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<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, 1996 Commission File Number 33-6122-02
MEDICAL INCOME PROPERTIES 2B LIMITED PARTNERSHIP
------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
<TABLE>
<S> <C>
Delaware 59-2726599
-------- ----------
(State of Organization) (IRS Employer Identification Number)
</TABLE>
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, 1996 was
10,907.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I 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 2B LIMITED PARTNERSHIP
INDEX
<TABLE>
<CAPTION>
Page No.
<S> <C>
Balance Sheets, March 31, 1996 and December 31, 1995 . . . . . . . . . . . . . . . . . . . . . 4
Statements of Operations for the three
months ended March 31, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Statements of Partners' Capital for the three
months ended March 31, 1996 and December 31, 1995 . . . . . . . . . . . . . . . . . . . . . . . 6
Statements of Cash Flows for the three months ended
March 31, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8-10
</TABLE>
3
<PAGE> 4
MEDICAL INCOME PROPERTIES 2B LIMITED PARTNERSHIP
Balance Sheets
March 31, 1996 and December 31, 1995
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
--------------- ---------------
<S> <C> <C>
ASSETS
Current assets
Cash and equivalents $ 266,117 $ 41,363
Accounts receivable, net of allowance
for doubtful accounts of $54,149 in 1996
and $54,188 in 1995 651,980 780,238
Estimated settlements due from third parties 169,244 316,962
Prepaid expenses and other assets 65,933 42,144
--------------- ---------------
Total current assets 1,153,274 1,180,707
Investment in joint ventures 6,991,726 7,034,698
Property, plant and equipment, net of
accumulated depreciation 2,953,812 2,988,787
Deferred financing costs, net of
accumulated amortization of
$1,580 in 1996 and $1,525 in 1995 1,907 1,962
--------------- ---------------
Total assets $ 11,100,719 $ 11,206,154
=============== ===============
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities
Current portion of long term debt $ 59,466 $ 57,447
Accounts payable 188,431 235,152
Accrued payroll and payroll taxes 95,122 47,516
Accrued vacation 30,895 31,082
Accrued insurance 16,225 28,384
Accrued real estate taxes 94,917 76,143
Accrued management fees 13,906 13,371
Patient deposits and trust liabilities 37,842 37,010
Other accrued expenses 45 387
Due to affiliates 978,646 1,137,913
--------------- ---------------
Total current liabilities 1,515,495 1,664,405
Bonds payable and capital lease obligations 688,998 705,550
--------------- ---------------
Total liabilities 2,204,493 2,369,955
--------------- ---------------
Partners' capital (deficit)
Limited partners 8,944,032 8,888,206
General partners (47,806) (52,007)
--------------- ----------------
Total partners' capital 8,896,226 8,836,199
--------------- ---------------
Total liabilities and partners' capital $ 11,100,719 $ 11,206,154
=============== ===============
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE> 5
MEDICAL INCOME PROPERTIES 2B LIMITED PARTNERSHIP
Statements of Operations
For the three months ended March 31, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
--------------- ---------------
<S> <C> <C>
Revenues
Net patient service revenue $ 907,933 $ 882,070
Other revenue 1,073 978
--------------- ---------------
Total revenue 909,006 883,048
--------------- ---------------
Operating expenses
Professional care of patients 493,991 483,960
Dietary 68,480 64,978
Household and plant 82,950 95,645
General and administrative 179,323 166,267
Employee health and welfare 52,967 46,079
Depreciation and amortization 37,188 38,009
--------------- ---------------
Total operating expenses 914,899 894,938
--------------- ---------------
Operating income (loss) (5,893) (11,890)
--------------- ----------------
Other income (expenses)
Interest expense, net (17,423) (18,908)
Provider fees (16,380) (16,200)
Partnership share of joint
venture income 217,003 184,661
--------------- ---------------
Total other income (expenses) 183,200 149,553
--------------- ---------------
Net income $ 177,307 $ 137,663
=============== ===============
Net income per limited partnership
unit outstanding $ 15.12 $ 11.74
=============== ===============
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE> 6
MEDICAL INCOME PROPERTIES 2B LIMITED PARTNERSHIP
Statements of Partners' Capital
For the Three Months Ended March 31, 1996 and December 31, 1995
(Unaudited)
<TABLE>
<CAPTION>
Limited Partners General
Unit Amount Partners Total
---- ------ -------- -----
<S> <C> <C> <C> <C>
Partners' capital (deficit),
December 31, 1995 10,907 $8,888,206 $(52,007) $8,836,199
Distributions to partners
($10.00 per limited
partnership unit outstanding) (109,070) (8,210) (117,280)
Net income 164,896 12,411 177,307
------ ---------- -------- ----------
Partners' capital (deficit),
March 31, 1996 10,907 $8,944,032 $(47,806) $8,896,226
====== ========== ========= ==========
</TABLE>
6
<PAGE> 7
MEDICAL INCOME PROPERTIES 2B LIMITED PARTNERSHIP
Statements of Cash Flow
Three Months Ended March 31, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
--------------- ---------------
<S> <C> <C>
Cash flows from operating activities:
Cash received from patient care $ 1,183,910 $ 811,863
Cash paid to suppliers and employees (893,163) (918,012)
Interest paid (17,423) (18,908)
Provider fees (16,380) (16,200)
Cash from other operating activities 1,073 978
--------------- ---------------
Net cash provided (used) by operating activities 258,017 (140,279)
--------------- ----------------
Cash flows from investing activities:
Distributions from joint ventures 259,976 32,726
Purchase of property (2,157) (6,427)
--------------- ----------------
Net cash provided from investing activities 257,819 26,299
--------------- ---------------
Cash flows from financing activities:
Principal payments on long term debt (14,533) (10,890)
Net borrowings (payments) to related parties (159,269) 120,364
Distributions to partners (117,280) (117,280)
--------------- ----------------
Net cash used by financing activities (291,082) (7,806)
--------------- ----------------
Net increase (decrease) in cash and equivalents 224,754 (121,786)
Cash and equivalents, beginning of period 41,363 125,450
--------------- ---------------
Cash and equivalents, end of period $ 266,117 $ 3,664
=============== ===============
Reconciliation of net income to net cash
provided by operating activities:
Net income $ 177,307 $ 137,663
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 37,188 38,009
Partnership share of joint venture (income) (217,003) (184,661)
Decrease in accounts receivable 128,259 90,520
Decrease (increase) in estimated settlements 147,718 (160,729)
Increase in prepaid expenses and other assets (23,790) (1,015)
Increase (decrease) in accounts payable and
accrued expenses 8,338 (60,066)
--------------- ----------------
Net cash provided (used) by operating activities $ 258,017 $ (140,279)
=============== ================
</TABLE>
The accompanying notes are an integral part of these statements.
7
<PAGE> 8
MEDICAL INCOME PROPERTIES 2B 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, 1995 audited financial statements have been omitted
from this report.
(2) Property, Plant and Equipment
Property, plant and equipment consisted of the following at March 31,
1996 and December 31, 1995:
<TABLE>
<CAPTION>
1996 1995
--------------- ---------------
<S> <C> <C>
Land $ 90,000 $ 90,000
Building and improvements 3,817,099 3,817,099
Furniture and equipment 287,837 285,680
--------------- ---------------
Total property, plant and equipment 4,194,936 4,192,779
Accumulated depreciation (1,241,124) (1,203,992)
--------------- ---------------
Net property, plant and equipment $ 2,953,812 $ 2,988,787
=============== ===============
</TABLE>
(3) Debt Obligations
Debt obligations consisted of the following at March 31, 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 $8,749 through April 1,
2005. The interest rate is adjusted every
May 1 and November 1. $ 748,464 $ 762,997
Less amounts due in one year or less 59,466 57,447
---------- -------------
$ 688,998 $ 705,550
========== =============
</TABLE>
The aggregate annual maturities for the succeeding five fiscal years are
as follows:
<TABLE>
<S> <C>
1996 $ 42,914
1997 62,355
1998 67,681
1999 73,463
2000 79,738
Thereafter 422,313
----------
$ 748,464
==========
</TABLE>
8
<PAGE> 9
(4) Investment in Joint Venture
The condensed financial information for the investments in joint ventures
as of March 31, 1996 and December 31, 1995 is as follows:
KATY (owned 50% by Partnership)
<TABLE>
<CAPTION>
1996 1995
--------------- ---------------
<S> <C> <C>
Current assets $ 1,813,310 $ 1,684,094
Long term assets 4,941,290 5,048,138
--------------- ---------------
Total assets $ 6,754,600 $ 6,732,232
=============== ===============
Current liabilities $ 595,136 $ 684,328
Equity 6,159,464 6,047,904
--------------- ---------------
Total liabilities and equity $ 6,754,600 $ 6,732,232
=============== ===============
Partnership's investment at March 31, 1996
and December 31, 1995 $ 3,079,732 $ 3,023,952
=============== ===============
Revenues $ 1,204,609 $ 4,985,129
Expenses 1,069,505 4,362,005
--------------- ---------------
Net income $ 135,104 $ 623,124
=============== ===============
</TABLE>
HUMBLE (owned 50% by Partnership)
<TABLE>
<CAPTION>
1996 1995
--------------- ---------------
<S> <C> <C>
Current assets $ 1,341,248 $ 1,140,926
Long term assets 3,536,267 3,651,762
--------------- ---------------
Total assets $ 4,877,515 $ 4,792,688
=============== ===============
Current liabilities $ 643,198 $ 703,933
Long term liabilities 737,300 691,850
Equity 3,497,017 3,396,905
--------------- ---------------
Total liabilities and equity $ 4,877,515 $ 4,792,688
=============== ===============
Partnership's investment at March 31, 1996
and December 31, 1995 $ 1,748,509 $ 1,698,453
=============== ===============
Revenues $ 1,105,891 $ 3,664,088
Expenses 978,112 3,526,809
--------------- ---------------
Net income $ 127,779 $ 137,279
=============== ===============
</TABLE>
9
<PAGE> 10
MEDICAL PARK (owned 45.45% by Partnership)
<TABLE>
<CAPTION>
1996 1995
--------------- ---------------
<S> <C> <C>
Current assets $ 2,202,056 $ 2,370,621
Long term assets 5,195,615 5,308,640
--------------- ---------------
Total assets $ 7,397,671 $ 7,679,261
=============== ===============
Current liabilities $ 645,823 $ 713,232
Long term liabilities 1,991,277 1,868,527
Equity 4,760,571 5,097,502
--------------- ---------------
Total liabilities and equity $ 7,397,671 $ 7,679,261
=============== ===============
Partnership's investment at March 31, 1996
and December 31, 1995 $ 2,163,485 $ 2,317,207
=============== ===============
Revenues $ 1,615,472 $ 5,907,763
Expenses 1,427,218 5,192,923
--------------- ---------------
Net income $ 188,254 $ 714,840
=============== ===============
</TABLE>
(5) Related Party Transactions
Through March 31, 1996 and 1995, QualiCorp, Inc. the parent of Qualicorp
Management, Inc. (the Managing General Partner of the Partnership)
charged $22,771 and $19,348 respectively, to the Partnership for
reimbursement of administrative expenses.
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 during the quarter ended March 31, 1996 by
$224,754 due to improved collections of Medicaid receivables, a tentative
settlement of amounts due from the Medicare program and funds received from The
Alabama Joint Venture. The Partnership used a portion of the proceeds to pay
amounts owed to other affiliates.
During the first quarter, the Partnership engaged an investment firm to assist
in evaluating its strategic alternatives, which could include a possible sale
of the Partnership assets.
The Partnership paid a distribution to its limited partners in February 1996 of
$10.00 per unit, which equals a 4% annualized return on the initial investment
of $1,000 per unit. 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
improvement to its properties and working capital reserves, no assurances can
be given that distributions will be made in the future.
Operations
The operating loss of $5,893 for the quarter reflects the operations of the
Edwardsville, Illinois facility. The loss for the comparable quarter of 1995
was $11,890. While the 1996 loss is lower than 1995, we continue to explore
alternatives for the property, including the possible sale of the facility.
During the quarter ended March 31, 1996, the facility had lower than expected
Medicare census which produced lower than expected revenue. Operating
expenses, particularly professional care of residents expenses, were in line
with expectations. Household and Plant expenses were lower in 1996 than 1995
due to higher weather related repairs and expenses caused by freeze damage in
1995.
Administrative and General expenses increased to $179,323 in 1996 due to higher
insurance costs and fees. Employee health and welfare expense increased $6,888
between quarters due to higher health insurance costs and higher employment
taxes. Income from the Partnership share of joint venture activities was
higher in 1996 than 1995 due to continued improvement in financial performance
at each Joint Venture property.
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 2B
LIMITED PARTNERSHIP
Registrant
By: /s/ John H. Stoddard Date: April 30, 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 2B LIMITED PARTNERSHIP FOR THE
QUARTER ENDED MARCH 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 266,117
<SECURITIES> 0
<RECEIVABLES> 706,129
<ALLOWANCES> 54,149
<INVENTORY> 0
<CURRENT-ASSETS> 1,153,274
<PP&E> 4,194,936
<DEPRECIATION> 1,241,124
<TOTAL-ASSETS> 11,100,719
<CURRENT-LIABILITIES> 1,515,495
<BONDS> 688,998
0
0
<COMMON> 0
<OTHER-SE> 8,896,226<F1>
<TOTAL-LIABILITY-AND-EQUITY> 11,100,719
<SALES> 907,933
<TOTAL-REVENUES> 909,006
<CGS> 0
<TOTAL-COSTS> 914,899
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 17,423
<INCOME-PRETAX> 177,307
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 177,307
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>5.02(31) REPRESENTS TOTAL PARTNERSHIP CAPITAL INCLUDING NET INCOME NET OF
DISTRIBUTIONS.
</FN>
</TABLE>
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