<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, 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 March 31, 1997 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, 1997 and December 31, 1996 . . . . . . . . . . . 4
Statements of Operations for the three
months ended March 31, 1997 and 1996 . . . . . . . . . . . . . . . . . . . 5
Statements of Partners' Capital for the three months
ended March 31, 1997 and December 31, 1996 . . . . . . . . . . . . . . . . 6
Statements of Cash Flows for the three months ended
March 31, 1997 and 1996 . . . . . . . . . . . . . . . . . . . . . . . . . 7
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . 8-10
</TABLE>
3
<PAGE> 4
MEDICAL INCOME PROPERTIES 2A LIMITED PARTNERSHIP
Balance Sheets
March 31, 1997 and December 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
ASSETS 1997 1996
------ ---- ----
<S> <C> <C>
Current assets
Cash and equivalents $ 2,798,254 $ 1,644,674
Marketable securities 2,296,647 2,339,380
Accounts receivable, net of allowance
for doubtful accounts of $195,242 in 1997
and $225,011 in 1996 2,273,506 2,179,723
Receivable due from escrow agent 20,546,413 --
Interest receivable 77,490 13,914
Estimated settlements due from third
party payors 51,606 739,842
Prepaid expenses and other assets 41,985 127,032
----------- -----------
Total current assets 28,085,901 7,044,565
Investments in joint ventures 1,545,098 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 $29,630,999 $25,542,844
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities
Current portion of long term debt $ -- $ 343,697
Accounts payable 1,472,433 906,261
Accrued payroll and payroll taxes 532,278 309,380
Accrued vacation -- 247,096
Accrued insurance 82,125 43,126
Accrued management fees 1,691,732 82,403
Patient deposits and trust liabilities 82,246 128,204
Other accrued expenses 39,967 91,947
Estimated settlements due to third
party payors 883,635 516,976
Due to affiliates 309,772 460,564
----------- -----------
Total current liabilities 5,094,188 3,129,654
Bonds, notes and capital lease obligations -- 3,558,529
----------- -----------
Total liabilities 5,094,188 6,688,183
----------- -----------
Venture partners' minority interest 973,663 2,100,875
----------- -----------
Partners' capital
Limited partners 23,510,034 16,709,571
General partners 53,114 44,215
----------- -----------
Total partners' capital 23,563,148 16,753,786
----------- -----------
Total liabilities and partners' capital $29,630,999 $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 March 31, 1997 and 1996
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Revenues
Net resident service revenue $ 5,544,095 $ 5,070,746
Other revenue 6,859 8,944
----------- -----------
Total revenue 5,550,954 5,079,690
----------- -----------
Operating expenses
Professional care of patients 2,815,378 2,400,321
Dietary 404,372 402,082
Household and plant 447,728 443,577
General and administrative 893,768 790,729
Employee health and welfare 236,693 259,189
Depreciation and amortization 182,687 203,943
----------- -----------
Total operating expenses 4,980,626 4,499,841
----------- -----------
Operating income 570,328 579,849
----------- -----------
Other income (expenses)
Interest income 57,510 47,055
Interest expense (87,281) (99,705)
Provider fees (137,445) (137,625)
Minority interest in consolidated
joint venture (84,938) (85,561)
Partnership share of joint
venture income 110,148 131,441
Gain on sale of properties 6,682,234 --
----------- -----------
Total other income (expenses) 6,540,228 (144,395)
----------- -----------
Net income $ 7,110,556 $ 435,454
=========== ===========
Net income per weighted average
limited partnership unit outstanding $ 379.88 $ 21.73
=========== ===========
</TABLE>
5
<PAGE> 6
MEDICAL INCOME PROPERTIES 2A LIMITED PARTNERSHIP
Statements of Partners' Capital
For the Three Months Ended March 31, 1997 and
December 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
Limited Partners General
Unit 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
($15.00 per limited
partnership unit outstanding) (279,585) (21,044) (300,629)
Net income 398,339 29,983 428,322
Gain on sale of properties 6,682,234 - 6,682,234
Unrealized loss on marketable
securities available for sale (525) (40) (565)
------ ----------- ------- -----------
Partners' capital,
March 31, 1997 18,639 $23,510,034 $53,114 $23,563,148
====== =========== ======= ===========
</TABLE>
6
<PAGE> 7
MEDICAL INCOME PROPERTIES 2A LIMITED PARTNERSHIP
Statements of Cash Flows
Three Months Ended March 31, 1997 and 1996
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Cash received from patient care $ 6,013,331 $ 5,541,741
Cash paid to suppliers and employees (4,324,153) (4,122,696)
Interest received 57,510 52,763
Interest paid (87,281) (99,705)
Provider fees (137,445) (137,625)
Other operating receipts 6,859 8,944
----------- -----------
Net cash provided by operating activities 1,528,821 1,243,422
----------- -----------
Cash flows from investing activities:
Distributions from joint ventures 22,500 22,500
Acquisitions of property (27,179) (121,662)
----------- -----------
Net cash provided (used) from investing activities (4,679) (99,162)
----------- -----------
Cash flows from financing activities:
Payments of long term debt and lease obligations (56,910) (79,461)
Net borrowings (payments) to related parties (13,023) 54,925
Distributions to partners (300,629) (300,629)
Distributions to venture partners -- (237,475)
----------- -----------
Net cash used by financing activities (370,562) (562,640)
----------- -----------
Net increase (decrease) in cash and equivalents 1,153,580 581,620
Cash and equivalents, beginning of period 1,644,674 889,401
----------- -----------
Cash and equivalents, end of period $ 2,798,254 $ 1,471,021
=========== ===========
Reconciliation of net income to net cash
provided by operating activities:
Net income $ 7,110,556 $ 435,454
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization 182,687 203,943
Minority Interest 84,938 85,561
Partnership share of joint venture (income) loss (110,148) (131,441)
Gain on sale of properties (6,682,234) --
Accretion of discount on marketable Securities -- 5,707
(Increase) decrease in:
Accounts receivable, net (157,358) 151,070
Third party receivables 688,236 236,684
Prepaid expenses and other assets (233,779) (185,071)
Increase (decrease) in:
Accounts payable and accrued expenses 707,563 358,275
Third party payables (61,640) 83,240
----------- -----------
Net cash provided by operating activities $ 1,528,821 $ 1,243,422
=========== ===========
</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, 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 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 $19,641,863,
which was held by the escrow agent at March 31, 1997. 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 Report on Form 8-K
dated February 18, 1997. In addition, the escrow agent held $904,550
which is subject to the terms of the indemnification provision of the
sales 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 will
provide for management and operation of the Properties for an interim
period. The Partnership borrowed $2,340,000 from Omega under a
non-recourse loan to fund operations and management of the Properties
during such interim period.
(3) Property, Plant and Equipment
Property, plant and equipment is recorded at cost and consists of the
following at March 31, 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 March 31, 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 April, 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>
(5) Investment in Joint Venture
The condensed financial information for the investments in joint ventures
as of March 31, 1997 and December 31, 1996 is as follows:
KATY (owned 50% by Partnership)
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Current assets $ 2,628,156 $ 2,501,874
Long term assets 346,062 4,771,630
----------- -----------
Total assets $ 2,974,218 $ 7,273,504
=========== ===========
Current liabilities $ 897,011 $ 860,008
Equity 2,077,207 6,413,496
----------- -----------
Total liabilities and equity $ 2,974,218 $ 7,273,504
=========== ===========
Partnership's investment at March 31, 1997
and December 31, 1996 $ 1,038,605 $ 3,206,748
=========== ===========
Revenues $ 1,443,341 $ 5,039,616
Expenses 1,314,546 4,385,765
----------- -----------
Net operating income 128,795 653,851
Gain on sale of property 1,160,007 -
----------- -----------
Net income $ 1,288,802 $ 653,851
=========== ===========
</TABLE>
9
<PAGE> 10
HUMBLE (owned 50% by Partnership)
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Current assets $ 1,516,384 $ 1,498,372
Long term assets 57,261 3,377,314
----------- -----------
Total assets $ 1,573,645 $ 4,875,686
=========== ===========
Current liabilities $ 560,660 $ 677,478
Long term liabilities -- 631,250
Equity 1,012,985 3,566,958
----------- -----------
Total liabilities and equity $ 1,573,645 $ 4,875,686
=========== ===========
Partnership's investment at March 31, 1997
and December 31, 1996 $ 506,493 $ 1,783,479
=========== ===========
Revenues $ 1,027,103 $ 4,415,307
Expenses 935,602 3,954,042
----------- -----------
Net income 91,501 461,265
Gain on sale of property 1,311,358 --
----------- -----------
Net income $ 1,402,859 $ 461,265
=========== ===========
</TABLE>
(6) Related Party Transactions
Through March 31, 1997 and 1996, QualiCorp, Inc., the parent of Qualicorp
Management, Inc. (the Managing General Partner of the Partnership)
charged $42,141 and $38,780, respectively, of administrative expenses to
the Partnership. In addition, Qualicorp, Inc. charged the Partnership
$90,213 for property management services during the quarter ended March
31, 1997.
10
<PAGE> 11
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
Cash, cash equivalents and marketable securities totaled $5,094,901 at March 31,
1997, an increase of $1,110,847 from December 31, 1996. This increase was due to
continued improvement in our collection efforts and settlement of Medicare cost
reports and lower than anticipated payments to vendors and contractors such as
therapy providers. These payables will be liquidated in the normal payment
process in the next few months.
Payments for capital expenditures were $27,179 in the first quarter of 1997.
On February 14, 1997, the Partnership paid distributions to limited partners
totaling $15.00 per unit, equaling a 6% annualized return on the initial
investment of $1,000 per unit. The Partnership expects to make the first
installment of liquidation proceeds, totaling $18,702,485 or $1003 per unit, on
or about May 9, 1997.
Operations
The Partnership's net income for the quarter ended March 31, 1997 was
$7,110,556, including a gain on the sale of its nursing properties of
$6,682,234. Net income before the gain on the sale of the properties was
$428,322 compared to $435,454 for the same quarter of the previous year.
Total revenue increased to $5,550,954 in the quarter or 9% higher than the
quarter ended March 31, 1996. Operating expenses increased $480,785 between
quarters due to higher salary costs, ancillary services, particularly
occupational therapy, pharmaceuticals and administrative and general costs.
Administrative and general expenses increased due to increased salary costs,
insurance, legal and property management fees paid to Qualicorp.
Interest income increased in 1997 over 1996 due to increased funds being
invested. The Partnership's share of joint venture income declined due to lower
census at both Texas properties.
11
<PAGE> 12
PART II
Item 6. Exhibit and reports on 8K
Exhibit
27 Financial Data Schedule (for SEC use only).
Reports on 8K
A. A report on Form 8-K was filed February 18, 1997 pertaining to the
disposition of Partnership assets.
B. A report on Form 8-K was filed on April 15, 1997 pertaining to the
disposition of assets and distribution of net proceeds to the limited
partners in the anticipated liquidation of the Partnership.
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, 1997
------------------------------------- --------------
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, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 2,798,254
<SECURITIES> 2,296,647
<RECEIVABLES> 2,468,748
<ALLOWANCES> 195,242
<INVENTORY> 0
<CURRENT-ASSETS> 28,085,901
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 29,630,999
<CURRENT-LIABILITIES> 5,094,188
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 23,563,148 <F1>
<TOTAL-LIABILITY-AND-EQUITY> 29,630,999
<SALES> 5,544,095
<TOTAL-REVENUES> 5,550,954
<CGS> 0
<TOTAL-COSTS> 4,980,626
<OTHER-EXPENSES> 137,625
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 87,281
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 428,322
<DISCONTINUED> 0
<EXTRAORDINARY> 6,682,234
<CHANGES> 0
<NET-INCOME> 7,110,556
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1> REPRESENT TOTAL PARTNERSHIP CAPITAL INCLUDING NET INCOME
</FN>
</TABLE>
