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, 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 0-15694
CONSOLIDATED RESOURCES HEALTH CARE FUND VI
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(Exact name of registrant as specified in its charter)
Georgia 58-1677247
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) identification No.)
400 Perimeter Center Terrace, Suite 650, Atlanta, Georgia
30346
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(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 29,308 Limited Partnership Units, 29,097 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 25.
SEE INDEX TO EXHIBITS ON PAGE 26.
PAGE ONE OF 27 PAGES.
<PAGE>
PART I
ITEM 1. BUSINESS
Consolidated Resources Health Care Fund VI (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, 1996, the Partnership had three general partners (the "General
Partners"), Consolidated Associates VI, a Georgia general partnership,
Consolidated Resources VI, Inc. as the Corporate General Partner ("CR-VI" or the
"Corporate Partner"), and WelCare Service Corporation-VI, a Georgia corporation
as Managing General Partner ("WSC-VI" or the "Managing General Partner"). At
December 31, 1996, WSC-VI was a wholly-owned subsidiary of Centennial
Acquisition Corp., ("CAC") which is in turn a wholly-owned subsidiary of
Centennial Healthcare Corporation ("Centennial"). CR-VI, a Georgia corporation,
is a wholly-owned subsidiary of WelCare Consolidated Resources Corporation of
America ("WCRCA"). At December 31, 1996, WCRCA, a Nevada corporation, was a
wholly-owned subsidiary of Centennial Acquisition Corporation. Prior to December
1996, CAC and Centennial were known as WelCare Acquisitions Corp. and WelCare
International, Inc., respectively. Consolidated Associates VI is composed of
WCRCA, as the managing general partner, and individuals who were previously
associated with Consolidated Resources Corporation of America ("CRCA"). On
January 30, 1997, all of the stock of the Corporate General Partner and the
Managing General Partner was sold to Consolidated Partners Corporation, which is
wholly-owned by the president of Centennial, who is also a general partner of
Consolidated Associates VI.
On December 27, 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 (the "Limited Partners") to participate in certain allocations
and distributions of the Partnership. The sale of Limited Partnership Units
closed in December 1986 with 29,308 units sold at $1,000 each, for gross
proceeds of $29,308,000 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 and
geriatric real properties for the benefit of its Limited Partners. On January 1,
1995, the Partnership owned four facilities (See Item 8, Note 6). Effective
January 31, 1995, the Partnership sold two facilities located in Nevada and Utah
(See Item 8, Note 6). On December 31, 1996 and 1995, the Partnership owned and
operated two skilled nursing facilities.
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 Managing General Partner anticipates that the Partnership's two remaining
facilities will be sold during 1997.
Operation of Nursing Home Facilities
On January 1, 1991, National Heritage, Inc. ("NHI") managed all of the
Partnership's nursing homes and a NHI subsidiary managed the Partnership's two
retirement centers. NHI, a New York Stock Exchange listed company, was
affiliated with the Partnership prior to Centennial's subsidiary's acquisition
of the Corporate General Partner on November 20, 1990. During the fourth quarter
of 1991, the Partnership notified NHI that their management contracts were
terminated effective on January 1, 1992, for Grandview Manor, and April 1, 1992,
for the other nine nursing homes then owned by the Partnership. Commencing on
these dates, these facilities were managed by an affiliate of the General
Partners. Effective March 1, 1991, the management of the two retirement centers
changed to American Lifestyles, Inc. ("ALI"), a division of Life Care Centers of
America, Inc. ALI is not an affiliate of the Partnership.
As a result of efforts made by the Corporate General Partner, in 1991, the
Partnership made two quarterly distributions of $200,000 each and a special
distribution of $499,994, the first distributions since 1988. During 1992, the
Partnership increased the quarterly distributions and made distributions
totalling $850,000. During 1993, the Managing General Partner caused the
Partnership to distribute a total of $6,300,000, $1,800,000 from operations and
$4,500,000 following the sale of certain of the Partnership's facilities. During
1995, distributions of $750,000 were made to the Limited Partners. Due to the
efforts of the General Partners since CAC acquired control of the Corporate
General Partner, the Partnership has continued to generate positive cash flow
and provide distributions to the Limited Partners.
As of December 31, 1996, the Partnership employed approximately 196 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 hour professional nursing care and related 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. The two retirement centers sold by the Partnership in 1995
provided apartment living for ambulatory senior citizens who do not require
assistance in their daily activities.
The Partnership's two remaining nursing 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. Both nursing facilities are certified for benefits
under the Federal Health Insurance for the Aged Act ("Medicare") which provides
for reimbursement for skilled care only in those facilities which are certified
for this program. The two retirement centers received revenue on a private pay
basis from the resident renting the unit.
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.
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 program payments to long-term care facilities
and could adversely affect the operations of the Partnership's nursing home
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
and 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 ("CON") 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 CON programs.
<PAGE>
The following table sets forth information regarding the average daily census
and sources of patient revenues at the Partnership's facilities at December 31,
1996:
Average Daily Census for Revenues for
Year Ended Year Ended
December 31, 1996 December 31,
1996
---------------------------------- ----------------------
Medicaid 149 77.0% 75.5%
Private Pay 29 15.1% 14.1%
VA,Medicare and Other 15 7.9% 10.4%
and Other
193 100.0% 100.0%
Overall 74.4%
Occupancy Rate
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 determined precisely. 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 reduce the occupancy
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, 1996. The buildings of the projects and the land on which they are
located are owned by the Partnership in fee simple.
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Properties (dollars in 000's)
Net
Acquisition Book Date
Property Cost Value Acquired
-------- ---- ----- --------
Grandview Manor
Nursing Home
Camp Point, IL
118 Licensed
Nursing Home
Beds $2,741 $ 534 (1) August 1986
Heritage Manor
of Westwood
Shreveport, LA
142 Licensed
Nursing Home
Beds 3,747 1,802 (1) September 1986
----- -----
$6,488 $2,336
These facilities have a total of 260 Beds
(1) A provision was made to write down the facility, to its net realizable value
as determined by the Corporate General Partner at the time of the write-downs
(See Item 8, Note 4). The amount reflects this write-down.
Rental Rates and Occupancy
Years Ended December 31,
-----------------------------------------------------------
1996 1995 1994 1993 1992
Grandview
Manor
Nursing Home
Occupancy Rate 78% 82% 81% 85% 92%
Rental Rate (PPD) $62 $59 $62 $62 $57
Heritage
Manor of
Westwood
Occupancy Rate 72% 79% 81% 79% 82%
Rental Rate (PPD) $87 $86 $67 $63 $58
Rental rates for nursing homes are presented using Per-Patient-Day Amounts
("PPD") the industry standard for comparison. The PPD amount is the average
rental revenue for a day of housing and services.
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.
The Partnership and Southmark reached a settlement which was 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.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
<PAGE>
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 3,241 as of March 28, 1997
(C) Due to improved operations and the sale of facilities following the change
of control of the Corporate General Partner, the Partnership reinstituted
distributions in 1991. The Partnership distributed $850,000 to the Limited
Partners during 1992, $6,300,000 in 1993, $600,000 in 1994, and $750,000 in
1995. There were no distributions to the limited partners during 1996.
Until 1991, no distributions had been made since 1988. Cumulative
distributions paid to the Limited Partners as of December 31, 1996, were
$12,196,595. There have been no distributions to the General Partners. See Item
7 Management's Discussion and Analysis of Financial Condition and Results of
Operations and Item 8, Note 3 for discussion of distributions.
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth a summary of certain 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
Operations 000's, except per unit figures)
--------------------------------------------------
1996 1995(1) 1994 1993(2) 1992
Operating revenue $5,591 $5,912 $8,846 $21,969 $25,378
Income (loss) before
extraordinary gain (517) (396) (750) 2,054 520
Net income (loss) (517) 2,538 (659) 2,054 520
Net income (loss) (16.93) 86.13 (21.57) 70.31 17.03
per L.P. unit
Distribution paid - 25.59 20.47 214.96 29.00
per L.P. Unit
(1) During 1995, the Partnership sold two facilities.
(2) During 1993, the Partnership sold eight facilities.
At December 31, (dollars in 000's)
--------------------------------------------------
Balance Sheets 1996 1995(1) 1994(2) 1993(3) 1992
Property held for sale $2,336 $2,548 $8,697 $- $-
Property and equip, net - - - 9,238 23,533
Total assets 3,802 4,128 10,492 11,841 28,360
Current maturities of
debt - - 7,885 8,007 66
Long-term debt
obligations, less
current maturities - - - - 19,385
Partners' equity 3,068 3,585 1,797 3,056 7,302
(1) During 1995, the Partnership sold two facilities and two facilities remained
in property held for sale. (2) During 1994, four facilities were transferred to
property held for sale.
(3) During 1993, the Partnership sold eight facilities.
<PAGE>
ITEM 7. 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.
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 and plans to sell the
properties to prospective purchasers during 1997.
At December 31, 1996 amd 1995, the Partnership has held available for sale its
two remaining nursing home facilities. Accordingly, the Partnership has
classified the facilities as property held for sale in the accompanying balance
sheets. On January 31, 1995, the Partnership sold Highland Cove Retirement
Center ("Highland Cove") and Paradise Cove Retirement Center ("Paradise Cove")
and retired the Partnership's mortgage debt obligations with the proceeds from
the sales.
Results of Operations
Revenue:
1996 compared to 1995
Operating revenue decreased $320,671 in 1996. Of this decrease, $304,111 was due
to the sales of Highland Cove and Paradise Cove on January 31, 1995. The
remaining decrease in revenues resulted from a decrease in patient census at the
Partnership's two remaining nursing home facilities which was offset, in part,
by increases in reimbursement rates and a favorable shift in payor mix as
compared to 1995 both facilities.
1995 compared to 1994:
Operating revenue decreased by 3,063,791 in 1995. This decrease is primarily due
to the sale of two facilities. The Partnership sold its two retirement centers
Highland Cove and Paradise Cove on January 31, 1995. Operating revenues
generated by the sold centers were $304,111 during 1995. During 1994 the two
sold facilities generated revenues of $3,739,281. Revenues for 1995 at the
Partnerships remaining facilities increased primarily due to increased
reimbursement rates and increased Medicare patient days at the Partnership's two
remaining nursing facilities.
Expenses:
1996 compared to 1995
Operating expenses decreased by $67,543 in 1996. The Partnership experienced a
$247,050 decrease in operating expenses due to the sales of Highland Cove and
Paradise Cove on January 31, 1995. The Partnership's two remaining nursing
facilities experienced an increase in expenses due primarily inflationary
increases and increased therapy volume.
<PAGE>
1995 compared to 1994
Operating expenses decreased by $1,296,541 in 1995. This decrease is primarily
due to the sale of the two facilities sold January 31, 1995. Operating expenses
incurred by the sold centers were $247,050 during 1995. During 1994 the sold
facilities produced operating expenses of approximately $1,977,676. Operating
expenses at the partnerships remaining facilities increased primarily due to
inflationary increases and an increase in therapy expenses over the prior year.
Liquidity and Capital Resources
At December 31, 1996, the Partnership held cash and cash equivalents of
$929,023, an increase of $199,147 from the amount held at December 31, 1995.
Cash is being held in reserve for working capital and operating contingencies.
During 1996, proceeds from the sale of two facilities and cash reserves from
1995 were adequate to cover all operating obligations of the Partnership and
provide for distributions to the Limited Partners. The Partnership should
produce sufficient cash flow from operations in 1997.
As of December 31, 1996, the Partnership was not obligated to perform any major
capital additions or renovations. No such major capital expenditures or
renovations are planned for 1997, other than necessary repairs, maintenance and
improvements which will 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 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.
Based on the Partnership's present cash balance, and the anticipated cash
requirements for operations, management believes the Partnership will have
sufficient cash resources to meet its operating and capital requirements in
1996. The Partnership does not, however, have existing lines of credit to draw
on in the unlikely event that present resources or cash flow from operations
should be inadequate.
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index Page
Number
Report of Independent Certified Public Accountants 10
Consolidated Financial Statements
Balance Sheets - December 31, 1996 and 1995 11
Statements of Operations
- Years ended December 31, 1996, 1995 and 1994 12
Statements of Partners' Equity (Deficit)
- Years ended December 31, 1996, 1995 and 1994 13
Statements of Cash Flows
- Years ended December 31, 1996, 1995 and 1994 14
Summary of Significant Accounting Policies 15-17
Notes to Consolidated Financial Statements 18-20
The following financial statement schedule for the years ended December 31,
1996, 1995 and 1994 of the Registrant is submitted herewith in response to Item
14 (a)(2):
Schedule II - Valuation and Qualifying Accounts 22
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.
<PAGE>
Report of Independent Certified Public Accountants
The Partners
Consolidated Resources Health Care Fund VI
We have audited the accompanying balance sheets of Consolidated Resources Health
Care Fund VI (a limited partnership) (the "Partnership"), as of December 31,
1996 and 1995, and the related statements of operations, partners' equity
(deficit) and cash flows for each of the years in the three year period ended
December 31, 1996. We have also audited the schedule listed in the accompanying
index. These financial statements and schedule are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
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 audit to obtain
reasonable assurance about whether the 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 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 financial statements and schedule. We believe that our
audits provide a reasonable basis for our opinion.
The Partnership is operating its properties under a plan approved by its Limited
Partners, as described in the Summary of Significant Accounting Policies, to
sell or otherwise dispose of its remaining properties by October 18, 1997. The
financial statements have been presented on a basis similar to liquidation
accounting. Actual events and results of such a liquidation may materially
differ from anticipated results as presented in the financial statements.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Consolidated Resources Health
Care Fund VI (a limited partnership) at December 31, 1996 and 1995, and the
results of its operations and its cash flows for each of the years in the three
year period ended December 31, 1996 in conformity with generally accepted
accounting principles.
Also, in our opinion, the schedule presents fairly, in all material respects,
the information set forth therein.
BDO Seidman, LLP
Atlanta, Georgia
March 28, 1997
<PAGE>
December 31,
1996 1995
ASSETS
Current
Cash and cash equivalents (Note 8) $ 929,023 $ 729,876
Patient accounts receivable, net (Note 7) 536,617 846,399
Other current assets 465 4,102
Property held for sale (Notes 4 and 5) 2,336,234 2,548,084
Total current assets $3,802,339 $4,128,461
LIABILITIES AND PARTNERS' EQUITY
Current liabilities
Trade accounts payable $ 437,476 $ 133,002
Accrued compensation 168,240 150,396
Provider taxes payable 21,558 19,279
Other liabilities 106,906 240,684
Total liabilities 734,180 543,361
Commitments and contingencies
(Notes 7 and 8)
Partners' equity (deficit) (Note 3)
Limited partners 3,465,037 3,961,300
General partners (396,878) (376,200)
Total partners' equity 3,068,159 3,585,100
$3,802,339 $4,128,461
See accompanying summary of significant accounting policies and notes to
consolidated financial statements.
<PAGE>
Consolidated Resources Health Care Fund VI
(limited partnerships)
Consolidated Statements of Operations
Years ended December 31,
1996 1995 1994
Revenues
Operating revenue $5,591,243 $5,911,914 $ 8,846,005
Interest income 45,353 41,873 64,847
Total revenues 5,636,596 5,953,787 8,910,852
Expenses
Operating expenses 5,245,987 5,313,530 6,610,071
Interest (Note 5) - 69,603 1,015,504
Depreciation and amortization 274,263 318,606 773,842
Management fees substantially
all to affiliates (Note 2) 340,986 352,576 523,483
Real estate taxes 147,100 135,941 229,355
Partnership administration costs
substantially all to
affiliates (Note 2 145,201 159,325 220,144
Loan extension fees (Note 5) - - 288,392
Total expenses 6,153,537 6,349,581 9,660,791
Operating loss (516,941) (395,794) (749,939)
Litigation settlemen income (Note 6) - - 91,301
Gain on disposition of
properties (Note 5) - 2,933,677 -
Net income (loss) $(516,941) $2,537,883 $(658,638)
Net income (loss) per L.P. $(16.93) $ 86.13 $ (21.57)
unit
Distributions paid per L.P. $ - $ 25.59 $ 20.47
unit
L.P. units outstanding 29,308 29,308 29,308
See accompanying summary of significant accounting policies and notes to
consolidated financial statements.
<PAGE>
Consolidated Resources Health Care Fund VI
(limited partnerships)
Consolidated Statements of Partners' Equity (Deficit) Years Ended
December 31, 1996, 1995 and 1994
Total
Partners'
Limited General Equity
Balance, at January 1, 1994 $3,419,214 $(363,359) $3,055,855
Net loss (632,292) (26,346) (658,638)
Distributions (Note 3) (600,000) - (600,000)
Balance, at December 31, 1994 2,186,922 (389,705) 1,797,217
Net income 2,524,378 13,505 2,537,883
Distributions (Note 3) (750,000) - (750,000)
Balance, at December 31, 1995 3,961,300 (376,200) 3,585,100
Net loss (496,263) (20,678) (516,941)
Balance, at December 31, 1996 $3,465,037 $(396,878) $3,068,159
See accompanying summary of significant accounting policies and notes to
consolidated financial statements.
<PAGE>
Consolidated Resources Health Care Fund VI
(limited partnerships)
Consolidated Statements of Cash Flows
Years ended December 31, 1996 1995 1994
Operating activities
Net income (loss) ..................... $ (516,941) $ 2,537,883 $ (658,638)
Adjustments to reconcile
net income (loss) to cash provided by
(used in) operating activities:
Depreciation and amortization ...... 274,263 318,606 773,842
Gain on disposition of properties .. -- (2,933,677) --
Changes in assets and liabilities:
Patient accounts receivable ....... 309,782 64,454 (102,550)
Other current assets .............. 3,637 30,050 78,121
Other assets ...................... -- 73,621 264,761
Trade accounts payable and
accrued liabilities .............. 190,819 (265,971) 30,450
Cash provided by (used in)
operating activities ............... 261,560 (175,034) 385,986
Investing activities
Payment for purchases of property
and equipment ..................... (62,413) (34,476) (216,067)
Proceeds from sale of properties ... -- 8,798,574 --
Cash provided by (used in)
investing activities ................ (62,413) 8,764,098 (216,067)
Financing activities
Principal payments on long-term
debt obligations ................. -- (7,885,442) (121,249)
Distributions to limited partners .. -- (750,000) (600,000)
Cash used in financing activities ..... -- (8,635,442) (721,249)
Net increase (decrease) in cash and
cash equivalents ..................... 199,147 (46,378) (551,330)
Cash and cash equivalents,
beginning of year .................... 729,876 776,254 1,327,584
Cash and cash equivalents,
end of year .......................... $ 929,023 $ 729,876 $ 776,254
See accompanying summary of significant accounting policies and notes to
consolidated financial statements.
12
<PAGE>
Consolidated Resources Health Care Fund VI
(limited partnerships)
Summary of Significant Accounting Policies
Organization
Consolidated Resources Health Care Fund VI (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 Partnership currently operates two nursing
homes in Illinois and Louisiana. The occupancy rate, in the aggregate, for the
Partnership's properties was 74% for the year ended December 31, 1996.
The General Partners of the Partnership are WelCare Service Corporation-VI as
managing general partner, a Georgia corporation ("WSC-VI" or the "Managing
General Partner"), Consolidated Resources VI, Inc. serving as the Corporate
General Partner, a Georgia corporation and a wholly-owned subsidiary of WelCare
Consolidated Resources Corporation of America ("WCRCA"), and Consolidated
Associates VI ("CA-VI"), a Georgia general partnership (collectively the
"General Partners"). At December 31, 1996, WSC-VI and WCRCA are wholly-owned
subsidiaries of Centennial Acquisition Corporation. ("CAC") formerly WelCare
Acquisition Corp., which is a wholly-owned subsidiary of Centennial Healthcare
Corporation ("Centennial"), formerly WelCare International, Inc. Prior to
December 1996, CAC and Centennial were known as WelCare Acquisition Corp. and
WelCare International, Inc., respectively. CA- VI is composed of WCRCA, as the
managing general partner, and individuals who were previously associated with
Consolidated Resources Corporation of America ("CRCA"). On January 30, 1997, all
of the stock of the Corporate General Partner and Managing General Partner of
the Partnership was sold to Consolidated Partners Corporation, which is
wholly-owned by the president of Centennial who is also a general partner of
CA-VI.
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 liquidated most of its assets pursuant to a
plan of reorganization. On November 20, 1990, CAC acquired from Southmark all
the stock of SCRCA whose name was then changed to WelCare Consolidated Resources
Corporation of America. Effective January 7, 1992, WSC-VI 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 and plans to sell the
properties to prospective purchasers.
The consolidated 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.
Property Held for Sale
Property held for sale at December 31, 1996 and 1995, consists of two skilled
nursing home facilities owned by the Partnership and carried at the lower of
cost or net realizable value less estimated cost 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,
1996 and 1995. As discussed in Note 5, two of the Partnership's retirement
centers were sold in January 1995.
Depreciation and Amortization
Property and equipment are depreciated using the straight-line method over lives
of 5 to 30 years. Renewals and betterments are capitalized and repairs and
maintenance are charged to operations as incurred.
Operating Revenue
Operating revenue is recorded when services are rendered and includes amounts
reimbursable by Medicaid and Medicare. Medicare revenue is recorded at the
applicable net reimbursement rates; therefore, no contractual adjustments are
reported.
Income Taxes
No provision has been made in the financial statements for Federal income taxes
because under current law, no Federal income taxes are paid directly by the
Partnership. The Partnership reports certain transactions differently for tax
and financial statement purposes.
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
determined by the method described in Note 4.
Net 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:
(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% per annum of the Limited Partners' average
invested capital for all fiscal years 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.
13
<PAGE>
Consolidated Resources Health Care Fund VI
(limited partnerships)
Summary of Significant Accounting Policies
Upon dissolution of the Partnership, the General Partners are required to
contribute to the Partnership an amount equal to the lesser of (1) the deficit
balances in their capital accounts at the time of dissolution, or (2) $296,010,
which is 1.01% of capital contributions made by the Limited Partners. Any funds
so contributed will become assets of the Partnership to be liquidated as
provided by the Partnership agreement. This provision could affect the amounts
of income or loss allocated to the Limited Partners' and General Partners'
capital accounts.
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 number of Limited
Partnership Units outstanding.
Reclassifications
Certain 1995 and 1994 amounts have been reclassified to conform with the 1996
presentation.
Statements of Cash Flows
For purposes of this statement, cash equivalents include bank repurchase
agreements, commercial paper, and certificates of deposits 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.
14
<PAGE>
Consolidated Resources Health Care Fund VI
(limited partnerships)
Notes to Consolidated Financial Statements
1. Transactions With Former Affiliates
The Partnership had mortgages secured by owned facilities payable to former
affiliates of Southmark, totalling $7,885,442 at December 31, 1994. These
obligations were retired in 1995 in conjunction with the sales of two retirement
centers (see Note 5).
Amounts claimed payable to former affiliates (primarily Southmark and the
Corporate General Partner), totalled $115,211, including accrued interest, at
December 31, 1994, and are included in the other liabilities on the 1994 balance
sheet. In July 1991 Southmark filed suit demanding payment of the alleged
advances. In 1991, after Centennial's affiliate acquired the Corporate General
Partner, it challenged the validity of some of these payables through claims
filed against the Southmark bankruptcy estate. In 1994, the suits were settled
whereby the Partnership was released of all liabilities to Southmark (See Note
6).
2. Management Fees and Affiliate Transactions
During 1996, 1995 and 1994, an affiliate of the Corporate General Partner
received management fees of 6% of gross operating revenues from the facilities
that the affiliate managed totalling $340,896, $352,576 and $336,518,
respectively. The affiliate was also reimbursed for cost incurred in connection
with the administration of Partnership activities of $145,201, $131,292 and
$170,501 during the same periods, respectively, which are included in the
Partnership Administration Costs on the accompanying
Consolidated Statements of Operations.
The two retirement centers, prior to their sale in January 1995, were managed by
a company that was unaffiliated with the Corporate General Partner, for a fee of
5% of gross revenues from each retirement center.
3. 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 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.
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.
The Partnership distributed to the Limited Partners $750,000 and $600,000 during
1995 and 1994, respectively.
There were no distributions during 1996.
<PAGE>
Consolidated Resources Health Care Fund VI
(limited partnerships)
Notes to Consolidated Financial Statements
4. Loss From Write-Down of Properties
Prior to 1992, the Partnership recorded write downs to reduce the carrying value
of certain properties to their estimated net realizable value as determined by
the Corporate Limited Partner. These write-downs were as follows as of December
31, 1996 and 1995:
Grandview Manor Nursing Home $ 1,001,839
Heritage Manor of Westwood 312,463
$ 1,314,302
Property held for sale at December 31, 1996, consisted of the Partnership's two
nursing home facilities. At December 31, 1994, Property held for sale included
the Partnership's two nursing home facilities and two retirement centers. The
two retirement centers were sold on January 31, 1995, as discussed more fully in
Note 5. The net book value of the facilities comprising Property Held for Sale
at December 31, 1996 were as follows:
Net Book
Value
Grandview Manor Nursing Home $ 534,391
Heritage Manor of Westwood 1,801,843
$2,336,234
5. Property Dispositions
On January 31, 1995, following the pursuit of several offers, the Partnership
sold Paradise Cove Retirement Park ("Paradise Cove"), located in Nevada and
Highland Cove Retirement Center ("Highland Cove"), located in Utah, to Life Care
Centers of America, Inc., an unaffiliated company that had managed the two
retirement centers since March 1991. The purchase prices were $6,000,000 and
$2,798,574 for Highland Cove and Paradise Cove, respectively. The Partnership
used the sales proceeds to satisfy $7,960,287 in mortgage debts secured by
Highland Cove, Paradise Cove, and Grandview Manor. During 1994, the Partnership
paid $288,392 in loan extension fees to the lender relating to these debts. The
Partnership paid interest of $69,603 and $1,070,661 in 1995 and 1994,
respectively prior to satisfaction of these debts. During 1995, the Partnership
recognized a gain on the sales of $2,933,677.
6. 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 Southmark filed suit against the Partnership,
the Corporate General Partner, and partnerships and corporations which are
unaffiliated with the Partnership or the Corporate General Partner. In this
suit, Southmark was seeking $126,361 alleging a fraudulent, preferential or
post-petition transfer. 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.
The Partnership and Southmark reached a settlement which was 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, Southmark released all claims against the Partnership and
recognized the Partnership's claims. In settlement of the Partnership's claims,
Southmark paid the Partnership $91,301 during 1994.
7. Cost Reimbursements
Accounts receivable and operating revenue include amounts estimated by
management to be reimbursable by Medicaid and other third-party programs 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 76%, 78% and 79% of operating revenue during 1996,
1995 and 1994, respectively.
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:
1996 1995
Illinois $156,075 $287,553
Louisiana 274,491 308,141
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.
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.
8. Concentration of Credit Risk
At December 31, 1996, the Partnership had cash on deposit with a bank which
exceeded Federal Deposit Insurance Corporation limits by approximately
$1,257,320.
<PAGE>
Schedule
<PAGE>
Consolidated Resources Health Care Fund VI and Subsidiaries
(limited partnerships)
Schedule II - Valuation and Qualifying Accounts Years Ended December
31, 1996, 1995 and 1994
Balance at Additions charged
beginning of to costs and Balance at
year expenses Deductions (1) end of year
1996
Allowance for
doubtful accounts $ - $ - $ - $ -
1995
Allowance for
doubtful accounts $ - $25,251 $ 25,251 $ -
1994
Allowance for
doubtful accounts $ 222,373 $96,858 $319,231 $ -
(1) Represents direct write-offs of receivables.
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTIONS AND EXECUTIVE OFFICERS OF THE
REGISTRANT
The Partnership does not have officers or directors. At December 31, 1996, the
General Partners of the Partnership were WelCare Service Corporation-VI,
Consolidated Resources VI, Inc., and Consolidated Associates VI. The executive
officers and director of WelCare Service Corporation-VI and Consolidated
Resources VI, Inc., who control the affairs of the Partnership, are as follows:
Name and Position Age Other Principal Occupations and
Other Directionships During the Past
5 Years
J. Stephen Eaton 46 J. Stephen Eaton is also Chairman of the
President, Chief Board and the founder of Centennial
Executive Officer HealthCare Corporation and has served
and Sole Director as its President and Chief Executive
Officer since its inception in Feb.1989.
Mr. Eaton has been involved in the
long-term care industry since 1982.
Mr. Eaton also serves as a director
of Saint Joseph's Mercy Care
Corporation, a non-profit
corporation based in Atlanta,
Georgia which provides mobile health
services to the homeless and other
underserved populations, and of
Saint Joseph's Health System, a
major tertiary care hospital and
health system in Atlanta, Georgia.
Alan C. Dahl 36 Alan C. Dahl has served as Executive
Vice President, Vice President, Chief Financial
Chief Financial Officer Officer, and Director of Centennial
and Treasurer HealthCare Corporation since
January 1996. From February
1991 to December 1995, he served as
senior vice president. Mr. Dahl has
been involved in healthcare finance
for the past eleven years. Mr. Dahl
was previously senior vice president
of Southmark Public Syndications,
Inc., a subsidiary of Southmark
Corporation. Mr. Dahl, a certified
public accountant, also worked in
the tax department at Arthur Young &
Company.
ITEM 11. EXECUTIVE COMPENSATION
No individual principal or principals as a group received any direct
remuneration from the Partnership.
The General Partners are not compensated directly for their services as General
Partners of the Partnership. See Item 13 and Note 2 to the financial statements
appearing in Part II, Item 8 for further discussion of compensation paid to
affiliates of the General Partners.
<PAGE>
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.
On January 30, 1997, all of the stock of the Corporate General Partner and
Managing General Partner of the Partnership was sold to Consolidated Partners
Corporation, which is wholly-owned by the president of Centennial who is also a
general partner of Consolidated Associates IV.
<PAGE>
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 1996.
Oversight and management fees $340,986
Administration of Partnership activities (1) 145,201
(1) For reimbursement of expenses incurred by the General Partners in performing
certain administrative functions including investor relations and accounting.
See Note 2 to the accompanying financial statements appearing in Item 8.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) (1) The following financial statements are included in Part II, Item 8:
Financial Statements Included in Part II, Item 8:
Report of Independent Certified Public Accountants
Balance Sheets as of December 31, 1996 and 1995
Statements of Operations for the Years Ended December 31, 1996,
1995 and 1994
Statements of Partners' Equity (Deficit) for the Years Ended
December 31, 1996, 1995 and 1994
Statements of Cash Flows for the Years Ended December 31, 1996,
1995 and 1994
Summary of Significant Accounting Policies
Notes to Financial Statements
(2) The following financial statement schedule is included in this
Form 10-K report:
Schedule II - Valuation and Qualifying Accounts
All 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.
<PAGE>
(3)Exhibits:
The following exhibits are incorporated by reference and are an integral
part of this Form 10-K.
Exhibit Page
Number Document Description Number
2.1 Liquidation Proposal incorporated by reference to the Proxy N/A
Statement filed on September 28, 1994 file 0-15694.
3.1 Amended and Restated Agreement of Limited Partnership of N/A
Consolidated Resources Health Care Fund VI incorporated
by reference to Exhibit A to the Registration Statement
on Form S-1, File No. 33-425
3.2 Amendment to Amended and Restated Agreement of Limited N/A
Partnership of Consolidated Resources Health Care Fund VI,
incorporated by reference to the Proxy Statement filed
on November 19, 1991, File No. 0-15694.
27 Financial Data Schedules E
E - Submitted electronically as a separate document herewith the
Registrant's Form 10-K405
(b) Reports on Form 8-K:
(1) None
<PAGE>
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 VI
(Registrant)
By: WELCARE SERVICE CORPORATION-VI
Managing General Partner
Date: April 15, 1997 By: /s/ J. STEPHEN EATON
-------------- ------------------------
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:
Date: April 15, 1997 By: /s/ J. STEPHEN EATON
-------------- ------------------------
J. Stephen Eaton,
Sole Director and Principal
Executive Officer of the
Managing General Partner
Date: April 15, 1997 By: /s/ ALAN C. DAHL
-------------- ------------------------
Alan C. Dahl
Chief Financial Officer
of the Managing
General Partner
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 929,023
<SECURITIES> 0
<RECEIVABLES> 536,617
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,802,339
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 3,802,339
<CURRENT-LIABILITIES> 734,180
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 3,465,037
<TOTAL-LIABILITY-AND-EQUITY> 3,068,159
<SALES> 5,591,243
<TOTAL-REVENUES> 5,636,596
<CGS> 5,245,987
<TOTAL-COSTS> 6,153,537
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (516,941)
<INCOME-TAX> (516,941)
<INCOME-CONTINUING> (516,941)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (516,941)
<EPS-PRIMARY> (16.930)
<EPS-DILUTED> (16.930)
</TABLE>
