0000950134-01-506774.txt : 20011009
0000950134-01-506774.hdr.sgml : 20011009
ACCESSION NUMBER: 0000950134-01-506774
CONFORMED SUBMISSION TYPE: 10-Q/A
PUBLIC DOCUMENT COUNT: 1
CONFORMED PERIOD OF REPORT: 20010630
FILED AS OF DATE: 20010927
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: TENDER LOVING CARE HEALTH CARE SERVICES INC/ NY
CENTRAL INDEX KEY: 0001082993
STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-HOME HEALTH CARE SERVICES [8082]
IRS NUMBER: 113476656
STATE OF INCORPORATION: DE
FISCAL YEAR END: 0331
FILING VALUES:
FORM TYPE: 10-Q/A
SEC ACT: 1934 Act
SEC FILE NUMBER: 000-25777
FILM NUMBER: 1745940
BUSINESS ADDRESS:
STREET 1: 1983 MARCUS AVE
CITY: LAKE SUCCESS
STATE: NY
ZIP: 11042
BUSINESS PHONE: 5163581000
MAIL ADDRESS:
STREET 1: 1983 MARCUS AVE
CITY: LAKE SUCCESS
STATE: NY
ZIP: 11042
10-Q/A
1
d90875a1e10-qa.txt
AMENDMENT NO. 1 TO FORM 10-Q
1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
--- SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY
PERIOD ENDED JUNE 30, 2001, 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 0-25777
-------
TENDER LOVING CARE HEALTH CARE SERVICES, INC.
---------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 11-3476656
-------- ----------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1983 MARCUS AVENUE, LAKE SUCCESS, NEW YORK 11042
------------------------------------------ -----
(Address of principal executive offices) (Zip Code)
(516) 358-1000
--------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such 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 .
The number of shares of common stock outstanding on August 10, 2001 was
11,809,653.
This amendment is being filed to reflect the restatement of the Company's
condensed consolidated financial statements, as discussed in Note 5 thereto, and
other information related to such restated financial statements. Except for
Items 1 and 2 of Part I, no other information included in the original report on
Form 10-Q is amended by this Form 10-Q/A.
2
TENDER LOVING CARE HEALTH CARE SERVICES, INC. AND SUBSIDIARIES
--------------------------------------------------------------------------------
INDEX
--------------------------------------------------------------------------------
PAGE NO.
--------
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets -
June 30, 2001 (as restated) and February 28, 2001
(as restated) 3
Condensed Statements of Consolidated
Operations - Three months ended
June 30, 2001 and 2000 4
Condensed Statements of Consolidated Cash
Flows - Three months ended June 30, 2001
and 2000 5
Notes to Condensed Consolidated Financial
Statements 6-9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS 10-11
Forward-Looking Statements 12-14
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 15
2
3
PART I. FINANCIAL INFORMATION
-----------------------------
TENDER LOVING CARE HEALTH CARE SERVICES, INC. AND SUBSIDIARIES
--------------------------------------------------------------
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
-------------------------------------------------
(IN THOUSANDS, EXCEPT SHARE DATA)
---------------------------------
JUNE 30, FEBRUARY 28,
2001 2001
--------- ------------
(RESTATED - SEE NOTE 5)
ASSETS
------
CURRENT ASSETS:
Cash and cash equivalents $ 6,100 $ 4,955
Accounts receivable, net of allowance
for doubtful accounts of $10,400 and
$10,500, respectively 75,987 71,425
Prepaid expenses and other current assets 1,909 2,860
-------------------------------------------------------------------------------------
Total current assets 83,996 79,240
FIXED ASSETS, net of accumulated
depreciation of $9,309 and $8,434, respectively 15,534 16,338
GOODWILL, net of accumulated
amortization of $8,980 and $8,789, respectively 5,116 5,307
OTHER ASSETS 1,965 2,139
-------------------------------------------------------------------------------------
TOTAL $ 106,611 $ 103,024
=====================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable and accrued expense $ 23,413 $ 21,015
Accrued payroll and payroll related expenses 20,889 21,732
Current portion of Medicare and Medicaid liabilities 12,900 10,713
Current portion of long-term debt 80,088 72,924
-------------------------------------------------------------------------------------
Total current liabilities 137,290 126,384
LONG-TERM DEBT 8,298 9,736
LONG-TERM MEDICARE AND MEDICAID
LIABILITIES 42,904 46,357
OTHER LIABILITIES 2,585 2,531
-------------------------------------------------------------------------------------
TOTAL LIABILITIES 191,077 185,008
-------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY (DEFICIT):
Common stock - $.01 par value;
50,000,000 shares authorized;
11,809,653 outstanding at June 30, 2001
and February 28, 2001 118 118
Additional paid-in capital 50,981 50,981
Accumulated deficit (135,565) (133,083)
-------------------------------------------------------------------------------------
Total stockholders' equity (deficit) (84,466) (81,984)
-------------------------------------------------------------------------------------
TOTAL $ 106,611 $ 103,024
=====================================================================================
3
4
TENDER LOVING CARE HEALTH CARE SERVICES, INC. AND SUBSIDIARIES
--------------------------------------------------------------
CONDENSED STATEMENTS OF CONSOLIDATED OPERATIONS (UNAUDITED)
-----------------------------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
-----------------------------------
THREE MONTHS ENDED
JUNE 30,
-----------------------
2001 2000
-------- --------
REVENUES:
---------
TOTAL REVENUES $ 65,744 $ 56,660
-------- --------
OPERATING EXPENSES:
Service costs 33,669 35,138
General and administrative costs 28,743 22,046
-------- --------
Total Operating Expenses 62,412 57,184
-------- --------
INCOME (LOSS) BEFORE INTEREST, DEPRECIATION,
AMORTIZATION AND INCOME TAXES 3,332 (524)
-------- --------
INTEREST AND OTHER EXPENSES:
Interest expense 4,618 3,306
Interest (income) (63) (235)
Depreciation and amortization 1,095 1,122
Other (income) expense, net (544) (75)
-------- --------
Total interest and other expense 5,106 4,118
-------- --------
(LOSS) BEFORE INCOME TAXES (1,774) (4,642)
PROVISION FOR INCOME TAXES 25 25
-------- --------
NET (LOSS) $ (1,799) $ (4,667)
======== ========
INCOME (LOSS) PER COMMON SHARE-BASIC $ (.15) $ (.40)
======== ========
INCOME (LOSS) PER COMMON SHARE-DILUTED $ (.15) $ (.40)
======== ========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING:
BASIC 11,810 11,810
======== ========
DILUTED 11,810 11,810
======== ========
4
5
TENDER LOVING CARE HEALTH CARE SERVICES, INC. AND SUBSIDIARIES
--------------------------------------------------------------
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS (UNAUDITED)
-----------------------------------------------------------
(IN THOUSANDS)
--------------
THREE MONTHS ENDED
JUNE 30,
-----------------------
2001 2000
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) $ (1,799) $ (4,667)
Adjustments to reconcile net (loss)
to net cash provided by operations:
Depreciation and amortization of fixed assets 952 967
Amortization of goodwill 143 155
Allowance for doubtful accounts (200) (530)
(Gain) on sale of assets -- (23)
Increase (decrease) in other liabilities 46 (140)
Change in operating assets and liabilities:
Accounts receivable (2,079) (5,323)
Accrued payroll and payroll related expenses (284) 298
Prepaid expenses and other current assets (375) 343
Accounts payable and accrued expenses 1,242 (3,326)
Increase (decrease) in Medicare and
Medicaid liabilities (157) (189)
Other assets 127 73
-------- --------
Net cash used in operating activities (2,384) (12,362)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of assets -- 25
Purchase of fixed assets (410) (316)
-------- --------
Net cash used in investing activities (410) (291)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under secured credit facility 4,893 8,861
Proceeds from note payable -- 1,000
Payment of notes payable and other long
term liabilities (1,126) (1,247)
-------- --------
Net cash provided by financing activities 3,767 8,614
-------- --------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 973 (4,039)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 5,127 9,299
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 6,100 $ 5,260
======== ========
SUPPLEMENTAL DATA:
Cash paid for:
Interest $ 3,899 $ 3,473
======== ========
Income taxes, net $ 37 $ (22)
======== ========
5
6
TENDER LOVING CARE HEALTH CARE SERVICES, INC. AND SUBSIDIARIES
--------------------------------------------------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
----------------------------------------------------------------
1. FINANCIAL STATEMENTS - Basis of Presentation: Tender Loving Care
Health Care Services, Inc. ("TLCS" or "the Company") is a leading
provider of home health care services with 87 locations in 22 states
and the District of Columbia. The accompanying unaudited condensed
consolidated financial statements reflect the results of operations of
TLCS and its related financial position and cash flows. In the opinion
of the Company, the accompanying unaudited condensed consolidated
financial statements contain all adjustments (consisting of only normal
and recurring accruals) necessary to present fairly the financial
position of the Company and its subsidiaries as of June 30, 2001 and
February 28, 2001 and the results of operations and the cash flows for
the three months ended June 30, 2001 and 2000. The results for the
three months ended June 30, 2001 and 2000 are not necessarily
indicative of the results for an entire year. It is suggested that
these condensed consolidated financial statements be read in
conjunction with the Company's audited financial statements as of
February 28, 2001 and for the fiscal year then ended which are included
in the Company's Annual Report on Form 10-K/A.
Change in Reporting Period: During the fourth quarter of the fiscal
year ended February 28, 2001, the Company's Board of Directors voted
unanimously to change the Company's fiscal year-end to March 31 from
February 28/29.
The accompanying unaudited condensed consolidated financial statements
reflect results of operations for the three months ended June 30, 2001.
The results of operations for the three months ended June 30, 2001
("the 2001 period") are comparable to the results of operations for the
three months ended May 31, 2000 ("the 2000 period"). The financial
information for the comparable prior year period is not distorted by
use of the quarterly period which ended on May 31, 2000. The Registrant
does not believe that seasonal or other factors exist in any material
respect that could affect the comparability of information or trends
reflected. Accordingly, the Registrant has not undertaken a recasting
of quarterly information for its prior year.
The net loss of $683 thousand for the one month period ended March 31,
2001 was recorded directly to Stockholders' Equity (Deficit) as a
reduction to retained earnings. The following table presents the
Company's condensed consolidated financial information for the one
month period ended March 31, 2001 (dollars in thousands):
6
7
One Month Ended
March 31, 2001
---------------
Revenue $ 21,813
=======
Income before interest, depreciation,
amortization and income taxes $ 1,140
=======
Interest and other expenses $ 1,823
=======
Net (loss) $ (683)
=======
The following table presents the Company's condensed consolidated cash
flow information for the one month period ended March 31, 2001:
One Month Ended
March 31, 2001
---------------
Net cash used in operating activities $ (2,443)
Net cash used in investing activities (59)
Net cash provided by financing activities 2,674
--------
Net increase in cash and cash equivalents 172
Cash and cash equivalents, beginning of period 4,955
--------
Cash and cash equivalents, end of period $ 5,127
========
2. EARNINGS (LOSS) PER COMMON AND COMMON EQUIVALENT SHARE -
The calculation of basic and diluted earnings (loss) per share was
calculated for all periods in accordance with the requirements of
Statement of Financial Accounting Standards No. 128, "Earnings per
Share."
The shares used in computing basic and diluted earnings (loss) per
share were 11,809,653 shares for the three months ended June 30, 2001
and 2000. The calculations of earnings (loss) per share reflect the
weighted average number of shares outstanding.
3. MEDICARE REPAYMENT PLAN - In May 2001, the Company obtained an
amendment to its repayment agreement ("the Agreement") from the Federal
Centers for Medicare and Medicaid Services ("CMS") (formerly the
Federal Health Care Financing Administration) for the repayment of all
excess PIP amounts and all audit liabilities relative to periods
through February 28, 2001. The Agreement, as amended, revised the terms
of a prior repayment agreement reached in December 1999, resulting in
reduced monthly payments in earlier periods and an extension of the
maturity date of the repayment plan. The Agreement, as amended,
provides for aggregate monthly payments of principal and interest from
June 2001 through May 2005. The required monthly payments are $750
thousand from June 2001 through February 2002, $1.0 million from March
2002 through November 2002, $1.5 million from December 2002 through May
2004 and $1.75 million from June 2004 through April 2005. Any remaining
7
8
liabilities as of May 2005 for periods covered by the Agreement will
then be paid in a balloon payment, the amount of which is to be
determined no later than March 1, 2005. Any overpayments or audit
liabilities that are successfully appealed by the Company will be
subtracted from the total amounts owed. Interest is accrued from the
date of each assessment at the government rate of interest (currently
at 13.75% per annum). United Government Services LLC ("UGS"), a fiscal
intermediary for CMS, collects amounts due under the repayment plan by
offsetting against current remittances due to the Company.
4. CONTINGENCIES - On December 21, 1998, H.L.N. Corporation, Frontlines
Homecare, Inc., E.T.H.L., Inc., Phoenix Homelife Nursing, Inc., and
Pacific Rim Health Care Services, Inc., former licensees (franchisees)
of the Company for the territory comprising certain counties in and
around Los Angeles, California and their holding company, instituted an
action against the Company subsidiaries, Staff Builders, Inc., Staff
Builders International, Inc. and Staff Builders Services, Inc., and
certain executive officers of the Company in the Superior Court for the
State of California, County of Los Angeles. The action was removed to
United States District Court for the Central District of California on
December 22,1998. Plaintiffs filed a First and Second Amended Complaint
in the Central District on January 8, 1999 and September 1, 1999,
respectively, to challenge the termination of the four franchise
agreements between the Company and certain of the named plaintiffs. The
plaintiffs are seeking damages for violations of California franchise
law, breach of contract, fraud and deceit, unfair trade practices,
claims under the RICO, negligence, intentional interference with
contractual rights, declaratory and injunctive relief and a request for
an accounting. The plaintiffs have not specified the amount of damages
they are seeking. Discovery is currently in process.
The Company is a defendant in several civil actions which are routine
and incidental to its business. The Company purchases insurance in such
amounts which management believes to be reasonable and prudent.
Although the Company cannot estimate the ultimate cost of its open
legal matters with precision, it has recorded a loss accrual at June
30, 2001 and February 28, 2001 for the aggregate, estimated amount to
litigate or resolve such matters. In the opinion of management, the
outcome of pending litigation will not have a material adverse effect
on the Company's consolidated financial position or results of
operations.
5. RESTATEMENT OF BALANCE SHEET
Subsequent to the issuance of the Company's condensed consolidated
financial statements included in its Quarterly Report on Form 10-Q for
the quarter ended June 30, 2001, the Company's management determined
that the amounts outstanding pursuant to its credit facility should
have been classified as current liabilities rather than long-term debt,
pursuant to the provisions of Consensus 95-22 issued by the Financial
Accounting Standards Board Emerging Issues Task Force. Accordingly, the
accompanying balance sheets have been restated to reflect the
reclassification of the amounts
8
9
outstanding pursuant to this credit facility as current liabilities. As
a result, current liabilities increased by $73.9 million and $65.7
million at June 30, 2001 and February 28, 2001, respectively, and
long-term debt decreased by the same amounts. This reclassification had
no effect on total assets, total stockholders' equity (deficit), total
revenues, operating income (loss), net (loss), or net cash provided by
(used in) operating activities for any period.
9
10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
---------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
The following discussion and analysis provides information which
management believes is relevant to an assessment and understanding of
the Company's results of operations and financial condition. This
discussion should be read in conjunction with the Condensed
Consolidated Financial Statements appearing in Item 1.
As discussed in Note 5 to the condensed consolidated financial
statements, the Company has restated its condensed consolidated balance
sheets as of June 30, 2001 and February 28, 2001 to classify amounts
outstanding pursuant to its credit facility as current liabilities
rather than as long-term debt.
RESULTS OF OPERATIONS
---------------------
Total revenues increased by $9.0 million, or 16.0%, to $65.7 million
for the three months ended June 30, 2001 ("the 2001 period") from $56.7
million for the three months ended May 31, 2000 ("the 2000 period").
The increase in the Company's revenues is primarily due to an increase
in the Company's Medicare revenues of $15.1 million to $42.4 million in
the 2001 period from $27.3 million in the 2000 period. This growth is
attributable to an increase in patient admissions as well as changes in
the Medicare payment methodology under a Prospective Payment System
("PPS") which became effective October 1, 2000 for providers of
Medicare home health services. Offsetting this increase is a decrease
in non-Medicare revenue resulting from the Company's change in revenue
mix by eliminating business with certain payor sources that represented
minimal profits or poor cash flow.
The following are the Company's service revenues by payment source:
THREE MONTHS ENDED
JUNE 30,
-----------------
2001 2000
---- ----
Medicare 64.6% 48.1%
Medicaid 20.9 26.7
Insurance, contracts and individuals 14.0 24.3
Other 0.5 0.9
----- -----
Total 100.0% 100.0%
===== =====
Direct service costs were 51.2% and 62.0% of revenues for the 2001 and
2000 periods, respectively. The decrease in operating costs as a
percentage of service revenues was primarily due to higher Medicare
rates paid for services under PPS as compared to cost reimbursement
previously received under the Medicare Interim Payment System ("IPS")
which was in effect from March 1, 1998 until September 30, 2000.
Additionally, the decreases in operating costs as a percentage of
service revenues results from a change in revenue mix, as the Company
complies with its objective to eliminate unprofitable and low margin
business.
General and administrative costs were $28.7 million and $22.0 million
and were 43.7% and 38.9% of revenues in the 2001 and 2000 periods,
respectively. The increase in general and administrative costs was
primarily due to increased administrative salary costs, related in part
to our sales force growth, and licensee distribution expense which
results from higher gross margins.
10
11
Interest expense was approximately $4.6 million in the 2001 period as
compared to $3.3 million in the 2000 period. The increase in interest
expense in the 2001 period was primarily due to the increase in the
level of borrowings under the Company's accounts receivable purchase
program.
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
The Company finances its operations through an accounts receivable
purchase program with an entity which provides health care accounts
receivable financing. Under the program, the Company may sell to an
affiliate of such entity up to $85 million of the Company's accounts
receivable so long as the receivables meet certain qualitative and
quantitative criteria and the Company is in compliance with the terms
of the agreement.
The balance of amounts outstanding under the Company's secured
financing facility increased primarily as a result of the increase in
the Company's accounts receivable. The Company's net trade accounts
receivable increased by approximately $4.6 million to $76.0 million at
June 30, 2001 from $71.4 million at February 28, 2001. This increase is
due to an increase in Medicare receivables resulting from an increase
in related revenue as well as a relatively high level of non-Medicare
receivables to related revenue due to certain slow payors. The Company
is taking significant steps to reduce the time it takes to collect
accounts receivable including the establishment of de-centralized
billing and service centers, changes in revenue mix toward more timely
payors and expansion of a comprehensive, Company-wide quality assurance
program to maximize the clarity and accuracy of all clinical and
financial billing data.
Management continues to pursue various strategies including, but not
limited to, obtaining additional financing, cost reductions, change in
revenue mix and negotiating with new and existing payor sources. The
Company believes that cash provided from operations and its existing
financing facility provides adequate funds for the Company's current
level of operations and debt obligations for at least the next twelve
months.
RECENTLY ISSUED ACCOUNTING STANDARDS
------------------------------------
In June 2001, the Financial Accounting Standards Board issued SFAS No.
141, "Business Combinations" (effective July 1, 2001) and SFAS No. 142,
"Goodwill and Other Intangible Assets" (effective December 15, 2001).
SFAS No. 141 prohibits pooling-of-interests accounting for
acquisitions. SFAS No. 142 specifies that goodwill and some intangible
assets will no longer be amortized but instead will be subject to
periodic impairment testing. The effect of the SFAS No. 142
pronouncement on the Company's financial results is currently being
evaluated.
11
12
FORWARD-LOOKING STATEMENTS
--------------------------
Certain statements in this report on Form 10-Q constitute
"forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. These statements are
typically identified by the inclusion of phrases such as "the Company
believes" and other phrases of similar meaning. These forward-looking
statements are based on the Company's current expectations. Such
forward-looking statements involve known and unknown risks,
uncertainties, and other factors that may cause the actual results,
performance or achievements of the Company to be materially different
from any future results, performance or achievements expressed or
implied by such forward-looking statements. The potential risks and
uncertainties which could cause actual results to differ materially
from the Company's expectations include the impact of further changes
in the Medicare reimbursement system, including any changes to the
current prospective payment system; government regulation; health care
reform; pricing pressures from third-party payors, including managed
care organizations; retroactive Medicare audit adjustments; and changes
in laws and interpretations of laws or regulations relating to the
health care industry.
GOVERNMENT REGULATION. As a home health care provider, the Company is
subject to extensive and changing state and Federal regulations
relating to the licensing and certification of its offices and the sale
and delivery of its products and services. The imposition of more
stringent regulatory requirements or the denial or revocation of any
license or permit necessary for the Company to operate in a particular
market could have a material adverse effect on the Company's
operations. The Federal government and Medicare fiscal intermediaries
have become more vigilant in their review of Medicare reimbursements to
home health care providers generally, and are preparing to conduct
reviews of a greater number of health care claims with an increased
focus on clinical procedures and related documentation. State and
Federal enforcement officials also have increased their scrutiny of
providers and are applying an increasingly expansive view of activities
they believe to be fraudulent or abusive. Changes in the law and
regulations as well as new interpretations enforced by the relevant
regulatory agencies could have a material adverse effect on the
Company's operations and the cost of doing business.
Additionally, third-party payors have generally sought to contain costs
by reducing payments and/or deferring payments to providers. Continued
cost reduction efforts by third-party payors could adversely affect the
Company's cash flow and results of operations.
THIRD-PARTY REIMBURSEMENT AND MANAGED CARE. Because the Company is
reimbursed for its services primarily by the Medicare/Medicaid
programs, insurance companies, managed care companies and other
third-party payors, the implementation of alternative payment
methodologies for any of these payors could have an impact on revenues
and profit margins.
HEALTH CARE REFORM. A new prospective payment system ("PPS") became
effective for all home health care agencies on October 1, 2000. Home
health care providers have an opportunity to generate profits under PPS
if costs are contained under the per-episode reimbursement amounts.
However, unforeseen changes in health care reimbursement regulations
could adversely affect the Company's ability to generate a profit under
PPS. In addition, because PPS requires significant changes in billing
methodology, the Company's systems may not be able to adapt immediately
or sufficiently to all such changes. Further, Medicare fiscal
intermediaries are implementing new systems which may result in slower
payments than otherwise anticipated.
12
13
As Congress and state reimbursement entities assess alternative health
care delivery systems and payment methodologies, the Company cannot
predict which additional reforms may be adopted or what impact they may
have on the Company. Additionally, uncertainties relating to the nature
and outcomes of health care reforms have also generated numerous
realignments, combinations and consolidations in the health care
industry which may also have an adverse impact on the Company's
business strategy and results of operations.
BUSINESS CONDITIONS. The Company must continue to establish and
maintain close working relationships with physicians and physician
groups, managed care organizations, hospitals, clinics, nursing homes,
social service agencies and other health care providers. There can be
no assurance that the Company will continue to establish or maintain
such relationships. The Company expects additional competition will
develop in future periods given the increasing market demand for the
type of services offered.
ATTRACTION AND RETENTION OF LICENSEES AND EMPLOYEES. Maintaining
quality caregivers, managers, branch administrators and licensees will
play a significant part in the future success of the Company. The
Company's professional nurses and other health care personnel are key
to the continued provision of quality care to the Company's patients.
The possible inability to attract and retain qualified nursing
management and sufficient numbers of credentialed health care
professionals and para-professionals as well as office management and
information technology personnel could adversely affect the Company's
operations and quality of service.
SATISFACTORY FINANCING. Proceeds from the Company's financing program
provided some working capital and the ability to pay portions of
certain accumulated indebtedness. Under the financing program, the
Company sells its trade accounts receivable. However, the financing
facility is not obligated to continually purchase such receivables. The
Company is limited to selling up to $85 million of eligible accounts
receivable under the financing facility and such facility expires on
December 31, 2002. The Company has negotiated deferred payment terms
for certain of its Medicare and Medicaid liabilities and has made
arrangements with many of its other creditors to either reduce its
liability to them, defer and/or extend payment of the liability, or a
combination of several of these steps. Management cannot provide
assurance the Company's vendors will continue to extend credit.
Pursuant to the Company's agreement with the Federal Centers for
Medicare and Medicaid Services ("CMS") (formerly the Federal Health
Care Financing Administration) to repay accumulated Medicare
liabilities, the Company will be required to pay excess periodic
interim payments received and Medicare audit liabilities on a monthly
basis through May 2005.
13
14
United Government Services LLC ("UGS"), a fiscal intermediary for CMS,
collects amounts due under the repayment plan by offsetting against
current remittances due to the Company. If no Medicare accounts
receivable are available for offset as amounts become due under the
repayment plan, then all amounts owed pursuant to this repayment plan
may become immediately due and payable.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(A) EXHIBITS
Exhibit No. Description
----------- -----------
3.1 Amended and Restated Certificate of Incorporation of the
Company, filed with the Secretary of State of Delaware on
October 14, 1999. (A)
3.2 Amended and Restated By-laws of the Company. (A)
NOTES TO EXHIBITS
(A) Incorporated by reference to the Company's Form 10-Q (File No.
0-25777) filed with the Commission on October 20, 1999.
(B) REPORTS ON FORM 8-K
During the quarter ended June 30, 2001 no reports on Form 8-K were
filed by the Registrant.
14
15
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.
TENDER LOVING CARE HEALTH CARE
SERVICES, INC.
Dated: September 27, 2001 By: /s/ Stephen Savitsky
---------------------------------
Stephen Savitsky
Chairman of the Board, and
Chief Executive Officer,
(Principal Executive Officer) and
Director
Dated: September 27, 2001 By: /s/ Dale R. Clift
---------------------------------
Dale R. Clift
President and Chief Operating Officer
Dated: September 27, 2001 By: /s/ Willard T. Derr
---------------------------------
Willard T. Derr
Chief Financial Officer, and Sr.
Vice President, Corporate
Controller and Treasurer
(Principal Financial and
Accounting Officer)
15