SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
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FORM 10-Q
(Mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1999
OR
[ ] TRANSITIONAL REPORT PURSUANT TO SECTION 13 0R 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _________ TO __________
COMMISSION FILE NUMBER 0-17292
ACCUHEALTH, INC.
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(Exact name of registrant as specified in its charter)
New York 13-3176233
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1575 Bronx River Avenue
Bronx, New York 10460
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (718) 518-9511
Indicate by check mark (X) whether the registrant has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities 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 [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares
outstanding of each of the issuer's classes of common stock, as of the latest
practicable date.
CLASS OUTSTANDING AT AUGUST 13, 1999
Common stock, par value $.01 per share 5,136,754 Shares
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ACCUHEALTH, INC. AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION
Page No.
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Item 1. Condensed Consolidated Financial Statements.
Condensed Consolidated Balance Sheets at
June 30, 1999 and March 31, 1999...............................................3
Condensed Consolidated Statements of Operations and Comprehensive Gain
for the three months ended June 30, 1999 and 1998..............................4
Condensed Consolidated Statements of Cash Flows
for the three months ended June 30, 1999 and 1998..............................5
Note to Condensed Consolidated Financial
Statements.....................................................................6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations..................................7-8
Item 3 Quantitative and Qualitative Disclosures About Market Risk.
Not Applicable.................................................................8
PART II. OTHER INFORMATION..............................................................9
SIGNATURES..................................................................................9
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2
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ACCUHEALTH, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS, EXCEPT SHARES AND PER SHARE DATA)
(UNAUDITED)
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<CAPTION>
JUNE 30, 1999 MARCH 31, 1999
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<S> <C> <C>
ASSETS
Current Assets:
Cash ........................................................... $ 509 $ 85
Marketable securities .......................................... 375 2,372
Accounts receivable, net ....................................... 15,062 14,499
Inventories .................................................... 2,268 1,653
Prepaid expenses and other current assets ...................... 270 267
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Total Current Assets ........................................... 18,484 18,876
Revenue producing equipment, net .................................. 820 901
Fixed assets, net ................................................. 2,257 2,100
Other ............................................................. 95 93
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Total Assets ................................................... $ 21,656 $ 21,970
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LIABILITIES AND STOCKHOLDERS' (DEFICIENCY) EQUITY
Current Liabilities:
Notes payable - revolving credit facility ...................... $ 9,421 $ 7,765
Current portion of notes payable - other ....................... 777 857
Margin payable ................................................. -- 1,281
Accounts payable ............................................... 5,466 5,517
Accrued expenses and other current liabilities ................. 1,923 2,245
Current portion of capital lease - Facility .................... 233 232
Current portion of other capital lease obligations ............. 448 430
Total Current Liabilities .................................... 18,268 18,327
12% Subordinated Debentures ....................................... 6,250 6,250
Notes payable - term loan ......................................... 725 750
Notes payable - other, less current portion ....................... 40 109
Other capital lease obligations, less current portion ............. 370 388
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Total Liabilities ............................................ 25,653 25,824
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Stockholders' Deficiency:
Preferred Stock, $.01 par value: authorized 3,650,000 shares; no
shares issued and outstanding
Preferred stock, $.01 par value; 6% cumulative convertible,
$213 and liquidation preference, authorized 1,350,000 shares;
issued and outstanding 105,000 shares .......................... 1 1
Common stock $0.1 par value; authorized 15,000,000 shares;
5,136,754, and 5,127,593 shares issued and outstanding,
respectively ................................................... 51 51
Additional paid-in capital ..................................... 7,612 7,606
Accumulated other comprehensive income (loss) .................. 4 (42)
Accumulated deficit ............................................ (11,041) (10,846)
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(3,373) (3,230)
Less treasury stock (308,004 shares) at cost ................... (624) (624)
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Total Stockholders' Deficiency .................................... (3,997) (3,854)
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Total Liabilities and Stockholders' Deficiency .................... $ 21,656 $ 21,970
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See note to condensed consolidated financial statements.
3
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ACCUHEALTH, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE GAIN
(AMOUNTS IN THOUSANDS, EXCEPT SHARES AND PER SHARE DATA)
(UNAUDITED)
THREE MONTHS ENDED JUNE 30,
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1999 1998
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<S> <C> <C>
Net sales ............................................................ $ 8,947 $ 8,623
Cost of goods sold ................................................... 5,622 5,139
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Gross profit ......................................................... 3,325 3,484
Selling, general and administrative expenses ......................... 3,027 2,980
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Operating income ..................................................... 298 504
Interest expense ..................................................... 487 257
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Net income (loss) .................................................... $ (189) $ 247
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Net income (loss) per common share applicable to common shareholders:
Basic ............................................................ $.04 $.07
Diluted .......................................................... $.04 $.07
Weighted number of common shares and equivalents outstanding:
Basic ............................................................ 5,130,588 3,193,975
Diluted .......................................................... 5,130,588 3,332,605
Net income (loss) ................................................ (189) 247
Other comprehensive income, net of tax: unrealized gain on marketable
securities, net .................................................. 4 --
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Total comprehensive income (loss) ................................ $ (185) $ 247
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See note to consolidated financial statements.
4
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ACCUHEALTH, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS, EXCEPT SHARES AND PER SHARE DATA)
(UNAUDITED)
Three Months Ended June 30
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1999 1998
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<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss) ............................................... $ (189) $ 247
Adjustments to reconcile net income (loss) to net cash provided
by (used in) operating activities:
Depreciation and amortization ............................... 178 176
Changes in operating assets and liabilities:
Accounts receivable ...................................... (563) (1,231)
Inventories .............................................. (615) 21
Prepaid expenses and other current assets ................ (2) (190)
Other assets ............................................. (2) 475
Accounts payable ......................................... 84 (1,199)
Accrued expenses and other current liabilities ........... (320) 223
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Cash used in operating activities ........................ (1,430) (1,478)
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INVESTING ACTIVITIES
Purchase of fixed assets .................................... (285) (147)
Net change in goodwill ...................................... -- (68)
Proceeds from sales of marketable securities ................ 720 --
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Cash provided by (used in) investing activities ............. 435 (215)
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FINANCING ACTIVITIES
Proceeds from note payable - revolving credit facility ...... 1,656 7,460
Proceed from notes payable - other .......................... -- 657
Proceeds from term loan ..................................... -- 250
Payments on notes payable - revolving credit facility ....... (25) (5,928)
Payments on notes payable - other ........................... (212) (852)
Principal payments on capital lease - Facility .............. -- (18)
Proceeds from issuance of capital stock ..................... -- 75
Payments on other capital lease obligations ................. -- 115
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Cash provided by financing activities ....................... 1,419 1,529
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Net increase (decrease) in cash ............................. 424 (164)
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Cash at beginning of period ................................. 85 249
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Cash at end of period ....................................... $ 509 $ 85
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SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid ............................................... $ 296 $ 234
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NONCASH INVESTING AND FINANCING ACTIVITIES:
Additions to capital leases ................................. $ -- $ 58
Accrued dividends and accretion on redeemable preferred stock $ 6 $ 27
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See note to consolidated financial statements.
5
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ACCUHEALTH, INC. AND SUBSIDIARIES
NOTE TO CONSOLIDATED FINANCIAL STATEMENTS
1. MARKETABLE SECURITIES/MARGIN PAYABLE
At June 30, 1999, management has classified all their equity securities
as available-for-sale securities, which are reported at fair market
value, with unrealized gains and losses reported as other comprehensive
income. Gains or losses on the sale of securities are recognized on a
specific identification basis. The Company's investment in marketable
securities for the quarter ended June 30, 1999 is summarized as
follows:
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<CAPTION>
Amortized Unrealized Fair Market
Cost Gain (Loss) Value
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<S> <C> <C> <C>
Balance - March 31, 1999....... $ 2,372 $ -- $ 2,372
Purchases...................... 762 -- 762
Sales.......................... (2,673) -- (2,673)
Realized loss.................. (90) -- (90)
Unrealized gain (loss)......... -- 4 4
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Balance - June 30, 1999........ $ 371 $ 4 $ 375
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
This Management's Discussion and Analysis should be read in conjunction with the
condensed consolidated financial statements of the Company and related notes
included elsewhere in this Form 10-Q.
RESULTS OF OPERATIONS
NET REVENUES. Net revenues increased approximately $324,000 or 4% from the
comparable 1998 quarter to approximately $8.9 million for the three months ended
June 30, 1999. The increase was primarily the result of increases in the
Company's institutional pharmacy business with durable medical equipment and
respiratory revenues remaining relatively constant with the prior quarter.
GROSS PROFIT. Gross profit for the three months ended June 30, 1999 and 1998 was
approximately $3.3 and $3.5 million, respectively, representing approximately
37% of net sales for the three months ended June 30, 1998 as compared to 40% for
the comparable prior year period. Gross profit decreased primarily due to the
Company continuing to experience downward pressure on its fees within the
infusion services business and growth in sales in the institutional pharmacy
business which generates a lower gross margin. Compounding this downward
pressure on reimbursement rates has been a change in our managed care patient
mix to lower margin modalities as a result of the prolonged, reduced
availability of intravenous immune gamma globulin - a higher margin medication
frequently administered to our patients.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses were approximately $3.0 and $3.0 million or
approximately 34% and 34% of net sales for the three months ended June 30, 1999
and 1998, respectively. There were decreases due to the elimination of certain
duplicate overhead costs resulting from the merger with Healix Healthcare, Inc.
on April 9, 1998. Offsetting these decreases were increases in bad debt expense
($100,000), due to general industry experience.
INTEREST EXPENSE. Net interest increased by $230,000 for the three months ended
June 30, 1999, to approximately $487,000. This increase was due to increased net
borrowings under our revolving line of credit and interest on the issuance of
$6,250,000, 12% Subordinated Debentures.
PROVISION FOR INCOME TAXES. No provision of income taxes has been reflected due
to the Company's federal and state net operating loss credits.
FINANCIAL CONDITION
As of June 30, 1999, the Company had working capital of approximately $216,000.
The Company's cash provided by financing activities of approximately $1.4
million was primarily attributable to the net proceeds of approximately $1.6
million under the Company's revolving credit facility and term loan offset by
principal payments on capital leases.
7
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Accounts receivable include amounts due from third party payors, primarily
governmental agencies (Medicare and Medicaid). At June 30, 1999, gross Medicare
and Medicaid receivables aggregated approximately $5.4 million.
The Company operates under cash flow pressure due to difficulty in collecting
its accounts receivable. As of June 30, 1999, the Company had borrowed the
maximum allowable under its revolving loan agreement ($9,000,000), overdraft
line ($1,000,000) and term loan ($725,000). Discussions to increase the
Company's borrowing capacity are in process.
DISCLOSURE REGARDING FORWARD LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 provides a "safe harbor"
for forward looking statements. Certain information in Items 1 and 2 of Part I
of this Form 10-Q include information that is forward looking, such as the
Company's plans to obtain additional financing. The matters referred to in
forward looking statements could be affected by the risks and uncertainties
involved in the Company's business. These risks and uncertainties include, but
are not limited to, the effect of economic and market conditions, the impact of
the cost containment efforts of third-party payors and the Company's ability to
obtain and maintain required licenses. Subsequent written and oral forward
looking statements attributable to the Company or persons acting on its behalf
are expressly qualified in their entirety by the cautionary statements in this
paragraph and elsewhere in this Form 10-Q.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable.
8
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Default 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
None
(b) Reports
None
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
ACCUHEALTH, INC.
Date: August 13, 1999 By: /s/ GLENN C. DAVIS
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Glenn C. Davis, as
President and Chief Executive Officer
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<CIK> 0000840401
<NAME> ACCUHEALTH, INC.
<MULTIPLIER> 1,000
<CURRENCY> USD
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-START> APR-1-1999
<PERIOD-END> JUN-30-1999
<EXCHANGE-RATE> 1
<CASH> 509
<SECURITIES> 0
<RECEIVABLES> 16,823
<ALLOWANCES> (1,761)
<INVENTORY> 2,268
<CURRENT-ASSETS> 18,484
<PP&E> 7,175
<DEPRECIATION> (4,098)
<TOTAL-ASSETS> 21,656
<CURRENT-LIABILITIES> 18,268
<BONDS> 0
0
1
<COMMON> 51
<OTHER-SE> 7,612
<TOTAL-LIABILITY-AND-EQUITY> 21,656
<SALES> 8,947
<TOTAL-REVENUES> 8,947
<CGS> 5,622
<TOTAL-COSTS> 5,622
<OTHER-EXPENSES> 3,027
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 487
<INCOME-PRETAX> (189)
<INCOME-TAX> 0
<INCOME-CONTINUING> (189)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (189)
<EPS-BASIC> (.04)
<EPS-DILUTED> (.04)
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