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, 1995 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 11 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 --
March 31, 1995 and December 31, 1994 3
Condensed consolidated statements of operations --
Three months ended March 31, 1995 and 1994 4
Consolidated statement of partners' equity 5
Condensed consolidated statements of cash flows --
Three months ended March 31, 1995 and 1994 6
Notes to condensed consolidated financial statements --
March 31, 1995 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II. OTHER INFORMATION
- --------------------------
Item 1. Legal Proceedings 10
Item 6. Exhibits and Reports on Form 8-K 10
SIGNATURES 11
- ----------
-2-
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
----------------------------
FORUM RETIREMENT PARTNERS, L.P. AND SUBSIDIARY PARTNERSHIP
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, December 31,
1995 1994
------------- ------------
(Without Audit) (Note)
ASSETS (in thousands)
Property and equipment:
Land $ 14,771 $ 14,758
Buildings 98,114 97,918
Furniture and equipment 8,258 8,174
----------- -----------
121,143 120,850
Less accumulated depreciation 24,885 24,000
----------- -----------
NET PROPERTY AND EQUIPMENT 96,258 96,850
Cash and cash equivalents 6,599 5,588
Accounts receivable, less allowances for doubtful
accounts of $260 and $208 2,898 2,650
Restricted cash 2,380 2,625
Deferred costs, net of accumulated amortization
of $442 and $352 2,067 2,152
Other assets 778 1,298
----------- -----------
TOTAL ASSETS $ 110,980 $ 111,163
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
Long-term debt, including $950 and $927 due
within one year $ 49,711 $ 49,934
Accounts payable and accrued expenses 3,756 3,969
Management fees and amounts due to parent
of general partner 1,439 1,195
Deferred management fees due to parent of
general partner 15,780 15,780
Resident deposits 1,448 1,445
----------- -----------
TOTAL LIABILITIES 72,134 72,323
----------- -----------
General partner's equity in subsidiary
partnership 228 228
----------- -----------
Partners' equity:
General partner 492 492
Limited partners (15,285 units issued and
outstanding) 38,126 38,120
----------- -----------
TOTAL PARTNERS' EQUITY 38,618 38,612
----------- -----------
$ 110,980 $ 111,163
=========== ===========
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
March 31,
---------------------
1995 1994
------ ------
(in thousands except
per unit amounts)
Revenues:
Routine $ 10,621 $ 10,189
Ancillary 1,467 1,086
Other income 72 47
---------- ----------
TOTAL REVENUES 12,160 11,322
---------- ----------
Costs and expenses:
Routine expenses 7,604 7,028
Ancillary costs 1,202 897
Management fees to parent of general partner 966 904
General and administrative 125 197
Litigation 39 22
Depreciation 885 856
Interest, including amounts to parent of
general partner of $8 and $11 1,333 1,348
---------- ----------
TOTAL COSTS AND EXPENSES 12,154 11,252
---------- ----------
Income before general partner's interest
in income of subsidiary partnership 6 70
General partner's interest in income of
subsidiary partnership 0 0
---------- ----------
NET INCOME 6 70
General partner's interest in net income 0 1
---------- ----------
Limited partners' interest in net income $ 6 $ 69
========== ==========
Average number of units outstanding 15,285 15,285
========== ==========
Net income per unit $ 0.00 $ 0.00
========== ==========
SEE Notes to Condensed Consolidated Financial Statements.
-4-
<PAGE>
FORUM RETIREMENT PARTNERS, L.P. AND SUBSIDIARY PARTNERSHIP
CONSOLIDATED STATEMENT OF PARTNERS' EQUITY
Three Months Ended March 31, 1995
(Without Audit)
General Limited
Partner Partners
------- --------
(in thousands)
Balance at January 1, 1995 $ 492 $38,120
Net income 0 6
------- -------
Balance at March 31, 1995 $ 492 $38,126
======= =======
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)
Three Months Ended
March 31,
-------------------------
1995 1994
---------- ----------
(in thousands)
Cash flows from operating activities:
Net income $ 6 $ 70
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation of property and equipment 885 856
Amortization of deferred financing costs 90 86
Accrued management fees currently due to
parent of general partner (15) 904
Other accrued revenues and expenses, net 361 77
---------- ----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,327 1,993
---------- ----------
Cash flows from investing activities:
Additions to property and equipment (293) (203)
---------- ----------
NET CASH USED BY INVESTING ACTIVITIES (293) (203)
---------- ----------
Cash flows from financing activities:
Reduction of long-term debt (223) (136)
Net decrease (increase) in restricted cash 248 (668)
Payment on note payable to parent of
general partner (43) (66)
Deferred loan costs (5) (107)
Other 0 (12)
---------- ----------
NET CASH USED BY FINANCING ACTIVITIES (23) (989)
---------- ----------
Net increase in cash and cash equivalents 1,011 801
Cash and cash equivalents at beginning of period 5,588 4,700
---------- ----------
Cash and cash equivalents at end of period $ 6,599 $ 5,501
========== ==========
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)
March 31, 1995
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, 1995 are not necessarily indicative of
the results that may be expected for the year ending December 31, 1995. 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, 1994, and the footnotes thereto, included in the Partnership's
Annual Report on Form 10-K for the year ended December 31, 1994 (the "1994
10-K").
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
March 31, 1995
Results Of Operations
- ---------------------
Net operating results reported for the Partnership for the first three months
of the current year were slightly below those for the same three-month period
of 1994. The actual performance for the Partnership was significantly ahead
of the prior year, but a $190,000 unfavorable adjustment in amounts
previously estimated to be reimbursable by Medicare in the prior year was
recorded in the current quarter and a favorable adjustment to workers'
compensation insurance costs of $360,000 was recorded in the same quarter
last year for estimates of costs incurred in the previous year.
As of March 31, 1995 and 1994, the Partnership owned nine retirement
communities ("RCs"), all of which were managed by Forum Group. A comparison
of operating revenues, operating expenses and net operating income, as
adjusted for the non-recurring amounts discussed above, for the nine RCs
owned by the Partnership is as follows:
Three Months Ended March 31,
-----------------------------------
1995 * 1994 * Change
------- ------- ------
(dollars in thousands)
RC operating revenues * $12,278 $11,227 + 9%
RC operating expenses * 8,806 8,285 + 6%
RC management fees 966 904 + 7%
------- -------
Net operating income * $ 2,506 $ 2,038 + 23%
======= =======
*As adjusted for non-recurring amounts
Current adjusted operating revenues of $12,278,000 were ahead of budget and
increased 9% over operating revenues for the same period last year. Current
adjusted operating expenses increased 6% over operating expenses for the same
period last year, primarily attributable to increases in occupancy,
additional ancillary services, and normal inflationary and operational
increases in other operating expenses. Current adjusted net operating income
(RC operating revenues less RC operating expenses and management fees) of
$2,506,000 was on budget and 23% ahead of net operating income for the same
period last year.
Combined average occupancy for the three months ended March 31, 1995 of 94.5%
increased by 1.2% compared to the same period of 1994, and the combined
average monthly rental rate for the three months ended March 31, 1995
increased by 4.7% compared to the same period for 1994. Ancillary services
to residents increased by almost $400,000. During these same quarterly
periods, the adjusted operating margin percentage improved from 26.2% for
1994 to 28.3% for 1995.
Partnership Status For Tax Purposes. The Omnibus Budget Reconciliation Act
of 1987 provides that certain publicly traded partnerships will be treated as
corporations for federal income tax purposes. A grandfathering provision
delays corporate tax status until 1998 for certain partnerships, including
the Partnership. On August 8, 1988, the General Partner was authorized by
-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 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. Assuming that the Partnership remains a publicly traded
partnership, alternatives available to avoid corporate taxation after 1998
include, among others, (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 seek to avoid being taxed as a corporation
for federal income tax purposes, there can be no assurance that it will be
successful.
Financial Condition
- -------------------
Liquidity And Capital Resources. At March 31, 1995, the Partnership had cash
and cash equivalents of $6,599,000, accounts receivable of $2,898,000, and
current liabilities of $6,145,000. The Partnership believes that it has
adequate liquidity to meet its foreseeable working capital requirements.
However, as discussed below, the Partnership is considering certain possible
expansion projects that would require substantial additional capital. There
can be no assurance that the Partnership will be able to obtain such
additional capital.
The General Partner is continuing to study the possible expansion of certain
of the Partnership's properties in an effort to further increase operating
income. Any expansion would likely add capacity to existing facilities
without incurring substantial land acquisition and common area build-out
costs. A preliminary study identified several attractive expansion
opportunities, which could increase the number of living units owned by the
Partnership by approximately 18% for an estimated capital expenditure of
$14 million. Any significant expansion could require the Partnership to
obtain additional financing, modify existing financing, and obtain regulatory
approvals. Approximately $2.2 million of the expansion opportunities have
been approved and are now in progress.
Operating activities provided $666,000 less cash during the three months
ended March 31, 1995 than during the comparable period of 1994, due
principally to an increase in accrued management fees due the parent of the
General Partner in 1994 as offset by changes in other accrued revenues and
expenses.
Investing activities used $90,000 more cash during the three months ended
March 31, 1995 than during the comparable period of 1994, due to normal
fluctuations in the purchases of property and equipment and $61,000 of costs
incurred for initial work on the expansion program.
Financing activities used $966,000 less cash during the three months ended
March 31, 1995 than during the comparable period of 1994, due principally to
additions to restricted cash reserves in 1994 as required by the terms of the
Nomura Loan and allowed withdrawals from those cash reserves in 1995.
Inflation. Management does not believe that inflation has had a material
effect on the Partnership's results of operations. To the extent possible,
increased costs are recovered through increased residency fees and charges.
-9-
<PAGE>
PART II. OTHER INFORMATION
FORUM RETIREMENT PARTNERS, L.P. AND SUBSIDIARY PARTNERSHIP
March 31, 1995
ITEM 1. LEGAL PROCEEDINGS
- -------------------------
On January 24, 1994, the Russell F. Knapp Revokable Trust (the
"Plaintiff"), filed a complaint (the "Complaint") in the United States
District Court for the Northern District of Iowa (the "District Court")
against the General Partner alleging breach of the Partnership Agreement,
breach of fiduciary duty, fraud, and civil conspiracy. On March 17,
1994, the Plaintiff amended the Complaint, adding Forum Group as a
defendant. The Complaint alleges, among other things, that the Plaintiff
holds a substantial number of Units, that the Board of Directors of the
General Partner is not comprised of a majority of independent directors,
as required by the Partnership Agreement and as allegedly represented in
the Partnership's 1986 Prospectus for its initial public offering, and
that the General Partner's Board of Directors has approved and/or
acquiesced to an 8% management fee charged by Forum Group under the
Management Agreement. The Complaint further alleges that the "industry
standard" for such fees is 4% thereby resulting in an "overcharge" to the
Partnership estimated by the Plaintiff at $1.8 million per annum,
beginning in 1994. The Plaintiff is seeking the restoration of certain
former directors to the Board of Directors of the General Partner and the
removal of certain other directors from that Board, an injunction
prohibiting the payment of an 8% management fee, and unspecified
compensatory and punitive damages.
On April 4, 1995, the District Court entered an order dismissing the
Complaint in its entirety because no personal jurisdiction exists in Iowa
over the General Partner or Forum Group. On May 3, 1995, the Plaintiff
filed a Notice of Appeal with the District Court, indicating that it will
appeal the District Court's decision to the United States Court of
Appeals for the Eighth Circuit.
The General Partner will continue to vigorously defend against this
litigation. In accordance with the Management Agreement, the Partnership
reimbursed the General Partner for $39,000 and $146,000, for the three
months ended March 31, 1995 and calendar year 1994, respectively, of
litigation costs relating to this claim.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- ----------------------------------------
(a) Exhibits:
--------
None
(b) Reports on Form 8-K:
-------------------
None
-10-
<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: May 15, 1995 By: /s/ Paul A. Shively
-------------------------------------
Paul A. Shively, Vice President,
Treasurer and Chief Financial Officer
-11-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 6,599
<SECURITIES> 0
<RECEIVABLES> 3,158
<ALLOWANCES> 260
<INVENTORY> 0
<CURRENT-ASSETS> 9,497
<PP&E> 121,143
<DEPRECIATION> 24,885
<TOTAL-ASSETS> 110,980
<CURRENT-LIABILITIES> 6,145
<BONDS> 49,711
<COMMON> 0
0
0
<OTHER-SE> 38,618
<TOTAL-LIABILITY-AND-EQUITY> 110,980
<SALES> 0
<TOTAL-REVENUES> 12,160
<CGS> 0
<TOTAL-COSTS> 12,154
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,333
<INCOME-PRETAX> 6
<INCOME-TAX> 0
<INCOME-CONTINUING> 6
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6
<EPS-PRIMARY> .00
<EPS-DILUTED> .00
</TABLE>
