UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
For annual and transition reports pursuant to sections 13 or 15 (d)
of the Securities Exchange Act of 1994.
(Mark One)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1994
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 0-14435
CONSOLIDATED RESOURCES HEALTH CARE FUND IV
(Exact name of registrant as specified in its charter)
Georgia 58-1582370
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 404-698-9040
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Limited
Partnership Units
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
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulations S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definite proxy or
information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ X ]
All of the registrant's 26,283 Limited Partnership Units are held by
non-affiliates. The aggregate market value of units held by non-
affiliates is not determinable since there is no public trading market
for Limited Partnership Units and transfers of units are subject to
certain restrictions.
THERE ARE NO EXHIBITS.
PAGE ONE OF 30 PAGES.
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<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index Page Number
Report of Independent Certified Public Accountants 3
Consolidated Financial Statements
Balance Sheets - December 31, 1994 and 1993 5-6
Statements of Operations 7
- Years ended December 31, 1994, 1993 and 1992
Statements of Partners' Equity (Deficit) 8
- Years ended December 31, 1994, 1993 and 1992
Statements of Cash Flows 9
- Years ended December 31, 1994, 1993 and 1992
Summary of Significant Accounting Policies 13
Notes to Consolidated Financial Statements 17
The following financial statement schedules for the years ended December
31, 1994, 1993 and 1992 of the Registrant are submitted herewith in
response to Item 14 (a)(2):
Schedule V - Property and Equipment 26
Schedule VI - Accumulated Depreciation of
and Equipment Property 27
Schedule VIII - Valuation and Qualifying Accounts 28
Schedule X - Supplementary Income Statement
Information 29
All other schedules of the Partnership for which provision is made in
the applicable regulations of the Securities and Exchange Commission are
not required under the related instructions, are inapplicable or have
been disclosed in the notes to the consolidated financial statements
and, therefore, have been omitted.
2
<PAGE>
Report of Independent Certified Public Accountants
The Partners
Consolidated Resources Health Care Fund IV and Subsidiaries
We have audited the accompanying consolidated balance sheets of
Consolidated Resources Health Care Fund IV and Subsidiaries (limited
partnerships) (the "Partnership") as of December 31, 1994 and 1993, and
the related consolidated statements of operations, partners' equity
(deficit) and cash flows for each of the three years in the period ended
December 31, 1994. We have also audited the schedules listed in the
accompanying index. These consolidated financial statements and
schedules are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these consolidated financial
statements and schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits
to obtain reasonable assurance about whether the consolidated financial
statements and schedules are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements and schedules. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall presentation of the consolidated financial statements and
schedules. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial
position of Consolidated Resources Health Care Fund IV and Subsidiaries
(limited partnerships) at December 31, 1994 and 1993, and the
consolidated results of their operations and their cash flows for each
of the three years in the period ended December 31, 1994, in conformity
with generally accepted accounting principles.
Also, in our opinion, the schedules present fairly, in all material
respects, the information set forth therein.
3
<PAGE>
The accompanying consolidated financial statements have been prepared
assuming that the Partnership will continue as a going concern. As
discussed in Notes 3 and 4 of the consolidated financial statements, the
Partnership has suffered recurring losses from operations, has a working
capital deficiency, has defaulted on certain debt, and has no assurance
of any financial support from the General Partners. These conditions
raise substantial doubt about the Partnership's ability to continue as a
going concern and to realize its plan to sell or otherwise dispose of
its remaining properties by October 18, 1997. Management's plans
regarding these matters are described in the Summary of Significant
Accounting Policies and Note 3. The consolidated financial statements
and schedules do not include any adjustments that might result from the
outcome of these uncertainties.
BDO Seidman
Atlanta, Georgia
March 10, 1995
4
<PAGE>
Consolidated Resources Health Care Fund IV
and Subsidiaries
(limited partnerships)
Consolidated Balance Sheets
December 31, 1994 1993
Assets
Current
Cash and cash equivalents (Note 14) $ 820,321 $ 917,478
Accounts receivable, net of allowance
for doubtful accounts of $72,978 and
$80,864 (Note 12) 367,145 637,317
Prepaid expenses and other 37,952 76,136
Property held for sale (Notes 4 and 6) 3,268,042 2,016,582
Total current assets 4,493,460 3,647,513
Property and equipment (Notes 4, 6 and 8)
Land - 174,333
Buildings and improvements - 5,610,177
Equipment and furnishings - 501,674
- 6,286,184
Less accumulated depreciation
and amortization - 2,779,770
Net property and equipment - 3,506,414
Other
Restricted escrow and other deposits
(Note 4) 329,589 333,332
Note receivable (Note 8) 250,000 250,000
Deferred loan costs, net of
accumulated amortization
of $90,048 and $78,480 120,699 132,267
Total other assets 700,288 715,599
$5,193,748 $7,869,526
See accompanying summary of significant accounting policies
and notes to consolidated financial statements.
5
<PAGE>
Consolidated Resources Health Care Fund IV
and Subsidiaries
(limited partnerships)
Consolidated Balance Sheets
December 31, 1994 1993
Liabilities and Partners' Deficit
Current liabilities
Current maturities of long-term debt
obligations, including debt in
default of $4,683,405 and $1,951,802
(Note 4) $4,683,405 $2,006,802
Accounts payable 112,059 202,940
Accrued compensation 144,832 111,019
Insurance payable 38,129 25,046
Accrued interest (Notes 1 and 4) 397,326 374,012
Accrued real estate taxes 18,833 1,246,076
Total current liabilities 5,394,584 3,965,895
Advances from affiliates and
former affiliates
(Notes 1 and 9) 1,941,359 2,174,747
Long-term debt obligations, less current
maturities and unamortized discounts
(Note 4) - 2,825,000
Total liabilities 7,335,943 8,965,642
Commitments and Contingencies
(Notes 3, 4, 9, and 12)
Partners' deficit (Note 5)
Limited Partners (1,403,484) (383,426)
General Partners (738,711) (712,690)
Total partners' deficit (2,142,195) (1,096,116)
$ 5,193,748 $ 7,869,526
See accompanying summary of significant accounting policies
and notes to consolidated financial statements.
6
<PAGE>
Consolidated Resources Health Care Fund IV
and Subsidiaries
(limited partnerships)
Consolidated Statements of Operations
Years ended December 31, 1994 1993 1992
Revenue
Operating revenue (Note 8) $ 4,997,231 $ 9,319,314 $11,111,446
Interest income 73,854 43,816 74,555
Total revenue 5,071,085 9,363,130 11,186,001
Operating costs and expenses
Operating expenses (Note 8) 4,718,267 7,691,005 9,080,633
Interest (Notes 1 and 4) 453,979 642,391 860,973
Depreciation and amortization 324,202 607,138 712,487
Management fees (Note 2) 317,271 774,555 875,755
Real estate taxes 41,284 365,415 382,265
Partnership administration
costs (Note 2) 179,060 171,660 189,288
Total operating costs and
expenses 6,034,063 10,252,164 12,101,401
Operating loss (962,978) (889,034) (915,400)
Gain on sale of properties
(Note 8) 607,169 2,408,667 -
Loss on write-down of
properties and property held
for sale (Note 6) - - (2,133,920)
Income (loss) before
extraordinary item (355,809) 1,519,633 (3,049,320)
Extraordinary gain on
extinguishment of debt
(Notes 1 and 10) 309,730 1,333,802 -
Net income (loss) $ (46,079) $ 2,853,435 $(3,049,320)
Net income (loss) per limited
partnership unit
Income (loss) before
extraordinary gain (12.30) 58.25 (111.38)
Extraordinary gain from
debt extinguishment 11.31 50.24 -
Net income (loss) per limited
partnership unit $ (.99) $ 108.49 $ (111.38)
Distributions paid per limited
partnership unit $ 38.05 $ 28.54 $ -
Limited partnership units
outstanding 26,283 26,283 26,283
See accompanying summary of significant accounting policies
and notes to consolidated financial statements.
7
<PAGE>
Consolidated Resources Health Care Fund IV
and Subsidiaries
(limited partnerships)
Consolidated Statements of Partners' Equity (Deficit)
Years Ended December 31, 1994, 1993 and 1992
Total
Partners'
Equity
Limited General (Deficit)
Balance,
at December 31, 1991 $ 442,349 $(592,580) $ (150,231)
Net loss (2,927,347) (121,973) (3,049,320)
Balance,
at December 31, 1992 (2,484,998) (714,553) (3,199,551)
Net income 2,851,572 1,863 2,853,435
Distributions (Note 5) (750,000) - (750,000)
Balance,
at December 31, 1993 (383,426) (712,690) (1,096,116)
Net loss (20,058) (26,021) (46,079)
Distributions (Note 5) (1,000,000) - (1,000,000)
Balance,
at December 31, 1994 $(1,403,484) $(738,711) $(2,142,195)
See accompanying summary of significant accounting policies
and notes to consolidated financial statements.
8
<PAGE>
Consolidated Resources Health Care Fund IV
and Subsidiaries
(limited partnerships)
Consolidated Statements of Cash Flows
Years ended December 31, 1994 1993 1992
Operating activities
Net income (loss) $ (46,079) $ 2,853,435 $(3,049,320)
Adjustments to reconcile
net income (loss) to cash
used in operating activities:
Depreciation and
amortization 324,202 607,138 712,487
Gain on sale of
properties (607,169) (2,408,667) -
Loss on write-down of
properties and property
held for sale - - 2,133,920
Extraordinary gain on
debt forgiveness (309,730) (1,333,802) -
Amortization of discount on
long-term debt obligations - - 13,084
Changes in assets and
liabilities:
Accounts receivable 270,172 11,011 (154,127)
Prepaid expenses and other 38,184 178,176 (35,948)
Other assets 3,743 35,055 18,720
Accounts payable and
accrued liabilities (34,444) (335,260) 274,916
Cash used in operating
activities (361,121) (392,914) (86,268)
Investing activities
Additions to property held
for sale (74,263) - -
Payment for purchases of
property and equipment - (83,699) (245,978)
Net proceeds from sale of
properties 1,410,283 5,374,810 -
Payment for settlement of
obligations owed to former
affiliates - (425,000) -
Cash provided by (used in)
investing activities 1,336,020 4,866,111 (245,978)
Financing activities
Principal payments on
long term debt obligations (148,398) (3,325,747) (139,731)
Distributions to limited
partners (1,000,000) (750,000) -
Cash proceeds from
settlement 76,342 - -
Cash used in financing
activities (1,072,056) (4,075,747) (139,731)
9
<PAGE>
Consolidated Resources Health Care Fund IV
and Subsidiaries
(limited partnerships)
Consolidated Statements of Cash Flows
Years ended December 31, 1994 1993 1992
Net increase (decrease) in cash
and cash equivalents (97,157) 397,450 (471,977)
Cash and cash equivalents,
beginning of year 917,478 520,028 992,005
Cash and cash equivalents,
end of year $ 820,321 $ 917,478 $ 520,028
See accompanying summary of significant accounting policies
and notes to consolidated financial statements.
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Consolidated Resources Health Care Fund IV
and Subsidiaries
(limited partnerships)
Summary of Significant Accounting Policies
Organization
Consolidated Resources Health Care Fund IV (the "Partnership") was
organized on August 10, 1984 as a Limited Partnership under the
provisions of the Georgia Uniform Limited Partnership Act for the
purpose of acquiring, operating and holding for investment and future
capital appreciation income producing, healthcare related real
properties.
The General Partners of the Partnership are WelCare Consolidated
Resources Corporation of America, ("WCRCA" or the "Corporate General
Partner"), a Nevada corporation, WelCare Service Corporation-IV as
managing general partner("WSC-IV" or the "Managing General Partner"),
a Georgia corporation, and Consolidated Associates IV ("CA-IV"), a
Georgia general partnership (collectively the "General Partners").
WCRCA and WSC-IV are wholly-owned subsidiaries of WelCare Acquisition
Corp, which in turn, is a subsidiary of WelCare International, Inc.
("WelCare"). WelCare, a privately owned Georgia corporation, is
engaged in the operation, acquisition, property management and
oversight management of long-term care facilities. Consolidated
Associates IV is composed of WCRCA, as the managing general partner,
and individuals who were associated with Consolidated Resources
Corporation of America ("CRCA").
Pursuant to an agreement dated October 30, 1985, CRCA, a Georgia
corporation that initially was the Corporate General Partner of the
Partnership, was merged into a subsidiary of Southmark Corporation
("Southmark"). The name of the surviving Southmark subsidiary was
then changed to Southmark Consolidated Resources Corporation of
America ("SCRCA"). Southmark emerged from Chapter 11 bankruptcy on
August 10, 1990 and is liquidating most of its assets under its plan
of reorganization. On November 20, 1990, WelCare Acquisition Corp.
acquired from Southmark all the stock of SCRCA whose name was then
changed to WelCare Consolidated Resources Corporation of America.
Effective January 1992, WSC-IV, was added as the Managing General
Partner to the Partnership.
A majority of interest of the Partnership's Limited Partners approved
a proposal, on October 18, 1994, which provides for the sale of all of
the Partnership's remaining assets and the eventual dissolution of the
Partnership, as outlined in a proxy statement dated September 28,
1994. Under the approved proposal, the Limited Partners consented for
the Managing General Partner to attempt to sell or otherwise dispose
of its remaining properties prior to October 18, 1997. Upon the
disposition of all of its assets, the approved proposal requires that
the Managing General Partner dissolve the Partnership.
13
<PAGE>
Consolidated Resources Health Care Fund IV
and Subsidiaries
(limited partnerships)
Summary of Significant Accounting Policies
As discussed in Item 8, Note 4, the Partnership's three mortgage debt
obligations were in default as of December 31, 1994. The Partnership
will continue to operate the facilities and plans to
(A) sell the properties to prospective purchasers or (B) negotiate a
settlement with its lenders.
At December 31, 1994, the Partnership has held available for sale all
of its nursing home facilities. Accordingly, the Partnership has
classified the facilities as property held for sale in the
accompanying balance sheet.
The consolidated financial statements do not reflect assets the
partners may have outside their interests in the Partnership, nor any
personal obligations, including income taxes, of the individual
partners.
Consolidation
The consolidated financial statements include the accounts of the
Partnership and the partnership in which it holds a majority interest.
All significant intercompany balances and transactions have been
eliminated. The amount of minority interest is immaterial.
Property Held for Sale
Property held for sale at December 31, 1994 consists of three nursing
home facilities owned by the Partnership and carried at the lower of
cost or net realizable value less estimated costs to dispose. In
accordance with a plan approved by the Limited Partners on October 18,
1994, the Managing General Partner has been given permission to either
sell or otherwise dispose of the Partnership's assets by October 18,
1997. Accordingly, all facilities of the Partnership have been
classified as property held for sale as of December 31, 1994.
Property held for sale at December 31, 1993 consist of one property
subject to a court directed plan of disposition. As discussed in Note
8, this property was sold in January 1994.
Property and Equipment
Property and equipment at December 31, 1993 consisted of three nursing
home facilities owned by the partnership which are recorded at cost
less appropriate reductions for permanent declines in net realizable
value. Property and equipment are not adjusted for increases in net
realizable value.
14
<PAGE>
Consolidated Resources Health Care Fund IV
and Subsidiaries
(limited partnerships)
Summary of Significant Accounting Policies
Depreciation and Amortization
Property and equipment are depreciated using the straight-line method
over lives of 5 to 30 years. Amortization of leased assets is
included in depreciation and amortization expense. Renewals and
betterments are capitalized and repairs and maintenance are charged to
operations as incurred.
Deferred Loan Costs
Deferred loan costs are amortized over the terms of the respective
loans using the straight-line method. Amortization of deferred loan
costs is included in depreciation and amortization expense.
Operating Revenue
Operating revenue is recorded when services are rendered and includes
amounts reimbursable by Medicaid and Medicare. Medicare revenue is
recorded at the applicable net reimbursement rates; therefore, no
contractual adjustments are reported.
Income Taxes
No provision has been made in the financial statements for Federal
income taxes because under current law, no Federal income taxes are
paid directly by the Partnership. The Partnership reports certain
transactions differently for tax and financial statement purposes (See
Note 7).
Allocation of Net Income or Net Loss
The Partnership's net profits and net losses (other than net profits
or net losses from a sale or refinancing of Partnership property) are
allocated 96% to the Limited Partners and 4% to the General Partners.
Distributions are allocated on the basis described in Note 5.
Net profits and losses resulting from a sale or refinancing shall be
allocated 99% to the Limited Partners and 1% to the General Partners.
Net profits resulting from a sale or refinancing shall be allocated in
the following order:
1. First, 1% to the General Partners and 99% to the Limited
Partners until the net profits allocated to the Limited
Partners from such sale or refinancing equals the excess of
the greater of the following items over their capital
account immediately prior to such sale or refinancing:
(a) zero; or
(b) the Limited Partners' invested capital immediately prior
to such sale or refinancing plus 9% per annum of the
Limited Partners' average invested capital for all
fiscal years to the extent not received through prior
15
<PAGE>
Consolidated Resources Health Care Fund IV
and Subsidiaries
(limited partnerships)
Summary of Significant Accounting Policies
distributions of distributable cash from operations or
sale or refinancing proceeds; or
(c) the amount of sale or refinancing proceeds distributable
to the Limited Partners;
2. Second, to the General Partners until the net profits
allocated to the General Partners from such sale or
refinancing equals the excess of the greater of the
following items over their capital account immediately prior
to such sale or refinancing:
(a) zero; or
(b) the amount of sale or refinancing proceeds distributable
to the General Partners from such sale or refinancing;
3. Third, any remaining net profits shall be allocated 15% to
the General Partners and 85% to the Limited Partners.
Net Income (Loss) Per Limited Partnership Unit
Net income (loss) per Limited Partnership Unit is computed by dividing
net income (loss) allocated to the Limited Partners by the number of
Limited Partnership units outstanding.
Reclassifications
Certain 1993 amounts have been reclassified to conform to the 1994
presentation.
Statements of Cash Flows
For purposes of this statement, cash equivalents include bank
repurchase agreements backed by U.S. Government Securities, U.S.
Treasury Obligations and money market funds.
16
<PAGE>
Consolidated Resources Health Care Fund IV
and Subsidiaries
(limited partnerships)
Notes to Consolidated Financial Statements
1. Transactions With Former Affiliates
The Partnership paid property management fees based on a percentage of
gross property operating revenues to National Heritage, Inc. ("NHI"),
a former affiliate of Southmark, for supervising the maintenance and
operations of the Partnership's properties. At the beginning of 1991,
all seven of the Partnership's nursing homes were managed by NHI.
During 1991, one of the facilities was sold and a company that is
unaffiliated with WelCare, Southmark or NHI assumed management of
another facility. Also, during 1991, the Partnership terminated NHI
as manager of three more facilities and effective January 31, 1992,
the Partnership terminated NHI as manager of the remaining two
facilities. NHI provided accounting services for a varying number of
homes through September 30, 1993. For services provided during its
management period, fees paid to NHI ranged from 1% to 2% of operating
revenues for accounting services and 4% to 5% of operating revenues
for management services.
In December 1991, NHI, through a lawsuit, sought to take possession of
certain of the Partnership's properties. In 1993, the Partnership and
NHI reached an agreement which settled all lawsuits and claims (See
Note 10). In connection with this lawsuit, the Partnership retained
possession of all of the properties.
Amounts claimed payable to former affiliates (primarily Southmark and
the Corporate General Partner, who formerly was an affiliate of
Southmark), which totaled $1,941,359 and $2,174,747, at December 31,
1994 and 1993 respectively, are classified as advances from affiliates
and former affiliates on the accompanying balance sheets. In July
1991, Southmark filed suit demanding payment of these alleged
advances. In 1991, after WelCare's affiliate acquired the Corporate
General Partner, it challenged the validity of these payables through
claims filed against the Southmark Bankruptcy Estate. In February
1994, the suits were settled whereby the Partnership was released of
all liabilities to Southmark (see Note 9). Accordingly, the
Partnership has recorded a gain on debt extinguishment related to this
settlement totalling $309,730 which includes payables to Southmark and
former affiliates of Southmark of $233,388 plus settlement proceeds
paid to the Partnership by Southmark totalling $76,342. The Corporate
General Partner still has claims outstanding against the Partnership.
2. Management Fees and Affiliate Transactions
An affiliate of the Corporate General Partner was responsible for
management of three facilities as of December 31, 1991, and assumed
responsibility for two additional facilities effective January 31,
1992. During 1993, the affiliate of the Corporate General Partner
received fees ranging from 4% to 5% of gross operating revenues on the
facilities that the affiliate managed.
During 1994, 1993 and 1992, the affiliate of the Corporate General
Partner received oversight fees and management fees from the
Partnership amounting to $317,271, $351,882 and $391,606,
17
<PAGE>
Consolidated Resources Health Care Fund IV
and Subsidiaries
(limited partnerships)
Notes to Consolidated Financial Statements
respectively, and was reimbursed for costs incurred in connection with
the administration of Partnership activities of $55,928, $59,762 and
$74,543, respectively.
During 1993, an affiliate of the Corporate General Partner advanced
funds to a subsidiary of the Partnership to pay off the bond financing
secured by Heritage Manor of Hiawatha. These advances were repaid
when the facility was sold. Total interest paid on these advances
during 1993 was $30,287, which accrued at 7%.
3. Going Concern
The Partnership's consolidated financial statements have been
presented on the basis that it is a going concern, which contemplates
the realization of assets and the satisfaction of liabilities in the
normal course of business. At December 31, 1994, the Partnership has
experienced working capital deficiencies, had defaulted on certain
debt obligations and had no assurance of any financial support from
the General Partners.
The Partnership's continued existence is dependent upon its ability to
generate sufficient cash flow to meet its obligations on a timely
basis, to comply with the terms of its financing agreements, and to
obtain additional financing as may be required. During 1993 and 1992,
the Corporate General Partner reversed the decline of operations at
the Partnership's facilities, and strengthened working capital. The
Partnership reached a settlement with Southmark during the first
quarter of 1994 (See Item 3).
4. Long-Term Debt Obligations
Long-term debt obligations consisted of:
1994 1993
10.25% First Mortgage Revenue Bonds,
related to The Oaks of Mountain Grove $2,825,000 $2,880,000
9.4% note related to Heritage Manor of
Emporia, collateralized by real estate with
recourse to other assets of the Partnership;
payable in monthly installments of principal
and interest of $16,215, due April 1, 1996 1,174,905 1,237,214
9.4% note related to Heritage Manor of
Hoisington, collateralized by real estate
with recourse to other assets of the
Partnership; payable in monthly install-
ments of principal and interest of
$9,194, due April 1, 1996 683,500 714,588
4,683,405 4,831,802
Less current maturities 4,683,405 2,006,802
$ - $2,825,000
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<PAGE>
Consolidated Resources Health Care Fund IV
and Subsidiaries
(limited partnerships)
Notes to Consolidated Financial Statements
The 10.25% First Mortgage Revenue Bonds are payable in varying amounts
until maturity, November 1, 2013. The Bonds are collateralized by
real estate. In connection with the Bonds, debt service funds of
$305,608 and $295,398 at December 31, 1994 and 1993, respectively, are
included in restricted escrow and other deposits on the accompanying
balance sheets. The bond agreement includes covenants and
restrictions on the facilities operations and financial activities.
Included in these covenants is the requirement to maintain a debt
service coverage ratio of at least 120%. At December 31, 1994, the
facility had a debt service ratio of (17%) and was therefore
technically in default of this obligation. As a result, this
obligation was classified as current in the accompanying balance sheet
at December 31, 1994. The Partnership was not in default with respect
to this obligation at December 31, 1993.
The Partnership was in default on the long-term debt related to
Heritage Manor of Hoisington and Heritage Manor of Emporia at December
31, 1994 and 1993 due to failure to maintain certain minimum debt
service escrow balances. As a result, these obligations are
classified as current liabilities in the accompanying balance sheets
for 1994 and 1993.
At December 31, 1994, substantially all property held for sale is held
as collateral for long-term debt obligations.
The Partnership paid interest of $430,665, $800,379 and $701,531 in
1994, 1993 and 1992, respectively.
5. Distributions
Distributions to the Partners are paid from operations of the
Partnership's properties, or from sales or refinancing of properties.
Cash from operations is distributed 96% to the Limited Partners and 4%
to the General Partners. However, no distributions of cash from
operations may be made to the General Partners in any year until the
Limited Partners have received distributions for such year equal to 9%
of their invested capital.
Distributions of cash from sales and refinancing are made in the
following order:
(a) first to the Limited Partners in an amount equal to their
invested capital; then,
(b) to the Limited Partners in an amount necessary to provide
the Limited Partners with a 9% cumulative, non-compounded
return on invested capital to the extent not previously
received through distributions of distributable cash from
operations; then,
(c) to the General Partners in an amount up to 3% of the sales
price of all properties on a cumulative basis; then,
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<PAGE>
Consolidated Resources Health Care Fund IV
and Subsidiaries
(limited partnerships)
Notes to Consolidated Financial Statements
(d) the balance 15% to the General Partners and 85% to the
Limited Partners.
Due to improvements in operations obtained after WelCare's affiliate
acquired the Corporate General Partner, the Corporate General Partner
caused the Partnership to distribute $150,000 to the Limited Partners
during 1991. No distributions were made in 1992. During 1993, the
Partnership distributed $750,000 of proceeds from facility sales (see
Note 8). During 1994, the Partnership distributed $1,000,000 of
proceeds from the sale of the Rainbow Springs facility (see Note 8).
Cumulative distributions paid to the Limited Partners as of December
31, 1994 were $5,446,590. There have been no distributions to the
General Partners.
6. Property Held for Sale and Loss from Write-Down of Properties
At December 31, 1994, property held for sale consists of the net book
value of property and equipment of The Oaks of Mountain Grove,
Heritage Manor of Emporia and Heritage Manor of Hoisington. At
December 31, 1993, property held for sale consisted of the net book
value of property and equipment of Rainbow Springs.
The carrying value of the Partnership's interest in Rainbow Springs
was reduced by $2,133,920 in 1992 and $2,257,654 in 1990 to its
estimated fair value, as determined by the Corporate General Partner.
Rainbow Springs was sold in 1994 (See Note 8).
The reduction, by property, was as follows:
1994 1993
Heritage Manor of Emporia $1,317,825 $1,317,825
Heritage Manor of Mountain Grove 470,941 470,941
Heritage Manor of Hoisington 447,506 447,506
Rainbow Springs (1) - 4,391,574
$2,236,272 $6,627,846
(1) Property was sold in 1994
20
<PAGE>
Consolidated Resources Health Care Fund IV
and Subsidiaries
(limited partnerships)
Notes to Consolidated Financial Statements
7. Taxable Income (Loss)
A reconciliation between the consolidated financial statement net
income (loss) and income (loss) for tax purposes follows:
1994 1993 1992
Financial statement net
income (loss) $ (46,079) $ 2,853,435 $(3,049,320)
Add:
Jobs tax credit
salary reduction - - 7,683
Bad debts per
financial statements 9,754 133,547
Provision for loss on
write-down of properties
and assets held
for sale - - 2,133,920
Excess of financial state-
ment over tax amortization 844 11,568 -
Interest expense per financial
statements not deductible - 39,612 -
Other - 217,757 4,623
Taxable income excluded
from financial statement
income 13,607 9,776 -
Penalties - - 51,651
Deduct:
Excess of tax over financial
statement depreciation (103,458) (85,529) (102,641)
Excess of tax over financial
statement amortization - - (17,796)
Excess of financial
statement over tax gain
on sale of properties (4,753,110) (1,527,653) -
Financial statement income
excluded from taxable
income (16,778) (118,712) (173,232)
Taxable income (loss) $(4,895,220) $ 1,400,254 $(1,011,565)
21
<PAGE>
Consolidated Resources Health Care Fund IV
and Subsidiaries
(limited partnerships)
Notes to Consolidated Financial Statements
8. Property Dispositions
The Partnership sold its interest in Heritage Manor of Hiawatha
("Hiawatha") and Kent's Nursing Care Center ("Kent's") pursuant to a
purchase and sale agreement dated as of October 1, 1993.
These facilities were sold for $3,900,000, of which $3,150,000 was
allocated for Kent's and $750,000 for Hiawatha. Each of these
facilities was sold for a purchase price that equaled or exceeded the
appraised value of the facility. The Partnership received gross
proceeds of $3,750,000 and a note from the Purchaser in the amount of
$200,000 which was repaid in 1994. The Partnership recognized a total
gain of approximately $2,076,000 from the sale, $1,886,000 and
$190,000 from Kent's and Hiawatha, respectively.
On April 1, 1993, River Oaks Care Center ("River Oaks") was sold in a
transaction whereby the purchaser acquired the facility and rights to
its net operating cash flow for the period from January 1, 1993
through March 31, 1993. A gain of $332,913 was recognized by the
Partnership from the sale. The Partnership received cash of $590,000
(net of $10,000 in closing costs). During the three month period
ended March 31, 1993, River Oaks earned approximately $602,000 in
revenues and incurred the same amount of expenses.
During the nine month period ended September 30, 1993, Kent's earned
approximately $1,737,000 in revenue and incurred approximately
$1,668,000 in expenses. During the same period, Hiawatha earned
approximately $903,000 in revenue and incurred approximately
$1,075,000 in expenses.
Heritage Manor of Red Boiling Springs was sold effective April 30,
1991, and a loss of $26,521 was recognized. The total sales price was
$2,950,000. The Partnership received cash of $1,115,000 and a note
receivable from the purchaser for $250,000 (quarterly interest
payments are due with interest at the rate of 11% per annum, with
principal and any unpaid accrued interest due April 30, 1996).
In 1989, the joint owner of Rainbow Springs filed for bankruptcy
protection. Rainbow Springs was auctioned for sale by the bankruptcy
court with jurisdiction over this joint owner on January 31, 1994.
The sale was closed on March 21, 1994 at a purchase price of
$4,200,000 Under the allocation of proceeds, the Partnership received
proceeds of $1,410,283 (net of delinquent real estate taxes totalling
$1,213,468) and recognized, a gain on sale of $607,169.
9. Southmark Litigation
In November 1990, the Partnership filed claims against Southmark in
the United States Bankruptcy Court for the Northern District of Texas.
In August of 1991, the Partnership was served notice that on July 12,
1991, Southmark filed suit against the Partnership, the Corporate
General Partner, partnerships controlled by affiliates of the
Corporate General Partner and partnerships and corporations which are
22
<PAGE>
Consolidated Resources Health Care Fund IV
and Subsidiaries
(limited partnerships)
Notes to Consolidated Financial Statements
unaffiliated with the Partnership or the Corporate General Partner.
The suit was also filed in the United States Bankruptcy Court for the
Northern District of Texas, Dallas Division. On October 15, 1991, the
Partnership filed its response, including counterclaims against
Southmark, for alleged fraud and misrepresentation and asserting that
in fact Southmark owed amounts to the Partnership as represented by
Proof of Claims filed against Southmark's bankruptcy estate.
The Partnership and Southmark reached a settlement agreement
effectively filed with the Bankruptcy Court in January 1994, regarding
the claims filed by the Partnership against Southmark and Southmark's
suit against the Partnership. Under this settlement agreement,
Southmark releases all claims against the Partnership and recognized
the Partnership's claims. In settlement of the Partnership's claims,
Southmark paid $76,345 to the Partnership in 1994.
10. NHI Settlement
The Partnership had filed a lawsuit against NHI seeking to void all
promissory notes from the Partnership to NHI. NHI had also brought
suit against the Partnership seeking payment of the notes and mortgage
foreclosure.
In October 1993, the Partnership reached a settlement of all matters
between the Partnership and NHI. NHI agreed to accept $425,000 as full
settlement of all matters outstanding, including workers' compensation
liabilities of $415,246, secured notes of $750,000, accrued interest
of $445,271 and other liabilities of $148,285. In connection with
this settlement, NHI discontinued the performance of accounting
services for Heritage Manor of Hoisington (See Note 1).
11. Workers' Compensation
The Partnership's facilities participated in a self-insured program
for workers' compensation liability insurance through July 1989,
covering all facilities managed by NHI. The Partnership had satisfied
this obligation as part of the settlement with NHI (See Note 10) as of
December 31, 1993.
12. Cost Reimbursements
Accounts receivable and operating revenue include amounts estimated by
management to be reimbursable by Medicaid under the provisions of cost
reimbursement formulas in effect. Final determination of amounts
earned is subject to audit by the intermediaries. In the opinion of
management, adequate provision has been made for any adjustments that
may result from such audits. Differences between estimated provisions
and final settlement are reflected as charges or credits to operating
revenue in the year finalized. Medicaid accounted for approximately
51%, 55% and 56% of operating revenue during 1994, 1993 and 1992,
respectively.
23
<PAGE>
Consolidated Resources Health Care Fund IV
and Subsidiaries
(limited partnerships)
Notes to Consolidated Financial Statements
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.
Accounts receivable are recorded at net realizable value and relate
principally to amounts due from various state Medicaid programs.
Receivables from these programs were approximately as follows:
1994 1993
Missouri $132,000 $127,000
Kansas 122,000 117,000
Texas - 245,000
Amounts due from Medicaid programs are usually paid on an interim and
final basis, depending on the state, generally within 30 to 60 days
from date of billing. Medicaid receivables for Kent's Nursing Center
and River Oaks Care Center, are awaiting a final settlement audit by
the State. As of December 31, 1994, the Partnership no longer owned
any facilities in Texas.
13. Subsequent Event
During February 1995, the Partnership ceased fundings to a bond
sinking fund for the bond secured by the Oaks of Mountain Grove. The
Partnership is in negotiation with the lender and is currently seeking
a buyer for the facility that would purchase the property and assume
the outstanding debt balance on the facility.
14. Cash and Cash Equivalents
At December 31, 1994, the Partnership had cash invested in U.S.
Treasury Obligations totalling $400,000 and cash invested in bank
repurchase agreements totalling $405,959.
24
<PAGE>
SCHEDULES 25
<PAGE>
Consolidated Resources Health Care Fund IV
and Subsidiaries
(limited partnerships)
Schedule V - Property and Equipment
Years Ended December 31, 1994, 1993 and 1992
Balance at Balance
beginning Additions Other at end
Classification of year at cost Retirements(1) changes(2)(3) of year
1994
Land $ 174,333 $ - $ - $ (174,333)$ -
Buildings and
improvements 5,610,177 41,933 - (5,652,110) -
Equipment and
furnishings 501,674 32,330 - (534,004) -
$ 6,286,184 $ 74,263 $ - $(6,360,447)$ -
1993
Land $ 432,767 $ - $ 258,434 $ - $ 174,333
Buildings and
improvements 8,049,242 8,102 2,447,167 - 5,610,177
Equipment and
furnishings 747,369 75,597 321,292 - 501,674
$ 9,229,378 $ 83,699 $3,026,893 $ - $6,286,184
1992
Land $ 517,359 $ - $ - $ (84,592)$ 432,767
Buildings and
improvements 10,085,075 22,431 - (2,058,264) 8,049,242
Equipment and
furnishings 946,386 82,993 - (282,010) 747,369
$11,548,820 $105,424 $ - $(2,424,866)$9,229,378
(1) Three facilities were sold in 1993.
(2) One facility was transferred to property held for sale in 1992.
(3) Three facilities were transferred to property held for sale
in 1994.
26
<PAGE>
Consolidated Resources Health Care Fund IV
and Subsidiaries
(limited partnerships)
Schedule VI - Accumulated Depreciation of Property
and Equipment
Years Ended December 31, 1994, 1993 and 1992
Balance at Balance
beginning Additions Other at end
Classification of year at cost Retirements(1) changes(2)(3) of year
1994
Buildings and
improvements $2,234,896 $ 270,915 $ - $(2,505,811)$ -
Equipment and
furnishings 544,874 41,720 - (586,594) -
$2,779,770 $ 312,635 $ - $(3,092,405)$ -
1993
Buildings and
improvements $2,996,814 $ 436,548 $1,198,466 $ - $2,234,896
Equipment and
furnishings 789,867 114,479 359,472 - 544,874
$3,786,681 $ 551,027 $1,557,938 $ - $2,779,770
1992
Buildings and
improvements $3,115,861 $ 531,338 $ - $ (650,385)$2,996,814
Equipment and
furnishings 843,089 169,581 - (222,803) 789,867
$3,958,950 $ 700,919 $ - $ (873,188)$3,786,681
(1) Three facilities were sold in 1993.
(2) One facility was transferred to property held for sale in 1992.
(3) Three facilities were transferred to property held for sale in
1994.
27
<PAGE>
Consolidated Resources Health Care Fund IV
and Subsidiaries
(limited partnerships)
Schedule VIII - Valuation and Qualifying Accounts
Years Ended December 31, 1994, 1993 and 1992
Additions
Balance at charged to Balance
beginning costs and at end
Description of year expenses Deductions(1) of year
1994
Allowance for
doubtful accounts $ 80,864 $ 9,754 $(17,640) $ 72,978
1993
Allowance for
doubtful accounts $166,742 $ - $(85,878) $ 80,864
1992
Allowance for
doubtful accounts $ 32,995 $149,487 $(15,740) $166,742
(1) Represents direct write-offs of receivables.
28
<PAGE>
Consolidated Resources Health Care Fund IV
and Subsidiaries
(limited partnerships)
Schedule X - Supplementary Income Statement Information
Years Ended December 31, 1994, 1993 and 1992
Charged
to operating
expenses
1994
Repairs and Maintenance $ 59,333
1993
Repairs and Maintenance $116,325
1992
Repairs and maintenance $190,175
29
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
CONSOLIDATED RESOURCES HEALTH CARE FUND IV
By: WELCARE CONSOLIDATED RESOURCES
CORPORATION OF AMERICA
Corporate General Partner
Date: April 20, 1995 /s/ J. Stephen Eaton
J. Stephen Eaton,
President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons, on behalf of the
Registrant and in the capacities and on the dates indicated:
Date: April 20, 1995 /s/ J. Stephen Eaton
J. Stephen Eaton,
Sole Director and
Principal Executive Officer of the
Corporate General Partner
Date: April 20, 1995 /s/ Alan C. Dahl
Alan C. Dahl,
Principal Financial Officer of the
Corporate General Partner
30
<PAGE>
