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, 1997
[ ] 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)
(972) 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
Transitional Small Business Disclosure Format Yes No X
<PAGE>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
CAPITAL SENIOR LIVING COMMUNITIES, LP
CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1997 AND DECEMBER 31, 1996
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
(Unaudited) (Audited)
----------- ---------
ASSET
<S> <C> <C>
PROPERTY AND EQUIPMENT, Net $ 12,615,781 $ 12,576,523
OTHER ASSETS:
Cash and cash equivalents 2,837,488 10,463,887
Cash, restricted 206,376 206,376
Accounts receivable, net of allowance for doubtful accounts
of $164,822 in 1997 and $164,822 in 1996 405,983 373,163
Prepaid expenses and other 46,281 92,302
Deferred charges, less accumulated amortization
of $343,745 in 1997 and $311,938 in 1996 169,634 201,440
Investment in limited partnerships (Note 4) 16,421,212 8,275,920
---------- ---------
Total assets $ 32,702,755 32,189,611
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES:
Accrued expenses and other liabilities $ 1,425,786 $ 1,303,833
Customer deposits 255,863 248,458
------------ -----------
Total liabilities 1,681,649 1,552,291
---------- ----------
DEFERRED INCOME (Note 4) 3,382,446 3,400,684
PARTNERS' CAPITAL:
General partner 79,842 72,526
Limited partner 1 1
Beneficial unit certificates, 1,264,000
issued and 1,151,426 outstanding 29,150,792 28,426,464
Repurchased beneficial unit certificates (1,591,975) (1,262,355)
---------- ----------
Total partners' capital 27,638,660 27,236,636
---------- ----------
Total liabilities and partners' capital $ 32,702,755 $ 32,189,611
========== ==========
</TABLE>
<PAGE>
CAPITAL SENIOR LIVING COMMUNITIES, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months ended March 31,
1997 1996
---- ----
RENTAL AND OTHER INCOME
<S> <C> <C>
Multi-family $ 0 $ 323,750
Independent 1,847,313 1,796,430
Assisted Living 430,412 406,748
Nursing 1,204,606 1,210,624
Other 240,195 216,489
---------------- ----------------
3,722,526 3,954,041
INTEREST INCOME 64,445 105,798
INCOME ON INVESTMENTS 159,294 25,523
---------------- ----------------
Total income 3,946,265 4,085,362
---------------- ----------------
EXPENSES:
Salaries, wages and benefits 1,425,780 1,455,783
Operating and other administrative expenses 1,593,625 1,659,433
Depreciation and amortization 195,216 407,461
---------------- ----------------
Total expenses 3,214,621 3,522,677
---------------- ----------------
NET INCOME $ 731,644 $ 562,685
================ ================
NET INCOME ALLOCATION:
General partner $ 7,316 $ 5,627
Beneficial unit certificate holders 724,328 557,058
---------------- ----------------
Total $ 731,644 $ 562,685
================ ================
NET INCOME PER BENEFICIAL UNIT
CERTIFICATE $ .63 $ .44
================ ================
OUTSTANDING BENEFICIAL UNIT
CERTIFICATES 1,151,426 1,264,000
================ ================
</TABLE>
<PAGE>
CAPITAL SENIOR LIVING COMMUNITIES, L.P.
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
FOR THE THREE MONTHS ENDED MARCH 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
Beneficial Repurchased
Unit Beneficial Limited General
Certificates Unit Certificates Partner Partner Total
------------ ----------------- ------- ------- -----
<S> <C> <C> <C> <C> <C>
BALANCE, December 31, 1996 $ 28,426,464 $ (1,262,355) $ 1 $ 72,526 $ 27,236,636
Net Income 724,328 - - 7,316 731,644
Repurchased Beneficial Unit
Certificates - (329,620) - - (329,620)
------------- ------------ ------ ---------- -----------
BALANCE, March 31, 1997 $ 29,150,792 $ (1,591,975) 1 79,842 27,638,660
============= ============ ====== ========== ===========
</TABLE>
<PAGE>
CAPITAL SENIOR LIVING COMMUNITIES, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(UNAUDITED)
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
1997 1996
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income $ 731,644 $ 562,685
Adjustments to reconcile net income
to net cash provided by (used in) operating activities:
Depreciation 163,410 368,871
Amortization of deferred financing charges 31,806 38,590
Provision for bad debt 0 15,000
Amortization of deferred income (44,864) 0
(110,230) 0
Changes in assets and liabilities,
net of effects of acquisitions:
Accounts receivable (32,820) 31,999
Prepaid expenses and other 46,021 22,700
Accrued expenses and other liabilities 121,953 41,089
Customer Deposits 7,405 7,812
------- ---------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 914,325 1,088,746
------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (202,668) (93,229)
Investments in limited partnerships (8,008,436) (625,664)
---------- --------
NET CASH USED IN
INVESTING ACTIVITIES (8,211,104) (718,893)
---------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on notes payable 0 (12,320)
Deferred charges 0 (20,352)
Repurchase of beneficial unit certificates (329,620) 0
------- ---------
NET CASH USED IN
FINANCING ACTIVITIES (329,620) (32,672)
-------- ---------
NET (DECREASE) INCREASE IN CASH AND
CASH EQUIVALENTS (7,626,399) 337,181
CASH AND CASH EQUIVALENTS, Beginning of Period 10,463,887 9,743,330
---------- ---------
CASH AND CASH EQUIVALENTS, End of Period $ 2,837,488 $ 10,080,511
========= ==========
</TABLE>
<PAGE>
CAPITAL SENIOR LIVING COMMUNITIES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Principals of Consolidation
The accompanying consolidated balance sheet, as of March 31, 1997, 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,
1996.
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, 1997, 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 is recognized in the period
in which the unit rental and/or food services relate.
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 $56,376 in certificates of deposit at March 31, 1997 and
December 31, 1996 respectively, restricted for utility deposits. The
certificates of deposit mature one year from the original purchase date.
<PAGE>
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, 1997 and 1996, were approximately $105,357
and $86,930, respectively. Management fees reimbursed and expensed by the
Partnership to RLC and affiliates for the first fiscal quarter ended March 31,
1997 and 1996, were approximately $241,928 and $250,338, respectively.
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 1997 and 1996, were approximately
$1,322,908 and $1,359,574, 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 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, L.P. is an affiliate of RLC. See Note 4.
4. ACQUISITION OF INVESTMENTS
During 1997, 1996 and 1995, the Partnership made various purchases of limited
partnership interests in HealthCare Properties, L.P. During 1997, 1996 and 1995,
the Partnership paid $135,366, $3,200,685 and $308,825, respectively, for
partnership interests in HealthCare Properties, L.P. As of March 31, 1997, the
Partnership has cumulatively paid $3,644,876 for a 31.8% ownership in HealthCare
Properties, L.P., which owns a portfolio of 8 nursing home facilities.
In the second quarter of 1996, 9.36% in limited partnership interests in
HealthCare Properties, L.P. was purchased from Capital Realty Group Senior
Housing, Inc. (CRGSH), an affiliate of RLC, who had acquired the interests in
1993. The Partnership paid $1,269,077 to such affiliate, who recognized a
$878,592 gain on the transaction. Because of this purchase, the Partnership
exceeded 20% ownership and changed its method of accounting from the cost method
to the equity method. The change resulted in recognizing $3,545,942 of deferred
income for the difference between cost and the underlying equity in HealthCare
Properties, L.P., which is being amortized over 20 years.
During 1997, 1996 and 1995, the Partnership made various purchases of
outstanding Pension Notes of NHP Retirement Housing Partners I, L.P. During
1997, 1996 and 1995, the Partnership paid $7,873,070, $199,158 and $587,580,
respectively, for purchases of Pension Notes. As of March 31, 1997, the
Partnership has cumulatively paid $8,659,808 for a 25.4% ownership of
outstanding Pension Notes of NHP Retirement Housing Partners I, L.P. NHP
Retirement Housing Partners I, L.P. owns a portfolio of 5 independent living
retirement facilities. The Pension Notes bear simple interest at 13% per annum.
Interest of 7% is paid quarterly, with the remaining 6% interest deferred.
Deferred interest and principal matures on December 31, 2001. The Partnership is
not accruing the deferred interest on the Pension Notes due to uncertainties
regarding their ultimate realization. The ultimate realization of the Pension
Notes is expected to be based primarily upon the value of the underlying
properties. During 1996, the Partnership paid $1,364 for a 3.1% ownership of
limited partnership interests in NHP Retirement Housing Partners I, L.P.
<PAGE>
Subsequent to March 31, 1997 and through April 28, 1997, the Partnership is
committed to purchase approximately $2,735,550 for additional investment in
HealthCare Properties, L.P. interests and $882,640 for additional investment in
Pension Notes of NHP Retirement Housing Partners I, L.P. These purchases will
bring the Partnership's ownership of HealthCare Properties, L.P. interests to
44.9% and 27.7% for NHP Retirement Housing Partners I, L.P. Pension Notes. The
General Partner is attempting to draw down on its line of credit to fund the
purchase of these commitments.
5. DISPOSITION OF PROPERTY
On November 5, 1996, the Partnership sold the Lakeridge and Silver Lakes
Apartments to an unrelated party at a combined sales price of $4,793,000, paid
in cash. After payment of the mortgage loan on the Silver Lakes Apartments and
refund of its escrow balance, the Partnership received cash of approximately
$2,549,000 on the sale. Due to the sale of Silver Lakes and Lakeridge,
Partnership total revenues for the three months ended March 31, 1996 would have
decreased approximately $323,750, and there would not have been a significant
impact to net income.
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, 1997, the Partnership's assets included four retirement projects
(Harrison, Cottonwood Village, Canton Regency, and Towne Centre), a 3% interest
in Encore Limited Partnership, a 31.8% limited partnership interest in
HealthCare Properties, L.P., 25.4% of the outstanding pension notes of NHP
Retirement Housing Partners I, L.P., a 3.1% limited partnership interest in NHP
Retirement Housing Partners I, L.P., and a 99% interest in Retirement
Partnership, Ltd. (the "Partnership Subsidiary").
RESULTS OF OPERATIONS
The Partnership's primary source of funds is net rental income from the
ownership and management of the four real estate projects owned by the
Partnership.
FIRST QUARTER OF 1997 COMPARED WITH FIRST QUARTER OF 1996
Rental and other income for the first fiscal quarter ended March 31, 1997 and
1996 was $3,722,526 and $3,954,041 respectively. Rental and other income
decreased 5.9% from the first quarter 1996 to 1997, and was primarily
attributable to the sale of the Silver Lakes and Lakeridge Apartments. Interest
income for the first fiscal quarter ended March 31, 1997 and 1996, was $64,445
and $105,798, respectively. Interest income decreased $41,353 from the first
quarter ended 1996 to the first quarter ended 1997 due to decreasing cash
reserves used for purchasing investments. During the three months ended March
31, 1997, the Partnership recognized $159,294 of equity participation and
amortization of deferred income relating to the Partnership's investment in
HealthCare Properties, L.P. Operating expenses are maintained by property and by
natural expense classification, but are not allocated by revenue type. Salaries,
wages, and benefits of $1,425,780 were paid by the Partnership for the first
fiscal quarter of 1997. Approximately $1,322,908 of such amount was paid to
Capital Senior Living, Inc. ("CSL"), an affiliate of RLC, as reimbursement for
its 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 1996 was $1,455,783 (with
approximately $1,359,574 paid to CSL). Salaries, wages, and benefits decreased
2.1% from the first quarter 1996 to 1997. Operating and other administrative
expenses decreased from $1,659,433 in 1996 to $1,593,625 in 1997, or 4.0%.
Depreciation and amortization for 1997 was $195,216 and $407,461 in 1996. The
decrease in salaries, wages, and benefits, operating and other administrative
expenses, and depreciation and amortization was primarily due to the sale of the
Silver Lakes and Lakeridge Apartments.
<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 $2,837,488 at March
31, 1997 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. The loan expires July 29, 1998. As of March 31, 1997, there have
been no advances made to the Partnership on this loan.
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 four
income-producing real properties owned by the Partnership as of March 31, 1997.
As discussed above, the Lakeridge and Silver Lakes Apartments were sold on
November 5, 1996.
<TABLE>
<CAPTION>
Number of Units At Occupancy
Project Name/Location March 31, 1997 03/31/96 03/31/97
--------------------- -------------- -------- --------
<S> <C> <C> <C>
Cottonwood Retirement 65 - residential 96% 92%
Community
Cottonwood, Arizona
The Harrison Retirement 124 - residential 83% 89%
Community
Indianapolis, Indiana
Towne Centre Retirement 147 - residential 95% 96%
Community 34 - assisted living
Merrillville, Indiana 64 - nursing
Canton Regency Retirement 147 - residential 97% 97%
Community 34 - assisted living
Canton, Ohio 50 - nursing
</TABLE>
PART II OTHER INFORMATION
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
Item 27 Financial Data Schedule required by Item 601 of Regulation S-B
No reports on Form 8-K have been filed by the registrant during the quarter
ended March 31, 1997.
<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 13, 1997 By: /s/Keith Johannessen
---------------------
Keith Johannessen
President
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000789283
<NAME> Capital Senior Living Communities, L.P.
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 3,043,864
<SECURITIES> 16,421,212
<RECEIVABLES> 570,805
<ALLOWANCES> (164,822)
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 19,552,531
<DEPRECIATION> (6,936,750)
<TOTAL-ASSETS> 32,702,755
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 27,638,660
<TOTAL-LIABILITY-AND-EQUITY> 32,702,755
<SALES> 0
<TOTAL-REVENUES> 3,946,265
<CGS> 0
<TOTAL-COSTS> 3,214,621
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 731,644
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 731,644
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
