<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
-------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
------------- ---------------
Commission file number 0-18158
---------
QUEST HEALTH CARE INCOME FUND I, L.P.
- ---------------------------------------------------------------------------
Formerly: Southmark/CRCA Health Care Income Fund I, L.P.
--------------------------------------------------------
Delaware 58-1697906
- -----------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1117 Perimeter Center West E-210 Atlanta, GA 30338
- -----------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (770) 617-1014
-----------------------
Indicate by check mark whether the registrant, (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
There are no exhibits.
TOTAL OF 15 PAGES
1
<PAGE> 2
QUEST HEALTH CARE INCOME FUND I, L.P.
BALANCE SHEETS
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ASSETS
<TABLE>
<CAPTION>
Sept. 30, December 31,
------------ ------------
1995 1994
------------ ------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 1,676,243 $ 270,593
Accounts receivable, net of allowance
for doubtful accounts of $60,450 and
$125,085 at September 30, 1995 and
December 31, 1994, respectively 814,777 1,667,857
Prepaid expenses 91,497 839,830
---------- ----------
Total current assets 2,582,517 2,778,280
---------- ----------
PROPERTY AND EQUIPMENT, at cost
Land 240,617 495,915
Buildings and improvements 1,872,215 7,037,234
Equipment and furnishings 859,379 2,153,529
---------- ----------
2,972,211 9,686,678
Less accumulated depreciation and amortization 2,211,313 5,219,535
---------- ----------
Net property and equipment 760,898 4,467,143
---------- ----------
TOTAL ASSETS $ 3,343,415 $ 7,245,423
========== ==========
</TABLE>
The financial information included herein has been prepared by management
without audit by independent public accountants. See notes to financial
statements.
2
<PAGE> 3
QUEST HEALTH CARE INCOME FUND I, L.P.
BALANCE SHEETS
LIABILITIES AND PARTNERS' EQUITY
<TABLE>
<CAPTION>
Sept. 30, December 31,
------------- ------------
1995 1994
------------- ------------
<S> <C> <C>
CURRENT LIABILITIES:
Note payable $ - $ 600,000
Current maturities of long-term debt 9,738 40,840
Trade accounts payable 266,154 857,666
Accrued compensation 195,439 636,853
Accrued insurance 37,947 655,540
Estimated third party settlements 62,805 206,525
Other 133,344 568,918
Payable to Quest and affiliates 14,346 62,735
---------- ----------
Total current liabilities 719,773 3,629,077
LONG-TERM DEBT, less current maturities 9,998 91,095
---------- ----------
Total liabilities 729,771 3,720,172
---------- ----------
PARTNERS' EQUITY:
Limited Partners 2,778,651 3,689,007
General Partner (165,007) (163,756)
---------- ----------
Total partners' equity 2,613,644 3,525,251
---------- ----------
TOTAL LIABILITIES AND PARTNERS' EQUITY $ 3,343,415 $ 7,245,423
========== ==========
</TABLE>
The financial information included herein has been prepared by management
without audit by independent public accountants. See notes to financial
statements.
3
<PAGE> 4
QUEST HEALTH CARE INCOME FUND I, L.P.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the For the
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------------- ----------------------------
1995 1994 1995 1994
---------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
REVENUES:
Operating revenue $1,917,047 $5,275,334 $7,888,046 $15,496,156
Interest income 23,490 4,977 51,918 11,769
Gain on sale - - 103,988 -
--------- --------- --------- ----------
Total revenues 1,940,537 5,280,311 8,043,952 15,507,925
--------- --------- --------- ----------
EXPENSES:
Wages & salaries 996,877 2,679,126 4,071,641 7,981,397
Payroll tax & employee benefits 242,132 506,642 960,693 1,441,186
Supplies 165,305 499,266 771,425 1,475,392
Other operating expenses 118,923 505,178 671,304 1,543,938
Ancillary services 219,573 319,352 632,233 858,815
Health benefits 29,590 59,845 144,541 200,425
Management fees 96,218 257,950 391,451 774,958
Management fees-affiliate 19,244 51,513 76,669 154,330
Property taxes 17,217 42,581 67,667 125,459
Interest 505 22,338 16,335 67,814
Depreciation and amortization 12,346 150,179 45,138 451,777
Partnership administration 67,845 86,257 319,973 345,111
--------- --------- --------- ----------
Total expenses 1,985,775 5,180,227 8,169,070 15,420,602
--------- --------- --------- ----------
Income (loss) before extraordinary gain (45,238) 100,084 (125,118) 87,323
Extraordinary gain from settlement
of payables - 64,977 , 64,977
--------- --------- --------- ----------
Net income (loss) $ (45,238) $ 165,061 $ (125,118) $ 152,300
========= ========= ========= ==========
Net income (loss) per limited
partnership unit
Income (loss) before extraordinary
gain (.17) .38 (.47) .33
Extraordinary gain from settlement - .24 - .24
--------- --------- --------- ----------
Net income (loss) per Limited
Partnership Unit $ (.17) $ .62 $ (.47) $ .57
========= ========= ========= ==========
Weighted average Limited Partnership
Units outstanding 262,183 262,183 262,183 262,183
========= ========= ========= ==========
</TABLE>
The financial information included herein has been prepared by management
without audit by independent public accountants.
4
<PAGE> 5
QUEST HEALTH CARE INCOME FUND I, L.P.
STATEMENTS OF PARTNERS' EQUITY
<TABLE>
<CAPTION>
Total
General Limited Partners'
Partner Partners Equity
--------- ---------- ----------
<S> <C> <C> <C>
Balance at December 31, 1993 $(105,947) $9,412,115 $9,306,168
Net income 1,523 150,777 152,300
-------- --------- ---------
Balance at September 30, 1994 $(104,424) $9,562,892 $9,458,468
======== ========= =========
Balance at December 31, 1994 $(163,756) $3,689,007 $3,525,251
Net (loss) (1,251) (123,867) (125,118)
Distributions - (786,489) (786,489)
-------- --------- ---------
Balance at September 30, 1995 $(165,007) $2,778,651 $2,613,644
======== ========= =========
</TABLE>
The financial information included herein has been prepared by management
without audit by independent public accountants. See notes to financial
statements.
5
<PAGE> 6
QUEST HEALTH CARE INCOME FUND I, L.P.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-------------------------------
1995 1994
----------- ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from residents and
government agencies $ 8,121,154 $ 15,210,090
Cash paid to suppliers and
employees (8,008,143) (14,966,618)
Interest received 51,918 11,769
Interest paid (16,335) (67,814)
Property taxes paid (76,835) (86,746)
---------- -----------
Net cash provided by
operating activities 71,759 100,681
---------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of facilities 2,734,651 -
Additions/retirements to property
and equipment (3,755) (113,390)
---------- -----------
Net cash provided by (used in)
investing activities 2,730,896 (113,390)
---------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to partners (786,489) -
Principal payments on long-term debt (610,516) (38,543)
---------- -----------
Net cash used in financing
activities (1,397,005) (38,543)
---------- -----------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 1,405,650 (51,252)
Cash and cash equivalents at beginning of
period 270,593 540,727
---------- -----------
Cash and cash equivalents at end of period $ 1,676,243 $ 489,475
========== ===========
</TABLE>
The financial information included herein has been prepared by management
without audit by independent public accountants. See notes to financial
statements.
6
<PAGE> 7
QUEST HEALTH CARE INCOME FUND I, L.P.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-----------------------------
1995 1994
--------- ---------
<S> <C> <C>
RECONCILIATION OF NET INCOME (LOSS) TO NET CASH
PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Net income (loss) $(125,118) $ 152,300
Adjustments to reconcile net loss to
net cash provided by (used in)
operating activities:
Gain on sale of facilities (103,988) -
Depreciation and amortization 45,138 451,777
Settlement HSG payables - (64,977)
Cash provided (used) by changes in
assets and liabilities:
Accounts receivable 233,108 (286,066)
Prepaid expenses 442,773 (20,065)
Accounts payable and accrued
liabilities (371,765) (151,072)
Payable to Quest and affiliates (48,389) 18,784
-------- --------
Net cash provided by
operating activities $ 71,759 $ 100,681
======== ========
</TABLE>
The financial information included herein has been prepared by management
without audit by independent public accountants. See notes to financial
statements.
7
<PAGE> 8
QUEST HEALTH CARE INCOME FUND I, L.P.
NOTES TO FINANCIAL STATEMENTS
September 30, 1995
NOTE 1
During interim periods, Quest Health Care Income Fund I, L.P. (the
"Partnership") follows the accounting policies set forth in its Annual Report
on Form 10-K filed with the Securities and Exchange Commission. Users of
financial information provided for interim periods should refer to the annual
financial information and footnotes contained in the Annual Report on Form 10-K
when reviewing the interim financial results presented herein.
In the opinion of management, the accompanying unaudited interim financial
statements, prepared in accordance with the instructions for Form 10-Q, contain
all material adjustments, consisting only of normal recurring adjustments
necessary to present fairly the financial condition, results of operations,
changes in partners' equity and cash flows of the Partnership for the
respective interim periods presented. The results of operations for such
interim periods are not necessarily indicative of results of operations for a
full year.
NOTE 2
The Partnership maintains cash accounts with a variety of unrelated banks, all
of which are insured by the Federal Deposit Insurance Corporation (FDIC). At
September 30, 1995, the Partnership maintained cash balances at these banks
aggregating $1,551,370 in excess of the $100,000 FDIC insured maximum.
NOTE 3
Quest, in an effort to continue certain health benefits for facility employees,
created an employee benefit trust (the "Trust") in compliance with the
guidelines promulgated pursuant to VEBA and ERISA. Amounts contributed under
the Trust plan by Partnership employees and the Partnership are strictly for
the benefit of employees of the participating employers, payment of excess loss
reinsurance, life insurance and accidental death and dismemberment and claims
and plan administration and employee medical claims. Quest has engaged a
claims precertification organization to review all claims made by the
Partnership's employees. Approximately $144,541 was accrued under this
arrangement in the first nine months of 1995. The Trust is administered by an
affiliate of Quest; however, no profits accrue to the benefit of either the
affiliate or Quest.
Quest Administrative Services, L.P. (QASLP), an affiliate of Quest, provides
management services to the Partnership's facilities. Total accruals to QASLP
for the first nine months of 1995 were $76,669.
8
<PAGE> 9
QUEST HEALTH CARE INCOME FUND I, L.P.
NOTES TO FINANCIAL STATEMENTS
September 30, 1995
NOTE 4
In December 1994, the Partnership received a Notice and Demand for Payment from
the Idaho State Tax Commission for approximately $90,000 resulting from sales
tax audits of three of the Partnership's facilities. Of this amount,
approximately $54,000 of gross liability was assumed by the purchaser of two of
the facilities, which facilities were sold in February 1995 (see Note 5). The
Company is discussing a settlement of this matter and has recorded a provision
of approximately $27,000, attributable to the remaining facility, in the
Partnership's Financial Statements. Management is of the opinion that the
final resolution will not have a material adverse effect on the Partnership's
financial position.
NOTE 5
On February 28, 1995, the Partnership sold its partnership interests in seven
of its facilities to an unaffiliated third party. The contract called for
adjusting working capital, as defined, to exclude interpartnership accounts and
the current portion of long term debt and to reflect a 25% discount on accounts
receivable at closing. The contract also provided for a cash consideration
adjustment based on changes in working capital including the change in the 25%
discount proportionate to changes in accounts receivable occurring between
December 31, 1994 and the date of closing of February 28, 1995, which was
determined and collected during the third quarter of 1995.
At closing, the Partnership received initial consideration of $2,734,651,
consisting of cash of $2,133,359 and debt retired from sales proceeds of
$601,292. Subsequently, the Partnership determined that $417,254 of additional
cash was due to the Partnership from post closing adjustments. In addition the
purchaser assumed debt related to equipment of approximately $103,000. Total
consideration was therefore $3,258,905. The Partnership made a final
determination of adjusted working capital when the Partnership's accountants
completed certain special procedures, during the third quarter. An initial
distribution of $786,489 to the limited partners commenced during the third
quarter, subject to establishing adequate reserves for the continued operation
of the Partnership. The balance sheet of the Partnership reflects the effects
of the sale of the Partnership's interests in the seven facilities. The
remaining facilities are reflected at estimated net realizable value. The
Partnership is seeking to liquidate the Partnership's interests in its
remaining facilities, subject to the restrictions set forth in the Partnership
governing documents.
NOTE 6
Due to the impact of the partnership selling its interests in seven facilities
in February 1995, as described in Note 5, historical financial position and
results of operations may not be indicative of future financial position and
results of operations and net income (loss) per limited partnership unit. The
following unaudited pro forma condensed statement of operations is presented as
if the transactions previously described in Note 5 occurred as of January 1,
1995. In the opinion of the Partnership's management, all adjustments
necessary to reflect the effects of the sale have been made.
9
<PAGE> 10
The pro forma condensed financial information does not purport to present what
actual results of operations would have been if the transactions previously
described had occurred on such dates or to project results for any future
period.
PRO FORMA CONDENSED STATEMENT OF OPERATIONS
For the Nine Months Ended September 30, 1995
(Unaudited in thousands)
<TABLE>
<CAPTION>
Historical Adjustments Pro Forma
-------------- -------------- -------------
<S> <C> <C> <C>
Revenues: $7,940 $(2,346)(A) $5,594
----- ------ -----
Expenses:
Wages and salaries 4,072 (1,225)(A) 2,847
Operating expenses 3,180 (894)(A) 2,286
Management fees 391 (116)(A) 275
Management fees-affiliate 77 (22)(A) 55
Property taxes and interest 84 (31)(A) 53
Depreciation and amortization 45 (1)(A) 44
Partnership administration 320 - 320
----- ------ -----
8,169 (2,289) 5,880
----- ------ -----
Net income (loss) (B) $ (229) $ (57) $ (286)
===== ====== =====
</TABLE>
Per Unit
(A) The pro forma adjustments remove revenues and expenses directly related to
the interests in seven nursing homes sold to an unaffiliated third party on
February 28, 1995.
(B) The historical statement of operations for the period ended September 30,
1995 includes a gain from the sale of a facility of $104, in thousands. This
amount is not included in the above pro forma condensed statement of operations
due to its non recurring nature.
NOTE 7
The Partnership's financial statements have been presented on the basis that it
is a going concern, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. The sale of the
Partnership's interests in seven nursing homes and possible future sales of its
remaining interests will have an effect on cash flow from operations in the
future.
Management of the Partnership believes that successful control of facility and
Partnership expenses and establishing adequate reserves from the sales of
facilities should enable the Partnership to meet its obligations and upon final
sale of its assets, liquidate in orderly fashion.
NOTE 8
In March 1995, the Financial Accounting Standards Board issued Statement of
Accounting Standard No. 121 - "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of", which is effective for
fiscal years beginning after December 15, 1995. Since the Partnership has
recognized impairment losses and the losses were discussed in the 1993 and 1994
Annual Reports on Form 10-K, effectively adjusting the carrying value of its
long-lived assets to estimated net realizable value, no significant adjustment
from net realizable value to fair value is expected.
10
<PAGE> 11
PART 1
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS:
Results of Operations:
In February 1995, the Partnership sold its partnership interests in seven of
its properties to an unaffiliated third party. Initial distributions of
$786,489 or $3/unit to the limited partners of the Partnership occurred in the
third quarter. After adequate reserves were established for the Partnership's
continued operation, the proceeds from the sale were subject to adjustment
reflecting changes in elements of working capital between December 31, 1994 and
February 28, 1995. Such adjustment was completed in the current quarter.
Neither the general partner of the Partnership nor its affiliates will receive
any remuneration or distributions of sales proceeds.
Revenue:
In February 1995, the Partnership's interest in seven facilities were sold.
Therefore, the revenues and expenses for the nine months ended September 30,
1995 are not directly comparable to the same period in 1994. On a pro forma
basis, for the three remaining facilities, Burley, Hearthside and South Salem,
revenues increased $154,385 and $588,263, respectively for the three and nine
month periods ended September 30, 1995. The majority of this increase is
related to occupancy increases at Hearthside. In 1994, Hearthside was
experiencing the effects of a survey related ban on admissions, which was
lifted in December 1993. The remaining increase relates to increased ancillary
utilization and changes in patient mix. Revenue in 1994 included $10,553,925
for the nine month period related to the interests in seven facilities sold by
the Partnership in 1995 and $359,066 related to Comanche View, which was closed
in May 1994.
All resident receivables are recorded at their original face amount and are due
and payable under "normal" market terms and conditions. In the event of
non-collection, the ultimate loss to the Partnership would be limited to the
recorded balance of the receivables as shown in the balance sheet.
The significant components of accounts receivable at September 30, 1995 and
December 31, 1994 are:
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Medicaid 41% 52%
Private Pay 11% 11%
VA, Medicare and Other 48% 37%
--- ---
100% 100%
=== ===
</TABLE>
Payments by both the state and federal governments are normally received within
60-90 days. The sources of patient revenues for periods ended September 30,
1995 and 1994 are:
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Medicaid 62% 63%
Private Pay 20% 20%
VA, Medicare and Other 18% 17%
--- ---
100% 100%
=== ===
</TABLE>
Expenses:
On a pro forma basis; expenses for the three month and nine month periods ended
September 30, 1995 increased $245,403 and $651,360 respectively. The primary
reasons for these increases were increased ancillary utilization of $166,784,
salary increases, workers compensation rate increases, and employee health
benefit costs of $379,885 relating to competition for labor by manufacturing
companies and fast food restaurants. Saving in other areas of operations
helped to offset these increases. Partnership administration expense was
comparable to the comparable period in 1994 despite legal and accounting costs
associated with the facility sales.
11
<PAGE> 12
Expenses in 1994 included $10,272,003 related to the seven facilities whose
interests were sold by the Partnership and $524,107 related to Comanche View.
Hearthside is located in the town of Coos Bay in a remote part of Oregon. Coos
Bay was dominated by the lumber industry which has been decimated by various
government regulations. In view of the depressed occupancy at Hearthside and
the limited potential for growth in the area, management of the Partnership
reviewed the expected undiscounted cash flows over the remaining life of the
property and compared the same to the current carrying value. After reviewing
alternative uses, such as participating in Oregon's new, but unfunded, crisis
intervention program, management determined that it was probable that the
carrying value of Hearthside would not be fully recovered through operations
over its remaining estimated useful life. The financial statements recognize a
write down to its estimated net realizable value of $150,000 in December 1994.
Occupancy and Medicare utilization have improved during 1995. It cannot
currently be determined by management of the Partnership if such improvement
will continue.
In addition, Comanche View, a facility two hours south of Odessa, located in
the far west Texas town of Fort Stockton, has confronted several serious
challenges. First, despite state controls over construction of nursing
facilities and a limited marketplace, a new 120 bed nursing facility was built
near the Comanche facility. In addition, two physicians closed their practices
and moved to Alpine 100 miles southwest leaving three physicians in town.
Alternative uses for the facility such as adult day care or a rural health
clinic are of low probability because of design constraints of the physical
plant. In light of these factors and the limited population of the area the
facility was closed in May 1994. The facility was written down to its
estimated net realizable value of $100,000 at December 31, 1993.
On February 25, 1995, the Partnership sold its interests in seven facilities to
an unaffiliated third party. The contract called for adjusting working
capital, as defined, to exclude interpartnership accounts and the current
portion of long term debt and to reflect a 25% discount on accounts receivable
at closing. The contract also provided for a cash consideration adjustment
based on changes in working capital including the change in the 25% discount
proportionate to changes in accounts receivable occurring between December 31,
1994 and the date of closing of February 28, 1995, which was finally determined
subsequent to the second quarter of 1995.
At closing, the Partnership received initial consideration of $2,734,651,
consisting of cash of $2,133,359 and debt retired from sales proceeds of
$601,292. Subsequently, the Partnership determined that $417,254 additional
cash was due to the Partnership from post closing adjustments, In addition,
the Purchaser assumed debt related to equipment of approximately $103,000.
Total consideration was therefore $3,258,905. The Partnership made a final
determination of adjusted working capital when the Partnership's accountants
completed certain special procedures. Distributions of cash to the limited
partners commenced subsequent to the end of the second quarter, after
establishing adequate reserves for the continued operation of the Partnership.
The balance sheet of the Partnership reflects the effects of the sale of the
Partnership's interests in the seven facilities. The Partnership may also seek
to liquidate the Partnership's interests in its remaining facilities.
Liquidity and Capital Resources:
At September 30, 1995, the Partnership held cash and cash equivalents of
$1,626,243 which represents an increase of $1,405,650 since December 31, 1994.
The cash increase is due primarily to the sale of the Partnership's interests
in seven facilities. The cash position of the Partnership remains highly
variable. While the Partnership's remaining facilities have shown improvement,
cash is being conserved wherever possible to be used for Partnership
obligations, payment of property taxes, and any potential paybacks to Medicare
and Medicaid that may arise.
Medicare is a federal entitlement program and Medicaid (the source of the
majority of the Partnership's revenue) represents an entitlement program
administered differently by each state which is partially funded by the Federal
government. In August 1993, Congress enacted Title XIII of OBRA 93. This act,
12
<PAGE> 13
among other things, taxed social security benefits received by the elderly and
further limited payments under state Medicaid programs for which federal
matching would be permitted. In October 1993, the Health Care Financial
Administration (HCFA) implemented a freeze on Medicare reimbursement, for at
least two years, on routine cost limits, certain Part B ancillaries and
prospective payment system rates. In addition, HCFA eliminated the return on
equity component of the reimbursement rate. Further, by the end of 1993,
several states, because of federal actions and/or budgetary difficulties, had
either taken action to curtail the growth in entitlement programs and/or had
indicated that future action was possible. In 1995, the latest concept appears
to be "block grants" to the states and significant Medicare budgetary
reductions. What this means to nursing facilities cannot currently be
determined by management.
Despite the fact that national health care reform proposals are dead,
activities at the state level continue and are encouraged by HCFA. An example
of state level action is Oregon's plan, the location of the Partnership's
Hearthside and South Salem facilities, to convert its Medicaid reimbursement
system to a managed care program administered by third parties such as Blue
Cross/Blue Shield. The effect on reimbursement cannot currently be determined
by management of the Partnership.
The Partnership has no established credit lines with outside lending sources
and relies solely on cash flow and cash reserves to conduct Partnership
business. There are no material commitments for capital improvements at the
remaining facilities.
The Partnership's continued existence is dependent upon its ability to: (i)
generate sufficient cash flow to meet its obligations on a timely basis; and
(ii) obtain additional sources of funding as may be required. In February
1995, the Partnership sold its interests in seven of its properties to an
unaffiliated third party. Distributions were made to each of the limited
partners after establishing adequate reserves.
Neither the general partner nor its affiliates will receive any remuneration or
distributions of sales proceeds. The Partnership will seek to liquidate the
remaining Partnership interests in the Partnership's remaining facilities.
The Partnership's June 30, 1995 Balance Sheet reflects the estimated net
realizable value of remaining facilities. The significant writedown of property
and equipment in 1994 is based on the Partnership's future plans for its
interests in the nursing facilities and the attendant accounting policies.
In March 1995, the Financial Accounting Standards Board issued Statement of
Accounting Standard No. 121 - "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of", which is effective for
fiscal years beginning after December 15, 1995. Since the Partnership has
recognized impairment losses and were discussed in the 1993 and 1994 Annual
Reports on Form 10-K, effectively adjusting the carrying value of its
long-lived assets to estimated net realizable value, no significant adjustment
from net realizable value to fair value is expected.
13
<PAGE> 14
PART II. OTHER INFORMATION
ITEMS 1-5
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibits.
Exhibit 27 - Financial Data Schedule (for SEC use only)
(B) Reports on Form 8-K.
None during the third quarter
14
<PAGE> 15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, Registrant
has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
QUEST HEALTH CARE INCOME
FUND I, L.P.
(Registrant)
By: QUEST RESCUE PARTNERS I-1, L.P.
General Partner
By: QUEST RESCUE PARTNERS I-1 CORP,
Date: November 15, 1995 By:/s/ Stuart C. Berry
------------------ -----------------------------
Executive Vice President/CFO
By:/s/ Michael G. Hunter
-----------------------------
President
15
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF QUEST HEALTH CARE INCOME FUND I, L.P. FOR THE NINE
MONTHS ENDED SEPTEMBER 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> US
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<EXCHANGE-RATE> 1
<CASH> 1,676,243
<SECURITIES> 0
<RECEIVABLES> 875,227
<ALLOWANCES> 60,450
<INVENTORY> 0
<CURRENT-ASSETS> 2,582,517
<PP&E> 2,972,211
<DEPRECIATION> 2,211,313
<TOTAL-ASSETS> 3,343,415
<CURRENT-LIABILITIES> 719,773
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 2,613,644
<TOTAL-LIABILITY-AND-EQUITY> 3,343,415
<SALES> 0
<TOTAL-REVENUES> 8,043,952
<CGS> 0
<TOTAL-COSTS> 8,142,732
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 10,003
<INTEREST-EXPENSE> 16,335
<INCOME-PRETAX> (125,118)
<INCOME-TAX> 0
<INCOME-CONTINUING> (125,118)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (125,118)
<EPS-PRIMARY> (.47)
<EPS-DILUTED> (.47)
</TABLE>
