VIA EDGAR
Ms. Mary Mast
Ms. Sasha Parikh
Securities and Exchange Commission
Division of Corporate Finance
This correspondence includes the pertinent excerpted pages of our draft Form
10-K/A as discussed in our telephone conference today. These pages have also
been faxed to you marked to show changes from our original Form 10K. The
document has not been subjected to all the quality assurance work that would
precede actual filing so there may be some typographical errors. That work will
take place Thursday and Friday November 10 and 11.
We appreciate your willingness to review these draft pages and share your
guidance with us. It is the Company's intent to file the Form 10-K/A, the
required 8K and our September Form 10Q all on Monday November 14.
We appreciate your consideration.
Sincerely,
C. Steven Guenthner
Senior Vice President
& Chief Financial Officer
Almost Family, Inc.
DRAFT
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
(Mark One)
/ X /ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2004
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 1-09848
ALMOST FAMILY, INC.
(Exact name of registrant as specified in its charter)
Delaware 06-1153720
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization) Identification No.)
organization)
9510 Ormsby Station Road, Suite 300 40223
(Address of principal executive offices) (Zip Code)
(502) 891-1000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Title of Each Class Name of Each Exchange on
Common Stock, par value $.10 per share Which Registered
Preferred Stock Purchase Rights NASDAQ SmallCapSystem
Indicate by check mark whether the Registrant 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 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 by check mark if disclosure of delinquent filers pursuant to Item 405
of regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. ______
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2).
Yes No x .
----------- -----------
The aggregate market value of Registrant's Common Stock held by non-affiliates
of the Registrant as of June 30, 2004 was approximately $14,597,000 (based on
the last sale price of a share of the common stock as of June 30, 2004 ($8.45),
as reported by the NASDAQ SmallCap System). As of March 28, 2005, 2,316,527
shares of the Registrant's Common Stock were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
The definitive proxy statement relating to the registrant's Annual Meeting of
Stockholders, to be held May 16, 2005, is incorporated by reference in Part III
to the extent described therein.
PART I
Amendment of Previous Financial Reports Related to Contingent Liability Matters
The Company's Form 10-K filings for the years ended December 31, 2004 and 2003
previously disclosed the following three items, all of which, from an accounting
perspective, are characterized as contingent liabilities in accordance with
Statement of Financial Accounting Standards No. 5 "Accounting for Contingent
Liabilities":
o in April 2003 the Chancery Court of Williamson County, Tennessee,
issued a ruling in favor of Franklin Associates L.P. ("Franklin"),
awarding damages against the Company in the amount of $984,970
o a Kentucky transportation broker which owes the Company
approximately $535,000 entered into bankruptcy proceedings in
the fourth quarter of 2002; and
o the expiration of applicable statutes of limitations on tax returns
related to the Company's 2000 fiscal year, in which it sold its product
operations and adopted discontinued operations accounting treatment for
its visiting nurse segment (later reversed), resulted in the recording
in discontinued operations in our 2003 financial statements of a
one-time reduction in estimated tax liabilities of approximately
$854,000.
The Company received a letter from the U.S. Securities and Exchange Commission
following the SEC staff's routine review of the Company's form 10-K for the year
ended December 31, 2004, which letter commented on, among other items, the
accounting treatment of these contingent liability matters. In addition, at the
same time, management entered into discussions with Ernst & Young LLP, the
Company's independent auditors for the financial statements for each of the
three years ended December 31, 2004, relating to the accounting treatment for
these litigation matters. Management believes there was a reasonable basis for
its original accounting (which was agreed to by Ernst & Young). Following
detailed discussions with the auditors, and with the concurrence of the auditors
and the SEC staff, the Company has amended the financial statements for the
following non-cash items in order to account for these items as set forth below.
Note that the lawsuit in question is still being aggressively appealed and the
receivable in question is still being pursued for collection:
o With respect to the Franklin litigation, provision of approximately
$1,154,000 (for which there is no related income tax benefit) has been
made as of April 2003 ($984,000 for award of damages) and as of
September 2003 ($170,000 for estimated post-judgment interest).
o With respect to the Kentucky transportation receivable, provision of
approximately $331,000 net of related income tax benefit has been made
as of November 2002 of an additional allowance for uncollectible
accounts for the Kentucky transportation receivable, and the provision
of approximately $66,000 net of related income tax benefit previously
recorded in 2004 has been reversed. Thus the net effect of this matter
is $266,000 net of related income tax benefit.
o The one-time reduction in estimated tax liabilities has been removed
from fiscal 2003 and treated as a reduction in estimated tax
liabilities as it was determined that the reserve that was reversed in
2003 should have been reversed in the fiscal year ended 2001 or
earlier. This has the effect of increasing beginning retained earnings
at January 1, 2002, in this amended December 31, 2004 Form 10-K/A
All related disclosures have been revised to give effect to the new accounting
treatment for these matters. In the event the Company is able to collect a
portion of the Kentucky receivable it would record a gain in the period in which
payment is received. In the event the Company prevails on appeal in the Franklin
litigation (and no further appeal is available), the Company would record a gain
in the period in which the Company prevails. For a more detailed discussion of
these contingencies, refer to pages __ - __herein.
The following table summarizes changes in reported net income and earnings per
share for each of the three years in the period ended December 31, 2004 as a
result of these changes:
(In thousands except for per share amounts)
2004 2003 2002
----------------- --------------- ------------------
Change in Net Income from:
Franklin litigation $ - $ (1,154) $ -
Kentucky transportation litigation 66 (331)
-
Reduction in income tax liabilities - (854) -
----------------- --------------- ------------------
Total $ 66 $ (2,008) $ (331)
================= =============== ==================
Change in Earnings Per Share:
Basic $ 0.03 $ (0.88) $ (0.14)
Diluted $ 0.03 $ (0.79) $ (0.12)
The Company's loan agreement provides that the provision of a loss for the above
litigation cases will be excluded from financial results for purposes of
calculating borrowing availability or financial covenant compliance.
ITEM 2. PROPERTIES
Our executive offices are located in Louisville, Kentucky in approximately
25,000 square feet of space leased from an unaffiliated party.
We have 67 real estate leases ranging from approximately 200 to 24,000 square
feet of space in their respective locations. See "Item 1. Business - Operating
Segments" and Note 9 to our audited consolidated financial statements. We
believe that our facilities are adequate to meet our current needs, and that
additional or substitute facilities will be available if needed.
ITEM 3. LEGAL PROCEEDINGS
From time to time, we are subject to claims and suits arising in the ordinary
course of our business, including claims for damages for personal injuries. In
our opinion the ultimate resolution of any of these pending claims and legal
proceedings will not have a material effect on our financial position or results
of operations.
Franklin Litigation
On January 26, 1994 Franklin Capital Associates L.P. (Franklin), 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 certain home health operations in February 1991. The
1994 suit alleged that 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 both Aetna parties 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 April 2000, Franklin re-filed its lawsuit. The second trial took place in
February 2003. In April 2003 the court issued a ruling in favor of the
plaintiffs awarding damages of $984,970. The Company believes the Court erred
both in its finding of liability and in its determination of the amount of
damages. The Company is seeking appellate review of the lower court decision. As
a part of the appeal, the Company was required to post cash of $1,154,241 (which
consists of $984,970 in damages and $169,721 of estimated post-judgment
interest) in an escrow account with the Tennessee Courts in lieu of a
supersedeas appeal bond until the appeal court issues a decision.
As described in "Amendment of Previous Financial Reports Related to Contingent
Liability Matters" above, the Company has recorded a litigation loss provision
of $1,154,241 on a restated basis in the year ended December 31, 2003.. The cash
will remain in escrow until the matter reaches its ultimate resolution.
Despite the recording of a litigation loss provision, based on the advice of
legal counsel, the Company believes it has strong grounds for appealing the
trial court's decision and it intends to vigorously pursue its appeal. The
Company can give no assurance that it will be successful in its appeal. The
appeals court heard oral arguments in the case in February 2005 but has given no
indication of when it will issue a ruling. Both the amount of the judgment and
the estimated post-judgment interest are subject to change depending upon the
outcome of the appeal process. In the event the Company prevails on appeal in
the Franklin litigation (and no further appeal is available), the Company would
record a gain in the period in which it prevails.
Kentucky Transportation Litigation Prior to July 1, 2002, the Commonwealth of
Kentucky managed its Medicaid transportation program internally. Effective July
1, 2002 the Commonwealth contracted with an independent broker (the Broker) for
the management of the program in the Louisville KY area. The Broker then
contracted with the Company, among others, for the provision of transportation
services to Medicaid beneficiaries. The Company's services pursuant to the
contract were limited to transportation of Medicaid beneficiaries who also
attended the Company's in-center adult day care programs. The Broker almost
immediately began to encounter significant financial difficulties and paid the
Company for only a small portion of the amounts due for services rendered. On
October 22, 2002, three of the Broker's other contracted providers filed a
motion with the US Bankruptcy Court to liquidate the Broker under Chapter 7 of
the Federal Bankruptcy Code. On November 25, 2002, the Broker voluntarily chose
to convert its bankruptcy status to a Chapter 11 voluntary reorganization. On
March 3, 2003, the Broker reconverted its case to a Chapter 7 liquidation
proceeding.
In May 2003, along with a group of other affected providers, the Company filed
suit against the Commonwealth in Franklin Circuit Court seeking payment directly
from the Commonwealth. The Commonwealth objected to the lawsuit on the basis of
sovereign immunity (since the group did not have a direct contract with the
Commonwealth) and filed a motion to dismiss the lawsuit. In July 2003, a hearing
on the motion to dismiss was held and at the judge's request written briefs were
filed before the judge would make a decision. In August 2003, the motion to
dismiss was granted and after discussion with legal counsel, an appeal of this
decision was made to the Kentucky Court of Appeals. On September 24, 2004 the
appeals court affirmed the lower court's decision. In its decision, the Court
indicated that the Company could pursue its claim at the Kentucky Board of
Claims; such a claim would be limited to $200,000 in damages.
On June 26, 2004 a lawsuit was filed on behalf of the bankruptcy estate against
the Commonwealth of Kentucky. The case alleges that the state misrepresented
material facts about the contract that it signed with the Broker. The suit
alleges that the Commonwealth intentionally under-funded the contract with the
bankrupt Broker. Unlike the group of affected providers in the Franklin Circuit
Court proceeding discussed above, the Broker did have a direct contract with the
Commonwealth.
As of December 31, 2004 and December 31, 2003, the Broker owed the Company
approximately $535,000.
As described in "Amendment of Previous Financial Reports Related to Contingent
Liability Matters" above, the Company has recorded a provision for uncollectible
accounts of $535,000 on a restated basis in the year ended December 31, 2002. In
the event the Company is able to collect a portion of the receivable it would
record a gain in the period in which payment is received.
The Company's loan agreement executed with its lender in March 2004 provides
that the provision for a loss of either or both of the above litigation cases
will be excluded from financial results for purposes of calculating borrowing
availability or financial covenant compliance.
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected financial information derived from the
consolidated financial statements of the Company for the periods and at the
dates indicated. The information is qualified in its entirety by and should be
read in conjunction with the consolidated financial statements and related notes
included elsewhere in this and prior year Form 10-Ks.
(AS RESTATED)
Year Ended Nine Months
Year Ended Year Ended Year Ended December 31 Ended December Year Ended
(Dollar amounts in 000's December 31, December 31, December 31, 2001 31, March 31,
except per share data) 2004 (1) 2003 (1) 2002 (2) (unaudited) 2001 2001
Results of operations data:
Net revenues $ 86,827 $ 83,260 $ 80,952 $ 74,456 $ 55,937 $ 71,144
Income (loss) from:
Continuing operations $ 1,596 $ 270 $ 1,335 $ 2,759 $ 2,230 $ 854
Discontinued operations (339) (159) (321) 1,001 1,098 426
---------------------------------------------------------------------------------------------------
Net income (loss) $ 1,257 $ 111 $ 1,014 $ 3,761 $ 3,328 $ 1,278
===================================================================================================
Per share:
Basic:
Number of shares
(in 000's) 2,303 2,295 2,416 2,646 2,478 3,146
Income (loss) from:
Continuing operations $ 0.69 $ 0.12 $ 0.55 $ 1.04 $ 0.90 $ 0.27
Discontinued operations (0.15) (0.07) (0.13) 0.38 0.44 0.13
---------------------------------------------------------------------------------------------------
Net income (loss) $ 0.55 $ 0.05 $ 0.42 $ 1.42 $ 1.34 $ 0.40
===================================================================================================
Diluted:
Number of shares
(in 000's) 2,567 2,539 2,720 3,077 2,909 3,307
Income (loss) from:
Continuing operations $ 0.62 $ 0.11 $ 0.49 $ 0.90 $ 0.77 $ 0.26
Discontinued operations (0.13) (0.06) (0.12) 0.32 0.37 0.12
---------------------------------------------------------------------------------------------------
Net income (loss) $ 0.49 $ 0. 04 $ 0.37 $ 1.22 $ 1.14 $ 0.38
===================================================================================================
December December December December March
Balance sheet data as of: 2004 2003 2002 2001 2001
-------------- --------------- -------------- -----------------------------
Working capital $ 6,253 $ 9,738 $ 10,989 $ 13,435 $ 10,595
Total assets 27,796 31,769 36,469 34,103 33,984
Long-term liabilities 6,988 13,848 17,071 14,847 13,482
Total liabilities 15,649 20,991 25,842 22,867 25,872
Stockholders' equity 12,147 10,778 10,627 11,235 8,112
(1) Where appropriate, amounts for these periods have been restated and
reclassified as discussed in Note 1 to the financial statements
MD&A
Amendment of Previous Financial Reports Related to Contingent Liability Matters
Our Form 10-K filings for the years ended December 31, 2004 and 2003 previously
disclosed the following three items, all of which, from an accounting
perspective, are characterized as contingent liabilities in accordance with
Statement of Financial Accounting Standards No. 5 "Accounting for Contingent
Liabilities":
o in April 2003 the Chancery Court of Williamson County, Tennessee,
issued a ruling in favor of Franklin Associates L.P. ("Franklin"),
awarding damages against us in the amount of $984,970
o a Kentucky transportation broker which owes us approximately $535,000
entered into bankruptcy proceedings in the fourth quarter of 2002; and
o the expiration of applicable statutes of limitations on tax returns
related to our 2000 fiscal year, in which we sold our product
operations and adopted discontinued operations accounting treatment for
our visiting nurse segment (later reversed), resulted in the recording
in discontinued operations in our 2003 financial statements of a
one-time reduction in estimated tax liabilities of approximately
$854,000.
We received a letter from the U.S. Securities and Exchange Commission following
the SEC staff's routine review of our form 10-K for the year ended December 31,
2004, which letter commented on, among other items, our accounting treatment of
these contingent liability matters. In addition, at the same time, we entered
into discussions with Ernst & Young LLP, our independent auditors for the
financial statements for each of the three years ended December 31, 2004,
relating to the accounting treatment for these litigation matters. We believe
there was a reasonable basis for their original accounting (which was agreed to
by Ernst & Young). Following our detailed discussions with our auditors, and
with the concurrence of the auditors and the SEC staff, we have amended the
financial statements for the following non-cash items in order to account for
these items as set forth below. Note that the lawsuit in question is still being
aggressively appealed and the receivable in question is still being pursued for
collection:
o With respect to the Franklin litigation, provision of
approximately $1,154,000 (for which there is no related income
tax benefit) has been made as of April 2003 ($984,000 for award of
damages) and as of September 2003 ($170,000 for estimated post-judgment
interest). Note that the Company is aggressively pursuing its appeal of
the trial court's ruling.
o With respect to the Kentucky transportation receivable, provision of
approximately $331,000 net of related income tax benefit has been made
as of November 2002 of an additional allowance for uncollectible
accounts for the Kentucky transportation receivable, and the provision
of approximately $66,000 net of related income tax benefit previously
recorded in 2004 has been reversed. Thus the net effect of this matter
is $266,000 net of related income tax benefit.
o The one-time reduction in estimated tax liabilities has been removed
from fiscal 2003 and treated as a reduction in estimated tax
liabilities as it was determined that the reserve that was reversed in
2003 should have been reversed in the fiscal year ended 2001 or
earlier. This has the effect of increasing beginning retained earnings
at January 1, 2002, in this amended December 31, 2004 Form 10-K/A
All related disclosures have been revised to give effect to the new accounting
treatment for these matters. In the event the we are able to collect a portion
of the Kentucky receivable we would record a gain in the period in which payment
is received. In the event we prevail on appeal in the Franklin litigation (and
no further appeal is available), we would record a gain in the period in which
we prevail. For a more detailed discussion of these contingencies, refer to
pages __ - __herein.
The following table summarizes changes in reported net income and earnings per
share for each of the three years in the period ended December 31, 2004 as a
result of these changes:
(In thousands except for per share amounts)
2004 2003 2002
----------------- --------------- ------------------
Change in Net Income from:
Franklin litigation $ - $ (1,154) $ -
Kentucky transportation litigation 66 (331)
-
Reduction in income tax liabilities - (854) -
================= =============== ==================
Total $ 66 $ (2,008) $ (331)
================= =============== ==================
Change in Earnings Per Share:
Basic $ 0.03 $ (0.88) $ (0.14)
Diluted $ 0.03 $ (0.79) $ (0.12)
Our loan agreement provides that the provision for loss of the above litigation
cases will be excluded from financial results for purposes of calculating
borrowing availability or financial covenant compliance.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ALMOST FAMILY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(AS RESTATED SEE NOTE 1)
Year Ended Year Ended Year Ended
December 31, December 31, December 31,
2004 (1) 2003 (1) 2002 (1)
--------------------------------------------------------
Net revenues $ 86,827,180 $ 83,259,743 $ 80,952,450
Cost of services 73,097,205 68,857,816 65,470,647
General and administrative expenses 6,454,289 7,487,829 7,604,921
Cost of restatement - - 815,794
Depreciation and amortization expense 2,459,463 2,411,886 2,004,227
Provision for uncollectible accounts 1,704,105 1,562,212 2,141,258
---------------- ------------------- -----------------
Income from continuing operations before other
income (expense) and income taxes 3,112,118 2,940,000 2,915,603
Other income (expense):
Interest expense (447,038) (658,867) (788,915)
Litigation loss - (1,154,241) -
Facility losses (43,363) (104,489) -
---------------- ------------------- -----------------
Income from continuing operations before income taxes 2,621,718 1,022,403 2,126,688
Provision for income taxes 1,026,101 752,920 791,805
---------------- ------------------- -----------------
Income from continuing operations 1,595,617 269,863 1,334,883
Income (loss) from discontinued operations, net of tax (338,641) (158,673) (321,050)
---------------- ------------------- -----------------
Net income $ 1,256,975 $ 111,190 $ 1,013,833
================ =================== =================
Per share amounts-Basic:
Average shares outstanding 2,303,267 2,294,771 2,416,224
Income from continuing operations $ 0.69 $ 0.12 $ 0.55
Income (loss) from discontinued operations (0.15) (0.07) (0.13)
---------------- ------------------- -----------------
Net income $ 0.55 $ 0.05 $ 0.42
================ =================== =================
Per share amounts-Diluted:
Average shares outstanding 2,567,468 2,538,871 2,719,809
Income from continuing operations $ 0.62 $ 0.11 $ 0.49
Income (loss) from discontinued operations (0.13) (0.06) (0.12)
---------------- ------------------- -----------------
Net income $ 0.49 $ 0.04 $ 0.37
================ =================== =================
(1) Where appropriate, amounts for these periods have been restated as discussed
in Note 1 to the financial statements.
The accompanying notes to consolidated financial statements are an
integral part of these financial statements.
ALMOST FAMILY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(AS RESTATED SEE NOTE 1)
ASSETS December 31, December 31,
------
2004 (1) 2003 (1)
------------------------------------------
CURRENT ASSETS:
Cash and cash equivalents $ 423,031 $ 895,743
Accounts receivable - net 12,362,682 14,147,338
Prepaid expenses and other current assets 654,650 736,255
Deferred tax assets 1,352,000 1,066,911
Net assets of discontinued operations 122,503 34,193
------------------- -------------------
TOTAL CURRENT ASSETS 14,914,866 16,880,440
CASH HELD IN ESCROW 1,154,241 1,154,241
PROPERTY AND EQUIPMENT - NET 5,106,628 7,223,989
GOODWILL 6,449,310 6,335,783
OTHER ASSETS 171,045 174,739
------------------- -------------------
$ 27,796,090 $ 30,614,951
=================== ===================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 3,260,747 $ 2,292,995
Accrued liabilities 4,823,157 4,624,012
Current portion - capital leases and notes payable 577,785 225,578
------------------ ------------------
8,661,689 7,142,585
------------------ ------------------
LONG-TERM LIABILITIES:
Revolving credit facility 3,769,575 10,891,423
Capital leases 1,312,750 1,085,178
Notes payable - 300,000
Deferred tax liabilities 225,690 61,328
Other liabilities 1,679,676 1,510,273
------------------ ------------------
TOTAL LONG-TERM LIABILITIES 6,987,691 13,848,202
------------------ ------------------
TOTAL LIABILITIES 15,649,380 20,990,787
------------------ ------------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, par value $0.10; authorized 10,000,000 shares;
3,414,874 and 3,394,874 issued, respectively 341,490 339,490
Treasury stock, at cost, 1,096,783 shares (7,772,048) (7,772,048)
Additional paid-in capital 26,548,634 26,439,304
Accumulated deficit (6,971,366) (8,228,341)
------------------ ------------------
TOTAL STOCKHOLDERS' EQUITY 12,146,710 10,778,405
------------------ ------------------
$ 27,796,090 $ 31,769,192
================== ==================
(1) Where appropriate, amounts for these periods have been restated as discussed
in Note 1 to the financial statements.
The accompanying notes to consolidated financial statements are an
integral part of these financial statements.
ALMOST FAMILY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(AS RESTATED SEE NOTE 1)
Additional Total
Common Stock Treasury Stock Paid-in Accumulated Stockholders'
-------------------------- ---------------------------
Shares Amount Shares Amount Capital Deficit Equity
------------- ------------- ---------- -------------- --------------- --------------------------
Balance, December 31, 2001 (1) 3,317,874 $ 331,790 837,312 $ (5,783,597) $ 26,040,728 $ (9,353,364) $ 11,235,557
Options Exercised 51,800 5,180 136,927 142,107
Repurchased Shares 250,071 (1,922,555) (1,922,555)
Tax benefit from exercise of
non-qualified stock options 158,208 158,208
Net Income 1,013,833 1,013,833
------------- ------------- ---------- -------------- --------------- ------------ -------------
Balance, December 31, 2002 (1) 3,369,674 $ 336,970 1,087,383 $ (7,706,152) $ 26,335,863 $ (8,339,531 $ 10,627,150
Options Exercised 25,200 2,520 73,630 76,150
Repurchased Shares 9,400 (65,896) (65,896)
Tax benefit from exercise of 29,811
non-qualified stock options 29,811
Net Income 111,190 111,190
------------- ------------- ---------- -------------- --------------- -------------- ----------
Balance, December 31, 2003 (1) 3,394,874 $ 339,490 1,096,783 $ (7,772,048) $ 26,439,304 $ (8,228,341) $10,778,405
Options Exercised 20,000 2,000 66,750 68,750
Tax benefit from exercise of
non-qualified stock options 42,580 42,580
Net Income 1,256,975 1,256,975
------------- ------------- ---------- -------------- --------------- ------------- ----------
Balance, December 31, 2004 (1) 3,414,874 $ 341,490 1,096,783 $ (7,772,048) $ 26,548,634 $ (6,971,366) $ 12,146,710
============= ============= ========== ============== =============== ============= ============
(1) Where appropriate, amounts for these periods have been restated as discussed
in Note 1 to the financial statements.
The accompanying notes to consolidated financial statements are an
integral part of these financial statements.
ALMOST FAMILY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(AS RESTATED SEE NOTE 1)
Year Ended Year Ended Year Ended
December 31, December 31, December 31,
2004 2003 2002
---------------- ----------------- ----------------
Cash flows from operating activities:
Net income $ 1,256,975 $ 111,190 $ 1,013,833
Less income (loss) from discontinued operations (338,641) (158,673) (321,050)
---------------- ----------------- ----------------
Income from continuing operations 1,595,616 269,863 1,334,883
Adjustments to reconcile income from continuing operations to
net cash provided by /(used in)operating activities:
Depreciation and amortization 2,459,463 2,411,886 2,004,227
Provision for uncollectible accounts 1,704,105 1,562,212 2,141,258
Litigation loss accrued - 1,154,241 -
Loss on sale of assets 43,363 104,489 -
Deferred income taxes (120,727) 806,557 (592,273)
---------------- ----------------- ----------------
5,681,820 6,309,248 4,888,095
Change in certain net assets, net of the effects of acquisitions:
(Increase) decrease in:
Accounts receivable 80,551 84,359 (462,839)
Prepaid expenses and other current assets 81,607 (270,883) 317,299
Other assets 3,694 799,127 214,725
Increase (decrease) in:
Accounts payable and accrued expenses 1,029,056 (199,957) (726,206)
Other liabilities 33,145 (789,900) 75,886
---------------- ----------------- ----------------
Net cash provided by/(used in) operating activities 6,909,873 5,931,904 4,306,960
---------------- ----------------- ----------------
Cash flows from investing activities:
Cash held in escrow - (1,154,241) -
Capital expenditures (560,017) (1,664,109) (2,523,028)
Cash received from sale of assets 1,047,749 685,992 -
Acquisitions, net of cash acquired (113,527) - (2,949,577)
---------------- ----------------- ----------------
Net cash provided by/(used in) investing activities 374,205 (2,132,358) (5,472,605)
---------------- ----------------- ----------------
Cash flows from financing activities:
Net revolving credit facility borrowings (repayments) (7,121,848) (3,590,814) 1,895,705
Repurchase of common shares - (65,896)
(1,922,555)
Proceeds from stock option exercises 68,750 76,150 142,107
Principal payments on capital leases and notes payable (276,740) (211,843) (470,771)
---------------- ----------------- ----------------
Net cash used in financing activities (7,329,838) (3,792,403) (355,514)
---------------- ----------------- ----------------
Net cash used in discontinued operations (426,952) (81,536) (287,595)
---------------- ----------------- ----------------
Net decrease in cash and cash equivalents (472,712) (74,391) (954,607)
Cash and cash equivalents at beginning of period 895,743 970,134 1,924,741
---------------- ----------------- ----------------
Cash and cash equivalents at end of period $ 423,031 $ 895,743 $ 970,134
================ ================= ================
Supplemental disclosures of cash flow information:
Cash payment of interest, net of amounts capitalized $ 517,000 $ 703,000 $ 822,000
Cash payment of taxes $ 993,000 $ 42,000 $ 465,000
Summary of non-cash investing activities:
Capital expenditures financed under capital leases $ 556,520 $ 392,012 $ 373,833
Acquisition note payable $ - $ - $ 300,000
(1) Where appropriate, amounts for these periods have been restated as discussed
in Note 1 to the financial statements.
The accompanying notes to consolidated financial statements are an
integral part of these financial statements.
ALMOST FAMILY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AS RESTATED SEE NOTE 1)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF CONSOLIDATION AND DESCRIPTION OF BUSINESS
The consolidated financial statements include the accounts of Almost Family,
Inc. (a Delaware corporation) and its wholly-owned subsidiaries (collectively
"Almost Family" or the "Company"). The Company has operations in Alabama,
Connecticut, Florida, Indiana, Kentucky, Maryland, Massachusetts, and Ohio. All
material intercompany transactions and accounts have been eliminated in
consolidation.
AMENDMENT OF PREVIOUS FINANCIAL REPORTS RELATED TO CONTINGENT LIABILITY MATTERS
The Company's Form 10-K filings for the years ended December 31, 2004 and 2003
previously disclosed the following three items, all of which, from an accounting
perspective, are characterized as contingent liabilities in accordance with
Statement of Financial Accounting Standards No. 5 "Accounting for Contingent
Liabilities":
o in April 2003 the Chancery Court of Williamson County, Tennessee,
issued a ruling in favor of Franklin Associates L.P. ("Franklin"),
awarding damages against the Company in the amount of $984,970
o a Kentucky transportation broker which owes the Company approximately
$535,000 entered into bankruptcy proceedings in the fourth quarter of
2002; and
o the expiration of applicable statutes of limitations on tax returns
related to the Company's 2000 fiscal year, in which it sold its product
operations and adopted discontinued operations accounting treatment for
its visiting nurse segment (later reversed), resulted in the recording
in discontinued operations in our 2003 financial statements of a
one-time reduction in estimated tax liabilities of approximately
$854,000.
The Company received a letter from the U.S. Securities and Exchange Commission
following the SEC staff's routine review of the Company's form 10-K for the year
ended December 31, 2004, which letter commented on, among other items, the
accounting treatment of these contingent liability matters. In addition, at the
same time, management entered into discussions with Ernst & Young LLP, the
Company's independent auditors for the financial statements for each of the
three years ended December 31, 2004, relating to the accounting treatment for
these litigation matters. Management believes there was a reasonable basis for
its original accounting (which was agreed to by Ernst & Young). Following
detailed discussions with the auditors, and with the concurrence of the auditors
and the SEC staff, the Company has amended the financial statements for the
following non-cash items in order to account for these items as set forth below.
Note that the lawsuit in question is still being aggressively appealed and the
receivable in question is still being pursued for collection:
o With respect to the Franklin litigation, provision of approximately
$1,154,000 (for which there is no related income tax benefit) has been
made as of April 2003 ($984,000 for award of damages) and as of
September 2003 ($170,000 for estimated post-judgment interest).
o With respect to the Kentucky transportation receivable, provision of
approximately $331,000 net of related income tax benefit has been made
as of November 2002 of an additional allowance for uncollectible
accounts for the Kentucky transportation receivable, and the provision
of approximately $66,000 net of related income tax benefit previously
recorded in 2004 has been reversed. Thus the net effect of this matter
is $266,000 net of related income tax benefit.
o The one-time reduction in estimated tax liabilities has been removed
from fiscal 2003 and treated as a reduction in estimated tax
liabilities as it was determined that the reserve that was reversed in
2003 should have been reversed in the fiscal year ended 2001 or
earlier. This has the effect of increasing beginning retained earnings
at January 1, 2002, in this amended December 31, 2004 Form 10-K/A
All related disclosures have been revised to give effect to the new accounting
treatment for these matters. In the event the Company is able to collect a
portion of the Kentucky receivable it would record a gain in the period in which
payment is received. In the event the Company prevails on appeal in the Franklin
litigation (and no further appeal is available), the Company would record a gain
in the period in which the Company prevails. For a more detailed discussion of
these contingencies, refer to pages __ - __herein.
The following table summarizes changes in reported net income and earnings per
share for each of the three years in the period ended December 31, 2004 as a
result of these changes:
(In thousands except for per share amounts)
2004 2003 2002
----------------- --------------- ------------------
Change in Net Income from:
Franklin litigation $ - $ (1,154) $ -
Kentucky transportation litigation 66 (331)
-
Reduction in income tax liabilities - (854) -
================= =============== ==================
Total $ 66 $ (2,008) $ (331)
================= =============== ==================
Change in Earnings Per Share:
Basic $ 0.03 $ (0.88) $ (0.14)
Diluted $ 0.03 $ (0.79) $ (0.12)
The Company's loan agreement provides that the provision of a loss for the above
litigation cases will be excluded from financial results for purposes of
calculating borrowing availability or financial covenant compliance.
NOTE 6 - INCOME TAXES
The Company recognizes deferred tax assets and liabilities for the expected
future tax consequences of events that have been included in the financial
statements or tax returns. Under this method, deferred tax assets and
liabilities are determined based on the difference between the Company's book
and tax bases of assets and liabilities and tax carryforwards using enacted tax
rates in effect for the year in which the differences are expected to reverse.
The principal tax carryforwards and temporary differences were as follows:
(Restated)
December 31, 2004 December 31, 2003
--------------------- -------------------
Deferred tax assets
Nondeductible reserves and
allowances $ 654,000 $ 374,000
Intangibles 955,000 1,214,000
Insurance accruals 744,000 718,000
Net operating loss carryforwards 725,000 838,000
--------------------- -------------------
3,078,000 3,144,000
Valuation allowance (557,000) (639,000)
--------------------- -------------------
2,521,000 2,505,000
Deferred tax liabilities
Accelerated depreciation (1,395,000) (1,500,000)
--------------------- -------------------
Net deferred tax assets $ 1,126,000 $ 1,005,000
===================== ===================
Deferred tax assets (liabilities) are reflected in the accompanying balance
sheets as:
Current $ 1,352,000 $ 1,067,000
Long-term (226,000) (62,000)
--------------------- -------------------
Net deferred tax assets $ 1,126,000 $ 1,005,000
===================== ===================
The Company has state and local net operating loss carryforwards of
approximately $17.9 million which expire on various dates through 2016.
Provision (benefit) for income taxes consists of the following:
(Restated)
Year Ended Year Ended Year Ended
December 31, 2004 December 31, 2003 December 31, 2002
-------------------- ------------------- ------------------
Federal - current $ 1,079,000 $ 29,000 $ (27,000)
State and local - current 179,000 22,000 43,000
Deferred (241,000) 702,000 776,000
-------------------- ------------------- ------------------
$ 1,017,000 $ 753,000 $ 792,000
==================== =================== ==================
Shown in the accompanying statements of income as:
Continuing operations $ 1,017,000 $ 753,000 $ 792,000
Discontinued operations 30,000 (956,000) (207,000)
-------------------- ------------------- ------------------
$ 1,047,000 $ (203,000) $ 585,000
==================== =================== ==================
A reconciliation of the statutory to the effective rate of the Company (for
continuing operations only) is as follows:
Year Ended December Year Ended December Year Ended
31, 2004 31, 2003 December 31, 2002
----------------------- ---------------------- -----------------------
Tax provision using statutory rate 34.0% 34.0 %
34.0 %
Valuation allowance (0.5%) (2.7%)
(0.8%)
State and local taxes, net of Federal benefit 5.0% 4.0 %
(0.6%)
Other, net 0.7% 2.1 %
2.0 %
----------------------- ---------------------- -----------------------
Tax provision for continuing operations 39.2% 37.4 %
34.6 %
======================= ====================== =======================
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 in individual tax
locales and expectations for the future. The Company's ability to generate the
expected amounts of taxable income from future operations to realize its
recorded net deferred tax assets is dependent upon general economic conditions,
competitive pressures on revenues and margins and legislation and regulation at
all levels of government. There can be no assurances that the Company will meet
its expectations of future taxable income. However, management has considered
the above factors in reaching its conclusion that it is more likely than not
that future taxable income will be sufficient to realize the net deferred tax
assets as of December 31, 2004.
During the year ended December 31, 2004, 2003 and 2002, based on changes in
facts and circumstances, favorable changes occurred in the Company's
expectations with regard to the generation of future taxable income in certain
tax jurisdictions. Accordingly, the state and local tax provision for these
periods include a reduction of previously recorded valuation allowances of
approximately $21,000, $96,000 and $73,000, respectively.
During the year ended December 31, 2003, the Company recorded a provision for
litigation loss in the Franklin litigation case. The Company will receive no tax
deduction for this loss and accordingly, this loss has been excluded from income
for purposes of income tax calculations and the above disclosures.
NOTE 9 - COMMITMENTS AND CONTINGENCIES (AS RESTATED)
Operating Leases
The Company leases certain real estate, office space, vehicles and equipment
under non-cancelable operating leases expiring at various dates through 2010 and
which contain various renewal and escalation clauses. Rent expense amounted to
approximately $3,499,264, $3,836,727 and $4,094,982 for years ended December 31,
2004, 2003 and 2002. At December 31, 2004 the minimum rental payments under
these leases were as follows:
2005 $ 2,905,911
2006 2,284,834
2007 1,862,332
2008 1,554,107
2009 940,762
Thereafter 988,830
------------------
$ 10,536,766
==================
Legal Proceedings
The Company is currently, and from time to time, 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 Litigation (AS RESTATED)
On January 26, 1994 Franklin Capital Associates L.P. (Franklin), 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 certain home health operations in February 1991. The
1994 suit alleged that 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 both Aetna parties 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 April 2000, Franklin re-filed its lawsuit. The second trial took place in
February 2003. In April 2003 the court issued a ruling in favor of the
plaintiffs awarding damages of $984,970. The Company believes the Court erred
both in its finding of liability and in its determination of the amount of
damages. The Company is seeking appellate review of the lower court decision. As
a part of the appeal, the Company was required to post cash of $1,154,241 (which
consists of $984,970 in damages and $169,721 of estimated post-judgment
interest) in an escrow account with the Tennessee Courts in lieu of a
supersedeas appeal bond until the appeal court issues a decision.
As described in "Amendment of Previous Financial Reports Related to Contingent
Liability Matters" above, the Company has recorded a litigation loss provision
of $1,154,241 in the year ended December 31, 2003. The cash will remain in
escrow until the matter reaches its ultimate resolution.
Despite the recording of a litigation loss provision, based on the advice of
legal counsel, the Company believes it has strong grounds for appealing the
trial court's decision and it intends to vigorously pursue its appeal. The
Company can give no assurance that it will be successful in its appeal. The
appeals court heard oral arguments in the case in February 2005 but has given no
indication of when it will issue a ruling. Both the amount of the judgment and
the estimated post-judgment interest are subject to change depending upon the
outcome of the appeal process. In the event the Company prevails on appeal in
the Franklin litigation (and no further appeal is available), the Company would
record a gain in the period in which the Company prevails.
Kentucky Transportation Litigation (AS RESTATED)
Prior to July 1, 2002, the Commonwealth of Kentucky managed its Medicaid
transportation program internally. Effective July 1, 2002 the Commonwealth
contracted with an independent broker (the Broker) for the management of the
program in the Louisville KY area. The Broker then contracted with the Company,
among others, for the provision of transportation services to Medicaid
beneficiaries. The Company's services pursuant to the contract were limited to
transportation of Medicaid beneficiaries who also attended the Company's
in-center adult day care programs. The Broker almost immediately began to
encounter significant financial difficulties and paid the Company for only a
small portion of the amounts due for services rendered. On October 22, 2002,
three of the Broker's other contracted providers filed a motion with the US
Bankruptcy Court to liquidate the Broker under Chapter 7 of the Federal
Bankruptcy Code. On November 25, 2002, the Broker voluntarily chose to convert
its bankruptcy status to a Chapter 11 voluntary reorganization. On March 3,
2003, the Broker reconverted its case to a Chapter 7 liquidation proceeding.
In May 2003, along with a group of other affected providers, the Company filed
suit against the Commonwealth in Franklin Circuit Court seeking payment directly
from the Commonwealth. The Commonwealth objected to the lawsuit on the basis of
sovereign immunity (since the group did not have a direct contract with the
Commonwealth) and filed a motion to dismiss the lawsuit. In July 2003, a hearing
on the motion to dismiss was held and at the judge's request written briefs were
filed before the judge would make a decision. In August 2003, the motion to
dismiss was granted and after discussion with legal counsel, an appeal of this
decision was made to the Kentucky Court of Appeals. On September 24, 2004 the
appeals court affirmed the lower court's decision. In its decision, the Court
indicated that the Company could pursue its claim at the Kentucky Board of
Claims; such a claim would be limited to $200,000 in damages.
On June 26, 2004 a lawsuit was filed on behalf of the bankruptcy estate against
the Commonwealth of Kentucky. The case alleges that the state misrepresented
material facts about the contract that it signed with the Broker. The suit
alleges that the Commonwealth intentionally under-funded the contract with the
bankrupt Broker. Unlike the group of affected providers in the Franklin Circuit
Court proceeding discussed above, the Broker did have a direct contract with the
Commonwealth.
As of December 31, 2004 and December 31, 2003, the Broker owed the Company
approximately $535,000, which amount is included in accounts receivable on the
accompanying balance sheets.
As described in "Amendment of Previous Financial Reports Related to Contingent
Liability Matters" above, the Company has recorded a provision for uncollectible
accounts of $535,000 in the year ended December 31, 2002. In the event the
Company is able to collect a portion of the Kentucky receivable it would record
a gain in the period in which payment is received.
The Company's loan agreement executed with its lender in March 2004 provides
that the provision for a loss of either or both of the above litigation cases
will be excluded from financial results for purposes of calculating borrowing
availability or financial covenant compliance.
NOTE 11 - SEGMENT DATA (AS RESTATED)
The Company operates in two service line groups: Home Health Care and Adult Day
Care (ADC). The Home Health Care group consists of two reportable segments,
Visiting Nurse (VN) and Personal Care (PC) while the ADC service line is also a
separate reportable segment. Reportable segments have been identified based upon
how management has organized the business by services provided to customers and
the criteria in SFAS 131, "Disclosures about Segments of an Enterprise and
Related Information."
The Company's VN segment provides skilled medical services in patients' homes
largely to enable recipients to reduce or avoid periods of hospitalization
and/or nursing home care. VN Medicare revenues are generated on a per episode
basis rather than a fee per visit or day of care. Approximately 91% of the VN
segment revenues are generated from the Medicare program while the balance is
generated from Medicaid and private insurance programs.
The Company's PC segment services are also provided in patients' homes. These
services (generally provided by paraprofessional staff such as home health
aides) are generally of a custodial rather than skilled nature. PC revenues are
generated on an hourly basis. Approximately 65% of the PC segment revenues are
generated from Medicaid and other government programs while the balance is
generated from insurance programs and private pay patients.
The Company's ADC segment provides adult day care to disabled or frail adults
who require some care or supervision, but who do not require intensive medical
attention and/or wish not to live in a nursing home or other inpatient
institution. These services are provided in the Company's facilities. ADC
revenues are usually generated on a per day of care basis. Approximately 85% of
the ADC segment revenues are generated from Medicaid and other government
programs while the balance is generated from insurance programs and private pay
patients.
Certain general and administrative expenses incurred at the corporate level have
not been allocated to the segments. The Company has service locations in
Florida, Kentucky, Ohio, Maryland, Connecticut, Massachusetts, Indiana and
Alabama (in order of revenue significance).
The presentation of the Company's operations in three segments differs from its
previous reporting of two segments due to a reorganization of the way in which
the Company manages its business and in the way in which information is
reported, both of which resulted from refinements in the Company's business plan
adopted in early 2004. Segment data for previous periods have been restated to
conform to the new reporting structure.
(AS RESTATED)
Year Ended Year Ended Year Ended
December 31, 2004 December 31, 2003 December 31, 2002
- ----------------------------------------- ------------------- --- ------------------ --- -------------------
Net revenues
Visiting nurses $ 32,227,614 $ 29,375,519 $ 28,799,296
Personal care 33,542,824 32,266,965 29,928,685
Adult day health services 21,056,742 21,617,259 22,224,469
------------------- ------------------ -------------------
$ 86,827,180 $ 83,259,742 $ 80,952,450
=================== ================== ===================
Operating income (loss)
Visiting nurses $ 4,671,221 $ 4,281,189 $ 4,996,141
Personal care 3,036,043 3,786,610 3,596,130
Adult day health services 1,193,575 1,067,178 1,199,608
Corporate/Unallocated (5,788,721) (6,194,977) (6,876,276)
------------------- ------------------ -------------------
$ 3,112,118 $ 2,940,000 $ 2,915,603
=================== ================== ===================
Identifiable assets
Visiting nurses $ 4,340,804 $ 3,643,137 $ 7,485,349
Personal care 9,071,086 11,173,701 10,006,128
Adult day health services 6,018,087 7,377,285 7,862,458
Corporate/Unallocated 8,366,113 9,575,069 9,669,005
------------------- ------------------ -------------------
$ 27,796,090 $ 31,769,192 $ 35,022,940
=================== ================== ===================
Identifiable liabilities
Visiting nurses $ 1,994,746 $ 1,169,886 $ 1,516,395
Personal care 2,900,642 972,131 1,569,330
Adult day health services 4,174,775 12,702,934 15,896,736
Corporate/Unallocated 6,579,217 6,145,836 5,413,329
------------------- ------------------ -------------------
$ 15,649,380 $ 20,990,787 $ 24,395,790
=================== ================== ===================
Capital expenditures
Visiting nurses $ 68,517 $ 500,323 $ 514,315
Personal care 5,615 377,042 74,092
Adult day health services 184,043 435,680 222,255
Corporate/Unallocated 301,842 351,064 1,712,366
------------------- ------------------ -------------------
$ 560,017 $ 1,664,109 $ 2,523,028
=================== ================== ===================
Depreciation and amortization
Visiting nurses $ 842,389 $ 860,478 $ 884,608
Personal care 346,956 257,668 156,253
Adult day health services 1,091,003 946,737 758,241
Corporate/Unallocated 179,116 347,004 205,125
------------------- ------------------ -------------------
$ 2,459,463 $ 2,411,886 $ 2,004,227
=================== ================== ===================
NOTE 12 - QUARTERLY FINANCIAL DATA (AS RESTATED)-- (UNAUDITED)
Summarized quarterly financial data for the years ended December 31, 2004 and
2003 are as follows (in thousands except per share data):
(AS RESTATED)
Year Ended December 31, 2004 Year Ended December 31, 2003
-------------------------------------------------- ----------------------------------------------------
Dec. 31, Sept. 30, June 30, March 31, Dec. 31, Sept.30 June 30, March 31,
2004 2004 2004 2004 2003 2003 2003 2003
-------------------------------------------------- ----------------------------------------------------
Net Revenues $ 22,179 $ 21,478 $ 21,702 $ 21,468 $ 21,051 $ 20,712 $ 20,883 $ 20,614
Gross Profit 3,262 3,532 3,504 3,431 3,513 3,484 3,868 3,536
Income from
continuing 413 412 428 342 318 135 (493) 310
operations
Income from discontinued
operations (256) (7) (34) (41) (63) (21) (3) (71)
Net income 157 405 394 301 255 114 (496) 239
Income (loss)
from
continuing operations
Basic $ 0.18 $ 0.18 $ 0.19 $ 0.15 $ 0.14 $ 0.06 $ (0.21) $ 0.13
Diluted $ 0.16 $ 0.16 $ 0.17 $ 0.13 $ 0.13 $ 0.05 $ (0.19) $ 0.12
Income (loss)
from
discontinued operations
Basic $ (0.11) $ - $ (0.01) $ (0.02) $ (0.03) $ (0.01) $ - $ (0.03)
Diluted $ (0.10) $ - $ (0.01) $ (0.02) $ (0.02) $ (0.01) $ - $ (0.03)
Net income (loss)
per share
Basic $ 0.07 $ 0.18 $ 0.17 $ 0.13 $ 0.11 $ 0.05 $ (0.22) $ 0.10
Diluted $ 0.06 $ 0.16 $ 0.15 $ 0.12 $ 0.10 $ 0.04 $ (0.20) $ 0.09
Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders
Almost Family, Inc.
We have audited the accompanying consolidated balance sheets of Almost Family,
Inc. and subsidiaries as of December 31, 2004 and 2003, and the related
consolidated statements of income, shareholders' equity, and cash flows for each
of the three years in the period ended December 31, 2004. Our audits also
included the financial statement schedule listed in the index at Item 15(a).
These financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. We were not engaged to perform an
audit of the Company's internal control over financial reporting. Our audits
included consideration of internal control over financial reporting as a basis
for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the
Company's internal control over financial reporting. Accordingly, we express no
such opinion. An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Almost Family,
Inc. and subsidiaries at December 31, 2004 and 2003, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended December 31, 2004, in conformity with U.S. generally accepted
accounting principles. Also, in our opinion, the related financial statement
schedule, when considered in relation to the basic financial statements taken as
a whole, presents fairly in all material respects the information set forth
therein.
As discussed in Note 1 to the consolidated financial statements, the Company has
restated previously issued 2002, 2003 and 2004 consolidated financial
statements.
March 18, 2005,
except for Note 13, as to which the date is
March 30, 2005 and
except for Note 1, as to which the date is November 11, 2005.
ALMOST FAMILY, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
SCHEDULE II
(AS RESTATED)
Col. A Col. B Col. C Col. D Col. E
------ ------ ------ ------ ------
Additions
------------------------------
(1)
Balance at Charged to Charged to
Beginning of Costs Other (2) Balance at
Description Period and Expenses Accounts Deductions End of Period
- --------------------------------------------------------------------------- ------------- --------------- ----------------
Allowance for bad debts:
Year Ended December 31, 2004 $ 2,917,355 $ 1,704,105 - $ 1,567,783 $ 3,053,677
Year ended December 31, 2003 $ 2,816,757 $ 1,562,212 - $ 1,461,615 $ 2,917,354
Year ended December 31, 2002 $ 2,359,657 $ 2,141,258 - $ 1,684,158 $ 2,816,757
(1) Charged to bad debt expense. (2) Write-off of accounts.