<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15 (d) of
the Securities and Exchange Act of 1934
For the Fiscal Year Ended Commission File Number
- ------------------------- ----------------------
December 31, 1995 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, GA 30328
-----------------
(Address of Principal Executive Office)
(770) 668-1080
--------------
Registrant's Telephone Number, Including Area Code
Securities Registered Pursuant to Section 12 (b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
------------------- -------------------
LIMITED PARTNERSHIP UNITS NONE
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
----- -----
Aggregate market value of the voting stock held by non-affiliates of the
Registrant is not applicable.
The number of limited partnership units outstanding on March 4, 1996 was 18,639.
The Prospectus of the Registrant dated October 22, 1986, filed pursuant to Rule
424 (b) under the Securities Act of 1933 is incorporated by reference, to the
extent indicated to Part III of this report.
<PAGE> 2
MEDICAL INCOME PROPERTIES 2A LIMITED PARTNERSHIP
INDEX TO ANNUAL REPORT
ON FORM 10-K
<TABLE>
<CAPTION>
Page
<S> <C> <C>
PART I
Item 1: Business 1
Item 2: Properties 2
Item 3: Legal Proceedings 3
Item 4: Submission of Matters to a Vote of Security Holders 3
PART II
Item 5: Market for the Registrant's Common Equity and Related Stockholder Matters 3
Item 6: Selected Financial Data 3
Item 7: Management's Discussion and Analysis of Financial Condition and Results
of Operations 4
Item 8: Financial Statements and Supplementary Data 7
Item 9: Disagreements on Accounting and Financial Disclosure 7
PART III
Item 10: Directors and Executive Officers of the Registrant 8
Item 11: Executive Compensation 8
Item 12: Security Ownership of Certain Beneficial Owners and Management 8
Item 13: Certain Relationships and Related Transactions 8
PART IV
Item 14: Exhibits, Financial Statement Schedules and Reports on Form 8-K 9
Signatures 11
</TABLE>
<PAGE> 3
PART I
ITEM 1. BUSINESS
General
Medical Income Properties 2A Limited Partnership (the Partnership), is a
Delaware limited partnership which was organized on May 14, 1986. The
Partnership is one of a series of three limited partnerships as represented by
the registration statement filed with the Securities and Exchange Commission on
October 22, 1986 (the Effective Date), providing for the sale of $10,000,000 of
limited partnership units (the Units), with an option to increase the offering
by an additional $10,000,000. The offering closed on June 2, 1987, upon the
sale of 18,639 units for an aggregate purchase price of $18,639,000.
The purpose of the Partnership is to engage in the business of acquiring and
holding for investment income-producing health care related properties,
primarily nursing homes, and operating such properties as skilled and
intermediate care nursing homes. As of December 31, 1995 the Partnership
owned a 100% interest of four nursing homes, a 54.55% interest in a nursing
home in Decatur, Alabama and a 50% interest in two joint venture nursing homes
in the Houston, Texas area. The Partnership employed approximately 488
employees as of March 4, 1996.
Business Strategy
The Partnership intends to hold its real property investments until such time
as a sale or other disposition appears to be advantageous. Such factors as
potential capital appreciation, industry trends, cash flow and federal income
tax consequences to the Limited Partners will be considered before Partnership
property dispositions are made.
Long Term Care Industry
The long term care industry is composed of many facilities offering services to
subacute, skilled, assisted living, and personal care residents. The
Partnership's nursing homes are considered to be in the skilled segment of the
industry, although several of its homes offer subacute services. Subacute
services have allowed many providers to expand their services and at the same
time become more profitable. In addition, providers have taken advantage of
these higher returns to consolidate their operations either through initial
public offerings or through merging with one another. Subacute, however, is
not for everyone. Many companies have established a different criteria,
including minimum population levels, in order to operate a subacute program in
a profitable manner. This is necessary due to the shorter lengths of stay of
patients and the need to obtain more and more admissions to fill the shorter
stay beds. Even with higher costs in the nursing and service departments,
nursing home industry subacute care is considered to be more cost effective in
caring for patients than hospital care.
Historically, nursing homes have derived their revenues from Medicare, Medicaid
and private pay patients. In the past few years, the industry has seen an
increase in private insurance patients and to a greater extent, contractual
services from Health Maintenance Organizations (HMO's) and Preferred Provider
Organizations (PPO's).
The industry has always faced an increasing challenge in staffing its
facilities. This is particularly true with regard to Registered Nurses,
Licensed Practical Nurses and Certified Nurse Aides, although depending upon
the geographic area, the Partnership competes with hotels, motels and
restaurants for other employees, including dietary and housekeeping workers.
Approximately fifty percent of Partnership operating costs are composed of
employee salaries and benefits. From time to time, the Federal government has
proposed increasing the minimum wage. Any increase in the minimum wage would
adversely impact nursing home providers and would have to be supported by
increases in Medicare and Medicaid reimbursement rates.
Furthermore, the Federal government has been discussing these very programs as
it looks for ways to down size government. The Medicaid program may be
impacted through block grant programs. Such a program would cap the federal
funding of the program and should the state wish to retain the current level of
services and programs, significant additional funding would have to be found.
This is particularly true if the OBRA regulations were not repealed. The
Medicare program is being examined for possible changes
1
<PAGE> 4
including implementing cost limits on ancillary services (such as therapy
programs, equipment and diagnostic services), capital cost reductions, a
continued freeze of the routine cost limits and, perhaps, a prospective payment
system. The potential impact of such changes, either alone or in combination,
cannot be determined at this time.
The Partnership owns nursing facilities in the States of Illinois, Texas and
Alabama. Each state reimburses nursing facilities on a prospective basis,
although Alabama is the only state which bases reimbursement on the nursing
facilities' actual cost. Texas and Illinois use average cost derived from all
filed cost reports. Texas reimburses nursing facilities on a patient specific
need called Texas Index of Level of Effort (TILE). Illinois pays nursing
facilities based upon different cost parameters, including paying additional
incentives based on facility services provided. Each state has developed a
wait and see attitude toward program changes until such time as the Federal
government acts.
Information regarding industry segments is not applicable for the Partnership
business.
Seasonality
The Partnership's revenue and operating income fluctuate from quarter to
quarter and tend to be higher in the first and second quarter of each fiscal
year. This seasonality is due primarily to the state Medicaid programs in
which the Partnership operates, rate increases and census cycles.
SERVICES PROVIDED
Routine Services
All of the nursing facilities operated by the Partnership are licensed as
skilled care facilities by the appropriate regulatory agencies. Routine
services include the provision of skilled care services and assistance with
activities of daily living, depending upon the needs of each resident. Skilled
nursing care is rendered 24 hours per day by registered or licensed nurses and
nurses aides.
Ancillary Services
The Partnership provides a variety of rehabilitative services at its facilities
for residents. These services include physical, speech, occupational, and
respiratory therapy programs. The Partnership continues to expand these
services as the needs of its residents and the requirements of third-party
payor programs warrants. In addition, the Partnership has added subacute care
programs to several of its facilities.
ITEM 2. PROPERTIES
As of December 31, 1995, the following properties were owned by the
Partnership:
<TABLE>
<CAPTION>
Average Daily Census
Date of No. of --------------------
Property Acquisition Beds Description 1995 1994 1993 1992 1991
-------- ----------- ------ ----------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Muscle Shoals, AL. 9/1/87 90 Nursing home 84 84 81 82 84
Shoals, AL. 9/1/87 103 Nursing home 100 101 102 102 102
Oak Crest, AL. 9/1/87 109 Nursing home 94 96 99 99 97
University Manor, IL. 3/1/88 120 Nursing home 114 109 112 117 115
Medical Park 7/1/88 183 Nursing home 174 179 180 181 181
Decatur, AL. (54.55% Interest)
</TABLE>
In addition, the Partnership has invested in a joint venture consisting of two
nursing homes with Medical Income Properties 2B Limited Partnership:
<TABLE>
<CAPTION>
Average Daily Census
Date of No. of Ownership --------------------
Property Acquisition Beds Description % 1995 1994 1993 1992 1991
-------- ----------- ------ ----------- --------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Renaissance Place-Katy, TX. 5/1/88 130 Nursing home 50% 123 113 118 117 114
Renaissance Place-Humble, TX. 5/1/88 120 Nursing home 50% 118 118 117 117 116
</TABLE>
2
<PAGE> 5
A description of the Partnership's purchase of its properties is disclosed in
Notes 1(f), 2, 4, 5 and 6 of the Notes to Financial Statements.
ITEM 3. LEGAL PROCEEDINGS
There are no material pending legal actions against the Partnership. As noted
in the financial statements note 10, however, the Partnership does have certain
contingent liabilities.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S PARTNERSHIP
UNITS AND RELATED SECURITY HOLDER MATTERS
There is no established public trading market for the Partnership Units. There
were 1,786 limited partners as of March 4, 1996. Distributions paid per limited
partner unit for each quarter in the last five years are incorporated by
reference from Item 6 below.
ITEM 6. SELECTED FINANCIAL DATA
Selected financial data for the period January 1, 1991 to December 31, 1995 is
shown below:
<TABLE>
<CAPTION>
(000's omitted except for per share data and distributions)
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Summary of Operations:
Total Revenue $ 19,050 17,906 16,607 16,037 14,036
Operating Income $ 1,941 1,994 2,624 2,373 1,422
Net Income $ 1,184 1,206 1,651 1,300 762
Per Share Data:
Net Income per
Limited Partner Unit $ 59.09 60.20 82.36 64.87 38.02
Financial Condition:
Total Assets $ 25,186 24,703 24,479 23,612 22,942
Bonds, Notes and
Capitalized Lease
Obligations $ 4,241 4,584 4,951 4,977 5,189
Partners' Capital $ 16,260 16,233 16,218 15,319 14,520
Distributions per Limited Partner Unit:
First Quarter $ 15.00 12.50 8.75 5.00 --
Second Quarter $ 15.00 15.00 8.75 6.25 --
Third Quarter $ 15.00 15.00 10.00 6.25 --
Fourth Quarter $ 15.00 15.00 10.00 7.50 5.00
</TABLE>
3
<PAGE> 6
Quarterly Financial data for the period January 1, 1993 to December 31, 1995:
(000's omitted)
<TABLE>
<CAPTION>
1995
------------------------------------------
1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr.
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Total Revenue $ 4,881 $ 4,841 $ 4,967 $ 4,361
Income from Operations 747 606 528 60
Net Income (Loss) 591 495 401 (303)
<CAPTION>
1994
------------------------------------------
1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr.
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Total Revenue $ 4,302 $ 4,412 $ 4,488 $ 4,704
Income from Operations 641 496 476 381
Net Income 425 271 380 130
<CAPTION>
1993
------------------------------------------
1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr.
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Total Revenue $ 3,970 $ 3,931 $ 4,108 $ 4,598
Income from Operations 555 456 658 955
Net Income 292 236 447 676
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Reserves
Cash and equivalents balances and marketable securities totaled $3,051,156 at
December 31, 1995, an increase of $35,567 from December 31, 1994. Accounts
receivable balances during the same period increased $370,200. The Partnership
experienced increased accounts receivable balances primarily in Medicare and
private payors due to increased Medicare usage and higher ancillary volumes.
This increase was partially offset by a decline in the amount of Medicaid
receivables due from the State of Illinois. During the year, those receivables
decreased $257,000.
The Partnership spent $391,040 on capital expenditures in 1995 and expects to
spend approximately $500,000 on similar expenditures in 1996. The Partnership
had an outstanding certificate of need to construct a fourteen bed addition to
its Shoals Nursing Home property which was allowed to lapse during 1995. We
expect to submit a request in 1996 to allow for the transfer of approximately
10 beds from the Oak Crest Nursing Home to either the Shoals or Muscle Shoals
location. If this project moves forward, the construction funds will come from
present cash balances and cash provided by operations and not from additional
borrowing.
In 1995, the Partnership paid regular distributions to its limited partners of
$60.00 per unit. This distribution equaled a 6% return on the initial
investment of $1,000 per unit. Although the Partnership expects to make
distributions to its limited partners based upon cash flow generated from
operations after considering cash required for debt obligations, necessary
improvements to its properties and working capital reserves, no assurances can
be given that distributions will be made in the future.
The Partnership has a $500,000 line of credit available to it should the need
arise. At the present time, the Managing General Partner believes the
Partnership has adequate working capital and does not believe it will be
necessary to borrow additional funds.
4
<PAGE> 7
Results of Operations
Fiscal Year 1995 Compared to 1994
Net income for the year was $1,184,339, compared to $1,206,438 in 1994.
Revenue from patient services increased to $19,017,058 during the year, an
increase of 6% over the prior year. The cost of nursing care, including
ancillary services rose $965,000 between years due to higher labor costs,
ancillary services and supply costs. Temporary labor costs declined $134,000
from the prior year level.
Professional care of patients costs by year are:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Salaries and Wages $ 5,515,416 $ 5,114,186
Supplies and Pharmaceuticals 740,854 611,700
Ancillary Services Expense 2,160,552 1,661,797
Social Service and Activities 320,187 310,435
Medical Records 65,715 62,918
Temporary Labor 46,869 180,950
Other Expenses 356,192 298,801
----------- -----------
$ 9,205,785 $ 8,240,787
=========== ===========
</TABLE>
Dietary expenses rose $52,334 due to increased food and supply costs while
Household and Plant costs increased $97,124, primarily due to higher labor,
supplies and utilities expenses.
General and Administrative expenses by year are:
<TABLE>
<S> <C> <C>
Salaries and Wages $ 502,629 $ 453,807
Supplies 54,296 50,556
Insurance 595,953 665,557
Management Fees 950,808 914,238
Cost Reimbursement 136,679 147,110
Property Tax 69,709 55,586
Accounting and Auditing 185,395 184,757
Telephone 52,921 45,568
Travel 43,577 52,404
Other Expenses 298,764 229,196
----------- -----------
$ 2,890,731 $ 2,798,779
=========== ===========
</TABLE>
Insurance costs continue to decline due to improved controls on the workers
compensation programs in the State of Alabama. Total other income/expenses,
net totaled $756,889 for the year, a $31,065 improvement over the prior year.
The earnings of the two Texas properties were substantially higher than the
previous year, therefore increasing the Partnership share of joint venture
income by $152,754. The minority interest arising from the operation of the
Medical Park Nursing Home reflects improved earnings at that facility due to
ancillary services utilization.
Fiscal Year 1994 Compared to 1993
Net income for the year ended December 31, 1994 was $1,206,438, compared to
$1,650,574 for 1993. This decline in earnings was due to sharply higher
operating expenses for the care of patients which could not be reflected in
increased rates in the current year. These expenditures should be reflected in
higher patient care rates in future periods.
5
<PAGE> 8
Professional care of patient costs by year are:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Salaries and Wages $ 5,114,186 $ 4,461,047
Supplies and Pharmaceuticals 611,700 478,020
Ancillary Service Expense 1,661,797 897,741
Social Service and Activities 310,435 285,804
Medical Records 62,918 54,084
Temporary Labor 180,950 93,344
Other Expenses 298,801 242,756
----------- -----------
$ 8,240,787 $ 6,512,796
=========== ===========
</TABLE>
Ancillary services include physical, occupational, and speech therapy programs
that allow patients to have an improved quality of life and, in some cases, to
be discharged to their homes. Expenses for salaries and wages include the cost
of several new nursing positions which were added in response to the many
regulatory changes being implemented by the various state and federal agencies.
In addition, vacation pay was allocated to each department in 1994 instead of
being included in Employee Health and Welfare accounts, as it was in previous
years.
A recap of General and Administrative expenses include:
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Salaries and Wages $ 453,807 $ 409,137
Supplies 50,556 41,104
Insurance 665,557 751,997
Management Fees 914,238 864,674
Cost Reimbursement 147,110 137,579
Property Tax 55,586 79,569
Audit and Accounting 184,757 153,545
Telephone 45,568 42,377
Travel 52,404 36,944
Other Expenses 229,196 177,747
----------- -----------
$ 2,798,779 $ 2,694,653
=========== ===========
</TABLE>
The decrease in insurance costs was due to improved controls on the workers
compensation insurance programs, particularly in the State of Alabama.
Fiscal Year 1993 Compared to 1992
Net income increased in 1993 to $1,650,574, from $1,300,074 during 1992. Net
patient service revenue was $16,570,880, an increase of 4% over the previous
year, due primarily to higher room and board charges.
6
<PAGE> 9
Expenses increased during the year by $320,023 due to general cost increases.
The following chart compares the professional care of patients between fiscal
years 1993 and 1992:
<TABLE>
<CAPTION>
1993 1992
---- ----
<S> <C> <C>
Salaries and Wages $ 4,461,047 $ 4,384,812
Supplies and Pharmaceuticals 478,020 489,279
Ancillary Service Costs 897,741 890,717
Social Service and Activities 285,804 268,885
Medical Records 54,084 70,492
Temporary Labor 93,344 114,804
Other Expenses 242,756 218,472
----------- -----------
$ 6,512,796 $ 6,437,461
=========== ===========
</TABLE>
Dietary costs increased over the prior year by $39,047 due to higher food cost
and increased salaries. Household and plant expenses increased due to higher
utility costs of $37,914 and repairs and maintenance costs of $8,975. General
and administrative costs totaled $2,694,653, for an increase of $48,136 over
1992. A recap of these expenses include:
<TABLE>
<CAPTION>
1993 1992
---- ----
<S> <C> <C>
Salaries and Wages $ 409,137 $ 390,027
Supplies 41,104 36,125
Insurance 751,977 702,212
Management Fees 864,674 868,550
Cost Reimbursement 137,579 114,791
Property Tax 79,569 107,111
Audit and Accounting 153,545 176,312
Telephone 42,377 41,913
Travel 36,944 30,034
Other expenses 177,747 179,442
----------- -----------
$ 2,694,653 $ 2,646,517
=========== ===========
</TABLE>
Employee health and welfare expenses totaled $1,017,491. These expenses were
higher due to employment taxes, health insurance costs and vacation accruals.
Interest income totaled $93,388, for an increase of $38,295 due to higher cash
balances being maintained. Interest expense was $44,292 lower than 1992 due
to lower debt balances and the debt refinancing completed in May 1993.
Provider fees include amounts paid to the Alabama and Illinois Medicaid
programs to enhance the Medicaid rates. During the year ended 1993, the
Illinois program changed its provider fee and payment formula and the changes
resulted in a net decrease in fees paid.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data required by Regulation S-X are
included in this Form 10-K commencing on page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
There were no changes of auditors for the Partnership during the fiscal years
1995 and 1994.
7
<PAGE> 10
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Partnership has no directors or executive officers. QualiCorp Management,
Inc. (QMI), a Delaware corporation, is the Managing General Partner of the
Partnership. The directors and executive officers of QMI as of December 31,
1995 are listed below. Directors serve for one year or until the next annual
meeting of stockholders of QMI or until their successors are elected and
qualified. QMI is a wholly-owned subsidiary of QualiCorp, Inc., a Louisiana
corporation. The directors and executive officers of QualiCorp, Inc. are also
listed below. The relationship of the Managing General Partner to its
Affiliates is described under the caption "Conflicts of Interest" on pages 38
through 42 of the Prospectus, which pages are specifically incorporated by
reference herein.
The directors and executive officers of QMI and QualiCorp, Inc. are as follows:
<TABLE>
<CAPTION>
Name Age Principal Occupation During the Past Five Years
---- --- -----------------------------------------------
<S> <C> <C>
John M. DeBlois 58 Chairman of the Board since 1981. Chairman of the Board of Qualicare, Inc., a
hospital management company, from the mid 1970's to 1983.
John H. Stoddard 53 President and Chief Financial Officer from July 1, 1988. Senior Vice President
with Safecare Health Services, Inc., a health care management company, from
September 1, 1985 to March 1988. From May 1983 to August 1985, Treasurer,
Continental Health Services, a health care management company. Prior to May
1993, was Vice President - Finance with Qualicare, Inc.
Wanda J. Honea 38 Vice President - Investor Services from May 1990. Office relocation consultant
from October 1989 through April 1990. From October 1988 to October 1990, Office
Administrator for Hunton & Williams, a law firm. Prior to 1988, administrative
assistant at Hansell & Post.
</TABLE>
Mr. DeBlois and Mr. Stoddard are Directors of QMI and Qualicorp, Inc. There
are no family relationships among any of the above officers and/or directors.
ITEM 11. EXECUTIVE COMPENSATION
The Partnership has no officers or directors. No director or officer of the
Managing General Partner received any remuneration from the Partnership during
the three years ended December 31, 1995. The Partnership paid to Qualicorp,
Inc., the parent of QMI, the Managing General Partner, $136,679 as
reimbursement for administrative expenses (primarily salaries) incurred during
the year.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
No person or group is known by the Partnership to own beneficially more than 5%
of the outstanding Units of the Partnership.
No executive officers or directors of QMI owned any Units in the Partnership at
December 31, 1995. Qualicorp, Inc., parent of QMI, the Partnership's Managing
General Partner, held 42 units in the Partnership at December 31, 1995.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
For the five years ended December 31, 1995, QualiCorp, Inc., the parent of QMI,
charged the Partnership for administrative services $136,679, $147,110,
$137,579, $114,791, and $105,746.
8
<PAGE> 11
Under the Partnership Agreement, the General Partners are entitled to
participate in distributions of the Partnership's Cash Flow as described under
the caption "Management Compensation" at pages 32 through 36 of the Prospectus.
Cash distributions of $84,175, $80,671, $52,606, $35,074, and $7,016 were made
to the General Partners during 1995, 1994, 1993, 1992, and 1991, respectively.
The General Partners also share in the Partnership's net profits and net
losses.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
1. Financial statements and supplementary information appear on a
separate section of this Form 10-K commencing on pages
referenced below:
MEDICAL INCOME PROPERTIES 2A LIMITED PARTNERSHIP
<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditor's Report F-1
Financial Statements
Balance Sheets F-2
Statements of Operations F-3
Statements of Partners' Capital F-4
Statements of Cash Flows F-5
Notes to Financial Statements F-7
Information Accompanying the Basic Financial Statements
Independent Auditor's Report on Additional Information F-18
Schedule VIII - Valuation and Qualifying Accounts and Reserves
for Allowances for Doubtful Accounts F-19
Schedule X - Consolidated Supplementary Income Statement Information F-20
Schedule XI - Real Estate and Accumulated Depreciation F-21
</TABLE>
All schedules other than those indicated have been omitted as the required
information is inapplicable or the information is presented in the financial
statements or related notes.
THE TEXAS JOINT VENTURE
<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditor's Report F-22
Financial Statements
Balance Sheets F-23
Statements of Operations F-24
Statements of Partners' Capital F-25
Statements of Cash Flows F-26
Notes to Financial Statements F-28
Information Accompanying the Basic Financial Statements
Independent Auditor's Report on Additional Information F-35
Schedule VIII - Valuation and Qualifying Accounts and Reserves for
Allowance for Doubtful Accounts F-36
Schedule X - Consolidated Supplementary Income Statement Information F-37
Schedule XI - Real Estate and Accumulated Depreciation F-38
</TABLE>
All schedules other than those indicated have been omitted as the required
information is inapplicable or the information is presented in the financial
statements or related notes.
9
<PAGE> 12
2. Exhibits
3-A. The prospectus of the Partnership dated October 22, 1986, as
amended October 23, 1986, October 29, 1986 and supplemented on
February 26, 1987 and filed pursuant to Rule 424(b) is hereby
incorporated herein by reference.
3-B. Amended and restated agreement of Limited Partnership set
forth as Exhibit A to the prospectus, incorporated herein by
reference.
(b) No report on Form 8-K has been filed during the fourth quarter of the
fiscal year ended December 31, 1995.
10
<PAGE> 13
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
QUALICORP MANAGEMENT, INC.
Managing General Partner
By: /s/ John H. Stoddard Date: March 15, 1996
-----------------------------------------
John H. Stoddard
President, Director, Chief Financial
Officer and Principal Accounting Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Name Position Date
---- -------- ----
<S> <C> <C>
/s/ John M. DeBlois Chairman of the Board March 15, 1996
- ---------------------------
John M. DeBlois
/s/ John H. Stoddard President, Director, March 15, 1996
- --------------------------- Chief Financial Officer
John H. Stoddard and Principal Accounting
Officer
</TABLE>
11
<PAGE> 14
SELF & MAPLES, P.A.
CERTIFIED PUBLIC ACCOUNTANTS
ONEONTA, ALABAMA 35121
THOMAS E. SELF, C.P.A. AMERICAN INSTITUTE
DON MAPLES, C.P.A. OF CERTIFIED PUBLIC ACCOUNTANTS
B. MARTIN COPELAND, C.P.A.
------- ALABAMA SOCIETY
CONNIE T. HARVEY, C.P.A. OF CERTIFIED PUBLIC ACCOUNTANTS
RANDY M. JOHNSTON, C.P.A. -------
ROGER D. LOGGINS, C.P.A. 1601 2ND AVENUE EAST
MARK S. SIMS, C.P.A. P.O. BOX 489
LINDA ROMBERG YORK, C.P.A. ONEONTA, ALABAMA 35121
GWIN E. DAVIS, P.A. -------
ROYCE E. GARGUS, P.A. TELEPHONE: (205) 625-3472
TELECOPIER: (205) 274-0182
INDEPENDENT AUDITOR'S REPORT
To the Partners
Medical Income Properties 2A Limited Partnership
We have audited the balance sheets of Medical Income Properties 2A Limited
Partnership as of December 31, 1995 and 1994 and the related statements of
operations, partners' capital and cash flows for each of the years in the
three-year period ended December 31, 1995. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to
express an opinion on the financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Medical Income Properties 2A
Limited Partnership as of December 31, 1995 and 1994 and the results of its
operations and its cash flows for each of the years in the three-year period
ended December 31, 1995 in conformity with generally accepted accounting
principles.
/s/ Self & Maples, P.A.
- -----------------------
Self & Maples, P.A.
January 26, 1996
Oneonta, Alabama
F-1
<PAGE> 15
MEDICAL INCOME PROPERTIES 2A LIMITED PARTNERSHIP
BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
ASSETS
------
Current assets
Cash and equivalents $ 889,401 $ 864,318
Marketable securitites 2,161,755 2,151,271
Accounts receivable, net of allowance
for doubtful accounts of $190,934
in 1995 and $168,203 in 1994 2,634,141 2,263,954
Estimated settlements due from third parties 485,609 363,385
Prepaid expenses and other assets 110,667 240,729
----------- -----------
Total current assets 6,281,573 5,883,657
Investment in joint ventures 4,718,713 4,628,512
Property, plant and equipment, net
of accumulated depreciation 13,394,031 13,756,481
Deferred financing costs, net of
accumulated amortization of
$39,294 in 1995 and $24,514 in 1994 37,326 52,106
Due from affiliates 754,471 382,517
----------- -----------
Total assets $25,186,114 $24,703,273
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
---------------------------------
Current liabilities
Current portion of long term debt $ 337,075 $ 338,739
Accounts payable 870,895 640,042
Accrued payroll and payroll taxes 259,497 238,086
Accrued vacation 207,362 196,686
Accrued insurance 65,028 226,018
Accrued management fees 79,234 131,274
Patient deposits and trust liabilities 97,569 92,510
Other accrued expenses 92,522 114,579
Estimated settlements due to third parties 453,166 112,772
Due to affiliates 243,814 101,526
----------- -----------
Total current liabilities 2,706,162 2,192,232
Bonds, notes and capital lease obligations 3,903,921 4,245,657
----------- -----------
Total liabilities 6,610,083 6,437,889
Venture partners' minority interest 2,315,986 2,031,996
----------- -----------
Partners' capital
Limited partners 16,250,393 16,225,603
General partners 9,652 7,785
----------- -----------
Total partners' capital 16,260,045 16,233,388
----------- -----------
Total liabilities and partners' capital $25,186,114 $24,703,273
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-2
<PAGE> 16
MEDICAL INCOME PROPERTIES 2A LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Revenues
Net patient service revenue $19,017,059 $17,872,338 $16,570,880
Other revenue 32,618 34,056 36,480
----------- ----------- -----------
Total revenue 19,049,677 17,906,394 16,607,360
----------- ----------- -----------
Operating expenses
Professional care of patients 9,205,785 8,240,787 6,512,796
Dietary 1,609,770 1,557,436 1,492,315
Household and plant 1,714,594 1,617,470 1,475,210
General and administrative 2,890,731 2,798,779 2,694,653
Employee health and welfare 919,299 925,354 1,017,491
Depreciation and amortization 768,270 772,176 791,288
----------- ----------- -----------
Total operating expenses 17,108,449 15,912,002 13,983,753
----------- ----------- -----------
Operating income 1,941,228 1,994,392 2,623,607
----------- ----------- -----------
Other income (expenses)
Interest income 157,839 152,591 93,388
Interest expense (419,354) (380,587) (363,374)
Provider fees (550,681) (540,739) (666,405)
Minority interest in
consolidated joint venture (324,895) (246,667) (294,399)
Partnership share of
unconsolidated joint
venture income 380,202 227,448 257,757
----------- ----------- -----------
Total other income
(expenses) (756,889) (787,954) (973,033)
----------- ----------- -----------
Net income $ 1,184,339 $ 1,206,438 $ 1,650,574
=========== =========== ===========
Net income attributable
to limited partners (93%) $ 1,101,435 $ 1,121,987 $ 1,535,034
Net income attributable
to general partners (7%) 82,904 84,451 115,540
----------- ----------- -----------
$ 1,184,339 $ 1,206,438 $ 1,650,574
=========== =========== ===========
Net income per weighted
average limited partnership
unit outstanding $ 59.09 $ 60.20 $ 82.36
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-3
<PAGE> 17
MEDICAL INCOME PROPERTIES 2A LIMITED PARTNERSHIP
STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
Limited Partners
--------------------------- General
Units Amount Partners Total
------ ----------- ---------- -----------
<S> <C> <C> <C> <C>
Partners' capital
(deficit) at
December 31, 1992 $18,639 $15,375,359 $ (56,214) $15,319,145
Distributions to
partners ($37.50 per
limited partnership
unit outstanding) - (698,962) (52,606) (751,568)
Net income - 1,535,034 115,540 1,650,574
------- ----------- --------- -----------
Partners' capital at
December 31, 1993 18,639 16,211,431 6,720 16,218,151
Distributions to
partners ($57.50 per
limited partnership
unit outstanding) - (1,071,744) (80,671) (1,152,415)
Net income - 1,121,987 84,451 1,206,438
Unrealized loss on
marketable securities
available for sale - (36,071) (2,715) (38,786)
------- ----------- --------- -----------
Partners' capital at
December 31, 1994 18,639 16,225,603 7,785 16,233,388
Distributions to
partners ($60.00 per
limited partnership
unit outstanding) - (1,118,339) (84,175) (1,202,514)
Net income - 1,101,435 82,904 1,184,339
Unrealized gain on
marketable securities
available for sale - 41,694 3,138 44,832
------- ----------- --------- -----------
Partners' capital at
December 31, 1995 $18,639 $16,250,393 $ 9,652 $16,260,045
======= =========== ========= ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE> 18
MEDICAL INCOME PROPERTIES 2A LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Cash received from patient care $18,869,199 $17,291,338 $16,331,974
Interest and dividends received 159,582 125,965 93,388
Other operating receipts 32,618 34,056 36,480
Cash paid to suppliers and employees (16,177,204) (14,858,368) (13,373,171)
Interest paid (419,354) (380,587) (363,374)
Provider fees (550,681) (540,739) (666,405)
----------- ----------- -----------
Net cash provided by operations 1,914,160 1,671,665 2,058,892
----------- ----------- -----------
Cash flows from investing activities:
Purchases of marketable securities (755,533) (2,169,477) -
Proceeds from sales of
marketable securities 783,981 - -
Acquisitions of property (391,040) (353,775) (75,399)
Distributions from joint ventures 290,000 189,999 90,000
----------- ----------- -----------
Net cash provided (used)
by investing activities (72,592) (2,333,253) 14,601
----------- ----------- -----------
Cash flows from financing activities:
Distributions to partners (1,202,514) (1,152,415) (751,568)
Payments on long-term debt and
lease obligations (343,400) (367,156) (24,816)
Net related party transactions (229,666) (150,708) 125,368
Distributions to venture partners (40,905) (86,355) (131,805)
----------- ----------- -----------
Net cash used by financing activities (1,816,485) (1,756,634) (782,821)
----------- ----------- -----------
Net increase (decrease) in cash and
equivalents 25,083 (2,418,222) 1,290,672
Cash and equivalents, beginning of year 864,318 3,282,540 1,991,868
----------- ----------- -----------
Cash and cash equivalents, end of year $ 889,401 $ 864,318 $ 3,282,540
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE> 19
MEDICAL INCOME PROPERTIES 2A LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Reconciliation of net income to net cash
provided by operating activities:
Net income $ 1,184,339 $ 1,206,438 $ 1,650,574
----------- ----------- -----------
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 768,270 772,176 791,288
(Increase) decrease in interest
receivable, securities premium
amortization and securities
discount amortization 1,743 (26,626) -
Partnership share of
unconsolidated joint
venture (income) loss (380,202) (227,448) (257,757)
Minority interest in
consolidated joint
venture income (loss) 324,895 246,667 294,399
Provision for losses on accounts
receivable 22,731 21,058 (28,236)
(Increase) decrease in
accounts receivable (388,761) (670,429) 152,850
(Increase) decrease in
third party receivables (122,224) (1,184) (285,475)
(Increase) decrease in prepaid
expenses and other assets 130,062 (93,140) 41,184
Increase (decrease) in accounts
payable and accrued expenses 32,913 374,598 (221,890)
Increase (decrease) in
third party payables 340,394 69,555 (78,045)
----------- ----------- -----------
Total adjustments 729,821 465,227 408,318
----------- ----------- -----------
Net cash provided by operations $ 1,914,160 $ 1,671,665 $ 2,058,892
=========== =========== ===========
Supplemental schedule of noncash investing
and financing activities:
Unrealized gain (loss) on marketable
securities available for sale 44,832 (38,786) -
Note payable used to pay existing debt - - 3,883,835
</TABLE>
The accompanying notes are an integral part of these statements.
F-6
<PAGE> 20
MEDICAL INCOME PROPERTIES 2A LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
Note 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Organization
Medical Income Properties 2A Limited Partnership (the
Partnership) is a Delaware limited partnership formed on May
14, 1986 that is engaged in the business of acquiring,
operating and holding for investment purposes,
income-producing, health care related properties, primarily
nursing homes. The Partnership is one of a series of three
partnerships as represented by the Partnership Prospectus
(Prospectus) dated October 22, 1986, providing for the sale of
10,000 units at $1,000 per unit (with an option to increase to
20,000 units per partnership). The Partnership's first
closing on the sale of units was December 9, 1986. The
offering closed on June 2, 1987. For the period May 15, 1986
(inception) to August 31, 1987, the Partnership was in the
development stage. On September 1, 1987, the Partnership
began acquiring property.
The general partners are QualiCorp Management, Inc. (a
wholly-owned subsidiary of QualiCorp, Inc.) and QualiCorp
Capital, Inc.
(b) Allocation of Net Profits and Net Losses
Net profits and net losses shall be determined and allocated
as of December 31 of each year, as follows:
- Net profits (losses) (exclusive of net profits
(losses) attributable to the sale or disposition of
Partnership properties) are allocated 93% to the
limited partners and 7% to the general partners.
- Net profits attributable to the sale or disposition
of a Partnership property shall be allocated as
follows:
- First, to limited partners with negative
balances in their capital accounts in
proportion to such negative balances, to the
extent of the total of such negative
balances;
- Second, 1% to the general partners and 99%
to the limited partners until the capital
account of each limited partner is equal to
his capital investment; and
- Third, the balance, if any, 85% to the
limited partners and 15% to the general
partners.
F-7
<PAGE> 21
MEDICAL INCOME PROPERTIES 2A LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
- Net losses attributable to the sale or disposition of
a Partnership property shall be allocated in a manner
similar to above, except that limited and general
partner accounts would be reduced pro rata to the
amount of their respective capital investments, then,
pro rata to zero, and for any remaining loss, 93% to
the limited partners and 7% to the general partners.
(c) Cash Distributions
Cash distributions shall be made quarterly within 45 days
after the end of the quarter. Cash flow shall be distributed
93% to the limited partners and 7% to the general partners.
Sale or financing proceeds shall be distributed first to
creditors and then to the limited partners to the extent of
their original capital contribution and then the remainder
shall be distributed 85% to the limited partners and 15% to
the general partners.
(d) Per Unit Information
Limited partnership information per unit is based on units
outstanding of 18,639 in 1995, 1994 and 1993.
(e) Patient Service Revenue
Patient service revenue is recorded at the nursing homes'
established rates with contractual adjustments ($6,182,176 in
1995, $4,915,980 in 1994, and $3,180,670 in 1993), provision
for uncollectible accounts, bad debts ($22,731 in 1995,
$21,058 in 1994, and $(28,236) in 1993) and other discounts
deducted to arrive at net patient service revenue.
Net patient revenue includes amounts estimated by management
to be reimbursable by Medicare, Medicaid and other third-party
programs under the provisions of cost and prospective payment
reimbursement formulas in effect. Amounts received under
these programs are generally less than the established billing
rates of the nursing homes and the difference is reported as a
contractual adjustment and deducted from gross revenue. The
nursing homes recognize currently estimated final settlements
due from or to third-party programs.
F-8
<PAGE> 22
MEDICAL INCOME PROPERTIES 2A LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
Final determination of amounts earned is subject to audit by
the intermediaries. Differences between estimated provisions
and final settlement will be reflected as charges or credits
to operating revenues in the year the cost reports are
finalized.
(f) Property, Plant and Equipment
Property, plant and equipment is stated at cost. Items
capitalized under capital lease obligations are recorded at
their fair market value at the inception of the lease.
Depreciation of the buildings is provided over their estimated
useful lives of thirty years on the straight-line method.
Equipment and other personal property are depreciated over
five to seven years on the straight-line method.
(g) Income Taxes
Taxable income is allocated to the individual partners and,
therefore, no income taxes have been provided for in these
financial statements.
(h) Cash Equivalents Policy
For the purposes of the statement of cash flows, the
Partnership considers all highly liquid debt instruments with
an original maturity of three months or less to be cash
equivalents.
(i) Uninsured Cash Balances
The Partnership maintains cash balances in several banks.
Cash accounts at banks are insured by the FDIC for up to
$100,000. Amounts in excess of insured limits were
approximately $380,063 at December 31, 1995 and $2,668,102 at
December 31, 1994. The 1995 amount includes the total of
commingled funds discussed in Note 7., since the amount in
excess of FDIC limits related to these funds is not
determinable.
(j) Marketable Securities
The classification of marketable securities is determined at
the date of purchase. Gains or losses on the sale of
securities are recognized on a specific identification basis.
Marketable securities represent an investment of excess funds
as a part of the Partnership's cash management policies.
These securities are considered to be available for sale under
Statement of Financial Accounting Standards No. 115 and are,
thus, stated at fair value. Unrealized gains and losses are
F-9
<PAGE> 23
MEDICAL INCOME PROPERTIES 2A LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
recognized as a component of partners' capital as is required
by SFAS No. 115.
(k) Uses of Estimates
Management uses estimates and assumptions in preparing
financial statements. Those estimates and assumptions affect
the reported amounts of assets and liabilities, the disclosure
of contingent assets and liabilities, and the reported
revenues and expenses.
Note 2. ACQUISITIONS
On September 1, 1987, the Partnership acquired Muscle Shoals Nursing
Home, Oak Crest Nursing Home, and Shoals Nursing Home located in
Alabama for $6,625,000 plus capitalized acquisition costs and fees of
$165,612. In 1988 an additional $344,631 of acquisition costs and
fees were capitalized. While the transaction is recorded as a
purchase, the property was subject to a capitalized lease obligation
(see Note 6) of $1,685,000. Title is held by a governmental entity
until the lease obligation expires in 2008, at which time title
passes to the Partnership. In 1993 the mortgage associated with this
capitalized lease was repaid with proceeds of a new mortgage note
(see Note 6). The lease continues at $1 per year until the lease
expires.
On March 1, 1988, the Partnership acquired Edwardsville West Nursing
Home, now known as University Manor, located in Illinois for
$4,200,000 plus capitalized acquisition fees and costs of $311,738.
The property was subject to Industrial Revenue Bonds outstanding of
$1,269,723.
On July 1, 1988, the Partnership acquired 54.55% of Medical Park
Nursing Home (The Alabama Joint Venture) located in Alabama for
$2,782,050 plus capitalized acquisition costs of $206,893. Medical
Income Properties 2B Limited Partnership (MIP2B) purchased the
remaining 45.45% of Medical Park. The assets and liabilities of
Medical Park have been consolidated in the financial statements of
the Partnership with a minority interest in 45.45% of the net assets
recorded.
Medical Park's equity at December 31, 1995 and 1994 was $5,097,502
and $4,452,599, respectively, and it had net income of $714,840,
$542,722 and $647,742 for the years ended December 31, 1995, 1994 and
1993, respectively.
The acquisitions have been accounted for under the purchase method of
accounting. Consequently, only operations subsequent to the
acquisition date have been included in the accompanying financial
statements.
F-10
<PAGE> 24
MEDICAL INCOME PROPERTIES 2A LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
Note 3. MARKETABLE SECURITIES
Marketable securities consist of U.S. Treasury securities. The
following schedule summarizes marketable securities activity for the
years ended December 31, 1995 and 1994:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Beginning balance, amortized cost $2,190,057 $ -
Purchase of marketable securities 755,533 2,857,634
Redemption of investments (783,981) (688,157)
Net amortization of premiums and
accretion of discounts (5,900) 20,580
---------- ----------
Amortized cost 2,155,709 2,190,057
Gross unrealized loss 6,046 (38,786)
---------- ----------
Fair value $2,161,755 $2,151,271
========== ==========
</TABLE>
The maturities of investment securities at December 31, 1995
were as follows:
<TABLE>
<S> <C>
Due in one year or less $1,401,675
Due in two years or less 754,034
----------
$2,155,709
==========
</TABLE>
Note 4. INVESTMENT IN JOINT VENTURES
The Partnership has invested in two joint ventures with MIP2B, an
affiliated limited partnership.
The Alabama Joint Venture
The Alabama Joint Venture includes only Medical Park which is
accounted for as a purchase and is consolidated in these financial
statements as described in Note 2 above.
The Texas Joint Venture
The Texas Joint Venture is accounted for under the equity method. On
May 1, 1988 the Partnership purchased 50% of the Renaissance Place -
Katy Nursing Home located in Texas for $2,736,250 plus capitalized
acquisition costs and fees of $254,645. Also, on the same date, the
Partnership purchased 50% of Renaissance Place - Humble Nursing Home
located in Texas for $2,243,750 plus capitalized acquisition costs
and fees of $114,406.
F-11
<PAGE> 25
MEDICAL INCOME PROPERTIES 2A LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
The condensed balance sheet information for the investment in joint
venture as of December 31, 1995 and 1994 and operating statement
information for each of the years in the three-year period ending
December 31, 1995 is as follows:
<TABLE>
<CAPTION>
Katy 1995 1994
---- ---- ----
<S> <C> <C>
Current assets $ 1,684,094 $ 1,411,011
Long term assets 5,048,138 4,898,053
----------- -----------
Total assets $ 6,732,232 $ 6,309,064
=========== ===========
Current liabilities 684,328 610,922
Long term liabilities - -
Equity 6,047,904 5,698,142
----------- -----------
Total liabilities
and equity $ 6,732,232 $ 6,309,064
=========== ===========
Partnership's investment
at December 31,
1995 and 1994 $ 3,023,952 $ 2,849,071
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Revenues $ 4,985,129 $ 3,700,538 $ 3,291,225
Expenses 4,362,005 3,505,169 3,038,817
----------- ----------- -----------
Net income $ 623,124 $ 195,369 $ 252,408
=========== =========== ===========
Humble 1995 1994
------ ---- ----
Current assets $ 1,140,926 $ 1,424,629
Long term assets 3,651,762 3,540,311
----------- -----------
Total assets $ 4,792,688 $ 4,964,940
=========== ===========
Current liabilities 703,933 681,728
Long term liabilities 691,850 752,347
Equity 3,396,905 3,530,865
----------- -----------
Total liabilities
and equity $ 4,792,688 $ 4,964,940
=========== ===========
Partnership's investment
at December 31,
1995 and 1994 $ 1,698,453 $ 1,765,433
=========== ===========
</TABLE>
F-12
<PAGE> 26
MEDICAL INCOME PROPERTIES 2A LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Humble (con't) 1995 1994 1993
------ ---- ---- ----
<S> <C> <C> <C>
Revenues $ 3,664,088 $ 3,373,417 $ 3,107,004
Expenses 3,526,809 3,113,890 2,843,900
----------- ----------- -----------
Net income $ 137,279 $ 259,527 $ 263,104
=========== =========== ===========
</TABLE>
Note 5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is recorded at cost and consists of the
following at December 31, 1995 and 1994:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Land $ 493,528 $ 482,000
Buildings and improvements 10,141,958 10,031,300
Furniture and equipment 2,076,727 1,715,532
Property under capitalized lease 6,550,539 6,642,882
----------- -----------
Total 19,262,752 18,871,714
Accumulated depreciation (5,868,721) (5,115,233)
----------- -----------
Net property plant and equipment $13,394,031 $13,756,481
=========== ===========
</TABLE>
Note 6. DEBT OBLIGATIONS
Debt obligations consisted of the following at December 31, 1995 and
1995:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Mortgage notes secured by interest in capitalized lease
with interest at prime plus 1% (9.5% at December 31,
1995 and December 31, 1994) payable in 60 payments of
$22,728 plus interest through April 26, 1998, with a
balloon payment due May 26, 1998 $ 3,386,439 $ 3,659,173
Industrial Revenue Bonds secured by real estate, payable
at a variable rate of interest (8.225% at December 31, 1995
and 7.285% at December 31, 1994) with monthly principal and
interest payments of $11,020 through April 1, 2005. The
interest rate is adjusted every May 1 and November 1. 854,557 915,939
</TABLE>
F-13
<PAGE> 27
MEDICAL INCOME PROPERTIES 2A LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
<TABLE>
<S> <C> <C>
Capitalized leases on various pieces of minor equipment
payable monthly at interest rates from 9% to 10% - 9,284
----------- -----------
4,240,996 4,584,396
Less amounts due in one year or less 337,075 338,739
----------- -----------
$ 3,903,921 $ 4,245,657
=========== ===========
</TABLE>
The aggregate annual maturities of bonds and notes payable for the
succeeding five fiscal years are as follows:
<TABLE>
<S> <C>
1996 $ 337,075
1997 342,571
1998 2,916,775
1999 82,278
2000 89,307
Thereafter 472,990
----------
$4,240,996
==========
</TABLE>
The Partnership leases certain property, plant and equipment under a
capital lease. The mortgage associated with this capital lease
obligation was repaid in 1993 (see Note 2). The capital lease
expires in 2008. Principal payments in various amounts are payable
monthly under the minor equipment leases.
The mortgage note is secured by all real estate owned by the
Partnership. The General Partner of MIP2A has guaranteed the debt,
as well as pledged its stock and partnership interest. The
management company (See Note 9) has also guaranteed the debt and
entered into a negative pledge agreement whereby they will not
pledge, transfer or encumber their stock while the loan is
outstanding. All management fees are subordinate to the debt.
Note 7. RELATED PARTY TRANSACTIONS
QualiCorp, Inc. charged the Partnership $136,679 in 1995, $147,110 in
1994 and $137,579 in 1993 for administrative expenses (primarily
salaries).
As a result of the consolidation of Medical Park as described in Note
2. above, amounts due to The Alabama Joint Venture from MIP2B are
included in the amounts due from affiliates. Details of the amounts
due from affiliates at December 31 are as follows:
F-14
<PAGE> 28
MEDICAL INCOME PROPERTIES 2A LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Due from affiliates of the general partner $ 371,954 -
Due from MIP2B 382,517 382,517
---------- ----------
$ 754,471 $ 382,517
========== ==========
</TABLE>
Details of the amounts due to affiliates at December 31 are as
follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Due to QualiCorp, Inc. $ 31,358 $ 17,679
Due to The Texas Joint Venture 212,456 83,847
---------- ----------
$ 243,814 $ 101,526
========== ==========
</TABLE>
During the year, the General Partners established a pooled investment
account in which the General Partners and the partnerships in which
they act as general partners could participate. This account was
used by those entities to invest overnight cash balances, and borrow
funds when an entity needed temporary access to funds. Each entity
received its share of interest earned monthly, and was charged
interest on any funds borrowed.
The Articles of Limited Partnership of the partnerships involved
state that no General Partner shall have the authority to cause those
partnerships to make loans other than in connection with the
purchase, sale or disposition of partnership property. The Articles
of Limited Partnership of those partnerships also state that the
partnerships' funds may not be commingled with any other entities'
funds except as necessary for the operation of those partnerships.
At December 31, 1995, the Partnership had loaned $371,954 to the
other entities, and had earned interest of $33,229 from this
arrangement.
Note 8. INCOME TAXES
No provision for income taxes is made in the financial statements
since taxable income is reported in the income tax returns of its
partners. Differences between the net income as reported in the
financial statements and Federal taxable income arise from the nature
and timing of certain revenue and expense items. The following is a
reconciliation of reported net income and Federal taxable income:
F-15
<PAGE> 29
MEDICAL INCOME PROPERTIES 2A LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Net income as reported $ 1,184,339 $ 1,206,438 $ 1,650,574
Adjustments:
Depreciation differences 34,742 60,405 42,550
Insurance deductible (76,360) 76,360
Bad debt reserve 71,255 10,571 (49,402)
Vacation accrual 21,768 23,613 18,092
Nondeductible meals, and
entertainment 27,867 12,725 8,832
----------- ----------- -----------
Federal taxable income $ 1,263,611 $ 1,313,752 $ 1,747,006
=========== =========== ===========
Federal taxable income per limited
partnership unit outstanding $63.05 $65.55 $87.17
=========== =========== ===========
</TABLE>
Note 9. CONTRACTUAL AGREEMENTS
In 1988, the Partnership entered into management agreements whereby
the Manager is required to perform certain services at each of the
nursing facilities. Each of the agreements had an initial five-year
term with one additional five-year option that was exercised in 1993.
Fees were based on 6% of gross collected operating revenues through
June 30, 1992. Thereafter they were based on 5% of gross collected
operating revenues, but not less than $816,000 in a calendar year and
were increased by an inflation factor after 1992. The Manager has
a right of first refusal to match a bona fide offer made by an
outside party to purchase or lease each of the nursing facilities.
The management agreements, as amended, contained a termination clause.
The management agreements were amended on January 1, 1995. The
amendments call for fixed monthly management fees totaling $79,234
with a cost of living factor equal to the greater of 4% per annum or
the increase in the Consumer Price Index or such other measure
mutually agreeable to the parties. The agreements expire December
31, 1998. The termination on sale clauses were amended to base the
fees on a sum equal to the discounted present value of the monthly
management fees as of the date of termination of the agreements times
the number of months remaining in the management agreements
discounted to the date of termination at an annual interest rate of
ten percent (10%).
Management fees charged to the Partnership were $950,808 in 1995,
$914,238 in 1994, and $864,674 in 1993.
F-16
<PAGE> 30
MEDICAL INCOME PROPERTIES 2A LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
Note 10. CONTINGENCY
On May 1, 1990, the Texas Joint Venture, of which the Partnership
owns 50%, began self insuring its workmen's compensation claims for
two nursing home facilities located in Texas. Accrued liabilities
have been estimated to cover all asserted and unasserted claims and
assessments and funds have been escrowed to cover such claims.
The Partnership maintains insurance or reserves which it believes are
adequate to meet the needs of the Partnership. While the Partnership
has been named as a defendant in several lawsuits, nothing has come
to the attention of the Partnership which leads it to believe that it
is exposed to a risk of material loss not covered by insurance or
reserves.
Note 11. RENTALS UNDER OPERATING LEASES
The Partnership leases certain minor equipment under various
operating leases. The following is a schedule by years of minimum
future rentals on operating leases as of December 31, 1995:
<TABLE>
<S> <C> <C>
1996 $ 7,146
1997 1,851
--------
Total minimum future rentals $ 8,997
========
</TABLE>
Note 12. MAJOR SOURCES OF REVENUE
The Partnership provides patient care services under various third
party agreements. The principal sources of revenue under these
contracts are derived primarily through the Medicaid and Medicare
programs, as well as contracts with private pay patients who do not
qualify for assistance from the other programs. The percentage of
the Joint Venture's income from each of these sources for the years
ended December 31, 1995, 1994, and 1993 is as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Private pay patients 16.18% 17.73% 22.12%
Medicaid 65.72% 64.55% 67.12%
Medicare 18.10% 17.72% 10.76%
------ ------ ------
Total 100.00% 100.00% 100.00%
====== ====== ======
</TABLE>
The percentage attributable to private pay patients includes only
amounts due for services where the primary payer is a private source.
The Medicaid and Medicare percentages include amounts due from those
programs as well as the patient's financial responsibility incurred
under these contracts.
F-17
<PAGE> 31
SELF & MAPLES, P.A.
CERTIFIED PUBLIC ACCOUNTANTS
ONEONTA, ALABAMA 35121
THOMAS E. SELF, C.P.A. AMERICAN INSTITUTE
DON MAPLES, C.P.A OF CERTIFIED PUBLIC ACCOUNTANTS
B. MARTIN COPELAND, C.P.A.
------- ALABAMA SOCIETY
CONNIE T. HARVEY, C.P.A. OF CERTIFIED PUBLIC ACCOUNTANTS
RANDY M. JOHNSTON, C.P.A. -------
ROGER D. LOGGINS, C.P.A. 1601 2ND AVENUE EAST
MARK S. SIMS, C.P.A. P.O. BOX 489
LINDA ROMBERG YORK, C.P.A. ONEONTA, ALABAMA 35121
GWIN E. DAVIS, P.A. -------
ROYCE E. GARGUS, P.A. TELEPHONE: (205) 625-3472
TELECOPIER: (205) 274-0182
INDEPENDENT AUDITOR'S REPORT
ON ADDITIONAL INFORMATION
To the Partners
Medical Income Properties 2A Limited Partnership
Our report on our audits of the basic financial statements of Medical Income
Properties 2A Limited Partnership for 1995 appears on page 1. Those audits
were made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The Schedule of Valuation and Qualifying Accounts
and Reserves for Allowances for Doubtful Accounts, Schedule of Consolidated
Supplementary Income Statement Information, and Schedule of Real Estate and
Accumulated Depreciation are presented for purposes of additional analysis and
are not required parts of the basic financial statements. Such information has
been subjected to the auditing procedures applied to the audits of the basic
financial statements, and in our opinion, is fairly stated in all material
respects in relation to the financial statements taken as a whole.
/s/ Self & Maples, P.A.
- -----------------------
Self & Maples, P.A.
January 26, 1996
Oneonta, Alabama
F-18
<PAGE> 32
MEDICAL INCOME PROPERTIES 2A LIMITED PARTNERSHIP
SCHEDULE VIII
VALUATION AND QUALIFYING ACCOUNTS
AND RESERVES FOR ALLOWANCES FOR DOUBTFUL ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Balance at beginning of year $ 168,203 $ 147,145 $ 175,381
Charged to patient service revenue (93,597) (59,198) (35,626)
Write-offs 116,328 80,256 7,390
--------- --------- ---------
Balance at end of year $ 190,934 $ 168,203 $ 147,145
========= ========= =========
</TABLE>
F-19
<PAGE> 33
MEDICAL INCOME PROPERTIES 2A LIMITED PARTNERSHIP
SCHEDULE X
CONSOLIDATED SUPPLEMENTARY INCOME STATEMENT INFORMATION
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Professional care of patients
Salaries and wages $ 5,515,416 $ 5,114,186 $ 4,461,047
Ancillary service expenses 2,160,552 1,661,797 897,741
Supplies and pharmaceuticals 740,854 611,700 478,020
Temporary labor 46,869 180,950 93,344
General and administrative
Salaries and wages 502,629 453,807 409,137
Accounting and auditing 185,395 184,757 153,545
Insurance 595,953 665,557 751,977
Property tax 69,709 55,586 79,569
Management fees 950,808 914,238 864,674
Cost reimbursement 136,679 147,110 137,579
Dietary
Food cost 748,440 726,976 741,225
Household and plant
Repairs and maintenance 210,971 210,299 171,838
Utilities 482,949 445,174 450,093
Depreciation $ 753,489 $ 757,395 $ 758,973
=========== =========== ===========
</TABLE>
F-20
<PAGE> 34
MEDICAL INCOME PROPERTIES 2A LIMITED PARTNERSHIP
SCHEDULE XI
REAL ESTATE AND ACCUMULATED DEPRECIATION
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
INITIAL COST COSTS CAPITALIZED GROSS AMOUNT AT WHICH CARRIED
TO PARTNERSHIP(A) SUBSEQUENT TO AS OF DECEMBER 31, 1995(B)
ACQUISITION
BUILDING AND CARRYING BUILDING AND
DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS IMPROVEMENTS COST LAND IMPROVEMENTS TOTAL
- ----------------------- ------------ ----- ------------ ----------- -------- ------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
MUSCLE SHOALS $ 413,890 $ 55,610 $ 2,227,047 $ 268,059 $113,945 $ 55,610 $ 2,609,051 $ 2,664,661
SHOALS 609,244 44,636 2,412,436 459,468 126,526 44,636 2,998,430 3,043,066
OAK CREST 331,111 56,316 2,083,684 210,735 104,160 56,316 2,398,579 2,454,895
UNIVERSITY MANOR 854,557 82,000 4,407,718 389,728 82,000 4,797,446 4,879,446
MEDICAL PARK (54.55% 2,032,194 400,000 5,424,540 396,144 400,000 5,820,684 6,220,684
INTEREST)
---------- -------- ----------- ---------- -------- -------- ----------- -----------
$4,240,996 $638,562 $16,555,425 $1,724,134 $344,631 $638,562 $18,624,190 $19,262,752
========== ======== =========== ========== ======== ======== =========== ===========
<CAPTION>
LIFE ON WHICH
DEPRECIATION
IN LATEST
STATEMENT OF
ACCUMULATED DATE OF DATE OPERATION IS
DEPRECIATION CONSTRUCTION ACQUIRED COMPUTED
------------ ------------ --------- ------------
<S> <C> <C> <C> <C>
MUSCLE SHOALS $ 856,484 1974/1986 09/01/87 27.5 YEARS
SHOALS 982,776 1966/1968 09/01/87 27.5 YEARS
OAK CREST 783,210 1961/1968 09/01/87 27.5 YEARS
UNIVERSITY MANOR 1,398,448 1984 03/01/88 40 YEARS
MEDICAL PARK (54.55% INTEREST) 1,847,803 1969/1980 07/01/88 27.5 YEARS
----------
$5,868,721
==========
</TABLE>
(A) The initial cost to the Partnership represents the original purchase price
of the properties.
(B) The aggregate cost of real estate owned at December 31, 1995 for Federal
Income tax purposes was approximately $19,262,752.
(C) Reconciliation of real estate owned at December 31, 1995, 1994, and 1993:
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Balance at beginning of period $18,871,714 $18,517,939 $18,442,539
Additions 391,038 353,775 75,400
Reductions 0 0 0
----------- ----------- -----------
Balance at end of period $19,262,752 $18,871,714 $18,517,939
=========== =========== ===========
(D) Reconciliation of accumulated depreciation:
Balance at beginning of period $ 5,115,233 $ 4,357,837 $ 3,599,864
Depreciation expense 753,488 757,396 757,973
Reductions 0 0 0
----------- ----------- -----------
Balance at end of period $ 5,868,721 $ 5,115,233 $ 4,357,837
=========== =========== ===========
</TABLE>
F-21
<PAGE> 35
SELF & MAPLES, P.A.
CERTIFIED PUBLIC ACCOUNTANTS
ONEONTA, ALABAMA 35121
THOMAS E. SELF, C.P.A. AMERICAN INSTITUTE
DON MAPLES, C.P.A. OF CERTIFIED PUBLIC ACCOUNTANTS
B. MARTIN COPELAND, C.P.A.
----------- ALABAMA SOCIETY
CONNIE T. HARVEY, C.P.A. OF CERTIFIED PUBLIC ACCOUNTANTS
RANDY M. JOHNSTON, C.P.A. --------
ROGER D. LOGGINS, C.P.A. 1601 2ND AVENUE EAST
MARK S. SIMS, C.P.A. P.O. BOX 489
LINDA ROMBERG YORK, C.P.A. ONEONTA, ALABAMA 35121
GWIN E. DAVIS, P.A. --------
ROYCE E. GARGUS, P.A. TELEPHONE: (205) 625-3472
TELECOPIER: (205) 274-0182
INDEPENDENT AUDITOR'S REPORT
To the Partners
The Texas Joint Venture
We have audited the balance sheets of The Texas Joint Venture as of December
31, 1995 and 1994 and the related statements of operations, partners' capital
and cash flows for each of the three years in the three-year period ended
December 31, 1995. These financial statements are the responsibility of the
Joint Venture's management. Our responsibility is to express an opinion on the
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The Texas Joint Venture as of
December 31, 1995 and 1994 and the results of its operations and its cash flows
for each of the three years in the three-year period ended December 31, 1995 in
conformity with generally accepted accounting principles.
/s/ Self & Maples, P.A.
January 26, 1996
Oneonta, Alabama
F-22
<PAGE> 36
THE TEXAS JOINT VENTURE
BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
----------- -----------
ASSETS
<S> <C> <C>
Current assets
Cash and equivalents $ 447,196 $ 750,715
Marketable securities 1,409,670 1,366,550
Accounts receivable, net of allowance
for doubtful accounts of $132,796
in 1995 and $56,941 in 1994 722,378 644,988
Estimated settlements due from third
parties 202,244 25,109
Prepaid expenses and other assets 43,532 48,278
----------- -----------
Total current assets 2,825,020 2,835,640
Property, plant and equipment, net
of accumulated depreciation 8,110,133 8,253,992
Due from affiliates 576,998 166,318
Deferred financing costs, net of
accumulated amortization of
$13,651 in 1995 and $8,366 in 1994 12,769 18,054
----------- -----------
Total assets $11,524,920 $11,274,004
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities
Current portion of long term debt $ 60,600 $ 65,280
Accounts payable 588,225 550,919
Accrued payroll and payroll taxes 139,197 117,452
Accrued vacation 93,309 70,029
Accrued insurance 200,952 332,367
Accrued management fees 31,379 28,063
Patient deposits and
trust liabilities 117,005 120,181
Other accrued expenses 157,594 8,359
----------- -----------
Total current liabilities 1,388,261 1,292,650
Notes payable and
capital lease obligations 691,850 752,347
----------- -----------
Total liabilities 2,080,111 2,044,997
----------- -----------
Partners' capital 9,444,809 9,229,007
----------- -----------
Total liabilities and
partners' capital $11,524,920 $11,274,004
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-23
<PAGE> 37
THE TEXAS JOINT VENTURE
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
------------ ------------ -----------
Revenues
<S> <C> <C> <C>
Net patient service revenue $ 8,647,019 $ 7,072,940 $ 6,396,559
Other revenue 2,198 1,015 1,670
------------ ------------ -----------
Total revenue 8,649,217 7,073,955 6,398,229
------------ ------------ -----------
Operating expenses
Professional care of
patients 4,812,691 3,604,449 2,897,958
Dietary 616,733 586,512 562,729
Household and plant 618,775 571,882 522,911
General and administrative 1,063,756 1,051,234 1,070,068
Employee health and welfare 355,508 324,545 340,860
Depreciation and
amortization 450,189 449,049 426,583
------------ ------------ -----------
Total operating expenses 7,917,652 6,587,671 5,821,109
------------ ------------ -----------
Operating income 731,565 486,284 577,120
------------ ------------ -----------
Other income (expenses)
Interest income 107,160 39,215 656
Interest expense (78,322) (70,603) (62,264)
------------ ------------ -----------
Total other income (expense) 28,838 (31,388) (61,608)
------------ ------------ -----------
Net income $ 760,403 $ 454,896 $ 515,512
============ ============ ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-24
<PAGE> 38
THE TEXAS JOINT VENTURE
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Cash received from patient care $8,414,019 $7,066,092 $6,355,909
Interest received 91,364 - 656
Other operating receipts 2,198 1,015 1,670
Cash paid to suppliers and
employees (7,362,426) (5,972,586) (5,433,112)
Interest paid (78,322) (70,603) (62,264)
---------- ---------- ----------
Net cash provided by operations 1,066,833 1,023,918 862,859
---------- ---------- ----------
Cash flows from investing activities:
Purchase of property (301,045) (352,677) (64,622)
Purchases of marketable securities (503,438) (1,381,702) -
Sales of marketable securities 489,988 - -
---------- ---------- ----------
Net cash used by investing
activities (314,495) (1,734,379) (64,622)
---------- ---------- ----------
Cash flows from financing activities:
Payments on long-term debt and
lease obligations (65,177) (71,908) (62,517)
Distributions to partners (580,000) (379,998) (180,000)
Net related party transactions (410,680) 55,651 (4,843)
---------- ---------- ----------
Net cash used by financing
activities (1,055,857) (396,255) (247,360)
---------- ---------- ----------
Net increase (decrease) in
in cash and equivalents (303,519) (1,106,716) 550,877
Cash and equivalents, beginning of
year 750,715 1,857,431 1,306,554
---------- ---------- ----------
Cash and equivalents, end of year $ 447,196 $ 750,715 $1,857,431
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-25
<PAGE> 39
THE TEXAS JOINT VENTURE
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- ------------
<S> <C> <C> <C>
RECONCILIATION OF NET INCOME TO
NET CASH PROVIDED BY OPERATING ACTIVITIES
Net income $ 760,403 $ 454,896 $ 515,512
---------- ---------- ---------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 450,189 449,049 426,583
Provision for losses on accounts
receivable 75,855 16,294 (63,100)
(Increase) decrease in accounts
receivable (131,720) (26,942) 22,127
(Increase) in interest receivable,
securities premium amortization, and
securities discount accretion (15,796) (39,215) -
(Increase) decrease in
third party receivables (177,135) 3,800 323
(Increase) in prepaid
expenses and other assets 4,746 (2,972) (17,818)
Increase (decrease) in accounts
100,291 169,008 (20,768)
---------- ---------- ---------
Total adjustments 306,430 569,022 347,347
---------- ---------- ---------
Net cash provided by operations $1,066,833 $1,023,918 $ 862,859
========== ========== =========
Supplemental schedule of noncash investing and financing activities:
Unrealized gain (loss) on marketable
securities available for sale 35,399 (28,015) -
Note paid with proceeds of new debt - - (909,250)
New debt used to pay off existing note - - 909,250
Securities valuation allowance (35,399) 28,015 -
</TABLE>
The accompanying notes are an integral part of these statements.
F-26
<PAGE> 40
THE TEXAS JOINT VENTURE
STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
MEDICAL INCOME PROPERTIES
LIMITED PARTNERSHIPS
<TABLE>
<CAPTION>
2A 2B TOTAL
------------ ------------ ------------
<S> <C> <C> <C>
Partners' capital at
December 31, 1992 $ 4,423,306 $ 4,423,306 $ 8,846,612
Distributions to
partners (90,000) (90,000) (180,000)
Net income 257,756 257,756 515,512
------------ ------------ ------------
Partners' capital at
December 31, 1993 4,591,062 4,591,062 9,182,124
Distributions to
partners (189,999) (189,999) (379,998)
Net income 227,448 227,448 454,896
Unrealized loss on
marketable securities
available for sale (14,007) (14,008) (28,015)
------------ ------------ ------------
Partners' capital at
December 31, 1994 4,614,504 4,614,503 9,229,007
Distributions to
partners (290,000) (290,000) (580,000)
Net income 380,202 380,201 760,403
Unrealized gain on
marketable securities
available for sale 17,699 17,700 35,399
------------ ------------ ------------
Partners' capital at
December 31, 1995 $ 4,722,405 $ 4,722,404 $ 9,444,809
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
F-27
<PAGE> 41
THE TEXAS JOINT VENTURE
NOTES TO FINANCIAL STATEMENTS
Note 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Organization
The Texas Joint Venture was formed on April 29, 1988, and is
engaged in the business of acquiring, operating and holding
for investment purposes, income-producing, health care related
properties, primarily nursing homes. The joint venture
partners are Medical Income Properties 2A Limited Partnership
and Medical Income Properties 2B Limited Partnership. Each
partner owns 50% of the Joint Venture. Both partners are part
of a series of three Delaware limited partnerships as
represented by a Partnership Prospectus dated October 22,
1986. The Texas Joint Venture currently owns and operates two
nursing homes in Texas.
(b) Allocation of Net Profits and Net Losses
Net profits and net losses are shared equally by the partners.
(c) Cash Distributions
Cash distributions are made quarterly within 45 days after the
end of the quarter. Cash flow shall be distributed equally to
the partners. Sale or financing proceeds will be distributed
first to creditors and then to the partners equally.
(d) Patient Service Revenue
Patient service revenue is recorded at the nursing homes'
established rates with contractual adjustments ($4,015,882 in
1995, $2,929,956 in 1994 and $2,140,792 in 1993), provision
for uncollectible accounts, (bad debt expense of ($75,855) in
1995, $16,294 in 1994 and ($63,100) in 1993) and other
discounts deducted to arrive at net patient service revenue.
Net patient revenue includes amounts estimated by management
to be reimbursable by Medicare, Medicaid and other third-party
programs under the provisions of cost and prospective payment
reimbursement formulas in effect. Amounts received under
these programs are generally less than the established billing
rates of the nursing homes and the difference is reported as a
contractual adjustment and deducted from gross revenue.
The nursing homes recognize currently estimated final
settlements due from or to third party programs. Final
determination of amounts earned is subject to audit by the
intermediaries. Differences between estimated provisions and
F-28
<PAGE> 42
THE TEXAS JOINT VENTURE
NOTES TO FINANCIAL STATEMENTS
final settlement will be reflected as charges or credits to
operating revenues in the year the cost reports are finalized.
(e) Property, Plant and Equipment
Property, plant and equipment are stated at cost.
Depreciation of the buildings is provided over their estimated
useful lives of thirty years on the straight-line method.
Equipment and other personal property are depreciated over
five to seven years on the straight-line method.
(f) Income Taxes
Taxable income is allocated to the partners and, therefore, no
income taxes have been provided for in these financial
statements.
(g) Cash Equivalents Policy
For the purposes of the statements of cash flows, the Joint
Venture considers all highly liquid debt instruments with an
original maturity of three months or less to be cash
equivalents.
(h) Uninsured Cash Balances
The Joint Venture maintains cash balances in several banks.
Cash accounts at banks are insured by the FDIC for up to
$100,000. Amounts in excess of insured limits were
approximately $274,391 at December 31, 1995 and $1,413,713 at
December 31, 1994. The 1995 amount includes the total of
commingled funds discussed in Note 8., since the amount in
excess of FDIC limits related to these funds is not
determinable.
(i) Marketable Securities
The classification of marketable securities is determined at
the date of purchase. Gains or losses on the sale of
securities are recognized on a specific identification basis.
Marketable securities represent an investment of excess funds
as a part of the Joint Venture's cash management policies.
These securities are considered to be available for sale under
Statement of Financial Accounting Standards No. 115 and are,
thus, stated at fair value. Unrealized gains and losses are
recognized as a component of partners' capital as is required
by SFAS No. 115.
F-29
<PAGE> 43
THE TEXAS JOINT VENTURE
NOTES TO FINANCIAL STATEMENTS
(j) Uses of Estimates
Management uses estimates and assumptions in preparing
financial statements. Those estimates and assumptions affect
the reported amounts of assets and liabilities, the disclosure
of contingent assets and liabilities, and the reported
revenues and expenses.
Note 2. ACQUISITIONS
On May 1, 1988, the Joint Venture purchased Renaissance Place - Katy
Nursing Home located in Texas for $5,472,500 plus capitalized
acquisition costs and fees of $509,290. The seller took back a note
for $300,000 due May 1, 1992, that has subsequently been paid.
On May 1, 1988, the Joint Venture purchased Renaissance Place -
Humble Nursing Home located in Texas for $4,487,500 plus capitalized
acquisition costs and fees of $228,812.
Note 3. MARKETABLE SECURITIES
Marketable securities consist of U.S. Treasury securities. The
following schedule summarizes marketable securities activity for the
years ended December 31, 1995 and 1994.
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Beginning balance, amortized cost $1,394,565 $ -
Purchase of marketable securities 503,438 1,381,702
Redemption of investments (489,988) -
Net amortization of premiums and
accretion of discounts (5,729) 12,863
---------- ----------
Amortized cost 1,402,286 1,394,565
Gross unrealized gain (loss) 7,384 (28,015)
---------- ----------
Fair value $1,409,670 $1,366,550
========== ==========
The maturities of investment securities at December 31, 1995 were as follows:
Due in one year or less $ 900,363
Due in two years or less 501,923
----------
$1,402,286
==========
</TABLE>
F-30
<PAGE> 44
THE TEXAS JOINT VENTURE
NOTES TO FINANCIAL STATEMENTS
Note 4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following at December
31:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Land $ 950,000 $ 950,000
Buildings and improvements 9,525,253 9,321,281
Furniture and equipment 1,118,289 991,778
Property under capital leases - 29,436
----------- -----------
Total 11,593,542 11,292,495
Accumulated depreciation (3,483,409) (3,038,503)
----------- -----------
Net property plant and equipment $ 8,110,133 $ 8,253,992
=========== ===========
</TABLE>
Note 5. NOTES PAYABLE AND CAPITALIZED LEASE OBLIGATIONS
Notes payable and capitalized leases at December 31 are as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Mortgage note with a variable rate of interest (9.5% at
December 31, 1995 and December 31, 1994) with monthly
principal and interest payments of $5,050 through
April 26, 1998, with a balloon payment due May 26, 1998. $ 752,450 $ 813,050
Capitalized leases on various pieces of minor equipment
payable monthly at interest rates from 9% to 16.86% - 4,577
---------- ----------
752,450 817,627
Less amounts due in one year or less 60,600 65,280
---------- ----------
$ 691,850 $ 752,347
========== ==========
</TABLE>
The aggregate annual maturities of notes payable and capitalized
lease obligations are as follows:
<TABLE>
<S> <C>
1996 $ 60,600
1997 60,600
1998 631,250
---------
$ 752,450
=========
</TABLE>
The mortgage note is secured by all real estate owned by the Joint
Venture, as well as the real estate owned by The Alabama Joint
Venture. Both the Joint Venture and The Alabama Joint Venture are
jointly owned by the Medical Income Properties 2A Limited
F-31
<PAGE> 45
THE TEXAS JOINT VENTURE
NOTES TO FINANCIAL STATEMENTS
Partnership (MIP2A) and the Medical Income Properties 2B Limited
Partnership (MIP2B). The General Partner of MIP2A and MIP2B has
guaranteed the debt, as well as pledged its stock and partnership
interest. The management company (See Note 6) has also guaranteed
the debt and entered into a negative pledge agreement whereby it will
not pledge, transfer or encumber its stock while the loan is
outstanding. All management fees are subordinate to the debt.
Note 6. CONTRACTUAL AGREEMENTS
On May 1, 1988, the Joint Venture entered into a management agreement
whereby the Manager is required to perform certain services. The
agreement had an initial five-year term with one additional five-year
option that was exercised in 1993. Fees were based on 6% of gross
collected operating revenues through June 30, 1992. Thereafter they
were based on 5% of gross collected operating revenues, but not less
than $324,000 in a calendar year and were increased by an inflation
factor after 1992. These fees are subordinated to the outstanding
mortgage debt (See Note 5). The Manager has a right of first refusal
to match a bona fide offer made by an outside party to purchase or
lease the nursing home. The management agreement, as amended,
contained a termination clause.
The management agreement was amended on January 1, 1995. The
amendment calls for a fixed monthly management fee of $31,379 with a
cost of living factor equal to the greater of 4% per annum or the
increase in the Consumer Price Index or such other measure mutually
agreeable to the parties. The agreement expires December 31, 1998.
The termination on sale clause was amended to base the fee on a sum
equal to the discounted present value of the monthly management fee
as of the date of termination of the agreement times the number of
months remaining in the management agreement discounted to the date
of termination at an annual interest rate of ten percent (10%).
Management fees charged to the Joint Venture were $376,548 in 1995,
$362,065 in 1994, and $343,325 in 1993.
Note 7. INCOME TAXES
No provision for income taxes is made in the financial statements
since taxable income is reported in the tax returns of the partners.
Differences between the net income as reported in the financial
statements and Federal taxable income arise from the nature and
timing of certain revenue and expense items. The following is a
reconciliation of reported net income and Federal taxable income.
F-32
<PAGE> 46
THE TEXAS JOINT VENTURE
NOTES TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Net income as reported $ 760,403 $ 454,896 $ 515,512
Adjustments:
Depreciation differences 56,349 74,970 61,501
Bad debt reserve 75,856 16,294 (63,100)
Nondeductible travel and
entertainment 9,770 6,430 3,583
Accrued insurance (80,000) - 80,000
Vacation accrual 23,280 15,272 (2,715)
---------- --------- ----------
Federal taxable income $ 845,658 $ 567,862 $ 594,781
========== ========= ==========
</TABLE>
Note 8. RELATED PARTY TRANSACTIONS
Details of the amounts due from affiliates at December 31 are as
follows:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Due from MIP2A $ 212,456 $ 83,847
Due from MIP2B 210,631 82,471
Due from affiliates of the general partner 153,911 -
---------- ----------
Due from affiliates $ 576,998 $ 166,318
========== ==========
</TABLE>
During the year, the General Partners established a pooled investment
account in which the General Partners and the partnerships in which
they act as general partners could participate. This account was
used by those entities to invest overnight cash balances, and borrow
funds when an entity needed temporary access to funds. Each entity
received its share of interest earned monthly, and was charged
interest on any funds borrowed.
The Articles of Limited Partnership of the joint venture partners
state that no General Partner shall have the authority to cause the
joint venture partners to make loans other than in connection with
the purchase, sale or disposition of partnership property. The
Articles of Limited Partnership also state the joint venture
partners' funds may not be commingled with any other entities' funds
except as necessary for the operation of the partnerships.
At December 31, 1995, the Joint Venture had loaned $153,911 to the
other entities, and had earned interest of $24,238 from this
arrangement.
F-33
<PAGE> 47
THE TEXAS JOINT VENTURE
NOTES TO FINANCIAL STATEMENTS
Note 9. CONTINGENCY
On May 1, 1990, the Joint Venture began self insuring its workmen's
compensation claims for its two nursing home facilities. Accrued
liabilities have been estimated to cover all asserted and unasserted
claims and assessments and funds have been escrowed to cover such
claims. The Joint Venture maintains insurance or reserves that it
believes are adequate to meet the needs of the Joint Venture.
While the Joint Venture Partners have been named as a defendant in
several lawsuits, nothing has come to the attention of the Joint
Venture that leads it to believe that it is exposed to a risk of
material loss not covered by insurance or reserves.
The real estate owned by The Texas Joint Venture is mortgaged as
security on debt incurred by a joint venture partner - Medical Income
Properties 2A Limited partnership (MIP2A). This debt is also secured
by all other real estate owned by MIP2A. The total outstanding debt
secured by all these properties is $4,138,889.
Note 10. MAJOR SOURCES OF REVENUE
The Joint Venture provides patient care services under various third
party agreements. The principal sources of revenue under these
contracts are derived primarily through the Medicaid and Medicare
programs, as well as contracts with private pay patients who do not
qualify for assistance from the other programs. The percentage of
the Joint Venture's income from each of these sources for the years
ended December 31, 1995, 1994, and 1993 is as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Private pay patients 18.05% 19.42% 21.97%
Medicaid 38.99% 47.81% 59.29%
Medicare 42.96% 32.77% 18.74%
------ ------ ------
Total 100.00% 100.00% 100.00%
====== ====== ======
</TABLE>
The percentage attributable to private pay patients includes only
amounts due for services where the primary payer is a private source.
The Medicaid and Medicare percentages include amounts due from those
programs as well as the patient's financial responsibility incurred
under these contracts.
F-34
<PAGE> 48
SELF & MAPLES, P.A.
CERTIFIED PUBLIC ACCOUNTANTS
ONEONTA, ALABAMA 35121
[LETTERHEAD]
INDEPENDENT AUDITOR'S REPORT
ON ADDITIONAL INFORMATION
To the Partners
The Texas Joint Venture
Our report on our audits of the basic financial statements of The
Texas Joint Venture for 1995 appears on page 1. Those audits were
made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The Schedule of Valuation and
Qualifying Accounts and Reserves for Allowances for Doubtful
Accounts, Schedule of Consolidated Supplementary Income Statement
Information, and Schedule of Real Estate and Accumulated Depreciation
are presented for purposes of additional analysis and are not
required parts of the basic financial statements. Such information
has been subjected to the auditing procedures applied to the audits
of the basic financial statements, and in our opinion, is fairly
stated in all material respects in relation to the financial
statements taken as a whole.
/s/ Self & Maples, P.A.
January 26, 1996
Oneonta, Alabama
F-35
<PAGE> 49
THE TEXAS JOINT VENTURE
SCHEDULE VIII
VALUATION AND QUALIFYING ACCOUNTS
AND RESERVES FOR ALLOWANCES FOR DOUBTFUL ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- -----------
<S> <C> <C> <C>
Balance at beginning of year $ 56,941 $ 40,647 $ 103,747
Charged to patient service
revenues (32,477) (51,472) (70,688)
Write-offs 108,332 67,766 7,588
---------- ---------- -----------
Balance at end of year $ 132,796 $ 56,941 $ 40,647
========== ========== ===========
</TABLE>
F-36
<PAGE> 50
THE TEXAS JOINT VENTURE
SCHEDULE X
CONSOLIDATED SUPPLEMENTARY INCOME STATEMENT INFORMATION
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
------------ ------------- -------------
<S> <C> <C> <C>
Professional care of patients
Nursing salaries and wages $ 2,469,846 $ 2,197,347 $ 1,928,210
Ancillary services expense 1,714,698 940,266 426,238
Supplies 151,705 107,170 95,450
Temporary labor 83,851 32,084 176,642
General and administrative
Salaries and wages 207,708 192,944 172,124
Accounting and auditing 64,745 69,999 74,227
Insurance 13,436 48,076 136,501
Property tax 237,917 223,764 220,810
Management fees 376,548 362,065 343,325
Dietary
Food 291,648 279,660 266,058
Household and plant
Repairs and maintenance 103,388 73,199 54,541
Utilities 165,204 175,535 171,572
------------ ------------- -------------
Depreciation $ 444,905 $ 443,765 $ 423,501
============ ============= =============
</TABLE>
F-37
<PAGE> 51
THE TEXAS JOINT VENTURE
SCHEDULE XI
REAL ESTATE AND ACCUMULATED DEPRECIATION
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
INITIAL COST COSTS CAPITALIZED GROSS AMOUNT AT WHICH CARRIED
TO PARTNERSHIP(A) SUBSEQUENT TO AS OF DECEMBER 31, 1995(B)
ACQUISITION
BUILDING AND CARRYING BUILDING AND
DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS IMPROVEMENTS COST LAND IMPROVEMENTS TOTAL
- ------------------------ ------------ ---------------------- ------------------------ ---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
RENAISSANCE PLACE-KATY $ 0 $650,000 $4,822,500 $466,184 $509,290 $650,000 $ 5,797,974 $ 6,447,974
RENAISSANCE PLACE-HUMBLE 752,450 300,000 4,187,500 429,256 228,812 300,000 4,845,568 5,145,568
-------- --------------------- --------------------- --------------------------------------
$752,450 $950,000 $9,010,000 $895,440 $738,102 $950,000 *********** $11,593,542
======== ===================== ===================== ======================================
<CAPTION>
LIFE ON WHICH
DEPRECIATION
IN LATEST
STATEMENT OF
ACCUMULATED DATE OF DATE OPERATION IS
DESCRIPTION DEPRECIATION CONSTRUCTION ACQUIRED COMPUTED
- ------------------------ ------------ ------------------------------------------------
<S> <C> <C> <C> <C>
RENAISSANCE PLACE-KATY $1,848,908 1984 05/01/88 5 TO 30 YEARS
RENAISSANCE PLACE-HUMBLE 1,634,501 1987 05/01/88 5 TO 30 YEARS
----------
$3,483,409
==========
</TABLE>
(A) The initial cost to the Partnership represents the original purchase price
of the properties.
(B) The aggregate cost of real estate owned at December 31, 1994 for Federal
Income tax purposes was approximately $11,593,542.
(C) Reconciliation of real estate owned at December 31, 1995, 1994, and 1993:
<TABLE>
<CAPTION>
1995 1994 1993
------------ ----------- -----------
<S> <C> <C> <C>
Balance at beginning of period $11,292,495 $10,939,816 $10,875,195
Additions 301,047 352,679 64,621
Reductions 0 0 0
----------- ----------- -----------
Balance at end of period $11,593,542 $11,292,495 $10,939,816
=========== =========== ===========
</TABLE>
(D) Reconciliation of accumulated depreciation:
<TABLE>
<S> <C> <C> <C>
Balance at beginning of period $3,038,503 $2,594,737 $2,171,237
Depreciation expense 444,906 443,766 423,500
Reductions 0 0 0
---------- ---------- ----------
Balance at end of period $3,483,409 $3,038,503 $2,594,737
========== ========== ==========
</TABLE>
F-38
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
AUDITED FINANCIAL STATEMENTS OF MEDICAL INCOME PROPERTIES 2A LIMITED
PARTNERSHIP FOR THE YEAR ENDED DECEMBER 31, 1995, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 889,401
<SECURITIES> 2,161,755
<RECEIVABLES> 2,825,075
<ALLOWANCES> 190,934
<INVENTORY> 0
<CURRENT-ASSETS> 6,281,573
<PP&E> 19,262,752
<DEPRECIATION> 5,868,721
<TOTAL-ASSETS> 25,186,114
<CURRENT-LIABILITIES> 2,706,162
<BONDS> 3,903,921
0
0
<COMMON> 0
<OTHER-SE> 16,260,045<F1>
<TOTAL-LIABILITY-AND-EQUITY> 25,186,114
<SALES> 0
<TOTAL-REVENUES> 19,049,677
<CGS> 0
<TOTAL-COSTS> 17,108,449
<OTHER-EXPENSES> 337,535
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 419,354
<INCOME-PRETAX> 1,184,339
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,184,339
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>5.02 (31) REPRESENTS TOTAL PARTNERSHIP CAPITAL INCLUDING NET INCOME OF
DISTRIBUTIONS.
</FN>
</TABLE>
