-----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, G1EoB496456MtodL26l4DRwaT/1l/8nhPOJvaoLu3t2/SBt5mMLUIJfNpicUjYjX SfpnTapfqdqR0Z6+guU/BA== 0001068800-99-000236.txt : 19990514 0001068800-99-000236.hdr.sgml : 19990514 ACCESSION NUMBER: 0001068800-99-000236 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 14 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990513 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: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 033-65948 FILM NUMBER: 99620736 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-Q SEC ACT: SEC FILE NUMBER: 033-65948-01 FILM NUMBER: 99620737 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-Q SEC ACT: SEC FILE NUMBER: 033-65948-02 FILM NUMBER: 99620738 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-Q SEC ACT: SEC FILE NUMBER: 033-65948-03 FILM NUMBER: 99620739 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-Q SEC ACT: SEC FILE NUMBER: 033-65948-04 FILM NUMBER: 99620740 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-Q SEC ACT: SEC FILE NUMBER: 033-65948-05 FILM NUMBER: 99620741 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-Q SEC ACT: SEC FILE NUMBER: 033-65948-06 FILM NUMBER: 99620742 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-Q SEC ACT: SEC FILE NUMBER: 033-65948-07 FILM NUMBER: 99620743 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-Q SEC ACT: SEC FILE NUMBER: 033-65948-08 FILM NUMBER: 99620744 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-Q SEC ACT: SEC FILE NUMBER: 033-65948-09 FILM NUMBER: 99620745 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-Q SEC ACT: SEC FILE NUMBER: 033-65948-10 FILM NUMBER: 99620746 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-Q SEC ACT: SEC FILE NUMBER: 033-65948-11 FILM NUMBER: 99620747 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-Q SEC ACT: SEC FILE NUMBER: 033-65948-12 FILM NUMBER: 99620748 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-Q 1 ROSEWOOD CARE CENTERS CAPITAL FUNDING CORP. FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1999 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 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) 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), (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares of stock of each of the issuer's classes of common stock, as of the latest practicable date: N/A Certain information called for on Item 6 of Part II of this Form 10-Q 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, Registrants' Form 10-Q filed May 14, 1996, Registrants' Form 10-K filed September 26, 1996, Registrants' Form 10-Q filed November 13, 1996, Registrants' Form 10-Q filed November 12, 1997, Registrants' Form 10-Q filed February 11, 1998, Registrants' Form 10-Q filed November 12, 1998 and Registrants' Form 10-Q filed February 12, 1999. Index to Exhibits is on Page 41. 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 ROSEWOOD CARE CENTERS CAPITAL FUNDING CORPORATION Index Part I Financial Information Page - ----------------------------- ---- Item 1. Financial Statements 4 Rosewood Care Centers Capital Funding Corporation: Balance Sheet 4 Statement of Operations 5 Statement of Cash Flows 6 Notes to Financial Statement 7 Rosewood Care Center Obligated 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. Combined Balance Sheet 8 Combined Statement of Operations 10 Combined Statement of Cash Flows 11 Notes to Combined Financial Statements 12 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 14 Part II Other Information - -------------------------- Item 1. Legal Proceedings 26 Item 2. Changes in Securities 26 Item 3. Defaults Upon Senior Securities 26 Item 4. Submission of Matters to a Vote of Security Holders 26 Item 5. Other Information 26 Item 6. Exhibits and Reports on Form 8-K 26 Index to Exhibits 41 - ----------------- Signatures 28 - ---------- 3 Part I Financial Information --------------------- Item 1. Financial Statements ROSEWOOD CARE CENTERS CAPITAL FUNDING CORPORATION BALANCE SHEET (Dollars in Thousands) (Unaudited)
June 30, March 31, 1998 1999 -------- --------- Assets ------ Cash $ 262 $ 262 Mortgage notes receivable, Rosewood Companies 25,561 23,842 ------- ------- $25,823 $24,104 ======= ======= Liabilities and Stockholders' Equity ------------------------------------ First mortgage redeemable bonds $25,666 $23,958 Accrued interest 156 145 Stockholders' equity: Common stock, $1 par value Authorized - 30,000 shares Issued and outstanding - 500 shares, at issue price 1 1 Retained earnings - - ------- ------- $25,823 $24,104 ======= ======= The accompanying notes are an integral part of this financial statement.
4 ROSEWOOD CARE CENTERS CAPITAL FUNDING CORPORATION STATEMENT OF OPERATIONS (Dollars in Thousands) (Unaudited)
Three Months Nine Months Ended Ended March 31, March 31, ------------- ---------------- 1998 1999 1998 1999 ---- ---- ---- ---- Interest Income $473 $436 $1,456 $1,348 Interest expense 473 436 $1,456 $1,348 ---- ---- ------ ------ Net Income $ 0 $ 0 $ 0 $ 0 ==== ==== ====== ====== The accompanying notes are an integral part of this financial statement.
5 ROSEWOOD CARE CENTERS CAPITAL FUNDING CORPORATION STATEMENT OF CASH FLOWS (Dollars in Thousands) (Unaudited)
Three Months Nine Months Ended Ended March 31, March 31, -------------- ------------------ 1998 1999 1998 1999 ---- ---- ---- ---- Cash flow from operating activities: Net income $ 0 $ 0 $ 0 $ 0 Decrease in accrued interest receivable 0 0 167 0 Increase (decrease) in accrued interest (2) (3) (10) (11) ----- ----- ------- ------- Net cash provided by operating activities (2) (3) 157 (11) ----- ----- ------- ------- Cash flow from investing activities: Collections on notes receivable 310 346 1,705 1,719 ----- ----- ------- ------- Net cash used by investing activities 310 346 1,705 1,719 ----- ----- ------- ------- Cash flow from financing operations: Reduction of redeemable bonds (308) (344) (1,601) (1,708) ----- ----- ------- ------- Net cash provided by financing (308) (344) (1,601) (1,708) ----- ----- ------- ------- Net increase (decrease) in cash 0 1 261 0 Cash, beginning 262 263 1 262 ----- ----- ------- ------- Cash, ending 262 262 262 262 ===== ===== ======= ======= Cash paid for interest $ 473 $ 447 $ 1,456 $ 1,359 ===== ===== ======= ======= The accompanying notes are an integral part of this financial statement.
6 ROSEWOOD CARE CENTERS CAPITAL FUNDING CORPORATION NOTES TO FINANCIAL STATEMENTS 1. Interim Financial Statements ---------------------------- In the opinion of the Company, these unaudited financial statements include all adjustments necessary for a fair presentation of its financial position as of June 30, 1998, and March 31, 1999, and the results of its operations and its cash flows for the three month and the nine month periods ended March 31, 1999 and 1998. Such adjustments were of a normal recurring nature. The results of operations for the nine months ended March 31, 1999, and 1998 are not necessarily indicative of the results for the full year. It is suggested that these financial statements be read in conjunction with the financial statements, accounting policies and financial notes thereto included in the Form 10K Annual Report (No. 33-65948), which has previously been filed with the Commission. 2. Issuance of Bonds ----------------- On October 21, 1993, the Company issued $33,000,000 of its 7-1/4% First Mortgage Redeemable Bonds due November 1, 2013. Of the ending cash balance, $260,000 represents the note receivable payment on the 25th of the month which is held in the Bond Payment Fund - Principal and Interest accounts until it is disbursed to the Bond Holders on the 1st of the following month. 7 ROSEWOOD CARE CENTER FACILITY COMPANIES AND REAL ESTATE COMPANIES COMBINED BALANCE SHEETS (Dollars in Thousands) (Unaudited)
June 30, March 31, 1998 1999 -------- --------- Assets ------ Current assets: Cash $ 2,866 $ 1,478 Accounts receivable - residents, net of allowance for doubtful accounts of $168 and $171, respectively 1,352 1,422 Accounts receivable - third party payor 2,766 2,540 Due from affiliates 327 -0- Interest receivable 282 346 Prepaid insurance and other prepaids 44 115 Deferred income tax benefits 52 52 ------- ------- Total current assets 7,689 5,953 ------- ------- Property, plant and equipment: Land 943 943 Site improvements 2,140 2,143 Building 17,830 17,830 Equipment 3,962 4,061 Leasehold improvements 389 482 ------- ------- 25,264 25,459 Less accumulated depreciation 8,282 8,924 ------- ------- 16,982 16,535 ------- ------- Other assets: Notes receivable from Rosewood Care Center Holding Company 6,910 6,028 Amortizable Costs, Net 840 749 ------- ------- 7,750 6,777 ------- ------- $32,421 $29,265 ======= ======= The accompanying notes are an integral part of these financial statements. 8 ROSEWOOD CARE CENTER FACILITY COMPANIES AND REAL ESTATE COMPANIES COMBINED BALANCE SHEETS (Dollars in Thousands) (Unaudited) June 30, March 31, 1998 1999 -------- --------- Liabilities and Stockholders' Equity ------------------------------------ Current liabilities: Current portion of long-term debt $ 2,071 $ 2,186 Accounts payable - trade 2,144 1,133 Accrued expenses: Salaries and payroll taxes 576 493 Vacation and employee fringes 257 250 Real estate taxes 471 544 Accrued interest -0- -0- Accrued Rent 43 32 Management fees - affiliate 599 417 Income taxes 4 -0- Dividends payable 801 778 ------- ------- Total current liabilities 6,966 5,833 ------- ------- Long-term debt: Notes payable - Rosewood Care Center Capital Funding Corporation 25,561 23,842 ------- ------- 25,561 23,842 Less current maturities 2,071 2,186 ------- ------- 23,490 21,656 ------- ------- Stockholders' equity: Common stock 65 65 Paid-in capital 481 481 Retained earnings 1,419 1,230 ------- ------- 1,965 1,776 ------- ------- $32,421 $29,265 ======= ======= The accompanying notes are an integral part of these financial statements.
9 ROSEWOOD CARE CENTER FACILITY COMPANIES AND REAL ESTATE COMPANIES COMBINED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS (Dollars in Thousands) (Unaudited)
Three Months Nine Months Ended Ended March 31, March 31, ------------ ----------- 1998 1999 1998 1999 ---- ---- ---- ---- Patient service revenue: Private $4,792 $4,957 $14,446 $14,829 Medicare 2,564 2,881 7,259 8,333 Medicaid 380 384 1,130 1,196 Other patient revenues, net of expenses 89 34 233 122 ------ ------ ------- ------- 7,825 8,256 23,068 24,480 ------ ------ ------- ------- Operating expenses: Facility expenses: Administrative expense 270 502 793 1,120 Employee fringe benefits 522 616 1,505 1,719 Dietary 504 541 1,483 1,611 Nursing 1,964 2,349 5,676 6,839 Ancillary services 1,663 1,068 4,517 3,289 Plant utilities and maintenance 282 304 879 949 Housekeeping and laundry 257 292 748 892 Social services and activities 192 63 550 393 ------ ------ ------- ------- 5,654 5,735 16,151 16,812 ------ ------ ------- ------- Income after facility expenses 2,171 2,521 6,917 7,668 ------ ------ ------- ------- Nonfacility expenses: Real estate taxes 143 165 421 462 Rent 43 217 43 537 Base management fees 209 232 605 677 Illinois Medicaid assessments 105 114 302 336 Depreciation and amortization 247 227 779 733 ------ ------ ------- ------- 747 955 2,150 2,745 ------ ------ ------- ------- Income before incentives 1,424 1,566 4,767 4,923 ------ ------ ------- ------- Incentive management fees (308) (402) (1,205) (1,240) Officers' bonuses - - - - ------ ------ ------- ------- Income from operations 1,116 1,164 3,562 3,683 ------ ------ ------- ------- Other income (expense): Interest income 157 123 494 418 Interest expense (474) (436) (1,457) (1,349) ------ ------ ------- ------- (317) (313) (963) (931) ------ ------ ------- ------- Income before income taxes 799 851 2,599 2,752 Income tax expense (52) (63) (206) (218) ------ ------ ------- ------- Net income 747 788 2,393 2,534 Retained earnings, beginning 1,422 1,220 1,388 1,419 Dividends declared (747) (778) (2,359) (2,723) ------ ------ ------- ------- Retained earnings, ending $1,422 $1,230 $ 1,422 $ 1,230 ====== ====== ======= ======= The accompanying notes are an integral part of these financial statements.
10 ROSEWOOD CARE CENTER FACILITY COMPANIES AND REAL ESTATE COMPANIES COMBINED STATEMENTS OF CASH FLOWS (Dollars in Thousands) (Unaudited)
Three Months Nine Months Ended Ended March 31, March 31, ------------ ----------- 1998 1999 1998 1999 ---- ---- ---- ---- Cash flow from operating activities: Net income $ 748 $ 787 $ 2,394 $ 2,534 Adjustments: Depreciation 217 198 685 642 Amortization 31 30 95 91 Decrease (increase) in: Accounts receivable - residents 10 164 (278) (70) Accounts receivable - third party payors 476 (129) 1,354 226 Other receivables and prepaids 252 (127) (191) 192 Increase (decrease) in: Accounts payable - trade 120 145 13 (1,011) Accrued salaries, taxes and fringes (54) (85) 17 (90) Accrued real estate taxes 113 111 54 73 Accrued management fees (152) (168) 54 (182) Other payables and accruals (7) (22) (129) (15) ------- ------- ------- ------- Net cash provided by operating activities 1,754 904 4,068 2,390 ------- ------- ------- ------- Cash flow from investing activities: Purchase of property and equipment (73) (27) (135) (195) Loans and deposits with affiliate 81 (198) 898 82 ------- ------- ------- ------- Net cash (provided) by investing activities 8 (225) 763 687 ------- ------- ------- ------- Cash flow from financing activities: Reduction of long-term debt (311) (346) (1,706) (1,719) Dividends paid (823) (937) (2,155) (2,746) ------- ------- ------- ------- Net cash (used) by financing activities (1,134) (1,283) (3,861) (4,465) ------- ------- ------- ------- Net increase (decrease) in cash 628 (604) 970 (1,388) Cash, beginning 2,662 2,082 2,320 2,866 ------- ------- ------- ------- Cash, ending $ 3,290 $ 1,478 $ 3,290 $ 1,478 ======= ======= ======= ======= Cash paid for: Interest $ 473 $ 437 $ 1,623 $ 1,349 ======= ======= ======= ======= Income taxes $ 95 $ 58 $ 249 $ 165 ======= ======= ======= ======= The accompanying notes are an integral part of these financial statements.
11 ROSEWOOD CARE CENTER FACILITY COMPANIES AND REAL ESTATE COMPANIES NOTES TO COMBINED FINANCIAL STATEMENTS 1. Interim Financial Statements ---------------------------- In the opinion of the Companies, these unaudited combined financial statements include all adjustments necessary for a fair presentation of their financial position as of June 30, 1998 and March 31, 1999, and the results of their operations and their cash flows for the three and nine month periods ended March 31, 1999 and 1998. Such adjustments were of a normal recurring nature. The results of operations for the nine month periods ended March 31, 1999 and 1998 are not necessarily indicative of the results for the full years. It is suggested that these financial statements be read in conjunction with the financial statements, accounting policies and financial notes thereto included in the Form 10K Annual Report (No. 33-65948), which has previously been filed with the Commission. 2. 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 services, and employment claims. 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 individually or in the aggregate, likely to have a material adverse effect on the combined financial position or results of operations of the Companies. 3. Refinancing of Long-Term Debt ----------------------------- On October 21, 1993, the Companies refinanced their long-term debt with Rosewood Care Centers Capital Funding Corporation, which issued $33,000,000 of its 7-1/4% First Mortgage Redeemable Bonds due November 1, 2013. Remaining loan proceeds were loaned to Rosewood Care Center Holding Company under unsecured promissory notes bearing interest at 7-1/4% per annum and having maturities from October to December 2000. 12 ROSEWOOD CARE CENTER FACILITY COMPANIES AND REAL ESTATE COMPANIES NOTES TO COMBINED FINANCIAL STATEMENTS 3. Refinancing of Long-Term Debt (Continued) ----------------------------------------- Loan costs of $609,000 and underwriter's discount of $841,500 are being amortized over the term of the long-term debt, on the interest method. 4. Dividends --------- Dividends in the amount of $2,723,000 were declared during the nine months ended March 31, 1999. 13 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ROSEWOOD CARE CENTERS CAPITAL FUNDING CORPORATION The Corporation is a pass through entity. Interest income and expenses offset, resulting in no income or loss. THE COMBINED FACILITY COMPANIES AND REAL ESTATE COMPANIES THREE MONTHS ENDED MARCH 31, 1999 COMPARED WITH THREE MONTHS ENDED MARCH 31, 1998 Forward Looking Statements - -------------------------- This quarterly report contains certain "forward looking" statements, as that term is defined by the Private Securities Litigation Reform Act of 1995. All statements regarding expected future financial performance of the Companies, including ability to service debt obligations, response to changes in government regulations, and similar statements including without limitation, those containing words such as "believes," "anticipates," "expects," and other similar expressions are forward looking statements. Forward looking statements involve risks and uncertainties, both known and unknown, that may cause the Companies' actual performance in future periods to differ materially from those projected or contemplated in the forward looking statements. Actual results could differ materially from those in the forward looking statements as a result of, but not limited to, the following factors: national and local economic conditions and occupancy levels, especially with respect to newly added beds; changes in Medicare and Medicaid reimbursement policies and other government regulation affecting healthcare; the ability to attract and retain qualified employees; Year 2000 problems, both within the Companies and at the operations of suppliers and third party payors, especially the United States government. 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 1999. The facility in East Peoria, where occupancy has stagnated due to administrative turnover and operational difficulties, has underperformed. This result may continue into the next fiscal year. Marketing --------- The Companies' attempt to increase admissions through marketing programs. The Companies' marketing programs are executed under the direction of a full time marketing staff member employed by 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. 14 Governmental Regulation and Reimbursement ----------------------------------------- The Companies' nursing facilities are required to comply with various federal and state health care regulations and statutes. All six facilities participate in the federally administered Medicare and Medicaid programs. 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. Health care reform continues to be a high priority concern at both the Federal and State government levels. In August 1997, the Balanced Budget Act of 1997 was signed into law. Included in the law are program changes directed at balancing the federal budget. The legislation changes Medicare and Medicaid policy in a number of ways as follows: a) Development of new Medicare and Medicaid health plan options; b) Creation of additional safeguards designed to prevent fraud and abuse; c) A 10% reduction in Part B therapy costs for the period January 1, 1998 through July 1, 1998. As of July 1, 1998, reimbursement for services is based on fee schedules established by the United States Department of Health and Human Services Health Care Financing Administration ("HCFA"); d) Phase-in of a Medicare Prospective Payment System ("PPS") for skilled nursing facilities effective July 1, 1998; and e) Limitations in Part B therapy charges per beneficiary per year. The new legislation will force skilled nursing facilities to contain costs as well as place further focus on patient outcomes. PPS was effective for all of the Companies on July 1, 1998. This has changed the manner in which the facilities are paid for inpatient services provided to Medicare beneficiaries. PPS will have a four year phase-in period. For the fiscal year ending June 30, 1999, the Medicare reimbursement rate will be based 75% on the June 30, 1995 facility- specific Medicare costs, as adjusted for inflation, and 25% will be federally determined based on the acuity level of the Medicare patients. For the fiscal year ending June 30, 2000, the rate will be based 50% on the 1995 facility-specific costs and 50% on the federally determined acuity rate. For the fiscal year ending June 30, 2001, the Medicare reimbursement will be based 25% on the 1995 facility-specific costs and 75% on the federally determined acuity rate. For the fiscal year ending June 30, 2002, the Medicare reimbursement rate will be based entirely on the federally determined rate based on the acuity level of the patients. PPS requires significant additional documentation and reporting regarding patient care in accordance with resource utilization group (RUGs) categories. The Companies do not expect to expend material amounts on systems software and personnel to handle this additional compliance since these costs are being paid for by the affiliated management company. However, the Companies have hired additional administrative and nursing personnel at the 15 facilities as necessary for the additional patient care record keeping requirements mandated by PPS. The Companies are analyzing their 1995 facility rates and the acuity level of the Medicare patients in the facilities. Based on this analysis, the Companies are attempting to implement changes to lower the cost of providing services to their Medicare residents. To date, although the per diem under PPS has decreased, the Companies have experienced increased Medicare revenues under PPS. The Companies' ability to reduce costs and still provide quality patient care in the PPS environment is due primarily to management's decision during fiscal 1997 and 1998 to bring therapy services in-house and to negotiate significant cost-savings with the company that provides prescription drugs to the patients at the facilities. Under reimbursement regulations effective through June 30, 1998, 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, 1996, have not resulted in any material adjustments for any of the Companies that were not otherwise indemnified for by private vendors to the Companies. The cost reports for the fiscal years ended June 30, 1997 and 1998 have not been audited by the intermediary and are still subject to audit at some time in the future. In general, the long term skilled nursing care industry is struggling with the new regulatory environment. Skilled nursing facilities are paid a single per diem, "all inclusive" rate per patient which must cover most of the care needed by each patient, regardless of any patient's individual acuity or need for ancillary therapies and other services. This new payment system is forcing all long term care providers to alter operations in order to reduce costs and still provide appropriate patient care. The projected reduction over five years in payments made by Medicare under PPS for long term care has been revised by the Congressional Budget Office from $9.5 billion to $16 billion. This is evidence that the method of determining the PPS rates is cutting much deeper into the long term care industry's revenues than previously anticipated. Although President Clinton's fiscal 2000 budget proposal, released in February 1999, included additional Medicare reductions of approximately $10 billion over the next five years, the recently completed House and Senate Budget committee proposals did not include any additional reductions, but instead proposed certain increases in Medicare spending. It is anticipated that these differing positions will be the subject of negotiations. A final budget agreement is not anticipated until September 1999. Several proposals are under discussion that would provide some relief from the negative impact to long term care providers of PPS, particularly those with a high acuity mix of patients. The most significant proposal appears to be one which would allow payments for drugs, respiratory therapy and lab tests, in addition to the PPS per diem. HCFA is currently reevaluating the issue of potential refinements to the resource utilization group (RUGs) categories to appropriately compensate long term care providers for many of the non-therapy ancillary services at the high acuity end of the patient care spectrum. HCFA has indicated that this review will probably last until the end of 1999. 16 The Illinois Department of Public Health ("IDPH") and other agencies with whom the IDPH contracts to assist it in its reviews and investigations, conduct annual licensure surveys and other periodic inspections and investigations, continually assessing the facilities for compliance. 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. Any of these on-going investigations, if determined adversely to the Companies, could have an impact on the continued participation of one or more of the facilities in the Medicare and Medicaid programs. As part of the new regulatory environment, Congress has increased allocations for enforcement budgets, resulting in stepped up investigations for fraud and abuse. Both the Office of the Inspector General (OIG) and the Department of Justice are devoting significant resources to investigations of long term care providers. Announced priorities of the OIG for fiscal 1999 include: oversight and certification processes for long term care facilities; resident abuse at long term care facilities; therapy and ancillary services utilization at skilled nursing facilities; and physician practices with excessive nursing home visits and billings. Fraudulent billing and patient rights issues are priority areas announced by the Department of Justice. The Department of Justice contemplates a special litigation section to enforce the Civil Rights of Institutionalized Persons and the creation of a special criminal section to enforce violations of patients' civil rights by nursing home operators. In addition, the Department of Justice has announced the creation of a nursing home work group to address abuse and civil rights issues for nursing home residents. Federal and state regulators have also intensified their quality of care reviews of skilled nursing facilities. A finding of poor quality of care in nursing homes may result in a nursing home's being charged with fraud under the False Claims Act. Differences in interpretation of billing practices or allocations have also recently resulted in long term care providers being charged with fraud and abuse. In 1998, two major long term care providers announced they are targets of fraud and abuse investigations relating to alleged billing abuses. In the first calendar quarter of 1999, a third major long term care provider announced that it is also the target of a similar investigation. New initiatives announced by President Clinton increase licensure surveys of nursing homes, as well as sanctions and fines for deficient facilities. There is also a push in Congress to legislate increased standards for long term care facilities. HCFA recently announced the publication of a "quality report card" of all nursing homes in the United States. A new federal law, The Nursing Home Resident Protection Amendments of 1999, was recently enacted which provides certain rights for persons who are residents of a long term care facility which participates in the Medicaid program but subsequently decides to withdraw voluntarily from the Medicaid program. If a facility withdraws from Medicaid, a person who was a resident of that facility, at the date the new law went into effect, must be allowed to stay in the facility as a Medicaid recipient. This applies even to a resident who was not receiving services paid for by Medicaid at the effective date of the new law. Residents admitted to the facility after the effective date of the new law must be provided certain information advising them of the risk that the facility could decide to withdraw from the Medicaid program and transfer the resident if the resident is receiving services paid by Medicaid at that time. Failure to provide this information obligates the facility to 17 continue to provide care to the resident. The application of this law to facilities with "distinct part" Medicaid participation is unclear. All of the Companies participate in the Medicaid program under the "distinct part" certification for only a limited number of beds at each facility. Under Illinois law regarding "distinct part" certification, Medicaid will only pay for services to a resident in a specific bed which has been identified by the provider to Medicaid. The effect of the new federal law may be to increase the number of Medicaid residents at a facility, leaving fewer beds for private paying and Medicare patients. The Companies are assessing whether there is a material risk that the facilities could be required to accommodate significantly increased numbers of Medicaid residents at the facilities as a result of the new law and, if so, whether to reevaluate their continued participation in the Medicaid program. Year 2000 - --------- Many computers currently in use in business and government use only two digits, rather than four, to identify the year where information about the date is entered into or automatically added to computer files. These computers automatically add the "19" prefix to the last two digits the computer reads for the year when date information becomes part of a computer file. Thus, when "2000" is entered, the computer will only read the "00" and interpret the date as "1900", rather than "2000". This is becoming known as the Year 2000 ("Y2K") problem. This issue is more of a problem for systems employing large mainframe computers and other similar or older systems. Additional problems come from microprocessors embedded in machinery. The Companies do not utilize mainframes and have updated their computer systems recently, including accounting and clinical software and hardware. The Companies are in the process of upgrading all of the Companies computers to insure microprocessor compatibility. Investigation of readiness of all mechanical systems and other equipment in the Companies' facilities has progressed and equipment upgrades and readiness are continuing over the course of the year. The Companies believe their internal accounting and patient management systems will not be materially disrupted or adversely affected by the Y2K problem because of software upgrades. Internal software and hardware systems have undergone extensive upgrading in the last two years, in part to address the Y2K issues. The Companies will not be making any significant expenditures for computer equipment or software upgrades, since the cost is being paid for by the affiliated management company. The Companies have had communications with their principal suppliers to determine the extent to which the Companies' systems and operations are vulnerable to third party failure to remedy their own year 2000 issues. There can be no assurance that the systems of other companies or those of the State and Federal governments, on which the Companies' operations rely, will be timely converted and will not have an adverse effect on the Companies' operations. The Companies receive substantial payments from insurance companies and Federal and State agencies. The Y2K readiness of individual insurance companies is not uniform. The United States Government General Accounting Office (GAO) has reported that both HCFA and certain fiscal intermediaries, the entities that make Medicare payments on behalf of the government, may be significantly behind schedule in making systems Year 2000 compliant. 18 According to the Office of Management and Budget (OMB), as of November 1998, HCFA had tested less than 10% of its external systems. The Senate Special Committee on Y2K has noted that none of the HCFA Medicare systems were Y2K compliant as of February 24, 1999. However, HCFA reported that 91% of its systems were Y2K compliant as of March 15, 1999 and HCFA has previously stated that its internal goal was to have all systems Y2K compliant as of March 31, 1999. Accordingly, the Companies can not make any assurances that these third party payors will be in compliance by January 1, 2000, and if they are not, there would be a significant impact on the Companies' cash flow. Since under the terms of the bond documents, the Companies are not allowed additional borrowings, they have not established any lines of credit and currently have no other contingency plans in place to normalize cash flow in the event of a significant disruption of payments from third party payors. The Companies will continue to use internal and external sources to insure that the operations of the Companies are not disrupted. However, there can be no assurance that the goals will be achieved and actual results could be materially different from those anticipated. Factors that may cause problems include, but are not limited to, availability and cost of personnel trained in this area, the ability to locate and correct all computer codes, third party readiness and other uncertainties. The Companies also face the possibility of litigation arising from errors to patient records or interruptions to patient care caused by equipment failure, power failure or other Y2K problems. Operating Results ----------------- Net revenues have increased to $8,256,000 for the three months ended March 31, 1999 from $7,825,000 for the three months ended March 31, 1998, an increase of $431,000 or 5.5%. Private revenues have increased $165,000 from $4,792,000 for the three months ended March 31, 1998 to $4,957,000 for the three months ended March 31, 1999. Revenue generated from ancillary services for private paying patients decreased $53,000, while revenue from room charges increased $218,000 when compared to the same three month period last year. Effective March 1, 1999, the Companies discontinued billing the private paying residents for drugs. The drugs are billed directly to the residents by a non- related third party vendor, which accounts for the $53,000 decrease in ancillary revenue when compared to the same three month period last year. It should be noted that there was a corresponding decrease in ancillary expense for the cost of the drugs for private residents since the drugs were billed to the residents at the Companies' cost. Private census has increased from 39,636 patient days for 1998 to 39,650 patient days for the current three month period ended March 31, 1999. Net revenues for Medicare increased from $2,564,000 for the three months ended March 31, 1998 to $2,881,000 for the three months ended March 31, 1999, an increase of $317,000 or 12.4%. The Medicare census has increased to 11,503 patient days from 9,384 patient days for the same period last year. The average Medicare reimbursement rate has decreased approximately $25 per patient day when compared to the same three month period last year. The decrease in the reimbursement rate is the direct result of the implementation of the new PPS reimbursement program previously discussed. The Companies are closely monitoring the cost associated with providing service to Medicare qualified residents in an effort to offset the decrease in the Medicare reimbursement 19 program. The Companies have reduced the cost of therapy and drugs provided to Medicare residents. Medicaid revenue has increased from $380,000 to $384,000 when compared to the same three month period last year. The Medicaid census has increased from 5,505 patient days for the three months ended March 31, 1998 to 5,511 patient days for the three months ended March 31, 1999. The facilities have an average occupancy rate of 77.6% for the three months ended March 31, 1999, compared to 84.1% for the same period last year. The East Peoria facility is the only facility which continues to have an occupancy level significantly lower than the other five locations. Management is of the opinion that this trend will continue. The Alton facility reflects a decline in occupancy level as a result of a 60 bed addition which was opened during January 1998. The Galesburg facility reflects a decline in occupancy level as a result of a 60 bed addition that was opened October 9, 1998. Due to uncertainties presented by the effects of PPS on occupancy and current market conditions, management is unable to forecast when occupancy at the Alton and Galesburg facilities will return to pre-expansion levels. The occupancy level of the facilities for the three months ended March 31, 1999 and 1998 are as follows: MARCH 31 1999 1998 Swansea 97.2 98.1 Galesburg 56.4 84.5 Moline 90.5 90.6 Alton 83.1 78.4 Peoria 85.5 90.8 East Peoria 62.9 65.0 AVERAGE 77.6 84.1 The decrease in the other patient revenue net of expenses can be accounted for by the change in the contract the Companies have with an unrelated third party vendor providing pharmacy services to the residents. As previously discussed, effective March 1, 1999, the Companies no longer bill private paying residents for drugs. In prior years the Companies retained a portion of the drug charges as compensation for performing the billing and collecting for pharmacy charges. Due to the discontinuance of billings for private drugs, effective March 1, 1999, and the negotiated fixed rate for drugs supplied to Medicare residents, effective July 1, 1998, the Companies have realized a reduction in other patient revenue of $55,000 when compared to the same three month period last year. Facility operating expenses were $5,735,000 (or $101.21 per patient day) for the current three month period ended March 31, 1999, compared to $5,654,000 (or $103.70 per patient day) for the three months ended March 31, 1998, a decrease of $2.49 per patient day. The Company has reclassified certain expenses from the social service and activities designation to the administrative expenses cost center. Total expenses for administrative, social service and activities increased from 20 $462,000 for the three months ended March 31, 1998 to $565,000 for the three months ended March 31, 1999, an increase of $103,000 or 22%. The increase is due to an $8,000 increase in employee want ads, a $16,000 increase in new employee orientation and training, a $17,000 increase in professional fees and a $47,000 increase in wages. The increase in wages is a direct result of the increase in expense associated with admissions activities and the implementation of the PPS Medicare reimbursement system. The $15,000 balance of the increase is inflationary increases in the other expenses comprising the administrative, social services and activities category. The cost of employee fringe benefits has increased from $522,000 for the three months ended March 31, 1998 to $616,000 for the three months ended March 31, 1999. The increase aggregating $94,000 can be accounted for by a $43,000 increase in payroll taxes and a $48,000 increase in holiday and vacation pay. The addition of 60 beds at each of the Alton and Galesburg facilities has increased the total payroll, and the resulting payroll taxes, for those facilities. The remainder of the increase of $3,000 can be accounted for by inflationary factors. Dietary expenses have increased approximately $37,000 when compared to the same three month period last year. Wages have increased approximately $16,000 while the cost of food and supplies has increased $21,000 when compared to the same three month period last year. Nursing costs increased from $1,964,000 for the three months ended March 31, 1998 to $2,349,000 for the three months ended March 31, 1999, an increase of $385,000 or 19.6%. Wages have increased $474,000, while the cost of supplies has decreased $89,000. Included in the increase in wages is approximately $100,000 resulting from additional staff hired to monitor effectively the reporting requirements under the new PPS reimbursement program for Medicare residents previously discussed. Labor costs continue to increase due to the increased pressure on the availability of qualified personnel. Management is of the opinion that this employment trend will continue as long as the economy remains strong. The Companies continue to monitor labor cost closely since it accounts for the major portion of the operating cost of the facilities. The Companies will attempt to adjust daily room rates to offset the increase in costs, while at the same time remaining competitive in the market place. Ancillary service costs have decreased approximately $595,000 when compared to the same three month period last year. Private drug expense has decreased approximately $53,000 when compared to the same period last year as a result of the change previously discussed concerning drugs for private paying residents. The remainder of the decrease in costs is the direct result of the reduction in therapy and drug costs brought about by utilizing an affiliated therapy company and a reduction in ancillary services provided to the Medicare residents under the PPS guidelines. Plant utilities and maintenance for the quarter ended March 31, 1999 aggregated $304,000, compared to the $282,000 expended for the three month period ended March 31, 1998. The majority of the increase can be accounted for by the increase in utility costs associated with the 60 bed addition at Galesburg which opened during October of 1998. Housekeeping and laundry costs have increased $35,000 when compared to the same three month period last year. Labor costs have increased $18,000 while the cost of supplies has increased $17,000. 21 Rent, base management fees, and the Illinois Medicaid Assessments have increased when compared to the same period last year as a result of the opening of the 60 bed additions to the Alton and Galesburg facilities. In each case rent is paid to an affiliated company, Alton Real Estate II, L.L.C. and Galesburg Real Estate II, L.L.C., respectively, which companies are not parties to the bond documents. Incentive management fees have increased $94,000 when compared to the same period last year as a result of the increase in income before incentives. Interest income has decreased from $157,000 for the three months ended March 31, 1998 to $123,000 for the three months ended March 31, 1999 as a result of the decrease in the notes receivable from the related party Rosewood Care Center Holding Co. Interest expense decreased $38,000 when compared to the same three month period last year. The decrease is the result of the decrease in the long term debt of the facility. NINE MONTHS ENDED MARCH 31, 1999 COMPARED WITH NINE MONTHS ENDED MARCH 31, 1998 Operating Results ----------------- Net revenues have increased to $24,480,000 for the nine months ended March 31, 1999 from $23,068,000 for the nine months ended March 31, 1998, an increase of $1,412,000 or 6.1%. Private revenues have increased $383,000 from $14,446,000 for the nine months ended March 31, 1998, to $14,829,000 for the nine months ended March 31, 1999. Revenue generated from ancillary services for private paying patients increased $69,000, while revenue from room charges increased $314,000 when compared to the same period last year. The average private room rate for the current period aggregated $117 per patient day compared to $114 per patient day for the same period last year. As previously discussed, the Companies have discontinued billing private residents for drugs effective March 1, 1999. Even with this change in billing policy, drug charges for the nine months ended March 31, 1999, aggregated $618,000, compared to $588,000 for the nine months ended March 31, 1998, an increase of $30,000 over the same nine month period last year. The $39,000 balance of the increase in ancillary revenue is the result of an increase in therapy services provided to the private paying residents. Private census has decreased from 120,234 patient days for the first nine months of 1998 to 119,459 patient days for the current period ended March 31, 1999. Net revenues for Medicare have increased from $7,259,000 for the nine months ended March 31, 1998 to $8,333,000 for the nine months ended March 31, 1999, an increase of $1,074,000 or 14.8%. The Medicare census has increased from 27,230 patient days for the nine months ended March 31, 1998 to 33,206 patient days for the nine months ended March 31, 1999. The average Medicare reimbursement rate has decreased approximately $16 per patient day when compared to the same nine month period last year. The decrease in the reimbursement rate is the direct result of the implementation of the new PPS reimbursement program previously discussed. The Companies are closely monitoring the cost associated with providing service to Medicare qualified residents in an effort to offset the decrease in the Medicare reimbursement 22 program. The Companies have reduced the cost of therapy and drugs provided to the Medicare residents by more than the corresponding decrease in the Medicare reimbursement rate for the period. Medicaid revenue has increased from $1,130,000 to $1,196,000 when compared to the same period last year. The facilities have received an increase in the Medicaid reimbursement rate of approximately 3%, effective July 1, 1998. The Medicaid census has increased from 16,532 patient days for the nine months ended March 31, 1998 to 16,848 patient days for the nine months ended March 31, 1999. The facilities have an average occupancy rate of 78.2% for the current nine month period, compared to 86.0% for the same period last year. The East Peoria facility is the only facility which continues to have an occupancy level significantly lower than the other five locations. Management is of the opinion that this trend will continue. The Alton facility reflects a decline in occupancy level as a result of a 60 bed addition which was opened during January 1998. The Galesburg facility reflects a decline in occupancy level as a result of a 60 bed addition that was opened October 9, 1998. Due to uncertainties presented by the effects of PPS on occupancy and current market conditions, management is unable to forecast when occupancy at the Alton and Galesburg facilities will return to pre-expansion levels. The occupancy level of the facilities for the nine months ended March 31, 1999 and 1998 are as follows: DECEMBER 31 1999 1998 Swansea 96.9 98.5 Galesburg 61.8 81.6 Moline 92.5 93.1 Alton 81.0 89.7 Peoria 82.3 90.6 East Peoria 60.4 62.9 AVERAGE 78.2 86.0 As previously discussed, effective March 1, 1999, the Companies do not bill private paying residents for drugs and have negotiated a fixed rate for drugs prescribed to the Medicare residents, effective July 1, 1998. As a result of this change, the other patient revenues net of expenses has decreased from $233,000 for the nine months ended March 31, 1998, to $122,000 for the nine months ended March 31, 1999. Facility operating expenses increased to $16,812,000 (or $99.18 per patient day) for the current nine month period ended March 31, 1999, from $16,151,000 (or $98.48 per patient day) for the nine months ended March 31, 1998. As previously discussed, the Company has reclassified certain expenses from the social service and activities designation to the administrative expense cost center. Total expenses for administrative, social service and activities increased from $1,343,000 for the nine months ended March 31, 1998 to $1,513,000 for the nine months ended March 31, 1999, an increase of 23 $170,000 or 12.7%. The majority of the increase can be accounted for by a $104,000 increase in wages, an $8,000 increase in admissions costs, a $7,000 increase in professional fees and a $35,000 increase in telephone costs. The increase in marketing and telephone costs is the direct result of an increase in admissions efforts as a result of the Medicare PPS reimbursement system previously discussed. The remainder of the increase of $16,000 can be accounted for by inflationary increases since March 31, 1998. The cost of employee fringe benefits increased approximately $214,000 when compared to the same nine month period last year which is the result of a $72,000 increase in holiday and vacation pay and a $103,000 increase in payroll taxes, with the balance of the increase accounted for by the increase in workers' compensation insurance costs. Dietary expenses have increased approximately $128,000 when compared to the same period last year. Wages have increased approximately $74,000, with the balance of the increase accounted for by the increase in raw food costs which increase is a combination of the increased census and inflation. Nursing costs increased from $5,676,000 for the nine months ended March 31, 1998 to $6,839,000 for the nine months ended March 31, 1999, an increase of $1,163,000 or 20.4%. All of the increase can be accounted for by the increase in wages. Approximately $300,000 of the increase in labor costs can be accounted for by the increase in staffing at the Alton facility as a result of the opening of the new 60 bed addition in January of 1998. Also included in the increase in wages is approximately $360,000 resulting from additional staff hired to monitor effectively the reporting requirements under the new PPS reimbursement program for Medicare residents previously discussed. Labor costs continue to increase due to the increased pressure on the availability of qualified personnel. Management is of the opinion that this employment trend will continue as long as the economy remains strong. The Companies continue to monitor labor cost closely since it accounts for the major portion of the operating cost of the facilities. The Companies will attempt to adjust daily room rates to offset the increase in costs, while at the same time remaining competitive in the market place. Ancillary service costs have decreased approximately $1,228,000 when compared to the same nine month period last year. The decrease in costs is the direct result of the reduction in therapy and drug costs brought about by utilizing an affiliated therapy company and a reduction in ancillary services provided to the Medicare qualified residents under the new PPS guidelines. Plant utilities and maintenance costs have increased $70,000 from $879,000 for the nine months ended March 31, 1998 to $949,000 for the nine month period ended March 31, 1999. The increase is the direct result of the 60 bed addition at Alton and Galesburg. Housekeeping and laundry costs have increased $144,000 when compared to the same nine month period last year. Labor costs have increased $109,000, while the cost of supplies has increased $35,000 when compared to the same period last year. Rent, base management fees, and the Illinois Medicaid Assessments have increased when compared to the same period last year as a result of the opening of the 60 bed additions to the Alton and Galesburg facilities. In each case rent is paid to an affiliated company, Alton Real Estate II, L.L.C. and 24 Galesburg Real Estate II, L.L.C., respectively, which companies are not parties to the bond documents. Incentive management fees have increased slightly when compared to the same period last year because of the increase in income before incentives. Interest income has decreased $76,000 when compared to the same period last year as a result of the decrease in the notes receivable outstanding during the nine month period from the affiliated company, Rosewood Care Center Holding Co. Interest expense decreased $108,000 when compared to the same period last year. The decrease is the result of the decrease in the long term debt of the facility from $25,876,000 on March 31, 1998 to $23,842,000 as of March 31, 1999. The Facility Companies file a consolidated income tax return with their parent company, Rosewood Care Center Holding Co. The income of the Real Estate Companies is taxed at the individual shareholder level, as each real estate company is an S corporation. The amount reflected as income taxes is the facility companies' portion of federal and state taxes calculated for the nine months ended March 31, 1999 and 1998, on an annualized basis. Liquidity and Capital Resources ------------------------------- As of March 31, 1999, the Companies had approximately $1,478,000 in cash and cash equivalents and net working capital of approximately $120,000. There was a net decrease in cash of $1,388,000 since June 30, 1998. For the nine months ended March 31, 1999, net cash provided by operations was $2,390,000 after reductions of approximately $1,300,000 to pay trade creditors and reduce accrued expenses since June 30, 1998. Net cash from investing activities was $687,000 of which $82,000 was received from Rosewood Care Center Holding Co. as payment on notes due from the affiliated company and $195,000 was used by the Companies for the purchase of personal property and equipment used in the operations of the facilities. Net cash used in financing activities aggregated $4,465,000, of which $1,719,000 was used to retire debt and $2,746,000 was used for the payment of dividends. The Companies believe they have adequate capital for operations and replacements for the coming year and the foreseeable future. Accounts receivable from private paying patients increased to $1,422,000 as of March 31, 1999, compared to $1,352,000 as of June 30, 1998. Accounts receivable from third party payers decreased to $2,540,000 as of March 31, 1999, compared to $2,766,000 as of June 30, 1998. $395,882 of this amount is due from Medicare for unsettled cost reports through June 30, 1998, which are subject to audit. Of this amount, $359,000 was received from the intermediary during May 1999. The Medicare program continues to face intense scrutiny and significant cutbacks. As previously noted, effective July 1, 1998 all of the facilities are subject to the new Medicare PPS payment system previously discussed. Based on the Companies' analysis of their 1995 facility rates and the acuity level of the Medicare patients in the facilities, the Companies hope to implement changes to lower the cost of providing services to their Medicare residents. 25 Should the Companies be unable to execute the changes to reduce costs, PPS could have a material negative effect on the Companies' financial position and results of operations. The Companies had no open lines of credit with any financial institution as of March 31, 1999. 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 payment programs. However, changes in the 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 results of operations and cash flow of the Companies. PART II OTHER INFORMATION - -------------------------- ITEM 1. LEGAL PROCEEDINGS. There were no material developments with respect to legal proceedings during the quarter ended March 31, 1999. ITEM 2. CHANGES IN SECURITIES. Not applicable. ITEM 3. DEFAULTS UPON SENIOR SECURITIES. None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None. ITEM 5. OTHER INFORMATION. The Companies contract with a related company, Rosewood Therapy Services, Inc. to provide speech, physical and occupational therapy services to the residents of the facilities. Therapy services are provided to the facilities at competitive market rates, on terms and conditions as would be entered into with unrelated therapy companies. Amounts paid by the Companies to Rosewood Therapy Services during the first nine months of the 1999 fiscal year, aggregated $2,091,000. The 60 bed expansion wing at the Alton Rosewood Care Center opened January 22, 1998. The 60 bed expansion wing at the Galesburg Rosewood Care Center was licensed by the State of Illinois and was opened on October 9, 1998. Item 6. Exhibits and Reports on Form 8-K. (a) See Index to Exhibits on Page 41. 26 (b) Reports on Form 8-K. None. 27 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: May 13, 1999 By: /s/ Larry Vander Maten --------------------------------------- Larry Vander Maten President and Director (Principal Executive Officer and Principal Financial and Accounting Officer) 28 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: May 13, 1999 By: /s/ Larry Vander Maten ------------------------------------ Larry Vander Maten President and Director (Principal Executive Officer and Principal Financial and Accounting Officer) 29 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: May 13, 1999 By: /s/ Larry Vander Maten ----------------------------------- Larry Vander Maten President and Director (Principal Executive Officer and Principal Financial and Accounting Officer 30 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: May 13, 1999 By: /s/ Larry Vander Maten ------------------------------------ Larry Vander Maten President and Director (Principal Executive Officer and Principal Financial and Accounting Officer) 31 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: May 13, 1999 By: /s/ Larry Vander Maten ----------------------------------- Larry Vander Maten President and Director (Principal Executive Officer and Principal Financial and Accounting Officer) 32 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: May 13, 1999 By: /s/ Larry Vander Maten ------------------------------------ Larry Vander Maten President and Director (Principal Executive Officer and Principal Financial and Accounting Officer) 33 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: May 13, 1999 By: /s/ Larry Vander Maten ------------------------------------ Larry Vander Maten President and Director (Principal Executive Officer and Principal Financial and Accounting Officer) 34 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: May 13, 1999 By: /s/ Larry Vander Maten -------------------------------------- Larry Vander Maten President and Director (Principal and Executive Officer and Principal Financial and Accounting Officer 35 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: May 13, 1999 By: /s/ Larry Vander Maten ------------------------------------ Larry Vander Maten President and Director (Principal Executive Officer and Principal Financial and Accounting Officer) 36 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: May 13, 1999 By: /s/ Larry Vander Maten ------------------------------------ Larry Vander Maten President and Director (Principal Executive Officer and Principal Financial and Accounting Officer) 37 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: May 13, 1999 By: /s/ Larry Vander Maten ------------------------------------ Larry Vander Maten President and Director (Principal Executive Officer and Principal Financial and Accounting Officer) 38 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: May 13, 1999 By: /s/ Larry Vander Maten ------------------------------------ Larry Vander Maten President and Director (Principal Executive Officer and Principal Financial and Accounting Officer) 39 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: May 13, 1999 By: /s/ Larry Vander Maten ------------------------------------ Larry Vander Maten President and Director (Principal Executive Officer and Principal Financial and Accounting Officer) 40 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 - ------ ----------- 4.1 Reference is made to Article III of the Articles of Incorporation of Rosewood Care Centers Capital Funding Corporation filed on September 28, 1994 as Exhibit 3.1 (and referenced in Exhibit 4.1) of the Form 10-K. 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 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 41 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. 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 42 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. 10.18 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 November 13, 1996 as Exhibit 10.18 of the Form 10-Q of the Registrants. 10.19 Reference is made to the Consultant Services Agreement between Rosewood Therapy Services, Inc. and Rosewood Care Center, Inc. of Alton (Additional Consultant Services Agreements listed on the Schedule), which was filed on November 12, 1997 as Exhibit 10.19 of the Form 10-Q of the Registrants. 10.20 Reference is made to 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 11, 1998 as Exhibit 10.20 of the Form 10-Q of the Registrants. 10.21 Reference is made to Consultant Services Agreement between Rosewood Therapy Services, Inc. and Rosewood Care Center, Inc. of Alton (Revised) filed on November 12, 1998 as Exhibit 10.21 of the Form 10-Q of the Registrants (Additional Consultant Services Agreements listed on the Schedule). 10.22 Reference is made to Renewal of 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 11, 1999 as Exhibit 10.22 of the Form 10-Q of the Registrants. 27.1 Financial Data Schedule of Rosewood Care Center Capital Funding Corporation. 27.2 Financial Data Schedule of Rosewood Care Center of Galesburg. 27.3 Financial Data Schedule of Rosewood Care Center of Swansea. 27.4 Financial Data Schedule of Rosewood Care Center of East Peoria. 27.5 Financial Data Schedule of Rosewood Care Center of Peoria. 43 27.6 Financial Data Schedule of Rosewood Care Center of Alton. 27.7 Financial Data Schedule of Rosewood Care Center of Moline. 27.8 Financial Data Schedule of Swansea Real Estate. 27.9 Financial Data Schedule of Galesburg Real Estate. 27.10 Financial Data Schedule of East Peoria Real Estate. 27.11 Financial Data Schedule of Peoria Real Estate. 27.12 Financial Data Schedule of Alton Real Estate. 27.13 Financial Data Schedule of Moline Real Estate. 99.1 Reference is made to the Amended and Restated License Agreement filed September 28, 1994 as Exhibit 99.1 of Form 10-K of 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 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. 44 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 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 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 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 Registrants. 99.17 Reference is made to the Skilled Nursing Facility Agreement between Health Care Service Corporation and Rosewood Care Center, et al. filed on September 26, 1996 as Exhibit 99.17 of the Form 10-K of the Registrants. 45 SCHEDULE THE FOLLOWING DOCUMENTS ARE SUBSTANTIALLY IDENTICAL TO THE DOCUMENT FILED AS THE CORRESPONDING EXHIBIT IN THE 10-Q OF THE REGISTRANTS FILED ON NOVEMBER 23, 1993 10-Q. 4.4 Loan Guaranty Agreement between Rosewood Care Centers Capital Funding Corporation and Rosewood Care Center, Inc. of Swansea Loan Guaranty Agreement between Rosewood Care Centers Capital Funding Corporation and Rosewood Care Center, Inc. of Peoria Loan Guaranty Agreement between Rosewood Care Centers Capital Funding Corporation and Rosewood Care Center, Inc. of East Peoria Loan Guaranty Agreement between Rosewood Care Centers Capital Funding Corporation and Rosewood Care Center, Inc. of Moline Loan Guaranty Agreement between Rosewood Care Centers Capital Funding Corporation and Rosewood Care Center, Inc. of Galesburg 4.5 Note executed by Swansea Real Estate, Inc. Note executed by Peoria Real Estate, Inc. Note executed by East Peoria Real Estate, Inc. Note executed by Moline Real Estate, Inc. Note executed by Galesburg Real Estate, Inc. 10.2 Collateral Pledge and Security Agreement between Rosewood Care Centers Capital Funding Corporation and Swansea Real Estate, Inc. Collateral Pledge and Security Agreement between Rosewood Care Centers Capital Funding Corporation and Peoria Real Estate, Inc. Collateral Pledge and Security Agreement between Rosewood Care Centers Capital Funding Corporation and East Peoria Real Estate, Inc. Collateral Pledge and Security Agreement between Rosewood Care Centers Capital Funding Corporation and Moline Real Estate, Inc. Collateral Pledge and Security Agreement between Rosewood Care Centers Capital Funding Corporation and Galesburg Real Estate, Inc. 10.3 Mortgage Between Swansea Real Estate, Inc. and Rosewood Care Centers Capital Funding Corporation Mortgage Between Peoria Real Estate, Inc. and Rosewood Care Centers Capital Funding Corporation Mortgage Between East Peoria Real Estate, Inc. and Rosewood Care Centers Capital Funding Corporation 46 Mortgage Between Moline Real Estate, Inc. and Rosewood Care Centers Capital Funding Corporation Mortgage Between Galesburg Real Estate, Inc. and Rosewood Care Centers Capital Funding Corporation 10.4 Security Agreement between Rosewood Care Centers Capital Funding Corporation and Rosewood Care Center, Inc. of Swansea Security Agreement between Rosewood Care Centers Capital Funding Corporation and Rosewood Care Center, Inc. of Peoria Security Agreement between Rosewood Care Centers Capital Funding Corporation and Rosewood Care Center, Inc. of East Peoria Security Agreement between Rosewood Care Centers Capital Funding Corporation and Rosewood Care Center, Inc. of Moline Security Agreement between Rosewood Care Centers Capital Funding Corporation and Rosewood Care Center, Inc. of Galesburg 10.5 Assignment of Rents and Leases between Rosewood Care Centers Capital Funding Corporation and Swansea Real Estate, Inc. Assignment of Rents and Leases between Rosewood Care Centers Capital Funding Corporation and Peoria Real Estate, Inc. Assignment of Rents and Leases between Rosewood Care Centers Capital Funding Corporation and East Peoria Real Estate, Inc. Assignment of Rents and Leases between Rosewood Care Centers Capital Funding Corporation and Moline Real Estate, Inc. Assignment of Rents and Leases between Rosewood Care Centers Capital Funding Corporation and Galesburg Real Estate, Inc. 10.6 Subordination and Attornment Agreement between Rosewood Care Centers Capital Funding Corporation and Swansea Real Estate, Inc. Subordination and Attornment Agreement between Rosewood Care Centers Capital Funding Corporation and Peoria Real Estate, Inc. Subordination and Attornment Agreement between Rosewood Care Centers Capital Funding Corporation and East Peoria Real Estate, Inc. Subordination and Attornment Agreement between Rosewood Care Centers Capital Funding Corporation and Moline Real Estate, Inc. Subordination and Attornment Agreement between Rosewood Care Centers Capital Funding Corporation and Galesburg Real Estate, Inc. 10.8 Administrative Services Agreement between Hovan Enterprises, Inc. and Swansea Real Estate, Inc. 47 Administrative Services Agreement between Hovan Enterprises, Inc. and Peoria Real Estate, Inc. Administrative Services Agreement between Hovan Enterprises, Inc. and East Peoria Real Estate, Inc. Administrative Services Agreement between Hovan Enterprises, Inc. and Moline Real Estate, Inc. Administrative Services Agreement between Hovan Enterprises, Inc. and Galesburg Real Estate, Inc. 10.9 Revised and Restated Management Agreement between Rosewood Care Center, Inc. of Swansea and Hovan Enterprises, Inc. Revised and Restated Management Agreement between Rosewood Care Center, Inc. of Peoria and Hovan Enterprises, Inc. Revised and Restated Management Agreement between Rosewood Care Center, Inc. of East Peoria and Hovan Enterprises, Inc. Revised and Restated Management Agreement between Rosewood Care Center, Inc. of Moline and Hovan Enterprises, Inc. Revised and Restated Management Agreement between Rosewood Care Center, Inc. of Galesburg and Hovan Enterprises, Inc. 10.10 Lease between Swansea Real Estate, Inc. and Rosewood Care Center, Inc. of Swansea Lease between Swansea Real Estate, Inc. and Rosewood Care Center, Inc. of Peoria Lease between Swansea Real Estate, Inc. and Rosewood Care Center, Inc. of East Peoria Lease between Swansea Real Estate, Inc. and Rosewood Care Center, Inc. of Moline Lease between Swansea Real Estate, Inc. and Rosewood Care Center, Inc. of Galesburg 10.11 Assignment of Management Agreement between Rosewood Care Center, Inc. of Swansea and Mercantile Bank Assignment of Management Agreement between Rosewood Care Center, Inc. of Peoria and Mercantile Bank Assignment of Management Agreement between Rosewood Care Center, Inc. of East Peoria and Mercantile Bank Assignment of Management Agreement between Rosewood Care Center, Inc. of Moline and Mercantile Bank 48 Assignment of Management Agreement between Rosewood Care Center, Inc. of Galesburg and Mercantile Bank THE FOLLOWING DOCUMENTS ARE SUBSTANTIALLY IDENTICAL TO THE DOCUMENT FILED AS THE CORRESPONDING EXHIBIT IN THE 10-Q OF THE REGISTRANTS FILED ON NOVEMBER 12, 1997 10.19 Consultant Services Agreement between Rosewood Therapy Services, Inc. and Rosewood Care Center, Inc. of Swansea Consultant Services Agreement between Rosewood Therapy Services, Inc. and Rosewood Care Center, Inc. of Moline Consultant Services Agreement between Rosewood Therapy Services, Inc. and Rosewood Care Center, Inc. of Galesburg Consultant Services Agreement between Rosewood Therapy Services, Inc. and Rosewood Care Center, Inc. of Peoria Consultant Services Agreement between Rosewood Therapy Services, Inc. and Rosewood Care Center, Inc. of East Peoria THE FOLLOWING DOCUMENTS ARE SUBSTANTIALLY IDENTICAL TO THE DOCUMENT FILED AS THE CORRESPONDING EXHIBIT IN THE 10-Q OF THE REGISTRANTS FILED ON NOVEMBER 12, 1998 10.21 Consultant Services Agreement between Rosewood Therapy Services, Inc. and Rosewood Care Center, Inc. of Swansea (Revised) Consultant Services Agreement between Rosewood Therapy Services, Inc. and Rosewood Care Center, Inc. of Moline (Revised) Consultant Services Agreement between Rosewood Therapy Services, Inc. and Rosewood Care Center, Inc. of Galesburg (Revised) Consultant Services Agreement between Rosewood Therapy Services, Inc. and Rosewood Care Center, Inc. of Peoria (Revised) Consultant Services Agreement between Rosewood Therapy Services, Inc. and Rosewood Care Center, Inc. of East Peoria (Revised) 49 EX-27.1 2 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from the Financial Statements at March 31, 1999 for the period ended March 31, 1999 and is qualified in its entirety by reference to such financial statements. 0000909110 ROSEWOOD CARE CENTER CAPITAL FUNDING CORPORATION 1000 9-MOS JUN-30-1999 JUL-01-1998 MAR-31-1999 262 0 23,842 0 0 262 0 0 24,104 145 23,958 1 0 0 0 24,104 0 1,348 0 0 0 0 1,348 0 0 0 0 0 0 0 0 0
EX-27.2 3 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from the Combined Financial Statements at March 31, 1999 for the period ended March 31, 1999 and is qualified in its entirety by reference to such financial statements. 0000909114 ROSEWOOD CARE CENTER OF GALESBURG 1000 9-MOS JUN-30-1999 JUL-01-1998 MAR-31-1999 1,478 0 4,133 171 0 5,953 25,459 8,924 29,265 5,833 0 65 0 0 1,711 29,265 24,480 24,898 0 20,797 0 0 1,349 2,752 218 0 0 0 0 2,534 39 0
EX-27.3 4 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from the Combined Financial Statements at March 31, 1999 for the period ended March 31, 1999 and is qualified in its entirety by reference to such financial statements. 0000909113 ROSEWOOD CARE CENTER OF SWANSEA 1000 9-MOS JUN-30-1999 JUL-01-1998 MAR-31-1999 1,478 0 4,133 171 0 5,953 25,459 8,924 29,265 5,833 0 65 0 0 1,711 29,265 24,480 24,898 0 20,797 0 0 1,349 2,752 218 0 0 0 0 2,534 39 0
EX-27.4 5 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from the Combined Financial Statements at March 31, 1999 for the period ended March 31, 1999 and is qualified in its entirety by reference to such financial statements. 0000909115 ROSEWOOD CARE CENTER OF EAST PEORIA 1000 9-MOS JUN-30-1999 JUL-01-1998 MAR-31-1999 1,478 0 4,133 171 0 5,953 25,459 8,924 29,265 5,833 0 65 0 0 1,711 29,265 24,480 24,898 0 20,797 0 0 1,349 2,752 218 0 0 0 0 2,534 39 0
EX-27.5 6 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from the Combined Financial Statements at March 31, 1999 for the period ended March 31, 1999 and is qualified in its entirety by reference to such financial statements. 0000909116 ROSEWOOD CARE CENTER OF PEORIA 1000 9-MOS JUN-30-1999 JUL-01-1998 MAR-31-1999 1,478 0 4,133 171 0 5,953 25,459 8,924 29,265 5,833 0 65 0 0 1,711 29,265 24,480 24,898 0 20,797 0 0 1,349 2,752 218 0 0 0 0 2,534 39 0
EX-27.6 7 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from the Combined Financial Statements at March 31, 1999 for the period ended March 31, 1999 and is qualified in its entirety by reference to such financial statements. 0000909117 ROSEWOOD CARE CENTER OF ALTON 1000 9-MOS JUN-30-1999 JUL-01-1998 MAR-31-1999 1,478 0 4,133 171 0 5,953 25,459 8,924 29,265 5,833 0 65 0 0 1,711 29,265 24,480 24,898 0 20,797 0 0 1,349 2,752 218 0 0 0 0 2,534 39 0
EX-27.7 8 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from the Combined Financial Statements at March 31, 1999 for the period ended March 31, 1999 and is qualified in its entirety by reference to such financial statements. 0000909118 ROSEWOOD CARE CENTER OF MOLINE 1000 9-MOS JUN-30-1999 JUL-01-1998 MAR-31-1999 1,478 0 4,133 171 0 5,953 25,459 8,924 29,265 5,833 0 65 0 0 1,711 29,265 24,480 24,898 0 20,797 0 0 1,349 2,752 218 0 0 0 0 2,534 39 0
EX-27.8 9 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from the Combined Financial Statements at March 31, 1999 for the period ended March 31, 1999 and is qualified in its entirety by reference to such financial statements. 0000909120 SWANSEA REAL ESTATE 1000 9-MOS JUN-30-1999 JUL-01-1998 MAR-31-1999 1,478 0 4,133 171 0 5,953 25,459 8,924 29,265 5,833 0 65 0 0 1,711 29,265 24,480 24,898 0 20,797 0 0 1,349 2,752 218 0 0 0 0 2,534 39 0
EX-27.9 10 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from the Combined Financial Statements at March 31, 1999 for the period ended March 31, 1999 and is qualified in its entirety by reference to such financial statements. 0000909121 GALESBURG REAL ESTATE 1000 9-MOS JUN-30-1999 JUL-01-1998 MAR-31-1999 1,478 0 4,133 171 0 5,953 25,459 8,924 29,265 5,833 0 65 0 0 1,711 29,265 24,480 24,898 0 20,797 0 0 1,349 2,752 218 0 0 0 0 2,534 39 0
EX-27.10 11 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from the Combined Financial Statements at March 31, 1999 for the period ended March 31, 1999 and is qualified in its entirety by reference to such financial statements. 0000909122 EAST PEORIA REAL ESTATE 1000 9-MOS JUN-30-1999 JUL-01-1998 MAR-31-1999 1,478 0 4,133 171 0 5,953 25,459 8,924 29,265 5,833 0 65 0 0 1,711 29,265 24,480 24,898 0 20,797 0 0 1,349 2,752 218 0 0 0 0 2,534 39 0
EX-27.11 12 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from the Combined Financial Statements at March 31, 1999 for the period ended March 31, 1999 and is qualified in its entirety by reference to such financial statements. 0000909123 PEORIA REAL ESTATE 1000 9-MOS JUN-30-1999 JUL-01-1998 MAR-31-1999 1,478 0 4,133 171 0 5,953 25,459 8,924 29,265 5,833 0 65 0 0 1,711 29,265 24,480 24,898 0 20,797 0 0 1,349 2,752 218 0 0 0 0 2,534 39 0
EX-27.12 13 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from the Combined Financial Statements at March 31, 1999 for the period ended March 31, 1999 and is qualified in its entirety by reference to such financial statements. 0000909124 ALTON REAL ESTATE 1000 9-MOS JUN-30-1999 JUL-01-1998 MAR-31-1999 1,478 0 4,133 171 0 5,953 25,459 8,924 29,265 5,833 0 65 0 0 1,711 29,265 24,480 24,898 0 20,797 0 0 1,349 2,752 218 0 0 0 0 2,534 39 0
EX-27.13 14 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from the Combined Financial Statements at March 31, 1999 for the period ended March 31, 1999 and is qualified in its entirety by reference to such financial statements. 0000909125 MOLINE REAL ESTATE 1000 9-MOS JUN-30-1999 JUL-01-1998 MAR-31-1999 1,478 0 4,133 171 0 5,953 25,459 8,924 29,265 5,833 0 65 0 0 1,711 29,265 24,480 24,898 0 20,797 0 0 1,349 2,752 218 0 0 0 0 2,534 39 0
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