<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, 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)
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, 1997 was
18,639.
1
<PAGE> 2
TABLE OF CONTENTS
Page No.
PART I
<TABLE>
<S> <C> <C>
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, June 30, 1997 and December 31, 1996..................... 4
Statements of Operations for the three months ended June 30, 1997
and 1996 and the six months ended June 30, 1997 and 1996................ 5
Statements of Partners' Capital for the six months
ended June 30, 1997 and 1996 ........................................... 6
Statements of Cash Flows for the six months ended
June 30, 1997 and 1996.................................................. 7
NOTES TO FINANCIAL STATEMENTS........................................... 8 - 11
</TABLE>
3
<PAGE> 4
MEDICAL INCOME PROPERTIES 2A LIMITED PARTNERSHIP
Balance Sheets
June 30, 1997 and December 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
ASSETS 1997 1996
------ ---- -----
<S> <C> <C>
Current assets
Cash and equivalents $ 4,636,411 $ 1,644,674
Marketable securities 1,546,129 2,339,380
Accounts receivable, net of allowance
for doubtful accounts of $173,340 in 1997
and $225,011 in 1996 303,425 2,179,723
Interest receivable 85,136 13,914
Estimated settlements due from third
party payors - 739,842
Prepaid expenses and other assets 200 127,032
----------- -----------
Total current assets 6,571,301 7,044,565
Investments in joint ventures 6,541,749 4,986,273
Property, plant and equipment, net of
accumulated depreciation 0 13,016,044
Deferred financing costs, net of accumulated
amortization of $76,620 in 1997 and
$54,075 in 1996 0 22,545
Due from affiliates 0 473,417
----------- -----------
Total assets $13,113,050 $25,542,844
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
---------------------------------
Current liabilities
Current portion of long term debt $ - $ 343,697
Accounts payable 1,626,957 906,261
Accrued payroll and payroll taxes 54,644 309,380
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 856,928 516,976
Due to affiliates 4,956,845 460,564
----------- -----------
Total current liabilities 7,520,184 3,129,654
Bonds, notes and capital lease obligations - 3,558,529
----------- -----------
Total liabilities 7,520,184 6,688,183
----------- -----------
Venture partners' minority interest 736,543 2,100,875
----------- -----------
Partners' capital
Limited partners 4,856,323 16,709,571
General partners - 44,215
----------- -----------
Total partners' capital 4,856,323 16,753,786
----------- -----------
Total liabilities and partners' capital $13,113,050 $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 June 30, 1997 and 1996
and the six months ended June 30, 1997 and 1996
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
------------------ -----------------
1997 1996 1997 1996
----- ---- ---- ----
<S> <C> <C> <C> <C>
Revenue
Net resident service revenue $3,776,158 $5,043,896 $9,320,253 $10,114,642
Other revenue 5,081 7,368 11,940 16,312
---------- ---------- ---------- -----------
Total revenue 3,781,239 5,051,264 9,332,193 10,130,954
---------- ---------- ---------- -----------
Operating expenses:
Professional care of residents 1,795,105 2,507,264 4,610,483 4,907,586
Dietary 275,724 411,506 680,096 813,588
Household and plant 300,739 427,115 748,468 870,691
General and administrative 463,577 761,554 1,357,344 1,552,283
Employee health and welfare 174,895 232,665 411,588 491,854
Rent 673,784 - 673,784 -
Depreciation and amortization - 178,974 182,687 382,917
---------- ---------- ---------- -----------
Total operating expenses 3,683,824 4,519,078 8,664,450 9,018,919
---------- ---------- ---------- -----------
Operating income 97,415 532,186 667,743 1,112,035
---------- ---------- ---------- -----------
Other income (expenses):
Interest income 193,100 41,112 250,610 88,167
Interest expense (12,213) (93,912) (99,494) (193,617)
Provider fees (91,750) (137,625) (229,195) (275,250)
Minority Interest (29,165) (102,592) (114,103) (188,153)
Partnership share of joint
venture income (26,540) 85,735 83,608 217,176
Gain (loss) on sale of properties (142,236) - 6,539,998 -
---------- ---------- ---------- -----------
Total other
income (expenses) (108,804) (207,282) 6,431,424 (351,677)
---------- ---------- ---------- -----------
Net income (loss) $ (11,389) $ 324,904 $7,099,167 $ 760,358
========== ========== ========== ===========
Net income (loss) per weighted
average limited partnership unit
outstanding $ (.57) $ 16.21 $ 382.12 $ 37.94
========== ========== ========== ===========
</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, 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
($1018 per limited
partnership unit outstanding) (18,974,502) (21,044) (18,995,546)
Net income 7,122,338 (23,171) 7,099,167
Unrealized gain on marketable
securities available for sale (1,084) - (1,084)
------ ----------- ------- -----------
Partners' capital,
June 30, 1997 18,639 $ 4,856,323 $ 0 $ 4,856,323
====== =========== ======= ===========
</TABLE>
6
<PAGE> 7
MEDICAL INCOME
PROPERTIES 2A LIMITED PARTNERSHIP
Statements of Cash Flows
Six months ended June 30, 1997 and 1996
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Cash flows from operating activities:
Cash received from patient care $ 12,205,123 $10,837,391
Cash paid to suppliers and employees (8,456,938) (8,463,496)
Interest received 250,610 94,140
Interest paid (99,494) (193,617)
Provider fees (229,195) (275,250)
Other operating receipts 11,940 16,312
------------ -----------
Net cash provided by operating activities 3,682,046 2,015,480
------------ -----------
Cash flows from investing activities:
Proceeds from sale of properties 20,404,177 -
Investment in marketable securities 793,251 (148,861)
Distributions (to) from joint ventures (2,412,477) (520,853)
Acquisitions of property (27,179) (216,375)
------------ -----------
Net cash used by investing activities 18,757,772 (886,089)
------------ -----------
Cash flows from financing activities:
Payments of long term debt
and lease obligations (56,910) (159,704)
Net borrowings (payments) to related parties (395,625) 382,608
Distributions to partners (18,995,546) (601,258)
------------ -----------
Net cash used by financing activities (19,448,081) (378,354)
------------ -----------
Net increase in cash and equivalents 2,991,737 751,037
Cash and equivalents, beginning of period 1,644,674 889,401
------------ -----------
Cash and equivalents, end of period $ 4,636,411 $ 1,640,438
============ ===========
Reconciliation of net income to net cash
provided by operating activities
Net income $ 7,099,167 $ 760,358
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 182,687 382,917
Minority Interest 114,103 188,153
Partnership share of joint venture (income) loss (83,608) (217,176)
Gain on sale of properties (6,539,998) -
Accretion of discount on marketable securities - 5,974
Decrease (increase) in accounts receivable, net 1,805,075 153,991
Decrease in third party receivables 739,842 229,556
(Increase) decrease in prepaid expenses
and other assets 126,832 (164,475)
Increase in accounts payable and
accrued expenses (102,006) 336,980
Increase (decrease) in third party payables 339,952 339,202
------------ -----------
Net cash provided by operating activities $ 3,682,046 $ 2,015,480
============ ===========
</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 June 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 June 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 June 30, 1997 and December 31, 1996 is as follows:
<TABLE>
<CAPTION>
KATY (owned 50% by Partnership)
-------------------------------
1997 1996
---------- ----------
<S> <C> <C>
Current assets $1,788,458 $2,501,874
Long term assets 6,337,428 4,771,630
---------- ----------
Total assets $8,125,886 $7,273,504
========== ==========
Current liabilities $ 204,758 $ 860,008
Equity 7,921,128 6,413,496
---------- ----------
Total liabilities and equity $8,125,886 $7,273,504
========== ==========
Partnership's investment at June 30, 1997
and December 31, 1996 $3,960,564 $3,206,748
========== ==========
Revenues $2,258,675 $5,039,616
Expenses 2,157,922 4,385,765
---------- ----------
Net operating income 100,753 653,851
Gain on sale of property 1,433,333 -
---------- ----------
Net income $1,534,086 $ 653,851
========== ==========
</TABLE>
10
<PAGE> 11
<TABLE>
<CAPTION>
HUMBLE (owned 50% by Partnership)
- -------------------------------
1997 1996
---------- ----------
<S> <C> <C>
Current assets $1,120,370 $1,498,372
Long term assets 4,195,221 3,377,314
---------- ----------
Total assets $5,315,591 $4,875,686
========== ==========
Current liabilities $ 154,322 $ 677,478
Long term liabilities - 631,250
Equity 5,161,269 3,566,958
---------- ----------
Total liabilities and equity $5,315,591 $4,875,686
========== ==========
Partnership's investment at June 30, 1997
and December 31, 1996 $2,580,635 $1,783,479
========== ==========
Revenues $1,640,826 $4,415,307
Expenses 1,574,363 3,954,042
---------- ----------
Net operating income 66,463 461,265
Gain on sale of property 1,555,404 -
---------- ----------
Net income $1,621,867 $ 461,265
========== ==========
</TABLE>
(5) Related Party Transactions
Through June 30, 1997 and 1996, QualiCorp, Inc., the parent of Qualicorp
Management, Inc. (the Managing General Partner of the Partnership) charged
$105,162 and $64,654, respectively, of administrative expenses to the
Partnership. In addition, Qualicorp, Inc. charged the Partnership $90,213
for property management services during the six months ended June 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 $4,636,411 at June 30, 1997, an increase
of $2,991,737 from December 31, 1996. 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. As of June 30, 1997, limited
partners had not surrendered 1102 limited partnership certificates to the
Managing General Partner and consequently, the Partnership had not released
$1,105,306 to those limited partners. At June 30, 1997 that amount was
included in accounts payable.
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 June 30, 1997 was $11,389.
Included in the loss is an adjustment to the gain on the nursing home property
of $142,236. The remaining operating income of $130,847 was attributed to
interest earned on invested funds, additions to the Medicare settlement
liabilities, and cost reimbursements. It is anticipated that the future close
down expenses of the Partnership will approximate $415,000, 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. Exhibit: 27 Financial Data Schedule (for SEC use 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: August 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 JUNE 30, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 4,636,411
<SECURITIES> 1,546,129
<RECEIVABLES> 476,765
<ALLOWANCES> 173,340
<INVENTORY> 0
<CURRENT-ASSETS> 6,571,301
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 13,113,050
<CURRENT-LIABILITIES> 7,520,184
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 4,856,323<F1>
<TOTAL-LIABILITY-AND-EQUITY> 13,113,050
<SALES> 9,320,253
<TOTAL-REVENUES> 9,332,193
<CGS> 0
<TOTAL-COSTS> 8,664,450
<OTHER-EXPENSES> 229,195
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 99,494
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 559,189
<DISCONTINUED> 0
<EXTRAORDINARY> 6,539,998
<CHANGES> 0
<NET-INCOME> 7,099,187
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>REPRESENT TOTAL PARTNERSHIP CAPITAL INCLUDING NET INCOME NET OF DISTRIBUTIONS.
</FN>
</TABLE>
