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, 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 of1934 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
CONSOLIDATED RESOURCES HEALTH CARE FUND IV
CONSOLIDATED BALANCE SHEETS
June 30, December 31,
1995 1994
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 360,229 $ 820,321
Accounts receivable, net of allowance
for doubtful accounts of $72,978 632,203 367,145
Prepaid expenses 37,951 37,952
Property held for sale 3,154,007 3,268,042
Total current assets 4,184,390 4,493,460
Restricted escrows and other deposits 233,994 329,589
Note receivable 250,000 250,000
Deferred loan costs, net of accumulated
amortization of $95,833 and $78,480 114,914 120,699
Total other assets 598,908 700,288
$ 4,783,298 $ 5,193,748
LIABILITIES AND PARTNERS' DEFICIT
Current liabilities:
Current maturities of long-term
obligations including debt in default $ 4,637,078 $ 4,683,405
Trade accounts payable 162,696 112,059
Accrued compensation 131,350 144,832
Insurance payable 45,486 38,129
Accrued interest 397,504 397,326
Accrued real estate taxes 38,317 18,833
Total current liabilities 5,412,431 5,394,584
Advances from affiliates (Note 6) - 1,941,359
Total liabilities 5,412,431 7,335,943
Partners' equity (deficit):
Limited partners 49,056 (1,403,484)
General partners (678,189) (738,711)
Total partners' deficit (629,133) (2,142,195)
$ 4,783,298 $ 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 Six months ended
June 30, June 30,
1995 1994 1995 1994
Revenues:
Operating revenues $1,413,201 $1,214,444 $2,759,692 $2,457,909
Interest income 22,938 17,568 34,571 32,906
Total revenues 1,436,139 1,232,012 2,794,263 2,490,815
Expenses:
Operating expenses 1,436,306 1,254,246 2,787,269 2,494,968
Interest 117,662 111,758 236,188 223,730
Depreciation and amortization 85,595 77,027 169,324 167,323
Partnership administration
costs 9,895 17,051 29,778 32,886
Total expenses 1,649,458 1,460,082 3,222,559 2,918,907
Operating loss (213,319) (228,070) (428,296) (428,092)
Litigation settlement
income (Note 6) - - - 76,345
Gain on sale of
property (Note 5) - - - 607,169
Income(loss) before
extraordinary gain (213,319) (228,070) (428,296) 255,422
Extraordinary gain on
settlement of advances - - 1,941,358 -
(Note 6)
Net income (loss) $ (213,319) $ (228,070) $1,513,062 $ 255,422
Net income(loss) per L.P. unit
Income (loss) before $ (7.79) $ (8.33) $ (15.64) $ 10.02
extraordinary gain
Extraordinary gain on
settlement of advances - - 70.91 -
Net income per L.P. unit $ (7.79) $ (8.33) $ 55.27 $ 10.02
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 CASH FLOWS
(Unaudited)
Six months ended June 30,
1995 1994
Operating Activities:
Cash received from residents
and government agencies $ 2,494,634 $ 2,535,921
Cash paid to suppliers and employees (2,655,901) (2,770,902)
Interest received 34,571 32,906
Interest paid (236,010) (32,784)
Property taxes paid (1,554) (24,281)
Cash used in operating activities (364,260) (259,140)
Investing Activities:
Additions to property and equipment
held for sale (49,505) (46,289)
Net proceeds from sale of property (Note 5) - 1,410,283
Cash provided by (used in) investing activites (49,505) 1,363,994
Financing Activities:
Principal payments on long-term obligations (46,327) (46,139)
Distribution to limited partners - (1,000,000)
Cash used in financing activities (46,327) (1,046,139)
Net increase (decrease) in cash
and cash equivalents (460,092) 58,715
Cash and cash equivalents, beginning of period 820,321 917,478
Cash and cash equivalents, end of period $ 360,229 $ 1,106,038
See accompanying notes to consolidated financial statements. 5
CONSOLIDATED RESOURCES HEALTH CARE FUND IV
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six months ended June 30,
1995 1994
Reconciliation of Net Income
to Cash Used in Operating
Activities:
Net income $ 1,513,062 $ 255,422
Adjustments to reconcile net income
to cash used in operating
activities:
Depreciation and amortization 169,324 167,323
Gain on settlement of advances (1,941,358) -
Gain on sale of property - (607,169)
Changes in assets and liabilities:
Accounts receivable (265,058) 78,012
Other assets - 57,341
Trade accounts payable and
accrued liabilities 159,769 (210,069)
Cash used in operating activities $ (364,260) $ (259,140)
See accompanying notes to consolidated financial statements. 6
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) (7,998) 263,420 255,422
Balance, at June 30, 1994 $ (720,688) $ (1,120,006) $ (1,840,694)
Balance, at December 31, 1994 $ (738,711) $ (1,403,484) $ (2,142,195)
Net income 60,522 1,452,540 1,513,062
Balance, at June 30, 1995 $ (678,189) $ 49,056 $ (629,133)
See accompanying notes to consolidated financial statements. 4
CONSOLIDATED RESOURCES HEALTH CARE FUND IV
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 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 six
months ended June 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 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, 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:
Six Months Ended
June 30,
1995 1994
Charged to costs and expenses:
Property management and oversight
management fees . . . . . . . . . . . . $165,678 $166,266
Financial accounting, data processing,
tax reporting, legal and compliance,
investor relations and supervision
of outside services . . . . . . . . . . $29,778 $32,886
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 June 30, 1995,
the Partnership has experienced working capital deficiencies, had
defaulted on certain debt obligations and had no assurance of any
7
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 Parnership filed claims against Southmark
Corporation ("Southmark"), in the Bankruptcy Court. In response
to the partnership's filing, Southmark filed suit against the
Parnership 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
June 30, 1995, and December 31, 1994, due to inadequate reserve
requirements. Accordingly, these obligations were included in
Current maturities of long-term obligations in the accompanying
balance sheets.
8
During February 1995, the partnership ceased fundings of a bond
sinking 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. Currently, the Partnership is in
negotiations with the lender and is seeking a buyer for the
facility to purchase the property and assume the debt balance on
the facility.
As of June 30, 1995 and December 31, 1994 property held for sale
consisted of the net book value of The Oaks, Emporia, and
Hoisington. The Partner ship anticipates The Oaks will be sold
during the 3rd quarter of 1995. The remaining facilities will
probably be sold during 1995 or 1996.
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 June 30, 1995. The Partnership will
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 June 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:
9
Operating revenue increased by $198,757 for the quarter ended
June 30, 1995, compared to the second quarter of the prior year.
This increase was due primarily to increased reimbursement rates
at the Partnership's remaining facilities. As discussed in Item 1,
Note 5, Rainbow was sold during the first quarter of 1994.
Expenses:
Operating expenses increased by $182,060 for the quarter ended
June 30, 1995, as compared to the same period in the prior year.
As discussed above, Rainbow was sold during the first quarter of
1994. 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 June 30, 1995, the Partnership held cash and cash equivalents
of $360,229 a decrease of $460,092 from the amount held at
December 31, 1994. The cash balance is being held in reserve for
working capital, capital improvements and operating
contingencies.
Accounts receivable increased to $265,058, at June 30, 1995, as
compared to December 31, 1995. This increase was due primarily to
an increase in Medicare receivables at The Oaks of Mountain Grove.
During July 1995, the Partnership received interim Medicare cash
settlement payments totaling approzimately $44,000 in connection
with Medicare services bieng provided during 1995.
As of June 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.
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.
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. The
Partnership's continued existence has in the past been placed at
risk due to the litigation with NHI and due to tax liabilities
owed at Rainbow Springs. The Managing General Partner's
successful resolution of the litigation with NHI and the sale of
Rainbow Springs has satisfied these contingencies and allowed the
Partnership to make cash distributions to the Limited Partners in
1994 and 1993. 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 June 30, 1995, due to inadequate reserve
requirements. The Partnership has made timely payments on all of
10
its debt service obligations with respect to Hoisington and
Emporia and anticipates remaining current on these obligations
during 1995. The Partnerships' mortgage debt remains 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.
In addition, as of December 31, 1994, the Partnership was in
default on the long-term debt of The Oaks of Mountain Grove due
to violation of certain loan covenants and restrictions. During
February 1995, this facility ceased fundings to a bond sinking
fund used to make semi-annual interest payments on and annual
redemptions of long-term bonds payable secured by the facility.
The Partnership is in negotiations with the lender and has
accepted an offer fo rthe sale of the facility that would satisfy
the bond obligation, while there could be assurance that the sale
will occur it is scheduled to close during the third quarter
1995. As long as these default situations exist, the Partnership
remains at risk relative to this loan. The Partnership has no
existing lines of credit to draw upon should present resources or
cash flow from operations be inadequate.
11
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
None
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: By: /s/ J. Stephen Eaton
J. Stephen Eaton,
President
Date: By: /s/ Alan C. Dahl
Alan C. Dahl,
Vice President and Principal
Financial Officer
13
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<LEGEND>
THIS SCHEDULE CONTAINS UNAUDITED SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE JUNE 30, 1995 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
10-Q.
</LEGEND>
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