<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 33-6122-02
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 March 31, 1997 was
10,907.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I
Page No.
<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, 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 2B LIMITED PARTNERSHIP
Balance Sheets
March 31, 1997 and December 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
ASSETS
------
Current assets
Cash and equivalents $ 167,682 $ 269,249
Accounts receivable, net of allowance
for doubtful accounts of $102,587 in 1997
and $102,329 in 1996 580,896 616,404
Amount due from escrow agent 9,911,554 -
Estimated settlements due from third parties 8,391 203,628
Prepaid expenses and other assets 50 54,122
----------- -----------
Total current assets 10,668,573 1,143,403
Investment in joint ventures 2,518,761 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 $13,187,334 $11,087,491
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities
Current portion of long term debt $ - $ 63,388
Accounts payable 396,952 334,901
Accrued payroll and payroll taxes 106,723 73,433
Accrued vacation - 32,722
Accrued insurance 6,557 10,657
Accrued real estate taxes - 75,096
Accrued management fees 328,506 13,906
Patient deposits and trust liabilities 30,041 48,244
Other accrued expenses 4,656 4,949
Due to affiliates 1,035,144 840,835
----------- -----------
Total current liabilities 1,908,579 1,498,131
Bonds payable and capital lease obligations - 640,309
----------- -----------
Total liabilities 1,980,579 2,138,440
----------- -----------
Partners' capital (deficit)
Limited partners 11,323,826 8,993,158
General partners (45,071) (44,107)
----------- -----------
Total partners' capital 11,278,755 8,949,051
----------- -----------
Total liabilities and partners' capital $13,187,334 $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 March 31, 1997 and 1996
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Revenues
Net patient service revenue $ 1,036,811 $ 907,933
Other revenue 1,190 1,073
----------- -----------
Total revenue 1,038,001 909,006
----------- -----------
Operating expenses
Professional care of patients 590,924 493,991
Dietary 69,332 68,480
Household and plant 88,921 82,950
General and administrative 266,090 179,323
Employee health and welfare 49,958 52,967
Depreciation and amortization 36,078 37,188
----------- -----------
Total operating expenses 1,101,303 914,899
----------- -----------
Operating income (loss) (63,302) (5,893)
----------- -----------
Other income (expenses)
Interest expense, net (12,067) (17,423)
Provider fees (16,200) (16,380)
Partnership share of joint
venture income 195,086 217,003
Gain on sale of nursing home properties 2,343,467 -
----------- -----------
Total other income (expenses) 2,510,286 183,200
----------- -----------
Net income $ 2,446,984 $ 177,307
=========== ===========
Net income per limited partnership
unit outstanding $ 223.69 $ 15.12
=========== ===========
</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, 1997 and December 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
Limited Partners General
Unit 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
($10.00 per limited
partnership unit outstanding) (109,070) (8,210) (117,280)
Gain on sale of nursing home property 2,343,467 - 2,343,467
Net income 96,271 7,246 103,517
--------- ------------ ------------ ------------
Partners' capital (deficit),
March 31, 1997 10,907 $ 11,323,826 $ (45,071) $ 11,278,755
========= ============ ============ ============
</TABLE>
6
<PAGE> 7
MEDICAL INCOME PROPERTIES 2B LIMITED PARTNERSHIP
Statements of Cash Flow
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 $ 1,026,856 $ 1,183,910
Cash paid to suppliers and employees (1,044,586) (893,163)
Interest paid (12,068) (17,423)
Provider fees (16,200) (16,380)
Cash from other operating activities 1,190 1,073
----------- -----------
Net cash provided (used) by operating activities (44,808) 258,017
----------- -----------
Cash flows from investing activities:
Distributions from joint ventures 32,726 259,976
Purchase of property - (2,157)
----------- -----------
Net cash provided from investing activities 32,726 257,819
----------- -----------
Cash flows from financing activities:
Principal payments on long term debt (10,227) (14,533)
Net borrowings (payments) to related parties 38,022 (159,269)
Distributions to partners (117,280) (117,280)
----------- -----------
Net cash used by financing activities (89,485) (291,082)
----------- -----------
Net increase (decrease) in cash and equivalents (101,567) 224,754
Cash and equivalents, beginning of period 269,249 41,363
----------- -----------
Cash and equivalents, end of period $ 167,682 $ 266,117
=========== ===========
Reconciliation of net income to net cash
- -----------------------------------------
provided by operating activities:
---------------------------------
Net income $ 2,446,984 $ 177,307
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 36,078 37,188
Partnership share of joint venture (income) (195,086) (217,003)
Gain on sale of property (2,343,467) -
(Increase) decrease in:
Accounts receivable 35,508 128,259
Estimated settlements (45,463) 147,718
Prepaid expenses and other assets (7,397) (23,790)
Increase (decrease) in:
Accounts payable and accrued expenses 28,035 8,338
----------- -----------
Net cash provided (used) by operating activities $ (44,808) $ 258,017
=========== ===========
</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, 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 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 $9,498,204,
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
$413,350 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 $260,000 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 consisted of the following at March 31,
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 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 $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 - 63,338
----------- -----------
$ - $ 640,309
=========== ===========
</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:
<TABLE>
<CAPTION>
KATY (owned 50% by Partnership)
-------------------------------
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>
<TABLE>
<CAPTION>
HUMBLE (owned 50% by Partnership)
---------------------------------
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
=========== ===========
</TABLE>
9
<PAGE> 10
<TABLE>
<S> <C> <C>
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 operating income 91,501 461,265
Gain on sale of property 1,311,358 -
----------- -----------
Net income $ 1,402,859 $ 461,265
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
MEDICAL PARK (owned 45.45% by Partnership)
------------------------------------------
1997 1996
----------- -----------
<S> <C> <C>
Current assets $ 2,019,170 $ 1,699,553
Long term assets 1,036,810 5,369,994
----------- -----------
Total assets $ 3,055,980 $ 7,069,547
=========== ===========
Current liabilities $ 913,707 $ 743,586
Long term liabilities - 1,704,860
Equity 2,142,273 4,621,101
----------- -----------
Total liabilities and equity $ 3,055,980 $ 7,069,547
=========== ===========
Partnership's investment at March 31, 1997
and December 31, 1996 $ 973,663 $ 2,100,682
=========== ===========
Revenues $ 1,735,753 $ 6,396,385
Expenses 1,548,870 5,579,678
----------- -----------
Net operating income 186,883 816,707
Gain on sale of property 4,910,256 -
----------- -----------
Net income $ 5,097,139 $ 816,707
=========== ===========
</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 $24,739 and $22,771 respectively, to the
Partnership for reimbursement of administrative expenses. In addition,
Qualicorp, Inc. charged $55,539 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 and equivalent balances totaled $167,682 at March 31, 1997, a decrease of
$101,567 from December 31, 1996. Collections, particularly from the State of
Illinois have been steady during the first quarter although census has been
slightly under budget. In addition, during the quarter, the Partnership paid a
former therapy company for services rendered for periods prior to October 1996
in the amount of $146,900. These funds had been withheld until certain therapy
services appeals had been heard by the Medicare intermediary.
On February 14, 1997, the Partnership paid distributions to limited partners
totaling $10.00 per unit, equaling a 4% annualized return on the initial
investment of $1,000 per unit.
The Partnership expects to make the first installment of liquidation proceeds,
totaling $7,909,791 or $725 per unit, to the limited partners on or about May 9,
1997.
Operations
The Partnership's net income for the quarter ended March 31, 1997 was
$2,446,984, including a gain on the sale of its interest in its nursing home
properties of $2,343,467. Net income before the gain on the sale of the
properties for the period was $103,517, compared to net income of $177,307 for
the same period in the previous year.
Total revenue for the 1997 quarter was $1,038,001, $128,995 over the same
quarter in 1996. Operating expenses increased $186,404 between years due to
higher nursing salary costs, higher speech and occupational therapy costs and
higher general and administrative costs. General and Administrative costs
increased $86,767 due to higher legal and consulting fees, workers compensation
premiums and property management fees.
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 2B
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 2B 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> 167,682
<SECURITIES> 0
<RECEIVABLES> 683,483
<ALLOWANCES> 102,587
<INVENTORY> 0
<CURRENT-ASSETS> 10,668,573
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 13,187,334
<CURRENT-LIABILITIES> 1,908,579
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 11,278,755<F1>
<TOTAL-LIABILITY-AND-EQUITY> 13,187,334
<SALES> 1,036,811
<TOTAL-REVENUES> 1,038,001
<CGS> 0
<TOTAL-COSTS> 1,101,303
<OTHER-EXPENSES> 16,200
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,067
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 103,517
<DISCONTINUED> 0
<EXTRAORDINARY> 2,343,467
<CHANGES> 0
<NET-INCOME> 2,446,984
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>5.02(31) REPRESENT TOTAL PARTNERSHIP CAPITAL INCLUDING NET INCOME NET OF
DISTRIBUTIONS.
</FN>
</TABLE>
