<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 March 31, 1997
{ } 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, 1997 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
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MERIDIAN HEALTHCARE GROWTH AND INCOME FUND LIMITED PARTNERSHIP
Consolidated Balance Sheets
(Unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
Assets
Current Assets
<S> <C> <C>
Cash and cash equivalents $ 4,808 $ 3,962
Accounts receivable, net 6,096 6,429
Estimated third-party payor settlements - 105
Prepaid expenses 528 514
Total current assets 11,432 11,010
Property and equipment, net of accumulated de 35,470 35,680
Other assets
Goodwill, net 5,425 5,490
Loan acquisition costs, net 52 64
Other deferred charges 7 11
5,484 5,565
Total assets $ 52,386 $ 52,255
Liabilities and Partners' Capital
Current liabilities
Current portion of long-term debt $ 24,445 $ 621
Line of credit 1,000 -
Accrued compensation and related costs 1,667 2,415
Accounts payable and other accrued expenses 3,691 2,147
Estimated third party payor settlements 3,007 2,958
Total current liabilities 33,810 8,141
Deferred management fee payable 781 770
Loan payable to the Development General Partn 996 984
Line of credit borrowings - 1,000
Long-term debt - 23,971
1,777 26,725
Partners' capital
General partners (149) (143)
Assignee limited partners; 1,540,040
units issued and outstanding 16,948 17,532
Total partners' capital 16,799 17,389
Total liabilities and
partners' capital $ 52,386 $ 52,255
</TABLE>
See accompanying notes to financial statements
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MERIDIAN HEALTHCARE GROWTH AND INCOME FUND LIMITED PARTNERSHIP
Consolidated Statements of Earnings For the three months ended March 31,
(Unaudited) (Dollars in thousands except per unit amounts)
<TABLE>
<CAPTION>
1997 1996
Revenues
<S> <C> <C>
Medicaid and Medicare patients $ 9,003 $ 8,613
Private patients 2,846 2,873
Investment and other income 104 121
11,953 11,607
Expenses
Operating, including $1,542 and
$1,210 to related parties 9,771 9,399
Management and administration fees
to related parties 762 734
General and administrative 177 110
Depreciation and amortization 489 490
Interest expenses 518 512
11,717 11,245
Net earnings $ 236 $ 362
Net earnings per unit of assignee
limited partnership interest $ 0.15 $ 0.23
</TABLE>
See accompanying notes to financial statements
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MERIDIAN HEALTHCARE GROWTH AND INCOME FUND LIMITED PARTNERSHIP Consolidated
Statements of Partners' Capital For the Three Months Ended March 31, 1997 and
1996
(Unaudited)
Dollars in thousands
<TABLE>
<CAPTION>
Assignee
General Limited
Partners Partners Total
<S> <C> <C> <C>
Balance at December 31, 1996 $ (143) $ 17,532 $17,389
Net earnings 2 234 236
Distributions to partners (8) (818) (826)
Balance at March 31, 1997 $ (149) $ 16,948 $16,799
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
</TABLE>
See accompanying notes to financial statements
-3-
<PAGE>
MERIDIAN HEALTHCARE GROWTH AND INCOME FUND LIMTIED PARTNERSHIP
Consolidated Statements of Cash Flows
For the Three Months Ended March 31,
(Unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
1997 1996
Cash flows from operating activities
<S> <C> <C>
Net earnings $ 236 $ 362
Adjustments to reconcile net earnings to net
cash provided by operating activities
Depreciation and amortization 489 490
Minority interest in net earnings of operating
partnerships 3 4
Increase in loan payable to Development Gen 12 13
Increase in deferred management fee payable 11 11
Change in other assets and liabilities
Accounts receivable 330 341
Estimated third-party payor settlements 154 98
Prepaid expenses (14) 135
Accrued compensation and related costs (748) 170
Accounts payable and other accrued expense 1,544 905
Net cash provided by operating activities 2,017 2,529
Cash flows from investing activities-
additions to property and equipment (198) (50)
Cash flows from financing activities
Line of credit borrowings - 100
Repayment of long-term debt (147) (130)
Distributions to partners (826) (826)
Net cash used in financing activities (973) (856)
Net increase in cash and cash equivalents 846 1,623
Cash and cash equivalents
Beginning of period 3,962 1,539
End of period $ 4,808 $ 3,162
</TABLE>
See accompanying notes to financial statements
- -4-
<PAGE>
MERIDIAN HEALTHCARE GROWTH AND INCOME FUND LIMITED PARTNERSHIP
Notes to Consolidated Financial Statements
March 31, 1997
(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 1996 Consolidated Statement of
Operations have been reclassified to conform to the 1997 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 1996 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 March 31,
1997 and 1996 are as follows:
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Management and administration fees $ 762,000 $ 734,000
Drug and medical supplies purchases 572,000 444,000
Nursing and rehabilitation services 970,000 766,000
Interest expense on borrowings 23,000 24,000
</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 $996,000 at March 31, 1997 and $984,000 at December 31,
1996.
NOTE 3 - DEBT
At December 31, 1996, the Randallstown facility failed to meet the required
ratio of cash flow to debt service. Effective March 14, 1997, the lender agreed
under a Limited Forbearance Agreement to refrain and forbear temporarily from
exercising and enforcing any of its remedies for a period of time ending on and
including May 15, 1997. The agreement provides that should Randallstown not meet
all its convenants for the quarter ended March 31, 1997, the lender shall
require that certain partnerships and/or the Fund become either joint and
several co- obligors or guarantors of Randallstown's obligation, note and loan.
The Randallstown facility did not meet the required ratio of cash flow to debt
service at March 31, 1997. Under the terms of the agreement, Caton Manor
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MERIDIAN HEALTHCARE GROWTH AND INCOME FUND LIMITED PARTNERSHIP
Notes to Consolidated Financial Statements
March 31, 1997
(Unaudited)
NOTE 3 - DEBT (continued)
Meridian Limited Partnership, Frederick Meridian Limited Partnership and
Hamilton Meridian Limited Partnership will jointly and severally guaranty
Randallstown's obligation and will secure such guaranty with an indemnity deed
of trust lien on their respective facilities and properties.
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-
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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.
At December 31, 1996, the Randallstown facility did not meet its
required ratio of cash flow to debt service. Effective March 14, 1997, the
lender agreed under a Limited Forbearance Agreement to refrain and forbear
temporarily from exercising and enforcing any of its remedies for a period of
time ending on and including May 15, 1997. The agreement provides that should
Randallstown not meet all its covenants for the quarter ended March 31, 1997,
the lender shall require that certain partnerships and/or the Fund become either
joint and several co-obligors or guarantors of Randallstown's obligation, note
and loan. The Randallstown facility did not meet the required ratio of cash flow
to debt service at March 31, 1997. Under the terms of the agreement, Caton Manor
Meridian Limited Partnership, Frederick Meridian Limited Partnership and
Hamilton Meridian Limited Partnership will jointly and severally guaranty
Randallstown's obligation and will secure such guaranty with an indemnity deed
of trust lien on their respective facilities and properties.
The Fund's long-term debt is scheduled to mature February 28, 1998. As
a result of this maturity date being less than one year from the end of the
current reporting period, the Fund has classified the balance of this debt,
$24,445,000, as a current liability on its March 31, 1997 balance sheet. The
Fund is currently considering several financial options for the repayment of the
loan balances.
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 March 31, 1997 the
outstanding borrowings under this Facility totaled $1,000,000 and were
completely repaid in April. These borrowings are classified as current on the
March 31, 1997 balance sheet since the maturity date is less than one year from
the reporting period. The Fund is currently considering options to replace the
credit facility.
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. Future action by the North Carolina
Medicaid Agency could affect the reimbursement component for equity and
therefore reduce Medicaid reimbursement for the Fund by up to $233,750 annually.
On or about May 15, 1997 the Fund will make a cash distribution of
$826,410 of which $473,031, or 57%, will be funded from nursing center
operations generated during the first quarter of 1997 after payment of
approximately $71,000 of upper tier expenses.
While the 1997 operating budget projected that operations would
generate sufficient cash flow to allow distributions to remain at current
levels, first quarter results were significantly under budget due to lower than
projected revenues. Through the first quarter, revenues were under budget by
approximately $252,000 due to lower than projected occupancy levels. The overall
occupancy level for the seven facilities was 93.1% versus a budgeted occupancy
level of 95.3%. The major challenge to the Fund in the foreseeable future is to
improve occupancy levels and maximize revenues through strategic admissions
policies while controlling operating expenditures. While management expects both
the occupancy levels and profitability of the Fund to improve during the
remainder of the year, future distributions remain dependent on the operating
performance of the properties. Fund management will review future operating
results and updated projections with respect to future distribution levels
throughout the remainder of the year.
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MERIDIAN HEALTHCARE GROWTH AND INCOME FUND LIMITED PARTNERSHIP
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
The Fund's patient revenues increased by approximately $363,000 (or
3.2%) for the first three months of 1997 as compared to the same period in 1996.
Approximately $311,000 of the increase is attributable to room rate increases
which resulted in an effective rate increase of 4.8% compared to the first
quarter of 1996. Also contributing to the increase in patient revenues was an
increase in Medicare ancillary revenues of approximately $77,000 in the first
quarter of 1997 versus the corresponding period in 1996. The ancillary revenue
increase was primarily a result of increased therapy utilization. Total
occupancy decreased slightly from 93.4% in the first quarter of 1996 as compared
to 93.1% in the first quarter of 1997. Medicare census increased by 572 days in
the first three months of 1997 as compared to the first three months of 1996.
This increase was offset slightly by decreases in private and Medicaid census.
Lastly, prior year favorable cost report settlements recorded in the first
quarter of 1997 were $37,000 higher than those recorded in the first quarter of
1996.
First quarter 1997 operating expenses increased $372,000 (or 4%) versus
the same period in 1996. As a percentage of revenue, operating expenses
increased to 81.8% of total revenue in the first quarter of 1997 from 81.0% of
total revenue for the corresponding period in 1996. Salaries and wages increased
2.9% in the first quarter of 1997 as compared to 1996 as a result of normal wage
increases. Benefits remained flat as a result of a decrease in the unemployment
rate in the State of Maryland which affects four of the Fund's facilities. As a
result of a shortage of certified nursing assistant's in Maryland, nursing
agency usage has increased by approximately $42,000 in the first quarter of 1997
as compared to 1996. Total nursing costs, as a result, are $1.87 per patient day
higher in 1997 as compared to 1996.
Another factor contributing to the operating expense increase and the
drop in profitability was increased ancillary costs due to the higher acuity
levels of the residents along with increased utilization. As compared to the
last quarter of 1996, a greater percentage of the ancillaries are being utilized
by the Medicaid population in the facilities and are not reimbursed under the
Medicaid programs. On a gross revenue basis, Medicaid ancillaries in the first
quarter of 1997 accounted for 12.5% of the total as compared to 10.5% during the
same period in 1996. On a per patient day basis, there was an increase in
Medicaid utilization of approximately $3 per day. The effect of this is a
revenue decline of approximately $197,000.
General and administrative expenses for the three months ended March
31, 1997 increased $67,000 as compared to the same period in 1996 of which
approximately $27,000 is due to an increase in professional and consulting fees.
In addition, there was a $10,000 increase in legal fees associated with
collection efforts and banking amendments, while facility licenses and dues
increased by approximately $6,000.
-8-
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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-
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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: 5/9/97 By: /s/ John M. Prugh
John M. Prugh
President and Director
Brown-Healthcare, Inc.
Administrative General Partner
DATE: 5/9/97 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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-1-1997
<PERIOD-END> MAR-31-1997
<EXCHANGE-RATE> 1
<CASH> 4,808,000
<SECURITIES> 0
<RECEIVABLES> 6,096,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 11,432,000
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 52,386,000
<CURRENT-LIABILITIES> 33,810,000
<BONDS> 0
0
0
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<TOTAL-LIABILITY-AND-EQUITY> 52,386,000
<SALES> 0
<TOTAL-REVENUES> 11,953,000
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 11,199,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 518,000
<INCOME-PRETAX> 236,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 236,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 236,000
<EPS-PRIMARY> 0.000
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