of 2017 as compared to the fourth quarter of 2016. 

Operating expenses for the fourth quarter of 2017 were $71.3 million, a decrease of $0.5 million from the fourth quarter of 2016, despite approximately $0.5 million of additional operating expenses in the fourth quarter of 2017 as compared to the fourth quarter of 2016 due to the acquisition of a senior housing community in November 2016. Operating expenses include a $1.5 million business interruption insurance credit related to the Company’s two Houston communities impacted by Hurricane Harvey to offset the lost revenues and continuing expenses, and to restore the communities’ net income for the fourth quarter of 2017 based on an approximate average of the communities’ net income in the seven months of 2017 prior to the hurricane.

General and administrative expenses for the fourth quarter of 2017 were $5.9 million.  This compares to general and administrative expenses of $6.7 million in the fourth quarter of 2016.  Excluding transaction and conversion costs in both periods, general and administrative expenses increased $0.9 million in the fourth quarter of 2017 as compared to the fourth quarter of 2016, primarily due to a $0.6 million increase in net healthcare expense year over year.  As a percentage of revenues under management, general and administrative expenses, excluding transaction and conversion costs, were 4.8% in the fourth quarter of 2017 compared to 4.1% in the fourth quarter of 2016. 

Income from operations for the fourth quarter of 2017 was $8.2 million.  The Company recorded a net loss on a GAAP basis of $6.4 million in the fourth quarter of 2017.  Excluding items noted and reconciled on the final page of this release, the Company’s adjusted net loss was $2.2 million in the fourth quarter of 2017. 

The Company’s Non-GAAP financial measures exclude four communities that are undergoing repositioning, lease-up of higher-licensed units or significant renovation and conversion (see “Non-GAAP Financial Measures” below).

Adjusted EBITDAR for the fourth quarter of 2017 was $39.4 million as compared to $38.6 million in the fourth quarter of 2016.  The four communities undergoing repositioning, lease-up or significant renovation and conversion not included in Adjusted EBITDAR generated an additional $1.0 million of EBITDAR.

Adjusted CFFO was $12.3 million in the fourth quarter of 2017, as compared to $12.2 million in the fourth quarter of 2016. 

Financial Results – Full Year

The Company reported 2017 revenue of $467.0 million, compared to revenue of $447.4 million in 2016, an increase of 4.4%.  Revenue for consolidated communities excluding the four communities undergoing repositioning, lease-up or significant renovation and conversion, and the two Houston communities impacted by Hurricane Harvey, increased 5.1% in 2017 as compared to 2016.  Operating expenses were $290.7 million in 2017, an increase of $16.8 million from 2016.

General and administrative expenses were $23.6 million in 2017 compared to $23.7 million in 2016.  General and administrative expenses as a percentage of revenues under management, excluding one-time, transaction and conversion costs, were 4.7% in 2017 compared to 4.4% in 2016.

Income from operations for full year 2017 was $7.8 million.  The Company recorded a net loss on a GAAP basis of $44.2 million for full year 2017.  Excluding non-recurring or non-economic items reconciled on the final page of this release, the Company’s adjusted net loss was $8.7 million for full year 2017.  

Adjusted EBITDAR was $153.4 million for full year 2017.  The four communities undergoing repositioning, lease-up or significant renovation and conversion, not included in Adjusted EBITDAR, generated an additional $3.7 million of EBITDAR in 2017.  Adjusted CFFO for 2017 was $45.9 million.

Operating Activities

Same-community results exclude the four communities previously noted that are undergoing repositioning, lease-up or significant renovation and conversion, the two Houston communities impacted by Hurricane Harvey, and one community that was acquired during the fourth quarter of 2016. Same-community results also exclude certain transaction and conversion costs.

Same-community revenue in the fourth quarter of 2017 increased 2.1% versus the fourth quarter of 2016. 

Same-community operating expenses increased 1.7% from the fourth quarter of the prior year, excluding conversion costs in both periods.  On the same basis, labor costs, including benefits, increased 1.4% and utilities increased 3.0%, while food costs decreased 2.3%, all as compared to the fourth quarter of 2016.  At communities that have not converted units to higher levels of care in the last year, labor costs decreased 0.6%.  Contract labor costs decreased $0.3 million sequentially from the third quarter of 2017 and were essentially flat with the fourth quarter of 2016.  Same-community net operating income increased approximately 3.0% in the fourth quarter of 2017 as compared to the fourth quarter of 2016. 

Capital expenditures for the third quarter of 2017 were $9.8 million, representing approximately $8.3 million of investment spending and approximately $1.5 million of recurring capital expenditures.

Balance Sheet

The Company ended the quarter with $31.0 million of cash and cash equivalents, including restricted cash.  During the fourth quarter of 2017, the Company spent $9.8 million on capital improvements and received net cash proceeds of $7.1 million related to supplemental loans on two communities. The Company received reimbursements from one of its REIT partners totaling $0.5 million in the fourth quarter for capital improvements at certain leased communities and expects to receive additional reimbursements as the remaining projects at leased communities are completed.

As of December 31, 2017, the Company financed its owned communities with mortgages totaling $963.1 million at interest rates averaging 4.7%.  All of the Company’s debt is at fixed interest rates, except for two bridge loans totaling approximately $76.5 million at December 31, 2017, one of which matures in the second quarter of 2019 and the other in the first quarter of 2020.  The earliest maturity date for the Company’s fixed-rate debt is in 2021. 

The Company’s cash on hand and cash flow from operations are expected to be sufficient for working capital, prudent reserves and the equity needed to fund the Company’s acquisition, conversion and renovation programs.

Q4 2017 Conference Call Information

The Company will host a conference call with senior management to discuss the Company’s fourth quarter and full year 2017 financial results.  The call will be held on Tuesday, February 27, 2018, at 5:00 p.m. Eastern Time.  The call-in number is 323-701-0230, confirmation code 5306718.  A link to a simultaneous webcast of the teleconference will be available at www.capitalsenior.com through Windows Media Player or RealPlayer.

For the convenience of the Company’s shareholders and the public, the conference call will be recorded and available for replay starting February 27, 2018 at 8:00 p.m. Eastern Time, until March 7, 2018 at 8:00 p.m. Eastern Time.  To access the conference call replay, call 719-457-0820, confirmation code 5306718.  The conference call will also be made available for playback via the Company’s corporate website, www.capitalsenior.com.

Non-GAAP Financial Measures of Operating Performance

Adjusted EBITDAR is a financial valuation measure and Adjusted Net Income and Adjusted CFFO are financial performance measures that are not calculated in accordance with U.S. generally accepted accounting principles (“GAAP”).  Non-GAAP financial measures may have material limitations in that they do not reflect all of the costs associated with our results of operations as determined in accordance with GAAP.  As a result, these non-GAAP financial measures should not be considered a substitute for, nor superior to, financial results and measures determined or calculated in accordance with GAAP. 

Adjusted EBITDAR is a valuation measure commonly used by our management, research analysts and investors to value companies in the senior living industry.  Because Adjusted EBITDAR excludes interest expense and rent expense, it allows our management, research analysts and investors to compare the enterprise values of different companies without regard to differences in capital structures and leasing arrangements.

The Company believes that Adjusted Net Income and Adjusted CFFO are useful as performance measures in identifying trends in day-to-day operations because they exclude the costs associated with acquisitions and conversions and other items that do not ordinarily reflect the ongoing operating results of our primary business.  Adjusted Net Income and Adjusted CFFO provide indicators to management of progress in achieving both consolidated and individual business unit operating performance and are used by research analysts and investors to evaluate the performance of companies in the senior living industry.

The Company strongly urges you to review on the last page of this release the reconciliation of net loss to Adjusted EBITDAR and the reconciliation of net (loss) income to Adjusted Net (Loss) Income and Adjusted CFFO, along with the Company’s consolidated balance sheets, statements of operations, and statements of cash flows.

About the Company

Capital Senior Living Corporation is one of the nation’s largest operators of residential communities for senior adults. The Company’s operating strategy is to provide value to residents by providing quality senior housing services at reasonable prices.  The Company’s communities emphasize a continuum of care, which integrates independent living, assisted living, and memory care services, to provide residents the opportunity to age in place.  The Company operates 129 senior housing communities in geographically concentrated regions with an aggregate capacity of approximately 16,500 residents.

Safe Harbor

The forward-looking statements in this release are subject to certain risks and uncertainties that could cause results to differ materially, including, but not without limitation to, the Company’s ability to find suitable acquisition properties at favorable terms, financing, refinancing, community sales, licensing, business conditions, risks of downturns in economic conditions generally, satisfaction of closing conditions such as those pertaining to licensure, availability of insurance at commercially reasonable rates, and changes in accounting principles and interpretations among others, and other risks and factors identified from time to time in our reports filed with the Securities and Exchange Commission.

For information about Capital Senior Living, visit www.capitalsenior.com.

Contact Carey P. Hendrickson, Chief Financial Officer, at 972-770-5600 for more information.

CAPITAL SENIOR LIVING CORPORATION
CONSOLIDATED BALANCE SHEETS
(audited, in thousands, except per share data)
		December 31,
		2017				2016
		(In thousands)
ASSETS
Current assets:
Cash and cash equivalents		$	17,646			$	34,026
Restricted cash			13,378				13,297
Accounts receivable, net			12,307				13,675
Property tax and insurance deposits			14,386				14,665
Prepaid expenses and other			6,332				6,365
Total current assets			64,049				82,028
Property and equipment, net			1,099,786				1,032,430
Other assets, net			18,836				31,323
Total assets		$	1,182,671			$	1,145,781
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	7,801			$	5,051
Accrued expenses			40,751				39,064
Current portion of notes payable, net of deferred loan costs			19,728				17,889
Current portion of deferred income			13,840				16,284
Current portion of capital lease and financing obligations			3,106				1,339
Federal and state income taxes payable			383				218
Customer deposits			1,394				1,545
Total current liabilities			87,003				81,390
Deferred income			10,033				12,205
Capital lease and financing obligations, net of current portion			48,805				37,439
Deferred taxes			1,941				—
Other long-term liabilities			16,250				15,325
Notes payable, net of deferred loan costs and current portion			938,206				882,504
Commitments and contingencies
Shareholders’ equity:
Preferred stock, $.01 par value:			—				—
Authorized shares — 15,000; no shares issued or outstanding
Common stock, $.01 par value:
Authorized shares — 65,000; issued and outstanding shares 30,505 and 30,012 in 2017 and 2016, respectively			310				305
Additional paid-in capital			179,459				171,599
Retained deficit			(95,906	)			(51,556	)
Treasury stock, at cost – 494 shares in 2017 and 2016			(3,430	)			(3,430	)
Total shareholders’ equity			80,433				116,918
Total liabilities and shareholders’ equity		$	1,182,671			$	1,145,781

CAPITAL SENIOR LIVING CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(audited, in thousands, except per share data)
		Three Months EndedDecember 31,								Year EndedDecember 31,
		2017				2016				2017				2016
Revenues:
Resident revenue		$	116,971			$	115,805			$	466,997			$	447,448
Expenses:
Operating expenses (exclusive of facility lease expense and depreciation and amortization expense shown below)			71,314				71,806				290,662				273,899
General and administrative expenses			5,896				6,702				23,574				23,671
Facility lease expense			13,934				15,568				56,432				61,718
Loss on facility lease termination			—				—				12,858				—
Provision for bad debt			393				513				1,748				1,727
Stock-based compensation expense			1,849				4,163				7,682				11,645
Depreciation and amortization expense			15,337				16,295				66,199				60,398
Total expenses			108,723				115,047				459,155				433,058
Income from operations			8,248				758				7,842				14,390
Other income (expense):
Interest income			22				17				73				67
Interest expense			(12,531	)			(11,241	)			(49,471	)			(42,207	)
Gain (Loss) on disposition of assets, net			3				(12	)			(123	)			(65	)
Other income			1				—				7				233
Loss before provision for income taxes			(4,257	)			(10,478	)			(41,672	)			(27,582	)
Benefit (Provision) for income taxes			(2,102	)			(32	)			(2,496	)			(435	)
Net loss		$	(6,359	)		$	(10,510	)		$	(44,168	)		$	(28,017	)
Per share data:
Basic net loss per share		$	(0.22	)		$	(0.36	)		$	(1.50	)		$	(0.97	)
Diluted net loss per share		$	(0.22	)		$	(0.36	)		$	(1.50	)		$	(0.97	)
Weighted average shares outstanding — basic			29,531				29,000				29,453				28,909
Weighted average shares outstanding — diluted			29,531				29,000				29,453				28,909
Comprehensive loss		$	(6,359	)		$	(10,510	)		$	(44,168	)		$	(28,017	)

CAPITAL SENIOR LIVING CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(audited, in thousands)
		Year Ended December 31,
		2017				2016
Operating Activities
Net loss		$	(44,168	)		$	(28,017	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization			66,199				60,398
Amortization of deferred financing charges			1,626				1,193
Amortization of deferred lease costs and lease intangibles			859				679
Amortization of lease incentives			(1,336	)			(710	)
Deferred income			(1,397	)			(414	)
Deferred taxes			1,941				—
Lease incentives			5,673				7,530
Loss on facility lease termination			12,858				—
Loss on disposition of assets, net			123				65
Provision for bad debts			1,748				1,727
Stock-based compensation expense			7,682				11,645
Changes in operating assets and liabilities:
Accounts receivable			(8,159	)			(14,519	)
Property tax and insurance deposits			279				(267	)
Prepaid expenses and other			33				(1,995	)
Other assets			4,061				(2,228	)
Accounts payable			2,750				1,695
Accrued expenses			1,689				4,798
Other liabilities			5,017				12,014
Federal and state income taxes receivable/payable			165				107
Deferred resident revenue			(1,898	)			(1,148	)
Customer deposits			(151	)			(274	)
Net cash provided by operating activities			55,594				52,279
Investing Activities
Capital expenditures			(39,959	)			(62,371	)
Cash paid for acquisitions			(85,000	)			(138,750	)
Proceeds from disposition of assets			19				72
Net cash used in investing activities			(124,940	)			(201,049	)
Financing Activities
Proceeds from notes payable			77,197				150,798
Repayments of notes payable			(20,099	)			(17,680	)
Cash payments for capital lease and financing obligations			(2,869	)			(1,314	)
Increase in restricted cash			(81	)			(138	)
Cash proceeds from the issuance of common stock			—				67
Excess tax benefits on stock options exercised			—				(27	)
Purchases of treasury stock			—				(2,496	)
Deferred financing charges paid			(1,182	)			(2,501	)
Net cash provided by financing activities			52,966				126,709
Decrease in cash and cash equivalents			(16,380	)			(22,061	)
Cash and cash equivalents at beginning of period			34,026				56,087
Cash and cash equivalents at end of period		$	17,646			$	34,026
Supplemental Disclosures
Cash paid during the period for:
Interest		$	47,022			$	40,585
Income taxes		$	543			$	582

Capital Senior Living Corporation
Supplemental Information
												Average
						Communities						Resident Capacity						Average Units
						Q4 17			Q4 16			Q4 17			Q4 16			Q4 17			Q4 16
Portfolio Data
	I. Community Ownership / Management
		Consolidated communities
				Owned		83			79			10,767			9,971			7,970			7,616
				Leased		46			50			5,756			6,333			4,414			4,901
				Total		129			129			16,523			16,304			12,384			12,517
		Independent living										6,879			6,965			5,000			5,295
		Assisted living										9,644			9,339			7,384			7,222
				Total								16,523			16,304			12,384			12,517
	II. Percentage of Operating Portfolio
		Consolidated communities
				Owned		64.3	%		61.2	%		65.2	%		61.2	%		64.4	%		60.8	%
				Leased		35.7	%		38.8	%		34.8	%		38.8	%		35.6	%		39.2	%
				Total		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%
		Independent living										41.6	%		42.7	%		40.4	%		42.3	%
		Assisted living										58.4	%		57.3	%		59.6	%		57.7	%
				Total								100.0	%		100.0	%		100.0	%		100.0	%

Capital Senior Living Corporation
Supplemental Information (excludes four communities being repositioned/leased up and two Houston communities impacted by Hurricane Harvey)
Selected Operating Results				Q4 17			Q4 16
	I. Owned communities
		Number of communities		78			74
		Resident capacity		9,841			9,045
		Unit capacity (1)		7,472			6,891
		Financial occupancy (2)		89.0	%		89.8	%
		Revenue (in millions)		70.2			63.6
		Operating expenses (in millions) (3)		43.8			40.1
		Operating margin (3)		38	%		37	%
		Average monthly rent		3,515			3,426
	II. Leased communities
		Number of communities		45			49
		Resident capacity		5,530			6,107
		Unit capacity (1)		4,228			4,715
		Financial occupancy (2)		84.7	%		86.8	%
		Revenue (in millions)		40.8			44.5
		Operating expenses (in millions) (3)		23.3			25.3
		Operating margin (3)		43	%		43	%
		Average monthly rent		3,797			3,621
	III. Consolidated communities
		Number of communities		123			123
		Resident capacity		15,371			15,152
		Unit capacity		11,699			11,606
		Financial occupancy (2)		87.5	%		88.6	%
		Revenue (in millions)		110.9			108.1
		Operating expenses (in millions) (3)		67.0			65.4
		Operating margin (3)		40	%		40	%
		Average monthly rent		3,613			3,503
	IV. Communities under management
		Number of communities		123			123
		Resident capacity		15,371			15,152
		Unit capacity (1)		11,699			11,606
		Financial occupancy (2)		87.5	%		88.6	%
		Revenue (in millions)		110.9			108.1
		Operating expenses (in millions) (3)		67.0			65.4
		Operating margin (3)		40	%		40	%
		Average monthly rent		3,613			3,503
	V. Same communities under management
		Number of communities		122			122
		Resident capacity		15,171			14,952
		Unit capacity (1)		11,577			11,524
		Financial occupancy (2)		87.4	%		88.6	%
		Revenue (in millions)		109.3			107.0
		Operating expenses (in millions) (3)		65.9			64.8
		Operating margin (3)		40	%		39	%
		Average monthly rent		3,603			3,496
	VI. General and Administrative expenses as a percent of Total Revenues under Management
		Fourth quarter (4)		4.8	%		4.1	%
		Year to date (4)		4.7	%		4.4	%
	VII. Consolidated Mortgage Debt Information (in thousands, except interest rates)
		(excludes insurance premium financing)
		Total fixed rate mortgage debt		886,597			895,469
		Total variable rate mortgage debt		76,505			11,742
		Weighted average interest rate		4.68	%		4.61	%
	(1)	Due to conversion and refurbishment projects completed at certain communities, unit capacity is higher in Q4 17 than Q4 16 for same communities under management, which affects all groupings of communities.
	(2)	Financial occupancy represents actual days occupied divided by total number of available days during the month of the quarter.
	(3)	Excludes management fees, provision for bad debts and transaction and conversion costs.
	(4)	Excludes transaction and conversion costs.

CAPITAL SENIOR LIVING CORPORATION
NON-GAAP RECONCILIATIONS
(In thousands, except per share data)
		Three Months Ended December 31,								Year Ended December 31,
			2017				2016				2017				2016
Adjusted EBITDAR
	Net loss	$	(6,359	)		$	(10,510	)		$	(44,168	)		$	(28,017	)
	Depreciation and amortization expense		15,337				16,295				66,199				60,398
	Stock-based compensation expense		1,849				4,163				7,682				11,645
	Facility lease expense		13,934				15,568				56,432				61,718
	Loss on facility lease termination		-				-				12,858				-
	Provision for bad debts		393				513				1,748				1,727
	Interest income		(22	)			(17	)			(73	)			(67	)
	Interest expense		12,531				11,241				49,471				42,207
	(Gain) Loss on disposition of assets, net		(3	)			12				123				65
	Other income		(1	)			-				(7	)			(233	)
	Provision for income taxes		2,102				32				2,496				435
	Casualty losses		269				202				1,996				1,271
	Transaction and conversion costs		331				1,859				2,323				4,922
	Communities excluded due to repositioning/lease-up		(976	)			(733	)			(3,716	)			(3,167	)
	Adjusted EBITDAR	$	39,385			$	38,625			$	153,364			$	152,904
Adjusted Revenues
	Total revenues	$	116,971			$	115,805			$	466,997			$	447,448
	Communities excluded due to repositioning/lease-up		(6,017	)			(4,532	)			(21,178	)			(17,730	)
	Adjusted revenues	$	110,954			$	111,273			$	445,819			$	429,718
Adjusted net loss and Adjusted net loss per share
	Net loss	$	(6,359	)		$	(10,510	)		$	(44,168	)		$	(28,017	)
	Casualty losses		269				202				1,996				1,271
	Transaction and conversion costs		352				4,888				2,906				7,719
	Resident lease amortization		236				3,401				7,643				12,993
	Loss on facility lease termination		-				-				12,858				-
	(Gain) Loss on disposition of assets		(3	)			12				122				65
	Tax impact of Non-GAAP adjustments (37%)		(316	)			(3,146	)			(9,444	)			(8,158	)
	Deferred tax asset valuation allowance		2,678				2,170				16,698				8,569
	Communities excluded due to repositioning/lease-up		947				700				2,735				1,694
	Adjusted net (loss) income	$	(2,196	)		$	(2,283	)		$	(8,654	)		$	(3,864	)
	Diluted shares outstanding		29,531				29,000				29,453				28,909
	Adjusted net (loss) income per share	$	(0.07	)		$	(0.08	)		$	(0.29	)		$	(0.13	)
Adjusted CFFO
	Net loss	$	(6,359	)		$	(10,510	)		$	(44,168	)		$	(28,017	)
	Non-cash charges, net		19,769				22,647				95,976				82,113
	Lease incentives		(514	)			(1,672	)			(5,673	)			(7,530	)
	Recurring capital expenditures		(1,186	)			(1,183	)			(4,746	)			(4,634	)
	Casualty losses		269				202				2,028				1,271
	Transaction and conversion costs		352				2,737				2,681				5,568
	Tax impact of Spring Meadows Transaction		-				(106	)			-				(424	)
	Communities excluded due to repositioning/lease-up		(21	)			49				(226	)			(43	)
	Adjusted CFFO	$	12,310			$	12,164			$	45,872			$	48,304