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 December 31, 1998
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 February 12, 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 December 31, 1998 3
Consolidated Statements of Income
for the three month periods ended
December 31, 1997 and 1998 4
Consolidated Statements of Income
for the six month periods ended
December 31, 1997 and 1998 5
Consolidated Statements of Cash Flows
for the six month periods ended 6
December 31, 1997 and 1998
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>
HELP AT HOME, INC.
Consolidated Balance Sheet
December 31 June 30
1998 1998
(Unaudited) (Audited)
Assets
<TABLE>
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 433,460 $ 412,012
Accounts receivable (net of allowance
for doubtful accounts of $770,238
and $560,000, respectively) 7,926,931 6,789,224
Prepaid expenses and other 158,012 154,163
Federal income tax receivable 494,667 436,583
Deferred income taxes - current 64,388 335,283
----------- -----------
Total Current Assets 9,077,458 8,127,265
Furniture and equipment, net 186,865 203,703
Due from officer 139,797 133,668
Deferred tax asset - noncurrent 146,715
Other assets 88,275 88,275
----------- -----------
Total Assets $ 9,639,110 $ 8,552,911
=========== ===========
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable $ 1,002,454 $ 841,511
Accrued expenses 2,851,324 1,858,821
Due to third party payors 704,228 713,269
Current maturities of long-term debt 2,565,953 2,919,969
Deferred income taxes - current 198,720 152,600
----------- -----------
Total Current Liabilities 7,322,679 6,486,170
Deferred income taxes - noncurrent 174,463 158,600
Long-term debt, less current portion 2,793
----------- -----------
Total Liabilities 7,497,142 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 (1,589,821) (1,826,446)
----------- -----------
Total Stockholders' Equity 2,005,981 1,905,348
Total Liabilities and
Stockholders' Equity $ 9,639,110 $ 8,552,911
=========== ===========
</TABLE>
The accompanying notes to these consolidated financial statements
are an integral part hereof.
<PAGE>
HELP AT HOME, INC.
Consolidated Statements of Income
(Unaudited)
<TABLE>
Three Months Ended December 31
1998 1997
<S> <C> <C>
Service fees $ 6,992,707 $ 5,757,472
Direct costs of services 4,694,827 3,973,431
----------- -----------
Gross margin 2,297,880 1,784,041
Selling, general and
administrative expenses 2,071,050 2,071,575
----------- -----------
Income (loss) from continuing
operations before income taxes 226,830 (287,534)
Income tax expense (benefit) 90,840 (61,564)
----------- -----------
Income (loss) from continuing
operations 135,990 (225,970)
Discontinued operations:
Income from operations of
Medicare agencies (less
applicable income tax
expense of $13,102 in
1997) - 19,653
----------- -----------
Net Income (loss) $ 135,990 $ (206,317)
=========== ===========
Basic and Diluted Income (Loss)
Per Share:
Income (loss) from continuing
operations $ .07 $ (.12)
Income from discontinued
operations - .01
----------- -----------
Net Income (loss) per share $ .07 $ (.11)
=========== ===========
Weighted average number of
common shares 1,869,375 1,869,375
</TABLE>
The accompanying notes to these consolidated financial statements
are an integral part hereof.
<PAGE>
HELP AT HOME, INC.
Consolidated Statements of Income
(Unaudited)
<TABLE>
Six Months Ended December 31
1998 1997
<S> <C> <C>
Service fees $ 13,651,840 $ 11,151,472
Direct costs of services 9,249,157 7,775,687
------------ ------------
Gross margin 4,402,683 3,375,785
Selling, general and
administrative expenses 4,037,809 4,004,894
------------ ------------
Income (loss) from continuing
operations before income taxes 364,874 (629,109)
Income tax expense (benefit) 128,249 (176,777)
------------ ------------
Income (loss) from continuing
operations 236,625 (452,332)
Discontinued operations:
Income from operations of
Medicare agencies (less
applicable income tax
expense of $20,822 in
1997) - 31,235
----------- -----------
Net Income (loss) $ 236,625 $ (421,097)
=========== ===========
Basic and Diluted Income (Loss)
Per Share:
Income (loss) from continuing
operations $ .13 $ (.24)
Income from discontinued
operations - .02
----------- -----------
Net Income (loss) per share $ .13 $ (.22)
=========== ===========
Weighted average number of
common shares 1,869,375 1,869,375
</TABLE>
The accompanying notes to these consolidated financial statements
are an integral part hereof.
<PAGE>
HELP AT HOME, INC.
Statement of Consolidated Cash Flows
(Unaudited)
<TABLE>
Six Months Ended December 31
1998 1997
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 236,625 $ (421,097)
Noncash changes in net loss
Depreciation 25,240 72,366
Amortization - 68,153
Deferred income taxes 65,509 (25,467)
Changes in:
Accounts receivable (1,137,707) (1,077,376)
Prepaid expenses and other (3,849) 35,736
Accounts payable 160,938 (192,019)
Other current liabilities 992,503 474,444
Due to third party payors (9,041) 344,572
Current income taxes 62,570 1,793
----------- ----------
Net cash provided by (used in)
operating activities 392,788 (718,899)
Cash flows from investing activities:
Acquisition of property (8,402) (36,514)
(Increase) in shareholder loan (6,129) (6,242)
----------- ----------
Net cash used in investing activities (14,531) (42,756)
Cash flows from financing activities:
Proceeds from long-term debt - 67,582
Repayment of long-term debt (356,809)
----------- -----------
Net cash (used in) provided by
financing activities (356,809) 67,582
----------- ----------
Net increase (decrease) in cash and
cash equivalents 21,448 (694,073)
Cash and cash equivalents:
Beginning of period 412,012 870,634
----------- ----------
End of period $ 433,460 $ 176,561
=========== ==========
Supplemental disclosure of noncash investing
and financing activities:
Cash payments for:
Interest $ 193,945 $ 62,289
</TABLE>
The accompanying notes to these financial statements are an
integral part hereof.
<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 (Harris
Bank), 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. As of December 31, 1998 the Company remained
in technical default with a (defined) current ratio of 1.22:1 and
tangible net worth of approximately $2,142,000. The Company is
continuing to work toward finalization of a replacement credit facility.
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.
<PAGE>
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 and Chief
Financial Officers. In the event of a change in control the maximum
aggregate salary commitment for these employees would be approximately
$900,000.
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 33 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.
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.
This report covers the Company's operations for the second quarter of
its 1999 fiscal year which will end on June 30, 1999. References herein
to the second quarter of 1999 are specifically intended to relate to the
quarter ended December 31, 1998, while references to the second quarter
of 1998 are specifically intended to relate to the quarter ended
December 31, 1997.
<PAGE>
THREE MONTHS ENDED DECEMBER 31, 1998 COMPARED TO THE THREE MONTHS ENDED
DECEMBER 31, 1997:
Reportable Segments: In keeping with the adoption of SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information",
the Company has identified reportable segments based on geographic
areas (states). Revenues in all four segments are derived from the
provision of unskilled homemaker/respite services. In addition to the
disclosures made elsewhere herein, the following table presents a
quarter to quarter comparison (in thousands) of the Company's
segments:
<TABLE>
Alabama Illinois Missouri Mississippi Total
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1998 1997 1998 1997 1998 1997 1998 1997 1998 1997
Revenues $ 844 $1,037 $4,869 $3,751 $ 328 $ 218 $ 952 $ 751 $6,993 $5,757
Direct
Costs 584 776 3,227 2,575 203 131 681 489 4,695 3,971
----- ------ ------ ------ ----- ----- ----- ----- ------ ------
Gross
Margin 260 261 1,642 1,176 125 87 271 262 2,298 1,786
Operating
Expenses 131 181 890 789 114 65 324 362 1,459 1,397
----- ------ ------ ------ ----- ----- ------ ----- ------ ------
Operating
income
(loss) 129 80 752 387 11 22 (53) (100) 839 389
Discontinued
Operations:
Gain (loss)
from ops 33 (23) 22 32
----- ------ ------- ------ ----- ----- ------ ------ ------ ------
Net Gain
(loss) $ 129 $ 113 $ 752 $ 364 $ 11 $ 44 $ (53) $(100)$ 839 $ 421
====== ====== ======= ====== ===== ===== ====== ===== ====== ======
Total
Assets $1,892 $3,532 $4,665 $3,432 $ 613 $ 418 $1,353 $1,606 $8,523 $8,988
====== ====== ======= ====== ===== ===== ====== ====== ====== ======
</TABLE>
Reconciliation of segments' operating income to the consolidated net gain
(loss) is as follows:
1998 1997
Segments' operating income $ 839 $ 421
Less:
Income tax expense 97 (48)
Corporate overhead expense 606 675
------ -----
Net income (loss) $ 136 $(206)
====== =====
Reconciliation of segments' total assets to consolidated net assets
is as follows:
Segments Total Assets $8,523 $8,988
Plus:
Corporate/support entities' total assets 1,116 785
------ ------
Total Assets $9,639 $9,773
====== ======
<PAGE>
Client Service Revenue: Revenues derived from services to the Company's
clients for the three months ended December 31, 1998 grew to
approximately $7.0 Million reflecting an increase of $1.2 Million or 21%
over the second quarter of fiscal 1998.
Approximately $6.2 Million, or 88%, of the Company's revenues for the
second 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 $4.9 Million
or 86% of total revenues. Approximately $839,000, or 12%, of the
Company's second quarter 1999 revenue was derived from commercial
payors, institutional staffing arrangements, and private pay
arrangements as compared to $806,000 or 14% for the same quarter of
1998.
A comparison of the second 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 ($201,000 or
27%)and Missouri ($109,000 or 50%). Alabama revenues declined by
$192,000 or 19% from 1998 to 1999 due to the Company's decision to
consolidate offices and/or de-emphasize services in certain rural
markets.
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 $4,695,000 (67% of revenues) for the three
months ended December 31, 1998 versus $3,973,000 (69% of revenues)for
the same quarter one year earlier. The increase of $722,000 (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 66% of revenues as
compared to 69% for the same quarter one year earlier due to rate
increases which were only partially offset by wage adjustments. Alabama
direct costs were 69% for the 1999 quarter compared to 75% 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 December 31, 1998 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 $514,000 in 1999 and reached $2.3
Million as compared to $1.8 Million for the same quarter in fiscal 1998.
Gross margin contributions by state include $1,642,000 for Illinois
(compared to $1,173,000 for the same quarter last year), $260,000 for
Alabama (as compared to $261,000 for the same quarter last year),
$124,000 for Missouri (as compared to $87,000 for the same quarter last
year) and $271,000 for Mississippi (as compared to $262,000 for the same
quarter last year).
<PAGE>
Selling, General and Administrative Expense: Overall selling, general
and administrative expenses remained unchanged for the second quarter of
1999 at $2,071,000. Certain administrative expense reductions amounting
to approximately $214,000 were entirely offset by increases in interest
and other nonoperating expense.
Selling, general and administrative expense for the second quarter of
fiscal 1999 represented 30% of revenues as compared to 36% of revenues
for the same quarter in fiscal 1998. The proportionate improvement
enabled a pre-tax income contribution of $227,000 versus a pre-tax loss
of $288,000 on continuing operations for the same quarter last year.
Administrative salaries and benefits decreased by $143,000 for the
quarter to $990,000 versus $1,133,000 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 $103,000 to $228,000 during the quarter due
primarily to higher insurance premiums as a result of expansion.
Occupancy expenses increased from $236,000 to $262,000 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
$40,000 during the first quarter of 1998, moving from $89,000 to 49,000,
with the entirety of the decrease attributable to savings in corporate
travel expenses. Bad debt expenses increased by $16,000 from $87,000 to
103,000 due entirely to service volume increases which form the basis
for calculation of bad debt expense reserves. Depreciation and
amortization expense decreased by $33,000 to $23,000 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 $101,000 increase in overall operating expenses which grew
from $788,000 to $890,000 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 $50,000
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 75% ($65,000 in 1998
growing to $114,000) in the first quarter of 1999 compared to the same
quarter in 1998 due to the addition of two new offices in Kansas City
and St. Joseph. Mississippi operating expenses decreased by $38,000 to
$324,000 during 1999 reflecting the closure of low volume offices in
that state.
Earnings: Net income of $136,000 in the second quarter of 1999 compares
to a net loss of $(206,000) for the same quarter last year. Earnings
per share of common stock were $.07 and $(.11) 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>
SIX MONTHS ENDED DECEMBER 31, 1998 COMPARED TO THE SIX MONTHS ENDED
DECEMBER 31, 1997.
<TABLE>
Alabama Illinois Missouri Mississippi Total
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1998 1997 1998 1997 1998 1997 1998 1997 1998 1997
Revenues $1,728 $2,005 $9,445 $7,380 $ 638 $ 411 $1,840 $1,356 $13,651 $11,152
Direct
Costs 1,249 1,635 6,289 5,002 385 252 1,326 887 9,249 7,776
------ ------ ------ ------ ----- ----- ------ ----- ------ ------
Gross
Margin 479 370 3,156 2,378 253 159 514 469 4,402 3,376
Operating
Expenses 268 415 1,689 1,539 227 104 606 628 2,790 2,704
------ ------- ------ ------ ----- ----- ------ ------ ------ ------
Operating
income
(loss) 211 (45) 1,467 839 26 55 (92) (159) 1,612 672
Discontinued
Operations:
Gain (loss)
from ops 71 (19) 52
------- ------ ------ ------ ----- ----- ------ ------ ------- -------
Net Gain
(loss) $ 211 $ 26 $1,467 $ 820 $ 26 $ 55 $ (92) $(159) $ 1,612 $ 742
======= ====== ======= ====== ===== ==== ====== ====== ======= ======
Total
Assets $ 1,892 $3,532 $4,665 $3,432 $ 613 $ 418 $1,353 $1,606 $8,523 $ 8,988
======= ====== ======= ====== ===== ===== ====== ====== ====== ======
</TABLE>
Reconciliation of segments' operating income to the consolidated net gain
(loss) is as follows:
1998 1997
Segments' operating income $ 1,612 $ 742
Less:
Income tax expense 128 (151)
Corporate overhead expense 1,247 1,314
------- ------
Net income (loss) $ 237 $ (421)
======= ======
Reconciliation of segments' total assets to consolidated net assets
is as follows:
Segments Total Assets $8,523 $8,988
Plus:
Corporate/support entities' total assets 1,116 785
------- ------
Total Assets $9,639 $9,773
====== ======
<PAGE>
Client Service Revenue: Revenues derived from services to the Company's
clients for the six months ended December 31, 1998 grew to approximately
$13.7 Million reflecting an increase of $2.5 Million or 22% over the
first two quarters of fiscal 1998.
Approximately $12.0 Million, or 88%, of the Company's revenues for the
first six 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 $9.6
Million or 86% of total revenues. Approximately $1.6 Million, or 12%, of
the Company's 1999 revenue was derived from commercial payors,
institutional staffing arrangements, and private pay arrangements as
compared to $1.6 Million or 14% for the same quarter of 1998.
A comparison of the first six months of fiscal 1999 as contrasted to the
same period in fiscal 1998, by state, shows the greatest revenue growth
($2.1 Million or 28%) in Illinois, followed by Mississippi ($484,000 or
36%)and Missouri ($228,000 or 55%). Alabama revenues declined by
$277,000 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% ($1.4 Million)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 six months ended December 31, 1998 versus. 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 $9.2 Million (68% of revenues) for the six
months ended December 31, 1998 versus $7.8 Million (70% of revenues)for
the same period one year earlier. The increase of $1.4 Million (19%) 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 68% for the same period one year earlier. Alabama direct
costs were 72% for 1999 compared to 82% for the corresponding six 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 six
months ended December 31, 1998 versus 61% of revenues for the same six
month period one year earlier. Mississippi direct costs were 72% of
revenues for 1999 versus 65% for the same two 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 Million in 1999 and reached $4.4
Million as compared to $3.4 Million for the same six months in fiscal
1998. Gross margin contributions by state include $3.2 Million for
Illinois (compared to $2.4 for the same six months last year), $480,000
for Alabama (as compared to $370,000 for the same period last year),
$253,000 for Missouri (as compared to $159,000 for the same period last
year) and $513,000 for Mississippi (as compared to $469,000 for the same
period last year).
<PAGE>
Selling, General and Administrative Expense: Overall selling, general
and administrative expenses remained essentially flat at $4.0 Million
for both six month periods.
Selling, general and administrative expense for the six months ended
December 31, 1998 represented 30% of revenues as compared to 36% of
revenues for the same six month period in fiscal 1998. The
proportionate improvement enabled a pre-tax income contribution of
$365,000 versus a pre-tax loss of $(629,000) on continuing operations
for the same six months last year.
Administrative salaries and benefits associated with continuing
operations decreased by $162,000 for the six months to $1,973,000 versus
$2,135,000 for the same period one year earlier. The decrease is
attributable to corporate support staff expense reductions ($154,000)
and elimination of certain administrative positions in Alabama due to
consolidation of offices ($58,000)and staff growth in Illinois ($50,000)
due to establishment of new offices and volume growth in established
locations. Professional fees and insurance expenses grew by $117,000 to
$263,000 during the six months due to higher insurance premiums as a
result of expansion and fees associated with routine legal matters.
Occupancy expenses increased from $474,000 to $523,000 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
$73,000 during the first six months of 1999, moving from $180,000 to
$107,000, with the entirety of the decrease attributable to savings in
corporate travel expenses. Bad debt expenses increased by $35,000 from
$168,000 to 203,000 due entirely to service volume increases which form
the basis for calculation of bad debt expense reserves. Depreciation
and amortization expense decreased by $56,000 to $46,000 for the six
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 $158,000 increase in overall operating expenses which grew
from $1,531,000 to $1,689,000 for the six months ended December 31,
1998. The entirety of the growth is due to expansion in new markets
plus service volume growth in established locations. Alabama operating
expenses decreased by $152,000 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% ($118,000 in 1998 growing to $227,000) in the first six months of
1999 due to the addition of two new offices in Kansas City and St.
Joseph. Mississippi operating expenses decreased by $30,000 to $605,000
during the first six months of 1999 reflecting the closure of low volume
offices in that state.
Earnings: Net income of $237,000 for the six months ended December 31,
1998 compares to a net loss of $(473,000) for the same six month period
last year. Earnings per share of common stock were $.13 and $(.22) for
the six month periods, 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.
<PAGE>
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 December 31, 1998. Total long-term
debt as of December 31, 1997 totaled approximately $1.5 Million. Total
working capital stood at $1.7 Million as of December 31, 1998 versus
$2.1 Million as of the same date in 1997.
The Company, as of December 31, 1998, was in technical default relative
to two financial ratios enumerated in the loan agreement for its secured
bank debt of $2.6 Million. At December 31, 1998 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 December
31, 1998, the current ratio (as defined in the loan agreement) was
1.22:1 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 November 30, 1998. 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 $392,000 versus an operational
cash deficit of $(719,000) for the same quarter in fiscal 1998.
The Company had approximately $433,000 of cash on hand as of December
31, 1998 as contrasted to $871,000 of cash on hand at December 31, 1997.
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 February 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: February 12, 1999 /s/ Louis Goldstein
Louis Goldstein
Chairman/CEO
Date: February 12, 1999 /s/ Sharon S. Harder
Sharon S. Harder
Chief Financial Officer
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