SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
Amendment No. 1 on FORM 10-K/A
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: July 31, 1995. Commission File Number 0-12927
NATIONAL HOME HEALTH CARE CORP.
(Exact name of registrant as specified in its charter)
Delaware 22-2981141
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
700 WHITE PLAINS ROAD, SCARSDALE, NEW YORK 10583
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 914-722-9000
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.001 per share
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 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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge in definitive proxy or information statements,
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
As of October 25, 1995, the aggregate market value of the Common Stock of the
Registrant, its only class of voting securities, held by non-affiliates of the
Registrant was approximately $10,258,540, calculated on the basis of the average
closing bid and asked prices of such stock on the National Association of
Securities Dealers Automated Quotation System on that date, as reported by the
National Association of Securities Dealers, Inc.
The number of shares outstanding of the Registrant's Common Stock on October 25,
1995 was 4,722,576.
-1-
<PAGE>
Portions of the Registrant's Proxy Statement for its 1995 Annual Meeting of
Stockholders (which Proxy Statement will be filed with the Securities and
Exchange Commission on or before November 28, 1995) are incorporated by
reference in Part III hereof.
-2-
<PAGE>
THE FOLLOWING IS HEREBY REFILED WITH THE SECURITIES AND EXCHANGE COMMISSION IN
THE FORM PREVIOUSLY TRANSMITTED THERETO ON OCTOBER 27, 1995.
PART I
ITEM 1. BUSINESS
GENERAL
National Home Health Care Corp. ("the Registrant") is a Delaware
corporation which was incorporated on July 27, 1983 under the name of Family
Medical Treatment Centers of America, Inc. Effective December 14, 1984, the
Registrant changed its name to National HMO Corp. and effective December 20,
1991, the Registrant changed its name to National Home Health Care Corp. The
Registrant completed its initial public offering in December 1983. The
Registrant is a provider of home health care and outpatient medical services.
The Registrant has four operating subsidiaries:
* HEALTH ACQUISITION CORP., formerly Allen Health Care Services,
Inc., a New York corporation, of which Allen Health Care
Services ("Allen Health Care") is the sole operating division.
The operations of Hitech Home Care, formerly another operating
division of Health Acquisition Corp., were discontinued during
the fiscal year ended July 31, 1993. Accordingly, all
operations relating to Hitech Home Care are shown as
discontinued operations in the financial statements and notes
thereto appearing elsewhere herein.
* BREVARD MEDICAL CENTER, INC., a Delaware corporation ("Brevard
Medical Center"), which conducts business in Brevard County,
Florida. Boro Medical Corp., a Florida corporation, is a
wholly-owned subsidiary of Brevard Medical Center.
* FIRST HEALTH, INC., a Florida corporation ("First Health"),
which conducts business in Volusia County, Florida.
* NEW ENGLAND HOME CARE, INC., a Connecticut corporation ("New
England"),which conducts business in the State of Connecticut.
HEALTH ACQUISITION CORP.
ALLEN HEALTH CARE SERVICES
Allen Health Care maintains its principal administrative office in
Jamaica, New York and has satellite offices in New York City, Farmingdale and
Hempstead, New York. The company provides personal home health care services,
including registered nurses, licensed practical nurses, personal care aides,
home health aides and homemakers in the following counties in the State of New
York:
-3-
<PAGE>
Nassau, Suffolk, Queens, Kings, New York and the Bronx. All personnel are
licensed or are agency certified under a New York State approved program and can
be engaged on a full-time, part-time or live-in basis. Allen Health Care is a
participating provider in both the Nassau and Suffolk Counties Department of
Social Services Medicaid Programs. The Public Health Council of the State of New
York Department of Health has approved the application for licensure of Health
Acquisition Corp. d/b/a Allen Health Care with no limited life restrictions.
Allen Health Care received Joint Commission on Accreditation of
Healthcare Organizations (JCAHO) status in New York State. JCAHO, which is the
accrediting body for all health care providers, is associated with providing
quality services. This status is required by many of the certified home health
care agencies that Allen Health Care currently services. The company's
accreditation expires in May 1996, at which time a resurvey will be commenced.
Reimbursement for the division's services is primarily provided by the
Department of Social Services of both Nassau and Suffolk Counties, New York, as
well as by certified home health care agencies and long term health care
provider programs which contract with the division. In addition, in April 1995,
services of this subsidiary were expanded to include home care pediatric skilled
nursing for medically fragile children and their families.
Allen Health Care provides home health care services to its clients,
twenty-four hours per day, seven days per week. Although the company's offices
are open during normal business hours, personnel are available twenty-four hours
per day to respond to emergencies and to provide other service requests. The
registered nurses of Allen Health Care, in accordance with New York State
Department of Health Regulations and Contract Requirements, visit patients
regularly and review the records of service which are completed by home health
and personal care aides daily. These records are maintained by Allen Health
Care. In addition, the home care coordinator ensures that appropriate coverage
is maintained for all patients and acts as the liaison among family members,
aides and the professional staff.
To a large extent, Allen Health Care's growth potential depends upon
its ability to recruit and maintain qualified personnel. The company's training
programs for home health aides and personnel care aides have been approved by
the New York State Department of Health. The company believes that it offers
competitive salaries and fringe benefits and has been able to keep its home
health aides working on a steady basis.
HITECH HOME CARE
In May 1992, Health Acquisition Corp. purchased substantially all of
the assets of Hitech Registered Nurses of New Jersey, Inc. ("Hitech"), a
licensed nursing agency that provided home intravenous infusion therapy and
skilled nursing in the adult, pediatric and high risk maternity areas in the
State of New Jersey. In addition, Health Acquisition Corp. entered into a
three-year employment agreement with each of the two former shareholders of
Hitech . Each employment
-4-
<PAGE>
agreement called for compensation to the employee during the three-year period
in the aggregate amount of $255,000, with an additional signing bonus of
$225,000 to each employee.
In July 1993, the Registrant discontinued the operations of Hitech Home
Care after determining that the time and financial commitment required to expand
its operations and to make it profitable would be too great to pursue. In
connection with such discontinuation, Health Acquisition Corp. entered into
agreements relating to the termination of the employment agreements of each of
the two key Hitech Home Care employees and the termination of the lease of
Hitech Home Care's office in Valhalla, New York. The agreements required the
payment of $30,000 in accrued bonuses and severance to one employee of
approximately $13,000. The lease termination required the one-time payment of
$75,000 and the forfeiture of a $30,000 security deposit in order to terminate
the lease, which would have required monthly payments of $5,687 per month until
April 1995. See "Notes to Financial Statements - Discontinued Operations".
NEW ENGLAND HOME CARE
On August 4, 1995, the Registrant consummated the acquisition of 100%
of the capital stock of Nurse Care, Inc. ("Nurse Care"), the parent company of
New England Home Care, Inc. ("New England") for $3,150,000 in cash. In addition,
one of the two former shareholders entered into a one-year employment contract
as the Administrator of New England with a base salary of $125,000. The other
former shareholder entered into a one-year consulting agreement to provide
certain consulting services with respect to the operations of New England in
consideration of $20,000 in consulting fees.
New England is a Medicare certified and licensed home health care
company in the State of Connecticut. The company provides a wide variety of home
health care services consisting of home health aides, skilled nursing, physical
therapy, speech therapy, occupational therapy and social work. New England
maintains its principal administrative office in Milford, Connecticut and has
branch offices in Norwalk, Hamden, Waterbury, Seymour and Danbury, Connecticut.
Although the company is currently undertaking the necessary steps to achieve
JCAHO status in the State of Connecticut, there can be no assurance that this
status will be obtained. Reimbursement for New England's services are primarily
provided by the Federal Medicare Program and the State of Connecticut Medicaid
Programs. Additional sources of revenue are from managed care programs, hospices
and commercial insurance carriers.
BREVARD MEDICAL CENTER
Brevard Medical Center provides out-patient multi-specialty and primary
medical care through its five outpatient medical offices located throughout
Brevard County, Florida. The company maintains its principal administrative
office in Melbourne, Florida.
-5-
<PAGE>
The services of the company include primary and specialty physician
care, diagnostic testing, laboratory and x-ray services, minor office surgery,
follow-up care relating to specific treatments as well as continuous care to
patients.
The company enters into contracts with primary care physicians who are
either Board Certified or Board Eligible in their primary care discipline. The
physician is also required to obtain and maintain local hospital admitting
privileges to provide continuity of care to Brevard Medical Center's patients,
both in and out of the hospital. The physicians render services in accordance
with quality assurance standards set by the American Medical Association and are
monitored by the company's Quality Improvement Committee. In addition, Brevard
Medical Center enters into agreements with specialty physicians to provide
Brevard Medical Center's patients with in-house consultations, consultations in
their own offices as well as acute care in the hospital for advanced diagnostic
testing and major surgery.
Brevard Medical Center contracts with employer groups, health plans,
preferred provider organizations and community health purchasing alliances
consisting of local health maintenance organizations. The company also
participates with various indemnity coverage programs.
In addition, Brevard Medical Center provides out-patient medical
services for its wholly-owned subsidiary, Boro Medical Corp. Boro Medical Corp.
is the holder of a prepaid cost reim bursement contract with the Health Care
Financing Administration of the Federal Government to provide certain
out-patient medical services to Medicare subscribers. In addition, Boro Medical
Corp. is the holder of a prepaid health clinic license (PHC), which is a
certificate of authority issued by the Florida Department of Insurance to
provide certain outpatient medical services to subscribers.
Although Brevard Medical Center has been able to recruit physicians,
there can be no assurance that it will successfully continue to do so. If it is
unsuccessful, it will then be necessary for the company to use temporary medical
personnel, which will increase the company's costs for physicians, the Company
believes, by approximately fifty (50%) percent.
FIRST HEALTH, INC.
First Health, which was incorporated in the State of Florida in April
1994, provides outpatient medical services through its three outpatient medical
offices in Volusia County, Florida. In 1994, First Health purchased certain
fixed and intangible assets of Healthmark, P.A. and Atlantic Medical Associates,
P.A., which were engaged in providing outpatient medical services in Volusia
County.
First Health is a preferred provider for a health maintenance
organization under both medicare and commercial provider agreements in all three
of its outpatient medical centers. The company contracts with primary care
physicians who are either Board Certified or Board Eligible in their primary
care discipline. The physician is also required to obtain and maintain local
hospital admitting privileges to provide continuity of care to First Health's
patients, both in and out of the hospital. The
-6-
<PAGE>
physicians render services in accordance with quality assurance standards set by
the American Medi cal Association and are monitored by the company's Quality
Improvement Committee.
Although First Health has been able to recruit physicians, there can be
no assurance that it will successfully continue to do so. If it is unsuccessful,
it will then be necessary for the company to use temporary medical personnel,
which will increase the company's costs for physicians, the Company believes, by
approximately fifty (50%) percent.
NATIONAL HMO (NEW YORK), INC.
On April 30, 1994, Boro Medical, P.C. and Boro Health Care of Union,
P.C. (collectively "Boro Medical"), a medical provider to which National HMO
(New York), Inc. ("National New York") and National HMO Corp. of Elizabeth, Inc.
("National Elizabeth") provided non-medical and administrative management
services, terminated its relationship with National New York and National
Elizabeth. In addition, on April 30, 1994, National New York and National
Elizabeth entered into an asset purchase agreement with Boro Medical. Under the
terms of the agreement, as consideration for the sale by National New York and
National Elizabeth of certain assets, Boro Medical agreed to pay a purchase
price of $750,000, as well as all outstanding management fees due to National
New York through April 30, 1994 in the aggregate amount of $500,000. Boro
Medical delivered at closing five-year and three-year promissory notes in the
aggregate amounts of $750,000 and $500,000, respectively, each at an interest
rate of seven percent. The leases at all of the medical offices subject to the
former relationship were assumed by Boro Medical and National New York and
National Elizabeth were released from any further obligations under the
applicable lease agreements. In addition, National New York, National Elizabeth
and certain of its officers and Boro Medical and certain of its officers
delivered mutual releases with respect to all prior claims that may have existed
between them relating to their former relationship and further agreed not to
compete with one another in certain operations and in specific areas relating to
their respective businesses.
For the fiscal year ended July 31, 1993, the revenue associated with
Boro Medical represented approximately 21% of the Registrant's consolidated
revenues from continuing operations for such year. In addition, in July 1994,
National New York terminated its management agreement with the dental
practitioner to which it also provided administrative and management services.
Accordingly, the Registrant has reclassified its financial statements to show
separately the results of the discontinued operations. See "Notes to Financial
Statements - Discontinued Operations".
INSURANCE
The Registrant maintains professional malpractice liability coverage on
professionals employed in the rendering of health care services in addition to
coverage for the customary risks inherent in the operation of businesses in
general. Health Acquisition Corp. and New England carry corporate malpractice
insurance policies providing coverage in an amount of up to $1,000,000 per
occurrence and up to $6,000,000 in the aggregate. Both Brevard Medical Center
and First Health carry a
-7-
<PAGE>
corporate malpractice insurance policy providing coverage in an amount of
$1,000,000 per occurrence and $3,000,000 in the aggregate. Recent market
conditions with respect to liability insurance have caused wide fluctuations in
the cost and availability of coverage. While the Registrant believes its
insurance policies are adequate in the amount and coverage for its current
operations, there can be no assurance that coverage will continue to be
available in adequate amounts or at a reasonable cost.
EMPLOYEES
As of October 27, 1995, the Registrant employed approximately 1,600
full and part-time employees of whom 18 were employed in various management
capacities and 3 were employed in marketing activities.
Health Acquisition Corp., New England, Brevard Medical Center and First
Health recruit health service personnel principally through referral from
existing personnel and through newspaper advertisements. The Registrant has
standardized procedures for recruiting, interviewing and reference checking
prospective health care personnel. All nurses and physicians must be licensed by
the appropriate licensing authorities. Employees receive instruction in the
procedures and policies of the respective subsidiary corporations.
The Registrant's ability to attract a staff of highly trained personnel
is a material element of its business. There currently is intense competition
for qualified personnel and there can be no assurance that the Registrant will
be successful in maintaining or in securing additional qualified personnel. The
Registrant has no union contracts with any of its employees and believes that
its relationship with its employees is satisfactory.
COMPETITION
The home health care field is highly competitive. The Registrant is
competing with numerous other licensed as well as certified home health care
agencies. In addition, the Registrant competes with companies that, in addition
to providing health aid and skilled nursing services, also, unlike the
Registrant, provide pharmaceutical products and other home care services that
generate additional referrals.
The out-patient medical field is highly competitive as well. The
Registrant faces competition in securing patients and in recruiting qualified
personnel from hospitals, health maintenance organizations and other medical
providers. Many of the Registrant's competitors are larger and have greater
experience and financial resources which facilitates their ability to secure
patients and recruit personnel.
-8-
<PAGE>
CUSTOMERS
One or more customers have each accounted for more than 10% of the
Registrant's revenues. For the fiscal years ended July 31, 1995, 1994 and 1993,
VNS Home Care, a non-profit, Medicare certified home health care agency,
accounted for 40%, 39% and 34%, respectively, and the Department of Social
Services accounted for 13%, 17% and 21%, respectively, of the Registrant's
consolidated revenues from continuing operations. The total loss of any of the
foregoing customers would have a material adverse effect on the Registrant.
GOVERNMENT REGULATIONS
General
- -------
The health care industry is highly regulated, and the regulatory
environment in which the Registrant operates may change significantly in the
future, particularly in light of many proposed changes of the current
administration.
Significant aspects of the Registrant's businesses are subject to
local, state and federal statutes and regulations governing, among other areas,
licensing, fee splitting, reimbursement under federal and state medical
assistance programs, financial relationships between healthcare providers and
potential referral sources, workplace health and safety and other matters. The
Registrant's businesses may also be affected by changes in ethical guidelines
and operating standards of professional and trade associations.
Many states require regulatory approval, including certificates of
need, before establishing certain types of health care facilities, offering
certain health care services or making expenditures in excess of statutory
thresholds for health care equipment, facilities or programs.
The ability of the Registrant to operate profitably will depend in part
upon the Registrant obtaining and maintaining all necessary licenses,
certificates of need and other approvals and operating in compliance with
applicable health care regulations.
State Regulation
- ----------------
State laws impose licensing requirements on health care professionals,
and on facilities operated by such professionals. In addition, state laws
specify who may practice medicine and limit the scope of relationships between
medical practitioners and other parties. Violations of these laws may result in
civil and criminal penalties.
Several states have adopted or are considering legislation that, if
enacted, would restrict or prohibit referrals by physicians to facilities in
which the physicians have an ownership interest or with which they have a
financial relationship. Violations of these laws may result in the loss of
healthcare
-9-
<PAGE>
provider licenses as well as fines and criminal penalties. On April 8, 1992, the
State of Florida enacted a patient Self-Referral Act that severely restricts
patient referrals for certain services, prohibits mark-ups of certain
procedures, requires disclosure of ownership requirements and places other
regulations on health care providers. The Registrant believes that its Florida
offices fit within the group practice exemption contained in the Florida Act;
however, certain relationships are not explicitly sanctioned by the Act, but are
not believed to be prohibited. There can be no assurance that other states will
not adopt similar legislation or that the Registrant's offices will in all cases
be able to comply with such laws. Such statutes could restrict expansion of the
Registrant's operations into those jurisdictions.
Medicare Fraud and Abuse
- ------------------------
Provisions of the Social Security Act under Medicare and Medicaid
generally prohibit soliciting, receiving, offering or paying, directly or
indirectly, any form of remuneration in return for the referral of Medicare or
state health care program patients or patient care opportunities, or in return
for the purchase, lease or order of any facility item or service that is covered
by Medicare or a state health care program. In July 1991, the federal government
published regulations that provide exceptions, or "safe harbors," for business
transactions that will be deemed not to violate the anti-kickback statute.
Violations of the statute may result in civil and criminal penalties and
exclusion from participation in the Medicare and Medicaid programs.
The Registrant believes that its current operations are not in
violation of the anti-kickback statute. However, judicial decisions interpreting
the statute and the regulations promulgated thereunder, have resulted in varying
and ambiguous interpretations of the statute. Thus, the scope of the
anti-kickback statute is unclear. A determination that the contracts and
relationships entered into by the Registrant violated the anti-kickback statute
would have a material adverse impact on the business of the Registrant.
As medical providers, both Brevard Medical Center and First Health are
subject to the above mentioned regulations. If these companies were found to be
in violation of such regulations, the Registrant would be materially adversely
affected.
Regulatory Compliance
- ---------------------
The Registrant believes that health care regulations will continue to
change and, therefore, regularly monitors developments in health care law. The
Registrant expects to modify its agreements and operations from time to time as
the business and regulatory environment changes. While the Registrant believes
it will be able to structure all its agreements and operations in accordance
with applicable law, there can be no assurance that its arrangements will not be
successfully challenged.
-10-
<PAGE>
ITEM 2. PROPERTIES.
The Registrant, directly or through certain subsidiaries, leases
various office facilities under lease agreements with various expiration dates
through the year 2000. The following sets forth the location, approximate square
footage, use of each office and expiration date of each lease:
<TABLE>
<CAPTION>
Approximate Expiration Date
Location Square Feet Use of Lease
- -------- ----------- ------------------ ---------------
<S> <C> <C> <C>
Scarsdale, NY 2,095 Corporate headquarters July 31, 1996
Yonkers, NY 2,500 Corporate headquarters March 31, 1997
Queens, NY 5,200 Administrative office January 31, 1996
Farmingdale, NY 3,519 Satellite office April 30, 1996
Hempstead, NY 700 Satellite office Month to Month
Manhattan, NY 1,265 Satellite office April 30, 1996
Deltona, FL 2,500 Outpatient medical office April 30, 1996
South Daytona, FL 2,500 Outpatient medical office May 31, 1996
Daytona, FL 2,000 Outpatient medical office April 30, 1996
Melbourne, FL 1,600 Administrative office March 31, 1996
Melbourne, FL 2,900 Outpatient medical office July 31, 1996
Palm Bay, FL 2,800 Outpatient medical office July 31, 1996
Merritt Island, FL 2,680 Outpatient medical office August 31, 1996
Satellite Beach, FL 2,580 Outpatient medical office July 31, 1996
Titusville, FL 3,200 Outpatient medical office June 30, 1998
Milford, CT 9,600 Administrative office May 31, 1997
Danbury, CT 1,200 Satellite office November 30, 1998
Hamden, CT 2,605 Satellite office July 31, 1998
Seymour, CT 2,000 Satellite office February 29, 1996
Waterbury, CT 2,000 Satellite office July 31, 2000
Norwalk, CT 2,772 Satellite office May 31, 1996
</TABLE>
The Registrant believes that its facilities are adequate for the
conduct of its existing operations. The Registrant regularly evaluates the
suitability of each office and the overall adequacy of its various satellite
offices. The Registrant believes that it will be able to renew or find adequate
replacement offices for all leases which will expire in the current fiscal year.
ITEM 3. LEGAL PROCEEDINGS.
In the ordinary course of business, the Registrant may be subject, from
time to time, to claims and legal actions. No material actions are currently
pending against the Registrant. The Registrant maintains professional
malpractice insurance, general liability insurance and other insurance coverages
of the types and in the amounts it believes are typical for similar companies in
its industry.
-11-
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS.
No matters were submitted to a vote of stockholders of the Registrant
during the fourth quarter of the fiscal year ended July 31, 1995.
-12-
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK
AND RELATED STOCKHOLDER MATTERS.
(A) Market Information
------------------
The Registrant's Common Stock is quoted on the NASDAQ National Market
System under the symbol NHHC. (Prior to December 20, 1991, the symbol was NHMO).
The following table pre sents the quarterly high and low bid quotations in the
over-the-counter market, as reported by the National Association of Securities
Dealers for the two fiscal years ended July 31, 1994 and July 31, 1995. These
quotations reflect the inter-dealer prices, without retail mark-up, mark-down or
commission and may not necessarily represent actual transactions.
Year ended July 31, 1994 Market Prices
High ------------- Low
- ------------------------ ---- ----
1st Quarter $ 3.25 $ 2.25
2nd Quarter 3.25 2.25
3rd Quarter 3.50 1.75
4th Quarter 2.75 2.13
Year ended July 31, 1995
- ------------------------
1st Quarter $ 3.75 $ 2.00
2nd Quarter 3.88 2.13
3rd Quarter 4.00 2.75
4th Quarter 3.75 2.75
(B) Holders
-------
There were approximately 180 holders of record of Common Stock as of
October 25, 1995, excluding shares held by depository companies for certain
beneficial owners.
(C) Dividends
---------
The Registrant has not declared or paid any dividends on its shares of
Common Stock during the last three fiscal years. It anticipates that for the
foreseeable future all earnings will be retained for use in its business, and,
accordingly, it does not intend to pay cash dividends.
-13-
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA.
The following table, which presents selected financial data for the
Registrant for each of the last five fiscal years, has been derived from the
Consolidated Financial Statements of the Registrant, which have been audited by
Richard A. Eisner & Company, LLP, independent auditors.
The data set forth below should be read in conjunction with the
Consolidated Financial Statements in Item 8 of this Report.
<TABLE>
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Revenues $24,556,000 $20,116,000 $18,059,000 $16,230,000 $11,396,000
Net Income from
continuing
operations 1,426,000 1,218,000 1,309,000 1,189,000 968,000
Net income from
continuing
operations per
share .30 .26 .27 .25 .20
Net income
(loss) from
discontinued
operations- -0- (3,472,000) (461,000) 658,000 641,000
Net income
(loss) per share
from dis-
continued
operations -0- (.73) (.09) .14 .14
Total Assets 18,865,000 17,926,000 20,309,000 19,106,000 17,356,000
Long Term 14,000 40,000 77,000 146,000 --
Obligations
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
The following discussion and analysis provides information which the
Registrant's management believes is relevant to an assessment and understanding
of the Registrant's results of operations and financial condition. This
discussion should be read in conjunction with the consolidated financial
statements and notes thereto appearing elsewhere herein.
-14-
<PAGE>
On April 30, 1994, Boro Medical, a medical provider to which National
New York and National Elizabeth provided non-medical and administrative
management services, terminated its relationship with National New York and
National Elizabeth. In addition, in July 1994, National New York terminated its
relationship with the dental practitioner to which it also provided management
services. See "Business - National HMO (New York), Inc."
In July 1993, the Registrant discontinued the operations of Hitech Home
Care, the division of Health Acquisition Corp. that provided skilled nursing and
home intravenous therapy services. In management's opinion, there was not
sufficient growth potential in this market to make any further expenditures of
working capital.
The above transactions have been reflected in the financial statements
as discontinued operations. See "Notes to Financial Statements-Discontinued
Operations." The results of operations as discussed below relate to the
continuing operations of the Registrant.
RESULTS OF OPERATIONS
- ---------------------
Year Ended July 31, 1995 as Compared to Year Ended July 31, 1994
- ----------------------------------------------------------------
Total revenues increased approximately $4,440,000 or 22% to $24,556,000
for the year ended July 31, 1995 ("fiscal 1995") from $20,116,000 for the year
ended July 31, 1994 ("fiscal 1994"). Approximately $3,270,000 or 74% of this
increase is attributable to Health Acquisition Corp., the subsidiary that
provides home health care services. Health Acquisition Corp. was again
successful in securing new provider contracts, as well as increasing volume with
existing customers. In addition, in April 1995 services of this subsidiary were
expanded to include home care pediatric skilled nursing for medically fragile
children and their families. Revenues from Brevard Medical Center, the
subsidiary that operates outpatient medical centers in Brevard County, Florida,
increased approximately $358,000, or 9% from the previous fiscal year. As a
result of the health care industry shifting towards managed care, Brevard was
successful in becoming preferred providers for new managed care plans coming
into the county. This increase in revenues is the direct result of additional
capitation business generated from managed care plans, primarily from health
maintenance organizations (HMO's), offset by a reduction in traditional
fee-for-service business. The Registrant expects these trends to continue in the
future. Although revenues increased over the previous fiscal year, the loss of
any of these new managed care contracts would have a material adverse effect on
the Registrant. Revenue from First Health, the subsidiary that operates
outpatient medical centers in Volusia County, Florida, increased approximately
$812,000 from the previous fiscal year, as only three months were included in
fiscal July 31, 1994 operations. The major source of revenue is from a large
health maintenance organization, to which First Health is a preferred provider.
Revenues from home care services accounted for 79% of the Registrant's
consolidated revenues in the current fiscal year and has historically generated
the greatest operating margins for the Registrant. The Registrant's recent
acquisition of Nurse Care, Inc. and its wholly-owned
-15-
<PAGE>
subsidiary, New England Health Care, Inc. is an example of the Registrant's
commitment to devoting substantially all of its resources to the expansion of
home health care services. See "Business - New England Home Care."
Operating expenses as a percentage of consolidated revenues increased
to 91% in fiscal 1995 as compared to 89% in fiscal 1994. Personnel costs
increased to 77% of consolidated revenues for fiscal 1995 as compared to 75% in
fiscal 1994. These increases are attributable to the outpatient medical center
operations in Florida. In preparation for becoming preferred providers for
additional managed care plans, the Company increased its medical personnel to
service these plans, which increase, however, was not met with a proportionate
increase in revenue from these managed care plans. General and administrative
expenses remained at 13% of consolidated revenues in both fiscal years 1995 and
1994.
Interest income increased approximately $249,000 or 155% from the
previous fiscal year. This increase is attributable to interest earned on both
the notes receivable from Boro Medical and the federal income tax refund
received in the current fiscal year of approximately $2,100,000 as a result of
carryback claims.
The Registrant's effective tax rate decreased to approximately 44% in
the current fiscal year as compared to 47% in the previous fiscal year. This
decrease is primarily attributable to federal income tax credits utilized in the
current fiscal year.
Year Ended July 31, 1994 as Compared to Year Ended July 31, 1993
- ----------------------------------------------------------------
Total revenues increased approximately $2,057,000, or 11%, to
$20,116,000 for the year ended July 31, 1994 from $18,059,000 for the year ended
July 31, 1993. Health Acquisition Corp., the subsidiary that provides
paraprofessional home health care services accounted for $1,759,000, or 85%, of
the increase in revenues. This increase is due to Health Acquisition Corp.
securing additional contracts from certified home health care agencies and other
long-term provider programs, as well as additional volume with existing
contracts. Revenues from Brevard Medical Center, the subsidiary that operates
the outpatient medical centers in Brevard County, Florida, increased
approximately $116,000, or 3%, from the previous fiscal year. This increase is
attributable to Brevard Medical Center securing additional revenue from
preferred provider arrangements offset by the decrease in traditional
fee-for-service revenue. As the health care industry has been changing towards a
managed care network, Brevard Medical Center has secured additional prepaid or
capita tion revenue by becoming a preferred provider for various health care
alliances. It expects this trend to continue in the future. In addition, in May
1994, the Registrant through a wholly-owned subsidiary, First Health, commenced
operations in Volusia County, Florida with the acquisition of certain assets of
three outpatient medical centers. Revenues for the three months were
approximately $182,000. Currently, the major source of revenue is from a large
health maintenance organization, to which First Health is a preferred provider.
-16-
<PAGE>
Operating expenses as a percentage of consolidated revenues increased
to 89% in fiscal 1994 as compared to 87% in fiscal 1993. Personnel costs
remained at 75% of consolidated revenues for both fiscal years 1994 and 1993.
General and administrative expenses increased approximately $629,000 to 13% of
consolidated revenue in fiscal 1994 as compared to 11% in fiscal 1993. This
increase is attributable to additional administrative costs of Health
Acquisition Corp., the start-up of First Health and approximately $200,000 of
non-recurring charges in fiscal 1994 as compared to fiscal 1993.
Interest income increased approximately $45,000, or 38%, from the
previous fiscal year due to an increase in cash from operations in fiscal 1994.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
As of July 31, 1995 and prior to the acquisition of Nurse Care, Inc.
and New England Home Care, Inc., as described below, the ratio of current assets
to current liabilities was approximately 17:1 as compared to approximately 12:1
as of July 31, 1994. Cash and investments increased to $9,790,000 as of the most
recent fiscal year end from $6,570,000 in the previous fiscal year.
A majority of the Registrant's business (home health care services)
requires weekly payments to health care personnel at the time services are
rendered. Payment for these services is typically on a contracted basis of 90 to
120 days. However, reimbursement for the other portion of the Registrant's
business (outpatient medical services) is received each month in the form of
capitation payments. Accounts receivable represented 33% of current assets at
both July 31, 1995 and July 31, 1994. See "Notes to Financial Statements -
Acquisitions." For the fiscal year ended July 31, 1995 accounts receivable
turnover decreased to 79 days from 88 days in the previous fiscal year.
The Registrant has available a $2,000,000 secured line of credit with
its bank at the alternate base commercial lending rate of the bank. The line of
credit expires November 30, 1995 and is subject to renewal. As of July 31, 1995,
the Registrant had no outstanding balance under the line of credit.
The Registrant intends to meet both its short and long term liquidity
needs with its current cash balances, cash flow and available line of credit.
The acquisition on August 4, 1995 of Nurse Care, Inc. and New England Home Care,
Inc. for $3,150,000 was made in cash generated from internal funds. In addition,
New England Home Care, Inc. is currently seeking to secure a line of credit to
finance its own accounts receivable.
The Internal Revenue Service (the "IRS") is currently conducting an
examination of the Federal Tax Return filed by the Registrant for the fiscal
year ended July 31, 1993. The Registrant has been advised that it is standard
procedure for refund claims in excess of $1,000,000 to be reviewed by the IRS's
Joint Committee on Taxation after the IRS has conducted an examination to
determine that the refund amount is correct. Therefore, since the Registrant
received a refund claim
-17-
<PAGE>
approximating $2,100,000 as a result of net operating loss carryback claims
relating to the fiscal year ended July 31, 1994, the years affected by the
carryback (fiscal years ended July 31, 1991 through 1994) are now being
examined. No assessment has been made to date.
IMPACT OF INFLATION
The impact of inflation on the Registrant was not material during the
year ended July 31, 1995.
ECONOMIC OUTLOOK
The home health care industry has become increasingly competitive and
management believes this trend will continue in the future. This competition has
lead to mergers between large well diversified home health care companies over
the past year. Further, such companies have more acquisition and growth
opportunities available to them. Additionally, there is tremendous competition
for qualified personnel in the home health care industry. Management believes
that it offers com petitive salaries and benefit packages. There can be no
assurance, however, that the Registrant will be successful in attracting and
retaining qualified personnel. If unsuccessful, this could have a material
adverse effect on the Registrant's business.
There is also increased competition in Florida where the Registrant is
a provider of out-patient medical services. Competition comes from health
maintenance organizations, independent doctors' offices and out-patient
satellite offices of hospitals which have established networks of medical
treatment offices. In addition, as the delivery of medical services has shifted
to a managed care system, there is increased competition in becoming preferred
providers for many of the new health care alliances that are being formed.
Furthermore, there is tremendous competition in recruiting and retaining
qualified Board Certified primary care physicians. Primary care physicians are
the gatekeepers in a managed care network and are vital in securing and
maintaining managed care contracts. If the Registrant is unsuccessful in
attracting and retaining such physicians, it could have a material adverse
effect on the Registrant's business.
Other than as set forth herein, the Registrant has no material
commitments for capital expenditures as of July 31, 1995.
In the opinion of management there will be no material impact on the
financial statements of the Registrant from any recently issued accounting
standards.
-18-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Quarterly Results (unaudited)
- ----------------------------
The following table presents unaudited condensed financial data for the
last eight fiscal quarters beginning August 1, 1993. In the opinion of
management, all necessary adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. The following
selected quarterly information should be read in conjunction with the
consolidated financial statements included elsewhere herein.
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
1994 ------- ------- ------- -------
- ----
<S> <C> <C> <C> <C>
Revenues $4,890,276 $4,921,714 $4,977,213 $5,326,797
Earnings from continuing operations 385,749 366,268 235,801 230,182
Earnings (loss) from discontinued operations (73,242) (6,854,454) 992,947 2,462,749
Earnings per share from continuing operations 0.08 0.08 0.05 0.05
Earnings (loss) per share from discontinued operations (0.01) (1.44) 0.21 0.51
Earnings (loss) per share 0.07 (1.36) 0.26 0.56
1995
- ----
Revenues 5,729,691 6,044,671 6,295,814 6,485,824
Earnings from continuing operations 265,497 334,455 400,489 425,559
Earnings per share from continuing operations .06 .07 .08 .09
Earnings per share .06 .07 .08 .09
</TABLE>
The other information required by this item is set forth in the
Consolidated Financial Statements on pages F-1 through F-20.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE.
Not applicable.
-19-
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
ITEM 11. EXECUTIVE COMPENSATION.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by each of the items of Part III is omitted
from this Report. Pursuant to the General Instruction G(3) to Form 10-K, the
information is included in the Company's Proxy Statement for its 1995 Annual
Meeting of Stockholders to be held on December 8, 1995, and is incorporated
herein by reference. Such Proxy Statement will be filed with the Securities and
Exchange Commission not later than 120 days subsequent to July 31, 1995.
-20-
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K.
(a) The following represents a listing of all financial
statements, financial statement schedules and exhibits filed as part of this
Report.
(1) FINANCIAL STATEMENTS (see index to the consolidated
financial statements).
(2) FINANCIAL STATEMENT SCHEDULES (see index to the
consolidated financial statements).
(3) EXHIBITS
Exhibit
Number Exhibit to this Report Method of Filing
- ------ ---------------------- ----------------
3.1 Certificate of Incorporation Incorporated by
of the Registrant reference to Exhibit
3(a) to Registration
Statement on Form S-1
(No. 2-86643) filed
September 20, 1983 (the
"1983 Registration
Statement").
3.2 Certificate of Amendment Incorporated by
to Certificate of reference to Exhibit 3.2
Incorporation of the to the Registrant's
Registrant Annual Report on Form
10-K for the year ended
July 31, 1992 (the "1992
Form 10-K").
3.3 By-Laws of the Registrant Incorporated by
reference to Exhibit
4(a) to the 1983
Registration Statement.
4.1 Specimen Stock Certificate Incorporated by
reference to Exhibit
4(a) to the 1983
-21-
<PAGE>
Exhibit
Number Exhibit to this Report Method of Filing
- ------ ---------------------- ----------------
Registration Statement.
10.1 1992 Stock Option Plan of Incorporated by
the Registrant reference to Exhibit
10.1 to the Registrant's
Annual Report on Form
10-K for the year ended
July 31, 1993 (the
"1993 Form 10-K").
10.2 Incentive Stock Option Plan Incorporated by
of the Registrant reference to Exhibit
10(b) to the 1983
Registration Statement.
10.3 Agreement between Allen Incorporated by reference
Health Care Services to Exhibit 10.3 to the
and VNS Home Care dated Registrant's Annual Report
January 1, 1994 on Form 10-K forthe fiscal
year ended July 31, 1994
(the "1994 Form 10-K").
10.4 Agreement between Boro Incorporated by
Medical Corp. and Brevard reference to Exhibit
Medical Center dated 10.25 to the Registrant's
September 11, 1991 Annual Report on Form
10-K for the year ended
July 31, 1991 (the "1991
Form 10-K").
10.5 Employment Agreement Incorporated by
between the Registrant reference to Exhibit 10.7
and Steven Fialkow to the 1993 Form 10-K.
dated August 1993
10.6 Employment Agreement Incorporated by
between the Registrant reference to Exhibit 10.8
and Richard Garofalo to the 1993 Form 10-K.
dated August 1993
-22-
<PAGE>
Exhibit
Number Exhibit to this Report Method of Filing
- ------ ---------------------- ----------------
10.7 Employment Agreement Incorporated by
between the Registrant reference to Exhibit 10.9
and Gerald Kline to the 1993 Form 10-K.
dated August 1993
10.8 Employment Agreement Incorporated by
between the Registrant reference to Exhibit
and Thomas Smith 10.10 to the 1993
dated August 1993 Form 10-K.
10.9 Employment Agreement between Incorporated by reference
the Registrant and Robert to Exhibit 10.9 to the
Heller dated August 1994 1994 Form 10-K.
10.10 Agreement between Division Incorporated by
of Social Services of reference to Exhibit
County of Suffolk and 10.35 to the 1991
Health Acquisition Corp. Form 10-K.
d/b/a A Round The Clock
Temporary Services
10.11 Agreement between Nassau Incorporated by reference
County Department of Social to Exhibit 10.9 to
Services and Allen Health the 1992 Form 10-K.
Care Services
10.12 Agreement between Catholic Incorporated by reference
Medical Center of Brooklyn to Exhibit 10.14 to the
and Queens, Inc. on behalf 1994 Form 10-K.
of Mary Immaculate
Hospital Home Health
Agency and Allen Health
Care Services, dated
January 1, 1994
-23-
<PAGE>
Exhibit
Number Exhibit to this Report Method of Filing
- ------ ---------------------- ----------------
10.13 Letter Agreement dated Filed herewith.
March 15, 1995 securing
line of credit from the
Bank of New York
10.14 Letter dated June 1, 1992 Incorporated by reference
from Public Health Council to Exhibit 10.13 to
of the State of New York the 1992 Form 10-K.
Department of Health to
Health Acquisition Corp.
d/b/a Allen Health Care
Services
10.15 Employment Agreement Incorporated by
between the Registrant reference to Exhibit
and Frederick H. Fialkow 10.20 to the 1993
dated April 30, 1993; Form 10-K.
First Amendment to
Employment Agreement
dated August 1, 1993
10.16 Letter from Joint Commission Incorporated by
on Accreditation of reference to Exhibit
Healthcare Organizations 10.24 to the 1993
awarding accreditation to Form 10-K.
Allen Health Care,
dated September 20, 1993
10.17 1993 401(k) Plan Incorporated by
of the Registrant reference to Exhibit
10.25 to the 1993
Form 10-K.
10.18 Letter Agreement between Incorporated by
National HMO (New York), reference to Exhibit
Inc. and Boro Medical, 10.26 to the 1993
P.C. dated November 12, Form 10-K.
1993
-24-
<PAGE>
Exhibit
Number Exhibit to this Report Method of Filing
- ------ ---------------------- ----------------
10.19 Asset Purchase Agreement Incorporated by reference
among National HMO (New to Exhibit 10.24 to the
York), Inc., National HMO 1994 Form 10-K.
Corp. of Elizabeth, Inc.,
Boro Medical, P.C. and Boro
Health Care of Union, P.C.
dated April 30, 1994
10.20 Asset Purchase Agreement Incorporated by reference
between First Health, Inc. to Exhibit 10.25 to the
and Healthmark P.A. and 1994 Form 10-K.
Cesar N. Abiera, Jr., M.D.
dated April 29, 1994
10.21 Asset Purchase Agreement Incorporated by reference
between First Health, Inc. and to Exhibit 10.26 to the
Atlantic Medical Associates, 1994 Form 10-K.
P.A. and Ernest Cook, Jr.,
M.D. dated June 1, 1994
10.22 Agreement for the Purchase of Incorporated by reference
the Stock of Nurse Care, Inc. to Exhibit 10.1 to the
and Related Transactions Registrant's Current
Report on Form 8-K
dated August 4, 1995.
10.23 Employment Agreement between Incorporated by reference
New England and Aileen to Exhibit 10.2 to the
O'Connell dated as of Registrant's Current
August 1, 1995 Report on Form 8-K dated
August 4, 1995.
10.24 Form of Employment Agreement Filed herewith.
between Brevard Medical Center, Inc.
and Warren D. Stowell dated as of
November 1, 1995
21.1 List of Subsidiaries Filed herewith.
23.1 Consent of Richard A. Eisner & Co. Filed herewith.
(b) REPORTS ON FORM 8-K. None have been filed during the last
fiscal quarter.
-25-
<PAGE>
NATIONAL HOME HEALTH CARE CORP.
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
FILED WITH THE ANNUAL REPORT OF THE COMPANY ON FORM 10-K
PART II ITEM 8:
REPORT OF INDEPENDENT AUDITORS F- 2
CONSOLIDATED BALANCE SHEETS AS AT JULY 31, 1995
AND 1994 F- 3
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE
YEARS ENDED JULY 31, 1995, 1994 AND 1993 F- 4
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS'
EQUITY FOR THE YEARS ENDED JULY 31, 1995, 1994
AND 1993 F- 5
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS
ENDED JULY 31, 1995, 1994 AND 1993 F- 6
NOTES TO FINANCIAL STATEMENTS F- 7
PART IV ITEM 14:
REPORT OF INDEPENDENT AUDITORS ON SCHEDULE F-21
II - VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS
ENDED JULY 31, 1995, 1994 AND 1993 F-22
Schedules Omitted
Other schedules have been omitted as the conditions requiring their filing are
not present or the information required therein has been included in the notes
to consolidated financial statements.
F-1
<PAGE>
[RICHARD A. ESINER & COMPANY, LLP]
[Letterhead]
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Stockholders
National Home Health Care Corp.
Scarsdale, New York
We have audited the accompanying consolidated balance sheets
of National Home Health Care Corp. and subsidiaries as at July 31, 1995 and July
31, 1994, and the related consolidated statements of operations, changes in
stockholders' equity and cash flows for each of the years in the three-year
period ended July 31, 1995. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements enumerated above
present fairly, in all material respects, the consolidated financial position of
National Home Health Care Corp. and subsidiaries at July 31, 1995 and July 31,
1994, and the consolidated results of their operations and their consolidated
cash flows for each of the years in the three-year period ended July 31, 1995,
in conformity with generally accepted accounting principles.
/s/ Richard A. Eisener & Company, LLP
New York, New York
October 6, 1995
F-2
<PAGE>
<TABLE>
<CAPTION>
NATIONAL HOME HEALTH CARE CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
Pro Forma
July 31, July 31,
--------------------------------
A S S E T S 1995 1995 1994
-----------
----------- ----------- ----------
(Note 1)
(Unaudited)
<S> <C> <C> <C>
Current assets:
Cash (including cash equivalents of $5,272,000 (pro forma),
$8,422,000 and $4,568,000) (Note 10)............................... $ 6,704,000 $ 9,237,000 $ 5,017,000
Investments - available for sale..................................... 813,000 813,000 1,553,000
Accounts receivable - (less allowance for doubtful accounts of $439,000 (pro
forma), $99,000 and $84,000) (Note 10)............................. 8,266,000 5,338,000 4,823,000
Notes receivable (Note 3)............................................ 349,000 349,000 271,000
Income taxes receivable (Note 7)..................................... 352,000 72,000 2,625,000
Prepaid expenses and other assets.................................... 298,000 354,000 193,000
Deferred taxes....................................................... 190,000 80,000 200,000
---------- ----------- ----------
Total current assets.............................................. 16,972,000 16,243,000 14,682,000
Furniture, equipment and leasehold improvements (Notes 1 and 2)........ 510,000 445,000 512,000
Notes receivable - noncurrent (Note 3)................................. 690,000 690,000 1,011,000
Investment in certificate of deposit................................... 260,000
Excess of cost over fair value of net assets of businesses acquired
(Notes 1 and 4)...................................................... 2,905,000 1,036,000 1,073,000
Other intangible assets (Note 5)....................................... 342,000 342,000 248,000
Deposits and other assets.............................................. 116,000 109,000 140,000
---------- ----------- ----------
T O T A L...................................................... $21,535,000 $18,865,000 $17,926,000
========== =========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Accounts payable and accrued
expenses.......................................................... $ 1,708,000 $ 910,000 $ 867,000
Capital lease obligations - current (Note 6)........................ 27,000 27,000 31,000
Reserve for state income tax settlement (Note 9)..................... 300,000
Estimated third-party payor settlements.............................. 1,872,000
---------- ----------- ----------
Total current liabilities.......................................... 3,607,000 937,000 1,198,000
Capital lease obligations - noncurrent (Note 6)........................ 14,000 4,000 40,000
---------- ----------- ----------
Total liabilities.................................................. 3,621,000 951,000 1,238,000
---------- ----------- ----------
Commitments, contingencies and other matters (Notes 9 and 12)..........
Stockholders' equity (Note 11):........................................
Common stock, $.001 par value; authorized 20,000,000 shares, issued
5,673,075 (pro forma), 5,673,075 and 5,670,075 shares............. 6,000 6,000 6,000
Additional paid-in capital............................................ 15,552,000 15,552,000 15,544,000
Retained earnings..................................................... 3,307,000 3,307,000 1,881,000
---------- ----------- ----------
18,865,000 18,865,000 17,431,000
Less treasury stock (955,000 (pro forma), 955,000 and 891,000
shares) - at cost.................................................. (951,000) (951,000) (743,000)
---------- ----------- ----------
Total stockholders' equity......................................... 17,914,000 17,914,000 16,688,000
---------- ----------- ----------
T O T A L...................................................... $21,535,000 $18,865,000 $17,926,000
========== =========== ==========
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE>
<TABLE>
<CAPTION>
NATIONAL HOME HEALTH CARE CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended July 31,
-----------------------------------------------------------------------------
1995 1994 1993
----------------- -------------------- -------------------
<S> <C> <C> <C>
Net patient fee income
(Note 10)............................. $24,556,000 $20,116,000 $18,059,000
----------------- -------------------- -------------------
Operating expenses:
Personnel costs....................... 18,959,000 15,109,000 13,541,000
General and administrative............ 3,286,000 2,687,000 2,058,000
Amortization of intangibles........... 169,000 186,000 196,000
----------------- -------------------- -------------------
Total operating expenses........ 22,414,000 17,982,000 15,795,000
----------------- -------------------- -------------------
Income from operations................... 2,142,000 2,134,000 2,264,000
Interest income.......................... 410,000 161,000 116,000
----------------- -------------------- -------------------
Income from continuing operations
before taxes. 2,552,000 2,295,000 2,380,000
Provision for income taxes(Note 9)....... 1,126,000 1,077,000 1,071,000
----------------- -------------------- -------------------
Income from continuing operations........ 1,426,000 1,218,000 1,309,000
----------------- -------------------- -------------------
Discontinued operations (Note 7):
Income (loss) from operations
(net of income taxes of $40,000
and $290,000)....................... (32,000) 53,000
Loss on disposals (net of income
tax benefit of $2,734,000 in 1994
and deferred income tax benefit of
$319,000) in 1993).................. (3,440,000) (514,000)
-------------------- -------------------
T o t a l....................... (3,472,000) (461,000)
-------------------- -------------------
NET INCOME (LOSS)........................ $1,426,000 $(2,254,000) $848,000
================= ==================== ===================
Net income (loss) per share of common stock (Note 1):
Continuing operations............... $ .30 $ .26 $ .27
Discontinued operations............. (.73) (.09)
------- ------
Net income (loss)................... $ .30 $ (.47) $ .18
===== ======= =====
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
NATIONAL HOME HEALTH CARE CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Common Stock Treasury Stock
------------------------- -----------------------
Additional Number
Number of Paid-In Retained of
Shares Amount Capital Earnings Shares Cost
---------- ------ ----------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balance at
July 31, 1992................. 5,670,075 $6,000 $15,544,000 $3,287,000 891,000 $(743,000)
Net income..................... 848,000
---------- ------ ----------- ----------- --------- ---------
Balance at
July 31, 1993................. 5,670,075 6,000 15,544,000 4,135,000 891,000 (743,000)
Net (loss)..................... (2,254,000)
---------- ------ ----------- ----------- --------- ---------
Balance at
July 31, 1994................. 5,670,075 6,000 15,544,000 1,881,000 891,000 (743,000)
Net income .................... 1,426,000
Acquisition of treasury shares,
$3.25 per share............... 64,000 (208,000)
Exercise of common
stock options................. 3,000 8,000
---------- ------ ----------- ----------- --------- ---------
BALANCE AT
JULY 31, 1995................. 5,673,075 $6,000 $15,552,000 $ 3,307,000 955,000 $(951,000)
=========== ====== =========== =========== ========= ==========
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE>
<TABLE>
<CAPTION>
NATIONAL HOME HEALTH CARE CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended July 31,
---------------------------------------------------------
1995 1994 1993
--------------- ---------------- --------------
<S> <C> <C> <C>
Cash flows from operating activities:
Income from continuing operations..................... $1,426,000 $ 1,218,000 $1,309,000
Adjustments to reconcile income from continuing operations to
net cash provided by (used in) operating activities:
Depreciation and amortization....................... 329,000 327,000 304,000
(Settlement) provision for state income taxes....... (300,000) 50,000
Provision for doubtful accounts..................... 173,000 141,000 76,000
Deferred tax........................................ 120,000 (20,000) (14,000)
Changes in operating assets and liabilities:
(Increase) decrease in management fee receivable.. (52,000) 22,000
(Increase) in accounts receivable................. (688,000) (323,000) (1,141,000)
(Increase) in prepaid expenses and other assets... (130,000) (146,000) (56,000)
Increase (decrease) in accounts payable, accrued expenses
and other liabilities........................... 43,000 230,000 (97,000)
(Increase) decrease in income taxes receivable/payable 2,553,000 445,000 (455,000)
Cash provided by discontinued operations.......... 985,000 832,000
--------------- ---------------- --------------
Net cash provided by operating ................. 3,526,000 2,855,000 780,000
--------------- ---------------- --------------
Cash flows from investing activities:
Purchase of furniture, equipment and leasehold improvements (94,000) (76,000) (81,000)
Proceeds (purchase) of investments.................... 1,000,000 (865,000) (250,000)
Purchase of assets of businesses...................... (225,000) (147,000)
Cash (used) by discontinued operations................ (174,000) (34,000)
--------------- ---------------- --------------
Net cash (used in) investing activities.......... 681,000 (1,262,000) (365,000)
--------------- ---------------- --------------
Cash flows from financing activities:
Decrease in notes receivable.......................... 243,000
Principal payments under capital lease obligations.... (30,000) (40,000) (24,000)
Purchase of treasury shares........................... (208,000)
Payments under capital lease obligations by discontinued
operations............................................ (21,000)
Proceeds from exercise of stock options............... 8,000
--------------- ---------------- --------------
Net cash provided by (used in) financing activities 13,000 (40,000) (45,000)
--------------- ---------------- --------------
NET INCREASE IN CASH AND CASH EQUIVALENTS............... 4,220,000 1,553,000 370,000
Cash and cash equivalents - beginning of year*.......... 5,017,000 3,464,000 3,094,000
--------------- ---------------- --------------
CASH AND CASH EQUIVALENTS - END OF YEAR................. $9,237,000 $ 5,017,000 $ 3,464,000
Supplemental disclosures of cash flow information: Cash paid during the year
for:
Interest.......................................... $ 13,000 $ 12,000 $ 25,000
Taxes............................................. 618,000 651,000 1,562,000
</TABLE>
* Includes cash of discontinued operations in 1994 and 1993.
See accompanying notes to financial statements.
F-6
<PAGE>
NATIONAL HOME HEALTH CARE CORP. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(NOTE 1) - NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES AND ACQUISITION:
[a] Nature of business and acquisition:
----------------------------------
National Home Health Care Corp. and subsidiaries (the
"Company") is a provider of home health care services and outpatient medical
services.
On August 4, 1995, the Company acquired all of the outstanding
common shares of Nurse Care, Inc., the parent company of New England Home Care,
Inc. (New England). New England is a licensed Medicare certified home health
care agency providing services in Fairfield and New Haven counties in the State
of Connecticut. The purchase price of $3,150,000 was generated from internal
funds. The acquisition will be accounted for as a purchase and the excess of the
purchase price over the fair value of the assets acquired, $1,869,000, will be
allocated to goodwill.
The following unaudited pro forma consolidated statement of
operations information gives effect to the acquisition described above as though
it had occurred on August 1, 1994, after giving effect to certain adjustments,
including amortization of goodwill of $93,000, decrease in interest income of
$189,000, elimination of former shareholder compensation of $250,000, benefit
from additional third-party reimbursement of $200,000 and income taxes of
$104,000. The unaudited pro forma financial information may not necessarily
reflect the results of operations that would have occurred had the acquisition
occurred on August 1, 1994.
<TABLE>
<CAPTION>
Unaudited
------------
<S> <C>
Patient fee income . . . . . . . . . . . . . . $ 40,547,000
Operating expenses . . . . . . . . . . . . . . (37,777,000)
------------
Income from continuing operations . . . . . . $ 2,770,000
============
Net income . . . . . . . . . . . . . . . . . . $ 1,632,000
============
Net income per share . . . . . . . . . . . . $.34
====
</TABLE>
The unaudited pro forma balance sheet gives effect to the
acquisition as though it had occurred on July 31, 1995, after giving effect to
the purchase price of $3,150,000, estimated costs of the acquisition of $63,000
and the excess of purchase price over the fair value of assets acquired of
$1,869,000.
F-7
<PAGE>
NATIONAL HOME HEALTH CARE CORP. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(NOTE 1) - NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES: (continued)
[b] Principles of consolidation:
---------------------------
The consolidated financial statements include the accounts of
National Home Health Care Corp. and its wholly owned subsidiaries. All
significant intercompany accounts and transactions have been eliminated in the
consolidated financial statements.
[c] Revenue recognition:
-------------------
Revenues are reported on the accrual basis in the period in
which services are provided. Third party contractual adjustments are accrued on
an estimated basis in the period the related services are rendered and adjusted
as required in subsequent periods.
[d] Cash equivalents:
----------------
For the purposes of the statements of cash flows, the Company
considers all highly liquid investment instruments purchased with a maturity of
three months or less to be cash equivalents.
[e] Furniture, equipment and leasehold improvements:
-----------------------------------------------
Furniture, equipment and leasehold improvements are stated at
cost. Depreciation is being provided on the straight-line method over the
estimated useful lives of the assets (generally five to ten years). Amortization
of leasehold improvements is being provided on the straight-line method over the
various lease terms or estimated useful lives, if shorter.
[f] Excess of cost over fair value of net assets of
business acquired:
-----------------------------------------------
The excess of cost over the fair value of net assets acquired
(goodwill) is principally being amortized over a period of 40 years on a
straight-line basis. Goodwill is evaluated periodically and adjusted if
necessary, if events and circumstances indicate that a permanent decline in
value below the current unamortized historical cost has occurred.
(continued)
F-8
<PAGE>
NATIONAL HOME HEALTH CARE CORP. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(NOTE 1) - NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES: (continued)
[g] Earnings per common share:
-------------------------
Earnings per common share are computed using the weighted
average number of common shares and dilutive common stock equivalents (options)
outstanding during each period. During the three years ended July 31, 1995, the
options were not dilutive. The number of shares used in the calculation of
earnings per share are 4,760,705 for the year ended July 31, 1995 and 4,779,075
for the years ended July 31, 1994 and July 31, 1993.
[h] Investments:
-----------
During 1995, the Company adopted Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities" which requires that, except for debt securities classified as
"held-to maturity securities", investments in debt and equity securities be
reported at fair value. Its implementation had no significant effect on the
results of operations of the Company.
Investment securities available for sale at July 31, 1995 are
summarized as follows:
<TABLE>
<CAPTION>
Amortized
Cost (1)
----------
<S> <C>
Certificate of deposit, maturing
within one year . . . . . . . . . . . $260,000
Floating rate debentures issued by
New York State, maturing in one to
five years. . . . . . . . . . . . . . 160,000
Floating rate debentures issued by
New York State, maturing in five to
ten years . . . . . . . . . . . . . . 180,000
Floating rate debentures issued by
New York State, maturity after ten
years . . . . . . . . . . . . . . . . 195,000
Other. . . . . . . . . . . . . . . . . . 18,000
--------
$813,000
========
</TABLE>
(1) Amortized cost approximates market value.
F-9
<PAGE>
NATIONAL HOME HEALTH CARE CORP. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(NOTE 2) - FURNITURE, EQUIPMENT AND LEASEHOLD IMPROVEMENTS:
Furniture, equipment and leasehold improvements are stated at cost and
are summarized as follows:
<TABLE>
<CAPTION>
July 31,
------------------------------
1995 1994
------ ------
<S> <C> <C>
Equipment, furniture and
fixtures.............................. $1,562,000 $1,475,000
Leasehold improvements.................. 368,000 362,000
--------- ----------
1,930,000 1,837,000
Less accumulated depreciation
and amortization...................... 1,485,000 1,325,000
--------- ----------
Balance.................. $ 445,000 $ 512,000
========= ==========
</TABLE>
The net book value of furniture and equipment held under capital leases was
$79,000 and $126,000 at July 31, 1995 and July 31, 1994, respectively.
Depreciation expense includes depreciation on assets held under capital leases.
(NOTE 3) - NOTES RECEIVABLE:
In April 1994, as a result of the sale of assets discussed in Note 7,
the Company received promissory notes aggregating $750,000. The Company also
received a promissory note for $500,000 for the balance of management fees
previously due it. The notes bear interest at 7% and principal payments are due
in equal monthly installments over 30 months (for the $500,000 note) and 66
months (for the $750,000 notes), beginning November 1, 1994. The aggregate
principal balance of the notes at July 31, 1995 and July 31, 1994 amount to
$1,025,000 and $1,250,000, respectively, $336,000 and $252,000 of which is
included as current in the balance sheet at July 31, 1995 and July 31, 1994,
respectively. The notes are collateralized by all present and future personal
property of the payor.
F-10
<PAGE>
NATIONAL HOME HEALTH CARE CORP. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(NOTE 4) - EXCESS OF COST OVER FAIR VALUE:
Changes in the excess of cost over fair value of net assets of
businesses acquired and discontinued during the three years ended July 31, 1995
are as follows:
<TABLE>
<CAPTION>
Year Ended July 31,
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Balance - beginning of
year........................................... $1,073,000 $6,868,000 $7,102,000
Consideration for
acquisition.................................... 5,000
Write-off due to
discontinued operations........................ (5,671,000) (12,000)
Amortization..................................... (37,000) (129,000) (222,000)
----------------- ------------------- -----------------
Balance - end of year............................ $1,036,000 $1,073,000 $6,868,000
================= =================== =================
</TABLE>
(NOTE 5) - OTHER INTANGIBLE ASSETS:
Other intangible assets are as follows:
<TABLE>
<CAPTION>
July 31,
-----------------------------
1995 1994
---- ----
<S> <C> <C>
Covenants not to compete........................................ $485,000 $285,000
Personal files.................................................. 478,000 453,000
Other........................................................... 2,000 2,000
----------------- ---------------
965,000 740,000
Less accumulated amortization................................... 623,000 492,000
----------------- ---------------
$342,000 $248,000
================= ===============
</TABLE>
Other intangible assets increased during fiscal 1995 and 1994 primarily
as a result of the noncompetition agreements described in Note 8. Other
intangible assets are being amortized using the straight-line method over a
period of 3 to 5 years.
F-11
<PAGE>
NATIONAL HOME HEALTH CARE CORP. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(NOTE 6) - CAPITAL LEASE OBLIGATIONS:
At July 31, 1995 approximate future minimum lease payments under
capitalized lease obligations were as follows:
<TABLE>
<CAPTION>
Year Ending
July 31, Amount
- --------------- ------
<S> <C>
1996.................................................. $ 30,000
1997.................................................. 15,000
---------------
Total minimum lease payments.......................... 45,000
Less amounts representing interest.................... 4,000
---------------
Present value of future lease payments
at end of year...................................... 41,000
---------------
Less amount due within one year....................... 27,000
---------------
Amounts due after one year............................ $ 14,000
===============
</TABLE>
(NOTE 7) - DISCONTINUED OPERATIONS:
[a] The Company's National HMO (New York), Inc. ("HMO") subsidiary
provided administrative and nonmedical management services for a medical group
and a dental group. In March 1994 the medical group informed the Company that it
was terminating the management arrangement between the parties. As a result, in
April 1994, the Company sold to the medical provider, the assets related to the
management business for notes receivable aggregating $750,000 (see Note 3). The
parties mutually agreed not to compete with one another for a period of two
years. Subsequently, the Company made a determination to discontinue all of its
management operation. The loss on disposal consists primarily of a write-off of
goodwill of approximately $5,700,000 net of a federal income tax benefit of
approximately $2,550,000.
F-12
<PAGE>
NATIONAL HOME HEALTH CARE CORP. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(NOTE 7) - DISCONTINUED OPERATIONS: (continued)
[a] (continued)
Results from discontinued operations related to HMO are as
follows:
<TABLE>
<CAPTION>
Year Ended July 31,
-------------------------
1994 1993
----------- ----------
<S> <C> <C>
Net revenue..................................................... $3,521,000 $5,011,000
========== ==========
Income from operations
before taxes.................................................. 8,000 806,000
Income tax provision............................................ 40,000 467,000
---------- ----------
Income (loss) from
operations.................................................... (32,000) 339,000
Loss on disposal................................................ (6,174,000)
Income tax benefit.............................................. 2,550,000
Deferred income tax
benefit....................................................... 80,000
---------- ----------
Income (loss) from
discontinued
operations.................................................... $(3,576,000) $ 339,000
========== ==========
</TABLE>
[b] In May 1992, the Company purchased certain assets and assumed
certain liabilities of Hitech Registered Nurses of New Jersey, Inc., ("Hitech")
for $250,000. In July 1993, the Company made a determination to discontinue
these operations, after concluding that the time and financial commitment needed
to turn around Hitech's operations (skilled nursing and home intravenous
therapy) would be too great for it to pursue. During the year ended July 31,
1993, in connection with the decision to discontinue the operation, the Company
recorded a charge of $514,000 (net of a deferred tax benefit of $319,000),
consisting of a provision for estimated loss on disposition of Hitech's assets
and a provision for estimated operating losses through the expected time of
disposition.
F-13
<PAGE>
NATIONAL HOME HEALTH CARE CORP. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(NOTE 7) - DISCONTINUED OPERATIONS: (continued)
[b] (continued)
Results from discontinued operations related to Hitech are as
follows:
<TABLE>
<CAPTION>
Year Ended July 31,
---------------------
1994 1993
---- ----
<S> <C> <C>
Net revenue........................ $3,503,000
=========
Income from operations
before income taxes.............. $(463,000)
Income tax benefit................. 177,000
---------
(Loss) from operations............. (286,000)
Provision for loss on
disposal......................... (833,000)
Income tax benefit................. $423,000
Deferred income tax................ (319,000) 319,000
-------- ---------
Income (loss) from
discontinued
operations........................ $104,000 $(800,000)
======== =========
</TABLE>
(NOTE 8) - ACQUISITIONS:
See Note 1[a] for acquisition subsequent to year end.
In April and June 1994, the Company, through a newly formed wholly
owned subsidiary purchased certain assets of two companies engaged in providing
outpatient medical services in Volusia County, Florida for an aggregate purchase
price of $147,000.
In March 1995, the Company purchased certain assets of a company
engaged in home health care services for an aggregate purchase price of
$250,000.
F-14
<PAGE>
NATIONAL HOME HEALTH CARE CORP. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(NOTE 8) - ACQUISITIONS: (continued)
The purchase price for the above acquisitions were allocated as
follows:
<TABLE>
<CAPTION>
1995 1994
Acquisition Acquisition
----------- -----------
<S> <C> <C>
Furniture and equipment......................... $ 25,000 $ 57,000
Excess of cost over fair value of
net assets of businesses acquired............. 5,000
Covenant not to compete......................... 200,000 85,000
Personnel files................................. 25,000
--------- ---------
Total.................................. $250,000 $147,000
========= =========
</TABLE>
The above acquisitions have been accounted for utilizing purchase
accounting principles. Accordingly, the results of operations of the acquired
companies are included in the Company's consolidated statements of operations
since the dates of acquisition.
Had the operations of the company acquired in 1994 been acquired as of
August 1, 1992 and had the operations of the company acquired in 1995 been
acquired as of August 1, 1993, there would have been no material effect on the
consolidated operations of the Company for the years ended July 31, 1995, July
31, 1994 and July 31, 1993.
(NOTE 9) - INCOME TAXES:
The provision for income taxes for 1995, 1994 and 1993 applicable to
continuing operations is summarized as follows:
<TABLE>
<CAPTION>
Year Ended July 31,
--------------------
1995 1994 1993
------ ------ -----
<S> <C> <C> <C>
Current:
Federal............. $515,000 $688,000 $673,000
State............... 491,000 409,000 412,000
---------- ---------- ----------
1,006,000 1,097,000 1,085,000
Deferred............... 120,000 (20,000) (14,000)
---------- ---------- ----------
Total........ $1,126,000 $1,077,000 $1,071,000
========== ========== ===========
</TABLE>
-15-
<PAGE>
(NOTE 9) - INCOME TAXES: (continued)
Deferred income taxes reflect the tax impact of temporary differences
between the amounts of assets and liabilities for financial reporting purposes
and such amounts as measured by tax laws and regulations. The principal items
making up the deferred income tax expenses (benefit) are as follows:
<TABLE>
<CAPTION>
Year Ended July 31,
--------------------
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
State tax............. $120,000 $(20,000)
Depreciation.......... $(14,000)
-------- -------- --------
$120,000 $(20,000) $(14,000)
======== ========= ========
</TABLE>
The deferred tax assets as of July 31, 1995, are as follows:
<TABLE>
<CAPTION>
Assets
<S> <C>
Accrued liability and reserves............................. $80,000
State net operating loss carryforwards..................... 348,000
-------
428,000
Valuation allowance........................................ (348,000)
-------
$80,000
=======
</TABLE>
Two subsidiaries of the Company have incurred losses which can be used
to offset their state taxable income through 2010. Total net operating losses
applicable to New York State and Florida amount to approximately $7,700,000 and
$3,700,000, respectively.
F-16
<PAGE>
NATIONAL HOME HEALTH CARE CORP. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(NOTE 9) - Income Taxes: (continued)
The reconciliation of the statutory tax rate to the effective tax rate
for the three years ended July 31, 1995 is as follows:
<TABLE>
<CAPTION>
Year Ended July 31,
--------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Statutory rate...................... 34% 34% 34%
State and local taxes (net of
federal tax effect)................. 12 12 11
Federal tax credit.................. (5)
Other............................... 3 1
--- --- ---
Effective rate...................... 44% 47% 45%
=== === ===
</TABLE>
In 1995, the Company and the New York State Department of Taxation and
Finance entered into a Stipulation of Discontinuance regarding all open taxable
years for which the Company previously had been assessed. In consideration for a
payment of approximately $333,000, this matter was settled. The Company
previously established a provision to cover the payment and interest.
The Internal Revenue Service is currently conducting an examination of
federal tax returns for the years ended July 31, 1991 through July 31, 1994. The
Company received a refund of approximately $2,100,000 as a result of net
operating loss carryback claims made in fiscal year ended July 31, 1994 and the
years affected by the claims are now being examined. No assessment has been made
to date.
(NOTE 10) - CONCENTRATIONS OF CREDIT RISK AND MAJOR CUSTOMERS:
Most of the Company's business is with customers and governmental
agencies who are in the health care industry.
The Company provides temporary health care personnel to in-home
patients in the New York City metropolitan area and outpatient services in
Florida. Credit losses relating to customers historically have been minimal and
within management's expectations.
F-17
<PAGE>
NATIONAL HOME HEALTH CARE CORP. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(NOTE 10) - CONCENTRATIONS OF CREDIT RISK AND MAJOR CUSTOMERS:
(continued)
At July 31, 1995, the Company maintained approximately 58% of its cash
and cash equivalents with one financial institution.
Under certain third party contracts the Company received revenues
approximating, $3,125,000, $3,427,000 and $3,762,000 for the years ended July
31, 1995, 1994 and 1993, respectively, from a governmental agency and,
$9,933,000, $7,842,000 and $6,188,000 for the years ended July 31, 1995, 1994
and 1993, respectively, from a private company. At July 31, 1995 the Company had
an outstanding receivable from the private company of $2,473,000.
(NOTE 11) - STOCK OPTION PLAN:
In 1992, the stockholders approved the 1992 Stock Option Plan (the
"1992 Plan") designed to provide an incentive to key employees (including
directors and officers who are key employees) and to Directors who are not
employees of the Company. The 1992 Plan authorizes the granting of both
incentive and nonqualified stock options to purchase up to 500,000 shares of the
Company's common stock.
The 1992 Plan is administered by the Compensation Committee which has
the authority to determine when options are granted, the term during which an
option may be exercised (provided no option has a term exceeding ten years), the
exercise price and the exercise period. The exercise price shall generally not
be less than the fair market value on the date of grant. No option may be
granted under the 1992 Plan after August 16, 2002.
During 1995, 283,502 options previously granted under another stock
option plan were cancelled upon termination of that plan and replaced with
283,502 options granted under the 1992 Plan.
At July 31, 1995, 497,000 shares of the Company's common stock have
been reserved for future issuance pursuant to the 1992 Plan.
F-18
<PAGE>
NATIONAL HOME HEALTH CARE CORP. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(NOTE 11) - STOCK OPTION PLAN: (continued)
Listed below is a summary of stock option activity for the three years
ended July 31, 1995.
<TABLE>
<CAPTION>
Number of Shares
---------------- Exercise
1995 1994 1993 Price
------ ------ ------ ------------
<S> <C> <C> <C> <C>
Outstanding -
beginning of
period.............. 300,502 313,502 196,000 $2.63 - $4.75
Options granted....... 286,502 120,002 2.63 - 4.15
Options exercised..... (3,000) 2.63
Options forfeited..... (288,502) (13,000) (2,500) 2.63 - 4.75
-------- -------- -------
Options outstanding... 295,502 300,502 313,502 2.63 - 4.75
======== ======== =======
Options exercisable... 295,502 300,502 262,627
======== ======== =======
</TABLE>
(NOTE 12) - COMMITMENTS, CONTINGENCIES AND OTHER MATTERS:
[a] The Company has an Employee Savings and Stock Investment Plan
organized under Section 401(k) of the Internal Revenue Code. Under the plan,
employees may contribute up to 10% of their salary into the plan, limited to the
maximum amount allowable under federal tax regulations. The Company will match
employee contributions invested in Company common stock up to 5% of the
employee's salary and may also make additional contributions at its discretion.
In addition to investing in Company stock, an employee may invest in several
mutual funds. The Company's contribution for each of the years ended July 31,
1995, July 31, 1994 and July 31, 1993 was $59,000, $74,000 and $99,000,
respectively.
[b] The Company and its subsidiaries have employment agreements with
five officers which provide for aggregate annual salaries of $681,000. The
employment agreements expire through April 1998. One of the agreements provides
for additional compensation of up to $150,000 based on 5% of pre-tax income, as
defined, in excess of $3,000,000.
[c] The Company rents various medical and office facilities through
1999 under the terms of several lease agreements which include escalation
clauses.
F-19
<PAGE>
NATIONAL HOME HEALTH CARE CORP. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(NOTE 12) - COMMITMENTS, CONTINGENCIES AND OTHER MATTERS:
(continued)
At July 31, 1995, minimum annual rental commitments under
noncancellable operating leases are as follows:
<TABLE>
<CAPTION>
Year Ending
July 31,
-----------
<S> <C>
1996. . . . . . . . . $585,000
1997. . . . . . . . . 176,000
1998. . . . . . . . . 99,000
1999. . . . . . . . . 26,000
-------
T o t a l . . . . . . $886,000
=======
</TABLE>
Rent expense (including discontinued operations) for the years
ended July 31, 1995, 1994 and 1993 was approximately $584,000, $859,000 and
$1,066,000, respectively.
One lease is with a company controlled by the Company's Chief
Executive Officer. Rent expense under such lease approximates $108,000 per year.
[d] The Company has a line of credit with its bank totalling $2,000,000
available until November 30, 1995. Advances against the line are to be
collateralized by the assets of the Company. At July 31, 1995 the Company has no
outstanding balance under the line of credit.
[e] The Company is party to certain claims arising in the ordinary
course of business. In the opinion of management, all such claims are without
merit or involve amounts which would not have a significant adverse effect on
the financial position of the Company.
F-20
<PAGE>
[RICHARD A. EISNER & COMPANY, LLP]
[Letterhead]
REPORT OF INDEPENDENT AUDITORS ON SCHEDULE
Board of Directors and Stockholders
National Home Health Care Corp.
New York, New York
The audits referred to in our report dated October 6, 1995 on
the consolidated financial statements of National Home Health Care Corp. and
subsidiaries, which appears in Part II, includes Schedule II for each of the
years in the three-year period ended July 31, 1995. In our opinion, such
schedule presents fairly the information set forth therein in compliance with
the applicable accounting regulation of the Securities and Exchange Commission.
/s/Richard A. Eisner & Company, LLP
New York, New York
October 6, 1995
F-21
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE II
NATIONAL HOME HEALTH CARE CORP. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED JULY 31, 1995, JULY 31, 1994 AND JULY 31, 1993
- -----------------------------------------------------------------------------------------------------------------
Column A Column B Column C Column D Column E
- -----------------------------------------------------------------------------------------------------------------
Additions
-----------------------------
Balance (1) (2)
-----------------------------
at Charged to Balance
beginning Charged to other at
of costs and accounts- Deductions - end of
Description period expenses describe describe period
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Year ended July 31, 1995:
Reserve and allowance
deducted from asset
account and allowance
for uncollectible
accounts . . . . . . $84,000 $173,000 $(158,000) (1) $99,000
======== ======== ========== ========
Year ended July 31, 1994:
Reverse and allowance
deducted from asset
account and allowance
for uncollectible
accounts . . . . . . $54,000 $141,000 $(111,000) (1) $84,000
======== ======== ========== ========
Year ended July 31, 1993:
Reserve and allowance
deducted from asset
account and allowance
for uncollectible
accounts . . . . . . $74,000 $76,000 $(96,000) (1) $54,000
======== ======== ========== ========
</TABLE>
(1) Represents actual write-offs.
See accompanying notes to financial statements.
F-22
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
NATIONAL HOME HEALTH CARE CORP.
By:/S/ ROBERT P. HELLER
--------------------
Robert P. Heller
Vice President of Finance and
Chief Financial Officer
Dated: November 22, 1995
<PAGE>
Commission File No. 0-12927
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
EXHIBITS
to
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE
FISCAL YEAR ENDED JULY 31,1995
NATIONAL HOME HEALTH CARE CORP.
<PAGE>
Exhibit Page
Number Exhibit to this Report Method of Filing No.
- ------ ---------------------- ---------------- ----
3.1 Certificate of Incorporation Incorporated by reference to
of the Registrant Exhibit 3(a) to Registration
Statement on Form S-1
(No. 2-86643) filed September
20, 1983 (the "1983
Registration Statement").
3.2 Certificate of Amendment to Incorporated by reference
Certificate of Incorporation to Exhibit 3.2 to the
of the Registrant Registrant's Annual Report
on Form 10-K for the year
ended July 31, 1992 (the
"1992 Form 10-K").
3.3 By-Laws of the Registrant Incorporated by reference to
Exhibit 4(a) to the 1983
Registration Statement.
4.1 Specimen Stock Certificate Incorporated by reference to
Exhibit 4(a) to the 1983
Registration Statement.
10.1 1992 Stock Option Plan of Incorporated by reference to
the Registrant Exhibit Annual Report on Form 10-K for
the year ended July 31,
1993 (the "1993 Form 10-K).
10.2 Incentive Stock Option Plan of Incorporated by reference
the Registrant to Exhibit 10(b) to the 1983
Registration Statement.
<PAGE>
Exhibit Page
Number Exhibit to this Report Method of Filing No.
- ------ ---------------------- ---------------- ----
10.3 Agreement between Allen Incorporated by reference to
Health Care and VNS Home Exhibit 10.3 to the Registrant's
Care dated January 1, 1994 Annual Report on Form 10-K
for the year ended July 31,
1994 (the "1994 Form 10-K").
10.4 Agreement between Boro Incorporated by reference to
Medical Corp. and Brevard Exhibit 10.25 to the Report
Medical Center dated on Form 10-K for the
September 11, 1991 year ended July 31, 1991
(the "1991 Form 10-K").
10.5 Employment Agreement between Incorporated by reference
the Registrant and Steven to Exhibit 10.7 to the
Fialkow dated August 1993 1993 Form 10-K.
10.6 Employment Agreement between Incorporated by reference
the Registrant and Richard to Exhibit 10.8 to the
Garofalo dated August 1993 1993 Form 10-K.
10.7 Employment Agreement between Incorporated by reference
the Registrant and Gerald to Exhibit 10.9 to the
Kline dated August 1993 1993 Form 10-K
10.8 Employment Agreement between Incorporated by reference
the Registrant and Thomas to Exhibit 10.10 to the
Smith dated August 1993 1993 Form 10-K.
10.9 Employment Agreement between Incorporated by reference
the Registrant and Robert to Exhibit 10.9 to the
Heller dated August 1994 1994 Form 10-K.
10.10 Agreement between Division Incorporated by
of Social Services of County reference to Exhibit 10.35
of Suffolk and Health to the 1991 Form 10-K.
Acquisition Corp. d/b/a
A Round The Clock Temporary
Services
<PAGE>
Exhibit Page
Number Exhibit to this Report Method of Filing No.
- ------ ---------------------- ---------------- ----
10.11 Agreement between Nassau Incorporated by reference
County Department of Social to Exhibit 10.9 to the
Services and Allen Health Care 1992 Form 10-K.
10.12 Agreement between Catholic Incorporated by reference
Medical Center of Brooklyn to Exhibit 10.14 to the
and Queens, Inc. on behalf of 1994 Form10-K.
Mary Immaculate Hospital
Home Health Agency and
Allen Health Care, dated
January 1, 1994
10.13 Letter Agreement dated March 15, Filed herewith.
1995 providing secured line of
credit from The Bank of New York
10.14 Letter dated June 1, 1992 Incorporated by reference
from Public Health Council to Exhibit 10.13 to the
of the State of New York 1992 Form 10-K.
Department of Health to Health
Acquisition Corp. d/b/a
Allen Health Care
10.15 Employment Agreement between the Incorporated by reference
Registrant and Frederick H. to Exhibit 10.20 to the
Fialkow dated April 30, 1993; 1993 Form 10-K.
First Amendment to Employment
Agreement dated August 1, 1993
10.16 Letter from Joint Commission Incorporated by reference
on Accreditation of Healthcare to Exhibit 10.24 to the
Organizations awarding 1993 Form 10-K.
accreditation to Allen Health
Care, dated September 20, 1993
<PAGE>
Exhibit Page
Number Exhibit to this Report Method of Filing No.
- ------ ---------------------- ---------------- ----
10.17 1993 401(k) Plan of the Incorporated by reference
Registrant to Exhibit 10.25 to the
1993 Form 10-K.
10.18 Letter Agreement between Incorporated by reference
National HMO (New York), to Exhibit 10.26 to the
Inc. and Boro Medical, P.C. 1993 Form 10-K.
dated November 12, 1993
10.19 Asset Purchase Agreement Incorporated by reference
among National HMO (New to Exhibit 10.24 to the
York), Inc., National HMO 1994 Form 10-K.
Corp. of Elizabeth, Inc., Boro
Medical, P.C. and Boro Health
Care of Union, P.C. dated
April 30, 1994
10.20 Asset Purchase Agreement Incorporated by reference
between First Health, Inc. and to Exhibit 10.25 to the
Healthmart P.A. and Cesar N. 1994 Form 10-K.
Abiera, Jr., M.D. dated April
29, 1994
10.21 Asset Purchase Agreement Incorporated by reference
between First Health, Inc. and to Exhibit 10.26 to the
Atlantic Medical Associates, 1994 Form 10-K.
P.A. and Ernest Cook, Jr.,
M.D. dated June 1, 1994
10.22 Agreement for the Purchase of Incorporated by reference
the Stock of Nurse Care, Inc. to Exhibit 10.1 to the
and Related Transaction. Registrant's Current Report
on Form 8-K dated August 4,
1995.
10.23 Employment Agreement between Incorporated by reference
New England and Arleen O'Connell to Exhibit 10.2 to the
dated as of August 11, 1995. Registrant's Current Report
on Form 8-K dated August 4,
1995.
<PAGE>
Exhibit Page
Number Exhibit to this Report Method of Filing No.
- ------ ---------------------- ---------------- ----
10.24 Form of Employment Agreement Filed herewith.
between Brevard Medical Center,
Inc. and Warren D. Stowell
dated as of November 1, 1995.
21.1 List of Subsidiaries Filed herewith.
23.1 Consent of Richard A. Eisner Filed herewith.
& Co.
<PAGE>
Exhibit 10.13
<PAGE>
Page 1
3/15/95
[THE BANK OF NEW YORK]
[Letterhaead]
March 15, 1995
Mr. Robert E. Heller, Vice President &
Chief Financial Officer
National Home Health Care Corporation
850 Bronx River Road
Yonkers, New York 10708
Dear Bob:
This letter confirms that The Bank of New York (the "Bank") holds available a
$2,000,000 secured offering line of credit to National Home Health Care
Corporation.
Advances under the line of credit shall be payable on demand and bear interest
at a rate per annum equal to the alternate base commercial lending rate of the
Bank as publicly announced to be in effect from time to time (the "Alternative
Base Rate"), such rate to change on the effective date of any change in the
Alternate Base Rate.
"Alternate Base Rate" shall mean, for any day, a rate per
annum equal to the higher of (i) the Prime Rate in
effect on such day and (ii) the Federal Funds Rate in
effect on such day plus 1/2 of 1%.
For purposes of this definition:
"Prime Rate" shall mean the prime commercial lending
rate of the Bank as publicly announced to be in
effect from time to time, such rate to be adjusted
automatically, without notice, on the effective date
of any change in such rate.
"Federal Funds Rate" shall mean, for any day, the
weighted average of the rates on overnight Federal
funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as
published for such day (or if such day is not a
business day, for the next preceding business day) by
the Federal Reserve Bank of New York, or if such rate
is not so published for any day which is a business
day, the average of quotations for such day on such
transactions received by the Bank from three Federal
funds brokers of recognized standing selected by the
Bank.
<PAGE>
Page 2
3/15/95
All advances and all principal payments hereunder shall be endorsed by the Bank
on the sheet attached to the Promissory Grid Note and shall be secured by all
assets of the borrower pursuant to a security agreement. The borrower authorizes
the Bank to accept telephonic instructions from a duly authorized representative
of the borrower, as indicated by the latest Corporate Resolution on file with
the Bank, to make an advance or receive a payment hereunder and to endorse the
sheet attached to this Promissory Grid Note accordingly. All advances made
hereunder shall be credited to the Borrower's deposit account referred to above,
which credits shall be confirmed to the borrower by standard advice of credit.
The borrower agrees that the actual crediting of the sum of money so borrowed to
the borrower's deposit account shall constitute conclusive evidence that the
advance was made, and the failure of the Bank to endorse the amount of any
advance on the sheet attached to this note or to forward to the borrower an
advice of credit shall not affect the obligation of the borrower to repay such
advance.
In addition, all advances under the line of credit shall be jointly and
severally guaranteed by Health Acquisition Corp. and First Health, Inc. and
Brevard Medical Center, Inc. Each guarantee shall be secured by all assets of
the respective guarantors pursuant to a security agreement. The form of note,
security agreement and guarantee to be furnished to the Bank shall be in form
and substance acceptable to the Bank and its counsel.
Advances under the line of credit are subject to the Bank's satisfaction with
(i) the specific purpose and expected time and source of repayment of each
advance, and (ii) the Borrower's and the guarantors' financial condition,
business prospects and operations at the time of each advance. As you know,
lines of credit may be cancelled by either party at any time, however, unless
cancelled earlier, the line of credit shall be held available until November 30,
1995.
Additionally, all outstanding advances under the line of credit shall be reduced
to zero for a period of 30 consecutive days during each twelve (12) month
calendar period in which the line of credit is held available.
Very truly yours,
THE BANK OF NEW YORK
/s/ John Gusciora
John Gusciora
Vice President
JG:bc
Exhibit 10.24
<PAGE>
EMPLOYMENT AGREEMENT
This Agreement, dated as of November 1, 1995, by and between Brevard
Medical Center, Inc., a Delaware corporation, with offices at 850 Bronx River
Road, Yonkers, New York 10708, or any successor corporation thereto (the
"Company"), and WARREN D. STOWELL, an individual residing at 2704 Shad Lane,
Geneva, Florida 32732 ("Employee").
W I T N E S S E T H
-------------------
WHEREAS, the Company wishes to employ Employee and Employee wishes to
accept such employment, on the terms and conditions set forth herein;
NOW, THEREFORE, the parties agree as follows:
1. EMPLOYMENT.
A. The Company hereby agrees to employ Employee and Employee agrees to be
employed by the Company upon the terms and conditions set forth below. Subject
to earlier termination as provided herein, the employment provided for herein
shall commence on the date hereof. The period from the date hereof until the
Effective Date (as defined below) is referred to herein as the "Initial Period".
Subject to earlier termination as provided herein, the employment provided for
herein shall continue from the effective date (the "Effective Date") of the
initial public offering (the "Offering") of the Company, which currently is
expected to occur no later than February 28, 1996, for a period of one year from
the Effective Date (such one-year period, the "Employment Period"); thereafter,
this Agreement may be renewed for successive one-year Employment Periods upon
terms and conditions mutually agreed to by Employee and the Company unless,
within 30 days of the end of the then-current Employment Period, either party
notifies the other of its election not to so renew. If for any reason the
Offering is not
<PAGE>
consummated on or before the February 28, 1996, then, unless such date is
extended by written agreement of the parties hereto, this Agreement shall be
terminated as of such date. During the Initial Period and the Employment Period,
Employee will hold the position of President and Chief Executive Officer of the
Company and shall perform all duties and services incident to those positions as
may be assigned to Employee from time to time by the Board of Directors of the
Company, as well as those duties and services that Employee, in his reasonable
discretion, deems to be consistent with his positions and in the best interest
of the Company. Employee will devote all his working time and efforts to the
business of the Company to accomplish the duties assigned by the Board of
Directors of the Company, will perform those duties to the best of Employee's
ability and will devote Employee's best efforts to advance the interests of the
Company.
B. During the term hereof, Employee shall serve as a member of the Board of
Directors of the Company and shall have the authority to appoint one additional
member to the Board of Directors of the Company, subject to the amendment of the
Certificate of Incorporation and/or By-laws of the Company, if necessary, and
any other arrangements necessary to implement the foregoing, all of which
arrangements the Company agrees to use its best efforts to effect; provided,
however, that the provisions of this paragraph 1B shall terminate upon the
termination of this Agreement and the two foregoing Board of Directors positions
shall then be vacated.
2. COMPENSATION.
A. For all services performed by Employee for the Company during the term
hereof, the Company will pay Employee a salary at the rate of $125,000 per
annum, payable in accordance with the normal payment practices of the Company;
provided, however, that, subject to paragraph 2D below, no such compensation
shall be payable with respect to the Initial Period unless
-2-
<PAGE>
and until the Offering shall have been consummated during the term hereof; and
provided further, that the salary and any incentive bonus (the "Remuneration"),
and the terms and conditions
B. thereof, for each successive employment period following the Employment
Period shall be mutually agreed to by Employee and the Company: (i) no later
than January 1, 1997 for the first such successive employment period, and (ii)
prior to the commencement of each subsequent such successive employment period.
During the Employment Period, the Company will provide Employee the use, for
business purposes, of a full-sized domestic automobile owned or leased by the
Company, at the Company's election. Employee will be entitled to vacation during
the Employment Period not to exceed three weeks per annum. The vacation may be
taken at times agreed upon by Employee and the Company. During that vacation,
Employee will receive Employee's usual compensation. No additional compensation
will be paid to Employee for vacation time that is not taken. Employee will be
entitled to participate, at a level commensurate with his position, in any
benefit plans, including health, pension and stock option plans adopted by the
Company for its executive employees.
C. As additional compensation for services rendered during the Employment
Period, pursuant to a stock option contract between the Company and the
Employee, Employee will be granted on the Effective Date, ten-year non-qualified
stock options (the "Options") to purchase two hundred and seventy-five thousand
(275,000) shares of common stock, par value $.01 per share of the Company
("Common Stock"), at an exercise price per share equal to $0.25. The Options
shall be exercisable immediately upon grant as to one-fourth of the shares
covered thereby and shall be exercisable as to one-fourth of the shares covered
thereby on each of the three successive anniversaries of the day before the date
of grant. In the event this Agreement is terminated earlier as provided in
paragraph 4 herein, the Employee may exercise the Options, only to the extent
-3-
<PAGE>
then exercisable, in accordance with the terms of the Plan, unless the Employee
is terminated for Cause, as defined in paragraph 5 herein, in which case the
Options shall terminate immediately. Commencing one year after the effective
date of the Company's initial public offering, the Company agrees to use its
best efforts, without incurring substantial expense and subject to applicable
securities and other laws, to file with the Securities and Exchange Commission a
registration statement on Form S-8 relating to the Options; provided that the
Company is eligible to use such Form.
D. The shares of the Company's Common Stock which may be purchased by
Employee pursuant to the Options granted under paragraph 2B (the "Option
Shares"), shall be held by Employee for his own account, for investment purposes
only and not with a view to the resale or distribution thereof, and no sale,
offer to sell or transfer of the Option Shares, or of any shares or other
securities issued in exchange for or in respect of the Shares shall be made
unless a registration statement under the Securities Act of 1933, as amended,
(the "Act") with respect to the Option Shares is in effect, or an exemption from
the registration requirements of the Act is then in fact applicable to the
Shares and the certificates representing the Option Shares shall contain a
legend to that effect.
E. The Company hereby agrees that in the event that it or its
shareholder(s) shall sell, or enter into a binding agreement to sell, the
Company or substantially all of the assets of the Company (other than in an
initial public offering), it being agreed however that the Company is not
prohibited from considering such sale, during the period from the date hereof
through February 28, 1996, then Employee shall be entitled to receive his salary
at the rate described in paragraph 2A above during the period from the date
hereof through and including the date of such sale (but not later than February
28, 1996).
-4-
<PAGE>
3. REIMBURSEMENT OF EXPENSES: As of the date hereof, and during the
Employment Period, the Company recognizes that Employee, in performing
Employee's duties hereunder, may be required to spend sums of money in
connection with those duties on behalf of or for the benefit of the Company.
Employee may present to the Company, on a weekly basis, an itemized voucher
listing all sums of money paid or expenses incurred by Employee in the
performance of Employee's duties on behalf of or for the benefit of the Company,
and on presentation of that itemized voucher and receipts for all such expenses
the Company will reimburse Employee or pay the expense incurred in conformity
with Company policy for all such reasonable expenses including, but not limited
to, travel, meals, lodging, entertainment and promotion.
4. DEATH AND DISABILITY:
A. The Employment Period shall terminate on the date of Employee's death,
in which event Employee's Remuneration, if any, payable through the date of
Employee's death, shall be paid to Employee's estate.
B. If, during the Employment Period, in the opinion of the Company,
Employee, because of physical or mental illness or incapacity, shall become
substantially unable to perform the duties and services required of him under
this Agreement for a period of six (6) consecutive months or nine (9) months in
the aggregate during any twelve (12) month period, the Company may, upon at
least ten (10) days' prior written notice given at any time after the expiration
of such six (6) or nine (9) month period, as the case may be, to Employee of its
intention to do so, terminate this Agreement as of such date as may be set forth
in the notice. In case of such termination, Employee shall be entitled to
receive his Remuneration earned or accrued and reimbursable expenses owing to
Employee through the date of termination. Employee will not be
-5-
<PAGE>
entitled to any other compensation upon termination of this Agreement pursuant
to this paragraph 4(B).
5. DISCHARGE FOR CAUSE: The Company may discharge Employee for cause at any
time. Cause for discharge will exist when (i) Employee materially breaches this
Agreement and such breach is not cured within thirty (30) days following written
notice by the Company to Employee of such breach, (ii) Employee commits any act
or engages in a course of action involving moral turpitude which adversely
affects the reputation of the Company, or (iii) Employee breaches any policy
applicable to all executive officers of the Company promulgated by Company's
Board of Directors, the breach of which has been specified by the Board of
Directors to be cause for discharge, including, without limitation, those
policies set forth in the Addendum to Employment Agreement between the Company
and Employee attached hereto and incorporated herein by reference. If, as of the
date hereof or during the Employment Period, Employee is discharged for cause,
this Agreement terminates and the Company, without any limitation on any
remedies it may have at law or equity, is without liability for Remuneration or
any other liability to Employee after the date of
such discharge.
6. DISCLOSURE OF CONFIDENTIAL INFORMATION: "Confidential Information" means
all information known by Employee, because of service by the Company, about the
Company's present or prospective products, processes, services, or activities.
Confidential Information does not include information generally known, other
than through breach of a confidentiality agreement with the Company, in the
industries in which the Company engages or may engage. The determination as to
whether information is generally known in the industries in which the Company
engages or may engage will be made, in good faith, solely by the Company and
will be binding on Employee. Employee will never, as of the date hereof and
during or after the Employment Period, directly or
-6-
<PAGE>
indirectly, use any Confidential Information except in the performance of
Employee's duties for the Company, or publish or disclose any Confidential
Information except to persons to whom disclosure of Confidential Information is
necessary in the performance of Employee's duties and to other persons as
directed by the Company. The Company has the right to decide in what
circumstances disclosures of Confidential Information are necessary. Employee
will use his best efforts to prevent unauthorized use or disclosure of
Confidential Information. Upon termination of this Agreement, Employee will
deliver to the Company all writings relating to or containing Confidential
Information, including, without limitation, notes, memoranda, letters, drawings,
diagrams and printouts and also including any tapes, discs or other forms of
recorded information. Full compliance with this paragraph is a condition of
continued employment with, or retention by or association with, the Company. If
Employee violates any provision of this paragraph commencing with the date
hereof, or at any time until the termination hereof, the Company may immediately
discharge Employee without any liability for Remuneration or any other liability
to Employee after the date of discharge. If Employee violates any provision of
this paragraph commencing with the date hereof, or at any time until the
termination hereof, the Company will have no further liability to Employee,
including rights, benefits, privileges or other interests which may have vested
for Employee's account during the Employment Period. Moreover, if Employee
violates any provision of this paragraph commencing with the date hereof, or
until the termination hereof, the Company may seek full indemnification from
Employee should the Company suffer any monetary damages or incur any legal
liability to any person as a result of the disclosure or use of Confidential
Information by Employee in violation of this paragraph.
7. RESTRICTIVE COVENANTS: During the Employment Period and for a period of
six months thereafter, Employee will not directly or indirectly, either as an
individual or as a partner, joint venturer, independent contractor, consultant,
stockholder, director, employee or officer, engage in
-7-
<PAGE>
or participate in the management or ownership of any business or activity in
Volusia or Brevard Counties, Florida, which directly or indirectly competes with
the business conducted by the Company; provided, however, that this paragraph 7
shall not apply in the event that Employee is actually discharged by the Company
without cause, as that term is described in paragraph 5 hereof.
8. OWNERSHIP OF INVENTIONS, DISCOVERIES AND IMPROVEMENTS: Employee shall
promptly disclose in writing to the Board of Directors of the Company all
inventions, discoveries, designs, developments, processes, software programs,
works of authorship, formulas, data, techniques and any other improvements
conceived, devised, created, or developed by Employee (either alone or with
others) while in the employ of the Company (collectively, "Invention"), and
Employee shall transfer and assign to the Company all right, title and interest
in and to such Invention, including any and all domestic and foreign patent
rights, domestic and foreign copyright rights therein, and any renewal thereof.
Such disclosure is to be made promptly after the conception of each Invention,
and each Invention is to become and remain the property of the Company, whether
or not patent or copyright applications are filed thereon by the Company. On
request of the Company, Employee shall execute from time to time, during or
after the termination of employment, such further instruments including, without
limitation, applications for patents and copyrights and assignments thereof as
may be deemed necessary or desirable by the Company to effectuate the provisions
of this paragraph 8.
9. CONSTRUCTION: If the provisions of paragraph 7 should be deemed
unenforceable, invalid or overbroad in whole or in part for any reason, then any
court of competent jurisdiction or any Arbitrator appointed in accordance with
paragraph 10 is hereby authorized, requested and instructed to reform such
paragraph to provide for the maximum competitive restraints
-8-
<PAGE>
upon Employee's activities (in time, product, geographic area and customer
solicitation as may then be legal and valid).
10. REMEDIES, DAMAGES AND JURISDICTION:
A. Employee agrees that violation of paragraphs 6, 7 or 8 would cause
irreparable injury to the Company for which the remedy at law would be
inadequate, and that the Company shall be entitled in any court of law or equity
or in any arbitration proceeding in accordance with this paragraph 10, whichever
forum is designated by the Company, to preliminary, permanent or other
injunctive relief against any breach of the provisions contained in paragraphs
6, 7 or 8, and such punitive and compensatory damages as shall be awarded.
Further, in the event of a violation of the provisions of paragraph 7, the
period of noncompetition referred to therein shall be extended but not decreased
for a period of time equal to the period that the violation occurred.
B. Except as otherwise provided in paragraphs 9 and 10A relating to the
reformation of the restrictive covenants and obtaining equitable relief, any
controversy or claim arising out of, or relating to this Agreement, or the
breach thereof, shall be settled by arbitration by one arbitrator in Florida, in
accordance with the rules of the American Arbitration Association, and judgment
upon the award rendered by the arbitrator may be entered in any court having
jurisdiction thereof.
C. Each of the Company and Employee hereby consents to the jurisdiction of
the Supreme Court of the State of New York for the County of New York and the
United States District Court for the Southern District of New York for all
purposes in connection with said arbitration or for obtaining the relief
referred to in paragraphs 6 or 8, and further consents that any process or
notice of motion therewith may be served by certified or registered mail or
personal
-9-
<PAGE>
service, within or without the State of New York, provided a reasonable time for
appearance is allowed.
11. SEVERABILITY: If any of the provisions of this Agreement is held to be
invalid, illegal, or unenforceable, that determination will not affect the
enforceability of any other provisions of this Agreement, and the remaining
provisions of this Agreement will be valid and enforceable according to their
terms.
12. Binding Effect: This Agreement constitutes the entire understanding of
the parties, may be modified only in writing, is governed by and construed in
accordance with the laws of the state of New York, without regard to the
conflicts of law rules thereof, and will be binding upon and inure to the
benefit of Employee and Employee's personal representatives and the Company and
the Company's successors and assigns. This Agreement is in the nature of a
personal services contract, is not assignable by Employee and the duties imposed
hereby are non-delegable.
-10-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
BREVARD MEDICAL CENTER, INC.
By:
--------------------------
--------------------------
WARREN D. STOWELL
-11-
Exhibit 21.1
<PAGE>
List of Subsidiaries
Wholly Owned Subsidiary State of Incorporation
Brevard Medical Center, Inc. Delaware
National HMO (New York), Inc. Delaware
National HMO Corp. of
Elizabeth, Inc. New Jersey
Health Acquisition Corp. New York
d/b/a Allen Health Care
Services
Boro Medical Corp. Florida
First Health, Inc. Florida
Nurse Care, Inc. Connecticut
New England Home Care, Inc. Connecticut
Exhibit 23.1
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration
Statement of National Home Health Care Corp. on Form S-8, Registration No.
33-61315 pertaining to the 1992 Stock Option Plan and the 1993 401(k) Plan, as
filed with the Securities and Exchange Commission on July 26, 1995 of our report
dated October 6, 1995, with respect to the consolidated financial statements and
schedules of National Home Health Care Corp. and subsidiaries as at July 31,
1995 and July 31, 1994 and for each of the years in the three year period ended
July 31, 1995 included in Amendment No.1 to its Annual Report on Form 10-K/A for
the year ended July 31, 1995.
/s/ Richard A. Eisner & Company, LLP
New York, New York
November 22, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000728389
<NAME> NATIONAL HOME HEALTH CARE CORP.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1995
<PERIOD-START> AUG-1-1994
<PERIOD-END> JUL-31-1995
<CASH> 9,237
<SECURITIES> 813
<RECEIVABLES> 5,437
<ALLOWANCES> (99)
<INVENTORY> 0
<CURRENT-ASSETS> 16,243
<PP&E> 1,930
<DEPRECIATION> (1,485)
<TOTAL-ASSETS> 18,865
<CURRENT-LIABILITIES> 937
<BONDS> 0
<COMMON> 6
0
0
<OTHER-SE> 17,908
<TOTAL-LIABILITY-AND-EQUITY> 18,865
<SALES> 24,556
<TOTAL-REVENUES> 24,556
<CGS> 0
<TOTAL-COSTS> 22,414
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (410)
<INCOME-PRETAX> 2,552
<INCOME-TAX> 1,126
<INCOME-CONTINUING> 1,426
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,426
<EPS-PRIMARY> .30
<EPS-DILUTED> .30
</TABLE>
