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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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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, 1997
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 September 30, 1997 - 3,129,413
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<PAGE>
CARETENDERS HEALTH CORP. AND SUBSIDIARIES
FORM 10-Q
INDEX
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets as of September 30, 1997
and March 31, 1997 3
Consolidated Statements of Operations for the Three
Months ended September 30, 1997 and 1996 4
Consolidated Statements of Operations for the Six
Months ended September 30, 1997 and 1996 5
Consolidated Statements of Cash Flows for the Six
Months ended September 30, 1997 and 1996 6
Notes to Interim Consolidated Financial Statements 7 - 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9 - 15
Part II. Other Information
Items 1 through 6 16
<PAGE>
<TABLE>
<CAPTION>
CARETENDERS HEALTH CORP. AND SUBSIDIARIES
INTERIM CONSOLIDATED BALANCE SHEETS
ASSETS September 30, March 31,
1997 1997
------------- -----------
<S> <C> <C>
(UNAUDITED)
CURRENT ASSETS:
Cash and cash equivalents $938,567 $1,014,604
Accounts receivable - net of allowance
for uncollectible accounts of approximately
$3,365,000 and $3,153,000 18,822,845 20,436,964
Prepaid expenses and other current assets 1,597,483 1,765,168
Deferred tax assets 1,646,990 1,646,990
------------- ------------
TOTAL CURRENT ASSETS 23,005,885 24,863,726
PROPERTY AND EQUIPMENT - net 6,276,376 4,959,217
COST IN EXCESS OF NET ASSETS ACQUIRED -
net of accumulated amortization of
approximately $1,539,000 and $1,430,000 7,614,280 7,723,263
OTHER ASSETS 1,296,633 1,198,367
------------- ------------
$38,193,174 $38,744,573
============= ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable - trade $3,772,650 $ 3,334,671
Accrued expenses 3,751,848 3,696,350
Current portion of term debt and capital
lease obligations 191,144 261,716
Other current liabilities 100,000 100,000
------------- -----------
TOTAL CURRENT LIABILITIES 7,815,642 7,392,737
LONG-TERM LIABILITIES
Revolving Credit Facility 8,202,477 9,754,640
Term debt and capital lease obligations 99,423 145,308
Other liabilities 705,128 788,616
------------- -----------
TOTAL LONG-TERM LIABILITIES 9,007,028 10,688,564
------------- -----------
TOTAL LIABILITIES 16,822,670 18,081,301
------------- -----------
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 (4,184,341) (4,891,573)
-------------- ------------
TOTAL STOCKHOLDERS' EQUITY 21,370,504 20,663,272
------------- -----------
$38,193,174 $38,744,573
============= ===========
</TABLE>
See accompanying notes to interim consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
CARETENDERS HEALTH CORP. AND SUBSIDIARIES
INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended
------------------
September September
30, 1997 30, 1996
------------- -------------
<S> <C> <C>
Net revenues $22,833,566 $19,157,759
Cost of sales and services 17,951,478 15,275,213
Selling, general and administrative expenses 2,647,336 2,099,003
Depreciation and amortization expense 634,414 519,370
Provision for uncollectible accounts 661,951 585,831
---------- -----------
Income before other income (expense) and taxes 938,387 678,342
Other income (expense):
Interest expense (232,579) (174,688)
---------- -----------
Income before provision for income taxes 705,808 503,654
Provision for income taxes 291,145 39,000
---------- ----------
Net income $414,663 $464,654
========== ==========
PER SHARE:
Weighted average common and common equivalent
shares outstanding for primary earnings
per share 3,162,676 3,150,163
Net income per share $ 0.13 $ 0.15
========== ==========
</TABLE>
See accompanying notes to interim consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
CARETENDERS HEALTH CORP. AND SUBSIDIARIES
INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Six Months Ended
----------------
September 30, September 30,
1997 1996
------------- --------------
<S> <C> <C>
Net revenues $44,354,816 $36,874,793
Cost of sales and services 34,836,903 28,870,373
Selling, general and administrative expenses 5,318,351 4,557,214
Depreciation and amortization expense 1,242,800 1,112,562
Provision for uncollectible accounts 1,281,584 1,089,159
---------- ----------
Income before other income (expense) and taxes 1,675,178 1,245,485
Other income (expense):
Interest expense (471,380) (334,229)
---------- ----------
Income before provision for income taxes 1,203,798 911,256
Provision for income taxes 496,566 78,000
---------- ----------
Net income $707,232 $833,256
========== ==========
PER SHARE:
Weighted average common and common equivalent
shares outstanding for primary earnings
per share 3,153,930 3,150,163
Net income per share $ 0.22 $ 0.26
========== ==========
</TABLE>
See accompanying notes to interim consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
CARETENDERS HEALTH CORP. AND SUBSIDIARIES
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended
-----------------
September September
30, 1997 30, 1996
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income $707,232 $833,256
Adjustments to reconcile net income to net
cash provided(used) by operating activities:
Depreciation and amortization 1,242,800 1,112,562
Provision for uncollectible accounts 1,281,584 1,089,159
------------ -----------
3,231,616 3,034,977
Change in certain net current assets
(Increase) decrease in:
Accounts receivable 332,535 (4,785,393)
Prepaid expenses and other current assets 167,685 (402,074)
Increase (decrease) in:
Accounts payable and accrued liabilities 493,477 1,311,688
Other liabilities - (6,985)
----------- -----------
Net cash provided (used) by operating activities 4,225,313 (847,787)
Cash flows from investing activities:
Capital expenditures (2,223,334) (1,015,587)
Other assets (325,908) (333,669)
------------ ------------
Net cash provided (used) by investing activities (2,549,242) (1,349,256)
Cash flows from financing activities:
Principal payments on long-term debt (116,457) (256,244)
Net revolving credit facility borrowings (1,552,163) 2,128,026
Other (83,488) (92,920)
----------- -----------
Net cash provided (used) by financing activities (1,752,108) 1,778,862
----------- -----------
Net increase (decrease) in cash (76,037) (418,181)
Cash and cash equivalents at beginning of period 1,014,604 1,561,041
------------ -----------
Cash and cash equivalents at end of period $938,567 $1,142,860
=========== ===========
</TABLE>
See accompanying notes to interim consolidated financial statements.
<PAGE>
CARETENDERS HEALTH CORP. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying interim consolidated financial statements for the six
months ended September 30, 1997 and 1996 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,
1997 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
adjustments) necessary to present fairly the financial position at
September 30, 1997 and the results of operations and cash flows for
the periods ended September 30, 1997 and 1996.
The results of operations for the three and six months ended September
30, 1997 are not necessarily indicative of the operating results for
the year.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and reported amounts of revenues and expenses
during the reported period. Actual results could differ from those
estimates.
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, Aetna Casualty and
Surety 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 & Casualty withdrew its claim against the
Company without prejudice.
<PAGE>
3. NET INCOME PER SHARE
Net income per common and common equivalent share is computed based on
the weighted average number of common shares and common equivalent
shares outstanding. Common equivalent shares result from dilutive stock
options, warrants, and convertible preferred stock.
In March 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standard No. 128, _Earnings Per Share_ (_SFAS
128_). The standard modifies disclosure requirements for companies
required to report earnings per share (_EPS_) to include presentations
of Basic EPS (which includes no dilution of common stock equivalents)
and, if applicable, Diluted EPS (which reflects the potential dilution
of common stock equivalents). The pro forma Basic and Diluted EPS for
the six months ended September 30, 1997 and 1996 were as follows:
<TABLE>
1997 1996
<S> <C> <C>
Earnings per share:
Net Income
Basic $ 0.23 $ 0.27
Diluted $ 0.22 $ 0.26
Weighted average shares
outstanding:
Basic 3,119,436 3,119,436
Diluted 3,171,835 3,150,163
4. 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 positioning itself to take advantage of healthcare reform
activities by focusing its resources into 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 the Company
believes are preferred by consumers and operate at lower costs than
hospitals and nursing homes. The trend toward alternative site delivery
of healthcare is increasing, as more payor organizations are seeking to
reduce the costs of medical care.
Today more than seven million senior Americans are in need of
alternatives to long-term nursing home confinement and this number is
expanding rapidly. These individuals desire to remain in their homes and
out of nursing homes in order to conserve their financial resources as
long as possible. Caretenders SeniorCare Solutions TM provides seniors
in need with a lower-cost alternative to institutional care helping them
gain economic security, access to health care, mobility and independence
without isolation.
Utilizing its strengths in home health care and adult day health
services, the Company is actively addressing the issue of senior care in
America by its comprehensive strategy _ Caretenders SeniorCare Solutions
TM. Through care management by a Registered Nurse (RN), Caretenders
helps families identify solutions for caring for loved ones who can no
longer meet their own health and personal care needs. Through the
Company's Care Manager, families can learn about long-term care options
available for seniors and obtain assistance in choosing from Caretenders'
SeniorCare Day and Home Health Care Centers or, if appropriate, other
available community based resources.
The Company is currently engaged in an expansion strategy that began in
late 1996 and will continue for the foreseeable future. During this
expansion period the Company expects to add up to 28 additional adult day
health centers and 15 home health care centers. Since the inception of
the expansion strategy, the Company has added 7 adult day health services
and 12 home health care centers.
<PAGE>
Earnings For the Quarter Ended September 30, 1997 Versus 1996
The Company generated a 40% increase in pre-tax income despite investing
in initial operating losses related to geographic expansion. The
increase in pre-tax income is primarily a result of a 12% increase in net
revenues from recurring operations due to increased volumes. Selling,
General and Administration costs did not change significantly as a
percentage of net revenues. Income tax expense for 1996 included a non-
recurring credit of approximately $168,757 or $0.05 per share related to
the reduction in a previously recorded valuation allowance for net
deferred taxes. As a result of these factors, earnings per share were
$0.13 in 1997 as compared to $0.15 for 1996.
Earnings For the Six Months Ended September 30, 1997 Versus 1996
The Company generated a 32% increase in pre-tax income primarily a result
of a 13% increase in net revenues from recurring operations due to
increased volumes. As reported for the quarter, Selling, General and
Administration costs did not change significantly as a percentage of net
revenues for the six month period. Income tax expense for 1996 included
a non-recurring credit of approximately $302,987 or $0.10 per share
related to the reduction in a previously recorded valuation allowance for
net deferred taxes. As a result, earnings per share were $0.22 in 1997
as compared to $0.26 for 1996 for the six month period.
The following table reflects the results of operations separated into on-
going or recurring operations on an as reported and comparably taxed
basis:
</TABLE>
<TABLE>
<CAPTION>
Quarter Ended Six-Months Ended
------------------------------------ ---------------------------------
As Reported 9/30/97 9/30/96 % Change 9/30/97 9/30/96 % Change
------------- ----------- -------- ----------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
Net Revenues
Recurring Operations $21,173,514 $18,936,100 12% $41,510,828 $36,575,768 13%
Start-up Operations (1) 1,660,052 221,659 649% 2,843,988 299,026 851%
Total 22,833,566 19,157,759 19% 44,354,816 36,874,794 20%
Pre-tax Income
Recurring Operations $ 875,378 $ 721,907 21% $ 1,848,973 $ 1,389,806 33%
Start-up Operations (169,570) (218,254) (22%) (645,175) (478,551) 35%
Total 705,808 503,654 40% 1,203,798 911,256 32%
Net Income as reported
Recurring Operations $ 514,285 $ 666,008 (23%) $ 1,086,272 $ 1,270,845 (15%)
Start-up Operations (99,622) (201,354) (51%) (379,040) (437,589) (13%)
Total 414,663 464,654 (11%) 707,232 833,256 (15%)
Weighted Primary Shares 3,162,676 3,150,163 3,153,930 3,150,163
Net Income Per Share as reported
Recurring Operations $ 0.16 $ 0.21 (23%) $ 0.34 $ 0.40 (15%)
Start-up Operations $ (0.03) $ (0.06) (51%) $ (0.12) $ (0.14) (13%)
Total $ 0.13 $ 0.15 (13%) $ 0.22 $ 0.26 (14%)
As Adjusted for Comparable Tax Provision
Net Income as reported $ 414,663 $ 464,654 (11%) $ 707,232 $ 833,256 (15%)
1996 Non-recurring credit
to tax expense (2) - (168,757) (100%) - (302,987) (100%)
Net Income as adjusted $ 414,663 $ 295,897 40% $ 707,232 $ 530,269 33%
Net Income as adjusted
Recurring Operations $ 514,285 $ 424,121 21% $ 1,086,272 $ 811,417 34%
Start-up Operations (99,622) (128,224) (22%) (379,040) (281,149) 35%
Total 414,663 295,897 40% 707,232 530,269 33%
Net Income Per Share as adjusted
Recurring Operations $ 0.16 $ 0.13 21% $ 0.34 $ 0.26 34%
Start-up Operations $ (0.03) $ (0.04) (22%) $ (0.12) $ (0.09) 35%
Total $ 0.13 $ 0.09 40% $ 0.22 $ 0.17 33%
</TABLE>
(1) Start-up operations include those businesses started by the Company that
have not been in operation for the entirety of both comparable periods
(2) Reduction of previously recorded valuation allowance related to net
deferred tax assets ($.06 per share for the quarter and $0.09 ytd)
<PAGE>
Results of Operations
<TABLE>
<CAPTION>
Caretenders Health Corp.
Operating Data
for the three months ended September 30,
1 9 9 7 1 9 9 6 Change
--------------------- -------------------- --------------------
% of % of
Amount Revenues Amount Revenues Amount %
<S> <C> <C> <C> <C> <C> <C>
Net Revenues
Home Health Care 18,667,044 100.0% 15,503,748 100.0% 3,163,296 20.4%
Adult Day Health Services 4,166,522 100.0% 3,654,011 100.0% 512,511 14.0%
----------- --------- ---------
22,833,566 19,157,759 3,675,807 19.2%
Costs of Sales and Services
Home Health Care 14,465,292 77.5% 12,443,664 80.3% 2,021,628 16.2%
Adult Day Health Services 3,486,186 83.7% 2,831,549 77.5% 654,637 23.1%
----------- ----------- ----------
17,951,478 78.6% 15,275,213 79.7% 2,676,265 17.5%
Center Contribution
Home Health Care 4,201,752 22.5% 3,060,084 19.7% 1,141,668 37.3%
Adult Day Health Services 680,336 16.3% 822,462 22.5% (142,126) (17.3%)
----------- ----------- ----------
4,882,088 21.4% 3,882,546 20.3% 999,542 25.7%
Selling, General & Administrative 2,647,336 11.6% 2,099,003 11.0% 548,333 26.1%
Depreciation and Amortization 634,414 2.8% 519,370 2.7% 115,044 22.2%
Provision for Uncollectible accounts 661,951 2.9% 585,831 3.1% 76,120 13.0%
Accounts
Interest, Net 232,579 1.0% 174.688 0.9% 57,891 33.1%
----------- --------- --------
Income Before Taxes 705,808 3.1% 503,564 2.6% 202,154 40.1%
============ ========= ========
</TABLE>
Home Health Care
Revenues. Net revenues increased approximately 20% primarily
as a result of increased volumes in nursing services, durable
medical equipment rentals and infusion therapies. Startup
operations are described below. The balance of the increase
in revenues came from recurring operations revenue growth of
12%.
Costs of Sales and Services. Costs of sales and services as a
percent of net revenues decreased due to revenue growth.
Start-up Operations. _Start-up Operations_ include those
business units started by the Company that have not been in
operation for the entirety of both comparable reporting
periods. For the quarter ended September 30, 1997 the Company
had seven home care business units in five markets classified
as start-up operations. These business units generated
revenues of $ 1,369,683 and earnings before interest and taxes
of $ 56,172 in 1997 and revenues of $ 199,037 and losses
before interest and taxes of $ (146,996)in 1996.
<PAGE>
Adult Day Health Services
Net Revenues. The 14% increase in adult day health services
revenues was a result of improved pricing and increased
volumes in recurring centers. Start-up operations are
described below. As of September 30, 1997, the Company had 19
centers in operation versus 15 centers at September 30, 1996.
Costs of Sales and Services. As a percent of net revenues,
cost of sales and services increased primarily due to the
effect of new operations which generated initial operating
losses.
Start-up Operations. For the quarter ended September 30, 1997
the Company had five adult day health business units in five
markets classified as start-up operations. These business
units generated revenues of $ 290,369 and losses before
interest and taxes of $ (225,742) in 1997 and revenues of $
22,622 and losses before interest and taxes of $ (71,257)in
1996.
Selling, General and Administrative. The increase in selling,
general and administrative costs is due to the costs incurred
related to the Company's geographic expansion. These costs did not
change significantly as a percentage of revenue.
Provision for Uncollectible Accounts. The provision for
uncollectible accounts for the quarters ended September 30, 1997
and 1996 was recorded at approximately 3% of net revenues based on
management's evaluation of collectibility.
Depreciation and Amortization. The increase results primarily from
capital additions.
Interest. The increase in interest is primarily the result of
higher average outstanding debt levels.
<PAGE>
<TABLE>
<CAPTION>
Caretenders Health Corp.
Operating Data
for the six months ended September 30,
1 9 9 7 1 9 9 6 Change
--------------------- -------------------- --------------------
% of % of
Amount Revenues Amount Revenues Amount %
<S> <C> <C> <C> <C> <C> <C>
Net Revenues
Home Health Care 36,308,100 100.0% 29,858,495 100.0 6,449,605 21.6%
Adult Day Health Services 8,046,716 100.0% 7,016,298 100.0 1,030,418 14.7%
---------- ----------- ----------
44,354,816 36,874,793 7,480,023 20.3%
Costs of Sales and Services
Home Health Care 28,060,325 77.3% 23,445,474 78.5 4,614,852 19.7%
Adult Day Health Services 6,776,578 84.2% 5,424,899 77.3 1,351,679 24.9%
---------- ----------- ----------
34,836,903 78.5% 28,870,373 78.3 5,966,530 20.7%
Center Contribution
Home Health Care 8,247,775 22.7% 6,413,021 21.5 1,834,753 28.6%
Adult Day Health Services 1,270,138 15.8% 1,591,399 22.7 (321,261) (20.2%)
---------- ---------- -----------
9,517,913 21.5% 8,004,420 21.7 1,513,493 18.9%
Selling, General & Administrative 5,318,351 12.0% 4,557,214 12.3 761,137 16.7%
Depreciation and Amortization 1,242,800 2.8% 1,112,562 3.0 130,238 11.7%
Provision for Uncollectible Accounts 1,281,584 2.9% 1,089,159 3.0 192,425 17.7%
Interest, Net 471,380 1.1% 334,229 0.9 137,151 41.0%
----------- ---------- ---------
Income Before Taxes 1,203,798 2.7% 911,256 2.5 292,542 32.1%
=========== ========== =========
</TABLE>
Home Health Care
Revenues. Net revenues increased approximately 21% primarily
as a result of increased volumes in nursing services, durable
medical equipment rentals and infusion therapies. Startup
operations accounted for approximately $2,101,000 of the $6.4
million increase in home health revenues The balance of the
increase in revenues came from recurring operations revenue
growth of 13%.
Costs of Sales and Services. Costs of sales and services as a
percent of net revenues decreased due to revenue growth.
Start-up Operations. For the six-months ended September 30,
1997 the Company had nine home care business units in six
markets classified as start-up operations. These business
units generated revenues of $ 2,377,707 and losses before
interest and taxes of $ (173,200) in 1997 and revenues of $
276,404 and losses before interest and taxes of $ (392,293) in
1996.
<PAGE>
Adult Day Health Services
Net Revenues. The 15% increase in adult day health services
revenues was a result of improved pricing and increased
volumes in recurring centers plus revenues from start-up
centers as described below.
Costs of Sales and Services. As a percent of net revenues,
cost of sales and services increased primarily due to the
effect of new operations which generated initial operating
losses.
Start-up Operations. For the six-months ended September 30,
1997 the Company had five adult day health business units in
five markets classified as start-up operations. These
business units generated revenues of $ 466,281 and losses
before interest and taxes of $ (471,975) in 1997 and revenues
of $ 22,622 and losses before interest and taxes of $
(86,257)in 1996.
Selling, General and Administrative. The increase in selling,
general and administrative costs is due to the costs incurred
related to the Company's geographic expansion. These costs did not
change significantly as a percentage of revenue.
Provision for Uncollectible Accounts. The provision for
uncollectible accounts for the six months ended September 30, 1997
and 1996 was recorded at approximately 3% of net revenues based on
management's evaluation of collectibility.
Depreciation and Amortization. The increase results primarily from
capital additions.
Interest. The increase in interest is primarily the result of
higher average outstanding debt levels.
<PAGE>
Liquidity and Capital Resources
Revolving Credit Facility
The Company has a $12 million revolving credit facility with the
Healthcare Financial Services Division of Heller Financial, Inc.
Interest accrues on amounts drawn under the facility at a rate of 1
percent over prime. Availability is determined pursuant to a formula
principally consisting of a percentage of accounts receivable subject
to certain exclusions. At September 30, 1997, the Company has total
cash and unused borrowings of approximately $4.7 million available for
working capital and development. The facility will remain in effect
until October 13, 1998 and for annual one year terms thereafter unless
either party to the credit agreement provides the other with a written
notice of termination 60 days prior to the renewal date.
This facility should provide working capital resources sufficient to
support operations for the next year. Management will continuously
pursue additional capital including possible debt and equity
investments in the Company to support a more rapid development of the
business than would be possible with internal funds.
<PAGE>
Cash Flows
Key elements to the Consolidated Statements of Cash Flows were (in
thousands):
<TABLE>
<CAPTION>
Net Change in Cash and Cash Equivalents 1997 1996
-------------- ------------
<S> <C> <C>
Provided by (used in)
Operating activities $ 4,225 $ (848)
Investing activities (2,549) (1,349)
Financing activities (1,752) 1,779
-------------- ------------
Net Change in Cash and Cash Equivalents $ (76) $ (418)
</TABLE>
Net cash provided by operating activities of approximately $4.2
million resulted principally from current period earnings net of
non-cash expenses such as depreciation and bad debt provision. Net
cash used in investing activities of approximately $2.5 million
resulted principally from amounts invested in expansion activities
and capital expenditures related to purchase of certain durable
medical equipment and real estate. Net cash of approximately $1.7
million was used in financing activities to reduce the outstanding
balance on the revolving credit facility
Health Care Reform
The health care industry is experiencing extensive and dynamic change.
In addition to economic forces and regulatory influences, continuing
political debate is subjecting the health care industry to significant
reform. Health care reform proposals have been formulated by the
current federal government administration, members of Congress, and,
periodically, state legislators. Government officials can be expected
to continue to review and assess alternative health care delivery
systems and payment methodologies. Changes in the law or new
interpretations of existing laws may have a dramatic effect on the
definition of permissible or impermissible activities, the relative
cost of doing business, and the methods and amounts of payments for
medical care by both governmental and other payors. Legislative changes
to "balance the budget" and slow the annual rate of growth of Medicare
and Medicaid are expected. Such changes may impact reimbursement for
home health care. There can be no assurance that future legislation or
regulatory changes will not have a material adverse effect on the
future operations 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, 1997
<PAGE>
CARETENDERS HEALTH CORP. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
EXHIBIT 11
<TABLE>
<CAPTION>
Three MonthsEnded Six MonthsEnded
September 30, September 30,
-------------------------- -------------------------
1997 1996 1997 1996
PRIMARY ---------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Net income for primary income per common share $414,663 $464,654 $707,232 $833,256
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 43,263 30,750 34,517 30,750
Weighted average number of shares used in
calculation of primary earnings per share 3,162,676 3,150,163 3,153,930 3,150,163
PER SHARE
Net income $0.13 $0.15 $0.22 $0.26
FULLY DILUTED
Net income for fully diluted income per
common share $414,663 $464,654 $707,232 $833,256
Weighted average number of shares used in
calculation of primary earnings per share 3,162,676 3,150,163 3,153,930 3,150,163
Weighted average number of shares used in
calculation of fully diluted earnings per share 3,162,676 3,150,163 3,171,835 3,150,163
PER SHARE
Net income $0.13 $0.15 $0.22 $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 14, 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> 6-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> SEP-30-1997
<CASH> 938
<SECURITIES> 0
<RECEIVABLES> 22,188
<ALLOWANCES> (3,365)
<INVENTORY> 0
<CURRENT-ASSETS> 3,244
<PP&E> 16,508
<DEPRECIATION> (10,232)
<TOTAL-ASSETS> 38,193
<CURRENT-LIABILITIES> 7,815
<BONDS> 0
<COMMON> 21,371
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 38,193
<SALES> 44,355
<TOTAL-REVENUES> 44,355
<CGS> 34,836
<TOTAL-COSTS> 34,836
<OTHER-EXPENSES> 6,561
<LOSS-PROVISION> 1,282
<INTEREST-EXPENSE> 471
<INCOME-PRETAX> 1,204
<INCOME-TAX> 497
<INCOME-CONTINUING> 707
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 707
<EPS-PRIMARY> 0.22
<EPS-DILUTED> 0.22
</TABLE>
