<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 DECEMBER 31, 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 January 7, 2000, the number of shares outstanding of the
registrant's common stock, $.03 par value was 5,520,553 shares.
<PAGE>
IN HOME HEALTH, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE NO.
<S> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets -
December 31, 1999 and September 30, 1999 2-3
Consolidated Statements of Operations -
For the Three Months Ended December 31,
1999 and 1998 4
Consolidated Statements of Cash Flows -
For the Three Months Ended December 31,
1999 and 1998 5
Notes to Unaudited Consolidated Financial Statements 6-9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS 10-13
PART II. OTHER INFORMATION 14
</TABLE>
1
<PAGE>
IN HOME HEALTH, INC.
CONSOLIDATED BALANCE SHEETS
(DOLLARS AND SHARES IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
Dec. 31, 1999 Sept. 30,
(Unaudited) 1999
----------- ---------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 15,701 $ 21,406
Accounts receivable, net of allowances of $1,119 and
$1,079 in December and September 1999, respectively 12,714 11,937
Deferred income tax 986 1,006
Prepaid expenses and other current assets 737 668
------- -------
Total current assets 30,138 35,017
------- -------
Property:
Furniture and equipment 7,187 7,202
Computer equipment and software 5,832 6,099
Leasehold improvements 409 399
------- -------
Total 13,428 13,700
Accumulated depreciation (10,154) (10,433)
------- -------
Property - net 3,274 3,267
------- -------
Other Assets:
Accounts receivable, long-term 4,787 4,658
Goodwill, net 5,093 5,115
Other assets 98 92
------- -------
Total other assets 9,978 9,865
------- -------
Total Assets $ 43,390 $ 48,149
------- -------
------- -------
</TABLE>
SEE NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.
2
<PAGE>
IN HOME HEALTH, INC.
CONSOLIDATED BALANCE SHEETS (CONTINUED)
(DOLLARS AND SHARES IN THOUSANDS)
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Dec. 31, 1999 Sept. 30,
(Unaudited) 1999
----------- ---------
<S> <C> <C>
Current Liabilities:
Current maturities of long-term debt $ 37 $ 67
Accounts payable 3,992 4,045
Accrued liabilities:
Third party 6,119 10,209
Compensation 3,170 3,869
Insurance 2,522 2,593
Other 465 552
------- -------
Total current liabilities 16,305 21,335
------- -------
Long-Term Debt 38 43
Deferred Rent Payable 130 144
Deferred Income Tax 986 1,006
Commitments and Contingencies -- --
Redeemable Convertible Preferred Stock - $1.00 par value, $13,000 redemption
value, authorized 130 shares; issued
and outstanding December 31 and September 30 - 130 shares 12,832 12,782
Shareholders' Equity:
Redeemable convertible preferred stock - $1.00 par value, $7,000 redemption
value, authorized 70 shares; issued
and outstanding December 31 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 December 31 and September 30 - 5,521 shares 166 166
Additional paid-in capital 23,739 23,739
Retained deficit (17,806) (18,066)
------- -------
Total shareholders' equity 13,099 12,839
------- -------
Total Liabilities and Shareholders' Equity $ 43,390 $ 48,149
------- -------
------- -------
</TABLE>
SEE NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.
3
<PAGE>
IN HOME HEALTH, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE THREE MONTHS ENDED DECEMBER 31, 1999 AND 1998
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Revenue [including (unfavorable) favorable Medicare
Reserve adjustments of ($100) and $57 in 1999 and
1998, respectively] $ 22,831 $ 18,571
------ ------
Operating Expenses:
Direct costs of revenue (primarily payroll
related costs) 13,086 10,359
General, administrative and selling expenses 9,102 8,034
------ ------
Total operating expenses 22,188 18,393
------ ------
Income from operations 643 178
------ ------
Interest:
Interest income 269 345
Interest expense (2) (6)
------ ------
Net interest income 267 339
------ ------
Income before income taxes 910 517
Income tax expense -- --
------ ------
Net income $ 910 $ 517
------ ------
------ ------
Net income (loss) available to common
shareholders $ 260 $ (132)
------ ------
------ ------
Basic and diluted earnings (loss) per share $ .05 $ (.02)
------ ------
------ ------
</TABLE>
SEE NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.
4
<PAGE>
IN HOME HEALTH, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE THREE MONTHS ENDED DECEMBER 31, 1999 AND 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1999 1998
----- -----
<S> <C> <C>
Cash Flows From Operating Activities:
Net income $ 910 $ 517
Adjustments:
Depreciation and amortization 307 393
Loss on disposal of assets 44 103
Accounts receivable (906) 1,691
Prepaid expenses and other assets (79) (31)
Accounts payable (53) 266
Accrued liabilities (4,947) (833)
Deferred revenue -- (21)
Deferred rent payable (14) (11)
Deferred income tax -- (7)
------- -------
Net cash (used) provided by operating activities (4,738) 2,067
------- -------
Cash Flows From Investing Activities:
Acquisition of property and agencies (342) (13)
Other 10 6
------- -------
Net cash used by investing activities (332) (7)
------- -------
Cash Flows From Financing Activities:
Payment of long-term debt (35) (56)
Preferred dividends paid (600) (600)
------- -------
Net cash used by financing activities (635) (656)
------- -------
Cash and Cash Equivalents:
Net (decrease) increase (5,705) 1,404
Beginning of period 21,406 21,462
------- -------
End of period $ 15,701 $ 22,866
------- -------
------- -------
</TABLE>
SEE NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.
5
<PAGE>
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 (consisting of only
normal, recurring accruals) necessary to present fairly the financial position
of the Company and its subsidiaries as of December 31, 1999 and the results of
operations and cash flows for the three months ended December 31, 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 Form 10-K.
Certain reclassifications have been made to the fiscal 1999 financial
statements to conform to the presentations adopted in fiscal 2000. These
reclassifications had no effect on net income, earnings (loss) per share or
shareholders' equity as previously reported.
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133 "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS 133"), which is effective for the Company on
October 1, 2000. SFAS 133 requires companies to record derivatives on the
balance sheet as assets or liabilities, measured at fair value. Gains or losses
resulting from changes in the values of those derivatives would be accounted for
depending on the use of the derivative and whether it qualifies for hedge
accounting. The Company is currently reviewing the standard and its effect on
the financial statements.
2. BASIC AND DILUTED EARNINGS PER SHARE
The following table reflects the calculation of basic and diluted
earnings (loss) per share for the three months ended December 31, 1999 and 1998.
<TABLE>
<CAPTION>
(in thousands, except per
share amounts)
1999 1998
---- ----
<S> <C> <C>
EARNINGS PER SHARE:
Net income $ 910 $ 517
Dividends on preferred stock (600) (600)
Preferred stock accretion (50) (49)
--------- ---------
Net income (loss) available to common shareholders $ 260 $ (132)
--------- ---------
--------- ---------
Weighted average shares outstanding 5,521 5,480
Dilutive effect of outstanding stock options 124 --
--------- ---------
Dilutive potential shares outstanding 5,645 5,480
--------- ---------
--------- ---------
Basic and diluted earnings (loss) per share $ .05 $ (.02)
--------- ---------
--------- ---------
</TABLE>
Options to purchase 614,055 shares of common stock were outstanding at
December 31, 1999. Of these, 431,000 were dilutive and included in the
computation above while the remaining options were not included in the
computation of diluted earnings per share as their exercise prices were greater
than
6
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the average market price of the common shares. Options to purchase 272,142
shares of common stock were outstanding at December 31, 1998 and were not
included in the computation of diluted earnings per share because the options'
exercise prices were 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 Manor Care, Inc. ("Manor Care"), in
October 1995. As of December 31, 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 have voting rights on an as-if converted basis, and are
initially convertible into 3,333,334 common shares at an initial conversion
price of $6.00 per share. The impact of the redeemable convertible preferred
stock on diluted earnings (loss) per share would be anti-dilutive and,
therefore, has been excluded.
3. COMMITMENTS AND CONTINGENCIES
Approximately 49% and 46% of revenue for the three months ended December
31, 1999 and 1998, respectively, was derived from services provided to Medicare
beneficiaries for which payment is based on cost. Payments for these 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 on an annual basis, 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 related 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 such
costs are not reimbursable and thus not recoverable by the Company under 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 December 31, 1999, total disputed costs were $8,038,000. The Company believes
that recovery of $3,251,000 of such costs (including extrapolation for all
unsettled cost reporting periods) may not be probable and, accordingly, has
established reserves totaling $3,251,000 at December 31, 1999.
At December 31, 1999, disputed costs totaling $4,787,000 were not
reserved. Of these costs, $977,000 relates to the compensation of physical
therapists employed by the Company, and the Eighth Circuit of Appeals has
affirmed a lower court ruling in favor of the Company as to the eligibility of
these costs for Medicare reimbursement for the fiscal 1992 cost reporting
period. The Company and its legal counsel believe that the Court of Appeal's
decision will also govern the remainder of the $977,000 of disputed costs
related to the compensation of physical therapists employed by the Company.
$1,333,000 of unreserved disputed costs involves the Company's home
office costs as they relate to the pharmacy operations in the Company's branch
offices. The Company's fiscal intermediary has adopted an allocation method of
the Company's home office costs that the Company believes is in violation of a
written agreement between the Company and its fiscal intermediary. The Company
7
<PAGE>
believes that it will prevail in this case.
$1,145,000 of unreserved disputed costs involves the Company's skilled
nursing costs. The Company's fiscal intermediary has allocated such costs to all
services of the Company in spite of the fact that the activities of the
Company's skilled nursing staff are 100% attributable to the Company's Visits
services. The Company believes that it will prevail in this case.
$969,000 of unreserved disputed costs involves the Company's payments for
services from Manor Care, Inc. ("Manor Care"). Beginning in fiscal 1996, the
Company made payments to Manor Care in return for services performed on behalf
of the Company. To ensure that the expenses incurred by Manor Care were not
submitted to Medicare on both the Company's and on Manor Care's cost reports,
the Company's fiscal intermediary requested documentation that the amounts were
removed from Manor Care's cost report. The Company is working with Manor Care to
provide such documentation. The Company believes that it will prevail in this
case.
$363,000 of unreserved disputed costs involves the costs of certain
administrative/clerical personnel. The Company's fiscal intermediary has
allocated such costs across all services of the Company in spite of the fact
that they are incurred primarily in the Visits services due to the relatively
high need for documentation and filing in the Visits services. The Company
believes that it will prevail in this case.
At December 31, 1999, total accounts receivable (net of reserves) due
from Medicare were $9,906,000. Based on the progress toward resolution of the
disputed costs, management estimates that net receivables of $4,787,000 will not
be realized within the next twelve months, and accordingly, has classified net
receivables of $4,787,000 as a non-current asset. Accrued liabilities to
third-party of $6,119,000 at December 31, 1999 represent payments from Medicare
in excess of amounts that the Company will be entitled to upon ultimate
settlement of Medicare cost reports.
4. INCOME TAXES
At September 30, 1999, the Company had federal operating loss
carryforwards of $5,245,000 which will expire in 2012 and 2013. 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
three months ended December 31, 1999, income tax expense of approximately
$350,000 was offset by utilizing a portion of the net operating loss
carryforwards versus $200,000 for the same period of the previous year.
5. SEGMENT INFORMATION
The Company's management analyzes operating performance on a geographic
basis and considers each branch an operating segment. All branches offer
substantially the same services to similar types of clients entirely within the
United States. Additionally, all branches operate in the same regulatory
environment and utilize similar processes to provide care to their clients. For
financial reporting purposes, all the Company's operating segments are
aggregated into one reportable segment. Therefore, the Company has concluded
that the current reportable segment is consistent with the "management approach"
methodology.
8
<PAGE>
Revenue by service for the three months ended December 31 were as follows
(in thousands):
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Visits $ 12,620 $ 9,260
Extended Hours 6,100 5,642
Hospice 3,738 3,345
Other 373 324
--------- ---------
$ 22,831 $ 18,571
--------- ---------
--------- ---------
</TABLE>
Revenue from Medicare was $14,799,000 and $11,687,000 for the three
months ended December 31, 1999 and 1998, respectively.
9
<PAGE>
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 the Health Care Financing Administration
("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") 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. 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 months ended December 31, 1999 increased 23% over
the same period in the prior year. Visit revenue increased 36% due to an
increase in patient visits and increased business from six home health agencies
purchased in October 1999. Extended Hours revenue increased 8% due primarily to
the additional revenue generated by the newly acquired agencies. Infusion
revenue increased 15% due to a modest increase in service volume. Hospice
revenue increased 12% due to increased overall patient census.
Direct costs, as a percent of revenue, were 57% versus 56% for the three
months ended December 31, 1999 and 1998, respectively. The increased percent of
revenues was primarily due to lower margin patient services in the newly
acquired agencies and increases in direct labor rates in excess of rate
increases provided by the Company's primary payers. General, administrative and
selling expenses, as a percent of revenue, were 40% for the three months ended
December 31, 1999 compared to 43% for the same period last year. The decrease in
general, administrative and selling expenses, as a percent of revenue, was
principally due to continued controls over corporate overhead leveraged over the
expanded revenue base generated through increased visit volume.
Net interest income for the three months ended December 31, 1999 was
$267,000 versus $339,000 for the same period of the previous year. The decrease
in net interest income was principally attributable to lower average cash
balances due to cash repayments to Medicare of $4,688,000 in October 1999.
Net income for the three months ended December 31, 1999 was $910,000,
compared to $517,000 for the same period of the previous year. The improvement
in net income over last year principally resulted from continued controls over
corporate overhead leveraged over the expanded revenue base generated by
increased visit volume and revenue from the newly acquired agencies. Net income
available to common shareholders was $260,000 for the three months ended
December 31, 1999, compared to a loss of $132,000 for the same period of the
previous year. The difference between net income and net
10
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income available to common shareholders is primarily the result of the preferred
stock dividend to ManorCare Health Services, Inc., a wholly owned subsidiary of
Manor Care, Inc. ("Manor Care") for its $20 million preferred stock investment
in the Company. Basic and diluted earnings per share for the three months ended
December 31, 1999 was $.05 compared to loss of $.02 per share last year.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and cash equivalents decreased $5,705,000 to
$15,701,000 at December 31, 1999 from $21,406,000 at September 30, 1999. During
the three months ended December 31, 1999, the Company paid $600,000 to Manor
Care for preferred stock dividends and repaid Medicare $4,688,000, which was
included in the accrued liabilities to third party at September 30, 1999.
Approximately 49% and 46% of revenue for the three months ended December
31, 1999 and 1998, respectively, was derived from services provided to Medicare
beneficiaries for which payment is based on cost. Payments for these 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 on an annual basis, 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 related 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 such
costs are not reimbursable and thus not recoverable by the Company under 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 December 31, 1999, total disputed costs were $8,038,000. The Company believes
that recovery of $3,251,000 of such costs (including extrapolation for all
unsettled cost reporting periods) may not be probable and, accordingly, has
established reserves totaling $3,251,000 at December 31, 1999.
At December 31, 1999, disputed costs totaling $4,787,000 were not
reserved. Of these costs, $977,000 relates to the compensation of physical
therapists employed by the Company, and the Eighth Circuit of Appeals has
affirmed a lower court ruling in favor of the Company as to the eligibility of
these costs for Medicare reimbursement for the fiscal 1992 cost reporting
period. The Company and its legal counsel believe that the Court of Appeal's
decision will also govern the remainder of the $977,000 of disputed costs
related to the compensation of physical therapists employed by the Company.
$1,333,000 of unreserved disputed costs involves the Company's home
office costs as they relate to the pharmacy operations in the Company's branch
offices. The Company's fiscal intermediary has adopted an allocation method of
the Company's home office costs that the Company believes is in violation of a
written agreement between the Company and its fiscal intermediary. The Company
believes that it will prevail in this case.
$1,145,000 of unreserved disputed costs involves the Company's skilled
nursing costs. The
11
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Company's fiscal intermediary has allocated such costs to all
services of the Company in spite of the fact that the activities of the
Company's skilled nursing staff are 100% attributable to the Company's Visits
services. The Company believes that it will prevail in this case.
$969,000 of unreserved disputed costs involves the Company's payments for
services from Manor Care, Inc. ("Manor Care"). Beginning in fiscal 1996, the
Company made payments to Manor Care in return for services performed on behalf
of the Company. To ensure that the expenses incurred by Manor Care were not
submitted to Medicare on both the Company's and on Manor Care's cost reports,
the Company's fiscal intermediary requested documentation that the amounts were
removed from Manor Care's cost report. The Company is working with Manor Care to
provide such documentation. The Company believes that it will prevail in this
case.
$363,000 of unreserved disputed costs involves the costs of certain
administrative/clerical personnel. The Company's fiscal intermediary has
allocated such costs across all services of the Company in spite of the fact
that they are incurred primarily in the Visits services due to the relatively
high need for documentation and filing in the Visits services. The Company
believes that it will prevail in this case.
At December 31, 1999, total accounts receivable (net of reserves) due
from Medicare were $9,906,000. Based on the progress toward resolution of the
disputed costs, management estimates that net receivables of $4,787,000 will not
be realized within the next twelve months, and accordingly, has classified net
receivables of $4,787,000 as a non-current asset. Accrued liabilities to
third-party of $6,119,000 at December 31, 1999 represent payments from Medicare
in excess of amounts that the Company will be entitled to upon ultimate
settlement of Medicare cost reports.
The Company has unused letter of credit facilities for $1,915,000. These
credit facilities are collateralized by secured investments and expire in
December 2000.
The redeemable convertible preferred stock issued to Manor Care includes
130,000 shares that may be redeemed at the option of Manor Care or the Company
at $13,000,000 face value on or after October 24, 2000 and 70,000 shares with a
face value of $7,000,000 that may only be redeemed at the option of the Company.
Management has performed preliminary evaluations on a number of financing
alternatives in the event Manor Care elects to redeem the $13,000,000 of
preferred stock. Management believes that cash provided from operations along
with existing cash balances will be sufficient to finance the Company's
operations through October 24, 2000, and long-term financing alternatives will
be available to meet the Company's future needs, however there are no assurances
such long-term financing will ultimately be obtained.
YEAR 2000
The Company continues to assess the potential impact of the Year 2000
issue, primarily concerning the ability of information systems to properly
recognize and process information relating to the year 2000 and beyond.
Principal risk areas for the Company would be the potential inability to bill
its principal third party payers for services rendered to patients, or the
inability of the third party payers' systems to recognize the billing data,
delaying payment for services rendered. Although the Company has not experienced
any significant problems with its internal or external critical systems, it
continues to monitor these systems. The Company is not aware of any significant
exposure due to its own systems or the systems of third parties, however, there
can be no guarantee that the systems of
12
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third parties on which the Company relies will be compliant in a timely manner,
or that such failure would not have a material adverse impact on the Company.
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)
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 the 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, 1999 for a more thorough discussion of forward looking
information.
13
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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.
14
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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: January 31, 2000 /s/Wolfgang von Maack
--------------------------------
Wolfgang von Maack
Chief Executive Officer
Date: January 31, 2000 /s/Robert J. Hoffman, Jr.
--------------------------------
Robert J. Hoffman, Jr.
Chief Financial Officer
15
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEETS, THE STATEMENTS OF OPERATIONS 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> 3-MOS
<FISCAL-YEAR-END> SEP-30-2000
<PERIOD-START> OCT-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 15,701
<SECURITIES> 0
<RECEIVABLES> 18,620
<ALLOWANCES> 1,119
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0
19,832
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