SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549-1004
FORM 10-Q
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended September 30, 1997
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 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 shares outstanding of each of Registrant's classes of securities:
Number of Units at
Title of Each Class September 30, 1997
Units of Limited Partnership
Interest: $1,000 per unit 30,000
There is no public market for the trading of partnership units and
therefore no market value can be determined.
DOCUMENTS INCORPORATED BY REFERENCE
Parts I and II, 1996 Form 10-K, filed with the
Securities and Exchange Commission on April 14, 1997,
Parts III and IV - Form S-11 Registration Statement
and all amendments and supplements thereto
File No 33-4301
CONSOLIDATED BALANCE SHEETS
September 30, December 31,
1997 1996
(Audited)
ASSETS
Cash and Cash Equivalents $ 2,574,951 $ 2,063,474
Restricted Cash 43,302 67,059
Accounts Receivable (Net of Allowance
of $270,728 and $343,770) 1,019,259 718,772
Sale Proceeds Receivable 4,992,507 0
Loan Receivable 1,000,000 1,000,000
Prepaid Expenses 80,874 119,871
Deferred Debt Costs (Net of Accumulated
Amortization of $13,262 and $10,826) 19,216 21,652
Intangible Assets (Net of Accumulated
Amortization of $52,701 and $44,380) 391,097 399,418
Investment Properties, at Cost (Net of
Accumulated Depreciation and Amortization
of $1,008,346 and $943,066) 1,986,605 5,002,563
Construction in Progress 4,307 0
Total Assets $12,112,118 $ 9,392,809
LIABILITIES AND PARTNERS' EQUITY
Liabilities:
Accounts Payable $ 716,007 687,968
Accrued Payroll 299,544 276,267
Payable to Related Parties
- General Partner 0 2,524
- Affiliates 355,829 336,929
Mortgage Notes Payable 1,230,496 1,256,214
Minority Interest 675,755 682,927
Total Liabilities $ 3,277,631 $ 3,242,829
Partners' Equity:
Limited Partners (30,000 units outstanding
at September 30, 1997 and December 31, 1996) $ 8,857,746 $ 6,226,929
General Partner (23,259) (76,949)
Total Partners' Equity $ 8,834,487 $ 6,149,980
Total Liabilities and Partners' Equity $12,112,118 $ 9,392,809
The accompanying notes are an integral part of these consolidated financial
statements.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE NINE MONTHS ENDED
September 30,September 30,
1997 1996
Revenues:
Net Resident Service Revenues $ 2,134,722 $ 2,146,188
Interest Income 103,643 196,892
Total Revenues $ 2,238,365 $ 2,343,080
Expenses:
Resident Service Expenses 1,840,536 1,709,692
Interest Expense - Other 81,654 83,801
General and Administrative - Affiliates 14,591 13,049
- Other 16,609 120,698
Depreciation and Amortization 76,037 77,769
Total Expenses $ 2,029,427 $ 2,005,009
Operating Income $ 208,938 $ 338,071
Minority Interest in Net (Income)/Loss
of Consolidated Subsidiary (57,828) (96,205)
Income from Continuing Operations $ 151,110 $ 241,866
Discontinued Operations:
Income from Real Estate Rental Operations 0 779,849
Income from Health Care Operations 496,549 82,127
Gain on Sale of Assets 2,036,848 9,941,447
Lease Termination Settlement 0 1,293,464
Income from Discontinued Operations $ 2,533,397 $12,096,887
Net Income $ 2,684,507 $12,338,753
Income from Continuing Operations
Per $1,000 Limited Partnership Unit $ 4.93 $ 7.90
Income from Discontinued Operations
Per $1,000 Limited Partnership Unit 82.76 395.16
Total Income Per $1,000
Limited Partnership Unit $ 87.69 $ 403.06
Number of Limited Partnership Units
Outstanding 30,000 30,000
The accompanying notes are an integral part of these consolidated financial
statements.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED
September 30,September 30,
1997 1996
Revenues:
Net Resident Service Revenues $ 788,153 $ 781,502
Interest Income 37,493 60,827
Total Revenues $ 825,646 $ 842,329
Expenses:
Resident Service Expenses 686,669 623,333
Interest Expense - Other 27,031 27,762
General and Administrative - Affiliates 6,806 (5,405)
- Other 12,419 27,191
Depreciation and Amortization 24,236 26,714
Total Expenses $ 757,161 $ 699,595
Operating Income 68,485 142,734
Minority Interest in Net (Income)/Loss
of Consolidated Subsidiary (23,512) (37,243)
Income from Continuing Operations 44,973 105,491
Discontinued Operations:
Income from Real Estate Rental Operations 0 71,066
Income from Health Care Operations 12,152 35,150
Gain on Sale of Assets 2,036,848 3,268,608
Income from Discontinued Operations 2,049,000 3,374,824
Net Income $ 2,093,973 $ 3,480,315
Income from Continuing Operations
Per $1,000 Limited Partnership Unit $ 1.47 $ 3.45
Income from Discontinued Operations
Per $1,000 Limited Partnership Unit 66,93 110.24
Total Income Per $1,000
Limited Partnership Unit $ 68.40 $ 113.69
Number of Limited Partnership Units
Outstanding 30,000 30,000
The accompanying notes are an integral part of these consolidated financial
statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED
September 30, September 30,
1997 1996
Cash Flows from Operating Activities:
Net Income $ 2,684,507 $12,338,753
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities:
Depreciation and Amortization 145,343 438,195
Gain on Sale of Assets (2,036,848) (9,941,447)
Minority Interest in Net Income (Loss)
of Consolidated Subsidiary 57,828 96,205
Changes in Operating Assets and Liabilities:
(Increase) Decrease in Accounts Receivable (300,487) (384,662)
(Increase) Decrease in
Sale Proceeds Receivable (4,992,507) 0
(Increase) Decrease in Prepaid Expenses 38,997 (41,293)
(Increase) Decrease in Restricted Cash 23,757 24,759
Increase (Decrease) in Payable to Related
Parties 16,376 (24,900)
Increase (Decrease) in Payables and Accruals 51,316 (221,517)
Net Cash Used In Operating Activities (4,311,718) 2,284,093
Cash Flows from Investing Activities:
(Additions) to Investment Properties (27,794) (100,201)
(Additions) to Construction in Progress (4,307) 0
Sale of Investment Properties 4,946,014 21,598,942
Net Cash Provided by (Used in)
Investing Activities 4,913,913 21,498,741
Cash Flows from Financing Activities:
Payments of Mortgage Notes Payable (25,718) (5,422,779)
Distribution to Partners:
Limited Partners 0 (13,950,000)
General Partner 0 (32,060)
Minority Interest (65,000) (60,550)
Net Cash (Used in) Financing Activities (90,718)(19,465,389)
Increase (Decrease) in Cash and Cash Equivalents 511,477 4,317,445
Cash and Cash Equivalents at Beginning of Period 2,063,474 1,626,628
Cash and Cash Equivalents at End of Period $ 2,574,951 $ 5,944,073
Supplemental Disclosure of Cash Flow Information:
Interest Paid $ 81,654 $ 453,028
Non-cash Items:
Sale of Investment Properties
Notes Receivable 0 1,000,000
Assumed Mortgage 0 1,259,719
Miscellaneous Settlements 0 (208,661)
Deferred Debt Cost Amortization 0 39,787
Depreciation - Discontinued Health
Care Operations 69,306 0
Total $ 69,306 $ 2,090,845
The accompanying notes are an integral part of these consolidated financial
statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
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, 1996. In the opinion of
management, these 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 1996 financial statements have been reclassified
for comparative purposes to conform with the financial statement
presentation used in the 1997 statements.
Consolidation
The accompanying consolidated 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, 1997.
General and Administrative Costs and Fees $ 14,591
Cash Distributions $ 0
NOTE 3 - INVESTMENT PROPERTY:
As of September 30, 1997, the Partnership owned, through limited
partnership investments, an interest in one nursing home property.
A summary of the Partnership's investment property is as follows:
Operated
Land $ 180,000
Building 2,211,149
Furniture and Fixtures 603,802
Investment Property, at Cost 2,994,951
Less: Accumulated Depreciation
and Amortization 1,008,346
Net Book Value $1,986,605
The Partnership, through a manager, operates one skilled nursing
facility. Olympic Healthcare, a 60-bed skilled nursing facility with a 24-
bed assisted living wing located in Sequim, Washington, for the nine months
ended September 30, 1997, had an average occupancy in the skilled nursing
facility of 87.1% that was comprised of 32.3% private, 9.6% Medicare and
58.1% Medicaid. The average reimbursement rates in the skilled nursing
facility were $111, $228 and $102 per day for private, Medicare and
Medicaid, respectively. The average monthly revenue was $197,496. The 24-
bed assisted living wing maintained an average occupancy of 86.4% that was
comprised of 22.1% private and 77.9% Medicaid. The average reimbursement
rates were $64 and $59 per day for private and Medicaid, respectively. The
average monthly revenue was $37,746.
NOTE 4 - DISCONTINUED OPERATIONS:
Cumberland Healthcare, L.P. I-A ("Cumberland") and Premier Management
Company ("Premier"), effective August 1, 1997, entered into a Purchase and
Sale Agreement to which Premier agreed to purchase two California nursing
facilities, Paramount Chateau Convalescent Hospital and Pacific Palms
Skilled Nursing, for a purchase price of $5,050,000. The closing date for
the sale was September 30, 1997. As a result of the sale of the two
operated facilities, the Partnership realized a gain on sale of assets of
$2,036,848.
NOTE 5 - SUBSEQUENT EVENT:
Cumberland Healthcare, L.P. I-A and William Littlejohn, both 49 1/2%
limited partners, entered into a Purchase and Sale Agreement with Public
Hospital District No. 2 of Clallam County ("Public Hospital"). Public
Hospital has agreed to purchase Olympic Health Care Center in Sequim,
Washington for a purchase price of $2,800,000. The scheduled closing date
for the sale is December 31, 1997.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Net resident service revenues decreased by $11,466 (.5%) for the nine
months ended September 30, 1997, as compared to the same period in 1996,
due to a 3.4% census decrease offset by an increase in the Medicare and
Medicaid reimbursement rates. Resident service expenses increased by
$130,844 (7.6%) for the nine months ended September 30, 1997, as compared
to the same period in 1996, due to a $49,607 decrease in the Washington
State workers' compensation benefit refund and a $73,150 increase in
nursing salaries and supply costs.
Interest income decreased by $93,249 (47.4%) for the nine months ended
September 30, 1997, as compared to the same period in 1996, due to
decreased cash balances in interest bearing accounts. The decreased
average cash balances are a result of the 1996 cash distributions and final
mortgage payments made after September 1996.
General and Administrative - Affiliates expense increased by $1,542
(11.8%) for the nine months ended September 30, 1997, as compared to the
same period in 1996 due to the increased need for senior management
involvement which was necessary for the 1997 sale of the nursing
facilities.
General and Administrative - Other expense decreased by $104,089
(86.2%) for the nine months ended September 30, 1997, compared to the same
period in 1996, due to an increase in the percentage of home office
overhead costs directly relating to and allocated to resident service
expenses.
Discontinued Operations - Income from Health Care Operations increased
by $414,422 for the nine months ended September 30, 1997, as compared to
the same period in 1996 due in most part to an increase in the annual
Medicare cost report settlements made to the Paramount Chateau and Pacific
Palms facilities for $275,888 and $85,964, respectively. All real estate
rental and lease operations were discontinued in 1996. Hence, there will
not be any further allocations to Income from Real Estate Rental Operations
or Lease Termination Settlement. Gain on Sale of Assets decreased by
$7,904,599 for the period ended September 30, 1997, as compared to the same
period in 1996 due to 1997 reflecting a gain on two (2) sold nursing
facilities and 1996 reflecting a gain on eight (8) sold nursing facilities.
Net resident service revenues increased by $6,651 (.9%) for the three
months ended September 30, 1997, as compared to the same period in 1996 due
to a 3.4% decrease in the census offset by an increase in the Medicare and
Medicaid reimbursement rates. Resident service expenses increased by
$63,336 (10.2%) for the three months ended September 30, 1997, compared to
the same period in 1996 due to an increase in nursing salaries and supply
costs.
Interest income decreased by $23,334 (38.4%) for the three months
ended September 30, 1997, as compared to the same period in 1996 due to a
decrease in average cash balances in interest bearing accounts.
General and Administrative - Affiliates expense increased by $12,211
for the three months ended September 30, 1997, as compared to the same
period in 1996 due to an increase in expenses relating to the sale of the
two (2) remaining California facilities.
General and Administrative - Other expense decreased by $14,772
(54.3%) for the three months ended September 30, 1997, compared to the same
period in 1996, due to an increase in the percentage of home office
overhead costs directly relating to and allocated to resident service
expenses.
The primary sources of funds for the period ended September 30, 1997,
were revenues from nursing home operations and collection of accounts
receivable. These funds were used to pay nursing home expenses. As of
September 30, 1997, the Partnership has an interest in one nursing home
that has a net book value of $1,986,605. Net book value is not necessarily
representative of market value.
In the opinion of the General Partner, there are no material trends,
favorable or unfavorable, in the Partnership's capital resources. The
resources will be sufficient to meet the Partnership's needs for the next
12 to 24 months. These sources include cash flows from operations and
current cash reserves.
Short-term liquidity requirements consist of funds needed to meet
commitments for debt service, administrative expense and operations. These
short-term needs will be funded by cash at September 30, 1997, plus 1997
interest income and cash flows from operations. A cash reserve has been
established to offset expenses which may arise if the Premier Management
license transfer application is denied.
The cash balance, not including restricted cash, at September 30,
1997, was $2,574,951. The Partnership had net income of $2,684,507. After
adjusting for depreciation, amortization, gain on sale of assets and
changes in operating assets and liabilities, net cash used in operating
activities was $4,311,718. The net cash used in financing activities was
$90,718 and consisted of principal payments on notes payable and
distributions to the minority interest. Accounts Receivable increased
$5,292,994 primarily due to the October 2, 1997, payment of the $4,992,507
sale proceeds from Premier Management Company. Accounts Payable increased
$51,316 primarily due to improved cash flow management and an increase in
the payroll liability as compared to 1996. Net cash provided by investing
activities was $4,946,014 due to the sale of the two (2) remaining
California facilities. Mortgage Notes Payable decreased by $25,718 due to
payments made to U. S. Bank for application to the Sequim, Washington
nursing facility mortgage.
Cash distributions to Limited Partners were discontinued during the
first quarter of 1988 and resumed in February 1992. The 1995 distribution
to Limited Partners totaled $1,500,000 (5% of the original capital of
$30,000,000). The February 1996 distribution to the Limited Partners was
$750,000 (2.5% of the original capital of $30,000,000). The July 1996
distribution to the Limited Partners was $13,200,000 (44% of the original
capital of $30,000,000). The December 1996 distribution to the Limited
Partners was $4,200,000 (14%) of the original capital of $30,000,000).
Future distributions will be at a level that is warranted by the cash flow
and profits of the Partnership.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits filed with this Report - 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 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
ATTEST:
Date: December 30, 1997 By: /s/ Fred E. Whaley
President and Director
Date: December 30, 1997 By: /s/ J. Davenport Mosby, III
Vice President and Director
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURTIES
EXCHANGE ACT OF 1934 FOR THE PERIOD ENDED SEPTEMBER 30, 1997.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 2,574,951
<SECURITIES> 0
<RECEIVABLES> 1,289,987
<ALLOWANCES> 270,728
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 2,994,951
<DEPRECIATION> 1,008,346
<TOTAL-ASSETS> 12,112,118
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 1,906,251
0
0
<COMMON> 0
<OTHER-SE> 8,834,487
<TOTAL-LIABILITY-AND-EQUITY> 12,112,118
<SALES> 0
<TOTAL-REVENUES> 2,238,365
<CGS> 0
<TOTAL-COSTS> 2,029,427
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 81,654
<INCOME-PRETAX> 2,684,507
<INCOME-TAX> 0
<INCOME-CONTINUING> 151,110
<DISCONTINUED> 2,533,397
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,684,507
<EPS-PRIMARY> 87.69<F2>
<EPS-DILUTED> 87.69<F2>
<FN>
<F1>REGISTRANT HAS AN UNCLASSIFIED BALANCE SHEET
<F2>EPS IS NET INCOME PER $1,000 LIMITED PARTNERSHIP UNIT
</FN>
</TABLE>
