<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) November 26, 1996
HOME HEALTH CORPORATION OF AMERICA, INC.
(Exact name of registrant as specified in its charter)
Pennsylvania 23-2224800 0-26938
(State or other jurisdiction of (IRS Employer Identification (Commission File
incorporation) No.) Number)
2200 Renaissance Boulevard
Suite 300
King of Prussia, PA 19406
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (610) 272-1717
Exhibit index is located on page 20
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On November 27, 1996, Home Health Corporation of America, Inc. (the "Company")
acquired from Randy DiSalvo all of the outstanding capital stock of R.S.D.
Management, Inc., a provider of primarily Medicare cost-reimbursed nursing and
related patient services (the "RSD Acquisition"). This transaction was
previously reported on a Form 8-K dated November 27, 1996, as filed on December
13, 1996. This Form 8-K/A is being filed for the purpose of satisfying
requirements of Item 7 of Form 8-K.
ITEM 7. FINANCIAL STATEMENTS AND PRO FORMA FINANCIAL INFORMATION
a) Financial Statements
The following lists the historical financial statements of the companies
acquired in the RSD Acquisition, attached hereto:
<TABLE>
<CAPTION>
Page
------
<S> <C>
Report of Simione, Scillia, Larrow & Dowling LLC 5
Consolidated Balance Sheets as of June 30, 1996 (audited) and September
30, 1996 (unaudited) 6
Consolidated Statements of Operations and Accumulated Deficit for the year
ended June 30, 1996 (audited) and the three months ended September 30, 1995
and 1996 (unaudited) 7
Consolidated Statements of Cash Flows for the year June 30, 1996 (audited) and
the three months ended September 30, 1995 and 1996 (unaudited)
8
Notes to Consolidated Financial Statements 9
b) Unaudited Pro Forma Financial Information
The following lists the unaudited pro forma financial information of the
companies acquired in the RSD Acquisition, attached hereto:
Pro forma Consolidated Balance Sheet as of September 30, 1996 16
</TABLE>
2
<PAGE>
<TABLE>
<S> <C>
Pro forma Consolidated Statement of Operations for the year ended June 30,
1996 17
Pro forma Consolidated Statement of Operations for the three months ended
September 30, 1996 18
Notes to Pro Forma Consolidated Financial Statements 19
</TABLE>
c) Exhibits
2.1* Stock Purchase Agreement among Home Health Corporation of America,
Inc., Home Health Corporation of Delaware, Inc., Randy DiSalvo, R.S.D.
Management, Inc., Nursing Services Home Care, Inc., Nursing Services
Home Care, Ltd., Nursing Services Staffing of N.H., Inc. and Nursing
Services, Inc.
2.2* Amendment 1 to Stock Purchase Agreement among Home Health Corporation
of America, Inc., Home Health Corporation of Delaware, Inc., Randy
DiSalvo, R.S.D. Management, Inc., Nursing Services Home Care, Inc.,
Nursing Services Home Care, Ltd., Nursing Services Staffing of N.H.,
Inc. and Nursing Services, Inc.
2.3* Amendment 2 to Stock Purchase Agreement among Home Health Corporation
of America, Inc., Home Health Corporation of Delaware, Inc., Randy
DiSalvo, R.S.D. Management, Inc., Nursing Services Home Care, Inc.,
Nursing Services Home Care, Ltd., Nursing Services Staffing of N.H.,
Inc. and Nursing Services, Inc.
23.1 Consent of Independent Accountants
_________________________________
* Incorporated by reference to the Company's Form 8-K dated November 27,
1996, as filed on December 13, 1996.
3
<PAGE>
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 hereunto duly authorized.
Home Health Corporation of America, Inc.
Date: February 11, 1997 /s/ Bruce J. Colburn
-------------------------------------
Name: Bruce J. Colburn,
Title: Chief Financial and Accounting
Officer
4
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors
R.S.D. Management, Inc. and Subsidiaries
Salem, New Hampshire
We have audited the accompanying consolidated balance sheet of R.S.D.
Management, Inc. and Subsidiaries ("R.S.D.") as of June 30, 1996 and the related
consolidated statements of operations and accumulated deficit and cash flows for
the year then ended. These financial statements are the responsibility of
R.S.D.'s management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of R.S.D. Management,
Inc. and Subsidiaries as of June 30, 1996 and the results of their operations
and their cash flows for the year then ended in conformity with generally
accepted accounting principles.
/s/ Simione, Scillia, Larrow & Dowling LLC
New Haven, Connecticut
October 18, 1996, except for Note 10 as to which
the date is November 29, 1996
5
<PAGE>
R.S.D MANAGEMENT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, June 30,
1996 1996
------------------ -----------------
<S> <C> <C>
ASSETS (unaudited) (audited)
CURRENT ASSETS
Cash $ 23,834 $ 12,430
Accounts receivable, less allowance for doubtful
accounts of approximately $341,000 and
$299,000 615,135 916,214
Accounts receivable pledged as collateral
under financing arrangement 5,531,231 5,144,933
Prepaid expenses and other current assets 108,315 132,213
------------ ------------
Total current assets 6,278,515 6,205,790
------------ ------------
EQUIPMENT AND
LEASEHOLD IMPROVEMENTS, net 211,503 224,634
------------ ------------
$ 6,490,018 $ 6,430,424
============ ============
LIABILITIES AND DEFICIENCY IN ASSETS
CURRENT LIABILITIES
Line of credit $ 1,000,000 $ 1,000,000
Notes payable to stockholder and officers 2,121,846 1,687,994
Advances under financing arrangement 2,897,018 3,327,966
Accounts payable 504,095 551,145
Due to Medicare 622,910 304,180
Accrued payroll and related withholdings 670,689 714,452
Accrued insurance and interest 647,611 534,449
Accrued consulting agreement 28,678 -
------------ ------------
Total current liabilities 8,492,847 8,120,186
------------ ------------
ACCRUED CONSULTING AGREEMENT, less
current portion 482,322 -
------------ ------------
DEFICIENCY IN ASSETS
Common stock, Class A, no par value; 150 shares
authorized, 10 shares issued and outstanding 100 100
Common stock, Class B, no par value; 150 shares
authorized, issued and outstanding 900 900
Accumulated deficit (2,486,151) (1,690,762)
------------ ------------
(2,485,151) (1,689,762)
------------ ------------
$ 6,490,018 $ 6,430,424
============ ============
</TABLE>
See notes to consolidated financial statements.
6
<PAGE>
R.S.D. MANAGEMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
SEPTEMBER 30, JUNE 30,
-------------------------------
1996 1995 1996
-------------- --------------- ----------------
(UNAUDITED) (AUDITED)
<S> <C> <C> <C>
REVENUE
Net service income $ 4,495,720 $ 4,412,373 $ 18,349,585
Interest income 2,071 - 1,923
------------ ------------ -------------
TOTAL REVENUE 4,497,791 4,412,373 18,351,508
------------ ------------ -------------
COSTS AND EXPENSES
Direct service costs 3,187,202 2,829,988 12,256,231
General and administrative expenses 2,105,978 1,852,107 7,305,087
------------ ------------ -------------
TOTAL COSTS AND EXPENSES 5,293,180 4,682,095 19,561,318
------------ ------------ -------------
NET LOSS (795,389) (269,722) (1,209,810)
ACCUMULATED DEFICIT, Beginning (1,690,762) (480,952) (480,952)
------------ ------------ --------------
ACCUMULATED DEFICIT, Ending $ (2,486,151) $ (750,674) $ (1,690,762)
============ ============ ==============
</TABLE>
See notes to consolidated financial statements.
7
<PAGE>
R.S.D. MANAGEMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
SEPTEMBER 30, JUNE 30,
---------------------------
1996 1995 1995
------------ ------------- -----------------
(UNAUDITED) (AUDITED)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (795,389) $ (269,722) $ (1,209,810)
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities
Depreciation and amortization 13,131 12,930 52,479
Provision for bad debts 14,446 200,000 295,395
Changes in assets and liabilities:
Accounts receivable (99,665) (174,674) (2,632,840)
Prepaid expenses and other current assets 23,898 39,783 150,310
Accounts payable (47,050) (54,062) 339,753
Due to Medicare 318,730 150,000 (64,738)
Accrued payroll and related withholdings (43,763) (22,238) 297,866
Accrued insurance and interest 113,162 (12,928) 382,486
Accrued consulting agreement 511,000 - -
----------- ----------- -------------
Net cash provided by (used in)
operating activities 8,500 (130,911) (2,389,009)
----------- ----------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of equipment and leasehold
improvements - (9,287) (28,289)
----------- ----------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Decrease in cash overdraft - (87,552) (305,420)
Net (repayments) advances under
financing arrangement (430,948) - 3,327,966
Net borrowings (payments) on lines of credit - 5,000 (750,000)
Payments of notes payable (22,000) (31,250) (932,500)
Proceeds from the issuance of notes payable 455,852 254,000 1,089,772
----------- ----------- -------------
Net cash provided by financing activities 2,904 140,198 2,429,818
----------- ----------- -------------
NET INCREASE IN CASH 11,404 - 12,430
CASH, Beginning 12,430 - -
----------- ----------- -------------
CASH, Ending $ 23,834 $ - $ 12,430
=========== =========== =============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest $ 49,046 $ 90,467 $ 388,595
=========== =========== =============
</TABLE>
See notes to consolidated financial statements.
8
<PAGE>
R.S.D. MANAGEMENT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
The Company provides various types of homecare services to private homes and
hospitals in Massachusetts and New Hampshire.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION - The consolidated financial statements include the
accounts of R.S.D. Management, Inc. ("R.S.D. Management") and its wholly-owned
subsidiaries, Nursing Services Homecare, Ltd., Nursing Services Homecare, Inc.,
Nursing Services Staffing of New Hampshire, Inc., and Nursing Services, Inc.
(collectively, "R.S.D."). All intercompany balances and transactions are
eliminated.
UNAUDITED FINANCIAL STATEMENTS -- The unaudited financial statements and the
related notes for the three months ended September 30, 1996 and 1995 include all
normal and recurring adjustments that, in the opinion of management, are
necessary for a fair presentation and are prepared on the same basis as the
audited financial statements. The interim financial results are not necessarily
indicative of the results of the full fiscal year.
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 the reported amounts of revenues and expenses during the
reporting period. Accordingly, actual results could differ from those
estimates.
EQUIPMENT AND LEASEHOLD IMPROVEMENTS - Equipment and leasehold improvements are
recorded at cost. Maintenance and repairs are charged to expense as incurred.
When assets are sold or otherwise disposed of, the cost and related accumulated
depreciation are removed from the respective accounts and the resulting gain or
loss is reflected in operations. Depreciation of equipment is computed using
the straight-line method over the estimated useful lives of the assets, ranging
from 3 to 7 years. Leasehold improvements are amortized over their estimated
useful life.
NET SERVICE INCOME - Net service income is reported at the estimated net
realizable amounts from patients and third party payors.
INCOME TAXES - R.S.D. files consolidated federal income tax returns. For state
income tax purposes, R.S.D. files a consolidated return for New Hampshire, and
it files separate returns for each entity in Massachusetts. Although R.S.D.
Management is ultimately liable for corporate income taxes resulting from
consolidated tax returns, such taxes have been allocated to each subsidiary as
if each subsidiary filed its own corporate tax returns. Deferred income taxes
reflect the net tax effects of temporary differences between the carrying
amounts of assets and liabilities and the amount used for income tax purposes.
9
<PAGE>
NOTE 2 - THIRD-PARTY RATE ADJUSTMENTS, REVENUE AND RECEIVABLE
The following percent of net service income was derived under the federal
government's Medicare program:
<TABLE>
<CAPTION>
Three months ended Year ended
September 30, June 30,
---------------------
1996 1995 1996
--------------------- -----------------
(unaudited) (audited)
<S> <C> <C>
62% 62% 62%
=== === ===
</TABLE>
These revenues are based on cost reimbursement principles and are subject to
audit and retroactive adjustment by the respective third-party fiscal
intermediaries. R.S.D.'s Medicare cost reports have been audited through June
30, 1994. In the opinion of management, retroactive adjustments, if any, would
not be material to the financial position or results of operations of R.S.D.
Accounts receivable includes amounts due from Medicare of $4,747,412 (unaudited)
at September 30, 1996 and $4,263,215 (audited) at June 30, 1996. During the
three months ended September 30, 1996 and the year ended June 30, 1996,
significant delays were encountered in collecting Medicare accounts because of
increased requests for documentation of charges. Collection of the Medicare
portion of accounts receivable, which includes the following amounts over 180
days old, is dependent on Medicare's review and approval:
<TABLE>
<CAPTION>
September 30, June 30,
1996 1996
--------------- ------------
(unaudited) (audited)
<S> <C>
$ 668,000 $ 340,000
============== ============
</TABLE>
Because of the uncertainty associated with the Medicare approval process, it is
reasonably possible that management's estimate of the amount of that receivable
which is collectible may change in the near term. However, the amount of that
change that is reasonably possible cannot be estimated.
NOTE 3 - ACCOUNTS RECEIVABLE FINANCING ARRANGEMENT
In January 1996, Nursing Services Homecare, Inc., Nursing Services Homecare,
Ltd., and Nursing Services, Inc. entered into an agreement with a finance
company to factor accounts receivable. Under the agreement, the companies are
advanced 80 percent of eligible receivables, which are submitted weekly in
batches. The fee charged by the finance company is based on a percentage of the
amount advanced, calculated based on the average days required for collection.
Any amount collected on the receivables in excess of the advanced amount and
corresponding fee is remitted to the companies.
10
<PAGE>
NOTE 4 - EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Equipment and leasehold improvements consist of the following:
<TABLE>
<CAPTION>
September 30, June 30,
1996 1996
-------------- --------------
(unaudited) (audited)
<S> <C> <C>
Office and medical equipment $ 285,797 $ 285,797
Leasehold improvements 106,365 106,365
-------------- --------------
392,162 392,162
Less accumulated depreciation
and amortization 180,659 167,528
-------------- --------------
$ 211,503 $ 224,634
============== ==============
</TABLE>
NOTE 5 - LINE OF CREDIT
R.S.D. Management's wholly-owned subsidiary, Nursing Services Homecare, Inc.,
has a $1,000,000 line of credit that was utilized fully at June 30, 1996
(audited) and at September 30, 1996 (unaudited). The line bears interest at the
30-day Commercial Paper Rate plus 2.95 percent (8.3 percent at September 30,
1996 and 8.4 percent at June 30, 1996) and expires in April 1997. The line is
collateralized by securities owned by an officer of R.S.D. Management and is
guaranteed by the companies in the consolidated group.
In November 1995, R.S.D.'s $1,750,000 line of credit expired.
NOTE 6 - NOTES PAYABLE TO STOCKHOLDER AND OFFICERS
All notes payable are unsecured and consist of the following:
<TABLE>
<CAPTION>
September 30, June 30,
1996 1996
--------------- ---------------
(unaudited) (audited)
<S> <C> <C>
Notes payable to stockholder with interest at
10 percent per annum, payable on demand. $ 986,846 $ 652,994
Notes payable to officers with interest at
14 percent per annum, payable on demand. 835,000 735,000
Note payable to stockholder with interest at
12 percent per annum. Beginning January
1995, monthly payments of principal and
interest of $6,673 are required through
January 2000. No principal repayments
have been made as of September 30, 1996.
Accordingly, the balance of the note is
classified as a current liability. 300,000 300,000
---------- ----------
$2,121,846 $1,687,994
========== ==========
</TABLE>
11
<PAGE>
Interest expense was $119,331and $90,470 (both unaudited) for the three months
ended September 30, 1996 and 1995 and $460,948 (audited) for the year ended June
30, 1996. Of those amounts, $45,382 and $32,157 (both unaudited) for the three
months ended September 30, 1996 and 1995 and $190,269 (audited) for the year
ended June 30, 1996 were related to notes payable to the stockholder and
officers. Accrued interest amounted to $56,356 (unaudited) at September 30,
1996 and $29,589 (audited) at June 30, 1996. Of the accrued interest, $15,796
(unaudited) at September 30, 1996 and $11,460 (audited) at June 30, 1996 are
payable to the stockholder and officers.
NOTE 7 -- CONSULTING AGREEMENT
During October 1996, R.S.D. entered into a noncancellable consulting agreement
with Richard W. McDonough Associates. The agreement requires monthly payments
in various amounts equaling an annual payment of $75,000 through February 2008.
For the term of the agreement, the consultant shall provide R.S.D. with:
technical advice and assistance in connection with R.S.D.'s business and advice
on strategic matters relating to the expansion of R.S.D.'s business; direction
for establishing a government affairs division within R.S.D., and once
established, to act as an interim director thereof until a permanent director is
chosen by R.S.D.; and direction and guidance whenever R.S.D. must appear before
or make a presentation to any regulatory authority.
The agreement may be terminated upon the death of the consultant or physical or
mental incapacity of the consultant that prevents the consultant from
substantially fulfilling his obligations. The agreement may also be terminated
at any time by R.S.D. with written notice to the consultant. However,
termination of the agreement has no effect on the consultant's right to receive
the fees noted above.
Because of its unconditional nature, the present value of the payment obligation
under this agreement has been determined using a discount rate of 10 percent and
is recognized as a liability in the accompanying balance sheet at $511,000. The
present value of the future maturities of the liability are as follows:
<TABLE>
<CAPTION>
Year ending
September 30,
-------------
(unaudited)
<S> <C>
1997 $ 28,678
1998 28,090
1999 31,031
2000 34,280
2001 37,870
Thereafter 351,051
--------
$511,000
========
</TABLE>
12
<PAGE>
NOTE 8 - OPERATING LEASES
R.S.D. occupies office space in several locations under various operating leases
expiring between 1996 and 1999. In addition to minimum lease payments, one
lease provides that real estate taxes and operating expenses be paid by R.S.D..
Rental expense amounted to $58,469 and $55,026 (both unaudited), for the three
months ended September 30, 1996 and 1995 and $229,266 (audited) for the year
ended June 30, 1996.
In addition, R.S.D. leases vehicles under operating leases which expire in June
and July 1997. Total lease expense amounted to $5,335 and $5,399 (both
unaudited) for the three months ended September 30, 1996 and 1995 and $24,648
(audited) for the year ended June 30, 1996.
Future minimum lease payments under noncancellable leases are as follows:
<TABLE>
<CAPTION>
Year ending September 30,
-------------------------
(unaudited)
<S> <C>
1997 $ 209,888
1998 90,453
----------
$ 300,341
==========
</TABLE>
NOTE 9 - INCOME TAXES
Deferred tax assets are as follows:
<TABLE>
<CAPTION>
September 30, June 30,
1996 1996
-------------- -------------
(unaudited) (audited)
<S> <C> <C>
Total deferred tax assets $ 554,137 $ 445,194
Valuation allowance (554,137) (445,194)
------------ ------------
$ - $ -
============ ============
</TABLE>
The deferred tax asset results from basis differences in certain trade accounts
receivable and the benefit of available federal and state net operating loss
carryforwards.
R.S.D.'s management has determined that a valuation allowance is required due to
the uncertainty that future operations will generate sufficient taxable income
to realize the deferred tax assets.
13
<PAGE>
The valuation allowance increased (decreased) as follows:
<TABLE>
<CAPTION>
Three months ended Year ended
September 30, June 30,
--------------------------------
1996 1995 1996
------------- --------------- ----------------
(unaudited) (audited)
<S> <C> <C>
$ 108,943 $ (23,100) $ 370,194
========== =========== ============
</TABLE>
R.S.D. had net operating loss carryforwards for federal and state tax reporting
purposes of approximately $1,645,000 and $875,000 (both unaudited) at September
30, 1996 and 1995 and $1,385,000 (audited) at June 30, 1996. If not utilized to
offset future taxable income, those carryforwards will begin to expire in tax
years in 2007 for federal purposes and in 1998 for state purposes.
NOTE 10 -- SUBSEQUENT EVENT
On November 29, 1996, R.S.D. Management's sole shareholder sold the stock held
in R.S.D. Management to Home Health Corporation of America, Inc.
14
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The unaudited pro forma consolidated statements of operations for the year ended
June 30, 1996 and the three months ended September 30, 1996 reflect the
operations of the companies acquired in the RSD Acquisition as if such
acquisition occurred as of July 1, 1995 and 1996, respectively. The RSD
Acquisition is accounted for as a purchase.
The unaudited pro forma consolidated balance sheet at September 30, 1996 reflect
the accounts of the companies acquired in the RSD Acquisition as if such
acquisition occurred on September 30, 1996.
The unaudited pro forma consolidated financial statements do not purport to
represent what the Company's actual results of operations or financial condition
would have been had the RSD Acquisition occurred as of such dates, or to project
the Company's results of operations or financial condition for any period or
date, nor does it give effect to any matters other than those described in the
notes thereto. In addition, the allocations of purchase price to the assets and
liabilities of the companies acquired in the RSD Acquisition are preliminary and
the final allocations may differ from the amounts reflected therein. The pro
forma adjustments are based upon available information and upon certain
assumptions that management believes are reasonable. These adjustments are
directly attributable to the acquisition and are expected to have a continuing
impact on the financial condition and results of operations of the Company. The
unaudited pro forma consolidated financial statements should be read in
conjunction with the respective historical financial statements of the Company,
as filed on Form 10-K on September 30, 1996 and Form 10-Q on November 14, 1996,
and the RSD Acquisition, included elsewhere in this Form 8-K/A.
15
<PAGE>
HOME HEALTH CORPORATION OF AMERICA, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1996
(UNAUDITED)
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
---------------------------- ----------------------------
RSD
ASSETS HHCA ACQUISITION (1) ADJUSTMENTS TOTAL
----------- --------------- ------------- ------------
<S> <C> <C> <C> <C>
Current assets:
Cash $ 2,041 $ 24 $ - $ 2,065
Accounts receivable 28,525 6,146 - 34,671
Inventories 1,584 - - 1,584
Prepaid expenses and other 688 108 - 796
Deferred taxes 862 - - 862
--------- --------- ---------- ----------
Total 33,700 6,278 - 39,978
Property and equipment 9,184 212 - 9,396
Goodwill 31,051 - 7,670 (2) 38,721
Other assets 1,054 - - 1,054
--------- --------- ---------- ----------
Total assets $ 74,989 $ 6,490 $ 7,670 $ 89,149
========= ========= ========== ==========
LIABILITIES
Current Liabilities:
Long-term debt, current portion $ 3,409 $ 6,019 $ (6,019)(3) $ 3,409
Accounts payable 2,353 504 - 2,857
Accrued salaries 2,277 671 - 2,948
Accrued expenses 1,660 1,299 - 2,959
Income taxes payable 966 - - 966
--------- --------- ---------- ----------
10,665 8,493 (6,019) 13,139
Long-term debt, net 22,566 - 10,404 (3) 32,970
Other noncurrent liabilities 698 482 - 1,180
Deferred taxes 126 - - 126
--------- --------- ---------- ----------
Total liabilities 34,055 8,975 4,385 47,415
Common stock, no par, mezzanine 500 - - 500
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock, no par 34,400 1 799 (2)(3) 35,200
Retained earnings (deficit) 6,048 (2,486) 2,486 (2) 6,048
Subscriptions receivable (14) - - (14)
--------- --------- ---------- ----------
Total stockholders' equity (deficit) 40,434 (2,485) 3,285 41,234
--------- --------- ---------- ----------
Total liabilities and stockholder's
equity (deficit) $ 74,989 $ 6,490 $ 7,670 $89,149
========= ========= ========== ==========
</TABLE>
See notes to unaudited pro forma consolidated financial statements.
16
<PAGE>
HOME HEALTH CORPORATION OF AMERICA, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1996
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
---------------------------------- -----------------------------------
RSD
HHCA ACQUISITION (4) ADJUSTMENTS TOTAL
--------------- ---------------- --------------- ---------------
<S> <C> <C> <C> <C>
Net revenues $ 87,694 $ 18,350 $ 822 (5) $ 106,866
Operating Costs and Expenses:
Patient care costs 42,050 12,256 - 54,306
General and administrative 32,893 6,496 - 39,389
Provision for doubtful accounts 2,848 295 - 3,143
Depreciation 784 52 (8) (6) 828
Amortization 1,016 - 237 (6) 1,253
Interest expense, net 1,454 459 467 (7) 2,380
Bridge financing 913 - - 913
--------------- ---------------- --------------- ---------------
Total expenses 81,958 19,558 696 102,212
--------------- ---------------- --------------- ---------------
Income before provision for income
taxes and extraordinary item 5,736 (1,208) 126 4,654
Provision for income taxes 2,348 - (443)(8) 1,905
--------------- ---------------- --------------- ---------------
Income before extraordinary item $ 3,388 $ (1,208) $ 569 $ 2,749
=============== ================ =============== ===============
Per Share Data:
Net income available to common stockholders
before extraordinary item $ 2,550 $ 1,911
=============== ===============
Earnings per share before extraordinary item $ 0.39 $ 0.29
=============== ===============
Weighted average common and common
equivalent shares outstanding 6,468 6,562 (9)
=============== ===============
</TABLE>
See notes to unaudited pro forma consolidated financial statements.
17
<PAGE>
HOME HEALTH CORPORATION OF AMERICA, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1996
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
-------------------------- -----------------------------
RSD
HHCA ACQUISITION (4) ADJUSTMENTS TOTAL
--------- --------------- -------------- ----------
<S> <C> <C> <C> <C>
Net revenues 25,302 $4,498 $ 114 (5) $29,914
Operating Costs and Expenses:
Patient care costs 12,226 3,187 15,413
General and administrative 8,819 1,959 10,778
Provision for doubtful accounts 906 14 920
Depreciation 260 13 (2)(6) 271
Amortization 355 - 86 (6) 441
Interest expense, net 431 119 89 (7) 639
-------- ----------- ----------- -------
Total expenses 22,997 5,292 173 28,462
-------- ----------- ----------- -------
Income before provision for income taxes
and extraordinary item 2,305 (794) (59) 1,452
Provision for income taxes 899 - (349)(8) 550
-------- ---------- ----------- -------
Income before extraordinary item $ 1,406 $ (794) $ 290 $ 902
======== ========== =========== =======
Per Share Data:
Net income available to common
stockholders before extraordinary item $ 1,406 $ 902
======== =======
Earnings per share before extraordinary item $ 0.17 $ 0.11
======== =======
Weighted average common and common
equivalent shares outstanding 8,182 8,276 (9)
======== =======
</TABLE>
See notes to unaudited pro forma consolidated financial statements.
18
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
PRO FORMA CONSOLIDATED BALANCE SHEETS
(1) Represents the historical balance sheet of the RSD Acquisition. This
acquisition is accounted for as a purchase in the pro forma consolidated
balance sheet.
(2) Adjusts assets and liabilities of the RSD Acquisition to fair market value.
(3) Reflects the consideration for the RSD Acquisition which includes $1.0
million of notes payable to the sellers with interest at 8.0% per annum,
$800,000 in common stock of the Company and $9.4 million in cash. The cash
portion of the consideration was financed through the Company's senior
credit facility.
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(4) Represents the historical results of operations of the RSD Acquisition for
the year ended June 30, 1996 and the three months ended September 30, 1996.
This acquisition is accounted for as a purchase in the pro forma
consolidated statements of operations.
(5) Reflects the pro forma allocation of corporate expenses, which results in
corresponding adjustments to net revenues for cost-based reimbursed
Medicare agencies.
(6) Reflects increases (decreases) in the historical amounts of the net assets
of the RSD Acquisition for depreciation resulting from the revaluation in
purchase accounting of fixed assets and for the amortization of goodwill
over 25 years.
(7) Reflects the additional interest expense that would have been incurred if
the RSD Acquisition had occurred as of July 1, 1995 and 1996. The interest
rates of 9% and 8% per annum used to calculate pro forma interest expense
on the debt required to fund the cash payments for this acquisition
reflects the Company's weighted average borrowing rate on its senior credit
facility for the fiscal year ended June 30, 1996 and the three months ended
September 30, 1996, respectively. The interest rate used to calculate pro
forma interest expense on the seller notes of 8.0% per annum represents the
rate of interest on those notes.
(8) Reflects the adjustments to income taxes which would have been provided on
the pro forma income before provision for income taxes and extraordinary
item using the Company's effective tax rate at June 30, 1996 of 41%.
(9) The weighted average shares outstanding used in calculating pro forma
net income per share reflects the shares that would have been outstanding
if the shares issued as partial consideration for the RSD Acquisition had
been issued as of July 1, 1995 and 1996. The shares issued in connection
with the RSD Acquisition were issued at $10.63 per share.
19
<PAGE>
EXHIBIT INDEX
2.1* Stock Purchase Agreement among Home Health Corporation of America,
Inc., Home Health Corporation of Delaware, Inc., Randy DiSalvo, R.S.D.
Management, Inc., Nursing Services Home Care, Inc., Nursing Services
Home Care, Ltd., Nursing Services Staffing of N.H., Inc. and Nursing
Services, Inc.
2.2* Amendment 1 to Stock Purchase Agreement among Home Health Corporation
of America, Inc., Home Health Corporation of Delaware, Inc., Randy
DiSalvo, R.S.D. Management, Inc., Nursing Services Home Care, Inc.,
Nursing Services Home Care, Ltd., Nursing Services Staffing of N.H.,
Inc. and Nursing Services, Inc.
2.3* Amendment 2 to Stock Purchase Agreement among Home Health Corporation
of America, Inc., Home Health Corporation of Delaware, Inc., Randy
DiSalvo, R.S.D. Management, Inc., Nursing Services Home Care, Inc.,
Nursing Services Home Care, Ltd., Nursing Services Staffing of N.H.,
Inc. and Nursing Services, Inc.
23.1 Consent of Independent Accountants
____________________________
. Incorporated by reference to the Company's Form 8-K dated November 27,
1996, as filed on December 13, 1996.
20
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement
of Home Health Corporation of America, Inc. on Form S-8 of our report dated
October 18, 1996, except for Note 10 as to which the date is November 29,
1996, on our audit of the consolidated balance sheet of R.S.D. Management,
Inc. and Subsidiaries as of June 30, 1996, and the related consolidated
statements of operations and accumulated deficit and cash flows for the
year then ended, which report is included in this Form 8-K/A.
/s/ Simione, Scillia, Larrow & Dowling LLC
New Haven, Connecticut
February 10, 1997
