-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, J+GYW14zBNns5TgtFVOG4HfHZlKOtuWzwTYibxNb5jlpOoEk6Y6mB6GuKaiF7qS/ MnHF3KQYfTucHERiMsj48Q== 0000928385-96-000573.txt : 19960517 0000928385-96-000573.hdr.sgml : 19960517 ACCESSION NUMBER: 0000928385-96-000573 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960515 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: FORUM RETIREMENT PARTNERS L P CENTRAL INDEX KEY: 0000804752 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SOCIAL SERVICES [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: 96566974 BUSINESS ADDRESS: STREET 1: 8900 KEYSTONE CROSSING STE 200 STREET 2: PO BOX 40498 CITY: INDIANAPOLIS STATE: IN ZIP: 46240-0498 BUSINESS PHONE: 3178460700 MAIL ADDRESS: STREET 1: 8900 KEYSTONE CROSSING STE 200 STREET 2: PO BOX 40498 CITY: INDIANAPOLIS STATE: IN ZIP: 46240-0498 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 For Quarter Ended March 31,1996 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 (IRS Employer incorporation or organization) Identification No.) 11320 Random Hills Road, Suite 400 Fairfax, Virginia 22030 (Address of principal executive offices) (Zip Code) 703-277-7000 (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 _____ ----- INDEX FORUM RETIREMENT PARTNERS, L.P. AND SUBSIDIARY PARTNERSHIP
PART I. FINANCIAL INFORMATION PAGE - ----------------------------- ---- Item 1. Financial Statements (Without Audit) Condensed consolidated balance sheets -- March 31, 1996 and December 31, 1995 3 Condensed consolidated statements of operations -- Three months ended March 31, 1996 and 1995 5 Condensed consolidated statement of partners' equity -- March 31, 1996 and December 31, 1995 6 Condensed consolidated statements of cash flows -- Three months ended March 31, 1996 and 1995 7 Notes to condensed consolidated financial statements -- March 31, 1996 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10 PART II. OTHER INFORMATION - --------------------------- Item 1. Legal Proceedings 16 Item 2. Changes in Securities 16 Item 3. Defaults Upon Senior Securities 16 Item 4. Submission of Matters to a Vote of Security Holders 16 Item 5. Other Events 16 Item 6. Exhibits and Reports on Form 8-K 16 SIGNATURES 17 - ----------
2 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS ----------------------------- FORUM RETIREMENT PARTNERS, L.P. AND SUBSIDIARY PARTNERSHIP CONDENSED CONSOLIDATED BALANCE SHEETS (Without Audit)
March 31, December 31, 1996 1995 ------------- ------------- (in thousands) ASSETS ------ Current Assets: Cash and cash equivalents $ 2,966 $ 2,960 Accounts receivable, less allowances for doubtful accounts of $298 for 1996 and $227 for 1995 3,330 3,057 Other receivables 38 30 Estimated third-party settlements 339 550 Inventory and prepaid expenses 421 639 Other current assets 74 75 -------- -------- TOTAL CURRENT ASSETS 7,168 7,311 -------- -------- Restricted cash 4,662 4,154 -------- -------- Property and equipment: Land 14,867 14,867 Buildings 99,452 99,293 Furniture and equipment 9,254 9,198 Construction in progress 2,379 1,478 -------- -------- 125,952 124,836 Less accumulated depreciation 28,578 27,630 -------- -------- Property and Equipment, net 97,374 97,206 -------- -------- Deferred costs, net of accumulated amortization of $806 in 1996 and $714 in 1995 1,847 1,939 ---------- ---------- TOTAL ASSETS $ 111,051 $ 110,610 ---------- ----------
See Notes to Condensed Consolidated Financial Statements. 3 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS ----------------------------- FORUM RETIREMENT PARTNERS, L.P. AND SUBSIDIARY PARTNERSHIP CONDENSED CONSOLIDATED BALANCE SHEETS (Without Audit)
March 31, December 31, 1996 1995 ----------- ----------- (in thousands) LIABILITIES AND PARTNERS' EQUITY ------------------------------- Current Liabilities: Current portion of long-term debt $ 1,049 $ 1,023 Accounts payable and accrued expenses 4,773 4,298 Management fees and amounts due to parent of general partner 951 1,121 Resident deposits 1,272 1,266 -------- -------- Total Current Liabilities 8,045 7,708 Long-term debt, less current portion payable within one year 47,711 47,984 Deferred management fees due to parent of general partner 15,780 15,780 -------- -------- TOTAL LIABILITIES 71,536 71,472 -------- -------- General partners' equity in subsidiary partnership 232 229 Partners' Equity: General Partner 499 495 Limited Partners (15,285 units issued and outstanding) 38,784 38,414 -------- -------- TOTAL PARTNERS' EQUITY 39,283 38,909 -------- -------- TOTAL LIABILITIES AND PARTNERS' EQUITY $111,051 $110,610 -------- --------
See Notes to Condensed Consolidated Financial Statements. 4 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS ----------------------------- FORUM RETIREMENT PARTNERS, L.P. AND SUBSIDIARY PARTNERSHIP CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Without Audit)
Three Months Ended March 31, 1996 1995 ------- ------- (in thousands except per share amounts) Revenues: Routine revenue $11,332 $10,621 Ancillary revenue 1,689 1,467 Other Income 51 72 ------- ------- TOTAL REVENUES 13,072 12,160 ------- ------- Costs and Expenses: Routine expenses 7,770 7,604 Ancillary cost 1,290 1,202 Management fees to parent of general partner 1,041 966 General and administrative 221 125 Litigation 114 39 Depreciation 948 885 Interest, including amounts to parent of general partner of $6 and $8, respectively 1,311 1,333 ------- ------- TOTAL COSTS AND EXPENSES 12,695 12,154 -------- ------- Income before general partner's interest in income of subsidiary partnership 377 6 General partner's interest in income of subsidiary partnership 3 0 ------- ------- NET INCOME $ 374 $ 6 ------- ------- General partners' interest in net income $ 4 $ 0 ------- ------- Limited partners' interest in net income $ 370 6 ------- ------- Average number of units outstanding 15,285 $15,285 ------- ------- Net income per unit $ 0.02 $ 0.00 ------- -------
See Notes to Condensed Consolidated Financial Statements. 5 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS ----------------------------- FORUM RETIREMENT PARTNERS, L.P. AND SUBSIDIARY PARTNERSHIP CONDENSED CONSOLIDATED STATEMENT OF PARTNERS' EQUITY (Without Audit)
General Limited Partner Partners -------- --------- (in thousands) Balances at January 1, 1996 $ 495 $ 38,414 Net Income 4 370 ------ -------- Balances at March 31, 1996 $ 499 $ 38,784 ------ -------- Accumulated balances: Capital contributions $1,173 $116,279 Offering costs (4) (6,715) Cash distributions (255) (29,679) Accumulated losses (415) (41,101) ------ -------- Balances at March 31, 1996 $ 499 $ 38,784 ------ --------
See Notes to Condensed Consolidated Financial Statements. 6 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS ----------------------------- FORUM RETIREMENT PARTNERS, L.P. AND SUBSIDIARY PARTNERSHIP CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Without Audit)
Three Months Ended March 31, ----------------- 1996 1995 ------- ------- (in thousands) Cash flows from operating activities: Net income $ 374 $ 6 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation of property and equipment 948 885 Amortization of deferred financing costs 92 90 Management fees and amounts due to parent of general partner (162) (15) Other accrued revenue and expenses, net 633 361 ------ ------ NET CASH PROVIDED BY OPERATING ACTIVITIES 1,885 1,327 ------ ------ Cash flows from investing activities: Additions to property and equipment (1,116) (293) ------- ------ NET CASH USED IN INVESTING ACTIVITIES (1,116) (293) ------- ------ Cash flows from financing activities: Reduction of long-term debt (255) (266) Net decrease (increase) in restricted cash (508) 248 Deferred loan costs -0- (5) ------ ------ NET CASH USED BY FINANCING ACTIVITIES (763) (23) ------ ------ Net increase in cash and cash equivalents 6 1,011 Cash and cash equivalents at beginning of period 2,960 5,588 ------ ------ Cash and cash equivalents at end of period $2,966 $6,599 ------ ------
See Notes to Condensed Consolidated Financial Statements. 7 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS ---------------------------- FORUM RETIREMENT PARTNERS, L.P. AND SUBSIDIARY PARTNERSHIP NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Without Audit) March 31, 1996 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. The financial statements have been prepared using the accounting policies described in the consolidated financial statements of Forum Retirement Partners, L.P. and Subsidiary Partnership (the "Partnership") included in the Partnership's Annual Report on Form 10-K for the year ended December 31, 1995 (the "Annual Report"). The unaudited condensed consolidated financial statements include all adjustments which are necessary, in the opinion of management, to reflect fairly, in all material respects, the Partnership's financial position and results of operations for the applicable periods. Certain amounts in the 1995 consolidated financial statements have been reclassified to conform to the 1996 presentation. Operating results for the three month period ended March 31, 1996 are not necessarily indicative of the results that may be expected for the year ending December 31, 1996 and these financial statements should be read in conjunction with the Partnership's Annual Report. NOTE B - OWNERSHIP INTEREST OF THE GENERAL PARTNER AND ITS AFFILIATES - --------------------------------------------------------------------- Forum Retirement, Inc., a wholly owned subsidiary of Forum Group, Inc. ("Forum Group"), is the general partner of the Partnership (the "General Partner") and owns a one percent interest in the Partnership and in a subsidiary operating partnership in which the Partnership owns a ninety-nine percent interest. The General Partner's interest in the subsidiary operating partnership is reflected in the statements of operations as a reduction of the income or loss of the Partnership. Forum Group beneficially owns approximately 79.0% of the outstanding Preferred Depository Units (the "Units") representing preferred limited partner's interests in the Partnership. 8 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS ---------------------------- FORUM RETIREMENT PARTNERS, L.P. AND SUBSIDIARY PARTNERSHIP NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) (Without Audit) March 31, 1996 NOTE C - COMMITMENTS AND CONTINGENCIES - -------------------------------------- For information concerning certain legal proceedings involving the Partnership, see Item 3 and Note 4 of the Notes to Consolidated Financial Statements contained in Item 8 of Part I of the Annual Report. Such information is incorporated herein by reference. 9 FORUM RETIREMENT PARTNERS, L.P. AND SUBSIDIARY PARTNERSHIP PART I. Financial Information ------------------------------ ITEM 2. Management's Discussion and Analysis of ------------------------------------------------ Financial Condition and Results of Operations --------------------------------------------- March 31, 1996 FORWARD-LOOKING STATEMENTS - -------------------------- Statements in this report which are not strictly historical are "forward- looking" and are subject to a number of risks and uncertainties which affect the Partnership's business. These uncertanities, which include competition with other retirement communities, the balance between supply of and demand for retirement communities, the Partnership's ability to timely effect its planned expansion program on current and anticipated terms, including sufficiency of cash flow from operations to finance the expansion (or the availability of borrowings if necessary) and timely receipt of zoning and other governmental approvals, potential changes in Medicaid and/or Medicare reimbursement levels or criteria, potential changes in the regulatory environment applicable to retirement communities and related healthcare services, the effect of national and regional economic conditions, are described from time to time in the Partnership's filings with the Securities and Exchange Commission, including Exhibit 99.1 to this report. RESULTS OF OPERATIONS - --------------------- As of March 31, 1996 and 1995, the Partnership owned nine retirement communities ("RC's"), all of which were managed by Forum Group. The Partnership reported net income of $374,000 for the three month period ended March 31, 1996 compared to net income of $6,000 for the same period in 1995. Total revenues for the three month period ended March 31, 1996 increased $912,000, or 7.5%, to $13,072,000 compared to the same period last year. Total revenues consist primarily of routine service and ancillary service revenues. Routine service revenues are generated from monthly charges for independent living units and daily charges for assisted living suites and nursing beds which are recognized monthly based on the terms of the resident's agreements. Ancillary service revenues are generated on a "fee for service" basis for supplementary items requested by residents and are recognized as the services are provided. Combined average occupancy at the nine RC's was 93.7% for the three month period ended March 31, 1996, a decrease of approximately 0.4% points compared to the same period in 1995. The decrease was primarily the result of three 10 FORUM RETIREMENT PARTNERS, L.P. AND SUBSIDIARY PARTNERSHIP PART I. Financial Information ------------------------------ ITEM 2. Management's Discussion and Analysis of ------------------------------------------------ Financial Condition and Results of Operations --------------------------------------------- (continued) March 31, 1996 communities which experienced occupancy declines of 0.7%, 3.4% and 8.4% points, respectively, with the remaining six communities experiencing occupancy increases ranging from 0.8% to 4.3% points for the three month period ended March 31, 1996 compared to the three month period ended March 31, 1995. The combined average monthly rental rate per occupied unit increased approximately 8% for the three month period ended March 31, 1996 compared to the same period in 1995, with each of the nine communities experiencing increases. THREE MONTHS ENDED MARCH 31, 1996 AND 1995. Routine and ancillary revenues - ------------------------------------------ increased $933,000, or 7.7%, to $13,021,000 over the comparable period in 1995. The revenue increase is primarily attributable to increases in residency fees and charges in the independent and assisted living and nursing components, increases in the provision of therapy and other ancillary healthcare services, higher average occupancy at a majority of the RC's and an unfavorable net Medicare settlement of $190,000 in 1995 for the comparable period. Each of the nine communities experienced overall increases in total revenues for the three months ended March 31, 1996 compared to the same period in 1995. Three RC's experienced occupancy declines in the first three months of 1996 yet reflected increased revenues, two RC's as a result of the provision of a higher level of therapy and other ancillary services and the third RC as a result of an unfavorable net Medicare settlement of $190,000 in 1995. Routine expenses and ancillary costs increased $254,000, or 2.9%, to $9,060,000 compared to the same period in 1995. The higher costs and expenses resulted primarily from the increased provision of ancillary healthcare services, higher levels of average occupancy at six of the nine RC's and normal inflationary and other operational increases in other expenses. The higher occupancy rates at six RC's principally impact the costs associated with the higher level of nursing, therapy, housekeeping and dining services required by these residents. One RC experienced a reduction in routine expenses and ancillary costs of approximately $219,000 due primarily to a decline in occupancy of 8.4% points as well as reductions in certain operating expenses due to the implementation of certain cost-reduction measures. Adjusted for the 1995 non-comparable item previously 11 FORUM RETIREMENT PARTNERS, L.P. AND SUBSIDIARY PARTNERSHIP PART I. Financial Information ------------------------------ ITEM 2. Management's Discussion and Analysis of ------------------------------------------------ Financial Condition and Results of Operations --------------------------------------------- (continued) March 31, 1996 noted which was incurred in the three month period ended March 31, 1995, Net Operating Income ("NOI") calculated as routine and ancillary revenues ("operating revenues") less routine and ancillary expenses ("operating expenses") and management fees increased $414,000, or 16.5%, to $2,920,000 and the operating margin (operating revenues less operating expenses) as a percentage of operating revenues increased from 28.3% for the three month period ended March 31, 1995 to 30.4% for the comparable period in 1996. Six of the nine RC's experienced increases in NOI on a period to period basis. The overall operating margin increase was most affected by one RC, which incurred a decrease in operating revenues (adjusted for the noncomparable item previously noted) that was more than offset by significant decreases in certain operating expenses. Management fees increased as a function of revenue. Depreciation and amortization increased as a result of current and prior year additions to property and equipment. Total interest expense for the three months ended March 31, 1996 decreased by $22,000 compared to total interest expense for the same period in 1995 due primarily to a reduction in the principal amount of long-term debt. Pursuant to the terms of the Management Agreement as in effect since the Partnership's formation in 1986, management fees (based on the Partnership's gross operating revenues) payable to Forum Group for all periods prior to 1994 have been deferred. Fees occurring after January 1, 1994 have been paid on a current basis. The deferred management fees were expensed in the Partnership's statements of operations and reflected on a deferred basis in the Partnership's balance sheets for the relevant periods. Accordingly, except for changes in management fees payable resulting from variations in revenue levels, the current payment of such fees for periods after January 1, 1994 had a comparable impact on the Partnership's operating and net income as compared to prior periods, although it did affect the Partnership's cash position commencing in 1994. 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 12 FORUM RETIREMENT PARTNERS, L.P. AND SUBSIDIARY PARTNERSHIP PART I. Financial Information ------------------------------ ITEM 2. Management's Discussion and Analysis of ------------------------------------------------ Financial Condition and Results of Operations --------------------------------------------- (continued) March 31, 1996 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 1998 include: (i) selling or otherwise disposing of all or substantially all of the Partnership's assets pursuant to a plan of liquidation and (ii) converting the Partnership into a real estate investment trust or other type of legal entity. Such actions are prohibited or restricted under the Partnership's current financing and may require the granting of a waiver by the lender thereunder. There can be no assurance that any such waiver would be granted. There can be no assurance that the Partnership will avoid being taxed as a corporation for federal income tax purposes. FINANCIAL CONDITION - ------------------- Liquidity and Capital Resources. At March 31, 1996, the Partnership had cash and cash equivalents of $2,966,000, accounts receivable of $3,330,000, other current assets of $872,000 and current liabilities of $8,045,000, including $1,272,000 of resident deposits of which $1,237,000 is included in restricted cash at the balance sheet date. The Partnership believes that it has adequate liquidity to meet its foreseeable working capital requirements. The Partnership has initiated an expansion program at some of its properties to improve the Partnership's operating results. Currently, one project has been completed and three projects are underway. Six more expansion projects are expected to begin by late 1996 and four more projects are expected to begin after 1996. The four projects which are either under construction or have been completed are expected to increase the number of living and nursing units owned by the Partnership by approximately 4% at a budgeted capital cost of $3.7 million. The six additional projects expected to begin by late 1996 are expected to increase the Partnership's number of units by an additional 10% at an expected capital cost of $10.7 million. The expansion program is designed to modify the uses of or add capacity to existing facilities without incurring 13 FORUM RETIREMENT PARTNERS, L.P. AND SUBSIDIARY PARTNERSHIP PART I. Financial Information ------------------------------ ITEM 2. Management's Discussion and Analysis of ------------------------------------------------ Financial Condition and Results of Operations --------------------------------------------- (continued) March 31, 1996 substantial land acquisition and common area build-out costs. The projects that have not yet commenced will require additional regulatory approvals. The Partnership presently intends to finance this expansion from the Partnership's cash flow from operations. If cash flow from operations is insufficient to complete the expansion on a timely basis, the expansion may be delayed, reduced in scope or discontinued. In that event, the Partnership may seek to obtain financing from Forum Group or the Partnership's general partner, although they have no obligation to provide any such financing. The Partnership's long-term debt agreement restricts the ability of the Partnership to obtain third-party financing above $1 million (other than from Forum Group or the general partner, on an unsecured, subordinated basis), and prohibits the imposition of liens on the Partnership's assets. There is no assurance that a waiver can be obtained from the lender to permit any third-party financing, or whether, when and on what terms any such financing may be available. As a result of the capital required to fund the expansion, the Partnership does not expect to make distributions in respect of limited partner units in the foreseeable future. The implementation of the expansion program and its impact on the value of an investment in the Partnership is subject to a number of variables, including without limitation the cost and availability of any required financing, the timing with respect to obtaining any such financing, the ability to obtain required zoning variances and permits from local governmental authorities and the timing thereof, whether development and construction costs are higher or lower than anticipated, whether newly added living units are occupied faster or slower than anticipated and whether operating costs are higher or lower than anticipated. The management fee payable to Forum Group of $15,780,000 for all periods from the formation of the Partnership in 1986 to December 31, 1993 was deferred. Management fees for periods after December 31, 1993 are being paid quarterly, in arrears. Deferred management fees are payable to Forum Group out of proceeds of sales and refinancing after making distributions of those proceeds in an amount sufficient to (i) meet limited partners' tax liabilities, (ii) repay limited partners' capital contributions, and (iii) pay a 12% cumulative, simple annual return on limited partners' unrecovered 14 FORUM RETIREMENT PARTNERS, L.P. AND SUBSIDIARY PARTNERSHIP PART I. Financial Information ------------------------------ ITEM 2. Management's Discussion and Analysis of ------------------------------------------------ Financial Condition and Results of Operations --------------------------------------------- (continued) March 31, 1996 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 no 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 predict when or if management fees deferred prior to January 1, 1994 will become payable. Operating activities provided $558,000 more cash during the three months ended March 31, 1996 than during the comparable period in 1995 due principally to increases in both net income as discussed previously and certain accounts payable and accrued expenses. Investing activities used $823,000 more cash during the three months ended March 31, 1996 than during the comparable period in 1995 due principally to the significant increase in expansion and renovation activity at several of the RC's funded by cash from operating activities. Financing activities used $740,000 more cash during the three months ended March 31, 1996 than during 1995 due principally to an increase in restricted cash which resulted from the establishment in the three month period ended September 30, 1995, of additional fixed asset, insurance and real estate tax reserve funds as required by the mortgage loan agreement encumbering the nine RC's owned by the Partnership. 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. 15 Part II. Other Information --------------------------- FORUM RETIREMENT PARTNERS, L.P. AND SUBSIDIARY PARTNERSHIP March 31, 1996 ITEM 1. LEGAL PROCEEDINGS - -------------------------- Part I, Item 3 of the Partnership's Annual Report on Form 10-K for the year ended December 31, 1995 is incorporated herein by reference. ITEM 2. CHANGES IN SECURITIES - ------------------------------ None. ITEM 3. DEFAULTS UPON SENIOR SECURITIES - ---------------------------------------- None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - ------------------------------------------------------------ None. ITEM 5. OTHER EVENTS - --------------------- None. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K - ----------------------------------------- (a) Exhibits Exhibit No. Description ---------- ----------- 99.1 Forward-Looking Statements 99.2 Part I, Item 3 of the Partnership's Annual Report on Form 10-K for the year ended December 31, 1995 (b) Reports on Form 8-K None. 16 SIGNATURES PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) 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., its general partner ------------------------------------------- Date: May 15, 1996 By: /s/ Paul E. Johnson, Jr. ------------------------------------------ PAUL E. JOHNSON, JR. PRESIDENT AND CHAIRMAN OF THE BOARD 17 EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS DEC-31-1996 JAN-01-1996 MAR-31-1996 2,966 0 3,628 298 0 7,168 125,952 28,578 111,051 8,045 47,711 0 0 0 39,283 111,051 0 13,072 0 12,695 0 0 1,311 374 0 374 0 0 0 374 .02 .02
EX-99.1 3 EXHIBIT EX-99.1 EXHIBIT 99.1 IMPORTANT FACTORS REGARDING FORWARD-LOOKING STATEMENTS The following factors, among others, could cause actual results to differ materially from those contained in forward-looking statements made in this report and presented elsewhere by management from time to time. Reference is also made to uncertainties discussed in the following portions of the Partnership's annual report on Form 10-K for the fiscal year ended December 31, 1995: (a) the subsections entitled "Sources of Payment," "Regulation and Other Factors" and "Competition" in Item 2, within the "PROPERTIES" section, which describe (i) the federal and state governmental involvement and discretion in the funding and payment of Medicare and Medicaid payments that comprise a significant portion of the Partnership's revenues, (ii) the federal, state and local govermental regulation of healthcare facilities, including the requirement of continued licensure, and (iii) the competitive conditions faced by the Partnership, and (b) Item 7, "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS." Competition: The profitability of retirement communities is subject to general economic conditions, competition, the desirability of particular locations, the relationship between supply of and demand for senior living facilities, and other factors. The Partnership's retirement communities are generally located in markets that contain numerous competitors, and the continued success of the Partnership's retirement communities in their respective markets will be dependent, in large part, upon those facilities' ability to compete in such areas as access, location, quality of accommodations, amenities, specialized services and rate structure. Facility Expansion: The timing and success of the planned expansion of the Partnership's existing retirement communities is dependent upon a number of factors, including the ability to obtain required zoning variances and permits from local governmental authorities and the timing thereof, whether development and construction costs are higher or lower than anticipated, whether construction is completed faster or slower than anticipated, whether newly added living units are occupied faster or slower than anticipated, whether rental rates for additional living units are higher or lower than anticipated, and whether operating costs are higher or lower than anticipated. Availability of Financing: The Partnership presently intends to finance the planned expansion of its existing retirement communities out of the Partnership's cash flow from operations. If cash flow from operations is insufficient to complete such expansion on a timely basis, the expansion may be delayed, reduced in scope or discontinued. In that event, the Partnership may seek to obtain financing from Forum Group or the General Partner, although they do not have an obligation to provide any such financing. The Nomura Loan restricts the ability of the Partnership to obtain third-party financing (other than from Forum Group or the General Partner, on an unsecured, subordinated basis) above $1 million in the aggregate, and prohibits the imposition of liens on the Partnership's assets. There can be no assurance that a waiver could be obtained from the lender to permit any third-party financing, or whether, when and on what terms any such financing may be available. EX-99.2 4 EXHIBIT EX-99.2 EXHIBIT 99.2 LEGAL PROCEEDINGS On January 24, 1994, The Russell F. Knapp Revocable Trust (the "Plaintiff") filed a complaint (the "Iowa Complaint") in the United States District Court for the Northern District of Iowa (the "Iowa Court") against the General Partner alleging breach of the Partnership Agreement, breach of fiduciary duty, fraud, and civil conspiracy. The Plaintiff subsequently amended the Iowa Complaint, adding Forum Group as a defendant. The Iowa Complaint alleged, among other things, that the Plaintiff holds a substantial number of Units, that the Board of Directors of the General Partner is not comprised of a majority of independent directors as required by the Partnership Agreement and as allegedly represented in the Partnership's 1986 Prospectus for its initial public offering, and that the General Partner's Board of Directors has approved and/or acquiesced to an 8% management fee charged by Forum Group under the Management Agreement. The Iowa Complaint further alleged that the "industry standard" for such fees is 4%, thereby resulting in an "overcharge" to the Partnership estimated by the Plaintiff at $1.8 million per annum beginning in 1994. The Plaintiff sought the restoration of certain former directors to the Board of Directors of the General Partner and the removal of certain other directors from the Board, an injunction prohibiting the payment of an 8% management fee, and unspecified compensatory and punitive damages. On April 4, 1995, the District Court entered an order dismissing the Iowa Complaint on jurisdictional grounds. Although the Plaintiff filed a notice of appeal of the Iowa Court's ruling, it subsequently dismissed this appeal. On June 15, 1995, the Plaintiff filed a complaint (the "Indiana Complaint") in the United States District Court for the Southern District of Indiana (the "Indiana Court") against the General Partner and Forum Group containing essentially the same allegations asserted in the Iowa Complaint, and seeking essentially the same relief. The defendants moved to dismiss the Indiana Complaint for failure to state a claim for which relief could be granted and, in response, on December 11, 1995 the Plaintiff amended the Indiana Complaint. The defendants have also moved to dismiss the amended complaint on similar grounds. The parties are awaiting the Indiana Court's ruling. The General Partner intends to vigorously defend against this litigation. The Partnership, in accordance with the Management Agreement, reimbursed the General Partner for $89,000 and $146,000 of litigation costs relating to this claim in 1995 and 1994, respectively. -----END PRIVACY-ENHANCED MESSAGE-----