<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 Third Quarter Ended September 30, 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)
Two Hartford Square West, Suite 300, Hartford, CT 06106
(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
September 30, 1997: 10,398,243
<PAGE> 2
U.S. HOMECARE CORPORATION
INDEX
Page Number
Part I - Financial Information
Item 1 Consolidated Balance Sheets as of
September 30, 1997 and December 31, 1996 3
Consolidated Statements of Operations
for the three months ended September 30, 1997
and 1996. 4
Consolidated Statements of Operations
for the nine months ended September 30, 1997
and 1996. 5
Consolidated Statements of Cash Flows
for the nine months ended September 30, 1997
and 1996. 6
Notes to Unaudited Consolidated
Financial Statements. 7 -10
Item 2 Management's Discussion and Analysis
of Financial Condition and Results of
Operations. 11 - 14
Part II - Other Information
Item 6 Exhibits & Reports on Form 8-K 15 - 17
Signatures 18
<PAGE> 3
U.S. HOMECARE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
------------------------------
ASSETS (unaudited) (audited)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 13 $ 647
Accounts receivable, net of allowance
for doubtful accounts of $2,616 and $3,843 7,083 7,925
Other current assets 1,283
1,225
-------- --------
TOTAL CURRENT ASSETS 8,379 9,797
-------- --------
PROPERTY AND EQUIPMENT, net 924 2,578
-------- --------
OTHER ASSETS
Excess cost over net assets acquired, net of
accumulated amortization of $715 and $653 1,518 1,581
Intangible assets, net of accumulated amortization of
$5,429 and $5,165 558 822
Other 984 767
-------- --------
TOTAL OTHER ASSETS 3,060 3,170
-------- --------
$ 12,363 $ 15,545
TOTAL ASSETS ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Current maturities of long-term debt $ 8,153 $ 346
Accounts payable 2,777 3,175
Accrued expenses 2,606 4,509
Reserve for restructuring and other non-recurring charges 1,781 3,670
Accrued payroll and related costs 1,449 1,608
-------- --------
TOTAL CURRENT LIABILITIES 16,766 13,308
-------- --------
OTHER LIABILITIES
Long-term debt 0 7,983
Other long term liabilities 978 1,309
-------- --------
TOTAL OTHER LIABILITIES 978 9,292
-------- --------
TOTAL LIABILITIES 17,743 22,600
-------- --------
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock, $0.01 par value, 40,000,000 shares
authorized, 10,398,243 and 9,419,973 shares
outstanding 104 94
Preferred stock, $1 par value, 5,000,000 authorized,
328,569 shares outstanding 328 328
Additional paid-in capital 45,573 44,923
Accumulated deficit (51,385) (52,400)
-------- --------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) (5,380) (7,055)
-------- --------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 12,363 $ 15,545
(DEFICIT) ======== ========
</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 September 30,
1997 1996
-------- --------
(unaudited)
<S> <C> <C>
Net revenues $ 12,195 $ 13,094
Cost of revenues, primarily payroll and related costs 7,879 10,753
-------- --------
Gross Profit 4,316 2,341
Operating Expenses:
Selling, general and administrative expenses 3,712 5,645
Amortization and depreciation 360 472
Merger Expenses 588
Restructuring and Non-recurring Charges 309 4,524
-------- --------
Total Operating Expenses 4,969 10,641
Income (loss) from continuing operations before interest
expense and income taxes (653) (8,300)
Interest Expense 210 292
-------- --------
Income (loss) from continuing operations before income
taxes (863) (8,592)
Provision for State Income Taxes 37 29
-------- --------
Income (loss) from continuing operations (900) (8,621)
Discontinued Operations:
Income (loss) from discontinued operations 0 (1,573)
Loss on sale of IV therapy business 0 (12,879)
-------- --------
Net income (loss) $ (900) $(23,073)
======== ========
Primary income (loss) per share:
Income (loss) from continuing operations $ (0.08) $ (0.95)
Income (loss) from discontinued operations:
Income (loss) from operations -- (0.17)
Loss on disposal of IV therapy business -- (1.42)
-------- --------
Net Income (loss) per share, primary $ (0.08) $ (2.54)
======== ========
Weighted average common shares outstanding
Primary 11,853 9,066
======== ========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
-4-
<PAGE> 5
U.S. HOMECARE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
1997 1996
-------- --------
(unaudited)
<S> <C> <C>
Net revenues $ 39,924 $ 40,902
Cost of revenues, primarily payroll and related costs 24,593 28,869
-------- --------
Gross Profit 15,331 12,033
Operating Expenses:
Selling, general and administrative expenses 11,539 14,976
Amortization and depreciation 1,089 1,498
Merger Expenses 588
Restructuring and Non-recurring Charges 309 4,524
-------- --------
Total Operating Expenses 13,525 20,998
Income (loss) from continuing operations before interest expense
and income taxes 1,806 (8,965)
Interest Expense 678 854
-------- --------
Income (Loss) from continuing operations before income taxes 1,128 (9,819)
Provision for State Income Taxes 113 86
-------- --------
Income (loss) from continuing operations 1,016 (9,905)
Discontinued Operations:
Income (loss) from discontinued operations 0 (1,464)
Loss on sale of IV therapy business 0 (12,879)
-------- --------
Net income (loss) $ 1,016 $(22,784)
======== ========
Primary income (loss) per share:
Income (Loss) from continuing operations $ 0.09 $ (1.12)
Income (loss) from discontinued operations:
Income (loss) from operations -- (0.17)
Loss on disposal of IV therapy business -- (1.47)
-------- --------
Net Income (Loss ) per share, primary $ 0.09 $ (2.76)
======== ========
Fully diluted income (loss) per share:*
Income (Loss) from continuing operations $ 0.05
Income (loss) from discontinued operations --
--------
Net Income (Loss ) per share, fully diluted $ 0.05
========
Weighted average common shares outstanding:
Primary 11,563 8,773
======== ========
Fully Diluted* 18,912
========
</TABLE>
* Fully diluted earnings per share for the nine months ended September 30, 1996
is not computed as the effect of common stock equivalents on a net loss is
anti-dilutive.
See accompanying notes to unaudited consolidated financial statements.
-5-
<PAGE> 6
U.S. HOMECARE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Nine months ended September 30,
--------------------------------------
1997 1996
--------- ---------
(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net income (loss) $ 1,016 $(24,248)
Adjustments to reconcile net income (loss) to net cash provided by (used in)
operating activities:
Loss on sale of IV therapy business 12,879
Depreciation and amortization 1,089 2,457
Provision for bad debts 351 1,016
Non-cash charges 408 133
Changes in operating assets and liabilities:
Decrease in accounts receivable 491 2,326
(Increase) Decrease in other current assets (58) 480
(Increase) in receivable from IV sale (2,000)
Decrease / (increase) in other assets (527) 274
(Decrease) increase in accrued payroll and related costs 29 172
Increase (Decrease) in accounts payable and accrued expenses (2,301) 3,532
Increase (Decrease) in reserve for restructuring and other non-recurring
charges (684) 3,837
Decrease in other liabilities (331) --
-------- --------
Net cash (used in) provided by operating activities (517) 858
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from the sale of property and equipment 192
(Purchase) disposal of property and equipment, net (132) --
-------- --------
Net cash provided by investing activities 60 --
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on long-term debt (176) (723)
-------- --------
Net cash used in financing activities (176) (723)
-------- --------
Net (decrease) increase in cash and cash equivalents (633) 135
Cash and cash equivalents, beginning of period 647 225
-------- --------
Cash and cash equivalents, end of period $ 13 $ 360
======== ========
Cash paid during the period for:
Income taxes $ 113 $ --
======== ========
Interest $ 678 $ 854
======== ========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
-6-
<PAGE> 7
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
September 30, 1997 and the results of its operations and its cash flows
for the three months and nine months ended September 30, 1997 and 1996,
and its cash flows for the nine months ended September 30, 1997. 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 and nine month periods ended
September 30, 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 changes to certain rates. The Company
records such changes 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
On October 31, 1996, the Company completed the sale of certain assets
(not including accounts receivable) of its IV therapy business for
approximately $2,000,000 in cash. The sale had an effective date of
October 1, 1996. The accompanying consolidated financial statements of
operations for the three and nine month periods ended September 30, 1997
and 1996 present the results of operations of the IV therapy business as
a discontinued operation. As a result of the sale, the Company recorded a
loss on disposal of the IV therapy business of $12,879,000 in the quarter
ended September 30, 1996. Such loss on sale included (1) a write-off of
$11,577,000 of goodwill and other intangible assets, (2) additional
provisions for losses on accounts receivable of $1,678,000, and (3)
$1,624,000 related to a charge for severance and other anticipated costs
during the phase out period net of (4) the net cash proceeds of the sale
of approximately $2,000,000.
The loss from operations of the IV therapy business was $1,573,000 for the three
months ended September 30, 1996, and $1,464,000 for the nine month periods ended
September 30, 1996. As a result of net operating loss tax credit carryforwards,
no income tax benefits have been recognized for the discontinued operations. The
balance sheets at September 30, 1997 and December 31, 1996 include approximately
$150,000 and $2,000,000, respectively, of net accounts receivable
-7-
<PAGE> 8
related to the assets of the IV therapy business which was sold.
Note 4 - Stockholders' Equity
During the quarter ended September 30, 1997, the Company issued 147,916
shares of Common Stock as dividends on the Company's $35.00 6%
Convertible Preferred Stock (the "Preferred Stock"). Additionally, the
Company issued 222,500 shares of Common Stock in connection with
extensions of the contracts with certain management consultants, and
14,580 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 these issuances of shares was to increase
Stockholders' Equity by $281,214.
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.
Pursuant to certain contractual obligations, the Company filed a
registration statement in April, 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.
Additionally, the Company filed a registration statement covering 2.5
million shares under the Company's 1995 Stock Option/Stock Issuance Plan.
Both registration statements became effective during July, 1997.
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
September 30, 1997 and at December 31, 1996 was approximately $0.8 and
$1.0 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 - Announced Merger of the Company
On September 26, 1997, the Company entered into an Agreement and Plan of
Merger (Merger) with Home Health Corporation of America, Inc. (HHCA).
Under the terms of the agreement the Company's common and preferred
shareholders will receive an aggregate between 2.6 and 2.8 million shares
of HHCA's common stock. The number of shares to be received is based upon
the market price of HHCA's common stock prior to the shareholders meeting
called to approve the merger. During the third quarter 1997 the Company
incurred and expensed $588,000 of costs related to legal, accounting,
investment banking and other miscellaneous merger costs. The companies
filed preliminary proxy material with the Securities and Exchange
Commission on November 7, 1997 in anticipation of a shareholders meeting
which have not yet been scheduled. The closing of the merger, which is
subject to SEC review and shareholder approval, is expected to occur
early next year.
Note 7 - Debt and Accounts Receivable Securitization
-8-
<PAGE> 9
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 September 30,
1997 and December 31, 1996 were $6.2 million and $7.5 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 September 30, 1997. The
Securitization Program also expires during January, 1998.
Note 8 - Presentation of Prior Year Information
The presentation of certain prior year information has been reclassified
to conform with the current year presentation.
Note 9 - Restructuring Charges
During the third quarter of 1996, the Company's Board of Directors made
decisions to restructure the operations of the Company and restore its
focus on core home nursing operations. These decisions included the sale
of the Company's IV therapy business discussed in Note 3. Additional
actions included the retention of two individual turnaround specialists,
implementation of plans to reorganize its home nursing operations in a
more cost effective manner, a reduction in both corporate management and
non-management expenses and consolidation of certain offices.
As a result of these decisions, the Company recorded a restructuring
charge of $4,524,000 at September 30, 1996 which was comprised of:
severance of $1,000,000, turnaround specialists $1,898,000, and other
reorganization costs of $1,626,000 (including asset write-offs and lease
costs). The reserve for compensation for the turnaround specialists
includes a monthly cash retainer aggregating $428,000 through September
1997 and performance based equity incentives valued at approximately
$1,470,000.
The Company granted options to purchase an aggregate of 1,730,000 shares
of common stock as performance based equity incentives under its Stock
Issuance Program to the turnaround specialists for $.15 per share. The
turnaround consultants exercised their options on October 6, 1997,
accordingly, during the fourth quarter of 1997, $1,470,000 included in
the reserve for restructuring and non-recurring charges will be credited
to equity. The remaining reserve
-9-
<PAGE> 10
balance of $311,000 relates primarily to remaining severance and
abandoned lease obligations that will be paid through 1998.
Note 10 - New Accounting Pronouncements
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 September 30, 1997, EPS would have been $ .09 for basic and
$ .09 for diluted. Had SFAS No. 128 been effective for the nine months
ended September 30, 1997, EPS would have been $ .10 for basic and $ .05
for diluted.
In June, 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income", which requires that changes in comprehensive income be shown in
a financial statement that is displayed with the same prominence as other
financial statements. This statement is effective for periods beginning
after December 15, 1997. Management is currently evaluating the effects
of this change on the Company's financial statements.
In June, 1997, the FASB issued SFAS No. 131, "Disclosures About Segments
of an Enterprise and Related Information", which changes the way public
companies report information about segments. This statement is effective
for financial statements for periods beginning after December 15, 1997.
Management is currently evaluating the effects of this change on the
Company's financial statements.
-10-
<PAGE> 11
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 September 30, 1997
Compared With Three Months Ended September 30, 1996
Net revenues for the three month period ended September 30, 1997 were
$12,195,000 compared to $13,094,000 for the same quarter in 1996.
Cost of revenues as a percentage of net revenues was 64.6% for the
third quarter of 1997, compared with 82.1% in the third 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 $4,316,000 and $2,341,000, or 35.4% and
17.9%, for the quarters ended September 30, 1997 and 1996, respectively.
Selling, general and administrative expenses were $3,712,000 in the
third quarter of 1997 as compared to $5,645,000 in the third 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. Most of the
reduction was in Corporate administrative expenses.
Net interest expense was $210,000 for the third quarter of 1997
compared to $292,000 for third quarter 1996. The decrease resulted from
reduction in borrowed funds.
Amortization and depreciation were $360,000 for the third quarter of
1997 as compared to $472,000 for the third 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. Loss from discontinued operations amounted to
$14,452,000 for the quarter ended September 30, 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.
-11-
<PAGE> 12
In addition to the above, the Company recognized two non-recurring expenses that
had a significant effect on the quarterly results. The first of these is the
recognition of $309,000 as additional non-recurring expenses related to the
extension of turnaround consulting contracts. The other non-recurring item was
$588,000 of expenses related to the Merger, comprised of professional fees
payable to accountants, lawyers, and investment bankers.
As a result of the foregoing, for the three months ended September 30,
1997, the Company had a net loss of $900,000 compared to a net loss of
$23,073,000 for the corresponding quarter in 1996.
Nine Months Ended September 30, 1997
Compared With Nine Months Ended September 30, 1996
Net revenues for the nine month period ended September 30, 1997 were
$39,924,000 compared to $40,902,000 for the first three quarters of 1996.
Cost of revenues as a percentage of net revenues was 61.6% for the
first three quarters of 1997, compared with 70.1% in the first three quarters 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 $15,331,000 and
$12,033,000, or 38.4% and 29.4%, for the quarters ended September 30, 1997 and
1996, respectively.
Selling, general and administrative expenses were $11,539,000 in the
first three quarters of 1997 as compared to $14,976,000 in the first three
quarters 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. Most of the reduction was in Corporate administrative expenses.
Net interest expense was $678,000 for the first three quarters of 1997
compared to $854,000 for first three quarters 1996. The decrease resulted from
reduction in borrowed funds.
Amortization and depreciation were $1,089,000 for the first three
quarters of 1997 as compared to $1,498,000 for the first three quarters 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. Loss from discontinued operations amounted to
$14,343,000 for the nine months ended September 30, 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.
In addition to the above, the Company recognized two non-recurring expenses that
had a significant effect on the nine month results. The first of these is the
recognition of $309,000 as additional non-recurring expenses related to the
extension of turnaround consulting contracts. The other non-recurring item was
$588,000 of expenses related to the Merger, comprised of professional fees
payable to accountants, lawyers, and investment bankers.
-12-
<PAGE> 13
As a result of the foregoing, for the nine months ended September 30,
1997, the Company had net income of $1,016,000 compared to a net loss of
$24,248,000 for the corresponding quarter in 1996.
FINANCIAL CONDITION
As of September 30, 1997, the Company's cash and cash equivalents
totaled $13,000 compared to $647,000 at December 31, 1996. Undrawn funds
available from the Company's Revolving Line of Credit was approximately $281,000
at September 30, 1997.
Accounts receivable managed by the Company, net of allowances and
including accounts receivable that are securitized, declined $2,089,000 to
$13,294,000 at September 30, 1997 from $15,389,000 at December 31, 1996.
Receivables from core nursing operations, net of allowances and including
accounts that are securitized were $13,145,000 and $13,297,000, at September 30,
1997 and December 31, 1996, respectively. IV receivables, net of allowances and
including accounts that are securitized were $148,000 and $2,092,000 at
September 30, 1997 and December 31, 1996, respectively.
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. The Company is currently seeking
to extend its existing credit facilities to ensure sufficient funding of the
Company's operations through the time of the anticipated Merger closing. In the
event the Merger does not close, the Company will seek alternative financing.
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.
-13-
<PAGE> 14
NEW ACCOUNTING PRONOUNCEMENTS
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 September 30, 1997, EPS would have been $ .09 for basic and
$ .09 for diluted. Had SFAS No. 128 been effective for the nine months
ended September 30, 1997, EPS would have been $ .10 for basic and $ .05
for diluted.
In June, 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income", which requires that changes in comprehensive income be shown in
a financial statement that is displayed with the same prominence as other
financial statements. This statement is effective for periods beginning
after December 15, 1997. Management is currently evaluating the effects
of this change on the Company's financial statements.
In June, 1997, the FASB issued SFAS No. 131, "Disclosures About Segments
of an Enterprise and Related Information", which changes the way public
companies report information about segments. This statement is effective
for financial statements for periods beginning after December 15, 1997.
Management is currently evaluating the effects of this change on the
Company's financial statements.
-14-
<PAGE> 15
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 and nine months ended September
30, 1997 and 1996
B. Reports on Form 8-K
1. A Reports on Form 8-K was filed on October
6, 1997 related to the Agreement and Plan of
Merger with Home Health Corporation of
America, Inc.
-15-
<PAGE> 16
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
Sept. 30, 1997 Sept. 30, 1997
-------- --------
<S> <C> <C>
Computation of weighted average number of
common and equivalent shares outstanding:
Primary -
Weighted number of shares outstanding 10,219 9,066
Dilutive effect of stock options 1,634 0
-------- --------
Weighted average number of common and
equivalent shares 11,853 9,066
======== ========
Income / (loss) from continuing operations $ (900) $ (8,621)
Discontinued Operations:
Loss from operations per common share - 0 (1,573)
Loss from sale of IV business per common share 0 (12,879)
-------- --------
Net income / (loss) $ (900) $(23,073)
======== ========
Income / (loss) from continuing operations per common share $ (0.08) $ (0.95)
Discontinued Operations:
Loss from operations per common share - (0.17)
Loss from sale of IV business per common share 0 (1.42)
-------- --------
Net income / (loss) per common share $ (0.08) $ (2.54)
======== ========
</TABLE>
-16-
<PAGE> 17
U.S. HOMECARE CORPORATION
CALCULATION
OF EARNINGS (LOSS) PER SHARE
(In thousands, except for per common share data)
<TABLE>
<CAPTION>
Nine months ended Nine months ended
Sept. 30, 1997 Sept. 30, 1997
-------- --------
<S> <C> <C>
Computation of weighted average number of
common and equivalent shares outstanding:
Primary -
Weighted number of shares outstanding 9,941 8,733
Dilutive effect of stock options 1,622 0
-------- --------
Weighted average number of common and equivalent shares 11,563 8,733
======== ========
Income / (loss) from continuing operations $ 1,016 ($ 9,905)
Discontinued Operations:
Loss from operations per common share - 0 (1,464)
Loss from sale of IV business per common share 0 (12,879)
-------- --------
Net income / (loss) $ 1,016 ($24,248)
======== ========
Income / (loss) from continuing operations per common share $ 0.09 ($ 1.12)
Discontinued Operations:
Loss from operations per common share - -- (0.17)
Loss from sale of IV business per common share 0 (1.47)
-------- --------
Net income / (loss) per common share $ 0.09 ($ 2.76)
======== ========
Fully diluted - *
Weighted average number of shares outstanding 9,941
Dilutive effect of stock options 1,819
Conversion of $35.00 Preferred Stock 7,152
--------
Weighted average number of common and equivalent shares 18,912
========
Net income (loss) per common share $ 0.05
========
</TABLE>
* Fully diluted earnings per share for the nine months ended September
30, 1996 is not computed as the effect of common stock equivalents on a
net loss is anti-dilutive.
-17-
<PAGE> 18
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
November 14, 1997 /s/ Jay C. Huffard
- --------------------------- -----------------------------------
Date President and Chief Executive Officer
(Principal Executive Officer)
November 14, 1997 /s/ Clifford G. Johnson
- --------------------------- -----------------------------------
Date Vice President Finance and
Administration and Chief
Financial Officer
(Principal Financial Officer)
-18-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S UNAUDITED FINANCIAL STATEMENTS DATED AS OF SEPTEMBER 30, 1997 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> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 13
<SECURITIES> 0
<RECEIVABLES> 9,699
<ALLOWANCES> 2,616
<INVENTORY> 0
<CURRENT-ASSETS> 8,379
<PP&E> 7,573
<DEPRECIATION> 6,649
<TOTAL-ASSETS> 12,363
<CURRENT-LIABILITIES> 16,766
<BONDS> 0
0
328
<COMMON> 104
<OTHER-SE> (5,812)
<TOTAL-LIABILITY-AND-EQUITY> 12,363
<SALES> 39,924
<TOTAL-REVENUES> 39,924
<CGS> 0
<TOTAL-COSTS> 24,593
<OTHER-EXPENSES> 13,523
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 678
<INCOME-PRETAX> 1,128
<INCOME-TAX> 113
<INCOME-CONTINUING> 1,016
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,016
<EPS-PRIMARY> 0.09
<EPS-DILUTED> 0.05
</TABLE>
