<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 33-6122-02
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, 1997 was
10,907.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page No.
PART I
<S> <C> <C>
Item 1. Financial Information......................................................... 3 - 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 2B 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
Statement of Partners' Capital for the six months
ended June 30, 1997 and 1996.............................................................................. 6
Statements of Cash Flow for the six months ended
June 30, 1997 and 1996.................................................................................... 7
Notes to Financial Statements............................................................................. 8 - 11
</TABLE>
3
<PAGE> 4
MEDICAL INCOME PROPERTIES 2B LIMITED PARTNERSHIP
Balance Sheets
June 30, 1997 and December 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
---------------- ---------------
<S> <C> <C>
ASSETS
Current assets
Cash and equivalents $ 2,196,251 $ 269,249
Accounts receivable, net of allowance
for doubtful accounts of $93,970 in 1997
and $102,329 in 1996 137,338 616,404
Estimated settlements due from third parties 10,660 203,628
Prepaid expenses and other assets 50 54,122
---------------- --------------
Total current assets 2,344,299 1,143,403
Investment in joint ventures 1,671,062 7,087,148
Property, plant and equipment, net of
accumulated depreciation - 2,855,196
Deferred financing costs, net of
accumulated amortization of
$3,487 in 1997 and $1,743 in 1996 - 1,744
---------------- --------------
Total assets $ 4,015,361 $ 11,087,491
================ ==============
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities
Current portion of long term debt $ - $ 63,388
Accounts payable 689,279 334,901
Accrued payroll and payroll taxes - 73,433
Accrued vacation - 32,722
Accrued insurance 6,557 10,657
Accrued real estate taxes - 75,096
Accrued management fees - 13,906
Patient deposits and trust liabilities - 48,244
Other accrued expenses 4,998 4,949
Due to affiliates 18,416 840,835
---------------- --------------
Total current liabilities 719,250 1,498,131
Bonds payable and capital lease obligations - 640,309
---------------- --------------
Total liabilities 719,250 2,138,440
---------------- --------------
Partners' capital (deficit)
Limited partners 3,296,111 8,993,156
General partners - (44,107)
---------------- ---------------
Total partners' capital 3,296,111 8,949,051
---------------- --------------
Total liabilities and partners' capital $ 4,015,361 $ 11,087,491
================ ==============
</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, 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 $ 732,537 $ 878,700 $ 1,769,349 $ 1,786,632
Other revenue 3,358 1,280 4,547 2,354
------------- ------------- ------------- ------------
Total Revenue 735,895 879,980 1,773,896 1,788,986
------------- ------------- ------------- ---------
Operating expenses:
Professional care of residents 422,154 464,127 1,013,078 958,117
Dietary 48,391 67,257 117,723 135,737
Household and plant 47,897 76,609 136,817 159,560
General and administrative 123,662 187,722 389,752 367,045
Employee health and welfare 48,649 50,622 98,608 103,589
Rent 64,087 - 64,087 -
Depreciation and
amortization - 39,311 36,078 76,499
------------- ------------- ------------- -------------
Total operating expenses 754,840 885,648 1,856,143 1,800,547
------------- ------------- ------------- -------------
Operating income (loss) (18,945) (5,668) (82,247) (11,561)
------------- ------------- ------------- -------------
Other income (expenses):
Interest income 64,182 - 65,645 -
Interest expense (2,355) (15,031) (15,886) (32,454)
Provider fees (10,920) (16,560) (27,120) (32,940)
Partnership share of joint venture
income 2,625 188,326 197,712 405,329
Gain (loss) on sale of properties (109,657) - 2,233,811 -
-------------- ------------- ------------- -------------
Total other income (expenses) (56,125) 156,735 2,454,162 339,935
-------------- ------------- ------------- -------------
Net income (loss) $ (75,070) $ 151,067 $ 2,371,915 $ 328,374
============= ============= ============= =============
Net income (loss) per weighted average
limited partnership unit outstanding $ (6.40) $ 12.88 $ 212.67 $ 28.00
============= ============= ============= ============
</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, 1997 and December 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
Limited Partners General
Units Amount Partners Total
----- ------ -------- -----
<S> <C> <C> <C> <C>
Partners' capital (deficit),
December 31, 1996 10,907 $8,993,158 $(44,107) $8,949,051
Distributions to partners
($735 per limited
partnership unit outstanding) (8,016,645) (8,210) (8,024,855)
Net income 2,319,598 52,317 2,371,915
------ ---------- ---------- ----------
Partners' capital, June 30, 1997 10,907 $3,296,111 $ 0 $3,296,111
====== ========== ========== ==========
</TABLE>
6
<PAGE> 7
MEDICAL INCOME
PROPERTIES 2B 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 $ 2,441,383 $ 2,057,604
Cash paid to suppliers and employees (1,628,346) (1,735,516)
Interest earned 65,645 -
Interest paid (15,886) (32,454)
Provider fees (27,120) (32,940)
Cash from other operating activities 4,547 2,354
------------- ------------
Net cash provided (used) by operating activities 840,223 259,048
------------- ------------
Cash flows from investing activities:
Proceeds from sale of property 9,801,898 610,851
Distributions from joint ventures 32,726 (6,455)
------------- -------------
Net cash provided by investing activities 9,834,624 604,396
------------- ------------
Cash flows from financing activities:
Principal payments of long term debt (10,227) (28,952)
Net borrowings (payments) to related parties (712,763) (487,858)
Distributions to partners (8,024,855) (234,560)
-------------- ------------
Net cash used by financing activities (8,747,845) (751,370)
-------------- ------------
Net increase (decrease) in cash and equivalents 1,927,002 112,074
Cash and equivalents, beginning of period 269,249 41,363
------------- ------------
Cash and equivalents, end of period $ 2,196,251 $ 153,437
============= ============
Reconciliation of net income to net cash
provided by operating activities:
Net income $ 2,371,915 $ 328,374
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 36,078 76,499
Partnership share of joint venture (income) (197,712) (405,329)
Gain on sale of property (2,233,811) -
Decrease in accounts receivable 479,066 141,426
Decrease (increase) in estimated settlements 192,968 129,545
(Increase) decrease in prepaid expenses
and other assets 54,072 (19,590)
Increase (decrease) in accounts payable and
accrued expenses 137,647 8,123
------------- ------------
Net cash provided (used) by operating activities $ 840,223 $ (259,048)
============= =============
</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, 1996 audited financial statements have been omitted
from this report.
(2) Sale of Properties
On March 31, 1997, Medical Income Properties 2B Limited Partnership (the
"Partnership") closed the sale of its interest in its four 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 $9,388,547.
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, the escrow agent held $413,350 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 consisted of the following at June 30,
1997 and December 31, 1996:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Land $ - $ 90,000
Building and improvements - 3,812,869
Furniture and equipment - 302,317
-------------- ---------------
Total property, plant and equipment - 4,205,186
Accumulated depreciation - 1,349,990
-------------- ---------------
Net property, plant and
equipment $ - $ 2,855,196
============== ===============
</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 $8,749 through April 1,
2005. The interest rate is adjusted every
May 1 and November 1. $ - $ 703,697
Less amounts due in one year or less - 63,388
-------------- ---------------
$ - $ 640,309
============== ===============
</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:
KATY (owned 50% by Partnership)
<TABLE>
<CAPTION>
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
================ ================
HUMBLE (owned 50% by Partnership)
1997 1996
---------------- ----------
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
================ ================
</TABLE>
10
<PAGE> 11
<TABLE>
<S> <C> <C>
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
================ ================
MEDICAL PARK (owned 45.45% by Partnership)
1997 1996
---------------- ----------
Current assets $ 557,114 $ 1,699,553
Long term assets 1,085,122 5,369,994
---------------- ----------------
Total assets $ 1,642,236 $ 7,069,547
================ ================
Current liabilities $ 21,679 $ 743,586
Long term liabilities - 1,704,860
Equity 1,620,557 4,621,101
---------------- ----------------
Total liabilities and equity $ 1,642,236 $ 7,069,547
================ ================
Partnership's investment at June 30, 1997
and December 31, 1996 $ 736,543 $ 2,100,682
================ ================
Revenues $ 2,467,055 $ 6,396,385
Expenses 2,460,561 5,579,678
---------------- ----------------
Net operating income 6,494 816,707
Gain on sale of property 5,591,439 -
---------------- ----------------
Net income $ 5,597,933 $ 816,707
================ ================
</TABLE>
(6) 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
$61,698 and $37,991 respectively, to the Partnership for reimbursement of
administrative expenses. In addition, Qualicorp, Inc. charged $55,539 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 $2,196,251 at June 30, 1997, an increase
of $1,927,002 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
$7,907,575 or $725 per unit on May 12, 1997. As of June 30, 1997, limited
partners had not surrendered 596 limited partnership certificates to the
Managing General Partner and consequently, the Partnership had not released
$432,100 to those limited partners. At June 30, 1997 that amount was included
in accounts payable.
In addition, on July 11, 1997, the Partnership distributed $1,668,771 or $153
per unit to the limited partners. The Partnership had planned to distribute
$153 in March 1998; however, the Managing General Partner felt that sufficient
cash was available to pay that amount 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 $75,070.
Included in the loss is an adjustment to the gain on the nursing home property
of $109,657. The remaining operating income of $34,587 was attributed to
interest earned, adjustments to the Medicare settlement liabilities, and cost
reimbursement expenses. It is anticipated that the future close down expenses
of the Partnership will approximate $210,000, exclusive of any changes to
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 2B
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 2B 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> 2,196,251
<SECURITIES> 0
<RECEIVABLES> 231,308
<ALLOWANCES> 93,970
<INVENTORY> 0
<CURRENT-ASSETS> 2,344,299
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 4,015,361
<CURRENT-LIABILITIES> 719,250
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 3,296,111<F1>
<TOTAL-LIABILITY-AND-EQUITY> 4,015,361
<SALES> 1,769,349
<TOTAL-REVENUES> 1,773,896
<CGS> 0
<TOTAL-COSTS> 1,856,143
<OTHER-EXPENSES> 27,120
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 15,886
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 138,104
<DISCONTINUED> 0
<EXTRAORDINARY> 2,233,811
<CHANGES> 0
<NET-INCOME> 2,371,915
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1> REPRESENT TOTAL PARTNERSHIP CAPITAL INCLUDING NET INCOME NET OF
DISTRIBUTIONS
</FN>
</TABLE>
