<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, 1998 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)
(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, 1998 was
18,639.
<PAGE> 2
TABLE OF CONTENTS
PART I
<TABLE>
<CAPTION>
Page No.
<S> <C> <C>
Item 1. Financial Information . . . . . .. . . . . . . . . . 3 - 9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations . . . 10
PART II
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . 11
Signatures . . . . . . . . . . . . . . . . . . . . . 11
</TABLE>
2
<PAGE> 3
PART I
ITEM 1.
FINANCIAL INFORMATION
MEDICAL INCOME PROPERTIES 2A LIMITED PARTNERSHIP
INDEX
<TABLE>
Page No.
<S> <C>
Balance Sheets, March 31, 1998 and December 31, 1997 . . . . . . . . . . 4
Statements of Operations for the three
months ended March 31, 1998 and 1997 . . . . . . . . . . . . . . . . . . 5
Statements of Partners' Capital for the three months
ended March 31, 1998 and December 31, 1997 . . . . . . . . . . . . . . . 6
Statements of Cash Flows for the three months ended
March 31, 1998 and 1997 . . . . . . . . . . . . . . . . . . . . . . . . . 7
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . 8-10
</TABLE>
3
<PAGE> 4
MEDICAL INCOME PROPERTIES 2A LIMITED PARTNERSHIP
Balance Sheets
March 31, 1998 and December 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
ASSETS 1998 1997
------ ------------- ------------
<S> <C> <C>
Current assets
Cash and equivalents $ 1,445,443 $ 1,520,944
Marketable securities 1,171,546 1,154,640
Accounts receivable, net of allowance
for doubtful accounts of $10,000 in 1998
and $10,000 in 1997 42,909 75,523
Estimated settlements due from third
party payors -- 224,839
------------- ------------
Total current assets 2,659,898 2,975,946
Investments in joint ventures 6,297,604 6,302,656
Due from affiliates 3,952,035 3,952,035
------------- ------------
Total assets $ 12,909,537 $ 13,230,637
============= ============
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities
Accounts payable $ 3,441 $ 62,925
Accrued insurance 75,169 75,169
Other accrued expenses 226,284 257,409
Estimated settlements due to third
party payors 1,169,072 1,386,798
Due to affiliates 5,664,862 5,658,630
------------- ------------
Total current liabilities 7,138,828 7,440,931
Venture partners' minority interest 4,041,179 4,047,063
Partners' capital
Limited partners 1,729,530 1,742,643
------------- ------------
Total liabilities and partners' capital $ 12,909,537 $ 13,230,637
============= ============
</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, 1998 and 1997
(Unaudited)
<TABLE>
<CAPTION>
1998 1997
---------- -------------
<S> <C> <C>
Revenues
Net resident service revenue $ -- $ 5,544,095
Other revenue -- 6,859
---------- -------------
Total revenue -- 5,550,954
---------- -------------
Operating expenses
Professional care of patients -- 2,815,378
Dietary -- 404,372
Household and plant -- 447,728
General and administrative -- 893,768
Employee health and welfare -- 236,693
Depreciation and amortization -- 182,687
---------- -------------
Total operating expenses -- 4,980,626
---------- -------------
Operating income -- 570,328
---------- -------------
Other income (expenses)
Interest income 39,125 57,510
Interest expense -- (87,281)
Provider fees -- (137,445)
Minority interest in consolidated
joint venture 5,884 (84,938)
Partnership share of joint
venture income (loss) (5,052) 110,148
---------- -------------
Total other income (expenses) 39,957 (142,006)
---------- --------------
Net income before recognition of gain on sales of
properties and loss on discontinued operations 39,957 428,322
Gain on sales of properties -- 6,682,234
Loss from discontinued operations (53,070) --
---------- -------------
Net income (loss) (13,113) 7,110,556
========== =============
Net income (loss) per weighted average
limited partnership unit outstanding $ .70 $ 379.88
========== =============
</TABLE>
5
<PAGE> 6
MEDICAL INCOME PROPERTIES 2A LIMITED PARTNERSHIP
Statements of Partners' Capital
For the Three Months Ended March 31, 1998 and December 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
Limited Partners
Unit Amount
------ ----------
<S> <C> <C>
Partners' capital,
December 31, 1997 18,639 $1,742,643
Net income (loss) -- (13,113)
------ ----------
Partners' capital,
March 31, 1998 18,639 $1,729,530
====== ==========
</TABLE>
6
<PAGE> 7
MEDICAL INCOME PROPERTIES 2A LIMITED PARTNERSHIP
Statements of Cash Flows
Three Months Ended March 31, 1998 and 1997
(Unaudited)
<TABLE>
<CAPTION>
1998 1997
------------ -----------
<S> <C> <C>
Cash flows from operating activities:
Cash received from patient care $ 39,727 $ 6,013,331
Cash paid to suppliers and employees (143,679) (4,324,153)
Interest received 22,219 57,510
Interest paid -- (87,281)
Provider fees -- (137,445)
Other operating receipts -- 6,859
------------ ------------
Net cash provided (used) by operating activities (81,733) 1,528,821
------------ ------------
Cash flows from investing activities:
Distributions from joint ventures -- 22,500
Acquisitions of property -- (27,179)
------------ ------------
Net cash provided (used) from investing activities -- (4,679)
------------ ------------
Cash flows from financing activities:
Payments of long term debt and lease obligations -- (56,910)
Net borrowings (payments) to related parties 6,232 (13,023)
Distributions to partners -- (300,629)
------------ ------------
Net cash provided (used) by financing activities 6,232 (370,562)
------------ ------------
Net increase (decrease) in cash and equivalents (75,501) 1,153,580
Cash and equivalents, beginning of period 1,520,944 1,644,674
------------ ------------
Cash and equivalents, end of period $ 1,445,443 $ 2,798,254
============ ============
Reconciliation of net income (loss) to net cash
provided by operating activities:
Net income (loss) $ (13,113) $ 7,110,556
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization -- 182,687
Minority Interest (5,884) 84,938
Partnership share of joint venture (income) loss 5,052 (110,148)
Gain on sale of properties -- (6,682,234)
(Increase) decrease in:
Accounts receivable, net 15,708 (157,358)
Third party receivables 224,839 688,236
Prepaid expenses and other assets -- (233,779)
Increase (decrease) in:
Accounts payable and accrued expenses (90,609) 707,563
Third party payables (217,726) (61,640)
------------ ------------
Net cash provided (used) by operating activities $ (81,733) $ 1,528,821
============ ============
</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, 1997 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 $20,552,089,
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 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 interim lease was terminated on May 31, 1997.
(3) Investment in Joint Venture
The condensed financial information for the investments in joint ventures
as of March 31, 1998 and December 31, 1997 is as follows:
TEXAS JOINT VENTURE (owned 50% by Partnership)
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
Current assets $ 1,783,169 $ 2,075,238
Long term assets 11,252,814 11,267,814
------------ ------------
Total assets $ 13,035,983 $ 13,343,052
============ ============
Current liabilities $ 440,776 $ 737,741
Equity 12,595,207 12,605,311
------------ ------------
Total liabilities and equity $ 13,035,983 $ 13,343,052
============ ============
Partnership's investment at March 31, 1998
and December 31, 1997 $ 6,297,604 $ 6,302,656
============ ============
</TABLE>
8
<PAGE> 9
<TABLE>
<CAPTION>
1998 1997
----------- ------------
<S> <C> <C>
Revenues $ -- $ 4,041,346
Expenses -- 3,947,564
----------- ------------
Net operating income before other income,
gain on sales of properties and
discontinued operations -- 93,782
Interest income 14,767 122,223
Gain on sales of properties -- 2,251,762
Loss on discontinued operations (24,871) --
----------- ------------
Net income (loss) $ (10,104) $ 2,467,767
=========== ============
</TABLE>
(4) Related Party Transactions
Through March 31, 1998 and 1997, QualiCorp, Inc., the parent of Qualicorp
Management, Inc. (the Managing General Partner of the Partnership)
charged $20,455 and $42,141, 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.
9
<PAGE> 10
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
Cash and equivalent balances totaled $1,445,443 as of March 31, 1998, a decrease
of $75,501 compared to December 31, 1997. This decrease was primarily due to
settlement of various vendors accounts payable reduced by collections of
accounts receivable.
The Partnership will make a final distribution of any remaining funds following
the expiration of the periods within which claims for breach of representations
and warranties and claims by Medicare, Medicaid or other third parties may be
made against the Partnership either by contract or under applicable law.
Operations
The Partnership's net loss for the quarter ended March 31, 1998 was $13,113.
Interest income totaled $39,125 for the quarter while the joint venture partners
recorded a loss of $5,052. Minority interest income for the quarter was $5,884.
Discontinued operating expense was $53,070 for the period ended March 31, 1998.
The comparison between quarters shows substantial differences primarily due to
the Partnership suspending all business operations on May 31, 1997.
10
<PAGE> 11
PART II
Item 6. Exhibits and reports on 8K
A. Exhibits - 27 Financial Data Schedule (for SEC purposes only).
B. No report on Form 8-K was filed during the quarter ended
March 31, 1998.
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: May 6, 1998
------------------------------------- ---------------
John H. Stoddard
President and Chief Financial Officer
QualiCorp Management, Inc.
Managing General Partner
11
<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, 1998, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 1,445,443
<SECURITIES> 1,171,546
<RECEIVABLES> 52,909
<ALLOWANCES> 10,000
<INVENTORY> 0
<CURRENT-ASSETS> 2,659,898
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 12,909,537
<CURRENT-LIABILITIES> 7,138,828
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 1,729,530<F1>
<TOTAL-LIABILITY-AND-EQUITY> 12,909,537
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> (39,125)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 39,957
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> (53,070)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (13,113)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>REPRESENT TOTAL PARTNERSHIP CAPITAL INCLUDING NET INCOME NET OF
DISTRIBUTIONS.
</FN>
</TABLE>
