Capital Senior Living Corporation Reports Fourth Quarter and Full Year 2009 Results

Capital Senior Living Corporation (NYSE:CSU), one of the country’s largest operators of senior living communities, today announced operating results for the fourth quarter and full year 2009. Company highlights for the fourth quarter and full year include:

Financial Highlights – Fourth Quarter

• Revenues were $48.7 million in the fourth quarter of 2009 compared to $48.0 million in the fourth quarter of 2008.
• Adjusted EBITDAR was $14.6 million in the current quarter compared to $14.1 million in the prior year period.
• Adjusted EBITDAR margin was 29.9 percent compared to 29.4 percent in the fourth quarter of the prior year.
• Net income was $0.8 million or $0.03 per diluted share in the fourth quarter of 2009, equal to the adjusted net income reported in the fourth quarter of 2008.
• Adjusted cash flow from operations ("CFFO”) was $5.7 million or $0.22 per share in the fourth quarter of 2009 compared to adjusted CFFO of $3.9 million or $0.15 per share in the fourth quarter of 2008.

Financial Highlights – Full Year

• Revenues were $192.0 million in 2009 compared to $193.3 million in the prior year.
• Adjusted EBITDAR was $57.3 million compared to $58.2 million in 2008.
• Adjusted EBITDAR margin was 29.8 percent in 2009 versus 30.1 percent in 2008.
• Adjusted net income was $2.8 million or $0.10 per diluted share in 2009 compared to adjusted net income of $4.7 million or $0.18 per diluted share in 2008.
• Adjusted CFFO was $16.6 million or $0.63 per share in 2009 compared to adjusted CFFO of $15.9 million or $0.60 per share in the prior year.

Operational Highlights – Fourth Quarter

• Average physical occupancy rate for 58 stabilized communities was 87 percent.
• Operating margins (before property taxes, insurance and management fees) were 49 percent in stabilized independent and assisted living communities.
• At communities under management, excluding three communities undergoing conversions to higher levels of care, same-store revenue increased 1.7 percent versus the fourth quarter of 2008 as a result of a 2.8 percent increase in average monthly rent. Same-store expenses decreased 2.1 percent and net income increased 7.7 percent from the comparable period of the prior year.

"We continue to report positive results despite a challenging operating environment,” said Lawrence A. Cohen, Chief Executive Officer of the Company. "Sequential occupancies in our consolidated communities increased 30 basis points and all communities under management increased 70 basis points from the third quarter. Average monthly rents have continued to grow while both operating expenses and corporate overhead have declined year-over-year. Our focus on expense control and productive use of our resources has resulted in CFFO of $0.63 per share in 2009. We are well-positioned to leverage our competitive strengths and expand care to our residents to generate attractive returns, maximize free cash flow and enhance shareholder value.”

OPERATING AND FINANCIAL RESULTS

Fourth Quarter Results

For the fourth quarter of 2009, the Company reported revenue of $48.7 million, compared to revenue of $48.0 million in the fourth quarter of 2008. Resident and healthcare revenue equaled the fourth quarter of the prior year as slightly lower occupancies were offset by higher average rents. The number of consolidated communities was 50 in both periods. Financial occupancy of the consolidated portfolio averaged 84.2 percent in the fourth quarter of 2009 with an average monthly rent of $2,553 per occupied unit. Excluding three communities with units being converted to higher levels of care, financial occupancy of the consolidated portfolio averaged 85.6 percent.

Revenue under management was $56.6 million in the fourth quarter of 2009 compared to $55.7 million in the fourth quarter of 2008. Revenue under management includes revenue generated by the Company’s consolidated communities, communities owned through joint ventures and communities owned by third parties that are managed by the Company. There were 66 communities under management in the fourth quarter of 2009 compared to 64 communities under management in the fourth quarter of 2008. Two joint venture developments opened in the second quarter of this year.

Operating expenses for the fourth quarter of 2009 decreased $1.1 million from the fourth quarter of 2008. As a percentage of resident and healthcare revenue, operating expenses were 60.9 percent in the fourth quarter of 2009 compared to 63.5 percent in the fourth quarter of 2008.

General and administrative expenses of $3.1 million were approximately $0.9 million lower than the fourth quarter of 2008. Approximately $0.6 million of the variance was the result of separation pay incurred in the fourth quarter of the prior year as a result of discontinuing development activities. As a percentage of revenue under management, general and administrative expenses were 5.4 percent in the fourth quarter of 2009.

Facility lease expenses were $6.4 million in the fourth quarter of 2009, approximately $0.1 million higher than the fourth quarter of 2008, primarily reflecting increases in contingent rent on 25 leased communities.

Depreciation and amortization expense increased $0.2 million from the fourth quarter of the prior year, as a result of capital improvements at certain of the Company’s owned and leased facilities.

Adjusted EBITDAR for the fourth quarter of 2009 was approximately $14.6 million, compared to $14.1 million in the fourth quarter of 2008. Adjusted EBITDAR margin was 29.9 percent for the period, an improvement of 50 basis points from the fourth quarter of the prior year.

Interest expense was $2.9 million in the fourth quarter of 2009, compared to $3.0 million in the fourth quarter of 2008, reflecting lower debt outstanding due to principal amortization.

The Company reported pre-tax profit of approximately $1.5 million in the fourth quarter of 2009 compared to a pre-tax loss of approximately $0.4 million in the fourth quarter of 2008. Fourth quarter 2008 results include several infrequent non-operating items such as separation pay, casualty losses, write-off of preacquisition costs, property tax adjustments and other items identified on the last page of this release and reconciled to the most comparable GAAP measure. On an adjusted basis, the Company’s pre-tax profit of $1.5 million in the fourth quarter of 2009 compares to a pre-tax profit of $1.2 million in the fourth quarter of 2008.

The Company’s tax provision in the fourth quarter of 2009 was nearly 48 percent, as state taxes comprise an increasing share of the tax liability. The Company is impacted by the Texas Margin Tax, which effectively imposes a tax on modified gross revenues for communities operated in Texas. Approximately one-fourth of the Company’s consolidated revenues are from the state of Texas. In addition, the state of Michigan recently enacted a similar measure based on revenues from that state. Net income was $0.8 million or $0.03 per diluted share in the fourth quarter of 2009, equal to the adjusted net income reported in the fourth quarter of 2008.

Adjusted CFFO for the fourth quarter of 2009 was $5.7 million or $0.22 per share compared to $3.9 million or $0.15 per share in the fourth quarter of 2008. Net cash provided by operating activities increased $1.3 million from the fourth quarter of the prior year, while changes in operating assets and liabilities contributed an additional $0.5 million of cash flow.

Full Year Results

For the 2009 fiscal year, the Company reported revenues of $192.0 million, compared to revenues of $193.3 million in 2008. The difference is primarily attributable to a reduction of $2.2 million in management services revenue as the Company no longer earned development and marketing fees from three communities developed in joint ventures in 2008.

Operating expenses of $104.8 million were $2.5 million below the prior year. Operating expenses as a percentage of resident and healthcare revenues were 61.2 percent in 2009 compared to 62.4 percent in 2008, an improvement of 120 basis points.

General and administrative expenses of $11.9 million were also less than the prior year, with most of the $1.8 million reduction due to lower corporate salary expense.

Adjusted EBITDAR of $57.3 million in 2009 was approximately 1.6 percent below the prior year figure, largely reflecting the absence of development fee income. EBITDAR margin in 2009 was 29.8 percent compared to 30.1 percent in 2008.

Adjusted net income was $2.8 million or $0.10 per diluted share in 2009 compared to adjusted net income of $4.7 million or $0.18 per share in 2008. Margin improvement and lower corporate expenses in 2009 were not enough to compensate for the loss of development fee income realized in 2008.

Adjusted CFFO was $16.6 million or $0.63 per share in 2009 compared to $15.9 million or $0.60 per share in 2008. Cash and cash equivalents, including restricted cash, increased $5.3 million in 2009, purchases of treasury stock equaled $0.9 million and debt repayments were $6.4 million.

CAPITAL OVERVIEW AND FINANCING

The Company ended the year with $29.0 million of cash and cash equivalents and $2.2 million of restricted cash. As of December 31, 2009, the Company financed its 25 owned communities with mortgage debt totaling $182.3 million at fixed interest rates averaging 6.1 percent. With the exception of one mortgage of $4.6 million, which matured in September of 2009, the next closest maturity is July of 2015. While the nonrecourse mortgage that matured in September 2009 was not paid off at maturity, the Company is in negotiations with the lender. Possible outcomes include a reduced pay-off of the note as well as other potential remedies.

Capital expenditures for the year were approximately $8.0 million, representing $4.0 million of investment spending and $4.0 million of recurring Capex. Spending for recurring Capex in 2009 equaled approximately $600 per unit.

Q409 CONFERENCE CALL INFORMATION

The Company will host a conference call with senior management to discuss the Company’s fourth quarter and full year 2009 financial results. The call will be held on Thursday, March 11, 2010 at 11:00 a.m. Eastern Time.

The call-in number is 913-312-1483, confirmation code 2696463. 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 11, 2010 at 2:00 p.m. Eastern Time, until March 19, 2010 at 8:00 p.m. Eastern Time. To access the conference call replay, call 719-457-0820, confirmation code 2696463. 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 66 senior living communities in 23 states with an aggregate capacity of approximately 10,000 residents.

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 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.