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 September 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
----- -----
There are 12 pages in this report.
<PAGE>
INDEX
FORUM RETIREMENT PARTNERS, L.P. AND SUBSIDIARY PARTNERSHIP
PART I. FINANCIAL INFORMATION PAGE
- - ----------------------------- ----
Item 1. Financial Statements (Without Audit)
Condensed consolidated balance sheets --
September 30, 1994 and December 31, 1993 3
Condensed consolidated statements of operations --
Three and nine months ended September 30, 1994 and 1993 4
Consolidated statement of partners' equity --
Nine months ended September 30, 1994 5
Condensed consolidated statements of cash flows --
Nine months ended September 30, 1994 and 1993 6
Notes to condensed consolidated financial statements --
September 30, 1994 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II. OTHER INFORMATION
- - --------------------------
Item 6. Exhibits and Reports on Form 8-K 11
SIGNATURES 12
- - ----------
-2-
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FORUM RETIREMENT PARTNERS, L.P. AND SUBSIDIARY PARTNERSHIP
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, December 31,
1994 1993
--------------- ------------
(Without Audit) (Note)
ASSETS (in thousands)
Property and Equipment:
Land $ 14,702 $ 14,572
Buildings 97,579 96,473
Furniture and equipment 8,098 7,739
----------- -----------
120,379 118,784
Less accumulated depreciation 23,126 20,519
----------- -----------
NET PROPERTY AND EQUIPMENT 97,253 98,265
Cash and cash equivalents 5,388 4,700
Accounts receivable, less allowances for doubtful
accounts of $214 and $126 2,900 2,274
Restricted cash 2,430 1,719
Deferred costs, net of accumulated amortization
of $263 in 1994 2,240 2,339
Other assets 1,409 1,183
----------- -----------
TOTAL ASSETS $ 111,620 $ 110,480
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
Long-term debt, including $904 and $773 due
within one year $ 50,152 $ 50,707
Long-term debt due to parent of general partner 477 633
Accounts payable and accrued expenses 3,963 3,402
Management fees and amounts due to parent of
general partner 1,031 5
Deferred management fees due to parent of
general partner 15,780 15,780
Resident deposits 1,392 1,341
----------- -----------
TOTAL LIABILITIES 72,795 71,868
----------- -----------
General partner's equity in subsidiary
partnership 229 226
----------- -----------
Partners' equity:
General partner 492 490
Limited partners (15,285 units issued and
outstanding) 38,104 37,896
----------- -----------
TOTAL PARTNERS' EQUITY 38,596 38,386
----------- -----------
$ 111,620 $ 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.
-3-
<PAGE>
FORUM RETIREMENT PARTNERS, L.P. AND SUBSIDIARY PARTNERSHIP
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Without Audit)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
1994 1993 1994 1993
-------- -------- -------- --------
(in thousands except per unit amounts)
Revenues:
Operating revenues $ 12,038 $ 11,154 $ 34,705 $ 32,275
Other income 56 237 150 295
-------- -------- -------- --------
TOTAL REVENUES 12,094 11,391 34,855 32,570
-------- -------- -------- --------
Costs and expenses:
Operating expenses 8,742 8,499 25,057 24,544
Management fees to parent
of general partner 968 898 2,786 2,589
Litigation 8 0 50 0
Depreciation 834 842 2,617 2,507
Interest:
Parent of general partner 9 12 30 39
Other 1,336 1,566 4,012 4,693
-------- -------- -------- --------
TOTAL COSTS AND EXPENSES 11,897 11,817 34,552 34,372
-------- -------- -------- --------
Income (loss) before general partner's
interest in income (loss) of
subsidiary partnership 197 (426) 303 (1,802)
General partner's interest in income
(loss) of subsidiary partnership 1 (2) 2 (11)
-------- -------- -------- --------
NET INCOME (LOSS) 196 (424) 301 (1,791)
General partner's interest in
net income (loss) 2 (4) 3 (18)
-------- -------- -------- --------
Limited partners' interest in
net income (loss) $ 194 $ (420) $ 298 $ (1,773)
======== ======== ======== ========
Average number of units
outstanding 15,285 8,785 15,285 8,785
======== ======== ======== ========
Net income (loss) per unit $ 0.01 $ (0.05) $ 0.02 $ (0.20)
======== ======== ======== ========
SEE Notes to Condensed Consolidated Financial Statements.
-4-
<PAGE>
FORUM RETIREMENT PARTNERS, L.P. AND SUBSIDIARY PARTNERSHIP
CONSOLIDATED STATEMENT OF PARTNERS' EQUITY
Nine Months Ended September 30, 1994
(Without Audit)
General Limited
Partner Partners
---------- ----------
(in thousands)
Balances at January 1, 1994 $ 490 $ 37,896
Costs from issuance of units (1) (90)
Net income 3 298
---------- ----------
Balances at September 30, 1994 $ 492 $ 38,104
========== ==========
SEE Notes to Condensed Consolidated Financial Statements.
-5-
<PAGE>
FORUM RETIREMENT PARTNERS, L.P. AND SUBSIDIARY PARTNERSHIP
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Without Audit)
Nine Months Ended
September 30,
-------------------------
1994 1993
---------- ----------
(in thousands)
Cash flows from operating activities:
Net income (loss) $ 301 $ (1,791)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation of property and equipment 2,617 2,506
Amortization of deferred financing costs 263 341
Deferred management fees due to parent of
general partner 0 2,589
Accrued management fees currently due to
parent of general partner 968 0
Other accrued revenues and expenses, net (458) (1,462)
Payment of rent from general partner 0 225
Other 4 64
---------- ----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 3,695 2,472
---------- ----------
Cash flows from investing activities:
Additions to property and equipment (1,382) (683)
---------- ----------
NET CASH USED BY INVESTING ACTIVITIES (1,382) (683)
---------- ----------
Cash flows from financing activities:
Reduction of long-term debt (555) (2,475)
Net increase in restricted cash (660) (74)
Payment on note payable to parent of
general partner (156) (200)
Deferred loan costs (163) (300)
Other (91) 0
---------- ----------
NET CASH USED BY FINANCING ACTIVITIES (1,625) (3,049)
---------- ----------
Net increase (decrease) in cash and cash equivalents 688 (1,260)
Cash and cash equivalents at beginning of period 4,700 4,888
---------- ----------
Cash and cash equivalents at end of period $ 5,388 $ 3,628
========== ==========
SEE Notes to Condensed Consolidated Financial Statements.
-6-
<PAGE>
FORUM RETIREMENT PARTNERS, L.P., AND SUBSIDIARY PARTNERSHIP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Without Audit)
September 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 nine-month period ended September 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.
Certain amounts in the 1993 consolidated financial statements have been
restated to conform to the 1994 presentation.
Note B - General Partner's Interest in Subsidiary Partnership
- - -------------------------------------------------------------
Forum Retirement, Inc., a wholly-owned subsidiary of Forum Group, Inc.
("Forum Group"), is the general partner of the Partnership (the "General
Partner") and owns a one percent interest in the Partnership and in a
subsidiary operating partnership in which the Partnership owns a ninety-nine
percent interest. The General Partner's interest in the subsidiary operating
partnership is reflected in the statements of operations as a reduction of
the income or loss of the Partnership. The Partnership is a 62.1% owned
subsidiary of Forum Group.
-7-
<PAGE>
FORUM RETIREMENT PARTNERS, L.P., AND SUBSIDIARY PARTNERSHIP
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
September 30, 1994
The first nine months of the current year produced significantly better
operating results than the same nine-month period in 1993. Operating
revenues for the three and nine months ended September 30, 1994 were 8% above
operating revenues for the same periods last year, and net operating income
(operating revenues less operating expenses) was 24% and 25%, respectively,
above net operating income for the same periods in 1993. The three and nine
months ended September 30, 1994 produced net income of $196,000 and $301,000,
respectively, compared to net losses of $424,000 and $1,791,000,
respectively, for the same periods of 1993. Combined occupancy was 94% at
September 30, 1994 and December 31, 1993, and 92% at September 30, 1993.
As of September 30, 1994, the Partnership owned nine RCs, all of which were
managed by Forum Group.
Results Of Operations
- - ---------------------
Operating Revenues. Operating revenues for the three and nine months ended
September 30, 1994 increased by $884,000 (8%) and $2,430,000 (8%),
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 nine months
ended September 30, 1994 increased by 2.5% compared to the same period of
1993, and the combined average monthly rental rate for the nine months ended
September 30, 1994 increased by 5.8% compared to the same period of 1993.
Costs and Expenses. Operating expenses, including management fees and
depreciation for the three and nine months ended September 30, 1994,
increased by $305,000 (3%) and $820,000 (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 $151,000 and
$386,000, for the three and nine months ended September 30, 1994,
respectively, due to a change in the estimate of accrued workers'
compensation premiums.
Total interest expense for the three and nine months ended September 30, 1994
decreased by $233,000 and $690,000, respectively, compared to total interest
expense for the same periods in 1993, due principally to a decrease in the
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
-8-
<PAGE>
FORUM RETIREMENT PARTNERS, L.P., AND SUBSIDIARY PARTNERSHIP
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
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 seek to avoid being taxed as a corporation for federal income tax
purposes, there can be no assurance that it will be successful in this
regard.
Financial Condition
- - -------------------
Liquidity And Capital Resources. At September 30, 1994, the Partnership had
cash and cash equivalents of $5,388,000, accounts receivable of $2,900,000,
and current liabilities of $6,375,000. The Partnership believes that it has
adequate liquidity to meet its foreseeable working capital requirements.
The General Partner is continuing to conduct 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 study has
identified several attractive expansion opportunities, which could increase
the number of living units owned by the Partnership by approximately 30%, for
an estimated capital expenditure totalling $25 million. 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 obtain regulatory approvals.
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 secured debt under a prior bank credit facility (the "Prior Loan") which
was due to mature on December 31, 1993 and (ii) approximately $34.1 million
aggregate principal amount of the Partnership's split coupon first mortgage
notes, which were due to mature on 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) were deferred. Management fees for periods after December 31,
1993 are being paid quarterly, in arrears. 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
-9-
<PAGE>
FORUM RETIREMENT PARTNERS, L.P., AND SUBSIDIARY PARTNERSHIP
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
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 $1,223,000 more cash during the nine months
ended September 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, net of the above-described difference in
the treatment of management fees due the parent of the General Partner.
Investing activities used $699,000 more cash during the nine months ended
September 30, 1994 than during the comparable period of 1993, due to normal
fluctuations in the purchases of property and equipment.
Financing activities used $1,424,000 less cash during the nine months ended
September 30, 1994 than during the comparable period of 1993, due principally
to a March, 1993 principal payment on the Prior Loan, partially offset by an
increase in restricted cash reserves in 1994 as 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.
-10-
<PAGE>
PART II. OTHER INFORMATION
FORUM RETIREMENT PARTNERS, L.P. AND SUBSIDIARY PARTNERSHIP
September 30, 1994
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- - ----------------------------------------
(a) Exhibits:
None
(b) Reports on Form 8-K:
None
-11-
<PAGE>
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: November 4, 1994 By: /s/ Paul A. Shively
--------------------------------------
Paul A. Shively, Vice President,
Treasurer and Chief Financial Officer
-12-
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1994
<CASH> 5,388
<SECURITIES> 0
<RECEIVABLES> 3,114
<ALLOWANCES> 214
<INVENTORY> 0
<CURRENT-ASSETS> 8,288
<PP&E> 120,379
<DEPRECIATION> 23,126
<TOTAL-ASSETS> 111,620
<CURRENT-LIABILITIES> 6,375
<BONDS> 50,152
<COMMON> 0
0
0
<OTHER-SE> 38,596
<TOTAL-LIABILITY-AND-EQUITY> 111,620
<SALES> 0
<TOTAL-REVENUES> 34,855
<CGS> 0
<TOTAL-COSTS> 34,552
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,042
<INCOME-PRETAX> 301
<INCOME-TAX> 0
<INCOME-CONTINUING> 301
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 301
<EPS-PRIMARY> .02
<EPS-DILUTED> .02
</TABLE>
