4
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549-1004
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 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
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: 30,000
Title of Each Class
Units of Limited Partnership Interest
$1,000 per unit
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. X
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
Title of Each Class at December 31, 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
None
Exhibit Index: Pages 24 - 27
PART I
Item 1. Business
General Development of Business
The Registrant is a limited partnership (the "Partnership") composed of
Medical Investments Partners (the "General Partner") and purchasers of
Partnership units as the limited partners. The General Partner is composed
of RJ Health Properties, Inc. and RJ Medical Investors, Inc., both of which
are wholly-owned subsidiaries of Raymond James Financial, Inc. The
Partnership was formed under the laws of Delaware and commenced operations
on March 13, 1986.
Financial Information about Industry Segments
The Partnership was formed to engage in only one industry segment, the
acquisition of nursing homes subject to leases to third parties. As a
result of the bankruptcy of the original lessees of the Partnership's
nursing homes, the Partnership, on an interim basis, became the operator of
the fourteen nursing homes owned by it pending locating qualified lessees
for the nursing homes.
Narrative Description of Business
The Partnership's business is to acquire and lease nursing homes,
primarily through operating leases expected to generate cash distributions
to the Limited Partners from leasing revenues and proceeds from the sale or
other disposition of the nursing homes.
Termination and Dissolution of the Partnership
On May 8, 1996, the limited partners approved a plan of liquidation
pursuant to which the Partnership will be dissolved and its affairs wound
up pursuant to Article XIV of the Limited Partnership Agreement and its
assets be liquidated with the proceeds of such liquidation to be expended
and distributed as required by the Limited Partnership Agreement. All
operating assets of the Partnership have been liquidated, and the non-
operating assets should be converted to liquid assets during 1998. Upon
distribution of all of the assets of the Partnership, the Partnership will
be terminated.
Nursing Home Operations
The Partnership owns 99% of Cumberland Healthcare, L.P. I-C which
leased the Hillcrest Care Center to Arbor Health Care Company ("Arbor").
The General Partner owns the remaining 1% of Cumberland Healthcare, L.P. I-
C. The lease provided for a minimum rent of $330,000 per year and
additional rent of 4% of net revenue. Total lease payments were capped
annually at $545,000. Arbor had an option to purchase the facility which
became effective February 1, 1995, and terminated February 1, 1997, at an
amount determined according to the lease agreement. Arbor exercised its
option to purchase Hillcrest Care Center and on September 20, 1996, the
purchase was closed with the payment of $5,750,000 by Arbor to Cumberland
Healthcare, L.P. I-C.
The Partnership leased Bel Tooren, Imperial, La Habra, Mirada Hills,
Northwalk, Rimrock and Sun City (collectively the "LCCA Homes") to Life
Care Centers of America ("LCCA"). The leases with LCCA are hereinafter
referred to as the "LCCA Leases". The LCCA Leases required an annual
minimum rent of $2,408,932 for the fiscal year ended May 31, 1996, with an
annual adjustment based on 6% of the increase in resident service revenues.
The LCCA Leases also called for incentive rent based on a 50% sharing of
LCCA's net profit from the LCCA Homes. LCCA had an option to purchase the
LCCA Homes beginning June 1, 1999 and ending December 31, 1999 for a
purchase price equal to the then fair market value of the LCCA Homes;
provided, however, that the aggregate price for all the LCCA Homes,
pursuant to the option, would not be less than $24,292,000. The LCCA
Leases original expiration date was May 2000. LCCA's obligations under the
LCCA Leases were personally guaranteed by the principal shareholder of
LCCA. During 1994, the Partnership notified LCCA that it believed that
LCCA was in violation of certain technical reporting, rent computation and
other covenants of the LCCA Leases since the reports and certifications
required to be delivered to the Partnership under the LCCA Leases were not
in the detail and form required by the LCCA Leases. LCCA denied that
violations or breaches of the LCCA Leases occurred. The disputes involved
the accounting methods used by LCCA to calculate whether any incentive rent
was due. The parties disagreed as to what credits and debits could be
properly used in making the calculation under the LCCA Leases. The General
Partner estimated the aggregate amount of the disputes to be $50,000. The
Partnership did not recognize any of the disputed amounts as revenue.
Resolution of the disputes was a condition precedent to both parties'
obligations pursuant to the Purchase Agreement and was settled through
negotiations. In addition, LCCA had informed the Partnership that it was
seeking future rental concessions under the LCCA Leases.
The Partnership entered into an agreement with LCCA on August 4, 1995
(the "Purchase Agreement") pursuant to which LCCA agreed to purchase seven
nursing facilities located in California for a purchase price of
$17,900,000. The Purchase Agreement required the purchase price to be paid
by LCCA as follows:
(a) LCCA would assume the indebtedness secured by a mortgage on the
Rimrock Facility.
(b) LCCA would deliver a purchase money note in the amount of $1,000,000
guaranteed by its principal shareholder to the Partnership (the "LCCA
Note"). The LCCA Note matures on the fifth anniversary of its issuance but
payment may be demanded at the option of the Partnership on or anytime
after December 28, 1997. A portion of the accrued interest is payable
monthly and the balance is due on the maturity of the LCCA Note. However,
if the Partnership exercises its right to call the LCCA Note on or after
December 28, 1997, the accrued interest which would otherwise be due at
maturity will be canceled; and
(c) The balance of the purchase price would be paid in cash at closing by
federal funds wire transfer to the Partnership.
The agreement to sell the LCCA Homes to LCCA was subject to Partners'
approval. Approval by the Partners' for the sale of the LCCA Homes was
granted May 8, 1996. On May 29, 1996, the closing of the sale of the LCCA
Homes was finalized. All lease agreements previously held between the
Partnership and LCCA were terminated.
Effective September 19, 1990, the Partnership leased its Rancho Los
Padres nursing home to FHP, Inc. ("FHP"), a large California based HMO and
the principal subsidiary of FHP International Corporation, for ten years.
The lease for Rancho Los Padres required FHP, as lessee, to make a monthly
minimum lease payment of $22,000 ($264,000 annually) for the first year,
$24,500 ($294,000 annually) for the second year, and $24,500 plus the
greater of the percentage increase of the Medi-Cal rate or consumer price
index increase, but not less than 3% nor more than 8%, for years three
through ten of the lease. On October 25, 1995, a Lease Termination
Agreement was signed by Cumberland Healthcare (Cumberland) and FHP, Inc.
relating to FHP - Norwalk f/k/a Rancho Los Padres whereby Cumberland would
receive an early lease termination payment. A Management Agreement was
also signed whereby Cumberland would become the interim operator of
the facility. Pursuant to the Lease Termination Agreement, $1,566,174 was
placed in escrow, and payment was contingent upon Cumberland obtaining the
appropriate license to operate and maintain the FHP - Norwalk facility. In
January 1996, the State of California - Department of Health Services
issued a license to Cumberland to operate and maintain Pacific Palms
Skilled Nursing f/k/a FHP - Norwalk f/k/a Rancho Los Padres. After various
prorations, working capital advances and earned interest, the net
distribution from the escrow account to Cumberland was $1,534,334. FHP, as
part of the termination agreement, agreed to maintain at the nursing
facility an average census of its members/patients sufficient to average
not less than five patient days for each day between September 30, 1995,
and October 1, 1996, at a rate which is essentially $45 per patient day
greater than market rent. In the event of a sale or subsequent lease of
all or any interest in Pacific Palms Skilled Nursing prior to October 1,
1996, the Partnership was required to pay to the lessee 50% of the sale
proceeds in excess of $1,600,000, up to a maximum total payment of
$500,000.
On September 30, 1997, the Partnership closed on a purchase agreement
with Premier Management Company (Premier) whereby Premier purchased Pacific
Palms (Norwalk, California) and Paramount Chateau (Paramount, California)
for $5,050,000. On December 31, 1997, the Partnership closed on a purchase
agreement with Public Hospital District No. 2 (the hospital) whereby the
hospital purchased the Sequim, Washington (Olympic Healthcare) facility for
$2,800,000.
As a result of the two 1997 sale closings, the Partnership no longer
owns any investment properties.
As of December 31, 1997 and 1996, the Partnership and its subsidiaries
had 0 and 229 employees, respectively.
Item 2. Properties
As of December 31, 1997, the Partnership does not own directly or
through limited partnership investments any properties or interest in
properties.
As a result of the sale of the Partnership's leased facilities in 1996,
the Partnership, directly or through a manager, operated three remaining
facilities until their sale in 1997. 1997 resident occupancy percentages
are included in the following table.
Paramount Chateau (99 Beds - SNF) 12/31/97 12/31/96
12/31/95
Average Census 84.7% 83.7% 87.6%
Private 8.2% 7.2% 9.9%
Medicare 10.8% 10.1%
6.2%
Medi-Cal 77.6% 80.6%
83.9%
HMO 2.7% .6% --
Hospice .7% 1.5% --
Average Reimbursement Rate
Private $ 95.73 $ 96.58 $ 79.69
Medicare 286.88 254.25
244.76
Medi-Cal 74.11 73.30
73.89
HMO 184.12 148.08 --
Hospice 78.20 81.09 --
Average Monthly Revenue $295,561 $247,659 $234,807
Pacific Palms (99 Beds - SNF)
Average Census 47.0% 36.7% N/A
Private 4.1% 9.0% N/A
Medicare 5.6% 6.3%
N/A
Medi-Cal 78.7% 65.3%
N/A
HMO 11.0% 16.4% N/A
Hospice .6% 3.0% N/A
Average Reimbursement Rate
Private $ 106.66 $ 107.71 N/A
Medicare 302.69 269.30
N/A
Medi-Cal 74.04 72.64
N/A
HMO 208.15 204.90 N/A
Hospice 128.79 141.02 N/A
Average Monthly Revenue $160,851 $136,188 N/A
Item 2. Properties (Continued)
Olympic Healthcare (60 Bed - SNF)
Average Census 88.3% 94.2% 88.1%
Private 30.9% 35.8% 31.8%
Medicare 10.5% 9.9%
11.4%
Medicaid 58.6% 54.3%
56.8%
Average Reimbursement Rate
Private $ 110.84 $ 99.03 $ 94.75
Medicare 228.60 189.43
173.62
Medicaid 102.65 98.74
94.45
Average Monthly Revenue $202,911 $190,642 $183,536
Olympic Healthcare (24 Bed - ALF)
Average Census 80.7% 76.2% 60.3%
Private 20.8% 30.3% 61.0%
Medicaid 79.2% 69.7%
39.0%
Average Reimbursement Rate
Private $ 65.60 $ 60.59 $ 49.97
Medicaid 58.90 53.58
51.27
Average Monthly Revenue $ 36,347 $ 32,312 $ 23,644
All Operated Homes
Average Occupancy Rates 73.0% 69.0% 84.0%
Item 3. Legal Proceedings
There are no material pending legal proceedings to which the
Partnership is a party or to which its property is subject. Therefore, no
provision has been made in the accompanying financial statements.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders, through the
solicitation of proxies or otherwise, during the fourth quarter of 1997.
PART II
Item 5. Market for the Registrant's Securities and Related Security Holder
Matters
(a) The Registrant's limited partnership interests are not publicly
traded. There is no market for the Registrant's limited partnership
interests and it is unlikely that any will develop.
(b) Approximate number of Equity Security Holders:
Number of Record Holders
Title of Class as of December 31, 1997
Units of Limited Partnership Interest 1,937
General Partner Interest 1
No Limited Partner owns more than 5% of the Units. The General Partner
Interest is owned by Medical Investments Partners, The Raymond James
Financial Center, 880 Carillon Parkway, St. Petersburg, Florida 33716.
(c) Total Units of Limited Partnership (1,000 units) 30,000
Total Units Outstanding ($1,000 per unit) 30,000
1997 1996 1995
Distributions to Limited Partners None $18,150,000$ 1,500,000
Distributions to General Partner None 37,620 30,612
All of the distributions for 1996 or 1995 represent return of capital
on a GAAP basis.
Item 6. Selected Financial Data
1997 1996 1995 1994 1993
Total Revenues(1) $ 199,361$ 269,390$ 62,825$ 37,086$ 192,336
Net Income(2) $ 149,699 138,294 (57,976) (73,326) 21,319
Total Assets $9,770,909 9,392,80922,181,44222,618,44826,301,479
Mortgage Notes
Payable 0 1,256,214 7,946,917 8,782,49710,889,660
Distributions to
Limited Partners
Per Partnership Unit 0 605.00 50.00 35.00 20.00
Net Income(2)
Per Unit $4.89 $4.52 $(1.89) $(2.40)
$.70
(1) Total revenues in 1993 omit extraordinary gain on sale of minority
interest and forgiveness of indebtedness.
(2) Net Income and Net Income Per Unit does not include income from
discontinued operations.
The above selected financial data should be read in conjunction with
the financial statements and related notes appearing elsewhere in this
report. This statement is not covered by the auditors' opinion included
elsewhere in this report.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Continuing Operations:
Interest income decreased by $70,029 (26%) for the year ended December
31, 1997, compared to the same period in 1996, due to decreased average
cash balances in interest bearing accounts as a result of the distributions
issued for the LCCA and Arbor sale proceeds. Interest income increased
$206,565 (328.8%) for the year ended December 31, 1996, compared to the
same period in 1995, due to increased average cash balances in interest
bearing accounts. The increased average cash balances were a result of the
cash proceeds from the sale of eight of the eleven nursing homes.
General and Administrative - Affiliate expenses decreased by $54,744
(91.4%) for the year ended December 31, 1997, compared to the same period
in 1996, due to decreased senior management involvement resulting from the
sale of the nursing facilities. Affiliate expenses increased by $15,730
(35.6%) for the year ended December 31, 1996, compared to the same period
in 1995, due to the increased time and travel required by senior management
to negotiate and execute the LCCA sale, the Arbor sale and the FHP lease
termination.
General and Administrative - Other expenses decreased by $26,690
(37.5%) for the year ended December 31, 1997, compared to the same period
in 1996, due to an increase in the percentage of travel and overhead of
affiliates directly related to and allocated to resident services expenses.
General and Administrative - Other expenses decreased by $5,435 (7.1%) for
the year ended December 31, 1996, compared to the same period in 1995, due
in most part to a decrease of $7,927 in insurance costs.
As a result of the above revenue and expense items, the Partnership
had $149,699 net income from continuing operations for the year ending
December 31, 1997, $138,294 net income from continuing operations for the
year ending December 31, 1996 and $(57,976) net loss from continuing
operations for the year ending December 31, 1995. Inflation and changing
prices have not had a material impact on net revenues and expenses from
continuing operations over the past three years.
Discontinued Operations:
Due to the 1996 sale of the rental segment of the operations, there is
no 1997 income to compare to prior years. Rental income included in
discontinued operations decreased by $954,152 (57.8%) for the year ended
December 31, 1996, compared to the same period in 1995 due to the May 29,
1996, sale of the LCCA Homes, the September 20, 1996, sale of Hillcrest
Care Center and the transfer of the Norwalk, California facility to an
operated facility. Resident service revenues decreased by $560,655 (7.4%)
for the year ended December 31, 1997, compared to the same period in 1996.
This decrease is due, in most part, to the September 30, 1997, sale of the
Norwalk and Paramount, California nursing facilities. Resident service
revenues increased by $2,140,548 (39.6%) for the
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued)
Discontinued Operations: (Continued)
year ended December 31, 1996, compared to the same period in 1995. This
increase is due to $1,634,018 resulting from the operation of the Norwalk,
California facility, $164,250 resulting from the payment by FHP,Inc. for
the lease termination resident day guarantee, $154,225 resulting from a
private payor room rate increase and a Medicare per diem rate increase at
the Paramount, California facility and $189,300 resulting from a 7.2%
census increase at the Sequim, Washington skilled nursing facility and a
26% census increase at the Sequim, Washington assisted living facility.
Resident service expenses decreased by $360,539 (5.4%) for the year
ended December 31, 1997, compared to the same period in 1996. This
decrease is due, in most part, to the September 30, 1997, sale of the
Norwalk and Paramount, California nursing facilities. Resident service
expenses increased by $1,893,646 (40.0%) for the year ended December 31,
1996, compared to the same period in 1995, due to the Norwalk, California
nursing facility becoming an operated facility.
General and Administrative - Other expenses decreased by $172,898
(98.9%) for the year ended December 31, 1996, compared to the same period
in 1995 due to a decrease in legal, consulting and accounting fees
associated with the 1995 negotiations and drafting of sales contracts for
the sale of the LCCA Homes and the FHP lease termination.
Interest expense decreased by $323,666 (73.4%) for the year ended
December 31, 1997, compared to the same period in 1996, due to the 1996
payoffs of mortgages on the Sun City Convalescent Hospital and Hillcrest
Care Center, the 1996 assumption by LCCA of the mortgage on the Rimrock
Villa nursing home and the 1997 decrease in interest expense on the Olympic
Healthcare nursing home due to the ordinary monthly principal paydown.
Interest expense decreased by $276,688 (38.6%) for the year ended December
31, 1996, compared to the same period in 1995 due to the payoff of
mortgages on the Sun City Convalescent Hospital and Hillcrest Care Center
from proceeds received as a result of the LCCA and Arbor sales contracts
and the assumption of the mortgage on the Rimrock Villa nursing home by
LCCA.
Depreciation and Amortization expense decreased by $293,233 (60.2%)
for the year ended December 31, 1997, compared to the same period in 1996,
due to the 1996 sale of eight of the eleven nursing homes and the September
30, 1997, sale of two nursing homes. Depreciation and Amortization expense
decreased by $221,627 (31.3%) for the year ended December 31, 1996,
compared to the same period in 1995 due to the sale of the LCCA homes and
the Hillcrest Care Center.
The operating income from the discontinued health care segment
decreased by $318,556 for the year ended December 31, 1997, compared to the
same period in 1996, due to the September 30, 1997, sale of the Norwalk and
Paramount, California facilities. The operating income from the
discontinued health care segment increased by $127,947 for the year ended
December 31, 1996, compared to the same period in 1995, due to an increase
in the Medicare and Medi-Cal per diem rates at the Norwalk and Paramount,
California nursing facilities. The operating income from the discontinued
real estate rental segment decreased by $954,152 for the year ended
December 31, 1996, compared to the same period in 1995, due to the May 29,
1996, sale of the LCCA Homes and the September 20, 1996, sale of the
Hillcrest Care Center. The Partnership realized income of $12,224,268 for
the year ended December 31, 1996, from transactions related to discontinued
operations. $9,732,487 is from the gain on sale of the LCCA Homes and the
Hillcrest Care Center for the sum of $6,463,878 and $3,268,609,
respectively. $1,293,464 is from the lease termination settlement received
from FHP, Inc. for the early termination of FHP's lease on Pacific Palms
Skilled Nursing f/k/a FHP - Norwalk.
As a result of the above revenue and expense items, the Partnership
had $2,773,070 net income for the year ending December 31, 1997,
$12,224,268 net income for the year ending December 31, 1996 and $2,024,522
net income for the year ending December 31, 1995. Inflation and changing
prices have not had a material impact on net revenues and losses from
continuing operations over the past three years.
LIQUIDITY AND CAPITAL RESOURCES
The primary sources of funds for the periods ending December 31, 1997,
1996 and 1995 were rental income, revenues from nursing home operations,
prepayment of the FHP lease and proceeds from the sale of assets. These
funds were used to pay nursing home expenses, pay recurring debt service,
make cash distributions to partners and reduce the amount of
LIQUIDITY AND CAPITAL RESOURCES (Continued)
outstanding indebtedness. As of December 31, 1997, the Partnership has no
ownership interest in any properties.
Short-term liquidity requirements consist of funds needed to meet
commitments for administrative expenses and operations. These short term
needs will be funded by cash at December 31, 1997, plus interest income.
Debt service paid in 1997 totaled $1,256,214.
In the opinion of the General Partner, the Partnership has sufficient
funds or sources of funds to remain liquid for the next 12 - 24 months.
The General Partner is not aware of any trends that may significantly
affect the Partnership's liquidity.
The cash balance at December 31, 1997, was $7,268,682. The
Partnership had net income of $2,773,070. After adjusting for
depreciation, amortization, gain on sale of assets and changes in operating
assets and liabilities, net cash used in operating activities was $353,593.
The net cash provided by investing activities was $7,669,619 which includes
fixed asset additions and the sale of investment properties. The net cash
used in financing activities was $2,110,818 and consisted of principal
payments on mortgage notes payable and distributions to minority interest.
Significant changes to the balance sheet which affected the cash flow of
the Partnership for 1997 are primarily due to the September 30, 1997, sale
of the Norwalk and Paramount, California nursing facilities. Payables and
accruals decreased by $530,005 primarily due to the fourth quarter 1997
payoff of accrued expenses at the Norwalk and Paramount, California nursing
facilities. Investing activities increased primarily from the September
30, 1997, sale of the Norwalk and Paramount, California nursing facilities
which provided $4,938,062 in cash proceeds and the December 31, 1997, sale
of the Sequim, Washington facility which provided $2,759,351 in cash
proceeds. Mortgage Notes Payable decreased by $1,256,214 due to the payment
of debt on the Sequim, Washington facility from proceeds from the sale of
the facility.
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 issued for the 1997 sale proceeds of the last
remaining properties and the 1998 liquidation of the Partnership.
Item 8. Financial Statements and Supplementary Data
CUMBERLAND HEALTHCARE, L.P. I-A
(a Limited Partnership)
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page No.
Independent Auditor's Report 10
Consolidated Balance Sheets as of December 31, 1997 and 1996 11
Consolidated Statements for the Years Ended December 31, 1997,
1996 and 1995:
Income 12
Partners' Equity 13
Cash Flows 14
Notes to Consolidated Financial Statements 15 -
21
Directors and Officers of the Registrant
21 - 22
Exhibit Index 22 - 25
Financial Statement Schedules -
Schedule VIII - Valuation and Qualifying Accounts
25
and Reserves
Schedule X - Supplementary Income Statement Information
25
INDEPENDENT AUDITOR'S REPORT
To the Partners of
Cumberland Healthcare, L.P. I-A
We have audited the accompanying consolidated balance sheets of
Cumberland Healthcare, L.P. I-A (a Delaware Limited Partnership) as of
December 31, 1997 and 1996, and the related consolidated statements of
income, partners' equity, and cash flows for each of the three years in the
period ended December 31, 1997. These consolidated financial statements
are the responsibility of the Partnership's management. Our responsibility
is to express an opinion on these statements 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 consolidated financial
statements are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position of
Cumberland Healthcare, L.P. I-A as of December 31, 1997 and 1996 and the
results of its operations and its cash flows for each of the three years in
the period ended December 31, 1997 in conformity with generally accepted
accounting principles.
As more fully discussed in Note 12, during 1996, the Partnership
discontinued the leasing segment of its operations. Historically, assets
and operations of the leasing segment have represented a substantial
portion of the Partnership's total assets and results of operations.
As more fully disclosed in Note 13, the Partners have approved a plan
of dissolution of the Partnership.
Our audits were made for the purpose of forming an opinion on the
basic financial statements taken as a whole. The schedules listed under
Item 14 in the index are presented for purposes of complying with the
Securities and Exchange Commission's rules and are not part of the basic
financial statements. These schedules have been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in
our opinion, fairly state in all material respects the financial data
required to be set forth therein in relation to the basic financial
statements taken as a whole.
SPENCE, MARSTON, BUNCH, MORRIS & CO.
Certified Public Accountants
Clearwater, Florida
May 7, 1998
CUMBERLAND HEALTHCARE, L.P. I-A
(a Limited Partnership)
CONSOLIDATED BALANCE SHEETS
DECEMBER 31,DECEMBER 31,
1997 1996
ASSETS
Cash and Cash Equivalents $ 7,268,682 $ 2,063,474
Restricted Cash 0 67,059
Accounts Receivable (Net of Allowance
of $306,105 and $343,770) 671,683 718,772
Note Receivable 1,000,000 1,000,000
Sale Proceeds Receivable 764,604 0
Prepaid Expenses 65,940 119,871
Deferred Debt Costs (1996 Net of Accumulated
Amortization of $10,826) 0 21,652
Intangible Assets (1996 Net of Accumulated
Amortization of $44,380) 0 399,418
Investment Properties, at Cost (1996 Net of
Accumulated Depreciation and Amortization
of $2,416,187) 0 5,002,563
Construction in Progress 0 0
Total Assets $ 9,770,909 $ 9,392,809
LIABILITIES AND PARTNERS' EQUITY
Liabilities:
Accounts Payable $ 294,664 $ 687,968
Accrued Payroll 139,566 276,267
Payable to Related Parties
- General Partner 0 2,524
- Affiliates 355,829 336,929
Mortgage Notes Payable 0 1,256,214
Minority Interest 57,800 682,927
Total Liabilities 847,859 3,242,829
Partners' Equity:
Limited Partners (30,000 units outstanding
at December 31, 1997 and 1996) 8,944,538 6,226,929
General Partner (21,488) (76,949)
Total Partners' Equity 8,923,050 6,149,980
Total Liabilities and Partners' Equity $ 9,770,909 $ 9,392,809
The accompanying notes are an integral part
of these consolidated financial statements.
CUMBERLAND HEALTHCARE, L.P. I-A
(a Limited Partnership)
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED
DECEMBER 31, DECEMBER 31,DECEMBER 31,
1997 1996 1995
(Restated)
Revenues:
Interest Income $ 199,361 269,390 62,825
Total Revenues 199,361 269,390 62,825
Expenses:
General and Administrative
- Affiliates 5,183 59,927 44,197
- Other 44,479 71,169 76,604
Total Expenses 49,662 131,096 120,801
Income From Continuing Operations 149,699 138,294 (57,976)
Discontinued Operations:
Income from Real Estate Rental Operations 0 696,600 1,650,752
Income From Health Care Operations 183,161 501,717 373,770
Gain on Sale of Assets 2,440,210 9,732,487 0
Lease Termination Settlement 0 1,293,464 0
Income from Discontinued Operations 2,623,371 12,224,268 2,024,522
Net Income $ 2,773,070 $12,362,562
$ 1,966,546
Income from Continuing Operations
Per $1,000 Limited Partnership Unit$ 4.89 $ 4.52 $ (1.89)
Income from Discontinued Operations
Per $1,000 Limited Partnership Unit 85.70 399.32 66.13
Total Income Per $1,000
Limited Partnership Unit $ 90.59 $ 403.84 $ 64.24
Number of Limited Partnership Units
Outstanding 30,000 30,000 30,000
The accompanying notes are an integral part
of these consolidated financial statements.
CUMBERLAND HEALTHCARE, L.P. I-A
(a Limited Partnership)
CONSOLIDATED STATEMENTS OF PARTNERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
Limited General Total
Partners' Partner's Partners'
Equity Equity Equity
Balance at December 31, 1993 $11,302,930 $ (306,144) $10,996,786
Net Income - 1994 (Restated) 1,581,473 32,275 1,613,748
Distribution (1,050,000) (21,430) (1,071,430)
Balance at December 31, 1994
(Restated) $11,834,403 $ (295,299) $11,539,104
Net Income - 1995 1,927,215 39,331 1,966,546
Distribution (1,500,000) (30,612) (1,530,612)
Balance at December 31, 1995 $12,261,618 $ (286,580) $11,975,038
Net Income - 1996 12,115,311 247,251 12,362,562
Distribution (18,150,000) (37,620) (18,187,620)
Balance at December 31, 1996 $ 6,226,929 $ (76,949) $ 6,149,980
Net Income - 1997 2,717,609 55,461 2,773,070
Distribution 0 0 0
Balance at December 31, 1997 $ 8,944,538 $ (21,488) $ 8,923,050
The accompanying notes are an integral part
of these consolidated financial statements.
CUMBERLAND HEALTHCARE, L.P. I-A
(a Limited Partnership)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED
December 31, December 31,December 31, 1997
1996 1995
Cash Flows from Operating Activities:
Net Income $ 2,773,070$12,362,562$ 1,966,546
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities:
Depreciation and Amortization 194,224 487,456 709,083
Minority Interest in Net Income (Loss) 229,477 83,019 44,888
Gain on Sale of Assets (2,440,210)(9,732,487) 0
Changes in Operating Assets and Liabilities:
(Increase) Decrease in Accounts Receivable47,089 (13,261) 303,118
(Increase) Decrease Sale Proceeds Receivable(764,604) 0 0
(Increase) Decrease in Prepaid Expenses 53,931 (45,190) (29,998)
(Increase) Decrease in Restricted Cash 67,059 (7,787) (6,492)
Increase (Decrease) in Payable to Related
Parties 16,376 (18,000) 18,490
Increase (Decrease) in Payables and Accruals (530,005) (262,341) (10
0,288)
Net Cash Provided by (Used In)
Operating Activities (353,593) 2,853,971 2,905,347
Cash Flows from Investing Activities:
(Additions) to Investment Properties (27,794) (112,952) (52,173)
(Additions) to Construction in Progress 0 0 (74,324)
Sale of Investment Properties 7,697,413 21,389,981 0
Net Cash Provided by (Used in)
Investing Activities 7,669,619 21,277,029 (126,497)
Cash Flows from Financing Activities:
Payments of Mortgage Notes Payable (1,256,214) (5,430,984) (836,030)
(Increase) Decrease in Deferred Debt Costs 0 0 12,245
Distribution to Partners:
Limited Partners 0(18,150,000)(1,500,000)
General Partner 0 (37,620) (30,612)
Minority Interest (854,604) (75,550) 0
Net Cash (Used in) Financing
Activities (2,110,818)(23,694,154) (2,354,397)
Increase (Decrease) in Cash and Cash Equivalents5,205,208436,846 424,453
Cash and Cash Equivalents at Beginning of Year 2,063,474 1,626,628 1,2
02,175
Cash and Cash Equivalents at End of Year 7,268,682$ 2,063,474$ 1,626,628
Supplemental Disclosure of Cash Flow Information:
Interest Paid 117,090$ 475,402$ 723,159
See Note 9 for Non-Cash Investing and Financing Activities
The accompanying notes are an integral part
of these consolidated financial statements.
CUMBERLAND HEALTHCARE, L.P. I-A
(a Limited Partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
NOTE 1 - ORGANIZATION:
Cumberland Healthcare, L.P. I-A (the "Partnership"), a limited
partnership, was organized under the provisions of the Delaware Revised
Uniform Limited Partnership Act as amended. Operations commenced on March
13, 1986, for the purpose of acquiring and leasing nursing homes. On May
8, 1996, the limited partners approved a plan of liquidation pursuant to
which the Partnership will be dissolved and its affairs wound up pursuant
to Article XIV of the Limited Partnership Agreement.
Medical Investments Partners, the General Partner, manages and
controls the business and affairs of the Partnership. Medical Investments
Partners is a Florida general partnership whose corporate partners are RJ
Health Properties, Inc. and RJ Medical Investors, Inc., both wholly-owned
subsidiaries of Raymond James Financial, Inc.
These consolidated financial statements include the accounts of
several limited partnerships in which the Partnership is a 99% Limited
Partner. Detailed information as to the consolidated entities is as
follows:
Net Book Value Income/Loss
of Investment Net Sharing
General Properties at Income Limited General
Partnership Name Partners 12/31/97 (Loss) Partners Partners
Cumberland Healthcare, Medical
L.P. I-A Investments $ 0 $2,537,076 N/A N/A
Partners
Cumberland Healthcare, Medical
L.P. I-B * Investments 0 229,477 99% 1%
Partners &
Olympic Health
Services, Inc.
Cumberland Healthcare, Medical
L.P. I-C Investments 0 6,517 99% 1%
Partners
Total $ 0$2,773,070
* A 50% interest was sold to Olympic Health Services, Inc. and William
Littlejohn effective as of January 1, 1993.
Allocation of Net Income and Net Losses
Net income and loss of the Partnership, other than that attributable
to a sale or other disposition of the properties, shall be allocated 98% to
the limited partners and 2% to the General Partner. Any distributions of
cash from operations for any year shall be distributed 98% to the limited
partners and 2% to the General Partner until the limited partners have
received distributions of cash from operations for such year equal to 9% of
their respective adjusted capital contribution; thereafter, any remaining
cash from operations for such calendar year shall be distributed 85% to the
limited partners and 15% to the General Partner. In no event shall such
cash from operations distributed to the General Partner for any calendar
year exceed 10% of the total distributions of cash from operations made for
such calendar year.
Net income or loss and cash distributions from the sale or other
disposition of the properties will be allocated as formulated in the
Limited Partnership Agreement.
CUMBERLAND HEALTHCARE, L.P. I-A
(a Limited Partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 1997
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES:
Basis of Accounting
The accompanying financial statements are prepared on the accrual
basis. Revenues are recognized when earned and expenses are recognized
as obligations when incurred. These financial statements include the
accounts of Cumberland Healthcare, L.P. I-B and Cumberland Healthcare, L.P.
I-C. In Cumberland Healthcare, L.P. I-C, the Partnership is a 99% Limited
Partner. In Cumberland Healthcare, L.P. I-B, the Partnership is a 49 1/2%
Limited Partner with William Littlejohn being a 49 1/2% Limited Partner.
The only activity of these entities is to hold title for certain of the
properties included in these financial statements. See Note 1 for further
explanation.
Cash and Cash Equivalents
It is the Partnership's policy to include all money market funds,
commercial paper and banker's acceptances with an original maturity of
three months or less in Cash and Cash Equivalents.
Concentrations of Credit Risk
Financial instruments which potentially subject the Partnership to
concentrations of credit risk consist principally of short-term investments
and receivables.
The Partnership's short-term investments are primarily in high quality
securities placed with institutions with high credit ratings. The
Partnership's investment policy limits the exposure to concentration of
credit risk.
The Partnership's receivables are related to medical services and are
primarily due from federal and state agencies in California and Washington
and are not collateralized.
The Partnership maintains deposits in excess of federally insured
limits. Statement of Financial Accounting Standards No. 105 requires
disclosure regardless of the degree of risk.
Investment Properties
These assets are carried at the lower of cost, or net realizable value
plus a revaluation increase for Olympic Health Care of Cumberland
Healthcare, L.P. I-B. Impairment in value is reflected as an adjustment to
carrying value when appropriate. There was no impairment in value in
1996 or 1997.
Major additions are capitalized while replacements, maintenance and
repairs which do not improve or extend the life of the respective assets
are expensed currently. When property is retired or otherwise disposed of,
the cost of the property is eliminated from the asset account, accumulated
depreciation is charged with an amount equal to the depreciation provided,
and the difference, if any, is charged or credited to income.
Depreciation is provided for on the straight-line method over the
estimated useful lives which are as follows:
Building and Improvements: 35 Years
Furniture and Fixtures: 8 Years
Leasehold Interest: 8-28 Years
Deferred Debt Costs
Deferred debt costs represent the cost of obtaining financing for the
Partnership. Such cost was being amortized on a straight-line basis over
the life of the remaining loan. Due to the sale of the property, the
remaining loan balance was paid and the remaining amortization was charged
to expense.
CUMBERLAND HEALTHCARE, L.P. I-A
(a Limited Partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 1997
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES: (Continued)
Medicare/Medicaid Settlements
The Partnership does not record any Medicare or Medi-Cal receivables
above their current rate of reimbursement. No receivables are recorded for
cost report settlements. The accounts payable for third party settlements
for prior years was $100,000 for the years ended December 31, 1997 and
1996.
Resident Service Revenues
Resident Service Revenues are reported net of provisions for
contractual and other adjustments in the Consolidated Statements of Income
for financial reporting purposes. There are no revenues from outside
donations included in Resident Service Revenues.
Income Taxes
Federal and state income tax regulations provide that taxes on the
income or loss of the Partnership are reportable by the Partners in their
individual income tax returns. Accordingly, no provision for such taxes has
been made.
Intangible Assets
Intangible assets are comprised of a licensing fee and goodwill which
were recognized upon the revaluation of assets due to the sale of one half
of the Partnership's interest in Cumberland Healthcare, L.P. I-B. The
licensing fee represents the value of the license to operate the Olympic
Health Care Center. Goodwill represents the excess of the cost of the
partnership interest over the fair value of the net assets as of the
revaluation date, January 1, 1993. These items were being amortized on the
straight line method over 40 years. Due to the sale of the property, the
remaining balance was charged against the gain on sale.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires the use of estimates that affect
certain reported amounts and disclosures. These estimates are based on
management's knowledge and experience. Accordingly, actual results could
differ from these estimates.
Reclassification
Certain items in the 1996 and 1995 financial statements have been
reclassified for comparative purposes to conform with the financial
statement presentation used in the 1997 statements.
NOTE 3 - RELATED PARTY TRANSACTIONS:
The General Partner manages the operations of the Partnership's
investment properties and is entitled to a property management fee equal to
1.25% of gross lease payments received by the Partnership. This amounted
to $0, $17,391 and $41,287 for 1997, 1996 and 1995, respectively.
The General Partner is reimbursed for general and administrative costs
on an accountable basis. The General Partner's reimbursable costs were
$3,521, $42,881 and $28,067 for 1997, 1996 and 1995, respectively.
Affiliates of the General Partner are reimbursed for direct costs incurred
on behalf of the Partnership. Direct reimbursable costs amounted to $704,
$7,946 and $7,920 for 1997, 1996 and 1995, respectively. These costs are
included in the Consolidated Statements of Income.
The General Partner is reimbursed a general and administration fee of
up to .5% of the Partnership's aggregate capital contributions on an annual
basis for certain expenses incurred on behalf of the Partnership. The
General Partner's reimbursable expenses were $958, $9,100 and $8,210 for
1997, 1996 and 1995, respectively. These expenses are accrued but not paid
and are included in the Consolidated Statements of Income.
CUMBERLAND HEALTHCARE, L.P. I-A
(a Limited Partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 1997
NOTE 3 - RELATED PARTY TRANSACTIONS: (Continued)
As of December 31, 1997, 1996 and 1995, the amounts payable to the
General Partner and affiliates for the above items are $364,696, $336,929
and $357,453, respectively. The payable is non-interest bearing, unsecured
and payable on demand.
NOTE 4 -NOTES RECEIVABLE:
The notes receivable is recorded at its face value. The note is a
promissory note with a maturity date of May 29, 2001, secured by the
personal guarantee of the principal shareholder of Life Care Centers of
America, Inc. Interest shall accrue at the rate of 10% per annum and shall
be payable monthly at the rate of 5% per annum. The unpaid interest shall
accrue. The Partnership has the right to demand payment in full at any
time on or after December 28, 1997, with 60 days prior written notice. If
the Partnership exercises its right to demand payment before the maturity
date, the 5% accrued interest shall be canceled. On February 28, 1998,
notice for demand of payment was given to Life Care Centers of America,
Inc.
NOTE 5 - LEASES AND INVESTMENT PROPERTIES:
Leases
The Partnership leased Hillcrest Care Center to Arbor Health Care
Company ("Arbor"). The lease with Arbor required the lessee to make a
minimum rent payment of $330,000 per year and additional rent payments
based on four percent (4%) of net revenue. Total lease payments were
capped annually at $545,000. The lessee had an option to purchase the
facility which became effective February 1, 1995 and terminated February 1,
1997, at an amount determined according to the lease agreement. Arbor
exercised its option to purchase Hillcrest Care Center and on September 20,
1996, the purchase was closed with the payment of $5,750,000 by Arbor to
Cumberland Healthcare I-C.
The Partnership leased Bel Tooren, Imperial, La Habra, Mirada Hills,
Northwalk, Rimrock and Sun City to Life Care Centers of America ("LCCA").
The Leases required a minimum rent payment of $2,408,932 annually with an
annual adjustment based on 6% of the increase in resident service revenues.
These payments have amounted to $1,022,994, $2,474,732 and $2,358,813 for
1996, 1995 and 1994, respectively. The Leases also called for incentive
rent based on an equal sharing of profits. There has been no incentive
rent to date. The Lessee had an option to purchase the facilities
beginning June 1, 1999 and ending December 31, 1999. The Leases would have
expired in May 2000.
LCCA's obligations under the leases were personally guaranteed by the
principal shareholder of LCCA.
The Partnership entered into an agreement with LCCA on August 4, 1995
(the "Purchase Agreement") pursuant to which LCCA agreed to purchase seven
nursing facilities located in California for a purchase price of
$17,900,000.
The Purchase Agreement required the purchase price to be paid by LCCA as
follows:
(a) LCCA would assume the indebtedness secured by a mortgage on the
Rimrock Facility.
(b) LCCA would deliver a purchase money note in the amount of $1,000,000
guaranteed by its principal shareholder to the Partnership (the "LCCA
Note"). The LCCA Note would mature on the fifth anniversary of its
issuance but could be accelerated at the option of the Partnership at the
end of 1997. A portion of the accrued interest would be payable monthly
and the balance would be due on the maturity of the LCCA Note. However, if
the Partnership exercised its right to call the Note after 1997, the
accrued interest which would otherwise be due at maturity would be
canceled; and
(c) The balance of the purchase price would be paid in cash at closing by
federal funds wire transfer to the Partnership.
Closing of the LCCA transaction was contingent upon approval of the
plan by a majority interest of the Limited Partners. Approval by the
Partners for the sale of the LCCA Homes was granted May 8, 1996. On May
29, 1996, the closing of the sale of the LCCA Homes finalized the Purchase
Agreement requirements and terminated all lease agreements previously held
between the Partnership and LCCA.
CUMBERLAND HEALTHCARE, L.P. I-A
(a Limited Partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 1997
NOTE 5 - LEASES AND INVESTMENT PROPERTIES:(Continued)
Leases (Continued)
Effective September 19, 1990, the Partnership entered into a ten-year
lease with FHP, Inc. ("FHP"), the principal subsidiary of FHP International
Corporation, for Rancho Los Padres. The lease required FHP, as lessee, to
make a monthly minimum lease payment of $22,000 ($264,000 annually) for the
first year, $24,500 ($294,000 annually) for the second year, and $24,500
plus the greater of the Medi-Cal rate increase or consumer price index
increase, but not less than 3% nor more than 8%, for years three through
ten of the lease.
On October 25, 1995, a Lease Termination Agreement was signed by
Cumberland Healthcare ("Cumberland") and FHP, Inc. relating to FHP-Norwalk
f/k/a Rancho Los Padres whereby Cumberland would receive an early lease
termination payment. A Management Agreement was also signed whereby
Cumberland would become the interim operator of the facility. The Lease
Termination Agreement was consummated January 1996.
Due to the sale of the Partnership's leased properties, there is no
future rental income on non-cancelable leases to report.
Rental Income Included in Discontinued Operations
1997 1996 1995
Contingent $ 0 $ 118,577 $ 169,193
Guaranteed 0 1,311,626 3,165,985
Total $ 0 $ 1,430,203 $
3,335,178
Until its sale on December 31, 1997, the Partnership continued to
operate Olympic Healthcare Center pursuant to a management contract with a
third party operator. Until its sale on September 30, 1997, Paramount
Chateau was being managed under an employment contract with a third party
operator. As a result of the FHP lease termination and until its sale on
September 30, 1997, the Partnership operated Pacific Palms Skilled Nursing.
Investment Properties
As of December 31, 1997, the Partnership does not own any properties or
interests in properties.
A summary of the land, buildings, personal property and
accumulated depreciation for the years ended December 31, 1997 and
1996 is as follows:
1997 1997 1996 1996
Operated Leased Operated Leased
Land $ 0 $ 0 $ 1,534,105 $ 0
Buildings 0 0 4,555,358 0
Furniture & Fixtures 0 0 1,329,287 0
Leasehold Interest 0 0 0 0
7,418,750 0
Accum. Depreciation
and Amortization 0 0 (2,416,187) 0
$ 0 $ 0 $ 5,002,563 $ 0
NOTE 6 - MORTGAGE NOTES PAYABLE:
Mortgage notes payable is summarized below:
December 31, December 31,
Mortgagor 1997 1996
U.S. Bank of Oregon $ 0 $ 1,256,214
U.S. Bank of Oregon mortgage note payable had a fixed interest rate of
8.75%, payable monthly in installments of principal and interest based on a
20-year amortization schedule, with a balloon payment due September 1,
2013. This note was secured by Olympic Healthcare Center. Due to the sale
of Olympic Healthcare Center, this note was paid in full at closing.
Interest charged to expense was $117,090, $440,756 and $716,807 for the
years ended December 31, 1997, 1996 and 1995, respectively.
CUMBERLAND HEALTHCARE, L.P. I-A
(a Limited Partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 1997
NOTE 7 - REVOLVING LINE OF CREDIT:
Raymond James Financial, Inc. entered into a revolving loan agreement
December 28, 1994 which provided that Raymond James Financial, Inc. would
advance to the Partnership, on a revolving basis up to $5,000,000 at an
interest rate of 15.5%. The Partnership granted to Raymond James
Financial, Inc. a security interest in virtually all of the Partnership's
real estate assets and LCCA Leases to secure any advances under the loan
agreement. The loan agreement was canceled in May 1996.
NOTE 8 - TAXABLE INCOME:
The financial statements of the Partnership and the Partnership tax
returns are prepared on the accrual basis. The following is a
reconciliation between net income per the financial statements and
Partnership net income for tax purposes:
1997 1996 1995
Net income (loss) per
financial statements $2,773.070 $12,362,562 $
1,966,546
Tax depreciation and amortization
in excess of book depreciation (69,140) (265,398) (539,176)
Gain on sale of Assets 228,831 2,025,263
0
Other Adjustments 67,965 176,393 6,652
Partnership income (loss) for
tax purposes $3,000,726$14,298,820 $ 1,434,022
NOTE 9- ADDITIONAL CASH FLOW INFORMATION:
The Partnership's non-cash investing and financing activities for the
years ended December 31, 1997, 1996 and 1995 were as follows:
December 31, 1997:
Intangible Asset Amortization $ 388,323
December 31, 1996:
Notes Receivable
$ 1,000,000
Assumed Mortgage
1,259,719
Construction in Progress Paid in Prior Year
Transferred to Investment Property in 1996 74,324
December 31, 1995:
None to Report
NOTE 10 - LEGAL PROCEEDINGS:
The General Partner is not aware of any uninsured open claims that have
been filed against the Partnership. Therefore, no provision has been made
in the accompanying financial statements.
NOTE 11- DISTRIBUTIONS:
There were no distributions made to limited partners in 1997. The 1996
cash distributions to limited partners were $18,150,000 (60.5% of capital
contributions) and for 1995 totaled $1,500,000 (5% of capital
contributions). The 1996 distributions represented a return of capital.
Future distributions will be issued for the 1997 sale proceeds of the last
remaining properties and the 1998 liquidation of the Partnership.
CUMBERLAND HEALTHCARE, L.P. I-A
(a Limited Partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 1997
Note 12 - DISCONTINUED OPERATIONS:
As a result of the Partnership's 1996 discontinuance of the leasing
segment of its operations, the real estate rental revenues from
discontinued operations were $0, $1,990,064 and $1,650,752 for the years
ended December 31, 1997, 1996 and 1995, respectively. As a result of the
1997 property sales and the Partnership's discontinuance of the health care
segment of its operations, the health care operations revenues from
discontinued operations were $183,161, $501,717 and $373,770 for the years
ended December 31, 1997, 1996 and 1995, respectively.
The following assets and liabilities from discontinued operations were
included in the 1996 balance sheet.
Restricted Cash $ 67,059
Deferred Debt Cost 21,652
Investment Properties
(Net of Accum.Depreciation) 5,002,563
Intangible Assets 399,418
Mortgage Notes Payable (1,256,214)
Related Parties Payable (2,524)
Net Assets of Discontinued
Operations $4,231,954
The income statements for the years ended December 31, 1996 and 1995
have been restated to reclassify the operating results of the leasing and
health care segments to discontinued operations.
As a result of the sale of the three operated homes, the Partnership
realized a gain on sale of assets of $2,440,210 for the year ended December
31, 1997.
Note 13 - TERMINATION AND DISSOLUTION OF THE PARTNERSHIP
On May 8, 1996, the limited partners approved a plan of liquidation
pursuant to which the Partnership will be dissolved and its affairs wound
up pursuant to Article XIV of the Limited Partnership Agreement and its
assets be liquidated with the proceeds of such liquidation to be expended
and distributed as required by the Limited Partnership Agreement. Upon
distribution of all of the assets of the Partnership, the Partnership will
be terminated.
Item 9. Disagreements on Accounting and Financial Disclosures
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
The General Partner is Medical Investments Partners ("MIP"), a Florida
General Partnership with two Partners, RJ Health Properties, Inc. ("RJHP")
(99% interest in MIP) and RJ Medical Investors, Inc. ("RJMI") (1% interest
in MIP).
RJHP is the Managing General Partner of MIP, who is the General
Partner of Cumberland Healthcare. RJHP is owned 100% by Raymond James
Financial, Inc.
The Board of Directors of RJHP currently has two members. Directors
hold their terms until the annual meeting of the parent company at which
time they are reaffirmed. Executive officers serve at the pleasure of the
Board.
RJ Health Properties, Inc. Board of Directors and Executive Officers:
Fred E. Whaley, age 52, has been the President and Director of RJ
Health Properties, Inc. since January, 1986. Mr. Whaley's term will expire
in 1998. He was a Managing Director for Raymond James & Associates, Inc.
from 1980 until April 1997.
J. Davenport Mosby III, age 42, has been a Vice President and Director
of RJ Health Properties, Inc. since December, 1988. Mr. Mosby's term will
expire in 1998. He is a Managing Director of Raymond James & Associates,
Inc. in the Investment Banking department, which he joined in 1982.
Richard M. Todd, age 47, has been a Vice President of RJ Health
Properties, Inc. since August 1997. He is a director of special projects
at Smart Choice Automotive Group a division of Eckler's Quality Products.
Item 11. Executive Compensation
The directors and officers of RJ Health Properties, Inc., managing
General Partner of Medical Investments Partners the General Partner of
Cumberland Healthcare, do not receive any compensation from the Partnership
or any of its affiliates for acting in the capacity of a director or
officer of RJ Health Properties, Inc. However, Richard Todd receives
monthly compensation, payable in advance, for his services relating to the
operations of the Partnership. He also received a consulting fee relating
to the sale of the Partnership's two California facilities.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The corporate partners of Medical Investments Partners, as purchasers
of Partnership units, do not own any units of the outstanding securities of
the Partnership as of December 31, 1997. Directors and officers of the
General Partners of Medical Investments Partners do own units of the
outstanding securities of the Partnership as of December 31, 1997. In a
secondary market transaction 45 units were acquired by J. Davenport Mosby,
III, Vice President and Director. In a secondary market transaction, 18
units were acquired by Richard Todd, Vice President.
The Registrant is a Limited Partnership and therefore does not have
voting shares of stock. To the knowledge of the Partnership, no person
owns of record or beneficially more than 5% of the Partnership's
outstanding units.
Item 13. Certain Relationships and Related Transactions
The Partnership has no officers or directors. However, under the
terms of the public offering, various kinds of compensation and fees are
payable to the General Partner and its affiliates during the organization
and operations of the Partnership. The General Partner received a property
management fee of $0, $17,391 and $41,287 for 1997, 1996 and 1995,
respectively. Reimbursement to the General Partner for general and
administrative costs amounted to $3,521, $42,881 and $28,067 for 1997,
1996 and 1995, respectively. Reimbursable expenses to the General Partner
on behalf of the Partnership amounted to $958, $9,100 and $8,210 for 1997,
1996 and 1995, respectively. Direct reimbursable costs to affiliates of the
General Partner amounted to $704, $7,946 and $7,920 for 1997, 1996 and
1995, respectively. Total payments to the General Partner and affiliates
amounted to $114,847, $218,368 and $364,493 for 1997, 1996 and 1995,
respectively.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
A. (1) Financial Statements - See accompanying index to financial
statements, Item 8.
(2) Financial Statement Schedules -
Schedule VIII - Valuation and Qualifying Accounts and Reserves
Schedule X - Supplementary Income Statement Information
All other schedules for the Partnership have been omitted as not required,
not applicable, or the information required to be shown therein is included
in the financial statements and related notes.
Table Number
Page
(3) Exhibit Index -
2 Plan of acquisition, organization, arrangement, liquidation or
succession *
3 Articles of Incorporation and By-laws
*
3.10 Amended Certificate and Agreement of Limited Partnership of
Columbia
Healthcare Partnership II-A, L.P. dated November 19, 1986 among
Columbia Healthcare Partners Inc., Medical Investments Partners,
Alfred W. Taylor, III, and Cumberland Healthcare, L.P. I-A **
3.11 Amended Agreement of Limited Partnership of Cumberland Healthcare,
L.P. I-C dated November 19, 1986 among Medical Investments
Partners,
Frank N. Fleischer, and Cumberland Healthcare, L.P. I-A **
3.12 Amended Certificate and Agreement of Limited Partnership of
Columbia
Healthcare Partners III-A dated November 19, 1986 among Columbia
Healthcare Partners, Inc., Medical Investments Partners, Alfred W.
Taylor, III, and Cumberland Healthcare, L.P. I-A **
3.13 Amended Agreement of Limited Partnership of Cumberland Healthcare,
L.P. I-B dated November 19, 1986 among Medical Investments
Partners,
Frank N. Fleischer, and Cumberland Healthcare, L.P. I-A **
4 Instruments defining the rights of security holders, including
debentures *
9 Voting Trust Agreement ***
10 Material Contracts ***
10.7 Quakertown Lease Agreement dated December 1, 1986 between Columbia
Healthcare Partners, II-A, L.P. and Columbia East Corporation. **
10.8 First Amendment to Lease Agreement dated February 3, 1987 between
Columbia Healthcare Partners II-A, L.P. and Columbia East
Corporation. **
10.9 Mortgage Note for $3,500,000 dated as of December 8, 1986 between
Columbia Healthcare Partners II-A, L.P. and Rhode Island Hospital
Trust National Bank. **
10.10 Mortgage and Security Agreement dated as of December 8, 1986
between
Columbia Healthcare Partners II-A, L.P. and Rhode Island Hospital
Trust National Bank. **
10.11 Subordination Agreement dated as of December 8, 1986 between
Columbia Healthcare Partners II-A, L.P., Medical Investments
Partners,
Columbia East Corporation and Columbia Corporation in favor of
Rhode
Island Hospital Trust National Bank. **
10.12 Conditional Assignment dated as of December 8, 1986 by Columbia
Healthcare Partners II-A, L.P. to Rhode Island Hospital Trust
National
Bank. **
10.13 UCC Financing Statement dated December 8, 1986 between Columbia
Healthcare Partners II-A, L.P. and Rhode Island Hospital Trust
National
Bank. **
10.14 Hillcrest Lease Agreement dated February 3, 1987 between
Cumberland
Healthcare, L.P. I-C and Columbia East Corporation. **
10.15 Hopkins House Lease Agreement dated February 3, 1987 between
Columbia Healthcare Partners, III-A, and Columbia East Corporation.
**
10.16 Olympic Lease Agreement dated as of February 3, 1987 between
Cumberland
Healthcare, L.P. I-B and Columbia West Corporation. **
11 Computation of per-share earnings
***
12 Computation of ratios
***
13 Annual report to security holders
***
16.1 Letter regarding change in certifying accountants
**
18 Letter regarding change in accounting principles
***
19 Previously unfiled documents ***
22 Subsidiaries of the Registrant
***
23 Published report regarding matters submitted to a vote of security
holders ***
24 Consents of experts and counsel
***
25 Power of Attorney
***
28 Additional Exhibits
28.01 Excerpts from Appraisal Report for Quakertown Manor Care Center
as
of February 1, 1986 **
28.02 Excerpts from Appraisal Report for Hillcrest Care Center as of
September 3, 1986 **
28.03 Excerpts from Appraisal Report for Hopkins House Nursing Home as
of July 14, 1986 **
28.04 Excerpts from Appraisal Report for Olympic Health Care Center as
of
August 19, 1986 **
28.05 Letter to limited partner dated June 24, 1988
**
28.06 Restructuring Agreement by and among Cumberland Healthcare,
L.P. I-A, Cumberland Healthcare, L.P. I-B, Cumberland Healthcare,
L.P.
I-C, and Columbia Healthcare Partners III-A, and Carteret Savings
Bank, F.A. and The Howard Savings Bank, dated April 6, 1989. ****
28.07 Release and Indemnification made and entered into as of the 6th
day of April, 1989, by Cumberland Healthcare, L.P. I-A, Cumberland
Healthcare, L.P. I-B, Cumberland Healthcare, L.P. I-C, and
Columbia Healthcare Partners III-A (collectively "Borrowers")
and Carteret Savings Bank, F.A., and The Howard Savings Bank
(collectively "Lenders"). ****
28.08 Assignment of Leases made as of the 6th day of April, 1989, by
and
between Cumberland Healthcare, L.P. I-A ("Assignor") Carteret
Savings Bank, F.A. ("Assignee") and Life Care Centers of
America, Inc. ("Lessee"). ****
28.09 Second Amended and Restated Master Lease between Cumberland
Healthcare,
L.P. I-A, Lessor, and Life Care Centers of America, Inc., a
Tennessee corporation, Lessee, dated as of March 1, 1989 (Bel
Tooren
Villa, La Habra, North Walk, and Rancho Los Padres Facilities)****
28.10 Second Amended and Restated Management Agreement made and entered
into effective as of the 1st day of March, 1989, by and between
Cumberland Healthcare, L.P. I-A ("Owner") and Life Care Centers
of America, Inc. ("Manager"). ****
28.11 Second Amended and Restated Unconditional Guaranty of Payment and
Performance dated as of the 6th day of April, 1989 by and between
Forrest L. Preston ("Guarantor"), Cumberland Healthcare, L.P. I-A
("Lessor"), and Life Care Centers of America, Inc. ("Lessee").****
28.12 Facility Lease (Hillcrest Facility) dated as of the 1st day of
February,
1989, among Cumberland Healthcare, L.P. I-C, ("Lessor") and Arbor
Health Care Company ("Lessee"). ****
28.13 Open End Mortgage and Security Agreement executed on the 18th day
of April, 1989, between Cumberland Healthcare, L.P. I-C,
("Mortgagor") and Southeast Bank, N.A. ("Lender"). ****
28.14 Note dated April 18, 1989 between Cumberland Healthcare, L.P. I-C
("Maker") and Southeast Bank, N.A. ("Holder") in the amount of
$2,600,000. ****
28.15 Reimbursement, Indemnification and Security Agreement made and
entered
into as of the 18th day of April, 1989 by and among Raymond James
Financial, Inc., RJ Health Properties, Inc., Raymond James
Partners, Inc., Medical Investments Partners, Inc.
(collectively the "Obligators") and Cumberland Healthcare, L.P.
I-C (the "Limited Partner"). ****
28.16 Assignment of Leases, Rents and Contract Rights made as of the
18th day of April, 1989 by Cumberland Healthcare, L.P. I-C
("Assignor") to Southeast Bank, N.A. ("Assignee"). ****
28.17 Subordination, Non-Disturbance, and Attornment Agreement made and
entered into as of the 18th day of April, 1989, by and among
Southeast Bank, N.A. ("Mortgagee") by Cumberland Healthcare,
L.P. I-C ("Landlord") and Arbor Health Care Company ("Tenant").****
28.18 Indemnity Agreement made as of the 18th day of April, 1989, from
Cumberland Healthcare, L.P. I-C ("Borrower") and Raymond James
Financial Corp. ("Indemnitor") to Southeast Bank, N.A. ("Lender").
****
28.19 Purchase and Sale Agreement, executed August 24, 1989, by
and between Cumberland Healthcare, L.P. I-A, Columbia Healthcare
Partners II-A, L.P., Columbia Healthcare Partners III-A,
collectively, "Sellers" and Multicare Management, Inc., a New York
Corporation, Daniel E. Straus and Moshael J. Straus, "Buyers"
covering Holly Manor, Mendham, New Jersey; Quakertown Manor,
Quakertown,
Pennsylvania; and Hopkins House, Wyncote, Pennsylvania. **
28.20 Letter, dated September 13, 1989, referencing Quakertown Manor
Nursing Home, Quakertown, PA, amending certain sections of the
Purchase and Sale Agreement, dated August 24, 1989. **
28.21 Letter, dated October 4, 1989, referencing the Purchase and Sale
Agreement as of July 1, 1989, amending Section 9.4 of the Purchase
and Sale Agreement, dated August 24, 1989. **
28.22 Letter, dated October 4, 1989, referencing Quakertown Manor
Nursing
Home, Quakertown, PA, amending certain segments of the Purchase
and Sale Agreement, dated August 24, 1989. **
28.23 Purchase and Sale Agreement dated March 31, 1990, by and among
Cumberland Healthcare, L.P., Columbia Healthcare Partners, II-A,
L.P., and Columbia Healthcare Partners III-A, as Sellers and
Multicare Management, Inc., Daniel E. Straus and Moshael J. Straus
as Buyers, effective as of July 1, 1989, as amended by those
certain
letter agreements, dated August 24, 1989, September 7, 1989,
September 13, 1989, September 14, 1989, September 15, 1989,
September
22, 1989, October 4, 1989 (three letter agreements), October 6,
1989,
October 19, 1989, October 31, 1989, November 1, 1989, and November
17, 1989 (collectively, the "Agreement"). **
28.24 Fourth Amendment to the Second Amended and Restated Master Lease
Agreement between Life Care Centers of America, Inc., a Tennessee
corporation, and Cumberland Healthcare, L.P. I-A ("Owner") a
Delaware
limited partnership dated March 1, 1989. *****
28.25 Lease between Cumberland Healthcare, L.P. I-A, as lessor
("Lesssor"),
a limited partnership and FHP, Inc., a California corporation as
lessee ("Lessee") dated September 19, 1990. *****
28.26 Management Contract between Olympic Health Services, Inc., a
Washington corporation ("OHS") and Cumberland Healthcare, L.P. I-B,
a Delaware limited partnership ("Owner") dated January 1, 1993.**
***
28.27 Amended and Restated Limited Partnership Agreement by and among
Medical
Investments Partners, a Florida general Partnership, ("MIP"), and
Olympic Health Services, Inc., a Washington corporation ("OHS"), as
General Partners, Cumberland Healthcare, L.P. I-A, a Delaware
limited
partnership ("Cumberland"), and William W. Littlejohn, a resident
of
the State of Washington ("Littlejohn"), as Limited Partners dated
January 1, 1993. *****
28.28 Sublease among Cumberland Healthcare, L.P. I-A, as lessor
("Sublessor"),
a limited partnership and Life Care Centers of America, Inc., a
Tennessee corporation as lessee ("Sublessee") dated March 1, 1989.
*****
28.29 Deed of Trust among Cumberland Healthcare, L.P. I-B, a Delaware
Limited Partnership, ("Grantor"); U.S. Bank of Washington, National
Association, ("Lender" and sometimes "Beneficiary"); and United
States
National Bank of Oregon ("Trustee") dated August 25, 1993. *****
28.30 Loan Agreement between First Union National Bank of Florida, a
national
banking association ("Lender") and Cumberland Healthcare, L.P. I-A,
a
Delaware limited partnership ("Borrower") dated December 28, 1994.
*****
28.31 Purchase and Sale Agreement between Cumberland Healthcare, L.P. I-
A,
a Delaware limited partnership (the "Seller") and Life Care Centers
of
America, Inc. and permitted assigns (the "Purchaser"). *****
28.32 Revolving Loan Agreement between Cumberland Healthcare, L.P. I-A,
a Delaware limited partnership ("Borrower") and Raymond James Financial,
Inc., a Florida corporation ("Lender") dated December 28, 1994.**
***
29 Information from reports furnished to state insurance regulatory
authorities. *****
* Included with Form S-11, Registration No. 33-4301 previously
filed with the Securities and Exchange Commission.
** Included with Forms 8-K, as amended, previously filed with the
Securities and Exchange Commission.
*** Exhibits were omitted as not required, not applicable, or the
information required to be shown therein is included elsewhere
in this report.
**** Included as exhibits to Form 10-K for year ended December 31,
1988.
***** Included as exhibits to Form 10-K for year ended December 31, 1994.
****** Included as exhibit to Form 10-Q for period ended June 30, 1995.
******* Included as exhibit to Form 10-K for year ended December 31, 1995.
B. Reports filed on Form 8-K - None.
C. Exhibits filed with this Report - None
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
Balance atAdditions DeductionsBalance
Beginning to From at End
of Year Reserves Reserves of Year
Reserve deducted in the
Balance Sheet from the asset
to which it applies:
Reserve for doubtful accounts:
Year Ended December 31, 1997343,770 127,763 165,428 306,105
Year Ended December 31, 199673,373 318,937 48,540 343,770
Year Ended December 31, 199563,866 9,507 0 73,373
SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION
Year Ended December 31,
1997 1996 1995
Amortization of Deferred
Debt Costs 21,652 49,442 19,437
Amortization of Leasehold
Properties 0 15,422 37,498
Amortization of Intangible
Assets 399,418 11,095 11,095
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly authorized.
CUMBERLAND HEALTHCARE, L.P. I-A
By: Medical Investments Partners
By: RJ Health Properties, Inc.
Managing General Partner
ATTEST:
Fred E. Whaley By: J. Davenport Mosby, III,
President Vice President
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: By: Fred E. Whaley
President and Director
Date: By: J. Davenport Mosby, III
Vice President and Director
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
the annual report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the year ended December 31, 1997
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 7,268,682
<SECURITIES> 0
<RECEIVABLES> 977,788
<ALLOWANCES> 306,105
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 9,770,909
<CURRENT-LIABILITIES> 0<F2>
<BONDS> 57,800
0
0
<COMMON> 0
<OTHER-SE> 8,923,050
<TOTAL-LIABILITY-AND-EQUITY> 9,770,909
<SALES> 0
<TOTAL-REVENUES> 199,361
<CGS> 0
<TOTAL-COSTS> 149,699
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 149,699
<INCOME-TAX> 0
<INCOME-CONTINUING> 149,699
<DISCONTINUED> 2,623,371
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,773,070
<EPS-PRIMARY> 4.89<F2>
<EPS-DILUTED> 4.89<F2>
<FN>
<F1>REGISTRANT HAS AN UNCLASSIFIED BALANCE SHEET
<F2>EPS IS NET INCOME PER $1,000 LIMITED PARTNERSHIP UNIT
</FN>
</TABLE>
