<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 June 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 June 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
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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>
June 30, December 31,
1996 1995
Assets
Current Assets
<S> <C> <C>
Cash and cash equivalents $ 2,752 $ 1,539
Accounts receivable, net 7,161 6,167
Estimated third-party payor settlements 1,135 337
Prepaid expenses 404 571
Total current assets 11,452 8,614
Property and equipment, net of accumulated depreciation 36,004 36,625
Other assets
Goodwill, net 5,612 5,743
Loan acquisition costs, net 86 100
Preopening costs, net 17 25
5,715 5,868
Total assets $ 53,171 $ 51,107
Liabilities and Partners' Capital
Current liabilities
Current portion of long-term debt $ 591 $ 553
Line of credit 1,819 719
Accrued compensation and related costs 1,538 1,099
Accounts payable and other accrued expenses 3,366 2,895
Estimated third party payor settlements 1,662 612
Total current liabilities 8,976 5,878
Deferred management fee payable 749 728
Loan payable to the Development General Partner 958 932
Long-term debt 24,291 24,596
25,998 26,256
Partners' capital
General partners (135) (127)
Assignee limited partners; 1,540,040
units issued and outstanding 18,332 19,100
Total partners' capital 18,197 18,973
Total liabilities and
partners' capital $ 53,171 $ 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 Six Months Ended
June 30, June 30, June 30, June 30,
1996 1995 1996 1995
Revenues
<S> <C> <C> <C> <C>
Medicaid and Medicare patients $ 8,932 $ 8,113 $ 17,545 $ 16,047
Private patients 2,724 2,864 5,597 5,565
Investment and other income 122 105 244 263
11,778 11,082 23,386 21,875
Expenses
Operating, including $1,139, $1,153,
$2,349 and $2,221 to related parties 9,358 9,110 18,759 17,795
Management and administration fees
to related parties 775 718 1,509 1,416
General and administrative 124 121 233 248
Depreciation and amortization 476 459 965 955
Interest expenses 531 555 1,043 1,099
11,264 10,963 22,509 21,513
Net earnings $ 514 $ 119 $ 877 $ 362
Net earnings per unit of assignee
limited partnership interest $ 0.33 $ 0.08 $ 0.56 $ 0.23
</TABLE>
See accompanying notes to financial statements
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<PAGE>
MERIDIAN HEALTHCARE GROWTH AND INCOME FUND LIMITED PARTN Consolidated Statements
of Partners' Capital For the Six Months Ended June 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 9 868 877
Distributions to partners (17) (1,636) (1,653)
Balance at June 30, 1996 $ (135)$ 18,332 $ 18,197
Balance at December 31, 1994$ (113)$ 20,501 $ 20,388
Net earnings 4 358 362
Distributions to partners (17) (1,636) (1,653)
Balance at June 30, 1995 $ (126)$ 19,223 $ 19,097
</TABLE>
See accompanying notes to financial statements
-3-
<PAGE>
MERIDIAN HEALTHCARE GROWTH AND INCOME FUND LIMITED PARTNERSHIP
Consolidated Statements of Cash Flows
For the Six Months Ended June 30,
(Unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
1996 1995
Cash flows from operating activities
<S> <C> <C>
Net earnings $ 877 $ 362
Adjustments to reconcile net earnings
to net cash provided by operating activities
Depreciation and amortization 965 955
Minority interest in net earnings of operating
partnerships 10 5
Increase in loan payable to Development General Partner 26 26
Increase in deferred management fee payable 21 18
Change in other assets and liabilities
Accounts receivable (1,004) (422)
Estimated third-party payor settlements 252 109
Prepaid expenses 167 33
Accrued compensation and related costs 439 (42)
Accounts payable and other accrued expenses 471 282
Net cash provided by operating activities 2,224 1,326
Cash flows from investing activities-
additions to property and equipment (191) (170)
Cash flows from financing activities
Increase in loan acquisition costs -- (39)
Proceeds from issuance of long-term debt -- 6,250
Line of credit borrowings 1,100 --
Repayment of long-term debt (267) (6,194)
Proceeds from line of credit borrowings -- 725
Distributions to partners (1,653) (1,653)
Net cash used in financing activities (820) (911)
Net increase in cash and cash equivalents 1,213 245
Cash and cash equivalents
Beginning of period 1,539 1,932
End of period $ 2,752 $ 2,177
</TABLE>
See accompanying notes to financial statements
-4-
<PAGE>
MERIDIAN HEALTHCARE GROWTH AND INCOME FUND LIMITED PARTNERSHIP
Notes to Consolidated Financial Statements
June 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
June 30, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Management and administration fees $ 775,000 $ 718,000
Drug and medical supplies purchases 447,000 433,000
Nursing and rehabilitation services 692,000 720,000
Interest expense on borrowings 23,000 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 $958,000 at June 30, 1996 and $932,000 at December 31,
1995.
NOTE 3 - DEBT
On May 9, 1996, the Fund modified the revolving credit facility ("Facility") to
extend the maturity from April 30, 1996 until July 29, 1996. On July 29, 1996
the Fund again modified 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 secured primarily by the accounts receivable of the Fund. Any
outstanding cash borrowings under the Facility bear interest at LIBOR plus
1.75%. At June 30, 1996, the outstanding borrowings under this Facility totaled
$1,819,000.
-5-
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MERIDIAN HEALTHCARE GROWTH AND INCOME FUND LIMITED PARTNERSHIP
Notes to Consolidated Financial Statements
June 30, 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.
NOTE 5 - RECLASSIFICATIONS
Certain 1995 amounts have been reclassified to conform with current year
presentation.
-6-
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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 $958,000 at June 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.
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 July 29, 1996, and increased the maximum available on the line from
$3,000,000 to $4,,000,000. The Fund borrowed an additional $1,000,000 during the
second quarter and as of June 30, 1996, the balance on the line was $1,819,000.
The second quarter borrowings were required primarily to offset a build-up of
Medicaid receivables due from the State of Maryland resulting from start-up
problems associated with the installation of a new computer system. Any
outstanding borrowings under this line of credit arrangement bear interest at
the bank's prime rate. The Facility is scheduled to expire in February, 1998.
Subsequent to June 30, 1996, the Fund was able to negotiate an advance
from the State of Maryland against its Medicaid receivables in the amount of
$792,000. The Fund continues to work directly with the State of Maryland to
resolve the problems associated with the implementation of its new computer
system and the ultimate collection of its outstanding Medicaid receivables.
Additionally, the Fund collected outstanding receivables from the State of North
Carolina related to prior year cost settlements totaling $823,000 in July 1996.
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 or About August 12, 1996, the Fund will make a cash distribution of
$826,410 of which approximately $615,602, or 75%, will be funded from nursing
center operations generated during the second quarter of 1996 after payment of
approximately $105,000 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. Based upon results through the first half of the year, the
remaining 1996 budget and updated settlement projections, we expect the
operating income from the seven nursing home facilities will fund approximately
94% of the distribution, while the balance will be funded from reserves.
Results of Operations
Three Months Ended June 30, 1996 vs. Three Months Ended June 30, 1995
The Fund's patient revenues increased by approximately $679,000 (or 6%)
for the three months ended June 30, 1996 as compared to the same period for
1995. Occupancy levels during the second quarter of 1996 increased to 96.7% as
compared to 93.7% during the second quarter of 1995. This resulted in
approximately $191,000 of the revenue increase. This increase would have been
higher, however, the quality mix of residents 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)
homes shifted to homes with overall lower average room rates. Therapy
utilization also increased by $141,000 during the three months ended June 30,
1996 versus the three months ended June 30, 1995. The remainder of the increase
in revenue was a result of favorable prior year cost report settlements of
$348,000.
Second quarter 1996 operating expenses increased approximately $248,000
(or 3%) as compared to the same period in 1996. Salaries and benefits increased
approximately $190,000, or 3%, primarily as a result of normal wage increases.
The remainder of the increase in operating expenses was a result of the
increased expenses in response to the increased ancillary revenue during the
quarter.
Second quarter 1996 interest expense decreased $24,000 as compared to
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 of interest based on 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 June 30, 1996 were lower than those prevailing during the three
months ended June 30, 1995.
Six Months Ended June 30, 1996 vs. Six Months Ended June 30, 1995
Patient revenues for the Fund's seven operating partnerships increased
approximately $1,530,000 (or 7%) for the six months ended June 30, 1996 versus
the same period in 1995. Approximately $822,000 of the increase was attributable
to room rate increases which resulted in an effective rate increase of 4% from
the corresponding prior year period. Also contributing to the increase in
patient revenues was an increase in ancillary revenue of $311,000 for the six
months ended June 30, 1996 as compared to the same period on 1995. This was due
to increased Medicare census in the first six months of 1996 as compared to
1995, as well as increased utilization of therapies. The remainder of the
increase in revenue was attributable to prior year cost report settlements of
$397,000.
Operating expenses for the six months ended June 30, 1996 increased
$964,000 (or 5%) as compared to the same period in 1995. Salaries and benefits
increased $679,000, or 6%. This increase is a result of normal wage increases in
addition to the increased Medicare census creating a need for more nursing
hours. The remainder of the increase was a result of increased ancillary
expenses in response to the increased ancillary revenue during the six months
ended June 30, 1996 as compared to the six months ended June 30, 1995.
Interest expense for the six months ended June 30, 1996 decreased
$56,000 as compared to 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
of interest based on 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 six months ended June 30, 1996 were lower than those
prevailing during the six months ended June 30, 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: 8/8/96 By: /s/ John M. Prugh
John M. Prugh
President and Director
Brown-Healthcare, Inc.
Administrative General Partner
DATE: 8/8/96 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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-1-1996
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1
<CASH> 2,752,000
<SECURITIES> 0
<RECEIVABLES> 7,161,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 11,452,000
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 53,171,000
<CURRENT-LIABILITIES> 8,976,000
<BONDS> 24,291,000
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 53,171,000
<SALES> 0
<TOTAL-REVENUES> 23,386,000
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 21,466,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,043,000
<INCOME-PRETAX> 877,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 877,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 877,000
<EPS-PRIMARY> 0.000
<EPS-DILUTED> 0.000
</TABLE>
