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, 1995
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 770-698-9040
Indicate by check mark whether the registrant, (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months,
and (2) has been subject to such filing requirements for the past
90 days. Yes x No
THERE ARE NO EXHIBITS.
PAGE ONE OF 13 PAGES.
PART I. - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATMENTS
CONSOLIDATED RESOURCES HEALTH CARE FUND IV
CONSOLIDATED BALANCE SHEETS
September 30, December 31,
1995 1994
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 706,110 $ 820,321
Accounts receivable, net of allowance
for doubtful accounts of $72,978 514,189 367,145
Prepaid expenses 40,159 37,952
Property held for sale 3,089,080 3,268,042
Total current assets 4,349,538 4,493,460
Restricted escrows and other deposits 242,704 329,589
Note receivable - 250,000
Deferred loan costs, net of accumulated
amortization of $98,725.35 and $78,480 112,023 120,699
Total other assets 354,727 700,288
$ 4,704,265 $ 5,193,748
LIABILITIES AND PARTNERS' DEFICIT
Current liabilities:
Current maturities of long-term
obligations including debt in default $ 4,613,687 $ 4,683,405
Trade accounts payable 183,795 112,059
Accrued compensation 139,338 144,832
Insurance payable 43,054 38,129
Accrued interest 469,224 397,326
Accrued real estate taxes 48,638 18,833
Total current liabilities 5,497,736 5,394,584
Advances from affiliates (Note 6) - 1,941,359
Total liabilities 5,497,736 7,335,943
Partners' deficit:
Limited partners (108,709) (1,403,484)
General partners (684,762) (738,711)
Total partners' deficit (793,471) (2,142,195)
$ 4,704,265 $ 5,193,748
See accompanying notes to consolidated financial statements 2
CONSOLIDATED RESOURCES HEALTH CARE FUND IV
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
1995 1994 1995 1994
Revenues:
Operating revenues $1,446,990 $1,283,906 $4,206,682 $3,741,815
Interest income 8,630 14,730 43,201 47,636
Total revenues 1,455,620 1,298,636 4,249,883 3,789,451
Expenses:
Operating expenses 1,385,584 1,189,627 4,158,529 3,617,143
Interest 118,471 111,128 354,659 334,858
Depreciation and amortization 84,463 84,809 253,787 252,132
Partnership administration
costs 4,532 3,316 75,542 103,654
Total expenses 1,593,050 1,388,880 4,842,517 4,307,787
Operating loss (137,429) (90,244) (592,634) (518,336)
Litigation settlement
income (Note 6) - - - 32,354
Gain on sale of
property (Note 5) - - - 607,169
Income(loss) before
extraordinary gain (137,429) (90,244) (592,634) 121,187
Extraordinary gain on
settlement of advances
(Note 6) - - 1,941,358 -
Net income (loss) $ (137,429) $ (90,244) $1,348,724 $ 121,187
Net income(loss) per L.P. unit
Income (loss) before $ (5.02) $ (3.30) $ (21.65) $ 5.12
extraordinary gain
Extraordinary gain on
settlement of advances - - 70.91 -
Net income (loss) per L.P. uni$ (5.02) $ (3.30) $ 49.26 $ 5.12
L.P. units outstanding 26,283 26,283 26,283 26,283
See accompanying notes to consolidated financial statements. 3
CONSOLIDATED RESOURCES HEALTH CARE FUND IV
CONSOLIDATED STATEMENTS OF PARTNERS' EQUITY (DEFICIT)
(Unaudited)
Total
Partners'
General Limited Deficit
Balance, at December 31, 1993 $ (712,690) $ (383,426) $ (1,096,116)
Distributions - (1,000,000) (1,000,000)
Net income (loss) (13,368) 134,555 121,187
Balance, at September 30, 1994 $ (726,058) $ (1,248,871) $ (1,974,929)
Balance, at December 31, 1994 $ (738,711) $ (1,403,484) $ (2,142,195)
Net income 53,949 1,294,775 1,348,724
Balance, at September 30, 1995 $ (684,762) $ (108,709) $ (793,471)
See accompanying notes to consolidated financial statements. 4
CONSOLIDATED RESOURCES HEALTH CARE FUND IV
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine months ended September 30,
1995 1994
Operating Activities:
Cash received from residents
and government agencies $ 4,059,638 $ 3,822,443
Cash paid to suppliers and employees (4,042,749) (3,993,297)
Settlement received 32,354
Interest received 43,201 47,636
Interest paid (282,761) (190,554)
Property taxes paid (5,673) (24,281)
Cash used in operating activities (228,344) (305,699)
Investing Activities:
Additions to property and equipment
held for sale (66,149) (67,572)
Collection of note receivable 250,000
Net proceeds from sale of property (Note 5) - 1,410,283
Cash provided by investing activites 183,851 1,342,711
Financing Activities:
Principal payments on long-term obligations (69,718) (70,128)
Distributions to limited partners - (1,000,000)
Cash used in financing activities (69,718) (1,070,128)
Net increase (decrease) in cash
and cash equivalents (114,211) (33,116)
Cash and cash equivalents, beginning of period 820,321 917,478
Cash and cash equivalents, end of period $ 706,110 $ 1,014,207
See accompanying notes to consolidated financial statements. 5
CONSOLIDATED RESOURCES HEALTH CARE FUND IV
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine months ended September 30,
1995 1994
Reconciliation of Net Income
to Cash Used in Operating
Activities:
Net income $ 1,348,724 $ 121,187
Adjustments to reconcile net income
to cash used in operating
activities:
Depreciation and amortization 253,787 252,132
Gain on settlement of advances (1,941,358) -
Gain on sale of property - (607,169)
Changes in assets and liabilities:
Accounts receivable (147,045) 80,628
Other assets - 57,122
Trade accounts payable and
accrued liabilities 257,548 (209,599)
Cash used in operating activities $ (228,344) $ (305,699)
See accompanying notes to consolidated financial statements. 6
CONSOLIDATED RESOURCES HEALTH CARE FUND IV
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1995
NOTE 1.
The consolidated 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 financial position and operating results for
the interim periods. The results of operations for the nine
months ended September 30, 1995, are not necessarily indicative
of the results to be expected for the year ending December 31,
1995.
NOTE 2.
The consolidated financial statements should be read inconjunction
with the consolidated financial statements and the notes there
to contained in the Partnership's Annual Report on
Form 10-K for the year ended December 31, 1994, as filed with the
Securities and Exchange Commission, a copy of which is available
upon request by writing to WelCare Service Corporation-IV (the
"Managing General Partner"), at 7000 Central Parkway, Suite 970,
Atlanta, Georgia, 30328.
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,
1995 1994
Charged to costs and expenses:
Property management and oversightmanagement fees.$252,649 $241,887
Financial accounting, data processing,
tax reporting, legal and compliance,
investor relations and supervision
of outside services . . . . . . . . . . $ 48,633 $ 47,065
NOTE 4.
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 September 30,
1995, 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.
NOTE 5:
On January 31, 1994, Rainbow Springs ("Rainbow") was auctioned
for sale by the Bankruptcy Court presiding over the bankruptcy
proceedings of the joint owner of the Rainbow property. On
February 1, 1994, the Bankruptcy Court approved the auction sale
of Rainbow to a third-party purchaser for $4,200,000 in cash. On
March 21, 1994, after payment of closing expenses and outstanding
property taxes of $1,213,408, the Partnership received 62%, or
$1,410,283 of the net proceeds from the sale, resulting in a gain
to the Partnership of $607,169. In the Consolidated Statement of
Cash Flows, proceeds from the sale are shown net of the payment
of property taxes and other closing costs. Accordingly, the
payment of these property taxes is not shown within Operating
Activities in the statement.
NOTE 6:
In November 1990, the Partnership filed claims against Southmark
Corporation ("Southmark"), in the Bankruptcy Court. In response
to the partnership's filing, Southmark filed suit against the
Partnership in August of 1991. The Partnership and Southmark
reached a settlement of this litigation and the partnership
received a nonappealable court order approving the settlement in
April 1994. Under this settlement, Southmark paid the
Partnership $76,345, which was included in litigation settlement
income in the accompanying statements of operations.
During the first quarter of 1995, the Partnership recognized a
gain on the settlement of advances as all litigation issues have
been resolved with Southmark. In the past, Southmark and the
Corporate General Partner of the Partnership asserted their
position with respect to operating advances made to the
Partnership prior to 1990.
NOTE 7:
The Partnership was in technical default on its long-term debt
obligations secured by Heritage Manor of Hoisington
("Hoisington") and Heritage Manor of Emporia ("Emporia") as of
September 30, 1995, and December 31, 1994, due to inadequate
reserve requirements. Accordingly, these obligations were
8
included in Current maturities of long-term obligations in the
accompanying balance sheets.
During February 1995, the partnership ceased fundings of a
bondsinking fund used to service debt secured by The Oaks of
Mountain Grove ("The Oaks"). Accordingly, the facility's debt
was included in Current maturities of long-term obligations in the
accompanying balance sheets. This facility was sold in October
1995, as discussed more fully in Note 8.
NOTE 8:
On October 18, 1995, the Partnership sold The Oaks of Mountain
Grove to Mt. Grove #1,Inc., (the "Purchaser") an unrelated third
party.
In consideration, the Purchaser assumed bonds payable and accrued
interest totaling approximately $2,970,000, fully releasing the
Partnership of its obligation under these bonds. The purchaser
also acquired the Partnership's interest in a bond sinking fund
amounting to approximately $196,000. The Partnership will
recognize a gain of approximately $360,000 on the sale during the
fourth quarter.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
WelCare Acquisition Corp., an affiliate of WelCare International,
Inc. ("WelCare"), acquired the stock of the Partnership's
corporate general partner from Southmark on November 20, 1990.
Following the first full year of WelCare's affiliate's management
of the affairs of the Partnership, the Limited Partners
overwhelmingly elected WelCare Service Corporation-IV, a wholly
owned subsidiary of WelCare Acquisition Corp., as Managing
General Partner of the Partnership. On January 7, 1992, WelCare
Service Corporation-IV was admitted as Managing General Partner.
Plan of Operations
A majority in 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.
As discussed in Item 1, Note 7, the Partnership had one mortgage
debt obligation in default, and had two mortgages that were in
technical default as of September 30, 1995. The Partnership will
9
continue to operate the facilities and plans to (A) sell the
remaining facilities to prospective purchasers or (B) negotiate
settlements with its lenders. Accordingly, at September 30,
1995, and December 31, 1994, the Partnership has classified the
facilities as Property held for sale in the accompanying balance
sheets.
Results of Operations
Revenues:
Operating revenue increased by $163,084 for the quarter ended
September 30, 1995, compared to the third quarter of the prior
year. This increase was due primarily to increased reimbursement
rates at the Partnership's remaining facilities.
Expenses:
Operating expenses increased by $195,957 for the quarter ended
September 30, 1995, as compared to the same period in the prior
year. The increase in operating expenses at the Partnership's
nursing facilities was due primarily to general inflationary
increases in health care costs, and an increase in therapy
services being provided.
Liquidity and Capital Resources
At September 30, 1995, the Partnership held cash and cash
equivalents of $706,110 a decrease of $114,211 from the amount
held at December 31, 1994. The cash balance is being held in
reserve for working capital, capital improvements and operating
contingencies.
As of September 30, 1995, the Partnership was not obligated to
perform any major capital additions or renovations. No such
capital expenditures or renovations are planned for the next
twelve months, other than necessary minor repairs, maintenance
and capital expenditures which are expected to be funded by
operations.
On October 18, 1995, the Partnership sold The Oaks of Mountain
Grove ("The Oaks"). Through the sale, the Partnership was
relieved of its debt obligations secured by this facility.
Additionally, the negative operating cash flow generated by this
facility will no longer impact the Partnership in the future.
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 that
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.
10
On September 14, 1995, the Partnership received $250,000 in
payment of its note receivable from the Purchaser of Red Boiling
Springs, a facility sold by the Partnership in 1991. These funds
will be held to meet working capital requirements.
The Managing General Partner anticipates that during the
remainder of 1995, the Partnership will be able to meet its
operating obligations related to its nursing facilities.
However, the Partnership remains in technical default on the
long-term debt obligations secured by Heritage Manor of
Hoisington ("Hoisington") and Heritage Manor of Emporia
("Emporia") as of September 30, 1995, due to inadequate reserve
requirements. The Partnership has made timely payments on all of
its debt service obligations with respect to Hoisington and
Emporia and anticipates remaining current on these obligations
during the next twelve months. These mortgage debts are
classified as a current liability due to a technical default
under the terms of the loan documents. While the Partnership
remains at risk due to this technical default, the lender has not
made any indication that it will seek any payments other than
scheduled debt service.
11
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
On November 2 1995, the Partnership filed a Form 8-k
disclosing the closing of the sale of The Oaks of
Mountain Grove on October 18, 1995. On November 3,
1995 the Partnership filed a Form 8-K/A amending its
Form 8-K filed on November 2, 1995.
12
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 IV
By: WELCARE SERVICE CORPORATION - IV
Managing General Partner
Date:September 14, 1995 By: /s/ J. Stephen Eaton
J. Stephen Eaton,
President
Date: September 14, 1995 By: /s/ Alan C. Dahl
Alan C. Dahl,
Vice President and
Principal Financial
Officer
13
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This schedule contains unaudited summary financial information extracted from
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