<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 June 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)
June 30, December 31,
1997 1996
----------------- ------------------
ASSETS
Current assets:
Cash and cash equivalents $ 1,011,577 $ 1,339,758
Accounts receivable, net of
allowance for doubtful accounts
of $43,226 386,273 343,421
Prepaid expenses and other 27,102 40,184
----------------- ------------------
Total current assets 1,424,952 1,723,363
----------------- ------------------
Property and equipment
Land 178,609 178,609
Buildings and improvements 6,621,285 6,333,497
Equipment and furnishings 751,623 666,806
----------------- ------------------
7,551,517 7,178,912
----------------- ------------------
Accumulated depreciation
and amortization (3,945,730) (3,738,651)
----------------- ------------------
Net property and equipment 3,605,787 3,440,261
----------------- ------------------
Other
Restricted escrows and other deposits 349,320 315,012
Deferred loan costs, net of
accumulated amortization
of $11,998 and $11,480 20,312 20,831
----------------- ------------------
Total other assets 369,632 335,843
----------------- ------------------
$ 5,400,371 $ 5,499,467
================= ==================
LIABILITIES AND PARTNERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 74,514 $ 67,222
Accounts payable 172,718 197,950
Accrued expenses 419,800 373,500
Accrued management fees 329,340 254,518
Other liabilities 168,373 179,130
----------------- ------------------
Total current liabilities 1,164,745 1,072,320
----------------- ------------------
Long-term obligations,
less current maturities 4,169,884 4,205,585
----------------- ------------------
Total liabilities 5,334,629 5,277,905
----------------- ------------------
Partners' equity (deficit):
Limited partners 254,680 412,271
General partners (188,938) (190,709)
----------------- ------------------
Total partners' equity 65,742 221,562
----------------- ------------------
$ 5,400,371 $ 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 Six Months Ended
June 30, June 30,
1997 1996 1997 1996
---------------- ---------------- -------------- ----------------
<S> <C> <C> <C> <C>
Revenue:
Operating revenues $ 1,925,960 $ 1,763,623 $ 3,654,172 $ 3,388,980
Interest income 8,834 5,599 18,438 9,405
---------------- ---------------- -------------- ----------------
Total revenue 1,934,794 1,769,222 3,672,610 3,398,385
---------------- ---------------- -------------- ----------------
Expenses:
Operating expenses 1,677,440 1,595,514 3,234,737 3,043,343
Depreciation & amortization 106,190 101,891 204,401 196,263
Interest 80,131 80,890 160,277 162,049
Partnership adminstration
costs 13,048 7,796 28,915 7,796
---------------- ---------------- -------------- ----------------
Total expenses 1,876,809 1,786,091 3,628,330 3,409,451
---------------- ---------------- -------------- ----------------
Net income (loss) $ 57,985 $ (16,869) $ 44,280 $ (11,066)
================ ================ ================ ================
Net income (loss) per L.P. unit $ 3.71 $ (1.08) $ 2.83 $ (0.71)
================ ================ ================ ================
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)
Six months ended June 30,
1997 1996
--------------- ----------------
Operating Activities:
Cash received from residents and
government agencies $ 3,611,320 $ 3,667,014
Cash paid to suppliers and employees (3,166,430) (3,219,167)
Interest received 18,438 9,406
Interest paid (160,277) (169,687)
Property taxes paid (30,119) -
--------------- ----------------
Cash provided by (used in)
operating activities 272,932 287,566
--------------- ----------------
Investing Activities:
Additions to property and equipment (372,605) (93,207)
--------------- ----------------
Financing Activities:
Principal payments on long-term debt (28,409) (26,783)
Distributions (200,100) (150,000)
--------------- ----------------
Cash used in financing activities (228,509) (176,783)
--------------- ----------------
Net (decrease) in cash
and cash equivalents (328,182) 17,576
Cash and cash equivalents, beginning of period 1,339,758 1,115,300
--------------- --------------
Cash and cash equivalents, end of period $ 1,011,577 $ 1,132,876
=============== ================
See accompanying notes to financial statements.
<PAGE>
CONSOLIDATED RESOURCES HEALTH CARE FUND II
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six months ended June 30,
1997 1996
--------------- --------------
Reconciliation of Net Income (Loss) to cash
Provided by Operating Activities:
Net income (loss) $ 44,280 $ (11,066)
Adjustments to reconcile net income
to cash provided by (used in)
operating activities:
Depreciation and amortization 204,401 196,26
Changes in assets and liabilities:
Accounts receivable (42,852) 278,034
Restricted escrows (34,308) (17,083)
Other current assets 13,082 (116,777)
Accounts payable and
accrued liabilities 88,329 (34,167)
--------------- --------------
Cash provided by (used in) operating
activities $ 272,932 $ 295,204
=============== ================
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 (10,624) (443) (11,066)
Distribution (150,000) - (150,000)
-------------- -------------- --------------
Balance, at June 30, 1996 $ 134,083 $ (202,300) $ (68,216)
============== ============== ==============
Balance, at December 31, 1996 $ 412,271 $ (190,709) $ 221,562
Net income 42,509 1,771 44,280
Distribution (200,100) - (200,100)
------------ ------------ ------------
Balance, at June 30, 1997 $ 254,680 $ (188,938) $ 65,742
============== ============== ==============
See accompanying notes to the financial statements.
<PAGE>
CONSOLIDATED RESOURCES HEALTH CARE FUND II
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 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 six
months ended June 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:
Three Months Ended
March 31,
1997 1996
Charged to costs and expenses:
Property management and oversight
management fees......................... $36,541 $78,097
Financial accounting, data processing,
tax reporting, legal and compliance,
investor relations and supervision
of outside services..................... $28,915 $ 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 June 30, 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 $265,192 for the six months ended June
30, 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 facility 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 $191,394 for the six months ended June
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 June 30, 1997, the Partnership held cash and cash equivalents of $1,011,577 a
decrease of $328,182 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 June 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. During
1997, the Partnership's retirement center is undergoing 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 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: August 14, 1997 By: /s/J. Stephen Eaton
J. Stephen Eaton
President
Date: August 14, 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 JUNE 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> JUN-30-1997
<CASH> 1,011,577
<SECURITIES> 0
<RECEIVABLES> 429,539
<ALLOWANCES> 43,226
<INVENTORY> 0
<CURRENT-ASSETS> 1,424,952
<PP&E> 7,551,517
<DEPRECIATION> 0
<TOTAL-ASSETS> 5,400,371
<CURRENT-LIABILITIES> 1,164,745
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 65,742
<TOTAL-LIABILITY-AND-EQUITY> 5,400,371
<SALES> 1,925,960
<TOTAL-REVENUES> 1,934,794
<CGS> 1,783,630
<TOTAL-COSTS> 1,876,809
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 80,131
<INCOME-PRETAX> 57,985
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 57,985
<EPS-PRIMARY> 3.71
<EPS-DILUTED> 3.71
</TABLE>
