<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, 1997 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.
Class Outstanding at October 31, 1997
----- -------------------------------
Common Stock, par value 6,186,826
$.01 per share
Common Stock Purchase Warrants 414,538 (1)
(1) Upon exercise, represents 1,139,980 shares of The Wendt-Bristol
Health Services Corporation.
<PAGE> 2
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1997
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
AND SUBSIDIARIES
I N D E X
<TABLE>
<CAPTION>
Part I Page No.
- ------ --------
<S> <C> <C>
Financial Statements:
Consolidated Balance Sheets - December 31, 1996 and
September 30, 1997 (Unaudited) 3-4
Consolidated Statements of Operations (Unaudited)
Three and Nine Months Ended September 30, 1997 and 1996 5
Consolidated Statements of Cash Flow (Unaudited)
Nine Months Ended September 30, 1997 and 1996 6-7
Notes to Consolidated Financial Statements 8-12
Management's Discussion and Analysis of Financial Condition
and Results of Operations 13-15
Part II
- ------- Signatures 16
Exhibits:
Exhibit 27 EDGAR Financial Data Schedule 17
</TABLE>
2
<PAGE> 3
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1997
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS AT SEPTEMBER 30, 1997 AND DECEMBER 31, 1996
ASSETS
<TABLE>
<CAPTION>
September 30 December 31
1997 1996
------------ -----------
(Unaudited)
<S> <C> <C>
Current assets:
Cash $ 316,380 $ 890,670
------------ ------------
Restricted cash 524,829 381,025
------------ ------------
Receivables:
Trade, net of allowance for doubtful
accounts of $173,000 (September)
and $190,000 (December) 3,062,346 2,014,403
Notes receivable 308,847 120,613
Miscellaneous 972,180 890,655
------------ ------------
4,343,373 3,025,671
------------ ------------
Inventories 342,580 482,930
Prepaid expenses and other 214,942 250,947
------------ ------------
Total current assets 5,742,104 5,031,243
------------ ------------
Property, plant and equipment, at cost 21,499,814 20,880,293
Less: Accumulated depreciation and
amortization (6,560,352) (6,135,704)
------------ ------------
14,939,462 14,744,589
------------ ------------
Investments and other assets:
Notes and other receivables, net of current portion 332,116 359,007
Notes receivable from officers, employees and
related parties, net of amounts payable 942,631 993,580
Life insurance premiums receivable 949,546 865,299
Investment in unconsolidated affiliates (Note 4) 667,187 --
Excess of cost over assets of businesses
and subsidiaries acquired, less amortization 575,368 621,629
Deferred charges 1,007,115 956,795
Other assets 381,939 345,963
------------ ------------
Total investments and other assets 4,855,902 4,142,273
------------ ------------
$ 25,537,468 $ 23,918,105
============ ============
</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, 1997
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Continued)
AS AT SEPTEMBER 30, 1997 AND DECEMBER 31, 1996
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
September 30 December 31
1997 1996
------------ ------------
(Unaudited)
<S> <C> <C>
Current liabilities:
Notes payable - officer $ -- $ 55,000
Securitization program advances -- 392,287
Accounts payable 2,952,576 2,729,021
Accrued expenses and other liabilities:
Salaries and wages 455,440 482,134
Workers' compensation 80,782 380,502
Taxes, other than federal income taxes 326,393 726,106
Interest 160,692 118,640
Stock purchase agreement payable -- 325,000
Other 246,974 841,643
Long-term obligations classified as current 844,471 750,758
------------ ------------
Total current liabilities 5,067,328 6,801,091
------------ ------------
Long-term obligations, less amounts classified
as current 15,398,135 12,080,856
------------ ------------
Total liabilities 20,465,463 18,881,947
------------ ------------
Minority interests 165,951 294,128
------------ ------------
Stockholders' equity:
Common stock: $.01 par;
authorized: 12,000,000 shares
issued: 8,248,480 shares (September)
and 8,243,480 (December) 82,485 82,435
Capital in excess of par 10,244,805 10,238,750
Retained earnings (deficit) (2,899,491) (3,119,096)
------------ ------------
7,427,799 7,202,089
Treasury stock, at cost, 2,051,154 (September)
and 2,007,460 shares (December) (2,521,745) (2,460,059)
------------ ------------
Total stockholders' equity 4,906,054 4,742,030
------------ ------------
$ 25,537,468 $ 23,918,105
============ ============
</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, 1997
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
September 30 September 30
----------------------------- --------------------------
1997 1996 1997 1996
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
Revenues:
Net sales $ 1,924,713 $ 2,085,074 $ 504,305 $ 709,033
Service income 13,722,299 14,187,278 4,669,806 4,818,996
------------ ------------ ----------- -----------
15,647,012 16,272,352 5,174,111 5,528,029
------------ ------------ ----------- -----------
Costs and expenses:
Cost of sales 1,479,636 1,515,526 416,363 535,157
Selling, general and administrative
expenses, net 12,569,941 13,003,451 4,300,234 4,425,138
------------ ------------ ----------- -----------
14,049,577 14,518,977 4,716,597 4,960,295
------------ ------------ ----------- -----------
Operating income before depreciation 1,597,435 1,753,375 457,514 567,734
Depreciation 789,809 730,303 276,756 266,779
------------ ------------ ----------- -----------
Operating income 807,626 1,023,072 180,758 300,955
Equity in earnings of unconsolidated
affiliates, net of minority interests in
consolidated affiliates (See Notes 4 & 5) 179,122 (125,981) 76,481 (18,170)
------------ ------------ ----------- -----------
986,748 897,091 257,239 282,785
Other income (expense):
Interest expense (926,480) (788,156) (313,139) (303,099)
Other, net (See Note 6) 176,737 73,705 124,481 41,855
------------ ------------ ----------- -----------
(749,743) (714,451) (188,658) (261,244)
------------ ------------ ----------- -----------
Income before income taxes 237,005 182,640 68,581 21,541
Income tax expense (17,400) (26,000) (5,700) (10,329)
------------ ------------ ----------- -----------
Net income $ 219,605 $ 156,640 $ 62,881 $ 11,212
============ ============ =========== ===========
Income per common share $ 0.04 $ 0.03 $ 0.01 $ --
============ ============ =========== ===========
Weighted average shares outstanding 6,237,303 5,730,975 6,228,326 5,736,020
============ ============ =========== ===========
</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, 1997
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended September 30
-------------------------------
1997 1996
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 219,605 $ 156,640
----------- -----------
Adjustments required to reconcile
net income to net cash provided by
operating activities:
Amortization, depreciation and other, net 836,070 745,313
Provision for losses on notes and accounts receivable 90,823 65,174
Gain on sale of assets 11,465 --
Minority interest in earnings of consolidated affiliates 25,765 125,981
Equity in net earnings of unconsolidated affiliates (204,887) --
Changes in assets and liabilities:
Receivables
Sale (purchase) of receivables (607,229) 970,550
Other changes (613,062) 168,933
Merchandise inventories 140,350 (7,301)
Prepaid expenses and other current assets 45,463 52,867
Accounts payable 223,555 (929,848)
Accrued expenses and other liabilities (1,603,744) (1,335,910)
Federal income taxes payable -- (100,000)
Deferred charges and other (86,294) (209,687)
----------- -----------
Total adjustments (1,741,725) (453,928)
----------- -----------
Net cash used in operating activities (1,522,120) (297,288)
----------- -----------
Cash flows from investing activities:
Proceeds from the sale of assets 40,000 --
Increase in notes receivable (161,343) (31,705)
Investment in unconsolidated affiliates (462,300) --
Disbursements to related parties
and former affiliates, net (33,298) (180,532)
Deposits to restricted cash (143,804) (57,307)
Capital expenditures (274,581) (480,130)
----------- -----------
Net cash used in investing activities (1,035,326) (749,674)
----------- -----------
Cash flows from financing activities:
Purchase of common stock/partnership units of affiliates (10,100) (8,000)
Treasury stock purchased (69,414) --
Distributions to limited partners, net (143,842) --
Proceeds from officer obligation 90,000 --
Principal payments of officer obligation (145,000) --
Proceeds from stock options exercised 4,375 --
Principal payments of long-term obligations (905,860) (920,710)
Proceeds from long-term obligations 3,555,284 1,618,453
Net payments to securitization program (392,287) 423,408
----------- -----------
Net cash provided by financing activities 1,983,156 1,113,151
----------- -----------
Net increase (decrease) in cash (574,290) 66,189
Cash at beginning of period 890,670 35,825
----------- -----------
Cash at end of period $ 316,380 $ 102,014
=========== ===========
</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, 1997
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended September 30
------------------------------
1997 1996
----------- ---------
<S> <C> <C>
Cash paid during the nine months for:
Interest, net of interest income $ 884,428 $ 762,284
Income taxes $ 16,775 $ 136,830
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 installment finance agreements.
Increase in equipment cost, net $ 761,568 $ 875,626
Increase in long-term obligations (761,568) (875,626)
</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, 1997
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, 1997
and December 31, 1996 and the consolidated results of its operations for
the three and nine months ended September 30, 1997 and 1996 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, 1996,
WHICH IS HEREBY INCORPORATED BY REFERENCE.
2. 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, 1996 attributes is as follows:
Deferred tax assets $1,953,000
Less: valuation allowance 200,000
----------
1,753,000
Deferred tax liabilities 1,499,300
----------
Net deferred tax asset $ 253,700
==========
During 1997, 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, 1997
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. INCOME TAXES (CONTINUED)
State and local taxes are summarized as follows:
<TABLE>
<CAPTION>
Nine months ended Three months ended
September 30, September 30,
----------------- ---------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
State and local taxes:
Current expense $17,400 $26,000 $5,700 $10,329
======= ======= ====== =======
</TABLE>
3. STOCKHOLDERS' EQUITY
Warrants
At September 30, 1997 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 1997, are May 1, 1998 for the initial Warrant and May 1,
1999 for the Series II Warrants. There were no warrants exercised during
the nine months ended September 30, 1997.
In conjunction with the issuance, pursuant to Regulation S of the
Securities Act of 1933, of Series No. 1 bonds issued on February 14, 1997,
the Company issued thirty-three (33) Series No. 1 warrants exercisable into
a total of 300,000 shares of the common stock of the Company for $2.00 per
share for the beneficial ownership of non U.S. persons.
Options
No options were exercised in 1996. There were stock options outstanding at
September 30, 1997 at prices ranging from $.375 to $1.375 per share.
In 1997, 5,000 options were exercised at $.875 per share for total proceeds
of $4,375. Additionally, 10,000 options with exercise prices of $.875 to
$1.25 were terminated as the employees are no longer employed by the
Company.
(Continued)
9
<PAGE> 10
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1997
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. STOCKHOLDERS' EQUITY (CONTINUED)
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.
In February 1997, Statement of Financial Accounting Standards (SFAS) No.
128 "Earnings per Share" was issued, which changes the methodology for
calculating earnings per share. Implementation of SFAS 128 is required for
financial statements issued for periods ending after December 15, 1997,
including interim periods; earlier adoption is not permitted. Early
adoption of SFAS 128 would have had no effect on earnings per share for the
nine or three months ended September 30, 1997.
4. NEW VENTURES
A. During December, 1996, an 83% owned subsidiary of the Company formed an
Ohio limited liability company. The subsidiary acquired a 50% interest
through a capital contribution of $325,000 in January 1997. The new entity
closed, in January 1997, on the acquisition of operating assets, including
an open field magnetic resonance imaging device. Operations began in
January, 1997 and the operating results are included in the statement of
operations under the caption "Equity in earnings of unconsolidated
affiliates...". The Company is managing the facility. See Note 5.
B. In April, 1997, an 83% owned subsidiary of the Company acquired a 22.5%
interest in an Ohio limited liability company which will operate a
radiation therapy practice. The new venture has entered into a two year
lease agreement which includes a mandatory purchase of the building for
$1,400,000. Operation commenced in October 1997. The Company will manage
the facility.
(Continued)
10
<PAGE> 11
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1997
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. NEW VENTURES (CONTINUED)
Unaudited financial information of the affiliates which are accounted for
by the equity method is summarized below:
COMBINED BALANCE SHEETS
September 30, 1997
------------------
Current assets $ 554,822
Property, plant and equipment
net of accumulated depreciation 1,070,749
Other non-current assets 390,198
----------
Total assets $2,015,769
==========
Liabilities $ 736,394
Equity 1,279,375
----------
Total liabilities and equity $2,015,769
==========
COMBINED STATEMENTS OF OPERATIONS
Nine months ended
September 30, 1997
------------------
Service Revenues $1,019,172
Net income 409,774
As a result of the limited liability companies being taxed as partnerships
for Federal income tax purposes, there is no tax provided for earnings. See
Note 2. Income Taxes.
C. During the Fourth Quarter of 1997, an 83% owned subsidiary of the Company
will be opening an additional outpatient diagnostic center in central Ohio.
11
<PAGE> 12
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1997
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. UNCONSOLIDATED AFFILIATES/MINORITY INTEREST
The following table reflects the Company's proportionate share of the
earnings (losses) of unconsolidated affiliates (See Note 4) and the
proportionate share of Minority interest attributable to investors in the
(earnings) losses of consolidated affiliates.
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
September 30 September 30
---------------------- --------------------
1997 1996 1997 1996
--------- --------- -------- --------
<S> <C> <C> <C> <C>
Minority interests in (earnings) losses of
consolidated affiliates, net of tax $ (25,765) $(125,981) $ 5,697 $(18,170)
Equity in earnings of
unconsolidated affiliates 204,887 -- 70,784 --
--------- --------- -------- --------
$ 179,122 $(125,981) $ 76,481 $(18,170)
========= ========= ======== ========
</TABLE>
6. OTHER
A. Effective mid April 1997, management decided to cease operations of a
significant portion of its home health care agency in order to eliminate
unprofitable portions of the business. Management anticipates a positive
impact to the full year 1997 operating results as a result of the second
quarter implementation of this decision.
B. On June 21, 1997, the Company closed one of its retail pharmacy locations,
selling certain of its assets to a retail competitor. The closing of the
pharmacy reduces the total number of retail pharmacies operated by the
Company from three to two.
C. Other income for the three and nine months 1997 includes an affiliate's
reduction of an estimated liability (approximate $100,000 reduction). As a
result of the recognition of Minority Interests, the revised estimate
increased consolidated net income approximately $42,000.
(Continued)
12
<PAGE> 13
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1997
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 increasingly favorable results will be achieved in 1997
and thereafter as a result of its aggressive expansion of the Diagnostic and
Radiology business, including radiation therapy (See Note 4) in addition to
disposition of non-profitable business such as the home health care agency
eliminated in the second quarter of 1997. Furthermore, the issuance of stock in
late 1996 along with the issuance of long-term bonds in the first quarter of
1997 will allow the Company to reduce its costs of borrowing and achieve cost
savings through an improved availability of funds for operations. The financing
also allows the Company to expand its profitable operations through selective
ventures with non-related third parties, such as the newly-formed limited
liability companies. The improving profitability during 1997 is a
forward-looking statement that is subject to change as a result of factors
including occupancy and utilization rates, third-party reimbursement rates,
market conditions, and changes in the overall health care industry.
Working capital increased approximately $2,445,000 during the nine months ended
September 30, 1997, due mostly from the issuance of $3,417,000 of long-term
bonds in February, 1997. Current assets increased approximately $711,000, due
mostly from increases in restricted cash ($144,000), accounts receivable
($1,048,000), and notes receivable ($188,000) offset by a decrease in cash of
($574,000). The increase in restricted cash is mostly due to funds on deposit in
a margin account related to a currency hedging strategy employed by the Company.
The increase in accounts receivable is a direct result of the Company
terminating its accounts receivable securitization program in March, 1997 and
buying back all of the accounts receivable that were previously sold. The
majority of the increase in notes receivable is due to the issuance of a
short-term note to an affiliated limited liability company. The decrease in cash
is primarily due to the Company investing in unconsolidated affiliates. Current
liabilities decreased approximately $1,734,000, due primarily from reductions in
securitization program advances ($392,000), accrued workers' compensation
($300,000), taxes other than federal income tax ($400,000), stock purchase
agreement payable ($325,000), and accrued expenses other ($595,000) offset by an
increase in accounts payable ($224,000). The issuance of the long-term bonds
allowed the Company to terminate the accounts receivable securitization program
and significantly reduce the amount of current liabilities.
(Continued)
13
<PAGE> 14
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1997
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
The Company continued to improve its liquidity position in the first nine months
of 1997 by issuing long-term 5% bonds pursuant to Regulation S of the Securities
Act of 1933 to a group of European investors in February, 1997. The Company
received approximately $3,417,000, of which approximately $1,462,000 was used to
repay advances from the accounts receivable securitization program. The
remaining funds are being used for general working capital requirements and
expansion into new ventures in the diagnostic and radiology fields (see note 4
herein).
The Company and its subsidiaries, limited partnership, and newly-formed limited
liability companies, have committed to certain equipment upgrades or
acquisitions that will be financed either through a combination of current
equipment financing relationships, vendor programs or newly available resources.
The cost of such equipment currently on order is approximately $3,700,000.
Management further believes the present resources available along with
profitable operations will meet anticipated requirements for operations of the
business. There are no further material commitments for capital expenditures.
RESULTS OF OPERATIONS 1997 - 1996
Consolidated revenues from operations for the nine months ended September 30,
1997 decreased approximately $625,000 or 3.8% while revenues for the three
months ended September 30, 1997 decreased approximately $354,000 or 6.4% from
1996. Net sales decreased approximately $160,000 or 7.7% for the nine months and
$205,000 or 28.9% for the three months ended September 30, 1997 as compared to
the same periods in 1996 due to the closing of one of the retail pharmacies.
Service revenues decreased approximately $465,000 or 3.3% for the nine months
and $149,000 or 3.1% for the three months over the same periods in 1996, mostly
attributable to a decline in visits and revenues in the Home Care subsidiary
which ceased operations in April 1997. It should be further noted that as a
result of expansion through ventures with non-related third parties, these new
operations will not be consolidated (See Note 4) and therefore while the
consolidated revenues would not be increasing, the consolidated results of
operations are expected to produce increased net income through recognition of
the proportionate equity in the new operations.
Cost of sales decreased approximately $36,000 or 2.4% for the nine months and
$119,000 or 22.2% for the three months ended September 30, 1997 as compared to
the corresponding periods in 1996. Gross margin for the nine months ended
September 30, 1997 declined to 23.1% compared to 27.3% for the same period in
1996, attributable to new competition in the retail pharmacy division and price
reductions at the location that closed in the second quarter of 1997.
(Continued)
14
<PAGE> 15
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1997
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Selling, general and administrative expenses decreased approximately $434,000 or
3.3% for the nine months and $125,000 or 2.8% for the three months ended
September 30, 1997 over the same periods in 1996. The decrease is mostly due to
decreased visits in the home health agency.
Interest expense increased approximately $138,000 or 17.6% for the nine months
and $10,000 or 3.3% for the three months ended September 30, 1997 as compared to
the same periods in 1996. In 1996, the Company did not have a working capital
line of credit in place until late May and therefore, the only interest expense
for the first five months of 1996 was related to equipment and mortgages. The
1997 amount includes the accounts receivable securitization program interest
through the middle of March and the interest attributable to the convertible
subordinated and Series 1 bonds (see note 15 of 1996 Form 10-K).
(Continued)
15
<PAGE> 16
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1997
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
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 14, 1997 By: /s/ Sheldon A. Gold
---------------------------
Sheldon A. Gold
President
(Principal Executive Officer)
November 14, 1997 By: /s/ Charles R. Cicerchi
---------------------------
Charles R. Cicerchi
Vice-President, Finance
(Principal Financial and
Accounting Officer)
16
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 841,209
<SECURITIES> 0
<RECEIVABLES> 3,235,346
<ALLOWANCES> 173,000
<INVENTORY> 342,580
<CURRENT-ASSETS> 5,742,104
<PP&E> 21,499,814
<DEPRECIATION> 6,560,352
<TOTAL-ASSETS> 25,537,468
<CURRENT-LIABILITIES> 5,067,328
<BONDS> 15,398,135
0
0
<COMMON> 82,485
<OTHER-SE> 4,823,569
<TOTAL-LIABILITY-AND-EQUITY> 25,537,468
<SALES> 1,924,713
<TOTAL-REVENUES> 15,647,012
<CGS> 1,479,636
<TOTAL-COSTS> 1,479,636
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 926,480
<INCOME-PRETAX> 237,005
<INCOME-TAX> 17,400
<INCOME-CONTINUING> 219,605
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 219,605
<EPS-PRIMARY> .04
<EPS-DILUTED> .04
</TABLE>
