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 December 31, 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 December 31, 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 December 31, 1996
and March 31, 1996 3
Interim Consolidated Statements of Operations for the Three
Months ended December 31, 1996 and 1995 4
Interim Consolidated Statements of Operations for the Nine
Months ended December 31, 1996 and 1995 5
Interim Consolidated Statements of Cash Flows for the Nine
Months ended December 31, 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>
December 31, March 31,
1996 1996
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 572,795 $1,561,041
Accounts receivable - net of allowance
for uncollectible accounts of
$3,039,000 and $2,900,000 20,292,561 17,197,400
Prepaid expenses and other current assets 3,015,057 2,592,876
TOTAL CURRENT ASSETS 23,880,413 21,351,317
PROPERTY AND EQUIPMENT - net 4,070,876 3,981,934
COST IN EXCESS OF NET ASSETS ACQUIRED - net
of accumulated amortization of $1,331,000
and $1,190,000 7,009,268 7,005,232
OTHER ASSETS 1,152,146 878,351
$ 36,112,703 $33,216,834
LIABILITIES AND
STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable - trade $ 2,690,773 $ 3,306,484
Accrued expenses 4,137,654 3,661,967
Current portion of long-term debt
and capital leases 316,206 432,329
Other current liabilities 100,000 106,986
TOTAL CURRENT LIABILITIES 7,244,633 7,507,766
LONG-TERM LIABILITIES
Revolving Credit Facility 7,924,327 5,851,708
Term debt and capital lease obligations 198,682 321,839
Other liabilities 496,313 631,619
TOTAL LONG-TERM LIABILITIES 8,619,322 6,805,166
TOTAL LIABILITIES 15,863,955 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 (5,306,097) (6,650,943)
TOTAL STOCKHOLDERS' EQUITY 20,248,748 18,903,902
$ 36,112,703 $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
December 31, December 31,
1996 1995
<S> <C> <C>
Net revenues $19,629,566 $16,228,442
Cost of sales and services 15,376,205 12,636,862
Selling, general and administrative expenses 2,336,333 1,927,525
Depreciation and amortization expense 571,145 505,899
Provision for uncollectible accounts 573,663 442,967
Income before other income (expense) and 772,220 715,189
income taxes
Other income (expense):
Interest expense (221,630) (169,478)
Income before provision for income taxes 550,590 545,711
Provision for income taxes 39,000 39,000
Net income $ 511,590 $ 506,711
PER SHARE:
Weighted average common and common
equivalent shares outstanding for primary
and fully diluted earnings per share 3,133,300 3,139,210
Net income per share $ 0.16 $ 0.16
<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>
Nine Months Ended
December 31, December 31,
1996 1995
<S> <C> <C>
Net revenues $47,193,195 $56,534,390
Cost of sales and services 44,276,609 37,029,653
Selling, general and administrative expenses 6,893,547 5,336,413
Depreciation and amortization expense 1,683,707 1,548,863
Provision for uncollectible accounts 1,662,822 1,318,383
Income before other income (expense) and 2,017,705 1,959,883
income taxes
Other income (expense):
Interest expense (555,859) (542,952)
Income before provision for income taxes 1,461,846 1,416,931
Provision for income taxes 117,000 97,000
Net income $1,344,846 $ 1,319,931
PER SHARE:
Weighted average common and common equivalent
shares outstanding for primary and fully
diluted earnings per share 3,143,750 3,136,278
Net income per share $ 0.43 $ 0.42
<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>
Nine Months Ended
December 31, December 31,
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,344,846 $ 1,319,931
Adjustments to reconcile net income to
net cash provided (used) by
operating activities:
Depreciation and amortization 1,683,707 1,548,863
Provision for uncollectible accounts 1,662,822 1,318,383
4,691,375 4,187,177
Change in certain net current assets
(Increase) decrease in:
Accounts receivable (4,757,983) (1,347,849)
Prepaid expenses and other
current assets (383,950) (246,607)
Increase (decrease) in:
Accounts payable and accrued
liabilities (99,312) 1,124,832
Other liabilities (6,985) (112,661)
Net cash provided (used) by
operating activities (556,855) 3,604,892
Cash flows from investing activities:
Capital expenditures (1,530,723) (535,455)
Other assets (504,643) (168,109)
Net cash provided (used) by
investing activities (2,035,366) (703,564)
Cash flows from financing activities:
Principal payments on long-term debt (333,338) (450,245)
Issuance of long-term debt
and capital leases - 120,356
Net revolving credit facility
borrowings 2,072,619 (1,510,591)
Other (135,306) -
Net cash provided (used) by
financing activities 1,603,975 (1,840,480)
Net increase (decrease) in cash (988,246) 1,060,848
Cash and cash equivalents at
beginning of period 1,561,041 1,264,775
Cash and cash equivalents at
end of period $ 572,795 $ 2,325,623
<FN>
See accompanying notes to interim consolidated financial statements.
</FN>
</TABLE>
<PAGE>
CARETENDERS HEALTH CORP. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
BASIS OF PRESENTATION
The accompanying interim consolidated financial statements for the three
and nine months ended December 31, 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 December 31, 1996 and the
results of operations and cash flows for the periods ended December 31,
1996 and 1995.
The results of operations for the nine months ended December 31, 1996
are not necessarily indicative of the operating results for the year.
COMMITMENTS AND CONTINGENCIES
Legal Proceedings
The Company is currently, and from time to time, may be 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
operations 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.
In January 1997, Aetna Life and Casualty withdrew its claim against the
Company without prejudice.
FINANCIAL STATEMENT RECLASSIFICATIONS
Certain amounts have been reclassified in the 1996 financial statements in
order to conform to the 1997 presentation. Such reclassifications had no
effect on previously reported net income.
<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 8 new adult day health centers and 7 new home health
care operations. Of these, the Company has opened 5 and acquired 2 new
home care operations and opened 3 new adult day health centers since
March 31, 1996.
Through February 12, 1997, 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, Cincinnati OH and West Palm Beach FL.
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 nine-months ended December 31, 1996
remained at the same level as those for the same period of the prior
year despite the incurrence of $250,000 or $0.08 per share of initial
operating losses for the quarter and $642,000 or $0.20 per share for
the nine months related to the Company's geographic expansion. Earnings
per share from operations was consistent at $0.16 for the quarter and
$0.43 from $0.42 for the nine-months ended December 31, 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
Caretenders Health Corp.
Operating Data
for the three months ended December 31,
<TABLE>
<CAPTION>
1996 1995 Change
% of % of
Amount Revenues Amount Revenues Amount %
<S> <C> <C> <C> <C> <C> <C>
Net Revenues
Home Health Care 16,151,116 100.0% 13,027,202 100.0% 3,123,914 24.0%
Adult Day Health
Services 3,478,450 100.0% 3,201,240 100.0% 277,210 8.7%
Total 19,629,566 16,228,442 3,401,124 21.0%
Costs of Sales and
Services
Home Health Care 12,286,446 76.1% 10,060,680 77.2% 2,225,766 22.1%
Adult Day Health
Services 3,089,759 88.8% 2,576,182 80.5% 513,577 19.9%
Total 15,376,205 78.3% 12,636,862 77.9% 2,739,343 21.7%
Center Contribution
Home Health Care 3,864,670 23.9% 2,966,522 22.8% 898,148 30.3%
Adult Day Health
Services 388,691 11.2% 625,058 19.5% (236,367) (37.8)%
Total 4,253,361 21.7% 3,591,580 23.1% 661,781 18.4%
Selling, General &
Administrative 2,336,333 11.9% 1,927,525 11.9% 408,808 21.2%
Depreciation and
Amortization 571,145 2.9% 505,899 3.1% 65,246 12.9%
Provision for
Uncollectible
Accounts 573,663 2.9% 442,967 2.7% 130,696 29.5%
Interest, Net 221,630 1.1% 169,478 1.0% 52,152 30.8%
Income Before Taxes 550,590 2.8% 545,711 3.4% 4,879 0.9%
</TABLE>
Home Health Care
Revenues. Net revenues increased 24.0% from $13,027,202 in 1995 to
$16,151,116 in 1996 primarily due to volume and geographic
expansion. Expansion operations accounted for approximately
$1,501,000 of the $3.1 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 improved
existing operations despite startup losses from geographic
expansion.
Adult Day Health Services
Net Revenues. The increase of $277,210 in adult day health
services revenues is primarily attributable to increased volumes
in existing centers. Total days of service provided increased
6.1% from 54,770 in 1995 to 58,121 in 1996. As of December 31,
1996, the Company had 16 centers in operation.
Cost of Sales and Services. As a percent of net revenues, cost of
sales and services primarily increased due to operating losses
relating to geographic expansion.
<PAGE>
Selling, General and Administrative. The increase of $408,808 in these
expenses is due to: a) increased overhead expenses (primarily personnel
and travel) related to the Company's geographic expansion activities
and b) normal year-to year cost increases and variable expenses
associated with managing volume growth in existing operations.
Provision for Uncollectible Accounts. The provision for uncollectible
accounts for the quarter ended December 31, 1996 was recorded at
approximately 2.9% of net revenues based on management's evaluation of
collectibility.
Depreciation and Amortization. The increase resulted primarily from
investments related to the Company's geographic expansion activities.
Interest. The increase in Interest is primarily the result of an
increase in average outstanding debt levels to fund initial start up
losses and working capital related to geographic expansion.
<PAGE>
Results of Operations
Caretenders Health Corp.
Operating Data
for the nine months ended December 31,
<TABLE>
<CAPTION>
1996 1995 Change
% of % of
Amount Revenues Amount Revenues Amount %
<S> <C> <C> <C>
Net Revenues
Home Health Care 46,039,642 100.0% 37,697,963 100.0% 8,341,679 22.1%
Adult Day Health
Services 10,494,748 100.0% 9,495,232 100.0% 999,516 10.5%
Total 56,534,390 47,193,195 9,341,195 19.8%
Costs of Sales and
Services
Home Health Care 36,068,410 78.3% 29,252,747 77.6% 6,815,663 23.3%
Adult Day Health
Services 8,208,199 78.2% 7,776,906 81.9% 431,293 5.5%
Total 44,276,609 78.3% 37,029,653 78.5% 7,246,956 19.6%
Center Contribution
Home Health Care 9,971,232 21.7 % 8,445,216 22.4% 1,526,016 18.1%
Adult Day Health
Services 2,286,549 21.8% 1,718,326 18.1% 568,223 33.1%
Total 12,257,781 21.7% 10,163,542 21.5% 2,094,239 20.6%
Selling, General &
Administrative 6,893,547 12.2% 5,336,413 11.3% 1,557,134 29.2%
Depreciation and
Amortization 1,683,707 3.0% 1,548,863 3.3% 134,844 8.7%
Provision for
Uncollectible Accounts 1,662,822 2.9% 1,318,383 2.8% 344,439 26.1%
Interest, Net 555,859 1.0% 542,952 1.2% 12,907 2.4%
Income Before Taxes 1,461,846 2.6% 1,416,931 3.0% 44,915 3.2%
</TABLE>
Home Health Care
Revenues. Net revenues increased 22.1% from $37,697,963 in 1995 to
$46,039,642 in 1996 primarily as a result of increased volume and
geographic expansion. Expansion operations accounted for
approximately $3.7 million of the $8.3 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 $999,516 in adult day health
services revenues is primarily attributable to increased volumes
in existing centers. Total days of service provided increased 7.7%
from 164,546 in 1995 to 177,258 in 1996. As of December 31, 1996,
the Company had 16 centers in operation.
Cost of Sales and Services. As a percent of net revenues, cost of
sales and services decreased due to volume increases in existing
centers partially offset by startup losses from geographic
expansion.
<PAGE>
Selling, General and Administrative. The increase of $1,557,134 in
these expenses is due to: a) increased overhead expenses (primarily
personnel and travel) related to the Company's geographic expansion
activities, and b) normal year-to year cost increases and variable
expenses associated with managing volume growth in existing operations
Provision for Uncollectible Accounts. The provision for uncollectible
accounts for the nine-months ended December 31, 1996 was recorded at
approximately 2.9% of net revenues based on management's evaluation of
collectibility.
Depreciation and Amortization. The increase resulted primarily from
investments related to the Company's geographic expansion activities.
Interest. The increase in Interest is primarily the result of an
increase in average outstanding debt levels to fund initial start up
losses and working capital related to geographic expansion
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 Equivalents 1996 1995
<S> <C> <C>
Provided by (used in)
Operating activities $ (557) $ 3,604
Investing activities (2,035) (703)
Financing activities 1,604 (1,840)
Net Change in Cash and Cash Equivalents $ (988) $ 1,061
</TABLE>
Net cash used in operating activities of $557,000 resulted primarily
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 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.
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
December 31, 1996
<PAGE>
CARETENDERS HEALTH CORP. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
EXHIBIT 11
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
December 31, December 31,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
PRIMARY
Net income for primary income
per common share $511,590 $506,711 $1,344,846 $1,319,931
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 13,887 19,797 24,337 16,865
Weighted average number of shares
used in calculation of primary
earnings per share 3,133,300 3,139,210 3,143,750 3,136,278
PER SHARE
Net income $0.16 $0.16 $0.43 $0.42
FULLY DILUTED
Net income for fully diluted
income per common share $511,590 $506,711 $1,344,846 $1,319,931
Weighted average number of
shares used in the
calculation of primary
earnings per share 3,133,300 3,139,210 3,143,750 3,136,278
Weighted average number of
shares used in the
calculation of fully diluted
earnings per share 3,133,300 3,139,210 3,143,750 3,136,278
PER SHARE
Net income $0.16 $0.16 $0.43 $0.42
</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: February 13, 1997
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> 9-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> DEC-31-1996
<CASH> 573
<SECURITIES> 0
<RECEIVABLES> 23,332
<ALLOWANCES> (3,039)
<INVENTORY> 0
<CURRENT-ASSETS> 3,015
<PP&E> 12,950
<DEPRECIATION> (8,879)
<TOTAL-ASSETS> 36,112
<CURRENT-LIABILITIES> 7,245
<BONDS> 0
<COMMON> 20,249
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 36,112
<SALES> 56,534
<TOTAL-REVENUES> 56,534
<CGS> 44,277
<TOTAL-COSTS> 44,277
<OTHER-EXPENSES> 8,577
<LOSS-PROVISION> 1,663
<INTEREST-EXPENSE> 556
<INCOME-PRETAX> 1,462
<INCOME-TAX> 117
<INCOME-CONTINUING> 1,345
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,345
<EPS-PRIMARY> 0.43
<EPS-DILUTED> 0.43
</TABLE>
