<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, 1996 Commission File Number 33-6122-02
MEDICAL INCOME PROPERTIES 2B LIMITED PARTNERSHIP
(Exact Name of Registrant as Specified in its Charter)
Delaware 59-2726599
(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, 1996
was 010,907.
1
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page No.
PART I
<S> <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, June 30, 1996 and December 31, 1995.......................................................... 4
Statements of Operations for the three
months ended June 30, 1996 and 1995 and the six months
ended June 30, 1996 and 1995................................................................................. 5
Statements of Partners' Capital for the six months
ended June 30, 1996 and 1995................................................................................. 6
Statements of Cash Flow for the six months ended
June 30, 1996 and 1995........................................................................................ 7
Notes to Financial Statements................................................................................. 8-10
</TABLE>
3
<PAGE> 4
MEDICAL INCOME PROPERTIES 2B LIMITED PARTNERSHIP
Balance Sheets
June 30, 1996 and December 31, 1995
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
---------------- -----------------
ASSETS
<S> <C> <C>
Current assets
Cash and equivalents $ 153,437 $ 41,363
Accounts receivable, net of allowance
for doubtful accounts of $54,149 in 1996
and $54,188 in 1995 638,812 780,238
Estimated settlements due from third parties 187,417 316,962
Prepaid expenses and other assets 61,734 42,144
---------------- ----------------
Total current assets 1,041,400 1,180,707
Investment in joint ventures 6,829,177 7,034,698
Property, plant and equipment, net of
accumulated depreciation 2,918,853 2,988,787
Due from affiliates
Deferred financing costs, net of
accumulated amortization of
$1,634 in 1996 and $1,525 in 1995 1,853 1,962
---------------- ----------------
Total assets $ 10,791,283 $ 11,206,154
================ ================
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities
Current portion of long term debt $ 60,610 $ 57,447
Accounts payable 260,448 235,152
Accrued payroll and payroll taxes 65,621 47,516
Accrued vacation 31,130 31,082
Accrued insurance 27,409 28,384
Accrued real estate taxes 38,995 76,143
Accrued management fees 13,906 13,371
Patient deposits and trust liabilities 39,291 37,010
Other accrued expenses 367 387
Due to affiliates 650,058 1,137,913
---------------- ----------------
Total current liabilities 1,187,835 1,664,405
Bonds payable and capital lease obligations 673,435 705,550
---------------- ----------------
Total liabilities 1,861,270 2,369,955
---------------- ----------------
Partners' capital (deficit)
Limited partners 8,975,454 8,888,206
General partners (45,441) (52,007)
---------------- ----------------
Total partners' capital 8,930,013 8,836,199
---------------- ----------------
Total liabilities and partners' capital $ 10,791,283 $ 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 June 30, 1996 and 1995
and the six months ended June 30, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
--------------------- --------------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenue
Net resident service revenue $ 878,700 $ 826,990 $ 1,786,632 $ 1,709,061
Other revenue 1,280 1,047 2,354 2,025
------------- ------------- ------------- ------------
Total Revenue 879,980 828,037 1,788,986 1,711,086
------------- ------------- ------------- ---------
Operating expenses:
Professional care of residents 464,127 510,990 958,117 994,950
Dietary 67,257 65,889 135,737 130,868
Household and plant 76,609 76,948 159,560 172,593
General and administrative 187,722 166,507 367,045 332,774
Employee health and welfare 50,622 52,130 103,589 98,209
Depreciation and amortization 39,311 36,852 76,499 74,860
------------- ------------- ------------- -------------
Total operating expenses 885,648 909,316 1,800,547 1,804,254
------------- ------------- ------------- -------------
Operating income (loss) (5,668) (81,279) (11,561) (93,168)
------------- ------------- ------------- ----------
Other income (expenses):
Interest income (expense), net (15,031) (32,305) (32,454) (51,214)
Provider fees (16,560) (16,380) (32,940) (32,580)
Partnership share of joint venture
income 188,326 168,090 405,329 352,751
------------- ------------- ------------- -------------
Total other income (expense) 156,735 119,405 339,935 268,957
------------- ------------- ------------- -------------
Net income $ 151,067 $ 38,126 $ 328,374 $ 175,789
============= ============= ============= =============
Net income per weighted average
limited partnership unit outstanding $ 12.88 $ 3.25 $ 28.00 $ 14.99
============= ============= ============= =============
</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 Six Months Ended June 30, 1996 and December 31, 1995
(Unaudited)
<TABLE>
<CAPTION>
Limited Partners General
Units 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
($20.00 per limited
partnership unit outstanding) (218,140) (16,420) (234,560)
Net income 305,388 22,986 328,374
------ ---------- -------- ----------
Partners' capital (deficit),
June 30, 1996 10,907 $8,975,454 $(45,441) $8,930,013
====== ========== ======== ==========
</TABLE>
6
<PAGE> 7
MEDICAL INCOME
PROPERTIES 2B LIMITED PARTNERSHIP
Statements of Cash Flows
Six months ended June 30, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
---- ----
Cash flows from operating activities:
<S> <C> <C>
Cash received from patient care $ 2,057,604 $ 1,633,581
Cash paid to suppliers and employees (1,735,516) (1,521,296)
Interest received (paid) (32,454) (51,214)
Provider fees (32,940) (32,580)
Cash from other operating activities 2,354 2,025
------------- ---------------
Net cash provided by operating activities 259,048 30,516
------------- ---------------
Cash flows from investing activities:
Distributions from joint ventures 610,851 65,453
Purchase of property (6,455) (33,184)
------------- ---------------
Net cash provided by investing activities 604,396 32,269
------------- ---------------
Cash flows from financing activities:
Principal payments of long term debt (28,952) (24,966)
Net borrowings (payments) to related parties (487,858) 135,675
Distributions to partners (234,560) (234,560)
-------------- ---------------
Net cash used by financing activities (751,370) (123,851)
-------------- ---------------
Net increase (decrease) in cash 112,074 (61,066)
Cash and equivalents, beginning of period 41,363 125,450
------------- ---------------
Cash and equivalents, end of period $ 153,437 $ 64,384
============= ===============
Reconciliation of net income to net cash provided by operating activities:
Net income $ 328,374 $ 175,789
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 76,499 74,860
Partnership share of joint venture (income) (405,329) (352,751)
Decrease in accounts receivable 141,426 40,248
(Increase) decrease in estimated settlements 129,545 (115,728)
(Increase) decrease in prepaid expenses and
other assets (19,590) 16,909
Increase in accounts payable and
accrued expenses 8,123 191,189
------------- ---------------
Net cash provided (used) by operating activities $ 259,048 $ 30,516
============= ===============
</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
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, 1995 audited financial statements have been omitted
from this report.
(2) Property, Plant and Equipment
Property, plant and equipment consisted of the following at June 30,
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 292,135 285,680
-------------- ---------------
Total property, plant and equipment 4,199,234 4,192,779
Accumulated depreciation (1,280,381) (1,203,992)
-------------- ---------------
Net property, plant and
equipment $ 2,918,853 $ 2,988,787
============== ===============
(3) Debt Obligations
Debt obligations consisted of the following at June 30, 1996 and December 31, 1995:
1996 1995
---- ----
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. $ 734,045 $ 762,997
Less amounts due in one year or less 60,610 57,447
-------------- ---------------
$ 673,435 $ 705,550
============== ===============
</TABLE>
8
<PAGE> 9
The aggregate annual maturities for the succeeding five fiscal years are
as follows:
1996 $ 28,495
1997 62,355
1998 67,681
1999 73,463
2000 79,738
Thereafter 422,313
-------------
$ 734,045
=============
(4) Investment in Joint Venture
The condensed financial information for the investments in joint
ventures as of June 30, 1996 and December 31, 1995 is as follows:
KATY (owned 50% by Partnership)
<TABLE>
<CAPTION>
1996 1995
---------------- ----------------
<S> <C> <C>
Current assets $ 2,043,647 $ 1,684,094
Long term assets 4,896,169 5,048,138
---------------- ----------------
Total assets $ 6,939,816 $ 6,732,232
================ ================
Current liabilities $ 629,228 $ 684,328
Equity 6,310,588 6,047,904
---------------- ----------------
Total liabilities and equity $ 6,939,816 $ 6,732,232
================ ================
Partnership's investment at June 30, 1996
and December 31, 1995 $ 3,155,294 $ 3,023,952
================ ================
Revenues $ 2,445,259 $ 4,985,129
Expenses 2,135,361 4,362,005
---------------- ----------------
Net income $ 309,898 $ 623,124
================ ================
HUMBLE (owned 50% by Partnership)
1996 1995
---------------- ----------
Current assets $ 1,353,524 $ 1,140,926
Long term assets 3,491,494 3,651,762
---------------- ----------------
Total assets $ 4,845,018 $ 4,792,688
================ ================
Current liabilities $ 651,675 $ 703,933
Long term liabilities 722,150 691,850
Equity 3,471,193 3,396,905
---------------- ----------------
Total liabilities and equity $ 4,845,018 $ 4,792,688
================ ================
Partnership's investment at June 30, 1996
and December 31, 1995 $ 1,735,597 $ 1,698,453
================ ================
</TABLE>
9
<PAGE> 10
<TABLE>
<CAPTION>
1996 1995
---------------- ----------------
<S> <C> <C>
Revenues $ 2,080,924 $ 3,664,088
Expenses 1,956,469 3,526,809
---------------- ----------------
Net income $ 124,455 $ 137,279
================ ================
MEDICAL PARK (owned 45.45% by Partnership)
1996 1995
---------------- ----------------
Current assets $ 1,596,464 $ 2,370,621
Long term assets 5,184,279 5,308,640
---------------- ----------------
Total assets $ 6,780,743 $ 7,679,261
================ ================
Current liabilities $ 566,589 $ 713,232
Long term liabilities 1,950,361 1,868,527
Equity 4,263,793 5,097,502
---------------- ----------------
Total liabilities and equity $ 6,780,743 $ 7,679,261
================ ================
Partnership's investment at June 30, 1996
and December 31, 1995 $ 1,937,894 $ 2,317,207
================ ================
Revenues $ 3,192,295 $ 5,907,763
Expenses 2,778,318 5,192,923
---------------- ----------------
Net income $ 413,977 $ 714,840
================ ================
</TABLE>
(5) Related Party Transactions
Through June 30, 1996 and 1995, QualiCorp, Inc. the parent of Qualicorp
Management, Inc. (the Managing General Partner of the Partnership)
charged $37,991 and $37,514 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 equivalent balances decreased during the second quarter of 1996 by
$112,680, due to payments made to affiliates. Accounts receivable balances
continued to decrease in the quarter, although amounts due from the Medicare
program increased slightly. Prepaid items increased in the second quarter due
to increased prepaid insurance costs.
The Partnership presently owns a 45.45% interest in the Medical Park
Convalescent Center located in Decatur, Alabama. According to industry
representatives, the State of Alabama has reached an impasse with the Health
Care Financing Administration (HCFA) which will cause the September payment for
Medicaid patients to be delayed by one month to October 1996. The facility
presently receives approximately $250,000 per month from the Alabama Medicaid
program. In addition, the State of Alabama has proposed significant rate
reductions and changes in eligibility requirements which will reduce Medicaid
census if implemented.
As indicated in the prior quarter report, the Partnership has engaged an
investment firm to assist it in evaluating the Partnership's strategic
alternatives. It was expected this evaluation would lead to a sale of the
Partnership properties. However, due to the uncertainly of the Alabama Medicaid
issues described above, the prospective buyer has requested a 90 day extension
of the letter of intent which the Partnership intends to grant.
The Partnership paid a distribution to its limited partners in May 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 $5,668 for the quarter reflects the operations of the
Edwardsville, Illinois facility. The loss for the comparable quarter of 1995
was $81,279. While the 1996 loss is lower than 1995, we continue to explore
alternatives for the property, including a possible sale of this facility
alone. During the quarter ended June 30, 1996, the facility continued to have
lower than expected Medicare patient days which produced lower than expected
revenue. Operating expenses, particularly professional care of resident
expenses, were in line with expectations.
Administrative and General expenses increased to $187,722 in 1996 due to higher
insurance costs and legal fees. Interest expense was lower in 1996 than 1995
due to improved cash position and less need to borrow funds from affiliated
companies. 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: July 31, 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 JUNE 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 153,437
<SECURITIES> 0
<RECEIVABLES> 692,961
<ALLOWANCES> 54,149
<INVENTORY> 0
<CURRENT-ASSETS> 1,041,400
<PP&E> 4,199,234
<DEPRECIATION> 1,280,381
<TOTAL-ASSETS> 10,791,283
<CURRENT-LIABILITIES> 1,187,835
<BONDS> 673,435
0
0
<COMMON> 0
<OTHER-SE> 8,930,013<F1>
<TOTAL-LIABILITY-AND-EQUITY> 10,791,283
<SALES> 1,786,632
<TOTAL-REVENUES> 1,788,986
<CGS> 0
<TOTAL-COSTS> 1,800,547
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 32,454
<INCOME-PRETAX> 328,374
<INCOME-TAX> 0
<INCOME-CONTINUING> 328,374
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 328,374
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>REPRESENTS TOTAL PARTNERSHIP CAPITAL INCLUDING NET INCOME NET OF
DISTRIBUTIONS PAID.
</FN>
</TABLE>
