<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended September 30, 1995 Commission File Number 2-92396
RWB MEDICAL INCOME PROPERTIES 1 LIMITED PARTNERSHIP
(Exact Name of Registrant as Specified in its Charter)
Louisiana 72-1007233
--------- ----------
(State of Organization) (IRS Employer Identification Number)
7000 Central Parkway, Suite 850
-------------------------------
Atlanta, Georgia 30328
----------------------
(Address of Principal Executive Office)
(770) 668-1080
---------------
Registrant's Telephone Number, Including Area Code
Indicate by check 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 (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--------- ---------
The number of limited partnership units outstanding at September 30, 1995 was
22,895.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I
Page No.
<S> <C> <C>
Item 1. Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . 3 - 9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations . . . . . . . . . . . . . . 10
PART II
Item 1. Report on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
</TABLE>
2
<PAGE> 3
PART I
ITEM 1.
FINANCIAL INFORMATION
RWB MEDICAL INCOME PROPERTIES 1 LIMITED PARTNERSHIP
INDEX
<TABLE>
<CAPTION>
Page No.
<S> <C>
Balance Sheets, September 30, 1995 and December 31, 1994 . . . . . . . . . . . . . . . . . 4
Statements of Operations for the three
months ended September 30, 1995 and 1994 and the nine months
ended September 30, 1995 and 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Statements of Partners' Capital for the nine months
ended September 30, 1995 and 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Statements of Cash Flows for the nine months ended
September 30, 1995 and 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 - 9
</TABLE>
3
<PAGE> 4
RWB MEDICAL INCOME PROPERTIES 1 LIMITED PARTNERSHIP
Balance Sheets
September 30, 1995 and December 31, 1994
(Unaudited)
<TABLE>
<CAPTION>
ASSETS 1995 1994
------ ----------- -----------
<S> <C> <C>
Current Assets
Cash and equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,085,853 $ 1,327,313
Accounts receivable, less allowance
for doubtful accounts of $610,963 in 1995
and $1,233,671 in 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . 2,034,543 1,961,437
Current portion of note receivable . . . . . . . . . . . . . . . . . . . . . . . . 1,063,838 72,600
Prepaid expenses and other assets . . . . . . . . . . . . . . . . . . . . . . . 209,955 183,543
----------- -----------
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,394,189 3,544,893
Notes receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 779,447
Property, plant and equipment, net of
accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,308,097 13,498,598
Deferred financing costs, less accumulated
amortization of $24,323 in 1995 and
$17,262 in 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,754 29,816
----------- -----------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $15,725,040 $17,852,754
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
---------------------------------
Current Liabilities
Current portion of long term debt . . . . . . . . . . . . . . . . . . . . . . . . $ 83,466 $ 86,679
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 656,772 427,988
Accrued payroll and payroll taxes . . . . . . . . . . . . . . . . . . . . . . . . 308,259 227,285
Accrued vacation pay . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47,851 146,113
Accrued real estate taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92,520 191
Accrued insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86,353 77,614
Accrued management fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53,158 15,870
Patient deposits and trust liabilities . . . . . . . . . . . . . . . . . . . . . . 86,740 95,247
Other accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,327 23,531
Estimated settlements due to third parties . . . . . . . . . . . . . . . . . . . . 272,210 259,793
----------- -----------
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . 1,710,656 1,360,311
Mortgage notes and capital lease obligations . . . . . . . . . . . . . . . . . . . . . . . 926,085 984,037
Due to affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 207,605 202,846
----------- -----------
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,844,346 2,547,194
----------- -----------
Partners' capital (deficit)
Limited partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,252,997 15,508,120
General partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (372,303) (202,560)
----------- -----------
Total partners' capital . . . . . . . . . . . . . . . . . . . . . . . . . 12,880,694 15,305,560
----------- -----------
Total liabilities and partners' capital . . . . . . . . . . . . . . . . . $15,725,040 $17,852,754
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE> 5
RWB MEDICAL INCOME PROPERTIES 1 LIMITED PARTNERSHIP
Statements Of Operations
For The Three Months Ended September 30, 1995 and 1994
and the Nine Months Ended September 30, 1995 and 1994
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
-------------------------- --------------------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Income:
Patient service revenues, net . . . . . . . . . . . . . . $ 3,293,074 $ 3,307,327 $ 9,872,160 $ 9,391,643
Rental income . . . . . . . . . . . . . . . . . . . . . . - 50,342 36,300 380,342
----------- ----------- ----------- -----------
Total revenue . . . . . . . . . . . . . . . . . . . 3,293,074 3,357,669 9,908,460 9,771,985
----------- ----------- ----------- -----------
Operating expenses:
Costs of patient service . . . . . . . . . . . . . . . . . 1,780,046 1,631,633 5,050,453 4,374,772
Costs of rentals . . . . . . . . . . . . . . . . . . . . . - 3,626 - 14,528
Dietary . . . . . . . . . . . . . . . . . . . . . . . . . 267,699 257,514 769,217 745,097
Household and plant . . . . . . . . . . . . . . . . . . . 307,685 296,429 890,257 835,767
General and administrative . . . . . . . . . . . . . . . . 527,786 501,396 1,631,915 1,582,715
Employee health and welfare . . . . . . . . . . . . . . . 182,320 163,293 549,178 515,320
Depreciation and amortization . . . . . . . . . . . . . . 126,999 236,883 471,911 715,557
----------- ----------- ----------- -----------
Total operating expenses . . . . . . . . . . . . . 3,192,535 3,090,774 9,362,931 8,783,746
Operating income . . . . . . . . . . . . . . . . . 100,539 266,895 545,529 988,239
----------- ----------- ----------- -----------
Other income (expense):
Interest income . . . . . . . . . . . . . . . . . . . . . 20,230 7,952 45,063 24,396
Interest expense . . . . . . . . . . . . . . . . . . . . . (28,616) (23,921) (80,854) (66,396)
Provider fees . . . . . . . . . . . . . . . . . . . . . . (30,999) (30,998) (92,996) (92,996)
Other net . . . . . . . . . . . . . . . . . . . . . . . . 6,286 7,952 19,828 19,603
----------- ----------- ----------- -----------
Total other
income (expense) . . . . . . . . . . . . . . . (33,099) (39,015) (108,959) (115,393)
----------- ----------- ----------- -----------
Net income (loss) from
continuing operations. . . . . . . . . . . . . . 67,440 227,880 436,570 872,846
----------- ----------- ----------- -----------
Discontinued Operations
Loss from operations of dis-
continued operations of Lakecrest
Nursing Home . . . . . . . . . . . . . . . . . . . . . (302,073) - (359,703) -
Loss on sale of Lakecrest Nursing
Home . . . . . . . . . . . . . . . . . . . . . . . . . (586,906) - (1,393,908) -
----------- ----------- ----------- -----------
Net loss from discontinued
operations . . . . . . . . . . . . . . . . . . . (888,978) - (1,753,611) -
----------- ----------- ----------- -----------
Net income (loss) . . . . . . . . . . . . . . . . . $ (821,539) $ 227,880 $(1,317,041) $ 872,846
=========== =========== =========== ===========
Net income (loss) per weighted
average limited partnership unit
outstanding . . . . . . . . . . . . . . . . . . . . . . . $ (33.37) $ 9.26 $ (53.50) $ 35.46
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE> 6
RWB MEDICAL INCOME PROPERTIES 1 LIMITED PARTNERSHIP
Statements of Partners' Capital
For the Nine Months Ended September 30, 1995 and December 31, 1994
(Unaudited)
<TABLE>
<CAPTION>
Limited Partners General
Units Amount Partners Total
----- ------ -------- -----
<S> <C> <C> <C> <C>
Partners' capital (deficit),
December 31, 1994 . . . . . . . . . . . . . . . . . . . 22,895 $ 15,508,120 $ (202,560) $ 15,305,560
Distributions to partners
($45.00 per limited
partnership unit outstanding) . . . . . . . . . . . . . (1,030,275) (77,550) (1,107,825)
Net income (loss) . . . . . . . . . . . . . . . . . . . . . (1,224,848) (92,193) (1,317,041)
------ ------------ ---------- ------------
Partners' capital (deficit),
September 30, 1995 . . . . . . . . . . . . . . . . . . . 22,895 $ 13,252,997 $ (372,303) $ 12,880,694
====== ============ ========== ============
</TABLE>
6
<PAGE> 7
RWB MEDICAL INCOME PROPERTIES 1 LIMITED PARTNERSHIP
Statements of Cash Flows
Nine Months Ended September 30, 1995 and 1994
(Unaudited)
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Cash received from patient care . . . . . . . . . . . . . . . $ 9,847,781 $ 9,864,776
Cash paid to suppliers and employees . . . . . . . . . . . . . (8,576,294) (7,933,781)
Interest received . . . . . . . . . . . . . . . . . . . . . . 45,063 24,396
Interest paid . . . . . . . . . . . . . . . . . . . . . . . . (80,854) (66,396)
Provider fees . . . . . . . . . . . . . . . . . . . . . . . . (92,996) (92,996)
Other operating receipts . . . . . . . . . . . . . . . . . . . 19,828 19,603
----------- -----------
Net cash provided by operating activities . . . . . . . . 1,162,528 1,815,602
----------- -----------
Cash flows from investing activities:
Proceeds from sale of property . . . . . . . . . . . . . . . . 4,000,000 -
Loans made . . . . . . . . . . . . . . . . . . . . . . . . . . (1,133,261) 49,838
Collection on loans . . . . . . . . . . . . . . . . . . . . . 53,864 (370,030)
Cash payments for capital expenditures . . . . . . . . . . . . (160,358) (67,511)
----------- -----------
Net cash provided (used) by investing activities . . . . . 2,760,245 (387,703)
----------- -----------
Cash flows from financial activities:
Additional debt obligations . . . . . . . . . . . . . . . . . 218,855 -
Principal payment on debt obligations . . . . . . . . . . . . (280,019) (77,529)
Net borrowings (payments) to related parties . . . . . . . . . 4,757 29,377
Distributions to partners . . . . . . . . . . . . . . . . . . (1,107,825) (1,107,825)
----------- -----------
Net cash used by financing activities . . . . . . . . . . (1,164,232) (1,155,977)
----------- -----------
Net increase (decrease) in cash . . . . . . . . . . . . . . . . . 2,758,541 271,922
Cash and equivalents, beginning of period . . . . . . . . . . . . 1,327,312 565,622
----------- -----------
Cash and equivalents, end of period . . . . . . . . . . . . . . . $ 4,085,853 $ 837,544
=========== ===========
Reconciliation of net income to net cash
provided by operating activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . $(1,317,041) $ 872,846
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . . 471,911 715,557
Loss on sale of property . . . . . . . . . . . . . . . . . . . 1,393,907 -
Discontinued operations . . . . . . . . . . . . . . . . . . . 359,703 -
Decrease (increase) in accounts receivable . . . . . . . . . . (73,106) 10,342
Decrease in third party receivables . . . . . . . . . . . . . 12,418 82,450
(Increase) in prepaid expenses and other assets . . . . . . . (26,413) (71,616)
Increase in accounts payable and
accrued expenses . . . . . . . . . . . . . . . . . . . . . 341,149 206,023
----------- -----------
Net cash provided by operating activities . . . . . . . . . . . . $ 1,162,528 $ 1,815,602
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
7
<PAGE> 8
RWB MEDICAL INCOME PROPERTIES 1 LIMITED PARTNERSHIP
Notes to Financial Statements
(Unaudited)
(1) Financial Statements
These financial statements have been prepared in accordance with generally
accepted accounting principles. The financial information included in
these financial statements is unaudited, however, in management's opinion,
all normal recurring adjustments necessary for a fair presentation of the
results of operations for the periods included have been made.
Footnote disclosures which would substantially duplicate those contained in
the December 31, 1994 audited financial statements have been omitted from
this report.
(2) Mortgage Notes Payable and Capitalized Lease Obligations
Mortgage notes payable at September 30, 1995 and December 31, 1994 are
summarized as follows:
<TABLE>
<CAPTION>
1995 1994
------------ -----------
<S> <C> <C>
Prime plus 1% mortgage note payable
in monthly principal installments
of $6,667 plus interest, with a final
balloon principal payment due
March 1, 1998 $ 1,000,000 $ 1,056,200
Capitalized lease obligation payable monthly
with interest rates from 8% to 13.46% 9,551 14,516
------------ -----------
$ 1,009,551 $ 1,070,716
=========== ===========
</TABLE>
The aggregate annual maturities of mortgage notes payable and capital
lease obligations for the succeeding four fiscal years are as follows:
<TABLE>
<S> <C> <C>
1995 $ 21,657
1996 84,105
1997 84,105
1998 820,659
----------
1,010,526
Less amounts representing interest
on capital lease obligations (975)
----------
Net present value $1,009,551
==========
</TABLE>
8
<PAGE> 9
(3) Land, Buildings and Related Personal Property
On May 1, 1995, the Partnership purchased the stock of Lakecrest Nursing
Home, Inc., formerly Atrium Living Centers of Indiana, Inc., for a nominal
amount and canceled the lease agreement. The transaction is accounted for
as a purchase. When the acquisition occurred, the Partnership held the
property for sale. The sale of the assets occurred on September 1, 1995
(see footnote 4 below).
A summary of land, buildings, related personal property and accumulated
depreciation at September 30, 1995 and December 31, 1994 is as follows:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Land $ 533,200 $ 1,209,226
Buildings and improvements 11,571,063 16,115,557
Furniture and equipment 1,178,385 1,509,840
Property under capitalized leases 50,033 50,033
----------- -----------
Total $13,332,681 $18,884,656
Accumulated depreciation (5,024,584) (5,386,058)
----------- -----------
Net property, plant and equipment $ 8,308,097 $13,498,598
=========== ===========
</TABLE>
(4) Discontinued Operations and Sale of Lakecrest Nursing Home
Lakecrest Nursing Home, located in Merrillville, Indiana, was sold on
September 1, 1995. The loss from discontinued operations was $302,073 for
the quarter ended September 30, 1995 and $359,703 for the nine months ended
September 30, 1995. In addition, the Partnership recorded a loss on the
sale of the Lakecrest Nursing Home of $586,906 for the quarter ended
September 30, 1995 and $1,393,908 for the nine months ended September
30, 1995.
As noted in footnote 3, the operation of the Lakecrest Nursing Home was
acquired on May 1, 1995 as a stock acquisition. Prior to that time, the
Partnership had recorded rental income from the leased assets.
Consequently, the operation of the facility has been shown as a
discontinued operation effective May 1, 1995. The results of operations
for the period ended September 30, 1995 were:
<TABLE>
<S> <C>
Revenue, net $ 1,016,496
Expense 1,376,199
-----------
Net Loss $ (359,703)
===========
</TABLE>
(5) Related Party Transactions
Through September 30, 1995, QualiCorp, Inc., the parent of RWB Management
Corp. (the Managing General Partner of the Partnership) charged $92,046 of
property management fees and $114,711 of administrative expense to the
Partnership.
Through September 30, 1994, QualiCorp, Inc., the parent of RWB Management
Corp. (the Managing General Partner of the Partnership) charged $97,634 of
property management fees and $128,718 of administrative expense to the
Partnership.
9
<PAGE> 10
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
The Partnership sold the Lakecrest Nursing Home, located in Merrillville,
Indiana on September 1, 1995 recording a loss from operations for the period
ended September 30, 1995 of $359,703 less payments and expenses of $640,000 and
a loss from sale of the asset of $1,393,908. The Partnership received
$4,000,000 of cash plus a one million ($1,000,000) dollar promissory note
payable on September 1, 1996 at an interest rate of nine (9%) percent per
annum.
Cash balances for the nine months ended September 30 have declined $448,500,
exclusive of the sale proceeds, due to the loss on the discontinued operations
and the ongoing facility redecoration plans and needed equipment purchases. It
is expected these continuing expenditures will total $250,000 over the next
fifteen months.
During the fourth quarter, the Partnership will make its regular distribution
of $15.00 per unit on November 15 and in addition, make a special distribution
of the excess cash from the sale of the Lakecrest facility.
Medicaid and Medicare reimbursement may well change during the next eighteen
months if the proposals being discussed in Washington, DC are passed and then
signed by the President. It appears Congress may give back to the States
responsibility for implementation of the Medicaid program and fund the program
through Block Grants. In addition, some changes may be made in the OBRA
regulations. Changes in Medicare reimbursement may include establishing cost
limits on ancillary services (including therapy, drugs, and equipment), capital
cost limits, and possibly a prospective reimbursement system. What is clear,
however, is that any new legislation will encourage providers of care to manage
with less revenue from traditional Medicare and Medicaid programs. Expenses
will have to be controlled even more than before.
The Partnership will continue to make quarterly distributions to its limited
partners based upon cash flow generated by facility operations after
considering cash requirements for debt services, needed improvement to its
property and cash reserves. There can be no assurance the current distribution
of $15.00 per unit per quarter will be maintained into 1996.
Operations
The Partnership net loss for the quarter ended September 30, 1995 was $821,538
which included the loss from the discontinued operation of the Lakecrest
Nursing Home and the loss on the sale of the Lakecrest property of $888,978.
The net income from continuing operations of $67,440 compared unfavorably to
the third quarter of 1994 profit of $227,880.
The primary reason for the lower earnings in 1995 as compared to 1994 is due to
the higher cost associated with caring for more acutely ill residents and the
highly competitive managed care market in the Miami, Florida area. We believe
the Southpoint facility has been positioned to gain an increasing share of the
managed care market, however, at the same time better expense controls must be
introduced in order to make this a profitable business segment. It is expected
the facility will receive shortly its routine cost limit waiver which will also
benefit net income.
Expenses on a year to date basis reflect the fact the Southpoint facility
introduced its expanded ancillary programs during the third quarter of 1994.
The cost of patient care increased for the nine months ended September 30, 1995
over 1994 by $675,681 with approximately $560,000 being attributed to the
expanded ancillary programs. Household and Plant costs continue to reflect
costs of the continuing redecorating/improvement program.
10
<PAGE> 11
PART II
ITEM 1
REPORT ON FORM 8-K
Report on Form 8-K dated September 8, 1995, Sale of Merrillville, Indiana
property known as Lakecrest Nursing Home.
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.
RWB MEDICAL INCOME PROPERTIES 1
LIMITED PARTNERSHIP
Registrant
By: /s/ John H. Stoddard Date: October 31, 1995
--------------------------------------- ----------------------
John H. Stoddard
President and Chief Financial Officer
RWB Management Corp.
Managing General Partner
11
<PAGE> 12
RWB MEDICAL INCOME PROPERTIES 1 LIMITED PARTNERSHIP
Index of Exhibits
27 Financial Data Schedule for Third Quarter 1995
10-Q (for SEC use only)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF RWB MEDICAL INCOME PROPERTIES 1 LIMITED PARTNERSHIP FOR
THE QUARTER ENDED SEPTEMBER 30, 1995, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 4,085,853
<SECURITIES> 0
<RECEIVABLES> 2,645,506
<ALLOWANCES> 610,963
<INVENTORY> 0
<CURRENT-ASSETS> 7,394,189
<PP&E> 13,332,681
<DEPRECIATION> 5,024,584
<TOTAL-ASSETS> 15,725,040
<CURRENT-LIABILITIES> 1,710,656
<BONDS> 926,085
<COMMON> 0
0
0
<OTHER-SE> 12,880,694<F1>
<TOTAL-LIABILITY-AND-EQUITY> 15,725,040
<SALES> 9,872,160
<TOTAL-REVENUES> 9,908,460
<CGS> 0
<TOTAL-COSTS> 9,362,931
<OTHER-EXPENSES> 28,105
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 80,854
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 436,570
<DISCONTINUED> (359,703)
<EXTRAORDINARY> (1,393,908)
<CHANGES> 0
<NET-INCOME> (1,317,041)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1> REPRESENTS TOTAL PARTNERSHIP CAPITAL INCLUDING NET INCOME NET OF
DISTRIBUTIONS.
</FN>
</TABLE>
