Partnership AccountingI've been reading up on partnership accounting. It is different from regular accounting that you and I analyze.
When Brad says management is forecasting a loss in the Palladium Partnership in 2010, what he is saying is that Revenue, minus Expenses (presumably including management fees paid to NHC), minus Limited Partner Salaries as specified in the Partnership agreement is projected to be less than zero.
According to partnership accounting, partners (in this case, limited partners) receive two disbursements: the partner salary plus their share of the profits. Both amounts are taxed the same in the hands of the partner (in the US) in the year earned, so they really don't care for tax purposes. Partnership Salaries are just a device to put more of the income in the hands of certain partners in a different proportion than the Partners' Capital, since partnership profit is shared among partners in proportion to their share of the partner capital. Some partnerships pay big salaries and have low profit. Some pay no salaries and have big profits.
Bottom line is: I don't know what the salaries are, as specified in the Palladium Partnership agreement, so I cannot interpret whether "a loss in Palladium Partnership" is the same as a loss to NHC from Palladium's operation.
Brad also mentions distributions. Distributions to partners are different from partnership profit. A partner's share of Partnership profits are added to their capital account. If they take cash out of the partnership as a distribution, it reduces their capital account. Their initial capital account is set up at fair market value of the assets they contribute. This may have been derived from the IPO valuation as calculated in my previous post. Unless you know what they have already taken out, you also cannot interpret Brad's comment "no distributions".