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, 1996
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.)
400 Perimeter Center Terrace, Suite 650, Atlanta, Georgia 30346
(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
CONSOLIDATED RESOURCES HEALTH CARE FUND IV
CONSOLIDATED BALANCE SHEETS
(Unaudited)
September 30, December 31,
1996 1995
ASSETS
Current assets:
Cash and cash equivalents $ 655,778 $ 628,543
Accounts receivable, net of allowance
for doubtful accounts of $72,978 434,717 477,805
Prepaid expenses 78,362 18,529
Property held for sale 657,648 744,147
Total current assets 1,826,505 1,869,024
Restricted escrows and other deposits 43,204 49,241
Deferred loan costs, net of accumulated
amortization of $106,243 in 1996 - 34,931
Total other assets 43,204 84,172
$ 1,869,709 $ 1,953,196
LIABILITIES AND PARTNERS' DEFICIT
Current liabilities:
Current maturities of long-term
obligations including debt in default $ 1,693,758 $ 1,763,962
Trade accounts payable 164,025 156,102
Accrued compensation 96,932 126,004
Insurance payable 69,949 58,255
Accrued interest 56,497 46,637
Accrued real estate taxes 41,895 43,376
Total current liabilities 2,123,056 2,194,336
Partners' equity (deficit):
Limited partners 421,137 432,856
General partners (674,484) (673,996)
Total partners' deficit (253,347) (241,140)
$ 1,869,709 $ 1,953,196
See accompanying notes to consolidated financial statements.
CONSOLIDATED RESOURCES HEALTH CARE FUND IV
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
1996 1995 1996 1995
Revenues:
Operating revenues $ 992,651 $ 1,446,990 $2,718,399 $4,206,682
Interest income 5,833 8,630 15,457 43,201
Total revenues 998,484 1,455,620 2,733,856 4,249,883
Expenses:
Operating expenses 810,664 1,385,584 2,425,022 4,158,529
Interest 39,515 118,471 123,750 354,659
Depreciation and amort. 39,081 84,463 152,175 253,787
Partnership administration
costs 14,562 4,532 45,116 75,542
Total expenses 903,822 1,593,050 2,746,063 4,842,517
Income (loss) before
extrordinary gain 94,662 (137,430) (12,207) (592,634)
Extraordinary gain on
settlement of advances - - - 1,941,358
Net income (loss) $ 94,662 $ (137,430) $ (12,207) $1,348,724
Net income (loss) per L.P. unit
before extraordinary gain 3.46 (5.02) (0.45) (21.65)
Extraordinary gain on
settlement of advances - - - 73.13
Net income (loss) per L.P.
unit $ 3.46 $ (5.02) $ (0.45) $ 51.48
L.P. units outstanding 26,283 26,283 26,283 26,283
See accompanying notes to consolidated financial statements.
CONSOLIDATED RESOURCES HEALTH CARE FUND IV
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine months ended September
1996 1995
Operating Activities:
Cash received from residents
and government agencies $ 2,761,487 $ 4,059,638
Cash paid to suppliers and employees (2,540,907) (4,042,749)
Cash paid to restricted escrows,
net of escrow distribution 6,037 (5,673)
Interest received 15,457 43,201
Interest paid (113,890) (282,761)
Cash (used in) provided by operating activities 128,184 (228,344)
Investing Activities:
Additions to property and equipment
held for sale (30,745) (66,149)
Collection of note receivable - 250,000
Cash (used in) provided by investing activites (30,745) 183,851
Financing Activities:
Principal payments on long-term obligations (70,204) (69,718)
Cash (used in) financing activities (70,204) (69,718)
Net (decrease) increase in cash
and cash equivalents 27,235 (114,211)
Cash and cash equivalents, beginning of period 628,543 820,321
Cash and cash equivalents, end of period $ 655,778 $ 706,110
See accompanying notes to consolidated financial statements.
CONSOLIDATED RESOURCES HEALTH CARE FUND IV
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine months ended September
1996 1995
Reconciliation of Net Income (Loss)
to Cash (Used in) Provided by Operating
Activities:
Net income (loss) $ (12,207) $ 1,348,724
Adjustments to reconcile net income (loss)
to cash (used in) provided by operating
activities:
Depreciation and amortization 152,175 253,787
Extraordinary gain of extinguishment of debt - (1,941,358)
Changes in assets and liabilities:
Accounts receivable 43,088 (147,046)
Other assets (59,833) -
Restricted escrow and other deposits 6,037 -
Trade accounts payable and
accrued liabilities (1,076) 257,548
Cash used in operating activities $ 128,184 $ (228,344)
See accompanying notes to consolidated financial statements.
CONSOLIDATED RESOURCES HEALTH CARE FUND IV
CONSOLIDATED STATEMENTS OF PARTNERS' EQUITY (DEFICIT)
(Unaudited)
Total
Partners'
General Limited Deficit
Balance, at December 31, 1994 $ (738,711) $ (1,403,484) $ (2,142,195)
Net income (4,292) 1,353,016 1,348,724
Balance, at September 30, 1995 $ (684,762) $ (108,709) $ (793,471)
Balance, at December 31, 1995 $ (673,996) $ 432,856 $ (241,140)
Net loss (488) (11,719) (12,207)
Balance, at September 30, 1996 $ (674,484) $ 421,137 $ (253,347)
See accompanying notes to consolidated financial statements.
CONSOLIDATED RESOURCES HEALTH CARE FUND IV
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1996
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, 1996, are not necessarily indicative of
the results to be expected for the year ending December 31, 1996.
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, 1995, 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 400 Perimeter Center Terrace,
Suite 650, Atlanta, Georgia, 30346.
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,
1996 1995
Charged to costs and expenses:
Property management and oversight
management fees $162,928 $252,648
Financial accounting, data processing,
tax reporting, legal and compliance,
investor relations and supervision
of outside services $ 45,116 $ 48,633
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,
1996, 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:
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 6:
The Partnership is in default on its long-term debt obligations
secured by Heritage Manor of Hoisington ("Hoisington") and
Heritage Manor of Emporia ("Emporia"), as these debts were due to
be repaid on April 1, 1996. The Partnership and the lender of
these matured loans are currently negotiating a standstill
agreement. Under this agreement, the Partnership has additional
time to pursue the sale of the facilities while it continues to
pay monthly debt service payments on terms substantially similar
to the original terms of the notes. Accordingly, these
obligations were included in Current maturities of long-term
obligations in the accompanying balance sheets. The Partnership
is current on and continues to pay its monthly debt service.
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 6, the Partnership's two mortgage
debt obligations were in default as of September 30, 1996. The
Partnership will continue to operate the facilities and plans to
negotiate an extension with its lenders while it proceeds with the
sale of the properties.
At September 30, 1996 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.
Results of Operations
Revenues:
Operating revenue decreased by $ 454,339 for the quarter ended
September 30, 1996, compared to the second quarter of the prior
year. This decrease was due primarily to the sale of the Oaks of
Mountain Grove in the third quarter of 1995. Operating revenues
generated by the sold facility were $602,843. The reduction in
revenue was offset by increased census and Medicare patients at
Hoisington.
Expenses:
Operating expenses decreased by $574,920 for the quarter ended
September 30, 1996, as compared to the same period in the prior
year. As discussed above, Mountain Grove was sold during the
third quarter of 1995. Operating expense incurred by the sold
facility was $739,575. 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, 1996, the Partnership held cash and cash
equivalents of $ 655,778 an increase of $27,235 from the amount
held at December 31, 1995. The cash balance is being held in
reserve for working capital, capital improvements and operating
contingencies.
During 1995, the Partnership maintained current debt service
payments on all of its debt secured by facilities currently owned
by the Partnership. The Partnership should produce sufficient cash
flow from operations during 1996 to continue to satisfy current
monthly debt service obligations.
As of September 30, 1996, 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 Partnership is in default on the long-term debt obligations
secured by Heritage Manor of Hoisington and Heritage Manor of
Emporia as these loans were due April 1, 1996. The Partnership is
currently seeking purchasers for these facilities at a sale price
that would satisfy the operating and debt obligations extensions
sufficient to allow for the orderly sale of these facilities,
however, there can by no assurance that the facilities can by sold
prior to foreclosure. As long as these default situations exist,
the Partnership has no existing lines of credit to draw upon
should present resources or cash flow from operations by
inadequate.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
None
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: November 14, 1996 By: /s/ J. Stephen Eaton
J. Stephen Eaton,
President
Date: November 14, 1996 By: /s/ Alan C. Dahl
Alan C. Dahl,
Chief Financial Officer
of the Corporate General Partner
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THIS SCHEDULE CONTAINS UNAUDITED SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE SEPTEMBER 30, 1996 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH 10-Q.
</LEGEND>
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