<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended March 31, 1996 Commission File Number 33-6122-01
MEDICAL INCOME PROPERTIES 2A LIMITED PARTNERSHIP
------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Delaware 59-2724921
-------- ----------
(State of Organization) (IRS Employer Identification Number)
7000 Central Parkway, Suite 850
-------------------------------
Atlanta, Georgia 30328
----------------------
(Address of Principal Executive Office)
(770) 668-1080
---------------
Registrant's Telephone Number, Including Area Code
Indicate by check whether the Registrant (1) has filed all reports required to
be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
The number of limited partnership units outstanding at March 31, 1996 was
18,639.
<PAGE> 2
TABLE OF CONTENTS
PART I
<TABLE>
<CAPTION>
Page No.
<S> <C> <C>
Item 1. Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 - 10
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . . 11
PART II
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
</TABLE>
2
<PAGE> 3
PART I
ITEM 1.
FINANCIAL INFORMATION
MEDICAL INCOME PROPERTIES 2A LIMITED PARTNERSHIP
INDEX
<TABLE>
<CAPTION>
Page No.
<S> <C>
Balance Sheets, March 31, 1996 and December 31, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . 4
Statements of Operations for the three
months ended March 31, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Statements of Partners' Capital for the three months
ended March 31, 1996 and December 31, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Statements of Cash Flows for the three months ended
March 31, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8-10
</TABLE>
3
<PAGE> 4
MEDICAL INCOME PROPERTIES 2A LIMITED PARTNERSHIP
Balance Sheets
March 31, 1996 and December 31, 1995
(Unaudited)
<TABLE>
<CAPTION>
ASSETS 1996 1995
------ ---- ----
<S> <C> <C>
Current assets
Cash and equivalents $ 1,471,021 $ 889,401
Marketable securities 2,151,100 2,161,755
Accounts receivable, net of allowance
for doubtful accounts of $168,469 in 1996
and $190,934 in 1995 2,483,072 2,634,141
Estimated settlements due from third
party payors 248,925 485,609
Prepaid expenses and other assets 295,739 110,667
--------------- ---------------
Total current assets 6,649,857 6,281,573
Investments in joint ventures 4,827,656 4,718,713
Property, plant and equipment, net of
accumulated depreciation 13,315,445 13,394,031
Deferred financing costs, net of accumulated
amortization of $42,989 in 1996 and
$39,294 in 1995 33,630 37,326
Due from affiliates 711,326 754,471
--------------- ---------------
Total assets $ 25,537,914 $ 25,186,114
=============== ===============
LIABILITIES AND PARTNERS' CAPITAL
---------------------------------
Current liabilities
Current portion of long term debt $ 332,478 $ 337,075
Accounts payable 963,065 870,895
Accrued payroll and payroll taxes 391,941 259,497
Accrued vacation 227,474 207,362
Accrued insurance 116,902 65,028
Accrued management fees 82,403 79,234
Patient deposits and trust liabilities 134,208 97,569
Other accrued expenses 114,388 92,522
Estimated settlements due to third
party payors 536,406 453,166
Due to affiliates 255,594 243,814
--------------- ---------------
Total current liabilities 3,154,859 2,706,162
Bonds, notes and capital lease obligations 3,829,057 3,903,921
--------------- ---------------
Total liabilities 6,983,916 6,610,083
--------------- ---------------
Venture partners' minority interest 2,164,072 2,315,986
--------------- ---------------
Partners' capital
Limited partners 16,371,182 16,250,393
General partners 18,744 9,652
--------------- ---------------
Total partners' capital 16,389,926 16,260,045
--------------- ---------------
Total liabilities and partners' capital $ 25,537,914 $ 25,186,114
=============== ===============
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE> 5
MEDICAL INCOME PROPERTIES 2A LIMITED PARTNERSHIP
Statements Of Operations
For The Three Months Ended March 31, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
-------------- ---------------
<S> <C> <C>
Revenues
Net resident service revenue $ 5,070,746 $ 4,873,580
Other revenue 8,944 7,587
-------------- ---------------
Total revenue 5,079,690 4,881,167
-------------- ---------------
Operating expenses
Professional care of patients 2,400,321 2,156,485
Dietary 402,082 385,369
Household and plant 443,577 426,336
General and administrative 790,729 759,142
Employee health and welfare 259,189 219,543
203,943 186,927
-------------- ---------------
Total operating expenses 4,499,841 4,133,802
-------------- ---------------
Operating income 579,849 747,365
-------------- ---------------
Other income (expenses)
Interest income 47,055 38,461
Interest expense (99,705) (106,594)
Provider fees (137,625) (137,445)
Minority interest in consolidated
joint venture (85,561) (67,814)
Partnership share of joint
venture income 131,441 116,848
-------------- ---------------
Total other income (expenses) (144,395) (156,544)
-------------- ----------------
Net income $ 435,454 $ 590,821
============== ===============
Net income per weighted average
limited partnership unit outstanding $ 21.73 $ 29.48
============== ===============
</TABLE>
5
<PAGE> 6
MEDICAL INCOME PROPERTIES 2A LIMITED PARTNERSHIP
Statements of Partners' Capital
For the Three Months Ended March 31, 1996 and December 31, 1995
(Unaudited)
<TABLE>
<CAPTION>
Limited Partners General
Unit Amount Partners Total
---- ------ -------- -----
<S> <C> <C> <C> <C>
Partners' capital,
December 31, 1995 18,639 $16,250,393 $ 9,652 $16,260,045
Distributions to partners
($15.00 per limited
partnership unit outstanding) (279,585) (21,044) (300,629)
Net income 404,972 30,482 435,454
Unrealized loss on marketable
securities available for sale (4,598) (346) (4,944)
----------- ------- -----------
Partners' capital,
March 31, 1996 18,639 $16,371,182 $18,744 $16,389,926
====== =========== ======= ===========
</TABLE>
6
<PAGE> 7
MEDICAL INCOME PROPERTIES 2A LIMITED PARTNERSHIP
Statements of Cash Flows
Three Months Ended March 31, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
-------------- ---------------
<S> <C> <C>
Cash flows from operating activities:
Cash received from patient care $ 5,541,741 $ 4,652,765
Cash paid to suppliers and employees (4,122,696) (4,101,326)
Interest received 52,763 31,725
Interest paid (99,705) (106,594)
Provider fees (137,625) (137,445)
Other operating receipts 8,944 7,587
-------------- ---------------
Net cash provided by operating activities 1,243,422 346,712
-------------- ---------------
Cash flows from investing activities:
Distributions from joint ventures 22,500 22,500
Acquisitions of property (121,662) (7,797)
-------------- ---------------
Net cash provided (used) from investing activities (99,162) 14,703
-------------- ---------------
Cash flows from financing activities:
Payments of long term debt and lease obligations (79,461) (67,143)
Net borrowings (payments) to related parties 54,925 145,500
Distributions to partners (300,629) (300,629)
Distributions to venture partners (237,475) (10,226)
-------------- ---------------
Net cash used by financing activities (562,640) (232,498)
-------------- ---------------
Net increase (decrease) in cash and equivalents 581,620 128,917
Cash and equivalents, beginning of period 889,401 864,318
-------------- ---------------
Cash and equivalents, end of period $ 1,471,021 $ 993,235
============== ===============
Reconciliation of net income to net cash
provided by operating activities:
Net income $ 435,454 $ 590,821
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 203,943 186,927
Minority Interest 85,561 67,814
Partnership share of joint venture (income) loss (131,441) (116,848)
Accretion of discount on marketable Securities 5,707 (6,736)
(Increase) in accounts receivable, net 151,070 (276,815)
(Increase) decrease in third party receivables 236,684 98,983
(Increase) in prepaid expenses and other assets (185,071) (126,337)
Increase (decrease) in accounts payable and
accrued expenses 358,275 (28,115)
Increase (decrease) in third party payables 83,240 (42,982)
-------------- ---------------
Net cash provided by operating activities $ 1,243,422 $ 346,712
============== ===============
</TABLE>
The accompanying notes are an integral part of these statements.
7
<PAGE> 8
MEDICAL INCOME PROPERTIES 2A LIMITED PARTNERSHIP
Notes to Financial Statements
(Unaudited)
(1) Financial Statements
These financial statements have been prepared in accordance with
generally accepted accounting principles. The financial information
included in these financial statements is unaudited, however, in
management's opinion, all normal recurring adjustments necessary for a
fair presentation of the results of operations for the periods
included have been made.
Footnote disclosures which would substantially duplicate those
contained in the December 31, 1995 audited financial statements have
been omitted from this report.
(2) Property, Plant and Equipment
Property, plant and equipment is recorded at cost and consists of the
following at March 31, 1996 and December 31, 1995:
<TABLE>
<CAPTION>
1996 1995
--------------- ---------------
<S> <C> <C>
Land $ 493,528 $ 493,528
Building 10,214,563 10,141,958
Equipment 2,125,784 2,076,727
Property under capitalized lease 6,550,539 6,550,539
--------------- ---------------
Total property, plant and equipment $ 19,384,414 $ 19,262,752
Accumulated depreciation and amortization (6,068,969) (5,868,721)
--------------- ---------------
Net property, plant and equipment $ 13,315,445 $ 13,394,031
=============== ===============
</TABLE>
(3) Debt Obligations
Debt obligations consisted of the following at March 31, 1996 and
December 31, 1995:
<TABLE>
<CAPTION>
1996 1995
--------------- ---------------
<S> <C> <C>
Industrial Revenue Bonds payable at a variable
rate of interest with monthly principal and
interest payments of $9,799 through April 1,
2005. The interest rate is adjusted every
May 1 and November 1. $ 838,280 $ 854,557
Mortgage note with interest at the prime rate plus
1% in 60 payments of $22,728 through
April, 1998, with a balloon payment due
May, 1998. 3,323,255 3,386,439
--------------- ---------------
4,161,535 4,240,996
Less amounts due in one year or less 332,478 337,075
--------------- ---------------
$ 3,829,057 $ 3,903,921
=============== ===============
</TABLE>
8
<PAGE> 9
The aggregate annual maturities for the next five fiscal years are as follows:
<TABLE>
<S> <C>
1996 $ 257,614
1997 342,571
1998 2,916,775
1999 82,278
2000 89,307
Thereafter 472,990
--------------
$ 4,161,535
==============
</TABLE>
(4) Investment in Joint Venture
The condensed financial information for the investments in joint ventures
as of March 31, 1996 and December 31, 1995 is as follows:
<TABLE>
<CAPTION>
KATY (owned 50% by Partnership)
1996 1995
--------------- ---------------
<S> <C> <C>
Current assets $ 1,813,310 $ 1,684,094
Long term assets 4,941,290 5,048,138
--------------- ---------------
Total assets $ 6,754,600 $ 6,732,232
=============== ===============
Current liabilities $ 595,136 $ 684,328
Equity 6,159,464 6,047,904
--------------- ---------------
Total liabilities and equity $ 6,754,600 $ 6,732,232
=============== ===============
Partnership's investment at March 31, 1996
and December 31, 1995 $ 3,079,732 $ 3,023,952
=============== ===============
Revenues $ 1,204,609 $ 4,985,129
Expenses 1,069,505 4,362,005
--------------- ---------------
Net income $ 135,104 $ 623,124
=============== ===============
</TABLE>
9
<PAGE> 10
<TABLE>
<CAPTION>
HUMBLE (owned 50% by Partnership)
1996 1995
--------------- ---------------
<S> <C> <C>
Current assets $ 1,341,248 $ 1,140,926
Long term assets 3,536,267 3,651,762
--------------- ---------------
Total assets $ 4,877,515 $ 4,792,688
=============== ===============
Current liabilities $ 643,198 $ 703,933
Long term liabilities 737,300 691,850
Equity 3,497,017 3,396,905
--------------- ---------------
Total liabilities and equity $ 4,877,515 $ 4,792,688
=============== ===============
Partnership's investment at March 31, 1996
and December 31, 1995 $ 1,748,509 $ 1,698,453
=============== ===============
Revenues $ 1,105,891 $ 3,664,088
Expenses 978,112 3,526,809
--------------- ---------------
Net income $ 127,779 $ 137,279
=============== ===============
</TABLE>
(6) Related Party Transactions
Through March 31, 1996 and 1995, QualiCorp, Inc., the parent of
Qualicorp Management, Inc. (the Managing General Partner of the
Partnership) charged $38,780 and $32,948, respectively, of administrative
expenses to the Partnership.
10
<PAGE> 11
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
Cash and equivalents increased $581,620 during the quarter ended March 31, 1996
due to improved collections of receivables and settlement of outstanding
Medicare cost reports. Payables and accrued expenses remain current while
increasing during the quarter by $358,275.
During the first quarter, the Partnership engaged an investment firm to assist
in evaluating its strategic alternatives, which could include a possible sale
of the Partnership assets.
The Partnership paid a distribution to its limited partners in February 1996 of
$15.00 per unit, which equals a 6% annualized return on the initial investment
of $1,000 per unit. Although the Partnership expects to continue to make
distributions to its limited partners based upon cash flow generated from
operations, after considering cash required for debt service, necessary
improvement to its properties and working capital reserves, no assurances can
be given that distributions will be made in the future.
Operations
Net income for the quarter ended March 31, 1996 was $435,454 as compared to
$590,821 for the same quarter in 1995. The revenue between quarters increased
$197,166 while costs of caring for residents increased $243,838. The increase
in the cost of care of residents was due to higher ancillary service expenses,
primarily physical and occupational therapies and increased salaries and wages,
which increased approximately 5% between quarters.
Dietary expenses were $16,713 above the 1995 level due to increased costs and
the timing of purchases. Household and Plant expenses totaled $443,577 in 1996
as compared to $426,336 in 1995, reflecting higher utility costs. General and
Administrative costs rose $31,587 due to higher fees and supply costs, although
these costs were offset by lower insurance expenses.
Minority interest expense increased to $85,561 as compared to $67,814 in 1995
due to continuing earnings improvement at the Alabama Joint Venture property.
The Partnership's share of joint venture income received from the Texas Joint
Venture continues to reflect improving operational performance at the two Texas
properties.
11
<PAGE> 12
PART II
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
MEDICAL INCOME PROPERTIES 2A
LIMITED PARTNERSHIP
Registrant
By: /s/ John H. Stoddard Date: April 30, 1996
------------------------------------- ------------------------
John H. Stoddard
President and Chief Financial Officer
QualiCorp Management, Inc.
Managing General Partner
12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF MEDICAL INCOME PROPERTIES 2A LIMITED PARTNERSHIP FOR
THE QUARTER ENDED MARCH 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 1,471,021
<SECURITIES> 2,151,100
<RECEIVABLES> 2,651,541
<ALLOWANCES> 168,469
<INVENTORY> 0
<CURRENT-ASSETS> 6,649,857
<PP&E> 19,384,414
<DEPRECIATION> 6,068,969
<TOTAL-ASSETS> 25,537,914
<CURRENT-LIABILITIES> 3,154,859
<BONDS> 3,829,057
0
0
<COMMON> 0
<OTHER-SE> 16,389,926<F1>
<TOTAL-LIABILITY-AND-EQUITY> 25,537,914
<SALES> 5,070,746
<TOTAL-REVENUES> 5,079,690
<CGS> 0
<TOTAL-COSTS> 4,499,841
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 99,705
<INCOME-PRETAX> 435,454
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 435,454
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>5.02(31) REPRESENTS TOTAL PARTNERSHIP CAPITAL INCLUDING NET INCOME NET OF
DISTRIBUTIONS.
</FN>
</TABLE>
