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 October 31, 1997
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
- ------------------------------- ---------------------------------
(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 December 15, 1997 was
5,251,846.
<PAGE>
NATIONAL HOME HEALTH CARE CORP.
FORM 10-Q
FOR THE QUARTER ENDED OCTOBER 31, 1997
PART I. FINANCIAL INFORMATION Page
Item 1. Financial Statements
Consolidated Balance Sheets as of October 31, 1997
and July 31, 1997 (Unaudited) 3-4
Consolidated Statements of Operations for the three
months ended October 31, 1997 and
October 31, 1996 (Unaudited) 5
Consolidated Statements of Cash Flows for the three
months ended October 31, 1997 and
October 31, 1996 (Unaudited) 6
Notes to Consolidated Financial Statements 7-8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9-12
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 13
SIGNATURES 14
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<PAGE>
NATIONAL HOME HEALTH CARE CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
UNAUDITED
October 31, July 31,
1997 1997
----------- -----------
ASSETS
Current assets:
Cash and cash equivalents $ 9,551,000 $ 9,324,000
Investments 508,000 508,000
Accounts receivable -
less allowance for doubtful accounts of
$310,000 at October 31, 1997 and
$327,000 at July 31, 1997 8,725,000 8,176,000
Prepaid expenses and other assets 110,000 163,000
Deferred taxes 230,000 230,000
----------- -----------
Total current assets 19,124,000 18,401,000
Furniture, equipment and leasehold
improvements, net 376,000 378,000
Excess of cost over fair value of net assets of
businesses acquired, net 3,307,000 3,350,000
Other intangible assets, net 896,000 947,000
Deposits and other assets 137,000 138,000
Investment in unconsolidated investee 1,663,000 2,010,000
----------- -----------
TOTAL $25,503,000 $25,224,000
=========== ===========
(continued)
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<PAGE>
NATIONAL HOME HEALTH CARE CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
UNAUDITED
<TABLE>
<CAPTION>
October 31, July 31,
1997 1997
------------ ------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 1,009,000 $ 1,331,000
Income taxes payable 385,000 22,000
Estimated third-party payor settlements 226,000 195,000
------------ ------------
Total current liabilities 1,620,000 1,548,000
------------ ------------
Deferred tax liability 198,000 316,000
------------ ------------
Total liabilities 1,818,000 1,864,000
------------ ------------
Stockholders' equity:
Common stock, $.001 par value: authorized
20,000,000 shares, issued 6,228,746 and
6,208,646 shares 6,000 6,000
Additional paid-in capital 18,525,000 18,476,000
Retained earnings 6,221,000 5,842,000
------------ ------------
24,752,000 24,324,000
Less treasury stock (977,900 and 957,500 shares)
- at cost (1,067,000) (964,000)
------------ ------------
Total stockholders' equity 23,685,000 23,360,000
------------ ------------
TOTAL $ 25,503,000 $ 25,224,000
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
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<PAGE>
NATIONAL HOME HEALTH CARE CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
UNAUDITED
For the three months ended October 31,
--------------------------------------
1997 1996
---------------------------------
Net patient revenue $ 9,101,000 $ 8,686,000
----------- -----------
Operating expenses:
Cost of revenue 5,891,000 5,691,000
General and administrative 2,222,000 2,069,000
Amortization of intangibles 93,000 48,000
----------- -----------
Total operating expenses 8,206,000 7,808,000
----------- -----------
Income from operations 895,000 878,000
Other income:
Interest income 140,000 105,000
(Loss) from equity investee (347,000) (30,000)
----------- -----------
Income before taxes 688,000 953,000
Provision for income taxes 309,000 415,000
----------- -----------
NET INCOME 379,000 538,000
=========== ===========
Net income per share of common stock 0.07 0.10
=========== ===========
Weighted average shares outstanding 5,250,319 5,248,346
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 three months ended October 31,
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1997 1996
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<S> <C> <C>
Cash flows from operating activities:
Net income $ 379,000 $ 538,000
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 119,000 76,000
Provisions for doubtful accounts 15,000 --
Loss from equity investee 347,000 30,000
Deferred tax (118,000) 58,000
Changes in:
Accounts receivable (564,000) 352,000
Prepaid expenses and other assets 54,000 48,000
Accounts payable, accrued expenses and other
liabilities (322,000) (123,000)
Income taxes receivable/payable 363,000 134,000
Estimated third party payor settlements 31,000 (294,000)
----------- -----------
Net cash provided by operating activities 304,000 819,000
----------- -----------
Cash flows from investing activities:
Purchase of furniture, equipment and leasehold
improvements (23,000) (80,000)
----------- -----------
Net cash (used in) investing activities (23,000) (80,000)
----------- -----------
Cash flows from financing activities:
Proceeds from exercise of stock options 49,000 --
Purchase of treasury shares (103,000) --
----------- -----------
Net cash (used in) financing activities (54,000) --
----------- -----------
Net increase in cash and cash equivalents 227,000 739,000
Cash and cash equivalents - beginning of period 9,324,000 8,929,000
----------- -----------
Cash and cash equivalents-end of period $ 9,551,000 $ 9,668,000
=========== ===========
Supplemental disclosures of cash flow information: Cash paid during the period
for:
Taxes $ 83,000 $ 395,000
Interest 1,000 --
</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-month period ended October 31,
1997 are not necessarily indicative of the results that may be expected for the
year ended July 31, 1998. 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, 1997.
NOTE 2 - 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. As a result of the offering, the
Company currently owns 900,000 shares, or approximately 37.6%, of SunStar. The
Company is accounting for its investment in SunStar using the equity method of
accounting.
NOTE 3 - ACQUISITIONS
On March 25, 1997, the Company, through its wholly-owned subsidiary
Health Acquisition Corp., acquired, for $672,000 in cash, including acquisition
costs of $22,000, certain assets of C.J. Home Care, Inc., d/b/a Garden City Home
Care, a New York licensed home health care company which provides home care
services in Nassau County, New York.
On May 29, 1997, the Company, through its wholly-owned subsidiary
Health Acquisition Corp., acquired, for $1,213,000 in cash, including
acquisition costs of approximately $77,000, certain assets of Home Health Aides,
Inc. and H.H.A. Aids, Inc., two licensed home health care companies which
provide home care services in both Nassau and Suffolk Counties, New York.
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<PAGE>
NOTE 4 - STOCK DIVIDEND
On October 10, 1997, the Company's Board of Directors declared a 3%
stock dividend payable on December 8, 1997 for shareholders of record as of
November 6, 1997. A total of 153,025 shares of common were issued in connection
with the dividend. All stock related data in the consolidated financial
statements reflect the stock dividend for all periods presented.
-8-
<PAGE>
ITEM 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Medicare Reimbursement
- ----------------------
The Balanced Budget Act of 1997 ("the Act"), which was signed into
law on August 5, 1997 contains many sweeping changes to Medicare home health
reimbursement and coverage. Under the Act, for cost reporting period beginning
on or after October 1, 1997, Medicare providers will be reimbursed under an
interim payment system for a two-year period prior to the implementation of a
prospective payment system. Under the interim payment system, home health care
providers will be reimbursed the lower of (i) actual costs, (ii) cost per visit
limits, or (iii) an aggregate per beneficiary limit based on a blending of
agency-specific costs and a census region costs for cost reporting periods
ending during fiscal 1994. The prospective payment system calls for payments to
Medicare providers for cost reporting periods on or after October 1, 1999 in
accordance with a prospective payment system to be established by the Secretary
of the Department of Health and Human Services. The foregoing is a summary of
certain of the reimbursement provisions of the Act, to which reference is made
for a more complete understanding thereof.
The Company will be reimbursed under the interim payment system
effective July 1, 1998. The Company is currently analyzing the impact of the Act
on its operations, liquidity and cash flows and formulating plans to minimize
the Act's negative impact. The Company's future operating results could differ
materially from results previously achieved or previously projected in forward
looking statements made by, or on behalf of, the Company.
Results of Operations and Effects of Inflation
- ----------------------------------------------
Net patient revenue increased approximately $415,000 or 4.8% to
$9,101,000 for the three months ended October 31, 1997 from $8,636,000 for the
three months ended October 31, 1996. Revenues from Health Acquisition Corp., the
subsidiary providing home health care services in the New York metropolitan
area, increased $985,000 or 20% to $5,907,000 for the three months ended October
31, 1997 from $4,922,000 for the three months ended October 31, 1996. This
increase is attributable to the acquisitions that the Company completed in March
and May of 1997. Revenues from New England Home Care, Inc., the subsidiary that
is Medicare certified and licensed in the State of Connecticut decreased
approximately $596,000 or 20% to $2,395,000 for the three months ended October
31, 1997 from $2,991,000 for the three months ended October 31, 1996. This
decrease is primarily attributable to a decrease in Medicare visits. Revenues
from Nurse Care, Inc., the licensed home health care subsidiary in the State of
Connecticut increased 3.3% to $799,000 for the three months ended October 31,
1997 from $773,000 for the three months ended October 31, 1996.
Cost of revenue as a percentage of net patient revenue decreased to
64.7% for the three months ended October 31, 1997 from 65.5% for the three
months ended October 31, 1996. This decrease is attributable to the increase in
revenues derived from the Company's New York operations, which generate higher
operating margins.
-9-
<PAGE>
General and administrative expenses increased $153,000 or 7% to
$2,222,000 for the three months ended October 31, 1997 from $2,069,000 for the
three months ended October 31, 1996. This increase is primarily attributable to
the increase in administrative salaries and expenses in connection with the
acquisitions made by Health Acquisition Corp. As a percentage of revenue,
general and administrative expenses remained at 24% for both comparable periods.
Amortization of intangibles increased $45,000 to $93,000 for the
three months ended October 31, 1997 from $48,000 for the three months ended
October 31, 1996. This increase is attributable to the acquisitions made by
Health Acquisition Corp.
Interest income increased $35,000 or 33% to $140,000 for the three
months ended October 31, 1997 from $105,000 for the three months ended October
31, 1996. This increase is attributable to increased short-term investment
yields obtained by the Company and improved cash management.
The loss from equity investee increased $(317,000) to $(347,000) for
the three months ended October 31, 1997 as compared to a loss from equity
investee of $(30,000) for the three months ended October 31, 1996. The loss from
equity investee represents the Company's share of the SunStar net loss for the
respective periods.
As a result of the foregoing, net income for the three months ended
October 31, 1997 was $379,000, or $.07 per share, as compared to a net income of
$538,000, or $.10 per share, for the three months ended October 31, 1996.
The rate of inflation had no material effect on operations for the
three months ended October 31, 1997.
Financial Conditions and Capital Resources
- ------------------------------------------
Current assets increased to approximately $19,124,000 and current
liabilities increased to $1,620,000, respectively, at October 31, 1997. These
results increased working capital by $651,000 from $16,853,000 at July 31, 1997
to $17,504,000 at October 31, 1997. Cash and cash equivalents at October 31,
1997 was $9,551,000 as compared with $9,324,000 at July 31, 1997.
The Company provided net cash from operating activities of $304,000
for the three months ended October 31, 1997 as compared to net cash provided by
operating activities of $819,000 for the three months ended October 31, 1996.
The decrease in operating cash flow is primarily attributable to the increase in
accounts receivable of $549,000 for the three months ended October 31, 1997 as
compared to a decrease of $352,000 for the three months ended October 31, 1996.
The increase in accounts receivable is the result of the Company's current
Medicare reimbursement rate being below actual costs of services being provided,
principally due to a decrease in the number of Medicare visits. Historically,
the Company has financed its working capital requirements through cash flow from
operating activities. Net cash used in investing activities for the three months
ended October 31, 1997 and 1996 reflects the purchase of equipment. Net cash
used in financing activities for the three months ended October 31, 1997
reflects the purchase of treasury shares offset by the proceeds from
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<PAGE>
the exercise of stock options. For the three months ended October 31, 1996, the
Company had no financing cash flow activities.
The Company has available a $2,000,000 secured line of credit with
its bank. In addition, a subsidiary of the Company has a secured line of credit.
The maximum amount that can be borrowed under the subsidiary's line of credit
may not exceed the lesser of eligible accounts receivable or $2,000,000. Each
credit facility bears interest at the alternate base commercial lending rate of
the bank and expires January 30, 1998. At October 31, 1997, there were no
outstanding balances under either line of credit.
The Company intends to meet both its short and long term liquidity
needs with its current cash balances, cash flow and available lines of credit.
The Company believes that its current cash balances will also allow it to
continue to make acquisitions in the home health care field without affecting
its liquidity needs.
In July 1997, the Board of Directors authorized a stock repurchase
program authorizing the Company to repurchase up to $1,000,000 of its Common
Stock. The buyback program will be financed out of existing cash balances. To
date, the Company has repurchased shares at a total cost of approximately
$117,000 under the stock repurchase program.
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<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and reports on Form 8-K
(a) Exhibits:
None.
(b) Reports on Form 8-K:
None.
-12-
<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: December 15, 1997 /s/ Robert P. Heller
---------------------
Robert P. Heller
Vice President of Finance,
(chief financial and
accounting officer)
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<NAME> NATIONAL HOME HEALTH CARE CORP.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-START> AUG-01-1997
<PERIOD-END> OCT-31-1997
<CASH> 9,551,000
<SECURITIES> 508,000
<RECEIVABLES> 9,035,000
<ALLOWANCES> (310,000)
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<PP&E> 936,000
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<CURRENT-LIABILITIES> 1,620,000
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<COMMON> 6,000
<OTHER-SE> 23,679,000
<TOTAL-LIABILITY-AND-EQUITY> 25,503,000
<SALES> 9,101,000
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<CGS> 5,891,000
<TOTAL-COSTS> 2,315,000
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<LOSS-PROVISION> (347,000)
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