UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
(Amendment No. 2)
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): January 10, 2012
Griffin-American Healthcare REIT II, Inc.
(Exact name of registrant as specified in its charter)
Maryland | 000-54371 | 26-4008719 | ||
(State or other jurisdiction of incorporation) |
Commission File Number) |
(I.R.S. Employer Identification No.) | ||
4000 MacArthur Boulevard, West Tower, Suite 200, Newport Beach, California |
92660 | |||
(Address of principal executive offices) | (Zip Code) |
Registrants telephone number, including area code: (949) 270-9200
Not Applicable
Former name or former address, if changed since last report
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c) |
INFORMATION TO BE INCLUDED IN THE REPORT
We previously filed a Current Report on Form 8-K on January 17, 2012 reporting our acquisition of ten skilled nursing facilities: (i) Rockdale Healthcare Center, Riverside Health Care Center, New London Healthcare, Bell Minor Home, Westminister Commons and Nurse Care of Buckhead, located in Conyers, Covington, Snellville, Gainsville, Atlanta and Atlanta, Georgia, respectively; (ii) Parkway Health and Rehabilitation Center and Millington Healthcare Center, located in Memphis and Millington, Tennessee, repectively; (iii) Nurse Care of Shreveport, located in Shreveport, Lousisiana; and (iv) Sea Breeze Health Care Center, located in Mobile, Alabama, or collectively the Southeastern SNF Portfolio, for an aggregate purchase price of $166,500,000, plus closing costs. We subsequently filed a Current Report on Form 8-K/A, Amendment No. 1, on January 18, 2012, to amend the Form 8-K. We are filing this Current Report on Form 8-K/A, Amendment No. 2, to provide the financial information required by Item 9.01.
On January 10, 2012, we acquired the Southeastern SNF Portfolio which is leased to a majority-owned subsidiary of Wellington Healthcare Services, LP, or Wellington, whereby Wellington and subsidiaries serve as the guarantors of the leased properties.
In evaluating the Southeastern SNF Portfolio as a potential acquisition and determining the appropriate amount of consideration to be paid for the portfolio, a variety of factors were considered, including our evaluation of property condition reports, the respective locations, visibility and access to the ten facilities, the age, physical condition and curb appeal of the ten facilities, neighboring property uses, local market conditions and general economic conditions and patient demand.
The Southeastern SNF Portfolio was built between 1969 and 1999 and consists of approximately 454,000 square feet of gross leasable area, or GLA, in the aggregate, and each facility has between 84 and 227 beds. The Southeastern SNF Portfolio is 100% leased to one tenant which has operations at each of the ten facilities. We believe that the financial condition and results of operations of the guarantor, Wellington Healthcare Services, LP and Subsidiaries, are more relevant to investors than the financial statements of the individual properties and enable investors to evaluate the credit-worthiness of the guarantor of the lease and pursuant to the guidance provided by the United States Securities and Exchange Commission, or the SEC, we have provided the audited financial statements of Wellington Healthcare Services, LP and Subsidiaries, below.
-2-
Item 9.01 Financial Statements and Exhibits.
Page | ||||
(a) Financial statements of businesses acquired. |
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1. Wellington Healthcare Services, LP and Subsidiaries |
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I. Independent Auditors Report |
4 | |||
II. Consolidated Balance Sheets as of December 31, 2011 and 2010 |
5 | |||
III. Consolidated Statements of Income for the Years Ended December 31, 2011 and 2010 |
7 | |||
IV. Consolidated Statements of Partners Equity for the Years Ended December 31, 2011 and 2010 |
8 | |||
V. Consolidated Statements of Cash Flows for the Years Ended December 31, 2011 and 2010 |
9 | |||
VI. Notes to Consolidated Financial Statements |
10 | |||
VII. Supplementary Information |
20 | |||
2. Wellington Healthcare Services, LP and Subsidiaries |
||||
I. Independent Auditors Report |
36 | |||
II. Consolidated Balance Sheets as of December 31, 2010 and 2009 |
37 | |||
III. Consolidated Statements of Income for the Years Ended December 31, 2010 and 2009 |
39 | |||
IV. Consolidated Statements of Partners Equity for the Years Ended December 31, 2010 and 2009 |
40 | |||
V. Consolidated Statements of Cash Flows for the Years Ended December 31, 2010 and 2009 |
41 | |||
VI. Notes to Consolidated Financial Statements |
42 | |||
VII. Supplementary Information |
52 | |||
(b) Pro forma financial information. |
||||
Grriffin-American Healthcare REIT II, Inc. |
||||
I. Unaudited Pro Forma Condensed Consolidated Financial Statements as of December 31, 2011 and for the Year Ended December 31, 2011 |
68 | |||
II. Unaudited Pro Forma Condensed Consolidated Balance Sheet as of December 31, 2011 |
69 | |||
III. Unaudited Pro Forma Condensed Consolidated Statement of Operations for the Year Ended December 31, 2011 |
70 | |||
IV. Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements as of December 31, 2011 and for the Year Ended December 31, 2011 |
71 |
-3-
To the Partners
of Wellington Healthcare Services, LP and Subsidiaries
Independent Auditors Report
We have audited the accompanying consolidated balance sheets of Wellington Healthcare Services, LP and Subsidiaries as of December 31, 2011 and 2010, and the related consolidated statements of income, partners equity, and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Partnerships management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Wellington Healthcare Services, LP and Subsidiaries as of December 31, 2011 and 2010, and the results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.
Our audits were conducted for the purpose of forming an opinion on the consolidated financial statements as a whole. The December 31, 2011 consolidating balance sheet and related statement of income on pages 21 through 35 are presented for the purposes of additional analysis of the consolidated financial statement rather than to present the financial position and the results of operations of the individual companies, and is not a required part of the consolidated financial statement. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the consolidated financial statement. The consolidating information has been subjected to the auditing procedures applied in the audit of the consolidated financial statement and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the consolidated financial statement or to the consolidated financial statement itself, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the consolidating information is fairly stated in all material respects in relation to the consolidated financial statement taken as a whole.
/s/ Bradley Associates
Indianapolis, Indiana
March 16, 2012
201 S. Capitol Avenue, Suite 910 Indianapolis, IN 46225 P 317.237.5500 F317.237.5503 bradleycpa.com
-4-
WELLINGTON HEALTHCARE SERVICES, LP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2011 AND 2010
ASSETS
2011 | 2010 | |||||||
Current assets: |
||||||||
Cash |
$ | 3,821,639 | $ | 3,832,645 | ||||
Patient accounts receivable, net of allowance for doubtful accounts of $1,020,315 and $812,964 for 2011 and 2010, respectively |
7,694,602 | 6,868,754 | ||||||
Third party receivables |
432,522 | 623,971 | ||||||
Accounts receivable, related parties |
9,378 | |||||||
Escrow accounts |
1,388,248 | 944,121 | ||||||
Prepaid expenses |
799,221 | 1,098,278 | ||||||
|
|
|
|
|||||
Total current assets |
14,136,232 | 13,377,147 | ||||||
|
|
|
|
|||||
Investments |
2,465,987 | 2,470,432 | ||||||
|
|
|
|
|||||
Restricted cash |
4,344,115 | 4,344,115 | ||||||
|
|
|
|
|||||
Property and equipment, net |
76,130,030 | 74,994,734 | ||||||
|
|
|
|
|||||
Other assets: |
||||||||
Deferred loan costs, net |
2,731,135 | 2,946,912 | ||||||
Goodwill |
4,015,652 | 4,015,652 | ||||||
Other assets |
420,799 | 209,714 | ||||||
|
|
|
|
|||||
Total other assets |
7,167,586 | 7,172,278 | ||||||
|
|
|
|
|||||
Total assets |
$ | 104,243,950 | $ | 102,358,706 | ||||
|
|
|
|
The accompanying notes are an integral part
of the consolidated financial statements.
-5-
LIABILITIES AND PARTNERS EQUITY
2011 | 2010 | |||||||
Current liabilities: |
||||||||
Current maturities of long-term debt |
$ | 14,078,955 | $ | 1,481,103 | ||||
Accounts payable, trade |
4,267,679 | 4,093,360 | ||||||
Third party payables |
132,694 | |||||||
Accrued expenses |
5,467,397 | 4,566,404 | ||||||
|
|
|
|
|||||
Total current liabilities |
23,946,725 | 10,140,867 | ||||||
|
|
|
|
|||||
Long-term debt, less current maturities |
69,521,028 | 83,968,946 | ||||||
|
|
|
|
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Partners equity |
10,776,197 | 8,248,893 | ||||||
|
|
|
|
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Total liabilities and partners equity |
$ | 104,243,950 | $ | 102,358,706 | ||||
|
|
|
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The accompanying notes are an integral part
of the consolidated financial statements.
-6-
WELLINGTON HEALTHCARE SERVICES, LP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 2011 AND 2010
2011 | 2010 | |||||||
Revenue: |
||||||||
Net routine services |
$ | 101,449,027 | $ | 85,731,775 | ||||
Net special services |
4,099,691 | 2,933,434 | ||||||
Billing service fees |
492,989 | 481,714 | ||||||
Management fees |
10,500 | |||||||
|
|
|
|
|||||
106,041,707 | 89,157,423 | |||||||
|
|
|
|
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Other operating revenue |
40,890 | 38,693 | ||||||
|
|
|
|
|||||
Operating expenses: |
||||||||
Routine service |
33,088,782 | 29,721,447 | ||||||
Special service |
13,946,211 | 11,549,915 | ||||||
Dietary |
6,941,499 | 6,175,370 | ||||||
Laundry and housekeeping |
3,504,150 | 3,101,465 | ||||||
Plant operation and maintenance |
4,606,072 | 4,118,404 | ||||||
General and administrative |
19,937,030 | 16,644,022 | ||||||
Property and related |
2,475,930 | 2,116,753 | ||||||
Depreciation and amortization |
2,796,788 | 2,680,554 | ||||||
Bad debts |
1,068,996 | 665,496 | ||||||
|
|
|
|
|||||
88,365,458 | 76,773,426 | |||||||
|
|
|
|
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Operating income |
17,717,139 | 12,422,690 | ||||||
|
|
|
|
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Financial income: |
||||||||
Interest income |
18,954 | 9,731 | ||||||
Gain on sale of assets |
(154,312 | ) | 2,398 | |||||
Interest expense |
(4,127,233 | ) | (4,485,909 | ) | ||||
Other |
(249,141 | ) | ||||||
|
|
|
|
|||||
(4,262,591 | ) | (4,722,921 | ) | |||||
|
|
|
|
|||||
Net income |
$ | 13,454,548 | $ | 7,699,769 | ||||
|
|
|
|
The accompanying notes are an integral part
of the consolidated financial statements.
-7-
WELLINGTON HEALTHCARE SERVICES, LP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF PARTNERS EQUITY
YEARS ENDED DECEMBER 31, 2011 AND 2010
2011 | 2010 | |||||||
Balance, beginning |
$ | 8,248,893 | $ | 1,800,169 | ||||
Net income |
13,454,548 | 7,699,769 | ||||||
Contributions |
4,344,115 | |||||||
Distributions |
(10,927,244 | ) | (5,595,160 | ) | ||||
|
|
|
|
|||||
Balance, ending |
$ | 10,776,197 | $ | 8,248,893 | ||||
|
|
|
|
The accompanying notes are an integral part
of the consolidated financial statements.
-8-
WELLINGTON HEALTHCARE SERVICES, LP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2011 AND 2010
2011 | 2010 | |||||||
Cash flows from operating activities: |
||||||||
Net income |
$ | 13,454,548 | $ | 7,699,769 | ||||
Adjustments to reconcile net income to cash flows from operating activities: |
||||||||
Depreciation and amortization |
2,796,788 | 2,680,554 | ||||||
Bad debt |
1,068,996 | 665,496 | ||||||
Gain on sale of assets |
154,312 | (2,398 | ) | |||||
Changes in assets and liabilities: |
||||||||
Patient accounts receivable |
(1,894,844 | ) | (263,676 | ) | ||||
Third party receivables |
191,449 | 27,694 | ||||||
Accounts receivable, related parties |
9,378 | (3,113 | ) | |||||
Prepaid expenses |
299,057 | (29,942 | ) | |||||
Other assets |
(211,085 | ) | (136,805 | ) | ||||
Accounts payable, trade |
174,319 | 551,173 | ||||||
Third party payables |
132,694 | |||||||
Accrued expenses |
900,993 | 3,585 | ||||||
|
|
|
|
|||||
Cash flows from operating activities |
17,076,605 | 11,192,337 | ||||||
|
|
|
|
|||||
Cash flows from investing activities: |
||||||||
Purchase of property and equipment |
(3,835,880 | ) | (13,981,971 | ) | ||||
Change in escrow accounts |
(439,682 | ) | (3,086,025 | ) | ||||
Change in restricted cash |
(4,344,115 | ) | ||||||
|
|
|
|
|||||
Cash flows from investing activities |
(4,275,562 | ) | (21,412,111 | ) | ||||
|
|
|
|
|||||
Cash flows from financing activities: |
||||||||
Contributions |
4,344,115 | |||||||
Distributions |
(10,927,244 | ) | (5,595,160 | ) | ||||
Net payments on revolving line of credit |
(2,140,000 | ) | ||||||
Proceeds from short-term borrowings |
1,008,676 | 737,057 | ||||||
Proceeds from long-term borrowings |
85,143,534 | |||||||
Costs incurred to obtain financing |
(34,739 | ) | (2,389,159 | ) | ||||
Principal payments on notes payable |
(2,858,742 | ) | (68,489,463 | ) | ||||
|
|
|
|
|||||
Cash flows from financing activities |
(12,812,049 | ) | 11,610,924 | |||||
|
|
|
|
|||||
Change in cash |
(11,006 | ) | 1,391,150 | |||||
Cash at beginning of year |
3,832,645 | 2,441,495 | ||||||
|
|
|
|
|||||
Cash at end of year |
$ | 3,821,639 | $ | 3,832,645 | ||||
|
|
|
|
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Supplemental disclosures of cash flow information: |
||||||||
Cash payments for interest |
$ | 4,076,631 | $ | 4,667,028 | ||||
|
|
|
|
The accompanying notes are an integral part
of the consolidated financial statements.
-9-
WELLINGTON HEALTHCARE SERVICES, LP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. | Nature of Business |
Wellington Healthcare Services, LP (Partnership), was organized as a Limited Partnership for the purpose of owning, operating and managing long-term care facilities and related businesses. Under the terms of the partnership agreement, the limited partnership has an infinite life. The Partnerships subsidiaries (which operate in Alabama, Louisiana, Georgia, and Tennessee) are as follows:
Andrees Investments, LP owns a parcel of undeveloped real estate in Millington, Tennessee.
Bombay Lane, LP provides consulting services to Wellington Healthcare Services, LP and Subsidiaries.
Congress Street Partners, LP subleases and operates Sea Breeze Health Care Center, a nursing facility located in Mobile, Alabama.
Elkins Road Associates, LP is the general partner of each of the Partnerships subsidiaries.
England Associates, LP leases and operates New London Health Center, a nursing facility located in Snellville, Georgia.
Facility Investments, LP subleases and operates Westminster Commons, a nursing facility located in Atlanta, Georgia.
Falligant Associates, LP owns the real property occupied as Rockdale Healthcare Center located in Conyers, Georgia.
Hamilton Mill Associates, LP subleases and operates Bell Minor Home, a nursing facility located in Gainesville, Georgia.
Irving Place Associates, LP subleases and operates Nursecare of Shreveport, a nursing facility located in Shreveport, Louisiana.
Ivan Associates, LP owns the real property occupied as Sea Breeze Health Care Center located in Mobile, Alabama.
LTC Consulting, LP leases and operates Rockdale Healthcare Center, a nursing facility located in Conyers, Georgia.
-10-
WELLINGTON HEALTHCARE SERVICES, LP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. | Nature of Business (Continued) |
McGee Road Associates, LP owns the real property occupied as New London Health Center in Snellville, Georgia.
Wellington Healthcare Properties, LP subleases and operates Millington Healthcare Center, a nursing facility located in Millington, Tennessee.
Pharr Court Associates, LP leases and operates Nursecare of Buckhead, a nursing facility located in Atlanta, Georgia.
Powder Springs Road Associates, LP owns the real property occupied as Nursecare of Buckhead located in Atlanta, Georgia.
Red River Associates, LP owns the real property occupied as Nursecare of Shreveport located in Shreveport, Louisiana.
Riverside Healthcare, LP subleases and operates Riverside Health Care Center, a nursing facility located in Conyers, Georgia.
San Alejandro Associates, LP owns the real property occupied as Bell Minor Home located in Gainesville, Georgia.
San Carlos Associates, LP owns the real property occupied as Westminster Commons located in Atlanta, Georgia.
South Parkway Associates, LP subleases and operates Parkway Health & Rehabilitation Center, a nursing facility located in Memphis, Tennessee.
Tennessee Property Associates, LP owns the real property occupied as Parkway Health & Rehabilitation Center located in Memphis, Tennessee.
Warsaw Road, LP holds a master lease agreement for seven of the nursing facilities.
Wellington Healthcare Billing, LP provides Part B billing services for nursing facilities operated by Wellington Healthcare Services, LP and its subsidiaries.
-11-
WELLINGTON HEALTHCARE SERVICES, LP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. | Nature of Business (Continued) |
Wellington Realty, LP owned the real property at 500 Bombay Lane in Roswell, Georgia and leased the real property at 400 Bombay Lane in Roswell, Georgia. Both locations were occupied as the corporate offices until October 2008. During 2011 Wellington Realty sold the real property at 500 Bombay Lane and terminated the lease at 400 Bombay Lane. Wellington Realty LP also leases the current corporate offices located at 20 Mansell Court East, Suite 200 in Roswell, Georgia and owns a parking lot used in connection with the Westminster Commons facility.
Wellington Retirement Management, LP provided management and marketing services up to July 2010 to North Metro Property Development Corp. which owns an assisted living facility located in Roswell, Georgia.
West Point Road Associates, LP owns the real property occupied as Millington Healthcare Center located in Millington, Tennessee.
West Street Associates, LP owns the real property occupied as Riverside Health Care Center located in Covington, Georgia.
2. | Significant Accounting Policies |
Principles of Consolidation
The consolidated financial statements include the accounts of the Partnership and its subsidiaries. All material intercompany accounts and transactions are eliminated in consolidation. All subsidiaries are wholly-owned.
Use of Estimates
The preparation of financial statements, in conformity with accounting principles generally accepted in the United States of America, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash
For purpose of reporting the statement of cash flows, the Partnership considers all cash accounts which are not subject to withdrawal restrictions or penalties, all money market accounts and all highly liquid investments purchased with a maturity of 90 days or less as cash on the accompanying balance sheets.
-12-
WELLINGTON HEALTHCARE SERVICES, LP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. | Significant Accounting Policies (Continued) |
Cash (Continued)
The Partnership maintains its cash in bank accounts which, at times, may exceed federally insured limits. The Partnership has not experienced any losses in such accounts.
Patient Accounts Receivable
Accounts receivable are stated at the amount management expects to collect from outstanding balances. Management provides for probable uncollectible amounts through an adjustment to bad debt expense and a credit to a valuation allowance based on its current assessment of accounts receivable. Balances that are still outstanding after management has used reasonable collection efforts are written off through a charge to the valuation allowance and a credit to accounts receivable. Changes in the valuation allowance have not been material to the financial statements.
Investments
The Partnership is required by the U.S. Department of Housing and Urban Development (HUD) to set aside amounts for the replacement of property and other project expenditures approved by HUD in replacement reserve accounts. The reserves are stated at confirmed, fair market value. At times, these reserve balances may exceed federally insured limits. The Partnership believes it is not exposed to any significant credit risk on these reserve accounts.
Restricted Cash
The Partnership has restricted cash in a savings account that holds the cash collateral related to the term loan discussed in Note 6. The Partnership can not withdraw the money until the loan is refinanced or paid in full.
Property and Equipment
Property and equipment are recorded at cost. Depreciation and amortization are computed by the straight-line method over the estimated useful lives of the assets. When equipment is retired, its cost and the related accumulated depreciation are eliminated from the respective accounts and gains or losses arising from the disposition are reflected as income or expense. The cost of maintenance and repairs are expensed as incurred; significant renewals and betterments are capitalized.
-13-
WELLINGTON HEALTHCARE SERVICES, LP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. | Significant Accounting Policies (Continued) |
Deferred Loan Costs
Deferred loan costs consist of costs incurred to obtain financing. Deferred loan costs are amortized using the interest method over the life of the related loan.
Patient Service Revenue
Revenue from the Medicaid and Medicare programs accounted for approximately 45% and 40%, respectively of net routine and special services revenue for the year ended December 31, 2011. Revenue from the Medicaid and Medicare programs accounted for approximately 48% and 37%, respectively of net routine and special services revenue for the year ended December 31, 2010.
Revenue received under the Medicaid program is based in part on cost reimbursement principles and are subject to audit by state agencies. Medicaid cost reports through June 30, 2011, have been accepted by the respective intermediaries without significant adjustments. Management believes it has properly applied cost reimbursement principles in the preparation of those cost reports that have not yet been audited.
Revenue for services rendered under the Medicare program is based on a prospective payment system, under which the facility is paid varying amounts based on individual patient acuity, regardless of the cost incurred to care for that patient. Under this reimbursement methodology, each facility prepares an annual cost report and has a settlement with the Medicare program for bad debts that are deemed to be reimbursable under existing Medicare regulations. All other costs are considered to be reimbursed through the prospective payment rates.
Revenue under third-party payer agreements is subject to audit and retroactive adjustment. Differences between interim and final statements are reported in operations in the year of settlement. The effect of these differences was not material to the financial statements for 2011 or 2010.
-14-
WELLINGTON HEALTHCARE SERVICES, LP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. | Significant Accounting Policies (Continued) |
Income Taxes
As a limited partnership, the Partnerships taxable income or loss is allocated to partners in accordance with their respective ownership percentage. Therefore, no provision or liability for federal income taxes has been included in the financial statements. In the states of Alabama, Georgia and Louisiana, the Partnership has elected to file using the composite method whereby the partnership pays applicable state income taxes on behalf of the partners.
3. | Property and Equipment |
At December 31, 2011, the cost and accumulated depreciation by major classes of assets were as follows:
Property and equipment |
||||||||||
Useful Life |
Cost | Accumulated Depreciation |
||||||||
Land |
$ | 12,557,979 | $ | |||||||
Buildings and improvements |
8-40 | 64,180,784 | 7,707,969 | |||||||
Leasehold improvements |
20 | 1,907,631 | 300,511 | |||||||
Fixed equipment |
10-20 | 1,946,376 | 591,775 | |||||||
Major moveable equipment |
10-20 | 3,488,732 | 1,551,933 | |||||||
Computers and electronics |
5 | 2,091,997 | 1,002,128 | |||||||
Construction in progress |
1,110,847 | |||||||||
|
|
|
|
|||||||
$ | 87,284,346 | $ | 11,154,316 | |||||||
|
|
|
|
Depreciation expense totaled $2,546,272 and $2,032,214 for the years ending December 31, 2011 and 2010, respectively. At December 31, 2011, the estimated cost to complete construction in progress is approximately $500,000.
On December 8, 2010, a subsidiary of the Partnership purchased property and equipment known as New London Nursing Facility, located in Snellville, Georgia, for $12,000,000 through the issuance of a note payable.
-15-
WELLINGTON HEALTHCARE SERVICES, LP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. | Deferred Loan Costs |
Costs incurred in connection with obtaining long-term debt have been deferred. These costs will be amortized over the period the obligations are outstanding. At December 31, 2011 the Partnership had total cost and accumulated amortization of $3,000,492 and $269,357, respectively.
5. | Goodwill |
Goodwill is not subject to amortization. Management tests goodwill at the facility level for impairment on an annual basis and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of the goodwill below its carrying amount. There was no impairment of goodwill for the year ended December 31, 2011 or 2010.
6. | Pledged Assets and Long-Term Debt |
Long-term debt and the collateral pledged thereon as of December 31, 2011 are as follows:
Mortgage loans insured HUD |
$ | 70,569,819 | ||
Term loan |
12,674,734 | |||
Notes payable to finance insurance |
355,430 | |||
|
|
|||
83,599,983 | ||||
Less current maturities |
14,078,955 | |||
|
|
|||
Total long-term debt |
$ | 69,521,028 | ||
|
|
Aggregate maturities of long-term debt at December 31, 2011, are due in future years as follows:
2012 |
$ | 14,078,955 | ||
2013 |
1,096,529 | |||
2014 |
1,152,728 | |||
2015 |
1,208,511 | |||
2016 |
1,267,001 | |||
Later years |
64,796,259 | |||
|
|
|||
$ | 83,599,983 | |||
|
|
-16-
WELLINGTON HEALTHCARE SERVICES, LP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. | Pledged Assets and Long-Term Debt (Continued) |
The HUD insured loans are secured by a mortgage on the real estate and buildings of nine nursing facilities, and are due in monthly installments of $23,384 to $63,296, including interest ranging from 4.57% to 5.25%, and mature through August 2045. The HUD insured loans do not have any financial covenants.
The term loan is to finance the purchase of New London Health Center, in which monthly installments are due for interest only. Of the original loan amount, $8,330,619 is collateralized by the real estate and property of McGee Road Associates and the other $4,344,115 is collateralized by restricted cash of McGee Road Associates. Monthly installments are due for interest only at 2.0% above LIBOR on the cash collateralized portion and 6.5% above LIBOR for the property collateralized portion. All principal is due upon maturity in May 2012. At December 31, 2010 LIBOR is 0.375%. This term loan requires compliance with certain restrictions and financial and operating ratios.
The notes payable to finance insurance are due in monthly installments of $1,816 to $17,789, including interest ranging from 3.95% to 4.25%, and mature through May 2012. All notes are collateralized by the unearned premiums.
During January 2011 the Partnership obtained a $750,000 line of credit. At December 31, 2011, the outstanding balance on the line of credit was $0. The line of credit was extended in January 2012 (see Note 10) and bears interest at 3.5% above LIBOR. The line of credit is unsecured. This line of credit requires compliance with certain restrictions and financial and operating ratios.
7. | Concentration of Credit Risk |
The Partnership grants credit without collateral to its clients, most of whom are local residents. Receivables from Medicare, Medicaid, other third-party payors and clients were as follows:
2011 | 2010 | |||||||
Medicaid |
36 | % | 31 | % | ||||
Medicare |
32 | 37 | ||||||
Other third-party payors |
24 | 24 | ||||||
Private payors |
8 | 8 | ||||||
|
|
|
|
|||||
100 | % | 100 | % | |||||
|
|
|
|
-17-
WELLINGTON HEALTHCARE SERVICES, LP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. | Insured Risks |
The Partnership has a partially funded, minimum premium plan for the cost of employee related workers compensation benefits. Under this plan, the Partnership has an Individual Stop Level (ISL) and an Aggregate Stop Level (ASL) of $250,000 and $690,000, respectively. The ASL is based on the number of employees enrolled in the plan on a month to month basis. Amounts in excess of the ISL or ASL are covered through a commercial stop-loss policy. At December 31, 2011, the Partnership estimated $180,746 of workers compensation benefit claims were incurred prior to year end, but not reported to the plan. This amount is included in accrued expenses on the Consolidated Balance Sheets and general and administrative expense on the Consolidated Statements of Income.
9. | Risk Management |
The Partnership operates in the long-term care industry. Over time, the industry has seen an increase in litigation related to patient care issues. The Partnership carries professional liability insurance on all of its nursing facilities to cover potential losses resulting from litigation. Based on insurance coverage in effect during the period, there is no pending litigation or unasserted claims that would result in significant losses to the Partnership.
In addition to professional liability claims, the partnership is involved in litigation and regulatory investigations arising in the ordinary course of business. These matters are expected to be resolved without material adverse effect on the partnerships consolidated financial position.
10. | Reclassifications |
Certain 2010 balances were reclassified to agree with the 2011 presentation.
-18-
WELLINGTON HEALTHCARE SERVICES, LP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. | Healthcare Reform |
During 2010, the federal government enacted various laws including the Patient Protection and Affordable Care Act and the Healthcare Education and Reconciliation Act. These laws and their related regulations will lead to significant changes in how health care companies are regulated and reimbursed for the services they provide. In addition, these laws may have a significant impact on the health insurance programs that the company offers to its employees which will have an impact on the cost of these programs. The Partnership cannot currently predict with certainty the ultimate impact of any of the above laws on the Partnerships financial condition, cash flows or results of operations.
12. | Subsequent Events |
On January 10, 2012, the Partnership sold substantially all of the assets and long-term debt of the 10 nursing facilities to an unrelated party under a sale-leaseback transaction. The sale resulted in a gain of approximately $84,000,000 that will be deferred over the lives of the new leases. The new leases have covenant tests that will be tested each test period.
During January 2012, the Partnership extended its $750,000 line of credit. As of March 16, 2012, the balance on the line of credit is $0.
Subsequent events have been evaluated through March 16, 2012, which is the date the financial statements were available to be issued.
-19-
SUPPLEMENTARY INFORMATION
-20-
WELLINGTON HEALTHCARE SERVICES, LP AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEET
DECEMBER 31, 2011
Congress | ||||||||||||||||||||||||
Andrees | Bombay | Street | England | Facility | Falligant | |||||||||||||||||||
Investments, LP | Lane, LP | Partners, LP | Associates, LP | Investments, LP | Associates, LP | |||||||||||||||||||
Assets |
||||||||||||||||||||||||
Current assets: |
||||||||||||||||||||||||
Cash |
$ | $ | 125,511 | $ | 104,548 | $ | 225,321 | $ | 53,664 | $ | 103,957 | |||||||||||||
Patient accounts receivable, net |
473,560 | 831,669 | 494,493 | |||||||||||||||||||||
Third party receivables |
8,651 | 56,910 | ||||||||||||||||||||||
Accounts receivable, related parties |
||||||||||||||||||||||||
Escrow accounts |
441,922 | 54,527 | ||||||||||||||||||||||
Prepaid expenses |
19,484 | 86,211 | 25,954 | 53,190 | 10,033 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total current assets |
586,917 | 672,970 | 1,139,854 | 601,347 | 168,517 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Investments |
399,357 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Restricted cash |
||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Property and equipment, net |
202,755 | 404,850 | 220,867 | 150,013 | 7,758,764 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Other assets: |
||||||||||||||||||||||||
Deferred loan costs, net |
268,761 | |||||||||||||||||||||||
Goodwill |
||||||||||||||||||||||||
Other assets |
6,988 | 1,520 | 414 | 4,507 | 34,182 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total other assets |
6,988 | 1,520 | 414 | 4,507 | 302,943 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total assets |
$ | 202,755 | $ | 998,755 | $ | 895,357 | $ | 1,140,268 | $ | 755,867 | $ | 8,629,581 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
-21-
WELLINGTON HEALTHCARE SERVICES, LP AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEET (CONTINUED)
DECEMBER 31, 2011
Wellington | ||||||||||||||||||||||||
Hamilton Mill | Irving Place | Ivan | LTC | McGee Road | Healthcare | |||||||||||||||||||
Associates, LP | Associates, LP | Associates, LP | Consulting, LP | Associates, LP | Properties, LP | |||||||||||||||||||
Assets |
||||||||||||||||||||||||
Current assets: |
||||||||||||||||||||||||
Cash |
$ | 66,498 | $ | 119,645 | $ | 255,889 | $ | 120,476 | $ | 67,755 | $ | 52,264 | ||||||||||||
Patient accounts receivable, net |
497,103 | 1,218,664 | 877,113 | 493,760 | ||||||||||||||||||||
Third party receivables |
89,736 | 79,014 | 129,092 | |||||||||||||||||||||
Accounts receivable, related parties |
787,080 | 133,455 | 167,118 | |||||||||||||||||||||
Escrow accounts |
46,338 | 257,419 | ||||||||||||||||||||||
Prepaid expenses |
79,668 | 128,996 | 16,800 | 100,242 | 29,744 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total current assets |
733,005 | 1,467,305 | 319,027 | 1,963,925 | 458,629 | 871,978 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Investments |
231,190 | 49,560 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Restricted cash |
4,344,115 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Property and equipment, net |
138,283 | 207,123 | 5,914,863 | 68,334 | 13,259,126 | 376,221 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Other assets: |
||||||||||||||||||||||||
Deferred loan costs, net |
252,352 | 197,999 | ||||||||||||||||||||||
Goodwill |
||||||||||||||||||||||||
Other assets |
2,314 | 1,590 | 33,682 | 5,300 | 72,570 | 32,381 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total other assets |
2,314 | 1,590 | 286,034 | 5,300 | 270,569 | 32,381 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total assets |
$ | 873,602 | $ | 1,676,018 | $ | 6,751,114 | $ | 2,037,559 | $ | 18,381,999 | $ | 1,280,580 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
-22-
WELLINGTON HEALTHCARE SERVICES, LP AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEET (CONTINUED)
DECEMBER 31, 2011
Powder Springs | ||||||||||||||||||||||||
Pharr Court | Road | Red River | Riverside | San Alejandro | San Carlos | |||||||||||||||||||
Associates, LP | Associates, LP | Associates, LP | Healthcare, LP | Associates, LP | Associates, LP | |||||||||||||||||||
Assets |
||||||||||||||||||||||||
Current assets: |
||||||||||||||||||||||||
Cash |
$ | 154,156 | $ | 297,195 | $ | 430,301 | $ | 49,435 | $ | 402,695 | $ | 60,630 | ||||||||||||
Patient accounts receivable, net |
1,142,148 | 725,806 | ||||||||||||||||||||||
Third party receivables |
69,119 | |||||||||||||||||||||||
Accounts receivable, related parties |
151,986 | 1,746,670 | ||||||||||||||||||||||
Escrow accounts |
104,054 | 121,085 | 48,545 | 41,004 | ||||||||||||||||||||
Prepaid expenses |
156,972 | 14,869 | 36,150 | 75,540 | 23,580 | 15,289 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total current assets |
1,674,381 | 416,118 | 587,536 | 2,597,451 | 474,820 | 116,923 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Investments |
360,326 | 310,868 | 329,972 | 140,371 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Restricted cash |
||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Property and equipment, net |
227,464 | 12,854,845 | 10,306,372 | 100,834 | 7,302,639 | 3,999,171 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Other assets: |
||||||||||||||||||||||||
Deferred loan costs, net |
328,245 | 353,363 | 268,373 | 224,741 | ||||||||||||||||||||
Goodwill |
2,680,150 | |||||||||||||||||||||||
Other assets |
974 | 33,682 | 33,682 | 972 | 33,682 | 33,682 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total other assets |
974 | 361,927 | 3,067,195 | 972 | 302,055 | 258,423 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total assets |
$ | 1,902,819 | $ | 13,993,216 | $ | 14,271,971 | $ | 2,699,257 | $ | 8,409,486 | $ | 4,514,888 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
-23-
WELLINGTON HEALTHCARE SERVICES, LP AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEET (CONTINUED)
DECEMBER 31, 2011
Tennessee | Wellington | Wellington | West Point | |||||||||||||||||||||
South Parkway | Property | Healthcare | Wellington | Retirement | Road | |||||||||||||||||||
Associates, LP | Associates, LP | Billing, LP | Realty, LP | Management, LP | Associates, LP | |||||||||||||||||||
Assets |
||||||||||||||||||||||||
Current assets: |
||||||||||||||||||||||||
Cash |
$ | 104,857 | $ | 333,611 | $ | 45,941 | $ | 771 | $ | 32 | $ | 236,907 | ||||||||||||
Patient accounts receivable, net |
808,765 | 131,521 | ||||||||||||||||||||||
Third party receivables |
||||||||||||||||||||||||
Accounts receivable, related parties |
211,770 | 99,129 | 4,523 | |||||||||||||||||||||
Escrow accounts |
108,163 | 74,304 | ||||||||||||||||||||||
Prepaid expenses |
31,267 | 22,511 | 17,939 | 2,749 | 15,957 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total current assets |
944,889 | 464,285 | 407,171 | 102,649 | 4,555 | 327,168 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Investments |
188,723 | 180,237 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Restricted cash |
||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Property and equipment, net |
138,693 | 4,198,351 | 721,165 | 4,498,090 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Other assets: |
||||||||||||||||||||||||
Deferred loan costs, net |
272,225 | 211,556 | ||||||||||||||||||||||
Goodwill |
||||||||||||||||||||||||
Other assets |
(27,299 | ) | 33,682 | 14,930 | 33,682 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total other assets |
(27,299 | ) | 305,907 | 14,930 | 245,238 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total assets |
$ | 1,056,283 | $ | 5,157,266 | $ | 407,171 | $ | 838,744 | $ | 4,555 | $ | 5,250,733 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
-24-
WELLINGTON HEALTHCARE SERVICES, LP AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEET (CONTINUED)
DECEMBER 31, 2011
Wellington | ||||||||||||||||||||
West Street | Healthcare | |||||||||||||||||||
Associates, LP | Services, LP | Subtotal | Eliminations | Consolidated | ||||||||||||||||
Assets |
||||||||||||||||||||
Current assets: |
||||||||||||||||||||
Cash |
$ | 377,806 | $ | 31,774 | $ | 3,821,639 | $ | 3,821,639 | ||||||||||||
Patient accounts |
| |||||||||||||||||||
receivable, net |
7,694,602 | 7,694,602 | ||||||||||||||||||
Third party receivables |
432,522 | 432,522 | ||||||||||||||||||
Accounts receivable, related parties |
272,563 | 3,574,294 | (3,574,294 | ) | ||||||||||||||||
Escrow accounts |
90,887 | 1,388,248 | 1,388,248 | |||||||||||||||||
Prepaid expenses |
37,765 | 4,367 | 1,005,277 | (206,056 | ) | 799,221 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total current assets |
506,458 | 308,704 | 17,916,582 | (3,780,350 | ) | 14,136,232 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Investments |
275,383 | 10,743,635 | 13,209,622 | (10,743,635 | ) | 2,465,987 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Restricted cash |
4,344,115 | 4,344,115 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Property and equipment, net |
3,081,207 | 76,130,030 | 76,130,030 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Other assets: |
||||||||||||||||||||
Deferred loan costs, net |
353,520 | 2,731,135 | 2,731,135 | |||||||||||||||||
Goodwill |
1,335,502 | 4,015,652 | 4,015,652 | |||||||||||||||||
Other assets |
33,682 | 420,799 | 420,799 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total other assets |
1,722,704 | | 7,167,586 | 7,167,586 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total assets |
$ | 5,585,752 | $ | 11,052,339 | $ | 118,767,935 | $ | (14,523,985 | ) | $ | 104,243,950 | |||||||||
|
|
|
|
|
|
|
|
|
|
-25-
WELLINGTON HEALTHCARE SERVICES, LP AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEET (CONTINUED)
DECEMBER 31, 2011
Congress | ||||||||||||||||||||||||
Andrees | Bombay | Street | England | Facility | Falligant | |||||||||||||||||||
Investments, LP | Lane, LP | Partners, LP | Associates, LP | Investments, LP | Associates, LP | |||||||||||||||||||
Liabilities and Partners Equity |
||||||||||||||||||||||||
Current liabilities: |
||||||||||||||||||||||||
Current maturities of long-term debt |
$ | $ | 1,816 | $ | 40,884 | $ | $ | 23,596 | $ | 91,988 | ||||||||||||||
Accounts payable, trade |
419,350 | 321,881 | 352,843 | 250,856 | 971 | |||||||||||||||||||
Third party payables |
5,994 | |||||||||||||||||||||||
Accounts payable, related parties |
1,406 | 1,806,397 | 578,445 | 179,780 | 108,479 | 8,713 | ||||||||||||||||||
Accrued expenses |
500 | 1,293,567 | 281,264 | 330,351 | 162,166 | 39,227 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total current liabilities |
1,906 | 3,521,130 | 1,222,474 | 862,974 | 551,091 | 140,899 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Long-term debt, less current maturities |
7,959,987 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Partners equity |
200,849 | (2,522,375 | ) | (327,117 | ) | 277,294 | 204,776 | 528,695 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total liabilities and partners equity |
$ | 202,755 | $ | 998,755 | $ | 895,357 | $ | 1,140,268 | $ | 755,867 | $ | 8,629,581 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
-26-
WELLINGTON HEALTHCARE SERVICES, LP AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEET (CONTINUED)
DECEMBER 31, 2011
Wellington | ||||||||||||||||||||||||
Hamilton Mill | Irving Place | Ivan | LTC | McGee Road | Healthcare | |||||||||||||||||||
Associates, LP | Associates, LP | Associates, LP | Consulting, LP | Associates, LP | Properties, LP | |||||||||||||||||||
Liabilities and Partners Equity |
||||||||||||||||||||||||
Current liabilities: |
||||||||||||||||||||||||
Current maturities of long-term debt |
$ | 43,551 | $ | 67,900 | $ | 87,077 | $ | 58,349 | $ | 12,674,734 | $ | |||||||||||||
Accounts payable, trade |
176,784 | 531,454 | 318,565 | 230,543 | ||||||||||||||||||||
Third party payables |
53,963 | |||||||||||||||||||||||
Accounts payable, related parties |
172,433 | 502,402 | ||||||||||||||||||||||
Accrued expenses |
225,391 | 612,234 | 23,389 | 343,154 | 56,838 | 311,403 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total current liabilities |
618,159 | 1,767,953 | 110,466 | 720,068 | 12,731,572 | 541,946 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Long-term debt, less current maturities |
4,970,869 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Partners equity |
255,443 | (91,935 | ) | 1,669,779 | 1,317,491 | 5,650,427 | 738,634 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total liabilities and partners equity |
$ | 873,602 | $ | 1,676,018 | $ | 6,751,114 | $ | 2,037,559 | $ | 18,381,999 | $ | 1,280,580 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
-27-
WELLINGTON HEALTHCARE SERVICES, LP AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEET (CONTINUED)
DECEMBER 31, 2011
Powder Springs | ||||||||||||||||||||||||
Pharr Court | Road | Red River | Riverside | San Alejandro | San Carlos | |||||||||||||||||||
Associates, LP | Associates, LP | Associates, LP | Healthcare, LP | Associates, LP | Associates, LP | |||||||||||||||||||
Liabilities and Partners Equity |
||||||||||||||||||||||||
Current liabilities: |
||||||||||||||||||||||||
Current maturities of long-term debt |
$ | 86,064 | $ | 136,325 | $ | 187,370 | $ | 33,269 | $ | 122,840 | $ | 79,647 | ||||||||||||
Accounts payable, trade |
779,187 | 238,640 | 396,650 | 3,895 | ||||||||||||||||||||
Third party payables |
47,186 | |||||||||||||||||||||||
Accounts payable, related parties |
12,256 | 19,237 | 831 | |||||||||||||||||||||
Accrued expenses |
534,252 | 56,207 | 45,720 | 371,308 | 31,037 | 21,530 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total current liabilities |
1,399,503 | 204,788 | 490,967 | 848,413 | 154,708 | 105,072 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Long-term debt, less current maturities |
11,796,634 | 10,696,217 | 6,976,551 | 4,523,454 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Partners equity |
503,316 | 1,991,794 | 3,084,787 | 1,850,844 | 1,278,227 | (113,638 | ) | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total liabilities and partners equity |
$ | 1,902,819 | $ | 13,993,216 | $ | 14,271,971 | $ | 2,699,257 | $ | 8,409,486 | $ | 4,514,888 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
-28-
WELLINGTON HEALTHCARE SERVICES, LP AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEET (CONTINUED)
DECEMBER 31, 2011
Tennessee | Wellington | Wellington | West Point | |||||||||||||||||||||
South Parkway | Property | Healthcare | Wellington | Retirement | Road | |||||||||||||||||||
Associates, LP | Associates, LP | Billing, LP | Realty, LP | Management, LP | Associates, LP | |||||||||||||||||||
Liabilities and Partners Equity |
||||||||||||||||||||||||
Current liabilities: |
||||||||||||||||||||||||
Current maturities of long-term debt |
$ | $ | 86,712 | $ | $ | $ | $ | 61,091 | ||||||||||||||||
Accounts payable, trade |
330,602 | 47,226 | ||||||||||||||||||||||
Third party payables |
25,551 | |||||||||||||||||||||||
Accounts payable, related parties |
106,880 | 3,898 | 3,537 | |||||||||||||||||||||
Accrued expenses |
383,881 | 54,989 | 57,397 | 40,660 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total current liabilities |
846,914 | 145,599 | 47,226 | 57,397 | 105,288 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Long-term debt, less current maturities |
6,684,456 | 4,738,697 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Partners equity |
209,369 | (1,672,789 | ) | 359,945 | 781,347 | 4,555 | 406,748 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total liabilities and partners equity |
$ | 1,056,283 | $ | 5,157,266 | $ | 407,171 | $ | 838,744 | $ | 4,555 | $ | 5,250,733 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
-29-
WELLINGTON HEALTHCARE SERVICES, LP AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEET (CONTINUED)
DECEMBER 31, 2011
Wellington | ||||||||||||||||||||
West Street | Healthcare | |||||||||||||||||||
Associates, LP | Services, LP | Subtotal | Eliminations | Consolidated | ||||||||||||||||
Liabilities and Partners Equity |
||||||||||||||||||||
Current liabilities: |
||||||||||||||||||||
Current maturities of long-term debt |
$ | 195,742 | $ | $ | 14,078,955 | $ | 14,078,955 | |||||||||||||
Accounts payable, trade |
132,795 | 4,532,242 | (264,563 | ) | 4,267,679 | |||||||||||||||
Third party payables |
132,694 | 132,694 | ||||||||||||||||||
Accounts payable, related parties |
11,093 | 3,515,787 | (3,515,787 | ) | ||||||||||||||||
Accrued expenses |
47,585 | 143,347 | 5,467,397 | 5,467,397 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total current liabilities |
254,420 | 276,142 | 27,727,075 | (3,780,350 | ) | 23,946,725 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Long-term debt, less current maturities |
11,174,163 | 69,521,028 | 69,521,028 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Partners equity |
(5,842,831 | ) | 10,776,197 | 21,519,832 | (10,743,635 | ) | 10,776,197 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total liabilities and partners equity |
$ | 5,585,752 | $ | 11,052,339 | $ | 118,767,935 | $ | (14,523,985 | ) | $ | 104,243,950 | |||||||||
|
|
|
|
|
|
|
|
|
|
-30-
WELLINGTON HEALTHCARE SERVICES, LP AND SUBSIDIARIES
CONSOLIDATING INCOME STATEMENT
DECEMBER 31, 2011
Congress | ||||||||||||||||||||||||
Andrees | Bombay | Street | England | Facility | Falligant | |||||||||||||||||||
Investments, LP | Lane, LP | Partners, LP | Associates, LP | Investments, LP | Associates, LP | |||||||||||||||||||
Revenue: |
||||||||||||||||||||||||
Net routine services |
$ | $ | $ | 7,297,464 | $ | 11,564,041 | $ | 5,266,505 | $ | |||||||||||||||
Net special services |
135,120 | 653,113 | 120,652 | |||||||||||||||||||||
Billing service fees |
||||||||||||||||||||||||
Management fees |
5,279,535 | |||||||||||||||||||||||
Lease income |
747,844 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
5,279,535 | 7,432,584 | 12,217,154 | 5,387,157 | 747,844 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Other operating revenue |
2,728 | 4,087 | 1,408 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Operating expenses: |
||||||||||||||||||||||||
Routine service |
2,632,362 | 3,266,778 | 1,976,799 | |||||||||||||||||||||
Special service |
602,631 | 1,715,362 | 650,238 | |||||||||||||||||||||
Dietary |
665,464 | 739,952 | 371,001 | |||||||||||||||||||||
Laundry and housekeeping |
307,508 | 349,226 | 224,455 | |||||||||||||||||||||
Plant operation and maintenance |
48,990 | 485,231 | 423,698 | 296,034 | ||||||||||||||||||||
General and administrative |
14 | 5,340,861 | 1,507,132 | 1,996,149 | 1,251,402 | 4,243 | ||||||||||||||||||
Property and related |
593 | 304,437 | 848,915 | 1,537,636 | 707,078 | 50,493 | ||||||||||||||||||
Depreciation and amortization |
161,525 | 45,235 | 30,433 | 245,683 | ||||||||||||||||||||
Bad debts |
50,850 | 95,928 | 108,576 | 27,553 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
607 | 5,906,663 | 7,190,406 | 10,137,377 | 5,534,993 | 300,419 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Operating income |
(607 | ) | (624,400 | ) | 246,265 | 2,081,185 | (147,836 | ) | 447,425 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Financial income: |
||||||||||||||||||||||||
Interest income |
25 | 15 | 238 | 774 | ||||||||||||||||||||
Gain on sale of assets |
||||||||||||||||||||||||
Interest expense |
(13,276 | ) | (424,849 | ) | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
(13,276 | ) | 25 | 15 | 238 | (424,075 | ) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Equity in earnings of subsidiaries |
||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net income |
$ | (607 | ) | $ | (637,676 | ) | $ | 246,290 | $ | 2,081,200 | $ | (147,598 | ) | $ | 23,350 | |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
-31-
WELLINGTON HEALTHCARE SERVICES, LP AND SUBSIDIARIES
CONSOLIDATING INCOME STATEMENT (CONTINUED)
DECEMBER 31, 2011
Wellington | ||||||||||||||||||||||||
Hamilton Mill | Irving Place | Ivan | LTC | McGee Road | Healthcare | |||||||||||||||||||
Associates, LP | Associates, LP | Associates, LP | Consulting, LP | Associates, LP | Properties, LP | |||||||||||||||||||
Revenue: |
||||||||||||||||||||||||
Net routine services |
$ | 7,279,816 | $ | 14,411,903 | $ | $ | 11,413,795 | $ | $ | 6,972,521 | ||||||||||||||
Net special services |
288,859 | 1,049,104 | 112,112 | 177,827 | ||||||||||||||||||||
Billing service fees |
||||||||||||||||||||||||
Management fees |
||||||||||||||||||||||||
Lease income |
764,346 | 1,422,100 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
7,568,675 | 15,461,007 | 764,346 | 11,525,907 | 1,422,100 | 7,150,348 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Other operating revenue |
5,106 | 4,292 | 3,152 | 1,755 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Operating expenses: |
||||||||||||||||||||||||
Routine service |
2,279,077 | 5,499,962 | 2,843,264 | 1,997,669 | ||||||||||||||||||||
Special service |
831,152 | 2,110,328 | 1,990,635 | 1,018,216 | ||||||||||||||||||||
Dietary |
502,438 | 1,148,270 | 517,728 | 488,598 | ||||||||||||||||||||
Laundry and housekeeping |
268,890 | 527,901 | 261,773 | 239,003 | ||||||||||||||||||||
Plant operation and maintenance |
351,492 | 652,768 | 340,478 | 277,653 | ||||||||||||||||||||
General and administrative |
1,389,254 | 2,693,266 | 4,501 | 1,803,717 | 2,009 | 1,255,746 | ||||||||||||||||||
Property and related |
1,023,869 | 2,003,309 | 42,549 | 896,517 | 874,530 | |||||||||||||||||||
Depreciation and amortization |
22,573 | 35,154 | 201,100 | 13,094 | 539,000 | 49,728 | ||||||||||||||||||
Bad debts |
38,247 | 186,751 | 116,500 | 80,242 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
6,706,992 | 14,857,709 | 248,150 | 8,783,706 | 541,009 | 6,281,385 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Operating income |
866,789 | 607,590 | 516,196 | 2,745,353 | 881,091 | 870,718 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Financial income: |
||||||||||||||||||||||||
Interest income |
12 | 2,550 | 1,670 | 477 | ||||||||||||||||||||
Gain on sale of assets |
||||||||||||||||||||||||
Interest expense |
(1,423 | ) | (234,434 | ) | (673,188 | ) | (89 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
12 | 1,127 | (232,764 | ) | 477 | (673,188 | ) | (89 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Equity in earnings of subsidiaries |
||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net income |
$ | 866,801 | $ | 608,717 | $ | 283,432 | $ | 2,745,830 | $ | 207,903 | $ | 870,629 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
-32-
WELLINGTON HEALTHCARE SERVICES, LP AND SUBSIDIARIES
CONSOLIDATING INCOME STATEMENT (CONTINUED)
DECEMBER 31, 2011
Powder Springs | ||||||||||||||||||||||||
Pharr Court | Road | Red River | Riverside | San Alejandro | San Carlos | |||||||||||||||||||
Associates, LP | Associates, LP | Associates, LP | Healthcare, LP | Associates, LP | Associates, LP | |||||||||||||||||||
Revenue: |
||||||||||||||||||||||||
Net routine services |
$ | 17,117,782 | $ | $ | $ | 11,244,300 | $ | $ | ||||||||||||||||
Net special services |
904,787 | 334,371 | ||||||||||||||||||||||
Billing service fees |
||||||||||||||||||||||||
Management fees |
||||||||||||||||||||||||
Lease income |
1,151,845 | 1,684,775 | 945,690 | 595,285 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
18,022,569 | 1,151,845 | 1,684,775 | 11,578,671 | 945,690 | 595,285 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Other operating revenue |
13,233 | 742 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Operating expenses: |
||||||||||||||||||||||||
Routine service |
5,763,319 | 3,923,247 | ||||||||||||||||||||||
Special service |
2,566,848 | 1,230,004 | ||||||||||||||||||||||
Dietary |
1,199,176 | 720,295 | ||||||||||||||||||||||
Laundry and housekeeping |
586,829 | 405,698 | ||||||||||||||||||||||
Plant operation and maintenance |
949,795 | 392,874 | ||||||||||||||||||||||
General and administrative |
3,390,115 | 4,742 | 4,651 | 2,111,950 | 4,243 | 4,267 | ||||||||||||||||||
Property and related |
1,465,562 | 74,976 | 91,556 | 1,425,626 | 59,725 | 38,725 | ||||||||||||||||||
Depreciation and amortization |
47,573 | 266,545 | 329,287 | 17,129 | 200,210 | 106,880 | ||||||||||||||||||
Bad debts |
191,734 | 62,742 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
16,160,951 | 346,263 | 425,494 | 10,289,565 | 264,178 | 149,872 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Operating income |
1,874,851 | 805,582 | 1,259,281 | 1,289,848 | 681,512 | 445,413 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Financial income: |
||||||||||||||||||||||||
Interest income |
222 | 727 | 2,373 | 253 | 2,683 | 1,005 | ||||||||||||||||||
Gain on sale of assets |
||||||||||||||||||||||||
Interest expense |
(317 | ) | (629,622 | ) | (504,449 | ) | (326,921 | ) | (211,969 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
(95 | ) | (628,895 | ) | (502,076 | ) | 253 | (324,238 | ) | (210,964 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Equity in earnings of subsidiaries |
||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net income |
$ | 1,874,756 | $ | 176,687 | $ | 757,205 | $ | 1,290,101 | $ | 357,274 | $ | 234,449 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
-33-
WELLINGTON HEALTHCARE SERVICES, LP AND SUBSIDIARIES
CONSOLIDATING INCOME STATEMENT (CONTINUED)
DECEMBER 31, 2011
Tennessee | Wellington | Wellington | West Point | |||||||||||||||||||||
South Parkway | Property | Healthcare | Wellington | Retirement | Road | |||||||||||||||||||
Associates, LP | Associates, LP | Billing, LP | Realty, LP | Management, LP | Associates, LP | |||||||||||||||||||
Revenue: |
||||||||||||||||||||||||
Net routine services |
$ | 8,880,900 | $ | $ | $ | $ | $ | |||||||||||||||||
Net special services |
323,746 | |||||||||||||||||||||||
Billing service fees |
492,989 | |||||||||||||||||||||||
Management fees |
||||||||||||||||||||||||
Lease income |
979,207 | 243,907 | 716,587 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
9,204,646 | 979,207 | 492,989 | 243,907 | | 716,587 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Other operating revenue |
4,358 | 29 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Operating expenses: |
||||||||||||||||||||||||
Routine service |
2,895,728 | 10,577 | ||||||||||||||||||||||
Special service |
1,001,250 | 229,547 | ||||||||||||||||||||||
Dietary |
588,577 | |||||||||||||||||||||||
Laundry and housekeeping |
332,867 | |||||||||||||||||||||||
Plant operation and maintenance |
387,059 | |||||||||||||||||||||||
General and administrative |
1,727,152 | 4,505 | 46,324 | 4,890 | 167 | 4,501 | ||||||||||||||||||
Property and related |
1,166,587 | 88,850 | 185,901 | 67,381 | ||||||||||||||||||||
Depreciation and amortization |
25,635 | 153,223 | 40,073 | 138,318 | ||||||||||||||||||||
Bad debts |
109,873 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
8,234,728 | 246,578 | 286,448 | 230,864 | 167 | 210,200 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Operating income |
974,276 | 732,629 | 206,570 | 13,043 | (167 | ) | 506,387 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Financial income: |
||||||||||||||||||||||||
Interest income |
181 | 1,433 | 1,341 | |||||||||||||||||||||
Gain on sale of assets |
(137,265 | ) | ||||||||||||||||||||||
Interest expense |
(151 | ) | (311,192 | ) | (34,232 | ) | (222,031 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
30 | (309,759 | ) | (171,497 | ) | (220,690 | ) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Equity in earnings of subsidiaries |
||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net income |
$ | 974,306 | $ | 422,870 | $ | 206,570 | $ | (158,454 | ) | $ | (167 | ) | $ | 285,697 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
-34-
WELLINGTON HEALTHCARE SERVICES, LP AND SUBSIDIARIES
CONSOLIDATING INCOME STATEMENT (CONTINUED)
DECEMBER 31, 2011
Wellington | ||||||||||||||||||||
West Street | Healthcare | |||||||||||||||||||
Associates, LP | Services, LP | Subtotal | Eliminations | Consolidated | ||||||||||||||||
Revenue: |
||||||||||||||||||||
Net routine services |
$ | $ | $ | 101,449,027 | $ | $ | 101,449,027 | |||||||||||||
Net special services |
4,099,691 | 4,099,691 | ||||||||||||||||||
Billing service fees |
492,989 | 492,989 | ||||||||||||||||||
Management fees |
5,279,535 | (5,279,535 | ) | |||||||||||||||||
Lease income |
1,323,104 | 10,574,690 | (10,574,690 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
1,323,104 | 121,895,932 | (15,854,225 | ) | 106,041,707 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Other operating revenue |
40,890 | 40,890 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Operating expenses: |
||||||||||||||||||||
Routine service |
33,088,782 | 33,088,782 | ||||||||||||||||||
Special service |
13,946,211 | 13,946,211 | ||||||||||||||||||
Dietary |
6,941,499 | 6,941,499 | ||||||||||||||||||
Laundry and housekeeping |
3,504,150 | 3,504,150 | ||||||||||||||||||
Plant operation and maintenance |
4,606,072 | 4,606,072 | ||||||||||||||||||
General and administrative |
4,229 | 656,535 | 25,216,565 | (5,279,535 | ) | 19,937,030 | ||||||||||||||
Property and related |
95,705 | 100 | 13,050,620 | (10,574,690 | ) | 2,475,930 | ||||||||||||||
Depreciation and amortization |
128,390 | 2,796,788 | 2,796,788 | |||||||||||||||||
Bad debts |
1,068,996 | 1,068,996 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
228,324 | 656,635 | 104,219,683 | (15,854,225 | ) | 88,365,458 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Operating income |
1,094,780 | (656,635 | ) | 17,717,139 | 17,717,139 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Financial income: |
||||||||||||||||||||
Interest income |
1,980 | 995 | 18,954 | 18,954 | ||||||||||||||||
Gain on sale of assets |
(17,047 | ) | (154,312 | ) | (154,312 | ) | ||||||||||||||
Interest expense |
(526,990 | ) | (12,100 | ) | (4,127,233 | ) | (4,127,233 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
(525,010 | ) | (28,152 | ) | (4,262,591 | ) | (4,262,591 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Equity in earnings of subsidiaries |
14,139,335 | 14,139,335 | (14,139,335 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net income |
$ | 569,770 | $ | 13,454,548 | $ | 27,593,883 | $ | (14,139,335 | ) | $ | 13,454,548 | |||||||||
|
|
|
|
|
|
|
|
|
|
-35-
To the Partners
of Wellington Healthcare Services, LP and Subsidiaries
Independent Auditors Report
We have audited the accompanying consolidated balance sheets of Wellington Healthcare Services, LP and Subsidiaries as of December 31, 2010 and 2009, and the related consolidated statements of income, partners equity, and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Partnerships management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Wellington Healthcare Services, LP and Subsidiaries as of December 31, 2010 and 2009, and the results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.
Our audits were conducted for the purpose of forming an opinion on the consolidated financial statements as a whole. The December 31, 2010 consolidating balance sheets and related statements of income on pages 53 through 67 are presented for the purposes of additional analysis of the consolidated financial statements rather than to present the financial position and the results of operations of the individual companies, and is not a required part of the consolidated financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the consolidated financial statements. The consolidating information has been subjected to the auditing procedures applied in the audit of the consolidated financial statements or to the consolidated financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the consolidating information is fairly stated in all material respects in relation to the consolidated financial statements taken as a whole.
/s/ Bradley & Associates, Inc.
Indianapolis, Indiana
March 25, 2011 |
201 S. Capitol Avenue, Suite 910 Indianapolis, IN 46225 P 317.237.5500 F317.237.5503 bradleycpa.com
-36-
WELLINGTON HEALTHCARE SERVICES, LP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2010 AND 2009
ASSETS
2010 | 2009 | |||||||
Current assets: |
||||||||
Cash |
$ | 3,832,645 | $ | 2,441,495 | ||||
Patient accounts receivable, net of allowance for doubtful accounts of $812,964 and $1,082,573 for 2010 and 2009, respectively |
6,868,754 | 7,270,574 | ||||||
Estimated third party payor receivables |
623,971 | 651,665 | ||||||
Accounts receivable, related parties |
9,378 | 6,265 | ||||||
Escrow accounts |
944,121 | 288,867 | ||||||
Prepaid expenses |
1,098,278 | 1,068,336 | ||||||
|
|
|
|
|||||
Total current assets |
13,377,147 | 11,727,202 | ||||||
|
|
|
|
|||||
Investments |
2,470,432 | 39,661 | ||||||
|
|
|
|
|||||
Restricted cash |
4,344,115 | |||||||
|
|
|
|
|||||
Property and equipment, net |
74,994,734 | 63,042,580 | ||||||
|
|
|
|
|||||
Other assets: |
||||||||
Deferred loan costs, net |
2,946,912 | 1,206,092 | ||||||
Goodwill |
4,015,652 | 4,015,652 | ||||||
Other assets |
209,714 | 72,909 | ||||||
|
|
|
|
|||||
Total other assets |
7,172,278 | 5,294,653 | ||||||
|
|
|
|
|||||
Total assets |
$ | 102,358,706 | $ | 80,104,096 | ||||
|
|
|
|
The accompanying notes are an integral part
of the consolidated financial statements
-37-
LIABILITIES AND PARTNERS EQUITY
2010 | 2009 | |||||||
Current liabilities: |
||||||||
Revolving line of credit |
$ | $ | 2,140,000 | |||||
Current maturities of long-term debt |
1,481,103 | 1,870,674 | ||||||
Accounts payable, trade |
4,093,360 | 3,542,187 | ||||||
Accrued expenses |
4,566,404 | 4,562,819 | ||||||
|
|
|
|
|||||
Total current liabilities |
10,140,867 | 12,115,680 | ||||||
|
|
|
|
|||||
Long-term debt, less current maturities |
83,968,946 | 66,188,247 | ||||||
|
|
|
|
|||||
Partners equity |
8,248,893 | 1,800,169 | ||||||
|
|
|
|
|||||
Total liabilities and partners equity |
$ | 102,358,706 | $ | 80,104,096 | ||||
|
|
|
|
The accompanying notes are an integral part
of the consolidated financial statements.
-38-
WELLINGTON HEALTHCARE SERVICES, LP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 2010 AND 2009
2010 | 2009 | |||||||
Revenue: |
||||||||
Net routine services |
$ | 85,731,775 | $ | 83,363,364 | ||||
Net special services |
2,933,434 | 2,682,244 | ||||||
Management fees |
10,500 | 22,500 | ||||||
Billing service fees |
481,714 | 591,642 | ||||||
|
|
|
|
|||||
89,157,423 | 86,659,750 | |||||||
|
|
|
|
|||||
Other operating revenue |
38,693 | 41,070 | ||||||
|
|
|
|
|||||
Operating expenses: |
||||||||
Routine service |
29,721,447 | 29,049,616 | ||||||
Special service |
11,549,915 | 11,674,619 | ||||||
Dietary |
6,175,370 | 5,990,544 | ||||||
Laundry and housekeeping |
3,101,465 | 3,002,727 | ||||||
Plant operation and maintenance |
4,118,404 | 4,059,315 | ||||||
General and administrative |
16,644,022 | 17,389,306 | ||||||
Property and related |
2,116,753 | 1,499,421 | ||||||
Depreciation and amortization |
2,680,554 | 2,188,362 | ||||||
Bad debts |
665,496 | 1,012,633 | ||||||
|
|
|
|
|||||
76,773,426 | 75,866,543 | |||||||
|
|
|
|
|||||
Operating income |
12,422,690 | 10,834,277 | ||||||
|
|
|
|
|||||
Financial income (expense): |
||||||||
Interest income |
9,731 | 2,747 | ||||||
Gain (loss) on sale of assets |
2,398 | (2,267 | ) | |||||
Interest expense |
(4,485,909 | ) | (5,631,579 | ) | ||||
Other |
(249,141 | ) | ||||||
|
|
|
|
|||||
(4,722,921 | ) | (5,631,099 | ) | |||||
|
|
|
|
|||||
Net income |
$ | 7,699,769 | $ | 5,203,178 | ||||
|
|
|
|
The accompanying notes are an integral part
of the consolidated financial statements
-39-
WELLINGTON HEALTHCARE SERVICES, LP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF PARTNERS EQUITY
YEARS ENDED DECEMBER 31, 2010 AND 2009
2010 | 2009 | |||||||
Balance, beginning |
$ | 1,800,169 | $ | 3,124,025 | ||||
Net income |
7,699,769 | 5,203,178 | ||||||
Contributions |
4,344,115 | |||||||
Distributions |
(5,595,160 | ) | (6,527,034 | ) | ||||
|
|
|
|
|||||
Balance, ending |
$ | 8,248,893 | $ | 1,800,169 | ||||
|
|
|
|
The accompanying notes are an integral part
of the consolidated financial statements
-40-
WELLINGTON HEALTHCARE SERVICES, LP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2010 AND 2009
2010 | 2009 | |||||||
Cash flows from operating activities: |
||||||||
Net income |
$ | 7,699,769 | $ | 5,203,178 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
Depreciation and amortization |
2,680,554 | 2,188,362 | ||||||
Bad debt |
665,496 | 1,012,633 | ||||||
(Gain) loss on sale of assets |
(2,398 | ) | 2,267 | |||||
Changes in assets and liabilities: |
||||||||
Patient accounts receivable |
(263,676 | ) | (1,944,762 | ) | ||||
Estimated third party payor receivables |
27,694 | (535,167 | ) | |||||
Accounts receivable, related parties |
(3,113 | ) | (2,415 | ) | ||||
Prepaid expenses |
(29,942 | ) | (42,306 | ) | ||||
Other assets |
(136,805 | ) | 5,971 | |||||
Accounts payable, trade |
551,173 | 593,510 | ||||||
Estimated third party payor payables |
(372,234 | ) | ||||||
Accrued expenses |
3,585 | 514,008 | ||||||
|
|
|
|
|||||
Net cash provided by operating activities |
11,192,337 | 6,623,045 | ||||||
|
|
|
|
|||||
Cash used in investing activities: |
||||||||
Purchase of property and equipment |
(13,981,971 | ) | (1,077,463 | ) | ||||
Change in escrow accounts |
(3,086,025 | ) | (9,059 | ) | ||||
Change in restricted cash |
(4,344,115 | ) | ||||||
|
|
|
|
|||||
Net cash (used) by investing activities |
(21,412,111 | ) | (1,086,522 | ) | ||||
|
|
|
|
|||||
Cash flows from financing activities: |
||||||||
Contributions |
4,344,115 | |||||||
Distributions |
(5,595,160 | ) | (6,527,034 | ) | ||||
Net payments on revolving line of credit |
(2,140,000 | ) | (319,000 | ) | ||||
Proceeds from long-term borrowings |
85,880,591 | 1,422,702 | ||||||
Costs incurred to obtain financing |
(2,389,159 | ) | (537,262 | ) | ||||
Principal payments on notes payable |
(68,489,463 | ) | (2,523,104 | ) | ||||
|
|
|
|
|||||
Net cash provided (used) by financing activities |
11,610,924 | (8,483,698 | ) | |||||
|
|
|
|
|||||
Change in cash |
1,391,150 | (2,947,175 | ) | |||||
Cash at beginning of year |
2,441,495 | 5,388,670 | ||||||
|
|
|
|
|||||
Cash at end of year |
$ | 3,832,645 | $ | 2,441,495 | ||||
|
|
|
|
|||||
Supplemental disclosures of cash flow information: |
||||||||
Cash payments for interest |
$ | 4,667,028 | $ | 5,645,281 | ||||
|
|
|
|
The accompanying notes are an integral part
of the consolidated financial statements
-41-
WELLINGTON HEALTHCARE SERVICES, LP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. | Nature of Business |
Wellington Healthcare Services, LP (the Partnership), was organized as a Limited Partnership for the purpose of owning, operating and managing long-term care and assisted living facilities and related businesses. Under the terms of the partnership agreement, the limited partnership has an infinite life. The Partnerships subsidiaries (which operate in Alabama, Louisiana, Georgia, and Tennessee) are as follows:
Andrees Investments, LP owns a parcel of undeveloped real estate in Millington, Tennessee.
Bombay Lane, LP provides consulting services to Wellington Healthcare Services, LP and Subsidiaries.
Congress Street Partners, LP subleases and operates Sea Breeze Health Care Center, a nursing facility located in Mobile, Alabama.
England Associates, LP leases and operates New London Health Center, a nursing facility located in Snellville, Georgia.
Facility Investments, LP subleases and operates Westminster Commons, a nursing facility located in Atlanta, Georgia.
Falligant Associates, LP owns the real property occupied as Rockdale Healthcare Center located in Conyers, Georgia.
Hamilton Mill Associates, LP subleases and operates Bell Minor Home, a nursing facility located in Gainesville, Georgia.
Irving Place Associates, LP subleases and operates Nursecare of Shreveport, a nursing facility located in Shreveport, Louisiana.
Ivan Associates, LP owns the real property occupied as Sea Breeze Health Care Center located in Mobile, Alabama.
LTC Consulting, LP leases and operates Rockdale Healthcare Center, a nursing facility located in Conyers, Georgia.
McGee Road Associates, LP owns the real property occupied as New London Health Center in Snellville, Georgia.
-42-
WELLINGTON HEALTHCARE SERVICES, LP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. | Nature of Business (Continued) |
Wellington Healthcare Properties, LP subleases and operates Millington Healthcare Center, a nursing facility located in Millington, Tennessee.
Pharr Court Associates, LP leases and operates Nursecare of Buckhead, a nursing facility located in Atlanta, Georgia.
Powder Springs Road Associates, LP owns the real property occupied as Nursecare of Buckhead located in Atlanta, Georgia.
Red River Associates, LP owns the real property occupied as Nursecare of Shreveport located in Shreveport, Louisiana.
Riverside Healthcare, LP subleases and operates Riverside Health Care Center, a nursing facility located in Conyers, Georgia.
San Alejandro Associates, LP owns the real property occupied as Bell Minor Home located in Gainesville, Georgia.
San Carlos Associates, LP owns the real property occupied as Westminster Commons located in Atlanta, Georgia.
South Parkway Associates, LP subleases and operates Parkway Health & Rehabilitation Center, a nursing facility located in Memphis, Tennessee.
Tennessee Property Associates, LP owns the real property occupied as Parkway Health & Rehabilitation Center located in Memphis, Tennessee.
Warsaw Road, LP holds a master lease agreement for seven of the nursing facilities.
Wellington Healthcare Billing, LP provides Part B billing services for nursing facilities owned or leased by Wellington Healthcare Services, LP and its subsidiaries.
Wellington Realty, LP owns the real property at 500 Bombay Lane in Roswell, Georgia and leases the real property at 400 Bombay Lane in Roswell, Georgia. Both locations were occupied as the corporate offices until October 2008. Wellington Realty LP also leases the current corporate offices located at 20 Mansell Court East, Suite 200 in Roswell, Georgia and owns a parking lot used in connection with the Westminster Commons facility.
-43-
WELLINGTON HEALTHCARE SERVICES, LP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. | Nature of Business (Continued) |
Wellington Retirement Management, LP provided management and marketing services to North Metro Property Development Corp. which owns an assisted living facility located in Roswell, Georgia.
West Point Road Associates, LP owns the real property occupied as Millington Healthcare Center located in Millington, Tennessee.
West Street Associates, LP owns the real property occupied as Riverside Health Care Center located in Covington, Georgia.
2. | Significant Accounting Policies |
Principles of Consolidation
The consolidated financial statements include the accounts of the Partnership and its subsidiaries. All material intercompany accounts and transactions are eliminated in consolidation. All subsidiaries are wholly-owned.
Use of Estimates
The preparation of financial statements, in conformity with accounting principles generally accepted in the United States of America, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash
For purpose of reporting the statement of cash flows, the Partnership considers all cash accounts which are not subject to withdrawal restrictions or penalties, all money market accounts and all highly liquid investments purchased with a maturity of 90 days or less as cash and cash equivalents on the accompanying balance sheets.
The Partnership maintains its cash in bank accounts which, at times, may exceed federally insured limits. The Partnership has not experienced any losses in such accounts.
-44-
WELLINGTON HEALTHCARE SERVICES, LP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. | Significant Accounting Policies (Continued) |
Patient Service Revenues
Revenue from patient services includes room and board and ancillary services and is recognized as the services are rendered. Georgia Medicaid residents are normally billed weekly for services rendered during the period. Tennessee Medicaid residents are billed at the end of the month for services rendered during the previous period. Alabama Medicaid residents are normally billed twice monthly for services rendered during the period. Louisiana Medicaid residents are billed at the end of the month for services rendered during the previous month. Medicare residents are billed at the beginning of the month for services rendered during the previous month. Private pay patients are billed in advance at the end of the prior month. If a private pay patient leaves the facility prior to the end of the month, a refund is provided for services not rendered.
Revenues from the Medicaid and Medicare programs accounted for approximately 48% and 37%, respectively of net patient service revenues for the year ended December 31, 2010. Revenues from the Medicaid and Medicare programs accounted for approximately 49% and 38%, respectively of net patient service revenues for the year ended December 31, 2009.
Revenues received under the Medicaid program are based in part on cost reimbursement principles and are subject to audit by state agencies. Medicaid cost reports through June 30, 2010, have been accepted by the respective intermediaries without significant adjustments. Management believes it has properly applied cost reimbursement principles in the preparation of those cost reports that have not yet been audited.
Revenues for services rendered under the Medicare program are based on a prospective payment system, under which the facility is paid varying amounts based on individual patient acuity, regardless of the cost incurred to care for that patient. Under this reimbursement methodology, each facility prepares an annual cost report and has a settlement with the Medicare program for bad debts that are deemed to be reimbursable under existing Medicare regulations. All other costs are considered to be reimbursed through the prospective payment rates.
Revenue under third-party payer agreements is subject to audit and retroactive adjustment. Differences between interim and final statements are reported in operations in the year of settlement. The effect of these differences could be material to the financial statements.
-45-
WELLINGTON HEALTHCARE SERVICES, LP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. | Significant Accounting Policies (Continued) |
Patient Accounts Receivable
Accounts receivable are stated at the amount management expects to collect from outstanding balances. Management provides for probable uncollectible amounts through an adjustment to bad debt expense and a credit to a valuation allowance based on its current assessment of accounts receivable. Balances that are still outstanding after management has used reasonable collection efforts are written off through a charge to the valuation allowance and a credit to accounts receivable. Changes in the valuation allowance have not been material to the financials statements.
Restricted Cash
The Partnership has restricted cash in a savings account that holds the cash collateral related to the term loan discussed in Note 4. The Partnership can not withdraw the money until the loan is refinanced or paid in full.
Property and Equipment
Property and equipment are recorded at cost. Depreciation and amortization are computed by the straight-line method over the estimated useful lives of the assets. When equipment is retired, its cost and the related accumulated depreciation are eliminated from the respective accounts and gains or losses arising from the disposition are reflected as income or expense. The cost of maintenance and repairs are expensed as incurred; significant renewals and betterments are capitalized.
Deferred Loan Costs
Deferred loan costs consist of costs incurred to obtain financing. Deferred loan costs are amortized using the interest method over the life of the related loan.
Income Taxes
As a limited partnership, the Partnerships taxable income or loss is allocated to partners in accordance with their respective ownership percentage. Therefore, no provision or liability for federal income taxes has been included in the financial statements. In the states of Alabama, Georgia and Louisiana, the Partnership has elected to file using the composite method whereby the partnership pays applicable state income taxes on behalf of the partners.
-46-
WELLINGTON HEALTHCARE SERVICES, LP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. | Property and Equipment and Intangible Assets |
At December 31, 2010, the cost and accumulated depreciation and amortization by major classes of assets were as follows:
Property and equipment |
||||||||||
Useful Life |
Cost | Accumulated Depreciation |
||||||||
Land |
$ | 12,488,079 | $ | |||||||
Buildings and improvements |
8-40 | 63,892,265 | 6,197,910 | |||||||
Leasehold improvements |
20 | 1,052,303 | 198,895 | |||||||
Fixed equipment |
10-20 | 1,801,023 | 452,677 | |||||||
Major moveable equipment |
10-20 | 3,012,402 | 1,164,625 | |||||||
Computers and electronics |
5 | 1,336,720 | 688,838 | |||||||
Construction in progress |
114,887 | |||||||||
|
|
|
|
|||||||
$ | 83,697,679 | $ | 8,702,945 | |||||||
|
|
|
|
Depreciation expense totaled $2,032,214 and $1,917,693 for the years ending December 31, 2010 and 2009, respectively. Amortization expense totaled $648,340 and $270,669 for the years ending December 31, 2010 and 2009 respectively. At December 31, 2010, the estimated cost to complete construction in progress is $605,000.
On December 8, 2010, the Partnership purchased property and equipment known as New London Nursing Facility, located in Snellville, Georgia, for $12,000,000 through the issuance of a note payable. Based on the appraised values, $790,000 was allocated to land, $10,950,000 was allocated to buildings and improvements, and $500,000 was allocated to equipment. The fair value exceeded the purchase price by $240,000, which is included as a gain in other financial income on the Consolidated Statement of Income.
Goodwill is not subject to amortization. Management tests goodwill at the facility level for impairment on an annual basis and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of the goodwill below its carrying amount. There was no impairment of goodwill for the year ended December 31, 2010.
-47-
WELLINGTON HEALTHCARE SERVICES, LP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. | Property and Equipment and Intangible Assets (Continued) |
Costs incurred in connection with obtaining long-term debt have been deferred. These costs will be amortized over the period the obligations are outstanding. At December 31, 2010 the Partnership had total cost and accumulated amortization of $2,996,321 and $49,409, respectively.
4. | Pledged Assets and Long-Term Debt |
Long-term debt and the collateral pledged thereon as of December 31, 2010 are as follows:
Mortgage loans insured by U.S Department of Housing and Urban Development (HUD) |
$ | 71,570,219 | ||
Term loan |
12,674,734 | |||
Other notes payable |
872,055 | |||
Notes payable to finance insurance |
333,041 | |||
|
|
|||
85,450,049 | ||||
Less current maturities |
1,481,103 | |||
|
|
|||
Total long-term debt |
$ | 83,968,946 | ||
|
|
Aggregate maturities of long-term debt at December 31, 2010, are due in future years as follows:
2011 |
$ | 1,481,103 | ||
2012 |
13,838,745 | |||
2013 |
1,219,833 | |||
2014 |
1,284,618 | |||
2015 |
1,262,167 | |||
Later years |
66,363,583 | |||
|
|
|||
$ | 85,450,049 | |||
|
|
The HUD insured loans are secured by a mortgage on the real estate and buildings of nine nursing facilities, and are due in monthly installments of $23,384 to $63,296, including interest ranging from 4.57% to 5.25%, and mature through August 2045.
-48-
WELLINGTON HEALTHCARE SERVICES, LP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. | Pledged Assets and Long-Term Debt (Continued) |
The term loan is to finance the purchase of New London Health Center, in which monthly installments are due for interest only. Of the original loan amount, $8,330,619 is collateralized by the real estate and property of McGee Road Associates and the other $4,344,115 is collateralized by restricted cash of McGee Road Associates. Monthly installments are due for interest only at 2.0% above LIBOR on the cash collateralized portion and 6.5% above LIBOR for the property collateralized portion. All principal is due upon maturity in May 2012. At December 31, 2010 LIBOR is 0.375%.
The first note payable in the amount of $448,630 at December 31, 2010 is for the purchase of a parking lot used by Westminster Commons. It is due in monthly installments of $9,703, including interest at 7.00%, and matures in June 2015. The note is collateralized by the real estate.
The second note payable in the amount of $412,195 at December 31, 2010 is for the purchase of an office building. It is due in monthly installments of $3,864, including interest at 6.86%, and matures in December 2024. The note is collateralized by the real estate.
The other note payable in the amount of $11,230 at December 31, 2010 is due in monthly installments of $11,230, including interest at 3.00%, and matured in February 2011.
The notes payable to finance insurance are due in monthly installments of $3,710 to $15,040, including interest ranging from 4.95% to 5.95%, and mature through May 2011. All notes are collateralized by the unearned premiums.
On February 10, 2010, a loan held by CIT for two of the nursing facilities was refinanced with Greystone and issued by HUD with an interest rate of 5.25%. The old CIT loan was to mature in February of 2011; however, the two new HUD backed loans will not mature until March of 2045.
On July 12, 2010, a CIT loan held for seven of the nursing facilities was refinanced with Capital Funding, LLC and issued by HUD. The old CIT loan was to mature in November of 2012; however, the seven new HUD backed loans do not mature until August 2040 or 2045.
-49-
WELLINGTON HEALTHCARE SERVICES, LP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. | Concentration of Credit Risk |
The Partnership grants credit without collateral to its clients, most of whom are local residents. Receivables from Medicare, Medicaid, other third-party payors and clients were as follows:
2010 | 2009 | |||||||
Medicare |
37 | % | 36 | % | ||||
Medicaid |
31 | 40 | ||||||
Other third-party payors |
24 | 21 | ||||||
Private payors |
8 | 3 | ||||||
|
|
|
|
|||||
100 | % | 100 | % | |||||
|
|
|
|
6. | Related Party Transactions |
Wellington Healthcare Services, LP, through various subsidiaries, provides consulting services to owned facilities and receives a monthly fee for this service. Up until July 2010 Wellington also provided consulting services to a third party facility and received a monthly fee for this service. All fees for the Partnerships subsidiaries are eliminated in the consolidated financial statements.
The Partnership provides workers compensation and liability insurance to owned facilities and property insurance to owned and client facilities under a blanket insurance policy. The facilities are billed monthly.
7. | Insured Risks |
The Partnership also has a partially funded, minimum premium plan for the cost of employee related workers compensation benefits. Under this plan, the Partnership has an Individual Stop Level (ISL) and an Aggregate Stop Level (ASL) of $250,000 and $625,000, respectively. The ASL is based on the number of employees enrolled in the plan on a month to month basis. Amounts in excess of the ISL or ASL are covered through a commercial stop-loss policy. At December 31, 2010, the Partnership estimated $232,834 of workers compensation benefit claims were incurred prior to year end, but not reported to the plan. This amount is included in accrued expenses on the Consolidated Balance Sheet and general and administrative expense on the Consolidated Statement of Income.
-50-
WELLINGTON HEALTHCARE SERVICES, LP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. | Risk Management |
The Partnership operates in the long-term care industry. Over time, the industry has seen an increase in litigation related to patient care issues. The Partnership carries professional liability insurance on all of its nursing facilities to cover potential losses resulting from litigation. In the opinion of management and counsel, and based on insurance coverage in effect during the period, there is no pending litigation or unasserted claims that would result in significant losses to the Partnership.
In addition to professional liability claims, the partnership is involved in litigation and regulatory investigations arising in the ordinary course of business. In the opinion of management, after consultation with legal counsel, these matters are expected to be resolved without material adverse effect on the partnerships consolidated financial position.
9. | Reclassifications |
Certain 2009 balances were reclassified to agree with the 2010 presentation.
10. | Healthcare Reform |
During March, 2010, the federal government enacted various laws including the Patient Protection and Affordable Care Act and the Healthcare Education and Reconciliation Act. These laws and their related regulations will lead to significant changes in how health care companies are regulated and reimbursed for the services they provide. In addition, these laws may have a significant impact on the health insurance programs that the company offers to its employees which will have an impact on the cost of these programs. The Partnership cannot currently predict with certainty the ultimate impact of any of the above laws on the Partnership's financial condition, cash flows or results of operations.
11. | Subsequent Events |
As of January 26, 2011, the Partnership has completed a $750,000 line of credit with Fifth Third Bank. As of March 25, 2011, the balance on the line of credit is $0.
Subsequent events have been evaluated through March 25, 2011, which is the date the financial statements were available to be issued. The Partnership has not evaluated subsequent events after March 25, 2011.
-51-
SUPPLEMENTARY INFORMATION
-52-
WELLINGTON HEALTHCARE SERVICES, LP AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEET
DECEMBER 31, 2010
Congress | ||||||||||||||||||||||||
Andrees | Bombay | Street | England | Facility | Falligant | |||||||||||||||||||
Investments, LP | Lane, LP | Partners, LP | Associates, LP | Investments, LP | Associates, LP | |||||||||||||||||||
Assets |
||||||||||||||||||||||||
Current assets: |
||||||||||||||||||||||||
Cash |
$ | $ | 28,725 | $ | 119,457 | $ | 121,755 | $ | 133,088 | $ | 117,766 | |||||||||||||
Patient accounts receivable, net |
467,679 | 326,503 | 284,626 | |||||||||||||||||||||
Estimated third party payor receivables |
11,756 | 8,888 | ||||||||||||||||||||||
Accounts receivable, related parties |
10,398 | 69,911 | 82,187 | |||||||||||||||||||||
Escrow accounts |
168,553 | 67,810 | ||||||||||||||||||||||
Prepaid expenses |
14,486 | 88,153 | 1,018 | 37,228 | 20,174 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total current assets |
211,764 | 687,045 | 459,674 | 533,741 | 287,937 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Investments |
335,964 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Restricted cash |
||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Property and equipment, net |
202,755 | 454,891 | 266,102 | 180,447 | 7,800,035 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Other assets: |
||||||||||||||||||||||||
Deferred loan costs, net |
276,844 | |||||||||||||||||||||||
Goodwill |
||||||||||||||||||||||||
Other assets |
50,928 | 548 | 82,361 | 3,780 | 500 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total other assets |
50,928 | 548 | 82,361 | 3,780 | 277,344 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total assets |
$ | 202,755 | $ | 717,583 | $ | 953,695 | $ | 542,035 | $ | 717,968 | $ | 8,701,280 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
-53-
WELLINGTON HEALTHCARE SERVICES, LP AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEET (CONTINUED)
DECEMBER 31, 2010
Wellington | ||||||||||||||||||||||||
Hamilton Mill | Irving Place | Ivan | LTC | McGee Road | Healthcare | |||||||||||||||||||
Associates, LP | Associates, LP | Associates, LP | Consulting, LP | Associates, LP | Properties, LP | |||||||||||||||||||
Assets |
||||||||||||||||||||||||
Current assets: |
||||||||||||||||||||||||
Cash |
$ | 89,069 | $ | 752,878 | $ | 149,782 | $ | 287,946 | $ | 1,257 | $ | 79,265 | ||||||||||||
Patient accounts receivable, net |
502,290 | 837,149 | 898,425 | 593,955 | ||||||||||||||||||||
Estimated third party payor receivables |
6,681 | 160,945 | 20,431 | 81,727 | ||||||||||||||||||||
Accounts receivable, related parties |
54,668 | 488,660 | 88,388 | |||||||||||||||||||||
Escrow accounts |
29,691 | 262,846 | ||||||||||||||||||||||
Prepaid expenses |
78,162 | 113,060 | 34,149 | 77,332 | 37,047 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total current assets |
676,202 | 1,864,032 | 268,290 | 1,772,794 | 264,103 | 880,382 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Investments |
228,653 | 9,960 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Restricted cash |
4,344,115 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Property and equipment, net |
160,857 | 242,277 | 6,009,081 | 81,428 | 12,539,313 | 425,949 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Other assets: |
||||||||||||||||||||||||
Deferred loan costs, net |
261,155 | 304,009 | ||||||||||||||||||||||
Goodwill |
||||||||||||||||||||||||
Other assets |
1,342 | 962 | 3,700 | 38,888 | 6,766 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total other assets |
1,342 | 962 | 261,155 | 3,700 | 342,897 | 6,766 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total assets |
$ | 838,401 | $ | 2,107,271 | $ | 6,767,179 | $ | 1,857,922 | $ | 17,500,388 | $ | 1,313,097 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
-54-
WELLINGTON HEALTHCARE SERVICES, LP AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEET (CONTINUED)
DECEMBER 31, 2010
Powder Springs | ||||||||||||||||||||||||
Pharr Court | Road | Red River | Riverside | San Alejandro | San Carlos | |||||||||||||||||||
Associates, LP | Associates, LP | Associates, LP | Healthcare, LP | Associates, LP | Associates, LP | |||||||||||||||||||
Assets |
||||||||||||||||||||||||
Current assets: |
||||||||||||||||||||||||
Cash |
$ | 429,800 | $ | 139,931 | $ | 219,370 | $ | 291,764 | $ | 181,729 | $ | 99,379 | ||||||||||||
Patient accounts receivable, net |
1,304,861 | 658,464 | ||||||||||||||||||||||
Estimated third party payor receivables |
126,601 | (33,573 | ) | |||||||||||||||||||||
Accounts receivable, related parties |
159,105 | 266,980 | 1,213,794 | 59,479 | 46,760 | |||||||||||||||||||
Escrow accounts |
140,367 | 76,032 | 31,618 | 26,837 | ||||||||||||||||||||
Prepaid expenses |
129,572 | 30,044 | 73,481 | 65,750 | 47,935 | 31,080 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total current assets |
1,990,834 | 469,447 | 635,863 | 2,196,199 | 320,761 | 204,056 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Investments |
322,405 | 379,436 | 389,851 | 144,309 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Restricted cash |
||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Property and equipment, net |
275,037 | 12,915,822 | 9,394,555 | 117,963 | 7,360,520 | 3,379,714 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Other assets: |
||||||||||||||||||||||||
Deferred loan costs, net |
338,117 | 365,689 | 277,735 | 232,581 | ||||||||||||||||||||
Goodwill |
2,680,150 | |||||||||||||||||||||||
Other assets |
1,928 | (3,440 | ) | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total other assets |
1,928 | 338,117 | 3,045,839 | (3,440 | ) | 277,735 | 232,581 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total assets |
$ | 2,267,799 | $ | 14,045,791 | $ | 13,455,693 | $ | 2,310,722 | $ | 8,348,867 | $ | 3,960,660 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
-55-
WELLINGTON HEALTHCARE SERVICES, LP AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEET (CONTINUED)
DECEMBER 31, 2010
Tennessee | Wellington | Wellington | West Point | |||||||||||||||||||||
South Parkway | Property | Healthcare | Wellington | Retirement | Road | |||||||||||||||||||
Associates, LP | Associates, LP | Billing, LP | Realty, LP | Management, LP | Associates, LP | |||||||||||||||||||
Assets |
||||||||||||||||||||||||
Current assets: |
||||||||||||||||||||||||
Cash |
$ | 81,904 | $ | 168,962 | $ | 22,546 | $ | 1,330 | $ | 353 | $ | 122,546 | ||||||||||||
Patient accounts receivable, net |
930,192 | 64,610 | ||||||||||||||||||||||
Estimated third party payor receivables |
240,515 | |||||||||||||||||||||||
Accounts receivable, related parties |
93,000 | 153,970 | 93,300 | 4,370 | 13,120 | |||||||||||||||||||
Escrow accounts |
41,706 | 59,572 | ||||||||||||||||||||||
Prepaid expenses |
39,957 | 45,553 | 17,133 | 2,736 | 32,288 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total current assets |
1,292,568 | 349,221 | 258,259 | 97,366 | 4,723 | 227,526 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Investments |
200,580 | 186,129 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Restricted cash |
||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Property and equipment, net |
164,329 | 4,230,534 | 1,216,342 | 4,510,507 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Other assets: |
||||||||||||||||||||||||
Deferred loan costs, net |
280,311 | 26,779 | 217,840 | |||||||||||||||||||||
Goodwill |
||||||||||||||||||||||||
Other assets |
2,771 | 14,930 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total other assets |
2,771 | 280,311 | 41,709 | 217,840 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total assets |
$ | 1,459,668 | $ | 5,060,646 | $ | 258,259 | $ | 1,355,417 | $ | 4,723 | $ | 5,142,002 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
-56-
WELLINGTON HEALTHCARE SERVICES, LP AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEET (CONTINUED)
DECEMBER 31, 2010
Wellington | ||||||||||||||||||||
West Street | Healthcare | |||||||||||||||||||
Associates, LP | Services, LP | Subtotal | Eliminations | Consolidated | ||||||||||||||||
Assets |
||||||||||||||||||||
Current assets: |
||||||||||||||||||||
Cash |
$ | 183,957 | $ | 8,086 | $ | 3,832,645 | $ | 3,832,645 | ||||||||||||
Patient accounts receivable, net |
6,868,754 | 6,868,754 | ||||||||||||||||||
Estimated third party payor receivables |
623,971 | 623,971 | ||||||||||||||||||
Accounts receivable, related parties |
59,292 | 196,674 | 3,154,056 | (3,144,678 | ) | 9,378 | ||||||||||||||
Escrow accounts |
39,089 | 944,121 | 944,121 | |||||||||||||||||
Prepaid expenses |
76,823 | 5,117 | 1,098,278 | 1,098,278 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total current assets |
359,161 | 209,877 | 16,521,825 | (3,144,678 | ) | 13,377,147 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Investments |
273,145 | 8,232,311 | 10,702,743 | (8,232,311 | ) | 2,470,432 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Restricted cash |
4,344,115 | 4,344,115 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Property and equipment, net |
3,066,276 | 74,994,734 | 74,994,734 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Other assets: |
||||||||||||||||||||
Deferred loan costs, net |
365,852 | 2,946,912 | 2,946,912 | |||||||||||||||||
Goodwill |
1,335,502 | 4,015,652 | 4,015,652 | |||||||||||||||||
Other assets |
3,750 | 209,714 | 209,714 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total other assets |
1,701,354 | 3,750 | 7,172,278 | 7,172,278 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total assets |
$ | 5,399,936 | $ | 8,445,938 | $ | 113,735,695 | $ | (11,376,989 | ) | $ | 102,358,706 | |||||||||
|
|
|
|
|
|
|
|
|
|
-57-
WELLINGTON HEALTHCARE SERVICES, LP AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEET (CONTINUED)
DECEMBER 31, 2010
Congress | ||||||||||||||||||||||||
Andrees | Bombay | Street | England | Facility | Falligant | |||||||||||||||||||
Investments, LP | Lane, LP | Partners, LP | Associates, LP | Investments, LP | Associates, LP | |||||||||||||||||||
Liabilities and Partners Equity (Deficit) |
||||||||||||||||||||||||
Current liabilities: |
||||||||||||||||||||||||
Current maturities of long-term debt |
$ | $ | 18,278 | $ | 43,928 | $ | $ | 15,279 | $ | 87,293 | ||||||||||||||
Accounts payable, trade |
270 | 578,179 | 204,044 | 279,667 | 211,334 | |||||||||||||||||||
Accounts payable, related parties |
676 | 1,501,205 | 422,332 | |||||||||||||||||||||
Accrued expenses |
354 | 572,353 | 324,297 | 198,773 | 174,981 | 35,609 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total current liabilities |
1,300 | 2,670,015 | 994,601 | 478,440 | 401,594 | 122,902 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Long-term debt, less current maturities |
8,051,974 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Partners equity (deficit) |
201,455 | (1,952,432 | ) | (40,906 | ) | 63,595 | 316,374 | 526,404 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total liabilities and partners equity |
$ | 202,755 | $ | 717,583 | $ | 953,695 | $ | 542,035 | $ | 717,968 | $ | 8,701,280 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
-58-
WELLINGTON HEALTHCARE SERVICES, LP AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEET (CONTINUED)
DECEMBER 31, 2010
Wellington | ||||||||||||||||||||||||
Hamilton Mill |
Irving Place Associates, LP |
Ivan Associates, LP |
LTC Consulting, LP |
McGee Road Associates, LP |
Healthcare Properties, LP |
|||||||||||||||||||
Liabilities and Partners Equity (Deficit) |
||||||||||||||||||||||||
Current liabilities: |
||||||||||||||||||||||||
Current maturities of long-term debt |
$ | 48,220 | $ | 58,133 | $ | 83,169 | $ | 46,261 | $ | $ | ||||||||||||||
Accounts payable, trade |
189,891 | 604,962 | 297,033 | 64,206 | 266,514 | |||||||||||||||||||
Accounts payable, related parties |
39,811 | 617,091 | 115,788 | |||||||||||||||||||||
Accrued expenses |
241,838 | 638,737 | 19,708 | 338,967 | 292,078 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total current liabilities |
519,760 | 1,918,923 | 102,877 | 682,261 | 179,994 | 558,592 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Long-term debt, less current maturities |
5,057,946 | 12,674,734 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Partners equity (deficit) |
318,641 | 188,348 | 1,606,356 | 1,175,661 | 4,645,660 | 754,505 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total liabilities and partners equity |
$ | 838,401 | $ | 2,107,271 | $ | 6,767,179 | $ | 1,857,922 | $ | 17,500,388 | $ | 1,313,097 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
-59-
WELLINGTON HEALTHCARE SERVICES, LP AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEET (CONTINUED)
DECEMBER 31, 2010
Pharr Court Associates, LP |
Powder Springs Road Associates, LP |
Red River Associates, LP |
Riverside Healthcare, LP |
San Alejandro Associates, LP |
San Carlos Associates, LP |
|||||||||||||||||||
Liabilities and Partners Equity (Deficit) |
||||||||||||||||||||||||
Current liabilities: |
||||||||||||||||||||||||
Current maturities of long-term debt |
$ | 74,278 | $ | 129,367 | $ | 178,962 | $ | 28,709 | $ | 117,363 | $ | 76,095 | ||||||||||||
Accounts payable, trade |
695,892 | 388,479 | ||||||||||||||||||||||
Accounts payable, related parties |
43,909 | |||||||||||||||||||||||
Accrued expenses |
536,159 | 52,773 | 42,406 | 401,991 | 27,484 | 17,820 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total current liabilities |
1,350,238 | 182,140 | 221,368 | 819,179 | 144,847 | 93,915 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Long-term debt, less current maturities |
11,932,959 | 10,883,587 | 7,099,391 | 4,603,101 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Partners equity (deficit) |
917,561 | 1,930,692 | 2,350,738 | 1,491,543 | 1,104,629 | (736,356 | ) | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total liabilities and partners equity |
$ | 2,267,799 | $ | 14,045,791 | $ | 13,455,693 | $ | 2,310,722 | $ | 8,348,867 | $ | 3,960,660 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
-60-
WELLINGTON HEALTHCARE SERVICES, LP AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEET (CONTINUED)
DECEMBER 31, 2010
South Parkway Associates, LP |
Tennessee Property Associates, LP |
Wellington Healthcare Billing, LP |
Wellington Realty, LP |
Wellington Retirement Management, LP |
West Point Road Associates, LP |
|||||||||||||||||||
Liabilities and Partners Equity (Deficit) |
||||||||||||||||||||||||
Current liabilities: |
||||||||||||||||||||||||
Current maturities of long- term debt |
$ | $ | 82,846 | $ | $ | 136,384 | $ | $ | 58,350 | |||||||||||||||
Accounts payable, trade |
379,623 | 52,484 | ||||||||||||||||||||||
Accounts payable, related parties |
202,675 | |||||||||||||||||||||||
Accrued expenses |
366,307 | 37,057 | 75,649 | 22,920 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total current liabilities |
948,605 | 119,903 | 52,484 | 212,033 | 81,270 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Long-term debt, less current maturities |
6,771,168 | 724,393 | 4,799,788 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Partners equity (deficit) |
511,063 | (1,830,425 | ) | 205,775 | 418,991 | 4,723 | 260,944 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total liabilities and partners equity |
$ | 1,459,668 | $ | 5,060,646 | $ | 258,259 | $ | 1,355,417 | $ | 4,723 | $ | 5,142,002 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
-61-
WELLINGTON HEALTHCARE SERVICES, LP AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEET (CONTINUED)
DECEMBER 31, 2010
West Street Associates, LP |
Wellington Healthcare Services, LP |
Subtotal | Eliminations | Consolidated | ||||||||||||||||
Liabilities and Partners Equity (Deficit) |
||||||||||||||||||||
Current liabilities: |
||||||||||||||||||||
Current maturities of long- term debt |
$ | 186,958 | $ | 11,230 | $ | 1,481,103 | $ | 1,481,103 | ||||||||||||
Accounts payable, trade |
81,973 | 4,294,551 | (201,191 | ) | 4,093,360 | |||||||||||||||
Accounts payable, related parties |
2,943,487 | (2,943,487 | ) | |||||||||||||||||
Accrued expenses |
44,301 | 103,842 | 4,566,404 | 4,566,404 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total current liabilities |
231,259 | 197,045 | 13,285,545 | (3,144,678 | ) | 10,140,867 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Long-term debt, less current maturities |
11,369,905 | 83,968,946 | 83,968,946 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Partners equity (deficit) |
(6,201,228 | ) | 8,248,893 | 16,481,204 | (8,232,311 | ) | 8,248,893 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total liabilities and partners equity |
$ | 5,399,936 | $ | 8,445,938 | $ | 113,735,695 | $ | (11,376,989 | ) | $ | 102,358,706 | |||||||||
|
|
|
|
|
|
|
|
|
|
-62-
WELLINGTON HEALTHCARE SERVICES, LP AND SUBSIDIARIES
CONSOLIDATING INCOME STATEMENT
DECEMBER 31, 2010
Congress | ||||||||||||||||||||||||
Andrees | Bombay | Street | England | Facility | Falligant | |||||||||||||||||||
Investments, LP | Lane, LP | Partners, LP | Associates, LP | Investments, LP | Associates, LP | |||||||||||||||||||
Revenue: |
||||||||||||||||||||||||
Net routine services |
$ | $ | $ | 6,757,452 | $ | 628,213 | $ | 4,891,242 | $ | |||||||||||||||
Net special services |
236,734 | 17,253 | 164,837 | |||||||||||||||||||||
Management fees |
4,435,190 | |||||||||||||||||||||||
Billing service fees |
||||||||||||||||||||||||
Lease income |
788,966 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
4,435,190 | 6,994,186 | 645,466 | 5,056,079 | 788,966 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Other operating revenue |
1,076 | 3,571 | 174 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Operating expenses: |
||||||||||||||||||||||||
Routine service |
2,637,706 | 240,729 | 1,930,215 | |||||||||||||||||||||
Special service |
556,425 | 73,948 | 554,114 | |||||||||||||||||||||
Dietary |
641,796 | 43,206 | 375,728 | |||||||||||||||||||||
Laundry and housekeeping |
311,685 | 22,592 | 222,606 | |||||||||||||||||||||
Plant operation and maintenance |
57,884 | 536,593 | 32,998 | 250,347 | ||||||||||||||||||||
General and administrative |
278 | 4,121,524 | 1,322,182 | 120,005 | 1,089,269 | 691 | ||||||||||||||||||
Property and related |
935 | 361,806 | 779,014 | 94,437 | 485,704 | 72,628 | ||||||||||||||||||
Depreciation and amortization |
150,588 | 45,437 | 30,449 | 262,828 | ||||||||||||||||||||
Bad debts |
120,086 | 49,360 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
1,213 | 4,691,802 | 6,950,924 | 627,915 | 4,987,792 | 336,147 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Operating income (loss) |
(1,213 | ) | (255,536 | ) | 46,833 | 17,725 | 68,287 | 452,819 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Financial income (expense): |
||||||||||||||||||||||||
Interest income |
635 | 3 | 110 | 714 | ||||||||||||||||||||
Gain (loss) on sale of assets |
2,400 | |||||||||||||||||||||||
Gain (loss) on refinancing |
1,573,742 | |||||||||||||||||||||||
Interest expense |
(27,078 | ) | (454,907 | ) | ||||||||||||||||||||
Other |
||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
(24,678 | ) | 635 | 3 | 110 | 1,119,549 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Equity in earnings of subsidiaries |
||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net income (loss) |
$ | (1,213 | ) | $ | (280,214 | ) | $ | 47,468 | $ | 17,728 | $ | 68,397 | $ | 1,572,368 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
63
WELLINGTON HEALTHCARE SERVICES, LP AND SUBSIDIARIES
CONSOLIDATING INCOME STATEMENT (CONTINUED)
DECEMBER 31, 2010
Wellington | ||||||||||||||||||||||||
Hamilton Mill | Irving Place | Ivan | LTC | McGee Road | Healthcare | |||||||||||||||||||
Associates, LP | Associates, LP | Associates, LP | Consulting, LP | Associates, LP | Properties, LP | |||||||||||||||||||
Revenue: |
||||||||||||||||||||||||
Net routine services |
$ | 7,068,432 | $ | 14,275,893 | $ | $ | 9,581,750 | $ | $ | 6,585,133 | ||||||||||||||
Net special services |
253,202 | 760,792 | 114,500 | 149,716 | ||||||||||||||||||||
Management fees |
||||||||||||||||||||||||
Billing service fees |
||||||||||||||||||||||||
Lease income |
698,490 | 85,500 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
7,321,634 | 15,036,685 | 698,490 | 9,696,250 | 85,500 | 6,734,849 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Other operating revenue |
5,732 | 12,540 | 497 | 3,243 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Operating expenses: |
||||||||||||||||||||||||
Routine service |
2,409,840 | 5,464,551 | 2,718,655 | 2,025,413 | ||||||||||||||||||||
Special service |
771,106 | 2,176,436 | 1,698,099 | 1,051,141 | ||||||||||||||||||||
Dietary |
541,771 | 1,110,760 | 505,430 | 503,256 | ||||||||||||||||||||
Laundry and housekeeping |
261,708 | 507,647 | 254,496 | 240,255 | ||||||||||||||||||||
Plant operation and maintenance |
302,863 | 604,934 | 284,906 | 273,267 | ||||||||||||||||||||
General and administrative |
1,330,036 | 2,689,920 | 979 | 1,643,629 | 375 | 1,140,209 | ||||||||||||||||||
Property and related |
853,661 | 1,517,063 | 24,312 | 902,195 | 699,973 | |||||||||||||||||||
Depreciation and amortization |
22,390 | 34,314 | 251,932 | 13,326 | 40,281 | 50,122 | ||||||||||||||||||
Bad debts |
26,505 | 194,494 | 51,503 | 39,311 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
6,519,880 | 14,300,119 | 277,223 | 8,072,239 | 40,656 | 6,022,947 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Operating income (loss) |
807,486 | 749,106 | 421,267 | 1,624,508 | 44,844 | 715,145 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Financial income (expense): |
||||||||||||||||||||||||
Interest income |
45 | 546 | 655 | 360 | 61 | |||||||||||||||||||
Gain (loss) on sale of assets |
||||||||||||||||||||||||
Gain (loss) on refinancing |
1,509,667 | |||||||||||||||||||||||
Interest expense |
(87 | ) | (1,028 | ) | (382,901 | ) | 17 | (44,443 | ) | 2 | ||||||||||||||
Other |
(47,998 | ) | 240,000 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
(42 | ) | (482 | ) | 1,079,423 | 377 | 195,557 | 63 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Equity in earnings of subsidiaries |
||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net income (loss) |
$ | 807,444 | $ | 748,624 | $ | 1,500,690 | $ | 1,624,885 | $ | 240,401 | $ | 715,208 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
-64-
WELLINGTON HEALTHCARE SERVICES, LP AND SUBSIDIARIES
CONSOLIDATING INCOME STATEMENT (CONTINUED)
DECEMBER 31, 2010
Powder Springs | ||||||||||||||||||||||||
Pharr Court | Road | Red River | Riverside | San Alejandro | San Carlos | |||||||||||||||||||
Associates, LP | Associates, LP | Associates, LP | Healthcare, LP | Associates, LP | Associates, LP | |||||||||||||||||||
Revenue: |
||||||||||||||||||||||||
Net routine services |
$ | 16,516,148 | $ | $ | $ | 11,026,819 | $ | $ | ||||||||||||||||
Net special services |
589,395 | 299,155 | ||||||||||||||||||||||
Management fees |
||||||||||||||||||||||||
Billing service fees |
||||||||||||||||||||||||
Lease income |
1,140,970 | 1,207,008 | 779,921 | 379,051 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
17,105,543 | 1,140,970 | 1,207,008 | 11,325,974 | 779,921 | 379,051 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Other operating revenue |
6,372 | 959 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Operating expenses: |
||||||||||||||||||||||||
Routine service |
5,685,359 | 3,848,768 | ||||||||||||||||||||||
Special service |
2,210,413 | 1,154,329 | ||||||||||||||||||||||
Dietary |
1,173,506 | 702,163 | ||||||||||||||||||||||
Laundry and housekeeping |
565,635 | 391,477 | ||||||||||||||||||||||
Plant operation and maintenance |
943,736 | 444,369 | ||||||||||||||||||||||
General and administrative |
3,182,507 | 881 | 362 | 1,999,805 | 65 | 53 | ||||||||||||||||||
Property and related |
1,374,598 | 107,489 | 52,313 | 1,025,240 | 34,127 | 22,127 | ||||||||||||||||||
Depreciation and amortization |
52,204 | 315,410 | 402,541 | 16,623 | 258,128 | 130,769 | ||||||||||||||||||
Bad debts |
163,095 | (8,945 | ) | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
15,351,053 | 423,780 | 455,216 | 9,573,829 | 292,320 | 152,949 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Operating income (loss) |
1,760,862 | 717,190 | 751,792 | 1,753,104 | 487,601 | 226,102 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Financial income (expense): |
||||||||||||||||||||||||
Interest income |
312 | 684 | 1,103 | 197 | 1,166 | 409 | ||||||||||||||||||
Gain (loss) on sale of assets |
||||||||||||||||||||||||
Gain (loss) on refinancing |
(1,573,742 | ) | (1,399,141 | ) | 352,741 | (1,991,891 | ) | |||||||||||||||||
Interest expense |
(1,163 | ) | (650,260 | ) | (684,749 | ) | 24 | (461,724 | ) | (208,448 | ) | |||||||||||||
Other |
(105,986 | ) | (67,693 | ) | (44,327 | ) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
(851 | ) | (2,223,318 | ) | (2,188,773 | ) | 221 | (175,510 | ) | (2,244,257 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Equity in earnings of subsidiaries |
||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net income (loss) |
$ | 1,760,011 | $ | (1,506,128 | ) | $ | (1,436,981 | ) | $ | 1,753,325 | $ | 312,091 | $ | (2,018,155 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
-65-
WELLINGTON HEALTHCARE SERVICES, LP AND SUBSIDIARIES
CONSOLIDATING INCOME STATEMENT (CONTINUED)
DECEMBER 31, 2010
Tennessee | Wellington | Wellington | West Point | |||||||||||||||||||||
South Parkway | Property | Healthcare | Wellington | Retirement | Road | |||||||||||||||||||
Associates, LP | Associates, LP | Billing, LP | Realty, LP | Management, LP | Associates, LP | |||||||||||||||||||
Revenue: |
||||||||||||||||||||||||
Net routine services |
$ | 8,400,693 | $ | $ | $ | $ | $ | |||||||||||||||||
Net special services |
347,850 | |||||||||||||||||||||||
Management fees |
10,500 | |||||||||||||||||||||||
Billing service fees |
481,714 | |||||||||||||||||||||||
Lease income |
849,355 | 256,113 | 555,645 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
8,748,543 | 849,355 | 481,714 | 256,113 | 10,500 | 555,645 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Other operating revenue |
3,134 | 1,184 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Operating expenses: |
||||||||||||||||||||||||
Routine service |
2,748,076 | 12,135 | ||||||||||||||||||||||
Special service |
1,101,132 | 202,772 | ||||||||||||||||||||||
Dietary |
577,754 | |||||||||||||||||||||||
Laundry and housekeeping |
323,364 | |||||||||||||||||||||||
Plant operation and maintenance |
386,507 | |||||||||||||||||||||||
General and administrative |
1,746,709 | 1,216 | 49,005 | 4,746 | 30 | 331 | ||||||||||||||||||
Property and related |
1,038,230 | 56,664 | 190,551 | 36,521 | ||||||||||||||||||||
Depreciation and amortization |
23,799 | 192,999 | 22,468 | 179,386 | ||||||||||||||||||||
Bad debts |
30,087 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
7,975,658 | 250,879 | 263,912 | 217,765 | 30 | 216,238 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Operating income (loss) |
776,019 | 598,476 | 218,986 | 38,348 | 10,470 | 339,407 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Financial income (expense): |
||||||||||||||||||||||||
Interest income |
99 | 580 | 545 | |||||||||||||||||||||
Gain (loss) on sale of assets |
||||||||||||||||||||||||
Gain (loss) on refinancing |
2,889,301 | 670,217 | ||||||||||||||||||||||
Interest expense |
(2,864 | ) | (550,274 | ) | (40,331 | ) | (327,309 | ) | ||||||||||||||||
Other |
(65,240 | ) | (45,621 | ) | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
(2,765 | ) | 2,274,367 | (40,331 | ) | 297,832 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Equity in earnings of subsidiaries |
||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net income (loss) |
$ | 773,254 | $ | 2,872,843 | $ | 218,986 | $ | (1,983 | ) | $ | 10,470 | $ | 637,239 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
-66-
WELLINGTON HEALTHCARE SERVICES, LP AND SUBSIDIARIES
CONSOLIDATING INCOME STATEMENT (CONTINUED)
DECEMBER 31, 2010
Wellington | ||||||||||||||||||||
West Street | Healthcare | |||||||||||||||||||
Associates, LP | Services, LP | Subtotal | Eliminations | Consolidated | ||||||||||||||||
Revenue: |
||||||||||||||||||||
Net routine services |
$ | $ | $ | 85,731,775 | $ | $ | 85,731,775 | |||||||||||||
Net special services |
2,933,434 | 2,933,434 | ||||||||||||||||||
Management fees |
4,445,690 | (4,435,190 | ) | 10,500 | ||||||||||||||||
Billing service fees |
481,714 | 481,714 | ||||||||||||||||||
Lease income |
936,270 | 7,677,289 | (7,677,289 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
936,270 | 101,269,902 | (12,112,479 | ) | 89,157,423 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Other operating revenue |
211 | 38,693 | 38,693 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Operating expenses: |
||||||||||||||||||||
Routine service |
29,721,447 | 29,721,447 | ||||||||||||||||||
Special service |
11,549,915 | 11,549,915 | ||||||||||||||||||
Dietary |
6,175,370 | 6,175,370 | ||||||||||||||||||
Laundry and housekeeping |
3,101,465 | 3,101,465 | ||||||||||||||||||
Plant operation and maintenance |
4,118,404 | 4,118,404 | ||||||||||||||||||
General and administrative |
1,274 | 633,131 | 21,079,212 | (4,435,190 | ) | 16,644,022 | ||||||||||||||
Property and related |
54,593 | 9,861 | 9,794,042 | (7,677,289 | ) | 2,116,753 | ||||||||||||||
Depreciation and amortization |
184,560 | 2,680,554 | 2,680,554 | |||||||||||||||||
Bad debts |
665,496 | 665,496 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
240,427 | 642,992 | 88,885,905 | (12,112,479 | ) | 76,773,426 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Operating income (loss) |
695,843 | (642,781 | ) | 12,422,690 | 12,422,690 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Financial income (expense): |
||||||||||||||||||||
Interest income |
792 | 715 | 9,731 | 9,731 | ||||||||||||||||
Gain (loss) on sale of assets |
(2 | ) | 2,398 | 2,398 | ||||||||||||||||
Gain (loss) on refinancing |
(2,030,894 | ) | ||||||||||||||||||
Interest expense |
(648,386 | ) | (4,485,909 | ) | (4,485,909 | ) | ||||||||||||||
Other |
(112,276 | ) | (249,141 | ) | (249,141 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
(2,790,764 | ) | 713 | (4,722,921 | ) | (4,722,921 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Equity in earnings of subsidiaries |
8,341,837 | 8,341,837 | (8,341,837 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net income (loss) |
$ | (2,094,921 | ) | $ | 7,699,769 | $ | 16,041,606 | $ | (8,341,837 | ) | $ | 7,699,769 | ||||||||
|
|
|
|
|
|
|
|
|
|
-67-
Griffin-American Healthcare REIT II, Inc.
Unaudited Pro Forma Condensed Consolidated Financial Statements
As of December 31, 2011 and for the Year Ended December 31, 2011
The accompanying unaudited pro forma condensed consolidated financial statements (including the notes thereto) are qualified in their entirety by reference to and should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2011. In managements opinion, all adjustments necessary to reflect the transactions have been made.
The accompanying unaudited pro forma condensed consolidated balance sheet as of December 31, 2011 is presented as if we acquired the Southeastern SNF Portfolio on December 31, 2011. The Southeastern SNF Portfolio was acquired using a combination of debt financings, including assumed mortgage loans and borrowings under our line of credit with Bank of America, N.A., or Bank of America, or our Bank of America line of credit, and our line of credit with KeyBank National Association, or KeyBank, or our KeyBank line of credit, or collectively our lines of credit, and cash proceeds, net of offering costs, received from our initial public offering, or our offering, through the acquisition date. However, the pro forma adjustments assume that the proceeds from our debt financings, borrowings under our lines of credit and the offering proceeds, at a price of $10.00 per share, net of offering costs, were raised as of December 31, 2011.
The accompanying unaudited pro forma condensed consolidated statement of operations for the year ended December 31, 2011 is presented as if we acquired the Philadelphia SNF Portfolio and the Southeastern SNF Portfolio, or collectively the Properties, on January 1, 2011. The Properties were acquired using a combination of debt financing from either assumed mortgage loans or proceeds from our lines of credit, and cash proceeds, net of offering costs, received from our initial public offering through the acquisition date. However, the pro forma adjustments assume that the debt proceeds and the offering proceeds, at a price of $10.00 per share, net of offering costs, were raised as of January 1, 2011.
The accompanying pro forma condensed consolidated financial statements are unaudited and are subject to a number of estimates, assumptions, and other uncertainties, and do not purport to be indicative of the actual results of operations that would have occurred had the acquisitions reflected therein in fact occurred on the date specified, nor do such financial statements purport to be indicative of the results of operations that may be achieved in the future.
-68-
Griffin-American Healthcare REIT II, Inc.
Unaudited Pro Forma Condensed Consolidated Balance Sheet
As of December 31, 2011
Acquisition of | ||||||||||||
Company | the Southeastern | Company | ||||||||||
Historical (A) | SNF Portfolio (B) | Pro Forma | ||||||||||
ASSETS |
| |||||||||||
Real estate investments: |
||||||||||||
Operating properties, net |
$ | 369,317,000 | $ | 148,060,000 | $ | 517,377,000 | ||||||
Cash and cash equivalents |
44,682,000 | (25,160,000 | ) | 19,522,000 | ||||||||
Accounts and other receivables, net |
1,763,000 | | 1,763,000 | |||||||||
Accounts receivable due from affiliate |
121,000 | | 121,000 | |||||||||
Restricted cash |
2,289,000 | 2,528,000 | 4,817,000 | |||||||||
Real estate and escrow deposits |
7,550,000 | (5,000,000 | ) | 2,550,000 | ||||||||
Identified intangible assets, net |
66,115,000 | 22,940,000 | 89,055,000 | |||||||||
Other assets, net |
7,315,000 | 372,000 | 7,687,000 | |||||||||
|
|
|
|
|
|
|||||||
Total assets |
$ | 499,152,000 | $ | 143,740,000 | $ | 642,892,000 | ||||||
|
|
|
|
|
|
|||||||
LIABILITIES AND EQUITY |
| |||||||||||
Liabilities: |
||||||||||||
Mortgage loans payable, net |
$ | 80,466,000 | $ | 87,659,000 | $ | 168,125,000 | ||||||
Lines of credit |
| 58,435,000 | 58,435,000 | |||||||||
Accounts payable and accrued liabilities |
7,703,000 | 101,000 | 7,804,000 | |||||||||
Accounts payable due to affiliates |
1,111,000 | | 1,111,000 | |||||||||
Derivative financial instruments |
819,000 | | 819,000 | |||||||||
Identified intangible liabilities, net |
623,000 | | 623,000 | |||||||||
Security deposits, prepaid rent and other liabilities |
10,950,000 | 2,254,000 | 13,204,000 | |||||||||
|
|
|
|
|
|
|||||||
Total liabilities |
101,672,000 | 148,449,000 | 250,121,000 | |||||||||
Commitments and contingencies |
||||||||||||
Equity: |
||||||||||||
Stockholders equity: |
||||||||||||
Preferred stock, $0.01 par value; 200,000,000 shares authorized; none issued and outstanding |
| | | |||||||||
Common stock, $0.01 par value; 1,000,000,000 shares authorized; 48,869,669 issued and outstanding |
489,000 | | (C) | 489,000 | ||||||||
Additional paid-in capital |
435,252,000 | | (C) | 435,252,000 | ||||||||
Accumulated deficit |
(38,384,000 | ) | (4,709,000 | )(D) | (43,093,000 | ) | ||||||
|
|
|
|
|
|
|||||||
Total stockholders equity |
397,357,000 | (4,709,000 | ) | 392,648,000 | ||||||||
Noncontrolling interests |
123,000 | | 123,000 | |||||||||
|
|
|
|
|
|
|||||||
Total equity |
397,480,000 | (4,709,000 | ) | 392,771,000 | ||||||||
|
|
|
|
|
|
|||||||
Total liabilities and equity |
$ | 499,152,000 | $ | 143,740,000 | $ | 642,892,000 | ||||||
|
|
|
|
|
|
The accompanying notes are an integral part of the unaudited pro forma condensed consolidated financial statements.
-69-
Griffin-American Healthcare REIT II, Inc.
Unaudited Pro Forma Condensed Consolidated Statement of Operations
For the Year Ended December 31, 2011
Acquisition of | Acquisition of | |||||||||||||||
Company | the Philadelphia | the Southeastern | Company | |||||||||||||
Historical (E) | SNF Portfolio (F) | SNF Portfolio (G) | Pro Forma | |||||||||||||
Revenue: |
||||||||||||||||
Rental income |
$ | 40,457,000 | $ | 4,449,000 | $ | 16,715,000 | $ | 61,621,000 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Expenses: |
||||||||||||||||
Rental expenses |
8,330,000 | 564,000 | 898,000 | (H) | 9,792,000 | |||||||||||
General and administrative |
5,992,000 | 626,000 | 1,514,000 | (I) | 8,132,000 | |||||||||||
Acquisition related expenses |
10,389,000 | (3,855,000 | ) | (156,000 | )(J) | 6,378,000 | ||||||||||
Depreciation and amortization |
14,826,000 | 1,555,000 | 5,853,000 | (K) | 22,234,000 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total expenses |
39,537,000 | (1,110,000 | ) | 8,109,000 | 46,536,000 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Income from operations |
920,000 | 5,559,000 | 8,606,000 | 15,085,000 | ||||||||||||
Other income (expense): |
||||||||||||||||
Interest expense (including amortization of deferred financing costs and debt discount and premium): |
||||||||||||||||
Interest expense |
(6,345,000 | ) | (1,723,000 | ) | (5,260,000 | )(L) | (13,328,000 | ) | ||||||||
Loss in fair value of derivative financial instruments |
(366,000 | ) | | | (366,000 | ) | ||||||||||
Interest income |
17,000 | | | 17,000 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net (loss) income |
(5,774,000 | ) | 3,836,000 | 3,346,000 | 1,408,000 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Less: Net income attributable to noncontrolling interests |
(2,000 | ) | | | (2,000 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net (loss) income attributable to controlling interest |
$ | (5,776,000 | ) | $ | 3,836,000 | $ | 3,346,000 | $ | 1,406,000 | |||||||
|
|
|
|
|
|
|
|
|||||||||
Net (loss) income per common share attributable to controlling interest basic and diluted |
$ | (0.19 | ) | $ | 0.04 | |||||||||||
|
|
|
|
|||||||||||||
Weighted average number of common shares outstanding basic and diluted |
30,808,725 | 37,537,123 | (M) | |||||||||||||
|
|
|
|
The accompanying notes are an integral part of the unaudited pro forma condensed consolidated financial statements.
-70-
Griffin-American Healthcare REIT II, Inc.
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
1. Notes to Unaudited Pro Forma Condensed Consolidated Balance Sheet as of December 31, 2011
(A) As reported in our Annual Report on Form 10-K for the year ended December 31, 2011.
(B) Amounts represent the purchase price of the assets acquired and liabilities incurred or assumed by us in connection with the acquisition of the Southeastern SNF Portfolio. The purchase price, plus closing costs and acquisition fees, was financed using $83,159,000 in assumed mortgage loans, $58,435,000 in borrowings under our lines of credit and proceeds, net of offering costs, received from our offering.
In connection with the acquisition, we paid an acquisition fee of approximately $4,579,000, or 2.75% of the contract purchase price, to Grubb & Ellis Equity Advisors, LLC, an affiliate of our former advisor.
For purposes of the pro forma condensed consolidated balance sheet in this Form 8-K/A, we allocated the purchase price to the fair value of the assets acquired and liabilities assumed as follows: $12,063,000 to land, $134,419,000 to building and improvements, $1,578,000 to furniture, fixtures and equipment, $13,639,000 to in-place leases, $9,301,000 to tenant relationships and $(4,500,000) to debt premium.
The purchase price allocations are preliminary and are subject to change.
(C) The Southeastern SNF Portfolio was acquired using proceeds, net of offering costs, received from our offering through the acquisition date at $10.00 per share. We had excess cash on hand as of December 31, 2011, and therefore no additional proceeds are assumed raised as of December 31, 2011.
(D) Amount represents the estimated one-time acquisition related expenses incurred in connection with the acquisition of the Southeastern SNF Portfolio, not included in the historical results.
2. Notes to Unaudited Pro Forma Condensed Consolidated Statement of Operations for the Year Ended December 31, 2011
(E) As reported in our Aunnual Report on Form 10-K for the year ended December 31, 2011.
(F) Amounts represent the estimated operations, including pro forma adjustments, based on historical operations of the Philadelphia SNF Portfolio, which was acquired on June 30, 2011.
(G) The Southeastern SNF Portfolio is leased under the terms of a bond net lease and the related pro forma adjustments include the rental revenues, tenant recoveries and rental expenses directly attributable to the bond net leased property based on the master lease entered into on January 10, 2012.
(H) Amount represents the estimated rental expenses of the Southeastern SNF Portfolio. Pursuant to our former advisory agreement which was effective through January 6, 2012, our advisor or its affiliates were entitled to receive, for services in managing each of our properties, either a monthly property management fee or a monthly oversight fee of up to 4.0% of the gross monthly cash receipts of the property. As a result, the pro forma amounts shown are reflective of our former advisory agreement for an oversight fee at a rate of 1.0%.
Also, adjustments were made for an incremental property tax expense assuming the acquisition price and historical property tax rate.
(I) Pursuant to our former advisory agreement, our advisor or its affiliates were entitled to receive a monthly asset management fee for services rendered in connection with the management of our assets equal to one-twelfth of 0.85% of average invested assets, subject to our stockholders receiving distributions in an amount equal to 5.0% per annum, cumulative, non-compounded, of invested capital. At the time of the acquisition of the Southeastern SNF Portfolio, our stockholders had received annualized distributions greater than 5.0% per annum. As such, we assumed an asset management fee of 0.85% of average invested assets was incurred for the year ended December 31, 2011.
-71-
Griffin-American Healthcare REIT II, Inc.
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements (Continued)
(J) We incurred a total of approximately $4,865,000 in acquisition related expenses, $156,000 of which was incurred in 2011, in connection with the acquisition of the Southeastern SNF Portfolio. As these are nonrecurring charges, they have been excluded from the unaudited pro forma condensed consolidated statement of operations for the year ended December 31, 2011.
(K) Amount represents depreciation and amortization expense on the allocation of the purchase price. Depreciation and amortization expense is recognized using the straight-line method over an estimated useful life of 39.0 years, 4.5 to15.0 years, 6.0 years, 15.0 years, and 30.0 years for building, improvements, furniture, fixtures and equipment, in-place leases and tenant relationships, respectively.
The purchase price allocations, and therefore, depreciation and amortization expense are preliminary and are subject to change.
(L) We financed the purchase price, plus closing costs, of the Southeastern SNF Portfolio, using assumed mortgage loans of $83,159,000, borrowings of $38,435,000 and $20,000,000 under our Bank of America line of credit and our KeyBank line of credit, respectively, and the remaining balance using cash proceeds from our offering. Borrowings under our Bank of America line of credit and our KeyBank line of credit are limited to the availability of credit on the line of credit at the time of acquisition which was $38,435,000 and $71,500,000, respectively. For the purposes of the unaudited pro forma condensed consolidated statement of operations for the year ended December 31, 2011, we have reflected the amount of interest expense calculated on $22,000,000 and $52,870,000 in borrowings under our Bank of America line of credit and our KeyBank line credit, respectively, in the amount listed in the Acquisition of the Philadelphia SNF Portfolio column. Therefore, we have assumed the purchase price, plus closing costs, was financed using assumed mortgage loans of $83,159,000, $16,435,000 in borrowings under our Bank of America line of credit, $18,630,000 in borrowings under our KeyBank line of credit and the remaining balance from cash proceeds from our offering.
As such, this amount represents interest expense on the assumed mortgage loans and our lines of credit. Also, this amount represents amortization of the corresponding loan fees and amortization of the debt premiums on the assumed mortgage loans.
Our Bank of America line of credit, our KeyBank line of credit and one of our assumed mortgage loans on the Southeastern SNF Portfolio bear interest at variable interest rates. If interest rates increase by 0.125%, interest expense would increase by $61,000 for the year ended December 31, 2011.
(M) Amount represents the weighted average number of shares of our common stock from our offering, at $10.00 per share, required to generate sufficient offering proceeds, net of offering costs, to fund the purchase of the Properties. The calculation assumes these proceeds were raised as of January 1, 2011.
-72-
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Griffin-American Healthcare REIT II, Inc. | ||||||
Date: March 28, 2012 | By: | /s/ Jeffrey T. Hanson | ||||
Name: Jeffrey T. Hanson | ||||||
Title: Chief Executive Officer |
-73-