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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 December 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 jurisdicti(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 February 11, 1998 the Registrant had outstanding 3,253,092 shares of
its $.01 par value Common Stock.
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<PAGE>
INFU-TECH, INC.
Index
Part I - Financial Information:
Page
Item 1
Consolidated Balance Sheets at December 31, 1997 (Unaudited)
and June 30, 1997...................................................... 3
Consolidated Statements of Operations (Unaudited) for the three months
ended December 31, 1997 and 1996.................................... ... 4
Consolidated Statements of Operations (Unaudited) for the six months
ended December 31, 1997 and 1996..................................... .. 5
Consolidated Statements of Cash Flows (Unaudited) for the six months
ended December 31, 1997 and 1996....................................... 6
Notes to Unaudited Consolidated Financial Statements..................... 7
Item 2
Management's Discussion and Analysis of Financial Condition and
Results of Operations.................................................8 - 10
Part II - Other Information............................................... 11
Signatures....................................................... 12
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<TABLE>
<CAPTION>
INFU-TECH, INC.
Consolidated Balance Sheets
(Dollars in thousands, except for share amounts)
December 31, June 30,
1997 1997
---- ----
(Unaudited) (Audited)
ASSETS
<S> <C> <C>
Cash and cash equivalents.................................................................$ 93 $ 512
Accounts receivable, net of allowances for uncollectible accounts
of $1,505 and $1,995................................................................... 6,517 6,088
Accounts receivable from related parties.................................................. 1,309 1,214
Inventories............................................................................... 1,545 1,654
Deferred income taxes..................................................................... 702 702
Prepaid expenses and other current assets................................................. 510 365
----------- -----------
Total current assets............................................................... 10,676 10,535
Property and equipment, at cost, net of accumulated depreciation
of $499 and $450....................................................................... 362 244
Goodwill, net ............................................................................ 132 139
Other assets.............................................................................. 545 700
----------- -----------
Total assets.......................................................................$ 11,715 $ 11,618
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable..........................................................................$ 4,155 $ 4,288
Accrued payroll and related expenses...................................................... 573 499
Income taxes payable...................................................................... 423 449
Other current liabilities................................................................. 130 255
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Total current liabilities.......................................................... 5,281 5,491
Capital lease obligation.................................................................. -- 26
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Total liabilities.................................................................. 5,281 5,517
Stockholders' equity:
Common stock, $.01 par value; 5,000,000 shares authorized; 3,253,092 issued............ 32 32
Additional paid-in capital............................................................. 3,107 3,100
Retained earnings...................................................................... 3,368 3,042
Treasury stock, at cost; 39,300 shares................................................. (73) (73)
----------- -----------
Total stockholders' equity......................................................... 6,434 6,101
----------- -----------
Commitments and contingencies
Total liabilities and stockholders' equity.........................................$ 11,715 $ 11,618
=========== ===========
See accompanying notes to consolidated financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
INFU-TECH, INC.
Consolidated Statements of Operations
(Dollars in thousands, except per share amounts)
Three Months Ended December 31,
1997 1996
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(Unaudited)
<S> <C> <C>
Revenues...........................................................................$ 6,978 $ 6,525
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Costs and expenses:
Medical and nutritional product............................................... 3,730 3,091
Personnel..................................................................... 1,764 1,779
Selling, general and administrative........................................... 900 776
Provision for uncollectible accounts.......................................... 99 277
Management fees to majority shareholder ...................................... 112 104
Depreciation and amortization................................................. 31 33
Other expense (income), net................................................... 60 (20)
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6,696 6,040
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Income before income taxes......................................................... 282 485
Provision for income taxes......................................................... 115 199
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Net income ...................................................................$ 167 $ 286
============== ===============
Earnings per Share:
Basic....................................................................... .05 .09
Diluted..................................................................... .05 .09
Basic weighted average number of common shares..................................... 3,212,764 3,178,517
Diluted weighted average number of common shares................................... 3,288,410 3,211,324
See accompanying consolidated financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
INFU-TECH, INC.
Consolidated Statements of Operations
(Dollars in thousands, except per share amounts)
Six Months Ended December 31,
1997 1996
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(Unaudited)
<S> <C> <C>
Revenues...........................................................................$ 13,702 $ 12,968
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Costs and expenses:
Medical and nutritional product............................................... 7,301 6,171
Personnel..................................................................... 3,552 3,468
Selling, general and administrative........................................... 1,811 1,571
Provision for uncollectible accounts.......................................... 170 589
Management fees to majority shareholder ...................................... 220 207
Depreciation and amortization................................................. 56 68
Other expense (income), net................................................... 38 (53)
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13,148 12,021
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Income before income taxes......................................................... 554 947
Provision for income taxes......................................................... 227 388
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Net income ...................................................................$ 327 $ 559
============== ===============
Earnings per share:
Basic ........................................................................ .10 .18
Diluted....................................................................... .10 .18
Basic weighted average number of common shares..................................... 3,212,764 3,176,542
Diluted weighted average number of common shares................................... 3,254,458 3,210,315
See accompanying consolidated financial statements
</TABLE>
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<TABLE>
<CAPTION>
INFU-TECH, INC.
Consolidated Statements of Cash Flows
(Dollars in thousands, except per share amounts)
Six Months Ended December 31,
1997 1996
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(Unaudited)
<S> <C> <C>
Operating activities:
Net income ......................................................................$ 327 $ 559
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Depreciation expense....................................................... 49 68
Amortization of goodwill................................................... 7 --
Provision for uncollectible accounts....................................... 170 589
Amortization of deferred income............................................ -- (63)
Increase (decrease) in cash due to changes in:
Accounts receivable...................................................... (599) (1,129)
Accounts receivable from affiliates ..................................... (95) --
Inventories.............................................................. 109 64
Prepaid expenses and other current assets................................ (145) (237)
Other assets............................................................. 155 (4)
Taxes payable............................................................ (26) --
Accounts payable......................................................... (133) 595
Accrued payroll and related.............................................. 74 122
Other current liabilities................................................ (82) (93)
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Net cash (used in) provided by operating activities.......................... (189) 471
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Investing activities:
Expenditures for property and equipment.......................................... (167) (51)
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Net cash used in investing activities........................................ (167) (51)
Financing activities:
Exercise of options ............................................................. 7 11
Payment of capital lease obligations............................................. (61) (24)
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Net cash used in financing activities........................................ (54) (13)
Net increase (decrease) in cash and cash equivalents................................ (410) 407
Cash and cash equivalents, beginning of period...................................... 512 691
------------- --------------
Cash and cash equivalents, end of period............................................$ 102 $ 1,098
============= ==============
Supplemental disclosure of cash flow data:
Income taxes paid................................................................$ 153 $ 53
See accompanying notes to consolidated financial statements
</TABLE>
<PAGE>
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 Kuala Healthcare, Inc. ("Kual")
formerly 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 six month period ended December 31, 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.
3. Earnings Per Share
Options excluded from the computation of diluted earnings per share since
such options could not have a diluted effect as the exercise price is above
the average market price for the period were as follows:
1997 1996
---- ----
Options excluded for the 3 month period
ending December 31,...................... 157,834 133,200
Options excluded for the 6 month period
ending December 31,...................... 403,668 133,200
<PAGE>
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 December 31, 1997 Compared with Three Months Ended
December 31, 1996
Total revenues increased by $453,000, or 7%, from $6,525,000 to $6,978,000.
Cost of medical and nutritional products sold to patients and other customers
increased $639,000 or 21%, from $3,091,000 in 1996 to $3,730,000 in 1997. As a
percentage of total revenues, medical and nutritional product costs were 47% in
1996 as compared to 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 decreased by $15,000 or 1% from $1,779,000 in 1996 to
$1,764,000 in 1997.
Selling, general and administrative expenses increased by $124,000, or 15% from
$776,000 in 1996 to $900,000 in 1997. The increase of $124,000 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.
The provision for uncollectible accounts was 1.4% of revenues in 1997 and 4.2%
of revenues in 1996. A lower provision rate was recorded for fiscal 1998 based
on a change in the company's payor mix towards managed care relationships.
Management fees to Kuala Healthcare, Inc., ("KUAL") formerly Continental Health
Affiliates, Inc. and subsidiaries ("CHA") was $112,000 in 1997 and $104,000 in
1996 were 1.6% of revenues in both years.
Depreciation expense decreased from $33,000 in 1996 to $27,000 in 1997 due to
property and equipment retirements. During the quarter, amortization of $4,000
was also recognized.
Other expense of $60,000 in 1997 consisted primarily of non recurring one time
charges. Other income was $20,000 in 1996.
The net income in 1997 was $167,000 or $.05 cents per share compared to net
income in 1996 of $286,000 or $.09 cent per share. The decrease in net income
was primarily attributable to increases in cost of medical and nutritional
products sold and selling, general and administrative costs partially offset by
the lower provision rate for uncollectible accounts and decreases in personnel
costs. Income before taxes for the quarter ended December 31, 1997 was $282,000
compared to $485,000 for the comparable quarter last year.
RESULTS OF OPERATIONS
Six Months ended December 31,1997 Compared with Six Months Ended
December 31, 1996
Total revenues increased by $734,000, or 5%, from $12,968,000 in 1996 to
$13,702,000 in 1997, primarily due to an increase in home infusion division
revenues. This increase is primarily attributed to the number of patients
serviced and the therapy mix of those patients.
Costs of medical and nutritional products sold to patients and other customers
increased $1,130,000 or 18%, from $6,171,000 in 1996 to $7,301,000 in 1997. As a
percentage of total revenues, medical and nutritional product costs increased
from 47% 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 $84,000, or 2% from $3,468,000 in 1996 to
$3,552,000 in 1997, primarily attributable to higher nursing and pharmacy costs
incurred to support the number of home infusion patients serviced, increasing
geographical coverage through sales force expansion, and the opening of a
Florida pharmacy.
Selling, general and administrative expenses increased by $240,000, or 15% from
$1,571,000 in 1996 to $1,811,000 in 1997. The increase is largely attributable
to 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 costs associated
with the Humana Health Plans capitation contract in Illinois added to the
increase in selling, general and administrative expenses.
The provision for uncollectible accounts was 1.2% of revenues in 1997 and 4.5%
of revenues in 1996. A lower provision rate was charged against sales for fiscal
1998 based on a change in the company's payor mix towards managed care
relationships.
Management fees to Kuala Healthcare, Inc. ("KUAL") formerly Continental Health
Affiliates, Inc. and subsidiaries ("CHA") of $220,000 in 1997 and $207,000 in
1996 were 1.6% of revenues in both periods.
Depreciation expense decreased from $68,000 in 1996 to $49,000 in 1997 due to
property and equipment retirements. Amortization expense of $7,000 was
recognized during the current year.
Other expense net of $38,000 in 1997 consisted of prior period consulting
charges and interest expense offset by write offs of accounts payable. Other
income, net of $53,000 in 1996 consisted of $63,000 of amortization in 1996 of a
$628,000 payment received by the Company in 1992 as consideration for the
Company's releasing the buyer of KUAL's former Home Nursing Division from an
agreement not to sell infusion therapy services and KUAL'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 was completed in the
period ended March 31, 1997.
This income was offset by interest expense for the period.
The net income in 1997 was $327,000, or $.10 per share compared to a net income
in 1996 of $559,000 or $.18 per share. Income before taxes for the six months
ending December 31, 1997 was $554,000 compared to $947,000 for the comparable
prior period.
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 1997, the Company had total assets of $11.7 million, working
capital of $5.4 million and a net worth of $6.4 million. Its liabilities
consisted almost entirely of accounts payable and other operating obligations.
The Company had no borrowing and its primary capital requirements have been for
investment in working capital, principally accounts receivable and inventories.
At December 31, 1997, the balance in net accounts receivable for Infu-Tech was
7% higher than the balance at June 30, 1997 attributed to higher revenues.
Infu-Tech's net accounts receivable has increased from 102 days sales at June
30, 1997 to 106 days sales at December 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
their higher volume of claims.
Among the nursing homes with which the Company does business are five facilities
which are owned or managed by Kuala Healthcare, Inc . Through December 31, 1997,
the Company's sales to those nursing homes totaled $204,000 for the six month
period. At December 31, 1997, the Company's net accounts receivable from the
managed nursing homes totaled $1,309,000.
The Company has focused its effort on enhancing cash collections to improve cash
flow. Since the Company has no borrowing, 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.
<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, 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
<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 17, 1998 /S/ JACK ROSEN
- ------------------------ ---------------
Jack Rosen
Chairman and Director
(Chief Executive Officer)
Date: February 17, 1998 /S/ ALLISON K. ALLEN
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Allison K. Allen
Principal Accounting Officer
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
</LEGEND>
<CIK> 0000890152
<NAME> INFU-TECH, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 93
<SECURITIES> 0
<RECEIVABLES> 7,826
<ALLOWANCES> 1,505
<INVENTORY> 1,545
<CURRENT-ASSETS> 10,676
<PP&E> 861
<DEPRECIATION> 499
<TOTAL-ASSETS> 11,715
<CURRENT-LIABILITIES> 5,281
<BONDS> 0
0
0
<COMMON> 32
<OTHER-SE> 6,402
<TOTAL-LIABILITY-AND-EQUITY> 11,715
<SALES> 6,978
<TOTAL-REVENUES> 6,978
<CGS> 3,730
<TOTAL-COSTS> 6,696
<OTHER-EXPENSES> 60
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<INCOME-PRETAX> 282
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