<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR QUARTERLY PERIOD ENDED JUNE 30, 1999
COMMISSION FILE NO. 0-17490
IN HOME HEALTH, INC.
(Exact name of registrant as specified in its charter)
MINNESOTA 41-1458213
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
601 CARLSON PARKWAY
SUITE 500
MINNETONKA, MINNESOTA 55305-5214
(Address of principal executive offices)
(Zip Code)
612-449-7500
(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 __
--
As of June 30, 1999, the number of shares outstanding of the
registrant's common stock, $.03 par value was 5,479,736 shares.
<PAGE>
IN HOME HEALTH, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE NO.
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<S> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets -
June 30, 1999 and September 30, 1998 2-3
Consolidated Statements of Income -
For the Three Months and Nine Months Ended June 30,
1999 and 1998 4
Consolidated Statements of Cash Flows -
For the Nine Months Ended June 30,
1999 and 1998 5
Notes to Unaudited Consolidated Financial Statements 6-8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS 9-12
PART II. OTHER INFORMATION 13
</TABLE>
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IN HOME HEALTH, INC.
CONSOLIDATED BALANCE SHEETS
(DOLLARS AND SHARES IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
June 30, 1999 Sept. 30,
(Unaudited) 1998
------------- -----------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 19,094 $ 21,462
Accounts receivable, net of allowances of $1,094 and
$1,175 at June 30, 1999 and September 30, 1998,
respectively 11,897 13,598
Deferred income tax 1,075 1,269
Prepaid expenses and other current assets 831 970
---------- -----------
Total current assets 32,897 37,299
---------- -----------
Property:
Furniture and equipment 7,365 8,123
Computer equipment and software 6,640 6,771
Leasehold improvements 441 529
---------- -----------
Total 14,446 15,423
Accumulated depreciation (10,939) (10,954)
---------- -----------
Property - net 3,507 4,469
---------- -----------
Other Assets:
Accounts receivable, long-term 977 988
Goodwill, net 5,155 5,274
Other assets 245 330
---------- -----------
Total other assets 6,377 6,592
---------- -----------
Total Assets $ 42,781 $ 48,360
---------- -----------
---------- -----------
</TABLE>
SEE NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.
2
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IN HOME HEALTH, INC.
CONSOLIDATED BALANCE SHEETS (CONTINUED)
(DOLLARS AND SHARES IN THOUSANDS)
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
June 30, 1999 Sept. 30,
(Unaudited) 1998
------------- ---------
<S> <C> <C>
Current Liabilities:
Current maturities of long-term debt $ 111 $ 219
Accounts payable 2,973 2,612
Accounts payable - related party 123 111
Accrued liabilities:
Third party 5,372 12,669
Compensation 3,847 3,225
Insurance 3,363 3,246
Restructuring 150 456
Other 600 538
-------- --------
Total current liabilities 16,539 23,076
-------- --------
Long-Term Debt 48 44
Deferred Revenue 7 41
Deferred Rent Payable 151 198
Deferred Income Tax 1,075 1,288
Commitments and Contingencies -- --
Redeemable Convertible Preferred Stock - $1.00 par value, $13,000 redemption
value, authorized 130 shares; issued
and outstanding June 30 and September 30 - 130 shares 12,732 12,584
Shareholders' Equity:
Redeemable Convertible Preferred Stock - $1.00 par value, $7,000 redemption
value, authorized 70 shares; issued and outstanding June 30 and
September 30 - 70 shares 7,000 7,000
Preferred stock - authorized 800 shares -- --
Common stock - $.03 par value, authorized 13,334 shares; issued and
outstanding June 30 - 5,480 shares and September 30 - 5,479 shares 164 164
Additional paid-in capital 23,675 23,675
Retained deficit (18,610) (19,710)
-------- --------
Total shareholders' equity 12,229 11,129
-------- --------
Total Liabilities and Shareholders' Equity $ 42,781 $ 48,360
-------- --------
-------- --------
</TABLE>
SEE NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.
3
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IN HOME HEALTH, INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
FOR THE THREE AND NINE MONTHS ENDED JUNE 30, 1999 AND 1998
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
June 30 June 30
---------------------- ----------------------
1999 1998 1999 1998
------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenue [including (unfavorable) favorable
Medicare reserve adjustments of ($55),
($66), $2,141, and $4,163 for the
respective periods] $20,165 $22,904 $59,815 $77,201
------- ------- ------- -------
Operating Expenses:
Direct costs of revenue (primarily payroll
related costs) 11,237 12,604 32,338 43,932
General, administrative and selling expenses 8,030 9,665 25,275 31,432
------- ------- ------- -------
Total operating expenses 19,267 22,269 57,613 75,364
------- ------- ------- -------
Income from operations 898 635 2,202 1,837
------- ------- ------- -------
Interest:
Interest income 256 321 874 811
Interest expense (5) (20) (28) (57)
------- ------- ------- -------
Net interest income 251 301 846 754
------- ------- ------- -------
Income before income taxes 1,149 936 3,048 2,591
Income tax expense -- -- -- --
------- ------- ------- -------
Net income $ 1,149 $ 936 $ 3,048 $ 2,591
------- ------- ------- -------
------- ------- ------- -------
Net income available to common
shareholders $ 500 $ 287 $ 1,100 $ 593
------- ------- ------- -------
------- ------- ------- -------
Basic and diluted earnings per share $ .09 $ .05 $ .20 $ .11
------- ------- ------- -------
------- ------- ------- -------
</TABLE>
SEE NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.
4
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IN HOME HEALTH, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE NINE MONTHS ENDED JUNE 30, 1999 AND 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1999 1998
------- -------
<S> <C> <C>
Cash Flows From Operating Activities:
Net income $ 3,048 $ 2,591
Adjustments:
Depreciation and amortization 1,107 1,913
Loss on disposal of assets 322 267
Accounts receivable 1,712 1,387
Prepaid expenses and other assets 130 3,634
Accounts payable 361 (1,696)
Accounts payable - related party 12 4,108
Accrued liabilities (6,802) (3,475)
Deferred revenue (34) (316)
Deferred rent payable (47) (41)
Deferred income tax (19) (84)
------- -------
Net cash (used) provided by operating activities (210) 8,288
------- -------
Cash Flows From Investing Activities:
Acquisition of property (185) (28)
Repayments of advances to officers and employees 9 7
------- -------
Net cash used by investing activities (176) (21)
------- -------
Cash Flows From Financing Activities:
Payment of long-term debt (182) (662)
Preferred dividends paid (1,800) (1,800)
------- -------
Net cash used by financing activities (1,982) (2,462)
------- -------
Cash and Cash Equivalents:
Net (decrease) increase (2,368) 5,805
Beginning of period 21,462 13,853
------- -------
End of period $19,094 $19,658
------- -------
------- -------
</TABLE>
SEE NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.
5
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IN HOME HEALTH, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. FINANCIAL STATEMENTS
In the opinion of management of the Company, the accompanying unaudited
consolidated financial statements contain all adjustments necessary to
present fairly the financial position of the Company and its subsidiaries as
of June 30, 1999 and the results of operations for the three and nine months
and cash flows for the nine months ended June 30, 1999 and 1998. The results
of operations for any interim period are not necessarily indicative of the
results for the year. These interim consolidated financial statements should
be read in conjunction with the Company's annual financial statements and
related notes in the Company's fiscal 1998 Form 10-K.
2. BASIC AND DILUTED EARNINGS PER SHARE
The following table reflects the calculation of basic and diluted
earnings per share for the three and nine months ended June 30, 1999 and 1998.
<TABLE>
<CAPTION>
(in thousands, except per share amounts)
Three Months Nine Months
--------------- ----------------
1999 1998 1999 1998
------ ------ ------ ------
<S> <C> <C> <C> <C>
EARNINGS PER SHARE:
Net income $1,149 $ 936 $3,048 $2,591
Dividends on preferred stock (600) (600) (1,800) (1,800)
Preferred stock accretion (49) (49) (148) (198)
------ ------ ------ ------
Net income available to
common shareholders $ 500 $ 287 $1,100 $ 593
------ ------ ------ ------
------ ------ ------ ------
Weighted average shares outstanding 5,480 5,466 5,480 5,466
------ ------ ------ ------
------ ------ ------ ------
Basic and diluted earnings per share $ .09 $ .05 $ .20 $ .11
------ ------ ------ ------
------ ------ ------ ------
</TABLE>
Options to purchase 503,896 and 356,981 shares of common stock were
outstanding at June 30, 1999 and 1998, respectively. These options were not
included in the computation of diluted earnings per share because the options'
exercise price was greater than the average market price of the common shares.
Redeemable convertible preferred stock was issued to ManorCare Health
Services, Inc., a wholly owned subsidiary of HCR Manor Care, Inc. ("HCR"), in
October 1995. As of June 30, 1999, 130,000 preferred shares may be redeemed in
cash at the option of the holder or the Company on and after the fifth
anniversary of their issuance, while 70,000 shares can be redeemed only at the
option of the Company on and after the fifth anniversary. The redeemable
preferred shares are initially convertible into 3,333,334 common shares at an
initial conversion price of $6.00 per share. In December 1998, an agreement was
signed with HCR to modify the terms of the preferred shares. Under the terms of
the modification agreement, HCR irrevocably waived the voting rights of the
preferred stock, except with respect to any proposal presented to the Company's
stockholders to (i) wind up, dissolve or liquidate the Company or revoke or
forfeit its charter, (ii) amend the Company's articles of incorporation, (iii)
merge or consolidate or enter into an exchange agreement with another
corporation, or (iv) sell, lease, transfer or otherwise dispose of all or
substantially all of the Company's
6
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assets not in the usual and regular course of business. In consideration, the
Company waived its right to pay dividends on the preferred stock in shares of
its common stock. The impact of the redeemable convertible preferred stock on
diluted earnings per share would be anti-dilutive and, therefore, has been
excluded from the computation of basic and diluted earnings per share.
3. RESTRUCTURING CHARGE
During fiscal 1997, the Company recorded $2,476,000 in restructuring
charges as a result of the implementation of a plan to restructure its field
operations and reduce the Company's cost structure. The charge included
$1,820,000 of costs associated with lease costs and related equipment
write-offs associated with the closing of eight pharmacies, the consolidation
of seven sites in multi-site markets, the relocation of eight other sites to
more economical locations and $361,000 of severance costs related to
administrative staff reductions.
Total expenditures related to facilities consolidation were $107,000
during the nine months ended June 30, 1999 as compared to $566,000 for the
same period of the previous year. As of June 30, 1999, $150,000 of costs,
comprised of lease costs and related equipment write-offs associated with
vacated sites, remain to be paid out and are included in other current
liabilities. The restructuring plan is substantially complete.
4. COMMITMENTS AND CONTINGENCIES
Approximately 49% and 56% of revenue for the nine months ended June 30,
1999 and 1998, respectively, was derived from services provided to Medicare
beneficiaries, for which payment is based on cost. Payments for reimbursable
services are made by the Medicare program based on reimbursable costs
incurred in rendering services. Medicare makes interim payments as services
are rendered, and the Company files cost reports annually, which are subject
to audit and retroactive adjustment by Medicare. The Company reports revenue
only for those costs that it believes are probable (as defined in Statement
of Financial Accounting Standards No. 5) of recovery under the applicable
Medicare statutes and regulations and reports its accounts receivable
balances at net realizable value.
Over the years, Medicare auditors employed by the Medicare fiscal
intermediaries have, in connection with their retrospective audit process,
taken certain positions with respect to certain types of costs, claiming that
they are not reimbursable and thus not recoverable by the Company from the
Medicare program. When the Company disagrees with findings of the Medicare
fiscal intermediaries, it seeks relief through administrative and legal
channels. Based on a detailed analysis of statutes and regulations,
administrative and judicial decisions, and consultation with independent
industry experts and legal counsel, the Company provides a reserve (by means
of a revenue deduction) for any costs incurred which are not probable of
recovery. At June 30, 1999, total disputed costs were $3,372,000; the Company
believes that recovery of $2,395,000 of such costs (including extrapolation
for all unsettled cost reporting periods) may not be probable and,
accordingly, has established reserves totaling $2,395,000 as of June 30, 1999.
At June 30, 1999, unreserved disputed costs totaling $977,000 related to
the compensation of physical therapists employed by the Company. The Medicare
intermediary took the position that contractor physical therapist salary
equivalency guidelines should be applied to the Company's employee physical
therapists, and thus disallowed certain physical therapy costs for the fiscal
1992 cost reporting period. The Company appealed to the Provider
Reimbursement Review Board ("PRRB") and received a favorable ruling in
February 1996. In April 1996, the Health Care Financing Administration
("HCFA") reversed the PRRB ruling and disallowed all of the disputed costs.
The Company appealed to the U.S. Federal District Court ("District Court") in
Minneapolis, which ruled in favor of the Company, declaring HCFA's decision
contrary to law and setting it aside. In August 1998,
7
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HCFA appealed the decision to the Eighth Circuit Court of Appeals, where this
case was heard in June 1999. The decision of the Eighth Circuit is pending.
The Company, based on its assessment and the opinion of its legal counsel,
Lindquist & Vennum P.L.L.P. of Minneapolis, Minnesota, continues to believe
that it is probable that the Company will ultimately prevail in this case.
At June 30, 1999, total accounts receivable (net of reserves) due from
Medicare were $6,237,000. Based on the progress toward resolution of the
disputed costs, management estimates that net receivables of $977,000 will
not be realized within the next twelve months, and accordingly, has
classified such receivables as non-current. Accrued liabilities to
third-party at June 30, 1999 represent payments from Medicare in excess of
amounts that the Company believes it will be entitled to upon ultimate
settlement of Medicare cost reports.
5. INCOME TAXES
At September 30, 1998, the Company had federal operating loss
carryforwards of $9,100,000 which will expire in 2012. Management believes it
is more likely than not that certain of these net operating loss
carryforwards and other temporary differences may expire unused and,
accordingly, has established a valuation allowance against them. During the
nine months ended June 30, 1999, income tax expense of $1,200,000 was offset
by utilizing a portion of the net operating loss carryforwards versus
$1,100,000 for the same period of the previous year.
6. RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standard ("SFAS") No. 131 "Disclosures about Segments
of an Enterprise and Related Information" which is effective for the Company
in fiscal 1999. The Company is continuing to evaluate the effect of SFAS No.
131 on its financial statement disclosures and will implement the Standard in
its fiscal 1999 Form 10-K.
8
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ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis provides information which
management believes is relevant to an assessment and understanding of the
Company's level of operation and financial condition. This discussion should
be read with the consolidated financial statements appearing in Item 1.
RESULTS OF OPERATIONS
The Balanced Budget Act of 1997 (the "Budget Act") and the Omnibus
Consolidated and Emergency Supplemental Appropriations Act for Fiscal Year
1999 (the "Appropriations Act") require HCFA to implement a prospective
payment system ("PPS") for home health agencies by October 1, 2000. Until PPS
is implemented, the Budget Act established an Interim Payment System ("IPS"),
effective October 1, 1997, that reimburses home health agencies the lesser
of: (1) actual, reasonable costs, (2) per-visit cost limits, or (3) newly
implemented per-beneficiary cost limits. The IPS program rates were announced
April 1, 1998, but given effect retroactively to October 1, 1997. In response
to the implementation of IPS, the Company initiated a series of cost
reduction programs and care delivery process improvements.
Revenue for the three and nine months ended June 30, 1999 decreased
12% and 23%, respectively, over the same periods in the prior year. The
decreases in revenue occurred primarily in cost reimbursed revenue due to
cost reduction initiatives in response to lower Medicare payments under the
new per-beneficiary limits announced in 1998. Visit Division revenue
decreased 17% and 32% for the three and nine months ended June 30, 1999
compared to the same periods last year due to a decrease in patient visits
and corporate cost reductions implemented in an effort to minimize the impact
of IPS. Extended Hours Division revenue declined 13% and 15% for the three
and nine months ended June 30, 1999 compared to the same periods last year
due to a reduction in the volume of new low margin cases accepted and a lack
of staffing for certain service offerings in several markets. Hospice
Division revenue increased 13% and 14% for the three and nine months ended
June 30, 1999 as compared to last year due to increased patient census.
Direct costs, as a percent of revenue, were 56% and 54% for the three
and nine months ended June 30, 1999 versus 55% and 57% for the same periods
of the previous year.
General, administrative and selling expenses for the three and nine
months ended June 30, 1999 were $8,030,000 and $25,275,000 compared to
$9,665,000 and $31,432,000 for the same periods last year. The decreases were
due to the cost reduction initiatives implemented last year. As a percent of
revenue, such expenses were 40% and 42% for the three and nine months ended
June 30, 1999 versus 42% and 41% last year.
Net interest income for the three and nine months ended June 30, 1999
was $251,000 and $846,000 versus $301,000 and $754,000 for the same periods
of the previous year.
Net income for the three and nine months ended June 30, 1999 was
$1,149,000 and $3,048,000, compared to $936,000 and $2,591,000 for the same
periods of the previous year. Net income available
9
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to common shareholders was $500,000 and $1,100,000 for the three and nine
months ended June 30, 1999, compared to $287,000 and $593,000 for the same
periods of the previous year. The difference between net income and net
income available to common shareholders is primarily the result of the
preferred stock dividend to ManorCare Health Services, Inc., a wholly owned
subsidiary of HCR Manor Care, Inc. ("HCR") for its $20 million preferred
stock investment in the Company. Basic and diluted earnings per share were
$.09 and $.20 for the three and nine month periods ended June 30, 1999,
compared to $.05 and $.11 for the same periods of the previous year.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and cash equivalents decreased $2,368,000 to
$19,094,000 at June 30, 1999 from $21,462,000 at September 30, 1998. Net cash
used by operating activities for the nine months ended June 30, 1999 was
$210,000. During the same period, the Company paid $1,800,000 to HCR for
preferred stock dividends.
Approximately 49% and 56% of revenue for the nine months ended June
30, 1999 and 1998, respectively, was derived from services provided to
Medicare beneficiaries, for which payment is based on cost. Payments for
reimbursable services are made by the Medicare program based on reimbursable
costs incurred in rendering services. Medicare makes interim payments as
services are rendered, and the Company files cost reports annually, which are
subject to audit and retroactive adjustment by Medicare. The Company reports
revenue only for those costs that it believes are probable (as defined in
Statement of Financial Accounting Standards No. 5) of recovery under the
applicable Medicare statutes and regulations and reports its accounts
receivable balances at net realizable value.
Over the years, Medicare auditors employed by the Medicare fiscal
intermediaries have, in connection with their retrospective audit process,
taken certain positions with respect to certain types of costs, claiming that
they are not reimbursable and thus not recoverable by the Company from the
Medicare program. When the Company disagrees with findings of the Medicare
fiscal intermediaries, it seeks relief through administrative and legal
channels. Based on a detailed analysis of statutes and regulations,
administrative and judicial decisions, and consultation with independent
industry experts and legal counsel, the Company provides a reserve (by means
of a revenue deduction) for any costs incurred which are not probable of
recovery. At June 30, 1999, total disputed costs were $3,372,000; the Company
believes that recovery of $2,395,000 of such costs (including extrapolation
for all unsettled cost reporting periods) may not be probable and,
accordingly, has established reserves totaling $2,395,000 as of June 30, 1999.
At June 30, 1999, unreserved disputed costs totaling $977,000 related
to the compensation of physical therapists employed by the Company. The
Medicare intermediary took the position that contractor physical therapist
salary equivalency guidelines should be applied to the Company's employee
physical therapists, and thus disallowed certain physical therapy costs for
the fiscal 1992 cost reporting period. The Company appealed to the Provider
Reimbursement Review Board ("PRRB") and received a favorable ruling in
February 1996. In April 1996, the Health Care Financing Administration
("HCFA") reversed the PRRB ruling and disallowed all of the disputed costs.
The Company appealed to the U.S. Federal District Court ("District Court") in
Minneapolis, which ruled in favor of the Company, declaring HCFA's decision
contrary to law and setting it aside. In August 1998, HCFA appealed the
decision to the Eighth Circuit Court of Appeals, where this case was heard in
June 1999. The decision of the Eighth Circuit is pending. The Company, based
on its assessment and the opinion of its legal counsel, Lindquist & Vennum
P.L.L.P. of Minneapolis, Minnesota, continues to believe that it is probable
that the Company will ultimately prevail in this case.
10
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At June 30, 1999, total accounts receivable (net of reserves) due from
Medicare were $6,237,000. Based on the progress toward resolution of the
disputed costs, management estimates that net receivables of $977,000 will
not be realized within the next twelve months, and accordingly, has
classified such receivables as non-current. Accrued liabilities to
third-party at June 30, 1999 represent payments from Medicare in excess of
amounts that the Company believes it will be entitled to upon ultimate
settlement of Medicare cost reports.
The Company has unused letter of credit facilities from a commercial
bank totaling $1,915,000. These credit facilities are collateralized by
secured investments and will expire in December 1999.
Management believes cash provided by operations and existing cash
balances are sufficient to meet the Company's financial requirements for the
foreseeable future.
YEAR 2000
The Company has assessed and continues to assess the potential impact
of the Year 2000 issue affecting most corporations, primarily concerning the
ability of information systems to properly recognize and process information
relating to the year 2000 and beyond.
The Company began addressing the Year 2000 issue in fiscal 1997,
primarily in the business systems area, such as general ledger, payroll, and
accounts payable, which were modified and are now compliant. The programming
changes for the internally developed operations systems have been completed.
The wide area network and phone systems have also been updated. During the
third quarter of fiscal 1999, the Company replaced its current hardware
system and is substantially Year 2000 compliant. The estimated cost of Year
2000 compliance is $275,000, and is not expected to have a material impact on
the Company's financial performance.
Principal risk areas for the Company would be the potential inability
to bill its principal third-party payer, Medicare, for services rendered to
patients, or the inability of the third-party payer's systems to recognize
the billing data, delaying payment for services rendered. HCFA's March 31,
1999 Quarterly Progress Report states that all 25 of their internal mission
critical systems are compliant. Of their external mission critical systems,
75 of 82 are compliant and the remaining 7 are to be retired. The Company's
principal Fiscal Intermediary, United Government Services, anticipates all
information technology under their control will be compliant by November 1,
1999. The Company is not aware of any significant exposure due to its own or
the systems of third-parties; however, there can be no guarantee that the
systems of third-parties on which the Company relies will be converted in a
timely manner, or that such failure would not have a material adverse impact
on the Company. The Company will continue to monitor information provided by
HCFA and United Government Services and develop contingency plans as
conditions merit.
FORWARD LOOKING INFORMATION
Statements included in this Form 10-Q that are not historical or
current facts are "forward-looking statements" made pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995 and
are subject to certain risks and uncertainties that could cause actual
results to differ materially. The Company's ability to succeed in the future
is dependent upon government regulation, third party reimbursement,
competition and factors affecting the health care industry in general. The
Company's future results of operations and financial condition will be
affected by factors such as (i)
11
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proposed changes to the Medicare reimbursement system from a retrospective
cost-based system to a prospective payment system, (ii) settlements which may
be reached with HCFA regarding cost reports, and (iii) its ability to
establish and maintain close working relationships with referral sources,
including payers, hospitals, physicians and other health care professionals.
As a result of these developments, the Company is not able to conclude that
it is more likely than not that it will be able to generate future earnings
which will allow it to utilize its NOLs and, accordingly, has established a
valuation allowance against the NOLs. Please refer to our Form 10-K for the
fiscal year ended September 30, 1998 for a more thorough discussion of
forward looking information.
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PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS - None.
ITEM 2 - CHANGE IN SECURITIES - None.
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES - None.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - None
ITEM 5 - OTHER INFORMATION - None.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits -
Exhibit 27 - Financial Data Schedule.
(b) Reports on Form 8-K - None.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this Form 10-Q report to be signed on its behalf by
the undersigned thereunto duly authorized.
IN HOME HEALTH, INC.
-------------------------------------
Registrant
Date: July 26, 1999 /S/WOLFGANG VON MAACK
-------------------------------------
Wolfgang von Maack
Chief Executive Officer
Date: July 26, 1999 /S/ROBERT J. HOFFMAN, JR.
-------------------------------------
Robert J. Hoffman, Jr.
Chief Financial Officer
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEETS, THE STATEMENTS OF INCOME, AND THE STATEMENTS OF CASH FLOWS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> OCT-01-1998
<PERIOD-END> JUN-30-1999
<CASH> 19,094
<SECURITIES> 0
<RECEIVABLES> 13,968
<ALLOWANCES> 1,094
<INVENTORY> 0
<CURRENT-ASSETS> 32,897
<PP&E> 14,446
<DEPRECIATION> 10,939
<TOTAL-ASSETS> 42,781
<CURRENT-LIABILITIES> 16,539
<BONDS> 0
0
19,732
<COMMON> 164
<OTHER-SE> 5,065
<TOTAL-LIABILITY-AND-EQUITY> 42,781
<SALES> 0
<TOTAL-REVENUES> 59,815
<CGS> 0
<TOTAL-COSTS> 32,338
<OTHER-EXPENSES> 25,275
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (846)
<INCOME-PRETAX> 3,048
<INCOME-TAX> 0
<INCOME-CONTINUING> 3,048
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,048
<EPS-BASIC> .20
<EPS-DILUTED> .20
</TABLE>
