SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
(Mark One)
[X] Quarterly Report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended March 31, 1996
[ ] Transition report under Section 13 or 15(d) of the Exchange
Act for the transition period From
to
Commission file number 0-14752.
CAPITAL SENIOR LIVING COMMUNITIES, L.P.
(Exact name of Small Business Issuer as Specified in Its Charter)
DELAWARE 35-1665759
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
14160 Dallas Parkway, Suite 300, Dallas, Texas 75240
(Address of Principal Executive Offices)
(214) 770-5600
(Issuer's Telephone Number, Including Area Code)
Check whether the issuer: (1) filed all reports required to
be filed by Section 13 or 15(d) of the Exchange Act during the
past 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
1<PAGE>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
CAPITAL SENIOR LIVING COMMUNITIES, LP
CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1996 AND DECEMBER 31, 1995
<CAPTION>
March 31, 1996 December 31,
(Unaudited) 1995
-------------- ------------
ASSET
<S> <C> <C>
PROPERTY AND EQUIPMENT, Net $17,077,013 $ 17,352,655
OTHER ASSETS:
Cash and cash equivalents 10,080,511 9,743,330
Cash, restricted 203,788 203,788
Accounts receivable,
net of allowance for
doubtful accounts of
$157,535 and $141,452,
respectively 362,487 409,486
Prepaid expenses and other 106,028 128,728
Deferred charges, less
accumulated amortization
of $180,350 and $141,760,
respectively 310,427 328,665
Investment in limited
partnerships (Note 4) 1,522,069 896,405
----------- -----------
Total assets $ 29,662,323 $ 29,063,057
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES:
Accrued expenses and other
liabilities $ 1,395,728 $ 1,354,639
Notes payable 2,022,828 2,035,148
Customer deposits 287,794 279,982
----------- -----------
Total liabilities 3,706,350 3,669,769
----------- -----------
2<PAGE>
PARTNERS' CAPITAL:
General partner 47,096 41,469
Limited partner 1 1
Beneficial unit certificates,
1,264,000 issued and
outstanding 25,908,876 25,351,818
----------- -----------
Total partners' capital 25,955,973 25,393,288
----------- -----------
Total liabilities and
partners' capital $ 29,662,323 $ 29,063,057
=========== ===========
</TABLE>
3<PAGE>
<TABLE>
CAPITAL SENIOR LIVING COMMUNITIES, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(UNAUDITED)
<CAPTION>
Three Months ended March 31,
1996 1995
---------- ----------
<S> <C> <C>
RENTAL AND OTHER INCOME
Multi-family $ 323,750 $ 282,990
Independent 1,796,430 1,767,202
Assisted Living 406,748 426,959
Nursing 1,210,624 1,091,783
Other 216,489 219,774
----------- -----------
3,954,041 3,788,708
INTEREST INCOME 105,798 65,608
INCOME ON INVESTMENT 25,523 0
----------- -----------
Total income 4,085,362 3,854,316
----------- -----------
EXPENSES:
Salaries, wages and benefits 1,455,783 1,443,477
Operating and other
administrative expenses 1,659,433 1,542,875
Depreciation and amortization 407,461 440,561
----------- -----------
Total expenses 3,522,677 3,426,913
----------- -----------
NET INCOME $ 562,685 $ 427,403
=========== ===========
NET INCOME ALLOCATION:
General partner $5,627 $ 4,274
Beneficial unit
certificate holders 557,058 423,129
----------- -----------
Total 562,685 427,403
=========== ===========
4<PAGE>
NET INCOME PER BENEFICIAL UNIT
CERTIFICATE, 1,264,000 issued
and outstanding $ .44 $ .33
</TABLE> =========== ===========
5<PAGE>
<TABLE>
CAPITAL SENIOR LIVING COMMUNITIES, L.P.
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
FOR THE THREE MONTHS ENDED MARCH 31, 1996
(UNAUDITED)
<CAPTION>
<S> <C> <C> <C> <C>
Beneficial
Unit Limited General
Certificates Partner Partner Total
BALANCE,
December 31, 1995 $ 25,351,818 $ 1 $ 41,469 $ 25,393,288
Net Income 557,058 - 5,627 562,685
---------- ----- ------- -----------
BALANCE, March 31,
1996 $25,908,876 $ 1 $ 47,096 $ 25,955,973
========== ===== ======= ===========
</TABLE>
6<PAGE>
<TABLE>
CAPITAL SENIOR LIVING COMMUNITIES, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(UNAUDITED)
<CAPTION>
For the Three Months
Ended March 31,
1996 1995
-------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 562,685 $ 427,403
Adjustments to reconcile net
income to net cash provided
by (used in) operating activities:
Depreciation and amortization 407,461 440,561
Changes in assets and liabilities,
net of effects of acquisitions:
Accounts receivable 46,999 (17,062)
Prepaid expenses and other 22,700 32,570
Accrued expenses and other
liabilities 41,089 50,572
Customer Deposits 7,812 6,411
NET CASH PROVIDED BY
OPERATING ACTIVITIES 1,088,746 940,455
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (93,229) (26,361)
Investments in limited
partnerships (625,664) 0
--------- --------
NET CASH USED IN
INVESTING ACTIVITIES (718,893) (26,361)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on notes payable (12,320) (10,695)
Deferred charges (20,352) 0
NET CASH USED IN
FINANCING ACTIVITIES (32,672) (10,695)
--------- --------
NET INCREASE IN CASH AND
CASH EQUIVALENTS 337,181 903,399
CASH AND CASH EQUIVALENTS,
Beginning of Period 9,743,330 8,018,471
7<PAGE>
CASH AND CASH EQUIVALENTS,
End of Period $10,080,511 $ 8,921,870
========== ==========
</TABLE>
8<PAGE>
CAPITAL SENIOR LIVING COMMUNITIES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Principals of Consolidation
The accompanying consolidated balance sheet, as of March 31, 1996,
includes the accounts of the Partnership and its 99%-owned
subsidiary, Retirement Partnership, Ltd. All significant
intercompany accounts and transactions have been eliminated in
consolidation. The 1% minority interest in Retirement Partnership,
Ltd. is not presented separately due to its immateriality.
The financial information has been prepared in accordance with the
Partnership's customary accounting practices and has not been
audited. In the opinion of management, the information presented
reflects all adjustments necessary for a fair statement of interim
results. All such adjustments are of a normal and recurring nature.
The financial statements should be read in conjunction with the
consolidated financial statements and the footnotes thereto included
in the Partnership's annual report filed in Form 10-KSB for the year
ended December 31, 1995.
Property and Equipment
The Partnership provides for depreciation and amortization on
property and equipment using the straight-line method by charges to
operations in amounts to allocate the cost of the property and
equipment over their estimated useful lives.
The carrying value of property and equipment is reviewed if the
facts and circumstances suggest that it may be impaired. As of
March 31, 1996, no reserve for impaired value has been provided.
Cash Equivalents
The Partnership considers investments with original maturities of
three months or less to be cash equivalents.
Revenue Recognition
Revenue from the four retirement living communities and the two
multifamily apartment complexes is recognized in the period in which
the unit rental and/or food services relate.
9<PAGE>
Revenue from the two Projects (Towne Centre and Canton Regency)
which offer assisted living, intermediate, and skilled health care
(in addition to retirement living), is recognized as services are
performed. The Towne Centre health care center (the "Center") is a
provider of services under the Indiana Medicaid program.
Accordingly, the Center is entitled to reimbursement under the
foregoing program at rates which are lower than private pay rates.
Patient service revenue for Medicaid patients is recorded at the
reimbursement rates. The Towne Centre and Canton Regency health
care centers (the "Centers") are also providers of services under
the Medicare program.
The Centers are entitled to reimbursement under the foregoing
program in amounts which approximate the lower of cost or charges
for caring for these patients. During the period, the Centers
received payments from this program on an estimated basis. Any
differences between estimated and actual reimbursements are
recognized in the subsequent year.
2. COMMITMENTS AND CONTINGENCIES:
The Partnership had $53,788 in certificates of deposit at March 31,
1996 and December 31, 1995, restricted for utility deposits. The
certificates of deposit mature one year from the original purchase
date.
In conjunction with the Partnership's increased mortgage loan
commitment on June 30, 1995 (see LIQUIDITY AND CAPITAL RESOURCES), a
compensating balance of $150,000 was established with the mortgage
company.
3. TRANSACTIONS WITH RELATED PARTIES:
In accordance with the Partnership Agreement, the general partner,
Retirement Living Communities, L.P. ("RLC"), does not receive any
fees from the Partnership but may be reimbursed by the Partnership
for any actual costs and expenses incurred in connection with the
operations of the Partnership. In addition, an affiliate of RLC is
managing the assets of the Partnership. Partnership expenses
incurred by RLC and affiliates, which were expensed by the
Partnership for the first fiscal quarter ended March 31, 1996 and
1995, were approximately $86,930 and $84,720 respectively.
Management fees reimbursed and expensed by the Partnership to RLC
and affiliates for the first fiscal quarter ended March 31, 1996 and
1995, were approximately $250,338 and $242,649, respectively.
10<PAGE>
In addition, the Partnership has no employees. An affiliate of RLC
makes gross payroll deposits and health insurance premium payments
on behalf of the properties owned by the Partnership, which are
reimbursed by the Partnership, and is required to fund any excess
health insurance claims not covered by the Partnership's health
premiums or related insurance policy. Reimbursed gross payroll
deposits and health insurance premiums, which were expensed by the
Partnership during the first fiscal quarter of 1996 and 1995, were
approximately $1,359,574 and $1,334,326, respectively.
In connection with the extension of the Silver Lakes mortgage, an
affiliate of RLC received a 1% financing fee of $20,352 in the
first quarter of 1996.
In May 1995, the Partnership contracted with Quality Home Care,
Inc., an affiliate of RLC, to provide nursing services to the
assisted living residents at The Harrison facility. The contract
was executed to comply with certain state regulations. As part of
the contract, the Partnership has transferred its share of assisted
living revenues and expenses for The Harrison to Quality Home Care,
Inc. resulting in an approximate decrease of $63,000 in net
annualized profits.
In addition, a 50% partner of RLC is chairman of the board of a bank
where the Partnership holds the majority of its operating cash
accounts.
The general partner and managing agent of Healthcare Properties,
L.P. and NHP Retirement Housing Partners I LP is an affiliate of
RLC. See Note 4.
4. ACQUISITION AND DISPOSITION OF INVESTMENTS
During 1995, the Partnership made various purchases of limited
partnership interests in Healthcare Properties, L.P. As of December
31, 1995, the Partnership had cumulatively paid $308,825 for a 5.8%
ownership in Healthcare Properties, L.P. During the first quarter
of 1996, the Partnership purchased additional limited partnership
interests for $607,170, bringing the Partnership's total interest in
Healthcare Properties, L.P. to 11.08%. Healthcare Properties, L.P.
is a portfolio comprised of 9 nursing home facilities.
11<PAGE>
During 1995, the Partnership made various purchases of outstanding
pension notes of NHP Retirement Housing Partners I, L.P. As of
December 31, 1995, the Partnership had cumulatively paid $587,580
for a 3.25% ownership of outstanding pension notes of NHP Retirement
Housing Partners I, L.P. During the first quarter of 1996, the
Partnership purchased additional limited partnership interests for
$17,640, bringing the Partnership's total interest in NHP Retirement
Housing Partners I, L.P. to 3.35%. NHP Retirement Housing Partners
I, L.P. owns a portfolio of 5 independent living retirement
facilities. The pension notes bear simple interest at 13% annum.
Interest of 7% is paid quarterly, with the remaining 6% interest
deferred. Deferred interest and principal matures on December 31,
2001. During the first quarter of 1996, the partnership paid $855
for a 1.87% ownership of limited partnership interests in NHP
Retirement Housing Partners I, L.P.
5. SUBSEQUENT EVENT
Subsequent to March 31, 1996, the Partnership purchased additional
limited partnership interests in Healthcare Properties, L.P. from an
affiliate of RLC, increasing its ownership from 11.05% at March 31,
1996 to over 20% in April, 1996. Because of this purchase, the
Partnership will change its method of accounting for its investment
in Healthcare Properties, L.P. from the cost method to the equity
method of accounting. This change in accounting will result in
recognizing $2,407,196 of equity in Healthcare Properties, L.P. over
the Partnership's cost as deferred income, of which $35,817 relates
to 1995 and first quarter 1996 net investment earnings from
Healthcare Properties, L.P. and the balance of $2,371,379 to be
amortized over 20 years. The Partnership paid $1,269,077 to an
affiliate of RLC. The affiliate of RLC recognized a $878,592 gain
on the transaction.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
This discussion should be read in conjunction with the financial
statements of Capital Senior Living Communities, L.P. (the
"Partnership") included in this Report.
As of March 31, 1996, the Partnership's assets included four
retirement projects (Harrison, Cottonwood Village, Canton Regency,
and Towne Centre), a multi-family apartment project (Lakeridge
Apartments, formerly known as Village Green II Apartments), a 12%
interest in Encore Limited Partnership, and a 99% interest in
Retirement Partnership, Ltd. (the "Partnership Subsidiary"), which
owns a multi-family apartment project (Silver Lakes Apartments,
formerly known as Village Green I Apartments).
12<PAGE>
Silver Lakes Apartments is pledged as collateral to secure repayment
of a $2,022,828 mortgage loan payable to a nonaffiliated mortgage
company. The Partnership has a 6 month extension through July 1,
1996 on the loan which is renewable for a second 6th month extension
through December 31, 1996.
RESULTS OF OPERATIONS
The Partnership's primary source of funds is net rental income from
the ownership and management of the six real estate projects owned
by the Partnership.
FIRST QUARTER OF 1995 COMPARED WITH FIRST QUARTER OF 1994
Rental and other income for the three months ended March 31, 1996
and 1995 was $3,954,041 and $3,788,708, respectively. Rental and
other income increased 4.4% from the first quarter 1995 to 1996, and
was primarily attributable to higher rents. Interest income for the
first fiscal quarter ended March 31, 1996 and 1995, was $105,798 and
$65,608, respectively. Interest income increased $40,190 from the
first quarter ended 1995 to the first quarter ended 1996 due to
additional cash available for investment. During the three months
ended March 31, 1996, the Partnership received $25,523 income on
investment from its investment in Encore Limited Partnership.
Operating expenses are maintained by property and by natural expense
classification, but are not allocated by revenue type. Salaries,
wages, and benefits of $1,455,783 were paid by the Partnership for
the first fiscal quarter of 1996. Approximately $1,359,574 of such
amount was paid to Capital Senior Living, Inc. (CSL), an affiliate
of RLC, as reimbursement for their direct out-of-pocket costs under
the property management agreements for salaries, wages, and benefits
of on-site employees employed at the properties, with the remainder
being contract labor and reimbursement to CSL for an allocable
portion of its home office employees' salaries and wages for time
expended on matters attributable to the properties. Corresponding
payments of salaries and wages for the first fiscal quarter of 1995
was $1,443,477 (with approximately $1,334,326 paid to CSL). The
increase in such payments of 0.8% from 1995 to 1996 was attributable
to increased labor costs. Operating and other administrative
expenses increased from $1,542,875 in 1995 to $1,659,433 in 1996, or
7.6%, and was mainly attributable to an increase in utilities and
therapy costs. Depreciation and amortization for 1996 was
approximately $407,461 and $440,561 in 1995, resulting in a decrease
of 7.5% from 1995 to 1996.
13<PAGE>
The Partnership expects its future operating results will depend in
large part on its operating costs and occupancy levels in its
facilities. If the operating costs increase or occupancy levels
decline, the Partnership's operating results will be adversely
affected.
LIQUIDITY AND CAPITAL RESOURCES
The General Partner believes cash and cash equivalents of
$10,080,511 at March 31, 1996 is adequate for the working capital
needs of the Partnership. These reserves will be used to support
ongoing working capital needs, pay existing debt obligations, meet
the capital and marketing improvements necessary to succeed in a
competitive atmosphere, and fund future acquisitions or development
of real estate projects.
The Partnership's business is no longer the ownership of tax-exempt
bonds. Instead, the Partnership will hold and operate real
properties. This will adversely impact the tax-exempt nature of the
Partnership's operations in that it will cause the operations of the
Partnership to be fully taxable for federal income tax purposes and
will require the individual BUC holders to report their respective
shares of any taxable income of the Partnership. Moreover, as a
result of federal tax law changes in 1986, BUC holders will not be
able to use losses from any other source, other than "passive
activity" losses, to offset their share of the Partnership's taxable
income.
On July 29, 1994, the Partnership obtained a $12,000,000 open end
mortgage loan from a non-affiliated mortgage company, and pledged
the Cottonwood, Harrison, Towne Centre and Canton Regency Retirement
Community as collateral. On June 30, 1995, the Partnership increased
its mortgage loan commitment from $12,000,000 to $17,500,000. As of
March 31, 1996, there have been no advances made to the Partnership
on this loan. The loan expires July 29, 1998.
The management of the Partnership believes that through improved
management of the properties' operations, the liquidity of the
Partnership and the return on the BUC holder's investment will be
maximized. Potential additional sources of liquidity could include
new mortgage financings on one or more of the existing unencumbered
facilities and a potential sale of one or more of the existing
facilities.
PARTNERSHIP PROPERTIES
The following table sets forth summary information concerning the
six income-producing real properties owned by the Partnership:
14<PAGE>
<TABLE>
Number of
Units At
March 31, Occupancy
Project Name/Location 1996 03/31/95 03/31/96
- ---------------------- ---------------- --------- --------
<S> <C> <C> <C>
Cottonwood Retirement 65 - residential 100% 96%
Community,
Cottonwood, Arizona
The Harrison Retirement 124 - residential 91% 83%
Community
Indianapolis, Indiana
Towne Centre Retirement 147 - residential 96% 95%
Community 34 - assisted living
Merrillville, Indiana 64 - nursing
Canton Regency Retirement 147 - residential 93% 97%
Community 34 - assisted living
Canton, Ohio 50 - nursing
Lakeridge Apartments 138 - residential 77% 92%
Kissimmee, Florida
Silver Lakes Apartments 132 - residential 81% 93%
Kissimmee, Florida
</TABLE>
15<PAGE>
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
No reports on Form 8-K have been filed by the registrant during the
quarter ended March 31, 1996.
16<PAGE>
SIGNATURES
Pursuant to the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
CAPITAL SENIOR LIVING COMMUNITIES,
L.P.
By: RETIREMENT LIVING COMMUNITIES,
L.P.
General Partner
By: CAPITAL RETIREMENT
GROUP, INC.
General Partner
Date: May 14, 1996 By: \s\ Keith Johannessen
President
17<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule conatins summary financial information extracted from the
consolidated balance sheet at March 31, 1996 and the consolidated statements of
operations and cash flows for the quarter ended March 31, 1996, and is qualified
in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1996
<CASH> 10,284,299
<SECURITIES> 1,522,069
<RECEIVABLES> 520,022
<ALLOWANCES> (157,535)
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 24,165,603
<DEPRECIATION> (7,088,590)
<TOTAL-ASSETS> 29,662,323
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 25,955,973
<TOTAL-LIABILITY-AND-EQUITY> 29,662,323
<SALES> 0
<TOTAL-REVENUES> 4,085,362
<CGS> 0
<TOTAL-COSTS> 3,466,103
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 56,574
<INCOME-PRETAX> 562,685
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 562,685
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
