USHO-from the filings....17M in debt, 1.7M interest payments
for 9 Months, Operating expenses off the wall compared to
revenues,34.8M revenues, yet a loss of473K, Severe credit problems, company was notified by a customer that its contract will not be renewed, this contract accounts for
5.6% of the revenue reported for 9 months...must secure financing to continue in business..some revenues coming in in 1999 are probably prior years medacaid revenues..
Hope this helps, and explains how 34.8M in revenues, can
be totally misleading when examining a stock....without
putting the puzzle together....
Nine Months Ended September 30, 1999
Compared With Nine Months Ended September 30, 1998
Net revenues for the nine month period ended September 30, 1999 were
$34,791,000 compared to $35,938,000 for the first nine months in 1998. The
decline is principally the result of $611,000 total revenue charge taken in the
third quarter of 1998 to offset 1996 Medicare Cost Report settlement charges.
This revenue loss was partially offset by Medicare rate increases in 1999 in all
of the Company's certified locations.
Cost of revenues as a percentage of net revenues was 64.2% for the first
nine months in 1999, compared with 67.4% in the first nine months in 1998. The
decrease in cost of revenue in 1999 is principally the result of the above
described rate increases, which resulted in a higher gross margin. The resulting
gross profits were $12,446,000 and $11,713,000 or 35.8% and 32.6%, for the nine
months ended September 30, 1999 and 1998, respectively.
Selling, general and administrative expenses were $10,589,000 for the first
nine months in 1999, as compared to $12,103,000 for the first nine months in
1998. The net decrease was due to a company wide reduction in branch staffing
and other expenses as well as from the consolidation of two branches, one in
Connecticut and one in New York City.
Interest and other financing expenses were $1,728,000 for the first nine
months in 1999 as compared to $1,246,000 for the first nine months in 1998.
Total bank debt was $17,275,000 at September 30, 1999 as compared to $15,061,000
at September 30, 1998.
The Company's net operating loss carryforwards offset any Federal tax
liability. The income tax provision relates to state tax obligations.
As a result of the foregoing, for the nine months ended September 30, 1999,
the Company had a net loss of $473,000 compared to net loss of $2,891,000 for
the corresponding periods in 1998.
FINANCIAL CONDITION
As of September 30, 1999, the Company's cash and cash equivalents totaled
$304,000 compared to $267,000 at December 31, 1998. There were no funds
available from the Company's Revolving Line of Credit at September 30, 1999.
The Company is not in compliance with the financial covenants of the RLOC
or its subordinated credit facility. Non-compliance with financial covenants
gives the lenders the right to declare the amounts outstanding under the
Company's credit facilities immediately due and payable. See Note 4 Notes to
Unaudited Consolidated Financial Statements.
-11-
The Company's current credit facilities, together with cash generated from
operations, are not 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 restructure 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. Both
the RLOC lender and the subordinated credit facility lender have deferred the
collection of interest on their respective debt facilities effective July 1999.
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.
In October 1999 the Company was notified by a customer that its annual
contract will not be renewed. Revenues for the nine months ended September 30,
1999 from this contract accounted for approximately 5.6% of total revenues for
the same period.
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