COVID-19’s negative effects on occupancy, revenues and expenses “raise substantial doubt about the company’s ability to continue as a going concern,” Capital Senior Living said Thursday in a press release issued before its first-quarter earnings call.
Accounting standards required the disclosure.
“While our financial results will be impacted by the pandemic for the next several months, we look forward to continuing our operational turnaround as market conditions stabilize,” President and CEO Kimberly S. Lody said in a statement.
In the meantime, the Dallas-based company said it has taken or will take several steps “to improve its liquidity position and address uncertainty about its ability to continue as a going concern.” They include:
- Continuing a three-year operational turnaround plan begun a year ago. This plan began showing positive results in the first quarter and “is expected to continue to produce incremental profitability improvements,” Capital said.
- Reducing discretionary spending and lower capital spending.
- Exiting underperforming leases, resulting in reduced rent payments through December, and eliminating all rent payments beginning in January.
- Evaluating selling some communities to obtain cash.
- Entering into short-term debt forbearance agreements with some lenders.
- Using the Coronavirus Aid, Relief, and Economic Security (CARES) Act payroll tax deferral program to delay paying the employer portion of payroll taxes from April to December. The company said it expects to use approximately $7 million from the program, with one-half of the deferred payroll taxes due by December 2021 and the other half due by December 2022.
- Evaluating possible debt and capital options.
Capital said it saw results in line with its expectations in March but that new resident leads, visits and move-ins declined “significantly” in April compared with typical levels. Occupancy decreased from 79.8% in March to 78.7% in April, and revenue decreased approximately $0.5 million in that same time period.
“We expect further deterioration of occupancy and revenue resulting from fewer move-ins due to the impacts of COVID-19. Lower-than-normal controllable move-out activity during the COVID-19 pandemic may partially offset future adverse revenue impacts,” the company said.
Also, Capital said it continues to experience increased supply costs related to COVID-19, especially for personal protection equipment and paper goods needed for in-room dining, labor, specialized cleaning and disinfecting costs, and testing of residents and employees. “To mitigate the impact of the COVID-related expenditures, the company has reduced spending on non-essential supplies, travel costs and certain other discretionary items, and has ceased all non-critical capital expenditure projects,” Capital said.
Editor’s Note: See subsequent coverage of the earnings call here.