FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Quarterly Report Under Section 13 of 15(d)
of the Securities Exchange Act of 1934
For quarter ended March 31, 1996 Commission file number 33-9881
NATIONAL HEALTHCARE L.P.
(Exact name of registrant as specified in its Charter)
Delaware 62-1292855
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
100 Vine Street
Murfreesboro, TN 37130
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code (615) 890-2020
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.
Yes x No
(2) Has been subject to such filing requirements for the past 90
days.
Yes x No
8,423,896 units were outstanding as of March 31, 1996.
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
NATIONAL HEALTHCARE L.P.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended
March 31
1996 1995
(in thousands)
REVENUES:
Net patient revenues $ 80,607 $ 73,322
Other revenues 12,025 10,434
Net revenues 92,632 83,756
COSTS AND EXPENSES:
Salaries, wages and benefits 51,869 44,766
Other operating 28,791 26,833
Depreciation and amortization 3,035 3,634
Interest 3,472 4,351
Total costs and expenses 87,167 79,584
NET INCOME $ 5,465 $ 4,172
EARNINGS PER UNIT:
Primary $ .64 $ .53
Fully diluted $ .56 $ .47
WEIGHTED AVERAGE UNITS OUTSTANDING:
Primary 8,575,499 7,860,699
Fully diluted 10,524,051 9,833,565
CASH DISTRIBUTIONS PER UNIT $ .52 $ .42
NET INCOME ALLOCABLE TO PARTNERS:
General Partners $ 55 $ 42
Limited Partners 5,410 4,130
$ 5,465 $ 4,172
The accompanying notes to interim condensed consolidated financial
statements are an integral part of these statements.
<PAGE>
NATIONAL HEALTHCARE L.P.
CONSOLIDATED BALANCE SHEETS
(in thousands)
ASSETS
March 31 December 31
1996 1995
(unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 6,132 $ 4,835
Cash held by trustees 1,398 1,721
Marketable securities 3,197 1,514
Accounts receivable, less allowance for
doubtful accounts of $4,699 and $4,441 50,117 47,285
Notes receivable 2,306 2,538
Loan participation agreements 17,062 27,579
Inventory at lower of cost (first-in,
first-out method) or market 3,031 3,075
Prepaid expenses and other assets 1,042 893
Total current assets 84,285 89,440
PROPERTY AND EQUIPMENT AND ASSETS UNDER
ARRANGEMENT WITH OTHER PARTIES:
Property and equipment at cost 165,614 165,265
Accumulated depreciation and
amortization (40,547) (38,265)
Assets under arrangement with other
parties,net 26,781 29,921
Net property, equipment and assets under
arrangement with other parties 151,848 156,921
OTHER ASSETS:
Bond reserve funds, mortgage replacement
reserves and other deposits 1,383 1,789
Unamortized financing costs 1,766 1,937
Notes receivable 99,413 86,178
Notes receivable from National 12,253 12,271
Minority equity investments and other 7,112 6,955
Total other assets 121,927 109,130
$358,060 $355,491
The accompanying notes to consolidated financial statements are an integral
part of these consolidated balance sheets.
<PAGE>
NATIONAL HEALTHCARE L.P.
CONSOLIDATED BALANCE SHEETS
(in thousands)
LIABILITIES AND PARTNERS' CAPITAL
March 31 December 31
1996 1995
(Unaudited)
CURRENT LIABILITIES:
Current portion of long-term debt $ 8,784 $ 8,558
Trade accounts payable 3,921 6,142
Accrued payroll 21,404 23,876
Amount due to third-party payors 6,038 9,800
Accrued interest 2,201 1,822
Other current liabilities 8,169 8,849
Total current liabilities 50,517 59,047
LONG-TERM DEBT, less current portion 112,529 100,871
DEBT SERVICED BY OTHER PARTIES,
less current portion 38,113 40,771
MINORITY INTERESTS IN
CONSOLIDATED SUBSIDIARIES 806 812
COMMITMENTS, CONTINGENCIES AND GUARANTEES
SUBORDINATED CONVERTIBLE NOTES 29,314 30,000
DEFERRED INCOME 15,339 15,091
PARTNERS' CAPITAL:
General partners 1,302 1,290
Limited partners 110,140 107,609
Total partners' capital 111,442 108,899
$358,060 $355,491
The accompanying notes to consolidated financial statements are an integral
part of these consolidated balance sheets.
<PAGE>
NATIONAL HEALTHCARE L.P.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
March 31
1996 1995
(in thousands)
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Net income $ 5,465 $ 4,172
Adjustments to reconcile net income to net cash
provided from (used in) operating activities:
Depreciation 3,146 3,515
Provision for doubtful accounts and notes 643 607
Amortization of intangibles and deferred charges 396 239
Amortization of deferred income (89) (74)
Equity in earnings of unconsolidated investments (178) (91)
Distributions from unconsolidated investments 15 16
Changes in assets and liabilities:
(Increase) decrease in accounts receivable (3,475) 3,050
Decrease in inventory 44 9
Increase in prepaid expenses and other assets (149) (333)
(Decrease) in trade accounts payable (2,221) (11,705)
Increase (Decrease) in accrued payroll (2,472) 2,320
Decrease in amounts due to third party payors (3,762) (4,203)
Increase (decrease) in accrued interest payable 384 (266)
Decrease in other current liabilities (680) (358)
(2,933) (3,102)
CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES:
Additions to and acquisitions of property and
equipment, net (619) (6,409)
Investment in long-term notes receivable and loan
participation agreements (13,603) (13,102)
Collection in long-term notes receivable and loan
participation agreements 11,135 33,414
Decrease in minority equity investments
and other 221 770
(Increase) Decrease in debt and equity securities (1,600) 2,360
(4,466) 17,033
CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES:
Proceeds from debt issuance 12,086 3,128
Decrease in cash held by trustee 323 84
Increase in minority interest in subsidiaries -- 4
(Increase) decrease in bond reserve funds, mortgage
replacement reserves and other deposits 406 (82)
Issuance of partnership units 627 --
Collection of receivables 5 735
Payments on debt (424) (545)
Cash distributions to partners (4,327) (3,275)
Increase in financing costs -- (67)
8,696 (18)
NET INCREASE IN CASH AND CASH EQUIVALENTS 1,297 13,913
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 4,835 1,442
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 6,132 $15,355
Supplemental Information:
Cash payments for interest expense $ 3,103 $ 4,616
<PAGE>
The accompanying notes to consolidated financial statements are an integral
part of these consolidated statements.
<PAGE>
NATIONAL HEALTHCARE L.P.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
March 31
1996 1995
(in thousands)
During the three months ended March 31, 1996, NHC
was released from its liability on debt serviced
by others by the respective lenders
Debt serviced by other parties $(2,536) $ --
Assets under arrangement with other parties 2,536 --
During the three months ended March 31, 1996, $686,000
of convertible subordinated debentures were converted
into 45,112 units of NHC's partnership units:
Convertible subordinated debentures (686) --
Financing costs 1 --
Accrued interest (5) --
Partner's capital 690 --
<PAGE>
<TABLE>
NATIONAL HEALTHCARE L.P.
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(dollars in thousands)
<CAPTION> Receivables Unrealized Total
Number of From Sale of Gains on General Limited Partners'
Units Units Securities Partners Partners Capital
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT 12/31/95 8,353,114 $(26,196) $ 345 $1,290 $133,460 $108,899
Net income -- -- -- 55 5,410 5,465
Collection of
receivables -- 5 -- -- -- 5
Units sold 25,670 -- -- -- 627 627
Units in conversion of
convertible debentures
to partnership units 45,112 -- -- -- 690 690
Unrealized gains on
securities -- -- 83 -- -- 83
Cash distributions
($.52 per unit) -- -- -- (43) (4,284) (4,327)
BALANCE AT 3/31/96 8,423,896 $(26,191) $428 $1,302 $135,903 $111,442
BALANCE AT 12/31/94 7,826,165 $(14,697) $ 480 $1,095 $114,128 $101,006
Net income -- -- -- 42 4,130 4,172
Collection of
receivables -- 735 -- -- -- 735
Units sold 736 -- -- -- -- --
Unrealized losses on
securities -- -- (272) -- -- (272)
Cash distributions
($.42 per unit) -- -- -- (33) (3,242) (3,275)
BALANCE AT 3/31/95 7,826,901 $(13,962) $ 208 $1,104 $115,016 $102,366
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these consolidated statements.
<PAGE>
NATIONAL HEALTHCARE L.P.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(Unaudited)
Note 1 - CONSOLIDATED FINANCIAL STATEMENTS:
The financial statements for the three months ended March
31, 1996 and 1995, which have not been examined by independent
public accountants, reflect, in the opinion of management, all
adjustments necessary to present fairly the data for such
periods. The results of the operations for the three months
ended March 31, 1996 are not necessarily indicative of the
results that may be expected for the entire fiscal year ended
December 31, 1996. The interim condensed balance sheet at
December 31, 1995 is taken from the audited financial statements
at that date. The interim condensed financial statements should
be read in conjunction with the consolidated financial
statements, including the notes thereto, for the periods ended
December 31, 1995, December 31, 1994, and December 31, 1993.
Note 2 - OTHER REVENUES:
Three Months Ended
March 31
1996 1995
(in thousands)
Revenue from managed centers $ 8,341 $ 6,633
Guarantee fees 180 235
Advisory fee from NHI 797 797
Earnings on securities 61 366
Equity in earnings of unconsolidated
investments 160 90
Interest income 1,589 1,525
Other 897 788
$12,025 $10,434
Revenues from managed centers include management fees and
interest income on notes receivable from the managed centers.
"Other" revenues include non-health care related earnings.
Note 3 - INVESTMENT IN MARKETABLE SECURITIES:
Statement of Financial Accounting Standards ("SFAS") No. 115
"Accounting for Certain Investments in Debt and Equity
Securities" was issued by the Financial Accounting Standards
Board effective for fiscal years beginning after December 15,
1993. As required by SFAS 115, securities are classified as
trading, held-to-maturity or available for sale. Trading
securities are bought and held principally for the purpose of
selling them in the near term. Securities are classified as
held-to-maturity when the Company has both the positive intent
and ability to hold them to maturity. All other securities are
<PAGE>
classified as available for sale. NHC considers its investments
in marketable securities as available for sale securities and
unrealized gains and losses are recorded in partners' capital in
accordance with SFAS 115.
Partners' capital for the period ended March 31, 1996 was
increased by $83,000 and for the period ended March 31, 1995 was
decreased by approximately $272,000 to reflect the net unrealized
investment gain or loss on marketable securities without stated
maturities classified as available for sale.
Proceeds from the sale of investments in debt and equity
securities for the period ended March 31, 1995 were $2,696,000,
resulting in gross investment gains of $336,000 realized on these
sales. Realized gains and losses from securities sales are
determined on the specific identification of the securities. The
adoption of SFAS 115 did not have a material effect on NHC's
financial position or results of operations.
Note 4 - GUARANTEES:
In order to obtain management agreements and to facilitate
the construction or acquisition of certain health care centers
which NHC manages for others, NHC has guaranteed some or all of
the debt (principal and interest) on those centers. For this
service NHC charges an annual guarantee fee of 1% to 2% of the
outstanding principal balance guaranteed, which fee is in
addition to NHC's management fee. The principal amounts
outstanding under the guarantees is approximately $79,151,000
(net of available debt service reserves) at variable and fixed
interest rates with a weighted average of 4.6% at March 31, 1996.
Item 2. Management's Discussion and Analysis of Financial
Conditions and Results of Operations
Overview
National HealthCare L.P. (NHC, or the Company) operates and
manages 98 long-term health care centers with 12,663 beds in nine
states. NHC provides nursing care as well as ancillary therapy
services to patients in a variety of settings including long-term
care nursing centers, managed care specialty units, subacute care
units, Alzheimer's care units, homecare programs, and facilities
for assisted living. NHC also operates retirement centers.
Results of Operations
Three Months Ended March 31, 1996 Compared to Three Months Ended
March 31, 1995.
<PAGE>
Net revenues for the three months ended March 31, 1996
increased $8.9 million or 10.6% to $92.6 million from $83.8
million for the three months ended March 31, 1995. Net patient
revenues increased $7.3 million or 9.9% in the 1996 period as
compared to the 1995 period. Other revenues increased 15.2% to
$12.0 million.
The increased revenues for the quarter reflect the continued
growth of operations. Compared to the quarter a year ago, NHC
has increased the number of owned or leased long-term care beds
from 6,355 beds to 6,382 beds. The number of long-term care beds
managed for others has increased from 6,044 beds to 6,281 beds.
The number of homecare locations has increased from 28 locations
to 31 locations and includes for the first time the offering of
services in the state of South Carolina. Also contributing to
increased revenues are improvements in both private pay and third
party payor rates.
Revenues from management services, which are included in the
Statements of Income in Other Revenues, increased 25.8% in 1996
from $6.6 million to $8.3 million due to the increased number of
beds being managed for others, increased management fees, and
increased interest income from higher principal amounts and
interest rates on floating rate and fixed rate loans to managed
centers. Management fees are generally based upon a percentage
of net revenues of the managed center and therefore tend to
increase as a facility matures and as prices rise in general.
Total costs and expenses for the 1996 first quarter
increased $7.6 million or 9.5% to $87.2 million from $79.6
million. Salaries, wages and benefits, the largest operating
costs of this service company, increased $7.1 million or 15.9% to
$51.9 million from $44.8 million. Other operating expenses
increased $2.0 million or 7.3% to $28.8 million for the 1996
first quarter compared to $26.8 million in the 1995 period.
Depreciation and amortization decreased 16.5% to $3.0 million.
Interest costs decreased $0.9 million or 20.2% to $3.5 million
from $4.4 million for last year.
Increases in salaries, wages and benefits are attributable
to the increase in staffing levels due to long-term care bed
additions, homecare expansions, and the increased emphasis on
rehabilitative services. Also contributing to higher costs of
labor are inflationary increases for salaries and the associated
benefits.
Operating costs have increased due to the increased number
of beds in operation, the expansion of homecare services, the
expansion of rehabilitative and managed care services, and due to
the growth in management services provided to others.
<PAGE>
Depreciation expense and interest expense both decreased
compared to the quarter a year ago due primarily to capital
transactions which occurred in 1995. During December 1995,
National Health Investors ("NHI") prepaid debt on which NHC had
also been obligated in the amount of $20,544,000. In addition,
NHC was released from its obligation on approximately $25,324,000
of debt which had been transferred to NHI in 1991. Since NHC is
no longer obligated on transferred debt in the amount of
$45,868,000, debt serviced by other parties and assets under
arrangement with other parties was reduced by $45,868,000.
The leases with NHI provide that NHC shall continue to make
non-obligated debt service rent payments equal to the debt
service including principal and interest on the obligated debt
which was prepaid and from which NHC has been released. As a
result, other operating expenses are increased by the amount of
the rent payments, depreciation is decreased by the amount of
depreciation formerly charged on assets under arrangement with
other parties and interest expense is decreased by the amount of
interest expense formerly associated with the debt serviced by
other parties.
The total census at owned and leased centers for the quarter
averaged 93.5% compared to an average of 92.9% for the same
quarter a year ago.
Three Months Ended March 31, 1995 Compared to Three Months Ended
March 31, 1994.
Net revenues for the three months ended March 31, 1995
increased $15.2 million or 22.1% to $83.8 million from $68.6
million for the three months ended March 31, 1994. Net patient
revenues increased $11.3 million or 18.2% in the 1995 period as
compared to the 1994 period. Other revenues increased 59.5% to
$10.4 million.
The increased revenues for the quarter reflect the continued
growth of operations. Compared to the quarter a year ago, NHC
has increased the number of owned or leased long-term care beds
from 6,056 beds to 6,355 beds. The number of long-term care beds
managed for others has increased from 5,954 beds to 6,044 beds.
The number of homecare locations has increased from 17 locations
to 28 locations due to the purchase of a Florida homecare company
in February, 1994. Also contributing to increased revenues are
improvements in both private pay and third party payor rates.
Revenues also improved during 1995 due to increased emphasis
on rehabilitative and managed care services. To boost the
ability to offer physical, speech and occupational therapy to
greater numbers of patients, the Company is continuing to
increase the size of its staff of professionally licensed
therapists. The Company has also signed managed care contracts
<PAGE>
with private insurance companies to provide subacute care to
their insurees, offering a less expensive alternative to acute
care and rehabilitative hospitals. NHC also now has a network of
case managers to assure appropriate placement and payment for
subacute patients in the NHC system.
Revenues from management services, which are included in the
Statements of Income in Other Revenues, increased 51.4% in 1995
from $4.0 million to $6.0 million due to the increased number of
beds being managed for others, increased management fees, and
increased interest income from higher principal amounts and
interest rates on floating rate and fixed rate loans to managed
centers. Management fees are generally based upon a percentage
of net revenues of the managed center and therefore tend to
increase as a facility matures and as prices rise in general.
Total costs and expenses for the 1995 first quarter
increased $14.2 million or 21.7% to $79.6 million from $65.4
million. Salaries, wages and benefits, the largest operating
costs of this service company, increased $7.4 million or 19.9% to
$44.8 million from $37.3 million. Other operating expenses
increased $4.8 million or 21.6% to $26.8 million for the 1995
first quarter compared to $22.1 million in the 1994 period.
Depreciation and amortization increased 11.8% to $3.6 million.
Interest costs increased $1.7 million or 61.1% to $4.4 million
from $2.7 million for last year.
Increases in salaries, wages and benefits are attributable
to the increase in staffing levels due to long-term care bed
additions, homecare expansions, and the increased emphasis on
rehabilitative services. Also contributing to higher costs of
labor are inflationary increases for salaries and the associated
benefits.
Operating costs have increased due to the increased number
of beds in operation, the expansion of homecare services, the
expansion of rehabilitative and managed care services, and due to
the growth in management services provided to others.
Depreciation and amortization increased as a result of the
Company's placing of newly constructed or purchased assets in
service and due to capital improvements at existing properties.
Interest expense increased due to additional borrowing for
newly purchased or constructed long-term care beds and due to
increased interest rates of floating rate debt. Approximately
32% of the Company's long-term debt is at floating rates.
The total census at owned and leased centers for the quarter
averaged 92.9% compared to an average of 93.9% for the same
quarter a year ago.
<PAGE>
Liquidity and Capital Resources
During the first three months of 1996, the Company generated
net cash of $11.1 million from the collection of long-term notes
receivable, $12.1 million in debt proceeds and $0.6 million from
the issuance of partnership units. Of these funds, $2.9 million
was used in operating activities, $13.6 million for investments
in long term notes receivable and loan participation agreements,
$0.6 million in additions to and acquisitions of property and
equipment, $0.4 million for payments on debt, and $4.3 million
for cash distributions to partners. Cash and cash equivalents
increased $1.3 million during the quarter.
At March 31, 1996, the Company's ratio of long-term
obligations to convertible debt and capital is 1.1 to 1.
The ratio of current assets to current liabilities is 1.6 to
1. Working capital is $33.8 million. These financial resources
with anticipated funds from future operations and future
borrowings are expected to be adequate to enable the Partnership
to meet its working capital requirements and expansion goals.
Development
Currently, NHC has 1,219 beds under development at 24 health
care centers in various locations. These beds are either under
construction or a Certificate of Need has been received from the
appropriate state agency authorizing the construction of
additional centers or beds.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
The Company is subject to claims and suits in the
ordinary course of business. While there are several
worker's compensation and personal liability claims and
other suits presently in the court system, management
believes that the ultimate resolution of all pending
proceedings will not have any material adverse effect
on the Company or its operations.
Item 2. Changes in Securities. Not applicable
Item 3. Defaults Upon Senior Securities. None
Item 4. Submission of Matters to Vote of Security Holders
(a) The annual meeting of the unitholders was held on
March 21, 1996. There were no matters submitted
to security holders for a vote.
<PAGE>
Item 5. Other Information. None
Item 6. Exhibits and Reports on Form 8-K.
(a) List of exhibits - Exhibit 27 - Financial Data
Schedule (for SEC purposes only)
(b) Reports on Form 8-K - none required
SIGNATURES
Pursuant to the requirements of the Security Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
NATIONAL HEALTHCARE L.P.
(Registrant)
Date April 14, 1996 S/Richard F. LaRoche, Jr.
Richard F. LaRoche, Jr.
Secretary
Date April 14, 1996 S/Donald K. Daniel
Donald K. Daniel
Vice President and Controller
Principal Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 7,530,000
<SECURITIES> 3,197,000
<RECEIVABLES> 74,184,000
<ALLOWANCES> (4,699,000)
<INVENTORY> 3,031,000
<CURRENT-ASSETS> 84,285,000
<PP&E> 192,395,000
<DEPRECIATION> (40,547,000)
<TOTAL-ASSETS> 358,060,000
<CURRENT-LIABILITIES> 50,517,000
<BONDS> 179,956,000
0
0
<COMMON> 0
<OTHER-SE> 111,442,000
<TOTAL-LIABILITY-AND-EQUITY> 358,060,000
<SALES> 0
<TOTAL-REVENUES> 92,632,000
<CGS> 0
<TOTAL-COSTS> 87,167,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 643,000
<INTEREST-EXPENSE> 3,472,000
<INCOME-PRETAX> 5,465,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,465,000
<EPS-PRIMARY> .64
<EPS-DILUTED> .56
</TABLE>
