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, 1997
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 4 PAGES.
PART I. - FINANCIAL INFORMATION
CONSOLIDATED RESOURCES HEALTH CARE FUND IV
CONSOLIDATED BALANCE SHEETS
(Unaudited)
March 31, December 31,
1997 1996
ASSETS
Current assets:
Cash and cash equivalents $ 653,278 $ 723,569
Accounts receivable and third party settlements
net of allowance of $131,762 35,651 165,545
Prepaid expenses 49,575 901
Property held for sale 610,269 613,198
Total current assets 1,348,773 1,503,213
Restricted escrows and other deposits 50,658 46,979
Deferred loan costs, net of accumulated
amortization of $106,242 66,324 -
Total other assets 116,982 46,979
$ 1,465,755 $ 1,550,192
LIABILITIES AND PARTNERS' DEFICIT
Current liabilities:
Current maturities of long-term
obligations including debt in default $ 1,627,182 $ 1,656,836
Trade accounts payable 176,616 156,163
Accrued compensation 70,314 103,960
Insurance payable 57,027 58,062
Accrued interest 19,069 17,916
Accrued real estate taxes 37,472 29,455
Total current liabilities 1,987,680 2,022,392
Partners' equity (deficit):
Limited partners 163,302 211,038
General partners (685,227) (683,238)
Total partners' deficit (521,925) (472,200)
$ 1,465,755 $ 1,550,192
See accompanying notes to consolidated financial statements.
CONSOLIDATED RESOURCES HEALTH CARE FUND IV
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended
March 31,
1997 1996
Revenues:
Operating revenues $ 798,943 $ 891,546
Interest income 6,928 5,422
Total revenues 805,871 896,968
Expenses:
Operating expenses 751,075 821,214
Interest 39,258 43,531
Depreciation and amortization 39,081 74,013
Partnership administration
costs 26,182 20,846
Total expenses 855,596 959,604
Operating loss (49,725) (62,636)
Net loss $ (49,725) $ (62,636)
Operating loss per L.P. unit $ (1.82) $ (2.29)
Net loss per L.P unit $ (1.82) $ (2.29)
L.P. units outstanding 26,283 26,283
See accompanying notes to consolidated financial statements.
CONSOLIDATED RESOURCES HEALTH CARE FUND IV
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three months ended March 31,
1997 1996
Operating Activities:
Cash received from residents
and government agencies $ 928,837 $ 902,892
Cash paid to suppliers and employees (832,142) (844,051)
Cash paid to restricted escrows, net of escrow (3,679) (6,375)
Interest received 6,928 5,422
Interest paid (38,105) (44,571)
Cash provided by operating activities 61,839 13,317
Investing Activities:
Additions to property and equipment
held for sale (102,476) (4,981)
Cash used in investing activites (102,476) (4,981)
Financing Activities:
Principal payments on long-term obligations (29,654) (25,698)
Cash (used in) financing activities (29,654) (25,698)
Net (decrease) increase in cash
and cash equivalents (70,291) (17,362)
Cash and cash equivalents, beginning of period 723,569 628,543
Cash and cash equivalents, end of period $ 653,278 $ 611,181
See accompanying notes to consolidated financial statements.
CONSOLIDATED RESOURCES HEALTH CARE FUND IV
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three months ended March 31,
1997 1996
Reconciliation of Net Loss
to Cash (Used in) Provided by Operating
Activities:
Net loss $ (49,725) $ (62,636)
Adjustments to reconcile net income (loss)
to cash (used in) provided by operating
activities:
Depreciation and amortization 39,081 74,013
Changes in assets and liabilities:
Accounts receivable 129,894 11,346
Other assets (48,674) (60,000)
Restricted escrow and other deposits (3,679) (6,375)
Trade accounts payable and
accrued liabilities (5,058) 56,969
Cash provided by operating activities $ 61,839 $ 13,317
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, 1995 $ (673,996) $ 432,856 $ (241,140)
Net loss (2,505) (60,131) (62,636)
Balance, at March 31, 1996 $ (676,501) $ 372,725 $ (303,776)
Balance, at December 31, 1996 $ (683,238) $ 211,038 $ (472,200)
Net loss (1,989) (47,736) (49,725)
Balance, at March 31, 1997 $ (685,227) $ 163,302 $ (521,925)
See accompanying notes to consolidated financial statements.
<PAGE>
CONSOLIDATED RESOURCES HEALTH CARE FUND IV
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1997
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, 1997, are not necessarily indicative of the results
to be expected for the year ending December 31, 1997.
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, 1996,
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:
Three Months Ended
March 31,
1997 1996
Charged to costs and expenses:
Property management and oversight
management fees $ 47,938 $ 53,316
Financial accounting, data processing,
tax reporting, legal and compliance,
investor relations and supervision
of outside services $ 18,164 $ 20,846
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, 1997, 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:
The Partnership's two mortgage debt obligations secured by Heritage Manor of
Emporia ("Emporia") and Hoisington Rehabilitation Center ("Hoisington") were in
default as of December 31, 1996. These obligations matured on April 1, 1996. The
Partnership has obtained an extension from the lender until May 31, 1997 to
allow for the sale of the facilities. Under the extension, the Partnership is
obligated to make monthly principal and interest payments. In consideration for
the extension, the Partnership paid the lender $50,000 on January 31, 1997. The
Partnership has also paid the lender a refundable extension fee equal to 1% of
the balance of the mortgage debt obligations as of January 31, 1997. The
extension fee will be forfeited by the Partnership if the mortgage debt
obligations are not satisfied by May 31, 1997. The Partnership will continue to
operate the facilities and is actively seeking a buyer for these properties and
plans to either sell the properties to prospective purchasers, or negotiate a
settlement with its lenders.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Certain statements contained in this Management Discussion and Analysis are not
based on historical facts, but are forward-looking statements that are based
upon numerous assumptions about future conditions that may ultimately prove to
be inaccurate. Actual events and results may materially differ from anticipated
results described in such statements. The Partnership's ability to achieve such
results is subject to certain risks and uncertainties. Such risks and
uncertainties include, but are not limited to, changes in healthcare
reimbursement systems and rates, the availability of prospective purchasers for
its facilities, and other factors affecting the Partnership's business that may
be beyond its control.
At March 31, 1997, the Partnership had three general partners (the "General
Partners"), WelCare Consolidated Resources Corporation of America, a Nevada
corporation, serving as the corporate general partner ("WCRCA" or the "Corporate
General Partner"), Consolidated Associates IV, and WelCare Service
Corporation-IV ("WSC-IV" or the "Managing General Partner"), a Georgia
Corporation, serving 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 5, the Partnership's two mortgage debt obligations
were in default as of March 31, 1997. 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 March 31, 1997 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
Three Months ended March 31, 1997 and 1996
Revenues:
Operating revenue decreased by $92,602 for the quarter ended March 31, 1997,
compared to the first quarter of the prior year. Approximately $52,000 of this
decrease was caused by lower census at the Partnership's Emporia facility
resulting from new entrants in the local health care market. The remaining
decrease was attributable to the Partnership's Hoisington facility which
experienced a slight decrease in patient census and its Medicare rate on a per
patient day basis.
Expenses:
Operating expenses decreased by $20,489 for the quarter ended March 31, 1997, as
compared to the same period in the prior year. Of this net decrease,
approximately $30,000 resulted from a reduction in operating expenses at Emporia
due primarily to a decline in staffing levels corresponding with the decrease in
census as previously discussed. The decrease at Emporia was offset by general
increases in costs at Hoisington.
Liquidity and Capital Resources
At March 31, 1997, the Partnership held cash and cash equivalents of $ 653,278
an decrease of $70,291 from the amount held at December 31, 1996. The cash
balance is being held in reserve for working capital, capital improvements and
operating contingencies.
During the first quarter of 1997, the Partnership maintained current debt
service payments on all of its debt secured by facilities currently owned by the
Partnership. The Partnership's Hoisington facility should produce sufficient
cash flow from operations during 1997 to continue to satisfy its current monthly
debt service obligations. During the first quarter of 1997, the Partnership's
Emporia facility experienced a decrease in occupancy and did not provide
sufficient cash flow from its operations to satisfy its monthly debt service
obligations. The Partnership anticipates that Emporia's census will not improve
significantly during the remainder of 1997 due to new entrants in the facility's
local health care market. Accordingly, Emporia's monthly debt service
obligations will be funded with existing cash reserves of the Partnership to the
extent its cash flows from operations are inadequate.
As of March 31, 1997, 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 has obtained an extension from the lender
until May 31, 1997 to satisfy these debts and is in the process of obtaining an
additional extension. 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.
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
None
<PAGE>
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 20, 1997 By: /s/ J. Stephen Eaton
- ------------------ -------------------------
J. Stephen Eaton
President
Date: May 20, 1997 By: /s/ Alan C. Dahl
- ------------------ -------------------------
Alan C. Dahl
Chief Financial Officer
of the Corporate General Partner
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS UNAUDITED SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE MARCH 31, 1997 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH 10-Q.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 653,278
<SECURITIES> 0
<RECEIVABLES> 108,629
<ALLOWANCES> 72,978
<INVENTORY> 0
<CURRENT-ASSETS> 1,348,773
<PP&E> 610,269
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,465,755
<CURRENT-LIABILITIES> 1,987,680
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> (521,925)
<TOTAL-LIABILITY-AND-EQUITY> 1,465,755
<SALES> 798,943
<TOTAL-REVENUES> 805,871
<CGS> 816,338
<TOTAL-COSTS> 855,596
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 39,258
<INCOME-PRETAX> (49,725)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (49,725)
<EPS-PRIMARY> (1.820)
<EPS-DILUTED> (1.820)
</TABLE>
