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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, 1998
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 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 No X
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As of November 16, 1998 the Registrant had outstanding 3,262,571 shares of
its $.01 par value Common Stock.
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INFU-TECH, INC.
Index
Part I - Financial Information:
<TABLE>
<CAPTION>
Page
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Item 1
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<S> <C>
Consolidated Balance Sheets at September 30, 1998 (Unaudited)
and June 30, 1998......................................................................... 3
Consolidated Statements of Operations (Unaudited) for the three months
ended September 30, 1998 and 1997......................................................... 4
Consolidated Statements of Cash Flows (Unaudited) for the three months
ended September 30, 1998 and 1997......................................................... 5
Notes to Unaudited Consolidated Financial Statements........................................ 6
Item 2
Management's Discussion and Analysis of Financial Condition and
Results of Operations.....................................................................7 - 8
Part II - Other Information.......................................................................... 9
Signatures.................................................................................. 10
</TABLE>
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INFU-TECH, INC.
Consolidated Balance Sheets
(Dollars in thousands, except for share amounts)
<TABLE>
<CAPTION>
September 30, June 30,
1998 1998
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(Unaudited) (Audited)
ASSETS
<S> <C> <C>
Cash and cash equivalents................................................................. $ 188 $ 163
Accounts receivable, net of allowances for uncollectible accounts
of $1,593 and $1,578................................................................... 6,784 6,530
Accounts receivable from affiliates....................................................... 410 437
Inventories .............................................................................. 1,057 1,452
Deferred income taxes..................................................................... 551 551
Prepaid expenses and other current assets................................................. 348 165
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Total current assets............................................................... 9,338 9,298
Property and equipment, at cost, net of accumulated depreciation
of $588 and $566....................................................................... 348 370
Goodwill, net ............................................................................ 121 125
Receivable from affiliates, non-current................................................... 2,250 2,189
Other assets.............................................................................. 115 140
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Total assets....................................................................... $ 12,172 $ 12,122
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LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable.......................................................................... $ 4,725 $ 5,057
Accrued payroll and related expenses...................................................... 766 435
Income taxes payable...................................................................... 199 194
Other current liabilities................................................................. 148 110
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Total current liabilities.......................................................... 5,838 5,796
Commitments and contingencies
Stockholders' equity:
Common stock, $.01 par value; 5,000,000 shares authorized; 3,262,571 issued............ 33 33
Additional paid-in capital............................................................. 3,128 3,128
Retained earnings...................................................................... 3,246 3,238
Treasury stock, at cost; 39,300 shares................................................. (73) (73)
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Total stockholders' equity......................................................... 6,334 6,326
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Total liabilities and stockholders' equity......................................... $ 12,172 $ 12,122
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</TABLE>
See accompanying notes to consolidated financial statements
3
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INFU-TECH, INC.
Consolidated Statements of Operations
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended September 30,
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1998 1997
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(Unaudited)
<S> <C> <C>
Revenues........................................................................... $ 5,725 $ 6,724
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Costs and expenses:
Medical and nutritional product............................................... 3,255 3,571
Personnel..................................................................... 1,574 1,788
Selling, general and administrative........................................... 738 911
Provision for uncollectible accounts.......................................... 77 71
Management fees to majority shareholder ...................................... 92 108
Depreciation and amortization................................................. 26 25
Other (income), net........................................................... (50) (22)
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5,712 6,452
Income before income taxes......................................................... 13 272
Provision for income taxes......................................................... 5 112
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Net income .................................................................. $ 8 $ 160
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Earnings per share:
Basic........................................................................... $ 0.00 $ 0.05
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Diluted......................................................................... $ 0.00 $ 0.05
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Basic weighted average number of common shares..................................... 3,262,571 3,212,150
=========== ==========
Diluted weighted average number of common shares................................... 3,298,600 3,241,477
=========== ==========
</TABLE>
See accompanying consolidated financial statements
4
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INFU-TECH, INC.
Consolidated Statements of Cash Flows
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended September 30,
---------------------------------------
1998 1997
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(Unaudited)
<S> <C> <C>
Operating activities:
Net income ...................................................................... $ 8 $ 160
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Depreciation expense....................................................... 22 22
Amortization of goodwill................................................... 4 3
Provision for uncollectible accounts....................................... 77 71
Increase (decrease) in cash due to changes in:
Accounts receivable...................................................... (331) (281)
Accounts receivable from affiliates ..................................... 27 (103)
Inventories.............................................................. 395 (21)
Prepaid expenses and other current assets................................ (183) 30
Receivables from affiliates, non current................................. (61) --
Other assets............................................................. 25 (135)
Taxes payable............................................................ 5 8
Accounts payable......................................................... (332) 247
Accrued payroll and related.............................................. 331 (87)
Other current liabilities................................................ 58 (95)
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Net cash provided by (used in) operating activities.......................... 45 (181)
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Investing activities -
Expenditures for property and equipment.......................................... -- (103)
Net cash used in investing activities........................................ -- (103)
Financing activities -
Payment of capital lease obligations............................................. (20) (31)
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Net cash used in financing activities........................................ (20) (31)
Net increase (decrease) in cash and cash equivalents................................ 25 (315)
Cash and cash equivalents, beginning of period...................................... 163 512
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Cash and cash equivalents, end of period............................................ $ 188 $ 197
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Supplemental disclosure of cash flow data:
Income taxes paid................................................................ $ -- $ 105
</TABLE>
See accompanying notes to consolidated financial statements
5
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INFU-TECH, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. The Company
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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"), 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 changes in
Medicare and Medicaid reimbursement rates.
2. Basis of Presentation
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The accompanying unaudited 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, 1998, are not
necessarily indicative of the results that may be expected for the year
ending June 30, 1999.
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, 1998.
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 Consolidated
Financial Statements and Notes thereto, included in the quarterly report and
with the Company's Annual Report on Form 10-K for the year ended June 30, 1998.
RESULTS OF OPERATIONS
Three Months ended September 30,1998 Compared with Three Months Ended September
30, 1997
Revenues in the quarter ended September 30, 1998 decreased 14.9%, or
approximately $1 million, to $5.7, from $6.7 million in 1997, primarily due to
the loss of patients on Immunoglobulin products because of a national shortage
of these drugs, exiting unprofitable managed care contracts, and decreased
revenues from the Contract Services Division due to increased competition for
Medicare Part B services from nursing homes doing their own billing.
Medical and nutritional product costs were 56.9% of revenues in 1998, compared
to 53.1% in 1997, reflecting higher drug costs and margin reductions from
increasingly operating in a managed care environment.
Personnel costs in the 1998 quarter decreased 12.0%, or approximately $.2
million, to $1.6 million from $1.8 million in 1997, primarily due to a reduction
of personnel in branch and corporate operations.
Selling, general and administrative expenses in the 1998 quarter decreased by
18.9%, or approximately $.2 million, to $.7 million, from $.9 million in 1997.
The decrease is largely due to increased operating efficiencies in the 1998
period and non-recurring investment costs in the 1997 period..
Management fees to KUAL are 1.6% of revenues.
The net income in 1998 was $8,000 or $ .00 cents per share compared to net
income in 1997 of $160,000 or $.05 cents per share. The decrease is primarily
attributable to the decrease in revenues and, as a percentage of revenues,
increased cost of medical and nutritional products sold.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1998, the Company had total assets of $12.2 million, working
capital of $3.5 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.
The collection of accounts receivable is adversely affected by sporadic slow
payments from Medicare and continued slow payments from managed care companies.
Among the nursing homes with which the Company does business are five facilities
which are owned or managed by KUAL. The Company's sales to those nursing homes
totalled approximately $81,000 for the three month period ended September 30,
1998. At September 30, 1998, the Company's net accounts receivable from those
nursing homes totalled approximately $1.5 million.
The Company is focusing its effort on enhancing cash collections to improve its
cash flow. 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.
7
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INFU-TECH, INC.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Year 2000 Compliance
Infu-Tech has developed a task force to research a solution to the need for Year
2000 System Compliance. To date the Infu-Tech task force has identified the
programs that will be effected by the Year 2000 System Compliance issue and the
procedures that are required to make these programs Year 2000 compliant..
Currently the Infu-Tech task force has explored many options to resolve the Year
2000 System Compliance issues. These options included the purchase of a new
hardware and software system or migrating to AS400/OS400 platforms which would
be an upgrade to the existing hardware currently utilized by the Company. The
cost of this upgrade is approximately $50,000.
A proposal is being requested to upgrade the hardware and software. The upgrade
of a new system will cost approximately $400,000. Infu-Tech is exploring a
number of lease options for this upgrade. Once a decision is reached a detailed
plan will be implemented for training, installation of hardware and the new
software. All systems being considered are Year 2000 compliant.
As with any implementation of a new computer system, there are risks such as
delays in down loading existing files, software that might require debugging,
upgrading or training difficulties.
Should it not be feasible to make its current systems Year 2000 compliant,
Infu-Tech will upgrade its hardware and software as previously discussed.
It is expected that a final decision will be made on the Year 2000 System
Compliance by the first quarter of calendar 1999.
8
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INFU-TECH, INC.
Part II - Other Information
Item 1. Legal Proceedings
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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, 1998.
Item 2. Changes in Securities
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None
Item 3. Defaults Upon Senior Securities
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None
Item 4. Submission of Matters to Vote of Security Holders
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None
Item 5. Other Information
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None
Item 6. Exhibits and Reports on Form 8-K
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None
9
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INFU-TECH, INC.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Company has duly caused this Report to be signed on its behalf
by the undersigned, thereunto duly authorized.
Infu-Tech, Inc.
Date: November 23, 1998 By: /S/ JACK ROSEN
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Chairman of the Board
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.
Date: November 23, 1998 By: /S/ JACK ROSEN
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Jack Rosen
Principal Executive Officer
Date: November 23, 1998 By: /S/ EDWARD J. HALAS
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Edward J. Halas
Principal Financial Officer
10
