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2: EX-31.1 Certification -- §302 - SOA'02 HTML 23K
3: EX-31.2 Certification -- §302 - SOA'02 HTML 23K
4: EX-32.1 Certification -- §906 - SOA'02 HTML 20K
5: EX-32.2 Certification -- §906 - SOA'02 HTML 20K
11: R1 Cover Page HTML 73K
12: R2 Condensed Consolidated Balance Sheets HTML 118K
13: R3 Condensed Consolidated Balance Sheets HTML 49K
(Parenthetical)
14: R4 Condensed Consolidated Statements of Operations HTML 111K
(Unaudited)
15: R5 Condensed Consolidated Statements of Shareholders' HTML 54K
Equity (Deficit) (Unaudited)
16: R6 Condensed Consolidated Statements of Cash Flows HTML 115K
(Unaudited)
17: R7 Basis of Presentation HTML 27K
18: R8 Going Concern Uncertainty and Related Strategic HTML 34K
Cash Preservation Initiatives
19: R9 Summary of Significant Accounting Policies HTML 64K
20: R10 Property and Equipment, net HTML 39K
21: R11 Accrued expenses HTML 29K
22: R12 Notes Payable HTML 61K
23: R13 Redeemable Preferred Stock HTML 27K
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25: R15 Net Income (Loss) Per Share HTML 43K
26: R16 Stock-Based Compensation HTML 27K
27: R17 Commitments and Contingencies HTML 23K
28: R18 Related Party Transactions HTML 23K
29: R19 Fair Value Measurements HTML 36K
30: R20 Derivatives and Hedging HTML 39K
31: R21 Summary of Significant Accounting Policies HTML 101K
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Cash Preservation Initiatives (Details)
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Schedule of Cash and Cash Equivalents and
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Narrative (Detail)
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Property and Equipment and Leasehold Improvements
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Maturities of Notes Payable (Details)
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(Exact Name of Registrant as Specified in its Charter)
iDelaware
i75-2678809
(State
or Other Jurisdiction of Incorporation or Organization)
(I.R.S. Employer Identification No.)
i14755 Preston Road, iSuite
810, iDallas, iTexas
i75254
(Address
of principal executive offices)
(Zip code)
(i972) i770-5600
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section
12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of exchange on which registered
iCommon Stock,
$0.01 par value per share
iSNDA
iNew York Stock Exchange
Indicate by check mark whether the
registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. iYesx No ¨
Indicate by check mark whether the registrant
has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). iYesx No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated
filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,”“accelerated filer,”“smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
¨
Accelerated filer
¨
iNon-accelerated
filer
x
Smaller reporting company
ix
Emerging growth company
i☐
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by a check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes i☐ No x
Certain information contained in this Quarterly Report on Form 10-Q of Sonida Senior Living, Inc. (together with its consolidated subsidiaries, “Sonida,”“we,”“our,”“us,” or the “Company”) constitutes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical facts included in this Quarterly Report on Form 10-Q, including, without limitation, those relating to the Company’s future business prospects and strategies, financial results, working capital, liquidity,
capital needs and expenditures, interest costs, insurance availability and contingent liabilities, are forward-looking statements. Forward-looking statements can be identified by the use of forward-looking terminology such as “may,”“will,”“would,”“intend,”“could,”“believe,”“expect,”“anticipate,”“project,”“plans,”“estimate” or “continue” or the negatives thereof or other variations thereon or comparable terminology.
Forward-looking statements are subject to certain risks and uncertainties that could cause the Company’s actual results and financial condition to differ materially from those indicated in the forward-looking statements, including, among others, the risks, uncertainties and factors set forth under
“Item. 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the Securities and Exchange Commission (the “SEC”) on March 30, 2023, and also include the following:
•the impact of COVID-19, including the actions taken to prevent or contain the spread of COVID-19, the transmission of its highly contagious variants and sub-lineages and the development and availability of vaccinations and other related treatments, or another epidemic, pandemic or other health crisis;
•the Company’s ability to generate sufficient cash flows from operations, additional
proceeds from debt financings or refinancings, and proceeds from the sale of assets to satisfy its short and long-term debt obligations and to fund the Company’s capital improvement projects to expand, redevelop, and/or reposition its senior living communities;
•increases in market interest rates that increase the cost of certain of our debt obligations;
•increased competition for, or a shortage of, skilled workers, including due to the COVID-19 pandemic or general labor market conditions, along with wage pressures resulting from such increased competition, low unemployment levels, use of contract labor, minimum wage increases and/or changes in overtime laws;
•the
Company’s ability to obtain additional capital on terms acceptable to it;
•the Company’s ability to extend or refinance its existing debt as such debt matures;
•the Company’s compliance with its debt agreements, including certain financial covenants, and the risk of cross-default in the event such non-compliance occurs;
•the Company’s ability to complete acquisitions and dispositions upon favorable terms or at all;
•the risk of oversupply
and increased competition in the markets which the Company operates;
•the Company’s ability to improve and maintain controls over financial reporting and remediate the identified material weakness discussed in Item 4 of Part I of this Quarterly Report on Form 10-Q;
•the departure of certain of the Company’s key officers and personnel;
•the cost and difficulty of complying with applicable licensure, legislative oversight, or regulatory changes;
•risks
associated with current global economic conditions and general economic factors such as inflation, the consumer price index, commodity costs, fuel and other energy costs, competition in the labor market, costs of salaries, wages, benefits, and insurance, interest rates, and tax rates; and
•changes in accounting principles and interpretations.
We caution you that the risks, uncertainties and other factors referenced above may not contain all of the risks, uncertainties and other factors that are important to you. In addition, we cannot assure you that we will realize the results, benefits or outcomes that we expect or anticipate or, even if substantially realized, that they will result in the consequences or affect us or our business in the way expected. All forward-looking statements in this Quarterly Report on Form
10-Q apply only as of the date made and are expressly qualified in their entirety by the cautionary statements included in this Quarterly Report on Form 10-Q. Except as required by applicable law, we undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise.
Current
portion of notes payable, net of deferred loan costs
i81,151
i46,029
Current
portion of deferred income
i3,857
i3,419
Federal
and state income taxes payable
i260
i—
Other
current liabilities
i640
i653
Total
current liabilities
i127,011
i94,317
Notes
payable, net of deferred loan costs and current portion
i554,723
i625,002
Other
liabilities
i95
i113
Total liabilities
i681,829
i719,432
Commitments
and contingencies
i
i
Redeemable preferred stock:
Series
A convertible preferred stock, $ii0.01/
par value; ii41/ shares authorized, iiii41///
shares issued and outstanding as of March 31, 2023 and December 31, 2022
i44,748
i43,550
Shareholders’
deficit:
Preferred stock, $ii0.01/
par value:
Authorized shares - ii15,000/
as of March 31, 2023 and December 31, 2022; iiiinone///
issued or outstanding, except Series A convertible preferred stock as noted above
Adjustments
to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization
i9,881
i9,578
Amortization
of deferred loan costs
i366
i244
Gain
on sale of assets, net
(i251)
i—
Unrealized
loss on interest rate cap, net
i572
i—
(Gain)
loss on extinguishment of debt
(i36,339)
i641
Provision
for bad debt
i237
i106
Non-cash
stock-based compensation expense
i902
i1,828
Other
non-cash items
(i1)
(i55)
Changes
in operating assets and liabilities:
Accounts receivable, net
(i48)
(i625)
Prepaid
expenses and other
i1,159
i1,633
Other
assets, net
i62
i296
Accounts
payable and accrued expense
i1,828
i1,700
Federal
and state income taxes payable
i260
i251
Deferred
income
i438
i365
Other
current liabilities
i38
i26
Net
cash provided by (used in) operating activities
i3,249
(i690)
Cash
flows from investing activities:
Acquisition of new communities
i—
(i12,342)
Capital
expenditures
(i5,429)
(i5,582)
Proceeds
from sale of assets
i343
i—
Net
cash used in investing activities
(i5,086)
(i17,924)
Cash
flows from financing activities:
Proceeds from notes payable
i—
i80,000
Repayments
of notes payable
(i3,714)
(i90,579)
Dividends
paid to Series A preferred stockholders
i—
(i718)
Deferred
loan costs paid
i—
(i2,137)
Other
financing costs
(i45)
i—
Net
cash used in financing activities
(i3,759)
(i13,434)
Decrease
in cash and cash equivalents and restricted cash
(i5,596)
(i32,048)
Cash,
cash equivalents, and restricted cash at beginning of period
i30,742
i92,876
Cash,
cash equivalents, and restricted cash at end of period
$
i25,146
$
i60,828
Supplemental
Disclosures of Cash Flow Information
Cash paid during the period for:
Interest
$
i7,639
$
i7,076
Income
taxes paid (refunds received), net
$
(i193)
$
i3
Non-cash
investing and financing activities:
Accrued dividends on Series A convertible preferred stock
$
i1,198
$
i1,133
Non-cash
additions of property, plant and equipment
$
i1,150
$
i40
See
Notes to Condensed Consolidated Financial Statements.
7
Sonida Senior Living, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. iBasis
of Presentation
Organization and Business
Sonida Senior Living, Inc. (formerly known as Capital Senior Living Corporation), a Delaware corporation (together with its subsidiaries, the “Company”), is one of the leading owner-operators of senior housing communities in the United States in terms of resident capacity. The Company owns, operates, develops, and manages senior housing communities throughout the United States. As of March 31, 2023, the Company operated i72
senior housing communities in i18 states with an aggregate capacity of approximately i8,000 residents, including
i62 senior housing communities that the Company owned and i10 communities that the
Company managed on behalf of third parties. As of December 31, 2022, the Company had itwo properties that the Company no longer operated that were in the process of transitioning legal ownership back to the Federal National Mortgage Association ("Fannie Mae"). The transfer of ownership was completed during January 2023. The accompanying
condensed consolidated financial statements include the financial statements of Sonida Senior Living, Inc. and its wholly owned subsidiaries. All material intercompany balances and transactions have been eliminated in consolidation.
Interim Unaudited Financial Information
The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and should be read in conjunction with the condensed consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2022. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with GAAP have been omitted from this Quarterly Report on Form 10-Q pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The results for the interim periods shown in this report are not necessarily indicative of future financial results. The accompanying condensed consolidated financial statements have not been audited by our independent registered public accounting firm. In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments, including normal recurring items, necessary to present fairly our condensed consolidated financial position as of March 31, 2023 and December 31, 2022, and our condensed consolidated results of operations and cash flows for the periods ended March 31,
2023 and 2022.
iReclassifications
Certain amounts previously reflected in the prior year condensed consolidated balance sheet have been reclassified to conform to our March 31, 2023 presentation. The condensed consolidated statements of operations include the consolidation of “stock-based compensation
expense” within “general and administrative expenses.” The condensed consolidated statements of cash flows include reclassifying “property tax and insurance deposits” to restricted cash and lender reserves from “other assets, net” to restricted cash. Additionally, “lease expense adjustment” was reclassified to “other non-cash items.”
i
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that
affect the reported amounts and disclosures in the financial statements. These estimates include such items related to the accounting for: income taxes, including assessments of probabilities of realization of income tax benefits; impairment of long-lived assets, including applicable cash flow projections, holding periods and fair value evaluations; self-insurance liabilities and expense; stock-based compensation; and depreciation and amortization including determination of estimated useful lives. Actual results could differ from those estimates.
2. iGoing
Concern Uncertainty and Related Strategic Cash Preservation Initiatives
Accounting Standards Codification (“ASC”) 205-40, “Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” requires an evaluation of whether there are conditions or events, considered in the aggregate, that raise substantial doubt about an entity’s ability to continue as a going concern within 12 months after the date the financial statements are issued. Initially, this evaluation does not consider the potential mitigating effect of management’s plans that have not been fully implemented. When substantial doubt exists, management evaluates the mitigating effect of its plans to determine
8
if
it is probable that (1) the plans will be effectively implemented within one year after the date the financial statements are issued, and (2) when implemented, the plans will mitigate the relevant conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern.
In complying with the requirements under ASC 205-40 to complete an evaluation without considering mitigating factors, the Company considered several conditions or events including: (1) the continued impact of the COVID-19 pandemic, the current inflationary environment and the impact of elevated interest rates on the Company’s operations and financial results; (2) $i81.2 million
of principal payments and $i38.5 million of scheduled interest payments due in the next 12 months; (3) recurring operating losses and projected operating losses for fiscal periods through June 30, 2024; (4) the Company’s working capital deficit; and (5) events of non-compliance with certain of our mortgage agreements, as noted in "Note 6–Notes Payable". The
above conditions raise substantial doubt about the Company’s ability to continue as a going concern for the 12-month period following the date the March 31, 2023 financial statements are issued.
As discussed below, the Company has implemented plans which encompass short-term cash preservation initiatives to provide the Company with adequate liquidity to meet its obligations for at least the 12-month period following the date its March 31, 2023 financial statements are issued, in addition
to creating sustained cash flow generation thereafter. The Company’s primary sources of near- and medium-term liquidity are expected to be (1) net cash generated from operations; (2) COVID-19 or related relief grants from various state agencies; and (3) debt modifications, refinancings and extensions to the extent available on acceptable terms.
Strategic and Cash Preservation Initiatives
The Company has either taken, or intends to take, the following actions, among others, to improve its liquidity position and to address uncertainty about its ability to continue as a going concern:
•Upon
its management team transition in September 2022, the Company promptly implemented new strategic and operational plans to accelerate margin recovery, including the following:
◦Design and execution of a comprehensive resident rate review program to align revenues with the significant increase in the operating cost environment.
◦Implementation of a global purchasing organization function to leverage scaled purchasing to lower unit operating costs.
◦Use of several internally developed and external programs to provide alternative mitigants to a challenging
labor environment.
•We have adopted a comprehensive cash optimization strategy aimed at improving working capital management.
•The Company is engaged in discussions with certain of its lenders in regard to potential modifications of certain mortgage debt on more favorable terms, which does not preclude a potential ownership transfer on select communities based on various financial metrics.
•Through recently integrated systems and revised process workflows, the Company has implemented additional
proactive spending reductions, including reduced discretionary spending and more stringent, return-based capital spending.
•The Company received approximately $i2.0 million in various state grants during the quarter ended March 31, 2023, and has outstanding applications for additional grants not yet received.
•Under
the terms of the A&R Investment Agreement, the Company may request additional investments from the Conversant Investors in shares of Series A Preferred Stock (up to an aggregate amount equal to $i25.0 million) that can be used for future investment in accretive capital expenditures and acquisitions, subject to certain conditions.
While the
Company’s plans are designed to provide it with adequate liquidity to meet its obligations for at least the 12-month period following the date its financial statements are issued, the remediation plan is dependent on conditions and matters that may be outside of the Company’s control, and no assurances can be given that certain options will be available on terms acceptable to the Company, or at all. Accordingly, management could not conclude that it was probable that the plans will mitigate the relevant conditions or events that raise substantial doubt about the Company’s ability to continue as a going
9
concern.
In addition, it is probable that the Company will not be able to comply with some of the financial covenants and other restrictions contained in our debt instruments, which would in turn trigger an event of default under our loan agreements. An event of default, subject to cure provisions in certain instances, would give the respective lenders the right to accelerate the related debt and to declare all amounts outstanding to be immediately due and payable, or foreclose on collateral securing the outstanding indebtedness. We cannot assure that we could pay these debt obligations if they became due prior to their stated dates.
The accompanying condensed consolidated financial statements have been prepared assuming the
Company will continue as a going concern, which contemplates continuity of operations, realization of assets and the satisfaction of liabilities in the normal course of business for the 12-month period following the date the financial statements are issued. As such, the accompanying consolidated financial statements do not include any adjustments relating to the recoverability and classification of assets and their carrying amounts, or the amount and classification of liabilities that may result should the Company be unable to continue as a going concern.
3. iSummary
of Significant Accounting Policies
i
Cash, Cash Equivalents, and Restricted Cash
The Company considers all highly liquid investments with original maturities of three months or less at the date of acquisition to be cash equivalents. The Company has deposits in banks that exceed Federal Deposit Insurance Corporation insurance
limits. Management believes that credit risk related to these deposits is minimal. Restricted cash consists of reserve accounts for property insurance, real estate taxes, capital expenditures, and debt service required by certain loan agreements. In addition, restricted cash includes deposits required by certain counterparties as collateral pursuant to letters of credit which must remain so long as the letters of credit are outstanding, which are subject to renewal annually.
In March 2022, the Company completed the refinancing of certain existing mortgage debt with Ally Bank. Ally Bank required a debt service reserve of $ii1.5/ million
as part of this transaction, which is included in the restricted cash balances as of March 31, 2023 and December 31, 2022. See "Note 6–Notes Payable."
i
The following table sets forth our cash and cash equivalents and restricted cash (in thousands):
Deposits
pursuant to outstanding letters of credit
i4,111
i4,111
Total
restricted cash
i12,174
i13,829
Total
cash, cash equivalents, and restricted cash
$
i25,146
$
i30,742
//i
Long-Lived
Assets
Property and equipment are stated at cost and depreciated on a straight-line basis over the estimated useful lives of the assets. At each balance sheet date, the Company reviews the carrying value of its property and equipment to determine if facts and circumstances suggest that they may be impaired or that the depreciation period may need to be changed. The Company considers internal factors such as net operating losses along with external factors relating to each asset, including contract changes, local market developments, and other publicly available information to determine whether impairment indicators exist.
If
an indicator of impairment is identified, recoverability of an asset group is assessed by comparing its carrying amount to the estimated future undiscounted net cash flows expected to be generated by the asset group through operation or disposition, calculated utilizing the lowest level of identifiable cash flows. If this comparison indicates that the carrying amount of an asset group is not recoverable, we estimate fair value of the asset group and record an impairment loss when the carrying amount exceeds fair value. There were iino/
impairments on long-lived assets during the three months ended March 31, 2023 and March 31, 2022.
In evaluating our long-lived assets for impairment, we undergo continuous evaluations of property level performance and real estate trends, and management makes several estimates and assumptions, including, but not limited to, the projected date of disposition, estimated sales price and future cash flows of each property during our estimated holding period. If our analysis or
/
10
assumptions
regarding the projected cash flows expected to result from the use and eventual disposition of our properties change, we incur additional costs and expenses during the holding period, or our expected hold periods change, we may incur future impairment losses.
Upon the acquisition of new communities accounted for as an acquisition of an asset, we recognize the assets acquired and the liabilities assumed as of the acquisition date, measured at their relative fair values once we have determined the fair value of each of these assets and liabilities. The acquisition date is the date on which we obtain control of the real estate property. The assets acquired and liabilities assumed consist of land, inclusive of associated rights, buildings, assumed debt, and identified intangible assets and liabilities. See “Note 4– Property and Equipment, net.”
i
Revenue
Recognition
Resident revenue consists of fees for basic housing and certain support services and fees associated with additional housing and expanded support requirements such as assisted living care, memory care, and ancillary services. Basic housing and certain support services revenue is recorded when services are rendered, and amounts billed are due from residents in the period in which the rental and other services are provided. Residency agreements are generally short term in nature with durations of one year or less and are typically terminable by either party, under certain circumstances, upon providing 30 days’ notice, unless state law provides otherwise, with resident fees billed monthly in advance. Revenue for certain ancillary services is recognized as services are provided, and includes fees for services such as medication management, daily living activities, beautician/barber, laundry, television, guest meals,
pets, and parking which are generally billed monthly in arrears. Other operating revenue consists of “Provider Relief Funds” received from various states due to the financial distress impacts of COVID-19.
The Company's senior housing communities have residency agreements that generally require the resident to pay a community fee and other amounts prior to moving into the community which are initially recorded by the Company as deferred revenue. The Company had contract liabilities for deferred fees paid by our residents prior to the month housing and support services
were to be provided totaling approximately $i3.9 million and $i3.4
million, respectively, which are included as a component of deferred income within current liabilities of the Company’s condensed consolidated balance sheets as of March 31, 2023 and December 31, 2022.
Revenues from the Medicaid program accounted for approximately i9.3% and i9.6%
of the Company’s revenue in the three months ended March 31, 2023 and March 31, 2022, respectively. During the three months ended March 31, 2023 and 2022, i24 and i28,
respectively, of the Company’s communities were providers of services under the Medicaid program. Accordingly, these communities were entitled to reimbursement under the Medicaid program at established rates that were lower than private pay rates. Resident revenues for Medicaid residents were recorded at the reimbursement rates as the rates were set prospectively by the applicable state upon the filing of an annual cost report. None of the Company’s communities were providers of services under the Medicare program during fiscal quarters ended March 31, 2023 and 2022.
Laws and regulations governing the Medicaid program are complex and subject to interpretation.
The Company believes that it is in compliance with all applicable laws and regulations and is not aware of any pending or threatened investigations involving allegations of potential wrongdoing that would have a material effect on its Condensed Consolidated Financial Statements. While no such regulatory inquiries have been made, compliance with such laws and regulations can be subject to future government review and interpretation as well as significant regulatory action including fines, penalties and exclusion from the Medicaid program.
The Company has management agreements whereby it manages certain communities on behalf of third-party owners under contracts that
provide for periodic management fee payments to the Company. The Company has determined that all community management activities are a single performance obligation, which is satisfied over time as the services are rendered. The Company’s estimate of the transaction price for management services also includes the amount of reimbursement due from the owners of the communities for services provided and related costs incurred. Such revenue is included in “managed community reimbursement revenue” on the Company’s condensed consolidated statements of operations. The related costs are included in “managed community reimbursement
expense” on the Company’s condensed consolidated statements of operations. See “Note 8– Revenue.”
/
11
In January and February 2023, the Company received approximately $i2.0 million
in various Provider Relief Funds received from state departments due to financial distress impacts of COVID-19. For the three months ended March 31, 2022, the Company received approximately $i0.7 million in various Provider Relief Funds from state departments due to financial distress impacts of COVID-19.
i
Credit
Risk and Allowance for Doubtful Accounts
The Company’s resident accounts receivable are generally due within i30 days after the date billed. Accounts receivable are reported net of an allowance for doubtful accounts of $i6.2
million and $i5.9 million as of March 31, 2023 and December 31, 2022, respectively, and represent the Company’s estimate of the amount that ultimately will be collected. The adequacy of the Company’s allowance for doubtful accounts is reviewed on an ongoing
basis, using historical payment trends, write-off experience, analyses of receivable portfolios by payor source and aging of receivables, as well as a review of specific accounts, and adjustments are made to the allowance, as necessary. Credit losses on resident receivables have historically been within management’s estimates, and management believes that the allowance for doubtful accounts adequately provides for expected losses.
/i
Concentration
of Credit Risk and Business Risk
Substantially all of our revenues are derived from senior living communities we own and senior living communities that we manage. Senior living operations are particularly sensitive to adverse economic, social and competitive conditions and trends, including the effects of the COVID-19 pandemic, which has adversely affected, and may continue to adversely affect, our business, financial condition, and results of operations.
We have a concentration of owned properties operating in Texas (i16),
Indiana (i12), Ohio (i11) and Wisconsin (i8),
which we estimate represented approximately i25%, i18%, i19%
and i10%, respectively, of our resident revenues for the three months ended March 31, 2023.
/i
Self-Insurance
Liability Accruals
The Company offers full-time employees an option to participate in its health and dental plans. The Company is self-insured up to certain limits and is insured if claims in excess of these limits are incurred. The cost of employee health and dental benefits, net of employee contributions, is shared between the corporate office and the senior housing communities based on the respective number of plan participants. Funds collected are used to pay the actual program costs, including estimated annual claims, third-party administrative fees, network provider fees, communication costs, and other related administrative costs incurred by the plans. Claims are paid as they are submitted to the
Company’s third-party administrator. The Company records a liability for outstanding claims and claims that have been incurred but not yet reported. This liability is based on the historical claim reporting lag and payment trends of health insurance claims. Additionally, the Company may be liable for an Employee Shared Responsibility Payment (“ESRP”) pursuant to the Patient Protection and Affordable Care Act. The ESRP is applicable to employers that (i) had 50 or more full-time equivalent employees, (ii) did not offer minimum essential coverage (“MEC”) to at least 70% of full-time employees and their dependents, or (iii) did offer MEC to at least 70% of full-time employees and their dependents that did not meet the affordable or minimum value criteria and had one or more full-time
employees certified as being allowed the premium tax credit. The Internal Revenue Service ("IRS") determines the amount of the proposed ESRP from information returns completed by employers and from income tax returns completed by such employers' employees. Management believes that the recorded liabilities and reserves established for outstanding losses and expenses are adequate to cover the ultimate cost of losses and expenses incurred as of March 31, 2023. It is possible that actual claims and expenses may differ from established reserves. Any subsequent changes in estimates are recorded in the period in which they are determined.
The Company uses a combination of insurance and self-insurance for workers’ compensation. Determining the
reserve for workers’ compensation losses and costs that the Company has incurred as of the end of a reporting period involves significant judgments based on projected future events, including among other factors, potential settlements for pending claims, known incidents which may result in claims, estimates of incurred but not yet reported claims, changes in insurance premiums and estimated litigation costs. The Company regularly adjusts these estimates to reflect changes in the foregoing factors. However, since this reserve is based on estimates, it is possible the actual expenses incurred may differ from the amounts reserved. Any subsequent changes in estimates are recorded in the period in which they are determined.
i
Income
Taxes
Income taxes are computed using the asset and liability method and current income taxes are recorded based on amounts refundable or payable in the current year. The effective tax rates for the three months ended March 31, 2023 and 2022 differ from the statutory tax rates due to state income taxes, permanent tax differences, and changes in the deferred tax asset valuation allowance.
12
Deferred income taxes are recorded based on the estimated future tax effects of loss carryforwards and temporary differences between financial statement carrying amounts of existing assets and liabilities and their respective tax basis.
Deferred tax assets and liabilities are measured using enacted tax rates that are expected to apply to taxable income in the years in which the Company expects those carryforwards and temporary differences to be recovered or settled. Management regularly evaluates the future realization of deferred tax assets and provides a valuation allowance, if considered necessary, based on such evaluation. As part of the evaluation, management has evaluated taxable income in carryback years, future reversals of taxable temporary differences, feasible tax planning strategies, and future expectations of income. As of December 31, 2022, the Company had a three-year cumulative net operating loss for its U.S. operations and is subject to annual operating loss utilization
limits and accordingly, has provided a full valuation allowance on its U.S. and state net deferred tax assets. The valuation allowance reduces the Company’s net deferred tax assets to the amount that is “more likely than not” (i.e., a greater than 50% likelihood) to be realized. However, in the event that the Company were to ultimately determine that it would be more likely than not that the Company would realize the benefit of deferred tax assets in the future in excess of their net recorded amounts, adjustments to deferred tax assets would increase net income in the period such determination was made. The benefits of the net deferred tax assets might not be realized if actual results differ from expectations.
The Company evaluates uncertain tax positions through consideration of accounting and reporting guidance on criteria, measurement, derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition that is intended to provide better financial statement comparability among different companies. The Company is required to recognize a tax benefit in its financial statements for an uncertain tax position only if management’s assessment is that its position is “more likely than not” (i.e., a greater than 50 percent likelihood) to be upheld on audit based only on the technical merits of the tax position. The Company’s policy
is to recognize interest related to unrecognized tax benefits as interest expense and penalties as income tax expense.
i
Redeemable Preferred Stock
The Company's Series A Preferred Stock is convertible outside of our control and in accordance with ASC 480-10-S99-3A is classified as mezzanine equity. The Series A Preferred Stock was initially recorded at fair
value upon issuance, net of issuance costs and discounts. The holders (“Conversant Investors”) of Series A Preferred Stock are entitled to vote with the holders of common stock on all matters submitted to a vote of stockholders of the Company. As such, the Conversant Investors, in combination with their common stock ownership as of March 31, 2023 and December 31, 2022, have voting rights in excess of ii50/%
of the Company’s total voting stock. It is deemed probable that the Series A Preferred Stock could be redeemed for cash by the Conversant Investors, and as such, the Series A Preferred Stock is required to be remeasured and adjusted to its maximum redemption value at the end of each reporting period. However, to the extent that the maximum redemption value of the Series A Preferred Stock does not exceed the fair value of the shares at the date of issuance, the shares are not adjusted below the fair value at the date of issuance. As of March 31, 2023 and December 31, 2022, the Series A Preferred Stock is carried at the maximum redemption value. The Series A Preferred Stock does not have a maturity date and therefore is considered as perpetual.
/
Dividends
on redeemable preferred stock are recorded to retained earnings or additional paid-in capital if retained earnings is an accumulated deficit. Dividends are cumulative, and any declaration of dividends is at the discretion of the Company’s Board of Directors. If the Board does not declare a dividend in respect of any dividend payment date, the amount of such accrued and unpaid dividend is added to the liquidation preference and compounds quarterly thereafter. During the three months ended March 31, 2023, the Board did not declare a dividend with respect to the Series A Preferred Stock, and accordingly, $i1.2 million
was added to the liquidation preference of the Series A Preferred Stock, effectively increasing the carrying value of the redeemable preferred stock.
i
Derivative Instruments
We use derivative instruments as part of our overall strategy to manage our exposure to market risks associated with the fluctuations in interest rates. We are also required to enter into interest rate derivative instruments in compliance with certain debt agreements. We regularly monitor the financial stability and credit standing of the counterparties to our derivative instruments. We do not enter
into derivative financial instruments for trading or speculative purposes. We record all derivatives at fair value. As of March 31, 2023, our derivative instruments consisted of interest rate caps that were not designated as hedge instruments. Changes in fair value of undesignated hedge instruments are recorded in current period earnings in interest expense. See “Note14–Derivatives and Hedging.”
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i
Net
Income (Loss) Per Common Share
The Company uses the two-class method to compute net income (loss) per common share because the Company has issued securities (Series A Preferred Stock) that entitle the holder to participate in dividends and earnings of the Company. Under this method, net income is reduced by the amount of any dividends earned during the period. The remaining earnings (undistributed earnings) are allocated based on the weighted-average shares outstanding of common stock and Series A Preferred Stock (on an if-converted basis) to the extent that each preferred security may share in earnings as if all of the earnings for the period had been distributed. The
total earnings allocated to common stock is then divided by the number of outstanding shares to which the earnings are allocated to determine the earnings per share. The two-class method is not applicable during periods with a net loss, as the holders of the Series A Preferred Stock have no obligation to fund losses.
Diluted net income (loss) per common share is computed under the two-class method by using the weighted-average number of shares of common stock outstanding, plus, for periods with net income attributable to common stockholders, the potential dilutive effects of stock options, stock-based compensation awards and warrants. In addition, the Company analyzes the potential dilutive effect of the outstanding Series A Preferred Stock under the "if-converted" method when calculating diluted earnings per share, in which it
is assumed that the outstanding Series A Preferred Stock converts into common stock at the beginning of the period or when issued, if later. The Company reports the more dilutive of the approaches (two class or "if-converted") as its diluted net income per share during the period. See “Note 9 - Net Income (Loss) Per Share.”
i
Segment Reporting
The Company
evaluates the performance and allocates resources of its senior living communities based on current operations and market assessments on a property-by-property basis. The Company does not have a concentration of operations geographically or by product or service as its management functions are integrated at the property level. The Company has determined that its operating units meet the criteria in ASC Topic 280, Segment Reporting, to be aggregated into one reporting segment. As such, the Company operates in ione
segment.
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i
Recently Adopted Accounting Pronouncements
Allowance for Doubtful Accounts
In June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-13, Financial Instruments
- Credit Losses: Measurement of Credit Losses on Financial Instruments. Current U.S. generally accepted accounting principles (GAAP) require an “incurred loss” methodology for recognizing credit losses that delays recognition until it is probable a loss has been incurred. ASU 2016-13 replaces the current incurred loss methodology for credit losses and removes the thresholds that companies apply to measure credit losses on financial statements measured at amortized cost, such as loans, receivables, and held-to-maturity debt securities with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to form credit loss estimates. The determination of the allowance for credit losses under the new standard would typically be based on evaluation of a number of factors, including, but not limited to, general economic conditions, payment status, historical collection patterns and loss experience,
financial strength of the borrower, and nature, extent and value of the underlying collateral. For smaller reporting companies, ASU 2016-13 is effective for fiscal years and for interim periods within those fiscal years beginning after December 15, 2022. It requires a cumulative effect adjustment to the balance sheet as of the beginning of the first reporting period in which the guidance is effective. The Company adopted ASU 2016-13 on January 1, 2023. The effect of the adoption had an immaterial impact on our condensed consolidated financial statements.
Reference Rate Reform
In March 2020, the FASB issued ASU 2020-04, Facilitation of the Effects of
Reference Rate Reform on Financial Reporting, which provides optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on contracts, hedging relationships, and other transactions that reference the London InterBank Offered Rate. The new standard was effective upon issuance and elections can be made through December 31, 2024. The adoption of the optional expedient has not had and is not expected to have a material impact on the Company's condensed consolidated financial statements.
14
4.
iProperty and Equipment, net
i
As of March 31, 2023 and December 31, 2022, property
and equipment, net and leasehold improvements, which include assets under finance leases, consist of the following (in thousands):
Assets
under financing leases and leasehold improvements (1)
i3,749
i1,899
Construction
in progress
i697
i666
Total
property and equipment
i973,817
i968,888
Less
accumulated depreciation and amortization
(i362,872)
(i353,134)
Total
property and equipment, net
$
i610,945
$
i615,754
__________
(1)
Leasehold improvements are amortized over the shorter of the useful life of the asset or the remaining lease term. Assets under financing leases and leasehold improvements include $i0.2 million and $i0.2
million of financing lease right-of-use assets as of March 31, 2023 and December 31, 2022, respectively.
The
following schedule summarizes our notes payable as of March 31, 2023 (in thousands):
Principal payments due in:
2023 (4)
$
i80,081
2024
i150,220
2025
i76,031
2026
i136,116
2027
i3,980
Thereafter
i194,165
Total
notes payable, excluding deferred loan costs
$
i640,593
__________
(1) See “Foreclosure Proceedings on Fannie Mae Loans (18 properties)” disclosure below.
(2) See Note 14 for interest rate cap agreements on variable rate mortgage notes payable.
(3) March
31, 2023 includes $i69.8 million aggregate outstanding principal due under the loans currently in default with Protective Life Insurance Company.
(4) See “Protective Life Insurance Company Non-recourse Mortgages” disclosure below.
/
As of March 31, 2023, our fixed rate mortgage notes bear
interest rates ranging from i3.6% to i6.3%. Our variable rate mortgage notes are based on either one-month LIBOR or the Secured Overnight Financing Rate (“SOFR”)
plus an applicable margin. As of March 31, 2023, one-month LIBOR and one-month SOFR werei4.9% and i4.9%, respectively,
and the applicable margins were i2.14% and i3.50%, respectively.
As of March 31,
2023, we had property and equipment with a net carrying value of $i599.8 million that is secured by outstanding notes payable, and two unencumbered properties with a net book value of $i11.2 million
which could provide a
source of liquidity from either sales proceeds or new debt.
2022 Mortgage Refinance
In March 2022, the Company completed the refinancing of certain existing mortgage debt (“Refinance Facility”) for iten of its communities. The Refinance Facility includes an initial term loan of $i80 million. In
addition, $i10 million is available as delayed loans that can be borrowed upon achieving and maintaining certain financial covenant requirements and up to an additional uncommitted $i40 million
may be available to fund future growth initiatives. In addition, the Company provided a limited payment guaranty (“Limited Payment Guaranty”) of i33%, that reduces to i25%
and then to i10%, of the then outstanding balance of the Refinance Facility based upon achieving certain financial covenants and then maintained over the life of the loan. As defined and required in the Limited Payment Guaranty, the Company is required to maintain certain covenants including maintaining a Tangible Net Worth of $i150 million
and Liquid Assets of at least $i13 million, which is inclusive of a $i1.5 million debt service reserve provided by the
Company at the closing of the Refinance Facility. The debt service reserve may be released upon terms described in the “Loan Agreement” and is included in restricted cash.
16
In conjunction with the Refinance Facility, the Company incurred costs of $i2.2 million in March 2022. These costs,
net of amortization of $i0.6 million, are included in deferred loan costs as of March 31, 2023.
On December 13, 2022, the Company amended the Refinance Facility with Ally Bank by adding itwo
additional subsidiaries of the Company as borrowers and mortgaging their communities. The amendment increased the principal by $i8.1 million to $i88.1 million. In
conjunction with the amendment, the Company incurred costs of approximately $i0.2 million in December 2022 that are included in deferred loan costs as of March 31, 2023 and will be deferred and amortized over the remaining life of the term loan.
The Refinance Facility also requires the financial performance of the twelve communities to meet certain financial covenants, including a minimum debt service coverage
ratio and a minimum debt yield (as defined in the Loan Agreement) with a first measurement date as of June 30, 2022 and quarterly measurement dates thereafter. As of March 31, 2023, we were in compliance with the financial covenants. We can provide no assurance that any financial covenants will be met in the future.
The Refinance Facility requires the Company to purchase and maintain an interest rate cap facility during the term of the Refinance Facility. To comply with the lender’s requirement, the Company entered into an interest rate cap agreement for an aggregate notional amount of $i88.1 million
in November 2022.
Notes Payable - Insurance
In December 2022, the Company renewed certain insurance policies and entered into a finance agreement totaling approximately $i1.1 million. As of March 31, 2023, the Company had finance agreements totaling $i0.8 million,
with fixed interest rates ranging from i4.75% to i5.60%, and weighted average rate of i5.59%,
with principal amounts being fully repaid over a iseven-month term.
Foreclosure Proceedings on Fannie Mae Loans (18 properties)
The Coronavirus Aid, Relief and Economic Security (“CARES”) Act, among other things, permitted borrowers with mortgages from Government Sponsored Enterprises who experienced a financial hardship related to the COVID-19 pandemic to obtain forbearance of their loans for up to 90 days. During 2020, the
Company entered into several loan forbearance agreements with the Federal National Mortgage Association (“Fannie Mae”). In July 2020, the Company elected not to pay $i3.8 million on the loans for i18
properties as of that date as it initiated a process intended to transfer the operations and ownership of such properties to Fannie Mae. Therefore, the Company was in default on such loans.
As a result of the events of default and receivership order obtained by Fannie Mae, the Company discontinued recognizing revenues and expenses related to the i18
properties effective August 1, 2020, which was the date of default. In addition, the Company concluded that it was no longer entitled to receive any existing accounts receivable or revenue related to the properties, that all amounts held in escrow by Fannie Mae were forfeited, and that the Company no longer had control of the properties in accordance with GAAP. Accordingly, the Company derecognized the net carrying value of the properties and related assets from the financial statements and recorded a loss from the forbearance. The Company continued to recognize the related debt
and liabilities until the debt was formally released. Once the debts were formally released, the net carrying value of the debts were derecognized and a gain on extinguishment of debt was recognized. As of December 31, 2022, Fannie Mae had completed the transition of legal ownership of i16 of the Company's properties.
On
January 11, 2023, the Company received notice that the foreclosure sales conducted by Fannie Mae had successfully transitioned the remaining itwo properties to new owners. This event relieved the Company of the existing Fannie Mae debt relating to the two properties. Accordingly, the
Company recognized a total of $i36.3 million for the gain on debt extinguishments for the quarter ended March 31, 2023. With the transition of these itwo
remaining properties, the i18 total Fannie Mae properties’ foreclosure was completed.
Protective Life Insurance Company Non-recourse Mortgages
During the first quarter of 2023, the Company elected to not make principal and interest payments due under certain non-recourse mortgage loan agreements with an aggregate outstanding principal amount of $i69.8 million
for ifour communities as of March 31, 2023. Therefore, the Company is in default on these loans, and has presented the total amount due as current notes payable on the condensed consolidated balance sheet. The Company is currently engaged in discussions with Protective Life Insurance Company (“Protective”), the lender of such debt, in order to resolve
this matter.
In November 2021, the Company issued i41,250
shares of Series A Preferred Stock. The Series A Preferred Stock is convertible outside of the Company's control and, in accordance with GAAP, is classified as mezzanine equity, outside the stockholders’ equity (deficit) section, on our condensed consolidated balance sheets.
The Series A Preferred Stock has an i11% annual dividend calculated on the original investment of approximately $i41.3 million
accrued quarterly in arrears and compounded. Dividends are cumulative, and any declaration of dividends is at the discretion of the Company’s Board of Directors. If the Board does not declare a dividend in respect of any dividend payment date, the amount of such accrued and unpaid dividend is added to the liquidation preference and compounds quarterly thereafter. On March 31, 2023, the Board did not declare a dividend with respect to the Series A Preferred Stock, and accordingly, $i1.2 million
was added to the liquidation preference of the Series A Preferred Stock, effectively increasing the carrying value of the Series A Preferred Stock. On March 31, 2022, the Company declared a $i1.1 million cash dividend on the Series A Preferred Stock which was included in accounts payable and accrued expense as of March 31, 2022
and paid in April 2022.
8. iRevenue
i
Revenue
for the three months ended March 31, 2023 and 2022 is comprised of the following components (in thousands):
(1) Other
operating revenue consists of Provider Relief Funds received from state departments due to financial distress impacts of COVID-19. The Company intends to pursue additional funding that may become available in the future, but there is no guarantee of qualifying for, or receiving, any additional relief funds.
Community fees, ancillary services, management fees, and community reimbursement revenue represent revenue from contracts with customers in accordance with GAAP.
9. iNet
Income (Loss) Per Share
Basic net income (loss) per share (“EPS”) is calculated by dividing net earnings by the weighted average number of common shares outstanding during the period. Potentially dilutive securities include warrants, Series A Preferred Stock, shares of restricted stock, restricted stock units and former employee stock options. Diluted EPS reflects the assumed exercise or conversion of all dilutive securities. The Series A Preferred Stock and restricted shares are considered participating securities for the purposes of the Company's EPS calculation.
18
iThe
following table sets forth the computation of basic and diluted net income (loss) per share (in thousands, except for per share amounts):
Basic net (loss) income per common share calculation:
Net
income (loss)
$
i24,145
$
(i16,678)
Less:
Dividends on Series A Preferred Stock
(i1,198)
(i1,133)
Less:
Undistributed earnings allocated to participating securities
(i3,182)
i—
Net
income (loss) attributable to common stockholders
$
i19,765
$
(i17,811)
Weighted
average shares outstanding — basic
i6,855
i6,341
Basic
net income (loss) per share
$
i2.88
$
(i2.81)
Diluted
net income (loss) per common share calculation:
Net income (loss) attributable to common stockholders
$
i19,765
$
(i17,811)
Weighted
average shares outstanding — diluted
i7,168
i6,341
Diluted
net income (loss) per share
$
i2.76
$
(i2.81)
/
i
The
following weighted-average shares of securities were not included in the computation of diluted net income (loss) per common share as their effect would have been antidilutive:
Three Months Ended March 31,
(shares in thousands)
2023
2022
Warrants
i1,031
i1,031
Series
A Preferred Stock (if converted)
i1,104
i1,031
Restricted
stock awards
i190
i218
Stock
options
i10
i10
Total
i2,335
i2,290
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10.
iStock-Based Compensation
During the three months ended March 31, 2023, the Company granted restricted stock awards under the Company’s 2019 Omnibus Stock and Incentive Plan. iGrants
of restricted stock awards were as follows:
The
Company recognized $i0.9 million and $i1.8 million in stock-based compensation expense for the three months
ended March 31, 2023 and 2022, respectively.
11.iCommitments and Contingencies
As of March 31, 2023, we had contractual commitments of $i2.6 million
related to future renovations and technology enhancements to our communities. We expect these amounts to be substantially expended during 2023.
The Company has claims incurred in the normal course of its business. Most of these claims are believed by management to be covered by insurance, subject to deductibles, normal reservations of rights by the insurance companies and possibly subject to certain exclusions in the applicable insurance policies. Whether or not covered by insurance, these claims, in the opinion of management, based on advice of legal counsel, should not have a material impact on the condensed consolidated financial statements of the Company.
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12.
iRelated Party Transactions
As of March 31, 2023, affiliates of Conversant Capital LLC owned approximately i56.5%
of our outstanding shares of common stock (inclusive of common stock issuable upon conversion of outstanding Series A Preferred Stock and outstanding warrants). See “Note 3– Significant Accounting Policies and Recently Issued Accounting Standards” and “Note 7– Redeemable Preferred Stock.”
13. iFair Value Measurements
Assets
and Liabilities Measured at Fair Value on a Recurring Basis
The Company uses interest rate cap arrangements with financial institutions to manage exposure to interest rate changes for loans that utilize floating interest rates. As of March 31, 2023, we had interest rate cap agreements with an aggregate notional value of $i138.4 million that were entered into during
2022. The fair value of these derivative assets as of March 31, 2023 was $i2.1 million and was determined using significant observable inputs (Level 2), including quantitative models that utilize multiple market inputs to value the position. The majority of market inputs are actively quoted and can be validated through external sources, including brokers, market transactions and third-party
pricing services.
Financial Instruments Not Reported at Fair Value
i
For those financial instruments not carried at fair value, the carrying amount and estimated fair values of our financial assets and liabilities were as follows as of March 31, 2023 and December 31, 2022 (in thousands):
We
believe the carrying amount of cash and cash equivalents, restricted cash, accounts receivable, and accounts payable and accrued expenses approximate fair value due to their short-term nature.
The fair value of notes payable, excluding deferred loan costs, is estimated using discounted cash flow analysis, based on current incremental borrowing rates for similar types of borrowing arrangements, which represent Level 2 inputs as defined in ASC 820, Fair Value Measurement.
Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
The Company may adjust the carrying amount of certain non-financial assets to fair value on a non-recurring basis when they are impaired. During
the year ended December 31, 2022, the Company recorded a non-cash impairment charge of $i1.6 million related to the management's commitment to a plan to sell the community shortly after the balance sheet date, and the agreed-upon selling price being below the community's carrying amount. There were ino
impairment losses for the three months ended March 31, 2023.
14. iDerivatives and Hedging
The Company uses derivatives as part of our overall strategy to manage our exposure to market risks associated with the fluctuations
in interest rates. We are also required to enter into interest rate derivative instruments in compliance with certain debt agreements. We do not enter into derivative financial instruments for trading or speculative purposes.
On March 1, 2022, the Company entered into an interest rate cap transaction for an aggregate notional amount of $i50.3 million to reduce exposure to interest rate fluctuations associated
with certain of our variable mortgage notes payable. The interest rate cap agreement has a i24-month term and effectively caps LIBOR at i4.00% from March 1, 2022 through March
1, 2024 with respect to such floating rate indebtedness. In the event LIBOR is less than the capped rate, we will pay interest at the lower LIBOR rate plus the applicable margin. In the event LIBOR is higher than the capped rate, we will only pay interest at the capped rate of i4.00% plus the applicable margin. The interest rate cap is not designated as a cash flow hedge under ASC
20
815-20,
Derivatives - Hedging, and therefore, all changes in the fair value of the instrument are captured as a component of interest expense in our condensed consolidated statements of operations.
On November 30, 2022, in order to comply with the lender’s requirements under the Ally Bank Refinance Facility, the Company entered into a SOFR-based interest rate cap transaction for an aggregate notional amount of $i88.1 million
at a cost of $i2.4 million. The interest rate cap agreement has a i12-month term and effectively caps the interest rate of the SOFR portion of the Ally Bank debt at i2.25%. The
interest rate cap is not designated as a hedge under ASC 815-20, Derivatives - Hedging, and therefore, all changes in the fair value of the instrument are included as a component of interest expense in our condensed consolidated statements of operations.
As of March 31, 2023, the entire balance of our outstanding variable-rate debt obligations was covered by the interest rate transactions entered into during 2022 to better manage our exposure to market risks associated with the fluctuations in interest rates.
i
The
following table presents the fair values of derivative assets and liabilities in the condensed consolidated balance sheets (in thousands):
Loss on derivative not designated as hedge included in interest expense
(i572)
i—
/
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Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help provide an understanding of our business and results of operations. This MD&A should be read in conjunction with our unaudited condensed consolidated financial statements and the related notes thereto included elsewhere in this Quarterly Report on Form 10-Q. This report, including the following MD&A, contains forward-looking statements regarding future events or trends that should be read in conjunction with the risks, uncertainties and other factors described under “Cautionary Note Regarding Forward-Looking Statements” above in this Quarterly Report on Form 10-Q and “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December
31, 2022 filed with the SEC on March 30, 2023, or “2022 Annual Report.” Actual results may differ materially from those projected in such statements as a result of such risks, uncertainties and other factors. Unless otherwise specified or where the context otherwise requires, references in this Report to “our,”“we,”“us,”“Sonida”, the “Company” and “our business” refer to Sonida Senior Living, Inc., together with its consolidated subsidiaries.
Overview
The following discussion and analysis addresses (i) the
Company’s results of operations for the three months ended March 31, 2023 and 2022, and (ii) liquidity and capital resources of the Company.
The Company is one of the leading owner-operators of senior housing communities in the United States. The Company’s operating strategy is to provide value to its senior living residents by providing quality senior living services at reasonable prices, while achieving and sustaining a strong, competitive position within its geographically concentrated regions, as well as continuing to enhance the performance of its operations.
The Company generally provides senior living services to the 75+ population, including independent living, assisted living, and memory care services at reasonable prices. Many of the Company’s communities offer a continuum of care to meet each of their resident’s needs as they change over time. This continuum of care, which integrates independent living, assisted living, and memory care that may be bridged by home care through independent home care agencies, sustains our residents’ autonomy and independence based on their physical and mental abilities.
As of March 31, 2023, the Company operated 72 senior housing communities
in 18 states with an aggregate capacity of approximately 8,000 residents, including 62 owned senior housing communities and 10 communities that we manage on behalf of third parties.
COVID-19 Pandemic
The United States broadly continues to recover from the pandemic caused by COVID-19, which significantly disrupted the nation’s economy, the senior living industry, and the Company’s business. The COVID-19 pandemic caused a decline in the occupancy levels at the Company’s communities, which negatively impacted the
Company’s revenues and operating results, that depend significantly on such occupancy levels. In an effort to protect its residents and employees and slow the spread of COVID-19 and in response to quarantines, shelter-in-place orders and other limitations imposed by federal, state and local governments, the Company had previously restricted or limited access to its communities, including limitations on in-person prospective resident tours and, in certain cases, new resident admissions. As of March 31, 2023, all of the Company's senior living communities were open for new resident move-ins. Although vaccines are now widely available, we cannot predict the duration of the ongoing impact of the pandemic on our business. If the COVID-19 pandemic
worsens, including the transmission of highly contagious variants of the COVID-19 virus, the Company may have to impose or revert to restricted or limited access to its communities.
The COVID-19 pandemic has required the Company to incur significant additional operating costs and expenses in order to implement enhanced infection control protocols and otherwise care for its residents, including increased costs and expenses relating to supplies and personal protective equipment, testing of the Company’s residents and employees, labor and specialized disinfecting and cleaning services, which has increased the costs of caring for the residents and resulted in reduced occupancy
at such communities. During the three months ended March 31, 2023 and 2022, the Company incurred $33 thousand and $0.2 million, respectively, in direct costs related to the COVID-19 pandemic.
During the three months ended March 31, 2023 and 2022, the Company received approximately $2.0 million and $0.7 million, respectively, in various relief funds received from state departments due to financial distress impacts of COVID-19, or (“Provider Relief Funds”). While we intend to pursue additional funding that may become available, there can be no assurances
that we will qualify for, or receive, any additional relief funds in the future.
We cannot, at this time, predict with reasonable certainty the continued impact that the COVID-19 pandemic will ultimately have on our business, results of operations, cash flow and liquidity, and our response efforts may delay or negatively impact our strategic initiatives, including plans for future growth.
22
Going Concern Uncertainty and Related Strategic Cash-Preservation Initiatives
We have taken, and continue to take, actions to improve our liquidity position and to address the uncertainty about our ability to continue as a going concern, but these actions are
subject to a number of assumptions, projections, and analyses. If these assumptions prove to be incorrect, we may be unsuccessful in executing our business plans or achieving the projected results, which could adversely impact our financial results and liquidity. Those plans include various cost-cutting, efficiency and profitability initiatives. There are no assurances such plans will prove to be successful or the cost savings, profitability or other results we achieve through those plans will be consistent with our expectations. As a result, our results of operations, financial position and liquidity could be negatively impacted. In particular, if we are unable to extend or refinance our indebtedness prior to scheduled maturity dates, our liquidity and financial condition could be adversely impacted. Even if we are able to extend or refinance such indebtedness, the terms of the new financing may not be as favorable to us as the terms of the existing financing. If we
become insolvent or fail to continue as a going concern, our common stock may become worthless.
Accounting Standards Codification (“ASC”) 205-40, “Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” requires an evaluation of whether there are conditions or events, considered in the aggregate, that raise substantial doubt about an entity’s ability to continue as a going concern within 12 months after the date the financial statements are issued. Initially, this evaluation does not consider the potential mitigating effect of management’s plans that have not been fully implemented. When substantial doubt exists, management evaluates the mitigating effect of its plans to determine if it is probable that (1) the plans will be effectively implemented within one year after the date the financial statements are issued, and (2) when implemented,
the plans will mitigate the relevant conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern.
In complying with the requirements under ASC 205-40 to complete an evaluation without considering mitigating factors, the Company considered several conditions or events including: (1) the continued impact of the COVID-19 pandemic, the current inflationary environment and the impact of elevated interest rates on the Company’s operations and financial results; (2) $81.2 million of principal payments and $38.5 million of scheduled interest payments due in the next 12 months; (3) recurring operating losses and projected operating
losses for fiscal periods through June 30, 2024; (4) the Company’s working capital deficit; and (5) events of non-compliance with certain of our mortgage agreements, as noted in "Note 6–Notes Payable". The above conditions raise substantial doubt about the Company’s ability to continue as a going concern for the 12-month period following the date the March 31, 2023 financial statements are issued.
As discussed below, the Company
has implemented plans which encompass short-term cash preservation initiatives to provide the Company with adequate liquidity to meet its obligations for at least the 12-month period following the date its March 31, 2023 financial statements are issued, in addition to creating sustained cash flow generation thereafter. The Company’s primary sources of near- and medium-term liquidity are expected to be (1) net cash generated from operations; (2) COVID-19 or related relief grants from various state agencies; and (3) debt modifications, refinancings and extensions to the extent available on acceptable terms.
Strategic and Cash Preservation Initiatives
The
Company has either taken, or intends to take, the following actions, among others, to improve its liquidity position and to address uncertainty about its ability to continue as a going concern:
•Upon its management team transition in September 2022, the Company promptly implemented new strategic and operational plans to accelerate margin recovery, including the following:
◦Design and execution of a comprehensive resident rate review program to align revenues with the significant increase in the operating cost environment.
◦Implementation of a global purchasing
organization function to leverage scaled purchasing to lower unit operating costs.
◦Use of several internally developed and external programs to provide alternative mitigants to a challenging labor environment.
•We have adopted a comprehensive cash optimization strategy aimed at improving working capital management.
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•The Company is engaged in discussions with certain of its lenders in regard to potential modifications
of certain mortgage debt on more favorable terms, which does not preclude a potential ownership transfer on select communities based on various financial metrics.
•Through recently integrated systems and revised process workflows, the Company has implemented additional proactive spending reductions, including reduced discretionary spending and more stringent, return-based capital spending.
•The Company received approximately $2.0 million in various state grants during the quarter ended March 31, 2023, and has outstanding applications for additional
grants not yet received.
•Under the terms of the A&R Investment Agreement, the Company may request additional investments from the Conversant Investors in shares of Series A Preferred Stock (up to an aggregate amount equal to $25.0 million) that can be used for future investment in accretive capital expenditures and acquisitions, subject to certain conditions.
While the Company’s plans are designed to provide it with adequate liquidity to meet its obligations for at least the 12-month period following the date its financial statements are issued, the remediation plan is dependent on conditions and matters
that may be outside of the Company’s control, and no assurances can be given that certain options will be available on terms acceptable to the Company, or at all. Accordingly, management could not conclude that it was probable that the plans will mitigate the relevant conditions or events that raise substantial doubt about the Company’s ability to continue as a going concern. In addition, it is probable that the Company will not be able to comply with some of the financial covenants and other restrictions contained in our debt instruments, which would in turn trigger an event of
default under our loan agreements. An event of default, subject to cure provisions in certain instances, would give the respective lenders the right to accelerate the related debt and to declare all amounts outstanding to be immediately due and payable, or foreclose on collateral securing the outstanding indebtedness. We cannot assure that we could pay these debt obligations if they became due prior to their stated dates.
The accompanying condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates continuity of operations, realization of assets and the satisfaction of liabilities in the normal course of business for the 12-month period following the date the financial statements are issued. As such, the accompanying condensed
consolidated financial statements do not include any adjustments relating to the recoverability and classification of assets and their carrying amounts, or the amount and classification of liabilities that may result should the Company be unable to continue as a going concern.
Significant Financial and Operational Highlights
Operations
The Company derives its revenue primarily by providing senior living and healthcare services to seniors. During the quarter ended March 31, 2023, the
Company generated resident revenue of approximately $56.6 million compared to resident revenue of approximately $50.8 million in the prior quarter ended March 31, 2022 representing an increase of approximately 11.4%. The increase in revenue was primarily due to increased occupancy, increased average rent rates, and the acquisition of two new communities in early 2022.
Weighted average occupancy for the three months ended March 31, 2023 and 2022 for the 62 communities owned by the Company during both periods was 84.0% and 81.8%, respectively, reflecting continued occupancy recovery following the
onset of the COVID-19 pandemic. The average monthly rental rate for these communities for the quarter ended March 31, 2023 was higher by 960 basis points when compared to the quarter ended March 31, 2022.
During the three months ended March 31, 2023, the Company continued to be impacted by the senior living industry's workforce challenges related to limited staff availability, which required the use of overtime, shift bonuses and contract labor to properly support our senior living communities and residents.
2022
Mortgage Refinance
In March 2022, the Company completed the refinancing of certain existing mortgage debt with Ally Bank (“Refinance Facility”) for ten of its communities. The Refinance Facility includes an initial term loan of $80 million. In addition, $10 million is available as delayed loans that can be borrowed upon achieving and maintaining certain financial covenant requirements and up to an additional uncommitted $40 million may be available in the lender's discretion to fund future growth initiatives. On December 13, 2022, the Company entered into an agreement with Ally Bank to amend the Refinance Facility by adding two additional subsidiaries
of the Company (which own the two Indiana properties acquired during the first quarter of
24
2022) as borrowers and mortgaging their properties. The amendment increased the principal by $8.1 million to $88.1 million, with an additional $10 million still available as delayed loans that can be borrowed upon achieving and maintaining certain financial covenant requirements. See “Note 6–Notes Payable” in the Notes to Condensed Consolidated Financial Statements.
Other Significant Transactions
Foreclosure Proceedings on Fannie Mae Loans (18 properties)
The
Coronavirus Aid, Relief and Economic Security (“CARES”) Act, among other things, permitted borrowers with mortgages from Government Sponsored Enterprises who experienced a financial hardship related to the COVID-19 pandemic to obtain forbearance of their loans for up to 90 days. During 2020, the Company entered into several loan forbearance agreements with the Federal National Mortgage Association (“Fannie Mae”). In July 2020, the Company elected not to pay $3.8 million on the loans for 18 properties as of that date as it initiated a process intended to transfer the operations and ownership of such properties to Fannie Mae. Therefore, the
Company was in default on such loans.
As a result of the events of default and receivership order obtained by Fannie Mae, the Company discontinued recognizing revenues and expenses related to the 18 properties effective August 1, 2020, which was the date of default. In addition, the Company concluded that it was no longer entitled to receive any existing accounts receivable or revenue related to the properties, that all amounts held in escrow by Fannie Mae were forfeited, and that the Company no longer had control of the properties in accordance with GAAP. Accordingly, the
Company derecognized the net carrying value of the properties and related assets from the financial statements and recorded a loss from the forbearance. The Company continued to recognize the related debt and liabilities until the debt was formally released. Once the debts were formally released, the net carrying value of the debts were derecognized and a gain on extinguishment of debt was recognized. As of December 31, 2022, Fannie Mae had completed the transition of legal ownership of 16 of the Company's properties.
On January 11, 2023, the Company received notice
that the foreclosure sales conducted by Fannie Mae had successfully transitioned the remaining two properties to new owners. This event relieved the Company of the existing Fannie Mae debt relating to the two properties. Accordingly, the Company recognized a total of $36.3 million for the gain on debt extinguishments for the quarter ended March 31, 2023. With the transition of these two remaining properties, the 18 total Fannie Mae properties’ foreclosure that commenced in 2020 was completed.
Protective Life Insurance Company Non-recourse Mortgages
During the first quarter of 2023, the
Company elected to not make principal and interest payments due under certain non-recourse mortgage loan agreements with an aggregate outstanding principal amount of $69.8 million for four communities as of March 31, 2023. Therefore, the Company is in default on these loans, and has presented the total amount due as current notes payable on the condensed consolidated balance sheet. The Company is currently engaged in discussions with Protective Life Insurance Company (“Protective”), the lender of such debt, in order to resolve this matter.
Application of Critical Accounting Policies and Estimates
The
preparation of financial statements in conformity with U.S. generally accepted accounting principles requires us to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. For a discussion of our critical accounting policies and estimates, please refer to our Annual Report on Form 10-K for the fiscal year ended December 31, 2022. There have been no significant changes to our critical accounting policies since December 31, 2022.
Recent Accounting Guidance Adopted
See “Note 3– Summary of Significant Accounting Policies” in the Notes to Condensed Consolidated Financial Statements for a discussion of new accounting pronouncements and
our assessment of any expected impact of these pronouncements, if known.
Resident revenue for the three months ended March 31, 2023 was $56.6 million as compared to $50.8 million for the three months ended March 31,
2022,an increase of $5.8 million, or 11.4%. The increase in revenue was primarily due to increased occupancy, increased average rent rates, and the acquisition of two new communities in early 2022.
Management fee revenue for the three months ended March 31, 2023 decreased by $0.1 million as compared to the three months ended March 31, 2022, primarily as a result of managing fewer communities in 2023.
Managed community reimbursement revenue for the three months ended March 31, 2023 was $5.0 million as compared to $7.0 million for the three months ended March 31, 2022, representing a decrease
of $2.0 million. The decrease was primarily a result of managing fewer communities in 2023.
Expenses
Operating expenses for the three months ended March 31, 2023 were $43.8 million as compared to $41.9 million for the three months ended March 31, 2022, an increase of $1.9 million, or 4.5%. The increase is primarily due to a $1.3 million increase in labor and employee-related expenses and a $0.6 million increase in utility costs.
General and administrative expenses for the three months ended March 31, 2023 were $7.1 million as compared to $8.3 million for the three months ended March 31, 2022, representing a decrease
of $1.2 million. This decrease is primarily due to a $0.9 million decrease in stock-based compensation expense from prior quarter due to forfeiture credits in connection with executive personnel changes in 2022, and a $0.3 million net decrease in recurring corporate expenses.
Managed community reimbursement expense for the three months ended March 31, 2023 was $5.0 million as compared to $7.0 million for the three months ended March 31, 2022, representing a decrease of $2.0 million. The decrease was primarily a result of managing fewer communities in 2023.
Interest expense for the three months ended March 31, 2023 was $8.9 million as compared to $7.6 million for the three months ended March 31,
2022, representing a increase of $1.3 million primarily due to increased interest rates associated with the Company’s variable rate mortgages.
Gain on extinguishment of debt for the three months ended March 31, 2023was $36.3 million. The gain related to the derecognition of notes payable and liabilities as a result of the transition of legal ownership of two communities to Fannie Mae, the holder of the related non-recourse debt. Loss on extinguishment of debt for the three months ended March 31, 2022 was 0.6 million related to the 2022 debt refinancing.
Liquidity
and Capital Resources
In addition to approximately $13.0 million of unrestricted cash balances on hand as of March 31, 2023, our principal sources of liquidity are expected to be cash flows from operations, COVID-19 or related relief grants from various state agencies, proceeds from debt refinancings or loan modifications, and/or proceeds from the sale of owned assets. In March 2022 the Company completed the refinancing of certain existing mortgage debt, which was amended in December 2022. See "Note 6–Notes Payable" in the Notes to Condensed Consolidated Financial Statements.
The
Company has implemented plans, which include strategic and cash-preservation initiatives, designed to provide the Company with adequate liquidity to meet its obligations for at least the 12-month period following the date its first quarter 2023 financial statements are issued. While the Company’s plans are designed to provide it with adequate liquidity to meet its obligations for at least the 12-month period following the date its financial statements are issued, the remediation plan is dependent on conditions and matters that may be outside of the Company’s control, and no assurance can be given that certain options will be available on terms acceptable to the Company, or at all. If
the Company is unable to successfully execute all of the planned initiatives or if the plan does not fully mitigate the Company’s liquidity challenges, the Company’s operating plans and resulting cash flows along with its cash and cash equivalents and other sources of liquidity may not be sufficient to fund operations for the 12-month period following the date the financial statements are issued. See “Note 2–Going Concern Uncertainty" in the Notes to Condensed Consolidated Financial Statements.
The Company, from time to time, considers and evaluates financial
and capital raising transactions related to its portfolio, including debt refinancings, purchases and sales of assets and other transactions. There can be no assurance that the Company will continue to generate cash flows at or above current levels, or that the Company will be able to obtain the capital necessary to meet the Company’s short and long-term capital requirements.
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Recent changes in the current economic environment, and other future changes, could result in decreases in the fair value of assets, slowing
of transactions, and the tightening of liquidity and credit markets. These impacts could make securing debt or refinancings for the Company or buyers of the Company’s properties more difficult or on terms not acceptable to the Company. The Company’s actual liquidity and capital funding requirements depend on numerous factors, including its operating results, its capital expenditures for community investment, and general economic conditions, as well as other factors described in “Item 1A. Risk Factors” of our 2022 Annual Report.
In summary, the
Company’s cash flows were as follows (in thousands):
Net cash provided by (used in) operating activities
3,249
(690)
Net
cash used in investing activities
(5,086)
(17,924)
Net cash used in financing activities
(3,759)
(13,434)
Decrease in cash and cash equivalents
$
(5,596)
$
(32,048)
Operating activities
Net
cash provided by operating activities for the three months ended March 31, 2023 was $3.2 million as compared to net cash used in operating activities of $0.7 million for the three months ended March 31, 2022, an increase of $3.9 million. The increase is primarily due to improved operations, as well as grants of $2.0 million in the first quarter of 2023 from Provider Relief Funds received from state departments due to financial distress impacts of COVID-19, as compared to grants of $0.7 million in the first quarter of 2022.
Investing activities
Net cash used in investing activities for the three months ended March 31, 2023 was $5.1 million as compared to $17.9 million
for the three months ended March 31, 2022primarily due to the acquisition of two new communities during the quarter ended March 31, 2022 for $12.3 million. In addition, capital expenditures for the three months ended March 31, 2023 include approximately $2.0 million related to rebuild activities from Winter Storm Elliott, of which we anticipate receiving approximately $1.1 million in reimbursements from insurance policies.
Financing activities
Net cash used in financing activities for the three months ended March 31, 2023 was $3.8 million primarily due to repayments of notes payable. The
net cash used in financing activities for the three months ended March 31, 2022 was $13.4 million primarily due to repayments of notes payable in conjunction with the debt refinancing that occurred during the period and $0.7 million of dividends paid to Series A Preferred Stockholders.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
Item 4. Controls and Procedures
Effectiveness of Controls and Procedures
The
Company’s management, with the participation of the Company’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), has evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this Quarterly Report on Form 10-Q. The Company’s disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange
Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. The Company’s disclosure controls and procedures are also designed to ensure that such information is accumulated and communicated to the Company’s management, including the CEO and CFO as appropriate, to allow timely decisions regarding required disclosure.
Based upon the controls evaluation, procedures evaluation and the material weakness described in our Annual Report on Form 10-K, which was filed with the SEC on March 30, 2023, the Company’s CEO and CFO have concluded that, as
of the end of the period covered by this Quarterly Report on Form 10-Q, the Company’s disclosure controls and procedures are ineffective.
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There have not been any changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the Company’s fiscal quarter ended March 31, 2023 that have materially affected, or are reasonably likely to materially affect, the
Company’s internal control over financial reporting.
Remediation Plan
As disclosed in our 2022 Annual Report on Form 10-K for the year ended December 31, 2022, which was filed with the SEC on March 30, 2023, we identified a material weakness in our internal control over financial reporting. Due to challenges in hiring and maintaining necessary accounting staffing levels, this material weakness has not been remediated as of March 31, 2023, as disclosed above.
We have developed and initiated a plan for remediation of the material weakness, including developing and maintaining appropriate management review and process
level controls. We will continue to monitor the effectiveness of our remediation measures in connection with our future assessments of the effectiveness of internal control over financial reporting and disclosure controls and procedures, and we will make any changes to the design of our plan and take such other actions that we deem appropriate given the circumstances. Based on the current remediation plan, we expect to have implemented the remediation process, including developing and maintaining appropriate management review and process level controls, by the end of the fourth quarter of 2023. Control weaknesses are not considered remediated until new internal controls have been operational for a period of time, are tested, and management concludes that these controls are operating effectively.
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Part
II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company has claims incurred in the normal course of its business. Most of these claims are believed by management to be covered by insurance, subject to normal reservations of rights by the insurance companies and possibly subject to certain exclusions in the applicable insurance policies. Whether or not covered by insurance, these claims, in the opinion of management, based on advice of legal counsel, should not have a material effect on the condensed consolidated financial statements of the Company if determined adversely to the
Company.
Item 1A. Risk Factors.
There have been no material changes to the risk factors set forth in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2022.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
(c) Purchases of Equity Securities by the Issuer and Affiliated Purchasers
The following information is provided pursuant to Item 703 of Regulation S-K. The information
set forth in the table below reflects the common stock purchased by the Company for the quarter ended March 31, 2023:
Period
Total
Number
of
Shares
Purchased (1)
Average Price Paid per Share
Total Shares Purchased as Part of Publicly Announced Program
Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program
(1) Does
not include shares withheld to satisfy tax liabilities due upon the vesting of restricted stock, all of which have been reported in Form 4 filings relating to the Company. The average price paid per share for such share withholding is based on the closing price per share on the vesting date of the restricted stock or, if such date is not a trading day, the trading day immediately prior to such vesting date.
On January 22, 2009, the Company’s board of directors approved a share repurchase program that authorized the Company to purchase up to $10.0 million of the
Company’s common stock. On January 14, 2016, the Company announced that its board of directors approved a continuation of the share repurchase program. The repurchase program does not obligate the Company to acquire any particular amount of common stock and the share repurchase authorization has no stated expiration date. All shares that have been acquired by the Company under this program were purchased in open-market transactions. The Company may evaluate whether to acquire additional shares of common stock under this program at its discretion.
Item 3.
Defaults upon Senior Securities
As of March 31, 2023, the Company was in default for non-compliance on its required debt service payments under non-recourse mortgage loan agreements with Protective Life for four communities. As of March 31, 2023, we had $69.8 million outstanding under such loan agreements and an additional $48.7 million outstanding under other loan agreements on six communities with Protective Life, for which we were not in default as of March 31, 2023.
Item 4. Mine Safety Disclosures
Not
applicable.
Item 5. Other Information
Not applicable.
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Item 6. Exhibits
The following documents are filed as a part of this report. Those exhibits previously filed and incorporated herein by reference are identified below. Exhibits not required for this report have been omitted.
The following materials
from the Company’s Quarterly Report on Form 10-Q for the three months ended March 31, 2023 formatted in Inline Extensible Business Reporting Language (iXBRL): (i) the Condensed Consolidated Statements of Operations, (ii) the Condensed Consolidated Balance Sheets, (iii) the Condensed Consolidated Statements of Cash Flows, (iv) the Condensed Consolidated Statements of Shareholders’ Equity (Deficit) and (v) related notes.
104*
Cover page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
