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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-K/A
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
FOR THE FISCAL YEAR ENDED MARCH 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NO. 0-27506
------------------------
COHR INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 95-4559155
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION)
21540 PLUMMER STREET 91311-4103
CHATSWORTH, CALIFORNIA (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
</TABLE>
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (818) 773-2647
------------------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
COMMON STOCK, $0.01 PAR VALUE PER SHARE
(TITLE OF CLASS)
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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
As of March 13, 1998 there were outstanding 6,433,189 shares of the
Registrant's Common Stock, part value $0.01 ("Common Stock"), which is the only
class of Common Stock of the Registrant. As of March 13, the aggregate market
value of the shares of Common Stock held by non-affiliates of the Registrant,
computed based on the closing sale price of $10 15/16 per share as reported by
Nasdaq, was approximately $70,363,005.
DOCUMENTS INCORPORATED BY REFERENCE
The information called for by Part III is incorporated by reference to the
definitive Proxy Statement for the 1997 Annual Meeting of Stockholders of the
Registrant which was filed with the Securities and Exchange Commission.
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In its press release attached as an exhibit to the Company's Form 10-Q
Quarterly Report for the period ended December 31, 1997 filed with the
Securities and Exchange Commission on February 17, 1998, the Company announced
its intention to restate previously reported financial statements for the first
two quarters of fiscal 1998 and for the fiscal year ended March 30 1997. The
following items of the Company's Form 10-K for the year ended March 30, 1997 are
hereby amended.
ITEM 6. SELECTED FINANCIAL DATA
The following table presents selected financial data of the Company which
have been derived from the audited consolidated financial statements of the
Company. The selected financial data below should be read in conjunction with
the financial statements and the notes thereto and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included in this
report.
<TABLE>
<CAPTION>
FISCAL YEARS ENDED MARCH 31
-----------------------------------------------------------------
1997 1996 1995 1994 1993
------------- --------- --------- --------- ---------
(AS RESTATED, (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
SEE NOTE 15)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues:
COHR MasterPlan..................... $65,171 $48,160 $28,042 $12,617 $ 8,203
Purchase Connection................. 21,050 18,094 15,618 13,026 12,678
------- ------- ------- ------- -------
Total....................... 86,221 66,254 43,660 25,643 20,881
Gross margin.......................... 20,782 18,059 13,561 8,773 7,732
Selling, general and administrative
expenses............................ 17,656 14,559 11,523 7,309 6,370
Operating income...................... 3,126 3,500 2,038 1,464 1,362
Net income............................ $ 2,326 $ 2,142 $ 1,368 $ 946 $ 917
======= ======= ======= ======= =======
Net income per common share........... $ 0.42 $ 0.89 $ 0.65 $ 0.45 $ 0.43
Weighted Average Shares Outstanding... 5,498 2,402 2,112 2,112 2,112
BALANCE SHEET DATA:
Working capital....................... $49,889 $23,470 $ 4,127 $ 4,626 $ 5,374
Equipment and improvements, net....... 6,636 3,718 2,727 2,611 2,245
Intangible assets, net................ 9,237 2,530 1,967 216
Total assets.......................... 85,079 44,472 21,613 15,836 13,973
Total long-term debt.................. 1,146 276 528
Total shareholders' equity............ 64,508 29,115 7,270 6,138 5,419
SUPPLEMENTAL DATA:
Regional service and sales sites:
COHR MasterPlan..................... 31 18 14 7 5
Purchase Connection................. 8 7 6 2 1
------- ------- ------- ------- -------
Total....................... 39 25 20 9 6
Total employees....................... 804 558 428 339 254
Gross margin percentage............... 24.0% 27.3% 31.1% 34.2% 37.0%
Selling, general and administrative
expenses margin..................... 20.4% 22.0% 26.4% 28.5% 30.5%
Operating income margin............... 3.6% 5.3% 4.7% 5.7% 6.5%
Average days in receivables........... 79 57 54 57 62
</TABLE>
2
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FORWARD LOOKING STATEMENTS
This form 10-K/A and other statements issued or made from time to time by
COHR Inc. or its representatives contain statements which may constitute
"forward-looking statements" within the meaning of the Securities Act of 1933
and the Securities Exchange Act of 1934, as amended by the Private Securities
Litigation Reform Act of 1995. 15 U.S.C.A. sections 772-2 and 78u-5 (SUPP.1996).
Those statements include statements regarding the intent, belief or current
expectation of COHR Inc. and members of its management team as well as the
assumptions on which such statements are based. Prospective investors are
cautioned that such forward-looking statements are not guarantees of future
performance and involve risks and uncertainties, and that actual results may
differ materially from those contemplated by such forward-looking statements.
Important factors currently known to management that could cause actual results
to differ materially from those in forward-looking statements are set forth in
the safe harbor compliance statement for forward-looking statements included
herein and in the Company's documents filed from time to time with the
Securities and Exchange Commission. The Company undertakes no obligation to
update or revise forward-looking statements to reflect changed assumptions, the
occurrence of unanticipated events or changes to future operating results over
time.
GENERAL
The Company is a national outsourcing service organization providing
equipment servicing, group purchasing and other services to hospitals,
integrated health systems and alternate site providers.
Additional Revenues From New and Existing Customers -- The Company
aggressively markets a full range of equipment services in its existing markets,
the highest sales priority being Maintenance MasterPlan (comprehensive equipment
management) sales. The Company has also developed the ability to service new,
high technology equipment to grow its business with, and increase revenues from,
its existing customer base.
Gross Margins -- During the past five years, COHR MasterPlan has grown at a
more rapid rate than Purchase Connection. The Company's gross margin percentages
have decreased during this time. Further, gross margin percentages have
fluctuated in each segment as a result of the timing of acquisitions and the
costs incurred to assimilate these acquisitions. In addition, in order to
increase market share, the Company has not increased billing rates to its COHR
MasterPlan customers as its labor costs have increased.
Operating Income -- The fluctuations in operating income in total and as a
percentage of revenues have been caused by changes in the Company's business mix
toward more equipment service business, the impact of new sites and acquisitions
and the level of direct operating and selling, general and administrative
expenses. Development expenses for new products and the COHR 835 Direct software
package amounted to $1.1 million (1997) and $1.0 million (1996). During the
fiscal year ended March 31, 1997, development expenses on new products continued
but decreased as a percentage of total revenues from prior years.
RESTATEMENT OF PRIOR PERIOD FINANCIAL STATEMENTS
The Company has concluded that a restatement of previously reported
financial statements for the first two quarters of fiscal year 1998 and for
fiscal year 1997 is appropriate based upon management's determination that
certain equipment and software sales were prematurely recorded and that certain
liabilities were understated. Please see Note 15 to the Restated Consolidated
Financial Statements for the Fiscal Year Ended March 31, 1997.
RESULTS OF OPERATIONS
FISCAL YEAR ENDED MARCH 31, 1997, AS RESTATED, VERSUS FISCAL YEAR ENDED MARCH
31, 1996
Revenues. The Company's revenues for the fiscal year ended March 31, 1997
totaled $86.2 million, an increase of $20.0 million or 30.1% over revenues of
$66.3 million for the fiscal year ended March 31, 1996. Of the $20.0 million
increase in revenues, approximately $16.0 million was due to revenue growth
related to COHR MasterPlan. During the fiscal year ended March 31, 1997, COHR
MasterPlan acquired nine smaller
3
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service maintenance companies (12 sites) and opened nine new sites. The
remaining revenue increase was due to internal growth and the opening of new
sites for Purchase Connection. During the fiscal year 1997, the Company opened
or acquired a total of 23 new sales and customer service sites. As a result of
these acquisitions, revenues increased by $7.0 million.
Direct Operating Expenses. The Company's direct operating expenses for the
fiscal year ended March 31, 1997 totaled $65.4 million which was an increase of
$17.2 million or 35.8% over the fiscal year ended March 31, 1996 total of $48.2
million. Direct operating expenses as a percentage of revenues increased to
75.9% in fiscal year ended March 31, 1997 from 72.7%. COHR MasterPlan has higher
direct operating expenses as a percentage of revenues than Purchase Connection.
COHR MasterPlan is a more labor intensive business than Purchase Connection
which results in lower gross margins than those realized by Purchase Connection.
Gross Margin. The Company's gross margin for the year ended March 31, 1997
totaled $20.8 million, an increase of $2.7 million or 15.1% over the year ended
March 31, 1996 total of $18.1 million. Gross margin as a percentage of revenues
decreased to 24.1% for the year ended March 31, 1997 from 27.3% for the year
ended March 31, 1996. The decrease in gross margin percentage was partially due
to an increase in the percentage of the Company's revenues derived from the
lower margin COHR MasterPlan.
Selling, General and Administrative Expense. The Company's selling, general
and administrative expenses for the year ended March 31, 1997 totaled $17.7
million, an increase of $3.1 million or 21.3% over the year ended March 31, 1996
total of $14.6 million. As a percentage of revenues, selling, general and
administrative expenses decreased during the year ended March 31, 1997 to 20.5%
from 22.0% during the year ended March 31, 1996. The actual increase in expenses
reflected the increase in costs necessary to support the Company's rapid growth.
The decrease in selling, general and administrative expenses as a percentage of
revenues reflected the growth of revenues without a corresponding increase in
administrative costs or head count as well as other cost savings achieved
through the consolidation of regional sales and customer service sites.
Operating Income. The Company's operating income for the year ended March
31, 1997 totaled $3.1 million, a decrease of $0.4 million from the year ended
March 31, 1996 total of $3.5 million. Operating income for the year ended March
31, 1997 as a percentage of revenues decreased to 3.6% from 5.3% for the year
ended March 31, 1996. This was primarily the result of an increase in Direct
Operating Expenses as a percentage of revenues.
Provision for Income Taxes. The Company's provision for income taxes for
the year ended March 31, 1997 totaled $1.6 million, an increase of $0.1 million
from the year ended March 31, 1996 total of $1.5 million, due to the increase in
pre-tax income for the year ended March 31, 1997. The Company's effective tax
rate of 40.0% was lower than the prior year's rate of 40.6% due to interest
income being earned free of income taxes in the fiscal year ended March 31, 1997
compared to taxable interest being earned in the fiscal year ended March 31,
1996.
Net Income. The Company's net income for the year ended March 31, 1997
totaled $2.3 million, an increase of $0.2 million from the year ended March 31,
1996 total of $2.1 million. As a percentage of revenues, net income decreased to
2.7% in fiscal year 1997 from 3.2% in fiscal 1996, primarily due to increased
direct operating expenses as a percentage of revenues. Net income per share
decreased from $0.46 cents in 1996 to $0.42 cents in 1997 primarily as a result
of the issuance of 2,450,000 new shares of common stock in February 1996 and
1,764,000 new shares of common stock in a second public offering in November
1996.
FISCAL YEAR ENDED MARCH 31, 1996 VERSUS FISCAL YEAR ENDED MARCH 31, 1995
Revenues. The Company's revenues for the fiscal year ended March 31, 1996
totaled $66.3 million, an increase of $22.6 million or 51.7% over revenues of
$43.7 million for the fiscal year ended March 31, 1995. Of the $22.6 million
increase in revenues, $20.1 million resulted from growth in COHR MasterPlan. The
$20.1 million was primarily from increases in revenues from sites acquired or
opened in previous periods. The
4
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Company acquired or opened 14 new service and sales sites in fiscal 1995 and six
new service and sales sites in fiscal 1996.
Direct Operating Expenses. The Company's direct expenses for the fiscal
year ended March 31, 1996 totaled $48.2 million which is an increase of $18.1
million or 60.1% over the fiscal year ended March 31, 1995 total of $30.1
million. Direct operating expenses as a percentage of revenues for the fiscal
year ended March 31, 1996 increased to 72.7% from 68.9% for the fiscal year
ended March 31, 1995. This increase resulted primarily from the fact that the
Company derived a greater percentage of revenues from COHR MasterPlan, which has
higher direct operating expenses as a percentage of revenues than Purchase
Connection. COHR MasterPlan is a more labor intensive business than Purchase
Connection which results in lower gross margins than those realized by Purchase
Connection.
Gross Margin. The Company's gross margin for the fiscal year ended March
31, 1996 totaled $18.1 million, an increase of $4.5 million or 33.1% over the
fiscal year ended March 31, 1995 total of $13.6 million. Gross margin as a
percentage of revenues decreased to 27.3% for the fiscal year ended March 31,
1996 from 31.1% for the fiscal year ended March 31, 1995. The decrease in gross
margin percentage was principally the result of the increase in the percentage
of the Company's revenues derived from the lower margin COHR MasterPlan.
Selling, General and Administrative Expenses. The Company's selling,
general and administrative expenses for the fiscal year ended March 31, 1996
totaled $14.6 million, an increase of $3.1 million or 27.0% over the fiscal year
ended March 31, 1995 total of $11.5 million. As a percentage of revenues,
selling, general and administrative expenses decreased during the fiscal year
ended March 31, 1996 to 22.0% from 26.4% during the fiscal year ended March 31,
1995. The actual increase in expenses reflected the increase in costs necessary
to support the Company's expanded operations. The decrease in selling, general
and administrative expenses as a percentage of revenues reflected the growth of
revenues without a corresponding increase in administrative costs, as well as
other cost savings achieved through the consolidation of regional sales and
customer service sites.
Operating Income. The Company's operating income for the fiscal year ended
March 31, 1996 totaled $3.5 million, an increase of $1.5 million or 75.0% over
the fiscal year ended March 31 ,1995 total of $2.0 million. Operating income as
a percentage of revenues for the fiscal year ended March 31, 1996 increased to
5.3% as compared to 4.7% for the fiscal year ended March 31, 1995.
Provision for Income Taxes. The Company's provision for income taxes for
the fiscal year ended March 31, 1996 totaled $1,483,000, an increase of $718,000
or 93.9% over the fiscal year ended March 31, 1995 total of $765,000, due to the
increase in pre-tax income for the fiscal year ended March 31, 1996. The
Company's effective tax rate for the fiscal year ended March 31, 1996 was 40.9%
as compared to 35.9% for the fiscal year ended March 31, 1995.
Net Income. The Company's net income for the fiscal year ended March 31,
1996 totaled $2,142,000, an increase of $774,000 or 56.6% over the fiscal year
ended March 31, 1995 total of $1,368,000. As a percentage of revenues, net
income increased to 3.2% in the fiscal year ended March 31, 1996 from 3.1% in
the fiscal year ended March 31, 1995.
LIQUIDITY AND CAPITAL RESOURCES
In November, 1996, the Company sold 1,500,000 shares of its common stock,
$0.01 par value, at $20.00 per share pursuant to a second public offering,
realizing $27.7 million in net proceeds after fees and other selling expenses.
In December, 1996, the Company realized $4.6 million, net of fees, from certain
options exercised by the Underwriters granted under the Underwriting Agreement
pursuant to which the secondary offering was effected and certain options
exercised by selling shareholders under the 1995 Stock Option Plan. In fiscal
year 1997, the Company utilized $8.3 million to acquire 10 companies. Subsequent
to year end, the Company has utilized $.8 million to acquire two companies.
The Company had working capital of $53.4 million, $23.5 million and $4.1
million as of March 31, 1997, March 31, 1996 and March 31, 1995 respectively.
The Company had cash and cash equivalents of
5
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$22.9 million, $19.3 million and $4.5 million for the same respective periods.
The Company had investments of $6.0 million as of March 31, 1997.
Net cash provided by (used in) operating activities was $(11.3) million,
$(1.9) million and $1.5 million for fiscal years 1997, 1996 and 1995,
respectively. The fluctuations in cash provided or used in operations were due
primarily to changes in accounts receivable, accounts payable and current income
tax liabilities. A significant portion of the Company's growth has been funded
internally through effective working capital management. The increase in average
days in receivables from 57 in fiscal year 1996 to 76 in fiscal year 1997 is
primarily due to an increase in business in the Northeast where payment is
traditionally slower.
Net cash used in investing activities was $16.9 million, $2.8 million and
$1.8 million, for fiscal years 1997, 1996 and 1995, respectively. The principal
uses of this cash were for the purchase of businesses, customer lists and
related assets. Capital expenditures during these periods amounted to $2.6
million, $1.4 million and $.5 million respectively.
Cash flows used in financing activities were principally for the repayment
of notes payable and long-term debt of $1.3 million and $.1 million for the
years ended March 31, 1997 and 1996, respectively, and payment of dividends to
its stockholders of approximately $.2 million and $.2 million for the years
ended March 31, 1996 and 1995, respectively, and the repayment of a $.2 million
note assumed in an acquisition. The Company has not paid dividends since its
initial public offering in February 1996.
FACTORS AFFECTING OPERATING RESULTS
The discussion of these factors has been amended by Item 2 of the Company's
Form 10-Q Quarterly Report for the period ended December 31, 1997 filed on
February 17, 1998.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND REPORTS ON FORM 8-K
(a) 1. FINANCIAL STATEMENTS
The documents described in the "Index to Consolidated Financial
Statements and Financial Statement Schedule" are included in this
report starting at page 1.
2. FINANCIAL STATEMENT SCHEDULE
The financial statement schedule described in the "Index to
Consolidated Financial Statements and Financial Statement Schedule"
are included in this report starting on page 2.
All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are
not required under the related instructions or are inapplicable, and
therefore have been omitted.
3. EXHIBITS
Exhibits included or incorporated herein:
See Exhibit Index
7
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COHR INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULE
<TABLE>
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PAGE
NUMBER
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<S> <C>
INDEPENDENT AUDITORS' REPORT................................ 2
CONSOLIDATED FINANCIAL STATEMENTS:
Consolidated Balance Sheets at March 31, 1997 (restated)
and 1996............................................... 3
Consolidated Statements of Income for Each of the Years
Ended March 31, 1997 (restated), 1996 and 1995......... 4
Consolidated Statements of Changes in Shareholders' Equity
for Each of the Years Ended March 31, 1997 (restated),
1996 and 1995.......................................... 5
Consolidated Statements of Cash Flows for Each of the
Years Ended March 31, 1997 (restated), 1996 and 1995... 6
Notes to Consolidated Financial Statements................ 7-18
Schedule V -- Valuation and Qualifying Accounts for Each
of the Years Ended March 31, 1997 (restated), 1996 and
1995................................................... 19
</TABLE>
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INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholders of
COHR Inc. and subsidiaries
Los Angeles, California:
We have audited the accompanying consolidated balance sheets of COHR Inc.
and subsidiaries (the "Company") as of March 31, 1997 and 1996, and the related
consolidated statements of income, shareholders' equity, and cash flows for each
of the three years in the period ended March 31, 1997. Our audits also included
the financial statement schedule and exhibit listed in the Index. These
consolidated financial statements and financial statement schedules are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements and financial statement
schedule and exhibit based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements and financial
statement schedule and exhibit referred to above present fairly, in all material
respects, the consolidated financial position of the Company as of March 31,
1997 and 1996, and the consolidated results of its operations and its cash flows
for each of the three years in the period ended March 31, 1997 in conformity
with generally accepted accounting principles.
As described in Note 15, the accompanying consolidated financial statements
as of March 31, 1997 and for the year then ended have been restated.
Los Angeles, California
May 30, 1997
(February 17, 1998 as to Note 15)
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COHR INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1997 (RESTATED) AND 1996
(DOLLARS IN THOUSANDS, EXCEPT NUMBER OF SHARES)
ASSETS (Note 8)
<TABLE>
<CAPTION>
1997 1996
------------- -------
(AS RESTATED,
SEE NOTE 15)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents................................. $22,948 $19,314
Investments............................................... 6,000
Accounts receivable:
Trade, net of allowance for doubtful accounts of $1,490
(1997) and $835 (1996)................................ 24,681 12,644
Other.................................................. 2,325 1,233
Inventory................................................. 9,126 3,486
Prepaid expenses and other................................ 1,263 620
Income tax refund receivable.............................. 1,348
Deferred income tax asset (Note 5)........................ 1,124 806
------- -------
Total current assets.............................. 68,815 38,103
EQUIPMENT AND IMPROVEMENTS, net (Note 3).................... 6,636 3,718
INTANGIBLE ASSETS, net of accumulated amortization of $665
(1997) and $280 (1996) (Note 4)........................... 9,237 2,530
OTHER ASSETS................................................ 391 121
------- -------
TOTAL............................................. $85,079 $44,472
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable (Note 6).................................... $ 1,342
Accounts payable -- trade and other....................... 5,668 $ 6,590
Accrued expenses.......................................... 4,669 3,372
Deferred revenue.......................................... 6,394 4,586
Current portion of long-term debt (Notes 4 and 7)......... 853 85
------- -------
Total current liabilities......................... 18,926 14,633
LONG-TERM DEBT (Note 7)..................................... 1,146 276
DEFERRED INCOME TAX LIABILITY (Note 5)...................... 499 448
COMMITMENTS AND CONTINGENCIES (Note 8)
SHAREHOLDERS' EQUITY (Notes 10 and 11):
Preferred stock, $.01 par value; 2,000,000 shares
authorized; no shares issued and outstanding Common
stock, $.01 par value; 20,000,000 shares authorized;
6,391,000 (1997) and 4,562,000 (1996) shares issued and
outstanding............................................ 887 869
Additional paid-in capital................................ 55,153 22,104
Retained earnings......................................... 8,468 6,142
------- -------
Total shareholders' equity........................ 64,508 29,115
------- -------
TOTAL............................................. $85,079 $44,472
======= =======
</TABLE>
See notes to consolidated financial statements.
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COHR INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR EACH OF THE YEARS ENDED MARCH 31, 1997 (RESTATED), 1996 AND 1995
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1997 1996 1995
------------- ------- -------
(AS RESTATED,
SEE NOTE 15)
<S> <C> <C> <C>
REVENUES.................................................... $86,221 $66,254 $43,660
DIRECT OPERATING EXPENSES................................... 65,439 48,195 30,099
------- ------- -------
GROSS MARGIN................................................ 20,782 18,059 13,561
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (Note 2)....... 17,656 14,559 11,523
------- ------- -------
OPERATING INCOME............................................ 3,126 3,500 2,038
INTEREST INCOME............................................. 889 155 137
INTEREST EXPENSE............................................ (95) (30) (42)
------- ------- -------
INCOME BEFORE INCOME TAXES.................................. 3,920 3,625 2,133
PROVISION FOR INCOME TAXES (Note 5)......................... 1,594 1,483 765
------- ------- -------
NET INCOME.................................................. $ 2,326 $ 2,142 $ 1,368
======= ======= =======
NET INCOME PER SHARE........................................ $ 0.42 $ 0.89 $ 0.65
======= ======= =======
WEIGHTED AVERAGE NUMBER OF COMMON STOCK AND COMMON STOCK
EQUIVALENTS OUTSTANDING DURING THE PERIOD................. 5,498 2,402 2,112
======= ======= =======
</TABLE>
See notes to consolidated financial statements.
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COHR INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR EACH OF THE YEARS ENDED MARCH 31, 1997 (RESTATED), 1996 AND 1995
(DOLLARS IN THOUSANDS, EXCEPT NUMBER OF SHARES)
<TABLE>
<CAPTION>
TOTAL
COMMON STOCK ADDITIONAL SHARE-
------------------ PAID-IN RETAINED HOLDERS'
SHARES AMOUNT CAPITAL EARNINGS EQUITY
--------- ------ ---------- -------- --------
<S> <C> <C> <C> <C> <C>
BALANCE, APRIL 1, 1994........................... 2,112,000 $844 $ 2,179 $3,115 $ 6,138
Dividend paid to shareholders (Pre-IPO)........ (236) (236)
Net income.................................. 1,368 1,368
--------- ---- ------- ------ -------
BALANCE, MARCH 31, 1995.......................... 2,112,000 844 2,179 4,247 7,270
Net proceeds from sale of common stock through
an initial public offering (Note 10)........ 2,450,000 25 19,925 19,950
Dividend paid to shareholders (Pre-IPO)........ (247) (247)
Net income..................................... 2,142 2,142
--------- ---- ------- ------ -------
BALANCE, MARCH 31, 1996.......................... 4,562,000 869 22,104 6,142 29,115
Net proceeds from sale of common stock through
a secondary public offering (Note 10)....... 1,739,000 17 32,240 32,257
Stock options exercised........................ 90,000 1 809 810
Net income (as restated, see Note 15).......... 2,326 2,326
--------- ---- ------- ------ -------
BALANCE, MARCH 31, 1997
(as restated, see Note 15)..................... 6,391,000 $887 $55,153 $8,468 $64,508
========= ==== ======= ====== =======
</TABLE>
See notes to consolidated financial statements.
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COHR INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR EACH OF THE YEARS ENDED MARCH 31, 1997 (RESTATED), 1996 AND 1995
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1996 1995
------------- ------- -------
(AS RESTATED,
SEE NOTE 15)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................ $ 2,326 $ 2,142 $ 1,368
-------- ------- -------
Adjustments to reconcile net income to net cash (used in)
provided by operating activities:
Depreciation and amortization........................... 1,364 838 691
Provision for losses on accounts receivable............. 587 62 31
Provision for deferred income tax....................... (267) 49 (181)
Deferred rent........................................... (180) (592) (369)
Changes in assets and liabilities, net of effect of
acquisition of certain assets:
Accounts receivable................................... (11,262) (4,747) (3,374)
Inventory............................................. (2,631) (1,078) (695)
Prepaid expense and other............................. (379) (174) 93
Other assets.......................................... (184) (41) (20)
Income tax refund receivable.......................... (1,348)
Accounts payable -- trade and other................... (1,634) 589 1,280
Accrued expenses...................................... 543 1,234 (128)
Deferred revenue...................................... 1,808 344 3,465
Income taxes payable.................................. (360) (735)
Deferred compensation................................. (169) 89
-------- ------- -------
Total adjustments.................................. (13,583) (4,045) 147
-------- ------- -------
Net cash (used in) provided by operating
activities....................................... (11,257) (1,903) 1,515
-------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures...................................... (2,557) (1,427) (465)
Payments for acquisitions................................. (8,298) (1,387) (1,293)
Purchases of investments.................................. (6,000)
-------- ------- -------
Net cash used in investing activities.............. (16,855) (2,814) (1,758)
-------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of dividends to shareholders...................... $ (247) $ (236)
Repayment of loan payable................................. (221)
Repayment of notes payable and long-term debt............. (1,321) (125) (21)
Issuance of common stock.................................. 32,257 19,950
Exercise of stock options................................. 810
-------- ------- -------
Net cash provided by (used in) financing
activities....................................... 31,746 19,578 (478)
-------- ------- -------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........ 3,634 14,861 (721)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD.............. 19,314 4,453 5,174
-------- ------- -------
CASH AND CASH EQUIVALENTS, END OF PERIOD.................... $ 22,948 $19,314 $ 4,453
======== ======= =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION -- Cash
paid during the period for:
Income taxes.............................................. $ 3,054 $ 1,843 $ 1,680
======== ======= =======
Interest.................................................. $ 25 $ 37 $ 5
======== ======= =======
DETAILS OF BUSINESSES OR ASSETS ACQUIRED AT FAIR VALUE ARE
AS FOLLOWS (Note 4):
Current assets............................................ $ 5,727 $ 409 $ 475
Equipment................................................. 1,426 235 228
Goodwill and other intangibles............................ 7,092 893 1,865
-------- ------- -------
14,245 1,537 2,568
Liabilities assumed....................................... 3,288 600
Debt issued for acquisitions.............................. 2,659 150 675
-------- ------- -------
NET CASH PAID FOR ACQUISITIONS............................ $ 8,298 $ 1,387 $ 1,293
======== ======= =======
</TABLE>
See notes to consolidated financial statements.
-6-
<PAGE> 14
COHR INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR EACH OF THE YEARS ENDED MARCH 31, 1997 (RESTATED), 1996 AND 1995
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business Description -- COHR Inc. and subsidiaries (the "Company") provide
fee-for-service products and services to hospitals and other health care
providers (see Note 13 for information relating to the Company's business
segments).
The Company was formerly a majority owned subsidiary of Healthcare
Association of Southern California ("HASC"). Effective February 16, 1996, the
Company became a publicly held company, at which time HASC became a minority
shareholder (see Note 10).
Basis of Presentation -- The consolidated financial statements include the
accounts of the Company and its wholly owned subsidiary, COHR MasterPlan (India)
Private Limited, located in New Delhi, India. The operations of the subsidiary
began in May 1995 and are deemed immaterial to the consolidated financial
statements as a whole. All intercompany accounts and transactions have been
eliminated.
Use of Estimates -- The preparation of the consolidated financial
statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the amounts in the
consolidated financial statements and accompanying notes. Actual results could
differ from the estimates.
Cash and Cash Equivalents -- The Company considers all highly liquid
investments purchased with initial maturities of three months or less to be cash
equivalents. The Company actively evaluates the creditworthiness of the
financial institutions in which it invests.
Investments -- Investment securities consist of certificates of deposit
with original maturities of 90 to 180 days. Due to the short maturity period,
cost approximates market.
Inventory -- Inventory, consisting primarily of medical equipment repair
parts, is stated at the lower of cost or market, cost being determined on the
first-in, first-out basis.
Equipment and Improvements -- Equipment and improvements are stated at
cost, net of accumulated depreciation and amortization. Depreciation of
furniture and equipment and amortization of improvements are provided for using
the straight-line method over the estimated useful lives of the respective
assets, as follows:
<TABLE>
<S> <C>
Computer equipment and software............ 5 years
Office furniture, equipment and
automobiles.............................. 3 to 7 years
Technical equipment........................ 5 to 10 years
Leasehold improvements..................... Shorter of lease term or useful life
</TABLE>
Intangible Assets -- Goodwill and other purchased intangible assets are
stated at amortized cost and amortized on a straight-line basis over 15 years.
The projection of undiscounted future cash flows of the operations is evaluated
at each reporting period in assessing the recoverability of goodwill and other
purchased intangibles.
Revenue Recognition -- The COHR MasterPlan is a program whereby the Company
contracts with hospitals on an annual basis to manage the hospitals' equipment
maintenance and repairs. The Company bills the hospitals in advance, and
revenues on those contracts are recognized over the contract period. Losses, if
any, on maintenance contracts are recorded when known. Group purchasing revenue
is recognized in the period earned. Revenue on equipment sales are recognized
when risk of ownership is transferred to the buyer, which is typically upon
delivery.
Income Taxes -- The asset and liability approach is applied in accounting
for income taxes in accordance with Statement of Financial Accounting Standards
("SFAS") No. 109, "Accounting for Income Taxes."
-7-
<PAGE> 15
COHR INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR EACH OF THE YEARS ENDED MARCH 31, 1997 (RESTATED), 1996 AND 1995
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
Under this method, deferred tax assets and liabilities are recorded to reflect
the future tax consequences of events that have been recognized in the Company's
financial statements but have not yet been recognized for tax purposes. Such
deferred income tax asset and liability computations are based on enacted tax
laws and rates applicable to years in which the differences are expected to
affect taxable income. A valuation allowance is established, when necessary, to
reduce deferred income tax assets to the amount expected to be realized. The
provision for income taxes is the tax payable or refundable for the year
adjusted for the change during the year in deferred income taxes.
Stock Option Plans -- SFAS No. 123, "Accounting for Stock-Based
Compensation," encourages but does not require companies to record compensation
cost for stock-based employee compensation plans at fair value. The Company has
chosen to continue to account for stock-based compensation using the intrinsic
value method prescribed in Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees," and related interpretations.
Accordingly, compensation cost for stock options is measured as the excess, if
any, of the quoted market price of the Company's stock at the date of the grant
over the amount an employee must pay to acquire the stock.
Fair Value of Financial Instruments -- The Company adopted the provisions
of SFAS No. 107, "Fair Value of Financial Instruments." The fair values of cash
and cash equivalents approximate their carrying values due to the short-term
nature of such instruments. The fair values of other financial instruments,
including accounts receivable, notes payable, accounts payable, and deferred
revenue, are deemed not to be materially different from their carrying values.
Such fair values were determined by discounting future cash flows using the
current interest rate at the reporting date.
Impairment of Long-Lived Assets -- In accordance with the provisions of
SFAS No. 121, the Company regularly reviews long-lived assets and intangible
assets for impairment whenever events or changes in circumstances indicate that
the carrying amount to the asset may not be recoverable. No impairment losses
were required for the year ended March 31, 1997.
Current Accounting Pronouncements -- The Financial Accounting Standards
Board has issued SFAS No. 123, "Accounting for Stock-Based Compensation," which
encourages companies to account for stock compensation awards based on their
fair value at the date the awards are granted. This statement does not require
the application of fair value method and allows the continuance of current
accounting method, which requires accounting for stock compensation awards based
on their intrinsic value as of the grant date. However, SFAS No. 123 requires
pro forma disclosure of net income and, if presented, earnings per share, as if
the fair value based method of accounting defined in this statement had been
applied. The accounting and disclosure requirements of this statement are
effective for financial statements for fiscal years beginning after December 15,
1995, although earlier adoption is encouraged. The Company has elected not to
adopt the fair value provisions of this statement.
Concentration of Credit Risk -- The Company provides services to hospitals
and other health care providers throughout the United States. The Company's
trade accounts receivable are exposed to credit risk; however, such risk is
limited due to the large numbers and geographic dispersion of the customer base.
The Company monitors the creditworthiness of its customers and provides
allowances for doubtful accounts when appropriate.
The Company maintains cash and cash equivalents and investments of $15.6
million (1997) and $13.9 million (1996) with a single financial institution.
Other financial institutions are located throughout the country. The Company
performs periodic evaluations of the relative credit standing of these financial
institutions, which are considered the Company's investment strategy. The
Company has $3.0 million (1997) and $5.0 million (1996) in variable preferred
stock of a publicly traded company. At March 31, 1997, the
-8-
<PAGE> 16
COHR INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR EACH OF THE YEARS ENDED MARCH 31, 1997 (RESTATED), 1996 AND 1995
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
Company had cash equivalents totaling $10.0 million, of which $5.5 million is in
preferred municipal funds and $4.5 million is in municipal bonds maturing within
60 days of purchase.
Research and Development -- Research and development costs are expensed as
incurred. Such costs amounted to $1,059 (1997), $990 (1996) and $940 (1995).
Net Income per Share -- Net income per common share is computed using the
weighted average number of common stock and common stock equivalents outstanding
during the year.
Reclassifications -- Certain reclassifications have been made to the prior
period's consolidated financial statements to conform them to the current
period's presentation.
2. RELATED-PARTY TRANSACTIONS
The Company had related-party transactions resulting from the allocation of
expenses (including rent and insurance) from HASC of $218 (1997), $2,427 (1996),
$1,975 (1995) and $1,822 (1994), and expenses incurred by the Company (including
accounting, payroll and personnel costs) of $2,448 (1996) and $2,625 (1995) on
behalf of HASC and an affiliate, National Health Foundation. Expenses allocated
to the Company from HSAC are included in selling, general and administrative
expenses in the accompanying statements of income. Occupancy costs are allocated
based upon square footage utilized by the respective entities. Accounting,
payroll and personnel costs are allocated based upon the identification of tasks
performed for the individual companies.
At March 31, 1997 and 1996, the Company had approximately $3.2 million and
$5.2 million, respectively, held at a financial institution, of which a member
of the Board of Directors of the Company is a partner.
3. EQUIPMENT AND IMPROVEMENTS
Equipment and improvements consist of:
<TABLE>
<CAPTION>
MARCH 31,
-----------------
1997 1996
------- ------
<S> <C> <C>
Computer equipment and software........................... $ 3,857 $2,648
Office furniture and equipment............................ 2,794 1,395
Technical equipment....................................... 3,213 2,378
Leasehold improvements.................................... 836 403
Automobiles............................................... 40 29
------- ------
10,740 6,853
Less accumulated depreciation and amortization............ 4,104 3,135
------- ------
$ 6,636 $3,718
======= ======
</TABLE>
-9-
<PAGE> 17
COHR INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR EACH OF THE YEARS ENDED MARCH 31, 1997 (RESTATED), 1996 AND 1995
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
4. ACQUISITIONS
During fiscal 1997 and 1996, the Company acquired the businesses of several
small entities similar to that of the Company through a purchase of certain
assets and service contract rights and an assumption of certain liabilities. In
addition, the Company assumed the operating leases on the facilities of some of
these entities. Following is a summary of the assets acquired and liabilities
assumed at estimated fair market value:
<TABLE>
<CAPTION>
MARCH 31,
-----------------
1997 1996
------- ------
<S> <C> <C>
Accounts receivable....................................... $ 2,454
Inventory................................................. 3,009 $ 409
Prepaid expenses and other................................ 350
Equipment and improvements................................ 1,340 235
Goodwill.................................................. 7,092 893
------- ------
14,245 1,537
------- ------
Accounts payable and accrued liabilities.................. (1,693)
Loan payable.............................................. (229)
Long-term debt............................................ (1,366)
-------
(3,288)
------- ------
Net assets of businesses acquired......................... $10,957 $1,537
======= ======
</TABLE>
The purchases of these businesses and intangible assets were made through
the cash payments of approximately $8,298 (1997) and $1,387 (1996) and the
issuance of $2,659 (1997) and $150 (1996) notes payable. In connection with
certain acquisitions, the Company issued notes to sellers which are payable over
12 months. Interest on these notes ranges from 0% to prime plus 1%. The imputed
interest on notes bearing no interest is not material to the financial
statements.
5. INCOME TAXES
The provision for income taxes includes the following:
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
-------------------------
1997 1996 1995
------ ------ -----
<S> <C> <C> <C>
Current:
Federal......................................... $1,438 $1,117 $ 717
State........................................... 422 317 229
------ ------ -----
1,860 1,434 946
------ ------ -----
Deferred:
Federal......................................... (176) 25 (122)
State........................................... (90) 24 (59)
------ ------ -----
(266) 49 (181)
------ ------ -----
Total provision for income taxes........ $1,594 $1,483 $ 765
====== ====== =====
</TABLE>
-10-
<PAGE> 18
COHR INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR EACH OF THE YEARS ENDED MARCH 31, 1997 (RESTATED), 1996 AND 1995
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
Deferred income taxes for fiscal 1997 and 1996 reflect the impact of
temporary differences between the financial statement and tax bases of assets
and liabilities. The tax effects of the temporary differences that create
deferred tax assets and liabilities at March 31, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
MARCH 31,
---------------
1997 1996
------ -----
<S> <C> <C>
Deferred tax assets -- current:
Compensation-related accruals............................ $ 431 $ 354
Balance sheet reserves................................... 579 314
State income taxes....................................... 99 108
Deferred compensation.................................... 95
Prepaid expenses......................................... (79) (65)
Accrued severance pay.................................... 94
------ -----
Gross deferred tax assets.................................. 1,124 806
Deferred tax liabilities -- noncurrent -- Depreciation..... (499) (448)
------ -----
Net deferred tax assets.................................... $ 625 $ 358
====== =====
</TABLE>
The differences between federal income tax computed at the statutory rate
and the actual tax provisions are shown as follows:
<TABLE>
<CAPTION>
1997 1996 1995
----- ----- -----
<S> <C> <C> <C>
Provision at statutory rate.......................... 34.0% 34.0% 34.0%
State income tax, net of federal benefit............. 5.6 6.6 6.2
Adjustment for prior year provision.................. (4.9)
Permanent differences................................ 1.1 0.3 0.6
----- ----- -----
Effective tax rate................................... 40.7% 40.9% 35.9%
===== ===== =====
</TABLE>
6. NOTES PAYABLE
Notes payable comprise amounts due for acquisition of certain companies and
notes acquired as a result of acquisitions. The notes bear interest ranging from
0% to prime plus 1% and are all payable within one year from date of issue. The
imputed interest on the notes bearing no interest is not material to the
financial statements.
-11-
<PAGE> 19
COHR INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR EACH OF THE YEARS ENDED MARCH 31, 1997 (RESTATED), 1996 AND 1995
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
7. LONG-TERM DEBT
Long-term debt at March 31, 1997 and 1996 consists of the following:
<TABLE>
<CAPTION>
1997 1996
------ ----
<S> <C> <C>
Noninterest-bearing note payable with original terms of $750
due in five annual installments of $150 each starting in
July 1995. The balance of the note payable is net of
imputed interest of $65 (effective rate of 6.95%) at March
31, 1997.................................................. $ 252 $322
Note payable bearing interest at 7%, due in two equal
installments of $500 each at May 1, 1997 and 1998......... 1,000
Noninterest-bearing notes payable, due in five installments
of $30 commencing July 27, 1997........................... 150
Capital lease obligations with interest rates ranging from
11.9% to 16.0%, payable over 42 months from the start of
the lease................................................. 597
Other....................................................... 39
------ ----
1,999 361
Less current portion........................................ 853 85
------ ----
$1,146 $276
====== ====
</TABLE>
Principal, plus imputed interest, paid in 1997 was approximately $318.
The expected future installments under the long-term debt (including
imputed interest of $65), for the years ending Marc 31, are as follows:
<TABLE>
<S> <C>
1998................................................ $ 853
1999................................................ 837
2000................................................ 302
2001................................................ 42
2002................................................ 30
------
$2,064
======
</TABLE>
8. COMMITMENTS AND CONTINGENCIES
The Company leases its facilities and certain equipment under noncancelable
operating leases. Certain of these leases include renewal provisions at the
option of the Company. Rent expense amounted to $1,515 (1997), $1,052 (1996) and
$1,000 (1995).
Aggregate minimum lease commitments under noncancelable operating lease
agreements, exclusive of adjustments for taxes and other expenses, for the years
ending March 31, are as follows:
<TABLE>
<S> <C>
1998............................................... $ 1,571
1999............................................... 1,105
2000............................................... 915
2001............................................... 831
2002............................................... 747
Thereafter......................................... 5,043
-------
$10,212
=======
</TABLE>
-12-
<PAGE> 20
COHR INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR EACH OF THE YEARS ENDED MARCH 31, 1997 (RESTATED), 1996 AND 1995
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
A lease for the Company's new facility, commencing August 1996 and expiring
in January 2009, was signed in April 1996. The lease is for a combined 76,000
square foot facility in Chatsworth, California, which houses the corporate
offices, operations for group purchasing of and some operations for the
equipment maintenance division. The other leases contain renewal options, and
management expects that, in the normal course of business, such leases will be
renewed or replaced by other leases upon expiration.
In December 1995, the Company signed a $2,000 revolving line of credit
agreement with a bank bearing an initial variable interest rate indexed at the
bank's reference rate at November 14, 1996. This line is collateralized by the
Company's tangible and intangible assets and expires on June 30, 1997. No
amounts have been borrowed against this line of credit during the years ended
March 31, 1997 and 1996. The line was increased to $5,000 effective November 14,
1996.
In the normal course of business, the Company is involved in various
litigation. Based upon communication with legal counsel, in the opinion of
management, the disposition of all pending litigation will not have a material
adverse effect on the Company's financial position, results of its operations or
liquidity.
9. PENSION AND PROFIT SHARING PLANS
The Company maintains profit sharing and salary deferral plans qualified
under Sections 401(a) and 401(k), respectively, of the Internal Revenue Code. As
of January 1, 1996, the employees of the Company were transferred from the
multi-employer plans to new plans, which are solely for the benefit of the
employees of the Company. The provisions of the new plans are identical to the
prior plans. These plans cover all employees who meet the eligibility
requirements of the plans. The total expenses charged to operations relating to
these plans were $1,004 (1997), $627 (1996) and $414 (1995).
10. SHAREHOLDERS' EQUITY
Preferred Stock -- On January 16, 1996, the Company was reincorporated in
the state of Delaware, and in connection therewith, the shareholders and the
Board of Directors of the Company adopted and approved the authorization of
2,000,000 shares of preferred stock at a par value of $0.01 per share.
Common Stock -- In November 1995, the Company increased the number of
shares of common stock from 1,000 to 20,000,000 and effected a 20,000-for-1
split in the form of a common stock dividend. All share and per share data have
been restated to reflect the stock split.
On February 16, 1996, the Company closed its initial public offering of its
common stock. Of the 3,000,000 shares sold at $9 per share in the offering,
2,000,000 were sold by the Company, and 1,000,000 were sold by HASC and Hospital
Council Coordinated Programs, Inc. (the "Selling Shareholders"). The Company did
not receive any proceeds from the sale of shares by the Selling Shareholders. On
March 6, 1996, the underwriters purchased 450,000 common shares at $9 per share
to cover over-allotment. The proceeds to the Company from the sale of 2,450,000
shares amounted to $19,950, which was net of underwriters discounts and offering
expenses of approximately $2,100.
On November 27, 1996, the Company completed a secondary offering of its
common stock. Of the 1,760,000 shares sold at $20 per share in the offering,
1,500,000 were sold by the Company and 260,000 were sold by HASC and Hospital
Council Coordinated Programs, Inc. The Company did not receive any proceeds from
the sale of shares by the Selling Shareholders. The remaining 852,000 shares
held by the Selling Shareholders at the date of the secondary are not eligible
for sale until February 16, 1998 without prior written consent of the Company.
On December 18, 1996, the underwriters purchased 239,000 common shares at $20
per share to cover over-allotment. Certain officers sold a total of 25,000 stock
options at the same time. The
-13-
<PAGE> 21
COHR INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR EACH OF THE YEARS ENDED MARCH 31, 1997 (RESTATED), 1996 AND 1995
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
Company received $9 per share. The proceeds to the Company from the sale of
1,739,000 shares amounted to $32,257, which was net of underwriters discounts
and offering expenses of approximately $2,700.
11. STOCK OPTION PLANS
1995 Stock Option Plan -- The Board of Directors and shareholders of the
Company have adopted and approved a 1995 stock option plan (the "1995 Plan")
pursuant to which certain officers, directors and other key employees of the
Company are eligible to receive nonqualified options to purchase the Company's
common stock. The maximum number of shares of common stock that may be issued
pursuant to options granted under the 1995 Plan is 600,000. As of March 31,
1997, there were outstanding options to purchase 492,500 shares of common stock
(net of cancellations and sales by optionees). The weighted average exercise
price of the foregoing options is at $12.15 per share, which represents the fair
market value on the date of the grant.
Under the 1995 Plan, key employees are eligible to be granted options under
the 1995 Plan if so selected by the Committee in its absolute discretion. The
number of shares subject to an option and the term and conditions, including the
purchase price per share of common stock subject to each options, shall be set
by the Committee; provided, however, that the exercise price shall not be less
than the fair market value of the common stock as of the date the option is
granted. No options granted under the 1995 Plan may be exercised after the
expiration of ten years from the date it was granted. Options granted to key
employees vest in accordance with the following schedule: (i) 25% upon the date
of grant, (ii) 50% upon the first anniversary of the date of grant, (iii) 75%
upon the second anniversary of the date of grant, and (iv) 100% upon the third
anniversary of the date of grant. At March 31, 1996, 142,500 options were
exercisable under the 1995 Plan.
Options granted under the 1995 Plan are generally nontransferable. In the
event of any merger, consolidation, sale of all or substantially all of the
assets of the Company or a liquidation involving the Company, all granted or
awarded options will immediately vest in the optionee. At the time of the
Secondary offering in November 1996, each options holder was automatically
vested in 50% of the nonvested portion of any options previously awarded. The
1995 Plan may be terminated at any time by the Board.
At March 31, 1997 and 1996, 377,813 and 142,500 options, respectively, were
exercisable under the 1995 Plan.
1996 Stock Option Plan -- On November 7, 1996 the Board of Directors of the
Company adopted the 1996 Stock Option Plan (the "1996 Plan"), pursuant to which
certain officers, non-employee directors and other key employees of the Company
are eligible to receive nonqualified options to purchase the Company's common
stock. The 1996 Plan is administered by the Board of Directors; however, either
a committee of the Board composed solely of two or more non-employee directors
(the "Committee") or the Board of Directors may approve the grant options. The
maximum number of shares of common stock that may be issued pursuant to options
granted under the 1996 Plan is 300,000.
The 1996 Plan is subject to approval by the stockholders on or before
November 7, 1997. The Board of Directors will not grant any options under the
1996 Plan unless and until the 1996 Plan is approved by the stockholders.
Under the 1996 Plan, officers and other managerial employees ("Key
Employees") are eligible to be granted options if so selected by the Committee
or the Board of Directors in its absolute discretion. The number of shares
subject to an option and the term and conditions, including the purchase price
per share of common stock subject to each option, shall be set by the Committee;
provided, however, that the exercise price shall not be less than the fair
market value of the common stock as of the date the option is granted. Unless
otherwise determined by the Committee, options issued to Key Employees vest 25%
upon the date of
-14-
<PAGE> 22
COHR INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR EACH OF THE YEARS ENDED MARCH 31, 1997 (RESTATED), 1996 AND 1995
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
grant and on each of the first, second and third anniversary dates of the grant.
Unless otherwise determined by the Committee, options issued to non-employee
directors vest on the date of issuance. No option granted under the 1996 Plan
may be exercised after the expiration of ten years from the date it was granted.
Options granted under the 1996 Plan would generally be nontransferable. In
the event of any merger, consolidation, sale of all or substantially all of the
assets of the Company or liquidation involving the Company, all granted options
will immediately vest in the optionee. The 1996 Plan may be terminated at any
time by the Board.
Information regarding these option plans for the years ended March 31, 1997
and 1996 is as follows:
<TABLE>
<CAPTION>
1997 1996
-------------------------- -------
WEIGHTED-AVERAGE
SHARES EXERCISE PRICE SHARES
------- ---------------- -------
<S> <C> <C> <C>
Options outstanding, beginning of year........... 465,000 9.00
Options granted................................ 125,000 21.43 465,000
Options exercised.............................. (90,000) 9.00
Options forfeited.............................. (7,500) 9.00
------- -------
Options outstanding, end of year................. 492,500 12.15 465,000
======= =============== =======
Options price range, end of year................. $9.00 to $26.00
Option price range for exercised shares.......... $9.00
Options price range for forfeited shares......... >$9.00
Options available for grant, end of year....... 17,500 135,000
======= =======
Weighted-average fair value of options granted
during the year................................ $24.56
</TABLE>
The fair value of options at date of grant was estimated using the
Black-Scholes model with the following weighted-average assumptions:
The following table summarizes information about fixed-price stock options
outstanding at March 1, 1997:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
----------------------------------------------- -------------------------------
NUMBER WEIGHTED-AVERAGE NUMBER
OUTSTANDING REMAINING WEIGHTED EXERCISABLE WEIGHTED-AVERAGE
RANGE EXERCISE PRICES AT 3/31/97 CONTRACTUAL LIFE EXERCISE PRICE AT 3/31/97 EXERCISE PRICE
- --------------------- ----------- ---------------- -------------- ------------ ----------------
<S> <C> <C> <C> <C> <C>
$9.00................. 367,500 9 years $ 9.00 284,375 $ 9.00
$9.00 to $26.00....... 125,000 10 years $21.43 69,688 $21.43
</TABLE>
The fair value at date of grant for stock options granted during the years
ended March 31, 1997 and 1996 was $12.54 and $18.23, respectively.
<TABLE>
<CAPTION>
MARCH 31,
----------------
1997 1996
------ ------
<S> <C> <C>
Expected life years........................................ 10 10
Interest rate.............................................. 6.85% 6.25%
Volatility................................................. 25.50% 26.00%
</TABLE>
Stock-based compensation costs reduced pre-tax income by $248 ($149 after
tax or $0.03 per share) and $429 ($258 after tax or $0.11 per share) in the
years ended March 31, 1997 and 1996, respectively.
-15-
<PAGE> 23
COHR INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR EACH OF THE YEARS ENDED MARCH 31, 1997 (RESTATED), 1996 AND 1995
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
12. SUBSEQUENT EVENTS
Subsequent to March 31, 1997, the Company acquired the businesses of two
companies similar to that of COHR Inc. The acquisitions included the purchase of
certain assets, including inventory, equipment, and other assets, for a combined
purchase price of $1,207, of which $930 was paid in cash, with a short-term note
issued for the remainder.
13. BUSINESS SEGMENTS (RESTATED)
The Company currently provides services to the health care industry through
two principal business segments. The COHR MasterPlan provides equipment
maintenance and repairs to hospitals and other health care providers. The
Purchase Connection is a group purchasing organization that negotiates pricing
for its membership with manufacturers. General corporate expenses are classified
as "Corporate and Other." Identifiable assets are those used in the Company's
operations in each segment as estimated by management based upon factors such as
revenue generated, number of personnel and space occupied by each segment.
Information concerning the Company's business segments in fiscal 1997
(restated), 1996 and 1995 is as follows:
<TABLE>
<CAPTION>
EQUIPMENT PURCHASING CORPORATE
SERVICES SERVICES AND OTHER TOTAL
--------- ---------- --------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
1997 (AS RESTATED, SEE NOTE 15)
Revenues........................................ $66,012 $20,209 $86,221
Operating income (expense)...................... 2,549 6,650 $(6,073) 3,126
Identifiable assets............................. 45,135 4,896 35,048 85,079
Depreciation and amortization................... 876 325 163 1,364
Capital expenditures............................ 1,698 214 645 2,557
1996
Revenues........................................ $48,160 $18,094 $66,254
Operating income (expense)...................... 2,409 6,941 $(5,850) 3,500
Identifiable assets............................. 19,523 3,771 21,178 44,472
Depreciation and amortization................... 558 214 66 838
Capital expenditures............................ 1,182 193 52 1,427
1995
Revenues........................................ $28,042 $15,618 $43,660
Operating income (expense)...................... 1,498 5,559 $(5,019) 2,038
Identifiable assets............................. 11,975 3,683 5,955 21,613
Depreciation and amortization................... 315 215 161 691
Capital expenditures............................ 200 135 130 465
</TABLE>
-16-
<PAGE> 24
COHR INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR EACH OF THE YEARS ENDED MARCH 31, 1997 (RESTATED), 1996 AND 1995
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
14. QUARTERLY INFORMATION 1997 AND 1996 (UNAUDITED)
<TABLE>
<CAPTION>
QUARTER ENDED FISCAL YEAR 1997
----------------------------------------------------
DECEMBER 31, MARCH 31,
JUNE 30, SEPTEMBER 30, 1996 1997
1996 1996 (RESTATED) (RESTATED)
-------- ------------- ------------ ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Net revenues............................... $20,465 $21,205 $20,153 $24,398
Gross margin............................... 5,745 5,933 5,294 4,815
Operating income........................... 1,328 1,725 762 (689)
Net income................................. $ 931 $ 1,064 $ 574 $ 239
======= ======= ======= =======
Net income per share....................... $ 0.20 $ 0.22 $ 0.10 $ 0.04
======= ======= ======= =======
Weighted-average number of common stock
outstanding.............................. 4,735 4,832 5,545 6,709
</TABLE>
<TABLE>
<CAPTION>
QUARTER ENDED FISCAL YEAR 1996
---------------------------------------------------
JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31,
1995 1995 1995 1996
-------- ------------- ------------ ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Net revenues............................... $15,369 $15,465 $16,667 $18,753
Gross margin............................... 4,294 4,229 4,481 5,055
Operating income........................... 734 838 815 1,113
Net income................................. $ 457 $ 514 $ 478 $ 693
======= ======= ======= =======
Net income per share....................... $ 0.22 $ 0.24 $ 0.23 $ 0.20
======= ======= ======= =======
Weighted-average number of common stock
outstanding.............................. 2,112 2,112 2,112 3,270
</TABLE>
15. RESTATEMENT
Subsequent to the issuance of the Company's fiscal 1997 consolidated
financial statements, the Company's management determined that certain equipment
and software sales were prematurely recorded and that certain liabilities were
understated. As a result, the accompanying consolidated financial statements as
of March 31, 1997 and for the year then ended have been restated from the
amounts previously reported to reverse these sales and to record the appropriate
liabilities.
-17-
<PAGE> 25
COHR INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR EACH OF THE YEARS ENDED MARCH 31, 1997 (RESTATED), 1996 AND 1995
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
A summary of the significant effects of the restatement is as follows:
<TABLE>
<CAPTION>
AS PREVIOUSLY AS
REPORTED RESTATED
------------- --------
<S> <C> <C>
At March 31, 1997:
Accounts receivable....................................... $25,439 $24,681
Inventory................................................. 8,535 9,126
Equipment and improvements................................ 6,943 6,636
Income tax refund receivable.............................. 1,348
Deferred income tax asset................................. 1,143 1,124
Other assets.............................................. 351 391
Accrued expenses.......................................... 2,618 4,669
Income tax payable........................................ 162
Deferred income tax liability............................. 628 499
Accounts payable -- trade and other....................... 4,040 5,668
Retained earnings......................................... 10,961 8,468
For the year ended March 31, 1997:
Revenues.................................................. 90,524 86,221
Direct operating expenses................................. 65,519 65,439
Income before taxes....................................... 8,033 3,920
Net income................................................ 4,819 2,326
Net income per share...................................... 0.88 0.42
</TABLE>
-18-
<PAGE> 26
SCHEDULE V
COHR, INC.
VALUATION AND QUALIFYING ACCOUNTS (IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING COSTS AND OTHER END
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS(1) OF PERIOD
----------- ---------- ---------- ---------- ------------- ----------
<S> <C> <C> <C> <C> <C>
Allowance for Doubtful Accounts:
Year Ended March 31, 1995............... $(742) $(155) $ 0 $124 $ (773)
Year Ended March 31, 1996............... $(773) $(205) $ 0 $143 $ (835)
Year Ended March 31, 1997 (restated).... $(835) $(600) $(68) $ 13 $(1,490)
</TABLE>
- ---------------
(1) Represents accounts receivable written off against the allowance for
doubtful accounts.
-19-
<PAGE> 27
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of Securities and
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, who is thereunto duly authorized.
Dated: March 17, 1998
By: /s/ STEPHEN W. GAMBLE
------------------------------------
Stephen W. Gamble
Interim President and Chief
Executive Officer
Pursuant to the requirement of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<C> <C> <S>
/s/ STEPHEN W. GAMBLE Interim President, Chief March 17, 1998
------------------------------------------------- Executive Officer and Director
Stephen W. Gamble (Principal Executive Officer)
/s/ DANIEL F. CLARK Executive Vice President -- March 17, 1998
------------------------------------------------- Finance and Chief Financial
Daniel F. Clark Officer (Principal Accounting
and Financial Officer)
/s/ LOUIS A. SIMPSON Director March 17, 1998
-------------------------------------------------
Louis A. Simpson
/s/ RONNIE J. MESSENGER Director March 17, 1998
-------------------------------------------------
Ronnie J. Messenger
/s/ FREDERICK C. MEYER Director March 17, 1998
-------------------------------------------------
Frederick C. Meyer
/s/ MICHAEL MASUURA Director March 17, 1998
-------------------------------------------------
Michael Masuura
</TABLE>
<PAGE> 28
COHR INC. AND SUBSIDIARIES
INDEX TO EXHIBITS
ITEM (6)
(a) EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ------- ----------- ------------
<S> <C> <C>
3.1* Certificate of Incorporation of Registrant..................
3.2* By-laws of Registrant.......................................
4.1* Form of Warrant to be issued to the Representatives of the
Underwriters................................................
4.2* Form of Registration Rights Agreement between Registrant,
Healthcare Association of Southern California ("HASC") and
Hospital Council Coordinated Programs, Inc. ................
4.3* Specimen Stock Certificate..................................
10.1* Form of Indemnity Agreement entered into between Registrant
and each of its executive officers and directors............
10.2* Employment Agreement between Registrant and Paul Chopra,
effective January 1, 1996...................................
10.4* Form of 1995 Stock Option Plan of Registrant and Form of
Nonstatutory Option Grant Under the Plan....................
10.8** Office Lease between TCEP II properties and Registrant dated
May 8, 1996.................................................
10.9*** 1996 Stock Option Plan of Registrant, as amended and
restated on June 17, 1997...................................
11 Computation of Per Share Earnings...........................
</TABLE>
- ---------------
* Incorporated by reference from Registrant's Statement on Form S-1,
Registration No. 33-80635.
** Incorporated by reference from Registrant's Annual Report for the fiscal
year ended March 31, 1996 on Form 10-K.
*** Incorporated by reference from Registrant's Quarterly Report for the fiscal
quarter ended June 30, 1997 on Form 10-Q.
<PAGE> 1
EXHIBIT 11
COHR INC.
COMPUTATION OF PER SHARE EARNINGS
(IN THOUSANDS, EXCEPT EARNINGS PER SHARE)
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
---------------------------------
1997 1996 1995
------------- ------ ------
(AS RESTATED,
SEE NOTE 15)
<S> <C> <C> <C>
NET INCOME ATTRIBUTABLE TO COMMON STOCK..................... $2,326 $2,142 $1,368
====== ====== ======
PRIMARY AND FULLY DILUTED EARNINGS PER SHARE:
Weighted average number of common shares outstanding...... 5,165 2,391 2,112
Dilutive effect of stock options and warrants after
application of treasury stock method................... 333 11
------ ------ ------
Number of shares used to compute primary earnings per
share.................................................. 5,498 2,402 2,112
====== ====== ======
Primary and fully diluted earnings per share.............. $ 0.42 $ 0.89 $ 0.65
====== ====== ======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> MAR-31-1997
<CASH> 22,948
<SECURITIES> 6,000
<RECEIVABLES> 26,171
<ALLOWANCES> 1,490
<INVENTORY> 9,126
<CURRENT-ASSETS> 68,815
<PP&E> 10,740
<DEPRECIATION> 4,104
<TOTAL-ASSETS> 85,079
<CURRENT-LIABILITIES> 18,926
<BONDS> 0
0
0
<COMMON> 887
<OTHER-SE> 63,621
<TOTAL-LIABILITY-AND-EQUITY> 85,079
<SALES> 86,221
<TOTAL-REVENUES> 86,221
<CGS> 65,439
<TOTAL-COSTS> 65,439
<OTHER-EXPENSES> 16,988
<LOSS-PROVISION> 668
<INTEREST-EXPENSE> 95
<INCOME-PRETAX> 3,920
<INCOME-TAX> 1,594
<INCOME-CONTINUING> 2,326
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,326
<EPS-PRIMARY> .42
<EPS-DILUTED> .42
</TABLE>
