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, 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.)
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 10 PAGES.
PART I. - FINANCIAL INFORMATION
CONSOLIDATED RESOURCES HEALTH CARE FUND IV
CONSOLIDATED BALANCE SHEETS
March 31, December 31,
1996 1995
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 611,181 $ 628,543
Accounts receivable, net of allowance
for doubtful accounts of $72,978 466,458 477,805
Prepaid expenses 78,529 18,529
Property held for sale 710,046 744,147
Total current assets 1,866,214 1,869,024
Restricted escrows and other deposits 55,616 49,241
Deferred loan costs, net of accumulated
amortization of $90,048 in 1995. - 34,931
Total other assets 55,616 84,172
$ 1,921,830 $ 1,953,196
LIABILITIES AND PARTNERS' DEFICIT
Current liabilities:
Current maturities of long-term
obligations including debt in default $ 1,738,264 $ 1,763,962
Trade accounts payable 212,147 156,102
Accrued compensation 109,192 126,004
Insurance payable 69,365 58,255
Accrued interest 45,597 46,637
Accrued real estate taxes 51,042 43,376
Total current liabilities 2,225,607 2,194,336
Partners' equity (deficit):
Limited partners 372,725 432,856
General partners (676,501) (673,996)
Total partners' deficit (303,776) (241,140)
$ 1,921,830 $ 1,953,196
See accompanying notes to consolidated financial statements 2
CONSOLIDATED RESOURCES HEALTH CARE FUND IV
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended
March 31,
1996 1995
Revenues:
Operating revenues $ 891,546 $1,346,491
Interest income 5,421 11,633
Total revenues 896,967 1,358,124
Expenses:
Operating expenses 821,214 1,350,963
Interest 43,531 118,526
Depreciation and amortization 74,013 83,729
Partnership administration
costs 20,846 19,883
Total expenses 959,603 1,573,101
Loss before extraordinary gain (62,636) (214,977)
Extraordinary gain on extinguishment
of debt (Note 5) - 2,266,170
Net income (loss) $ (62,636) $2,051,193
Net loss per L.P. unit before
exraordinary gain (2.29) (7.85)
Extraordinary gain on extinguishment
of debt per L.P. unit - 82.76
Net Income per L.P. unit $ (2.29) $ 74.91
L.P. units outstanding 26,283 26,283
See accompanying notes to consolidated financial statements 3
CONSOLIDATED RESOURCES HEALTH CARE FUND IV
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three months ended March 31,
1996 1995
Operating Activities:
Cash received from residents
and government agencies $ 902,892 $ 1,296,789
Cash paid to suppliers and employees (844,051) (1,355,447)
Cash paid to restricted escrows (6,375) (35,263)
Interest received 5,421 11,633
Interest paid (44,571) (44,890)
Cash provided by (used in)
operating activities 13,317 (127,178)
Investing Activities:
Additions to property and equipment
held for sale (4,981) (34,090)
Cash used in investing activites (4,981) (34,090)
Financing Activities:
Principal payments on long-term obligations (25,698) (23,204)
Cash used in financing activities (25,698) (23,204)
Net decrease in cash
and cash equivalents (17,362) (184,472)
Cash and cash equivalents, beginning of period 628,543 820,321
Cash and cash equivalents, end of period $ 611,181 $ 635,849
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,
1996 1995
Reconciliation of Net Income (Loss)
to Cash Used in Operating
Activities:
Net income $ (62,636) $ 2,051,193
Adjustments to reconcile net income (loss)
to cash used in operating
activities:
Depreciation and amortization 74,013 83,729
Extraordinary gain of extinguishment of debt (2,266,170)
Changes in assets and liabilities:
Accounts receivable 11,347 (49,702)
Other assets (60,000) -
Restricted escrow and other deposits (6,375) (35,263)
Trade accounts payable and
accrued liabilities 56,969 89,035
Cash provided by (used in)
operating activities $ 13,317 $ (127,178)
See accompanying noes 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 $ (1,403,484) $ (738,711) $ (2,142,195)
Net income 82,048 1,969,145 2,051,193
Balance, at March 31, 1995 $ (1,321,436) $ 1,230,434 $ (91,002)
Balance, at December 31, 1995 $ (673,996) $ 432,856 $ (241,140)
Net income (loss) (2,505) (60,131) (62,636)
Balance, at March 31, 1995 $ (676,501) $ 372,725 $ (303,776)
See accompanying notes to consolidated financial statements. 4
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, 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 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,
1996 1995
Charged to costs and expenses:
Property management and oversight
management fees $53,316 $80,417
Financial accounting, data processing,
tax reporting, legal and compliance,
investor relations and supervisi on
of outside services $20,846 $19,883
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, 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. The Partnership is in the process of seeking
buyers for its two remaining facilities. Debt obligations secured by these
facilities matured April 1, 1996. The Partnership is currently seeking an
extension of the due date on these obligations. The inability to obtain
extensions could result in foreclosure and a loss of the facilities. The
Partnership does not anticipate improved liquidity during the remainder of
1996. Should the Partnership's cash reserves prove inadequate, the
Partnership has no existing lines of credit to draw on, or the ability to
increase its borrowings on its two remaining facilities.
NOTE 5:
In July 1991, Southmark filed suit demanding payment of alleged advances to
the Partnership. 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. Accordingly, during the first quarter 1995 the Partnership
recorded a gain on debt extinguishment related to this settlement $2,266,170
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 Note 4, the Partnership's two mortgage debt obligations were in
default as of March 31, 1996. These obligations matured April 1, 1996. The
Partnership is currently seeking an extension from the lender to allow for the
sale of the facilities
At March 31, 1996, and December 31, 1995, 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
sheets.
Results of Operations
Revenues:
Operating revenue decreased by $454,945 for the quarter ended March 31, 1996,
compared to the third 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 $549,246 during
the first quarter of 1995. The reduction in revenue was offset primarily by
increased reimbursement rates at the Partnership's remaining facilities.
Expenses:
Operating expenses decreased by $529,749 for the quarter ended March 31, 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 were $615,104. 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
As discussed in Note 4, the Partnership's financial statements have been
presented on the basis that it is a going concern. The Partnership does not
anticipate improved liquidity during the remainder of 1996, due to the
expected operating cash flow from the Partnership's two remaining facilities,
monthly debt service payments and the payment of recurring partnership
expenses. As discussed in more detail below, the Partnership is currently
seeking an extension on debt obligations secured by its two remaining
facilities. Should the lenders of these debts pursue their satisfaction, the
related facilities could be lost to foreclosure and the financial resources
and liquidity of the Partnership could be adversely impacted.
At March 31, 1996, the Partnership held cash and cash equivalents of $611,181 a
decrease of $17,362 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 1996, 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.
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 used to meet working capital
requirements.
As of March 31, 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 extensions from the
lender on these debts. The inability to obtain extensions could result in
foreclosure and a loss of these facilities. The Partnership is currently
seeking purchasers for these facilities at a sales price that would satisfy
the operating and debt obligations of the facilities. The Managing General
Partner anticipates obtaining extensions sufficient to allow for the orderly
sale of these facilities, however, there can be no assurance that the
facilities can be sold prior to foreclosure. 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.
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: May 15, 1996 By: /s/ J. Stephen Eaton
J. Stephen Eaton,
President
Date: May 15, 1996 By: /s/ Alan C. Dahl
Alan C. Dahl,
Vice President and Principal
Financial Officer
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This schedule contans unaudited summary financial information extracted from
the March 31, 1996 10-Q and is qualified in its entirety by reference
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