<PAGE> 1
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, 1997 Commission File #0-19240
U.S. HOMECARE CORPORATION
(Exact name of registrant as specified in its charter)
New York 13-2853680
- ------------------------------- -----------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
750 Main Street, Hartford, CT 06103
- ------------------------------- -----------------------------------
(Address of principal executive (Zip Code)
office)
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, 1997: 9,742,499
<PAGE> 2
U.S. HOMECARE CORPORATION
INDEX
<TABLE>
<CAPTION>
Page Number
-----------
<S> <C>
Part I - Financial Information
Item 1 Consolidated Balance Sheets as of
March 31, 1997 and December 31, 1996 3
Consolidated Statements of Operations
for the three months ended March 31, 1997
and 1996. 4
Consolidated Statements of Cash Flows
for the three months ended March 31, 1997
and 1996. 5
Notes to Unaudited Consolidated
Financial Statements. 6 & 7
Item 2 Management's Discussion and Analysis
of Financial Condition and Results of
Operations. 8 - 10
Part II - Other Information
Item 6 Exhibits & Reports on Form 8-K 11 & 12
Signatures 13
</TABLE>
<PAGE> 3
U.S. HOMECARE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
-------- --------
ASSETS (unaudited) (audited)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 400 $ 647
Accounts receivable, net of allowance
for doubtful accounts of $3,376 and $3,843 7,076 7,925
Other current assets 1,247 1,225
-------- --------
TOTAL CURRENT ASSETS 8,723 9,797
-------- --------
PROPERTY AND EQUIPMENT, net 1,952 2,578
-------- --------
OTHER ASSETS
Excess cost over net assets acquired, net
of accumulated amortization of $674 and $653 1,560 1,581
Intangible assets, net of accumulated
amortization of $5,279 and $5,165 708 822
Other 907 767
-------- --------
TOTAL OTHER ASSETS 3,175 3,170
-------- --------
TOTAL ASSETS $ 13,850 $ 15,545
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Current maturities of long-term debt $ 7,476 $ 346
Accounts payable 2,973 3,175
Accrued expenses 3,886 4,509
Reserves for restructuring and other non-recurring charges 2,877 3,670
Accrued payroll and related costs 1,487 1,608
-------- --------
TOTAL CURRENT LIABILITIES 18,699 13,308
-------- --------
OTHER LIABILITIES
Long-term debt 94 7,983
Other long-term liabilities 1,054 1,309
-------- --------
TOTAL OTHER LIABILITIES 1,148 9,292
-------- --------
TOTAL LIABILITIES 19,847 22,600
-------- --------
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock, $0.01 par value, 40,000,000 shares
authorized, 9,742,499 and 9,419,973 shares outstanding 97 94
Preferred stock, $1.00 par value, 5,000,000
authorized, 328,569 shares outstanding 328 328
Additional paid-in capital 45,023 44,923
Accumulated deficit (51,445) (52,400)
-------- --------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) (5,997) (7,055)
-------- --------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY (DEFICIT) $ 13,850 $ 15,545
======== ========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
-3-
<PAGE> 4
U.S. HOMECARE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended March 31,
1997 1996
------- --------
(unaudited)
<S> <C> <C>
Net revenues $13,754 $ 13,776
Cost of revenues, primarily
payroll and related costs 8,214 9,041
------- --------
Gross profit 5,540 4,735
Operating expenses:
Selling, general and administrative expenses 3,945 4,733
Amortization and depreciation 382 538
------- --------
Total operating expenses 4,327 5,271
Income (loss) from continuing operations before
interest expense and income taxes 1,213 (536)
Interest expense 220 287
------- --------
Income (loss) from continuing operations before
income taxes 993 (823)
Provision for state income taxes 38 28
------- --------
Income (loss) from continuing operations 955 (851)
Income (loss) from discontinued operations 0 285
------- --------
Net income (loss) $ 955 $ (566)
======= ========
Primary income (loss) per share:
Income (loss) from continuing operations $ 0.09 $ (0.10)
Income (loss) from discontinued operations
-- 0.03
------- --------
Net Income (loss ) per share $ 0.09 $ (0.07)
======= ========
Fully diluted income (loss) per share:
Income (loss) from continuing operations $ 0.05 $ *
Income (loss) from discontinued operations --
------- --------
Net Income (loss ) per share $ 0.05 $ *
======= ========
Weighted average number of common and equivalent shares:
Primary 11,131 8,557
======= ========
Fully diluted 18,368 15,128
======= ========
</TABLE>
* Fully diluted earnings per share for the quarter ended March 31, 1996 is
not computed as the effect of common stock equivalents on the net loss is
anti-dilutive.
See accompanying notes to unaudited consolidated financial statements.
-4-
<PAGE> 5
U.S. HOMECARE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Three months ended March 31,
----------------------------
(unaudited)
1997 1996
----- -----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 955 ($568)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization 382 846
Provision for bad debts 176 362
Non-cash charges 103 0
Changes in operating assets and liabilities:
Decrease in accounts receivable 673 828
Decrease / (increase) in other current assets (22) 424
Decrease / (increase) in other assets (250) 28
Decrease in accrued payroll and related costs (121) (559)
Decrease in accounts payable and accrued expenses (825) (489)
Decrease in restructuring reserve (270) (81)
Decrease in other liabilities (255) 0
----- -----
Net cash provided by operating activities 546 791
----- -----
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment, net (34) (24)
----- -----
Net cash used in investing activities (34) (24)
----- -----
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on long-term debt (759) (614)
----- -----
Net cash used in financing activities (759) (614)
----- -----
Net (decrease) increase in cash and cash equivalents (247) 153
Cash and cash equivalents, beginning of period 647 225
----- -----
Cash and cash equivalents, end of period $ 400 $ 378
===== =====
Cash paid during the period for:
Income taxes $ 0 $ 0
===== =====
Interest $ 176 $ 267
===== =====
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
-5-
<PAGE> 6
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, 1997 and the results of its operations and its cash flows for the three
months ended March 31, 1997 and 1996. 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, 1996.
The results of operations for the three month period ended March 31, 1997
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. The Company records such
additional amounts as revenue 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 - Discontinued Operations
The accompanying consolidated financial statements of operations for the
three month period ended March 31, 1996 present the results of operations
of the IV therapy business as a discontinued operation, which was sold as
of October 31, 1996.
Note 4 - Stockholders' Equity
During the quarter ended March 31, 1997, the Company issued 238,375 shares
of Common Stock as dividends on the Company's $35.00 6% Convertible
Preferred Stock (the "Preferred Stock"), 29,010 shares of Common Stock in
lieu of cash payments for several obligations, and 51,141 shares of Common
Stock to directors in lieu of cash fees under the Director Stock Fee
Program of the Company's 1995 Stock Option/Stock Issuance Plan. The impact
of the issuance of the shares was to increase Stockholders' Equity by
$103,000.
On March 25, 1997, the Company issued Warrants for an aggregate of 913,000
shares of Common Stock exercisable at $1.59 per share to its lenders. The
foregoing securities are restricted securities within the definition of
Rule 144.
-6-
<PAGE> 7
Pursuant to certain contractual obligations, the Company filed a
registration statement on April 30, 1997 in order to register approximately
14 million shares of Common Stock for resale and plans to keep such
registration statement effective for a minimum of three years.
Note 5 - Commitments and Contingencies
Medicare revenues are based in part on cost reimbursement principles and
are subject to audit and retroactive adjustment by the respective
third-party fiscal intermediaries. Included in accrued expenses at December
31, 1996 and at March 31, 1997 was approximately $1.0 and $0.8 million,
respectively, which is an estimate of what is to be paid upon finalization
of certain cost reports. In the opinion of management, additional other
retroactive adjustments, if any, are not expected to be material to the
consolidated financial statements of the Company.
Note 6 - Debt and Accounts Receivable Securitization
The Company's Receivables Purchase and Servicing Agreement (the
"Securitization Program"), allows the Company to sell for cash an undivided
percentage ownership interest in a designated pool of eligible receivables,
as defined. The Company relies on this accounts receivable financing to
fund working capital for current operations. The maximum amount of cash
advances (based on eligible accounts receivable) allowed under the program
is $10.0 million. The net proceeds from the sale of accounts receivable
through the Securitization Program at December 31, 1996 and March 31, 1997
were $7.5 million and $6.5 million, respectively.
The Company's Revolving Line of Credit ("RLOC") and the Company's
subordinated credit facility expire during January, 1998. Because these
facilities expire in less than a year, all such outstanding debt has been
classified as current liabilities at March 31, 1997. The Securitization
Program also expires during January, 1998.
Note 7 - Presentation of Prior Year Information
The presentation of certain prior year information has been reclassified
to conform with the current year presentation.
Note 8 - New Accounting Pronouncement
Statement of Financial Accounting Standards No. 128 ("SFAS 128") was issued
in February, 1997 and is effective for financial statements issued after
December 15, 1997. The statement establishes new standards for computing
and presenting earnings per share ("EPS") and will require restatement of
prior years' information. This statement simplifies the standards for
computing EPS previously found in APB Opinion 15. It replaces the
presentation of primary and fully diluted EPS with a presentation of basic
EPS and diluted EPS, requires a dual presentation on the face of the
financial statements, and requires a reconciliation of basic EPS to diluted
EPS. Had SFAS No. 128 been effective for the three months ended March 31,
1997, EPS would have been $.10 for basic and $.05 for diluted.
-7-
<PAGE> 8
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, 1997
Compared With Three Months Ended March 31, 1996
Net revenues for the three month period ended March 31, 1997 were $13,754,000
compared to $13,776,000 for the first quarter of 1996.
Cost of revenues as a percentage of net revenues was 59.7% for the first
quarter of 1997, compared with 65.6% in the first quarter of 1996. The decrease
in cost of revenues is primarily due to the Company's restructuring of its
nursing services operations which was completed during the fourth quarter of
1996. The resulting gross profits were $5,540,000 and $4,735,000, or 40.3% and
34.4%, for the quarters ended March 31, 1997 and 1996, respectively.
Selling, general and administrative expenses were $3,945,000 in the first
quarter of 1997 as compared to $4,733,000 in the first quarter of 1996. The
decrease reflects the cost reductions which were implemented as part of the
Company's restructuring program during the fourth quarter of 1996.
Net interest expense was $220,000 for the first quarter of 1997 compared to
$287,000 for first quarter 1996. The decrease resulted from continued reduction
in borrowed funds.
Amortization and depreciation were $382,000 for the first quarter of 1997 as
compared to $538,000 for the first quarter of 1996, reflecting the fact that a
portion of the Company's property and equipment has now been fully depreciated.
During the third quarter of 1996, the Company discontinued its Infusion
Therapy (IV Therapy) business. Income from discontinued operations amounted to
$0 for the quarter ended March 31, 1997, and $285,000 for the corresponding
period in 1996.
The Company's utilization of its net operating loss carryforwards offset its
Federal tax liability. The income taxes noted relate to state tax obligations.
-8-
<PAGE> 9
As a result of the foregoing, for the three months ended March 31, 1997, the
Company had net income of $955,000 compared to a net loss of $566,000 for the
corresponding quarter in 1996.
FINANCIAL CONDITION
As of March 31, 1997, the Company's cash and cash equivalents totaled
$400,000 compared to $647,000 at December 31, 1996. Undrawn funds available from
the Company's Revolving Line of Credit was approximately $1,599,000 at March 31,
1997.
Net accounts receivable declined $849,000 from $7,925,000 at December 31,
1996 to $7,076,000 at March 31, 1997, reflecting net cash collections on the
Company's IV Therapy receivables retained by the Company after the sale of the
IV Therapy operations and improved collections of nursing related receivables.
The Company believes that its existing credit facilities, together with cash
generated from operations, will be sufficient to fund the Company's operations
and debt obligations through 1997. Beyond 1997, the Company believes that it
will need to extend or replace its existing credit facilities to ensure
sufficient funding of the Company's operations.
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 home health care
services to its customers and to successfully collect for such services.
Inherent in this process are a number of risks that the Company must carefully
manage in order to be successful. Some of these risks are: dependence on
referral sources; dependence on reimbursement by third party payors including
Medicaid and Medicare; pricing pressures which the health care industry is
currently experiencing as a result of market-driven reforms; complying with the
federal and state regulations which apply to home health care agencies;
fundamental changes in the health care industry which could be brought about by
health care reform; the need to refinance or extend the Company's existing
credit facilities, including the Securitization Program, which are scheduled to
mature in January 1998; complying with the financial covenants in the Company's
revolving line of credit, subordinated credit facility and Securitization
Program; obtaining sufficient cash flow from operations to meet its debt service
and pay vendors on a timely basis; competing effectively with other home health
care providers; attracting and retaining senior management personnel and branch
level management as well as qualified health care professionals and
paraprofessionals; maintaining adequate liability insurance; and lack of
liquidity in the market for the Company's common stock and the potential
volatility of the price of the Company's common stock. The failure to manage
such risks successfully could have a material adverse effect on the Company's
business, financial condition and results of operations.
-9-
<PAGE> 10
NEW ACCOUNTING PRONOUNCEMENT
Statement of Financial Accounting Standards No. 128 ("SFAS 128") was issued in
February, 1997 and is effective for financial statements issued after December
15, 1997. The statement establishes new standards for computing and presenting
earnings per share ("EPS") and will require restatement of prior years'
information. This statement simplifies the standards for computing EPS
previously found in APB Opinion 15. It replaces the presentation of primary and
fully diluted EPS with a presentation of basic EPS and diluted EPS, requires a
dual presentation on the face of the financial statements, and requires a
reconciliation of basic EPS to diluted EPS. Had SFAS No. 128 been effective for
the three months ended March 31, 1997, EPS would have been $.10 for basic and
$.05 for diluted.
-10-
<PAGE> 11
U.S. HOMECARE CORPORATION
Part II - Other Information
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, 1997 and 1996
B. Reports on Form 8-K
1. No Reports on Form 8-K were filed during the quarter
for which this report is filed.
-11-
<PAGE> 12
EXHIBIT 1
U.S. HOMECARE CORPORATION
CALCULATION
OF EARNINGS (LOSS) PER SHARE
(In thousands, except for per common share data)
<TABLE>
<CAPTION>
Quarter ended Quarter ended
March 31, 1997 March 31, 1996
-------------- --------------
<S> <C> <C>
Computation of weighted average number of common
and equivalent shares outstanding:
Primary -
Weighted number of shares outstanding 9,625 8,557
Dilutive effect of stock options 1,506 0
Weighted average number of common and -------- --------
equivalent shares 11,131 8,557
======== ========
Income / (loss) from continuing operations $ 955 ($ 851)
Income from discontinued operations 0 285
Net income / (loss) -------- --------
$ 955 ($ 561)
======== ========
Income / (loss) from continuing operations
per common share $ 0.09 ($ 0.10)
Income from discontinued operations per
common share 0 0.03
Net income / (loss) per common share --------- ---------
$ 0.09 ($ 0.07)
======== ========
Fully diluted -
Weighted average number of shares outstanding 9,625 8,557
Dilutive effect of stock options 1,522 --
Conversion of $35.00 Preferred Stock 7,221 6,571
-------- --------
Weighted average number of common and
equivalent shares 18,368 15,128
======== ========
Net income (loss) per common share $ 0.05 *
======== ========
</TABLE>
* Fully diluted earnings per share for the quarter ended March 31, 1996 is
not computed as the effect of common stock equivalents on a net loss is
anti-dilutive.
-12-
<PAGE> 13
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 2, 1997 /s/ Jay C. Huffard
- --------------------------- ------------------------------------------
Date Interim President and Chief Executive Officer
(Principal Executive Officer)
May 2, 1997 /s/ Gerald J. Boisvert
- --------------------------- ------------------------------------------
Date Vice President Finance and Administration
and Chief Financial Officer
(Principal Financial Officer)
-13-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S AUDITED FINANCIAL STATEMENTS DATED AS OF DECEMBER 31, 1996 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> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 400
<SECURITIES> 0
<RECEIVABLES> 10,452
<ALLOWANCES> 3,376
<INVENTORY> 0
<CURRENT-ASSETS> 8,723
<PP&E> 11,166
<DEPRECIATION> 9,214
<TOTAL-ASSETS> 13,850
<CURRENT-LIABILITIES> 18,699
<BONDS> 0
0
328
<COMMON> 97
<OTHER-SE> (6,422)
<TOTAL-LIABILITY-AND-EQUITY> 13,850
<SALES> 13,754
<TOTAL-REVENUES> 13,754
<CGS> 0
<TOTAL-COSTS> 8,214
<OTHER-EXPENSES> 4,327
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 220
<INCOME-PRETAX> 993
<INCOME-TAX> 38
<INCOME-CONTINUING> 955
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 955
<EPS-PRIMARY> 0.09
<EPS-DILUTED> 0.05
</TABLE>
