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, 1997
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.
<PAGE>
PART I. FINANCIAL INFORMATION
CONSOLIDATED RESOURCES HEALTH CARE FUND II
CONSOLIDATED BALANCE SHEETS
(Unaudited)
March 31, December 31,
1997 1996
ASSETS
Current assets:
Cash and cash equivalents $ 867,886 $ 1,339,758
Accounts receivable, net of
allowance for doubtful accounts
of $53,554 399,759 343,421
Prepaid expenses and other 27,076 40,184
Total current assets 1,294,721 1,723,363
Property and equipment
Land 178,609 178,609
Buildings and improvements 6,531,661 6,333,497
Equipment and furnishings 695,802 666,806
7,406,072 7,178,912
Accumulated depreciation
and amortization (3,839,799) (3,738,651)
Net property and equipment 3,566,273 3,440,261
Other
Restricted escrows and other deposits 312,393 315,012
Deferred loan costs, net of
accumulated amortization
of $11,739 and $11,480 20,571 20,831
Total other assets 332,964 335,843
$ 5,193,958 $ 5,499,467
LIABILITIES AND PARTNERS' EQUITY(DEFICIT)
Current liabilities:
Current maturities of long-term debt $ 74,514 $ 67,222
Accounts payable 191,849 197,950
Accrued expenses 274,527 373,500
Accrued management fees 317,747 254,518
Other liabilities 138,972 179,130
Total current liabilities 997,609 1,072,320
Long-term obligations,
less current maturities 4,188,592 4,205,585
Total liabilities 5,186,201 5,277,905
Partners' equity (deficit ):
Limited partners 199,014 412,271
General partners (191,257) (190,709)
Total partners' deficit 7,757 221,562
$ 5,193,958 $ 5,499,467
See accompanying notes to consolidated financial statements.
CONSOLIDATED RESOURCES HEALTH CARE FUND II
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended
March 31,
1997 1996
Revenue:
Operating revenues $1,728,212 $1,625,357
Interest income 9,604 3,806
Total revenue 1,737,816 1,629,163
Expenses:
Operating expenses 1,557,297 1,440,033
Depreciation & amortization 98,211 94,372
Interest 80,146 81,159
Partnership adminstration
costs 15,867 7,796
Total expenses 1,751,521 1,623,360
Operating Income (Loss) (13,705) 5,803
Net income (loss) $ (13,705) $ 5,803
Operating income (loss) per L.P. unit (0.88) 0.37
Net income (loss) per L.P. unit $ (0.88) $ 0.37
L.P. units outstanding 15,000 15,000
See accompanying notes to consolidated financial statements.
CONSOLIDATED RESOURCES HEALTH CARE FUND II
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three months ended March
1997 1996
Operating Activities:
Cash received from residents and
government agencies $ 1,671,874 $ 1,624,253
Cash paid to suppliers and employees (1,606,125) (1,532,588)
Interest received 9,604 3,806
Interest paid (80,146) (81,159)
Property taxes paid (30,119) -
Cash provided by (used in)
operating activities (34,912) 14,312
Investing Activities:
Additions to property and equipment (227,160) (18,453)
Financing Activities:
Principal payments on long-term debt (9,701) (12,316)
Distributions (200,100) (150,000)
Cash used in financing activities (209,801) (162,316)
Net (decrease) in cash
and cash equivalents (471,873) (166,457)
Cash and cash equivalents, beginning of period 1,339,758 1,115,300
Cash and cash equivalents, end of period $ 867,886 $ 948,843
See accompanying notes to consolidated financial statements.
CONSOLIDATED RESOURCES HEALTH CARE FUND II
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three months ended March
1997 1996
Reconciliation of Net Income (Loss) to cash
Provided by Operating Activities:
Net income (loss) $ (13,705) $ 5,803
Adjustments to reconcile net income
to cash provided by (used in)
operating activities:
Depreciation and amortization 98,211 94,372
Gain on settlement of advances - -
Changes in assets and liabilities:
Accounts receivable (56,338) (1,104)
Restricted excrows 2,619 (43,689)
Other current assets 13,108 (55,403)
Accounts payable and
accrued liabilities (78,807) 14,333
Cash provided by (used in) operating
activities $ (34,912) $ 14,312
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, 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)
Balance, at December 31, 1996 $ 412,271 $ (190,709) $ 221,562
Net loss (13,157) (548) (13,705)
Distribution (200,100) - (200,100)
Balance, at March 31, 1997 $ 199,014 $ (191,257) $ 7,757
See accompanying notes to consolidated financial statements.
<PAGE>
CONSOLIDATED RESOURCES HEALTH CARE FUND II
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1997
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, 1997, are not necessarily indicative of the results
to be expected for the year ending December 31, 1997.
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, 1996,
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:
Three Months Ended
March 31,
1997 1996
Charged to costs and expenses:
Property management and oversight
management fees.................................. $6,795 $32,028
Financial accounting, data processing,
tax reporting, legal and compliance,
investor relations and supervision
of outside services.............................. $15,867 $7,796
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Certain statements contained in this Management Discussion and Analysis are not
based on historical facts, but are forward-looking statements that are based
upon numerous assumptions about future conditions that may ultimately prove to
be inaccurate. Actual events and results may materially differ from anticipated
results described in such statements. The Partnership's ability to achieve such
results is subject to certain risks and uncertainties. Such risks and
uncertainties include, but are not limited to, changes in healthcare
reimbursement systems and rates, the availability of capital and financing, and
other factors affecting the Partnership's business that may be beyond its
control.
At March 31, 1997, the Partnership had three general partners (the "General
Partners"), Consolidated Associates II, ("CA-II") WelCare Consolidated Resources
Corporation of America, serving as the corporate general partner ("WCRCA" or the
"Corporate General Partner") and WelCare Service Corporation-II as managing
general partner ("WSC-II" or the "Managing General Partner").
Results of Operations
Revenues:
Operating revenue showed an increase of $102,855 for the quarter ended March 31,
1997, 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, in the Partnership's nursing which was offset by a decrease
in the revenues from the retirement center due to lower occupancy levels as
compared to the same period in the prior year.
Expenses:
Operating expenses showed an increase of $133,131 for the quarter ended March
31, 1997, as compared to the same period for the prior year. This increase is
primarily due to increased nursing and therapy costs due to increased Medicare
census at the Partnership's nursing facility.
Liquidity and Capital Resources:
At March 31, 1997, the Partnership held cash and cash equivalents of $867,886 a
decrease of $471,872 from December 31, 1996. This reduction in cash is due
primarily to the distribution of $200,100 to the Limited Partners in February
1997. The current 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 1997.
As of March 31, 1997, the Partnership was not obligated to perform any major
capital expenditures or renovations other than its current project at the
retirement center. For the quarter ended March 31, 1997, the Partnership's
capital expenditures related primarily to its renovation of the retirement
center. 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.
On February 15, 1997, the Partnership distributed $200,100 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 1997, 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.
<PAGE>
Part II - OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
None
<PAGE>
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 20, 1997 By: /s/J. Stephen Eaton
- ------------------ -------------------
J. Stephen Eaton,
President
Date: May 20, 1997 By: /s/Alan C. Dahl
- ------------------ ---------------
Alan C. Dahl,
Vice President and Principal
Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS UNAUDITED SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE MARCH 31, 1997 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH 10-Q.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 867,886
<SECURITIES> 0
<RECEIVABLES> 467,039
<ALLOWANCES> 67,280
<INVENTORY> 0
<CURRENT-ASSETS> 1,294,721
<PP&E> 7,406,072
<DEPRECIATION> 0
<TOTAL-ASSETS> 5,193,958
<CURRENT-LIABILITIES> 997,609
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 7,757
<TOTAL-LIABILITY-AND-EQUITY> 5,193,958
<SALES> 1,728,212
<TOTAL-REVENUES> 1,737,816
<CGS> 1,655,508
<TOTAL-COSTS> 1,751,521
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 80,146
<INCOME-PRETAX> (13,705)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (13,705)
<EPS-PRIMARY> (0.880)
<EPS-DILUTED> (0.880)
</TABLE>