SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________to_______
Commission file number 1-9848
ALMOST FAMILY, INC. TM
(Exact name of registrant as specified in its charter)
Delaware 06-1153720
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
100 Mallard Creek Road, Suite 400 40207
(Address of principal executive offices) (Zip Code)
(502) 899-5355
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if
changed since last report.)
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 and Exchange Act of 1934
during the preceding 12 months (or for such shorter 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 ____.
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class of Common Stock $.10 par value
Shares outstanding at December 31, 2000, 3,143,436
ALMOST FAMILY, INC. AND SUBSIDIARIES
FORM 10-Q
INDEX
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets as of December 31, 2000
and March 31, 2000 3
Consolidated Statements of Operations for the Three
Months ended December 31, 2000 and 1999 4
Consolidated Statements of Operations for the Nine
Months ended December 31, 2000 and 1999 5
Consolidated Statements of Cash Flows for the Nine
Months ended December 31, 2000 and 1999 6
Notes to Interim Consolidated Financial Statements 7-10
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11-18
Item 3. Quantitative and Qualitative Disclosures About Market
Risk 19
Part II. Other Information
Items 1 through 6 20
ALMOST FAMILY, INC. AND SUBSIDIARIES
INTERIM CONSOLIDATED BALANCE SHEETS
ASSETS December 31, March 31, 2000
------ 2000 2000
--------------- --------------
(UNAUDITED)
CURRENT ASSETS
Cash and cash equivalents
$ 2,159,949 $1,427,537
Accounts receivable - net
6,849,905 6,459,004
Prepaid expenses and other current assets
271,730 301,415
Net assets of discontinued operations
830,941 --
----------- ------------
TOTAL CURRENT ASSETS
10,112,525 8,187,956
PROPERTY AND EQUIPMENT - net
3,584,247 3,079,636
COST IN EXCESS OF NET ASSETS ACQUIRED - net
2,481,769 2,537,740
DEFERRED TAX ASSETS
3,545,928 3,429,093
OTHER ASSETS
883,745 916,482
------------ ------------
$20,608,214 $18,150,907
=========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued liabilities
$ 6,724,354 $ 5,309,359
----------- ------------
TOTAL CURRENT LIABILITIES
6,724,354 5,309,359
----------- ------------
LONG-TERM LIABILITIES:
Revolving credit facility
327,551 651,221
Other liabilities
889,385 1,037,296
----------- ------------
TOTAL LONG-TERM LIABILITIES
1,216,936 1,688,517
----------- ------------
TOTAL LIABILITIES
7,941,290 6,997,876
----------- ------------
COMMITMENTS AND CONTINGENCIES
Stockholders' equity:
Common stock, par value $.10; authorized
10,000,000 shares; 3,141,186 issued and outstanding
317,369 315,119
Treasury stock, at cost, 10,000 shares
(95,975) (95,975)
Additional paid-in capital
25,435,551 25,384,270
Accumulated deficit
(12,990,021) 11,153,031
----------- ------------
TOTAL STOCKHOLDERS' EQUITY
12,666,924 11,153,031
----------- ------------
$20,608,214 $18,150,907
=========== ============
See accompanying notes to interim consolidated financial statements.
ALMOST FAMILY, INC. AND SUBSIDIARIES
INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended
----------------------------
December 31, December 31,
2000 1999
------------- -------------
Net revenues $12,621,389 $ 11,884,749
Cost of sales and services 10,444,101 9,974,275
General and administrative expenses 905,802 966,360
Depreciation and amortization expense 268,832 245,020
Provision for uncollectible accounts 139,142 234,337
------------- -------------
Income before other income (expense) and income taxes 863,512 464,757
Other income (expense):
Interest expense (21,615) (60,555)
------------- -------------
Income before income taxes 841,897 404,202
Income tax expense 403,773 169,765
------------- -------------
Net income from continuing operations 438,124 234,437
Discontinued operations:
Net income from operations net of applicable income 227,450 -
taxes of $201,701
Estimated loss on disposal, net of applicable - -
income taxes
------------- -------------
Net income $ 665,574 $ 234,437
============= =============
Per share amounts - Basic:
Average shares outstanding - Basic 3,143,436 3,120,413
Net income from continuing operations $ 0.14 $ 0.08
Discontinued operations
Income from operations, net of applicable 0.07 -
income taxes
Loss on disposal, net of applicable - -
income taxes
------------- -------------
Net income $ 0.21 $ 0.08
============= =============
Per share amounts - Diluted:
Average shares outstanding - Diluted 3,356,562 3,120,413
Net income from continuing operations $ 0.13 $ 0.08
Discontinued operations
Income from operations, net of applicable 0.07 -
income taxes
Loss on disposal, net of applicable - -
income taxes
------------- -------------
Net income $ 0.20 $ 0.08
============= =============
See accompanying notes to interim consolidated financial statements.
ALMOST FAMILY, INC. AND SUBSIDIARIES
INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Nine Months Ended
----------------------------
December 31, December 31,
2000 1999
------------- -------------
Net revenues $36,942,984 $33,324,894
Cost of sales and services 30,534,434 27,947,792
General and administrative expenses 2,777,545 2,899,369
Depreciation and amortization expense 803,423 693,265
Provision for uncollectible accounts 425,641 645,061
------------- -------------
Income before other income (expense) and income taxes 2,401,941 1,139,407
Other income (expense):
Interest expense (68,925) (294,007)
Loss on sale of building - (91,701)
------------- -------------
Income before income taxes 2,333,016 753,699
Income tax expense 1,100,104 316,554
------------- -------------
Net income from continuing operations 1,232,912 437,145
Discontinued operations:
Net income from operations net of applicable income
taxes of $201,701 and $57,000 respectively 227,450 78,258
Estimated loss on disposal, net of applicable income
Tax provision of $527,000 - (5,000,000)
------------- -------------
Net income (loss) $1,460,362 $(4,484,597)
============= =============
Per share amounts - Basic:
Average shares outstanding - Basic 3,143,436 3,120,413
Net income from continuing operations $ 0.39 $ 0.14
Discontinued operations
Income from operations, net of applicable 0.07 0.02
income taxes
Loss on disposal, net of applicable
income taxes - (1.60)
------------- -------------
Net income (loss) $ 0.46 $ (1.44)
============= =============
Per share amounts - Diluted:
Average shares outstanding - Diluted 3,307,660 3,120,413
Net income from continuing operations $ 0.37 $ 0.14
Discontinued operations
Income from operations, net of applicable 0.07 0.02
income taxes
Loss on disposal, net of applicable - (1.60)
income taxes
------------- -------------
Net income (loss) $ 0.44 $ (1.44)
============= =============
See accompanying notes to interim consolidated financial statements.
ALMOST FAMILY, INC. AND SUBSIDIARIES
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended
-------------------------------
December 31, December 31,
2000 1999
--------------- ---------------
Cash flows from operating activities:
Net income from continuing operations $ 1,232,912 $ 437,145
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 803,423 693,265
Provision for uncollectible accounts 425,641 645,061
Loss on sale of assets - 91,701
Deferred taxes - 80,900
--------------- ---------------
2,461,976 1,948,072
Change in certain net assets
(Increase) decrease in:
Accounts receivable (816,542) (1,477,356)
Prepaid expenses and other (161,992) (495,599)
current assets
Increase (decrease) in:
Accounts payable and accrued 1,414,995 (643,244)
liabilities --------------- ---------------
Net cash provided (used) by
operating activities 2,898,437 (668,127)
--------------- ---------------
Cash flows from investing activities:
Capital expenditures (1,154,330) (518,296)
Other assets 32,737 -
Goodwill (22,700) -
Sale of assets - 119,009
--------------- ---------------
Net cash used by investing (1,144,293) (399,197)
activities --------------- ---------------
Cash flows from financing activities:
Net revolving credit facility (323,670) (12,296,171)
borrowings (payments)
Proceeds from stock option exercises 53,531 -
Other (148,102) -
--------------- ---------------
Net cash used by financing activities (418,241) (12,296,171)
--------------- ---------------
Cash flows provided (used) by (603,491) 12,787,728
discontinued operations --------------- -------------
Net increase (decrease) in cash 732,412 (575,767)
Cash and cash equivalents at beginning of 1,427,537 1,036,951
period --------------- --------------
Cash and cash equivalents at end of period $ 2,159,949 $ 461,184
=============== ===============
See accompanying notes to interim consolidated financial statements.
ALMOST FAMILY, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying interim consolidated financial statements for the three
and nine months ended December 31, 2000 and 1999 have been prepared
pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included
in financial statements prepared in accordance with generally accepted
accounting principles have been omitted pursuant to such rules and
regulations. Accordingly, the reader of this Form 10-Q is referred to the
Company's Form 10-K for the year ended March 31, 2000 for further
information. In the opinion of management of the Company, the accompanying
unaudited interim financial statements reflect all adjustments (consisting
of normally recurring adjustments) necessary to present fairly the
financial position at December 31, 2000 and the results of operations and
cash flows for the periods ended December 31, 2000 and 1999.
The results of operations for the three and nine months ended December 31,
2000 are not necessarily indicative of the operating results for the year.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and reported amounts of revenues and expenses during
the reported period. Actual results could differ from those estimates.
2. COMMITMENTS AND CONTINGENCIES
Legal Proceedings
The Company, from time to time, is subject to claims and suits arising in
the ordinary course of its business, including claims for damages for
personal injuries. In the opinion of management, the ultimate resolution of
any of these pending claims and legal proceedings will not have a material
effect on the Company's financial position or results of operations.
Franklin
On January 26, 1994 Franklin Capital Associates L.P., Aetna Life and
Casualty Company and Aetna Casualty and Surety Company, shareholders, who
at one time held approximately 320,000 shares of the Company's common stock
(approximately 13% of shares outstanding) filed suit in Chancery Court of
Williamson County, Tennessee claiming unspecified damages not to exceed
three million dollars in connection with registration rights they received
in the Company's acquisition of National Health Industries in February
1991.
ALMOST FAMILY, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
2. COMMITMENTS AND CONTINGENCIES (continued)
-----------------------------------------
The suit alleges the Company failed to use its best efforts to register the
shares held by the plaintiffs as required by the merger agreement. The
Company settled with Aetna shortly before the case went to trial in
February 2000. In mid-trial Franklin voluntarily withdrew its complaint
reserving its legal rights to bring a new suit as allowed under Tennessee
law. In May 2000, Franklin re-filed its claim. The Company believes it has
meritorious defenses to the claims and does not expect the ultimate outcome
of the suit to have a material impact on the Company's results of
operations, liquidity or financial position. The Company plans to
vigorously defend its position in this case. Anticipated costs of
litigation have been included in the Company's one-time charge for
discontinuing its home health operations in September 1999.
3. FINANCIAL STATEMENT RECLASSIFICATIONS
Certain amounts have been reclassified in the 1999 financial statements in
order to conform to the 2000 presentation. Such reclassifications had no
effect on previously reported net income (loss).
4. LOSS ON SALE OF BUILDING
In May 1999, the Company sold an office building resulting in a
non-operating loss of $91,701. The transaction generated net cash of
$79,093 after repaying mortgage debt of approximately $40,000.
5. DISCONTINUED OPERATIONS
As part of a formal plan of separation, the Company in late 1999 sold its
product operations (consisting of infusion therapy and respiratory and
medical equipment businesses) to Lincare Holdings, Inc. in an asset sale
for $14.5 million and is pursuing available strategic alternatives to
complete the separation of its visiting nurse operations. Proceeds from
the sale were used to repay obligations outstanding under the Company's
bank line of credit. As a result of the operational separations, the
Company recorded a one-time net of tax loss of approximately $5 million or
($1.60) in the quarter ended September 30, 1999. That charge reduced the
book value of the operations to management's best estimate of net
realizable value, provided for estimated losses on fulfilling certain
obligations and close down costs, and included the estimated future
operating losses of the visiting nurse operations through disposition. The
amounts the Company will ultimately realize could differ materially from
the amounts assumed in arriving at the loss on disposal of the
discontinued operations.
ALMOST FAMILY, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
5. DISCONTINUED OPERATIONS (continued)
On October 1, 2000 Medicare's new Prospective Payment System for home care
(PPS) went into effect replacing the previous reimbursement system, which
was cost-based and had been in effect for over 30 years. Unlike the
previous cost-based system, which prohibited profitable operation for the
visiting nurse (VN) business, PPS makes it at least possible to make a
profit. Approximately 85% of the Company's VN revenues are derived from
the Medicare program. In the quarter ended December 31, 2000, the VN
division generated net income of $227,540 or $0.07 per share marking its
first quarter of profitable operation.
Although discontinued operations accounting treatment is being used for
this segment, these earnings are reported in the Company's income
statement for the quarter and will be reported in the same manner in
future quarters. Under discontinued operations accounting rules, losses
incurred in the comparable quarters of last year and in the first two
quarters of this year were previously provided for in the one-time charge
recorded in September 1999.
The division's financial performance under PPS is in part a result of the
Company's work to prepare for operation under PPS and in part due to
higher reimbursement rates under PPS. As shown in the table below, the VN
operations incurred net losses in the first six months of this fiscal year
operating under PPS. In the quarter ended December, the Company earned a
higher rate of reimbursement and incurred lower operating costs on its VN
operations than were earned and incurred respectively in the first six
months of the year. Additionally, the Company has taken steps to reduce
unprofitable insurance and managed care business.
Revenue from visiting nurse operations was approximately $18.8 million for
the nine-months ended December 31, 2000. Interest expense has been
allocated to continuing and discontinued operations on the basis of
allocated debt balances. Accordingly, interest expense of $347,952 has
been allocated to discontinued operations for the nine-months ended
December 31, 2000. The following is a condensed statement of operations
for the VN business for this fiscal year to date:
Visiting Nurse Operations - Statements of Operations
Three-Months
Six-Months Ended Nine-Months
Ended 9/2000 12/2000 Ended
Pre-PPS PPS Results 12/2000
------------ ------------ ------------
Revenues
$12,114,361 6,668,474 18,782,835
Operating expenses 13,025,885 6,168,913 19,194,798
Interest expense 277,542 70,710 347,952
------------ ------------ ------------
Pre-tax income (loss) (1,189,066) 429,151 (759,915)
Income taxes (451,845) 201,701 (250,144)
------------ ------------ ------------
Net income (loss) (737,221) 227,450 (509,771)
Less amounts previously 737,221 -- 737,221
provided ------------ ------------ ------------
Shown in accompanying
statement of operations $ -- $ 227,450 $ 227,450
============ ============ ==========
ALMOST FAMILY, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
5. DISCONTINUED OPERATIONS (continued)
The accompanying balance sheet includes net current assets and liabilities
of discontinued operations, consisting primarily of accounts receivable,
inventory, accounts payable and accrued liabilities, and long term assets
of discontinued operations consisting primarily of property and equipment,
net of accumulated depreciation and goodwill. The amounts the Company will
ultimately realize could differ materially from the amounts assumed in
arriving at the loss on disposal of the discontinued operations.
Visiting Nurse Operations - Balance Sheet - As Of December 31,
2000
-------------
Accounts receivable $9,454,031
Other current assets 1,491,150
Long-term assets -
Current liabilities 3,539,705
Revolving credit facility 6,040,881
Long-term liabilities 533,654
-------------
Net assets held for sale $ 830,941
=============
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
As described elsewhere herein, the Company has sold its product operations and
is pursuing strategic alternatives for its visiting nurse operations.
Accordingly, the results of continuing operations presented below include only
the result of the Company's adult day health services operations consisting of
in-center adult day care (ADC) and personal care services provided in the
patients' homes.
RESULTS OF CONTINUING OPERATIONS
The financial tables that follow are presented for continuing operations:
Quarter Ended December 31, 2000 Compared with Quarter Ended December 31, 1999
2000 1999 Change
--------------------- -------------------- ------------------
Amount % Rev. Amount % Rev. Amount %
------ ------ ------ ----- ----- --
Net Revenues $12,621,389 100.0% 11,884,749 100.0% $736,640 6.2%
Cost of Sales and Ser. 10,444,101 82.8% 9,974,275 83.9% 469,826 4.7%
---------- ------------- -----------
Center Contribution 2,177,288 17.2% 1,910,474 16.1% 266,814 14.0%
General & Administrative 905,802 7.2% 966,360 8.1% (60,558) (6.3)%
Depreciation and
Amortization 268,832 2.1% 245,020 2.1% 23,812 9.7%
Provision for uncollectible
Accounts 139,142 1.1% 234,337 2.0% (95,195)(40.6)%
Interest, Net 21,615 0.2% 60,555 0.5% (38,940)(64.3)%
------------- ------------- -----------
Income from continuing
operations before
non-recurring items &
taxes $ 841,897 6.6% $ 404,202 3.4% $ 437,695 108.3%
============= ============= ===========
Net Revenues
Net revenues increased 6.2% to $12.6 million from $11.9 million in the prior
year. Growth came primarily from volumes, which grew to 175,720 days of care in
2000 from 168,731 in 1999. Average revenue per day of care increased 1.7% due to
price increases. Increased volumes were derived primarily from increased
attendance in the adult day care centers, which grew to 1,262 guests per weekday
in 2000 from 1,210 in 1999 and increased personal care volumes in state funded
programs. ADC in-center occupancy rates were 74.2% and 75.5% in 2000 and 1999
respectively while average capacity increased 6% to 1,701 in 2000 from 1,604 in
the same quarter last year. As of December 31, 2000 total system capacity was
1,701 guests per day.
Cost of Sales and Services
Cost of sales and services as a percent of revenues declined to 82.8% in 2000
from 83.9% in 1999 primarily as a result of increased volumes of business, and
increased pricing relative to operating costs.
General and Administrative
General and administrative costs declined between years primarily as a result of
personnel reductions. G&A as a percent of revenues dropped to 7.2% in 2000 from
8.1% in 1999.
Depreciation and Amortization
Depreciation and amortization increased by $23,812 due to capital expenditures.
Provision for Uncollectible Accounts
Management establishes an allowance for uncollectible accounts based on its
estimate of probable collection losses. The decrease in provision for
uncollectible accounts resulted from improved collection results in 2000.
Interest, Net
The decrease in interest, net is primarily a result of lower average outstanding
debt levels associated with the Company's improved operating results and
proceeds from the sale of the product operations.
Nine-Months Ended December 31, 2000 Compared with Nine-Months Ended
December 31, 1999
2000 1999 Change
-------------------------------------------------------
Amount $ Rev. Amount % Rev. Amount %
----- ------ ------ ------ ------ --
Net Revenues $36,942,984 100.0% $33,324,894 100.0% $3,618,090 10.9%
Cost of Sales and Ser. 30,534,434 82.7% 27,947,792 83.9% 2,586,642 9.3%
------------ ----------- ----------
Center Contribution 6,408,550 17.3% 5,377,102 16.1% 1,031,448 19.2%
General & Administrative 2,777,545 7.5% 2,899,369 8.7% (121,824) (4.2)%
Depreciation and
Amortization 803,423 2.2% 693,265 2.1% 110,158 15.9%
Provision for uncollectible
accounts
425,641 1.1% 645,061 1.9% (219,420) (34.0)%
Interest, Net
68,925 0.2% 294,007 0.9% (225,082) (76.6)%
------------ ----------- ----------
Income from continuing
operations before non-
recurring items and
taxes $2,333,016 6.3% $ 845,400 2.5% $1,487,616 176.0%
============ =========== ==========
Net Revenues
Net revenues increased 10.9% to $36.9 million from $33.3 million in the prior
year. Growth came primarily from volumes, which grew to 532,769 days of care in
2000 from 474,046 in 1999. Average revenue per day of care decreased 1.4% due to
mix changes offsetting price increases of about 6%. Increased volumes were
derived primarily from increased attendance in the adult day care centers, which
grew to 1,266 guests per weekday in 2000 from 1,166 in 1999 and increased
personal care volumes in state funded programs. ADC in-center occupancy rates
were 75.1% and 75.2% in 2000 and 1999 respectively while average capacity
increased 8.6% to 1,684 in 2000 from 1,550 last year.
Cost of Sales and Services
Cost of sales and services as a percent of revenues declined to 82.7% in 2000
from 83.9% in 1999 primarily as a result of increased volumes of business, and
increased pricing relative to operating costs.
General and Administrative
General and administrative costs declined 4% between years primarily due to the
elimination of certain corporate positions. G&A as a percent of revenues dropped
to 7.5% in 2000 from 8.7% in 1999.
Depreciation and Amortization
Depreciation and amortization increased by $110,158 due to capital expenditures.
Provision for Uncollectible Accounts
Management establishes an allowance for uncollectible accounts based on its
estimate of probable collection losses. The decrease in provision for
uncollectible accounts resulted from improved collection results in 2000.
Interest, Net
The decrease in interest, net is primarily a result of lower average outstanding
debt levels associated with the Company's improved operating results and
proceeds from the sale of the product operations.
Income Taxes
As of December 31, 2000, the Company has net deferred tax assets of
approximately $3.5 million. The net deferred tax asset is composed of $3.4
million of long-term deferred tax assets and $116,000 of current deferred tax
assets.
The Company has provided a valuation allowance against certain net deferred tax
assets based upon management's estimation of realizability of those assets
through future taxable income. This valuation was based in large part on the
Company's history of generating operating income or losses, individual tax
locales and expectations for the future. The Company's ability to generate the
expected amounts of taxable income from future operations is dependent upon
general economic conditions, competitive pressures on revenues and margins and
legislation and regulation at all levels of government. Management has
considered the above factors in reaching its conclusions that it is more likely
than not that future taxable income will be sufficient to fully utilize the net
deferred tax assets. However, there can be no assurances that the Company will
meet its expectations of future taxable income.
For the three and nine-month periods ended December 31, 2000, the effective
income tax rate was approximately 47% of income before income taxes, as compared
to an effective income tax rate of approximately 42% of income before taxes for
1999. The change in the effective tax rate results from changes in the Company's
business and the state and local tax jurisdictions in which taxable income was
generated.
Discontinued Operations
Results of operations for the nine-months ended December 31, 1999 included a net
loss of ($4,921,742) from operations which have subsequently been sold or are
subject to disposition. Please refer to the Company's report on Form 10K for the
year ended March 31, 2000 for a more detailed description.
On October 1, 2000 Medicare's new Prospective Payment System for home care (PPS)
went into effect replacing the previous reimbursement system, which was
cost-based and had been in effect for over 30 years. Unlike the previous
cost-based system, which prohibited profitable operation for the visiting nurse
(VN) business, PPS makes it at least possible to make a profit. Approximately
85% of the Company's VN revenues are derived from the Medicare program. In the
quarter ended December 31, 2000, the VN division generated net income of
$227,540 or $0.07 per share marking its first quarter of profitable operation.
Although discontinued operations accounting treatment is being used for this
segment, these earnings are reported in the Company's income statement for the
quarter and will be reported in the same manner in future quarters. Under
discontinued operations accounting rules, losses incurred in the comparable
quarters of last year and in the first two quarters of this year were previously
provided for in the one-time charge recorded in September 1999.
The division's financial performance under PPS is in part a result of the
Company's work to prepare for operation under PPS and in part due to higher
reimbursement rates under PPS. As shown in the table below, the VN operations
incurred net losses in the first six months of this fiscal year operating under
PPS. In the quarter ended December, the Company earned a higher rate of
reimbursement and incurred lower operating costs on its VN operations than were
earned and incurred respectively in the two quarters of the year. Additionally,
the Company has taken steps to reduce unprofitable insurance and managed care
business.
The Company is continuing to reduce its operating costs through operating
efficiencies. Accordingly, although it is not releasing an estimate of expected
future earnings, and although there can be no assurance of continued
profitability, management does expect visiting nurse earnings in the next
quarter and in the next fiscal year to improve over the current quarter's
results. The Company is continuing to evaluate strategic alternatives for this
business unit pursuant to plans it adopted last year.
Revenue from visiting nurse operations was approximately $18.8 million for the
nine-months ended December 31, 2000. Interest expense has been allocated to
continuing and discontinued operations on the basis of allocated debt balances.
Accordingly, interest expense of $347,952 has been allocated to discontinued
operations for the nine-months ended December 31, 2000. The following is a
condensed statement of operations for the VN business for this fiscal year to
date:
Visiting Nurse Operations - Statements of Operations
Three-Months
Six Months Ended Nine-Months
Ended 9/2000 12/2000 Ended
Pre-PPS PPS Results 12/2000
------------ ------------ ------------
Revenues $12,114,361 6,668,474 18,782,835
Operating expenses 13,025,885 6,168,913 19,194,798
Interest expense 277,542 70,710 347,952
------------ ------------ ------------
Pre-tax income (loss) (1,189,066) 429,151 (759,915)
Income taxes (451,845) 201,701 (250,144)
------------ ------------ ------------
Net income (loss) (737,221) 227,450 (509,771)
Less amounts previously 737,221 - 737,221
provided ------------ ------------ ------------
Shown in accompanying
statement of operations $ - $ 227,450 $ 227,450
============ ============ ============
Building Sale
In May 1999, the Company sold an office building resulting in a non-operating
loss of $91,701. The transaction generated net cash of $79,093 after repaying
mortgage debt of approximately $40,000.
Liquidity and Capital Resources
Revolving Credit Facility
The Company has a $20 million revolving credit facility with Bank One Kentucky,
NA. The credit facility bears interest at prime plus a margin (ranging from 0%
to 1.0%, currently 1.0%) dependent upon total leverage and is secured by
substantially all assets and the stock of the Company's subsidiaries. Borrowings
are available equal to the greater of: a) a multiple of earnings before
interest, taxes, depreciation and amortization (as defined) or, b) an asset
based formula, primarily based on accounts receivable. Borrowings under the
facility may be used for working capital, capital expenditures, development and
growth of the business and other corporate purposes. The facility has an
expiration date of January 10, 2002.
As of December 31, 2000 approximately $6.3 million was outstanding on the line
of credit. The Company has retained certain assets and liabilities associated
with the discontinued operations, the liquidation of which, together with
disposition of the visiting nurse operations, is expected to reduce the
Company's bank borrowings to approximately $327,000. Accordingly, as of December
31, 2000, approximately $6 million of debt has been classified with net assets
from discontinued operations in the accompanying balance sheet.
The Company believes that this facility will be sufficient to fund its operating
needs for at least the next twelve months.
Management will continue to evaluate additional capital including possible debt
and equity investments in the Company to support a more rapid development of the
business than would be possible with internal funds.
Cash Flows and Financial Conditions
Key elements to the Consolidated Statements of Cash Flows for the nine-months
ended December 31, 2000 and 1999 were:
Net Change in Cash and Cash Equivalents 2000 1999
- --------------------------------------- -------------- ------------------
Continuing Operations
Provided by (used in)
Operating activities $ 2,898 $ (668)
Investing activities (1,144) (399)
Financing activities (418) (12,297)
-------------- -------------
1,336 (13,364)
Discontinued operations (603) 12,788
-------------- ------------
Net Change in Cash and Cash $ 733 $ (576)
============== =============
Equivalents
2000
Net cash provided by operating activities resulted principally from current
period income, net of changes in accounts receivable, accounts payable and
accrued expenses and changes in insurance funding. In December, the Company
issued a $2.4 million letter of credit in favor of its self-insurance plan
administrator, resulting in a refund of $2.1 million cash previously on deposit.
The increase in accounts receivable resulted from volume increases. Days sales
outstanding declined to 51 from 53 at March 31, 2000. Net cash used in investing
activities resulted principally from amounts invested in adult day health
services expansion activities (including approximately $330,000 used in the
acquisition of a building for a new adult day care center), and improvements in
information systems. Net cash used in financing activities resulted primarily
from lower borrowings under the Company's credit facility. Discontinued
operations used cash to reduce certain previously recorded liabilities to third
party payers and finance operating results.
1999
Net cash used by operating activities resulted principally from current period
income, net of changes in accounts receivable, accounts payable and accrued
expenses. The increase in prepaid expenses resulted from the timing of insurance
payments. The increase in accounts receivable resulted from volume increases.
Days sales outstanding declined to 60 from 62 at March 31, 1999. The decrease in
accounts payable and accrued liabilities resulted from a reduction in days
payables outstanding. Net cash used in investing activities resulted principally
from amounts invested in adult day health services expansion activities, and
improvements in information systems, plus the proceeds from the sale of a
building. Net cash used in financing activities resulted primarily from reduced
borrowings under the Company's credit facility. Discontinued operations provided
cash from operating results and a reduction in accounts receivable.
Health Care Reform
The health care industry has experienced, and is expected to continue to
experience, extensive and dynamic change. In addition to economic forces and
regulatory influences, continuing political debate is subjecting the health care
industry to significant reform. Health care reforms have been enacted as
discussed elsewhere in this document and proposals for additional changes are
continuously formulated by departments of the federal government, Congress, and
state legislatures.
Government officials can be expected to continue to review and assess
alternative health care delivery systems and payment methodologies. Changes in
the law or new interpretations of existing laws may have a dramatic effect on
the definition of permissible or impermissible activities, the relative cost of
doing business, and the methods and amounts of payments for medical care by both
governmental and other payers. Legislative changes to "balance the budget" and
slow the annual rate of growth of expenditures are expected to continue. Such
future changes may further impact reimbursement. There can be no assurance that
future legislation or regulatory changes will not have a material adverse effect
on the operations of the Company.
The Company cannot predict what additional government regulations may be enacted
in the future affecting its business or how existing or future laws and
regulations might be interpreted, or whether the Company will be able to comply
with such laws and regulations in its existing or future markets.
Refer to the sections on Reimbursement Changes and Cautionary Statements -
Forward Outlook and Risks in Part I, and the notes to the accompanying financial
statements and Management's Discussion and Analysis of Financial Condition and
Results of Operations all included in the Company's report on Form 10K for the
year ended March 31, 2000 for additional information.
Impact of Inflation
Management does not believe that inflation has had a material effect on income
during the past several years.
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
Derivative Instruments
The Company does not use derivative instruments.
Market Risk of Financial Instruments
The Company's primary market risk exposure with regard to financial instruments
is to changes in interest rates.
At December 31, 2000, a hypothetical 100 basis point increase in short-term
interest rates would result in a reduction of approximately $1,733 in annual
pre-tax earnings from continuing operations.
Commission File No. 1-9848
Part II - Other Information
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 11 Calculation of Earnings Per Share (attached)
Exhibit 27 Financial Data (electronic filing only)
(b) Form 8-K - None
ALMOST FAMILY, INC. AND SUBSIDIARIES
(FORMERLY CARETENDERS HEALTH CORP)
COMPUTATION OF EARNINGS PER SHARE
EXHIBIT 11
Three Months Ended Nine Months Ended
December 31, 2000 December 31, 2000
------------------------- --------------------------
BASIC 2000 1999 2000 1999
----------- ------------ ----------- -----------
Net income (loss) $ 665,574 $ 234,437 $ 1,460,362 $(4,484,597)
Weighted average outstanding shares during
the period 3,143,436 3,120,413 3,143,436 3,120,413
----------- ------------ ----------- -----------
Net income (loss) per share $0.21 $0.08 $0.46 $(1.44)
=========== ============ =========== ===========
DILUTED
Net income for diluted income per common share $ 665,574 $ 234,437 $ 1,460,362 $(4,484,597)
----------- ------------ ----------- -----------
Weighted average outstanding shares during
the period 3,143,436 3,120,413 3,143,436 3,120,413
Add-common equivalent shares representing
shares issuable upon exercise of dilutive
options and warrants 215,376 - 166,474 (a)
----------- ------------ ----------- -----------
3,356,562 3,120,413 3,307,660 3,120,413
----------- ------------ ----------- -----------
Net income (loss) per share $ 0.20 $ 0.08 $ 0.44 $ (1.44)
=========== ============ =========== ===========
(a) Omitted since effect is anti-dilutive
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.
Date: February 8, 2001
ALMOST FAMILY, INC.
BY /s/ William B. Yarmuth
------------------------
William B. Yarmuth,
Chairman of the Board, President
and Chief Executive Officer
BY /s/ C. Steven Guenthner
-------------------------
C. Steven Guenthner,
Senior Vice President and
Chief Financial Officer