<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-18158
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QUEST HEALTH CARE INCOME FUND I, L.P.
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(Exact name of registrant as specified in its charter)
Delaware 58-1697906
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1117 Perimeter Center West Suite E-210 Atlanta, GA 30338
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (770) 671-1014
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Formerly: Southmark/CRCA Health Care Income Fund I, L.P.
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Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
None None
- --------------------------- -------------------------------------------------
Securities registered pursuant to Section 12(g) of the Act:
Limited Partnership Interests
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
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (Section 229.405 of this chapter) 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 ]
All of the registrant's 262,183 limited partnership interests are held by
non-affiliates. The aggregate market value of units held by non-affiliates is
not determinable since there is no public trading market for the limited
partnership interests and transfers of interests are subject to certain
restrictions.
Documents Incorporated by Reference: See Page 35
Exhibit Index: See Page 36-37
TOTAL OF 38 PAGES
1
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Part I
ITEM 1 BUSINESS
Quest Health Care Income Fund I, L.P. (the Partnership), formerly
Southmark/CRCA Health Care Income Fund I, L.P., was organized on July 16, 1986,
as a limited partnership under the provisions of the Delaware Revised Uniform
Limited Partnership Act. On September 16, 1986, a Registration Statement on
Form S-1 was declared effective by the Securities and Exchange Commission
whereby the Partnership offered for sale $30,000,000 of limited partnership
interests (the Units). The Units represent equity interests in the Partnership
and entitle the holders thereof to participate in certain allocations and
distributions of the Partnership. The sale of Units closed in June 1987, with
262,183 units sold at $100 each, or gross proceeds of $26,218,300 to the
Partnership.
The general partner of the Partnership is Quest Rescue Partners I-1, L.P.
(Quest), whose sole limited partner is Quest Financial Corp. and whose sole
general partner is Quest Rescue Partners I-1 Corp. Quest became the general
partner of the Partnership on August 1, 1990.
The former General Partner of the Partnership was Southmark Investment Group
86, Inc. (SIG), a Nevada corporation and a wholly-owned subsidiary of Southmark
Corporation (Southmark).
The Partnership's primary business and only industry segment is to own, invest
in, operate and ultimately dispose of a diversified portfolio of healthcare
related real properties for the benefit of its Partners. At December 31, 1995,
the Partnership held interests in four nursing home properties as described in
Item 2 below and the Partnership employed approximately 229 persons, including
administrative, nursing, dietary, laundry, housekeeping, social services and
maintenance personnel.
The services provided at the Partnership's long-term care facilities consist of
intermediate and skilled nursing care. Intermediate care consists of providing
assistance or supervision with daily activities such as dressing, bathing, diet
or medication. Skilled nursing care consists of 24 hour a day services of
registered nurses and related medical services prescribed by the resident's
physician. Under the federal Omnibus Budget Reconciliation Act (OBRA), which
became effective October 1, 1990, the distinction between skilled nursing and
intermediate care facilities was eliminated. The legislation imposed a variety
of quality of care requirements on all long-term care facilities, with
resulting increases in operating costs. The legislation imposed more stringent
requirements regarding staff, screening and assessment of residents, residents'
rights and survey and certification requirements. It also subjects facilities
to a number of sanctions, including civil money penalties, for substandard
survey results. Under this legislation, states are required to amend their
Medicaid plans to make an appropriate adjustment in the rates at which they
reimburse long-term care facilities in order to reflect the costs of these
requirements. There is, however, no requirement that the rate adjustments
actually cover all new costs, nor are there any assurances that budgetary
constraints of individual states will sustain the increased costs associated
with these federal mandates.
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In addition, during 1995, the final regulations pertaining to OBRA 87 were
instituted. OBRA 87 contained, among other things, new stringent survey
requirements with severe penalties for non-compliance. The expenses of the
facilities have increased as a result of increased personnel costs necessary to
comply with OBRA 87. The Partnership's facilities that provide skilled care
are certified to receive benefits under the Federal Health Insurance for the
Aged Act (Medicare) and under joint Federal and state funded programs
administered by the various states to provide medical assistance to the
indigent, known generally as Medicaid. Benefits under Medicare are for skilled
care only. However, Medicaid plans provide for different levels of
reimbursement, depending upon the level of care and services rendered.
Medicaid reimbursement formulas are established in accordance with Federal
guidelines by each state with the approval of the Federal government and vary
from state to state. Typically they provide for reimbursement for specified
services up to specified limits based on historical costs, with adjustments for
inflation. Federal law requires that Medicaid reimbursement rates be
reasonable and adequate to meet the cost which must be incurred by efficiently
and economically operated facilities in order to provide care and services in
conformity with applicable laws, regulations and quality and safety standards.
Medicaid payments are set either retrospectively, prospectively, on a flat rate
basis or a combination thereof. The Medicaid rates for the Partnership's
properties are calculated prospectively for two properties and retrospectively
for one property. The Medicare and Medicaid programs are subject to statutory
and regulatory changes, administrative rulings, political fiats,
interpretations of policy and determinations by intermediaries, and to
governmental funding restrictions, all of which may materially increase or
decrease the rate of program payments to long-term care facilities, such as
those owned by the Partnership.
In the operation of health care facilities, the Partnership competes with a
number of individuals and entities, including large, national nursing home
chains and small, locally owned nursing care facilities. Some competing
operators have greater financial resources than the Partnership or may operate
on a nonprofit basis or as charitable organizations. The degree of success
with which the Partnership's facilities compete varies from location to
location and depends on a number of factors. There is limited, if any,
competition in price with respect to Medicaid and Medicare patients, since
revenues for services to such patients are strictly controlled and based on
fixed rates and cost reimbursement principles.
In light of these factors, the Partnership will continue to seek to meet
competition in each locality by improving the appearances of the properties,
improving the quality of service provided at each facility, establishing a
reputation within the local medical communities for providing competent care
services, and by appropriately responding to regional variations in
demographics and tastes.
During 1995, the Partnership sold its interests in seven facilities to an
unaffiliated third party. See Part II, Item 7, for further discussion.
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The following table sets forth information regarding the average daily census
and sources of patient revenues at the Partnership's facilities:
<TABLE>
<CAPTION>
Average Daily Census Revenues for
for Year End Year Ended
December 31, December 31,
---------------------------- -----------------------
1993 1994 1995 1993 1994 1995
------- ------- -------- ------ ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Medicaid 436 71% 430 70% 139 69% 65% 63% 59%
Private Pay 152 24% 146 24% 42 21% 22% 20% 18%
VA, Medicare and Other 29 5% 40 6% 20 10% 13% 17% 23%
--- --- --- --- --- --- --- --- ---
617 100% 616 100% 201 100% 100% 100% 100%
=== === === === === === === === ===
Overall Occupancy Rate 85% 84% 87%
=== === ===
</TABLE>
Because of a changing census mix, the occupancy required for a facility to
achieve an operating break-even point cannot be precisely determined.
Generally, a greater ratio of Medicaid patients will require a higher occupancy
to reach a break-even point. However, a high Medicare census can change the
break-even point due to a high reimbursement rate, even though expenses
associated with Medicare qualified residents are significantly higher than
Medicaid.
All licensed beds at the Partnership's facilities are being utilized, except
that in some instances a small number of rooms have been taken out of service
to be utilized as office space and ancillary support areas.
ITEM 2 PROPERTIES
The following table sets forth the investment portfolio of the Partnership at
December 31, 1995. The buildings and the land on which they are located are
owned by the Partnership and its majority owned partnerships in fee.
The Partnership's majority owned partnerships were a creation of Southmark to
enable the Partnership to acquire properties from Southmark affiliates without
paying transfer taxes, or having to perform relicensing of the homes more than
once. The Southmark affiliate had already paid the tax and relicensed the
facilities prior to the acquisition by the Partnership. There appears to have
been no adverse economic impact on the Partnership by this arrangement. Quest
maintained the arrangement to avoid creating tax and relicensing problems
associated with dissolving the majority owned partnerships. Quest has not
received any financial benefit from this ownership structure.
4
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ITEM 2 PROPERTIES continued
<TABLE>
<CAPTION>
Properties Occupancy
at net Rate Date
Property Description book value for 1995 Acquired
- -------- ----------- ---------- -------- --------
<S> <C> <C> <C> <C>
Burley Care Center Skilled Care
Burley, Idaho Nursing Home
68 Licensed Beds $496,241 84% June 1987
Hearthside Care Center Intermediate Care
Coos Bay, Oregon Nursing Home
92 Licensed Beds $132,831 85% June 1987
South Salem Intermediate Care
Care Center Nursing Home
Salem, Oregon 70 Rentable Beds $ 48,384 94% June 1987
Comanche View Intermediate
Nursing Home Care Nursing Home
Ft. Stockton, Texas 58 Rentable Beds $ 76,038 Closed August 1987
--------
$753,494
========
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TOTAL: 4 Nursing Homes 288 Beds
</TABLE>
ITEM 3 LEGAL PROCEEDINGS
The State of Idaho sought a deficiency lien against the Partnership's Idaho
facilities for sales and use taxes for periods prior to ownership by the
Partnership. The total amount of the state claim is $36,410. Management of
the Partnership is discussing a settlement of this matter and has recorded a
provision of $27,308 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. The Partnership plans to
continue to vigorously defend against these claims. No other legal actions,
other than ordinary routine litigation incidental to business, were filed
against the Partnership.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None during the fourth quarter of 1995.
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Part II
ITEM 5 MARKET FOR THE REGISTRANT'S UNITS OF LIMITED PARTNERSHIP AND RELATED
SECURITY HOLDER MATTERS
(A) No established public trading market for the Units exists nor is one
expected to develop.
<TABLE>
<CAPTION>
(B) Title of Class Number of Record Unit Holders
-------------- -----------------------------
<S> <C>
Limited Partnership Interests 3,124 as of February 27, 1996
</TABLE>
(C) No cash distributions were made to the Limited Partners in 1990, 1991,
1992, 1993 or 1994. Cash distributions of $786,489 and $585,713 were made to
the Limited Partners in the years ended December 31, 1995 and 1989,
respectively. No distributions have been made to the General Partner. See the
Liquidity and Capital Resources section of Item 7 - Management's Discussion and
Analysis of Financial Condition and Results of Operations.
ITEM 6 SELECTED FINANCIAL DATA
The following table sets forth a summary of certain financial data for the
Partnership. Write-downs of properties, as discussed in Notes A-4 and F of the
Financial Statements have materially impacted the comparability of net losses
in 1993 and 1994. The settlement of litigation impacts 1993 and 1994 financial
information. The sale of seven facilities in 1995 resulted in a reduced net
loss. This summary should be read in conjunction with the Partnership's
financial statements and related notes appearing in Item 8.
<TABLE>
<CAPTION>
Years ended December 31,
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Statements of Operations 1995 1994 1993 1992 1991
- ------------------------ ---------- ----------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Operating revenue $9,806,965 $20,482,437 $19,322,743 $18,752,220 $17,384,328
Net loss (130,741) (5,780,917) (2,272,373) (586,809) (523,103)
Net loss per (1) (2) (3)
weighted average Limited
Partnership Unit (.49) (21.83) (8.58) (2.22) (1.98)
Distributions paid per (1) (2) (3)
weighted average Limited
Partnership Unit 3.00 -0- -0- -0- -0-
</TABLE>
(1) Includes gain on sale of seven facilities of $103,988 or $ .39 per
unit.
(2) Includes extraordinary gain on settlement of Healthcare Services Group
payables of $64,977 or $.24 per unit and loss from writedown of properties
of $5,517,275 or $(20.83) per unit.
(3) Includes extraordinary gain on settlement of Southmark payables of
$830,637 or $3.14 per unit and loss from write down of properties of
$1,976,615 or $(7.46) per unit.
<TABLE>
<CAPTION>
As of December 31,
------------------------------------------------------------------------------
Balance Sheet 1995 1994 1993 1992 1991
- ------------- ----------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Property & Equipment,net $ 753,494 $4,467,143 $10,122,142 $12,522,654 $12,958,058
Total Assets 3,577,065 7,245,423 12,587,006 15,480,701 15,334,320
Long-term obligations,
less current maturities 7,275 91,095 131,936 105,687 32,553
Partners' Equity 2,608,021 3,525,251 9,306,168 11,578,541 12,165,350
</TABLE>
6
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ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
In February 1995, the Partnership sold its interests in seven of its properties
to an unaffiliated third party and recognized a gain of $103,988. In August
1995, $786,489 or $3/unit was distributed to the limited partners from sales
proceeds.
Neither the general partner nor its affiliates received any remuneration or
distributions from the sale of facilities.
Revenues:
Operating revenue for the twelve month period ended December 31, 1995 decreased
$10,675,472 when compared to the prior period. This was primarily the result
of selling the Partnership's interests in seven facilities in May 1995. On a
pro forma basis, removing the affect of the sales, revenues increased $521,530
in 1995 as compared to the same period in 1994. The primary reason for this
was increased Medicare utilization and occupancy increases at Hearthside. The
other facilities remained static. Revenue in 1995 included $2,344,502 related
to the seven sold facility interests.
Operating revenue for the twelve months ending December 31, 1994 increased
$1,159,694 when compared to the same period in 1993. Medicare revenue
increased by 54% in 1994 when compared to 1993 due to rate increases and to an
increase in Medicare residents. Increased overall census at Burley, Crestview
and Parkway North also contributed to the revenue increase. In addition, Sunny
Vista became certified for Medicaid in August 1993 and its census increased 15%
in 1994. Some facilities saw their patient mix change in the form of increased
private and Medicare patients which generally generates higher revenue. The
remainder of the increase relates to private and Medicaid rate increases at all
the facilities.
Operating revenues for 1994 and 1993 included $359,075 and $951,652 related to
Comanche View. Please see the discussion of the closure of the facility under
Expenses. Operating revenue in 1994 and 1993 included $13,542,770 and
$12,432,181 respectively, related to the seven sold properties.
Receivables do not present a credit risk as the Medicaid/Medicare system is
federally financed. Receivables are, however, subject to disallowance by
Medicare and Medicaid upon audit. Such governmental audits are typically one
to two years in arrears. Inflation is not a material factor due to the fact
that the reimbursement rates are set by governmental agencies, however such
agencies are not obligated to increase reimbursements at the rate of inflation.
The significant components of accounts receivable at December 31, 1994 and 1995
are:
<TABLE>
<CAPTION>
1994 1995
---- ----
<S> <C> <C>
Medicaid 52% 34%
Private Pay 11% 15%
VA, Medicare & Other 37% 51%
--- ---
100% 100%
=== ===
</TABLE>
7
<PAGE> 8
Payments by both the state and federal governments are normally received within
60-90 days. As of December 31, 1995, the receivables of the Partnership, prior
to adjustments as disclosed in the Financial Statements, represent
approximately 37 days of revenue.
EXPENSES:
For the twelve month period ended December 31, 1995, total expenses decreased
$16,229,896. On a pro forma basis, eliminating the effect of the seven sold
facility interests, expenses increased $288,284 in 1995 as compared to the same
period in 1994. This is primarily the result of costs associated with
increased Medicare utilization and OBRA 87 driven personnel costs. Supply and
ancillary expense increased as a result of increased occupancy and Medicare
utilization. Total expenses in 1995, 1994 and 1993 included $2,261,731,
$13,354,223 and $12,272,285, respectively, relating to the seven sold facility
interests.
Total operating expenses increased $3,896,184 in 1994 as compared to the same
period in 1993. Losses from writedown of properties and contractual discount
of accounts receivable, as discussed in the notes to the Financial Statements,
were $5,517,275 and $1,976,615 in 1994 and 1993, respectively. Excluding the
impact of the writedown losses, operating expenses increased $355,524. Burley,
Crestview, Parkway North and Sunny Vista experienced increases in nursing costs
and supplies to care for their greater number of residents. Parkway North and
Sunny Vista were more severely impacted in that much of their increase in
nursing costs related to pool nursing, which is typically substantially more
expensive than the facilities own staff. In addition to staffing, ancillary
costs increased at Crestview due to higher Medicare census and at South Salem
due to the increase in Medicare Part B utilization.
Employee health benefits decreased $251,237 due to an extraordinarily good year
in 1993 and those savings resulted in lower than expected expense for the
facilities during 1994. In 1995, such expenses are expected to return to a
level similar to the years prior to 1994. Payroll tax and employee benefits
decreased in 1994 due to a $146,871 workers compensation refund in the states
of Oregon and Idaho. Partnership administration expense increased during 1994
when compared to the prior year primarily as a result of increased third party
accounting, legal and tax professional fees. The increase is also due to legal
and accounting costs relating to preliminary proxy materials filed by the
Partnership in 1994 which was subsequently withdrawn from the Securities and
Exchange Commission review process.
As set forth in the preliminary proxy materials, should the preliminary proxy
not be completed, it was the Partnership's intent to sell its assets to
generate cash proceeds for distribution to the limited partners. Accordingly
consistent with the Partnership's accounting policy as described in Note A, the
Partnership has reflected the property and equipment as of December 31, 1994 at
the lower of cost (as previously adjusted for writedowns if applicable) or
estimated net realizable value, determined on an individual nursing home basis.
At December 31, 1994, Property and Equipment for the Hearthside, South Salem
and Burley facilities were written down by $1,107,603, $355,252 and $583,557,
respectively, which represents management's opinion of the writedown necessary
to adjust facilities to estimated net realizable value (Note F and G). As of
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December 31, 1995, management estimates that fair value exceeds the carrying
value and accordingly, does not expect any further material adjustments upon
the adoption of Statement of Accounting Standard No. 121 in 1996 unless
warranted by a change in market conditions or other relevant factors.
While occupancy at the Hearthside facility has increased since the first
quarter of 1994, the writedown was necessary to conform to the Partnership's
accounting policy. The South Salem facility, located in Oregon, continues to
operate near capacity. However, competition from the local hospital, the
Oregon Managed Care System and a competitive labor market indicate that future
earnings of the facility will be suspect. The Burley facility is located in
Burley, Idaho, a non-certificate of need state, thus there are no restrictions
on the construction of competing facilities and the facility is exposed to
market competition.
On February 28, 1995, the Partnership sold to an unaffiliated third party its
Partnership interests in seven facilities. The contract for the sale provided
for cash consideration adjustments 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 calculated subsequent to the first quarter of
1995. Expenses in 1994 included $13,186,000 related to the sale of the
Partnership's interests in seven facilities.
Based on the carrying value of the seven facilities at December 31, 1994, the
Partnership expected to incur a loss on the sale of its interests in the
facilities and, accordingly, recognized this loss in the accompanying
statements of operations of $3,470,863 consisting of a writedown of property
and equipment of $3,166,590 and $304,273 for the 25% discount of accounts
receivable.
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, 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 recognized a write down of
carrying value of $805,733, at December 31, 1993. In 1994, occupancy improved.
In 1995, occupancy continued to improve as has Medicare utilization.
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 1993. 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, management considered it probable that the facility would not generate
future cash flow. The facility was written down at December 31, 1993 to its
net realizable value of $100,000. The
9
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Financial Statements recognized a write down of carrying value of $1,170,882,
at December 31, 1993. Included in operating expenses for 1995, 1994 and 1993
were $95,817, $553,155 and $1,212,399, respectively, related to Comanche View.
Ancillary Revenue and Expense is a term that describes specialized services
provided by third party unaffiliated vendors. These services include speech,
occupational, physical and occasionally intravenous therapies. These revenues
and expenses are subject to certain cost limitations and do not materially
affect the profitability of a facility. However, the ability to provide these
services enables a facility to accept residents reimbursed under the federal
Medicare system instead of the state Medicaid system. Generally increases in
ancillary expense will be reflected in increased Medicare revenues. Typically,
the Medicare system reimburses at a higher daily rate than Medicaid. These
Medicare residents are people, not necessarily elderly, who, under another set
of regulations, must be discharged from hospitals before they are well enough
to go home. The result is that nursing homes that once were a final stop in
life's journey have become more like auxiliary hospitals with a substantially
shortened length of stay. However, the pursuit of higher reimbursement
Medicare residents limits the number of Medicaid beds available to the indigent
elderly. These people will be required to live with relatives or find low
skilled "foster care" or community based services.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1995, the Partnership held cash and cash equivalents of
$1,546,363 which represents an increase of $1,275,770 since December 31, 1994
as a result of the sale of the Partnership's interests in the facilities
referenced above, less the distributions made to the limited partners.
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. A distribution
of $786,489 to the limited partners was made 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.
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<PAGE> 11
Neither the general partner of the Partnership nor its affiliates received any
remuneration or distributions of sales.
The Partnership is seeking to liquidate the Partnership's interests in its
remaining facilities. In recent months, the Partnership has received several
expressions of interest in acquiring one of the Partnership's remaining
facility interests. The Partnership is currently assessing the adequacy of
these offers and the impact upon the orderly liquidation of the Partnership.
At December 31, 1994, the Partnership held cash and cash equivalents of
$270,593 which represents a decrease of $270,134 since December 31, 1993. Most
of this decrease is attributable to payment for purchases of equipment and
property improvements and repayment of debt. Cash from operations was negative
due mainly to an increase in accounts receivable at two facilities. The cash
position of the Partnership remains highly variable.
Cash is being conserved wherever possible to be used for capital improvement,
payment of property taxes and any potential paybacks to Medicare and Medicaid
which 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,
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, 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 health care reform proposals at the federal level are
dead, activities at the state level continue and are encouraged by HCFA. Some
examples of state level actions are: Oregon's plan, the location of two of the
Partnership's facilities, is to convert its Medicaid reimbursement system to a
managed care program administered by third parties such as Blue Cross/Blue
Shield; Idaho, location of the Partnership's other facility, is attempting to
significantly reduce Medicaid reimbursement levels. The impact is not yet
quantifiable.
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
facilities.
Private pay sources accounted for 18% of the Partnership's total revenues in
1995, all other revenue came from federal and state entitlement programs. Any
11
<PAGE> 12
reduction in these programs will have an immediate impact on the total revenue
and cash flow of the Partnership.
The note in the amount of $600,000 related to the Parkway North facility was
paid off when the facility interest was sold in 1995.
In 1993, an agreement was reached between the Partnership and Southmark to
resolve their competing claims. The agreement was approved by the court
governing Southmark's Bankruptcy Plan. As a result of the settlement, the
Partnership paid $89,300 to Southmark and avoided payment of $919,937 in
payables due to Southmark. The amount of $830,637 was recognized as an
extraordinary item in 1993.
During the third quarter of 1994, the Partnership settled its litigation with
Healthcare Services Group, Inc. resulting in $64,977 being recognized as
non-cash income.
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. The Partnership
will entertain offers to sell any or all of its four remaining facilities and,
if accepted and closed, plans to liquidate in an orderly fashion.
The Partnership's December 31, 1994 Balance Sheet reflected the lower of costs
or estimated net realizable value. The significant writedown of property and
equipment in 1994 was based on the Partnership's future plans for its
interests in the nursing facilities and the attendant accounting policies. At
December 31, 1993, the nursing facilities were considered operating assets
since it was the Partnership's plan to continue to operate the facilities as it
had in the past. Consistent with generally accepted accounting principals
("GAAP") and the Partnership's accounting policy for operating assets, property
and equipment were carried in the 1993 balance sheet at the lower of cost or
estimated undiscounted future cash flows expected to be generated over the
remaining estimated useful life of the property and equipment. The remaining
estimated useful life of the property and equipment at December 31, 1993 was
approximately 23 years.
It is not the objective of GAAP to reflect operating property and equipment at
estimated market value less costs of disposal, otherwise known as estimated net
realizable value. Instead, under GAAP most property and equipment is carried at
cost less accumulated depreciation taken over the years of prior service.
During 1994, as described in the notes to the Financial Statements, the
Partnership determined that it would market for sale its interests in the
nursing facilities. Since the future life under these circumstances is the
length of time required to dispose of the assets as opposed to the much longer
term of the assets remaining useful operating life, GAAP and the Partnership's
accounting policy require that the property and equipment under these
circumstances be carried at the lower of cost (the then existing carrying
value) or estimated net realizable value. Accordingly, under these
circumstances, the time value of money (over approximately 22 remaining years),
the risk of capital invested, local, national and industry conditions including
competition, state and federal reimbursement plans, patient mix, among many
other factors, are taken into consideration. Consequently, as a result of a
change in the Partnership's future
12
<PAGE> 13
direction, a loss on property and equipment representing the difference in (1)
the carrying value as determined based on the lower of cost or estimated
undiscounted future cash flows over the remaining estimated useful life for
operating assets, and (2) the lower of cost or estimated net realizable value
was recognized during 1994 in the amount of $5,213,002 and is reflected in the
Financial Statements.
The Partnership's December 31, 1995 Balance Sheet reflects the estimated net
realizable value of the remaining facilities. The significant writedown of
property and equipment in 1994 was 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 as discussed above, effectively adjusting the
carrying value of its long-lived assets to estimated net realizable value, no
material adjustment from net realizable value to fair value is expected.
13
<PAGE> 14
ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
QUEST HEALTH CARE INCOME FUND I, L.P.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
Number
------
<S> <C>
Report of Independent Accountants 15
Balance Sheets as of December 31, 1995 and 1994 16 - 17
Statements of Operations for the Years Ended
December 31, 1995, 1994 and 1993 18
Statements of Partners' Equity for the Years
Ended December 31, 1995, 1994 and 1993 19
Statements of Cash Flows for the Years Ended
December 31, 1995, 1994 and 1993 20 - 21
Notes to Financial Statements 22 - 30
Schedule V - Property and Equipment
for the Years Ended December 31, 1995, 1994 and 1993 31
Schedule VI - Accumulated Depreciation
for the Years Ended December 31, 1995, 1994 and 1993 32
Schedule VIII - Valuation and Qualifying Accounts
for the Years Ended December 31, 1995, 1994 and 1993 33
</TABLE>
All other schedules are omitted since they are not required, are not applicable
or the financial information required is included in the financial statements
or the notes thereto.
14
<PAGE> 15
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners
Quest Health Care
Income Fund I, L.P.
We have audited the financial statements and financial statement schedules of
Quest Health Care Income Fund I, L.P. listed in the index of this Form 10-K.
These financial statements and financial statement schedules are the
responsibility of the Partnership's management. Our responsibility is to
express an opinion on these financial statements and financial statement
schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements and
financial statement schedules are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the 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 financial statements referred to above present fairly, in
all material respects, the financial position of Quest Health Care Income Fund
I, L.P. as of December 31, 1995 and 1994, and the results of its operations and
its cash flows for the three years in the period ended December 31, 1995, in
conformity with generally accepted accounting principles. In addition, in our
opinion, the financial statement schedules referred to above, when considered
in relation to the basic financial statements taken as a whole, present fairly,
in all material respects, the information required to be included therein.
As discussed in Note F to the accompanying financial statements, the
Partnership decided to market for sale its operating property and equipment
during 1994. Prior to that decision, in accordance with generally accepted
accounting principles, the Partnership carried operating property and equipment
in its consolidated financial statements at the lower of cost or estimated
undiscounted future cash flows, before interest charges, on an individual
property basis. As a result of this decision, the Partnership has written down
its property and equipment to estimated net realizable value as determined by
management through a charge to earnings of $5,517,275 in 1994. Because of the
sale of a significant portion of the Partnership's operating assets, future
results of operations may differ significantly from historical results of
operations. See Notes A, F, G, H and I to the accompanying financial
statements.
Coopers & Lybrand LLP
Raleigh, North Carolina
April 5, 1996
15
<PAGE> 16
QUEST HEALTH CARE INCOME FUND I, L.P.
BALANCE SHEETS
December 31, 1995 and 1994
<TABLE>
<CAPTION>
ASSETS 1995 1994
- ------ ---------- ----------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $1,546,363 $ 270,593
Accounts receivable, net of allowance for
doubtful accounts of $21,780 and $125,085
in 1995 and 1994, respectively (Note G) 998,120 1,667,857
Prepaid expenses 279,088 839,830
---------- ----------
Total current assets 2,823,571 2,778,280
---------- ----------
PROPERTY AND EQUIPMENT (Notes A, C, F and G)
Land 240,617 495,915
Buildings and improvements 1,872,215 7,037,234
Equipment and furnishings 862,217 2,153,529
---------- ----------
2,975,049 9,686,678
Less accumulated depreciation and amortization 2,221,555 5,219,535
---------- ----------
Net property and equipment 753,494 4,467,143
---------- ----------
TOTAL ASSETS $3,577,065 $7,245,423
========== ==========
</TABLE>
See notes to financial statements.
16
<PAGE> 17
QUEST HEALTH CARE INCOME FUND I, L.P.
BALANCE SHEETS - CONTINUED
December 31, 1995 and 1994
<TABLE>
<CAPTION>
LIABILITIES AND PARTNERS' EQUITY 1995 1994
- -------------------------------- ---------- ----------
<S> <C> <C>
CURRENT LIABILITIES:
Note payable (Note C) $ - $ 600,000
Current maturities of long-term obligations 10,086 40,840
Trade accounts payable 315,367 857,666
Accrued compensation 254,743 636,853
Accrued insurance 204,640 655,540
Estimated third party settlements 76,029 206,525
Other 90,414 568,918
Payable to Quest and affiliates (Note B) 10,490 62,735
---------- ----------
Total current liabilities 961,769 3,629,077
LONG-TERM OBLIGATIONS, less current maturities 7,275 91,095
---------- ----------
(Note C)
Total liabilities 969,044 3,720,172
---------- ----------
PARTNERS' EQUITY
Limited Partners 2,773,084 3,689,007
General Partner (165,063) (163,756)
---------- ----------
2,608,021 3,525,251
---------- ----------
TOTAL LIABILITIES AND PARTNERS' EQUITY $3,577,065 $7,245,423
========== ==========
</TABLE>
See notes to financial statements.
17
<PAGE> 18
QUEST HEALTH CARE INCOME FUND I, L.P.
STATEMENTS OF OPERATIONS
For the Years Ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
REVENUES:
Operating revenue $ 9,806,965 $20,482,437 $19,322,743
Interest income 71,018 14,277 20,671
Gain on sale 103,988 - -
----------- ----------- -----------
Total revenue 9,981,971 20,496,714 19,343,414
----------- ----------- -----------
EXPENSES:
Wages & salaries 5,052,492 10,672,625 10,521,791
Payroll tax & employee benefits 1,165,852 1,943,209 2,011,233
Supplies 1,012,677 1,983,993 1,860,348
Other operating costs 773,892 2,123,374 2,085,894
Ancillary services 824,530 1,172,049 925,730
Health benefits (Note B) 177,596 316,003 567,239
Management fees 487,459 1,031,878 977,149
Management fees-affiliate (Note B) 95,871 207,771 193,782
Property taxes 79,190 168,102 166,026
Interest 17,174 90,157 106,042
Depreciation and amortization 55,380 578,340 686,322
Partnership administration (Note B) 370,599 537,832 368,253
Loss from writedown of
properties (Notes F and G) - 5,517,275 1,976,615
----------- ----------- -----------
Total expenses 10,112,712 26,342,608 22,446,424
----------- ----------- -----------
Loss before extraordinary gain (130,741) (5,845,894) (3,103,010)
Extraordinary gain from settlement-
HSG & Southmark payables (Note E) - 64,977 830,637
----------- ----------- -----------
Net loss $ (130,741) $(5,780,917) $(2,272,373)
=========== =========== ===========
Net income (loss) per limited
partnership unit
Loss before extraordinary gain $ (.49) (22.07) (11.72)
Extraordinary gain from settlement - .24 3.14
----------- ----------- -----------
Net loss per limited
partnership unit $ (.49) $ (21.83) $ (8.58)
=========== =========== ===========
Distributions paid per limited
partnership unit $ 3.00 $ - $ -
=========== =========== ===========
Weighted average Limited Partnership
Units outstanding 262,183 262,183 262,183
=========== =========== ===========
</TABLE>
See notes to financial statements.
18
<PAGE> 19
QUEST HEALTH CARE INCOME FUND I, L.P.
STATEMENTS OF PARTNERS' EQUITY
For the Years Ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
General Limited Total
Partner Partners Equity
--------- ----------- -----------
<S> <C> <C> <C>
Balance at December 31, 1992 (83,223) 11,661,764 11,578,541
Net loss (22,724) (2,249,649) (2,272,373)
--------- ----------- -----------
Balance at December 31, 1993 (105,947) 9,412,115 9,306,168
Net loss (57,809) (5,723,108) (5,780,917)
--------- ----------- -----------
Balance at December 31, 1994 $(163,756) $ 3,689,007 $ 3,525,251
Net loss (1,307) (129,434) (130,741)
Distributions - (786,489) (786,489)
--------- ----------- -----------
Balance at December 31, 1995 $(165,063) $ 2,773,084 $ 2,608,021
========= =========== ===========
</TABLE>
See notes to financial statements.
19
<PAGE> 20
QUEST HEALTH CARE INCOME FUND I, L.P.
STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from residents and
government agencies $ 9,479,672 $ 20,162,172 $ 19,442,345
Cash paid to suppliers and employees (9,853,445) (19,993,765) (19,137,612)
Interest received 71,018 14,277 20,671
Interest paid (17,174) (90,157) (106,042)
Real estate taxes paid (110,038) (174,510) (161,998)
----------- ------------ ------------
Net cash provided by (used in)
operating activities (429,967) (81,983) 57,364
----------- ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of facilities 3,111,709 - -
Additions to property
and equipment (6,593) (136,343) (179,659)
Reduction of restricted deposits - - 33,300
----------- ------------ ------------
Net cash provided by (used in)
investing activities 3,105,116 (136,343) (146,359)
----------- ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to partners (786,489) - -
Principal payments on debt (612,890) (51,808) (240,230)
----------- ------------ ------------
Net cash (used in)
financing activities (1,399,379) (51,808) (240,230)
----------- ------------ ------------
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS: 1,275,770 (270,134) (329,225)
Cash and cash equivalents at
the beginning of the year 270,593 540,727 869,952
----------- ------------ ------------
Cash and cash equivalents at
the end of the year $ 1,546,363 $ 270,593 $ 540,727
=========== ============ ============
</TABLE>
See notes to financial statements.
20
<PAGE> 21
QUEST HEALTH CARE INCOME FUND I, L.P.
STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
1995 1994 1993
--------- ----------- -----------
<S> <C> <C> <C>
RECONCILIATION OF NET LOSS TO NET
CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES
Net loss $(130,741) $(5,780,917) $(2,272,373)
Adjustments to reconcile net loss
to net cash provided by (used in)
operating activities:
Depreciation and amortization 55,380 578,340 686,322
Charge-off of deferred loan costs - - 32,018
Charge-off of construction costs - - 40,060
Gain on sale of facilities (103,988) - -
Loss from write down of properties - 5,517,275 1,976,615
Settlement HSG or Southmark payables - (64,977) (830,637)
Changes net of effect of sold
facilities:
Accounts receivable (327,293) (320,265) 119,602
Other current assets 255,182 (567,558) (61,022)
Accounts payable and accrued
liabilities (126,262) 508,582 354,673
Payable to Quest and affiliates (52,245) 47,537 12,106
--------- ----------- -----------
Net cash provided by (used in)
operating activities $(429,967) $ (81,983) $ 57,364
========= =========== ===========
SUPPLEMENTAL SCHEDULE OF NON CASH
INVESTING AND FINANCING ACTIVITIES
1995 1994 1993
--------- ----------- -----------
Acquisition of vehicles
Cost of vehicles $ - $ - $ 63,366
Loan $ - - 57,028
-----------
Cash paid $ - $ - 6,338
===========
Required connection to city sewer
line financed with long-term debt $ - $ - $ 25,738
===========
Debt assumed by purchaser in sale $ 101,684 $ - $ -
</TABLE>
See notes to financial statements.
21
<PAGE> 22
QUEST HEALTH CARE INCOME FUND I, L.P.
NOTES TO FINANCIAL STATEMENTS
NOTE A ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1. Organization
Quest Health Care Income Fund I, L.P. (the Partnership), formerly
Southmark/CRCA Health Care Income Fund I, L.P., was organized on July 16, 1986,
as a limited partnership under the provisions of the Delaware Revised Uniform
Limited Partnership Act, to acquire and operate income-producing health care
related properties.
On August 1, 1990, Quest Rescue Partners - I-1, L.P. (Quest) became the General
Partner of the Partnership. Quest's sole general partner is Quest Rescue
Partners - I-1 Corp. and its sole limited partner is Quest Financial Corp.
Southmark Investment Group 86, Inc. (SIG), a Nevada corporation and a
wholly-owned subsidiary of Southmark Corporation (Southmark), was the General
Partner of the Partnership prior to August 1, 1990.
The Partnership's primary business and only industry segment is to own, invest
in, operate and ultimately dispose of health care related facilities for the
benefit of its partners. The services provided at the Partnership's long-term
care facilities, which are primarily located in the western United States,
consist of intermediate and skilled nursing care.
The financial statements include the accounts of the Partnership and its 99%
owned partnerships which hold the individual properties. All significant
interpartnership balances and transactions have been eliminated. The amount of
minority interest attributable to affiliates of the General Partner is
immaterial.
2. Cash and Cash Equivalents
For purposes of reporting cash flows, cash and cash equivalents include cash on
hand, demand deposits, money market funds and investments in certificates of
deposit with original maturities, when purchased, of three months or less.
The Partnership maintains cash accounts with a variety of unrelated banks, all
of which are covered by the Federal Deposit Insurance Corporation (FDIC). At
December 31, 1995, the Partnership maintained cash balances at these banks
aggregating $1,430,877 in excess of the $100,000 FDIC insured maximum.
Included in cash and cash equivalents is $1,340,000 invested in repurchase
agreements with underlying United States government backed securities, which
have original maturities of less than 30 days.
3. Operating Revenue
Operating revenue is recorded when services are rendered and includes amounts
reimbursable by the Medicaid and Medicare programs. Medicaid and Medicare
revenues are recorded at the applicable net reimbursement rates; therefore, no
contractual adjustments are reported.
22
<PAGE> 23
QUEST HEALTH CARE INCOME FUND I, L.P.
NOTES TO FINANCIAL STATEMENTS
3. Operating Revenue continued
The Partnership grants unsecured credit to the residents of its facilities.
Inherent in this practice is a credit risk of non-collection. Management has
provided an allowance which it believes will be sufficient to absorb all
uncollectible amounts existing at December 31, 1995 and 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.
Accounts receivable consist primarily of amounts due from residents funded
through Medicare, Medicaid, commercial insurance and private resources.
Accounts receivable includes approximately 38% due from Medicare, 23% due from
Idaho Medicaid and 11% due from Oregon Medicaid.
The sources of patient revenues for years ended December 31, 1993, 1994 and
1995 are as follows:
<TABLE>
<CAPTION>
1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
Medicaid 65% 61% 59%
Private Pay 22% 22% 18%
VA, Medicare and Other 13% 17% 23%
--- --- ---
100% 100% 100%
=== === ===
</TABLE>
The significant components of accounts receivable at December 31, 1994 and 1995
are:
<TABLE>
<CAPTION>
1994 1995
---- ----
<S> <C> <C>
Medicaid 52% 34%
Private Pay 11% 15%
VA, Medicare & Other 37% 51%
--- ---
100% 100%
=== ===
</TABLE>
Payments by both the state and federal governments are normally received within
60-90 days.
4. Property and Equipment
Property and equipment are depreciated using the straight-line method over
lives of 5 to 30 years. Amortization of leased assets is included in
depreciation and amortization expense. Renewals and betterment are capitalized
and repairs and maintenance are charged to operations as incurred.
The Partnership recognizes an impairment loss on operating property and
equipment of its long-term care facilities if it becomes probable that the
carrying amount of the facility may not be recoverable through future
operations. Write downs are charged to operations for the difference in the
net carrying value and the estimated undiscounted future cash flows before
interest charges of the facility. Upon the determination that a facility will
be abandoned, foreclosed, placed on the market for sale, or otherwise disposed
of, the facility's carrying value is adjusted to the estimated net realizable
value, if less than carrying value, through a charge to operations. Since
impairment losses on operating property and equipment is measured against
estimated undiscounted future cash flows, the proceeds from a sale of the
property could be less than the carrying value.
23
<PAGE> 24
QUEST HEALTH CARE INCOME FUND I, L.P.
NOTES TO FINANCIAL STATEMENTS
5. Income Taxes
No provision has been made in the financial statements for income taxes because
under current law, no income taxes are paid directly by the Partnership. The
Partnership reports certain transactions differently for tax and financial
statement purposes.
6. Allocation of Net Income or Net Loss and Distributions
The Partnership Agreement provides that net income (other than net income from
a sale or refinancing of Partnership property), will be allocated to the
Partners in proportion to cash distributions. Net losses will be allocated 99%
to the Limited Partners and 1% to the General Partner.
Net profits from a sale or refinancing of Partnership property will be
allocated first to any partners in proportion to and to the extent of their
negative adjusted capital accounts; then in accordance with distributions of
sale proceeds, refinancing proceeds and cash from other sources.
Distributions of cash from operations are made as follows:
(a) First, to the Limited Partners until they have received distributions of
cash from operations equal to a prescribed (8.5% through April 1, 1990,
and 10.5% thereafter as a result of the Quest Proxy) non-cumulative
return on their invested capital; then,
(b) to the General Partner in the amount of distribution advances, if any,
previously advanced; then,
(c) to the General Partner until it has received cash from operations equal
to 4% of the total distributions of cash from operations; then,
(d) 96% to the Limited Partners and 4% to the General Partners.
Distributions of cash from the sale or refinancing of properties will be
distributed as follows:
(a) First, to all Limited Partners until they have received distributions
from all sources equal to their priority return not previously
distributed through distributions of cash from operations; then,
(b) to the General Partner in the amount of distribution advances, if any,
previously advanced; then,
(c) to all Limited Partners until they have received distributions of cash
from property sales and refinancing and cash from other sources equal to
their original capital investment; then,
(d) to the General Partner until it has received distributions equal to 1%
of the total distributions made by the Partnership other than in return
of the Limited Partners' original capital investment or in payment of
distribution advances to the General Partner; then,
(e) 85% to the Limited Partners and 15% to the General Partner.
24
<PAGE> 25
QUEST HEALTH CARE INCOME FUND I, L.P.
NOTES TO FINANCIAL STATEMENTS
7. Net Income (Loss) Per Limited Partnership Unit
Net income (loss) per Limited Partnership Unit is computed by dividing net
income (loss) allocated to the Limited Partners by the weighted average number
of Limited Partnership Units outstanding.
8. Future Operations
Distribution will be made to the limited partners after establishing adequate
reserves for future operations (Note I).
9. Use of Estimates
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make certain estimates and
assumptions that affect the reported amounts in the balance sheets and
statements of operations. Actual results could differ from those estimates.
10. Fair Value of Financial Instruments
During 1995, the Company adopted Statement of Financial Accounting Standards
No. 107, "Disclosures about fair value of financial Instruments," which
requires disclosure of fair value information about financial instruments,
whether or not recognized in the balance sheet.
The carrying value of cash and cash equivalents, accounts receivable, accounts
payable and accrued expenses approximate fair value due to the short-term
nature of these instruments. There are no off-balance sheet financial
instruments to which the Partnership is subject.
NOTE B TRANSACTIONS WITH AFFILIATES
The Partnership Agreement provides for payment of property management fees
based on 6% of gross property operating revenue. Quest Administrative
Services, L.P., (QASLP), an affiliate of Quest, receives 1% of gross operating
revenue relating to services provided directly to the facilities. Total
payments to QASLP under this contract in 1995, 1994 and 1993 were $95,871,
$207,771 and $193,782, respectively.
Quest, in an effort to continue certain health benefits for Partnership
employees, created an employee benefit trust (the "Trust") in compliance with
the guidelines promulgated by VEBA and ERISA. Amounts contributed to the Trust
by the Partnership and Partnership employees 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
pre-certification organization to review all claims made by the Partnership's
employees. Approximately $177,596, $316,003 and $567,239 were recorded under
this arrangement in 1995, 1994 and 1993, respectively. The Trust is
administered by an affiliate of Quest, however, no profits accrue to the
benefit of either the affiliate or Quest.
Partnership administration costs paid through QASLP were $370,599, $537,832 and
$368,253 in 1995, 1994 and 1993, respectively. Such charges represent legal
costs associated with litigation and SEC filings, investor service functions
and other partnership administration costs.
25
<PAGE> 26
QUEST HEALTH CARE INCOME FUND I, L.P.
NOTES TO FINANCIAL STATEMENTS
NOTE C LONG-TERM OBLIGATIONS
A summary of the long-term obligations of the Partnership at December 31, 1995
and 1994 follows:
<TABLE>
<CAPTION>
1995 1994
------- --------
<S> <C> <C>
12% note collateralized by the Parkway North
facility with monthly interest only payments. $ - $600,000
7.03% unsecured note for sewer improvements
at Sunny Vista with bi-annual payments of
$1,597. Note is due November 2012. - 23,164
9.5% installment notes related to three vans
for three facilities, collateralized by the
vehicles. Monthly payments of principal and
interest of $1,433 in total. Notes are due
August 1997. - 40,360
13.75% installment notes related to seven vans
in 1994 and to two vans in 1995 collateralized
by the vehicles. Monthly payments of principal
and interest of $942 in total. Notes are due
May 1997. 17,361 68,411
------- --------
17,361 731,935
Less current maturities 10,086 640,840
------- --------
Long-term portion $ 7,275 $ 91,095
======= ========
</TABLE>
As of December 31, 1995, principal maturities for the next five years for
long-term debt are as follows:
<TABLE>
<CAPTION>
<S> <C>
1996 10,086
1997 7,275
1998 -
1999 -
2000 -
2001 and after -
------
17,361
======
</TABLE>
The Partnership sold its interests in seven facilities in 1995. Sales proceeds
were applied to retire the Parkway North mortgage. Other debt, relating to
sewer improvements or vans was assumed by the purchaser.
26
<PAGE> 27
QUEST HEALTH CARE INCOME FUND I, L.P.
NOTES TO FINANCIAL STATEMENTS
NOTE D TAXABLE INCOME (LOSS)
A reconciliation between the net loss for financial reporting purposes and the
loss for tax purposes follows:
<TABLE>
<CAPTION>
Year Ended December 31,
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Financial statement net loss $ (130,741) $(5,780,917) $(2,272,373)
Add:
Bad debts - 6,556 5,240
Jobs tax credit - 93,781 86,846
Minority interest 3,396 6,174 10,184
Other - - 2
Writedown of properties - 5,517,275 1,976,615
Prior year expense accrual (67,707) 67,707 -
Current year expense accrual 10,374 - -
Deduct:
Bad debts (28,901) - -
Excess of tax over book depreciation (292,512) (184,224) (115,903)
Excess of tax over book basis of
disposed facilities (4,532,999) (387,760) -
----------- ----------- -----------
Taxable loss $(5,039,090) $ (661,408) $ (309,389)
=========== =========== ===========
</TABLE>
NOTE E LITIGATION
During 1993, the Partnership settled its litigation with Southmark. The
Partnership made a net payment to Southmark of $89,300 and was relieved of a
$919,937 liability on its financial statements. This forgiveness of liability
resulted in the recognition of Non-cash income of $830,637. The majority of
the liability removed from the Partnership's balance sheet appeared in "Payable
to Southmark and Affiliates" and "Distribution Advances from the General
Partner".
During the third quarter of 1994, the Partnership settled its litigation with
Healthcare Services Group, Inc. which resulted in $64,977 being recognized as
Non-cash income.
In December 1994, the Partnership received a Notice and Demand for Payment from
the Idaho State Tax Commission resulting from sales tax audits for
approximately $90,000. The Company is discussing a settlement of this matter
and has recorded a provision of approximately $67,000 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. As a result of selling facility interests in 1995, the liability
and reserve were reduced to $36,410 and $27,308, respectively. The Partnership
is involved in certain other routine litigation incidental to business.
Management does not expect settlements, if any, to have a material adverse
effect on the Partnership's financial position.
27
<PAGE> 28
QUEST HEALTH CARE INCOME FUND I, L.P.
NOTES TO FINANCIAL STATEMENTS
NOTE F IMPAIRMENT LOSS
Fourth quarter results for 1993 include a non-cash charge related to property
and equipment write down for the Hearthside and Comanche facilities of $805,733
and $1,170,882, respectively. For the Hearthside facility, the writedown
resulted from the Partnership's reassessment of projected undiscounted future
cash flows over the life of the property in light of the economic and
regulatory environment in which this facility operates and the related impact
on future estimated revenue and expense levels. For the Comanche View
facility, management contemplated closing the facility, therefore, it was
written down to estimated net realizable value. The Partnership believed that
in 1993 based on its assessment of future census, revenues and expenses, the
writedowns were adequate. Management closed the Comanche View facility in May,
1994.
During 1994, the Partnership filed preliminary proxy materials with the
Securities and Exchange Commission (the "SEC") which described a proposed sale
of its interests in eleven facilities and related operating assets including
working capital to an affiliate of the General Partner. In December 1994, it
became apparent the preliminary proxy could not be completed on a timely basis,
therefore, all negotiations with the affiliate were terminated and subsequently
the preliminary proxy materials were withdrawn from the SEC review process.
As set forth in the preliminary proxy materials, should the preliminary proxy
not be completed, it was the Partnership's intent to sell its assets to
generate cash proceeds for distribution to the limited partners. Accordingly
consistent with the Partnership's accounting policy as discussed in Note A, the
Partnership has reflected the property and equipment as of December 31, 1994 at
the lower of cost (as previously adjusted for writedowns if applicable) or
estimated net realizable value, determined on an individual nursing home basis.
At December 31, 1994, Property and Equipment for the Hearthside, South Salem
and Burley facilities were written down by $1,107,603, $355,252 and $583,557,
respectively, which represents management's opinion of the estimated net
realizable value. The remaining facilities were also adjusted to estimated net
realizable value.
NOTE G SALE OF FACILITIES
On February 28, 1995, the Partnership sold its partnership interests in seven
of its facilities to an unaffiliated third party. The Partnership reflected an
estimated loss on the sale of these facilities of $3,470,863 at December 31,
1994, and recognized a gain of $103,988 upon closing of the sale. 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 of which $377,058
was received in 1995, and the balance was collected in the first quarter of
1996. In addition the purchaser assumed debt related to equipment of
approximately $102,000. Total consideration was therefore, $3,253,905. The
Partnership made
28
<PAGE> 29
QUEST HEALTH CARE INCOME FUND I, L.P.
NOTES TO FINANCIAL STATEMENTS
NOTE G SALE OF FACILITIES continued
a final determination of adjusted working capital when the Partnership's
accountants completed certain agreed upon procedures, during the third quarter.
A distribution of $786,489 to the limited partners was made during the third
quarter of 1995.
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, as of December 31, 1994. 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 H PRO FORMA INFORMATION (UNAUDITED)
Due to the impact of the Partnership selling its interests in seven of its
facilities in 1995, historical results of operations may not be indicative of
future 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 occurred as of January
1995. In the opinion of the Partnership's management, all adjustments necessary
to reflect the effects of the sale have been made.
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 period. It
is management of the Partnership's belief that all adjustments necessary to
reflect the affects of the sales have been made.
PRO FORMA CONDENSED STATEMENT OF OPERATIONS (B)
For the Year Ended December 31, 1995
(Unaudited in thousands)
<TABLE>
<CAPTION>
Historical Adjustments Pro Forma
---------- ----------- ---------
<S> <C> <C> <C>
Revenues: $ 9,878 $(2,346)(A) $7,532
------- ------- ------
Expenses:
Wages and salaries $ 5,052 $(1,225)(A) $3,827
Operating expenses 3,956 (894)(A) 3,062
Management fees 487 (116)(A) 371
Management fees affiliate 96 (22)(A) 74
Property taxes and interest 96 (31)(A) 65
Depreciation and amortization 55 (1)(A) 54
Partnership administration 371 - 371
------- ------- ------
10,113 (2,289) 7,824
------- ------- ------
Net income (loss) (B) $ (235) $ (57) $ (292)
======= ======= ======
</TABLE>
(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 December 31,
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.
29
<PAGE> 30
QUEST HEALTH CARE INCOME FUND I, L.P.
NOTES TO FINANCIAL STATEMENTS
NOTE I GOING CONCERN
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 any
or all of its remaining facilities will have an effect on cash flow from
operations in the future.
Management of the Partnership believes that successful control of the facility
and Partnership expenses and establishing adequate reserves from the sales of
facilities should enable the Partnership to meet its obligations and upon the
final sale of its assets, liquidate in an orderly fashion.
NOTE J
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, as discussed in Notes F and G, effectively
adjusting the carrying value of its long-lived assets to estimated net
realizable value, as of December 31, 1994, no significant adjustment from net
realizable value to fair value is expected.
30
<PAGE> 31
QUEST HEALTH CARE INCOME FUND I, L.P.
SCHEDULE V - PROPERTY AND EQUIPMENT
For the Years Ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
Balance at Balance
Beginning Additions Retirement & Other at End
Classification of Year at Cost Write Downs Changes of Year
- -------------- ----------- --------- ------------ ----------- ----------
<S> <C> <C> <C> <C> <C>
FOR THE YEAR ENDED DECEMBER 31, 1995:
- -------------------------------------
Land $ 495,915 $ - $ (255,298) $ - $ 240,617
Buildings and
improvements 7,037,234 - (5,165,019) - 1,872,215
Equipment and
furnishings 2,153,529 6,594 (1,297,906) - 862,217
----------- -------- ------------ ----------- ------------
$ 9,686,678 $ 6,594 $ (6,718,223) $ - $ 2,975,049
=========== ======== ============ =========== ============
FOR THE YEAR ENDED DECEMBER 31, 1994:
- -------------------------------------
Land $ 495,915 $ - $ - $
Buildings and
improvements 12,206,052 49,879 (5,213,002) (5,695) 7,037,234
Equipment and
furnishings 2,083,752 86,464 - (16,687) 2,153,529
----------- -------- ------------ ----------- ------------
$14,785,719 $136,343 $ (5,213,002) $ (22,382) $ 9,686,678
=========== ======== ============ =========== ============
FOR THE YEAR ENDED DECEMBER 31, 1993:
- -------------------------------------
Land $ 495,915 $ - $ - $ - $ 495,915
Buildings and
improvements 14,010,143 104,870 (1,908,961) - 12,206,052
Construction in
process 40,060 - - (40,060) -
Equipment and
furnishings 1,993,851 57,555 (67,654) - 2,083,752
----------- -------- ------------ ----------- ------------
$16,539,969 $ 62,425 $ (1,976,615) $ (40,060) $ 14,785,719
=========== ======== ============ =========== ============
</TABLE>
31
<PAGE> 32
QUEST HEALTH CARE INCOME FUND I, L.P.
SCHEDULE VI - ACCUMULATED DEPRECIATION
For the Years Ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
Additions
Charged to Balance
Beginning Costs and Other at End
Classification of Year Expenses Retirements Changes of Year
- -------------- ----------- ----------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C>
FOR THE YEAR ENDED DECEMBER 31, 1995:
Buildings and
improvements $ 3,577,558 $ 1,549 $(2,002,179) $ - $ 1,576,928
Equipment and
furnishings 1,641,977 53,831 (1,051,181) - 644,627
----------- ----------- ----------- ---------- -----------
$ 5,219,535 $ 55,380 $(3,053,360) $ - $ 2,221,555
=========== =========== =========== ========== ===========
FOR THE YEAR ENDED DECEMBER 31, 1994:
Buildings and
improvements $ 3,201,409 $ 381,844 $ - $ (5,695) $ 3,577,558
Equipment and
furnishings 1,462,168 196,496 - (16,687) 1,641,977
----------- ----------- ----------- ---------- -----------
$ 4,663,577 $ 578,340 $ - $ (22,382) $ 5,219,535
=========== =========== =========== ========== ===========
FOR THE YEAR ENDED DECEMBER 31, 1993:
Buildings and
improvements $ 2,722,468 $ 478,941 $ - $ - $ 3,201,409
Equipment and
furnishings 1,254,787 207,381 - - 1,462,168
----------- ----------- ----------- ---------- -----------
$ 3,977,255 $ 686,322 $ - $ - $ 4,663,577
=========== =========== =========== ========== ===========
</TABLE>
32
<PAGE> 33
QUEST HEALTH CARE INCOME FUND I, L.P.
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
For the Years Ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
Receivable Write-off of
Balance at Additions Charged Allowance
Beginning Charged to Against for Sold Balance at
Description of Year Expenses Allowance Facilities End of Year
- ----------- ---------- ---------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1995
- ----------------------------
Allowance for
doubtful
accounts $ 125,085 $ 28,665 $ (57,567) $ (74,403) $ 21,780
========== ========== =========== ========= ==========
Year ended December 31, 1994
- ----------------------------
Allowance for
doubtful
accounts $ 118,529 $ 30,813 $ (24,257) $ - $ 125,085
========== ========== =========== ========= ==========
Year ended December 31, 1993
- ----------------------------
Allowance for
doubtful
accounts $ 105,389 $ 26,066 $ (12,926) $ - $ 118,529
========== ========== ========== ========= ==========
</TABLE>
33
<PAGE> 34
ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
The Partnership has had no disagreement with its accountants on accounting or
financial issues during the past three years.
ITEM 10 DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Partnership does not have officers or directors. Quest Rescue Partners I-1,
L.P. is the General Partner, whose general partner is Quest Rescue Partners I-1
Corp. The principal officers and directors of the general partner of Quest are
as follows:
<TABLE>
<CAPTION>
Other Principal Occupations and Other
Name and Position Age Directorships During the Past 5 Years
- ----------------- --- -------------------------------------
<S> <C> <C>
Stuart C. Berry 42
Chairman
Executive Vice-President Chairman of Quest Financial Corp. and the
Quest Affiliates, and has been since their inception in 1989. Mr. Berry
received a B.S. degree in Finance from Babson College, Wellesley,
Massachusetts in l976.
Michael G. Hunter 38
President & Director President of Quest Financial Corp. and the Quest Affiliates. From 1988
and prior to starting Quest, Mr. Hunter was Senior Vice President and
Chief Financial Officer of Healthcare Concepts, Inc., Atlanta, Georgia, a
consulting and investment advisor to long term care providers, lenders
and capital markets. Mr. Hunter received a B.S. degree in Finance from
the University of Arkansas in 1982. He is both a general securities
principal and a financial operations principal.
</TABLE>
ITEM 11 EXECUTIVE COMPENSATION
None of the executive officers of the general partner of Quest receive any
direct remuneration from the Partnership. Quest is not compensated directly
for its services as general partner of the Partnership. See Item 13 for
further discussion of compensation paid to affiliates of Quest.
ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(A) Security ownership of certain beneficial owners.
No person or group, as defined by Section 13(d)(3) of the Securities
Exchange Act of 1934, known to the Partnership is the beneficial owner
of more than 5% of the Units.
34
<PAGE> 35
(B) Security ownership of management.
None of the officers or directors of the general partner of Quest own
any Units.
The General Partner is entitled to distributions of cash from operations
and from "other sources" (primarily from the sale or refinancing of
Partnership properties, as set forth in Item 8, Note A.)
(C) Change in control.
There exists no arrangement known to the Partnership, the operation of
which may at a subsequent date, result in a change in control of the
Partnership.
ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
(A) and (B) Affiliates of the General Partner, in accordance with the terms of
the Agreement, may receive compensation for services rendered to the
Partnership.
The management companies engaged by the Partnership receive a management fee of
5% of gross operating revenues. Quest Administrative Services, L.P., an
affiliate of Quest, receives a fee of 1% of gross operating revenues for
providing certain management services. These fees are prescribed in the
Partnership Agreement and the structure permits a rapid and efficient method of
termination of a facility manager, should the need ever arise. Total payments
to QASLP under this agreement in 1995 were $95,871. Quest created an employee
benefit trust in compliance with the guidelines promulgated by VEBA and ERISA.
Approximately $177,596 was contributed under this arrangement in 1995. The
trust is administered by an affiliate of Quest, however, no profits accrued to
the benefit of either the affiliate or Quest.
See Note B to the accompanying consolidated financial statements appearing in
Item 6.
(C) No management persons are indebted to the Partnership.
(D) There have been no transactions with promoters.
ITEM 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(A) The following documents are filed as a part of this report:
1. Consolidated Financial Statements:
Report of Independent Accountants
Consolidated Balance Sheets
as of December 31, 1995 and 1994
Consolidated Statements of Operations
for the Years Ended December 31, 1995, 1994 and 1993
Consolidated Statements of Partners' Equity
for the Years Ended December 31, 1995, 1994 and 1993
35
<PAGE> 36
Consolidated Statements of Cash Flows
for the Years Ended December 31, 1995, 1994 and 1993
Notes to Consolidated Financial Statements
2. Financial Statement Schedules
Schedules V - Property and Equipment
for the Years Ended December 31, 1995, 1994 and 1993
Schedule VI - Accumulated Depreciation
for the Years Ended December 31, 1995, 1994 and 1993
Schedule VIII - Valuation and Qualifying Accounts
for the Years Ended December 31, 1995, 1994 and 1993
Other schedules are omitted since they are not required, are not applicable or
the financial information required is included in the consolidated financial
statements or notes thereto.
3. Exhibits
The following exhibits are filed or incorporated by reference and are an
integral part of this Form 10-K.
<TABLE>
<CAPTION>
Exhibit Number Document Description
-------------- --------------------
<S> <C>
2 Agreement of Purchase and Sale by and among
persons and entities set forth on Exhibit A,
attached thereto, and Southmark Corporation
dated as of April 1, 1987 incorporated by
reference to Form 8-K dated June 30, 1987.
2 Assignment of Purchase and Sale Agreement by
and among Southmark Corporation and the
Limited Partnerships set out on Exhibit A,
attached thereto, dated June 30, 1987
incorporated by reference to Form 8-K dated
June 30, 1987.
2 Composite Contract of Sale - Multiple
Properties dated June 1, 1988, by and among
Cedar Springs Care Center, Inc.,
Connersville Care Centers, Inc. and
Southmark/CRCA Health Care Income Fund I,
L.P. incorporated by reference to Form 8-K dated
June 30, 1987.
2 Agreement of Sale and Purchase for Nursing
Home by and between July Associates V, L.P.
and John A Freeman, Jr., dated April 8, 1986
incorporated by reference to Form 8-K dated
June 30, 1987.
2 Assignment of Purchase and Sale Agreement by
and between V.J.F., Inc. and Fort Stockton
Associates L.P., dated January 14, 1987
incorporated by reference to Form 8-K dated
June 30, 1987.
</TABLE>
36
<PAGE> 37
<TABLE>
<S> <C>
3 Agreement of Limited Partnership of
Southmark/CRCA Health Care Income Fund I,
L.P., incorporated by reference to Form S-
Page A-1, File No. 33-7368
3 Amendment to Agreement of Limited
Partnership of Southmark/CRCA Health Care
Income Fund I, L.P., dated August 1, 1990.
3 Second Amendment to Agreement of Limited
Partnership of Southmark/CRCA Health Care
Income Fund I, L.P., dated August 1, 1990.
3 Form of Fourth Amendment to Agreement of
Limited Partnership Southmark/CRCA Health
Care Income Fund I, L.P., dated June 1,
1992.
10 Health Care Center Consultant and Management
Services Agreement between National Heritage
Management, Inc. and Coos Bay Associates
Limited Partnership d/b/a Coos Bay Care
Center incorporated by reference to amended
form 10-K for fiscal year ended December 31,
1988.
10 Agreement for laundry and housekeeping
services between American Services Company
and Parkway North Associates, L.P. d/b/a
Parkway North Care Center incorporated by
reference to amended form 10-K for fiscal
year ended December 31, 1988.
10 Nursing Home Management Agreement between
Southmark/CRCA Health Care Income Fund I,
L.P. and LTCS, L.P. d/b/a VHA Long Term Care
dated November 28, l989.
10 Form of Amendment, effective March 1, 1992,
to the Nursing Home Management Agreement
between Southmark/CRCA Health Care Income
Fund I, L.P. and LTCS, L.P. dba VHA Long
Term Care.
10 Contract for sale of seven facilities
between Quest Health Care Income Fund I and
Emile Properties, Inc.
22 List of majority owned partnerships.
27 Financial Data Schedule (for SEC use only).
</TABLE>
(B) Reports on Form 8-K
None during the fourth quarter of 1995.
(C) An annual report for the fiscal year 1995 will be sent to the Limited
Partners subsequent to this filing and the Partnership will furnish copies
of such report to the Securities and Exchange Commission at that time.
37
<PAGE> 38
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
By: QUEST RESCUE PARTNERS
I-1, L.P.
General Partner
By: QUEST RESCUE PARTNERS
I-1, Corp., General
Partner
Date: April 12, 1995 By: /s/ Stuart C. Berry
----------------- ------------------------
Stuart C. Berry
Executive Vice-President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons, on behalf of the
Registrant and in the capacities and on the dates indicated:
Date: April 12, 1996 /s/ Stuart C. Berry
------------------ ------------------------
Chairman, Executive Vice
President and Chief
Financial Officer of the
General Partner of
the General Partner
Date: April 12, 1996 /s/ Michael G. Hunter
------------------ ------------------------
Michael G. Hunter
President and Director
of the General Partner
of the General Partner
38
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF QUEST HEALTH CARE INCOME FUND L.P. FOR THE YEAR ENDED
DECEMBER 31, 1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 1,546,363
<SECURITIES> 0
<RECEIVABLES> 1,019,900
<ALLOWANCES> 21,780
<INVENTORY> 0
<CURRENT-ASSETS> 2,823,571
<PP&E> 2,975,049
<DEPRECIATION> 2,221,555
<TOTAL-ASSETS> 3,577,065
<CURRENT-LIABILITIES> 961,769
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 2,608,021
<TOTAL-LIABILITY-AND-EQUITY> 3,577,065
<SALES> 0
<TOTAL-REVENUES> 9,981,971
<CGS> 0
<TOTAL-COSTS> 10,066,873
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 28,665
<INTEREST-EXPENSE> 17,174
<INCOME-PRETAX> (130,741)
<INCOME-TAX> 0
<INCOME-CONTINUING> (130,741)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (130,741)
<EPS-PRIMARY> (.49)
<EPS-DILUTED> (.49)
</TABLE>
