<PAGE> 1
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 the Quarter Ended September 30, 1995 Commission File Number 33-6122-01
MEDICAL INCOME PROPERTIES 2A LIMITED PARTNERSHIP
------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Delaware 59-2724921
-------- ----------
(State of Organization) (IRS Employer Identification Number)
7000 Central Parkway, Suite 850
-------------------------------
Atlanta, Georgia 30328
-----------------------
(Address of Principal Executive Office)
(770) 668-1080
--------------
(Registrant's Telephone Number, Including Area Code)
Indicate by check 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
----- -----
The number of limited partnership units outstanding at September 30, 1995 was
18,639.
1
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C>
Page No.
PART I
Item 1. FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 - 10
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . 11
PART II
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
</TABLE>
2
<PAGE> 3
PART I
ITEM 1.
FINANCIAL INFORMATION
MEDICAL INCOME PROPERTIES 2A LIMITED PARTNERSHIP
INDEX
<TABLE>
<CAPTION>
Page No.
<S> <C>
Balance Sheets, September 30, 1995 and December 31, 1994 . . . . . . . . . . . . . . . . . . . . 4
Statements of Operations for the three
months ended September 30, 1995 and 1994 and the nine months
ended September 30, 1995 and 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Statements of Partners' Capital for the nine months
ended September 30, 1995 and 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Statements of Cash Flows for the nine months ended
September 30, 1995 and 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 - 10
</TABLE>
3
<PAGE> 4
MEDICAL INCOME PROPERTIES 2A LIMITED PARTNERSHIP
Balance Sheets
September 30, 1995 and December 31, 1994
(Unaudited)
<TABLE>
<CAPTION>
ASSETS 1995 1994
------ ---- ----
<S> <C> <C>
Current assets
Cash and equivalents $ 1,359,472 $ 864,318
Marketable securities 2,154,475 2,151,271
Accounts receivable, net of allowance
for doubtful accounts of $111,282 in 1995
and $168,203 in 1994 2,873,686 2,263,954
Estimated settlements due from third
party payors 60,883 363,385
Prepaid expenses and other assets 199,191 240,729
----------- -----------
Total current assets 6,647,707 5,883,657
Investments in joint ventures 4,723,335 4,628,512
Property, plant and equipment, net of
accumulated depreciation 13,549,733 13,756,481
Deferred financing costs, net of accumulated
amortization of $35,600 in 1995 and
$24,514 in 1994 41,020 52,106
Due from affiliates 382,517 382,517
----------- -----------
Total assets $25,344,312 $24,703,273
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
---------------------------------
Current liabilities
Current portion of long term debt $ 341,658 $ 338,739
Accounts payable 683,787 640,042
Accrued payroll and payroll taxes 287,382 238,086
Accrued vacation 197,458 196,686
Accrued insurance 233,221 226,018
Accrued management fees 79,234 131,274
Patient deposits and trust liabilities 108,591 92,510
Other accrued expenses 134,454 114,579
Estimated settlements due to third
party payors 36,084 112,772
Due to affiliates 243,617 101,526
----------- -----------
Total current liabilities 2,345,486 2,192,232
Bonds, notes and capital lease obligations 3,993,841 4,245,657
----------- -----------
Total liabilities 6,339,327 6,437,889
----------- -----------
Venture partners' minority interest 2,143,273 2,031,996
----------- -----------
Partners' capital
Limited partners 16,809,945 16,225,603
General partners 51,767 7,785
----------- -----------
Total partners' capital 16,861,712 16,233,388
----------- -----------
Total liabilities and partners' capital $25,344,312 $24,703,273
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE> 5
MEDICAL INCOME
PROPERTIES 2A LIMITED PARTNERSHIP
Statements of Operations
For the three months ended September 30, 1995 and 1994
and the nine months ended September 30, 1995 and 1994
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
---------------------- ----------------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenue
Net resident service revenue $4,952,906 $4,482,098 $14,660,506 $13,177,996
Other revenue 13,446 5,854 28,384 23,886
---------- ---------- ----------- -----------
Total revenue 4,966,352 4,487,952 14,688,890 13,201,882
---------- ---------- ----------- -----------
Operating expenses:
Professional care of residents 2,386,476 2,149,373 6,788,561 5,933,640
Dietary 411,772 401,108 1,196,849 1,148,561
Household and plant 445,238 424,065 1,281,641 1,212,221
General and administrative 773,908 620,748 2,295,034 2,014,040
Employee health and welfare 229,444 224,086 678,964 703,715
Depreciation and amortization 192,170 192,900 566,920 576,819
---------- ---------- ----------- -----------
Total operating expenses 4,439,008 4,012,280 12,807,969 11,588,996
---------- ---------- ----------- -----------
Operating income 527,344 475,672 1,880,921 1,612,886
---------- ---------- ----------- -----------
Other income (expenses):
Interest income 52,591 60,271 119,178 106,549
Interest expense (105,668) (100,952) (320,641) (276,329)
Provider fees (137,805) (137,805) (412,876) (412,875)
Minority Interest (43,245) (40,423) (141,956) (251,516)
Partnership share of joint
venture income (loss) 108,283 123,052 362,324 297,110
---------- ---------- ----------- -----------
Total other
income (expenses) (125,844) (95,857) (393,971) (537,061)
---------- ---------- ----------- -----------
Net income $ 401,500 $ 379,815 $ 1,486,950 $ 1,075,825
========== ========== =========== ===========
Net income per weighted
average limited partnership unit
outstanding $ 20.03 $ 18.95 $ 74.19 $ 53.68
========== ========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE> 6
MEDICAL INCOME PROPERTIES 2A LIMITED PARTNERSHIP
Statements of Partners' Capital
For the Nine Months Ended September 30, 1995 and December 31, 1994
(Unaudited)
<TABLE>
<CAPTION>
Limited Partners General
Units Amount Partners Total
----- ------ -------- -----
<S> <C> <C> <C> <C>
Partners' capital,
December 31, 1994 18,639 $16,225,603 $ 7,785 $ 16,233,388
Distributions to partners
($45.00 per limited
partnership unit outstanding) (838,755) (63,132) (901,887)
Net income 1,382,864 104,086 1,486,950
Unrealized gain on marketable
securities available for sale 40,233 3,028 43,261
------ ----------- -------- -----------
Partners' capital,
September 30, 1995 18,639 $16,809,945 $ 51,767 $16,861,712
====== =========== ======== ===========
</TABLE>
6
<PAGE> 7
MEDICAL INCOME
PROPERTIES 2A LIMITED PARTNERSHIP
Statements of Cash Flows
Nine months ended September 30, 1995 and 1994
(Unaudited)
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Cash flows from operating activities:
Cash received from patient care $ 14,276,588 $ 12,425,633
Cash paid to suppliers and employees (12,114,579) (11,071,387)
Interest received 122,383 106,549
Interest paid (320,641) (276,329)
Provider fees (412,876) (412,875)
Other operating receipts 28,384 23,886
------------ ------------
Net cash provided by operating activities 1,579,259 795,477
------------ ------------
Cash flows from investing activities:
Distributions from joint ventures 236,821 91,370
Acquisitions of property (349,085) (170,994)
------------ ------------
Net cash used by investing activities (112,264) (79,624)
------------ ------------
Cash flows from financing activities:
Payments of long term debt
and lease obligations (248,898) (277,069)
Net borrowings (payments) to related parties 178,944 (154,010)
Distributions to partners (901,887) (851,782)
------------ ------------
Net cash used by financing activities (971,841) (1,282,861)
------------ ------------
Net increase (decrease) in cash and equivalents 495,154 (567,008)
Cash and equivalents, beginning of period 864,318 3,282,540
------------ ------------
Cash and equivalents, end of period $ 1,359,472 $ 2,715,532
============ ============
Reconciliation of net income to net cash
provided by operating activities
Net income $ 1,486,950 $ 1,075,825
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 566,920 576,819
Minority Interest 141,956 251,516
Partnership share of joint venture (income) loss (362,324) (297,110)
Accretion of discount on marketable securities 3,204 -
(Increase) in accounts receivable, net (609,731) (573,425)
(Increase) decrease in third party receivables 302,502 (197,918)
(Increase) decrease in prepaid expenses
and other assets 41,538 (42,248)
Increase (decrease) in accounts payable and
accrued expenses 84,932 (16,958)
Increase (decrease) in third party payables (76,688) 18,976
------------ ------------
Net cash provided by operating activities $ 1,579,259 $ 795,477
============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
7
<PAGE> 8
MEDICAL INCOME
PROPERTIES 2A LIMITED PARTNERSHIP
Notes to Financial Statements
(Unaudited)
(1) Financial Statements
The financial statements have been prepared in accordance with generally
accepted accounting principles. The financial information included in
these financial statements is unaudited, however, in management's
opinion, all normal recurring adjustments necessary for a fair
presentation of the results of operations for the periods included have
been made.
Footnote disclosures which would substantially duplicate those contained
in the December 31, 1994 audited financial statements have been omitted
from this report.
(2) Property, Plant and Equipment
Property, plant, and equipment is recorded at cost and consists of the
following at September 30, 1995 and December 31, 1994:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Land $ 482,000 $ 482,000
Building 10,226,394 10,031,300
Equipment 1,869,524 1,715,532
Property under capitalized lease 6,642,882 6,642,882
----------- -----------
Total property, plant and equipment $19,220,800 $18,871,714
Accumulated depreciation and amortization (5,671,067) (5,115,233)
----------- -----------
Net property, plant and equipment $13,549,733 $13,756,481
=========== ===========
</TABLE>
(3) Debt Obligations
Debt Obligations consisted of the following at September 30, 1995 and
December 31, 1994:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Industrial Revenue Bonds payable at a variable
rate of interest with monthly principal and
interest payments of $9,799 through April 1,
2005. The interest rate is adjusted every
May 1 and November 1. $ 871,322 $ 915,939
Mortgage note with interest at the prime rate
plus 1% in 60 payments of $22,728 through
May 26, 1998; with a balloon payment due
May, 1998. 3,463,711 3,659,173
Capitalized leases on various pieces of minor
equipment payable monthly at interest rates
from 9% to 10% 466 9,284
----------- -----------
$ 4,335,499 $ 4,584,396
=========== ===========
</TABLE>
8
<PAGE> 9
The aggregate annual maturities for the next five fiscal years are as
follows:
<TABLE>
<S> <C>
1995 $ 129,744
1996 333,321
1997 338,080
1998 2,911,255
1999 82,052
Thereafter 541,057
----------
4,335,509
Less amounts representing
interest on capitalized lease
obligations 10
----------
$4,335,499
==========
</TABLE>
(4) Investment in Joint Venture
The condensed financial information for the investments in joint ventures
as of September 30, 1995 and December 31, 1994 is as follows:
KATY (owned 50% by Partnership)
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Current assets $1,683,742 $1,411,011
Long term assets 4,923,431 4,898,053
---------- ----------
Total assets $6,607,173 $6,309,064
========== ==========
Current liabilities $ 697,672 $ 610,922
Equity 5,909,501 5,698,142
---------- ----------
Total liabilities and equity $6,607,173 $6,309,064
========== ==========
Partnership's investment at September 30, 1995
and December 31, 1994 $2,954,750 $2,849,071
========== ==========
Revenues $3,822,154 $3,700,538
Expenses 3,357,716 3,505,169
---------- ----------
Net income $ 464,438 $ 195,369
========== ==========
</TABLE>
9
<PAGE> 10
HUMBLE (owned 50% by Partnership)
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Current assets $1,374,978 $1,424,629
Long term assets 3,563,410 3,540,311
---------- ----------
Total assets $4,938,388 $4,964,940
========== ==========
Current liabilities $ 633,619 $ 681,728
Long term liabilities 767,600 752,347
Equity 3,537,169 3,530,865
---------- ----------
Total liabilities and equity $4,938,388 $4,964,940
========== ==========
Partnership's investment at September 30, 1995
and December 31, 1994 $1,768,585 $1,765,433
========== ==========
Revenues $2,852,877 $3,373,417
Expenses 2,592,608 3,113,890
---------- ----------
Net income $ 260,209 $ 259,527
========== ==========
</TABLE>
(5) Related Party Transactions
Through September 30, 1995 and 1994, QualiCorp, Inc., the parent of
Qualicorp Management, Inc. (the Managing General Partner of the
Partnership) charged $94,483 and $105,753, respectively, of
administrative expenses to the Partnership.
10
<PAGE> 11
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Liquidity and Capital Resources
Cash and equivalents increased during the quarter ended September 30, 1995 by
$419,587. This increase was achieved even though patient receivables increased
$310,500 during the same period. Payables and accrued expenses remain current,
although the totals for both rose $277,400 in the quarter. In addition, the
State of Illinois has begun to pay for the care of Medicaid residents in a more
timely fashion. Property improvements and equipment purchases totaled $93,700
for the quarter and are projected to continue into 1996.
Medicaid and Medicare reimbursement may well change during the next eighteen
months if the proposals being discussed in Washington, DC are passed and then
signed by the President. It appears Congress may give back to the States
responsibility for implementation of the Medicaid program and fund the program
through Block Grants. In addition, some changes may be made in the OBRA
regulations. Changes in Medicare reimbursement may include establishing cost
limits on ancillary services (including therapy, drugs, and equipment), capital
cost limits, and possibly a prospective reimbursement system. What is clear,
however, is that any new legislation will encourage providers of care to manage
with less revenue from traditional Medicare and Medicaid programs. Expenses
will have to be controlled even more than before.
It is expected that construction of the fourteen bed addition to the Shoals
Nursing Home property could start in the first quarter of 1996. The
Certificate of Need for the eighteen bed addition to the Medical Park facility
has been put on hold due to zoning problems which may cause this project to be
dropped for the foreseeable future.
In August 1995, the Partnership paid distributions to its limited partners of
$15.00 per unit. This distribution equaled an annualized return of six (6%)
percent on the initial investment of $1,000 per unit. The Partnership expects
to make distributions to its limited partners based on cash flow from
operations after considering cash required for debt obligations, necessary
capital expenditures and working capital reserves.
Operations
Net income for the quarter ended September 30, 1995 was $401,500 compared to
$379,815 for the quarter ended September 30, 1994. Revenue increased between
quarters by 10.7% due to improved ancillary services and a higher routine
services rate in the Alabama facilities. Expenses were $426,700 higher than
the previous year due to higher cost of resident services, primarily salaries
and ancillary costs. In addition, Administrative and General expenses were
higher due to increased insurance costs and management fees. Other income
(expense) was affected by lower earnings from the joint venture properties.
11
<PAGE> 12
PART II
SIGNATURES
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.
MEDICAL INCOME PROPERTIES 2A
LIMITED PARTNERSHIP
Registrant
By /s/ John H. Stoddard Date: October 31, 1995
-------------------- --------------------------
John H. Stoddard
President and Chief Financial Officer
QualiCorp Management, Inc.
Managing General Partner
12
<PAGE> 13
MEDICAL INCOME PROPERTIES 2A LIMITED PARTNERSHIP
Index of Exhibits
27 Financial Data Schedule for Third Quarter 1995
10-Q (for SEC use only)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF MEDICAL INCOME PROPERTIES 2A LIMITED PARTNERSHIP FOR
THE QUARTER ENDED SEPTEMBER 30, 1995, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 1,359,472
<SECURITIES> 2,154,475
<RECEIVABLES> 2,984,968
<ALLOWANCES> 111,282
<INVENTORY> 0
<CURRENT-ASSETS> 6,647,707
<PP&E> 19,220,800
<DEPRECIATION> 5,671,067
<TOTAL-ASSETS> 25,344,312
<CURRENT-LIABILITIES> 2,345,486
<BONDS> 3,993,841
<COMMON> 0
0
0
<OTHER-SE> 16,861,712<F1>
<TOTAL-LIABILITY-AND-EQUITY> 25,344,312
<SALES> 14,660,506
<TOTAL-REVENUES> 14,688,890
<CGS> 0
<TOTAL-COSTS> 12,807,969
<OTHER-EXPENSES> 73,330
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 320,641
<INCOME-PRETAX> 1,486,950
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,486,950
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>REPRESENTS TOTAL PARTNERSHIP CAPITAL INCLUDING NET INCOME NET OF
DISTRIBUTIONS.
</FN>
</TABLE>
