SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended October 31, 1995 Commission File No. 0-18472
HEALTH MANAGEMENT, INC.
(Exact name of registrant as specified in charter)
Delaware 75-2096632
(State or other jurisdiction of incorporation) (IRS Employer
Identification No.)
4250 Veterans Memorial Highway, Suite 400 West, Holbrook, New York 11741
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (516) 981-0034
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES x NO
As of November 15, 1995, there were outstanding 9,322,182 shares of common
stock, $.03 par value.
HEALTH MANAGEMENT, INC.
October 31, 1995
TABLE OF CONTENTS
Page No.
Part I.FINANCIAL INFORMATION:
Item 1. Financial Statements 3
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 3
Part II. OTHER INFORMATION
Item 1. Legal Proceedings 17
Item 2. Changes in Securities 17
Item 3. Defaults Upon Senior Securities 17
Item 4. Submission of Matters to a Vote of
Security Holders 17
Item 5. Other Information 17
Item 6. Exhibits and Reports on Form 8-K 18
SIGNATURES 21
PART I.FINANCIAL INFORMATION
Item 1. Financial Statements
The condensed consolidated financial Statements of Health Management,
Inc. (the "Company") begin on the page following Item 2 of this
Part I.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
RESULTS OF OPERATIONS
PRELIMINARY STATEMENT
All statements contained herein that are not historical facts, including, but
not limited to, statements regarding the Company's current business strategy,
the Company's projected sources and uses of cash, and the Company's plans for
future development and operations, are based upon current expectations. These
statements are forward-looking in nature and involve a number of risks and
uncertainties. Actual results may differ materially. Among the factors that
could cause actual results to differ materially are the following: the
availability of sufficient capital to finance the Company's business plans on
terms satisfactory to the Company; competitive factors; the ability of the
Company to adequately defend or reach a settlement of outstanding litigations
and investigations involving the Company or it management; changes in labor,
equipment and capital costs; changes in regulations affecting the Company's
business; future acquisitions or strategic partnerships; general business and
economic conditions; and other factors described from time to time in the
Company's reports filed with the Securities and Exchange Commission. The Company
wishes to caution readers not to place undue reliance on any such forward-
looking statements, which statements are made pursuant to the Private Litigation
Reform Act of 1995 and, as such, speak only as of the date made.
The financial information discussed herein has been restated. (See Note 4 to
the Condensed Consolidated Financial Statements.)
Three months ended October 31, 1995 vs. October 31, 1994
The Company's revenues were $39,274,787 for the quarter ended October 31, 1995,
an increase of $18,390,460 or 88.1% over revenues of $20,884,327 for the three
months ended October 31, 1994. This increase was attributable principally to
the increase in revenues generated by the recent acquisitions of the company
which expanded the Lifecare Program into other chronic disease therapies as well
as to continued growth in the Company's core aftercare business areas.
Gross profit margins were 23.3% of the quarter ended October 31, 1995, as
compared to 29.2% for the quarter ended October 31, 1994. The decrease in gross
profit margin was primarily attributable to the following factors: increase in
multiple sclerosis revenues, which presently yield lower margins that have been
historically experienced by the Company in other disease management programs,
reductions in the fixed fee reimbursement rates from certain state Medicaid
programs (principally New York, which lowered its reimbursement rate by 10%),
and reduction of reimbursement rates that occur when the drug benefit is carved
out from the major medical benefit and is switched to a drug card plan. In
addition, the Company has continued to experience an increase in the number of
transplant patients receiving immunosuppressant drug benefits under Medicare due
to the extension of Medicare coverage beyond the historical one year post-
transplant period. Medicare reimburses at lower rates than indemnity insurance.
Operating expenses as a percentage of revenues were 21.04% for the quarter ended
October 31, 1995, as compared to 21.0% for the quarter ended October 31, 1994.
Total operating expenses were $8,263,507 for the quarter ended October 31, 1995,
an increase of $3,876,861 over the quarter ended October 31, 1994. The increase
was due to the fact that during the last quarter of the fiscal year ended
April 30, 1995 the Company consummated two acquisitions, the principal one being
the acquisition of the Clozaril Patient Management Business ("CPMB") from
Caremark, Inc. Operating expenses in connection with these acquisitions
accounted for approximately $2,800,000 of expenses during the quarter ended
October 31, 1995, In addition to support the Company's continued expansion,
payroll-related expenses increased by approximately $500,000 and selling
expenses increased by approximately $200,000. Also non cash expenditures such
as depreciation, amortization and bad debt expense increased by approximately
$600,000. The balance of the increase occurred in distribution and
administration expenses.
Net interest expense for the quarter ended October 31, 1995 was $651,926, an
increase of $742,380 compared to net interest income of $90,454 for the quarter
ended October 31, 1994. Approximately $520,000 of the increase was due to
interest charges relating to the Company's $24,000,000 debt financing for the
acquisition of the Clozaril Patient Management Business ("CPMB") of Caremark,
Inc. The balance of the increase was a result of interest charges for the
Company's borrowings against its line of credit.
Net Income was $139,522 for the quarter ended October 31, 1995, compared to
$1,044,193 for the quarter ended October 31, 1994, a decrease of $904,671.
Primary earnings and fully diluted earnings per common share for the quarter
ended October 31, 1995 were $.01 compared to $.11 for the quarter ended
October 31, 1994.
Six months ended October 31, 1995 vs. October 31, 1994
Revenues for the six months ended October 31, 1995, were $77,568,817 an increase
of $39,468,188 or 103.6%, in comparison to revenues for the six months ended
October 31, 1994. This increase was attributable principally to the increase in
revenues generated by the recent acquisitions of the Company which expanded the
Lifecare Program into other chronic disease therapies as well as to continued
growth in the Company's core aftercare business areas.
Gross profit margins were 27.0% for the six months ended October 31, 1995
compared to 29.1% for the same period last year. The decrease in gross profit
margin as primarily attributable to the following factors: increases in multiple
sclerosis revenues, which presently yield lower margins than have been
historically experienced by the Company in other disease management programs,
reductions in the fixed fee reimbursement rates from certain state Medicaid
programs (principally New York, which lowered its reimbursement rate by 10%),
and reduction of reimbursement rates that occur when the drug benefit is carved
out from the major medical benefit and is switched to a drug card plan. In
addition, the Company has continued to experience an increase in the number of
transplant patients receiving immunosuppressant drug benefits under Medicare due
to the extension of Medicare coverage beyond the historical one year post-
transplant period. Medicare reimburses at lower rates than indemnity insurance.
Operating expenses as a percentage of revenues decreased to 21.5% for the six
months ended October 31, 1995, as compared to 23.4% for the six months ended
October 31, 1994. Total operating expenses were $16,713,123 for the six months
ended October 31, 1995, an increase of $7,798,025 over the six months ended
October 31, 1994. Operating expenses in connection with the acquisition that
occurred during the last quarter of fiscal year ended April 30, 1995 accounted
for approximately $5,500,000 of expenses during the six months ended October 31,
1995. In addition to support the Company's continual expansion, payroll related
expenses increased by approximately $1,100,000 and selling expenses increased by
approximately $700,000. Also non cash expenditures such as depreciation,
amortization and bad debt expenses increased by approximately $1,000,000. The
balance of the increase occurred in distribution and administrative expenses.
Net interest expense for the six months ended October 31, 1995 was $1,262,862 an
increase of $1,441,620 compared to net interest income of $178,758 for the same
period last year. Approximately $1,100,000 of the increase was due to charges
relating to the Company's financing of the CPMB acquisition, while the balance
of the increase was a result of interest charges for the Company's borrowings
against its line of credit.
Net income was $1,728,260 an increase of $380,473 or 28.2% for the six months
ended October 31, 1995, compared to net income of $1,347,787 for the same period
last year. The increase in net income was primarily attributable to the
increases in Lifecare revenues, increased revenues derived from the Company's
acquisitions, offset by a lower gross profit margin, and increases in operating
and interest expenses.
Primary and fully diluted earnings per share for the six months ended
October 31, 1995 were $.18 as compared to $.14 for the same fiscal period last
year.
LIQUIDITY AND CAPITAL RESOURCES
The decrease in the Company's cash and cash equivalents of $468,839 to
$4,093,873 at October 31, 1995 was attributable to cash used for operating and
investing activities offset by net cash provided by financing activities. The
Company's continued growth resulted in utilization of cash for operating and
capital investing activities. Increases in net income, accounts payable and
non-cash adjustments were offset by increases in accounts receivable and
inventory.
Working capital at October 31, 1995 was $10,077,231 an increase of $781,996 from
April 30, 1995. The primary factors were increases in accounts receivable net
of the allowance for doubtful accounts of $9,372,420 and inventories of
$3,055,905 offset by increases in accounts payable of $6,209,920 and the payment
of corporate income taxes.
The Company has borrowed $21,000,000 on a term loan of which $1,500,000 has been
repaid as of October 31, 1995. This term loan bears interest at a rate of .5%
above the alternative base rate which was 8.75% on October 31, 1995. The
principal is payable over 5 years in quarterly installment payments of $750,000
through March 31, 1996; $1,000,000 through March 31, 1997, $1,250,000 through
March 31, 1999 and $ 1,000,000 through March 21, 2000.
The Company also maintains a credit facility of up to $15,000,000 with the same
lending institutions and matures in March 1997. As of October 31, 1995, the
Company had borrowed $5,650,000 leaving an availability of $9,350,000 under the
line of credit.
As a result of the restatement the Company is in violation of its current loan
agreements and, accordingly, all borrowings under the term loan and the credit
facility are classified as current liabilities.
In connection with the CPMB acquisition, the Company is also obligated on a
$3,000,000 subordinated note payable bearing interest at an annual rate of 8%
and matures on March 31, 2000.
As of October 31, 1995, days sales outstanding were 96, down 21 days from 117
days for the quarter ended October 31, 1994. The days sales outstanding was
positively impacted by the newly generated revenues arising out of the recent
acquisitions.
HEALTH MANAGEMENT, INC.
AND SUBSIDIARIES
Index to Condensed Consolidated Financial Statements
Page No.
Balance Sheets as of October 31, 1995 (unaudited)
and April 30, 1995 (Audited) 8 - 9
Statements of Income for the three and Six Months
Ended October 31, 1995 and October 31, 1994 (Unaudited) 10
Statements of Cash Flow Flows for the Six Months Ended
October 31, 1995 and October 31, 1994 (Unaudited) 11 - 12
Statement of Changes in Stockholders' Equity for the
Six Months Ended October 31, 1995 (Unaudited) 13
Notes to Financial Statements 14 - 16
HEALTH MANAGEMENT, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
October 31, 1995 April 30, 1995
(Unaudited) (Audited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash $ 4,093,873 $ 4,562,712
equivalents
Accounts Receivable,
less allowance for
doubtful accounts 40,712,229 31,339,809
Inventories 10,843,566 7,787,661
Tax Refund Receivable 2,447,380 1,827,000
Due from Seller 403,000
Deferred Taxes 3,910,792 3,133,300
Prepaid Expenses and 809,989 1,163,541
Other
TOTAL CURRENT ASSETS 63,220,829 49,814,023
IMPROVEMENTS and EQUIPMENT, less
accumulated depreciation
and amortization 3,894,392 2,136,062
EXCESS OF PURCHASE PRICE OVER
NET ASSETS ACQUIRED 34,805,278 35,464,260
OTHER 1,174,566 1,275,775
$103,095,065 $ 88,690,120
See Notes to Condensed Consolidated Financial Statements
</TABLE>
HEALTH MANAGEMENT, INC.
AND SUBSIDIARIES
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
October 31, April 30, 1995
1995 (Audited)
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES:
Accounts Payable $ 18,053,864 $ 12,329,991
Accrued Expenses 5,200,892 1,862,407
Current Maturities of Long 26,271,393 23,135,267
Term Debt
TOTAL CURRENT 49,526,149 37,327,665
LIABILITIES
Deferred Taxes 426,324 -
Long Term Debt, Less Current 3,191,125 3,191,123
Maturities
TOTAL LIABILITIES 53,143,598 40,518,788
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred Stock - $.01 Par
Value:
Shares Authorized - 1,000,000:
Issued and Outstanding - 0
Common Stock - $.03 Par Value:
Shares Authorized - 20,000,000:
Issued and Outstanding -
9,321,017 and 9,316,017 279,631 279,481
Additional Paid-In Capital 38,071,235 38,019,510
Retained Earnings 11,600,601 9,872,341
TOTAL STOCKHOLDERS' 49,951,467 48,171,332
EQUITY
$ 103,095,065 $ 88,690,120
See Notes to Condensed Consolidated Financial Statement
</TABLE>
HEALTH MANAGEMENT, INC.
AND SUBSIDIARIES
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
OCTOBER 31, OCTOBER 31,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Revenue $39,274,787 $20,884,327 $77,568,817 $38,100,629
Cost of Sales 30,119,746 14,781,442 56,652,980 27,012,402
Gross Profits 9,155,041 6,102,885 20,915,837 11,088,227
OPERATING EXPENSE:
Selling 1,206,433 804,027 2,291,635 1,326,111
General & 7,057,074 3,582,619 14,421,488 7,588,987
Administrative
8,263,507 4,386,646 16,713,123 8,915,098
INCOME FROM
OPERATIONS 891,534 1,716,239 4,202,714 2,173,129
INTEREST EXPENSE
(INCOME) 651,926 (90,454) 1,262,862 (178,758)
Income Before Taxes
on Income 239,608 1,806,693 2,939,852 2,351,887
Taxes on Income 100,086 762,500 1,211,592 1,004,100
Net Income $139,522 $1,044,193 $1,728,260 $1,347,787
EARNINGS PER COMMON
SHARE
Primary $.01 $.11 $.18 $.14
Fully Diluted $.01 $.11 $.18 $.14
WEIGHTED AVERAGE
SHARES OUTSTANDING
Primary 9,405,222 9,332,371 9,425,071 9,326,910
Fully Diluted 9,405,222 9,373,719 9,425,071 9,347,584
See Notes to Condensed Consolidated Financial Statements
</TABLE>
HEALTH MANAGEMENT, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOW
FOR THE SIX MONTHS ENDED OCTOBER 31
(Unaudited)
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net Income $ 1,728,260 $ 1,347,787
Adjustments to reconcile net
income to net cash used in
operating activities - -
Depreciation & Amortization 1,302,574 358,457
Provision for Doubtful Accounts 3,429,901 2,918,777
Deferred Taxes (351,168) (1,024,000)
Loss from Disposition of rental 287,287
equipment
Compensation Under Restricted - 28,530
Stock
Increase (decrease) in cash flows
from changes in operating assets
and liabilities net of effects of
acquisition of PMA in 1994:
Accounts receivable (12,802,321) (6,178,170)
Inventory (3,055,905) (486,580)
Prepaid Expenses and Other 91,802 (189,015)
Other Assets (12,535) (85,658)
Accounts Payable 6,209,920 275,908
Receivable from Seller (403,000)
Accrued Bonus - (37,801)
Accrued Expenses 2,852,438 560,734
Income Tax Payable, net of tax (620,380) (2,484,911)
refund receivable
NET CASH USED IN OPERATING
ACTIVITIES (1,630,414) (4,708,655)
CASH FLOWS FROM INVESTING
ACTIVITIES
Capital Expenditures (1,037,034) (724,600)
Cash used in acquisition of PMA (187,500)
Proceeds from closing adjustments
of the Murray Group - 1,444,426
Proceeds from Sale of Rental
Equipment - 214,598
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES (1,037,034) 746,924
See Notes to Condensed Consolidated Financial Statements
</TABLE>
HEALTH MANAGEMENT, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOW (CONCLUDED)
FOR THE SIX MONTHS ENDED OCTOBER 31
(Unaudited)
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
CASH FLOWS FROM FINANCING
ACTIVITIES:
Increase (Decrease in bank
loan, net of repayments $2,150,000 $ -
Principal payments on long- (3,266) (117,941)
term debt
Proceeds from exercise of _ 145,800
underwriter warrants
Proceeds from exercise of 51,875 _
stock options
NET CASH PROVIDED BY 2,198,609 27,859
FINANCING ACTIVITIES
NET INCREASE (DECREASE) IN (468,839) (3,933,872)
CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS, 4,562,712 13,495,480
AT BEGINNING OF PERIOD
CASH AND CASH EQUIVALENTS,
AT END OF PERIOD $4,093,873 9,561,608
Supplemental disclosure of
cash flow information:
Cash Paid for Interest $ 924,511 $ 54,215
Cash Paid for Taxes $2,202,380 $2,687,683
Supplemental disclosures of non-cash investing activities:
1. The Company financed $989,394 of new computer equipment during the six
months ended 10/31/95.
2. On May 14, 1994, the Company issued 20,000 shares of non-registered common
stock in connection with the PMA acquisition.
See Notes to Condensed Consolidated Financial Statements
</TABLE>
HEALTH MANAGEMENT, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
SIX MONTHS ENDED OCTOBER 31, 1995
(Unaudited)
<TABLE>
<CAPTION>
Common Stock Additional
$.03 Par Value Paid-in Retained
Shares Amount Capital Earnings
<S> <C> <C> <C> <C>
Balance May 1, 1995 9,316,017 $279,481 $38,019,510 $ 9,872,341
Common Stock Issued 5,000 150 51,725 -
Upon Exercise of
Stock Options
Net Income for the _ _ _ 1,728,260
Six Months Ended
October 31, 1995
Balance, 9,321,017 $279,631 $38,071,235 $11,600,601
October 31, 1995
See Notes to Condensed Consolidated Financial Statements
</TABLE>
HEALTH MANAGEMENT, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: BASIS OF PRESENTATION
The condensed consolidated financial statements include Health Management, Inc.,
a Delaware corporation, and its wholly-owned subsidiaries Homecare Management,
Inc., a New York corporation, HMI Pennsylvania, Inc., a Delaware corporation,
HMI Retail Corp., Inc., a Delaware corporation, HMI PMA, Inc., a Delaware
corporation, Health Reimbursement Corp., a Delaware corporation, HMI Maryland,
Inc., a Delaware corporation, and HMI Illinois, Inc., a Delaware corporation.
All intercompany accounts and transactions have been eliminated in
consolidation.
The condensed Consolidated Financial Statements included herein are unaudited
and include all adjustments which, in the opinion of management, are necessary
for a fair presentation of the results of operations of the interim period
pursuant to the rules and regulations of the Securities and Exchange Commission.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. These condensed financial statements should be
read in conjunction with the Company's Annual Report on Form 10-K for the year
ended April 30, 1995. The results of operations for periods for the interim
periods are not necessarily indicative of the operating results for the whole
year.
NOTE 2. CAPITAL TRANSACTIONS
During the six months ended October 31, 1995, two employees exercised 5,000
stock options for a total exercise price of $51,875.
NOTE 3: CONTINGENCY
On April 3, 1995, American Preferred Prescription, Inc. ("APP") filed a
complaint against the Company, Preferred Rx, Inc., Community Prescription
Services and Sean Strub in the New York Supreme Court for tortious
interference,with existing and prospective contractual relationships, for lost
customers and business opportunities resulting from allegedly slanderous
statements and for allegedly false advertising and promotion. Four separate
causes of action are alleged, each for up to $10 million in damages. APP had
previously filed a similar suit in the United States Bankruptcy Court of the
East District of New York, which was dismissed and the court abstained from
exercising jurisdiction. The Company has answered the complaint and
counterclaimed for libel and slander predicated upon a false press release
issued by APP and added as defendants the principals of APP. Management
believes APP's suit against it to be without merit, intends to defend the
proceedings vigorously and believes the outcome will not have a material adverse
effect on the Company's results of operations or financial position.
On or about November 6, 1995, a stipulation of dismissal without prejudice was
entered into in the United States Bankruptcy Court, Eastern District of New York
in respect of the lawsuit which APP brought against the Company and a former
employee of APP who currently is an employee of the Company. That lawsuit,
which was filed on or about April 14, 1995, involved, among others, claims by
APP that the Company had offered the employee employment in order to obtain
confidential information regarding APP and that the Company's employment of the
employee constituted interference with the employee's contract with APP. In
that lawsuit, APP sought injunctive relief and damages in excess of $70 million.
NOTE 4: RESTATEMENT
In February 1996, a Special Committee of the Board of Directors was established
to review certain accounting and financial matters. The Special Committee
determined that, as a result of certain accounting irregularities, restatements
of prior 1995 and 1996 fiscal periods would be required.
As a result of these developments, the Company's auditors withdrew their
previously issued unqualified opinion dated July 27, 1995 on the financial
statements of the Company for the year ended April 30, 1995. Also, the
restatement caused the Company to be in violation of its current loan agreements
and, accordingly, all borrowings under such agreements are classified as current
liabilities.
The Company has restated its 1995 financial statements as well as the quarterly
financial statements for each of the four quarters in the year ended April 30,
1995 and the first two quarters in the year ending April 30, 1996. A
reconciliation of the Company's previously reported net income to the restated
net income in the restated financial statements for the three months ended
October 31, 1995 and the six months ended October 31, 1995 is as follows:
<TABLE>
<CAPTION>
Three Months Six Months
Ended Ended
October 31, 1995 October 31, 1995
<S> <C> <C>
Income, as previously reported $ 2,039,000 $ 3,741,000
Adjustments:
Overstatement of revenues (963,000) (2,471,000)
Overstatement of inventory and
understatement of purchases (1,949,000) (230,000)
Understatement of expenses (307,000) (711,000)
Total adjustments (3,219,000) (3,412,000)
Less tax benefit of adjustments 1,320,000 1,399,000
Income, as restated $ 140,000 $ 1,728,000
Earnings per share of common stock, as
previously reported primary and fully-
diluted $ .22 $ .40
Adjustments, net of tax benefit (.21) (.12)
Earnings per share of common stock, as
restated primary and fully-diluted $ .01 $ .18
</TABLE>
PART II. OTHER INFORMATION
Item I. Legal Proceedings
On April 3, 1995, American Preferred Prescription, Inc. ("APP") filed a
complaint against the Company, Preferred Px, Inc., Community Prescription
Services and Sean Strub in the New York Supreme Court for tortious interference
with existing and prospective contractual relationships, for lost customers and
business opportunities resulting from alleged, each for up to $10 million in
damages allegedly slanderous statements and for allegedly false advertising and
promotion. Four separate causes of action are alleged, each for up to $10
million in damages. APP had previously filed a similar suit in the United
States Bankruptcy Court of the East District of New York, which was dismissed
and the court abstained from exercising jurisdiction. The Company has answered
the complaint and counterclaimed for libel and slander predicated upon a false
press release issued by APP and added as defendants the principals of APP.
Management believes APP's suit against it to be without principals of APP.
Management believes APP's suit against it to be without merit, intends to defend
the proceedings vigorously and believes the outcome will not have a material
adverse effect on the Company's results of operations or financial position.
On or about November 6, 1995, a stipulation of dismissal without prejudice was
entered into in the United States Bankruptcy Court, Eastern District of New York
in respect of the lawsuit which APP brought against the Company and a former
employee of APP who currently is an employee of the Company. That lawsuit,
which was filed on or about April 74, 1995, involved, among others, claims by
APP that the Company had offered the employee employment in order to obtain
confidential information regarding APP and that the Company's employment of the
employee constituted interference with the employee's contract with APP. in that
lawsuit, APP sought injunctive relief and damages in excess of $10 million.
Item 2. Change in Securities - None
Item 3. Default Upon Senior Securities - Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders
At the Company's annual meeting of stockholders which was held on
October 25, 1995, two matters were submitted to a vote of the stockholders.
First, the existing five directors of the Company, Clifford E. Hotte,
Robert C. Clifton, Virginia Belloise, Andre C. Dimitriadis and David R.
Walker, were re-elected for a one-year term.
Second, the stockholders approved the appointment of BDO Seidman as the
Company's independent auditors. 6,919,910 votes were cast in favor of such
appointment, 27,429 votes were against and 15,144 were abstention or broken
non-votes.
Item 5. Other Information - None
Item 6. Exhibits and Reports of Form 8-K
(a) Exhibits
3. 1 Certificate of Incorporation of the Company, as filed with the
Secretary of State of Delaware on March 25, 1986 (incorporated by
reference to Registration Statement on Form S-1, Registration No.
33-04485).
3. 2 Certificate of Amendment to Certificate of Incorporation of the
Company, as filed with the Secretary of State of Delaware on
March 9, 1988 (incorporated by reference to Form 10-K for year
ended April 30, 1988).
3.3 Certificate of Amendment to Certificate of Incorporation of the
Company, as filed with the Secretary of State of Delaware on
March 31, 1992 (incorporated by reference to Registration
Statement on Form S-1, No. 33-46996).
3.4 Certificate of Amendment to Certificate of Incorporation of the
Company, as filed with the Secretary of State of Delaware on
October 27, 1994 (incorporated by reference to Form 10-K for year
ended April 30, 1995).
3.5 Amended and Restated By-Laws of the Company.
27 * Financial Data Schedule - 601(c)
(b) Reports on Form 8-K
Amendment No. 1 on Form 8-K/A, dated July 18, 1995, to the Company's
Current Report on Form 8-K, dated April 14, 1995, was filed with the
Commission on July 24, 1995.
* Attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Quarterly Report to be signed on its behalf by
the undersigned, thereunto duly authorized, in the County of Suffolk, State of
New York, on the 30th of April, 1996.
HEALTH MANAGEMENT, INC.
(Registrant)
By: /s/ James R. Mieszala
James R. Mieszala, Acting President
(Principal Executive Officer)
By: /s/ Paul Jurewicz
Paul Jurewicz, Treasurer,
Chief Financial Officer
and Executive Vice President
(Principal Financial Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE OCTOBER
31, 1995 FINANCIAL STATEMENTS OF THE COMPANY AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> APR-30-1996
<PERIOD-END> OCT-31-1995
<CASH> 4,093,873
<SECURITIES> 0
<RECEIVABLES> 50,550,087
<ALLOWANCES> 9,837,858
<INVENTORY> 10,843,566
<CURRENT-ASSETS> 63,220,829
<PP&E> 5,031,930
<DEPRECIATION> 1,137,538
<TOTAL-ASSETS> 103,095,065
<CURRENT-LIABILITIES> 49,526,149
<BONDS> 29,462,518
0
0
<COMMON> 279,631
<OTHER-SE> 49,671,836
<TOTAL-LIABILITY-AND-EQUITY> 103,095,065
<SALES> 77,568,817
<TOTAL-REVENUES> 77,568,817
<CGS> 56,652,980
<TOTAL-COSTS> 73,366,103
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 3,429,901
<INTEREST-EXPENSE> 1,262,862
<INCOME-PRETAX> 2,939,852
<INCOME-TAX> 1,211,592
<INCOME-CONTINUING> 1,728,260
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,728,260
<EPS-PRIMARY> .18
<EPS-DILUTED> .18
</TABLE>
