Capital Senior Living Corporation Reports Second Quarter 2013 Results; CFFO Increases 15% versus Pri

Capital Senior Living Corporation Reports Second Quarter 2013 Results; CFFO Increases 15% versus Prior Year

DALLAS--(BUSINESS WIRE)-- Capital Senior Living Corporation (the "Company") (NYS: CSU) , one of the country's largest operators of senior living communities, today announced operating results for the second quarter of 2013. Company highlights for the second quarter include:

Highlights

  • Adjusted Cash From Facility Operations ("CFFO") increased 15.1% to $9.5 million, or $0.34 per share in the second quarter of 2013, an increase of $0.04 per share from the second quarter of 2012.

  • Adjusted EBITDAR increased 8.5% to $30.1 million in the second quarter of 2013, an increase of $2.4 million from the second quarter of 2012. Excluding two CCRCs being re-positioned, EBITDAR margin was 36.4% in the second quarter of 2013.

  • Revenue increased 13.2% to $87.2 million in the second quarter of 2013, an increase of $10.2 million from the second quarter of 2012.

  • Average monthly rent for the consolidated communities increased 2.5% to $3,043 per occupied unit in the second quarter of 2013, an increase of $75 per occupied unit from the second quarter of 2012.

  • Same-community occupancies increased 50 basis points from the second quarter of 2012. Same-community revenue grew 3.2%, same-community expenses increased 2.0% and same-community operating income increased 4.7% compared to the second quarter of 2012.

  • The Company completed the acquisition of two senior living communities for a combined purchase price of approximately $25.4 million.


"We are very pleased to report continued positive results for the second quarter as we recovered from the effects of the flu season in the first quarter," said Lawrence A. Cohen, Chief Executive Officer of the Company. "Second quarter same-community occupancies increased 50 basis points, revenue increased over 13% and CFFO grew 15% from the second quarter of the prior year. We are also pleased to announce that we are further enhancing our private-pay revenues through a re-positioning of two continuing care retirement communities. After considering a number of alternatives, including a sale of these owned communities, we decided that a reconfiguration of the services we offer will enhance annual CFFO, improve our operating metrics and enable meaningful gains in shareholder value.

"Complementing this organic growth is a robust pipeline that allows us to continue our disciplined and strategic acquisition program that increases our ownership of high-quality senior living communities in geographically concentrated regions and generates meaningful increases in CFFO, earnings and real estate value. We differentiate Capital Senior Living as the value leader in providing quality seniors housing and care at reasonable prices. We are well positioned to make meaningful gains in shareholder value as a substantially all private-pay business in an industry that benefits from need-driven demand, limited new supply, and an improving economy and housing market."

Recent Investment Activity

  • The Company completed the acquisition of two senior living communities in Missouri and Indiana for a combined purchase price of approximately $25.4 million. Highlights of these transactions include:

    • Additional CFFO of $1.0 million, or $0.03 per share.

    • Incremental earnings of $0.5 million, or $0.02 per share.

    • Increases annual revenue by $5.0 million.

    • Average occupancy 92%.

    • Average monthly rents are approximately $2,900.

  • The two communities were financed with an aggregate of approximately $19.1 million of non-recourse mortgage debt consisting of $14.5 million of 12-year debt with an interest rate of 5.30% and bridge financing of approximately $4.6 million with a variable interest rate of approximately 4.00%. The bridge loan is for a community that is converting from independent living to assisted living and once licensure is complete, will be refinanced with permanent financing.

  • The Company is conducting due diligence on approximately $65.0 million of additional transactions consisting of high-quality senior living communities in regions with extensive existing operations. Subject to completion of due diligence and customary closing conditions, the Company has numerous additional acquisitions in the pipeline that are expected to close in the third and fourth quarters of the year.

Financial Results

For the second quarter of 2013, the Company reported revenue of $87.2 million, compared to revenue of $77.0 million in the second quarter of 2012. Resident and healthcare revenue increased from the second quarter of the prior year by approximately $9.7 million, or 12.9%, largely as a result of acquiring 13 communities since the second quarter of 2012. The number of consolidated communities increased from 88 in the second quarter of 2012 to 101 in the second quarter of 2013.

Average monthly rent for the consolidated communities was $3,043 per occupied unit in the second quarter of 2013, an increase of $75, or 2.5%, over the second quarter of 2012. Financial occupancy of the consolidated portfolio averaged 85.9% in the second quarter of 2013, 10 basis points higher than the second quarter of 2012. Excluding the two communities being re-positioned, average monthly rents increased 3.4% and financial occupancy was 86.7%, a 40 basis points improvement from the second quarter of 2012.

As a percentage of resident and healthcare revenue, operating expenses were 59.9% in the second quarter of 2013, compared to 59.4% in the second quarter of 2012. Operating expenses for the second quarter of 2013 were $51.1 million, an increase of $6.2 million from the second quarter of 2012, primarily due to 13 additional communities now being consolidated.

General and administrative expenses as a percentage of revenues under management were 5.2% for the quarter, excluding transaction costs of approximately $0.4 million. Expenses this quarter were once again impacted by an abnormally high level of medical claims. The Company is self-insured for the costs of employee and dependent medical benefits and purchases stop-loss protection on an individual and aggregate basis. This self-insurance program significantly reduces the Company's health insurance costs. Occasionally, expenses are higher than average in a particular quarter as a few claims approach stop-loss insurance thresholds. Health care costs in the second quarter of 2013 exceeded the second quarter of 2012 by approximately $0.5 million.

Adjusted EBITDAR for the second quarter of 2013 was approximately $30.1 million, an increase of $2.4 million, or 8.5% from the second quarter of 2012. Adjusted EBITDAR margin was 34.5% for the period. Excluding the two communities being re-positioned, EBITDAR margin for the second quarter of 2013 was 36.4%.

Adjusted net income for the second quarter of 2013 was $1.1 million, or $0.04 per share, excluding non-recurring or non-economic items reconciled on the final page of this release. Adjusted CFFO was $9.5 million or $0.34 per share in the second quarter of 2013. Adjusted CFFO exceeded the second quarter of 2012 by $1.2 million, or $0.04 per share.

The CFFO in the second quarter of 2013 did not include a benefit from the cost segregation study completed earlier this year. Consequently, there remains approximately $0.18 per share of CFFO from this change in depreciation for tax purposes that will be realized as the Company generates taxable income in future periods.

For the first six months of 2013, the Company reported revenue of $173.4 million, compared to revenue of $149.2 million for the first six months of 2012. Resident and healthcare revenue increased $23.5 million, or 16.0%, from the first half of the prior year.

Adjusted EBITDAR for the first six months of 2013 was $60.5 million, compared to $53.4 million for the first six months of 2012. The Company earned adjusted net income of $2.9 million, or $0.10 per share, in the first six months of 2013. Adjusted CFFO was $19.2 million, or $0.69 per share, in the first six months of 2013, an increase of 28.4% compared to $14.9 million, or $0.55 per share, in the first six months of 2012.

Operating Activities

The Company is well positioned as a substantially all private-pay business and intends to further differentiate itself by enhancing its private-pay revenues. Two continuing care retirement communities are being re-positioned with space being converted to other private-pay use. While these communities are being re-positioned, same-community results for these two communities will be excluded.

At communities under management, excluding the two communities referenced above, same-community revenue in the second quarter of 2013 increased 3.2% versus the second quarter of 2012. Same-community expenses increased 2.0% and net operating income increased 4.7% from the second quarter of the prior year. Same-community occupancies were 50 basis points higher than the second quarter of 2012 and average rents were 2.5% higher.

Capital expenditures for the second quarter of 2013 were approximately $3.0 million, representing $2.0 million of investment spending and $1.0 million of recurring capital expenditures. If annualized, spending for recurring capital expenditures equaled approximately $400 per unit.

Balance Sheet

The Company ended the second quarter of 2013 with $30.5 million of cash and cash equivalents, including restricted cash. As of June 30, 2013, the Company financed its 51 owned communities with mortgages totaling $381.3 million at interest rates averaging 5.23%. All of the Company's debt is at fixed interest rates, except one $4.6 million bridge loan at a variable rate. The Company has no mortgage maturities before the third quarter of 2015.

Q2 2013 Conference Call Information

The Company will host a conference call with senior management to discuss the Company's second quarter 2013 financial results. The call will be held on Tuesday, August 6, 2013 at 11:00 a.m. Eastern Time. The call-in number is 913-312-0395, confirmation code 5787453. A link to a simultaneous webcast of the teleconference will be available at www.capitalsenior.com through Windows Media Player or RealPlayer.

For the convenience of the Company's shareholders and the public, the conference call will be recorded and available for replay starting August 6, 2013 at 2:00 p.m. Eastern Time, until August 15, 2013 at 2:00 p.m. Eastern Time. To access the conference call replay, call 719-457-0820, confirmation code 5787453. The conference call will also be made available for playback via the Company's corporate website, www.capitalsenior.com, beginning August 7, 2013.

About the Company

Capital Senior Living Corporation is one of the nation's largest operators of residential communities for senior adults. The Company's operating strategy is to provide value to residents by providing quality senior living services at reasonable prices. The Company's communities emphasize a continuum of care, which integrates independent living, assisted living and home care services, to provide residents the opportunity to age in place. During the second quarter, the Company operated 104 senior living communities in geographically concentrated regions with an aggregate capacity of approximately 13,900 residents.

Safe Harbor

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

This release contains certain financial information not derived in accordance with generally accepted accounting principles (GAAP), including adjusted EBITDAR, adjusted EBITDAR margin, Adjusted CFFO, Adjusted CFFO per share and other items.The Company believes this information is useful to investors and other interested parties.Such information should not be considered as a substitute for any measures derived in accordance with GAAP, and may not be comparable to other similarly titled measures of other companies.Reconciliation of this information to the most comparable GAAP measures is included as an attachment to this release.

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

Contact Ralph A. Beattie, Chief Financial Officer, at 972-770-5600 for more information.

CAPITAL SENIOR LIVING CORPORATION

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)

June 30,

December 31,

2013

2012

(unaudited)

ASSETS

Current assets:

Cash and cash equivalents

$

20,314

$

18,737

Restricted cash

10,192

10,179

Accounts receivable, net

5,603

5,229

Accounts receivable from affiliates

341

753

Federal and state income taxes receivable

894

3,901

Deferred taxes

1,548

1,443

Property tax and insurance deposits

10,997

11,442

Prepaid expenses and other

5,763

4,758

Total current assets

55,652

56,442

Property and equipment, net

548,325

527,159

Deferred taxes

10,220

9,350

Investments in unconsolidated joint ventures

1,065

1,074

Other assets, net

38,226

42,917

Total assets

$

653,488

$

636,942

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

Accounts payable

$

1,828

$

6,978

Accounts payable to affiliates

81

2

Accrued expenses

24,177

24,445

Current portion of notes payable

12,714

20,230

Current portion of deferred income

8,421

8,193

Current portion of capital lease and financing obligations

829

766

Customer deposits

1,536

1,540

Total current liabilities

49,586

62,154

Deferred income

18,824

19,990

Capital lease and financing obligations, net of current portion

41,733

42,146

Other long-term liabilities

1,626

1,692

Notes payable, net of current portion

373,667

342,366

Commitments and contingencies

Shareholders' equity:

Preferred stock, $.01 par value:

Authorized shares - 15,000; no shares issued or outstanding

Common stock, $.01 par value:

Authorized shares - 65,000; issued and outstanding

shares - 28,786 and 28,218 in 2013 and 2012, respectively

291

286

Additional paid-in capital

141,466

137,867

Retained earnings

27,229

31,375

Treasury stock, at cost - 350 shares

(934

)

(934

)

Total shareholders' equity

168,052

168,594

Total liabilities and shareholders' equity

$

653,488

$

636,942

CAPITAL SENIOR LIVING CORPORATION

CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS

(unaudited, in thousands, except per share data)

Three Months Ended

June 30,

Six Months Ended

June 30,

2013

2012

2013

2012

Revenues:

Resident and health care revenue

$

85,301

$

75,586

$

170,076

$

146,584

Affiliated management services revenue

196

162

381

316

Community reimbursement revenue

1,722

1,278

2,987

2,346

Total revenues

87,219

77,026

173,444

149,246

Expenses:

Operating expenses (exclusive of facility lease expense and depreciation and amortization expense shown below)

51,130

44,909

101,250

87,395

General and administrative expenses

5,081

3,858

10,003

7,635

Facility lease expense

14,269

13,865

28,539

27,360

Stock-based compensation expense

1,293

596

2,289

1,241

Depreciation and amortization

10,761

9,050

22,650

15,756

Community reimbursement expense

1,722

1,278

2,987

2,346

Total expenses

84,256

73,556

167,718

141,733

Income from operations

2,963

3,470

5,726

7,513

Other income (expense):

Interest income

17

41

121

67

Interest expense

(5,694

)

(4,308

)

(11,378

)

(7,852

)

Gain (Loss) on disposition of assets, net

(2

)

(7

)

(1

)

(5

)

Equity in earnings (losses) of unconsolidated joint ventures, net

30

(78

)

33

(215

)

Other income

6

18

Loss before benefit (provision) for income taxes

(2,680

)

(882

)

(5,481

)

(492

)

Benefit (Provision) for income taxes

610

198

1,335

(49

)

Net loss

$

(2,070

)

$

(684

)

$

(4,146

)

$

(541

)

Per share data:

Basic net loss per share

$

(0.07

)

$

(0.02

)

$

(0.15

)

$

(0.02

)

Diluted net loss per share

$

(0.07

)

$

(0.02

)

$

(0.15

)

$

(0.02

)

Weighted average shares outstanding — basic

27,809

27,347

27,697

27,305

Weighted average shares outstanding — diluted

27,809

27,347

27,697

27,305

Comprehensive loss

$

(2,070

)

$

(684

)

$

(4,146

)

$

(541

)

CAPITAL SENIOR LIVING CORPORATION