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 September 30, 1998
[ ] Transition report under Section 13 or 15(d) of the Exchange Act for the
transition period
From to
---------------------------- --------------------------
Commission file number 0-14752.
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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
<TABLE>
<CAPTION>
<S> <C> <C>
CAPITAL SENIOR LIVING COMMUNITIES, LP
CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1998 AND DECEMBER 31, 1997
September 30, December 31,
1998 1997
(Unaudited) (Audited)
ASSET
OTHER ASSETS:
Cash and cash equivalents $ 6,470,563 $ 66,818,286
Cash, restricted 20,958 19,960
Accounts receivable, net of allowance for doubtful accounts
of $73,390 in 1998 and $145,602 in 1997 161,329 599,824
Prepaid expenses and other 0 4,889
----------------- ------------------
Total assets $ 6,652,850 $ 67,442,959
================= ==================
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES:
Accrued expenses and other liabilities $ 328,148 $ 147,830
----------------- ------------------
Total liabilities 328,148 147,830
----------------- ------------------
PARTNERS' CAPITAL:
General partner 81,633 482,718
Limited partner 1 1
Beneficial unit certificates, 1,264,000
issued and 1,117,692 outstanding 8,466,182 69,035,516
Repurchased beneficial unit certificates (2,223,106) (2,223,106)
----------------- -------------------
Total partners' capital 6,324,710 67,295,129
----------------- ------------------
Total liabilities and partners' capital $ 6,652,850 $ 67,442,959
================= ==================
</TABLE>
See notes to financial statements
1
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
CAPITAL SENIOR LIVING COMMUNITIES, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
------------------------------------------------------
(UNAUDITED)
-----------
Three Months ended September 30,
--------------------------------
1998 1997
---- ----
RENTAL AND OTHER INCOME
Independent $ 0 1,936,839
Assisted Living 0 435,702
Nursing (22,211) 1,933,354
Facility lease income 0 1,056,067
Other 0 592,034
----------- ----------
Total rental and other income (22,211) 5,953,996
EXPENSES:
Salaries, wages and benefits 7,788 2,360.785
Operating and other administrative expenses 47,869 2,311,541
Depreciation and amortization 0 646,797
----------- ----------
Total expenses 55,657 5,319,123
----------- ----------
(Loss) Income from operations (77,868) 634,873
OTHER INCOME (EXPENSE):
Interest income 58,651 1,271,524
Interest expense 0 (1,092,271)
Other income 0 22,200
Minority interest 0 (126,190)
----------- ----------
Total other income (expense) 58,651 75,263
----------- ----------
NET (LOSS) INCOME $ (19,217) $ 710,136
=========== ==========
NET (LOSS) INCOME ALLOCATION:
General partner $ (192) $ 7,101
Beneficial unit certificate holders (19,025) $ 703,035
----------- ----------
Total $ (19,217) $ 710,136
=========== ==========
NET (LOSS) INCOME PER BENEFICIAL UNIT CERTIFICATE $ (.02) $ .62
=========== ==========
OUTSTANDING BENEFICIAL UNIT CERTIFICATES $ 1,117,692 $1,117,692
=========== ==========
</TABLE>
See notes to financial statements
2
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
CAPITAL SENIOR LIVING COMMUNITIES, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
-----------------------------------------------------
(UNAUDITED)
Nine Months ended September 30,
-------------------------------
1998 1997
---- ----
RENTAL AND OTHER INCOME
Independent $ 0 $ 5,684,104
Assisted Living 0 1,288,780
Nursing (22,051) 7,388,881
Facility lease income 0 3,214,040
Other 90,727 1,053,444
-------------- ------------
Total rental and other income 68,676 18,629,249
EXPENSES:
Salaries, wages and benefits (80,394) 6,867,567
Operating and other administrative expenses 81,891 6,963,769
Depreciation and amortization 0 1,590,240
-------------- ------------
Total expenses 1,497 15,421,576
-------------- ------------
Income from operations 67,179 3,207,673
OTHER INCOME (EXPENSE):
Interest income 843,541 2,059,220
Interest expense 0 (1,478,618)
Other income 0 22,200
Minority interest 0 (521,652)
--------------- ------------
Total other income (expense) 843,541 81,150
--------------- ------------
NET INCOME $ 910,720 $ 3,288,823
=============== ============
NET INCOME ALLOCATION:
General partner $ 9,107 $ 32,888
Beneficial unit certificate holders $ 901,613 $ 3,255,935
--------------- ------------
Total $ 910,720 $ 3,288,823
=============== ============
NET INCOME PER BENEFICIAL UNIT CERTIFICATE $ .81 $ 2.87
=============== ============
OUTSTANDING BENEFICIAL UNIT CERTIFICATES $ 1,117,692 $ 1,117,692
=============== ============
</TABLE>
See notes to financial statements.
3
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
CAPITAL SENIOR LIVING COMMUNITIES, L.P.
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(UNAUDITED)
Repurchased
Beneficial Beneficial Limited General
Unit Certificates Unit Certificates Partner Partner Total
BALANCE, December 31, 1997 $ 69,035,516 $ (2,223,106) $ 1 $ 482,718 $ 67,295,129
Net Income 901,613 0 0 9,107 910,720
Net Income Distribution
Adjustment (1,392,608) 0 0 1,392,608 0
Distributions (60,078,339) 0 0 (1,802,800) (61,881,139)
--------------- ---------------- ----------- ---------- --------------
BALANCE, September 30, 1998 $ 8,466,182 $ (2,223,106) $ 1 $ 81,633 $ 6,324,710
=============== ================ =========== ========== ==============
</TABLE>
See notes to financial statements
4
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
CAPITAL SENIOR LIVING COMMUNITIES, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
-----------------------------------------------------
(UNAUDITED)
-----------
For the Nine Months
Ended September 30,
-------------------
1998 1997
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 910,270 $ 3,288,823
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation 0 1,266,044
Amortization of deferred financing charges 0 324,196
Provision for bad debt (72,212) 43,061
Minority Interest 0 521,652
Changes in assets and liabilities, net of effects of acquisitions:
Cash, restricted (998) (63,472,007)
Accounts receivable 510,707 (1,271,229)
4,889 7,607
Prepaid expenses and other
Accrued expenses and other liabilities 180,310 446,445
Customer Deposits 0 21,025
------------ -------------
NET CASH PROVIDED (USED) BY
OPERATING ACTIVITIES 1,533,416 (58,824,383)
------------ -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash acquired upon consolidation of HCP 0 8,875,286
Additions to property and equipment 0 (1,195,016)
Investments in limited partnerships 0 15,571,261
------------ -------------
NET CASH USED IN INVESTING ACTIVITIES 0 (7,890,991)
------------ -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds on note 0 76,131,267
Payments on notes payable 0 (6,384,961)
Deferred charges 0 (85,355)
5
<PAGE>
Distributions (61,881,139) (224,795)
Repurchase of beneficial unit certificates 0 (960,752)
------------ -------------
NET CASH PROVIDED (USED) IN
FINANCING ACTIVITIES (61,881,139) 68,475,404
------------ -------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (60,347,723) 1,760,030
CASH AND CASH EQUIVALENTS, Beginning of Period 66,818,286 10,463,887
------------ -------------
CASH AND CASH EQUIVALENTS, End of Period $ 6,470,563 $ 12,223,917
============ =============
</TABLE>
Seet notes to financial statements.
6
<PAGE>
CAPITAL SENIOR LIVING COMMUNITIES, L.P.
---------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
SEPTEMBER 30, 1998
------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
------------------------------------------
Principals of Consolidation
- ---------------------------
The accompanying consolidated balance sheet, as of September 30, 1998, includes
the accounts of the Partnership and its 99%-owned subsidiary, Retirement
Partnership, Ltd. In addition, the accompanying consolidated statement of
operations, as of September 30, 1997, includes the accounts of HealthCare
Properties, L.P. ("HCP"). The Partnership's interest in HCP was subsequently
sold on November 3, 1997. 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,
1997.
Cash Equivalents
- ----------------
The Partnership considers investments with original maturities of three months
or less to be cash equivalents.
2. COMMITMENTS AND CONTINGENCIES:
------------------------------
The Partnership had $20,958 and $19,960 in certificates of deposit at September
30, 1998 and December 31, 1997 respectively, restricted for utility deposits.
The certificates of deposit mature one year from the original purchase date.
3. TRANSACTIONS WITH RELATED PARTIES:
----------------------------------
Retirement Living Communities, L.P. ("RLC"), did not receive any fees from the
Partnership for this period, but was reimbursed by the Partnership for any
actual costs and expenses incurred in connection with the operations of the
Partnership.
In addition, the Partnership and HCP 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. Reimbursements and
fees paid to the general partner and affiliates of the general partner are as
follows:
7
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Nine months ended Nine months ended
September 30, 1998 September 30, 1997
Salary and benefit reimbursements $ 0 $ 6,469,374
Administrative reimbursements 37,980 442,531
Asset management fees 0 345,967
Property management fees 0 1,010,229
General partner management fees 0 68,101
------------- ---------------
$ 37,980 $ 8,336,202
============= ===============
</TABLE>
In the second quarter of 1997, the Partnership received a loan from two
affiliates of the general partner totaling $500,000. The loan was repaid in the
second quarter of 1997 and paid accrued interest at 10% of $3,014.
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.
4. DISPOSITION OF PROPERTY
-----------------------
On July 8, 1997, the Partnership entered into an asset purchase agreement with
an affiliate of RLC, Capital Senior Living Properties, Inc. ("CSLP"), pursuant
to which the Partnership agreed to sell substantially all of its assets, other
than working capital, to CSLP conditioned upon, among other things, the funding
of the parent company of CSLP's initial public offering. On November 3, 1997,
the Partnership sold its four retirement projects, its interest in Encore
Limited Partnership, its interest in HCP, and its interest in the Pension Notes
and limited partnership interests of NHP Retirement Housing Partners I Limited
Partnership ("NHP") to CSLP for $76,617,993. The Partnership obtained
independent valuations of properties from third party valuation firms, which
were utilized in determining the sales price. Sales proceeds were paid by the
assumption of the Lehman loan of $70,883,798 and by delivery of short term note
of $5,784,195. The short term note was subsequently paid in full on November 6,
1997. After payment of closing costs and broker fees, net cash proceeds to the
Partnership were $336,736. Effective November 6, 1997, restrictions on U.S.
Treasury bills being held were released and such U.S. Treasury bills in the
principal amount of $64,202,685 became an unrestricted asset of the Partnership.
In conjunction with the sale of the Partnership's investment in HCP, and in
compliance with Section 16b of the Securities and Exchange Act, the Partnership
paid to HCP $440,007 in short swing profits made on purchases of interests in
HCP within a six month period prior to the sale.
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 September 30, 1998, the Partnership's assets included a 99% interest in
Retirement Partnership, Ltd. (the "Partnership Subsidiary").
RESULTS OF OPERATIONS
- ---------------------
Since the sale of Partnership property on November 3, 1997, the Partnership's
primary source of funds is interest income earned on cash holdings.
8
<PAGE>
FIRST NINE MONTHS OF 1998 COMPARED WITH FIRST NINE MONTHS OF 1997
Rental and other income for the nine months ended September 30, 1998 and 1997
was $68,676 and $18,629,249, respectively. The decreased revenues of $
18,560,573 from the nine months ended September 30, 1997 to 1998 is attributable
to the sale of Partnership properties in November, 1997. For the nine months
ended September 30, 1998, nursing revenues shows a debit balance of $22,051,
which was substantially incurred during the third quarter of 1998. This is the
result of $190,351 in 1997 Medicare settlements received by Towne Centre and an
accrual of $212,691 due Medicare resulting from an audit of the Towne Centre
1996 cost report. Interest income for the nine months ended September 30, 1998
and 1997 was $843,541 and $2,059,220, respectively. Interest income decreased
$1,215,679 from the nine months ended September 30, 1997 to 1998 and is due to
the sale of Partnership assets in November, 1997. Total expenses for the nine
months ended September 30, 1998 and 1997 were $1,497 and $15,421,576,
respectively. The decreased expenses of $15,420,079 from the nine months 1997 to
1998 is attributable to the sale of Partnership properties in November, 1997.
During the second quarter ended June 30, 1998, the Partnership received a
workers compensation refund of $113,792, resulting in a credit balance for
salaries, wages and benefits of $80,394 for the nine months ended September 30,
1998.
The Partnership incurred no depreciation and amortization, interest expense,
other income and minority interest expense for the three months and nine months
ended September 30, 1998 in comparison to the respective periods in 1997 due to
the sale of Partnership assets in November, 1997. For the three months ended
September 30, 1998 compared with the three months ended September 30, 1997, the
Partnership's revenue and expenses were impacted by the same shifts of revenue
and expenses as discussed above with the exception that salaries, wages and
benefits incurred $7,788 in expenses for the three months ended September 30,
1998. Interest income significantly decreased $1,212,873 from the three months
ended September 30, 1997 to 1998 due to less cash available for investment
resulting from cash distributions made in 1998.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1998, the Partnership had cash and cash equivalents of $
6,470,563. It is the intention of the general partner to wind down the business
affairs of the Partnership and to substantially distribute its cash holdings,
leaving a small working capital reserve available for obligations that may
result from future contingencies. On March 12, 1998, a distribution of
$61,000,000 was made available to the BUC Holders, of which $60,078,339 has been
disbursed to the BUC Holders and a $1,802,800 distribution was disbursed to the
general partner. Approximately, $4,700,000 will be retained as a working capital
reserve.
9
<PAGE>
YEAR 2000 ISSUE
Year 2000 Issue
The Year 2000 Issue is the result of computer programs being written using two
digits rather than four to define the applicable year. Any of the Partnership's
computer programs or hardware that have date-sensitive software or embedded
chips may recognize the year 2000 as a date other than the year 2000. This could
result in a system failure or miscalculations causing disruptions of operations,
including, among other things, a temporary inability to process transactions,
send invoices, or engage in similar normal business activities.
Based on ongoing assessments, the Partnership has developed a program to modify
or replace significant portions of its software and certain hardware, which are
generally PC-based systems, so that those systems will properly utilize dates
beyond December 31, 1999. The Partnership expects to substantially complete
software reprogramming and software and hardware replacement no later than
December 31, 1998, with 100% completion targeted for September 30, 1999. The
Partnership presently believes that these modifications and replacements of
existing software and certain hardware will mitigate the Year 2000 Issue.
However, if such modifications and replacements are not completed timely, the
Year 2000 Issue could have a material impact on the operations of the
Partnership.
The Partnership has assessed its exposure to operating equipment, and such
exposure is not significant due to the nature of the Partnership's business.
The Partnership is not aware of any external agent with a Year 2000 Issue that
would materially impact the Partnership's results of operations, liquidity, or
capital resources. However, the Partnership has no means of determining whether
or ensuring that external agents will be Year 2000 ready. The inability of
external agents to complete their Year 2000 resolution process in a timely
fashion could materially impact the Partnership.
Management of the Partnership believes it has an effective program in place to
resolve the Year 2000 Issue in a timely manner. As noted above, the Partnership
has completed most but not all necessary phases of its Year 2000 program. In the
event that the Partnership does not complete the current program or any
additional phases, the Partnership could incur disruptions to its operations. In
addition, disruptions in the economy generally resulting from Year 2000 Issues
could also materially adversely affect the Partnership. The Partnership could be
subject to litigation for computer systems failure. The amount of potential
liability and lost revenue cannot be reasonably estimated at this time.
The Partnership currently has no contingency plans in place in the event it does
not complete all phases of its Year 2000 program. The Partnership plans to
evaluate the status of completion in early 1999 and determine whether such a
plan is necessary.
10
<PAGE>
PART II OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6.
No reports on Form 8-K have been filed by the registrant during the quarter
ended September 30, 1998.
Item 27 Financial Data Schedule required by Item 601 of Regulation S-B
11
<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: November 12, 1998 By:
--------------------
Keith Johannessen
President
12
<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: November 12, 1998 By: \s\ Keith Johannessen
----------------------
President
13
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Financial Data Sheet for Capital Senior Living Communities, L.P.
</LEGEND>
<CIK> 0000789283
<NAME> za@8cass
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-1-1998
<PERIOD-END> SEP-30-1998
<EXCHANGE-RATE> 1
<CASH> 6,491,521
<SECURITIES> 0
<RECEIVABLES> 234,719
<ALLOWANCES> (73,390)
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 6,652,850
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 6,324,710
<TOTAL-LIABILITY-AND-EQUITY> 6,652,850
<SALES> 0
<TOTAL-REVENUES> 912,217
<CGS> 0
<TOTAL-COSTS> 1,497
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 910,720
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 910,720
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
