<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 March 31, 1998 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 April 30, 1998
----- -----------------------------
Common Stock, par value 6,050,426
$.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 MARCH 31, 1998
--------- ------------------------------------
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
---------------------------------------------
AND SUBSIDIARIES
----------------
I N D E X
Part I Page No.
- ------ --------
Financial Statements:
Consolidated Balance Sheets - March 31, 1998 (Unaudited)
and December 31, 1997 3-4
Consolidated Statements of Operations (Unaudited)
Three Months Ended March 31, 1998 and 1997 5
Consolidated Statements of Cash Flow (Unaudited)
Three Months Ended March 31, 1998 and 1997 6-7
Notes to Consolidated Financial Statements 8-11
Management's Discussion and Analysis of Financial Condition
and Results of Operations 12-14
Part II
- -------
Signatures 15
Exhibits:
Exhibit 27 EDGAR Financial Data Schedule 16
2
<PAGE> 3
<TABLE>
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
---------------------------------------------
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1998
--------- ------------------------------------
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS AT MARCH 31, 1998 AND DECEMBER 31, 1997
<CAPTION>
ASSETS
March 31 December 31
1998 1997
----------- -----------
(Unaudited)
<S> <C> <C>
Current assets:
Cash $ 42,227 $ 625,609
----------- -----------
Restricted cash 230,546 221,120
----------- -----------
Receivables:
Trade, net of allowance for doubtful
accounts of $185,000 (March)
and $201,000 (December) 2,218,635 2,878,726
Notes receivable 3,260,546 3,236,900
Miscellaneous 1,798,971 1,650,664
----------- -----------
7,278,152 7,766,290
----------- -----------
Inventories 201,064 202,951
Prepaid expenses and other 159,238 148,825
----------- -----------
Total current assets 7,911,227 8,964,795
----------- -----------
Property, plant and equipment, at cost 14,221,954 13,081,583
Less: Accumulated depreciation and
amortization (4,912,327) (4,742,587)
----------- -----------
9,309,627 8,338,996
----------- -----------
Investments and other assets:
Notes and other receivables, net of current portion 409,276 420,651
Notes receivable from officers, employees and
related parties, net of amounts payable 761,823 902,271
Life insurance premiums receivable 995,356 972,451
Investment in unconsolidated affiliates 643,562 640,980
Advances to unconsolidated affiliates 516,946 451,110
Excess of cost over assets of businesses
and subsidiaries acquired, less amortization 351,803 355,439
Deferred charges 889,699 691,158
Other assets 298,190 258,668
----------- -----------
Total investments and other assets 4,866,655 4,692,728
----------- -----------
$22,087,509 $21,996,519
=========== ===========
</TABLE>
(Continued)
The accompanying notes are an integral part of the financial statements.
3
<PAGE> 4
<TABLE>
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
---------------------------------------------
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1998
--------- ------------------------------------
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Continued)
AS AT MARCH 31, 1998 AND DECEMBER 31, 1997
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
March 31 December 31
1998 1997
----------- -----------
(Unaudited)
<S> <C> <C>
Current liabilities:
Notes payable - officer $ 50,000 $ --
Accounts payable 3,165,581 3,307,082
Accrued expenses and other liabilities:
Salaries and wages 174,442 533,346
Taxes, other than federal income taxes 224,811 219,885
Interest 109,599 117,313
Other 854,245 874,814
Long-term obligations classified as current 1,099,363 986,148
Federal income taxes payable 40,000 40,000
----------- -----------
Total current liabilities 5,718,041 6,078,588
----------- -----------
Long-term obligations, less amounts classified
as current 9,926,539 9,151,637
----------- -----------
Total liabilities 15,644,580 15,230,225
----------- -----------
Minority interests 237,457 321,168
----------- -----------
Stockholders' equity:
Common stock: $.01 par;
authorized: 12,000,000 shares
issued: 8,243,480 shares 82,485 82,485
Capital in excess of par 10,244,805 10,244,805
Retained earnings (deficit) (1,445,210) (1,337,483)
----------- -----------
8,882,080 8,989,807
Treasury stock, at cost, 2,164,254 shares (March)
and 2,067,254 shares (December) (2,676,608) (2,544,681)
----------- -----------
Total stockholders' equity 6,205,472 6,445,126
----------- -----------
$22,087,509 $21,996,519
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE> 5
<TABLE>
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
---------------------------------------------
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1998
--------- ------------------------------------
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
(UNAUDITED)
<CAPTION>
Three Months Ended March 31
-----------------------------
1998 1997
---------- ----------
<S> <C> <C>
Revenues:
Net sales $ 286,987 $ 683,979
Service income 2,295,393 4,511,550
---------- ----------
2,582,380 5,195,529
---------- ----------
Costs and expenses:
Cost of sales 179,194 503,134
Selling, general and administrative
expenses, net 2,313,396 4,140,943
---------- ----------
2,492,590 4,644,077
---------- ----------
Operating income before depreciation 89,790 551,452
Depreciation 193,152 232,961
---------- ----------
Operating income (loss) (103,362) 318,491
Equity in earnings of unconsolidated
affiliates, net of minority interests in
consolidated affiliates 86,293 36,229
---------- ----------
(17,069) 354,720
---------- ----------
Other income (expense):
Interest expense (103,018) (314,046)
Other, net 10,760 17,304
---------- ----------
(92,258) (296,742)
---------- ----------
Income (loss) before income taxes (109,327) 57,978
Income tax benefit(expense) 1,600 (6,400)
---------- ----------
Net income (loss) $ (107,727) $ 51,578
========== ==========
Income (loss) per common share:
Basic $ (0.02) $ 0.01
========== ==========
Diluted $ (0.02) $ 0.01
========== ==========
Weighted average shares outstanding:
Basic 6,138,609 6,236,510
========== ==========
Diluted 6,138,609 6,340,000
========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE> 6
<TABLE>
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
---------------------------------------------
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1998
--------- ------------------------------------
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
(UNAUDITED)
<CAPTION>
Three Months Ended March 31
-----------------------------
1998 1997
--------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $(107,727) $ 51,578
--------- -----------
Adjustments required to reconcile net income
to net cash provided by operating activities:
Amortization, depreciation and other, net 196,788 238,437
Provision for losses on notes and accounts receivable 35,225 34,734
Minority interest in earnings (losses) of consolidated affiliates (83,711) 51,329
Equity in net earnings of unconsolidated affiliates (2,582) (87,558)
Changes in assets and liabilities:
Receivables
Purchase of receivables -- (607,229)
Other changes 476,559 (448,587)
Merchandise inventories 1,887 (8,574)
Prepaid expenses and other current assets (10,413) (38,164)
Accounts payable (141,501) 149,300
Accrued expenses and other liabilities (382,261) (906,962)
Deferred charges and other (238,056) (47,617)
--------- -----------
Total adjustments (148,065) (1,670,891)
--------- -----------
Net cash used in operating activities (255,792) (1,619,313)
--------- -----------
Cash flows from investing activities:
Advances to unconsolidated affiliates (65,836) --
(Increase) decrease in notes receivable (12,271) 2,387
Investment in unconsolidated affiliates -- (445,000)
(Disbursements to) collections from related parties
and former affiliates, net 117,543 (11,393)
Deposits to restricted cash (9,426) (128,370)
Capital expenditures (71,932) (64,971)
--------- -----------
Net cash used in investing activities (41,922) (647,347)
--------- -----------
Cash flows from financing activities:
Distributions to limited partners, net -- (143,842)
Treasury stock purchased (131,927) --
Proceeds from officer obligation 50,000 90,000
Principal payments of officer obligation -- (70,000)
Principal payments of long-term obligations (203,741) (518,234)
Proceeds from long-term obligations -- 3,554,934
Net payments to securitization program -- (392,287)
--------- -----------
Net cash provided by (used in) financing activities (285,668) 2,520,571
--------- -----------
Net increase (decrease) in cash (583,382) 253,911
Cash at beginning of period 625,609 890,670
--------- -----------
Cash at end of period $ 42,227 $ 1,144,581
========= ===========
</TABLE>
(Continued)
The accompanying notes are an integral part of the financial statements.
6
<PAGE> 7
<TABLE>
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
---------------------------------------------
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1998
--------- ------------------------------------
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
(UNAUDITED)
<CAPTION>
Three Months Ended March 31
----------------------------
1998 1997
----------- --------
<S> <C> <C>
Cash paid during the three months for:
Interest, net of interest income $ 110,732 $359,291
Income taxes $ -0- $ -0-
Supplemental disclosures of noncash investing and financing activity:
A subsidiary and a partnership, of which the subsidiary is the
managing general partner, purchased equipment which was
financed by entering into installment finance agreements.
Increase in equipment cost, net $ 1,091,858 $ 49,500
Increase in long-term obligations (1,091,858) (49,500)
</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 MARCH 31, 1998
--------- ------------------------------------
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 March
31, 1998 and December 31, 1997 and the consolidated results of its
operations for the three months ended March 31, 1998 and 1997 as well
as the cash flows for the respective three 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, 1997, 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 and a
deferred tax asset. A summary of the December 31, 1997 attributes is as
follows:
Deferred tax assets $861,900
Deferred tax liabilities 724,500
--------
Net deferred tax asset $137,400
========
During 1998, 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. During the quarter, the
Company recognized a tax refund of a subsidiary due to the amendment of
a prior year's tax return.
(Continued)
8
<PAGE> 9
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
---------------------------------------------
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1998
--------- ------------------------------------
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
---------------------------------------------
AND SUBSIDIARIES
----------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)
2. INCOME TAXES (CONTINUED)
Federal, state and local taxes are summarized as follows:
Three months ended March 31,
----------------------------
1998 1997
---- ----
Federal taxes:
Current expense (benefit) $(3,000) --
State and local taxes:
Current expense 1,400 6,400
------- ------
Total expense (benefit) $(1,600) $6,400
======== ======
3. STOCKHOLDERS' EQUITY
At March 31, 1998 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 1998, are May 1,
1999 for the initial Warrant and May 1, 2000 for the Series II
Warrants. There were no warrants exercised during the three months
ended March 31, 1998.
4. EARNINGS PER SHARE
In February 1997, the Financial Accounting Standard Board issued
statement of Financial Accounting Standards No. 128, "Earnings per
Share," which changed the method used to calculate earnings per share.
Basic earnings per share has been calculated as income available to
common stockholders divided by the weighted average number of common
shares outstanding. Diluted earnings per share has been calculated as
income available to common stockholders divided by the diluted weighted
average number of common shares. Diluted weighted average number of
common shares has been calculated using the treasury stock method for
Common Stock equivalents, which includes Common Stock issuable pursuant
to stock options and Common Stock warrants. The following is provided
to reconcile the earnings per share calculations:
(Continued)
9
<PAGE> 10
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
---------------------------------------------
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1998
--------- ------------------------------------
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
---------------------------------------------
AND SUBSIDIARIES
----------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)
-----------------------------------------------------
4. EARNINGS PER SHARE (CONTINUED)
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1998 1997
---- ----
<S> <C> <C>
Income (loss) available to common stockholders $ (107,727) $ 51,578
=========== ==========
Shares:
Weighted average shares (basic) 6,138,609 6,236,510
Effect of dilutive securities
Options 66,005
Warrants 37,485
---------- ----------
Diluted weighted average shares (1) 6,340,000
========== ==========
Income per common share:
Basic $ (0.02) $ 0.01
========== ==========
Diluted $ (0.02) $ 0.01
========== ==========
</TABLE>
(1)At March 31,1998, all potential common stock options and warrants
would be anti-dilutive due to the net loss.
At March 31, 1997, 1,000 stock options not associated with convertible debt were
excluded from the computation of diluted EPS because the exercise price was
greater than the average market price of the common shares. 500,000 stock
options associated with convertible debt were excluded because their exercise
would be anti-dilutive.
5. UNCONSOLIDATED AFFILIATES/MINORITY INTEREST
The following table reflects the Company's proportionate share of the
earnings (losses) of unconsolidated affiliates and the proportionate
share of Minority interest attributable to investors in the (earnings)
losses of consolidated affiliates.
Three Months Ended
------------------
March 31,
---------------------
1998 1997
---- ----
Minority interest in (earnings) losses of
consolidated affiliates, net of tax 83,711 (51,329)
Equity in earnings of
unconsolidated affiliates 2,582 87,558
------- -------
$86,293 $36,229
======= =======
(Continued)
10
<PAGE> 11
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
---------------------------------------------
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1998
--------- ------------------------------------
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
---------------------------------------------
AND SUBSIDIARIES
----------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)
5. UNCONSOLIDATED AFFILIATES/MINORITY INTEREST (CONTINUED)
Unaudited financial information of the affiliates which are accounted for by the
equity method is summarized below:
COMBINED BALANCE SHEETS
March 31, 1998 March 31, 1997
-------------- --------------
Current assets $1,028,352 $343,593
Property, plant and equipment
net of accumulated depreciation 6,295,493 298,517
Other non-current assets 364,722 5,391
---------- --------
Total assets $7,688,567 $647,501
========== ========
Liabilities $6,521,697 $ 82,386
Equity 1,166,870 565,115
---------- --------
Total liabilities and equity $7,688,567 $647,501
========== ========
COMBINED STATEMENTS OF OPERATIONS
Three Months Ended Three Months Ended
March 31, 1998 March 31, 1997
------------------- ------------------
Service Revenues $ 549,003 $357,678
Net income (loss) $ (26,113) $175,115
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.
11
<PAGE> 12
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
---------------------------------------------
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1998
--------- ------------------------------------
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.
Except for historical information contained herein, certain matters discussed
herein are forward-looking statements made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995. Any
statements that express, or involve discussions as to, expectations, beliefs,
plans, objectives, assumptions or future events or performance (often, but not
always, through the use of words or phrases such as will likely result, are
expected to, will continue, is anticipated, estimated, projection, outlook) are
not statements of historical facts and may be forward-looking. Forward-looking
statements involve estimates, assumptions and uncertainties that could cause
actual results to differ materially from those expressed in the forward-looking
statements. These forward-looking statements are based largely on the Company's
expectations and are subject to a number of risks and uncertainties, including
but not limited to, economic, competitive, regulatory, growth strategies,
available financing and other factors discussed elsewhere in this report and in
the documents filed by the Company with the SEC. Many of these factors are
beyond the Company's control. Actual results could differ materially from the
forward-looking statements made. In light of these risks and uncertainties,
there can be no assurance that the results anticipated in the forward-looking
information contained in this report will, in fact, occur.
Any forward-looking statement speaks only as of the date on which such statement
is made, and the Company undertakes no obligation to update any forward-looking
statement or statements to reflect events or circumstances after the date on
which such statement is made or to reflect the occurrence of unanticipated
events. New factors emerge from time to time and it is not possible for
management to predict all of such factors, nor can it assess the impact of each
such factor on the business or the extent to which any factor, or combination of
factors, may cause actual results to differ materially from those contained in
any forward-looking statements.
FINANCIAL CONDITION
Management has positioned the Company to focus on continuing the aggressive
expansion of its Diagnostic and Radiology business, including radiation therapy.
During 1997 the Company ceased operations of its unprofitable home health care
business and sold two if its three retail pharmacies in order to concentrate on
its core business. In addition, on December 31, 1997, the company sold its two
Columbus nursing homes and will use the cash from the gain on the sale to
further expand into the diagnostic and radiology services industry. The sale of
these two homes along with the cost savings from the closing of the home health
operations further strengthened the liquidity of the Company and will allow
management to focus on enhancing the operations and profits at its diagnostic
and radiology centers. In February 1998 the Company, through a subsidiary,
opened its third diagnostic center in Central Ohio. This center, located in
Granville, Ohio, provides state of the art diagnostic imaging techniques
including magnetic resonance imaging (MRI), CT scans, ultrasound, bone
densitometry, x-ray and mammography. Additionally, a new center is expected to
commence operations in the third quarter of 1998 (see next page).
(Continued)
12
<PAGE> 13
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
---------------------------------------------
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1998
--------- ------------------------------------
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
---------------------------------------------
AND SUBSIDIARIES
----------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
FINANCIAL CONDITION (CONTINUED)
Working capital decreased approximately $693,000 from $2,886,000 at December 31,
1997 to $2,193,000 at March 31, 1998 due mostly to debt repayment ($204,000),
treasury stock purchases ($132,000), and the net loss for the quarter
($108,000). Current assets decreased approximately $1,054,000, due mostly from
decreases in cash ($583,000), and accounts receivable ($660,000) offset by an
increase in miscellaneous receivables ($148,000). The decrease in cash is due to
the payment of wages and a portion of the accounts payable attributable to the
nursing homes sold on December 31, 1997 while the decrease in accounts
receivable is attributable to the collection of year-end receivables from the
nursing homes that were sold. Current liabilities decreased approximately
$361,000, due primarily from reductions in accounts payable ($142,000) and
accrued wages ($359,000) related to the nursing homes, partially offset by an
increase in current portion of long-term debt ($113,000).
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity position in the first quarter remains strong with
working capital at $2,193,000 at March 31,1998. During April 1998 the Company
collected the remaining balance of approximately $2.9 million on the notes
receivable due from the sale of the two nursing homes. Also in April 1998, the
Company secured an equipment lease line of credit for $1,000,000 with a finance
company. As of April 30, 1998, no draws have been made against this lease line.
The Company and its subsidiaries, limited partnership, and limited liability
companies, have committed to certain equipment upgrades or acquisitions that
will be financed either through the current equipment financing relationship or
through vendor programs. The cost of such equipment currently on order is
approximately $2,000,000.
During 1998, the Company, along with a partner, has commenced construction of a
major 31,000 square feet, two-building center including radiology, nuclear
medicine, cytology, radiation therapy, Positron Emission Tomography (the first
PET Scanner in central Ohio), and a therapy and rehab center. A subsidiary of
the Company has a participating partnership relationship (20%) in the rehab
center, a 22-1/2% interest and management control and responsibility in the
radiation therapy, and 100% ownership in the radiology, PET, nuclear and
cytology operations. The subsidiary also has a 50% interest in the land and
buildings associated to the new center. In addition, the limited partnership, in
which the same subsidiary of the Company is the general partner, is planning to
expand its facility by adding approximately 7,500 square feet. The adjoining
addition (which will be financed with a commitment from a bank) is anticipated
to cost approximately $800,000 and will be used to create the first major
women's breast center in central Ohio.
(Continued)
13
<PAGE> 14
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
---------------------------------------------
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1998
--------- ------------------------------------
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)
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 1998 - 1997
Consolidated revenues from operations for the three months ended March 31, 1998
decreased approximately $2,613,000 or 50.3% from the same period in 1997. Net
sales decreased $397,000 or 58.0% while service revenues declined $2,216,000 or
49.1%. The decline in net sales is due to the reduction in the number of
pharmacies from three in 1997 to one in 1998 while the decrease in service
revenues is attributable to the sale of two nursing homes at December 31,1997.
Excluding the two sold nursing homes, revenue for the first quarter 1998 as
compared to 1997 was relatively stable.
Cost of sales decreased approximately $324,000 or 64.4% for the three months
ended March 31, 1998 while gross margin increased to 37.6% in 1998 from 26.4% in
1997, primarily due to the sale of two retail pharmacies during 1997.
Selling, general and administrative expenses decreased approximately $1,828,000
or 44.1% for the quarter ended March 31, 1998 as compared to the same period in
1997. The decrease is mostly due to the reduction in expenses caused by the sale
of the two nursing homes and two pharmacies offset by increases in expenses at
the diagnostic center due to additional modalities and the expansion of mobile
mammography.
Interest expense for the three months ended March 31, 1998 decreased
approximately $211,000 or 67.2% as compared to the same period in 1997. The
reduction is due to the reduced debt from the mortgages on the two sold nursing
homes and the interest income earned on the notes receivable from the sale of
the homes.
Pre-tax earnings, exclusive of depreciation of $193,152, was $83,825 in 1998 as
compared to pre-tax earnings of $290,939 (exclusive of $232,961 of depreciation)
in the first quarter of 1997. The 1998 first quarter reflected the effects of
the start-up of a new radiation oncology business (in the fourth quarter of
1997) as well as a new diagnostic and radiology center in the Newark, Ohio area
(February 1998) and the process of expanding the diagnostic modalities at the
company's two centers in Columbus, Ohio. The Company does not believe that the
results of the first quarter are indicative of the full year results. The focus
on the expansion of Diagnostic and Radiology, including radiation therapy, along
with the economies of size and cost control are expected to generate profits for
1998 and thereafter. The new medical complex located on Jasonway Road in
Columbus, is scheduled for completion in the summer of 1998. This major facility
will include the Company's second Radiation Oncology facility as well as an
advanced Diagnostic Center including the first Positron Emission Tomography
(PET) scanning unit in Central Ohio. The Company also anticipates breaking
ground for its Women's Breast Center on Kenny Road in the second quarter of
1998.
14
<PAGE> 15
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
---------------------------------------------
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1998
--------- ------------------------------------
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)
May 14, 1998 By: /s/ Sheldon A. Gold
-----------------------------------------
Sheldon A. Gold
President
(Principal Executive Officer)
May 14, 1998 By: /s/ Charles R. Cicerchi
-----------------------------------------
Charles R. Cicerchi
Vice-President, Finance
(Principal Financial and
Accounting Officer)
15
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 272,773
<SECURITIES> 0
<RECEIVABLES> 2,403,635
<ALLOWANCES> 185,000
<INVENTORY> 201,064
<CURRENT-ASSETS> 7,911,227
<PP&E> 14,221,954
<DEPRECIATION> 4,912,327
<TOTAL-ASSETS> 22,087,509
<CURRENT-LIABILITIES> 5,718,041
<BONDS> 15,644,580
0
0
<COMMON> 82,485
<OTHER-SE> 6,122,987
<TOTAL-LIABILITY-AND-EQUITY> 22,087,509
<SALES> 286,987
<TOTAL-REVENUES> 2,582,380
<CGS> 179,194
<TOTAL-COSTS> 179,194
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 103,018
<INCOME-PRETAX> (109,327)
<INCOME-TAX> (1,600)
<INCOME-CONTINUING> (107,727)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (107,727)
<EPS-PRIMARY> (.02)
<EPS-DILUTED> (.02)
</TABLE>
