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 March 31, 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 404-698-9040
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
CONSOLIDATED RESOURCES HEALTH CARE FUND IV
CONSOLIDATED BALANCE SHEETS
March 31, December 31,
1995 1994
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 635,849 $ 820,321
Accounts receivable, net of allowance
for doubtful accounts of $72,978 416,847 367,145
Prepaid expenses 37,952 37,952
Property held for sale 3,221,293 3,268,042
Total current assets 4,311,941 4,493,460
Restricted escrows and other deposits 364,852 329,589
Note receivable 250,000 250,000
Deferred loan costs, net of accumulated
amortization of $90,049 and $78,480 117,807 120,699
Total other assets 732,659 700,288
$ 5,044,600 $ 5,193,748
LIABILITIES AND PARTNERS' DEFICIT
Current liabilities:
Current maturities of long-term obligations
including debt in default $ 4,660,201 $ 4,683,405
Trade accounts payable 123,141 112,059
Accrued compensation 137,305 144,832
Insurance payable 39,256 38,129
Accrued interest 470,962 397,326
Accrued real estate taxes 29,550 18,833
Total current liabilities 5,460,414 5,394,584
Advances from affiliates 1,941,358 1,941,359
Total liabilities 7,401,772 7,335,943
Partners' deficit:
Limited partners (1,609,862) (1,403,484)
General partners (747,310) (738,711)
Total partners' deficit (2,357,172) (2,142,195)
$ 5,044,600 $ 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 March 31,
1995 1994
Revenues:
Operating revenue $1,346,491 $1,243,465
Interest income 11,633 15,338
Total revenues 1,358,124 1,258,803
Expenses:
Operating expenses 1,350,963 1,252,075
Interest 118,526 111,973
Depreciation and amortization 83,729 90,297
Partnership administration costs 19,883 56,275
Total expenses 1,573,101 1,510,620
Operating loss (214,977) (251,817)
Litigation settlement income
(Note 6) - 76,345
Gain on sale of property (Note 5) - 607,169
Net income(loss) $ (214,977) $ 431,697
Net income(loss) per L.P. unit $ (8.18) $ 16.46
L.P. units outstanding 26,283 26,283
See accompanying notes to consolidated financial state 3
CONSOLIDATED RESOURCES HEALTH CARE FUND IV
CONSOLIDATED STATEMENTS OF PARTNERS' DEFICIT
(Unaudited)
Total
Partners'
General Limited Deficit
Balance, at December 31, 1993 $ (712,690) $ (383,426) $(1,096,116)
Net income(loss) (851) 432,548 431,697
Balance, at March 31, 1994 $ (713,541) $ 49,122 $ (664,419)
Balance, at December 31,1994 $ (738,711) $(1,403,484) $(2,142,195)
Net loss (8,599) (206,378) (214,977)
Balance, at March 31, 1995 $ (747,310) $(1,609,862) $(2,357,172)
See accompanying notes to consolidated financial statements 4
CONSOLIDATED RESOURCES HEALTH CARE FUND IV
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three months ended March 31,
1995 1994
Operating Activities:
Cash received from residents and
government agencies $ 1,296,789 $ 1,283,620
Cash paid to suppliers and employees (1,355,447) (1,180,942)
Cash paid into restricted escrows (35,263) (57,328)
Interest received 11,633 15,338
Interest paid (44,890) (27,878)
Property taxes paid - (24,281)
Cash provided by (used in) operating activities (127,178) 8,529
Investing Activities:
Addition to property and equipment held
for sale (34,090) (33,373)
Net proceeds from sale of property (Note 5) - 1,410,283
Cash provided by (used in) investing activites (34,090) 1,376,910
Financing Activities:
Principal payments on long-term obligations (23,204) (14,143)
Cash used in financing activities (23,204) (14,143)
Net increase (decrease) in cash and cash equival (184,472) 1,371,296
Cash and cash equivalents, beginning of period 820,321 917,478
Cash and cash equivalents, end of period $ 635,849 $ 2,288,774
See accompanying notes to consolidated financial statements. 5
CONSOLIDATED RESOURCES HEALTH CARE FUND IV
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three months ended March 31,
1995 1994
Reconciliation of Net Income (Loss) to Cash
Provided by (Used in) Operating Activities:
Net income(loss) $ (214,977) $ 431,697
Adjustments to reconcile net income (loss)
to cash provided by (used in) operat
activities:
Depreciation and amortization 83,729 90,297
Gain on sale of property - (607,169)
Changes in assets and liabilities:
Accounts receivable (49,702) (36,190)
Other assets - 25,931
Trade accounts payable and accrued liabilities
accrued liabilities 89,034 161,291
Restricted Escrow and other deposits (35,263) (57,328)
Cash provided by (used in) operating
activities $ (127,178) $ 8,529
See accompanying notes to consolidated financial statements. 6
CONSOLIDATED RESOURCES HEALTH CARE FUND IV
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 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 three
months ended March 31, 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:
Three Months Ended
March 31,
1995 1994
Charged to costs and expenses:
Property management and oversight
management fees . . . . . . . . . . $80,417 $75,542
Financial accounting, data processing,
tax reporting, legal and compliance,
investor relations and supervision
of outside services. . . . . . . . $19,883 $15,835
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 March 31, 1995,
the Partnership has experienced working capital deficiencies, had
7
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:
The Partnership and Southmark Corporation ("Southmark") reached a
settlement which was 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, Southmark released all claims against the
Partnership and recognized the Partnership's claims. In
settlement of the Partnership's claims Southmark paid the
Partnership $76,345 during 1994.
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
March 31, 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.
During February 1995, the partnership ceased fundings of a bond
sinking fund used to service debt secured by The Oaks of Mountain
Grove. 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.
Accordingly, the facility's debt was included in Current
maturities of long-term obligations in the accompanying balance
sheets.
8
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 obligations in default, and had two mortgages that were in
technical default as of March 31, 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 March 31, 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 $103,026 for the quarter ended
March 31, 1995, compared to the first 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.
Operating revenue from Rainbow were not significant during the
first quarter of 1994, as the golf course had not been opened for
the season.
Expenses:
9
Operating expenses increased by $98,888 for the quarter ended
March 31, 1995, as compared to the same period in the prior year.
As discussed above, Rainbow was sold during the first quarter of
1994. Operating expenses for Rainbow during the first quarter of
1994 were $51,894. 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 March 31, 1995, the Partnership held cash and cash equivalents
of $635,849 a decrease of $184,472 from the amount held at
December 31, 1994. The cash balance is being held in reserve for
working capital, capital improvements and operating
contingencies.
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. Accrued taxes of the Partnership
of approximately $1,200,000 were satisfied in the sale. In
addition, the sale provided cash to the Partnership of
approximately $1,400,000. The Partnership received 62% of the
net proceeds.
During 1994, the Partnership distributed $1,000,000 from the
proceeds of the sale of Rainbow Springs to the Limited Partners.
During 1993, the Partnership distributed $750,000 to the Limited
Partners from the proceeds from sale of Kent's, River Oaks and
Hiawatha. In addition to the distributions noted above, the
Partnership distributed $150,000 to the Limited Partners in 1991.
This was the first distribution since distributions were
suspended in 1987. No distributions were made in 1992.
In 1990 the Corporate General Partner filed claims against
Southmark in the Bankruptcy Court on behalf of the Partnership.
A significant portion of these claims were filed under WelCare's
affiliate's direction within ten days of its acquisition of the
Corporate General Partner on November 20, 1990. The Managing
General Partner reached a settlement of these claims and other
matters between the Partnership and Southmark during 1994. Under
this settlement, Southmark waived all claims against the
Partnership and the Partnership received $76,345 in cash from
Southmark.
As of March 31, 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.
10
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 was in technical default
on the long-term debt obligations secured by Heritage Manor of
Hoisington ("Hoisington") and Heritage Manor of Emporia
("Emporia") as of March 31, 1995, and 1994, 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 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, the Oaks of Mountain Grove 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
is currently seeking a buyer for the facility to purchase the
property and assume the outstanding debt balance on the facility.
However, as long as these default situations exist, the
Partnership remains at risk relative to these loans. 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 CONSOLIDATED RESOURCES
CORPORATION OF AMERICA
Corporate General Partner
Date: May 22, 1995 By: /s/ J. Stephen Eaton
J. Stephen Eaton,
Sole Director and
Principal Executive Officer of the
Corporate General Partner
Date: May 22, 1995 By: /s/ Alan C. Dahl
Principal Financial Officer of the
Corporate General Partner
13
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THIS SCHEDULE CONTAINS UNAUDITED SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
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