<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, 1999 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, Connecticut 06106
(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, 1999: 19,455,325
<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, 1999 and December 31, 1998 3
Consolidated Statements of Operations
for the three months ended March 31, 1999
and 1998. 4
Consolidated Statements of Cash Flows
for the three months ended March 31, 1999 and 1998. 5
Notes to Unaudited Consolidated
Financial Statements. 6 - 8
Item 2 Management's Discussion and Analysis
of Financial Condition and Results of Operations. 9 - 11
Item 3 Market Risk Disclosure 12
Part II - Other Information
Item 1 Legal Proceedings 12
Item 2 Changes in Securities and Use of Proceeds 12
Item 3 Defaults Upon Senior Securities 12
Item 4 Other Information 12 - 13
Item 5 Exhibits & Reports on Form 8-K 13
Signatures 14
</TABLE>
<PAGE> 3
U.S. HOMECARE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
-------- --------
ASSETS (unaudited) (audited)
CURRENT ASSETS
<S> <C> <C>
Cash and cash equivalents $ 66 $ 267
Accounts receivable, net of allowance
For doubtful accounts of $562 and $546 6,496 5,525
Other current assets 1,120 673
-------- --------
TOTAL CURRENT ASSETS 7,682 6,465
-------- --------
PROPERTY AND EQUIPMENT, net 606 629
-------- --------
OTHER ASSETS
Excess cost over net assets acquired, net
of accumulated amortization of $840 and $820 1,394 1,414
Intangible assets, net of accumulated
Amortization of $5,852 and $5,784 136 203
Other 489 661
-------- --------
TOTAL OTHER ASSETS 2,019 2,278
-------- --------
TOTAL ASSETS $ 10,307 $ 9,372
======== ========
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Current maturities of long-term debt $ 9,340 $ 8,277
Accounts payable and unpresented checks 2,736 2,850
Accrued expenses 6,552 6,248
Accrued payroll and related costs 1,331 991
-------- --------
TOTAL CURRENT LIABILITIES 19,959 18,366
-------- --------
OTHER LIABILITIES
Long-term debt -- --
Other long-term liabilities 1,127 1,477
-------- --------
TOTAL OTHER LIABILITIES 1,127 1,477
-------- --------
TOTAL LIABILITIES 21,086 19,843
======== ========
STOCKHOLDERS' DEFICIT
Common stock, $0.01 par value, 40,000,000 shares authorized, 193 137
19,455,325 and 13,752,937 shares outstanding
Preferred stock, $1 par value, 5,000,000 authorized, 328,569 328 328
Shares outstanding
Additional paid-in capital 47,097 47,153
Accumulated deficit (58,397) (58,089)
-------- --------
TOTAL STOCKHOLDERS' DEFICIT (10,779) (10,471)
-------- --------
TOTAL LIABILITIES & STOCKHOLDERS' DEFICIT $ 10,307 $ 9,372
======== ========
</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,
1999 1998
-------- --------
(unaudited)
<S> <C> <C>
Net revenues $ 11,684 $ 12,962
Cost of revenues, primarily
payroll and related costs 7,641 8,193
-------- --------
Gross profit 4,043 4,769
Operating expenses:
Selling, general and administrative expenses 3,538 3,536
Amortization and depreciation 174 248
-------- --------
Total operating expenses 3,712 3,784
(Loss) income before interest expense and income taxes 331 985
Interest and other financing expense 601 597
-------- --------
(Loss) income before income taxes (270) 388
Provision for state income taxes 38 38
-------- --------
Net (loss) income (308) 350
Dividends on preferred stock, paid in common stock (172) (172)
-------- --------
Net (loss) income applicable to common shareholders $ (480) $ 178
======== ========
Net (loss) income per share:
Basic $ (0.03) $ 0.01
======== ========
Diluted $ (0.03) $ 0.01
======== ========
Weighted average common shares outstanding:
Basic 17,554 12,399
Dilutive effect of stock options -- --
Conversion of preferred shares -- --
-------- --------
Diluted 17,554 12,399
======== ========
</TABLE>
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,
----------------------------
1999 1998
------- -------
(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net (loss) income $ (308) $ 350
Adjustments to reconcile net income to
net cash provided by (used in) operating activities:
Depreciation and amortization 174 248
Provision for bad debts 149 85
Non-cash charges -- 19
Changes in operating assets and liabilities:
Decrease/(increase) in accounts receivable (1,120) (501)
Decrease/(increase) in other current assets (447) 616
Decrease/(increase) in other assets 163 (393)
(Decrease)/increase in accrued payroll and related costs 339 147
(Decrease)/increase in accounts payable and accrued expenses 191 (524)
(Decrease)/increase in other liabilities (350) (232)
------- -------
Net cash provided by (used in) operating activities (1,209) (185)
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (55) (72)
------- -------
Net cash (used in) provided by investing activities (55) (72)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in bank financing 1,063 37
------- -------
Net cash provided by (used in) financing activities 1,063 37
------- -------
Net decrease in cash and cash equivalents (201) (220)
Cash and cash equivalents, beginning of period 267 313
------- -------
Cash and cash equivalents, end of period $ 66 $ 93
======= =======
CASH PAID DURING THE PERIOD FOR:
Income taxes $ 88 $ 173
======= =======
Interest $ 437 $ 407
======= =======
</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, 1999 and the results of its operations and its cash flows for the
three months ended March 31, 1999 and 1998. 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, 1998.
The results of operations for the three month period ended March 31, 1999
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 and decreases to certain rates.
The Company records such amounts as changes in revenue when it is
notified by the payors or when the amounts are 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 quarter ended March 31, 1999 and 1998, the Company issued
5,702,388 and 238,375 shares, respectively, of Common Stock as dividends
on the Company's $35.00, 6% Convertible Preferred Stock (the "Preferred
Stock"), and no 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 as a result of the Directors having waived
these fees for 1999.
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<PAGE> 7
Note 4 - Commitments and Contingencies
Medicare revenues are based in part on cost reimbursement principles and
per beneficiary limits as specified by the Interim Payment System ("IPS")
and are subject to audit and retroactive adjustment by the respective
third-party fiscal intermediaries. Included in accounts payable at March
31, 1999 and at December 31, 1998 was approximately $ 2.0 and $2.1
million, respectively, which are estimates of what is to be paid upon
finalization of certain cost reports. In the opinion of management,
additional 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, in part, 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 as of March 31, 1999. The net
proceeds from the sale of accounts receivable through the Securitization
Program at March 31, 1999 and December 31, 1998 were $6.7 million. The
Securitization Program expired during January 1999 and has been renewed
monthly since that time.
The Company's Revolving Line of Credit ("RLOC") and the Company's
subordinated credit facility also expired during January 1999 and has been
renewed monthly since that time. Because these facilities expire in less
than a year, all such outstanding debt has been classified as current
liabilities at March 31, 1999.
Summary of the proforma receivables and debt levels including securitized
financing:
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
(in thousands) (in thousands)
<S> <C> <C>
Total Accounts Receivable $ 13,758 $ 12,771
Provision for Bad Debt (562) (546)
-------- --------
Net Accounts Receivable $ 13,196 $ 12,225
Accounts Receivables Sold to Securitization (6,700) (6,700)
-------- --------
Accounts Receivables, on the Balance Sheet $ 6,496 $ 5,525
======== ========
Total Bank Debt, on the Balance Sheet $ 9,340 $ 8,277
Securitization Advances 6,700 6,700
-------- --------
Total Bank Financing $ 16,040 $ 14,977
======== ========
</TABLE>
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<PAGE> 8
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").
For the quarters ended March 31, 1999 and 1998, conversion of preferred
stock has not been considered in the computation of diluted earnings per
share because to do so would be anti-dilutive.
-8-
<PAGE> 9
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, 1999
Compared With Three Months Ended March 31, 1998
Net revenues reported for the three month period ended March 31, 1999
were $11,684,000 compared to $12,962,000 for the first quarter of 1998. The
decline is principally the result of continued downward pressures on rates and
utilization by government payors.
Cost of revenues as a percentage of net revenues was 65.4% for the
first quarter of 1999, compared with 63.2% in the first quarter of 1998. The
increase in cost of revenues is due primarily to above described pressures on
rates and utilization which resulted in a shift in business mix with more
revenues derived from lower margin contracts and less from traditionally more
profitable governmental payor sources. The resulting gross profits were
$4,043,000 and $4,769,000 or 34.6% and 36.8%, for the quarters ended March 31,
1999 and 1998, respectively.
Selling, general and administrative expenses were $3,538,000 in the
first quarter of 1999 as compared to $3,536,000 in the first quarter of 1998.
Interest and other financing expenses were $601,000 for the first
quarter of 1999 compared to $597,000 in the first quarter of 1998. Though total
debt throughout the first quarter of 1998 was less than the outstanding balances
during the first quarter of 1999, the interest and other financing costs were
similar as a result of extension and other fees charged by the bank group in
conjunction with the one year extension of the bank debt at the time.
Amortization and depreciation were $174,000 for the first quarter of 1999 as
compared to $248,000 for the first quarter of 1998 which included amortization
for deferred financing costs incurred in prior periods.
The Company's net operating losses eliminated any Federal income tax
liability. The income tax provision relates to state tax obligations.
As a result of the foregoing, for the three months ended March 31,
1999, the Company had a net loss of ($308,000) compared to a net income of
$350,000 for the corresponding quarter in 1998.
-9-
<PAGE> 10
FINANCIAL CONDITION
As of March 31, 1999, the Company's cash and cash equivalents totaled
$66,000 compared to $267,000 at December 31, 1998. There were no funds available
from the Company's Revolving Line of Credit at March 31, 1999.
The Company is not in compliance with the financial covenants of its
revolving credit agreement. Noncompliance with financial covenants gives the
banks the right to declare the amounts outstanding under the Company's credit
facilities immediately due and payable. To date, the banks have not called the
loans and are working with U.S. HomeCare on a month to month basis in providing
funding for the Company's cash needs.
The credit facilities, within the existing funding parameter, together
with cash generated from operations will not be sufficient to fund the Company's
operations through 1999 even if the credit facilities continue to be renewed.
U.S. HomeCare will need to raise equity capital and/or increase and extend or
replace its existing credit facilities to ensure sufficient funding of its
operations. U.S. HomeCare is currently discussing with its current creditors and
others such expanded and extended financing. There can be no assurance that U.S.
HomeCare will obtain such expanded and extended financing. Failure to obtain
such financing would have a material adverse effect on U.S. HomeCare's business,
financial condition and results of operations.
FACTORS AFFECTING THE COMPANY'S BUSINESS
U.S. HomeCare's future business, financial condition and results of
operations are dependent on the Company's ability to successfully raise equity
capital and/or increase and extend or replace its existing credit facilities to
ensure sufficient funding of its operations.
Additionally, U.S. HomeCare's future business and results of operations
are subject to the following risks: 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; 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; and maintaining adequate
liability insurance. The failure to manage such risks successfully could have a
material adverse effect on the Company's business, financial condition and
results of operations.
-10-
<PAGE> 11
YEAR 2000 COMPLIANCE
The inability of computers, software and other equipment utilizing
microprocessors to recognize and properly process data fields containing a
2-digit year is commonly referred to as the Year 2000 Compliance issue. As the
year 2000 approaches, such systems may be unable to accurately process certain
date-based information.
U.S. HomeCare has identified all significant applications that will
require modification to ensure Year 2000 Compliance. Internal and external
resources are being used to make the required modifications and test Year 2000
Compliance. U.S. HomeCare plans on completing the testing process of all
significant applications by July 31, 1999.
U.S. HomeCare has also initiated discussions with its significant
suppliers, large customers and financial institutions to determine that those
parties have appropriate plans to remediate Year 2000 issues where their systems
interface with the U.S. HomeCare's system or otherwise impact its operations.
U.S. HomeCare is assessing the extent to which its operations are vulnerable
should those organizations fail to properly remediate their computer systems,
and as of the date hereof is not able to quantify the impact on the Company, if
any, of failures of those organizations to remediate Year 2000 issues properly.
The total cost to U.S. HomeCare of those Year 2000 Compliance
activities has not been and is not anticipated to be material to its financial
position or results of operations in any given year. These costs and the date on
which U.S. HomeCare plans to complete the Year 2000 modification and testing
processes are based on management's best estimates, which were derived utilizing
numerous assumptions of future events including the continued availability of
certain resources, third party modifications plans and other factors. However,
there can be no guarantee that these estimates will be achieved and actual
results could differ from those plans.
-11-
<PAGE> 12
U.S. HOMECARE CORPORATION
Item 3. Market Risk Disclosures
None.
Part II - Other Information
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Other Information
On April 27, 1999, the Company filed a Proxy Statement with
the Securities and Exchange Commission giving notice of the
Company's upcoming Annual Meeting and its intention to seek
shareholders' approval to effect a 1-for-1,500 reverse stock split
of the Company's Common Stock. The reverse stock split will reduce
the number of shareholders of record of the Company below 300,
which will enable the Company to deregister its Common Stock under
the Securities Exchange Act of 1934.
As disclosed in the April 27th proxy statement, the deadline
for submitting proposals to be considered for inclusion in the
Company's Proxy Statement for the 2000 Annual Meeting is January
7, 2000. In addition, pursuant to the Company's By-Laws,
shareholder proposals intended for presentation at the 2000 Annual
Meeting that are not intended to be considered for inclusion in
the Company's Proxy Statement for the 2000 Annual Meeting must be
received by the Secretary of the Company no earlier than March 24,
2000 and no later than April 17, 2000.
-12-
<PAGE> 13
Pursuant to recent amendments to Rule 14a-4(c)(1) under the
Securities Exchange Act of 1934, as amended, the Company will have
discretionary voting authority if a proponent does not notify the
Company by March 27, 2000 of their intent to present a proposal
from the floor at the 2000 Annual Meeting of Shareholders or of
their intent to commence a proxy solicitation for the 2000 annual
Meeting of Shareholders.
Item 5. Exhibits and Reports on Form 8-K
A. Exhibits - The following exhibits are filed
herewith or incorporated herein.
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.
-13-
<PAGE> 14
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
/s/ Sophia V. Bilinsky
- --------------------------- ------------------------------------------
Date President and Chief Executive Officer
(Principal Executive Officer)
/s/ Trevor W. Gordon
- --------------------------- ------------------------------------------
Date (Principal Financial Officer)
-14-
<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, 1999 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 66
<SECURITIES> 0
<RECEIVABLES> 6,496
<ALLOWANCES> 562
<INVENTORY> 0
<CURRENT-ASSETS> 7,682
<PP&E> 606
<DEPRECIATION> 7,305
<TOTAL-ASSETS> 10,307
<CURRENT-LIABILITIES> 19,959
<BONDS> 0
0
328
<COMMON> 193
<OTHER-SE> (10,779)
<TOTAL-LIABILITY-AND-EQUITY> 10,307
<SALES> 11,684
<TOTAL-REVENUES> 11,684
<CGS> 0
<TOTAL-COSTS> 7,641
<OTHER-EXPENSES> 3,712
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 601
<INCOME-PRETAX> (270)
<INCOME-TAX> 38
<INCOME-CONTINUING> (308)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (308)
<EPS-PRIMARY> (0.03)
<EPS-DILUTED> (0.03)
</TABLE>
