<PAGE>
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, 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
<PAGE>
PART I. FINANCIAL INFORMATION
CONSOLIDATED RESOURCES HEALTH CARE FUND II
CONSOLIDATED BALANCE SHEETS
(Unaudited)
September 30, December 31,
1997 1996
----------------- ------------------
ASSETS
Current assets:
Cash and cash equivalents $ 1,323,164 $ 1,339,758
Accounts receivable, net of
allowance for doubtful accounts
of $44,686 484,509 343,421
Prepaid expenses and other 14,138 40,184
----------------- ------------------
Total current assets 1,821,811 1,723,363
----------------- ------------------
Property and equipment
Land 178,609 178,609
Buildings and improvements 6,617,854 6,333,497
Equipment and furnishings 782,046 666,806
----------------- ------------------
7,578,509 7,178,912
----------------- ------------------
Accumulated depreciation
and amortization (4,034,081) (3,738,651)
----------------- ------------------
Net property and equipment 3,544,428 3,440,261
----------------- ------------------
Other
Restricted escrows and other deposits 400,839 315,012
Deferred loan costs, net of
accumulated amortization
of $12,258 and $11,480 20,052 20,831
----------------- ------------------
Total other assets 420,891 335,843
----------------- ------------------
$ 5,787,130 $ 5,499,467
================= ==================
LIABILITIES AND PARTNERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 74,516 $ 67,222
Accounts payable 170,609 197,950
Accrued expenses 387,009 373,500
Accrued management fees 344,648 254,518
Other liabilities 171,166 179,130
----------------- ------------------
Total current liabilities 1,147,948 1,072,320
----------------- ------------------
Long-term obligations,
less current maturities 4,151,258 4,205,585
----------------- ------------------
Total liabilities 5,299,206 5,277,905
----------------- ------------------
Partners' equity (deficit):
Limited partners 659,975 412,271
General partners (172,051) (190,709)
----------------- ------------------
Total partners' equity 487,924 221,562
----------------- ------------------
$ 5,787,130 $ 5,499,467
================= ==================
See accompanying notes to consolidated financial statements.
<PAGE>
CONSOLIDATED RESOURCES HEALTH CARE FUND II
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
---------------- ---------------- -------------- ----------------
<S> <C> <C> <C> <C>
Revenue:
Operating revenues $ 2,347,175 $ 1,686,383 $ 6,001,347 $ 5,075,363
Interest income 8,145 3,871 26,583 13,276
---------------- ---------------- -------------- ----------------
Total revenue 2,355,320 1,690,254 6,027,930 5,088,639
---------------- ---------------- -------------- ----------------
Expenses:
Operating expenses 1,684,276 1,586,806 4,919,013 4,630,149
Depreciation & amortization 120,960 103,623 325,361 299,886
Interest 79,557 70,258 239,834 232,307
Partnership adminstration
costs 48,345 - 77,260 7,796
---------------- ---------------- -------------- ----------------
Total expenses 1,933,138 1,760,687 5,561,468 5,170,138
---------------- ---------------- -------------- ----------------
Net income (loss) $ 422,182 $ (70,433) $ 466,462 $ (81,499)
================ ================ ================ ================
Net income (loss) per L.P. unit $ 27.02 $ (4.51) $ 29.85 $ (5.22)
================ ================ ================ ================
L.P. units outstanding 15,000 15,000 15,000 15,000
================ ================ ============== ================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
CONSOLIDATED RESOURCES HEALTH CARE FUND II
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine months ended September 30,
1997 1996
--------------- ----------------
Operating Activities:
Cash received from residents and
government agencies $ 5,860,259 $ 5,431,560
Cash paid to suppliers and employees (4,954,405) (4,893,616)
Interest received 26,583 13,276
Interest paid (239,834) (232,307)
Property taxes paid (62,465) (60,026)
--------------- ----------------
Cash provided by
operating activities 630,138 258,887
--------------- ----------------
Investing Activities:
Additions to property and equipment (399,597) (134,155)
--------------- ----------------
Financing Activities:
Principal payments on long-term debt (47,033) (53,628)
Distributions (200,100) (150,000)
--------------- ----------------
Cash used in financing activities (247,133) (203,628)
--------------- ----------------
Net (decrease) in cash
and cash equivalents (16,592) (78,896)
Cash and cash equivalents, beginning of period 1,339,758 1,115,300
--------------- --------------
Cash and cash equivalents, end of period $ 1,323,166 $ 1,036,404
=============== ================
See accompanying notes to financial statements.
<PAGE>
CONSOLIDATED RESOURCES HEALTH CARE FUND II
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine months ended September 30,
1997 1996
--------------- --------------
Reconciliation of Net Income (Loss) to cash
Provided by Operating Activities:
Net income (loss) $ 466,462 $ (81,499)
Adjustments to reconcile net income
to cash provided by (used in)
operating activities:
Depreciation and amortization 325,361 299,886
Changes in assets and liabilities:
Accounts receivable (141,088) 356,197
Restricted escrows (85,827) (22,343)
Other current assets 26,046 (104,480)
Accounts payable and
accrued liabilities 39,184 (188,874)
--------------- --------------
Cash provided by operating
activities $ 630,138 $ 258,887
=============== ================
See accompanying notes to financial statements.
<PAGE>
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 loss (78,239) (3,260) (81,499)
Distribution (150,000) - (150,000)
-------------- -------------- --------------
Balance, at September 30, 1996 $ 66,467 $ (205,117) $ (138,649)
============== ============== ==============
Balance, at December 31, 1996 $ 412,271 $ (190,709) $ 221,562
Net income 447,804 18,658 466,462
Distribution (200,100) - (200,100)
------------ ------------ ------------
Balance, at September 30, 1997 $ 659,975 $ (172,051) $ 487,924
============== ============== ==============
See accompanying notes to the financial statements.
<PAGE>
CONSOLIDATED RESOURCES HEALTH CARE FUND II
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 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 nine months ended September 30, 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:
Nine Months Ended
September 30,
1997 1996
Charged to costs and expenses:
Property management and oversight
management fees.................... $6,795 $88,290
Financial accounting, data processing,
tax reporting, legal and compliance,
investor relations and supervision
of outside services................. $15,867 $7,796
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 prospective purchasers for
its facilities, and other factors affecting the Partnership's business that may
be beyond its control.
At September 30, 1997, the Partnership had three general partners (the
"General Partners"), Consolidated Associates II, a Georgia general partnership,
WelCare Consolidated Resources Corporation of America, serving as the Corporate
General Partner ("WCRCA" or the "Corporate General Partner"), and WelCare
Service Corporation-II, a Georgia corporation as Managing General Partner
("WSC-II" or the "Managing General Partner").
At December 31, 1996 and September 30, 1997, the Partnership owned and
operated two health care facilities, a nursing home and retirement center, both
located in Columbus, Ohio.
Results of Operations
Revenues:
Operating revenue showed an increase of $660,792 for the quarter ended
September 30, 1997, compared to the same period for the prior year. Of this
increase, approximately $362,000 was attributable to favorable Medicare cost
report settlements related to the year ended December 31, 1995 not previously
recognized by the Partnership's nursing facility. The remaining increase was
primarily due to favorable changes in census mix at the Partnership's nursing
facility as compared to the same period in the prior year, which offset in part
a decline in revenues at the Partnership's retirement center resulting from
lower occupancy levels.
Expenses:
Operating expenses showed an increase of $97,470 for the quarter ended
September 30, 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 September 30, 1997, the Partnership held cash and cash equivalents of
$1,323,164 a decrease of $16,594 from December 31, 1996. 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 1997.
As of September 30, 1997, 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.
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.
Part II - OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27.1 Financial Data Schedule (for SEC use only)
(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, 1997 By: /s/J. Stephen Eaton
J. Stephen Eaton
President
Date: November 14, 1997 By: /s/Alan C. Dahl
Alan C. Dahl
Vice President and Principal
Financial Officer
EXHIBIT INDEX
Exhibit Number Description
27.1 Financial Data Schedule (for SEC use only)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS UNAUDITED SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE SEPTEMBER 30, 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-31-1996
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 1,323,164
<SECURITIES> 0
<RECEIVABLES> 529,195
<ALLOWANCES> 44,686
<INVENTORY> 0
<CURRENT-ASSETS> 1,821,811
<PP&E> 7,578,509
<DEPRECIATION> 0
<TOTAL-ASSETS> 5,787,130
<CURRENT-LIABILITIES> 1,147,948
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 487,924
<TOTAL-LIABILITY-AND-EQUITY> 5,787,130
<SALES> 2,347,175
<TOTAL-REVENUES> 2,355,320
<CGS> 1,805,236
<TOTAL-COSTS> 1,933,138
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 79,557
<INCOME-PRETAX> 422,182
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 422,182
<EPS-PRIMARY> 27.02
<EPS-DILUTED> 27.02
</TABLE>
