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, 1996
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.)
400 Perimeter Center Terrace, Suite 650, Atlanta, Georgia 30346
(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
CONSOLIDATED RESOURCES HEALTH CARE FUND II
CONSOLIDATED BALANCE SHEETS
(Unaudited)
September 30, December 31,
1996 1995
ASSETS
Current assets:
Cash and cash equivalents $ 1,036,404 $ 1,115,300
Accounts receivable, net of
allowance for doubtful accounts
of $67,280 209,768 565,965
Prepaid expenses and other 148,797 44,317
Total current assets 1,394,968 1,725,582
Property and equipment
Land 179,341 179,341
Buildings and improvements 6,271,367 6,224,958
Equipment and furnishings 599,336 511,590
7,050,044 6,915,889
Accumulated depreciation
and amortization (3,638,661) (3,351,815)
Net property and equipment 3,411,383 3,564,074
Other
Restricted escrows and other deposits 302,589 280,246
Deferred loan costs, net of
accumulated amortization
of $11,221 and $8,094 19,464 21,867
Total other assets 322,053 302,113
$ 5,128,404 $ 5,591,769
LIABILITIES AND PARTNERS' EQUITY(DEFICIT)
Current liabilities:
Current maturities of long-term debt $ 64,878 $ 62,380
Accounts payable 164,305 335,240
Accrued expenses 266,881 275,532
Accrued management fees 388,638 394,918
Other liabilities 167,079 170,087
Total current liabilities 1,051,781 1,238,157
Long-term obligations,
less current maturities 4,215,272 4,260,762
Total liabilities 5,267,053 5,498,919
Partners' equity (deficit ):
Limited partners 66,468 294,707
General partners (205,117) (201,857)
Total partners' deficit (138,649) 92,850
$ 5,128,404 $ 5,591,769
See accompanying notes to consolidated financial statements.
CONSOLIDATED RESOURCES HEALTH CARE FUND II
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
1996 1995 1996 1995
Revenue:
Operating revenues $1,686,383 $1,736,363 5,075,363 $5,010,377
Interest income 3,871 5,018 13,276 25,738
Total revenue 1,690,254 1,741,381 5,088,639 5,036,115
Expenses:
Operating expenses 1,586,806 1,511,066 4,630,149 4,280,483
Depreciation & amortization 103,623 93,884 299,886 281,162
Interest 70,258 81,777 232,307 245,931
Partnership adminstration
costs - 1,737 7,796 49,478
Total expenses 1,760,687 1,688,464 5,170,138 4,857,054
Income before extraordinary gain (70,433) 52,917 (81,499) 179,061
Extraordinary gain on settlement
of advances (Note 4) - - - 5,651,854
Net income (loss) $ (70,433) $ 52,917 $ (81,499) $5,830,915
Net income(loss) per L.P. unit
Income(loss) before extraordinary gain (4.51) 3.39 (5.22) 11.46
Extraordinary gain on settlement
of advances per L.P. unit - - - 361.72
Net income (loss) per L.P. unit $ (4.51) $ 3.39 $ (5.22) $ 373.18
L.P. units outstanding 15,000 15,000 15,000 15,000
See accompanying notes to consolidated financial statements.
CONSOLIDATED RESOURCES HEALTH CARE FUND II
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine months ended September
1996 1995
Operating Activities:
Cash received from residents and
government agencies $ 5,431,560 $ 5,005,105
Cash paid to suppliers and employees (4,893,616) (4,569,194)
Interest received 13,276 25,738
Interest paid (232,307) (245,931)
Property taxes paid (60,026) (60,738)
Cash provided by (used in)
operating activities 258,887 154,980
Investing Activities:
Additions to property and equipment (134,155) (82,558)
Financing Activities:
Principal payments on long-term debt (53,628) (39,361)
Distributions (150,000) (150,000)
Cash used in financing activities (203,628) (189,361)
Net (decrease) in cash
and cash equivalents (78,896) (116,939)
Cash and cash equivalents, beginning of period 1,115,300 1,196,256
Cash and cash equivalents, end of period $ 1,036,404 $ 1,079,317
See accompanying notes to consolidated financial statements.
CONSOLIDATED RESOURCES HEALTH CARE FUND II
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine months ended September
1996 1995
Reconciliation of Net Income (Loss) to cash
Provided by Operating Activities:
Net income (loss) $ (81,499) $ 5,830,915
Adjustments to reconcile net income
to cash provided by (used in)
operating activities:
Depreciation and amortization 299,886 281,162
Gain on settlement of advances - (5,651,854)
Changes in assets and liabilities:
Accounts receivable 356,197 (5,272)
Restricted excrows (22,343)
Other current assets (104,480) 48,019
Accounts payable and
accrued liabilities (188,874) (347,990)
Cash provided by (used in) operating
activities $ 258,887 $ 154,980
See accompanying notes to consolidated financial statements.
CONSOLIDATED RESOURCES HEALTH CARE FUND II
CONSOLIDATED STATEMENTS OF PARTNERS' DEFICIT
(Unaudited)
Total
Partners'
Limited General Deficit
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
Balance, at December 31, 1995 $ 294,707 $ (201,857) $ 92,850
Net loss (78,239) (3,260) (81,499)
Distribution (150,000) - (150,000)
Balance, at September 30, 1996 $ 66,468 $ (205,117) $ (138,649)
See accompanying notes to consolidated financial statements.
CONSOLIDATED RESOURCES HEALTH CARE FUND II
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1996
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 30, 1996, are not necessarily indicative of the results to be
expected for the year ending December 31, 1996.
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, 1995,
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 400 Perimeter Center Terrace, Suite 650,
Atlanta, Georgia 30346.
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,
1996 1995
Charged to costs and expenses:
Property management and oversight
management fees $88,290 $66,783
Financial accounting, data processing,
tax reporting, legal and compliance,
investor relations and supervision
of outside services $7,796 $10,268
NOTE 4.
In July 1991, Southmark filed suit demanding payment of alleged advances to
the Partnership. In 1991, after WelCare's affiliate acquired the Corporate
General Partner, it challenged the validity of some of these payables through
claims filed against the Southmark bankruptcy estate. In 1994, the suits were
settled whereby the Partnership was released of all liabilities to Southmark.
In 1995, the Corporate General Partner released the Partnership from all
remaining liabilities, forgave all remaining amounts owed by the Partnership,
resulting in a gain on debt forgiveness of $5,651,854 for the quarter ended
March 31, 1995.
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 a decrease of $49,980 for the quarter ended September
30, 1996, compared to the same period for the prior year. The decrease is due
to a decrease in occupancy primarily at the Partnership's retirement center.
The decrease in revenue from the decline in occupancy was partially offset by
an increase in private rates at both facilities.
Expenses:
Operating expenses showed an increase of $75,740 for the quarter ended
September 30, 1996, as compared to the same period for the prior year. The
increase is due primarily to an increase in therapy expense resulting from the
Partnership's nursing facility hiring its own in-house therapists. In the
prior year, the nursing facility utilized contract therapy, the cost of which
can be more easily reduced or increased depending on actual facility therapy
needs as opposed to the cost of maintaining in-house therapists. Additional
costs resulted from increased repairs and maintenance at the Partnership's
retirement center. The Partnership is currently planning a major renovation of
the retirement center, which should reduce the need for repairs in future
periods.
Liquidity and Capital Resources:
At September 30, 1996, the Partnership held cash and cash equivalents of
$1,036,404 a decrease of $78,896 from December 31, 1995. This reduction in
cash is due primarily to the distribution of $150,000 to the Limited Partners.
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.
The Partnership's two remaining facilities produced sufficient revenues to
meet their operating and debt service obligations as well as provide
additional cash flow to supplement cash reserves. These facilities should
continue to produce positive cash flow in 1996.
As of September 30, 1996, the Partnership was not obligated to perform any
major capital expenditures or renovations. The Managing General Partner
anticipates that any repairs, maintenance, or capital expenditures will be
financed with cash reserves, HUD replacement reserves and cash flow from
operations. The Partnership is planning to make renovations to its retirement
center. The Partnership's existing cash, HUD replacement reserves and cash
from operations should be sufficient to cover the cost of these renovations.
On February 10, 1995 and on February 15, 1996, the Partnership distributed
$150,000 to the Limited Partners. 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 surplus cash at the facility level.
Significant changes have and will continue to be made in government
reimbursement programs, and such changes could have a material impact on
future reimbursement formulas. Based on information currently available,
Management does not believe proposed legislation will have an adverse effect
on the Partnership's operations. However, as health care reform is ongoing,
the long-term effects of such changes cannot be accurately predicted at the
present time.
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 1996, 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.
Part II - OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
None
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: November 14, 1996 By: /s/ J. Stephen Eaton
J. Stephen Eaton
President
Date: November 14, 1996 By: /s/ Alan C. Dahl
Alan C. Dahl
Vice President and
Principal Financial Officer
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THIS SCHEDULE CONTAINS UNAUDITED SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE SEPTMEBER 30, 1996 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH 10-Q.
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