FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the period ended September 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____ to ____
Commission File Number 0-28134
HOUSECALL MEDICAL RESOURCES, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 58-2114917
- ---------------------------- ----------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or Identification No.)
organization)
1000 Abernathy Road, Building 400, Suite 1825, Atlanta, Georgia 30328
----------------------------------------------------------------------
(Address of principal executive offices and zip code)
(770) 379-9000
----------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes x No
--- ---
Shares outstanding of each of the issuer's classes of common stock at
November 13, 1996: 10,218,900 shares of Common Stock, $0.01 par value
share.
<PAGE>
INDEX
HOUSECALL MEDICAL RESOURCES, INC.
Part I. Financial Information
Item 1. Financial Statements (Unaudited)
Condensed consolidated balance sheets at June 30, 1996 and
September 30, 1996
Condensed consolidated statements of operations - Three months ended
September 30, 1995 and 1996
Condensed consolidated statement of stockholders' equity - Three
months ended September 30, 1996
Condensed consolidated statements of cash flows - Three months ended
September 30, 1995 and 1996
Notes to condensed consolidated financial statements - September 30,
1996
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Part II. Other Information.
Item 6. Exhibits and Reports on Form 8-K
Signatures<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
HOUSECALL MEDICAL RESOURCES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, September 30,
1996 1996
-------- --------------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 7,785,000 $ 8,952,000
Accounts Receivable -- less allowance for doubtful accounts of
$2,920,000 in June 30, 1996 and $3,049,000 in September 30, 1996 27,293,000 25,174,000
Income taxes receivable 940,000 873,000
Deferred income taxes 3,223,000 3,223,000
Other current assets 1,987,000 2,386,000
----------- -----------
Total current assets 41,228,000 40,608,000
Property and equipment, net 5,169,000 5,067,000
Excess of cost of acquired businesses over fair values of net assets
acquired 55,575,000 55,219,000
Deferred financing costs 1,480,000 1,440,000
Other assets 493,000 830,000
----------- -----------
$ 103,945,000 $ 103,164,000
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 7,455,000 $ 6,328,000
Accrued payroll and other liabilities 10,381,000 11,007,000
Current portion of long-term debt and capital lease obligations 4,746,000 4,636,000
----------- -----------
Total current liabilities 22,582,000 21,971,000
Long-term debt 10,186,000 10,182,000
Capital lease obligations 1,534,000 1,439,000
Other long-term liabilities 1,887,000 1,702,000
Deferred income taxes 1,005,000 1,011,000
Commitments and contingencies
Stockholders' equity:
Common stock, $.01 par value, 30,000,000 shares authorized,
and 10,218,900 shares issued and outstanding 102,000 102,000
Additional paid in capital on common stock 66,649,000 66,649,000
Retained earnings - 108,000
----------- -----------
Total stockholders' equity 66,751,000 66,859,000
----------- -----------
$ 103,945,000 $ 103,164,000
=========== ===========
</TABLE>
See accompanying notes.
<PAGE>
HOUSECALL MEDICAL RESOURCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three months ended
September 30,
----------------------
1995 1996
---- ----
<S> <C> <C>
Net revenues $ 49,648,000 $ 48,525,000
Operating expenses:
Patient care 23,304,000 21,820,000
General and administrative 21,401,000 24,683,000
Provision for doubtful accounts 1,021,000 569,000
Depreciation and amortization 818,000 770,000
----------- -----------
Total operating expenses 46,544,000 47,842,000
----------- -----------
Income from operations 3,104,000 683,000
Interest expense, net 1,295,000 494,000
----------- -----------
Income before income taxes 1,809,000 189,000
Provision for income taxes 775,000 81,000
----------- -----------
Net income 1,034,000 108,000
Cumulative dividends and accretion on
Series A Preferred Stock (redeemable) (552,000) -
----------- -----------
Net income attributable to common stockholders $ 482,000 $ 108,000
=========== ===========
Net income per common share $ 0.07 $ 0.01
=========== ===========
Weighted average common shares outstanding 7,124,000 11,186,000
=========== ===========
</TABLE>
See accompanying notes.
<PAGE>
HOUSECALL MEDICAL RESOURCES, INC.
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
Common Stock Additional
---------------------- Paid-in Retained
Shares Amount Capital Earnings Total
------ ------- ------- -------- -------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Balance at June 30, 1996 10,218,900 $ 102,000 $ 66,649,000 $ - $ 66,751,000
Net income - - - 108,000 108,000
---------- --------- ------------ ---------- ------------
Balance at September 30, 1996 10,218,900 $ 102,000 $ 66,649,000 $ 108,000 $ 66,859,000
========== ========= ============ ========== ============
</TABLE>
See accompanying notes.<PAGE>
HOUSECALL MEDICAL RESOURCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three months ended
September 30,
------------------
1995 1996
---- ----
OPERATING ACTIVITIES
<S> <C> <C>
Net income $ 1,034,000 $ 108,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 818,000 770,000
Amortization of deferred financing costs 87,000 110,000
Deferred income taxes (191,000) 6,000
Changes in operating assets and liabilities, net of
acquired businesses:
Accounts receivable 162,000 2,119,000
Other current assets (496,000) (398,000)
Accounts payable (954,000) (1,127,000)
Accrued payroll and other liabilities 561,000 631,000
Income taxes receivable 424,000 67,000
---------- ----------
Net cash provided by operating activities 1,445,000 2,286,000
INVESTING ACTIVITIES
Payments for business acquisitions, net of cash acquired (8,966,000) -
Additions to property and equipment (325,000) (231,000)
Other, net 215,000 (372,000)
---------- ----------
Net cash used by investing activities (9,076,000) (603,000)
FINANCING ACTIVITIES
Repayment of long-term debt (1,026,000) (27,000)
Proceeds from issuance of long-term debt 3,500,000 -
Refinancing of long-term debt (3,713,000) -
Proceeds from issuance of common stock 800,000 -
Principal payments under capital lease obligations (275,000) (198,000)
Deferred financing costs - (106,000)
Decrease in other long-term liabilities (286,000) (185,000)
---------- ----------
Net cash used by financing activities (1,000,000) (516,000)
---------- ----------
Net increase (decrease) in cash and cash equivalents (8,631,000) 1,167,000
Cash and cash equivalents at beginning of period 18,349,000 7,785,000
---------- ----------
Cash and cash equivalents at end of period $ 9,718,000 $ 8,952,000
=========== ==========
</TABLE>
See accompanying notes.<PAGE>
HOUSECALL MEDICAL RESOURCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with generally
accepted accounting principles for interim financial information
and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted
accounting principles for complete financial statements. In the
opinion of management, all adjustments, consisting of normal
recurring adjustments, considered necessary for a fair
presentation have been included. Operating results for the three
month period ended September 30, 1996 are not necessarily
indicative of the results that may be expected for the year ended
June 30, 1997. For further information, refer to the company's
consolidated financial statements and footnotes thereto for the
year ended June 30, 1996.
2. Acquisitions
The following unaudited pro forma information for the three
months ended September 30, 1995 is presented as if the 1996
purchase of the business of R.N. Registry, described in Note 2 to
the Company's consolidated financial statements for the year
ended June 30, 1996, had been effected as of July 1, 1995. The
pro forma information is (in thousands, except per share
amounts):
<TABLE>
<CAPTION>
Three months ended
September 30,
1995
------------------
<S> <C>
Net revenues $ 49,847
Net income 993
Net income attributable to common stockholders 441
Net income per common share $ 0.06
3. Commitments and Contingencies
At July 1, 1996, the Company maintained general and professional
liability insurance with independent insurance carriers primarily on a
claims-made basis. Beginning August 1, 1996, the Company purchased
professional liability insurance with terms which are on an occurrence
basis. Claims based on occurrences during the term of the policy, but
asserted subsequently, would be insured. Additionally, the Company's
risk management system has procedures for identifying and reporting
claims on a timely basis.<PAGE>
HOUSECALL MEDICAL RESOURCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) (Continued)
During the first quarter, three lawsuits were filed by certain
persons who seek to represent a class of shareholders who
purchased shares of the Company's common stock in the April 1996
public offering or in the subsequent aftermarket. The individual
plaintiffs in the cases allege that they were induced to purchase
the Company's stock on the basis of misrepresentations about the
Company and its prospects. Two of the complaints assert claims under
Sections 11, 12(2) and 15 of the Securities Act of 1933 (the "Securities
Act"). The third complaint asserts claims under those sections of
the Securities Act, as well as claims under the Georgia Securities
Act and common law. The complaints name as the defendants the
Company, its directors and certain of its officers, and the lead
underwriters associated with the public offering. The Company
intends to vigorously defend these lawsuits.
The Company is a party to a number of legal actions arising
in the ordinary course of its business. In management's opinion,
after consultation with legal counsel, the disposition of these
actions, are not expected to have a material adverse effect on
the Company's consolidated financial position, liquidity or
results of operations.
4. Subsequent Events
On October 30, 1996, the Company entered into a $15,000,000
Credit Line (the "Credit Line") with Toronto Dominion Bank. The
outstanding balance on the Credit Line will be payable and due on
October 30, 1999. Borrowings outstanding under the Credit Line
bear interest, at the Company's option, at either the bank's
prime rate plus .75% or Libor plus 2.25%. Commitment fees of .5%
are payable quarterly on the unused portion. Borrowings under
the Credit Line were used to repay the Company's remaining
indebtedness under its previous credit facility with NationsBank,
which was then terminated. The extraordinary loss, net of taxes,
for the early extinguishment of debt is approximately $700,000
and will be recorded in the second quarter.
On October 31, 1996, the Company acquired all of the stock
of Messick Homecare, Inc. ("Messick"), a provider of home
respiratory services and medical equipment based in Murfreesboro,
Tennessee, for consideration of approximately $5,500,000 in cash,
including transaction costs. The Company also refinanced $2.1
million of bank and other indebtedness of Messick with funds from
the Company's Credit Line.<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
In the following discussions, most percentages and dollar
amounts have been rounded to aid presentation; as a result all
such figures are approximations. References to such
approximations have generally been omitted.
RESULTS OF OPERATIONS
Housecall's results of operations during the three-month
period ended September 30, 1996 reflect the performance of the
R.N. Registry acquisition (collectively referred to as the "1996
Acquisition") for the entire period, but Housecall's results of
operations during the three-month period ended September 30, 1995
do not reflect the performance by that company. This factor does
not account for any significant change in the Company's period-
to-period results discussed below.
The following table sets forth, for the periods indicated,
selected financial information as a percentage of net revenues:
</TABLE>
<TABLE>
<CAPTION>
Percentage of Net Revenues
Three Months Ended
September 30,
1995 1996
---------- ----------
<S> <C> <C>
Net revenues 100.0% 100.0%
Operating expenses:
Patient care costs 46.9% 45.0%
General and administrative 43.1% 50.9%
Provision for doubtful accounts 2.1% 1.1%
Depreciation and amortization 1.7% 1.6%
----- -----
Total operating expenses 93.8% 98.6%
----- -----
Income from operations 6.2% 1.4%
Interest expense, net 2.6% 1.0%
----- -----
Income from operations 3.6% .4%
Provision for income taxes 1.5% .2%
----- -----
Net income 2.1% .2%
===== =====
</TABLE>
NET REVENUES. Net revenues decreased 2% in the first
quarter of fiscal 1997 to $48.5 million compared to $49.6 million
for the first quarter of fiscal 1996. The decrease in net
revenues is attributable to the cancellation of the Company's
TennCare contract with Access MedPlus in the third quarter of
fiscal 1996, and the related reduction in other referrals to the
Company in Tennessee. The resulting reduction in net revenues to
the Company in Tennessee was partially offset, however, by higher
reimbursement for Medicare visits. Medicare-cost based visits<PAGE>
were approximately 5% lower in the first quarter of fiscal 1997
compared to the first quarter of fiscal 1996. However, Medicare-
cost based revenues increased approximately $1.4 million in the
first quarter of fiscal 1997 compared to the first quarter of
fiscal 1996. The higher reimbursement per visit reflects the
effect of increased first quarter expenses, as discussed below
under "General and Administrative."
PATIENT CARE COSTS. Patient care costs are comprised of
salaries and related benefits for patient care personnel and cost
of sales for home medical equipment, infusion products, and
supplies. Patient care costs decreased 6% in the first quarter
of fiscal 1997 to $21.8 million compared to $23.3 million for the
first quarter of fiscal 1996. The decrease in patient care costs
is primarily attributable to the aforementioned 5% decrease in
Medicare cost based visits. In addition, during June and July
1996, the Tennessee nursing operations were restructured
including reductions in certain of the per visit pay rates paid
to some of the Company's patient care staff.
GENERAL AND ADMINISTRATIVE EXPENSES. General and
administrative expenses are comprised of salaries and benefits
for administrative and support staff, occupancy expenses, and
other non-patient care operating costs. General and
administrative expenses increased 15% in the first quarter of
fiscal 1997 to $24.7 million compared to $21.4 million for the
first quarter of fiscal 1996. The increase is attributable to
the addition of administrative, marketing and sales staff to
support implementation of the Company's expansion and growth
plans.
In addition, during the quarter, the Company restructured
certain of its operations. The Company reorganized the accounting,
billing and other administrative functions primarily related to
the Company's Virginia and Tennessee operations. As a result,
costs were incurred to train personnel on new systems, and
certain administrative functions were duplicated during the
initial phases of the reorganization. Also, in September 1996,
the Company implemented a reduction in force to eliminate
redundant positions and consolidate various functions which
resulted in the accrual of severance costs of $.3 million.
PROVISION FOR DOUBTFUL ACCOUNTS. The provision for doubtful
accounts decreased in the first quarter of fiscal 1997 to $.6
million compared to $1.0 million for the first quarter of fiscal
1996. The decrease is primarily a result of the elimination of
the reserve that had been set up in first quarter of fiscal 1996
for unpaid claims submitted to Access MedPlus under the TennCare
program.
DEPRECIATION AND AMORTIZATION EXPENSES. Depreciation is
taken on the Company's property and equipment. Amortization
expense includes the amortization, over a 40-year period, of the
excess of the purchase price over the fair market value of the
net identifiable assets acquired by the Company (goodwill) and
the amortization of other intangibles. Depreciation and
amortization expense remained constant in the first quarter of
fiscal 1997 at $.8 million.
<PAGE>
INTEREST EXPENSE, NET. Interest expense, net, reflects the
net result of interest income earned from short-term investments
of cash and the interest paid by the Company on indebtedness.
Interest expense decreased in the first quarter of fiscal 1997 to
$.5 million compared to $1.3 million for the first quarter of
fiscal 1996. In April 1996, the Company repaid $37.6 million of
its borrowings under the NationsBank Credit Facility, which
significantly reduced the interest expense that the Company
incurred in the first quarter of fiscal 1997 compared to the
first quarter of fiscal 1996.
NET INCOME. The Company had net income of $108,000 for the
first quarter of fiscal 1997 compared to net income of $1,034,000
for the first quarter of fiscal 1996. The $926,000 decrease is
attributable to the above factors.
LIQUIDITY AND CAPITAL RESOURCES
On October 30, 1996, the Company entered into a $15,000,000
Credit Line (the "Credit Line") with Toronto Dominion Bank. The
Credit Line was used to refinance the remaining outstanding
indebtedness of the Company's previous credit facility with
NationsBank, as well as to provide financing for the Company's
recent acquisition of Messick Homecare, Inc. and for working
capital. As of October 31, the Company has approximately $4
million of available borrowing capacity under the new Credit
Line. The Company is in the process of negotiating additional
capacity within this credit facility with Toronto Dominion and a
consortium of banks.
Management believes the new Credit Line, together with cash
flow generated from operations, will be adequate to enable the
Company to fund its operations and anticipated growth for at
least the next year, assuming the Company is able to consummate
successfully its negotiations to increase substantially the size
of the new facility. However, no assurance can be given that
such sources of capital will be adequate to meet the Company's
requirements or that alternative sources will be available on
terms acceptable to the Company to take advantage of each
attractive acquisition or expansion opportunity that might
develop in the future. In addition, delays in reimbursements to
the Company by third party payors (or the effect of a Medicare
adjustment with respect to a prior period's reimbursement) may
cause working capital constraints. While the Company has
experienced such delays and adjustments, the Company has not had
a working capital shortfall as a result of such occurrence.
At June 30, 1996, the Company had cash and cash equivalents
of $7.8 million and working capital of $18.6 million. At
September 30, 1996, these amounts were $9.0 million and $18.6
million, respectively. Cash provided by operating activities was
$2.3 million for the three months ended September 30, 1996. A
significant factor which increased the cash provided by
operations was a decrease in receivables by $2.1 million. The
decrease in receivables is primarily a result of the timing
schedule of Medicare reimbursement under the periodic interim
payments system.
During the three months ended September 30, 1996, the
Company's investing activities used $.6 million in cash. The
investing activities consisted of both additions to property,
plant and equipment as well as other assets.
<PAGE>
Financing activities used $.5 million of cash during the
three months ended September 30, 1996. The majority of the
financing activities consist of scheduled maturities of debt.
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibit 11 - Statement re: computation of earnings per share.
Exhibit 27 - Financial Data Schedule (for SEC use only)
Reports on Form 8-K
Form 8-K filed July 15, 1996, Reporting an Item 2 Acquisition
Form 8-K/A filed September 13, 1996, Reporting an Item
2 Acquisition, containing the following financial
statements:
Financial statements of R.N. Registry, Inc. ("R.N. Registry"),
including the balance sheet as of December 31, 1995, and the related
statements of operations, capital deficiency, and cash flows for the
year then ended, including the report of independent auditors.
Unaudited condensed financial statements of R.N. Registry as of and
for the nine months ended March 31, 1996.
Unaudited proforma financial statements of the Registrant, including
the unaudited proforma balance sheet as of March 31, 1996, and the
related unaudited proforma statement of operations for the year ended
June 30, 1995 and for the nine months ended March 31, 1996 and notes
thereto.
<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.
Housecall Medical Resources, Inc.
(Registrant)
Date November 13, 1996 by: s/ Harold W. Small
Harold W. Small
Chief Executive Officer
Date November 13, 1996 by: /s/ Peter J. Bibb
Peter J. Bibb
Chief Financial Officer
Housecall Medical Resources, Inc.
Exhibit 11
Statement Regarding Computation of Earnings Per Share
(in thousands, except for per share data)
<TABLE>
<CAPTION>
Three months ending
September 30,
-----------------------
1995 1996
---- ----
<S> <C> <C>
PRIMARY:
Weighted average common shares outstanding 5,993 10,219
Net effect of dilutive stock options and warrants -
based on the treasury stock method using period end
market price 601 967
Adjustment for stock and options issued within
one year of January 29, 1996 in accordance
with SAB 83 530 -
------ -------
Weighted average common shares and equivalents
outstanding 7,124 11,186
Net income attributable to common stockholders $ 482 $ 108
====== ======
Per share amount $ 0.07 $ 0.01
====== ======
FULLY DILUTED:
Weighted average common shares outstanding 5,993 10,219
Net effect of dilutive stock options and warrants -
based on the treasury stock method using period end
market price 612 735
Adjustment for stock and options issued within
one year of January 29, 1996 in accordance
with SAB 83 530 -
----- ------
Weighted average common shares and equivalents
outstanding 7,135 10,954
===== ======
Net income attributable to common stockholders $ 482 $ 108
===== ======
Per share amount $ 0.07 $ 0.01
===== ======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001006604
<NAME> HOUSECALL MEDICAL RESOURCES, INC.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 8,952,000
<SECURITIES> 0
<RECEIVABLES> 28,223,000
<ALLOWANCES> 3,049,000
<INVENTORY> 0
<CURRENT-ASSETS> 40,608,000
<PP&E> 7,286,000
<DEPRECIATION> 2,219,000
<TOTAL-ASSETS> 103,164,000
<CURRENT-LIABILITIES> 21,971,000
<BONDS> 10,182,000
0
0
<COMMON> 102,000
<OTHER-SE> 66,757,000
<TOTAL-LIABILITY-AND-EQUITY> 103,164,000
<SALES> 48,525,000
<TOTAL-REVENUES> 48,525,000
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 47,273,000
<LOSS-PROVISION> 569,000
<INTEREST-EXPENSE> 494,000
<INCOME-PRETAX> 189,000
<INCOME-TAX> 81,000
<INCOME-CONTINUING> 108,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 108,000
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
