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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
{ X } ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1997
OR
{ } TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to
Commission file number 000-17596
Meridian Healthcare Growth and Income Fund Limited Partnership
(Exact Name of Registrant as Specified in its Charter)
Delaware 52-1549486
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
225 East Redwood Street, Baltimore, Maryland 21202
(Address of Principal Executive Offices) (Zip Code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
None
Securities registered pursuant to section 12(g) of the Act:
Assignee Units of Limited Partnership Interests
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
As of December 31, 1997, there were 1,538,800 Units of Assignee Limited
Partnership Interests held by non-affiliates of the Registrant. Because there is
not an established public trading market for the Units, the aggregate market
value of the Units held by non-affiliates of the Registrant cannot be
calculated.
Documents Incorporated by Reference
The Annual Report for 1997 is incorporated by reference.
MERIDIAN HEALTHCARE GROWTH AND INCOME FUND LIMITED PARTNERSHIP
INDEX
Page (s)
CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS 3
Part I.
Item 1. Business 4-5
Item 2. Properties 5-7
Item 3. Legal Proceedings 7
Item 4. Submission of Matters to a Vote of Security Holders 7
Part II.
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters 7-8
Item 6. Selected Financial Data 8
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9-10
Item 8. Financial Statements and Supplementary Data 11
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 11
Part III.
Item 10. Directors and Executive Officers of Registrant 11-13
Item 11. Executive Compensation 13
Item 12. Security Ownership of Certain Beneficial Owners
and Management 13
Item 13. Certain Relationships and Related Transactions 14
Part IV.
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K 14-16
Signatures 17-18
MERIDIAN HEALTHCARE GROWTH AND INCOME FUND LIMITED PARTNERSHIP
Cautionary Statement Regarding Forward Looking Statements
Certain statements contained herein, including certain statements in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" concerning the Fund's business outlook or future economic
performances, anticipated profitability, revenues, expenses or other financial
items together with other statements that are not historical facts are
"forward-looking statements" as that term is defined under the Federal
Securities Law. Forward-looking statements are necessarily estimates reflecting
the best judgement of the party making such statements based upon correct
information and involve a number of risks, uncertainties and other factors which
could cause actual results to differ materially from those stated in such
statements. Risks, uncertainties and factors which could affect the accuracy of
such forward looking statements are identified in the Fund's Prospectus and the
Fund's Registration Statement filed by the Fund with the Securities and Exchange
Commission, and forward looking statements contained herein or in other public
statements of the Fund should be considered in light of those factors. There can
be no assurance that factors will not affect the accuracy of such forward
looking statements.
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MERIDIAN HEALTHCARE GROWTH AND INCOME FUND LIMITED PARTNERSHIP
PART I
Item 1. Business
Meridian Healthcare Growth and Income Fund Limited Partnership (the
"Fund") was organized under the laws of the State of Delaware on December 8,
1987. The Fund will continue until December 31, 2037, unless sooner terminated
under the provisions of the Partnership Agreement. The Fund was formed to
acquire 98.99% of the limited partnership interests in seven limited
partnerships, each of which owns and operates a single nursing center (the
"Facilities").
The Fund's objectives are to (i) preserve Investors' capital; (ii)
obtain capital appreciation through increases in the value of the Facilities;
and (iii) provide quarterly cash distributions to Investors from income
generated by the Facilities' operating income, the income taxation of a portion
of which is anticipated to be deferred.
The General Partners of the Fund are Brown Healthcare, Inc., a Maryland
corporation (the "Administrative General Partner") and Meridian Healthcare
Investments, Inc., a Maryland corporation (the "Development General Partner").
Pursuant to the Registration Statement, a maximum of 1,540,000 assignee
units of limited partnership interests ("Units") were registered under the
Securities and Exchange Act of 1933, as amended. During 1988 all 1,540,000 Units
were sold, and the Fund's net proceeds available for investment aggregated
$31,878,000 (gross proceeds of $38,500,000 less public offering expenses and
acquisition fees of $6,622,000). The Assignor Limited Partner also aquired 40
units of limited partnership interests in 1988.
The Fund acquired 98.99% limited partnership interests (the "Operating
Partnership Interests") in the operating limited partnerships which own and
operate seven nursing center facilities. The Facilities include four nursing
centers located in Maryland that were acquired in May and June of 1988; two
newly constructed nursing centers located in North Carolina that were acquired
in August, 1988; and one newly constructed facility in New Jersey that was
acquired in December, 1989. Each operating partnership owns the real and
personal property of its nursing center facility. (See Note 1, "Organization and
Operations", in Item 8, Financial Statements and Supplementary Data, and Item 2.
Properties, herein.)
The Fund acquired the Operating Partnership Interests with offering
proceeds and certain indebtedness.
The Fund completed a sixty-bed expansion on its Salisbury, North
Carolina facility during 1991. Construction costs for the expansion were
$1,354,000, slightly below the $1.5 million budget, and were funded from
existing capital reserves.
The Fund completed construction of its sixty-bed expansion at the
Mooresville, North Carolina facility during the first quarter of 1992. The total
cost of the addition, including the cost of obtaining the Certificate of Need,
was slightly less than the $2 million budget. Funding for this expansion was
provided from equity capital and capital generated from operations.
The nursing centers owned by the operating partnerships are managed by
and purchase drugs, medical supplies and agency nursing and rehabilitation
services from affiliates of the Development General Partner. (See Note 3,
"Related Party Transactions" in Item 8. Financial Statements and Supplementary
Data, herein.)
On November 30, 1993, Genesis Health Ventures, Inc. ("Genesis") acquired
substantially all of the assets of Meridian Inc., Meridian Healthcare, Inc. and
their affiliated entities, including all of the stock of the Development General
Partner. See Item 10. Directors and Executive Officers of Registrant, herein.
-4-
MERIDIAN HEALTHCARE GROWTH AND INCOME FUND LIMITED PARTNERSHIP
Item 1. Business (continued)
The Fund's sole business is its investment in partnerships which own
and operate nursing centers that are healthcare facilities licensed by
individual states to provide long-term healthcare within guidelines established
by the appropriate state health agencies and as directed by each patient's
physician. Healthcare and related services from private pay and Medicaid and
Medicare patients accounted for approximately 99% of revenues during each of the
years in the three-year period ended December 31, 1997.
Healthcare facilities, including those owned by the operating
partnerships, are subject to extensive federal, state and in some cases, local
regulatory licensing and inspection requirements. In addition, government
revenue sources, particularly Medicaid and Medicare programs, are subject to
statutory and regulatory changes due to administrative rulings, interpretations
of policy and determination by fiscal intermediaries, and to government funding
restrictions, all of which may materially affect the rate of program payments to
nursing facilities.
The nursing center Facilities face competition with similar facilities
in their general locations as well as the development of other nursing centers
that are able to obtain Certificates of Need and to meet certain other
requirements.
Item 2. Properties
The Fund owns Operating Partnership Interests in operating partnerships
that own four nursing facilities in the State of Maryland, two nursing
facilities in the State of North Carolina, and one nursing facility in New
Jersey.
The Facilities are described below:
Property & Equipment Patient
(before depreciation) Revenues
at December 31, 1997 1997
Name, Location and Description (Dollars in thousands)
Facility 1. Hamilton $ 4,579 $ 4,269
6040 Harford Road
Baltimore City,
Maryland
A 104-bed nursing facility located on 1.06 acres, constructed in 1972 consisting
of a "T" shaped two-story plus partial basement masonry structure containing
22,082 square feet. The facility contains 104 comprehensive care beds of which
14 are Medicare-certified. There are two private rooms, 15 semi-private rooms, 4
three-person rooms and 15 four-person rooms.
Facility 2. Randallstown 10,607 9,288
9109 Liberty Road
Randallstown,
Maryland
A 250-bed nursing facility located on 2.83 acres, constructed in 1971 consisting
of a rectangularly-shaped two-story plus partial basement masonry structure
containing a total of 72,780 square feet. The facility contains 246
comprehensive care beds of which 38 are Medicare-certified and four domiciliary
care beds. There are 111 semi-private rooms and 28 private rooms.
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MERIDIAN HEALTHCARE GROWTH AND INCOME FUND LIMITED PARTNERSHIP
Item 2. Properties (continued)
Property & Equipment Patient
(before depreciation) Revenues
at December 31, 1997 1997
Name, Location and Description (Dollars in thousands)
Facility 3. Caton Manor $ 7,353 $ 7,160
3330 Wilkens Avenue
Baltimore City,
Maryland
A 184-bed nursing facility located on 0.92 acres, constructed in 1972 consisting
of an "L" shaped four-story plus basement masonry structure containing a total
of 48,660 square feet. All 184 beds are comprehensive care beds of which 20 are
Medicare-certified. All rooms are semi-private.
Facility 4. Frederick 7,087 7,422
(Collegeview)
400 North Avenue
Frederick,
Maryland
A 166-bed nursing facility located on 1.13 acres, originally constructed in 1966
consisting of a two-story plus partial basement masonry structure, the second
floor added in 1968, containing a total of 52,661 square feet. The facility
contains 156 comprehensive care beds of which 28 are Medicare-certified. There
are 10 domiciliary care beds and two non-licensed residential apartments which
are leased to persons who do not require nursing care.
Facility 5. Mooresville 5,803 6,667
550 Glenwood Road
Mooresville,
North Carolina
A 160-bed nursing facility located on 11.38 acres, originally constructed with
100 beds in 1988 with a 60-bed addition completed in 1992 consisting of a
one-story slab on grade building containing a total of 47,657 square feet. The
facility contains 130 beds for skilled care and intermediate care residents, of
which 14 are Medicare certified. There are 30 beds in the Home for the Aged (HA)
wing. There are 8 private rooms and 76 semi-private rooms.
Facility 6. Salisbury 5,659 7,221
710 Julian Road
Salisbury,
North Carolina
A 180-bed nursing facility located on 6.02 acres, originally constructed with
120 beds in 1988 with a 60-bed addition completed in 1991 consisting of a
one-story slab on grade building containing a total of 50,500 square feet. The
facility contains 160 beds for skilled care and intermediate care residents, of
which 28 are Medicare certified. There are 20 beds in the Home for the Aged (HA)
wing. There are 16 private rooms and 82 semi-private rooms.
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MERIDIAN HEALTHCARE GROWTH AND INCOME FUND LIMITED PARTNERSHIP
Item 2. Properties (continued)
Property & Equipment Patient
(before depreciation) Revenues
at December 31, 1997 1997
Name, Location and Description (Dollars in thousands)
Facility 7. Woodlands $ 8,156 $ 7,230
1400 Woodland Avenue
Plainfield,
New Jersey
A 140-bed nursing facility located on 6.52 acres, constructed in 1989 consisting
of a two-story slab on grade building containing a total of 54,000 square feet.
The facility contains 120 comprehensive nursing home beds, of which 27 are
Medicare certified, and 20 residential care beds. There are 12 private rooms, 46
semi-private rooms and 9 four-bed rooms. The facility also provides space for a
child day-care program.
$49,244 $49,257
Item 3. Legal Proceedings
The Fund is a party to litigation arising in the ordinary course of
business. The Fund does not believe the results of such litigation, even if the
outcome is unfavorable to the Fund, would have a material adverse effect on its
consolidated financial position or results of operations.
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to the security holders for a vote
during the last quarter of the fiscal year covered by this report.
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters
An established public trading market for the Units does not exist and
the Fund does not anticipate that a public market will develop. Transfer of
Units by an investor and purchase of Units by the Fund may be accommodated under
certain terms and conditions. The Partnership Agreement imposes certain
limitations on the transfer of Units and may restrict, delay or prohibit a
transfer primarily if:
o the transfer of Units would result in 50% or more of all Units
having been transferred by assignment or otherwise within a
12-month period;
o such a transfer would be a violation of any federal or state
securities laws that may cause the Fund to be classified other than
as a partnership for federal income tax purposes;
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MERIDIAN HEALTHCARE GROWTH AND INCOME FUND LIMITED PARTNERSHIP
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters (continued)
o such transfers would cause the Fund to be treated as a "publicly
traded partnership" under Sections 7704 and 469(k) of the Internal
Revenue Code; and
o the transfer of Units would cause a technical termination of the
Partnership within meaning of Section 708(b)(1)(A) of the Internal
Revenue Code.
As of December 31, 1997, there were 1,799 holders of Units of the
registrant, owning an aggregate of 1,540,040 Units, including 40 Units held by
the Assignor Limited Partner. The Fund made four quarterly distributions
totaling approximately $3,306,000 in each of the years in the three-year period
ended December 31, 1997. See Note 5, "Distributions to Partners and Allocation
of Net Income", in Item 8. Financial Statements and Supplementary Data, herein.
Item 6. Selected Financial Data
Years Ended December 31,
1997 1996 1995 1994 1993
(Dollars in thousands - except per Unit amounts)
Statement of Income Data
Net revenue $49,568 $47,885 $45,398 $42,852 $38,524
Operating income before capital costs** 6,286 5,735 5,937 6,834 5,752
Net income 2,268 1,722 1,891 2,903 1,842
Net income per assignee Unit-basic $ 1.46 $ 1.12 $ 1.23 $ 1.88 $ 1.20
Operating Data
Payor mix (as a percent of revenue):
Medicaid and Medicare 77% 77% 75% 75% 72%
Private 23% 23% 25% 25% 28%
Occupancy percentage 93.2% 94.3% 94.8% 94.4% 95.8%
Patient Days Available 429,000 431,000 430,000 433,000 433,000
Balance Sheet Data
Total assets $49,707 $52,255 $51,107 $52,494 $50,580
Property and equipment, net of
accumulated depreciation 34,839 35,680 36,625 37,714 38,761
Long-term debt, including loan
payable to Development General
Partner, less current portion 24,363 25,955 25,528 25,797 26,217
Partners' capital 16,351 17,389 18,973 20,388 20,791
Cash distributions paid per Unit:
from operations $2.12 $ 2.12 $ 1.88 $ 2.12 $ 1.89
from return of capital - - .24 - .23
**Capital costs include depreciation, amortization and interest expense.
-8-
MERIDIAN HEALTHCARE GROWTH AND INCOME FUND LIMITED PARTNERSHIP
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Liquidity and Capital Resources
The Fund has sufficient liquid assets and other available credit resources
to satisfy its operating expenditures and anticipated routine capital
improvements at each of the seven nursing home facilities.
On March 3, 1998, the Fund entered into a renewal commitment with a bank to
refinance all of the existing indebtedness. Under the terms of the refinancing,
the mortgages will mature on February 28, 2000 and will bear interest at LIBOR
plus 1.55%. The refinancing will also extend the line of credit commitment until
February 28, 2000. The Fund has a $4,000,000 line of credit which is designated
for working capital needs and is primarily secured by the accounts receivable of
the Fund. At December 31, 1997, there were no outstanding borrowings under this
line of credit.
Between 1988 and 1989 the Development General Partner loaned the Fund
$597,000 to support operating deficits generated by the Mooresville, Salisbury
and Woodlands nursing centers during each center's first two years of operation.
Loans outstanding under this arrangement, including accumulated interest from
inception of the loan at 9% per annum, were $1,035,000 at December 31, 1997. The
Fund is obligated to repay these loans when certain specified financial criteria
are met, the most significant of which is the payment of a preferred return to
the assignee limited partners as defined in the Fund's partnership agreement.
On February 13, 1998, the Fund made a cash distribution of $826,410 to its
assignee limited partners, which was funded from nursing center operations
generated during the fourth quarter of 1997 after payment of approximately
$72,000 of upper tier expenses. During 1997, nursing center operations generated
approximately 89% of the total distributions after payments for capital
improvements, long term debt principal reduction and upper tier expenses.
Based on a preliminary review of the 1998 operating budget, operating
results are projected to improve over 1997 results. Distributions to partners
are expected to remain at current levels and operating cash flow is expected to
completely fund the distributions. The major challenge to the Fund in the
foreseeable future is to control operating expenses while maximizing revenues
through strategic admissions policies.
Results of Operations
December 31, 1997 vs. December 31, 1996
Patient revenues for the Fund's seven operating partnerships increased by
approximately $1,712,000 (or 3.6%) for the year ended December 31, 1997 as
compared to the year ended December 31, 1996. The increase is primarily
attributable to increased room rates which resulted from an effective rate
increase of 6% (or $1,767,000), of which $1,466,000 relates to Medicaid
residents. Effective July 1, 1997, the four Maryland facilities received
Medicaid increases of 5%- 6% as compared to approximately 2.5% on July 1, 1996.
Also contributing to the Medicaid increase was a shift to higher acuity Medicaid
residents at the facilities. The remaining rate increase of approximately
$296,000 was generated equally by Medicare and private payor classes. Among
Medicare patients, there has been a shift to a higher acuity resident, while
there has been a shift in the census mix of private payors to facilities with
higher base private rates. Additionally, ancillary usage increased in 1997
versus 1996. Partially offsetting these favorable variances was a decrease of
approximately $252,000 in prior year third party cost report settlements.
Profitability for the Fund increased approximately $546,000 (or 32%) to
$2,268,000 in 1997 as compared to $1,722,000 in 1996. Operating expenses as a
percentage of revenues remained consistent at 80% of revenue. Salaries, wages
and benefits increased approximately $462,000 (or 2%) during 1997 versus 1996
due to inflationary wage increases. As a result of the shortage in certified
nursing assistants in the State of Maryland, nursing agency usage increased
approximately $109,000 in 1997 as compared to the prior year.
-9-
MERIDIAN HEALTHCARE GROWTH AND INCOME FUND LIMITED PARTNERSHIP
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations (continued)
Another factor contributing to the operating expense increase was higher
ancillary utilization in 1997 as compared to the prior year. This increase was a
result of the higher acuity residents in the facilities as well as increased
utilization by the Medicaid population. On a per patient day basis, Medicaid
ancillary utilization is $1.98 higher in 1997 than in 1996.
Interest expense decreased $113,000 in 1997 as compared to 1996. This
decrease is primarily due to line of credit borrowings that were repaid in full
in April, 1997.
December 31, 1996 vs. December 31, 1995
Patient revenues for the Fund's seven operating partnerships increased by
approximately $2,572,000 (or 6%) for the year ended December 31, 1996 as
compared to the year ended December 31, 1995. The increase is primarily
attributable to increased Medicare census as well as increased room rates which
resulted in an effective rate increase of 4.1% (or $1,592,000) over 1995.
Continued efforts in Medicare maximization resulted in an increase of the
Medicare population in the seven facilities from 8.6% of total patient days for
1995 to 9.8% of total patient days in 1996. As a result, ancillary consumption
increased by $847,000 in 1996 as compared to 1995. In addition, revenues were
further increased by recognition of retroactive cost settlement adjustments that
were $366,000 higher than those recognized in 1995. These positive variances in
revenue were offset by an overall census decline of 1,806 patient days in 1996
as compared to 1995 which accounted for a negative variance in revenue of
$233,000.
Private census also declined in 1996 when compared to 1995.
Profitability for the Fund declined approximately $169,000 (or 8.9%) from
$1,891,000 in 1995 to $1,722,000 in 1996. The decline in profitability was
primarily attributable to increased operating expenses which were not completely
covered by the Medicare and Medicaid reimbursement programs. Operating expenses
as a percentage of patient revenues increased to 81% in 1996 from 80% in 1995.
With the continued increase in Medicare census, the overall acuity level of the
residents was higher than in 1995 resulting in increased salaries, benefits and
ancillary costs. Additionally, maintenance costs in 1996 were $100,000 higher
than in 1995 due to the continued aging of the buildings. The four Maryland
facilities were built in the late 1960's and early 1970's and are beginning to
need increasing levels of repair and maintenance.
Also contributing to the decline in profitability was an increase of
$172,000 (or 34%) in general and administrative expenses in 1996 as compared to
1995. The majority of this increase was due to higher professional and
consulting costs incurred during 1996.
Interest expense decreased $84,000 (or 3.8%) in 1996 versus 1995.
Approximately $5.7 million of the Fund's debt bears interest at floating rates
which were, on average, lower in 1996 than in 1995.
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MERIDIAN HEALTHCARE GROWTH AND INCOME FUND LIMITED PARTNERSHIP
Item 8. Financial Statements and Supplementary Data
Index to Financial Statements:
Page(s)
Annual Report
Independent Auditors' Report 3
Consolidated Balance Sheets 4
Consolidated Statements of Earnings 5
Consolidated Statements of Partners' Capital (Deficit) 6
Consolidated Statements of Cash Flows 7
Notes to Consolidated Financial Statements 8-15
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of Registrant
The General Partners of the Fund are Meridian Healthcare Investments, Inc.,
the Development General Partner, and Brown Healthcare, Inc., the Administrative
General Partner. The Fund's principal executive offices are located at 225 East
Redwood Street, Baltimore, Maryland 21202. The General Partners had primary
responsibility for the selection and negotiation of terms concerning the
acquisition of the Operating Partnership Interests, selecting a manager for the
interim investments and the structure of the Offering and the Fund. The General
Partners have primary responsibility for overseeing the performance of those who
contract with the Fund as well as making decisions with respect to the
financing, sale and liquidation of the Fund's or the operating partnerships'
assets. The General Partners are responsible for all reports to and
communications with investors and others, all distributions and allocations to
investors, the administration of the Fund's business and all filings with the
Securities and Exchange Commission and other Federal or State regulatory
authorities. The Fund's Partnership Agreement provides certain rights for
investors, which are incorporated herein by reference.
The Development General Partner
Meridian Healthcare Investments, Inc., the Development General Partner, is
a Maryland corporation. On November 30, 1993, Genesis acquired substantially all
the assets of Meridian, Inc., Meridian Healthcare (" MHC") and their affiliated
entities, including all the stock of the Fund's Development General Partner. As
part of the acquisition, MHC, the manager of the Fund's seven nursing centers,
continues to operate the facilities pursuant to management agreements. Since
completion of the Meridian transaction, Genesis operates 320 geriatric care
facilities (78 wholly owned, 116 jointly owned, 32 leased and 94 managed, which
includes 51 centers managed by an unconsolidated affiliate). The five geographic
markets that Genesis principally serves are: New England Region
(Massachusetts/Connecticut/New Hampshire); Mid-Atlantic Region (Greater
Philadelphia/Delaware Valley); Chesapeake Region (Southern Delaware, Eastern
Shore of Maryland; Baltimore, Maryland/Washington D.C./Virginia); Southern
Region (Central Florida/North Carolina); and Allegheny Region (Western
Pennsylvania/West Virginia, Ohio, Illinois and Wisconsin).
-11-
MERIDIAN HEALTHCARE GROWTH AND INCOME FUND LIMITED PARTNERSHIP
Item 10. Directors and Executive Officers of Registrant (continued)
The Development General Partner (continued)
The following individuals are the directors and principal officers of
Meridian Healthcare Investments, Inc.:
Michael R. Walker, age 49, is President and a Director of the Development
General Partner and is a co-founder of Genesis and has served as Chairman and
Chief Executive Officer of Genesis since its inception in 1985. In 1998, Mr.
Walker became the Chairman of the Board of Trustees of ElderTrustsm, a
healthcare related real estate investment trust. In 1981, Mr. Walker co-founded
Health Group Care Centers ("HGCC"). At HGCC, he served as Chief Financial
Officer and, later, as President and Chief Operating Officer. Prior to its sale
in 1985, HGCC operated nursing homes with 4,500 nursing beds in 12 states. From
1978 to 1981, Mr. Walker was the Vice President and Treasurer of AID Healthcare
Centers, Inc. ("AID"). AID, which owned and operated 20 nursing centers, was
co-founded in 1977 by Mr. Walker as the nursing home division of Hospital
Affiliates International ("HAI"). Mr. Walker holds a Master of Business
Administration degree from Temple University and a Bachelor of Arts in Business
Administration from Franklin and Marshall College. Mr. Walker serves on the
Board of Directors of Renal Treatment Centers, Inc. and the Board of Trustees of
Universal Health Realty and Income Trust.
Richard R. Howard, age 49, is a Director of the Development General Partner
and has served as a Director of Genesis since its inception in 1985 and as
President since June, 1986. From June, 1986 through March, 1997, Mr. Howard
served as President and Chief Operating Officer of Genesis. He joined Genesis in
September, 1985 as Vice President of Development. Mr. Howard's background in
healthcare includes two years as the Chief Financial Officer of HGCC. Mr.
Howard's experience also includes over ten years with Fidelity Bank,
Philadelphia, Pennsylvania and one year with Equibank, Pittsburgh, Pennsylvania.
Mr. Howard is a graduate of the Wharton School, University of Pennsylvania,
where he received a Bachelor of Science degree in Economics in 1971.
George V. Hager, Jr., age 42, is Vice President and Treasurer of the
Development General Partner and is Senior Vice President and Chief Financial
Officer of Genesis. Mr. Hager was previously partner in charge of the healthcare
practice for KPMG Peat Marwick LLP in the Philadelphia office. Mr. Hager began
his career at KPMG Peat Marwick LLP in 1979 and has over fifteen years of
experience in the healthcare industry. Mr. Hager received a Bachelor of Arts
degree in Economics from Dickinson College in 1978 and a Master of Business
Administration degree from Rutgers Graduate School of Management. He is a
certified public accountant and a member of the AICPA and PICPA.
Administrative General Partner
Brown Healthcare, Inc., the Administrative General Partner, is a Maryland
corporation, and is wholly-owned by Alex. Brown Realty, Inc. The Administrative
General Partner is responsible for administering the business of the Fund,
including providing clerical services, communications, services and reports to
investors, and making all reports and filings to securities regulatory
authorities.
The following individuals are the directors and principal officers of the
Administrative General Partner:
John M. Prugh, age 49, has been a Director and President of the
Administrative General Partner since 1988, and of Alex. Brown Realty, Inc. and
Armata Financial Corp. since 1984. Mr. Prugh graduated from Gettysburg College
in 1970, and was designated a Certified Property Manager by the Institute of
Real Estate Management in 1979. He has worked in property management for H. G.
Smithy Co., in Washington, D.C., and Dreyfuss Bros., Inc. in Bethesda, Maryland.
Since 1977, Mr. Prugh has been involved in managing, administering, developing
and selling real estate investment projects sponsored by Alex. Brown Realty,
Inc. and its subsidiaries.
-12-
MERIDIAN HEALTHCARE GROWTH AND INCOME FUND LIMITED PARTNERSHIP
Item 10. Directors and Executive Officers of Registrant (continued)
Administrative General Partner (continued)
Peter E. Bancroft, age 45, has been a Director and Vice President of the
Administrative General Partner since 1988 and a Senior Vice President of Alex.
Brown Realty, Inc. and Armata Financial Corp. since 1983. Mr. Bancroft graduated
from Amherst College in 1974, attended the University of Edinburgh, and received
a J.D. degree from the University of Virginia School of Law in 1979. Prior to
joining Alex. Brown Realty, Inc. in 1983, Mr. Bancroft held legal positions with
Venable, Baetjer and Howard and T. Rowe Price Associates, Inc.
Terry F. Hall, age 51, has been the Secretary of the Administrative General
Partner and a Vice President and Secretary of, and Legal Counsel for, Alex.
Brown Realty, Inc. since 1989. Mr. Hall graduated from the University of
Nebraska-Lincoln in 1968, and received a J.D. degree from the University of
Pennsylvania Law School in 1973. Prior to joining Alex. Brown Realty, Inc. in
1986, Mr. Hall was a Partner at the law firm of Venable, Baetjer and Howard from
1981 to 1986 and an associate at the same firm from 1973 to 1981.
Timothy M. Gisriel, age 41, has been the Treasurer of the Administrative
General Partner and of Alex. Brown Realty, Inc. and Armata Financial Corp. since
1990. He was Controller of Alex. Brown Realty, Inc. and Armata Financial Corp.
from 1984 through 1990. Mr. Gisriel graduated from Loyola College in 1978 and
received his Masters of Business Administration degree from the Robert G.
Merrick School of Business, University of Baltimore. Prior to joining Alex.
Brown Realty, Inc. in 1984, Mr. Gisriel was an audit supervisor in the Baltimore
office of Coopers & Lybrand. He is a Maryland Certified Public Accountant.
There is no family relationship among the officers and directors of the
General Partner.
Item 11. Executive Compensation
The officers and directors of the Administrative General Partner and
Development General Partner received no compensation from the Fund.
The General Partners are entitled to receive a share of cash distributions
and a share of profits and losses as described in the Agreement of Limited
Partnership. (See Note 5, "Distributions to Partners and Allocation of Net
Income" in Item 8. Financial Statements, herein.)
For a discussion of compensation and fees to which the General Partners are
entitled, see Item 13. Certain Relationships and Related Transactions, herein.
Item 12. Security Ownership of Certain Beneficial Owners and Management
No person is known to the Fund to own beneficially more than 5% of the
outstanding Units of the Fund.
The General Partners each have a .5% interest in the Fund as General
Partners, but do not hold any Units.
The Assignor Limited Partner, Brown Healthcare Holding Co., Inc., an
affiliate of the Administrative General Partner, owns for its benefit 40 Units.
The Units held by the Assignor Limited Partner have all rights attributable to
such Units under the Limited Partnership Agreement except that these Units are
non-voting.
There are no arrangements, known to the Fund, the operation of which may at
a subsequent date, result in a change of control of the registrant.
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MERIDIAN HEALTHCARE GROWTH AND INCOME FUND LIMITED PARTNERSHIP
Item 13. Certain Relationships and Related Transactions
The General Partners and their affiliates have and are permitted to engage
in transactions with the Fund. For a summarization of fees paid during 1997,
1996 and 1995, and to be paid to the General Partners and their affiliates at
December 31, 1997, see Note 3, "Related Party Transactions" in Item 8. Financial
Statements, herein.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) 1. Financial Statements: see Index to Financial Statements and
Supplementary Data in Item 8 on Page 11.
2. Financial Statement Schedules: Schedule II - Valuation and
Qualifying Accounts for the years ended December 31, 1997, 1996 and
1995. All other schedules are omitted because they are not
applicable or the required information is shown in the financial
statements or notes thereto.
3. Exhibits:
(3, 4) Limited Partnership Agreement on pages 1 through 41 of
Exhibit A to the Fund's Prospectus, and the Fund's
Registration Statement on Form S-1 (File No. 33-19277)
included herein by reference.
(13) Annual Report for 1997.
(b) Reports on Form 8-K: None.
-14-
Meridian Healthcare Growth and Income Fund Limited Partnership
Independent Auditors' Report
To the Partners of Meridian Healthcare Growth and Income
Fund Limited Partnership
Under date of February 6, 1998, except for paragraph 2 of note 4 which is as of
March 3, 1998, we reported on the consolidated balance sheets of Meridian
Healthcare Growth and Income Fund Limited Partnership as of December 31, 1997
and 1996, and the related consolidated statements of earnings, partners' capital
(deficit) and cash flows for each of the years in the three-year period ended
December 31, 1997, as contained in the annual report on Form 10K for the year
1997. In connection with our audits of the aforementioned consolidated financial
statements, we also audited the related consolidated financial statement
schedule in the Form 10K. This consolidated financial statement schedule is the
responsibility of the Fund's management. Our responsibility is to express an
opinion on this consolidated financial statement schedule based on our audits.
In our opinion, such schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.
KPMG PEAT MARWICK LLP
Philadelphia, Pennsylvania
February 6, 1998
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Meridian Healthcare Growth and Income Fund Limited Partnership
Valuation and Qualifying Accounts
Years Ended December 31, 1997, 1996 and 1995
(Dollars in Thousands)
Schedule II
Balance at Beginning Charged to Balance at End
Description of Period Operations Deductions(1) of Period
Year Ended December 31, 1997 $551 351 (389) $513
Allowance for Doubtful Accounts
Year Ended December 31, 1996 $440 376 (265) $551
Allowance for Doubtful Accounts
Year Ended December 31, 1995 $313 375 (248) $440
Allowance for Doubtful Accounts
(1) - Represents amounts written off as uncollectible.
-16-
MERIDIAN HEALTHCARE GROWTH AND INCOME FUND LIMITED PARTNERSHIP
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, as amended, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
MERIDIAN HEALTHCARE GROWTH AND INCOME
FUND LIMITED PARTNERSHIP
DATE: 3/24/98 BY: /s/ John M. Prugh
John M. Prugh
President and Director
Brown-Healthcare, Inc.
Administrative General Partner
Pursuant to the requirements of the Securities Exchange Act of 1934 as amended,
this report has been signed by the following in the capacities and on the dates
indicated.
DATE: 3/24/98 By: /s/ John M. Prugh
John M. Prugh
President and Director
Brown-Healthcare, Inc.
Administrative General Partner
DATE: 3/24/98 By: /s/ Peter E. Bancroft
Peter E. Bancroft
Vice President and Director
Brown-Healthcare, Inc.
Administrative General Partner
DATE: 3/24/98 By: /s/ Terry F. Hall
Terry F. Hall
Secretary
Brown-Healthcare, Inc.
Administrative General Partner
DATE: 3/24/98 By: /s/ Timothy M. Gisriel
Timothy M. Gisriel
Treasurer
Brown-Healthcare, Inc.
Administrative General Partner
-17-
MERIDIAN HEALTHCARE GROWTH AND INCOME FUND LIMITED PARTNERSHIP
SIGNATURES (continued)
DATE: 3/27/98 BY: /s/ Michael R. Walker
Michael R. Walker
President and Director
Meridian Healthcare Investments, Inc.
Development General Partner
DATE: 3/26/98 BY: /s/ Richard R. Howard
Richard R. Howard
Director
Meridian Healthcare Investments, Inc.
Development General Partner
DATE: 3/26/98 BY: /s/ George V. Hager, Jr.
George V. Hager, Jr.
Vice President and Treasurer
Meridian Healthcare Investments, Inc.
Development General Partner
-18-