UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
Commission File No. 033-97034
HELP AT HOME, INC.
DELAWARE 36-4033986
(State of other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
223 W. Jackson Blvd., Suite 500 Chicago, IL 60606
(Address of principal executive offices) (Zip Code)
(312) 663-4244
(Issuer's telephone number, including area code)
Indicate by checkmark whether the issuer (1) has filed all reports
required to be filed by Sections 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the issuer was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:
Common Stock, par value $.02 per share, 1,869,375 shares outstanding as
of May 14, 1999
Transitional Small Business Disclosure Format: Yes No [X]
<PAGE>
Help at Home, Inc.
Index
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets at
June 30, 1998 and March 31, 1999 3
Consolidated Statements of Income
for the three month periods ended
March 31, 1998 and 1999 4
Consolidated Statements of Income
for the nine month periods ended
March 31, 1998 and 1999 5
Consolidated Statements of Cash Flows
for the six month periods ended
March 31, 1998 and 1999 6
Notes to the Consolidated Financial Statements 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 9
PART II: OTHER INFORMATION 17
ITEM 1 LEGAL PROCEEDINGS 17
ITEM 2. CHANGES IN THE RIGHTS OF THE COMPANY'S
SECURITY HOLDERS 17
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 17
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS 17
ITEM 5. OTHER INFORMATION 18
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 18
SIGNATURES 19
<PAGE>
<TABLE>
HELP AT HOME, INC.
Consolidated Balance Sheet
<CAPTION>
March 31 June 30
1999 1998
(Unaudited) (Audited)
---------- ----------
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 966,861 $ 412,012
Accounts receivable (net of allowance
for doubtful accounts of $872,550
and $560,000, respectively) 8,549,492 6,789,224
Prepaid expenses and other 192,333 154,163
Federal income tax receivable 494,667 436,583
Deferred income taxes - current 64,388 335,283
---------- ----------
Total Current Assets 10,267,741 8,127,265
Furniture and equipment, net 167,480 203,703
Due from officer 142,966 133,668
Deferred tax asset - noncurrent 146,715 -
Other assets 88,275 88,275
---------- ----------
Total Assets $10,813,177 $ 8,552,911
========== ==========
<PAGE>
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable $ 1,214,074 $ 841,511
Accrued expenses 3,736,374 1,858,821
Due to third party payors 704,228 713,269
Current maturities of long-term debt 2,425,166 2,919,969
Deferred income taxes - current 285,994 152,600
---------- ----------
8,365,836 6,486,170
Deferred income taxes - noncurrent 174,463 158,600
Long-term debt, less current portion - 2,793
---------- ----------
Total Liabilities 8,540,299 6,647,563
Stockholders' Equity
Preferred stock, par value $.01 per share;
1,000,000 shares authorized, none issued
or outstanding
Common stock, par value $.02 per share;
14,000,000 shares authorized, 1,869,375
issued and outstanding 37,388 37,388
Additional paid in capital 3,694,401 3,694,406
Retained deficit (1,458,911) (1,826,446)
---------- ----------
Total Stockholders' Equity 2,272,878 1,905,348
Total Liabilities and
Stockholders' Equity $10,813,177 $ 8,552,911
========== ==========
The accompanying notes to these consolidated financial statements
are an integral part hereof.
</TABLE>
<PAGE>
<TABLE>
HELP AT HOME, INC.
Consolidated Statements of Income
(Unaudited)
Three Months Ended March 31
1999 1998
---------- ----------
<S> <C> <C>
Service fees $ 6,916,129 $ 5,735,580
Direct costs of services 4,741,746 4,080,310
---------- ----------
Gross margin 2,174,383 1,655,270
Selling, general and
administrative expenses 1,959,507 2,332,879
---------- ----------
Income (loss) from continuing operations 214,876 (677,609)
Other Income 3,310 598,873
---------- ----------
Income (loss) before income taxes 218,186 (78,736)
Income tax expense (benefit) 87,274 (183,307)
---------- ----------
Income (loss) from continuing operations 130,912 104,571
Discontinued operations:
Income from operations of
Medicare agencies (less
applicable income tax
Benefit of $6,167 in 1997) - (9,251)
---------- ----------
Net Income (loss) 130,912 95,320
========== ==========
Basic and Diluted Income (Loss)
Per Share:
Income (loss) from continuing operations $ 0 .07 $ 0.06
Income from discontinued operations ( 0 .01) -
---------- ----------
Net Income (loss) per share $ 0.07 $ 0.05
========== ==========
Weighted average number of
common shares 1,869,375 1,869,375
The accompanying notes to these consolidated financial statements
are an integral part hereof.
</TABLE>
<PAGE>
<TABLE>
HELP AT HOME, INC.
Consolidated Statements of Income
(Unaudited)
Nine Months Ended March 31
1999 1998
---------- ----------
<S> <C> <C>
Service fees $20,567,969 $16,886,963
Direct costs of services 13,990,903 11,859,383
---------- ----------
Gross margin 6,577,066 5,027,580
Selling, general and
administrative expenses 5,997,316 6,400,278
---------- ----------
Income (loss) from continuing
operations before income taxes 579,750 (1,372,698)
Other Income 3,310 630,789
---------- ----------
Income (loss) before income taxes 583,060 (741,909)
Income tax expense (benefit) 215,523 (373,710)
---------- ----------
Income (loss) from continuing
operations 367,537 (368,199)
Discontinued operations:
Income from operations of
Medicare agencies (less
applicable income tax
expense of $28,281 in 1997) - 42,422
---------- ----------
Net Income (loss) 367,537 (325,777)
========== ==========
Basic and Diluted Income (Loss) Per Share:
Income (loss) from continuing operations $0.20 ($0.19)
Income from discontinued operations - $0.02
---------- ----------
Net Income (loss) per share $0.20 ($0.17)
========== ==========
Weighted average number of
common shares 1,869,375 1,869,375
The accompanying notes to these consolidated financial statements
are an integral part hereof.
</TABLE>
<PAGE>
<TABLE>
HELP AT HOME, INC.
Statement of Consolidated Cash Flows
(Unaudited)
Nine Months Ended March 31
1999 1998
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 367,537 ($325,777)
Noncash changes in net loss
Depreciation and Amortization 72,105 215,651
Deferred taxes 65,509 (222,293)
Debt extinguishement (241,282)
Changes in:
Accounts receivable (1,760,268) (1,394,387)
Prepaid expenses and other (38,170) (349,955)
Accounts payable 372,563 79,863
Other current liabilities 1,741,546 623,985
Due to third party payors (9,041) 424,256
Current income taxes 149,844 1,793
---------- ----------
Net cash provided by (used in)
operating activities 961,625 (1,188,146)
Cash flows from investing activities:
Acquisition of property (35,882) (59,086)
(Increase) in shareholder loan (9,298) (9,141)
---------- ----------
Net cash used in investing activities (45,180) (68,227)
Cash flows from financing activities:
Proceeds from long-term debt - 2,704,487
Repayment of long-term debt (361,596) (1,047,699)
---------- ----------
Net cash (used in) provided by
financing activities (361,596) 1,656,788
---------- ----------
Net increase (decrease) in cash and
cash equivalents 554,849 400,415
Cash and cash equivalents:
Beginning of period 412,012 870,634
---------- ----------
End of period $ 966,861 $ 1,271,049
========== ==========
Supplemental disclosure of noncash
investing and financing activities:
Cash payments for:
Interest $ 252,539 $ 142,972
The accompanying notes to these financial statements are an
integral part hereof.
</TABLE>
<PAGE>
HELP AT HOME, INC.
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Note 1: Basis of Presentation
These unaudited Consolidated Financial Statements should be read in
conjunction with the Consolidated Financial Statements and Notes thereto
included in Help at Home, Inc.'s (the Company) annual Report on Form-KSB
for the fiscal year ended June 30, 1998 (1998 Form 10-KSB). The
following Notes to the Unaudited Consolidated Financial Statements
highlight significant changes to the Notes included in the 1998 Form
10-KSB and such interim disclosures as required by the Securities and
Exchange Commission. Certain financial information that is normally
included in annual financial statements prepared in accordance with
generally accepted accounting principles but is not required for interim
reporting purposes has been omitted. The accompanying unaudited
consolidated Financial Statements reflect, in the opinion of management,
all adjustments necessary for a fair presentation of the interim
financial statements. All such adjustments are of a normal and recurring
nature. The financial results for interim periods may not be indicative
of financial results for the full year.
Note 2: Debt
Effective December 30, 1997, the Company entered into a one-year
revolving credit agreement with Harris Trust and Savings Bank
(HarrisBank), Chicago, IL. The credit facility, collateralized by the
entirety of the Company's accounts receivable together with the capital
stock of the Company's subsidiaries (other than Homemakers of Montgomery,
Inc.) had a maximum allowable loan limit of $3.5 Million or 75% of
eligible accounts receivable, whichever was less. An October 1998
transaction through which the Company sold certain assets of Homemakers
of Montgomery, Inc. for $350,000 operated to reduce the maximum allowable
loan limit to $3,150,000. The Company utilized 100% of the proceeds of
the Homemakers of Montgomery transaction to reduce its indebtedness under
the credit facility as of October 9, 1998.
Pursuant to the terms of the credit facility, the Company must, during
the life of the loan maintain defined tangible net worth of at least
$2,265,000 and a defined current ratio of no less than 1.25:1. As of
June 30, 1998 the Company was in technical default relative to
maintenance of both financial ratios. The Company's lender declined to
waive the technical defaults, but agreed to a standstill agreement
through November 30, 1998. The Note became due on December 30, 1998. The
Company entered into another standstill Agreement with Harris Bank on
April 8, 1999 which ran through April 30, 1999. The Company is
continuing to work toward finalization of a replacement credit facility.
<PAGE>
Note 3: Commitments and Contingencies
Litigation. The Company has been named in several legal proceedings in
connection with matters that arose during the normal course of its
business and related to certain acquisitions. While the ultimate result
of the litigation or claims cannot be determined, it is management's
opinion, based upon information it presently possesses, that it has
adequately provided for losses that may be incurred related to these
claims.
Termination and Benefits Agreements. As of October, 1997 the Company's
Compensation Committee established a termination and benefits policy with
respect to key executive employees which provides for payment of
severance and benefits to promote adherence to the Company's
non-competition policies in the event of involuntary termination without
cause and/or a change in control. As of March 1, 1998 the Company
entered into employment agreements with the Chief Operating Officer. In
the event of a change in control the maximum aggregate salary commitment
for these employees would be approximately $450,000.
As of December 5, 1997 the Compensation Committee also approved a revised
ten-year contract for the Chief Executive Officer which provides for
severance and a one-time change of control payment in the event of
involuntary termination without cause or termination arising from a
change in the ownership and/or management of the Company. Assuming an
effective date of March 1, 1999, the maximum aggregate severance
commitment pursuant to this contract provision is approximately $2.5
Million. The change of control payment is defined as an amount equal
to 10% of excess market capitalization of the Company on the 30th day
following the change in control. Excess market capitalization is defined
as an amount equal to the Company's outstanding capital stock multiplied
by the closing per share price on the 30th day following the change less
$6 Million.
Note 4: Earnings Per Share.
Earnings per share have been determined by dividing earnings by the
weighted average number of shares of Common Stock outstanding during each
period.
<PAGE>
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
OVERVIEW:
Help at Home, Inc. (The "Company") provides general homemaker and respite
services to the elderly, medically fragile and disabled in their homes.
The Company has engaged in the provision of unskilled homemaker services
for over two decades. Help at Home operates 28 locations in Illinois,
Missouri, Indiana, Alabama, Arkansas and Mississippi. The Company
derives a significant portion of its revenues from 20 contracts with the
Illinois Department on Aging. Similarly, the Company contracts with other
state, regional and municipal agencies for the provision of custodial
home care services.
The Company's Board of Directors elected to discontinue Medicare home
health operations and adopted a disposition plan as of June 30, 1998
which calls for the sale or closure of the Company's Medicare home health
agencies (Homemakers of Montgomery, Inc., Lakeside Home Health Agency,
Inc. [IL], Lakeside Home Health Agency, Inc. [MO], and Rosewood Home
Health, Inc. In connection with the Company's decision to discontinue
Medicare home health services, Lakeside Home Health Agency, Inc. (IL)
ceased operations as of August 31, 1998. Certain assets of Homemakers of
Montgomery, Inc. were sold as of October 9, 1998 and that entity's
patients were simultaneously transferred to a non-affiliated provider.
Rosewood Home Health, Inc. was closed as of October 30, 1998 and its
patients transferred to another non-affiliated provider. Lakeside Home
Health Agency Inc. (MO) was closed on December 15, 1998 and its patients
transferred to another non-affiliated provider.
The statements which are not historical facts contained in this form
10-QSB are forward looking statements that involve risks and
uncertainties, including, but not limited to, the integration of new
acquisitions into the operations of the Company, the ability of the
Company to locate attractive acquisition candidates, the effect of
economic conditions and interest rates, general labor costs, the impact
and pricing of competitive services, regulatory changes and conditions,
the results of financing efforts, the actual closing of contemplated
transactions and agreements, the effect of the Company's accounting
policies, and other risks detailed in the Company's Securities and
Exchange Commission filings. No assurance can be given that the actual
results of operations and financial condition will conform to the
forward-looking statements contained herein.
<PAGE>
This report covers the Company's operations for the third quarter of its
1999 fiscal year which will end on June 30, 1999. References herein to
the third quarter of 1999 are specifically intended to relate to the
quarter ended March 31, 1999, while references to the third quarter of
1998 are specifically intended to relate to the quarter ended March 31,
1998.
<TABLE>
THREE MONTHS ENDED MARCH 31, 1999 COMPARED TO THE THREE MONTHS ENDED
MARCH 31, 1998:
Alabama Illinois Missouri Mississippi Total
1999 1998 1999 1998 1999 1998 1999 1998 1999 1998
----------- -------------- ------------ ------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues $ 717 $854 $4,840 $3,746 $ 329 $ 213 $ 1,030 $922 $6,916 $ 5,735
Direct
Costs 477 666 3,330 2,667 208 133 726 615 4,741 4,081
----------- -------------- ------------ ------------- --------------
Gross
Margin 240 188 1,510 1,079 121 80 304 307 2,175 1,654
Operating
Expenses 119 249 729 707 116 165 228 366 1,192 1,487
----------- -------------- ------------ ------------- --------------
Operating
income
(loss) 121 (61) 781 372 5 (85) 76 (59) 983 167
Discontinued
Operations:
Gain (loss)
from ops 7 (25) 2 (16)
Net Gain
(loss) $121 ($54) $781 $347 $5 ($83) $ 76 ($59) $983 $151
----------- -------------- ------------ ------------- --------------
Total
Assets $2,122 $3,380 $5,233 $4,405 $688 $240 $1,518 $2,090 $9,561 $10,115
----------- -------------- ------------ ------------- --------------
</TABLE>
<PAGE>
<TABLE>
Reconciliation of segments' operating income to the consolidated net gain
(loss) is as follows:
1999 1998
---- ----
<S> <C> <C>
Segments' operating income $ 983 $ 151
Plus:
Nonoperating Income 3 591
Less:
Income tax expense 87 (187)
Corporate overhead expense 768 834
---- ----
Net income (loss) $ 131 $ 95
---- ----
Reconciliation of segments' total assets to consolidated net assets
is as follows:
March 31 March 31
1999 1998
------ ------
<S> <C> <C>
Segments Total Assets $ 9,561 $10,115
Plus:
Corporate/support entities' total assets 1,252 1,602
------ ------
Total Assets $10,813 $ 1,717
----- ------
</TABLE>
Client Service Revenue: Revenues derived from services to the Company's
clients for the three months ended March 31, 1999 grew to approximately
$6.9 Million reflecting an increase of $1.2 Million or 21% over the third
quarter of fiscal 1998.
Approximately $6.1 Million, or 88%, of the Company's revenues for the
third quarter of 1999 were derived from contracts pursuant to which the
Company provides custodial services to clients in their homes. For the
same quarter of fiscal 1998, contract services represented $5.0 Million
or 80% of total revenues. Approximately $816,129 or 12%, of the Company's
third quarter 1999 revenue was derived from commercial payors,
institutional staffing arrangements, and private pay arrangements as
compared to $790,000 or 13% for the same quarter of 1998.
A comparison of the third quarter of fiscal 1999 as contrasted to the
same period in fiscal 1998, by state, shows the greatest revenue growth
($1.1 Million or 30%) in Illinois, followed by Mississippi ($108,000 or
10%) and Missouri ($109,000 or 50%). Alabama revenues declined by
$137,000 or 16% from 1998 to 1999 due to the Company's decision to
consolidate offices and/or de-emphasize services in certain rural
markets.
<PAGE>
Approximately 57% ($707,000)of the fiscal 1999 growth in revenue was
derived from services provided to clients of the Illinois Department on
Aging ("IDOA"). Services to IDOA client amounted to 59% of consolidated
revenues for both quarters. The Company realized, as of July 1, 1998, a
9.5% rate increase for all services provided to IDOA clients.
Direct Costs of Providing Services: Direct costs of providing services to
clients, comprised entirely of wages and related expenses paid to field
staff members, were $4,742,000 (68% of revenues) for the three months
ended March 31, 1999 versus $4,080,000 (71% of revenues) for the same
quarter one year earlier. The increase of $722,000 (18%) is attributable
to the increase in service volume during the quarter and an increase in
wages to the Chicago field workers as a result of their new collective
bargaining agreement. A comparison of direct costs by segment shows that,
as a percentage of revenues, Illinois direct costs were 68% of revenues
as compared to 71% for the same quarter one year earlier due to rate
increases which were only partially offset by wage adjustments. Alabama
direct costs were 67% for the 1999 quarter compared to 77% for the
corresponding quarter in 1998. The 6% improvement in performance is the
direct result of the Company's imposition of a wage limit for field
workers employed in that state. Missouri direct costs were 62% of
revenues for the quarter ended March 31, 1999 versus 60% of revenues for
the same quarter one year earlier with the increase attributable to
competitive wage rate increases for services to clients of the Missouri
Department on Aging. Mississippi direct costs were 72% of revenues for
the 1999 quarter versus 65% for the same quarter in fiscal 1998. The 7%
increase is attributable to higher wage rates for new Mississippi
Medicaid Waiver business acquired by the Company in the fall of 1998.
The gross margin on services grew by $457,000 in 1999 and reached $2.2
Million as compared to $1.7 Million for the same quarter in fiscal 1998.
Gross margin contributions by state include $1,510,000 for Illinois
(compared to $1,079,000 for the same quarter last year), $240,000 for
Alabama (as compared to $188,000 for the same quarter last year),
$121,000 for Missouri (as compared to $80,000 for the same quarter last
year) and $304,000 for Mississippi (as compared to $307,000 for the same
quarter last year).
Selling, General and Administrative Expense: Overall selling, general and
administrative expenses decreased slightly for the third quarter of 1999
at $1,960,000. Certain administrative expense reductions amounting to
approximately $214,000 were mostly offset by increases in interest and
other nonoperating expense.
Selling, general and administrative expense for the second quarter of
fiscal 1999 represented 28% of revenues as compared to 38% of revenues
for the same quarter in fiscal 1998. The proportionate improvement
enabled a pre-tax income contribution of $218,000 versus a pre-tax loss
of $78,736 on continuing operations for the same quarter last year.
<PAGE>
Administrative salaries and benefits decreased by $193,000 for the
quarter to $980,000 versus $1,173,000 for the same period one year
earlier. The decrease is attributable to corporate support staff expense
reductions and elimination of certain administrative positions in Alabama
due to consolidation of offices. Professional fees and insurance expenses
grew by $79,000 to $198,544 during the quarter due primarily to higher
insurance premiums as a result of expansion. Occupancy expenses increased
from $236,000 to $276,000 with the entirety of the increase due to new
locations in Arkansas, Kansas City and St. Joseph, Missouri. Travel and
entertainment expenses were reduced by $50,000 during the third quarter
of 1999, moving from $89,000 to 39,000, with the entirety of the decrease
attributable to savings in corporate travel expenses. Bad debt expenses
increased by $17,000 from $87,000 to 104,000 due entirely to service
volume increases which form the basis for calculation of bad debt expense
reserves. Depreciation and amortization expense decreased by $34,000 to
$22,000 for the quarter largely as a result of the write-off of the
Oxford companies' goodwill as of June 30, 1998.
With respect to the Company's identified segments, Illinois operations
experienced a $22,000 increase in overall operating expenses which grew
from $707,000 to $729,000 quarter to quarter. The entirety of the growth
is due to expansion in new markets plus service volume growth in
established locations. Alabama operating expenses decreased by
$130,000 from 1998 to 1999 due to the imposition of cost cutting measures
in virtually all of the Alabama offices during the third quarter of
fiscal 1998. Missouri operating expenses decreased by 29% ($165,000 in
1998 to $116,000) in the third quarter of 1999 compared to the same
quarter in 1998 due to the reduction of administrative personnel in the
two new offices in Kansas City and St. Joseph. Mississippi operating
expenses decreased from $366,000 to $228,000 during 1999 reflecting the
closure of low volume offices in that state.
Earnings: Net income of $131,000 in the third quarter of 1999 compares to
a net income of 95,000 for the same quarter last year. Earnings per
share of common stock were $.07 and $(.05) for the quarters,
respectively. The EPS calculation is based on the computational
guidelines for earnings per share information contained in the FASB
Statement of Financial Accounting Standards No. 128, "Earning Per Share."
The Company has 1,869,375 shares of Common Stock outstanding and
1,710,000 Warrants outstanding.
<PAGE>
<TABLE>
NINE MONTHS ENDED MARCH 31, 1999 COMPARED TO THE NINE MONTHES ENDED
MARCH 31, 1998.
Alabama Illinois Missouri Mississippi Total
1999 1998 1999 1998 1999 1998 1999 1998 1999 1998
------------- -------------- ------------ --------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues $2,445 $2,859 $14,285 $11,126 $967 $ 624 $2,870 $2,278 $20,567 $16,887
Direct
Costs 1,726 2,301 9,619 7,669 593 385 2,052 1,502 13,990 11,857
------------- --------------- ------------ --------------- --------------
Gross
Margin 719 558 4,666 3,457 374 23 818 776 6,577 5,030
Operating
Expenses 387 664 2,418 2,246 343 269 834 994 3,982 4,173
------------- --------------- ------------ --------------- --------------
Operating
income
(loss) 332 (106) 2,248 1,211 31 (30) (16) (218) 2,595 857
Discontinued
Operations:
Gain (loss)
from ops 0 78 0 (44) 0 2 0 0 0 36
Net Gain
(loss) $ 332 $ 28 $ 2,248 $1,167 $ 31 $ (28) $ (16) $ (218) $ 2,595 $ 893
------------- --------------- ------------ --------------- --------------
Total
Assets $2,122 $3,380 $ 5,233 $4,405 $688 $ 240 $1,518 $2,090 $ 9,561 $10,115
------------- --------------- ------------ --------------- --------------
</TABLE>
<PAGE>
<TABLE>
Reconciliation of segments' operating income to the consolidated net gain
(loss) is as follows:
1999 1998
------ ------
<S> <C> <C>
Segments' operating income $ 2,595 $ 742
Plus:
Nonoperating income 3 591
Less:
Income tax expense 87 (339)
Corporate overhead expense 2,143 2,149
------ ------
Net income (loss) $ 368 $ (326)
------ ------
Reconciliation of segments' total assets to consolidated net assets
is as follows:
March 31 March 31
1999 1998
------ ------
<S> <C> <C>
Segments Total Assets $ 9,561 $10,115
Plus:
Corporate/support entities' total assets 1,252 1,602
------ ------
Total Assets $10,813 $11,717
------ ------
Client Service Revenue: Revenues derived from services to the Company's
clients for the nine months ended March 31, 1999 grew to approximately
$20.6 Million reflecting an increase of $3.8 Million or 23% over the
first three quarters of fiscal 1998.
Approximately $18.2 Million, or 88%, of the Company's revenues for the
first nine months of 1999 were derived from contracts pursuant to which
the Company provides custodial services to clients in their homes. For
the same quarters of fiscal 1998, contract services represented $14.4
Million or 83% of total revenues. Approximately $816,000 or 12%, of the
Company's 1999 revenue was derived from commercial payors, institutional
staffing arrangements, and private pay arrangements as compared to $2.4
Million or 14% for the same quarter of 1998.
<PAGE>
A comparison of the first nine months of fiscal 1999 as contrasted to the
same period in fiscal 1998, by state, shows the greatest revenue growth
($2.9 Million or 28%) in Illinois, followed by Mississippi ($592,000 or
26%) and Missouri ($343,000 or 55%). Alabama revenues declined by
$414,000 or 14% from 1998 to 1999 due to the Company's decision to
consolidate offices and/or de-emphasize services in certain rural
markets.
Approximately 57% ($2,500,000) of the fiscal 1999 growth in revenue was
derived from services provided to clients of the Illinois Department on
Aging ("IDOA"). Services to IDOA client amounted to 59% of consolidated
revenues for the nine months ended March 31, 1999. The Company realized,
as of July 1, 1998, a 9.5% rate increase for all services
provided to IDOA clients.
Direct Costs of Providing Services: Direct costs of providing services to
clients, comprised entirely of wages and related expenses paid to field
staff members, were $14.0 Million (68% of revenues) for the nine months
ended March 31, 1999 versus $11.9 Million (69% of revenues)for the same
period one year earlier. The increase of $2.1 Million (18%) is
attributable entirely to the increase in service volume during the
quarter. A comparison of direct costs by segment shows that, as a
percentage of revenues, Illinois direct costs were 67% of revenues as
compared to 69% for the same period one year earlier. Alabama direct
costs were 71% for 1999 compared to 80% for the corresponding nine month
period in 1998. The 10% improvement in performance is the direct result
of the Company's imposition of a wage limit for field workers employed in
that state. Missouri direct costs were 60% of revenues for the nine
months ended March 31, 1998 versus 61% of revenues for the same nine
month period one year earlier. Mississippi direct costs were 72% of
revenues for 1999 versus 65% for the same three quarters in fiscal 1998.
The 7% increase is attributable to higher wage rates for new Mississippi
Medicaid Waiver business acquired by the Company in the fall of 1998.
The gross margin on services grew by $1.6 Million in 1999 and reached
$6.6 Million as compared to $5.0 Million for the same nine months in
fiscal 1998. Gross margin contributions by state include $4.8 Million
for Illinois (compared to $3.6 for the same nine months last year),
$720,000 for Alabama (as compared to $555,000 for the same period last
year), $379,500 for Missouri (as compared to $238,500 for the same period
last year) and $513,000 for Mississippi (as compared to $703,500 for the
same period last year).
Selling, General and Administrative Expense: Overall selling, general and
administrative expenses remained essentially flat at $6.0 Million for
both nine month periods.
Selling, general and administrative expense for the nine months ended
December 31, 1998 represented 30% of revenues as compared to 36% of
revenues for the same nine month period in fiscal 1998. The
proportionate improvement enabled a pre-tax income contribution of
$583,060 versus a pre-tax loss of $(741,909) on continuing operations for
the same nine months last year.
<PAGE>
Administrative salaries and benefits associated with continuing
operations decreased by $233,000 for the nine months to $3,134,884 versus
$3,367,884 for the same period one year earlier. The decrease is
attributable to corporate support staff expense reductions ($221,000) and
elimination of certain administrative positions in Alabama due to
consolidation of offices ($87,000)and staff growth in Illinois ($75,000)
due to establishment of new offices and volume growth in established
locations. Professional fees and insurance expenses grew by $175,500 to
$394,500 during the nine months due to higher insurance premiums as a
result of expansion and fees associated with routine legal matters.
Occupancy expenses increased from $711,000 to $784,000 with the entirety
of the increase due to new locations in Arkansas, Kansas City and St.
Joseph, Missouri. Travel and entertainment expenses were reduced by
$109,500 during the first nine months of 1999, moving from $270,000 to
$160,500, with the entirety of the decrease attributable to savings in
corporate travel expenses. Bad debt expenses increased by $52,500 from
$252,000 to 304,500 due entirely to service volume increases which form
the basis for calculation of bad debt expense reserves. Depreciation and
amortization expense decreased by $84,000 to $69,000 for the nine months
due to the write-off of the Oxford companies' goodwill as of June 30,
1998.
With respect to the Company's identified segments, Illinois operations
experienced a $105,000 increase in overall operating expenses which grew
from $756,000 to $891,000 for the nine months ended March 31, 1999. The
entirety of the growth is due to expansion in new markets plus service
volume growth in established locations. Alabama operating expenses
decreased by $228,000 from 1998 to 1999 due to the imposition of cost
cutting measures in virtually all of the Alabama offices during the third
quarter of fiscal 1998. Missouri operating expenses increased by 92%
(66,000 in 1998 growing to $115,000) in the third quarter of 1999 due
to the addition of two new offices in Kansas City and St. Joseph.
Mississippi operating expenses decreased by $45,000 to $907,500 during
the first nine months of 1999 reflecting the closure of low volume
offices in that state.
Earnings: Net income of $422,000 for the nine months ended March 31, 1999
compares to a net loss of $(325,777) for the same nine month period
last year. Earnings per share of common stock were $.05 and $(.17) for
the quarters, respectively. The EPS calculation is based on the
computational guidelines for earnings per share information contained in
the FASB Statement of Financial Accounting Standards No. 128, "Earning
Per Share." The Company has 1,869,375 shares of Common Stock outstanding
and 1,710,000 Warrants outstanding as a result of its initial public
offering.
LIQUIDITY AND CAPITAL RESOURCES:
The Company's basic cash requirements are for operating expenses,
generally comprised of labor, occupancy and administrative costs. The
Company relied in 1998 on approximately $1.9 Million of new borrowings
under its existing credit facility to augment cash flow from operations
for business expansion. The Company's secured debt obligations total
approximately $2.6 Million as of March 31, 1999. Total long-term debt as
of March 31, 1998 totaled approximately $2.8 Million. Total working
capital stood at $1.7 Million as of March 31, 1999 versus $2.1 Million as
of the same date in 1997.
<PAGE>
The Company, as of March 31, 1999, was in technical default relative to
two financial ratios enumerated in the loan agreement for its secured
bank debt of $2.6 Million. At March 31, 1999 the loan agreement required
that the Company's current ratio be maintained at a level of 1.25:1 and
tangible net worth equal at least $2,625,000. As of March 31, 1999, the
current ratio (as defined in the loan agreement) was 1.23:1 and tangible
net worth stood at $2.1 Million. The Company's lender has declined to
waive the technical defaults as noted, but agreed to a standstill
agreement effective through April 30, 1999. While the standstill
agreement has expired, the Company is continuing to work with its lender
to effectuate replacement The Company believes that it will be
successful in closing a replacement credit facility by within 30 days;
however, there can be no assurance as to what action its current lender
will take in the event an alternate financing arrangement is not
obtained.
Cash provided by operations in 1999 was $989,912 versus an operational
cash deficit of $(1,188,146) for the same quarter in fiscal 1998.
The Company had approximately $966,861 of cash on hand as of March 31,
1999 as contrasted to $1,271,049 of cash on hand at March 31, 1998.
Based on the Company's operating projections, cash flows from established
operations should be sufficient to fund existing business locations
during the remainder of the fiscal year. Proceeds realized from future
sales of discontinued operations may be used to augment operating cash
flows and bolster the Company's overall cash position.
The Company presently has 1,638,750 Warrants outstanding with an exercise
price of $6.00. The Warrants can be exercised at any time prior to
December 5, 2005 and can be called anytime after December 5, 1996
provided the closing price of the Company's Common Stock is equal to or
greater than $9.00 for ten consecutive days. The Company could realize a
maximum of approximately $9.8 Million from the exercise of its Warrants.
There can be no assurance, however, that the closing price of the
Company's common stock will reach a level sufficient to precipitate
exercise of the Warrants. As of the close of business May 12, 1999, the
closing price of the Common Stock on the NASDAQ Stock Market was $1.44.
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is not a party to any legal proceedings which it believes may
have a materially adverse effect on the Company's financial condition or
results of operations.
ITEM 2. CHANGES IN THE RIGHTS OF THE COMPANY'S SECURITY HOLDERS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
On December 23, 1998 the Company held its annual meeting of shareholders
to elect a Board of Directors for the ensuing year. No other business was
transacted at the meeting.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
None.
<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 thereunto duly authorized.
HELP AT HOME, INC.
Registrant
Date: May 14, 1999 /s/ Louis Goldstein
Louis Goldstein
Chairman/CEO
Date: May 14, 1999 /s/ Joel Davis
Joel Davis
President/C.O.O
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