SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended April 30, 1996
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission file number 0-12927
NATIONAL HOME HEALTH CARE CORP.
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(Exact name of Registrant as Specified in Its Charter)
Delaware 22-2981141
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(State or Other Jurisdiction of (IRS Employer Identification No.)
Incorporation or Organization)
700 White Plains Road, Scarsdale, New York 10583
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(Address of Principal Executive Offices with Zip Code)
Registrant's Telephone Number Including Area Code: 914-722-9000
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Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report.
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required by Section 12, 13 or 15(d) of the Securities Exchange Act of
1934 subsequent to the distribution of securities under a plan confirmed by a
court. Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
The number of shares of common stock outstanding as of June 12, 1996 was
4,806,907.
<PAGE>
NATIONAL HOME HEALTH CARE CORP.
FORM 10-Q
FOR THE QUARTER ENDED APRIL 30, 1996
PART I. FINANCIAL INFORMATION Page
Item 1. Financial Statements
Consolidated Balance Sheets as of April 30, 1996
and July 31, 1995 (unaudited) 3-4
Consolidated Statements of Operations for the
three months ended April 30, 1996 and April 30,
1995 and nine months ended April 30, 1996 and
April 30, 1995 (unaudited) 5
Consolidated Statements of Cash Flows for the nine
months ended April 30, 1996 and April 30, 1995
(unaudited) 6
Notes to Consolidated Financial Statements 7-8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9-10
PART II. OTHER INFORMATION 11
Item 6. Exhibits and Reports on Form 8-K 11
SIGNATURES 12
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<PAGE>
NATIONAL HOME HEALTH CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
UNAUDITED
April 30, 1996 July 31, 1995
----------- -----------
ASSETS
Current assets:
Cash and cash equivalents $ 8,772,000 $ 9,237,000
Investments 528,000 813,000
Accounts receivable -
less allowance for doubtful accounts
of $419,000 at April 30, 1996 and
$99,000 at July 31, 1995 8,404,000 5,338,000
Notes receivable - - - 349,000
Income taxes receivable - - - 72,000
Prepaid expenses and other assets 511,000 354,000
Deferred taxes 190,000 80,000
----------- -----------
Total current assets 18,405,000 16,243,000
Furniture, equipment and leasehold
improvements, net 447,000 445,000
Notes receivable - noncurrent - - - 690,000
Excess of cost over fair value of net
assets of businesses acquired, net 2,807,000 1,036,000
Other intangible assets, net 220,000 342,000
Deposits and other assets 121,000 109,000
----------- -----------
TOTAL $22,000,000 $18,865,000
=========== ===========
(Continued)
-3-
<PAGE>
NATIONAL HOME HEALTH CARE CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
UNAUDITED
April 30, 1996 July 31, 1995
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 1,435,000 $ 910,000
Capital lease obligations-current 21,000 27,000
Estimated third-party payor settlements 1,008,000 - - -
Income taxes payable 95,000 - - -
------------ ------------
Total current liabilities 2,559,000 937,000
Capital lease obligations-noncurrent - - - 14,000
------------ ------------
Total liabilities 2,559,000 951,000
Stockholders' equity:
Common stock, $.001 par value; authorized
20,000,000 shares, issued 5,699,907
shares and 5,673,075 shares 6,000 6,000
Additional paid-in capital 15,622,000 15,552,000
Retained earnings 4,764,000 3,307,000
------------ ------------
20,392,000 18,865,000
Less treasury stock (955,000 shares) at cost (951,000) (951,000)
------------ ------------
Total stockholders' equity 19,441,000 17,914,000
------------ ------------
TOTAL $ 22,000,000 $ 18,865,000
============ ============
See accompanying notes to consolidated financial statements.
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<PAGE>
NATIONAL HOME HEALTH CARE CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
UNAUDITED
<TABLE>
<CAPTION>
For the three months ended For the nine months ended
April 30, April 30,
-----------------------------------------------------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Patient service revenues $ 9,760,000 $ 6,296,000 $29,800,000 $18,070,000
----------- ----------- ----------- -----------
Operating expenses:
Cost of revenues 6,245,000 3,873,000 18,954,000 11,092,000
General and administrative 2,571,000 1,788,000 8,226,000 5,331,000
Amortization 73,000 43,000 219,000 115,000
----------- ----------- ----------- -----------
Total operating expenses 8,889,000 5,704,000 27,399,000 16,538,000
----------- ----------- ----------- -----------
Income from operations 871,000 592,000 2,401,000 1,532,000
Other income:
Interest income 99,000 118,000 302,000 283,000
----------- ----------- ----------- -----------
Income from operations before
taxes 970,000 710,000 2,703,000 1,815,000
Provision for income taxes 437,000 310,000 1,246,000 815,000
----------- ----------- ----------- -----------
NET INCOME $ 533,000 $ 400,000 $ 1,457,000 $ 1,000,000
=========== =========== =========== ===========
Net income per share of
common stock $ 0.11 $ 0.08 $ 0.31 $ 0.21
=========== =========== =========== ===========
Weighted average shares 4,741,840 4,776,794 4,726,228 4,775,071
outstanding
</TABLE>
See accompanying notes to consolidated financial statements.
-5-
<PAGE>
NATIONAL HOME HEALTH CARE CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
<TABLE>
<CAPTION>
For the nine months ended April 30,
-----------------------------------
1996 1995
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,457,000 $ 1,000,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 374,000 233,000
Deferred tax - - - 120,000
Changes in operating assets and liabilities:
(Increase) in accounts receivable (138,000) (887,000)
Decrease in income taxes receivable 446,000 2,410,000
(Increase) in prepaid expenses and other assets (155,000) (3,000)
(Decrease) in accounts payable and accrued expenses (273,000) (133,000)
(Decrease) in estimated third party payor settlements (864,000) - - -
(Decrease) in reserve for state income tax settlement - - - (300,000)
----------- -----------
Net cash provided by operating activities 847,000 2,440,000
----------- -----------
Cash flows from investing activities:
Purchase of property, plant and equipment (91,000) (86,000)
Proceeds (purchase) of investments 285,000 (4,271,000)
Purchase of Nurse Care, Inc., net of cash acquired (2,595,000) - - -
Purchase of assets of businesses - - - (225,000)
----------- -----------
Net cash (used in) investing activities (2,401,000) (4,582,000)
----------- -----------
Cash flows from financing activities:
Decrease in notes receivable 1,039,000 155,000
Principal payments under capital lease obligations (20,000) (23,000)
Proceeds from exercise of stock options 70,000 8,000
Purchase of treasury shares - - - (208,000)
----------- -----------
Net cash provided by (used in) financing activities 1,089,000 (68,000)
----------- -----------
NET (DECREASE) IN CASH AND CASH
EQUIVALENTS (465,000) (2,210,000)
Cash and cash equivalents-beginning of period 9,237,000 5,017,000
----------- -----------
CASH AND CASH EQUIVALENTS-END OF
PERIOD $ 8,772,000 $ 2,807,000
=========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Taxes $ 1,263,000 $ 405,000
Interest 13,000 8,000
</TABLE>
See accompanying notes to consolidated financial statements.
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<PAGE>
NATIONAL HOME HEALTH CARE CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of Management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three and nine month periods ended
April 30, 1996 are not necessarily indicative of the results that may be
expected for the year ending July 31, 1996. For further information, refer to
the consolidated financial statements and footnotes thereto included in the
Company's annual report on Form 10-K for the year ended July 31, 1995.
NOTE 2 - ACQUISITION
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 was accounted for as a purchase and the excess of purchase price
over the fair value of the assets acquired, $1,869,000, was allocated to
goodwill and is being amortized over a twenty year period.
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.
Unaudited Unaudited
Three months ended Nine months ended
April 30, 1995 April 30, 1995
-------------- --------------
Patient service revenues $10,294,000 $30,063,000
Operating expenses 9,545,000 28,060,000
----------- -----------
Income from operations $ 749,000 $ 2,003,000
Net income $ 452,000 $ 1,155,000
=========== ===========
Net income per share $ .09 $ .24
=========== ===========
-7-
<PAGE>
NOTE 3 - INITIAL PUBLIC OFFERING OF SUNSTAR HEALTHCARE, INC.
On May 21, 1996, the initial public offering of common stock by
SunStar Healthcare, Inc. ("SunStar") was consummated. Prior to the offering,
SunStar had been a wholly-owned subsidiary of the Company, consisting of its
Florida outpatient medical center operations. The initial public offering
consisted of the sale of 1,300,000 shares at a price of $5.00 per share. H.J.
Meyers & Co., Inc. and Richter & Co., Inc. acted as the underwriters in the
offering. On June 6, 1996, the underwriters exercised an over-allotment option
to purchase an additional 195,000 shares at a price of $5.00. The Company
continues to own 900,000 shares, or approximately 37.6%, of SunStar. In
connection with the SunStar offering, the Company will recognize a one time gain
of approximately $900,000, net of taxes, in the fiscal quarter ending July 31,
1996. Subsequently, the Company will use the equity method to account for its
investment in SunStar.
NOTE 4 - RECLASSIFICATION
Certain amounts in the April 30, 1995 consolidated statements of
operations have been reclassified to conform to the April 30, 1996 consolidated
statements of operations.
NOTE 5 - INCOME TAXES
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 during the fiscal year
ended July 31, 1995 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.
-8-
<PAGE>
ITEM 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Results of Operations and Effects of Inflation
- ----------------------------------------------
For the three months ended April 30, 1996, patient service revenues
increased by $3,464,000, or 55%, from $6,296,000 for the three months ended
April 30, 1995 to $9,760,000 for the three months ended April 30, 1996. This
increase is attributable to the acquisition of New England.
Cost of revenue as a percentage of revenue increased from 62% for the
three months ended April 30, 1995 to 64% for the three months ended April 30,
1996. This increase is primarily attributable to the acquisition of New England,
which has higher cost of revenue as a result of revenue generated from its
Medicare patients being limited to cost reimbursement principles.
General and administrative expenses as a percentage of revenue
decreased from 28% for the three months ended April 30, 1995 to 26% for the
three months ended April 30, 1996. General and administrative expenses excluding
those relating to New England decreased approximately $215,000 or 12% from the
three months ended April 30, 1995. This decrease is attributable to the decrease
in administrative salaries in New York and the implementation of cost-control
measures in connection with the shift in the healthcare industry towards managed
care in Florida.
Amortization of intangibles increased from $43,000 to $73,000 for the
three months ended April 30, 1996 primarily as a result of the recognition of
goodwill in connection with the acquisition of New England.
As a result of the foregoing, net income for the three months ended
April 30, 1996 was $533,000, or $.11 per share, as compared to a net income of
$400,000, or $.08 per share, for the three months ended April 30, 1995.
For the nine months ended April 30, 1996, patient service revenues
increased by $11,730,000, or 65% from $18,070,000 for the nine months ended
April 30, 1995 to $29,800,000 for the nine months ended April 30, 1996.
Approximately $10,624,000 or 91% of this increase is attributable to the
acquisition of New England. Patient service revenues from Health Acquisition
Corp. increased $1,229,000 or 9% from the nine months ended April 30, 1995. This
increase was the result of additional volume from existing contracts, as well as
the expansion of services to include home care pediatric skilled nursing
services for medically fragile children and their families.
Cost of revenue as a percentage of revenue increased from 61% for the
nine months ended April 30, 1995 to 64% for the nine months ended April 30,
1996. This increase is attributable to the acquisition of New England, which has
higher cost of revenue as a result of revenue generated from its Medicare
patients being limited to cost reimbursement principles.
General and administrative expenses as a percentage of revenue
decreased from 29% of revenue for the nine months ended April 30, 1995 to 28%
for the nine months ended April 30, 1996. General and administrative expenses
excluding those related to New England decreased $202,000 or 4% from the
corresponding period of 1995. This decrease is explained in the above three
month
-9-
<PAGE>
discussion. New England's general and administrative expenses as a percentage of
revenue for the nine months ended April 30, 1996 was 29%.
Amortization of intangibles increased from $115,000 to $219,000 for
the nine months ended April 30, 1996 primarily as a result of the recognition of
goodwill in connection with the acquisition of New England.
As a result of the foregoing, net income for the nine months ended
April 30, 1996 was $1,457,000, or $.31 per share, as compared to a net income of
$1,000,000, or $.21 per share, for the nine months ended April 30, 1995.
The rate of inflation had no material effect on operations for the
nine months ended April 30, 1996.
Financial Condition and Capital Resources
- -----------------------------------------
Current assets and current liabilities increased to approximately
$18,405,000 and $2,559,000, respectively, at April 30, 1996, representing an
increase of approximately $2,162,000 and $1,622,000, respectively, from July 31,
1995. These results increased working capital by $540,000 from $15,306,000 at
July 31, 1995 to $15,846,000 at April 30, 1996. As a result of the acquisition
of New England, the current ratio decreased from 17.3x at July 31, 1995 to 7.2x
at April 30, 1996.
The Company provided net cash from operating activities of $847,000
for the nine months ended April 30, 1996 as compared to net cash provided by
operating activities of $2,440,000 for the nine months ended April 30, 1995.
This decrease is primarily attributable to the tax carryback claims received in
the preceding fiscal year. Historically, the Company has financed its working
capital requirements through cash flow from operating activities. Net cash used
in investing activities for the nine months ended April 30, 1996 reflects the
purchase of equipment and the purchase of Nurse Care, Inc., offset by proceeds
from investments. For the nine months ended April 30, 1995, net cash used in
investing activities consisted of the purchase of equipment and the purchase of
investments. The Company realized net cash from financing activities for the
nine months ended April 30, 1996 from the Company receiving a lump sum payment
on notes receivable and proceeds from the exercise of stock options, offset by
payments made under capital lease obligations. For the nine months ended April
30, 1995, the Company used cash in financing activities for the purchase of
treasury shares and payments under capital lease obligations, offset by the
payments received on notes receivable and proceeds from the exercise of stock
options.
The Company believes that it has sufficient cash to fund its
operations for at least the ensuing twelve month period. In addition, the
Company has available a $2,000,000 secured offering line of credit and New
England has a secured advised line of credit. The maximum amount of the New
England line shall not exceed the lesser of eligible accounts receivable or
$2,000,000. Both facilities bear interest at the alternate base commercial
lending rate of the lender and expire December 31, 1996. As of April 30, 1996,
there were no outstanding balances under either line of credit.
-10-
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and reports on Form 8-K
(a) Exhibits:
None
(b) Reports on Form 8-K:
None
-11-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
National Home Health Care Corp.
Date: June 12, 1996 /s/ Robert P. Heller
---------------------
Robert P. Heller
Vice President of Finance,
Chief Financial
and Accounting Officer
-12-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-START> AUG-01-1995
<PERIOD-END> APR-30-1996
<CASH> 8,772,000
<SECURITIES> 528,000
<RECEIVABLES> 8,823,000
<ALLOWANCES> (419,000)
<INVENTORY> 0
<CURRENT-ASSETS> 18,405,000
<PP&E> 2,247,000
<DEPRECIATION> (1,800,000)
<TOTAL-ASSETS> 22,000,000
<CURRENT-LIABILITIES> 2,559,000
<BONDS> 0
0
0
<COMMON> 6,000
<OTHER-SE> 19,435,000
<TOTAL-LIABILITY-AND-EQUITY> 22,000,000
<SALES> 29,800,000
<TOTAL-REVENUES> 29,800,000
<CGS> 0
<TOTAL-COSTS> 27,399,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (302)
<INCOME-PRETAX> 2,703,000
<INCOME-TAX> 1,246,000
<INCOME-CONTINUING> 1,457,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,457,000
<EPS-PRIMARY> 0.31
<EPS-DILUTED> 0
</TABLE>
