SEC Company Response from ALMOST FAMILY INC (CIK 0000799231) — Nov 9, 2005
ALMOST FAMILY INC (CIK 0000799231)
Date: Nov. 9, 2005 · CIK: 0000799231 · Accession: 0000799231-05-000042
AI Filing Summary & Sentiment
Letter
VIA EDGAR
Ms. Mary Mast Ms. Sasha Parikh Securities and Exchange Commission Division of Corporate Finance
This correspondence includes the pertinent excerpted pages of our draft Form 10-K/A as discussed in our telephone conference today. These pages have also been faxed to you marked to show changes from our original Form 10K. The document has not been subjected to all the quality assurance work that would precede actual filing so there may be some typographical errors. That work will take place Thursday and Friday November 10 and 11.
We appreciate your willingness to review these draft pages and share your guidance with us. It is the Company's intent to file the Form 10-K/A, the required 8K and our September Form 10Q all on Monday November 14.
We appreciate your consideration.
Sincerely,
C. Steven Guenthner
Senior Vice President
& Chief Financial Officer
Almost Family, Inc.
Show Raw Text
<DOCUMENT>
<TYPE>CORRESP
<SEQUENCE>1
<FILENAME>filename1.txt
<TEXT>
VIA EDGAR
Ms. Mary Mast
Ms. Sasha Parikh
Securities and Exchange Commission
Division of Corporate Finance
This correspondence includes the pertinent excerpted pages of our draft Form
10-K/A as discussed in our telephone conference today. These pages have also
been faxed to you marked to show changes from our original Form 10K. The
document has not been subjected to all the quality assurance work that would
precede actual filing so there may be some typographical errors. That work will
take place Thursday and Friday November 10 and 11.
We appreciate your willingness to review these draft pages and share your
guidance with us. It is the Company's intent to file the Form 10-K/A, the
required 8K and our September Form 10Q all on Monday November 14.
We appreciate your consideration.
Sincerely,
C. Steven Guenthner
Senior Vice President
& Chief Financial Officer
Almost Family, Inc.
<PAGE>
DRAFT
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
(Mark One)
/ X /ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2004
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 1-09848
ALMOST FAMILY, INC.
(Exact name of registrant as specified in its charter)
Delaware 06-1153720
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization) Identification No.)
organization)
9510 Ormsby Station Road, Suite 300 40223
(Address of principal executive offices) (Zip Code)
(502) 891-1000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Title of Each Class Name of Each Exchange on
Common Stock, par value $.10 per share Which Registered
Preferred Stock Purchase Rights NASDAQ SmallCapSystem
Indicate by check mark whether the Registrant has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. ______
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2).
Yes No x .
----------- -----------
The aggregate market value of Registrant's Common Stock held by non-affiliates
of the Registrant as of June 30, 2004 was approximately $14,597,000 (based on
the last sale price of a share of the common stock as of June 30, 2004 ($8.45),
as reported by the NASDAQ SmallCap System). As of March 28, 2005, 2,316,527
shares of the Registrant's Common Stock were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
The definitive proxy statement relating to the registrant's Annual Meeting of
Stockholders, to be held May 16, 2005, is incorporated by reference in Part III
to the extent described therein.
<PAGE>
PART I
Amendment of Previous Financial Reports Related to Contingent Liability Matters
The Company's Form 10-K filings for the years ended December 31, 2004 and 2003
previously disclosed the following three items, all of which, from an accounting
perspective, are characterized as contingent liabilities in accordance with
Statement of Financial Accounting Standards No. 5 "Accounting for Contingent
Liabilities":
o in April 2003 the Chancery Court of Williamson County, Tennessee,
issued a ruling in favor of Franklin Associates L.P. ("Franklin"),
awarding damages against the Company in the amount of $984,970
o a Kentucky transportation broker which owes the Company
approximately $535,000 entered into bankruptcy proceedings in
the fourth quarter of 2002; and
o the expiration of applicable statutes of limitations on tax returns
related to the Company's 2000 fiscal year, in which it sold its product
operations and adopted discontinued operations accounting treatment for
its visiting nurse segment (later reversed), resulted in the recording
in discontinued operations in our 2003 financial statements of a
one-time reduction in estimated tax liabilities of approximately
$854,000.
The Company received a letter from the U.S. Securities and Exchange Commission
following the SEC staff's routine review of the Company's form 10-K for the year
ended December 31, 2004, which letter commented on, among other items, the
accounting treatment of these contingent liability matters. In addition, at the
same time, management entered into discussions with Ernst & Young LLP, the
Company's independent auditors for the financial statements for each of the
three years ended December 31, 2004, relating to the accounting treatment for
these litigation matters. Management believes there was a reasonable basis for
its original accounting (which was agreed to by Ernst & Young). Following
detailed discussions with the auditors, and with the concurrence of the auditors
and the SEC staff, the Company has amended the financial statements for the
following non-cash items in order to account for these items as set forth below.
Note that the lawsuit in question is still being aggressively appealed and the
receivable in question is still being pursued for collection:
o With respect to the Franklin litigation, provision of approximately
$1,154,000 (for which there is no related income tax benefit) has been
made as of April 2003 ($984,000 for award of damages) and as of
September 2003 ($170,000 for estimated post-judgment interest).
o With respect to the Kentucky transportation receivable, provision of
approximately $331,000 net of related income tax benefit has been made
as of November 2002 of an additional allowance for uncollectible
accounts for the Kentucky transportation receivable, and the provision
of approximately $66,000 net of related income tax benefit previously
recorded in 2004 has been reversed. Thus the net effect of this matter
is $266,000 net of related income tax benefit.
o The one-time reduction in estimated tax liabilities has been removed
from fiscal 2003 and treated as a reduction in estimated tax
liabilities as it was determined that the reserve that was reversed in
2003 should have been reversed in the fiscal year ended 2001 or
earlier. This has the effect of increasing beginning retained earnings
at January 1, 2002, in this amended December 31, 2004 Form 10-K/A
All related disclosures have been revised to give effect to the new accounting
treatment for these matters. In the event the Company is able to collect a
portion of the Kentucky receivable it would record a gain in the period in which
payment is received. In the event the Company prevails on appeal in the Franklin
litigation (and no further appeal is available), the Company would record a gain
in the period in which the Company prevails. For a more detailed discussion of
these contingencies, refer to pages __ - __herein.
The following table summarizes changes in reported net income and earnings per
share for each of the three years in the period ended December 31, 2004 as a
result of these changes:
(In thousands except for per share amounts)
<TABLE>
<CAPTION>
2004 2003 2002
----------------- --------------- ------------------
<S> <C> <C> <C>
Change in Net Income from:
Franklin litigation $ - $ (1,154) $ -
Kentucky transportation litigation 66 (331)
-
Reduction in income tax liabilities - (854) -
----------------- --------------- ------------------
Total $ 66 $ (2,008) $ (331)
================= =============== ==================
Change in Earnings Per Share:
Basic $ 0.03 $ (0.88) $ (0.14)
Diluted $ 0.03 $ (0.79) $ (0.12)
</TABLE>
The Company's loan agreement provides that the provision of a loss for the above
litigation cases will be excluded from financial results for purposes of
calculating borrowing availability or financial covenant compliance.
ITEM 2. PROPERTIES
Our executive offices are located in Louisville, Kentucky in approximately
25,000 square feet of space leased from an unaffiliated party.
We have 67 real estate leases ranging from approximately 200 to 24,000 square
feet of space in their respective locations. See "Item 1. Business - Operating
Segments" and Note 9 to our audited consolidated financial statements. We
believe that our facilities are adequate to meet our current needs, and that
additional or substitute facilities will be available if needed.
ITEM 3. LEGAL PROCEEDINGS
From time to time, we are subject to claims and suits arising in the ordinary
course of our business, including claims for damages for personal injuries. In
our opinion the ultimate resolution of any of these pending claims and legal
proceedings will not have a material effect on our financial position or results
of operations.
Franklin Litigation
On January 26, 1994 Franklin Capital Associates L.P. (Franklin), Aetna Life and
Casualty Company and Aetna Casualty and Surety Company shareholders, who at one
time held approximately 320,000 shares of the Company's common stock
(approximately 13% of shares outstanding), filed suit in Chancery Court of
Williamson County, Tennessee claiming unspecified damages not to exceed three
million dollars in connection with registration rights they received in the
Company's acquisition of certain home health operations in February 1991. The
<PAGE>
1994 suit alleged that the Company failed to use its best efforts to register
the shares held by the plaintiffs as required by the merger agreement. The
Company settled with both Aetna parties shortly before the case went to trial in
February 2000. In mid-trial Franklin voluntarily withdrew its complaint
reserving its legal rights to bring a new suit as allowed under Tennessee law.
In April 2000, Franklin re-filed its lawsuit. The second trial took place in
February 2003. In April 2003 the court issued a ruling in favor of the
plaintiffs awarding damages of $984,970. The Company believes the Court erred
both in its finding of liability and in its determination of the amount of
damages. The Company is seeking appellate review of the lower court decision. As
a part of the appeal, the Company was required to post cash of $1,154,241 (which
consists of $984,970 in damages and $169,721 of estimated post-judgment
interest) in an escrow account with the Tennessee Courts in lieu of a
supersedeas appeal bond until the appeal court issues a decision.
As described in "Amendment of Previous Financial Reports Related to Contingent
Liability Matters" above, the Company has recorded a litigation loss provision
of $1,154,241 on a restated basis in the year ended December 31, 2003.. The cash
will remain in escrow until the matter reaches its ultimate resolution.
Despite the recording of a litigation loss provision, based on the advice of
legal counsel, the Company believes it has strong grounds for appealing the
trial court's decision and it intends to vigorously pursue its appeal. The
Company can give no assurance that it will be successful in its appeal. The
appeals court heard oral arguments in the case in February 2005 but has given no
indication of when it will issue a ruling. Both the amount of the judgment and
the estimated post-judgment interest are subject to change depending upon the
outcome of the appeal process. In the event the Company prevails on appeal in
the Franklin litigation (and no further appeal is available), the Company would
record a gain in the period in which it prevails.
Kentucky Transportation Litigation Prior to July 1, 2002, the Commonwealth of
Kentucky managed its Medicaid transportation program internally. Effective July
1, 2002 the Commonwealth contracted with an independent broker (the Broker) for
the management of the program in the Louisville KY area. The Broker then
contracted with the Company, among others, for the provision of transportation
services to Medicaid beneficiaries. The Company's services pursuant to the
contract were limited to transportation of Medicaid beneficiaries who also
attended the Company's in-center adult day care programs. The Broker almost
immediately began to encounter significant financial difficulties and paid the
Company for only a small portion of the amounts due for services rendered. On
October 22, 2002, three of the Broker's other contracted providers filed a
motion with the US Bankruptcy Court to liquidate the Broker under Chapter 7 of
the Federal Bankruptcy Code. On November 25, 2002, the Broker voluntarily chose
to convert its bankruptcy status to a Chapter 11 voluntary reorganization. On
March 3, 2003, the Broker reconverted its case to a Chapter 7 liquidation
proceeding.
In May 2003, along with a group of other affected providers, the Company filed
suit against the Commonwealth in Franklin Circuit Court seeking payment directly
from the Commonwealth. The Commonwealth objected to the lawsuit on the basis of
sovereign immunity (since the group did not have a direct contract with the
Commonwealth) and filed a motion to dismiss the lawsuit. In July 2003, a hearing
on the motion to dismiss was held and at the judge's request written briefs were
filed before the judge would make a decision. In August 2003, the motion to
dismiss was granted and after discussion with legal counsel, an appeal of this
decision was made to the Kentucky Court of Appeals. On September 24, 2004 the
appeals court affirmed the lower court's decision. In its decision, the Court
indicated that the Company could pursue its claim at the Kentucky Board of
Claims; such a claim would be limited to $200,000 in damages.
On June 26, 2004 a lawsuit was filed on behalf of the bankruptcy estate against
the Commonwealth of Kentucky. The case alleges that the state misrepresented
material facts about the contract that it signed with the Broker. The suit