SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549-1004
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended September 30, 1995
Commission File Number 0-16415
CUMBERLAND HEALTHCARE, L.P. I-A
(Exact name of Registrant as specified in its Charter)
Delaware 59-2660778
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
880 Carillon Parkway, St. Petersburg, Florida 33716
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (813) 573-3800
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 and Exchange
Act of 1934 during the preceding 12 months (or such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES X NO
Number of Units at
Title of Each Class September 30, 1995
Units of Limited Partnership
Interest: $1,000 per unit 30,000
DOCUMENTS INCORPORATED BY REFERENCE
Parts I and II, 1994 Form 10-K, filed with the
Securities and Exchange Commission on April 12, 1995,
Parts III and IV - Form S-11 Registration Statement
and all amendments and supplements thereto
File No. 33-4301
COMBINED BALANCE SHEETS
September 30, December 31,
1995 1994
ASSETS (Unaudited) (Audited)
Cash and Cash Equivalents $ 1,289,291 $ 1,202,175
Restricted Cash 60,871 52,780
Accounts Receivable (Net of Allowance of
$63,866 and $63,866) 714,341 1,008,629
Prepaid Expenses 84,358 44,683
Construction in Progress 32,754 0
Investment Properties, at Cost (Net of
Accumulated Depreciation and Amortization
of $11,407,024 and $10,874,938) 18,976,244 19,471,007
Deferred Debt Costs (Net of Accumulated
Amortization of $53,825 and $39,247) 75,953 102,777
Intangible Assets (Net of Accumulated
Amortization of $30,511 and $22,190) 413,287 421,608
Total Assets $ 21,647,099 $ 22,303,659
LIABILITIES AND PARTNERS' EQUITY
Liabilities:
Accounts Payable $ 1,110,544 $ 1,067,429
Accrued Payroll 232,653 219,284
Interest Payable - Affiliate 0 6,582
- Other 34,807 33,569
Payable to Related Parties
- General Partner 11,047 26,435
- Affiliates 332,529 312,528
Mortgage Notes Payable
- Affiliate 0 500,000
- Other 8,023,591 8,282,947
Minority Interest 674,603 630,570
Total Liabilities 10,419,774 11,079,344
Partners' Equity:
Limited Partners (30,000 units outstanding
at September 30, 1995
and December 31, 1994) 11,528,860 11,525,910
General Partner (301,535) (301,595)
Total Partners' Equity 11,227,325 11,224,315
Total Liabilities and Partners' Equity $ 21,647,099 $ 22,303,659
COMBINED STATEMENTS OF OPERATIONS
(Unaudited)
FOR THE NINE MONTHS ENDED
September 30, September 30,
1995 1994
Revenues:
Resident Service Revenues $ 4,089,700 $ 3,629,066
Rental Income 2,482,321 2,383,509
Interest Income 47,839 29,558
Total Revenues 6,619,860 6,042,133
Expenses:
Resident Service Expenses 3,555,560 3,222,014
Interest Expense - Affiliate 637 87,592
- Other 534,143 522,070
Rent Expense 225,212 219,824
Property Management Fees - General Partner 30,726 29,502
General and Administrative - Affiliates 20,095 21,473
- Other 118,735 75,544
Depreciation and Amortization 557,097 946,862
Total Expenses 5,042,205 5,124,881
Net Operating Income $ 1,577,655 $ 917,252
Minority Interest in Net (Income) Loss
of Combined Subsidiary (44,033) 45,231
Net Income $ 1,533,622 $ 962,483
Allocation of Net Income
Limited Partners $ 1,502,950 $ 943,233
General Partner 30,672 19,250
Total Income $ 1,533,622 $ 962,483
Net Income Per $1,000 Limited Partnership Unit $ 50.10 $ 31.44
Number of Limited Partnership Units 30,000 30,000
COMBINED STATEMENTS OF OPERATIONS
(Unaudited)
FOR THE THREE MONTHS ENDED
September 30, September 30,
1995 1994
Revenues:
Resident Service Revenues $ 1,288,563 $ 1,247,431
Rental Income 855,851 811,420
Interest Income 19,908 14,149
Total Revenues 2,164,322 2,073,000
Expenses:
Resident Service Expenses 1,183,603 1,122,328
Interest Expense - Affiliate 0 19,126
- Other 176,179 174,269
Rent Expense 75,070 80,448
Property Management Fees - General Partner 10,614 10,038
General and Administrative - Affiliates 5,977 3,109
- Other 57,076 20,155
Depreciation and Amortization 185,785 320,971
Total Expenses 1,694,304 1,750,444
Net Operating Income $ 470,018 $ 322,556
Minority Interest in Net (Income) Loss
of Combined Subsidiary (2,558) 15,928
Net Income $ 467,460 $ 338,484
Allocation of Net Income
Limited Partners $ 458,111 $ 331,714
General Partner 9,349 6,770
Total Income $ 467,460 $ 338,484
Net Income Per $1,000 Limited Partnership Unit $ 15.27 $ 11.06
Number of Limited Partnership Units 30,000 30,000
COMBINED STATEMENTS OF CASH FLOWS
(Unaudited)
FOR THE NINE MONTHS ENDED
September 30, September 30,
1995 1994
Cash Flows from Operating Activities:
Net Income $ 1,533,622 $ 962,483
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities:
Depreciation and Amortization 557,097 946,862
Minority Interest in Net Income (Loss)
of Combined Subsidiary 44,033 (45,231)
Changes in Operating Assets and Liabilities:
(Increase) Decrease in Accounts Receivable 294,288 (87,219)
(Increase) Decrease in Prepaid Expenses (39,675) 5,097
(Increase) Decrease in Restricted Cash (8,091) 1,381
Increase (Decrease) in Payable to Related
Parties 4,613 29,035
Increase (Decrease) in Payables
and Accruals 51,140 14,676
Net Cash Provided by Operating
Activities 2,437,027 1,827,084
Cash Flows from Investing Activities:
(Additions) to Investment Properties (39,435) (43,372)
(Additions) to Construction in Progress (32,754) (64,132)
Net Cash Provided by (Used in)
Investing Activities (72,189) (107,504)
Cash Flows from Financing Activities:
Payments of Notes Payable (759,356) (2,559,386)
(Increase) Decrease in Deferred Debt Cost 12,246 (11,724)
Distribution to Partners:
Limited Partners (1,500,000) (1,050,000)
General Partner (30,612) (21,430)
Net Cash Provided by (Used in)
Financing Activities (2,277,722) (3,642,540)
Increase (Decrease) in Cash and Cash Equivalents 87,116 (1,922,960)
Cash and Cash Equivalents at Beginning
of Period 1,202,175 3,011,916
Cash and Cash Equivalents at End of Period $ 1,289,291 $ 1,088,956
Supplemental Disclosure of Cash Flow Information:
Interest Paid $ 540,124 $ 637,735
NOTES TO COMBINED FINANCIAL STATEMENTS
(Unaudited)
SEPTEMBER 30, 1995
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES:
Basis of Preparation
The unaudited financial statements presented herein have been prepared
in accordance with the instructions to Form 10-Q and do not include all of the
information and note disclosures required by generally accepted accounting
principles. These statements should be read in conjunction with the financial
statements and notes thereto included in the Partnership's Form 10-K for the
year ended December 31, 1994. In the opinion of management, such financial
statements include all adjustments, consisting only of normal recurring
adjustments, necessary to summarize fairly the Partnership's financial
position and results of operations. The results of operations for the period
may not be indicative of results to be expected for the year.
Reclassification
Certain items in the 1994 financial statements have been reclassified
for comparative purposes to conform with the financial statement presentation
used in the 1995 statements.
Combination
The accompanying combined financial statements include the accounts
of the company and all of its subsidiaries. Intercompany transactions and
balances have been eliminated. Minority interest is accounted for by using
the equity method.
NOTE 2 - COMPENSATION, REIMBURSEMENTS, AND ACCRUALS FOR GENERAL PARTNERS AND
AFFILIATES:
The General Partner and affiliates are entitled to the following
types of compensation and reimbursement for costs and expenses incurred for
the Partnership for the nine months ended September 30, 1995:
Property Management Fees $ 30,726
General and Administrative
Costs and Fees 20,095
Cash Distributions 30,612
Interest Expense 637
NOTE 3 - INVESTMENT PROPERTIES
As of September 30, 1995, the Partnership owned, directly or through
limited partnership investments, an interest in eleven nursing home
properties.
A summary of the Partnership's investment properties is as follows:
September 30,
1995
Land $ 4,682,743
Buildings 19,606,940
Personal Property 5,243,927
Leasehold Interest 849,658
Investment Properties, at Cost 30,383,268
Less: Accumulated Depreciation
and Amortization (11,407,024)
$ 18,976,244
NOTE 4 - COMMITMENTS AND CONTINGENCIES
Cumberland Healthcare, L.P. I-A ("Cumberland") and Life Care Centers of
America, Inc. ("LCCA"), effective August 4, 1995, entered into a Purchase and
Sale Agreement pursuant to which LCCA agreed to acquire seven nursing homes
from Cumberland for an aggregate purchase price of $17,900,000, subject to
certain prorations and adjustments. Cumberland owns six of these homes and
leases the seventh from an independent owner.
The purchase price consists of approximately $15,600,000 in cash at
closing, the issuance by LCCA of a $1,000,000 promissory note made payable
to Cumberland due on the fifth anniversary of its issuance, and the balance
in the form of an assumption of approximately $1,300,000 of long term debt.
The partnership anticipates using $1,830,000 of the cash to pay off existing
debt. The nursing homes being purchased by LCCA are all located in southern
California and are currently leased from Cumberland and operated by LCCA.
LCCA deposited $100,000 earnest money with an escrow agent. Closing of
the transaction is subject to certain conditions, including approval of the
transaction by Cumberland's limited partners and LCCA obtaining financing
necessary to consummate the transaction upon terms satisfactory to LCCA. In
addition regulatory and other consents and approvals must be obtained.
The sale is scheduled for late 1995. However, due to the time which may
be necessary to obtain approval from Cumberland's limited partners, the sale
is likely to occur in early 1996. Because of the conditions to closing,
neither Cumberland nor LCCA are able to give any assurances that the sale
will occur.
If the sale is consummated, this would leave Cumberland with two
ninety-nine bed skilled nursing facilities in southern California, a one
hundred bed skilled nursing facility in Ohio and a sixty bed skilled nursing
facility in Washington, which also has a twenty-four bed assisted living wing.
NOTE 5 - SUBSEQUENT EVENTS
Cumberland Healthcare, L.P. I-A and FHP, Inc.(Lessee of Rancho Los Padres
AKA FHP - Norwalk) have entered into a Lease Termination Agreement effective
October 1, 1995. As a condition of this Agreement, RJ Medical Investors, Inc.
has assumed the management responsibilities for Pacific Palms Rehabilitation
Hospital (f/k/a FHP, Norwalk). FHP, Inc. has placed into escrow a lease
termination settlement of $1,566,174. The terms and conditions of this
Agreement are subject to the approval of and issuance of an operating
license by the County of Los Angeles Department of Health Services.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Resident service revenues increased by $460,634 (12.7%) for the nine months
ended September 30, 1995, as compared to the same period in 1994. This
increase is primarily due to an increase in census with the opening of the
assisted living wing at the Sequim, Washington facility. Resident services
expenses increased $333,546 (10.4%) for the nine months ended September 30,
1995, as compared to the same period in 1994. This increase is due to an
increase in nursing expenses from the use of additional ancillary services
needed to accommodate the higher resident census and acuity level, along with
increased labor costs from the operation of the assisted living wing at the
Sequim, Washington facility.
Rental income increased by $98,812 (4.1%) for the nine months ended September
30, 1995, as compared to the same period in 1994. This increase is due to the
annual increase in rental rates per the lease agreements.
Interest income increased $18,281 (61.8%) for the nine months ended September
30, 1995, as compared to the same period in 1994. This increase is due to
increased average cash balances in interest bearing accounts.
Interest expense decreased by $74,882 (12.3%) for the nine months ended
September 30, 1995, as compared to the same period in 1994. This decrease
resulted from a reduction of the average level of debt and a reduction of
interest rates.
General and Administrative - Other expense increased by $43,191 (57.2%) for
the nine months ended September 30, 1995, as compared to the same period in
1994. This increase resulted from the increased cost of legal and consulting
fees relating to the proposed sale of seven nursing homes to LCCA, the FHP,
Inc. Lease Termination Agreement and the refinancing research costs for
Paramount Chateau Convalescent Hospital.
Depreciation and Amortization expense decreased by $389,765 (41.2%) for the
nine months ended September 30, 1995, as compared to the same period in 1994.
This decrease is primarily due to certain furniture and fixture items reaching
their fully depreciated life.
Resident service revenues increased by $41,132 (3.3%) for the three months
ended September 30, 1995, as compared to the same period in 1994. This
increase is primarily due to an increase in census with the opening of the
assisted living wing at the Sequim, Washington facility. Resident services
expenses increased $61,275 (5.5%) for the three months ended September 30,
1995, as compared to the same period in 1994. This increase is due to an
increase in nursing expenses from the use of additional ancillary services
needed to accommodate the higher resident acuity level and increase labor
costs due to the opening of the assisted living wing at the Sequim,
Washington facility.
Rental income increased by $44,431 (5.5%) for the three months ended September
30, 1995, as compared to the same period in 1994. This increase is due to
the annual increase in rental rates per the lease agreements.
Interest income increased by $5,759 (40.7%) for the three months ended
September 30, 1995, as compared to the same period in 1994. This increase
is due to increased cash balances in interest bearing accounts.
Interest expense decreased by $17,216 (8.9%) for the three months ended
September 30, 1995, as compared to the same period in 1994. This decrease
resulted from a reduction of the average level of debt and a reduction of
interest rates.
General and Administrative - Other expense increased by $36,921 (183.2%) for
the three months ended September 30, 1995, as compared to the same period
in 1994. This increase is due to the increased cost of legal and consulting
fees relating to the proposed sale of seven nursing homes to LCCA, the FHP,
Inc. Lease Termination Agreement and the refinancing research costs for
Paramount Chateau Convalescent Hospital.
Depreciation and Amortization expense decreased by $135,186 (42.1%) for
the three months ended September 30, 1995, as compared to the same period
in 1994. This decrease is primarily due to certain furniture and fixture
items reaching their fully depreciated life.
As a result of the above items, the Partnership's net income for the nine
months and three months ended September 30, 1995, is $1,533,622 and $467,460,
respectively, as compared to $962,483 and $338,484 for the same periods in
1994, representing increases of 59.3% and 38.1%.
In the opinion of the General Partner, the Partnership has sufficient funds
or sources of funds to meet its expected needs for liquidity. The General
Partner is not aware of any trends that significantly affect the
Partnership's liquidity.
Cash distributions to Limited Partners were discontinued during the first
quarter of 1988 and resumed in February 1992. The 1993 distribution to
Limited Partners totaled $600,000 (2%). The 1994 distribution to the Limited
Partners totaled $1,050,000 (3.5%). The February 1995 semi-annual
distribution to the Limited Partners was $750,000 (2.5%) followed by the
August 1995 semi-annual distribution to the Limited Partners of $750,000
(2.5%) resulting in a total distribution to the Limited Partners of
$1,500,000 (5.0%) in 1995. Future distributions will be at a level that is
warranted by the cash flow and profits of the Partnership.
Item 5. Other Information
Cumberland Healthcare, L.P. I-A ("Cumberland") and Life Care Centers of
America, Inc. ("LCCA"), effective August 4, 1995, entered into a Purchase
and Sale Agreement pursuant to which LCCA agreed to acquire seven nursing
homes from Cumberland for an aggregate purchase price of $17,900,000 subject
to certain prorations and adjustments. Cumberland owns six of these homes
and leases the seventh from an independent owner.
The purchase price consists of approximately $15,600,000 in cash at closing,
the issuance by LCCA of a $1,000,000 promissory note made payable to
Cumberland due on the fifth anniversary of its issuance, and the balance
in the form of an assumption of approximately $1,300,000 long term debt.
The partnership anticipates using $1,830,000 of the cash to pay off existing
debt. The nursing homes being purchased by LCCA are all located in southern
California and are currently leased from Cumberland and operated by LCCA.
LCCA deposited $100,000 earnest money with an escrow agent. Closing of the
transaction is subject to certain conditions, including approval of the
transaction by Cumberland's limited partners and LCCA obtaining financing
necessary to consummate the transaction upon terms satisfactory to LCCA. In
addition regulatory and other consents and approvals must be obtained.
The sale is scheduled for late 1995. However, due to the time which may
be necessary to obtain approval from Cumberland's limited partners, the
sale is likely to occur in early 1996. Because of the conditions to closing
neither Cumberland nor LCCA are able to give any assurances that the sale
will occur.
If the sale is consummated this would leave Cumberland with two ninety-nine
bed skilled nursing facilities in southern California, a one hundred bed
skilled nursing facility in Ohio and a sixty bed skilled nursing facility in
Washington, which also has a twenty-four bed assisted living wing.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits filed with this Report - None
(b) Reports on Form 8-K - None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, this report has been signed by the following persons on
behalf of the Registrant and in the capacities and on the dates indicated.
CUMBERLAND HEALTHCARE, L.P. I-A
By: Medical Investments Partners
By: RJ Health Properties, Inc.
Managing General Partner
Date: 11/14/95 By: /s/Fred E. Whaley
President and Director
Date: 11/14/95 By: /s/J. Davenport Mosby, III
Vice President and Director
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial informaiton extracted from the
quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended September 30, 1995.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1994 DEC-31-1994
<PERIOD-END> SEP-30-1995 SEP-30-1995
<CASH> 1,350,162 1,350,162
<SECURITIES> 0 0
<RECEIVABLES> 778,207 778,207
<ALLOWANCES> 63,886 63,886
<INVENTORY> 0 0
<CURRENT-ASSETS> 0 0<F1>
<PP&E> 30,416,022 30,416,022
<DEPRECIATION> 11,407,024 11,407,024
<TOTAL-ASSETS> 21,647,099 21,647,099
<CURRENT-LIABILITIES> 0 0<F1>
<BONDS> 8,698,194 8,698,194
<COMMON> 0 0
0 0
0 0
<OTHER-SE> 11,227,325 11,227,325
<TOTAL-LIABILITY-AND-EQUITY> 21,647,099 21,647,099
<SALES> 0 0
<TOTAL-REVENUES> 2,164,322 6,619,860
<CGS> 0 0
<TOTAL-COSTS> 1,258,673 3,780,772
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 176,179 534,780
<INCOME-PRETAX> 467,460 1,533,622
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 467,460 1,533,622
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 467,460 1,533,622
<EPS-PRIMARY> 15.27 50.10<F2>
<EPS-DILUTED> 0 0<F2>
<FN>
<F1>Registrant has an unclassified balance sheet.
<F2>EPS - is net income per $1,000 Limited Partnership unit.
</FN>
</TABLE>
