SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
For the fiscal year ended July 31, 2000 Commission File Number 0-12927
NATIONAL HOME HEALTH CARE CORP.
(Exact name of Registrant as specified in its charter)
Delaware 22-2981141
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
700 WHITE PLAINS ROAD, SCARSDALE, NEW YORK 10583
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(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, as amended, 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. [X]
As of October 23, 2000, 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 $16,399,529, 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 23,
2000 was 4,947,258.
Portions of the Registrant's Proxy Statement for its 2000 Annual Meeting of
Stockholders are incorporated by reference in Part III hereof.
<PAGE>
PART I
ITEM 1. BUSINESS.
GENERAL
National Home Health Care Corp. (the "Company") is a Delaware
corporation which was organized in 1983 and completed its initial public
offering that year. Formerly Family Treatment Centers of America, Inc. and then
National HMO Corp., in 1991 the Company changed its name to National Home Health
Care Corp. The Company is a provider of home health care services in New York,
New Jersey and Connecticut.
The Company has four principal operating subsidiaries:
o Health Acquisition Corp., formerly Allen Health Care Services, Inc.
("Allen Health Care"), a New York corporation. Allen Health Care conducts home
health care operations in New York.
o New England Home Care, Inc. ("New England"), a Connecticut
corporation, which conducts home health care operations in Connecticut.
o Accredited Health Services, Inc. ("Accredited"), a New Jersey
corporation which conducts home health care operations in New Jersey.
o Connecticut Staffing Works Corp. ("Connecticut Staffing"), a
Connecticut corporation, which conducts healthcare staffing operations in
Connecticut.
In January 1996, the outpatient medical service business of the
Company, formerly known as Brevard Medical Center, Inc. and First Health, Inc.,
was reorganized as SunStar Healthcare, Inc. ("SunStar"), a newly-formed,
wholly-owned subsidiary of the Company. In May 1996, SunStar completed its
initial public offering (thus reducing the Company's ownership percentage in
SunStar to approximately 37.6%) following a complete change in management and
the adoption of a business plan by new management for the establishment of a
health maintenance organization. As a result, SunStar was no longer consolidated
with the Company for accounting purposes and the Company accounted for its
investment in SunStar using the equity method of accounting. During the fiscal
year ended July 31, 1998, the Company's ownership percentage was reduced to
30.5% as a result of SunStar issuing additional shares of its common stock
pursuant to a private placement. As of July 31, 2000, the Company's ownership
percentage of SunStar was 21.6% and the Company's value of its investment in
SunStar was $0. In February 2000, SunStar's sole operating subsidiary
effectively discontinued operations.
Health Acquisition Corp.
------------------------
d/b/a Allen Health Care Services
--------------------------------
In October 1986, the Company acquired all of the outstanding capital
stock of Allen Health Care. Allen Health Care is a provider of personal home
health care services in New York State. Services are provided by registered
nurses, personal care aides, home health aides and homemakers. The Company is
licensed by the Public Health Council of the State of New York Department of
Health. Allen Health Care maintains its principal administrative office in
Jamaica, New York and
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<PAGE>
has branch offices in Lindenhurst and Mount Vernon, New York. Case coordinating
of patients is performed at these three offices. In addition, the Company has
satellite offices in Brooklyn, Islandia, Hempstead and the Bronx, New York. The
satellite offices are primarily used for the recruitment and training of home
health aides. Services are provided in the following counties in the State of
New York: Nassau, Suffolk, Westchester, Queens, Kings, New York and the Bronx.
All home health care personnel are licensed or agency certified under a
New York State approved program and can be engaged on a full-time, part-time or
live-in basis. Since July 1996, Allen Health Care has required residential
criminal background investigations for all new personnel. In addition, urine
drug testing is part of the pre-employment screening process and is performed
annually and randomly thereafter. In February 1999, Allen Health Care was
re-surveyed by the Joint Commission of Accreditation of Health Care
Organizations ("JCAHO"), an accrediting body for health care providers. JCAHO
accreditation 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 re-survey resulted in Allen Health Care extending
its accredited status through the year 2002.
Reimbursement for Allen Health Care's services is primarily by
certified home health care agencies ("CHHAs") and long-term health care provider
programs that subcontract their patients to Allen Health Care, as well as from
private payors and the Nassau, Suffolk and Westchester Counties Department of
Social Services Medicaid Programs, for which Allen Health Care is a
participating provider.
Allen Health Care provides home health care services to its clients
twenty-four hours per day, seven days per week. Although Allen Health Care'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 the
home health aide and personnel 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 professional staff.
Allen Health Care has expanded in recent years through selected
acquisitions of complementary businesses in its geographic region. In March
1997, Allen Health Care completed the acquisition of certain assets of C.J. Home
Care, Inc., d/b/a Garden City Home Care, a New York licensed home health care
agency that provided home health aide services in Nassau County, New York. In
May 1997, Allen Health Care completed the acquisition of certain assets of Home
Health Aides, Inc. and H.H.A. Aides, Inc., two New York licensed home health
care agencies that provided home health aide services in both Nassau and Suffolk
Counties, New York. The latter acquisition gave the Company an entree into the
Shared Aide Program in Nassau County. The Shared Aide Program is a program for
Medicaid patients that brings together a group of home health aides to care for
patients in one geographic area, thus increasing operating efficiencies and
reducing costs.
In August 1998, Allen Health Care completed the acquisition of certain
assets of Bryan Employment Agency, Inc., d/b/a Bryan Home Care Services, a New
York licensed home health care agency that provided home health aide services in
Westchester County, New York. The acquisition expanded the geographic presence
of the Company and enabled Allen Health Care to
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<PAGE>
become a participating provider in the Westchester County Department of Social
Services Medicaid Program.
To a larger extent, Allen Health Care's continued growth depends on its
ability to recruit and maintain qualified personnel. Allen Health Care's
training programs for home health aides and personal care aides have been
approved by the New York State Department of Health. Allen Health Care believes
that it offers competitive salaries and fringe benefits and has been able to
keep its home health aides working on a steady basis.
New England Home Care, Inc.
---------------------------
In August 1995, the Company acquired New England in a stock purchase
arrangement. New England is a Medicare certified and licensed home health care
company in Connecticut. In October 1998, New England was re-surveyed by JCAHO,
resulting in New England extending its accredited status through 2001. New
England provides services throughout the state of Connecticut. Services include
skilled nursing, physical therapy, occupational therapy, medical social
services, home health aide and homemaker services. In addition, New England
provides specialty services consisting of adult/geriatric, pediatric, post-acute
rehabilitation, behavioral medicine and maternal/child health. New England
provides full-service home health care twenty-four hours per day, seven days per
week. Weekends, holidays and after-hours are supported by an on-call system for
each office location with medical supervision by a registered nurse at all
times. All home health care personnel are licensed or agency certified under a
Connecticut state-approved program and can be engaged on a full-time, part-time
or live-in basis. Since 1995, New England has performed criminal background
investigations on all new personnel.
New England maintains its principal administrative office in Milford,
Connecticut. In addition, New England has an administrative office in Cromwell
and satellite offices in Norwalk, Hamden, Waterbury, Danbury, Branford,
Hartford, Norwich and Bridgeport, Connecticut. Case coordinating of patients is
performed at the Milford administrative office. The satellite offices are used
as drop-off offices for paperwork, recruitment, in services and orientation of
personnel. Reimbursement for New England's services is primarily provided by the
Connecticut Medicaid Program, the Federal Medicare Program, managed care
companies, private payors, hospices and other Medicare certified home health
agencies and long-term care providers that subcontract their patients to New
England.
New England has expanded its operations in the past year through
increased penetration of market share in Connecticut and selected acquisitions
of complementary assets in its geographic region. In November 1999, New England
acquired certain assets of Optimum Care Services of Connecticut, Inc., Optimum
Home Health of Connecticut, Inc. and Optimum Home Care of Connecticut, Inc.
(collectively, the "Optimum Entities"). The Optimum Entities included a Medicare
certified and licensed home health care company engaged in providing home health
care services in Connecticut. The assets were acquired from a court-appointed
Chapter 7 Trustee. The final purchase price of $4,400,000 in cash was determined
through an auction process conducted at the United States Bankruptcy Court for
the District of Massachusetts. The acquisition of these assets was coupled with
a successful penetration of the market share made available as a result of the
liquidation of the Optimum Entities.
In April 2000, New England acquired certain assets of the Connecticut
operations of U.S. HomeCare Corp. ("U.S. HomeCare-Connecticut"), a Medicare
certified and licensed home health
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<PAGE>
care company engaged in providing home health care services in Connecticut, for
$300,000 in cash. The acquisition complemented the Company's existing operations
in Connecticut.
The continued growth of New England depends on its ability to recruit
and retain qualified personnel. New England's training program for home health
aides has been approved under a Connecticut state-approved program. New England
primarily recruits nurses through newspaper advertisements. New England believes
that it offers competitive salaries and fringe benefits and has been able to
keep its employees working on a steady basis.
Connecticut Staffing Works Corp.
--------------------------------
Connecticut Staffing was organized in October 1999 to operate certain
of the assets acquired from the Optimum Entities.
Connecticut Staffing is a full-service health care staffing company. It
provides temporary staffing to hospitals, skilled nursing facilities, home
health organizations and schools and other institutions. Staffing personnel
include registered nurses, licensed practical nurses, certified nursing
assistants, home health aides, homemakers, opticians, medical secretaries and
emergency medical technicians. The company maintains its administrative office
in Cromwell, Connecticut. Staffing services are provided twenty-four hours per
day, seven days per week. Staffing coordinators are in the office from 6 a.m. to
10 p.m. Weekends, holidays and after hours are supported by an on-call system
which pages a staffing coordinator.
The company maintains a roster of quality professional personnel. The
continued success of Connecticut Staffing is dependent on its ability to
maintain its steady roster of per diem workers for meeting the staffing
requirements of its clients. The company believes that it offers competitive
salaries and fringe benefits and has been able to keep its personnel working on
a steady basis.
Accredited Health Services, Inc.
--------------------------------
In October 1998, the Company acquired all of the outstanding capital
stock of Accredited. Accredited is a licensed home health care company that
provides home health aide services and skilled nursing services in Bergen,
Hudson, Passaic, Essex, Morris, Union, Somerset and Middlesex Counties, New
Jersey. Accredited maintains its principal administrative office in Hackensack,
New Jersey. In addition, it has a branch office in Verona and a satellite office
in Union, New Jersey. Case coordinating of patients is performed in both the
Hackensack and Verona offices. The satellite office is used for recruitment and
orientation of personnel.
Accredited provides home health care services to its clients
twenty-four hours per day, seven days per week. Weekends, holidays and
after-hours are supported by an on-call system for each office. All home health
aides are licensed under a New Jersey state-approved program and can be engaged
on a full-time, part-time or live-in basis. In June 2000, Accredited was
re-surveyed by the Commission on Accreditation for Home Care (CAHC), one of the
accrediting bodies required for participation as a Medicaid provider in New
Jersey. This accreditation was extended for an additional year. Reimbursement
for Accredited's services is primarily by the State of New Jersey Medicaid
Program, Medicare certified home health care agencies that subcontract their
patients to Accredited and private payors.
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<PAGE>
Accredited's growth depends on its ability to recruit and retain
qualified home health aides. 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.
On August 25, 2000, Accredited purchased certain assets of Health Force
Owned, Ltd. and its affiliates ("Health Force"). Health Force's operations
included the provision of home health aide and skilled nursing services in
northern and central New Jersey. Annual revenue for the New Jersey operations of
Health Force approximated $4,200,000 at the time of acquisition. The acquisition
complemented the Company's existing operations in New Jersey and also expanded
its services to include skilled nursing.
Insurance
---------
The Company and its subsidiaries maintain professional malpractice
liability coverage on professionals employed in the rendering of health care
services providing coverage per occurrence and in the aggregate and coverage for
the customary risks inherent in the operation of business in general. Recent
market conditions with respect to liability insurance have caused wide
fluctuations in the cost and availability of coverage. The Company also carries
directors and officers liability insurance. While the Company 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 and Labor Relations
-----------------------------
As of October 12, 2000, the Company had approximately 2,800 full and
part-time employees of whom approximately 21 were employed in various management
capacities and approximately four were employed in marketing capacities. The
Company has no union contracts with any of its employees. The Company believes
its relationship with its employees is satisfactory. The Company has
standardized procedures for recruiting, interviewing and reference checking
prospective health care personnel. All nurses and home health aides must be
licensed or certified by appropriate authorities.
Competition
-----------
The home health care field is highly competitive in each state in which
the Company operates. The Company is competing with numerous other licensed as
well as certified home health care agencies in each of the markets it serves. In
addition, the Company competes with companies that, in addition to providing
home health aide and skilled nursing services, also, unlike the Company, provide
pharmaceutical products and other home health care services that generate
additional referrals. Competition also involves the quality of services provided
and the pricing for its services. As a result of changes in Medicare
reimbursement and the competitive pressures of managed care, the home health
care industry continues to experience consolidation. In addition, the Company
believes that smaller, less financially secure home health agencies will
continue to find it difficult to compete for market share and comply with
regulatory compliance standards.
The Company'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 Company will be
successful in maintaining or in securing additional qualified personnel. Over
the past year, the strong labor market has made it more difficult to attract the
level
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<PAGE>
of health care personnel necessary to the Company's business. The Company
recruits personnel principally through newspaper advertisements and through
referrals from existing personnel.
Customers
---------
The Company provides its services to four types of payor sources. These
sources include federal and state funded public assistance programs (Medicare
and Medicaid), other third party payors (subcontracts), insurance companies and
private payors.
A substantial portion of the Company's revenue is derived from
subcontracts that the Company has with Medicare certified home health care
agencies and long-term health care provider programs that subcontract their
patients to the Company. From time to time, some of these agencies have
requested bids from the home care agencies to which they subcontract. If the
Company is not successful in maintaining these contracts as they came up for
bid, it could have a materially adverse effect on the Company's results of
operations.
One or more customers have each accounted for more than 10% of the
Company's revenue. For the fiscal years ended July 31, 2000, 1999 and 1998:
Visiting Nurse Service of New York, a non-profit Medicare home health care
agency, accounted for 10%, 16% and 22%, respectively, of the Company's revenue;
the State of New York Department of Social Services personal care aide program
for the counties of Nassau, Suffolk and Westchester accounted for 9%, 16% and
18%, respectively, of the Company's revenue; the State of Connecticut Department
of Social Services medical assistance program accounted for 18%, 7% and 9%
respectively, of the Company's revenue; and the federal Medicare program
accounted for approximately 6%, 8% and 13%, respectively, of the Company's
revenue. The loss of any of the foregoing customers would have a material
adverse effect on the Company.
Although the Company had been notified in October 1999 by Visiting
Nurse Service of New York that commencing with 2000 it would not continue to
subcontract home health aides from Allen Health Care, in January 2000 Allen
Health Care had its contract with Visiting Nurse Service of New York renewed for
an additional year.
Government Regulations and Licensing
------------------------------------
The health care industry is highly regulated. The Company's business is
subject to substantial and frequently changing regulations by federal, state and
local authorities. The Company must comply with state licensing along with
federal and state eligibility standards for certification as a Medicare and
Medicaid provider.
The ability of the Company to operate profitably will depend in part
upon the Company obtaining and maintaining all necessary licenses and other
approvals in compliance with applicable health care regulations.
Medicare
--------
Title XVIII of the Social Security Act authorizes Part A of the
Medicare program, the health insurance program that pays for home health care
services for covered persons (typically, those aged 65 and older and long-term
disabled). Home health care providers may participate in the Medicare program
subject to certain conditions of participation and upon acceptance of a provider
agreement
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by the Secretary of the Department of Health and Human Services. Only enumerated
services, upon satisfaction of certain coverage criteria, are eligible for
reimbursement as a Medicare provider. The Company is currently Medicare
certified in Connecticut. Approximately 6%, 8% and 13% of revenue for the fiscal
years ended July 31, 2000, 1999 and 1998 were derived under the Medicare
program.
The Balanced Budget Act of 1997, as amended (the "Act"), was signed
into law in August 1997. The Act made significant changes in the reimbursement
system for Medicare home health services. The primary change that affects the
Company is a restructuring of the reimbursement system related to Medicare
certified home care agencies.
Under the Act, Medicare home care reimbursement changes were scheduled
in two phases. A temporary or interim payment system ("IPS") took effect for
cost reports beginning on or after October 1, 1997. Under IPS, Medicare home
health care providers were reimbursed the lower of (i) their actual costs, (ii)
cost limits based on 105% of median costs of freestanding home health agencies
or (iii) an agency-specific per patient cost limit based on 98% of 1994 costs
adjusted for inflation. Under IPS, most Medicare providers were reimbursed under
an agency-specific per patient cost limit. Prior to the implementation of IPS,
Medicare reimbursed providers on reasonable cost basis subject to
program-imposed cost per visit limitations. Effective October 1, 2000, under the
prospective payment system, the last remaining phase under the Act, Medicare now
reimburses providers a predetermined base payment. The payment is adjusted for
the health condition and care needs of the beneficiary and also is adjusted for
the geographic differences in wages across the country. Medicare provides home
health agencies with payments for 60-day "episodes of care". The 60-day episode
is the basic unit of payment. The 60-day episode coordinates with the 60-day
physician re-certification of the plan of care and with the 60-day reassessment
of the patient using the Outcomes and Assessment Information Set ("OASIS").
Oasis is the outcome study that Medicare utilized over the past two years to
determine the amount of reimbursement to providers for each 60-day episode.
As a result of the changes to Medicare reimbursement imposed by the
Act, the Company experienced a decline in revenue from its Medicare certified
nursing agency. In addition, the Company's operations in New York and New Jersey
are dependent upon referrals primarily from Medicare certified agencies, whose
future reimbursement may be adversely affected. Accordingly, there can be no
assurance that the Company's future referrals will not result in reduced
reimbursement rates or reduced volume in business. As the prospective payment
system has just recently been implemented, the Company is unable to predict its
impact on the Company.
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 state health care program. The federal government has 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 Company
believes that its current operations are not in violation of the anti-kickback
statute.
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Medicaid
--------
Approximately 30%, 27% and 27% of revenue for the fiscal years ended
July 31, 2000, 1999 and 1998, respectively, were derived under state sponsored
Medicaid programs. Reimbursement for home health care services rendered to
eligible Medicaid recipients is made in an amount determined in accordance with
procedures and standards established by state law under federal guidelines.
States differ as to reimbursement policies and rates. The Company is a licensed
Medicaid provider in Connecticut, New Jersey and in Nassau, Suffolk and
Westchester Counties, New York. Medicaid reimbursement rates may be reduced in
response to state economic and budgetary constraints, as well as in response to
changes in the Medicare program.
ITEM 2. PROPERTIES.
The Company, directly or through certain subsidiaries, leases various
office facilities under lease agreements with various expiration dates through
the year 2005. 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 2,679 Corporate headquarters October 31, 2003
Queens, NY 7,500 Administrative office January 31, 2001
Lindenhurst, NY 1,250 Branch office July 31, 2001
Mount Vernon, NY 2,400 Branch office December 31, 2001
Hempstead, NY 3,800 Satellite office September 30, 2004
Islandia, NY 2,100 Satellite office June 30, 2001
Brooklyn, NY 800 Satellite office October 31, 2000
Bronx, NY 648 Satellite office August 31, 2001
Milford, CT 10,336 Administrative office September 30, 2002
Cromwell, CT 12,419 Administrative office June 30, 2003
Norwalk, CT 1,400 Satellite office September 30, 2001
Hamden, CT 774 Satellite office July 31, 2001
Waterbury, CT 2,000 Satellite office Month to Month
Danbury, CT 780 Satellite office June 30, 2001
Branford, CT 200 Satellite office August 31, 2000
Hartford, CT 989 Satellite office April 30, 2002
Norwich, CT 1,200 Satellite office April 30, 2001
Bridgeport, CT 588 Satellite office April 30, 2001
Hackensack, NJ 4,281 Administrative office September 30, 2005
Verona, NJ 1,765 Branch office October 31, 2001
Hackensack, NJ 2,350 Satellite office October 31, 2001
Union, NJ 800 Satellite office March 31, 2001
</TABLE>
The Company believes that its office facilities are adequate for the
conduct of its existing operations. The Company regularly evaluates the
suitability and the overall adequacy of its various offices. The Company
believes that it will be able to renew or find adequate offices for all leases
which will expire in the current fiscal year.
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<PAGE>
ITEM 3. LEGAL PROCEEDINGS.
In the ordinary course of business, the Company is subject, from time
to time, to claims and legal actions.
The Company, certain of its officers and directors (who previously were
outside directors of SunStar (the "director defendants")) and other parties are
named as defendants in In Re SunStar Healthcare Securities Litigation (United
States District Court for Middle District of Florida), a consolidated class
action brought on behalf of a purported class of shareholders of Sunstar who
purchased stock of Sunstar between June 15, 1998 and December 14, 1999. The
Consolidated Amended Complaint (the "Complaint") (which supersedes all prior
class action complaints) in this litigation purports to assert claims under
sections 10(b) (and Rule 10b-5 promulgated thereunder) and 20(a) of the
Securities Exchange Act of 1934, as amended, based upon alleged acts or
omissions of the defendants which allegedly resulted in misrepresentations or
omissions of material information concerning the financial condition of SunStar
(and its subsidiary SunStar Health Plan, Inc., a Florida HMO presently in
receivership). The Complaint also alleges that the Company (which allegedly held
30.5% of SunStar's common stock during SunStar's fiscal year ending July 31,
1998 and reduced its holdings to 21.6% at July 31, 2000) and the director
defendants exercised control over SunStar and therefore are liable as
"controlling persons" thereof. On October 23, 2000 the defendants filed motions
to dismiss the Complaint. The Company believes that the complaints are without
merit and intends to vigorously defend them.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS.
No matters were submitted to a vote of stockholders of the Company
during the fourth quarter of the fiscal year ended July 31, 2000.
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PART II
ITEM 5. MARKET FOR COMPANY'S COMMON STOCK
AND RELATED STOCKHOLDER MATTERS.
(A) Market Information
------------------
The Company's Common Stock is quoted on the NASDAQ National Market
under the symbol NHHC. The following table presents 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, 1999
and 2000. These quotations reflect the inter-dealer prices, without retail
mark-up, mark-down or commission and may not necessarily represent actual
transactions.
<TABLE>
<CAPTION>
Market Prices
--------------------------------------
High Low
---- ---
Year ended July 31, 1999
------------------------
<S> <C> <C>
1st Quarter.............................................................. $4.75 $4.00
2nd Quarter.............................................................. 5.00 4.38
3rd Quarter.............................................................. 5.00 2.25
4th Quarter.............................................................. 4.75 3.13
Year ended July 31, 2000
------------------------
1st Quarter.............................................................. $4.75 $3.75
2nd Quarter.............................................................. 4.25 3.50
3rd Quarter.............................................................. 5.06 3.63
4th Quarter.............................................................. 5.00 4.00
</TABLE>
(B) Holders
-------
There were approximately 135 holders of record of Common Stock as of
October 23, 2000, excluding shares held by depository companies for certain
beneficial owners.
(C) Dividends
---------
The Company has not declared or paid any cash 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. The Company did not
declare any cash or stock dividends during the fiscal years ended July 31, 1998,
1999 and 2000.
ITEM 6. SELECTED FINANCIAL DATA.
The following table, which presents selected financial data for the
Company for each of the last five fiscal years, has been derived from the
Company's audited Consolidated Financial Statements. The data set forth below
should be read in conjunction with the Consolidated Financial Statements in Item
8 of this Report.
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<TABLE>
<CAPTION>
Fiscal Years Ended July 31,
----------------------------------------------------------------------------------
2000 1999 1998 1997 1996
----------------------------------------------------------------------------------
STATEMENT OF OPERATIONS DATA:
<S> <C> <C> <C> <C> <C>
Revenue........................... $55,574,000 $38,518,000 $34,313,000 $35,070,000 $38,830,000
Operating expenses................ 51,247,000 36,090,000 31,394,000 31,770,000 35,564,000
Income from operations............ 4,327,000 2,428,000 2,919,000 3,300,000 3,266,000
Other income (loss):
Gain resulting from sale of
stock of equity investee...... 1,602,000 --- --- --- ---
Interest income.................. 220,000 385,000 547,000 446,000 412,000
(Loss) from equity investee...... --- (674,000) (1,630,000) (612,000) (10,000)
Gain resulting from equity
investee's stock offering...... --- --- 331,000 --- 1,548,000
Income before income taxes........ 6,149,000 2,139,000 2,167,000 3,134,000 5,216,000
Provision for income taxes........ 2,058,000 1,001,000 964,000 1,278,000 1,859,000
Net income........................ 4,091,000 1,138,000 1,203,000 1,856,000 3,357,000
Diluted net income per share of
common stock...................... $0.81 $0.22 $0.23 $0.35 $0.64
</TABLE>
The above results include the operations of SunStar through April 30,
1996. Subsequent thereto, the operations of SunStar are recorded on the equity
method and are reflected above as loss from equity investee.
<TABLE>
<CAPTION>
At July 31,
----------------------------------------------------------------------------------
2000 1999 1998 1997 1996
-----------------------------------------------------------------------------------
BALANCE SHEET DATA:
<S> <C> <C> <C> <C> <C>
Total assets...................... $30,856,000 $26,092,000 $25,503,000 $25,224,000 $24,421,000
Working capital................... 19,312,000 17,708,000 19,134,000 16,853,000 16,288,000
Retained earnings................. 12,274,000 8,183,000 7,045,000 5,842,000 4,789,000
Stockholders' equity.............. 28,486,000 25,013,000 24,281,000 23,360,000 21,504,000
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
The following discussion and analysis provides information which the
Company's management believes is relevant to an assessment and understanding of
the Company's results of operations and financial condition. This discussion
should be read in conjunction with the consolidated financial statements and
notes appearing elsewhere herein.
This discussion contains forward-looking statements that are subject to
a number of known and unknown risks that, in addition to general economic,
competitive and other business conditions, could cause actual results,
performance and achievements to differ materially from those described or
implied in the forward-looking statements.
-12-
<PAGE>
The Company is subject to external factors that could significantly
impact its business, including changes in Medicare and Medicaid reimbursement,
government fraud and abuse initiatives, and other such factors that are beyond
the control of the Company. These factors could cause future results to differ
materially from historical results.
The Balanced Budget Act of 1997, as amended, (the "Act"), was signed
into law on August 5, 1997. Under the Act, until October 1, 2000, Medicare
certified home health agencies were reimbursed under an interim payment system
("IPS") for a two-year period prior to the implementation of a prospective
payment system. Under IPS, home health care providers were reimbursed the lower
of (i) their actual costs, (ii) cost limits based on 105% of median costs of
freestanding home health agencies, or (iii) an agency-specific per patient cost
limit, based on 1994 costs adjusted for inflation. Prior to the implementation
of IPS, Medicare reimbursed providers on a reasonable cost basis subject to
program-imposed cost per visit limitations. Effective October 1, 2000, under the
prospective payment system, the last remaining phase under the Act, Medicare now
reimburses providers a predetermined base payment. The payment is adjusted for
the health condition and care needs of the beneficiary and is also adjusted for
the geographic differences in wages across the country. Medicare provides home
health agencies with payments for 60-day "episodes of care".
The IPS cost limits were applied to the Company's Connecticut-based
Medicare certified nursing agency for the cost period beginning July 1, 1998.
The Company determined that these new limits would reduce reimbursement for the
Medicare services it provides. Accordingly, in May 1998, the Company combined
its operations in Connecticut by merging its Medicare certified subsidiary with
its licensed agency subsidiary to increase operational efficiencies.
The implementation of IPS resulted in a decrease in Medicare revenue
from the Company's Medicare certified agency. In addition, the Company's
operations in New York and New Jersey are dependent upon referrals, primarily
from Medicare certified home health care agencies, whose reimbursement has been
adversely affected. Under the prospective payment system, there can be no
assurance that the Company's future referrals will not result in reduced
reimbursement rates or reduced volume of business.
On April 14, 2000, the Company acquired, through its wholly-owned
subsidiary New England, certain assets of the Connecticut operations of U.S.
HomeCare Corp. ("U.S. HomeCare-Connecticut"), a licensed and Medicare certified
home health care company in the state of Connecticut. The acquisition was
accounted for utilizing purchase accounting principles.
On November 1, 1999, the Company acquired, through wholly owned
subsidiaries in Connecticut, certain assets of Optimum Care Services of
Connecticut, Inc., Optimum Home Health of Connecticut, Inc. and Optimum Home
Care of Connecticut, Inc. (the "Optimum Entities"). The assets were acquired
from a court-appointed Chapter 7 Trustee. The final purchase price was
determined through an auction process conducted at the United States Bankruptcy
Court for the District of Massachusetts. The Company is operating the acquired
assets under New England and Connecticut Staffing. The Optimum Entities had been
engaged in the business of providing home health care and staffing related
services in Connecticut. The acquisition was accounted for utilizing purchase
accounting principles.
-13-
<PAGE>
On October 30, 1998, the Company acquired all the outstanding common
shares of Accredited. Accredited is a licensed home health care company that
provides home health care services in Bergen, Hudson, Passaic, Essex, Morris,
Union, Somerset and Middlesex Counties, New Jersey. The acquisition was
accounted for utilizing purchase accounting principles.
On August 10, 1998, the Company acquired, through Allen Health Care,
its wholly-owned subsidiary, certain assets of Bryan Employment Agency, Inc.,
d/b/a Bryan Home Care Services ("Bryan Home Care"), a New York licensed home
health care company which provides home care services in Westchester County, New
York. The acquisition was accounted for utilizing purchase accounting
principles.
SunStar has been a publicly traded corporation since May of 1996.
SunStar, formerly a wholly-owned subsidiary of the Company, had comprised the
Company's Florida outpatient medical center operations. In May 1996, SunStar
completed its initial public offering following a complete change in management
and the adoption of a business plan by new management for the establishment of a
health maintenance organization. As a result, SunStar was no longer consolidated
with the Company for accounting purposes. The Company has utilized the equity
method of accounting for its investment in SunStar. In February 2000, SunStar's
sole operating subsidiary effectively discontinued operations. As of July 31,
2000, the Company's ownership percentage of SunStar was 21.6% and Company's
value of its investment in SunStar is $0.
RESULTS OF OPERATIONS
---------------------
<TABLE>
<CAPTION>
FISCAL YEAR ENDED JULY 31,
------------------------------------------------------
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
Net patient revenue 100.0% 100.0% 100.0%
Cost of revenue 64.2 65.8 64.5
General and administrative 25.8 26.4 25.9
Bad debt expense 1.0 --- ---
Amortization of intangibles 1.2 1.4 1.1
----- ----- -----
Total operating expenses 92.2 93.6 91.5
Income from operations 7.8 6.4 8.5
Gain resulting from sale of stock of equity investee
2.9 --- ---
Interest income 0.4 1.0 1.6
(Loss) from equity investee --- (1.8) (4.8)
Gain resulting from equity investee's stock offering --- --- ---
----- ----- -----
Income before income taxes 11.1 5.6 6.3
Provision for income taxes 3.7 2.6 2.8
-------- -------- -----
Net income 7.4% 3.0% 3.5%
=== === ===
</TABLE>
-14-
<PAGE>
YEAR ENDED JULY 31, 2000 COMPARED TO YEAR ENDED JULY 31, 1999
For the fiscal year ended July 31, 2000 ("fiscal 2000"), net patient
revenue increased $17,056,000, or 44.3% to $55,574,000 from $38,518,000 for the
fiscal year ended July 31, 1999 ("fiscal 1999"). This increase is attributable
to $17,877,000 of net patient revenue realized from the expansion of the
Company's operations in Connecticut through the opportunity represented by the
liquidation of the Optimum Entities, the acquisition on November 1, 1999 of
certain assets of the Optimum Entities from the bankruptcy trustee and the
successful penetration of the available market share, offset by the decline in
same source net patient revenue of ($821,000). As a result of such expansion,
net patient revenue from New England increased $14,109,000, or 145.7% to
$23,794,000 for fiscal 2000 from $9,685,000 for fiscal 1999. To a lesser degree,
net patient revenue generated from New England also benefited from the
acquisition on April 14, 2000 of certain assets of U.S. HomeCare-Connecticut.
Also as a result of such expansion, net patient revenue from Connecticut
Staffing, the Company's new subsidiary that provides supplemental staffing in
the state of Connecticut generated net patient revenue of $3,768,000 for fiscal
2000 as compared to $0 for fiscal 1999. During fiscal 2000, net patient revenue
from Allen Health Care decreased ($1,282,000), or (5.1%), to $23,627,000 from
$24,909,000 for fiscal 1999. This decrease is attributable to a decline in hours
and, in some cases, a decrease in reimbursement rates from the Medicare
certified home health care agencies with whom Allen Health Care contracts, as a
result of the implementation of IPS. Net patient revenue from Accredited for
fiscal 2000 was $4,385,000 as compared to $3,924,000 for fiscal 1999. This
increase is attributable to twelve months of revenue in fiscal 2000 as compared
to nine months of revenue in fiscal 1999.
Gross profit margin increased to 35.8% for fiscal 2000 from 34.2% for
fiscal 1999. This increase is attributable to the higher reimbursement rates
realized in the expansion into the market previously served by the Optimum
Entities and U.S. HomeCare-Connecticut.
General and administrative expenses increased $4,137,000, or 40.6%, to
$14,320,000 in fiscal 2000 from $10,183,000 in fiscal 1999. This increase is
attributable to the additional general and administrative expenses incurred in
connection with the expansion into the market previously served by the Optimum
Entities and U.S. HomeCare-Connecticut. As a percentage of net patient revenue,
general and administrative expenses decreased to 25.8% in fiscal 2000 from 26.4%
in fiscal 1999.
The Company recorded a provision of $595,000 in bad debt expense in
fiscal 2000 as compared to $0 in fiscal 1999. As the Company does not have
experience with many of the new payor sources with which it now contracts as a
result of the expansion into the new markets in Connecticut, the Company has
established a reserve against its accounts receivable. In addition, the Company
has experienced increases in accounts receivable balances with certain of the
Medicare certified agencies with whom it contracts. Accordingly, the Company is
reserving against accounts receivable in the event that some of these accounts
will have to be written off. The Company is closely monitoring the credit terms
being extended to these agencies.
Amortization of intangibles increased $110,000, or 20% to $660,000 in
fiscal 2000 from $550,000 in fiscal 1999. This increase is attributable to the
amortization of goodwill and intangibles associated with the acquisition of
certain assets of the Optimum Entities and U.S. HomeCare-Connecticut during
fiscal 2000.
-15-
<PAGE>
As a result of the foregoing, income from operations increased
$1,899,000, or 78.2% to $4,327,000 in fiscal 2000 from $2,428,000 in fiscal
1999.
Interest income decreased ($165,000), or (42.9%), to $220,000 in fiscal
2000 from $385,000 in fiscal 1999. This decrease is attributable to cash used in
investing activities resulting from the acquisition of certain assets of the
Optimum Entities and U.S. HomeCare-Connecticut.
During fiscal 2000, the Company recorded a gain resulting from the sale
of stock of equity investee of $1,602,000 resulting from the sale of 259,510
shares of SunStar. During fiscal 1999, the Company recorded a loss from equity
investee of ($674,000), representing the Company's share of the net loss
reported by SunStar for the same period.
The Company's effective tax rate decreased to 33.5% in fiscal 2000 as
compared to 46.8% in fiscal 1999. This decrease is attributable to both a lower
effective tax rate on the gain resulting from the sale of stock of equity
investee in fiscal 2000 and to no income tax benefit recorded in fiscal 1999
related to the loss from equity investee. Excluding the gain resulting from the
sale of stock of an equity investee and the loss from equity investee, the
effective tax rate increased to 41.3% in fiscal 2000 from 35.6% in fiscal 1999.
This increase is the result of a benefit recorded in fiscal 1999 for an
overaccrual of taxes in fiscal 1998.
Net income increased $2,953,000, or 259%, to $4,091,000, or $.81 per
share in fiscal 2000 from $1,138,000, or $.22 per share in fiscal 1999.
YEAR ENDED JULY 31, 1999 COMPARED TO YEAR ENDED JULY 31, 1998
For fiscal 1999, net patient revenue increased $4,205,000, or 12%, to
$38,518,000 from $34,313,000 for the fiscal year ended July 31, 1998 ("fiscal
1998"). During fiscal 1999, net patient revenue from Allen Health Care increased
$2,310,000, or 10.2%, to $24,909,000 from $22,599,000 for fiscal 1998. This
increase is attributable to the revenue generated from the purchase in August
1998 of Bryan Home Care of $5,737,000, offset by the decline in same source
revenue of ($3,427,000). The decline in same source revenue is attributable to
the continued decline in hours, and in some cases, a decrease in reimbursement
rates from the Medicare certified care agencies with whom Allen Health Care
contracts, as a result of the implementation of IPS. Net patient revenue from
New England decreased over the periods ($2,029,000), or (17.3%), to $9,685,000
from $11,714,000. This decrease is attributable to the decline in Medicare
revenue of ($1,605,000) and a decline in non-Medicare revenue of ($424,000). The
decrease in both Medicare and non-Medicare revenue is the result of the change
in Medicare reimbursement from cost reimbursement to IPS. Net patient revenue
from Accredited for fiscal 1999 was $3,924,000.
Gross profit margin decreased to 34.2% for fiscal 1999 from 35.5% for
fiscal 1998. This decrease is attributable to the decreases in certain
reimbursement rates from other existing Medicare certified home health care
agencies that the Company contracts with, as a result of the change in the
Medicare reimbursement system.
General and administrative expenses increased $1,297,000, or 14.6%, to
$10,183,000 in fiscal 1999 from $8,886,000 in fiscal 1998. This increase is
attributable to the additional general and administrative expenses of the three
branch offices which the Company acquired in the acquisitions of both Bryan Home
Care and Accredited, offset by the decline in general and
-16-
<PAGE>
administrative expenses of New England, as a result of the combining of
operations in Connecticut to offset the implementation of IPS. As a percentage
of net patient revenue, general and administrative expenses increased slightly
to 26.4% in fiscal 1999 from 25.9% in fiscal 1998.
Amortization of intangibles increased $177,000, or 47.5%, to $550,000
in fiscal 1999 from $373,000 in fiscal 1998. This increase is attributable to
the amortization of goodwill and intangibles associated with the acquisition of
Bryan Home Care and Accredited in fiscal 1999.
As a result of the foregoing, income from operations decreased
($491,000), or (16.8%), to $2,428,000 in fiscal 1999 from $2,919,000 in fiscal
1998.
Interest income decreased ($162,000), or (29.6%), to $385,000 in fiscal
1999 from $547,000 in fiscal 1998. This decrease is attributable to lower
outstanding cash balances resulting from cash used to acquire certain assets of
Bryan Home Care and the stock of Accredited.
The Company recorded a loss from equity investee of ($674,000) in
fiscal 1999 as compared to a loss of ($1,603,000) in fiscal 1998. In addition,
in fiscal 1998, as a result of a private placement of common stock by SunStar,
the Company adjusted the carrying value of its investment in SunStar which
resulted in a gain of $331,000. As of July 31, 1999, the Company's carrying
value of its investment in SunStar was $0.
The Company's effective tax rate increased to 46.8% in fiscal 1999 as
compared to 44.4 in fiscal 1998. This increase is attributable to no income tax
benefit recorded in fiscal 1999, as compared to ($306,000) recorded in fiscal
1998 related to the Company's share of SunStar's net loss. Excluding the tax
effect of loss from equity investee and gain resulting from equity investee's
stock offering, the effective tax rate decreased slightly to 35.6% as compared
to 36.6% in fiscal 1998.
Net income decreased ($65,000), or (6.7%), to $1,138,000, or $.22 per
diluted share, in fiscal 1999 from $1,203,000, or $.23 per diluted share, in
fiscal 1998.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Current assets increased to $21,682,000 and current liabilities
increased to $2,370,000, respectively, at July 31, 2000. This resulted in an
increase in working capital of $1,604,000 from $17,708,000 at July 31, 1999 to
$19,312,000 at July 31, 2000. Cash and cash equivalents decreased ($2,586,000)
to $4,856,000 at July 31, 2000 from $7,442,000 at July 31, 1999 and accounts
receivable increased $5,256,000 to $15,715,000 at July 31, 2000 from $10,459,000
at July 31, 1999. The decrease in cash and increase in accounts receivable is
primarily attributable to the acquisitions made by the Company of certain assets
of the Optimum Entities and U.S. HomeCare-Connecticut for an aggregate purchase
price of $4,800,000 in cash, offset by the proceeds from the sale of stock of
equity investee in the amount of $1,602,000.
On August 25, 2000, the Company acquired certain assets of Health Force
Owned Ltd., a New Jersey licensed home health care agency located in Hackensack,
New Jersey for approximately $1,822,000 in cash, including acquisition costs of
$42,000.
-17-
<PAGE>
Net cash provided by operating activities was $1,305,000 in fiscal 2000
as compared with $835,000 in fiscal 1999. The increase in operating cash flow of
$470,000, or 56.3%, is attributable to an increase in cash flow from operations
of $1,075,000, offset by the net changes in current assets and liabilities of
($605,000).
Investing activities in fiscal 2000 used cash of ($3,273,000) as
compared to cash used of ($3,558,000) in fiscal 1999. The cash used in investing
activities for fiscal 2000 consisted of the acquisitions made by the Company and
the purchase of equipment, offset by the proceeds of sale of stock of equity
investee, proceeds of investments and sale of assets. The cash used in investing
activities in fiscal 1999 consisted of the acquisitions made by the Company and
the purchase of equipment, offset by the proceeds of investments and sale of
assets.
Financing activities in fiscal 2000 used cash of ($618,000) as compared
to ($827,000) in fiscal 1999. The cash used in financing activities in fiscal
2000 reflects the purchase of treasury shares of ($618,000) pursuant to the
Company's stock repurchase plan. The purchase of treasury shares of ($406,000)
and the repayment of notes payable of ($421,000) to the former officers of
Accredited resulted in the cash used in financing activities in fiscal 1999.
The nature of the Company's business requires weekly payments to health
care personnel at the time services are rendered. The Company typically receives
payment for these services on a basis of 90 to 120 days with respect to
contracted and insurance business and 15 to 45 days with respect to certain
governmental payors, such as Medicare and Medicaid programs. Accounts receivable
turnover was 89 days in fiscal 2000 and 92 days in fiscal 1999.
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 advised line of
credit. The maximum amount that can be borrowed under the secured advised line
of credit may not exceed the lesser of eligible accounts receivable or
$2,000,000. Both credit facilities bear interest at the alternate base
commercial lending rate of the bank and expire January 31, 2001. At July 31,
2000, there was no outstanding balance under either line of credit. The Company
is currently considering increasing its credit facilities to finance operations,
including continuing to make acquisitions in the home health care field.
The Company intends to meet its short term and long term liquidity
needs with its current cash balances, cash flow from operations and existing and
future lines of credit.
In October 2000, the Board of Directors extended for one year its
program to repurchase its Common Stock. Purchases in the aggregate amount of up
to $1,000,000 in purchase price during the one-year extension would be made from
time to time in the open market and through privately negotiated transactions,
subject to general market and other conditions. The buyback program will be
financed out of existing cash or cash equivalents.
Other than set forth herein, the Company has no material commitments
for capital expenditures.
In the opinion of management, there will be no material impact on the
financial statements of the Company from any recently issued accounting
standards.
-18-
<PAGE>
INFLATION AND SEASONALITY
The rate of inflation had no material effect on operations for fiscal
2000. The effects of inflation on personnel costs in the future could have an
adverse effect on operations, as the Company may not be able to increase its
charges for services rendered. The Company's business is not seasonal.
YEAR 2000 COMPLIANCE
The Year 2000 issue is the result of date-sensitive devices, systems
and computer programs that were deployed using two digits rather than four to
define the applicable year. Any such technologies may recognize a year
containing "00" as the year 1900 rather than the year 2000. This could result in
a system failure or miscalculation causing disruption of operations including,
among other things, a temporary inability to process transactions or engage in
similar normal business activities.
The Company did not experience any significant malfunctions or errors
in its information or business systems when the date changed from 1999 to 2000.
Based on its operations since January 1, 2000, the Company does not expect any
significant problems related to the Year 2000 issue. However, it is possible
that the full impact of the date change has not been fully recognized. For
example, it is possible that Year 2000 or similar issues, such as leap-year
related problems, may occur with financial closings. The Company believes that
any such problems will be minor and easily corrected. In addition, the Company
could still be negatively impacted if the Year 2000 or similar issues adversely
affect its customers or suppliers. Currently, the Company is not aware of any
significant Year 2000 or similar problems that have arisen with its customers or
suppliers.
DISCLOSURE REGARDING PRIVATE LITIGATION REFORM ACT OF 1995
Except for historical information contained in this report on Form
10-K, certain matters set forth herein are forward-looking statements that are
dependent on certain risks and uncertainties, including such factors, among
others, as market acceptance, market demand pricing, changing regulatory
environment (including in particular the impact of recent prospective payment
Medicare regulations), changing economic conditions, risks in new product and
service development, the effect of the Companies accounting policies, risks in
connection with acquisitions, ability to attract and retain qualified personnel
in a strong labor market and other risks detailed in the Company's filings with
the Securities and Exchange Commission.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
None.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial information required by this item is set forth in the
Consolidated Financial Statements on pages F-1 through F-23.
-19-
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE.
There were no changes in, or disagreements with, the Company's
accountants during fiscal 2000.
-20-
<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 2000 Annual
Meeting of Stockholders to be held on December 7, 2000, and is incorporated
herein by reference. The Company intends to file such Proxy Statement with the
Securities and Exchange Commission not later than November 28, 2000.
-21-
<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 Schedule (see index to the
consolidated financial statements).
-22-
<PAGE>
NATIONAL HOME HEALTH CARE CORP.
-------------------------------
AND SUBSIDIARIES
----------------
REPORT ON AUDITS OF CONSOLIDATED
--------------------------------
FINANCIAL STATEMENTS
--------------------
THREE YEARS ENDED JULY 31, 2000
-------------------------------
<PAGE>
NATIONAL HOME HEALTH CARE CORP. AND SUBSIDIARIES
------------------------------------------------
REPORT ON AUDITS OF CONSOLIDATED FINANCIAL STATEMENTS
-----------------------------------------------------
THREE YEARS ENDED JULY 31, 2000
-------------------------------
CONTENTS
--------
<TABLE>
<CAPTION>
Page
CONSOLIDATED FINANCIAL STATEMENTS:
<S> <C>
Report of Holtz Rubenstein & Co., LLP, Independent
Certified Public Accountants F-2
Report of Richard A. Eisner & Company, LLP, Independent
Certified Public Accountants F-3
Balance sheets F-4
Statements of earnings F-5
Statements of changes in stockholders' equity F-6
Statements of cash flows F-7
Notes to financial statements F-8 - F-20
FINANCIAL STATEMENT SCHEDULE:
Independent Auditors' Report on Schedule,
Holtz Rubenstein & Co., LLP F-21
Independent Auditors' Report on Schedule,
Richard A. Eisner & Company, LLP F-22
Schedule II - Valuation and qualifying accounts F-23
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
----------------------------
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 of July 31, 2000 and 1999 and the related
consolidated statements of earnings, changes in stockholders' equity and cash
flows for the years then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits. We did
not audit the financial statements of SunStar Healthcare, Inc., a corporation in
which the Company had a 30.5% equity interest, which statements reflect a net
loss of ($1,631,000) for the period ended December 31, 1998. Those statements
were audited by other auditors whose report has been furnished to us; insofar as
our opinion on the 1999 consolidated financial statements relates to data
included for SunStar Healthcare, Inc. it is based solely on their report.
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 and the report of other auditors provide a reasonable
basis for our opinion.
In our opinion, based upon our audits and the report of other auditors, with
respect to SunStar Healthcare as described above, the consolidated financial
statements referred to above present fairly, in all material respects, the
consolidated financial position of National Home Health Care Corp. and
Subsidiaries as of July 31, 2000 and 1999, and the consolidated results of their
operations and their consolidated cash flows for the years then ended, in
conformity with generally accepted accounting principles.
/s/ Holtz Rubenstein & Co., LLP
-------------------------------
Holtz Rubenstein & Co., LLP
Melville, New York
October 3, 2000
F-2
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
National Home Health Care Corp.
Scarsdale, New York
We have audited the accompanying consolidated statements of earnings, changes in
stockholders' equity and cash flows of National Home Health Care Corp. and
subsidiaries for the year ended July 31, 1998. 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 audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements enumerated above present fairly, in all
material respects, the consolidated results of operations and cash flows of
National Home Health Care Corp. and subsidiaries for the year ended July 31,
1998, in conformity with generally accepted accounting principles.
/s/ Richard A. Eisner & Company, LLP
------------------------------------
Richard A. Eisner & Company, LLP
New York, New York
October 7, 1998
F-3
<PAGE>
NATIONAL HOME HEALTH CARE CORP. AND SUBSIDIARIES
------------------------------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
<TABLE>
<CAPTION>
July 31,
------------------------------------
ASSETS 2000 1999
------ -------------- --------------
CURRENT ASSETS:
<S> <C>
Cash (including cash equivalents of $2,852,000
and $6,664,000, respectively) $ 4,856,000 $ 7,442,000
Investments - available for sale 18,000 178,000
Accounts receivable, less allowance for doubtful
accounts of $673,000 and $392,000, respectively 15,715,000 10,459,000
Income taxes receivable - 110,000
Prepaid expenses and other assets 589,000 181,000
Deferred taxes 504,000 417,000
-------------- --------------
Total current assets 21,682,000 18,787,000
Furniture, equipment and leasehold improvements, net 760,000 543,000
Excess of cost over fair value of net assets acquired, net 6,945,000 5,334,000
Other intangible assets 1,257,000 1,239,000
Deposits and other assets 212,000 189,000
-------------- --------------
$ 30,856,000 $ 26,092,000
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 2,203,000 $ 1,079,000
Income taxes payable 167,000 -
-------------- --------------
Total current liabilities 2,370,000 1,079,000
-------------- --------------
COMMITMENTS, CONTINGENCIES
AND OTHER MATTERS
STOCKHOLDERS' EQUITY:
Common stock, $.001 par value, authorized
20,000,000 shares, issued 6,228,746 shares 6,000 6,000
Additional paid-in capital 18,525,000 18,525,000
Retained earnings 12,274,000 8,183,000
-------------- --------------
30,805,000 26,714,000
Less treasury stock (1,276,778 and 1,124,936 shares) - at cost 2,319,000 1,701,000
-------------- --------------
Total stockholders' equity 28,486,000 25,013,000
-------------- --------------
$ 30,856,000 $ 26,092,000
============== ==============
</TABLE>
See notes to consolidated financial statements
F-4
<PAGE>
NATIONAL HOME HEALTH CARE CORP. AND SUBSIDIARIES
------------------------------------------------
CONSOLIDATED STATEMENTS OF EARNINGS
-----------------------------------
<TABLE>
<CAPTION>
Years Ended
July 31,
----------------------------------------------------------
2000 1999 1998
--------------- -------------- --------------
<S> <C> <C> <C>
NET PATIENT REVENUE $ 55,574,000 $ 38,518,000 $ 34,313,000
--------------- -------------- --------------
OPERATING EXPENSES:
Cost of revenue 35,672,000 25,357,000 22,135,000
General and administrative 14,320,000 10,183,000 8,886,000
Bad debt expense 595,000 - -
Amortization of intangibles 660,000 550,000 373,000
--------------- -------------- --------------
51,247,000 36,090,000 31,394,000
--------------- -------------- --------------
INCOME FROM OPERATIONS 4,327,000 2,428,000 2,919,000
OTHER INCOME (LOSS):
Gain resulting from sale of
stock of equity investee 1,602,000 - -
Interest income 220,000 385,000 547,000
Loss from equity investee - (674,000) (1,630,000)
Gain resulting from equity investee's
stock offering - - 331,000
--------------- -------------- --------------
1,822,000 (289,000) (752,000)
--------------- -------------- --------------
INCOME BEFORE INCOME TAXES 6,149,000 2,139,000 2,167,000
PROVISION FOR INCOME TAXES 2,058,000 1,001,000 964,000
--------------- -------------- --------------
NET INCOME $ 4,091,000 $ 1,138,000 $ 1,203,000
=============== ============== ==============
NET INCOME PER COMMON SHARE:
Basic $.81 $.22 $.23
==== ==== ====
Diluted $.81 $.22 $.23
==== ==== ====
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING:
Basic 5,028,232 5,160,470 5,231,248
========= ========= =========
Diluted 5,041,362 5,215,487 5,307,158
========= ========= =========
</TABLE>
See notes to consolidated financial statements
F-5
<PAGE>
NATIONAL HOME HEALTH CARE CORP. AND SUBSIDIARIES
------------------------------------------------
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
----------------------------------------------------------
<TABLE>
<CAPTION>
Treasury Stock
Common Stock --------------
------------ Additional
Number of Paid-in Retained
Shares Amount Capital Earnings
------ ------ ------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance, July 31, 1997 6,208,646 $ 6,000 $ 18,476,000 $ 5,842,000
Net income - - - 1,203,000
Acquisition of treasury shares, $4.65 per share - - - -
Exercise of common stock options 20,100 - 49,000 -
---------- --------- --------------- -------------
Balance, July 31, 1998 6,228,746 6,000 18,525,000 7,045,000
Net income - - - 1,138,000
Acquisition of treasury shares, $4.23 per share - - - -
---------- --------- --------------- -------------
Balance, July 31, 1999 6,228,746 6,000 18,525,000 8,183,000
Net income - - - 4,091,000
-
Acquisition of treasury shares, $4.07 per share - - - -
---------- --------- --------------- -------------
Balance, July 31, 2000 6,228,746, $ 6,000 $ 18,525,000 $ 12,274,000
========== ========= =============== =============
</TABLE>
<TABLE>
<CAPTION>
Treasury Stock
--------------
Number of
Shares Cost
------ ----
<S> <C> <C>
Balance, July 31, 1997 957,500 (964,000)
Net income - -
Acquisition of treasury shares, $4.65 per share 71,379 (331,000)
Exercise of common stock options - -
------------ ---
Balance, July 31, 1998 1,028,879 (1,295,000)
Net income - -
Acquisition of treasury shares, $4.23 per share 96,057 (406,000)
------------ --------
Balance, July 31, 1999 1,124,936 (1,701,000)
Net income -
-
Acquisition of treasury shares, $4.07 per share 151,842 (618,000)
------------ --------
Balance, July 31, 2000 1,276,778 (2,319,000)
============ ==========
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE>
NATIONAL HOME HEALTH CARE CORP. AND SUBSIDIARIES
------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
<TABLE>
<CAPTION>
Years Ended
July 31,
-------------------------------------------------
2000 1999 1998
-------------- ------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net income $ 4,091,000 $ 1,138,000 $ 1,203,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 881,000 682,000 479,000
Gain resulting from sale of equity investee stock (1,602,000) - -
Provision for doubtful accounts net of write-offs 281,000 - 32,000
Deferred tax (87,000) - (375,000)
Gain on equity investee's stock offering - - (331,000)
Loss from equity investee - 674,000 1,630,000
(Gain) loss on sale of assets 2,000 (3,000) -
Changes in operating assets and liabilities:
(Increase) decrease in assets:
Accounts receivable (3,231,000) (1,400,000) (125,000)
Prepaid expenses and other current assets (431,000) 7,000 (48,000)
Increase (decrease) in liabilities:
Accounts payable, accrued expenses
and other liabilities 1,124,000 (62,000) (318,000)
Income taxes receivable (payable) 277,000 8,000 (145,000)
Estimated third-party payor settlements - (209,000) (14,000)
-------------- ------------- -------------
Net cash provided by operating activities 1,305,000 835,000 2,016,000
-------------- ------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of furniture, equipment
and leasehold improvements (257,000) (195,000) (123,000)
Proceeds from sale of assets 23,000 6,000 -
Proceeds of investments 160,000 310,000 20,000
Purchase of assets of businesses (4,801,000) (1,943,000) -
Purchase of Accredited Health Services, Inc.,
net of cash acquired - (1,736,000) -
Proceeds from sale of equity investee stock 1,602,000 - 37,000
-------------- ------------- -------------
Net cash used in investing activities (3,273,000) (3,558,000) (66,000)
-------------- ------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchase of treasury shares (618,000) (406,000) (331,000)
Proceeds from exercise of stock options - - 49,000
Repayment of notes payable - (421,000) -
-------------- ------------- -------------
Net cash used in financing activities (618,000) (827,000) (282,000)
-------------- ------------- -------------
Net (decrease) increase in cash and cash equivalents (2,586,000) (3,550,000) 1,668,000
Cash and cash equivalents, beginning of year 7,442,000 10,992,000 9,324,000
-------------- ------------- -------------
Cash and cash equivalents, end of year $ 4,856,000 $ 7,442,000 $ 10,992,000
============== ============ =============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ 16,000 $ 4,000 $ 2,000
============== ============= =============
Income taxes $ 1,870,000 $ 1,100,000 $ 1,512,000
============== ============= =============
</TABLE>
Supplemental disclosure of noncash investing and financing activities (see Note
6).
See notes to consolidated financial statements
F-7
<PAGE>
NATIONAL HOME HEALTH CARE CORP. AND SUBSIDIARIES
------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
THREE YEARS ENDED JULY 31, 2000
-------------------------------
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
---------------------------------------------------------------------
a. Nature of business
------------------
National Home Health Care Corp. and Subsidiaries (the
"Company") is a provider of home health care services, including nursing care,
personal care and other specialized therapies. Due to the similarities in
services, management considers their operations to be one reportable segment.
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 and allowance for doubtful accounts
-------------------------------------------------------
Net patient service revenues is reported at estimated net
realizable amounts from patients, third-party payors, and others for services
rendered and includes estimated retroactive revenue adjustments due to future
audits, reviews, and investigations. Retroactive adjustments are considered in
the recognition of revenue on an estimated basis in the period the related
services are rendered, and such amounts are adjusted in future periods as
adjustments become known or as years are no longer subject to such audits,
reviews and investigations. A provision for doubtful accounts is made for
revenue estimated to be uncollectible and is adjusted based upon management's
evaluation of current industry conditions, historical collection experience and
other relevant factors which, in the opinion of management, deserve recognition
in estimating the allowance for doubtful accounts.
Under Medicaid, Medicare and other cost-based reimbursement
programs, the Company is reimbursed for services rendered to covered program
patients as determined by reimbursement formulas. Laws and regulations governing
these programs are extremely complex and subject to interpretation. As a result,
there is at least a reasonable possibility that recorded estimates will change
by a material amount in the near term
Approximately 36%, 34% and 40% of net patient revenue for the
fiscal years ended July 31, 2000, 1999 and 1998, respectively, were derived
under federal and state third-party reimbursement programs
In December 1999, the Securities and Exchange Commission
("SEC") issued Staff Accounting Bulletin No. 101, "Revenue Recognition in
Financial Statements" ("SAB 101"). SAB 101 summarizes certain of the SEC's views
in applying generally accepted accounting principles to revenue recognition in
financial statements. SAB 101 is not a rule or
F-8
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (Cont'd)
--------------------------------------------------------------------
</TABLE>
interpretation of the SEC; however, it represents interpretations and practices
followed by the Division of Corporation Finance and the Office of the Chief
Accountants in administering the disclosure requirements of the Federal
securities laws. The Company does not believe that the interpretations outlined
in SAB 101 will have an impact on the Company's revenue recognition policies.
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 acquired
--------------------------------------------------------
The excess of cost over the fair value of net assets acquired
(goodwill) is being amortized principally over a period of 20 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.
g. Net income per share
--------------------
The basic calculation is determined by dividing net income
attributable to common shares outstanding (the basic numerator) by the weighted
average number of common shares outstanding (the basic denominator) during the
period.
The diluted calculation is determined by adjusting the basic
numerator for any changes in income or loss that would result from the assumed
exercise of potentially issued common shares. Additionally, the basic
denominator is increased to include the additional number of common shares that
would be outstanding if the potentially issued common shares had been issued, if
dilutive. Potentially issued common shares, consisting of options, are not
included in this calculation where the effect of the inclusion would be
antidilutive. The treasury stock method is used to reflect the dilutive effect
of outstanding options and warrants.
The reconciliation for the years ended July 31, 2000, 1999 and
1998 are as follows:
F-9
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (Cont'd)
--------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Years Ended July 31,
-----------------------------------------------------------------------------
2000 1999 1998
----------------------- ------------------------- ------------------------
Income Shares Income Shares Income Shares
---------- ---------- ------------ ----------- ----------- -----------
Basic EPS:
<S> <C> <C> <C> <C> <C> <C>
Net income $4,091,000 5,028,232 $ 1,138,000 5,160,470 $1,203,000 5,231,248
Effect of dilutive
securities -
common
stock options - 13,130 - 55,017 - 75,910
---------- ---------- ----------- ----------- ----------- -----------
Diluted EPS $4,091,000 5,041,362 $1,138,000 5,215,487 $1,203,000 5,307,158
========== ========= ========== ========= ========== =========
</TABLE>
h. Investments
-----------
The Company's investments are accounted for in accordance with
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.
Investment securities available for sale at July 31, 2000 and
1999 are summarized as follows:
<TABLE>
<CAPTION>
Amortized Cost (1)
--------------------------------
2000 1999
---------- -----------
<S> <C> <C>
Floating rate debentures issued by New York State,
maturing in one to five years $ - $ 145,000
Floating rate debentures issued by New York State,
maturing in five to ten years - 15,000
Other 18,000 18,000
---------- -----------
$ 18,000 $ 178,000
========== ===========
</TABLE>
(1) Amortized cost approximates market value. Accordingly,
there is no unrealized holding gain or loss.
i. Fair value of financial instruments
-----------------------------------
The carrying amount reported in the consolidated balance
sheets for cash, accounts receivable, accounts payable and accrued liabilities
approximates fair value because of the immediate or short-term maturity of the
financial instruments.
j. Accounting for stock options
----------------------------
The Company accounts for employee stock-based compensation in
accordance with Accounting Principles Board Opinion No. 25 ("APB Opinion 25"),
"Accounting for Stock Issued to Employees" using intrinsic values with
appropriate disclosure in conformity with the fair values based method of SFAS
123.
F-10
<PAGE>
k. Recently issued accounting pronouncements
-----------------------------------------
In 1998, the Financial Accounting Standards Board issued SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities," which
was subsequently amended by SFAS No. 137 "Accounting for Derivative Financial
Instruments and Hedging Activities - Deferral of the Effective Date of SFAS No.
133" and SFAS No. 138 "Accounting for Certain Derivative Instruments and Certain
Hedging Activities." SFAS No. 133 establishes accounting and reporting standards
requiring that every derivative instrument, including certain derivative
instruments embedded in other contracts, be recorded in the balance sheet as
either an asset or liability measured at its fair value. The statement also
requires that changes in the derivative's fair value be recognized in earnings
unless specific hedge accounting criteria are met. SFAS No. 133, as amended by
SFAS No. 137 and SFAS No. 138, is effective for fiscal year 2001. The adoption
of SFAS No. 133 is not expected to have a material impact on the Company's
financial condition or results of operations.
l. Use of estimates
----------------
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates. Such estimates relate primarily to amortization of goodwill and
intangibles, third-party payor settlements and valuation reserves for accounts
receivable and deferred tax assets.
m. Workers' compensation
---------------------
The Company self-insures up to specified limits certain risks
related to workers' compensation liability. The estimated costs of existing and
expected future claims under the insurance program are accrued based upon
historical loss development trends and may be subsequently revised based on
developments relating to such claims.
2. FURNITURE, EQUIPMENT AND LEASEHOLD IMPROVEMENTS:
------------------------------------------------
Furniture, equipment and leasehold improvements are stated at cost and
are summarized as follows:
<TABLE>
<CAPTION>
July 31,
-----------------------------------
2000 1999
------------- -------------
<S> <C> <C>
Furniture and equipment $ 1,539,000 $ 1,104,000
Leasehold improvements 212,000 212,000
------------- -------------
1,751,000 1,316,000
Less accumulated depreciation and amortization 991,000 773,000
------------- -------------
$ 760,000 $ 543,000
============= =============
</TABLE>
F-11
<PAGE>
3. EXCESS OF COST OVER FAIR VALUE:
-------------------------------
Changes in the excess of cost over fair value of net assets acquired
during the two years ended July 31, 2000 are as follows:
<TABLE>
<CAPTION>
Years Ended
July 31,
-----------------------------------
2000 1999
------------- -------------
<S> <C> <C>
Balance, beginning of year $ 5,334,000 $ 3,179,000
Consideration for acquisition 1,978,000 2,429,000
Amortization (367,000) (274,000)
------------- -------------
Balance, end of year $ 6,945,000 $ 5,334,000
============= =============
</TABLE>
4. OTHER INTANGIBLE ASSETS:
------------------------
<TABLE>
<CAPTION>
Other intangible assets are as follows:
July 31,
-----------------------------------
2000 1999
------------- -------------
<S> <C> <C>
Covenants not to compete $ 975,000 $ 975,000
Personnel files 1,119,000 963,000
Patient files 792,000 637,000
------------- -------------
2,886,000 2,575,000
Less accumulated amortization 1,629,000 1,336,000
------------- -------------
Balance, end of year $ 1,257,000 $ 1,239,000
============= =============
</TABLE>
Other intangible assets are being amortized using the straight-line
method over a period of three to ten years.
5. ACCOUNTS PAYABLE AND ACCRUED EXPENSES:
--------------------------------------
<TABLE>
<CAPTION>
Accounts payable and accrued expenses are as follows:
July 31,
-----------------------------------
2000 1999
------------- -------------
<S> <C> <C>
Trade accounts payable $ 276,000 $ 213,000
Accrued employee compensation and benefits 1,826,000 826,000
Other 101,000 40,000
------------- -------------
$ 2,203,000 $ 1,079,000
============= =============
</TABLE>
F-12
<PAGE>
6. SUBSIDIARY STOCK OFFERING:
--------------------------
During fiscal 1996, following an initial public offering and change in
management, the Company held a 37.6% investment in SunStar Healthcare, Inc.
("SunStar"), which was accounted for under the equity method of accounting.
In fiscal 1998, the Company's ownership percentage of SunStar was
reduced to 30.5% as a result of SunStar issuing additional shares of its common
stock pursuant to a private placement in which it received $1,318,000, net of
expenses. In connection therewith, the Company recorded a gain before tax of
$302,000 representing the net increase in book value of the Company's
investment. Also in fiscal 1998, the Company sold 10,000 shares of SunStar for
$37,000 and recorded a gain of $29,000.
During the fiscal year ended July 31, 2000, the Company sold 259,510
shares of SunStar for $1,602,000, resulting in a financial statement gain of
$1,602,000. The Company's carrying value in SunStar had been reduced to $0
during fiscal 1999. The Company's tax basis in SunStar was $1,072,000, resulting
in a tax gain of $530,000.
In February 2000, SunStar's sole operating subsidiary effectively
discontinued operations. As of July 31, 2000, the Company's ownership percentage
of SunStar was 21.6% and Company's value of its investment in SunStar is $0.
7. ACQUISITIONS:
-------------
Asset acquisitions
------------------
(a) On November 1, 1999, the Company acquired certain assets of Optimum
Care Services of Connecticut Inc., Optimum Home Health of Connecticut, Inc. and
Optimum Home Care of Connecticut, Inc. The assets were acquired from a
court-appointed Chapter 7 Trustee for a purchase price of $4,490,000 in cash,
including acquisition costs of $90,000. The final purchase price was determined
through an auction process conducted at the United States Bankruptcy Court for
the District of Massachusetts. The assets acquired included certain, but not
all, machinery, equipment, intangibles and accounts receivable and was allocated
as follows: $2,307,000 to accounts receivable, $205,000 to furniture and
equipment and $1,978,000 to excess of cost over fair value of net assets
acquired.
(b) On April 14, 2000, the Company acquired certain assets of
Connecticut operations of U.S. Home Care Corp. for $311,000 in cash, including
acquisition costs of $11,000. The assets purchased consisted of patient files of
$156,000 and employee files of $155,000.
F-13
<PAGE>
7. ACQUISITIONS: (Cont'd)
------------
Business acquisitions
---------------------
(a) On October 30, 1998, the Company acquired all of the outstanding
common shares of Accredited Health Services, Inc. ("Accredited"). Accredited is
a licensed home health care company that provides home health aide services in
various counties in New Jersey. The purchase of $1,946,000 was generated from
internal funds. The acquisition was accounted for as a purchase. The purchase
price was allocated as follows: $1,117,000 to total current assets, $58,000 to
furniture and equipment, $40,000 to other assets, $550,000 to total current
liabilities, $4,000 to other liabilities and $1,285,000 to goodwill.
(b) August 10, 1998, the Company acquired certain assets of Bryan
Employment Agency, Inc., d/b/a Bryan Home Care, for approximately $1,943,000,
including acquisition costs of $8,000. The assets purchased consisted of
personnel files of $285,000, patient files of $285,000, furniture and equipment
of $30,000, a covenant not to compete of $200,000 and goodwill of $1,143,000.
The above acquisitions have been accounted for utilizing purchase
accounting principles. Accordingly, the results of these operations have been
included in the accompanying consolidated financial statements since the dates
of acquisition.
The following unaudited pro forma consolidated results of operations
for the year ended July 31, 1999 assumes the business acquisitions occurred as
of August 1, 1998:
Revenues, net $ 39,849,000
Net income 1,181,000
Net income per share:
Basic $.23
====
Diluted $.23
====
8. INCOME TAXES:
-------------
The Company files a consolidated U.S. federal income tax return that
includes all 100% owned subsidiaries. State tax returns are filed on a combined
or separate basis depending on the applicable laws.
The provision (benefit) for income taxes is summarized as follows:
<TABLE>
<CAPTION>
Years Ended
July 31,
---------------------------------------------------------
2000 1999 1998
-------------- ------------- -------------
Current:
<S> <C> <C> <C>
Federal $ 1,504,000 $ 718,000 $ 920,000
State and local 641,000 283,000 419,000
-------------- ------------- -------------
2,145,000 1,001,000 1,339,000
Deferred (87,000) - (375,000)
-------------- ------------- -------------
$ 2,058,000 $ 1,001,000 $ 964,000
============== ============= =============
</TABLE>
F-14
<PAGE>
8. INCOME TAXES: (Cont'd)
------------
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 expense (benefit) are as follows:
<TABLE>
<CAPTION>
Years Ended
July 31,
---------------------------------------------------------
2000 1999 1998
-------------- ------------ ------------
<S> <C> <C> <C>
Loss from equity investee $ - $ - $ (316,000)
State tax net operating
loss carryforwards - - (59,000)
Accrued liability and reserves (87,000) - -
-------------- ------------ ------------
$ (87,000) $ - $ (375,000)
============== ============ ============
The deferred tax assets and liabilities are as follows:
July 31,
---------------------------------------------------------
2000 1999
--------------------------- --------------------------
Assets Liabilities Assets Liabilities
Accrued liability and reserves $ 294,000 $ - $ 353,000 $ -
Amortization of intangible assets 210,000 - - -
Equity investment in subsidiary - - 365,000 -
State net operating loss carryforwards 46,000 - 64,000 -
------------ ----------- ------------ -----------
550,000 - 782,000 -
Valuation allowance (46,000) - (365,000) -
------------ ----------- ------------ -----------
$ 504,000 $ - $ 417,000 $ -
============ =========== ============ ===========
One subsidiary of the Company has incurred losses which can be used to
offset state taxable income through 2019. At July 31, 2000, the total net
operating loss carryforward as applicable to New Jersey is approximately
$770,000.
The reconciliation of the statutory tax rate to the effective tax rate
for the three years ended July 31, 2000 is as follows:
2000 1999 1998
-------------- ------------ ------------
Statutory rate 34% 34% 34%
State and local taxes
(net of federal tax effect) 10 11 12
Federal tax credit (2) (4) (6)
Permanent differences 1 8 8
Change in valuation allowance (5) - -
Adjustments to prior years tax liabilities (2) - -
Other (3) (2) (4)
-- -- --
Effective rate 33% 47% 44%
== == ==
</TABLE>
F-15
<PAGE>
9. CONCENTRATIONS OF CREDIT RISK AND MAJOR CUSTOMERS:
--------------------------------------------------
Most of the Company's business is with customers who are in the health
care industry and with governmental agencies.
The Company provides temporary health care personnel to in-home
patients and facilities in the New York City metropolitan area, the State of
Connecticut and the State of New Jersey. Credit losses relating to customers
historically have been minimal and within management's expectations.
At July 31, 2000, the Company maintains approximately 49% of its cash
and cash equivalents with one financial institution.
Under certain federal and state third-party reimbursement programs, the
Company received net patient revenues approximating $19,955,000, $13,281,000 and
$13,666,000 for the years ended July 31, 2000, 1999 and 1998, respectively. The
Company also received net patient revenues of approximately $5,663,000,
$6,095,000 and $7,488,000 for the years ended July 31, 2000, 1999 and 1998,
respectively, from a private company. At July 31, 2000, the Company had an
aggregate outstanding receivable from federal and state agencies of $4,453,000
and an outstanding receivable of $1,484,000 from the private company.
10. STOCK OPTION PLAN:
------------------
In 1999, the stockholders approved the 1999 Stock Option Plan (the
"1999 Plan") designed to provide incentives to key employees (including
directors and officers who are key employees) and to non-employee Directors of
the Company. The 1999 Plan authorizes the granting of both incentive and non
qualified stock options to purchase up to 500,000 shares of the Company's common
stock.
The 1999 Plan is administered by the Board of Directors which, to the
extent it so determines, may delegate its powers with respect to the
administration of 1999 Plan to a committee (the "Committee") of the Board of
Directors consisting of not less than two directors, each of whom, will be a
non-employee director. The Committee 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 exercise period.
The exercise price shall generally not be less than the fair market value on the
date of grant. No options may be granted under the 1999 Plan after October 6,
2009.
At July 31, 2000, 500,000 shares have been reserved for future issuance
pursuant to the 1999 Plan.
The Company has a Stock Option Plan (the "1992 Plan") designed to
provide incentives to key employees (including directors and officers who are
key employees) and to non-employee Directors 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.
F-16
<PAGE>
10. STOCK OPTION PLAN: (Cont'd)
-----------------
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 options may be
granted under the 1992 Plan after August 16, 2002.
At July 31, 2000, 419,476 shares of the Company's common stock have
been reserved for future issuance pursuant to the 1992 Plan.
A summary of the status of the Company's stock options as of July 31,
2000, 1999 and 1998 and changes during the years ending on those dates is
presented below:
<TABLE>
<CAPTION>
2000 1999 1998
----------------------- ------------------------- ------------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
---------- ---------- ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Outstanding, beginning
of year 259,556 $ 4.19 241,758 $ 3.29 204,042 $ 2.77
Granted 246,000 4.37 180,902 3.93 60,000 4.81
Exercised - - - - (20,100) 2.47
Forfeited (29,102) 4.30 (163,104) 2.57 (2,184) 5.70
------- ------------ -----------
Outstanding, end of year 476,454 4.27 259,556 4.19 241,758 3.29
======= ============ ===========
Options exercisable
at year-end 476,454 4.27 259,556 4.19 241,758 3.29
========== ============ ===========
Weighted average fair
value of options granted
during the year $ 2.48 $ 1.97 $ 1.97
========== ========= ======
</TABLE>
The following table summarizes information about stock options
outstanding at July 31, 2000:
<TABLE>
<CAPTION>
Options Outstanding and Exercisable
-----------------------------------------------------------
Weighted-
Shares Average Weighted-
Outstanding Remaining Average
at July 31, Contractual Exercise
2000 Life Price
---------------- ------------- -------------
<S> <C> <C> <C>
$ 3.63 - $3.99 151,902 8.75 years $ 3.81
$ 4.06 - $4.25 167,000 9.34 years 4.23
$ 4.56 - $4.81 151,000 8.45 years 4.72
$ 5.70 6,552 5.68 years 5.70
</TABLE>
The fair value of options at date of grant was estimated using the
Black-Scholes option pricing model utilizing the following assumptions as of
July 31, 2000, 1999 and 1998:
F-17
<PAGE>
10. STOCK OPTION PLAN: (Cont'd)
-----------------
<TABLE>
<CAPTION>
Years Ended
July 31,
---------------------------------------------------------
2000 1999 1998
-------------- ------------ ------------
<S> <C> <C> <C>
Dividend yield 0.00% 0.00% 3.00%
Volatility 35.00% 33.00% 42.0%
Risk-Free interest rate 6.20% 5.50% 5.75%
Expected life 10 years 10 years 10 years
</TABLE>
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the Company's stock options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its stock options.
Since, the Company applies APB Opinion 25 and related interpretations
in accounting for its options, no compensation cost has been recognized for its
stock option grants. The effect of applying SFAS No. 123 on pro forma net income
is not necessarily representative of the effects on reported net income for
future years due to, among other things, (1) the vesting period of stock options
and (2) the fair value of additional stock options in future years. Had the
Company elected to recognize compensation cost based on the fair value of the
options at the date of grant as prescribed by SFAS 123, net income for the years
ended July 31, 2000, 1999 and 1998 would have been as follows:
<TABLE>
<CAPTION>
Years Ended
July 31,
---------------------------------------------------------
2000 1999 1998
-------------- ------------ ------------
<S> <C> <C> <C>
Proforma net income $3,843,000 $ 924,000 $ 1,085,000
Proforma income per share:
Basic $.76 $.18 $.21
==== ==== ====
Diluted $.76 $.17 $.20
==== ==== ====
</TABLE>
11. COMMITMENTS, CONTINGENCIES AND OTHER MATTERS:
---------------------------------------------
(a) Effective January 1, 1999, the Company amended and restated its
Employee Savings and Stock Investment Plan organized under Section 401(k) of the
Internal Revenue Code. Under the amended plan, employees may contribute up to
15% of their salary, limited to the maximum amount allowable under federal tax
regulations. The Company will match an amount equal to 100% of the first 3% of
employees' contributions and 50% of the next 2% of employees' contributions,
provided that in no event shall the matching contributions on behalf of any
employee exceed 4% of employees' compensation. The Company may also make
additional contributions at its discretion. An employee may invest in Company
stock and several mutual funds. The Company's matching contributions for each of
the years ended July 31, 2000, 1999 and 1998 were $226,000, $143,000 and
$105,000, respectively.
F-18
<PAGE>
11. COMMITMENTS, CONTINGENCIES AND OTHER MATTERS: (Cont'd)
--------------------------------------------
(b) The Company has employment agreements with four officers which
expire through November 30, 2003. The aggregate commitment for future salary,
excluding bonuses, under the agreements is $2,502,000. One agreement also
provides for increases based on increases in the consumer price index and
additional annual compensation based on 5% of pre-tax income, as defined, in
excess of $3,000,000. Two other agreements provide for additional compensation
based on 3% of income from operations, as defined, in excess of $3,300,000.
(c) The Company rents various office facilities through 2004 under the
terms of several lease agreements which include escalation clauses.
At July 31, 2000, minimum annual rental commitments under
noncancellable operating leases are as follows:
Year Ending
July 31,
-----------
2001 $ 638,000
2002 410,000
2003 289,000
2004 120,000
2005 78,000
Thereafter 12,000
-------------
$ 1,547,000
=============
Rent expense for the years ended July 31, 2000, 1999 and 1998 was
approximately $636,000, $594,000 and $527,000, respectively.
One lease is with a company controlled by the Chairman of the Board of
the Company. Rent expense under such lease approximates $135,000 per year.
(d) The Company has a line of credit with its bank totaling $2,000,000.
Advances against the line are to be collateralized by the assets of the Company.
In addition, a subsidiary of the Company has a secured line of credit. The
maximum amount that can be borrowed under the secured line of credit shall not
exceed the lesser of eligible accounts receivable or $2,000,000. Both credit
facilities bear interest at the alternate base commercial lending rate of the
bank and expire January 31, 2001. At July 31, 2000, there were no outstanding
balances under either line of credit.
(e) The Company and certain of its officers and directors have been
named as defendants in a consolidated class action brought on behalf of certain
shareholders of SunStar Healthcare, Inc. ("SunStar"). The lawsuit asserts
alleged acts or omissions, which resulted in misrepresentations or omissions of
material information concerning the financial condition of SunStar. In addition,
the lawsuit alleges that the Company and certain directors exercised control
over SunStar. The Company believes that the complaints are without merit and
intends to vigorously defend them.
F-19
<PAGE>
12. SUBSEQUENT EVENT:
-----------------
On August 25, 2000, the Company purchased certain assets of Health
Force Owned Ltd. and its affiliates in New Jersey for $1,822,000 in cash,
including acquisition costs of $42,000.
F-20
<PAGE>
INDEPENDENT AUDITORS' REPORT ON SCHEDULE
----------------------------------------
The audits referred to in our report dated October 3, 2000 on the consolidated
financial statements of National Home Health Care Corp. and Subsidiaries, which
appears in Part II, also included Schedule II for the years ended July 31, 2000
and 1999. This schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion based on our audit. In our opinion, the
financial statement schedule referred to above, when considered in relation to
the basic financial statements taken as a whole, presents fairly in all material
respects the information set forth therein, in compliance with the applicable
accounting regulations of the Securities and Exchange Commission.
/s/ Holtz Rubenstein & Co., LLP
-------------------------------
Holtz Rubenstein & Co., LLP
Melville, New York
October 3, 2000
F-21
<PAGE>
INDEPENDENT AUDITORS' REPORT ON SCHEDULE
----------------------------------------
Board of Directors and Stockholders
National Home Health Care Corp.
Scarsdale, New York
The audit referred to in our report dated October 7, 1998 on the consolidated
financial statements of National Home Health Care Corp. and subsidiaries, which
appears in Part II, also includes Schedule II for the year ended July 31, 1998.
This schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion based on our audit. In our opinion, the
financial statement schedule referred to above, when considered in relation to
the basic financial statements taken as a whole, presents fairly in all material
respects the information set forth therein, in compliance with the applicable
accounting regulations of the Securities and Exchange Commission.
/s/ Richard A. Eisner & Company, LLP
------------------------------------
Richard A. Eisner & Company, LLP
New York, New York
October 7, 1998
F-22
<PAGE>
NATIONAL HOME HEALTH CARE CORP. AND SUBSIDIARIES
------------------------------------------------
SCHEDULE II
-----------
VALUATION AND QUALIFYING ACCOUNTS
---------------------------------
<TABLE>
<CAPTION>
Column A Column B Column C
--------------------------------------------------- -------------- ---------------------------------
Additions
---------------------------------
(1) (2)
------------- -------------
Charged
Balance, Charged to to Other
Beginning Costs and Accounts -
Description of Period Expenses Describe
--------------------------------------------------- -------------- ------------- -------------
<S> <C> <C>
Year ended July 31, 2000:
Allowance deducted from asset account
Allowance for uncollectible accounts $ 392,000 $ 595,000
=========== ===========
Year ended July 31, 1999:
Allowance deducted from asset account
Allowance for uncollectible accounts $ 295,000 $ 196,500(b)
=========== ==========
Year ended July 31, 1998:
Allowance deducted from asset account
Allowance for uncollectible accounts $ 327,000 $ 32,000
=========== ===========
Column D Column E
-------------- -------------
Balance,
Deductions End
Description Describe of Period
--------------------------------------------------- -------------- -------------
Year ended July 31, 2000:
Allowance deducted from asset account
Allowance for uncollectible accounts $ 314,000(a) $ 673,000
========== ===========
Year ended July 31, 1999:
Allowance deducted from asset account
Allowance for uncollectible accounts $ 99,500(a) $ 392,000
========== ===========
Year ended July 31, 1998:
Allowance deducted from asset account
Allowance for uncollectible accounts $ (64,000)(a) $ 295,000
========== ===========
(a) Represents actual write-offs.
(b) Represents allowance acquired in acquisition of Accredited Health Services, Inc.
</TABLE>
F-23
<PAGE>
(3) Exhibits
EXHIBIT DOCUMENT
NUMBER --------
------
3.1 Certificate of Incorporation. Incorporated by reference to
the Registrant's Registration Statement on Form S-1 (No.
2-86643) filed September 20, 1983 (the "1983 Form S-1").
3.2 Certificate of Amendment to Certificate of Incorporation.
Incorporated by reference to the Registrant's Annual Report
on Form 10-K for the fiscal year ended July 31, 1992.
3.3 By-laws. Incorporated by reference to the 1983 Form S-1.
10.1 1992 Stock Option Plan. Incorporated by reference to the
Registrant's Annual Report on Form 10-K for the fiscal year
ended July 31, 1993 (the "1993 Form 10-K").
10.2 Incentive Stock Option Plan. Incorporated by reference to
the 1993 Form 10-K.
10.3* 1999 Stock Option Plan.
10.4* Third Amendment, dated as of August 1, 2000, to Employment
Agreement between the Registrant and Steven Fialkow.
10.5 Second Amendment, dated as of October 7, 1999, to Employment
Agreement between the Registrant and Steven Fialkow.
Incorporated by reference to the Registrant's Quarterly
Report on Form 10-Q for the fiscal quarter ended October 31,
1999 (the "October 31, 1999 Form 10-Q").
10.6 First Amendment, dated as of December 1, 1998, to Employment
Agreement between the Registrant and Steven Fialkow.
Incorporated by reference to the Registrant's Quarterly
Report on Form 10-Q for the fiscal quarter ended January 31,
1999 (the "January 31, 1999 Form 10-Q").
10.7 Employment Agreement dated as of November 1, 1997 between
the Registrant and Steven Fialkow. Incorporated by reference
to the Registrant's Quarterly Report on Form 10-Q for the
fiscal quarter ended January 31, 1998 (the "January 31, 1998
Form 10-Q").
10.8* Second Amendment, dated as of August 1, 2000, to Amended and
Restated Employment Agreement between the Registrant and
Frederick H. Fialkow.
23
<PAGE>
EXHIBIT DOCUMENT
NUMBER --------
------
10.9 First Amendment, dated as of December 1, 1998, to Amended
and Restated Employment Agreement between the Registrant and
Frederick H. Fialkow. Incorporated by reference to the
Registrant's Annual Report on Form 10-K for the fiscal year
ended July 31, 1999.
10.10 Amended and Restated Employment Agreement dated as of
December 1, 1998 between the Registrant and Frederick H.
Fialkow. Incorporated by reference to the January 31, 1999
Form 10-Q.
10.11 Employment Agreement dated as of November 1, 1997 between
the Registrant and Frederick H. Fialkow. Incorporated by
reference to the January 31, 1998 Form 10-Q.
10.12* Second Amendment, dated as of August 1, 2000, to Employment
Agreement between the Registrant and Robert P. Heller.
10.13 First Amendment, dated as of December 1, 1998, to Employment
Agreement between the Registrant and Robert P. Heller.
Incorporated by reference to the January 31, 1999 Form 10-Q.
10.14 Employment Agreement dated as of November 1, 1997 between
the Registrant and Robert P. Heller. Incorporated by
reference to the January 31, 1998 Form 10-Q.
10.15* Second Amendment, dated as of August 1, 2000, to Employment
Agreement between the Registrant and Richard Garofalo.
10.16 First Amendment, dated as of December 1, 1998, to Employment
Agreement between the Registrant and Richard Garofalo.
Incorporated by reference to the January 31, 1999 Form 10-Q.
10.17 Employment Agreement dated as of November 1, 1997 between
the Registrant and Richard Garofalo. Incorporated by
reference to the January 31, 1998 Form 10-Q.
10.18 Amended and Restated Asset Purchase Agreement dated October
15, 1999 among Charles L. Glerum as Trustee for Optimum Care
Services of Connecticut, Inc., Optimum Home Health of
Connecticut, Inc., Optimum Home Care of Connecticut, Inc.,
New England Home Care, Inc., Connecticut Staffing Works
Corp. and the Registrant. Incorporated by reference to the
Registrant's Current Report on Form 8-K dated November 11,
1999.
24
<PAGE>
EXHIBIT DOCUMENT
NUMBER --------
------
10.19 The Registrant's Employee Savings and Stock Investment Plan
under Section 401(k) of the Internal Revenue Code, effective
as of January 1, 1999. Incorporated by reference to the
October 31, 1999 Form 10-Q.
10.20 Letter Agreement dated February 20, 2000 providing a Secured
Advised Line of Credit from the Bank of New York to National
Home Health Care Corp. Incorporated by reference to the
Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended January 31, 2000 (the "January 31, 2000 Form
10-Q").
10.21 Letter Agreement dated February 20, 2000 providing a Secured
Advised Line of Credit from the Bank of New York to New
England Home Care, Inc. Incorporated by reference to the
January 31, 2000 Form 10-Q.
21.1* List of Subsidiaries.
23.1* Report of Holtz Rubenstein & Co., LLP.
23.2* Report of Richard A. Eisner & Company, LLP.
23.3* Consent of Holtz Rubenstein & Co., LLP.
23.4* Consent of Richard A. Eisner & Company, LLP.
27.1* Financial Data Schedule.
----------
* Filed herewith
(b) Reports on Form 8-K.
-------------------
None.
25
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
NATIONAL HOME HEALTH CARE CORP.
/s/ Robert P. Heller
-----------------------------------
By: Robert P. Heller
Vice President of Finance
and Chief Financial Officer
Dated: October 27, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed on the above date by the following persons
on behalf of the Registrant and in the capacities indicated.
<TABLE>
<CAPTION>
<S> <C>
/s/ Frederick H. Fialkow Chairman of the Board of Directors
------------------------
Frederick H. Fialkow
/s/ Steven Fialkow President, Chief Executive Officer,
----------------------------
Steven Fialkow Secretary and Director
/s/ Robert P. Heller Vice President of Finance and Chief
----------------------------
Robert P. Heller Financial Officer (principal financial and
accounting officer)
/s/ Ira Greifer Director
----------------------------
Ira Greifer, M.D.
/s/ Bernard Levine Director
----------------------------
Bernard Levine, M.D.
/s/ Robert Pordy Director
----------------------------
Robert Pordy, M.D.
</TABLE>
<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, AS AMENDED, FOR THE
FISCAL YEAR ENDED JULY 31, 2000
NATIONAL HOME HEALTH CARE CORP.
<PAGE>
EXHIBIT DOCUMENT
NUMBER --------
------
3.1 Certificate of Incorporation. Incorporated by reference to
the Registrant's Registration Statement on Form S-1 (No.
2-86643) filed September 20, 1983 (the "1983 Form S-1").
3.2 Certificate of Amendment to Certificate of Incorporation.
Incorporated by reference to the Registrant's Annual Report
on Form 10-K for the fiscal year ended July 31, 1992.
3.3 By-laws. Incorporated by reference to the 1983 Form S-1.
10.1 1992 Stock Option Plan. Incorporated by reference to the
Registrant's Annual Report on Form 10-K for the fiscal year
ended July 31, 1993 (the "1993 Form 10-K").
10.2 Incentive Stock Option Plan. Incorporated by reference to
the 1993 Form 10-K.
10.3* 1999 Stock Option Plan.
10.4* Third Amendment, dated as of August 1, 2000, to Employment
Agreement between the Registrant and Steven Fialkow.
10.5 Second Amendment, dated as of October 7, 1999, to Employment
Agreement between the Registrant and Steven Fialkow.
Incorporated by reference to the Registrant's Quarterly
Report on Form 10-Q for the fiscal quarter ended October 31,
1999 (the "October 31, 1999 Form 10-Q").
10.6 First Amendment, dated as of December 1, 1998, to Employment
Agreement between the Registrant and Steven Fialkow.
Incorporated by reference to the Registrant's Quarterly
Report on Form 10-Q for the fiscal quarter ended January 31,
1999 (the "January 31, 1999 Form 10-Q").
10.7 Employment Agreement dated as of November 1, 1997 between
the Registrant and Steven Fialkow. Incorporated by reference
to the Registrant's Quarterly Report on Form 10-Q for the
fiscal quarter ended January 31, 1998 (the "January 31, 1998
Form 10-Q").
10.8* Second Amendment, dated as of August 1, 2000, to Amended and
Restated Employment Agreement between the Registrant and
Frederick H. Fialkow.
<PAGE>
EXHIBIT DOCUMENT
NUMBER --------
------
10.9 First Amendment, dated as of December 1, 1998, to Amended
and Restated Employment Agreement between the Registrant and
Frederick H. Fialkow. Incorporated by reference to the
Registrant's Annual Report on Form 10-K for the fiscal year
ended July 31, 1999.
10.10 Amended and Restated Employment Agreement dated as of
December 1, 1998 between the Registrant and Frederick H.
Fialkow. Incorporated by reference to the January 31, 1999
Form 10-Q.
10.11 Employment Agreement dated as of November 1, 1997 between
the Registrant and Frederick H. Fialkow. Incorporated by
reference to the January 31, 1998 Form 10-Q.
10.12* Second Amendment, dated as of August 1, 2000, to Employment
Agreement between the Registrant and Robert P. Heller.
10.13 First Amendment, dated as of December 1, 1998, to Employment
Agreement between the Registrant and Robert P. Heller.
Incorporated by reference to the January 31, 1999 Form 10-Q.
10.14 Employment Agreement dated as of November 1, 1997 between
the Registrant and Robert P. Heller. Incorporated by
reference to the January 31, 1998 Form 10-Q.
10.15* Second Amendment, dated as of August 1, 2000, to Employment
Agreement between the Registrant and Richard Garofalo.
10.16 First Amendment, dated as of December 1, 1998, to Employment
Agreement between the Registrant and Richard Garofalo.
Incorporated by reference to the January 31, 1999 Form 10-Q.
10.17 Employment Agreement dated as of November 1, 1997 between
the Registrant and Richard Garofalo. Incorporated by
reference to the January 31, 1998 Form 10-Q.
10.18 Amended and Restated Asset Purchase Agreement dated October
15, 1999 among Charles L. Glerum as Trustee for Optimum Care
Services of Connecticut, Inc., Optimum Home Health of
Connecticut, Inc., Optimum Home Care of Connecticut, Inc.,
New England Home Care, Inc., Connecticut Staffing Works
Corp. and the Registrant. Incorporated by reference to the
Registrant's Current Report on Form 8-K dated November 11,
1999.
<PAGE>
EXHIBIT DOCUMENT
NUMBER --------
------
10.19 The Registrant's Employee Savings and Stock Investment Plan
under Section 401(k) of the Internal Revenue Code, effective
as of January 1, 1999. Incorporated by reference to the
October 31, 1999 Form 10-Q.
10.20 Letter Agreement dated February 20, 2000 providing a Secured
Advised Line of Credit from the Bank of New York to National
Home Health Care Corp. Incorporated by reference to the
Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended January 31, 2000 (the "January 31, 2000 Form
10-Q").
10.21 Letter Agreement dated February 20, 2000 providing a Secured
Advised Line of Credit from the Bank of New York to New
England Home Care, Inc. Incorporated by reference to the
January 31, 2000 Form 10-Q.
21.1* List of Subsidiaries.
23.1* Report of Holtz Rubenstein & Co., LLP.
23.2* Report of Richard A. Eisner & Company, LLP.
23.3* Consent of Holtz Rubenstein & Co., LLP.
23.4* Consent of Richard A. Eisner & Company, LLP.
27.1* Financial Data Schedule.
----------
* Filed herewith
