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 March 31, 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 March 31, 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
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 6-8
Part II. Other Information
Item 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>
March 31, December 31,
1996 1995
Assets
Current Assets
<S> <C> <C>
Cash and cash equivalents $ 3,162 $ 1,539
Accounts receivable, net 5,822 6,167
Estimated third-party payor settlements 1,876 337
Prepaid expenses 436 571
Total current assets 11,296 8,614
Property and equipment
Land and improvements 1,823 1,823
Buildings and improvements 42,459 42,440
Furniture and equipment 3,574 3,543
47,856 47,806
Accumulated depreciation (11,595) (11,181)
36,261 36,625
Other assets
Goodwill, net 5,677 5,743
Loan acquisition costs, net 94 100
Preopening costs, net 21 25
5,792 5,868
Total assets $ 53,349 $ 51,107
Liabilities and Partners' Capital
Current liabilities
Current portion of long-term debt $ 567 $ 553
Line of credit 819 719
Accrued compensation and related costs 1,269 1,099
Accounts payable and other accrued expenses 3,800 2,895
Estimated third party payor settlements 2,249 612
Total current liabilities 8,704 5,878
Deferred management fee payable 739 728
Loan payable to the Development General Partner 945 932
Long-term debt 24,452 24,596
26,136 26,256
Partners' capital
General partners (131) (127)
Assignee limited partners; 1,540,040
units issued and outstanding 18,640 19,100
Total partners' capital 18,509 18,973
Total liabilities and
partners' capital $ 53,349 $ 51,107
See accompanying notes to financial statements
-1-
</TABLE>
<PAGE>
MERIDIAN HEALTHCARE GROWTH AND INCOME FUND LIMITED PARTNERSH
Consolidated Statements of Earnings
For the three months ended March 31,
(Unaudited)
(Dollars in thousands except per unit amounts)
<TABLE>
<CAPTION>
1996 1995
Revenues
<S> <C> <C>
Medicaid and Medicare patients $ 8,613 $ 7,934
Private patients 2,873 2,701
Investment and other income 121 158
11,607 10,793
Expenses
Operating, including $ 1,068 and
$1,210 to related parties 9,399 8,686
Management and administration fees
to related parties 734 698
General and administrative 110 126
Depreciation and amortization 490 496
Interest expenses 512 544
11,245 10,550
Net earnings $ 362 $ 243
Net earnings per unit of assignee
limited partnership interest $ 0.23 $ 0.16
See accompanying notes to financial statements
-2-
</TABLE>
<PAGE>
MERIDIAN HEALTHCARE GROWTH AND INCOME FUND LIMITED PART Consolidated Statements
of Partners' Capital For the Three Months Ended March 31, 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 4 358 362
Distributions to partners (8) (818) (826)
Balance at March 31, 1996 $ (131)$ 18,640 $18,509
Balance at December 31, 1994$ (113)$ 20,501 $20,388
Net earnings 2 241 243
Distributions to partners (8) (818) (826)
Balance at March 31, 1995 $ (119)$ 19,924 $19,805
See accompanying notes to financial statements
-3-
</TABLE>
<PAGE>
MERIDIAN HEALTHCARE GROWTH AND INCOME FUND LIMITED PARTNERSHIP Consolidated
Statements of Cash Flows For the Three Months Ended March 31,
(Unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
1996 1995
Cash flows from operating activities
<S> <C> <C>
Net earnings $ 362 $ 243
Adjustments to reconcile net earnings
to net cash provided by operating activities
Depreciation and amortization 490 496
Minority interest in net earnings of operating
partnerships 4 3
Increase in loan payable to Development General Partner 13 13
Increase in deferred management fee payable 11 8
Change in other assets and liabilities
Accounts receivable 341 268
Estimated third-party payor settlements 98 (192)
Prepaid expenses 135 279
Accrued compensation and related costs 170 (445)
Accounts payable and other accrued expenses 905 (193)
Net cash provided by operating activities 2,529 480
Cash flows from investing activities-
additions to property and equipment (50) (104)
Cash flows from financing activities
Line of credit borrowings 100 --
Repayment of long-term debt (130) (134)
Distributions to partners (826) (826)
Net cash used in financing activities (856) (960)
Net increase (decrease) in cash and cash equivalents 1,623 (584)
Cash and cash equivalents
Beginning of period 1,539 1,932
End of period $3,162 $ 1,348
See accompanying notes to financial statements
-4-
</TABLE>
<PAGE>
MERIDIAN HEALTHCARE GROWTH AND INCOME FUND LIMITED PARTNERSHIP
Notes to Consolidated Financial Statements
March 31, 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 - NEW ACCOUNTING PRONOUNCEMENTS
In March 1995, The Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards No. 121 "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of"(Statement 121).
Statement 121 provides guidance for recognition and measurement of impairment of
long-lived assets, certain identifiable intangibles and goodwill related both to
assets to be held and used and assets to be disposed of. The Fund adopted
Statement 121 during the first quarter of 1996 and the adoption did not have any
impact on its consolidated financial statements.
NOTE 3 - 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 March 31,
1996 and 1995 are as follows:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Management and administration fees $ 734,000 $ 698,000
Drug and medical supplies purchases 444,000 381,000
Nursing and rehabilitation services 766,000 687,000
Interest expense on borrowings 24,000 21,000
</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 $945,000 at March 31, 1996 and $932,000 at December 31,
1995.
-5-
<PAGE>
MERIDIAN HEALTHCARE GROWTH AND INCOME FUND LIMITED PARTNERSHIP
Notes to Consolidated Financial Statements
March 31, 1996
(Unaudited)
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.
-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 $945,000 at March 31, 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.
In order to fund current working capital needs which may arise from
time to time, the Fund modified its line of credit arrangement (The "Facility"),
on March 31, 1995, and increased the maximum available on the line from $750,000
to $3,000,000. As of March 31, 1996 the balance on the line was $819,000.
Subsequent to quarter end, the Fund borrowed $1,000,000 for working capital
needs that resulted from delays in collecting receivables, especially Maryland
Medicaid. Though the Fund expects to repay some of these borrowings from
collections of receivables, the trend towards higher acuity and Medicare based
patients results in larger receivable days and will necessitate the continued
use of the line of credit. Any outstanding borrowings under this line of credit
arrangement bear interest at the bank's prime rate. The Facility was scheduled
to expire on April 30, 1996, however the Fund secured a 90 day extension during
which time we expect to formalize a new line of credit arrangement with the
bank.
On February 15, 1996 the Fund made a cash distribution of $826,410
which was funded from nursing center operations generated during the fourth
quarter of 1995 after payment of upper tier expenses. In addition to funding the
current distribution and fourth quarter upper tier expenses, fourth quarter
income was sufficient to reimburse Fund reserves $393,199, which had been
utilized to fund a portion of first half 1995 distributions. During 1995,
nursing center operations generated approximately 94% of the total distributions
after payment of upper tier expenses totaling approximately $263,000.
On or about May 15, 1996, the Fund will make a cash distribution of
$826,410 of which approximately $689,073, or 83%, will be funded from nursing
center operations generated during the first quarter of 1995 after payment of
approximately $74,000 of upper tier expenses.
While future distributions will remain dependent on the operating
performance of the properties, Fund management expects distributions will remain
at current levels. The 1996 budget projects that cash flow from the operation of
the seven nursing homes will fund approximately 93% of the distribution, while
the balance will be funded from reserves.
Results of Operations
The Fund's patient revenues increased by approximately $851,000 (or 8%)
for the first three months of 1996 as compared to the same period in 1995.
Approximately $347,000 of the increase is attributable to room rate increases
which resulted in an effective rate increase of 4.5% since the first quarter of
1995. Also contributing to the increase in patient revenues was an increase in
ancillary revenues of approximately $170,000 in the first quarter of 1996 versus
the corresponding period of 1995. The ancillary revenue increase was primarily a
result of increased therapy utilization. These increases in revenue were further
driven by an increase in census. The first quarter of 1996 had one additional
day as compared to 1995 resulting in the overall census being 204 days higher in
1996 as compared to 1995. The quality mix of residents at the facilities
continued to improve. Private census increased by
-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 (continued)
1,375 days and Medicare census increased by 1,012 days with an offsetting
decrease in Medicaid census of 2,183 days. The final factor contributing to the
revenue increase was prior year favorable cost report settlements of $239,000
recorded in the first quarter of 1996.
First quarter 1996 operating expenses increased $713,000 (or 8%) versus
the same period in 1995. As a percentage of revenue, operating expenses
increased to 81% in the first quarter of 1996 from 80.5% in the first quarter of
1995. Excluding nursing, salaries and wages increased 4% in the three months
ended March 31, 1996 as compared to the corresponding period in 1995 due to
normal wage increases. Due to the continued increase in acuity of the residents
resulting from the increased Medicare census, nursing salaries and other nursing
costs as well as ancillary costs increased significantly. Nursing salaries
increased 12% in the first quarter of 1996 as compared to 1995. Another factor
contributing to the increased nursing salaries was the severe weather
experienced in January, 1996. Many shifts were filled by overtime. Employee
benefits also increased in response to the increase in wages. Finally, ancillary
costs increased 16% in the first three months of 1996 versus 1995 as a result of
increased acuity and utilization.
First quarter interest expense decreased $32,000 (or 6%) versus the
same period in 1995 due to lower interest rates. Approximately $3.9 million of
the Fund's debt bears interest at a floating rate based in the LIBOR rate and
approximately $1.8 million of the Fund's debt bears interest at a floating rate
based on the prime rate. Overall, interest rates during the three months ended
March 31, 1996 were lower than those prevailing during the three months ended
March 31, 1995.
-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: 5/9/96 By: /s/ John M. Prugh
John M. Prugh
President and Director
Brown-Healthcare, Inc.
Administrative General Partner
DATE: 5/9/96 By: /s/ Timothy M. Gisriel
Timothy M. Gisriel
Treasurer
Brown-Healthcare, Inc.
Administrative General Partner
-10-
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(Replace this text with legend, if applicable)
</LEGEND>
<CIK> 0000826682
<NAME> Meridian Healthcare Growth and Income Fund L P
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-1-1996
<PERIOD-END> MAR-31-1996
<EXCHANGE-RATE> 1
<CASH> 3,162,000
<SECURITIES> 0
<RECEIVABLES> 5,822,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 11,296,000
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 53,349,000
<CURRENT-LIABILITIES> 8,704,000
<BONDS> 0
0
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<COMMON> 0
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<OTHER-EXPENSES> 10,733,000
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<INTEREST-EXPENSE> 512,000
<INCOME-PRETAX> 362,000
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