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, 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
December 31, 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 December 31, 1998...................... 1
Unaudited Statements of Operations for the
Three Months and Nine Months Ended
December 31, 1998 and 1997........................................ 2
Unaudited Statement of Stockholders'
Equity for the Nine Months
Ended December 31, 1998........................................... 3
Unaudited Statements of Cash Flows
for the Nine Months Ended
December 31, 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
December 31, 1998
(unaudited)
Assets
<S> <C>
Current assets:
Cash $ 450,135
Investments 199,596
Accounts receivable, net of allowance for
contractual adjustments of $5,000 130,250
Accrued interest receivable 8,597
Prepaid expenses 27,038
Inventory 11,120
Deferred tax asset 160,500
Total current assets 987,236
Property, plant, and equipment, net 6,219,720
Entrance fees in escrow 127,048
Other assets - principally loan refinancing costs 113,852
$ 7,447,856
Liabilities and Stockholders' Equity
Current liabilities:
Current installments of long-term debt $ 325,248
Accounts payable 148,509
Accrued liabilities 110,423
Unearned revenue 85,456
Total current liabilities 669,636
Deferred tax liability 21,500
Refundable entrance fees 127,048
Long-term debt, excluding current installments 4,114,186
Total liabilities 4,932,370
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 (132,400)
Total stockholders' equity 2,515,486
$ 7,447,856
</TABLE>
[CAPTION]
<TABLE>
CARC, INC.
Statements of Operations
For the Three and Nine Months Ended December 31, 1998 and 1997
(Unaudited)
<S> <C> <C> <C> <C>
Three Months Ended, Nine Months Ended,
December 31 December 31
1998 1997 1998 1997
Operating revenues:
Apartments $ 434,074 $ 384,010 $ 1,321,525 $ 1,153,735
Health Care Center, net 435,437 425,664 1,279,538 1,288,191
Dietary 12,775 11,071 35,597 30,412
Residential services 847 1,188 2,310 3,242
Miscellaneous 270 2,146 4,136 2,464
Total operating revenues 883,403 824,079 2,643,106 2,478,044
Operating expenses:
Apartments 61,675 45,606 176,331 157,341
Health Care Center 234,836 214,966 683,778 614,196
Dietary 148,362 149,025 460,778 442,730
Residential services 5,354 60 15,198 1,056
Maintenance and repair 24,007 25,091 76,096 77,430
Housekeeping 33,735 32,200 100,826 99,062
Administrative and general 92,326 72,931 254,231 218,186
Depreciation and amortization 92,954 69,179 271,916 207,227
Utilities 41,248 37,341 125,899 118,353
Interest 88,401 47,779 270,841 143,406
Property taxes 24,497 22,176 72,312 63,293
Miscellaneous 683 - 2,869 -
Total operating expenses 848,078 716,354 2,511,075 2,142,280
Income (loss) from operations 35,325 107,725 132,031 335,764
Nonoperating revenue (expense):
Interest and investment income 8,005 8,131 24,058 24,081
Loss on disposal of equipment - - - (5,703)
Nonoperating revenue 8,005 8,131 24,058 18,378
Income before income tax expense 43,330 115,856 156,089 354,142
Income tax expense 12,600 - 50,100 -
Net income $ 30,730 $ 115,856 $ 105,989 $ 354,142
Basic earnings per share $ .06 $ .22 $ .20 $ .66
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 Nine Months Ended December 31, 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 - - 105,989 105,989
Balances at
December 31, 1998 $ 536,000 $ 2,111,886 $ (132,400) $ 2,515,486
</TABLE>
[CAPTION]
<TABLE>
CARC, INC.
Statements of Cash Flows
For the Nine Months Ended December 31, 1998 and 1997
(Unaudited)
<S> <C> <C>
1998 1997
Cash flows from operating activities:
Net income $ 105,989 $ 354,142
Adjustment to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 271,916 207,227
Loss on disposal of equipment - 5,703
Provision for deferred income taxes 50,100 -
Decrease (increase) in:
Cash - funds held for others (14,231) 1,733
Accounts receivable (25,013) (8,672)
Accrued interest receivable 5,361 5,895
Prepaid expenses (17,589) (12,978)
Other assets - (50,911)
Increase (decrease) in:
Accounts payable (20,744) 273,870
Accrued liabilities (32,149) (40,079)
Unearned revenue 75,962 32,801
Deposits held for others 14,231 (1,733)
Net cash provided by operating activities 413,833 766,998
Cash flows from investing activities:
Capital expenditures (203,708) (1,831,900)
Cash flows from financing activities:
Principal payments of long-term debt (321,647) (377,026)
Proceeds from bank loan 268,739 1,486,253
Net cash provided by (used in)
financing activities (52,908) 1,109,227
Net increase in cash 157,217 44,325
Cash at beginning of period 292,918 236,236
Cash at end of period $ 450,135 $ 280,561
</TABLE>
CARC, INC.
Notes to Interim Financial Statements
December 31, 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 nine months ended December 31, 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 December 31, 1998. Total assets increased by
approximately $103,000 and stockholders' equity increased by net
income for the nine months of approximately $106,000.
On November 6, 1998, the Center began offering home health services
to its apartment residents. The Center is also in the planning stage
of upgrading one of its buildings to provide assisted living to
residents.
Results of Operations - For the nine months ended December 31, 1998
compared to the nine months ended December 31, 1997.
Net income for the nine months ended December 31, 1998 decreased by
approximately $248,000. This decrease was the result of additional
depreciation and amortization expense, debt service cost, and income
tax expense offset by increased operating revenues.
Operating Revenues
Operating Revenues for the nine months ended December 31, 1998 and
1997 were $2,643,000 and $2,478,000, respectively. The overall
increase in operating revenues of approximately $165,000 is due
primarily to the additional apartment income made available by the
expanded facilities. In addition, the nine months ended December 31,
1998 reflect a 3% increase in rates over 1997.
Operating Expenses
Operating expenses for the nine months ended December 31, 1998
and 1997 were approximately $2,511,000 and $2,142,000, respectively.
The increase of $369,000 in expenses was primarily demonstrated in
the following areas of operations. Healthcare expenses increased
$70,000 due to the increased use of temporary employees.
Depreciation and amortization expense increased $65,000 as a result
of the new buildings completed and amortization of loan costs.
Interest expense increased $127,000 as a result of the additional
facilities's financing. Residential services expense increased
$14,000 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 and Expenses
Nonoperating revenues, which consist primarily of interest and
investment income, for the nine months ended December 31, 1998
remained relatively stable in comparison to 1997. The nine months
ended December 31, 1997 did reflect a loss on equipment disposition
of approximately $6,000.
Liquidity
The Center generated $414,000 in cash flows from operating activities
and $269,000 from a bank loan for the nine months ended December
31, 1998. The cash flows were used primarily to fund $204,000 of
capital expenditures and repay long-term debt of $322,000.
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 was upgraded to Windows 95
in December 1998. 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
B. There were no reports on Form 8-K filed for the quarter ended
December 31, 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: February 4, 1999 By: /s/ Susan Davis
Susan Davis
Administrator
(Principal executive officer)
Date: February 4, 1999 By: /s/ Debra Turner
Debra Turner
Accountant
(Principal Financial and Accounting
Officer)
