UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 4, 2004
Capital Senior Living Corporation
(Exact name of registrant as specified in its charter)
Delaware 1-13445 75-2678809
- --------------------------- ----------------------- ------------------
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
14160 Dallas Parkway
Suite 300
Dallas, Texas 75254
- ------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (972) 770-5600
(Former name or former address, if changed since last report)
Item 7. Financial Statements and Exhibits.
(a) Not applicable.
(b) Not applicable.
(c) Exhibits.
The following exhibit to this Current Report on Form 8-K is not being
filed but is being furnished pursuant to Item 12 below:
99.1 Press Release dated August 4, 2004
Item 12. Results of Operations and Financial Condition.
On, August 4, 2004, the registrant announced its financial results for the
quarter ended June 30, 2004 by issuing a press release. The full text of the
press release issued in connection with the announcement is attached hereto as
Exhibit No. 99.1. This information is being furnished under Item 12 (Results of
Operations and Financial Condition) of Form 8-K. This information shall not be
deemed "filed" for purposes of Section 18 of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), or incorporated by reference in any
filing under the Securities Act of 1933, as amended, or the Exchange Act, except
as shall be expressly set forth by specific reference in such a filing. The
press release contains and may implicate, forward-looking statements regarding
the registrant and includes cautionary statements identifying important factors
that could cause actual results to differ materially from those anticipated.
In the press release, the registrant's management utilized non-GAAP
financial measures to describe the registrant's adjusted EBITDA, cash earnings
and cash earnings per share. These non-GAAP financial measures are used by
management to evaluate financial performance and resource allocation for its
facilities and for the registrant as a whole. These measures are commonly used
as an analytical indicator within the senior housing industry, and also serve as
a measure of leverage capacity and debt service ability. The registrant has
provided this information in order to enhance investors overall understanding of
the registrant's financial performance and prospects. In addition, because the
registrant has historically provided this type of information to the investment
community, the registrant believes that including this information provides
consistency in its financial reporting.
These non-GAAP financial measures should not be considered as measures of
financial performance under generally accepted accounting principles, and items
excluded from them are significant components in understanding and assessing
financial performance. These measures should not be considered in isolation or
as an alternative to net income, cash flows generated by operating, investing,
or financing activities, earnings per share or other financial statement data
presented in the consolidated financial statements as an indicator of financial
performance or liquidity. Because these measures are not measurements determined
in accordance with generally accepted accounting principles and are thus
susceptible to varying calculations, these measures as presented may not be
comparable to other similarly titled measures of other companies.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Date: August 4, 2004 Capital Senior Living Corporation
By: /s/ Ralph A. Beattie
Name: Ralph A. Beattie
Title: Executive Vice President and
Chief Financial Officer
EXHIBIT INDEX
Exhibit No. Description
- ---------- ------------
99.1 Press Release dated August 4, 2004
Exhibit 99.1
[GRAPHIC OMITTED] Capital
Senior
Living
Corporation
For Immediate Release Contact: Ralph A. Beattie
972/770-5600
CAPITAL SENIOR LIVING CORPORATION
REPORTS SECOND QUARTER 2004 EARNINGS
DALLAS - (BUSINESS WIRE) - August 4, 2004 - Capital Senior Living Corporation
("Capital") (NYSE:CSU), one of the country's largest operators of senior living
communities, today announced operating results for the second quarter of fiscal
2004.
Company highlights for the second quarter include:
o Revenues of $23.0 million vs. $14.3 million for the second quarter last
year
o Net loss of $1.6 million, or a $0.06 loss per share
o Cash earnings (net income plus depreciation and amortization) of $1.4
million, or $0.05 per diluted share
o Adjusted EBITDA (income from operations plus depreciation and amortization)
of $4.5 million
o Triad communities leased to 89 percent versus 79 percent one year ago
o Average occupancy rate on stabilized communities of 88 percent
o Operating margins (before property taxes, insurance and management fees) of
45 percent in stabilized independent and assisted living communities
o All community revenue increase of 7 percent from the prior year
For the second quarter of 2004, the Company reported revenues of $23.0 million,
compared to revenues of $14.3 million in the second quarter of 2003, an increase
of 61 percent. The 2004 revenues include 12 communities in Triads II through V
that were acquired in the third quarter of 2003, as well as seven communities in
Triad I that are consolidated due to the adoption on December 31, 2003 of FASB
Interpretation No. 46 "Consolidation of Variable Interest Entities" ("FIN 46").
The Company reported a second quarter 2004 loss of $1.6 million, or $0.06 per
share, compared to income of $3.1 million or $0.15 per diluted share in the
comparable period of 2003. The results for 2003 include gains of $0.10 per share
on the sales of two assets.
For the first half of 2004, the Company produced revenues of $45.6 million,
compared to revenues of $28.8 million for the first six months of last year. The
Company reported a net loss of $3.6 million, or $0.15 per share, compared to net
income of $4.3 million, or $0.21 per diluted share for the same period of 2003,
including gains of approximately $0.10 per share from asset sales.
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"We are pleased to report that the consolidation of the Triad communities has
increased revenues by over 61 percent from the second quarter of last year,"
commented James A. Stroud, Chairman of the Company. "These 19 communities in the
five Triad partnerships have experienced revenue growth of over 17 percent in
the last twelve months."
OPERATING AND FINANCIAL RESULTS
For the second quarter of 2004, the Company reported revenues of $23.0 million,
compared to revenues of $14.3 million in the second quarter of 2003, an increase
of 61 percent. The 2004 revenues include 12 communities in Triads II through V
that were acquired in the third quarter of 2003, as well as seven communities in
Triad I that are consolidated due to the adoption on December 31, 2003 of FASB
Interpretation No. 46 "Consolidation of Variable Interest Entities."
Adjusted EBITDA (defined as income from operations plus depreciation and
amortization) for the second quarter of 2004 increased 29 percent to $4.5
million, compared to $3.5 million in the prior year period.
Interest expense net of interest income was nearly $2.9 million higher in the
second quarter of 2004 compared to the second quarter of 2003, as the Company
consolidated the debt on 19 Triad communities.
The Company reported a pre-tax loss of $2.0 million in the second quarter of
2004, compared to a pre-tax profit of $4.9 million in the second quarter of last
year. During the second quarter of last year, the Company realized pre-tax gains
of approximately $3.5 million due to the sales of two assets. Of the $2.0
million pre-tax loss in the second quarter of this year, approximately $0.9
million is attributable to the consolidation of Triad I under FIN 46 and $1.1
million is attributable to other operations.
While the Company consolidates Triad I under Generally Accepted Accounting
Principles ("GAAP"), it does not receive a tax benefit from these losses.
Consequently, the Company received a tax benefit of only $0.4 million on the
reported pre-tax loss of $2.0 million. This pre-tax loss is in line with the
expectations of the Company. If the Triad I loss had received a tax benefit
consistent with the other consolidated entities, the loss per share for the
Company would have been reduced from $0.06 to $0.05 for the second quarter of
2004.
The net after-tax loss for the second quarter of 2004 was $1.6 million, or $0.06
per share, compared to net income of $3.1 million, or $0.15 per share, in the
second quarter of 2003. The results for 2004 include the consolidation of 19
Triad communities that were consolidated subsequent to the second quarter of
last year, while the results for 2003 include gains of $0.10 per share on the
sales of two assets.
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CAPITAL/Page 3
Cash earnings (defined as net income from operations plus depreciation and
amortization) were $1.4 million, or $0.05 per diluted share, in the second
quarter of 2004, compared to cash earnings of $4.4 million, or $0.22 per diluted
share, in the second quarter of the prior year. Cash earnings in the second
quarter of 2003 included approximately $2.1 million, or $0.10 per diluted share,
which resulted from the sales of two assets.
For the first half of 2004, the Company produced revenues of $45.6 million,
compared to revenues of $28.8 million for the first six months of last year. The
Company reported a net loss of $3.6 million, or $0.15 per diluted share,
compared to net income of $4.3 million, or $0.21 per diluted share for the same
period of 2003, including gains of approximately $0.10 per share from asset
sales.
Adjusted EBITDA for the first half of 2004 was $8.6 million, an increase of 12
percent compared to the first half of 2003.
The Company's pre-tax loss of $4.8 million is the first half of 2004 includes a
loss attributable to Triad I of $1.7 million and a loss attributable to all
other operations of $3.1 million. The provision for income taxes does not
include a tax benefit from the Triad I loss.
The Company produced cash earnings of $2.3 million, or $0.09 per diluted share,
in the first six months of 2004 compared to cash earnings of $7.0 million, or
$0.35 per diluted share, in the comparable prior year period, including $0.10
per diluted share from the sales of two assets.
The Company had total debt of $260.9 million on June 30, 2004 at a blended
average borrowing rate of 5.4 percent. Approximately $139.7 million of debt is
sensitive to changes in short-term rates, with the remainder either fixed or
floating with interest rate floors above current levels.
This approximate 50/50 mix of fixed and floating interest rates helps the
Company to reduce interest rate volatility while benefiting from the current low
interest rate environment. In addition, the floating rate loans provide
flexibility regarding opportunities for permanent financing as communities reach
stabilization.
As of June 30, 2004, the Company had $24.9 million of cash, cash equivalents and
restricted cash, and $154.0 million in shareholder's equity, equivalent to
approximately $5.98 per share.
"We continue to successfully implement our business plan," commented Lawrence A.
Cohen, Chief Executive Officer. "We have further improved the occupancy levels
in our Triad communities while increasing average rents. The stock offering
which we completed in the first quarter of this year has enabled us to retire
debt and has provided
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CAPITAL/Page 4
the liquidity we need to complement our organic growth with prudent acquisitions
and joint venture investments. The purchase agreement signed to acquire CGI
Management is a significant step in positioning the Company for future growth."
CGI MANAGEMENT ACQUISITION
The Company announced on August 2, 2004 that it has signed a definitive purchase
agreement with The Covenant Group of Texas, Inc. ("TCG") to acquire all of the
outstanding stock of Covenant's wholly owned subsidiary, CGI Management, Inc.
("CGIM"), a Fort Worth, Texas based company which operates 16 senior independent
and assisted living communities, including seven senior living communities owned
by TCG. At the closing of Capital's purchase of CGIM's stock, Capital will
receive the exclusive right and option through July 2009 to purchase the seven
senior living communities owned by TCG. Capital will also receive the right of
first refusal to acquire the seven communities owned by TCG for a period of 15
years.
In acquiring CGIM, Capital will assume management of 16 operating properties,
with a resident capacity of 2,070, including the seven properties owned by TCG
for which Capital will have options to purchase and rights of first refusal.
CGIM employs approximately 500 personnel at the 16 properties.
Capital will pay approximately $2.5 million in cash at closing, subject to
various adjustments set forth in the purchase agreement, to acquire all of the
outstanding stock of CGIM. Capital will also pay three installments of $366,667
on the first, third and fifth anniversaries of the closing subject to reduction
if the management fees earned from the nine third party owned communities with
various terms are terminated and not replaced by substitute agreements during
the period, and certain other adjustments. The management agreements on the TCG
owned communities are for a 15-year term.
The stock purchase is expected to close in the third quarter of 2004, subject to
receipt of required approvals and other closing conditions. Capital will use
cash on hand to acquire CGIM.
The CGIM portfolio includes 16 properties located in four states (Texas,
Oklahoma, Arkansas and Mississippi) with a resident capacity of 2,070.
Approximately 79 percent of the portfolio is independent living and 21 percent
is assisted living, with 95 percent of the revenues from private pay sources.
Capital estimates that the transaction will be accretive on a cash basis and
GAAP basis. The Company anticipates annual management fee revenue of
approximately $1.6 million and annual incremental expenses of approximately $0.6
million.
Capital and TCG will also form a strategic alliance to jointly pursue
development and management opportunities for not for profit owners. TCG's
leadership as a successful senior living developer for tax-exempt owners will be
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CAPITAL/Page 5
complemented by Capital's proven track record as a national operator of senior
living communities. The strategic alliance is expected to provide Capital with a
platform for additional external growth through long-term management contracts.
2Q04 CONFERENCE CALL INFORMATION
The Company will host a conference call with senior management to discuss the
Company's second quarter 2004 financial results. The call will be held on
Thursday, August 5, 2004 at 11:00 am Eastern Time.
The call-in number is 913-981-5509. No confirmation number is required. 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 5, 2004 at 2:00
pm Eastern Time, until August 12, 2004 at 8:00 pm Eastern Time. To access the
conference call replay, call 719-457-0820, confirmation code 514175. The
conference call will also be made available for playback via the Company's
corporate website, www.capitalsenior.com, and will be available until the next
earnings release date.
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 42 senior living communities in 20 states with an
aggregate capacity of approximately 6,900 residents, including 41 senior living
communities which the Company owns or in which the Company has an ownership
interest, and one community it manages for a third party. In the communities
operated by the company, 86 percent of residents live independently and 14
percent of residents require assistance with activities of daily living.
This release contains certain financial information not derived in accordance
with generally accepted accounting principles (GAAP), including adjusted EBITDA,
cash earnings, cash earnings 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.
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
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CAPITAL/Page 6
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.
Contact Ralph A. Beattie, Chief Financial Officer, at 972-770-5600 or Matt
Hayden, Hayden Communications, Inc. at 858-456-4533 for more information.
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CAPITAL SENIOR LIVING CORPORATION
CONSOLIDATED BALANCE SHEETS
June 30, December 31,
2004 2003
----------- ------------
(in thousands)
ASSETS
Current assets:
Cash and cash equivalents................................................ $ 18,719 $ 6,594
Restricted cash.......................................................... 6,183 7,187
Accounts receivable, net................................................. 1,376 1,295
Accounts receivable from affiliates...................................... 289 604
Federal and state income taxes receivable................................ 3,147 994
Deferred taxes........................................................... 356 385
Property tax and insurance deposits...................................... 2,908 1,855
Prepaid expenses and other............................................... 4,439 2,437
----------- -----------
Total current assets............................................. 37,417 21,351
Property and equipment, net................................................ 375,231 380,115
Deferred taxes............................................................. 6,380 6,554
Notes receivable from affiliates........................................... 5,216 4,981
Investments in limited partnerships........................................ 1,834 1,762
Assets held for sale....................................................... 2,391 2,391
Other assets, net.......................................................... 3,944 4,179
----------- -----------
Total assets..................................................... $ 432,413 $ 421,333
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable......................................................... $ 1,544 $ 2,158
Accrued expenses......................................................... 7,566 6,611
Current portion of notes payable......................................... 9,004 23,488
Customer deposits........................................................ 1,952 1,929
----------- -----------
Total current liabilities........................................ 20,066 34,186
Deferred income............................................................ 25 112
Deferred income from affiliates............................................ 116 102
Other long-term liabilities................................................ 6,084 6,736
Notes payable, net of current portion...................................... 251,884 255,549
Minority interest in consolidated partnership.............................. 256 281
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-- 25,731 and 19,847 at
June 30, 2004 and December 31, 2003, respectively.................... 257 198
Additional paid-in capital............................................... 124,883 92,336
Retained earnings........................................................ 28,842 31,833
----------- -----------
Total shareholders' equity....................................... 153,982 124,367
----------- -----------
Total liabilities and shareholders' equity....................... $ 432,413 $ 421,333
=========== ===========
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CAPITAL SENIOR LIVING CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except earnings per share)
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------------- --------------------------------
2004 2003 2004 2003
--------------- --------------- --------------- ---------------
Revenues:
Resident and health care revenue................. $ 22,493 $ 13,309 $ 44,605 $ 26,517
Unaffiliated management services revenue......... 41 -- 81 295
Affiliated management services revenue........... 483 892 957 1,802
Affiliated development fees...................... -- 69 -- 137
----- ----------- ----------- ------------
Total revenues.............................. 23,017 14,270 45,643 28,751
Expenses:
Operating expenses............................... 14,689 8,219 29,215 15,843
General and administrative expenses.............. 3,802 2,551 7,838 5,267
Depreciation and amortization.................... 2,951 1,339 5,908 2,686
----- ----------- ----------- ------------
Total expenses.............................. 21,442 12,109 42,961 23,796
------ ----------- ----------- ------------
Income from operations............................. 1,575 2,161 2,682 4,955
Other income (expense):
Interest income.................................. 158 1,784 321 3,421
Interest expense................................. (3,831) (2,577) (7,915) (5,170)
Other income..................................... 73 3,511 140 3,564
----- ----------- ----------- ------------
(Loss) income before income taxes and minority
interest in consolidated partnership............. (2,025) 4,879 (4,772) 6,770
Benefit (provision) for income taxes............... 422 (1,867) 1,096 (2,612)
----- ----------- ----------- ------------
(Loss) income before minority interest in
consolidated partnership......................... (1,603) 3,012 (3,676) 4,158
Minority interest in consolidated partnership...... 7 55 34 110
----- ----------- ----------- ------------
Net (loss) income.................................. $ (1,596) $ 3,067 $ (3,642) $ 4,268
=========== =========== =========== ============
Per share data:
Basic (loss) earnings per share.................. $ (0.06) $ 0.16 $ (0.15) $ 0.22
=========== ============ =========== ============
Diluted (loss) earnings per share................ $ (0.06) $ 0.15 $ (0.15) $ 0.21
=========== ============ =========== ============
Weighted average shares outstanding--basic....... 25,668 19,747 24,683 19,742
====== =========== =========== ============
Weighted average shares outstanding--diluted..... 25,668 19,897 24,683 19,880
====== =========== =========== ============
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CAPITAL SENIOR LIVING CORPORATION
RECONCILATION OF NON GAAP ITEMS
(in thousands, except per share amounts)
Three Months Ended Six Months Ended
June 30, June 30,
2004 2003 2004 2003
--------------- --------------- --------------- ----------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Cash earnings reconciliation:
Net (loss) income......................... $ (1,596) $ 3,067 $ (3,642) $ 4,268
Depreciation and amortization............. 2,951 1,339 5,908 2,686
----------- ----------- ----------- -----------
Cash earnings......................... $ 1,355 $ 4,406 $ 2,266 $ 6,954
=========== =========== =========== ===========
Cash earnings per diluted share reconciliation:
Net (loss) income per diluted share....... $ (0.06) $ 0.15 $ (0.15) $ 0.21
Depreciation and amortization per diluted share 0.11 0.07 0.24 0.14
------------ ------------ ----------- -----------
Cash earnings per diluted share....... $ 0.05 $ 0.22 $ 0.09 $ 0.35
============ ============ =========== ===========
Adjusted EBITDA reconciliation:
Income from operations.................... $ 1,575 $ 2,161 $ 2,682 $ 4,955
Depreciation and amortization............. 2,951 1,339 5,908 2,686
----------- ----------- ----------- -----------
Adjusted EBITDA....................... $ 4,526 $ 3,500 $ 8,590 $ 7,641
=========== =========== =========== ===========
Reconciliation of gain on asset sales:
Gain on sale of assets $ 3,491 $ 3,491
Provision for income taxes 1,396 1,396
----------- -----------
Net gain on sale of assets............ $ 2,095 $ 2,095
Net gain per diluted share............ $ 0.10 $ 0.10
=========== ===========
Cash earnings per diluted share....... $ 0.10 $ 0.10
=========== ===========
Reconciliation of net loss per share if Triad I
loss had received a tax benefit:
Net loss reported $ 1,596
Income tax benefit reported 422
-----------
Loss before income taxes.................. $ 2,018
Provision for income taxes................ 767
-----------
Net loss.................................. $ 1,251
Adjusted net loss..................... $ (0.05)
============
Reconciliation of shareholders' equity per
outstanding share:
Shareholders' equity...................... $ 153,982
Common shares outstanding at June 30, 2004 25,731
-----------
Shareholders' equity per diluted share $ 5.98
===========
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Capital Senior Living Corporation
Supplemental Information
Communities Resident Capacity
----------------------------- -------------------------
Q2 04 Q2 03 Q2 04 Q2 03
------------ ---------- ----------- ----------
Portfolio Data
I. Property Ownership / Management
Consolidated properties 31 14 4,831 2,621
Joint Venture properties (equity method) 10 28 1,867 4,233
Third party property managed 1 - 156 -
------------ ---------- ----------- ---------
Total 42 42 6,854 6,854
Independent living 5,925 5,725
Assisted living 759 759
Skilled nursing 170 170
Total 6,854 6,854
II. Percentage of Operating Portfolio
Consolidated properties 73.8% 33.3% 70.5% 38.2%
Joint venture properties (Equity Method) 23.8% 66.7% 27.2% 61.8%
Third Party property managed 2.4% 0.0% 2.3% 0.0%
------------ ---------- ----------- ---------
Total 100.0% 100.0% 100.0% 100.0%
Independent living 86.4% 86.4%
Assisted living 11.1% 11.1%
Skilled nursing 2.5% 2.5%
----------- ---------
Total 100.0% 100.0%
Selected Operating Results
I. Consolidated Properties
Number of properties 31 14
Resident capacity 4,831 2,621
Financial Occupancy 85.2% 84.7%
Revenue (in millions) 22.4 13.2
Average monthly rent 2,050 2,128
Operating margin (before taxes, 38% 39%
Insurance and management fees)
II. Triad Properties
Number of properties 19 19
Resident capacity 2,548 2,548
Financial Occupancy 85.5% 75.5%
Revenue (in millions) 10.2 8.7
Average monthly rent 1,791 1,709
Operating margin (before taxes, 35% 28%
Insurance and management fees)
III. Total Portfolio
Number of properties 42 42
Resident capacity 6,854 6,854
Financial Occupancy 83.2% 79.7%
Revenue (in millions) 32.2 30.2
Average monthly rent 2,160 2,062
Operating margin (before taxes, 40% 38%
Insurance and management fees)
IV. General and Administrative Expenses (in thousands)
Corporate 2,074 1,681
Property 1,728 871
Total 3,802 2,552
Note: Q2 2003 Corporate expenses reflect a credit of $250 for a tax study which was
not undertaken.
V. Consolidated Debt Information (in thousands,
except for interest rates)
Excludes insurance premium financing
Fixed rate debt 68,483 51,384
Variable rate debt with a floor 50,928 49,785
Variable rate debt, with a cap 35,111 36,191
Variable rate debt, no cap or floor 104,610 -
---------- --------
Total debt 259,132 137,360
========== =========
Fixed rate debt - weighted average rate 7.8% 8.1%
Variable rate debt - weighted average rate 4.6% 5.5%
Total debt - weighted rate 5.4% 6.4%
#######