-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, g8Qr+mi+I5EzxwP+s2EIh765+BaPDSvyFcOiXSjTASvtM1fXV/SeaKoe3/Bd2nV1 /kdXLbMhro4TI4j/ywkXDA== 0000804752-94-000003.txt : 19940817 0000804752-94-000003.hdr.sgml : 19940817 ACCESSION NUMBER: 0000804752-94-000003 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19940630 FILED AS OF DATE: 19940811 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FORUM RETIREMENT PARTNERS L P CENTRAL INDEX KEY: 0000804752 STANDARD INDUSTRIAL CLASSIFICATION: 8300 IRS NUMBER: 351686799 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-09302 FILM NUMBER: 94543077 BUSINESS ADDRESS: STREET 1: 8900 KEYSTONE CROSSING STE 200 STREET 2: PO BOX 40498 CITY: INDIANAPOLIS STATE: IN ZIP: 46240 BUSINESS PHONE: 3178460700 10-Q 1 FORUM RETIREMENT PARTNERS, L.P. 6/30/94 10Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 For Quarter Ended June 30, 1994 Commission File Number 1-9302 FORUM RETIREMENT PARTNERS, L.P. (Exact name of registrant as specified in its charter) DELAWARE 35-1686799 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 8900 Keystone Crossing, Suite 200 P.O. Box 40498 Indianapolis, Indiana 46240-0498 (Address of principal executive offices) (Zip Code) 317-846-0700 (Registrant's telephone number, including area code) 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 ----- ----- There are 13 pages in this report. INDEX FORUM RETIREMENT PARTNERS, L.P. AND SUBSIDIARY PARTNERSHIPS PART I. FINANCIAL INFORMATION PAGE - - ----------------------------- ---- Item 1. Financial Statements (Without Audit) Condensed consolidated balance sheets -- June 30, 1994 and December 31, 1993 3 Condensed consolidated statements of operations -- Three and six months ended June 30, 1994 and 1993 4 Consolidated Statement of Partners' Equity -- Six months ended June 30, 1994 5 Condensed consolidated statements of cash flows -- Six months ended June 30, 1994 and 1993 6 Notes to condensed consolidated financial statements -- June 30, 1994 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 PART II. OTHER INFORMATION - - -------------------------- Item 6. Exhibits and Reports on Form 8-K 12 SIGNATURES 13 - - ---------- -2- PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS ---------------------------- FORUM RETIREMENT PARTNERS, L.P. AND SUBSIDIARY PARTNERSHIPS CONDENSED CONSOLIDATED BALANCE SHEETS June 30, December 31, 1994 1993 ------------- ----------- (Without Audit) (Note) ASSETS (in thousands) Property and equipment: Land $ 14,630 $ 14,572 Buildings 97,277 96,473 Furniture and equipment 8,014 7,739 ----------- ----------- 119,921 118,784 Less accumulated depreciation 22,296 20,519 ----------- ----------- NET PROPERTY AND EQUIPMENT 97,625 98,265 Cash and cash equivalents 5,444 4,700 Accounts receivable, less allowances for doubtful accounts of $140 and $126 2,881 2,274 Restricted cash 2,472 1,719 Deferred costs, net of accumulated amortization of $173 in 1994 2,328 2,339 Other assets 1,002 1,183 ----------- ----------- TOTAL ASSETS $ 111,752 $ 110,480 =========== =========== LIABILITIES AND PARTNERS' EQUITY Long-term debt, including $882 and $773 due within one year $ 50,364 $ 50,707 Long-term debt due to parent of general partner 534 633 Accounts payable and accrued expenses 4,110 3,402 Management fees and amounts due to parent of general partner 972 5 Deferred management fees due to parent of general partner 15,780 15,780 Resident deposits 1,365 1,341 ----------- ----------- TOTAL LIABILITIES 73,125 71,868 ----------- ----------- General partner's equity in subsidiary partnership 227 226 ----------- ----------- Partners' equity: General partner 490 490 Limited partners (15,285 units issued and outstanding) 37,910 37,896 ----------- ----------- TOTAL PARTNERS' EQUITY 38,400 38,386 ----------- ----------- $ 111,752 $ 110,480 =========== =========== Note: The balance sheet at December 31, 1993, has been derived from the audited financial statements at that date. SEE Notes to Condensed Consolidated Financial Statements. -3- FORUM RETIREMENT PARTNERS, L.P. AND SUBSIDIARY PARTNERSHIPS CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Without Audit) Three Months Ended Six Months Ended June 30, June 30, ------------------ ------------------ 1994 1993 1994 1993 -------- -------- -------- -------- (in thousands except per unit amounts) Revenues: Operating revenues $ 11,392 $ 10,707 $ 22,667 $ 21,104 Other income 47 36 94 75 -------- -------- -------- -------- TOTAL REVENUES 11,439 10,743 22,761 21,179 -------- -------- -------- -------- Costs and expenses: Operating expenses 8,195 8,159 16,315 16,044 Management fees to parent of general partner 914 855 1,818 1,692 Litigation 20 0 42 0 Depreciation 926 835 1,783 1,665 Interest: Parent of general partner 10 12 21 27 Other 1,339 1,587 2,676 3,127 -------- -------- -------- -------- TOTAL COSTS AND EXPENSES 11,404 11,448 22,655 22,555 -------- -------- -------- -------- Income (loss) before general partner's interest in income (loss) of subsidiary partnerships 35 (705) 106 (1,376) General partner's interest in income (loss) of subsidiary partnerships 0 (4) 1 (9) -------- -------- -------- -------- NET INCOME (LOSS) 35 (701) 105 (1,367) General partner's interest in net income (loss) 0 (7) 1 (14) -------- -------- -------- -------- Limited partners' interest in net income (loss) $ 35 $ (694) $ 104 $ (1,353) ======== ======== ======== ======== Average number of units outstanding 15,285 8,785 15,285 8,785 ======== ======== ======== ======== Net income (loss) per unit $ 0.00 $ (0.08) $ 0.01 $ (0.15) ======== ======== ======== ======== SEE Notes to Condensed Consolidated Financial Statements. -4- FORUM RETIREMENT PARTNERS, L.P. AND SUBSIDIARY PARTNERSHIPS CONSOLIDATED STATEMENT OF PARTNERS' EQUITY Six Months Ended June 30, 1994 General Limited Partner Partners ------- -------- (in thousands) Balance at January 1, 1994 $ 490 $37,896 Costs from issuance of units (1) (90) Net income 1 104 ------- ------- Balance at June 30, 1994 $ 490 $37,910 ======= ======= SEE Notes to Condensed Consolidated Financial Statements. -5- FORUM RETIREMENT PARTNERS, L.P. AND SUBSIDIARY PARTNERSHIPS CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Without Audit) Six Months Ended June 30, ------------------------- 1994 1993 ---------- ---------- (in thousands) Cash flows from operating activities: Net income (loss) $ 105 $ (1,367) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation of property and equipment 1,783 1,666 Amortization of deferred financing costs 173 201 Deferred management fees due to parent of general partner 0 1,692 Accrued management fees currently due to parent of general partner 914 0 Other accrued revenues and expenses, net 6 (1,421) Payment of rent due from general partner 0 225 Other 1 34 ---------- ---------- NET CASH PROVIDED BY OPERATING ACTIVITIES 2,982 1,030 ---------- ---------- Cash flows from investing activities: Additions to property and equipment (815) (426) ---------- ---------- NET CASH USED BY INVESTING ACTIVITIES (815) (426) ---------- ---------- Cash flows from financing activities: Reduction of long-term debt (343) (2,475) Net increase in restricted cash (729) (40) Payment on note payable to parent of general partner (99) (186) Deferred loan costs (162) (225) Other (90) 0 ---------- ---------- NET CASH USED BY FINANCING ACTIVITIES (1,423) (2,926) ---------- ---------- Net increase (decrease) in cash and cash equivalents 744 (2,322) Cash and cash equivalents at beginning of period 4,700 4,888 ---------- ---------- Cash and cash equivalents at end of period $ 5,444 $ 2,566 ========== ========== SEE Notes to Condensed Consolidated Financial Statements. -6- FORUM RETIREMENT PARTNERS, L.P., AND SUBSIDIARY PARTNERSHIPS NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Without Audit) June 30, 1994 Note A - Basis of Presentation - - ------------------------------ The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the six-month period ended June 30, 1994 are not necessarily indicative of the results that may be expected for the year ending December 31, 1994. For further information, refer to the consolidated financial statements of Forum Retirement Partners, L.P. (the "Partnership"), as of and for the year ended December 31, 1993, and the footnotes thereto, included in the Partnership's Annual Report on Form 10-K for the year ended December 31, 1993. Note B - General Partner's Interest in Subsidiary Partnership - - ------------------------------------------------------------- The general partner owns a one percent interest in an affiliated operating partnership. This interest is reflected in the statements of operations as a reduction of the income or loss of the Partnership. -7- FORUM RETIREMENT PARTNERS, L.P., AND SUBSIDIARY PARTNERSHIPS ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS June 30, 1994 The first six months of the current year produced significantly better operating results than the same six-month period in 1993. Operating revenues for the three and six months ended June 30, 1994 were 6% and 7%, respectively, above operating revenues for the same periods last year, and net operating income (operating revenues less operating expenses) was 25% and 26%, respectively, above net operating income for the same periods in 1993. The three and six months ended June 30, 1994 produced net income of $35,000 and $105,000, respectively, compared to net losses of $701,000 and $1,367,000, respectively, for the same periods of 1993. Combined occupancy at June 30, 1994 was 94%, compared to 94% at December 31, 1993, and 92% at June 30, 1993. As of June 30, 1994, the Partnership owned nine RCs, all of which were managed by Forum Group, Inc. ("Forum Group"), a corporation which is a substantial equity owner of the Partnership and the parent corporation of Forum Retirement, Inc., the general partner of the Partnership (the "General Partner"). Results Of Operations - - --------------------- Operating Revenues. Operating revenues for the three and six months ended June 30, 1994 increased by $685,000 (6%) and $1,563,000 (7%), respectively, compared to operating revenues for the same periods in 1993. These increases were principally attributable to changes in occupancy, increased provision of ancillary healthcare services and planned increases in residency fees and charges. Combined average occupancy for the six months ended June 30, 1994 increased by 2.7% compared to the same period of 1993, and the combined average monthly rental rate for the six months ended June 30, 1994 increased by 5.2% compared to the same period of 1993. Costs and Expenses. Operating expenses, including management fees and depreciation for the three and six months ended June 30, 1994, increased by $186,000 (2%) and $515,000 (3%), respectively, compared to those combined expenses for the same periods of 1993. These increases were principally attributable to changes in occupancy, increased provision of ancillary healthcare services and normal inflationary increases in other operating expenses, as partially offset by reductions of $171,000 and $379,000, for the three and six months ended June 30, 1994, respectively, due to a change in the estimate of accrued workers' compensation premiums. During the three and six months ended June 30, 1994, litigation expenses of $20,000 and $42,000, respectively, were recorded in conjunction with certain litigation commenced in January, 1994 by the Russell F. Knapp Revokable Trust. For a more complete description of this litigation, see Item 3 of the Partnership's Form 10-K for the year ended December 31, 1993. Total interest expense for the three and six months ended June 30, 1994 decreased by $250,000 and $457,000, respectively, compared to total interest expense for the same periods in 1993, due principally to a decrease in the -8- FORUM RETIREMENT PARTNERS, L.P., AND SUBSIDIARY PARTNERSHIPS ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) amount of outstanding long term debt and a lower interest rate resulting from the refinancing of the Partnership's debt discussed below. Income Taxes. The Omnibus Budget Reconciliation Act of 1987 provides that certain publicly-traded partnerships will be treated as corporations for federal income tax purposes. A grandfather provision delays corporate tax status until 1998 for publicly-traded partnerships in existence prior to December 18, 1987. On August 8, 1988, the General Partner was authorized by the limited partners to do all things deemed necessary or desirable to insure that the Partnership is not treated as a corporation for federal income tax purposes. Alternatives available to avoid corporate taxation after 1997 include: (i) selling or otherwise disposing of all or substantially all of the Partnership's assets pursuant to a plan of liquidation, (ii) converting the Partnership into a real estate investment trust or other type of legal entity, and (iii) restructuring the Partnership to qualify as a partnership primarily with passive rental income. While the Partnership presently intends to avoid being taxed as a corporation for federal income tax purposes, there can be no assurance that it will be successful. Financial Condition - - ------------------- Recapitalization. On October 6, 1993, the Partnership entered into an agreement (the "Recapitalization Agreement") with Forum Group pursuant to which the Partnership issued 6.5 million depositary units representing limited partners' interests in the Partnership ("Preferred Depositary Units" or "Units") to a subsidiary of Forum Group ("Forum A/H"), and Forum A/H made a capital contribution to the Partnership of $13.0 million in the aggregate, or $2.00 per Unit. The proceeds were used to prepay a portion of the Partnership's bank debt scheduled to mature on December 31, 1993 (the "Bank Credit Facility"). Pursuant to the Recapitalization Agreement, on January 10, 1994 the Partnership commenced a subscription offering in which holders of Preferred Depositary Units of record as of October 18, 1993 (other than Forum Group and its affiliates) were permitted to purchase .07398342 of a Preferred Depositary Unit for each Preferred Depositary Unit held by them on October 18, 1993 at a purchase price of $2.00 per Unit. 1,994,189 Preferred Depositary Units were issued in the subscription offering, which expired on February 25, 1994. In accordance with the Recapitalization Agreement, the Partnership used the $3,988,378 of proceeds of the subscription offering to repurchase 1,994,189 Preferred Depositary Units from Forum A/H at a purchase price of $2.00 per Unit. Following the repurchase transaction, Forum Group beneficially owned 43.2% of the Partnership, including its 1.0% General Partner's interest. Liquidity And Capital Resources. At June 30, 1994, the Partnership had cash and cash equivalents of $5,444,000 and accounts receivable of $2,881,000. The Partnership believes that its liquidity and the capital resources available to it are adequate to meet its forseeable working capital requirements. The Partnership's general partner currently is conducting a detailed feasibility study of the possible expansion of certain of the Partnership's properties in an effort to further increase operating income. A preliminary -9- FORUM RETIREMENT PARTNERS, L.P., AND SUBSIDIARY PARTNERSHIPS ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) study has identified several attractive expansion opportunities, which could increase the number of living units owned by the Partnership by up to 30%. Any expansion would likely modify the uses of, or add capacity to, existing facilities without incurring substantial land acquisition and common area build-out costs. Any significant expansion could require the Partnership to obtain additional financing, modify existing financing and/or obtain regulatory approvals. Such an expansion would also affect the Partnership's levels of distributable cash, if any. After provision for reserves, the Partnership had no net cash flow available for distribution with respect to the second quarter. On December 28, 1993, the Partnership entered into a loan agreement with Nomura Asset Capital Corporation ("Nomura") for $50,700,000 in new financing (the "Nomura Loan"). The Nomura Loan bears interest at the rate of 9.93% per annum (including a 0.20% servicing fee), is amortized over a 20-year period and matures on January 1, 2001. The proceeds of the Nomura Loan were used to prepay in full (i) the approximately $9.5 million remaining principal balance of the debt under the Bank Credit Facility, which would have matured on December 31, 1993 and (ii) approximately $34.1 million aggregate principal amount of the Partnership's split coupon first mortgage notes, which would have matured June 30, 1996, and to pay related fees and expenses. Pursuant to the terms of the management agreement between the Partnership and Forum Group (the "Management Agreement"), management fees (based on the Partnership's gross operating revenues) payable to Forum Group for all periods from the formation of the Partnership in 1986 to December 31, 1993 ($15,780,000) have been deferred. Management fees for periods after December 31, 1993 are to be paid on a current basis. Deferred management fees are payable to Forum Group out of proceeds of sales and refinancings after making distributions of those proceeds in an amount sufficient (i) to meet limited partners' tax liabilities, (ii) to repay limited partners' capital contributions, and (iii) to pay a 12% cumulative, simple annual return on limited partners' unrecovered capital contributions. Deferred management fees become immediately due and payable in the event that the Management Agreement is terminated, which may occur under certain conditions including, but not limited to, if Forum Retirement, Inc. is removed as the General Partner and 80% in interest of the limited partners vote to terminate such agreement. The Partnership is unable to determine when or if management fees deferred prior to January 1, 1994 will become payable. For a more complete description of the management agreement, see Item 7 of the Partnership's Form 10-K for the year ended December 31, 1993. Operating activities provided $1,952,000 more cash during the six months ended June 30, 1994 than during the comparable period of 1993, due principally to improved operating performance and reductions in other accrued revenues and expenses during 1993. Investing activities used $389,000 more cash during the six months ended June 30, 1994 than during the comparable period of 1993, due to normal fluctuations in the purchases of property and equipment. -10- FORUM RETIREMENT PARTNERS, L.P., AND SUBSIDIARY PARTNERSHIPS ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) Financing activities used $1,503,000 less cash during the six months ended June 30, 1994 than during the comparable period of 1993, due principally to a March, 1993 principal payment on the Bank Credit Facility, less an increase in restricted cash reserves required by the terms of the Nomura Loan. Inflation. Management does not believe that inflation has had a material effect on net income. To the extent possible, increased costs are recovered through increased residency fees and charges. -11- PART II. OTHER INFORMATION FORUM RETIREMENT PARTNERS, L.P. AND SUBSIDIARY PARTNERSHIPS June 30, 1994 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K - - ---------------------------------------- (a) Exhibits: None (b) Reports on Form 8-K: None -12- SIGNATURE --------- Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. FORUM RETIREMENT PARTNERS, L.P., a Delaware limited partnership By: Forum Retirement, Inc., General Partner Date: August 11, 1994 By: /s/ Paul A. Shively -------------------------------------- Paul A. Shively, Vice President, Treasurer and Chief Financial Officer -13- -----END PRIVACY-ENHANCED MESSAGE-----