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 June 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 10 PAGES.
PART I. FINANCIAL INFORMATION
CONSOLIDATED RESOURCES HEALTH CARE FUND II
CONSOLIDATED BALANCE SHEETS
June 30, December 31,
1995 1994
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 858,089 $ 1,196,256
Accounts receivable, net of
allowance for doubtful accounts
of $50,554 and $39,850 681,677 586,929
Prepaid expenses and other 81,540 108,229
Total current assets 1,621,306 1,891,414
Property and equipment
Land 179,341 179,341
Buildings and improvements 6,205,230 6,187,000
Equipment and furnishings 462,767 435,826
6,847,338 6,802,167
Accumulated depreciation
and amortization (3,163,877) (2,977,111)
Net property and equipment 3,683,461 3,825,056
Other
Restricted escrows and other deposits 253,292 239,657
Deferred loan costs, net of
accumulated amortization
of $9,926 and $8,369 23,182 23,701
Total other assets 276,474 263,358
$ 5,581,241 $ 5,979,828
LIABILITIES AND PARTNERS' DEFICIT
Current liabilities:
Current maturities of long-term debt $ 59,009 $ 57,886
Accounts payable 329,881 373,786
Accrued expenses 43,216 108,515
Accrued management fees 398,803 702,510
Other liabilities 405,810 343,183
Total current liabilities 1,236,719 1,585,880
Advances from former affilates (Note 4) - 5,651,854
Long-term obligations,
less current maturities 4,300,745 4,326,316
Total liabilities 5,537,464 11,564,050
Partners' deficit :
Limited partners 247,596 (5,149,283)
General partners (203,819) (434,939)
Total partners' deficit 43,777 (5,584,222)
$ 5,581,241 $ 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 Six months ended
June 30, June 30,
1995 1994 1995 1994
Revenue:
Operating revenues $1,731,662 $1,430,934 $3,274,014 $2,903,748
Interest income 9,875 7,499 20,720 15,891
Total revenue 1,741,537 1,438,433 3,294,734 2,919,639
Expenses:
Operating expenses 1,460,597 1,206,171 2,806,882 2,440,113
Depreciation & amortization 93,278 93,097 187,285 185,072
Interest 82,004 82,926 164,154 166,153
Partnership adminstration
costs - 32,843 10,268 47,060
Total expenses 1,635,879 1,415,037 3,168,589 2,838,398
Net income (loss) before 105,658 23,396 126,145 81,241
extraordinary gain
Extraordinary gain on
settlement of advances - - 5,651,854 -
(Note 4)
Net Income $ 105,658 $ 23,396 $5,777,999 $ 81,241
Net income (loss) per L.P. unit
Income before extraordinary
gain $ 6.76 $ 1.50 $ 8.07 $ 5.20
Extraordinary gain on
settlement of advances - - 361.72 -
Net Income per L.P. unit $ 6.76 $ 1.50 $ 369.79 $ 5.20
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 CASH FLOWS
(Unaudited)
Six months ended June 30,
1995 1994
Operating Activities:
Cash received from residents and
government agencies $ 3,179,266 $ 2,933,411
Cash paid to suppliers and employees (3,083,587) (2,607,896)
Interest received 20,720 15,891
Interest paid (164,154) (166,153)
Property taxes paid (70,793) (74,530)
Cash provided by (used in)
operating activities (118,548) 100,723
Investing Activities:
Additions to property and equipment (45,171) (29,692)
Financing Activities:
Principle payments on long-term debt (24,448) (26,367)
Distribution (150,000)
Cash used in financing activities (174,448) (26,367)
Net increase (decrease) in cash
and cash equivalents (338,167) 44,664
Cash and cash equivalents, beginning of period 1,196,256 1,083,173
Cash and cash equivalents, end of period $ 858,089 $ 1,127,837
See accompanying notes to consolidated financial statements. 5
CONSOLIDATED RESOURCES HEALTH CARE FUND II
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended June 30,
1995 1994
Reconciliation of Net Income to cash
Provided by (Used in) Operating Activities:
Net income $ 5,777,999 $ 81,241
Adjustments to reconcile net income
to cash provided by (used in)
operating activities:
Depreciation and amortization 187,285 171,354
Gain on settlement of advances (5,651,854)
Changes in assets and liabilities:
Accounts receivable (94,748) 29,663
Other current assets 26,689 30,161
Accounts payable and
accrued liabilities (363,919) (211,696)
Cash provieded by (used in)
operating activities $ (118,548) $ 100,723
See accompanying notes to consolidated financial statements. 6
CONSOLIDATED RESOURCES HEALTH CARE FUND II
CONSOLIDATED STATEMENTS OF PARTNERS' DEFICIT
(Unaudited)
Total
Partners'
Limited General Deficit
Balance, at December 31, 1993 $ (5,327,139) $ (442,350) $ (5,769,489)
Net income 77,991 3,250 81,241
Balance, at June 30, 1994 $ (5,249,148) $ (439,100) $ (5,688,248)
Balance, at December 31, 1994 $ (5,149,283) $ (434,939) $ (5,584,222)
Net income 5,546,879 231,120 5,777,999
Distribution (150,000) - (150,000)
Balance, at June 30, 1995 $ 247,596 $ (203,819) $ 43,777
See accompanying notes to consolidated financial statements. 4
THERE ARE NO EXHIBITS.
PAGE ONE OF 10 PAGES.
CONSOLIDATED RESOURCES HEALTH CARE FUND II
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 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 six months ended June 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 in
conjunction 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:
Six Months Ended
June 30,
1995 1994
Charged to costs and expenses:
Property management and oversight
management fees . . . . . . . . . . $398,803$29,342
Financial accounting, data processing,
tax reporting, legal and compliance,
investor relations and supervision
of outside services. . . . . . . . $10,268$13,800
In addition the general partner received $300,000 as repayment of
advances made in prior periods.
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.
During the first quarter of 1995, the Partnership recognized a
gain on the settlement of advances as all litigation issues have
7
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 $300,728 for the quarter
ended June 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 facility, and increases in home
health services being provided at the Partnership's retirement
facility.
Expenses:
Operating expenses showed an increase of $254,426 for the quarter
ended June 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 facility, and inflationary increases in
cost at both facilities.
Liquidity and Capital Resources:
At June 30, 1995, the Partnership held cash and cash equivalents
of $858,089 a decrease of $338,167 from December 31, 1994. This
reduction in cash is due 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
Partners in February 1995. In 1990 when WelCare Acquisition
Corp. acquired the stock of the corporate general partner from
8
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 facilities.
As of June 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
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
Managing General Partner
Date: June 22, 1995 By: /s/ J. Stephen Eaton
J. Stephen Eaton
President
Date: June 22, 1995 By: /s/ Alan C. Dahl
Alan C. Dahl
Vice President and Principal
Financial Officer
10
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THIS SCHEDULE CONTAINS UNAUDITED SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
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10-Q.
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