<PAGE> 1
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 June 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 June 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
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CUMBERLAND HEALTHCARE, L.P. I-A
(a Limited Partnership)
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page Number
Part I.Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets -
As of June 30, 1997 and December 31, 1996 3
Consolidated Statements of Income -
For the Six Months Ended June 30, 1997 and 1996 4
For the Three Months Ended June 30, 1997 and 1996 5
Consolidated Statements of Cash Flows -
For the Six Months Ended June 30, 1997 and 1996 6
Notes to Consolidated Financial Statements 7-8
Item 2.Management's Discussion and Analysis of Financial
Condition and Results of Operations 9-10
Part II.Other Information
Item 6.Exhibits and Reports of Form 8-K 10
<PAGE> 3
CONSOLIDATED BALANCE SHEETS
June 30, December 31,
1997 1996
(Audited)
ASSETS
Cash and Cash Equivalents $2,421,245 $2,063,474
Restricted Cash 41,127 67,059
Accounts Receivable (Net of Allowance
of $278,748 and $343,770) 921,365 718,772
Loan Receivable 1,000,000 1,000,000
Prepaid Expenses 64,647 119,871
Deferred Debt Costs (Net of Accumulated
Amortization of $12,450 and $10,826) 20,028 21,652
Intangible Assets (Net of Accumulated
Amortization of $49,927 and $44,380) 393,871 399,418
Investment Properties, at Cost (Net of
Accumulated Depreciation and Amortization
of $2,507,297 and $2,416,187) 4,931,169 5,002,563
Construction in Progress 4,307 0
Total Assets $9,797,759 $9,392,809
LIABILITIES AND PARTNERS' EQUITY
Liabilities:
Accounts Payable $ 519,144 $ 687,968
Accrued Payroll 262,073 276,267
Payable to Related Parties
- General Partner 0 2,524
- Affiliates 349,529 336,929
Mortgage Notes Payable 1,239,256 1,256,214
Minority Interest 687,243 682,927
Total Liabilities $3,057,245 $3,242,829
Partners' Equity:
Limited Partners (30,000 units outstanding
at June 30, 1997 and December 31, 1996) 6,805,652 6,226,929
General Partner (65,138) (76,949)
Total Partners' Equity 6,740,514 6,149,980
Total Liabilities and Partners' Equity $9,797,759 $9,392,809
The accompanying notes are an integral part
of these consolidated financial statements.
<PAGE> 4
CONSOLIDATED STATEMENTS OF INCOME
FOR THE SIX MONTHS ENDED
June 30, June 30,
1997 1996
Revenues:
Net Resident Service Revenues $4,168,285 $3,664,107
Interest Income 66,150 136,065
Total Revenues 4,234,435 3,800,172
Expenses:
Resident Service Expenses 3,444,706 3,218,920
Interest Expense - Other 54,623 56,039
General and Administrative
- Affiliates 7,785 18,454
- Other 4,190 93,507
Depreciation and Amortization 98,281 96,279
Total Expenses 3,609,585 3,483,199
Operating Income $ 624,850 $ 316,973
Minority Interest in Net (Income)/Loss
of Consolidated Subsidiary (34,316) (58,962)
Income Before Extraordinary Item 590,534 258,011
Discontinued Operations:
Income from Operations of Leased Homes 0 634,124
Gain on Sale of Assets 0 6,672,839
Lease Termination Settlement 0 1,293,464
Income from Discontinued Operations 0 8,600,427
Net Income $ 590,534 $8,858,438
Income from Continuing Operations
Per $1,000 Limited Partnership Unit $ 19.29 $ 8.43
Income from Discontinued Operations
Per $1,000 Limited Partnership Unit 0 280.95
Total Income Per $1,000
Limited Partnership Unit $ 19.29 $ 289.38
Number of Limited Partnership Units
Outstanding 30,000 30,000
The accompanying notes are an integral part
of these consolidated financial statements.
<PAGE> 5
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED
June 30, June 30,
1997 1996
Revenues:
Net Resident Service Revenues $2,214,168 $1,856,024
Interest Income 32,815 90,337
Total Revenues 2,246,983 1,946,361
Expenses:
Resident Service Expenses 1,684,763 1,597,688
Interest Expense - Other 27,219 27,935
General and Administrative
- Affiliates 289 (4,600)
- Other (3,304) 52,373
Depreciation and Amortization 49,014 46,982
Total Expenses 1,757,981 1,720,378
Operating Income 489,002 225,983
Minority Interest in Net (Income)/Loss
of Consolidated Subsidiary (25,864) (68,266)
Income Before Extraordinary Item 463,138 157,717
Discontinued Operations:
Income from Operations of Leased Homes 0 241,793
Gain on Sale of Assets 0 6,672,839
Income from Discontinued Operations 0 6,914,632
Net Income $ 463,138 $7,072,349
Income from Continuing Operations
Per $1,000 Limited Partnership Unit $ 15.13 $ 5.15
Income from Discontinued Operations
Per $1,000 Limited Partnership Unit 0 225.88
Total Income Per $1,000
Limited Partnership Unit $ 15.13 $ 231.03
Number of Limited Partnership Units
Outstanding 30,000 30,000
The accompanying notes are an integral part
of these consolidated financial statements.
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CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED
June 30, June 30,
1997 1996
Cash Flows from Operating Activities:
Net Income $ 590,534 $ 8,858,438
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities:
Depreciation and Amortization 98,281 330,702
Gain on Sale of Assets 0 (6,672,839)
Minority Interest in Net Income (Loss)
of Consolidated Subsidiary 34,316 58,962
Changes in Operating Assets and Liabilities:
(Increase) Decrease in Accounts Receivable (202,593) (455,280)
(Increase) Decrease in Prepaid Expenses 55,224 (63,258)
(Increase) Decrease in Restricted Cash 25,932 29,204
Increase (Decrease) in Payable to Related
Parties 10,076 12,097
Increase (Decrease) in Payables and Accruals (183,018) 18,387
Net Cash Provided by Operating
Activities 428,752 2,116,413
Cash Flows from Investing Activities:
(Additions) to Investment Properties (19,716) (85,655)
(Additions) to Construction in Progress (4,307) 0
Sale of Investment Properties 0 15,848,942
Net Cash Provided by (Used in)
Investing Activities (24,023) 15,763,287
Cash Flows from Financing Activities:
Payments of Mortgage Notes Payable (16,958) (1,966,330)
Distribution to Partners:
Limited Partners 0 (750,000)
General Partner 0 (15,305)
Minority Interest (30,000) (10,550)
Net Cash (Used in) Financing
Activities (46,958) (2,742,185)
Increase (Decrease) in Cash and Cash Equivalents 357,771 15,137,515
Cash and Cash Equivalents at Beginning of Period 2,063,474 1,626,628
Cash and Cash Equivalents at End of Period $ 2,421,245 $16,764,143
Supplemental Disclosure of Cash Flow Information:
Interest Paid $ 54,623 $ 358,133
Non-cash Items:
Sale of Investment Properties
Notes Receivable 0 1,000,000
Assumed Mortgage 0 1,259,719
Miscellaneous Settlements 0 (208,661)
Total $ 0 $ 2,051,058
The accompanying notes are an integral part
of these consolidated financial statements.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 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 Six Months ended June 30, 1997.
General and Administrative Costs and Fees $ 289
Cash Distributions $ 0
NOTE 3 - INVESTMENT PROPERTIES
As of June 30, 1997, the Partnership owned, directly or through
limited partnership investments, an interest in three nursing home
properties.
A summary of the Partnership's investment properties is as follows:
Operated
Land $1,534,105
Buildings 4,551,876
Furniture and Fixtures 1,352,485
Investment Properties, at Cost 7,438,466
Less: Accumulated Depreciation
and Amortization 2,507,297
Net Book Value $4,931,169
The Partnership, directly or through a manager, operates three skilled
nursing facilities. Paramount Chateau, a 99-bed facility located in
Paramount, California, for the six months ended June 30, 1997, had an
average occupancy rate of 87.1% that was comprised of 9.0% private, 11.7%
Medicare, 74.9% Medicaid and 4.4% HMO. The average reimbursement rates
were $96, $265, $74 and $168 per day for private, Medicare, Medicaid, and
HMO, respectively. The average monthly revenue was $322,855. Pacific
Palms, a 99-bed facility located in Norwalk, California, for the six months
ended June 30, 1997 had an average occupancy rate of 51.9% that was
comprised of 3.7% private, 4.1% Medicare, 80.1% Medicaid and 12.1% HMO.
The average reimbursement rates were $108, $299, $74 and $210 per day for
<PAGE> 8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
June 30, 1997
NOTE 3 - INVESTMENT PROPERTIES (Continued)
private, Medicare, Medicaid and HMO, respectively. The average monthly
revenue was $147,431. Olympic Healthcare, a 60-bed skilled nursing
facility with a 24-bed assisted living wing located in Sequim, Washington,
for the six months ended June 30, 1997, had an average occupancy in the
skilled nursing facility of 85.9% that was comprised of 33.8% private, 8.7%
Medicare and 57.5% Medicaid. The average reimbursement rates in the
skilled nursing facility were $110, $203 and $101 per day for private,
Medicare and Medicaid, respectively. The average monthly revenue was
$184,351. The 24-bed assisted living wing maintained an average occupancy
of 86.8% that was comprised of 22.3% private and 77.7% Medicaid. The
average reimbursement rates were $66 and $59 per day for private and
Medicaid, respectively. The average monthly revenue was $39,394.
NOTE 4 - SUBSEQUENT EVENT
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 acquire two California nursing
homes, Paramount Chateau Convalescent Hospital and Pacific Palms Skilled
Nursing, for a purchase price of $5,050,000. The Closing Date shall be on
or before August 31, 1997, subject to normal due diligence by Premier.
<PAGE> 9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Net resident service revenues increased by $504,178 (13.8%) for the
six months ended June 30, 1997, as compared to the same period in 1996 due
to an 8.1% census increase and an annual increase in the Medicare and
Medicaid reimbursement rates. Resident service expenses increased by
$225,786 (7.0%) for the six months ended June 30, 1997, as compared to the
same period in 1996 due to a decrease in the Washington State workers'
compensation benefit refund and an increase in administrative salaries and
management costs at the Norwalk, California facility.
Interest income decreased by $69,915 (51.4%) for the six months ended
June 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 June 1996.
General and Administrative - Affiliates expense decreased by $10,669
(57.8%) for the six months ended June 30, 1997, as compared to the same
period in 1996 due to the decreased need for senior management involvement
which was necessary for the 1996 sale of eight of the eleven nursing
facilities.
General and Administrative - Other expense decreased by $89,317
(95.5%) for the six months ended June 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.
Net resident service revenues increased by $358,144 (19.3%) for the
three months ended June 30, 1997, as compared to the same period in 1996
due to a 1% increase in the census and an increase in the Medicare and
Medicaid reimbursement rates. Resident service expenses increased by
$87,075 (5.5%) for the three months ended June 30, 1997, compared to the
same period in 1996 due to an increase in nursing and dietary costs
necessary to accommodate the census increase.
Interest income decreased by $57,522 (63.7%) for the three months
ended June 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 $4,889
for the three months ended June 30, 1997, as compared to the same period in
1996 due to a second quarter 1997 increase in expenses relating to the
sales marketing of the two (2) remaining California facilities.
General and Administrative - Other expense decreased by $55,677
(106.3%) for the three months ended June 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 June 30, 1997, were
revenues from nursing home operations and collection of accounts
receivable. These funds were used to pay nursing home expenses. As of
June 30, 1997, the Partnership has an interest in three nursing homes that
have a combined net book value of $4,931,169. 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 June 30, 1997, plus 1997
interest income and cash flows from operations. However, if future changes
in the health care market require extensive capital expenditures by the
Partnership in order for its facilities to meet new licensure and/or
marketplace standards, the Partnership may be required to seek additional
capital sources or increase its long term debt in order to meet potential
future expenditure requirements. The General Partner is unable at this time
to predict the extent of future capital
<PAGE> 10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
expenditure needs of the facilities resulting from future changes in the
nursing home industry.
The cash balance, not including restricted cash, at June 30, 1997, was
$2,421,245. The Partnership had net income of $589,306. After adjusting
for depreciation, amortization, and changes in operating assets and
liabilities, net cash provided by operating activities was $428,752. The
net cash used in financing activities was $46,958 and consisted of
principal payments on notes payable and distributions to the minority
interest. Accounts Receivable increased $202,593 primarily from the start
up of the Norwalk, California facility and a delay in collections at both
the Norwalk and Paramount, California facilities due to a change in office
personnel. Accounts Payable decreased $183,018 primarily due to a $145,275
decrease in the accounts payable balance at the Paramount, California
facility. Restricted cash decreased by $25,932 due to a decrease in the
resident trust accounts. Investment properties increased primarily from
additions to furniture and fixtures and building improvements at the
Paramount, California and Sequim, Washington nursing facilities. Mortgage
Notes Payable decreased by $16,958 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
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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: August 12, 1997 By: \s\Fred E. Whaley
President and Director
Date: August 12, 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 SECURITIES
EXCHANGE ACT OF 1934 FOR THE PERIOD ENDED JUNE 30, 1997.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 2,421,245
<SECURITIES> 0
<RECEIVABLES> 1,200,113
<ALLOWANCES> 278,748
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 7,438,466
<DEPRECIATION> 2,507,297
<TOTAL-ASSETS> 9,797,759
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 1,926,499
0
0
<COMMON> 0
<OTHER-SE> 6,740,514
<TOTAL-LIABILITY-AND-EQUITY> 9,797,759
<SALES> 0
<TOTAL-REVENUES> 4,234,435
<CGS> 0
<TOTAL-COSTS> 3,609,585
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 54,623
<INCOME-PRETAX> 590,534
<INCOME-TAX> 0
<INCOME-CONTINUING> 590,534
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 590,534
<EPS-PRIMARY> 19.29<F2>
<EPS-DILUTED> 19.29<F2>
<FN>
<F1>REGISTRANT HAS AN UNCLASSIFIED BALANCE SHEET
<F2>EPS IS NET INCOME PER $1,000 LIMITED PARTNERSHIP UNIT
</FN>
</TABLE>
