SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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 June 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 (IRS Employer
of incorporation or organization) Identification No.)
100 Mallard Creek Road, Suite 400 40207
(Address of principal executive offices) (Zip Code)
(502) 899-5355
(Registrant's telephone number, including area code)
Not Applicable
(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.
Yes __X____ 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 June 30, 1996 - 3,129,413
<PAGE>
CARETENDERS HEALTH CORP. AND SUBSIDIARIES
FORM 10-Q
INDEX
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets as of June 30, 1996
and March 31, 1996 3
Consolidated Statements of Operations for the Three
Months ended June 30, 1996 and 1995 4
Consolidated Statements of Cash Flows for the Three
Months ended June 30, 1996 and 1995 5
Notes to Interim Consolidated Financial Statements 6
Item 2.Management's Discussion and Analysis of Financial
Condition and Results of Operations 7 - 10
Part II. Other Information
Items 1 through 6 11
<PAGE>
<TABLE>
CARETENDERS HEALTH CORP. AND SUBSIDIARIES
INTERIM CONSOLIDATED BALANCE SHEETS
<CAPTION>
ASSETS June 30, March 31,
1996 1996
<S> <C> <C>
(UNAUDITED)
CURRENT ASSETS:
Cash and cash equivalents $ 845,444 $ 1,561,041
Accounts receivable - net of allowance1
for uncollectible accounts of
approximately $3,120,000 and $2,900,000 17,374,849 17,197,400
Prepaid expenses and other current assets 1,531,276 1,487,876
Deferred tax assets 1,105,000 1,105,000
TOTAL CURRENT ASSETS 20,856,569 21,351,317
PROPERTY AND EQUIPMENT - net 4,071,494 3,981,934
COST IN EXCESS OF NET ASSETS ACQUIRED-net
of accumulated amortization of proximately
$1,235,000 and $1,190,000 7,120,305 7,005,232
OTHER ASSETS 962,965 878,351
$33,011,333 $33,216,834
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable - trade $ 3,922,407 $ 3,306,484
Accrued expenses 3,610,192 3,661,967
Current portion of long-term debt and
capital leases 605,413 432,329
Other current liabilities 139,985 106,986
TOTAL CURRENT LIABILITIES 8,277,997 7,507,766
LONG-TERM LIABILITIES
Revolving Credit Facility 4,680,272 5,851,708
Term debt and capital lease obligations 228,753 321,839
Other liabilities 551,807 631,619
TOTAL LONG-TERM LIABILITIES 5,460,832 6,805,166
TOTAL LIABILITIES 13,738,829 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 (6,282,341) (6,650,943)
TOTAL STOCKHOLDERS' EQUITY 19,272,504 18,903,902
$33,011,333 $33,216,834
<FN>
See accompanying notes to interim consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
CARETENDERS HEALTH CORP. AND SUBSIDIARIES
INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<CAPTION>
Three Months Ended
June 30, June 30,
1996 1995
<S> <C> <C>
Net revenues $17,639,474 $14,969,434
Cost of sales and services 13,940,461 11,782,335
Selling, general and administrative expenses 2,035,350 1,641,578
Depreciation and amortization expense 593,192 561,689
Provision for uncollectible accounts 503,328 418,029
Income before other income (expense) and
income taxes 567,143 565,803
Other income (expense):
Interest expense (159,541) (181,295)
Income before provision for income taxes 407,602 384,508
Provision for income taxes 39,000 23,000
Net income $ 368,602 $ 361,508
PER SHARE:
Weighted average common and common
equivalent shares outstanding
for primary earnings per share 3,159,322 3,139,397
Net income per share $0.12 $0.12
<FN>
See accompanying notes to interim consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
CARETENDERS HEALTH CORP. AND SUBSIDIARIES
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<CAPTION>
Three Months Ending
June 30, June 30,
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net income $ 368,602 $ 361,508
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 593,192 561,689
Provision for uncollectible accounts 503,328 418,029
Deferred Income Taxes (40,500) (99,500)
1,424,622 1,241,726
Change in certain net current assets
(Increase) decrease in:
Accounts receivable (680,777) (633,457)
Prepaid expenses and other
current assets (43,401) (358,957)
Increase (decrease) in:
Accounts payable and accrued 658,206 217,180
liabilities
Other liabilities (6,312) (32,569)
Net cash provided by operating
activities 1,352,338 433,923
Cash flows from investing activities:
Capital expenditures (590,123) (332,805)
Other (292,316) 32,500
Net cash used in investing
activities (882,439) (300,305)
Cash flows from financing activities:
Principal payments on long-term debt (14,060) (156,641)
Issuance of long-term debt and
capital leases - 120,356
Net revolving credit facility
borrowings (1,171,436) 151,558
Net cash (used in) provided by
financing activities (1,185,496) 115,273
Net (decrease) increase in cash (715,597) 248,891
Cash and cash equivalents at
beginning of period 1,561,041 1,264,775
Cash and cash equivalents at
end of period $ 845,444 $ 1,513,666
<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
months ended June 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 June 30, 1996 and the results of
operations and cash flows for the periods ended June 30, 1996 and 1995.
The results of operations for the three months ended June 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 open 12-15 new adult day health centers and 7-9 new home health care
operations, creating nine integrated and seven new markets for Caretenders.
At the end of this period, the Company anticipates having 28 adult day
health centers and up to 15 home care operations in place. Since March 31,
1996, the Company has opened 5 and acquired 2 new home care operations and
opened 1 new adult day health center.
Through August 13, 1966, 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 center is located in Lexington KY.
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 ended June 30, 1996 remained at the same level as
those for the same quarter of the prior year despite the incurrance of
$112,000 or $0.04 per share of initial operating losses related to the
Company's geographic expansion. Earnings per share from operations was
consistent at $.12 for both 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>
Caretenders Health Corp.
Operating Data
for the three months ended June 30,
<CAPTION>
1 9 9 6 1 9 9 5 Change
% of % of
Amount Revenues Amount Revenues Amount %
<S> <C> <C> <C> <C> <C> <C>
Net Revenues
Home Health Care 14,277,187 100.0% 11,961,862 100.0% 2,315,325 19.4%
Adult Day Health
Services 3,362,287 100.0% 3,007,572 100.0% 354,715 11.8%
17,639,474 14,969,434 2,670,040 17.8%
Costs of Sales and
Services
Home Health Care 11,515,639 80.7% 9,494,012 79.4% 2,021,627 21.3%
Adult Day Health
Services 2,424,822 72.1% 2,288,323 76.1% 136,499 6.0%
13,940,461 79.0% 11,782,335 78.7% 2,158,126 18.3%
Center Contribution
Home Health Care 2,761,548 19.3% 2,467,850 20.6% 293,698 11.9%
Adult Day Health
Services 937,465 27.9% 719,249 23.9% 218,216 30.3%
3,699,013 21.0% 3,187,099 21.3% 511,914 16.1%
Selling, General &
Administrative 2,035,350 11.5% 1,641,578 11.0% 393,772 24.0%
Depreciation and
Amortization 593,192 3.4% 561,689 3.8% 31,503 5.6%
Provision for
Uncollectible
Accounts 503,328 2.9% 418,029 2.8% 85,299 20.4%
Interest, Net 159,541 0.9% 181,295 1.2% (21,754) (12.0)%
Income Before Taxes 407,602 2.3% 384,508 2.6% 23,094 6.0%
</TABLE>
Continuing Operations
Home Health Care
Revenues. Net revenues increased 19.4% from $11,961,862 in 1995
to $14,277,187 in 1996 primarily as a result of increased volume
for nursing services and durable medical equipment rentals offset
partially by decreased volume for infusion therapies. Acquired
operations accounted for approximately $640,000 of the $2.4
million increase in home health revenues.
Cost of Sales and Services. Cost of sales and services as a
percent of net revenues decreased slightly due to revenue growth
partially offset by the effect of $63,000 of initial operating
losses related to geographic expansion.
Adult Day Health Services
Net Revenues. The increase of $354,715 in adult day health
services revenues is primarily attributable to increased volumes
in existing centers. Total days of service provided increased
9.8% from 53,254 in 1995 to 58,478 in 1996. As of June 30, 1996,
the Company had 14 centers in operation.
Cost of Sales and Services. As a percent of net revenues, cost
of sales and services decreased due to volume growth in mature
centers partially offset by the effect of $49,000 of initial
operating losses relating to geographic expansion.
<PAGE>
Selling, General and Administrative. The increase of $394,000 in
these expenses is due to: a) normal year-to year cost increases and
variable expenses associated with managing volume growth in existing
operations ($160,000), and b) increased overhead expenses (primarily
personnel and travel) related to the Company's geographic expansion
activities ($234,000).
Provision for Uncollectible Accounts. The provision for uncollectible
accounts for the quarter ended June 30, 1996 was recorded at
approximately 2.8% of net revenues based on management's evaluation of
collectibility.
Depreciation and Amortization. The increase results primarily from
capital additions.
Interest. The decrease in Interest is primarily the result of the
lower average outstanding debt levels and a decrease in the interest
rate associated with the Company's working capital credit facility.
Liquidity and Capital Resources
Revolving Credit Facility
At June 30, 1996, the Company had total cash and unused borrowings of
approximately $8.1 million.
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>
<S> <C> <C>
Net Change in Cash and 1996 1995
Cash Equivalents
Provided by (used in)
Operating activities $ 1,352 $ 434
Investing activities (882) (300)
Financing activities (1,185) 115
Net Change in Cash and
Cash Equivalents $ (715) $ 249
</TABLE>
Net cash provided by operating activities of $1,352,000 resulted principally
from current period earnings plus non-cash expenses. Net cash used by
investing activities resulted principally from capital expenditures. Net
cash used in financing activities resulted primarily a reduction 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 June 30, 1996
<PAGE>
<TABLE>
CARETENDERS HEALTH CORP. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
EXHIBIT 11
<CAPTION>
Three Months Ended June 30,
1996 1995
<S> <C> <C>
PRIMARY
Net income for primary income per common share $ 368,602 $ 361,508
Weighted average outstanding shares
during the period 3,119,413 3,139,397
Add- common equivalent shares representing
shares issuable uponexercise of dilutive
options and warrants and conversion of
convertible preferred stock 39,909 -
Weighted average number of shares
used in calculation of
primary earnings per share 3,159,322 3,139,397
PER SHARE
Net income from continuing operations $0.12 $0.12
FULLY DILUTED
Net income for fully diluted income
per common share $ 368,602 $ 361,508
Weighted average number of shares
used in calculation of
primary earnings per share 3,159,322 3,139,397
Add- incremental shares representing
shares issuable upon
conversion of convertible debt 2,870 - (A)
Weighted average number of shares
used in calculation of fully diluted
earnings per share 3,162,192 3,139,397
PER SHARE
Fully diluted earnings per common share $0.12 $0.12
(A) Anti-dilutive impact.
</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: August 14, 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
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<MUTLIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 845
<SECURITIES> 0
<RECEIVABLES> 20,495
<ALLOWANCES> (3,120)
<INVENTORY> 0
<CURRENT-ASSETS> 2,636
<PP&E> 12,108
<DEPRECIATION> (8,037)
<TOTAL-ASSETS> 33,11
<CURRENT-LIABILITIES> 8,278
<BONDS> 0
<COMMON> 19,272
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 33,011
<SALES> 17,639
<TOTAL-REVENUES> 17,639
<CGS> 13,940
<TOTAL-COSTS> 13,940
<OTHER-EXPENSES> 2,628
<LOSS-PROVISION> 503
<INTEREST-EXPENSE> 159
<INCOME-PRETAX> 408
<INCOME-TAX> 39
<INCOME-CONTINUING> 369
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 369
<EPS-PRIMARY> 0.12
<EPS-DILUTED> 0.12
</TABLE>
