Capital Senior Living Corporation (the “Company”) (NYSE:CSU), one of the country’s largest operators of senior living communities, today announced operating results for the fourth quarter and full year 2010. Company highlights for the fourth quarter and full year include:

Fourth Quarter Highlights
  • Adjusted Cash From Facility Operations (“CFFO”) was $5.6 million or $0.21 per share in the fourth quarter of 2010, an increase of 31.3% or $0.05 per share from the fourth quarter of 2009.
  • Revenue of $59.9 million in the fourth quarter of 2010 increased $11.2 million or 23.0% from the fourth quarter of 2009.
  • Average monthly rent improved 8.0% to $2,756 per occupied unit from $2,553 per occupied unit in the fourth quarter of 2009.
  • Consolidated average occupancy was 85.1% in the fourth quarter of 2010, a 40 basis point increase from the third quarter of 2010 and a 90 basis point increase from the fourth quarter of 2009.
  • Adjusted EBITDAR improved over the fourth quarter of 2009 by $6.3 million, or 43.5%, to $20.9 million. EBITDAR margin improved to 34.9% from 29.9% in the fourth quarter of the prior year.

Full Year Highlights
  • Adjusted CFFO was $19.7 million or $0.74 per share in 2010, an increase of 18.3% or $0.11 per share from 2009.
  • Revenue of $211.9 million in 2010 increased $25.7 million or 15.0% from 2009.
  • Adjusted EBITDAR improved over 2009 by $11.3 million, or 19.7%, to $68.6 million. EBITDAR margin improved to 32.4% from 29.8% in 2009.

“By focusing on our core strengths, we produced strong results in the fourth quarter of 2010 and laid the groundwork for continued success,” said Lawrence A. Cohen, Chief Executive Officer of the Company. “We achieved better occupancy, higher average monthly rents and stronger cash flow. We increased our resident capacity while enhancing our geographic concentration and maximizing our competitive strengths within our markets. We increased our levels of care through acquisitions and conversions. And, most importantly, we enhanced shareholder value through growth in revenues, margins and cash flow. We are well-positioned to leverage these positive trends with improving industry fundamentals in 2011 and beyond.”

Significant Transactions

In December, the Company announced that a joint venture in which it holds a 5% partnership interest has entered into an agreement to sell four senior living communities to a REIT. Upon the anticipated closing in the first quarter of 2011, the Company will lease the communities from the REIT. The Company currently manages the communities for the joint venture.

Highlights of the transaction are estimated to include:
  • Sales proceeds, including incentive distributions, total approximately $17.0 million, compared to the Company’s original investment of $1.3 million
  • Increases annual revenue by $26.0 million
  • Adds $12.2 million of EBITDAR
  • Additional CFFO of $0.7 million, or $0.03 per share
  • Incremental earnings of $1.9 million, or $0.07 per share

Quarterly Financial Results

For the fourth quarter of 2010, the Company reported revenue of $59.9 million, compared to revenue of $48.7 million in the fourth quarter of 2009. Resident and healthcare revenue increased from the fourth quarter of the prior year by approximately $13.4 million or 23.0%, largely as a result of converting eight communities previously owned in joint ventures to leased communities and the addition of 12 new leased communities. The number of consolidated communities increased from 50 in the fourth quarter of 2009 to 70 in the fourth quarter of 2010.

Average monthly rent was $2,756 per occupied unit in the fourth quarter of 2010, an increase of $203, or 8.0%, over the fourth quarter of 2009. Financial occupancy of the consolidated portfolio averaged 85.1% in the fourth quarter of 2010, 40 basis points higher than the third quarter of 2010 and 90 basis points higher than the fourth quarter of 2009.

As a percentage of resident and healthcare revenue, operating expenses were 59.7% in the fourth quarter of 2010 compared to 60.9% in the fourth quarter of 2009, an improvement of 120 basis points. Operating expenses for the fourth quarter of 2010 were $33.8 million, an increase of $7.5 million from the fourth quarter of 2009, primarily due to 20 additional communities now being consolidated.

General and administrative expenses as a percentage of revenues under management were 3.9% for the quarter. General and administrative expenses of $2.5 million were approximately $0.5 million lower than the fourth quarter of 2009. 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 has resulted in significant savings in the Company’s health insurance costs.

Adjusted EBITDAR for the fourth quarter of 2010 was approximately $20.9 million, an increase of $6.3 million or 43.5% from the fourth quarter of 2009. Adjusted EBITDAR margin was 34.9% for the period, an improvement of 5.0 percentage points from the fourth quarter of 2009.

Net income was $1.6 million, or $0.06 per share, in the fourth quarter of 2010, versus $0.8 million, or $0.03 per share, in the fourth quarter of 2009. Excluding costs related to and amortization of resident leases acquired in recently-completed lease transactions, net income for the fourth quarter of 2010 was $2.0 million, or $0.08 per share.

Adjusted CFFO was $5.6 million or $0.21 per share in the fourth quarter of 2010. CFFO in the fourth quarter of the prior year included an adjustment which reflected the full-year tax benefit from accelerated depreciation. This benefit has been reflected quarterly in 2010. On a comparable basis, fourth quarter 2010 CFFO of $0.21 per share reflected a $0.05 per share, or 31.3%, improvement from the fourth quarter of 2009.

Annual Financial Results

The Company reported 2010 revenue of $211.9 million compared to revenue of $192.0 million in 2009. Resident and healthcare revenue increased $25.7 million or 15.0% from the prior year.

Operating expenses for 2010 were $119.6 million, or 60.7% of resident and healthcare revenue. Margins improved 50 basis points from the prior year.

General and administrative expenses in 2010 were $11.5 million, approximately 3.0% less than in 2009. General and administrative expense as a percentage of revenue under management was 4.8% for 2010 versus 5.3% in 2009.

Adjusted EBITDAR was $68.6 million in 2010 compared to $57.3 million in 2009. Adjusted EBITDAR margin of 32.4% in 2010 improved 2.6 percentage points from the prior year.

The Company earned adjusted net income of $4.7 million or $0.17 per share in 2010, an increase of approximately 70% from 2009. Adjusted CFFO was $19.7 million or $0.74 per share in 2010, an increase of 18.3% from the $16.6 million or $0.63 per share in 2009.

Operating Activities

At communities under management, same-store revenue in 2010 increased 3.1% versus 2009. Same-community expenses increased 2.4% and net income increased 4.2% from the prior year.

Capital expenditures for the fourth quarter of 2010 were approximately $2.0 million, representing $1.0 million of investment spending and $1.0 million of recurring capital expenditures. For the full year, capital expenditures were approximately $8.4 million, representing $4.7 million of investment spending and $3.7 million of recurring capital expenditures. Annual spending for recurring capital expenditures equaled approximately $500 per unit.

Balance Sheet

The Company ended the year with $37.6 million of cash and cash equivalents, including restricted cash. In 2010, cash increased by $6.4 million while debt was reduced by $7.5 million.

As of December 31, 2010, the Company financed its 25 owned communities with 24 mortgages totaling $174.0 million at fixed interest rates averaging 6.0%. The Company has no mortgage maturities prior to the third quarter of 2015. Net debt to fourth quarter annualized EBITDA was 3.7x.

Q4 2010 Conference Call Information

The Company will host a conference call with senior management to discuss the Company’s fourth quarter and full year 2010 financial results. The call will be held on Thursday, March 3, 2011 at 11:00 a.m. Eastern Time.

The call-in number is 913-312-1453, confirmation code 6647110. 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 March 3, 2011 at 2:00 p.m. Eastern Time, until March 12, 2011 at 2:00 p.m. Eastern Time. To access the conference call replay, call 719-457-0820, confirmation code 6647110. The conference call will also be made available for playback via the Company’s corporate website, www.capitalsenior.com.

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 philosophy emphasizes a continuum of care, which integrates independent living, assisted living and home care services, to provide residents the opportunity to age in place. The Company currently operates 77 senior living communities in 23 states with an aggregate capacity of approximately 11,000 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.

Contact Ralph A. Beattie, Chief Financial Officer, at 972-770-5600 for more information.
   
CAPITAL SENIOR LIVING CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands)
 
December 31, December 31,
2010 2009
 
ASSETS
Current assets:
Cash and cash equivalents $ 31,248 $ 28,972
Restricted cash 6,334 2,167
Accounts receivable, net 3,777 3,340
Accounts receivable from affiliates 911 424
Federal and state income taxes receivable 3,962 1,493
Deferred taxes 1,290 1,208
Assets held for sale 354 354
Property tax and insurance deposits 11,059 8,632
Prepaid expenses and other   4,896     4,010  
Total current assets 63,831 50,600
Property and equipment, net 295,095 300,678
Deferred taxes 3,478 7,781
Investments in joint ventures 2,224 6,536
Other assets, net   18,153     14,908  
Total assets $ 382,781   $ 380,503  
 
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,951 $ 2,037
Accrued expenses 16,125 12,287
Current portion of notes payable 5,645 9,347
Current portion of deferred income 7,242 6,838
Current portion of capital lease obligations 135
Customer deposits   1,299     1,295  
Total current liabilities 32,397 31,804
Deferred income 14,493 16,747
Capital lease obligations, net of current portion 83
Other long-term liabilities 1,959
Notes payable, net of current portion 170,026 173,822
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 27,083 and 26,945 in 2010 and 2009, respectively
274 273 273
Additional paid-in capital 133,014 131,576
Retained earnings 31,469 27,215
Treasury stock, at cost – 350 shares in 2010 and 2009   (934 )   (934 )
Total shareholders' equity   163,823     158,130  
Total liabilities and shareholders' equity $ 382,781   $ 380,503  
 
See accompanying notes to consolidated financial statements.
   
CAPITAL SENIOR LIVING CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
 
Three Months Ended

December 31,
Year Ended

December 31,
2010   2009 2010   2009
Revenues:
Resident and health care revenue $ 56,683 $ 43,244 $ 196,936 $ 171,194
Unaffiliated management services revenue 6 18 60 72
Affiliated management services revenue 419 706 2,044 2,698
Community reimbursement revenue   2,800     4,729     12,889     18,027  
Total revenues 59,908 48,697 211,929 191,991
Expenses:
Operating expenses (exclusive of facility lease expense and depreciation and amortization expense shown below)

33,849

26,339

119,614

104,790
General and administrative expenses 2,534 3,063 11,535 11,883
Facility lease expense 11,036 6,431 34,253 25,872
Stock-based compensation expense 136 299 919 1,201
Provision for bad debts 35 88 174 344
Depreciation and amortization 3,543 3,400 14,030 13,262
Community reimbursement expense   2,800     4,729     12,889     18,027  
Total expenses   53,933     44,349     193,414     175,379  
Income from operations 5,975 4,348 18,515 16,612
Other income (expense):
Interest income 16 11 48 67
Interest expense (2,802 ) (2,948 ) (11,242 ) (11,819 )
Gain on settlement of debt 684
Other income   (338 )   48     (330 )   107  
Income before provision for income taxes 2,851 1,459 7,675 4,967
Provision for income taxes   (1,261 )   (699 )   (3,421 )   (2,208 )
Net income $ 1,590   $ 760   $ 4,254   $ 2,759  
Per share data:
Basic net income per share $ 0.06   $ 0.03   $ 0.16   $ 0.10  
Diluted net income per share $ 0.06   $ 0.03   $ 0.16   $ 0.10  
Weighted average shares outstanding — basic   26,624     26,275     26,587     26,257  
Weighted average shares outstanding — diluted   26,732     26,395     26,687     26,356  
 
CAPITAL SENIOR LIVING CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
 
Year Ended

December 31,
2010   2009
Operating Activities
Net income

$

4,254

$

2,759
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation 14,030 13,251
Amortization 11
Amortization of deferred financing charges 330 335
Amortization of deferred lease costs, net 1,005 371
Deferred income (3,034 ) (2,645 )
Deferred income taxes 4,221 3,125
Equity in the earnings of unconsolidated joint ventures 331 (107 )
Gain on settlement of debt (684 )
Provision for bad debts 174 344
Stock based compensation expense 919 1,201
Changes in operating assets and liabilities:
Accounts receivable (611 ) 125
Accounts receivable from affiliates (487 ) 728
Property tax and insurance deposits (2,584 )
Prepaid expenses and other (931 ) 1,920
Other assets (2,670 ) (794 )
Accounts payable (86 ) 117
Accrued expenses 3,838 (1,374 )
Federal and state income taxes receivable (2,469 ) 566
Customer deposits   4     (298 )
Net cash provided by operating activities 15,550 19,635
Investing Activities
Capital expenditures (8,447 ) (8,049 )
Acquisition of Signature Transaction (2,000 )
Proceeds from sale of assets 1
Distributions from joint ventures   5,165     744  
Net cash used in investing activities (5,282 ) (7,304 )
Financing Activities
Increase in restricted cash (4,167 ) (2,167 )
Proceeds from notes payable 3,591 1,926
Lease incentive from Signature Transaction 2,000
Repayments of notes payable (10,154 ) (8,324 )
Increase in capital lease obligations 240
Cash payments for capital lease obligations (22 )
Cash proceeds from the issuance of common stock 359 223
Excess tax benefits on stock options exercised   161     37  
Net cash used in financing activities   (7,992 )   (9,239 )
Increase in cash and cash equivalents 2,276 3,092
Cash and cash equivalents at beginning of period   28,972     25,880  
Cash and cash equivalents at end of period $ 31,248   $ 28,972  
Supplemental Disclosures
Cash paid during the period for:
Interest $ 10,949   $ 11,464  
Income taxes $ 2,328   $ 530  
           
Capital Senior Living Corporation
Supplemental Information
     
Communities Resident Capacity Units
Q4 10 Q4 09 Q4 10 Q4 09 Q4 10 Q4 09
Portfolio Data
I. Community Ownership / Management
  Consolidated communities
Owned 25 25 4,052 4,058 3,501 3,503
Leased 45 25 5,514 3,892 4,377 3,104
Joint Venture communities (equity method) 7 15 1,434 2,086 1,061 1,654
Third party communities managed   1     148     115  
Total 77 66 11,000 10,184 8,939 8,376
 
Independent living 6,622 6,784 5,515 5,695
Assisted living 3,663 2,685 2,806 2,063
Continuing Care Retirement Communities 715   715   618   618  
11,000 10,184 8,939 8,376
Total
 

II. Percentage of Operating Portfolio
Consolidated communities
Owned 32.5 % 37.9 % 36.8 % 39.8 % 39.2 % 41.8 %
Leased 58.4 % 37.9 % 50.1 % 38.2 % 49.0 % 37.1 %
Joint venture communities (equity method) 9.1 % 22.7 % 13.1 % 20.5 % 11.8 % 19.7 %
Third party communities managed   1.5 %   1.5 %   1.4 %
Total 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %
 
Independent living 60.2 % 66.6 % 61.7 % 68.0 %
Assisted living 33.3 % 26.4 % 31.4 % 24.6 %
Continuing Care Retirement Communities 6.5 % 7.0 % 6.9 % 7.4 %
Total 100.0 % 100.0 % 100.0 % 100.0 %
   
Capital Senior Living Corporation
Supplemental Information
 
Selected Operating Results Q4 10 Q4 09
  I. Owned communities
  Number of communities 25 25
Resident capacity 4,052 4,058
Unit capacity 3,501 3,503
Financial occupancy (1) 84.7 % 85.6 %
Revenue (in millions) 20.6 20.7
Operating expenses (in millions) (2) 11.5 11.3
Operating margin 44 % 45 %
Average monthly rent 2,319 2,311
II. Leased communities
Number of communities 45 25
Resident capacity 5,514 3,892
Unit capacity 4,377 3,104
Financial occupancy (1) 85.4 % 82.5 %
Revenue (in millions) 36.0 22.4
Operating expenses (in millions) (2) 19.2 12.3
Operating margin 47 % 45 %
Average monthly rent 3,088 2,827
III. Consolidated communities
Number of communities 70 50
Resident capacity 9,566 7,950
Unit capacity 7,878 6,607
Financial occupancy (1) 85.1 % 84.2 %
Revenue (in millions) 56.6 43.1
Operating expenses (in millions) (2) 30.7 23.6
Operating margin 46 % 45 %
Average monthly rent 2,756 2,553
IV. Communities under management
Number of communities 77 66
Resident capacity 11,000 10,184
Unit capacity 8,939 8,376
Financial occupancy (1) 83.0 % 81.4 %
Revenue (in millions) 64.9 56.6
Operating expenses (in millions) (2) 35.3 30.6
Operating margin 46 % 46 %
Average monthly rent 2,852 2,734
V. Same Store communities under management
(excluding 3 communities with conversions)
Number of communities 59 59
Resident capacity 8,951 8,955
Unit capacity 7,404 7,404
Financial occupancy (1) 85.3 % 85.7 %
Revenue (in millions) 52.9 52.9
Operating expenses (in millions) (2) 28.6 27.6
Operating margin 46 % 48 %
Average monthly rent 2,751 2,744
VI. General and Administrative expenses as a% of Total Revenues under Management
Fourth Quarter (3) 3.9 % 5.4 %
Fiscal Year (3) 4.8 % 5.3 %
VII. Consolidated Debt Information (in thousands, except for interest rates)
Excludes insurance premium financing
Total fixed rate debt 173,965 182,313
Weighted average interest rate 6.0 % 6.1 %
 
(1) Financial occupancy represents actual days occupied divided by total number of available days during the month of the quarter.
(2) Excludes management fees, insurance and property taxes.
(3) Excludes acquisition costs incurred for the Midwest and Signature transactions.
 
CAPITAL SENIOR LIVING CORPORATION
NON-GAAP RECONCILIATIONS
       
Three Months Ended December 31, Year Ended December 31,
2010 2009 2010 2009
 
Adjusted EBITDAR
Net income from operations $ 5,975 $ 4,348 $ 18,515 $ 16,612
Depreciation and amortization expense 3,543 3,400 14,030 13,262
Stock-based compensation expense 136 299 919 1,201
Facility lease expense 11,036 6,431 34,253 25,872
Provision for bad debts 35 88 174 344
Casualty losses 99 - 260 -
Transaction costs   82     -     451     -  
Adjusted EBITDAR $ 20,906   $ 14,566   $ 68,602   $ 57,291  
 
Adjusted EBITDAR Margin
Adjusted EBITDAR $ 20,906 $ 14,566 $ 68,602 $ 57,291
Total revenues   59,908     48,697     211,929     191,991  
Adjusted EBITDAR margin   34.9 %   29.9 %   32.4 %   29.8 %
 
Adjusted net income and net income per share
Net income $ 1,590 $ 760 $ 4,254 $ 2,759
Casualty losses, net of tax 62 - 164 -
Transaction costs, net of tax 52 - 284 -
Gain on settlement of debt, net of tax - - (431 ) -
Resident lease amortization, net of tax   301     -     389     -  
Adjusted net income $ 2,005   $ 760   $ 4,660   $ 2,759  
       
Adjusted net income per share $ 0.08   $ 0.03   $ 0.17   $ 0.10  
 
Diluted shares outstanding 26,732 26,395 26,687 26,356
 
Adjusted CFFO and Adjusted CFFO per share
Net cash provided by operating activities $ 2,067 $ 3,163 $ 15,550 $ 19,635
Changes in operating assets and liabilities 4,080 1,662 * 5,996 (990 )
Recurring capital expenditures   (664 )   (505 )   (2,331 )   (2,020 )
CFFO $ 5,483 $ 4,320 $ 19,215 $ 16,625
Casualty losses, net of tax 62 - 164 -
Transaction costs, net of tax   52     -     284     -  
Adjusted CFFO $ 5,597   $ 4,320   $ 19,663   $ 16,625  
       
Adjusted CFFO per share $ 0.21   $ 0.16   $ 0.74   $ 0.63  

 
*

Fourth quarter 2009 changes in operating assets and liabilities has been revised to reflect only one quarter of the full year fixed asset book/tax depreciation adjustment.

Copyright Business Wire 2010

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