<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
------------------------------
For Quarter Ended September 30, 1996 Commission file number 0-11656
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
A Delaware Corporation I.R.S. No. 22-1807533
Two Nationwide Plaza, Suite 760, Columbus, Ohio 43215
Registrant's Telephone No. (614) 221-6000
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of 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 [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
Common Stock, as of the latest practicable date.
EACH OF THE FOLLOWING CLASSES ARE REGISTERED ON THE AMERICAN STOCK EXCHANGE.
<TABLE>
<CAPTION>
Class Outstanding at October 31, 1996
----- -------------------------------
<S> <C>
Common Stock, par value 6,236,020
$.01 per share
Common Stock Purchase Warrants 414,538 (1)
<FN>
(1) Upon exercise, represents 1,139,980 shares of The
Wendt-Bristol Health Services Corporation.
</TABLE>
<PAGE> 2
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
---------------------------------------------
FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1996
--------- ----------------------------------------
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
---------------------------------------------
AND SUBSIDIARIES
----------------
I N D E X
<TABLE>
<CAPTION>
Part I Page No.
- ------ ---------
<S> <C>
Financial Statements:
Consolidated Balance Sheets - December 31, 1995 and
September 30, 1996 (Unaudited) 3-4
Consolidated Statements of Operations (Unaudited)
Three and Nine Months Ended September 30, 1996 and 1995 5
Consolidated Statements of Cash Flow (Unaudited)
Nine Months Ended September 30, 1996 and 1995 6-7
Notes to Consolidated Financial Statements 8-10
Management's Discussion and Analysis of Financial Condition
and Results of Operations 11-13
Part II
Other Information 14
Signatures 14
Exhibits 14
</TABLE>
2
<PAGE> 3
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
---------------------------------------------
FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1996
--------- ----------------------------------------
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS AT SEPTEMBER 30, 1996 AND DECEMBER 31, 1995
ASSETS
<TABLE>
<CAPTION>
September 30 December 31
1996 1995
------------ ------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash $ 102,014 $ 35,825
------------ ------------
Restricted cash 368,219 310,912
------------ ------------
Receivables:
Trade, net of allowance for doubtful
accounts of $ 200,000 (September)
and $340,000 (December) 1,509,848 2,678,551
Notes receivable 109,953 49,920
Miscellaneous 845,578 858,032
------------ ------------
2,465,379 3,586,503
------------ ------------
Inventories 496,343 489,042
Prepaid expenses and other 358,691 402,824
------------ ------------
Total current assets 3,790,646 4,825,106
------------ ------------
Property, plant and equipment, at cost 20,816,046 19,531,862
Less: Accumulated depreciation and
amortization (5,901,792) (5,243,057)
------------ ------------
14,914,254 14,288,805
------------ ------------
Investments and other assets:
Notes and other receivables, net of current portion 367,584 395,912
Notes receivable from officers, employees and
related parties, net of amounts payable 964,442 863,509
Life insurance premiums receivable 842,394 758,795
Excess of cost over assets of businesses
and subsidiaries acquired, less amortization 627,104 637,729
Deferred charges 955,167 776,622
Other assets 265,835 260,847
------------ ------------
Total investments and other assets 4,022,526 3,693,414
------------ ------------
$ 22,727,426 $ 22,807,325
============ ============
</TABLE>
(Continued)
The accompanying notes are an integral part of the financial statements.
3
<PAGE> 4
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
---------------------------------------------
FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1996
--------- ----------------------------------------
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Continued)
AS AT SEPTEMBER 30, 1996 AND DECEMBER 31, 1995
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
September 30 December 31
1996 1995
------------ ------------
(Unaudited)
<S> <C> <C>
Current liabilities:
Accounts payable $ 1,906,626 $ 2,836,474
Accrued expenses and other liabilities:
Salaries and wages 452,080 451,718
Taxes, other than federal income taxes 939,515 1,315,508
Interest 113,392 87,520
Stock purchase agreement payable 625,000 625,000
Other 1,001,483 1,987,634
Long-term obligations classified as current 906,482 2,760,789
Federal income taxes payable -- 100,000
------------ ------------
Total current liabilities 5,944,578 10,164,643
------------ ------------
Long-term obligations, less amounts classified
as current 11,731,650 7,880,566
------------ ------------
Total liabilities 17,676,228 18,045,209
------------ ------------
Minority interests 343,249 219,541
------------ ------------
Stockholders' equity:
Common stock: $.01 par;
authorized: 12,000,000 shares
issued: 8,243,480 shares 82,435 82,435
Capital in excess of par 10,264,751 10,274,974
Retained earnings (deficit) (2,716,178) (2,872,818)
------------ ------------
7,631,008 7,484,591
Treasury stock, at cost, 2,507,460 shares (September)
and 2,523,722 shares (December) (2,923,059) (2,942,016)
------------ ------------
Total stockholders' equity 4,707,949 4,542,575
------------ ------------
$ 22,727,426 $ 22,807,325
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE> 5
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
---------------------------------------------
FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1996
--------- ----------------------------------------
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
September 30 September 30
---------------------------- --------------------------
1996 1995 1996 1995
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
Revenues:
Net sales $ 2,085,074 $ 2,012,077 $ 709,033 $ 660,085
Service income 14,187,278 13,687,012 4,818,996 4,418,222
------------ ------------ ----------- -----------
16,272,352 15,699,089 5,528,029 5,078,307
------------ ------------ ----------- -----------
Costs and expenses:
Cost of sales 1,515,526 1,369,777 535,157 449,172
Selling, general and administrative
expenses, net 13,003,451 12,517,093 4,425,138 4,055,859
------------ ------------ ----------- -----------
14,518,977 13,886,870 4,960,295 4,505,031
------------ ------------ ----------- -----------
Operating income before depreciation 1,753,375 1,812,219 567,734 573,276
Depreciation 730,303 877,484 266,779 295,656
------------ ------------ ----------- -----------
Operating income 1,023,072 934,735 300,955 277,620
------------ ------------ ----------- -----------
Other income (expense):
Minority interests in (earnings) losses, net (125,981) 27,383 (18,170) 37,165
Interest expense (788,156) (887,974) (303,099) (287,926)
Other, net 73,705 52,003 41,855 15,420
------------ ------------ ----------- -----------
(840,432) (808,588) (279,414) (235,341)
------------ ------------ ----------- -----------
Income before income taxes 182,640 126,147 21,541 42,279
Income tax expense (26,000) (58,000) (10,329) (13,000)
------------ ------------ ----------- -----------
Net income $ 156,640 $ 68,147 $ 11,212 $ 29,279
============ ============ =========== ===========
Income per common share $ 0.03 $ 0.01 $ -- $ --
============ ============ =========== ===========
Weighted average shares outstanding 5,730,975 6,658,894 5,736,020 6,219,758
============ ============ =========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE> 6
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
---------------------------------------------
FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1996
--------- ----------------------------------------
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended September 30
------------------------------
1996 1995
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 156,640 $ 68,147
----------- -----------
Adjustments required to reconcile net income
to net cash provided by operating activities:
Amortization, depreciation and other, net 745,313 888,145
Provision for losses on notes and accounts receivable 65,174 64,788
Minority interest in earnings (losses) of consolidated subsidiaries 125,981 (27,383)
Changes in assets and liabilities:
Receivables
Sale of receivables 970,550 --
Other changes 168,933 (159,815)
Merchandise inventories (7,301) (95,974)
Prepaid expenses and other current assets 52,867 342,567
Accounts payable (929,848) (316,014)
Accrued expenses and other liabilities (1,335,910) (37,223)
Federal income taxes payable (100,000) (175,000)
Deferred charges and other (209,687) (44,544)
----------- -----------
Total adjustments (453,928) 439,547
----------- -----------
Net cash provided by (used in) operating activities (297,288) 507,694
----------- -----------
Cash flows from investing activities:
Purchase of minority interest from limited partners -- (150,000)
Collection of miscellaneous receivable -- 1,700,000
(Increase) decrease in notes receivable (31,705) 68,210
Disbursements to related parties
and former affiliates, net (180,532) (170,823)
Utilization of or (deposit to) restricted cash (57,307) 245,684
Capital expenditures (480,130) (311,597)
----------- -----------
Net cash provided by (used in) investing activities (749,674) 1,381,474
----------- -----------
Cash flows from financing activities:
Purchase of common stock of subsidiary (8,000) (2,000)
Proceeds from warrants exercised -- 3,750
Principal payments of long-term obligations (920,710) (1,520,261)
Proceeds from long-term obligations 1,618,453 --
Net change in revolving credit agreement 423,408 --
Net borrowings from securitization program -- (478,500)
----------- -----------
Net cash provided by (used in) financing activities 1,113,151 (1,997,011)
----------- -----------
Net increase (decrease) in cash 66,189 (107,843)
Cash at beginning of period 35,825 182,042
----------- -----------
Cash at end of period $ 102,014 $ 74,199
=========== ===========
</TABLE>
(Continued)
The accompanying notes are an integral part of the financial statements.
6
<PAGE> 7
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
---------------------------------------------
FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1996
--------- ----------------------------------------
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended September 30
------------------------------
1996 1995
----------- -----------
<S> <C> <C>
Cash paid during the nine months for:
Interest $ 762,284 $ 916,615
Income taxes $ 136,830 $ 222,705
Supplemental disclosures of noncash investing and financing activity:
A partnership, of which the Company is the managing general partner
purchased equipment which was financed by entering into an installment
finance agreement.
Increase in equipment cost, net $ 875,626
Increase in long-term obligations (875,626)
Common stock of the Company (2,000,000 shares) and common stock of a
subsidiary (300,000 shares) were exchanged for 30,000 shares of preferred
stock, par value $100 per share, owned by the Company in Life Holdings,
Inc.
Decrease in investment in preferred stock, at cost $(3,000,000)
Decrease in minority interest 512,653
Increase in treasury stock 2,487,347
A subsidiary of the Company incurred costs for the construction of an
Alzheimer's and related disorders facility with draws against a HUD-insured
financing agreement
Increase in long-term obligations $ (166,826)
Increase in prepaid expenses and other current assets 45,116
Decrease in accounts payable 121,710
A subsidiary of the Company has sold the operating assets, net of
associated liabilities to a related party in exchange for an interest
bearing note.
Increase in notes receivable from officers, employees and related
parties, net of amounts payable:
Note arising in transaction $ 574,949
Other (55,936)
Decrease in accounts payable 48,624
Decrease in accrued expenses and other liabilities 83,006
Decrease in trade and miscellaneous receivables (4,668)
Decrease in inventories (126,703)
Decrease in prepaid expenses and other current assets (38,409)
Decrease in property, plant and equipment, net (240,079)
Decrease in deferred charges (500)
Decrease in other assets (240,284)
</TABLE>
The accompanying notes are an integral part of the financial statements
7
<PAGE> 8
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
---------------------------------------------
FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1996
--------- ----------------------------------------
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
---------------------------------------------
AND SUBSIDIARIES
----------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. MANAGEMENT'S REPRESENTATION
In the opinion of Management, the accompanying unaudited consolidated financial
statements contain all adjustments (consisting only of normal adjustments and
recurring accruals) necessary to present fairly The Wendt-Bristol Health
Services Corporation ("Wendt-Bristol" or "Company") and subsidiaries
consolidated financial position as at September 30, 1996 and December 31, 1995
and the consolidated results of its operations for the three and nine months
ended September 30, 1996 and 1995 as well as the cash flows for the respective
nine months. The results of operations for any interim period are not
necessarily indicative of results for the full year. THESE FINANCIAL STATEMENTS
SHOULD BE READ IN CONJUNCTION WITH THE FINANCIAL STATEMENTS AND NOTES THERETO
CONTAINED IN THE WENDT-BRISTOL ANNUAL REPORT FILED AS FORM 10-K FOR THE YEAR
ENDED DECEMBER 31, 1995, WHICH IS HEREBY INCORPORATED BY REFERENCE.
2. RECLASSIFICATIONS
Cash required to be held in escrow by HUD for "Replacement Reserves" at the
nursing homes in the amount of $146,950 has been reclassified from Prepaid
expenses to Restricted cash on the December 31, 1995 balance sheet to conform
with the presentation at September 30, 1996, which includes "Replacement
Reserves" in the amount of $198,499.
3. INCOME TAXES
The Company utilizes the provisions of SFAS No. 109 which requires the use of
the liability method of accounting for deferred income taxes. As a result, the
Company has recognized a deferred tax liability, a deferred tax asset and a
valuation allowance against the deferred tax assets. A summary of the December
31, 1995 attributes is as follows:
<TABLE>
<S> <C>
Deferred tax assets $ 2,000,200
Less: valuation allowance 300,000
-----------
1,700,200
Deferred tax liabilities 1,530,800
-----------
Net deferred tax asset $ 169,400
===========
</TABLE>
During 1996, the Company does not expect to incur any current Federal tax
liability since it will be able to utilize net operating loss carry forwards to
reduce taxable income to zero.
(Continued)
8
<PAGE> 9
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
---------------------------------------------
FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1996
--------- ----------------------------------------
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
---------------------------------------------
AND SUBSIDIARIES
----------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. INCOME TAXES (CONTINUED)
Federal, state and local taxes are summarized as follows:
<TABLE>
<CAPTION>
Nine months ended Three months ended
September 30, September 30,
----------------- ------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Federal income taxes:
Current expense $ - $45,000 $ - $10,000
State and local taxes:
Current expense 26,000 13,000 10,329 3,000
------ ------- ------- -------
Total tax expense $26,000 $58,000 $10,329 $13,000
======= ======= ======= =======
</TABLE>
4. STOCKHOLDERS' EQUITY
At September 30, 1996 there were 414,538 Common Stock purchase warrants
outstanding, exercisable at $3.75 per warrant. Each warrant, upon exercise,
provides two and three quarters (2 3/4) shares of the Company's common stock and
a Series II warrant (issuable upon completion of appropriate Securities and
Exchange Commission filings) exercisable for two shares at $3.00/share. The
Warrants' expiration dates, as amended by the Board of Directors in April 1996,
are May 1, 1997 for the initial Warrant and May 1, 1998 for the Series II
Warrants. No warrants were exercised during the nine or three months ended
September 30, 1996.
Earnings per share were computed using the weighted average number of shares
outstanding (net of Treasury shares) during each period. The common stock
equivalents (warrants and options) are anti-dilutive, thereby yielding similar
primary and fully diluted per share amounts.
5. FINANCING TRANSACTIONS
A. On April 1, 1996, the Company refinanced a mortgage at the Diagnostics and
Radiology Center, operated by a partnership of which a subsidiary is the general
partner. The mortgage of $712,500 bears a fixed interest rate of 9.41%, payable
in monthly installments through April, 2005, with any remaining balance due on
that date. Funds provided from the mortgage are for working capital related to
the expansion of operations at the facility.
(continued)
9
<PAGE> 10
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
---------------------------------------------
FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1996
--------- ----------------------------------------
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
---------------------------------------------
AND SUBSIDIARIES
----------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. FINANCING TRANSACTIONS (CONTINUED)
B. On April 19, 1996, the Company refinanced the mortgage relating to the New
Jersey property leased by the purchaser of its former manufacturing division.
The mortgage was initially due on October 1, 1995 but the Company received a
short-term extension from the lender; therefore, the entire balance of
approximately $1,640,000 was classified as current on the December 31, 1995
Balance Sheet. Terms of the new five-year $1,700,000 mortgage include
amortization on a ten year basis, a five-year renewal option and interest at
prime plus three percent.
C. On May 30, 1996, certain subsidiaries of the Company entered into a
three-year financing arrangement with a finance company to sell, with limited
recourse, its health care trade accounts receivable. Terms of the agreement
include a commitment of up to $1,500,000 against eligible receivables at an
annual interest rate of 12% plus servicing fees. Proceeds from the initial sale
of these receivables amounted to approximately $971,000 with an additional
$150,000 term note, amortizing over 36 months. Trade receivables as shown in the
Consolidated Balance Sheet are shown exclusive of the receivable interests sold
under this program.
D. On August 29, 1996, certain subsidiaries of the Company were added to an
existing (See 5C. above) three-year financing arrangement with a finance company
to borrow against its health care trade accounts receivable. Proceeds from the
initial borrowing against the subsidiaries' receivables amounted to
approximately $489,000.
6. SUBSEQUENT EVENT - PRIVATE SALE OF COMMON STOCK
During October 1996, the Company entered into a private sale of 500,000 shares
of the Company's common stock, held in treasury, in a Regulation S transaction
for $500,000. As a result of the transaction the Buyer, McBridge Advisory Ltd.
which is incorporated under the Laws of Ireland and has principal offices in
Lugano, Switzerland, has increased its holdings in the Company to 626,200
shares. The principal of McBridge, a personal friend of Marvin D. Kantor,
Chairman of the Company, has indicated that the purchase has been made for
investment purposes only. A portion of the proceeds ($300,000) was used toward
payment on a stock purchase agreement included in current liabilities on the
accompanying Balance Sheets ($625,000), while the remainder has been used for
working capital needs.
10
<PAGE> 11
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
---------------------------------------------
FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1996
--------- ----------------------------------------
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
---------------------------------------------
AND SUBSIDIARIES
----------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
NOTE: REFERENCE SHOULD BE MADE TO THE NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS HEREIN.
FINANCIAL CONDITION
Management believes that the Company's financial condition continues to be
strengthened through the concentration of efforts to develop its Health Care
Services business. As a result of the emphasis on health services, rather than
manufacture or distribution, Management believes that the Company has
established a focused growth plan that is evidenced by the increase in pre-tax
income of approximately $57,000 for the first nine months from $126,000 in 1995
to $183,000 in 1996.
Working capital increased approximately $3,186,000 during the nine months ended
September 30, 1996, due mostly from an equipment refinancing in March 1996, the
refinancing of the New Jersey mortgage in April 1996 (see Form 10-K Note 15 and
Note 5 herein), and the new accounts receivable financing (see Note 5 herein).
Current assets decreased approximately $1,034,000, due mostly from a decrease of
approximately $1,169,000 in trade receivables. The decrease in receivables is
mostly attributable to the accounts receivable financing program the Company
entered into in May 1996. Current liabilities decreased approximately
$4,220,000, due primarily from reductions/payments in current portion of
long-term debt ($1,854,000 - most of which was reclassified to long-term),
accrued expenses other ($986,000), accounts payable ($930,000), accrued taxes
other than federal income taxes ($376,000), and federal income taxes payable
($100,000).
LIQUIDITY AND CAPITAL RESOURCES
The Company improved its working capital during the first nine months of 1996 by
refinancing most of its equipment, replacing its balloon mortgage on the New
Jersey property (due April, 1996) with a mortgage that matures in 2001, and
obtaining accounts receivable financing.
On March 27, 1996 the Company, through several of its subsidiaries, refinanced
most of its equipment at the nursing homes and Diagnostics Center with a finance
company. The total amount refinanced of $1,700,000 is on a secured note and
bears an interest rate of 12 1/8% payable over sixty months. With the proceeds,
the Company paid off existing debt of approximately $1,023,000 and used the
remainder for working capital needs.
(Continued)
11
<PAGE> 12
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
---------------------------------------------
FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1996
--------- ----------------------------------------
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
---------------------------------------------
AND SUBSIDIARIES
----------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
On May 30, 1996 the Company entered into an agreement with a finance company to
secure additional working capital funds to replace the accounts receivable
securitization program that terminated in 1995. Terms of the agreement include a
lending commitment of up to $1,500,000 against eligible receivables at an annual
interest rate of 12% plus servicing fees. As a result of the transition between
financing companies, the Company had experienced some cash flow difficulties
from time to time, but has maintained good working relationships with its
vendors.
The Company, at its Diagnostic and Radiology Center, operated by a limited
partnership of which a subsidiary is general partner, obtained additional
imaging techniques such as angiography, fluoroscopy and bone densitometry in the
third quarter of 1996. The cost of such equipment, approximately $806,000, was
financed through the Partnership by favorable vendor financing programs. The
Center is also obtaining a state-of-the-art echospeed upgrade for its MR
equipment in the first quarter of 1997; such upgrade will enable an enhanced
ability to provide cardiac applications. The cost of such equipment,
approximately $400,000, will be financed through a favorable vendor program.
Management further believes the present resources available, the accounts
receivable financing program indicated above, as well as profitable operations
will meet anticipated requirements for operations of the business. There are no
further material commitments for capital expenditures.
RESULTS OF OPERATIONS 1996-1995
Consolidated revenues from operations for the nine months ended September 30,
1996 increased approximately $573,000 or 3.7% while revenues for the three
months ended September 30, 1996 increased approximately $450,000 or 8.9% over
1995. Net sales increased approximately $73,000 or 3.6% for the nine months and
increased $49,000 or 7.4% for the three months ended September 30, 1996 as
compared to the same periods in 1995. Service revenues increased approximately
$500,000 or 3.7% for the nine months and $401,000 or 9.1% for the three months
over the same periods in 1995, mostly attributable to higher revenues at the
Alzheimer's Center and Diagnostics Center partially offset by a decline in
visits and revenues in the Home Care subsidiary. Occupancy at the other nursing
homes was down for the quarter partially offset by rate increases.
Cost of sales increased approximately $146,000 or 10.6% for the nine months and
$86,000 or 19.1% for the three months ended September 30, 1996 as compared to
the corresponding periods in 1995. Gross margin for the nine months ended
September 30, 1996 declined to 27.3% compared to 31.9% for the same period in
1995, primarily attributable to new competition in the retail pharmacy division.
(Continued)
12
<PAGE> 13
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
---------------------------------------------
FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1996
--------- ----------------------------------------
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
---------------------------------------------
AND SUBSIDIARIES
----------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS 1996-1995 (CONTINUED)
Selling, general and administrative expenses, which include costs associated to
services rendered, increased approximately $486,000 or 3.9% for the nine months
and $369,000 or 9.1% for the three months ended September 30, 1996 over the same
periods in 1995.
Minority interests in earnings increased approximately $153,000 for the nine
months and $55,000 for the three months ended September 30, 1996 as compared to
the same periods in 1995 due to improved results in the operations that are not
wholly-owned by the Company, primarily the Alzheimer's Center which is no longer
in a start-up phase and is contributing to profits in 1996.
Interest expense decreased approximately $100,000 or 11.2% for the nine months
and increased $15,000 or 5.3% for the three months ended September 30, 1996 as
compared to the same periods in 1995. The nine month decrease is mostly due to
the termination of the accounts receivable securitization program for the first
part of the year while the third quarter increase is due to the new borrowings
that occurred during the current year.
13
<PAGE> 14
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
---------------------------------------------
FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1996
--------- ----------------------------------------
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.14 Amendment to Receivables Purchase and Sale Agreement
dated August 29, 1996 between The Wendt-Bristol
Company, et al, and HealthPartners Funding L.P., relating
to the health care receivables financing program.
27 EDGAR Financial Data Schedule
(b) Reports on Form 8-K - None
--------------------------------
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.
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
---------------------------------------------
(Registrant)
November 13, 1996 By: /s/ Sheldon A. Gold
-------------------
Sheldon A. Gold
President
(Principal Executive Officer)
November 13, 1996 By: /s/ Charles R. Cicerchi
-----------------------
Charles R. Cicerchi
Vice-President, Finance
(Principal Financial and Accounting Officer)
14
<PAGE> 1
FIRST AMENDMENT TO
RECEIVABLES PURCHASE AND SALE AGREEMENT
This First Amendment to Receivables Purchase and Sale Agreement (the
"Amendment") is entered into as of August 29, 1996 by and among HEALTHPARTNERS
FUNDING, L.P., a Delaware limited partnership ("Purchaser"), and WENDT-BRISTOL
DIAGNOSTICS COMPANY, L.P., a Delaware limited partnership, THE WENDT-BRISTOL
COMPANY, a Delaware corporation, ETHAN ALLEN CARE CENTER, INC., an Ohio
corporation, and WENDT-BRISTOL HOME HEALTH CARE COMPANY, an Ohio corporation
(collectively, the "Original Sellers"), and HEALTH AMERICA, INC., ("HAI") an
Ohio corporation, and AMERICAN CARE CENTER, INC., ("ACC") an Ohio corporation
(collectively, the "New Sellers"). The Original Sellers and the New Sellers are
referred to collectively herein as "Seller").
WITNESSETH
WHEREAS, the Original Sellers and Purchaser entered into that certain
Receivables Purchase and Sale Agreement dated as of May 30, 1996 (the
"Agreement");
WHEREAS, HAI obtained financing from LPC Mortgage Company which financing is
insured by HUD [Project No. 043-43088-PM];
WHEREAS, ACC obtained financing from JP Mortgage Company which financing is
insured by HUD [Project No. 043-43088-PM] (references herein to existing
financing of HAI and ACC shall mean the above financing and shall be referred to
herein as the HUD financing); and
WHEREAS, Seller and Purchaser now desire to enter into this Amendment in
accordance with the terms set forth below.
NOW, THEREFORE, the parties hereto agree that the Agreement is amended as
follows:
1. DEFINITIONS. Capitalized terms used herein and not otherwise defined or
amended herein shall have the meanings ascribed to them in the Agreement.
2. ADDITIONAL SELLERS. Health America, Inc. and American Care Center, Inc. shall
from and hereafter be additional Sellers for all purposes of the Agreement and
the other Purchase Documents.
3. FINANCING OF RECEIVABLES OF NEW SELLERS. Purchaser and Seller hereby agree
that Purchaser shall make advances against Receivables generated by the New
Sellers on the same terms and conditions applicable to the Original Sellers
under the Loan Agreement, and that accordingly the Purchase Discount, Initial
Payment, Reserves and other terms relating to the financing of Batches under the
Agreement shall apply to the New Sellers
1
<PAGE> 2
in the identical manner that they apply to the Original Sellers. Purchaser and
Seller acknowledge and agree, however, that the creation of a Lien against
Receivables generated by either or both of the New Sellers, or the sale of any
such Receivables to Purchaser, would violate the terms of financings that exist
between the New Sellers and HUD. Therefore, for all purposes of the Agreement
(as amended hereby) and the other Purchase Documents, Purchaser and Seller agree
as follows:
a) although the existence of Liens in favor of HUD with respect to
Receivables of either or both of the New Sellers prevents such Receivables from
qualifying as Eligible Receivables, Purchaser will not reject any Offers made by
either of the New Sellers solely by reason of the existence of such Liens;
b) notwithstanding Section 2.8 of the Agreement, the financings of
Receivables of the New Sellers shall be treated as unsecured loans as
distinguished from sales of Receivables, as Purchaser shall have no security
interests in any of the assets of either of the New Sellers;
c) Receivables of the New Sellers will be collected in accordance with the
same lockbox an other collection procedures that have been established pursuant
to the Purchase Documents with respect to all Receivables of the Original
Sellers;
d) Seller will notify Purchaser immediately in the event that either of the
New Sellers is notified that the financings contemplated by the Agreement (as
amended hereby) violates in any respect any of the agreements between either of
the New Sellers under the Purchase Documents with respect to Receivables of the
New Sellers that have been financed by Purchaser shall become immediately due
and payable;
e) in the event that the financing relationships of the New Sellers with HUD
are altered following the date hereof so as to permit Purchaser to be granted a
security or ownership interest in Receivables of either or both of the New
Sellers, (which event is not anticipated) or the security interest in any of the
Related Security of the New Sellers, the Agreement and the other Purchase
Documents shall be amended so as to grant Purchaser such permitted security
interests;
f) for so long as the Purchase Documents remain in effect neither of the New
Sellers shall grant, or otherwise permit to be granted, in favor of any other
Person (other than in connection with the HUD financings) any Lien or other
security interest in any of their respective assets other than purchase money
security interests or liens and security interests or liens arising out of
equipment leases; and
g) the parties specifically acknowledge and agree that for all purposes of
Sections 7.16 and 7.17 of the Agreement each of the New Sellers shall be treated
as an additional entity comprising Seller, and that the indemnity obligations
set forth in Section 7.16 shall
2
<PAGE> 3
apply specifically to any liabilities, obligations, losses, damages, penalties,
action, judgments, suits, claims, costs, expenses and disbursements of any kind
or nature whatsoever (including, without limitation, reasonable attorneys' fees
and expenses) that may be payable to HUD or any other Person associated with the
financings provided by HUD.
Notwithstanding the foregoing, the New Sellers shall not be jointly and
severally liable for any obligations of the other Sellers if such joint and
several liability is in violation of any of the express terms of the HUD
financing, a copy of which express terms has been furnished to Purchaser.
4. COUNTERPARTS. This Amendment may be executed in several counterparts, and
each counterpart when so executed shall be deemed an original.
5. NO CHANGE. Except as expressly stated herein, the terms, conditions, and
provisions of the Agreement, as amended, shall remain in full force and effect
and shall not be modified or otherwise affected by the execution of this
instrument.
3
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have executed or caused this Amendment to
be executed by their respective officers thereunto duly authorized as of the day
and year first above written.
HEALTHPARTNERS FUNDING, L.P.
By: HealthPartners Financial Corporation,
General Partner
By: /s/ Edward P. [Illegible], Jr.
------------------------------------
Name: Edward P. [Illegible], Jr.
Title: Senior Vice President
WENDT-BRISTOL DIAGNOSTICS COMPANY, L.P.
1550 Kenny Road
Columbus, Ohio 43212
By: Wendt-Bristol Diagnostics Company,
General Partner
By: /s/ Sheldon A. Gold [SEAL]
-----------------------------
Name: Sheldon A. Gold
Title: President
THE WENDT-BRISTOL COMPANY
Two Nationwide Plaza, Suite 760
Columbus, Ohio 43215
By: /s/ Sheldon A. Gold [SEAL]
-----------------------------
Name: Sheldon A. Gold
Title: President
4
<PAGE> 5
ETHAN ALLEN CARE CENTER, INC.
dba Bristol House of Springfield
Two Nationwide Plaza, Suite 760
Columbus, Ohio 43215
By: /s/ Sheldon A. Gold [SEAL]
-----------------------------
Name: Sheldon A. Gold
Title: President
WENDT-BRISTOL HOME HEALTH CARE COMPANY
Two Nationwide Plaza, Suite 760
Columbus, Ohio 43215
By: /s/ Sheldon A. Gold [SEAL]
-----------------------------
Name: Sheldon A. Gold
Title: President
HEALTH AMERICA, INC.
Two Nationwide Plaza, Suite 760
Columbus, Ohio 43215
By: /s/ Sheldon A. Gold [SEAL]
-----------------------------
Name: Sheldon A. Gold
Title: President
AMERICAN CARE CENTER, INC.
Two Nationwide Plaza, Suite 760
Columbus, Ohio 43215
By: /s/ Sheldon A. Gold [SEAL]
-----------------------------
Name: Sheldon A. Gold
Title: President
5
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<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 470,233
<SECURITIES> 0
<RECEIVABLES> 1,709,848
<ALLOWANCES> 200,000
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0
0
<OTHER-SE> 4,625,514
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<SALES> 2,085,074
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<NET-INCOME> 156,640
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