<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
(Mark One)
{ X } QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
{ } TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
For Quarter Ended September 30, 1996 Commission file number 000-17596
Meridian Healthcare Growth and Income Fund Limited Partnership
(Exact Name of Registrant as Specified in its Charter)
Delaware 52-1549486
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
225 East Redwood Street, Baltimore, Maryland 21202
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (410) 727-4083
N/A
(Former Name, Former Address, and Former Fiscal Year,
if Changed Since Last Report.)
Indicate by check mark 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
<PAGE>
MERIDIAN HEALTHCARE GROWTH AND INCOME FUND LIMITED PARTNERSHIP
INDEX
Page No.
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets 1
Consolidated Statements of Operations 2
Consolidated Statements of Partners' Capital 3
Consolidated Statements of Cash Flows 4
Notes to Consolidated Financial Statements 5-6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7-8
Part II. Other Information
1. through Item 6. 9
Signatures 10
<PAGE>
MERIDIAN HEALTHCARE GROWTH AND INCOME FUND LIMITED PARTNERSHIP
Consolidated Balance Sheets
(Unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
Assets
Current Assets
<S> <C> <C>
Cash and cash equivalents $ 3,301 $ 1,539
Accounts receivable, net 6,851 6,167
Estimated third-party payor settlements 469 337
Prepaid expenses 681 571
Total current assets 11,302 8,614
Property and equipment, net of accumulated depreciation 35,671 36,625
Other assets
Goodwill, net 5,546 5,743
Loan acquisition costs, net 78 100
Preopening costs, net 14 25
5,638 5,868
Total assets $ 52,611 $ 51,107
Liabilities and Partners' Capital
Current liabilities
Current portion of long-term debt $ 606 $ 553
Line of credit 1,619 719
Accrued compensation and related costs 1,097 1,099
Accounts payable and other accrued expenses 2,434 2,895
Estimated third party payor settlements 3,312 612
Total current liabilities 9,068 5,878
Deferred management fee payable 760 728
Loan payable to the Development General Partner 971 932
Long-term debt 24,131 24,596
25,862 26,256
Partners' capital
General partners (140) (127)
Assignee limited partners; 1,540,040
units issued and outstanding 17,821 19,100
Total partners' capital 17,681 18,973
Total liabilities and
partners' capital $ 52,611 $ 51,107
</TABLE>
See accompanying notes to financial statements
-1-
<PAGE>
MERIDIAN HEALTHCARE GROWTH AND INCOME FUND LIMITED PARTNERSHIP
Consolidated Statements of Earnings
(Unaudited)
(Dollars in thousands except per unit amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30, September 30, September 30,
1996 1995 1996 1995
Revenues
<S> <C> <C> <C> <C>
Medicaid and Medicare patients $ 9,391 $ 8,889 $ 26,936 $ 24,936
Private patients 2,652 2,853 8,250 8,435
Investment and other income 79 132 322 377
12,122 11,874 35,508 33,748
Expenses
Operating, including $1,476, $1,113,
$3,825 and $3,334 to related parties 9,684 9,330 28,443 27,125
Management and administration fees
to related parties 781 714 2,290 2,130
General and administrative 278 133 511 380
Depreciation and amortization 515 475 1,480 1,431
Interest expenses 554 549 1,597 1,648
11,812 11,201 34,321 32,714
Net earnings $ 310 $ 673 $ 1,187 $ 1,034
Net earnings per unit of assignee
limited partnership interest $ 0.20 $ 0.43 $ 0.76 $ 0.66
</TABLE>
See accompanying notes to financial statements
-2-
<PAGE>
MERIDIAN HEALTHCARE GROWTH AND INCOME FUND LIMITED PARTNE Consolidated
Statements of Partners' Capital For the Nine Months Ended September 30, 1996 and
1995
(Unaudited)
Dollars in thousands
<TABLE>
<CAPTION>
Assignee
General Limited
Partners Partners Total
<S> <C> <C> <C>
Balance at December 31, 1995 $ (127)$ 19,100 $ 18,973
Net earnings 12 1,175 1,187
Distributions to partners (25) (2,454) (2,479)
Balance at September 30, 1996$ (140)$ 17,821 $ 17,681
Balance at December 31, 1994 $ (113)$ 20,501 $ 20,388
Net earnings 10 1,024 1,034
Distributions to partners (25) (2,454) (2,479)
Balance at September 30, 1995$ (128)$ 19,071 $ 18,943
</TABLE>
See accompanying notes to financial statements
-3-
<PAGE>
MERIDIAN HEALTHCARE GROWTH AND INCOME FUND LIMTIED PARTNERSHIP
Consolidated Statements of Cash Flows
For the Nine Months Ended September 30,
(Unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
1996 1995
Cash flows from operating activities
<S> <C> <C>
Net earnings $ 1,187 $ 1,034
Adjustments to reconcile net earnings to net
cash provided by operating activities
Depreciation and amortization 1,480 1,431
Minority interest in net earnings of operating
partnerships 14 9
Increase in loan payable to Development General Partner 39 38
Increase in deferred management fee payable 32 29
Change in other assets and liabilities
Accounts receivable (698) (564)
Estimated third-party payor settlements 2,568 816
Prepaid expenses (110) (75)
Accrued compensation and related costs (2) (443)
Accounts payable and other accrued expenses (461) (25)
Net cash provided by operating activities 4,049 2,250
Cash flows from investing activities-
additions to property and equipment (296) (292)
Cash flows from financing activities
Increase in loan acquisition costs -- (38)
Proceeds from issuance of long-term debt -- 6,250
Repayment of line of credit borrowings (200) --
Repayment of long-term debt (412) (6,338)
Proceeds from credit borrowings 1,100 725
Distributions to partners (2,479) (2,479)
Net cash used in financing activities (1,991) (1,880)
Net increase in cash and cash equivalents 1,762 78
Cash and cash equivalents
Beginning of period 1,539 1,932
End of period $ 3,301 $ 2,010
</TABLE>
See accompanying notes to financial statements
- -4-
<PAGE>
MERIDIAN HEALTHCARE GROWTH AND INCOME FUND LIMITED PARTNERSHIP
Notes to Consolidated Financial Statements
September 30, 1996
(Unaudited)
NOTE 1 - THE FUND AND BASIS OF PREPARATION
The Fund, through its seven operating partnerships, derives substantially all of
its revenue from extended healthcare provided to nursing center residents
including room and board, nursing care, drugs and other medical services.
The accompanying financial statements of Meridian Healthcare Growth and Income
Fund Limited Partnership (the "Fund") do not include all of the information and
note disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles. The unaudited interim
consolidated financial statements reflect all adjustments which are, in the
opinion of management, necessary to a fair statement of the results for the
interim periods presented. All such adjustments are of a normal recurring
nature. Certain amounts included in the 1995 Consolidated Statement of
Operations have been reclassified to conform to the 1996 presentation. The
unaudited interim financial information contained in the consolidated financial
statements should be read in conjunction with the consolidated financial
statements contained in the 1995 Annual Report.
NOTE 2 - RELATED PARTY TRANSACTIONS
The Fund is obligated to pay the Administrative General Partner an annual
administration fee of the greater of $75,000 per year or 1/2 of 1% of the Fund's
annual revenues. The nursing centers owned by the operating partnerships are
managed by Meridian Healthcare, Inc., an affiliate of the Development General
Partner, under the terms of ten year management agreements which provide for
management fees equal to 6% of the annual revenues of each nursing center.
Certain of the operating partnerships also purchase drugs and medical supplies
and other services from affiliates of the Development General Partner. Such
purchases are in turn billed to patients or third party payors at prices which
on average approximate the nursing center's cost.
Transactions with these related parties for the three months ended
September 30, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Management and administration fees $ 781,000 $ 714,000
Drug and medical supplies purchases 649,000 417,000
Nursing and rehabilitation services 826,000 696,000
Interest expense on borrowings 24,000 23,000
</TABLE>
Loans outstanding under an arrangement with the Development General Partner to
fund operating deficits generated by the Mooresville, Salisbury and Woodlands
nursing centers were $971,000 at September 30, 1996 and $932,000 at December 31,
1995.
NOTE 3 - DEBT
On July 29, 1996 the Fund modified the revolving credit facility (" Facility")
by increasing the maximum amount to $4,000,000 and extending the maturity date
until February 28, 1998. The Facility is designated for working capital needs
and issuance of letters of credit. The Facility is secured primarily by the
accounts receivable of the Fund. Any outstanding cash borrowings under the
Facility bear interest at LIBOR plus 1.75%. At September 30, 1996, the
outstanding borrowings under this Facility totaled $1,619,000.
-5-
<PAGE>
MERIDIAN HEALTHCARE GROWTH AND INCOME FUND LIMITED PARTNERSHIP
Notes to Consolidated Financial Statements
September 30, 1996
(Unaudited)
NOTE 3- DEBT (continued)
At September 30, 1996, the Randallstown facility did not meet its required ratio
of cash flow to debt service as a result of measures taken in response to the
unfavorable State survey that they received. As of November 13, 1996, the bank
has not issued a formal waiver to the Fund. The debt has not been classified as
current in the accompanying balance sheet as Management believes that it is
likely that the bank will issue the waiver and not call the debt.
NOTE 4 - NET EARNINGS PER UNIT OF ASSIGNEE LIMITED PARTNERSHIP INTEREST
Net earnings per unit of assignee limited partnership interest is disclosed on
the Consolidated Statements of Operations and is based upon 1,540,040 units.
NOTE 5 - RECLASSIFICATIONS
Certain 1995 amounts have been reclassified to conform with current year
presentation.
-6-
<PAGE>
MERIDIAN HEALTHCARE GROWTH AND INCOME FUND LIMITED PARTNERSHIP
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Liquidity and Capital Resources
The Fund has sufficient liquid assets and other available credit
resources to satisfy its operating expenditures and anticipated routine capital
improvements at each of the seven nursing home facilities.
Between 1988 and 1989 the Development General Partner loaned the Fund
$597,000 to support operating deficits generated by the Mooresville, Salisbury
and Woodlands nursing centers during each center's first two years of operation.
Loans outstanding under this arrangement, including interest at 9% per annum,
were $971,000 at September 30, 1996. The Fund is obligated to repay these loans
when certain specified financial criteria are met, the most significant of which
is the payment of a preferred return to the assignee limited partners as defined
in the Fund's partnership agreement.
At September 30, 1996, the Randallstown facility did not meet its
required ratio of cash flow to debt service as a result of measures taken in
response to the unfavorable State survey that they received. As of November 13,
1996, the bank has not issued a formal waiver to the Fund. The debt has not been
classified as current in the accompanying balance sheet as Management believes
that it is likely that the bank will issue the waiver and not call the debt.
On July 29, 1996 the Fund modified the revolving credit facility ("The
Facility") by increasing the maximum amount to $4,000,000 and extending the
maturity date until February 28, 1998. The Facility is designated for working
capital needs and issuance of letters of credit. The Facility is primarily
secured by the accounts receivable of the Fund. Any outstanding cash borrowings
under the Facility bear interest at LIBOR plus 1.75%. At September 30, 1996 the
outstanding borrowings under this Facilty totaled $1,619,000.
The State of North Carolina has delayed the effective date of
elimination in its Medicaid methodology of the current reimbursement rate
component for equity until July 1, 1997. Fund management had projected the
effective date of this elimination to be July 1, 1996. As a result of this
action, Medicaid reimbursements from North Carolina during the second half of
1996 are expected to be approximately $182,000 over budget. Future action by the
North Carolina Medicaid Agency could reduce and or eliminate the reimbursement
component for equity and therefore reduce Medicaid reimbursement for the Fund by
up to $360,000 annually.
On November 13, 1996, the Fund will make a cash distribution
of $826,410 of which approximately $653,000, or 79%, will be funded from nursing
center operations generated during the third quarter of 1996 after payment of
approximately $64,000 of upper tier expenses.
Future distributions will remain dependent on the operating performance
of the properties. The General Partners will review the 1997 operating budget
along with updated estimates for exception revenue and third party settlements
in mid-December to determine the level of distributions anticipated for 1997.
The major challenge to the Fund in the foreseeable future is to control
operating expenses while maximizing revenues through strategic admissions
policies.
-7-
<PAGE>
MERIDIAN HEALTHCARE GROWTH AND INCOME FUND LIMITED PARTNERSHIP
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
Three Months Ended September 30, 1996 vs. Three Months Ended September 30, 1995
The Fund's patient revenues increased by approximately $301,000 (or
3%)for the three months ended September 30, 1996 as compared to the same period
for 1995. Medicare census as a percentage of the total census increased to 10.2%
in the third quarter of 1996 as compared to 8.6% for the same period in 1995. As
a result, therapy revenue increased $298,000. Favorable settlements and
adjustments to reflect estimated third party payor settlements accounted for a
$213,000 increase in revenue in 1996 versus 1995. These favorable variances were
partially offset by a decrease in the overall census of the Fund's facilities
which led to an unfavorable revenue variance of $46,000. Occupancy levels during
the third quarter of 1996 decreased to 94.2% as compared to 95.3% during the
third quarter of 1995. The decrease in private revenue was a result of declining
private pay census as well as a decrease in overall private pay room rates.
Finally, within the Fund's seven nursing homes, there was a shift in census
toward homes with overall lower average room rates.
Third quarter 1996 operating expenses increased $354,000 (or 4%) as
compared to the same period in 1995. Salaries and benefits increased
approximately $273,000 (or 5%). This was a result of normal wage increases as
well as increased staffing to support the higher Medicare census which typically
requires additional nursing hours per patient day when compared to other patient
types. Operating expenses also rose due to increased staffing and related costs
at the Randallstown facility resulting from unfavorable State survey results.
Subsequent to the end of the quarter, a follow-up survey was done and the
facility received approval for all corrective actions. The remainder of the
increase in operating expenses resulted from increased therapy utilization
during the quarter.
Third quarter general and administrative expenses increased $145,000 in
1996 versus the same period in 1995. Approximately one-half of this increase is
a result of consulting fees paid for assistance in filing third party cost
reports. The remainder of the increase is due to a reclassification of certain
overhead costs in the third quarter of 1996.
Nine Months Ended September 30, 1996 vs. Nine Months Ended September 30, 1996
Patient revenues for the Fund's seven operating partnerships increased
$1,815,000 (or 5%) for the nine months ended September 30, 1996 as compared to
the same period in 1995. Approximately $310,000 of the increase was attributable
to room rate increases which resulted in an effective increase of 1% from the
corresponding prior year period. This increase would have been higher, however
the quality mix of residents by home has shifted to homes with overall lower
average room rates. Also contributing to the increase in patient revenues was an
increase in ancillary revenue of $666,000 for the first nine months of 1996 as
compared to 1995. This was due to increased Medicare census in the nine months
ended September 30, 1996 as compared to the same period in 1995, as well as
increased utilization of therapies. The remainder of the increase in revenue was
attributable to prior year third party cost report settlements of $839,000.
Operating expenses for the nine months ended September 30, 1996
increased $1,318,000 (or 5%) versus the same period in 1995. Salaries and
benefits increased $1,019,000 (or 6%) as a result of normal wage increases as
well as increased staffing at the Randallstown facility due to a State survey in
the third quarter of 1996 and to support the increased Medicare census during
the first nine months of 1996. The remainder of the increase resulted from
increased therapy utilization.
General and administrative expenses for the nine months ended September
30, 1996 increased $131,000 (or 34%) as compared to the same period in 1995.
Approximately $77,000 of the increase is attributable to consulting fees paid
for assistance in filing third party cost reports. The remainder of the increase
is due to an increase in other professional and consulting costs.
-8-
<PAGE>
MERIDIAN HEALTHCARE GROWTH AND INCOME FUND LIMITED PARTNERSHIP
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Inapplicable
Item 2. Changes in Securities
Inapplicable
Item 3. Defaults upon Senior Securities
Inapplicable
Item 4. Submission of Matters to a Vote of Security Holders
Inapplicable
Item 5. Other Information
Inapplicable
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits: None
b) Reports on Form 8-K: None
-9-
<PAGE>
MERIDIAN HEALTHCARE GROWTH AND INCOME FUND LIMITED PARTNERSHIP
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, as amended, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
MERIDIAN HEALTHCARE GROWTH AND INCOME FUND
LIMITED PARTNERSHIP
DATE: 11/8/96 By: /s/ John M. Prugh
John M. Prugh
President and Director
Brown-Healthcare, Inc.
Administrative General Partner
DATE: 11/8/96 By: /s/ Timothy M. Gisriel
Timothy M. Gisriel
Treasurer
Brown-Healthcare, Inc.
Administrative General Partner
-10-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(Replace this text with legend, if applicable)
</LEGEND>
<CIK> 0000826682
<NAME> Meridian Healthcare Growth and Income Fund LP
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-1-1996
<PERIOD-END> SEP-30-1996
<EXCHANGE-RATE> 1
<CASH> 3,301,000
<SECURITIES> 0
<RECEIVABLES> 6,851,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 11,302,000
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 52,611,000
<CURRENT-LIABILITIES> 9,068,000
<BONDS> 24,131,000
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 52,611,000
<SALES> 0
<TOTAL-REVENUES> 35,508,000
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 32,724,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,597,000
<INCOME-PRETAX> 1,187,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,187,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,187,000
<EPS-PRIMARY> 0.000
<EPS-DILUTED> 0.000
</TABLE>
