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, 1998
{ } 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, 1998 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>
INDEX
Page No.
CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS 2
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets 3
Consolidated Statements of Operations 4
Consolidated Statements of Partners' Capital 5
Consolidated Statements of Cash Flows 6
Notes to Consolidated Financial Statements 7-8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9-10
Part II. Other Information
Item 1. through Item 6. 11
Signatures 12
<PAGE>
MERIDIAN HEALTHCARE GROWTH AND INCOME FUND LIMITED PARTNERSHIP
Cautionary Statement Regarding Forward Looking Statements
Certain statements contained herein, including certain statements in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" concerning the Fund's business outlook or future economic
performances, anticipated profitability, revenues, expenses or other financial
items together with other statements that are not historical facts are
"forward-looking statements" as that term is defined under the Federal
Securities Law. Forward-looking statements are necessarily estimates reflecting
the best judgement of the party making such statements based upon correct
information and involve a number of risks, uncertainties and other factors which
could cause actual results to differ materially from those stated in such
statements. Risks, uncertainties and factors which could affect the accuracy of
such forward looking statements are identified in the Fund's Prospectus and the
Fund's Registration Statement filed by the Fund with the Securities and Exchange
Commission, and forward looking statements contained herein or in other public
statements of the Fund should be considered in light of those factors. There can
be no assurance that factors will not affect the accuracy of such forward
looking statements.
-2-
<PAGE>
MERIDIAN HEALTHCARE GROWTH AND INCOME FUND LIMITED PARTNERSHIP
Consolidated Balance Sheets
(Unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
Assets
Current Assets
<S> <C> <C>
Cash and cash equivalents $ 3,373 $ 2,275
Accounts receivable, net 6,721 6,437
Estimated third-party payor settlements 237 343
Prepaid expenses and other current assets 440 565
Total current assets 10,771 9,620
Property and equipment, net of accumulated depreciation 34,528 34,839
Other assets
Goodwill, net 5,179 5,239
Loan acquisition costs, net -- 9
5,179 5,248
Total assets $ 50,478 $ 49,707
Liabilities and Partners' Capital
Current liabilities
Current portion of long-term debt $ 701 $ 707
Accrued compensation and related costs 615 1,054
Accounts payable and other accrued expenses 2,542 2,186
Estimated third party payor settlements 5,438 4,234
Total current liabilities 9,296 8,181
Deferred management fee payable 822 812
Loan payable to the Development General Partner 1,048 1,035
Long-term debt 23,191 23,328
25,061 25,175
Partners' capital
General partners (155) (153)
Assignee limited partners; 1,540,040
units issued and outstanding 16,276 16,504
Total partners' capital 16,121 16,351
Total liabilities and
partners' capital $ 50,478 $ 49,707
</TABLE>
See accompanying notes to consolidated financial statements
-3-
<PAGE>
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>
1998 1997
Revenues
<S> <C> <C>
Medicaid and Medicare patients $ 9,604 $ 9,003
Private patients 2,792 2,846
Investment and other income 76 104
12,472 11,953
Expenses
Operating, including $1,816 and
$1,542 to related parties 9,873 9,771
Management and administration fees
to related parties 798 762
General and administrative 180 177
Depreciation and amortization 486 489
Interest expenses 539 518
11,876 11,717
Net earnings $ 596 $ 236
Net earnings per unit of assignee
limited partnership interest - basic $ 0.38 $ 0.15
(computed based on 1,540,040 units)
</TABLE>
See accompanying notes to consolidated financial statements
-4-
<PAGE>
MERIDIAN HEALTHCARE GROWTH AND INCOME FUND LIMITED PARTNERSHIP
Consolidated Statements of Partners' Capital
For the Three Months Ended March 31, 1998 and 1997
(Unaudited)
Dollars in thousands
<TABLE>
<CAPTION>
Assignee
General Limited
Partners Partners Total
<S> <C> <C> <C>
Balance at December 31, 1997 $ (153) $ 16,504 $16,351
Net earnings 6 590 596
Distributions to partners (8) (818) (826)
Balance at March 31, 1998 $ (155) $ 16,276 $16,121
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
</TABLE>
See accompanying notes to consolidated financial statements
-5-
<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>
1998 1997
Cash flows from operating activities
<S> <C> <C>
Net earnings $ 596 $ 236
Adjustments to reconcile net earnings to net
cash provided by operating activities
Depreciation and amortization 486 489
Minority interest in net earnings of operating
partnerships 7 3
Increase in loan payable to Development General Partner 13 12
Increase in deferred management fee payable 10 11
Change in other assets and liabilities
Accounts receivable (291) 330
Estimated third-party payor settlements, net 1,310 154
Prepaid expenses 123 (14)
Accrued compensation and related costs (439) (748)
Accounts payable and other accrued expenses 356 1,544
Net cash provided by operating activities 2,171 2,017
Cash flows from investing activities-
additions to property and equipment (104) (198)
Cash flows from financing activities
Repayment of long-term debt (143) (147)
Distributions to partners (826) (826)
Net cash used in financing activities (969) (973)
Net increase in cash and cash equivalents 1,098 846
Cash and cash equivalents
Beginning of period 2,275 3,962
End of period $3,373 $4,808
</TABLE>
See accompanying notes to consolidated financial statements
-6-
<PAGE>
MERIDIAN HEALTHCARE GROWTH AND INCOME FUND LIMITED PARTNERSHIP
Notes to Consolidated Financial Statements
March 31, 1998
(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 1997 Consolidated Statement of Earnings
have been reclassified to conform to the 1998 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 1997 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,
1998 and 1997 are as follows:
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Management and administration fees $ 798,000 $ 762,000
Drug and medical supplies purchases 613,000 572,000
Nursing and rehabilitation services 1,203,000 970,000
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 $1,048,000 at March 31, 1998 and $1,035,000 at December 31,
1997.
NOTE 3 - DEBT
On March 3, 1998, the Fund entered into a renewal commitment with a bank to
refinance all of the existing indebtedness. Under the terms of the refinancing,
the mortgages will mature on February 28, 2000 and will bear interest at LIBOR
(5.69% at March 31, 1998) plus 1.55%. The refinancing also extended the
$4,000,000 line of credit commitment until February 28, 2000. There were no
borrowings outstanding under the line of credit commitment at March 31, 1998.
-7-
<PAGE>
MERIDIAN HEALTHCARE GROWTH AND INCOME FUND LIMITED PARTNERSHIP
Notes to Consolidated Financial Statements
March 31, 1998
(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.
-8-
<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.
On March 3, 1998, the Fund entered into a renewal commitment with a
bank to refinance all of the existing indebtedness. Under the terms of the
refinancing, the mortgages will mature on February 28, 2000 and will bear
interest at LIBOR plus 1.55%. The refinancing will also extend the line of
credit commitment until February 28, 2000. The Fund has a $4,000,000 line of
credit which is designated for working capital needs and is primarily secured by
the accounts receivable of the Fund. At March 31, 1998, there were no
outstanding borrowings under this line of credit.
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 $1,048,000 at March 31, 1998. 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.
On February 13, 1998, the Fund made a cash distribution of $826,410 to
its partners, which was funded from nursing center operations generated during
the fourth quarter of 1997 after payment of approximately $72,000 of upper tier
expenses. During 1997, nursing center operations generated approximately 89% of
the total distributions after payments for capital improvements, long term debt
principal reduction and upper tier expenses.
On May 14, 1998, the Fund will make a cash distribution of $826,410 to
its partners which will be funded from first quarter 1998 nursing center
operations after payment of approximately $72,000 of upper tier expenses.
Based on a review of the 1998 operating budget, operating results are
projected to improve over 1997 results. Distributions to partners are expected
to remain at current levels and cash flow is expected to completely fund the
distributions. The major challenge to the Fund in the foreseeable future is to
control operating expenses while maximizing revenues through strategic
admissions policies.
Results of Operations
Profitability for the Fund rose to $596,000 during the first quarter of 1998 as
compared to $236,000 in the first quarter of 1997 representing an increase of
$360,000. This increase resulted from both revenue growth and good cost
controls.
First quarter operating results exceeded budget by approximately $181,000
primarily as a result of higher than projected revenues. While overall census
numbers for the facilities were under budget for the quarter, the per diem rate
of $128.00 was $4.00, or 3.5%, higher than projected and revenues increased as a
result.
Patient revenues for the Fund's seven operating partnerships increased by
approximately $547,000 (or 4.6%) for the three months ended March 31, 1998 as
compared to the three months ended March 31, 1997. The increase is primarily the
result of higher room rates, an increase of Medicaid residents and higher
ancillary utilization. Aggregate room rates increased by 7.9% for all patients
types. Private rates increased due to a greater number of higher acuity private
pay
-9-
<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)
residents while Medicaid rates increased due to the recurring July 1, 1997
increase. Offsetting these favorable variances was a decrease in census for
Private and Medicare residents during the first quarter when compared to the
prior year. While admissions at all of the facilities continue to be strong, the
length of stay for many residents has decreased, resulting in higher turnover
and decreased census. Management is focused on improving census levels through
aggressive marketing and strategic admission guidelines.
Operating expenses during the first quarter of 1998 increased only 1% when
compared to similar expenses during the first quarter of 1997. As a percentage
of revenues, first quarter operating expenses decreased to 79% of revenue as
compared to 81% on 1997. Salaries, wages and benefits (the largest component of
the facilities' operating expenses) decreased $73,000 (or 1%) during the three
months ended March 31, 1998 when compared to the same period in 1997 due to
lower cost associated with non-productive time.
Management fees (which are calculated as a percentage of revenue) increased 4.7%
during the first quarter of 1998 when compared to 1997 due to the rise in
patient revenues. General and administrative expenses reflect an increase of
less than 1.7% versus 1997. While interest expense incurred during the first
quarter of 1998 reflects a slight increase when compared to 1997, we expect the
refinancing of the Fund's debt, which became effective February 22, 1998, will
result in an overall savings in interest expense for 1998 when compared to 1997.
-10-
<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
-11-
<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: 05/14/98 By: /s/ John M. Prugh
John M. Prugh
President and Director
Brown-Healthcare, Inc.
Administrative General Partner
DATE: 05/14/98 By: /s/ Timothy M. Gisriel
Timothy M. Gisriel
Treasurer
Brown-Healthcare, Inc.
Administrative General Partner
-12-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(Replace this text with legend, if applicable)
</LEGEND>
<CIK> 0000826682
<NAME> Meridian Healthcare Growt
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-1-1998
<PERIOD-END> MAR-31-1998
<EXCHANGE-RATE> 1
<CASH> 3,373,000
<SECURITIES> 0
<RECEIVABLES> 6,721,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 10,771,000
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 50,478,000
<CURRENT-LIABILITIES> 9,296,000
<BONDS> 23,191,000
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 50,478,000
<SALES> 0
<TOTAL-REVENUES> 12,472,000
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 11,337,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 539,000
<INCOME-PRETAX> 596,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 596,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
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<NET-INCOME> 596,000
<EPS-PRIMARY> 0.000
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</TABLE>
