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, 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.)
11320 Random Hills Road, Suite 400
Fairfax, Virginia 22030
(Address of principal executive offices) (Zip Code)
703-277-7000
(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
PART I. FINANCIAL INFORMATION PAGE
----------------------------- ----
Item 1. Financial Statements (Without Audit)
Condensed consolidated balance sheets --
June 30, 1995 and December 31, 1994 3
Condensed consolidated statements of operations --
Three and six months ended June 30, 1995 and 1994 4
Condensed consolidated statements of cash flows --
Six months ended June 30, 1995 and 1994 5
Notes to condensed consolidated financial statements --
June 30, 1995 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
PART II. OTHER INFORMATION
--------------------------
Item 1. Legal Proceedings 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
June 30, December 31,
1995 1994
------------- ------------
(Without Audit) (Note)
ASSETS (in thousands)
Property and equipment:
Land $ 14,816 $ 14,758
Buildings 98,477 97,918
Furniture and equipment 8,513 8,174
----------- -----------
121,806 120,850
Less accumulated depreciation 25,781 24,000
----------- -----------
NET PROPERTY AND EQUIPMENT 96,025 96,850
Cash and cash equivalents 6,273 5,588
Accounts receivable, less allowances for doubtful
accounts of $208 and $208 1,535 2,650
Restricted cash 2,928 2,625
Deferred costs, net of accumulated amortization
of $532 and $352 2,021 2,152
Other assets 2,059 1,298
----------- -----------
TOTAL ASSETS $ 110,841 $ 111,163
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
Long-term debt, including $974 and $927 due
within one year $ 49,482 $ 49,934
Accounts payable and accrued expenses 3,730 3,969
Management fees and amounts due to parent
of general partner 1,453 1,195
Deferred management fees due to parent of
general partner 15,780 15,780
Resident deposits 1,397 1,445
----------- -----------
TOTAL LIABILITIES 71,842 72,323
----------- -----------
General partner's equity in subsidiary
partnership 229 228
----------- -----------
Partners' equity:
General partner 492 492
Limited partners (15,285 units issued and
outstanding) 38,278 38,120
----------- -----------
TOTAL PARTNERS' EQUITY 38,770 38,612
----------- -----------
$ 110,841 $ 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 Six Months Ended
June 30, June 30,
------------------ -----------------
1995 1994 1995 1994
-------- -------- ------- --------
(in thousands except per unit amounts)
Revenues:
Routine $ 10,946 $ 10,352 $ 21,567 $ 20,502
Ancillary 1,424 1,040 2,891 2,165
Other income 80 47 153 94
-------- -------- ------- --------
TOTAL REVENUES 12,450 11,439 24,611 22,761
-------- -------- ------- --------
Costs and expenses:
Routine expenses 7,754 7,068 15,357 14,087
Ancillary costs 1,137 904 2,339 1,808
Management fees to parent
of general partner 991 914 1,957 1,818
General and administrative 162 223 287 420
Litigation 29 20 68 42
Depreciation 897 926 1,782 1,783
Interest, including amounts to
parent of general partner
of $7, $10, $15, and $21 1,327 1,349 2,661 2,697
-------- -------- ------- --------
TOTAL COSTS AND EXPENSES 12,297 11,404 24,451 22,655
-------- -------- ------- --------
Income before general partner's
interest in income of
subsidiary partnership 153 35 160 106
General partner's interest in income
of subsidiary partnership 1 0 1 1
-------- -------- ------- --------
NET INCOME 152 35 159 105
General partner's interest in
net income 1 0 1 1
-------- -------- ------- --------
Limited partners' interest in
net income $ 151 $ 35 $ 158 $ 104
======== ======== ======== ========
Average number of units
outstanding 15,285 15,285 15,285 15,285
======== ======== ======== ========
Net income per unit $ 0.01 $ 0.00 $ 0.01 $ 0.01
======== ======== ======== ========
See Notes to Condensed Consolidated Financial Statements.
-4-
<PAGE>
FORUM RETIREMENT PARTNERS, L.P. AND SUBSIDIARY PARTNERSHIP
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Without Audit)
Six Months Ended
June 30,
-------------------------
1995 1994
---------- ----------
(in thousands)
Cash flows from operating activities:
Net income $ 159 $ 105
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation of property and equipment 1,782 1,783
Amortization of deferred financing costs 179 173
Accrued management fees currently due to
parent of general partner 9 914
Other accrued revenues and expenses, net 426 7
---------- ----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 2,555 2,982
---------- ----------
Cash flows from investing activities:
Additions to property and equipment (957) (815)
---------- ----------
NET CASH USED BY INVESTING ACTIVITIES (957) (815)
---------- ----------
Cash flows from financing activities:
Reduction of long-term debt (452) (343)
Net increase in restricted cash (351) (729)
Payment on note payable to parent of
general partner (62) (99)
Deferred loan costs (48) (162)
Other 0 (90)
---------- ----------
NET CASH USED BY FINANCING ACTIVITIES (913) (1,423)
---------- ----------
Net increase in cash and cash equivalents 685 744
Cash and cash equivalents at beginning of period 5,588 4,700
---------- ----------
Cash and cash equivalents at end of period $ 6,273 $ 5,444
========== ==========
See Notes to Condensed Consolidated Financial Statements.
-5-
<PAGE>
FORUM RETIREMENT PARTNERS, L.P. AND SUBSIDIARY PARTNERSHIP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Without Audit)
June 30, 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 six-month period ended June 30, 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.
6
<PAGE>
FORUM RETIREMENT PARTNERS, L.P. AND SUBSIDIARY PARTNERSHIP
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
June 30, 1995
Results Of Operations
---------------------
Three Months Ended June 30, 1995 and 1994. Net operating results reported
for the Partnership for the second three months of the current year were
better than those for the same three-month period of 1994.
As of June 30, 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 a non-recurring item is as follows:
Three Months Ended June 30,
-------------------------------------
1995 1994 * Change
-------- -------- --------
(dollars in thousands)
RC operating revenues $12,370 $11,392 + 8.6%
RC operating expenses * 8,891 8,132 + 9.3%
RC management fees 991 914 + 8.4%
------- -------
Net operating income * $ 2,488 $ 2,346 + 6.1%
======= =======
------
*As adjusted for a $160,000 non-recurring favorable workers'
compensation adjustment in 1994.
Current operating revenues of $12,370,000 increased 8.6% over operating
revenues for the same period last year. Combined average occupancy for the
three months ended June 30, 1995 of 94.1% increased by 1.5 percentage points
as compared to the same period of 1994, and the combined average monthly
rental rate for the three months ended June 30, 1995 increased by 2.9%
compared to the same period for 1994. Ancillary services to residents
increased by $384,000. Current adjusted operating expenses increased 9.3%
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. As a
result, during these same quarterly periods, the adjusted operating margin
(RC operating revenues less RC operating expenses) percentage declined from
28.6% for 1994 to 28.1% for 1995.
Six Months Ended June 30, 1995 and 1994. Net operating results reported for
the Partnership for the first six months of the current year were better than
those for the same six-month period of 1994.
7
<PAGE>
FORUM RETIREMENT PARTNERS, L.P. AND SUBSIDIARY PARTNERSHIP
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
A comparison of operating revenues, operating expenses and net operating
income, as adjusted for non-recurring items is as follows:
Six Months Ended June 30,
-------------------------------------
1995 * 1994 * Change
-------- -------- --------
(dollars in thousands)
RC operating revenues * $24,648 $22,572 + 9.2%
RC operating expenses * 17,696 16,415 + 7.8%
RC management fees 1,957 1,818 + 7.6%
------- -------
Net operating income * $ 4,995 $ 4,339 + 15.1%
======= =======
------
*As adjusted for a $190,000 non-recurring unfavorable adjustment for
Medicare reimbursement estimates in 1995 for the prior year and a
$520,000 non-recurring favorable workers' compensation adjustment in
1994.
Current adjusted operating revenues of $24,648,000 increased 9.2% over
adjusted operating revenues for the same period last year. Combined average
occupancy for the six months ended June 30, 1995 of 94.1% increased by 1.2
percentage points as compared to the same period of 1994, and the combined
average monthly rental rate for the six months ended June 30, 1995 increased
by 3.8% compared to the same period for 1994. Ancillary services to
residents increased by $726,000. Current adjusted operating expenses
increased 7.8% 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. As a result, during these same periods, the adjusted
operating margin (RC operating revenues less RC operating expenses)
percentage improved from 27.3% for 1994 to 28.2% 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
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.
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)
Financial Condition
-------------------
Liquidity And Capital Resources. At June 30, 1995, the Partnership had cash
and cash equivalents of $6,273,000, accounts receivable of $1,535,000, and
current liabilities of $6,157,000. 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 partnership is continuing to analyze opportunities for expanding its
existing facilities. To date, approximately $2.2 million has been approved
for this program and the approved projects are currently in progress.
Operating activities provided $427,000 less cash during the six months ended
June 30, 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 $142,000 more cash during the six months ended
June 30, 1995 than during the comparable period of 1994, due to $166,000 of
costs incurred for initial work on the expansion program and normal
fluctuations in the purchases of property and equipment.
Financing activities used $510,000 less cash during the six months ended
June 30, 1995 than during the comparable period of 1994, due principally to
additions to restricted cash reserves in 1994 as required by the terms of a
loan and allowed withdrawals from loan 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
June 30, 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 "Iowa Action"), 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.
On June 15, 1995, the Plaintiff filed an action in the United States
District Court for the Southern District of Indiana against the General
Partner and Forum Group (the "Indiana Action") containing essentially the
same allegations made in the Iowa Action and other allegations.
The General Partner will continue to vigorously defend against this
litigation. In accordance with the Management Agreement, the Partnership
reimbursed the General Partner for $68,000 and $146,000, for the six
months ended June 30, 1995 and calendar year 1994, respectively, of
litigation costs relating to this litigation.
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: August 11, 1995 By: /s/ Richard A. Huber
------------------------------
Richard A. Huber, Secretary
11
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<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 6,273
<SECURITIES> 0
<RECEIVABLES> 1,743
<ALLOWANCES> 208
<INVENTORY> 0
<CURRENT-ASSETS> 7,808
<PP&E> 121,806
<DEPRECIATION> 25,781
<TOTAL-ASSETS> 110,841
<CURRENT-LIABILITIES> 6,157
<BONDS> 49,482
<COMMON> 0
0
0
<OTHER-SE> 38,770
<TOTAL-LIABILITY-AND-EQUITY> 110,841
<SALES> 0
<TOTAL-REVENUES> 24,611
<CGS> 0
<TOTAL-COSTS> 24,451
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,661
<INCOME-PRETAX> 158
<INCOME-TAX> 0
<INCOME-CONTINUING> 158
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 158
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
