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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 March 31, 1997
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 March 31, 1997, 14,284,977 shares of Common Stock were outstanding.
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RETIREMENT CARE ASSOCIATES AND SUBSIDIARIES
Form 10-Q For the Quarter Ended March 31, 1997
INDEX Page(s)
PART I. Financial Information
Item 1. Consolidated Financial Statements
Introduction . . . . . . . . . . . . . . . . . . . . . . 3
Consolidated Statements of Operations
(Unaudited) - Three Months Ended
March 31, 1997 and March 31, 1996. . . . . . . . . . . . 4
Consolidated Statements of Operations
(Unaudited) - Nine Months Ended
March 31, 1997 and March 31, 1996. . . . . . . . . . . . 5
Consolidated Balance Sheets - (Unaudited)
March 31, 1997 and (Audited) June 30, 1996 . . . . . . . 6-7
Consolidated Statements of Cash Flows
(Unaudited) - Nine Months Ended March 31,
1997 and March 31, 1996. . . . . . . . . . . . . . . . . 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. . . . . . . . . . . . . . . . . . . . 17
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
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 March 31, 1997 and 1996
March 31, March 31,
1997 1996
Revenues
Patient service revenue $ 53,044,270 $ 32,004,561
Medical supply revenue 11,736,583 2,100,600
Management fee revenue:
From affiliates 525,001 957,000
From others 107,579 73,882
Other operating revenue 250,193 486,370
65,663,626 35,622,413
Expenses
Cost of patient services 35,357,497 18,814,605
Cost of medical supplies sold 7,944,318 2,751,524
Lease expense 3,614,637 1,542,445
General and administrative 10,619,461 6,848,798
Depreciation and amortization 1,576,198 926,608
Interest 3,317,793 1,837,484
62,429,904 32,721,464
Income before minority interest and
income taxes 3,233,722 2,900,949
Minority interest (81,694) (58,097)
Income before income taxes 3,152,028 2,842,852
Income taxes 1,189,756 1,106,272
Net Income $ 1,962,272 $ 1,736,580
Net income per common and common
equivalent share .13 .15
Weighted average shares outstanding 15,567,830 11,861,885
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Retirement Care Associates, Inc. and Subsidiaries
Unaudited Consolidated Statements of Operations for
the Nine Months Ended March 31, 1997 and 1996
March 31, March 31,
1997 1996
Revenues
Patient service revenue: $142,979,301 $ 86,182,010
Medical supply revenue 34,592,701 5,294,915
Management fee revenue:
From affiliates 1,777,500 2,538,171
From others 347,701 296,506
Other operating revenue 2,493,323 1,181,165
182,190,526 95,492,767
Expenses
Cost of patient services 97,476,724 52,466,995
Cost of medical supplies sold 23,156,604 6,171,863
Lease expense 9,469,855 5,023,376
General and administrative 31,765,530 15,619,316
Depreciation and amortization 3,997,409 2,004,397
Interest 8,500,698 4,110,317
174,366,820 85,396,264
Income before minority interest
and income taxes 7,823,706 10,096,503
Minority interest (434,194) (127,057)
Income before income taxes and
extraordinary item 7,389,512 9,969,446
Income taxes 2,800,000 3,854,135
Income before extraordinary item 4,589,512 6,115,311
Extraordinary item, less applicable
income taxes of ($516,240) (842,580) --
Net Income $ 3,746,932 $ 6,115,311
Income per common and common equiva-
lent share before extraordinary item .31 .52
Net income per common and common
equivalent share .25 .52
Weighted average shares outstanding 15,247,055 11,861,885
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Retirement Care Associates, Inc. and Subsidiaries
Unaudited Consolidated Balance Sheets as of
March 31, 1997 and Audited at June 30, 1996
Unaudited Audited
March 31, June 30,
1997 1996
Assets
Current
Cash and cash equivalents $ 356,197 $ 45,365
Accounts receivable 41,272,073 20,556,920
Inventory 10,767,525 4,849,819
Deferred income taxes 420,000 461,214
Note and accrued interest receivable 627,500 713,750
Restricted Bond Fund 3,400,000 2,342,565
Prepaid expenses and other 4,342,014 1,791,442
Total current assets 61,185,309 30,761,075
Property and equipment 139,158,654 114,682,082
Other assets
Marketable equity securities 895,846 33,645
Investments in unconsolidated affiliates 734,514 496,800
Deferred lease and loan costs 10,997,028 7,665,891
Goodwill, net of accumulated amortiza-
tion 12,253,691 3,976,675
Notes and advances due from non-
affiliates 1,649,191 1,422,247
Notes and advances due from affiliates -- 14,316,661
Restricted bond funds 6,136,604 3,514,969
Other assets 3,150,805 2,687,602
Total other assets 35,817,679 34,114,490
$236,161,642 $179,557,647
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Retirement Care Associates, Inc. and Subsidiaries
Unaudited Consolidated Balance Sheets as of
March 31, 1997 and Audited at June 30, 1996
Unaudited Audited
March 31, June 30,
1997 1996
Liabilities and Shareholders' Equity
Current liabilities
Lines of credit $ 3,500,000 $ 1,456,535
Note payable 9,750,000 --
Current maturities of long-term de 7,970,922 2,055,880
Accounts payable 23,862,246 11,201,976
Accrued expenses 7,640,223 7,543,131
Income taxes payable 252,823 3,889,809
Deferred gain 40,000 40,000
Total current liabilities 53,016,214 26,187,331
Deferred gain 191,370 371,370
Deferred income taxes 1,465,877 1,465,877
Long-term debt, less current maturities 129,636,648 110,375,799
Minority interest 5,145,253 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;
14,284,977 and 12,145,875 shares
outstanding 1,429 1,215
Preferred stock 3,767,000 8,765,250
Additional paid-in capital 42,391,319 26,972,655
Retained earnings (1,253,468) (929,877)
Treasury stock ( -- ) (120,120)
Total shareholders' equity 44,906,280 34,689,123
Total Liabilities and shareholders'
equity $236,161,642 $179,557,647
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Retirement Care Associates, Inc.
Unaudited Consolidated Statements of Cash Flows for
the Nine Months Ended March 31, 1997 and 1996
March 31, March 31,
1997 1996
Operating activities
Net income $ 3,746,932 $ 6,115,311
Adjustments to reconcile net income to
cash provided by operating activities:
Depreciation and amortization 3,997,409 1,947,411
Amortization of deferred gain (180,000) --
Minority interest 1,077,106 127,057
Deferred income taxes 41,214 --
Changes in current assets and liabili-
ties net of effects of acquisitions:
Accounts receivable (20,715,153) (12,552,151)
Inventory (5,917,706) (1,494,627)
Prepaid expense and other assets (3,013,775) (6,814,868)
Accounts payable and accrued expenses 9,120,376 6,299,946
Increase in deferred lease and loan
costs (3,832,095) (1,916,123)
Cash (used in) operating activities (15,675,692) (8,288,044)
Investing activities
Purchase of property and equipment (27,789,604) (41,025,608)
Issuance of notes receivable and
advances to affiliates 14,316,661 (2,285,205)
Investment in and advances to Atrium
Ltd. -- (1,278,684)
Restricted bond funds (3,679,070) --
Changes in marketable equity securities (862,201) (574,766)
Change in receivable (140,694) 2,396,667
Investment in unconsolidated subsidiaries (237,714) --
Cash (used in) investing activities (18,392,622) (42,767,596)
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Retirement Care Associates, Inc.
Unaudited Consolidated Statements of Cash Flows for
the Nine Months Ended March 31, 1997 and 1996
March 31, March 31,
1997 1996
Financing activities
Dividends on preferred stock (150,000) (225,000)
Redemption of preferred stock (600,000) (600,000)
Net proceeds from issuance of:
Line of credit 2,043,465 --
Common stock 1,080,628 355,161
Long-term debt 28,110,035 48,036,000
Preferred stock 9,340,000 --
Payments on long-term debt (1,644,579) (1,377,466)
Purchase and retirement of common stock (3,800,403) --
Cash provided by financing activities 34,379,146 46,188,695
Net increase (decrease) in cash and
cash equivalents 310,832 (4,866,945)
Cash and cash equivalents, beginning of
year 45,365 5,207,185
Cash and cash equivalents, end of year $ 356,197 $ 340,240
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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.
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 March 31, 1997:
Raw material $ 352,485
Work in process 84,181
Finished goods 10,330,859
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$10,767,525
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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 March 31, 1997 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 $ 64,295,000 $59,986,000
Other debt secured by
retirement and nursing
facilities 52,127,681 39,848,938
Other debt 21,184,889 12,596,741
Totals 137,607,570 112,431,679
Current maturities 7,970,922 2,055,880
Total long-term debt $ 129,636,648 $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 MARCH 31, 1997 COMPARED TO THREE MONTHS ENDED MARCH 31,
1996
The Company's total revenues for the three months ended March 31, 1997, were
$65,663,626 compared to $35,622,413 for the three months ended March 31, 1996.
Due to the increased number of facilities owned or leased by the Company,
patient service revenue increased from $32,004,561 for the quarter ended March
31, 1996, to $53,044,270 for the quarter ended March 31, 1997. The Company
was operating 86 facilities for the quarter ended March 31, 1997 compared to
54 for the quarter ended March 31, 1996. The cost of patient services in the
amount of $18,814,605 for the quarter ended March 31, 1996, represented 59% of
patient service revenue, as compared to $35,357,497 or 67% of patient service
revenue during the quarter ended March 31, 1997. This increase is attributed
to the Company acquiring skilled nursing facilities which require more skilled
care and to delays in Medicaid rate increases discussed in the comparison of
the nine month periods ended March 31 below.
Medical supply revenue increased from $2,100,600 during the quarter ended
March 31, 1996, to $11,736,583 during the quarter ended March 31, 1997. 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, 1997, 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 March 31, 1997, 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 $1,030,882 in the quarter ended March 31, 1996
to $632,580 in the quarter ended March 31, 1997, due to the number of
facilities which the Company manages. As of March 31, 1996, the Company was
managing 24 facilities, and as of March 31, 1997, the Company was managing 11
facilities. The Company has leased or purchased 13 facilities it managed at
March 31, 1996. 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 March 31, 1997
were $10,619,461 representing 17% of total revenues, as compared to
$6,848,798 representing 19% of total revenues, for the three months ended
March 31, 1996. This increase in the dollar amount 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
and AmeriDyne.
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RETIREMENT CARE ASSOCIATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
For the quarter ended March 31, 1997, the Company incurred expense for income
taxes of $1,189,756 which represents an effective tax rate of 38%, as compared
to expenses for income taxes of $1,106,272 which represents an effective tax
rate of 39% for the quarter ended March 31, 1996.
The net income of $1,962,272 for the quarter ended March 31, 1997, is higher
than the net income of $1,736,580 for the quarter ended March 31, 1996. The
net income for the quarter ended March 31, 1997, is a result of additional
facilities the Company operates.
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.
NINE MONTHS ENDED MARCH 31, 1997 COMPARED TO THE NINE MONTHS ENDED MARCH 31,
1996
The Company's total revenues for the nine months ended March 31, 1997, were
$182,190,526 compared to $95,492,767 for the nine months ended March 31, 1996.
Due to the increased number of facilities owned or leased by the Company,
patient service revenue increased from $86,182,000 for the nine months ended
March 31, 1996, to $142,979,301 for the nine months ended March 31, 1997.
The Company was operating 86 facilities in the nine months ended March 31,
1997 compared to 54 for the nine months ended March 31, 1996. The cost of
patient services in the amount of $97,476,724 for the nine months ended March
31, 1997, represented 69% of patient service revenue, as compared to
$52,466,995 or 61% of patient service revenue during the nine months ended
March 31, 1996. 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 $5,294,915 during the quarter ended
March 31, 1996, to $34,592,701 during the quarter ended March 31, 1997. 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 March 31, 1997, 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 $2,834,677 in the nine months ended March 31,
1996 to $2,125,201 in the nine months ended March 31, 1997 because the Company
purchased or leased 13 facilities it managed at March 31, 1996. As of March
31, 1996, the Company was managing 24 facilities, and as of March 31, 1997 the
Company was managing 11 facilities.
General and administrative expenses for the nine months ended March 31, 1997
were $31,765,530 representing 18% of total revenues, as compared to
$15,619,316 representing 16% of total revenues, for the nine months ended
March 31, 1996. 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 nine months ended March 31, 1997, the Company incurred expenses for
income taxes of $2,800,000 which represents an effective tax rate of 38%, as
compared to expenses for income taxes of $3,854,135 which represents an
effective rate of 39% for the nine months ended March 31, 1996.
The net income of $3,746,932 for the nine months ended March 31, 1997, is less
than the net income of $6,115,311 for the nine months ended March 31, 1996.
The net income for the nine months ended March 31, 1997, 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 March 31. 1997, the Company had $8,169,095 in working capital compared to
$4,573,744 at June 30, 1996. The primary reason for the increase was the
receipt of $28,110,035 in proceeds from the issuance of long term debt.
During the nine months ended March 31, 1997, cash used by operating activities
was 15,675,692 as compared to 8,288,044 for the quarter ended March 31, 1996.
The 7,387,648 increase was primarily due to the increase in accounts
receivable for the nine months ended March 31, 1997 of $20,715,153. These
increases in non-cash assets were partially offset by increases in accounts
payable and accrued expense of $9,120,376.
Cash used in investing activities during the nine months ended March 31, 1997
was 18,392,622. The expenditures related to purchases of equipment,
securities, investments in subsidiaries and advances to affiliates.
Cash provided by financing activities during the nine months ended March 31,
1997 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 ($1,644,579)
in payments of long term debt and the purchase and retirement of common stock
of (3,800,403).
The Company has no commitments to make material capital expenditures.
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.
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<PAGE>
RETIREMENT CARE ASSOCIATES, INC
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS. None
ITEM 2. CHANGES IN SECURITIES. During the quarter ended March 31, 1997, the
Company issued securities in a transaction which was not registered under the
Securities Act of 1933, as amended (the "Act"), as follows:
The Company issued 54,986 shares of Common Stock to three accredited investors
for a total of $47,500 in cash in private transactions upon the exercise of
warrants held by such investors. In connection with such sales, the Company
relied on Section 4(2) of the Act and Rule 506 thereunder. Each investor
represented that they were purchasing such shares for investment purposes and
not for resale for the purpose of resale or distriction. The appropriate
restrictive legends were placed on the certificates and stop transfer
instructions were issued to the transfer agent with respect to such shares.
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. The Company filed a Report on Form 8-K dated
February 17, 1997, reporting information under Item 2-Acquisition of
Disposition of Assets and Item 7-Financial Statements, Pro Forma Financial
Information and Exhibits, reporting information concerning the Company
entering into an Agreement and Plan of Merger and Reorganization with Sun
Healthcare Group, Inc.
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<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: May 14, 1997 By:/s/ Chris Brogdon
Chris Brogdon, President
DATED: May 14, 1997 By:/s/ Darrell C. Tucker
Darrell C. Tucker, Treasurer
(Chief Financial Officer and
Principal Accounting Officer)
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<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> 9-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> MAR-31-1997
<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> .12
</TABLE>
