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 DECEMBER 31, 1997
[ ] 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
December 31, 1997 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 December 31, 1997................... 1
Unaudited Statements of Operations
for the Three Months and Nine Months
Ended December 31, 1997 and 1996............................... 2
Unaudited Statement of Stockholders'
Equity for the Nine Months
Ended December 31, 1997 ........................................3
Unaudited Statements of Cash Flows for
the Nine Months Ended December 31, 1997 and 1996............... 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
<TABLE>
<CAPTION>
CARC, INC.
Balance Sheet
December 31, 1997
(unaudited)
<S> <C>
Assets
Current assets:
Cash $ 280,561
Investments 207,344
Accounts receivable, net of allowance for
contractual adjustments of $5,000 127,021
Accrued interest receivable 9,448
Prepaid expenses 24,770
Inventory 10,799
Total current assets 659,943
Property, plant, and equipment, net 5,505,799
Entrance fees in escrow 104,085
Other assets - principally loan refinancing costs 127,332
$ 6,397,159
Liabilities and Stockholders' Equity
Current liabilities:
Current installments of long-term debt $ 270,564
Accounts payable 327,835
Accrued liabilities 84,778
Unearned revenue 59,321
Total current liabilities 742,498
Refundable entrance fees 104,085
Long-term debt, excluding current installments 3,396,695
Total liabilities 4,243,278
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 (494,005)
Total stockholders' equity 2,153,881
$ 6,397,159
See accompanying notes to interim financila statements.
</TABLE>
<TABLE>
<CAPTION>
CARC, INC.
Statements of Operations
For the Three and Nine Months Ended December 31, 1997 and 1996
(unaudited)
<S> <C> <C> <C> <C>
Three Months Ended Nine Months Ended
December 31, December 31,
1997 1996 1997 1996
Operating revenues:
Apartments $ 384,010 $ 389,633 $ 1,153,735 $ 1,126,855
Health Care Center 425,664 431,643 1,288,191 1,190,775
Dietary 11,071 13,249 30,412 36,678
Residential services 1,188 1,039 3,242 5,795
Miscellaneous 2,146 2,508 2,464 9,411
Total operating revenues 824,079 838,072 2,478,044 2,369,514
Operating expenses:
Apartments 45,606 53,713 157,341 162,952
Health Care Center 214,966 219,096 614,196 608,308
Dietary 149,025 155,071 442,730 455,310
Residential services 60 890 1,056 5,796
Maintenance and repair 25,091 24,619 77,430 78,391
Housekeeping 32,200 34,852 99,062 94,452
Administrative and general 72,931 65,202 218,186 209,809
Depreciation and amortization 69,179 70,897 207,227 214,022
Utilities 37,341 39,229 118,353 127,507
Interest 47,779 51,674 143,406 163,910
Property taxes 22,176 20,774 63,293 61,706
Total operating expenses 716,354 736,017 2,142,280 2,182,163
Income from operations 107,725 102,055 335,764 187,351
Nonoperating revenue (expense):
Interest and investment income 8,131 6,286 24,081 20,524
Loss on disposal of equipment - - (5,703) (527)
Nonoperating revenue (expense)8,131 6,286 18,378 19,997
Net income $ 115,856 $ 108,341 $ 354,142 $ 207,348
Per share information:
Net income $ .22 $ .20 $ .66 $ .39
Weighted average number of shares
outstanding during the period 536,000 536,000 536,000 536,000
See accompanying notes to interim financial statements.
</TABLE>
<TABLE>
<CAPTION>
CARC, INC.
Statement of Stockholders' Equity
For the Nine Months Ended December 31, 1997
(Unaudited)
<S> <C> <C> <C> <C>
Additional Total
Common Paid-In Accumulated Stockholders'
Stock Capital Deficit Equity
Balances at
March 31, 1997 $ 536,000 $ 2,111,886 $ (848,147) $ 1,799,739
Net income - - 354,142 354,142
Balances at
December 31, 1997 $ 536,000 $ 2,111,886 $ (494,005) $ 2,153,881
</TABLE>
<TABLE>
<CAPTION>
CARC, INC.
Statements of Cash Flows
For the Nine Months Ended December 31, 1997 and 1996
(Unaudited)
<S> <C> <C>
1997 1996
Cash flows from operating activities:
Net income $ 354,142 $ 207,348
Adjustment to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 207,227 214,022
Loss on disposal of equipment 5,703 527
Decrease (increase) in:
Cash - funds held for others 1,733 (5,625)
Accounts receivable (8,672) 1,019
Accrued interest receivable 5,895 (3,928)
Prepaid expenses (12,978) (5,242)
Other assets (50,911) (2,500)
Increase (decrease) in:
Accounts payable 273,870 114,725
Accrued expenses (40,079) (35,388)
Unearned revenue 32,801 40,274
Deposits held for others (1,733) 5,625
Net cash provided by operating activitie 766,998 530,857
Cash flows from investing activities:
Capital expenditures (1,831,900) (131,470)
Proceeds from sale of equipment - 50
Release by Board of assets whose use is limited - 109,336
Net cash used in investing activities (1,831,900) (22,084)
Cash flows from financing activities:
Principal payments of long-term debt (377,026) (351,913)
Proceeds from bank loan 1,486,253 -
Net cash provided by (used
in) financing activities 1,109,227 (351,913)
Net increase in cash 44,325 156,860
Cash at beginning of period 236,236 225,709
Cash at end of period $ 280,561 $ 382,569
See accompanying notes to interim financial statements.
</TABLE>
CARC, INC.
Notes to Interim Financial Statements
December 31, 1997
(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 financial statements should be read in
conjunction with the financial statements and the footnotes thereto
contained in the Annual Report on Form 10-KSB for the year ended
March 31, 1997 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 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 nine months ended December 31, 1997
are not necessarily indicative of the results to be expected for the
full year.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Financial Condition
During the first quarter of 1997, the Center began construction of
a twenty unit two-bedroom apartment building and an activity center.
At December 31, 1997, the project is approximately 69% complete.
There have been no other significant changes in the Center's
financial condition since March 31, 1997.
Results of Operations - For the nine months ended December 31, 1997
compared to nine months ended December 31, 1996.
Net income for the nine months ended December 31, 1997 increased
$147,000 or 71% compared to 1996.
Operating Revenues
Operating revenues for the nine months ended December 31, 1997 and
1996 were $2,478,000 and $2,369,000, respectively. The overall
increase in operating revenues of $109,000 is due primarily to a
five percent increase of rates occurring during the first quarter of
1997 in health care center and apartment revenues, and a Medicare
rate adjustment totaling $7,800.
Operating Expenses
Operating expenses for nine months ended December 31, 1997 and 1996
were $2,142,000 and $2,182,000, respectively. The net decrease of
$40,000 was primarily attributable to decreases in expenses for
apartments, interest expense, and utilities which were offset by an
increase in housekeeping and general and administrative expenses.
Routine maintenance expenses of the apartments decreased
approximately $6,000. Interest expense decreased $21,000 due to a
reduction of the principal balance of the mortgage. Housekeeping
expenses increased approximately $5,000 due to an increase in
temporary employees. Administrative and general expenses increased
approximately $8,000 due to overall salary increases. Other
operating expenses remained relatively stable.
Nonoperating revenue
Nonoperating revenues, which consist primarily of interest and
investment income, for the nine months ended December 31, 1997
remained relatively stable.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Liquidity
The Center generated $767,000 in cash flows from operating activities
and $1,109,000 from financing activities for the nine months ended
December 31, 1997. The cash flows were used primarily to fund
$1,832,000 of capital expenditures.
Future Commitments for Capital Expenditures
During the nine months ended December 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. Approximately $1,790,000 has
been spent on the construction as of December 31, 1997.
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 - 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
Item 6. Exhibits and Reports on Form 8-K
A. Exhibits None.
B. There were no reports on Form 8-K filed for the quarter ended
December 31, 1997.
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: February 2, 1998 By: /s/ Anita M. Davis
Anita M. Davis
Administrator
(Principal executive officer)
Date: February 2, 1998 By: /s/ Debra Turner
Debra Turner
Accountant
(Principal Financial and
Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> DEC-31-1997
<CASH> 280,561
<SECURITIES> 207,344
<RECEIVABLES> 132,021
<ALLOWANCES> 5,000
<INVENTORY> 10,799
<CURRENT-ASSETS> 659,943
<PP&E> 9,375,531
<DEPRECIATION> 3,869,732
<TOTAL-ASSETS> 6,397,159
<CURRENT-LIABILITIES> 742,498
<BONDS> 3,396,695
0
0
<COMMON> 536,000
<OTHER-SE> 494,005
<TOTAL-LIABILITY-AND-EQUITY> 6,397,159
<SALES> 0
<TOTAL-REVENUES> 2,478,044
<CGS> 0
<TOTAL-COSTS> 2,142,280
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 143,406
<INCOME-PRETAX> 354,142
<INCOME-TAX> 0
<INCOME-CONTINUING> 354,142
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 354,142
<EPS-PRIMARY> 0.66
<EPS-DILUTED> 0
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