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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For The First Quarter Ended March 31, 1996 Commission File #0-19240
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U.S. HOMECARE CORPORATION
(Exact name of registrant as specified in its charter)
New York 13-2853680
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization ) Identification Number)
750 Main Street, Hartford, CT 06103
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(Address of principal executive office) (Zip Code)
Registrant's telephone number, (860)278-7242
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__
Number of Shares of Registrant's Common Stock Outstanding:
March 31, 1996: 8,582,686
<PAGE>
U.S. HOMECARE CORPORATION
INDEX
Page Number
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Part I - Financial Information
Item 1 Consolidated Balance Sheets as of
December 31, 1995 and March 31, 1996 1
Consolidated Statements of Operations
for the three months ended March 31, 1996
and 1995. 2
Consolidated Statements of Cash Flows
for the three months ended March 31, 1996
and 1995. 3
Notes to Unaudited Consolidated
Financial Statements. 4-5
Item 2 Management's Discussion and Analysis
of Financial Condition and Results of
Operations. 6-7
Part II - Other Information
Item 1 Legal Proceedings 8-9
Item 6 Exhibits & Reports on Form 8-K 10
Signatures 11
<PAGE>
U.S. HOMECARE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
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<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 378 $ 225
Accounts receivable, net of allowance
for doubtful accounts of $2,611 and $2,960 14,290 15,480
Other current assets 1,905 2,329
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TOTAL CURRENT ASSETS 16,573 18,034
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PROPERTY AND EQUIPMENT, net 3,436 3,875
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OTHER ASSETS
Excess cost over net assets acquired, net
of accumulated amortization of $2,630 and $2,496 11,535 11,669
Intangible assets, net of accumulated
amortization of $6,896 and $6,573 3,412 3,735
Other 1,000 1,128
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TOTAL OTHER ASSETS 15,947 16,532
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TOTAL ASSETS $ 35,956 $ 38,441
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt $ 9,963 $ 1,119
Accounts payable and accrued expenses 5,945 6,434
Restructuring reserves 918 1,172
Accrued payroll and related costs 564 1,123
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TOTAL CURRENT LIABILITIES 17,390 9,848
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OTHER LIABILITIES
Bank revolving line of credit 3,000 11,766
Capital lease obligations and other long-term debt 66 758
Deferred income taxes 154 154
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TOTAL OTHER LIABILITIES 3,220 12,678
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TOTAL LIABILITIES 20,610 22,526
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STOCKHOLDERS' EQUITY
Common stock, $0.01 par value, 20,000,000 shares authorized,
8,782,963 shares outstanding 88 88
Preferred stock, $1 par value, 484,000 authorized, 328,569
shares outstanding 328 328
Additional paid-in capital 45,514 45,688
Accumulated deficit (29,175) (28,607)
Treasury stock at cost, 200,277 and 277,936 shares (1,409) (1,582)
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TOTAL STOCKHOLDERS' EQUITY 15,346 15,915
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TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 35,956 $ 38,441
======== ========
See accompanying notes to unaudited consolidated financial statements.
</TABLE>
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<PAGE>
U.S. HOMECARE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended March 31,
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1996 1995
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<S> <C> <C>
Net revenues $16,871 $17,958
Cost of revenues, primarily payroll and related costs 10,847 11,927
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Gross profit 6,024 6,031
Operating expenses:
Selling, general & administrative expenses 5,459 5,876
Amortization and depreciation 846 907
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Total operating expenses 6,305 6,783
Loss from operations (281) (752)
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Interest expense, net 258 222
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Loss before provision for income taxes (539) (974)
Provision for income taxes 29 0
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Net loss ($568) ($974)
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Loss per share ($0.07) ($0.12)
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Weighted average common shares outstanding 8,557 8,134
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</TABLE>
See accompanying notes to unaudited consolidated financial statements.
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<PAGE>
U.S. HOMECARE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(In Thousands)
<TABLE>
<CAPTION>
For the three months ended March 31,
------------------------------------
1996 1995
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss ($568) ($974)
Adjustments to reconcile net cash (used in) / provided
by operating activities:
Depreciation and amortization 846 907
Provision for bad debts 362 178
Loss on diposal of assets 17
Changes in operating assets and liabilities:
Decrease/(increase) in accounts receivable 828 (1,362)
Decrease in other current assets 424 2,231
Decrease/(increase) in other assets 28 (209)
(Decrease)/increase in accrued payroll and related costs (559) (74)
(Decrease)/increase in accounts payable and accrued expenses (489) (3,380)
Decrease in restructuring reserve (81) (1,040)
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Net cash (used in) / provided by operating activities 791 (3,706)
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CASH FLOWS FROM INVESTING ACTIVITIES
(Purchase)/disposition of property and equipment, net (24) 25
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Net cash (used in) / provided by investing activities (24) 25
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CASH FLOWS FROM FINANCING ACTIVITIES
(Payment)/ proceeds of promissory note (2,000)
Payments on capital leases and long-term debt (614) (1,427)
Purchase of treasury stock (329)
(Decrease)/increase in cash overdraft 279
Issuance of preferred stock 8,727
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Net cash provided by / (used in) financing activities (614) 5,250
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Net decrease in cash 153 1,569
Cash and cash equivalents, beginning of period 225 659
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Cash and cash equivalents, end of period $378 $2,228
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Cash paid during the period for:
Income taxes $0 $25
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Interest $267 $390
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See accompanying notes to unaudited consolidated financial statements.
</TABLE>
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<PAGE>
U.S. HOMECARE CORPORATION
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Unaudited Information
In the opinion of the management of U.S. HomeCare Corporation (the
"Company"), the accompanying unaudited consolidated financial statements
contain all adjustments (consisting of only normal recurring accruals)
necessary to present fairly the Company's financial position as of March
31, 1996 and the results of its operations and changes in cash flows for
the three month period ended March 31, 1996 and 1995. These consolidated
financial statements should be read in conjunction with the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1995.
The results of operations for the three month period ended March 31,
1996 are not necessarily indicative of the results to be expected for the
full year.
Note 2 - Revenue recognition
The Company recognizes revenues as the services are performed. The
Company receives retroactive increases to certain rates, certain of which
are intended to be passed through as additional salary and benefits to
Company personnel. The Company records such additional amounts as revenue
and expenses when they are notified by the payor or the amount is
estimable. Certain of the Company's revenues and related disbursements
are subject to audit by third party payors; these revenues are accrued on
an estimated basis in the period the related services are rendered. Net
revenues are adjusted, as required in subsequent periods, based on final
settlement.
Note 3 - Litigation
No substantive changes have occurred since the filing of the 1995 10-K.
For a more detailed description of pending matters, see Note 9 c. to the
Consolidated Financial Statements in the 1995 10-K.
Note 4 - Stockholders Equity
On February 1 and February 8, 1995, the Company issued and sold in a
private placement a total of 271,428 shares of $35.00 6% Convertible
Preferred Stock, $1.00 par value ( the "$35.00 Preferred") for $35.00 per
share (the "Private Placement"). The $35.00 Preferred is convertible into
5,428,560 shares Common Stock at a conversion price of $1.75 per share,
subject to certain adjustments, and will be automatically converted into
Common Stock if the 20 day moving average of the closing prices of the
Company's Common Stock is greater than $4.375 per share. The $35.00
Preferred pays an annual dividend of $2.10, which is payable quarterly in
cash or, at the Company's option, Common Stock. Simultaneously with the
initial closing of the Private Placement, all of the holders of Preferred
Stock issued in September and October 1994 (the "Exchange Preferred")
exchanged their 57,141 shares of Exchange Preferred for an equal number
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<PAGE>
of shares of the $35.00 Preferred and exchanged their certain related
Warrants for Warrants to purchase an aggregate of 99,997 shares of Common
Stock at $1.75 per share. The Company has incurred dividends of $675,226
to date. These dividends were paid by issuing shares of Common Stock from
Treasury .
Note 5 - Commitments and Contingencies
A Medicare audit of the Home Office cost report for the fiscal year ended
June 30, 1993 was begun during August 1995. The audit has not been
completed but a revenue reduction of approximately $150,000 is estimated
at this time. The revenue reduction was reflected in the 1995 third
quarter results. The Company's cost reports for 1994 and 1995 remain
subject to final audit.
Note 6 - Fair Value of Financial Instruments
Effective January 1, 1995, the Company has adopted Statement of Financial
Accounting Standards ("SFAS") No. 107 "Disclosures about Fair Values of
Financial Instruments". The Company considers the fair value of its
financial instruments to approximate their book values.
Note 7 - Accounting for Stock-Based Compensation
Effective January 1, 1996, the Company has adopted Statement of Financial
Accounting Standards No. 123 "Accounting for Stock-Based Compensation".
SFAS No. 123 requires expanded disclosures of stock-based compensation
arrrangements with employees and encourages (but does not require)
compensation cost to be measured based on the fair value of the equity
instrument awarded. The Company will continue to apply APB Opinion No. 25
to its stock based compensation awards to employees and will disclose the
required pro forma effect on net income and earning per share.
Note 8 - Revolving Line of Credit ("RLOC")
The Company's RLOC agreement with its bank expires March 31, 1997. It is
the Company's intention to refinance this obligation, since this has not been
done the debt is classified as current.
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<PAGE>
U.S. HOMECARE CORPORATION
Management's Discussion and Analysis of
Financial Condition and Results of Operations
This Quarterly Report on Form 10-Q contains certain statements of a
forward-looking nature relating to future events or the future financial
performance of the Company. Such statements are only predictions and the actual
events or results may differ materially from the results discussed in the
forward-looking statements. Factors that could cause or contribute to such
differences include those discussed below as well as those discussed in other
filings made by the Company with the Securities and Exchange Commission.
R E S U L T S O F O P E R A T I O N S
Three Months Ended March 31, 1996
Compared With Three Months Ended March 31, 1995
Net revenues for the three month period ended March 31, 1996 decreased by
$1,087,000 to $16,871,000 compared to $17,958,000 for the first quarter of 1995.
This decline was primarily the result of the continued pressures on the
Company's infusion therapy services. Net revenue from nursing services increased
$462,000 from $13,770,000 for the first quarter 1995 to $14,232,000 for first
quarter 1996. Net revenue from infusion therapy services was $2,639,000 for
first quarter 1996, which is $1,739,000 below last year's first quarter. These
decreases in IV net revenue are primarily due to the competitive pressures being
experienced in its infusion therapy markets and the Company's efforts to ensure
that new IV services revenue meets the Company's standards of pricing and risk
selection.
Cost of revenues as a percentage of net revenues was 64.3% for the first
quarter of 1996, compared with 66.4% in first quarter of 1995. The decrease in
cost of revenues is primarily due to the Company's efforts to ensure that new IV
services business meets the Company's standards of pricing as mentioned above.
Selling, general and administrative expenses were $5,459,000 in the first
quarter of 1996 as compared to $5,876,000 in the first quarter of 1995. This
reflects the efforts at cost reduction that the Company has been pursuing offset
by some increased costs due to investments in additional resources as the
Company began efforts to grow core operations.
Net interest expense was $258,000 for the first quarter of 1996 compared to
$222,000 for first quarter 1995.
Amortization and depreciation were $846,000 for the first quarter of 1996
as compared to $907,000 for the first quarter 1995.
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<PAGE>
Earnings before interest, taxes, depreciation and amortization ("EBITDA")
were $565,000 for the first quarter of 1996 compared to $155,000 for the first
quarter of 1995.
As a result of the foregoing, for the three months ended March 31, 1996,
the Company had a net loss of $568,000 or $.07 per share, compared to a net loss
of $974,000 or $.12 per share for the corresponding quarter in 1995.
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<PAGE>
FINANCIAL CONDITION
As of March 31, 1996 the Company's cash and cash equivalents totaled
$378,000 compared to $225,000 at December 31, 1995. Undrawn funds available from
the Company's Revolving Line of Credit increased approximately $295,000 to
$529,000 at March 31, 1996 compared to $234,000 at December 31, 1995.
Net accounts receivable declined $1,190,000 from $15,480,000 at December
31, 1995 to $14,290,000 at March 31, 1996 reflecting the decline in net revenue
for first quarter of 1996 and an increase in accounts receivable sold under the
Company's securitization program by $283,000.
Trade accounts payable declined from $4,205,000 at December 31, 1995 to
$3,160,000 at March 31, 1996.
The Company believes that its cash position and liquidity will continue to
require careful management over the remainder of 1996. The liquidity pressure
has caused the Company to manage its accounts payable closely, including
deferral of some disbursements. This situation has resulted in a number of
dissatisfied vendors including some who are operating on cash on delivery (COD)
terms with the Company.
The Company's financing facilities in the first quarter of 1996 included a
$9,000,000 bank revolving line of credit ("RLOC") which expires March 31, 1997.
The outstanding balance of $8,471,000 has been classified as a current
liability. The Company intends to renew the RLOC but has not entered into a new
financing agreement.
FACTORS AFFECTING THE COMPANY'S BUSINESS
The Company's future business, financial condition and results of
operations are dependent on the Company's ability to successfully provide
comprehensive home health care services to its customers and to successfully
collect for such services. Inherent in this process are a number of factors that
the Company must carefully manage in order to be successful. Some of these
factors are: obtaining sufficient cash flow from operations to meet its debt
service and pay vendors on a timely basis; correcting significant problems it
has experienced with its infusion therapy billing and collection procedures to
enable it to collect accounts receivable on a timely basis; obtaining additional
external financing to meets its working capital requirements, if necessary;
complying with the financial covenants in its revolving line of credit,
subordinated credit facility and accounts receivable securitization programs so
the banks would not have the right to declare the amounts outstanding under such
facilities immediately due and payable; maintaining and establishing close
-8-
<PAGE>
working relationships with home care and social services agencies, hospitals,
clinics, nursing homes, physicians and physician groups, health maintenance
organizations and other health care providers; fully implementing its
restrucuring plan; obtaining reimbursement from third party payors; complying
with applicable law regarding the health care industry; attracting and retaining
senior management personnel and branch level management as well as qualified
health care professionals and paraprofessionals; maintaining adequate liability
insurance; and competing effectively with other home health care providers. The
failure to manage such factors successfully could have a material adverse effect
on the Company's business, financial condition and results of operations.
-9-
<PAGE>
U.S. HOMECARE CORPORATION
Part II - Other Information
Item 1. Legal Proceedings
HIPS LITIGATION. In July 1993, in HIPS v. USHC Infusion, et al., Index No.
117835/93 (Supreme Court, State of New York, New York County), Home Infusion
Pharmaceutical Services, Inc. "HIPS") sued, on a motion for summary judgment in
lieu of complaint, to enforce the payment of promissory notes in the face amount
of $4.5 million and approximately $880,000 in consulting fees in connection with
the acquisition (the "Acquisition") of assets (or an interest therein) from HIPS
and its affiliate Abel Health Management Services, Inc. (collectively
"HIPS/Abel") and their principal, Edward J. Abel ("Abel"). In September 1994,
the Court denied HIPS's motion for summary judgment and instructed HIPS to bring
a plenary suit on the promissory notes. In October 1994, HIPS brought such a
suit and Abel joined in the suit, seeking payment on the consulting agreement.
In November 1994, the Company answered the complaint and counterclaimed for
rescission of the Acquisition, fraudulent inducement, fraud, breach of contract,
breach of the covenant of good faith and fair dealing, and for a declaratory
judgment relieving it of any further purported obligations in connection with
the Acquisition.
In September 1995, HIPS moved to dismiss certain of the Company's
counterclaims. On February 29, 1996 the court denied HIP's motion, except that
it struck the Company's request for the imposition of punitive damages.
Although the Company believes that is position in the HIPS/Abel litigation
is meritorious, the ultimate outcome of this matter cannot presently be
determined. A reserve has been established in the Company's consolidated
financial statements for specified amounts in connection with the resolution of
this matter.
KINGSLAND LITIGATION. Kingsland Associates v. Abel Health Management
Services, Inc. and U.S. HomeCare Infusion Therapy Products Corporation, Index
No. 14294/93 (Supreme Court of the State of New York, Nassau County) also arises
from the Acquisition. Based on the Asset Purchase Agreement provision regarding
USHC Infusion's assumption of certain liabilities in connection with the
Acquisition, Abel Health Management Services, Inc. ("AHMS") has impleaded USHC
Infusion into these cases brought by Kingsland Associates ("Kingsland") in
connection with AHMS's abandonment of three suites of offices. Kingsland has
also asserted a claim directly against USHC Infusion. Kingsland seeks damages in
excess of $50,000, approximately $325,000 in rent, attorneys' fees and rent
escalation amounts. USHC Infusion filed an answer on November 5, 1993,
asserting, among other defenses, that because of AHMS's breaches of contract and
torts in connection with the Acquisition, as alleged in USHC Infusion, et. al.
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<PAGE>
v. HIPS, USHC infusion is not liable to AHMS and therefore is not liable to
Kingsland.
In August 1995, AHMS moved to dismiss certain of USHC Infusion's
affirmative defenses. On March 22, 1996 the Court granted the motion in part,
denied it in part, certified the case for trial and ordered AHMS to participate
in search and discovery noticed by the Company. In so doing, the Court upheld
the same defense that was upheld in the HIPS litigation.
Item 6. Exhibits and Reports on Form 8-K
A. Exhibits - The following exhibits are filed
herewith or incorporated herein.
1. Calculation of earnings/(loss) per share - Three months ended
March 31, 1996 and 1995
B. Reports on Form 8-K
1. No reports on Form 8-K were filed during the quarter
for which this report is filed.
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<PAGE>
EXHIBIT 1
U.S. HOMECARE CORPORATION
CALCULATION
OF LOSS PER SHARE
For the Three Months Ended March 31, 1996
Primary
Net loss ($568,000)
Weighted average number of common shares 8,557,000
Loss per share ($0.07)
For the Three Months Ended March 31, 1995
Primary
Net loss ($974,000)
Weighted average number of common shares 8,134,000
Loss per share ($0.12)
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<PAGE>
U.S. HOMECARE CORPORATION
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.
U.S. HomeCare Corporation
May 14, 1996 G. Robert O'Brien
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Date President and Chief Executive Officer
(Principal Executive Officer)
May 14, 1996 Stephen H. Matheson
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Date Vice President and Chief Financial Officer
(Principal Financial Officer)
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