FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999
COMMISSION FILE NUMBER 0-14752
CAPITAL SENIOR LIVING COMMUNITIES, L.P.
(Exact name of registrant as specified in its charter)
DELAWARE 35-1665759
(State of other jurisdiction of incorporation or (I.R.S. Employer
organization) Identification No.)
14160 DALLAS PARKWAY, SUITE 300
DALLAS, TX 75240
(Address of principal executive offices)
(Zip Code)
(972) 770-5600
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 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
--- ---
<PAGE>
PART I FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
CAPITAL SENIOR LIVING COMMUNITIES, LP
CONSOLIDATED BALANCE SHEETS
September 30, 1999 December 31, 1998
------------------ -----------------
(Unaudited)
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 1,747,810 $ 6,111,572
Cash, restricted 22,090 20,958
Accounts receivable, net of allowance for doubtful
accounts of $29,024 in 1999 and $52,462 in
1998 5,791 46,666
Prepaid expenses and other 144 1,441
---------------- --------------
Total assets $ 1,775,835 $ 6,180,637
================ ==============
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Accrued expenses and other liabilities $ 7,500 $ 189,150
---------------- --------------
Total liabilities 7,500 189,150
---------------- --------------
Partners' Capital
General partner 175,811 165,446
Limited partner 1 1
Beneficial unit certificates, 1,264,000
issued and 1,117,692 outstanding 3,815,629 8,049,146
Repurchased beneficial unit certificates (2,223,106) (2,223,106)
---------------- --------------
Total partners' capital 1,768,335 5,991,487
---------------- --------------
Total liabilities and partners' capital $ 1,775,835 $ 6,180,637
================ ==============
</TABLE>
See notes to financial statements
1
<PAGE>
<TABLE>
<CAPTION>
CAPITAL SENIOR LIVING COMMUNITIES, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three-months ended September 30
1999 1998
---- ----
<S> <C> <C>
RENTAL AND OTHER INCOME
Nursing (adjustments) $ (6,330) $ (22,211)
--------------- ---------------
Total rental and other income (adjustments) (6,330) (22,211)
EXPENSES
Salaries, wages and benefits 4,712 7,788
Operating and other administrative expenses 31,771 47,869
--------------- ---------------
Total expenses 36,483 55,657
--------------- ---------------
Loss from operations (42,813) (77,868)
OTHER INCOME
Interest income 17,650 58,651
--------------- ---------------
Total other income 17,650 58,651
--------------- ---------------
NET LOSS $ (25,163) $ (19,217)
=============== ===============
NET LOSS ALLOCATION
General partner $ (2,516) $ (192)
Beneficial unit certificate holders (22,647) (19,025)
--------------- ---------------
Total $ (25,163) $ (19,217)
=============== ===============
NET LOSS PER BENEFICIAL UNIT
CERTIFICATE $ (.02) $ (.02)
============== ==============
OUTSTANDING BENEFICIAL UNIT
CERTIFICATES 1,117,692 1,117,692
============== ==============
</TABLE>
See notes to financial statements
2
<PAGE>
<TABLE>
<CAPTION>
CAPITAL SENIOR LIVING COMMUNITIES, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Nine-months ended September 30
1999 1998
---- ----
<S> <C> <C>
RENTAL AND OTHER INCOME
Nursing (adjustments) $ 79,375 $ (22,051)
Other - 90,727
-------------- --------------
Total rental and other income 79,375 68,676
EXPENSES
Salaries, wages and benefits (adjustments) 22,821 (80,394)
Operating and other administrative expenses 32,537 81,891
-------------- --------------
Total expenses 55,358 1,497
-------------- --------------
Income from operations 24,017 67,179
OTHER INCOME
Interest income 79,630 843,541
-------------- --------------
Total other income 79,630 843,541
-------------- --------------
NET INCOME $ 103,647 $ 910,720
============== ==============
NET INCOME ALLOCATION
General partner $ 10,365 $ 9,107
Beneficial unit certificate holders 93,282 901,613
-------------- --------------
Total $ 103,647 $ 910,720
============== ==============
NET INCOME PER BENEFICIAL UNIT
CERTIFICATE $ .08 $ .81
============== ==============
OUTSTANDING BENEFICIAL UNIT
CERTIFICATES 1,117,692 1,117,692
============== ==============
</TABLE>
See notes to financial statements
3
<PAGE>
<TABLE>
<CAPTION>
CAPITAL SENIOR LIVING COMMUNITIES, L.P.
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
(UNAUDITED)
Beneficial Repurchased
Unit Beneficial Limited General
Certificates Unit Certificates Partner Partner Total
------------ ----------------- ------- ------- -----
<S> <C> <C> <C> <C> <C>
BALANCE, December 31, 1998 $ 8,049,146 $ (2,223,106) $ 1 $ 165,446 $ 5,991,487
Net income 93,282 - - 10,365 103,647
Net income distribution
Adjustment (313,482) - - 313,482 -
Distributions (4,013,317) - - (313,482) (4,326,799)
----------- ------------ ------- ---------- -----------
BALANCE, September 30, 1999 $ 3,815,629 $ (2,223,106) $ 1 $ 175,811 $ 1,768,335
=========== ============ ======= ========== ===========
</TABLE>
See notes to financial statements
4
<PAGE>
<TABLE>
<CAPTION>
CAPITAL SENIOR LIVING COMMUNITIES, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine-months ended September 30,
1999 1998
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 103,647 $ 910,720
Adjustments to reconcile net income
to net cash provided by operating activities
Provision for bad debts (23,606) (72,212)
Changes in assets and liabilities
Cash, restricted (1,132) (998)
Accounts receivable 64,481 510,707
Prepaid expenses and other 1,297 4,889
Accrued expenses and other liabilities (181,650) 180,310
-------------- --------------
NET CASH (USED IN) PROVIDED BY
OPERATING ACTIVITIES (36,963) 1,533,416
-------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES
Distributions (4,326,799) (61,881,139)
-------------- --------------
NET CASH USED IN
FINANCING ACTIVITIES (4,326,799) (61,881,139)
-------------- --------------
NET DECREASE IN CASH AND
CASH EQUIVALENTS (4,363,762) (60,347,723)
CASH AND CASH EQUIVALENTS, Beginning of Period 6,111,572 66,818,286
-------------- --------------
CASH AND CASH EQUIVALENTS, End of Period $ 1,747,810 $ 6,470,563
============== ==============
</TABLE>
See notes to financial statements
5
<PAGE>
CAPITAL SENIOR LIVING COMMUNITIES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
Principals of Consolidation
- ---------------------------
The accompanying consolidated balance sheet, as of September 30, 1999,
includes the accounts of the Partnership and its 99 percent-owned subsidiary,
Retirement Partnership, Ltd. All significant intercompany accounts and
transactions have been eliminated in consolidation. The 1 percent minority
interest in Retirement Partnership, Ltd. is not presented separately due to its
immateriality.
The accompanying consolidated balance sheet, as of December 31, 1998,
has been derived from audited consolidated financial statements of the
Partnership for the year-ended December 31, 1998, and the accompanying unaudited
consolidated financial statements, as of September 30, 1999 and 1998, have been
prepared pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and note disclosures normally included in the
annual financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to those rules and
regulations. For further information, refer to the financial statements and
notes thereto for the year ended December 31, 1998 included in the Partnership's
Annual Report on Form 10-K filed with the Securities and Exchange Commission on
March 31, 1999.
In the opinion of management, the accompanying consolidated financial
statements contain all adjustments (all of which were normal recurring accruals)
necessary to present fairly the Partnership's financial position as of September
30, 1999 and 1998. The results of operations for the nine-month period ended
September 30, 1999 are not necessarily indicative of the results for the year
ending December 31, 1999.
2. COMMITMENTS
-----------
The Partnership had $22,090 in certificates of deposit at September 30,
1999 and December 31, 1998, restricted for utility deposits. The certificates of
deposit mature one year from the original purchase date.
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 third fiscal quarter ended September 30, 1999 and 1998, were
$8,513 and $8,628, respectively.
6
<PAGE>
In addition, a 50 percent partner of RLC is chairman of the board of a
bank where the Partnership holds the majority of its operating cash accounts.
4. DISTRIBUTIONS AND WIND UP
-------------------------
On March 12, 1998, a distribution of $61,000,000 was made available to
the BUC Holders, of which $60,711,842 has been disbursed to the BUC Holders and
a $1,802,800 distribution was disbursed to the general partner. In March 1999, a
distribution of $3,731,518 was made available to the BUC Holders, all of which
$3,731,518 has been disbursed to the BUC Holders and a $313,482 distribution was
disbursed to the general partner.
On or before December 31, 1999, a final distribution (after reserves)
will be made to the BUC Holders. The reserve amount will be set up to cover
anticipated costs after December 31, 1998 arising from regulatory Medicaid
and/or Medicare adjustments for the pre-1998 year, and accounting and legal
wind-down expenses. BUC Holders will receive final tax information (Form 1065
K-1) for 1999, and should consult their tax advisors regarding their individual
tax treatments.
Item 2. 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, 1999, the Partnership's assets included a 99
percent 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.
FIRST NINE-MONTHS OF 1999 COMPARED WITH NINE-MONTHS OF 1998
- -----------------------------------------------------------
Rental and other income for the nine-months ended September 30, 1999
and 1998 was $79,375 and $68,676, respectively. The increased revenues of
$10,699 from the nine-months ended September 30, 1999 compared to September 30,
1998 is attributable to a prior year Medicare cost settlement. Total expenses
for the nine-months ended September 30, 1999 and 1998 were $55,358 and $1,497,
respectively. The increased expenses of $53,861 from the nine-months ended
September 30, 1999 and 1998 is attributable to a workers compensation refund
received in 1998. Interest income for the nine-months ended September 30, 1999
and 1998 was $79,630 and $843,541, respectively. Interest income decreased
$763,911 from the nine-months ended September 30, 1998 to 1999 and is due to
decreased cash reserves held in investments resulting from cash distributions
made in 1998 and 1999.
For the three-months ended September 30, 1999 compared with the
three-months ended September 30, 1998, the Partnership's revenue adjustments
decreased from $(22,211) at September 30, 1998 to $(6,330) at September 30, 1999
and was attributable to a decrease in Medicare adjustments. Total expenses for
the three-months ended September 30, 1999 and 1998 were $36,483 and $55,657,
respectively. The decrease in total expenses of $19,174 is attributable to a
decrease in professional fees.
7
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
As of September 30, 1999, the Partnership had cash and cash equivalents
of $1,747,810. It is the intention of the general partner to wind down the
business affairs of the Partnership and to substantially distribute its cash
holdings on or before December 31, 1999, 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 $60,711,842 has been disbursed to the BUC Holders and a $1,802,800
distribution was disbursed to the general partner. The remaining 1998 declared
distribution available for disbursement is $288,158. In March 1999, a
distribution of $3,731,518 was made available to the BUC Holders, all of which
$3,731,518 has been disbursed to the BUC Holders and a $313,482 distribution was
disbursed to the general partner.
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
recognize and utilize dates beyond December 31, 1999. The Partnership has
substantially completed software reprogramming and software and hardware
replacement as of September 30, 1999, with 100 percent completion targeted for
December 31, 1999. The costs of the completed and future modifications and
replacement of hardware and software for the systems of the managing agent is
expected to result in expenditures of approximately $100,000. However, the
Partnership expects no allocation of this cost for completion of the managing
agent's year 2000 initiative. All of the Partnership's systems have been
upgraded with the exception of its general ledger program. The general ledger
program is Year 2000 compliant, however, some of the reporting tools used in
conjunction with the general ledger will not work properly with the current
version of the Partnership's general ledger after December 31, 1999. As a result
of this issue, the Partnership is currently in the process of upgrading its
current general ledger and reporting software and expects this process to be
completed by December 31, 1999. The Partnership presently believes that these
modifications and replacement 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 completed a survey requiring written responses from
its critical service providers in 1999. Based on the responses from the
Partnership's critical service providers, 90 to 95 percent of the respondents
indicated that they are currently Year 2000 compliant and the remaining
respondents indicate that they will be Year 2000 compliant by the end of the
year. The Partnership is therefore not aware of any external critical service
provider with a year 2000 issue that would materially impact the Partnership's
results of operations, liquidity or capital resources. However, the Partnership
has no other means of determining whether or ensuring that its critical service
providers are or will be Year 2000-ready. The inability of critical services
providers to complete their Year 2000 resolution process in a timely fashion
could materially impact the Partnership.
8
<PAGE>
The Partnership has assessed its exposure to operating equipment, and
such exposure it not significant due to the nature of the Partnership's
business.
The Partnership operates in a relatively low technology dependent
industry and does not anticipate any industry or Partnership specific Year 2000
risks beyond those discussed above. Significant Year 2000 problems could result
in the Partnership not having timely the operating information necessary to
efficiently manage and monitor its business activities. This could result in
disruptions in operation, including, among other things, a temporary inability
to process transactions, send invoices or engage in similar normal business
activities. The Partnership does not foresee Year 2000 issues affecting the
day-to-day operations of its senior living communities due to their limited use
of technology and the Partnership's evaluation of their operating equipment. The
Partnership considers the possibility of significant Year 2000 problems, based
on the evaluation of our internal systems and the response from our critical
service providers, to be remote.
The Partnership's management 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 also could materially adversely affect the Partnership. The
Partnership could be subject to litigation or computer systems failure. The
amount of potential liability and cost 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 continue to monitor the status of completion of its Year 2000
initiatives to determine whether such a plan is necessary.
9
<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. Exhibits and reports on Form 8-K
(A) Exhibit
27.1 Financial data schedule
(B) Reports on Form 8-K
None.
10
<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
By: /s/ Keith Johannessen
---------------------------
Keith Johannessen
President
Date: November ___, 1999
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
By: /s/ Keith Johannessen
---------------------------
Keith Johannessen
President
Date: November ___, 1999
12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Financial Data Schedule for Capital Senior Living Communities
</LEGEND>
<CIK> 0000789283
<NAME> Capital Senior Living Communities
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<EXCHANGE-RATE> 1
<CASH> 1,769,900
<SECURITIES> 0
<RECEIVABLES> 34,815
<ALLOWANCES> (29,024)
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,775,835
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 1,768,335
<TOTAL-LIABILITY-AND-EQUITY> 1,775,835
<SALES> 0
<TOTAL-REVENUES> 159,005
<CGS> 0
<TOTAL-COSTS> 55,358
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 103,647
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 103,647
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
