<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended September 30, 1997 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)
1100 Abernathy Road, Building 500, Suite 715
--------------------------------------------
Atlanta, Georgia 30328
----------------------
(Address of Principal Executive Office)
7000 Central Parkway, Suite 850
-------------------------------
Atlanta, Georgia 30328
----------------------
(Former Address of Principal Executive Office, Moved Since Last Report)
(770) 668-1080
--------------
(Registrant's Telephone Number, Including Area Code)
Indicate by check whether the Registrant (1) has filed all reports required to
be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- --- ------
The number of limited partnership units outstanding at September 30, 1997 was
18,639.
1
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page No.
<S> <C> <C>
PART I
Item 1. Financial Information..................................... 4 - 10
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations............. 12
PART II
Signatures................................................ 13
</TABLE>
2
<PAGE> 3
PART I
ITEM 1.
FINANCIAL INFORMATION
MEDICAL INCOME PROPERTIES 2A LIMITED PARTNERSHIP
INDEX
<TABLE>
<CAPTION>
Page No.
<S> <C>
Balance Sheets, September 30, 1997 and December 31, 1996.......................4
Statements of Operations for the three
months ended September 30, 1997 and 1996 and the nine months
ended September 30, 1997 and 1996..............................................5
Statements of Partners' Capital for the nine months
ended September 30, 1997 and 1996..............................................6
Statements of Cash Flows for the nine months ended
September 30, 1997 and 1996...................................................7
Notes to Financial Statements............................................ 8 - 11
</TABLE>
3
<PAGE> 4
MEDICAL INCOME PROPERTIES 2A LIMITED PARTNERSHIP
Balance Sheets
September 30, 1997 and December 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
ASSETS 1997 1996
------ ---- ----
<S> <C> <C>
Current assets
Cash and equivalents $1,524,937 $ 1,644,674
Marketable securities 1,050,533 2,339,380
Accounts receivable, net of allowance
for doubtful accounts of $173,711 in 1997
and $225,011 in 1996 342,373 2,179,723
Interest receivable 76,481 13,914
Estimated settlements due from third
party payors - 739,842
Prepaid expenses and other assets - 127,032
---------- -----------
Total current assets 2,994,324 7,044,565
Investments in joint ventures 6,557,084 4,986,273
Property, plant and equipment, net of
accumulated depreciation - 13,016,044
Deferred financing costs, net of accumulated
amortization of $76,620 in 1997 and
$54,075 in 1996 - 22,545
Due from affiliates - 473,417
---------- -----------
Total assets $9,551,408 $25,542,844
========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities
Current portion of long term debt $ - $ 343,697
Accounts payable 758 906,261
Accrued payroll and payroll taxes 56,285 309,380
Accrued vacation - 247,096
Accrued insurance 24,810 43,126
Accrued management fees - 82,403
Patient deposits and trust liabilities - 128,204
Other accrued expenses - 91,947
Estimated settlements due to third
party payors 959,332 516,976
Due to affiliates 5,754,299 460,564
---------- -----------
Total current liabilities 6,795,484 3,129,654
Bonds, notes and capital lease obligations - 3,558,529
---------- -----------
Total liabilities 6,795,484 6,688,183
---------- -----------
Venture partners' minority interest 510,199 2,100,875
---------- -----------
Partners' capital
Limited partners 2,245,725 16,709,571
General partners - 44,215
---------- -----------
Total partners' capital 2,245,725 16,753,786
---------- -----------
Total liabilities and partners' capital $9,551,408 $25,542,844
========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE> 5
MEDICAL INCOME
PROPERTIES 2A LIMITED PARTNERSHIP
Statements of Operations
For the three months ended September 30, 1997 and 1996
and the nine months ended September 30, 1997 and 1996
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
------------------- ----------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenue
Net resident service revenue $ 5,172 $ 5,074,667 $ 9,325,425 $ 15,189,309
Other revenue - 7,643 11,940 23,956
-------- ----------- ----------- ------------
Total revenue 5,172 5,082,310 9,337,365 15,213,265
-------- ----------- ----------- ------------
Operating expenses:
Professional care of residents 29,676 2,615,363 4,640,161 7,522,949
Dietary 2,996 416,036 683,092 1,229,625
Household and plant 4,688 423,882 753,155 1,294,573
General and administrative 86,559 714,563 1,443,903 2,266,846
Employee health and welfare (3,148) 207,736 408,440 699,591
Rent (35,932) - 637,852 -
Depreciation and amortization - 182,278 182,687 565,194
-------- ----------- ----------- ------------
Total operating expenses 84,839 4,559,858 8,749,290 13,578,778
-------- ----------- ----------- ------------
Operating income (79,667) 522,452 588,075 1,634,487
-------- ----------- ----------- ------------
Other income (expenses):
Interest income 59,484 55,104 310,094 143,271
Interest expense - (92,182) (99,494) (285,799)
Provider fees - (137,805) (229,195) (413,056)
Minority Interest 4,150 (82,542) (109,953) (270,695)
Partnership share of joint
venture income 15,335 192,207 98,943 409,384
Gain (loss) on sale of properties - - 6,539,998 -
-------- ----------- ----------- ------------
Total other
income (expenses) 78,969 (65,218) 6,510,393 (416,895)
-------- ----------- ----------- ------------
Net income (loss) $ (698) $ 457,234 $ 7,098,468 $ 1,217,592
======== =========== =========== ============
Net income (loss) per weighted
average limited partnership unit
outstanding $ (.04) $ 22.81 $ 382.08 $ 60.75
======== =========== =========== ============
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE> 6
MEDICAL INCOME PROPERTIES 2A LIMITED PARTNERSHIP
Statements of Partners' Capital
For the Nine Months Ended September 30, 1997 and December 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
Limited Partners General
Units Amount Partners Total
----- ------ -------- -----
<S> <C> <C> <C> <C>
Partners' capital,
December 31, 1996 18,639 $ 16,709,571 $ 44,215 $ 16,753,786
Distributions to partners
($1158 per limited
partnership unit outstanding) (21,583,962) (21,044) (21,605,006)
Net income 7,121,639 (23,171) 7,098,468
Unrealized gain on marketable
securities available for sale (1,523) - (1,523)
------ ------------ -------- ------------
Partners' capital,
September 30, 1997 18,639 $ 2,245,725 $ 0 $ 2,245,725
====== ============ ======== ============
</TABLE>
6
<PAGE> 7
MEDICAL INCOME
PROPERTIES 2A LIMITED PARTNERSHIP
Statements of Cash Flows
Nine months ended September 30, 1997 and 1996
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Cash flows from operating activities:
Cash received from patient care $ 12,282,406 $ 16,168,833
Cash paid to suppliers and employees (10,166,136) (12,590,650)
Interest received 310,094 150,024
Interest paid (99,494) (285,799)
Provider fees (229,195) (413,056)
Other operating receipts 11,940 23,956
------------ ------------
Net cash provided by operating activities 2,109,615 3,053,308
------------ ------------
Cash flows from investing activities:
Proceeds from sale of properties 20,404,177 -
Investment in marketable securities 1,290,784 (344,796)
Distributions (to) from joint ventures (2,412,477) (358,579)
Acquisitions of property (27,179) (239,416)
------------ ------------
Net cash used by investing activities 19,255,305 (942,791)
------------ ------------
Cash flows from financing activities:
Payments of long term debt
and lease obligations (56,910) (253,679)
Net borrowings (payments) to related parties 177,259 358,900
Distributions to partners (21,605,006) (901,886)
------------ ------------
Net cash used by financing activities (21,484,657) (796,665)
------------ ------------
Net increase in cash and equivalents (119,737) 1,313,852
Cash and equivalents, beginning of period 1,644,674 889,400
------------ ------------
Cash and equivalents, end of period $ 1,524,937 $ 2,203,252
============ ============
Reconciliation of net income to net cash
provided by operating activities
Net income $ 7,098,468 $ 1,217,592
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 182,687 565,194
Minority Interest 109,953 270,695
Partnership share of joint venture (income) loss (98,943) (409,384)
Gain on sale of properties (6,539,998) -
Accretion of discount on marketable securities - 6,753
Decrease (increase) in accounts receivable, net 1,774,784 230,151
Decrease in third party receivables 739,842 229,291
(Increase) decrease in prepaid expenses
and other assets 127,032 (108,113)
Increase in accounts payable and
accrued expenses (110,095) 531,047
Increase (decrease) in third party payables (1,174,113) 520,082
------------ ------------
Net cash provided by operating activities $ 2,109,617 $ 3,053,308
============ ============
</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, 1996 audited financial statements have been omitted
from this report.
(2) Sale of Properties
On March 31, 1997, Medical Income Properties 2A Limited Partnership (the
"Partnership") closed the sale of its interest in its seven remaining
long-term care facilities in Alabama, Texas and Illinois, and the
personal property and intangible assets related to the operation of those
facilities (the "Properties"). The Properties in Alabama and Texas were
sold to Omega Healthcare Investors, Inc., a Maryland corporation
("Omega"), pursuant to the asset Purchase and Sale Agreement dated as of
February 3, 1997 (the "Sale Agreement"), by and among the Partnership,
Qualicorp Management, Inc., the managing general partner of the
Partnership, and Omega as previously reported by the Partnership. The
Properties in Illinois were sold to OHI (Illinois), Inc. an Illinois
corporation ("OHI"), because of an assignment of certain rights of Omega
to OHI under the Sale Agreement.
Aggregate net proceeds from the sale of the Properties was $19,499,627.
The net proceeds and other assets of the Partnership will be distributed
to the Limited Partners of the Partnership in the anticipated liquidation
of the Partnership as described in the Partnership's Current Reports on
Form 8-K filed February 18, 1997 and July 18, 1997. In addition, included
in cash and equivalents is an escrow account for $904,550 which is
subject to the terms of the indemnification provision of the Sale
Agreement.
In connection with the closing of the sale of the Properties, the
Partnership entered into an interim lease of the Properties pursuant to
the terms of the Sale Agreement and under which the Partnership provided
for management and operation of the Properties for an interim period. The
lease was terminated May 31, 1997.
(3) Property, Plant and Equipment
Property, plant, and equipment is recorded at cost and consists of the
following at September 30, 1997 and December 31, 1996:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Land $ - $ 493,528
Building - 10,383,782
Equipment - 2,194,993
Property under capitalized lease - 6,550,539
------------ ------------
Total property, plant and equipment - 19,622,842
Accumulated depreciation and amortization - 6,606,798
------------ ------------
Net property, plant and equipment $ - $ 13,016,044
============ ============
</TABLE>
8
<PAGE> 9
(4) Debt Obligations
Debt Obligations consisted of the following at September 30, 1997 and
December 31, 1996:
<TABLE>
<CAPTION>
1997 1996
---- ----
<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 $ - $ 788,521
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 - 3,113,705
---------- ----------
- 3,902,226
Less amounts due in one year or less - 343,697
---------- ----------
$ - $3,558,529
========== ==========
</TABLE>
9
<PAGE> 10
(5) Investment in Joint Venture
The condensed financial information for the investments in joint ventures
as of September 30, 1997 and December 31, 1996 is as follows:
KATY (owned 50% by Partnership)
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Current assets $1,010,854 $2,501,874
Long term assets 7,425,572 4,771,630
---------- ----------
Total assets $8,436,426 $7,273,504
========== ==========
Current liabilities $ 497,604 $ 860,008
Equity 7,938,822 6,413,496
---------- ----------
Total liabilities and equity $8,436,426 $7,273,504
========== ==========
Partnership's investment at September 30, 1997
and December 31, 1996 $3,969,411 $3,206,748
========== ==========
Revenues $2,335,326 $5,039,616
Expenses 2,216,878 4,385,765
---------- ----------
Net operating income 118,448 653,851
Gain on sale of property 1,433,333 -
---------- ----------
Net income $1,551,781 $ 653,851
========== ==========
</TABLE>
10
<PAGE> 11
HUMBLE (owned 50% by Partnership)
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Current assets $ 892,729 $1,498,372
Long term assets 4,600,244 3,377,314
---------- ----------
Total assets $5,492,973 $4,875,686
========== ==========
Current liabilities $ 317,627 $ 677,478
Long term liabilities - 631,250
Equity 5,175,346 3,566,958
---------- ----------
Total liabilities and equity $5,492,973 $4,875,686
========== ==========
Partnership's investment at September 30, 1997
and December 31, 1996 $2,587,673 $1,783,479
========== ==========
Revenues $1,690,443 $4,415,307
Expenses 1,611,005 3,954,042
---------- ----------
Net operating income 79,438 461,265
Gain on sale of property 1,555,404 -
---------- ----------
Net income $1,634,872 $ 461,265
========== ==========
</TABLE>
(5) Related Party Transactions
Through September 30, 1997 and 1996, QualiCorp, Inc., the parent of
Qualicorp Management, Inc. (the Managing General Partner of the
Partnership) charged $170,858 and $94,483, respectively, of
administrative expenses to the Partnership. In addition, Qualicorp, Inc.
charged the Partnership $90,213 for property management services during
the nine months ended September 30, 1997.
11
<PAGE> 12
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Liquidity and Capital Resources
Cash and equivalents balances totaled $1,524,937 at September 30, 1997. As noted
in Footnote 2 of the financial statement, the Partnership has sold its operating
assets. The Partnership is presently collecting its remaining accounts
receivables, paying vendors the remaining balances owed and filing terminating
Medicare and Medicaid cost reports.
The Partnership made the first installment of the liquidation proceeds totaling
$18,694,917 or $1,003 per unit on May 12, 1997. In addition, on July 11, 1997,
the Partnership distributed $2,609,460 or $140 per unit to the limited partners.
The Partnership had planned to distribute $134 in March 1998; however, the
Managing General Partner felt that sufficient cash was available to pay this
distribution now instead of waiting until March 1998. The Managing General
Partner will evaluate in March 1998 whether the cash balances then on hand
exceed necessary reserves; however, should the estimated settlement liabilities
change or a claim asserted under the indemnification provision of the Sale
Agreement be made, then such claims or settlement could reduce the funds
available for future distribution. Should funds on hand exceed necessary
reserves in March 1998, the Managing General Partner may make a distribution of
the excess funds.
Operations
The Partnerships' net loss for the quarter ended September 30, 1997 was $698.
The operating loss was attributed to interest earned on invested funds,
additions to the Medicare settlement liabilities, settlement of vendor payables
and cost reimbursements. It is anticipated that the future close down expenses
of the Partnership will approximate $349,000, exclusive of any changes to the
estimated settlement liabilities or claims asserted under the indemnification
provision of the sales agreements.
12
<PAGE> 13
PART II
Item 6. Exhibit and reports on 8K
A. Exhibits - 27 Financial Data Schedule (for SEC purposes only).
B. A report on Form 8-K was filed July 18, 1997 describing pursuant to
Item 5 events pertaining to the disposition of Partnership assets.
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: November 7, 1997
------------------------------------- --------------------
John H. Stoddard
President and Chief Financial Officer
QualiCorp Management, Inc.
Managing General Partner
13
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF MEDICAL INCOME PROPERTIES 2A LIMITED PARTNERSHIP FOR
THE QUARTER ENDED SEPTEMBER 30, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 1,524,937
<SECURITIES> 1,050,533
<RECEIVABLES> 516,084
<ALLOWANCES> 173,711
<INVENTORY> 0
<CURRENT-ASSETS> 2,994,324
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 9,551,408
<CURRENT-LIABILITIES> 6,795,484
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 2,245,725<F1>
<TOTAL-LIABILITY-AND-EQUITY> 9,551,408
<SALES> 9,325,425
<TOTAL-REVENUES> 9,337,365
<CGS> 0
<TOTAL-COSTS> 8,749,290
<OTHER-EXPENSES> 229,195
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 99,494
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 558,470
<DISCONTINUED> 0
<EXTRAORDINARY> 6,539,998
<CHANGES> 0
<NET-INCOME> 7,098,468
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>REPRESENT TOTAL PARTNERSHIP CAPITAL INCLUDING NET INCOME OF NET
DISTRIBUTIONS.
</FN>
</TABLE>
