UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K/A

(Amendment No. 1)10-K

(Mark One)

For the Fiscal Year Ended December 31, 20192020

Or

For the transition period from                      to                     

Commission file number: 1-13445

Capital Senior Living Corporation

(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code:

(972) 770-5600

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

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

Indicate by a check mark if the registrant is a well-known seasoned issuer, as defined by Rule 405 of the Securities Act.    Yes  ☐    No  ☑

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  ☑

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  ☑    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).     Yes  ☑    No  ☐

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    Yes  ☐    No  ☑

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.  Yes  ☐    No  ☑

Indicate by a check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ☑

The aggregate market value of the 25,257,7642,090,169 shares, as adjusted for the fifteen-for-one reverse stock split, 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, directors, and certain significant stockholders) on June 28, 2019,30, 2020, the last day of the Registrant’s most recently completed second quarter, based upon the adjusted closing price of the Registrant’s Common Stock as reported by the New York Stock Exchange on such date was approximately $127.0$22.3 million. As of April 24, 2020,March 25, 2021, the Registrant had 31,882,7472,081,332 shares of Common Stock outstanding.outstanding as adjusted for the reverse stock split.

DOCUMENTS INCORPORATED BY REFERENCE

None

Portions of the Registrant’s definitive proxy statement pertaining to its 2021 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.

EXPLANATORY NOTE

This Amendment No. 1 on Form 10-K/A (this “Amendment”) amends the Annual Report on Form 10-K for Capital Senior Living Corporation (together with its subsidiaries, the “Company”) for the fiscal year ended December 31, 2019, which was filed with the Securities and Exchange Commission (the “SEC”) on March 31, 2020 (the “Original Filing”).

We are filing this Amendment to include the information required by Part III and not included in the Original Filing, as we will not file our definitive proxy statement within 120 days of the end of our fiscal year ended December 31, 2019. The reference on the cover page of the Original Filing to our incorporation by reference of certain sections of our definitive proxy statement into Part III of the Original Filing is hereby deleted.

Except as set forth in Part III below and the updates to the List of Exhibits, no other changes are made to the Original Filing. The Original Filing continues to speak as of the date of the Original Filing. Unless expressly stated, this Amendment does not reflect events occurring after the filing of the Original Filing, nor does it modify or update in any way the disclosures contained in the Original Filing. Accordingly, this Amendment should be read in conjunction with the Original Filing and our other filings with the SEC.

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CAPITAL SENIOR LIVING CORPORATION

TABLE OF CONTENTS

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PART IIII

Information required underOverview

Capital Senior Living Corporation, a Delaware corporation (together with its subsidiaries, "we," "us," "our," or "the Company"), is one of the leading owner-operators of senior housing communities in the United States in terms of resident capacity. The Company and its predecessors have provided senior housing since 1990. As of December 31, 2020, we operated 101 senior housing communities in 22 states with an aggregate capacity of approximately 13,000 residents, including 60 senior housing communities that we owned, 17 properties that were in the process of transitioning legal ownership back to Fannie Mae, 12 senior housing communities that we leased, and 12 communities that we managed on behalf of third parties. During 2020, we successfully exited all triple net leases and approximately 93.6% of total revenues for the senior housing communities that we operated were derived from private pay sources.

We provide senior living services in a residence setting to the senior population, including independent living, assisted living, and memory care services. Many of our communities offer a continuum of care to meet our residents’ needs as they change over time by integrating independent living, assisted living, and memory care, which may be bridged by home care through independent home care agencies. Our integrated approach sustains residents’ autonomy and independence based on their physical and cognitive abilities.

Strategy

Our strategic priorities are designed to strengthen the foundation of the organization, enhance our performance, and position our portfolio for near- and long-term growth.  We strive to provide value to our senior living residents by providing quality senior living services in a home-like setting at reasonable prices, while also striving to (i) achieve and sustain a strong, competitive position within our geographically concentrated regions, and (ii) continue to enhance the performance of our operations.

We have supplemented our operating strategy with our S.I.N.G. strategy which stands for “Stabilize, Invest, Nurture and Grow.” These initiatives are intended to complement and enhance our core operational efforts and position us for future growth and success in light of recent trends in demographics, technology, and healthcare delivery methods.  

Stabilize. A key component of stabilization has been the optimization of our portfolio of senior housing communities, which includes disposing of certain owned and leased communities. We undertook this Iteminitiative to simplify and streamline our business, increase the quality and durability of our cash flows, improve our liquidity, reduce our short-term and long-term debt and lease leverage, and increase our ownership in our consolidated community portfolio. During 2020, we successfully exited all triple net leases and closed on the sale of two senior housing communities, transitioning into a core continuing portfolio of owned communities.

Invest. Our resident-centric experience model includes investment in community upgrades and innovative and differentiated resident programming. Our focus on supportive transitions for new residents encourages opportunities and activities for residents to build their network of friends to foster new and continuing passions.

Nurture. We strive to create commercial distinction where our brand presence is synonymous with excellence.  Our sales team is focused on customer engagement and performance-based media strategies. Our marketing activities focus on increasing the volume of leading indicators, including new resident inquiries and tours, so that potential residents and their families can effectively evaluate our portfolio of services.  

Grow. Our strategy is focused on organic growth through existing community advancement. We continue to be positioned to provide competitive residential rates and flexible product offerings.  Our portfolio is situated in markets where positive demographic trends exist with respect to executive officers ofpopulation growth, income growth, and increased chronic medical conditions relative to the Company is included under the heading “Information about Our Executive Officers and Other Key Employees” at the end of Item 175+ age group.  

Recent Developments

COVID-19 Pandemic

The COVID-19 global pandemic was declared a public health emergency in the Original Filing. The namesUnited States in the first quarter of our directors, their ages2020 and, as of the date of this Amendment,Annual Report on Form 10-K, the United States continues to experience the substantial impacts of COVID-19, which has significantly disrupted the nation’s economy, the senior living industry, and our business.

In December 2020, we initiated the first round of COVID-19 vaccinations at all of our communities and as of February 2021, subsequent to year-end, we completed first-round vaccine clinics at 100% and second-round vaccine clinics at 68% of our communities. In communities that have completed second-round vaccine clinics, 75% of our residents and 34% of our staff have received both doses of the COVID-19 vaccine and are fully vaccinated.  As of February 2021, subsequent to year-end, COVID-19 incidence rates have declined across our portfolio, and leading indicators, such as leads and tours, are at their highest levels since March 2020, indicating that demand for senior housing and services is beginning to rebound.

We are determined to achieve market differentiation through our response to the COVID-19 pandemic by utilizing our digital tools and social media to continue to foster leads, tours and family communications.  Further, our senior leadership team has a deep experience in high-acuity settings, which provides us with the key fundamentals to take quick and accurate actions in response to the COVID-19 pandemic, by promptly implementing appropriate infection controls in all of our properties, supporting our patients with care and helping to mitigate the negative impact of COVID-19.

During the COVID-19 pandemic, we were also successful in the early procurement of personal protective equipment (“PPE”) and sterilization supplies, which enabled us to set up quick-access supply hubs to support our geographical regions.  We responded with real-time operational adjustments to support a consistent resident service model, despite the rapidly changing and challenging senior living environment.

During 2020, we incurred significant additional operating costs and expenses in order to implement enhanced infection control protocols and enhanced care for our residents. For example, we incurred substantial costs for procurement of additional PPE, cleaning and disposable food service supplies, enhanced cleaning, infection control, environmental sanitation costs, and increased labor expenses for hazard pay at certain communities with COVID-19 positive residents. We have also incurred costs related to COVID-19 testing of our residents and our employees. In total, we incurred approximately $9.4 million in incremental COVID-19 costs in fiscal year 2020. We expect to continue to incur such incremental costs until the COVID-19 pandemic significantly subsides. To mitigate these new costs, we have reduced spending on non-essential supplies, travel, and other informationdiscretionary items.

In November 2020, we accepted $8.1 million of Phase 2 Provider Relief funds under the Coronavirus Aid, Relief and Economic Security Act of 2020 (“CARES Act”), which are intended to reimburse the Company for COVID-19 related costs and lost revenue.  The $8.1 million Phase 2 Provider Relief Funds have been recorded as a reduction to operating expenses in the Consolidated Statements of Operations and Comprehensive Loss for the year ended December 31, 2020. We received an additional $8.7 million in the first quarter of 2021, subsequent to year-end, under the CARES Act Phase 3 and expect to fully recognize Phase 3 funds in 2021. The CARES Act Phase 2 and Phase 3 funds are grants that do not have to be repaid provided we satisfy the terms and conditions of the CARES Act. We are also utilizing the payroll tax deferral program under the CARES Act and delayed the employer portion of payroll taxes, totaling $7.4 million from, April 2020 through December 2020. One-half of the deferred payroll taxes, which amounted to $3.7 million, will be due by December 2021, with the other half due by December 2022.

CARES Act Provider Relief Funds are subject to the terms and conditions of the program, including stringent restrictions that funds may only be used to reimburse COVID-19 related expenses or lost revenue that are attributable to COVID-19 and have not been reimbursed from other sources or that other sources are not obligated to reimburse. While we intend to pursue additional funding that may become available, there can be no assurances that we will qualify for, or receive, any additional relief funds in the future.

Going Concern and Related Strategic and Cash-Preservation Initiatives

As noted elsewhere in this Annual Report on Form 10-K, due to the impact of COVID-19 on our financial position and our upcoming debt maturities, our management concluded as of December 31, 2020 that there is substantial doubt about themour ability to continue as a going concern. We have implemented plans, which includes strategic and cash-preservation initiatives, which are set forth below.designed to provide us with adequate liquidity to meet our obligations for at least the 12-month period following the date our fiscal year 2020 financial statements are issued. See “Note 2- Going Concern Uncertainty.”

We have taken, and continue to take, actions to improve our liquidity position and to address the uncertainty about our ability to operate as a going concern, but these actions are subject to a number of assumptions, projections, and analyses. If these assumptions prove to be incorrect, we may be unsuccessful in executing our business plans or achieving the projected results, which could adversely impact our financial results and liquidity. Those plans include various cost-cutting, efficiency and profitability initiatives. There are no family relationships among anyassurances such initiatives will prove to be

successful or the cost savings, profitability or other results we achieve through those plans will be consistent with our expectations. As a result, our results of operations, financial position and liquidity could be negatively impacted. In particular, if we are unable to extend or refinance our directorsindebtedness, including our maturing bridge loans, prior to scheduled maturity dates, our liquidity and financial condition could be adversely impacted. Even if we are able to extend or executive officers.refinance such indebtedness, the terms of the new financing may not be as favorable to us as the terms of the existing financing. If we become insolvent or fail to continue as a going concern, our common stock may become worthless.

DirectorsReverse Stock Split

OurOn December 9, 2020, the Company’s Board of Directors approved and effected a reverse stock split (the “Board”“Reverse Stock Split”) is currently divided into three classes andof the Company’s common stock at a ratio of 1-for-15. The Reverse Stock Split reduced the number of directors: Class I (terms expire at 2022 annual meeting), Class II (terms expire at 2020 annual meeting)issued and Class III (terms expire at 2021 annual meeting).outstanding shares of common stock from approximately 31,268,943 shares to approximately 2,084,596 shares. The Board had previously fixed the authorized number of directorsshares of common stock was also proportionately reduced from 65,000,000 shares to 4,333,334 shares.  All share amounts for the years ended December 31, 2019 and 2018 have been recast to give effect to the 1-for 15 Reverse Stock Split.

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 seniors who require limited services, independent living residences, supplemented at tentimes by home health care, offers a viable option. Most independent living communities typically offer community living packaged with basic services consisting of meals, housekeeping, laundry, 24-hour staffing, transportation, social and followingrecreational activities and health care monitoring. Independent living residents typically are not reliant on assistance with activities of daily living (“ADLs”), although some residents may utilize outside vendors 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 residents with ADLs such as ambulation, bathing, dressing, eating, grooming, personal hygiene and monitoring, or assistance with medications. Certain assisted living communities may also provide assistance to residents with low acuity medical needs.  Others may offer higher levels of personal assistance for residents with chronic diseases and conditions or memory care services for residents with Alzheimer’s disease or other cognitive frailties. Generally, assisted living residents require higher levels of care than residents of independent living residences but require lower levels of care than patients in skilled nursing facilities. For seniors who need the prior resignationconstant attention of a Class I director, we had nine directors and one vacant Board seat.skilled nurse or medical practitioner, a skilled nursing facility may be required.

The Board determinedsenior living industry is highly fragmented and characterized by numerous small operators. Moreover, the scope of senior living services varies substantially from one operator to rebalanceanother. Many smaller senior living providers do not operate purpose-built residences, do not have extensive professional training for staff and provide only limited assistance with ADLs. We believe that, as one of the nation’s leading owner-operators, we have the scale and resources needed to 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, whereas smaller providers do not.

We believe 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

We believe that senior housing communities are the setting preferred by many prospective residents and their families for the care of the senior population. Senior living offers residents greater independence and allows them to “age in place” in a residential setting, which we believe 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 directorsAmericans living alone. This growth in the number of seniors 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

Our portfolio is strategically positioned in (i) attractive, high-growth middle income demographic geographies and (ii) regions where the number of new senior living units needed will continue to grow as a result of the projected increase in the number of chronic conditions in the senior population.

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. We believe that a substantial portion of the senior population has historically accumulated significant resources available for their retirement and long-term care needs. Our target population is comprised of middle market seniors who have, either directly or indirectly through familial support, the financial resources to afford and pay for senior housing 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. We believe that a reduction in the availability of family care-givers, the reduction of average family size, and overall increased mobility in society is reducing the role of the family as the traditional and primary caregiver for aging parents. We believe that these factors will make it necessary for many seniors to look outside the family for assistance 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 certain capital expenditures, a state agency must determine that a need exists for the new beds or the proposed activities. We believe 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 continuing 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, we believe 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 our senior housing communities, including our 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 attempting 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 aging 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 one-fourth of the cost for comparable care in a nursing home and two-thirds of the cost of living at home with a third-party home health care provider.

Senior Living Services

We provide senior living services to residents aged 75 and greater, including independent living, assisted living, and memory care services. By offering a variety of services and encouraging the active participation of each Board classresident and such resident’s family and medical professionals, we are able to customize our service plan to meet the specific needs and desires of each resident. As a result, we believe that we are able to maximize customer satisfaction and avoid the cost of delivering unnecessary services to residents.

Our operating philosophy is to provide quality senior housing communities and services to senior citizens and deliver a continuum of care for our residents as their needs change over time in coordination with third party post-acute care providers. This continuum of care, which integrates independent living, assisted living, and memory care services,

and which is bridged by home care, sustains each resident’s autonomy and independence based on their physical and mental abilities. In many of our communities, as residents age, 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.

Our lease agreements with our independent living residents are generally for a term of one year and, under certain circumstances, are typically terminable by us or the resident upon providing 30 days’ notice, unless state law stipulates otherwise.

Independent Living Services

We provide 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. Independent living services provided by us include daily meals, transportation, social and recreational activities, laundry, housekeeping and 24-hour staffing. We also foster the wellness of our residents by offering access to health screenings (such as blood pressure checks), periodic special services (such as influenza inoculations), dietary and similar programs, and ongoing exercise and fitness classes. Classes are given by health care professionals to keep residents informed about health and disease management. Subject to applicable governmental regulations, personal care and medical services are available to independent living residents through either the community staff or through independent home care agencies. Our independent living residents generally pay an average monthly rent of approximately $2,500, depending on the specific community, program of services, size of the residential unit and the extent of included amenities.

Assisted Living Services

We offer a wide range of assisted living care and services, including personal care services, 24-hour staffing, support services, and other supplemental services, including memory care services at some communities (as described below). The residents at our assisted living residences generally need help with some or all ADLs, but do not require the more acute medical care traditionally provided in nursing homes. Upon admission to our 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 lifestyle assessment to determine the resident’s preferences. From these assessments, a care plan is developed for each resident so that all staff members who render care can meet the specific needs and preferences of each resident, where possible. Each resident’s individual care plan is reviewed periodically to determine whether a change in the level of care is needed.

We have 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 us include:

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.

Our assisted living residents generally pay an average monthly rent of approximately $3,800, depending on the specific community, the level of personal care services, support service and supplemental services provided to the resident, size of the residential unit and the extent of included amenities.

Memory Care Services

We maintain programs and special living accommodations at some of our 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 the resident’s remaining functional abilities. Special living accommodations for residents with certain forms of dementia are located in a separate area of the community with its 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 within a secure area with a minimum amount of disruption from other residents. Resident fees for these programs and special living accommodations are dependent on the level of services provided.

In January 2021, subsequent to year-end, we announced our new memory care program, Magnolia Trails, which was developed to meet the growing need for individualized programming for residents receiving memory care services. The program is designed to engage the five senses to create calming yet stimulating spaces and tailored care plans that seek to address our residents’ changing and evolving needs. Each resident’s preferences and current cognitive state influences his or her experience, including, the physical layout and design of the space, dining options, programs and activities. Aspects of the program include playing light background music that aligns with the generation living in the community, caregivers wearing business casual shirts and khakis rather than uniforms or scrubs, and our team members sharing items with residents in order to equalizespark positive memories of family members or past experiences. The same responsive, sensory-focused approach is taken with dining. A dynamic menu of options is served throughout the class sizes.  Accordingly, Ross Levin agreedday in a flexible but consistent manner. Our staff members provide warm, scented washcloths before each meal and incorporate inviting, calming aromas and soft music to be redesignated fromenhance the ambiance.

Because Magnolia Trails is focused on the best way to engage each individual resident, employees learn about and incorporate each resident’s personal history and interests into their ongoing daily interactions. Comforting, hands-on activities are available, such as flower arranging, puzzles and matching games. Interactive experience stations, such as pet care, gardening and tool benches are also available.  Another hallmark of the program is an emphasis on family connections, including ongoing educational opportunities specifically designed to help family members understand dementia and aspects of the disease and our progression. All communities with the Magnolia Trails program use a Class III directorresident engagement mobile application where family members can receive real-time photos, videos and updates about their loved ones electronically.  

Our memory care residents generally pay an average monthly rent of approximately $5,100, depending on the specific community, the level of personal care services, support services and supplemental services provided to the resident, the size of the residential unit and the extent of included amenities.

Respite Care and Temporary Care Programs

Our respite care and temporary care program provides a transitional apartment for seniors who are not entirely ready to return home after a hospital or rehabilitation stay. In addition to a Class II directorfully furnished apartment, seniors enrolled in this program also have full access to our community’s amenities and was redesignatedservices, including 24/7 staffing, delicious and nutritious dining and scheduled transportation. Our flexible agreement includes a minimum two-week stay, but allows our guests to remain for any extended period of time they so choose.

Home Care Services

As of December 31, 2020, we made home care services available through third-party providers to residents living at the majority of our senior housing communities. We believe that the provision of private pay, home care services is an attractive adjunct to our independent living services because it enables us to make available more services to our residents as they age in place and increases the length of stay in our communities. In addition, we make certain customized physician, dentistry, podiatry and other health-related rehabilitation and therapy services available to our residents through third-party providers.

Operating Communities

The table below sets forth certain information with respect to the senior housing communities we operated as of December 31, 2020.

Operations Overview

We believe that the fragmented nature of the senior living industry and the limited capital resources available to many small, private operators provide us with an attractive opportunity for competitive differentiation. We believe that our current operations with geographic concentrations throughout the United States and centralized support infrastructure serve as the foundation on which we can build senior living networks in targeted geographic markets and thereby provide a broad range of high-quality care in a cost-efficient manner. Our operating strategy includes the following core principles:

Provide a Broad Range of Quality Personalized Care

Central to our operating strategy is our focus on providing quality care and services that are personalized and tailored to meet the individual needs of each community resident. Our residences and services are designed to provide a broad range of care that permits residents to thrive and “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, we seek to attract seniors at an earlier stage, before they need the higher level of care provided in a skilled nursing facility.

Portfolio Optimization

We intend to continue to focus on our occupancy, rents and operating margins of our communities. We continually seek 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 Boarduse of technology, including enhanced digital marketing through social media and other electronic means, and on-site marketing programs focused on residents and family members; (iii) seeking referrals from senior care referral services and professional community outreach sources, including local religious organizations, senior social service programs, civic and business networks, as well as the medical community; (iv) disposing of properties or exiting management agreements of properties that do not meet our long-term goals; and (v) continually refurbishing and renovating our communities.

Offer Services Across a Class III directorRange of Pricing Options

Our range of products and services is continually expanding to meet the evolving needs of our residents. We have developed a menu of products and service programs that may be further customized to serve the middle-income market of a particular targeted geographic area. By offering a range of pricing options that are customized for each target market, we believe that it can develop synergies, economies of scale and operating efficiencies in our efforts to serve a larger percentage of the senior population within a particular geographic market.

Management Services

As of December 31, 2020, we managed 12 communities on behalf of third parties and, under our existing management arrangements, we receive management fees that are determined by an agreed-upon percentage of gross revenues (as defined in the management arrangement), as well as reimbursed expenses, which represent the reimbursement of certain expenses we incur on behalf of the owners.

Improve Operating Efficiencies

We seek to improve operating efficiencies at our communities by actively monitoring and managing operating costs and by moving to a Class II directormore centralized operating platform. By having an established portfolio of communities in geographically concentrated regions throughout the United States with regional management teams in place, we believe we have established a platform to stand for electionachieve 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 provide more effective management supervision and financial controls.

Centralized Management

We centralized our corporate and other administrative functions so that the community-based management and staff can focus their efforts on resident care. We maintain centralized accounting, finance, legal, human resources, training and other operational functions at our support center located in Dallas, Texas (“the 2020 annual meeting of the Company’s stockholders.  The Board also resolvedDallas Support Center”). Our Dallas Support Center is generally responsible for: (i) establishing Company-wide policies and procedures relating to, reduce the number of directors from tenamong other things, resident care and operations; (ii) performing accounting and finance and legal related functions; (iii) developing employee training programs and materials; (iv) coordinating human resources; (v) coordinating marketing functions; and (vi) providing strategic direction.

We seek to nine.  As a result of such changes, the Board currently consists of nine directors with three directors in each of Classes I, II and III.

In December 2019, the Board unanimously approved and declared advisable, and determined to recommend that our stockholders approve, amendments to the Fifth Article of our Amended and Restated Certificate of Incorporation, as amended, to implement a path to declassify the Board such that, if approved by our stockholders, we will hold annual elections of all directors beginning with the 2023 annual meeting of stockholders.

Set forth below is information concerning the age, principal occupation and employment during the past five years, other directorships and positions with the Companycontrol operational expenses for each of our communities through proprietary expense management systems, standardized management reporting and centralized controls of capital expenditures, asset replacement tracking, and purchasing larger and more frequently used supplies and food inventories through group purchasing programs. Community expenditures are monitored by territory directors includingand vice presidents who are accountable for the year in which he or she first became a directorresident satisfaction and financial performance of the Companycommunities in their territory.

Territory Management

We provide oversight and hissupport to each of our senior housing communities through experienced territory directors and vice presidents. A territory director will generally cover a geographic area consisting of eight to ten communities.

The executive director at each community reports to a territory director or her termvice president, who in turn reports to our Chief Operating Officer.  Territory directors and vice presidents make regular site visits to each of officetheir assigned communities. Site visits involve a physical plant inspection, quality assurance review, staff training, financial and systems audits, regulatory compliance, and team building activities.

Community-Based Management and Retention

We devote special attention to the hiring, screening, training, supervising and retention of our employees and caregivers to ensure that quality standards are achieved. In addition to normal on-site training, we conduct national management meetings and encourage sharing of expertise among managers. We have also implemented a comprehensive online training program that addresses the specific challenges of working within the senior living environment. Our commitment to the total quality management concept is emphasized throughout our training programs. This commitment to the total quality management concept emphasizes the identification of the “best practices” in the senior living market and communication of those “best practices” to our executive directors and their staff. The identification of best practices is realized by a number of means, including: (i) emphasis on territory and executive directors keeping up with professional trade publications; (ii) interaction with other professionals and consultants in the senior living industry

through seminars, conferences and consultations; (iii) visits to other properties; (iv) leadership and participation at national and local trade organization events; and (v) information derived from marketing studies and resident satisfaction surveys. This information is continually processed by territory directors and the executive directors and subsequently communicated to our employees as part of their training.

An executive director manages the day-to-day operations at each senior housing community, which includes maintaining oversight of the quality of care, delivery of resident services, sales and marketing, and monitoring of the community’s financial performance. Depending on the size of the community, the executive director is typically supported by a community-based leadership team consisting of a sales director, wellness director, and business director.  However, the executive director is ultimately responsible for all personnel, including food service, maintenance, activities, security, housekeeping, and, where applicable, assisted living 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 our senior housing communities is managed by licensed professionals, such as a director.

Philip A. Brooks has beennurse and/or a director since 2010. Mr. Brooks has morelicensed administrator. These licensed professionals have many of the same operational responsibilities as our executive directors, but their primary responsibility is to oversee resident care. Many of our senior housing communities are part of a campus setting, which may include independent living, assisted living and/or memory care. 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 31 yearsfreestanding facilities.

We actively recruit qualified personnel to maintain adequate staffing levels at our communities. We have adopted comprehensive recruiting and screening programs for management positions that utilize corporate office team interviews and thorough background and reference checks. We offer system-wide training and orientation for all of experience asour employees at the community level through a financiercombination of Company-sponsored seminars and investor, credit manager,conferences.

Quality Assurance

Quality assurance programs are coordinated and product/policy analyst. With extendedimplemented by our corporate and regional staff. Our quality assurance is targeted to achieve maximum resident and resident family member satisfaction with the care and services that we deliver. Our primary focus on seniors housingin quality control monitoring is to create and healthcare, he has provided $5 billionmaintain a safe and supportive environment for our residents and families, which includes routine in-service training and performance evaluations of operatingcaregivers and property capital for this sector. He isother support employees. We have established a principal investorCorporate Quality Assurance Committee, which consists of the Executive Vice President and managing partner in Select Living, LLC, which acquires properties to develop to special market dynamics. He is a portfolio advisor to NRV, a venture capital firm funding early stage growth companies in Virginia. Previously, Mr. Brooks served as aChief Operating Officer, Vice Presidents of Operations, Vice President of Clinical Operations, Senior Vice President, Loan Production for Walker & Dunlop, LLC, a NYSE-listed provider of financial services for ownersPresident- Human Resources, Quality and developers of commercial real estate throughout the United States. Prior to Walker & Dunlop, LLC, from February 2011, Mr. Brooks served asClinical Directors, and Senior Vice President, Loan Production for CWCapital, LLC, a mortgage finance company, which was acquired by Walker & Dunlop, LLC in September 2012. From 1996 to October 2010, Mr. Brooks served in various senior executive positions with Berkadia Commercial Mortgage, LLC, a national mortgage bank, which was previously known as Capmark Finance Inc. and GMAC Commercial Mortgage. He was a founding memberPresident- General Counsel. The purpose of the American Seniors Housing Association,committee is to monitor and evaluate the processes by which care is delivered to our residents and the appropriateness and quality of care provided within each of our communities. Additional quality assurance measures include:

Resident and Resident’s Family Input.    On a leading trade association promoting seniors housing,routine basis, we provide residents and wastheir family members with 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 the Board of Directors of the National Investment Center for the Seniors Housing & Care Industry, a leading trade association promoting the industrymonthly basis to offer input and suggestions as to the capital markets. Mr. Brooks also servesquality and delivery of services.

Regular Community Inspections.    Each community is inspected in person, on at least a director of the Virginia Council on Economic Education and the Virginia Community Development Corporation.

Ed A. Grier has been a director since 2016. Mr. Grier has been the Dean of the Virginia Commonwealth University (“VCU”) School of Business since March 2010. Prior to joining VCU, Mr. Grier spent approximately 29 years with the Walt Disney Company (“Disney”) beginning in 1981. He served as the President of the Disneyland Resort from 2006 until 2010 and held various senior financial and operational roles during his career with Disney. Mr. Grier serves as a director of NVR, Inc., a NYSE-listed

residential homebuilding company which operates in two business segments: homebuilding and mortgage banking (“NVR”), and asquarterly basis, by a member of the audit committee of NVR’s board of directors. Mr. Grier served as a director of the Middleburg Trust Company, a provider of wealth management services and a division of Access National Corp. (NADAQ: ANCX), until the consummation of its merger with and into Union Bankshares Corporation in February 2019.  He isregional and/or operational leadership team, which are also a director of Witt/Kieffer, an executive search firm. In addition, Mr. Grier serves on the boards of the Greater Richmond Chamber of Commerce, The Colonial Williamsburg Foundation and ChildFund International and serves as a trustee for Brandman University. Mr. Grier is also a Certified Public Accountant.

E. Rodney Hornbake, M.D. has been a director since 2011. Dr. Hornbake is currently serving as a part-time physician at a safety net clinic and as a consultant to various hospitals, medical groups and law firms across the country. Dr. Hornbake has served as the Medical Director of the Wheeler Clinic, a multisite provider of medical and other services in Connecticut. Dr. Hornbake formerly served as the Managing Partner of Essex Internal Medicine, a private practice of internal medicine and geriatrics, that he formed in 2002. Dr. Hornbake served as Senior Vice President and Chief Medical Officer of Gentiva from March 2000 to April 2002. Gentiva was spun-off from Olsten Corporation, a staffing services company, that Dr. Hornbake joinedsupplemented by virtual site visits. Included as part of this inspection is the monitoring of the overall appearance and maintenance 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 activities and the community’s compliance with governmental regulations.

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

Peer Review Program.      We implemented a peer review program in 2019.  For each region, a committee consisting of the top performing executive directors, sales directors, wellness directors, maintenance directors, and dietary directors visit other communities within the region to evaluate the performance of their peers at the community and share best practices.  Due to the COVID-19 pandemic, the peer review program was paused as of March 2020. In 2021, this program will be reviewed, and an appropriate time to re-engage will be determined based on, among other factors, the rates of COVID-19 instances within each territory or community.

Sales and Marketing

Most communities are staffed with on-site sales directors, depending on size and occupancy status. The primary focus of the on-site sales director is to perpetuate occupancy and revenue growth by creating awareness about the community and its management team in 1999. Dr. Hornbake also served as Medical Director of Care Centrix, a home care benefits management company, from November 1999 until 2002,services among prospective residents and he continued to servetheir family members, professional referral sources and other key decision makers. These efforts are outlined in a consulting rolestrategic plan that includes monthly, quarterly and annual goals for leasing, new lead generation, prospect follow up, community outreach, resident and family referrals and promotional events, and a market-specific media program.  The community sales director performs a competing community assessment on a quarterly basis. 

Each sales director’s effectiveness and productivity is monitored on a weekly basis.  The corporate sales and marketing team supports communities by developing marketing strategies and campaigns to Care Centrixaddress the continuously-changing resident profile, build brand awareness and increase digital traffic and leads. The marketing strategies focus on driving traffic to our website, national referral partners, review sites and social media platforms. To support this, the corporate marketing team develops content, marketing collateral and messaging, manages digital ad buys and provides ongoing sales and marketing training, support and best practices.  

Governmental 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 our operations. Failure by us to comply with any applicable regulatory requirement could have a material adverse effect on our business, financial condition, cash flows, and results of operations. Accordingly, we regularly monitor legal and regulatory developments on local, state and national levels.

The health care industry is subject to extensive regulation and frequent regulatory changes. 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 our assisted living communities are subject to regulation, licensing, and permitting requirements by state and local health care and social service agencies and other governmental regulatory authorities. While such requirements vary from 2002state to 2010. Dr. Hornbake previously servedstate, they typically relate to staffing, training, physical design, patient privacy, required services and the quality thereof, and resident characteristics. We believe that such regulation will increase in the future. In addition, health care providers are experiencing heightened scrutiny under anti-trust laws in the United States as Vice Presidentintegration and Medical Directorconsolidation of health care delivery increases and affects competition. Moreover, robust state and federal enforcement of fraud and abuse laws continues. Because some of our communities receive a portion of their funds from Medicaid, such communities are also subject to state and federal Medicaid standards, the noncompliance with which could result in the imposition of, among other things, penalties and sanctions and suspension and exclusion from participation in the Medicaid program. Our communities are also subject to various zoning restrictions, local building codes, and other ordinances, such as fire safety codes. Failure by us to comply with any applicable regulatory requirements could have a material adverse effect on our business, financial condition, and results of operations. Regulation of the North Shore-LIJassisted living industry is also continually evolving and we are unable to predict the scope, content or stringency of new regulations and their ultimate effect on our business. There can be no assurance that our operations will not be materially and adversely affected by regulatory developments in the future.

While we believe that our communities are in substantial compliance with applicable regulatory requirements, unannounced surveys or inspections may occur annually or bi-annually, or following a regulator’s receipt of a complaint about a community, any of which could result in a citation of deficiency. In the ordinary course of business, one or more of our communities could be cited for deficiencies resulting from such inspections or surveys from time to time. Although most inspection deficiencies are typically resolved through an agreed-upon plan of corrective action relating to the community’s operations, 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, repayment of amounts previously paid, 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 existing loan agreements

and/or trigger cross-defaults. Sanctions may be taken against providers or facilities without regard to the particular provider’s or facility’s history of compliance. We may also expend considerable resources to respond to federal and state investigations or other enforcement actions under applicable laws or regulations. 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 applicable legal and regulatory requirements could result in a material adverse effect on our business, financial condition, and results of operations 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 our residents do not receive federal or state funds.

Under the Americans with Disabilities Act of 1990, all places of public accommodation are required to meet certain 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 properties to permit access to the properties by disabled persons. While 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 SystemInsurance Portability and Accountability Act of 1996 (“HIPAA”), in New Yorkconjunction with the federal regulations promulgated thereunder by the U.S. Department of Health and Human Services, has established, among other requirements, standards governing the privacy and security 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 1996civil money penalties for errors and negligent acts to 1999, as Chief Medical Officercriminal fines and imprisonment for Aetna Professional Management Corporationknowing and intentional misconduct. In addition, we may from 1994time to 1996,time be subject to a corrective action plan, and as Chiefthe cost associated with complying with any such corrective action plan could be significant.

In addition, we are subject to various federal, state and local environmental laws and regulations, which could require an owner or operator of Medicinereal estate to investigate and clean up hazardous or toxic substances present at or migrating from properties they own, lease, or operate. Such laws and regulations often impose liability whether or not the owner or operator knew of, or was actually responsible for, the Park Medical Group/Park Ridge Health System in New York from 1993presence 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 1994. Dr. Hornbake servedany property is generally not limited under such laws and regulations.  Liabilities could exceed the property’s value and the aggregate assets of the owner or operator. The presence of these substances or the 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 Clinical Assistant Professorcollateral. Under these laws and regulations, an owner, operator or an entity that arranges for the disposal of Medicinehazardous or toxic substances, such as asbestos-containing materials, at a disposal site may also be liable for the costs of any required remediation or removal of the hazardous or toxic substances at the Universitydisposal site. In connection with the ownership or operation of Connecticut from August 2002 to 2010 and as an Associate Professor (Adjunct) of Hofstra University from 1998 to 2004. Dr. Hornbake served on the board of Equity Health Partners, a privately-held start-up technology company, from 2008 until 2012, and he served on the Commission on Office Laboratory Accreditationour properties, we could be liable for ten years, including two years as its Chairman.

Paul J. Isaac has been a director since March 2017. Mr. Isaac is the founder and CEO of Arbiter Partners Capital Management LLC. Mr. Isaac has been actively investing on behalf of himself and others for over forty years. Prior to founding Arbiter Partners, Mr. Isaac managed equity and debt portfolios directly; researched and employed outside managers; analyzed and invested in alternative strategies; and provided investment strategy consulting to investors. He also has a broad range of sell side experience, including eighteen years of managerial experience in the securities industry, spent at Mabon, Nugent & Co. and its successor firms. During that time, he developed and ran the firm’s training programthese costs, as well as managed the firm’s municipal, government, mortgage-backedcertain other costs, including governmental fines and high yield bond departments. He served as Chief Economist and chaired the firm’s commitments and credit committees. During his time at Mabon, Mr. Isaac also spent a time as Chairmaninjuries to persons or properties. We have completed Phase I environmental audits of substantially all of the Securities Industry Association Capital Rules Committee. Mr. Isaac currently serves as a director of Irex Corporation (North Lime Holdings). Mr. Isaac is Treasurer, Trustee and a member of the Executive Committee for PEF Israel Endowment Funds Inc. Mr. Isaac graduated from Williams College with Highest Honorscommunities in Political Economy and was a Thomas J. Watson Foundation Fellow.

Jill M. Krueger has been a director since 2004. She is the founding President and Chief Executive Officer of Symbria, Inc., and its affiliates, a leading national developer and provider of innovative, outcome-driven programs established in 1995 that enhance the lives of the geriatric population. Under Ms. Krueger’s leadership, Symbria has grown from $300,000 in revenue to more than $130 million with a workforce of nearly 2,000 employees. In 2015, she led Symbria’s transition to an Employee Stock Ownership Plan (ESOP) company. She also serves on the Board of Directors, Audit Committee and Compensation Committee of iMedia Brands, Inc., and is a member of the Board of Directors of the American Board of Post-Acute and Long-Term Care Medicine. Before she joined Symbria, Ms. Krueger was a partner at KPMG LLP responsible for overseeing the firm’s national Long-Term Care and Retirement Housing Practice. She served as a public commissioner for the Continuing Care Accreditation Commission and as a member of its financial advisory board. Ms. Krueger is a Certified Public Accountant and a Certified Management Accountant.

Ross B. Levin has been a director since March 2017. Mr. Levin, CFA, is the Director of Research for Arbiter Partners Capital Management LLC and a principal in the firm. Mr. Levin serves on the board of directors of Stereotaxis Inc. Mr. Levin is a former board member of Mood Media Corporation, American Community Properties Trust and Presidential Life Corporation. Mr. Levin is also chairman of the board of directors of Constructive Partnerships Unlimited, a nonprofit organization providing services and programs for people with developmental disabilities, and former vice chairman of the board of the Cerebral Palsy Associations of New York State. Mr. Levin is a member of the New York Society of Securities Analysts and a CFA charter holder. Mr. Levin holds a Bachelor of Science degree in Management with a concentration in Finance from the A.B. Freeman School of Business at Tulane University and has completed the Investment Decisions and Behavioral Finance programwhich we own interests, typically at the John F. Kennedy Schooltime of Government at Harvard University.

Kimberly S. Lody has been a director since 2014. Prior to her employment on January 7, 2019 as Chief Executive Officeracquisition, and President of the Company, Ms. Lody served as North America President and Senior Vice President of GN Hearing, a global manufacturer of hearing instruments and hearing protection devices, beginning in 2011. Ms. Lody led the strategic direction and daily execution of GN Hearing in North America while providing a portfolio of products and services to hearing healthcare professionals and their patients. Under Ms. Lody’s leadership, the North American business of GN Hearing experienced substantial growth in both revenue and profitability. Ms. Lody has over 26 years of senior management experience in a variety of clinical and commercial health care settings, including health insurance, durable medical equipment, home healthcare, infusion therapy, respiratory therapy, specialty

pharmaceuticals, and medical devices. Ms. Lody’s primary focus and expertise has been in developing and executing strategic growth initiatives, including business development, revenue cycle enhancement, sales performance management, M&A activities, and branding and communications. Ms. Lody received a Master of Business Administration degree from Wake Forest University and a Bachelor of Arts degree in business administration from Hiram College. She is Vice-Chairman of the board of the Hearing Industries Association, and serves as an advisor to Salus University’s Osborne College of Audiology.

Steven T. Plochocki has been a director since 2019. Mr. Plochocki previously served as Director and Chief Executive Officer of Quality Systems, Inc. (now NextGen Healthcare, Inc., NASDAQ: NXGN) from August 16, 2008, and also as its President from January 25, 2012, until his retirement in June 2015. From February 2007 to May 2008, he served as Chairman and Chief Executive Officer of Omniflight Helicopters, Inc., a Dallas-based air medical services company. From October 2006 to February 2007, Mr. Plochocki was a private healthcare investor. He previously served as Chief Executive Officer and Director of Trinity Hospice, a national hospice provider, from October 2004 through October 2006. Prior to joining Trinity Hospice, Mr. Plochocki was Chief Executive Officer of InSight Health Services Corp., a national provider of diagnostic imaging services, from November 1999 to August 2004. Prior to joining InSight Health Services Corp., he was Chief Executive Officer of Centratex Support Services, Inc., a support services company for the healthcare industry, and Mr. Plochocki had previously held other senior level positions with healthcare industry firms. Mr. Plochocki holds a B.A. in Journalism and Public Relations from Wayne State University and a Master’s degree in Business Management from Central Michigan University.

Michael W. Reid has been a director since October 2009 and has served as Chairman of the Board since 2016. Mr. Reid serves as managing partner at HSP Real Estate Group, a real estate investment and management company that manages and leases 4 million square feet in Midtown Manhattan. Mr. Reid was formally a member of the Board of Directors and the Chairman of the Audit Committee of Inland Residential Properties Trust, Inc., a real estate investment trust formed in December 2013 to acquire multifamily properties located in metropolitan areas throughout the United States, until 2019. Mr. Reid has nearly 36 years of investment banking and real estate experience, including heading Lehman Brothers REIT equity practice for nine years (from 1992 to 2001) as Managing Director in the Global Real Estate Department. In that capacity, he was responsible for developing and implementing the business strategy for its REIT equity underwriting business. Mr. Reid also served as Chief Operating Officer at SL Green Realty Corp. from 2001-2004, where some of his responsibilities included strategic planning, finance and reporting, capital markets, operations and budgeting for a $4 billion publicly-traded REIT. From 2004-2006, he served as President of Ophir Energy Corp., a company that invested in oil and gas production in Oklahoma. From 2006-2008, he served as Chief Operating Officer of Twining Properties, a real estate company specializing in high rise development in Cambridge, Massachusetts. Mr. Reid holds a Bachelor of Arts and Master of Divinity, both from Yale University.

Audit Committee

Wesuch audits have a separately-designated standing Audit Committee established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Audit Committee consists of Ms. Krueger (chair) and Messrs. Brooks, Grier and Levin, each of whom is “independent” as defined by the listing standards of the New York Stock Exchange in effectnot revealed as of the date of this Amendment. The Board has determinedAnnual Report on Form 10-K any material environmental liabilities that Ms. Krueger qualifiesexist with respect to these communities.

Under various U.S. 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 or migrating from 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. We are not aware, as an “audit committee financial expert” withinof the meaningdate of SEC regulations.

Delinquent Section 16(a) Reports

Basedthis Annual Report on a reviewForm 10-K, of reports filed by our directors, executive officers and beneficial holders of 10% or more of sharesany environmental liability with respect to any of our common stock,owned, leased or managed communities that we believe would have a material adverse effect on our business, financial condition, or results of operations. We believe that our communities are in compliance in all material respects with all federal, state and upon representationslocal laws, ordinances and regulations regarding hazardous or toxic substances or petroleum products. We have not been notified by any governmental authority, and are 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 we currently operate.

We are subject to U.S. federal and state laws, regulations and executive orders relating to healthcare providers’ response to the COVID-19 pandemic, which vary based on provider type and jurisdiction, but generally include mandatory requirements for testing of residents and staff, implementation of infection control standards and procedures, restrictions on new admissions or readmissions of residents, required screening of all persons entering a community, restrictions and/or limitations on who may visit residents and how residents may be visited, and mandatory notification requirements to residents, families, staff, and regulatory bodies related to positive COVID-19 cases. Enhanced or additional penalties may apply for violation of such requirements.

We believe that the structure and composition of government and, specifically, health care regulations will continue to change and, as a result, we regularly monitor material developments and changes in the law that impact our business. We expect to modify our agreements and operations from time to time as the business and regulatory environments change. While we believe we will be able to structure all our agreements and operations in accordance with applicable law, there can be no assurances that our arrangements will not be successfully challenged. These requirements include additional penalties that may apply for violation of such requirements.

Competition

The senior living industry is highly competitive.  Due to the relatively low barriers of entry into the senior living space, we expect that all segments of the industry will become increasingly competitive in the future. Although there are a number of substantial companies fairly active in the senior living industry and in the markets in which we operate, the industry continues to be very fragmented and characterized by numerous small operators. We primarily compete with national operators and other regional and local independent operators. We believe that the primary competitive factors in the senior living industry are: (i) quality on-site staff; (ii) location; (iii) reputation of, and commitment to, a high quality of service; (iv) support service offerings (such as food services); (v) fair pricing for services provided; and (vi) physical appearance and amenities associated with the communities. We compete with other companies providing independent living, assisted living, skilled nursing, home health care, and other similar service and care alternatives, some of which may have greater financial resources than us. Because prospective residents tend to choose senior housing communities in close proximity to their homes, our principal competitors are other senior living and long-term care communities in the same geographic areas as our communities. 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 that are critical to our business.

Human Capital Resources

We know that our people are at the center of everything we do.  They work individually and collectively each day to provide safety, wellness, care, and service to our residents.  As of December 31, 2020, we employed 3,416 persons (89 of whom are employed at our Dallas Support Center), of which 2,404 were full-time employees and 1,012 were part-time employees.

Our Culture

Our culture is the most important connection between all people at Capital Senior Living and is rooted in inclusion, respect, accountability, service, and deep care for each other and for those persons,we serve.  To create this environment, we focus on attracting, engaging, developing, and retaining the very best talent available in each of our markets by maintaining a compelling value proposition for each employee that includes a great work environment, excellent leadership, aligned pay and benefits, career development, and meaningful work. We have built a team with a deep sense of purpose for serving seniors and we believe that all SEC stock ownership reports required to be filed by those reporting persons during 2019 were timely made, except that Dr. Hornbake made one late Form 4 filing on March 15, 2019our engaged group enhances the resident experience each day.

Inclusion and Diversity

As we serve a diverse group of residents across several states and communities, we also strive to reflect the purchase of 10,400 sharessame diversity in our company.  We are proud to be an equal opportunity employer.  Our diversity is exhibited by the composition of our common stockworkforce with 84% female and 43% non-white employees.  We will continue to strive each day to maintain our inclusive culture through our efforts in recruiting, education, development and talent progression.

Talent Acquisition, Development, and Retention

In our efforts to attract new members to our team, we believe that a local focus, supported by our central talent team, provides the best results.  We continue to add new spaces to our recruiting landscape to ensure we are connecting with the best and brightest individuals.  For example, we utilize local Facebook pages to identify individuals for the

specific communities and geographic regions we serve.  We also utilize employee referral programs to bring great new people into our organization who already know our mission through current employees.  With a robust focus on March 12, 2019.talent acquisition, we have seen our average time to fill an open role shorten significantly in 2020.

CodeWe are proud of Business Conductour development programs that sponsor our current employees in achieving new levels of education, licensure and Ethicscredentials.  Through this approach, we support our employees’ growth while they continue to work with us in new roles, enhancing our service and care, and providing these employees with additional earning potential.

The Board has adopted a Code of Business ConductTotal Rewards

We provide fair, competitive and Ethics governingaligned compensation to all of our employees, includingpeople, which is reviewed at least annually for both merit and market-based adjustments.  Along with competitive compensation, we offer benefits that are designed to fit a wide variety of needs.  For example, our Chief Executive Officer, Chief Financial Officer, our principal accounting officerhealth plans allow participants to enter the plan at an affordable premium and corporate controller. A copy of this Code of Business Conductparticipants automatically receive unlimited free telehealth and Ethics is available in the “Corporate Governance Documents” sectionlocal retail clinic visits, along with all other benefits of the “Investor Relations” sectionplan.  This benefit provides our people quick and easy access to care at no cost to them when they need to access it.  We provide paid time off to both full-time and part-time employees to ensure they have paid time away from work.  We also offer a 401(k) plan for all eligible employees to participate in as they plan for their future.  Our total rewards design includes many other benefits that can be included at the choice of each employee based on their needs, which is our website at www.capitalsenior.com. We intendoverall strategy in providing engaging and flexible rewards to make all required disclosures concerning any amendments to, or waivers from, this Code of Business Conduct and Ethics on our website.people.            

The CompanyOur 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 Securities and Exchange Commission (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. Immediately below is a “smaller reporting company” under Item 10summary of Regulation S-K promulgatedthe principal factors that might cause our future operating results to differ materially from those currently expected. The risk factors summarized below are not the only risks facing us. Additional discussion of the risks summarized in the “Risk Factor Summary,” as well as other risks that may affect our business and operating results, can be found below under the Exchange Actheading “Risk Factors,” and has elected to comply with certain of the requirements applicable to smaller reporting companies in connection with this Amendment. Although the rules allow the Company to provide less detail about its executive compensation program, the Compensation Committee remains committed to providing the information necessary to help stockholders understand its executive compensation-related decisions.

Components of Executive Compensation

The four primary components of our executive compensation program are designed to provide a target value for compensation that is competitive with our peers and will attract and retain the talented executives necessary to execute on the Company’s strategic plan.

Base Salary

Base salary represents the only fixed component of the four primary components of our executive compensation program and is intended to provide a baseline amount of annual compensation for our named executive officers. While base salary is a major component of compensation for salaried employees, it becomes a smaller component as a percentage of total pay for executives.  In determining the base salary for our named executive officers, the Compensation Committee primarily relies upon peer group data, third party industry surveys and reports from any independent compensation consultant engaged by the Compensation Committee, other factors deemed relevant by such compensation consultant and input and recommendations from our CEO.

The following table shows the annualized base salaries of our named executive officers for fiscal 2019 and 2018.  Ms. Lody did not receive any base salary from the Company prior to her appointment as its President and Chief Executive Officer in January 2019, and as such, no base salary information is provided for Ms. Lody for fiscal 2018.

Annual Incentive Plan

Annual cash performance incentives are awarded to our named executive officers under an incentive compensation plan, which we refer to as our “Incentive Compensation Plan.” The Incentive Compensation Plan is designed to reward our named executive officers for accomplishing our 2019 Business Plan and additional compensation is awarded for performance beyond our 2019 Business Plan.

The Incentive Compensation Plan represents the Compensation Committee’s determination that, although a substantial portion of the cash performance incentive opportunity for our named executive officers should be dependent upon measurescarefully considered and evaluated before making an investment decision regarding our business. If we are unable to prevent events that are reflective of our overall financial performance, the Incentive Compensation Plan should also reward the individual contributions of each eligible named executive officer for the achievement of elements ofhave a negative effect from occurring, then our business plan thatmay suffer. Negative events are within such individual’s sphere of influence.likely to decrease our revenue, increase our costs, negatively impact our financial results and/or decrease our financial strength, and may cause our stock price to decline.

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Risk Factors Summary

Risks Related to the Incentive Compensation Plan, cash performance incentives are targeted at a pre-determined percentage of each named executive officer’s base salary for such year. These percentages are established by the Compensation Committee based upon (i) its general review of publicly-available information with respect to similar programs offered by the companies in our peer group, (ii) each officer’s ability, by virtue of his or her position with us, to exert a significant influence over the factors upon which cash performance incentives under the Incentive Compensation Plan are contingent and (iii) market analysis and reports from the compensation consultant engaged by the Compensation Committee. The target percentages in 2019 were as follows: Ms. Lody (110%), Mr. Hendrickson (70%) and Mr. Brickman (50%).

In determining the corporate and individual performance metrics under our Incentive Compensation Plan, the Compensation Committee endeavors to use metrics that drive shareholder value creation and incentivize achieving the Company’s strategic plan. The Incentive Compensation Plan metrics and weightings for 2019 were as follows: Adjusted Cash Flows from Operations (“CFFO”) per share (30%), Same Store Facility Net Operating Income (30%), Adjusted Earnings before Interest, Taxes, Depreciation, Amortization, and Rent (“EBITDAR”) (20%) and Individual Performance (20%).

Corporate Performance Goals

The table below shows the threshold, target and maximum cash bonus opportunities for our named executive officers under our Incentive Compensation Plan relating to corporate goals for 2019.  Performance below threshold level results in no payout for the applicable performance metric. Payouts are capped at the maximum level for performance that exceeds maximum goals. Payouts for performance between threshold, target and maximum levels are interpolated.

The table below shows the Company’s actual results with respect the corporate goals for 2019 under our Incentive Compensation Plan and the corresponding payout factors, if any, relating to each corporate goal.

COVID-19 Pandemic:

Individual Performance Goals

The table below shows the individual goals for our named executive officers under our Incentive Compensation Plan for 2019Risks Related to Our Liquidity and the Compensation Committee’s determination as to whether the individual goals were achieved. Based upon each named executive officer’s achievement of his or her individual goals, the Compensation Committee had discretion to award between 0% and 150% of the target cash bonus attributable to individual goals to such named executive officer.

Incentive Compensation Plan Payouts for 2019

Based upon the foregoing, the table below summarizes the payouts earned by each of our named executive officers under our Incentive Compensation Plan for 2019.

Indebtedness: