<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, 1998 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 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
March 31, 1998: 12,331,731
<PAGE> 2
U.S. HOMECARE CORPORATION
INDEX
Page Number
-----------
Part I - Financial Information
Item 1 Consolidated Balance Sheets as of
March 31, 1998 and December 31, 1997 3
Consolidated Statements of Operations
for the three months ended March 31, 1998
and 1997. 4
Consolidated Statements of Cash Flows
for the three months ended March 31, 1998
and 1997. 5
Notes to Unaudited Consolidated
Financial Statements. 6 & 7
Item 2 Management's Discussion and Analysis
of Financial Condition and Results of
Operations. 8 - 9
Item 3 Market Risk Disclosure 10
Part II - Other Information
Item 6 Exhibits & Reports on Form 8-K 10
Signatures 11
<PAGE> 3
U.S. HOMECARE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
----------- ------------
<S> <C> <C>
ASSETS (unaudited) (audited)
CURRENT ASSETS
Cash and cash equivalents $ 93 $ 313
Accounts receivable, net of allowance
For doubtful accounts of $1,732 and $1,892 5,563 5,147
Other current assets 913 1,339
-------- --------
TOTAL CURRENT ASSETS 6,569 6,799
-------- --------
PROPERTY AND EQUIPMENT, net 760 841
-------- --------
OTHER ASSETS
Excess cost over net assets acquired, net
of accumulated amortization of $757 and $736 1,477 1,497
Intangible assets, net of accumulated
Amortization of $5,574 and $5,502 413 485
Other 956 756
-------- --------
TOTAL OTHER ASSETS 2,846 2,738
-------- --------
TOTAL ASSETS $ 10,175 $ 10,378
======== ========
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Current maturities of long-term debt $ 7,614 $
Accounts payable 2,037 2,528
Accrued expenses 2,928 2,961
Accrued payroll and related costs 1,802 1,655
-------- --------
TOTAL CURRENT LIABILITIES 14,381 7,144
-------- --------
OTHER LIABILITIES
Long-term debt 7,577
Other long-term liabilities 1,896 2,128
-------- --------
TOTAL OTHER LIABILITIES 1,896 9,705
-------- --------
TOTAL LIABILITIES 16,277 16,849
-------- --------
STOCKHOLDERS' DEFICIT
Common stock, $0.01 par value, 40,000,000 shares authorized, 123 121
12,331,731 and 12,130,353 shares outstanding
Preferred stock, $1 par value, 5,000,000 authorized, 328,569 328 328
shares outstanding
Additional paid-in capital 47,094 47,077
Accumulated deficit (53,647) (53,997)
-------- --------
TOTAL STOCKHOLDERS' DEFICIT (6,102) (6,471)
-------- --------
TOTAL LIABILITIES & STOCKHOLDERS' DEFICIT $ 10,175 $ 10,378
======== ========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
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<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,
1998 1997
-------- --------
(unaudited)
<S> <C> <C>
Net revenues $ 12,962 $ 13,754
Cost of revenues, primarily
payroll and related costs 8,193 8,214
-------- --------
Gross profit 4,769 5,540
Operating expenses:
Selling, general and administrative expenses 3,723 3,945
Amortization and depreciation 438 382
-------- --------
Total operating expenses 4,161 4,327
Income before interest expense and income taxes 608 1,213
Interest expense 220 220
-------- --------
Income before income taxes 388 993
Provision for state income taxes 38 38
-------- --------
Net income 350 955
Dividends to preferred shareholders, paid in common stock (172) (172)
-------- --------
Net income applicable to common shareholders $ 178 $ 783
shareholders ======== ========
Basic income per share:
Net Income per share, basic $ 0.01 $ 0.08
======== ========
Diluted income per share:
Net Income per share, diluted $ 0.01 $ 0.05
======== ========
Weighted average common shares outstanding:
Basic 12,399 9,625
Dilutive effect of stock options -- 1,522
Conversion of preferred shares -- 7,221
-------- --------
Diluted 12,399 18,368
======== ========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
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<PAGE> 5
U.S. HOMECARE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Three months ended March 31,
----------------------------
1998 1997
---------- ------------
(unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 350 $ 955
Adjustments to reconcile net income to
net cash provided by (used in) operating activities:
Depreciation and amortization 438 382
Provision for bad debts 85 176
Non-cash charges 19 103
Changes in operating assets and liabilities:
Decrease/(increase) in accounts receivable (501) 673
Decrease / (increase) in other current assets 426 (22)
Decrease / (increase) in other assets (393) (250)
(Decrease)/increase in accrued payroll and related costs 147 (121)
Decrease in accounts payable and accrued expenses (524) (1,095)
Decrease in other liabilities (232) (255)
----- -------
Net cash provided by (used in) operating activities (185) 546
----- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (72) (34)
----- -------
Net cash used in investing activities (72) (34)
----- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in bank financing 37 (759)
----- -------
Net cash provided by (used in) financing activities 37 (759)
----- -------
Net decrease in cash and cash equivalents (220) (247)
Cash and cash equivalents, beginning of period 313 647
----- -------
Cash and cash equivalents, end of period $ 93 $ 400
===== =======
Cash paid during the period for:
Income taxes $ 173 $--
===== =======
Interest $ 220 $ 176
===== =======
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
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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, 1998 and the results of its operations and its cash flows for the
three months ended March 31, 1998 and 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, 1997.
The results of operations for the three month period ended March 31, 1998
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 - Stockholders' Deficit
During the quarters ended March 31, 1998 and 1997, the Company issued
238,375 and 180,922 shares, respectively of Common Stock as dividends on
the Company's $35.00 6% Convertible Preferred Stock (the "Preferred
Stock"), zero and 29,010 shares, respectively of Common Stock in lieu of
cash payments for several obligations, and 51,141 and 20,456 shares,
respectively 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' Deficit by $103,000 and $19,497, respectively.
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.
Note 4 - 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
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accrued expenses at March 31, 1998 and at December 31, 1997 was
approximately $0.4 and $0.6 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 5 - 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 $9.3 million. The net proceeds from the sale of
accounts receivable through the Securitization Program at March 31, 1998
and December 31, 1997 were $6.7 million and $6.9 million, respectively.
The Company's Revolving Line of Credit ("RLOC") and the Company's
subordinated credit facility expire during January, 1999. Because these
facilities expire in less than a year, all such outstanding debt has been
classified as current liabilities at March 31, 1998. The Securitization
Program also expires during January, 1999.
Note 6 - Presentation of Prior Year Information
The presentation of certain prior year information has been reclassified
to conform with the current year presentation.
Note 7 - Net Income Per Share
Net Income Per Share - As of December 31, 1997, the Company adopted
Statement of Financial Accounting Standards No. 128 "Earnings Per Share"
("SFAS 128"). As a result, net income per share for the period ended
March 31, 1997 has been restated to conform with the provisions of SFAS
128. Basic net income per share is based on weighted average number of
common shares outstanding. Convertible preferred stock, warrants, and
stock options outstanding are used in the calculation of diluted earnings
per share. For the quarter ended March 31, 1998, conversion of preferred
stock has not been included in the computation of diluted earnings per
share because to do so would be anti-dilutive.
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<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.
RESULTS OF OPERATIONS
Three Months Ended March 31, 1998
Compared With Three Months Ended March 31, 1997
Net revenues for the three month period ended March 31, 1998 were
$12,962,000 compared to $13,754,000 for the first quarter of 1997, principally
due to continued downward pressures on rates and utilization by government
payors.
Cost of revenues as a percentage of net revenues was 63.2% for the first
quarter of 1998, compared with 59.7% in the first quarter of 1997. The increase
in cost of revenues is primarily due to greater utilization of salaried nursing
staff as compared to per diem staffing. The resulting gross profits were
$4,769,000 and $5,540,000, or 36.8% and 40.3%, for the quarters ended March 31,
1998 and 1997, respectively.
Selling, general and administrative expenses were $3,723,000 in the first
quarter of 1998 as compared to $3,945,000 in the first quarter of 1997. 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 1998 and 1997.
Amortization and depreciation were $438,000 for the first quarter of 1998
as compared to $382,000 for the first quarter of 1997, primarily due to
amortization of deferred costs of refinancing the Company's credit facilities.
The Company's utilization of its net operating loss carryforwards offset
its Federal tax liability. The income tax provision relates to state
obligations.
As a result of the foregoing, for the three months ended March 31, 1998,
the Company had net income of $350,000 compared to a net income of $955,000 for
the corresponding quarter in 1997.
-8-
<PAGE> 9
FINANCIAL CONDITION
As of March 31, 1998, the Company's cash and cash equivalents totaled
$93,000 compared to $313,000 at December 31, 1997. Undrawn funds available from
the Company's Revolving Line of Credit was approximately $873,000 at March 31,
1998.
Net accounts receivable increased $416,000 from $5,147,000 at December 31,
1997 to $5,563,000 at March 31, 1998.
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 1998. Beyond 1998, 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 1999; 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.
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<PAGE> 10
U.S. HOMECARE CORPORATION
Item 3. Market Risk Disclosures
None.
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. None
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> 11
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 13, 1998
- ------------------- ----------------------------------------------------
Date President and Chief Executive Officer
(Principal Executive Officer)
May 13, 1998
- ------------------- ----------------------------------------------------
Date Vice President Finance and Administration and Chief
Financial Officer
(Principal Financial Officer)
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
company's unaudited financial statements dated as of March 31, 1998 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-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 93
<SECURITIES> 0
<RECEIVABLES> 7,295
<ALLOWANCES> 1,732
<INVENTORY> 0
<CURRENT-ASSETS> 6,569
<PP&E> 7,687
<DEPRECIATION> 6,927
<TOTAL-ASSETS> 10,175
<CURRENT-LIABILITIES> 14,381
<BONDS> 0
0
328
<COMMON> 123
<OTHER-SE> (6,653)
<TOTAL-LIABILITY-AND-EQUITY> 10,175
<SALES> 12,962
<TOTAL-REVENUES> 12,962
<CGS> 0
<TOTAL-COSTS> 6,193
<OTHER-EXPENSES> 4,161
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 220
<INCOME-PRETAX> 388
<INCOME-TAX> 38
<INCOME-CONTINUING> 350
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 350
<EPS-PRIMARY> 0.01
<EPS-DILUTED> 0.01
</TABLE>
