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 December 31, 1999
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
ALMOST FAMILY, INC. (FORMERLY 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, Louisville, KY 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 December 31, 1999 - 3,130,413
<PAGE>
ALMOST FAMILY, INC. AND SUBSIDIARIES (FORMERLY CARETENDERS HEALTH CORP)
FORM 10-Q
INDEX
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets as of December
31, 1999 and March 31, 1999 3
Consolidated Statements of Operations
for the Three Months ended December
31, 1999 and 1998 4
Consolidated Statements of Operations
for the Nine months ended December 31,
1999 and 1998 5
Consolidated Statements of Cash Flows for
the Nine months ended December 31,
1999 and 1998 6
Notes to Interim Consolidated
Financial Statements 7 - 9
Item 2. Management's Discussion and
Analysis of Financial
Condition and Results of Operations 10
Part II. Other Information
Items 1 through 6
<PAGE>
ALMOST FAMILY, INC. AND SUBSIDIARIES
(FORMERLY CARETENDERS HEALTH CORP)
INTERIM CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS December 31, 1999 March 31, 1999
----------------- --------------
<S> <C> <C>
(UNAUDITED)
CURRENT ASSETS:
Cash and cash equivalents $ 461,184 $ 1,036,951
Accounts receivable - net 7,262,663 6,430,368
Prepaid expenses and other current assets 443,790 85,571
Net assets of discontinued operations 1,624,150 9,200,093
---------- ------------
TOTAL CURRENT ASSETS 9,791,787 16,752,983
PROPERTY AND EQUIPMENT - net 3,135,216 3,434,518
COST IN EXCESS OF NET ASSETS ACQUIRED - net 2,431,076 2,517,543
DEFERRED TAX ASSETS 2,722,647 4,137,000
OTHER ASSETS 340,716 284,595
LONG TERM ASSETS OF DISCONTINUED OPERATIONS -- 9,227,753
------------ ------------
$ 18,421,442 $ 36,354,392
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued liabilities $ 3,471,546 $ 4,001,426
Current portion of term debt and
capital lease obligations -- 3,062,749
Other current liabilities 164,061 673,000
------------ ------------
TOTAL CURRENT LIABILITIES 3,635,607 7,737,175
------------ ------------
LONG-TERM LIABILITIES:
Revolving Credit Facility 3,296,836 12,530,258
Other liabilities 118,370 231,733
------------ ------------
TOTAL LONG-TERM LIABILITIES 3,415,206 12,761,991
------------ ------------
TOTAL LIABILITIES 7,050,813 20,499,166
------------ ------------
Commitments and Contingencies
Stockholders' equity:
Common stock, par value $.10;
authorized 10,000,000 shares;
3,130,436 issued and outstanding 313,044 313,044
Treasury stock, at cost, 10,000 shares (95,975) (95,975)
Additional paid-in capital 25,345,586 25,345,586
Accumulated deficit (14,192,026) (9,707,429)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 11,370,629 15,855,226
------------ ------------
$ 18,421,442 $ 36,354,392
============ ============
</TABLE>
See accompanying notes to interim consolidated
financial statements.
<PAGE>
ALMOST FAMILY, INC. AND SUBSIDIARIES
(FORMERLY CARETENDERS HEALTH CORP)
INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended December 31,
------------------------------
1999 1998
<S> <C> <C>
------------ ------------
Net revenues $ 11,884,749 $ 10,159,459
Cost of sales and services 9,836,275 8,537,431
Selling, general and administrative expenses 1,104,360 1,042,410
Depreciation and amortization expense 245,020 230,041
Provision for uncollectible accounts 234,337 93,114
------------ ------------
Income from continuing operations
before other income (expense) and income taxes 464,757 256,463
Other income (expense):
Interest expense (60,555) (135,058)
------------ ------------
Income from continuing operations
before provision for income taxes 404,202 121,405
Provision (benefit) for income taxes 169,765 50,079
------------ ------------
Net income from continuing operations $ 234,437 $ 71,326
Discontinued operations (Note 7):
Income from operations,
net of applicable income taxes of
$0 and $694,867 -- 991,543
------------ ------------
Net income (loss) $ 234,437 $ 1,062,869
============ ============
Per Share Amounts - Basic and Diluted
Average shares outstanding 3,120,413 3,120,413
Net income (loss)from continuing operations $ 0.08 $ 0.02
Discontinued operations:
Income (loss) from operations,
net of applicable income taxes -- 0.32
------------ ------------
Net income (loss) $ 0.08 $ 0.34
============ ============
</TABLE>
See accompanying notes to interim consolidated
financial statements.
<PAGE>
ALMOST FAMILY, INC. AND SUBSIDIARIES
(FORMERLY CARETENDERS HEALTH CORP)
INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine months Ended December 31,
------------------------------
1999 1998
------------ ------------
<S> <C> <C>
Net revenues $ 33,324,894 $ 29,472,651
Cost of sales and services 27,534,082 25,222,253
Selling, general and administrative expenses 3,313,079 3,541,303
Depreciation and amortization expense 693,265 694,662
Provision for uncollectible accounts 645,061 308,639
Goodwill write-down -- 113,196
------------ ------------
Income (loss) from continuing operations
before other income (expense) and income taxes 1,139,407 (407,401)
Other income (expense):
Interest expense (294,007) (409,400)
Loss on sale of building (91,701) --
------------ ------------
Income (loss) from continuing operations
before provision for income taxes 753,699 (816,802)
Provision (benefit) for income taxes 316,554 (336,931)
------------ ------------
Net income (loss)from continuing operations $ 437,145 $ (479,871)
------------ ------------
Discontinued operations (Note 7):
Income (loss) from operations,
net of applicable income taxes of
$57,000 and ($1,957,000) 78,258 (4,189,649)
Loss on disposal, net of applicable
income tax provision of $527,000 (5,000,000) --
------------ ------------
(4,921,742) (4,189,649)
------------ ------------
Cumulative effect on prior years of a change
in method of accounting for pre-opening costs,
net of tax -- (171,974)
------------ ------------
Net income (loss) $ (4,484,597) $ (4,841,494)
============ ============
Per Share Amounts - Basic and Diluted
Average shares outstanding 3,120,413 3,120,413
Net income (loss)from continuing operations $ 0.14 $ (0.15)
------------ ------------
Discontinued operations:
Income (loss) from operations,
net of applicable income taxes 0.02 (1.34)
Loss on disposal, net of applicable
income taxes (1.60) --
------------ ------------
(1.58) (1.34)
Cumulative effect on prior years of a change
in method of accounting for pre-opening costs,
net of tax -- (0.06)
------------ ------------
Net income (loss) $ (1.44) $ (1.55)
============ ============
</TABLE>
See accompanying notes to interim consolidated
financial statements.
<PAGE>
ALMOST FAMILY, INC. AND SUBSIDIARIES
(FORMERLY CARETENDERS HEALTH CORP)
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine months Ended December 31,
------------------------------
1999 1998
------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) from continuing operations $ 437,145 $ (651,845)
Adjustments to reconcile net income from
continuing operations to net cash provided
(used) by operating activities:
Depreciation and amortization 693,265 694,662
Provision for uncollectible accounts 645,061 308,639
Goodwill write-down 113,196
Loss on sale of building 91,701 --
Accounting change -- 171,974
Deferred taxes 80,900 (107,026)
------------ ----------
1,948,072 529,600
Change in certain net current assets
(Increase) decrease in:
Accounts receivable (1,477,356) 112,215
Prepaid expenses and other current assets (495,599) (140,183)
Increase (decrease) in:
Payables, accrual and other liabilities (643,244) (307,095)
-------------- -----------
Net cash provided (used) by continuing operations (668,127) 194,537
-------------- -----------
Cash flows from investing activities:
Capital expenditures (518,296) (374,196)
Sale of assets 119,009 --
------------ ----------
Net cash provided (used) by
investing activities (399,197) (374,196)
------------ ----------
Cash flows from financing activities:
Net revolving credit facility borrowings (12,296,171) 1,208,141
------------ ---------
Net cash provided (used) by financing activities (12,296,171) 1,208,141
------------ ---------
Net cash provided (used) by discontinued
operations 12,787,728 (1,813,716)
------------ -----------
Net increase (decrease) in cash (575,767) (785,234)
Cash and cash equivalents
at beginning of period 1,036,951 818,555
----------- ----------
Cash and cash equivalents
at end of period $ 461,184 $ 33,321
============ ============
See accompanying notes to interim consolidated
financial statements.
</TABLE>
<PAGE>
ALMOST FAMILY, INC. AND SUBSIDIARIES
(FORMERLY CARETENDERS HEALTH CORP)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying interim consolidated financial statements for the three
and nine months ended December 31, 1999 and 1998 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 is referred to
the Company's Form 10-K for the year ended March 31, 1999 for further
information. In the opinion of management of the Company, the
accompanying unaudited interim financial statements reflect all
adjustments (consisting of normally recurring adjustments) necessary to
present fairly the financial position at December 31, 1999 and the
results of operations and cash flows for the periods ended December 31,
1999 and 1998.
The results of operations for the three and nine months ended December
31, 1999 are not necessarily indicative of the operating results for the
year.
Name Change
On January 31, 2000, the Company's name was changed from "Caretenders
HealthCorp" to "Almost Family, Inc."
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, from time to time, is 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 L.P., Aetna Life and
Casualty Company and Aetna Casualty and Surety Company, 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 but is currently unable to predict whether the ultimate outcome of
the suit will have a material impact on the Company's 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>
ALMOST FAMILY, INC. (FORMERLY CARETENDERS HEALTH CORP). AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
Legal Proceedings (continued)
In January 1998, Aetna Life and Casualty Company withdrew its claim
against the Company without prejudice. Trial is scheduled for February
2000.
3. FINANCIAL STATEMENT RECLASSIFICATIONS
Certain amounts have been reclassified in the 1998 financial statements
in order to conform to the 1999 presentation. Such reclassifications,
which include reclassification of the results of the Company's product
and visiting nurse operations as discontinued operations had no effect
on previously reported net income (loss).
4. LOSS ON SALE OF BUILDING
In May 1999, the Company sold an office building resulting in a
non-operating loss of $91,701. The transaction generated net cash of
$79,093 after repaying mortgage debt of approximately $40,000.
5. ACCOUNTING FOR THE COSTS OF START-UP ACTIVITIES
Effective April 1, 1998, the Company adopted AICPA Statement of Position
98-5 "Reporting on the Costs of Start-up Activities" (SOP 98-5) which
requires all costs incurred readying a new business for operation prior
to revenue generation to be expensed as incurred. Accordingly, the
accompanying statement of operations for the nine months ended December
31, 1998 includes a non-recurring, net of tax, expense of $171,974 for
the cumulative effect on continuing operations of this change in
accounting principle.
6. GOODWILL WRITE-DOWN
During the quarter ended June 30, 1998, the Company recorded a
non-recurring write-down of goodwill of $113,196 before taxes. The
write-down of goodwill was required under Statement of Financial
Accounting Standard No. 121 ("SFAS 121"), "Accounting for the Impairment
of Long-lived Assets and for Long-lived Assets to be Disposed Of" based
upon management's estimate of the future cash flows from operations in
one of its adult day health centers.
7. Discontinued Operations
As part of a formal plan of separation, the Company on November 12, 1999
sold its product operations (consisting of infusion therapy and
respiratory and medical equipment businesses) to Lincare Holdings, Inc.
in an asset sale for $14.5 million and is pursuing available strategic
alternatives to complete the separation of its visiting nurse operations.
Proceeds from the sale are being used to repay obligations outstanding
under the Company's bank line of credit. As a result of the operational
separations, the Company recorded a one-time net of tax loss of
approximately $5 million or ($1.60) in the quarter ended September 30,
1999. This charge reduced the book value of the operations to their
expected net realizable value and includes the estimated future operating
results of the visiting nurse operations prior to separation. These
changes have been accounted for as discontinued operations in the
accompanying financial statements.
The estimated loss on disposal of discontinued operations reflected in
the accompanying financial statements includes management's estimate of
the results of operating the visiting nurse segment prior to disposal and
the estimated financial results of such disposal based on information
currently available. The form and timing of the implementation of a
Medicare Prospective Payment System for home care (PPS) may have a
material impact on the disposal value of the visiting nurse operations,
as described in more detail below.
<PAGE>
Revenues from discontinued operations were $11,216,872 and $14,065,495
for the quarter ended December 31, 1999 and 1998 respectively, and
$40,641,753 and $42,338,417 for the nine months ended December 31, 1999
and 1998 respectively. Interest expense has been allocated to continuing
and discontinued operations on the basis of relative net assets.
Accordingly, interest expense has been allocated to discontinued
operations in the amounts of $117,159 and $261,301 for the quarter ended
December 31, 1999 and 1998 respectively, and $568,827 and $454,898 for
the nine months ended December 31, 1999 and 1998 respectively. Results of
discontinued operations for the three and nine months ended December 31,
1998 included a $783,000 after-tax gain on a litigation settlement.
The accompanying balance sheet includes net current assets and
liabilities of discontinued operations, consisting primarily of accounts
receivable, inventory, accounts payable and accrued liabilities, and long
term assets of discontinued operations consisting primarily of property,
plant and equipment, net of accumulated depreciation and goodwill.
During the quarter ended June 30, 1998, the Company recorded a
non-recurring write-down of goodwill of $6,854,364 million before taxes
as a result of changes in Medicare reimbursement brought about by the
Balanced Budget Act of 1997 (the BBA) and their resulting impact on the
home health market place and the Company. The write-down of goodwill was
required under Statement of Financial Accounting Standard No. 121 ("SFAS
121"), "Accounting for the Impairment of Long-lived Assets and for
Long-lived Assets to be Disposed Of" based upon management's estimate of
the impact of the changes in Medicare reimbursement for home health
nursing services. Management determined that this impact indicated the
carrying value of goodwill should be written down by approximately $6.8
million based on the net present value of expected future cash flows of
specific acquired (primarily Medicare) nursing operations. This
write-down is included in loss from operations of discontinued operations
in the accompanying consolidated statement of operations, net of income
tax effects.
The BBA included a requirement for implementation of a prospective
payment system or "PPS" which would not be cost-based, no later than
October 1, 2000. Proposed PPS regulations were published by HCFA in
October 1999 with an invitation for comment. HCFA's schedule calls for
final rules to be published in the summer of 2000. The Company is
currently evaluating the proposed regulations for a prospective payment
system, its potential impact on the visiting nurse operations, and what
mitigating actions, if any, the Company may be able to take in response
to PPS.
The Company is unable to predict at this time what Medicare payment rates
will be under PPS. Likewise the Company is unable to predict what impact,
if any, PPS will have on the viability and disposition values of its
visiting nurse operations.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
As described elsewhere herein, the Company has sold its product operations and
is pursuing strategic alternatives for its visiting nurse operations.
Accordingly, the results of continuing operations presented below include only
the result of the Company's adult day health services operations consisting of
in-center adult day care and personal care services provided in the patients
homes.
RESULTS OF CONTINUING OPERATIONS
<TABLE>
<CAPTION>
Quarter Ended December 31, 1999 Compared With Quarter Ended December 31, 1998
- --------------------------------------------------------------------------------
<S> <C> <C>
1999 1998 Change
------------------- ------------------- -------------------
Amount %Rev. Amount %Rev. Amount %Rev.
----------- ------ ---------- ------- ---------- -------
Net Revenues $11,884,749 100.0% $10,159,459 100.0% $1,725,290 17.0%
Cost of Sales
and Services 9,836,275 82.8% 8,537,431 84.0% 1,298,844 15.2%
Center
Contribution 2,048,474 17.2% 1,622,028 16.0% 426,446 26.3%
Selling, General &
Administrative 1,104,360 9.3% 1,042,410 10.2% 61,950 5.9%
Depreciation and
Amortization 245,020 2.1% 230,041 2.3% 14,979 6.5%
Provision for
uncollectible
accounts 234,337 2.0% 93,114 0.9% 141,223 NM
Interest, Net 60,555 0.5% 135,058 1.3% (74,503) (55.2)%
----------- ---------- ----------
Income from
continuing operations
before taxes, and
accounting change 404,202 3.4% 121,405 1.2% 282,797 NM
Income taxes 169,765 1.4% 50,079 0.5% 119,686 NM
----------- ---------- ----------
Net income
from continuing
operations non-
recurring items
and accounting
change 234,437 2.0% 71,326 0.7% 163,111 NM
=========== ========== ==========
NM=Not Meaningful
- -------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Net Revenues
Net revenues increased 17% to $11.8 million from $10.2 million in the prior
year. Growth came primarily from volumes, which grew to 168,731 days of care in
1999 from 141,759 in 1998. Average revenue per day of care decreased just under
2% as mix changes offset price increases from Medicaid programs. Increased
volumes were derived primarily from increased occupancy in the adult day care
centers which grew to 74% of capacity in 1999 from 70% of capacity in 1998.
Cost of Sales and Services
Cost of sales and services as a percent of revenues declined to 83% in 1999 from
84% in 1998 primarily as a result of increased volumes of business and increased
occupancy rates for in-facility care.
Selling, General and Administrative
The decrease of $61,950 is due primarily to increased administrative costs
associated with the Company's strategic repositioning and name change
activities. SG&A as a percent of revenues dropped to 9.3% in 1999 from 10.2% in
1998.
Depreciation and Amortization
Depreciation and amortization increased by 6% or $14,979 due to capital
expenditures.
Provision for Uncollectible Accounts
Management establishes an allowance for uncollectible accounts based on its
estimate of probable collection losses. The increase in provision for
uncollectible accounts resulted from certain individual customer accounts which
became uncollectible during the period.
Interest, Net
The decrease in interest, net is primarily a result of lower average outstanding
debt levels associated with the Company's improved operating results and
proceeds from post-1998 transactions.
<PAGE>
<TABLE>
<CAPTION>
Nine months Ended December 31, 1999 Compared With Nine months Ended December 31, 1998
- -------------------------------------------------------------------------------------
1999 1998 Change
------------------- ------------------- -------------------
<S> <C> <C> <C> <C> <C> <C>
Amount %Rev. Amount %Rev. Amount %Rev.
----------- ------ ---------- ------- ---------- -------
Net Revenues $ 33,324,894 100.0% $ 29,472,651 100.0% $ 3,852,243 13.1%
Cost of Sales
and Services 27,534,082 82.5% 25,222,253 86.4% 2,311,829 9.2%
Center
Contribution 5,790,812 17.5% 4,250,398 13.6% 1,540,414 36.2%
Selling, General &
Administrative 3,313,079 10.3% 3,541,303 14.7% (228,224) (6.4)%
Depreciation and
Amortization 693,265 2.1% 694,662 2.4% (1,397) (0.2)%
Provision for
uncollectible
accounts 645,061 1.9% 308,639 1.1% 336,422 109.0%
Goodwill
write-down -- -% 113,196 0.6% (113,196) NM
Interest, Net 294,007 1.1% 409,400 1.4% (115,393) (28.2)%
-------- ---------- ---------
Income (Loss) from
continuing operations
before taxes, and
accounting change 845,400 3.1% (816,802) (6.6)% 1,662,202 NM
Loss on sale of
building 91,701 0.4% -- 91,701 NM
Income taxes 316,554 0.7% (336,931) (2.7)% 653,485 NM
-------- ------------ -------
Net income (loss)
from continuing
operations before
accounting change 437,145 0.9% (479,871) (3.9)% 917,016 NM
======== ========== =======
NM=Not Meaningful
- ---------------------------------------------------------------------------------------------------------
</TABLE>
Net Revenues
Net revenues increased 13% to $33.3 million from $29.5 million in the prior
year. Growth came primarily from volumes, which grew to 475,631 days of care in
1999 from 442,337 in 1998. Average revenue per day of care increased
approximately 5% as a result of pricing and mix changes. Increased volumes were
derived primarily from increased occupancy in the adult day care centers which
grew to 74% of capacity in 1999 from 70% of capacity in 1998.
Cost of Sales and Services
Cost of sales and services as a percent of revenues declined to 83% in 1999 from
86% in 1998 primarily as a result of increased volumes of business and increased
occupancy rates for in-facility care.
<PAGE>
Selling, General and Administrative
The decrease of $228,224 is due primarily to the Company's July 1998 down-sizing
in response to changes in the reimbursement environment. SG&A as a percent of
revenues dropped to 10.3% in 1999 from 14.7% in 1998.
Depreciation and Amortization
Depreciation and amortization was approximately the same as 1998 due to the
following factors: the June 1998 non-recurring write-down of goodwill, partially
offset by the impact of capital expenditures, net of certain property items
still in service reaching the end of their useful lives.
Provision for Uncollectible Accounts
Management establishes an allowance for uncollectible accounts based on its
estimate of probable collection losses. The increase in provision for
uncollectible accounts resulted from certain individual customer accounts which
became uncollectible during the period.
Interest, Net
The decrease in interest, net is primarily a result of lower average outstanding
debt levels associated with the Company's improved operating results and
proceeds from post-1998 transactions.
Income Taxes - Three and Nine months ended December 31, 1999 and 1998
As of December 31, 1999, the Company has net deferred tax assets of
approximately $2.5 million. The net deferred tax asset is composed of $2.7
million of long-term deferred tax assets and $200,000 of current deferred tax
liabilities.
The Company has provided a valuation allowance against certain net deferred tax
assets based upon management's estimation of realizability of those assets
through future taxable income. This valuation was based in large part on the
Company's history of generating operating income or losses, individual tax
locales and expectations for the future. The Company's ability to generate the
expected amounts of taxable income from future operations is dependent upon
general economic conditions, competitive pressures on revenues and margins and
legislation and regulation at all levels of government. Management has
considered the above factors in reaching its conclusions that it is more likely
than not that future taxable income will be sufficient to fully utilize the net
deferred tax assets. However, there can be no assurances that the Company will
meet its expectations of future taxable income.
The effective income tax rate was approximately 42% of income before income
taxes for 1999 as compared to an effective income tax rate of approximately
41.25% of loss before taxes for 1998. The benefit in 1998 resulted directly from
the recognition of losses incurred from continuing operations and was provided
at a lower than statutory rate due to the tax implications of state and local
net operating loss carryforwards arising from the 1998 losses.
Discontinued Operations
As part of a formal plan of separation, the Company on November 12, 1999 sold
its product operations (consisting of infusion therapy and respiratory and
medical equipment businesses) to Lincare Holdings, Inc. in an asset sale for
$14.5 million and is pursuing available strategic alternatives to complete the
separation of its visiting nurse operations. Proceeds from the sale are being
used to repay obligations outstanding under the Company's bank line of credit.
As a result of the operational separations, the Company has recorded a one-time
net of tax loss of approximately $5 million or ($1.60) in the quarter ended
September 30, 1999. This charge reduced the book value of the operations to
their expected net realizable value and includes the estimated future operating
results of the visiting nurse operations prior to separation. These changes have
been accounted for as discontinued operations in the accompanying financial
statements.
The estimated loss on disposal of discontinued operations reflected in the
accompanying financial statements includes management's estimate of the results
of operating the visiting nurse segment prior to disposal and the estimated
<PAGE>
financial results of such disposal based on information currently available. The
form and timing of the implementation of a Medicare Prospective Payment System
for home care (PPS) may have a material impact on the disposal value of the
visiting nurse operations, as described in more detail in the notes to the
accompanying financial statements.
Revenues from discontinued operations were $11,216,872 and $14,065,495 for the
quarter ended December 31, 1999 and 1998 respectively, and $40,641,753 and
$42,338,417 for the nine months ended December 31, 1999 and 1998 respectively.
Interest expense has been allocated to continuing and discontinued operations on
the basis of relative net assets. Accordingly, interest expense has been
allocated to discontinued operations in the amounts of $117,159 and $261,301 for
the quarter ended December 31, 1999 and 1998 respectively, and $568,827 and
$454,898 for the nine months ended December 31, 1999 and 1998 respectively.
The accompanying balance sheet includes net current assets and liabilities of
discontinued operations, consisting primarily of accounts receivable, inventory,
accounts payable and accrued liabilities, and long term assets of discontinued
operations consisting primarily of property, plant and equipment, net of
accumulated depreciation and goodwill.
Building Sale
In May 1999, the Company sold an office building resulting in a non-operating
loss of $91,701. The transaction generated net cash of $79,093 after repaying
mortgage debt of approximately $40,000.
Liquidity and Capital Resources
Revolving Credit Facility
The Company has a $20 million revolving credit facility with Bank One Kentucky,
NA. The credit facility bears interest at prime plus a margin (ranging from 0%
to 1.0%, currently 0.50%) dependent upon total leverage and is secured by
substantially all assets and the stock of the Company's subsidiaries. Borrowings
are available equal to the greater of: a) a multiple of earnings before
interest, taxes, depreciation and amortization (as defined) or, b) an asset
based formula, primarily based on accounts receivable. Borrowings under the
facility may be used for working capital, capital expenditures, development and
growth of the business and other corporate purposes. The facility has an
expiration date of April 10, 2001.
As part of a formal plan of separation, the Company sold its product operations
(consisting of infusion therapy and respiratory and medical equipment
businesses) to Lincare Holdings, Inc. in an asset sale for $14.5 million and is
pursuing available strategic alternatives to complete the separation of its
visiting nurse operations. Proceeds from the sale are being used to repay
obligations outstanding under the Company's bank line of credit. As of December
31, 1999 approximately $3.2 million remained outstanding on the line of credit.
The Company has retained certain assets and liabilities associated with the
discontinued operations, the liquidation of which is expected to generate
additional proceeds of approximately $1.6 million thus reducing the Company's
bank borrowings to approximately $1.6 million. Borrowing capacity will then be
available to the Company to pursue further development of the adult day care
business.
The Company believes that this facility will be sufficient to fund its operating
needs for at least the next twelve months.
Management will continue to evaluate 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 and Financial Conditions
Key elements to the Consolidated Statements of Cash Flows were (in thousands):
Net Change in Cash and Cash Equivalents 1999 1998
Continuing Operations:
Provided by (used in)
Operating activities $ (668) $ 194
Investing activities (399) (374)
Financing activities (12,297) 1,208
---------- ------------
$ (13,364) $ 1,208
Discontinued operations 12,788 (1,813)
--------- -------------
Net Change in Cash and Cash Equivalents $ (576) $ (785)
========= =============
1999
Net cash used by operating activities resulted principally from current period
income, net of changes in accounts receivable, accounts payable and accrued
expenses. The increase in accounts receivable resulted entirely from volume
increases. Days sales outstanding declined to 56 from 58 at March 31, 1999. The
decrease in accounts payable and accrued liabilities resulted principally from
the timing of payments. Net cash used in investing activities resulted
principally from amounts invested in adult day health services expansion
activities, and improvements in information systems, net of cash generated from
the sale of a building. Net cash used in financing activities resulted primarily
from reduced borrowings under the Company's credit facility and reduced mortgage
obligations related to the building sold.
1998
Net cash used by operating activities resulted principally from current period
losses, adjusted for non-cash items (refer to discussion of operating results
above and to statement of cash flows) net of changes in accounts receivable,
accounts payable and accrued expenses. Net cash used in investing activities
resulted principally from amounts invested in adult day health services
expansion activities, and improvements in information systems. Net cash provided
by financing activities resulted primarily from an increase in the Company's
credit facility related to investments made in acquisitions and expansion.
Year 2000 Computer System Issue
The Company has experienced no significant business issues related to the Year
2000 computer issue. Expenditures related to this issue were not material to the
Company's financial position or results of operations.
Health Care Reform
The health care industry has experienced, and is expected to continue to
experience, 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 reforms have been enacted as
discussed elsewhere in this document and proposals for additional changes are
continuously formulated by departments of the federal government, Congress, and
state legislatures.
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 expenditures are expected to continue. Such
future changes may further impact reimbursement. There can be no assurance that
<PAGE>
future legislation or regulatory changes will not have a material adverse effect
on the operations of the Company.
State legislative proposals continue to be introduced that would impose more
limitations on payments to providers of health care services such as the
Company. Many states have enacted, or are considering enacting, measures that
are designed to reduce their Medicaid expenditures.
The Company cannot predict what additional government regulations may be enacted
in the future affecting its business or how existing or future laws and
regulations might be interpreted, or whether the Company will be able to comply
with such laws and regulations in its existing or future markets.
Refer to the sections on Reimbursement Changes and Cautionary Statements -
Forward Outlook and Risks in Part I, the notes to the accompanying financial
statements and Management's Discussion and Analysis of Financial Condition and
Results of Operations all included in the Company's report on Form 10K for the
fiscal year ended March 31, 1999 for additional information.
Impact of Inflation
Management does not believe that inflation has had a material effect on income
during the past several years.
<PAGE>
ITEM 2a. Quantitative and Qualitative Disclosures About Market Risk
Derivative Instruments
The Company does not use derivative instruments.
Market Risk of Financial Instruments
The Company's primary market risk exposure with regard to financial instruments
is to changes in interest rates.
At December 31, 1999, a hypothetical 100 basis point increase in short-term
interest rates would result in a reduction of approximately $30,000 in annual
pre-tax earnings.
<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
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 11 Calculation of Earnings Per Share (attached)
Exhibit 27 Financial Data (electronic filing only)
(b) Form 8-K - none.
<PAGE>
ALMOST FAMILY, INC. AND SUBSIDIARIES
(FORMERLY CARETENDERS HEALTH CORP)
COMPUTATION OF EARNINGS PER SHARE
EXHIBIT 11
<TABLE>
<CAPTION>
Three Months Ended Nine months Ended
December 31, December,
------------------------- -------------------------
<S> <C> <C> <C> <C>
1999 1998 1999 1998
----------- ----------- ----------- -----------
BASIC
Net income (loss) $ 234,437 $ 1,062,869 $(4,484,597) $(4,841,494)
Weighted average
outstanding shares
during the period 3,120,413 3,120,413 3,120,413 3,120,413
----------- ----------- ----------- -----------
Net income (loss)
per share $ 0.08 $ 0.34 $ (1.44) $ (1.55)
=========== =========== =========== ===========
DILUTED
Net income (loss) for
diluted income
per common share $ 234,437 $ 1,062,869 $(4,484,597) $(4,841,494)
Weighted average
outstanding shares
during the period 3,120,413 3,120,413 3,120,413 3,120,413
Add-common equivalent
shares representing
shares issuable upon
exercise of dilutive
options and warrants (a) (a) (a) (a)
----------- ----------- ----------- -----------
Diluted Net
income (loss)
per common share $ 0.08 $ 0.34 $ (1.44) $ (1.55)
=========== =========== =========== ===========
(a) anti-dultive or would not impact rounded EPS
</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 14, 2000
ALMOST FAMILY, INC.
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
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> Mar-31-2000
<PERIOD-END> Dec-31-1999
<CASH> 461
<SECURITIES> 0
<RECEIVABLES> 7604
<ALLOWANCES> (341)
<INVENTORY> 0
<CURRENT-ASSETS> 444
<PP&E> 8644
<DEPRECIATION> (5508)
<TOTAL-ASSETS> 18421
<CURRENT-LIABILITIES> 3636
<BONDS> 0
0
0
<COMMON> 11371
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 18421
<SALES> 33325
<TOTAL-REVENUES> 33325
<CGS> 27534
<TOTAL-COSTS> 27534
<OTHER-EXPENSES> 4006
<LOSS-PROVISION> 645
<INTEREST-EXPENSE> 294
<INCOME-PRETAX> 754
<INCOME-TAX> 316
<INCOME-CONTINUING> 437
<DISCONTINUED> (4922)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4485)
<EPS-BASIC> (1.44)
<EPS-DILUTED> (1.44)
</TABLE>
