-----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, R/dJ0lMXTkXdwm0XSKz+JFjaswEANOS8aR9zO6XYHnb/tI0WH5dhz1HMrSVhHvbO LW+Nq6NKdaDvqq+69+a/Gg== 0000950114-96-000249.txt : 19960930 0000950114-96-000249.hdr.sgml : 19960930 ACCESSION NUMBER: 0000950114-96-000249 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 15 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960927 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ROSEWOOD CARE CENTERS CAPITAL FUNDING CORP CENTRAL INDEX KEY: 0000909110 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SKILLED NURSING CARE FACILITIES [8051] IRS NUMBER: 431623171 STATE OF INCORPORATION: MO FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 033-65948 FILM NUMBER: 96635333 BUSINESS ADDRESS: STREET 1: 11701 BORMAN DRIVE, SUITE 315 STREET 2: STE 113 CITY: ST LOUIS STATE: MO ZIP: 63146 BUSINESS PHONE: 3145760050 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ROSEWOOD CARE CENTER INC OF SWANSEA CENTRAL INDEX KEY: 0000909113 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SKILLED NURSING CARE FACILITIES [8051] IRS NUMBER: 431375489 STATE OF INCORPORATION: IL FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 033-65948-01 FILM NUMBER: 96635334 BUSINESS ADDRESS: STREET 1: 11701 BORMAN DRIVE STREET 2: STE 315 CITY: ST LOUIS STATE: MO ZIP: 63146 BUSINESS PHONE: 3149949070 MAIL ADDRESS: STREET 1: 11701 BORMAN DRIVE STREET 2: SUITE 315 CITY: ST LOUIS STATE: MO ZIP: 63146 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ROSEWOOD CARE CENTER INC OF GALESBURG CENTRAL INDEX KEY: 0000909114 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SKILLED NURSING CARE FACILITIES [8051] IRS NUMBER: 431375391 STATE OF INCORPORATION: IL FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 033-65948-02 FILM NUMBER: 96635335 BUSINESS ADDRESS: STREET 1: 11701 BORMAN DRIVE STREET 2: STE 315 CITY: ST LOUIS STATE: MO ZIP: 63146 BUSINESS PHONE: 3149949070 MAIL ADDRESS: STREET 1: 11701 BORMAN DRIVE STREET 2: SUITE 315 CITY: ST LOUIS STATE: MO ZIP: 63146 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ROSEWOOD CARE CENTER INC OF EAST PEORIA CENTRAL INDEX KEY: 0000909115 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SKILLED NURSING CARE FACILITIES [8051] IRS NUMBER: 431446788 STATE OF INCORPORATION: IL FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 033-65948-03 FILM NUMBER: 96635336 BUSINESS ADDRESS: STREET 1: 11701 BORMAN DRIVE STREET 2: STE 315 CITY: ST LOUIS STATE: MO ZIP: 63146 BUSINESS PHONE: 3149949070 MAIL ADDRESS: STREET 1: 11701 BORMAN DR STREET 2: SUITE 315 CITY: ST LOUIS STATE: MO ZIP: 63146 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ROSEWOOD CARE CENTER INC OF PEORIA CENTRAL INDEX KEY: 0000909116 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SKILLED NURSING CARE FACILITIES [8051] IRS NUMBER: 431446786 STATE OF INCORPORATION: IL FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 033-65948-04 FILM NUMBER: 96635337 BUSINESS ADDRESS: STREET 1: 11701 BOWMAN DRIVE STREET 2: STE 315 CITY: ST LOUIS STATE: MO ZIP: 63146 BUSINESS PHONE: 3149949070 MAIL ADDRESS: STREET 1: 11701 BOWMAN DRIVE STREET 2: SUITE 315 CITY: ST LOUIS STATE: MO ZIP: 63146 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ROSEWOOD CARE CENTER INC OF ALTON CENTRAL INDEX KEY: 0000909117 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SKILLED NURSING CARE FACILITIES [8051] IRS NUMBER: 431446787 STATE OF INCORPORATION: IL FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 033-65948-05 FILM NUMBER: 96635338 BUSINESS ADDRESS: STREET 1: 11701 BOWMAN DRIVE STREET 2: STE 315 CITY: ST LOUIS STATE: MO ZIP: 63146 BUSINESS PHONE: 3149949070 MAIL ADDRESS: STREET 1: 11701 BORMAN DR CITY: ST LOUIS STATE: MO ZIP: 63146 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ROSEWOOD CARE CENTER INC OF MOLINE CENTRAL INDEX KEY: 0000909118 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SKILLED NURSING CARE FACILITIES [8051] IRS NUMBER: 431453169 STATE OF INCORPORATION: IL FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 033-65948-06 FILM NUMBER: 96635339 BUSINESS ADDRESS: STREET 1: 11701 BORMAN DRIVE STREET 2: STE 315 CITY: ST LOUIS STATE: MO ZIP: 63146 BUSINESS PHONE: 3149949070 MAIL ADDRESS: STREET 1: 11701 BORMAN DRIVE STREET 2: SUITE 315 CITY: ST LOUIS STATE: MO ZIP: 63146 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SWANSEA REAL ESTATE INC CENTRAL INDEX KEY: 0000909120 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SKILLED NURSING CARE FACILITIES [8051] IRS NUMBER: 431446792 STATE OF INCORPORATION: IL FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 033-65948-07 FILM NUMBER: 96635340 BUSINESS ADDRESS: STREET 1: 11701 BORMAN DRIVE STREET 2: STE 315 CITY: ST LOUIS STATE: MO ZIP: 63146 BUSINESS PHONE: 3149949070 MAIL ADDRESS: STREET 1: 11701 BORMAN DRIVE STREET 2: SUITE 315 CITY: ST LOUIS STATE: MO ZIP: 63146 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GALESBURG REAL ESTATE INC CENTRAL INDEX KEY: 0000909121 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SKILLED NURSING CARE FACILITIES [8051] IRS NUMBER: 431453172 STATE OF INCORPORATION: IL FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 033-65948-08 FILM NUMBER: 96635341 BUSINESS ADDRESS: STREET 1: 11701 BORMAN DRIVE STREET 2: STE 315 CITY: ST LOUIS STATE: MO ZIP: 63146 BUSINESS PHONE: 3149949070 MAIL ADDRESS: STREET 1: 11701 BORMAN DRIVE STREET 2: SUITE 315 CITY: ST LOUIS STATE: MO ZIP: 63146 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EAST PEORIA REAL ESTATE INC CENTRAL INDEX KEY: 0000909122 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SKILLED NURSING CARE FACILITIES [8051] IRS NUMBER: 431453171 STATE OF INCORPORATION: IL FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 033-65948-09 FILM NUMBER: 96635342 BUSINESS ADDRESS: STREET 1: 11701 BORMAN DRIVE STREET 2: STE 315 CITY: ST LOUIS STATE: MO ZIP: 63146 BUSINESS PHONE: 3149949070 MAIL ADDRESS: STREET 1: 11701 BORMAN DRIVE CITY: ST LOUIS STATE: MO ZIP: 63146 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PEORIA REAL ESTATE INC CENTRAL INDEX KEY: 0000909123 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SKILLED NURSING CARE FACILITIES [8051] IRS NUMBER: 431446790 STATE OF INCORPORATION: IL FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 033-65948-10 FILM NUMBER: 96635343 BUSINESS ADDRESS: STREET 1: 11701 BORMAN DRIVE STREET 2: STE 315 CITY: ST LOUIS STATE: MO ZIP: 63146 BUSINESS PHONE: 3149949070 MAIL ADDRESS: STREET 1: 11701 BORMAN DRIVE STREET 2: SUITE 315 CITY: ST LOUIS STATE: MO ZIP: 63146 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALTON REAL ESTATE INC CENTRAL INDEX KEY: 0000909124 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SKILLED NURSING CARE FACILITIES [8051] IRS NUMBER: 431476931 STATE OF INCORPORATION: IL FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 033-65948-11 FILM NUMBER: 96635344 BUSINESS ADDRESS: STREET 1: 11701 BORMAN DRIVE STREET 2: STE 315 CITY: ST LOUIS STATE: MO ZIP: 63146 BUSINESS PHONE: 3149949070 MAIL ADDRESS: STREET 1: 11701 BORMAN DRIVE STREET 2: SUITE 315 CITY: ST LOUIS STATE: MO ZIP: 63146 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MOLINE REAL ESTATE INC CENTRAL INDEX KEY: 0000909125 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SKILLED NURSING CARE FACILITIES [8051] IRS NUMBER: 431453170 STATE OF INCORPORATION: IL FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 033-65948-12 FILM NUMBER: 96635345 BUSINESS ADDRESS: STREET 1: 11701 BORMAN DRIVE STREET 2: STE 315 CITY: ST LOUIS STATE: MO ZIP: 63146 BUSINESS PHONE: 3149949070 MAIL ADDRESS: STREET 1: 11701 BORMAN DRIVE STREET 2: SUTIE 315 CITY: ST LOUIS STATE: MO ZIP: 63146 10-K 1 ROSEWOOD CARE CENTERS CAPITAL FUNDING CORP. FORM 10-K 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) [ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED) FOR THE FISCAL YEAR ENDED JUNE 30, 1996 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED) Commission file number 33-65948 ROSEWOOD CARE CENTERS CAPITAL FUNDING CORPORATION (Exact name of Registrant as specified in its charter) (See table of Co-Registrants) MISSOURI 43-1623171 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 11701 BORMAN DRIVE, SUITE 315 ST. LOUIS, MISSOURI 63146 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (314) 994-9070 Securities registered pursuant to Section 12(b) of the Act: NONE Securities registered pursuant to Section 12(g) of the Act: NONE INDICATE BY CHECK MARK WHETHER 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 REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES X NO --- --- INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM 405 OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO THE BEST OF REGISTRANTS' KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION STATEMENTS INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY AMENDMENT TO THIS FORM 10-K. [ ] CERTAIN INFORMATION CALLED FOR ON ITEM 14 OF PART IV OF THIS FORM 10-K IS INCORPORATED BY REFERENCE TO REGISTRANTS' REGISTRATION STATEMENT (NO. 33-65948) DATED JULY 13, 1993 WHICH WAS DECLARED EFFECTIVE OCTOBER 14, 1993, REGISTRANTS' FORM 10-Q FILED NOVEMBER 29, 1993, REGISTRANTS' FORM 10-Q FILED FEBRUARY 11, 1994, REGISTRANTS' FORM 10-K FILED SEPTEMBER 28, 1994, REGISTRANTS' FORM 10-Q FILED FEBRUARY 14, 1995, REGISTRANTS' FORM 10-Q FILED MAY 15, 1995, REGISTRANTS' FORM 10-Q FILED FEBRUARY 13, 1996 AND REGISTRANTS' FORM 10-Q FILED MAY 14, 1996. Index to Exhibits is on Page 71. 2 CO-REGISTRANTS Rosewood Care Center, Inc. of Swansea Rosewood Care Center, Inc. of Galesburg Rosewood Care Center, Inc. of East Peoria Rosewood Care Center, Inc. of Peoria Rosewood Care Center, Inc. of Alton Rosewood Care Center, Inc. of Moline Swansea Real Estate, Inc. Galesburg Real Estate, Inc. East Peoria Real Estate, Inc. Peoria Real Estate, Inc. Alton Real Estate, Inc. Moline Real Estate, Inc. (Exact names of Co-Registrants as specified in their charters) No separate periodic or annual reports are filed for each of the co-registrants and no separate financial statements are included for each of the co-registrants because the co-registrants are effectively jointly and severally liable with respect to the Notes and because such separate periodic or annual reports and such separate financial statements are not deemed material to investors. 2 3 ROSEWOOD CARE CENTERS CAPITAL FUNDING CORPORATION INDEX PART I 4 ITEM 1. BUSINESS 4 ITEM 2. PROPERTIES 10 ITEM 3. LEGAL PROCEEDINGS 11 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS 11 PART II 12 ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS 12 ITEM 6. SELECTED FINANCIAL DATA 12 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 13 ITEM 8. COMBINED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 19 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 52 PART III 52 ITEM 10. DIRECTORS AND OFFICERS OF THE COMPANY 52 ITEM 11. EXECUTIVE COMPENSATION 52 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT 53 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 54 PART IV 56 ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES & REPORTS ON FORM 8-K 56 (a) 1 and 2 Financial Statements and Financial Statement Schedule 56 (a) 3 Exhibits 56 (b) Reports on Form 8-K 56 (c) Exhibits 56 (d) Financial Statement Schedule 56 SUPPLEMENTAL INFORMATION 57 EXHIBIT INDEX 71
3 4 PART I ITEM 1. BUSINESS. BUSINESS OF THE REMIC Rosewood Care Centers Capital Funding Corporation, a Missouri corporation, was formed June 23, 1993 as a single purpose corporation, to function as a real estate mortgage investment conduit ("REMIC"). The REMIC was organized to issue the 7 1/4% First Mortgage Redeemable Bonds due November 1, 2013 and to make first mortgage loans to six affiliated companies (the "Borrowing Companies"). Each of the six Borrowing Companies owns a skilled nursing facility which is state-licensed. The six skilled nursing facilities are operated by six affiliated companies, which are guarantors of the first mortgage loans (the "Guarantors") (collectively the Borrowing Companies and the Guarantors are the "Companies"). The principal assets of the REMIC are the notes from the six first mortgage loans. The REMIC does not engage in any business or investment activities other than in connection with administering the repayment of the bonds and the first mortgage loans. BUSINESS OF THE COMPANIES The Companies own and operate six Rosewood Care Centersm skilled nursing facilities located in Illinois, each with a 120 bed capacity. The facilities provide convalescent care, long-term care, and rehabilitative services primarily for elderly patients. Each facility offers a complete therapy program, including physical, occupational and speech therapy under the direction of a registered therapist. The Companies principally market to private paying patients and attempt to provide a high-quality alternative to competing facilities, both in the physical surroundings and services offered. The Companies' marketing strategy focuses on obtaining the highest average daily rate as well as high occupancy levels in order to maximize revenues from the facilities. Although the facilities provide long-term care for those patients who require it, emphasis is on rehabilitative services to allow a patient to convalesce and either return to independent living outside the facility or enjoy a maximum level of independence and mobility within the facility. The Companies believe this emphasis has an appeal to a much larger private payor market than exists for a strictly long-term care oriented nursing home. Approximately 62% of the patients in the facilities are private paying, though all the facilities participate in both the Medicare and Medicaid programs. The majority of the patients have sufficient funds and desire at the outset to try restorative therapy, which is covered by Medicare and private insurance. The Medicare program and various forms of private payment are the principal payors for short-term nursing home care and rehabilitative services. Because of the high percentage of patients in the facilities that are private paying, the average daily rate of the facilities is higher than it would be if the facilities had a greater participation in the Medicaid program. All of the facilities currently participate in one or more managed care programs. The Companies are negotiating with additional third parties and expect to enter into additional managed care contracts in the future. 4 5 OPERATIONS Each skilled nursing facility is managed by an affiliated company, HSM Management Services, Inc., an Illinois corporation ("HSM Management"), pursuant to management agreements with each Guarantor. HSM Management provides a state-licensed nursing home administrator for each skilled nursing facility. HSM Management employs a director of operations and three directors of nursing who supervise operations at the six facilities owned by the Companies, as well as others. In addition, nursing staff at each skilled nursing facility is under the supervision of a state-licensed director of nursing who is an employee of the facility. The nursing staffs consist of registered nurses and licensed practical nurses, as well as nurses aides. The facilities also contract with others to provide therapy services, medical and dietary consulting services, personal grooming services and recreational activities. The management agreements entered into with Hovan Enterprises, Inc. ("Hovan"), the precedessor of HSM Management, Inc. by each Guarantor on October 21, 1993, the bond issue date, continue in full force and effect after the merger of Hovan into HSM Management. All of the provisions of the management agreements apply to HSM Management in the same way they previously applied to Hovan. REVENUE BY PAYOR The following table indicates the percentage of patient service revenue of the Companies by type of payor for the periods indicated.
FISCAL YEAR ENDED JUNE 30, 1994 1995 1996 ---- ---- ---- (Dollars in Thousands) Amount Percent Amount Percent Amount Percent ------ ------- ------ ------- ------ ------- Private $16,307 67.0% $16,827 65.0% $17,079 62.0% Medicare 6,632 27.0 7,443 29.0 9,293 33.0 Medicaid 1,489 6.0 1,495 6.0 1,319 5.0 ------- ----- ------- ----- ------- ----- Total $24,428 100.0% $25,765 100.0% $27,691 100.0% ======= ===== ======= ===== ======= =====
OCCUPANCY BY LOCATION AS A PERCENTAGE OF AVAILABLE BEDS Each facility has the capacity of 120 beds. Most of the rooms are designed to be semi-private, with two beds per room. Some semi-private rooms are made available as private at a higher daily rate, thereby resulting in a lower number of available beds at a facility. The Companies focus on obtaining the highest average daily rate which may produce higher revenues even at lower occupancies, whereas if the facilities were principally Medicaid providers, maximum revenues could only be achieved with maximum occupancies. The following table indicates occupancy at each facility as a percentage of available beds for the periods indicated. 5 6
1992 1993 1994 1995 1996 ---- ---- ---- ---- ---- Swansea 91.8% 91.7% 96.6% 97.9% 96.5% Galesburg 93.8 90.4 95.7 91.4 82.2 Alton 90.3 90.2 97.1 95.7 97.6 Peoria 80.0 79.8 91.6 89.7 86.4 East Peoria 90.0 88.6 88.6 83.7 74.5 Moline 80.7 91.0 94.5 94.8 89.2 ---- ---- ---- ---- ---- Combined Average 87.8% 88.6% 93.8% 92.2% 87.7% ==== ==== ==== ==== ====
MARKETING The Companies attempt to increase admissions through marketing programs. The Companies' marketing programs are executed under the direction of HSM Management. Marketing is done through direct mail, community programs and television. Although the Companies provide long-term nursing home care, their marketing strategy emphasizes short-term nursing home care for rehabilitative purposes. The Companies believe this emphasis has an appeal to a much larger private payor market than exists for strictly long-term care oriented nursing homes. GOVERNMENTAL REGULATION AND REIMBURSEMENT The Companies' nursing facilities are required to comply with various federal and state health care regulations and statutes. Compliance with the state licensing regulations is a prerequisite for the operation of the facilities and for participation in government sponsored health care programs such as Medicaid and Medicare. All six facilities participate in the federally administered Medicare program. Medicare is a health insurance program for the aged and certain other disabled individuals, operated by the federal government and administered by an insurance intermediary. As a result of the Companies' emphasis on short-term rehabilitative nursing care, which is covered by Medicare, the percentage of patient service revenue attributable to Medicare continues to be a significant sector of the Companies' total revenue. The Companies have experienced significant growth in ancillary revenues, primarily for services reimbursed by Medicare, over the past several years. Ancillary revenues are derived from providing services to residents over and above room and board and include services such as occupational, physical, speech, and IV therapy, as well as prescription drugs and medical supplies. Such services are being provided primarily to Medicare and private pay residents which is consistent with the current trend of providing services in the lower cost setting of nursing facilities rather than in hospitals. Medicaid is a medical assistance program for the indigent, operated by the State of Illinois with financial aid provided by the federal government. Prior to January 1991, four of the six facilities participated in the state administered Medicaid program. In 1991, the Companies began to voluntarily 6 7 withdraw the facilities from the Medicaid program. However, in May 1993, as a result of a change in state policy, all six Guarantors requested and received certification in the Medicaid program for a distinct part of each facility for a limited number of beds. This certification permits the Companies to participate in the Medicaid program while limiting the Medicaid census at their respective facilities. The Galesburg and East Peoria facilities are certified for twenty beds each and the four remaining facilities for ten beds each. Under current reimbursement regulations, funds received under Medicare programs are subject to audit by the third party payor responsible for administering the facility account. This results either in amounts due to or from the facilities based on the actual costs of participating in the Medicare program during the year. Past audits of the Companies' reimbursements through the fiscal year ending June 30, 1994, have not resulted in any material adjustments for any of the Companies that were not otherwise indemnified for by private vendors to the Companies. Audits of the Medicare program for all the facilities have recently been completed through the fiscal year ended June 30, 1995. The Companies experienced a material negative adjustment to their Medicare cost reports for that year with regard to costs for therapy services furnished by a private vendor. The Companies were indemnified by the private vendor for most of the negative adjustment and continue to be indemnified for 1996 and the years thereafter. Medicare reimbursement of routine operating costs is subject to a cap that is related to costs of similar providers. In cases where this cap is exceeded, the facility may obtain an exception if it can show that the excess costs are caused by "atypical services." All six of the facilities exceeded the cap by the aggregate amount of $346,000 in 1996. The Company is in the process of compiling the information necessary to apply for the exception for two of the facilities which qualify for the exception for 1995 and one of the facilities which qualifies for 1996. Management cannot predict whether or not the Company will be successful in its application to the regulatory agency to grant the exception. Legislation was enacted by the United States Congress which froze the routine cost limits at pre October 1, 1993 levels for cost report periods beginning prior to October 1, 1995. The legislation limits any exceptions to such limits to the amount that would have been granted if no restriction on charges to the cost limits had been enacted. In addition, such legislation eliminated the return on equity payment available to certain nursing facilities. This legislation has not materially adversely affected the Companies' results of operations nor do the Companies expect any significant future impact on revenues. In addition to the requirements for participation in the Medicare and Medicaid programs, the Companies' health care facilities are subject to annual licensing and other regulatory requirements of state authorities. In order to maintain the operators' licenses, the nursing facilities must meet certain statutory and administrative requirements. The requirements relate to the physical condition of the building and equipment used in the patient care, the quality and adequacy of personnel and the quality of medical care. The Health Care Financing Administration of the Department of Health and Human Services ("HCFA") has adopted new survey, certification and enforcement procedures by regulations effective July 1, 1995, to implement various Medicare and Medicaid provisions of the Omnibus Budget Reconciliation Act of 1987 ("OBRA"). The 7 8 Companies' believe that the facilities are in full compliance with the requirements of the applicable Medicaid and Medicare regulatory requirements currently in effect. In the ordinary course of business, the Company receives notices of deficiencies for failure to comply with various regulatory requirements. The notices are reviewed and the Companies take the appropriate action to correct the deficiencies noted. There can be no assurance that the Company will not be required to expend significant sums in order to maintain its licenses in the future. While federal regulations do not provide states with the grounds to curtail funding of their Medicaid cost reimbursement programs due to state budget deficiencies, the states have reduced funding in the past. No assurance can be given that the state will not do so in the future or that the future funding of Medicaid programs will remain comparable to the present level. The United States Supreme Court ruled in 1990 that health care providers may bring suit in federal court to enforce the Medicaid Act requirement that states reimburse nursing facilities at rates which are reasonable and adequate. Governmental funding for health care programs continues to be under pressure. Recent actions have included lowering the Medicaid reimbursement rate, thus limiting payments to hospitals and nursing homes under the Medicaid program. Another reimbursement change currently being discussed is a change in the Medicare system of reimbursement for certain therapy services. Health care funding was again a prominent issue in the United States Congress during the past year. Numerous proposals are pending which seek to reduce the costs of the Medicare and Medicaid programs by lowering the utilization of the programs and by controlling costs within the programs. As a result of the national pressure on health care costs, the Medicare program is facing significant cutbacks and intense scrutiny. Due to this atmosphere, the Companies have experienced closer scrutiny and delays with regard to payment of claims under the Medicare program. The Companies do not expect this environment to improve in the near future and believe they will experience future problems relating to reimbursement, some of which could have a significant effect on operations. The Companies are carefully monitoring these developments and attempting to structure contractual arrangements which they believe will minimize the impact of reductions in government reimbursement. However, no assurance can be made that the funding of Medicare and Medicaid will remain at their current levels. Changes in the reimbursement policies of Medicare and Medicaid as a result of budget cuts by federal and state governments or other legislative actions could adversely affect the revenues of the Companies. COMPETITION The long-term care industry is highly competitive. The Companies compete with other providers on the basis of the breadth and quality of services they offer, the quality of their facilities and price. The Companies also compete in the recruitment of qualified health care personnel and the acquisition and development of additional facilities. The Companies' current and potential competitors include national, regional and local long-term care providers as 8 9 well as hospital-based extended care providers and rehabilitation hospitals, many of which have significantly greater financial and other resources than the Companies. In addition, certain competitors are operated by not-for-profit organizations and similar businesses which can finance capital expenditures on a tax-exempt basis or receive charitable contributions unavailable to the Companies. Managed care contracts will also have an impact on competition, as services formerly provided at hospitals are shifted to nursing homes and as the managed care model becomes more common in the nursing home industry. The degree of success with which the Companies compete varies from location to location and depends on a number of factors, including the number of competing facilities in the local market, types of services, quality of care, reputation, age and appearance of each facility and the cost of care in each location. In light of these factors, the Companies seek to meet competition in each location by establishing a reputation in the local community for high quality nursing services and attractive facilities, and by responding to the specialized health needs of their patients and referral sources. The need for skilled nursing facilities is expected to increase in the future as the demand for rehabilitative and long-term care increases. Construction of new skilled nursing facilities near the Companies' facilities could adversely affect the Companies' business. However, state regulations generally require a CON before a new skilled nursing facility can be constructed or additional beds can be added to existing facilities. The Companies believe that these regulations reduce the possibility of overbuilding and promote higher utilization of existing facilities. At the time the CON was granted for each of the Companies' skilled nursing facilities, the addition of such facilities resulted in an excess number of beds for purposes of future CON analysis. Under current CON regulations, existing facilities are given a preference in the opportunity to meet any additional need by expansion before a CON is issued for construction of a new facility. Recently, there have been Legislative initiatives to repeal existing CON laws and there can be no assurance that the CON procedure will not be eliminated or changed in the future. Although the terms of the loan documents prohibit the Borrowing Companies from undertaking new construction, the Guarantors are not prohibited from operating additional facilities, including expansion facilities. All of the facilities are adjacent to excess acreage owned by affiliated companies and related companies are allowed to construct expansions to current facilities under certain conditions. At Galesburg and Alton affiliated companies contemplate commencing construction of expansions during the 1997 fiscal year. LEASES Each of the facilities is leased by a Guarantor from the Borrowing Company which owns the facility. Lease payments consist of a base rent which is adjustable based on the amount needed by the Borrowing Company to service mortgage indebtedness on the facility and additional rent based on the economic performance of the facilities. Each lease has an initial term of four years and may be extended for up to five additional four-year periods. Under each lease, the Borrowing Company is required to furnish the building and all equipment and furnishings and any replacements necessary for the operation of the facility. 9 10 The Guarantor is responsible for paying all other expenses associated with operating the facility. The lease payments represent substantially all of the income earned by the Borrowing Companies. INSURANCE The Companies carry property insurance, general liability insurance and other insurance which they believe adequate to cover the facilities and their businesses. EMPLOYEES The REMIC and the Borrowing Companies have no employees. The Guarantors employed 497 persons at June 30, 1996. None of the employees of the Companies are covered by collective bargaining agreements. The Companies believe that their relations with their employees are good and they have never experienced a major labor dispute. The Company has experienced increases in its labor costs due to higher wages and greater benefits required to attract and retain qualified personnel. The Company expects labor costs to increase in the future, but any increase in costs would probably be offset by increases in patient rates. The Company has not experienced any shortages in qualified personnel to staff the facilities, but it competes with other health care providers and service industries which could adversely affect the availability of qualified personnel in the future. ITEM 2. PROPERTIES. THE FACILITIES Each of the facilities is a one story, 120 bed skilled nursing care facility consisting of approximately 38,000 to 40,000 square feet and situated on 4 to 7 acres. Each facility is new construction, with poured concrete foundation and brick veneer exterior walls. The facilities were built by the Companies for use as skilled nursing facilities with modern design and high quality systems. Accordingly, the Companies believe the properties are well suited to present and future needs. The six facilities are encumbered by the first mortgages given to the REMIC. ROSEWOOD CARE CENTER OF SWANSEA Rosewood Care Center of Swansea is owned by Swansea Real Estate, Inc. and is operated by Rosewood Care Center, Inc. of Swansea. The Swansea Facility opened October 8, 1987 and is located at 100 Rosewood Village Drive, Swansea, Illinois 62221 on the west side of Highway 159, just north of Fullerton Road in Swansea, Illinois. ROSEWOOD CARE CENTER OF GALESBURG Rosewood Care Center of Galesburg is owned by Galesburg Real Estate, Inc. and is operated by Rosewood Care Center, Inc. of Galesburg. The Galesburg Facility opened December 9, 1987 and is located at 1250 West Carl Sandburg Dr., Galesburg, Illinois 61401 on the southeast corner of Sandburg Mall Access Road 10 11 and West Carl Sandburg Drive. ROSEWOOD CARE CENTER OF ALTON Rosewood Care Center of Alton is owned by Alton Real Estate, Inc. and is operated by Rosewood Care Center, Inc. of Alton. The Alton facility opened May 15, 1989 and is located at 3490 Humbert Road, Alton, Illinois 62002 on the north side of Pebble Creek Lane at Humbert Road, Alton, Illinois. ROSEWOOD CARE CENTER OF PEORIA Rosewood Care Center of Peoria is owned by Peoria Real Estate, Inc. and is operated by Rosewood Care Center, Inc. of Peoria. The Peoria facility opened June 12, 1989 and is located at 1500 West Northmoor Road, Peoria, Illinois 61614 at the junction of Northmoor Road and University Avenue in Northwest Peoria. ROSEWOOD CARE CENTER OF EAST PEORIA Rosewood Care Center of East Peoria is owned by East Peoria Real Estate, Inc. and is operated by Rosewood Care Center, Inc. of East Peoria. The East Peoria facility opened April 18, 1989 and is located at 900 Centennial Drive, East Peoria, Illinois 61611 on the south side of Centennial Drive and Oakwood, East Peoria, Illinois. The East Peoria facility is approximately five miles from the Peoria facility. ROSEWOOD CARE CENTER OF MOLINE Rosewood Care Center of Moline is owned by Moline Real Estate, Inc. and is operated by Rosewood Care Center, Inc. of Moline. The Moline facility opened May 6, 1990 and is located at 7300 - 34th Avenue, Moline, Illinois 61265 on 34th Avenue two blocks east of Black Hawk College in Moline, Illinois. ITEM 3. LEGAL PROCEEDINGS. There are various lawsuits and regulatory actions pending against the Companies arising in the normal course of business, some of which seek punitive damages. The Companies do not believe that the ultimate resolution of these matters will have a material adverse effect on the Companies' combined financial position or results of operations. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS. Not applicable. 11 12 PART II ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. Not applicable. ITEM 6. SELECTED FINANCIAL DATA. The following table of selected combined financial data should be read in conjunction with the Combined Financial Statements and related Notes thereto included elsewhere in this annual report on Form 10-K.
1992 1993 1994 1995 1996 ---- ---- ---- ---- ---- STATEMENT OF OPERATIONS DATA: Patient Service Revenue: Private........................ $14,172 $15,083 $16,307 $16,827 $17,079 Medicare....................... 3,560 5,859 6,632 7,443 9,293 Medicaid....................... 1,726 1,811 1,489 1,495 1,319 Other Patient Revenues, Net of Expenses 82 80 76 74 62 ------- ------- ------- ------- ------- Total.......................... 19,540 22,833 24,504 25,839 27,753 ------- ------- ------- ------- ------- Facility Expenses................ 11,847 13,366 14,278 16,050 18,009 ------- ------- ------- ------- ------- Income After Facility Expenses... 7,693 9,467 10,226 9,789 9,744 ------- ------- ------- ------- ------- Nonfacility Expenses............. 3,799 2,141 2,867 2,772 2,829 ------- ------- ------- ------- ------- Income Before Incentives......... 5,668 5,552 7,359 7,017 6,915 Incentive Management Fees and Officers' Bonuses.............. (2,254) (1,528) (2,573) (2,221) (2,167) ------- ------- ------- ------- ------- Income From Operations........... 4,034 3,414 4,786 4,796 4,748 ------- ------- ------- ------- ------- Other Income (expenses).......... (1,684) (1,342) (1,576) (1,447) (1,367) ------- ------- ------- ------- ------- Income Before Taxes.............. 2,350 2,072 3,210 3,349 3,381 Income Tax (expense) Benefit..... 29 (299) (346) (336) (306) ------- ------- ------- ------- ------- Net Income ...................... $ 2,379 $ 1,773 $ 2,864 $3,013 $ 3,075 ======= ======= ======= ======= ======= OTHER DATA: Net income available for debt service................... $ 6,958 $ 6,958 $ 9,075 $8,905 $ 8,788 Debt service coverage ratio.. 2.90x 2.85x 2.81x DIVIDENDS DECLARED ................ $ 600 $ 1,649 $ 2,542 $ 2,819 $ 2,819 12 13 1992 1993 1994 1995 1996 ---- ---- ---- ---- ---- BALANCE SHEET DATA: Current Assets $ 3,509 $ 4,197 $ 5,916 $ 5,913 $ 6,960 Total Assets 27,881 27,118 36,478 35,584 34,457 Current Liabilities 2,643 2,689 4,147 4,726 5,136 Long-Term Debt 24,300 23,367 30,947 29,280 27,487 Stockholders Equity (Deficit) (938) 1,062 1,384 1,578 1,834 - ------------------------- "Net Income Available for Debt Service" is defined in the loan agreement among the REMIC and the Companies dated as of October 1, 1993. It is calculated for a 12 month period by taking the income from operations and adding non-cash expenditures (depreciation and amortization) and expenses subordinated to annual debt service (management fees, officers' bonuses) and interest income. Calculated by dividing the Net Income Available for Debt Service by the annual debt service on the 7 1/4% First Mortgage Redeemable Bonds due November 1, 2013.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. OVERVIEW The Companies' operating strategy focuses on the average daily rate as well as on occupancy levels in order to maximize revenues from the facilities. The Companies principally market their services to private paying patients. Revenues from this market continued to grow in 1996. The Companies have continued their marketing emphasis on short-term convalescent care while continuing to provide long-term care. The number of short-term care patients and demand for ancillary rehabilitative and therapy services continues to increase. Revenues and expenses associated with rehabilitative and therapy have continued to increase through June 30, 1996. The Medicare program and various forms of private payment are principal payors for short-term nursing home care and rehabilitative services. All six of the facilities participate in the federally administered Medicare program. In May 1993, as a result of a change in state policy allowing limited participation in Medicaid, the Companies requested and received certification in the Medicaid program for a distinct number of beds in each facility. The Companies believe this is the most economically desirable participation in the Medicaid program for them. Medicare revenues are expected to remain at substantially the level experienced in fiscal year 1996. Private patient revenues continue to represent the major share of all patient service revenues. All of the Companies currently participate in one or more managed care programs. The Companies are negotiating with third parties and expect to enter into additional managed care contracts in the future. 13 14 OPERATING RESULTS YEAR ENDED JUNE 30, 1996 COMPARED TO YEAR ENDED JUNE 30, 1995 Net Revenues. Net revenues increased to $27,753,000 for the year ended June 30, 1996, from $25,839,000 for the same period in 1995, an increase of $1,914,000 or 7.4%. Private revenue increased $252,000 or 1.5%, which is the result of an increase in the room revenue of $208,000 and a $44,000 increase in ancillary revenue during the 1996 fiscal year. Private census decreased to 162,387 patient days compared to a private census of 170,342 patient days for the fiscal year ended June 30, 1995. The average room rate for the year ended June 30, 1996 has increased to $102 per day compared to $96 per day for 1995. Medicare revenue increased $1,850,000 or 24.9%, due to an increase in the Medicare reimbursement rate for the current fiscal year, which is a direct result of the increase in the ancillary services provided to Medicare eligible residents. The Medicare census for the fiscal year ended June 30, 1996, aggregated 39,509 patient days compared to 40,049 for the fiscal year ended June 30, 1995. Medicaid revenue has decreased $176,000 or 11.8% when compared to the same period last year. The total patient census aggregated 87.7% of available beds for the fiscal year ended June 30, 1996, compared to 92.2% for the prior fiscal year. Facility Operating Expense. Facility operating expenses increased to $18,009,000 for the period ended June 30, 1996, (or $80.88 per patient day) from $16,050,000 (or $68.74 per patient day) for the fiscal year ended June 30, 1995, an increase of $1,959,000 (or $12.14 per patient day). Nursing expenses have decreased $38,000 from $6,556,000 for 1995 to $6,518,000 for the year ended June 30, 1996. Nursing payroll expenses increased $303,000 from $5,500,000 for 1995 to $5,803,000 for 1996, while other nursing expenses decreased $341,000 when compared to the same period last year. Ancillary services (which is comprised of physical therapy, occupational therapy, speech therapy, drugs and medical supplies), increased $1,826,000 when compared to the same period last year. The increase in cost is the direct result of the increase in ancillary services billed to Medicare and private pay residents. Dietary expenses increased $51,000 or 2.9% compared to the same period last year, which is primarily due to inflation. Plant utilities and maintenance expenses have increased $97,000 when compared to the same period last year. Housekeeping and laundry expenses increased $37,000 or 4.5% when compared to the same period last year. The majority of the increase is the result of an increase in the cost of supplies for those departments. Employee fringe benefit expenses decreased $32,000 compared to the same period last year. The majority of the decrease is attributable to the decrease in the cost of workmen's compensation insurance. Administrative expenses decreased $73,000 when compared to the same period last year, primarily as a result of a decrease in payroll expense for the current year. 14 15 Social service and activities expenses increased $91,000 or 19.8% when compared to the same period last year. The increase is attributable to an increase in staffing for these departments. Nonfacility Expense. Real estate taxes and insurance increased $36,000, which is the result of an increase in the cost of liability and property insurance of $10,000 and a $26,000 increase in real estate taxes. Depreciation and amortization expense increased $21,000 when compared to the same period last year. The increase is a result of leasehold improvements aggregating $159,000 and $171,000 for the fiscal years ended June 30, 1996 and 1995 respectively. Incentive Fees. Incentive management fees decreased $62,000 compared to the same period last year as a result of the decrease in the income from operations of the nursing facilities. Incentive management fees are based on the combined performance of the six facilities. Officers' bonuses of $188,000 paid during 1996, compared to $180,000 for 1995, were awarded at the discretion of the Companies' sole director. Other Income and Expense. Interest income decreased $36,000 or 4.2% compared to the same period last year. The decrease is the result of a decrease in notes receivable from $9,332,000 from Rosewood Care Center Holding Co. for 1995 to $8,056,000 for the fiscal year ended June 30, 1996. Interest expense decreased $116,000 compared to the same period last year which is the result of the decrease in the outstanding long-term debt. Income Taxes. Income taxes decreased $30,000 while income before income taxes increased $32,000 because the real estate companies' income is taxed at the individual shareholder level and not the corporate level. A larger portion of the combined revenue of the companies was sheltered in the real estate companies for the current fiscal year compared to the prior fiscal year. YEAR ENDED JUNE 30, 1995 COMPARED TO YEAR ENDED JUNE 30, 1994 Net Revenues. Net revenues increased to $25,839,000 for the year ended June 30, 1995, from $24,504,000 for the same period in 1994, an increase of $1,335,000 or 5.4%. Private revenue increased $520,000 or 3.2%, which is the result of an increase in the room rates during the 1995 fiscal year. Private census decreased to 170,342 patient days compared to a private census of 172,788 patient days for the fiscal year ended June 30, 1994. Medicare revenue increased $811,000 or 12.2%, due to an increase in the Medicare reimbursement rate for the current fiscal year, which reimbursement increase is a direct result of the increase in the cost of ancillary services provided to Medicare eligible residents. The Medicare census for the fiscal year ended June 30, 1995, aggregated 40,049 patient days compared to 40,332 for the fiscal year ended June 30, 1994. Medicaid revenue is virtually unchanged from the prior fiscal year. The total patient census aggregated 92.2% of available beds for the fiscal year ended June 30, 1995, compared to 93.8% for the prior fiscal year. Facility Operating Expense. Facility operating expenses increased to $16,050,000 for the period ended June 30, 1995, (or $68.74 per patient day) from 15 16 $14,278,000 (or $60.49 per patient day) for the fiscal year ended June 30, 1994, an increase of $1,772,000 (or $8.25 per patient day). Nursing services increased $567,000 or 9.5% when compared to the same period last year. The increase is the result of an increase in labor costs during the 1995 fiscal year. Ancillary services expense increased $830,000 as the result of an increase in the cost of ancillary services for occupational therapy, physical therapy, speech therapy, drugs and medical supplies provided for Medicare and private residents. Dietary expenses increased $67,000 or 4.0% compared to the same period last year. The increase is due primarily to inflation. Plant utilities and maintenance expenses are virtually unchanged from a year ago. Housekeeping and laundry expenses increased $42,000 or 5.4% when compared to the same period last year. The majority of the increase is the result of an increase in wages for those departments. Social services and activities expenses increased $80,000 or 21.1% compared to the same period last year. The increase is due to increased staffing in these departments. Employee fringe benefit expenses increased $139,000 compared to the same period last year. The cost per patient day increased from $7.06 for 1994 to $7.74 for 1995. The majority of the increase can be accounted for by the increase in payroll taxes and holiday pay. Payroll taxes increased as a result of the increase in wages and an increase in state unemployment tax rates. Full time employee equivalents aggregated 500 and 493 employees for 1995 and 1994 respectively. Holiday pay increased due to a change in company policy as to employee eligibility for holiday pay premiums. Administrative expenses increased $32,000 compared to the same period last year. The increase of 3.6% is the result of inflation for the current fiscal year. The cost per patient day increased to $3.96 per patient day compared to $3.76 per patient day for the fiscal year ended June 30, 1994. Nonfacility Expense. Real estate taxes and insurance decreased $42,000 compared to the same period last year. The $26,000 real estate tax reduction is the result of a decrease in the assessment of three of the six facilities after the appeals of prior increases were decided. Insurance costs also decreased $16,000. Depreciation and amortization decreased $53,000 when compared to the same period last year. The amortization expense for the fiscal year ended June 30, 1994, contained a write off of loan costs in the amount of $105,892 on refinanced debt. Incentive Fees. Incentive management fees decreased $357,000 compared to the same period last year as a result of the decrease in the income from operations of the nursing facilities. Incentive management fees are based on the combined performance of the six facilities. Officers' bonuses of $180,000 paid during 1995, compared to $175,000 for 1994, were awarded at the discretion of the Companies' sole director. 16 17 Other Income and Expense. Interest income increased $225,000 or 35.8% compared to the same period last year. The increase is the result of notes receivable aggregating $9,332,000 from Rosewood Care Center Holding Co. which were outstanding for the full twelve months of the current fiscal year, compared to only eight months for the prior fiscal year. Interest expense increased $96,000 compared to the same period last year. The refinancing of the corporate debt occurred during October 1993, four months into the 1994 fiscal year. Interest expense for the current year reflects a twelve month period under the refinancing arrangement compared to only eight months for the 1994 fiscal year. Income Taxes. Income taxes decreased $10,000 while income before income taxes increased $139,000 because the real estate companies' income is taxed at the individual shareholder level and not the corporate level. A larger portion of the combined revenue of the companies was sheltered in the real estate companies for the current fiscal year compared to the prior fiscal year. INFLATIONARY FACTORS The health care industry is labor intensive. General operating expenses related to personnel, such as salaries and employee benefits, as well as expenses of dietary, medical and other supplies, are subject to normal inflationary factors. The Companies' response to such pressures has been to concurrently increase rates charged private paying patients. Any cost increases billed under Medicare are paid for at year-end as a part of the annual cost reimbursement settlement. Reimbursement of increased expenses from Medicaid may lag for up to 18 months. Although the Companies have successfully implemented rate increases to compensate for increases in operating expenses in the past, there can be no assurance that the Companies will always be able to do so in the future. LIQUIDITY AND CAPITAL RESOURCES Overview. As of June 30, 1996 the Companies had approximately $2,237,000 in cash and cash equivalents and net working capital of approximately $1,824,000. The decrease in cash of $285,000 is the result of cash from operations aggregating $3,174,000, down from $3,827,000 in 1995, cash from investing activities of $1,117,000 (the majority of which was from payments on notes with Rosewood Care Center Holding Co.) and cash used in financing activities of $4,576,000 (which is comprised of debt retirement aggregating $1,667,000 and payment of dividends aggregating $2,909,000). On October 21, 1993 the Companies refinanced their long term debt with the REMIC which issued $33,000,000 of its 7-1/4% First Mortgage Redeemable Bonds due November 1, 2013. Proceeds from the sale of the bonds were used to pay off the Companies' existing debt with a number of banks and to pay the loan costs, including issuance costs of the bonds. Per the terms of the loan documents, a reserve fund in the form of an irrevocable letter of credit in the amount of approximately $3,130,000 from a commercial bank rated "AA" has been established. The letter of credit is secured by cash and investments of Rosewood Care Center Holding Co. Remaining loan proceeds, net of loan costs, were loaned to an affiliate, Rosewood Care Center Holding Co., under unsecured promissory notes bearing interest at 7-1/4% per annum and having maturities from October to December 1996. The Companies are not contemplating nor aware of any significant replacement of equipment and property beyond comparable amounts expended in 1995 and 1996 because the facilities are all newly constructed with an average age of seven years. 17 18 The Companies believe they have adequate capital for operations and replacements for the coming year and the foreseeable future. Accounts Receivable. Private paying patients are billed monthly at the beginning of the month for that month's routine nursing care charges. Charges for ancillary services are billed monthly in arrears. Accounts receivable from private paying patients increased to $1,257,000 as of June 30, 1996, compared to $705,000 as of June 30, 1995. The amounts allowed for doubtful accounts aggregated $206,000 and $120,000 for 1996 and 1995 respectively, which is 14.8% and 14.5% of the outstanding balances. Accounts receivable from third parties increased to $3,001,000 as of June 30, 1996, compared with $2,195,000 as of June 30, 1995. $1,799,000 of this is due from Medicare for unsettled Medicare Cost Reports filed for the fiscal year ended June 30, 1996, which are subject to audit by the third party payor. $671,500 of this amount was received subsequent to the end of the 1996 fiscal year. With the Medicare program facing intense scrutiny and significant cutbacks, the Companies have experienced closer scrutiny of their Medicare cost reports and delays with regard to payment of claims. An additional effect of Medicare's delay has been delay of co-payment amounts received from private payors. Management does not presently anticipate any cash flow shortages during the next fiscal year, despite the increase in the amounts due from Medicare, unless Medicare administration and payment terms significantly further deteriorate. The Companies had no open lines of credit with any financial institution as of June 30, 1996. Governmental funding for health care programs continues to be under pressure. Health care funding was again a prominent issue in the United States Congress during the past year. Numerous proposals are pending which seek to reduce the costs of the Medicare and Medicaid programs by lowering the utilization of the programs and by controlling costs within the programs. Implementation of a change in reimbursement for therapy services provided by private vendors resulted in a material negative adjustment on the Companies' Medicare cost reports for the year ended June 30, 1996. Due to an indemnification arrangement between the Companies and the private vendor, the effect on the Companies was minimal. However, due to the current national environment surrounding health care, the Companies believe they will experience future problems relating to reimbursement, some of which could have a significant effect on operations. The Companies continue to monitor legislative and other health care developments and will attempt to structure contractual arrangements to minimize the impact of reductions in government reimbursement. However, changes in the reimbursement policies of Medicare and Medicaid as a result of budget cuts by federal and state governments or other legislative actions could have a significant adverse effect on the revenues of the Companies. THE REMIC The REMIC is purely a pass-through entity and has no resources and no operations other than those arising out of the first mortgage loans and the bonds. All of the payments on the first mortgage loans are used to pay the obligations on the 7 1/4% First Mortgage Redeemable Bonds due November 1, 2013. All expenses of the offering and the administration of the Trust Indenture executed as of October 1, 1993 pursuant to which the bonds were issued are the responsibility of the Companies. 18 19 ITEM 8. COMBINED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. 1. ROSEWOOD CARE CENTERS CAPITAL FUNDING CORPORATION Report of Rubin, Brown, Gornstein & Co. 20 Balance Sheet 21 Statement of Operations 22 Statement of Cash Flows 23 Notes to Financial Statements 24 2. ROSEWOOD CARE CENTER COMPANIES Rosewood Care Center, Inc. of Swansea Rosewood Care Center, Inc. of Galesburg Rosewood Care Center, Inc. of East Peoria Rosewood Care Center, Inc. of Peoria Rosewood Care Center, Inc. of Alton Rosewood Care Center, Inc. of Moline Swansea Real Estate, Inc. Galesburg Real Estate, Inc. East Peoria Real Estate, Inc. Peoria Real Estate, Inc. Alton Real Estate, Inc. Moline Real Estate, Inc. Report of Rubin, Brown, Gornstein & Co. 29 Combined Balance Sheet 30 Combined Statement of Operations 32 Combined Statement of Stockholders' Equity 33 Combined Statement of Cash Flows 34 Notes to Combined Financial Statements 35 3. ROSEWOOD CARE CENTER COMPANIES FINANCIAL STATEMENT SCHEDULE Report of Rubin, Brown, Gornstein & Co. LLP 50 Schedule VIII Valuation and Qualifying Accounts 51
19 20 INDEPENDENT AUDITORS' REPORT To the Board of Directors and Stockholders of Rosewood Care Centers Capital Funding Corporation We have audited the accompanying balance sheet of Rosewood Care Centers Capital Funding Corporation as of June 30, 1995 and 1996 and the statement of operations for the years ended June 30, 1994, 1995 and 1996 and cash flows for the years ended June 30, 1994, 1995 and 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Rosewood Care Centers Capital Funding Corporation as of June 30, 1995 and 1996 and the results of operations for the years ended June 30, 1994, 1995 and 1996 and cash flows for the years ended June 30, 1994, 1995 and 1996, in conformity with generally accepted accounting principles. /s/ Rubin, Brown, Gornstein & Co. LLP August 30, 1996 20 21 ROSEWOOD CARE CENTERS CAPITAL FUNDING CORPORATION - ------------------------------------------------------------------------------- BALANCE SHEET (DOLLARS IN THOUSANDS)
ASSETS JUNE 30, ------------------------------------ 1995 1996 ------------------------------------ Cash and cash equivalents $ 262 $ 262 Mortgage notes receivable, Rosewood Companies 30,947 29,280 - ------------------------------------------------------------------------------------------------------ $ 31,209 $ 29,542 ====================================================================================================== LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES First Mortgage Redeemable Bonds $ 31,020 $ 29,363 Accrued expenses 188 178 - ------------------------------------------------------------------------------------------------------ TOTAL LIABILITIES 31,208 29,541 STOCKHOLDERS' EQUITY Common stock: Authorized 30,000 shares of $1 par value; issued and outstanding 1,000 shares at issue price 1 1 - ------------------------------------------------------------------------------------------------------ $ 31,209 $ 29,542 ====================================================================================================== - ------------------------------------------------------------------------------------------------------ See the accompanying notes to financial statements.
21 22 ROSEWOOD CARE CENTERS CAPITAL FUNDING CORPORATION - ------------------------------------------------------------------------------- STATEMENT OF OPERATIONS (DOLLARS IN THOUSANDS)
FOR THE YEARS ENDED JUNE 30, ------------------------------------------------------------- 1994 1995 1996 ------------------------------------------------------------- Interest income $ 1,651 $ 2,299 $ 2,183 Interest expense (1,651) (2,299) (2,183) - ------------------------------------------------------------------------------------------------------ Net income $ -- $ -- $ -- ====================================================================================================== - ------------------------------------------------------------------------------------------------------ See the accompanying notes to financial statements.
22 23 ROSEWOOD CARE CENTERS CAPITAL FUNDING CORPORATION - ------------------------------------------------------------------------------- STATEMENT OF CASH FLOWS (DOLLARS IN THOUSANDS)
FOR THE YEARS ENDED JUNE 30, --------------------------------------------- 1994 1995 1996 --------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES Net income $ -- $ -- $ -- Adjustments to reconcile net income to net cash provided by operating activities: Increase (decrease) in accrued expenses 198 (10) (10) - ------------------------------------------------------------------------------------------------------------------- NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 198 (10) (10) CASH FLOWS FROM INVESTMENT ACTIVITIES Repayments of mortgage notes receivable 502 1,551 1,667 CASH FLOWS FROM FINANCING ACTIVITIES Repayments of First Mortgage Redeemable Bonds (438) (1,542) (1,657) - ------------------------------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 262 (1) -- CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR 1 263 262 - ------------------------------------------------------------------------------------------------------------------- CASH AND CASH EQUIVALENTS - END OF YEAR $ 263 $ 262 $ 262 =================================================================================================================== - ------------------------------------------------------------------------------------------------------------------- See the accompanying notes to financial statements.
23 24 ROSEWOOD CARE CENTERS CAPITAL FUNDING CORPORATION - ------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS JUNE 30, 1995 AND 1996 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES HISTORY AND NATURE OF ACTIVITY Rosewood Care Centers Capital Funding Corporation was formed as a "single purpose entity" to function as a Real Estate Mortgage Investment Conduit (REMIC). Accordingly, the articles of incorporation restrict the activities to issuance of bonds, making of mortgage loans and related activities. Rosewood Care Centers Capital Funding Corporation (the "REMIC") is the issuer of the First Mortgage Redeemable Bonds. The Bond proceeds were lent to certain Rosewood Care Center real estate companies. The real estate companies are referred to as the "Borrowing Companies." Each of the real estate companies is 100% owned by the two stockholders who own Rosewood Care Centers Capital Funding Corporation in like ratios. ESTIMATES AND ASSUMPTIONS Management uses estimates and assumptions in preparing financial statements. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. CASH EQUIVALENTS The Company considers all investments purchased with maturities of three months or less to be cash equivalents. INCOME TAXES Although a REMIC is a separate entity for federal income tax purposes, a REMIC is not generally subject to entity-level income taxes. The net income or net loss of a REMIC is reported on the tax returns of the holders of its residual interest who are also the two stockholders of the real estate companies. The Bonds are designated "regular interests" and are generally taxable as debt of the REMIC. - -------------------------------------------------------------------------------- 24 25 ROSEWOOD CARE CENTERS CAPITAL FUNDING CORPORATION - -------------------------------------------------------------------------------- Notes To Financial Statements (Continued) 2. MORTGAGE NOTES RECEIVABLE The mortgage notes evidence the loans in the original amount of $33,000,000 from the REMIC to the real estate companies and are cross collateralized by a security agreement and assignment of management agreement from each facility company and a first mortgage which includes a security interest in fixtures, improvements, and other personal property, assignment of rents and leases, collateral pledge and security agreement and subordination and attornment agreements from each real estate company. In addition, compensation of officers or directors of the real estate companies is subordinated to payments under the loan agreement. The mortgage notes bear interest at 7.25%. The facility companies and the real estate companies are referred to together as the "Companies." The mortgage notes from the real estate companies require monthly principal and interest collections of $260,824 plus an additional annual principal collection of $720,000 for the first seven years, subject to certain conditions in the loan agreement. If all additional annual collections are made, the principal of the mortgage notes will be collected as follows:
ADDITIONAL YEARS ENDING ANNUAL JUNE 30, TOTAL SCHEDULED COLLECTIONS - ------------------------------------------------------------------------------------------------------ 1997 $ 1,792,278 $ 1,072,278 $ 720,000 1998 1,926,624 1,206,624 720,000 1999 2,071,044 1,351,044 720,000 2000 2,226,282 1,506,282 720,000 2001 2,393,160 1,673,160 720,000 2002 1,821,540 1,821,540 -- 2003 1,958,080 1,958,080 -- Thereafter 15,090,992 15,090,992 -- - ------------------------------------------------------------------------------------------------------ $ 29,280,000 $ 25,680,000 $ 3,600,000 ======================================================================================================
The Borrowing Companies are required to make the additional annual principal payments up to $720,000 per year to the extent the amount of cash available exceeds net income available for debt service (income from operations plus depreciation and amortization, incentive management fees, interest income, and officer bonuses) for the prior fiscal year less (a) the regular principal and interest payments for that year, (b) the amount necessary to pay income taxes of the obligated companies and their shareholders, (c) any increase in accounts receivable from third party payors, (d) interest income from related parties and (e) the $1,000,000 cash or cash equivalents required to be maintained by the loan agreement. - -------------------------------------------------------------------------------- 25 26 ROSEWOOD CARE CENTERS CAPITAL FUNDING CORPORATION - -------------------------------------------------------------------------------- Notes To Financial Statements (Continued) The failure of any real estate company to meet the required additional annual principal payments is not an event of default, but the deficit is cumulative to the extent any annual payment is less than $720,000. The difference is carried forward, at which time such real estate company is subject to certain covenants which restrict its ability to pay out officer bonuses, dividends and incentive management fees until the additional annual payment, on a cumulative basis, is paid in full. The Loan Agreement also contains certain covenants relating to the consolidation of companies, restrictions on indebtedness, transfers of property, expansion of facilities, and the commingling of funds. Bond issuance costs of $609,000 and underwriter's discount of $841,500 (aggregating $1,450,500) were paid by the REMIC on behalf of the real estate companies from the proceeds of the First Mortgage Redeemable Bonds. The Companies have established with the trustee and the trustee is the custodian of a 12 month debt service reserve fund consisting of a bank letter of credit for $3,129,889. 3. FIRST MORTGAGE REDEEMABLE BONDS The bonds are dated October 21, 1993 and bear interest at 7.25%. The Bonds are secured by first mortgage liens, assignments of rents and leases, collateral pledge and security agreements, subordination and attornment agreements from each real estate company, a security agreement, and assignment of management agreement from each facility company and are scheduled to mature November 1, 2013. However, if all the additional annual payments are made as required, the bonds will be paid in full in July 2009. The application of bond proceeds, tender and purchase of bonds, redemption of bonds and other covenants are defined in the trust indenture. All bond holders receive scheduled monthly principal and interest payments and may receive additional annual principal payments during the first seven years of the bond amortization, if additional annual payments are received on the mortgage notes (See Note 2). - -------------------------------------------------------------------------------- 26 27 ROSEWOOD CARE CENTERS CAPITAL FUNDING CORPORATION - -------------------------------------------------------------------------------- Notes To Financial Statements (Continued) Principal payments in the years subsequent to June 30, 1996 are approximately as follows:
YEARS ENDING ADDITIONAL JUNE 30, TOTAL SCHEDULED ANNUAL - ------------------------------------------------------------------------------------------------------ 1997 $ 1,781,520 $ 1,061,520 $ 720,000 1998 1,915,050 1,195,050 720,000 1999 2,058,606 1,338,606 720,000 2000 2,212,914 1,492,914 720,000 2001 2,378,790 1,658,790 720,000 2002 1,810,601 1,810,601 -- 2003 1,946,321 1,946,321 -- Thereafter 15,259,198 15,259,198 -- - ------------------------------------------------------------------------------------------------------ $ 29,363,000 $ 25,763,000 $ 3,600,000 ======================================================================================================
4. STOCKHOLDERS' EQUITY Stockholders' equity consists of the following investments: Larry Vander Maten Revocable Trust $ 750 Darrell Hoefling Revocable Trust 250 ----------- $ 1,000 =========== Each share of common stock has been designated as a "Certificate of Residual Interest". 5. FAIR VALUE OF FINANCIAL INSTRUMENTS The following methods and assumptions were used to estimate the fair value of each class of financial instruments: CASH AND CASH EQUIVALENTS The carrying amount approximates fair value because of the short maturity of those instruments. - -------------------------------------------------------------------------------- 27 28 ROSEWOOD CARE CENTERS CAPITAL FUNDING CORPORATION - -------------------------------------------------------------------------------- Notes To Financial Statements (Continued) MORTGAGE NOTES RECEIVABLE The fair value of the note receivable is estimated based on discounted future cash flows using current rates at which similar loans would be made to related borrowers for the same remaining maturities. FIRST MORTGAGE REDEEMABLE BONDS The fair value of the Company's first mortgage redeemable bonds is estimated based on discounted future cash flows at the current rates at which the Company could borrow funds with similar terms, degree of risk and remaining maturities. Estimated fair values of the Company's financial instruments, all of which are held for nontrading purposes, are as follows:
1996 ---------------------------------- CARRYING FAIR AMOUNT VALUE ---------------------------------- Mortgage notes receivable $ 29,280,000 $ 26,991,000 First mortgage redeemable bonds 29,363,000 27,051,000
The estimated fair value amounts presented herein have been determined using available market information and appropriate valuation methodologies and are not necessarily indicative of the amounts the Company could realize in a current market exchange. 28 29 INDEPENDENT AUDITORS' REPORT To the Boards of Directors and Stockholders of Rosewood Care Center Facility Companies Rosewood Real Estate Companies St. Louis, Missouri We have audited the accompanying combined balance sheet of Rosewood Care Center Facility Companies and Real Estate Companies (see Note 1 of Notes to Combined Financial Statements) as of June 30, 1995 and 1996 and the combined statements of operations, stockholders' equity and cash flows for the years ended June 30, 1994, 1995 and 1996. These combined financial statements are the responsibility of the management of the Companies. Our responsibility is to express an opinion on these combined financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the combined financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the combined financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the combined financial statements referred to in the first paragraph present fairly, in all material respects, the combined financial position of Rosewood Care Center Facility Companies and Real Estate Companies as of June 30, 1995 and 1996 and the combined results of operations and the combined cash flows for the years ended June 30, 1994, 1995 and 1996 in conformity with generally accepted accounting principles. /s/ Rubin, Brown, Gornstein & Co. LLP August 30, 1996 29 30 ROSEWOOD CARE CENTER FACILITY COMPANIES AND REAL ESTATE COMPANIES - -------------------------------------------------------------------------------- COMBINED BALANCE SHEET (DOLLARS IN THOUSANDS) PAGE 1 OF 2
ASSETS JUNE 30, ------------------------------- 1995 1996 ------------------------------- CURRENT ASSETS Cash and cash equivalents $ 2,522 $ 2,237 Accounts receivable - residents, net of allowance for doubtful accounts of $120 and $206, respectively 705 1,257 Accounts receivable - third party payors 2,195 3,001 Interest receivable 346 326 Prepaid insurance and other prepaids 108 74 Deferred income tax benefits 37 65 - ---------------------------------------------------------------------------------------------- TOTAL CURRENT ASSETS 5,913 6,960 - ---------------------------------------------------------------------------------------------- PROPERTY, PLANT AND EQUIPMENT Land 943 943 Site improvements 2,042 2,101 Buildings 17,830 17,830 Equipment 3,616 3,636 Leasehold improvements 192 272 - ---------------------------------------------------------------------------------------------- 24,623 24,782 Less: Accumulated depreciation 5,510 6,435 - ---------------------------------------------------------------------------------------------- TOTAL PROPERTY, PLANT AND EQUIPMENT 19,113 18,347 - ---------------------------------------------------------------------------------------------- OTHER ASSETS Notes receivable from Rosewood Care Center Holding Co. 9,332 8,056 Amortizable costs, net 1,226 1,094 - ---------------------------------------------------------------------------------------------- TOTAL OTHER ASSETS 10,558 9,150 - ---------------------------------------------------------------------------------------------- $ 35,584 $ 34,457 ============================================================================================== - ---------------------------------------------------------------------------------------------- See the accompanying notes to combined financial statements.
30 31 ROSEWOOD CARE CENTER FACILITY COMPANIES AND REAL ESTATE COMPANIES - -------------------------------------------------------------------------------- COMBINED BALANCE SHEET (DOLLARS IN THOUSANDS) PAGE 2 OF 2
LIABILITIES AND STOCKHOLDERS' EQUITY JUNE 30, ------------------------------- 1995 1996 ------------------------------- CURRENT LIABILITIES Current maturities of long-term debt $ 1,667 $ 1,792 Accounts payable - trade 655 1,136 Dividends payable 703 614 Accrued expenses: Salaries and payroll taxes 360 438 Vacation and employee fringes 91 124 Real estate taxes 543 480 Management fees - affiliate 537 464 Income taxes 170 88 - ---------------------------------------------------------------------------------------------- TOTAL CURRENT LIABILITIES 4,726 5,136 - ---------------------------------------------------------------------------------------------- LONG-TERM DEBT Notes payable - Rosewood Care Centers Capital Funding Corporation 30,947 29,279 Less: Current maturities 1,667 1,792 - ---------------------------------------------------------------------------------------------- TOTAL LONG-TERM DEBT 29,280 27,487 - ---------------------------------------------------------------------------------------------- STOCKHOLDERS' EQUITY Common stock 65 65 Paid-in capital 481 481 Retained earnings 1,032 1,288 - ---------------------------------------------------------------------------------------------- TOTAL STOCKHOLDERS' EQUITY 1,578 1,834 - ---------------------------------------------------------------------------------------------- $ 35,584 $ 34,457 ============================================================================================== - ---------------------------------------------------------------------------------------------- See the accompanying notes to combined financial statements.
31 32 ROSEWOOD CARE CENTER FACILITY COMPANIES AND REAL ESTATE COMPANIES - -------------------------------------------------------------------------------- COMBINED STATEMENT OF OPERATIONS (DOLLARS IN THOUSANDS)
FOR THE YEARS ENDED JUNE 30, ------------------------------------------------- 1994 1995 1996 ------------------------------------------------- PATIENT SERVICE REVENUE Private $ 16,307 $ 16,827 $ 17,079 Medicare 6,632 7,443 9,293 Medicaid 1,489 1,495 1,319 Other patient revenues, net of expenses 76 74 62 - ---------------------------------------------------------------------------------------------------- TOTAL PATIENT REVENUES, NET OF EXPENSES 24,504 25,839 27,753 - ---------------------------------------------------------------------------------------------------- FACILITY EXPENSES Administrative expenses 892 924 851 Employee fringe benefits 1,667 1,806 1,774 Dietary 1,666 1,733 1,784 Nursing 5,989 6,556 6,518 Ancillary services 1,904 2,734 4,560 Plant utilities and maintenance 1,009 1,024 1,121 Housekeeping and laundry 772 814 851 Social service and activities 379 459 550 - ---------------------------------------------------------------------------------------------------- TOTAL FACILITY EXPENSES 14,278 16,050 18,009 - ---------------------------------------------------------------------------------------------------- INCOME AFTER FACILITY EXPENSES 10,226 9,789 9,744 - ---------------------------------------------------------------------------------------------------- NONFACILITY EXPENSES Real estate taxes and insurance 592 550 586 Base management fees 792 792 792 Illinois Medicaid assessments 394 394 394 Depreciation and amortization 1,089 1,036 1,057 - ---------------------------------------------------------------------------------------------------- TOTAL NONFACILITY EXPENSES 2,867 2,772 2,829 - ---------------------------------------------------------------------------------------------------- INCOME BEFORE INCENTIVES 7,359 7,017 6,915 INCENTIVE MANAGEMENT FEES (2,398) (2,041) (1,979) OFFICERS' BONUSES (175) (180) (188) - ---------------------------------------------------------------------------------------------------- INCOME FROM OPERATIONS 4,786 4,796 4,748 - ---------------------------------------------------------------------------------------------------- OTHER INCOME (EXPENSE) Interest income 627 852 816 Interest expense (2,203) (2,299) (2,183) - ---------------------------------------------------------------------------------------------------- TOTAL OTHER INCOME (EXPENSE) (1,576) (1,447) (1,367) - ---------------------------------------------------------------------------------------------------- INCOME BEFORE INCOME TAXES 3,210 3,349 3,381 INCOME TAX (EXPENSE) BENEFIT (346) (336) (306) - ---------------------------------------------------------------------------------------------------- NET INCOME $ 2,864 $ 3,013 $ 3,075 ==================================================================================================== - ---------------------------------------------------------------------------------------------------- See the accompanying notes to combined financial statements.
32 33 ROSEWOOD CARE CENTER FACILITY COMPANIES AND REAL ESTATE COMPANIES - -------------------------------------------------------------------------------- COMBINED STATEMENT OF STOCKHOLDERS' EQUITY FOR THE YEARS ENDED JUNE 30, 1994, 1995 AND 1996 (DOLLARS IN THOUSANDS)
COMMON STOCK TOTAL ---------------------------- PAID-IN RETAINED STOCKHOLDERS' SHARES AMOUNT CAPITAL EARNINGS EQUITY ---------------------------------------------------------------------------------- Balance - June 30, 1993 65,000 $ 65 $ 481 $ 516 $ 1,062 Net Income -- -- -- 2,864 2,864 Dividends Declared -- -- -- (2,542) (2,542) - ----------------------------------------------------------------------------------------------------------------- Balance - June 30, 1994 65,000 65 481 838 1,384 Net Income -- -- -- 3,013 3,013 Dividends Declared -- -- -- (2,819) (2,819) - ----------------------------------------------------------------------------------------------------------------- Balance - June 30, 1995 65,000 65 481 1,032 1,578 Net Income -- -- -- 3,075 3,075 Dividends Declared -- -- -- (2,819) (2,819) - ----------------------------------------------------------------------------------------------------------------- Balance - June 30, 1996 65,000 $ 65 $ 481 $ 1,288 $ 1,834 ================================================================================================================= - ----------------------------------------------------------------------------------------------------------------- See the accompanying notes to combined financial statements.
33 34 ROSEWOOD CARE CENTER FACILITY COMPANIES AND REAL ESTATE COMPANIES - -------------------------------------------------------------------------------- COMBINED STATEMENT OF CASH FLOWS (DOLLARS IN THOUSANDS)
FOR THE YEARS ENDED JUNE 30, ------------------------------------------------- 1994 1995 1996 ------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 2,864 $ 3,013 $ 3,075 Adjustments to reconcile net income to net cash provided by operating activities: Loss on sale of equipment -- 2 -- Depreciation 891 903 925 Amortization 198 133 132 Change in assets and liabilities: (Increase) decrease in accounts receivable - residents (40) 135 (552) (Increase) decrease in accounts receivable - third party party payors 182 (585) (806) (Increase) decrease in other receivables, prepaids and deferred income tax benefit 70 (60) 26 Increase in accounts payable - trade 52 135 481 Increase in accrued salaries, taxes and fringes 34 45 111 Increase (decrease) in accrued real estate taxes 59 29 (63) Increase (decrease) in accrued management fees 390 (30) (73) Increase (decrease) in other payables and accruals (281) 107 (82) - ----------------------------------------------------------------------------------------------------------------- NET CASH PROVIDED BY OPERATING ACTIVITIES 4,419 3,827 3,174 - ----------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property and equipment (69) (171) (159) Net (advances) payments on notes with Rosewood Care Center Holding Co. (7,683) 24 1,276 Decrease in restricted cash 300 -- -- - ----------------------------------------------------------------------------------------------------------------- NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (7,452) (147) 1,117 - ----------------------------------------------------------------------------------------------------------------- CASH FLOW FROM FINANCING ACTIVITIES Repayments of notes with banks (23,673) -- -- Repayments of notes with officers (350) -- -- Proceeds from notes with Rosewood Care Centers Capital Funding 33,000 -- -- Repayments of notes with Rosewood Care Centers Capital Funding (502) (1,551) (1,667) Payment of loan and bond fees (1,494) -- -- Dividends paid (2,016) (2,642) (2,909) - ----------------------------------------------------------------------------------------------------------------- NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 4,965 (4,193) (4,576) - ----------------------------------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,932 (513) (285) CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR 1,103 3,035 2,522 - ----------------------------------------------------------------------------------------------------------------- CASH AND CASH EQUIVALENTS - END OF YEAR $ 3,035 $ 2,522 $ 2,237 ================================================================================================================= SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Interest paid $ 2,250 $ 2,299 $ 2,183 Income taxes paid 583 184 190 - ----------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------- See the accompanying notes to combined financial statements.
34 35 ROSEWOOD CARE CENTER FACILITY COMPANIES AND REAL ESTATE COMPANIES - -------------------------------------------------------------------------------- NOTES TO COMBINED FINANCIAL STATEMENTS JUNE 30, 1994, 1995 AND 1996 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES REPORTING ENTITY AND OPERATIONS The combined financial statements include the accounts of six facility companies (C Corporations) and their six related real estate companies (S Corporations).
COMMON STOCK -------------------------------------------------------------------- SHARES -------------------------------- ISSUED AND AUTHORIZED OUTSTANDING PAR AMOUNT -------------------------------------------------------------------- FACILITY COMPANIES: Rosewood Care Center, Inc. of - Swansea 100,000 500 No par $ 500 Galesburg 100,000 500 No par 500 Alton 30,000 500 $1 500 Peoria 30,000 500 1 500 East Peoria 30,000 500 1 500 Moline 30,000 500 1 500 REAL ESTATE COMPANIES: Swansea Real Estate, Inc. 30,000 30,000 $1 30,000 Galesburg Real Estate, Inc. 30,000 30,000 1 30,000 Alton Real Estate, Inc. 30,000 500 1 500 Peoria Real Estate, Inc. 30,000 500 1 500 East Peoria Real Estate, Inc. 30,000 500 1 500 Moline Real Estate, Inc. 30,000 500 1 500 --------------------------------------------------------------------------------------------------------------- 500,000 65,000 $ 65,000 ===============================================================================================================
The facility companies are wholly-owned subsidiaries of Rosewood Care Center Holding Co. ("Rosewood Holding Company"). Rosewood Holding Company and the real estate companies are under common control. The facility companies and the real estate companies are referred to together as the "Companies." The real estate companies own the real estate and equipment and lease the facilities to the affiliated facility companies. - -------------------------------------------------------------------------------- 35 36 ROSEWOOD CARE CENTER FACILITY COMPANIES AND REAL ESTATE COMPANIES - -------------------------------------------------------------------------------- Notes To Combined Financial Statements (Continued) The facility companies provide convalescent care, long-term care, and rehabilitative services primarily to elderly patients in their facilities in Illinois. Revenues are collected from the patients, their families, their insurance companies or from third party payors. Collections from the state third-party payor are in arrears as a result of budgetary limitations. All material intercompany balances and transactions between the Companies have been eliminated in combining the financial statements. Other similarly owned facility companies and real estate companies have been excluded from these combined statements because they are not borrowers or guarantor companies in connection with mortgage loans from Rosewood Care Centers Capital Funding Corporation. HISTORY OF OPERATIONS AND BUSINESS ACTIVITY Each facility company is licensed as a skilled nursing facility by the state of Illinois.
LOCATION DATE LICENSED ------------------------------------------------------------------ Swansea, Illinois October 8, 1987 Galesburg, Illinois December 9, 1987 Alton, Illinois May 15, 1989 Peoria, Illinois June 12, 1989 East Peoria, Illinois April 18, 1989 Moline, Illinois May 6, 1990
ESTIMATES AND ASSUMPTIONS Management uses estimates and assumptions in preparing financial statements. Those estimates and assumptions +affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. ACCOUNTING BASIS The Companies present their financial statements on the accrual basis in accordance with generally accepted accounting principles and in accordance with the Audit and Accounting Guide, Audits of Providers of Health Care Services, issued by the American Institute of Certified Public Accountants. - -------------------------------------------------------------------------------- 36 37 ROSEWOOD CARE CENTER FACILITY COMPANIES AND REAL ESTATE COMPANIES - -------------------------------------------------------------------------------- Notes To Combined Financial Statements (Continued) ACCOUNTING RECLASSIFICATION Certain 1994 and 1995 figures have been reclassified where appropriate to conform to the financial statement presentation used in 1996. PATIENT SERVICE REVENUE Patient service revenue is reported at the estimated net realizable amounts from residents, third-party payors and others for services rendered, including estimated retroactive adjustments. Revenue under federal and state third-party payor agreements is subject to audit and retroactive adjustment. Provisions for estimated federal and state third-party payor settlements are provided in the period the related services are rendered. Differences between the estimated amounts accrued and interim and final settlements are reported in operations in the year of settlement. Accounts receivable - third party payor is comprised of amounts due from the state Medicaid and Federal Medicare Program for services provided to residents eligible for participation in those programs. Also included is an estimate for the settlement of the cost report to be submitted for the year ended June 30, 1996. ILLINOIS MEDICAID ASSESSMENT PLAN PAYMENTS Effective July 1, 1993, a nursing home licensing fee of $1.50 per licensed bed day was imposed by the State of Illinois. The nursing home license fee for the years ended June 30, 1996 and 1995 was $394,200 for each year. PROPERTY, EQUIPMENT AND DEPRECIATION Property and equipment are carried at cost. Depreciation is computed on the straight-line method for financial reporting purposes as follows:
DEPRECIABLE LIVES --------------- Site improvements 25 years Buildings 40 years Equipment 10 years Leasehold improvements 7 years - -------------------------------------------------------------------------------- 37 38 ROSEWOOD CARE CENTER FACILITY COMPANIES AND REAL ESTATE COMPANIES - -------------------------------------------------------------------------------- Notes To Combined Financial Statements (Continued) AMORTIZABLE COSTS Amortizable costs consist of bond issuance costs of $609,000 and underwriters discount of $841,500 which are being amortized over the term of the bond issue, on the interest method. Amortization expense aggregated $131,553 in 1996 and $132,936 in 1995.
1995 1996 --------------------------------- Amortizable costs $ 1,450,500 $ 1,450,500 Less: Accumulated amortization 224,589 356,142 -------------------------------------------------------------------------- $ 1,225,911 $ 1,094,358 ==========================================================================
INCOME TAXES The six facility companies file a consolidated return with Rosewood Holding Company and its other facility companies. Income taxes are allocated to each facility based on its proportionate share of net income. The six real estate companies file separate S Corporation returns. Income taxes are provided for the tax effects of transactions reported in the financial statements and consist of taxes currently due plus deferred taxes (for the facility companies) related primarily to plant and equipment for financial and income tax reporting. The deferred tax assets represent the future tax return consequences of those differences, which will be deductible when the liabilities are settled. CASH EQUIVALENTS The Companies consider all investments purchased with maturities of three months or less to be cash equivalents. - -------------------------------------------------------------------------------- 38 39 ROSEWOOD CARE CENTER FACILITY COMPANIES AND REAL ESTATE COMPANIES - -------------------------------------------------------------------------------- Notes To Combined Financial Statements (Continued) 2 . RELATED PARTY TRANSACTIONS Related party interest is as follows:
JUNE 30, -------------------------------------- 1995 1996 -------------------------------------- Interest receivable $ 345,895 $ 326,352 =================================================================================================== FOR THE YEARS ENDED JUNE 30, -------------------------------------------------------------- 1994 1995 1996 -------------------------------------------------------------- Interest income $ 517,067 $ 696,599 $ 702,600 Interest expense 1,668,720 2,298,852 2,182,867 ===================================================================================================
The facility companies pay a management fee to HSM Management Services, Inc., (the management company, formerly known as Hovan Enterprises, Inc.) which is 100% owned by Rosewood Holding Company for certain management functions as specified in the management agreements. An annual base fee of $1,100 per licensed bed is payable monthly plus additional incentive fees. Incentive management fees are based on income from the nursing home operations before income taxes and incentive management fees (base income) of the combined group. The combined base income from the nursing home operations is multiplied by, on a graduated basis, various percentages with the maximum percentage of 75% applied to combined base income over $100,000. The base plus incentive management fee is limited to 15% of patient service revenue, by location. Rosewood Holding Company, as licensee, grants the subsidiary facility companies a nonexclusive right to the use of the service mark "Rosewood Care Center." - -------------------------------------------------------------------------------- 39 40 ROSEWOOD CARE CENTER FACILITY COMPANIES AND REAL ESTATE COMPANIES - -------------------------------------------------------------------------------- Notes To Combined Financial Statements (Continued) 3. NOTES RECEIVABLE FROM HOLDING COMPANY At the closing on the issuance of Rosewood Care Centers Capital Funding Corporation's (the REMIC) 7-1/4% First Mortgage Redeemable Bonds due November 1, 2013, $4,369,000 in excess proceeds were loaned to Rosewood Holding Company pursuant to notes to each Borrowing Company bearing interest at 7-1/4% per annum and having maturities of October 1996. In addition, Rosewood Holding Company delivered notes for outstanding indebtedness to the Borrowing Companies in the aggregate principal amount of $2,686,000. These notes bore interest at 7% and matured December 31, 1997. In December 1993, Rosewood Holding Company obtained a letter of credit which was deposited with the Trustee of the Trust Indenture into the debt service reserve fund for the benefit of holders of the REMIC's 7-1/4% First Mortgage Redeemable Bonds due November 1, 2013. Cash of approximately $3,130,000 which was being held in the debt service reserve fund was then loaned to Rosewood Holding Company pursuant to 3-year notes bearing interest at 7-1/4% per annum. Thereafter, loans of excess cash to Rosewood Holding Company were made pursuant to a series of 3-year notes bearing interest at 7-1/4% per annum. As of June 30, 1994, all of the notes except for the notes signed at the bond closing (totalling $4,369,000) were cancelled and replaced with six (6) new revolving credit notes. As of June 30, 1996, those notes were cancelled and replaced with new revolving credit notes which allow Rosewood Holding Company to borrow, pursuant to the revolving credit notes an aggregate of up to $9,100,000 from the Borrowing Companies. The new revolving credit notes also bear interest at a rate of 7-1/4% per annum and mature December 31, 1999. The outstanding balance of the notes signed at the bond closing was $3,485,000 at June 30, 1995 and 1996. The outstanding balance of the revolving credit notes was $5,847,000 at June 30, 1995 and $4,570,448 at June 30, 1996. All of the notes from Rosewood Holding Company to the Borrowing Companies are pledged to the Trustee under the Trust Indenture as additional collateral security for repayment of the REMIC's 7-1/4% First Mortgage Redeemable Bonds due November 1, 2013. 4. LONG-TERM DEBT Long-term debt consists of:
1995 1996 ---------------------------------------- NOTES PAYABLE - RELATED PARTIES: Notes payable - Rosewood Care Centers Capital Funding Corporation, payable in monthly installments of $260,824 plus an additional principal payment of $720,000 due annually on December 1, 1994 through December 1, 2000, interest at 7-1/4% per year, with final payment due November 1, 2013 $ 30,946,849 $ 29,279,548 ==================================================================================================
- -------------------------------------------------------------------------------- 40 41 ROSEWOOD CARE CENTER FACILITY COMPANIES AND REAL ESTATE COMPANIES - -------------------------------------------------------------------------------- Notes To Combined Financial Statements (Continued) The notes payable to Rosewood Care Centers Capital Funding Corporation evidence the loans from the REMIC to the real estate companies and are cross collateralized by a security agreement and assignment of management agreement from each facility company and a first mortgage which includes a security interest in fixtures, improvements, and other personal property, assignment of rents and leases, collateral pledge and security agreement and subordination and attornment agreements from each real estate company. In addition, compensation of officers or directors of the real estate companies is subordinated to payments under the loan agreement. The Borrowing Companies will be required to make the additional annual payments up to $720,000 per year to the extent the amount of cash available exceeds net income available for debt service (income from operations plus depreciation and amortization, incentive management fees, interest income, and officer bonuses) for the prior fiscal year less (a) the regular principal and interest payments for that year, (b) the amount necessary to pay income taxes of the Companies as if they were all taxed as C Corporations for income tax purposes, (c) any increase in accounts receivable from third party payors and (d) interest income from related parties. In addition, the Companies are required to maintain a minimum cash balance of $1,000,000. The failure of any real estate company to meet the required additional annual principal payments is not an event of default, but the deficit is cumulative to the extent any annual payment is less than $720,000. The difference is carried forward, at which time such real estate company is subject to certain covenants which restrict its ability to pay out officer bonuses, dividends and incentive management fees until the additional annual payment, on a cumulative basis, is paid in full. The Loan Agreement also contains certain covenants relating to the consolidation of companies, restrictions on indebtedness, transfers of property, expansion of facilities, and the commingling of funds. The Companies have established with the trustee and the trustee is the custodian of a 12 month debt service reserve fund consisting of a bank letter of credit for $3,129,889. - -------------------------------------------------------------------------------- 41 42 ROSEWOOD CARE CENTER FACILITY COMPANIES AND REAL ESTATE COMPANIES - -------------------------------------------------------------------------------- Notes To Combined Financial Statements (Continued) The scheduled maturities of long-term debt at June 30, 1996 are as follows:
YEAR AMOUNT --------------------------------------------- 1997 $ 1,792,278 1998 1,926,624 1999 2,071,044 2000 2,226,282 2001 2,393,161 Thereafter 18,870,159 --------------------------------------------- $ 29,279,548 =============================================
5. FAIR VALUE OF FINANCIAL INSTRUMENTS The following methods and assumptions were used to estimate the fair value of each class of financial instruments: NOTES RECEIVABLE FROM ROSEWOOD CARE CENTER HOLDING CO. It was not practicable to estimate the fair value of the notes receivable from Rosewood Care Center Holding Co. because of the uncertainty of future cash flows to be paid for interest and principal. Information pertinent to estimating the fair values is disclosed in Note 3. FIRST MORTGAGE REDEEMABLE BONDS The fair value of the Company's first mortgage redeemable bonds is estimated based on discounted future cash flows at the current rates at which the Company could borrow funds with similar terms, degree of risk and remaining maturities. Estimated fair values of the Company's financial instruments, all of which are held for nontrading purposes, are as follows:
1996 --------------------------------------- CARRYING FAIR AMOUNT VALUE --------------------------------------- Notes receivable from Rosewood Care Center Holding Co. $ 8,055,448 Not estimated Long-term debt 29,279,548 26,991,000
The estimated fair value amounts presented herein have been determined using available market information and appropriate valuation methodologies and are not necessarily indicative of the amounts the Company could realize in a current market exchange. - -------------------------------------------------------------------------------- 42 43 ROSEWOOD CARE CENTER FACILITY COMPANIES AND REAL ESTATE COMPANIES - -------------------------------------------------------------------------------- Notes To Combined Financial Statements (Continued) 6. INCOME TAXES Income tax expense (benefit) consists of:
1994 1995 1996 -------------------------------------------------------------- Computed expected tax expense $ 1,082,800 $ 1,138,700 $ 973,700 State income taxes 192,600 201,000 171,800 Portion of "expected" tax on S Corporation earnings for which tax will be paid at the individual level (929,400) (1,003,700) (839,500) -------------------------------------------------------------------------------------------------------------------- Income taxes $ 346,000 $ 336,000 $ 306,000 ==================================================================================================================== Current $ 349,000 $ 343,500 $ 333,300 Deferred (3,000) (7,500) (27,300) -------------------------------------------------------------------------------------------------------------------- $ 346,000 $ 336,000 $ 306,000 ====================================================================================================================
FACILITY COMPANIES The facility companies provide for deferred taxes on temporary differences between amounts reported for financial statement and income tax purposes of the facility companies, which are taxed under Subchapter C of the Internal Revenue Code of 1986. The estimated tax effect of each temporary difference is as follows:
1995 1996 ------------------------------------ Allowance for doubtful accounts $ 37,200 $ 82,600 Book versus tax difference between basis of property, plant and equipment -- 18,100 --------------------------------------------------------------------------------------------- $ 37,200 $ 64,500 =============================================================================================
REAL ESTATE COMPANIES The real estate companies do not provide for deferred taxes on temporary differences between financial statement and income tax depreciation expense on the real estate companies which are taxed under Subchapter S of the Internal Revenue Code of 1986. The shorter recovery periods, as prescribed by tax law, which result in lower taxable income, pass through to the individual shareholder level. - -------------------------------------------------------------------------------- 43 44 ROSEWOOD CARE CENTER FACILITY COMPANIES AND REAL ESTATE COMPANIES - -------------------------------------------------------------------------------- Notes To Combined Financial Statements (Continued) Income of the real estate companies is taxed at the individual shareholder level and not at the corporate level. 7. DIVIDENDS Dividends declared were as follows:
1995 1996 ---------------------------------- ------------------------------- PER SHARE AGGREGATE PER SHARE AGGREGATE ------------------------------------------------------------------------- FACILITY COMPANIES: Rosewood Care Center, Inc. of: Swansea $ 173.40 $ 86,700 $ 185.80 $ 92,900 Galesburg 99.20 49,600 94.20 47,100 Alton 168.00 84,000 227.60 113,800 Peoria 98.20 49,100 122.00 61,000 Moline 137.40 68,700 136.20 68,100 East Peoria 69.40 34,700 8.60 4,300 REAL ESTATE COMPANIES: Swansea Real Estate, Inc. 16.45 493,600 15.05 451,400 Galesburg Real Estate, Inc. 15.51 465,200 13.54 406,100 Alton Real Estate, Inc. 822.80 411,400 1037.20 518,600 Peoria Real Estate, Inc. 788.20 394,100 795.80 397,900 East Peoria Real Estate, Inc. 942.60 471,300 474.00 237,000 Moline Real Estate, Inc. 421.20 210,600 842.40 421,200 ---------------- --------------- $ 2,819,000 $ 2,819,400 ================ ===============
8. LITIGATION The Companies, from time to time, are involved in litigation in the ordinary course of business including disputes involving management contracts, patient services, employment claims and construction matters. The Companies are also involved in routine administrative and judicial proceedings regarding permits and expenses. The Companies are not a party to any lawsuit or proceeding which, in the opinion of management, is not adequately covered by insurance or which is, individually or in the aggregate, likely to have a material adverse effect on the combined financial position or results of operations of the Companies. - -------------------------------------------------------------------------------- 44 45 ROSEWOOD CARE CENTER FACILITY COMPANIES AND REAL ESTATE COMPANIES - -------------------------------------------------------------------------------- Notes To Combined Financial Statements (Continued) 9. SUMMARIZED COMBINING FINANCIAL INFORMATION Summarized condensed combining financial information for the facility companies and the real estate companies is as follows: Balance sheet information (Dollars in thousands):
REAL FACILITY ESTATE COMBINED COMPANIES COMPANIES ELIMINATIONS COMPANIES ------------------------------------------------------------------------------- June 30, 1995 Current assets $ 5,555 $ 955 $ (597) $ 5,913 Noncurrent assets 1,200 31,513 (3,042) 29,671 ---------------------------------------------------------------------------------------------------------------------- Total assets $ 6,755 $ 32,468 $ (3,639) $ 35,584 ====================================================================================================================== Current liabilities $ 3,038 $ 2,285 $ (597) $ 4,726 Noncurrent liabilities 3,042 29,280 (3,042) 29,280 ---------------------------------------------------------------------------------------------------------------------- Total liabilities 6,080 31,565 (3,639) 34,006 Stockholders' equity 675 903 -- 1,578 ---------------------------------------------------------------------------------------------------------------------- Total liabilities and stockholders' equity $ 6,755 $ 32,468 $ (3,639) $ 35,584 ====================================================================================================================== REAL FACILITY ESTATE COMBINED COMPANIES COMPANIES ELIMINATIONS COMPANIES ------------------------------------------------------------------------------- June 30, 1996 Current assets $ 6,626 $ 930 $ (596) $ 6,960 Noncurrent assets 1,944 29,991 (4,438) 27,497 ---------------------------------------------------------------------------------------------------------------------- Total assets $ 8,570 $ 30,921 $ (5,034) $ 34,457 ====================================================================================================================== Current liabilities $ 3,396 $ 2,335 $ (596) $ 5,136 Noncurrent liabilities 4,439 27,487 (4,438) 27,487 ---------------------------------------------------------------------------------------------------------------------- Total liabilities 7,835 29,822 (5,034) 32,623 Stockholders' equity 735 1,099 -- 1,834 ---------------------------------------------------------------------------------------------------------------------- Total liabilities and stockholders' equity $ 8,570 $ 30,921 $ (5,034) $ 34,457 ======================================================================================================================
- -------------------------------------------------------------------------------- 45 46 ROSEWOOD CARE CENTER FACILITY COMPANIES AND REAL ESTATE COMPANIES - -------------------------------------------------------------------------------- Notes To Combined Financial Statements (Continued) Statement of Operations information (Dollars in thousands):
REAL FACILITY ESTATE COMBINED COMPANIES COMPANIES ELIMINATIONS COMPANIES ------------------------------------------------------------------------------- YEAR ENDED JUNE 30, 1994 Gross revenues $ 24,504 $ 5,186 $ (5,186) $ 24,504 Costs and expenses (23,571) (1,333) 5,186 (19,718) ---------------------------------------------------------------------------------------------------------------------- Income from operations 933 3,853 -- 4,786 Other income (expenses) (354) (1,568) -- (1,922) ---------------------------------------------------------------------------------------------------------------------- Net income $ 579 $ 2,285 $ -- $ 2,864 ====================================================================================================================== YEAR ENDED JUNE 30, 1995 Gross revenues $ 25,839 $ 5,342 $ (5,342) $ 25,839 Costs and expenses (25,118) (1,267) 5,342 (21,043) ---------------------------------------------------------------------------------------------------------------------- Income from operations 721 4,075 -- 4,796 Other income (expenses) (288) (1,495) -- (1,783) ---------------------------------------------------------------------------------------------------------------------- Net income $ 433 $ 2,580 $ -- $ 3,013 ====================================================================================================================== YEAR ENDED JUNE 30, 1996 Gross revenues $ 27,753 $ 5,302 $ (5,302) $ 27,753 Costs and expenses (26,997) (1,310) 5,302 (23,005) ---------------------------------------------------------------------------------------------------------------------- Income from operations 756 3,992 -- 4,748 Other income (expenses) (310) (1,363) -- (1,673) ---------------------------------------------------------------------------------------------------------------------- Net income $ 446 $ 2,629 $ -- $ 3,075 ======================================================================================================================
- -------------------------------------------------------------------------------- 46 47 ROSEWOOD CARE CENTER FACILITY COMPANIES AND REAL ESTATE COMPANIES - -------------------------------------------------------------------------------- Notes To Combined Financial Statements (Continued) Statement of Cash Flows Information (Dollars in thousands):
REAL FACILITY ESTATE COMBINED COMPANIES COMPANIES ELIMINATIONS COMPANIES ---------------------------------------------------------- YEAR ENDED JUNE 30, 1994: CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 580 $ 2,284 $ -- $ 2,864 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 6 1,083 -- 1,089 Change in assets and liabilities: Increase in accounts receivable - residents (40) -- -- (40) Decrease in accounts receivable - third party payors 182 -- -- 182 (Increase) decrease in other receivables and prepaids (117) 730 (543) 70 Increase in accrued management fees 390 -- -- 390 Increase (decrease) in accounts payable and other accrued expenses (637) (42) 543 (136) --------------------------------------------------------------------------------------------------------------------- NET CASH PROVIDED BY OPERATING ACTIVITIES 364 4,055 -- 4,419 --------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property and equipment (29) (40) -- (69) Net (advances) payments on notes with Rosewood Care Holding Co. 1,967 (9,650) -- (7,683) Decrease in restricted cash -- 300 -- 300 --------------------------------------------------------------------------------------------------------------------- NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 1,938 (9,390) -- (7,452) --------------------------------------------------------------------------------------------------------------------- CASH FLOW FROM FINANCING ACTIVITIES Repayments of notes -- (23,673) -- (23,673) Repayments of notes with officers -- (350) -- (350) Net proceeds from notes with Rosewood Care Centers Capital Funding -- 32,498 -- 32,498 Payment of loan and bond fees -- (1,494) -- (1,494) Dividends paid (366) (1,650) -- (2,016) --------------------------------------------------------------------------------------------------------------------- NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (366) 5,331 -- 4,965 --------------------------------------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,936 (4) -- 1,932 CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR 1,094 9 -- 1,103 --------------------------------------------------------------------------------------------------------------------- CASH AND CASH EQUIVALENTS - END OF YEAR $ 3,030 $ 5 $ -- $ 3,035 ===================================================================================================================== - -------------------------------------------------------------------------------- 47 48 ROSEWOOD CARE CENTER FACILITY COMPANIES AND REAL ESTATE COMPANIES - -------------------------------------------------------------------------------- Notes To Combined Financial Statements (Continued)
REAL FACILITY ESTATE COMBINED COMPANIES COMPANIES ELIMINATIONS COMPANIES ---------------------------------------------------------- YEAR ENDED JUNE 30, 1995: CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 433 $ 2,580 $ -- $ 3,013 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Loss on sale of equipment -- 2 -- 2 Depreciation and amortization 16 1,020 -- 1,036 Change in assets and liabilities: Decrease in accounts receivable - residents 135 -- -- 135 Increase in accounts receivable - third party payors (585) -- -- (585) (Increase) decrease in other receivables and prepaids 261 276 (597) (60) Increase in accrued management fees (30) -- -- (30) Increase (decrease) in accounts payable and other accrued expenses (265) (16) 597 316 --------------------------------------------------------------------------------------------------------------------- NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (35) 3,862 -- 3,827 --------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property and equipment (127) (44) -- (171) Net (advances) payments on notes with Rosewood Care Holding Co. -- 24 -- 24 --------------------------------------------------------------------------------------------------------------------- NET CASH USED IN INVESTING ACTIVITIES (127) (20) -- (147) --------------------------------------------------------------------------------------------------------------------- CASH FLOW FROM FINANCING ACTIVITIES Repayments of notes -- (1,551) -- (1,551) Dividends paid (356) (2,286) -- (2,642) --------------------------------------------------------------------------------------------------------------------- NET CASH USED IN FINANCING ACTIVITIES (356) (3,837) -- (4,193) --------------------------------------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (518) 5 -- (513) CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR 3,029 6 -- 3,035 --------------------------------------------------------------------------------------------------------------------- CASH AND CASH EQUIVALENTS - END OF YEAR $ 2,511 $ 11 $ -- $ 2,522 =====================================================================================================================
- -------------------------------------------------------------------------------- 48 49 ROSEWOOD CARE CENTER FACILITY COMPANIES AND REAL ESTATE COMPANIES - -------------------------------------------------------------------------------- Notes To Combined Financial Statements (Continued)
REAL FACILITY ESTATE COMBINED COMPANIES COMPANIES ELIMINATIONS COMPANIES ---------------------------------------------------------- YEAR ENDED JUNE 30, 1996: CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 446 $ 2,629 $ -- $ 3,075 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 34 1,023 -- 1,057 Change in assets and liabilities: Decrease in accounts receivable - residents (552) -- -- (552) Increase in accounts receivable - third party payors (806) -- -- (806) (Increase) decrease in other receivables and prepaids (3) 625 (596) 26 Increase in accrued management fees (73) -- -- (73) Increase (decrease) in accounts payable and other accrued expenses (149) -- 596 447 --------------------------------------------------------------------------------------------------------------------- NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (1,103) 4,277 -- 3,174 --------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property and equipment (80) (79) -- (159) Net (advances) payments on notes with Rosewood Care Holding Co. 1,396 (120) -- 1,276 --------------------------------------------------------------------------------------------------------------------- NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 1,316 (199) -- 1,117 --------------------------------------------------------------------------------------------------------------------- CASH FLOW FROM FINANCING ACTIVITIES Repayments of notes -- (1,667) -- (1,667) Dividends paid (498) (2,411) -- (2,909) --------------------------------------------------------------------------------------------------------------------- NET CASH USED IN FINANCING ACTIVITIES (498) (4,078) -- (4,576) --------------------------------------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (285) -- -- (285) CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR 2,511 11 -- 2,522 --------------------------------------------------------------------------------------------------------------------- CASH AND CASH EQUIVALENTS - END OF YEAR $ 2,226 $ 11 $ -- $ 2,237 =====================================================================================================================
49 50 INDEPENDENT AUDITORS' REPORT Board of Directors Rosewood Care Center Facility and Real Estate Companies St. Louis, Missouri We have audited, in accordance with generally accepted auditing standards, the combined financial statements of Rosewood Care Center Facility Companies and Real Estate Companies as of June 30, 1995 and 1996 and for each of three years in the period ended June 30, 1994, 1995 and 1996, and have issued our report thereon dated August 30, 1996. The combined financial statement schedules are the responsibility of the Company's management and are presented for the purpose of complying with Securities and Exchange Commission's rules and are not part of the combined financial statements. These schedules have been subjected to the auditing procedures applied in the audit of the combined financial statements and, in our opinion, presents fairly in all material respects the financial data required to be set forth herein in relation to the combined financial statements taken as a whole. /s/ Rubin, Brown, Gornstein & Co. LLP RUBIN, BROWN, GORNSTEIN & CO., LLP St. Louis, Missouri August 30, 1996 50 51 ROSEWOOD CARE CENTER FACILITIES COMPANIES AND REAL ESTATE COMPANIES - -------------------------------------------------------------------------------- Schedule VIII Reg S-X210.12-09
Valuation And Qualifying Accounts (Dollars In Thousands) A B C D E - --------------------------------------------------------------------------------------------------------------------- ADDITIONS ------------------------------ CHARGED BALANCE AT CHARGED TO TO OTHER BALANCE AT BEGINNING COSTS AND ACCOUNTS- DEDUCTIONS- END OF DESCRIPTION OF PERIOD EXPENSES DESCRIBE DESCRIBE PERIOD - --------------------------------------------------------------------------------------------------------------------- YEAR ENDED JUNE 30, 1994: Allowance for doubtful accounts $ 61 $41 $ -- $ -- $102 ===================================================================================================================== YEAR ENDED JUNE 30, 1995: Allowance for doubtful accounts $102 $18 $ -- $ -- $120 ===================================================================================================================== YEAR ENDED JUNE 30, 1996: Allowance for doubtful accounts $120 $86 $ -- $ -- $206 =====================================================================================================================
51 52 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. There were no changes in or disagreements with accountants on accounting and financial disclosures during the fiscal year ended June 30, 1996. PART III ITEM 10. DIRECTORS AND OFFICERS OF THE COMPANY. The following table lists the directors and executive officers of the REMIC and each of the Companies, their ages and their positions. The director serves for a term of one year. Each executive officer serves at the pleasure of the director.
Name Age Position with the Issuer ---- --- ------------------------ Larry D. Vander Maten 50 Director and President Darrell D. Hoefling 46 Vice President Louis Netemeyer 49 Controller, Secretary and Treasurer
MR. VANDER MATEN is a founder and principal shareholder (through his trust) of the REMIC and the Companies. Mr. Vander Maten is actively involved in related companies in which Mr. Vander Maten, his trust or his family limited partnership is the principal shareholder. Such businesses have the same management as and operate substantially similar businesses or businesses closely related to that of the Companies. Mr. Vander Maten also serves on the Board of Directors of Charlestown, a life care retirement community in Baltimore, Maryland and Henry Ford Village, a life care retirement community in Dearborn, Michigan. MR. HOEFLING is Vice President of the REMIC and has been Vice President of Operations of the Companies and the affiliated Rosewood companies since 1985. He is a shareholder (through his trust or his family limited partnership) of the Companies and all affiliated Rosewood companies. MR. NETEMEYER has been Controller, Secretary and Treasurer of the REMIC since its formation and of the Companies since 1985. ITEM 11. EXECUTIVE COMPENSATION. The REMIC has no employees and pays no salaries to its officers. The Companies also do not regularly pay salaries to any officers. However, a bonus was paid to officers during 1996. The regular compensation of the executive officers for services rendered to the Companies is paid by HSM Management, pursuant to the Management Agreements or the Administrative Services Agreements. Currently, HSM Management pays all such compensation in the form of cash. Except for any incentive compensation which may be paid to Messrs. Vander Maten and Hoefling, all such compensation is paid from the base management fee payable to HSM Management pursuant to the Management Agreements. 52 53 THE FOLLOWING TABLE SETS FORTH CERTAIN INFORMATION WITH RESPECT TO THE ANNUAL COMPENSATION PAID OR ACCRUED FOR FISCAL YEAR ENDED JUNE 30, 1996 TO THE CHIEF EXECUTIVE OFFICER OF THE REMIC AND THE COMPANIES AND TO THE ONLY OTHER EXECUTIVE OFFICER WHOSE TOTAL SALARY EXCEEDED $100,000 DURING SUCH FISCAL YEAR.
Name and Principal Position Salary Bonus - --------------------------- ------ ----- Larry D. Vander Maten President $273,000 $141,000 Darrell D. Hoefling Vice President $147,000 $ 47,000 - ---------------------- Represents amounts paid to Messrs. Vander Maten and Hoefling by HSM Management. These amounts are allocated by HSM Management based on the number of facilities that HSM Management manages for the Companies and their affiliates and the value rendered to individual facilities. Paid by the Companies.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. The following table sets forth the shares of the REMIC and the Companies beneficially owned by each person who is the beneficial owner of more than 5% of the outstanding shares. All of the shares set forth in the following table are subject to an agreement between the shareholders restricting transfer of the shares. Each person named in the table has sole voting and investment power with respect to all shares shown in the table as being owned by such person. There are no arrangements known to the REMIC or the Companies which may, at a subsequent date, result in change in control of the REMIC or the Companies.
Percent Type of Stock Name and Address of Owner of Ownership - ------------- ------------------------- ------------ Common Stock Larry D. Vander Maten, as Trustee of Larry D. Vander Maten Revocable Trust 75% 11701 Borman Drive, Suite 315 St. Louis, Missouri 63146 Common Stock Darrell D. Hoefling, as Trustee of Darrell D. Hoefling Revocable Trust 25% 11701 Borman Drive, Suite 315 St. Louis, Missouri 63146
53 54 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. During 1996 and 1995 the Companies loaned excess cash to an affiliate, Rosewood Care Center Holding Co., pursuant to certain promissory notes. Rosewood Care Center Holding Co. is owned 75% by Mr. Vander Maten's family limited partnership and 25% by Mr. Hoefling's family limited partnership. Mr. Vander Maten and Mr. Hoefling through their respective controlled corporations act as general partner of their respective limited partnerships. Mr. Vander Maten is the president and sole director and Mr. Hoefling is the vice president of Rosewood Care Center Holding Co. The highest amount of such indebtedness by Rosewood Care Center Holding Co. to the Companies during 1996 and 1995 was $10,953,000 and $10,384,000 respectively. At June 30, 1996 and 1995, the amount of such indebtedness of Rosewood Care Center Holding Co. to the Companies was $8,056,448 and $9,332,000 respectively. At the closing on the issuance of the REMIC's 7 1/4% First Mortgage Redeemable Bonds due November 1, 2013, $4,369,000 in excess proceeds were loaned to Rosewood Care Center Holding Co. pursuant to notes to each Borrowing Company bearing interest at 7 1/4% per annum and having maturities of October 1996. As of June 30, 1996, when the remaining balance of the notes aggregated $3,554,847, the original notes were cancelled and replaced with notes bearing interest at 7 1/4% per annum and due December 31, 1999. In December 1993, Rosewood Care Center Holding Co. obtained a letter of credit which was deposited with the Trustee of the Trust Indenture into the debt service reserve fund for the benefit of holders of the REMIC's 7 1/4% First Mortgage Redeemable Bonds due November 1, 2013. Cash of approximately $3,130,000 which was being held in the debt service reserve fund was then loaned to Rosewood Care Center Holding Co. pursuant to 3 year notes bearing interest at 7 1/4% per annum. Subsequently, the notes aggregating approximately $3,130,000 were cancelled and replaced with revolving credit notes to allow additional amounts of excess cash to be loaned to Rosewood Care Center Holding Co. without the necessity of continuously revising or executing new promissory notes. As of June 30, 1996 outstanding notes were cancelled and replaced with six (6) new revolving credit notes which allow Rosewood Care Center Holding Co. to borrow, pursuant to the revolving credit notes, an aggregate up to $9,100,000 from the borrowing companies. The notes bear interest at 7 1/4% per annum and are due December 31, 1999. The balance outstanding for the revolving credit notes aggregated $4,501,601 as of June 30, 1996. All of the notes from Rosewood Care Center Holding Co. to the Borrowing Companies are pledged to the Trustee under the Trust Indenture as additional collateral security for repayment of the REMIC's 7 1/4% First Mortgage Redeemable Bonds due November 1, 2013. 54 55 The Guarantors incurred expenses for management fees to HSM Management during the year ended June 30, 1996 and 1995 of approximately $2,771,222 and $2,833,174 for services rendered during the 1996 and 1995 fiscal year respectively. HSM Management is a wholly owned subsidiary of Rosewood Care Center Holding Co. Mr. Vander Maten and Mr. Hoefling are the President and Vice President respectively of HSM Management and Mr. Vander Maten is HSM Management's sole director. At June 30, 1996 and 1995, $464,000 and 537,000 respectively of such fees were unpaid. All such accrued fees were paid subsequent to the end of the 1996 and 1995 fiscal years. Pursuant to the management agreements entered into as of October 21, 1993, the bond issue date, it was anticipated that the Guarantors would, from time to time, accrue a portion of the incentive management fees and thus be indebted to the management company until such amounts were paid. Under the loan documents, payment of the management fees is subordinated and any note given to the management company for incentive management fees must be subordinated to payment of the bonds and preclude remedial action against the Companies until the bonds are paid in full. The management agreements entered into continue in full force and effect. HSM Management pays the compensation of persons who render management services to the Guarantors. Such compensation is paid from the base management fee payable pursuant to the Management Agreements. In the last fiscal year, HSM Management allocated $273,000 and $147,000 as the compensation paid to Messrs. Vander Maten and Hoefling, respectively, relating to services rendered to the Guarantors. This compensation arrangement is anticipated to continue. Each Guarantor pays an annual license fee of $3,000 to Rosewood Care Center Holding Co. under the terms of a license agreement dated June 30, 1996 under which the Companies are authorized to use the name "Rosewood Care Center". During the last quarter of 1994, one of the Companies, Galesburg Real Estate, Inc., granted a long term ground lease and easements for nominal consideration to related companies, Galesburg Real Estate II, L.L.C. and HSM Investment, L.L.C., as permitted under the loan documents, for the purpose of facilitating construction of a planned 60 bed expansion at Rosewood Care Center of Galesburg. If expansion proceeds as originally planned, the easement rights will be assigned to Galesburg Real Estate, L.L.C. when it acquires the property adjoining the Galesburg facility from HSM Investment, L.L.C. Galesburg Real Estate II, L.L.C. and HSM Investment, L.L.C. are owned 75% by Mr. Vander Maten's family limited partnership and 25% by Mr. Hoefling's family limited partnership. Mr. Vander Maten is the Manager of both Galesburg Real Estate II, L.L.C. and HSM Investment, L.L.C. The expansion building will be connected to the existing Galesburg facility by a corridor. The expansion building will be constructed and owned by the affiliate Galesburg Real Estate II, L.L.C. but operated by Rosewood Care Center, Inc. of Galesburg and managed by HSM Management. The expansion building may share some special use areas and equipment with the Galesburg facility. However, the Galesburg facility will continue to be able to function as a separate facility. Therefore, if it should become necessary or desirable to sever the expansion building from the Galesburg facility or cease operation of the expansion building, there should be no material adverse effect on the existing Galesburg facility's ability to operate as a complete, separate physical structure. Although any rents or proceeds from the ground lease and easements are encumbered, the ground leases and easements are not encumbered by the mortgage held by the REMIC on the Galesburg facility. The bifurcated ownership structure is required by the loan documents and is intended to shelter bondholders from risks associated with construction. The Galesburg facility expansion is currently under review by the Illinois Health Facilities Planning Board and, if the expansion does proceed, it may not occur in the manner described above. 55 56 Plans for the expansion of the Alton facility on terms substantially similar to those described above for the Galesburg facility are nearing completion. As of June 30, 1996 construction of the Alton expansion was contemplated to begin in the next fiscal quarter. Similar expansion is a possibility at any or all of the remaining facilities. The Guarantors are all subsidiaries of and file a consolidated tax return with Rosewood Care Center Holding Co. As of June 30, 1996 and 1995, the Companies owed $88,263 and $170,120 respectively as their share of the current year income taxes to the Rosewood Care Center Holding Co. All such accrued amounts were paid subsequent to the end of the 1996 and 1995 fiscal years. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES & REPORTS ON FORM 8-K (a) 1 AND 2 FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE The financial statements and the financial statement schedule listed in Item 8 in the index to Combined Financial Statements and Supplementary Data are filed as part of this annual report on Form 10-K. (a) 3 EXHIBITS The Exhibits listed in the accompanying index to exhibits are incorporated by reference herein and filed as part of this annual report on Form 10-K. (b) REPORTS ON FORM 8-K No reports on Form 8-K were filed during the fourth quarter. (c) EXHIBITS See the accompanying index to exhibits referenced in Item 14(a)(3) above for a list of exhibits incorporated herein by reference or filed as part of this annual report on Form 10-K. (d) FINANCIAL STATEMENT SCHEDULE See the accompanying index to Combined Financial Statements and Supplementary Data referenced in Item 14(a)1 and 2 above. 56 57 SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION 15(d) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES PURSUANT TO SECTION 12 OF THE ACT The Registrant has only debt registered under the Securities Act of 1933. No annual report has been or will be sent to security (bond) holders. If any security holder requests information, a copy of this annual report on Form 10-K will be sent to such security holder. 57 58 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ROSEWOOD CARE CENTERS CAPITAL FUNDING CORPORATION, Registrant Dated: September 26, 1996 /s/ Larry D. Vander Maten ------------------------- Larry D. Vander Maten President and Director (Principal Executive Officer and Principal Financial and Accounting Officer) 58 59 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ROSEWOOD CARE CENTER, INC. OF SWANSEA, Registrant Dated: September 26, 1996 /s/ Larry D. Vander Maten ------------------------- Larry D. Vander Maten President and Director (Principal Executive Officer and Principal Financial and Accounting Officer) 59 60 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ROSEWOOD CARE CENTER, INC. OF GALESBURG, Registrant Dated: September 26, 1996 /s/ Larry D. Vander Maten ------------------------- Larry D. Vander Maten President and Director (Principal Executive Officer and Principal Financial and Accounting Officer 60 61 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ROSEWOOD CARE CENTER, INC. OF PEORIA, Registrant Dated: September 26, 1996 /s/ Larry D. Vander Maten ------------------------- Larry D. Vander Maten President and Director (Principal Executive Officer and Principal Financial and Accounting Officer) 61 62 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ROSEWOOD CARE CENTER, INC. OF EAST PEORIA, Registrant Dated: September 26, 1996 /s/ Larry D. Vander Maten ------------------------- Larry D. Vander Maten President and Director (Principal Executive Officer and Principal Financial and Accounting Officer) 62 63 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ROSEWOOD CARE CENTER, INC. OF ALTON, Registrant Dated: September 26, 1996 /s/ Larry D. Vander Maten ------------------------- Larry D. Vander Maten President and Director (Principal Executive Officer and Principal Financial and Accounting Officer) 63 64 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ROSEWOOD CARE CENTER, INC. OF MOLINE, Registrant Dated: September 26, 1996 /s/ Larry D. Vander Maten ------------------------- Larry D. Vander Maten President and Director (Principal Executive Officer and Principal Financial and Accounting Officer) 64 65 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. SWANSEA REAL ESTATE, INC., Registrant Dated: September 26, 1996 /s/ Larry D. Vander Maten ------------------------- Larry D. Vander Maten President and Director (Principal and Executive Officer and Principal Financial and Accounting Officer 65 66 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. GALESBURG REAL ESTATE, INC., Registrant Dated: September 26, 1996 /s/ Larry D. Vander Maten ------------------------- Larry D. Vander Maten President and Director (Principal Executive Officer and Principal Financial and Accounting Officer) 66 67 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. PEORIA REAL ESTATE, INC., Registrant Dated: September 26, 1996 /s/ Larry D. Vander Maten ------------------------- Larry D. Vander Maten President and Director (Principal Executive Officer and Principal Financial and Accounting Officer) 67 68 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. EAST PEORIA REAL ESTATE, INC., Registrant Dated: September 26, 1996 /s/ Larry D. Vander Maten ------------------------- Larry D. Vander Maten President and Director (Principal Executive Officer and Principal Financial and Accounting Officer) 68 69 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ALTON REAL ESTATE, INC., Registrant Dated: September 26, 1996 /s/ Larry D. Vander Maten ------------------------- Larry D. Vander Maten President and Director (Principal Executive Officer and Principal Financial and Accounting Officer) 69 70 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. MOLINE REAL ESTATE, INC., Registrant Dated: September 26, 1996 /s/ Larry D. Vander Maten ------------------------- Larry D. Vander Maten President and Director (Principal Executive Officer and Principal Financial and Accounting Officer) 70 71 ROSEWOOD CARE CENTERS CAPITAL FUNDING CORPORATION EXHIBIT INDEX These Exhibits are numbered in accordance with the Exhibit Table of Item 601 of Regulation S-K
Exhibit Number Description - ------- ----------- 3.1 Reference is made to the Amended and Restated Articles of Incorporation of Rosewood Care Centers Capital Funding Corporation filed on September 28, 1994 as Exhibit 3.1 of the Form 10-K of Registrants. 3.2 Reference is made to the Amended and Restated Articles of Incorporation of Rosewood Care Center, Inc. of Swansea filed on September 28, 1994 as Exhibit 3.2 of the Form 10-K of Registrants. 3.3 Reference is made to the Amended and Restated Articles of Incorporation of Rosewood Care Center, Inc. of Galesburg filed on September 28, 1994 as Exhibit 3.3 of the Form 10-K of Registrants. 3.4 Reference is made to the Amended and Restated Articles of Incorporation of Rosewood Care Center, Inc. of East Peoria filed on September 28, 1994 as Exhibit 3.4 of the Form 10-K of Registrants. 3.5 Reference is made to the Amended and Restated Articles of Incorporation of Rosewood Care Center, Inc. of Peoria filed on September 28, 1994 as Exhibit 3.5 of the Form 10-K of Registrants. 3.6 Reference is made to the Amended and Restated Articles of Incorporation of Rosewood Care Center, Inc. of Alton filed on September 28, 1994 as Exhibit 3.6 of the Form 10-K of Registrants. 3.7 Reference is made to the Amended and Restated Articles of Incorporation of Rosewood Care Center, Inc. of Moline filed on September 28, 1994 as Exhibit 3.7 of the Form 10-K of Registrants. 3.8 Reference is made to the Amended and Restated Articles of Incorporation of Swansea Real Estate, Inc. filed on September 28, 1994 as Exhibit 3.8 of the Form 10-K of Registrants. 3.9 Reference is made to the Amended and Restated Articles of Incorporation of Galesburg Real Estate, Inc. filed on September 28, 1994 as Exhibit 3.9 of the Form 10-K of Registrants. 71 72 3.10 Reference is made to the Amended and Restated Articles of Incorporation of East Peoria Real Estate, Inc. filed on September 28, 1994 as Exhibit 3.10 of the Form 10-K of Registrants. 3.11 Reference is made to the Amended and Restated Articles of Incorporation of Peoria Real Estate, Inc. filed on September 28, 1994 as Exhibit 3.11 of the Form 10-K of Registrants. 3.12 Reference is made to the Amended and Restated Articles of Incorporation of Alton Real Estate, Inc. filed on September 28, 1994 as Exhibit 3.12 of the Form 10-K of Registrants. 3.13 Reference is made to the Amended and Restated Articles of Incorporation of Moline Real Estate, Inc. filed on September 28, 1994 as Exhibit 3.13 of the Form 10-K of Registrants. 3.14 Reference is made to the Bylaws of Rosewood Care Centers Capital Funding Corporation filed on July 13, 1993 as Exhibit 3.14 of the Registration Statement of Registrants (No. 33-65948) declared effective October 14, 1993. 3.15 Reference is made to the Bylaws of Rosewood Care Center, Inc. of Swansea filed on July 13, 1993 as Exhibit 3.15 of the Registration Statement of Registrants (No. 33-65948) declared effective October 14, 1993. 3.16 Reference is made to the Bylaws of Rosewood Care Center, Inc. of Galesburg filed on July 13, 1993 as Exhibit 3.16 of the Registration Statement of Registrants (No. 33-65948) declared effective October 14, 1993. 3.17 Reference is made to the Bylaws of Rosewood Care Center, Inc. of East Peoria filed on July 13, 1993 as Exhibit 3.17 of the Registration Statement of Registrants (No. 33-65948) declared effective October 14, 1993. 3.18 Reference is made to the Bylaws of Rosewood Care Center, Inc. of Peoria filed on July 13, 1993 as Exhibit 3.18 of the Registration Statement of Registrants (No. 33-65948) declared effective October 14, 1993. 3.19 Reference is made to the Bylaws of Rosewood Care Center, Inc. of Alton filed on July 13, 1993 as Exhibit 3.19 of the Registration Statement of Registrants (No. 33-65948) declared effective October 14, 1993. 3.20 Reference is made to the Bylaws of Rosewood Care Center, Inc. of Moline filed on July 13, 1993 as Exhibit 3.20 of the Registration Statement of Registrants (No. 33-65948) declared effective October 14, 1993. 3.21 Reference is made to the Bylaws of Swansea Real Estate, Inc. filed on July 13, 1993 as Exhibit 3.21 of the Registration Statement of Registrants (No. 33-65948) declared effective October 14, 1993. 72 73 3.22 Reference is made to the Bylaws of Galesburg Real Estate, Inc. filed on July 13, 1993 as Exhibit 3.22 of the Registration Statement of Registrants (No. 33-65948) declared effective October 14, 1993. 3.23 Reference is made to the Bylaws of East Peoria Real Estate, Inc. filed on July 13, 1993 as Exhibit 3.23 of the Registration Statement of Registrants (No. 33-65948) declared effective October 14, 1993. 3.24 Reference is made to the Bylaws of Peoria Real Estate, Inc. filed on July 13, 1993 as Exhibit 3.24 of the Registration Statement of Registrants (No. 33-65948) declared effective October 14, 1993. 3.25 Reference is made to the Bylaws of Alton Real Estate, Inc. filed on July 13, 1993 as Exhibit 3.25 of the Registration Statement of Registrants (No. 33-65948) declared effective October 14, 1993. 3.26 Reference is made to the Bylaws of Moline Real Estate, Inc. filed on July 13, 1993 as Exhibit 3.26 of the Registration Statement of Registrants (No. 33-65948) declared effective October 14, 1993. 4.1 Reference is made to Article III of the Articles of Incorporation of Rosewood Care Centers Capital Funding Corporation filed on July 13, 1993 as Exhibit 3.1 (and referenced in Exhibit 4.1) of the Registration Statement of Registrants (No. 33-65948) declared effective October 14, 1993. 4.2 Reference is made to the Trust Indenture filed on November 29, 1993 as Exhibit 4.2 of the Form 10-Q of Registrants. 4.3 Reference is made to the Bond filed on November 29, 1993 as Exhibit 4.3 of the Form 10-Q of Registrants. 4.4 Reference is made to the Loan Guaranty Agreement between Rosewood Care Centers Capital Funding Corporation and Rosewood Care Center, Inc. of Alton and the additional Loan Guaranty Agreements listed on the Schedule filed on November 29, 1993 as Exhibit 4.4 of the Form 10-Q of Registrants. 4.5 Reference is made to the Note executed by Alton Real Estate, Inc. and the additional Notes listed on the Schedule filed on November 29, 1993 as Exhibit 4.5 of the Form 10-Q of Registrants. 10.1 Reference is made to the Trust Indenture filed on November 29, 1993 as Exhibit 4.2 of the Form 10-Q of Registrants. 10.2 Reference is made to the Collateral Pledge and Security Agreement between Rosewood Care Centers Capital Funding Corporation and Alton Real Estate, Inc. and the additional Collateral Pledge and Security Agreements listed on the 73 74 Schedule filed on November 29, 1993 as Exhibit 10.2 of the Form 10-Q of Registrants. 10.3 Reference is made to the Mortgage Between Alton Real Estate, Inc. and Rosewood Care Centers Capital Funding Corporation and the additional Mortgages listed on the Schedule filed on November 29, 1993 as Exhibit 10.3 of the Form 10-Q of Registrants. 10.4 Reference is made to the Security Agreement between Rosewood Care Centers Capital Funding Corporation and Rosewood Care Center, Inc. of Alton and the additional Security Agreements listed on the Schedule filed on November 29, 1993 as Exhibit 10.4 of the Form 10-Q of Registrants. 10.5 Reference is made to the Assignment of Rents and Leases between Rosewood Care Centers Capital Funding Corporation and Alton Real Estate, Inc. and the additional Assignments of Rents and Leases listed on the Schedule filed on November 29, 1993 as Exhibit 10.5 of the Form 10-Q of Registrants. 10.6 Reference is made to the Subordination and Attornment Agreement between Rosewood Care Centers Capital Funding Corporation and Alton Real Estate, Inc. and the additional Subordination and Attornment Agreements listed on the Schedule filed on November 29, 1993 as Exhibit 10.6 of the Form 10-Q of Registrants. 10.7 Reference is made to the Acknowledgment and Consent between Rosewood Care Centers Capital Funding Corporation and Hovan Enterprises, Inc. filed on November 29, 1993 as Exhibit 10.7 of the Form 10-Q of Registrants 10.8 Reference is made to the Administrative Services Agreement between Hovan Enterprises, Inc. and Alton Real Estate, Inc. and the additional Administrative Services Agreements listed on the Schedule filed on November 29, 1993 as Exhibit 10.8 of the Form 10-Q of Registrants. 10.9 Reference is made to the Revised and Restated Management Agreement between Rosewood Care Center, Inc. of Alton and Hovan Enterprises, Inc. and the additional Revised and Restated Management Agreements listed on the Schedule filed on November 29, 1993 as Exhibit 10.9 of the Form 10-Q of Registrants. 10.10 Reference is made to the Lease between Alton Real Estate, Inc. and Rosewood Care Center, Inc. of Alton and the additional Leases listed on the Schedule filed on November 29, 1993 as Exhibit 10.10 of the Form 10-Q of Registrants. 10.11 Reference is made to the Assignment of Management Agreement between Rosewood Care Center, Inc. of Alton and Mercantile Bank and the additional Assignments of Management Agreement listed on the Schedule filed on November 29, 1993 as Exhibit 10.11 of the Form 10-Q of Registrants. 74 75 10.12 Reference is made to the Contract between Resident and Facility filed on July 13, 1993 as Exhibit 10.12 of the Registration Statement of Registrants (No. 33-65948) declared effective October 14, 1993. 10.13 Reference is made to the Loan Agreement among Rosewood Care Centers Capital Funding Corporation and Alton Real Estate, Inc., Swansea Real Estate, Inc., Peoria Real Estate, Inc., East Peoria Real Estate, Inc., Moline Real Estate, Inc., and Galesburg Real Estate, Inc. filed on November 29, 1993 as Exhibit 10.13 of the Form 10-Q of Registrants. 10.14 Reference is made to the Loan Guaranty Agreement filed on November 29, 1993 as Exhibit 4.4 of the Form 10-Q of Registrants. 10.15 Reference is made to the Letter of Credit issued by Sun Bank, National Association to Mercantile Bank of St. Louis N.A. as Trustee under the Trust Indenture on December 6, 1993 and substituted for the cash in the Debt Service Reserve Fund on December 9, 1993, filed on February 11, 1994 as Exhibit 10.15 on the Form 10-Q of the Registrants. 10.16 Reference is made to the renewal of the Letter of Credit filed on February 11, 1994 as Exhibit 10.15 on the Form 10-Q of the Registrants, which renewal was filed on February 14, 1995 as Exhibit 10.16 of the Form 10-Q of the Registrants. 10.17 Reference is made to the renewal of the Letter of Credit filed on February 11, 1994 as Exhibit 10.15 on the Form 10-Q of the Registrants, which renewal was filed on February 13, 1996 as Exhibit 10.17 of the Form 10-Q of the Registrants. 27 Financial Data Schedule 99.1 Reference is made to the Amended and Restated License Agreement filed on September 28, 1994 as Exhibit 99.1 of the Form 10-K of the Registrants. 99.2 Reference is made to the Medicare Provider Agreement between The Secretary of Health and Human Services and Rosewood Care Center, Inc. of Swansea filed on July 13, 1993 as Exhibit 99.2 of the Registration Statement of Registrants (No. 33-65948) declared effective October 14, 1993. 99.3 Reference is made to the Medicare Provider Agreement between The Secretary of Health and Human Services and Rosewood Care Center, Inc. of Alton filed on July 13, 1993 as Exhibit 99.3 of the Registration Statement of Registrants (No. 33-65948) declared effective October 14, 1993. 99.4 Reference is made to the Medicare Provider Agreement between The Secretary of Health and Human Services and 75 76 Rosewood Care Center, Inc. of East Peoria filed on July 13, 1993 as Exhibit 99.4 of the Registration Statement of Registrants (No. 33-65948) declared effective October 14, 1993. 99.5 Reference is made to the Medicare Provider Agreement between The Secretary of Health and Human Services and Rosewood Care Center, Inc. of Peoria filed on July 13, 1993 as Exhibit 99.5 of the Registration Statement of Registrants (No. 33-65948) declared effective October 14, 1993. 99.6 Reference is made to the Medicare Provider Agreement between The Secretary of Health and Human Services and Rosewood Care Center, Inc. of Galesburg filed on July 13, 1993 as Exhibit 99.6 of the Registration Statement of Registrants (No. 33-65948) declared effective October 14, 1993. 99.7 Reference is made to the Medicare Provider Agreement between The Secretary of Health and Human Services and Rosewood Care Center, Inc. of Moline filed on July 13, 1993 as Exhibit 99.7 of the Registration Statement of Registrants (No. 33-65948) declared effective October 14, 1993. 99.8 Reference is made to the Medicaid Provider Agreement between The Illinois Department of Public Aid and Rosewood Care Center, Inc. of Swansea filed on July 13, 1993 as Exhibit 99.8 of the Registration Statement of Registrants (No. 33-65948) declared effective October 14, 1993. 99.9 Reference is made to the Medicaid Provider Agreement between The Illinois Department of Public Aid and Rosewood Care Center, Inc. of Alton filed on July 13, 1993 as Exhibit 99.9 of the Registration Statement of Registrants (No. 33-65948) declared effective October 14, 1993. 99.10 Reference is made to the Medicaid Provider Agreement between The Illinois Department of Public Aid and Rosewood Care Center, Inc. of East Peoria filed on July 13, 1993 as Exhibit 99.10 of the Registration Statement of Registrants (No. 33-65948) declared effective October 14, 1993. 99.11 Reference is made to the Medicaid Provider Agreement between The Illinois Department of Public Aid and Rosewood Care Center, Inc. of Peoria filed on July 13, 1993 as Exhibit 99.11 of the Registration Statement of Registrants (No. 33-65948) declared effective October 14, 1993. 99.12 Reference is made to the Medicaid Provider Agreement between The Illinois Department of Public Aid and Rosewood Care Center, Inc. of Galesburg filed on July 13, 1993 as Exhibit 99.12 of the Registration Statement of Registrants (No. 33-65948) declared effective October 14, 1993. 99.13 Reference is made to the Medicaid Provider Agreement between The Illinois Department of Public Aid and Rosewood Care Center, Inc. of Moline filed on July 13, 1993 as 76 77 Exhibit 99.13 of the Registration Statement of Registrants (No. 33-65948) declared effective October 14, 1993. 99.14 Reference is made to the Lease Agreement filed on September 28, 1994 as Exhibit 99.14 of the Form 10-K of the Registrants. 99.15 Reference is made to the Revised and Restated Grant and Declaration of Easements filed on September 28, 1994 as Exhibit 99.15 of the Form 10-K of the Registrants. 99.16 Reference is made to the Managed Care Agreement between Rosewood Care Center, Inc. of Moline, Heritage National Health Plan, Inc., John Deere Family Health Plan and Deere and Company filed on May 15, 1995 as Exhibit 99.16 of the Form 10-Q of the Registrants. 99.17 Skilled Nursing Facility Agreement between Health Care Service Corporation and Rosewood Care Center, et.al.
77 EX-99.17 2 SKILLED NURSING FACILITY AGREEMENT 1 EXHIBIT 99.17 78 2 99.17 SKILLED NURSING FACILITY AGREEMENT HEALTH CARE SERVICE CORPORATION, A MUTUAL LEGAL RESERVE COMPANY (BLUE CROSS AND BLUE SHIELD OF ILLINOIS) 233 North Michigan Avenue Chicago, Illinois 60601-5655 THIS AGREEMENT made this 15th day of July, 1996, by and between Health Care Service Corporation, a Mutual Legal Reserve Company (Blue Cross and Blue Shield of Illinois), a not-for-profit Illinois corporation (hereinafter referred to as "Blue Cross") and Rosewood Care Center, et al. of Illinois and ---------------------------- Missouri, and its wholly owned subsidiaries listed in Exhibit C, attached hereto, (hereinafter referred to as the "Provider"). WHEREAS, Blue Cross has established and is maintaining a health care service plan and is operating as a mutual legal reserve company; and WHEREAS, the Provider is an institution furnishing skilled nursing services and is duly licensed under the Illinois Nursing Home Care Act of 1979, as amended, or under the Illinois Hospital Licensing Act of Illinois, as amended; and WHEREAS, Blue Cross intends by entering into this Agreement to make available skilled nursing services to its members by contracting with Provider; and WHEREAS, the Provider intends to provide such health care in a cost efficient manner; and WHEREAS, this Agreement is intended to implement a relationship between Blue Cross and Provider based upon cost effective methods of health care delivery and financing; NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, the parties hereto agree as follows: ARTICLE I DEFINITIONS A. "Coverage Agreement" means any policy, contract or certificate entered into or issued by Blue Cross entitling Covered Persons to receive benefits for the Covered Services designated therein. Coverage Agreement also includes any agreement between Blue Cross and an employer or group for the furnishing of administrative services in support of such employer's or group's health care program. B. "Covered Person" means any person entitled to receive Covered Services pursuant to the terms of a Coverage Agreement. ALL REFERENCES TO "ILLINOIS" IN THIS AGREEMENT SHALL BE DEEMED TO MEAN - ---------------------------------------------------------------------- ILLINOIS OR MISSOURI. - --------------------- C. "Covered Services" means those Inpatient and Outpatient services and supplies which are specified as benefits pursuant to the terms of a Coverage Agreement. Covered Services includes services and supplies which by the terms of a Coverage Agreement, are subject to deductible and co-payment amounts. 79 3 D. "Inpatient" means a person formally admitted to the Provider for bed occupancy for purposes of receiving Inpatient Provider services, with the reasonable expectation that the person will occupy a bed and remain at least overnight even though it later develops that the person is discharged or transferred to another provider and does not actually use a Provider bed overnight. E. "Medical Services Advisory (MSA) Program" (hereinafter referred to as the "MSA Program") means a program performed by Blue Cross to assist Covered Persons in managing benefits under Coverage Agreements. The MSA Program includes, but is not limited to, the performance of pre-admission and length of stay reviews and the pre-certification of certain Outpatient services. F. "Medically Necessary" means Covered Services which, under the provisions of this Agreement, are determined through Utilization Review to be: (1) Appropriate and necessary for the treatment of the medical condition, and (2) Provided for the direct care and treatment of the medical condition, and (3) Within standards of good medical practice within the organized medical community, and (4) Not primarily for the convenience of the Covered Person, the Covered Person's physician or another provider, and (5) The most efficient and economical supply or level of service which can safely be provided. For Provider stays, this means that care as an Inpatient in a licensed skilled care bed is necessary due to the kind of services the Covered Person is receiving or the severity of the Covered Person's condition, and that safe and adequate care cannot be received as an Outpatient, or in some other less intensified setting. G. "Non-Covered Services" means those services or supplies which are not Covered Services under a Coverage Agreement. H. "Outpatient" means a person treated by the Provider as other than an Inpatient. I. "Utilization Review" means a function performed by the Provider or Blue Cross or by an organization or entity acting as an agent of Blue Cross to review and determine whether Covered Services are Medically Necessary. ARTICLE II PROVIDER SERVICES AND RESPONSIBILITIES A. Provider shall provide to Covered Persons Covered Services in accordance with this Agreement which are Medically Necessary, when such services are ordered by a licensed physician or, to the extent permitted by law, other health care practitioners. B. Provider shall provide Covered Services to Covered Persons in the same manner and quality as those services are provided to all other patients of Provider. 80 4 C. Provider agrees to participate in Utilization Review, as provided in Article VII, and to abide by decisions resulting from that review, subject to rights of reconsideration and review provided therein. D. Provider agrees to cooperate with Blue Cross towards establishing cost containment programs which can reasonably be expected to result in the cost effective delivery of Covered Services to Covered Persons. Such programs include, but are not limited to, discharge planning and generic drug substitution. Provider will maintain adequate records on these programs and their utilization by Covered Persons for review by Blue Cross. Blue Cross agrees to provide assistance to Provider for the establishment and maintenance of its cost containment programs. E. Provider represents that it is duly licensed under the Illinois Nursing Home Care Act of 1979, as amended or under the Illinois Hospital Licensing Act of Illinois, as amended. F. Provider agrees to notify Blue Cross in writing immediately upon any change in licensure or accreditation status by the Joint Commission on Accreditation of Healthcare Organizations or similar accrediting body, or the addition or deletion of any facility and/or program subject to such licensure or accreditation. G. Subject to Article VII F, Provider agrees, in the event that it is determined by Blue Cross that the care rendered by the Provider to a Covered Person was not Medically Necessary, that it will not charge or attempt to collect from Blue Cross or the Covered Person, and Blue Cross and the Covered Person shall not be obligated to pay the Provider for the care or any portion of the care rendered by the Provider to the Covered Person. The Provider may appeal such determination by giving written notice to Blue Cross. Such notice shall include medical information that the Provider believes supports its contention that the care was Medically Necessary. The notice shall also include evidence that the care rendered to the Covered Person has been reviewed by the Provider's Utilization Review Program and shall include the results of that review. Blue Cross shall review the information and provide a written notice of its decision to the Provider within thirty (30) calendar days after receipt of such notice. Provider agrees that the decision of Blue Cross shall be final and binding. H. Provider agrees to cooperate with Blue Cross in its provider assessment activities including but not limited to on-site visits by Blue Cross. I. Provider's Schedule of Facility Charges for Covered Services rendered to Covered Persons are set forth in Exhibit A, attached to and made a part of this Agreement. Provider agrees to furnish Blue Cross with thirty (30) days prior written notice of any increase in charges. J. Provider agrees to abide by decisions of the Illinois Health Facilities Planning Board and/or local planning agencies, and, if the Provider should initiate or expand a service or add to or alter its facilities in a manner that is inconsistent with the decisions of the Illinois Health Facilities Planning Board and/or local planning agencies, Blue Cross is not obligated to reimburse the Provider for any costs associated with such services or facilities that are used in providing Covered Services to Covered Persons. In such event, the Provider shall so notify in writing each Covered Person seeking such services or services in or through such facilities of the non-coverage of such services or facilities by virtue of the fact that they are inconsistent with the decisions 81 5 of the Illinois Health Facilities Planning Board and/or local planning agencies, prior to the rendering of any such services. If the Provider does not so notify each Covered Person, then Provider agrees to indemnify and hold harmless Blue Cross and each such Covered Person from any and all Provider charges for such services or services provided in or through such facilities. K. Except for any amounts attributable to deductibles and co-payments as specified in the particular Coverage Agreement, Provider agrees not to charge or collect from any Covered Person any amount whatsoever for Covered Services. The Provider may charge, and shall have the sole responsibility for collecting from, Covered Persons amounts attributable to deductibles and co-payments as specified in the particular Coverage Agreement and amounts attributable to Non-Covered Services. L.1. Certain Coverage Agreements provide that certain required communications with the MSA Program be made by the Provider. The identification cards issued by Blue Cross to Covered Persons and/or Blue Cross' normal admitting notification process will identify Covered Persons covered under such Coverage Agreements. For all such Covered Persons the Provider agrees as follows: a: Prior to all non-emergency Inpatient (elective) admissions of, and prior to rendering certain Outpatient services designated by Blue Cross for specific groups to, Covered Persons, the Provider agrees to contact the MSA Program by telephone at a number to be supplied by Blue Cross. The Provider shall advise the MSA Program of such pending Inpatient admission of or Outpatient service regarding the Covered Person. Blue Cross will confirm such telephone notice to the Provider in writing, or by notification through Blue Cross' normal electronic admitting process. Blue Cross will provide the Provider, from time to time, with notice of the certain Outpatient services so designated by Blue Cross and the particular groups to which such MSA Program notification applies. b. In the event of an Inpatient emergency admission, the Provider agrees to notify Blue Cross of the admission by telephone, at a number to be supplied by Blue Cross, as soon as possible but in no event later than one (1) working day after such admission. Blue Cross will confirm such telephone notice to the Provider in writing, or by notification through Blue Cross' normal electronic admitting process. c. In the event the Provider does not notify Blue Cross of a particular Inpatient admission or certain Outpatient service as required in this Paragraph L, Blue Cross shall not be obligated to pay the Provider, nor shall the Provider charge the Covered Person, for any portion of the particular admission or for the certain Outpatient service if it is determined to be not Medically Necessary pursuant to Article VII of this Agreement entitled "Utilization Review". 2. Blue Cross may, from time to time, inform the Provider of the preadmission and pre-certification processes required by other Blue Cross and/or Blue Shield Plans, the Blue Cross and Blue Shield Association ("BCBSA") National Program and the BCBSA Managed Care Program. Provider agrees to comply with all such preadmission and pre-certification processes. Provided, however, that once duly certified by Blue Cross, Covered Services rendered by Provider shall not be subject to retrospective denial. 82 6 ARTICLE III BLUE CROSS SERVICES AND RESPONSIBILITIES A. Blue Cross agrees to pay Provider compensation pursuant to the provisions of Articles IV, V and VI. B. Blue Cross agrees to provide Provider with information relating to Coverage Agreements. C. Blue Cross agrees to grant Provider the status of "Participating Provider", and to identify Provider as a Blue Cross participating skilled nursing facility upon receiving inquiries from its staff, employers, groups and Covered Persons. ARTICLE IV COMPENSATION AND BILLING A. Blue Cross shall pay Provider for the provision of Covered Services rendered to Covered Persons in accordance with the provisions of this Article IV. The payment from Blue Cross shall be limited to the amounts referred to in Article IV B, less deductible and co-payment amounts as provided in Article IV C and less amounts received from sources other than Blue Cross pursuant to the coordination of benefits ("COB") provisions of a particular Coverage Agreement. B. Provider shall accept the Payment Rate set forth in Exhibit B, attached to and made part of this Agreement, for Covered Services provided to Covered Persons as of the Effective Date of this Agreement. C. Provider agrees that the only charges for which a Covered Person may be liable and be billed by Provider shall be for Non-Covered Services and for deductible and co-payment amounts required by the applicable Coverage Agreement and for those Covered Services which are not Medically Necessary but for which the Covered Person has been notified pursuant to Article IV G. D. Blue Cross shall deduct from payment due Provider from Blue Cross pursuant to this Agreement, the appropriate amount of deductibles and co-payments required to be paid by the Covered Person pursuant to the applicable Coverage Agreement. The Provider's normal schedule of rates for patients who are not Covered Persons or covered under Medicare or Medicaid programs shall be the base from which the deductible shall be subtracted and for computing or determining the co-payment pursuant to this paragraph. Blue Cross shall pay only those amounts, if any, which when added to the deductibles and co-payments due the Provider from Covered Persons, and COB amounts as provided in Article IV E below, pursuant to this Article, equal One Hundred Percent (100%) of the amount required by this Agreement. E. Payment for claims for which Blue Cross had other than primary liability under the coordination of benefits ("COB") provisions of a particular Coverage Agreement, shall be limited to that amount, if any, which, when added to amounts receivable by the Provider from all other sources, pursuant to applicable COB rules, equals one hundred percent (100%) of the amount for which the Provider would have been paid pursuant to this Agreement had Blue Cross had primary liability under the particular Coverage Agreement. F. Provider shall bill Blue Cross in a manner acceptable to Blue Cross. Provider shall furnish, on request, all information reasonably required by Blue Cross to verify and substantiate the provision of Covered Services and the charges for 83 7 such services. Blue Cross reserves the right to review any and all statements submitted by Provider. G. Provider shall not charge Covered Persons for Provider services denied as not being Medically Necessary under Article VII B, unless Provider has duly provided notice to that Covered Person in accordance with Article VII F. H. Blue Cross shall not be liable for any claim not received on or before December 31st of the calendar year following the year in which the Covered Services were rendered. For the purposes of this paragraph, Covered Services furnished in the last month of a particular calendar year shall be considered to have been furnished in the succeeding calendar year. It is expressly agreed that the Provider shall not bill or seek to collect from a Covered Person the amount, or any part thereof, ineligible for payment by Blue Cross as a result of the Provider's failure to comply with the claim submission time limit specified in this paragraph. I. Charges for services rendered to Covered Persons shall not exceed the Provider's charges made to persons other than Covered Persons for the same services, except Medicare and Medicaid. If multiple charge schedules are maintained by Provider, the one which generates the lowest aggregate charge per case shall be used for Covered Persons. ARTICLE V INTERIM PAYMENT PROVISIONS A. Blue Cross, at its option, may pay Provider via the Uniform Payment Program (UPP). If Blue Cross pays Provider via UPP, then Blue Cross agrees to pay Provider a prospectively determined weekly payment for Covered Services rendered to Covered Persons. The amount of the payment will be computed by Blue Cross as follows: Projected weekly Provider charges for Covered Services rendered to Covered Persons LESS Projected weekly amount of Covered Person's deductibles, co-payments and COB amounts for Covered Services rendered to Covered Persons LESS Projected weekly Blue Cross Allowance (the amount retained by Blue Cross that represents the difference between Provider charges for Covered Services rendered to Covered Persons less deductibles, co-payments and COB amounts, and the amount due Provider from Blue Cross for these Covered Services pursuant to Article to Article IV of this Agreement) EQUALS The weekly interim payment for Covered Services rendered to Covered Persons. Such weekly interim payment will be reviewed and adjusted by Blue Cross as necessary to reflect actual Blue Cross claims for Covered Services rendered to Covered Persons by the Provider during the particular year as evidenced by Blue Cross processed claims data. The interim payments made pursuant to this Article 84 8 V are subject to the Payment Reconciliation Process in accordance with Article VI. ARTICLE VI PAYMENT RECONCILIATION PROCESS A. A periodic reconciliation shall be made by Blue Cross from time to time during the Term of this Agreement in order to reconcile the payment by Blue Cross to the Provider pursuant to Article V, Interim Payment Provisions, and the Compensation provisions specified in Article IV. B. The reconciliation process shall be completed, and the Provider shall be notified in writing of the results thereof. If the reconciliation process results in a determination that an amount is due to Blue Cross, the Provider shall pay Blue Cross that amount no later than thirty (30) calendar days after Provider's receipt of the aforesaid notice. In the event such payment to Blue Cross is not made by the Provider when due, Blue Cross may, at its option, deduct all or any part of the amount from the next payment or payments due the Provider pursuant to Article V of this Agreement, until such outstanding amount is recovered in full. ARTICLE VII UTILIZATION REVIEW A. Provider shall establish a Utilization Review Program applicable, at a minimum, to Covered Persons. B. A Utilization Review Program, whether performed by the Provider or Blue Cross pursuant to the terms of this Agreement, shall provide for reviews of admissions, durations of stays and Provider services rendered to determine whether they are Medically Necessary and shall conform with generally accepted principles of Utilization Review. A Utilization Review Program shall include, at a minimum, the following, to the extent required by Blue Cross: (1) "Admission Review" which means a review to determine whether an Inpatient admission is Medically Necessary. (2) "Concurrent Review" which means a review to determine whether a continued Inpatient Provider stay and services and supplies provided incident thereto are Medically Necessary; (3) "Discharge Planning" which means the process of planning in advance for the continuation of appropriate health care services for a patient's treatment and/or convalescence, subsequent to discharge from the Provider; (4) "Outpatient Review" which means a review to determine whether Outpatient services or the continuance of Outpatient services are Medically Necessary; (5) Provisions requiring compliance with all requirements of Blue Cross, including, but not limited to, the furnishing to Blue Cross of copies of medical records and other medical information on request. (6) Provisions requiring compliance with all requirements of the MSA Program, including, but not limited to, the furnishing to the MSA Program of copies medical of records and other medical information on request. 85 9 C. The Provider shall submit to Blue Cross a written description of any modification to its Utilization Review Program at least thirty (30) calendar days prior to implementing any such modification, unless such prior notice is waived by Blue Cross in writing. Blue Cross will notify the Provider of its acceptance or non-acceptance of the modification no later than thirty (30) calendar days after receipt of the description of modification. D. To determine continued acceptance of the Providers Utilization Review Program, Blue Cross will evaluate the results of Blue Cross' monitoring and evaluating the utilization patterns as reflected in utilization profiles developed by Blue Cross on the basis of its claim data for the Provider. Blue Cross' evaluation of the Provider's Utilization Review Program shall also include comparisons of Blue Cross data for the Provider and its peer groups. Blue Cross may also, at its option, evaluate the effectiveness of the Provider's Utilization Review Program through the retrospective review of the appropriateness of services provided to specific Covered Persons. Further, the Provider agrees to allow Blue Cross to audit and to make on-site examinations of the Provider's Utilization Review Program and medical records of Covered Persons. E. In the event Blue Cross determines at any time that the Provider's Utilization Review Program, or any element thereof, or any proposed modification thereto, is unacceptable, Blue Cross shall notify the Provider in writing specifying the unacceptable element(s) of the Program or proposed modification. The Provider shall evaluate such element(s) and respond in writing to Blue Cross, no later than fifteen (15) calendar days after the Hospital's receipt of such notice, regarding specific plans and timeframes for correction of the unacceptable element(s). F. The Utilization Review Program, whether performed by the Provider or Blue Cross or its agent, shall include a procedure whereby benefits may be terminated in advance of the Provider's rendering services or rendering further services. Such procedure shall provide that the Provider shall not charge Blue Cross or Covered Persons for services determined through Admission Review, Concurrent Review, or Outpatient Review to be not Medically Necessary. However, the Provider may charge a Covered Person for such services if the Provider has furnished the Covered Person with written notice that the services to be rendered will not be Covered Services and that the Covered Person will have responsibility for payment. Such notification shall provide the Covered Person with the procedure to appeal the Review decision and shall clearly state that the Covered Person shall be responsible for payment of all Provider services rendered after the Covered Person's receipt of notification of the Review decision. G. The parties expressly agree that the cost of the Provider's performing Utilization Review is included in the compensation provisions specified in Article IV. ARTICLE VIII RECORDS MAINTENANCE, AVAILABILITY, INSPECTION AND AUDIT A. MEDICAL RELEASES AND CONFIDENTIALITY The Provider shall obtain medical releases from each Covered Person as The Provider deems necessary in order for it to release Hospital medical records to Blue Cross regarding claims submitted for such Covered Person. Neither party 86 10 shall disclose or cause to be disclosed to anyone, patient-specific information provided by the other party without the agreement of the patient about whom such information pertains unless otherwise required or permitted by pertinent law or valid court order. B. PROVIDER RECORD AUDITS The Provider will permit Blue Cross access to examine and audit all medical records and other documents reasonably related to the Covered Services provided to any Covered Person during the term of this Agreement upon reasonable prior written notice to the Provider. ARTICLE IX TERM This Agreement shall be effective for a term commencing on July 1, 1996, and ending June 30, 1997 (the "Contract Term"). Thereafter, this Agreement shall be automatically renewed on a year-to-year basis, unless terminated pursuant to Article X of this Agreement, "Termination of Agreement". ARTICLE X TERMINATION OF AGREEMENT A. Either party may terminate this Agreement upon at least thirty (30) calendar days prior written notice to the other. B. If a party believes a material breach of this Agreement has been committed, it shall give written notice describing such material breach to the other party. In such event, the parties shall promptly confer to seek to resolve the matter. If the breach is not resolved within thirty (30) days of the allegedly breaching party's receipt of the aforesaid written notice, this Agreement may be terminated for material breach effective immediately upon written notice to the allegedly breaching party. C. This Agreement may be terminated by Blue Cross in accordance with the provisions of Article XIII C in the event of a transfer of majority interest or control of the Provider. D. If any voluntary or involuntary petition or similar pleading under any section or sections of any bankruptcy act shall be filed by or against either party, or any voluntary or involuntary proceeding in any court or tribunal shall be instituted to declare either party insolvent or unable to pay its debts, and in the case of the involuntary petition or proceeding, the petition or proceeding is not dismissed within sixty (60) days from the date it is filed, the other party may terminate this Agreement upon written notice to Provider or Blue Cross, as the case may be, effective upon receipt of such notice. ARTICLE XI OBLIGATIONS AFTER TERMINATION In the event this Agreement terminates for any reason, Provider shall continue to furnish Covered Services in accordance with the terms of this Agreement and the applicable Coverage Agreements to all Covered Persons who are Inpatients on the date of such termination during the remainder of their respective confinements or until such time as their respective eligibility for Covered Services expires or terminates pursuant to the terms of the Coverage Agreement, 87 11 whichever shall first occur. Blue Cross agrees to pay, in accordance with Articles IV, V and VI of this Agreement, for Covered Services furnished during such period of time following termination of this Agreement. ARTICLE XII NOTICES A. Any notice given or required under this Agreement shall be in writing and shall either be delivered or mailed, postage prepaid, by certified mail, return receipt requested, as follows: To Blue Cross: Health Care Service Corporation, a Mutual Legal Reserve Company 233 North Michigan Avenue Chicago, Illinois 60601-5655 Attention: Vice President-Hospital and Professional Affairs To Provider: Rosewood Care Centers, et al. 11701 Borman Drive, Suite 315 St. Louis, MO 63146 Attention: President B. The notice shall be effective if delivered, upon delivery, and if mailed, upon the date indicated on the return receipt. A party's address for notice may be changed at any time by notice given to the other in accordance with the provision of this Article. ARTICLE XIII MISCELLANEOUS A. Waiver of Breach of Agreement The failure of either party to insist upon strict performance of any of the terms of this Agreement shall not be construed as a waiver of its respective rights or remedies with respect to any subsequent breach or default in any of the terms of this Agreement. B. Assignment This Agreement may not be assigned by either party without the express prior written consent of the other party. If this Agreement is assigned in violation of this provision, this Agreement shall be null and void as of the date of such assignment. C. Transfer of Ownership of Provider The Provider shall give Blue Cross at least thirty (30)days written notice prior to the transfer of majority interest or control of the Provider. Blue Cross may elect to terminate this Agreement in the event of any such transfer of ownership 88 12 of the Provider by giving the Provider written notice of termination no later than thirty (30) days after receipt of the Provider's notice of such transfer, or thirty (30) days after knowledge of such transfer if the Provider does not provide the aforesaid notice to Blue Cross. If Blue Cross exercises its election to terminate this Agreement pursuant to this Article, the Agreement shall terminate thirty (30) days after the date of notice of termination or on such later date as Blue Cross may fix in its notice of termination. D. Limitations of Actions No action at law or in equity pertaining to any claim or controversy arising under this Agreement shall be maintained by either party against the other unless such action is commenced within two (2) years from the date when the cause of action arose. E. Entire Agreement; Amendments This Agreement constitutes this entire Agreement between Blue Cross and the Provider. This Agreement may not be amended, altered or modified except by a written amendment signed by an authorized representative of each party. F. Applicable Law This Agreement shall be construed and enforced in accordance with the laws of the State of Illinois. G. Severability This Agreement is inseverable. If any substantive provision of this Agreement is rendered invalid by order of any court of competent jurisdiction or by any valid federal or state law or regulation, this Agreement shall terminate as of the effective date of such order, law or regulation. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the 1st day of July 1996. Health Care Service Corporation, a Mutual Reserve Company By /s/ Joseph A. Arango -------------------- Attest Title Director Provider Contracting Provider By /s/ Larry D. Vander Maten ------------------------- Attest /s/ Michael Brady Title President - ----------------- 89 13 EXHIBIT A SNF SERVICES The payment to the Provider for Covered Services rendered to Covered Persons shall be the Provider's actual charge less twenty percent (20%), not to exceed the following per diem rates.
$240 $350 $450 Care or Activity Level 1 Level 2 Level 3 - ---------------- ------- ------- ------- Daily Nursing up to 3.0 up to 3.0 3.0 - 4.0 Hours Continence Infrequent Incontinent Supra pubic incontinence Staff Needs peri-care catheter assist with Depends Ostomy total bathroom needs Daily enema care Ostomy irrigations Medications Crushed meds Odd hour mods IVs Multi med routes Frequent vitals Daily labs Daily or weekly Weekly labs Unstable vitals IM meds condition Insulin for Insulin for controlled unstable brittle diabetics diabetic Skin Cond. Wound care 1x Wound care + 1x Stage 4 Decubiti daily daily Spec. skin care Stage 1 Stage 3 Continuos moist Stage 2 Sterile dressings dressing Whirlpool Respiratory Care 02 PRN 02 Continuous IPPB RX Daily 02 Daily PRN Trach care Suctioning IX Suction +1X Day Daily Nebulizer treatment 02 concentrator Diabetic Cond. Well controlled Difficult control Unstable Monthly blood Daily or weekly condition sugar check blood sugar QID blood check sugar Staff teach check insulin Sliding scale administration Restorative PROMS daily Prosthesis Therapy 2-3 Assistive device Therapy 1-2 hours daily Therapy 0-1 hours daily hours daily Daily application of brace or splint
90 14 EXHIBIT A (continued) The Skilled Nursing Facility services rendered to Blue Cross members shall be an all inclusive rate, including therapies, drugs, lab and supplies as detailed in this Exhibit. Provider agrees to itemize all services on the UB92. EXCLUSIONS FROM PER DIEM SNF will provide the following items requiring Case Manager Reauthorization at it's acquisition cost plus 15% or AWP whichever is less: Air Fluidized Therapy Customized DME Specialized Adaptive Equipment (Orthotics) IV Therapy Medications (Antibiotics, Chemo) Vivonex Dialysis LIMITATIONS Provider will pay for Medications not to exceed $150.00 per month. Provider will pay for Laboratory not to exceed $50.00 per month. Blue Cross agrees to pay hi excess of these amounts at SNF's acquisition cost. SERVICE EXCLUSIONS SNF does not provide the following services: Blood Transfusions Telemetry Monitoring Ventilators If during the term of this Agreement, the Provider shall provide Covered Services at a discount, rate, differential or other allowance more favorable than that provided in this Agreement, then the Provider shall promptly notify Blue Cross in writing, and Blue Cross, at its option, shall be give the advantage of such discount, rate, differential or other allowance effective as of the effective date of such contract or other arrangement. Provided, however, such provision shall not apply to Covered Services rendered under any government program. 91 15 EXHIBIT B
Facility FEIN # BLUE CROSS PROVIDER# Rosewood Care Center, Inc. of Alton 43-1446787 1074 3490 Humbert Road Alton, Illinois 62002 Rosewood Care Center, Inc. of East Peoria 43-1446788 1075 900 Centennial Drive East Peoria, Illinois 61611 Rosewood Care Center, Inc. of Edwardsville 43-1622946 1068 6277 Center Grove Road Edwardsville, Illinois 62025 Rosewood Care Center, Inc. of Elgin 43-1620366 1069 2355 Royal Boulevard Elgin, Illinois 60123 Rosewood Care Center, Inc. of Galesburg 43-1375391 1067 1250 W. Carl Sandburg Drive Galesburg, Illinois 61401 Rosewood Care Center. Inc. of Joliet 43-1478199 1070 3401 Hennepin Drive Joliet, Illinois 60431 Rosewood Care Center, Inc. of Moline 43-1453169 1071 7300- 34th Avenue Moline, Illinois 61265 Rosewood Care Center, Inc. of Peoria 43-1446786 1072 1500 W. Northmoor Road Peoria, Illinois 61614 Rosewood Care Center of 43-1478637 1073 St. Louis County, Inc. 11278 Schuetz Road St. Louis, Missouri 63146 Rosewood Care Center, Inc. of Swansea 43-1375409 1077 100 Rosewood Village Drive Swansea, Illinois 62222
92 EX-27.1 3 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from the Financial Statements at June 30, 1996 for the year ended June 30, 1996 and is qualified in its entirety by reference to such financial statements. 0000909110 ROSEWOOD CARE CENTER CAPITAL FUNDING CORPORATION 1000 12-MOS JUN-30-1996 JUL-01-1995 JUN-30-1996 262 0 29,286 0 0 262 0 0 29,542 178 29,363 1 0 0 0 29,542 0 0 0 0 0 0 2,183 0 0 0 0 0 0 0 0 0
EX-27.2 4 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from the Combined Financial Statements at June 30, 1996 for the year ended June 30, 1996 and is qualified in its entirety by reference to such financial statements. 0000909114 ROSEWOOD CARE CENTER OF GALESBURG 1000 12-MOS JUN-30-1996 JUL-01-1995 JUN-30-1996 2,237 0 4,790 206 0 6,960 24,782 6,435 34,457 5,136 0 65 0 0 1,769 34,457 27,753 28,569 0 23,005 0 0 2,183 3,381 306 0 0 0 0 3,075 47 0
EX-27.3 5 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from the Combined Financial Statements at June 30, 1996 for the year ended June 30, 1996 and is qualified in its entirety by reference to such financial statements. 0000909113 ROSEWOOD CARE CENTER OF SWANSEA 1000 12-MOS JUN-30-1996 JUL-01-1995 JUN-30-1996 2,237 0 4,790 206 0 6,960 24,782 6,435 34,457 5,136 0 65 0 0 1,769 34,457 27,753 28,569 0 23,005 0 0 2,183 3,381 306 0 0 0 0 3,075 47 0
EX-27.4 6 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from the Combined Financial Statements at June 30, 1996 for the year ended June 30, 1996 and is qualified in its entirety by reference to such financial statements. 0000909115 ROSEWOOD CARE CENTER OF EAST PEORIA 1000 12-MOS JUN-30-1996 JUL-01-1995 JUN-30-1996 2,237 0 4,790 206 0 6,960 24,782 6,435 34,457 5,136 0 65 0 0 1,769 34,457 27,753 28,569 0 23,005 0 0 2,183 3,381 306 0 0 0 0 3,075 47 0
EX-27.5 7 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from the Combined Financial Statements at June 30, 1996 for the year ended June 30, 1996 and is qualified in its entirety by reference to such financial statements. 0000909116 ROSEWOOD CARE CENTER OF PEORIA 1000 12-MOS JUN-30-1996 JUL-01-1995 JUN-30-1996 2,237 0 4,790 206 0 6,960 24,782 6,435 34,457 5,136 0 65 0 0 1,769 34,457 27,753 28,569 0 23,005 0 0 2,183 3,381 306 0 0 0 0 3,075 47 0
EX-27.6 8 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from the Combined Financial Statements at June 30, 1996 for the year ended June 30, 1996 and is qualified in its entirety by reference to such financial statements. 0000909117 ROSEWOOD CARE CENTER OF ALTON 1000 12-MOS JUN-30-1996 JUL-01-1995 JUN-30-1996 2,237 0 4,790 206 0 6,960 24,782 6,435 34,457 5,136 0 65 0 0 1,769 34,457 27,753 28,569 0 23,005 0 0 2,183 3,381 306 0 0 0 0 3,075 47 0
EX-27.7 9 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from the Combined Financial Statements at June 30, 1996 for the year ended June 30, 1996 and is qualified in its entirety by reference to such financial statements. 0000909118 ROSEWOOD CARE CENTER OF MOLINE 1000 12-MOS JUN-30-1996 JUL-01-1995 JUN-30-1996 2,237 0 4,790 206 0 6,960 24,782 6,435 34,457 5,136 0 65 0 0 1,769 34,457 27,753 28,569 0 23,005 0 0 2,183 3,381 306 0 0 0 0 3,075 47 0
EX-27.8 10 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from the Combined Financial Statements at June 30, 1996 for the year ended June 30, 1996 and is qualified in its entirety by reference to such financial statements. 0000909120 SWANSEA REAL ESTATE 1000 12-MOS JUN-30-1996 JUL-01-1995 JUN-30-1996 2,237 0 4,790 206 0 6,960 24,782 6,435 34,457 5,136 0 65 0 0 1,769 34,457 27,753 28,569 0 23,005 0 0 2,183 3,381 306 0 0 0 0 3,075 47 0
EX-27.9 11 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from the Combined Financial Statements at June 30, 1996 for the year ended June 30, 1996 and is qualified in its entirety by reference to such financial statements. 0000909121 GALESBURG REAL ESTATE 1000 12-MOS JUN-30-1996 JUL-01-1995 JUN-30-1996 2,237 0 4,790 206 0 6,960 24,782 6,435 34,457 5,136 0 65 0 0 1,769 34,457 27,753 28,569 0 23,005 0 0 2,183 3,381 306 0 0 0 0 3,075 47 0
EX-27.10 12 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from the Combined Financial Statements at June 30, 1996 for the year ended June 30, 1996 and is qualified in its entirety by reference to such financial statements. 0000909122 EAST PEORIA REAL ESTATE 1000 12-MOS JUN-30-1996 JUL-01-1995 JUN-30-1996 2,237 0 4,790 206 0 6,960 24,782 6,435 34,457 5,136 0 65 0 0 1,769 34,457 27,753 28,569 0 23,005 0 0 2,183 3,381 306 0 0 0 0 3,075 47 0
EX-27.11 13 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from the Combined Financial Statements at June 30, 1996 for the year ended June 30, 1996 and is qualified in its entirety by reference to such financial statements. 0000909123 PEORIA REAL ESTATE 1000 12-MOS JUN-30-1996 JUL-01-1995 JUN-30-1996 2,237 0 4,790 206 0 6,960 24,782 6,435 34,457 5,136 0 65 0 0 1,769 34,457 27,753 28,569 0 23,005 0 0 2,183 3,381 306 0 0 0 0 3,075 47 0
EX-27.12 14 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from the Combined Financial Statements at June 30, 1996 for the year ended June 30, 1996 and is qualified in its entirety by reference to such financial statements. 0000909124 ALTON REAL ESTATE 1000 12-MOS JUN-30-1996 JUL-01-1995 JUN-30-1996 2,237 0 4,790 206 0 6,960 24,782 6,435 34,457 5,136 0 65 0 0 1,769 34,457 27,753 28,569 0 23,005 0 0 2,183 3,381 306 0 0 0 0 3,075 47 0
EX-27.13 15 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from the Combined Financial Statements at June 30, 1996 for the year ended June 30, 1996 and is qualified in its entirety by reference to such financial statements. 0000909125 MOLINE REAL ESTATE 1000 12-MOS JUN-30-1996 JUL-01-1995 JUN-30-1996 2,237 0 4,790 206 0 6,960 24,782 6,435 34,457 5,136 0 65 0 0 1,769 34,457 27,753 28,569 0 23,005 0 0 2,183 3,381 306 0 0 0 0 3,075 47 0
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