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, 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)
June 30, December 31,
1996 1995
ASSETS
Current assets:
Cash and cash equivalents $ 496,043 $ 628,543
Accounts receivable, net of allowance
for doubtful accounts of $72,978 515,526 477,805
Prepaid expenses 78,529 18,529
Property held for sale 692,064 744,147
Total current assets 1,782,162 1,869,024
Restricted escrows and other deposits 61,991 49,241
Deferred loan costs, net of accumulated
amortization of $106,243 in 1996. - 34,931
Total other assets 61,991 84,172
$ 1,844,153 $ 1,953,196
LIABILITIES AND PARTNERS' DEFICIT
Current liabilities:
Current maturities of long-term
obligations including debt in default $ 1,711,872 $ 1,763,962
Trade accounts payable 183,027 156,102
Accrued compensation 125,066 126,004
Insurance payable 71,324 58,255
Accrued interest 43,607 46,637
Accrued real estate taxes 57,267 43,376
Total current liabilities 2,192,163 2,194,336
Partners' equity (deficit):
Limited partners 330,261 432,856
General partners (678,271) (673,996)
Total partners' deficit (348,010) (241,140)
$ 1,844,153 $ 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 Six months ended
June 30, June 30,
1996 1995 1996 1995
Revenues:
Operating revenues $ 834,202 $ 1,413,201 $1,725,748 $2,759,692
Interest income 4,204 22,938 9,625 34,571
Total revenues 838,406 1,436,139 1,735,373 2,794,263
Expenses:
Operating expenses 793,144 1,436,306 1,614,358 2,787,269
Interest 40,705 117,662 84,236 236,188
Depreciation and amortiz 39,081 85,595 113,094 169,324
Partnership administration
costs 9,708 9,895 30,554 29,778
Total expenses 882,638 1,649,458 1,842,243 3,222,559
Loss before extraordinary (44,232) (213,319) (106,870) (428,296)
Extraordinary gain on
settlement of advances - - - 1,941,358
Net income (loss) $ (44,232) $ (213,319) $ (106,870) $1,513,062
Net loss per L.P. unit before
exraordinary gain (1.62) (7.79) (3.90) (15.64)
Extraordinary gain on
settlement of advances - - - 70.91
Net income per L.P. unit $ (1.62) $ (7.79) $ (3.90) $ 55.27
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, 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)
Balance, at December 31, 1995 $ (673,996) $ 432,856 $ (241,140)
Net loss (4,275) (102,595) (106,870)
Balance, at June 30, 1996 $ (678,271) $ 330,261 $ (348,010)
See accompanying notes to consolidated financial statements. 4
CONSOLIDATED RESOURCES HEALTH CARE FUND IV
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six months ended June 30,
1996 1995
Operating Activities:
Cash received from residents
and government agencies $ 1,688,027 $ 2,494,634
Cash paid to suppliers and employees (1,651,966) (2,655,901)
Cash paid to restricted escrows (12,750) 34,571
Interest received 9,625 (236,010)
Interest paid (87,265) (1,554)
Cash used in operating activities (54,329) (364,260)
Investing Activities:
Additions to property and equipment
held for sale (26,080) (49,505)
Cash used in investing activites (26,080) (49,505)
Financing Activities:
Principal payments on long-term obligations (52,090) (46,327)
Cash used in financing activities (52,090) (46,327)
Net decrease in cash
and cash equivalents (132,500) (460,092)
Cash and cash equivalents, beginning of period 628,543 820,321
Cash and cash equivalents, end of period $ 496,043 $ 360,229
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,
1996 1995
Reconciliation of Net Income
to Cash Used in Operating
Activities:
Net income (loss) $ (106,870) $ 1,513,062
Adjustments to reconcile net income
to cash used in operating
activities:
Depreciation and amortization 113,094 169,324
Extraordinary gain of extinguishment of debt (1,941,358)
Changes in assets and liabilities:
Accounts receivable (37,721) (265,058)
Other assets (60,000) -
Restricted escrow and other deposits (12,750) -
Trade accounts payable and
accrued liabilities 49,917 159,769
Cash used in operating activities $ (54,329) $ (364,260)
See accompanying notes to consolidated financial statements. 6
CONSOLIDATED RESOURCES HEALTH CARE FUND IV
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 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 six months
ended June 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:
Six Months Ended
June 30,
1996 1995
Charged to costs and expenses:
Property management and oversight
management fees $103,370 $165,678
Financial accounting, data processing,
tax reporting, legal and compliance,
investor relations and supervision
of outside services $30,554 $29,778
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, 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.
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 was in default on its long-term debt obligations
secured by Heritage Manor of Hoisington ("Hoisington") and
Heritage Manor of Emporia ("Emporia") as of June 30, 1996 as the
loans were due April 1, 1996. Accordingly, these obligations were
included in Current maturities of long-term obligations in the
accompanying balance sheets. On July 30, 1996, the lender filed
foreclosure proceedings in the Barton county court to secure their
position at Hoisington. While risk of foreclosure exists, the
Corporate General Partner has an open dialogue with the lender and
anticipates receiving the necessary time to complete the
partnership's liquidation process and satisfy the loan. The
Partnership continues to make full debt service on the facilities.
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 June 30, 1996.
At June 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 sheets.
Results of Operations
Revenues:
Operating revenue decreased by $578,999 for the quarter ended June
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 $623,880. The reduction in revenue was
offset by increased reimbursement rates at the Partnership's
remaining facilities.
Expenses:
Operating expenses decreased by $643,162 for the quarter ended
June 30, 1996, as compared to the same period in the prior year.
As discussed above, Mountain Groves was sold during the third
quarter of 1995. Operating expenses incurred by the sold facility
were $650,993 during the second quarter of 1995. The increase in
operating expenses at the Partnership's nursing facilities was due
primarily to general inflationary increases.
Liquidity and Capital Resources
At June 30, 1996, the Partnership held cash and cash equivalents
of $496,043 a decrease of $132,500 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 June 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:August 19, 1996 By: /s/ J. Stephen Eaton
J. Stephen Eaton,
President
Date:August 19, 1996 By: /s/ Alan C. Dahl
Alan C. Dahl,
Vice President and Principal
Financial Officer
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This schedule contains unaudited summary financial information extracted from
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