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 March 31, 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 12 pages in this report.
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INDEX
FORUM RETIREMENT PARTNERS, L.P. AND SUBSIDIARY PARTNERSHIPS
PART I. FINANCIAL INFORMATION PAGE
Item 1. Financial Statements (Without Audit)
Condensed consolidated balance sheets --
March 31, 1994 and December 31, 1993 3
Condensed consolidated statements of operations --
Three months ended March 31, 1994 and 1993 4
Consolidated Statement of Partners' Equity 5
Condensed consolidated statements of cash flows --
Three months ended March 31, 1994 and 1993 6
Notes to condensed consolidated financial statements --
March 31, 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
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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
March 31, December 31,
1994 1993
------------- ------------
(Without Audit) (Note)
ASSETS (in thousands)
Property and equipment:
Land $ 14,599 $ 14,572
Buildings 96,563 96,473
Furniture and equipment 7,825 7,739
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118,987 118,784
Less accumulated depreciation 21,375 20,519
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NET PROPERTY AND EQUIPMENT 97,612 98,265
Cash and cash equivalents 5,501 4,700
Accounts receivable, less allowances for doubtful
accounts of $136 and $126 2,690 2,274
Restricted cash 2,403 1,719
Deferred costs, net of accumulated amortization
of $86 in 1994 2,360 2,339
Other assets 986 1,183
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TOTAL ASSETS $ 111,552 $ 110,480
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
Long-term debt, including $860 and $773 due
within one year $ 50,571 $ 50,707
Long-term debt due to parent of general partner 567 633
Accounts payable and accrued expenses 3,645 3,402
Management fees and amounts due to parent
of general partner 961 5
Deferred management fees due to parent of
general partner 15,780 15,780
Resident deposits 1,357 1,341
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TOTAL LIABILITIES 72,881 71,868
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General partner's equity in subsidiary
partnership 227 226
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Partners' equity:
General partner 491 490
Limited partners (15,285 units issued and
outstanding) 37,953 37,896
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TOTAL PARTNERS' EQUITY 38,444 38,386
----------- -----------
$ 111,552 $ 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
March 31,
---------------------
1994 1993
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(in thousands except
per unit amounts)
Revenues:
Operating revenues $ 11,275 $ 10,397
Other income 47 39
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TOTAL REVENUES 11,322 10,436
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Costs and expenses:
Operating expenses 8,122 7,884
Management fees to parent of general partner 904 836
Litigation expenses 22 0
Depreciation 856 831
Interest:
Parent of general partner 11 14
Other 1,337 1,541
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TOTAL COSTS AND EXPENSES 11,252 11,106
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Income (loss) before general partner's interest
in loss of subsidiary partnerships 70 (670)
General partner's interest in income (loss) of
subsidiary partnerships 0 (4)
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NET INCOME (LOSS) 70 (666)
General partner's interest in net income (loss) 1 (7)
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Limited partners' interest in net income (loss) $ 69 $ (659)
========== ==========
Average number of units outstanding 15,285 8,785
========== ==========
Net income (loss) per unit $ 0.00 $ (0.08)
========== ==========
SEE Notes to Condensed Consolidated Financial Statements.
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FORUM RETIREMENT PARTNERS, L.P. AND SUBSIDIARY PARTNERSHIPS
CONSOLIDATED STATEMENT OF PARTNERS' EQUITY
Three Months Ended March 31, 1994
General Limited
Partner Partners
------- --------
Balance at January 1, 1994 $ 490 $37,896
Costs from issuance of units 0 (12)
Net income 1 69
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Balance at March 31, 1994 $ 491 $37,953
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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)
Three Months Ended
March 31,
-------------------
1994 1993
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(in thousands)
Cash flows from operating activities:
Net income (loss) $ 70 $ (666)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation of property and equipment 856 831
Amortization of deferred financing costs 86 63
Deferred management fees due to parent of
general partner 0 836
Accrued management fees currently due to parent
of general partner 904 0
Other accrued revenues and expenses, net 77 (1,003)
Payment of rent due from general partner 0 225
Other 0 28
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NET CASH PROVIDED BY OPERATING ACTIVITIES 1,993 314
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Cash flows from investing activities:
Additions to property and equipment (203) (403)
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NET CASH USED BY INVESTING ACTIVITIES (203) (403)
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Cash flows from financing activities:
Reduction of long-term debt (136) (2,475)
Net increase in restricted cash (668) (36)
Payment on note payable to parent of
general partner (66) (105)
Deferred loan costs (107) (225)
Other (12) 0
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NET CASH USED BY FINANCING ACTIVITIES (989) (2,841)
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Net increase (decrease) in cash and cash equivalents 801 (2,930)
Cash and cash equivalents at beginning of period 4,700 4,888
---------- ----------
Cash and cash equivalents at end of period $ 5,501 $ 1,958
========== ==========
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)
March 31, 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 three-month period ended March 31, 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.
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
March 31, 1994
The first three months of the current year produced significantly better
operating results than the same three-month period in 1993. Current
operating revenues of $11,275,000 were 8% above operating revenues for the
same period last year, and current net operating income (operating revenues
less operating expenses) of $3,153,000 was 25% above net operating income for
the same period in 1993. The quarter ended March 31, 1994 produced net
income of $70,000 compared to a net loss of $666,000 for the three months
ended March 31, 1993. Combined occupancy at March 31, 1994 was 93%, compared
to 94% at December 31, 1993, and 91% at March 31, 1993.
As of March 31, 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 months ended March 31,
1994 and 1993, were $11,275,000 and $10,397,000, respectively. This increase
was 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 three months ended March 31,
1994 increased by 3.5% compared to the same period of 1993, and the combined
average monthly rental rate for the three months ended March 31, 1994
increased by 4.8% compared to the same period of 1993.
Costs and Expenses. Operating expenses, including management fees and
depreciation for the three months ended March 31, 1994 and 1993, were
$9,882,000 and $9,551,000, respectively. This increase was principally
attributable to changes in occupancy, increased provision of ancillary
healthcare services and normal inflationary increases in other operating
expenses. Current quarter operating expenses were reduced by $128,000, when
compared to the same quarter in 1993, due to a change in the estimate of
accrued workers' compensation premiums.
During the three months ended March 31, 1994, litigation expenses of $22,000
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 months ended March 31, 1994 decreased by
$207,000 compared to total interest expense for the same three-month period
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
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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)
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 1998
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 "Recaptialization 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. 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 (assuming 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
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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)
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, which will affect the
Partnership's cash position. 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 $1,679,000 more cash during the three months
ended March 31, 1994 than during the comparable period of 1993, due
principally to improved operating performance and reductions in accounts
payable and other accrued expenses during 1993.
Investing activities used $200,000 less cash during the three months ended
March 31, 1994 than during the comparable period of 1993, due principally to
normal fluctuations in the purchases of property and equipment. At March 31,
1994 the Partnership has no material commitments for capital expenditures.
Financing activities used $1,852,000 less cash during the three months ended
March 31, 1994 than during the comparable period of 1993, due principally to
(i) a March, 1993 principal payment made to facilitate the extension of the
maturity date of the Bank Credit Facility and (ii) 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
March 31, 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: May 12, 1994 By: /s/ Paul A. Shively
-------------------------------------
Paul A. Shively, Vice President,
Treasurer and Chief Financial Officer
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