UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-KSB
Annual Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the fiscal year ended March 31, 1997
Commission File Number 0-18727
CARC, Inc.
(Name of small business issuer in its charter)
South Carolina 57-0641693
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation of organization)
500 Downs Loop, Clemson, South Carolina 29631
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including
area code: (864) 654-1155
Securities registered pursuant to Section 12(b) of the Exchange Act: None
Securities registered pursuant to Section 12(g) of the Exchange Act:
Common Stock
(Title of class)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act 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
Check if there is no disclosure of delinquent filers in response to Item 405
of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-
KSB [x]
State issuer's revenues for its most recent fiscal year: $3,177,176
The aggregate market value of the voting stock held by non-affiliates of the
registrant is unknown and the stock is not currently being traded.
The number of shares outstanding at March 31, 1997 is :
Common stock, $1 par value 536,000
Documents Incorporated by Reference
Portions of registrant's definitive proxy statement (to be filed pursuant to
Regulation 14A) or definitive information statement (to be filed pursuant to
Regulation 14C) for registrant's 1997 annual meeting are incorporated by
reference in Part III.
PART 1
Item 1. Business.
CARC, Inc., the registrant, was organized under the laws of the State of
South Carolina on December 20, 1976 to plan, develop, construct and operate a
retirement community ("Clemson Downs") in the Clemson, South Carolina area to
include residential apartments, an accredited health care center and related
recreational and social facilities. The Company's present office is located
at 500 Downs Loop, Clemson, South Carolina 29631, and its telephone number
is (864) 654-1155.
The principal services rendered by the registrant are retirement community
services. They include the operation of a health care center, apartment
rentals and providing recreational and other associated services. For the
last two fiscal years, the percentage of total revenue contributed by each of
these services which provided 15% or more of consolidated revenue are as
follows:
1997 1996
1. Health care center - 50.3% 47.9%
2. Apartment rentals - 47.7% 49.3%
The apartment buildings at Clemson Downs provide a choice of seven floor
plans. The apartments rent for between $834 and $1,665 per month, depending
on which floor plan is chosen and whether the apartment is rented by one
person or a couple. One meal per day for each resident is included in the
rental fee. In addition, residents may select a catered living program.
Apartment rates for the catered living program range between $1,544 and
$3,214 per month, depending on the floor plan chosen and number of occupants
per apartment. The catered living program provides special services and
three meals per day to residents in the program. Each apartment has a patio
deck, and each floor of each building has its own washer and dryer room. All
buildings have entrances at ground level. Some buildings are also served by
elevators. Doors are electric with wheelchair level door openers. There are
thermal-pane windows in patio doors. All halls have assist rails and wide
doorways. Each apartment unit has individual heating and air-conditioning
systems and an individual hot water heater. All the apartments and public
areas in the apartment wings are carpeted, with the exception of the kitchen
and bathroom areas. The kitchens are fully equipped with a range and oven,
refrigerator, dishwasher and disposal. There is an emergency response call
system to the health care center in each apartment and smoke and heat
detectors are located throughout the property.
Item 1. Business. (continued)
The health care center provides convalescent and rehabilitative treatment to
inpatient adults, including those who are admitted after hospitalization and
before returning to their homes, and is designed to supplement general
hospital care, rather than compete directly with general hospitals. The
services furnished by the health care center include room, board, nursing
care, drugs, supplies, medical equipment, other medical services, social
activities and physical, speech and recreational therapy. The health care
center contains private and semi-private rooms. It also has laundry
facilities and a reception area. The admission, treatment and discharge of
each health care center resident are under the direction of the resident's
attending physician. Although no full-time staff physicians are retained,
the health care center has a part time-medical director as well as consulting
and on-call physicians as required.
The health care center receives payments for resident care directly on a
private pay basis, including payments from private health insurance, and from
governmental reimbursement programs such as the federal Medicare program.
Within the statutory framework of the Medicare program, there are substantial
areas subject to administrative rulings, interpretations and discretion which
affect payments made under those programs.
Health care facility operations are subject to federal, state and local
government regulations. Health care facilities are subject to periodic
inspection by state licensing agencies to determine whether the standards
necessary for continued licensure are maintained. In granting and renewing
licenses, the state agencies consider, among other things, the buildings,
furniture and equipment; the qualifications of the administrative personnel
and staff; the quality of care; and the compliance with the laws and
regulations relating to operation of the facilities. State licensure of a
health care facility is a prerequisite to certification for participation in
the Medicare program. Management believes that the health care center at
Clemson Downs is presently in substantial compliance with all applicable
federal, state and local regulations with respect to licensure requirements.
However, because those standards are subject to change, there can be no
assurance that the health care center will be able to maintain its licenses
upon a change in standards, and future changes in those standards could
necessitate substantial expenditures by the registrant to comply with them.
Clemson Downs competes with other local and regional retirement communities
on the basis of reputation and physical appearance and in the case of its
health care center on the basis of the quality of care provided. The
primary, secondary and tertiary service areas for Clemson Downs are as
follows:
Primary Service Area - the City of Clemson;
Secondary Service Area - an 18 mile radius extending from the City of
Clemson; and
Tertiary Service Area - All other areas.
Item 1. Business. (continued)
Approximately 60% of the current patients in the health care center resided
in the Primary Service Area immediately before being admitted to the health
care center. The Secondary Service Area accounted for almost 30% of the
current patients last residence and the remaining 10% of the patients at the
health care center were from areas outside of the 18 mile radius, or the
Tertiary Service Area.
There are many health care institutions and corporations that furnish
services similar to those offered by the registrant. Some competitors
operate nationally and have substantially greater resources than the
registrant.
The registrant also experiences competition in the search for nurses,
technicians, aides and other high-quality professional and non-professional
employees.
The registrant maintains professional liability, comprehensive general
liability and other typical insurance coverage on all its facilities. The
registrant believes that its insurance is adequate in amount and coverage.
The registrant employees approximately 75 persons in its business and
believes its relations with its employees are good.
Item 2. Properties.
The only property owned by the registrant is Clemson Downs, a retirement
community located in Clemson, South Carolina, which consists of 96
apartments, 52 nursing home beds and a community center which includes a
dining room, library, recreation areas and administrative offices. The
buildings are suitable and adequate for which they were designed and are in
good state of repair.
There is a mortgage balance of $2,558,031 at March 31, 1997 that is
collateralized by land and buildings.
Item 3. Legal Proceedings.
Registrant is not currently engaged in legal proceedings of material
consequence other than ordinary routine litigation incidental to its
business.
Item 4. Submission of Matters to a Vote of Shareholders.
No matters were submitted to a vote of shareholders during the fourth quarter
of 1997.
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters.
There is no established public trading market for the registrant's common
stock. The Center has served as agent in transferring shares from
stockholders to new residents interested in obtaining shares and has received
fees for these services. At March 31, 1997, there are approximately 536
holders of the registrant's common stock. There have been no cash dividends
declared or paid during the past two fiscal years to the holders of the
registrant's common stock.
Item 6. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
The discussion and analysis that follow discusses the financial condition,
results of operations, liquidity and capital resources of the registrant.
Financial Condition
At March 31, 1997 and 1996, assets were $4.7 million and $4.8 million,
respectively. The decrease of $100,000 is a result of depreciation of fixed
assets of $284,000 which was offset by additional operating income of
$192,000. During the second quarter of the current year, the Center exercised
an option stated in its mortgage with a bank to make a $150,000 payment
against the outstanding principal without penalty. All other assets and
liabilities remained relatively unchanged.
Results of Operations
Net income for the year ended March 31, 1997 and 1996 was $241,000 and
$250,000, respectively.
Operating Revenues
Operating revenues for the year ended March 31, 1997 and 1996 were $3.2
million and $3.0 million, respectively. The overall increase in operating
revenues of $192,000 is due primarily to an increase in health care center
revenues and apartment revenues offset by decrease in residential services.
Health care center revenues increased approximately $167,000 due to an
increase in apartment occupancy and a five percent rate increase. Apartment
revenues increase approximately $44,000 due to a five percent rate increase
and more residents paying for additional services such as catered living.
Residential services revenue decreased $24,000 due to a change in the billing
procedures for beauty shop services from a percentage of total fees billed to
a standard fee.
Item 6. Management's Discussion and Analysis of Financial Condition and
Results of Operations. (continued)
Operating Expenses
Operating expenses for the years ended March 31, 1997 and 1996 were $2.9
million and $2.8 million, respectively. The net increase was primarily
attributable to increases in apartment, health care center, dietary,
administrative and general, and housekeeping expenses which were offset by
decreases in residential services and interest expenses. Apartment expenses
increased $16,000 due to an increase in salary and maintenance costs. Health
care center costs increased $103,000 due to an increase in the use of
temporary employees and salary increases. Housekeeping expenses increased
approximately $25,000 due to additional employees and an increase in salary
and supply costs. Dietary expenses increased approximately $54,000 due to an
increase in food and beverage costs, and administrative and general expenses
increased approximately $19,000 due primarily to increase in wages and
professional fees. Residential services decreased approximately $24,000 due
to the change in the billing procedures for beauty shop services from a
percentage of total fees billed to a standard fee. Interest expense
decreased $29,000 due to a reduction of the principal balance of the
mortgage. Other operating expenses remained relatively stable.
Nonoperating revenue
Nonoperating revenue for the year ended March 31, 1997 decreased
approximately $29,000 over the same period in 1996 primarily due to a loss on
disposal of assets for the year ended March 31, 1997.
Liquidity
The Center generated $646,958 in cash flows from operating activities. The
operating cash flows were used to fund $211,489 in investing activities and
$424,942 in financing activities, which were primarily purchases of
investments and payments of long-term debt.
Future Commitments for Capital Expenditures
Subsequent to March 31, 1997, the Center entered into a contract with a
construction company for the construction of a twenty unit two-bedroom
apartment building and an activity center at an estimated cost of $2,598,694.
The Center received a maximum construction loan of $2,800,000 from Wachovia
Bank. This loan is secured by the real estate and apartment rents. Interest
is at prime less .25% and payments of interest only are due through October
1998. Beginning in November 1998, monthly principal and interest payments
will be made through April 2007. The monthly payment and applicable interest
rate will be determined at a later date.
PART II (continued)
Item 7. Financial Statements.
The financial statements required to be filed here under are attached hereto
following the signature page.
Item 8. Changes in and Disagreement with Accountants on Accounting and
Financial Disclosure. - None.
PART III
Item 9. Directors and Executive Officers of the Registrant.
Item 10. Executive Compensation.
Item 11. Security Ownership of Certain Beneficial Owners and Management.
Item 12. Certain Relationships and Related Transactions.
The information called for by Items 9, 10, 11, and 12 has been omitted
because the registrant will file with the SEC no later than 120 days after
the close of its fiscal year a definitive proxy pursuant to Regulation 14A.
Such information is hereby incorporated by reference from registrants
definitive proxy statement.
PART IV
Item 13. Exhibits and Reports on Form 8-K.
Following is a list of exhibits filed with this form 10KSB:
A. Exhibit 27 - Financial Data schedule
B. Reports on Form 8-K - None filed in the fourth quarter.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
Registrant CARC, INC.
Date: June 17, 1997 /s/ Anita M. Davis
Anita M. Davis
Administrator
<TABLE>
<CAPTION>
Exhibit 27
Financial Data Schedule
<S> <C>
Period type Year
Fiscal year end March 31, 1997
Period - start April 1, 1996
Period - end March 31, 1997
Cash $236,236
Securities $207,344
Receivables $123,349
Allowables $(5,000)
Inventory $10,799
Current assets $599,863
Property, plant and equipment $7,549,333
Depreciation $3,691,582
Total assets $4,669,030
Current liabilities $475,906
Bonds 0
Preferred - mandatory 0
Preferred 0
Common $536,000
Other - SE $1,799,739
Total liabilities and equity $4,669,030
Sales 0
Total revenues $3,177,176
Cost of goods sold 0
Total costs $2,928,830
Other - expenses 0
Loss-provision 0
Interest-expense $209,998
Income-pretax $241,073
Income-tax 0
Income-continuing $241,073
Discontinued 0
Extraordinary 0
Changes 0
Net - income $241,073
EPS - primary 20.00%
EPS - dilutes 0.00%
</TABLE>
Independent Auditors' Report
The Board of Directors
CARC, Inc.
Clemson, South Carolina
We have audited the accompanying balance sheets of CARC, Inc. (the Center) as
of March 31, 1997 and 1996, and the related statements of operations,
stockholders' equity and cash flows for the years then ended. These financial
statements are the responsibility of the Center's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the 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 audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of CARC, Inc. as of March 31,
1997 and 1996 and the results of its operations and its cash flows for the
years then ended, in conformity with generally accepted accounting
principles.
Greenville, South Carolina
May 8, 1997
<TABLE>
<CAPTION>
CARC, INC.
Balance Sheets
March 31, 1997 and 1996
Assets
<S> <C> <C>
1997 1996
Current assets
Cash and cash equivalents $ 236,236 $ 225,709
Investments 207,344 112,926
Accounts receivable, net of allowance
for doubtful accounts of $5,000 in
1997 and 1996 118,349 117,133
Accrued interest receivable 15,343 7,230
Prepaid insurance 11,792 20,613
Inventory 10,799 14,924
Total current assets 599,863 498,535
Assets whose use is limited:
By stockholders for expansion of facilities - 109,336
Property, buildings, and equipment, net 3,857,751 3,943,841
Entrance fees in escrow 105,918 99,063
Other assets - principally loan
refinancing costs 105,498 114,998
$ 4,669,030 $ 4,765,773
Liabilities and Stockholders' Equity
Current liabilities
Current installments of long-term debt $ 270,564 $ 252,021
Accounts payable 53,965 5,881
Accrued payroll 48,463 42,022
Accrued payroll and property taxes 20,559 27,752
Accrued interest 16,503 19,265
Other accrued liabilities 39,332 9,067
Unearned revene 26,520 21,084
Total current liabilities 475,906 377,092
Refundable entrance fees 105,918 99,063
Long-term debt, excluding current installments 2,287,467 2,730,952
Total liabilities 2,869,291 3,207,107
Stockholders' equity:
Common stock, $1 par value. Authorized
600,000 shares; issued and outstanding
536,000 shares 536,000 536,000
Additional paid-in capital 2,111,886 2,111,886
Accumulated deficit (848,147) (1,089,220)
Total stockholders' equity 1,799,739 1,558,666
$ 4,669,030 $ 4,765,773
</TABLE>
<TABLE>
<CAPTION>
CARC, INC.
Statements of Operations
Years Ended March 31, 1997 and 1996
<S> <C> <C>
1997 1996
Operating revenues:
Apartments $ 1,517,084 $ 1,472,650
Health care center 1,597,757 1,430,410
Dietary 45,881 46,815
Residential services 6,860 30,956
Miscellaneous 9,594 3,855
Net operating revenues 3,177,176 2,984,686
Operating expenses:
Apartments 217,189 201,049
Health care center 826,168 722,674
Dietary 614,780 560,532
Residential services 6,100 29,888
Maintenance and repair 107,076 104,978
Housekeeping 126,272 100,955
Administrative and general 286,629 268,037
Depreciation and amortization 283,784 278,903
Utilities 168,569 172,443
Interest 209,998 238,935
Property and taxes 82,265 78,201
Total operating expenses 2,928,830 2,756,595
Income from operations 248,346 228,091
Nonoperating revenues (expenses):
Interest and investment income 26,585 28,808
Loss on sale of equipment (33,858) (7,105)
Nonoperating revenues (expenses) (7,273) 21,703
Net income $ 241,073 $ 249,794
Per share information:
Net income $ .45 $ .47
Weighted average number of shares
outstanding during the year 536,000 536,000
</TABLE>
<TABLE>
<CAPTION>
CARC, INC.
Statements of Stockholders' Equity
Years Ended March 31, 1997 and 1996
<S> <C> <C> <C> <C>
Additional Total
Common Paid-In Accumulated Stockholders'
Stock Capital Deficit Equity
Balances at March 31, 1995 $ 536,000 $ 2,111,886 $ (1,339,014) $ 1,308,872
Net income - - 249,794 249,794
Balances at March 31, 1996 536,000 2,111,886 (1,089,220) 1,558,666
Net income - - 241,073 241,073
Balances at March 31, 1997 $ 536,000 $ 2,111,886 $ (848,147) $ 1,799,739
</TABLE>
<TABLE>
<CAPTION>
CARC, INC.
Statements of Cash Flows
Years Ended March 31, 1997 and 1996
<S> <C> <C>
1997 1996
Cash flows from operating activities:
Net income $ 241,073 $ 249,794
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 283,784 278,903
Loss on sale of equipment 33,858 7,105
Decrease (increase) in:
Accounts receivable, net (1,216) 11,335
Accrued interest receivable (8,113) 270
Prepaid insurance 8,821 (4,290)
Inventory 4,125 -
Other assets (2,500) -
Increase (decrease) in:
Accounts payable 48,084 (4,323)
Accrued payroll 6,441 5,140
Accrued payroll and property taxes (7,193) (1,220)
Accrued interest payable (2,762) (5,221)
Other accrued liabilities 30,265 2,067
Unearned revenue 5,436 (42,782)
Entrance fee proceeds 6,855 9,353
Net cash provided by
operating activities 646,958 506,131
(continued)
CARC, INC.
Statements of Cash Flows (continued)
Years Ended March 31, 1997 and 1996
1997 1996
Cash flows from investing activities:
Purchases of investments $ (313,262) $ (321,325)
Maturities of investments 321,325 330,876
Proceeds from sale of equipment 50 -
Capital expenditures (219,602) (118,241)
Net cash used in
investing activities (211,489) (108,690)
Cash flows from financing activities:
Principal payments of long-term debt (424,942) (393,359)
Net increase in cash 10,527 4,082
Cash and cash equivalents,
at beginning of year 225,709 221,627
Cash and cash equivalents,
at end of year $ 236,236 $ 225,709
</TABLE>
CARC, INC.
Notes to Financial Statements
March 31, 1997 and 1996
1. Summary of Significant Accounting Policies
CARC, Inc. (the "Center") is a corporation existing for the purpose of
operating a retirement community in the Clemson, South Carolina area with an
accredited health care facility, residential apartments and other
facilities. The following are the significant accounting policies used in
preparation of the accompanying financial statements.
Operating Revenues - Apartment revenues consist of rental, meals and
miscellaneous other income. Health Care Center revenues consist primarily of
room and board fees, and also include fees for medical supplies and physical
therapy. Dietary revenues consist of fees charged for meals and catered
functions.
Resident Revenue - Resident revenue is reported at the estimated net
realizable amounts from residents, third-party payors, and others for service
rendered.
Revenue received under the South Carolina Medicare program is subject to
audit and retroactive adjustment. Settlements, if any, are included as
contractual revenue adjustments in the year of determination.
Refundable Fees and Deposits - Refundable application fees are refunded upon
demand by the original applicant. Refundable security deposits are refunded
upon termination of the rental agreement less the cost of repairs.
Investment Securities - The Center accounts for investments according to
Statement of Financial Accounting Standards No. 115 "Accounting for Certain
Investment in Debt and Equity Securities (SFAS 115). Under SFAS 115,
investment securities held for investment are stated at amortized cost since
the Center has both the ability and intent to hold such securities to
maturity. Premiums and discounts on the investments are amortized into
income over the contractual terms of the security using a level yield
interest method. Gains and losses on the sale of these securities would be
calculated on the specific identification method.
Other Assets - Other assets consist primarily of loan refinancing cost and
are amortized over the life of the loan, which is twelve years.
Assets Whose Use Is Limited - Assets whose use is limited consist of funds
that have been set aside by the Center's stockholders for the expansion of
facilities. The body which placed the limitations retains control over the
funds and may, at its discretion, subsequently use such funds for other
purposes. Since the amount is designated for noncurrent assets, it has been
excluded from current assets in the accompanying balance sheets.
Property, Buildings, and Equipment - Property, buildings, and equipment are
stated at cost or, if donated, at fair market value at date of receipt.
Depreciation on buildings and equipment is calculated on the straight-line
method over the estimated useful lives of the assets. Equipment held under
capital leases is amortized using the straight-line method over the shorter
of the lease term or estimated useful life of the asset.
Inventory - Inventory consists of food and medical supplies and is carried at
cost (first-in, first-out).
Accounts Receivable - Accounts receivable consist of unsecured balances from
residents and patients for monthly apartment and health care center charges.
The Center uses the allowance method to account for uncollectible accounts
receivable. The allowance for bad debt accounts is based upon prior years'
experience and management's analysis of possible bad debts.
Income Taxes - The Center accounts for income taxes according to Statement of
Financial Accounting Standards No. 109 "Accounting for Income Taxes" (SFAS
109). Under SFAS 109, deferred income taxes are recognized for the tax
consequences of "temporary differences" by applying enacted statutory rates
applicable for future years to differences between the financial statement
carrying amounts and the tax basis of existing assets and liabilities.
Statements of Cash Flows - For purposes of the statements of cash flows, the
Center considers unrestricted highly liquid investments with an original
maturity of three months or less when purchased to be cash or cash
equivalents.
As supplemental disclosure to the statements of cash flows, the Center paid
interest amounting to $212,760 in 1997 and $215,348 in 1996. The Center paid
no income taxes in 1997 or 1996.
Unearned Revenue - Unearned revenue represents advance payment of gross room
rates.
Estimates - The presentation of financial statements in conformity with
generally accepted accounting principles 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.
Reclassifications - Certain prior year amounts have been reclassified to
conform to current year presentation.
2. Health Care Center Revenues
A portion of Health Care Center revenue is generated by patients who qualify
for the Medicare program. The approximate percentage of such revenue was 3%
in 1997 and 1% in 1996. The remainder of the revenues are from private
paying patients. Patient service revenue is recorded at established rates
with provisions made for differences between patient service revenue at the
Center's established rates and the related Medicare reimbursement. Such
adjustments are accrued on an estimated basis in the period the related
services are rendered.
3. Cash, Cash Equivalents and Investments
A summary of the Center's cash, cash equivalents and investments at March 31
follows:
1997 1996
Cash $ 236,236 $ 225,709
Investments:
U. S. Treasury obligations 313,262 321,325
$ 549,498 $ 547,034
The carrying amounts and approximate market value of investment securities
are:
Amortized Unrealized Market
Cost Gain Value
March 31, 1997 $ 313,262 $ 15,343 $ 328,605
March 31, 1996 $ 321,325 $ 7,229 $ 328,554
There were no unrealized losses on securities or realized gains or losses on
securities in 1996 or 1997.
The aggregate of these funds is classified as assets in the accompanying
balance sheets as follows:
1997 1996
Investments $ 207,344 $ 112,926
Assets whose use is limited - 109,336
Entrance fees in escrow 105,918 99,063
$ 313,262 $ 321,325
The Company has on deposit with a financial institution a cash balance of
$202,788 and $256,776 at March 31, 1997 and 1996, respectively. Amounts
exceeding $100,000 are not guaranteed by the Federal Deposit Insurance
Corporation.
4. Property, Building, and Equipment
A summary of property, buildings, and equipment at March 31 follows:
1997 1996
Land and land improvements $ 550,220 $ 539,119
Buildings 6,308,892 6,233,075
Equipment 538,168 533,545
Vehicles 53,079 53,079
Construction in progress 98,974 16,000
7,549,333 7,374,818
Less accumulated depreciation 3,691,582 3,430,977
Property, buildings and equipment, net $ 3,857,751 $ 3,943,841
5. Long-Term Debt
Long-term debt consists of a mortgage note due in October 2005. Monthly
payments of $40,626, including interest at 7.5% are to be made during the
first six years of the loan period. During the second six years, the
interest rate will equal the yield of the bank's cost of issuing a large
certificate of deposit in the secondary market and having a maturity most
proximate to six years plus 2.5% per annum. The note had an outstanding
balance of $2,558,031 at March 31, 1997 and $2,982,973 at March 31, 1996.
The note is collateralized by land and buildings with a depreciated cost of
approximately $3,637,000 at March 31, 1997.
The mortgage note has certain restrictive covenants pertaining to its current
ratio, working capital, cash flow coverage ratio, and tangible worth. The
Center is also limited as to property and equipment purchases. As of March
31, 1997, the Center was in compliance with such covenants or on May 28,
1997, received a waiver for events of noncompliance.
The aggregate annual maturities of long-term debt for each of the five years
subsequent to March 31, 1997 are as follows:
1998 $ 270,564
1999 288,825
2000 282,450
2001 246,222
2002 267,986
Thereafter 1,201,984
$ 2,558,031
6. Income Taxes
As of March 31, 1997, the Center has net operating loss carryforwards of
approximately $945,000 available to offset future taxable income which expire
as follows: 2002, $32,000; 2004, $146,000; 2005, $371,000; 2006, $269,000;
and 2007, $127,000.
The Center records income taxes in accordance with Financial Accounting
Standards Board Statement No. 109 ("SFAS No. 109"), "Accounting for Income
Taxes". SFAS No. 109 requires the recognition of deferred tax assets and
liabilities for the expected future tax consequences of events that have been
recognized in the Center's financial statement or tax returns. Under SFAS
No. 109, the deferred tax assets that resulted from the net operating loss
carryforwards and from the use of different depreciation methods for book and
tax purposes, have been fully reserved as of March 31, 1997 and 1996.
The components of the net deferred income tax assets are as follows:
1997 1996
Deferred income tax asset:
Net operating loss carryovers $ 368,700 $ 472,400
Accrued expense not currently
deductible for tax purposes 8,600 -
Valuation allowance (340,000) (437,900)
Deferred income tax liability:
Tax depreciation greater than
book depreciation (27,000) (26,300)
Accrued revenue not currently
recognized for tax purposes (10,300) (8,200)
Net deferred income tax asset $ - $ -
7. Retirement Plan
The Center has a 401(k) Retirement Plan for all employees who have completed
one year of service. Active participants may elect to have the Center make
salary reduction contributions on their behalf based on a percentage of their
earnings, not to exceed 15%. The Center has the option of making an annual
discretionary contribution and can also match each employees' contribution to
the plan up to a predetermined limit. The Center's combined contribution
totaled $26,290 and $23,182 for the years ended March 31, 1997 and 1996,
respectively.
8. Subsequent Events
The Center entered into a contract with a construction company in April 1997
for the construction of a new apartment building and an activity center at an
estimated cost of $2,598,694.
The Center received a maximum construction loan of $2,800,000 from Wachovia
Bank. This loan is secured by the real estate and apartment rents. Interest
is at prime less .25% and payments of interest only are due through October
1998. Beginning in November 1998, monthly principal and interest payments
will be made through April 2007. The monthly payment and applicable interest
rate will be determined at a later date.
The accompanying notes are an integral part of these financial statements.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-1-1996
<PERIOD-END> MAR-31-1997
<CASH> 236,236
<SECURITIES> 207,344
<RECEIVABLES> 123,349
<ALLOWANCES> 5,000
<INVENTORY> 10,799
<CURRENT-ASSETS> 599,863
<PP&E> 7,549,33
<DEPRECIATION> 3,691,582
<TOTAL-ASSETS> 4,669,030
<CURRENT-LIABILITIES> 475,906
<BONDS> 0
0
0
<COMMON> 536,000
<OTHER-SE> 1,799,739
<TOTAL-LIABILITY-AND-EQUITY> 4,669,030
<SALES> 0
<TOTAL-REVENUES> 3,177,176
<CGS> 0
<TOTAL-COSTS> 2,928,830
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 209,998
<INCOME-PRETAX> 241,073
<INCOME-TAX> 0
<INCOME-CONTINUING> 241,073
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 241,073
<EPS-PRIMARY> 20.00
<EPS-DILUTED> 0.00
</TABLE>
