SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[ X ] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended September 30, 1996
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from _______ to _______
Commission File Number: 0-20881
HEALTHCOR HOLDINGS, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 75-2294072
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
8150 North Central Expy, Suite M-2000, Dallas, Texas 75206
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (214) 692-4663
5720 LBJ Freeway, Suite 550, Dallas, Texas 75240
(Former address of principal executive offices) (Zip 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 [ ]
As of November 11, 1996, approximately 10,013,300 shares of Common Stock were
issued and outstanding.
1
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
- --------------------------------------------------------------------------------
The unaudited condensed consolidated financial statements include the
accounts of HealthCor Holdings, Inc. and subsidiaries (the "Company"), and have
been prepared in accordance with generally accepted accounting principles for
interim financial information. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
considered necessary for a fair presentation in the following financial
statements have been included. These condensed consolidated financial statements
should be read in conjunction with the audited consolidated financial statements
and the related notes for the year ended December 31, 1995, included in the
Company's Registration Statement on Form S-1, as filed with the Securities and
Exchange Commission.
2
<PAGE>
HEALTHCOR HOLDINGS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, DECEMBER 31,
1996 1995
----------- -----------
ASSETS
Current Assets:
Cash and cash equivalents .................... $ 1,006,730 $ 1,627,940
Accounts receivable, net of allowance
for doubtful accounts ........................ 23,216,083 11,465,655
Supplies inventory ........................... 2,032,693 1,709,355
Prepaid expenses and other ................... 2,259,212 1,456,958
Income taxes receivable ...................... 287,800 --
Deferred income taxes ........................ 966,396 2,003,328
----------- -----------
Total Current Assets ....................... 29,768,914 18,263,236
----------- -----------
Property and equipment, net ...................... 19,049,214 11,054,255
Excess of cost of acquired businesses over
fair values of net assets acquired, net .......... 35,981,128 23,220,167
Other assets ..................................... -- 35,290
----------- -----------
Total Assets ..................................... $84,799,256 $52,572,948
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses ........ $ 5,572,177 $ 5,934,404
Accrued payroll and related expenses ......... 5,661,890 4,836,735
Estimated settlements with third-party
payors ..................................... -- 322,566
Line of credit payable ....................... 4,450,000 2,475,000
Current portion of long-term debt and
capital lease obligations ............... 2,929,606 5,119,478
Income taxes payable ......................... -- 1,311,920
----------- -----------
Total Current Liabilities .................. 18,613,673 20,000,103
Deferred income taxes and other liabilities ...... 4,982,936 2,905,809
Long-term debt and capital lease obligations ..... 8,084,943 12,265,236
----------- -----------
Total Liabilities .......................... 31,681,552 35,171,148
Redeemable convertible preferred stock ........... -- 5,339,814
Stockholders' Equity:
Common stock, $.01 par value ................. 100,133 30,628
Additional paid-in capital ................... 39,848,259 2,471,129
Retained earnings ............................ 13,169,312 9,560,229
----------- -----------
Total Stockholders' Equity ................. 53,117,704 12,061,986
----------- -----------
Total Liabilities and Stockholders' Equity ....... $84,799,256 $52,572,948
=========== ===========
See accompanying notes to condensed consolidated financial statements
3
<PAGE>
HEALTHCOR HOLDINGS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPT. 30,
-------------------------------- --------------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net revenues ................................... $27,253,682 $21,578,032 $77,476,115 $57,499,574
Direct expenses ................................ 11,879,545 10,875,086 35,095,128 30,317,766
----------- ----------- ----------- -----------
Gross profit ................................... 15,374,137 10,702,946 42,380,987 27,181,808
Other costs and expenses:
General and administrative ................ 10,731,990 8,145,585 30,387,223 21,001,120
Depreciation and
amortization .............................. 924,557 320,484 2,173,262 823,082
Provision for doubtful
accounts .................................. 837,125 381,562 2,286,502 1,013,996
----------- ----------- ----------- -----------
Total costs and expenses ................ 12,493,672 8,847,631 34,846,987 22,838,198
----------- ----------- ----------- -----------
Income from operations ......................... 2,880,465 1,855,315 7,534,000 4,343,610
Interest, net .................................. 525,447 316,305 1,663,374 569,063
----------- ----------- ----------- -----------
Income before income taxes ..................... 2,355,018 1,539,010 5,870,626 3,774,547
Provision for income taxes ..................... 892,632 580,559 2,261,543 1,437,291
----------- ----------- =========== ===========
Net income ..................................... $ 1,462,386 $ 958,451 $ 3,609,083 $ 2,337,256
=========== =========== =========== ===========
Net income per common share .................... $ 0.17 $ 0.15 $ 0.49 $ 0.36
=========== =========== =========== ===========
Weighted average common shares
outstanding .................................... 8,575,019 6,502,994 7,324,030 6,488,298
=========== =========== =========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements
4
<PAGE>
HEALTHCOR HOLDINGS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------
1996 1995
------------ ------------
Cash flows from operating activities:
Net income ....................................$ 3,609,083 $ 2,337,256
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation and amortization ............. 3,615,382 1,565,847
Prepaid expenses and other ................ (726,219) (520,634)
Accounts receivable ....................... (8,341,820) (1,940,773)
Payroll liabilities ....................... 185,159 414,198
Income taxes payable ...................... (1,589,148) 716,472
Non-current liabilities ................... 2,057,544 2,906,546
Other ..................................... 1,626,133 545,802
------------ ------------
Net cash provided by operating activities . 436,114 6,024,714
Cash flows from investing activities:
Purchases of property and equipment ........... (5,369,007) (3,128,288)
Cash paid for acquisitions, net of
cash received ................................ (17,381,259) (12,655,690)
------------ ------------
Net cash used in investing
activities ................................ (22,750,266) (15,783,978)
Cash flows from financing activities:
Proceeds from issuance of long-term
debt ......................................... 35,592,469 14,256,377
Payments on long-term debt .................... (43,456,143) (6,319,719)
Payments on capital leases .................... (1,082,884) (392,891)
Issuance of common stock ...................... 30,639,500 4,165
------------ ------------
Net cash provided by financing
activities ................................ 21,692,942 7,547,932
------------ ------------
Net decrease in cash and cash equivalents ....... (621,210) (2,211,332)
Cash and cash equivalents at beginning of
period .......................................... 1,627,940 3,774,848
------------- ------------
Cash and cash equivalents at end of period ......$ 1,006,730 $ 1,563,516
============ ============
Supplemental disclosure of cash flow information:
Debt issued in connection with certain
acquisitions ..................................$ 1,366,068 $ 1,567,321
Debt assumed in connection with
certain acquisitions .......................... 244,674 566,340
Issuance of capital lease obligations ......... 2,940,652 1,251,091
Issuance of common stock to employee
stock option plan ............................. 1,467,500 1,400,000
See accompanying notes to condensed consolidated financial statements
5
<PAGE>
HEALTHCOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The unaudited condensed consolidated financial statements include the
accounts of HealthCor Holdings, Inc. and subsidiaries (the "Company") for the
nine months ended September 30, 1996 and 1995. All significant intercompany
transactions have been eliminated. Direct expenses on the statements of income
include all costs directly related to the production of net revenues, such as
salary and related benefit costs, depreciation of hand-held point-of-care
computers, billable medical supplies, product purchase costs, and rental
equipment depreciation. Depreciation costs not directly attributable to the
generation of net revenues are included in other costs and expenses.
2. Acquisitions
Effective May 1, 1996, the Company acquired, for $11,750,000 in cash and
$566,000 in debt, the net assets of I Care of Arkansas, Inc. and all of the
outstanding capital stock of I Care, Inc. (d/b/a I Care Health Services) and I
Care Home IV Affiliates, Inc. (collectively "I Care"), which provide infusion
therapy services and respiratory therapy equipment throughout Arkansas. The
acquisition was accounted for using the purchase method of accounting. The
purchase price and costs associated with the acquisition exceeded the fair value
of the net assets acquired by approximately $8,800,000, which has been recorded
as costs in excess of net assets acquired. The results of operations of I Care
have been included in the condensed consolidated statement of income from the
date of acquisition.
Effective September 1, 1996, the Company acquired, for $5,000,000 in cash
and $600,000 in debt, the net assets of Southern Medical Mart, Inc., a
respiratory therapy/medical equipment company with four locations in Louisiana.
The cash payment was financed using the amended credit facility (See note 4).
The acquisition will be accounted for using the purchase method of accounting.
The purchase price and costs associated with the acquisition are expected to
exceed the fair value of the net assets acquired by approximately $3,750,000,
which will be recorded as costs in excess of net assets acquired. The results of
operations of Southern Medical Mart, Inc. have been included in the condensed
consolidated statement of income from the date of acquisition.
The following unaudited pro forma information reflects the effect on the
consolidated statements of income assuming that all significant acquisitions
were consummated as of January 1, 1995 and 1996. This information does not
purport to be indicative of the results that would have actually been obtained
if the acquisitions had occurred on such dates. Therefore, pro forma information
cannot be considered indicative of future operations.
NINE MONTHS ENDED SEPTEMBER 30,
----------------------------------------
1996 1995
------ ------
(in thousands, except per share amounts)
Net revenues ..................................... $87,038 $86,180
Net income ....................................... 4,058 2,934
Net income per common share ...................... $ .55 $ .45
Weighted average common shares outstanding ....... 7,324 6,488
As mentioned in the "overview" section of Item 2 of this report, the
Company's business and revenue mix has changed significantly as a result of
acquisitions. This shift to a higher concentration of respiratory
therapy/medical equipment and infusion therapy has contributed materially to
favorabale growth in net income. Conversely, that same shift is the principal
reason for the lack of significant change in net revenues since the Company has
experienced a slight overall decline in the nursing portion of the business on a
pro forma basis.
6
<PAGE>
3. Initial Public Offering
On August 8, 1996, the Company offered and sold in an initial public
offering (the "IPO") 3,000,000 shares of common stock, and on September 11,
1996, the underwriters exercised their overallotment option to purchase an
additional 300,000 shares. Net proceeds from the IPO (after expenses) were
approximately $29.8 million, and were used to repay
(i) outstanding indebtedness under the Company's bank acquisition credit
facility, and (ii) other outstanding indebtedness incurred in connection with
acquisitions. The remaining proceeds of approximately $3.7 million is available
for general corporate purposes. In connection with the IPO, the Company's
convertible preferred stock was converted to common stock.
4. Credit Facilities
On September 3, 1996, the Company amended its bank credit agreement dated
May 16, 1996, to make an additional $10.0 million available under the Term Loan
portion of that agreement, for use in acquisitions of home health related
companies until November 1, 1996.
On October 31, 1996, the Company established a new credit facility,
effective November 1, 1996, that provides for an aggregate $75.0 million
facility consisting of a $60.0 million term facility for acquisitions and a
$15.0 million revolving credit line. Use of the new term loan facility is
limited to $52.5 million at the current stockholder equity levels, with the
remaining $7.5 million term facility available when the Company's stockholders'
equity increases by $10.0 million over a base stockholders' equity at August 8,
1996 of $47.3 million. The term facility is available for acquisitions until
October 31, 1998, and is repayable in quarterly installments of principal and
interest through October 31, 2001.
5. Subsequent Events
Subsequent to September 30, 1996, the Company acquired, for $2,350,000 in
cash and $1,750,000 in seller debt, the net assets of three nursing and
respiratory therapy/medical equipment companies and one personnel placement
company with locations in the southwestern and central United States. The cash
payments were financed using the amended credit facility (See note 4). The
acquisitions will be accounted for using the purchase method of accounting. The
purchase price and costs associated with the acquisitions are expected to exceed
the fair value of the net assets acquired by approximately $3,325,000, which
will be recorded as costs in excess of net assets acquired.
7
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
OVERVIEW
HealthCor Holdings, Inc. (the "Company") provides fully-integrated home
health care services, including nursing, respiratory therapy/medical equipment
and infusion therapy in nine states in the southwestern and central United
States. The Company has made 11 acquisitions of home health care companies since
September 30, 1995, primarily in the respiratory therapy/ medical equipment and
infusion therapy disciplines, to enable the Company to enter contiguous markets
and to expand the range of services offered in existing markets. The following
table summarizes these acquisitions:
Approximate
Acquisition Date Description Of Business Annual Revenues
- ----------------- ---------------------------------------- --------------
(in thousands)
October 31, 1995 Respiratory therapy/medical equipment $ 2,600
(three companies)
October 31, 1995 Nursing 3,500
April 1, 1996 Respiratory therapy/medical equipment 900
May 1, 1996 Respiratory therapy/medical equipment,
Infusion therapy 12,400
September 1, 1996 Respiratory therapy/medical equipment 7,000
October 1, 1996 Nursing 4,000
October 1, 1996 Respiratory therapy/medical equipment 700
October 1, 1996 Personnel placement services 4,300
November 1, 1996 Nursing 1,300
------------
$ 36,700
============
Subsequent to an acquisition, the Company seeks to implement its full
range of services throughout the acquired operations. In addition, the Company
plans to increase growth in existing offices by providing additional home health
care services, such as cardiac monitoring, hospice and primary home care. The
Company's strategy is to maximize the revenues of its offices in each of its
markets, which from time to time requires realignment of customers or services
among existing and new offices.
The Company's net revenue mix has changed dramatically as a result of
these acquisitions, shifting from predominantly nursing services to higher
margin respiratory therapy/medical equipment and infusion therapy businesses.
Following is a breakdown of net revenue mix (dollars in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
------------------------------------- ------------------------------------
1996 1995 1996 1995
-------------- --------------- --------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Nursing .................................... $14,669 53.8% $15,736 72.9% $46,029 59.4% $44,011 76.6%
Respiratory therapy/medical
equipment .............................. 7,613 28.0 4,463 20.7 20,566 26.5 10,314 17.9
Infusion therapy ........................... 4,972 18.2 1,379 6.4 10,881 14.1 3,175 5.5
------- ----- ------- ----- ------- ----- ------- -----
$27,254 100.0% $21,578 100.0% $77,476 100.0% $57,500 100.0%
======= ===== ======= ===== ======= ===== ======= =====
</TABLE>
8
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth certain items included in the Company's
unaudited condensed consolidated statements of income as a percentage of net
revenues:
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
-------------------------------- -------------------------------
1996 1995 1996 1995
------- ------ ------ ------
<S> <C> <C> <C> <C>
Net revenues ............................................... 100.0% 100.0% 100.0% 100.0%
Direct expenses ............................................ 43.6 50.4 45.3 52.7
------- ------ ------ ------
Gross profit ............................................... 56.4 49.6 54.7 47.3
Other costs and expenses:
General and administrative ............................. 39.3 37.7 39.2 36.5
Depreciation and amortization .......................... 3.4 1.5 2.8 1.4
Provision for doubtful accounts ........................ 3.1 1.8 3.0 1.8
------- ------ ------ ------
Total costs and expenses ....................... 45.8 41.0 45.0 39.7
------- ------ ------ ------
Income from operations ..................................... 10.6 8.6 9.7 7.6
Interest, net .............................................. 1.9 1.5 2.1 1.0
------- ------ ------ ------
Income before income taxes ................................. 8.7 7.1 7.6 6.6
Provision for income taxes ................................. 3.3 2.7 2.9 2.5
------- ------ ------ ------
Net income ................................................. 5.4 4.4 4.7 4.1
======= ====== ====== ======
</TABLE>
THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
NET REVENUES. Net revenues increased from $21.6 million for the three
months ended September 30, 1995 to $27.3 million for the same period in 1996, an
increase of $5.7 million, or 26.3%. This increase is primarily attributable to
incremental net revenues generated from the acquisitions made after September
30, 1995 and the expansion and addition of services at existing offices.
DIRECT EXPENSES. Included in direct expenses are all costs directly
related to the production of net revenues, including salary and employee benefit
costs, depreciation of hand-held point-of-care computers, billable medical
supplies, product purchase costs, and rental equipment depreciation. Direct
expenses increased from $10.9 million for the three months ended September 30,
1995 to $11.9 million for the three months ended September 30, 1996, an increase
of $1.0 million, or 9.2%. This increase is primarily a result of the acquisition
of additional respiratory therapy/medical equipment and infusion therapy
companies. As a percentage of net revenues, direct expenses declined from 50.4%
in 1995 to 43.6% in 1996 primarily as a result of the change in product mix to a
greater percentage of respiratory therapy/medical equipment and infusion
therapy, which have lower direct expenses than nursing.
GENERAL AND ADMINISTRATIVE. Included in general and administrative
expenses are occupancy costs, field office administration, corporate office
salaries and benefits, legal and accounting fees, and other nonpatient care
operating expenses. These costs increased from $8.1 million to $10.7 million, an
increase of $2.6 million, or 31.8%. Acquisitions account for the majority of
this increase, as well as for the increase in general and administrative expense
as a percent of net revenues from 37.7% to 39.4%. Although the shift in business
mix has contributed to lower direct costs as discussed above, general and
administrative expenses for respiratory therapy/medical equipment and infusion
therapy businesses are proportionality higher because the majority of all
personnel costs for these businesses are classified in this category.
Additionally, central office overhead increased in order to support Company
growth, particularly in the information services areas.
9
<PAGE>
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense
increased from $.3 million for the three months ended September 30, 1995, to $.9
million for the three months ended September 30,1996, an increase of $.6
million, or 188.5%. The increase is primarily due to acquisitions and increased
investment in information services equipment and costs capitalized as part of
the development of the Company's clinically-based management information system.
PROVISION FOR DOUBTFUL ACCOUNTS. The provision for doubtful accounts
increased from $.4 million for the three months ended September 30, 1995, to $.8
million for the three months ended September 30, 1996, an increase of $.4
million, or 119.4%. This increase is primarily due to acquisitions and the
resulting change in business mix to respiratory therapy/medical equipment and
infusion therapy businesses, which historically carry a higher provision for
doubtful accounts.
INTEREST, NET. Interest, net increased from $.3 million for the three
months ended September 30, 1995, to $.5 million for the same period of 1996, an
increase of $.2 million, or 66.1%. This increase relates primarily to the
increased debt associated with acquisitions, increased borrowings under the
Company's operating line of credit as a result of higher working capital needs,
and interest on leases associated with information systems development.
PROVISION FOR INCOME TAXES. The provision for income taxes increased from
$.6 million for the three months ended September 30, 1995, to $.9 million for
the three months ended September 30, 1996, an increase of $.3 million, or 53.8%,
primarily as a result of the increase in income before income taxes.
NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
NET REVENUES. Net revenues increased from $57.5 million for the nine
months ended September 30, 1995, to $77.5 million for the same period in 1996,
an increase of $20.0 million, or 34.7%. This increase is primarily attributable
to incremental net revenues generated from the acquisitions made after September
30, 1995 and integration of services through the office network.
DIRECT EXPENSES. Direct expenses increased from $30.3 million for the nine
months ended September 30, 1995, to $35.1 million for the nine months ended
September 30, 1996, an increase of $4.8 million, or 15.8%. This increase is
primarily associated with the acquisitions. As a percentage of net revenues,
direct expenses declined from 52.7% in 1995 to 45.3% in 1996 primarily as a
result of the change in product mix to a greater percentage of respiratory
therapy/medical equipment and infusion therapy, which have lower direct expenses
than nursing.
GENERAL AND ADMINISTRATIVE. General and administrative expenses increased
from $21.0 million for the nine months ended September 30, 1995, to $30.4
million for the nine months ended September 30, 1996, an increase of $9.4
million, or 44.7%. This increase is attributable primarily to costs associated
with acquisitions and additional central office overhead resulting from overall
Company growth.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense
increased from $.8 million for the nine months ended September 30, 1995, to $2.2
million for the same period of 1996, an increase of $1.4 million, or 164.0%.
This increase is primarily due to the acquisition activity and the investment in
information services equipment and costs capitalized as part of the development
of the Company's clinically-based management information system.
PROVISION FOR DOUBTFUL ACCOUNTS. The provision for doubtful accounts
increased from $1.0 million for the nine months ended September 30, 1995, to
$2.3 million for the nine months ended September 30, 1996, an increase of $1.3
million, or 125.5%. This increase is primarily due to the increase in net
revenues. As a percentage of net revenues, the provision for doubtful accounts
has increased from 1.8% for the nine months ended September 30, 1995 to 3.0% for
the nine months ended September 30, 1996 primarily because of the change in
business mix.
10
<PAGE>
INTEREST, NET. Interest, net increased from $.6 million for the nine
months ended September 30, 1995 to $1.7 million for the same period in 1996.
This increase of $1.1 million, or 192.3%, relates to the increased debt incurred
in connection with acquisitions, interest cost on borrowings under the Company's
line of credit as a result of higher working capital needs, and interest on
leases associated with information systems development.
PROVISION FOR INCOME TAXES. The provision for income taxes increased from
$1.4 million for the nine months ended September 30, 1995, to $2.3 million for
the same period in 1996, an increase of $.9 million, or 57.3%. This increase is
a result of the growth in income before income taxes.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal capital requirements are for acquisition of
additional home health care companies and to a lesser extent for the expansion
of services provided through existing offices. Historically, the Company has
funded its working capital needs and capital expenditures from cash flows
provided from operations, supplemented by short-term borrowings.
At September 30, 1996, the Company had current assets of $29.8 million and
current liabilities of $18.6 million, resulting in working capital of $11.2
million as compared to a working capital deficit of $1.7 million as of December
31, 1995. Working capital increased by $3.7 million as a result of the Company's
initial public offering, discussed further below. Additionally, $3.1 million
represents net current assets of companies acquired principally through use of
the Company's long-term credit facility and $1.5 million from the Company
contributing 130,000 shares of common stock to its employee stock option plan
("ESOP") to relieve the related liability from the books. The remaining
improvement came from operations.
On August 8, 1996, the Company consummated an initial public offering (the
"IPO") of 3,000,000 shares of common stock, and on September 11, 1996, the
underwriters exercised their overallotment option for an additional 300,000
shares. Net proceeds from the IPO (after expenses) were approximately $29.8
million, and were used to (i) repay outstanding indebtedness under the Company's
bank acquisition credit facility, and (ii) repay outstanding indebtedness to
certain individuals, incurred in connection with acquisitions. The remaining
proceeds of approximately $3.7 million are available for general corporate
purposes. In connection with the IPO, the Company's convertible preferred stock
was converted to common stock and warrants for 150,000 common shares were
exercised for $.3 million. On September 16, 1996, the Company contributed
130,000 common shares to its ESOP.
Accounts receivable at September 30, 1996 were $23.2 million, compared to
$11.5 million at December 31, 1995. Days of Sales Outstanding ("DSO"), defined
as accounts receivable divided by average daily net revenues for the preceding
three months, were 77.5 as of September 30, 1996, compared to 57.0 at December
31, 1995. The increase in DSO from December 31, 1995 to September 30, 1996 is
attributable primarily to: (i) timing delays in interim Medicare payments
resulting from procedural changes/interpretations by the Company's Medicare
fiscal intermediary; (ii) net revenue deferrals relating to the reimbursement of
certain re-engineering costs; (iii) changes in net revenue mix towards
respiratory therapy/medical equipment and infusion therapy, which historically
have higher DSO; and (iv) a slowdown by Medicare in paying for respiratory
therapy/medical equipment and infusion therapy.
Net cash provided by operating activities declined from $6.0 million for
the nine months ended September 30, 1995 to $.4 million for the nine months
ended September 30, 1996 , or a cash outflow of $5.6 million. The increase in
accounts receivable and related DSO accounts were primarily responsible for the
reduction in operating cash during 1996. Net cash used in investing activities
increased from $15.8 million for the first nine months of 1995 to $22.8 million
for the same period in 1996. Of this increase of $7.0 million, $4.7 million
relates to acquisitions in 1996 as compared to 1995, $2.2 million is a result of
greater 1996 software acquisition costs related to the re-engineering project,
and the remaining amount relates to other capital expenditures. The Company
utilizes capital leases to acquire equipment, primarily information services
equipment and medical equipment needed to accommodate increased sales volume in
the respiratory therapy/medical equipment business. Such lease amounts were $2.9
million and $1.3 million for the nine months ended September 30, 1996 and 1995,
respectively.
11
<PAGE>
The Company recently completed the acquisition of four companies in the
nursing, respiratory therapy/medical equipment and personnel placement services
for $4.1 million. The acquisitions were financed through the Company's bank
credit facility ($2.4 million) and seller debt ($1.7 million). The Company
continues to explore acquisition opportunities and has recently established a
new term loan facility of $60.0 million and a revolving credit facility of $15.0
million. Of the $60.0 million term loan facility, $52.5 million is available
immediately, with the remaining $7.5 million available to the Company when the
Company's stockholders' equity increases by $10.0 million over its stockholders'
equity balance at August 8, 1996 of $47.3 million. The new revolving credit
facility will replace the current $10.0 million revolving facility. The new
credit agreement contains covenants similar to those in the current credit
agreement dated May 16, 1996. As of November 11, 1996, the Company had $9.1
million unused credit available under the new revolving facility, and $45.0
million unused credit available under the extended long-term credit facility.
RECENT DEVELOPMENTS
Subsequent to September 30, 1996, the Company acquired in separate
transactions four companies in the nursing, respiratory therapy/medical
equipment and personnel placement businesses for $4.1 million in cash and seller
notes. The purchase prices for these companies are expected to exceed the fair
values of the assets acquired by approximately $3.2 million, which will be
recorded as costs in excess of net assets acquired. These companies are expected
to generate annual revenues of approximately $10.0 million.
12
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
11 -- Computation of net income per common equivalent share
(b) The Company filed one report on Form 8-K during the quarterly period
ended September 30, 1996. The report concerned Item 2, acquisition of assets,
specifically the acquisition of Southern Medical Mart, Inc. Form 8-K included
the financial statements of Southern Medical Mart, Inc., as follows: An audited
balance sheet at December 31. 1995, and the related statements of income and
retained earnings and cash flows for the year then ended, an unaudited balance
sheet at June 30, 1996, and the related unaudited statements of income and
retained earnings and cash flows for the six-month periods ended June 30, 1996
and 1995. Also included was unuadited pro forma condensed financial information
of the Company and Southern Medical Mart, Inc. at December 31, 1995, and for the
year then ended as well as for the six-month periods ended June 30, 1996 and
1995. The Form 8-K was filed on November 14, 1996.
13
<PAGE>
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.
HEALTHCOR HOLDINGS, INC.
Date: November 14, 1996 By: Susan L. Belske, Senior Vice President
and Chief Financial Officer
14
EXHIBIT 11
HEALTHCOR HOLDINGS, INC. AND SUBSIDIARIES
UNAUDITED NET INCOME PER COMMON EQUIVALENT SHARES
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPT. 30, NINE MONTHS ENDED SEPT. 30,
---------------------------- ----------------------------
1996 1995 1996 1995
---------- ---------- ---------- ----------
PRIMARY EARNINGS PER SHARE
<S> <C> <C> <C> <C>
Net income ................................................. $1,462,386 $ 958,451 $3,609,083 $2,337,256
========== ========== ========== ==========
Shares:
Weighted average common shares issued ................... 8,319,201 2,914,897 7,016,755 2,900,201
Assuming exercise of options,
reduced by the number of common
shares which could have been
purchased with the proceeds
from exercised of such options .......................... 255,818 248,799 307,275 248,799
Assuming conversion of Series A
preferred stocks ........................................ -- 2,000,000 -- 2,000,000
Assuming conversion of Series B
preferred stocks ........................................ -- 1,339,298 -- 1,339,298
---------- ---------- ---------- ----------
Weighted average number of common
shares outstanding, as adjusted ......................... 8,575,019 6,502,994 7,324,030 6,488,298
========== ========== ========== ==========
Net income per common share ................................ $ 0.17 $ 0.15 $ 0.49 $ 0.36
========== ========== ========== ==========
FULLY DILUTED EARNINGS PER SHARE
Net income ................................................. $1,462,386 $ 958,451 $3,609,083 $2,337,256
========== ========== ========== ==========
Shares:
Weighted average common shares issued ................... 8,319,201 2,914,897 7,016,755 2,900,201
Assuming exercise of options,
reduced by the number of common shares
which could have been purchased with
the proceeds from exercised of such
options ................................................. 278,546 248,799 332,092 248,799
Assuming conversion of Series A
preferred stocks ........................................ -- 2,000,000 -- 2,000,000
Assuming conversion of Series B
preferred stocks ........................................ -- 1,339,298 -- 1,339,298
---------- ---------- ---------- ----------
Weighted average number of common
shares outstanding, as adjusted ......................... 8,597,747 6,502,994 7,348,847 6,488,298
========== ========== ========== ==========
Net income per common share ................................ $ 0.17 $ 0.15 $ 0.49 $ 0.36
========== ========== ========== ==========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM SEPTEMBER 30, 1996 10-Q BALANCE SHEET & INCOME STATEMENT AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 1,006,730
<SECURITIES> 0
<RECEIVABLES> 23,216,083
<ALLOWANCES> 0
<INVENTORY> 2,032,693
<CURRENT-ASSETS> 29,768,914
<PP&E> 19,049,214
<DEPRECIATION> 0
<TOTAL-ASSETS> 84,799,256
<CURRENT-LIABILITIES> 18,613,673
<BONDS> 0
0
0
<COMMON> 100,133
<OTHER-SE> 53,017,571
<TOTAL-LIABILITY-AND-EQUITY> 84,799,256
<SALES> 77,476,115
<TOTAL-REVENUES> 77,476,115
<CGS> 35,095,128
<TOTAL-COSTS> 35,095,128
<OTHER-EXPENSES> 32,560,485
<LOSS-PROVISION> 2,286,502
<INTEREST-EXPENSE> 1,663,374
<INCOME-PRETAX> 5,870,626
<INCOME-TAX> 2,261,543
<INCOME-CONTINUING> 3,609,083
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,609,083
<EPS-PRIMARY> .49
<EPS-DILUTED> .49
</TABLE>
