<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 June 30, 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 June 30, 1996 was
18,639.
1
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page No.
PART I
<S> <C> <C>
Item 1. Financial Information........................................................... 4-10
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations................................... 11
PART II
Signatures...................................................................... 12
</TABLE>
2
<PAGE> 3
PART I
ITEM 1.
FINANCIAL INFORMATION
MEDICAL INCOME PROPERTIES 2A LIMITED PARTNERSHIP
INDEX
<TABLE>
<CAPTION>
Page No.
<S> <C>
Balance Sheets, June 30, 1996 and December 31, 1995........................................................... 4
Statements of Operations for the three
months ended June 30, 1996 and 1995 and the six months
ended June 30, 1996 and 1995................................................................................... 5
Statements of Partners' Capital for the six months
ended June 30, 1996 and 1995................................................................................... 6
Statements of Cash Flows for the six months ended
June 30, 1996 and 1995......................................................................................... 7
Notes to Financial Statements.................................................................................. 8-10
</TABLE>
3
<PAGE> 4
MEDICAL INCOME PROPERTIES 2A LIMITED PARTNERSHIP
Balance Sheets
June 30, 1996 and December 31, 1995
(Unaudited)
<TABLE>
<CAPTION>
ASSETS 1996 1995
------ ---- ----
<S> <C> <C>
Current assets
Cash and equivalents $ 1,640,438 $ 889,401
Marketable securities 2,299,961 2,161,755
Accounts receivable, net of allowance
for doubtful accounts of $85,701 in 1996
and $190,934 in 1995 2,480,151 2,634,141
Estimated settlements due from third
party payors 256,053 485,609
Prepaid expenses and other assets 275,143 110,667
---------------- ----------------
Total current assets 6,951,746 6,281,573
Investments in joint ventures 4,890,891 4,718,713
Property, plant and equipment, net of
accumulated depreciation 13,234,879 13,394,031
Deferred financing costs, net of accumulated
amortization of $46,685 in 1996 and
$39,294 in 1995 29,935 37,326
Due from affiliates 382,517 754,471
---------------- ----------------
Total assets $ 25,489,968 $ 25,186,114
================ ================
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities
Current portion of long term debt $ 340,617 $ 337,075
Accounts payable 1,061,890 870,895
Accrued payroll and payroll taxes 301,618 259,497
Accrued vacation 245,868 207,362
Accrued insurance 92,637 65,028
Accrued management fees 82,403 79,234
Patient deposits and trust liabilities 134,807 97,569
Other accrued expenses 89,864 92,522
Estimated settlements due to third
party payors 792,368 453,166
Due to affiliates 254,468 243,814
---------------- ----------------
Total current liabilities 3,396,540 2,706,162
Bonds, notes and capital lease obligations 3,740,674 3,903,921
---------------- ----------------
Total liabilities 7,137,214 6,610,083
---------------- ----------------
Venture partners' minority interest 1,938,287 2,315,986
Partners' capital
Limited partners 16,394,005 16,250,393
General partners 20,462 9,652
---------------- ----------------
Total partners' capital 16,414,467 16,260,045
---------------- ----------------
Total liabilities and partners' capital $ 25,489,968 $ 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 June 30, 1996 and 1995
and the six months ended June 30, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
----------------------- ------------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenue
Net resident service revenue $ 5,043,896 $ 4,829,894 $ 10,114,642 $ 9,707,600
Other revenue 7,368 11,476 16,312 14,937
--------------- --------------- --------------- ----------------
Total revenue 5,051,264 4,841,370 10,130,954 9,722,537
--------------- --------------- --------------- ----------------
Operating expenses:
Professional care of residents 2,507,264 2,245,600 4,907,586 4,402,085
Dietary 411,506 399,708 813,588 785,077
Household and plant 427,115 410,067 870,691 836,403
General and administrative 761,554 761,983 1,552,283 1,521,126
Employee health and welfare 232,665 229,977 491,854 449,519
Depreciation and amortization 178,974 187,823 382,917 374,751
--------------- --------------- --------------- ----------------
Total operating expenses 4,519,078 4,235,158 9,018,919 8,368,961
--------------- --------------- --------------- ----------------
Operating income 532,186 606,212 1,112,035 1,353,576
--------------- --------------- --------------- ----------------
Other income (expenses):
Interest income 41,112 28,126 88,167 66,587
Interest expense (93,912) (108,380) (193,617) (214,973)
Provider fees (137,625) (137,625) (275,250) (275,070)
Minority Interest (102,592) (30,897) (188,153) (98,711)
Partnership share of joint
venture income 85,735 137,193 217,176 254,041
--------------- --------------- --------------- ----------------
Total other
income (expenses) (207,282) (111,583) (351,677) (268,126)
--------------- --------------- --------------- ----------------
Net income $ 324,904 $ 494,629 $ 760,358 $ 1,085,450
=============== =============== =============== ================
Net income per weighted
average limited partnership unit
outstanding $ 16.21 $ 24.68 $ 37.94 $ 54.16
=============== =============== =============== ================
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE> 6
MEDICAL INCOME PROPERTIES 2A LIMITED PARTNERSHIP
Statements of Partners' Capital
For the Six Months Ended June 30, 1996 and December 31, 1995
(Unaudited)
<TABLE>
<CAPTION>
Limited Partners General
Units 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
($30.00 per limited
partnership unit outstanding) (559,170) (42,088) (601,258)
Net income 707,133 53,225 760,358
Unrealized loss on marketable
securities available for sale (4,351) (327) (4,678)
------ ----------- -------- -----------
Partners' capital,
June 30, 1996 18,639 $16,394,005 $ 20,462 $16,414,467
====== =========== ======== ===========
</TABLE>
6
<PAGE> 7
MEDICAL INCOME
PROPERTIES 2A LIMITED PARTNERSHIP
Statements of Cash Flows
Six months ended June 30, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities:
Cash received from patient care $ 10,837,391 $ 9,497,861
Cash paid to suppliers and employees (8,463,496) (8,185,426)
Interest received 94,140 59,691
Interest paid (193,617) (214,973)
Provider fees (275,250) (275,070)
Other operating receipts 16,312 14,937
---------------- ---------------
Net cash provided by operating activities 2,015,480 897,020
---------------- ---------------
Cash flows from investing activities:
Investment in marketable securities (148,861) -
Distributions (to) from joint ventures (520,853) 24,548
Acquisitions of property (216,375) (255,393)
----------------- ---------------
Net cash used by investing activities (886,089) (230,845)
----------------- ---------------
Cash flows from financing activities:
Payments of long term debt
and lease obligations (159,704) (174,166)
Net borrowings (payments) to related parties 382,608 194,916
Distributions to partners (601,258) (601,258)
---------------- ---------------
Net cash used by financing activities (378,354) (580,508)
---------------- ---------------
Net increase in cash and equivalents 751,037 85,667
Cash and equivalents, beginning of period 889,401 864,318
================ ===============
Cash and equivalents, end of period $ 1,640,438 $ 949,985
================ ===============
Reconciliation of net income to net cash
provided by operating activities
Net income $ 760,358 $ 1,085,450
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 382,917 374,750
Minority Interest 188,153 98,711
Partnership share of joint venture (income) loss (217,176) (254,041)
Accretion of discount on marketable Securities 5,974 (6,896)
(Increase) decrease in accounts receivable, net 153,991 (299,208)
Decrease in third party receivables 229,556 166,158
Decrease (increase) in prepaid expenses
and other assets (164,475) 1,250
Increase (decrease) in accounts payable and
accrued expenses 336,980 (192,465)
Increase (decrease) in third party payables 339,202 (76,689)
---------------- ---------------
Net cash provided by operating activities $ 2,015,480 $ 897,020
================ ===============
</TABLE>
The accompanying notes are an integral part of these statements.
7
<PAGE> 8
MEDICAL INCOME
PROPERTIES 2A LIMITED PARTNERSHIP
Notes to Financial Statements
(Unaudited)
(1) Financial Statements
The financial statements have been prepared in accordance with generally
accepted accounting principles. The financial information included in
these financial statements is unaudited, however, in management's
opinion, all normal recurring adjustments necessary for a fair
presentation of the results of operations for the periods included have
been made.
Footnote disclosures which would substantially duplicate those contained
in the December 31, 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 June 30, 1996 and December 31, 1995:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Land $ 493,528 $ 493,528
Building 10,235,585 10,141,958
Equipment 2,199,475 2,076,727
Property under capitalized lease 6,550,539 6,550,539
---------------- ----------------
Total property, plant and equipment $ 19,479,127 $ 19,262,752
Accumulated depreciation and amortization (6,244,248) (5,868,721)
---------------- ----------------
Net property, plant and equipment $ 13,234,879 $ 13,394,031
================ ================
</TABLE>
(3) Debt Obligations
Debt Obligations consisted of the following at June 30, 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. $ 822,131 $ 854,557
Mortgage note with interest at the prime rate plus 1% in 60 payments of
$22,728 through May 26, 1998; with a balloon payment due
May, 1998. 3,259,160 3,386,439
------------------ ----------------
4,081,291 4,240,996
Less amounts due in one year or less 340,617 337,075
------------------ ----------------
$ 3,740,674 $ 3,903,921
================== ================
</TABLE>
8
<PAGE> 9
The aggregate annual maturities for the next five fiscal years are as
follows:
<TABLE>
<S> <C>
1996 $ 177,370
1997 342,571
1998 2,916,775
1999 82,278
2000 89,307
Thereafter $ 472,990
--------------
$ 4,081,291
==============
</TABLE>
(4) Investment in Joint Venture
The condensed financial information for the investments in joint
ventures as of June 30, 1996 and December 31, 1995 is as follows:
<TABLE>
<CAPTION>
KATY (owned 50% by Partnership) 1996 1995
---------------- ----------------
<S> <C> <C>
Current assets $ 2,043,647 $ 1,684,094
Long term assets 4,896,169 5,048,138
---------------- ----------------
Total assets $ 6,939,816 $ 6,732,232
================ ================
Current liabilities $ 629,228 $ 684,328
Equity 6,310,588 6,047,904
---------------- ----------------
Total liabilities and equity $ 6,939,816 $ 6,732,232
---------------- ----------------
Partnership's investment at June 30, 1996
and December 31, 1995 $ 3,155,294 $ 3,023,952
================ ================
Revenues $ 2,445,259 $ 4,985,129
Expenses 2,135,361 4,362,005
---------------- ----------------
Net income $ 309,898 $ 623,124
================ ================
</TABLE>
9
<PAGE> 10
<TABLE>
<CAPTION>
1996 1995
---------------- ----------------
<S> <C> <C>
HUMBLE (owned 50% by Partnership)
Current assets $ 1,353,524 $ 1,140,926
Long term assets 3,491,494 3,651,762
---------------- ----------------
Total assets $ 4,845,018 $ 4,792,688
================ ================
Current liabilities $ 651,675 $ 703,933
Long term liabilities 722,150 691,850
Equity 3,471,193 3,396,905
---------------- ----------------
Total liabilities and equity $ 4,845,018 $ 4,792,688
================ ================
Partnership's investment at June 30, 1996
and December 31, 1995 $ 1,735,597 $ 1,698,453
================ ================
Revenues $ 2,080,924 $ 3,664,088
Expenses 1,956,469 3,526,809
---------------- ----------------
Net income $ 124,455 $ 137,279
================ ================
</TABLE>
(5) Related Party Transactions
Through June 30, 1996 and 1995, QualiCorp, Inc., the parent of Qualicorp
Management, Inc. (the Managing General Partner of the Partnership)
charged $64,654 and $63,863, 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 $169,417 during the quarter ended June 30, 1996
due to collections of amounts due from affiliates. Payables and accrued
expenses remain current while estimated settlements increased by $255,962.
The Partnership presently has three wholly owned nursing homes located in
Alabama and a 54.55% ownership in another home. According to industry
representatives, the State of Alabama has reached an impasse with the Health
Care Financing Administration (HCFA) which will cause the September payments
for Medicaid patients to be delayed by the month to October 1996. The
Partnership receives approximately $650,000 per month from the Alabama Medicaid
program. In addition, the State of Alabama has proposed significant rate
reductions and changes in eligibility requirements which will reduce Medicaid
census levels if implemented.
As indicated in the prior quarterly report, the Partnership has engaged an
investment firm to assist it in evaluating the Partnership's strategic
alternatives. It was expected this evaluation would lead to a sale of the
Partnership properties. However, due to the uncertainty of the Alabama Medicaid
issues described above, the prospective buyer has requested a 90 day extension
of the letter of intent which the Partnership intends to grant.
In May 1996, the Partnership paid a distribution of $15.00 per unit, which
equals a 6% annualized return on the original $1,000 per unit investment.
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 improvements 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 June 30, 1996 was $324,904 as compared to
$494,629 for the same quarter in 1995. The revenue between quarters increased
only $209,894. This lower than expected increase is due to higher than
anticipated contractual adjustments, which should improve in subsequent
quarters. 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.
Dietary expenses were $11,798 above the 1995 level due to increased food costs.
Household and Plant expenses totaled $427,115 in1996 as compared to $410,067 in
1995, reflecting higher utility costs and maintenance costs.
The minority interest net income allocation increased to $102,592 as compared
to $30,897 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 declined during the quarter due to lower Medicaid rates
received, lower than anticipated ancillary utilization and higher costs of care
of residents.
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: July 31, 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 JUNE 30, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 1,640,438
<SECURITIES> 2,299,961
<RECEIVABLES> 2,565,852
<ALLOWANCES> 85,701
<INVENTORY> 0
<CURRENT-ASSETS> 6,951,746
<PP&E> 19,479,127
<DEPRECIATION> 6,244,248
<TOTAL-ASSETS> 25,489,968
<CURRENT-LIABILITIES> 3,396,540
<BONDS> 3,740,674
0
0
<COMMON> 0
<OTHER-SE> 16,414,467<F1>
<TOTAL-LIABILITY-AND-EQUITY> 25,489,968
<SALES> 10,114,642
<TOTAL-REVENUES> 10,130,954
<CGS> 0
<TOTAL-COSTS> 9,018,919
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 193,617
<INCOME-PRETAX> 760,358
<INCOME-TAX> 0
<INCOME-CONTINUING> 760,358
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 760,358
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>REPRESENTS TOTAL PARTNERSHIP CAPITAL INCLUDING NET INCOME NET OF
DISTRIBUTIONS PAID.
</FN>
</TABLE>
