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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 March 31, 1997
Commission File Number 0-21006
INFU-TECH, INC.
(Exact name of registrant as specified in its charter)
Delaware 22-3127689
(State of other ju(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 May 12, 1997 the Registrant had outstanding 3,249,692 shares of its
$.01 par value Common Stock.
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1
<PAGE>
INFU-TECH, INC.
Index
Part I - Financial Information:
Page
Item 1
Consolidated Balance Sheets at March 31, 1997 (Unaudited)
and June 30, 1996............................................ 3
Consolidated Statements of Operations (Unaudited) for the three months
ended March 31, 1997 and 1996................................ 4
Consolidated Statements of Operations (Unaudited) for the nine months
ended March 31, 1997 and 1996................................ 5
Consolidated Statements of Cash Flows (Unaudited) for the nine months
ended March 31, 1997 and 1996................................ 6
Notes to Unaudited Consolidated Financial Statements........... 7
Item 2
Management's Discussion and Analysis of Financial Condition and
Results of Operations........................................8 - 10
Part II - Other Information.......................................... 11
Signatures..................................................... 12
2
<PAGE>
<TABLE>
<CAPTION>
INFU-TECH, INC.
Consolidated Balance Sheets
(Dollars in thousands, except for share amounts)
March 31, June 30,
1997 1996
---- ----
(Unaudited)(Audited)
ASSETS
<S> <C> <C>
Cash and cash equivalents.................................................................$ 43 $ 691
Accounts receivable, net of allowances for uncollectible accounts
of $2,314 and $2,456................................................................... 5,717 4,644
Accounts receivable from related parties.................................................. 1,156 1,025
Inventories............................................................................... 1,317 1,646
Deferred income taxes..................................................................... 822 822
Prepaid expenses and other current assets................................................. 138 205
----------- -----------
Total current assets............................................................... 9,193 9,033
Property and equipment, at cost, net of accumulated depreciation
of $414 and $320....................................................................... 277 307
Deferred income taxes..................................................................... 52 52
Goodwill, net ............................................................................ 142 --
Other assets.............................................................................. 555 92
----------- -----------
Total assets.......................................................................$ 10,219 $ 9,484
============= ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable..........................................................................$ 2,934 $ 2,779
Accrued payroll and related expenses...................................................... 505 403
Income taxes payable...................................................................... 473 --
Other current liabilities................................................................. 335 1,155
----------- -----------
Total current liabilities.......................................................... 4,247 4,337
Capital lease obligation.................................................................. 52 99
Deferred income........................................................................... -- 72
----------- -----------
Total Liabilities.................................................................. 4,299 4,508
Stockholders' equity:
Common stock, $.01 par value; 5,000,000 shares authorized; 3,249,692 issued............ 32 32
Additional paid-in capital............................................................. 3,100 2,928
Retained earnings...................................................................... 2,861 2,089
Treasury stock, at cost; 39,300 shares................................................. (73) (73)
----------- -----------
Total stockholders' equity......................................................... 5,920 4,976
------------ -----------
Commitments and contingencies
Total liabilities and stockholders' equity.........................................$ 10,219 $ 9,484
============= ===========
</TABLE>
See accompanying notes to consolidated financial statements
3
<PAGE>
<TABLE>
<CAPTION>
INFU-TECH, INC.
Consolidated Statements of Operations
(Dollars in thousands, except per share amounts)
Three Months Ended March 31,
1997 1996
---- ----
(Unaudited)
<S> <C> <C>
Revenues...........................................................................$ 6,733 $ 5,674
--------------- ---------------
Costs and expenses:
Medical and nutritional product............................................... 3,498 2,713
Personnel..................................................................... 1,809 1,637
Selling, general and administrative........................................... 973 667
Provision for uncollectible accounts.......................................... (46) 297
Management fees to majority shareholder ...................................... 108 91
Depreciation and amortization................................................. 36 35
Other income.................................................................. (5) (27)
-------------- ---------------
6,373 5,413
--------------- ---------------
Income loss before income taxes.................................................... 360 261
Provision for income taxes......................................................... 147 --
-------------- --------------
Net income ...................................................................$ 213 $ 261
============== ===============
Earnings per share.................................................................$ 0.06 $ 0.08
============== ===============
Weighted average number of shares.................................................. 3,205,368 3,170,058
</TABLE>
See accompanying consolidated financial statements
4
<PAGE>
<TABLE>
<CAPTION>
INFU-TECH, INC.
Consolidated Statements of Operations
(Dollars in thousands, except per share amounts)
Nine Months Ended March 31,
1997 1996
---- ----
(Unaudited)
<S> <C> <C>
Revenues...........................................................................$ 19,701 $ 18,220
-------------- ---------------
Costs and expenses:
Medical and nutritional product............................................... 9,669 9,195
Personnel..................................................................... 5,277 5,009
Selling, general and administrative........................................... 2,544 2,015
Provision for uncollectible accounts.......................................... 543 936
Management fees to majority shareholder....................................... 315 292
Depreciation and amortization................................................. 104 73
Other income.................................................................. (58) (89)
-------------- ---------------
18,394 17,431
---------------- ---------------
Income loss before income taxes.................................................... 1,307 789
Provision for income taxes......................................................... 535 --
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Net income ...................................................................$ 772 $ 789
============== ===============
Earnings per share.................................................................$ 0.24 $ 0.25
============== ===============
Weighted average number of shares.................................................. 3,186,150 3,167,086
</TABLE>
See accompanying consolidated financial statements
5
<PAGE>
<TABLE>
<CAPTION>
INFU-TECH, INC.
Consolidated Statements of Cash Flows
(Dollars in thousands, except per share amounts)
Nine Months Ended March 31,
1997 1996
---- ----
(Unaudited)
<S> <C> <C>
Operating activities:
Net income ......................................................................$ 772 $ 789
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation expense....................................................... 101 73
Warrants issued for services............................................... 44 --
Provision for uncollectible accounts....................................... 543 936
Amortization of deferred income............................................ (72) (95)
Increase (decrease) from changes in:
Accounts receivable...................................................... (1,616) (2,976)
Accounts receivable from related parties ................................ (131) (242)
Inventories.............................................................. 329 189
Prepaid expenses and other current assets................................ 67 250
Other assets............................................................. (315) (17)
Accounts payable......................................................... 155 507
Accrued payroll and related.............................................. 102 (92)
Other current liabilities................................................ (324) 514
------------- --------------
Net cash used in provided by operating activities............................ (345) (164)
------------- --------------
Investing activities:
Expenditures for property and equipment.......................................... (71) (16)
Acquisition of Universal Home Infusion........................................... (190) --
Financing activities:
Exercise of options ............................................................. 28 12
Payment of capital lease obligations............................................. (70) (41)
------------- --------------
Net cash used in financing activities........................................ (42) (29)
Net decrease in cash and cash equivalents........................................... (648) (209)
Cash and cash equivalents, beginning of period...................................... 691 546
------------- --------------
Cash and cash equivalents, end of period............................................$ 43 $ 337
============= ==============
Supplemental disclosure of cash flow data:
Income taxes paid................................................................$ 53 $ --
Non cash investing and financing activity:
Property and equipment obtained under capital lease obligation...................$ -- $ 230
Stock issued..................................................................... 100 --
See accompanying notes to consolidated financial statements
6
</TABLE>
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 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 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 nine month period ended March 31, 1997, 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 of Form 10-K for the year ended June 30, 1996.
3. Recently Issued Accounting Standards
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, Earnings Per Share ("EPS"), which
is effective as of December 31, 1997. This standard changes the way companies
compute EPS to require all companies to show "basic" and "dilutive" EPS and
is to be retroactively applied, including each 1997 interim quarter. The
statement is not expected to have a material effect on the calculation of
EPS.
7
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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 March 31,1997 Compared with Three Months Ended March 31, 1996
Total revenues increased by $1,059,000, or 19%, from $5,674,000 to $6,733,000
primarily due to a $725,000, or 17% increase in home infusion division revenues.
Contract services division revenues increased by $334,000 or 24%. These revenues
are comprised of enteral nutrition therapy and other products provided to
patients in long-term care facilities.
Cost of medical and nutritional products sold to patients and other customers
increased $785,000 or 29%, from $2,713,000 in 1996 to $3,498,000 in 1997. As a
percentage of total revenues, medical and nutritional product costs were 52% in
1997 and 48% in 1996. The increase in the nutritional product costs as a
percentage of sales is attributable to increased pricing pressure, causing a
reduction in margins.
Total personnel costs increased by $172,000 or 10% from $1,637,000 in 1996 to
$1,809,000 in 1997, primarily as a result of expansion of the home infusion
sales force and the opening of a Florida pharmacy.
Selling, general and administrative expenses increased by $306,000, or 46% from
$667,000 in 1996 to $973,000 in 1997. The increase of $306,000 is largely
attributable to investment banking retainer fees in connection with potential
acquisitions by the Company, engagement of an investor relations firm, costs
connected with the development of a disease state management program and
distribution cost increases. In addition, the opening of a Florida pharmacy and
start up costs associated with the Humana Health Plans capitation contract in
Illinois added to the increase in selling, general and administrative expenses.
During the quarter, the Company pursued a focused effort on cash collections.
This project has resulted in improved cash flows and enabled the Company to
conduct a review of its allowance for uncollectible accounts. As a result of the
review the Company determined that the existing allowance at March 31, 1997 was
excessive and a reduction from the existing allowance of $46,000 was made.
Management fees to Continental Health Affiliates, Inc. and subsidiaries
("CHA") of $108,000 in 1997 and $91,000 in 1996 were 1.6% of revenues in both
years.
Depreciation expense decreased from $35,000 in 1996 to $33,000 in 1997 due to
property and equipment additions involving infusion pump purchases offset by
retirements. During the quarter, amortization of $3,000 goodwill of $145,000 was
also recognized relating to an acquisition which occurred on January 6, 1997.
Other income, net of $5,000 in 1997 and $27,000 in 1996 consisted of $32,000 of
amortization in 1996 and $9,000 in 1997 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. The amortization of this
non-compete agreement has been completed in this quarter. Interest expense
offsets the other income.
8
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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 $213,000 or $.06 per share compared to net income in
1996 of $261,000 or $.08 per share. The decrease in net income was primarily
attributable to a 46% increase in selling, general and administrative costs as
well as the provision for income taxes offset by the 19% increase in revenue.
Income before taxes for the quarter ended March 31, 1997 was $360,000 compared
to $261,000 for the comparable quarter last year. As the Company has utilized
its net operating loss carryforwards, a full tax charge in the current quarter
results in net income of $213,000 compared to $261,000 for the comparable
quarter last year.
Nine Months Ended March 31, 1997 compared with Nine Months ended March 31, 1996
Total revenues increased by $1,481,000, or 8% from $18,220,000 in 1996 to
$19,701,000 in 1997, primarily due to a $1,040,000, or 24% increase in home
infusion division revenues. This increase is primarily attributed to a 12%
increase in the number of patients services. 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
increased by $474,000, or 5%, from $9,195,000 in 1996 to $9,669,000 in 1997. As
a percentage of total revenues, medical and nutritional product costs decreased
from 50% in 1996 to 49% in 1997. The improvement in the nutritional product
costs as a percentage of sales is partially attributable to the Company's
participation in group purchasing programs offset by increased pricing pressures
from certain vendors.
Total personnel costs increased by $268,000, or 5% from $5,009,000 in 1996 to
$5,277,000 in 1997, primarily attributed to higher nursing and pharmacy costs
incurred to support the 12% increase in home infusion patients services,
increasing geographical coverage through sales force expansion, and the opening
of a Florida pharmacy.
Selling, general and administrative expenses increased by $529,000, or 26% from
$2,015,000 in 1996 to $2,544,000 in 1997. The increase of $529,000 is largely
attributable to investment banking retainer fees in connection with acquisition
work, engagement of an investor relations firm, costs connected with the
development of a disease state management program and distribution cost
increases. In addition, the opening of a Florida pharmacy and start up costs
associated with the Humana Health Plans capitation contract in Illinois added to
the increase in selling, general and administrative expenses.
In January 1997, Company commenced a focused effort on cash collections. This
project has resulted in improved cash flows and enabled the Company to conduct a
review of its allowance for uncollectible accounts. As a result of the review
the Company determined that the existing allowance at March 31, 1997 was
excessive and a reduction from the existing allowance of $46,000 was made.
Management fees to CHA of $315,000 in 1997 and $292,000 in 1996 were 1.6% of
revenues in both periods.
Depreciation expense increased from $73,000 in 1996 to $101,000 in 1997 due to
property and equipment additions involving infusion pump purchases, as well as
amortization recognized during the current quarter.
Other income, net of $58,000 in 1997 and $89,000 in 1996 consisted of $63,000 of
amortization in 1996 and $23,000 in 1997 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
9
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INFU-TECH, INC.
Item 2. Management 's Discussion and Analysis of Financial Condition and Results
of Operations
Tennessee for a period of five years. The amortization of this non-compete
agreement has been completed in the period ended March 31, 1997. Interest
expense offsets the other income.
The net income in 1997 was $772,000, or $.24 per share compared to a net income
in 1996 of $789,000, or $.25 per share. Income before taxes for the nine months
ending March 31, 1997 was $1,307,000 compared to $789,000 for the comparable
period last quarter. As the Company has now utilized its net operating loss
carryforwards, a full tax charge in the current year results in net income of
$772,000 compared to $789,000 for the comparable period last year.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 1997, the Company had total assets of $10.2 million, working
capital of $4.9 million and a net worth of $5.9 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 March 31, 1997, the balance in net accounts receivable for Infu-Tech was 21%
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 92 days sales at March 31,
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 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. Through March 31, 1997, the
Company's sales from those nursing homes totaled $409,000 for the nine month
period. At March 31, 1997, the Company's net accounts receivable from the
managed nursing homes totaled $1,156,000. During the nine months ended March 31,
1997, the Company realized revenues of $313,000 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's cash flows have been tight during the past few months, partly
constrained by cash needed to acquire Universal Home Infusion. The focused
effort on cash collections referred to previously has improved 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.
10
<PAGE>
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, 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
11
<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: May 15, 1997 /S/ JACK ROSEN
--------------------------- --------------
Jack Rosen
Chairman and Director
(Chief Executive Officer)
Date: May 15, 1997 /S/ S. COLIN NEILL
--------------------------- ------------------
S. Colin Neill
Vice President and
Chief Financial Officer
12
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(Replace this text with the legend)
</LEGEND>
<CIK> 0000890152
<NAME> INFU-TECH, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> MAR-31-1997
<CASH> 43
<SECURITIES> 0
<RECEIVABLES> 9,187
<ALLOWANCES> 2,314
<INVENTORY> 1,317
<CURRENT-ASSETS> 9,193
<PP&E> 691
<DEPRECIATION> 414
<TOTAL-ASSETS> 10,129
<CURRENT-LIABILITIES> 4,247
<BONDS> 0
0
0
<COMMON> 32
<OTHER-SE> 5,888
<TOTAL-LIABILITY-AND-EQUITY> 10,219
<SALES> 0
<TOTAL-REVENUES> 19,701
<CGS> 9,669
<TOTAL-COSTS> 17,851
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 543
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,307
<INCOME-TAX> 535
<INCOME-CONTINUING> 772
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 772
<EPS-PRIMARY> 0.24
<EPS-DILUTED> 0
</TABLE>
