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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 DECEMBER 31, 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)
Ridge Hill
Yonkers, New York 10710
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (914) 964-6700
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 JANUARY 31, 2000
Common stock, par value $.01 per share 5,165,552 Shares
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Page No.
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PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets at
December 31, 1999 and March 31, 1999.........................3
Condensed Consolidated Statements of Operations and
Comprehensive Gain for the three and nine months
ended December 31, 1999 and 1998.............................4
Condensed Consolidated Statements of Cash Flows for
the nine months ended December 31, 1999 and 1998.............5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations........................6-8
Item 3. Quantitative and Qualitative Disclosures About Market
Risk Not Applicable..........................................8
PART II. OTHER INFORMATION............................................9
Item 1. Legal Proceedings............................................9
SIGNATURES................................................................10
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<TABLE>
<CAPTION>
ACCUHEALTH, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS, EXCEPT SHARES AND PER SHARE DATA)
(UNAUDITED)
December 31, March 31,
1999 1999
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<S> <C> <C>
ASSETS
Current Assets:
Cash ...................................................................... $ 25 85
Marketable securities ..................................................... -- 2,372
Accounts receivable, net .................................................. 16,300 14,499
Inventories ............................................................... 1,119 1,653
Prepaid expenses and other current assets ................................. 216 267
----------- -----------
Total Current Assets ...................................................... 17,660 18,876
Revenue producing equipment, net ............................................... 832 901
Fixed assets, net .............................................................. 2,492 2,100
Other .......................................................................... 189 93
-- --
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Total Assets .............................................................. $ 21,173 $ 21,970
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LIABILITIES AND STOCKHOLDERS' (DEFICIENCY) EQUITY
Current Liabilities:
Notes payable - revolving credit facility ................................. $ 9,195 $ 7,765
Current portion of notes payable - other .................................. 676 857
Margin payable ............................................................ -- 1,281
Accounts payable .......................................................... 7,797 5,517
Accrued expenses and other current liabilities ............................ 2,356 2,245
Current portion of capital lease - Facility ............................... 601 232
Current portion of other capital lease obligations ........................ 301 430
----------- -----------
Total Current Liabilities ................................................... 20,926 18,327
12% Subordinated Debentures .................................................... 6,250 6,250
Notes payable - term loan ...................................................... 650 750
Notes payable - other, less current portion .................................... -- 109
Other capital lease obligations, less current portion .......................... 256 388
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Total Liabilities ........................................................... 28,082 25,824
Stockholders' Deficiency:
Preferred Stock, $.01 par value: authorized 3,650,000 shares; no shares
issued and outstanding Preferred stock, $.01par 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; 5,165,552, and
5,127,593 shares issued and outstanding, respectively ..................... 51 51
Additional paid-in capital .................................................. 7,618 7,606
Accumulated other comprehensive income (loss) ............................... -- (42)
Accumulated deficit ......................................................... (13,955) (10,846)
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(6,285) (3,230)
Less treasury stock (308,004 shares) at cost ................................ (624) (624)
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Total Stockholders' Deficiency ................................................. (6,909) (3,854)
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Total Liabilities and Stockholders' Deficiency ................................. $ (21,173) $ 21,970
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</TABLE>
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<TABLE>
<CAPTION>
ACCUHEALTH, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE GAIN
(AMOUNTS IN THOUSANDS, EXCEPT SHARES AND PER SHARE DATA)
(UNAUDITED)
Three Months Ended Nine Months Ended
December 31, December 31,
-------------------------- --------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales ........................................................... $ 8,918 $ 9,973 $ 27,029 $ 27,460
Cost of goods sold .................................................. 6,069 6,026 18,535 16,311
----------- ----------- ----------- -----------
Gross Profit ........................................................ 2,849 3,947 8,494 11,149
Selling, general and administrative expenses ........................ 3,200 3,757 9,981 10,960
----------- ----------- ----------- -----------
Operating income (loss) ............................................. (351) 190 (1,487) 189
Interest expense .................................................... 563 456 1,613 1,105
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Net income (loss) ................................................... $ (914) $ (266) (3,100) (916)
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Net income (loss) per common share applicable to common shareholders:
Basic ........................................................... $ (.18) $ (.08) $ (.60) $ (.28)
Diluted ......................................................... $ (.18) $ (.08) $ (.60) $ (.27)
Weighted number of common shares and equivalents outstanding:
Basic ........................................................... 5,146,564 3,336,494 5,137,977 3,276,871
Diluted ......................................................... 5,146,564 3,441,880 5,137,977 3,382,257
Net income (loss) ............................................... (914) (266) (3,100) (916)
Other comprehensive income, net of tax: unrealized gain on
marketable securities, net .......................................... -- -- -- --
----------- ----------- ----------- -----------
Total comprehensive income (loss) ................................... $ (914) $ (266) $ (3,100) $ (916)
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</TABLE>
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<TABLE>
<CAPTION>
ACCUHEALTH, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS, EXCEPT SHARES AND PER SHARE DATA)
(UNAUDITED)
Nine Months Ended December 31,
1999 1998
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<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss) ................................................ $ (3,100) (916)
Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities:
Depreciation and amortization .................................... 626 570
Changes in operating assets and liabilities:
Accounts receivable .............................................. (1,801) (4,392)
Inventories ...................................................... 534 (1,229)
Prepaid expenses and other current assets ........................ 51 (157)
Other assets ..................................................... (96) 443
Accounts payable ................................................. 2,415 (979)
Accrued expenses and other current liabilities ................... 116 58
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Cash used in operating activities ................................ (1,255) (6,602)
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INVESTING ACTIVITIES
Purchase of fixed assets ......................................... (1,047) (584)
Purchase of marketable securities ................................ -- (4,249)
Proceeds from sales of marketable securities ..................... 1,095 --
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Cash provided by (used in) investing activities .................. 48 (4,833)
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FINANCING ACTIVITIES
Proceeds from note payable - revolving credit facility ........... 1,430 3,747
Proceeds from subordinated debentures ............................ -- 6,250
Proceeds from term loan .......................................... -- 250
Proceeds from sale of marketable securities ...................... 700
Proceeds from margin loan ........................................ 1,000
Payments on notes payable - revolving credit facility ............ (100)
Proceeds from notes payable-other ................................ 368 600
Payments on notes payable - other ................................ (290) (1,161)
Principal payments on capital lease - Facility ................... --
Proceeds from issuance of capital stock .......................... -- 89
Payments on other capital lease obligations ...................... (261) (77)
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Cash provided by financing activities ............................ 1,147 11,398
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Net increase (decrease) in cash .................................. (60) (37)
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Cash at beginning of period ...................................... 85 249
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Cash at end of period ............................................ $ 25 $ 212
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SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid .................................................... $ 948 $ 773
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NONCASH INVESTING AND FINANCING ACTIVITIES:
Additions to capital leases ...................................... $ -- $ 150
Accrued dividends and accretion on redeemable preferred stock .... $ 12 $ 20
</TABLE>
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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 included elsewhere in
this Form 10-Q.
RESULTS OF OPERATIONS
THREE MONTHS ENDED DECEMBER 31, 1999 AND 1998
NET REVENUES. Net revenues decreased approximately $ 1.1 million or 11% from the
comparable 1998 quarter to approximately $8.9 million for the three months ended
December 31, 1999. The decrease was primarily the result of decreases in the
Company's infusion therapy revenues and decreases in the sale and rental of
durable medical equipment.
GROSS PROFIT. Gross profit for the three months ended December 31, 1999 and 1998
was approximately $2.8 million and $3.9 million, respectively, representing
approximately 32% of net sales for the three months ended December 31, 1999 as
compared to 39% for the comparable prior year period. Gross profit decreased
primarily due to the mix of revenues. The Company experienced a greater
percentage of revenues from its institutional pharmacy business, which generates
lower gross margin as compared to the other lines of business. Further,
decreased revenues from the durable medical equipment, which generates the
Company's highest gross margin, also contributed to the decline in overall gross
profit. Moreover, declines in margins in the higher margin infusion therapies
were incurred due to changes in the customer base. 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 $3.2 million and $3.8 million or
approximately 37% and 38% of net sales for the three months ended December 31,
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 ($600,000) and costs associated with consolidating the
Company's headquarters' and operations in a new leased facility ($115,000).
INTEREST EXPENSE. Interest increased by $107,000 for the three months ended
December 31, 1999, to approximately $563,000. This increase was due to increased
net borrowings under our revolving line of credit and additional interest on the
$6,250,000, 12% Subordinated Debentures due to the receipt of additional funds
in August, 1998 and additional interest accrued on unpaid interest per the terms
of the agreement.
PROVISION FOR INCOME TAXES. No provision of income taxes has been reflected due
to the Company's federal and state net operating loss credits.
NINE MONTHS ENDED DECEMBER 31, 1999 AND 1998
NET REVENUES. Net revenues decreased approximately $431,000 or 2 % from the
comparable 1998 quarter to approximately $27.0 million for the nine months ended
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December 31, 1999. The decrease was primarily was primarily the result of
decreases in the Company's infusion therapy revenues and decreases in the sale
and rental of durable medical equipment.
GROSS PROFIT. Gross profit for the nine months ended December 31, 1999 and 1998
was approximately $8.5 and $11.1 million, respectively, representing
approximately 32% of net sales for the nine months ended December 31, 1999 as
compared to 40% for the comparable prior year period. Gross profit decreased
primarily due to the Company's growth in sales in the institutional pharmacy
business, which generates a lower gross margin, continued downward pressure on
its fees within the infusion therapy business, decreases in the durable medical
equipment business, which generates high gross margins and write off of unusable
revenue producing equipment. 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
patients.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses were approximately $10.0 and $11 million or
approximately 37% and 40% of net sales for the nine months ended December 31,
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 ($700,000) and costs associated with consolidating the
Company's headquarters and operations in a new leased facility ($115,000).
INTEREST EXPENSE. Interest expenses increased by $508,000 for the nine months
ended December 31, 1999, to approximately $1,613,000. This increase was
primarily due to increased net borrowings under our revolving line of credit and
additional interest on the $6,250,000 12% Subordinated Debentures due to the
receipt of additional funds in August 1998 and additional interest on unpaid
interest per the terms of the agreement.
PROVISION FOR INCOME TAXES. No provision of income taxes has been reflected due
to the Company's federal and state net operation loss credits.
FINANCIAL CONDITION
As of December 31, 1999, the Company had negative working capital of
approximately $3,266,000.
The Company's cash provided by financing activities of approximately $1.1
million was primarily attributable to the net proceeds of approximately $1.4
million under the Company's revolving credit facility and term loan offset by
principal payments on capital leases and other notes payable.
Accounts receivable includes amounts due from third party customers, primarily
governmental agencies (Medicare and Medicaid). At December 31, 1999, gross
Medicare and Medicaid receivables aggregated approximately $5.5 million.
In addition to the continuing losses, the Company operates under cash flow
pressure due to difficulty in collecting its accounts receivable. The difficulty
in collecting sufficient accounts receivable during the quarter ended December
31, 1999 has required that the Company attempt to negotiate extended terms for
vendor payments. In December 1999 the primary drug distributor stopped shipping
drugs to the Company and another drug distributor provided drugs on a cash on
delivery (C.O.D.) basis. In January 2000 the primary drug distributor instituted
a lawsuit temporarily restraining the operations of the Company. Also, a prior
drug distributor restrained the operations of the Company in February 2000.
Moreover, a supplier of nursing services was successful in sustaining a judgment
against the Company for $143,448. The court has since lifted the restraints. The
Company has been granted the opportunity within 60 days from February 10, 2000
to negotiate a settlement with the Company's former primary drug distributor and
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until March 17, 2000 to negotiate a settlement with the prior drug distributor
and is attempting to develop a payment plan with the nursing service provider.
(See Legal Proceedings, Part II, Item 1 elsewhere in this Report). There can be
no assurance that the Company will be successful in reaching agreement with any
of the plaintiffs, the result of which could have a material adverse effect on
the Company.
The Company is also evaluating alternatives to improve profitability and cash
flow such as eliminating unprofitable product lines and reviewing payors and
payor groups to determine whether to continue to service them, as well as
exploring financing alternatives. Three managed care organizations have been
notified that the Company is no longer accepting their new patients and is
transferring their existing patients to other service providers. The company
will continue to evaluate its payors and payor groups to selectively cease
business with those deemed unprofitable. To further improve cash flow, various
product lines are under evaluation to determine the impact of selling or
terminating that business
The need for additional cash is critical to the ongoing operations of the
Company; and accordingly, efforts are underway to identify the sources for a
cash infusion. As of December 31, 1999, the Company had borrowed the maximum
allowable under its revolving loan agreement ($9,000,000), overdraft line
($1,000,000), term loan ($700,000) and received an advance on the sale of its
building ($600,000). The Company entered into a contract for the sale of its
Bronx facility and has rented new space where it consolidated its operations.
The net cash proceeds anticipated from the sale of the building would be used to
pay the advance of $600,000 with the balance of the proceeds used to pay down
the overdraft line. Discussions with vendors to convert a portion of accounts
payable into notes or to provide more time for repayment are presently in
process. There can be no assurance that the Company will be successful in
obtaining additional cash infusion with favorable terms to the Company. If the
Company fails to obtain such cash infusion, the ability of the Company to
sustain operations and pay its creditors would be adversely effected.
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 includes information that is forward looking, such as the
Company's plans to convert accounts payable to notes payable. 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, the sale or termination of product
lines, the ability to obtain a cash infusion 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.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
On January 28, 2000 in an action entitled McKesson HBOC versus AccuHealth, Inc.
and Midview Drug, Inc. in the Supreme Court of the State of New York, County of
Westchester, the Company was served with an order to shows cause with temporary
restraints and a verified complaint from its former primary drug distributor
alleging that the Company owed a sum in excess of $4,000,000 and the Company was
ordered via a restraining order from conducting business. On February 1, 2000
the Company was successful in lifting the restraining order and on February 10,
2000 was granted by the plaintiff a 60 day time period to try and resolve this
matter.
On February 9, 2000 in an action entitled Neuman Distributors, Inc. against
Midview Drug, Inc, in the Supreme Court of the State of New York, County of
Kings, the Company was also served with a restraining notice to judgment Debtor
from another drug distributor alleging that it was owed $205,000. On February
14, 2000 the Company was successful in entering into a stipulation with
plaintiff obtaining a time period to resolve this matter until March 17, 2000
and the restrains were lifted.
In January 2000 a provider of nursing services was successful in sustaining its
judgment against the Company in the amount of $143,448. This resulted from an
action entitled Staff Builders Inc. against Healix Health Care, Inc. a/k/a/
Accuhealth/Healix Healthcare, Inc. in the Supreme Court of the State of New
York, County of Westchester. The Company is attempting to work out a payment
arrangement with the nursing service provider.
There are three other lawsuits against the Company, which have claims
aggregating less than $100,000. The Company's management is confident that it
has meritorious defenses against such claims.
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
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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: February 23, 2000 /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> 9-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-START> APR-01-1999
<PERIOD-END> DEC-31-1999
<EXCHANGE-RATE> 1
<CASH> 25
<SECURITIES> 0
<RECEIVABLES> 18,296
<ALLOWANCES> (1,996)
<INVENTORY> 1,119
<CURRENT-ASSETS> 17,660
<PP&E> 7,426
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<TOTAL-ASSETS> 21,173
<CURRENT-LIABILITIES> 20,926
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0
1
<COMMON> 51
<OTHER-SE> (6,960)
<TOTAL-LIABILITY-AND-EQUITY> 21,173
<SALES> 27,029
<TOTAL-REVENUES> 27,029
<CGS> 18,535
<TOTAL-COSTS> 18,535
<OTHER-EXPENSES> 9,981
<LOSS-PROVISION> (1,487)
<INTEREST-EXPENSE> 1,613
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