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 March 31, 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.)
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
CONSOLIDATED RESOURCES HEALTH CARE FUND II
CONSOLIDATED BALANCE SHEETS
March 31, December 31,
1996 1995
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 948,843 $ 1,115,300
Accounts receivable, net of
allowance for doubtful accounts
of $73,218 567,069 565,965
Prepaid expenses and other 99,720 44,317
Total current assets 1,615,632 1,725,582
Property and equipment
Land 179,341 179,341
Buildings and improvements 6,223,350 6,224,958
Equipment and furnishings 531,651 511,590
6,934,342 6,915,889
Accumulated depreciation
and amortization (3,445,928) (3,351,815)
Net property and equipment 3,488,415 3,564,074
Other
Restricted escrows and other deposits 323,934 280,246
Deferred loan costs, net of
accumulated amortization
of $10,703 and $10,444 21,608 21,867
Total other assets 345,542 302,113
$ 5,449,589 $ 5,591,769
LIABILITIES AND PARTNERS' EQUITY(DEFICIT)
Current liabilities:
Current maturities of long-term debt $ 63,503 $ 62,380
Accounts payable 357,545 335,240
Accrued expenses 32,678 275,532
Accrued management fees 388,829 394,918
Other liabilities 411,057 170,087
Total current liabilities 1,253,613 1,238,157
Long-term obligations,
less current maturities 4,247,324 4,260,762
Total liabilities 5,500,936 5,498,919
Partners' equity (deficit ):
Limited partners 150,277 294,707
General partners (201,625) (201,857)
Total partners' deficit (51,347) 92,850
$ 5,449,589 $ 5,591,769
See accompanying notes to consolidated financial statements. 2
CONSOLIDATED RESOURCES HEALTH CARE FUND II
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended
March 31,
1996 1995
Revenue:
Operating revenues $1,625,357 $1,542,352
Interest income 3,806 10,845
Total revenue 1,629,163 1,553,197
Expenses:
Operating expenses 1,440,033 1,346,285
Depreciation & amortization 94,372 94,007
Interest 81,159 82,150
Partnership adminstration
costs 7,796 10,268
Total expenses 1,623,360 1,532,710
Income before extraordinary gain 5,803 20,487
Extraordinary gain on settlement
of advances (Note 4) - 5,651,854
Net income $ 5,803 $5,672,341
Net income per L.P. unit
Income before extraordinary gain 0.37 1.31
Extraordinary gain on settlement
of advances per L.P. unit - 361.72
Net income per L.P. unit $ 0.37 $ 363.03
L.P. units outstanding 15,000 15,000
See accompanying notes to consolidated financial statements 3
CONSOLIDATED RESOURCES HEALTH CARE FUND II
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three months ended March 31,
1996 1995
Operating Activities:
Cash received from residents and
government agencies $ 1,624,253 $ 1,590,474
Cash paid to suppliers and employees (1,532,588) (1,448,047)
Interest received 3,806 (57,658)
Interest paid (81,159) 10,845
Property taxes paid - (82,152)
Cash provided by
operating activities 14,312 13,462
Investing Activities:
Additions to property and equipment (18,453) (22,980)
Financing Activities:
Principal payments on long-term debt (12,316) (14,068)
Distributions (150,000) (150,000)
Cash used in financing activities (162,316) (164,068)
Net decrease in cash
and cash equivalents (166,457) (173,586)
Cash and cash equivalents, beginning of period 1,115,300 1,241,447
Cash and cash equivalents, end of period $ 948,843 $ 1,067,861
See accompanying notes to consolidated financial statements. 5
CONSOLIDATED RESOURCES HEALTH CARE FUND II
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended March 31,
1996 1995
Reconciliation of Net Income to cash
Provided by Operating Activities:
Net income $ 5,803 $ 5,672,341
Adjustments to reconcile net income
to cash provided by (used in)
operating activities:
Depreciation and amortization 94,372 94,007
Gain on settlement of advances (5,651,854)
Changes in assets and liabilities:
Accounts receivable (1,104) 48,122
Restricted excrows (43,688) (57,658)
Other current assets (55,403) 42,553
Accounts payable and
accrued liabilities 14,333 (134,049)
Cash provided by operating
activities $ 14,312 $ 13,462
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, 1994 $ (5,149,283) $ (434,939) $ (5,584,222)
Net income 5,445,447 226,894 5,672,341
Distribution (150,000) - (150,000)
Balance, at March 31, 1995 $ 296,164 $ (208,045) $ (61,881)
Balance, at December 31, 1995 $ 294,707 $ (201,857) $ 92,850
Net income 5,570 232 5,803
Distribution (150,000) - (150,000)
Balance, at March 31, 1996 $ 150,277 $ (201,625) $ (51,347)
See accompanying notes to consolidated financial statements. 4
CONSOLIDATED RESOURCES HEALTH CARE FUND II
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 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
three months ended March 31, 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 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:
Three months Ended
March 31,
1996 1995
Charged to costs and expenses:
Property management and oversight
management fees $32,028 $20,711
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 an increase of $83,005 for the quarter ended March 31,
1996, compared to the same period for the prior year. This increase is
primarily due to changes in census mix from Medicaid to higher rate private pay
and Medicare residents, as well as increases in rates for all payor types at
the Partnerships nursing facility.
Expenses:
Operating expenses showed an increase of $93,748 for the quarter ended March
31, 1996, as compared to the same period for the prior year. This increase is
primarily due to increased nursing and therapy cost due to increased Medicare
census at the Partnership's nursing facility.
Liquidity and Capital Resources:
At March 31, 1996, the Partnership held cash and cash equivalents of $948,843 a
decrease of $166,457 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 March 31, 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. During 1996, the Partnership's retirement center may require
renovations to comply with requirements of the State of Ohio's regulations
governing rest homes. The Center'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: May 15, 1996 By: /s/
J. Stephen Eaton
President
Date: May 15, 1996 By: /s/
Alan C. Dahl
Vice President and Principal
Financial Officer
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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