ITEM 1. BUSINESS
General Development of Business
Caretenders Health Corp. ("Caretenders" or the "Company") is the first company to provide integrated adult day health services and home health care services for seniors and others with chronic and post-acute medical conditions who wish to remain in their homes and communities. With its extensive experience in home health care and leadership in adult day health center operations, the Company is embarking on an aggressive expansion program offering Caretenders' SeniorCare Solutions integrated home and community based health care. Through care management by a Registered Nurse (RN), Caretenders helps families identify solutions for caring for loved ones who can no longer meet their health and personal care needs. Through the Company's care manager, families can learn about their choices for long-term care for seniors and choose from Caretenders' SeniorCare Day and Home Health Care Centers as well as other community based resources available.
The Company was incorporated in Delaware in November, 1985. The Company delivers its adult day health services and home care services through a number of wholly owned subsidiaries. The Company operates 14 home care branches in Kentucky, Alabama, Indiana, Massachusetts and Virginia and manages 2 hospital-based agencies in Kentucky for Columbia/HCA. The Company also operates 14 adult day health centers, which are located in Maryland, Connecticut and Kentucky. The Company opened 1 adult day health center during the past year. Capacity was 938 guests per day at the beginning of the year and grew by 4% to 976 guests per day by the end of the year.
By the end of fiscal year 1997 (ending March 31, 1997), the Company expects to open 12-15 new adult day health centers and seven to nine new home health care operations, creating nine integrated and seven new markets for Caretenders. Since March 31, 1995, the Company has opened 2 and acquired 1 new home care operations. As of June 21, 1996, the Company had 8 new adult day care centers and 6 home health care units under development.
Today more than seven million senior Americans are in need of alternatives to long-term nursing home confinement and this number is expanding rapidly. These individuals desire to remain in their homes and out of nursing homes and conserve their financial resources as long as possible. Caretenders SeniorCare Solutions provides seniors in need with a lower-cost alternative to institutional care helping them gain economic security access to health care, mobility and independence without isolation.
Divestitures
On June 3, 1994, the Company entered into a strategic arrangement with Columbia/HCA Healthcare Corporation (Columbia), under which Columbia acquired one of the Company's two Louisville Certificates of Need for nursing services and hired the Company to manage the operations under the certificate. The parties also entered into a cooperative agreement for the provision of infusion, home medical equipment and adult day care services in the Louisville market.
On February 18, 1995, the Company entered into another arrangement with Columbia, under which Columbia acquired the Company's Certificate of Need to provide nursing services to patients in eight counties in the Elizabethtown, Kentucky area and hired the Company to manage the operations until the year 2000.
Acquisition Policy
The Company continually considers and reviews possible acquisitions of businesses that provide health care services similar to those currently offered by Caretenders' companies. Factors which may affect future acquisition decisions include the quality and potential profitability of the company under consideration, and the Company's ability to finance an acquisition.
On May 1, 1996, the Company completed a transaction to acquire the stock of Reliable Home Health Care, Inc., a provider of intermittent home nursing services in Cleveland Ohio.
Home Health Care Services
Caretenders provides home health care services through 14 branches as follows: Kentucky (7), Indiana (2), Alabama (1), Massachusetts (3) and Virginia (1). The Company's comprehensive strategy allows it to provide a full range of home health care services to a patient, enabling the physicians, payors and patients to deal with a single provider. All Caretenders services are rendered through care management by an RN, which coordinates nursing, home infusion and equipment services.
Caretenders nursing provides a comprehensive range of both professional and para-professional services from highly-skilled infusion therapy nursing to custodial companion care. Professional staff including registered nurses, licensed practical nurses, physical, speech and occupational therapists, and medical social workers implement and monitor medical treatment plans prescribed by physicians. Professional staff are subject to state licensing requirements in the particular states in which they practice. Para- professional staff includes home health aides, homemakers and companions who assist patients with health related tasks and the activities of daily living.
Home infusion therapy involves the intravenous or other administration of physician-prescribed nutrients, antibiotics, chemotherapeutic agents and other medications to patients in their homes. Such therapy generally continues a plan of treatment initiated in the hospital, or as a substitute for hospitalization. Home infusion costs are between 30% and 70% less than the same therapy administered in an institutional setting. There are five major categories of infusion therapy: total parenteral nutrition, enteral nutrition, antibiotic therapy, chemotherapy and pain management therapy.
Caretenders sells and rents medical equipment for use in the home. While the Company provides a complete range of equipment, the businesses generally can be divided into two predominant categories: respiratory/oxygen services and rehabilitation products.
Caretenders is compensated for its services through (i) private pay (paid by personal funds), (ii) Medicare, (iii) Medicaid, and (iv) other third party payors (e.g. insurance companies). See "Item 1. Business -- Payment Sources". Caretenders employs compensation specialists who advise patients as to the availability of sources of payment for its services.
Patients are referred to Caretenders by physicians, hospital discharge planners, third party administrators, insurance case managers, bank trust departments, clients' family members and other sources.
Adult Day Health Services
Adult day health services is an alternative method of providing care for seniors and other adults who without such care would likely be institutionalized. The field has grown rapidly, from just 15 centers in the United States in the early 1970s to over 3,000 today. Still in its early stages, the industry is highly fragmented with the majority operated by the non-profit sector. Caretenders operates 14 centers, (3 centers in Connecticut, 10 in Maryland and 1 in Kentucky) which provide care for approximately 1,400 clients. Caretenders is the largest for-profit provider of adult day care services in the U.S.
The Company's adult day health service centers provide professional, high quality adult day health services for disabled or frail adults who require some care or supervision, but who do not require intensive medical attention or institutionalization. The average center provides care for over 55 guests per day, seven days a week, from 9AM to 5PM. Round-trip transportation is provided to each participant.
The centers offer a range of therapeutic and medical services designed to promote the independence of participants and provide respite to families and caregivers. On-site staff nurses administer medications and ensure attention to medical care. Other services include (i) a light breakfast, a hot lunch, and an afternoon snack; (ii) a highly structured, individualized and creative activities program which includes recreation, education, field trips, sports, crafts, music and group conversations; and (iii) family counseling.
The centers market their services to professional referral sources in their communities as well as directly to consumers. These sources typically include Offices on Aging, social workers, hospital discharge planners and group living facilities.
Competition, Marketing and Customers
Home Health Care
The home health care industry is fragmented, with competition largely focused on individual products or services. Competitors can be classified into three categories: nursing services, infusion therapy, and medical equipment.
Caretenders competes with larger home health care providers through its comprehensive strategy, which facilitates focused accountability, reduced administrative burdens and convenience for patients and physicians. In addition to the larger, national companies, Caretenders also competes with numerous local and regional companies and pharmacies. Many of the Company's competitors have greater resources than the Company. Major home health competitors include Apria, Olsten Kimberly Quality Care and Coram.
The home health care industry is highly competitive. The Company believes competition is based primarily on the quality of service provided, and such quality is measured by responsiveness and the technical ability of the professional staff. The scope of services offered, relationships with referral sources and price are also competitive considerations. Another competitive factor in the home health care industry is accreditation by JCAHO (Joint Commission on Accreditation of Healthcare Organizations), a not-for-profit accreditation organization. All Caretenders offices are accredited by JCAHO.
Home health services are marketed by a direct sales force primarily to hospital discharge planners, physicians and insurance and managed care organizations. Referrals may also be sought through advertisements in several local specialty publications, attendance at major trade shows and voluntary participation in JCAHO. The Company is also developing consumer-direct sales, marketing and advertising programs designed to increase its private pay business.
Adult Day Health Services
The adult day health services industry is highly competitive but fragmented. The Company competes with alternative sources of senior adult day health services, including: other adult day health centers, ancillary programs provided by nursing homes and hospitals; other government-financed facilities; retirement communities; and senior adult associations. The Company believes the primary competitive factors among this group are quality of service and reputation among referral sources.
The Company markets its adult day health services through its adult day health center directors and the Company's marketing staff. The directors spend time contacting referral sources in their markets to market the Company's services. Major referral sources include Offices on Aging, social workers, hospital discharge planners and group living facilities.
Government Regulations
The Company is subject to laws and regulations administered by the federal government and the states in which it provides home health care and adult day health services. The Company believes that providers of these services may be subject to increasing regulation by both Federal and state governments. If the Company becomes subject to adverse, costly, time-consuming or otherwise burdensome government regulation in connection with its operations, such regulation could have a materially affect the Company.
The Company operates adult day health facilities in three states, Connecticut, Maryland and Kentucky. In order to be licensed, adult day health centers must meet requirements established by each state including the physical organization of facilities, staff to patient ratios and nutrition. Each of the Company's centers is appropriately licensed in each state in which it operates. The Company operates all its adult day care centers according to guidelines that exceed the requirements of each respective state in which it operates.
The expansion by the Company of its adult day health and home health care operations into new states or the addition of new adult day health centers or home health care services may be subject to compliance with additional governmental regulation. If the Company were unable to comply with any such regulations or qualify such centers or services under government sponsored reimbursement programs because of cost or for other reasons, such expansion or addition of services could be limited or prevented.
Health care, as one of the largest industries in the United States, continues to attract much legislative interest and public attention. In recent years, an increasing number of legislative proposals have been introduced or proposed in Congress and in some state legislatures that would effect major changes in the health care system, either nationally or at the state level. Among the proposals under consideration are cost controls, insurance market reforms, requirements that all businesses offer health insurance coverage to their employees and the creation of a single government health insurance plan that would cover all citizens. The costs of certain proposals would be funded in significant part by reductions in payments by governmental programs, including Medicare and Medicaid, to health care providers. The Company cannot predict whether any of the above proposals or any other proposals will be adopted, and if adopted, no assurance can be given that the implementation of such reforms will not have a material effect on the business of the Company.
Payment Sources
The Company receives payments from Medicaid, Medicare and other cost reimbursement programs, private pay and insurance policies as detailed below. The Company's dependence on government sponsored reimbursement programs makes it vulnerable to possible legislative and administrative regulations and budget cut-backs that could adversely affect the number of persons eligible for such programs, the amount of allowed reimbursements or other aspects of the program, any of which could materially affect the Company. In addition, loss of certification or qualification under Medicare/Medicaid programs would materially adversely affect the ability of its adult day health and home health care businesses to effectively market their services. The following table sets forth the Company's net revenues derived from each major class of payer during the following fiscal years (in thousands):
In determining charge rates for goods and services provided to customers, the Company evaluates several factors including cost and market competition. The Company also negotiates contract rates with third party providers such as insurance companies. The rates of reimbursement for a significant portion of the Company's charges are dictated by Federal or State programs such as Medicare, Medicaid and Workers Compensation.
Insurance
The Company and its subsidiaries carry general liability and professional liability insurance. The Company also carries product liability insurance associated with those operations requiring such coverage, including the durable medical equipment operations. The Company carries automobile liability coverage and property coverage on all owned or operated vehicles. The Company's properties are covered by casualty insurance policies. The Company carries directors and officers liability with a $3,000,000 limit. The Company believes its present insurance coverage is adequate.
The Company intends to maintain general liability and property insurance coverage in amounts which it believes reasonable for its operations. However, there can be no assurance that such insurance will be available, or, if available, that such insurance will be either adequate to cover the Company's liabilities or available at affordable rates. In addition, increasing insurance costs, and the increasing unwillingness of insurance companies to insure against certain types of losses, raise some questions as to whether the Company will be able to obtain or continue its present insurance coverage. The inability to obtain adequate insurance coverage at affordable rates, or a loss of existing coverage, could have a material effect on the Company.
Employees and Labor Relations
As of March 31, 1996, the Company had approximately 2,270 employees, 116 of whom are administrative and executive personnel. None of the Company's employees are represented by a labor organization. Management believes its relationship with its employees is satisfactory.
Cautionary Statements
Information provided herein by the Company contains, and from time to time the Company may disseminate material and make statements which may contain "forward-looking" information, as that term is defined by the Private Securities Litigation Reform Act of 1995 (the "Act"). These cautionary statements are being made pursuant to the provisions of the Act and with the intention of obtaining the benefits of "safe harbor" provisions of the Act. The Company cautions investors that any forward-looking statements made by the Company are not guarantees of future performance and that actual results may differ materially from those in the forward-looking statements as a result of various factors including but not limited to the following:
(i)In recent years, an increasing number of legislative proposals have been introduced or proposed in Congress and in some state legislatures that would effect major changes in the health care system, either nationally or at the state level. Among the proposals under consideration are cost controls, insurance market reforms, requirements that all businesses offer health insurance coverage to their employees and the creation of a single government health insurance plan that would cover all citizens. The costs of certain proposals would be funded in significant part by reductions in payments by governmental programs, including Medicare and Medicaid, to health care providers. The Company cannot predict whether any of the above proposals or any other proposals will be adopted, and if adopted, no assurance can be given that the implementation of such reforms will not have a material impact on the operations of the Company.
(ii)The Company competes with numerous well established competitors who have substantially greater financial resources than the Company. Competitors are increasingly focusing attention on providing alternative site health care services, specifically on adult day health services. Such increasing competition may adversely affect revenues and profitability of Company operations.
(iii)The Company's future operating results are dependent upon its ability to attract customers able to pay for the Company's charges from their own and their families' financial resources. Circumstances which adversely affect the ability or desire of seniors to pay for the Company's services could have an adverse effect on the Company. In the event that the Company encounters difficulty in attracting seniors with adequate resources to pay for the Company's services, the Company would be adversely affected.
(iv)The Company provides its services to individuals in home and community settings. Severe winter weather may hinder the Company's ability to provide its services and thus impact operating results. No assurances can be given that such severe winter weather conditions will not be experienced by the Company.
(v)By the end of fiscal 1997, the Company plans to develop 12-15 new adult day health centers and 7-9 new home health operations after which the Company plans to continue development efforts at a similar or accelerated pace. The Company's ability to achieve its development plans will depend upon a variety of factors, many of which are beyond the Company's control. There can be no assurance that the Company will not suffer delays in its development program, which could slow the Company's growth. The successful development of additional operations will involve a number of risks including the possibility that the Company may be unable to locate suitable sites at acceptable prices or may be unable to obtain, or may experience delays in obtaining, necessary zoning, land use, building, occupancy, licensing and other required governmental permits and authorizations.
ITEM 2.
ITEM 2. PROPERTIES
The Company's executive offices are located in Louisville, Kentucky in approximately 21,300 square feet of leased space.
The Company has 30 branch locations that each lease from approximately 2,000 to 17,000 square feet of space in their respective locations. The Company believes that its facilities are adequate to meet its current needs, and that additional or substitute facilities are available if needed.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
The Company is currently, and from time to time, subject to claims and suits arising in the ordinary course of its business, including claims for damages for personal injuries. In the opinion of management, the ultimate resolution of any of these pending claims and legal proceedings will not have a material effect on the Company's financial position or results of operations.
On January 26, 1994 Franklin Capital Associates and Aetna Life and Casualty, 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 National Health Industries in February 1991. The suit alleges the Company failed to use its best efforts to register the shares held by the plaintiffs as required by the merger agreement. The Company believes it has meritorious defenses to the claims and does not expect that the ultimate outcome of the suit will have a material impact on the Company's results of operations or financial position. The Company plans to vigorously defend its position in this case. 				 				 ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
				PART II
ITEM 5.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock ("Common Stock") is traded on the over- the-counter market and is quoted on the National Association of Securities Dealers Automated Quotation System ("NASDAQ") under the symbol "CTND". The prices shown below represent prices between dealers, do not indicate retail mark-ups, mark-downs or commissions, and do not necessarily represent actual transactions. Set forth below are the high and low bid quotations for the Common Stock for the periods indicated. The prices for the Common Stock were provided by NASDAQ and have been adjusted to reflect a one (1)-for- five (5) reverse stock split effective March 22, 1995.
On June 24, 1996, the last reported representative bid price for the Common Stock reported on the NASDAQ National Market System was $7.875 and there were approximately 769 holders of record of the Company's Common Stock. No cash dividends have been paid by the Company.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected financial information derived from the consolidated financial statements of the Company for the periods and at the dates indicated. This information has been restated to reflect the Company's 1 for 5 reverse stock split as further explained in Note 1 to the consolidated financial statements of the Company. The information is qualified in its entirety by and should be read in conjunction with the consolidated financial statements and related notes included elsewhere in this Form 10-K.
(1) does not include convertible preferred shares due to accounting rules relating to calculation of loss per share
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Strategic Focus
The Company is positioning itself to take advantage of healthcare reform activities by focusing its resources into its home and community based health care business units which consist of adult day health services and home health care (home health care includes nursing, infusion therapy and durable medical equipment). These businesses are involved with the delivery of health care in alternative settings which are preferred by consumers and operate at lower costs than hospitals and nursing homes. The trend toward alternative site delivery of healthcare is increasing, as more payor organizations are seeking to reduce the costs of medical care. The Company intends to continue to develop and acquire home and community-based healthcare service operations.
By the end of fiscal year 1997 (ending March 31, 1997), the Company expects to open 12-15 new adult day health centers and seven to nine new home health care operations, creating nine integrated and seven new markets for Caretenders. At the end of this period, the Company anticipates having 28 adult day health services centers and up to 15 home care operations in place. Since March 31, 1995, the Company has opened 2 and acquired 1 new home care operations. As of June 21, 1996, the Company had 8 new adult day care centers and 6 personal care units under development.
The Company is committed to establishing a preeminent position in this segment of the healthcare industry and is taking a rapid route. The adult day health services market is growing, but highly fragmented with approximately 3,000 centers nationwide. Caretenders is considered as the national leader in the field with its fourteen centers.
Although more mature, the home care industry also remains highly fragmented with few providers controlling more than 5 percent market share. The Company believes that there is no other single provider in its existing or prospective markets able to impose significant barriers to its future plans.
Earnings - 1996
Improvements in the profitability of operations continue to be made with center contribution improving by 14.8% due principally to revenue growth. The Company continues to experience very strong market demand for its services. Selling, General and Administrative costs increased slightly as a percent of sales increasing largely due to overhead additions preparing the Company for expansion. Pre- tax income from continuing operations improved by 31.4%. Earnings per share from continuing operations were $.50 in 1996 as compared to $.40 for 1995.
Liquidity and Capitalization
The Company has a $12 million revolving credit facility with approximately $5.9 million outstanding as of March 31, 1996. The credit facility bears interest at 1 percent over prime. This facility, combined with cash flow from operations, should provide sufficient working capital resources to support operations and future development. However, management will continue to pursue additional capital including debt and equity investments in the Company to support more rapid development.
RESULTS OF OPERATIONS
Fiscal Year Ended March 31, 1996 Compared With Fiscal Year Ended March 31, 1995 				
	
	 Overall. As more fully described below, the Company believes the improvement in operating results is attributable to its aggressive marketing techniques, horizontal integration of service lines in existing markets and resultant economies of scale both operationally and administratively. This is offset slightly by a increase in selling, general and administrative costs resulting from the Company's preparation for expansion in fiscal 1997.
	 Home Health Care Net Revenues. Net revenue increases in the Company's existing markets were primarily the result of increased volume for nursing services and durable medical equipment offset partially by decreased volume for infusion therapies. Nursing volumes increased 12% while durable medical equipment volumes increased 23%.
	 Net revenues for 1995 included $4,466,000 related to operations sold during 1995. After adjusting 1995 revenues to remove operations sold, home health care revenues increased 12.3%. Contribution continues to be generated from these operations under management contracts.
	 Home Health Care Cost of Sales and Services. Cost of sales and services as a percent of net revenues decreased primarily as a result of improved volumes in all markets and reductions in cost as a result of operations sold.
	 Adult Day Health Services Net Revenues. The increase of $1.9 million in adult day health services revenues is attributable to improved occupancy in all markets, improvement in mix of payors and rate increases. Total days of service provided increased 14% from 188,480 in 1995 to 214,600 in 1996. As of March 31, 1996, the Company had 14 centers in operation.
	 Adult Day Health Services Cost of Sales and Services. As a percent of net revenues, cost of sales and services decreased slightly as a result of better cost management, increased occupancy and fixed costs spread over higher volumes.
	 Selling, General and Administrative. The increase of $1.8 million is due primarily to an increase in certain administrative staff levels and costs incurred to centralize certain administrative functions.
	 Provision for Uncollectible Accounts. The provision for uncollectible accounts for the year ended March 31, 1996 was recorded based on management's evaluation of collectibility.
	 Depreciation and Amortization. The decrease of $243,000 resulted primarily due to replacement of purchased transportation equipment with leased transportation equipment.
	 Interest and Other, Net. The decrease in interest and other, net is primarily the result of the lower average outstanding debt levels and a decrease in the interest rate associated with the Company's working capital credit facility.
	 Income Taxes. As of March 31, 1996, the Company has net deferred tax assets of approximately $1,072,000. The net deferred tax asset is composed of $2,401,000 of deferred tax assets, $173,000 of deferred tax liabilities and a valuation allowance totaling approximately $1,156,000. The deferred tax asset includes the tax benefit of net operating loss carryforwards of approximately $340,000.
To realize the deferred tax assets (net of valuation allowance) related to net operating loss carryforwards and other temporary differences the Company must generate future taxable income of approximately $2,680,000. The net operating loss carryforwards expire in fiscal 2006 through 2008.
Based upon the expectations of future taxable income, management believes that it is more likely than not that the net deferred tax assets totaling $1,072,000 will be realized. As noted above, a valuation allowance has been established totaling $1,156,000 based on management's judgments including the risks inherent in relying solely on the prospects for future taxable income.
Following is a summary of the Company's approximate pretax book income and taxable income for the past three years (000's):
The differences between pretax book income and taxable income for the last three years consist mainly of non deductible goodwill amortization and the change in certain reserves that are not currently deductible for income tax purposes such as the provision for uncollectible accounts receivable. The increase in taxable income for fiscal 1995 is due to transactions entered into by the Company and Columbia/HCA with respect to the sale of certain certificates of need to provide nursing services in two markets and the non-tax deductible status of related goodwill.
Although the Company has experienced losses in the past, management believes that the Company will be able to realize its recorded deferred tax assets. The Company's ability to generate the expected amounts of taxable income from future operations is dependent upon general economic conditions, competitive pressures on revenues and margins and legislation and regulation at all levels of government. There can be no assurances that the Company will meet its expectations of future taxable income. However, management has considered the above factors in reaching its conclusions that it is more likely than not that future taxable income will be sufficient to fully utilize the deferred tax assets net of the valuation allowance as of March 31, 1996.
Fiscal Year Ended March 31, 1995 Compared With Fiscal Year Ended March 31, 1994
	 Overall. As more fully described below, the Company believes the improvement in operating results is attributable to its aggressive marketing techniques, horizontal integration of service lines in existing markets and resulting economies of scale both operationally and administratively.
	 Home Health Care Net Revenues. Net revenue increases in the Company's existing markets were primarily the result of increased volume for nursing services and infusion therapies offset partially by decreased reimbursement for providing certain infusion therapies. Nursing volumes increased 31% and average net revenue per unit increased 20% while infusion volumes increased 46% with a decrease in average net revenue per unit of 11% due to competitive industry pressures on pricing. Respiratory Therapy/Home Medical Equipment revenues increased principally as a result of expansion of this service line into the Louisville and Lexington, Kentucky markets.
	 Net revenues for 1995 and 1994 included $4,466,000 and $10,189,000 respectively related to operations sold during 1995. Contribution continues to be generated from these operations under management contracts.
	 Home Health Care Cost of Sales and Services. Cost of sales and services as a percent of net revenues decreased primarily as a result of improved volumes in all markets.
	 Adult Day Health Services Net Revenues. The increase of $3.0 million in adult day care revenues is attributable to the opening of 2 new centers, the expansion of 2 others and a rate increase of approximately 5.0% throughout all the centers. Total days of service provided increased 32.5% from 142,277 in 1994 to 188,480 in 1995. As of March 31, 1995, the Company had 13 centers in operation.
	 Adult Day Health Services Cost of Sales and Services. As a percent of net revenues, cost of sales and services improved as a result of improved operations in mature centers partially offset by the impact of initial operating losses from the development of new centers. The Company's new centers typically take from 12 to 15 months to reach break-even. The Company's two newest centers generated net revenues of $215,000 and losses of ($238,000).
	 Selling, General and Administrative. The increase of $1.4 million is due primarily to increased staffing in adult day care and other overhead expenses in preparation for expansion. These costs remained stable as a percent of sales.
	 Provision for Uncollectible Accounts. The provision for uncollectible accounts for the year ended March 31, 1995 was recorded based on management's evaluation of collectibility.
	 Depreciation and Amortization. The increase of $296,000 results primarily from additions of approximately $1.2 million of property and equipment.
	 Interest and Other, Net. The increase in interest and other, net is primarily the result of the higher average outstanding debt levels and higher interest rates. The Company's outstanding debt is higher as a result of larger investments in accounts receivable and property and equipment related to revenue growth while rates have increased due to increases in the prime rate.
Liquidity and Capital Resources
Revolving Credit Facility
On October 13, 1995, the Company expanded its revolving credit facility with the Healthcare Financial Services Division of Heller Financial, Inc. from $7.5 million to $12 million. At the same time the interest rate was reduced to 1 percent over prime from 1.5 percent over prime and advance rates on working capital were expanded. Availability is determined pursuant to a formula principally consisting of a percentage of accounts receivable subject to certain exclusions. At March 31, 1996, the Company has total cash and unused borrowings of approximately $7.6 million. The facility will remain in effect until October 13, 1998 and for annual one year terms thereafter unless either party to the credit agreement provides the other with a written notice of termination 60 days prior to the renewal date.
This facility should provide working capital resources sufficient to support operations. However, management will continue to pursue additional capital including possibly debt and equity investments in the Company to support a more rapid development of the business than would be possible with internal funds
Cash Flows
	 Key elements to the Consolidated Statements of Cash Flows were (in thousands):
Net cash provided by operating activities of approximately $1.8 million resulted principally from current period earnings net of changes in accounts receivable and accounts payable and accrued expenses. Net cash used in investing activities of approximately $993,000 resulted principally from capital expenditures. Net cash used in financing activities of approximately $528,000 resulted primarily from principal payments on term debt and capital leases.
Net cash used in operating activities of approximately $1.8 million resulted principally from current period earnings offset by increases in accounts receivable caused by revenue growth of 20% and longer payment cycles for some payors. Net cash provided from investing activities resulted principally from the proceeds from the sale of certain business offset by capital expenditures. Net cash used in financing activities resulted primarily from principal payments on term debt and capital leases. The Company received proceeds of approximately $2.5 million from the disposition of business units during 1995 which was used largely to fund capital expenditures and working capital associated with the Company's growth.
Net cash provided by operating activities of approximately $570,000 resulted from earnings net of changes in accounts receivable and accounts payable and accrued expenses. Approximately $813,000 was used in investing activities resulting principally from proceeds from sale of business ($1.2 million) net of capital expenditures of $2.1 million.
Health Care Reform
Health care, as one of the largest industries in the United States, continues to attract much legislative interest and public attention. In recent years, an increasing number of legislative proposals have been introduced or proposed in Congress and in some state legislatures that would effect major changes in the health care system, either nationally or at the state level. Among the proposals under consideration are cost controls, insurance market reforms, requirements that all businesses offer health insurance coverage to their employees and the creation of a single government health insurance plan that would cover all citizens. The costs of certain proposals would be funded in significant part by reductions in payments by governmental programs, including Medicare and Medicaid, to health care providers. The Company cannot predict whether any of the above proposals or any other proposals will be adopted, and if adopted, no assurance can be given that the implementation of such reforms will not have a material effect on the business of the Company.
Impact of Inflation
Management does not believe that inflation has had a material effect on income during the past several years.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
		 CARETENDERS HEALTH CORP. AND SUBSIDIARIES 			 CONSOLIDATED STATEMENTS OF INCOME
		 CARETENDERS HEALTH CORP. AND SUBSIDIARIES 		 CONSOLIDATED BALANCE SHEETS
	 			CARETENDERS HEALTH CORP. AND SUBSIDIARIES 			 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY 			 YEARS ENDED MARCH 31, 1996, 1995, and 1994
		 CARETENDERS HEALTH CORP. AND SUBSIDIARIES 			 CONSOLIDATED STATEMENTS OF CASH FLOWS 				
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF CONSOLIDATION AND DESCRIPTION OF BUSINESS
The consolidated financial statements include the accounts of Caretenders Health Corp. and its wholly-owned subsidiaries ("the Company"). The Company provides adult day health services and home health care services to individuals in Kentucky, Indiana, Alabama, Massachusetts, Virginia, Connecticut and Maryland. All material intercompany transactions and accounts have been eliminated in consolidation.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents. Non-cash acquisition of capital assets via assumption of debt of approximately $120,000 was excluded from the accompanying statement of cash flows for the year ended March 31, 1996.
Uninsured deposits at March 31, 1996, and 1995 were approximately $1,561,000 and $1,265,000, respectively.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives. The estimated useful lives of depreciable assets are as follows:
						Estimated 					 Useful Life 	 Building and Leasehold Improvements 5 - 30 	 Medical and Office Equipment 3 - 8 	 Transportation and Other Equipment 3 - 5
Included in Property and Equipment is rental equipment which may be sold. Upon sale, the cost net of related accumulated depreciation is charged to costs of sales and services.
COST IN EXCESS OF NET ASSETS ACQUIRED AND OTHER INTANGIBLE ASSETS
The costs in excess of fair value of net assets acquired and other intangible assets principally consisting of licenses and covenants not to compete, which are included in other assets on the accompanying balance sheets, are stated at cost and amortized on a straight-line basis over their estimated useful lives which range from 2 to 40 years.
Subsequent to its acquisitions, the Company evaluates whether later events and circumstances have occurred that indicate the remaining estimated useful life of goodwill may warrant revision or that the remaining balance of goodwill may not be recoverable. At March 31, 1996, no such events or circumstances existed warranting such revisions to the lives or recorded amounts of recorded goodwill. When factors indicate that goodwill should be evaluated for possible impairment, the Company will utilize appropriate methods (such as undiscounted cash flows over the remaining life of the goodwill), in measuring whether the goodwill is recoverable.
CAPITALIZATION POLICIES
Maintenance, repairs and minor replacements are charged to expense as incurred. Major renovations and replacements are capitalized to appropriate property and equipment accounts. Upon sale or retirement of property, the cost and related accumulated depreciation are eliminated from the accounts and the related gain or loss is recognized in income.
Construction costs incurred to ready a project for its intended use are capitalized for major development projects and are amortized over the lives of the related assets. Pre-opening costs related to the start up of new operations and facilities are deferred and amortized over two years beginning with commencement of operations.
NET REVENUES
Approximately 55%, 57%, and 74%, of net revenues for the fiscal years ended March 31, 1996, 1995, and 1994, respectively, were derived under federal and state third-party reimbursement programs. These revenues are based, in part, on cost reimbursement principles and are subject to examination and retroactive adjustment by agencies administering the programs. Management continuously evaluates the outcome of these reimbursement examinations and provides allowances for losses based upon the best available information. In the opinion of management, adjustments, if any, would not be material to the financial position or the results of operations of the Company.
NET INCOME/LOSS PER SHARE
Net income per common and common equivalent share is computed based on the weighted average number of common shares and common equivalent shares outstanding. Common equivalent shares result from dilutive stock options, warrants, and convertible preferred stock.
REVERSE STOCK SPLIT
On March 22, 1995, the shareholders approved and implemented a one (1) for five (5) reverse stock split. Simultaneously, the par value per common share changed from $.02 per share to $.10. Share and per share information have been restated for all periods presented to reflect this reverse stock split.
HEALTHCARE REFORM LEGISLATION, REGULATIONS AND MARKET CONDITIONS
Health care, as one of the largest industries in the United States, continues to attract much legislative interest and public attention. In recent years, an increasing number of legislative proposals have been introduced or proposed in Congress and in some state legislatures that would effect major changes in the health care system, either nationally or at the state level. Among the proposals under consideration are cost controls, insurance market reforms, requirements that all businesses offer health insurance coverage to their employees and the creation of a single government health insurance plan that would cover all citizens. The costs of certain proposals would be funded in significant part by reductions in payments by governmental programs, including Medicare and Medicaid, to health care providers. The Company cannot predict whether any of the above proposals or any other proposals will be adopted, and if adopted, no assurance can be given that the implementation of such reforms will not have a material effect on the business of the Company.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates.
FINANCIAL STATEMENT RECLASSIFICATIONS
Certain amounts have been reclassified in the 1995 and 1994 financial statements in order to conform to the 1996 presentation. Such reclassifications had no effect on previously reported net income.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments consist of cash, accounts receivable and payable and debt instruments. The book values of cash and accounts receivable and payable are considered representative of their respective fair values. The fair value of the Company's debt instruments approximate their carrying values as substantially all of such debt has rates which fluctuate with changes in market rates.
NEW ACCOUNTING PRONOUNCEMENTS
In March 1995, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of", effective for fiscal years beginning after December 15, 1995. The Company will adopt SFAS No. 121 in fiscal year ending March 31, 1997 and does not expect adoption to have a material impact on the Company's financial position or results of operations.
In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock- Based Compensation", which is also effective for fiscal years beginning after December 15, 1995. The standard encourages but does not require companies to measure and record as compensation expense the fair market value of stock-based compensation granted to employees. The standard permits companies electing not to record the compensation expense for these arrangements to provide disclosure of the impact to net income as if the compensation had been recorded. The Company will adopt SFAS No. 123 in the fiscal year ending March 31, 1997.
NOTE 2 - PROPERTY AND EQUIPMENT
Property and equipment, including equipment under capital leases, consist of the following:
Property and equipment acquired under capital leases consists principally of transportation, and office and other equipment, of $2.7 million and $2.6 million at March 31, 1996 and 1995, respectively against which obligations of approximately $434,000 and $825,000 were outstanding at those dates.
Depreciation expense was approximately $1.8, $1.7, and $1.4 million for the fiscal periods ended March 31, 1996, 1995, and 1994, respectively.
NOTE 3 - REVOLVING CREDIT FACILITY
On October 13, 1995, the Company expanded its revolving credit facility with the Healthcare Financial Services Division of Heller Financial, Inc. from $7.5 million to $12 million. At the same time the interest rate was reduced to 1 percent over prime from 1.5 percent over prime and advance rates on working capital collateral were expanded. Availability is determined pursuant to a formula principally consisting of a percentage of accounts receivable subject to certain exclusions, as defined. The facility is collaterialized by accounts receivable, inventory and a lien on the stock of the Company's subsidiaries. Approximately $12 million was available under the formula on March 31, 1996. The balance outstanding as of March 31, 1996 was approximately $5.9 million. The credit agreement contains certain restrictive covenants. The facility will remain in effect until October 13, 1998 and for annual one year terms thereafter unless either party to the credit agreement provides the other with a written notice of termination 60 days prior to the renewal date.
NOTE 4 - TERM DEBT AND CAPITAL LEASE OBLIGATIONS
Term debt and capital lease obligation borrowings consist of the following:
As of March 31, 1996, future net minimum lease payments under capital leases and maturities of term debt are as follows: 				
NOTE 5 - INCOME TAXES
The Company adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS 109) effective April 1, 1993. SFAS 109 requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the difference between the Company's book and tax bases of assets and liabilities and tax carryforwards using enacted tax rates in effect for the year in which the differences are expected to reverse. The principal tax carryforwards and temporary differences giving rise to the Company's deferred taxes consist of tax net operating loss carryforwards, differences in book and tax accounting for depreciation, bonuses, compensated absences, deferred compensation, and allowance for uncollectible accounts.
The Company's deferred tax assets and liabilities were as follows:
A valuation allowance is provided when the probability that the deferred tax asset to be realized does not meet the criteria established by the Financial Accounting Standards Board. The Company has determined, based on its history of operating earnings and its expectations for the future, that it is more likely than not that the net deferred tax assets at March 31, 1996 will be realized. During the year ended March 31, 1995, the Company utilized a subsidiary's pre- acquisition net operating loss carryforward of approximately $1.4 million. The reduction in the valuation allowance attributable to the tax benefits of these loss carryforwards reduced goodwill by approximately $474,000.
Provision for income taxes consist of the following:
The current federal income tax provision of $30,000 for the year ended March 31, 1996 is net of an approximate $514,000 tax benefit from the utilization of operating loss carryforwards.
As of March 31, 1996, the Company had a federal net operating loss carryforward of approximately $1,000,000 expiring in 2006 through 2008. In addition, the Company has Alternative Minimum Tax (AMT) credit carryforwards of approximately $120,000 which have an unlimited carryforward period.
A reconciliation of the statutory to the effective rate of the Company is as follows:
NOTE 6 - STOCK OPTIONS AND WARRANTS
(a) Employee Stock Option Plans
1. The Company has a Nonqualified Stock Option Plan which provides for the granting of options to key employees, officers, and directors, to purchase 220,000 shares of the Company's common stock. The Board of Directors will determine the amount and terms of the options which cannot exceed ten years.
2. The Company has an Incentive Stock Option Plan providing key employees, officers, and directors, options to purchase 80,000 shares of the Company's common stock. Generally, these options expire ten years after the date of grant, while options held by individuals owning more than 10% of the Company's common stock expire after five years. The option price cannot be less than the fair market price of the common stock at the date granted and the options are not exercisable during the first year.
3. The Company has a Supplemental Nonqualified Stock Option Plan which provides options for the purchase of 40,000 shares of the Company's common stock to key employees and non-employee consultants. The Board of Directors will determine the amount and terms of the options, which cannot exceed ten years.
4. The Company has a 1991 Long-term Incentive Nonqualified Stock Option Plan which provides options to purchase 500,000 shares of the Company's common stock to key employees, officers, and directors. The Board of Directors will determine the amount and terms of the options, which cannot exceed ten years.
5. The Company has a 1993 Stock Option Plan for Non-employee Directors which provides options to purchase up to 120,000 shares of the Company's common stock to directors who are not employees. Each newly elected director or any director who does not possess options to purchase 10,000 shares of the Company's common stock will automatically be granted options to purchase 10,000 shares of common stock at an exercise price based on the market price as of the date of grant.
(b) National Acquisition
In conjunction with the acquisition of National Health Industries, Inc. (National), the Company issued 87,035 options to purchase the Company's common stock at a price ranging from $1.95 to $7.70 per share. These options are covered under the Nonqualified Stock Option Plan and the Incentive Stock Option Plan described in Note 6(a), above. These options were included in the determination of the purchase price paid to acquire National at their fair value as determined by management based on exercise price, terms, the Company's stock price and other factors.
(c) Debt Redemption
In connection with the redemption of the HEALTHSOUTH debt and minority interest in a consolidated subsidiary, the Company issued warrants to purchase 66,600 shares of convertible preferred stock at a price of $10.65 per share. The warrants expire on December 31, 1999. See Note 8.
Changes in qualified options, non-qualified options, and supplemental non-qualified options and warrants outstanding are summarized as follows:
At March 31, 1996, 404,225 options and 286,600 warrants were exercisable.
NOTE 7 - COMMITMENTS AND CONTINGENCIES
(a) Operating Leases
The Company leases certain real estate, office space, and equipment under noncancellable operating leases expiring at various dates through 2001. Rent expense amounted to approximately $2,496,000, $2,357,000, and $1,705,000 for 1996, 1995, and 1994, respectively. At March 31, 1996 the minimum rental payments under these leases are as follows:
		 1997 2,045,000 		 1998 1,739,000 		 1999 1,288,000 		 2000 903,000 		 2001 732,000
(b) Employment Contracts
The Company has entered into an employment contract with an officer. In connection with this contract, the Company is contractually obligated to pay an annual base salary of $190,000 for three years. In addition, the agreement contains contingent obligations associated with performance bonuses and severance.
(c) Medical Malpractice Claims
The Company has insurance coverage with respect to medical malpractice risks. The malpractice insurance coverage provides coverage up to $1,000,000 per occurrence, and has no deductible for which the Company would be responsible.
It is the Company's policy to record losses from asserted and unasserted claims identified by the Company and unreported claims based on estimates that incorporate the Company's past experience, as well as other considerations including the nature of each claim or incident and relevant trend factors. Based on these factors and the Company's insurance coverage, no accrual for potential losses attributable to asserted and unasserted claims has been recorded in the accompanying financial statements.
(d) Legal Proceedings
The Company is currently, and from time to time, subject to claims and suits arising in the ordinary course of its business, including claims for damages for personal injuries. In the opinion of management, the ultimate resolution of any of these pending claims and legal proceedings will not have a material effect on the Company's financial position or results of operations.
On January 26, 1994 Franklin Capital Associates and Aetna Life and Casualty, 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 National Health Industries in February 1991. The suit alleges the Company failed to use its best efforts to register the shares held by the plaintiffs as required by the merger agreement. The Company believes it has meritorious defenses to the claims and does not expect that the ultimate outcome of the suit will have a material impact on the Company's results of operation or financial position. The Company plans to vigorously defend its position in this case. No amounts have been recorded in the accompanying financial statements related to this suit.
NOTE 8 - VOTING CONVERTIBLE PREFERRED STOCK
In December 1991 the Company issued 748,501 shares of voting convertible preferred stock and warrants for 66,600 shares of voting convertible preferred stock to HEALTHSOUTH Rehabilitation Corporation (HEALTHSOUTH) in return for 19% of one of the Company's subsidiary's stock owned by HEALTHSOUTH and cancellation of $5,515,196 of notes payable due HEALTHSOUTH.
On September 30, 1994, HEALTHSOUTH converted its shares of the Company's Series A voting convertible preferred stock into the same number of common shares. Non-cash aspects of this transaction have been excluded from the accompanying statement of cash flows.
NOTE 9 - RELATED PARTY TRANSACTIONS AND BALANCES
The Company has an agreement with HEALTHSOUTH under which HEALTHSOUTH purchases certain durable medical equipment and prosthetic and orthotic appliances (to fill HEALTHSOUTH's normal business requirements of such items)from the Company. During the years ended March 31, 1996, 1995 and 1994, the Company realized sales of $84,000, $391,000 and $503,000 to HEALTHSOUTH, respectively, at terms the Company normally offers its customers. The outstanding receivable from HEALTHSOUTH was $17,000 and $109,000 as of March 31, 1996 and 1995.
NOTE 10 - QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized quarterly financial data for years ended March 31, 1995 and 1996 are as follows (in thousands expect per share data):
NOTE 11 - SALE OF ASSETS On June 3, 1994, the Company entered into a strategic arrangement with Columbia/HCA Healthcare Corporation, under which Columbia acquired one of the Company's two Louisville Certificates of Need for nursing services and hired the Company to manage the operations under the certificate for five years. The transaction provided the Company with an infusion of approximately $1.8 million in cash (after transaction costs). On February 18, 1995, the Company entered into another arrangement with Columbia, under which Columbia acquired the Company's Certificate of Need license to provide nursing services to patients in eight counties in the Elizabethtown, Kentucky area and hired the Company to manage the operations until the year 2000. This transaction provided the Company with approximately $550,000 in cash. Simultaneously the Louisville agency management agreement was extended for one year.
	 Report of Independent Public Accountants
To Board of Directors and Stockholders of Caretenders Health Corp.:
We have audited the accompanying consolidated balance sheets of Caretenders Health Corp. (a Delaware corporation) and subsidiaries as of March 31, 1996 and 1995 and the related consolidated statements of income, stockholders' equity, and cash flows for each of the three years in the period ended March 31, 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Caretenders Health Corp. and subsidiaries as of March 31, 1996 and 1995, and the results of their operations and their cash flows for each of the three years in the period ended March 31, 1996 in conformity with generally accepted accounting principles.
				ARTHUR ANDERSEN LLP
Louisville, Kentucky May 23, 1996
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None
			 PART III 				 ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this Item is set forth the Registrants definitive proxy materials of the Company to be filed with the Commission no later than 120 days after March 31, 1996, except for the information regarding executive officers of the Company, which is contained in Item 1 of Part I report. The information required by this Item contained in such definitive proxy materials is incorporated herein by reference.
The following table sets forth certain information with respect to the Company's directors and executive officers.
Name Age Position with the Company - -------------------------------------------------------------------------- William B. Yarmuth (1) 44 Chairman of the Board, President and Chief Executive Officer
C. Steven Guenthner (2) 35 Senior Vice President and Chief Financial Officer
Mary A. Yarmuth (3) 49 Senior Vice President-Operations
JoAnn Young (4) 46 Vice President-Operations
William Elder (5) 51 Vice President-Operations
W. Timothy Luckett (6) 40 Vice President-Human Resources 			 Helen Simms (7) 39 Vice President-Operations
Anne Liechty (8) 44 Vice President-Operations
Tim Hoagland (9) 35 Vice President-Operations
Steven B. Bing (10) 49 Director
Patrick B. McGinnis (11) 49 Director
Donald G. McClinton (12) 62 Director
Tyree Wilburn (13) 44 Director
Executive officers of the Company are elected by the Board of Directors for one year and serve at the pleasure of the Board of Directors with the exception of William B. Yarmuth who has an employment agreement with the Company. See Item 11
Item 14. Exhibits and Financial Statement Schedules and Reports on Form 8-K.
						 Page Number (a)(1) Index to Consolidated Financial Statements
Consolidated Statements of Operations for the three years ended March 31, 1996, 1995, and 1994 21 Consolidated Balance Sheets - March 31, 1996 and 1995 22 Consolidated Statements of Stockholders' Equity for the three years ended March 31, 1996, 1995, and 1994 23 Consolidated Statements of Cash Flows for the three years ended March 31, 1996, 1995, and 1994 24 Notes to Consolidated Financial Statements 25-36 Report of Independent Public Accountants 37
(a)(2) Index to Financial Statement Schedule
Report of Independent Public Accountants 46 Schedule II - Valuation and Qualifying Accounts S-1
All other Schedules have been omitted because they are either not required, not applicable or, the information has otherwise been supplied in the financial statements or notes thereto.
(a)(3) Exhibits (* denotes filed herein)
Exhibit Number Description of Exhibit
3.1 Certificate of Incorporation, as amended
3.2 Amended and Restated By-laws
4.1 Credit Agreement by and between the Company and First 	 National Bank of Louisville and AmSouth Bank, N.A., and 	 HEALTHSOUTH Rehabilitation Corporation, as guarantor, 	 dated as of June 29, 1992 with exhibits (incorporated 	 by reference to Exhibit 10.88 to the Registrant's Form 	 S-1 Reg. 33-46565 dated April 23, 1993)
4.2 Medical Claims, Revolving Loan Agreement, Revolving 	 Credit Note and exhibits between the Company and Heller 	 Financial dated June 20, 1994
4.3 Other Debt Instruments -- copies of other debt 	 instruments for which the total debt is less than 10% of assets will be furnished to the Commission upon 	 request.
10.1 Form of Lender's Notes and Lenders' Warrants 	 (Incorporated by Reference to Exhibit 10.3 to the 	 Registrant's Registration Statement on Form S-1 Reg. 	 No. 33-8158 effective December 2, 1986)
10.2 Stockholders and Noteholders Agreement, dated February 	 5, 1991, by and among the Company, Senior Kentucky, 	 Inc., National Health Industries, Inc., Franklin 	 Capital Associates, L.P., Aetna Life and Casualty 	 Company, The Standard Fire Insurance Company and the 	 holders of National's common stock (Incorporated by 	 reference to Exhibit 2.3 to the Registrant's Report on 	 Form 8-K, dated February 5, 1991)
10.3 Nonqualified Stock Option Plan, as amended 	 (Incorporated by reference to the Registrant's 	 Registration Statement on Form S-8 Reg. No. 33-20815)
10.4 Supplemental Nonqualified Stock Option Plan 	 (Incorporated by reference to Exhibit 19.4 to the 	 Registrant's Report on Form 10-Q for the Quarter Ended 	 November 30, 1987 Commission File No. 15342)
10.5 Incentive Stock Option Plan, as amended (Incorporated 	 by reference to the Registrant's Registration Statement 	 on Form S-8 Reg. No. 33-20815)
10.6 Indemnity Agreement, effective as of October 15, 1987, 	 between Senior Service Corporation and Robert S. 	 Shulman (Incorporated by Reference to Exhibit 10.46 to 	 the Registrant's Post-Effective Amendment No. 3 to its Registration Statement on Form S-1 Reg. No. 33-8158)
10.7 Amendment to the Senior Service Corporation 1987 	 Nonqualified Stock Option Plan (Incorporated by 	 reference to Exhibit 19.3 to the Registrant's Report on 	 Form 10-Q for the quarter ended November 30, 1989)
10.9 Provider Agreement, dated May 24, 1989, between the 	 Maryland State Department of Health and Mental Hygiene 	 and Towson Community Adult Day Care (Incorporated by 	 reference to Exhibit 10.70 to the Registrant's Post- 	 Effective Amendment No. 4 to its Registration Statement 	 on Form S-1 File No. 33-8158)
10.22 1991 Long-Term Incentive Plan
10.23 Warrant Agreement, dated June 29, 1991, between the 	 Company and HEALTHSOUTH Rehabilitation Corporation 	 (incorporated by reference to Exhibit 10.88 to the 	 Registrant's Form S-1 Reg. 33-46565 dated April 23, 	 1993)
10.24* Employment Agreement, dated January 1. 1996, between 	 the Company and William B. Yarmuth
10.25 Asset Sale Agreements between the Company and 	 Columbia/HCA Healthcare Corporation
11* Schedule of Computation of Per Share Earnings
22* List of Subsidiaries of Caretenders Health Corp.
24.1* Consent of Arthur Andersen LLP
27* Financial Data Schedule
(b)Reports on Form 8-K
None.
(c)Exhibits
Described in Item 14(a)(3) of this report
(d)Financial Statement Schedules
Described in Item 14(a)(2) of this report
SIGNATURES
	 Pursuant to the requirements of Section 13 or 15(d) 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.
CARETENDERS HEALTH CORP. June 24, 1996
By /s/ William B. Yarmuth William B. Yarmuth Chairman, President and Chief Executive Officer
By /s/ C. Steven Guenthner C. Steven Guenthner Senior Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons in the capacities and on the dates indicated:
By /s/ William B. Yarmuth June 24, 1996 William B. Yarmuth Date Director
By /s/ Patrick B. McGinnis June 24, 1996 Patrick B. McGinnis Date Director
By /s/ Donald G. McClinton June 24, 1996 Donald G. McClinton Date Director
By /s/ Steven B. Bing June 24, 1996 Steven B. Bing Date Director
By /s/ Tyree Wilburn June 24, 1996 Tyree Wilburn Date Director
	 Report of Independent Public Accountants
To the Board of Directors and Stockholders of Caretenders Health Corp.:
Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedule listed in the index of Financial Statement Schedules is presented for purposes of complying with the Securities and Exchange Commissions rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole.
			ARTHUR ANDERSEN LLP
Louisville, Kentucky May 23, 1996
			 CARETENDERS HEALTH CORP AND SUBSIDIARIES 				VALUATION AND QUALIFYING ACCOUNTS SCHEDULE II
				 CARETENDERS HEALTH CORP AND SUBSIDIARIES 		 		 SCHEDULE OF COMPUTATION OF EARNINGS PER SHARE 								 EXHIBIT 11
				 		 	CARETENDERS HEALTH CORP 		 	 LIST OF SUBSIDIARIES 		 	 AS OF MARCH 31, 1996 				 		 		 EXHIBIT 22
Subsidiaries of Caretenders Health Corp 	Adult Day Care of America, Inc. 	Adult Day Care of Louisville, Inc. 	Adult Day Care of Maryland, Inc. 	Adult Day Clubs of America Joint Venture, Ltd. 	HouseCalls, Inc. 	SEI Publishing Corporation 	National Health Industries, Inc. 	HHJC Holdings, Inc.
Subsidiaries of National Health Industries, Inc. 	Freelife Medical Equipment, Inc. 	Caretenders Homecare, Inc. 	Caretenders Infusion of Birmingham, Inc. 	Caretenders of Birmingham, Inc. 	Caretenders of Boston, Inc. 	Caretenders of Cincinnati, Inc. 	Caretenders of Columbus, Inc. 	Caretenders of Elizabethtown, Inc. 	Caretenders of Indiana, Inc. 	Caretenders of Indianapolis, Inc. 	Caretenders of Lincoln Trail, Inc. 	Caretenders of Louisville, Inc. 	Caretenders of New Jersey, Inc. 	Caretenders of Northern Kentucky, Inc. 	Caretenders of Richmond, Inc. 	Caretenders of the Bluegrass, Inc. 	Caretenders Visiting Services of Richmond, Inc. 	House Calls of America, Inc. 	Caretenders Infusion Corp. 	National Orthopedic & Rehabilitation Services, Inc. 	Metro Home Care, Inc. 	Physician Affiliates, Inc. 	Special Healthcare Services, Inc.
Subsidiary of HHJC Holdings, Inc. 	Home Health of Jefferson County, Inc.
	 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our reports included in this Form 10-K, into the Company's previously filed Registration Statement File No. 33-33601 relating to the Company's Incentive Stock Option Plan, Registration Statement File No. 33-81122 related to the 1987 Nonqualified Stock Option Plan, Registration Statement No. 33-881100 related to the 1993 Non-Employee Directors Stock Option Plan, and Registration Statement No. 33-81124 related to the 1991 Long-Term Incentive Plan.
			 ARTHUR ANDERSEN LLP
Louisville, Kentucky June 26, 1996