Sonida Senior Living, Inc.

2015 ANNUAL REPORT

Dear Fellow Shareholders:

Successful execution of the Company’s clear and differentiated strategy produced
growth in all of the Company’s key metrics again in 2015. In 2015, revenue increased
7.4% to $412.2 million resulting in an 8.9% increase in Adjusted EBITDAR to $144.5
million. Our Adjusted EBITDAR Margin improved 70 basis points over the prior
year’s record-high annual margin to establish a new record-high annual margin of
36.6%. On a comparable basis, Adjusted CFFO increased 14.7% to $47.0 million or
$1.64 per share in 2015.*

We differentiate Capital Senior Living as the value leader in providing quality seniors hous-
ing and care at reasonable prices. We believe we are well positioned to drive superior
shareholder value with our substantially all private-pay business model
in a highly-
fragmented and resilient industry which benefits from long-term demographics, need-driven
demand, limited competitive new supply, a solid housing market and a growing economy.
Capital Senior Living is also differentiated by having the highest percentage of wholly-
owned communities among the nation’s top senior living operators, owning greater than
60% of its operated communities. Our prudently financed, owned communities create sig-
nificant real estate value and sustainable cash flow, which we are investing in people, train-
ing, technology, systems, renovations, refurbishments, conversion of units to higher levels
of care, accretive acquisitions and share repurchases, while maintaining prudent reserves.
And, as a larger company in a highly fragmented industry, we benefit from economies of
scale and proprietary systems that provide our operating communities with a competitive
advantage in the geographically concentrated regions in which they operate.

We are focused on reducing attrition and improving our key financial metrics by converting
independent living units to assisted living and memory care units at more than 20 commun-
ities. In 2015, we completed the first phase of conversions, with 400 independent living
units converted to higher levels of care by the middle of 2015. The impact of this first phase
of 400 converted units on occupancy, revenue and net operating income is already out-
standing. On a combined basis, occupancy at these communities grew from 82.4% prior to
conversion to 90.9% at December 31, 2015. Revenue at these communities increased 15.3%
in the fourth quarter of 2015 as compared to the fourth quarter of 2014, while net operating
income increased 16.7%. This first phase of 400 converted units added approximately $0.06
per share to the Company’s CFFO in 2015 and is expected to add approximately $0.20 in
annual CFFO per share when fully stabilized. Another 100 independent living units were
converted to higher levels of care in the second half of 2015, with 200 additional units
expected to be converted to higher levels of care in 2016. These next two phases of con-
versions are expected to add approximately $0.08 per share to CFFO when stabilized.

In 2015, we proactively enhanced the quality of our portfolio through the selective dis-
position of five non-strategic communities and the acquisition of nine high quality senior
living communities in our existing geographies. The dispositions eliminated our operations
in three states, allowing us to sharpen our focus and strengthen our operations in our geo-
graphically concentrated regions, and provided the Company with approximately $26 mil-
lion of cash for acquisitions of newer, high-performing communities. In 2015, we acquired
nine communities for a combined purchase price of $162.5 million. These acquisitions are
expected to generate an initial return on equity invested in excess of 15%, and meaningful
increases in the Company’s revenues, earnings and real estate value, with an increase in
annual CFFO of approximately $0.22 per share.

As evidenced by our consistent strong operating results, competitive new supply continues
to be constrained in our local markets. This confirms our value strategy with our reasonable
average monthly rents acting as an economic barrier to entry for new development. Rents
would have to be considerably higher than current levels to generate a reasonable return on
the cost of development. As such, senior housing construction remains concentrated in
select markets in which the Company has a limited presence.

We believe our competitive advantage that allows us to achieve solid operating results and
disciplined growth is our people and our culture. Our mission is to provide quality senior
living services and care to our residents at reasonable prices. We have talented, long-
tenured, and highly experienced employees who are dedicated to providing quality care to
our residents. With our onsite, regional and corporate teams’ focus and discipline, I am
pleased to report that our 2015 resident satisfaction results were 95%. Our talented employ-
ees give us great confidence in the future of our Company and our ability to create long-
term value for all of our shareholders and other stakeholders.

We are well positioned to add to our success as we expect to achieve continued significant
growth in CFFO, earnings and owned real estate that will lead to a meaningful increase in
shareholder value. Our fundamentals are strong, and I am excited about the Company’s
prospects as we benefit from our substantially all private-pay business model in a highly-
fragmented and resilient
industry with favorable long-term demographics, need-driven
demand, limited competitive new supply, a solid housing market and a growing economy.

We thank you for your support.

Lawrence A. Cohen
Chief Executive Officer

* A Non-GAAP reconciliation is provided on Attachment A. Beginning January 1, 2015, the
Company no longer includes the change in prepaid resident rent as a component of CFFO as it is
a non-economic timing item. On a comparable basis, Adjusted CFFO for full-year 2014 was
$41.0 million, or $1.45 per share.

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-K

(Mark One)

Í ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 2015
Or

‘ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from

to
Commission file number: 1-13445

Capital Senior Living Corporation

(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of
incorporation or organization)
14160 Dallas Parkway, Suite 300
Dallas, Texas
(Address of principal executive offices)

75-2678809
(I.R.S. Employer
Identification No.)
75254
(Zip Code)

Registrant’s telephone number, including area code:
(972) 770-5600

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Common Stock, $.01 par value per share
Preferred Stock Purchase Rights

Name of each exchange
on which registered

New York Stock Exchange
New York Stock Exchange

Indicate by a check mark if
No Í

Act. Yes ‘

Securities registered pursuant to Section 12(g) of the Act:
None

the registrant

is a well-known seasoned issuer, as defined by Rule 405 of

the Securities

Indicate by a check mark if the registrant

is not required to file reports pursuant

to Section 13 or Section 15(d) of the

Act. Yes ‘

No Í

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 Í

No ‘

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter
period that the registrant was required to submit and post such files). Yes Í

No ‘

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant’s knowledge, in definitive proxy statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. Í

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting
company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange
Act.
Large accelerated filer ‘

Smaller reporting company ‘

Accelerated filer Í

Non-accelerated filer ‘
(Do not check if a smaller reporting company)

Indicate by a check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ‘ No Í
The aggregate market value of the 27,820,315 shares of the Registrant’s common stock, par value $0.01 per share (“Common Stock”),
held by non-affiliates (defined to exclude all of the Registrant’s executive officers and directors) on December 31, 2015, based upon the
adjusted closing price of the Registrant’s Common Stock as reported by the New York Stock Exchange on June 30, 2015, was approximately
$681.6 million. As of February 19, 2016, the Registrant had 29,412,484 shares of Common Stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant’s definitive proxy statement pertaining to its 2016 Annual Meeting of Stockholders and filed or to be filed not

later than 120 days after the end of the fiscal year pursuant to Regulation 14A are incorporated herein by reference into Part III of this report.

CAPITAL SENIOR LIVING CORPORATION

TABLE OF CONTENTS

Page
Number

PART I
Item 1.
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 1A. Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 1B. Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 2.
Item 3.
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 4. Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PART II

Item 5. Market for Registrant's Common Equity; Related Stockholder Matters and Issuer Purchases of
Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 6.
Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations . . . .
Item 7A. Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 8.
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . . .
Item 9A. Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 9B. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PART III

Item 10. Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 13. Certain Relationships and Related Transactions, and Director Independence . . . . . . . . . . . . . . .
Principal Accounting Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 14.

1
17
24
24
24
24

25
28
28
49
50
50
50
51

52
52

52
52
52

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

53
Item 15. Exhibits and Financial Statement Schedules
54
Signatures
Index to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-1
Index to Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-1

PART IV

i

ITEM 1. BUSINESS.

Overview

PART I

Capital Senior Living Corporation, a Delaware corporation (together with its subsidiaries, the “Company”),
is one of the largest operators of senior living communities in the United States in terms of resident capacity. The
Company and its predecessors have provided senior living services since 1990. As of December 31, 2015, the
Company operated 121 senior living communities in 23 states with an aggregate capacity of approximately
15,400 residents, including 71 senior living communities which the Company owned and 50 senior living com-
munities the Company leased. As of December 31, 2015, the Company also operated one home care agency.
During 2015, approximately 95% of total revenues for the senior living communities operated by the Company
were derived from private pay sources.

The Company’s operating strategy is to provide value to its senior living residents by providing quality
senior living services at reasonable prices, while achieving and sustaining a strong, competitive position within
its geographically concentrated regions, as well as continuing to enhance the performance of its operations. The
Company provides senior living services to the elderly, including independent living, assisted living, and home
care services. Many of the Company’s communities offer a continuum of care to meet its residents’ needs as they
change over time. This continuum of care, which integrates independent living and assisted living and is bridged
by home care through independent home care agencies or the Company’s home care agency, sustains residents’
autonomy and independence based on their physical and mental abilities.

Website

The Company’s Internet website www.capitalsenior.com contains an Investor Relations section, which
provides links to the Company’s annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports
on Form 8-K, proxy statements, Section 16 filings and any amendments to those reports and filings. These
reports and filings are available through the Company’s Internet website free of charge as soon as reasonably
practicable after such material is electronically filed with or furnished to the Securities and Exchange Commis-
sion (“SEC”).

Industry Background

The senior living industry encompasses a broad and diverse range of living accommodations and supportive

services that are provided primarily to persons 75 years of age or older.

For the elderly who require limited services, independent living residences supplemented at times by home
health care, offers a viable option. Most independent living communities typically offer community living pack-
aged with basic services consisting of meals, housekeeping, laundry, 24-hour staffing, transportation, social and
recreational activities and health care monitoring. Independent living residents typically are not reliant on assis-
tance with activities of daily living (“ADL’s”) although some residents may contract out for those services.

As a senior’s need for assistance increases, care in an assisted living residence is often preferable and more
cost-effective than home-based care or nursing home care. Typically, assisted living represents a combination of
housing and support services designed to aid elderly residents with ADL’s such as ambulation, bathing, dressing,
eating, grooming, personal hygiene and monitoring or assistance with medications. Certain assisted living resi-
dences may also provide assistance to residents with low acuity medical needs, or may offer higher levels of
personal assistance for incontinent residents or residents with Alzheimer’s disease or other cognitive or physical
frailties. Generally, assisted living residents require higher levels of care than residents of independent living
residences and retirement living centers, but require lower levels of care than patients in skilled nursing facilities.
For seniors who need the constant attention of a skilled nurse or medical practitioner, a skilled nursing facility
may be required.

According to the American Seniors Housing Association Seniors Housing Construction Monitor report for
Winter 2016, as of the fourth quarter of fiscal 2015, 19.9% of the age-restricted seniors housing supply in the

1

United States were assisted living units, 22.7% were independent living units, 51.8% were nursing care units, and
5.6% were memory care units.

The senior living industry is highly fragmented and characterized by numerous small operators. Moreover,
the scope of senior living services varies substantially from one operator to another. Many smaller senior living
providers do not operate purpose-built residences, do not have extensive professional training for staff and pro-
vide only limited assistance with ADLs. The Company believes that many senior living operators do not provide
the required comprehensive range of senior living services designed to permit residents to “age in place” within
the community as residents develop further physical or cognitive frailties.

The Company believes that a number of demographic, regulatory and other trends will contribute to the

continued growth in the senior living market, including the following:

Consumer Preference

The Company believes that senior living communities are increasingly becoming the setting preferred by
prospective residents and their families for the care of the elderly. Senior living offers residents greater
independence and allows them to “age in place” in a residential setting, which the Company believes results in a
higher quality of life than that experienced in more institutional or clinical settings.

The likelihood of living alone increases with age. Most of this increase is due to an aging population in
which women outlive men. Societal changes, such as high divorce rates and the growing numbers of persons
choosing not to marry, have further increased the number of Americans living alone. This growth in the number
of elderly living alone has resulted in an increased demand for services that historically have been provided by a
spouse, other family members or live-in caregivers.

Demographics

The primary market for the Company’s senior living services is comprised of persons aged 75 and older.
This age group is one of the fastest growing segments of the United States population. The older population itself
is increasingly older. In 2011, the 75-84 age group (12.8 million) was 16 times larger than in 1900 and the 85 and
over age group (5.7 million) was 40 times larger. The 85 and over population is projected to triple from
5.7 million in 2011 to 14.1 million in 2040. As the number of persons aged 75 and older continues to grow, the
Company believes that there will be corresponding increases in the number of persons who need assistance with
ADLs.

Senior Affluence

The average net worth of senior citizens is typically higher than non-senior citizens, partially as a result of
accumulated equity through home ownership. The Company believes that a substantial portion of the senior
population has historically accumulated significant resources available for their retirement and long-term care
needs. The Company’s target population is comprised of moderate to upper income seniors who have, either
directly or indirectly through familial support, the financial resources to pay for senior living communities,
including an assisted living alternative to traditional long-term care.

Reduced Reliance on Family Care

Historically, the family has been the primary provider of care for seniors. The Company believes that the
increase in the percentage of women in the work force, the reduction of average family size, and overall
increased mobility in society is reducing the role of the family as the traditional caregiver for aging parents. The
Company believes that these factors will make it necessary for many seniors to look outside the family for assis-
tance as they age.

Restricted Supply of Nursing Beds

Several states in the United States have adopted Certificate of Need (“CON”) or similar statutes generally
requiring that, prior to the addition of new skilled nursing beds, the addition of new services, or the making of

2

certain capital expenditures, a state agency must determine that a need exists for the new beds or the proposed
activities. The Company believes that this CON process tends to restrict the supply and availability of licensed
nursing facility beds. High construction costs, limitations on government reimbursement, and start-up expenses
also act to constrain growth in the supply of such facilities. At the same time, nursing facility operators are con-
tinuing to focus on improving occupancy and expanding services to sub-acute patients generally of a younger age
and requiring significantly higher levels of nursing care. As a result, the Company believes that there has been a
decrease in the number of skilled nursing beds available to patients with lower acuity levels and that this trend
should increase the demand for the Company’s senior living communities, including, particularly, the Company’s
assisted living communities.

Cost-Containment Pressures

In response to rapidly rising health care costs, governmental and private pay sources have adopted cost
containment measures that have reduced admissions and encouraged reduced lengths of stays in hospitals and
other acute care settings. Private insurers have begun to limit reimbursement for medical services in general to
predetermined charges, and managed care organizations (such as health maintenance organizations) are attempt-
ing to limit hospitalization costs by negotiating for discounted rates for hospital and acute care services and by
monitoring and reducing hospital use. In response, hospitals are discharging patients earlier and referring elderly
patients, who may be too sick or frail to manage their lives without assistance, to nursing homes and assisted
living residences where the cost of providing care is typically lower than hospital care. In addition, third-party
payors are increasingly becoming involved in determining the appropriate health care settings for their insureds
or clients, based primarily on cost and quality of care. Based on industry data, the typical day-rate in an assisted
living facility is two-thirds of the cost for comparable care in a nursing home.

Operating Strategy

The Company’s operating strategy is to provide value to its senior living residents by providing quality
senior living services at reasonable prices, while achieving and sustaining a strong, competitive position within
its geographically concentrated regions, as well as continuing to enhance the performance of its operations. The
Company is implementing its operating strategy principally through the following methods:

Provide a Broad Range of Quality Personalized Care

Central to the Company’s operating strategy is its focus on providing quality care and services that are per-
sonalized and tailored to meet the individual needs of each community resident. The Company’s residences and
services are designed to provide a broad range of care that permits residents to “age in place” as their needs
change and as they develop further physical or cognitive frailties. By creating an environment that maximizes
resident autonomy and provides individualized service programs, the Company seeks to attract seniors at an ear-
lier stage, before they need the higher level of care provided in a skilled nursing facility. The Company also
maintains a comprehensive quality assurance program designed to ensure the satisfaction of its residents and
their family members. The Company conducts annual resident satisfaction surveys that allow residents at each
community to express whether they are “very satisfied,” “satisfied” or “dissatisfied” with all major areas of a
community, including, housekeeping, maintenance, activities and transportation, food service, security and
management. In 2015 and 2014, the Company achieved 95% and 94%, respectively, overall approval ratings
from the residents’ satisfaction surveys.

Offer Services Across a Range of Pricing Options

The Company’s range of products and services is continually expanding to meet the evolving needs of its
residents. The Company has developed a menu of products and service programs that may be further customized
to serve both the moderate and upper income markets of a particular targeted geographic area. By offering a
range of pricing options that are customized for each target market, the Company believes that it can develop
synergies, economies of scale and operating efficiencies in its efforts to serve a larger percentage of the elderly
population within a particular geographic market.

3

Improve Occupancy Rates

The Company continually seeks to maintain and improve occupancy rates by: (i) retaining residents as they
“age in place” by extending optional care and service programs and converting existing units to higher levels of
care; (ii) attracting new residents through the on-site marketing programs focused on residents and family mem-
bers; (iii) selecting communities in underserved markets; (iv) aggressively seeking referrals from professional
community outreach sources, including area religious organizations, senior social service programs, civic and
business networks, as well as the medical community; and (v) continually refurbishing and renovating its com-
munities.

Improve Operating Efficiencies

The Company seeks to improve operating efficiencies at its communities by actively monitoring and manag-
ing operating costs. By having an established portfolio of communities in geographically concentrated regions
throughout the United States with regional management in place, the Company believes it has established a plat-
form to achieve operating efficiencies through economies of scale in the purchase of bulk items, such as food and
supplies, and in the spreading of fixed costs, such as corporate overhead, over a larger revenue base, and to pro-
vide more effective management supervision and financial controls. The Company’s growth strategy includes
acquiring additional communities within our geographically concentrated regions to achieve further efficiencies.

Emphasize Employee Training and Retention

The Company devotes special attention to the hiring, screening, training, supervising and retention of its
employees and caregivers to ensure that quality standards are achieved. In addition to normal on-site training, the
Company conducts national management meetings and encourages sharing of expertise among managers. The
Company has also implemented a comprehensive online training program that addresses the specific challenges
of working within the senior living environment. The Company’s commitment to the total quality management
concept is emphasized throughout its training programs. This commitment to the total quality management con-
cept means identification of the “best practices” in the senior living market and communication of those “best
practices” to the Company’s executive directors and their staff. The identification of best practices is realized by
a number of means, including: emphasis on regional and executive directors keeping up with professional trade
publications; interaction with other professionals and consultants in the senior living industry through seminars,
conferences and consultations; visits to other properties; leadership and participation at national and local trade
organization events; and information derived from marketing studies and resident satisfaction surveys. This
information is continually processed by regional managers and the executive directors and communicated to the
Company’s employees as part of their training. The Company hires an executive director for each of its commun-
ities and provides them with autonomy, responsibility and accountability. The Company’s staffing of each
community with an executive director allows it to hire more professional employees at these positions, while the
Company’s developed career path helps it to retain the professionals it hires. The Company believes its commit-
ment to and emphasis on employee training and retention differentiates the Company from many of its com-
petitors.

Senior Living Services

The Company provides senior living services to the elderly, including independent living and assisted living
services, and also provides home care services at one of its communities. By offering a variety of services and
encouraging the active participation of the resident and the resident’s family and medical consultants, the Com-
pany is able to customize its service plan to meet the specific needs and desires of each resident. Additionally,
the Company is actively working to expand service offerings through conversions of existing units to higher lev-
els of care. As a result, the Company believes that it is able to maximize customer satisfaction and avoid the high
cost of delivering unnecessary services to residents.

The Company’s operating philosophy is to provide quality senior living communities and services to senior
citizens and deliver a continuum of care for its residents as their needs change over time. This continuum of care,
living and assisted living and is bridged by home care, sustains residents’
which integrates independent

4

autonomy and independence based on their physical and mental abilities. As residents age, in many of the
Company’s communities, they are able to obtain the additional services they need within the same community,
avoiding the disruptive and often traumatic move to a different facility.

Independent Living Services

The Company provides independent living services to seniors who typically do not yet need assistance or
support with ADLs, but who prefer the physical and psychological comfort of a residential community that offers
health care and other services. As of December 31, 2015, the Company owned 34 communities and leased 19
communities that provide independent living services, which include communities that combine assisted living
and other services, with an aggregate capacity for approximately 6,800 residents.

Independent living services provided by the Company include daily meals, transportation, social and recrea-
tional activities, laundry, housekeeping and 24-hour staffing. The Company also fosters the wellness of its resi-
dents by offering access to health screenings (such as blood pressure checks), periodic special services (such as
influenza inoculations), dietary and similar programs, as well as ongoing exercise and fitness classes. Classes are
given by health care professionals to keep residents informed about health and disease management. Subject to
applicable government regulation, personal care and medical services are available to independent living resi-
dents through either the community staff or through the Company’s agency or other independent home care
agencies. The Company’s independent living residents pay a fee ranging from $1,100 to $6,600 per month, in
general, depending on the specific community, program of services, size of the unit and amenities offered. The
Company’s contracts with its independent living residents are generally for a term of one year and are typically
terminable by either party, under certain circumstances, upon providing 30 days’ notice.

Assisted Living Services

The Company offers a wide range of assisted living care and services, including personal care services, 24-
hour staffing, support services, and supplemental services. As of December 31, 2015, the Company owned 57
communities and leased 41 communities that provide assisted living services, which include communities that
combine independent living and other services, with an aggregate capacity for approximately 8,600 residents.
The residents of the Company’s assisted living residences generally need help with some or all ADLs, but do not
require the more acute medical care traditionally given in nursing homes. Upon admission to the Company’s
assisted living communities, and in consultation with the resident, the resident’s family and medical consultants,
each resident is assessed to determine his or her health status, including functional abilities and need for personal
care services. The resident also completes a lifestyles assessment to determine the resident’s preferences. From
these assessments, a care plan is developed for each resident to ensure that all staff members who render care
meet the specific needs and preferences of each resident where possible. Each resident’s care plan is reviewed
periodically to determine when a change in care is needed.

The Company has adopted a philosophy of assisted living care that allows a resident to maintain a dignified
independent lifestyle. Residents and their families are encouraged to be partners in the residents’ care and to take
as much responsibility for their well-being as possible. The basic types of assisted living services offered by the
Company include the following:

Personal Care Services. These services include assistance with ADLs such as ambulation, bathing,

dressing, eating, grooming, personal hygiene, and monitoring or assistance with medications.

Support Services. These services include meals, assistance with social and recreational activities,

laundry services, general housekeeping, maintenance services and transportation services.

Supplemental Services. These services include extra transportation services, personal maintenance,
extra laundry services, and special care services, such as services for residents with certain forms of
dementia. Certain of these services require extra charges.

The Company’s assisted living residents pay a fee ranging from $1,400 to $8,400 per month, in general,
depending on the specific community, the level of personal care services, support service and supplemental serv-

5

ices provided to the resident, size of the unit and amenities offered. The Company’s contracts with its assisted
living residents are generally for a term of one year and are typically terminable by either party, under certain
circumstances, upon 30 days’ notice unless state law stipulates otherwise.

The Company maintains programs and special units at some of its assisted living communities for residents
with certain forms of dementia, which provide the attention, care and services needed to help those residents
maintain a higher quality of life. Specialized services include assistance with ADLs, behavior management and
life skills based activities programs, the goal of which is to provide a normalized environment that supports resi-
dents’ remaining functional abilities. Whenever possible, residents assist with meals, laundry and housekeeping.
Special units for residents with certain forms of dementia are located in a separate area of the community and
have their own dining facilities, resident lounge areas, and specially trained staff. The special care areas are
designed to allow residents the freedom to ambulate as they wish, while keeping them safely contained within a
secure area with a minimum of disruption to other residents. Resident fees for these special units are dependent
on the size of the unit, the design type and the level of services provided.

Home Care Services

As of December 31, 2015, the Company provided home care services to clients at one senior living commun-
ity through the Company’s home care agency and made home care services available to clients at a majority of
its senior living communities through third-party providers. The Company believes that the provision of private
pay, home care services is an attractive adjunct to its independent living services because it allows the Company
to make available more services to its residents as they age in place and increases the length of stay in the
Company’s communities. In addition, the Company makes available to residents certain customized physician,
dentistry, podiatry and other health-related rehabilitation and therapy services that may be offered by third-party
providers.

Operating Communities

The table below sets forth certain information with respect to senior living communities operated by the

Company as of December 31, 2015.

Community

Owned:

Resident Capacity1

Units

IL

AL

Total Ownership

Commencement
of Operations2

Aspen Grove . . . . . . . . . . . . . . . . . . . . . . . . . Lamberville, MI
Autumn Glen . . . . . . . . . . . . . . . . . . . . . . . . Greencastle, IN
Brookview Meadows . . . . . . . . . . . . . . . . . . Green Bay, WI
Canton Regency . . . . . . . . . . . . . . . . . . . . . . Canton, OH
Chateau of Batesville . . . . . . . . . . . . . . . . . . Batesville, IN
Country Charm . . . . . . . . . . . . . . . . . . . . . . . Greenwood, IN
Indianapolis, IN
Country Charm Village . . . . . . . . . . . . . . . .
Courtyards at Lake Granbury . . . . . . . . . . . . Granbury, TX
Good Tree Retirement and Memories . . . . . Stephenville, TX
Gramercy Hill . . . . . . . . . . . . . . . . . . . . . . . . Lincoln, NE
Greenbriar Village . . . . . . . . . . . . . . . . . . . .
Harbor Court
Heritage at the Plains at Parish

. . . . . . . . . . . . . . . . . . . . . . . . Rocky River, OH

Indianapolis, IN

Homestead . . . . . . . . . . . . . . . . . . . . . . . . Oneonta, NY

Independence Village of Peoria . . . . . . . . . . Peoria, IL
Keystone Woods Assisted Living . . . . . . . . Anderson, IN
Laurel Hurst Laurel Woods . . . . . . . . . . . . . Columbus, NC
Marquis Place of Elkhorn . . . . . . . . . . . . . . . Elkhorn, NE
Middletown . . . . . . . . . . . . . . . . . . . . . . . . . Middletown, OH
Montclair . . . . . . . . . . . . . . . . . . . . . . . . . . . Springfield, MO
North Pointe . . . . . . . . . . . . . . . . . . . . . . . . . Anderson, SC

6

83
78 —
52 —
64
78 — 156
145
239
162
41 —
43
90 — 166
73 — 105
81 — 112
75
20
60
146
103
62
124 — 134
122 — 144

53

97

166 —

108
158
50 —
102
70
64 —
61 —
158
70 —

70
60
69
75
178 —
70

83
64
156
307
43
166
105
112
95
165
134
144

150
166
70
130
69
75
178
70

100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%

100%
100%
100%
100%
100%
100%
100%
100%

03/14
06/13
01/15
03/91
10/12
10/12
10/12
03/12
03/12
10/98
08/15
12/12

05/15
08/00
07/11
10/11
03/13
09/13
12/12
10/11

Community

Resident Capacity1

Units

IL

AL

Total Ownership

Commencement
of Operations2

Park-Oak Grove . . . . . . . . . . . . . . . . . . . . . . Roanoke, VA
River Crossing Assisted Living . . . . . . . . . . Charlestown, IN
Riverbend Independent and Assisted

Jeffersonville, IN
Irving, TX

Living . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Remington at Valley Ranch . . . . . . . . . . . . .
Residence of Chardon . . . . . . . . . . . . . . . . . Chardon, OH
Sugar Grove . . . . . . . . . . . . . . . . . . . . . . . . . Plainfield, IN
Summit Place . . . . . . . . . . . . . . . . . . . . . . . . Anderson, SC
Summit Point Living . . . . . . . . . . . . . . . . . . Macedonia, OH
Towne Centre Retirement Community . . . . Merrillville, IN
Vintage Gardens . . . . . . . . . . . . . . . . . . . . . . St. Joseph, MO
Waterford at Baytown . . . . . . . . . . . . . . . . . Baytown, TX
Waterford at Bridle Brook . . . . . . . . . . . . . . Mahomet, IL
Waterford at College Station . . . . . . . . . . . . College Station, TX
Waterford at Columbia . . . . . . . . . . . . . . . . . Columbia, SC
Waterford at Corpus Christi . . . . . . . . . . . . . Corpus Christi, TX
Waterford at Deer Park . . . . . . . . . . . . . . . . Deer Park, TX
Waterford at Dillon Pointe . . . . . . . . . . . . . . Spartanburg, SC
Waterford at Edison Lakes . . . . . . . . . . . . . . South Bend, IN
Waterford at Fairfield . . . . . . . . . . . . . . . . . . Fairfield, OH
Waterford at Fitchburg . . . . . . . . . . . . . . . . . Fitchburg, WI
Waterford at Fort Worth . . . . . . . . . . . . . . . . Fort Worth, TX
Waterford at Hartford . . . . . . . . . . . . . . . . . . Hartford, WI
Waterford at Hidden Lake . . . . . . . . . . . . . . Canton, GA
Waterford at Highland Colony . . . . . . . . . . .
Jackson, MS
Waterford at Ironbridge . . . . . . . . . . . . . . . . Springfield, MO
Waterford at Levis Commons . . . . . . . . . . . Toledo, OH
Waterford at Mansfield . . . . . . . . . . . . . . . . Mansfield, OH
Waterford at Mesquite . . . . . . . . . . . . . . . . . Mesquite, TX
Waterford at Oakwood . . . . . . . . . . . . . . . . . Oakwood, GA
Waterford at Oshkosh . . . . . . . . . . . . . . . . . Oshkosh, WI
Waterford at Pantego . . . . . . . . . . . . . . . . . . Pantego, TX
Waterford at Plano . . . . . . . . . . . . . . . . . . . . Plano, TX
Waterford at Plymouth . . . . . . . . . . . . . . . . . Plymouth, WI
Waterford at Richmond Heights . . . . . . . . . Richmond Heights,

OH

Waterford at Thousand Oaks . . . . . . . . . . . . San Antonio, TX
Waterford at Virginia Beach . . . . . . . . . . . . Virginia Beach, VA
Waterford at West Bend . . . . . . . . . . . . . . . . West Bend, WI
Waterford on Cooper . . . . . . . . . . . . . . . . . . Arlington, TX
Waterford on Huebner . . . . . . . . . . . . . . . . . San Antonio, TX
Wellington at Arapaho . . . . . . . . . . . . . . . . . Richardson, TX
Wellington at Conroe . . . . . . . . . . . . . . . . . . Conroe, TX
Wellington at Dayton . . . . . . . . . . . . . . . . . . Dayton, OH
Wellington at Kokomo . . . . . . . . . . . . . . . . . Kokomo, IN
Wellington at North Richland Hills . . . . . . . North Richland

93 — 164
100 — 106

158 —

112 — 114
127
52
42 —
116
48
164
89
19
91
98
126
163
75
163
210
92
44
102
129
132
18
78 — 120
53 —
87
117

141 —

50 —

56

144 —

120
55
36 —
96
116
45
120
140 —
82 — 150
177 —
151
53
39 —
98
49 —

143 —
119
142 —
118
44
163
146
97
45
118
176 —
153
70
64 —
90 — 109
119
135
69 —

143 —
57
109
82

110

117
135 —

148
119
111 — 138
40 —
41
105 — 151
119
140
44
149

135 —
57
113
35
25
94
146
99
96 —

164
106

114
158
52
164
108
224
238
136
150
120
87
141
56
144
55
141
140
150
177
53
98
143
142
207
142
176
70
109
143
166
82

227
135
138
41
151
135
170
60
240
99

100%
100%

100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%

100%
100%
100%
100%
100%
100%
100%
100%
100%
100%

08/14
12/13

03/12
04/12
10/12
12/13
10/11
08/11
03/91
05/13
03/15
09/15
03/12
11/00
10/12
11/00
12/13
12/00
11/00
10/13
06/00
05/15
12/14
11/00
06/01
04/09
10/00
09/99
09/13
08/14
12/00
12/00
08/14

04/09
05/00
10/15
05/15
03/12
04/99
05/02
03/12
08/08
07/11

Hills, TX

119

139 —

139

100%

01/02

7

Community

Resident Capacity1

Units

IL

AL

Total Ownership

Commencement
of Operations2

Whispering Pines Village . . . . . . . . . . . . . . . Columbiana, OH
Whitcomb House . . . . . . . . . . . . . . . . . . . . . Milford, MA
Woodlands of Columbus . . . . . . . . . . . . . . . Columbus, OH
Woodlands of Hamilton . . . . . . . . . . . . . . . . Hamilton, OH
Woodlands of Shaker Heights . . . . . . . . . . . Shaker Heights, OH
Woodview Assisted Living . . . . . . . . . . . . . Fort Wayne, IN
Wynnfield Crossing Assisted Living . . . . . . Rochester, IN

88
68
24
68 —
87
116 — 117
87 — 100
66 —
85
88 — 130
79
59 —

112
87
117
100
85
130
79

100%
100%
100%
100%
100%
100%
100%

7,172 3,836 5,247

9,083

Leased:

Ventas:

Amberleigh . . . . . . . . . . . . . . . . . . . . . . . . Buffalo, NY
Cottonwood Village . . . . . . . . . . . . . . . . . Cottonwood, AZ
Crown Pointe . . . . . . . . . . . . . . . . . . . . . . Omaha, NE
Georgetowne Place . . . . . . . . . . . . . . . . . . Fort Wayne, IN
Harrison at Eagle Valley3 . . . . . . . . . . . . .
Indianapolis, IN
Independence Village of East Lansing . . . East Lansing, MI
Independence Village of Olde Raleigh . . Raleigh, NC
Rose Arbor . . . . . . . . . . . . . . . . . . . . . . . . Maple Grove, MN
Villa Santa Barbara . . . . . . . . . . . . . . . . . Santa Barbara, CA
West Shores . . . . . . . . . . . . . . . . . . . . . . . Hot Springs, AR
Whitley Place . . . . . . . . . . . . . . . . . . . . . . Keller, TX

HCN:

Azalea Trails Assisted Living . . . . . . . . . Tyler, TX
Buffalo Creek Assisted Living . . . . . . . . . Waxahachie, TX
Dogwood Trails Assisted Living . . . . . . . Palestine, TX
Hawkins Creek Assisted Living . . . . . . . . Longview, TX
Hearth at Prestwick . . . . . . . . . . . . . . . . . Avon, IN
Hearth at Windermere . . . . . . . . . . . . . . . Fishers, IN
Heritage Oaks Assisted Living . . . . . . . . . Conroe, TX
Keepsake Village of Columbus . . . . . . . . Columbus, IN
Magnolia Court Assisted Living . . . . . . . Nacogdoches, TX
Martin Crest Assisted Living . . . . . . . . . . Weatherford, TX
Pecan Point Assisted Living . . . . . . . . . . . Sherman, TX
Santa Fe Trails Assisted Living . . . . . . . . Cleburne, TX
Spring Lake Assisted Living . . . . . . . . . . Paris, TX
Spring Meadows Libertyville . . . . . . . . . . Libertyville, IL
Spring Meadows Naperville . . . . . . . . . . . Naperville, IL
Spring Meadows at Summit . . . . . . . . . . . Summit, NJ
Spring Meadows at Trumbull . . . . . . . . . . Trumbull, CT
Stonefield Assisted Living . . . . . . . . . . . . McKinney, TX
Walnut Creek Assisted Living . . . . . . . . . Mansfield, TX
Waterford at Ames . . . . . . . . . . . . . . . . . . Ames, IA
Waterford at Miracle Hills . . . . . . . . . . . . Omaha, NE
Waterford at Roxbury Park . . . . . . . . . . . Omaha, NE
Waterford at Van Dorn . . . . . . . . . . . . . . . Lincoln, NE
Waterford at Woodbridge . . . . . . . . . . . . Plattsmouth, NE

8

267
163
135
159
124
149
167
144
125
137

387 —
58
131
85
80
242 —
138 —
161 —
177 —

86
64
131
47 —

87
62
42
65

70
56 —
70
56 —
75
65 —
56 —
70
136 — 150
128 — 150
90
75 —
48
46 —
70
56 —
86
56 —
70
56 —
86
56 —
70
56 —
45
208
198
45
186
197
98
89 —
42
148
136
90
75 —
56 —
70
60 — 122
70
63 —
70
65 —
84
69 —
45
40 —

387
189
165
242
138
161
177
173
126
173
65

70
70
75
70
150
150
90
48
70
86
70
86
70
253
231
98
178
90
70
122
70
70
84
45

N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A

N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A

07/15
10/13
10/12
10/12
10/12
12/13
07/11

01/92
03/91
08/00
10/05
03/91
08/00
08/00
06/06
08/00
08/00
02/08

09/10
09/10
09/10
09/10
08/06
08/06
09/10
08/06
09/10
09/10
09/10
09/10
09/10
04/11
04/11
04/11
04/11
09/10
09/10
02/06
03/06
02/06
02/06
02/06

Community

HCP:

. . . . . . . . . . . . . . . Sacramento, CA

Atrium of Carmichael
Charlotte Square . . . . . . . . . . . . . . . . . . . . Charlotte, NC
Chesapeake Place . . . . . . . . . . . . . . . . . . . Chesapeake, VA
Covenant Place of Abilene . . . . . . . . . . . . Abilene, TX
Covenant Place of Burleson . . . . . . . . . . . Burleson, TX
Covenant Place of Waxahachie . . . . . . . . Waxahachie, TX
Crescent Place . . . . . . . . . . . . . . . . . . . . . Cedar Hill, TX
Crescent Point
. . . . . . . . . . . . . . . . . . . . . Cedar Hill, TX
Crosswood Oaks . . . . . . . . . . . . . . . . . . . . Sacramento, CA
Good Place . . . . . . . . . . . . . . . . . . . . . . . . North Richland

Hills, TX

Greenville Place . . . . . . . . . . . . . . . . . . . . Greenville, SC
Meadow Lakes . . . . . . . . . . . . . . . . . . . . . North Richland

Hills, TX

Myrtle Beach Estates . . . . . . . . . . . . . . . . Myrtle Beach, SC
Tesson Heights . . . . . . . . . . . . . . . . . . . . . St. Louis, MO
Veranda Club . . . . . . . . . . . . . . . . . . . . . . Boca Raton, FL

Resident Capacity1

Units

IL

AL

Total Ownership

Commencement
of Operations2

155 —

151
120 — 125
103 — 153
55
50 —
80
74 —
55
50 —
80 —
85
111
121

134 —
127 —

72 —
80
102 — 153

145 —

119
108 — 142
72
134
184
97
129
186

155
125
153
55
80
55
85
134
127

80
153

145
142
206
226

N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A

N/A
N/A

N/A
N/A
N/A
N/A

01/92
12/06
12/06
08/04
08/04
08/04
11/05
08/04
01/92

08/04
12/06

08/04
12/06
10/98
01/92

6,333
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,378 6,792 8,624 15,416

5,206 2,956 3,377

Total

(1) Independent living (IL) residences and assisted living (AL) residences based on community licensure.

(2) Indicates the date on which the Company acquired or commenced operating the community. The Company
operated certain of its communities pursuant to management agreements prior to acquiring interests in or
leasing the communities.

(3) The Company’s home care agency is on-site at The Harrison at Eagle Valley community.

Management Contracts

The Company was party to a series of property management agreements (the “SHPIII/CSL Management
Agreements”) with three joint ventures (collectively “SHPIII/CSL”) owned 90% by Senior Housing Partners III,
L.P. (“SHPIII”), a fund managed by Prudential Investment Management, Inc. (“Prudential Investment”) and 10%
by the Company, which collectively owned and operated three senior living communities. The SHPIII/CSL
Management Agreements were for initial terms of ten years from the date the certificate of occupancy was issued
and extended until various dates through January 2019. The SHPIII/CSL Management Agreements generally
provided for management fees of 5% of gross revenue plus reimbursement for costs and expenses related to the
communities. On June 30, 2014, the Company acquired 100% of the member interests in these joint ventures. For
additional information refer to Note 4, “Acquisitions”, within the notes to consolidated financial statements.

Growth Strategies

The Company believes that the fragmented nature of the senior living industry and the limited capital
resources available to many small, private operators provide an attractive opportunity for the Company to expand
its existing base of senior living operations. The Company believes that its current operations with geographic
concentrations throughout the United States serve as the foundation on which the Company can build senior liv-
ing networks in targeted geographic markets and thereby provide a broad range of high quality care in a cost-
efficient manner.

9

The following are the principal elements of the Company’s clear and differentiated growth strategy:

Organic Growth

The Company intends to continue to focus on its occupancy, rents and operating margins of its stabilized
communities. The Company continually seeks to improve occupancy rates and increase average rents by:
(i) retaining residents as they “age in place” by extending optional care and service programs and converting
existing units to higher levels of care; (ii) attracting new residents through the on-site marketing programs
focused on residents and family members and utilizing technology to enhance Internet marketing;
(iii) aggressively seeking referrals from professional community outreach sources, including area religious orga-
nizations, senior social service programs, civic and business networks, as well as the medical community; and
(iv) continually refurbishing and renovating its communities.

Expansion and Conversions of Existing Communities

The Company intends to increase levels of care and capacity at certain of its existing communities through
expansion and/or conversions of certain units. Increasing our levels of care and capacity is expected to increase
revenue and operating income while meeting the needs of our residents who have an average age of 85 years.

Pursue Strategic Acquisitions

The Company intends to continue to pursue acquisitions of senior living communities. Through strategic
acquisitions, joint venture investments, or facility leases, the Company seeks to acquire communities in existing
geographically concentrated regions as a means to increase market share, augment existing clusters, strengthen
its ability to provide a broad range of care, and create operating efficiencies. As the industry continues to con-
solidate, the Company believes that opportunities will arise to acquire other senior living companies. The Com-
pany believes that the current fragmented nature of the senior living industry, combined with the Company’s
financial resources, geographically concentrated regions, and extensive contacts within the industry, should pro-
vide it with the opportunity to evaluate a number of potential acquisition opportunities in the future. In reviewing
acquisition opportunities, the Company will consider, among other things, geographic location, competitive
climate, reputation and quality of management and communities, and the need for renovation or improvement of
the communities.

Expand Referral Networks

The Company intends to continue to develop relationships with local and regional hospital systems, man-
aged care organizations and other referral sources to attract new residents to the Company’s communities. In
certain circumstances these relationships may involve strategic alliances or joint ventures. The Company believes
that such arrangements or alliances, which could range from joint marketing arrangements to priority transfer
agreements, will enable it to be strategically positioned within the Company’s markets if, as the Company
believes, senior living programs become an integral part of the evolving health care delivery system.

Operations

Centralized Management

The Company centralizes its corporate and other administrative functions so that the community-based
management and staff can focus their efforts on resident care. The Company maintains centralized accounting,
finance, human resources, training and other operational functions at its national corporate office in Dallas,
Texas. The Company also has a corporate office in New York, New York. The Company’s corporate offices are
generally responsible for: (i) establishing Company-wide policies and procedures relating to, among other things,
resident care and operations; (ii) performing accounting functions; (iii) developing employee training programs
and materials; (iv) coordinating human resources; (v) coordinating marketing functions; and (vi) providing
strategic direction. In addition, financing, development, construction and acquisition activities, including feasi-
bility and market studies, and community design, development, and construction management are conducted at
the Company’s corporate offices.

10

The Company seeks to control operational expenses for each of its communities through proprietary
expense management systems, standardized management
reporting and centralized controls of capital
expenditures, asset replacement tracking, and purchasing for larger and more frequently used supplies and food
inventories through group purchasing programs. Community expenditures are monitored by regional and district
managers who are accountable for the resident satisfaction and financial performance of the communities in their
region.

Regional Management

The Company provides oversight and support to each of its senior living communities through experienced
regional and district managers. A district manager will generally oversee the marketing and operations of three to
seven communities clustered in a small geographic area. A regional manager will generally cover a larger geo-
graphic area consisting of eight to thirteen communities. In most cases, the district and regional managers will
office out of the Company’s senior living communities. Currently, there are district and regional managers based
in the East, Central Plains, South Central, Dallas, Indiana, Midwest, Texas, Southwest, and West regions.

The executive director at each community reports to a regional or district manager. The regional and district
managers report on the operations of each community directly to senior management at the Company’s corporate
office. The district and regional managers make regular site visits to each of their assigned communities. The site
visits involve a physical plant inspection, quality assurance review, staff training, financial and systems audits,
regulatory compliance, and team building.

Community-Based Management

An executive director manages the day-to-day operations at each senior living community, including over-
sight of the quality of care, delivery of resident services, and monitoring of financial performance. The executive
director is also responsible for all personnel, including food service, maintenance, activities, security, assisted
living, housekeeping, and, where applicable, nursing or care services. In most cases, each community also has
department managers who direct the environmental services, nursing or care services, business management
functions, dining services, activities, transportation, housekeeping, and marketing functions.

The assisted living component of the senior living communities is managed by licensed professionals, such
as a nurse and/or a licensed administrator. These licensed professionals have many of the same operational
responsibilities as the Company’s executive directors, but their primary responsibility is to oversee resident care.
Many of the Company’s senior living communities are part of a campus setting, which include independent liv-
ing. This campus arrangement allows for cross-utilization of certain support personnel and services, including
administrative functions that result in greater operational efficiencies and lower costs than freestanding facilities.

The Company actively recruits personnel to maintain adequate staffing levels at its existing communities
and hires new staff for new or acquired communities prior to opening. The Company has adopted comprehensive
recruiting and screening programs for management positions that utilize corporate office team interviews and
thorough background and reference checks. The Company offers system-wide training and orientation for all of
its employees at the community level through a combination of Company-sponsored seminars and conferences.

Quality Assurance

Quality assurance programs are coordinated and implemented by the Company’s corporate and regional
staff. The Company’s quality assurance is targeted to achieve maximum resident and resident family member
satisfaction with the care and services delivered by the Company. The Company’s primary focus in quality con-
trol monitoring includes routine in-service training and performance evaluations of caregivers and other support
employees. Additional quality assurance measures include:

Resident and Resident’s Family Input. On a routine basis, the Company provides residents and their fam-
ily members the opportunity to provide valuable input regarding the day-to-day delivery of services. On-site
management at each community has fostered and encouraged active resident councils and resident committees
who meet independently. These resident bodies meet with on-site management on a monthly basis to offer input
and suggestions as to the quality and delivery of services. Additionally, at each community the Company con-

11

ducts annual resident satisfaction surveys to further monitor the satisfaction levels of both residents and their
family members. These surveys are sent directly to a third party firm for tabulation, then to the Company’s
corporate headquarters for distribution to onsite staff. In fiscal 2015 and 2014, the Company achieved 95% and
94%, respectively, approval ratings from its residents. For any departmental area of service scoring below 90%, a
corrective action plan is developed jointly by on-site, regional and corporate staff for immediate implementation.

Regular Community Inspections. Each community is inspected, on at least a quarterly basis, by regional
and/or corporate staff. Included as part of this inspection is the monitoring of the overall appearance and main-
tenance of the community interiors and grounds. The inspection also includes monitoring staff professionalism
and departmental reviews of maintenance, housekeeping, activities, transportation, marketing, administration and
food and health care services, if applicable. The inspections also include observing residents in their daily activ-
ities and the community’s compliance with government regulations.

Independent Service Evaluations. The Company engages the services of outside professional independent
consulting firms to evaluate various components of the community operations. These services include mystery
shops, competing community analysis, pricing recommendations and product positioning. This provides
management with valuable unbiased product and service information. A plan of action regarding any areas
requiring improvement or change is implemented based on information received. At communities where health
care is delivered, these consulting service reviews include the on-site handling of medications, record keeping
and general compliance with all governmental regulations.

Sales and Marketing

Most communities are staffed by on-site sales directors and additional marketing/sales staff depending on
the community size and occupancy status. The primary focus of the on-site marketing staff is to create awareness
of the Company and its services among prospective residents and family members, professional referral sources
and other key decision makers. These efforts incorporate an aggressive marketing plan to include monthly, quar-
terly and annual goals for leasing, new lead generation, prospect follow up, community outreach and resident and
family referrals. Additionally, the marketing plan includes a calendar of promotional events and a comprehensive
media program. On-site marketing departments perform a competing community assessment quarterly. Corporate
and regional marketing directors monitor the on-site marketing departments’ effectiveness and productivity on a
weekly basis. Routine detailed marketing department audits are performed on annual monthly basis or more
frequently if deemed necessary. Corporate and regional personnel assist in the development of marketing strat-
egies for each community to address the continuously changing resident profile and maintain a focus on building
brand awareness and increasing Internet website traffic and leads. The marketing strategies developed utilize the
implementation of application program interface systems with certain website and Internet referral partners and
the production of creative media and necessary marketing collateral. The Company has also implemented
numerous Internet web-based initiatives to attract prospects including certain e-mail and website triggers prompt-
ing interactive invitations with on-going follow-ups, as well as a nurturing program to actively engage prospects
throughout the marketing/sales cycle. Ongoing sales training of on-site marketing/sales staff is implemented by
corporate and regional marketing directors.

Government Regulation

Changes in existing laws and regulations, adoption of new laws and regulations and new interpretations of
existing laws and regulations could have a material effect on the Company’s operations. Failure by the Company
to comply with applicable regulatory requirements could have a material adverse effect on the Company’s busi-
ness, financial condition, cash flows, and results of operations. Accordingly, the Company monitors legal and
regulatory developments on local and national levels.

The health care industry is subject to extensive regulation and frequent regulatory change. At this time, no
federal laws or regulations specifically regulate assisted or independent living residences. While a number of
states have not yet enacted specific assisted living regulations, certain of the Company’s assisted living commun-
ities are subject to regulation, licensing, CON and permitting by state and local health care and social service
agencies and other regulatory authorities. While such requirements vary from state to state, they typically relate
to staffing, physical design, required services and resident characteristics. The Company believes that such regu-

12

lation will increase in the future. In addition, health care providers are receiving increased scrutiny under anti-
trust laws as integration and consolidation of health care delivery increases and affects competition. The Compa-
ny’s communities are also subject to various zoning restrictions, local building codes, and other ordinances, such
as fire safety codes. Failure by the Company to comply with applicable regulatory requirements could have a
material adverse effect on the Company’s business, financial condition, and results of operations. Regulation of
the assisted living industry is evolving. The Company is unable to predict the content of new regulations and
their effect on its business. There can be no assurance that the Company’s operations will not be adversely
affected by regulatory developments.

The Company believes that its communities are in substantial compliance with applicable regulatory require-
ments. However, unannounced surveys or inspections may occur annually or bi-annually, or following a regulator’s
receipt of a complaint about a community. In the ordinary course of business, one or more of the Company’s commun-
ities could be cited for deficiencies resulting from such inspections or surveys. Most inspection deficiencies are
resolved through an agreed-to plan of corrective action relating to the community’s operations, but the reviewing
agency typically has the authority to take further action against a licensed or certified community, which could result in
the imposition of fines, imposition of a provisional or conditional license, suspension or revocation of a license,
suspension or denial of admissions, loss of certification as a provider under federal health care programs or imposition
of other sanctions, including criminal penalties. Loss, suspension or modification of a license may also cause us to
default under our loan or lease agreements and/or trigger cross-defaults. Sanctions may be taken against providers or
facilities without regard to the providers’ or facilities’ history of compliance. We may also expend considerable
resources to respond to federal and state investigations or other enforcement action under applicable laws or regu-
lations. To date, none of the deficiency reports received by us has resulted in a suspension, fine or other disposition that
has had a material adverse effect on our revenues. However, any future substantial failure to comply with any appli-
cable legal and regulatory requirements could result in a material adverse effect to our business as a whole. In addition,
states Attorneys General vigorously enforce consumer protection laws as those laws relate to the senior living industry.
State Medicaid Fraud and Abuse Units may also investigate assisted living communities even if the community or any
of its residents do not receive federal or state funds.

Under the Americans with Disabilities Act of 1990 (“ADA”), all places of public accommodation are
required to meet certain federal requirements related to access and use by disabled persons. A number of addi-
tional federal, state and local laws exist that also may require modifications to existing and planned properties to
permit access to the properties by disabled persons. While the Company believes that its communities are sub-
stantially in compliance with present requirements or are exempt therefrom, if required changes involve a greater
expenditure than anticipated or must be made on a more accelerated basis than anticipated, additional costs
would be incurred by the Company. Further legislation may impose additional burdens or restrictions with
respect to access by disabled persons, the costs of compliance with which could be substantial.

The Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), in conjunction with the
federal regulations promulgated thereunder by the Department of Health and Human Services, has established,
among other requirements, standards governing the privacy of certain protected and individually identifiable
health information (“PHI”) that is created, received or maintained by a range of covered entities. HIPAA has also
established standards governing uniform health care transactions, the codes and identifiers to be used by the
covered entities and standards governing the security of certain electronic transactions conducted by covered
entities. Penalties for violations can range from civil money penalties for errors and negligent acts to criminal
fines and imprisonment for knowing and intentional misconduct.

In addition, the Company is subject to various federal, state and local environmental laws and regulations.
Such laws and regulations often impose liability whether or not the owner or operator knew of, or was respon-
sible for, the presence of hazardous or toxic substances. The costs of any required remediation or removal of
these substances could be substantial and the liability of an owner or operator as to any property is generally not
limited under such laws and regulations and could exceed the property’s value and the aggregate assets of the
owner or operator. The presence of these substances or failure to remediate such contamination properly may
also adversely affect the owner’s ability to sell or rent the property, or to borrow using the property as collateral.
Under these laws and regulations, an owner, operator or an entity that arranges for the disposal of hazardous or
toxic substances, such as asbestos-containing materials, at a disposal site may also be liable for the costs of any

13

required remediation or removal of the hazardous or toxic substances at the disposal site. In connection with the
ownership or operation of its properties, the Company could be liable for these costs, as well as certain other
costs, including governmental fines and injuries to persons or properties. The Company has completed Phase I
environmental audits of substantially all of the communities in which the Company owns interests, typically at
the time of acquisition, and such audits have not revealed any material environmental liabilities that exist with
respect to these communities.

Under various federal, state and local environmental laws, ordinances and regulations, a current or previous
owner or operator of real estate may be required to investigate and clean up hazardous or toxic substances or
petroleum product releases at such property, and may be held liable to a governmental entity or to third parties
for property damage and for investigation and clean-up costs. The Company is not aware of any environmental
liability with respect to any of its owned, leased or managed communities that the Company believes would have
a material adverse effect on its business, financial condition, or results of operations. The Company believes that
its communities are in compliance in all material respects with all federal, state and local laws, ordinances and
regulations regarding hazardous or toxic substances or petroleum products. The Company has not been notified
by any governmental authority, and is not otherwise aware of any material non-compliance, liability or claim
relating to hazardous or toxic substances or petroleum products in connection with any of the communities the
Company currently operates.

The Company believes that the structure and composition of government and, specifically, health care regu-
lations will continue to change and, as a result, regularly monitors developments in the law. The Company
expects to modify its agreements and operations from time to time as the business and regulatory environments
change. While the Company believes it will be able to structure all its agreements and operations in accordance
with applicable law, there can be no assurance that its arrangements will not be successfully challenged.

Competition

The senior living industry is highly competitive, and the Company expects that all segments of the industry
will become increasingly competitive in the future. Although there are a number of substantial companies active
in the senior living industry and in the markets in which the Company operates, the industry continues to be very
fragmented and characterized by numerous small operators. The Company primarily competes with national
operators such as Brookdale Senior Living Inc., Holiday Retirement Corp., and Five Star Quality Care, Inc. and
other regional and local independent operators. The Company believes that the primary competitive factors in the
senior living industry are: (i) location; (ii) reputation for and commitment to a high quality of service; (iii) quality
on-site staff and support service offerings (such as food services); (iv) fair price for services provided; and
(v) physical appearance and amenities associated with the communities. The Company competes with other
companies providing independent living, assisted living, skilled nursing, home health care, and other similar
service and care alternatives, some of whom may have greater financial resources than the Company. Because
seniors tend to choose senior living communities near their homes, the Company’s principal competitors are
other senior living and long-term care communities in the same geographic areas as the Company’s communities.
The Company also competes with other health care businesses with respect to attracting and retaining nurses,
technicians, aides and other high quality professional and non-professional employees and managers.

Employees

As of December 31, 2015, the Company employed 7,384 persons, of which 3,871 were full-time employees
(92 of whom are located at the Company’s corporate offices) and 3,513 were part-time employees. None of the
Company’s employees are currently represented by a labor union and the Company is not aware of any union
organizing activity among its employees. The Company believes that its relationship with its employees is good.

14

Executive Officers and Other Key Employees of the Registrant

The following table sets forth certain information concerning each of the Company’s executive officers and

other key employees as of December 31, 2015:

Name

Lawrence A. Cohen . . . . . . . . . . . . . . . . . . . . . .

Keith N. Johannessen . . . . . . . . . . . . . . . . . . . . .
Carey P. Hendrickson . . . . . . . . . . . . . . . . . . . . .

David R. Brickman . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . .
David W. Beathard, Sr.
Gregory P. Boemer.
. . . . . . . . . . . . . . . . . . . . . .
Gary E. Fernandez . . . . . . . . . . . . . . . . . . . . . . .

Joseph G. Solari . . . . . . . . . . . . . . . . . . . . . . . . .
Gloria Holland . . . . . . . . . . . . . . . . . . . . . . . . . .
Glen H. Campbell . . . . . . . . . . . . . . . . . . . . . . . .
Christopher H. Lane . . . . . . . . . . . . . . . . . . . . . .
Robert F. Hollister . . . . . . . . . . . . . . . . . . . . . . .

Age

62

59
53

57

68
48
52

51
48
71
44
60

Position(s) with the Company

Chief Executive Officer and Vice Chairman
of the Board
President and Chief Operating Officer
Senior Vice President and Chief Financial
Officer
Senior Vice President, Secretary and
General Counsel
Senior Vice President — Operations
Vice President — Operations
Vice President — National Sales and
Marketing
Vice President — Corporate Development
Vice President — Finance
Vice President — Asset Management
Vice President — Financial Reporting
Property Controller

Lawrence A. Cohen has served as one of our directors since November 1996 and as Vice Chairman of the
Board since November 1996. He has served as our Chief Executive Officer since May 1999 and was our Chief
Financial Officer from November 1996 to May 1999. From 1991 to 1996, Mr. Cohen served as President and
Chief Executive Officer of Paine Webber Properties Incorporated. Mr. Cohen serves on the boards of various
charitable organizations and is active in several industry associations. Mr. Cohen was a founding member and is
Chairman of the American Seniors Housing Association and serves on the Operator Advisory Board of the
National Investment Center for the Seniors Housing & Care Industry. He received an LL.M. in Taxation from
New York University School of Law, a JD from St. John’s University School of Law, and a BBA in Accounting
from The George Washington University. Mr. Cohen has had positions with businesses involved in senior living
for 31 years.

Keith N. Johannessen has been a director since 1999. Mr. Johannessen has served as our President since
1994 and Chief Operating Officer since 1999. He previously served as our Executive Vice President from May
1993 to February 1994. He has more than 37 years of operational experience in seniors housing. He began his
senior housing career in 1978 with Life Care Services Corporation and then joined Oxford Retirement Services,
Inc as Executive Vice President. Mr. Johannessen later served as Senior Manager in the health care practice of
Ernst & Young LLP prior to joining the Company in 1993. He has served on the State of the Industry and Model
Assisted Living Regulations Committees of the American Seniors Housing Association. Mr. Johannessen holds a
Bachelor of Arts degree.

Carey P. Hendrickson joined the Company as Senior Vice President and Chief Financial Officer in May
2014. From 2010 through 2014, he served as the Senior Vice President/Chief Financial Officer and Treasurer of
Belo Corp., a television company that owned and operated network-affiliated television stations and their asso-
ciated websites (“Belo”). Prior to serving in such capacity, Mr. Hendrickson served Belo in various roles includ-
ing Senior Vice President/Chief Accounting Officer, Vice President/Human Resources, Vice President/Investor
Relations and Corporate Communications, and Vice President/Strategic & Financial Planning. He began his
career with KPMG LLP and was the director of financial planning for Republic Financial Services before joining
Belo in 1992. Mr. Hendrickson received a BBA in Accounting from Baylor University and a Master of Business
Administration in Finance from the University of Texas in Arlington.

David R. Brickman is currently the Senior Vice President, Secretary, and General Counsel of the Company.
He served as Vice President and General Counsel of the Company and its predecessors since July 1992 and has

15

served as Secretary of the Company since May 2007. From 1989 to 1992, Mr. Brickman served as in-house
counsel with LifeCo Travel Management Company, a corporation that provided travel services to U.S. corpo-
rations. Mr. Brickman earned a Juris Doctor and Masters of Business Administration from the University of
South Carolina and a Masters in Health Administration from Duke University. He currently serves on the Board
of Advisors for the Southern Methodist University Corporate Counsel Symposium. He is also a member of the
National Center for Assisted Living In-house Counsel Roundtable Task Force, as well as the Long-Term Care
Risk Legal Forum. Mr. Brickman has either practiced law or performed in-house counsel functions for 29 years.

David W. Beathard, Sr. is currently the Senior Vice President — Operations of the Company. He served as
Vice President — Operations of the Company and its predecessors from August 1996 to June 2013. From 1992
to 1996, Mr. Beathard owned and operated a consulting firm, which provided operational, marketing, and feasi-
bility consulting regarding senior housing facilities. Mr. Beathard has been active in the operational, sales and
marketing, and construction oversight aspects of senior housing for 42 years.

Gregory P. Boemer joined the Company in October 2001 as a Regional Manager and has served as Vice
President — Operations since June 2013. Prior to joining the Company, Mr. Boemer was a Regional Manager for
Alterra Healthcare. Mr. Boemer is a graduate of Texas A&M University and attended the University of North
Texas with a focus in Gerontology. Mr. Boemer has been active in all aspects of senior housing for 19 years.

Gary E. Fernandez joined the Company in October 2001 as a Regional Sales and Marketing Director and
served in such capacity until being promoted to his current position of Vice President — National Sales and
Marketing in January 2014. In addition to his role as Regional Sales and Marketing Director with the Company,
he served as Director of Corporate Marketing and Media from 2002 to 2003. Prior to joining the Company, he
served as National Sales and Marketing Director with Hearthstone Assisted Living from 1999 to 2001. He also
served as Director of Advertising with Alterra Healthcare from 1997 to 1999. He is a graduate of the University
of Wisconsin — Milwaukee and has been active in the senior housing industry for 18 years.

Joseph G. Solari joined the Company as Vice President — Corporate Development in September 2010.
Mr. Solari has more than 18 years of experience originating, structuring, negotiating and executing the acquis-
ition, sale and divestiture of healthcare real estate and real estate operating companies. Prior to joining the
Company, from 2007 to 2009, Mr. Solari was Managing Director, Acquisitions for Ventas, Inc., where he was
responsible for the firm’s real estate investment activities in the seniors housing and skilled nursing industries.
Prior to Ventas, Inc., from 1999 to 2007, Mr. Solari spent eight years in the healthcare investment banking group
of Houlihan Lokey, where he was responsible for the origination and execution of merger and acquisition, private
placement and financial restructuring engagements for the firm’s healthcare clients, with particular focus on
facility-based, healthcare services companies. Mr. Solari earned his Masters in Business Administration degree
from Virginia Commonwealth University.

Gloria M. Holland has served as Vice President — Finance of the Company since June 2004. From 2001 to
2004, Ms. Holland served as Assistant Treasurer and a corporate officer for Aurum Technology, Inc., a privately
held company that provided technology and outsourcing to community banks. From 1996 to 2001, Ms. Holland
held positions in Corporate Finance and Treasury at Brinker International, an owner and operator of casual dining
restaurants. From 1989 to 1996, Ms. Holland was a Vice President in the Corporate Banking division of
NationsBank and predecessor banks. Ms. Holland received a BBA in Finance from the University of Mississippi
in 1989.

Glen H. Campbell has served as Vice President — Asset Management of the Company since September
1997. From 1990 to 1997 Mr. Campbell served as Vice President of Development for Greenbrier Corporation, an
assisted living development and management company. From 1985 to 1990 Mr. Campbell served as Director of
Facility Management for Retirement Corporation of America. Mr. Campbell has been active in the design and
development of retirement communities for 43 years.

Christopher H. Lane, a Certified Public Accountant, joined the Company in December 2008 and currently
serves as Vice President — Financial Reporting. Prior to joining the Company, Mr. Lane served as a Senior
Manager in the financial services audit practice of KPMG LLP. Mr. Lane earned a Masters in Accounting from
Texas Tech University and is a member of the American Institute of Certified Public Accountants, Texas Society
of Certified Public Accountants and Institute of Management Accountants.

16

Robert F. Hollister, a Certified Public Accountant, has served as Property Controller for the Company and
its predecessors since April 1992. From 1985 to 1992, Mr. Hollister was Chief Financial Officer and Controller
of Kavanaugh Securities, Inc., a National Association of Securities Dealers broker dealer. Mr. Hollister is a
member of the American Institute of Certified Public Accountants.

Subsidiaries

Capital Senior Living Corporation is the parent company of several direct and indirect subsidiaries.
Although Capital Senior Living Corporation and its subsidiaries are referred to collectively for ease of reference
in this Form 10-K as the Company, these subsidiaries are separately incorporated and maintain their legal
existence separate and apart from the parent, Capital Senior Living Corporation.

ITEM 1A. RISK FACTORS.

Our business involves various risks and uncertainties. When evaluating our business the following
information should be carefully considered in conjunction with the other information contained in our periodic
filings with the SEC. Additional risks and uncertainties not known to us currently or that currently we deem to be
immaterial also may impair our business operations. If we are unable to prevent events that have a negative effect
from occurring, then our business may suffer. Negative events are likely to decrease our revenue, increase our
costs, make our financial results poorer and/or decrease our financial strength, and may cause our stock price to
decline.

We have significant debt and our failure to generate cash flow sufficient to cover required interest and
principal payments could result in defaults of the related debt.

As of December 31, 2015, we had mortgage and other indebtedness, excluding deferred loan costs, totaling
approximately $777.1 million. We cannot assure you that we will generate cash flow from operations or receive
proceeds from refinancings, other financings or the sales of assets sufficient to cover required interest and princi-
pal payments. Any payment or other default could cause the applicable lender to foreclose upon the communities
securing the indebtedness with a consequent loss of income and asset value to us. Further, because some of our
mortgages contain cross-default and cross-collateralization provisions, a payment or other default by us with
respect to one community could affect a significant number of our other communities.

We have significant lease obligations and our failure to generate cash flows sufficient to cover these lease
obligations could result in defaults under the lease agreements.

As of December 31, 2015, we leased 50 communities with future lease obligations totaling approximately
$570.3 million, with minimum lease obligations of $64.4 million in fiscal 2016. We cannot assure you that we
will generate cash flow from operations or receive proceeds from refinancings, other financings or the sales of
assets sufficient to cover these required operating lease obligations. Any payment or other default under any such
lease could result in the termination of the lease, with a consequent loss of income and asset value to us. Further,
because our leases contain cross-default provisions, a payment or other default by us with respect to one leased
community could affect all of our other leased communities with related lessors. Certain of our leases contain
various financial and other restrictive covenants, which could limit our flexibility in operating our business. Fail-
ure to maintain compliance with the lease obligations as set forth in our lease agreements could have a material
adverse impact on us. The termination of a significant portion of our facility lease agreements could have a mate-
rial adverse effect on our business, financial condition, cash flows, and results of operations.

Our failure to comply with financial covenants and other restrictions contained in debt instruments and
lease agreements could result in the acceleration of the related debt or lease or in the exercise of other
remedies.

Our outstanding indebtedness and leases are secured by our communities, and, in certain cases, a guaranty
by our Company or by one or more of our subsidiaries. Therefore, an event of default under the outstanding
indebtedness or leases, subject to cure provisions in certain instances, would give the respective lenders or les-

17

sors, as applicable, the right to declare all amounts outstanding to be immediately due and payable, terminate the
lease, or foreclose on collateral securing the outstanding indebtedness and leases.

There are various financial covenants and other restrictions in certain of our debt instruments and lease

agreements, including provisions which:

• require us to meet specified financial tests at the subsidiary company level, which include, but are not

limited to, tangible net worth requirements;

• require us to meet specified financial tests at the community level, which include, but are not limited to,

lease coverage tests; and

• require consent for changes in control of us.

If we fail to comply with any of these requirements, then the related indebtedness or lease obligations could
become due and payable prior to their stated dates. We cannot assure that we could pay these debt or lease
obligations if they became due prior to their stated dates.

We will require additional financing and/or refinancings in the future and may issue equity securities.

Our ability to obtain such financing or refinancing on terms acceptable to us could have a material adverse
effect on our business, financial condition, cash flows, and results of operations. Our ability to meet our long-
term capital requirements, including the repayment of certain long-term debt obligations, will depend, in part, on
our ability to obtain additional financing or refinancings on acceptable terms from available financing sources,
including through the use of mortgage financing, joint venture arrangements, by accessing the debt and/or equity
markets and possibly through operating leases or other types of financing, such as lines of credit. Turmoil in the
financial markets can severely restrict the availability of funds for borrowing and may make it more difficult or
costly for us to raise capital. There can be no assurance that financing or refinancings will be available or that, if
available, will be on terms acceptable to us. Moreover, raising additional funds through the issuance of equity
securities could cause existing stockholders to experience dilution and could adversely affect the market price of
our common stock. Disruptions in the financial markets may have a significant adverse effect on the market
value of our common stock and other adverse effects on us and our business. Our inability to obtain additional
financing or refinancings on terms acceptable to us could delay or eliminate some or all of our growth plans,
necessitate the sales of assets at unfavorable prices or both, and would have a material adverse effect on our
business, financial condition, cash flows, and results of operations.

Increases in market interest rates could significantly increase the costs of our floating rate debt and lease
obligations, which could adversely affect our liquidity and earnings.

Our floating rate debt and lease obligations and any future indebtedness and lease obligations, if applicable,
exposes us to interest rate risk. Therefore, increases in prevailing interest rates could increase in the future our
interest or lease payment obligations and could in the future have a material adverse effect on our business,
financial condition, cash flows, and results of operations.

We cannot assure that we will be able to effectively manage our growth.

We intend to expand our operations, directly or indirectly, through the acquisition of existing senior living
communities and/or the expansion of some of our existing senior living communities. The success of our growth
strategy will depend, in large part, on our ability to implement these plans and to effectively operate these
communities. If we are unable to manage our growth effectively, our business, financial condition, cash flows,
and results of operations may be adversely affected.

We cannot assure that we will attempt to, or be able to, acquire additional senior living communities, or
expand existing senior living communities.

The acquisition of existing communities or other businesses involves a number of risks. Existing commun-
ities available for acquisition frequently serve or target different markets than those presently served by us. We
may also determine that renovations of acquired communities and changes in staff and operating management

18

personnel are necessary to successfully integrate those communities or businesses into our existing operations.
The costs incurred to reposition or renovate newly acquired communities may not be recovered by us. In under-
taking acquisitions, we also may be adversely impacted by unforeseen liabilities attributable to the prior oper-
ators of those communities or businesses, against whom we may have little or no recourse. The success of our
acquisition strategy will be determined by numerous factors, including our ability to identify suitable acquisition
candidates; the competition for those acquisitions; the purchase price; the requirement to make operational or
structural changes and improvements; the financial performance of the communities or businesses after acquis-
ition; our ability to finance the acquisitions; and our ability to integrate effectively any acquired communities or
businesses into our management, information, and operating systems. We cannot assure that our acquisition of
senior living communities or other businesses will be completed at the rate currently expected, if at all, or if
completed, that any acquired communities or businesses will be successfully integrated into our operations.

Our ability to successfully expand existing senior living communities will depend on a number of factors,
including, but not limited to, our ability to acquire suitable sites at reasonable prices; our success in obtaining
necessary zoning, licensing, and other required governmental permits and authorizations; and our ability to con-
trol construction costs and accurately project completion schedules. Additionally, we anticipate that
the
expansion of existing senior living communities may involve a substantial commitment of capital for a period of
time of two years or more until the expansions are operating and producing revenue, the consequence of which
could be an adverse impact on our liquidity.

Termination of resident agreements and resident attrition could affect adversely our revenues and earnings.

State regulations governing assisted living facilities require written resident agreements with each resident.
Most of these regulations also require that each resident have the right to terminate the resident agreement for
any reason on reasonable notice. Consistent with these regulations, the resident agreements signed by us allow
residents to terminate their lease upon 0 to 30 days’ notice. Thus, we cannot contract with residents to stay for
longer periods of time, unlike typical apartment leasing arrangements that involve lease agreements with speci-
fied leasing periods of up to a year or longer. Our resident agreements generally provide for termination of the
lease upon death or allow a resident to terminate their lease upon the need for a higher level of care not provided
at the community. If a large number of residents elected to or otherwise terminate their resident agreements at or
around the same time, then our revenues and earnings could be adversely affected. In addition, the advanced age
of our average resident means that the resident turnover rate in our senior living facilities may be difficult to
predict.

We largely rely on private pay residents and circumstances that adversely affect the ability of the elderly to
pay for our services could have a material adverse effect on us.

Approximately 95% of our total revenues from communities that we operated were attributable to private
pay sources and approximately 5% of our revenues from these communities were attributable to reimbursements
from Medicaid during fiscal 2015. We expect to continue to rely primarily on the ability of residents to pay for
our services from their own or family financial resources. Unfavorable economic conditions in the housing,
financial, and credit markets, inflation, or other circumstances that adversely affect the ability of the elderly to
pay for our services could have a material adverse effect on our business, financial condition, cash flows, and
results of operations.

The senior living services industry is very competitive and some competitors may have substantially greater
financial resources than us.

The senior living services industry is highly competitive, and we expect that all segments of the industry
will become increasingly competitive in the future. We compete with other companies providing independent
living, assisted living, home health care and other similar services and care alternatives. We also compete with
other health care businesses with respect to attracting and retaining nurses, technicians, aides and other high
quality professional and non-professional employees and managers. Although we believe there is a need for
senior living communities in the markets where we operate residences, we expect that competition will increase
from existing competitors and new market entrants, some of whom may have substantially greater financial

19

resources than us. In addition, some of our competitors operate on a not-for-profit basis or as charitable orga-
nizations and have the ability to finance capital expenditures on a tax-exempt basis or through the receipt of
charitable contributions, neither of which are available to us. Furthermore, if the development of new senior liv-
ing communities outpaces the demand for those communities in the markets in which we have senior living
communities, those markets may become saturated. Regulation in the independent and assisted living industry is
not substantial. Consequently, development of new senior living communities could outpace demand. An over-
supply of those communities in our markets could cause us to experience decreased occupancy, reduced operat-
ing margins and lower profitability.

We rely on the services of key executive officers and the loss of these officers or their services could have a
material adverse effect on us.

We depend on the services of our executive officers for our management. The loss of some of our executive
officers and the inability to attract and retain qualified management personnel could affect our ability to manage
our business and could adversely affect our business, financial condition, cash flows, and results of operations.

A significant increase in our labor costs could have a material adverse effect on us.

We compete with other providers of senior living services with respect to attracting and retaining qualified
management personnel responsible for the day-to-day operations of each of our communities and skilled person-
nel responsible for providing resident care. A shortage of nurses or trained personnel may require us to enhance
our wage and benefits package in order to compete in the hiring and retention of these personnel or to hire more
expensive temporary personnel. We also will be dependent on the available labor pool of semi-skilled and
unskilled employees in each of the markets in which we operate. No assurance can be given that our labor costs
will not increase, or that, if they do increase, they can be matched by corresponding increases in rates charged to
residents. Any significant failure by us to control our labor costs or to pass on any increased labor costs to resi-
dents through rate increases could have a material adverse effect on our business, financial condition, cash flows,
and results of operations.

We are subject to risks related to the provision for employee health care benefits and recent health care
reform legislation.

We use a combination of insurance and self-insurance for employee health care plans. We record expenses
under these plans based on estimates of the costs of expected claims, administrative costs and stop-loss pre-
miums. These estimates are then adjusted to reflect actual costs incurred. Actual costs under these plans are sub-
ject to variability depending primarily upon participant enrollment and demographics, the actual costs of claims
and whether stop-loss insurance covers these claims. In the event that our cost estimates differ from actual costs,
we could incur additional unplanned health care costs which could have a material adverse effect on our busi-
ness, financial condition, cash flows, and results of operations.

In March 2010, comprehensive health care reform legislation under the Patient Protection and Affordable
Care Act (HR 3590) and the Health Care Education and Affordability Reconciliation Act (HR 4872) was passed
and signed into law. This legislation expands health care coverage to many uninsured individuals and expands
health care coverage to those already insured under existing plans. The health care reform legislation includes,
among other things, guaranteed coverage requirements, eliminates pre-existing condition exclusions and annual
and lifetime maximum limits, restricts the extent to which policies can be rescinded, and imposes new and sig-
nificant taxes on health insurers and health care benefits. Provisions of the health care reform legislation become
effective at various dates over the next several years. The United States Department of Health and Human Serv-
ices, National Association of Insurance Commissioners, Department of Labor and Treasury Department continue
to issue necessary enabling regulations and guidance with respect to the health care reform legislation. Due to the
breadth and complexity of the health care reform legislation, the lack of implementing regulations and inter-
pretative guidance, and the phased-in nature of the implementation, it is difficult to predict the overall impact this
legislation will have over the coming years; however, this legislation could have a material adverse effect on our
business, financial condition, cash flows, and results of operations.

20

There is an inherent risk of liability in the provision of personal and health care services, not all of which
may be covered by insurance.

The provision of personal and health care services in the long-term care industry entails an inherent risk of
liability. In recent years, participants in the long-term care industry have become subject to an increasing number
of lawsuits alleging negligence or related legal theories, many of which involve large claims and result in the
incurrence of significant defense costs. Moreover, senior living communities offer residents a greater degree of
independence in their daily living. This increased level of independence may subject the resident and, therefore,
us to risks that would be reduced in more institutionalized settings. We currently maintain insurance in amounts
we believe are comparable to those maintained by other senior living companies based on the nature of the risks,
our historical experience and industry standards, and we believe that this insurance coverage is adequate. How-
ever, we may become subject to claims in excess of our insurance or claims not covered by our insurance, such
as claims for punitive damages, terrorism and natural disasters. A claim against us not covered by, or in excess
of, our insurance could have a material adverse effect upon us.

In addition, our insurance policies must be renewed annually. Based upon poor loss experience, insurers for
the long-term care industry have become increasingly wary of liability exposure. A number of insurance carriers
have stopped writing coverage to this market, and those remaining have increased premiums and deductibles
substantially. Therefore, we cannot assure that we will be able to obtain liability insurance in the future or that, if
that insurance is available, it will be available on acceptable economic terms.

We are subject to government regulations and compliance, some of which are burdensome and some of
which may change to our detriment in the future.

Federal and state governments regulate various aspects of our business. The development and operation of
senior living communities and the provision of health care services are subject to federal, state and local
licensure, certification and inspection laws that regulate, among other matters, the number of licensed beds, the
provision of services, the distribution of pharmaceuticals, billing practices and policies, equipment, staffing
(including professional licensing), operating policies and procedures, fire prevention measures, environmental
matters and compliance with building and safety codes. Failure to comply with these laws and regulations could
result in the denial of reimbursement, the imposition of fines, temporary suspension of admission of new resi-
dents, suspension or decertification from the Medicaid program, restrictions on the ability to acquire new com-
munities or expand existing communities and, in extreme cases, the revocation of a community’s license or
closure of a community. We believe that such regulation will increase in the future and we are unable to predict
the content of new regulations or their effect on our business, any of which could materially adversely affect us.

Various states, including several of the states in which we currently operate, control the supply of licensed
beds and assisted living communities through CON or other programs. In those states, approval is required for
the addition of licensed beds and some capital expenditures at those communities. To the extent that a CON or
other similar approval is required for the acquisition or construction of new communities, the expansion of the
number of licensed beds, services, or existing communities, we could be adversely affected by our failure or
inability to obtain that approval, changes in the standards applicable for that approval, and possible delays and
expenses associated with obtaining that approval. In addition, in most states, the reduction of the number of
licensed beds or the closure of a community requires the approval of the appropriate state regulatory agency and,
if we were to seek to reduce the number of licensed beds at, or to close, a community, we could be adversely
affected by a failure to obtain or a delay in obtaining that approval.

Federal and state anti-remuneration laws, such as “anti-kickback” laws, govern some financial arrangements
among health care providers and others who may be in a position to refer or recommend patients to those providers.
These laws prohibit, among other things, some direct and indirect payments that are intended to induce the referral of
patients to, the arranging for services by, or the recommending of, a particular provider of health care items or services.
Federal anti-kickback laws have been broadly interpreted to apply to some contractual relationships between health
care providers and sources of patient referral. Similar state laws vary, are sometimes vague, and seldom have been
interpreted by courts or regulatory agencies. Violation of these laws can result in loss of licensure, civil and criminal
penalties, and exclusion of health care providers or suppliers from participation in the Medicaid program. There can be
no assurance that those laws will be interpreted in a manner consistent with our practices.

21

Under the Americans with Disabilities Act of 1990, all places of public accommodation are required to meet
federal requirements related to access and use by disabled persons. A number of additional federal, state and
local laws exist that also may require modifications to existing and planned communities to create access to the
properties by disabled persons. Although we believe that our communities are substantially in compliance with
present requirements or are exempt therefrom, if required changes involve a greater expenditure than anticipated
or must be made on a more accelerated basis than anticipated, additional costs would be incurred by us. Further
legislation may impose additional burdens or restrictions with respect to access by disabled persons, the costs of
compliance with which could be substantial.

The Health Insurance Portability and Accountability Act of 1996, in conjunction with the federal regulations
promulgated thereunder by the Department of Health and Human Services, has established, among other
requirements, standards governing the privacy of certain protected and individually identifiable health
information that is created, received or maintained by a range of covered entities. HIPAA has also established
standards governing uniform health care transactions, the codes and identifiers to be used by the covered entities
and standards governing the security of certain electronic transactions conducted by covered entities. Penalties
for violations can range from civil money penalties for errors and negligent acts to criminal fines and imprison-
ment for knowing and intentional misconduct. HIPAA is a complex set of regulations and many unanswered
questions remain with respect to the manner in which HIPAA applies to businesses such as those operated by us.

An increasing number of legislative initiatives have been introduced or proposed in recent years that would
result in major changes in the health care delivery system on a national or a state level. Among the proposals that
have been introduced are price controls on hospitals, insurance market reforms to increase the availability of
group health insurance to small businesses, requirements that all businesses offer health insurance coverage to
their employees and the creation of government health insurance plans that would cover all citizens and increase
payments by beneficiaries. We cannot predict whether any of the above proposals or other proposals will be
adopted and, if adopted, no assurances can be given that their implementation will not have a material adverse
effect on our business, financial condition or results of operations.

We may be subject to liability for environmental damages.

Under various federal, state and local environmental laws, ordinances and regulations, a current or previous
owner or operator of real estate may be required to investigate and clean up hazardous or toxic substances or
petroleum product releases at the property, and may be held liable to a governmental entity or to third parties for
property damage and for investigation and clean-up costs incurred by those parties in connection with the con-
tamination. These laws typically impose clean-up responsibility and liability without regard to whether the owner
knew of or caused the presence of the contaminants, and liability under these laws has been interpreted to be joint
and several unless the harm is divisible and there is a reasonable basis for allocation of responsibility. The costs
of investigation, remediation or removal of the substances may be substantial, and the presence of the substances,
or the failure to properly remediate the property, may adversely affect the owner’s ability to sell or lease the
property or to borrow using the property as collateral. In addition, some environmental laws create a lien on the
contaminated site in favor of the government for damages and costs it incurs in connection with the con-
tamination. Persons who arrange for the disposal or treatment of hazardous or toxic substances also may be liable
for the costs of removal or remediation of the substances at the disposal or treatment facility, whether or not the
facility is owned or operated by the person. Finally, the owner of a site may be subject to common law claims by
third parties based on damages and costs resulting from environmental contamination emanating from a site. If
we become subject to any of these claims the costs involved could be significant and could have a material
adverse effect on our business, financial condition, cash flows, and results of operations.

We rely on information technology in our operations, and any material failure, inadequacy, interruption or
security failure of that technology could harm our business.

We rely on information technology networks and systems, including the Internet, to process, transmit and
store electronic information and to manage or support a variety of our business processes, including medical
records, which may include personally identifiable
records,
information of residents and other customers and payroll data. We rely on commercially available systems, soft-
ware, tools and monitoring to provide security for processing, transmitting and storing confidential information,

transactions and maintenance of

financial

22

such as personally identifiable information relating to health and financial accounts. Although we have taken
steps to protect the security of the data maintained in our information systems, it is possible that our security
measures will not be able to prevent the systems’ improper functioning, or the improper disclosure of personally
identifiable information such as in the event of cyber-attacks. Security breaches, including physical or electronic
break-ins, computer viruses, attacks by hackers and similar breaches, can create system disruptions, shutdowns or
unauthorized disclosure of confidential information; however, no instances of these potential threats have been
identified by the Company. The Company maintains cyber and data privacy-related insurance coverage which
provides liability protection associated with network security, privacy and sensitive electronic-data, and privacy
breach expenses. Any failure to maintain proper function, security and availability of our information systems
could interrupt our operations, damage our reputation, subject us to liability claims or regulatory penalties and
could materially and adversely affect our business, financial condition, or results of operations.

Anti-takeover provisions in our governing documents, governing law and material agreements may dis-
courage, delay or prevent a merger or acquisition that our stockholders may consider favorable or prevent
the removal of our current board of directors and management.

Certain provisions of our amended and restated certificate of incorporation and our amended and restated
by-laws may discourage, delay or prevent a merger or acquisition that our stockholders may consider favorable
or prevent the removal of our current board of directors and management. We have a number of anti-takeover
devices in place that will hinder takeover attempts, including: a staggered board of directors consisting of three
classes of directors, each of whom serve three-year terms; removal of directors only for cause, and only with the
affirmative vote of at least a majority of the voting interest of stockholders entitled to vote; right of our directors
to issue preferred stock from time to time with voting, economic and other rights superior to those of our com-
mon stock without the consent of our stockholders; provisions in our amended and restated certificate of
incorporation and amended and restated by-laws limiting the right of our stockholders to call special meetings of
stockholders; advance notice requirements for stockholders with respect to director nominations and actions to be
taken at annual meetings; requirement for two-thirds stockholder approval for amendment of our by-laws and
certain provisions of our certificate of incorporation; and no provision in our amended and restated certificate of
incorporation for cumulative voting in the election of directors, which means that the holders of a majority of the
outstanding shares of our common stock can elect all the directors standing for election.

Several of our leases, loan documents and other material agreements require approval in case of a change of
control of our company. These provisions may have the effect of delaying or preventing a change of control of
our company even if this change of control would benefit our stockholders.

In addition to the anti-takeover provisions described above, we are subject to Section 203 of the Delaware
General Corporation Law. Section 203 generally prohibits a person beneficially owning, directly or in directly,
15% or more of our outstanding common stock from engaging in a business combination with us for three years
after the person acquired the stock. However, this prohibition does not apply if (A) our directors approve in
advance the person’s ownership of 15% or more of the shares or the business combination or (B) the business
combination is approved by our stockholders by a vote of at least two-thirds of the outstanding shares not owned
by the acquiring person.

Because we do not presently have plans to pay dividends on our common stock, stockholders must look
solely to appreciation of our common stock to realize a gain on their investment.

It is the policy of our Board of Directors to retain any future earnings to finance the operation and expansion
of the Company’s business. Accordingly, the Company has not and does not currently anticipate declaring or
paying cash dividends on your common stock in the foreseeable future. The payment of cash dividends in the
future will be at the sole discretion of our Board of Directors and will depend on, among other things, the
Company’s earnings, operations, capital requirements, financial condition, restrictions in then existing financing
agreements and other factors deemed relevant by our Board of Directors. Accordingly, stockholders must look
solely to appreciation of our common stock to realize a gain on their investment. This appreciation may not
occur.

23

The price of our common stock has fluctuated substantially over the past several years and may continue to
fluctuate substantially in the future.

Our stock price may continue to be subject to significant fluctuations as a result of a variety of factors,
which are described throughout this Annual report on Form 10-K, including those factors discussed under this
section entitled “Risk Factors.” Some of these factors are beyond our control. We may fail to meet the expect-
ations of our stockholders or securities analysts at some point in the future, and our stock price could decline as a
result.

ITEM 1B. UNRESOLVED STAFF COMMENTS.

None.

ITEM 2. PROPERTIES.

The executive and administrative offices of the Company are located at 14160 Dallas Parkway, Suite 300,
Dallas, Texas 75254, and consist of approximately 26,000 square feet. The lease on the premises currently
extends through September 2020. The Company believes that its corporate office facilities are adequate to meet
its requirements through at least fiscal 2016 and that suitable additional space will be available, as needed, to
accommodate further physical expansion of corporate operations. The Company also leases executive office
space in New York, New York pursuant to a two-year lease agreement.

As of December 31, 2015, the Company owned or leased and managed the senior living communities

referred to in Item 1 above under the caption “Operating Communities.”

ITEM 3. LEGAL PROCEEDINGS.

The Company has claims incurred in the normal course of its business. Most of these claims are believed by
management to be covered by insurance, subject to normal reservations of rights by the insurance companies and
possibly subject to certain exclusions in the applicable insurance policies. Whether or not covered by insurance,
these claims, in the opinion of management, based on advice of legal counsel, should not have a material effect
on the consolidated financial statements of the Company if determined adversely to the Company.

ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable.

24

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER

MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

(a) Market Price of and Dividends on the Registrant’s Common Equity and Related Stockholder Matters.

Market Information and Holders

The Company’s shares of common stock are listed for trading on the New York Stock Exchange (“NYSE”)
under the symbol “CSU”. The following table sets forth, for the periods indicated, the high and low sales prices
for the Company’s common stock, as reported on the NYSE. At February 19, 2016, there were approximately
165 stockholders of record of the Company’s common stock.

Year

2015

2014

High

Low

High

Low

First Quarter
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Second Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Third Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fourth Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$26.75
27.75
24.97
24.55

$22.52
24.40
19.20
19.59

$26.89
26.85
25.84
25.91

$21.52
22.26
20.33
21.05

Dividends

It is the policy of the Company’s Board of Directors to retain all future earnings to finance the operation and
expansion of the Company’s business. Accordingly, the Company did not declare or pay cash dividends on its
common stock during fiscal 2015 or 2014 and does not anticipate declaring or paying cash dividends on the
common stock in the foreseeable future. The payment of cash dividends in the future will be at the sole discretion
of the Company’s Board of Directors and will depend on, among other things, the Company’s earnings, oper-
ations, capital requirements, financial condition, restrictions in then existing financing agreements, and other
factors deemed relevant by the Board of Directors.

Securities Authorized for Issuance Under Equity Compensation Plans

The following table presents information relating to the Company’s equity compensation plans as of

December 31, 2015:

Plan Category

Equity compensation plans
approved by security
holders . . . . . . . . . . . . . . . .
Equity compensation plans not

approved by security
holders . . . . . . . . . . . . . . . .

Total . . . . . . . . . . . . . . . . . . . .

Number of Securities to
be Issued Upon
Exercise of Outstanding
Options, Warrants and
Rights

Weighted-Average
Exercise Price of the
Outstanding
Options, Warrants
and Rights

Number of Securities
Remaining Available for
Future Issuance Under
Equity Compensation Plans
(Excluding Securities
Reflected in First Column)

3,000

—

3,000

$10.97

1,901,886

—

$10.97

—

1,901,886

25

Performance Graph

The following Performance Graph shows the cumulative total return for the five-year period ended
December 31, 2015, in the value of $100 invested in: (1) the Company’s common stock; (2) the Standard &
Poor’s Broad Market Index (the “S&P 500”); and (3) the common stock of the Peer Group (as defined below) of
companies, whose returns represent the arithmetic average of such companies. The values with each investment
as of the beginning of each year are based on share price appreciation and the reinvestment of any dividends on
the respective ex-dividend dates.

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among Capital Senior Living Corporation, the S&P 500 Index, and a Peer Group

Capital Senior Living Corporation

S&P 500

Peer Group

500

400

300

200

100

0

S
R
A
L
L
O
D

12/10

12/11

12/12

12/13

12/14

12/15

*

$100 invested on 12/31/10 in stock or index, including reinvestment of dividends. Fiscal year ending
December 31.

Copyright© 2016 S&P, a division of McGraw Hill Financial. All rights reserved.

The preceding graph assumes $100 invested at the beginning of the measurement period, including reinvest-
ment of any dividends, in the Company’s common stock, the S&P 500, and the Peer Group and was plotted using
the following data:

12/10

12/11

12/12

12/13

12/14

12/15

Cumulative Total Returns

Capital Senior Living Corporation . . . . .

100.00

S&P 500 . . . . . . . . . . . . . . . . . . . . . . . . .

100.00

Peer Group . . . . . . . . . . . . . . . . . . . . . . . .

100.00

118.51

102.11

77.77

278.96

118.45

114.29

358.06

156.82

122.87

371.79

178.29

160.43

311.34

180.75

82.00

The Company’s Peer Group, which was selected in good faith on an industry basis, consists of Brookdale

Senior Living, Inc. and Five Star Quality Care, Inc.

(b) Recent Sales of Unregistered Securities; Use of Proceeds from Registered Securities.

Not applicable.

(c) Purchases of Equity Securities by the Issuer and Affiliated Purchasers.

The following information is provided pursuant to Item 703 of Regulation S-K. The Company did not
repurchase any shares of its common stock pursuant to the Company’s share repurchase program (as described

26

below) during the year ended December 31, 2015. The information set forth in the table below reflects shares
repurchased by the Company pursuant to this program prior to the year ended December 31, 2015.

Period

Total Number of
Shares Purchased

Average
Price Paid
per Share

Total Number of
Shares Purchased as
Part of Publicly
Announced Plans or
Programs

Approximate Dollar
Value of Shares
that May Yet Be
Purchased Under the
Plans or Programs(1)

Total at September 30, 2015 . . . . . . . . . . . .
October 1 – October 31, 2015 . . . . . . . . .
November 1 – November 30, 2015 . . . . .
December 1 – December 31, 2015 . . . . .

349,800
—
—
—

Total at December 31, 2015 . . . . . . . . . . . .

349,800

$2.67
—
—
—

$2.67

349,800
—
—
—

349,800

$9,065,571
—
—
—

$9,065,571

(1) On January 22, 2009, the Company’s board of directors approved a share repurchase program that authorized
the Company to purchase up to $10.0 million of the Company’s common stock. The repurchase program
does not obligate the Company to acquire any particular amount of common stock and the share repurchase
authorization has no stated expiration date. All shares that have been purchased by the Company under this
program were purchased in open-market transactions. On January 14, 2016, the Company announced that its
board of directors has approved a continuation of the share repurchase program.

27

ITEM 6. SELECTED FINANCIAL DATA.

The following table presents selected financial data of the Company which has been derived from the aud-
ited consolidated financial statements of the Company. The selected financial data should be read in conjunction
with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the con-
solidated financial statements and related notes thereto included in this Annual Report.

At and for the Year Ended December 31,

2015

2014

2013

2012

2011

(In thousands, except per share and other data)

Consolidated Statements of Operations and
Comprehensive (Loss) Income Data:
Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 412,177 $383,925 $350,362 $310,536 $263,502
17,911
Income from operations . . . . . . . . . . . . . . . . . . . . .
Net (loss) income . . . . . . . . . . . . . . . . . . . . . . . . . .
3,025
Net (loss) income per share:

11,250
(16,504)

13,900
(24,126)

18,835
(14,284)

13,655
(3,119)

Basic net (loss) income per share . . . . . . . . . . . . $
Diluted net (loss) income per share . . . . . . . . . . . $

(0.50) $
(0.50) $

(0.83) $
(0.83) $

(0.58) $
(0.58) $

(0.11) $
(0.11) $

0.11
0.11

Balance Sheet Data:

Cash and cash equivalents (excluding restricted

cash)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

56,087 $ 39,209 $ 13,611 $ 18,737 $ 22,283
20,786
(5,892)
26,726
Working capital (deficit)(1)
. . . . . . . . . . . . . . . . . .
462,326
745,549
1,019,033
Total assets(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt, excluding current portion(1)
224,940
467,376
754,949
. . . .
Shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . $ 135,746 $141,174 $157,950 $168,594 $169,141

(5,712)
636,942
342,366

13,113
891,370
592,884

Other Data:

Communities (at end of period)

Owned or leased . . . . . . . . . . . . . . . . . . . . . . . . .
Joint ventures & managed . . . . . . . . . . . . . . . . . .

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

121
—

121

117
—

117

109
3

112

98
3

101

81
3

84

Resident capacity:

Owned or leased . . . . . . . . . . . . . . . . . . . . . . . . .
Joint ventures & managed . . . . . . . . . . . . . . . . . .

15,416
—

15,149
—

13,939
674

12,973
674

11,150
674

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

15,416

15,149

14,613

13,647

11,824

(1) Working capital, total assets, and long-term debt, excluding current portion, for fiscal 2015 excludes $8,532
in debt issuance costs, net of accumulated amortization, and fiscal 2014 was revised from amounts previously
reported to reflect the impact of reclassifying $6,331 in debt issuance costs, net of accumulated amortization,
from other assets to notes payable. This revision was due to the Company’s adoption of ASU 2015-03, Inter-
est—Imputation of Interest- Simplifying the Presentation of Debt Issuance Costs, during the fourth quarter of
fiscal 2015 which requires current and retrospective application to the Company’s Consolidated Balance
Sheets for all periods presented.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS.

Certain information contained in this report constitutes “Forward-Looking Statements” within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of
1934, as amended, which can be identified by the use of forward-looking terminology such as “may,” “will,”
“would,” “intend,” “could,” “believe,” “expect,” “anticipate,” “estimate” or “continue” or the negative
thereof or other variations thereon or comparable terminology. The Company cautions readers that forward-

28

looking statements, including, without limitation, those relating to the Company’s future business prospects,
revenues, working capital, liquidity, capital needs, interest costs, and income, are subject to certain risks and
uncertainties that could cause actual results to differ materially from those indicated in the forward-looking
statements, due to several important factors herein identified. These factors include the Company’s ability to find
suitable acquisition properties at favorable terms, financing, licensing, business conditions, risks of downturn in
economic conditions generally, satisfaction of closing conditions such as those pertaining to licensure, avail-
ability of insurance at commercially reasonable rates, and changes in accounting principles and interpretations,
among others, and other risks and factors identified from time to time in the Company’s reports filed with the
SEC.

Overview

The following discussion and analysis addresses (i) the Company’s results of operations on a historical
consolidated basis for the years ended December 31, 2015, 2014, and 2013, and (ii) liquidity and capital
resources of the Company and should be read in conjunction with the Company’s historical consolidated finan-
cial statements and the selected financial data contained elsewhere in this report.

The Company is one of the largest operators of senior living communities in the United States. The Compa-
ny’s operating strategy is to provide value to its senior living residents by providing quality senior living services
at reasonable prices, while achieving and sustaining a strong, competitive position within its geographically
concentrated regions, as well as continuing to enhance the performance of its operations. The Company provides
senior living services to the elderly, including independent living, assisted living, and home care services at rea-
sonable prices. Many of the Company’s communities offer a continuum of care to meet its residents’ needs as
they change over time. This continuum of care, which integrates independent living and assisted living and is
bridged by home care through independent home care agencies or the Company’s home care agency, sustains
residents’ autonomy and independence based on their physical and mental abilities.

As of December 31, 2015, the Company operated 121 senior living communities in 23 states with an
aggregate capacity of approximately 15,400 residents, including 71 senior living communities which the Com-
pany owned and 50 senior living communities the Company leased. As of December 31, 2015, the Company also
operated one home care agency.

Significant Financial and Operational Highlights

The Company primarily derives its revenue by providing senior living and healthcare services to the elderly
and operating senior living communities under joint venture arrangements. When comparing fiscal 2015 to fiscal
2014, the Company generated total revenues of approximately $412.2 million compared to total revenues of
approximately $383.9 million, respectively, representing an increase of approximately $28.3 million, or 7.4%.
The increase in revenues primarily results from the senior living communities acquired by the Company during
fiscal 2015 and a full year of activity for the senior living communities acquired by the Company during fiscal
2014 which was slightly offset by a decrease in revenues due to the five properties sold by the Company during
fiscal 2015.

The weighted average financial occupancy rate for our consolidated communities for the fiscal years ended
December 31, 2015 and 2014 was 88.3% and 87.1%, respectively. In addition to the increase we experienced in
total consolidated occupancies, we also achieved an increase in average monthly rental rates of 6.5% at our con-
solidated communities when comparing fiscal 2015 to fiscal 2014. On a same-store basis, the weighted average
financial occupancy rate for our consolidated communities for the fiscal year ended December 31, 2015 and 2014
was 88.0% and 87.5%, respectively. In addition to the increase we experienced in our same-store occupancies,
we also achieved an increase in average monthly rental rates of 2.7% when comparing fiscal 2015 to fiscal 2014.
The increase in occupancies and average monthly rental rates was primarily the result of our recent community
acquisitions and the capital improvements we have prudently invested in our communities for unit conversions
which enable us to provide a broader range of senior living services at higher levels of care.

On December 17, 2015, the Company completed supplemental mortgage financing of approximately $7.6
million from Fannie Mae on three senior living communities at a fixed interest rate of 5.49% which is cotermi-

29

nous with existing mortgage debt maturing in November 2022. The supplemental mortgage loans are cross-
collateralized and cross-defaulted with the original mortgage debt.

On November 24, 2015, the Company completed supplemental mortgage financing of approximately $3.2
million from Fannie Mae on one senior living community at a fixed interest rate of 5.46% which is coterminous
with existing mortgage debt maturing in April 2023. The supplemental mortgage loan is cross-collateralized and
cross-defaulted with the original mortgage debt.

On November 24, 2015, the Company completed supplemental mortgage financing of approximately $8.7
million from Fannie Mae on one senior living community at a fixed interest rate of 5.39% which is coterminous
with existing mortgage debt maturing in January 2023. The supplemental mortgage loan is cross-collateralized
and cross-defaulted with the original mortgage debt.

On November 12, 2015, the Company repaid mortgage loans totaling approximately $31.6 million from
Fannie Mae associated with four of its senior living communities scheduled to mature in June 2017. The Com-
pany obtained approximately $52.8 million of new long-term fixed interest rate mortgage financing from Berka-
dia Commercial Mortgage LLC (“Berkadia”), who later sold the loans to Fannie Mae, at a fixed interest rate of
4.68% with a 10-year term and the principal amortized over a 30-year term. As a result of the early repayment of
the Company accelerated the amortization of approximately $0.1 million in
the existing mortgage debt,
unamortized deferred financing costs and incurred a prepayment premium of approximately $1.7 million to Fan-
nie Mae.

Effective October 30, 2015, the Company closed the acquisition of one senior living community located in
Virginia Beach, Virginia, for $38.0 million (the “Virginia Beach Transaction”). The community consists of 111
assisted living units. The Company obtained financing from Protective Life Insurance Company (“Protective
Life”) for $28.0 million of the acquisition price at a fixed interest rate of 4.25% with a 10-year term with the
balance of the acquisition price paid from the Company’s existing cash resources.

Effective September 30, 2015, the Company closed the acquisition of one senior living community located
in Mahomet, Illinois, for $15.5 million Mahomet Transaction (the “Mahomet Transaction”). The community
consists of 78 assisted living units. The Company obtained financing from Fannie Mae for approximately $11.1
million of the acquisition price at a fixed interest rate of 4.69% with a 10-year term with the balance of the
acquisition price paid from the Company’s existing cash resources.

On September 30, 2015, the Company completed supplemental financing of approximately $5.0 million
from Fannie Mae on an existing senior living community owned by the Company located in Macedonia, Ohio.
The supplemental loan is coterminous with existing mortgage debt maturing in October 2021 with a 5.19% fixed
interest rate and the principal amortized over a 30-year term. The supplemental loan is cross-collateralized and
cross-defaulted with the original mortgage debt.

On September 24, 2015, the Company obtained approximately $8.4 million long-term fixed interest rate
mortgage financing from Fannie Mae to replace interim variable interest rate financing obtained by the Company
from Berkadia on September 30, 2013, in connection with the Company’s previous acquisition of a senior living
community located in Oakwood, Georgia. The new mortgage loan has a 10-year term with a 4.7% fixed interest
rate and the principal amortized over a 30-year term.

Effective August 11, 2015, the Company closed the acquisition of one senior living community located in
Indianapolis, Indiana, for $21.0 million (the “Indianapolis Transaction”). The community consists of 124 assisted
living units. The Company obtained financing from Protective Life for $13.2 million of the acquisition price at a
fixed interest rate of 4.25% with a 10-year term with the balance of the acquisition price paid from the Compa-
ny’s existing cash resources. The note with Protective Life associated with the Indianapolis Transaction includes
a loan commitment for up to $2.6 million of supplemental funding at the same terms and 4.25% fixed interest
rate. The loan commitment is based on meeting certain funding requirements and is available through Febru-
ary 28, 2018.

Effective August 6, 2015, the Company closed a transaction to sell one of its senior living communities
located in Wichita, Kansas, for approximately $14.8 million (the “Sedgwick Sale Transaction”). As a result of

30

the sale, outstanding mortgage debt totaling approximately $6.8 million was assumed by the buyer. The Com-
pany recognized a gain on sale of approximately $6.4 million and received net proceeds, less the debt assump-
tion, of approximately $8.0 million. For income tax purposes, the Company executed a like-kind exchange and
acquired a replacement property shortly after the sale which resulted in the deferral of the gain without the
Company incurring any current federal or state income tax liabilities. The Company contracted with a qualified
intermediary for purposes of reaching its determination that the transaction satisfied all requirements of a like-
kind exchange under applicable federal and state income tax laws.

Effective July 28, 2015, the Company closed the acquisition of one senior living community located in
Columbiana, Ohio, for approximately $13.3 million (the “Columbiana Transaction”). The community consists of
68 assisted living units. The Company obtained financing from Protective Life for approximately $9.9 million of
the acquisition price at a fixed interest rate of 4.25% with a 10-year term with the balance of the acquisition price
paid from the Company’s existing cash resources.

Effective May 29, 2015, the Company closed the acquisition of one senior living community located in
Oneonta, New York, for $14.9 million (the “Heritage Transaction”). The community consists of 64 independent
living units and 44 assisted living units. The Company obtained financing from Fannie Mae for approximately
$11.2 million of the acquisition price at a fixed interest rate of 4.79% with a 10-year term with the balance of the
acquisition price paid from the Company’s existing cash resources.

Effective May 21, 2015, the Company closed the acquisition of two senior living communities located in
Hartford and West bend, Wisconsin, for $12.0 million (the “Emerald Transaction”). The communities consist of
79 assisted living units. The Company obtained financing from Fannie Mae for approximately $9.2 million of the
acquisition price at a fixed interest rate of 4.55% with a 10-year term with the balance of the acquisition price
paid from the Company’s existing cash resources.

Effective March 27, 2015, the Company closed the acquisition of one senior living community located in
Baytown, Texas, for approximately $29.6 million (the “Baytown Transaction”). The community consists of 9
independent living cottages and 120 assisted living units. The Company obtained financing from Protective Life
for approximately $21.4 million of the acquisition price at a fixed interest rate of 3.55% with a 10-year term with
the balance of the acquisition price paid from the Company’s existing cash resources.

On March 5, 2015, the Company repaid an interim, interest only variable rate mortgage loan totaling approx-
imately $21.6 million from Wells Fargo on one of its senior living communities located in Toledo, Ohio. The
Company obtained approximately $21.8 million of mortgage debt from Fannie Mae to replace the Wells Fargo
interim financing. This new mortgage loan has a 10-year term with a fixed interest rate of 3.84% and the princi-
pal amortized over 30-years.

On February 17, 2015, the Company obtained new permanent mortgage financing totaling approximately
$23.2 million from Fannie Mae on one of its owned senior living communities located in Peoria, Illinois. The
new financing replaced a mortgage loan previously scheduled to mature on September 1, 2015, which was
defeased by the Company on January 21, 2015, in conjunction with the Four Property Sale Transaction, dis-
cussed below. This new mortgage loan has a 10-year term with a fixed interest rate of 3.85% and the principal
amortized over 30 years. As a result of the Peoria financing, the Company repaid existing mortgage debt on two
owned properties totaling approximately $14.1 million.

Effective January 22, 2015, the Company closed a transaction to sell four of its senior living communities
located in Oklahoma City, Oklahoma, Shreveport, Louisiana, Southfield, Michigan, and Winston-Salem, North
Carolina, in a single transaction for approximately $36.5 million (the “Four Property Sale Transaction”). As a
result of the sale, the outstanding mortgage debt on the Company’s senior living communities located in
Oklahoma City and Shreveport was repaid without incurring any prepayment penalties as these notes were short-
term, bridge loan interim financing. However, the mortgage loan associated with the Company’s senior living
community located in Winston-Salem could not be prepaid under the existing loan agreement as it did not offer a
prepayment provision. Therefore, the Company determined it would defease the mortgage loan by acquiring
certain treasury securities to serve as collateral for the outstanding principal balance as of the date of the sale
until the note matured on September 1, 2015. The Company contracted with a third party trust to assume the

31

mortgage debt and assigned all of its rights to the treasury securities to serve as collateral until the balance
remaining comes due. Based on this structure, the Company concluded it met the requirements to report the debt
transaction as a legal defeasance which resulted in the Company removing the respective assets and liabilities
from its Consolidated Balance Sheet during the first quarter of fiscal 2015 when the transaction closed. The
Company previously reported these assets as held for sale at December 31, 2014, and recorded a remeasurement
write-down of approximately $0.6 million to adjust the carrying values of the assets to the sales price, less costs
to sell. As a result of the sale, the Company received net proceeds of approximately $35.7 million.

Effective January 13, 2015, the Company closed the acquisition of one senior living community located in
Green Bay, Wisconsin, for approximately $18.3 million (the “Green Bay Transaction”). The community consists
of 78 assisted living units. The Company obtained financing from Fannie Mae for approximately $14.1 million of
the acquisition price at a fixed interest rate of 4.35% with a 10-year term with the balance of the acquisition price
paid from the Company’s existing cash resources.

Joint Venture Transactions and Management Contracts

During fiscal 2014, the Company managed three communities owned by joint ventures in which the Com-
pany had a minority interest. For communities owned by joint ventures, the Company typically received a man-
agement fee of 5% of gross revenues. The Company’s joint venture management fees were based on a percentage
of gross revenues. As a result, the cash flow and profitability of such contracts to the Company were more
dependent on the revenues generated by such communities and less dependent on net cash flow than for owned
or leased communities. On June 30, 2014, the Company closed the SHPIII/CSL Transaction, acquiring 100% of
the member interests of SHPIII/CSL Miami, SHPIII/CSL Levis Commons, and SHPIII/CSL Richmond Heights.
For additional information refer to Note 4, “Acquisitions”, within the notes to consolidated financial statements.

Facility Leases

The Company currently leases 50 senior living communities from certain real estate investment trusts
(“REITs”). The lease terms are generally for 10-15 years with renewal options for 5-20 years at the Company’s
option. Under these lease agreements, the Company is responsible for all operating costs, maintenance and
repairs, insurance and property taxes.

As of December 31, 2015, the Company leased 11 senior living communities (collectively the “Ventas
Lease Agreements”), from Ventas , Inc. (“Ventas”). During the second quarter of fiscal 2015, the Company
executed amendments to the master lease agreements with Ventas to facilitate up to $24.5 million of leasehold
improvements for 10 communities within the Ventas lease portfolio and extend the lease terms until Sep-
tember 30, 2025, with two five-year renewal extensions available at the Company’s option. The initial lease rates
under each of the Ventas Lease Agreements ranged from 6.75% to 8% and are subject to certain conditional
escalation clauses which will be recognized when probable or incurred. The Company incurred $11.4 million in
lease acquisition and modification costs related to the Ventas Lease Agreements. These deferred lease acquisition
and modification costs are being amortized over the lease terms and are included in facility lease expense in the
Company’s Consolidated Statement of Operations and Comprehensive Loss. The Company accounts for nine of
the Ventas Lease Agreements as an operating lease and two as a capital lease and financing obligation.

As of December 31, 2015, the Company leased 15 senior living communities (collectively the “HCP Lease
Agreements”), from HCP, Inc. (“HCP”). During the fourth quarter of fiscal 2013, the Company executed an
amendment to the master lease agreement with HCP to facilitate up to $3.3 million of leasehold improvements
for one community within the HCP lease portfolio and extend the initial lease terms for nine communities until
October 31, 2020, with two 10-year renewal extensions available at the Company’s option. During the second
quarter of fiscal 2015, the Company exercised its right to extend the lease term with HCP for the remaining six
communities in the HCP lease portfolio until April 30, 2026, with one 10-year renewal extension available at the
Company’s option. The initial lease rates under the HCP Lease Agreements ranged from 7.25% to 8% and are
subject to certain conditional escalation clauses, which will be recognized when probable or incurred. The
Company incurred $1.6 million in lease acquisition and modification costs related to the HCP Lease Agreements.
These deferred lease acquisition and modification costs are being amortized over the lease terms and are included

32

in facility lease expense in the Company’s Consolidated Statements of Operations and Comprehensive Loss. The
Company accounts for each of the HCP Lease Agreements as an operating lease.

As of December 31, 2015, the Company leased 24 senior living communities (collectively the “HCN Lease
Agreements”), from Welltower, Inc., formerly Health Care REIT, Inc. (“HCN”). The HCN Lease Agreements
each have an initial term of 15 years, with one 15-year renewal extension available at the Company’s option. The
initial lease rates under the HCN Lease Agreements ranged from 7.25% to 8.5% and are subject to certain condi-
tional escalation clauses, which will be recognized when probable or incurred. The initial terms on the HCN
Lease Agreements expire on various dates through April 2026. The Company incurred $2.1 million in lease
acquisition costs related to the HCN Lease Agreements. These deferred lease acquisition costs are being amor-
tized over the lease terms and are included in facility lease expense in the Company’s Consolidated Statements of
Operations and Comprehensive Loss. The Company accounts for each of the HCN Lease Agreements as an
operating lease.

The following table summarizes each of the Company’s facility lease agreements as of December 31, 2015

(dollars in millions):

Landlord

Date of Lease

Number of
Communities

Value of
Transaction

Term

Ventas . . . . . . . . . September 30, 2005

Ventas . . . . . . . . . October 18, 2005

Ventas . . . . . . . . .

June 8, 2006

Ventas . . . . . . . . .

January 31, 2008

Ventas . . . . . . . . .

June 27, 2012

HCP . . . . . . . . . . .

May 1, 2006

HCP . . . . . . . . . . .

May 31, 2006

HCP . . . . . . . . . . . December 1, 2006

HCP . . . . . . . . . . . December 14, 2006

HCP . . . . . . . . . . .

April 11, 2007

HCN . . . . . . . . . . .

April 16, 2010

HCN . . . . . . . . . . .

May 1, 2010

6

1

1

1

2

3

6

4

1

1

5

3

$ 84.6

19.5

19.1

5.0

43.3

54.0

43.0

51.0

18.0

8.0

48.5

36.0

HCN . . . . . . . . . . . September 10, 2010

HCN . . . . . . . . . . .

April 8, 2011

12

4

104.6

141.0

(4)
(Two five-year renewals)
(4)
(Two five-year renewals)
(4)
(Two five-year renewals)
(4)
(Two five-year renewals)
(4)
(Two five-year renewals)
(5)
(Two ten-year renewals)
(6)
(One ten-year renewal)
(5)
(Two ten-year renewals)
(5)
(Two ten-year renewals)
(5)
(Two ten-year renewals)
15 years
(One 15-year renewal)
15 years
(One 15-year renewal)
15 years
(One 15-year renewal)
15 years
(One 15-year renewal)

Initial
Lease
Rate(1)

Lease
Acquisition
Costs(2)

Deferred
Gains / Lease
Concessions(3)

8% $ 9.5

$ 4.6

8%

0.3

8%

0.6

7.75%

0.2

6.75%

0.8

8%

0.3

8%

0.2

8%

0.7

7.75%

0.3

7.25%

0.1

8.25%

0.6

8.25%

0.2

8.50%

0.4

—

—

—

—

12.8

0.6

—

—

—

0.8

0.4

2.0

7.25%

0.9

16.3

Subtotal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated amortization through December 31, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated deferred gains / lease concessions recognized through December 31, 2015 . . . .

15.1
(7.4)
—

37.5
—
(20.2)

Net lease acquisition costs / deferred gains / lease concessions as of December 31, 2015 . . . .

$ 7.7

$ 17.3

33

(1) Initial lease rates are measured against agreed upon fair market values and are subject to conditional lease

escalation provisions as set forth in each respective lease agreement.

(2) Lease acquisition and modification costs are being amortized over the respective initial lease terms.

(3) Deferred gains of $34.9 million and lease concessions of $2.6 million are being recognized in the Company’s
Consolidated Statements of Operations and Comprehensive Loss as a reduction in facility lease expense over
the respective initial lease terms. Lease concessions of $0.6 million relate to the transaction with HCP on
May 31, 2006, and $2.0 million relate to the transaction with HCN on September 10, 2010.

(4) Effective June 17, 2015, the Company executed amendments to the master lease agreements with Ventas to
facilitate up to $24.5 million of leasehold improvements for 10 of the leased communities and extend the
lease terms through September 30, 2025, with two 5-year renewal extensions available at the Company’s
option.

(5) On November 11, 2013, the Company executed an amendment to the master lease agreement associated with
nine of its leased communities with HCP to facilitate up to $3.3 million of leasehold improvements for one of
the leased communities and extend the respective lease terms through October 31, 2020, with two 10-year
renewal extensions available at the Company’s option.

(6) On April 24, 2015, the Company exercised its right to extend the lease terms with HCP through April 30,

2026, with one 10-year renewal extension remaining available at the Company’s option.

Facility lease expense in the Company’s Consolidated Statements of Operations and Comprehensive Loss
includes rent expense plus amortization expense relating to leasehold acquisition costs offset by the amortization
of deferred gains and lease incentives. There are various financial covenants and other restrictions in the Compa-
ny’s lease agreements. The Company was in compliance with all of its lease covenants at December 31, 2015 and
2014.

Debt Transactions

On December 17, 2015, the Company completed supplemental mortgage financing of approximately $7.6
million from Fannie Mae on three senior living communities located in Columbus, Ohio, Chardon, Ohio, and
Greenwood, Indiana, at a fixed interest rate of 5.49% which is coterminous with existing mortgage debt maturing
in November 2022. The supplemental mortgage loans are cross-collateralized and cross-defaulted with the origi-
nal mortgage debt. The Company incurred approximately $0.2 million in deferred financing costs related to these
loans, which are being amortized over the remaining initial loan terms.

On November 24, 2015, the Company completed supplemental mortgage financing of approximately $3.2
million from Fannie Mae on one senior living community located in Elkhorn, Nebraska, at a fixed interest rate of
5.46% which is coterminous with existing mortgage debt maturing in April 2023. The supplemental mortgage
loan is cross-collateralized and cross-defaulted with the original mortgage debt. The Company incurred approx-
imately $0.1 million in deferred financing costs related to this loan, which are being amortized over the remain-
ing initial loan term.

On November 24, 2015, the Company completed supplemental mortgage financing of approximately $8.7
million from Fannie Mae on one senior living community located in Springfield, Missouri, at a fixed interest rate
of 5.39% which is coterminous with existing mortgage debt maturing in January 2023. The supplemental mort-
gage loan is cross-collateralized and cross-defaulted with the original mortgage debt. The Company incurred
approximately $0.1 million in deferred financing costs related to this loan, which are being amortized over the
remaining initial loan term.

On November 12, 2015, the Company repaid mortgage loans totaling approximately $31.6 million from
Fannie Mae associated with four of its senior living communities located in Columbia, South Carolina, Deer Park
and Pantego, Texas, and South Bend, Indiana, scheduled to mature in June 2017. The Company obtained approx-
imately $52.8 million of new long-term fixed interest rate mortgage financing from Berkadia, who later sold the
loans to Fannie Mae, at a fixed interest rate of 4.68% with a 10-year term and the principal amortized over a 30-
year term. The Company incurred approximately $0.6 million in deferred financing costs related to the new

34

mortgage loans, which are being amortized over 10 years. As a result of the early repayment of the existing
mortgage debt, the Company accelerated the amortization of approximately $0.1 million in unamortized deferred
financing costs and incurred a prepayment premium of approximately $1.7 million to Fannie Mae.

On October 30, 2015, in conjunction with the Virginia Beach Transaction, the Company obtained $28.0
million of mortgage debt from Protective Life. The new mortgage loan has a 10-year term with a 4.25% fixed
interest rate and the principal amortized over a 30-year term. The Company incurred approximately $0.4 million
in deferred financing costs related to this loan, which are being amortized over 10 years.

On September 30, 2015, in conjunction with the Mahomet Transaction, the Company obtained approx-
imately $11.1 million of mortgage debt from Fannie Mae. The new mortgage loan has a 10-year term with a
4.69% fixed interest rate and the principal amortized over a 30-year term. The Company incurred approximately
$0.2 million in deferred financing costs related to this loan, which are being amortized over 10 years.

On September 30, 2015, the Company completed supplemental financing of approximately $5.0 million
from Fannie Mae on an existing senior living community owned by the Company located in Macedonia, Ohio.
The supplemental loan is coterminous with existing mortgage debt maturing in October 2021with a 5.19% fixed
interest rate and the principal amortized over a 30-year term. The supplemental loan is cross-collateralized and
cross-defaulted with the original mortgage debt. The Company incurred approximately $0.1 million in deferred
financing costs related to this loan, which are being amortized over the remaining initial loan term.

On September 24, 2015, the Company obtained approximately $8.4 million long-term fixed interest rate
mortgage financing from Fannie Mae to replace interim variable interest rate financing obtained by the Company
from Berkadia on September 30, 2013, in connection with the Company’s previous acquisition of a senior living
community located in Oakwood, Georgia. The new mortgage loan has a 10-year term with a 4.7% fixed interest
rate and the principal amortized over a 30-year term. The Company incurred approximately $0.2 million in
deferred financing costs related to this loan, which are being amortized over 10 years.

On August 11, 2015, in conjunction with the Indianapolis Transaction, the Company obtained approx-
imately $13.2 million of mortgage debt from Protective Life. The new mortgage loan has a 10-year term with a
4.25% fixed interest rate and the principal amortized over a 30-year term. The Company incurred approximately
$0.2 million in deferred financing costs related to this loan, which are being amortized over 10 years. The note
with Protective Life associated with the Indianapolis Transaction includes a loan commitment for up to approx-
imately $2.6 million of supplemental funding for the same term and 4.25% fixed interest rate. The loan commit-
ment is based on meeting certain funding requirements and is available through February 28, 2018.

On August 6, 2015, outstanding mortgage debt totaling approximately $6.8 million was assumed by the
buyer in conjunction with the Sedgwick Sale Transaction. As a result of the buyer’s assumption of the existing
mortgage debt, the Company accelerated the amortization of approximately $0.1 million in unamortized deferred
financing costs. For additional information refer to Note 5, “Dispositions”, within the notes to consolidated
financial statements.

On July 28, 2015, in conjunction with the Columbiana Transaction, the Company obtained approximately
$9.9 million of mortgage debt from Protective Life. The new mortgage loan has a 10-year term with a 4.25%
fixed interest rate and the principal amortized over a 30-year term. The Company incurred approximately $0.2
million in deferred financing costs related to this loan, which are being amortized over 10 years.

On May 31, 2015, the Company renewed certain insurance policies and entered into a finance agreement
totaling approximately $1.7 million. The finance agreement has a fixed interest rate of 1.73% with the principal
being repaid over an 11-month term.

On May 29, 2015, in conjunction with the Heritage Transaction, the Company obtained approximately $11.2
million of mortgage debt from Fannie Mae. The new mortgage loan has a 10-year term with a 4.79% fixed inter-
est rate and the principal amortized over a 30-year term. The Company incurred approximately $0.2 million in
deferred financing costs related to this loan, which are being amortized over 10 years.

On May 21, 2015, in conjunction with the Emerald Transaction, the Company obtained approximately $9.2
million of mortgage debt from Fannie Mae. The new mortgage loan has a 10-year term with a 4.55% fixed inter-

35

est rate and the principal amortized over a 30-year term. The Company incurred approximately $0.2 million in
deferred financing costs related to this loan, which are being amortized over 10 years.

On March 27, 2015, in conjunction with the Baytown Transaction, the Company obtained approximately
$21.4 million of mortgage debt from Protective Life. The new mortgage loan has a 10-year term with a 3.55%
fixed interest rate and the principal amortized over a 30-year term. The Company incurred approximately $0.2
million in deferred financing costs related to this loan, which are being amortized over 10 years.

On March 5, 2015, the Company repaid an interim, interest only variable rate mortgage loan totaling approx-
imately $21.6 million from Wells Fargo on one of its senior living communities located in Toledo, Ohio. The
Company obtained approximately $21.8 million of mortgage debt from Fannie Mae to replace the Wells Fargo
interim financing. This new mortgage loan has a 10-year term with a fixed interest rate of 3.84% and the princi-
pal amortized over 30-years. The Company incurred approximately $0.2 million in deferred financing costs
related to this loan, which are being amortized over the loan term. As a result of the refinance, the Company
received approximately $0.2 million in cash proceeds. Due to the early repayment, the Company accelerated the
amortization of approximately $79,000 in unamortized deferred financing costs and incurred additional prepay-
ment fees totaling approximately $55,000.

On February 17, 2015, the Company obtained new permanent mortgage financing totaling approximately
$23.2 million from Fannie Mae on one of its owned senior living communities located in Peoria, Illinois. The
new financing replaced a mortgage loan previously scheduled to mature on September 1, 2015, which was
defeased by the Company on January 22, 2015, in conjunction with the Four Property Sale Transaction. This new
mortgage loan has a 10-year term with a fixed interest rate of 3.85% and the principal amortized over 30 years.
The Company incurred approximately $0.2 million in deferred financing costs related to this loan, which are
being amortized over the loan term. As a result of the Peoria financing, the Company repaid existing mortgage
debt on two owned properties totaling approximately $14.1 million. Due to the early repayment, the Company
accelerated the amortization of approximately $0.2 million in unamortized deferred financing costs and incurred
additional prepayment fees totaling approximately $0.5 million.

On January 22, 2015, outstanding mortgage debt totaling approximately $13.7 million was defeased in con-
junction with the Four Property Sale Transaction. The mortgage loan associated with the Company’s senior liv-
ing community located in Winston-Salem, North Carolina, carried an outstanding balance of approximately $5.7
million and could not be prepaid under the existing loan agreement as it did not offer a prepayment provision.
Additionally, this mortgage loan was cross-collateralized with another mortgage loan on one of the Company’s
senior living communities located in Peoria, Illinois, which carried an outstanding mortgage balance of approx-
imately $8.0 million and also did not offer a prepayment provision. Therefore, the Company determined it would
defease the Winston-Salem and Peoria mortgage loans by acquiring certain treasury securities to serve as
collateral for the outstanding principal balance as of the date of the sale until the note matured on September 1,
2015. The Company contracted with a third party trust to assume the mortgage debt and assigned all of its rights
to the treasury securities to serve as collateral until the balance remaining came due. Based on this structure, the
Company concluded it met the requirements to report the debt transaction as a legal defeasance which resulted in
the Company removing the respective assets and liabilities from its Consolidated Balance Sheet during the first
quarter of fiscal 2015 when the transaction closed. Due to the defeasance, the Company accelerated the amor-
tization of approximately $18,000 in unamortized deferred financing costs. For additional information refer to
Note 5, “Dispositions”, within the notes to consolidated financial statements.

On January 13, 2015, in conjunction with the Green Bay Transaction, the Company obtained approximately
$14.1 million of mortgage debt from Fannie Mae. The new mortgage loan has a 10-year term with a 4.35% fixed
interest rate and the principal amortized over a 30-year term. The Company incurred approximately $0.1 million
in deferred financing costs related to this loan, which are being amortized over 10 years.

Recent Events

Effective February 16, 2016, the Company closed the acquisition of two senior living communities located
in Pensacola, Florida, for approximately $48.0 million. The communities consist of 179 assisted living units. The
Company obtained financing from Protective Life for $35.0 million of the acquisition price at a fixed rate of

36

4.38% with a 10-year term with the balance of the acquisition price paid from the Company’s existing cash
resources.

Effective January 26, 2016, the Company closed the acquisition of three senior living communities located
in Colby, Park Falls, and Wisconsin Rapids, Wisconsin, for approximately $16.8 million. The communities con-
sist of 138 assisted living units. The Company obtained financing from Protective Life for $11.3 million of the
acquisition price at a fixed rate of 4.50% with a 10-year term with the balance of the acquisition price paid from
the Company’s existing cash resources.

Critical Accounting Policies

The preparation of financial statements in conformity with accounting principles generally accepted in the
United States requires management to make estimates and assumptions that affect the amounts reported in the
accompanying financial statements and related notes. Management bases its estimates and assumptions on histor-
ical experience, observance of industry trends and various other sources of information and factors, the results of
which form the basis for making judgments about the carrying value of assets and liabilities that are not readily
apparent from other sources. Actual results could differ from these estimates. Critical accounting policies are
defined as those that are reflective of significant judgments and uncertainties, and potentially could result in
materially different results under different assumptions and conditions. The Company believes the following crit-
ical accounting policies require management’s most difficult, subjective and complex judgments.

Revenue Recognition

Resident and health care revenue is recognized at estimated net realizable amounts, based on historical
experiences, due from residents in the period to which the rental and other services are provided. Additionally,
substantially all community fees received from residents are non-refundable and are recorded initially by the
Company as deferred revenue. The deferred amounts are amortized over the respective residents’ initial lease
term which is consistent with the contractual obligation associated with the estimated stay of the resident.

Revenues from the Medicaid program accounted for approximately 5% of the Company’s revenue fiscal
2015 and 4% of the Company’s revenue in each of fiscal 2014 and 2013. During fiscal 2015, 2014, and 2013, 34,
30, and 29, respectively, of the Company’s communities were providers of services under Medicaid programs.
Accordingly, these communities were entitled to reimbursement under the foregoing program at established rates
that were lower than private pay rates. Patient service revenue for Medicaid patients was recorded at the
reimbursement rates as the rates were set prospectively by the applicable state upon the filing of an annual cost
report. None of the Company’s communities were providers of services under the Medicare program during fis-
cal 2015 or 2014.

Laws and regulations governing the Medicaid program are complex and subject to interpretation. The
Company believes that it is in compliance with all applicable laws and regulations and is not aware of any pend-
ing or threatened investigations involving allegations of potential wrongdoing. While no such regulatory
inquiries have been made, compliance with such laws and regulations can be subject to future government review
and interpretation as well as significant regulatory action including fines, penalties, and exclusion from the
Medicaid program.

Management services revenue was recognized when earned and related to the Company providing certain
management and administrative support services under management contracts, which were terminated when the
Company acquired 100% of the member interests in its unconsolidated joint ventures on June 30, 2014.

Community reimbursement revenue is comprised of reimbursable expenses from the non-consolidated
communities that the Company operated under long-term management agreements, which were terminated when
the Company acquired 100% of the member interests in its unconsolidated joint ventures on June 30, 2014.

Credit Risk and Allowance for Doubtful Accounts

The Company’s resident receivables are generally due within 30 days from the date billed. Accounts receiv-
able are reported net of an allowance for doubtful accounts, and represent the Company’s estimate of the amount
that ultimately will be collected. The adequacy of the Company’s allowance for doubtful accounts is reviewed on

37

an ongoing basis, using historical payment trends, write-off experience, analyses of receivable portfolios by
payor source and aging of receivables, as well as a review of specific accounts, and adjustments are made to the
allowance as necessary. Credit losses on resident receivables have historically been within management’s esti-
mates, and management believes that the allowance for doubtful accounts adequately provides for expected
losses.

Investments in Unconsolidated Joint Ventures

The Company accounted for its investments in unconsolidated joint ventures under the equity method of
accounting. The Company had not consolidated these joint venture interests because the Company had concluded
that the other member of each joint venture had substantive kick-out rights or substantive participating rights.
Under the equity method of accounting, the Company recorded its investments in the unconsolidated joint ven-
tures at cost and adjusted such investments for its share of the earnings and losses of the joint ventures. On
June 30, 2014, the Company acquired 100% of the member interests in these joint ventures. For additional
information refer to Note 4, “Acquisitions” within the notes to consolidated financial statements.

Off-Balance Sheet Arrangements

The Company had no material off-balance sheet arrangements at December 31, 2015.

Lease Accounting

The Company determines whether to account for its leases as operating, capital or financing leases depend-
ing on the underlying terms of each lease agreement. This determination of classification requires significant
judgment relating to certain information, including the estimated fair value and remaining economic life of the
community, the Company’s cost of funds, minimum lease payments and other lease terms. The lease rates under
the Company’s lease agreements are subject to certain conditional escalation clauses which are recognized when
probable or incurred and are based on changes in the consumer price index or certain operational performance
measures. As of December 31, 2015 and 2014, the Company leased 50 communities, 48 of which the Company
classified as operating leases and two of which the Company classified as capital lease and financing obligations.
The Company incurs lease acquisition costs and amortizes these costs over the term of the respective lease
agreement. Certain leases entered into by the Company qualified as sale/leaseback transactions, and as such, any
related gains have been deferred and are being amortized over the respective lease term. No new communities
were leased by the Company during fiscal 2015 or 2014.

Facility lease expense in the Company’s Consolidated Statements of Operations and Comprehensive loss
includes rent expense plus amortization expense relating to leasehold acquisition costs offset by the amortization
of deferred gains and lease incentives.

Employee Health and Dental Benefits, Workers’ Compensation, and Insurance Reserves

The Company offers certain full-time employees an option to participate in its health and dental plans. The
Company is self-insured up to certain limits and is insured if claims in excess of these limits are incurred. The
cost of employee health and dental benefits, net of employee contributions, is shared between the corporate office
and the senior living communities based on the respective number of plan participants. Funds collected are used
to pay the actual program costs including estimated annual claims, third-party administrative fees, network pro-
vider fees, communication costs, and other related administrative costs incurred by the plans. Claims are paid as
they are submitted to the Company’s third-party administrator. The Company records a liability for outstanding
claims and claims that have been incurred but not yet reported. This liability is based on the historical claim
reporting lag and payment trends of health insurance claims. Management believes that the liability for out-
standing losses and expenses is adequate to cover the ultimate cost of losses and expenses incurred at
December 31, 2015; however, actual claims and expenses may differ. Any subsequent changes in estimates are
recorded in the period in which they are determined.

The Company uses a combination of insurance and self-insurance for workers’ compensation. Determining
the reserve for workers’ compensation losses and costs that the Company has incurred as of the end of a reporting
period involves significant judgments based on projected future events, including potential settlements for pend-

38

ing claims, known incidents which may result in claims, estimates of incurred but not yet reported claims,
changes in insurance premiums, estimated litigation costs and other factors. The Company regularly adjusts these
estimates to reflect changes in the foregoing factors. However, since this reserve is based on estimates, the actual
expenses incurred may differ from the amounts reserved. Any subsequent changes in estimates are recorded in
the period in which they are determined.

Long-Lived Assets

Property and equipment are stated at cost and depreciated on a straight-line basis over the estimated useful
lives of the assets. At each balance sheet date, the Company reviews the carrying value of its property and
equipment to determine if facts and circumstances suggest that they may be impaired or that the depreciation
period may need to be changed. The Company considers internal factors such as net operating losses along with
external factors relating to each asset, including contract changes, local market developments, and other publicly
available information. If an indicator of impairment is identified, the carrying value of a long-lived asset is con-
sidered impaired when the anticipated undiscounted cash flows from such asset is separately identifiable and is
less than its carrying value. In that event, a loss is recognized based on the amount the carrying value exceeds the
fair market value, generally based on discounted cash flows, of the long-lived asset. The Company does not
believe there are any indicators of impairment that would require an adjustment to the carrying value of the
property and equipment or their remaining useful lives as of December 31, 2015 and 2014.

Assets Held for Sale

Assets are classified as held for sale when the Company has determined all of the held-for-sale criteria have
been met. The Company determines the fair value, net of costs of disposal, of an asset on the date the asset is
categorized as held for sale, and the asset is recorded at the lower of its fair value, net of cost of disposal, or
carrying value on that date. The Company periodically re-evaluates assets held for sale to determine if the assets
are still recorded at the lower of fair value, net of cost of disposal, or carrying value. The fair values are generally
determined based on market rates, industry trends and recent comparable sales transactions. The actual sales
price of these assets could differ significantly from the Company’s estimates.

During the fourth quarter of fiscal 2014, the Company classified four senior living communities as held for
sale and determined the assets had an aggregate fair value, net of cost of disposal, that exceeded the carrying
values and a remeasurement write-down of approximately $0.6 million was recorded. The four senior living
communities were sold during the first quarter of fiscal 2015 in a single transaction for its carrying value. There
were no senior living communities classified as held for sale by the Company at December 31, 2015.

Income Taxes

Income taxes are computed using the asset and liability method and current income taxes are recorded based
on amounts refundable or payable in the current year. Deferred income taxes are recorded based on the estimated
future tax effects of loss carryforwards and temporary differences between financial statement carrying amounts
of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured
using enacted tax rates that are expected to apply to taxable income in the years in which we expect those carry-
forwards and temporary differences to be recovered or settled. Management regularly evaluates the future
realization of deferred tax assets and provides a valuation allowance, if considered necessary, based on such
evaluation. As part of the evaluation, management has evaluated taxable income in carryback years, future
reversals of taxable temporary differences, feasible tax planning strategies, and future expectations of income.
Based upon this evaluation, a valuation allowance has been recorded to reduce the Company’s net deferred tax
assets to the amount that is more likely than not to be realized. However, in the event that we were to determine
that it would be more likely than not that the Company would realize the benefit of deferred tax assets in the
future in excess of their net recorded amounts, adjustments to deferred tax assets would increase net income in
the period we made such a determination. The benefits of the net deferred tax assets might not be realized if
actual results differ from expectations. The effective tax rates for fiscal 2015 and 2014 differ from the statutory
tax rates due to state income taxes, permanent tax differences, and changes in the deferred tax asset valuation
allowance. The Company is impacted by the Texas Margin Tax (“TMT”), which effectively imposes tax on
modified gross revenues for communities within the State of Texas. During fiscal 2015, the Company con-

39

solidated 37 Texas communities and during 2014, the Company consolidated 36 Texas communities and the
TMT increased the overall provision for income taxes.

The Company evaluates uncertain tax positions through consideration of accounting and reporting guidance on
criteria, measurement, derecognition, classification, interest and penalties, accounting in interim periods, disclosure,
and transition that is intended to provide better financial-statement comparability among different companies. The
Company is required to recognize a tax benefit in its financial statements for an uncertain tax position only if man-
agement’s assessment is that its position is “more likely than not” (i.e., a greater than 50 percent likelihood) to be
upheld on audit based only on the technical merits of the tax position. The Company’s policy is to recognize interest
related to unrecognized tax benefits as interest expense and penalties as income tax expense. The Company is gen-
erally no longer subject to federal and state income tax audits for years prior to 2012.

Recently Issued Accounting Guidance

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards
Update (“ASU”) 2016-02, Leases. ASU 2016-02 amends the existing accounting standards for lease accounting,
including requiring lessees to recognize most leases on their balance sheets and making targeted changes to les-
sor accounting. ASU 2016-02 will be effective beginning in 2019. Early adoption of ASU 2016-02 as of its issu-
ance is permitted. The new leases standard requires a modified retrospective transition approach for all leases
existing at, or entered into after, the date of initial application, with an option to use certain transition relief. We
are currently evaluating the impact of adopting the new leases standard on our consolidated financial statements.

In November 2015, the FASB issued ASU 2015-17, Income Taxes – Balance Sheet Reclassification of
Deferred Taxes (Topic 740). ASU 2015-17 requires that deferred tax liabilities and assets be classified as non-
current in a classified statement of financial position. The current requirement that deferred tax liabilities and
assets of a tax-paying component of an entity be offset and presented as a single amount is not affected by the
amendments in this update. The amendments in this update are effective for financial statements issued for
annual periods beginning after December 15, 2016, and interim periods within those annual periods. Early adop-
tion is permitted and the amendments may be applied either prospectively to all deferred tax liabilities and assets
or retrospectively to all periods presented. The Company early adopted ASU 2015-17 in the fourth quarter of
2015 on a prospective basis and included the current portion of deferred tax assets within the non-current portion
of deferred tax liabilities within the Company’s consolidated balance sheet. The Company did not adjust its prior
period consolidated financial statements as a result of the adoption of ASU 2015-17.

In September 2015, the FASB issued ASU 2015-16, Business Combinations — Simplifying the Accounting
for Measurement-Period Adjustments. ASU 2015-16 eliminates the requirement for an acquirer in a business
combination to account for the measurement-period adjustment retrospectively. Instead, acquirers must recognize
measurement-period adjustments during the period in which they determine the amounts, including the effect on
earnings of any amounts they would have recorded in previous periods if the accounting had been completed at
the acquisition date. ASU 2015-16 is applied prospectively and is effective for fiscal years beginning after
December 15, 2015, and interim periods within those fiscal years. Early application is permitted. The Company
is currently evaluating the impact the adoption of ASU 2015-16 will have on the Company’s consolidated finan-
cial statements and disclosures.

In April 2015, the FASB issued ASU 2015-03, Interest — Imputation of Interest- Simplifying the Pre-
sentation of Debt Issuance Costs (Subtopic 835-30). The amendments in ASU No. 2015-03 requires debt issu-
ance costs related to a recognized debt liability to be presented on the balance sheet as a direct deduction from
the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guid-
ance for debt issuance costs are not affected by the amendments in ASU 2015-03. ASU 2015-03 requires retro-
spective application and will be effective for financial statements issued for fiscal years beginning after
December 15, 2015, and interim periods within those fiscal years. Early application is permitted. The Company
early adopted the provisions of ASU 2015-03 as of October 1, 2015, and incorporated the provisions of this
update to its consolidated financial statements upon adoption. As a result of adoption of ASU 2015-03, at
December 31, 2015, and 2014, approximately $8.5 million and $6.3 million, respectively, of debt issuance costs,
net of accumulated amortization, were reclassified within the Company’s Consolidated Balance Sheets from

40

other assets to notes payable. The adoption of ASU 2015-03 did not have an impact on the Company’s financial
condition or results of operations.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers. ASU 2014-09
affects any entity that either enters into contracts with customers to transfer goods or services or enters into con-
tracts for the transfer of nonfinancial assets. Under ASU 2014-09, an entity will recognize revenue when it trans-
fers promised goods or services to customers in an amount that reflects what it expects in exchange for the goods
or services. ASU 2014-09 is effective for annual periods beginning after December 15, 2017. The Company is
currently evaluating the impact the adoption of ASU 2014-09 will have on the Company’s consolidated financial
statements and disclosures.

Results of Operations

The following tables set forth, for the periods indicated, selected historical Consolidated Statements of
Operations and Comprehensive loss data in thousands of dollars and expressed as a percentage of total revenues.

Year Ended December 31,

2015

2014

2013

$

%

$

%

$

%

Revenues:

Resident and healthcare revenue . . . . . . . . . . . . . . . . .
Affiliated management services revenue . . . . . . . . . .
Community reimbursement income . . . . . . . . . . . . . .

$412,177
—
—

100.0% $380,400
415
3,110

—
—

99.1% $343,478
797
0.1
6,087
0.8

98.1%
0.2
1.7

Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

412,177

100.0

383,925

100.0

350,362

100.0

Expenses:

Operating expenses (exclusive of facility lease

expense and depreciation and amortization shown
below) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General and administrative expenses . . . . . . . . . . . . .
Facility lease expense . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for bad debts . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . .
Community reimbursement expense . . . . . . . . . . . . . .

248,736
20,351
61,213
1,192
8,833
53,017
—

Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

393,342

Income from operations . . . . . . . . . . . . . . . . . . . . . . . . . .
Other income (expense):

Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Write-off of deferred loan costs and prepayment

premium . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Joint venture equity investment valuation gain . . . . . .
Gain on disposition of assets, net
. . . . . . . . . . . . . . . .
Equity in earnings of unconsolidated joint ventures,

net

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Write-down of assets held for sale . . . . . . . . . . . . . . .
Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

18,835

53
(35,732)

(2,766)
—
6,225

—
—

1

Loss before provision for income taxes . . . . . . . . . . . . .
Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . .

(13,384)
(900)

60.3
4.9
14.9
0.3
2.1
12.9
—

95.4

4.6

0.0
(8.7)

(0.7)
—
1.5

—
—
0.0

(3.3)
(0.2)

230,495
19,622
59,332
717
7,262
49,487
3,110

370,025

13,900

52
(31,261)

(7,968)
1,519
784

105
(561)
23

(23,407)
(719)

60.0
5.1
15.5
0.2
1.9
12.9
0.8

96.4

3.6

0.0
(8.2)

(2.1)
0.4
0.2

0.0
(0.2)
0.0

(6.1)
(0.2)

207,744
20,238
56,986
497
4,322
43,238
6,087

339,112

11,250

59.3
5.8
16.3
0.2
1.2
12.3
1.7

96.8

3.2

151
(23,767)

0.2
(6.8)

—
—
1,454

133
—

34

—
—
0.4

0.1
—
0.0

(10,745)
(5,759)

(3.1)
(1.6)

Net loss and comprehensive loss . . . . . . . . . . . . . . . . . . .

$ (14,284)

(3.5)% $ (24,126)

(6.3)% $ (16,504)

(4.7)%

41

Year Ended December 31, 2015 Compared to the Year Ended December 31, 2014

Revenues

Total revenues were $412.2 million for the fiscal year ended December 31, 2015 compared to $383.9 mil-
lion for the fiscal year ended December 31, 2014, representing an increase of approximately $28.3 million, or
7.4%. This increase in revenue is primarily the result of a $31.8 million increase in resident and healthcare rev-
enue, slightly offset by a decrease in community reimbursement revenue of $3.1 million and a decrease in affili-
ated management services revenue of $0.4 million.

• The increase in resident and healthcare revenue primarily results from an increase of $36.7 million from
the senior living communities acquired by the Company during fiscal 2015 and a full year of operating
results from the senior living communities acquired by the Company during fiscal 2014 and an increase of
$5.8 million from an increase in average monthly rental rates of 1.5% at the Company’s other con-
solidated same-store communities, slightly offset by a decrease of $10.7 million due to the Sedgwick Sale
Transaction which closed on August 6, 2015 and Four Property Sale Transaction which closed on Jan-
uary 22, 2015.

• Affiliated management service revenue is comprised of management fees earned from unconsolidated
joint ventures that the Company operated under management agreements. On June 30, 2014, the Company
acquired 100% of the member interests in these joint ventures.

• Community reimbursement income is comprised of reimbursable expenses from unconsolidated joint
ventures that the Company operated under management agreements. On June 30, 2014, the Company
acquired 100% of the member interests in these joint ventures.

Expenses

Total expenses were $393.3 million during fiscal 2015 compared to $370.0 million during fiscal 2014, repre-
senting an increase of $23.3 million, or 6.3%. This increase in expenses is primarily the result of a $18.2 million
increase in operating expenses, a $3.5 million increase in depreciation and amortization expense, a $1.9 million
increase in facility lease expense, a $1.6 million increase in stock-based compensation expense, a $0.7 million
increase in general and administrative expenses, and a $0.5 million increase in provision for bad debts, slightly
offset by a decrease in community reimbursement expense of $3.1 million.

• The increase in operating expenses primarily results from an increase of $22.8 million from the senior
living communities acquired by the Company during fiscal 2015 and a full year of operating results from
the senior living communities acquired by the Company during fiscal 2014 and a $2.6 million increase in
general overall operating costs at the Company’s other consolidated same-store communities, partially
offset by a decrease of $7.2 million due to the Sedgwick Sale Transaction which closed on August 6, 2015
and Four Property Sale Transaction which closed on January 22, 2015.

• The increase in depreciation and amortization expense primarily results from an increase of $13.6 million
for senior living communities acquired by the Company during fiscal 2015 and a full year of operating
results from the senior living communities acquired by the Company during fiscal 2014 and an increase of
$2.0 million due to an increase in depreciable assets at the Company’s other consolidated same-store
communities, partially offset by a decrease in in-place lease amortization of $10.3 million from the senior
living communities acquired by the Company during fiscal 2014 and 2013 which were fully amortized
prior to fiscal 2015 and a decrease of $1.8 million due to the Sedgwick Sale Transaction which closed on
August 6, 2015 and Four Property Sale Transaction which closed on January 22, 2015.

• The increase in facility lease expense primarily results from contingent annual rental rate escalations for

certain existing leases.

• The increase in stock-based compensation expense results from the Company granting restricted stock
awards and units to certain employees and directors during fiscal 2015, some of which required accel-
erated expense recognition, and a full year of amortization for awards and units granted during fiscal
2014.

42

• The increase in general and administrative expenses primarily results from an increase of $1.6 million in
wages and benefits for existing employees, primarily attributable to annual merit increases, and additional
employees added throughout fiscal 2015 and 2014, partially offset by a decrease of $0.9 million in
employee insurance benefits and claims paid, which resulted in lower health insurance costs to the Com-
pany.

• Community reimbursement expense represents payroll and administrative costs paid by the Company for
the benefit of unconsolidated joint ventures that the Company operated under management agreements.
On June 30, 2014, the Company acquired 100% of the member interests in these joint ventures.

Other income and expense

• Interest income generally reflects interest earned on the investment of cash balances and escrowed funds

or interest associated with certain income tax refunds or property tax settlements.

• Interest expense increased $4.5 million in fiscal 2015 when compared to fiscal 2014 primarily due to an
increase of $5.6 million from the additional mortgage debt associated with the senior living communities
acquired by the Company during fiscal 2015 and a full year of interest expense for the senior living
communities acquired by the Company during fiscal 2014 and an increase of $0.1 million at the Compa-
ny’s other consolidated same-store communities due to additional mortgage debt added by the Company
associated with certain refinancings and supplemental loans that occurred during fiscal 2015, slightly
offset by a $1.2 million decrease due to the Sedgwick Sale Transaction which closed on August 6, 2015
and Four Property Sale Transaction which closed on January 22, 2015.

• Write-off of deferred loan costs and prepayment premiums is attributable to the early repayment of certain
mortgage debt on the Company’s owned properties due to scheduled maturities and the opportunity to
replace interim variable interest rate debt with long-term fixed interest rate financing.

• Joint venture equity investment valuation gain is attributable to the Company closing the SHPIII/CSL
Transaction during the second quarter of fiscal 2014. The Company acquired 100% of the members’
equity interests in SHPIII/CSL Miami, SHPIII/CSL Richmond Heights, and SHPIII/CSL Levis Commons
and received cash proceeds, including incentive distributions, of approximately $2.5 million which
resulted in the Company recording a gain of approximately $1.5 million to reflect the fair value of the
equity interests on the acquisition date.

• The increase in gain on disposition of assets is primarily attributable to the Sedgwick Sale Transaction

which closed on August 6, 2015.

• Equity in earnings of unconsolidated joint ventures, net, represents the Company’s share of the net earn-
ings on its investments in SHPIII/CSL Miami, SHPIII/CSL Richmond Heights, and SHPIII/CSL Levis
Commons. On June 30, 2014, the Company acquired 100% of the member interests in these joint ven-
tures.

• Write-down of assets held for sale is attributable to a fair value remeasurement adjustment recorded by
the Company upon classifying four senior living communities as held for sale during the fourth quarter of
fiscal 2014. This reclassification resulted in the Company determining the assets had an aggregate fair
value, net of costs of disposal, which exceeded the carrying values by approximately $0.6 million, that
was primarily attributable to costs of disposal. The four senior living communities were sold during the
first quarter of fiscal 2015 in a single transaction for its carrying value.

Provision for income taxes

Provision for income taxes for fiscal 2015 was $0.9 million, or 6.7% of loss before income taxes, compared
to provision for income taxes of $0.7 million, or 3.1% of loss before income taxes, for fiscal 2014. The effective
tax rates for fiscal 2015 and 2014 differ from the statutory tax rates due to state income taxes, permanent tax
differences, and changes in the deferred tax asset valuation allowance. The Company is impacted by the TMT
which effectively imposes tax on modified gross revenues for communities within the State of Texas. During
fiscal 2015 the Company operated 37 Texas communities and during fiscal 2014 the Company operated 36 Texas

43

communities and the TMT increased the overall provision for income taxes. For income tax purposes, in con-
junction with the Sedgwick Sale Transaction the Company executed a like-kind exchange and acquired a
replacement property shortly after the sale which resulted in deferral of the gain without the Company incurring
any current federal or state income tax liabilities.

Management regularly evaluates the future realization of deferred tax assets and provides a valuation allow-
ance, if considered necessary, based on such evaluation. As part of the evaluation, management has evaluated
taxable income in carryback years, future reversals of taxable temporary differences, feasible tax planning strat-
egies, and future expectations of income. Based upon this evaluation, an adjustment to the deferred tax asset
valuation allowance of $5.0 million and $8.5 million was recorded during fiscal 2015 and 2014, respectively, to
reduce the Company’s net deferred tax assets to the amount that is more likely than not to be realized.

Net loss and comprehensive loss

As a result of the foregoing factors, the Company reported net loss and comprehensive loss of $(14.3 mil-
lion) for the fiscal year ended December 31, 2015, compared to net loss and comprehensive loss of $(24.1 mil-
lion) for the fiscal year ended December 31, 2014. The retained deficit currently reported within the Company’s
Consolidated Balance Sheets is primarily the accumulated result of the Company recognizing accelerated amor-
tization expense of $67.2 million through December 31, 2015, associated with in-place leases from the Compa-
ny’s acquisition program which began during fiscal 2010.

Year Ended December 31, 2014 Compared to the Year Ended December 31, 2013

Revenues

Total revenues were $383.9 million for the year ended December 31, 2014 compared to $350.4 million for
the year ended December 31, 2013, representing an increase of approximately $33.6 million, or 9.6%. This
increase in revenue is the result of a $36.9 million increase in resident and healthcare revenue, slightly offset by a
decrease in affiliated management services revenue of $0.4 million, and a decrease in community reimbursement
revenue of $3.0 million.

• The increase in resident and healthcare revenue primarily results from an increase of $41.4 million from
the senior living communities acquired by the Company during fiscal 2014 and a full year of operating
results from the senior living communities acquired by the Company during fiscal 2013, partially offset
by a decrease of $7.8 million due to the Company no longer providing skilled nursing services at two of
its senior living communities which are in the process of being repositioned with the facilities being con-
verted to offer assisted living care and services.

• Affiliated management service revenue is comprised of management fees earned from unconsolidated
joint ventures that the Company operated under management agreements. On June 30, 2014, the Company
closed the SHPIII/CSL Transaction and acquired 100% of the member interests in these joint ventures.
For additional information refer to Note 4, “Acquisitions”, within the notes to consolidated financial
statements.

• Community reimbursement income is comprised of reimbursable expenses from unconsolidated joint
ventures that the Company operated under management agreements. On June 30, 2014, the Company
closed the SHPIII/CSL Transaction and acquired 100% of the member interests in these joint ventures.

44

Expenses

Total expenses were $370.0 million during fiscal 2014 compared to $339.1 million during fiscal 2013, repre-
senting an increase of $30.9 million, or 9.1%. This increase is the result of a $22.8 million increase in operating
expenses, a $6.2 million increase in depreciation and amortization expense, a $2.9 million increase in stock-
based compensation expense, a $2.3 million increase in facility lease expense, and a $0.2 million increase in
provision for bad debts, slightly offset by a decrease in community reimbursement expense of $3.0 million and a
decrease in general and administrative expenses of $0.6 million.

• The increase in operating expenses primarily results from an increase of $27.1 million from the senior
living communities acquired by the Company during fiscal 2014 and a full year of operating results from
the senior living communities acquired by the Company during fiscal 2013, and an increase in overall
operating costs at the Company’s other consolidated same-store communities of $4.2 million. These
increases were partially offset by a decrease of $8.5 million due to the Company no longer providing skil-
led nursing services at two of its senior living communities which are in the process of being repositioned
with the facilities being converted to offer assisted living care and services. The increase in overall operat-
ing costs of $4.2 million at the Company’s other consolidated same-store communities primarily results
from an increase in employee wages and benefits of $2.3 million, an increase in utilities of $0.5 million,
an increase in promotional and advertising costs of $0.5 million, an increase in food costs of $0.2 million,
an increase in property taxes of $0.2 million, and an increase in general operating expenses of $0.5 mil-
lion.

• The increase in facility lease expense primarily results from contingent annual rental rate escalations for

certain existing leases.

• The increase in stock-based compensation expense results from the accelerated vesting of certain
restricted stock awards associated with the retirement of the Company’s former Chief Financial Officer
during the second quarter of fiscal 2014 and the Company granting additional shares of restricted stock to
certain employees and directors throughout fiscal 2014 and 2013.

• The increase in depreciation and amortization expense primarily results from an increase of $19.8 million
for senior living communities acquired by the Company during fiscal 2014 and a full year of depreciation
and amortization from the senior living communities acquired by the Company during fiscal 2013, and an
increase of $0.6 million as a result of an increase in depreciable assets at the Company’s other con-
solidated same-store communities. These increases were partially offset by a decrease in in-place lease
amortization of $14.2 million from the senior living communities acquired by the Company prior to fiscal
2014.

• Community reimbursement expense represents payroll and administrative costs paid by the Company for
the benefit of unconsolidated joint ventures that the Company operated under management agreements.
On June 30, 2014, the Company acquired 100% of the member interests in these joint ventures. For addi-
tional information refer to Note 4, “Acquisitions”, within the notes to unaudited consolidated financial
statements.

• The decrease in general and administrative expenses primarily results from a decrease of $1.7 million in
employee insurance benefits and claims paid, which resulted in lower health insurance costs to the Com-
pany, and a decrease of $0.2 million related to professional fees paid for a cost segregation tax study
completed during the first quarter of fiscal 2013. These decreases were partially offset by an increase of
$1.1 million in wages and benefits for existing and additional employees added throughout fiscal 2014
and 2013 and an increase of $0.2 million for due diligence and legal expenses incurred in connection with
the Company’s acquisition program.

Other income and expense

• Interest income generally reflects interest earned on the investment of cash balances and escrowed funds

or interest associated with certain income tax refunds or property tax settlements.

45

• Interest expense increased $7.5 million in fiscal 2014 when compared to fiscal 2013 primarily due to the
additional mortgage debt associated with the senior living communities acquired by the Company during
fiscal 2014 and a full year of interest expense for the senior living communities acquired by the Company
during fiscal 2013.

• Write-off of deferred loan costs and prepayment premium is attributable to the early repayment of the
Company’s existing mortgage debt with Freddie Mac during fiscal 2014. The Company recorded non-
cash charges of approximately $0.5 million to remove the remaining unamortized deferred financing
assets related to the refinanced mortgage debt and incurred approximately $7.5 million in early repayment
fees and retirement costs.

• Joint venture equity investment valuation gain is attributable to the Company closing the SHPIII/CSL
Transaction on June 30, 2014, which resulted in the Company acquiring 100% of the members’ equity
interests in SHPIII/CSL Miami, SHPIII/CSL Richmond Heights, and SHPIII/CSL Levis Commons. The
Company received cash proceeds, including incentive distributions, of approximately $2.5 million which
resulted in the Company recording a gain of approximately $1.5 million to reflect the fair value of the
equity interests on the acquisition date.

• Write-down of assets held for sale is attributable to a fair value remeasurement adjustment recorded by
the Company upon classifying four senior living communities as held for sale during the fourth quarter of
fiscal 2014. This reclassification resulted in the Company determining the assets had an aggregate fair
value, net of costs of disposal, that exceeded the carrying values by approximately $0.6 million, which
was primarily attributable to costs of disposal. The four senior living communities were sold during the
first quarter of fiscal 2015 in a single transaction for its carrying value.

• Equity in earnings of unconsolidated joint ventures, net, represents the Company’s share of the net earn-
ings on its investments in SHPIII/CSL Miami, SHPIII/CSL Richmond Heights, and SHPIII/CSL Levis
Commons. On June 30, 2014, the Company closed the SHPIII/CSL Transaction acquiring 100% of the
member interests in these joint ventures.

Provision for income taxes

Provision for income taxes for fiscal 2014 was $0.7 million, or 3.1% of loss before income taxes, compared
to provision for income taxes of $5.8 million, or 53.5% of loss before income taxes, for fiscal 2013. The effective
tax rates for fiscal 2014 and 2013 differ from the statutory tax rates due to state income taxes, permanent tax
differences, and changes in the deferred tax asset valuation allowance. The Company is impacted by the TMT
which effectively imposes tax on modified gross revenues for communities within the State of Texas. During
fiscal 2014 and 2013, the Company consolidated 36 Texas communities and the TMT increased the overall
provision for income taxes.

Management regularly evaluates the future realization of deferred tax assets and provides a valuation allow-
ance, if considered necessary, based on such evaluation. As part of the evaluation, management has evaluated
taxable income in carryback years, future reversals of taxable temporary differences, feasible tax planning strat-
egies, and future expectations of income. Based upon this evaluation, adjustments to the deferred tax asset valu-
ation allowance of $8.5 million and $8.8 million were recorded during fiscal 2014 and 2013, respectively, to
reduce the Company’s net deferred tax assets to the amount that is more likely than not to be realized.

Net loss and comprehensive loss

As a result of the foregoing factors, the Company reported net loss and comprehensive loss of $(24.1 mil-
lion) for the fiscal year ended December 31, 2014, compared to net loss and comprehensive loss of $(16.5 mil-
lion) for the fiscal year ended December 31, 2013. The net loss and comprehensive loss of $(24.1 million)
reported by the Company for fiscal 2014, resulted in the Company realizing a retained deficit of $(9.3 million)
within the Company’s Consolidated Balance Sheet. The retained deficit currently reported within the Company’s
Consolidated Balance Sheets is primarily the accumulated result of the Company recognizing accelerated amor-
tization expense of $52.8 million associated with in-place leases from the Company’s acquisition program which
began during fiscal 2010.

46

Quarterly Results

The following table presents certain unaudited quarterly financial information for each of the four quarters
ended December 31, 2015 and 2014. This information has been prepared on the same basis as the audited con-
solidated financial statements of the Company appearing elsewhere in this report and include, in the opinion of
the Company’s management, all adjustments (consisting of normal recurring adjustments) necessary to present
fairly the quarterly results when read in conjunction with the audited consolidated financial statements of the
Company and the related notes thereto.

Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income from operations . . . . . . . . . . . . . . . . . . . . . . . .
Net (loss) income and comprehensive (loss)

income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net (loss) income per share, basic . . . . . . . . . . . . . . . .
Net (loss) income per share, diluted . . . . . . . . . . . . . . .
Weighted average shares outstanding, basic . . . . . . . .
Weighted average shares outstanding, fully diluted . . .

Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income from operations . . . . . . . . . . . . . . . . . . . . . . . .
Net loss and comprehensive loss . . . . . . . . . . . . . . . . . .
Net loss per share, basic . . . . . . . . . . . . . . . . . . . . . . . .
Net loss per share, diluted . . . . . . . . . . . . . . . . . . . . . . .
Weighted average shares outstanding, basic . . . . . . . . .
Weighted average shares outstanding, fully diluted . . .

Liquidity and Capital Resources

2015 Calendar Quarters

First

Second

Third

Fourth

(In thousands, except per share amounts)

$98,640
3,718

$101,588
3,680

$104,420
5,676

$107,529
5,761

(6,039)
$ (0.21) $
$ (0.21) $
28,565
28,565

(5,166)
(0.18) $
(0.18) $

28,705
28,705

2,871
0.10
0.10
28,732
28,733

$
$

(5,950)
(0.21)
(0.21)
28,749
28,749

2014 Calendar Quarters

First

Second

Third

Fourth

(In thousands, except per share amounts)

$91,857
2,615
(4,647)
$ (0.16)
$ (0.16)
28,146
28,146

$93,425
3,149
(9,819)
$ (0.34)
$ (0.34)
28,298
28,298

$98,483
2,679
(5,759)
$ (0.20)
$ (0.20)
28,371
28,371

$100,160
5,457
(3,901)
(0.13)
(0.13)
28,387
28,387

$
$

Changes in the current economic environment could result in decreases in the fair value of assets, slowing of
transactions, and tightening liquidity and credit markets. These impacts could make securing debt for acquisitions
or refinancings for the Company, its joint ventures, or buyers of the Company’s properties more difficult or on
terms not acceptable to the Company. Additionally, the Company may be more susceptible to being negatively
impacted by operating or performance deficits based on the exposure associated with certain lease coverage
requirements.

In addition to approximately $56.1 million of unrestricted cash balances on hand as of December 31, 2015,
the Company’s principal sources of liquidity are expected to be cash flows from operations, supplemental debt
financings, additional proceeds from debt refinancings, equity issuances, and/or proceeds from the sale of assets.
The Company expects its available cash and cash flows from operations, supplemental debt financings, addi-
tional proceeds from debt refinancings, and proceeds from the sale of assets to be sufficient to fund its short-term
working capital requirements. The Company’s long-term capital requirements, primarily for acquisitions and
other corporate initiatives, could be dependent on its ability to access additional funds through joint ventures and
the debt and/or equity markets. The Company from time to time considers and evaluates transactions related to
its portfolio including supplemental debt financings, debt refinancings, equity issuances, purchases and sales of
assets, reorganizations and other transactions. There can be no assurance that the Company will continue to gen-
erate cash flows at or above current levels or that the Company will be able to obtain the capital necessary to
meet the Company’s short and long-term capital requirements.

47

In summary, the Company’s cash flows were as follows (in thousands):

Year Ended
December 31,

2015

2014

2013

Net cash provided by operating activities . . . . . . . . . . . . . . . .
Net cash used in investing activities . . . . . . . . . . . . . . . . . . . .
Net cash provided by financing activities . . . . . . . . . . . . . . . .

$ 48,895
(161,427)
129,410

$ 46,312
(175,417)
154,703

$ 42,644
(162,296)
114,526

Increase (decrease) in cash and cash equivalents . . . . . . . . . . .

$ 16,878

$ 25,598

$

(5,126)

Operating Activities

The Company had net cash provided by operating activities of $48.9 million, $46.3 million, and $42.6 mil-
lion in fiscal 2015, 2014, and 2013, respectively. The net cash provided by operating activities for fiscal 2015
primarily results from net non-cash charges of $63.8 million, a decrease in prepaid expenses of $2.4 million, an
increase in accounts payable and accrued expenses of $3.0 million, and an increase in deferred resident rent and
customer deposits of $0.5 million, partially offset by net loss of $(14.3 million), an increase in accounts receiv-
able of $2.9 million, an increase in property tax and insurance deposits of $2.2 million, and an increase in other
assets of $1.3 million. The net cash provided by operating activities for fiscal 2014 results from net non-cash
charges of $65.6 million and net changes in operating assets and liabilities of $4.9 million, partially offset by net
loss of $(24.1 million).

Investing Activities

The Company had net cash used in investing activities of $161.4 million, $175.4 million, and $162.3 million
in fiscal 2015, 2014, and 2013, respectively. The net cash used in investing activities for fiscal 2015 primarily
results from capital expenditures of $42.4 million and acquisitions of senior living communities by the Company
of $162.5 million, partially offset by proceeds from the Sedgwick Sale Transaction and Four Property Sale
Transaction of $43.5 million. The net cash used in investing activities for fiscal 2014 primarily results from capi-
tal expenditures of $18.7 million and acquisitions of senior living communities by the Company of $160.1 mil-
lion, slightly offset by proceeds from the SHPIII/CSL Transaction of $2.5 million and proceeds from the sale of
assets of $0.8 million.

Financing Activities

The Company had net cash provided by financing activities of $129.4 million, $154.7 million, and $114.5
million in fiscal 2015, 2014, and 2013, respectively. The net cash provided by financing activities for fiscal 2015
primarily results from notes payable proceeds of $250.9 million, of which approximately $118.1 million is
related to new mortgage debt associated with the acquisition of senior living communities by the Company,
approximately $2.2 million related to insurance premium financing, and the remaining $130.6 million resulted
from supplemental financings, mortgage refinancings, or new mortgage debt obtained on existing unencumbered
senior living communities, partially offset by repayments of notes payable of $115.9 million, deferred financing
charges paid of $3.8 million, payments on capital lease and financing obligations of $1.0 million, and additions
to restricted cash of $0.9 million. The net cash provided by financing activities for fiscal 2014 primarily results
from notes payable proceeds of $300.8 million, of which $175.6 million related to the Company refinancing its
mortgage loans with Freddie Mac and $125.2 million related to the acquisition of senior living communities by
the Company and insurance premium financing, partially offset by repayments of notes payable of $141.0 mil-
lion, deferred financing charges paid of $3.5 million, payments on capital lease and financing obligations of $1.0
million, and additions to restricted cash of $0.8 million.

48

Disclosures About Contractual Obligations

The following table provides the amounts due under specified contractual obligations for the periods

indicated as of December 31, 2015 (in thousands):

Long-term debt, including interest expense(1)
Operating and capital leases(2)

. . . . . . . . . . . . . . .

. . . $ 50,708
65,135

Less
Than
One
Year

One to
Three Years

Three to
Five Years

More Than
Five Years

Total

$108,689
130,090

$ 96,556 $ 796,342 $1,052,295
573,292
250,477
127,590

Total contractual cash obligations . . . . . . . . . . . . . $115,843

$238,779

$224,146 $1,046,819 $1,625,587

(1) Amounts due associated with our variable rate mortgage debt is projected by applying the variable interest

rates effective at December 31, 2015.

(2) Reflects future minimum lease commitments under the Company’s various property and equipment lease

agreements at current rental rates.

Long-term debt relates to the aggregate maturities of the Company’s notes payable. The Company leases its
corporate headquarters in Dallas, an executive office in New York, 50 senior living communities and certain
automobiles and equipment used at the Company’s communities.

Impact of Inflation

To date, inflation has not had a significant impact on the Company. However, inflation could affect the
Company’s future revenues and results of operations because of, among other things, the Company’s dependence
on senior residents, many of whom rely primarily on fixed incomes to pay for the Company’s services. As a
result, during inflationary periods, the Company may not be able to increase resident service fees to account fully
for increased operating expenses. In structuring its fees, the Company attempts to anticipate inflation levels, but
there can be no assurance that the Company will be able to anticipate fully or otherwise respond to any future
inflationary pressures.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS.

The Company’s primary market risk is exposure to changes in interest rates on debt and lease instruments.
As of December 31, 2015, the Company had $777.1 million in outstanding debt comprised of various fixed and
variable rate debt instruments of $765.3 million and $11.8 million, respectively. In addition, as of December 31,
2015, the Company had $570.3 million in future facility lease obligations with contingent rent increases on cer-
tain leases based on changes in the consumer price index or certain operational performance measures.

Changes in interest rates would affect the fair market value of the Company’s fixed rate debt instruments,
but would not have an impact on the Company’s earnings or cash flows. Fluctuations in interest rates on the
Company’s variable rate debt instruments, which are tied to LIBOR, would affect the Company’s earnings and
cash flows but would not affect the fair market values of the variable rate debt. Each percentage point increase in
interest rates would impact the Company’s annual interest expense by approximately $0.1 million based on the
Company’s outstanding variable rate debt as of December 31, 2015. Increases in the consumer price index could
have an effect on future facility lease expense if the leased community exceeds the contingent rent escalation
thresholds set forth in each of the Company’s lease agreements.

The following table summarizes information on the Company’s debt

instruments outstanding as of
December 31, 2015. The table presents the principal due and weighted average interest rates by expected
maturity date for the Company’s debt instruments by fiscal year.

49

Principal Amount, which excludes deferred loan costs, and Average Interest Rate by Expected Maturity

Date at December 31, 2015 ($ in thousands):

2016

2017

2018

2019

2020

Thereafter

Total

Fair
Value

Long-term debt:

. . . $14,698 $13,518 $14,158 $14,829 $15,443 $692,670 $765,316 $712,969
4.6%

4.6%

4.6%

4.6%

4.6%

4.6%

11,800

4.8%

11,800

11,800

$777,116 $724,769

Fixed rate debt
Average interest rate . . .
Variable rate debt . . .

Average interest rate . . .
. . . . .
Total debt

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

The consolidated financial statements of the Company are included under Item 15 of this Annual Report on

Form 10-K.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND

FINANCIAL DISCLOSURE.

The Company had no disagreements on accounting or financial disclosure matters with its independent

accountants to report under this Item 9.

ITEM 9A. CONTROLS AND PROCEDURES.

Effectiveness of Controls and Procedures

The Company’s management, with the participation of the Company’s Chief Executive Officer (“CEO”)
and Chief Financial Officer (“CFO”), has evaluated the effectiveness of the Company’s disclosure controls and
procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934,
as amended (the “Exchange Act”)) as of the end of the period covered by this report. The Company’s disclosure
controls and procedures are designed to ensure that information required to be disclosed by the Company in the
reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within
the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures are also designed to
ensure that such information is accumulated and communicated to the Company’s management, including the
CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.

Based upon the controls evaluation, the Company’s CEO and CFO have concluded that, as of the end of the

period covered by this report, the Company’s disclosure controls and procedures are effective.

There have not been any changes in the Company’s internal control over financial reporting (as such term is
defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the Company’s fiscal quarter ended
December 31, 2015 that have materially affected, or are reasonably likely to materially affect, the Company’s
internal control over financial reporting.

Internal Controls Over Financial Reporting

Management’s Report On Internal Control Over Financial Reporting

Management of the Company, including the Chief Executive Officer and the Chief Financial Officer, is
responsible for establishing and maintaining adequate internal control over financial reporting, as defined in
Rules 13a-15(f) under the Exchange Act. The Company’s internal controls were designed to provide reasonable
assurance to the Company’s management and board of directors regarding the preparation and fair presentation
of published financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect mis-
statements. Therefore, even those systems determined to be effective can provide only reasonable assurance with
respect to financial statement preparation and presentation.

50

Management assessed the effectiveness of the Company’s internal control over financial reporting as of
December 31, 2015. In making this assessment, management used the criteria set forth by the Committee of
Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control – Integrated Framework
(2013 framework). Based on our assessment, we believe that, as of December 31, 2015, the Company’s internal
control over financial reporting is effective based on those criteria.

The effectiveness of our internal control over financial reporting as of December 31, 2015, has been audited
by Ernst & Young LLP, the independent registered public accounting firm that audited our consolidated financial
statements included in this Annual Report on Form 10-K, as stated in their report which is included as part of this
Annual Report on Form 10-K. The Ernst & Young LLP report is on page F-36 of this report.

ITEM 9B. OTHER INFORMATION.

None.

51

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERANCE.*

ITEM 11. EXECUTIVE COMPENSATION.*

ITEM 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS.*

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR

INDEPENDENCE.*

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.*

*Information required by Items 10, 11, 12, 13 and 14 is or will be set forth in the definitive proxy statement relat-
ing to the 2016 Annual Meeting of Stockholders of Capital Senior Living Corporation, which is to be filed with
SEC pursuant to Regulation 14A under the Exchange Act. This definitive proxy statement relates to a meeting of
stockholders involving the election of directors and the portions therefrom required to be set forth in this Form
10-K by Items 10, 11, 12, 13 and 14 are incorporated herein by reference pursuant to General Instruction G(3) to
Form 10-K.

52

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

PART IV

The following documents are filed as part of this Report:

(1) Financial Statements:

The response to this portion of Item 15 is submitted as a separate section of this Report. See

“Index to Financial Statements” at page F-1.

(2) Financial Statement Schedules:

All schedules have been omitted as the required information is inapplicable or the information is

presented in the financial statements or related notes.

(3) Exhibits:

The exhibits listed on the accompanying “Index To Exhibits” at page E-1 are filed as part of this

Report.

53

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant

has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

SIGNATURES

CAPITAL SENIOR LIVING CORPORATION

By: /S/ LAWRENCE A. COHEN

Lawrence A. Cohen
Vice Chairman of the Board
and Chief Executive Officer

Date: February 26, 2016

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the fol-
lowing persons on behalf of the Registrant and in the capacities and on the dates indicated. Each person whose
signature to this report appears below hereby appoints Lawrence A. Cohen and Keith N. Johannessen and each of
them, any one of whom may act without the joinder of the other, as his or her attorney-in-fact to sign on his
behalf, individually and in each capacity stated below, and to file all amendments to this report, which amend-
ment or amendments may make such changes in and additions to the report as any such attorney-in-fact may
deem necessary or appropriate.

Signature

Title

Date

/s/ LAWRENCE A. COHEN

Lawrence A. Cohen

/s/ KEITH N. JOHANNESSEN

Keith N. Johannessen

/s/ CAREY P. HENDRICKSON

Carey P. Hendrickson

/s/

JAMES A. MOORE

James A. Moore

/s/ PHILIP A. BROOKS

Philip A. Brooks

/s/ KIMBERLY S. LODY

Kimberly S. Lody

/s/ E. RODNEY HORNBAKE

E. Rodney Hornbake

/s/

JILL M. KRUEGER

Jill M. Krueger

/s/ RONALD A. MALONE

Ronald A. Malone

/s/ MICHAEL W. REID
Michael W. Reid

Chief Executive Officer and
Vice Chairman of the Board (Principal
Executive Officer)

February 26, 2016

President and Chief Operating
Officer and Director

February 26, 2016

Senior Vice President and
Chief Financial Officer (Principal
Financial and Accounting Officer)

February 26, 2016

Chairman of the Board

February 26, 2016

Director

Director

Director

Director

Director

Director

54

February 26, 2016

February 26, 2016

February 26, 2016

February 26, 2016

February 26, 2016

February 26, 2016

INDEX TO FINANCIAL STATEMENTS

Consolidated Financial Statements of Capital Senior Living Corporation

Report of Independent Registered Public Accounting Firm, Ernst & Young LLP . . . . . . . . . . . . . . . . . . .
Consolidated Balance Sheets — December 31, 2015 and 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Operations and Comprehensive Loss — For the years ended December 31,
2015, 2014 and 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Shareholders’ Equity — For the years ended December 31, 2015, 2014 and
2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Cash Flows — For the years ended December 31, 2015, 2014 and 2013 . . .
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Report of Independent Registered Public Accounting Firm on Internal Control over Financial

Page

F-2
F-3

F-4

F-5
F-6
F-7

Reporting, Ernst & Young LLP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-36

F-1

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders
Capital Senior Living Corporation

We have audited the accompanying consolidated balance sheets of Capital Senior Living Corporation as of
December 31, 2015 and 2014, and the related consolidated statements of operations and comprehensive loss,
shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2015. These
financial statements are the responsibility of the Company’s management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assess-
ing the accounting principles used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the con-
solidated financial position of Capital Senior Living Corporation at December 31, 2015 and 2014, and the con-
solidated results of their operations and their cash flows for each of the three years in the period ended
December 31, 2015, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States), Capital Senior Living Corporation’s internal control over financial reporting as of December 31,
2015, based on criteria established in Internal Control-Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 26,
2016, expressed an unqualified opinion thereon.

Dallas, Texas
February 26, 2016

/s/ Ernst & Young LLP

F-2

CAPITAL SENIOR LIVING CORPORATION

CONSOLIDATED BALANCE SHEETS

December 31,

2015

2014

(In thousands, except per
share data)

Current assets:

ASSETS

Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts receivable, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts receivable from affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Assets held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property tax and insurance deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other

$

Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

56,087
13,159
9,252
2

—
—
14,398
4,370

97,268
890,572
31,193

$ 39,209
12,241
5,903
5
460
35,761
12,198
6,797

112,574
747,613
31,183

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,019,033

$891,370

Current liabilities:

LIABILITIES AND SHAREHOLDERS’ EQUITY

Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable to affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes payable of assets held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current portion of notes payable, net of deferred loan costs . . . . . . . . . . . . . . . . . . . . .
Current portion of deferred income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current portion of capital lease and financing obligations . . . . . . . . . . . . . . . . . . . . . .
Federal and state income taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Customer deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital lease and financing obligations, net of current portion . . . . . . . . . . . . . . . . . . . . .
Deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes payable, net of deferred loan costs and current portion . . . . . . . . . . . . . . . . . . . . . .
Commitments and contingencies
Shareholders’ equity:

Preferred stock, $.01 par value:

3,362
—
34,300
—
13,634
16,059
1,257
111
1,819

70,542
13,992
38,835
—
4,969
754,949

$

2,540
7
32,154
14,847
32,538
14,603
1,054
219
1,499

99,461
15,949
40,016
460
1,426
592,884

Authorized shares — 15,000; no shares issued or outstanding . . . . . . . . . . . . . . . . .

—

—

Common stock, $.01 par value:

Authorized shares — 65,000; issued and outstanding shares 29,539 and 29,097 in

2015 and 2014, respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained deficit
Treasury stock, at cost — 350 shares in 2015 and 2014 . . . . . . . . . . . . . . . . . . . . . . . .

299
159,920
(23,539)
(934)

294
151,069
(9,255)
(934)

Total shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

135,746

141,174

Total liabilities and shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,019,033

$891,370

See accompanying notes to consolidated financial statements.

F-3

CAPITAL SENIOR LIVING CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

Year Ended December 31,

2015

2014
(In thousands, except per share data)

2013

Revenues:

Resident and health care revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Affiliated management services revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Community reimbursement revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$412,177
—
—

$380,400
415
3,110

$343,478
797
6,087

Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

412,177

383,925

350,362

Expenses:

Operating expenses (exclusive of facility lease expense and depreciation

and amortization expense shown below) . . . . . . . . . . . . . . . . . . . . . . . . . .
General and administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Facility lease expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for bad debts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Community reimbursement expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

248,736
20,351
61,213
1,192
8,833
53,017
—

230,495
19,622
59,332
717
7,262
49,487
3,110

207,744
20,238
56,986
497
4,322
43,238
6,087

Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

393,342

370,025

339,112

Income from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other income (expense):

18,835

13,900

11,250

Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Write-off of deferred loan costs and prepayment premiums . . . . . . . . . . . . .
Joint venture equity investment valuation gain . . . . . . . . . . . . . . . . . . . . . . .
Gain on disposition of assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity in earnings of unconsolidated joint ventures, net . . . . . . . . . . . . . . . .
Write-down of assets held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

53
(35,732)
(2,766)
—
6,225
—
—

1

Loss before provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(13,384)
(900)

52
(31,261)
(7,968)
1,519
784
105
(561)
23

(23,407)
(719)

151
(23,767)
—
—
1,454
133
—
34

(10,745)
(5,759)

Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ (14,284) $ (24,126) $ (16,504)

Per share data:

Basic net loss per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Diluted net loss per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

$

(0.50) $

(0.83) $

(0.58)

(0.50) $

(0.83) $

(0.58)

Weighted average shares outstanding — basic . . . . . . . . . . . . . . . . . . . . . . .

28,688

28,301

27,815

Weighted average shares outstanding — diluted . . . . . . . . . . . . . . . . . . . . . .

28,688

28,301

27,815

Comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ (14,284) $ (24,126) $ (16,504)

See accompanying notes to consolidated financial statements.

F-4

CAPITAL SENIOR LIVING CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

Common Stock

Shares

Amount

Additional
Paid-In
Capital

Retained
Earnings

Treasury
Stock

Total

Balance at January 1, 2013 . . . . . . . . . . . . . . . . .
Exercise of stock options . . . . . . . . . . . . . . . . .
Restricted stock awards . . . . . . . . . . . . . . . . . .
Stock-based compensation . . . . . . . . . . . . . . . .
Excess tax benefits on stock options

28,218
247
380
—

exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—
—

$286
2
4

—

—
—

Balance at December 31, 2013 . . . . . . . . . . . . . .
Exercise of stock options . . . . . . . . . . . . . . . . .
Restricted stock awards . . . . . . . . . . . . . . . . . .
Stock-based compensation . . . . . . . . . . . . . . . .
Excess tax benefits on stock options

28,845

292
13 —
239
—

—

2

exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—
—

Balance at December 31, 2014 . . . . . . . . . . . . . .
Exercise of stock options . . . . . . . . . . . . . . . . .
Restricted stock awards . . . . . . . . . . . . . . . . . .
Stock-based compensation . . . . . . . . . . . . . . . .
Excess tax benefits on stock options

29,097
3
439
—

exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—
—

—
—

294
1
4

—

—
—

(In thousands)

$137,867
3,157
—
4,322

$ 31,375
—
—
—

$(934)
—
—
—

$168,594
3,159
4
4,322

(1,625)
—

—

—
(16,504) —

143,721
168
—
7,262

14,871
—
—
—

(934)
—
—
—

(82)
—

—

—
(24,126) —

151,069
37
—
8,833

(9,255)
—
—
—

(934)
—
—
—

(19)
—

—

—
(14,284) —

(1,625)
(16,504)

157,950
168
2
7,262

(82)
(24,126)

141,174
38
4
8,833

(19)
(14,284)

Balance at December 31, 2015 . . . . . . . . . . . . . .

29,539

$299

$159,920

$(23,539)

$(934)

$135,746

See accompanying notes to consolidated financial statements.

F-5

CAPITAL SENIOR LIVING CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

Operating Activities
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to reconcile net loss to net cash provided by operating activities:

Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of deferred financing charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of deferred lease costs and lease intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lease incentives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Write-off of deferred loan costs and prepayment premiums . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Joint venture equity investment valuation gain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on disposition of assets, net
Equity in earnings of unconsolidated joint ventures, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Write-down of assets held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for bad debts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in operating assets and liabilities:

Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts receivable from affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property tax and insurance deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Federal and state income taxes receivable/payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred resident revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Customer deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Year Ended December 31,

2015

2014

2013

(in thousands)

$ (14,284) $ (24,126) $ (16,504)

53,017
1,029
1,421
(677)
—
2,464
2,766
—
(6,225)
—
—
1,192
8,833

(2,931)
3
(2,200)
2,427
(1,289)
815
2,146
(108)
176
320

49,487
1,361
1,230
(616)
—
—
7,968
(1,519)
(784)
(105)
561
717
7,262

(2,868)
411
(1,162)
(192)
(163)
(1,267)
2,833
5,342
1,932
10

43,238
1,100
1,164
(1,666)
10,793
—
—
—
(1,454)
(133)
—
497
4,322

980
337
406
(1,847)
(1,745)
(3,166)
4,876
(1,222)
2,719
(51)

Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investing Activities
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash paid for acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from SHPIII/CSL Transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from disposition of assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Distributions from joint ventures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financing Activities
Proceeds from notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repayments of notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash payments for capital lease and financing obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase in restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash proceeds from the issuance of common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Excess tax benefits on stock options exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred financing charges paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

48,895

46,312

42,644

(42,430)
(162,460)

—
43,463
—

(18,742)
(160,105)
2,532
796
102

(13,562)
(150,391)

—
1,460
197

(161,427)

(175,417)

(162,296)

250,944
(115,896)
(978)
(918)
42
(19)
(3,765)

300,820
(140,950)
(971)
(816)
170
(82)
(3,468)

140,237
(23,539)
(871)
(1,246)
3,163
(1,625)
(1,593)

Net cash provided by financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

129,410

154,703

114,526

Increase (Decrease) in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

16,878
39,209

25,598
13,611

(5,126)
18,737

Cash and cash equivalents at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 56,087

$ 39,209

$ 13,611

Supplemental Disclosures
Cash paid during the year for:

Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 33,642

$ 28,856

$ 21,953

Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Non-cash operating, investing, and financing activities:

Notes payable assumed by purchaser through disposition of assets . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

$

1,039

6,764

$

$

724

$

702

— $

—

See accompanying notes to consolidated financial statements.

F-6

CAPITAL SENIOR LIVING CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2015

1. Organization

Capital Senior Living Corporation, a Delaware corporation (together with its subsidiaries, the “Company”),
is one of the largest operators of senior living communities in the United States in terms of resident capacity. The
Company owns, operates, develops and manages senior living communities throughout the United States. As of
December 31, 2015, the Company operated 121 senior living communities in 23 states with an aggregate
capacity of approximately 15,400 residents, including 71 senior living communities which the Company owned
and 50 senior living communities that the Company leased. As of December 31, 2015, the Company also oper-
ated one home care agency. The accompanying consolidated financial statements include the financial statements
of Capital Senior Living Corporation and its wholly owned subsidiaries. All material intercompany balances and
transactions have been eliminated in consolidation. The Company accounts for significant investments in uncon-
solidated companies, in which the Company has significant influence, using the equity method of accounting.

2. Summary of Significant Accounting Policies

Cash and Cash Equivalents and Restricted Cash

The Company considers all highly liquid investments with original maturities of three months or less at the
date of acquisition to be cash equivalents. The Company has deposits in banks that exceed Federal Deposit
Insurance Corporation insurance limits. Management believes that credit risk related to these deposits is minimal.
Restricted cash consists of deposits required by certain lenders as collateral pursuant to letters of credit. The
deposit must remain so long as the letter of credit is outstanding which is subject to renewal annually.

Long-Lived Assets

Property and equipment are stated at cost and depreciated on a straight-line basis over the estimated useful
lives of the assets. At each balance sheet date, the Company reviews the carrying value of its property and
equipment to determine if facts and circumstances suggest that they may be impaired or that the depreciation
period may need to be changed. The Company considers internal factors such as net operating losses along with
external factors relating to each asset, including contract changes, local market developments, and other publicly
available information. If an indicator of impairment is identified, the carrying value of a long-lived asset is con-
sidered impaired when the anticipated undiscounted cash flows from such asset is separately identifiable and is
less than its carrying value. In that event, a loss is recognized based on the amount the carrying value exceeds the
fair market value, generally based on discounted cash flows, of the long-lived asset. The Company does not
believe there are any indicators of impairment that would require an adjustment to the carrying value of the
property and equipment or their remaining useful lives as of December 31, 2015 and 2014.

Assets Held for Sale

Assets are classified as held for sale when the Company has determined all of the held-for-sale criteria have
been met. The Company determines the fair value, net of costs of disposal, of an asset on the date the asset is
categorized as held for sale, and the asset is recorded at the lower of its fair value, net of cost of disposal, or
carrying value on that date. The Company periodically reevaluates assets held for sale to determine if the assets
are still recorded at the lower of fair value, net of cost of disposal, or carrying value. The fair values are generally
determined based on market rates, industry trends and recent comparable sales transactions. The actual sales
price of these assets could differ significantly from the Company’s estimates.

During the fourth quarter of fiscal 2014, the Company classified four senior living communities as held for
sale and determined the assets had an aggregate fair value, net of cost of disposal, that exceeded the carrying
values, using level 2 inputs as defined in the accounting standards codification, and a remeasurement write-down
of approximately $0.6 million was recorded to adjust the carrying values of the assets held for sale to $35.8 mil-

F-7

CAPITAL SENIOR LIVING CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

lion at December 31, 2014. The four senior living communities were sold during the first quarter of fiscal 2015 in
a single transaction for its carrying value. There were no senior living communities classified as held for sale by
the Company at December 31, 2015.

Investments in Unconsolidated Joint Ventures

The Company accounted for its investments in unconsolidated joint ventures under the equity method of
accounting. The Company had not consolidated these joint venture interests because the Company had concluded
that the other member of each joint venture had substantive kick-out rights or substantive participating rights.
Under the equity method of accounting, the Company recorded its investments in the unconsolidated joint ven-
tures at cost and adjusted such investments for its share of the earnings and losses of the joint ventures. On
June 30, 2014, the Company acquired 100% of the member interests in these joint ventures. For additional
information refer to Note 4, “Acquisitions.”

Off-Balance Sheet Arrangements

The Company had no material off-balance sheet arrangements at December 31, 2015.

Income Taxes

Income taxes are computed using the asset and liability method and current income taxes are recorded based
on amounts refundable or payable in the current year. Deferred income taxes are recorded based on the estimated
future tax effects of loss carryforwards and temporary differences between financial statement carrying amounts
of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured
using enacted tax rates that are expected to apply to taxable income in the years in which we expect those carry-
forwards and temporary differences to be recovered or settled. Management regularly evaluates the future
realization of deferred tax assets and provides a valuation allowance, if considered necessary, based on such
evaluation. As part of the evaluation, management has evaluated taxable income in carryback years, future
reversals of taxable temporary differences, feasible tax planning strategies, and future expectations of income.

The Company evaluates uncertain tax positions through consideration of accounting and reporting guidance
on criteria, measurement, derecognition, classification, interest and penalties, accounting in interim periods, dis-
closure, and transition that is intended to provide better financial-statement comparability among different
companies. The Company is required to recognize a tax benefit in its financial statements for an uncertain tax
position only if management’s assessment is that its position is “more likely than not” (i.e., a greater than 50
percent likelihood) to be upheld on audit based only on the technical merits of the tax position. The Company’s
policy is to recognize interest related to unrecognized tax benefits as interest expense and penalties as income tax
expense.

Revenue Recognition

Resident and health care revenue is recognized at estimated net realizable amounts, based on historical
experiences, due from residents in the period in which the rental and other services are provided. Additionally,
substantially all community fees received from residents are non-refundable and are recorded initially by the
Company as deferred revenue. The deferred amounts are amortized over the respective residents’ initial lease
term which is consistent with the contractual obligation associated with the estimated stay of the resident.

Revenues from the Medicaid program accounted for approximately 5% of the Company’s revenue in fiscal
2015 and 4% of the Company’s revenue in each of fiscal 2014 and 2013. During fiscal 2015, 2014, and 2013, 34,
30, and 29, respectively, of the Company’s communities were providers of services under the Medicaid program.
Accordingly, these communities were entitled to reimbursement under the foregoing program at established rates

F-8

CAPITAL SENIOR LIVING CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

that were lower than private pay rates. Patient service revenue for Medicaid patients was recorded at the
reimbursement rates as the rates were set prospectively by the applicable state upon the filing of an annual cost
report. None of the Company’s communities were providers of services under the Medicare program during fis-
cal 2015 or 2014.

Laws and regulations governing the Medicaid program are complex and subject to interpretation. The
Company believes that it is in compliance with all applicable laws and regulations and is not aware of any pend-
ing or threatened investigations involving allegations of potential wrongdoing. While no such regulatory
inquiries have been made, compliance with such laws and regulations can be subject to future government review
and interpretation as well as significant regulatory action including fines, penalties, and exclusion from the
Medicaid program.

Management services revenue was recognized when earned and related to the Company providing certain
management and administrative support services under management contracts which were terminated when the
Company acquired 100% of the member interests in its unconsolidated joint ventures on June 30, 2014.

Community reimbursement revenue is comprised of reimbursable expenses from the non-consolidated
communities that the Company operated under long-term management agreements, which were terminated when
the Company acquired 100% of the member interests in its unconsolidated joint ventures on June 30, 2014.

Lease Accounting

The Company determines whether to account for its leases as operating, capital or financing leases depend-
ing on the underlying terms of the lease agreement. This determination of classification requires significant
judgment relating to certain information, including the estimated fair value and remaining economic life of the
community, the Company’s cost of funds, minimum lease payments and other lease terms. The lease rates under
the Company’s lease agreements are subject to certain conditional escalation clauses which are recognized when
probable or incurred and are based on changes in the consumer price index or certain operational performance
measures. As of December 31, 2015 and 2014, the Company leased 50 communities, 48 of which the Company
classified as operating leases and two of which the Company classified as capital lease and financing obligations.
The Company incurs lease acquisition costs and amortizes these costs over the term of the lease agreement. Cer-
tain leases entered into by the Company qualified as sale/leaseback transactions, and as such, any related gains
have been deferred and are being amortized over the respective lease term. No new communities were leased by
the Company during fiscal 2015 or 2014.

Facility lease expense in the Company’s Consolidated Statements of Operations and Comprehensive loss
includes rent expense plus amortization expense relating to leasehold acquisition costs offset by the amortization
of deferred gains and lease incentives.

Credit Risk and Allowance for Doubtful Accounts

The Company’s resident receivables are generally due within 30 days from the date billed. Accounts receiv-
able are reported net of an allowance for doubtful accounts, and represent the Company’s estimate of the amount
that ultimately will be collected. The adequacy of the Company’s allowance for doubtful accounts is reviewed on
an ongoing basis, using historical payment trends, write-off experience, analyses of receivable portfolios by
payor source and aging of receivables, as well as a review of specific accounts, and adjustments are made to the
allowance as necessary. Credit losses on resident receivables have historically been within management’s esti-
mates, and management believes that the allowance for doubtful accounts adequately provides for expected
losses.

Employee Health and Dental Benefits, Workers’ Compensation, and Insurance Reserves

The Company offers certain full-time employees an option to participate in its health and dental plans. The
Company is self-insured up to certain limits and is insured if claims in excess of these limits are incurred. The

F-9

CAPITAL SENIOR LIVING CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

cost of employee health and dental benefits, net of employee contributions, is shared between the corporate office
and the senior living communities based on the respective number of plan participants. Funds collected are used
to pay the actual program costs, including estimated annual claims, third-party administrative fees, network pro-
vider fees, communication costs, and other related administrative costs incurred by the plans. Claims are paid as
they are submitted to the Company’s third-party administrator. The Company records a liability for outstanding
claims and claims that have been incurred but not yet reported. This liability is based on the historical claim
reporting lag and payment trends of health insurance claims. Management believes that the liability for out-
standing losses and expenses is adequate to cover the ultimate cost of losses and expenses incurred at
December 31, 2015; however, actual claims and expenses may differ. Any subsequent changes in estimates are
recorded in the period in which they are determined.

The Company uses a combination of insurance and self-insurance for workers’ compensation. Determining
the reserve for workers’ compensation losses and costs that the Company has incurred as of the end of a reporting
period involves significant judgments based on projected future events, including potential settlements for pend-
ing claims, known incidents which may result in claims, estimates of incurred but not yet reported claims,
changes in insurance premiums, estimated litigation costs and other factors. The Company regularly adjusts these
estimates to reflect changes in the foregoing factors. However, since this reserve is based on estimates, the actual
expenses incurred may differ from the amounts reserved. Any subsequent changes in estimates are recorded in
the period in which they are determined.

Advertising

Advertising is expensed as incurred. Advertising expenses for the years ended December 31, 2015, 2014,
and 2013 were $13.9 million, $12.7 million, and $10.5 million, respectively, and are included as a component of
operating expenses within the Consolidated Statements of Operations and Comprehensive Loss.

Net loss Per Share

Basic net loss per common share is computed by dividing net loss by the weighted average number of
common shares outstanding for the period. Potentially dilutive securities consist of unvested restricted shares and
shares that could be issued under outstanding stock options. Potentially dilutive securities are excluded from the
computation of net loss per common share if their effect is antidilutive.

The following table sets forth the computation of basic and diluted net loss per share (in thousands, except

for per share amounts):

Year Ended December 31,

2015

2014

2013

Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net loss allocated to unvested restricted shares . . . . . . . . . . . . . . .

$(14,284)

—

$(24,126)
(598)

$(16,504)
(513)

Undistributed net loss allocated to common shares . . . . . . . . . . . .
Weighted average shares outstanding — basic . . . . . . . . . . . . . . .
Effects of dilutive securities:

$(14,284)
28,688

$(23,528)
28,301

$(15,991)
27,815

Employee equity compensation plans . . . . . . . . . . . . . . . . . . . .

—

—

—

Weighted average shares outstanding — diluted . . . . . . . . . . . . . .

28,688

28,301

27,815

Basic net loss per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Diluted net loss per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

$

(0.50)

(0.50)

$

$

(0.83)

(0.83)

$

$

(0.58)

(0.58)

F-10

CAPITAL SENIOR LIVING CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Awards of unvested restricted stock representing approximately 0.8 million, 0.7 million, and 0.9 million
shares were outstanding for the fiscal years ended December 31, 2015, 2014, and 2013, respectively, and are
antidilutive. During fiscal 2015, the unvested restricted stock did not meet all of the requirements to be deemed
participating securities. Therefore, for current and future reporting periods, (losses) earnings per share will be
calculated under the treasury method and the two-class method will no longer be utilized by the Company.

Treasury Stock

The Company accounts for treasury stock under the cost method and includes treasury stock as a component
of shareholders’ equity. There were no repurchases of the Company’s stock during fiscal 2015 or 2014. The
Company has repurchased 144,315 shares during the first quarter of fiscal 2016 through the date of the filing of
our 2015 annual report on Form 10-K with the SEC.

Stock-Based Compensation

The Company recognizes compensation expense for share-based payment awards to certain employees and
directors, including grants of stock options and awards of restricted stock, in the Consolidated Statements of
Operations and Comprehensive Loss based on their fair values.

On May 8, 2007, the Company’s stockholders approved the 2007 Omnibus Stock and Incentive Plan for
Capital Senior Living Corporation (as amended, the “2007 Plan”) which provides for, among other things, the
grant of restricted stock awards and stock options to purchase shares of the Company’s common stock. The 2007
Plan authorizes the Company to issue up to 4.6 million shares of common stock and the Company has reserved
2.0 million shares of common stock for future issuance pursuant to awards under the 2007 Plan. Effective May 8,
2007, the 1997 Omnibus Stock and Incentive Plan (as amended, the “1997 Plan”) was terminated and no addi-
tional shares will be granted under the 1997 Plan. The Company has reserved 0.3 million shares of common
stock for future issuance upon the exercise of outstanding stock options pursuant to the 1997 Plan.

Segment Information

The Company evaluates the performance and allocates resources of its senior living facilities based on cur-
rent operations and market assessments on a property-by-property basis. The Company does not have a concen-
tration of operations geographically or by product or service as its management functions are integrated at the
property level. The Company has determined that all of its operating units meet the criteria in Accounting Stan-
dards Codification (“ASC”) Topic 280, Segment Reporting, to be aggregated into one reporting segment. As
such, the Company operates in one segment.

Recently Issued Accounting Guidance

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards
Update (“ASU”) 2016-02, Leases. ASU 2016-02 amends the existing accounting standards for lease accounting,
including requiring lessees to recognize most leases on their balance sheets and making targeted changes to les-
sor accounting. ASU 2016-02 will be effective beginning in 2019. Early adoption of ASU 2016-02 as of its issu-
ance is permitted. The new leases standard requires a modified retrospective transition approach for all leases
existing at, or entered into after, the date of initial application, with an option to use certain transition relief. We
are currently evaluating the impact of adopting the new leases standard on our consolidated financial statements.

In November 2015, the FASB issued ASU 2015-17, Income Taxes – Balance Sheet Reclassification of
Deferred Taxes (Topic 740). ASU 2015-17 requires that deferred tax liabilities and assets be classified as non-
current in a classified statement of financial position. The current requirement that deferred tax liabilities and
assets of a tax-paying component of an entity be offset and presented as a single amount is not affected by the
amendments in this update. The amendments in this update are effective for financial statements issued for
annual periods beginning after December 15, 2016, and interim periods within those annual periods. Early adop-

F-11

CAPITAL SENIOR LIVING CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

tion is permitted and the amendments may be applied either prospectively to all deferred tax liabilities and assets
or retrospectively to all periods presented. The Company early adopted ASU 2015-17 in the fourth quarter of
2015 on a prospective basis and included the current portion of deferred tax assets within the non-current portion
of deferred tax liabilities within the Company’s Consolidated Balance Sheet. The Company did not adjust its
prior period consolidated financial statements as a result of the adoption of ASU 2015-17.

In September 2015, the FASB issued ASU 2015-16, Business Combinations — Simplifying the Accounting
for Measurement-Period Adjustments. ASU 2015-16 eliminates the requirement for an acquirer in a business
combination to account for the measurement-period adjustment retrospectively. Instead, acquirers must recognize
measurement-period adjustments during the period in which they determine the amounts, including the effect on
earnings of any amounts they would have recorded in previous periods if the accounting had been completed at
the acquisition date. ASU 2015-16 is applied prospectively and is effective for fiscal years beginning after
December 15, 2015, and interim periods within those fiscal years. Early application is permitted. The Company
is currently evaluating the impact the adoption of ASU 2015-16 will have on the Company’s consolidated finan-
cial statements and disclosures.

In April 2015, the FASB issued ASU 2015-03, Interest — Imputation of Interest- Simplifying the Pre-
sentation of Debt Issuance Costs (Subtopic 835-30). The amendments in ASU No. 2015-03 requires debt issu-
ance costs related to a recognized debt liability to be presented on the balance sheet as a direct deduction from
the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guid-
ance for debt issuance costs are not affected by the amendments in ASU 2015-03. ASU 2015-03 requires retro-
spective application and will be effective for financial statements issued for fiscal years beginning after
December 15, 2015, and interim periods within those fiscal years. Early application is permitted. The Company
early adopted the provisions of ASU 2015-03 as of October 1, 2015, and incorporated the provisions of this
update to its consolidated financial statements upon adoption. As a result of adoption of ASU 2015-03, at
December 31, 2015, and 2014, approximately $8.5 million and $6.3 million, respectively, of debt issuance costs,
net of accumulated amortization, were reclassified within the Company’s Consolidated Balance Sheets from
other assets to notes payable. The adoption of ASU 2015-03 did not have an impact on the Company’s financial
condition or results of operations.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers. ASU 2014-09
affects any entity that either enters into contracts with customers to transfer goods or services or enters into con-
tracts for the transfer of nonfinancial assets. Under ASU 2014-09, an entity will recognize revenue when it trans-
fers promised goods or services to customers in an amount that reflects what it expects in exchange for the goods
or services. ASU 2014-09 is effective for annual periods beginning after December 15, 2017. The Company is
currently evaluating the impact the adoption of ASU 2014-09 will have on the Company’s consolidated financial
statements and disclosures.

Use of Estimates and Critical Accounting Policies

The preparation of financial statements in conformity with U.S. generally accepted accounting principles
requires management to make estimates and assumptions that affect the amounts reported in the accompanying
financial statements and related footnotes. Management bases its estimates and assumptions on historical experi-
ence, observance of industry trends and various other sources of information and factors, the results of which
form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent
from other sources. Actual results could differ from these estimates. Critical accounting policies are defined as
those that are reflective of significant judgments and uncertainties, and potentially could result in materially dif-
ferent results under different assumptions and conditions. The Company believes revenue recognition, credit risk
and allowance for doubtful accounts, investments in unconsolidated joint ventures, lease accounting, employee
health and dental benefits, workers’ compensation and insurance reserves, long-lived assets, assets held for sale,
and income taxes are its most critical accounting policies and require management’s most difficult and subjective
judgments.

F-12

CAPITAL SENIOR LIVING CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Reclassifications

Certain reclassifications have been made to prior period amounts to conform to current period presentation.
The Company’s Consolidated Statements of Cash Flows now reflect changes in deferred resident revenue sepa-
rately from other components of deferred income. Accordingly, the Company reclassified changes in deferred
resident revenue from changes in deferred income to a separate line item within the Consolidated Statements of
Cash Flows for the years ended December 31, 2014 and 2013, to be consistent with the presentation for the year
ended December 31, 2015. This reclassification had no impact on net cash provided by operating activities.

3. Transactions with Affiliates

The Company was party to a series of property management agreements (the “SHPIII/CSL Management
Agreements”) with three joint ventures (collectively “SHPIII/CSL”) owned 90% by Seniors Housing Partners III,
LP (“SHPIII”), a fund managed by Prudential Investment Management, Inc. (“Prudential Investment”) and 10%
by the Company, which collectively owned and operated three senior living communities. The SHPIII/CSL
Management Agreements were for initial terms of ten years from the date the certificate of occupancy was issued
and extended until various dates through January 2019. The SHPIII/CSL Management Agreements generally
provided for management fees of 5% of gross revenue plus reimbursement for costs and expenses related to the
communities. On June 30, 2014, the Company acquired 100% of the member interests in these joint ventures. For
additional information refer to Note 4, “Acquisitions.”

4. Acquisitions

Fiscal 2015

Effective October 30, 2015, the Company closed the acquisition of one senior living community located in
Virginia Beach, Virginia, for $38.0 million (the “Virginia Beach Transaction”). The community consists of 111
assisted living units. The Company incurred approximately $0.1 million in transaction costs related to this
acquisition which have been included in general and administrative expenses within the Company’s Consolidated
Statements of Operations and Comprehensive Loss. The Company obtained financing from Protective Life
Insurance Company (“Protective Life”) for $28.0 million of the acquisition price at a fixed interest rate of 4.25%
with a 10-year term with the balance of the acquisition price paid from the Company’s existing cash resources.

Effective September 30, 2015, the Company closed the acquisition of one senior living community located
in Mahomet, Illinois, for $15.5 million Mahomet Transaction (the “Mahomet Transaction”). The community
consists of 78 assisted living units. The Company incurred approximately $0.1 million in transaction costs related
to this acquisition which have been included in general and administrative expenses within the Company’s Con-
solidated Statements of Operations and Comprehensive Loss. The Company obtained financing from Fannie Mae
for approximately $11.1 million of the acquisition price at a fixed interest rate of 4.69% with a 10-year term with
the balance of the acquisition price paid from the Company’s existing cash resources.

Effective August 11, 2015, the Company closed the acquisition of one senior living community located in
Indianapolis, Indiana, for $21.0 million (the “Indianapolis Transaction”). The community consists of 124 assisted
living units. The Company incurred approximately $0.1 million in transaction costs related to this acquisition
which have been included in general and administrative expenses within the Company’s Consolidated Statements
of Operations and Comprehensive Loss. The Company obtained financing from Protective Life for $13.2 million
of the acquisition price at a fixed interest rate of 4.25% with a 10-year term with the balance of the acquisition
price paid from the Company’s existing cash resources. The note with Protective Life associated with the Indian-
apolis Transaction includes a loan commitment for up to $2.6 million of supplemental funding at the same terms
and 4.25% fixed interest rate. The loan commitment is based on meeting certain funding requirements and is
available through February 28, 2018.

Effective July 28, 2015, the Company closed the acquisition of one senior living community located in
Columbiana, Ohio, for approximately $13.3 million (the “Columbiana Transaction”). The community consists of

F-13

CAPITAL SENIOR LIVING CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

68 assisted living units. The Company incurred approximately $0.1 million in transaction costs related to this
acquisition which have been included in general and administrative expenses within the Company’s Consolidated
Statements of Operations and Comprehensive Loss. The Company obtained financing from Protective Life for
approximately $9.9 million of the acquisition price at a fixed interest rate of 4.25% with a 10-year term with the
balance of the acquisition price paid from the Company’s existing cash resources.

Effective May 29, 2015, the Company closed the acquisition of one senior living community located in
Oneonta, New York, for $14.9 million (the “Heritage Transaction”). The community consists of 64 independent
living units and 44 assisted living units. The Company incurred approximately $0.4 million in transaction costs
related to this acquisition which have been included in general and administrative expenses within the Compa-
ny’s Consolidated Statements of Operations and Comprehensive Loss. The Company obtained financing from
Fannie Mae for approximately $11.2 million of the acquisition price at a fixed interest rate of 4.79% with a 10-
year term with the balance of the acquisition price paid from the Company’s existing cash resources.

Effective May 21, 2015, the Company closed the acquisition of two senior living communities located in
Hartford and West bend, Wisconsin, for $12.0 million (the “Emerald Transaction”). The communities consist of
79 assisted living units. The Company incurred approximately $0.2 million in transaction costs related to this
acquisition which have been included in general and administrative expenses within the Company’s Consolidated
Statements of Operations and Comprehensive Loss. The Company obtained financing from Fannie Mae for
approximately $9.2 million of the acquisition price at a fixed interest rate of 4.55% with a 10-year term with the
balance of the acquisition price paid from the Company’s existing cash resources.

Effective March 27, 2015, the Company closed the acquisition of one senior living community located in
Baytown, Texas, for approximately $29.6 million (the “Baytown Transaction”). The community consists of 9
independent living cottages and 120 assisted living units. The Company incurred approximately $0.2 million in
transaction costs related to this acquisition which have been included in general and administrative expenses within
the Company’s Consolidated Statements of Operations and Comprehensive Loss. The Company obtained financing
from Protective Life for approximately $21.4 million of the acquisition price at a fixed interest rate of 3.55% with a
10-year term with the balance of the acquisition price paid from the Company’s existing cash resources.

Effective January 13, 2015, the Company closed the acquisition of one senior living community located in
Green Bay, Wisconsin, for approximately $18.3 million (the “Green Bay Transaction”). The community consists
of 78 assisted living units. The Company incurred approximately $0.1 million in transaction costs related to this
acquisition which have been included in general and administrative expenses within the Company’s Consolidated
Statements of Operations and Comprehensive Loss. The Company obtained financing from Fannie Mae for
approximately $14.1 million of the acquisition price at a fixed interest rate of 4.35% with a 10-year term with the
balance of the acquisition price paid from the Company’s existing cash resources.

As a result of these acquisitions, the Company recorded additions to property and equipment of approx-
imately $148.0 million and other assets of approximately $14.6 million, primarily consisting of in-place lease
intangibles, within the Company’s Consolidated Balance Sheets which will be depreciated or amortized over the
estimated useful lives. The purchase accounting for the fourth quarter 2015 acquisition is preliminary as it is
subject to final valuation adjustments.

During fiscal 2015, these acquisitions generated $17.2 million of revenue and $(6.5) million of losses before
income taxes which are included in the Company’s Consolidated Statements of Operations and Comprehensive Loss
from the dates of acquisition. Losses before income taxes primarily result from the amortization of in-place lease
intangibles associated with acquisitions during fiscal 2015 and 2014. The unaudited pro forma combined results of
operations have been prepared as if the acquisitions had occurred on January 1, 2014, as follows (in thousands):

Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$425,789
$ (3,616)

$416,518
$ (40,880)

F-14

December 31,

2015

2014

CAPITAL SENIOR LIVING CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The unaudited pro forma consolidated amounts are presented for informational purposes only and do not
necessarily reflect the results of operations of the Company that would have actually resulted had the acquisitions
occurred on January 1, 2014.

Fiscal 2014

Effective December 17, 2014, the Company closed the acquisition of one senior living community located
in Canton, Georgia, for approximately $14.6 million (the “Canton Transaction”). The community consists of 49
assisted living units. The Company incurred approximately $0.1 million in transaction costs related to this
acquisition which have been included in general and administrative expenses within the Company’s Consolidated
Statements of Operations and Comprehensive Loss. The Company obtained financing from Fannie Mae for
approximately $10.4 million of the acquisition price at a fixed interest rate of 4.50% with a 10-year term, with
the balance of the acquisition price paid from the Company’s existing cash resources.

Effective August 27, 2014, the Company closed the acquisition of one senior living community located in
Plymouth, Wisconsin, for $13.5 million (the “Plymouth Transaction”). The community consists of 69 assisted
living units. The Company incurred approximately $0.1 million in transaction costs related to this acquisition
which have been included in general and administrative expenses within the Company’s Consolidated Statements
of Operations and Comprehensive Loss. The Company obtained financing from Fannie Mae for approximately
$10.4 million of the acquisition price at a fixed interest rate of 4.70% with a 10-year term with the balance of the
acquisition price paid from the Company’s existing cash resources.

Effective August 4, 2014, the Company closed the acquisition of one senior living community located in
Roanoke, Virginia, for approximately $16.8 million (the “Roanoke Transaction”). The community consists of 60
assisted living units and 34 independent living units. The Company incurred approximately $0.2 million in trans-
action costs related to this acquisition which have been included in general and administrative expenses within
the Company’s Consolidated Statements of Operations and Comprehensive Loss. The Company obtained financ-
ing from Fannie Mae for approximately $12.9 million of the acquisition price at a fixed interest rate of 4.59%
with a 10-year term with the balance of the acquisition price paid from the Company’s existing cash resources.

Effective August 4, 2014, the Company closed the acquisition of one senior living community located in
Oshkosh, Wisconsin, for approximately $17.1 million (the “Oshkosh Transaction”). The community consists of
90 assisted living units. The Company incurred approximately $0.1 million in transaction costs related to this
acquisition which have been included in general and administrative expenses within the Company’s Consolidated
Statements of Operations and Comprehensive Loss. The Company obtained financing from Fannie Mae for
approximately $13.2 million of the acquisition price at a fixed interest rate of 4.59% with a 10-year term with the
balance of the acquisition price paid from the Company’s existing cash resources.

Effective June 30, 2014, the Company acquired 100% of the members’ equity interests in SHPIII/CSL Miami,
LLC (“SHPIII/CSL Miami”), SHPIII/CSL Richmond Heights, LLC (“SHPIII/CSL Richmond Heights”), and
SHPIII/CSL Levis Commons, LLC (“SHPIII/CSL Levis Commons”) for approximately $83.6 million (the “SHPIII/
CSL Transaction”). Prior to the acquisition, SHP III, a fund managed by Prudential Investment maintained a 90%
equity interest in each joint venture with the remaining 10% equity interest in each joint venture held by wholly
owned subsidiaries of the Company. Based on the Company acquiring the remaining ownership interests of the joint
ventures, the Company concluded the acquisition took the form of a “step-acquisition” or a “business combination
achieved in stages.” Further, with the Company obtaining complete ownership of the joint ventures, the act of
obtaining control triggered the application of the acquisition model in Accounting Standards Codification (“ASC”)
805, Business Combinations, which resulted in the equity ownership interest being remeasured at fair value and the
acquired assets and assumed liabilities measured at their full fair values. The remeasurement fair value of the equity
interests were determined based on the cash proceeds, including incentive distributions, received by the Company in
accordance with each respective joint venture partnership agreement. Accordingly, the Company received cash
proceeds of approximately $2.5 million and recognized a gain of approximately $1.5 million during the second

F-15

CAPITAL SENIOR LIVING CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

quarter of fiscal 2014 which was reflected as a joint venture equity investment valuation gain within the Company’s
Consolidated Statements of Operations and Comprehensive Loss.

On June 30, 2014, in conjunction with the SHPIII/CSL Transaction, the Company obtained approximately
$16.4 million of mortgage debt from Fannie Mae for the acquisition of SHPIII/CSL Miami. The new mortgage
loan has a 10-year term with a fixed interest rate of 4.30% and the principal amortized over a 30-year term. The
Company also obtained approximately $23.7 million of mortgage debt from Fannie Mae for the acquisition of
SHPIII/CSL Richmond Heights. The new mortgage loan has a 10-year term with a fixed interest rate of 4.48%
and the principal amortized over a 30-year term. The Company obtained interim, interest only, financing of $21.6
million from Wells Fargo Bank, N.A. (“Wells Fargo”) for the acquisition of SHPIII/CSL Levis Commons with a
variable interest rate of LIBOR plus 2.75% and a 24-month term. The balance of the acquisition price was paid
from the Company’s existing cash resources. The Company incurred approximately $0.3 million in transaction
costs related to this acquisition which have been included in general and administrative expenses within the
Company’s Consolidated Statements of Operations and Comprehensive Loss.

Effective March 26, 2014, the Company closed the acquisition of one senior living community located in
Lambertville, Michigan, for $14.6 million (the “Aspen Grove Transaction”). The community consists of 78
assisted living units. The Company incurred approximately $0.2 million in transaction costs related to this
acquisition which have been included in general and administrative expenses within the Company’s Consolidated
Statements of Operations and Comprehensive Loss. The Company obtained financing from Fannie Mae for $11.0
million of the acquisition price at a fixed interest rate of 5.43% with a 12-year term with the balance of the
acquisition price paid from the Company’s existing cash resources.

As a result of these acquisitions, the Company recorded additions to property and equipment of approx-
imately $146.1 million and other assets of approximately $14.1 million, primarily consisting of in-place lease
intangibles, within the Company’s Consolidated Balance Sheets which will be depreciated or amortized over the
estimated useful lives. The purchase accounting for the Canton Transaction which closed during the fourth quar-
ter of fiscal 2014 was preliminary as it was subject to final valuation adjustments. During the first quarter of fis-
cal 2015, final valuation adjustments resulted in the Company reclassifying approximately $0.4 million from
other assets to property and equipment and the 2014 Consolidated Balance Sheet has been recast to reflect the
final purchase price allocation.

During fiscal 2014, these acquisitions generated $16.6 million of revenue and $(4.6) million of losses before
income taxes which are included in the Company’s Consolidated Statements of Operations and Comprehensive
Loss from the dates of acquisition. Losses before income taxes primarily result from the amortization of in-place
lease intangibles associated with acquisitions during fiscal 2014 and 2013. The unaudited pro forma combined
results of operations have been prepared as if the acquisitions had occurred on January 1, 2013, as follows (in
thousands):

December 31,

2014

2013

Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$400,653
$ (15,655)

$378,737
$ (25,963)

The unaudited pro forma consolidated amounts are presented for informational purposes only and do not
necessarily reflect the results of operations of the Company that would have actually resulted had the acquisitions
occurred on January 1, 2013.

5. Dispositions

Effective August 6, 2015, the Company closed a transaction to sell one of its senior living communities
located in Wichita, KS, for approximately $14.8 million (the “Sedgwick Sale Transaction”). As a result of the
sale, outstanding mortgage debt totaling approximately $6.8 million was assumed by the buyer. The Company
recognized a gain on sale of approximately $6.4 million and received net proceeds, less the debt assumption, of

F-16

CAPITAL SENIOR LIVING CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

approximately $8.0 million. For income tax purposes, the Company executed a like-kind exchange and acquired
a replacement property shortly after the sale which resulted in the deferral of the gain without the Company
incurring any current federal or state income tax liabilities. The Company contracted with a qualified interme-
diary for purposes of reaching its determination that the transaction satisfied all requirements of a like-kind
exchange under applicable federal and state income tax law.

Effective January 22, 2015, the Company closed a transaction to sell four of its senior living communities
located in Oklahoma City, Oklahoma, Shreveport, Louisiana, Southfield, Michigan, and Winston-Salem, North
Carolina, in a single transaction for approximately $36.5 million (the “Four Property Sale Transaction”). As a
result of the sale, the outstanding mortgage debt on the Company’s senior living communities located in
Oklahoma City and Shreveport was repaid without incurring any prepayment penalties as these notes were short-
term, bridge loan interim financing. However, the mortgage loan associated with the Company’s senior living
community located in Winston-Salem could not be prepaid under the existing loan agreement as it did not offer a
prepayment provision. Additionally, this mortgage loan was cross-collateralized with another mortgage loan on
one of the Company’s senior living communities located in Peoria, IL, which also did not offer a prepayment
provision. Therefore, the Company determined it would defease the Winston-Salem and Peoria mortgage loans
by acquiring certain treasury securities to serve as collateral for the outstanding principal balance as of the date of
the sale until the note matured on September 1, 2015. The Company contracted with a third party trust to assume
the mortgage debt and assigned all of its rights to the treasury securities to serve as collateral until the balance
remaining comes due. Based on this structure, the Company concluded it met the requirements to report the debt
transaction as a legal defeasance which resulted in the Company removing the respective assets and liabilities
from its Consolidated Balance Sheet during the first quarter of fiscal 2015 when the transaction closed. The
Company had reported these assets as held for sale at December 31, 2014, and recorded a remeasurement write-
down of $0.6 million to adjust the carrying values of these assets to the sales price, less costs to sell. As a result
of the sale, the Company received net proceeds of approximately $35.7 million.

6. Property and Equipment

Property and equipment consists of the following (in thousands):

Asset Lives

2015

2014

December 31,

Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Land improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Buildings and building improvements . . . . . . . . . . . . . . . .
Furniture and equipment
. . . . . . . . . . . . . . . . . . . . . . . . . .
Automobiles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction in progress . . . . . . . . . . . . . . . . . . . . . . . . . .

5 to 20 years
10 to 40 years
5 to 10 years
5 to 7 years
(1)
NA

Less accumulated depreciation and amortization. . . . . . . .

$

61,254
17,613
897,668
42,879
4,977
58,466
5,700

1,088,557
197,985

$ 54,115
13,209
764,794
34,921
3,829
41,679
1,520

914,067
166,454

Property and equipment, net

. . . . . . . . . . . . . . . . . . . . .

$ 890,572

$747,613

(1) Leasehold improvements are amortized over the shorter of the useful life of the asset or the remaining lease term.

At December 31, 2015 and 2014, furniture and equipment include $3.0 million of capitalized computer
software development costs of which $2.6 million and $2.5 million, respectively, has been amortized and is
included as a component of accumulated depreciation and amortization. During fiscal 2015, final valuation
adjustments associated with 2014 senior living community acquisitions resulted in the Company reclassifying
approximately $0.4 million from other assets to property and equipment and the 2014 Consolidated Balance
Sheet has been recast to reflect the final purchase price allocation.

F-17

CAPITAL SENIOR LIVING CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Property and equipment includes $32.4 million of assets under capital lease in connection with the Ventas
Lease Transaction, as discussed at Note 17, “Leases”, of which $13.7 million and $12.8 million has been amor-
tized and is included as a component of accumulated depreciation and amortization at December 31, 2015 and
2014, respectively.

7. Other Assets

Other assets consist of the following (in thousands):

Deferred lease costs, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Security and other deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
In-place lease intangibles, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

December 31,

2015

2014

8,211
12,953
7,719
2,310

9,684
11,324
7,443
2,732

$31,193

$31,183

In connection with the Company’s acquisitions and certain lease transactions, subject to final valuation
adjustments, the Company records additions to in-place lease intangibles in order to reflect the value associated
with the resident operating leases acquired. In-place lease intangibles are being amortized over the estimated
remaining useful life of the respective resident operating leases. The value of in-place leases includes lost rev-
enue that would be realized if the resident operating leases were to be replaced by the Company.

During fiscal 2015, final valuation adjustments associated with 2014 senior living community acquisitions
resulted in the Company reclassifying approximately $0.4 million from other assets to property and equipment
and the 2014 Consolidated Balance Sheet has been recast to reflect the final purchase price allocations.
Additionally, other assets at December 31, 2014, was revised from amounts previously reported to reflect the
impact of reclassifying $6.3 million in debt issuance costs, net of accumulated amortization, to notes payable.
This revision was due to the Company’s adoption of ASU 2015-03, Interest—Imputation of Interest- Simplifying
the Presentation of Debt Issuance Costs, during the fourth quarter of fiscal 2015 which requires current and
retrospective application to the Company’s Consolidated Balance Sheets for all periods presented.

At December 31, 2015 and 2014, the Company had gross in-place lease intangibles of $74.9 million and
$60.6 million, respectively, of which $67.2 million and $52.8 million, respectively, has been amortized. The
unamortized balance at December 31, 2015 is expected to be fully amortized during fiscal 2016.

8. Accrued Expenses

Accrued expenses consist of the following (in thousands):

December 31,

2015

2014

Accrued salaries, bonuses and related expenses . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued property taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued health claims and workers comp . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued professional fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$11,121
14,087
3,035
3,230
748
2,079

$ 9,865
13,050
2,485
4,026
771
1,957

$34,300

$32,154

F-18

CAPITAL SENIOR LIVING CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

9. Notes Payable

Notes payable consists of the following (in thousands):

Lender

Average
Monthly
Payment

Net Book Value
Of Collateral(1)

Interest
Rate

Maturity
Date

Fannie Mae . . . . . . . . . . . . . . . . . . . . . —
Fannie Mae . . . . . . . . . . . . . . . . . . . . . —
Fannie Mae . . . . . . . . . . . . . . . . . . . . .
Fannie Mae . . . . . . . . . . . . . . . . . . . . .
Fannie Mae . . . . . . . . . . . . . . . . . . . . .
Fannie Mae . . . . . . . . . . . . . . . . . . . . .
Fannie Mae . . . . . . . . . . . . . . . . . . . . .
Fannie Mae . . . . . . . . . . . . . . . . . . . . .
Fannie Mae . . . . . . . . . . . . . . . . . . . . .
Fannie Mae . . . . . . . . . . . . . . . . . . . . .
Fannie Mae . . . . . . . . . . . . . . . . . . . . .
Fannie Mae . . . . . . . . . . . . . . . . . . . . .
Fannie Mae . . . . . . . . . . . . . . . . . . . . .
Fannie Mae . . . . . . . . . . . . . . . . . . . . .
Fannie Mae . . . . . . . . . . . . . . . . . . . . .
Fannie Mae . . . . . . . . . . . . . . . . . . . . .
Fannie Mae . . . . . . . . . . . . . . . . . . . . .
Fannie Mae . . . . . . . . . . . . . . . . . . . . .
Fannie Mae . . . . . . . . . . . . . . . . . . . . .
Fannie Mae . . . . . . . . . . . . . . . . . . . . .
Fannie Mae . . . . . . . . . . . . . . . . . . . . .
Fannie Mae . . . . . . . . . . . . . . . . . . . . .
Fannie Mae . . . . . . . . . . . . . . . . . . . . .
Fannie Mae . . . . . . . . . . . . . . . . . . . . .
Fannie Mae . . . . . . . . . . . . . . . . . . . . .
Fannie Mae . . . . . . . . . . . . . . . . . . . . .
Fannie Mae . . . . . . . . . . . . . . . . . . . . .
Fannie Mae . . . . . . . . . . . . . . . . . . . . .
Fannie Mae . . . . . . . . . . . . . . . . . . . . .
Fannie Mae . . . . . . . . . . . . . . . . . . . . .
Fannie Mae . . . . . . . . . . . . . . . . . . . . .
Fannie Mae . . . . . . . . . . . . . . . . . . . . .
Fannie Mae . . . . . . . . . . . . . . . . . . . . .
Fannie Mae . . . . . . . . . . . . . . . . . . . . .
Fannie Mae . . . . . . . . . . . . . . . . . . . . .
Fannie Mae . . . . . . . . . . . . . . . . . . . . .
Fannie Mae . . . . . . . . . . . . . . . . . . . . .
Fannie Mae . . . . . . . . . . . . . . . . . . . . .
Fannie Mae . . . . . . . . . . . . . . . . . . . . .
Fannie Mae . . . . . . . . . . . . . . . . . . . . .

78
26
101
27
117
27
60
135
60
144
33
43
84
49
39
85
18
45
67
67
282
632
120
81
134
54
53
95
70
109
102
47
59
81
58
44
273
62

—
—
5.69
4.97
4.92
5.19
4.92
4.38
4.76
4.69
4.48
4.34
4.50
5.49
4.32
5.39
4.58
4.66
5.46
5.93
5.50
5.38
5.56
4.24
4.48
4.30
4.59
4.70
4.50
4.46
4.35
3.85
3.84
4.55
4.79
5.30
4.69
4.70
4.68
5.43

(4)
(4)
August 2021
October 2021
October 2021
October 2021
November 2021
March 2022
April 2022
April 2022
May 2022
November 2022
November 2022
November 2022
January 2023
January 2023
January 2023
April 2023
April 2023
October 2023
November 2023
November 2023
January 2024

July 2024(5)
July 2024
July 2024
September 2024
September 2024
January 2025
January 2025
February 2025
March 2025
April 2025
June 2025
June 2025
June 2025
October 2025
October 2025
December 2025
April 2026

—
—
15,214
5,594
21,093
21,093
24,283
6,273
12,507
28,287
15,981
34,998
7,685
26,987
18,439
18,439
8,682
18,782
5,524
8,700
14,242
13,028
55,740
118,792
27,851
20,660
29,273
11,550
13,093
6,579
16,630
9,434
26,078
10,404
13,014
16,535
13,677
10,380
41,027
12,144

F-19

Notes Payable
December 31,

2015

2014

$ — $ 26,809
5,372
12,915
4,582
18,096
—
21,041
5,132
11,007
25,026
11,348
27,970
6,222
—
16,460
—
7,350
15,967
—
7,506
11,686
11,756
48,722
134,650
23,572
16,304
26,070
10,357
10,406
18,923
—
—
—
—
—
14,237
—
—
—
10,908

—
12,716
4,502
17,779
4,978
20,674
5,036
10,814
24,584
11,141
27,462
6,113
7,592
16,164
8,684
7,224
15,700
3,150
7,411
11,526
11,591
48,071
125,677
23,196
16,035
25,666
10,200
10,258
18,651
13,909
22,939
21,548
9,087
11,095
14,029
11,122
8,406
52,774
10,761

CAPITAL SENIOR LIVING CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Lender

Average
Monthly
Payment

Net Book Value
Of Collateral(1)

Interest
Rate

Maturity
Date

Notes Payable
December 31,

2015

2014

96
Protective Life . . . . . . . . . . . . . . . . . .
49
Protective Life . . . . . . . . . . . . . . . . . .
65
Protective Life . . . . . . . . . . . . . . . . . .
Protective Life . . . . . . . . . . . . . . . . . .
138
Berkadia . . . . . . . . . . . . . . . . . . . . . . . —
Berkadia . . . . . . . . . . . . . . . . . . . . . . . —
Berkadia . . . . . . . . . . . . . . . . . . . . . . . —
Berkadia . . . . . . . . . . . . . . . . . . . . . . . —
Berkadia . . . . . . . . . . . . . . . . . . . . . . . —
48
Berkadia . . . . . . . . . . . . . . . . . . . . . . .
Wells Fargo . . . . . . . . . . . . . . . . . . . . . —
16
HUD . . . . . . . . . . . . . . . . . . . . . . . . . .
71
Insurance Financing . . . . . . . . . . . . . .
138
Insurance Financing . . . . . . . . . . . . . .
Insurance Financing . . . . . . . . . . . . . .
208
Insurance Financing . . . . . . . . . . . . . . —
Insurance Financing . . . . . . . . . . . . . . —

26,385
12,207
19,045
34,327
—
—
—
—
—
14,359
—
5,759
—
—
—
—
—

3.55
4.25
4.25
4.25
—
—
—
—
—
(3)
—
4.48
1.73
1.73
1.79
—
—

April 2025
August 2025
September 2025
November 2025
(6)
(7)
(6)
(8)
(7)
July 2017(9)
(10)
September 2045
October 2016
April 2016
March 2016
February 2015
September 2015

21,081
9,882
13,145
27,961
—
—
—
—
—
11,800
—
3,093
711
553
625
—
—

—
—
—
—
13,777
4,550
9,300
8,472
9,500
11,800
21,600
3,142
—
—
3,095
390
580

$4,490

4.60%(2)

Less deferred loan costs, net . . . . . . . .

Less current portion . . . . . . . . . . . . . .

777,116

646,600

8,533

6,331

768,583
13,634

640,269
47,385

$754,949 $592,884

(1) 69 of the facilities owned by the Company are encumbered by mortgage debt and are provided as collateral

under their respective loan agreements.

(2) Weighted average interest rate on current fixed interest rate debt outstanding.

(3) Variable interest rate of LIBOR plus 4.50%, which was 4.79% at December 31, 2015.

(4) On November 12, 2015, the Company obtained new long-term financing from Berkadia, who later sold the
loans to Fannie Mae, to replace this mortgage debt with a fixed interest rate of 4.68% and a 10-year term.

(5) On August 6, 2015, approximately $6.8 million of this outstanding mortgage debt was assumed by the buyer
to Note 5,

in conjunction with the Sedgwick Sale Transaction. For additional
“Dispositions.”

information refer

(6) On January 22, 2015, this mortgage debt was repaid or defeased in conjunction with the Four Property Sale

Transaction. For additional information refer to Note 5, “Dispositions.”

(7) On February 17, 2015, the Company obtained new long-term financing from Fannie Mae to replace this

mortgage debt with a fixed interest rate of 3.85% and a 10-year term.

(8) On September 24, 2015, the Company obtained new long-term financing from Fannie Mae to replace this

mortgage debt with a fixed interest rate of 4.70% and a 10-year term.

F-20

CAPITAL SENIOR LIVING CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(9) On February 4, 2015, the Company exercised its right to extend the maturity date with Berkadia to July 10,

2017.

(10) On March 5, 2015, the Company obtained new long-term financing from Fannie Mae to replace this mort-

gage debt with a fixed interest rate of 3.84% and a 10-year term.

The aggregate scheduled maturities of notes payable at December 31, 2015 are as follows (in thousands):

2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

14,698
25,318
14,158
14,829
15,443
692,670

$777,116

On December 17, 2015, the Company completed supplemental mortgage financing of approximately $7.6
million from Fannie Mae on three senior living communities located in Columbus, Ohio, Chardon, Ohio, and
Greenwood, Indiana, at a fixed interest rate of 5.49% which is coterminous with existing mortgage debt maturing
in November 2022. The supplemental mortgage loans are cross-collateralized and cross-defaulted with the origi-
nal mortgage debt. The Company incurred approximately $0.2 million in deferred financing costs related to these
loans, which are being amortized over the remaining initial loan terms.

On November 24, 2015, the Company completed supplemental mortgage financing of approximately $3.2
million from Fannie Mae on one senior living community located in Elkhorn, Nebraska, at a fixed interest rate of
5.46% which is coterminous with existing mortgage debt maturing in April 2023. The supplemental mortgage
loan is cross-collateralized and cross-defaulted with the original mortgage debt. The Company incurred approx-
imately $0.1 million in deferred financing costs related to this loan, which are being amortized over the remain-
ing initial loan term.

On November 24, 2015, the Company completed supplemental mortgage financing of approximately $8.7
million from Fannie Mae on one senior living community located in Springfield, Missouri, at a fixed interest rate
of 5.39% which is coterminous with existing mortgage debt maturing in January 2023. The supplemental mort-
gage loan is cross-collateralized and cross-defaulted with the original mortgage debt. The Company incurred
approximately $0.1 million in deferred financing costs related to this loan, which are being amortized over the
remaining initial loan term.

On November 12, 2015, the Company repaid mortgage loans totaling approximately $31.6 million from
Fannie Mae associated with four of its senior living communities located in Columbia, South Carolina, Deer Park
and Pantego, Texas, and South Bend, Indiana, scheduled to mature in June 2017. The Company obtained approx-
imately $52.8 million of new long-term fixed interest rate mortgage financing from Berkadia Commercial Mort-
gage LLC (“Berkadia”), who later sold the loans to Fannie Mae, at a fixed interest rate of 4.68% with a 10-year
term and the principal amortized over a 30-year term. The Company incurred approximately $0.6 million in
deferred financing costs related to the new mortgage loans, which are being amortized over 10 years. As a result
of the early repayment of the existing mortgage debt, the Company accelerated the amortization of approximately
$0.1 million in unamortized deferred financing costs and incurred a prepayment premium of approximately $1.7
million to Fannie Mae.

On October 30, 2015, in conjunction with the Virginia Beach Transaction, the Company obtained $28.0
million of mortgage debt from Protective Life. The new mortgage loan has a 10-year term with a 4.25% fixed
interest rate and the principal amortized over a 30-year term. The Company incurred approximately $0.4 million
in deferred financing costs related to this loan, which are being amortized over 10 years.

F-21

CAPITAL SENIOR LIVING CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

On September 30, 2015, in conjunction with the Mahomet Transaction, the Company obtained approx-
imately $11.1 million of mortgage debt from Fannie Mae. The new mortgage loan has a 10-year term with a
4.69% fixed interest rate and the principal amortized over a 30-year term. The Company incurred approximately
$0.2 million in deferred financing costs related to this loan, which are being amortized over 10 years.

On September 30, 2015, the Company completed supplemental financing of approximately $5.0 million
from Fannie Mae on an existing senior living community owned by the Company located in Macedonia, Ohio.
The supplemental loan is coterminous with existing mortgage debt maturing in October 2021 with a 5.19% fixed
interest rate and the principal amortized over a 30-year term. The supplemental loan is cross-collateralized and
cross-defaulted with the original mortgage debt. The Company incurred approximately $0.1 million in deferred
financing costs related to this loan, which are being amortized over the remaining initial loan term.

On September 24, 2015, the Company obtained approximately $8.4 million long-term fixed interest rate
mortgage financing from Fannie Mae to replace interim variable interest rate financing obtained by the Company
from Berkadia on September 30, 2013, in connection with the Company’s previous acquisition of a senior living
community located in Oakwood, Georgia. The new mortgage loan has a 10-year term with a 4.7% fixed interest
rate and the principal amortized over a 30-year term. The Company incurred approximately $0.2 million in
deferred financing costs related to this loan, which are being amortized over 10 years.

On August 11, 2015, in conjunction with the Indianapolis Transaction, the Company obtained approx-
imately $13.2 million of mortgage debt from Protective Life. The new mortgage loan has a 10-year term with a
4.25% fixed interest rate and the principal amortized over a 30-year term. The Company incurred approximately
$0.2 million in deferred financing costs related to this loan, which are being amortized over 10 years. The note
with Protective Life associated with the Indianapolis Transaction includes a loan commitment for up to $2.6 mil-
lion of supplemental funding at the same terms and 4.25% fixed interest rate. The loan commitment is based on
meeting certain funding requirements and is available through February 28, 2018.

On August 6, 2015, outstanding mortgage debt totaling approximately $6.8 million was assumed by the
buyer in conjunction with the Sedgwick Sale Transaction. As a result of the buyer’s assumption of the existing
mortgage debt, the Company accelerated the amortization of approximately $0.1 million in unamortized deferred
financing costs. For additional information refer to Note 5, “Dispositions”.

On July 28, 2015, in conjunction with the Columbiana Transaction, the Company obtained approximately
$9.9 million of mortgage debt from Protective Life. The new mortgage loan has a 10-year term with a 4.25%
fixed interest rate and the principal amortized over a 30-year term. The Company incurred approximately $0.2
million in deferred financing costs related to this loan, which are being amortized over 10 years.

On May 31, 2015, the Company renewed certain insurance policies and entered into a finance agreement
totaling approximately $1.7 million. The finance agreement has a fixed interest rate of 1.73% with the principal
being repaid over an 11-month term.

On May 29, 2015, in conjunction with the Heritage Transaction, the Company obtained approximately $11.2
million of mortgage debt from Fannie Mae. The new mortgage loan has a 10-year term with a 4.79% fixed inter-
est rate and the principal amortized over a 30-year term. The Company incurred approximately $0.2 million in
deferred financing costs related to this loan, which are being amortized over 10 years.

On May 21, 2015, in conjunction with the Emerald Transaction, the Company obtained approximately $9.2
million of mortgage debt from Fannie Mae. The new mortgage loan has a 10-year term with a 4.55% fixed inter-
est rate and the principal amortized over a 30-year term. The Company incurred approximately $0.2 million in
deferred financing costs related to this loan, which are being amortized over 10 years.

On March 27, 2015, in conjunction with the Baytown Transaction, the Company obtained approximately
$21.4 million of mortgage debt from Protective Life. The new mortgage loan has a 10-year term with a 3.55%
fixed interest rate and the principal amortized over a 30-year term. The Company incurred approximately $0.2
million in deferred financing costs related to this loan, which are being amortized over 10 years.

F-22

CAPITAL SENIOR LIVING CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

On March 5, 2015, the Company repaid an interim, interest only variable rate mortgage loan totaling approx-
imately $21.6 million from Wells Fargo on one of its senior living communities located in Toledo, Ohio. The
Company obtained approximately $21.8 million of mortgage debt from Fannie Mae to replace the Wells Fargo
interim financing. This new mortgage loan has a 10-year term with a fixed interest rate of 3.84% and the princi-
pal amortized over 30-years. The Company incurred approximately $0.2 million in deferred financing costs
related to this loan, which are being amortized over the loan term. As a result of the refinance, the Company
received approximately $0.2 million in cash proceeds. Due to the early repayment, the Company accelerated the
amortization of approximately $79,000 in unamortized deferred financing costs and incurred additional prepay-
ment fees totaling approximately $55,000.

On February 17, 2015, the Company obtained new permanent mortgage financing totaling approximately
$23.2 million from Fannie Mae on one of its owned senior living communities located in Peoria, Illinois. The
new financing replaced a mortgage loan previously scheduled to mature on September 1, 2015, which was
defeased by the Company on January 22, 2015, in conjunction with the Four Property Sale Transaction. This new
mortgage loan has a 10-year term with a fixed interest rate of 3.85% and the principal amortized over 30 years.
The Company incurred approximately $0.2 million in deferred financing costs related to this loan, which are
being amortized over the loan term. As a result of the Peoria financing, the Company repaid existing mortgage
debt on two owned properties totaling approximately $14.1 million. Due to the early repayment, the Company
accelerated the amortization of approximately $0.2 million in unamortized deferred financing costs and incurred
additional prepayment fees totaling approximately $0.5 million.

On January 22, 2015, outstanding mortgage debt totaling approximately $13.7 million was defeased in con-
junction with the Four Property Sale Transaction. The mortgage loan associated with the Company’s senior liv-
ing community located in Winston-Salem, North Carolina, carried an outstanding balance of approximately $5.7
million and could not be prepaid under the existing loan agreement as it did not offer a prepayment provision.
Additionally, this mortgage loan was cross-collateralized with another mortgage loan on one of the Company’s
senior living communities located in Peoria, Illinois, which carried an outstanding mortgage balance of approx-
imately $8.0 million and also did not offer a prepayment provision. Therefore, the Company determined it would
defease the Winston-Salem and Peoria mortgage loans by acquiring certain treasury securities to serve as
collateral for the outstanding principal balance as of the date of the sale until the note matured on September 1,
2015. The Company contracted with a third party trust to assume the mortgage debt and assigned all of its rights
to the treasury securities to serve as collateral until the balance remaining came due. Based on this structure, the
Company concluded it met the requirements to report the debt transaction as a legal defeasance which resulted in
the Company removing the respective assets and liabilities from its Consolidated Balance Sheet during the first
quarter of fiscal 2015 when the transaction closed. Due to the defeasance, the Company accelerated the amor-
tization of approximately $18,000 in unamortized deferred financing costs. For additional information refer to
Note 5, “Dispositions”.

On January 13, 2015, in conjunction with the Green Bay Transaction, the Company obtained approximately
$14.1 million of mortgage debt from Fannie Mae. The new mortgage loan has a 10-year term with a 4.35% fixed
interest rate and the principal amortized over a 30-year term. The Company incurred approximately $0.1 million
in deferred financing costs related to this loan, which are being amortized over 10 years.

On December 23, 2014, the Company refinanced a mortgage loan totaling approximately $8.4 million from
Freddie Mac associated with one of its senior living communities located in Lincoln, Nebraska. The Company
obtained approximately $18.9 million of new mortgage debt from Fannie Mae. The new mortgage loan has a 10-
year term with a 4.46% fixed interest rate and the principal amortized over a 30-year term. The Company
incurred approximately $0.2 million in deferred financing costs related to this loan, which is being amortized
over 10 years. As a result of the early repayment of the existing mortgage debt with Freddie Mac, the Company
accelerated the amortization of approximately $48,000 in unamortized deferred financing costs and incurred a
prepayment premium of approximately $0.9 million.

F-23

CAPITAL SENIOR LIVING CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

On December 17, 2014, in conjunction with the Canton Transaction, the Company obtained approximately
$10.4 million of mortgage debt from Fannie Mae. The new mortgage loan has a 10-year term with a 4.50% fixed
interest rate and the principal amortized over a 30-year term. The Company incurred approximately $0.1 million
in deferred financing costs related to this loan, which is being amortized over 10 years.

On August 27, 2014, in conjunction with the Plymouth Transaction, the Company obtained approximately
$10.4 million of mortgage debt from Fannie Mae. The new mortgage loan has a 10-year term with a 4.70% fixed
interest rate and the principal amortized over a 30-year term. The Company incurred approximately $0.1 million
in deferred financing costs related to this loan, which is being amortized over 10 years.

On August 4, 2014, in conjunction with the Roanoke Transaction, the Company obtained approximately
$12.9 million of mortgage debt from Fannie Mae. The new mortgage loan has a 10-year term, with a 4.59% fixed
interest rate and the principal amortized over a 30-year term. The Company incurred approximately $0.1 million
in deferred financing costs related to this loan, which is being amortized over 10 years.

On August 4, 2014, in conjunction with the Oshkosh Transaction, the Company obtained approximately
$13.2 million of mortgage debt from Fannie Mae. The new mortgage loan has a 10-year term with a 4.59% fixed
interest rate and the principal amortized over a 30-year term. The Company incurred approximately $0.1 million
in deferred financing costs related to this loan, which is being amortized over 10 years.

On June 30, 2014, in conjunction with the SHPIII/CSL Transaction, the Company obtained approximately
$16.4 million of mortgage debt from Fannie Mae for the acquisition of SHPIII/CSL Miami. The new mortgage
loan has a 10-year term with a fixed interest rate of 4.30% and the principal amortized over a 30-year term. The
Company also obtained approximately $23.7 million of mortgage debt from Fannie Mae for the acquisition of
SHPIII/CSL Richmond Heights. The new mortgage loan has a 10-year term with a fixed interest rate of 4.48%
and the principal amortized over a 30-year term. The Company obtained interim, interest only, financing of $21.6
million from Wells Fargo for the acquisition of SHPIII/CSL Levis Commons with a variable interest rate of
LIBOR plus 2.75% and a 24-month term. The Company incurred approximately $0.5 million in deferred financ-
ing costs related to these loans, which are being amortized over the respective loan terms.

On June 27, 2014, the Company refinanced mortgage loans totaling approximately $111.9 million from
Freddie Mac associated with 15 of its senior living communities. The Company obtained approximately $135.5
million of mortgage debt and supplemental financings for 12 of the senior living communities from Fannie Mae.
These new mortgage loans have 10-year terms with fixed interest rates of 4.24% and the principal amortized over
30-year terms. The Company obtained interim, interest only, financing of $9.3 million from Berkadia for two of
the senior living communities with a variable interest rate of LIBOR plus 4.50% and a 12-month term. The
Company also obtained interim, interest only, financing of $11.8 million from Berkadia for one of the senior
living communities with a variable interest rate of LIBOR plus 4.50% and a 24-month term. The Company
incurred approximately $2.0 million in deferred financing costs related to these loans, which are being amortized
over the respective loan terms. As a result of the refinance, the Company received approximately $36.5 million in
cash proceeds. As a result of the early repayment of the existing mortgage debt with Freddie Mac, the Company
accelerated the amortization of approximately $0.5 million in unamortized deferred loan costs and incurred a
prepayment premium of approximately $6.5 million.

On May 31, 2014, the Company renewed certain insurance policies and entered into a finance agreement
totaling approximately $1.7 million. The finance agreement has a fixed interest rate of 1.92% with principal
being repaid over a 9-month term.

On March 26, 2014, in conjunction with the Aspen Grove Transaction, the Company obtained approx-
imately $11.0 million of mortgage debt from Fannie Mae. The new mortgage loan has a 12-year term with a
5.43% fixed interest rate and the principal amortized over a 30-year term. The Company incurred approximately
$0.2 million in deferred financing costs related to this loan, which is being amortized over 12 years.

On March 25, 2011, the Company issued standby letters of credit, totaling approximately $2.6 million, for

the benefit of HCN on certain leases between HCN and the Company.

F-24

CAPITAL SENIOR LIVING CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

On September 10, 2010, the Company issued standby letters of credit, totaling approximately $2.2 million,

for the benefit of HCN on certain leases between HCN and the Company.

On April 16, 2010, the Company issued standby letters of credit, totaling approximately $1.7 million, for the

benefit of HCN on certain leases between HCN and the Company.

In connection with the Company’s loan commitments described above, the Company incurred financing
charges that were deferred and amortized over the life of the notes. At December 31, 2015 and 2014, the Com-
pany had gross deferred loan costs of $10.3 million and $8.5 million, respectively. Accumulated amortization
was $1.8 million and $2.2 million at December 31, 2015 and 2014, respectively. During fiscal 2015, due to the
early repayment of the Company’s existing mortgage debt associated with the Four Property Sale Transaction,
Sedgwick Sale Transaction and refinancings with Fannie Mae, the Company wrote-off approximately $0.5 mil-
lion in unamortized deferred financing charges and removed the respective accumulated amortization of approx-
imately $1.4 million. Amortization expense is expected to be approximately $1.1 million in each of the next five
fiscal years. The Company was in compliance with all aspects of its outstanding indebtedness at December 31,
2015 and 2014.

10. Equity

Preferred Stock

The Company is authorized to issue preferred stock in series and to fix and state the voting powers and such
designations, preferences and relative participating, optional or other special rights of the shares of each such
series and the qualifications, limitations and restrictions thereof. Such action may be taken by the Board without
stockholder approval. The rights, preferences and privileges of holders of common stock are subject to the rights
of the holders of preferred stock. No preferred stock was outstanding as of December 31, 2015 and 2014.

Share Repurchases

On January 22, 2009, the Company’s board of directors approved a share repurchase program that
authorized the Company to purchase up to $10.0 million of the Company’s common stock. Purchases may be
made from time to time using a variety of methods, which may include open market purchases, privately nego-
tiated transactions or block trades, or by any combination of such methods, in accordance with applicable insider
trading and other securities laws and regulations. The size, scope and timing of any purchases will be based on
business, market and other conditions and factors, including price, regulatory and contractual requirements or
consents, and capital availability. The repurchase program does not obligate the Company to acquire any partic-
ular amount of common stock and the share repurchase authorization has no stated expiration date. Shares of
stock repurchased under the program will be held as treasury shares. Pursuant to this authorization, during fiscal
2009, the Company purchased 349,800 shares at an average cost of $2.67 per share for a total cost to the Com-
pany of approximately $0.9 million. All such purchases were made in open market transactions. The Company
did not purchase any shares of its common stock pursuant to the Company’s share repurchase program during
fiscal 2015, 2014, or 2013.

11. Stock-Based Compensation

Stock Options

Although the Company has not granted stock options in recent years, the Company’s stock option program
is a long-term retention program that is intended to attract, retain and provide incentives for employees, officers
and directors and to more closely align stockholder and employee interests. The Company’s stock options gen-
erally vest over one to five years and the related expense is amortized on a straight-line basis over the vesting
period.

F-25

CAPITAL SENIOR LIVING CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

A summary of the Company’s stock option activity and related information for the years ended

December 31, 2015, 2014, and 2013 is presented below:

Outstanding at
Beginning of
Year

Granted

Exercised

Forfeited

Outstanding
End of Year

Options
Exercisable

December 31, 2015
Shares . . . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted average price . . . . . . . . . . . . .
December 31, 2014
Shares . . . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted average price . . . . . . . . . . . . .
December 31, 2013
Shares . . . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted average price . . . . . . . . . . . . .

6,000
8.44

19,000
7.10

$

$

265,930
6.28

$

—
—

—
—

—
—

3,000 —
5.90 —

3,000
$ 10.97

3,000
$ 10.97

13,000 —
6.48 —

6,000
8.44

$

6,000
8.44

$

$

$

246,930 —
6.21 —

$

19,000
7.10

$

19,000
7.10

$

The options outstanding and the options exercisable at December 31, 2015, 2014, and 2013, had an
aggregate intrinsic value of $30,000, $0.1 million, and $0.3 million, respectively. All stock options outstanding
are fully vested.

The following table summarizes information relating to the Company’s options outstanding and options

exercisable as of December 31, 2015.

Range of Exercise Prices

Options Outstanding

Options Exercisable

Number
Outstanding at
End of Year

Weighted Average
Remaining
Contractual Life
(Years)

Weighted Average
Exercise Price

Number
Exercisable at
End of Year

Weighted Average
Exercise Price

$10.97 . . . . . . . . . . . . . . . . .

3,000

.35

$10.97

3,000

$10.97

Restricted Stock

The Company may grant restricted stock awards and units to employees, officers, and directors in order to
attract, retain, and provide incentives for such individuals and to more closely align stockholder and employee
interests. For restricted stock awards and units without performance-based vesting conditions, the Company
records compensation expense for the entire award on a straight-line basis over the requisite service period,
which is generally a period of one to four years, unless the award is subject to certain accelerated vesting
requirements. Restricted stock awards are considered outstanding at the time of grant since the holders thereof
are entitled to dividends, upon vesting, and voting rights. For restricted stock awards with performance-based
vesting conditions, total compensation expense is recognized over the requisite service period for each separately
vesting tranche of the award as if the award is, in substance, multiple awards once the performance target is
deemed probable of achievement. Performance goals are evaluated periodically and if such goals are not ulti-
mately met or it is not probable the goals will be achieved, no compensation expense is recognized and any pre-
viously recognized compensation expense is reversed.

F-26

CAPITAL SENIOR LIVING CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Company recognizes compensation expense of a restricted stock award over its respective vesting or
performance period based on the fair value of the award on the grant date, net of forfeitures. A summary of the
Company’s restricted common stock awards activity and related information for the years ended December 31,
2015, 2014, and 2013 is presented below:

Outstanding at
Beginning of
Year

Issued

Vested

Forfeited

Outstanding
End of Year

December 31, 2015
Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
December 31, 2014
Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
December 31, 2013
Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

702,718

467,944

358,716

28,636

783,310

870,217

350,716

406,072 112,143

702,718

803,218

403,715

312,980

23,736

870,217

The restricted stock outstanding at December 31, 2015, 2014, and 2013, had an aggregate intrinsic value of

$16.3 million, $17.5 million, and $20.9 million, respectively.

During fiscal 2015, the Company awarded 467,944 shares of restricted common stock to certain employees
and directors of the Company, of which 130,000 shares were subject to performance-based vesting conditions.
The average market value of the common stock on the date of grant was $24.08. These awards of restricted
shares vest over a one to four-year period, unless the award is subject to certain accelerated vesting requirements,
and had an intrinsic value of $11.3 million on the date of grant. Additionally, during fiscal 2015, the Company
awarded 11,756 restricted stock units to certain directors of the Company with an average market value of $25.52
and an intrinsic value of $0.3 million on the date of grant, that vest over a one-year period.

On February 24, 2016, the Company awarded 541,327 shares of restricted common stock to certain employ-
ees of the Company, of which 199,692 shares were subject to performance-based vesting conditions. The market
value of the common stock on the date of grant was $15.92. These awards of restricted shares vest over a one to
four-year period, unless the award is subject to certain accelerated vesting requirements, and had an intrinsic
value of $8.6 million on the date of grant.

Stock Based Compensation

The Company uses the Black-Scholes option pricing model to estimate the grant date fair value of its stock
options. The Black-Scholes model requires the input of certain assumptions including expected volatility,
expected dividend yield, expected life of the option and the risk free interest rate. The expected volatility used by
the Company is based primarily on an analysis of historical prices of the Company’s common stock. The
expected term of options granted is based primarily on historical exercise patterns on the Company’s outstanding
stock options. The risk free rate is based on zero-coupon U.S. Treasury yields in effect at the date of grant with
the same period as the expected option life. The Company does not expect to pay dividends on its common stock
and therefore has used a dividend yield of zero in determining the fair value of its awards. The option forfeiture
rate assumption used by the Company is based primarily on the Company’s historical option forfeiture patterns.
The Company recognizes compensation expense of a restricted stock award over its respective vesting period
based on the fair value of the award on the grant date, net of estimated forfeitures.

The Company recognized $8.8 million, $7.3 million, and $4.3 million in stock-based compensation expense
during fiscal 2015, 2014, and 2013, respectively. Unrecognized stock-based compensation expense, net of esti-
mated forfeitures, is $8.3 million for the year ended December 31, 2015. The Company expects this expense to
be recognized over a one-year period for performance awards and a one to four-year period for nonperformance
awards.

F-27

CAPITAL SENIOR LIVING CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

12. Income Taxes

The provision (benefit) for income taxes consists of the following (in thousands):

Year Ended December 31,

2015

2014

2013

Current:

Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$—
900

$—
719

$(5,411)
377

Deferred:

Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—
—

—
—

6,251
4,542

$900

$719

$ 5,759

The provision (benefit) for income taxes differed from the amounts of income tax provision (benefit)
determined by applying the U.S. federal statutory income tax rate to income before provision (benefit) for
income taxes as a result of the following (in thousands):

Tax (benefit) provision at federal statutory rates . . . . . . . . . . . . . . . . .
State income tax expense, net of federal effects . . . . . . . . . . . . . . . . .
Federal and state income tax return true up . . . . . . . . . . . . . . . . . . . . .
State effective rate changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in deferred tax asset valuation allowance . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Year Ended December 31,

2015

2014

2013

$(4,515)
64
—
—
4,986
365

$(7,958)
(90)
—

6
8,456
305

$(3,653)
401
325
(20)
8,810
(104)

$

900

$

719

$ 5,759

A summary of the Company’s deferred tax assets and liabilities, are as follows (in thousands):

December 31,

2015

2014

Deferred tax assets:

Deferred gains on sale/leaseback transactions . . . . . . . . . . . . . . . . . . . . . . . .
Net operating loss carryforward (expiring up to 2032) . . . . . . . . . . . . . . . . .
Compensation costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investments in unconsolidated joint ventures . . . . . . . . . . . . . . . . . . . . . . . . .
Capital loss carryforward . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 6,176
15,144
1,804
—
—
2,802

$ 7,027
12,556
972
—
—
1,806

Total deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Valuation Allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

25,926
(22,252)

22,361
(17,266)

Total deferred tax assets, net

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3,674

5,095

Deferred tax liabilities:

Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3,674)

(5,095)

Total deferred tax assets, net

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ —

$ —

Current deferred tax assets, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term deferred tax (liabilities) assets, net . . . . . . . . . . . . . . . . . . . . . . . . . .

$ —
—

$

460
(460)

Total deferred tax assets, net

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ —

$ —

F-28

CAPITAL SENIOR LIVING CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Income taxes are computed using the asset and liability method and current income taxes are recorded based
on amounts refundable or payable in the current year. Deferred income taxes are recorded based on the estimated
future tax effects of loss carryforwards and temporary differences between financial statement carrying amounts
of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured
using enacted tax rates that are expected to apply to taxable income in the years in which we expect those carry-
forwards and temporary differences to be recovered or settled. Management regularly evaluates the future
realization of deferred tax assets and provides a valuation allowance, if considered necessary, based on such
evaluation. As part of the evaluation, management has evaluated taxable income in carryback years, future
reversals of taxable temporary differences, feasible tax planning strategies, and future expectations of income.
Based upon this evaluation, a valuation allowance has been recorded to reduce the Company’s net deferred tax
assets to the amount that is more likely than not to be realized. A significant component of objective evidence
evaluated was the cumulative loss incurred by the Company over the past four fiscal years. Such objective evi-
dence severely limits the ability to consider other subjective evidence such as the Company’s ability to generate
sufficient taxable income in future periods to fully recover the deferred tax assets. However, in the event that we
were to determine that it would be more likely than not that the Company would realize the benefit of deferred
tax assets in the future in excess of their net recorded amounts, adjustments to deferred tax assets would increase
net income in the period we made such a determination. The benefits of the net deferred tax assets might not be
realized if actual results differ from expectations.

As of December 31, 2015, the Company has Federal and State Net Operating Loss (“NOL”) carryforwards
of $34.7 million and $63.3 million and related deferred tax assets of $11.7 million and $3.1 million, respectively,
and a Federal Alternative Minimum Tax Credit carryforward of $0.3 million. If not used, the Federal NOL will
expire during fiscal 2033 to 2035 and state NOL’s will expire during fiscal 2016 to 2035. Additionally, the
Company has a Federal NOL carryforward of $10.4 million related to the excess tax benefits associated with
stock-based compensation and stock option exercises. The benefit of this NOL will be recognized as an increase
to additional paid-in capital at the point when such NOL provides cash benefit to the Company.

The effective tax rates for fiscal 2015 and 2014 differ from the statutory tax rates due to state income taxes,
permanent tax differences, and changes in the deferred tax asset valuation allowance. The Company is impacted
by the Texas Margin Tax (“TMT”), which effectively imposes tax on modified gross revenues for communities
within the State of Texas. During fiscal 2015 the Company consolidated 37 Texas communities and during fiscal
2014 the Company consolidated 36 Texas communities and the TMT increased the overall provision for income
taxes. The Company is generally no longer subject to federal and state tax audits for years before 2012.

13. Employee Benefit Plans

The Company has a 401(k) salary deferral plan (the “Plan”) in which all employees of the Company meet-
ing minimum service and age requirements are eligible to participate. Contributions to the Plan are in the form of
employee salary deferrals, which are subject to employer matching contributions of 50% of up to 4% of the
employee’s annual salary. The Company’s contributions are funded semi-monthly to the Plan administrator.
Matching contributions of $0.5 million were contributed to the Plan in each of fiscal 2015 and 2014 and $0.4
million in fiscal 2013. The Company incurred administrative expenses related to the Plan of $20,900, $15,000,
and $15,300 in fiscal 2015, 2014, and 2013, respectively.

14. Contingencies

The Company has claims incurred in the normal course of its business. Most of these claims are believed by
management to be covered by insurance, subject to normal reservations of rights by the insurance companies and
possibly subject to certain exclusions in the applicable insurance policies. Whether or not covered by insurance,
these claims, in the opinion of management, based on advice of legal counsel, should not have a material effect
on the consolidated financial statements of the Company if determined adversely to the Company.

F-29

CAPITAL SENIOR LIVING CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

15. Fair Value of Financial Instruments

The carrying amounts and fair values of financial instruments at December 31, 2015 and 2014 are as follows

(in thousands):

Cash and cash equivalents . . . . . . . . . . . . . . . . . . . .
Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2015

2014

Carrying
Amount

$ 56,087
13,159
777,116

Fair Value

$ 56,087
13,159
724,769

Carrying
Amount

$ 39,209
12,241
646,600

Fair Value

$ 39,209
12,241
647,449

The following methods and assumptions were used in estimating its fair value disclosures for financial

instruments:

Cash and cash equivalents and Restricted cash: The carrying amounts reported in the balance sheet for
cash and cash equivalents and restricted cash equal fair value, which represent level 1 inputs as defined in the
accounting standards codification.

Notes payable: The fair value of notes payable is estimated using discounted cash flow analysis, based on
current incremental borrowing rates for similar types of borrowing arrangements, which represent level 2 inputs
as defined in the accounting standards codification.

The estimated fair value of these assets and liabilities could be affected by market changes and this effect

could be material.

16. Allowance for Doubtful Accounts

The components of the allowance for doubtful accounts are as follows (in thousands):

Balance at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for bad debts, net of recoveries . . . . . . . . . . . . . . . . . . . . . . . .
Write-offs and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$2,321
1,192
(325)

$1,900
717
(296)

$1,825
497
(422)

Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$3,188

$2,321

$1,900

December 31,

2015

2014

2013

17. Leases

The Company currently leases 50 senior living communities from certain real estate investment trusts
(“REITs”). The lease terms are generally for 10-15 years with renewal options for 5-20 years at the Company’s
option. Under these lease agreements, the Company is responsible for all operating costs, maintenance and
repairs, insurance and property taxes.

F-30

CAPITAL SENIOR LIVING CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following table summarizes each of the Company’s facility lease agreements as of December 31, 2015

Number of
Communities

Value of
Transaction

Term

Initial
Lease
Rate(1)

Lease
Acquisition
Costs(2)

Deferred
Gains /Lease
Concessions(3)

8% $ 9.5

$ 4.6

(dollars in millions):

Landlord

Date of Lease

Ventas . . . . . . . . . September 30, 2005

Ventas . . . . . . . . . October 18, 2005

Ventas . . . . . . . . .

June 8, 2006

Ventas . . . . . . . . .

January 31, 2008

Ventas . . . . . . . . .

June 27, 2012

HCP . . . . . . . . . . .

May 1, 2006

HCP . . . . . . . . . . .

May 31, 2006

HCP . . . . . . . . . . . December 1, 2006

HCP . . . . . . . . . . . December 14, 2006

HCP . . . . . . . . . . .

April 11, 2007

HCN . . . . . . . . . . .

April 16, 2010

HCN . . . . . . . . . . .

May 1, 2010

6

1

1

1

2

3

6

4

1

1

5

3

$ 84.6

19.5

19.1

5.0

43.3

54.0

43.0

51.0

18.0

8.0

48.5

36.0

(4)
(Two five-year renewals)
(4)
(Two five-year renewals)
(4)
(Two five-year renewals)
(4)
(Two five-year renewals)
(4)
(Two five-year renewals)
(5)
(Two ten-year renewals)
10 years
(Two ten-year renewals)
(5)
(Two ten-year renewals)
(5)
(Two ten-year renewals)
(5)
(Two ten-year renewals)
15 years
(One 15-year renewal)
15 years
(One 15-year renewal)
15 years
(One 15-year renewal)
15 years
(One 15-year renewal)

8%

8%

7.75%

6.75%

8%

8%

8%

7.75%

7.25%

8.25%

8.25%

8.50%

7.25%

0.3

0.6

0.2

0.8

0.3

0.2

0.7

0.3

0.1

0.6

0.2

0.4

0.9

—

—

—

—

12.8

0.6

—

—

—

0.8

0.4

2.0

16.3

37.5
—
(20.2)

HCN . . . . . . . . . . . September 10, 2010

HCN . . . . . . . . . . .

April 8, 2011

12

4

104.6

141.0

Subtotal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated amortization through December 31, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated deferred gains / lease concessions recognized through December 31, 2015 . . . .

15.1
(7.4)
—

Net lease acquisition costs / deferred gains / lease concessions as of December 31, 2015 . . . .

$ 7.7

$ 17.3

(1) Initial lease rates are measured against agreed upon fair market values and are subject to conditional lease

escalation provisions as set forth in each respective lease agreement.

(2) Lease acquisition and modification costs are being amortized over the respective initial lease terms.
(3) Deferred gains of $34.9 million and lease concessions of $2.6 million are being recognized in the Company’s
Consolidated Statements of Operations and Comprehensive Loss as a reduction in facility lease expense over
the respective initial lease terms. Lease concessions of $0.6 million relate to the transaction with HCP on
May 31, 2006, and $2.0 million relate to the transaction with HCN on September 10, 2010.

(4) Effective June 17, 2015, the Company executed amendments to the master lease agreements with Ventas to
facilitate up to $24.5 million of leasehold improvements for 10 of the leased communities and extend the
lease terms through September 30, 2025, with two 5-year renewal extensions available at the Company’s
option.

(5) On November 11, 2013, the Company executed a third amendment to the master lease agreement associated
with nine of its leased communities with HCP to facilitate up to $3.3 million of leasehold improvements for

F-31

CAPITAL SENIOR LIVING CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

one of the leased communities and extend the respective lease terms through October 31, 2020, with two 10-
year renewal extensions available at the Company’s option.

(6) On April 24, 2015, the Company exercised its right to extend the lease term with HCP through April 30,

2026, with one 10-year renewal extension remaining available at the Company’s option.

Ventas

As of December 31, 2015, the Company leased 11 senior living communities from Ventas, Inc. (“Ventas”).
During the second quarter of fiscal 2015, the Company executed amendments to the master lease agreements
with Ventas to facilitate up to $24.5 million of leasehold improvements for 10 communities within the Ventas
lease portfolio and extend the lease terms until September 30, 2025, with two five-year renewal extension avail-
able at the Company’s option. The initial lease rates under each of the Ventas Lease Agreements range from
6.75% to 8% and are subject to certain conditional escalation clauses which will be recognized when probable or
incurred. The Company incurred $11.4 million in lease acquisition and modification costs related to the Ventas
Lease Agreements. These deferred lease acquisition and modification costs are being amortized over the lease
terms and are included in facility lease expense in the Company’s Consolidated Statement of Operations and
Comprehensive loss. The Company accounts for nine of the Ventas Lease Agreements as an operating lease and
two as a Capital lease and financing obligation.

Effective June 27, 2012, the Company closed a lease modification transaction with Ventas which resulted in
the Company exchanging two of its owned communities for one of the communities in the existing Ventas lease
portfolio and simultaneously leasing back the two communities exchanged (the “Ventas Lease Transaction”).
This transaction was the result of negotiations for a solution to the anticipation of the Company not meeting cer-
tain lease coverage ratio requirements for its lease portfolio of ten properties with Ventas. The two communities
previously owned by the Company are located in East Lansing, Michigan (the “East Lansing Community”) and
Raleigh, North Carolina (the “Raleigh Community”) and were exchanged for a community located in Merrill-
ville, Indiana (the “Towne Centre Community”). All three communities continue to be operated by the Company.
In conjunction with this transaction, Ventas assumed approximately $18.3 million of existing mortgage debt from
Berkadia and the Company received the Towne Centre Community unencumbered. All of the leased commun-
ities in the Ventas lease portfolio were modified to be coterminous with the East Lansing and Raleigh Commun-
ity leases expiring on September 30, 2020, with two 5-year renewal extensions available at the Company’s
option, eliminate property-level lease covenants, and contain substantially similar terms and conditions. These
leases were re-evaluated by the Company at the modification date and continue to be treated as operating leases.
Under the terms of the original lease agreements with Ventas, the Company had previously deposited additional
cash collateral of approximately $3.4 million which was returnable to the Company once certain performance
targets were reached. However, due to the rebalanced lease portfolio meeting the lease coverage ratio require-
ments, the Company negotiated the return of these deposits as a condition to the lease modification. Additionally,
due to the extension of the lease terms for the Ventas lease portfolio to fiscal 2020, the rights of Ventas to reset
the underlying values of the leased communities were deferred for five years.

Pursuant to ASC 840, Leases, the Company performed a sale/leaseback analysis to determine whether the
East Lansing Community and Raleigh Community could be removed from its Consolidated Balance Sheets.
Based upon the analysis performed, the Company concluded certain aspects of the lease modification would be
considered forms of “continuing involvement” which precludes the Company from derecognizing these assets
from its Consolidated Balance Sheets under sale/leaseback accounting criteria. Therefore, the Company recorded
financing obligations equal to the fair market value of the communities exchanged and the mortgage debt
assumed by Ventas. At the end of the lease term, including exercise of any renewal options, the net remaining
financing obligation less the net carrying value of the leased assets will be recognized as a non-cash gain on sale
of the East Lansing Community and Raleigh Community. Rental payments under these leases will not be
reflected as a component of facility lease expense but will be recognized as a reduction of the financing obliga-
tion and interest expense based upon the Company’s incremental borrowing rate at the time the transaction was

F-32

CAPITAL SENIOR LIVING CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

closed. As a result of this transaction, the Company recorded additions to property and equipment of approx-
imately $13.2 million and other assets, primarily consisting of lease intangibles, of approximately $11.8 million
within the Company’s Consolidated Balance Sheets which will be depreciated or amortized over the estimated
useful lives. The additions to property and equipment were reduced by approximately $4.9 million which repre-
sented the unamortized portion of the deferred gain previously recognized by the Company when the Towne
Centre Community had been sold in fiscal 2006. Lease intangibles consist of the fair value of in-place leases
associated with the Towne Centre Community and the fair value attributable to Ventas deferring its right to reset
the underlying values of the lease portfolio five years until fiscal 2020.

HCP

As of December 31, 2015, the Company leased 15 senior living communities from HCP, Inc. (“HCP”).
During the fourth quarter of fiscal 2013, the Company executed an amendment to the master lease agreement
with HCP to facilitate up to $3.3 million of leasehold improvements for one community within the HCP lease
portfolio and extend the initial lease terms for nine communities until October 31, 2020, with two 10-year
renewal extensions available at the Company’s option. During the second quarter of fiscal 2015, the Company
exercised its right to extend the lease term with HCP for the remaining six communities in the HCP lease portfo-
lio until April 30, 2026, with one 10-year renewal extension available at the Company’s option. The initial lease
rates under the HCP Lease Agreements range from 7.25% to 8% and are subject to certain conditional escalation
clauses, which will be recognized when probable or incurred. The Company incurred $1.6 million in lease
acquisition and modification costs related to the HCP Lease Agreements. These deferred lease acquisition and
modification costs are being amortized over the lease terms and are included in facility lease expense in the
Company’s Consolidated Statements of Operations and Comprehensive Loss. The Company accounts for each of
the HCP Lease Agreements as an operating lease.

HCN

As of December 31, 2015, the Company leased 24 senior living communities from Welltower, Inc., for-
merly Health Care REIT, Inc. (“HCN”). The HCN Lease Agreements each have an initial term of 15 years, with
one 15-year renewal extension available at the Company’s option. The initial lease rates under the HCN Lease
Agreements range from 7.25% to 8.5% and are subject to certain conditional escalation clauses, which will be
recognized when probable or incurred. The initial terms on the HCN Lease Agreements expire on various dates
through April 2026. The Company incurred $2.1 million in lease acquisition costs related to the HCN Lease
Agreements. These deferred lease acquisition costs are being amortized over the lease terms and are included in
facility lease expense in the Company’s Consolidated Statements of Operations and Comprehensive Loss. The
Company accounts for each of the HCN Lease Agreements as an operating lease.

Facility lease expense in the Company’s Consolidated Statements of Operations and Comprehensive Loss
includes rent expense plus amortization expense relating to leasehold acquisition costs offset by the amortization
of deferred gains and lease incentives. The Company leases its corporate headquarters in Dallas, Texas, and an
office in New York City and has various lease contracts for a duration of 5 years or less on automobiles, buses
and office equipment. The lease on the corporate headquarters currently expires on September 30, 2020.

F-33

CAPITAL SENIOR LIVING CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Company incurred $62.8 million, $60.9 million, and $58.8 million in lease expense during fiscal 2015,
2014, and 2013, respectively. Future minimum lease commitments as of December 31, 2015, are as follows (in
thousands):

2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 65,135
65,092
64,998
64,939
62,651
250,477

$573,292

At December 31, 2015 and 2014, the Company had gross deferred lease costs of $15.1 million and $15.0
million, respectively. Accumulated amortization at December 31, 2015 and 2014 was $7.4 million and $6.0 mil-
lion, respectively, and amortization expense is expected to be approximately $1.5 million in each of the next five
fiscal years. There are various financial covenants and other restrictions in the Company’s lease agreements. The
Company was in compliance with all of its lease covenants at December 31, 2015 and 2014.

18. Quarterly Financial Information (Unaudited)

The following table presents certain unaudited quarterly financial information for each of the four quarters
ended December 31, 2015 and 2014. This information has been prepared on the same basis as the audited con-
solidated financial statements of the Company and include, in the opinion of the Company’s management, all
adjustments (consisting of normal recurring adjustments) necessary to present fairly the quarterly results when
read in conjunction with the audited consolidated financial statements of the Company.

2015 Calendar Quarters

First

Second

Third

Fourth

(In thousands, except per share amounts)

Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $98,640 $101,588 $104,420 $107,529
5,761
Income from operations . . . . . . . . . . . . . . . . . . . . . . . . . . .
(5,950)
Net (loss) income and comprehensive (loss) income . . . . .
(0.21)
Net (loss) income per share, basic . . . . . . . . . . . . . . . . . . . $ (0.21) $
(0.21)
Net (loss) income per share, diluted . . . . . . . . . . . . . . . . . . $ (0.21) $
28,749
Weighted average shares outstanding, basic . . . . . . . . . . . .
28,749
Weighted average shares outstanding, fully diluted . . . . . .

3,680
(5,166)
(0.18) $
(0.18) $

5,676
2,871
0.10 $
0.10 $

3,718
(6,039)

28,565
28,565

28,732
28,733

28,705
28,705

2014 Calendar Quarters

First

Second

Third

Fourth

(In thousands, except per share amounts)

$93,425
Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $91,857
3,149
2,615
Income from operations . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net loss and comprehensive loss . . . . . . . . . . . . . . . . . . . .
(9,819)
(4,647)
Net loss per share, basic . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (0.16) $ (0.34)
Net loss per share, diluted . . . . . . . . . . . . . . . . . . . . . . . . . . $ (0.16) $ (0.34)
28,298
Weighted average shares outstanding, basic . . . . . . . . . . . .
28,298
Weighted average shares outstanding, fully diluted . . . . . .

28,146
28,146

$98,483
2,679
(5,759)
$ (0.20) $
$ (0.20) $
28,371
28,371

$100,160
5,457
(3,901)
(0.13)
(0.13)
28,387
28,387

F-34

CAPITAL SENIOR LIVING CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

19. Subsequent Events

Effective February 16, 2016, the Company closed the acquisition of two senior living communities located
in Pensacola, Florida, for approximately $48.0 million. The communities consist of 179 assisted living units. The
Company obtained financing from Protective Life for $35.0 million of the acquisition price at a fixed rate of
4.38% with a 10-year term with the balance of the acquisition price paid from the Company’s existing cash
resources. The Company has not yet completed its initial purchase price allocation for this transaction.

Effective January 26, 2016, the Company closed the acquisition of three senior living communities located
in Colby, Park Falls, and Wisconsin Rapids, Wisconsin, for approximately $16.8 million. The communities con-
sist of 138 assisted living units. The Company obtained financing from Protective Life for $11.3 million of the
acquisition price at a fixed rate of 4.50% with a 10-year term with the balance of the acquisition price paid from
the Company’s existing cash resources. The Company has not yet completed its initial purchase price allocation
for this transaction.

F-35

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders
Capital Senior Living Corporation

We have audited Capital Senior Living Corporation’s internal control over financial reporting as of
December 31, 2015, based on criteria established in Internal Control—Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria).
Capital Senior Living Corporation’s management is responsible for maintaining effective internal control over
financial reporting, and for its assessment of the effectiveness of internal control over financial reporting
included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our
responsibility is to express an opinion on the company’s internal control over financial reporting based on our
audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether effective internal control over financial reporting was maintained in all material respects. Our
audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a
material weakness exists, testing and evaluating the design and operating effectiveness of internal control based
on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We
believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the compa-
ny’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect mis-
statements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that con-
trols may become inadequate because of changes in conditions, or that the degree of compliance with the policies
or procedures may deteriorate.

In our opinion, Capital Senior Living Corporation maintained, in all material respects, effective internal

control over financial reporting as of December 31, 2015, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States), the Consolidated Balance Sheets of Capital Senior Living Corporation as of December 31, 2015
and 2014, and the related consolidated statements of operations and comprehensive loss, shareholders’ equity,
and cash flows for each of the three years in the period ended December 31, 2015, and our report dated Febru-
ary 26, 2016, expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

Dallas, Texas
February 26, 2016

F-36

The following documents are filed as a part of this report. Those exhibits previously filed and incorporated

herein by reference are identified below. Exhibits not required for this report have been omitted.

INDEX TO EXHIBITS

Exhibit
Number

3.1

3.1.1

3.2

4.1

4.2

4.3

4.4

4.5

4.6

4.7

4.8

4.9

Description

— Amended and Restated Certificate of Incorporation of the Registrant (Incorporated by reference to
Exhibit 3.1 to the Registration Statement No. 333-33379 on Form S-1/A filed by the Company
with the Securities and Exchange Commission on September 8, 1997.)

— Amendment to Amended and Restated Certificate of Incorporation of the Registrant (Incorporated
by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q for the quarterly
period ended September 30, 1999, filed by the Company with the Securities and Exchange
Commission.)

— Second Amended and Restated Bylaws of the Registrant (Incorporated by reference to Exhibit 3.1
to the Company’s Current Report on Form 8-K filed by the Company with the Securities and
Exchange Commission on March 8, 2013.)

— 1997 Omnibus Stock and Incentive Plan for Capital Senior Living Corporation, as amended
(Incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on Form S-8,
filed on December 3, 1999, by the Company with Securities and Exchange Commission.)

— 2007 Omnibus Stock and Incentive Plan for Capital Senior Living Corporation. (Incorporated by
reference to Exhibit 4.6 to the Company’s Current Report on Form 8-K filed by the Company with
the Securities and Exchange Commission on May 31, 2007.)

— First Amendment

to 2007 Omnibus Stock and Incentive Plan for Capital Senior Living
Corporation. (Incorporated by reference to Exhibit 4.7 to the Company’s Current Report on Form
8-K filed by the Company with the Securities and Exchange Commission on May 31, 2007.)

— Amended and Restated Second Amendment to the 2007 Omnibus Stock and Incentive Plan for
Capital Senior Living Corporation, as amended. (Incorporated by reference to Exhibit 10.1 to the
Company’s Current Report on Form 8-K filed by the Company with the Securities and Exchange
Commission on May 22, 2015.)

— Rights Agreement, dated as of February 25, 2010, by and between Capital Senior Living
Corporation and Mellon Investor Services LLC, including all exhibits thereto (Incorporated by
reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed by the Company with
the Securities and Exchange Commission on February 26, 2010).

— Form of Certificate of Designation of Series A Junior Participating Preferred Stock, par value
$0.01 per share (Incorporated by reference to Exhibit 4.2 to the Company’s Current Report on
Form 8-K on February 26, 2010).

— Form of Right Certificate (included as Exhibit B to the Rights Agreement, which is Exhibit 4.4
hereto, as amended pursuant to the First Amendment to Rights Agreement, which is Exhibit 4.8
hereto, and incorporated herein by reference).

— Form of Summary of Rights (included as Annex A to the First Amendment to Rights Agreement,

which is Exhibit 4.8 hereto, and incorporate herein by reference).

— First Amendment to Rights Agreement, dated as of March 5, 2013, by and between the Company
and Computershare Shareowner Services LLC (Incorporated by reference to Exhibit 4.2 to the
Company’s Current Report on Form 8-K filed by the Company with the Securities and Exchange
Commission on March 8, 2013.)

10.1

— Form of Stock Option Agreement (Incorporated by reference to Exhibit 4.2 to the Company’s
Registration Statement on Form S-8, filed on December 3, 1999, by the Company with Securities
and Exchange Commission.)

E-1

Exhibit
Number

10.2

10.3

10.4

10.5

10.6

10.7

10.8

10.9

10.9.1

10.10

10.11

10.12

Description

— Employment Agreement, dated as of November 1, 1996, by and between Capital Senior Living
Corporation and Lawrence A. Cohen (Incorporated by reference to Exhibit 10.11 from the
Registration Statement No. 333-33379 on Form S-1 filed by the Company with the Securities and
Exchange Commission.)

— Employment Agreement, dated as of November 26, 1996, by and between Capital Senior Living,
Inc. and David R. Brickman (Incorporated by reference to Exhibit 10.12 to the Registration State-
ment No. 333-33379 on Form S-1 filed by the Company with the Securities and Exchange
Commission.)

— Employment Agreement, dated as of November 26, 1996, by and between Capital Senior Living,
Inc. and Keith N. Johannessen (Incorporated by reference to Exhibit 10.13 from the Registration
Statement No. 333-33379 on Form S-1 filed by the Company with the Securities and Exchange
Commission.

— Agreement of Limited Partnership of Triad Senior Living II, L.P. dated September 23, 1998
(Incorporated by reference to Exhibit 10.57 to the Company’s Annual Report on Form 10-K for the
year ended December 31, 1998, filed by the Company with the Securities and Exchange
Commission.)

— Agreement of Limited Partnership of Triad Senior Living III, L.P. dated November 10, 1998
(Incorporated by reference to Exhibit 10.58 to the Company’s Annual Report on Form 10-K for the
year ended December 31, 1998, filed by the Company with the Securities and Exchange
Commission.)

— Agreement of Limited Partnership of Triad Senior Living IV, L.P. dated December 22, 1998
(Incorporated by reference to Exhibit 10.59 to the Company’s Annual Report on Form 10-K for the
year ended December 31, 1998, filed by the Company with the Securities and Exchange
Commission.)

— Employment Agreement, dated May 26, 1999, by and between Lawrence A. Cohen and Capital
Senior Living Corporation (Incorporated by reference to the Exhibit 10.4 to the Company’s Quar-
terly Report on Form 10-Q for the quarterly period ended September 30, 1999, filed by the Com-
pany with the Securities and Exchange Commission.)

— Second Amended and Restated Agreement of Limited Partnership of Triad Senior Living I, L.P.
(Incorporated by reference to the Exhibit 10.78 to the Company’s Annual Report on Form 10-K,
dated March 30, 2000, filed by the Company with the Securities and Exchange Commission.)

— Amendment No. 1 to Second Amended and Restated Agreement of Limited Partnership of Triad
Senior Living I, LP. (Incorporated by reference to the Exhibit 10.10.5 to the Company’s Quarterly
Report on Form 10-Q for the quarterly period ended September 30, 2002, filed by the Company
with the Securities and Exchange Commission.)

— First Amendment to Triad II Partnership Agreement (Incorporated by reference to Exhibit 10.26 to
the Company’s Current Report on Form 8-K, dated August 15, 2000, filed by the Company with
the Securities and Exchange Commission.)

— Support Agreement dated as of September 11, 2002 by and between Capital Senior Living, Inc.,
Triad I, Triad II, Triad III, Triad IV and Triad V. (Incorporated by reference to Exhibit 10.102 to
the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2002,
filed by the Company with the Securities and Exchange Commission.)

— Second Amendment to the Employment Agreement of Lawrence A. Cohen, dated January 27,
2003 by and between Lawrence A. Cohen and Capital Senior Living Corporation (Incorporated by
reference to Exhibit 10.106 to the Company’s Annual Report on Form 10-K, dated March 26,
2003, filed by the Company with the Securities and Exchange Commission.)

E-2

Exhibit
Number

10.13

10.14

10.15

Description

— First Amendment to the Employment Agreement of Keith N. Johannessen, dated January 17, 2003
by and between Keith N. Johannessen and Capital Senior Living Corporation (Incorporated by
reference to Exhibit 10.107 to the Company’s Annual Report on Form 10-K, dated March 26,
2003, filed by the Company with the Securities and Exchange Commission.)

— Second Amendment to the Employment Agreement of David R. Brickman, dated January 27, 2003
by and between David R. Brickman and Capital Senior Living Corporation (Incorporated by refer-
ence to Exhibit 10.109 to the Company’s Annual Report on Form 10-K, dated March 26, 2003,
filed by the Company with the Securities and Exchange Commission.)

— Amended and Restated Draw Promissory Note, dated February 1, 2003, of Triad Senior Living I,
L.P. in favor of Capital Senior Living Properties, Inc. (Incorporated by reference to Exhibit 10.110
to the Company’s Annual Report on Form 10-K, dated March 26, 2003, filed by the Company with
the Securities and Exchange Commission.)

10.15.1 — Amended and Restated Draw Promissory Note (Fairfield), dated February 1, 2003, of Triad Senior
Living II, L.P. in favor of Capital Senior Living Properties, Inc. (Incorporated by reference to
Exhibit 10.111.1 to the Company’s Annual Report on Form 10-K, dated March 26, 2003, filed by
the Company with the Securities and Exchange Commission.)

10.15.2 — Amended and Restated Draw Promissory Note (Oklahoma City), dated February 1, 2003, of Triad
Senior Living II, L.P. in favor of Capital Senior Living Properties, Inc. (Incorporated by reference
to Exhibit 10.111.2 to the Company’s Annual Report on Form 10-K, dated March 26, 2003, filed
by the Company with the Securities and Exchange Commission.)

10.15.3 — Amended and Restated Draw Promissory Note (Plano), dated February 1, 2003, of Triad Senior
Living II, L.P. in favor of Capital Senior Living Properties, Inc. (Incorporated by reference to
Exhibit 10.111.3 to the Company’s Annual Report on Form 10-K, dated March 26, 2003, filed by
the Company with the Securities and Exchange Commission.)

10.16

10.17

10.18

10.19

10.20

10.21

— Amended and Restated Draw Promissory Note, dated February 1, 2003, of Triad Senior Living III,
L.P. in favor of Capital Senior Living Properties, Inc. (Incorporated by reference to Exhibit 10.112
to the Company’s Annual Report on Form 10-K, dated March 26, 2003, filed by the Company with
the Securities and Exchange Commission.)

— Amended and Restated Draw Promissory Note, dated February 1, 2003, of Triad Senior Living IV,
L.P. in favor of Capital Senior Living Properties, Inc. (Incorporated by reference to Exhibit 10.113
to the Company’s Annual Report on Form 10-K, dated March 26, 2003, filed by the Company with
the Securities and Exchange Commission.)

— Amended and Restated Draw Promissory Note, dated February 1, 2003, of Triad Senior Living V,
L.P. in favor of Capital Senior Living Properties, Inc. (Incorporated by reference to Exhibit 10.114
to the Company’s Annual Report on Form 10-K, dated March 26, 2003, filed by the Company with
the Securities and Exchange Commission.)

— Master Lease Agreement, dated June 30, 2005, between Ventas Amberleigh, LLC and Capital
Senior Management 2, Inc. (Incorporated by reference to Exhibit 10.1 to the Company’s Current
Report on Form 8-K/A, dated June 30, 2005, filed by the Company with the Securities and
Exchange Commission on July 11, 2005.)

— Schedule identifying substantially identical agreements to Exhibit 10.63 (Incorporated by reference
to Exhibit 10.2 to the Company’s Current Report on Form 8-K/A, dated June 30, 2005, filed by the
Company with the Securities and Exchange Commission on July 11, 2005.)

— Loan Agreement, dated July 18, 2005, by Capital Senior Living Peoria, LLC and GMAC Commer-
cial Mortgage Bank (Incorporated by reference to the Exhibit 10.1 to the Company’s Current
Report on Form 8-K, dated July 18, 2005, filed by the Company with the Securities and Exchange
Commission.)

E-3

Exhibit
Number

10.22

10.23

10.24

10.25

10.26

10.27

10.28

10.29

10.30

10.31

10.32

10.33

10.34

Description

— Schedule identifying substantially identical agreements to Exhibit 10.65 (Incorporated by reference
to the Exhibit 10.2 to the Company’s Current Report on Form 8-K, dated July 18, 2005, filed by
the Company with the Securities and Exchange Commission.)

— Master Lease Agreement, dated October 18, 2005, between Ventas Georgetowne, LLC and Capital
Senior Management 2, Inc. (Incorporated by reference to Exhibit 10.1 to the Company’s Current
Report on Form 8-K, dated October 18, 2005, filed by the Company with the Securities and
Exchange Commission.)

— Schedule identifying substantially identical agreements to Exhibit 10.70 (Incorporated by reference
to Exhibit 10.4 to the Company’s Current Report on Form 8-K, dated March 7, 2006, filed by the
Company with the Securities and Exchange Commission.)

— Master Lease Agreement, dated May 31, 2006, between subsidiaries of the Company and HCP
(Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, dated
May 31, 2006, filed by the Company with the Securities and Exchange Commission.)

— Lease, dated May 31, 2006, between subsidiaries of the Company and HCP regarding the Cross-
wood Oaks Facility in Citrus Heights, California (Incorporated by reference to Exhibit 10.2 to the
Company’s Current Report on Form 8-K, dated May 31, 2006, filed by the Company with the
Securities and Exchange Commission.)

— Schedule identifying substantially identical agreements to Exhibit 10.73 (Incorporated by reference
to Exhibit 10.3 to the Company’s Current Report on Form 8-K, dated May 31, 2006, filed by the
Company with the Securities and Exchange Commission.)

— Multifamily Note, dated June 9, 2006, executed by Triad Senior Living II, L.P. in favor of Cap-
mark. (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K,
dated June 9, 2006, filed by the Company with the Securities and Exchange Commission.)

— Schedule identifying substantially identical agreements to Exhibit 10.75 (Incorporated by reference
to Exhibit 10.2 to the Company’s Current Report on Form 8-K, dated June 9, 2006, filed by the
Company with the Securities and Exchange Commission.)

— Multifamily Deed of Trust, Assignment of Rents and Security Agreement and Fixture Filing, dated
June 9, 2006, by Triad Senior Living II, L.P. to Ed Stout, as trustee, for the benefit of Capmark.
(Incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K, dated
June 9, 2006, filed by the Company with the Securities and Exchange Commission.)

— Loan Agreement, dated June 20, 2006, by and between Triad Senior Living III, L.P. and Capmark
Bank. (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K,
dated June 20, 2006, filed by the Company with the Securities and Exchange Commission.)

— Multifamily Note dated May 3, 2007 executed by Triad Senior Living III, L.P. in favor of Capmark
Bank (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K,
dated March 3, 2007, filed by the Company with the Securities and Exchange Commission.)

— Schedule identifying substantially identical agreements to Exhibit 10.3 (Incorporated by reference
to Exhibit 10.2 to the Company’s Current Report on Form 8-K, dated March 3, 2007, filed by the
Company with the Securities and Exchange Commission.)

— Multifamily Deed of Trust, Assignment of Rents and Security Agreement and Fixture Filing dated
May 3, 2007 by Triad Senior Living III, L.P. in favor of Chicago Title Insurance Company, as
trustee for the benefit of Capmark Bank. (Incorporated by reference to Exhibit 10.3 to the Compa-
ny’s Current Report on Form 8-K, dated March 3, 2007, filed by the Company with the Securities
and Exchange Commission.)

E-4

Exhibit
Number

Description

10.35

10.36

10.37

10.38

10.39

10.40

10.41

10.42

*21.1

*23.1

*31.1

*31.2

*32.1

*32.2

— Schedule identifying substantially identical agreements to Exhibit 10.5. (Incorporated by reference
to Exhibit 10.4 to the Company’s Current Report on Form 8-K, dated March 3, 2007, filed by the
Company with the Securities and Exchange Commission.)

— Fourth Amendment to the Employment Agreement of Lawrence A. Cohen. (Incorporated by refer-
ence to exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Securities and
Exchange Commission on April 20, 2010.)

— Second Amendment to the Employment Agreement of Keith N. Johannessen. (Incorporated by
reference to exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the Securities
and Exchange Commission on April 20, 2010.)

— Master Lease Agreement, dated as of September 10, 2010, between Capital Texas S, LLC and the
Landlord parties thereto. (Incorporated by reference to exhibit 10.1 to the Company’s Current
Report on Form 8-K filed with the Securities and Exchange Commission on September 16, 2010.)

— Employment Agreement, dated July 22, 2010, by and between Capital Senior Living, Inc. and
Joseph G. Solari (Incorporated by reference to the Exhibit 10.50 to the Company’s Annual Report
on Form 10-K, dated March 12, 2012, filed by the Company with the Securities and Exchange
Commission.)

— Employment Agreement, dated April 25, 2014, by and between Capital Senior Living, Inc. and
Carey P. Hendrickson (Incorporated by reference to the Exhibit 10.1 to the Company’s Current
Report on Form 8-K, dated April 28, 2014, filed by the Company with the Securities and Exchange
Commission.)

— Form of Outside Directors Restricted Share Unit Award Under the 2007 Omnibus Stock and
Incentive Plan for Capital Senior Living Corporation. (Incorporated by reference to Exhibit 10.1 to
the Company’s Quarterly Report on Form 10-Q filed by the Company with the Securities and
Exchange Commission on August 5, 2015.)

— Second Amendment to Employment Agreement of Joseph G. Solari, dated August 31, 2013 by and
between Capital Senior Living Corporation and Joseph G. Solari. (Incorporated by reference to
Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed by the Company with the
Securities and Exchange Commission on May 6, 2015.)

— Subsidiaries of the Company

— Consent of Ernst & Young LLP

— Certification of Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a)

— Certification of Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a)

— Certification of Lawrence A. Cohen pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

— Certification of Carey P. Hendrickson pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

*101.INS — XBRL Instance Document

*101.SCH — XBRL Taxonomy Extension Schema Document

*101.CAL — XBRL Taxonomy Extension Calculation Linkbase Document

*101.LAB — XBRL Taxonomy Extension Label Linkbase Document

*101.PRE — XBRL Taxonomy Extension Presentation Linkbase Document

*101.DEF — XBRL Taxonomy Extension Definition Linkbase Document

* Filed herewith.

E-5

NON-GAAP RECONCILIATIONS
(In thousands, except per share data)

ATTACHMENT A

The Company utilizes certain financial measures of operating performance, such as adjusted EBITDAR,
adjusted CFFO and adjusted CFFO per share, that are not calculated in accordance with U.S. generally accepted
accounting principles (“GAAP”). Non-GAAP financial measures may have material limitations in that they do
not reflect all of the amounts associated with our results of operations as determined in accordance with GAAP.
As a result, these non-GAAP financial measures should not be considered a substitute for, nor superior to, finan-
cial results and measures determined or calculated in accordance with GAAP. The Company believes that these
non-GAAP measures are useful in identifying trends in day-to-day performance because they exclude items that
are of little or no significance to operations and provide indicators to management of progress in achieving opti-
mal operating performance. In addition, these measures are used by many research analysts and investors to
evaluate the performance and the value of companies in the senior living industry. The Company strongly urges
you to review the following reconciliation of net income from operations to adjusted EBITDAR and the
reconciliation of net loss to adjusted CFFO, along with the Company’s consolidated balance sheets, statements of
operations, and statements of cash flows included within the Company’s Annual Reports on Form 10-K.

Year Ended December 31,

2013

2014

2015

Adjusted EBITDAR

Net income from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization expense . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Facility lease expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for bad debts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Casualty losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transaction costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
CCRC’s being repositioned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 11,250
43,238
4,322
56,986
497
543
1,866
859

$ 13,900
49,487
7,262
59,332
717
748
2,648
(1,494)

$ 18,835
53,017
8,833
61,213
1,192
1,250
3,262
(3,141)

Adjusted EBITDAR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$119,561

$132,600

$144,461

Adjusted CFFO and Adjusted CFFO per share

Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-cash charges, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lease incentives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Recurring capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Casualty losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transaction costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax impact of 4 property sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax impact of Spring Meadows Transaction . . . . . . . . . . . . . . . . . . . . . . .
Tax impact of lease modificaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
CCRC’s being repositioned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ (16,504) $ (24,126) $ (14,284)
63,820
65,562
(2,464)
—
(4,413)
(4,257)
1,250
748
3,262
2,648
351
—
(424)
(424)
—
—
(101)
746

57,862
—
(3,866)
543
1,866
—
(424)
—
631

Adjusted CFFO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 40,108

$ 40,897

$ 46,997

Adjusted CFFO per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

1.44

$

1.45

$

1.64

Company Management

Board of Directors

Shareholder Information

LAWRENCE A. COHEN
Chief Executive Officer and Vice
Chairman of the Board

KEITH N. JOHANNESSEN
President and Chief Operating Officer

CAREY P. HENDRICKSON
Senior Vice President
and Chief Financial Officer

DAVID R. BRICKMAN
Senior Vice President, General
Counsel and Secretary

DAVID W. BEATHARD
Senior Vice President, Operations

GREGORY P. BOEMER
Vice President, Operations

GLEN H. CAMPBELL
Vice President, Asset Management

GARY E. FERNANDEZ
Vice President, National Marketing

GLORIA M. HOLLAND
Vice President, Finance

ROBERT F. HOLLISTER
Property Controller

CHRISTOPHER H. LANE
Vice President, Financial Reporting

JOSEPH G. SOLARI
Vice President, Corporate
Development

DONNY S. BEASLEY
Director of Human Resources

JAMES A. MOORE 1
Independent Chairman of the Board
President
Moore Diversified Services, Inc.
Fort Worth, Texas

LAWRENCE A. COHEN
Vice Chairman of the Board
and Chief Executive Officer
Capital Senior Living Corporation
New York, New York

PHILIP A. BROOKS 2, 3
Managing Partner
Select Living, LLC
Richmond, Virginia

KIMBERLY S. LODY 3
President
GN ReSound
Bloomington, Minnesota

E. RODNEY HORNBAKE, M.D. 3
Managing Partner
Essex Internal Medicine
Essex, Connecticut

KEITH N. JOHANNESSEN
President and Chief Operating Officer
Capital Senior Living Corporation
Dallas, Texas

JILL M. KRUEGER 2
President and CEO
Symbria, Inc.
Warrenville, Illinois

RONALD A. MALONE 1, 3
Former Director and CEO
Gentiva Health Services, Inc.
Atlanta, Georgia

MICHAEL W. REID 1, 2
Partner
Herald Square Properties
New York, New York

1 Member of the Board’s Compensation Committee
2 Member of the Board’s Audit Committee
3 Member of the Board’s Nominating and Corporate

Governance Committee

STOCK EXCHANGE LISTING
Capital Senior Living Corporation
Common Stock is listed on the New
York Stock Exchange and trades
under the symbol CSU.

TRANSFER AGENT AND
REGISTRAR
Computershare, Inc.
P.O. Box 30170
College Station, TX 77842-3170
or
211 Quality Circle, Ste. 210
College Station, TX 77845
(866) 267-2831
TDD for hearing impaired: (800) 231-5469
Foreign shareowners: (201) 680-6578
TDD foreign shareowners: (201) 680-6610
www.computershare.com/investor

AUDITORS
Ernst & Young LLP
2323 Victory Avenue, Suite 2000
Dallas, Texas 75219
(214) 969-8000

Corporate Information

CORPORATE HEADQUARTERS
14160 Dallas Parkway, Suite 300
Dallas, Texas 75254
(972) 770-5600
(972) 770-5666 fax
main@capitalsenior.com

NEW YORK OFFICE
590 Madison Avenue, Suite 2100
New York, New York 10022
(212) 551-1770
(212) 551-1774 fax

CORPORATE WEB SITE
www.capitalsenior.com

Form 10-K

A copy of Capital Senior Living
Corporation’s 2015 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 19, 2016 at 10:00 am, Eastern Time
New York Palace Hotel
455 Madison Avenue
New York, NY 10022
(212) 303-6071

14160 Dallas Parkway, Suite 300
Dallas, Texas 75254
972.770.5600

Fax: 972.770.5666

www.capitalsenior.com