(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) Capital Senior Living Capital Senior Living Corporation 2003 Summary Annual Report At Capital Senior Living, we provide communities where seniors love to live. With 42 communities in 20 states, we are one of the nation’s largest operators of residential communities for senior adults. From coast to coast, all our communities have the amenities that help seniors get the most out of their lives. To provide such quality, well-run communities, we strive to be a quality, well-run company. We celebrated our 14th year of senior living operations in 2003. With experienced management in place and a proven long-term strategy in effect, we look forward to serving our seniors for years to come. (cid:1) (cid:1) (cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) Living Well At Capital Senior Living, we believe seniors deserve well-built, well-run, well-located communities that are affordable and enjoyable. Our communities typically offer quality- of-life amenities such as restaurant-style dining, fitness center/exercise rooms and wellness programs, 24-hour staffing, scheduled trans- portation, housekeeping and linen services, libraries with computer access, and a wide array of social and recreational activities. (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 2 Occupancy Rates PROPERTY TYPE Stabilized Lease up 100% 80% 60% 40% 20% 0 1 0 N U J 1 0 P E S 1 0 C E D 2 0 R A M 2 0 N U J 2 0 P E S 2 0 C E D 3 0 R A M 3 0 N U J 3 0 P E S 3 0 C E D 1 0 N U J 1 0 P E S 1 0 C E D 2 0 R A M 2 0 N U J 2 0 P E S 2 0 C E D 3 0 R A M 3 0 N U J 3 0 P E S 3 0 C E D Capital Senior Living’s well-run communities achieve occupancy rates above industry averages. 3 (cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2) Most of the country’s rapidly expanding senior population prefer independent living communities. Capital Senior Living residences deliver the benefits of independent living, with spacious, amenity-filled apartments that typically include features such as kitchen facilities, safety features, access to cable TV and individual climate controls. Living Independently (cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2) Benefits of Independent Living Communities 42.1% 92.3% 94.0% 42.1% of residents feel healthier than they did before. 92.3% of residents would recommend independent living to their friends. 94.0% of residents are 94.0% of residents are satisfied or very satisfied satisfied or very satisfied with their quality of life. with their quality of life. Source: American Seniors Housing Association, 2003 The trend toward independent living continues in the senior community, with many residents attributing improved health and happiness to their new lifestyle. Capital Senior Living’s strategy of providing quality, independent living communities positions it to meet this growing demand. 5 4 (cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3) Living & Learning (cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3) 6 Capital Senior Living creates environments that are mentally, physically and emotionally stimulating for our residents. Our properties include elegant common lounges and libraries, and offer regularly scheduled educational programs, social events, group outings, shopping excursions and exercise classes. Demand for Senior Living ELDERLY POPULATION WITH INCOME OVER $15,000 1400 1200 1000 800 600 400 ) s d n a s u o h t n i ( s d e B 0 0 0 2 5 0 0 2 0 1 0 2 5 1 0 2 0 2 0 2 5 2 0 2 0 3 0 2 Source: Price Waterhouse LLP/National Investment Conference Independent Living Skilled Nursing Assisted Living Learning from nearly 150 years of cumulative industry experience, Capital Senior Living’s management team has positioned the Company to effectively meet the needs of the burgeoning senior housing market for decades to come. 7 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) Because we want our seniors to stay with us for years, we provide affordable, comfortable, sociable residences that they love to call home. Within many of our communities, we offer a continuum of care that can evolve to meet their needs as the years go by. Living for Tomorrow (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 8 Demographics ESTIMATED GROWTH IN ELDERLY POPULATION 40 35 30 25 20 15 10 5 0 ) ) s s n n o o i i l l l l i i m m n n i i ( ( n n o o i i t t a a l l u u p p o o P P 0 0 0 2 5 0 0 2 0 1 0 2 5 1 0 2 0 2 0 2 5 2 0 2 0 3 0 2 Source: U.S. Census Bureau To meet the demand for quality senior living for years to come, Capital Senior Living will continue to pursue our proven strategies of focusing primarily on independent living facilities, maximizing occupancy at our existing properties and pursuing new opportu- nities through selective acquisitions and management contracts. 9 Population Age 75+ Population Age 85+ (cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2) In choosing the location of its communities across the country, Capital Senior Living studies demographic information that helps us give our seniors a home that is convenient for visits from their adult children and, of course, grandchildren. Living in America (cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2) 10 Capital Senior Living operates 42 residence communities in 20 states, with purpose- built properties for nearly 7,000 seniors. This national presence provides a solid platform for growth through acquisitions and management contracts. 11 To our fellow shareholders: Capital Senior Living Corporation celebrated a year of significant accomplishment in 2003 which was highlighted by continued momentum in the lease-up rates of our communities. By the end of the year, we had successfully completed several significant actions that reduced our debt, provided the basis for enhanced organic growth, increased our liquidity, simplified our balance sheet and, combined with our offering of common stock in early 2004, better positioned us to grow through joint venture investments in, and acquisitions of, other senior living communities. These actions were taken within the parameters of our long-term strategy of providing quality, affordable senior living services, with a focus on private-pay, independent living communities. This has been our strategy since we first began senior living operations in 1990, and it has served us well through the years, including the recent turbulent times in our industry. At a time when many senior-living operators have faltered, our occupancy rates and operating margins have outperformed industry averages. With the foundation of our 2003 accomplishments, we expect to continue our progress well into the future. 2003 Accomplishments The Triad Entities. The most significant action we took during 2003 was to acquire the remaining interests in four limited partnerships that were formed to develop senior living communities managed by Capital Senior Living and in which the Company already owned an approximate one percent interest. These partnerships, known as the Triad Entities, included Triad Senior Living II, L.P., Triad Senior Living III, L.P., Triad Senior Living IV, L.P., and Triad Senior Living V, L.P. Collectively, the Triad Entities owned 12 communities with a combined capacity of 1,670 residents. The resident mix is extremely compatible with our focus on independent living, with 95 percent independent living and five percent assisted living. The communities, which generated approximately $21 million of revenue in 2003, are still in lease-up phase, providing the basis for potential future revenue and cash flow increases as the properties reach their stabilized levels. We purchased the interests for approximately $194 million of cash and assumed liabilities. In addition to the potential of increased future revenue and cash flow, the acquisition provided other benefits. Since we now own all the interests in these communities, the transaction served to simplify our balance sheet and made our business model more transparent – an important factor in today’s complex business environment. Blackstone Joint Venture. In January 2002, we announced the formation of a joint venture with an affiliate of Blackstone Real Estate Advisors (“Blackstone”), part of the Blackstone Group, to acquire senior housing prop- erties. The venture is 90 percent owned by Blackstone and 10 percent owned by the Company, with Capital Senior Living receiving continuing income as a partici- pant in the venture and through fees from long-term management contracts. In June 2003, we contributed our Cottonwood Village community, located in Cottonwood, Arizona, to the joint venture. This brought the total number of properties in the venture to six. As a result of the contribution, we retired $7.4 million of long-term debt, received $3.1 million in cash from the venture (a gain of approximately 10 cents per share), and retained a 10 percent ownership interest in the community, along with a long-term management contract and potential incentive payments. (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) LAWRENCE A. COHEN Chief Executive Officer (left) JAMES A. STROUD Chairman of the Company (right) 12 13 “We are serious about senior living and we understand the needs and desires of our residents.” Sale, Manage-back of Atrium of Carmichael. In September 2003, we completed the sale of our Atrium of Carmichael community in Sacramento, California, to a fund managed by Prudential Real Estate Investors for $11.7 million, resulting in a gain of over nine cents per share. We continue to manage the property under a long-term contract. The sale of the property provided additional liquidity, enabled us to retire $7.4 million of debt and reduced our average borrowing costs. Occupancy Rates. During 2003, the occupancy rate on owned and/or managed stabilized communities was an average of 91 percent. This is higher than the industry average occupancy rates of 89 percent in independent living communities and 84 percent in assisted living facilities. At year-end, our leased-to rate for newly opened communities increased to 85 percent from 70 percent at the beginning of the year. These high occupancy rates are indicative of the demand for the attractive, well-managed, quality communities that Capital Senior Living owns and/or operates. Supply and demand for senior living facilities appears to be stabilizing. Construction of new senior living units peaked in 1999, and then experienced a dramatic decline, with 67 percent fewer new units constructed in 2002 than in 1999. After three straight years of decline, there was a small increase in new development during 2003. The majority of new construction built during 1997 through 2003 was for assisted living facilities, rather than for independent living communities. We therefore believe that the demand for our properties should increase faster than the industry average. Second, even though we are principally focused on independent living, we believe in a continuum of care philosophy. Therefore, about 14 percent of our residents take advantage of our assisted living services and continuing care, retirement communities. This allows our residents to remain in their community while having access to additional services as they age. This continuum of care philosophy also allows residents to join our communities at a younger age and stay with us for a longer period of time compared to facilities that only offer a single level of service. Operating Margins. As we have for several years, Capital Senior Living reported some of the best operating margins in our industry. Our 2003 operating margins on stabilized communities of 47 percent exceeded the industry averages of approximately 43 percent for independent living and 39 percent for assisted living communities. We are able to maintain these operating margins while providing affordable, well-run communities because of our experience in the industry and the strength of our management team. This allows us to provide desirable senior living facilities while closely controlling our operating expenses. Industry Dynamics The demographic that we serve, people aged 75 years or older, is the fastest-growing segment of our nation’s population, with the 85-plus age group expected to grow nearly 40 percent this decade. Further, the demand for independent living senior housing, which is our principal focus, is expected to outpace both assisted living and skilled nursing. Retired Debt. An important part of our business strategy has been to retire debt. Overall in 2003, we were able to repay approximately $34 million in debt, and from the proceeds of our stock offering in early 2004, repaid close to another $14 million. Retiring this debt strengthens our balance sheet, provides flexibility in our capital structure and is an important factor as we look toward future growth through joint venture investments and acquisitions. Operating Results Our 2003 business plan called for increasing revenues, maintaining our focus on the lease-up of our recently built communities, sustaining the high occupancy rate of our stabilized properties, and ensuring our operating margins remained above the industry average. With the capable leadership of our senior management team, which has nearly 150 years of combined industry experience, we successfully accomplished each of these critical objectives. Revenues. Our 2003 revenues increased 7.9 percent to $66.3 million from $61.5 million in 2002. Resident revenue in all 42 communities we own and/or manage increased about 13 percent to approximately $122 million in 2003 compared to $109 million in 2002. The revenue growth resulted primarily from increasing occupancy rates in our newly developed properties as they continue their lease-up as well as rate increases in our stabilized properties. There continues to be consolidation in the industry. Within this consolidation we see opportunity to leverage our strengths. Our regional and national presence, combined with our financial strength, should permit us to make opportunistic investments and acquisitions. There is a large number of senior living facilities that are currently individually or privately owned that would be complementary to our regional structure. Additionally, with our experienced, successful management team, we intend to pursue management contracts for other portfolios. The Capital Senior Difference Capital Senior Living is unique in many ways. First, we are serious about senior living and we understand the needs and desires of our residents. We offer quality, purpose-built communities that are physically, mentally and emotionally stimulating. We understand that seniors today value their independence and are more active and alert than ever before. Therefore, many of our communities offer libraries with computers and Internet access as well as fitness centers and wellness programs. We know that seniors desire well-appointed communities and larger apartment units with amenities like kitchens and walk-in closets. They also appreciate the services we offer, including meals, housekeeping, linen service, transportation and an extensive range of activities. Third, we believe that senior housing, particularly in the private-pay sector in which we operate, must be affordable. In 2003, our average monthly rent for stabilized communities was $2,050, making our communities within the means of a large portion of the senior population and their families. Fourth, we clearly understand our markets. With a national platform of 42 owned and/or managed communities in 20 states, we have developed regional operating centers that provide oversight of our communities and assistance in operations and marketing. At the community level, our management works closely with the residents’ council to tailor the activities, meals and social programs specifically for the residents in that location. We have been focused on communities with more than 100 units located in growing markets. Our newly built communities range from 120 to 154 units, allowing us to have a professional on-site staff. In assessing locations, we analyze not only the population of people between 75 and 85 years old, but also consider the 45- to 59-year-old population. This indicates that adult children are living nearby, which is important to our residents and to the success of the community. 14 15 “In the long term, we believe demographics and industry dynamics will fuel our growth for many years to come.” Fifth, and importantly, we have a long-term strategy that has been validated and will continue to be driven by demographics demanding quality, affordable, independent senior living communities. And we have an exceptional, experienced management team that has proven its ability to successfully execute this strategy. In the long term, we believe demographics and industry dynamics will fuel our growth for many years to come. We offer desirable, affordable independent senior housing – the industry segment that is expected to be in the greatest demand and which has experienced the least amount of new construction. Going Forward As we look toward the future, we believe it is promising. Our experience and strategy have permitted us not only to survive, but to be successful during a period in which many senior living operators failed. Now, as the industry is stabilizing and the economy shows signs of improving, we have emerged with a stronger balance sheet, prepared to take advantage of the opportunities we see before us. In the short term, we see organic growth through continued lease-up of our newly developed properties. Additive to this will be revenue growth derived from increasing lease rates to market levels, as properties that were opened during extremely competitive environments stabilize. We are in a financial position, through our joint ventures and because of our strengthened balance sheet, to pursue acquisitions that fit within our operating philosophy and our regional structure. And we will continue to pursue management contracts that fit within our strength as an experienced and successful operator. This future outlook would not be possible without our shareholders, our Board of Directors, management team and employees, as well as our residents and their families. Thank you for your continued support. Sincerely, James A. Stroud Chairman of the Board Lawrence A. Cohen Chief Executive Officer Financial Review 16 17 Report of Ernst & Young LLP, Independent Auditors The Board of Directors and Shareholders Capital Senior Living Corporation We have audited, in accordance with auditing standards generally accepted in the United States, the consolidated balance sheets of Capital Senior Living Corporation at December 31, 2003 and 2002, and the related consolidated statements of income, shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2003 (not presented separately herein) and in our report dated February 23, 2004, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated financial statements is fairly stated in all material respects in relation to the consolidated financial statements from which it has been derived. Dallas, Texas February 23, 2004 18 19 Consolidated Balance Sheets Consolidated Statements of Income Capital Senior Living Corporation In thousands Assets Current assets: Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accounts receivable, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accounts receivable from affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Federal and state income taxes receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Property tax and insurance deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Prepaid expenses and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Due from affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Notes receivable from affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Investments in limited partnerships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Assets held for sale. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Liabilities and Shareholders’ Equity Current liabilities: Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Current portion of notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Customer deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred income from affiliates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Notes payable, net of current portion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Minority interest in consolidated partnership . . . . . . . . . . . . . . . . . . . . . . . . . . . . Commitments and contingencies Shareholders’ equity: Preferred stock, $.01 par value: December 31, 20 03 20 02 $$ 66,,559944 77,,118877 11,,229955 660044 999944 338855 11,,885555 22,,443377 2211,,335511 338800,,111155 66,,555544 –– 44,,998811 11,,776622 22,,339911 44,,117799 $$ 442211,,333333 $$ 22,,115588 66,,661111 2233,,448888 11,,992299 3344,,118866 111122 110022 66,,773366 225555,,554499 228811 $ 11,768 4,490 1,028 651 1,072 399 1,475 1,164 22,047 153,544 7,106 513 86,470 1,238 4,131 3,202 $ 278,251 $ 2,322 4,638 9,715 1,023 17,698 7 1,194 – 140,385 686 Authorized shares – 15,000; no shares issued or outstanding . . . . . . . . . . . . . . – – Common stock, $.01 par value: Authorized shares – 65,000 Issued and outstanding shares – 19,847 and 19,737 in 2003 and 2002, respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total liabilities and shareholders’ equity. . . . . . . . . . . . . . . . . . . . . . . . . . 119988 9922,,333366 3311,,883333 112244,,336677 $$ 442211,,333333 197 91,990 26,094 118,281 $ 278,251 Capital Senior Living Corporation In thousands, except per share dat a Revenues: Resident and health care revenue . . . . . . . . . . . . . . . . . . . Rental and lease income . . . . . . . . . . . . . . . . . . . . . . . . . Unaffiliated management services revenue . . . . . . . . . . . . . Affiliated management services revenue . . . . . . . . . . . . . . . Affiliated development fees . . . . . . . . . . . . . . . . . . . . . . . Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . Expenses: Operating expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . General and administrative expenses . . . . . . . . . . . . . . . . . Provision for bad debts . . . . . . . . . . . . . . . . . . . . . . . . . . Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . Total expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . Income from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . Other income (expense): Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Gain on sale of properties . . . . . . . . . . . . . . . . . . . . . . . . Other income (expense) . . . . . . . . . . . . . . . . . . . . . . . . . Income before income taxes and minority interest in consolidated partnership . . . . . . . . . . . . . . . . . . . . . . . Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . Income before minority interest in consolidated partnership . . . . . . . . . . . . . . . . . . . . . . . . . Minority interest in consolidated partnership . . . . . . . . . . . . Net income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Per share data: Basic earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . Diluted earnings per share . . . . . . . . . . . . . . . . . . . . . . . . Weighted average shares outstanding – basic . . . . . . . . . . . . Weighted average shares outstanding – diluted . . . . . . . . . . Year Ended December 31, 20 03 20 02 20 01 $$ 6622,,556644 –– 333366 33,,223366 118899 6666,,332255 4400,,220088 1122,,334433 116688 77,,779911 6600,,551100 55,,881155 44,,227788 ((1122,,448811)) 66,,775511 33,,661166 77,,997799 ((33,,009988)) $$ $$ $$ 44,,888811 110099 44,,999900 00..2255 00..2255 1199,,778844 1199,,997755 $ 57,574 37 1,069 2,062 740 61,482 32,851 11,557 267 5,846 50,521 10,961 5,968 (10,749) 1,876 69 8,125 (3,015) 5,110 (428) 4,682 0.24 0.24 19,726 19,917 $ $ $ $62,807 3,619 1,971 1,743 403 70,543 37,214 12,002 967 7,088 57,271 13,272 5,914 (14,888) 2,550 (885) 5,963 (1,777) 4,186 (1,430) $ 2,756 $ 0.14 $ 0.14 19,717 19,734 20 These financial statements should be read in conjunction with the Notes to Financial Statements contained in the Company’s Form 10-K filed with the SEC. These financial statements should be read in conjunction with the Notes to Financial Statements contained in the Company’s Form 10-K filed with the SEC. 21 Consolidated Statements of Cash Flows Consolidated Statements of Cash Flows ( c o n t i n u e d ) Capital Senior Living Corporation In thousands Operating Activities Net income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $$ Adjustments to reconcile net income to net cash provided by operating activities: Depreciation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Amortization of deferred financing charges. . . . . . . . . . . Minority interest in consolidated partnership . . . . . . . . . Deferred income from affiliates. . . . . . . . . . . . . . . . . . . Deferred income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred income from liquidation of HCP partnership . . Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . Equity in the (gains) losses of affiliates . . . . . . . . . . . . . . Gain on sale of properties . . . . . . . . . . . . . . . . . . . . . . Writedown of assets held for sale . . . . . . . . . . . . . . . . . . Provision for bad debts. . . . . . . . . . . . . . . . . . . . . . . . . Loss on foreclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . Non-cash compensation. . . . . . . . . . . . . . . . . . . . . . . . Changes in operating assets and liabilities, net of acquisitions: Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . Accounts receivable from affiliates . . . . . . . . . . . . . . Notes receivable . . . . . . . . . . . . . . . . . . . . . . . . . . Property tax and insurance deposits . . . . . . . . . . . . . Prepaid expenses and other. . . . . . . . . . . . . . . . . . . Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . Federal and state income taxes receivable (payable). . . Customer deposits. . . . . . . . . . . . . . . . . . . . . . . . . Net cash provided by operating activities . . . . . . . . Investing Activities Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net cash acquired in acquisition of Triad Entities. . . . . . . . . . Net cash upon consolidation of Triad I . . . . . . . . . . . . . . . . . Proceeds from sale of assets . . . . . . . . . . . . . . . . . . . . . . . . . Proceeds from sale of assets to BRE/CSL. . . . . . . . . . . . . . . . Advances to affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Investments in limited partnerships . . . . . . . . . . . . . . . . . . . Net cash provided by (used in) investing activities. . . . . . . . . . 20 03 44,,999900 77,,779911 – 11,,008800 ((110099)) ((334400)) 9966 ((33,,440066)) 11,,660055 ((221100)) ((66,,775511)) –– 116688 –– –– ((336644)) 4477 –– ((338800)) ((778855)) 11,,112222 ((991177)) ((11,,115522)) 117700 ((111144)) 22,,554411 ((11,,559911)) 112222 883322 55,,445588 33,,008888 ((77,,338811)) 119977 772255 Year Ended December 31, Capital Senior Living Corporation Year Ended December 31, 20 02 20 01 In thousands 20 03 20 02 20 01 Financing Activities Proceeds from notes payable . . . . . . . . . . . . . . . . . . . . . . . . Repayments of notes payable . . . . . . . . . . . . . . . . . . . . . . . . Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash proceeds from the exercise of stock options . . . . . . . . . . Distributions to minority partners . . . . . . . . . . . . . . . . . . . . Deferred financing charges paid . . . . . . . . . . . . . . . . . . . . . Net cash used in financing activities . . . . . . . . . . . . . . . . . . . (Decrease) increase in cash and cash equivalents. . . . . . . . . . . Cash and cash equivalents at beginning of year. . . . . . . . . . . . Cash and cash equivalents at end of year . . . . . . . . . . . . . . . . $$ 55,,111144 ((1188,,448800)) 55,,116699 225566 ((229966)) ((220033)) ((88,,444400)) ((55,,117744)) 1111,,776688 66,,559944 Supplemental Disclosures Cash paid during the year for: Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $$ 1111,,550033 11,,774488 Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $$ 4,823 (6,823) (2,390) 35 (2,127) (806) (7,288) 1,793 9,975 $ 11,768 3,207 (6,119) (1,000) – (7,617) (3) (11,532) (12,900) 22,875 9,975 $ $ $ 9,308 2,374 $ 13,931 744 $ 4,682 $ 2,756 $ 5,846 – 867 428 (556) (500) – 2,805 (69) (1,876) 863 267 – 14 (290) (218) – 805 54 91 (492) 1,332 (20) (121) 13,912 (2,199) – – 5,187 7,287 (22,441) 7,335 (4,831) 6,890 198 891 1,430 (491) 507 – (230) 451 (2,550) – 967 434 – 816 – 570 (640) 717 7 (867) 363 2,583 132 14,934 (2,138) – – 4,787 – (17,700) (1,251) (16,302) 22 These financial statements should be read in conjunction with the Notes to Financial Statements contained in the Company’s Form 10-K filed with the SEC. These financial statements should be read in conjunction with the Notes to Financial Statements contained in the Company’s Form 10-K filed with the SEC. 23 Consolidated Statements of Shareholders’ Equity C o m m o n S t o ck Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Capital Senior Living Corporation I n t h o u s a n d s Shares Balance at January 1, 2001 . . . . . . . . . . . . . . . . . . . . . . . . . 19,717 – Balance at December 31, 2001. . . . . . . . . . . . . . . . . . . . . . . 19,717 20 – – Balance at December 31, 2002 . . . . . . . . . . . . . . . . . . . . . . 19,737 110 Exercise of stock options . . . . . . . . . . . . . . . . . . . . . . . . . Non-cash compensation . . . . . . . . . . . . . . . . . . . . . . . . . Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Exercise of stock options . . . . . . . . . . . . . . . . . . . . . . . . . Other Comprehensive Income: Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Unrealized gain on interest rate lock . . . . . . . . . . . . . . . Total other comprehensive income . . . . . . . . . . . . . . . . . . – – – Balance at December 31, 2003 . . . . . . . . . . . . . . . . . . . . . 1199,,884477 Amount $ 197 – 197 – – – 197 1 – – – $$ 119988 Additional Paid-In Capit al $ 91,935 – 91,935 41 14 – 91,990 346 – – – $$ 9922,,333366 Ret ained Earnings $ 18,656 2,756 21,412 – – 4,682 26,094 – 4,990 749 5,739 $$ 3311,,883333 Tot al $ 110,788 2,756 113,544 41 14 4,682 118,281 347 4,990 749 5,739 $$ 112244,,336677 Company Management Board of Directors LAWRENCE A. COHEN Chief Executive Officer JAMES A. STROUD JAMES A. STROUD Chairman of the Board, Capital Senior Living Corporation Dallas, Texas Chairman of the Company and Secretary LAWRENCE A. COHEN KEITH N. JOHANNESSEN President and Chief Operating Officer RALPH A. BEATTIE Executive Vice President and Chief Financial Officer ROB L. GOODPASTER Vice President, National Marketing DAVID W. BEATHARD Vice President, Operations GLEN H. CAMPBELL Vice President, Development DAVID R. BRICKMAN Vice President and General Counsel JERRY D. LEE Corporate Controller ROBERT F. HOLLISTER Property Controller Vice Chairman of the Board, Capital Senior Living Corporation New York, New York KEITH N. JOHANNESSEN Capital Senior Living Corporation Dallas, Texas CRAIG F. HARTBERG1,2,3 Retired First Vice President, Bank One, Texas, N.A. Dallas, Texas JILL M. KRUEGER 2 President and CEO, Health Resources Alliance, Inc. Oakbrook, Illinois JAMES A. MOORE 1,2,3 President, Moore Diversified Services, Inc. Fort Worth, Texas VICTOR W. NEE, PH.D.1,2,3 Professor Emeritus, Department of Aerospace and Mechanical Engineering, University of Notre Dame Scottsdale, Arizona 1 Member of the Board’s Compensation Committee 2 Member of the Board’s Audit Committee 3 Member of the Board’s Nominating Committee 24 These financial statements should be read in conjunction with the Notes to Financial Statements contained in the Company’s Form 10-K filed with the SEC. 25 Profile Capital Senior Living Corporation is committed to providing quality housing and services. Our goal is to enrich the daily lives of our senior residents by providing an environment that stimulates them physically, mentally, and emotionally. Therefore, each community offers a relaxed atmosphere of warmth and caring that promotes companionship among residents and staff. Each community’s employees are personally committed to serving residents and treating them with dignity and respect. (cid:1) (cid:1) (cid:1) Corporate Information Regional Information CORPORATE HEADQUARTERS EASTERN REGIONAL OFFICE 14160 Dallas Parkway, Suite 300 186 Old Stagecoach Road Dallas, Texas 75254 (972) 770-5600 (972) 770-5666 fax main@capitalsenior.com NEW YORK OFFICE 300 Park Avenue, Suite 1700 New York, New York 10022 (212) 551-1770 (212) 551-1774 fax CORPORATE WEB SITE www.capitalsenior.com Shareholder Information Ridgefield, Connecticut 06877 (203) 894-9406 (203) 894-9407 fax MIDWESTERN REGIONAL OFFICE 3060 Valley Farms Road Indianapolis, Indiana 46214 (317) 280-9404 (317) 280-9405 fax WESTERN REGIONAL OFFICE 5757 Cypress Avenue Carmichael, California 95608 (916) 480-0634 (916) 486-4375 fax STOCK EXCHANGE LISTING SOUTHWESTERN REGIONAL Capital Senior Living Corporation OFFICE Common Stock is listed on the New York Stock 14160 Dallas Parkway, Suite 300 Exchange and trades under the symbol CSU. TRANSFER AGENT AND REGISTRAR Mellon Human Resources & Investor Solutions 85 Challenger Road Ridgefield Park, New Jersey 07660 (800) 635-9270 www.melloninvestor.com AUDITORS Ernst & Young LLP 2121 San Jacinto, Suite 1500 Dallas, Texas 75201 (214) 969-8000 Dallas, Texas 75254 (972) 770-5600 (972) 770-5666 fax Form 10-K A copy of Capital Senior Living Corporation’s 2003 annual report to the SEC on Form 10-K is available without charge upon written request to the Investor Relations Department at corporate headquarters. It can also be found on the Company’s web site, www.capitalsenior.com. Annual Shareholders Meeting May 19, 2004 at 10 a.m. Central Time Addison Conference & Theater Centre 15650 Addison Road Addison, Texas 75001 (972) 452-6200 26 27 Capital Senior Living Corporation 14160 Dallas Parkway, Suite 300 Dallas, Texas 75254 (972) 770-5600 fax (972) 770-5666 www.capitalsenior.com