UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark one)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
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 0-13415
CONSOLIDATED RESOURCES HEALTH CARE FUND II
(Exact name of registrant as specified in its charter)
Georgia 58-1542125
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) (identification No.)
7000 Central Parkway, Suite 970, Atlanta, Georgia 30328
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 770-698-9040
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,
and (2) has been subject to such filing requirements for the past
90 days. Yes x No
THERE ARE NO EXHIBITS.
PAGE ONE OF 11 PAGES.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED RESOURCES HEALTH CARE FUND II
CONSOLIDATED BALANCE SHEETS
September 30, December 31,
1995 1994
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 1,079,317 $ 1,196,256
Accounts receivable, net of
allowance for doubtful accounts
of $50,554 and $39,850 592,201 586,929
Prepaid expenses and other 60,210 108,229
Total current assets 1,731,728 1,891,414
Property and equipment
Land 192,148 179,341
Buildings and improvements 6,208,227 6,187,000
Equipment and furnishings 484,350 435,826
6,884,725 6,802,167
Accumulated depreciation
and amortization (3,257,502) (2,977,111)
Net property and equipment 3,627,224 3,825,056
Other
Restricted escrows and other deposits 304,718 239,657
Deferred loan costs, net of
accumulated amortization
of $10,185 and $8,369 22,924 23,701
Total other assets 327,642 263,358
$ 5,686,594 $ 5,979,828
LIABILITIES AND PARTNERS' DEFICIT
Current liabilities:
Current maturities of long-term debt $ 61,256 $ 57,886
Accounts payable 412,082 373,786
Accrued expenses 67,059 108,515
Accrued management fees 396,341 702,510
Other liabilities 369,579 343,183
Total current liabilities 1,306,317 1,585,880
Advances from former affilates (Note 4) - 5,651,854
Long-term obligations,
less current maturities 4,283,585 4,326,316
Total liabilities 5,589,901 11,564,050
Partners' equity (deficit) :
Limited partners 298,395 (5,149,283)
General partners (201,702) (434,939)
Total partners' equity (deficit) 96,693 (5,584,222)
$ 5,686,594 $ 5,979,828
See accompanying notes to consolidated financial statements. 2
CONSOLIDATED RESOURCES HEALTH CARE FUND II
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
1995 1994 1995 1994
Revenue:
Operating revenues $1,736,363 $1,438,731 $5,010,377 $4,342,479
Interest income 5,018 6,654 25,738 22,545
Total revenues 1,741,381 1,445,385 5,036,115 4,365,024
Expenses:
Operating expenses 1,511,066 1,319,982 4,280,483 3,760,095
Depreciation & amortization 93,884 94,183 281,162 279,255
Interest 81,777 82,531 245,931 248,684
Partnership adminstration
costs 1,737 7,718 49,478 54,778
Total expenses 1,688,465 1,504,414 4,857,055 4,342,812
Net income (loss) before 52,916 (59,029) 179,061 22,212
extraordinary gain
Extraordinary gain on
settlement of advances - - 5,651,854 -
(Note 4)
Net income (loss) $ 52,916 $ (59,029) $5,830,915 $ 22,212
Net income (loss) per L.P. unit
Income (loss) before extraordinary
gain $ 3.39 $ (3.78) $ 11.46 $ 1.42
Extraordinary gain on
settlement of advances - - 361.72 -
Net income (loss)per L.P. unit$ 3.39 $ (3.78) $ 373.18 $ 1.42
L.P. units outstanding 15,000 15,000 15,000 15,000
See accompanying notes to consolidated financial statements. 3
CONSOLIDATED RESOURCES HEALTH CARE FUND II
CONSOLIDATED STATEMENTS OF PARTNERS'EQUITY (DEFICIT)
(Unaudited)
Total
Partners'
Limited General Equity (Deficit)
Balance, at December 31, 1993 $ (5,327,139) $ (442,350) $ (5,769,489)
Net income 21,324 888 22,212
Balance, at September 30, 1994 $ (5,305,815) $ (441,462) $ (5,747,277)
Balance, at December 31, 1994 $ (5,149,283) $ (434,939) $ (5,584,222)
Net income 5,597,678 233,237 5,830,915
Distribution (150,000) - (150,000)
Balance, at September 30, 1995 $ 298,395 $ (201,702) $ 96,693
See accompanying notes to consolidated financial statements. 4
CONSOLIDATED RESOURCES HEALTH CARE FUND II
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine months ended September 30,
1995 1994
Operating Activities:
Cash received from residents and
government agencies $ 5,005,105 $ 4,449,046
Cash paid to suppliers and employees (4,569,193) (3,979,877)
Interest received 25,738 22,545
Interest paid (245,931) (248,684)
Property taxes paid (60,738) (75,759)
Cash provided by
operating activities 154,980 167,271
Investing Activities:
Additions to property and equipment (82,558) (82,268)
Financing Activities:
Principle payments on long-term debt (39,361) (41,200)
Distribution (150,000) -
Cash used in financing activities (189,361) (41,200)
Net increase (decrease) in cash
and cash equivalents (116,939) 43,803
Cash and cash equivalents, beginning of period 1,196,257 1,083,173
Cash and cash equivalents, end of period $ 1,079,317 $ 1,126,976
See accompanying notes to consolidated financial statements. 5
CONSOLIDATED RESOURCES HEALTH CARE FUND II
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended September 30,
1995 1994
Reconciliation of Net Income to cash
Provided by Operating Activities:
Net income $ 5,830,915 $ 22,212
Adjustments to reconcile net income
to cash provided by
operating activities:
Depreciation and amortization 281,162 279,255
Gain on settlement of advances (5,651,854) -
Changes in assets and liabilities:
Accounts receivable (5,272) 106,567
Other current assets 48,019 21,221
Accounts payable and
accrued liabilities (347,990) (261,984)
Cash provided by
operating activities $ 154,980 $ 167,271
See accompanying notes to consolidated financial statements. 6
CONSOLIDATED RESOURCES HEALTH CARE FUND II
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Septmeber 30, 1995
NOTE 1.
The financial statements are unaudited and reflect all
adjustments (consisting only of normal recurring adjustments)
which are, in the opinion of management, necessary for a fair
presentation of the Partnership's financial position and
operating results for the interim periods. The results of
operations for the nine months ended September 30, 1995, are not
necessarily indicative of the results to be expected for the year
ending December 31, 1995.
NOTE 2.
The consolidated financial statements should be read inconjunction
with the consolidated financial statements and the
notes thereto contained in the Partnership's Annual Report on
Form 10-K for the year ended December 31, 1994, as filed with the
Securities and Exchange Commission, a copy of which is available
upon request by writing to WelCare Service Corporation-II (the
"Managing General Partner"), at 7000 Central Parkway, Suite 970,
Atlanta, Georgia 30328.
NOTE 3.
A summary of compensation paid to or accrued for the benefit of
the Partnership's general partners and their affiliates and
amounts reimbursed for costs incurred by these parties on the
behalf of the Partnership are as follows:
Nine Months Ended
September 30,
1995 1994
Charged to costs and expenses:
Property management and oversightmanagement fees$ 66,783 $49,369
Financial accounting, data processing,
tax reporting, legal and compliance,
investor relations and supervision
of outside services . . . . . . . . $10,268 $19,645
NOTE 4.
In November 1990, the Partnership filed claims against Southmark
Corporation ("Southmark"), in the Bankruptcy Court. In response
to the partnership's filing, Southmark filed suit against the
Partnership in August of 1991. The Partnership and Southmark
reached a settlement of this litigation and the partnership
received a nonappealable court order approving the settlement in
April 1994.
7
During the first quarter of 1995, the Partnership recognized a
gain on the settlement of advances as all litigation issues have
been resolved with Southmark. In the past, Southmark and the
Corporate General Partner of the Partnership asserted their
position with respect to operating advances made to the
Partnership prior to 1990.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
WelCare Acquisition Corp. acquired the stock of the Partnership's
Corporate General Partner from Southmark Corporation
("Southmark") on November 20, 1990. The results of operations
for periods prior to November 20, 1990, occurred under the
direction and management of Southmark affiliates and not under
the direction and management of WelCare's affiliates.
Following the first year of WelCare's affiliate's management of
the affairs of the Partnership, the Limited Partners
overwhelmingly elected WelCare Service Corporation-II, a wholly-
owned subsidiary of WelCare Acquisition Corp., as managing
general partner. On January 7, 1992, WelCare Service
Corporation-II was admitted as Managing General Partner.
Results of Operations
Revenues:
Operating revenue showed an increase of $297,632 for the quarter
ended September 30, 1995, compared to the same period for the
prior year. Operating revenues increased primarily due to
increases in Medicare and Medicaid reimbursement rates and
ancillary services at the partnership's nursing facilities, and
increases in home health services being provided at the
Partnership's retirement facility.
Expenses:
Operating expenses showed an increase of $191,084 for the quarter
ended September 30, 1995, as compared to the same period for the
prior year. This increase in operating expenses is largely due
to increased use of skilled nursing and therapy personnel to
accommodate the additional Medicare and heavy-care patients
at the Partnership's nursing facilities, and inflationary
increases in cost at both facilities.
Liquidity and Capital Resources:
At September 30, 1995, the Partnership held cash and cash
equivalents of $1,079,317 a decrease of $116,939 from December
31, 1994. This reduction in cash is due primarily to the
distribution of $150,000 to the Limited Partners, and a reduction
in accounts payable. The cash balance will be necessary to meet
the Partnership's current obligations and for operating reserves.
In addition, cash balances maintained at the two Partnership
facilities will have to be maintained in accordance with
operating reserves established by HUD.
Due to the efforts of the Managing General Partner, the
Partnership distributed $150,000 to the Partnership's Limited
8
Partners in February 1995. In 1990 when WelCare Acquisition
Corp. acquired the stock of the corporate general partner from
Southmark, the Partnership had been experiencing significant
operating losses. The Managing General Partner successfully
reversed these operating losses and enabled the partnership to
return to profitability during the first quarter of 1993. As a
result, the Partnership was able to distribute $150,000 to its
Limited Partners in February 1995. The Managing General Partner
anticipates the annual distributions from operating cash flow
will continue in future periods. However, the Partnership's
ability to make distributions may be limited by HUD's
requirements for operation reserves at the facility level.
As of September 30, 1995, the Partnership was not obligated to
perform any major capital additions or renovations. No such
major capital expenditures or renovations are planned for the
next 12 months, other than necessary repairs, maintenance and
improvements which are expected to be funded by operations.
The Partnership should produce sufficient cash flow to meet its
ongoing obligations associated with the two facilities currently
owned by the Partnership. In addition, the Partnership's cash
reserves are considered adequate to meet contingent liabilities
related to third party reimbursements from the operation of the
Colorado facilities previously owned by the Partnership. During
1995, the Partnership has not received any demands for payment of
any actual or contingent liabilities related to these previously
owned facilities. The Partnership has no existing lines of
credit or assurance of financial support from the General
Partners should the need arise.
9
PART II - OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
None
10
SIGNATURES
Pursuant to the requirements 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.
CONSOLIDATED RESOURCES HEALTH CARE FUND II
By: WELCARE SERVICE CORPORATION - II
Its Managing General Partner
Date: November 14, 1995 By: /s/ J. Stephen Eaton
J. Stephen Eaton
President
Date: November 14, 1995 By: /s/ Alan C. Dahl
Alan C. Dahl
Vice President and
Principal Financial Officer
11
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This schedule contains unaudited summary financial information extracted from
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