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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, 1998
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 May 8, 1998 the Registrant had outstanding 3,258,092 shares of its
$.01 par value Common Stock.
<PAGE>
INFU-TECH, INC.
Index
Part I - Financial Information:
Page
Item 1
Consolidated Balance Sheets at March 31, 1998 (Unaudited)
and June 30, 1997........................................................ 3
Consolidated Statements of Operations (Unaudited) for the three months
ended March 31, 1998 and 1997............................................ 4
Consolidated Statements of Operations (Unaudited) for the nine months
ended March 31, 1998 and 1997............................................ 5
Consolidated Statements of Cash Flows (Unaudited) for the nine months
ended March 31, 1998 and 1997............................................ 6
Notes to Unaudited Consolidated Financial Statements....................... 7
Item 2
Management's Discussion and Analysis of Financial Condition and
Results of Operations............................................. ..8 - 10
Part II - Other Information................................................. 11
Signatures................................................................ 12
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<TABLE>
<CAPTION>
INFU-TECH, INC.
Consolidated Balance Sheets
(Dollars in thousands, except for share amounts)
March 31, June 30,
1998 1997
(Unaudited) (Audited)
ASSETS
<S> <C> <C>
Cash and cash equivalents.................................................$ 242 $ 512
Accounts receivable, net of allowances for uncollectible accounts
accounts of $1,205 and $1,995.............................................. 6,233 6,088
Accounts receivable from related parties.................................. 1,434 1,214
Inventories............................................................... 1,864 1,654
Deferred income taxes..................................................... 702 702
Prepaid expenses and other current assets................................. 631 365
---------- ---------
Total current assets................................................ 11,106 10,535
Property and equipment, at cost, net of accumulated depreciation
of $526 and $450........................................................ 369 244
Goodwill, net ............................................................ 128 139
Other assets.............................................................. 863 700
--------- ----------
Total assets........................................................$ 12,466 $ 11,618
========= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable........................................................$ 4,345 $ 4,288
Accrued payroll and related expenses.................................... 879 499
Income taxes payable.................................................... 528 449
Other current liabilities............................................... 103 255
----------- ---------
Total current liabilities......................................... 5,855 5,491
Capital lease obligation................................................ -- 26
----------- ---------
Total liabilities................................................. 5,855 5,517
Stockholders' equity:
Common stock, $.01 par value; 5,000,000 shares authorized; 32 32
3,258,092 issued
Additional paid-in capital............................................ 3,128 3,100
Retained earnings..................................................... 3,524 3,042
Treasury stock, at cost; 39,300 shares................................ (73) (73)
----------- -----------
Total stockholders' equity........................................ 6,611 6,101
----------- -----------
Commitments and contingencies
Total liabilities and stockholders' equity........................$ 12,466 $ 11,618
=========== ===========
See accompanying notes to consolidated financial statements
</TABLE>
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<TABLE>
<CAPTION>
INFU-TECH, INC.
Consolidated Statements of Operations
(Dollars in thousands, except per share amounts)
Three Months Ended March 31,
1998 1997
---- ----
(Unaudited)
<S> <C> <C>
Revenues............................................................$ 6,272 $ 6,733
------------- -----------
Costs and expenses:
Medical and nutritional product................................. 3,337 3,498
Personnel....................................................... 1,769 1,809
Selling, general and administrative............................. 795 973
Provision for uncollectible accounts............................ (2) (46)
Management fees to majority shareholder ........................ 100 108
Depreciation and amortization................................... 31 36
Other income, net............................................... (21) (5)
------------- -----------
6,009 6,373
Income before income taxes.......................................... 263 360
Provision for income taxes.......................................... 108 147
------------ -----------
Net income .....................................................$ 155 $ 213
============ ===========
Earnings per Share:
Basic......................................................... .05 .07
Diluted....................................................... .05 .07
Basic weighted average number of common shares...................... 3,218,792 3,205,954
Diluted weighted average number of common shares ................... 3,390,704 3,276,805
See accompanying consolidated financial statements
</TABLE>
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<TABLE>
<CAPTION>
INFU-TECH, INC.
Consolidated Statements of Operations
(Dollars in thousands, except per share amounts)
Nine Months Ended March 31,
1998 1997
---- ----
(Unaudited)
<S> <C> <C>
Revenues............................................................$ 19,974 $ 19,701
------------ -----------
Costs and expenses:
Medical and nutritional product................................. 10,638 9,669
Personnel....................................................... 5,321 5,277
Selling, general and administrative............................. 2,606 2,544
Provision for uncollectible accounts............................ 168 543
Management fees to majority shareholder ........................ 320 315
Depreciation and amortization................................... 87 104
Other expense (income), net..................................... 17 (58)
------------ ------------
19,157 18,394
Income before income taxes.......................................... 817 1,307
Provision for income taxes.......................................... 335 535
------------ ------------
Net income .....................................................$ 482 $ 772
============ ============
Earnings per share:
Basic........................................................... .15 .24
Diluted......................................................... .15 .24
Basic weighted average number of common shares...................... 3,214,569 3,186,346
Diluted weighted average number of common shares.................... 3,285,599 3,220,961
See accompanying consolidated financial statements
</TABLE>
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<TABLE>
INFU-TECH, INC.
Consolidated Statements of Cash Flows
(Dollars in thousands, except per share amounts)
Nine Months Ended March 31,
1998 1997
---- ----
(Unaudited)
<S> <C> <C>
Operating activities:
Net income ........................................................$ 482 $ 772
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Depreciation expense......................................... 76 101
Warrants issued for services................................. -- 44
Amortization of goodwill..................................... 11 3
Provision for uncollectible accounts......................... 168 543
Amortization of deferred income.............................. -- (72)
Increase (decrease) in cash due to changes in:
Accounts receivable......................................... (313) (1,616)
Accounts receivable from affiliates ........................ (220) (131)
Inventories................................................. (210) 329
Prepaid expenses and other current assets................... (266) 67
Other assets................................................ (163) (315)
Taxes payable............................................... 79 --
Accounts payable............................................ 57 155
Accrued payroll and related................................. 380 102
Other current liabilities................................... (98) (327)
----------- ------------
Net cash used in operating activities.......................... (17) (345)
----------- ------------
Investing activities:
Expenditures for property and equipment............................ (201) (71)
Acquisition of Universal Home Infusion............................. -- (190)
----------- ------------
Net cash used in investing activities.......................... (201) (261)
Financing activities:
Exercise of options ............................................... 28 28
Payment of capital lease obligations............................... (80) (70)
----------- -----------
Net cash used in financing activities.......................... (52) (42)
Net decrease in cash and cash equivalents............................ (270) (648)
Cash and cash equivalents, beginning of period....................... 512 691
----------- -----------
Cash and cash equivalents, end of period.............................$ 242 $ 43
=========== ===========
Supplemental disclosure of cash flow data:
Income taxes paid..................................................$ 153 $ 53
Stock issued....................................................... -- 100
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 nine month period ended March 31, 1998, 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 do not have a diluted effect as the exercise price is above
the average market price for the period were as follows:
1998 1997
---- ----
Options excluded for the 3 month period
ending March 31,.................................. 157,500 359,942
Options excluded for the 9 month period
ending March 31,.................................. 302,834 320,700
<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 March 31, 1998 Compared with Three Months Ended March 31,1997
Total revenues decreased by $461,000, or 7%, from $6,733,000 to $6,272,000. Home
infusion revenues increased by $86,000 resulting from an increased focus on
implementing managed care accounts. Contract services revenues decreased by
$547,000 due to changes in Medicare reimbursement.
Cost of medical and nutritional products sold to patients and other customers
decreased $161,000 or 5%, from $3,498,000 in 1997 to $3,337,000 in 1998. As a
percentage of total revenues, medical and nutritional product costs were 52% in
1997 as compared to 53% in 1998. 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, and margin reductions from operating
in a managed care environment.
Total personnel costs decreased by $40,000, or 2.2%, from $1,809,000 in 1997 to
$1,769,000 in 1998.
Selling, general and administrative expenses decreased by $178,000, or 18%,from
$973,000 in 1997 to $795,000 in 1998. The decrease of $178,000 is largely
attributable to non-recurring investment costs connected with the development of
a disease state management program incurred during 1997.
Due to a focused effort on collecting old receivables the provision for
uncollectible accounts reflects a review of the existing allowance on an account
by account basis. As a result, a reduction of $2,000 in 1998 and $46,000 in 1997
was made.
Management fees to Kuala Healthcare, Inc., ("KUAL") of $100,000 in 1998 and
$108,000 in 1997 were 1.6% of revenues in both years.
Depreciation expense decreased from $36,000 in 1997 to $28,000 in 1998 due to
property and equipment retirements. During the quarter, amortization of $3,000
was also recorded.
Other income, net of $21,000 consisted primarily of interest charged on accounts
receivables over normal contract terms. Other income was $5,000 in 1997.
The net income in 1998 was $155,000 or $.07 per share compared to net income in
1997 of $213,000 or $.06 per share. The decrease in net income was primarily
attributable to lower sales. Income before taxes for the quarter ended March 31,
1998 was $263,000 compared to $360,000 for the comparable quarter last year.
RESULTS OF OPERATIONS
Nine Months ended March 31,1998 Compared with Nine Months Ended March 31, 1997
Total revenues increased by $273,000, or 1%, from $19,701,000 in 1997 to
$19,974,000 in 1998, primarily due to a change in the therapy mix of home
infusion patients serviced offset by a decrease Medicare reimbursement for our
nursing home business.
Costs of medical and nutritional products sold to patients and other customers
increased $969,000 or 10%, from $9,669,000 in 1997 to $10,638,000 in 1998. As a
percentage of total revenues, medical and nutritional product costs increased
from 49% in 1997 to 53% in 1998. 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, and margin reductions from operating
in a managed care environment.
Total personnel costs increased by $44,000, or 1% from $5,277,000 in 1997 to
$5,321,000 in 1998, primarily attributable to higher nursing and pharmacy costs
incurred to support the therapies of home infusion patients serviced.
Selling, general and administrative expenses increased by $62,000, or 2% from
$2,544,000 in 1997 to $2,606,000 in 1998. The increase is attributable to
distribution cost increases incurred to support home infusion patients serviced.
The provision for uncollectible accounts was 1.1% of revenues in 1998 and 3% of
revenues in 1997. A lower provision rate was recorded for fiscal 1998 based on a
change in the company's payor mix towards managed care relationships and
improved collections of older accounts.
Management fees to Kuala Healthcare, Inc. ("KUAL") of $320,000 in 1998 and
$315,000 in 1997 were 1.6% of revenues in both periods.
Depreciation expense decreased from $101,000 in 1997 to $76,000 in 1998 due to
property and equipment retirements. Amortization expense of $11,000 was
recognized in 1998 and $3,000 in 1997.
Other expense, net of $17,000 in 1998 consisted of prior period consulting
charges and interest expense offset by write offs of accounts payable and
interest charged on accounts receivables over normal contract terms. Other
income, net of $58,000 in 1997 consisted of $23,000 of amortization in 1997 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.
The net income in 1998 was $482,000, or $.15 per share compared to a net income
in 1997 of $772,000 or $.24 per share. Income before taxes for the nine months
ending March 31, 1998 was $817,000 compared to $1,307,000 for the comparable
prior period.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 1998, the Company had total assets of $12.5 million, working
capital of $5.3 million and a net worth of $6.6 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 March 31, 1998, the balance in net accounts receivable for Infu-Tech was 5%
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 105 days sales at March 31, 1998, 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 March 31, 1998,
the Company's sales to those nursing homes totaled $304,000 for the nine month
period. At March 31, 1998, the Company's net accounts receivable from the
nursing homes totaled $1,434,000.
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. 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: May 15, 1998 /S/ JACK ROSEN
----------------------------------- --------------------------
Jack Rosen
Chairman and Director
(Chief Executive Officer)
Date: May 15, 1998 /S/ ALLISON K. ALLEN
----------------------------------- --------------------------
Allison K. Allen
Principal Accounting Officer
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000890152
<NAME> INFU-TECH, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> MAR-31-1998
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 7,667
<ALLOWANCES> 1,205
<INVENTORY> 1,864
<CURRENT-ASSETS> 11,106
<PP&E> 895
<DEPRECIATION> 526
<TOTAL-ASSETS> 12,466
<CURRENT-LIABILITIES> 5,855
<BONDS> 0
0
0
<COMMON> 32
<OTHER-SE> 6,579
<TOTAL-LIABILITY-AND-EQUITY> 12,466
<SALES> 6,272
<TOTAL-REVENUES> 6,272
<CGS> 3,337
<TOTAL-COSTS> 6,009
<OTHER-EXPENSES> (21)
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<INCOME-TAX> 108
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