<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
F O R M 10 - Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended September 30, 1995 Commission file number 0-17821
The Care Group, Inc.
(Exact name of registrant as specified in its charter)
Delaware 11-2962027
(State of other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1 Hollow Lane, Lake Success, New York, 11042
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 516-869-8383
N/A
(Former name, former address and former fiscal year,
if changed from 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 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
As of October 26, 1995, the registrant had 8,450,015 shares of common
stock, $.001 par value per share, outstanding.
Page 1 of 13 Pages
<PAGE>
THE CARE GROUP, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
PAGE
3 Financial Information
8 Notes to Consolidated Financial Statements
9-11 Management's Discussion and Analysis of Financial
Condition and Results of Operations
12 Other Information
13 Signature Page
Page 2 of 13 Pages
<PAGE>
THE CARE GROUP, INC. AND SUBSIDIARIES
THREE MONTHS & NINE MONTHS ENDED SEPTEMBER 30, 1995
PART I - FINANCIAL INFORMATION
Page 3 of 13 Pages
<PAGE>
<TABLE>
<CAPTION>
THE CARE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands,
except per
share data) September 30, December 31, September 30,
1995 1994 1994
(Unaudited) (Unaudited)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $267 $577 $578
Marketable securities 771 711 767
Accounts receivable, net
of allowances of
$3,036 at
September 30,
1995, $4,186 at
December 31,
1994 and $3,858
at September 30, 1994 15,553 15,585 15,308
Inventories 1,287 1,163 1,310
Prepaid expenses and
other current assets 810 593 1,027
Total Current Assets 18,688 18,629 18,990
Property and equipment
- at cost 4,844 3,808 3,550
Less - Accumulated depreciation 1,622 1,195 1,146
Net property and equipment 3,222 2,613 2,404
INTANGIBLES, Net 14,222 13,851 13,263
OTHER ASSETS 749 315 289
TOTAL ASSETS $36,881 $35,408 $34,946
LIABILITIES AND
STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of
long-term debt $1,541 $568 $14
Accounts payable 1,196 1,374 976
Accrued expenses 484 851 459
Income taxes payable - 264 363
Deferred income taxes - - 139
Total Current Liabilities 3,221 3,057 1,951
LONG-TERM LIABILITIES
NOTE PAYABLE TO BANK 7,200 6,000 6,200
DEFERRED INCOME TAXES 299 158 274
LONG-TERM DEBT,
Excluding Current Portion 1,825 2,856 3,608
TOTAL LIABILITIES 12,545 12,071 12,033
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred Stock, $.001
par value per share; 1,000
shares authorized;
no shares issued and outstanding - - -
Common Stock, $.001 par value
per share; 20,000
shares authorized; 8,638,
8,359 and 8,222 shares issued
and outstanding at September
30, 1995, December 31, 1994
and September 30, 1994,
respectively 9 8 8
Additional paid-in capital 20,884 20,390 20,154
Retained earnings 4,475 3,858 3,670
25,368 24,256 23,832
Common Stock held in treasury,
at cost-217,
207 and 207 shares at
September 30, 1995,
December 31,
1994 and September 30, 1994,
respectively (1,032) (919) (919)
Total Stockholders' Equity 24,336 23,337 22,913
TOTAL LIABILITIES
AND STOCKHOLDERS'
EQUITY $36,881 $35,408 $34,946
</TABLE>
Page 4 of 13 Pages
<PAGE>
<TABLE>
<CAPTION>
THE CARE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
For The Nine Months Ended
September 30,
1995 1994
(In thousands, except
per share data) (Unaudited) (Unaudited)
<S> <C> <C>
NET REVENUES $30,648 $26,624
COST OF REVENUES 15,665 14,703
GROSS PROFIT 14,983 11,921
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 13,334 9,739
OPERATING INCOME 1,649 2,182
INTEREST:
Interest income 27 14
Interest expense (478) (407)
Net interest expense (451) (393)
INCOME BEFORE PROVISION FOR
INCOME TAXES 1,198 1,789
PROVISION FOR INCOME TAXES 581 763
NET INCOME $617 $1,026
NET INCOME PER COMMON AND COMMON
EQUIVALENT SHARES $.07 $.14
WEIGHTED AVERAGE COMMON AND
COMMON EQUIVALENT SHARES
OUTSTANDING 8,424 7,589
</TABLE>
Page 5 of 13 Pages
<PAGE>
<TABLE>
THE CARE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
For The Three Months Ended
September 30,
1995 1994
(In thousands, except per
share data) (Unaudited) (Unaudited)
<S> <C> <C>
NET REVENUES $9,592 $10,210
COST OF REVENUES 5,275 5,404
GROSS PROFIT 4,317 4,806
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 3,880 3,952
OPERATING INCOME 437 854
INTEREST:
Interest income 11 4
Interest expense (168) (204)
Net interest expense (157) (200)
INCOME BEFORE PROVISION FOR
INCOME TAXES 280 654
PROVISION FOR INCOME TAXES 133 286
NET INCOME $147 $368
NET INCOME PER COMMON AND COMMON
EQUIVALENT SHARES $.02 $.05
WEIGHTED AVERAGE COMMON AND
COMMON EQUIVALENT SHARES
OUTSTANDING 8,450 7,985
</TABLE>
Page 6 of 13 Pages
<PAGE>
<TABLE>
<CAPTION>
THE CARE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For The Nine Months Ended September 30,
(In thousands) 1995 1994
(unaudited) (unaudited)
<S> <C> <C>
OPERATING ACTIVITIES:
Net Income $617 $1,026
Adjustments to reconcile
net income to net cash
provided by (used in)
operating activities:
Depreciation and amortization 950 910
Provision for bad debts 792 -
Unrealized (gain) loss on marketable securities (77) 39
(Gain) loss on sale of marketable securities (71) 109
Provision for deferred income taxes 141 (347)
Changes in assets and liabilities:
Accounts receivable (1,018) (1,447)
Inventories (124) (607)
Prepaid expenses and other current assets (292) (54)
Other assets 79 (126)
Accounts payable (178) 143
Accrued expenses (367) (259)
Income taxes payable (264) 296
Net cash provided by (used in)
operating activities 188 (317)
INVESTING ACTIVITIES:
Purchases of property and equipment (1,053) (495)
Payments for intangible assets acquired (473) (642)
Restrictive covenant (71) -
Investment in certified home health agency (413) -
Investment in licensed home health agency (100) -
Net sales (purchases) of marketable securities 88 (60)
Net cash used in investing activities (2,022) (1,197)
FINANCING ACTIVITIES:
Proceeds from bank loan 1,200 3,200
Proceeds from long-term debt 367 -
Repayments of long-term debt (425) (2,778)
Proceeds from exercise of stock options 553 328
Purchases of treasury stock (847) -
Sales of treasury stock 676 -
Net cash provided by financing activities 1,524 750
NET DECREASE IN CASH
AND CASH EQUIVALENTS (310) (764)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 577 1,342
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 267 $ 578
Supplemental Disclosure of
Cash Flow Information:
Interest Paid $ 478 $ 309
Taxes Paid $ 927 $ 751
Supplemental Disclosure of non-cash investing
and financing activities:
Increase in accounts receivable allowance and
goodwill related to a prior acquisition $258 $ -
Issuance of stock in connection with acquisitions $ - $ 2,708
Issuance of note in connection with acquisitions $ - $ 3,600
Issuance of stock for employment agreements $ - $ 200
</TABLE>
Page 7 of 13 Pages
<PAGE>
THE CARE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1994.
NOTE 2 - COMMITMENTS
On September 22, 1994, the Company entered into a stock acquisition agreement
to acquire all of the outstanding common stock of a certified home health
agency. The purchase price, as amended in February 1995, is for an amount less
than $1,000,000, of which $62,500 was paid in 1994, and $400,000 was paid in
1995 in connection with the amendment to the agreement. Such amounts are
included in other assets as of September 30, 1995. The remaining purchase
price is payable one-half at closing, as defined, and one-half within one year
from the closing date, with interest at 8 percent per annum. Pursuant to the
terms of the agreement, as amended, the acquisition is subject to certain
contingencies. If the acquisition is not approved, the portion of the purchase
price paid in advance is refundable.
Additionally, the Company intends to enter into an agreement to acquire all of
the outstanding common stock of a licensed home health agency. The purchase
price will be for an amount less than $1,000,000, of which $100,000 was
advanced in 1995 in connection with the agreement. Such amount is included in
other assets as of September 30, 1995. The acquisition is subject to certain
contingencies. If the acquisition is not approved, the portion of the purchase
price paid in advance is refundable.
Page 8 of 13 Pages
<PAGE>
2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Management's analysis is intended to describe narratively the Company's
consolidated financial condition and its consolidated results of operations.
It should be read in conjunction with the Company's consolidated financial
statements and the accompanying notes.
RESULTS OF OPERATIONS
FOR NINE MONTHS ENDED SEPTEMBER 30, 1995
Net revenues for the nine months ended
September 30, 1995 increased to $30,648,000 as compared to $26,624,000 for the
comparable period last year. The increase of $4,024,000 or 15% was attributed
to several factors. Approximately $2,000,000, or 7.5%, of the increase was
attributable to prior year acquisitions. The balance is the result of internal
growth in existing branches.
The cost of revenues for the nine months ended September 30, 1995 as a
percentage of net revenues was 51% as compared to 55% for the comparable period
last year. The decrease is primarily due to the Company increasing its
durable medical equipment ("DME") business which has a lower cost of revenues
than the nursing and infusion therapy businesses.
The Company's selling, general and administrative ("SG&A") expenses as a
percentage of net revenues for the nine months ended September 30, 1995 was 44%
as compared to 37% for the comparable period in 1994. This increase is due in
part to the Company's expanding DME business and costs associated with the
establishment of the Company's new subsidiary, Mail Order Meds, Inc. ("MOM"),
as well as a decrease in infusion sales in the third quarter from the Company's
New York City branch. Infusion sales generally have higher net profits than
nursing or DME sales.
Net income for the nine months ended September 30, 1995 decreased to $617,000
($.07 per share) as compared with $1,026,000 ($.14 per share) for the same
period in 1994. Net income as a percentage of net revenues for the nine months
ended September 30, 1995 was 2.0% as compared to 3.9% for the same period last
year. The decrease in net income of approximately $400,000 was due to start-up
costs of the Company's MOM division and the reduction of the Company's gross
profit margin of 2% in its infusion business as a result of reduced pricing
from increased managed care.
Page 9 of 13 Pages
<PAGE>
RESULTS OF OPERATIONS
FOR THREE MONTHS ENDED SEPTEMBER 30, 1995
Net revenues for the three months ended September 30, 1995 decreased to
$9,592,000 as compared to $10,210,000 for the comparable period last
year, due to a decrease in revenues from the Company's
infusion services division. Infusion services were affected by an increase in
managed care business in New York which caused patient volume to decrease.
Managed care entities control an increasing portion of the patient
referral. The Company has now applied for several contracts in New York,
which if obtained, will offset the decrease previously experienced.
Management believes this was a temporary reduction and will not continue into
the fourth quarter (although there can be no assurance).
Cost of revenues for the three months ended September 30, 1995 as a percentage
of net revenues was 55% as compared to 53% for the same period in 1994. The
increase in the cost of revenues as a percentage of net revenues was
attributable to slightly lower margins with respect to the Company's infusion
business. The lower margins are the result of managed care reducing prices on
home infusion services.
The Company's selling, general and administrative (SG&A) expenses as a
percentage of net revenues for the three months ended September 30, 1995
increased to 40% as compared to 39% for the same period in 1994. This slight
increase is due to the decrease in infusion sales which have higher net
profits than nursing or DME sales.
Net income for the three months ended September 30, 1995 decreased to $147,000
($.02 per share) as compared with $368,000 ($.05 per share) for the same period
in 1994. Net income as a percentage of net revenues for the three months ended
September 30, 1995 was 1.5% as compared to 3.6% for the same period last year.
The decrease in net income is attributable to a decrease in infusion service
revenue and a reduction in the gross profit margins by 2%, both due to the
increasing impact of managed care.
Page 10 of 13 Pages
<PAGE>
FINANCIAL CONDITION AND LIQUIDITY
Current assets increased to $18,688,000 at September 30, 1995 from
$18,629,000 at December 31, 1994. The increase of $59,000 in current
assets is due to the Company's increase in inventories and
prepaid expenses. This was partially offset by a decrease in cash and accounts
receivable. The decrease in cash was primarily a result of the Company's
investments in home health agencies.
At September 30, 1995, working capital was $15,467,000 as compared to
$15,572,000 at December 31, 1994. The decrease of $105,000 is primarily
attributable to the increase in the current portion of long-term debt, which
was partrially offset by the decrease in accounts payable and accrued expenses.
The Company has a term revolving credit agreement with its bank which provides
for borrowings of up to $7,500,000, expiring February 14, 1997. The Company may
borrow up to 70% of eligible receivables, as defined pursuant to the terms of
the revolving credit agreement. Interest is charged at prime (8.75 percent at
September 30, 1995) plus one-half percent. The outstanding balance under this
arrangement at September 30,1995 was $7,200,000.
The average days sales in outstanding receivables decreased from 159 days for
the year ended December 31, 1994 to 139 days for the nine months ended
September 31, 1995 based upon net sales and net accounts receivable during the
respective periods. The reduction is the result of management's continued
effort to reduce the accounts receivable days outstanding. Delays resulting
from increased third-party payor scrutiny of invoices, refusal to pay or an
increased proportion of Medicare and Medicaid patients could in the future have
a materially adverse effect on the Company's liquidity and general financial
condition.
During the period January 1, 1995 through September 30, 1995, the Company
received approximately $553,000 from the exercise of 219,000 stock options.
Page 11 of 13 Pages
<PAGE>
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
See the Company's Reports on Form 10-Q for the quarter ended March 31,
1995 and 10-K for the year ended December 31, 1994 with respect to the legal
proceeding involving the Company's subsidiary Advanced Care Associates, Inc.
Item 2. Change in Securities
N/A
Item 3. Defaults upon Senior Securities
N/A
Item 5. Other Information
N/A
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits.
None
b. Reports on Form 8-K.
None
Page 12 of 13 pages
<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 by the undersigned thereunto duly authorized.
The Care Group, Inc.
(Registrant)
Dated: November 8, 1995
/s/ Ann T. Mittasch
Ann T. Mittasch
President and Chairman
Dated: November 8, 1995
/s/ Pat H. Celli
Pat H. Celli
Chief Financial Officer
(Principal Financial Officer)
Page 13 of 13 pages
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 267
<SECURITIES> 771
<RECEIVABLES> 18589
<ALLOWANCES> 3036
<INVENTORY> 1287
<CURRENT-ASSETS> 18688
<PP&E> 4844
<DEPRECIATION> 1622
<TOTAL-ASSETS> 36881
<CURRENT-LIABILITIES> 3221
<BONDS> 0
<COMMON> 9
0
0
<OTHER-SE> 24327
<TOTAL-LIABILITY-AND-EQUITY> 36881
<SALES> 9592
<TOTAL-REVENUES> 9592
<CGS> 4317
<TOTAL-COSTS> 4317
<OTHER-EXPENSES> 3880
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 157
<INCOME-PRETAX> 280
<INCOME-TAX> 133
<INCOME-CONTINUING> 147
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 147
<EPS-PRIMARY> .02
<EPS-DILUTED> 0
</TABLE>
