SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934
For Quarter Ended June 30, 1994 Commission File Number 1-9302
FORUM RETIREMENT PARTNERS, L.P.
(Exact name of registrant as specified in its charter)
DELAWARE 35-1686799
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
8900 Keystone Crossing, Suite 200
P.O. Box 40498
Indianapolis, Indiana 46240-0498
(Address of principal executive offices) (Zip Code)
317-846-0700
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days. Yes X No
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There are 13 pages in this report.
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INDEX
FORUM RETIREMENT PARTNERS, L.P. AND SUBSIDIARY PARTNERSHIPS
PART I. FINANCIAL INFORMATION PAGE
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Item 1. Financial Statements (Without Audit)
Condensed consolidated balance sheets --
June 30, 1994 and December 31, 1993 3
Condensed consolidated statements of operations --
Three and six months ended June 30, 1994 and 1993 4
Consolidated Statement of Partners' Equity --
Six months ended June 30, 1994 5
Condensed consolidated statements of cash flows --
Six months ended June 30, 1994 and 1993 6
Notes to condensed consolidated financial statements --
June 30, 1994 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II. OTHER INFORMATION
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Item 6. Exhibits and Reports on Form 8-K 12
SIGNATURES 13
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
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FORUM RETIREMENT PARTNERS, L.P. AND SUBSIDIARY PARTNERSHIPS
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, December 31,
1994 1993
------------- -----------
(Without Audit) (Note)
ASSETS (in thousands)
Property and equipment:
Land $ 14,630 $ 14,572
Buildings 97,277 96,473
Furniture and equipment 8,014 7,739
----------- -----------
119,921 118,784
Less accumulated depreciation 22,296 20,519
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NET PROPERTY AND EQUIPMENT 97,625 98,265
Cash and cash equivalents 5,444 4,700
Accounts receivable, less allowances for doubtful
accounts of $140 and $126 2,881 2,274
Restricted cash 2,472 1,719
Deferred costs, net of accumulated amortization
of $173 in 1994 2,328 2,339
Other assets 1,002 1,183
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TOTAL ASSETS $ 111,752 $ 110,480
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
Long-term debt, including $882 and $773 due
within one year $ 50,364 $ 50,707
Long-term debt due to parent of general partner 534 633
Accounts payable and accrued expenses 4,110 3,402
Management fees and amounts due to parent
of general partner 972 5
Deferred management fees due to parent of
general partner 15,780 15,780
Resident deposits 1,365 1,341
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TOTAL LIABILITIES 73,125 71,868
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General partner's equity in subsidiary
partnership 227 226
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Partners' equity:
General partner 490 490
Limited partners (15,285 units issued and
outstanding) 37,910 37,896
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TOTAL PARTNERS' EQUITY 38,400 38,386
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$ 111,752 $ 110,480
=========== ===========
Note: The balance sheet at December 31, 1993, has been derived from the
audited financial statements at that date.
SEE Notes to Condensed Consolidated Financial Statements.
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FORUM RETIREMENT PARTNERS, L.P. AND SUBSIDIARY PARTNERSHIPS
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Without Audit)
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ------------------
1994 1993 1994 1993
-------- -------- -------- --------
(in thousands except per unit amounts)
Revenues:
Operating revenues $ 11,392 $ 10,707 $ 22,667 $ 21,104
Other income 47 36 94 75
-------- -------- -------- --------
TOTAL REVENUES 11,439 10,743 22,761 21,179
-------- -------- -------- --------
Costs and expenses:
Operating expenses 8,195 8,159 16,315 16,044
Management fees to parent
of general partner 914 855 1,818 1,692
Litigation 20 0 42 0
Depreciation 926 835 1,783 1,665
Interest:
Parent of general partner 10 12 21 27
Other 1,339 1,587 2,676 3,127
-------- -------- -------- --------
TOTAL COSTS AND EXPENSES 11,404 11,448 22,655 22,555
-------- -------- -------- --------
Income (loss) before general partner's
interest in income (loss) of
subsidiary partnerships 35 (705) 106 (1,376)
General partner's interest in income
(loss) of subsidiary partnerships 0 (4) 1 (9)
-------- -------- -------- --------
NET INCOME (LOSS) 35 (701) 105 (1,367)
General partner's interest in
net income (loss) 0 (7) 1 (14)
-------- -------- -------- --------
Limited partners' interest in
net income (loss) $ 35 $ (694) $ 104 $ (1,353)
======== ======== ======== ========
Average number of units
outstanding 15,285 8,785 15,285 8,785
======== ======== ======== ========
Net income (loss) per unit $ 0.00 $ (0.08) $ 0.01 $ (0.15)
======== ======== ======== ========
SEE Notes to Condensed Consolidated Financial Statements.
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FORUM RETIREMENT PARTNERS, L.P. AND SUBSIDIARY PARTNERSHIPS
CONSOLIDATED STATEMENT OF PARTNERS' EQUITY
Six Months Ended June 30, 1994
General Limited
Partner Partners
------- --------
(in thousands)
Balance at January 1, 1994 $ 490 $37,896
Costs from issuance of units (1) (90)
Net income 1 104
------- -------
Balance at June 30, 1994 $ 490 $37,910
======= =======
SEE Notes to Condensed Consolidated Financial Statements.
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FORUM RETIREMENT PARTNERS, L.P. AND SUBSIDIARY PARTNERSHIPS
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Without Audit)
Six Months Ended
June 30,
-------------------------
1994 1993
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(in thousands)
Cash flows from operating activities:
Net income (loss) $ 105 $ (1,367)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation of property and equipment 1,783 1,666
Amortization of deferred financing costs 173 201
Deferred management fees due to parent of
general partner 0 1,692
Accrued management fees currently due to parent
of general partner 914 0
Other accrued revenues and expenses, net 6 (1,421)
Payment of rent due from general partner 0 225
Other 1 34
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NET CASH PROVIDED BY OPERATING ACTIVITIES 2,982 1,030
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Cash flows from investing activities:
Additions to property and equipment (815) (426)
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NET CASH USED BY INVESTING ACTIVITIES (815) (426)
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Cash flows from financing activities:
Reduction of long-term debt (343) (2,475)
Net increase in restricted cash (729) (40)
Payment on note payable to parent of
general partner (99) (186)
Deferred loan costs (162) (225)
Other (90) 0
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NET CASH USED BY FINANCING ACTIVITIES (1,423) (2,926)
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Net increase (decrease) in cash and cash equivalents 744 (2,322)
Cash and cash equivalents at beginning of period 4,700 4,888
---------- ----------
Cash and cash equivalents at end of period $ 5,444 $ 2,566
========== ==========
SEE Notes to Condensed Consolidated Financial Statements.
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FORUM RETIREMENT PARTNERS, L.P., AND SUBSIDIARY PARTNERSHIPS
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Without Audit)
June 30, 1994
Note A - Basis of Presentation
- - ------------------------------
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Rule
10-01 of Regulation S-X. Accordingly, they do not include all the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management,
all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for
the six-month period ended June 30, 1994 are not necessarily indicative of
the results that may be expected for the year ending December 31, 1994. For
further information, refer to the consolidated financial statements of Forum
Retirement Partners, L.P. (the "Partnership"), as of and for the year ended
December 31, 1993, and the footnotes thereto, included in the Partnership's
Annual Report on Form 10-K for the year ended December 31, 1993.
Note B - General Partner's Interest in Subsidiary Partnership
- - -------------------------------------------------------------
The general partner owns a one percent interest in an affiliated operating
partnership. This interest is reflected in the statements of operations as a
reduction of the income or loss of the Partnership.
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FORUM RETIREMENT PARTNERS, L.P., AND SUBSIDIARY PARTNERSHIPS
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
June 30, 1994
The first six months of the current year produced significantly better
operating results than the same six-month period in 1993. Operating revenues
for the three and six months ended June 30, 1994 were 6% and 7%,
respectively, above operating revenues for the same periods last year, and
net operating income (operating revenues less operating expenses) was 25% and
26%, respectively, above net operating income for the same periods in 1993.
The three and six months ended June 30, 1994 produced net income of $35,000
and $105,000, respectively, compared to net losses of $701,000 and
$1,367,000, respectively, for the same periods of 1993. Combined occupancy
at June 30, 1994 was 94%, compared to 94% at December 31, 1993, and 92% at
June 30, 1993.
As of June 30, 1994, the Partnership owned nine RCs, all of which were
managed by Forum Group, Inc. ("Forum Group"), a corporation which is a
substantial equity owner of the Partnership and the parent corporation of
Forum Retirement, Inc., the general partner of the Partnership (the "General
Partner").
Results Of Operations
- - ---------------------
Operating Revenues. Operating revenues for the three and six months ended
June 30, 1994 increased by $685,000 (6%) and $1,563,000 (7%), respectively,
compared to operating revenues for the same periods in 1993. These increases
were principally attributable to changes in occupancy, increased provision of
ancillary healthcare services and planned increases in residency fees and
charges. Combined average occupancy for the six months ended June 30, 1994
increased by 2.7% compared to the same period of 1993, and the combined
average monthly rental rate for the six months ended June 30, 1994 increased
by 5.2% compared to the same period of 1993.
Costs and Expenses. Operating expenses, including management fees and
depreciation for the three and six months ended June 30, 1994, increased by
$186,000 (2%) and $515,000 (3%), respectively, compared to those combined
expenses for the same periods of 1993. These increases were principally
attributable to changes in occupancy, increased provision of ancillary
healthcare services and normal inflationary increases in other operating
expenses, as partially offset by reductions of $171,000 and $379,000, for the
three and six months ended June 30, 1994, respectively, due to a change in
the estimate of accrued workers' compensation premiums.
During the three and six months ended June 30, 1994, litigation expenses of
$20,000 and $42,000, respectively, were recorded in conjunction with certain
litigation commenced in January, 1994 by the Russell F. Knapp Revokable
Trust. For a more complete description of this litigation, see Item 3 of the
Partnership's Form 10-K for the year ended December 31, 1993.
Total interest expense for the three and six months ended June 30, 1994
decreased by $250,000 and $457,000, respectively, compared to total interest
expense for the same periods in 1993, due principally to a decrease in the
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FORUM RETIREMENT PARTNERS, L.P., AND SUBSIDIARY PARTNERSHIPS
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
amount of outstanding long term debt and a lower interest rate resulting from
the refinancing of the Partnership's debt discussed below.
Income Taxes. The Omnibus Budget Reconciliation Act of 1987 provides that
certain publicly-traded partnerships will be treated as corporations for
federal income tax purposes. A grandfather provision delays corporate tax
status until 1998 for publicly-traded partnerships in existence prior to
December 18, 1987. On August 8, 1988, the General Partner was authorized by
the limited partners to do all things deemed necessary or desirable to insure
that the Partnership is not treated as a corporation for federal income tax
purposes. Alternatives available to avoid corporate taxation after 1997
include: (i) selling or otherwise disposing of all or substantially all of
the Partnership's assets pursuant to a plan of liquidation, (ii) converting
the Partnership into a real estate investment trust or other type of legal
entity, and (iii) restructuring the Partnership to qualify as a partnership
primarily with passive rental income. While the Partnership presently
intends to avoid being taxed as a corporation for federal income tax
purposes, there can be no assurance that it will be successful.
Financial Condition
- - -------------------
Recapitalization. On October 6, 1993, the Partnership entered into an
agreement (the "Recapitalization Agreement") with Forum Group pursuant to
which the Partnership issued 6.5 million depositary units representing
limited partners' interests in the Partnership ("Preferred Depositary Units"
or "Units") to a subsidiary of Forum Group ("Forum A/H"), and Forum A/H made
a capital contribution to the Partnership of $13.0 million in the aggregate,
or $2.00 per Unit. The proceeds were used to prepay a portion of the
Partnership's bank debt scheduled to mature on December 31, 1993 (the "Bank
Credit Facility").
Pursuant to the Recapitalization Agreement, on January 10, 1994 the
Partnership commenced a subscription offering in which holders of Preferred
Depositary Units of record as of October 18, 1993 (other than Forum Group and
its affiliates) were permitted to purchase .07398342 of a Preferred
Depositary Unit for each Preferred Depositary Unit held by them on October
18, 1993 at a purchase price of $2.00 per Unit. 1,994,189 Preferred
Depositary Units were issued in the subscription offering, which expired on
February 25, 1994. In accordance with the Recapitalization Agreement, the
Partnership used the $3,988,378 of proceeds of the subscription offering to
repurchase 1,994,189 Preferred Depositary Units from Forum A/H at a purchase
price of $2.00 per Unit. Following the repurchase transaction, Forum Group
beneficially owned 43.2% of the Partnership, including its 1.0% General
Partner's interest.
Liquidity And Capital Resources. At June 30, 1994, the Partnership had cash
and cash equivalents of $5,444,000 and accounts receivable of $2,881,000.
The Partnership believes that its liquidity and the capital resources
available to it are adequate to meet its forseeable working capital
requirements.
The Partnership's general partner currently is conducting a detailed
feasibility study of the possible expansion of certain of the Partnership's
properties in an effort to further increase operating income. A preliminary
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FORUM RETIREMENT PARTNERS, L.P., AND SUBSIDIARY PARTNERSHIPS
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
study has identified several attractive expansion opportunities, which could
increase the number of living units owned by the Partnership by up to 30%.
Any expansion would likely modify the uses of, or add capacity to, existing
facilities without incurring substantial land acquisition and common area
build-out costs. Any significant expansion could require the Partnership to
obtain additional financing, modify existing financing and/or obtain
regulatory approvals. Such an expansion would also affect the Partnership's
levels of distributable cash, if any.
After provision for reserves, the Partnership had no net cash flow available
for distribution with respect to the second quarter.
On December 28, 1993, the Partnership entered into a loan agreement with
Nomura Asset Capital Corporation ("Nomura") for $50,700,000 in new financing
(the "Nomura Loan"). The Nomura Loan bears interest at the rate of 9.93% per
annum (including a 0.20% servicing fee), is amortized over a 20-year period
and matures on January 1, 2001. The proceeds of the Nomura Loan were used to
prepay in full (i) the approximately $9.5 million remaining principal balance
of the debt under the Bank Credit Facility, which would have matured on
December 31, 1993 and (ii) approximately $34.1 million aggregate principal
amount of the Partnership's split coupon first mortgage notes, which would
have matured June 30, 1996, and to pay related fees and expenses.
Pursuant to the terms of the management agreement between the Partnership and
Forum Group (the "Management Agreement"), management fees (based on the
Partnership's gross operating revenues) payable to Forum Group for all
periods from the formation of the Partnership in 1986 to December 31, 1993
($15,780,000) have been deferred. Management fees for periods after December
31, 1993 are to be paid on a current basis. Deferred management fees are
payable to Forum Group out of proceeds of sales and refinancings after making
distributions of those proceeds in an amount sufficient (i) to meet limited
partners' tax liabilities, (ii) to repay limited partners' capital
contributions, and (iii) to pay a 12% cumulative, simple annual return on
limited partners' unrecovered capital contributions. Deferred management
fees become immediately due and payable in the event that the Management
Agreement is terminated, which may occur under certain conditions including,
but not limited to, if Forum Retirement, Inc. is removed as the General
Partner and 80% in interest of the limited partners vote to terminate such
agreement. The Partnership is unable to determine when or if management fees
deferred prior to January 1, 1994 will become payable. For a more complete
description of the management agreement, see Item 7 of the Partnership's Form
10-K for the year ended December 31, 1993.
Operating activities provided $1,952,000 more cash during the six months
ended June 30, 1994 than during the comparable period of 1993, due
principally to improved operating performance and reductions in other accrued
revenues and expenses during 1993.
Investing activities used $389,000 more cash during the six months ended June
30, 1994 than during the comparable period of 1993, due to normal
fluctuations in the purchases of property and equipment.
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FORUM RETIREMENT PARTNERS, L.P., AND SUBSIDIARY PARTNERSHIPS
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
Financing activities used $1,503,000 less cash during the six months ended
June 30, 1994 than during the comparable period of 1993, due principally to a
March, 1993 principal payment on the Bank Credit Facility, less an increase
in restricted cash reserves required by the terms of the Nomura Loan.
Inflation. Management does not believe that inflation has had a material
effect on net income. To the extent possible, increased costs are recovered
through increased residency fees and charges.
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PART II. OTHER INFORMATION
FORUM RETIREMENT PARTNERS, L.P. AND SUBSIDIARY PARTNERSHIPS
June 30, 1994
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- - ----------------------------------------
(a) Exhibits:
None
(b) Reports on Form 8-K:
None
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SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FORUM RETIREMENT PARTNERS, L.P.,
a Delaware limited partnership
By: Forum Retirement, Inc., General Partner
Date: August 11, 1994 By: /s/ Paul A. Shively
--------------------------------------
Paul A. Shively, Vice President,
Treasurer and Chief Financial Officer
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