SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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 March 31, 1996
- ---- 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 0-21006
-------
INFU-TECH, INC.
(Exact name of registrant as specified in its charter)
Delaware 22-3127689
- ------------------------------- --------------------------------------
(State of other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
910 Sylvan Avenue, Englewood Cliffs, NJ 07632
- --------------------------------------- --------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (201) 567 - 4600
-----------------
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 short 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
Number of Shares of Registrant's Common Stock Outstanding
May 7, 1996: 3,211,250
<PAGE>
INFU-TECH, INC. AND SUBSIDIARIES
INDEX
PAGE NUMBER
PART I - FINANCIAL INFORMATION:
Item 1 Consolidated Balance Sheets (Unaudited) at March 31, 1996
and June 30, 1995 ................................................. 2
Consolidated Statements of Operations (Unaudited) for the nine months
ended March 31, 1996 and 1995 ..................................... 3
Consolidated Statements of Operations (Unaudited) for the three months
ended March 31, 1996 and 1995 ..................................... 4
Consolidated Statements of Cash Flows (Unaudited) for the nine months
ended March 31, 1996 and 1995 ..................................... 5
Notes to Unaudited Consolidated Financial Statements ............... 6
Item 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations .........................................7 - 9
PART II - OTHER INFORMATION ...............................................10
Signatures .......................................................11
<PAGE>
INFU-TECH, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, June 30,
Assets 1996 1995
------ --------- --------
Unaudited) (Audited)
Cash and cash equivalents $ 337,000 $ 546,000
Accounts receivable, net of allowances
for uncollectible accounts of
$2,182,000 and $2,136,000 5,890,000 3,608,000
Inventories 1,265,000 1,454,000
Deferred income taxes 849,000 849,000
Prepaid expenses and other current assets 262,000 512,000
------------ ------------
Total current assets 8,603,000 6,969,000
Property and equipment, at cost, net
of accumulated depreciation of $285,000
and $212,000 346,000 173,000
Deferred income taxes 220,000 220,000
Other assets 69,000 52,000
------------- ------------
$9,238,000 $7,414,000
========== ==========
Liabilities and Stockholders' Equity
- ------------------------------------
Accounts payable $2,849,000 $2,342,000
Accrued payroll and related 315,000 407,000
Other current liabilities 1,236,000 649,000
------------ ------------
Total current liabilities 4,400,000 3,398,000
Capital lease obligations 164,000 48,000
Deferred income 103,000 198,000
Commitments and contingencies
Stockholders' equity:
Common stock, $.01 par value; 5,000,000
shares authorized;
3,205,750 shares issued 32,000 32,000
Additional paid-in capital 2,929,000 2,917,000
Retained earnings 1,683,000 894,000
Treasury stock, at cost; 39,300 shares (73,000) (73,000)
------------- ------------
Total stockholders' equity 4,571,000 3,770,000
------------- ------------
$9,238,000 $7,414,000
------------- ------------
See accompanying notes to consolidated financial statements.
2
<PAGE>
INFU-TECH, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Nine Months Ended March 31,
---------------------------
1996 1995
--------- --------
Revenues $18,220,000 $14,291,000
----------- -----------
Costs and expenses:
Medical and nutritional product 9,195,000 6,706,000
Personnel 5,009,000 5,178,000
Selling, general and administrative 2,015,000 2,378,000
Provision for uncollectible accounts 936,000 745,000
Management fees to CHA 292,000 229,000
Depreciation 73,000 64,000
Other income (89,000) (107,000)
---------- ----------
17,431,000 15,193,000
---------- ----------
Income (loss) before income taxes 789,000 (902,000)
Provision for income taxes -- 96,000
---------- ----------
Net income (loss) $789,000 ($998,000)
========== ==========
Earnings (loss) per share $0.25 ($0.32)
========== ==========
Weighted average number of shares 3,167,086 3,163,385
See accompanying notes to consolidated financial statements.
3
<PAGE>
INFU-TECH, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended March 31,
---------------------------
1996 1995
--------- --------
Revenues: 5,674,000 5,038,000
Costs and expenses:
Medical and nutritional product 2,713,000 2,652,000
Personnel 1,637,000 1,772,000
Selling, general and administrative 667,000 772,000
Provision for uncollectible accounts 297,000 313,000
Management fees to CHA 91,000 81,000
Depreciation 35,000 32,000
Other income (27,000) (33,000)
---------- ----------
5,413,000 5,589,000
---------- ----------
Income (loss) before income taxes 261,000 (551,000)
Provision for income taxes -- --
Net income (loss) $261,000 ($551,000)
========== ==========
Earnings (loss) per share $0.08 ($0.17)
========== ==========
Weighted average number of shares 3,170,058 3,160,974
See accompanying notes to consolidated financial statements.
4
<PAGE>
INFU-TECH, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended March 31,
---------------------------
1996 1995
--------- --------
Operating activities: $789,000 ($998,000)
Net income (loss)
Adjustments to reconcile net income (loss)
to net cash used in operating activities:
Depreciation expense 73,000 64,000
Provision for uncollectible accounts 936,000 745,000
Amortization of deferred income (95,000) (95,000)
Deferred income tax provision --- 96,000
Increase (decrease) from changes in:
Accounts receivable (3,218,000) (1,577,000)
Inventories 189,000 (211,000)
Prepaid expenses and other
current assets 250,000 (312,000)
Other assets (17,000) (133,000)
Accounts payable 507,000 1,111,000
Accrued payroll and related (92,000) 132,000
Other current liabilities 514,000 (175,000)
---------- ---------
Net cash (used in) provided by operating
activities (164,000) (1,353,000)
---------- ---------
Investing activities:
Expenditures for property and
equipment (16,000) (86,000)
---------- ----------
Financing activities:
Purchase of treasury stock --- (20,000)
Exercise of options 12,000 ---
Payment of captial lease obligations (41,000) (5,000)
---------- ---------
Net cash used in financing
activities (29,000) (25,000)
Net decrease in cash and cash equivalents (209,000) (1,464,000)
Cash and cash equivalents, beginning of period 546,000 1,902,000
---------- ---------
Cash and cash equivalents, end of period $337,000 $438,000
========= =========
Non cash investing and financing activity:
Property and equipment obtained under
capital lease obligation $230,000 $---
========= =========
See accompanying notes to consolidated financial statements.
5
<PAGE>
INFU-TECH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) UNAUDITED INFORMATION
In the opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments (consisting only of normal
recurring accruals) necessary to present fairly the Company's financial
position as of March 31, 1996, and the results of its operations and changes in
cash flows for the nine month periods ended March 31, 1996 and 1995. These
consolidated financial statements should be read in conjunction with the annual
consolidated financial statements of the Company.
The Company changed its fiscal year-end from December 31 to June 30 and has
filed its Transition Report on Form 10K for the transition period from January
1, 1995 to June 30, 1995.
The results of operations for the nine months ended March 31, 1996 are not
necessarily indicative of the results to be expected for the full year.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
RESULTS OF OPERATIONS
NINE MONTHS ENDED MARCH 31, 1996 COMPARED WITH
NINE MONTHS ENDED MARCH 31, 1995
Total revenues increased by $3,929,000, or 28%, from $14,291,000 in 1995 to
$18,220,000 in 1996, primarily due to a $4,448,000, or 48%, increase in home
infusion division revenues which was caused by a 39% increase in the number of
patients serviced with improved therapy pricing mix.
Costs of medical and nutritional products sold to patients and other customers
increased by $2,489,000, or 37%, from $6,706,000 in 1995 to $9,195,000 in 1996.
As a percentage of total revenues, medical and nutritional product costs
increased from 47% in 1995 to 50% in 1996. The increase is primarily
attributed to lower home infusion pricing.
Total personnel costs decreased by $169,000, or 3%, from $5,178,000 in 1995 to
$5,009,000 in 1996, primarily attributed to reductions in sales and
administrative personnel. These decreases were partially offset by higher
nursing and pharmacy costs incurred to support the 39% increase in home
infusion patients serviced.
Selling, general and administrative expenses decreased by $363,000, or 15%,
from $2,378,000 in 1995 to $2,015,000 in 1996, primarily as a result of
reductions in professional fees and selling related travel, which offset
increases in distribution costs incurred to support the 39% increase in home
infusion patients serviced.
The provision for uncollectible accounts was 5% of revenues in both years.
6
<PAGE>
INFU-TECH, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (Continued)
Management fees to Continental Health Affiliates, Inc. and subsidiaries ("CHA")
of $292,000 in 1996 and $229,000 in 1995 were 1.6% of revenues in both years.
Depreciation expense increased from $64,000 in 1995 to $73,000 in 1996 due to
property and equipment additions.
Other income of $89,000 in 1996 and $107,000 in 1995 consisted of $95,000 of
amortization in both years of a $628,000 payment received by the Company in
1992 as consideration for the Company's releasing the buyer of CHA's former
Home Nursing Division from an agreement not to sell infusion therapy services
and CHA's agreeing not to provide nursing services in California, Arizona or
Tennessee for a period of five years, as well as interest expense of $6,000 in
1996 and net interest income of $12,000 in 1995.
The provision for income taxes in 1995 was an offset to a prior benefit taken
in a prior quarter. Based on earnings trends for the nine month period ending
March 31, 1996, the Company expects to have taxable income which will enable
the Company to utilize a portion of its net operating loss carryforwards. The
deferred tax expense associated with utilization of these carryforwards is
offset by a reduction in the deferred tax valuation allowance. The deferred
tax asset remains at a level that the Company feels will be realizable.
The net income in 1996 was $789,000, or $.25 per share, compared to the net
loss in 1995 of $998,000, or $.32 per share. The improvement in net income was
primarily attributable to a 28% increase in revenues partially offset by a 37%
increase in medical and nutritional product costs.
THREE MONTHS ENDED MARCH 31, 1996 COMPARED WITH
THREE MONTHS ENDED MARCH 31, 1995
Total revenues increased by $636,000, or 13%, from $5,038,000 in 1995 to
$5,674,000 in 1996, primarily due to a $917,000, or 27%, increase in home
infusion division revenues which was caused by a 32% increase in the number of
patients serviced. This increase was offset by shorter periods of therapy per
patient combined with a lower pricing mix of bundled services.
Costs of medical and nutritional products sold to patients and other customers
increased by $61,000, or 2%, from $2,652,000 in 1995 to $2,713,000 in 1996. As
a percentage of total revenues, medical and nutritional product costs decreased
from 53% in 1995 to 48% in 1996.
Total personnel costs decreased by $135,000, or 8%, from $1,772,000 in 1995 to
$1,637,000 in 1996, primarily attributed to reductions in sales and
administrative personnel. These decreases were partially offset by higher
nursing and pharmacy costs incurred to support the 32% increase in home
infusion patients serviced.
Selling, general and administrative expenses decreased by $105,000, or 14%,
from $772,000 in 1995 to $667,000 in 1996, primarily attributed to lower travel
costs and professional fees. These reductions were partially offset by higher
distribution costs incurred to support the 32% increase in home infusion
patients serviced.
7
<PAGE>
INFU-TECH, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (Continued)
The provision for uncollectible accounts was 5% of revenues in 1996 and 6% of
revenues in 1995.
Management fees to CHA of $91,000 in 1996 and $81,000 in 1995 were 1.6% of
revenues in both years.
Depreciation expense increased from $32,000 in 1995 to $35,000 in 1996 due to
property and equipment additions.
Other income of $27,000 in 1996 and $33,000 in 1995 consisted of $32,000 of
amortization in both years of a $628,000 payment received by the Company in
1992 as consideration for the Company's releasing the buyer of CHA's former
Home Nursing Division from an agreement not to sell infusion therapy services
and CHA's agreeing not to provide nursing services in California, Arizona or
Tennessee for a period of five years, as well as interest expense of $5,000 in
1996 and net interest income of $1,000 in 1995.
Based on earnings trends for the three month period ending March 31, 1996, the
Company expects to have taxable income which will enable the Company to utilize
a portion of its net operating loss carryforwards. The deferred tax expense
associated with utilization of these carryforwards is offset by a reduction in
the deferred tax valuation allowance. The deferred tax asset remains at a
level that the Company feels will be realizable.
Net income in 1996 was $261,000, or $.08 per share, compared to a net loss in
1995 of $551,000, or $.17 per share. This improvement is attributed to the 13%
increase in revenues.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 1996, the Company had total assets of $9.2 million and a net
worth of $4.6 million. The Company's liabilities consisted entirely of
accounts payable and other operating obligations and deferred income. The
Company had no borrowings and its primary capital requirements have been for
investment in working capital, principally accounts receivable and inventories.
During the nine month period ended March 31, 1996, the Company used $164,000 of
cash in operating activities, primarily due to an increase of $2,282,000 in
accounts receivable, partially offset by a $507,000 increase in accounts
payable and net income of $789,000.
At March 31, 1996, the balance in net accounts receivable was 63% higher than
the balance at June 30, 1995. Of this increase, 17% occured during the three
months ended March 31, 1996. The Company's overall outstanding net accounts
receivable has increased from 69 days' sales at December 31, 1995 to 89 days'
sales at March 31, 1996, primarily as a result of a slow-down in payments from
Medicare and managed care companies. Medicare payments have been delayed due
to changes in reimbursement policies, while managed care companies have
experienced delays in processing payments due to a higher volume of claims, as
well as confusion due to consolidation within the managed care industry. As a
result, the Company has experienced increased delays in having its claims
processed as well as an increase in the number of initial claims rejected.
8
<PAGE>
INFU-TECH, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (Continued)
This is an industry-wide problem and the Company believes that claims
processing will improve and the days' sales outstanding of accounts
receivable will decrease as these problems are resolved.
The increase in accounts payable is primarily attributed to an improved mix of
payment terms that the Company has been able to obtain from suppliers to take
account of the increase in accounts receivable.
During the nine month period ended March 31, 1996, the Company spent $16,000
for property and equipment. Infu-Tech has no material commitments for future
capital expenditures.
As of March 31, 1996, the Company's working capital was $4.2 million. At March
31, 1996, the Company's cash and cash equivalents of $337,000 were $209,000
less than the balance of $546,000 at June 30, 1995 and its accounts payable of
$2,849,000 were, as discussed above, $507,000 higher than the $2,342,000 at
June 30, 1995.
The Company believes that it would be able to secure adequate financing, if
necessary, to cover its cash requirements for the foreseeable future.
Part II Other Information
Item 1 Legal Proceedings
The Company has been notified that the government
intends to seek reimbursement for alleged overpayments
from Medicare relating to approximately $3 million of
sales between 1991 and 1993 of a product which was
discontinued in late 1993. The government believes that the
Company was paid under a higher reimbursement code than
that which should have been applicable. The Company
believes that it billed the product properly and was
paid under the appropriate code. The Company has
cooperated with the government and intends to continue
to do so in its effort to reach an appropriate resolution
of this matter.
Item 2 Changes in Securities
None
Item 3 Defaults Upon Senior Securities
None
Item 4 Submission of Matters to Vote of Security Holders
None
Item 5 Other Information
None
Item 6 Exhibits and Reports on Form 8-K
None
9
<PAGE>
INFU-TECH, INC. AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this Amended Report to be signed on its
behalf by the undersigned thereunto duly authorized.
Infu-Tech, Inc.
Date May 14, 1996 JACK ROSEN
------------------------ ---------------------------
Jack Rosen
Chairman and Director
(Chief Executive Officer)
Date May 14, 1996 ALLISON KURUS ALLEN
----------------------- ---------------------------
Allison Kurus Allen
Chief Accounting Officer
10
<PAGE>
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<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<EXCHANGE-RATE> 0.00001
<CASH> 337,000
<SECURITIES> 0
<RECEIVABLES> 8,072,000
<ALLOWANCES> 2,182,000
<INVENTORY> 1,265,000
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<PP&E> 631,000
<DEPRECIATION> 285,000
<TOTAL-ASSETS> 9,238,000
<CURRENT-LIABILITIES> 1,236,000
<BONDS> 0
0
0
<COMMON> 32,000
<OTHER-SE> 1,610,000
<TOTAL-LIABILITY-AND-EQUITY> 9,238,000
<SALES> 18,220,000
<TOTAL-REVENUES> 18,220,000
<CGS> 9,195,000
<TOTAL-COSTS> 17,431,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
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<INCOME-PRETAX> 789,000
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