1
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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, 1996
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
--------------------------------------
COMMISSION FILE NUMBER 33-65948
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ROSEWOOD CARE CENTERS CAPITAL FUNDING CORPORATION
(Exact name of Registrant as specified in its charter)
(See table of Co-Registrants)
MISSOURI
(State or other jurisdiction of
incorporation or organization)
11701 Borman Drive, Suite 315
St. Louis, Missouri
(Address of principal executive offices)
43-1623171
(I.R.S. Employer Identification No.)
63146
(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 and 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 and Registrants' Form 10-Q filed February 13, 1996.
Index to Exhibits is on Page 19.
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2
CO-REGISTRANTS
Rosewood Care Center, Inc. of Swansea
Rosewood Care Center, Inc. of Galesburg
Rosewood Care Center, Inc. of East Peoria
Rosewood Care Center, Inc. of Peoria
Rosewood Care Center, Inc. of Alton
Rosewood Care Center, Inc. of Moline
Swansea Real Estate, Inc.
Galesburg Real Estate, Inc.
East Peoria Real Estate, Inc.
Peoria Real Estate, Inc.
Alton Real Estate, Inc.
Moline Real Estate, Inc.
(Exact names of Co-Registrants as specified in their charters)
No separate periodic or annual reports are filed for each of the co-
registrants and no separate financial statements are included for each of the
co-registrants because the co-registrants are effectively jointly and
severally liable with respect to the Notes and because such separate periodic
or annual reports and such separate financial statements are not deemed
material to investors.
3
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 12
Notes to Combined Financial Statements 13
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 14
PART II OTHER INFORMATION
- - ---------------------------
Item 1. Legal Proceedings 17
Item 2. Changes in Securities 17
Item 3. Defaults Upon Senior Securities 17
Item 4. Submission of Matters to a Vote of Security Holders 17
Item 5. Other Information 17
Item 6. Exhibits and Reports on Form 8-K 18
INDEX TO EXHIBITS 19
- - -----------------
SIGNATURES 23
- - -----------------
4
PART I FINANCIAL INFORMATION
- - -----------------------------
ITEM 1. FINANCIAL STATEMENTS
ROSEWOOD CARE CENTERS CAPITAL FUNDING CORPORATION
BALANCE SHEET
(Dollars in Thousands)
(Unaudited)
June 30, March 31,
Assets 1995 1996
---------------------------------------------
Cash $ 262 $ 262
Mortgage notes receivable, Rosewood Companies 30,947 29,528
--------- --------
$ 31,209 $ 29,790
--------- ---------
--------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
First mortgage redeemable bonds $ 31,020 $ 29,610
Accrued interest 188 179
Stockholders' equity:
Common stock, $1 par value
Authorized - 30,000 shares
Issued and outstanding - 500 shares,
at issue price 1 1
Retained earnings - -
-------- --------
$ 31,209 $ 29,790
-------- --------
-------- --------
<FN>
The accompanying notes are an integral part of this financial statement.
</FN>
5
ROSEWOOD CARE CENTERS CAPITAL FUNDING CORPORATION
STATEMENT OF OPERATIONS
(Dollars in Thousands)
(Unaudited)
Three Months Nine Months
Ended Ended
March 31, March 31,
1995 1996 1995 1996
------------------------------------------------------
Interest Income $ 567 $ 538 $ 1,735 $ 1,649
Interest expense 567 538 $ 1,735 $ 1,649
--------- --------- -------- --------
Net Income $ 0 $ 0 $ 0 $ 0
--------- --------- -------- --------
--------- --------- -------- --------
<FN>
The accompanying notes are an integral part of this financial statement.
</FN>
6
ROSEWOOD CARE CENTERS CAPITAL FUNDING CORPORATION
STATEMENT OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
Three Months Nine Months
Ended Ended
March 31, March 31,
1995 1996 1995 1996
----------------------------------------------
Cash flow from operating activities:
Net income $ 0 $ 0 $ 0 $ 0
Increase (decrease) in accrued interest (2) (2) (9) (9)
-------- ------- -------- --------
Net cash provided by operating activities (2) (2) (9) (9)
-------- ------- -------- --------
Cash flow from investing activities:
Collections on notes receivable 215 245 1,332 1,419
-------- ------- --------- --------
Net cash used by investing activities 215 245 1,332 1,419
-------- ------- --------- --------
Cash flow from financing operations:
Reduction of redeemable bonds (213) (243) (1,324) (1,410)
-------- ------- --------- --------
Net cash provided by financing (213) (243) (1,324) (1,410)
-------- ------- --------- --------
Net increase (decrease) in cash (0) 0 (1) 0
Cash, beginning 262 262 263 262
-------- ------- --------- --------
Cash, ending 262 262 262 262
-------- ------- --------- --------
-------- ------- --------- --------
Cash paid for interest $ 567 $ 538 $ 1,735 $ 1,649
-------- ------- --------- --------
-------- ------- --------- --------
<FN>
The accompanying notes are an integral part of this financial statement.
</FN>
7
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, 1995, and March 31, 1996, and the
results of its operations and its cash flows for the three month and the
nine month periods ended March 31, 1995 and 1996. Such adjustments were
of a normal recurring nature.
The results of operations for the nine months ended March 31, 1995, and
1996 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.
8
ROSEWOOD CARE CENTER
FACILITY COMPANIES AND REAL ESTATE COMPANIES
COMBINED BALANCE SHEETS
(Dollars in Thousands)
(Unaudited)
June 30, March 31,
Assets 1995 1996
------------------------------------------------
Current assets:
Cash $ 2,522 $ 2,430
Accounts receivable - residents, net of allowance
for doubtful accounts of $120 and $114,
respectively 705 1,138
Accounts receivable - third party payor 2,195 2,540
Interest receivable 346 145
Prepaid insurance and other prepaids 108 69
Deferred income tax benefits 37 37
-------- ---------
Total current assets 5,913 6,359
-------- ---------
Property, plant and equipment:
Land 943 943
Site improvements 2,042 2,101
Building 17,830 17,830
Equipment 3,616 3,629
Leasehold improvements 192 269
-------- ---------
24,623 24,772
Less accumulated depreciation 5,510 6,213
-------- ---------
19,113 18,559
-------- ---------
Other assets:
Notes receivable from Rosewood Care Center
Holding Company 9,332 8,377
Amortizable Costs, Net 1,226 1,127
-------- ---------
10,558 9,504
-------- ---------
$ 35,584 $ 34,422
-------- ---------
-------- ---------
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
9
ROSEWOOD CARE CENTER
FACILITY COMPANIES AND REAL ESTATE COMPANIES
COMBINED BALANCE SHEETS
(Dollars in Thousands)
(Unaudited)
June 30, March 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 1995 1996
------------------------------------- -------- -------
Current liabilities:
Current portion of long-term debt $ 1,667 $ 1,760
Accounts payable - trade 655 685
Accrued expenses:
Salaries and payroll taxes 360 589
Vacation and employee fringes 91 121
Real estate taxes 543 544
Management fees - affiliate 537 396
Income taxes 170 86
Dividends payable 703 638
--------- --------
Total current liabilities 4,726 4,819
--------- --------
Long-term debt:
Notes payable - Rosewood Care Center
Capital Funding Corporation 30,947 29,528
--------- --------
30,947 29,528
Less current maturities 1,667 1,760
--------- --------
29,280 27,768
--------- --------
Stockholders' equity:
Common stock 65 65
Paid-in capital 481 481
Retained earnings 1,032 1,289
--------- --------
1,578 1,835
--------- --------
$ 35,584 $ 34,422
--------- --------
--------- --------
<FN>
The accompanying notes are in integral part of these financial statements.
</FN>
10
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,
1995 1996 1995 1996
------------------------------------------
Patient service revenue:
Private $4,193 $ 4,200 $12,720 $12,863
Medicare 1,958 2,245 5,314 6,816
Medicaid 377 316 1,136 1,013
Other patient revenues, net of expenses 15 13 50 48
------- ------- ------ -------
6,543 6,774 19,220 20,740
------- ------- ------ -------
Operating expenses:
Facility expenses:
Administrative expense 230 196 716 621
Employee fringe benefits 475 485 1,348 1,406
Dietary 437 444 1,300 1,329
Nursing 2,385 2,752 6,866 8,106
Facility utilities and insurance 176 218 533 604
Facility maintenance 107 110 316 340
Housekeeping, laundry and activities 327 350 931 1,030
------- ------- ------ ------
4,137 4,555 12,010 13,436
------- ------- ------ ------
Income after facility expenses 2,406 2,219 7,210 7,304
------- -------- ------ ------
Nonfacility expenses:
Real estate taxes 110 106 345 322
Base management fees 198 198 594 594
Illinois Medicaid assessments 101 101 298 298
Depreciation and amortization 258 277 772 802
------- ------ ------- ------
667 682 2,009 2,016
------- ------ ------- ------
Income before incentives 1,739 1,537 5,201 5,288
Incentive management fees (521) (412) (1,489) (1,538)
Officers' bonuses - - - -
------- ------ -------- ------
Income from operations 1,218 1,125 3,712 3,750
------- ------ -------- ------
Other income (expense):
Interest income 214 166 636 603
Interest expense (567) (538) (1,735) (1,649)
------- ------ -------- -------
(353) (372) (1,099) (1,046)
------- ------ -------- -------
Income before income taxes 865 753 2,613 2,704
Income tax expense (83) (54) (251) (240)
------- ------ -------- -------
Net income 782 699 2,362 2,464
11
Retained earnings, beginning 1,031 1,228 838 1,032
Dividends declared (730) (638) (2,117) (2,207)
------- ------ -------- --------
Retained earnings, ending $1,083 $1,289 $1,083 $1,289
------- ------ --------- --------
------- ------ --------- --------
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
12
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,
Cash flow from operating activities: 1995 1996 1995 1996
---------------------------------------
Net income $ 782 $ 699 $2,362 $2,464
Adjustments:
Depreciation 226 244 672 703
Amortization 33 32 100 99
Decrease (increase) in:
Accounts receivable - residents 121 78 105 (433)
Accounts receivable - third party payors 30 (300) (54) (345)
Other receivables and prepaids 337 300 130 240
Increase (decrease) in:
Accounts payable - trade 109 (799) 76 30
Accrued salaries, taxes and fringes 119 209 112 259
Accrued real estate taxes 109 108 61 1
Accrued management fees 372 (176) ( 58) (142)
Other payables and accruals (155) (32) 14 (84)
------- ------- ------ ------
Net cash provided by operating activities 2,083 363 3,520 2,792
------- ------- ------ ------
Cash flow from investing activities:
Purchase of property and equipment (105) (51) (121) (149)
Loans and deposits with affiliate (1,872) 1,217 (1,028) 955
------- ------- ------ ------
Net cash (used) by investing activities (1,977) 1,166 (1,149) 806
------- ------- ------ ------
Cash flow from financing activities:
Reduction of long-term debt (215) (245) (1,332) (1,419)
Dividends paid (687) (890) (1,913) (2,271)
------- ------- ------ ------
Net cash (used) by financing activities (902) (1,135) (3,245) (3,690)
------- ------- ------ ------
Net increase (decrease) in cash (796) 394 (874) (92)
Cash, beginning $2,957 $2,036 $3,035 $2,522
------- ------- ------ ------
Cash, ending $2,161 $2,430 $2,161 $2,430
------- ------- ------ ------
Cash paid for ------- ------- ------ ------
Interest $ 500 $ 538 $1,735 $1,649
------- ------- ------ ------
------- ------- ------ ------
Income taxes $ 237 $ 115 $ 237 $ 387
------- ------- ------ ------
------- ------- ------ ------
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
13
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, 1995, and March 31, 1996, and the
results of their operations and their cash flows for the three and nine
month periods ended March 31, 1995 and 1996. Such adjustments were of a
normal recurring nature.
The results of operations for the nine month periods ended March 31, 1995
and 1996 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 1996.
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 $2,207,100 were declared during the nine months
ended March 31, 1996. Of this amount $1,568,600 has been paid and
$638,500 remains unpaid.
14
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 expense
offset resulting in no income or loss.
THE COMBINED FACILITY COMPANIES AND REAL ESTATE COMPANIES
Operating Results
-----------------
THREE MONTHS ENDED MARCH 31, 1996 COMPARED WITH
THREE MONTHS ENDED MARCH 31, 1995
Overview
--------
The companies have continued their marketing emphasis on short-term
convalescent care while continuing to provide long-term care. The number of
short-term care patients and demand for ancillary rehabilitative and therapy
services has continued to increase. Revenues and expenses associated with
rehabilitative and therapy services have continued to increase through March
31, 1996.
The Medicare program and various forms of private payment are principal
payors for short-term nursing home care and rehabilitative services. All six
of the facilities participate in the federally administered Medicare program.
All six of the facilities also participate in the Medicaid program for a
distinct number of beds in each facility.
The Companies and Affiliates of the Companies are actively pursuing
managed care contracts. Affiliates of the Companies are also actively
pursuing possible acquisition and formation of businesses related to the
skilled nursing home business, including therapy companies and home health
care agencies. Such Affiliated Companies would provide services to the
Companies which are currently being provided by outside vendors. Although the
financial impact of such changes cannot be projected at this time, management
believes that this structure will allow better control of cost and quality of
ancillary services.
The skilled nursing industry and the general health care industry are
moving into managed care. Management views the ability to provide a wide
spectrum of services as important to its general contracting power in the
managed care industry.
The Companies will continue to be affected by market issues facing the
nursing home industry as a whole. The ability of the Companies to control the
costs of labor which continue to rise and represent one of the largest
components of the Companies's operating expenses, will also significantly
impact the future operating results.
Operating Results
-----------------
Net revenues have increased to $6,774,000 for the three months ended March
31, 1996 from $6,543,000 for the three months ended March 31, 1995, an
increase of $231,000 or 3.5%. Private revenues have increased $7,000 from
$4,193,000 for the three months ended March 31, 1995 to $4,200,000 for the
three months ended March 31, 1996. Although there was an overall increase as
a result of an increase in the room rates, there was a decrease in the private
pay census from 41,719 patient days for the three months ended March 31, 1995
to 39,475 patient days for the three months ended March 31, 1996.
Medicare revenues increased $287,000 or 14.7% from $1,958,000 for the
three months ended March 31, 1995 to $2,245,000 for the three months ended
<PAGE 15>
March 31, 1996. Although the majority of the increase is due to an increase
in the Medicare reimbursement rate which increased due to increased ancilliary
services provided to Medicare residents, the Medicare census decreased from
10,201 patient days for the three months ended March 31, 1995 to 9,454 patient
days for the three months ended March 31, 1996.
Medicaid revenue decreased $61,000 or 16.2% from $377,000 for the three
nine months ended March 31, 1995 to $316,000 for the three months ended March
31, 1996. The majority of the decrease is the result of the decrease in the
Medicaid census from 5,877 patient days for the nine months ended March 31,
1995 to 4,936 patient days for the nine months ended March 31, 1996.
Facility operating expenses increased to $4,555,000 for the three months
ended March 31, 1996, (or $84.56 per patient day) from $4,137,000 (or $71.58
per patient day) for the three months ended March 31, 1995, an increase of
$418,000 (or $12.98 per patient day). The majority of the increase ($367,000)
can be accounted for by the increase in nursing costs which is primarily the
result of the increase in the cost of the ancillary services for occupational
therapy, physical therapy, speech therapy, drugs and medical supplies provided
primarily for Medicare and private residents.
Dietary expenses increased $7,000 compared to the same period last year.
Facility utilities and insurance increased $42,000 when compared to the
same period last year.
Facility maintenance increased $3,000 compared to the same period last
year.
Administrative expenses decreased $34,000 while employee benefits
increased $10,000 when compared to the same period last year.
Housekeeping, laundry and activities increased $23,000 compared to the
same period last year.
Total nonfacility expenses have increased $15,000 which is primarily the
result of an increase in depreciation expense for the current period.
Incentive management fees have decreased from $521,000 for the three
months ended March 31, 1995 to $412,000 for the three months ended March 31,
1996 as a result of the decrease in operating income of the facilities.
Interest income decreased $48,000 when compared to the same period last
year. The decrease is the result of a decrease in the notes receivable from
the affiliated company, Rosewood Care Center Holding Co.
Interest expense decreased $29,000 when compared to the same three month
period last year. The interest expense decrease is the result of the decrease
in the long term debt of the facilities.
NINE MONTHS ENDED MARCH 31, 1996 COMPARED WITH
NINE MONTHS ENDED MARCH 31, 1995
-----------------------------------------------------
Operating Results
-----------------
Net revenues have increased to $20,740,000 for the nine months ended March
31, 1996 from $19,220,000 for the nine months ended March 31, 1995, an
increase of $1,520,000 or 7.9%. Private revenues have increased $143,000 from
$12,720,000 for the nine months ended March 31, 1995 to $12,863,000 for the
nine months ended March 31, 1996. The primary cause of the increase is the
increase in room rates. The private pay census has decreased from 128,870
patient days for the nine months ended March 31, 1995 to 122,304 for the nine
16
months ended March 31, 1996. Management is of the opinion that the decrease
will continue through the end of the current fiscal year.
Medicare revenue increased $1,502,000 or 28.3% from $5,314,000 for the
nine months ended March 31, 1995 to $6,816,000 for the nine months ended March
31, 1996. The majority of the increase is due to an increase in the Medicare
reimbursement rate which increased due to the increase in ancillary services
provided to Medicare residents. The Medicare census for the nine months ended
March 31, 1996 has decreased to 28,933 patient days from 29,460 patient days
for the nine month period ended March 31, 1995.
Medicaid revenue for the nine months ended March 31, 1995 was $1,013,000
compared to $1,136,000 for the nine months ended March 31, 1995, a decrease of
$123,000 or 10.8%. The decrease is the result of a decrease in census from
17,429 patient days for the nine months ended March 31, 1995 to 15,905 patient
days for the nine months ended March 31, 1996. There has been a minor change
in the reimbursement rate received from the state for the Medicaid residents
since the prior year.
The overall occupancy rate of the facilities was 88% for the current nine
month period ended March 31, 1996, compared to 92% for the same period last
year.
Facility operating expenses increased to $13,436,000 for the nine months
ended March 31, 1996 (or $80.38 per patient day) from $12,010,000 (or $68.34
per patient day) for the nine months ended March 31, 1995, an increase of
$1,426,000 (or $12.04 per patient day). The majority of the increase
($1,240,000) can be accounted for by the increase in nursing costs which is
primarily the result of the increase in the cost of the ancillary services for
occupational therapy, physical therapy, speech therapy, drugs and medical
supplies provided primarily for Medicare and private pay residents.
Dietary expenses increased $29,000 compared to the same period last year,
primarily as a result of an increase in labor costs.
Facility utilities, consisting of electric, gas, water, sewer and trash
disposal, increased $65,000 and insurance increased $6,000 when compared to the
same period last year.
Facility maintenance increased $24,000 compared to the same period last
year.
Administrative expenses decreased $95,000 while employee benefits
increased $58,000 when compared to the same period last year. The decrease in
administrative expenses can be accounted for primarily by the decrease in
labor cost for the current year. The increase in employee benefits is a
result of a change in the Companies' policy regarding eligibility for premium
pay for holiday work at some facilities, which is accounted for as an employee
benefit.
Housekeeping, laundry and activities increased $99,000 compared to the
same period last year. The majority of the increase is due to an increase in
labor costs for the current year.
Total nonfacility expenses are virtually unchanged from the same nine
month period last year.
Incentive management fees have increased from $1,489,000 for the nine
months ended March 31, 1995 to $1,538,000 for the nine months ended March 31,
1996 as a result of the increase in operating income of the facilities.
Interest income decreased $33,000 when compared to the same period last
year. The decrease is the result of a decrease in the notes receivable from
the affiliated company, Rosewood Care Center Holding Co.
17
Interest expense decreased $86,000 when compared to the same nine month
period last year. The interest expense decrease is the result of the decrease
in the long term debt of the facilities.
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, 1996 and 1995, on an annualized basis.
Liquidity and Capital Resources
-------------------------------
As of March 31, 1996, the Companies had approximately $2,430,000 in cash
and cash equivalents and net working capital of approximately $1,540,000.
There was a net decrease in cash of approximately $92,000 since June 30, 1995.
For the three months ended March 31, 1996, net cash provided by operations
was $363,000. Net cash from investing activities was $1,166,000. $1,217,000
from investing activities was received from Rosewood Care Center Holding Co.,
of which $51,000 was used by the Companies for the purchase of personal
property and equipment. Net cash used in financing activities aggregated
$1,135,000, of which $245,000 was used to retire debt and $890,000 was used
for the payment of dividends.
For the nine months ended March 31, 1996, net cash provided by operations
was $2,792,000. Net cash from investing activities was $806,000, of which
$955,000 was received from Rosewood Care Center Holding Co. and $149,000 was
used by the Companies for the purchase of personal property and equipment.
Net cash used in financing activities aggregated $3,690,000, of which
$1,419,000 was used to retire debt and $2,271,000 was used for the payment of
dividends.
The Companies believe that the existing cash and cash equivalent and
working capital from operations will be adequate to repay their debts due
within one year and meet the working capital requirements of the operations.
PART II OTHER INFORMATION
- - --------------------------
ITEM 1. LEGAL PROCEEDINGS.
There were no material developments with respect to legal proceedings
during the quarter ended March 31, 1996.
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 and their affiliates continue to investigate managed care.
As of the end of the third quarter of 1996, no new managed care contracts had
been entered into. However, written contract proposals are pending between
Affiliates of the Companies and third parties. In the event all or some of
these proposals are finalized into executed contracts, certain of the
18
Companies, in particular Swansea and Alton, may begin handling managed care
patients.
Affiliates of the Companies are also actively pursuing possible
acquisition and formation of businesses related to the skilled nursing home
business, including therapy companies and home health care agencies.
Although no acquisition would be made by the Companies themselves, the
acquisition of any such businesses by one or more affiliates of the Companies
may affect the financial statements of the Companies if products or services
which were previously contracted from outside vendors are supplied by an
affiliated company.
Certain developments relating to expansion of the Rosewood facility at
Galesburg, Illinois occurred in the third quarter of 1996. On March 29, 1996,
the loan was closed for financing the construction of the expansion. Although
the Department of Public Health has approved the architect's plans for the
proposed 60 bed expansion, the project may not be completed with the same
architect. In that event, the new architect's plans will need to be approved
by the Department of Public Health prior to commencement of the project. In
conjunction with the construction loan closing, a new ground lease was entered
into between Galesburg Real Estate, Inc. and Galesburg Real Estate II, L.L.C.,
the related company which will construct and own the expansion wing. Since the
expansion wing will be partially built on real estate owned by Galesburg Real
Estate, Inc., Galesburg Real Estate II, L.L.C. has a long term ground lease
for the area situated on the eastern portion of the property owned by
Galesburg Real Estate, Inc. When and if the expansion is completed, it is
contemplated that the expansion wing will be operated by Rosewood Care Center,
Inc. of Galesburg and managed by HSM Management Services, Inc. f/k/a Hovan
Enterprises, Inc., the operator and manager, respectively, of the main
Galesburg facility. Prior to the effectiveness of the lease between Galesburg
Real Estate II, L.L.C. and Rosewood Care Center, Inc. of Galesburg, the
architect or engineer must deliver its certificate that the physical
connection between the two facilities can be broken with no material damage to
the main Galesburg facility. The determination must also be made that the
severing of the connection will not have a material adverse effect on the
ability of the main Galesburg facility to maintain its license and
certification to operate as a skilled nursing facility without utilizing the
expansion wing. Both the operating lease and the management agreement are
terminable at will by Rosewood Care Center, Inc. of Galesburg without penalty
and without remedial action against Rosewood Care Center, Inc. of Galesburg so
long as it is a party to the Loan Guaranty Agreement dated as of October 1,
1993 with Rosewood Care Centers Capital Funding Corporation.
An architect has also been engaged to draft plans for a 60-bed expansion
wing at Rosewood Care Center of Alton. It is anticipated that work may begin
on the expansion wing at Alton shortly after the end of the current fiscal
year.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) See Index to Exhibits on Page 19.
(b) Reports on Form 8-K.
None.
19
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
NO. 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 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.
20
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 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, 994 as Exhibit 10.15 on the Form 10-Q of the Registrants,
which renewal was filed on February 13, 1996 as Exhibit 10.17 of the
Form 10-Q of the Registrants.
27 Financial Data Schedule
99.1 Reference is made to the Amended and Restated License Agreement filed
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.
21
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.
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.
22
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.
23
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
Date: May 10, 1996
Larry D. Vander Maten
----------------------------------
Larry D. Vander Maten
(President and Director
Principal Executive Officer and
Principal Financial and Accounting
Officer)
24
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
Date: May 10, 1996
Larry D. Vander Maten
----------------------------------
Larry D. Vander Maten
(President and Director
Principal Executive Officer and
Principal Financial and Accounting
Officer)
/TABLE
25
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
Date: May 10, 1996
Larry D. Vander Maten
----------------------------------
Larry D. Vander Maten
(President and Director
Principal Executive Officer and
Principal Financial and Accounting
Officer)
26
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
Date: May 10, 1996
Larry D. Vander Maten
----------------------------------
Larry D. Vander Maten
(President and Director
Principal Executive Officer and
Principal Financial and Accounting
Officer)
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 CENTER, INC. OF
EAST PEORIA, Registrant
Date: May 10, 1996
Larry D. Vander Maten
----------------------------------
Larry D. 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
ALTON, Registrant
Date: May 10, 1996
Larry D. Vander Maten
----------------------------------
Larry D. 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
MOLINE, Registrant
Date: May 10, 1996
Larry D. Vander Maten
----------------------------------
Larry D. 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.
SWANSEA REAL ESTATE, INC., Registrant
Date: May 10, 1996
Larry D. Vander Maten
----------------------------------
Larry D. 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.
GALESBURG REAL ESTATE, INC., Registrant
Date: May 10, 1996
Larry D. Vander Maten
----------------------------------
Larry D. 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.
PEORIA REAL ESTATE, INC., Registrant
Date: May 10, 1996
Larry D. Vander Maten
----------------------------------
Larry D. 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.
EAST PEORIA REAL ESTATE, INC., Registrant
Date: May 10, 1996
Larry D. Vander Maten
----------------------------------
Larry D. 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.
ALTON REAL ESTATE, INC., Registrant
Date: May 10, 1996
Larry D. Vander Maten
----------------------------------
Larry D. Vander Maten
(President and Director
Principal 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.
MOLINE REAL ESTATE, INC., Registrant
Date: May 10, 1996
Larry D. Vander Maten
----------------------------------
Larry D. Vander Maten
(President and Director
Principal Executive Officer and
Principal Financial and Accounting
Officer)