THIS DOCUMENT IS A COPY OF THE 10-K FILED ON APRIL 16, 1996
PURSUANT TO A RULE 201 TEMPORARY HARDSHIP EXEMPTION.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
For annual and transition reports pursuant to sections 13 or 15 (d) of the
Securities Exchange Act of 1934.
(Mark One)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 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 0-14436
CONSOLIDATED RESOURCES HEALTH CARE FUND V
(Exact name of registrant as specified in its charter)
Georgia 58-1618135
(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
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Limited
Partnership
Units
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
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulations S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definite proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [ X ]
Of the registrant's 29,596 Limited Partnership Units, 29,591 are held by non-
affiliates. The aggregate market value of units held by non-affiliates is not
determinable since there is no public trading market for Limited Partnership
Units and transfers of units are subject to certain restrictions.
Documents Incorporated by Reference: See Page 29.
SEE INDEX TO EXHIBITS ON PAGE 34
PAGE ONE OF 35 PAGES.
PART I
ITEM 1. BUSINESS
Consolidated Resources Health Care Fund V (the "Partnership") was organized on
January 2, 1985, as a Limited Partnership under the provisions of the Georgia
Uniform Limited Partnership Act.
At December 31, 1995, the Partnership had three general partners (the "General
Partners"), WelCare Consolidated Resources Corporation of America, serving as
the Corporate General Partner ("WCRCA" or the "Corporate General Partner"),
Consolidated Associates V, a Georgia Corporation, serving as Manager General
Partner and WelCare Service Corporation-V ("WSC-V" or the "Managing General
Partner"). WCRCA and WSC-V are wholly-owned subsidiaries of WelCare
Acquisition Corp., a Georgia corporation, which is in turn a wholly-owned
subsidiary of WelCare International, Inc., ("WelCare"). WelCare, is engaged
in the operation, acquisition, property management and oversight management of
long-term care facilities. Consolidated Associates V, is composed of WCRCA,
as the Managing General Partner, and individuals who were previously
associated with Consolidated Resources Corporation of America ("CRCA").
Pursuant to an agreement dated October 30, 1985, CRCA, a Georgia corporation
that initially was the corporate general partner of the Partnership, was
merged into a subsidiary of Southmark Corporation ("Southmark"). The name of
the surviving Southmark subsidiary was then changed to Southmark Consolidated
Resources Corporation of America ("SCRCA"). Southmark, a Georgia corporation,
emerged from Chapter 11 bankruptcy on August 10, 1990, and has liquidated most
of its assets pursuant to a plan of reorganization. On November 20, 1990,
WelCare, through its subsidiary WelCare Acquisition Corp., acquired from
Southmark all the stock of SCRCA whose name was then changed to WelCare
Consolidated Resources Corporation of America. Southmark is no longer
affiliated with the Partnership. WSC-V was added as the Managing General
Partner of the Partnership on January 7, 1992, following the approval by a
majority-in-interest of the Partnership's limited partners. The acquisition of
SCRCA by WelCare Acquisition Corp. and the addition of WSC-V as Managing
General Partner did not result in a change in the compensation paid the
General Partners (See Item 8, Notes 1 and 2, and Item 13).
On May 14, 1985, a Registration Statement on Form S-1 was declared effective
by the Securities and Exchange Commission whereby the Partnership offered for
sale $30,000,000 of Limited Partnership Units. The Limited Partnership Units
represent equity interests in the Partnership and entitle the holders thereof
("Limited Partners") to participate in certain allocations and distributions
of the Partnership. The sale of Limited Partnership Units closed in December
1985 with 29,596 units sold at $1,000 each, or gross proceeds of $29,596,000
to the Partnership.
The Partnership's primary business and only industry segment is to own,
operate and ultimately dispose of a diversified portfolio of health care
related real properties for the benefit of its Limited Partners. On January
1, 1995, the Partnership owned two operating nursing homes and two closed
facilities. On March 24, 1995, the Partnership transferred its interest in
one of the two closed facilities (see Item 8, Note 7).
Current Developments
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.
The Partnership will continue to operate the facilities and plans to: (A) sell
the properties to prospective purchasers or (B) negotiate settlements with its
lenders.
Operation of Nursing Home Facilities
On January, 1992, seven of the Partnership's properties were managed by
National Heritage, Inc. ("NHI") (currently known as Evergreen Health Care,
Inc.). During 1991, two of these facilities were sold and in November 1991,
the Partnership notified NHI that effective January 31, 1992, NHI was
terminated from providing management services at the remaining five facilities
managed by NHI. In December 1991, through a lawsuit, NHI sought to take
possession of certain of the Partnership's properties. On December 31, 1991,
NHI and the Partnership entered into a consent order which allowed NHI to
continue to manage three of the five operating facilities and perform
accounting services for an additional facility, under the supervision of the
Corporate General Partner and the court. In June 1992, the Senior and
Disabled Services Division for the State of Oregon removed NHI as manager at
Plantation Center and effective October 31, 1992, NHI consented to removal as
manager at the remaining two facilities. This litigation was resolved in
October 1993.
Effective April 1, 1991, an affiliate of the Corporate General Partner assumed
management responsibilities of the River Hills South facility, located in
Milwaukee, Wisconsin. Effective February 2, 1992, this affiliate assumed
management responsibilities for the Pinewood Care facility, which had
previously been managed by NHI. Effective November 1, 1992, this affiliate
took over management responsibilities for Libby Care Center and Orofino Care
Center and, in 1993, took over the management of Plantation Care Center.
During 1994, this affiliate received a management fee of 4% to 6% of gross
revenues and NHI received a fee for providing accounting services at the River
Hills South, Orofino and Libby facilities through October 1993. Additionally,
this affiliate provided oversight management services for all of the
Partnership's remaining facilities. As of October 1993, NHI did not perform
accounting services or any other services for the Partnership's facilities.
Effective April 1, 1995, the Partnership transferred the operational
management responsibilities for Plantation to Westcare Management, Inc.
( Westcare ), an unaffiliated management company. The management agreement
provides for management fees of 3.5% of gross facility revenues. The
management agreement with Westcare has been extended on a month-to-month
basis.
The Partnership also signed a right of first refusal and option agreement with
Westcare with respect to Plantation. Under the terms of the agreement,
Westcare has the option to purchase Plantation for $1,250,000, plus any unpaid
interest that accrues on the note payable secured by the facility after
February 1, 1995. The purchase price is substantially equal to the underlying
secured debt on the facility. The option agreement will continue until the
management agreement is terminated.
An affiliate of the Corporate General Partner, will continue to provide
accounting and data processing services to the Plantation during the term of
the Westcare management agreement for 2.5 % of gross facility revenues.
In 1991 a distribution of $150,000 was made to the Limited Partners. This was
the first distribution made since 1987. During 1993, the Partnership
distributed $1,750,000 to the Limited Partners as proceeds from facility
sales. Since the inception of the Partnership, the Partnership has
distributed $5,942,867 to the Limited Partners. No distributions have been
paid to the General Partners.
During the time the Corporate General Partner was owned by Southmark, two
facilities owned by the Partnership, Champaign Opportunity House ("Champaign")
and Village Inn Nursing Home ("Village Inn"), were effectively closed. Since
that time, the General Partners have sought to dispose of these non-performing
assets. In 1995, Champaign was transferred to its mortgage holder by a deed
in lieu of foreclosure. The remaining facility, Village Inn has been included
in Property Held for Sale on the balance sheet (see Item 8).
As of December 31, 1995, the Partnership employed approximately 392 persons
including administrative, nursing, dietary, social services and maintenance
personnel.
The services provided at the Partnership's nursing facilities consist of long-
term nursing care. Nursing care consists of 24 hours medical services
prescribed by the resident's physician as well as assistance or supervision
with activities of daily living such as dressing, grooming, bathing,
medication and dietary needs.
All of the operating facilities are certified to receive benefits under joint
Federal and State funded programs administered by the respective states to
provide medical assistance to the indigent, known generally as the "Medicaid"
program. Benefits under the Federal Health Insurance for the Aged Act
("Medicare") are for skilled care only in those facilities which are certified
for this program.
Medicaid reimbursement formulas vary by state and are established in
accordance with Federal guidelines. Typically, Medicaid provides for
reimbursement for nursing home care of an all-inclusive nature up to specified
limits based on historical costs, with adjustments for inflation. Federal law
requires that Medicaid reimbursement rates be reasonable and adequate to meet
the costs which are incurred by efficiently and economically operated
facilities to provide care and services in conformity with applicable laws,
regulations and quality and safety standards. Medicaid payments are generally
set prospectively for each facility with the exception of a few states
including Idaho, where retrospective settlement exists. Two of the facilities
sold during 1993 were located in Idaho. During 1994, the Partnership was
informed of retrospective settlements for the Idaho facilities sold in 1993
(see Item 8, Note 10).
The Medicare and Medicaid programs are subject to statutory and regulatory
changes, administrative rulings, interpretations of policy and determinations
by intermediaries, and to governmental funding restrictions, all of which may
materially increase or decrease programs payments to long-term care facilities
and could adversely affect the operations of the Partnership's nursing
facilities.
In the operation and sale of properties, the Partnership competes with a
number of individuals and entities including large, national nursing home
chains and small, locally owned geriatric care facilities. Some competing
operators have greater financial resources than the Partnership or may operate
on a nonprofit basis or as charitable organizations. The degree of success
with which the Partnership's facilities compete varies by location and depends
on a number of factors. The Partnership believes that the quality of care
provided, the reputation and physical appearance of facilities and, in the
case of private pay patients, charges for services, are significant
competitive factors. There is limited, if any, competition in price with
respect to Medicaid and Medicare patients since revenues for services to such
patients are strictly controlled based on fixed rates and cost reimbursement
principles. In light of these factors, the Partnership seeks to meet
competition in each locality by improving the quality of services provided at
its facilities, establishing a reputation within the local medical community
for providing excellent care services, and by responding appropriately to
regional variations in demographics and tastes. In most states, approval by
state health care regulatory agencies must be obtained, and a Certificate of
Need or authorization issued, before new long-term care beds can be
constructed. This tends to stabilize competition, however some states have
already or are considering repeal of Certificate of Need programs.
The following table sets forth information regarding the average daily census
and sources of patient revenues at the Partnership's facilities:
Average Daily Census for Year Revenues for Year
Ended Ended
December 31, 1995 December 31, 1995(1)
Medicaid 200 79% 63%
Private Pay 29 11% 12%
VA, Medicare and Other 25 10% 25%
254 100% 100%
Overall Occupancy Rate 81%
(1) Excludes Village Inn Nursing Home which was closed in 1990.
Because of a changing census mix (i.e. private pay patients vs. government
reimbursed patients), the occupancy required for a facility to achieve an
operating break-even point cannot be precisely determined. Generally, a
greater ratio of Medicaid patients will require a higher occupancy to reach a
break-even point. On the other hand, a high Medicare census can lower the
number of patients necessary to reach the break-even point due to a higher
reimbursement rate.
All licensed beds in the operating facilities are available except in a few
instances where a small number of rooms have been taken out of service to be
utilized as office space and ancillary support areas, including revenue
generating rehabilitation services.
ITEM 2. DESCRIPTION OF PROPERTY
The following table sets forth the investment portfolio of the Partnership at
December 31, 1995. The buildings of the projects and the land on which they
are located are owned by the Partnership and its majority-owned partnerships
in fee. Each of these facilities are subject in each case to secured debt, as
set forth more fully in Item 8, Note 4.
Properties (dollars in 000 s)
Net
Secured Acquisition Book Date
Property Debt Cost Value Acquired
Operating Facilities:
River Hills South
Milwaukee, WI
196 Licensed
Nursing Home Beds $5,008 $8,913 $4,784(2) April 1986
Plantation Care
Center
Salem, OR
100 Licensed
Nursing Home Beds 1,250 2,515 1,458(2) June 1987
Closed Facility:
Village Inn
Nursing Home
Dixon, IL
Closed Nursing
Home Facility 2,242 2,962 2,279(1)(2) August 1986
Totals: $8,500 $14,390 $8,521
Available Nursing Home Beds:296 Beds
(See Item 8, Note 4)
(1) Facility was closed in January 1990
(2) A provision was made to write-down the facility for Partnership
Statement purposes to its net realizable or estimated fair value at the
time of the write-down as determined by the Corporate General Partner
(see Item 8, Note 6). The amount reflects this write-down.
Occupancy Levels and Rental Rates
The following table sets forth the occupancy levels and rental rates for the
past four years for the facilities owned by the Partnership as of December 31,
1995. Rental rates are presented as Per-Patient-Day amounts ("PPD"), the
standard of comparison used in the long-term care industry. The PPD amount
represents the average revenue received per day of care provided.
1995 1994 1993 1992 1991
Plantation Care Center
Occupancy Rate 66% 76% 81% 77% 96%
Rental Rate (PPD) $96.88 $97.62 $87.21 $73.00 $62.00
River Hills South
Occupancy Rate 96% 98% 98% 98% 97%
Rental Rate (PPD) $111.46 $107.31 $92.89 $81.00 $75.00
ITEM 3. LEGAL PROCEEDINGS
The Partnership is not a party to any material pending legal proceedings,
other than ordinary litigation routine to the Partnership's business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S UNITS OF LIMITED PARTNERSHIP
AND SECURITY HOLDER MATTERS
(A) No market for Limited Partnership Units exists nor is one expected
to develop.
(B) Title of Class Number of Record Unit Holders
Limited Partnership Units 2,575 as of March 1996
There were no cash distributions made to the Limited Partners in
1990 and 1989. Cumulative distributions paid to the Limited
Partners as of December 31, 1995 were $5,942,867. There have been
no distributions to the General Partners. See Liquidity and Capital
Resources section of Item 7, Management Discussion and Analysis of
Financial Condition and Results of Operations and Item 8, Note 5 for
discussion of distributions.
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth a summary of selected financial data for the
Partnership. This summary should be read in conjunction with the notes to the
Partnership's financial statements appearing in Item 8.
Statements of Years Ended December 31, (dollars in 000 s)
Operations 1995 1994 1993(2) 1992 1991(1)
Operating revenue $9,628 $9,850 $13,962 $13,685 $14,647
Income (loss) before
extraordinary gain (656) (1,828) (875) (1,538) (1,651)
Net income (loss) 6,233 (1,828) 5,004 (1,538) (1,651)
Income (loss) before
extraordinary gain
per weighted average
Limited Partnership
Unit(in dollars) (21.02) (59.30) (28.39) (49.90) (53.66)
Net income (loss) per
weighted average
Limited Partnership
Unit (in dollars) 199.76 (59.30) 168.29 (49.90) (36.26)
Distribution paid per
weighted average
Limited Partnership Unit
(in dollars) - - 59.13 - 5.07
Years Ended December 31, (dollars in 000 s)
1995(4) 1994(3) 1993(2) 1992 1991(1)
Balance Sheets
Property and
equipment, net $ - $ - $ 6,850 $11,989 $12,473
Total assets 10,021 12,564 13,505 17,876 20,127
Long-term debt
obligations, less
current maturities - - 6,339 5,210 5,221
Partners (deficit) (1,804) (8,037) (6,209) (9,464) (7,925)
During 1991, the Partnership sold two facilities.
During 1993, the Partnership sold three facilities and two facilities with
a book value of $3,745 were classified as property held for sale.
(1)During 1994, all of the Partnership's facilities were classified as
property held for sale, totalling $10,267.
During 1995, the Partnership transferred one of its closed facilities,
Champaign, to the holder of the note secured by the facility.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
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.
The Partnership will continue to operate the facilities, while it proceeds
with the sale of the properties or negotiates a settlement with the lender
holding the mortgage on Plantation Care Center.
At December 31, 1995, the Partnership had 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. On
March 24, 1995, the Partnership transferred a deed in lieu of foreclosure to
the holder of the note secured by one facility as more fully discussed in Item
8, Note 7.
Results of Operations
Revenue
1995 compared to 1994
Operating revenues decreased by $101,559 for 1995 compared to the prior year.
The decrease in revenues is primarily due to decreased census at the
Plantation Care Center ( Plantation ) which was offset by a retrospective
settlement from the State of Idaho which reduced operating revenue in 1994 by
approximately $258,000.
1994 compared to 1993:
Operating revenues decreased by $4,111,502 for 1994, compared to the prior
year. Effective October 1, 1993, the Partnership sold Libby Care Center,
Orofino Care Center and Pinewood Care Center. These facilities produced
operating revenues of approximately $5,114,567 during 1993. During 1994, a
retrospective settlement from the state of Idaho Medicaid program as discussed
in Item 8, Note 10, reduced operating revenue by approximately $258,000.
These decreases in revenues were offset by increased revenues at the
Partnership's remaining facilities due primarily to higher Medicare
utilization and Medicaid rate increases at River Hills South.
Expenses:
1995 compared to 1994
Operating expenses decreased by $829,592 for 1995 as compared to the prior
year. This decrease is primarily due to decreased staffing caused by decreased
census at Plantation.
1994 compared to 1993:
Operating expenses decreased by $2,613,005 for 1994, compared to the prior
year. Operating expenses decreased by approximately $4,049,900 due to the sale
of three facilities during 1993. This reduction was offset by increased
expenses at the Partnership's remaining facilities primarily due to increases
in staffing of skilled nurses to accommodate a higher Medicare patient mix,
increases in therapy service volume and higher operating costs at Plantation
Care Center.
Liquidity and Capital Resources
As discussed in the financial statements (see Item 8, Note 3), 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 continued negative operating results
generated by Plantation, the payment of recurring partnership expenses and the
potential redemption of tax certificates secured by Village Inn could result
in a significant use of existing cash reserves. As discussed in more detail
below, the Partnership has defaulted on obligations secured by two of its
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 December 31, 1995, the Partnership held cash and cash equivalents of
$319,587, a decrease of $396,601 from 1994. Cash decreased primarily due to
negative cash flow generated by operations and debt service payments at
Plantation Care Center. Cash is being held in reserve for working capital and
operating contingencies. The Managing General Partner anticipates that the
Partnership will generate negative operating cash flow during 1996 due to
Plantation Care Center. Based on the Partnership's present cash balance and
the Partnership's anticipated operating performance, management believes the
Partnership may not have sufficient cash resources to meet its operating and
capital requirements in 1996. The Partnership has no existing lines of credit
to draw on should present resources or cash flow from operations be
inadequate.
As of December 31, 1995, the Partnership was not obligated to perform any
major capital expenditures or renovations on its facilities. During 1996,
repairs and capital expenditures will most likely be funded from cash
reserves.
On March 24, 1995, the Managing General Partner negotiated the transfer of the
Partnership's interest in Champaign to the holder of a recourse note that was
secured by a mortgage on the facility. The Partnership paid approximately
$62,000 in back taxes in connection with this transfer and satisfied its
obligation under the mortgage with the transfer. The remaining closed
facility, Village Inn, has tax certificates of approximately $130,000
outstanding for accrued real estate taxes that may require redemption by the
Partnership during 1996. The recourse note secured by Village Inn could have
an adverse effect on the Partnership and its ability to continue as a going
concern, should the holder of the note pursue its satisfaction.
Due to negative operating cash flow generated by Plantation, the Partnership
ceased debt service on its $1,250,000 note payable secured by the facility
during March 1995. Based on current offers from prospective purchasers, a
sale of the facility would not satisfy this obligation. As a result, the
Partnership is currently in negotiations with the lender. On April 1, 1995,
the facility s operational management was changed to a local management
company with the expectation that the transaction would lead the sale of the
facility. Management anticipates that Plantation will be sold or transferred
to the lender, during the second quarter of 1996. Should the Partnership be
unable to negotiate a settlement with the holder of Plantation s debt or sell
the facility at an amount equal to its debt, the Partnership s ability to
continue as a going concern could be adversely affected.
As of December 31, 1995, the Partnership was current on its debt service
related to its mortgage secured by RHS. Subsequent to year end, the
Partnership obtained an extension of the due date on this debt until March 28,
1997. The Partnership intends to sell this facility before the due date of
the underlying debt. Management believes the sale price of the facility will
be sufficient to satisfy the obligations of the facility and the operating
obligations of the Partnership.
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 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.
Accounting Pronouncement
The Financial Accounting Standards Board has issued Statement on Financial
Accounting Standards No. 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of (SFAS No. 121). The
Company will adopt this standard in Fiscal 1996. In management s opinion,
there will be no material effect on the Company s financial statements of
adopting SFAS No. 121.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index Page Number
Report of Independent Certified Public Accountants 13
Consolidated Financial Statements
Balance Sheets - December 31, 1995 and 1994 14-15
Statements of Operations
- Years ended December 31, 1995, 1994 and 19931 16
Statements of Partners' Deficit
- Years ended December 31, 1995, 1994 and 1993 17
Statements of Cash Flows
- Years ended December 31, 1995, 1994 and 1993 18
Summary of Significant Accounting Policies 19-21
Notes to Consolidated Financial Statements 22-27
The following financial statement schedule for the years ended December 31,
1995, 1994 and 1993 of the Registrant is submitted herewith in response to
Item 14 (a)(2):
Schedule II - Valuation and Qualifying Accounts 29
All other schedules of the Partnership for which provision is made in the
applicable regulations of the Securities and Exchange Commission are not
required under the related instructions, are inapplicable or have been
disclosed in the notes to the consolidated financial statements and,
therefore, have been omitted.
Report of Independent Certified Public Accountants
The Partners
Consolidated Resources Health Care Fund V and Subsidiaries
We have audited the accompanying consolidated balance sheets of Consolidated
Resources Health Care Fund V and Subsidiaries (limited partnerships) (the
"Partnership") as of December 31, 1995 and 1994, and the related consolidated
statements of operations, partners' deficit and cash flows for each of the
three years in the period ended December 31, 1995. We have also audited the
schedule listed in the accompanying index. These consolidated financial
statements and schedule are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these consolidated
financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the consolidated financial
statements and schedule are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the consolidated financial statements and schedule. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the consolidated
financial statements and schedule. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Consolidated Resources Health Care Fund V and Subsidiaries (limited
partnerships) at December 31, 1995 and 1994, and the consolidated results of
their operations and their cash flows for each of the three years in the
period ended December 31, 1995, in conformity with generally accepted
accounting principles.
Also, in our opinion, the schedule present fairly, in all material respects,
the information set forth therein.
The accompanying consolidated financial statements have been prepared assuming
that the Partnership will continue as a going concern. As discussed in Notes
3 and 4 of the consolidated financial statements, the Partnership has suffered
recurring losses from operations, has a working capital deficiency, has
defaulted on certain debt, and has no assurance of any financial support from
the General Partners. These conditions raise substantial doubt about the
Partnership's ability to continue as a going concern and to realize its plan
to sell or otherwise dispose of its remaining properties by October 18, 1997.
Management's plans regarding these matters are described in the Summary of
Significant Accounting Policies and Note 3. The consolidated financial
statements and schedule do not include any adjustments that might result from
the outcome of these uncertainties.
BDO Seidman, LLP
Atlanta, Georgia
March 1, 1996
Consolidated Resources Health Care Fund V and Subsidiaries
(limited partnerships)
Consolidated Balance Sheets
December 31, 1995 1994
Assets
Current
Cash and cash equivalents (Note 11) $ 319,587 $ 716,188
Accounts receivable, net of allowance for
doubtful accounts of $168,133 (Note 10) 876,593 1,199,849
Prepaid expenses and other 292,926 357,152
Property held for sale (Notes 4 and 6) 8,521,347 10,267,062
Total current assets 10,010,453 12,540,251
Deferred loan costs, net 10,452 23,540
$10,020,905 $12,563,791
See accompanying summary of significant accounting policies and notes to
consolidated financial statements.
Consolidated Resources Health Care Fund V and Subsidiaries
(limited partnerships)
Consolidated Balance Sheets
December 31, 1995 1994
Liabilities and Partners' Deficit
Current liabilities
Mortgage debt obligations,
including debt in default of $3,491,885
and $3,624,314 (Notes 1 and 4) $8,499,759 $9,982,997
Accounts payable 302,448 372,530
Accrued interest 1,955,432 4,480,481
Accrued real estate taxes 438,769 487,613
Insurance payable 3,262 98,462
Medicaid settlements payable (Note 10) - 258,969
Other liabilities (Note 1) 347,289 293,149
Total current liabilities 11,546,959 15,974,201
Advances from affiliates and former affiliates
(Note 1) - 4,348,983
Deferred gain on installment sale (Note 7) 278,166 278,166
Total liabilities 11,825,125 20,601,350
Commitments and Contingencies (Notes 3, 4, 10
and 11)
Partners' deficit (Note 5)
Limited partners (1,014,315) (6,998,320)
General partners (789,905) (1,039,239)
Total partners' deficit (1,804,220) (8,037,559)
$10,020,905 $12,563,791
See accompanying summary of significant accounting policies and notes to
consolidated financial statements.
Consolidated Resources Health Care Fund V and Subsidiaries
(limited partnerships)
Consolidated Statements of Operations
Years ended December 31, 1995 1994 1993
Revenue
Operating revenue (Note 8) $9,627,973 $9,850,313 $13,961,815
Interest income 84,839 96,447 91,198
Total revenue 9,712,812 9,946,760 14,053,013
Operating costs and expenses
Operating expenses (Note 8) 8,279,965 9,109,557 11,722,562
Interest (Note 4) 651,000 1,074,416 1,414,659
Depreciation and amortization 376,514 376,278 569,027
Management fees (Note 2) 619,862 608,161 706,810
Real estate taxes 246,076 365,379 292,142
Partnership administration costs
(Note 2) 195,158 273,419 299,898
Total operating costs and expenses 10,368,575 11,807,210 15,005,098
Operating loss (655,763) (1,860,450) (952,085)
Gain on sale of properties (Note 7) - - 1,881,283
Income from litigation settlement
(Note 8) - 32,354 -
Loss on write-down of properties
(Note 6) - - (1,804,440)
Loss before extraordinary gain (655,763) (1,828,096) (875,242)
Extraordinary gain on extinguishment
of debt (Notes 7, 8 and 9) 6,889,102 - 5,879,698
Net income (loss) $6,233,339 $(1,828,096) $5,004,456
Loss per limited partnership unit
before extraordinary gain $(21.02) $(59.30) $(28.39)
Extraordinary gain on extinguishment
of debt $220.78 $ - $196.68
Net income (loss) per
limited partnership unit $199.76 $(59.30) $168.29
Limited partnership units outstanding 29,956 29,596 29,596
See accompanying summary of significant accounting policies and notes to
consolidated financial statements.
Consolidated Resources Health Care Fund V and Subsidiaries
(limited partnerships)
Consolidated Statements of Partners Deficit
Years Ended December 31, 1995, 1994 and 1993
Total
Partners
Limited General Deficit
Balance, at January 1, 1993 $(8,476,322) $(987,597) $(9,463,919)
Net income 4,982,974 21,482 5,004,456
Distributions (Note 5) (1,750,000) - (1,750,000)
Balance, at December 31, 1993 (5,243,348) (966,115) (6,209,463)
Net loss (1,754,972) (73,124) (1,828,096)
Balance, at December 31, 1994 (6,998,320) (1,039,239) (8,037,559)
Net income 5,984,005 249,334 6,233,339
Balance, at December 31, 1995 $(1,014,315) $(789,905) $(1,804,220)
See accompanying summary of significant accounting policies and notes to
consolidated financial statements.
Consolidated Resources Health Care Fund V and Subsidiaries
(limited partnerships)
Consolidated Statements of Cash Flows
Years ended December 31, 1995 1994 1993
Operating activities
Net income (loss) $6,233,339$(1,828,096) $5,004,456
Adjustments to reconcile net income
(loss) to cash used in operating
activities:
Depreciation and amortization 376,514 376,278 569,027
Bad debt expense - - 158,911
Interest expense accrued
and forgiven - - 401,063
Gain on sale of properties - - (1,881,283)
Loss on write-down of properties - - 1,804,440
Extraordinary gain from
extinguishment of debt (6,889,102) - (5,879,698)
Changes in assets and liabilities:
Trade accounts receivable 323,256 216,140 (409,998)
Prepaid expenses and other 64,223 17,926 (174,802)
Accounts payable and
accrued liabilities (320,544) 1,178,924 302,474
Cash used in operating activities (212,314) (38,828) (105,410)
Investing activities
Additions to property held for sale (83,479) (35,441) -
Payment for purchases of property and
equipment - - (256,233)
Proceeds from sale of properties - - 4,915,829
Cash provided by (used in) investing
activities (83,479) (35,441) 4,659,596
Financing activities
Principal payments on long term debt-
obligations (100,808) (92,149) (2,649,221)
Distribution to limited partners - - (1,750,000)
Cash used in financing activities (100,808) (92,149) (4,399,221)
Net increase (decrease) in cash and
cash equivalents $(396,601) $(166,418) $154,965
Cash and cash equivalents, beginning of
year 716,188 882,606 727,641
Cash and cash equivalents, end of year $319,587 $716,188 $882,606
See accompanying summary of significant accounting policies and notes to
consolidated financial statements.
Consolidated Resources Health Care Fund V and Subsidiaries
(limited partnerships)
Summary of Significant Accounting Policies
Organization
Consolidated Resources Health Care Fund V (the "Partnership") was organized on
January 2, 1985 as a Limited Partnership under the provisions of the Georgia
Uniform Limited Partnership Act for the purpose of acquiring, operating and
holding for investment and future capital appreciation income producing,
health care related real properties.
The General Partners of the Partnership are WelCare Consolidated Resources
Corporation of America, ("WCRCA" or the "Corporate General Partner") serving
as Corporate General Partner, a Nevada corporation, WelCare Service
Corporation-V ("WSC-V" or the "Managing General Partner"), a Georgia
corporation serving as Managing General Partner, and Consolidated Associates
V, a Georgia general partnership (collectively the "General Partners"). WCRCA
and WSC-V are wholly-owned subsidiaries of WelCare Acquisition Corp., which is
a subsidiary of WelCare International, Inc., ("WelCare"). WelCare, a
privately owned Georgia corporation, is engaged in the operation, acquisition,
property management and oversight management of long-term care facilities.
Consolidated Associates V is composed of WCRCA, as the managing general
partner, and individuals who were associated with Consolidated Resources
Corporation of America ("CRCA").
Pursuant to an agreement dated October 30, 1985, CRCA, a Georgia corporation
that initially was the Corporate General Partner of the Partnership, was
merged into a subsidiary of Southmark Corporation ("Southmark"). The name of
the surviving Southmark subsidiary was then changed to Southmark Consolidated
Resources Corporation of America ("SCRCA"). Southmark emerged from Chapter 11
bankruptcy on August 10, 1990 and has liquidated most of its assets pursuant
to a plan of reorganization. On November 20, 1990, WelCare Acquisition
Corp., acquired from Southmark all the stock of SCRCA whose name was then
changed to WelCare Consolidated Resources Corporation of America. Effective
January 1992, WSC-V, was added as the Managing General Partner.
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.
The Partnership will continue to operate the facilities, while it proceeds
with the sale of the properties or negotiates a settlement with the lender
holding the mortgage on Plantation Care Center.
At December 31, 1995, the Partnership has held available for sale all of its
nursing homes facilities. Accordingly, the Partnership has classified the
facilities as property held for sale in the accompanying balance sheet.
The financial statements do not reflect assets the partners may have outside
their interests in the Partnership, nor any personal obligations, including
income taxes, of the individual partners.
Consolidation
The consolidated financial statements include the accounts of the Partnership
and the partnerships in which it holds a majority interest. All significant
intercompany balances and transactions have been eliminated. The amount of
minority interest is immaterial.
Consolidated Resources Health Care Fund V and Subsidiaries
(limited partnerships)
Summary of Significant Accounting Policies
Property Held for Sale
Property held for sale at December 31, 1995, consists of two operating and one
closed nursing home facility owned by the Partnership and carried at the lower
of cost or net realizable value less estimated costs to dispose. In
accordance with a plan approved by the Limited Partners on October 18, 1994,
the Managing General Partner has been given permission to either sell or
otherwise dispose of the Partnership s assets by October 18, 1997.
Accordingly, all facilities of the Partnership have been classified as
property held for sale as of December 31, 1995. Property held for sale at
December 31, 1994 consist of two operating nursing home facilities and two
closed nursing home facilities.
The Financial Accounting Standards Board has issued Statement on Financial
Accounting Standards No. 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of (SFAS No. 121). The
Company will adopt this standard in Fiscal 1996. In management s opinion,
there will be no material effect on the Company s financial statements of
adopting SFAS No. 121.
Depreciation and Amortization
Property and equipment are depreciated using the straight-line method over
lives of 5 to 30 years. Amortization of leased assets is included in
depreciation and amortization expense. Renewals and betterments are
capitalized and repairs and maintenance are charged to operations as incurred.
Deferred Loan Costs
Deferred loan costs are amortized over the terms of the respective loans using
the straight-line method. Amortization of deferred loan costs is included in
depreciation and amortization expense.
Operating Revenue
Operating revenue is recorded when services are rendered and includes amounts
reimbursable by the Medicaid program. Medicaid revenue is recorded at the
applicable net reimbursement rates; therefore, no contractual adjustments are
reported.
Income Taxes
No provision has been made in the consolidated financial statements for
Federal income taxes because under current law, no Federal income taxes are
paid directly by the Partnership.
Allocation of Net Income or Net Loss
The Partnership's net profits and net losses (other than net profits or net
losses from a sale or refinancing of Partnership property) are allocated 96%
to the Limited Partners and 4% to the General Partners. Distributions are
allocated on the basis described in Note 5. Net profits and losses resulting
from a sale or refinancing shall be allocated 99% to the Limited Partners and
1% to the General Partners. Net profits resulting from a sale or refinancing
shall be allocated in the following order:
Consolidated Resources Health Care Fund V and Subsidiaries
(limited partnerships)
Summary of Significant Accounting Policies
(1) First, 1% to the General Partners and 99% to the Limited Partners until
the net profits allocated to the Limited Partners from such sale or
refinancing equals the excess of the greater of the following items
over their capital account immediately prior to such sale or
refinancing:
(a) zero; or
(b) the Limited Partners' invested capital
immediately prior to such sale or refinancing plus 9% of the Limited
Partners' average invested capital to the extent not received through
prior distributions of distributable cash from operations or sale or
refinancing proceeds; or
(c) the amount of sale or refinancing proceeds
distributable to the Limited Partners;
(2) Second, to the General Partners until the net profits allocated
to the General Partners from such sale or refinancing equals the excess
of the greater of the following items over their capital account
immediately prior to such sale or refinancing:
(a) zero; or
(b) the amount of sale or refinancing proceeds distributable to the
General Partners from such sale or refinancing;
(3) Third, any remaining net profits shall be allocated 15% to the
General Partners and 85% to the Limited Partners.
Net Income (Loss) Per Limited Partnership Unit
Net income (loss) per Limited Partnership Unit is computed by dividing net
income (loss) allocated to the Limited Partners by the weighted average number
of Limited Partnership units outstanding.
Statements of Cash Flows
For purposes of this statement, cash equivalents include U.S. government
securities, commercial paper and certificates of deposit with original
maturities of three months or less.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Consolidated Resources Health Care Fund V and Subsidiaries
(limited partnerships)
Notes to Consolidated Financial Statements
1. Transactions With Former Affiliates
The Partnership paid property management fees based on a percentage of gross
property operating revenues to National Heritage, Inc. ("NHI") (currently
known as Evergreen Health Care, Inc.), a former affiliate of Southmark, for
supervising the maintenance and operations of the Partnership's properties.
NHI, who managed five facilities in 1990 and three facilities in 1991 and
1992, was effectively removed as manager on October 1, 1993. For services
provided during its management period, fees paid to NHI ranged from 1% to 6%
of operating revenues of the managed facility.
In December 1991, NHI, through a lawsuit, sought to take possession of certain
of the Partnership's properties. In 1993, WelCare and NHI reached an
agreement which settled all lawsuits and claims (See Note 9). In connection
with this lawsuit, the Partnership retained possession of all of the
properties.
The Partnership had notes payable to a former affiliate of Southmark,
totalling $2,241,885 in 1995 and $3,624,314 in 1994 and are currently payable
to the Resolution Trust Corporation. These notes are comprised of a note
related to Village Inn Nursing Home of $2,241,885 in 1995 and 1994 and a note
related to Champaign Opportunity House of $1,382,429 in 1994 (See Note 4).
Amounts claimed payable to former affiliates (primarily Southmark and the
Corporate General Partner, formerly owned by Southmark), totalled $4,348,983
plus accrued interest in the amount of $1,510,056 at December 31, 1994, and
are classified as Advances from Affiliates and Former Affiliates in the 1994
balance sheets. In 1991, the former affiliates filed suit demanding payment of
the alleged advances. In 1991, after WelCare s affiliate acquired the
Corporate General Partner, it challenged the validity of these payables
through claims against the Southmark bankruptcy estate. In January 1994, the
suits were settled whereby the Partnership was released of all liabilities to
Southmark and received a lump sum payment from Southmark of $32,354 (See Note
8). In 1995, the Corporate General Partner released the Partnership from all
remaining liabilities resulting in a gain on debt forgiveness of $5,859,039.
2. Management Fees
In 1995, 1994 and 1993 the Partnership s facilities were managed by an
affiliate of the Corporate General Partner. This affiliate provided
management and accounting services to the facilities and earned management
fees ranging from 4% to 6% of gross operating revenues or oversight fees
ranging from 1% to 2.5% of gross operating revenues. Total oversight and
management fees earned by the affiliate amounted to $554,950 , $608,161 and
$584,329 in 1995, 1994 and 1993, respectively. Included in Partnership
administration costs are reimbursed costs incurred in connection with the
administration of Partnership activities of $60,884, $67,228 and $74,163 in
1995, 1994 and 1993, respectively.
3. Going Concern
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. The
Partnership has working capital deficiencies, has defaulted on certain debt
and has no assurance of any financial support from the General Partners.
These conditions raise substantial doubt about the Partnership's ability to
continue as a going concern. The Partnership's continued existence is
dependent on its ability to negotiate satisfactory settlements with its
lenders and to sell its facilities in an orderly fashion.
Consolidated Resources Health Care Fund V and Subsidiaries
(limited partnerships)
Notes to Consolidated Financial Statements
The Partnership s closed facility, Village Inn, has tax certificates of
approximately $130,000 outstanding for accrued real estate taxes that may
require redemption by the Partnership during 1996. The recourse note secured
by Village Inn could have an adverse effect on the Partnership and its ability
to continue as a going concern, should the holder of the note pursue its
satisfaction. Demand for payment has not yet been asserted by the holder, but
could occur during 1996.
Due to negative operating cash flow generated by Plantation, the Partnership
ceased debt service on its $1,250,000 note payable secured by the facility
during March 1995. Based on current offers from prospective purchasers, a
sale of the facility would not satisfy this obligation. As a result, the
Partnership is currently in negotiations with the lender. On April 1, 1995,
the facility s operational management was changed to a local management
company with the expectation that the transaction would lead the sale of the
facility. Management anticipates that Plantation will be sold or transferred
to the lender during the second quarter of 1996. Should the Partnership be
unable to negotiate a settlement with the holder of Plantation s debt or sell
the facility at an amount equal to its debt, the Partnership s ability to
continue as a going concern could be adversely affected.
As of December 31, 1995, the Partnership was current on its debt service
related to its mortgage secured by RHS. Subsequent to year end, the
Partnership obtained an extension of the due date on this debt until March 28,
1997. The Partnership intends to sell this facility before the due date of
the underlying debt. Management believes the sale price of the facility will
be sufficient to satisfy the obligations of the facility and the operating
obligations of the Partnership.
The Partnership does not anticipate improved liquidity during the remainder of
1996, due to the continued negative operating results generated by Plantation
and the potential payment of tax certificates secured by Village Inn. Should
the Partnership s cash reserves prove inadequate, the Partnership has no
existing lines of credit to draw on or the ability to borrow against its other
facilities.
4. Mortgage Debt Obligations
Mortgage debt obligations consisted of:
1995 1994
Prime plus .5% note, related to River Hills
South, collateralized by property held for sale
with a net book value of $4,784,000; requiring
monthly payments of principal and interest based
on a fifteen year amortization schedule, due
March 28, 1997. $5,007,874 $5,108,683
12% note payable to the Resolution Trust
Corporation ("RTC"), related to Village Inn
Nursing Home; collateralized by property held
for sale with a net book value of $2,279,000;
requiring monthly installments of principal and
interest based on a thirty year amortization
schedule, due August 1, 1994. In default
for nonpayment of principal and interest. 2,241,885 2,241,885
Consolidated Resources Health Care Fund V and Subsidiaries
(limited partnerships)
Notes to Consolidated Financial Statements
1995 1994
12% note, payable to the RTC, related to
Champaign Opportunity House, collateralized
by property held for sale with a net book
value of $1,466,000; requiring monthly
installments of principal and interest based
on a thirty year amortization schedule, due
August 1, 1994. Release from debt effective
March 17, 1995 when sold to non-profit agency. - 1,382,429
7% note, related to Plantation Care Center,
collateralized by property held for sale with
a book value of $1,458,000; interest only
payable monthly beginning November 1, 1993
with the principal balance due December 31,
1996. In default for nonpayment of interest. 1,250,000 1,250,000
$8,499,759 $9,982,997
At December 31, 1995 and 1994, Village Inn Nursing Home, Plantation Care
Center and River Hills South were being held for sale by the Partnership.
Accordingly, the facilities have been classified as Property Held for Sale in
the accompanying December 31, 1995 and 1994 balance sheets. In addition, the
underlying debt secured by these facilities has been included in current
maturities of mortgage debt as these obligations would have priority to any
sales proceeds.
Prior to WelCare s affiliate's acquisition of SCRCA, payment of debt service
on the notes collateralized by Village Inn Nursing Home and Champaign
Opportunity House had been stopped and the facilities had ceased operations.
As discussed in Note 7, Champaign Opportunity House was transferred to the
lender in March 1995 in full satisfaction of the associated mortgage and
accrued interest. It is anticipated that if Village Inn is not sold prior to
the mortgage due date, the mortgage could be foreclosed upon and the facility
will revert to the RTC. Accrued interest in the accompanying balance sheets
includes interest of $1,955,432 and $2,916,413 at December 31, 1995 and 1994,
respectively, in connection with these properties. At December 31, 1995 and
1994, these properties are included in Properties Held for Sale on the
accompanying balance sheets.
The Partnership paid interest of $551,157, $632,438 and $868,692 in 1995,
1994, and 1993, respectively.
Due to the default provisions described above, it is not practical to estimate
the fair value of the Partnership s mortgage obligations.
5. Distributions
Distributions to the Partners are paid from operations of the Partnership's
properties, or from sales or refinancing of properties. Cash from operations
is distributed 96% to the Limited Partners and 4% to the General Partners.
However, no distributions of cash from operations may be made to the General
Partners in any year until the Limited Partners have received distributions
for such year equal to 9% of their invested capital.
Consolidated Resources Health Care Fund V and Subsidiaries
(limited partnerships)
Notes to Consolidated Financial Statements
Distributions of cash from sales and refinancing are made in the following
order:
(a) first to the Limited Partners in an amount equal to their invested
capital; then,
(b) to the Limited Partners in an amount necessary to provide the
Limited Partners with a 9% cumulative, non-compounded return on
invested capital to the extent not previously received through
distributions of distributable cash from operations; then,
(c) to the General Partners in an amount up to 3% of the sale price
of all properties on a cumulative basis; then,
(d) the balance 15% to the General Partners and 85% to the Limited
Partners.
Due to improvements in operations obtained after WelCare's affiliate acquired
the Corporate General Partner on November 20, 1990, the Partnership
distributed $150,000 to the Limited Partners during 1991. No distributions
were made to the Limited Partners in 1992. During 1993, the Partnership
distributed $1,750,000 of proceeds from facility sales (see Note 7). The
Partnership did not make any distribution in 1994 or 1995. The distribution
paid in 1991 was the first distribution since 1987. Cumulative distributions
since inception, January 2, 1995, paid to the Limited Partners through
December 31, 1995 were $5,942,867. There have been no distributions to the
General Partners.
6. Loss on Write-Down of Properties
The Partnerships recorded writedowns in prior years to reduce the carrying
value of certain properties to their estimated net realizable value as
determined by the Corporate General Partner.
These write-downs were as follows as of December 31, 1995 and 1994:
1995 1994
River Hills South $1,544,440 $1,544,440
Plantation Care Center 260,000 260,000
Champaign Opportunity House - 123,467
Village Inn Nursing Home 89,140 89,140
$1,893,580 $2,017,047
In 1995, the Champaign Opportunity House was transferred to the lender in full
satisfaction of outstanding indebtedness. The Partnership s remaining
facilities are classified as assets held for sale at December 31, 1995 and are
expected to be disposed of prior to October 1997.
The net book value of the properties at December 31, 1995 were as follows:
Net Book
Value
River Hills South
$4,784,000
Village Inn Nursing Home 2,279,000
Plantation Care Center 1,458,000
$8,521,000
Consolidated Resources Health Care Fund V and Subsidiaries
(limited partnerships)
Notes to Consolidated Financial Statements
7. Property Dispositions
On March 24, 1995, the Partnership transferred a deed in lieu of foreclosure
to the holder of the note secured by a mortgage on the Champaign Opportunity
House ( Champaign ). This note was recourse to the Partnership. The Managing
General Partner successfully negotiated the transfer of deed and payment of
back taxes of approximately $62,000 in full satisfaction of this obligation.
The Partnership recognized an extraordinary gain on the transaction of
$1,030,063 representing the excess of debt outstanding over the net book value
of the property as of the date of transfer.
On October 20, 1993, the Partnership sold its interest in Libby Care Center,
Orofino Care Center, and the Pinewood Care Center pursuant to a Purchase and
Sale Agreement dated October 1, 1993. These facilities were sold for an
aggregate price of $5,050,000, subject to certain adjustments and prorations.
Each of these facilities was sold for a purchase price that equaled or
exceeded the appraised value of each facility. The Partnership recognized an
aggregate gain of $1,881,283 from these sales. During the nine months ended
September 30, 1993, Libby Care Center earned approximately $1,669,000 in
revenue and incurred approximately 1,446,000 in expenses. During the same
period, Orofino Care Center earned approximately $1,220,000 in revenue and
incurred approximately $976,000 in expenses, and Pinewood Care Center earned
approximately $2,225,000 in revenue and incurred approximately $1,804,000 and
in expenses.
In a separate transaction, effective as of August 1, 1991, Brushwood Care
Center ("Brushwood") was sold in a transaction whereby the purchaser acquired
the property and the Partnership's obligation under outstanding debt secured
by the property was extinguished. The sale of Brushwood Care Center was
accounted for as an installment sale whereby profit recognition is based on
the percentage of profit to the sales price and is recognized on total cash
payments to total sales price. The Partnership received cash of $637,644, and
a note from the purchaser for $500,000, which is unsecured, bears interest at
10% and matured in August 1994. The deferred gain recorded on the sale was
$778,166, $278,166 of which is reflected as deferred gain on installment sale
in the accompanying 1995 and 1994 balance sheets. The Partnership is currently
negotiating an extension agreement with the purchaser for repayment of the
note receivable. Due to the uncertainty regarding eventual payment, the note
was offset against the associated deferred gain on sale.
8. Southmark Litigation
In November 1990, the Partnership filed claims against Southmark in the United
States Bankruptcy Court for the Northern District of Texas. In August 1991,
the Partnership was served notice that on July 12, 1991, Southmark filed suit
against the Partnership, the Corporate General Partner, partnerships
controlled by affiliates of the Corporate General Partner and partnerships and
corporations which are unaffiliated with the Partnership or the Corporate
General Partner. The suit was also filed in the United States Bankruptcy
Court for the Northern District of Texas, Dallas Division. On October 15,
1991, the Partnership filed its response, including counterclaims against
Southmark, for alleged fraud and misrepresentation and asserting that in fact
Southmark owed amounts to the Partnership as represented by Proof of Claims
filed against Southmark's bankruptcy estate.
Consolidated Resources Health Care Fund V and Subsidiaries
(limited partnerships)
Notes to Consolidated Financial Statements
The Partnership reached a settlement agreement 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 agreement, Southmark released all claims against the
Partnership and recognized the Partnership's claims. In settlement of the
Partnership's claims, Southmark paid $32,354 to the Partnership.
9. NHI Settlement
The Partnership had filed a lawsuit against NHI seeking to void all promissory
notes due from the Partnership to NHI. NHI had brought suit against the
Partnership seeking payment of the note and mortgage foreclosure.
In October 1993, the Partnership recorded an extraordinary gain of $5,879,698
based on the settlement of all matters in the lawsuit between the Partnership
and NHI whereby NHI agreed to accept cash of $2,575,000 and a $1,250,000
promissory note, secured by Plantation Care Center, in settlement of all
matters including secured notes payable of $6,900,000, accrued interest of
$2,510,026, and outstanding worker s compensation liabilities and other
liabilities of $294,672.
10. Cost Reimbursements
Accounts receivable and operating revenue include amounts estimated by
management to be reimbursable by Medicaid under the provisions of cost
reimbursement formulas in effect. Final determination of amounts earned is
subject to audit by the intermediaries. In the opinion of management,
adequate provision has been made for any adjustments that may result from such
audits. Differences between estimated provisions and final settlement are
reflected as charges or credits to operating revenue in the year finalized.
Medicaid programs accounted for approximately 63%, 61% and 66% of operating
revenue during 1995, 1994 and 1993, respectively.
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.
Accounts receivable are recorded at net realizable value and relate
principally to amounts due from various state Medicaid programs. Receivables
from these programs were approximately as follows:
1995 1994
Wisconsin $436,000 $486,000
Oregon 121,000 204,000
Amounts due from Medicaid programs are generally paid on an interim and final
basis, depending on the state, primarily within 30 to 60 days from date of
billing.
Consolidated Resources Health Care Fund V and Subsidiaries
(limited partnerships)
Notes to Consolidated Financial Statements
In March 1994, the Partnership received notification from the Idaho Medicaid
program that the Partnership owed the state $149,485 and $109,484,
respectively, for Medicaid overpayments made to the Partnership during 1993
and 1992. These amounts related to two Idaho facilities in which the
Partnership sold its interests in 1993 (see Note 7). These settlement
amounts reduced operating revenue in 1994 and are included in Medicaid
settlements payable in the accompanying 1994 balance sheet. These liabilities
were completely repaid in 1995.
11. Concentration of Credit Risk
The Partnership had funds invested in a money market account at December 31,
1995 that exceeded Federal Deposit Insurance Company limits by $167,474.
12. Supplemental Disclosures of Cash Flow Information
As discussed in Note 1, the Partnership had a forgiveness of debt due to the
Corporate General Partner during 1995. In connection with the forgiveness, a
gain of $5,859,039 was recorded.
As discussed in Note 7, during 1995 the Partnership recognized an
extraordinary gain of $1,030,063 relating to the disposition of Champaign
Opportunity House.
Both of the above amounts are included in the extraordinary gain from
extinguishment of debt in the accompanying 1995 statement of cash flows.
SCHEDULES
Consolidated Resources Health Care Fund V and Subsidiaries
(limited partnerships)
Schedule II - Valuation and Qualifying Accounts
Years Ended December 31, 1995, 1994 and 1993
Additions
Balance at charged to costs Balance at
beginning of year and expenses end of year
1995
Allowance for
doubtful accounts $168,133 $ - $ - $168,133
1994
Allowance for
doubtful accounts $202,649 $ 7,649 $42,165 $168,133
1993
Allowance for
doubtful accounts $108,557 $158,911 $64,819 $202,649
Represents direct write-offs of receivables.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Partnership does not have officers or directors. At December 31, 1995,
the General Partners of the Partnership were WelCare Consolidated Resources
Corporation of America and Consolidated Associates V. Effective January 7,
1992, WSC-V was added as managing general partner of the Partnership. The
executive officers and director of WSC-V and WCRCA, who control the affairs of
the Partnership, are as follows:
Name and Position Age Other Principal Occupations and Other Directorships
During the Past 5 Years
J. Stephen Eaton
President and
Director 45 Mr. Eaton has been President and
Director of WelCare International, Inc. since its
formation in February 1989. WelCare International,
Inc., an affiliate of the General Partners, is
engaged in the operation, acquisition, property
management and oversight management of long-term care
facilities. Since 1988, Mr. Eaton has served as a
Director and is currently Chairman of St. Joseph's
Mercy Care Corporation, a non-profit corporation.
Kent C. Fosha, Sr.
Executive Vice
President
Operations 54 Mr. Fosha has been Executive Vice
President of WelCare International, Inc. since 1990.
WelCare International, Inc., an affiliate of the
General Partners, is engaged in the operation,
acquisition, property management and oversight
management of long-term care facilities. Mr. Fosha
is a licensed nursing home administrator in the state
of Georgia.
Alan C. Dahl
Executive Vice
President 35 Mr. Dahl has been Executive Vice
President of WelCare International, Inc. since
February 1991. WelCare International, Inc., an
affiliate of the General Partners, is engaged in the
operation, acquisition, property management and
oversight management of long-term care facilities.
Mr. Dahl is a certified public accountant.
ITEM 11. EXECUTIVE COMPENSATION
No individual principal or principals as a group received any direct
renumeration from the Partnership.
The General Partners are not compensated directly for their services as
general partners of the Partnership. See Item 13 and Item 8, Note 2 to the
consolidate financial statements appearing in Item 8 for further discussion of
compensation paid to affiliates of the General Partners.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(A) Security ownership of certain beneficial owners.
No individual or group as defined by Section 13(d)(3) of the Securities
Exchange Act of 1934, known to the Partnership is the beneficial owner of
more than 5% of the Partnership's securities.
(B) Security ownership of management.
The General Partners and their management own less than 1%.
The General Partners are entitled to distributions of cash from operations
and from "other sources" (primarily from the sale or refinancing of
Partnership properties, as set forth in Item 8, Note 4).
(C) Change in control.
None.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Affiliates and former affiliates of the General Partners, in accordance with
the Partnership Agreement, may receive compensation for services rendered.
The following is a summary of compensation paid to or accrued for the benefit
of the General Partners and affiliates in 1994:
Oversight management and management fees $554,950
Administration of partnership activities (1) 60,884
(1) For reimbursement of expenses incurred by the
Corporate General Partner in performing certain administrative
functions, including investor relations and accounting.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as a part of this report:
(1) Consolidated Financial Statements:
Report of Independent Certified Public Accountants
Balance Sheets
as of December 31, 1995 and 1994
Statements of Operations
for the Years Ended December 31, 1995, 1994 and 1993
Statements of Partners' Deficit
for the Years Ended December 31, 1995, 1994 and 1993
Statements of Cash Flows
for the Years Ended December 31, 1995, 1994 and 1993
Summary of Significant Accounting Policies
Notes to Consolidated Financial Statements
(2) Schedules included in Part II, Item 8:
Schedule VIII - Valuation and Qualifying Accounts
for the Years Ended December 31, 1995, 1994 and 1993
Other schedules are omitted since they are not required, are not applicable or
the financial information required is included in the financial statements or
notes thereto.
(3) Exhibits:
The following exhibits are incorporated by reference and are an integral part
of this Form 10-K.
Exhibit Number
(as per Exhibit Table) Document Description
2.1 Liquidation Proposal incorporated by reference
to the Proxy Statement filed on September 28, 1994 file
0-14436
3.1 Amended and Restated Agreement of Limited
Partnership of Consolidated Resources Health Care Fund
V incorporated by reference to Exhibit A to the
Registration Statement on Form S-1, Page A-1, File No.
2-96380
3.2 Amendment to Amended and Restated Agreement of
Limited Partnership of Consolidated Resources Health
Care Fund V incorporated by reference to Exhibit A to
Proxy Statement filed on November 19, 1991, File No. 0-
14436
22 Subsidiaries
(b) Reports on Form 8-K:
(1) None
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
CONSOLIDATED RESOURCES HEALTH CARE FUND
V
(Registrant)
By: WELCARE CONSOLIDATED RESOURCES
CORPORATION OF AMERICA
Corporate General Partner
By:/S/ J. Stephen Eaton
Date J. Stephen Eaton,
President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons, on behalf of the
Registrant and in the capacities and on the dates indicated:
By: /S/ J. Stephen Eaton
Date J. Stephen Eaton,
Sole Director and Principal
Executive Officer of the
Corporate General Partner
By:/S/ Alan C. Dahl
Date Alan C. Dahl
Chief Financial Officer
of the Corporate
General Partner
Exhibit Index
Exhibit Number Description Sequential Page Number
2.1
Liquidation Proposal incorporated by
reference to the Proxy Statement filed on
September 28, 1994 file No. 0-14436 N/A
3.1
Amended and Restated Agreement of Limited
Partnership of Consolidated Resources Health Care
Fund V incorporated by reference to
Exhibit A to the Registration Statement on Form
S-1, File No. 2-96380 N/A
3.2
Amendment to Amended and Restated Agreement of
Limited Partnership of Consolidated
Resources Health Care Fund V incorporated by
reference to Exhibit A to Proxy Statement filed
on November 19, 1991, File No. 0-14436. N/A
22
Subsidiaries 36
27
Financial Data Schedules N/A
Exhibit 22
SUBSIDIARY (LIMITED PARTNERSHIPS)
Brushwood Associates Limited Partnership
Libby Associates Limited Partnership (Inactive)
Orofino Associates Limited Partnership (Inactive)
Pinewood Associates Limited Partnership (Inactive)
Plantation Associates Limited Partnership
Pleasant Grove Associates Limited Partnership (Inactive)
River Hills South Investors L.P.
SCHEDULES
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THIS SUMMARY CONTAINS UNAUDITED SUMMARY FINANCIAL INFORMATION EXTRACTED
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REFERENCE TO SUCH FILING.
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