SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________________
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from___________to_______
Commission file number 1-9848
CARETENDERS HEALTH CORP.
(Exact name of registrant as specified in its charter)
Delaware 06-1153720
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
100 Mallard Creek Road, Suite 400, Louisville, Kentucky 40207
(Address of principal executive offices)
(Zip Code)
(502) 899-5355
(Registrant's telephone number, including area code)
Former address: 9200 Shelbyville Road, Louisville, Kentucky 40222
_______________________________________________________________________
(Former name, former address and former fiscal year, if changed since
last report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities and
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.
X
Yes ______ No______.
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class of Common Stock $.10 par value
Shares outstanding at September 30, 1996 - 3,119,436
<PAGE>
CARETENDERS HEALTH CORP. AND SUBSIDIARIES
FORM 10-Q
INDEX
Part I. Financial Information
Item 1. Financial Statements
Interim Consolidated Balance Sheets as of September 30,
1996 and March 31, 1996 3
Interim Consolidated Statements of Operations for the
Three Months ended September 30, 1996 and 1995 4
Interim Consolidated Statements of Operations for the
Six Months ended September 30, 1996 and 1995 5
Interim Consolidated Statements of Cash Flows for the
Six Months ended September 30, 1996 and 1995 6
Notes to Interim Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8 - 13
Part II. Other Information
Items 1 through 6 14
<PAGE>
CARETENDERS HEALTH CORP. AND SUBSIDIARIES
INTERIM CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, March 31,
1996 1996
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 1,142,860 $ 1,561,041
Accounts receivable - net of
allowance for uncollectible accounts of
$3,267,000 and $2,900,000 20,893,634 17,197,400
Prepaid expenses and other current assets 2,994,949 2,592,876
TOTAL CURRENT ASSETS 25,031,443 21,351,317
PROPERTY AND EQUIPMENT - net 3,979,535 3,981,934
COST IN EXCESS OF NET ASSETS ACQUIRED -
net of accumulated amortization of $1,281,000
and $1,190,000 7,059,214 7,005,232
OTHER ASSETS 1,063,462 878,351
$37,133,654 $33,216,834
LIABILITIES AND
STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable - trade $ 4,293,166 $ 3,306,484
Accrued expenses 3,892,915 3,661,967
Current portion of long-term debt and
capital leases 408,971 432,329
Other current liabilities 100,000 106,986
TOTAL CURRENT LIABILITIES 8,695,052 7,507,766
LONG-TERM LIABILITIES
Revolving Credit Facility 7,979,734 5,851,708
Term debt and capital lease obligations 183,011 321,839
Other liabilities 538,699 631,619
TOTAL LONG-TERM LIABILITIES 8,701,444 6,805,166
TOTAL LIABILITIES 17,396,496 14,312,932
Commitments and Contingencies (Note 2)
Stockholders' equity:
Common stock, par value $.10; authorized
10,000,000 shares; 3,129,436 issued and
outstanding 312,944 312,944
Treasury stock, at cost, 10,000 shares (95,975) (95,975)
Additional paid-in capital 25,337,876 25,337,876
Accumulated deficit (5,817,687) (6,650,943)
TOTAL STOCKHOLDERS' EQUITY 19,737,158 18,903,902
$37,133,654 $33,216,834
<FN>
See accompanying notes to interim consolidated financial statements.
</FN>
</TABLE>
<PAGE>
CARETENDERS HEALTH CORP. AND SUBSIDIARIES
INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
September September
30, 1996 30, 1995
<S> <C> <C>
Net revenues $19,157,759 $15,999,319
Cost of sales and services 15,275,215 12,317,206
Selling, general and administrative
expenses 2,099,003 1,986,155
Depreciation and amortization expense 519,370 555,680
Provision for uncollectible accounts 585,831 457,387
Income before other income (expense) and 678,340 682,891
income taxes
Other income (expense):
Interest expense (174,686) (192,179)
Income before provision for income taxes 503,654 490,712
Provision for income taxes 39,000 35,000
Net income $464,654 $455,712
PER SHARE:
Weighted average common and common
equivalent shares outstanding for primary
and fully diluted earnings per share 3,150,163 3,140,826
Net income per share $ 0.15 $ 0.15
<FN>
See accompanying notes to interim consolidated financial statements.
</FN>
</TABLE>
<PAGE>
CARETENDERS HEALTH CORP. AND SUBSIDIARIES
INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
September September
30, 1996 30, 1995
<S> <C> <C>
Net revenues $36,874,793 $30,968,753
Cost of sales and services 29,293,216 23,894,235
Selling, general and administrative expenses 4,134,371 3,833,039
Depreciation and amortization expense 1,112,562 1,117,369
Provision for uncollectible accounts 1,089,159 875,416
Income before other income (expense) and 1,245,485 1,248,694
income taxes
Other income (expense):
Interest expense (334,229) (373,474)
Income before provision for income taxes 911,256 875,220
Provision for income taxes 78,000 58,000
Net income $833,256 $817,220
PER SHARE:
Weighted average common and common equivalent
shares outstanding for primary and fully
diluted earnings per share 3,150,163 3,140,826
Net income per share $ 0.26 $ 0.26
<FN>
See accompanying notes to interim consolidated financial statements.
</FN>
</TABLE>
<PAGE>
CARETENDERS HEALTH CORP. AND SUBSIDIARIES
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
September September
30, 1996 30, 1995
<S> <C> <C>
Cash flows from operating
activities:
Net income $ 833,256 $ 817,220
Adjustments to reconcile net
income to net cash provided
(used) by operating activities:
Depreciation and amortization 1,112,562 1,117,369
Provision for uncollectible
accounts 1,089,159 875,416
--------- ---------
3,034,977 2,810,005
Change in certain net current assets
(Increase) decrease in:
Accounts receivable (4,785,393) (2,416,012)
Prepaid expenses and
other current assets (402,074) (225,788)
Increase (decrease) in:
Accounts payable and
accrued liabilities 1,311,688 537,829
Other liabilities (6,985) (82,918)
Net cash provided (used) by
operating activities (847,787) 623,116
Cash flows from investing
activities:
Capital expenditures (1,015,587) (464,368)
Other assets (333,669) (144,163)
Net cash provided (used) by
investing activities (1,349,256) (608,531)
Cash flows from financing
activities:
Principal payments on long-term
debt (256,244) (317,961)
Issuance of long-term debt and
capital leases - 120,356
Net revolving credit facility
borrowings 2,128,026 339,625
Other (92,920) -
Net cash provided (used) by
financing activities 1,778,862 142,020
Net increase (decrease) in cash (418,181) 156,605
Cash and cash equivalents at
beginning of period 1,561,041 1,264,775
Cash and cash equivalents at
end of period $ 1,142,860 $ 1,421,380
<FN>
See accompanying notes to interim consolidated financial statements.
</FN>
</TABLE>
<PAGE>
CARETENDERS HEALTH CORP. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying interim consolidated financial statements for the
three and six months ended September 30, 1996 and 1995 have been
prepared 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 omitted
pursuant to such rules and regulations. Accordingly, the reader of
this Form 10-Q may wish to refer to the Company's Form 10-K for the
year ended March 31, 1996 for further information. In the opinion of
management of the Company, the accompanying unaudited interim
financial statements reflect all adjustments (consisting only of
normally recurring accruals) necessary to present fairly the
financial position at September 30, 1996 and the results of
operations and cash flows for the periods ended September 30, 1996
and 1995.
The results of operations for the six months ended September 30,
1996 are not necessarily indicative of the operating results for the
year.
2. COMMITMENTS AND CONTINGENCIES
Legal Proceedings
The Company is currently, and from time to time, subject to claims and
suits arising in the ordinary course of its business, including claims
for damages for personal injuries. In the opinion of management, the
ultimate resolution of any of these pending claims and legal
proceedings will not have a material effect on the Company's financial
position or results of operations.
On January 26, 1994 Franklin Capital Associates and Aetna Life and
Casualty, shareholders, who at one time held approximately 320,000
shares of the Company's common stock (approximately 13% of shares
outstanding) filed suit in Chancery Court of Williamson County,
Tennessee claiming unspecified damages not to exceed three million
dollars in connection with registration rights they received in the
Company's acquisition of National Health Industries in February 1991.
The suit alleges the Company failed to use its best efforts to
register the shares held by the plaintiffs as required by the merger
agreement. The Company believes it has meritorious defenses to the
claims and does not expect that the ultimate outcome of the suit will
have a material impact on the Company's results of operation or
financial position. The Company plans to vigorously defend its
position in this case. No amounts have been recorded in the
accompanying financial statements related to this suit.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
OVERVIEW
Strategic Focus
The Company is continuing its previously announced plans for the
geographic expansion of its home and community based health care
business units which consist of adult day health services and home
health care (home health care includes nursing, infusion therapy and
durable medical equipment). These businesses are involved with the
delivery of health care in alternative settings which are preferred by
consumers and operate at lower costs than hospitals and nursing homes.
The Company intends to continue to develop and acquire home and
community-based healthcare service operations and to continue to shift
its emphasis toward providing alternatives to institutional long-term
care.
By the end of fiscal year 1997 (ending March 31, 1997), the Company
expects to have opened 11 new adult day health centers and 7 new home
health care operations. Since March 31, 1996, the Company has opened 5
and acquired 2 new home care operations and opened 2 new adult day
health centers.
Through November 11, 1996, new home care operations have been opened in
Baltimore MD, Stamford CT, Indianapolis IN, and Columbus and Cincinnati
OH. Home care operations have been acquired in Cleveland OH and Ft.
Lauderdale FL. The new adult day health centers are located in
Lexington KY and Cincinnati OH.
Please refer to the Company's Form 10-K for the year ended March 31,
1996 for information regarding the Company's cautionary statements
regarding forward looking information.
Earnings
Earnings for the quarter and six-months ended September 30, 1996
remained at the same level as those for the same period of the prior
year despite the incurrence of $280,000 or $0.09 per share of initial
operating losses for the quarter and $392,000 or $0.12 per share for
the six months related to the Company's geographic expansion. Earnings
per share from operations was consistent at $0.15 for the quarter and
$0.26 for the six-months ended September 30, 1996 and 1995. The
increase in selling, general and administrative expenses was primarily
related to the Company's geographic expansion activities.
<PAGE>
Results of Operations
<TABLE>
<CAPTION>
Caretenders Health Corp.
Operating Data
for the three months ended September 30,
1996 1995 Change
% of % of
Amount Revenues Amount Revenues Amount %
<S> <C> <C> <C> <C> <C> <C>
Net Revenues
Home Health Care 15,503,748 100.0% 12,712,899 100.0% 2,790,849 21.9%
Adult Day Health 3,654,011 100.0% 3,286,420 100.0% 367,591 11.2%
Services
Total 19,157,759 15,999,319 3,158,440 19.7%
Costs of Sales and Services
Home Health Care 12,581,597 81.2% 9,903,361 77.9% 2,678,236 27.0%
Adult Day Health 2,693,618 73.7% 2,413,845 73.4% 279,773 11.6%
Services
Total 15,275,215 79.7% 12,317,206 77.0% 2,958,009 24.0%
Center Contribution
Home Health Care 2,922,151 18.8% 2,809,538 22.1% 112,613 4.0%
Adult Day Health 960,393 26.3% 872,575 26.6% 87,818 10.1%
Services
3,882,544 20.3% 3,682,113 23.0% 200,431 5.4%
Selling, General &
Administrative 2,099,003 11.0% 1,986,155 12.4% 112,848 5.7%
Depreciation and
Amortization 519,370 2.7% 555,680 3.5% (36,310) (6.5)%
Provision for
Uncollectible
Accounts 585,831 3.1% 457,387 2.9% 128,444 28.1%
Interest, Net 174.686 0.9% 192,179 1.2% (17,493) (9.1)%
Income Before Taxes 503,564 2.6% 490,712 3.1% 12,852 2.6%
</TABLE>
Home Health Care
Revenues. Net revenues increased 21.9% from $12,712,899 in
1995 to $15,503,748 in 1996 primarily due to volume and
geographic expansion. Expansion operations accounted for
approximately $1,354,000 of the $2.8 million increase in home
health revenues.
Cost of Sales and Services. Cost of sales and services as a
percent of net revenues increased due to revenue growth and
operating costs related to geographic expansion.
Adult Day Health Services
Net Revenues. The increase of $367,591 in adult day health
services revenues is primarily attributable to increased
volumes in existing centers. Total days of service provided
increased 7.3% from 56,522 in 1995 to 60,659 in 1996. As of
September 30, 1996, the Company had 15 centers in operation.
Cost of Sales and Services. As a percent of net revenues,
cost of sales and services remained relatively unchanged
despite operating costs relating to geographic expansion.
<PAGE>
Selling, General and Administrative. The increase of $112,848 in
these expenses is due to: a) normal year-to year cost increases
and variable expenses associated with managing volume growth in
existing operations, and b) increased overhead expenses (primarily
personnel and travel) related to the Company's geographic
expansion activities.
Provision for Uncollectible Accounts. The provision for
uncollectible accounts for the quarter ended September 30, 1996
was recorded at approximately 3.1% of net revenues based on
management's evaluation of collectibility.
Depreciation and Amortization. The decrease resulted from assets
still in use reaching the end of their depreciable lives.
Interest. The decrease in Interest is primarily the result of
the decrease in the interest rate associated with the Company's
working capital credit facility.
<PAGE>
Results of Operations
<TABLE>
<CAPTION>
Caretenders Health Corp.
Operating Data
for the six months ended September 30,
1996 1995 Change
% of % of
Amount Revenues Amount Revenues Amount %
<S> <C> <C> <C> <C> <C> <C>
Net Revenues
Home Health Care 29,858,495 100.0% 24,674,761 100.0% 5,183,734 21.0%
Adult Day Health 7,016,298 100.0% 6,293,992 100.0% 722,306 11.5%
Services
Total 36,874,793 30,968,753 5,906,040 19.1%
Costs of Sales and Services
Home Health Care 24,174,776 81.0% 19,192,067 77.8% 4,982,709 26.0%
Adult Day Health 5,118,440 73.0% 4,702,168 74.7% 416,272 8.9%
Services
Total 29,293,216 79.4% 23,894,235 77.2% 5,398,981 22.6%
Center Contribution
Home Health Care 5,683,719 19.0% 5,482,694 22.2% 201,025 0.4%
Adult Day Health 1,897,858 27.0% 1,591,824 25.3% 306,034 19.2%
Services
7,581,577 20.6% 7,074,518 22.8% 507,059 7.2%
Selling, General &
Administrative 4,134,371 11.2% 3,833,039 12.4% 301,332 7.9%
Depreciation and
Amortization 1,112,562 3.0% 1,117,369 3.6% (4,807) (0.4)%
Provision for
Uncollectible
Accounts 1,089,159 3.0% 875,416 2.8% 213,743 24.4%
Interest, Net 334,229 0.9% 373,474 1.2% (39,245) 10.5%
Income Before Taxes 911,256 2.5% 875,220 2.8% 36,036 4.1%
</TABLE>
Home Health Care
Revenues. Net revenues increased 21.0% from $24,674,791 in
1995 to $29,858,495 in 1996 primarily as a result of
increased volume and geographic expansion. Expansion
operations accounted for approximately $2 million of the $5.2
million increase in home health revenues.
Cost of Sales and Services. Cost of sales and services as a
percent of net revenues increased due to revenue growth and
operating costs related to geographic expansion.
Adult Day Health Services
Net Revenues. The increase of $722,306 in adult day health
services revenues is primarily attributable to increased
volumes in existing centers. Total days of service provided
increased 8.5% from 109,776 in 1995 to 119,137 in 1996. As
of September 30, 1996, the Company had 15 centers in
operation.
Cost of Sales and Services. As a percent of net revenues,
cost of sales and services decreased due to volume and
operating costs relating to geographic expansion.
<PAGE>
Selling, General and Administrative. The increase of $301,332 in
these expenses is due to: a) normal year-to year cost increases
and variable expenses associated with managing volume growth in
existing operations, and b) increased overhead expenses (primarily
personnel and travel) related to the Company's geographic
expansion activities.
Provision for Uncollectible Accounts. The provision for
uncollectible accounts for the quarter ended September 30, 1996
was recorded at approximately 3.0% of net revenues based on
management's evaluation of collectibility.
Depreciation and Amortization. The decrease resulted from assets
still in use reaching the end of their depreciable lives.
Interest. The decrease in Interest is primarily a decrease in
the interest rate associated with the Company's working capital
credit facility.
Liquidity and Capital Resources
Revolving Credit Facility
The revolving credit facility is expected to provide working capital
resources sufficient to support operations and current expansion plans.
However, management will continue to evaluate raising additional capital
including possibly debt and equity investments in the Company to support a
more rapid development of the business than would be possible with
internal funds.
Cash Flows
Key elements of the Consolidated Statements of Cash Flows were (in
thousands):
<TABLE>
Net Change in Cash and Cash 1996 1995
Equivalents
<S> <C> <C>
Provided by (used in)
Operating activities $ (848) $ 623
Investing activities (1,349 ) (608)
Financing activities 1,779 142
Net Change in Cash and Cash
Equivalents $ (418) $ 156
</TABLE>
Net cash used in operating activities of $848,000 resulted principally
from an increase in accounts receivable. Days sales outstanding have
not changed substantially from March 31, 1996. The growth in
receivables results from volume growth, especially related to a sizable
home health acquisition (Cleveland) made in the first quarter in which
receivables were not acquired. Net cash used in investing activities
resulted principally from capital expenditures and the Company's
expansion efforts. Net cash provided by financing activities resulted
primarily from an increase in the balance outstanding on the revolving
credit facility.
<PAGE>
Health Care Reform
Health care, as one of the largest industries in the United States,
continues to attract much legislative interest and public attention. In
recent years, an increasing number of legislative proposals have been
introduced or proposed in Congress and in some state legislatures that
would effect major changes in the health care system, either nationally or
at the state level. Among the proposals under consideration are cost
controls, insurance market reforms, requirements that all businesses offer
health insurance coverage to their employees and the creation of a single
government health insurance plan that would cover all citizens. The costs
of certain proposals would be funded in significant part by reductions in
payments by governmental programs, including Medicare and Medicaid, to
health care providers. The Company cannot predict whether any of the above
proposals or any other proposals will be adopted, and if adopted, no
assurance can be given that the implementation of such reforms will not
have a material effect on the business of the Company.
Impact of Inflation
Management does not believe that inflation has had a material effect on
income during the past several years.
<PAGE>
Commission File No. 1-9848
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
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 11 (attached)
Exhibit 27 (attached)
(b) No reports on Form 8-K have been filed during the
quarter ended September 30, 1996
<PAGE>
<TABLE>
<CAPTION>
CARETENDERS HEALTH CORP. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
EXHIBIT 11
Three Months Ended Six Months Ended
September 30, September 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
PRIMARY
Net income for primary income
per common share $464,654 $455,712 $833,256 $ 817,220
Weighted average outstanding
shares during the period 3,119,413 3,119,413 3,119,413 3,119,413
Add- common equivalent shares
representing shares issuable
upon exercise of dilutive options
and warrants and conversion of
convertible preferred stock 30,750 21,413 30,750 21,413
Weighted average number of
shares used in calculation of
primary earnings per share 3,150,163 3,140,826 3,150,163 3,140,826
PER SHARE
Net income $0.15 $0.15 $0.26 $0.26
FULLY DILUTED
Net income for fully diluted income
per common share $464,654 $455,712 $833,256 $817,220
Weighted average number of
shares used in calculation of
primary earnings per share 3,150,163 3,140,826 3,150,163 3,140,826
Weighted average number of
shares used in calculation of
fully diluted earnings per
share 3,150,163 3,140,826 3,150,163 3,140,826
PER SHARE
Net income $0.15 $0.15 $0.26 $0.26
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf of the
undersigned thereunto duly authorized.
Date: November 11, 1996
CARETENDERS HEALTH CORP.
BY: /s/ William B. Yarmuth
William B. Yarmuth,
Chairman of the Board, President
and Chief Executive Officer
BY: /s/ C. Steven Guenthner
C. Steven Guenthner,
Senior Vice President and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> SEP-30-1996
<CASH> 1,143
<SECURITIES> 0
<RECEIVABLES> 24,161
<ALLOWANCES> (3,267)
<INVENTORY> 0
<CURRENT-ASSETS> 2,995
<PP&E> 12,467
<DEPRECIATION> (8,487)
<TOTAL-ASSETS> 37,134
<CURRENT-LIABILITIES> 8,695
<BONDS> 0
<COMMON> 19,737
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 37,134
<SALES> 36,875
<TOTAL-REVENUES> 36,875
<CGS> 29,293
<TOTAL-COSTS> 29,293
<OTHER-EXPENSES> 5,247
<LOSS-PROVISION> 1,089
<INTEREST-EXPENSE> 334
<INCOME-PRETAX> 911
<INCOME-TAX> 78
<INCOME-CONTINUING> 833
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 833
<EPS-PRIMARY> 0.26
<EPS-DILUTED> 0.26
</TABLE>
