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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
For the Quarter Ended September 30, 1997
Commission File Number 0-21006
INFU-TECH, INC.
(Exact name of registrant as specified in its charter)
Delaware 22-3127689
(State of other juris(I.R.S. Employer Identification Number)
incorporation or organization)
910 Sylvan Avenue, Englewood Cliffs, NJ 07632
(Address of principal executive offices)
(201) 567-4600
Registrant's telephone number, including area code
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 November 10, 1997 the Registrant had outstanding 3,249,692 shares
of its $.01 par value Common Stock.
1
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INFU-TECH, INC.
Index
Part I - Financial Information:
Item 1
Consolidated Balance Sheets at September 30, 1997 (Unaudited)
and June 30, 1997.....................................................
Consolidated Statements of Operations (Unaudited) for the three months
ended September 30, 1997 and 1996.....................................
Consolidated Statements of Cash Flows (Unaudited) for the three months
ended September 30, 1997 and 1996.....................................
Notes to Unaudited Consolidated Financial Statements....................
Item 2
Management's Discussion and Analysis of Financial Condition and
Results of Operations.................................................
Part II - Other Information.....................................................
Signatures..............................................................
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<CAPTION>
INFU-TECH, INC.
Consolidated Balance Sheets
(Dollars in thousands, except for share amounts)
September 30, June 30,
1997 1997
(Unaudited) (Audited)
ASSETS
<S> <C> <C>
Cash and cash equivalents.................................................$ 197 $ 512
Accounts receivable, net of allowances for uncollectible accounts
of $1,652 and $1,995.................................................... 6,298 6,088
Accounts receivable from related parties.................................. 1,317 1,214
Inventories............................................................... 1,675 1,654
Deferred income taxes..................................................... 702 702
Prepaid expenses and other current assets................................. 335 365
---------- ---------
Total current assets................................................ 10,524 10,535
Property and equipment, at cost, net of accumulated depreciation
of $472 and $450............................................... ......... 325 244
Goodwill, net ..................................................... ....... 136 139
Other assets........................................................ ...... 835 700
----------- ---------
Total assets........................................................$ 11,820 $ 11,618
============ ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable..........................................................$ 4,535 $ 4,288
Accrued payroll and related expenses...................................... 412 499
Income taxes payable...................................................... 457 449
Other current liabilities................................................. 155 255
----------- ---------
Total current liabilities........................................... 5,559 5,491
Capital lease obligation.................................................. -- 26
----------- ---------
Total liabilities................................................... 5,559 5,517
Stockholders' equity:
Common stock, $.01 par value; 5,000,000 shares authorized; 3,249,692 issued 32 32
Additional paid-in capital.............................................. 3,100 3,100
Retained earnings....................................................... 3,202 3,042
Treasury stock, at cost; 39,300 shares.................................. (73) (73)
---------- ---------
Total stockholders' equity.......................................... 6,261 6,101
----------- ---------
Commitments and contingencies
Total liabilities and stockholders' equity..........................$ 11,820 $ 11,618
=========== ==========
See accompanying notes to consolidated financial statements
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<CAPTION>
INFU-TECH, INC.
Consolidated Statements of Operations
(Dollars in thousands, except per share amounts)
Three Months Ended September 30,
1997 1996
---- ----
(Unaudited)
<S> <C> <C>
Revenues............................................................$ 6,724 $ 6,443
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Costs and expenses:
Medical and nutritional product................................. 3,571 3,080
Personnel....................................................... 1,788 1,689
Selling, general and administrative............................. 911 795
Provision for uncollectible accounts............................ 71 312
Management fees to majority shareholder ........................ 108 103
Depreciation and amortization................................... 25 35
Other (income) expense, net..................................... (22) (33)
------------ ------------
6,452 5,981
Income before income taxes.......................................... 272 462
Provision for income taxes.......................................... 112 189
------------ ------------
Net income .....................................................$ 160 $ 273
============ ============
Earnings per share..................................................$ .05 $ 0.09
============ ============
Weighted average number of shares................................... 3,241,477 3,174,567
See accompanying consolidated financial statements
4
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<CAPTION>
INFU-TECH, INC.
Consolidated Statements of Cash Flows
(Dollars in thousands, except per share amounts)
Three Months Ended September 30,
1997 1996
---- ----
(Unaudited)
<S> <C> <C>
Operating activities:
Net income ........................................................$ 160 $ 273
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Depreciation expense......................................... 22 35
Amortization of goodwill..................................... 3 --
Provision for uncollectible accounts......................... 71 312
Amortization of deferred income.............................. -- (32)
Increase (decrease) in cash due to changes in:
Accounts receivable......................................... (281) (1,041)
Accounts receivable from affiliates ........................ (103) --
Inventories................................................. (21) (232)
Prepaid expenses and other current assets................... 30 (31)
Other assets................................................ (135) --
Taxes payable............................................... 8 --
Accounts payable............................................ 247 956
Accrued payroll and related................................. (87) 219
Other current liabilities................................... (95) (25)
----------- ------------
Net cash (used in) provided by operating activities............ (181) 434
----------- -----------
Investing activities:
Expenditures for property and equipment............................ (103) (9)
----------- -----------
Net cash used in investing activities.......................... (103) (9)
Financing activities:
Exercise of options ............................................... -- 2
Payment of capital lease obligations............................... (31) (24)
----------- -----------
Net cash used in financing activities.......................... (31) (22)
Net increase (decrease) in cash and cash equivalents................. (315) 403
Cash and cash equivalents, beginning of period....................... 512 691
----------- -----------
Cash and cash equivalents, end of period.............................$ 197 $ 1,094
=========== ===========
Supplemental disclosure of cash flow data:
Income taxes paid..................................................$ 105 $ 53
See accompanying notes to consolidated financial statements
</TABLE>
5
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INFU-TECH, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
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 58% owned by Continental Health Affiliates, Inc. ("CHA"), a
public company. The minority 42% 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 pricing
pressure from managed care, Medicare and Medicaid.
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 three month period ended September 30, 1997, are not
necessarily indicative of the results that may be expected for the year
ended June 30, 1998.
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 of Form 10-K for the year ended June 30, 1997.
6
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INFU-TECH, INC.
Item 2. 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 September 30,1997 Compared with Three Months Ended
September 30, 1996
Total revenues increased by $281,000, or 4%, from $6,443,000 to $6,724,000.
Cost of medical and nutritional products sold to patients and other customers
increased $491,000 or 16%, from $3,080,000 in 1996 to $3,571,000 in 1997. As a
percentage of total revenues, medical and nutritional product costs were 48% in
1996 and 53% in 1997. The increase in the medical and nutritional product costs
as a percentage of sales is attributable to increased revenues associated with
Ceredase, a high cost drug, a capitation agreement, and margin reductions from
operating in a managed care environment.
Total personnel costs increased by $99,000 or 6% from $1,689,000 in 1996 to
$1,788,000 in 1997, primarily due to addition of personnel in branch and
corporate operations and the establishment of the Disease Management Division.
Selling, general and administrative expenses increased by $116,000, or 15% from
$795,000 in 1996 to $911,000 in 1997. The increase of $116,000 is largely
attributable to investment costs connected with the development of a disease
state management program and the expenses related to a Florida pharmacy which
opened in February 1997.
Beginning in the quarter ended March 31, 1997, the Company continues to review
its allowance for uncollectible accounts in light of the company's changed payor
mix. The Company's business focus is on managed care relationships which now
account for 73% of its payor mix. The managed care relationships are generally
governed by contracts which provide for payment within defined terms. The
Company's collection experience for these contracts has been good and greatly
improved from the historical collection experience upon which the allowance for
uncollectible accounts had previously been established. Based on this analysis
the Company has charged a lower provision rate against sales for fiscal 1998.
Management fees to Continental Health Affiliates, Inc. and subsidiaries
("CHA") of $108,000 in 1997 and $103,000 in 1996 were 1.6% of revenues in both
years.
Depreciation expense decreased from $35,000 in 1996 to $22,000 in 1997 due to
property and equipment retirements. During the quarter, amortization of $3,000
was also recognized.
Other income of $22,000 in 1997 consisted primarily of write offs of accounts
payable. Other income of $33,000 in 1996 consisted of $32,000 of amortization of
a $628,000 payment received by the company in 1992 as consideration of 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.
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INFU-TECH, INC.
Item 2. Management 's Discussion and Analysis of Financial Condition and Results
of Operations
The net income in 1997 was $160,000 or $.05 cents per share compared to net
income in 1997 of $273,000 or $.09 cent per share. The decrease in net income
was primarily attributable to increases in cost of medical and nutritional
products sold, selling, general and administrative costs as well as increases in
personnel costs partially offset by the lower provision rate for uncollectible
accounts. Income before taxes for the quarter ended September 30, 1997 was
$272,000 compared to $462,000 for the comparable quarter last year.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1997, the Company had total assets of $11.8 million, working
capital of $5 million and a net worth of $6.3 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 September 30, 1997, the balance in net accounts receivable for Infu-Tech was
3% higher than the balance at June 30, 1997 attributed to higher revenues.
Infu-Tech's net accounts receivable has remained relatively constant at 104 days
sales at September 30, 1997, 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 their higher volume of claims.
Among the nursing homes with which the Company does business are five facilities
which are owned or managed by CHA. Through September 30, 1997, the Company's
sales from those nursing homes totalled $102,000 for the three month period. At
September 30, 1997, the Company's net accounts receivable from the managed
nursing homes totalled $1,317,000. During the three months ended September 30,
1997, the Company realized revenues of $65,000 or 6%, of the Company's total
contract services revenues, from the sale of products and services to residents
of the managed nursing homes.
The Company has focused its effort on enhancing cash collections to improve cash
flow. Since 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.
8
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INFU-TECH, INC.
Part II - Other Information
Item 1. Legal Proceedings
Presently, there are no pending material legal proceedings
other than as reported in the Company's Form 10-K for the
year ended June 30, 1997.
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
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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: November 14, 1997 /S/ JACK ROSEN
---------------------------------- ---------------
Jack Rosen
Chairman and Director
(Chief Executive Officer)
Date: November 14, 1997 /S/ ALLISON K. ALLEN
---------------------------------- ---------------------
Allison K. Allen
Principal Accounting Officer
10
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<NAME> INFU-TECH, INC.
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