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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
FORM 10-Q FOR QUARTER ENDED APRIL 30, 2003
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended April 30, 2003
--------------
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 0-12927
NATIONAL HOME HEALTH CARE CORP.
------------------------------------------------------
(Exact name of Registrant as Specified in Its Charter)
Delaware 22-2981141
- ---------------------------------- ---------------------------------
(State or Other Jurisdiction of (IRS Employer Identification No.)
Incorporation or Organization)
700 White Plains Road, Scarsdale, New York 10583
(Address of Principal Executive Offices with Zip Code)
Registrant's Telephone Number Including Area Code: 914-722-9000
------------
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 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 __
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required by Section 12, 13 or 15(d) of the Securities Exchange Act of
1934 subsequent to the distribution of securities under a plan confirmed by a
court. Yes __ No __
APPLICABLE ONLY TO CORPORATE ISSUERS:
The number of shares of common stock outstanding as of June 12, 2003 was
5,498,188.
NATIONAL HOME HEALTH CARE CORP.
FORM 10-Q
FOR THE QUARTER ENDED APRIL 30, 2003
PART I. FINANCIAL INFORMATION Page
----
Item 1. Financial Statements
Balance Sheets as of April 30, 2003 and July 31,
2002 (unaudited) 3-4
Statements of Operations for the three months
ended April 30, 2003 and April 30, 2002 and the
nine months ended April 30, 2003 and April 30,
2002 (unaudited) 5
Statements of Cash Flows for the nine months ended
April 30, 2003 and April 30, 2002 (unaudited) 6
Notes to Consolidated Financial Statements 7-8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Item 4. Controls and Procedures 14
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 14
SIGNATURES 15
EXHIBIT INDEX 18
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NATIONAL HOME HEALTH CARE CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
April 30, 2003 July 31, 2002
-------------- -------------
ASSETS
Current:
Cash and cash equivalents $13,260,000 $15,341,000
Investments 25,000 35,000
Accounts receivable-less allowance for
possible losses of $620,000 and $691,000 18,789,000 16,382,000
Prepaid expenses and other assets 843,000 778,000
Income taxes receivable 15,000 234,000
Deferred income taxes 375,000 295,000
----------- -----------
Total current assets 33,307,000 33,065,000
Furniture, equipment and leasehold
improvements, net 900,000 857,000
Goodwill 10,628,000 7,366,000
Other intangible assets, net 2,250,000 1,406,000
Deferred income taxes 200,000 515,000
Deposits and other assets 391,000 303,000
----------- -----------
TOTAL $47,676,000 $43,512,000
=========== ===========
(continued)
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NATIONAL HOME HEALTH CARE CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
April 30, 2003 July 31, 2002
-------------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 3,728,000 $ 3,581,000
Estimated third-party payor settlements 745,000 912,000
Deferred revenue 518,000 340,000
------------ ------------
Total current liabilities 4,991,000 4,833,000
------------ ------------
Stockholders' equity:
Common stock, $.001 par value; authorized
20,000,000 shares, issued 6,903,819 shares 7,000 7,000
Additional paid-in capital 25,556,000 25,552,000
Retained earnings 20,281,000 15,839,000
------------ ------------
45,844,000 41,398,000
Less: treasury stock (1,384,671 and 1,329,979
shares) at cost (3,159,000) (2,719,000)
------------ ------------
Total stockholders' equity 42,685,000 38,679,000
------------ ------------
TOTAL $ 47,676,000 $ 43,512,000
============ ============
See accompanying notes to consolidated financial statements.
-4-
NATIONAL HOME HEALTH CARE CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
For the three months ended For the nine months ended
April 30, April 30,
-------------------------- -------------------------
2003 2002 2003 2002
---- ---- ---- ----
Net patient revenue $25,120,000 $20,620,000 $72,702,000 $61,361,000
----------- ----------- ----------- -----------
Operating expenses:
Cost of revenue 16,374,000 13,081,000 47,070,000 38,979,000
General and administrative 6,020,000 5,186,000 17,605,000 15,022,000
Amortization of intangibles 150,000 136,000 441,000 409,000
Provision for possible losses 75,000 65,000 175,000 245,000
----------- ----------- ----------- -----------
Total operating expenses 22,619,000 18,468,000 65,291,000 54,655,000
----------- ----------- ----------- -----------
Income from operations 2,501,000 2,152,000 7,411,000 6,706,000
Other income:
Interest 31,000 48,000 121,000 170,000
----------- ----------- ----------- -----------
Income before taxes 2,532,000 2,200,000 7,532,000 6,876,000
Provision for income taxes 1,038,000 839,000 3,090,000 2,679,000
----------- ----------- ----------- -----------
Net income $ 1,494,000 $ 1,361,000 $ 4,442,000 $ 4,197,000
=========== =========== =========== ===========
Net income per share:
Basic $ 0.27 $ 0.25 $ 0.80 $ 0.78
=========== =========== =========== ===========
Diluted $ 0.26 $ 0.24 $ 0.77 $ 0.72
=========== =========== =========== ===========
Weighted average shares outstanding:
Basic 5,549,674 5,533,217 5,561,363 5,502,732
=========== =========== =========== ===========
Diluted 5,758,346 5,791,315 5,767,720 5,791,315
=========== =========== =========== ===========
See accompanying notes to consolidated financial statements.
-5-
NATIONAL HOME HEALTH CARE CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the nine months ended April 30,
2003 2002
---- ----
Cash flows from operating activities:
Net income $ 4,442,000 $ 4,197,000
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 653,000 606,000
Provision for doubtful accounts, net of writeoffs 71,000 153,000
Unrealized loss on investments 10,000 27,000
Deferred income taxes 235,000 --
Tax benefit realized from the exercise of stock options
by employees -- 398,000
Changes in assets and liabilities:
Accounts receivable (2,478,000) (638,000)
Prepaid expenses and other (153,000) 364,000
Income taxes receivable 219,000 (253,000)
Accounts payable, accrued expenses and other liabilities 147,000 (186,000)
Estimated third-party payor settlements (167,000) (139,000)
Deferred revenue 178,000 2,000
------------ ------------
Net cash provided by operating activities 3,157,000 4,531,000
------------ ------------
Cash flows from investing activities:
Purchase of property, plant and equipment (96,000) (161,000)
Purchase of assets of business (4,706,000) (85,000)
Purchase of investments -- (66,000)
------------ ------------
Net cash used in investing activities (4,802,000) (312,000)
------------ ------------
Cash flows from financing activities:
Proceeds from exercise of stock options 4,000 456,000
Purchase of treasury shares (440,000) (156,000)
------------ ------------
Net cash provided by (used in) financing activities (436,000) 300,000
------------ ------------
Net increase (decrease) in cash and cash equivalents (2,081,000) 4,519,000
Cash and cash equivalents-beginning of period 15,341,000 9,082,000
------------ ------------
Cash and cash equivalents-end of period $ 13,260,000 $ 13,601,000
============ ============
Supplemental disclosures of cash flow information:
Cash paid during the period for
Taxes $ 2,637,000 $ 2,533,000
Interest 15,000 8,000
See accompanying notes to consolidated financial statements.
-6-
NATIONAL HOME HEALTH CARE CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three and nine month periods ended
April 30, 2003 are not necessarily indicative of the results that may be
expected for the year ending July 31, 2003. For further information, refer to
the consolidated financial statements and footnotes thereto included in the
Company's annual report on Form 10-K for the year ended July 31, 2002.
NOTE 2 - ACQUISITIONS
On September 3, 2002, the Company, through a newly-formed subsidiary in
Massachusetts, acquired certain assets of Medical Resources, Inc. and related
entities ("Medical Resources"). Medical Resources provided home health care
services throughout Massachusetts. The purchase price of $2,623,000 in cash,
including acquisition costs of $73,000, was financed using internal funds. The
acquisition was accounted for as a purchase.
On December 14, 2002, the Company, through a wholly-owned subsidiary in
New Jersey, acquired certain assets of Mary Baker's Health Care Services, Inc.
("Mary Baker"). Mary Baker provided home health care services in Bergen and
Passaic Counties, New Jersey. The purchase price of $434,000 in cash, including
acquisition costs of $14,000, was financed using internal funds. The acquisition
was accounted for as a purchase.
On March 17, 2003, the Company, through a wholly-owned subsidiary in
Connecticut, acquired certain assets from Professional Relief Nurses, Inc.
("PRN"). PRN provided home health care services in Hartford, Litchfield, New
Haven and Middlesex Counties, Connecticut. The purchase price of $1,248,000,
including acquisition costs of $98,000, was financed using internal funds. The
acquisition was accounted for as a purchase.
NOTE 3 - RECLASSIFICATIONS
Certain reclassifications have been made in prior years' financial
statements to conform to classifications used in the current period.
-7-
NOTE 4 - NET INCOME PER SHARE DATA
A reconciliation of shares used in calculating basic and diluted net
income per share is as follows:
================================================================================
For the three months ended
April 30,
----------------------------------------------------------------------
2003 2002
---- ----
Income Shares Income Shares
------ ------ ------ ------
Basic EPS:
Net income $1,494,000 5,549,674 $1,361,000 5,533,217
Effect of dilutive securities - - - - 208,672 - - - - 258,098
---------- --------- ---------- ---------
Diluted EPS: $1,494,000 5,758,346 $1,361,000 5,791,315
========== ========= ========== =========
For the nine months ended
April 30,
----------------------------------------------------------------------
2003 2002
---- ----
Income Shares Income Shares
------ ------ ------ ------
Basic EPS:
Net income $4,442,000 5,561,363 $4,197,000 5,502,732
Effect of dilutive securities - - - - 206,357 - - - - 288,583
---------- --------- ---------- ---------
Diluted EPS: $4,442,000 5,767,720 $4,197,000 5,791,315
========== ========= ========== =========
-8-
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
GENERAL
The following discussion and analysis provides information which the
Company's management believes is relevant to an assessment and understanding of
the Company's results of operations and financial condition. This discussion and
analysis should be read in conjunction with the attached unaudited consolidated
financial statements and notes thereto, and with the Company's audited financial
statements and notes thereto for the fiscal year ended July 31, 2002 included
with the Company's annual report on Form 10-K with respect to such fiscal year.
Certain matters set forth in this report are forward-looking statements
that are dependent on certain risks and uncertainties, including but not limited
to risks and uncertainties relating to whether the Company can identify,
consummate and integrate on favorable terms acquisitions or market penetrations,
market acceptance, pricing and demand for the Company's services, changing
regulatory environment, changing economic conditions, whether the Company can
attract and retain qualified personnel, ability to manage the Company's growth,
and other risks detailed in the Company's other filings with the Securities and
Exchange Commission.
The Company is subject to significant external factors that could
significantly impact its business, including changes in Medicare and Medicaid
reimbursement, government fraud and abuse initiatives and other such factors
that are beyond the control of the Company. As a participant in the home health
care industry, the Company is subject to extensive federal, state and local
regulations. There can be no assurance that any of these regulations will not
change from existing standards, that additional standards will not be imposed or
that the Company will not experience adverse effects as a result of efforts to
comply with applicable standards, which are extensive, complex and
often-changing.
The Balanced Budget Act (the "Act") was signed into law in August 1997.
The Act made significant changes in the reimbursement system for Medicare home
health care services. The primary change that affects the Company is a
restructuring of the reimbursement system related to Medicare certified home
health care agencies. Prior to the Act, Medicare reimbursed providers on a
reasonable cost basis subject to program-imposed cost per visit limitations.
Under the Act, changes in Medicare home care reimbursement were
scheduled in two phases. A temporary or interim payment system ("IPS") took
effect for cost reports beginning on or after October 1, 1997. Under IPS, home
health care providers were reimbursed the lower of (i) their actual costs, (ii)
cost limits based on 105% of median costs of freestanding home health agencies
or (iii) an agency-specific per patient cost limit, based on 98% of 1994 costs
adjusted for inflation. Under IPS, most Medicare providers were reimbursed under
an agency-specific per patient cost limit. Effective October 1, 2000, under the
prospective payment system, the last remaining phase under the Act, Medicare now
reimburses providers a predetermined base payment. The payment is adjusted for
the health condition and care needs of the beneficiary and is also adjusted for
the geographic differences in wages across the country. Medicare provides home
health agencies with payments for 60-day "episodes of care".
The latest aspect of the Act called for a 15% reduction in Medicare
reimbursement, effective October 1, 2002. Although the change to the prospective
payment system has not, to
-9-
date, had a material adverse impact on the Company, there can be no assurance
that the Medicare prospective payment system will not adversely impact the
Company's reimbursement rates or otherwise have a material adverse effect on the
Company.
The implementation of IPS resulted in a decrease in Medicare revenue
from the Company's Medicare certified agency. In addition, the Company's
operations in New York and New Jersey are dependent upon referrals, primarily
from Medicare certified home health care agencies, whose reimbursement had been
adversely affected. Under the prospective payment system, there can be no
assurances that the Company's future referrals will not result in reduced
reimbursement rates or reduced volume of business.
The Company derives a substantial amount of revenue from state
sponsored Medicaid programs. Approximately 47%,48% and 30% of revenue for the
fiscal years ended July 31, 2002, 2001 and 2000, respectively, were derived from
state sponsored Medicaid programs. Reimbursement for home health care services
rendered to eligible Medicaid recipients is made in an amount determined in
accordance with procedures and standards established by state law under federal
guidelines. States differ as to reimbursement policies and rates. The Company is
a licensed Medicaid provider in Connecticut, New Jersey and in Nassau, Suffolk
and Westchester Counties, New York.
CERTAIN TRENDS EXPECTED TO IMPACT FUTURE RESULTS OF OPERATIONS
Effective May 1, 2003, the Connecticut Department of Social Services
significantly reduced the Medicaid reimbursement rate for certain nursing
visits. The rate for a medication administration visit, defined as
administration of oral, intramuscular and/or subcutaneous medication by health
care agency/professional, was reduced from $85 to $52 per visit. The Company
believes that the decrease is a function of the continuing efforts by all
third-party payors to contain or reduce costs. The rate change has no impact on
the Company's historical results of operations, including the results of
operations for the three months ended April 30, 2003 covered by this quarterly
report. However, the rate change will impact periods following the May 1, 2003
effective date, and at current levels of operations, the Company estimates that
the rate change will result in a decline in net patient revenue of approximately
$8,000,000 annually and a decrease in net income of approximately $2,700,000.
RESULTS OF OPERATIONS AND EFFECTS OF INFLATION
Three Months Ended April 30, 2003 Compared to Three Months Ended April
30, 2002
For the three months ended April 30, 2003, net patient revenue
increased $4,500,000, or 21.8%, to $25,120,000 from $20,620,000 for the three
months ended April 30, 2002. This increase is primarily attributable to the
acquisition of Medical Resources during the current fiscal year, which generated
net patient revenue of $2,083,000 for the recent period in Massachusetts. The
net patient revenue increase also included $1,884,000 of continued successful
market penetration of existing markets and the Company's other acquisitions in
the current fiscal year. Lastly, the net patient revenue increase also included
$533,000 from the expansion of the Company's operations to include staffing and
related personnel to hospitals, nursing homes and facilities in New York and New
Jersey in the current period.
-10-
Gross profit margin decreased to 34.8% for the three months ended April
30, 2003 from 36.6% for the three months ended April 30, 2002. This decrease is
primarily attributable to lower gross profit margins on the new staffing
operations and, in addition, the Company did not experience any increase in its
Medicaid reimbursement rates in Connecticut, New York and New Jersey during the
recent three-month period. Effective May 1, 2003, the Company expects a
substantial further decline in gross profit margin, as a result of the reduction
in certain Medicaid nursing rates in Connecticut.
General and administrative expenses increased $834,000, or 16.1%, to
$6,020,000 for the three months ended April 30, 2003 from $5,186,000 for the
three months ended April 30, 2002. This increase is primarily attributable to
additional administrative personnel and occupancy costs incurred in connection
with the acquisition of Medical Resources of $549,000, the balance of the
increase of $285,000 is attributable to the opening of an additional
full-service administrative office in West Hartford, Connecticut, as well as
increases in all of the Company's insurance costs over the previous three-month
period. As a percentage of net patient revenue, general and administrative
expenses decreased to 24.0% for the three months ended April 30, 2003 from 25.2%
for the three months ended April 30, 2002.
Amortization of intangibles increased $14,000, or 10.3%, to $150,000
for the three months ended April 30, 2003 from $136,000 for the three months
ended April 30, 2002. This increase results from additional such amortization
attributable to the acquisition of Medical Resources, offset by reduced
amortization of intangibles from previous acquisitions that have now been fully
amortized.
The Company recorded an allowance for possible losses of $75,000 for
the three months ended April 30, 2003, as compared to $65,000 for the three
months ended April 30, 2002.
As a result of the foregoing, income from operations increased
$349,000, or 16.2%, to $2,501,000 for the three months ended April 30, 2003 from
$2,152,000 for the three months ended April 30, 2002.
Interest income decreased $17,000, or 35.4%, to $31,000 for the three
months ended April 30, 2003 from $48,000 for the three months ended April 30,
2002. This decrease is attributable to the lower cash balances of the Company,
as a result of the acquisitions of Medical Resources, Mary Baker and PRN, as
well as the continued decline in interest rates.
The Company's effective tax rate increased to 41.0% for the three
months ended April 30, 2003 from 38.1% for the three months ended April 30,
2002. This increase is attributable to higher state income tax rates and a
decrease in work opportunity tax credits in the current three month period.
Net income increased $133,000, or 9.8%, to $1,494,000, or $.26 per
diluted share, in the three months ended April 30, 2003 from $1,361,000, or $.24
per diluted share, in the three months ended April 30, 2002.
Nine Months Ended April 30, 2003 Compared to Nine Months Ended April
30, 2002
For the nine months ended April 30, 2003, net patient revenue increased
$11,341,000, or 18.5%, to $72,702,000 from $61,361,000 for the nine months ended
April 30, 2002. This
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increase is primarily attributable to the acquisition of Medical Resources,
which generated net patient revenue of $5,496,000 for the recent period in
Massachusetts. The net patient revenue increase also included $4,098,000 of
continued successful penetration of existing markets and the Company's other
acquisitions in the current fiscal year. Lastly, the net patient revenue
increase also included $1,747,000 from the expansion of the Company's operations
to include staffing and related personnel to hospitals, nursing homes and
facilities in New York and New Jersey in the current period.
Gross profit margin decreased to 35.3% for the nine months ended April
30, 2003 from 36.5% for the nine months ended April 30, 2002. This decrease is
primarily attributable to lower gross profit margins on the new staffing
operations and, in addition, the Company did not experience any increase in its
Medicaid reimbursement rates in Connecticut, New York and New Jersey in the
recent nine-month period. Effective May 1, 2003, the Company expects a
substantial further decline in gross profit margin, as a result of the reduction
in certain Medicaid nursing rates in Connecticut.
General and administrative expenses increased $2,583,000, or 17.2%, to
$17,605,000 for the nine months ended April 30, 2003 from $15,022,000 for the
nine months ended April 30, 2002. This increase is attributable to additional
administrative personnel and occupancy costs incurred in connection with the
acquisition of Medical Resources of $1,472,000 and the expansion of the
Company's services to include staffing and related operations in New York and
New Jersey of $218,000. The balance of the increase of $893,000 is attributable
to the opening of an additional full-service administrative office in West
Hartford, Connecticut, as well as increases in all of the Company's insurance
costs over the previous nine-month period. As a percentage of net patient
revenue, general and administrative expenses decreased slightly to 24.2% for the
nine months ended April 30, 2003 from 24.5% for the nine months ended April 30,
2002.
Amortization of intangibles increased $32,000, or 7.8%, to $441,000 for
the nine months ended April 30, 2003 from $409,000 for the nine months ended
April 30, 2002. This increase is explained in the above three-month discussion.
The Company recorded a provision for possible losses of $175,000 for
the nine months ended April 30, 2003, as compared to $245,000 for the nine
months ended April 30, 2002. This decrease is attributable to the Company
reserving against its accounts receivable in the previous period as a result of
the Company entering into contracts with many new payor sources over the past
two years.
As a result of the foregoing, income from operations increased
$705,000, or 10.5%, to $7,411,000 for the nine months ended April 30, 2003 from
$6,706,000 for the nine months ended April 30, 2002.
Interest income decreased $49,000, or 28.8%, to $121,000 for the nine
months ended April 30, 2003 from $170,000 for the nine months ended April 30,
2002. This decrease is explained in the above three-month discussion.
The Company's effective tax rate increased to 41.0% for the nine months
ended April 30, 2003 from 39.0% for the nine months ended April 30, 2002. This
increase is explained in the above three-month discussion.
-12-
Net income increased $245,000, or 5.8%, to $4,442,000, or $.77 per
diluted share, in the nine months ended April 30, 2003 from $4,197,000, or $.72
per diluted share, in the nine months ended April 30, 2002.
The rate of inflation had no material effect on operations for the nine
months ended April 30, 2003.
FINANCIAL CONDITION AND CAPITAL RESOURCES
Current assets increased to $33,307,000 and current liabilities
increased to $4,991,000 at April 30, 2003. This resulted in an increase in
working capital of $84,000 from $28,232,000 at July 31, 2002 to $28,316,000 at
April 30, 2003. Cash and cash equivalents decreased $2,081,000 to $13,260,000 at
April 30, 2003 from $15,341,000 at July 31, 2002. This decrease in cash is
attributable to the cash used for the acquisitions of Medical Resources, Mary
Baker and PRN, which totaled $4,706,000.
The Company provided net cash from operating activities of $3,157,000
for the nine months ended April 30, 2003 as compared to net cash provided by
operating activities of $4,531,000 for the nine months ended April 30, 2002. The
decrease in net cash provided by operating activities of $1,374,000, or 30.3%,
is attributable to an increase in operating assets, primarily accounts
receivable, of $1,885,000, offset by an increase in operating liabilities of
$481,000 and an increase in operating cash flow of $30,000 over the comparable
period for the nine months ended April 30, 2002. Net cash used in investing
activities for the nine months ended April 30, 2003, consisted of the purchase
of assets of businesses and the purchase of equipment. The net cash used in
investing activities for the nine months ended April 30, 2002 consisted of the
purchase of assets of businesses, equipment and investments. Net cash used in
financing activities for the nine months ended April 30, 2003 consisted of the
purchase of treasury shares, offset by the proceeds from the exercise of stock
options. Net cash provided by financing activities for the nine months ended
April 30, 2002 consisted of the proceeds from the exercise of stock options,
offset by the purchase of treasury shares.
Effective May 1, 2003, the Company expects an annual decline in
operating cash flow of approximately $2,700,000, as a result of the reduction of
certain Medicaid nursing rates in Connecticut.
The nature of the Company's business requires weekly payments to health
care personnel at the time services are rendered. The Company typically receives
payment for these services on a basis of 90 to 120 days with respect to
contracted and insurance business and 15 to 45 days with respect to certain
governmental payors, such as Medicare and Medicaid programs. Accounts receivable
turnover was 69 days at April 30, 2003 as compared to 76 days at April 30, 2002.
The Company has a $7,500,000 committed revolving line of credit
facility ( the "credit facility") with its bank. The credit facility provides
for the Company to borrow up to the lesser of $7,500,000 or 80% of eligible
accounts receivable that are aged less than 120 days at the bank's prime rate or
LIBOR plus 2.5%. The credit facility expires on October 23, 2003 and requires
the Company to meet certain financial covenants and ratios. The Company is
required to pay .25% commitment fee on unused amounts, payable quarterly in
arrears.
-13-
In April 2003, the Company's Board of Directors increased its program
to repurchase its Common Stock from $1,000,000 to $3,000,000. Purchases would be
made from time to time in the open market and through privately-negotiated
transactions, subject to general market and other conditions. The buyback
program will be financed out of existing cash or cash equivalents.
The Company intends to incur capital expenditures of approximately
$500,000 during the current fiscal year in connection with the proposed
implementation of new computer software systems and hardware. The new hardware
would be designed to, among other things, update certain data input capability
regarding services rendered at certain locations. The Company believes that the
software will provide efficiencies in data organization, retrieval and analysis,
both for continuing operations and in connection with certain audits. The
Company intends to fund these expenditures and otherwise meet its short term and
long term liquidity need with its current cash balances, cash flow from
operations and its credit facility.
ITEM 4. CONTROLS AND PROCEDURES.
(a) Evaluation of Disclosure Controls and Procedures. Within the 90-day
period prior to the filing date of this report, the Company carried out an
evaluation, under the supervision and with the participation of management of
the Company, including the Company's Chief Executive Officer and Principal
Financial Officer, of the effectiveness of the design and operation of the
Company's disclosure controls and procedures. Based on the Company's evaluation,
the Company's Chief Executive Officer and Principal Financial Officer concluded
that the Company's disclosure controls and procedures were effective.
(b) Changes in Internal Controls. Since the date of the evaluation
described above, there have not been any significant changes in the Company's
internal accounting controls or in other factors that could significantly affect
those controls subsequent to the date of their evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are filed herewith:
Exhibit
Number Description
------- -----------
99.1 Certificate of Chief Executive Officer
99.2 Certificate of Chief Financial Officer
(b) Reports on Form 8-K:
During the quarterly period for which this report is filed, the Company
filed a report on Form 8-K dated April 24, 2003 reporting under Item 5 and
Item 7.
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SIGNATURES
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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.
National Home Health Care Corp.
Date: June 12, 2003. /s/ Robert P. Heller
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Robert P. Heller
Vice President of Finance (principal
financial officer and principal
accounting officer)
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CERTIFICATION BY PRINCIPAL EXECUTIVE OFFICER
I, Steven Fialkow, certify that:
1. I have reviewed this quarterly report on Form 10-Q of National Home
Health Care Corp.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:
(a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
(c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent function):
(a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
(b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: June 12, 2003.
/s/ Steven Fialkow
----------------------
Steven Fialkow
Chief Executive Officer
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CERTIFICATION BY PRINCIPAL FINANCIAL OFFICER
I, Robert P. Heller, certify that:
1. I have reviewed this quarterly report on Form 10-Q of National Home
Health Care Corp.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:
(a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
(c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent function):
(a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
(b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: June 12, 2003.
/s/ Robert P. Heller
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Robert P. Heller
Vice President of Finance
and Chief Financial Officer
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EXHIBIT INDEX
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EXHIBIT
NUMBER DOCUMENT
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99.1* Certification of Principal Executive Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
99.2* Certification of Principal Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
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* Filed herewith
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