SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 OR 15 (d) of
the Securities Exchange Act of 1934
For the quarter ended December 31, 1996
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
incorporation or organization) Identification Number)
910 Sylvan Avenue
Englewood Cliffs, NJ 07632
(Address of principal executive offices)
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
As of February 7, 1997, the Registrant had outstanding 3,248,092
shares of its $.01 par value Common Stock.
<PAGE>
INFU-TECH, INC.
Index
Page Number
PART I - FINANCIAL INFORMATION:
Item 1 Consolidated Balance Sheets December 31, 1996 (Unaudited)
and June 30, 1996 . . . . . . . . . . . . . . . . . . . . . . . . . 2
Consolidated Statements of Operations (Unaudited) for the three
months ended December 31, 1996 and 1995 . . . . . . . . . . . . . . 3
Consolidated Statements of Operations (Unaudited) for the six months
ended December 31, 1996 and 1995 . . . . . . . . . . . . . . . . . 4
Consolidated Statements of Cash Flows (Unaudited) for the six months
ended December 31, 1996 and 1995 . . . . . . . . . . . . . . . . . 5
Notes to Unaudited Condensed 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.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
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<S> <C> <C>
December 31 June 30,
Assets 1996 1996
(Unaudited)
Cash and cash equivalents $ 1,098 $ 691
Accounts receivable, net of allowances for
uncollectible accounts of $2,632 and $2,456 6,209 5,669
Inventories 1,582 1,646
Deferred income taxes 822 822
Prepaid expenses and other current assets 442 205
Total current assets 10,153 9,033
Property and equipment, at cost, net of
accumulated depreciation of $386 and $320 292 307
Deferred income taxes 52 52
Other assets 96 92
Total assets $10,593 $9,484
Liabilities and Stockholders' Equity
Accounts payable $3,374 $2,779
Accrued payroll and related expenses 525 403
Other current liabilities 1,067 1,155
Total current liabilities 4,966 4,337
Capital lease obligation 72 99
Deferred income 9 72
Total liabilities 5,047 4,508
Stockholders' equity:
Common stock, $.01 par value; 5,000,000
shares authorized; 3,217,150 issued 32 32
Additional paid-in capital 2,939 2,928
Retained earnings 2,648 2,089
Treasury stock, at cost; 39,300 shares (73) (73)
Total stockholders' equity 5,546 4,976
Commitments and contingencies
Total liabilities and stockholders' equity $10,593 $9,484
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
INFU-TECH, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands)
<TABLE>
<S> <C> <C>
(Unaudited)
Three months ended December 31,
1996 1995
Revenues $6,525 $6,214
Costs and expenses:
Medical and nutritional product 3,091 3,180
Personnel 1,779 1,671
Selling, general and administrative 776 658
Provision for uncollectible accounts 277 306
Management fees to majority sharehold 104 100
Depreciation 33 12
Other income,net (20) (30)
6,040 5,897
Income before income taxes 485 317
Provision for income taxes 199 0
Net income $286 $317
Earnings per share $0.09 $0.10
Weighted average number of shares 3,178,517 3,170,058
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
INFU-TECH, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands)
<TABLE>
<S> <C> <C>
(Unaudited)
Six months ended December 31,
1996 1995
Revenues $12,968 $12,546
Costs and expenses:
Medical and nutritional product 6,171 6,482
Personnel 3,468 3,372
Selling, general and administrative 1,571 1,348
Provision for uncollectible accounts 589 639
Management fees to majority sharehold 207 201
Depreciation 68 38
Other income,net (53) (62)
12,021 12,018
Income before income taxes 947 528
Provision for income taxes 388 0
Net income $559 $528
Earnings per share $0.18 $0.17
Weighted average number of shares 3,176,542 3,165,600
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
INFU-TECH, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<TABLE>
(Unaudited)
Six months ended
December 31,
<S> <C> <C>
1996 1995
Operating activities:
Net income $ 559 $ 528
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation expense 68 38
Provision for uncollectible accounts 589 639
Amortization of deferred income (63) (63)
Increase (decrease) from changes in:
Accounts receivable (1,129) (2,066)
Inventories 64 67
Prepaid expenses and other current (237) 208
Other assets (4) 0
Accounts payable 595 889
Accrued payroll and related 122 (141)
Other current liabilities (93) 9
Net cash provided by operating activiti 471 108
Investing activities:
Expenditures for property and equipment (51) (44)
Financing activities:
Payment of capital lease obligation (24) (23)
Exercise of option 11 11
Net cash used in financing activities (13) (12)
Net increase in cash and cash equivalents 407 52
Cash and cash equivalents, beginning of the period 691 546
Cash and cash equivalents, end of the period $1,098 $598
Supplemental disclosures of cash flow data:
Income taxes paid $ 53 $ -
Non cash investing and financing activity:
Property and equipment obtained under capital
lease obligation $ - $ 216
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
Infu-Tech, Inc.
(Unaudited)
Notes to Condensed Consolidated Financial Statements
1. The Company
Infu-Tech, Inc. (the "Company") is a provider of clinical services
and products to the non-hospital based health care market. This
includes a broad range of complete home infusion therapy services
including total parenteral nutrition therapy, antibiotic therapy
and other therapies to patients at home and enteral nutrition
infusion therapy and other medical services and products provided
primarily to patients in long-term care facilities. The Company is
59% owned by Continental Health Affiliates, Inc. ("CHA"), a public
company. The minority 41% of the Company's equity is publicly
traded.
The Company is subject to certain risks and uncertainties as a
result of changes that could occur in the healthcare industry,
including medicare and medicaid reimbursement rates.
2. Basis of Presentation
The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with generally accepted
accounting principles for interim financial information and
pursuant to 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 accrual
adjustments, considered necessary for a fair presentation have been
included. Operating results for the six month period ended
December 31, 1996, are not necessarily indicative of the results
that may be expected for the year ended June 30, 1997.
These financial statements and notes should be read in conjunction
with the Company's audited financial statements and notes thereto
included in the Company's Annual Report on Form 10-K for the year
ended June 30, 1996.
<PAGE>
Infu-Tech, Inc.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Management's Discussion and Analysis of Financial
Condition and Results of Operations
The following discussion should be read in conjunction with the
Condensed Consolidated Financial Statements and Notes thereto.
Results of Operations
Three Months Ended December 31, 1996 and 1995
Total revenues increased by $311,000, or 5%, from $6,214,000 to
$6,525,000 partially due to a $164,000, or 11%, increase in contract
service division revenues. These revenues are comprised of enteral
nutrition therapy and other products provided to patients in long-term
care facilities. Home infusion division revenues increased by
$147,000 or 3% partially attributed to a 27% increase in the number of
patients serviced. These patients experienced shorter terms of
therapy as well as discounted pricing negotiated with managed care
companies.
Cost of medical and nutritional products sold to patients and other
customers decreased by $89,000, or 3%, from $3,180,000 in 1995 to
$3,091,000 in 1996. As a percentage of total revenues, medical and
nutritional product costs were 47% in 1996 and 51% in 1995. The
improvement in the nutritional product costs as a percentage of sales
is partially attributable to participating in group purchasing
programs that make bulk purchases more economical.
Total personnel costs increased by $108,000, or 6%, from $1,671,000 in
1995 to $1,779,000 in 1996, primarily as a result of expansion of the
home infusion sales force.
Selling, general and administrative expenses increased by $118,000, or
18%, from $658,000 in 1995 to $776,000 in 1996 primarily due to an
increase in investor relations expenses, legal fees and distribution
costs to support the 27% increase in home infusion patients serviced.
The provision for uncollectible accounts was 4% of revenues in 1996
and 5% of revenues in 1995.
Management fees to Continental Health Affiliates, Inc. and
subsidiaries ("CHA") of $104,000 in 1996 and $100,000 in 1995 were
1.6% of revenues in both years.
Depreciation expense increased from $12,000 in 1995 to $33,000 in 1996
due to property and equipment additions involving infusion pump
purchases.
Other income, net of $20,000 in 1996 and $30,000 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. Interest expense offsets the other income.
The net income in 1996 was $286,000, or $.09 per share compared to net
income in 1995 of $317,000 or $.10 per share. The decrease in net
income was primarily attributable to an 18% increase in selling,
general and administrative costs as well as the provision for income
taxes offset by the 5% increase in revenue. Income before taxes for
the quarter ended December 31, 1996 was $485,000 compared to $317,000
for the comparable quarter last year. As the Company has now utilized
its net operating loss
<PAGE>
Infu-Tech, Inc.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
carryforwards, a full tax charge in the current quarter results in net
income of $286,000 compared to $317,000 for the comparable quarter
last year.
Six Months Ended December 31, 1996 and 1995
Total revenues increased by $422,000, or 3%, from $12,546,000 in 1995
to $12,968,000 in 1996, primarily due to a $315,000, or 3 %, increase
in home infusion division revenues. This increase is primarily
attributed to a 19% increase in the number of patients serviced. These
patients experienced shorter terms of therapy as well as discounted
pricing negotiated with managed care companies.
Costs of medical and nutritional products sold to patients and other
customers decreased by $311,000, or 5%, from $6,482,000 in 1995 to
$6,171,000 in 1996. As a percentage of total revenues, medical and
nutritional product costs decreased from 52% in 1995 to 48% in 1996.
The improvement in the nutritional product costs as a percentage of
sales is partially attributable to the Company's participation in
group purchasing programs.
Total personnel costs increased by $96,000, or 3%, from $3,372,000 in
1995 to $3,468,000 in 1996, primarily attributed to higher nursing and
pharmacy costs incurred to support the 19% increase in home infusion
patients services as well as an increasing geographical coverage
through sales force expansion.
Selling, general and administrative expenses increased by $223,000, or
17%, from $1,348,000 in 1995 to $1,571,000 in 1996, primarily as a
result of increases in investor relations expenses, legal fees and
distribution costs incurred to support the 19% increase in home
infusion patients serviced.
The provision for uncollectible accounts was approximately 5% of
revenues in both periods.
Management fees to CHA of $207,000 in 1996 and $201,000 in 1995 were
1.6% of revenues in both periods.
Depreciation expense increased from $38,000 in 1995 to $68,000 in 1996
due to property and equipment additions involving infusion pump
purchases.
Other income, net of $53,000 in 1996 and $62,000 in 1995 consisted of
$63,000 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. Interest expense offsets the other income.
The net income in 1996 was $559,000, or $.18 per share compared to a
net income in 1995 of $528,000, or $.17 per share. Income before
taxes for the six months ending December 31, 1996 was $947,000
compared to $528,000 for the comparable period last quarter. As the
Company has now utilized its net operating loss carryforwards, a full
tax charge in the current quarter results in net income of $559,000
compared to $528,000 for the comparable period last year.
<PAGE>
Infu-Tech, Inc.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Liquidity and Capital Resources
As of December 31, 1996, the Company had total assets of $10.6
million, working capital of $5.2 million and a net worth of $5.6
million. Its liabilities consisted almost entirely of accounts
payable and other operating obligations. The Company had no
borrowings and its primary capital requirements have been for
investment in working capital, principally accounts receivable and
inventories.
At December 31, 1996, the balance in net accounts receivable for Infu-
Tech was 10% higher than the balance at June 30, 1996. Infu-Tech's
net accounts receivable has increased from 84 days sales at June 30,
1996 to 88 days sales at December 31, 1996, primarily as a result of
continued slow 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 a result,
Infu-Tech has experienced increased delays in having its claims
processed as well as an increase in the number of initial claims
rejected.
Among the nursing homes with which the Company does business are seven
facilities which are owned or managed by CHA and three facilities
which are owned by companies controlled by one or more of CHA s
Principal Stockholders. Through December 31, 1996, the Company's
sales from those nursing homes totalled $266,000 for the six month
period. At December 31, 1996, the Company s net accounts receivable
from those nursing homes totalled $1,013,000. During the six months
ended December 31, 1996, the Company realized revenues of $198,000 or
6%, of the Company s total contract services revenues, from the sale
of products and services to residents of the seven nursing homes owned
or managed by CHA and the three nursing homes owned by companies
controlled by one or more of CHA s Principal Stockholders.
As the Company has no borrowings, management believes that the Company
is in a favorable position to secure financing, if needed. Based upon
preliminary informal discussions with potential lenders, the company
believes that it would be able to secure adequate financing to cover
its cash requirements for the foreseeable future. Meanwhile, the
Company has initiated a focused effort on cash collections engaging a
dedicated manager to lead the effort.
<PAGE>
Infu-Tech, Inc.
Part II Other Information
Item 1 Legal Proceedings
There are no presently pending material legal proceedings
other than as reported in the Company's Form 10K for the
year ended June 30, 1996.
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
<PAGE>
Infu-Tech, Inc.
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.
Infu-Tech, Inc.
Date February 13, 1997 /s/ JACK ROSEN
Jack Rosen
Chairman and Director
(Chief Executive Officer)
Date February 13, 1997 /s/ S. COLIN NEILL
S. Colin Neill
Vice President and
Chief Financial Officer
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<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> DEC-31-1996
<CASH> 1,098,000
<SECURITIES> 0
<RECEIVABLES> 8,841,000
<ALLOWANCES> 2,632,000
<INVENTORY> 1,582,000
<CURRENT-ASSETS> 10,153,000
<PP&E> 678,000
<DEPRECIATION> 386,000
<TOTAL-ASSETS> 386,000
<CURRENT-LIABILITIES> 4,966,000
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<COMMON> 32,000
<OTHER-SE> 5,514,000
<TOTAL-LIABILITY-AND-EQUITY> 10,593,000
<SALES> 12,968,000
<TOTAL-REVENUES> 12,968,000
<CGS> 6,171,000
<TOTAL-COSTS> 12,021,000
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<LOSS-PROVISION> 589,000
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<INCOME-TAX> 388,000
<INCOME-CONTINUING> 559,000
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