Communities

Capital Senior Living Corporation Reports Second Quarter 2016 Results

August 2, 2016

Capital Senior Living Corporation (the “Company”) (CSU), one of the nation’s largest operators of senior living communities, today announced operating and financial results for the second quarter 2016. Company highlights for the second quarter include:

Operating and Financial Summary (all amounts in this operating and financial summary exclude three communities that are undergoing repositioning, lease-up or significant renovation and conversion, unless otherwise noted; also, see Non-GAAP Financial Measures below and reconciliation of Non-GAAP measures to the most directly comparable GAAP measure on the final page of this release)

• Revenue in the second quarter of 2016, including all communities, was $111.0 million, a $9.4 million, or 9.3%, increase from the second quarter of 2015. • Occupancy for the Company’s consolidated communities was 88.4% in the second quarter of 2016, an increase of 40 basis points from the second quarter of 2015 and a decrease of 10 basis points from the first quarter of 2016. Same-community occupancy was 88.6% for the second quarter of 2016, a 50 basis point increase from the second quarter of 2015 and a 10 basis point increase from the first quarter of 2016.
• Average monthly rent for the Company’s consolidated communities in the second quarter of 2016 was $3,473, an increase of $110 per occupied unit, or 3.3%, as compared to the second quarter of 2015. Same-community average monthly rent was $3,426, an increase of $54 per occupied unit, or 1.6%, from the second quarter of 2015.

• Occupancy for the Company’s consolidated communities was 88.4% in the second quarter of 2016, an increase of 40 basis points from the second quarter of 2015 and a decrease of 10 basis points from the first quarter of 2016. Same-community occupancy was 88.6% for the second quarter of 2016, a 50 basis point increase from the second quarter of 2015 and a 10 basis point increase from the first quarter of 2016.
• Average monthly rent for the Company’s consolidated communities in the second quarter of 2016 was $3,473, an increase of $110 per occupied unit, or 3.3%, as compared to the second quarter of 2015. Same-community average monthly rent was $3,426, an increase of $54 per occupied unit, or 1.6%, from the second quarter of 2015.
• Income from operations, including all communities, was $5.8 million, a $2.1 million, or 57.4%, increase from the second quarter of 2015, due to the Company’s acquisitions of senior living communities made during or since the second quarter of 2015 and increases in the Company’s same-community revenues and occupancies. • Adjusted EBITDAR was $39.0 million in the second quarter of 2016, a 9.2% increase from the second quarter of 2015. The Company’s Adjusted EBITDAR margin was 36.5% for the second quarter of 2016. The three communities undergoing repositioning, lease-up or significant renovation and conversion, not included in Adjusted EBITDAR, generated an additional $0.8 million of EBITDAR.

• Adjusted EBITDAR was $39.0 million in the second quarter of 2016, a 9.2% increase from the second quarter of 2015. The Company’s Adjusted EBITDAR margin was 36.5% for the second quarter of 2016. The three communities undergoing repositioning, lease-up or significant renovation and conversion, not included in Adjusted EBITDAR, generated an additional $0.8 million of EBITDAR.
• The Company’s Net Loss for the second quarter of 2016, including all communities, was $4.4 million, or $0.15 per share, due mostly to non-cash amortization of resident leases of $3.5 million associated with communities acquired by the Company in the previous 12 months. Excluding non-recurring or non-economic items, the Company’s adjusted net loss was $0.1 million in the second quarter of 2016. • Adjusted Cash From Facility Operations (“CFFO”) was $12.9 million, or $0.45 per share, in the second quarter of 2016 compared to $11.7 million, or $0.41 per share, in the second quarter of 2015, an increase of 10.0%.

• Adjusted Cash From Facility Operations (“CFFO”) was $12.9 million, or $0.45 per share, in the second quarter of 2016 compared to $11.7 million, or $0.41 per share, in the second quarter of 2015, an increase of 10.0%.
• The Company previously announced the expected acquisition of three communities for $74 million, subject to completion of due diligence and customary closing conditions. One of the communities to be purchased for approximately $18 million is currently expected to close in August 2016, and the other two communities totaling approximately $56 million are expected to close late in the third quarter or early in the fourth quarter. Once completed, this will bring the Company’s total acquisitions in 2016 to approximately $138.4 million.

“The Company once again achieved solid growth in our key performance metrics despite the heavy rain and flooding in Texas and the Midwest that impacted our traffic in May and early June. Our performance continues to demonstrate the advantages of our clear and differentiated strategy to drive superior shareholder value by successfully executing on our multiple avenues of growth,” said Lawrence A. Cohen, Chief Executive Officer of the Company. “We achieved a record number of move-ins in the last week of June and expect momentum in our occupancy to continue to build in the second half of the year, as the third and fourth quarters are seasonally our quarters of greatest occupancy growth.

“Complementing our growth is a robust acquisition pipeline that allows us to increase our ownership of high-quality senior living communities in geographically concentrated regions and generate meaningful increases in our key performance metrics and real estate value. We currently expect to close on the acquisition of three communities during the second half of 2016, and we continue to pursue additional opportunities.

“We believe that we are well positioned to create long-term shareholder value as a larger company with scale, competitive advantages and a substantially all private-pay business model in a highly fragmented industry that benefits from long-term demographics, need-driven demand, limited competitive new supply in our local markets, a strong housing market and a growing economy.”

Recent Investment Activity
• During the second quarter of 2016, the Company completed supplemental loans on seven communities that resulted in $16.9 million in net cash proceeds, which recognizes the significant value that has been created in these communities since the date of their primary loan in July 2014. These loans have an interest rate of 4.98% and mature coterminous with the original loans in July 2024. Also, the Company completed a supplemental loan on a community that resulted in net cash proceeds of $2.6 million. The loan has a 4.25% interest rate and matures coterminous with the original loan in September 2025.
• As noted above, acquisitions of three communities totaling approximately $74 million are expected to close in the third and fourth quarters of 2016, subject to completion of due diligence and customary closing conditions. This will bring the Company’s total acquisitions in 2016 to approximately $138.4 million.
• The Company has a strong pipeline of near- to medium-term targets. With a strong reputation among sellers, the Company sources the majority of its acquisitions off-market and at attractive terms.

Financial Results – Second Quarter

For the second quarter of 2016, the Company reported revenue of $111.0 million, compared to revenue of $101.6 million in the second quarter of 2015, an increase of 9.3%. Excluding the revenue of the community the Company sold in the third quarter of 2015, revenues increased $10.0 million, or 10.4%, in the second quarter of 2016 as compared to the second quarter of 2015, mostly due to the acquisition of 12 communities during or since the second quarter of 2015. Revenue for consolidated communities excluding the three communities undergoing repositioning, lease-up or significant renovation and conversion increased 9.4% in the second quarter of 2016 as compared to the second quarter of 2015. These increases were achieved with fewer units available for lease in the second quarter of 2016 than the second quarter of 2015, exclusive of acquisitions, due to conversion and refurbishment projects currently in progress at certain communities.

Operating expenses for the second quarter of 2016 were $67.2 million, an increase of $6.5 million from the second quarter of 2015, also primarily due to the acquisitions of senior living communities made during or since the second quarter of 2015.

General and administrative expenses for the second quarter of 2016 were $5.0 million compared to $5.7 million in the second quarter of 2015. Excluding transaction and conversion costs of $0.4 million from the second quarter of 2016 and $0.8 million from the second quarter of 2015, general and administrative expenses decreased $0.4 million in the second quarter of 2016 as compared to the second quarter of 2015. As a percentage of revenues under management, general and administrative expenses, excluding transaction and conversion costs, were 4.1% in the second quarter of 2016 as compared to 4.8% in the second quarter of 2015.

Income from operations for the second quarter of 2016 was $5.8 million, an increase of $2.1 million, or 57.4%, from the second quarter of 2015. This increase is primarily attributable to the Company’s acquisitions of senior living communities made during or since the second quarter of 2015 and increases in the Company’s same-community revenues and occupancies.

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