Capital Senior Living Corporation (CSU)

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Capital Senior Living Corp. (CSU)

Q4 2008 Earnings Call

March 11, 2009; 11:00 am ET


James Stroud - Chairman of the Board

Larry Cohen - Vice Chairman of the Board & Chief Executive Officer

Ralph Beattie - Chief Financial Officer & Executive Vice President


Jerry Doctrow - Stifel Nicolaus

David Cohen - Athena Capital Management

Charles Gillman - Boston Avenue Capital

Todd Cohen - MTC Advisors



Good day everyone, and welcome to the Capital Senior Living fourth quarter 2008 earnings release conference call. Today’s conference is being recorded.

Any forward-looking statements made by management in this conference call are subject to certain risks and uncertainties that could cause results to differ materially including, but not without limitations to the company’s ability to find suitable acquisition properties at favorable terms, financing, licensing, business condition, risks of downturns in economic conditions generally, satisfaction of closing conditions such as those pertaining to licenser, availability of insurance at commercially reasonable rates and changes in accounting principles and interpretations among others, and other risk and factors identified from time to time in the company’s reports filed with the Securities and Exchange Commission.

Now at this time for opening remarks, I would like to turn the conference over to Mr. Larry Cohen. Mr. Cohen, please go ahead sir.

Larry Cohen

Thank you, Matt and I am pleased to welcome everybody to Capital Senior Living’s fourth quarter and full year 2008 earnings release conference call. Our community’s offers Senior’s Quality Housing and well appointed buildings with support of services at affordable rates.

We made progress during the fourth quarter in spite of the economic down turn. Our occupancies held relatively flat as we implemented rent increases and employed sound expense management. We are encouraged by the higher number of move ins and deposits in the first two months of 2009, as compared to the same period in 2008. These results evaluate our focus on providing affordable quality housing and care, promoting Senior’s independent to wellness while enriching there lives daily. I also want to congratulate all of our associates for achieving a 95.2% resident satisfaction rating in our 2008 surveys.

We continue to differentiate our communities as an affordable option delivering exceptional value to seniors in challenging economic times. Our communities enjoy stable, well established reputations in their markets. Our skilled marketing and sales staff are building relationships and implementing innovative marketing plans to increase our outreach and contacts with referral sources.

In the first two months of 2009 we had 23 more move-ins and 70 more deposits than we had during the first two months of 2008. Our disciplined approach to managing expenses and increasing rates is producing positive results.

Average monthly rents in December 2008 increased 5.2% from December 2007 and 1.1% from September 2008, while operating expenses excluding adjustments that will be discussed later by Ralph declined sequentially from the third quarter of 2008. 57 of our communities were stabilized during the fourth quarter, with an 88% average physical occupancy rates.

Operating margins before property taxes, insurance and management fees improved to 48% in stabilized independent and assisted living communities. At communities under management, these include our consolidated communities, communities owned in joint ventures as well as communities owned by third parties and managed by the company, excluding four communities with units being converted to higher levels of care.

Same-store revenue increased 1% versus the fourth quarter of 2007, with a 4.5% increase in average monthly rent. Our expense management in group purchasing program limited growth in same-store expenses excluding adjustments to 1.1% despite increases in utilities indication of core expenses in December 2008. These achievements generate same-store net income growth of 0.9% from the comparable periods in 2007.

The number of communities we consolidated in the fourth quarter increased to 50 from 49 a year earlier. Financial occupancies of the consolidated portfolio averaged 85.5% in the fourth quarter. Excluding the four communities with units being converted to higher levels of care, the average financial occupancy for the quarter for 46 consolidated communities was 87 %.

Average monthly rents were $2,506 a 4.2% increase from fourth quarter 2007 average monthly rates. The average age of our resident is 85 and the decision to move into a senior living community, both independent living with supported services or assisted living is need driven. Residents typically move from their former residences due to health problems, difficulty in maintaining a home, loneliness or the need for supportive services.

Through assisted living, our home healthcare residing in our independent living communities, residents can receive these services at all of our properties and the cost of living at a Capital Senior Living community is typically more affordable than living at home. This is even more compelling today as many seniors are facing increasing challenges and are seeking value.

While we have seen the effects of the economic downturn impact certain markets, our move-ins, deposits, tours and leads generated continued to be stable in most markets as we execute on the fundamentals to focus all communities and utilize state-of-the-art technology to enhance our operations, marketing and services to our residents.

In those communities that have been impacted by the economy, we continued to manage our operating expenses and staffing to occupancy levels and thereby maintain margins. In addition, we are converting unit with many of these properties to higher levels of care providing more services to residents as they age implies. We have, or in a process of converting 207 independent living units in 7 communities to assist the living for dementia care.

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