SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR TRANSITION PERIOD FROM TO .
Commission file number 0-18727
CARC, Inc.
(Exact name of registrant as specified in its charter)
South Carolina 57-0641693
(State or other jurisdiction (I.R.S. Employer
of incorporation of organization) Identification No.)
500 Downs Loop
Clemson, SC 29631
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code: (864) 654-1155
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) or 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 [ ]
The number of shares outstanding of the Issuer's Shares of Common Stock as of
September 30, 1998 was 536,000.
Transitional Small Business Disclosure Format:
Yes [ ] No [ X ]
CARC, INC.
Form 10-QSB Index
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Unaudited Balance Sheet at September 30, 1998...................... 1
Unaudited Statements of Operations for the
Three Months and Six Months Ended
September 30, 1998 and 1997........................................ 2
Unaudited Statement of Stockholders'
Equity for the Six Months
Ended September 30, 1998........................................... 3
Unaudited Statements of Cash Flows for
the Six Months Ended
September 30, 1998 and 1997........................................ 4
Notes to Unaudited Financial Statements............................ 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations .....................................................6 - 7
Part II. OTHER INFORMATION
Item 1. Legal Proceedings.................................................. 8
Item 2. Changes in Securities.............................................. 8
Item 3. Defaults Upon Senior Securities ....................................8
Item 4. Submission of Matters to a Vote of Security Holders ................8
Item 5. Other Information ..................................................8
Item 6. Exhibits and Reports on Form 8-K ...................................8
Signatures .................................................................9
[CAPTION]
<TABLE>
CARC, INC.
Balance Sheet
September 30, 1998
(unaudited)
Assets
<S> <C>
Current assets:
Cash $ 426,333
Investments 199,596
Accounts receivable, net of allowance for
contractual adjustments of $5,000 134,573
Accrued interest receivable 9,187
Prepaid expenses 43,261
Inventory 11,120
Deferred tax asset 173,100
Total current assets 997,170
Property, plant, and equipment, net 6,301,047
Entrance fees in escrow 128,497
Other assets - principally loan refinancing costs 117,406
$ 7,544,120
Liabilities and Stockholders' Equity
Current liabilities:
Current installments of long-term debt $ 325,248
Accounts payable 74,947
Accrued liabilities 189,949
Unearned revenue 95,944
Total current liabilities 686,088
Deferred tax liability 21,500
Refundable entrance fees 128,497
Long-term debt, excluding current installments 4,223,281
Total liabilities 5,059,366
Stockholders' equity:
Common stock $1 par value. Authorized 600,000
shares; issued and outstanding 536,000 shares 536,000
Additional paid-in capital 2,111,886
Accumulated deficit (163,132)
Total stockholders' equity 2,484,754
$ 7,544,120
</TABLE>
[CAPTION]
<TABLE>
CARC, INC.
Statements of Operations
For the Three and Six Months Ended September 30, 1998 and 1997
(Unaudited)
<S> <C> <C> <C> <C>
Three Months Ended, Six Months Ended,
September 30 September 30
1998 1997 1998 1997
Operating revenues:
Apartments $ 450,621 $ 383,157 $ 887,450 $ 769,725
Health Care Center, net 416,813 434,833 844,101 862,527
Dietary 10,635 9,024 22,822 19,341
Residential services 425 1,140 1,463 2,055
Miscellaneous 2,076 937 5,341 937
Total operating revenues 880,570 829,091 1,761,177 1,654,585
Operating expenses:
Apartments 58,606 57,562 114,654 111,736
Health Care Center 229,829 207,782 448,942 399,230
Dietary 158,524 144,711 312,418 293,705
Residential Services 4,639 343 9,842 996
Maintenance and repair 24,991 27,263 52,088 52,339
Housekeeping 32,915 32,752 67,089 66,861
Administrative and general 85,403 71,823 161,906 145,255
Depreciation and amortization 93,703 69,083 178,962 138,049
Utilities 45,259 43,057 84,654 81,011
Interest 90,861 47,120 182,440 95,627
Property taxes 24,497 20,558 47,816 41,117
Miscellaneous - 620 3,661 620
Total operating expenses 849,227 722,674 1,664,472 1,426,546
Income from operations 31,343 106,417 96,705 228,039
Nonoperating revenue (expense):
Interest and investment income 8,138 8,544 16,052 15,950
Loss on disosal of equipment - - - (5,703)
Nonoperating revenue 8,138 8,544 16,052 10,247
Income before income tax expense 39,481 114,961 112,757 238,286
Income tax expense (13,500) - (37,500) -
Net income $ 25,981 $ 114,961 $ 75,257 $ 238,286
Basic earnings per share $ .05 $ .21 $ .14 $ .44
Weighted average number of shares
outstanding during the period 536,000 536,000 536,000 536,000
</TABLE>
[CAPTION]
<TABLE>
CARC, INC.
Statement of Stockholders' Equity
For the Six Months Ended September 30, 1998
(Unaudited)
<S> <C> <C> <C> <C>
Additional Total
Common Paid-In Accumulated Stockholders'
Stock Capital Deficit Equity
Balances at March 31, 1998 $ 536,000 $ 2,111,886 $ (238,389) $ 2,409,497
Net income - - 75,257 75,257
Balances at September 30,1998 $ 536,000 $ 2,111,886 $ (163,132) $ 2,484,754
</TABLE>
[CAPTION]
<TABLE>
CARC, INC.
Statements of Cash Flows
For the Six Months Ended September 30, 1998 and 1997
(Unaudited)
<S> <C> <C>
1998 1997
Cash flows from operating activities:
Net income $ 75,257 $ 238,286
Adjustment to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 178,962 138,049
Loss on disposal of equipment - 5,703
Provision for deferred income taxes 37,500 -
Decrease (increase) in:
Cash - funds held for others (15,680) (857)
Accounts receivable (29,336) (4,543)
Accrued interest receivable 4,771 7,603
Prepaid expenses (33,812) (28,804)
Other assets - (50,912)
Increase (decrease)in:
Accounts payable (94,306) 252,763
Accrued liabilities 47,377 44,271
Unearned revenue 86,450 32,018
Deposits held for others 15,680 857
Net cash provided by operating activities 272,863 634,434
Cash flows from investing activities:
Capital expenditures (195,635) (977,131)
Cash flows from financing activities:
Principal payments of long-term debt (212,552) (298,131)
Proceeds from bank loan 268,739 682,375
Net cash provided by financing activities 56,187 384,244
Net increase in cash 133,415 41,547
Cash at beginning of period 292,918 236,236
Cash at end of period $ 426,333 $ 277,783
</TABLE>
See accompanying notes to interim financial statements.
CARC, INC.
Notes to Interim Financial Statements
September 30, 1998
(1) Basis of Presentation
The accompanying unaudited financial statements, which are for interim
periods, do not include all disclosures provided in the annual financial
statements. These unaudited interim financial statements should be read in
conjunction with the audited financial statements and the footnotes
thereto contained in the Annual Report on Form 10-KSB for the year ended
March 31, 1998 of CARC, Inc., (the "Center") as filed with the Securities
and Exchange Commission.
(2) Interim Periods
In the opinion of the Center, the accompanying unaudited interim financial
statements contain all adjustments (which are of a normal recurring
nature) necessary for a fair presentation of the financial statements.
The results of operations for the three and six months ended
September 30, 1998 are not necessarily indicative of the results to be
expected for the entire year.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Financial Condition
The balance sheet of the Center has not materially changed from
March 31, 1998 to September 30, 1998. Total assets increased by
approximately $187,000 and stockholders' equity increased by net
income for the six months of approximately $75,000.
Results of Operations - For the six months ended September 30, 1998
compared to the six months ended September 30, 1997.
Net income for the six months ended September 30, 1998 decreased by
approximately $163,000. This decrease was the result of additional
depreciation and amortization expense and debt service cost offset
by increased operating revenues.
Operating Revenues
Operating Revenues for the six months ended September 30, 1998 and
1997 were $1,760,000 and $1,655,000, respectively. The overall
increase in operating revenues of approximately $105,000 is due
primarily to the additional apartment income made available by the
expanded facilities. In addition, there was a three percent increase
in rates occurring in the third quarter of 1997 in health care center
and apartment revenues, which is reflected in operating revenues for
the quarter ending September 30, 1998.
Operating Expenses
Operating expenses for the three months ended September 30, 1998 and
1997 were approximately $1,663,000 and $1,427,000, respectively. The
increase of $236,000 in expenses was primarily demonstrated in the
following areas of operations. Healthcare expenses increased $49,000
due to the increased use of temporary employees. Depreciation and
amortization expense increased $41,000 as a result of the new
buildings completed and amortization of loan costs. Interest expense
increased $87,000 as a result of the additional facilities'
financing. Residential services expense increased $9,000 due to
hiring an activities director for the new activities building. Other
operating expenses remained relatively stable in comparison to the
same period in 1997.
Nonoperating revenue
Nonoperating revenues, which consist primarily of interest and
investment income, for the six months ended September 30, 1998
remained relatively stable in comparison to 1997. The six months
ended September 30, 1997 did reflect a loss on equipment disposition
of approximately $6,000.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Liquidity
The Center generated $273,000 in cash flows from operating
activities and $56,000 from financing activities for the six months
ended June 30, 1998. The cash flows were used primarily to fund
$196,000 of capital expenditures.
Year 2000
The Company has addressed its Year 2000 compliance issues internally
through a plan which included upgrading computer terminals at a
minimal cost. The network operating system is scheduled to be
upgraded to Windows 95 by January 1999. Estimated costs of this
upgrade range from $7,000 to $10,000. Externally, the Company has
received notification from significant vendors and its primary
financial institution confirming their Year 2000 compliance.
The Company will continue to monitor the Year 2000 issue and, if
necessary, develop a contingency plan to enable operations to
continue and its financial position and operating results not to be
materially impacted should their current plans not provide the
desired results.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
There are no material pending legal proceedings, other than
ordinary routine litigation incidental to its business, to which
the CARC, Inc. is a party or to which any of its property is the
subject.
Item 2. Changes in Securities
There have been no changes in securities during the reporting
period.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
A. Exhibit 27.1 Financial Data Schedule
There were no reports on Form 8-K filed for the quarter ended
September 30, 1998.
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 thereunto duly authorized.
CARC, Inc.
Clemson, South Carolina
Date: November 10, 1998 By: /s/ Anita M. Davis
Anita M. Davis
Administrator
(Principal executive
officer)
Date: November 10, 1998 By: /s/ Debra Turner
Debra Turner
Accountant
(Principal Financial and
Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
<CASH> 426,333
<SECURITIES> 199,596
<RECEIVABLES> 139,573
<ALLOWANCES> 5,000
<INVENTORY> 11,120
<CURRENT-ASSETS> 997,170
<PP&E> 10,404,610
<DEPRECIATION> 4,103,563
<TOTAL-ASSETS> 7,544,120
<CURRENT-LIABILITIES> 686,088
<BONDS> 4,223,281
0
0
<COMMON> 536,000
<OTHER-SE> 1,948,754
<TOTAL-LIABILITY-AND-EQUITY> 7,544,120
<SALES> 0
<TOTAL-REVENUES> 1,761,177
<CGS> 0
<TOTAL-COSTS> 1,482,032
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 182,440
<INCOME-PRETAX> 112,757
<INCOME-TAX> 37,500
<INCOME-CONTINUING> 75,257
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 75,257
<EPS-PRIMARY> .14
<EPS-DILUTED> .14
</TABLE>
