8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 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 8, 2005

Capital Senior Living Corporation

(Exact Name of Registrant as Specified in Its Charter)

Delaware
(State or Other Jurisdiction of Incorporation)

1-13445	75-2678809
(Commission File Number)	(IRS Employer Identification No.)

14160 Dallas Parkway
Suite 300
Dallas Texas	75254
(Address of Principal Executive Offices)	(Zip Code)

(972) 770-5600
(Registrant’s Telephone Number, Including Area Code)

________________________________________________________________
(Former Name or Former Address, if Changed Since Last Report)

     Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

     o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

     o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

     o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

     o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02 Results of Operations and Financial Condition.

     On August 8, 2005, the registrant announced its financial results for the quarter ended June 30, 2005 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 being furnished under this Item 2.02 and Exhibit 99.1 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.

Item 9.01 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 9.01:

               99.1 Press Release dated August 8, 2005

SIGNATURES

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 hereunto duly authorized.

Date: August 8, 2005	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.                                                            Exhibit Name

     The following exhibit to this current report on Form 8-K is not being filed but is being furnished pursuant to Item 9.01:

               99.1 Press Release dated August 8, 2005

EX-99.1

Exhibit 99.1

	Capital
	Senior
	Living
	Corporation

For Immediate Release	Contact:	Ralph A. Beattie
			972/770-5600

CAPITAL SENIOR LIVING CORPORATION
REPORTS SECOND QUARTER 2005 EARNINGS

DALLAS – (BUSINESS WIRE) – August 8, 2005 – Capital Senior Living Corporation (NYSE:CSU), one of the country’s largest operators of senior living communities, today announced operating results for the second quarter of fiscal 2005.

Company highlights for the second quarter include:

• Revenues of $24.4 million versus $23.0 million for the second quarter of last year, an increase of approximately six percent.

• Net loss (excluding treasury rate lock agreements) of $1.1 million, or a $0.04 loss per share, versus a loss of $1.6 million, or a $0.06 loss per share, in the second quarter of 2004. Net loss of $1.1 million, or a $0.04 loss per share, on non-cash mark-to-market adjustments on treasury rate lock agreements.

• Excluding the effect of the treasury rate lock agreements, cash earnings (net income plus depreciation and amortization) in the second quarter of 2005 were $2.0 million, or $0.08 per diluted share, versus $1.4 million, or $0.05 per diluted share, for the second quarter or 2004, an increase of 49 percent.

• Adjusted EBITDA (income from operations plus depreciation and amortization) of $5.8 million, versus $4.5 million in the prior year period, an increase of over 27 percent.

• Average physical occupancy rate on stabilized communities of 90 percent.

• Operating margins (before property taxes, insurance and management fees) of 47 percent in stabilized independent and assisted living communities.

• All community revenue increase of 6 percent versus the second quarter of the prior year.

The Company reported a second quarter 2005 net loss of $2.2 million, or a loss of $0.08 per share, compared to a net loss of $1.6 million, or a loss of $0.06 per share, in the second quarter of 2004. Excluding the effect of the treasury rate lock agreements, the Company’s loss improved from $0.06 per share in the second quarter of last year to $0.04 per share in the current quarter.

“We are pleased to report continued growth in revenues and cash earnings,” commented James A. Stroud, Chairman of the Company. “Occupancies and operating margins both improved significantly from the second quarter of the prior year, enabling the Company to increase income from operations by over one million dollars.”

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Operating and Financial Results

For the second quarter of 2005, the Company reported revenues of $24.4 million, compared to revenues of $23.0 million in the second quarter of 2004, an increase of $1.4 million or approximately 6 percent. Resident and healthcare revenue increased from the second quarter of the prior year by approximately $1.0 million, or 4.4 percent, as a result of a 2.3 percent increase in the average monthly rent and a 1.3 percent increase in occupancy in the consolidated properties. Management services revenue increased by approximately $0.4 million from the second quarter of the prior year, primarily due to the acquisition of CGI Management in the third quarter of 2004, which resulted in the addition of 14 communities under management.

Revenues under management increased approximately 27 percent to $41.1 million in the second quarter of 2005 from $32.3 million in the second quarter of 2004. Revenues under management include revenues generated by the company’s consolidated communities, communities owned in joint ventures and communities owned by third parties that are managed by the Company.

Even with the increase in revenues, operating expenses were equal to the comparable quarter of the prior year, reflecting over three percentage points of margin improvement. These improved operating margins, along with a combined increase of $0.4 million in general and administrative expenses and depreciation and amortization, resulted in income from operations of $2.6 million, compared to $1.6 million in the second quarter of the prior year, an increase of approximately 66 percent.

General and administrative expenses as a percentage of revenues under management decreased in the second quarter of 2005 to 6 percent compared to 7 percent in the second quarter of 2004, primarily due to the addition of 14 communities under management.

Adjusted EBITDA (defined as income from operations plus depreciation and amortization) for the second quarter of 2005 was $5.8 million, compared to $4.5 million in the second quarter of 2004, an increase of $1.3 million or approximately 27 percent.

Interest expense net of interest income was approximately $0.8 million higher in the second quarter of 2005 compared to the second quarter of 2004, primarily due to higher rates on the Company’s variable rate debt. The Company’s weighted average interest rate was 6.5% in the second quarter of 2005.

For the first half of 2005, the Company produced revenues of $48.7 million, compared to revenues of $45.6 million in the first half of 2004, for an increase of $3.1 million or approximately 6.6 percent.

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The Company reported a net loss of $2.9 million, or $0.11 per share, in the first half of 2005 compared to a net loss of $3.6 million, or $0.15 per share, in the first half of the prior year. Excluding the effect of the treasury rate lock agreements, the Company’s loss from operations improved from $0.15 per diluted share in the first half of 2004 to $0.08 per diluted share in the first half of 2005.

Adjusted EBITDA for the first half of 2005 was $11.5 million, an increase of approximately $3.0 million or 34 percent from the prior year.

Excluding the effect of the treasury rate lock agreements, the Company produced cash earnings of $4.2 million, or $0.16 per diluted share, in the first half of 2005 compared to cash earnings of $2.3 million, or $0.09 per diluted share, in the comparable prior year period.

Capital Overview and Financing

As part of the Company’s strategy to convert variable rate debt to long-term fixed rates at attractive terms, the Company announced in July that it has completed the refinancing of four communities known as the Independence Village properties with GMAC Commercial Mortgage (“GMAC”). The new loans on the four properties total $39,150,000, equal to approximately 70% of their appraised value of $56 million.

The interest rate on these loans is fixed for the entire ten-year term at the rate of 5.46%. These new loans replace approximately $34 million of debt previously financed through GMAC at variable interest rates equal to LIBOR plus 240 basis points (approximately 5.83% at the time of the refinancing). Consequently, the refinancing will increase the Company’s available cash by approximately $4.6 million, while reducing the interest rate on the new loan amount by approximately 40 basis points and fixing it for ten years.

In the second quarter of 2005, the Company recorded a pre-tax loss of $1.6 million on treasury rate lock agreements with a previous lender to Triad II, which was acquired by the Company in July of 2003. These rate lock agreements, along with interest rate swaps, were originally required by the lender to hedge the risk that the costs of future issuance of debt may be adversely affected by changes in interest rates. The debt related to these agreements was refinanced in the fourth quarter of 2004, no longer qualifying these agreements as an effective interest rate hedge.

The Company reflects the interest rate lock agreements at fair value on the balance sheet and related gains and losses are reflected on the income statement. The mark-to-market value of these obligations generally moves in the opposite direction of the yield on the 10-year treasury note.

During the second quarter, a reduction of over 50 basis points in the yield on the 10-year treasury note caused an increase of $1.6 million in the settlement amount of this obligation. Since June 30, 2005, the yield on the 10-year treasury has increased and the Company has recovered approximately $1.0 million of the reported loss.

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These non-cash mark-to-market adjustments will continue until the settlement date of January 3, 2006 or until the Company decides to convert the settlement amount of this obligation to a term note. The Company has an option to convert the settlement amount to a note with a five year term at an interest rate of LIBOR plus 250 basis points.

The Company had total mortgage debt of $252.8 million on June 30, 2005 at a blended average borrowing rate of 6.5 percent. Approximately $210.5 million of debt was sensitive to changes in short-term rates prior to the refinancing announced in July. Subsequent to the refinancing, approximately 30% of the Company’s debt is fixed and 70% is variable with partial interest rate caps in place.

As of June 30, 2005, the Company had $15.8 million of cash, cash equivalents and restricted cash, and $146.8 million in shareholders’ equity, equivalent to approximately $5.69 per share. The Company expects to receive net proceeds of approximately $10 million in the third quarter of 2005 due to the GMAC refinancing discussed earlier and the sale/leaseback agreement with Ventas, Inc. (“Ventas”).

Sale/Leaseback with Ventas

As recently announced, the Company’s joint venture with affiliates of Blackstone Real Estate Advisors (“Blackstone”) entered into a Purchase and Sale Agreement with Ventas to sell the six communities owned by the joint venture to Ventas for approximately $85 million. In addition, the Company executed Master Lease Agreements with Ventas to lease these six communities from Ventas.

The Ventas Leases each have an initial term of ten years, with two five year renewal options. The initial lease rate on the Ventas Leases will be 8 percent and will be subject to conditional escalation clauses. The transaction is expected to close in the third quarter of 2005, subject to lender and regulatory approvals and other customary closing conditions.

The Company expects to record a gain on the sale of these six properties, which will be recognized over the initial lease term. Furthermore, the Company anticipates receiving net proceeds from the transaction which represent its equity interest and additional incentive payments from the joint venture. These proceeds are estimated to be approximately $6.5 million, subject to adjustments and prorations, compared to the

Company’s initial investment of approximately $1.6 million. Upon closing the transaction, the Company will begin consolidating the operations of the six communities in its consolidated statement of operations.

“This quarter reflects continuing progress toward higher occupancies and rental rates,” said Lawrence A. Cohen, Chief Executive Officer. “We began this year with an improved capital structure, including reduced debt, and an expanded portfolio of communities under management. The operating and financial improvements we are

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achieving are converging with better industry fundamentals, lower capitalization rates and attractive interest rates to form a solid platform for future growth. These positive factors are contributing to an active acquisitions market, which we believe will accelerate the improvement of the Company’s profitability.”

2Q05 Conference Call Information

The Company will host a conference call with senior management to discuss the Company’s second quarter 2005 financial results. The call will be held on Tuesday, August 9, 2005 at 11:00 am Eastern Time.

The call-in number is 719-457-2633. 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 9, 2005 at 2:00 pm Eastern Time, until August 16, 2005 at 8:00 pm Eastern Time. To access the conference call replay, call 719-457-0820, confirmation code 4207378. 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 54 senior living communities in 20 states with an aggregate capacity of approximately 8,700 residents, including 39 senior living communities which the Company owns or in which the Company has an ownership interest, and 15 communities it manages for third parties. In the communities operated by the company, 84 percent of residents live independently and 16 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.

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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.

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
(In thousands)

	June 30,		December 31,
	2005		2004
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	15,359	$	19,515
Restricted cash		483		—
Accounts receivable, net		2,542		2,073
Accounts receivable from affiliates		284		1,220
Federal and state income taxes receivable		2,496		2,018
Deferred taxes		642		642
Assets held for sale		520		1,008
Property tax and insurance deposits		4,006		2,731
Prepaid expenses and other		4,116		2,766
Total current assets		30,448		31,973
Property and equipment, net		376,053		381,051
Deferred taxes		9,182		7,565
Investments in limited partnerships		3,284		3,202
Assets held for sale		1,514		1,026
Other assets, net		8,507		6,358
Total assets	$	428,988	$	431,175
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	1,976	$	2,162
Accounts payable to affiliates		—		318
Accrued expenses		8,324		7,478
Deferred income		789		680
Current portion of notes payable		10,263		42,242
Customer deposits		1,957		1,936
Total current liabilities		23,309		54,816
Deferred income from affiliates		85		125
Other long-term liabilities		7,770		6,909
Notes payable, net of current portion		250,759		219,526
Minority interest in consolidated partnership		251		252
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 — 25,805 and 25,751 in 2005 and 2004, respectively		258		258
Additional paid-in capital		125,169		124,963
Retained earnings		21,387		24,326
Total shareholders’ equity		146,814		149,547
Total liabilities and shareholders’ equity	$	428,988	$	431,175

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CAPITAL SENIOR LIVING CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands, except earnings per share)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2005			2004			2005			2004
Revenues:
Resident and health care revenue	$	23,486		$	22,493		$	46,860		$	44,605
Unaffiliated management services revenue		403			41			796			81
Affiliated management services revenue		547			483			1,018			957
Total revenues		24,436			23,017			48,674			45,643
Expenses:
Operating expenses (exclusive of depreciation and amortization shown below)		16,207			16,238			32,286			32,717
General and administrative expenses		2,469			2,253			4,839			4,336
Depreciation and amortization		3,147			2,951			6,281			5,908
Total expenses		21,823			21,442			43,406			42,961
Income from operations		2,613			1,575			5,268			2,682
Other income (expense):
Interest income		34			158			57			321
Interest expense		(4,521	)		(3,831	)		(8,751	)		(7,915	)
Loss on treasury rate lock agreement		(1,620	)		—			(1,353	)		—
Other income		124			73			234			140
Loss before income taxes and minority interest in consolidated partnership		(3,370	)		(2,025	)		(4,545	)		(4,772	)
Benefit for income taxes		1,191			422			1,605			1,096
Loss before minority interest in consolidated partnership		(2,179	)		(1,603	)		(2,940	)		(3,676	)
Minority interest in consolidated partnership.		(2	)		7			1			34
Net loss	$	(2,181	)	$	(1,596	)	$	(2,939	)	$	(3,642	)
Per share data:
Basic loss per share	$	(0.08	)	$	(0.06	)	$	(0.11	)	$	(0.15	)
Diluted loss per share	$	(0.08	)	$	(0.06	)	$	(0.11	)	$	(0.15	)
Weighted average shares outstanding — basic		25,776			25,668			25,765			24,683
Weighted average shares outstanding — diluted		25,776			25,668			25,765			24,683

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CAPITAL SENIOR LIVING CORPORATION
RECONCILATION OF NON GAAP ITEMS
(unaudited, in thousands, except per share amounts)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2005			2004			2005			2004
Reconciliation of cash earnings excluding loss on treasury rate locks:
Net loss	$	(2,181	)	$	(1,596	)	$	(2,939	)	$	(3,642	)
Depreciation and amortization		3,147			2,951			6,281			5,908
Loss on treasury rate locks, net of tax		1,053			—			879			—
Adjusted cash earnings	$	2,019		$	1,355		$	4,221		$	2,266
Reconciliation of cash earnings excluding loss on treasury rate locks per diluted share:
Net loss per diluted share	$	(0.08	)	$	(0.06	)	$	(0.11	)	$	(0.15	)
Depreciation and amortization per diluted share		0.12			0.11			0.24			0.24
Loss on treasury rate locks per diluted share		0.04			—			0.03			—
Adjusted cash earnings per diluted share	$	0.08		$	0.05		$	0.16		$	0.09
Reconciliation of net loss excluding loss on treasury rate locks:
Net loss	$	(2,181	)	$	(1,596	)	$	(2,939	)	$	(3,642	)
Loss on treasury rate locks, net of tax		1,053			—			879			—
Adjusted net loss	$	(1,128	)	$	(1,596	)	$	(2,060	)	$	(3,642	)
Reconciliation of net loss excluding the loss on treasury rate locks per diluted share:
Net loss per diluted share	$	(0.08	)	$	(0.06	)	$	(0.11	)	$	(0.15	)
Loss on treasury rate locks per diluted share		0.04			—			0.03			—
Adjusted net loss per diluted share	$	(0.04	)	$	(0.06	)	$	(0.08	)	$	(0.15	)
Adjusted EBITDA reconciliation:
Income from operations	$	2,613		$	1,575		$	5,268		$	2,682
Depreciation and amortization		3,147			2,951			6,281			5,908
Adjusted EBITDA	$	5,760		$	4,526		$	11,549		$	8,590
Reconciliation of shareholders’ equity per outstanding share:
Shareholders’ equity	$	146,814
Common shares outstanding at June 30, 2005		25,805
Shareholders’ equity per outstanding share	$	5.69

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Capital Senior Living Corporation
Supplemental Information

	Communities						Resident Capacity						Units
	Q2 05			Q2 04			Q2 05			Q2 04			Q2 05			Q2 04
Portfolio Data
I. Community Ownership / Management
Consolidated communities		29			31			4,831			4,831			4,324			4,324
Joint Venture communities (equity method)		10			10			1,867			1,867			1,576			1,576
Third party communities managed		15			1			1,970			156			1,688			152
Total		54			42			8,668			6,854			7,588			6,052
Independent living								7,313			5,925			6,324			5,164
Assisted living								1,185			759			1,095			719
Skilled nursing								170			170			169			169
Total								8,668			6,854			7,588			6,052
II. Percentage of Operating Portfolio
Consolidated communities		53.7	%		73.8	%		55.7	%		70.5	%		57.0	%		71.4	%
Joint venture communities (equity method)		18.5	%		23.8	%		21.5	%		27.2	%		20.8	%		26.0	%
Third party communities managed		27.8	%		2.4	%		22.7	%		2.3	%		22.2	%		2.5	%
Total		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%
Independent living								84.4	%		86.4	%		83.3	%		85.3	%
Assisted living								13.7	%		11.1	%		14.4	%		11.9	%
Skilled nursing								2.0	%		2.5	%		2.2	%		2.8	%
Total								100.0	%		100.0	%		100.0	%		100.0	%
Selected Operating Results
I. Consolidated communities
Number of communities		29			31
Resident capacity		4,831			4,831
Unit capacity		4,324			4,324
Financial occupancy (1)		86.3	%		85.2	%
Revenue (in millions)		23.4			22.4
Operating expenses (in millions) (2)		14.3			14.0
Operating margin		39	%		38	%
Average monthly rent		2,098			2,050
II. Waterford / Wellington communities
Number of communities (3)		17			17
Resident capacity		2,426			2,426
Unit capacity		2,132			2,132
Financial occupancy (1)		88.2	%		86.0	%
Revenue (in millions)		10.1			9.4
Operating expenses (in millions) (2)		6.0			6.0
Operating margin		41	%		36	%
Average monthly rent		1,800			1,737
III. Total Portfolio
Number of communities		54			42
Resident capacity		8,668			6,854
Unit capacity		7,588			6,052
Financial occupancy (1)		85.1	%		83.2	%
Revenue (in millions)		41.1			32.3
Operating expenses (in millions) (2)		23.8			19.3
Operating margin		42	%		40	%
Average monthly rent		2,130			2,160
IV. Consolidated Debt Information (in thousands, except for interest rates) Excludes insurance premium financing
Fixed rate debt		42,328			68,483
Variable rate debt, with a floor		—			50,928
Variable rate debt, with a cap		184,108			35,111
Variable rate debt, no cap or floor		26,401			104,610
Total debt		252,837			259,132
Fixed rate debt – weighted average rate		8.1	%		7.8	%
Variable rate debt – weighted average rate		6.2	%		4.6	%
Total debt – weighted average rate		6.5	%		5.4	%

(1)	– Financial occupancy represents actual days occupied divided by total number of available days during the quarter.
(2)	– Excludes management fees, insurance and property taxes.
(3)	– Excludes Canton and Towne Centre expansions which were each consolidated with their main campus in December 2004.

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