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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarter Ended December 31, 1996
Commission File No. 1-14114
RETIREMENT CARE ASSOCIATES, INC.
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(Exact Name of Registrant as Specified in its Charter)
Colorado 43-1441789
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(State or Other Jurisdiction of (IRS Employer Identification Number)
Incorporation or Organization)
6000 Lake Forrest Drive, Suite 200, Atlanta, Georgia 30328
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(Address of Principal Executive Offices)
(404) 255-7500
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(Registrant's Telephone Number, Including Area Code)
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 report(s), and (2) has been subject to
such filing requirements for the past 90 days.
Yes [ X ] No [ ]
As of December 31, 1996, 13,474,995 shares of Common Stock were outstanding.
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RETIREMENT CARE ASSOCIATES AND SUBSIDIARIES
Form 10-Q For the Quarter Ended December 31, 1996
INDEX Page(s)
PART I. Financial Information
Item 1. Consolidated Financial Statements
Introduction 3
Consolidated Statements of Operations
(Unaudited) - Three Months Ended
December 31, 1996 and December 31, 1995 4
Consolidated Statements of Operations
(Unaudited) - Nine Months Ended
December 31, 1996 and December 31, 1995 5
Consolidated Balance Sheets - (Unaudited)
December 31, 1996 and (Audited) June 30, 1995 6-7
Consolidated Statements of Cash Flows
(Unaudited) - Six Months Ended December 31,
1996 and December 31, 1995 8-9
Notes to Consolidated Financial Statements
(Unaudited) 10-12
Item 2. Managements' Discussion and Analysis of
Results of Operations and Financial
Condition 13-16
PART II. Other Information
Item 1. None
Item 2. None
Item 3. None
Item 4. None
Item 5. Other information
Item 6. Exhibits and Reports on Form 8-K 17
Signatures 18
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PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
INTRODUCTION - CONSOLIDATED FINANCIAL STATEMENTS
The consolidated financial statements included herein have been prepared
pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures have been condensed
or omitted pursuant to such rules and regulations. In the opinion of
Management, all adjustments, which were of a normal recurring nature,
necessary to present fairly the consolidated financial position and results of
operations and cash flows for the periods presented have been included. These
consolidated financial statements should be read in conjunction with the
financial statements and the notes thereto included in the Annual Report on
Form 10-K, Retirement Care Associates, Inc. (the "Company") for the fiscal
year ended June 30, 1996, File No. 1-14114.
The Financial information included in this report has been prepared by the
Company, without audit, and should not be relied upon to the same extent as
audited financial statements.
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Retirement Care Associates, Inc. and Subsidiaries
Unaudited Consolidated Statements of Operations
for the Three Months Ended December 31, 1996 and 1995
December 31, December 31,
1996 1995
Revenues
Patient service revenue: $ 47,950,464 $ 28,342,120
Medical supply revenue 11,631,336 1,605,242
Management fee revenue:
From affiliates 446,334 783,669
From others 112,241 112,247
Other operating revenue 1,246,894 386,899
61,387,269 31,230,177
Expenses
Cost of patient services 31,638,661 17,608,280
Cost of medical supplies sold 7,745,113 1,831,267
Lease expense 3,233,666 1,729,516
General and administrative 11,539,580 4,314,937
Depreciation and amortization 1,320,618 588,175
Interest 2,807,304 1,343,981
58,284,942 27,416,156
Income before minority interest and
income taxes 3,102,327 3,814,021
Minority interest (157,500) (31,412)
Income before income taxes and
extraordinary item 2,944,287 3,782,609
Income taxes 1,119,034 1,462,598
Income before extraordinary item 1,825,793 2,320,011
Extraordinary item, less applicable
income taxes of ($516,240) (842,580) --
Net Income $ 983,213 $ 2,320,011
Income per common and common equiva-
lent share before extraordinary item .12 .19
Net income per common and common equivalent
share .06 .19
Weighted average shares outstanding 15,420,468 12,386,290
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Retirement Care Associates, Inc. and Subsidiaries
Unaudited Consolidated Statements of Operations for
the Six Months Ended December 31, 1996 and 1995
December 31, December 31,
1996 1995
Revenues
Patient service revenue: $ 89,935,031 $ 54,177,449
Medical supply revenue 22,856,118 3,194,315
Management fee revenue:
From affiliates 1,252,501 1,581,171
From others 240,120 222,624
Other operating revenue 2,243,130 694,795
116,526,900 59,870,354
Expenses
Cost of patient services 62,119,227 33,652,390
Cost of medical supplies sold 15,212,286 3,420,339
Lease expense 5,855,218 3,480,931
General and administrative 21,146,069 8,770,518
Depreciation and amortization 2,421,211 1,077,789
Interest 5,182,905 2,272,833
111,936,916 52,674,800
Income before minority interest and
income taxes 4,589,984 7,195,554
Minority interest (352,500) (68,960)
Income before income taxes and
extraordinary item 4,237,484 7,126,594
Income taxes 1,610,244 2,747,863
Income before extraordinary item 2,627,240 4,378,731
Extraordinary item, less applicable
income taxes of ($516,240) (842,580) --
Net Income $ 1,784,660 $ 4,378,731
Income per common and common equiva-
lent share before extraordinary item .18 .35
Net income per common and common
equivalent share .12 .35
Weighted average shares outstanding 14,996,887 12,386,290
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Retirement Care Associates, Inc. and Subsidiaries
Unaudited Consolidated Balance Sheets as of
December 31, 1996 and Audited at June 30, 1996
Unaudited Audited
December 31, June 30,
1996 1996
Assets
Current
Cash and cash equivalents $ 328,924 $ 45,365
Accounts receivable 36,296,497 20,556,920
Inventory 10,193,585 4,849,819
Deferred income taxes 470,193 461,214
Note and accrued interest receivable 636,250 713,750
Restricted Bond Fund 5,513,728 2,342,565
Prepaid expenses and other 2,975,460 1,791,442
Total current assets 56,414,637 30,761,075
Property and equipment 138,485,928 114,682,082
Other assets
Marketable equity securities 1,101,393 33,645
Investments in unconsolidated affiliates 645,249 496,800
Deferred lease and loan costs 9,797,224 7,665,891
Goodwill, net of accumulated amortiza-
tion 11,550,103 3,976,675
Notes and advances due from non-
affiliates 2,307,682 1,422,247
Notes and advances due from affiliates -- 14,316,661
Restricted bond funds 4,400,000 3,514,969
Other assets 2,751,108 2,687,602
Total other assets 32,552,759 34,114,490
$227,453,324 $179,557,647
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Retirement Care Associates, Inc. and Subsidiaries
Unaudited Consolidated Balance Sheets as of
December 31, 1996 and Audited at June 30, 1996
Unaudited Audited
December 31, June 30,
1996 1996
Liabilities and Shareholders' Equity
Current liabilities
Lines of credit $ 3,500,000 $ 1,456,535
Current maturities of long-term de 16,491,228 2,055,880
Accounts payable 19,981,410 11,201,976
Accrued expenses 7,296,601 7,543,131
Income taxes payable -- 3,889,809
Deferred gain 40,000 40,000
Total current liabilities 47,309,239 26,187,331
Deferred gain 201,370 371,370
Deferred income taxes 1,387,000 1,465,877
Long-term debt, less current maturities 129,983,611 110,375,799
Minority interest 4,793,056 4,068,147
Redeemable convertible preferred stock 1,800,000 2,400,000
Shareholders' equity
Common stock, $.0001 par value;
300,000,000 shares authorized;
13,786,278 and 12,145,875 shares
outstanding 1,379 1,215
Preferred stock 6,230,000 8,765,250
Additional paid-in capital 38,918,417 26,972,655
Retained earnings (2,629,318) (929,877)
Treasury stock (541,430) (120,120)
Total shareholders' equity 41,979,048 34,689,123
Total Liabilities and shareholders'
equity $227,453,324 $179,557,647
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Retirement Care Associates, Inc.
Unaudited Consolidated Statements of Cash Flows for
the Six Months Ended December 31, 1996 and 1995
December 31, December 31,
1996 1995
Operating activities
Net income $ 1,784,660 $ 4,378,731
Adjustments to reconcile net income to
cash provided by operating activities:
Depreciation and amortization 2,421,211 1,077,789
Amortization of deferred gain (170,000) --
Minority interest 352,500 181,716
Deferred income taxes (87,856) --
Changes in current assets and liabili-
ties net of effects of acquisitions:
Accounts receivable (15,739,577) (12,491,771)
Inventory (5,343,766) (338,280)
Prepaid expense and other assets (1,247,524) (2,477,168)
Accounts payable and accrued expenses 4,643,095 8,427,971
Increase in deferred lease and loan
costs (2,711,399) (1,017,781)
Cash (used in) operating activities (16,098,656) (2,258,793)
Investing activities
Purchase of property and equipment (25,644,991) (39,301,488)
Issuance of notes receivable and
advances to affiliates 14,316,661 (2,018,200)
Investment in and advances to Atrium
Ltd. -- (655,253)
Restricted bond funds (4,056,194) --
Changes in marketable equity securities (1,067,748) (459,239)
Change in receivable (807,935) 1,141,900
Investment in unconsolidated subsidiaries (148,449) --
Cash (used in) investing activities (17,408,656) (41,292,280)
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Retirement Care Associates, Inc.
Unaudited Consolidated Statements of Cash Flows for
the Six Months Ended December 31, 1996 and 1995
December 31, December 31,
1996 1995
Financing activities
Dividends on preferred stock (105,000) (150,000)
Redemption of preferred stock (600,000) --
Net proceeds from issuance of:
Line of credit 2,043,465 --
Common stock 70,676 295,198
Long-term debt 28,110,035 40,427,251
Preferred stock 9,340,000 --
Payments on long-term debt (1,267,894) (1,210,667)
Purchase and retirement of common stock (3,800,411) --
Cash provided by financing activities 33,790,871 39,361,782
Net (decrease) in cash and cash equiva-
lents 283,559 (4,189,291)
Cash and cash equivalents, beginning of
year 45,365 5,207,185
Cash and cash equivalents, end of year $ 328,924 $ 1,017,894
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RETIREMENT CARE ASSOCIATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1: BASIS OF PRESENTATION
The consolidated financial statements included herein have been prepared by
the Company, without audit, 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
pursuant to such rules and regulations, although the Company believes that the
disclosures are adequate to make the information presented not misleading.
These consolidated financial statements and the notes thereto should be read
in conjunction with the consolidated financial statements included in the
Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1996,
File No 1-14114.
In the opinion of management of the Company, the accompanying unaudited
consolidated financial statements contain all necessary adjustments to present
fairly the financial position, the results of operations and cash flows for
the periods reported. All adjustments are of a normal recurring nature.
The Financial Accounting Standard Board has adopted Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities" (SFAS No. 115). The Company has adopted this standard in
fiscal 1995. In management's opinion, adopting SFAS No. 115 did not
materially effect the Company's financial statements for the three months
ended December 31, 1995.
For purposes of computing earnings per share, net income is reduced for the
10% cumulative preferred dividend on the Series AA preferred stock.
NOTE 2. ACCOUNTS RECEIVABLE AND COST REIMBURSEMENTS
Accounts receivable and operating revenue include net amounts reimbursed by
Medicaid under the provisions of cost reimbursement formulas in effect. The
Company operates under a prospective payment system with Medicare, under which
annual rates are assigned based on estimated reimbursements. Differences
between estimated provisions and final settlement are reflected as adjustments
to future rates.
NOTE 3. INVENTORIES
Inventories consist of the following at December 31, 1996:
Raw material $ 330,823
Work in process 62,985
Finished goods 9,799,777
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$10,193,585
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RETIREMENT CARE ASSOCIATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 4: NOTES RECEIVABLE AND ADVANCES TO AFFILIATES
At December 31, 1996 and June 30, 1996, the Company had notes and advances to
affiliates totaling approximately $0 and $14,316,661, respectively. The
notes were repaid by the sale of two retirement homes to the Company at fair
market value and the retirement of 399,992 shares of the Companies stock held
by the affiliates. (See Note 6)
NOTE 5: LONG-TERM DEBT
Long-term debt payable consisted of the following:
December 31, June 30,
1996 1996
Amounts outstanding under
Revenue Bonds secured by
retirement facilities $65,110,000 $59,986,000
Other debt secured by
retirement and nursing
facilities 54,123,531 39,848,938
Other debt 27,241,308 12,596,741
Totals 146,474,839 112,431,679
Current maturities 16,491,228 2,055,880
Total long-term debt $129,983,611 $110,375,799
NOTE 6: FACILITY ACQUISITIONS
During the quarter ended December 31, 1996, the Company entered into a series
of transactions with Winter Haven, Gordon Jensen Health Care Association, Inc.
("Gordon Jensen"), National Assistance Bureau, Inc. ("NAB"), Southeastern
Cottages, Inc. ("Southeastern"), Chamber Health Care Society, Inc.
("Chamber"), and Senior Care, Inc. ("Senior"); all are entities which
principal shareholders of the Company either own or control. The result of
the transactions was to eliminate all notes receivable and advances due to the
Company from affiliates. The following is a summary of the transactions:
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RETIREMENT CARE ASSOCIATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
NOTE 6: FACILITY ACQUISITION (Continued)
On September 30, 1996, Winter Haven sold to the Company two retirement
facilities for their fair value, based on independent appraisal, totaling
$19,200,000. The facilities were acquired by the Company subject to bond debt
of $7,670,000, resulting in debt due to Winter Haven from the Company of
$11,530,000. As part of the sales agreement, the Company and Winter Haven
agreed that the debt of $11,530,000 would be applied to eliminate the
receivable, totaling $11,214,320, due to the Company by Winter Haven.
On September 27, 1996, Gordon Jensen contributed to the treasury of the
Company 400,000 shares of stock in the Company which had a fair market value
of $3,000,000. This transaction results in the elimination of the debt,
totaling $2,982,000, due to the Company by Gordon Jensen and a reduction of
stockholders' equity of the Company by $3,000,000.
NOTE 7: OTHER TRANSACTIONS
On August 6, 1996, Contour acquired all of the outstanding stock of Atlantic
Medical Supply Company, Inc. ("Atlantic Medical"), a distributor of disposable
medical supplies and a provider of third-party billing services to the nursing
home and home health care markets. The acquisition was made retroactively to
July 1, 1996. Contour paid $1.4 million in cash and $10.5 million in
promissory notes for all of the outstanding stock of Atlantic Medical. The
promissory notes bear interest at 7% per annum and were due in full on January
10, 1997. In the event of a default in the payment of the promissory notes,
they were convertible into shares of common stock of RCA. On January 10,
1997, Contour retired all outstanding notes due to sellers of Atlantic Medical
in the aggregate principal amount of $10,850,000, along with accrued interest.
The retirement of these notes was funded by a loan of $9,750,000 from the
Company, with the balance funded from Contour's existing line of credit with
Barnett Bank. The loan from the Company was evidenced by a convertible
promissory note bearing interest at 9% per annum and payable upon demand.
This note was convertible into 1,950,000 shares of Contour's Common Stock, and
on January 10, 1997, the Company exercised this conversion right.
During the period from September 27 through October 2, 1996, the Company sold
1,000,000 shares of Series F Convertible Preferred Stock in an offering to
foreign investors at $10.00 per share. Holders of the Series F Preferred
Stock have no voting rights except as required by law, and have liquidation
preference of $10.00 per share plus 4% per annum from the date of issuance.
The shares of Series F Preferred Stock are convertible into shares of common
stock at a conversion price of the lessor of (a) $9.6525 or 110% of the
average closing bid price for the twenty consecutive trading days commencing
September 30, 1996, whichever is lower, or (b) 85% of the average closing bid
price for the five trading days prior to the date of conversion. The maximum
number of shares of common stock which can be issued upon conversion of the
Series F Preferred Stock is 2,588,000. At the time of conversion, the holder
is also entitled to additional shares equal to $10.00 per share of Series F
Preferred Stock converted multiplied by 8% per annum from the date of issuance
divided by the applicable conversion price.
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RETIREMENT CARE ASSOCIATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
THREE MONTHS ENDED DECEMBER 31, 1996 COMPARED TO THREE MONTHS ENDED DECEMBER
31, 1995
The Company's total revenues for the three months ended December 31, 1996,
were $61,387,269 compared to $31,230,177 for the three months ended December
31, 1995.
Due to the increased number of facilities owned or leased by the Company,
patient service revenue increased from $28,342,120 for the quarter ended
December 31, 1995, to $47,950,464 for the quarter ended December 31, 1996.
The Company was operating 81 facilities for the quarter ended December 31,
1996 compared to 42 for the quarter ended December 31, 1995. The cost of
patient services in the amount of $31,638,661 for the quarter ended December
31, 1996, represented 65% of patient service revenue, as compared to
$17,608,280 or 63% of patient service revenue during the quarter ended
December 31, 1995. This increase is attributed to the Company acquiring
skilled nursing facilities which require more skilled care and to delays in
Medicaid rate increases discussed below.
Medical supply revenue increased from $1,605,242 during the quarter ended
December 31, 1995, to $11,631,336 during the quarter ended December 31, 1996.
These revenues, which are revenues of Contour Medical, Inc. ("Contour"), a
majority-owned subsidiary, increased primarily as a result of two acquisitions
made by Contour. Contour acquired AmeriDyne Corporation ("AmeriDyne")
effective March 1, 1996, and Atlantic Medical Supply Company, Inc.
("Atlantic") effective July 1, 1996. Cost of medical supplies sold as a
percentage of medical supply revenue decreased to approximately 66.5% during
the quarter ended December 31, 1996, as compared to approximately 100% of
such revenue during the same period last year. The reduced percentage is
primarily a result of higher gross profit margins on the products sold by
AmeriDyne and Atlantic.
Management fees decreased from $895,916 in the quarter ended December 31, 1995
to $558,575 in the quarter ended December 31, 1996, due to the number of
facilities which the Company manages. As of December 31, 1995, the Company
was managing 25 facilities, and as of December 31, 1996, the Company was
managing 18 facilities. The Company has leased or purchased 8 facilities it
managed at December 31, 1995. Management anticipates that the number of
facilities only managed by the company will continue to decline as a result of
acquisition of such facilities by the Company.
General and administrative expenses for the three months ended December 31,
1996 were $11,539,580 representing 19% of total revenues, as compared to
$4,314,937 representing 14% of total revenues, for the three months ended
December 31, 1995. This increase is due to the general and administrative
expenses related to operating the additional facilities owned or leased by the
Company, and the acquisition by Contour of Atlantic Medical.
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RETIREMENT CARE ASSOCIATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
For the quarter ended December 31, 1996, the Company incurred expense for
income taxes of $1,119,034 which represents an effective tax rate of 38%, as
compared to expenses for income taxes of $1,462,598 which represents an
effective tax rate of 39% for the quarter ended December 31, 1995.
The net income of $983,213 for the quarter ended December 31, 1996, is lower
than the net income of $2,320,011 for the quarter ended December 31, 1995.
The net income for the quarter ended December 31, 1996, is a result of an
extraordinary charge relating to a restructure of debt and the result of
delays in annual Medicaid rate increases, which are usually in effect on July
1 of each year. This year the rate increases in Georgia were delayed until
August 16, 1996, and the rate increase in Tennessee were delayed until
November 1, 1996. Most of the long-term care facilities operated by the
Company are located in these two states.
Most of the revenue from the management services division of the Company's
business is received pursuant to management agreements with entities
controlled by Messrs. Brogdon and Lane, two of the Company's officers and
directors. These management agreements have five year terms, however, they
are subject to termination on 60 days notice, after the end of the third year
of the Agreement with or without cause by either the Company or the owners.
Therefore, Messrs. Brogdon and Lane have full control over whether or not
these management agreements, and thus the management service revenue, continue
in the future.
SIX MONTHS ENDED DECEMBER 31, 1996 COMPARED TO THE SIX MONTHS ENDED DECEMBER
31, 1995
The Company's total revenues for the six months ended December 31, 1996, were
$116,526,900 compared to $59,870,354 for the six months ended December 31,
1995.
Due to the increased number of facilities owned or leased by the Company,
patient service revenue increased from $54,177,449 for the six months ended
December 31, 1995, to $89,935,031 for the six months ended December 31, 1996.
The Company was operating 81 facilities in the six months ended December 31,
1996 compared to 42 for the six months ended December 31, 1995. The cost of
patient services in the amount of $62,119,227 for the six months ended
December 31, 1996, represented 69% of patient service revenue, as compared to
$33,652,390 or 67% of patient service revenue during the six months ended
December 31, 1995. This increase is attributed to the Company acquiring
skilled nursing facilities which require more skilled care and to delays in
Medicaid rate increases discussed below.
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RETIREMENT CARE ASSOCIATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Medical supply revenues increased from $3,194,315 during the quarter ended
December 31, 1995, to $22,856,118 during the quarter ended December 31, 1996.
These revenues, which are revenues of Contour, a majority-owned subsidiary,
increased primarily as a result of two acquisitions made by Contour. Contour
acquired AmeriDyne Corporation ("AmeriDyne") effective March 1, 1996, and
Atlantic Medical effective July 1, 1996. Cost of medical supplies sold as a
percentage of medical supply revenue decreased to approximately 66.5% during
the quarter ended December 31, 1996, as compared to approximately 100% of such
revenue during the same period last year. The reduced percentage is primarily
a result of higher gross profit margins on the products sold by AmeriDyne and
Atlantic Medical.
Management fees decreased from $1,803,795 in the six months ended December 31,
1995 to $1,492,621 in the six months ended December 31, 1996 because the
Company purchased or leased 8 facilities it managed at December 31, 1995. As
of December 31, 1995, the Company was managing 25 facilities, and as of
December 31, 1996 the Company was managing 18 facilities.
General and administrative expenses for the six months ended December 31, 1996
were $21,146,069 representing 18% of total revenues, as compared to $8,770,518
representing 15% of total revenues, for the six months ended December 31,
1995. This increase is due to the general and administrative expenses related
to operating the additional facilities owned or leased by the Company, and the
acquisition by Contour of Atlantic Medical.
For the six months ended December 31, 1996, the Company incurred expenses for
income taxes of $1,610,244 which represents an effective tax rate of 38%, as
compared to expenses for income taxes of $2,747,863 which represents an
effective rate of 39% for the six months ended December 31, 1995.
The net income of $1,784,660 for the six months ended December 31, 1996, is
less than the net income of $4,378,731 for the six months ended December 31,
1995. The net income for the six months ended December 31, 1996, is a result
of an extraordinary charge relating to a restructuring of debt and the and the
result of delays in annual Medicaid rate increases, which are usually in
effect on July 1 of each year. This year the rate increases in Georgia were
delayed until August 16, 1996, and the rate increases in Tennessee were
delayed until November 1, 1996. Most of the long-term care facilities
operated by the Company are located in these two states.
Most of the revenue from the management services division of the Company's
business is received pursuant to management agreements with entities
controlled by Messrs. Brogdon and Lane, two of the Company's officers and
directors. These management agreements have five year terms, however, they
are all subject to termination on 60 days notice, with or without cause by
either the Company or the owners. Therefore, Messrs. Brogdon and Lane have
full control over whether or not these management agreements, and thus the
management services revenue, continue in the future.
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RETIREMENT CARE ASSOCIATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
LIQUIDITY AND CAPITAL RESOURCES
At December 31. 1996, the Company had $4,105,398 in working capital compared
to $4,573,744 at June 30, 1996.
During the six months ended December 31, 1996, cash used by operating
activities was (16,098,656) as compared to (2,258,793) for the quarter ended
December 31, 1995. The (13,839,863) decrease was primarily due to the
increase in accounts receivable for the six months ended December 31, 1996 of
$11,739,577. These increases in non-cash assets were partially offset by
increases in accounts payable and accrued expense of $4,643,095.
Cash used in investing activities during the six months ended December 31,
1996 was 17,408,656. The expenditures related to purchases of equipment,
securities, investments in subsidiaries and advances to affiliates.
Cash provided by financing activities during the six months ended December 31,
1996 consisted of $28,110,035 in long term loans and $9,340,000 in issuance of
preferred stock. Cash used in financing activities consisted of ($1,267,894)
in payments of long term debt and the purchase and retirement of common stock
of (3,800,411).
IMPACT OF PENDING FEDERAL HEALTH CARE LEGISLATION
Management is uncertain what the financial impact will be of the pending
federal health care reform package since the legislation has not been
finalized. However, based on information which has been released to the
public thus far, management does not believe that there will be cuts in
reimbursements paid to nursing homes.
Legislative and regulatory action at the state and federal level, has resulted
in continuing changes in the Medicare and Medicaid reimbursement programs.
The changes have limited payment increases under those programs. Also, the
timing of payments made under Medicare and Medicaid programs are subject to
regulatory action and governmental budgetary constraints. Within the
statutory framework of the Medicare and Medicaid programs, there are
substantial areas subject to administrative rulings and interpretations which
may further affect payments made under these programs. Further, the federal
and state governments may reduce the funds available under those programs in
the future or require more stringent utilization and quality review of health
care facilities.
-16-
<PAGE>
RETIREMENT CARE ASSOCIATES, INC
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
Management continues to look for acquisitions in the retirement and nursing
home field for the Company.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 27 - Financial Data Schedule Filed herewith electronically
(b) Reports on Form 8-K. None.
-17-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
RETIREMENT CARE ASSOCIATES, INC.
DATED: February 14, 1997 By:/s/ Chris Brogdon
Chris Brogdon, President
DATED: February 14, 1997 By:/s/ Darrell C. Tucker
Darrell C. Tucker, Treasurer
(Chief Financial Officer and
Principal Accounting Officer)
-18-
<PAGE>
EXHIBIT INDEX
EXHIBIT METHOD OF FILING
- ------- ------------------------------
27. Financial Data Schedule Filed herewith electronically
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
balance sheets and statements of operations found on pages 4-7 of the
Company's Form 10-Q for the year to date, and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<CIK> 0000798540
<NAME> RETIREMENT CARE ASSOCIATES, INC.
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> DEC-31-1996
<CASH> 328,924
<SECURITIES> 0
<RECEIVABLES> 36,296,497
<ALLOWANCES> 0
<INVENTORY> 10,193,585
<CURRENT-ASSETS> 56,414,637
<PP&E> 138,485,928
<DEPRECIATION> 0
<TOTAL-ASSETS> 227,453,324
<CURRENT-LIABILITIES> 47,309,239
<BONDS> 0
<COMMON> 1,379
0
6,230,000
<OTHER-SE> 35,747,669
<TOTAL-LIABILITY-AND-EQUITY> 227,453,324
<SALES> 22,856,118
<TOTAL-REVENUES> 116,526,900
<CGS> 77,331,513
<TOTAL-COSTS> 77,331,513
<OTHER-EXPENSES> 106,754,008
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,182,905
<INCOME-PRETAX> 4,237,484
<INCOME-TAX> 1,610,244
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> (842,587)
<CHANGES> 0
<NET-INCOME> 1,784,660
<EPS-PRIMARY> .12
<EPS-DILUTED> .00
</TABLE>
