On March 17, 2004, the company issued a demand promissory note to its parent for up to $1,500,000 of financing for equipment purchases with annual interest of 1.25% over the prime rate. The note was modified by increasing the maximum amount of advances that can be made to $2,000,000, and by adding to the purposes of the financing, working capital and other corporate needs. The company borrowed approximately $1,535,000 under this note during the first nine months of 2004 which had an interest rate of 6% as of September 30, 2004. Interest expense on the note amounted to approximately $16,000 and $25,000 for the three months and nine months ended September 30, 2004. Accrued interest payable on the note amounted to approximately $16,000 as of September 30, 2004.
|
DIALYSIS CORPORATION OF AMERICA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2004
(Unaudited)
|
NOTE 6--OTHER RELATED PARTY TRANSACTIONS
The 20% minority interest in DCA of Vineland, LLC was held by a company owned by the medical director of that facility, who became a director of the company in 2001 and ceased being a director at the annual meeting on June 3, 2004. In April, 2000, another company owned by this physician acquired an interest in DCA of Vineland, resulting in DCA of Vineland being owned 51% by the company and 49% by this physician’s companies.
In July, 2000, one of the companies owned by this physician acquired a 20% interest in DCA of Manahawkin, Inc. (formerly known as Dialysis Services of NJ, Inc. - Manahawkin), of which subsidiary company this physician also serves as medical director.
In May, 2001, the company loaned its President and CEO $95,000 to be repaid with accrued interest at prime minus 1% (floating prime) on or before maturity on May 11, 2006. This demand loan is collateralized by all of the President’s stock and stock options in the company and proceeds from sale of such stock. Interest income on the loan amounted to approximately $1,000 and $3,000 for the three months and nine months ended September 30, 2004, and for the same periods of the preceding year. Accrued interest on the loan was approximately $15,000 as of September 30, 2004, and $13,000 as of December 31, 2003.
Minority members in subsidiaries in certain situations may fund a portion of required capital contributions by issuance of an interest bearing note payable to the company which minority members may repay directly or through their portion of capital distributions of the subsidiary. The minority members funded in the aggregate approximately $295,000 in capital contributions during the first nine months of 2004, and $208,000 during the same period of the preceding year, under notes accruing interest at prime plus 2%, with an aggregate of approximately $69,000 of distributions applied against the notes and accrued interest during the first nine months of 2004, and $47,000 during the same period of the preceding year. These represent non-cash investing activities, which is
a supplemental disclosure required by Financial Accounts Standards Board Statement No. 95, “Statement of Cash Flows.” See Note 11.
NOTE 7--STOCK OPTIONS
In June, 1998, the board of directors granted an option under the now expired 1995 Stock Option Plan to a board member for 10,000 shares exercisable at $1.13 per share through June 9, 2003. This option was exercised in June, 2003 with the company receiving an $11,250 cash payment for the exercise price
|
DIALYSIS CORPORATION OF AMERICA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2004
(Unaudited)
|
NOTE 7--STOCK OPTIONS--Continued
In April, 1999, we adopted a stock option plan pursuant to which the board of directors granted 1,600,000 options exercisable at $.63 per share to certain of our officers, directors, employees and consultants with 680,000 options exercisable through April 20, 2000 and 920,000 options exercisable through April 20, 2004, of which 120,000 options to date have been cancelled. In April, 2000, the 680,000 one-year options were exercised for which we received cash payment of $3,400 and the balance in three-year promissory notes with the interest at 6.2% and which maturity was extended to April 20, 2004. All the notes were repaid with 91,800 shares of common stock with a fair market value of approximately $521,000 on February 9, 2004. Interest income on the notes amounted to a
pproximately $3,000 for the nine months ended September 30, 2004, all of which was earned during the first quarter. In March, 2003, 155,714 of the remaining 800,000 options outstanding were exercised for $97,322 with the exercise price satisfied by director bonuses accrued in 2002. In January, 2004, 130,278 of these options were exercised for $81,424 with the exercise price satisfied by director bonuses accrued in 2003. In February, 2004, 158,306 of these options were exercised for $98,941 with the exercise price satisfied by payment of 18,152 shares to the company for cancellation. In March, 2004, 355,702 of these options were exercised for $222,314 with the exercise price satisfied by the payment of 54,223 shares to the company. The exercises and share payments to the company represent noncash investing activity, which is a supplemental disclosure required by Financial Accounting Standards Board Statement No. 95, “Statement of Cash Flows.” See Note 11.
In January, 2001, the board of directors granted to our Chief Executive Officer and President a five-year option for 330,000 shares exercisable at $.63 per share with 66,000 options vesting at January, 2001, and 66,000 options vesting annually on January 1, 2002 to 2005. In January, 2004, 56,384 of these options were exercised for $35,240 with the exercise price satisfied by a director bonus accrued in 2003.
In September, 2001, the board of directors granted five-year options for an aggregate of 150,000 shares exercisable at $.75 per share through September 5, 2006, to certain officers, directors and key employees. 30,000 of the options vested immediately with the remaining 120,000 options to vest in equal increments of 30,000 options each September 5, commencing September 5, 2002. In March, 2003, 3,570 of these options were exercised for $2,678 with the exercise price satisfied by director bonuses accrued in 2002. In January, 2004, 4,576 of these options were exercised for $3,432 with the exercise price satisfied by director bonuses accrued in 2003. These exercises represent noncash investing activity, which is a supplemental disclosure required by Financial Accounting St
andards Board Statement No. 95, “Statement of Cash Flows.” See Note 11. In January, 2004, 7,200 of these options were exercised with the company receiving a $5,400 cash payment for the exercise price. Due to the resignation of a director in June 2004, 14,654 options were cancelled leaving 120,000 of these options outstanding as of September 30, 2004. As of September 30, 2004, an aggregate of 90,000 of these options had vested, of which 15,346 have been exercised.
In March, 2002, the board of directors granted a five-year option to an officer for 60,000 shares exercisable at $1.58 per share through February 28, 2007. The option was to vest in equal annual increments of 15,000 shares on each February 28 from 2003 through 2006. The 15,000 options that had vested in February, 2003, were exercised by the officer in October, 2003, and the remaining 45,000 options expired unvested due to the July 31, 2003 resignation of the officer.
|
DIALYSIS CORPORATION OF AMERICA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2004
(Unaudited)
|
NOTE 7--STOCK OPTIONS--Continued
In May, 2002, the board of directors granted five-year options for an aggregate of 21,000 shares to certain of the company’s employees of which 11,000 were outstanding and vested at September 30, 2004. These options are exercisable at $2.05 per share through May 28, 2007. Options for 10,000 shares have been cancelled as a result of the termination of several employee optionholders.
In June, 2003, the board of directors granted to an officer a five-year option for 50,000 shares exercisable at $1.80 per share through June 3, 2008. The option vests annually in increments of 12,500 shares on each June 4 from 2004 to 2007.
In August, 2003, the board of directors granted a three-year option to a director who serves on several of the company’s committees including the audit committee, for 10,000 shares exercisable at $2.25 per share through August 18, 2006. The option vests in two annual increments of 5,000 shares commencing on August 19, 2004.
In January, 2004, the board of directors granted a five year option to an employee for 20,000 shares exercisable at $3.09 per share through January 12, 2009. The option vests in annual increments of 5,000 shares on each January 13 from 2005 through 2008.
On January 28, 2004, the company effected a two-for-one stock split of its outstanding common stock. All option amounts and exercise prices have been adjusted to reflect the stock split. Split-adjusted option exercise prices resulting in a fraction of a cent have been rounded up to the nearest cent for purposes of these notes to the financial statements of the company.
In June, 2004, the board of directors granted 145,000 stock options to officers and directors exercisable at $4.02 per share through June 6, 2009. 15,000 options vested immediately and 130,000 options vest 25% annually commencing June 7, 2005.
In August, 2004, the board of directors granted 50,000 incentive stock options to an officer exercisable at $4.02 per share through August 15, 2009. The options vest 25% annually commencing August 16, 2005. See Part II, “Other Information, “Item 2, “Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities.”
NOTE 8--COMMITMENTS
Effective January 1, 1997, the company established a 401(k) savings plan (salary deferral plan) with an eligibility requirement of one year of service and 21 year old age requirement. The company and its parent established a new 401(k) plan effective January, 2003, which allows employees, in addition to
|
DIALYSIS CORPORATION OF AMERICA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2004
(Unaudited)
|
NOTE 8--COMMITMENTS--Continued
regular employee contributions, to elect to have a portion of bonus payments contributed. As an incentive to save for retirement, the company will match 10% of an employee’s contribution resulting from any bonus paid during the year and may make a discretionary contribution with the percentage of any discretionary contribution to be determined each year with only employee contributions up to 6% of annual compensation considered when determining employer matching. The company’s expense for employer matching contributions amounted to approximately $600 for the nine months ended September 30, 2004, all during the first quarter, with no matching contributions for the same periods of the preceding year.
NOTE 9--ACQUISITIONS
In August, 2001, the company acquired the remaining 30% minority interest in DCA of So. Ga., LLC, giving the company a 100% ownership interest, for $600,000. This transaction resulted in $523,000 goodwill representing the excess of the $600,000 purchase price over the $77,000 fair value of the assets acquired. The goodwill is being amortized for tax purposes over a 15-year period. The company’s decision to make this investment was based largely on the profitability of DCA of So. Ga. The party from whom the company acquired the minority interest is the medical director of another dialysis subsidiary of the company. See Note 1.
In April, 2002, the company acquired a dialysis center in Royston, Georgia for $550,000. This transaction resulted in $400,000 of goodwill representing the excess of the $550,000 purchase price over the $150,000 fair value of the assets acquired. The goodwill is being amortized for tax purposes over a 15-year period. The company’s decision to make this investment was based on its expectation of future profitability resulting from its review of this dialysis center’s operations prior to making the acquisition. See Note 1.
During the second quarter of 2003, the company acquired the assets of a Georgia dialysis center and the 30% minority interests in each of two of its existing Georgia dialysis centers for a total consideration of $1,415,000, of which $745,000 was paid initially and the remaining balance of $670,000 was paid during the second quarter of 2004. These acquisitions resulted in $1,368,000 of goodwill, representing the excess of the purchase price over the fair value of the net assets acquired. The goodwill is being amortized for tax purposes over a 15-year period. The company’s decision to make these acquisitions was based on its expectation of profitability resulting from management’s evaluation of the operations of these dialysis centers. The party from whom the 3
0% minority interests were purchased was the medical director of one of the facilities at which the 30% interest was acquired and is the medical director of two other of the company’s Georgia dialysis facilities. See Note 1.
Effective as of the close of business on August 31, 2004, the company acquired a Pennsylvania dialysis company for an estimated net purchase price of $1,521,000. Of that amount, $761,000 is currently in escrow, with the balance of approximately $760,000 to be paid in equal installments, each on the first and second anniversary of the effective date of the purchase agreement. This transaction resulted in $1,357,000 of estimated goodwill representing the excess of the net purchase price over the initially estimated $164,000 fair value of net assets acquired, including an $83,000 valuation of an eight year non-competition agreement that will be amortized over the life of the agreement. The goodwill is not
|
DIALYSIS CORPORATION OF AMERICA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2004
(Unaudited)
|
NOTE 9--ACQUISITIONS--Continued
amortizable for tax purposes, since the transaction was a stock acquisition. The initial allocation of purchase cost at fair value was based upon available information and will be finalized as any contingent purchase amounts are resolved and estimated fair values of assets are finalized. The company began recording the results of operations for the acquired company as of the effective date of the acquisition. The company’s decision to make this investment was based on its expectation of future profitability resulting from its review of the acquired company’s operations prior to making the acquisition. See
Note 1.
NOTE 10--LOAN TRANSACTIONS
The company has and may continue to provide funds in excess of capital contributions to meet working capital requirements of its dialysis facility subsidiaries, usually until they become self-sufficient. The operating agreements for the subsidiaries provide for cash flow and other proceeds to first pay any such financing, exclusive of any tax payment distributions. See Note 6.
NOTE 11--SUPPLEMENTAL CASH FLOW INFORMATION
The following amounts represent (rounded to the nearest thousand) non-cash financing and investing activities and other cash flow information in addition to information disclosed in Notes 3 and 6:
| |
|
Nine Months Ended |
|
| |
|
September 30, |
|
| |
|
2004 |
|
2003 |
|
|
Interest paid (see Note 3) |
|
$ |
142,000 |
|
$ |
186,000 |
|
|
Income taxes paid (see Note 4) |
|
|
648,000 |
|
|
604,000 |
|
|
Options exercise bonus (191,238 shares 2004;
159,284 shares 2003) (see Note 7) |
|
|
120,000 |
|
|
100,000 |
|
|
Subsidiary minority member capital contributions financed
(see Note 6) |
|
|
295,000 |
|
|
208,000 |
|
|
Subsidiary minority member distributions applied against
financing (see Note 6) |
|
|
69,000 |
|
|
47,000 |
|
|
Share payment (514,008 options exercised; 72,375 shares paid) |
|
|
|
|
|
|
|
|
for stock option exercises (see Note 7) |
|
|
321,000 |
|
|
--- |
|
|
Payment on note receivable with 91,800 shares of common
stock (see Note 7) |
|
|
521,000 |
|
|
--- |
|
|
DIALYSIS CORPORATION OF AMERICA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2004
(Unaudited)
|
NOTE 12--STOCKHOLDERS’ EQUITY
The changes in stockholders’ equity for the nine months ended September 30, 2004 are summarized as follows:
| |
|
Common Stock |
|
Capital in Excess of Par Value |
|
Retained Earnings |
|
Note Receivable |
|
Total |
|
|
Balance at December 31, 2003 |
|
$ |
79,376 |
|
$ |
5,238,952 |
|
$ |
6,073,589 |
|
$ |
(421,600 |
) |
$ |
10,970,317 |
|
|
Exercise of stock options |
|
|
6,400 |
|
|
119,095 |
|
|
--- |
|
|
--- |
|
|
125,495 |
|
|
Share repayment on notes |
|
|
(918 |
) |
|
(520,512 |
) |
|
--- |
|
|
421,600 |
|
|
(99,830 |
) |
|
Net income |
|
|
--- |
|
|
--- |
|
$ |
1,451,717 |
|
|
--- |
|
|
1,451,717 |
|
|
Balance September 30, 2004 |
|
$ |
84,858 |
|
$ |
4,837,535 |
|
$ |
7,525,306 |
|
$ |
--- |
|
$ |
12,447,699 |
|
NOTE 13--AFFILIATE FINANCIAL INFORMATION
The following amounts represent certain operating data of the company’s 40% owned Ohio affiliate that is accounted for in the equity method and not consolidated for financial reporting purposes (see Note 1):
| |
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
|
| |
|
2004 |
|
2003 |
|
2004 |
|
2003 |
|
|
Revenues |
|
$ |
717,476 |
|
$ |
375,541 |
|
$ |
1,602,407 |
|
$ |
1,186,470 |
|
|
Gross profit |
|
$ |
440,667 |
|
$ |
134,977 |
|
$ |
818,406 |
|
$ |
449,585 |
|
|
Net income |
|
$ |
305,940 |
|
$ |
22,027 |
|
$ |
431,929 |
|
$ |
75,797 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Management’s Discussion and Analysis of Financial Condition and Results of Operations, commonly known as MD&A, is our attempt to provide a narrative explanation of our financial statements, and to provide our shareholders and investors with the dynamics of our business as seen through our eyes as management. Generally, MD&A is intended to cover expected effects of known or reasonably expected uncertainties, expected effects of known trends on future operations, and prospective effects of events that have had a material effect on past operating results. Our discussion of MD&A should be read in conjunction with our unaudited consolidated financial statements, including the notes, included elsewhere in this Quarterly Report on Form 10-Q.
Overview
Dialysis Corporation of America provides dialysis services, primarily kidney dialysis treatments through 22 outpatient dialysis centers, including a 40% owned Ohio affiliate and one unaffiliated dialysis center which it manages, to patients with chronic kidney failure, also known as end-stage renal disease or ESRD. We provide dialysis treatments to dialysis patients at nine hospitals and medical centers through acute inpatient dialysis services agreements with those entities. We provide homecare services, including home peritoneal dialysis through method II services, the latter relating to providing patients with supplies and equipment.
The following table shows the number of in-center, home peritoneal and acute inpatient treatments performed by us through the dialysis centers we operate, including the two centers we manage, one in which we have a 40% ownership interest, and those hospitals and medical centers with which we have inpatient acute service agreements for the periods presented:
| |
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
|
| |
|
2004 |
|
2003 |
|
2004 |
|
2003 |
|
|
In-center |
|
|
33,001 |
|
|
26,900 |
|
|
90,774 |
|
|
75,731 |
|
|
Home peritoneal |
|
|
3,682 |
|
|
1,872 |
|
|
9,555 |
|
|
5,376 |
|
|
Acute |
|
|
2,171 |
|
|
1,990 |
|
|
6,379 |
|
|
5,953 |
|
| |
|
|
38,854(1 |
) |
|
30,762(1 |
) |
|
106,708(1 |
) |
|
87,060(1 |
) |
_______________
| (1) |
Treatments by the two managed centers included: in-center treatments of 3,414 and 9,492, for the three months and nine months ended September 30, 2004, and 2,968 and 8,214 for the three months and nine months ended September 30, 2003; no home peritoneal treatments; and acute treatments of 48 and 95, for the three months and nine months ended September 30, 2004, and 42 and 129 for the three months and nine months ended September 30, 2003. |
We also provide ancillary services associated with dialysis treatments, including the administration of EPO for the treatment of anemia in our dialysis patients. EPO is currently available from only one manufacturer, and no alternative drug has been available to us for the treatment of anemia in our dialysis patients. If our available supply of EPO were reduced either by the manufacturer or due to excessive demand, our revenues and net income would be adversely affected. The manufacturer of EPO could implement price increases which would adversely affect our net income. This manufacturer has developed another anemia drug that could possibly substantially reduce our revenues and profit from the treatment of anemia in our patients.
ESRD patients must either obtain a kidney transplant or obtain regular dialysis treatments for the rest of their lives. Due to a lack of suitable donors and the possibility of transplanted organ rejection, the most prevalent form of treatment for ESRD patients is hemodialysis through a kidney dialysis machine. Hemodialysis patients usually receive three treatments each week with each treatment lasting between three and five hours on an outpatient basis. Although not as common as hemodialysis in an outpatient facility, home peritoneal dialysis is an available treatment option, representing the third most common type of ESRD treatment after outpatient hemodialysis and kidney transplantation.
Approximately 56% of our medical service revenues were derived from Medicare and Medicaid reimbursement for the three months and nine months ended September 30, 2004, compared to 60% and 59% for the same periods of the preceding year, with rates established by CMS, and which rates are subject to legislative changes. Over the last two years, Medicare reimbursement rates have not increased. Dialysis is typically reimbursed at higher rates from private payors, such as a patient’s insurance carrier, as well as higher payments received under negotiated contracts with hospitals for acute inpatient dialysis services.
The following table shows the breakdown of our revenues by type of payor for the periods presented:
| |
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
|
| |
|
2004 |
|
2003 |
|
2004 |
|
2003 |
|
|
Medicare |
|
|
49 |
% |
|
52 |
% |
|
49 |
% |
|
51 |
% |
|
Medicaid and comparable programs |
|
|
7 |
|
|
8 |
|
|
7 |
|
|
8 |
|
|
Hospital inpatient dialysis services |
|
|
5 |
|
|
7 |
|
|
6 |
|
|
8 |
|
|
Commercial insurers and other private payors |
|
|
39 |
|
|
33 |
|
|
38 |
|
|
33 |
|
| |
|
|
100 |
% |
|
100 |
% |
|
100 |
% |
|
100 |
% |
Our medical service revenues are derived primarily from four sources: outpatient hemodialysis services, home peritoneal dialysis services, inpatient hemodialysis services and ancillary services. The following table shows the breakdown of our medical service revenues (in thousands) derived from our primary revenue sources and the percentage of total medical service revenue represented by each source for the periods presented:
| |
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
|
| |
|
2004 |
|
2003 |
|
2004 |
|
2003 |
|
|
Outpatient hemodialysis services |
|
$ |
4,181 |
|
|
39 |
% |
$ |
3,835 |
|
|
51 |
% |
$ |
13,200 |
|
|
46 |
% |
$ |
10,795 |
|
|
50 |
% |
|
Home peritoneal dialysis services |
|
|
728 |
|
|
7 |
|
|
334 |
|
|
4 |
|
|
1,745 |
|
|
6 |
|
|
932 |
|
|
4 |
|
|
Inpatient hemodialysis services |
|
|
576 |
|
|
5 |
|
|
531 |
|
|
7 |
|
|
1,686 |
|
|
6 |
|
|
1,551 |
|
|
7 |
|
|
Ancillary services |
|
|
5,372 |
|
|
49 |
|
|
2,836 |
|
|
38 |
|
|
12,133 |
|
|
42 |
|
|
8,419 |
|
|
39 |
|
| |
|
$ |
10,857 |
|
|
100 |
% |
$ |
7,536 |
|
|
100 |
% |
$ |
28,764 |
|
|
100 |
% |
$ |
21,697 |
|
|
100 |
% |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The healthcare industry is subject to extensive regulation by federal and state authorities. There are a variety of fraud and abuse measures to combat waste, including anti-kickback regulations and extensive prohibitions relating to self-referrals, violations of which are punishable by criminal or civil penalties, including exclusion from Medicare and other governmental programs. Unanticipated changes in healthcare programs or laws could require us to restructure our business practices which, in turn, could materially adversely affect our business, operations and financial condition. We have developed a Corporate Integrity Program to assure that we provide the highest level of patient care and services in a professional and ethical manner consistent with applicable fed
eral and state laws and regulations. Among the different programs is our Compliance Program, which has been implemented to provide us with our best efforts in assuring our compliance with fraud and abuse laws and to supplement our existing policies relating to claims submission, cost report preparation, initial audit and human resources, all geared towards a cost-efficient operation beneficial to patients and shareholders.
Dialysis Corporation of America’s future growth depends primarily on the availability of suitable dialysis centers for development or acquisition in appropriate and acceptable areas, and our ability to manage the development costs for these potential dialysis centers while competing with larger companies, some of which are public companies or divisions of public companies with greater numbers of personnel and financial resources available for acquiring and/or developing dialysis centers in areas targeted by us. Additionally, there is intense competition for qualified nephrologists who would serve as medical directors of dialysis facilities, and be responsible for the supervi
sion of those dialysis centers. There is no assurance as to when any new dialysis centers or inpatient service contracts with hospitals will be implemented, or the number of stations, or patient treatments such centers or service contracts may involve, or if such centers or service contracts will ultimately be profitable. It has been our experience that newly established dialysis centers, although contributing to increased revenues, have adversely affected our results of operations in the short term due to start-up costs and expenses and a smaller patient base.
Results of Operations
The following table shows our results of operations (in thousands) and the percentage of medical service revenue represented by each line item for the periods presented:
| |
|
Three Months Ended |
|
Nine Months Ended |
|
| |
|
September 30 |
|
September 30, |
|
| |
|
2004 |
|
2003 |
|
2004 |
|
2003 |
|
|
Medical service revenue |
|
|
10,857 |
|
|
100.0 |
% |
|
7,536 |
|
|
100.0 |
% |
$ |
28,764 |
|
|
100.0 |
% |
|
21,697 |
|
|
100.0 |
% |
|
Other income |
|
|
121 |
|
|
1.1 |
|
|
81 |
|
|
1.1 |
|
|
431 |
|
|
1.5 |
|
|
234 |
|
|
1.1 |
|
|
Total operating revenues |
|
|
10,978 |
|
|
101.1 |
|
|
7,617 |
|
|
101.1 |
|
|
29,195 |
|
|
101.5 |
|
|
21,931 |
|
|
101.1 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of medical services |
|
|
6,052 |
|
|
55.7 |
|
|
4,707 |
|
|
62.5 |
|
|
16,952 |
|
|
58.9 |
|
|
13,426 |
|
|
61.9 |
|
|
Selling, general and administrative expenses |
|
|
3,115 |
|
|
28.7 |
|
|
2,339 |
|
|
31.0 |
|
|
8,812 |
|
|
30.9 |
|
|
6,865 |
|
|
31.6 |
|
|
Provision for doubtful accounts |
|
|
303 |
|
|
2.8 |
|
|
3 |
|
|
-- |
|
|
652 |
|
|
2.3 |
|
|
258 |
|
|
1.2 |
|
|
Total operating costs and expenses |
|
|
9,470 |
|
|
87.2 |
|
|
7,049 |
|
|
93.5 |
|
|
26,416 |
|
|
91.8 |
|
|
20,549 |
|
|
94.7 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
|
1,508 |
|
|
13.9 |
|
|
568 |
|
|
7.5 |
|
|
2,779 |
|
|
9.7 |
|
|
1,382 |
|
|
6.4 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other, net |
|
|
2 |
|
|
-- |
|
|
19 |
|
|
.3 |
|
|
37 |
|
|
.1 |
|
|
57 |
|
|
1.3 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes, minority |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
interest and equity in affiliate earnings |
|
|
1,510 |
|
|
13.9 |
|
|
587 |
|
|
7.8 |
|
|
2,816 |
|
|
9.8 |
|
|
1,439 |
|
|
6.6 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax provision |
|
|
554 |
|
|
5.1 |
|
|
231 |
|
|
3.1 |
|
|
1,048 |
|
|
3.6 |
|
|
615 |
|
|
2.8 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before minority interest and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
equity in affiliate earnings |
|
|
956 |
|
|
8.8 |
|
|
356 |
|
|
4.7 |
|
|
1,768 |
|
|
6.2 |
|
|
824 |
|
|
3.8 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority interest in income of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
consolidated subsidiaries |
|
|
(302 |
) |
|
(2.8 |
) |
|
(57 |
) |
|
(.8 |
) |
|
(489 |
) |
|
(1.7 |
) |
|
(171 |
) |
|
(.8 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in affiliate earnings |
|
|
122 |
|
|
1.1 |
|
|
9 |
|
|
.1 |
|
|
173 |
|
|
.6 |
|
|
30 |
|
|
.1 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
776 |
|
|
7.1 |
% |
$ |
308 |
|
|
4.0 |
% |
$ |
1,452 |
|
|
5.0 |
% |
$ |
683 |
|
|
3.1 |
% |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income increased approximately $940,000 (165%) and $1,397,000 (101%) for the three months and nine months ended September 30, 2004, compared to the same periods of the preceding year. For these same periods, income taxes, minority interest and equity in affiliate earnings increased $923,000 (157%) and $1,376.000 (96%), and net income increased $468,000 (152%) and $768,000 (112%).
Medical service revenues increased approximately $3,322,000 (44%) and $7,066,000 (33%) for the three months and nine months ended September 30, 2004, compared to the same periods of the preceding year with the increase largely attributable to a 28% increase in total dialysis treatments performed by the company from 27,752 during the third quarter of 2003 to 35,392 during the third quarter of 2004, and a 23% increase in total dialysis treatments performed by the company from 78,717 during the first nine months of 2003 to 97,121 during the first nine months of 2004. This increase reflects increased revenues of approximately $840,000 and $1,799,000 for our Pennsylvania dialysis centers, including revenues of $258,000 and $489,000 for our new Pottstown center; and third qu
arter 2004 revenues of $181,000 for the two centers included in our acquisition of Keystone Kidney Care; increased revenues of $544,000 and $758,000 for our New Jersey centers; increased revenues of $258,000 and $730,000 for our Georgia centers; increased revenues of approximately $232,000 and $786,000 for our Maryland centers, including revenues of $126,000 and $137,000 for our new Rockville center; increased revenues of approximately $418,000 and $1,094,000 for our Ohio center; revenues of approximately $304,000 and $685,000 for our new Virginia center; and revenues of approximately $726,000 and $1,214,000 for our new South Carolina center. Some of our patients carry commercial insurance which may require an out of pocket co-pay by the patient, which is often uncollectible by us. This co-pay is typically limited, and therefore may lead to our under-recognition of revenue at the time of service. We routinely recognize these revenues as we become aware that these limits have been met.
Other operating income increased by approximately $40,000 and $197,000 for the three months and nine months ended September 30, 2004, compared to the same period of the preceding year. This includes a litigation settlement of $134,000 during the first quarter of 2004 and an increase in management fee income of $40,000 and $63,000 for the three months and nine months ended September 30, 2004, pursuant to management services agreements with our 40% owned Toledo, Ohio affiliate and our unaffiliated Georgia center.
Cost of medical services sales as a percentage of sales decreased to 56% and 59% for the three months and nine months ended September 30, 2004, compared to 62% for the same periods of the preceding year, including decreases in payroll costs and supply costs as a percentage of medical service sales. These decreases resulted from more efficient utilization of personnel resulting in lower per-treatment payroll costs, and more efficient supply utilization resulting in lower supply costs per treatment.
Approximately 29% and 28% of our medical services revenues for the three months and nine months ended September 30, 2004, and 28% for the same periods of the preceding year was derived from the administration of EPO to our dialysis patients. This drug is only available from one manufacturer in the United States. Price increases for this product without our ability to increase our charges would increase our costs and thereby adversely impact our earnings. We cannot predict the timing, if any, or extent of any future price increases by the manufacturer, or our ability to offset any such increases.
Selling, general and administrative expenses, those corporate and facility costs not directly related to the care of patients, including, among others, administration, accounting and billing, increased by approximately $776,000 (33%) and $1,947,000 (28%) for the three months and nine months ended September 30, 2004, compared to the same periods of the preceding year. This increase reflects operations of our new dialysis centers in Pennsylvania, South Carolina, Virginia, and Maryland, and increased support activities resulting from expanded operations. Selling, general and administrative
expenses as a percentage of medical services revenues decreased to approximately 29% and 31% for the three months and nine months ended September 30, 2004, compared to 31% and 32% for the same periods of the preceding year, including expenses of new centers incurred prior to Medicare approval for which there were no corresponding medical service revenues.
Provision for doubtful accounts increased approximately $300,000 and $393,000 for the three months and nine months ended September 30, 2004, compared to the same periods of the preceding year. Medicare bad debt recoveries of $150,000 and $180,000 were recorded during the three months and nine months ended September 30, 2003, with no such recoveries recorded during the first nine months of 2004. The provision for doubtful accounts reflects our collection experience with the impact of that experience included in accounts receivable presently reserved, plus recovery of accounts previously considered uncollectible from our Medicare cost report filings. The provision for doubtful accounts is determined under a variety of criteria, primarily aging of the receivables and payo
r mix. Accounts receivable are estimated to be uncollectible based upon various criteria including the age of the receivable, historical collection trends and our understanding of the nature and collectibility of the receivables, and are reserved for in the allowance for doubtful accounts until they are written off.
Other non-operating income (expense) decreased approximately $1,000 for the three months ended September 30, 2004, and increased approximately $6,000 for the nine months ended September 30, 2004, compared to the same periods of the preceding year. This includes a decrease in interest income of $6,000 and $16,000, an increase in rental income of $2,000 for the three months and a decrease in rental income of $1,000 for the nine months, a decrease in miscellaneous other income of $5,000 and $6,000 and a decrease in interest expense of $9,000 and $30,000 reflecting reduced average non-inter-company borrowings during both the three months and nine months ended September 30, 2004, compared to the same periods of the preceding year and lower average interest rates during the
nine month period with the reduction in average borrowings more than offsetting an increase in interest rates during the three month period. Interest expense to our parent, Medicore, Inc., increased $17,000 and $27,000 for the three months and nine months ended September 30, 2004 compared to the same periods of the preceding year as a result of an increase in the intercompany advance payable to our parent and borrowings under a demand promissory note payable to our parent. The prime rate was 4.75% at September 30, 2004, and 4% at December 31, 2003. See Notes 1, 3 and 5 of “Notes to the Consolidated Financial Statements.”
Although operations of additional centers have resulted in additional revenues, certain of these centers are still in the developmental stage and, accordingly, their operating results will adversely impact our overall results of operations until they achieve a patient count sufficient to sustain profitable operations.
We experienced same-center growth in total treatments of approximately 9% for the nine months ended September 30, 2004, compared to the same period of the preceding year, and same-center revenues grew approximately 20%. Management continues to search for ways to operate more efficiently and reduce costs through process improvements. In addition, we are reviewing technological improvements and intend to make capital investments to the extent we are confident such improvements will improve patient care and operating performance.
Minority interest represents the proportionate equity interests of minority owners of our subsidiaries whose financial results are included in our consolidated results. Equity in affiliate earnings represents our proportionate interest in the earnings of our 40% owned Ohio affiliate whose operating results improved for the three months and nine months ended September 30, 2004, compared to the same period of the preceding year. See Notes 1 and 13 to “Notes to Consolidated Financial Statements.”
Liquidity and Capital Resources
Working capital totaled approximately $2,570,000 at September 30, 2004, which reflected a decrease of $1,203,000 (32%) during the nine months ended September 30, 2004. Included in the changes in components of working capital was a decrease in cash and cash equivalents of $16,000, which included net cash provided by operating activities of $2,926,000; net cash used in investing activities of $3,911,000 (including additions to property and equipment of $2,378,000, acquisition payments to a minority member in two of our subsidiary dialysis centers for the remaining balance due of $670,000 to acquire an aggregate of 30% of such member’s interest in each of such subsidiaries, a net cash expenditure of $758,000 on acquisition of Keystone Kidney Care, $33,000 distributio
ns received from our 40% owned Ohio affiliate, and $125,000 loans to physician affiliates); and net cash provided by financing activities of $969,000 (including an increase in advances payable to our parent of $162,000, notes payable to our parent of $1,535,000, debt repayments of $573,000, distributions to subsidiary minority members of $212,000, $5,000 of receipts from the exercise of stock options and $52,000 capital contributions by a subsidiary minority member).
Our Easton, Maryland building has a mortgage to secure a development loan for our Vineland, New Jersey subsidiary, which loan is guaranteed by us. This loan had a remaining principal balance of $616,000 at September 30, 2004 and $636,000 at December 31, 2003. In April, 2001, we obtained a $788,000 five-year mortgage on our building in Valdosta, Georgia, which had an outstanding principal balance of approximately $685,000 at September 30, 2004 and $715,000 at December 31, 2003. See Note 3 to “Notes to Consolidated Financial Statements.”
We have an equipment financing agreement for kidney dialysis machines for our facilities, which had an outstanding balance of approximately $939,000 at September 30, 2004, and $1,321,000 at December 31, 2003. There was no additional equipment financing during the first nine months of 2004. See Note 3 to “Notes to Consolidated Financial Statements.”
During the first nine months of 2004, we borrowed approximately $1,535,000 to finance dialysis equipment purchases and for the initial payment of our acquisition of Keystone Kidney Care under a demand promissory note to our parent. See Note 5 to “Notes to Consolidated Financial Statements.”
We opened centers in Warsaw, Virginia; Aiken, South Carolina; Pottstown, Pennsylvania; and Rockville, Maryland during the first nine months of 2004, and acquired Keystone Kidney Care effective as of the close of business on August 31, 2004. We are in the process of developing a new dialysis center in each of Virginia and Ohio. Payment of the balance due of $670,000 on the purchase of minority interests in two of our Georgia dialysis centers was made during the second quarter of 2004. Payment of $761,000 was made September 1, 2004 on our Keystone Kidney Care acquisition. See Note 9 to “Notes to Consolidated Financial Statements.”
Capital is needed primarily for the development of outpatient dialysis centers. The construction of a 15 station facility, typically the size of our dialysis facilities, costs in the range of $750,000 to $1,000,000, depending on location, size and related services to be provided, which includes equipment and initial working capital requirements. Acquisition of an existing dialysis facility is more expensive than construction, although acquisition would provide us with an immediate ongoing operation, which most likely would be generating income. Although our expansion strategy focuses primarily on construction of new centers, we have expanded through acquisition of dialysis facilities and continue to review potential acquisitions. Development of a dialysis facility to initiate operations takes four to six months an
d usually up to 12 months or longer to generate income. We consider some of our centers to be in the developmental stage since they have not developed a patient base sufficient to generate and sustain earnings.
We are seeking to expand our outpatient dialysis treatment facilities and inpatient dialysis care and are presently in different phases of negotiations with physicians for the development of additional outpatient centers. Such expansion requires capital. We have been funding our expansion through internally generated cash flow and financing from our parent, Medicore, Inc. See Notes 3 and 5 to “Notes to Consolidated Financial Statements.” Our future expansion may require us to seek outside financing. While we anticipate that financing will be available either from a financial institution or our parent company, no assurance can be given that we will be successful in implementing our growth strategy or that adequate financing will be available to support our expansion.
Critical Accounting Policies and Estimates
The SEC has issued cautionary advice to elicit more precise disclosure in this Item 2, MD&A, about accounting policies management believes are most critical in portraying our financial results and in requiring management’s most difficult subjective or complex judgments.
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make judgments and estimates. On an on-going basis, we evaluate our estimates, the most significant of which include establishing allowances for doubtful accounts, a valuation allowance for our deferred tax assets and determining the recoverability of our long-lived assets. The basis for our estimates are historical experience and various assumptions that are believed to be reasonable under the circumstances, given the available information at the time of the estimate, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily available from other
sources. Actual results may differ from the amounts estimated and recorded in our financial statements.
We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements.
Revenue Recognition: Revenues are recognized net of contractual provisions at the expected collectable amount. We receive payments through reimbursement from Medicare and Medicaid for our outpatient dialysis treatments coupled with patients’ private payments, individually and through private third-party insurers. A substantial portion of our revenues are derived from the Medicare ERSD program, which outpatient reimbursement rates are fixed under a composite rate structure, which includes the dialysis services and certain supplies, drugs and laboratory tests. Certain of these ancillary services are reimbursable outside of the compo
site rate. Medicaid reimbursement is similar and supplemental to the Medicare program. Our acute inpatient dialysis operations are paid under contractual arrangements, usually at higher contractually established rates, as are certain of the private pay insurers for outpatient dialysis. We have developed a sophisticated information and computerized coding system, but due to the complexity of the payor mix and regulations, we sometimes receive more or less than the amount expected when the services are provided. We reconcile any differences at least quarterly.
Allowance for Doubtful Accounts: We maintain an allowance for doubtful accounts for estimated losses resulting from the inability of our patients or their insurance carriers to make required payments. Based on historical information, we believe that our allowance is adequate. Changes in general economic, business and market conditions could result in an impairment in the ability of our patients and the insurance companies to make their required payments, which would have an adverse effect on cash flows and our results of operations. The allowance for doubtful accounts is reviewed monthly and changes to the allowance are updated based o
n actual collection experience. We use a
combination of percentage of sales and the aging of accounts receivable to establish an allowance for losses on accounts receivable.
Valuation Allowance for Deferred Tax Assets: The carrying value of deferred tax assets assumes that we will be able to generate sufficient future taxable income to realize the deferred tax assets based on estimates and assumptions. If these estimates and assumptions change in the future, we may be required to adjust our valuation allowance for deferred tax assets which could result in additional income tax expense.
Long-Lived Assets: We state our property and equipment at acquisition cost and compute depreciation for book purposes by the straight-line method over estimated useful lives of the assets. In accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of the asset may not be recoverable. Recoverability of assets to be held and used is measured by comparison of the carrying amount of an asset to the future cash flows expected to be generated by the asset. If the carrying amount of the asset exceeds its estimated future cash flows, an impairment charge is recognized to the extent the carrying amount of the asset exceeds the fair value of the asset. These
computations are complex and subjective.
Goodwill and Intangible Asset Impairment: In assessing the recoverability of our goodwill and other intangibles we must make assumptions regarding estimated future cash flows and other factors to determine the fair value of the respective assets. This impairment test requires the determination of the fair value of the intangible asset. If the fair value of the intangible asset is less than its carrying value, an impairment loss will be recognized in an amount equal to the difference. If these estimates or their related assumptions change in the future, we may be required to record impairment charges for these assets. We adopted Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets,” (FAS 142) effective January 1, 2002, and are required to analyze goodwill and indefini
te lived intangible assets for impairment on at least an annual basis.
Impact of Inflation
Inflationary factors have not had a significant effect on our operations. A substantial portion of our revenue is subject to reimbursement rates established and regulated by the federal government. These rates do not automatically adjust for inflation. Any rate adjustments relate to legislation and executive and Congressional budget demands, and have little to do with the actual cost of doing business. Therefore, dialysis services revenues cannot be voluntarily increased to keep pace with increases in nursing and other patient care costs. Increased operating costs without a corresponding increase in reimbursement rates may adversely affect our earnings in the future.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We do not consider our exposure to market risks, principally changes in interest rates, to be significant.
Sensitivity of results of operations to interest rate risks on our investments is managed by conservatively investing funds in liquid interest bearing accounts of which we held approximately
$1,491,000 at September 30, 2004.
Interest rate risk on debt is managed by negotiation of appropriate rates for equipment financing and other fixed rate obligations based on current market rates. There is an interest rate risk associated with our variable rate mortgage obligations, which totaled approximately $1,301,000 at September 30, 2004, and our demand promissory note payable to our parent, Medicore, which amounted to approximately $1,535,000 at September 30, 2004.
We have exposure to both rising and falling interest rates. Assuming a relative 15% decrease in rates on our period-end investments in interest bearing accounts and a relative 15% increase in rates on our period-end variable rate debt would have resulted in a negative impact of approximately $13,000 on our results of operations for the nine months ended September 30, 2004.
We do not utilize financial instruments for trading or speculative purposes and do not currently use interest rate derivatives.
Item 4. Controls and Procedures
As of the end of the period of this quarterly report on Form 10-Q for the third quarter ended September 30, 2004, management carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and President, and the Vice President of Finance and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-15 of the Securities Exchange Act of 1934 (the “Exchange Act”). The disclosure controls and procedures are designed to ensure that information required to be disclosed by a company in the reports that it files under the Exchange Act, as is this quarterly report on Form 10-Q, is recorded, processed, summarized and reported within required time pe
riods specified by the SEC’s rules and forms. Based upon that evaluation, our Chief Executive Officer and President, and our Vice President of Finance and Chief Financial Officer concluded that our disclosure controls and procedures are effective in timely alerting them to material information relating to us, including our consolidated subsidiaries, required to be included in our periodic SEC filings.
There were no significant changes in our internal controls over financial reporting during our most recent fiscal quarter that have materially affected or are reasonably likely to materially affect, internal controls over financial reporting, including any corrective actions with regard to significant deficiencies and material weaknesses, of which there were none.
PART II -- OTHER INFORMATION
Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities.
Equity Securities Sold by the Company During the Third Quarter Ended September 30, 2004 and Not Registered Under the Securities Act
The only issuance of equity securities by the company during the third quarter ended September 30, 2004, was the grant in August, 2004, of a five-year incentive option exercisable at $4.02 per share expiring August 15, 2009, to one executive officer for an aggregate of 50,000 shares of common stock vesting in equal 25% increments each year commencing August 16, 2005. This option was granted under Section 4(2) of the Securities Act of 1933, as amended (the “Securities Act”), the non-public offering exemption from the registration requirements of the Securities Act, since the optionee is an executive officer of the company, who is knowledgeable and has access to information concerning the company and its operations, financial condition and management. The optio
n, as are the shares of common stock obtainable upon exercise of the option, is not publicly transferable absent registration under the Securities Act unless an exemption from such registration is available. Any shares obtained upon exercise of the option will be “restricted” securities as defined in Rule 144(a)(3) of the Securities Act, and will have a legend on each certificate indicating the limitation of public transferability together with stop transfer instructions placed against such shares with the company’s transfer agent.
Purchases of Equity Securities By or On Behalf of the Company During the Third Quarter Ended September 30, 2004
The company has a common stock repurchase program, which was announced in September, 2000, for the repurchase of up to 600,000 shares at the then current market prices of approximately $.90 (post January, 2004 split, $.45) per share. The repurchase program was reiterated in September, 2001, and continues. The maximum number of shares that may yet be purchased under the plan is 240,000 shares. There were no repurchases of any equity securities during the third quarter months of July, August and September, 2004. Repurchases are unlikely at the current market prices. The closing price of our common stock on November 4, 2004 was $8.20.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Part I Exhibits
31 Rule 13a-14(a)/15d-14(a) Certifications
| |
31.1 |
Certifications of the Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934. |
| |
31.2 |
Certifications of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934. |
32 Section 1350 Certifications
| |
32.1 |
Certifications of the Chief Executive Officer and the Chief Financial Officer pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934 and U.S.C. Section 1350. |
Part II Exhibits
None
(b) Reports on Form 8-K
There were no reports on Form 8-K for the third quarter ended September 30, 2004.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| |
|
|
| |
CORPORATION OF AMERICA |
|
|
|
|
By: |
/s/ Don Waite |
| |
DON WAITE, Vice President of Finance,
Chief Financial Officer |
| |
|
EXHIBIT INDEX
Exhibit No.
31 Rule 13a-14(a)/15d-14(a) Certifications
| |
31.1 |
Certifications of the Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934. |
| |
31.2 |
Certifications of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934. |
32 Section 1350 Certifications
| |
32.1 |
Certifications of the Chief Executive Officer and the Chief Financial Officer pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934 and U.S.C. Section 1350. |