C A P I T A L S E N I O R L I V I N G C O R P O R A T I O N
2 0 0 4 A N N U A L R E P O R T
What’s up
at Capital Senior Living
Corporation?
F I N A N C I A L B E N C H M A R K S
Our total revenues and
operating income rose in 2004.
Total Revenue
(in millions)
100
$93.3
80
60
40
20
0
$66.3
2003
2004
Operating Income
(in millions)
8
7
6
5
4
3
2
1
0
$6.7
$5.8
2003
2004
1.
What’s up:
K E Y O P E R A T I O N A L I N D I C A T O R S
2.
Our number of communities,
resident capacity, occupancy levels
and average rents rose in 2004.
Annual Change in Rent:
Stabilized Communities
5%
4%
3%
2%
1%
0
5%
5%
4%
CSU
IL
AL
I N D U S T R Y
Capital Senior Living
Communities
N U M B E R O F
C O M M U N I T I E S
54
42
R E S I D E N T
R E S I D E N T
C A PA C I T Y
C A PA C I T Y
20,000
20,000
15,000
15,000
60
50
40
30
20
10
0
8,668
8,668
10,000
10,000
6,854
6,854
Source: Company data and from
The State of Seniors Housing 2003
by the American Seniors
Housing Association (ASHA)
2003
2004
Wholly Owned
JV Ownership/Managed
Management Only
5,000
5,000
00
Occupancy Rates
P R O P E R T Y T Y P E
S t a b i l i z e d
S t a b i l i z e d
L e a s e u p
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
4
0
R
A
M
4
0
N
U
J
4
0
T
P
E
S
4
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
4
0
R
A
M
4
0
N
U
J
4
0
T
P
E
S
4
0
C
E
D
3.
What’s up:
D E M O G R A P H I C T R E N D S
Estimated Growth
in Elderly Population
P O P U L AT I O N I N M I L L I O N S
35
30
25
20
15
10
5
0
32.6
27.0
22.3
17.9 18.5 19.6
16.6
4.2
4.9
5.8
6.4
6.7
7.4
8.9
2000 2005 2010 2015 2020 2025 2030
Population Age 75+
Population Age 85+
Source: U.S. Census Bureau
4.
Demand for our services is
forecast to rise for years to come.
Senior Housing
Construction
T O TA L U N I T S B Y P R O P E R T Y T Y P E
70,000
60,000
50,000
40,000
30,000
20,000
10,000
0
1997 1998 1999 2000 2001 2002 2003 2004
Source: American Seniors Housing Association
Seniors Housing Construction Report, 2004
Srs. Apt.
CCRC
AL
IL
Demand for
Senior Living
E L D E R LY P O P U L AT I O N W I T H I N C O M E O V E R $ 1 5 , 0 0 0
)
s
d
n
a
s
u
o
h
t
n
i
(
s
d
e
B
1400
1200
1000
800
600
400
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
Independent Living
Skilled Nursing
Assisted Living
Source: Price Waterhouse LLP/
National Investment Conference
5.
What’s up:
for 2005 and beyond?
O P P O R T U N I T I E S F O R G R O W T H
6.
In a fragmented, consolidating industry,
Capital Senior Living’s financial strength, national presence
and industry expertise make us an attractive partner for
both joint venture acquisition investments and third party
management contracts, giving us opportunities
for continued growth in the years ahead.
Revenues Under
Management
(Q4 2004, annualized, in millions)
200
150
100
50
0
$160
$127
2003
2004
Capital Senior Living
National Platform
Wholly Owned (29)
JV Ownership/Managed (10)
Management Only (15)
7.
TO OUR FELLOW SHAREHOLDERS:
This year’s annual report asks, “What’s up at
Capital Senior Living?” The answer is: performance
in key areas throughout the Company.
Capital Senior Living has historically demonstrated
some of the strongest metrics in the industry, and
2004 was a year of significant accomplishment
for us. It was a year
that our long-term
converged
strategy
with
improving
industry fundamen-
tals. This strategy
positioned us well to
take advantage of both
industry trends and
opportunity during
the year. Focused
management and hard
work have resulted
in higher occupancy
r a t e s , i m p r o v e d
revenues, enhanced
operating income and strong margins while
important
we were completing
corporate initiatives:
J A M E S A . S T R O U D
several
Chairman of the Company
L AW R E N C E A . C O H E N
Chief Executive Officer
• We began the year with the successful completion
of a $34.5 million equity offering, further
strengthening our financial position and providing
a foundation for future growth opportunities.
• We retired $21.8 million of debt.
• We completed the acquisition of CGI Management,
Inc., adding 14 senior living communities to our
portfolio of managed properties and increasing our
capacity by 1,800 residents. We formed a new joint
venture with Prudential Real Estate Investors which
acquired four other communities with approximately
8.
700 residents. We retained long-term operating
contracts for each of these communities.
• We reorganized our national platform for more
efficient regional management, allowing us to
leverage our infrastructure for future growth.
• We took other actions, such as completing the
acquisition of the remaining Triad Entities, to
enjoy the economic benefit of ownership, simplify
our balance sheet and provide greater transparency
for our shareholders.
• We finished the year by refinancing approximately
half of our total debt, consolidating the loans with
one lender while increasing available cash and
eliminating numerous loan covenants.
In all, 2004 was one of significant accomplish-
ment that elevated our market presence, improved
our performance, and better positioned us to
capitalize on the opportunities we see before us.
Industry Dynamics
It is well documented that the U.S. population is
aging, and the average person now lives longer than
ever before. Today, the large baby-boomer genera-
tion is middle-aged and their parents are in their
senior years. During the late 1990s, construction
of senior housing surged to meet this anticipated
demand, creating a highly competitive industry
environment.
Starting in 2000, capital constraints and other
economic factors tempered new construction and,
since then, supply and demand have come back into
equilibrium. Factors including ongoing industry
consolidation, evidenced by several operators exiting
the senior housing market, have contributed to
significant changes in our industry. As a result,
both individual properties and entire portfolios are
in need of new ownership, new management, or
both. This creates a substantial near and long-term
opportunity for Capital Senior Living.
Strategies for Operations and Growth
Our successes are based on key operational and
growth strategies. Rather than being constrictive,
these strategies are adaptable to changing industry
conditions and provide the foundation for
opportunistic growth.
Provide quality, well-managed senior
living facilities at affordable prices in
demographically attractive areas.
At the end of 2004, we owned or managed 54
properties in 20 states, with the capacity to provide
living facilities and amenities to approximately
8,700 residents. The properties are dispersed in
geographic regions with high population densities
that create viable markets for our properties and
allow our residents to be close to their families. This
distribution is supported by our regional manage-
ment infrastructure. Our properties, whose
executive directors average 13 years of industry
experience, had an average monthly rent of
approximately $2,100 at the end of 2004.
Achieve internal growth through
lease-up of existing properties
and new services.
We completed 2004 with 44 stabilized com-
munities, 9 in lease-up, and one more in
renovation/releasing status. The 10 communities
in lease-up and renovation status will provide
incremental growth opportunities as we move
them toward a stabilized status.
Improve occupancy and operating
margins of stabilized communities.
Efficient operations are a hallmark of effective
management teams, and our goal is to attain high
industry metrics while providing quality facilities
and amenities for our residents. It is an ongoing
focus and the results demonstrate the success of our
efforts. Our stabilized communities achieved 90
percent occupancy, which exceeds the industry
averages of 89.5 percent and 87.5 percent for
independent living and assisted living, respectively.
Stabilized operating margins (before property
taxes, insurance, and management fees) were 45
percent compared to industry averages of 43.2
percent for independent living and 39.1 percent
for assisted living. Our annual resident satisfaction
survey underscores the reasons for strong demand
for our properties that make these results possible.
In 2004, we achieved a 95 percent satisfaction
rating from our residents. In fact, one of the best
referral sources we have is current residents.
Participate in acquisitions
or co-investments.
Current industry dynamics make acquisition an
attractive avenue for growth, either directly or with
a financial partner. With our national platform
and strengthened balance sheet, we are able to
evaluate and participate in opportunistic, strategic
acquisitions. In August 2004, we completed the
acquisition of CGI Management, Inc., adding 14
managed properties to our portfolio and providing
options to purchase seven of the properties in the
future at a fixed price. In November 2004, we
acquired an equity interest with management
contracts in four senior living communities
through a joint venture with Prudential Real
Estate Investors. In total, we have acquired 10
senior housing communities through ventures
with Blackstone and Prudential, adding capacity of
1,900 residents and providing ongoing revenue
through long-term management contracts.
We will continue to pursue similar opportunities
that fit well with our management/resident profile
and our long-term strategy.
9.
• Approximately 95 percent of our revenue is from
private-pay sources, allowing us to avoid significant
exposure to government reimbursement issues.
• We are well capitalized with a strong balance sheet.
• We have a national platform that we can leverage
to accommodate future growth.
• Our senior management has 150 years of
combined industry expertise, bringing decades
of successful experience to our operations.
• We have a long-term operating and growth
strategy that has delivered results through
industry cycles.
In summary, 2004 was one of considerable
significance for the Company. It delivered
strong results for the year and provided a
foundation for future growth and opportunity.
We thank you for your ongoing support.
Sincerely,
JAMES A. STROUD
Chairman of the Board
LAWRENCE A. COHEN
Chief Executive Officer
Manage acquired and
other communities.
One of our Company’s greatest strengths is our
industry experience and management expertise.
This provides us the opportunity for high margin
revenue growth through managing acquired
properties or to directly provide management
services for other entities.
Selectively develop communities
for third parties.
Our expertise in developing communities provid-
ing quality facilities that meet the unique needs of
the senior population is well established. As supply
and demand dynamics evolve in our industry, we
see the opportunity to assist other entities, such as
real estate or financial investors, in selectively
developing new senior
living communities.
We anticipate these development activities would
incorporate long-term management contracts of the
new properties.
The Capital Advantage
Capital Senior Living has a number of important
factors that differentiate us from others in the
industry.
• Our significant blended portfolio of 54
wholly-owned properties, joint-venture/managed
properties, and managed-only properties, provides
both equity ownership and long-term revenue.
• Our residents are classified as 85 percent
independent living – the segment of highest
demand in the senior living industry. The other
15 percent are primarily assisted living. Our assisted
living facilities permit residents to receive higher
levels of care without being relocated, allowing
them to stay with us for longer periods.
10.
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
GLORIA M. HOLLAND
Vice President, Finance
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. HARTBERG 1,2,3
Retired First Vice President, Bank One, Texas, N.A.
Dallas, Texas
JILL M. KRUEGER2
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. 1,3
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
11.
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 Investor Services LLC
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
12.
Dallas, Texas 75254
(972) 770-5600
(972) 770-5666 fax
TEXAS REGIONAL OFFICE
2222 Walter Smith Road
Azle, Texas 76020
(817) 237-2496
(817) 237-3496 fax
Form 10-K
A copy of Capital Senior Living Corporation’s
2004 annual report to the SEC on Form
10-K is included herein and 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 10, 2005 at 10 a.m. Central Time
Bent Tree Country Club
5201 Westgrove
Dallas, Texas 75248
(972) 931-3310
10-K
C a p i t a l S e n i o r L i v i n g C o r p o r a t i o n
14160 Dallas Parkway, Suite 300
Dallas, Texas 75254
(972) 770-5600 fax (972) 770-5666
www.capitalsenior.com