<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997
OR
[ ] 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 000-21505
INTENSIVA HEALTHCARE CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 43-1690769
------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
7733 FORSYTH BLVD., 11TH FLOOR, ST. LOUIS, MISSOURI 63105
----------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(314) 725-0112
------------------------------------------------------
(Registrant's telephone number, including area code)
- ---------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filled 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 [ ]
The number of shares outstanding of the registrant's Common Stock, par value
$0.001 per share, at April 30, 1997, was 9,905,062 shares.
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PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
INTENSIVA HEALTHCARE CORPORATION
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31,
1997 DECEMBER 31,
ASSETS (UNAUDITED) 1996
----------- -----------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 4,616,887 $ 5,105,096
Short-term investments 7,675,857 10,767,101
Accounts receivable, less allowance for doubtful
accounts of $2,034,063 and $1,270,478,
respectively 12,092,580 7,579,922
Inventories 254,803 254,177
Prepaid expenses 385,115 583,204
----------- -----------
Total current assets 25,025,242 24,289,500
Property and equipment, net 3,701,805 3,434,560
Organizational and preopening costs, net 170,342 147,117
Other assets 540,830 593,185
----------- -----------
$29,438,219 $28,464,362
=========== ===========
Liabilities and Stockholders' Equity
Current liabilities:
Current installments of long-term obligations $ 448,197 $ 484,966
Accounts payable and accrued expenses 3,738,496 3,077,326
Accrued salaries, wages and benefits 1,269,551 1,036,071
----------- -----------
Total current liabilities 5,456,244 4,598,363
Long-term obligations, less current installments 778,231 634,781
Deferred rent expense 1,143,376 1,085,300
Stockholders' equity:
Common stock, $0.001 par value, 70 million
shares authorized, 9,905,062 shares issued
and outstanding 9,905 9,905
Additional paid-in capital 30,184,544 30,184,544
Accumulated deficit (8,134,081) (8,048,531)
----------- -----------
Total stockholders' equity 22,060,368 22,145,918
----------- -----------
$29,438,219 $28,464,362
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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INTENSIVA HEALTHCARE CORPORATION
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(UNAUDITED)
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Net patient service revenues $12,400,383 $ 2,508,719
Costs and expenses:
Operating expenses 10,458,384 2,602,544
General and administrative 1,012,723 651,689
Provision for doubtful accounts 863,334 13,896
Depreciation and amortization 293,210 74,342
----------- -----------
Total costs and expenses 12,627,651 3,342,471
----------- -----------
Operating loss (227,268) (833,752)
Interest income 202,727 118,946
Interest expense (61,009) (14,732)
----------- -----------
Net loss $ (85,550) $ (729,538)
=========== ==========
Loss per share $ (0.01) $ (0.46)
=========== ===========
Weighted average outstanding shares 9,905,062 1,589,775
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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INTENSIVA HEALTHCARE CORPORATION
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(UNAUDITED)
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (85,550) $ (729,538)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization 293,210 74,342
Provision for doubtful accounts 863,334 13,896
Increase in accounts receivable (5,375,992) (1,559,990)
Decrease (increase) in inventories, prepaid expenses
and other assets 198,652 (351,816)
Increase in accounts payable and accrued expenses 661,170 333,536
Increase in accrued salaries, wages and benefits 233,480 189,516
Increase in accrued rent differential 58,076 271,403
----------- -----------
Net cash used in operating activities (3,153,620) (1,758,651)
---------- ----------
Cash flows from investing activities:
Additions to property and equipment (204,876) (841,248)
Proceeds from sale of equipment - 337,792
Organizational and preopening costs (69,918) (46,904)
Maturities of short-term investments 3,091,244 -
----------- ------------
Net cash provided by (used in) investing activities
2,816,450 (550,360)
----------- -----------
Cash flows from financing activities:
Proceeds from issuance of preferred stock - 22
Repayment of note payable - stockholder - (265,200)
Payments on long-term obligations (151,039) (61,396)
----------- -----------
Net cash used in financing activities (151,039) (326,574)
----------- -----------
Decrease in cash and cash equivalents (488,209) (2,635,585)
Cash and cash equivalents, beginning of period 5,105,096 11,261,422
----------- -----------
Cash and cash equivalents, end of period $ 4,616,887 $ 8,625,837
=========== ===========
Supplemental cash flow information - cash paid for interest $ 61,009 $ 14,732
=========== ===========
Supplemental information - noncash activity:
Acquisition of equipment through capital leases $ 257,724 $ 91,249
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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INTENSIVA HEALTHCARE CORPORATION
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) BASIS OF PRESENTATION
The condensed consolidated balance sheet as of March 31, 1997 and
related condensed consolidated statements of operations and cash flows
contained in this Form 10-Q, which are unaudited, include the accounts
of Intensiva HealthCare Corporation and its wholly-owned subsidiaries
("Intensiva" or the "Company"). All significant intercompany accounts
have been eliminated in consolidation. In the opinion of management,
all adjustments necessary for a fair presentation of such financial
statements have been included. Adjustments consist only of normal
recurring items. The results of operations for the three months ended
March 31, 1997 and 1996, are not necessarily indicative of the results
to be expected for the full fiscal year.
The condensed consolidated financial statements do not include all
information and footnotes necessary for a complete presentation of
financial position, results of operations and cash flows in conformity
with generally accepted accounting principles. Reference is made to
the Company's audited financial statements and the related notes,
included in the registrant's annual report on Form 10-K for the year
ended December 31, 1996.
(2) NET LOSS PER SHARE
The Company's net loss per share calculations are based upon the
weighted average number of shares of common stock outstanding.
Pursuant to the requirements of the Securities and Exchange Commission
Staff Accounting Bulletin No. 83, options to purchase common stock
issued at prices below the initial public offering during the twelve
months immediately preceding the contemplated initial filing of the
registration statement relating to the initial public offering (IPO),
have been included in the computation of net loss per share as if they
were outstanding for all periods prior to the effective date of the
IPO. Other shares issuable upon the exercise of stock options or
conversion of convertible preferred stock have been excluded from
historical per share amounts because the effect of their inclusion
would be anti-dilutive.
In February 1997, Statement of Financial Accounting Standards No. 128
(SFAS 128), "Earnings Per Share," was issued establishing new standards
for computing and presenting earnings per share. The historical
measures of earnings per share (primary and fully diluted) are
replaced with two new computations of earnings per share (basic and
diluted). The Company will adopt SFAS 128 as of December 31, 1997.
Loss per share, on a pro forma basis, for the three month-periods
ended March 31, 1997 and 1996, computed pursuant to the provisions of
SFAS 128, would have been as follows:
<TABLE>
<CAPTION>
1997 1996
----- -----
<S> <C> <C>
Basic loss per share $ (0.01) $ (0.46)
Diluted loss per share $ (0.01) $ (0.46)
</TABLE>
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Intensiva provides highly specialized, acute long-term care for
critically ill or injured patients who require intensive medical monitoring and
treatment, and who often have multiple medical conditions and are medically
unstable. The Company provides high quality, cost effective, specialized care
for its patients, who typically require an average length of stay of greater
than 25 days in an intensive inpatient setting. Intensiva's medical staffs
provide specialized medical services, as well as nursing and respiratory care,
and the Company is developing disease-specific pathways to treat pulmonary,
cancer, renal and cardiac conditions, among others. The Company's clinical
programs utilize specialized staff, equipment and protocols for the treatment
of its patients.
Intensiva leases underutilized space from general acute care hospitals
("Host Hospitals") in underserved secondary markets, creating a separate
"hospital within a hospital." By leasing space from the Host Hospital,
Intensiva is able to minimize capital and overhead costs including owning and
operating the physical plant and expensive medical and diagnostic equipment.
The Company is able to purchase certain services from its Host Hospitals, such
as laboratory and radiology (MRI, CAT Scan, X-Ray), as well as hotel services
such as laundry, housekeeping, dietary and property management. The Company's
business model provides for each of its specialized hospitals to become
certified by Medicare as a "long-term care hospital" and exempt from PPS after
approximately seven months of operations, and receive cost-based
reimbursement, which the Company believes is more appropriate given the medical
condition of its patients. In addition, the Company's business model seeks to
maintain the anticipated payor mix which includes both non-governmental and
governmental payors. The Company is reimbursed by non-governmental payors on
per diem, per discharge or other capitated forms of payment and fee for service
arrangements or negotiated charges.
Operations begin approximately four months after an agreement is
executed with a Host Hospital. During the qualification period, the Company
spends approximately one million dollars on renovation costs, equipment
purchases, pre-opening costs and working capital before the facility becomes
eligible for certification as a long-term care hospital. Patient volumes are
lower during the qualification phase while physicians, case managers, and
payors are educated as to the benefits of the Company's clinical services.
The Company currently operates ten facilities in five states. In
addition, the Company has four other facilities under development, all of which
the Company anticipates will begin operations during the second quarter of
1997. The Company has also entered into a lease agreement to open an
additional facility which the Company anticipates will open during 1997. The
Company has generated historical operating losses as a result of its rapid
growth and anticipates that it will continue to incur such losses through at
least the second quarter of 1997.
SOURCES OF REVENUES
The Company receives payment for health care services primarily from
non-governmental payors such as managed care organizations (e.g. preferred
provider and health maintenance organizations) and other commercial health
insurance carriers (e.g. traditional indemnity insurance plans), and the
federal government and state governments under the Medicare, Medicaid and other
governmental programs. Consistent with initiatives to control health care
costs, the Company generally negotiates payments with non-governmental
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payors based upon the type and extent of services to be provided to individual
patients. The following table sets forth the approximate percentages of the
Company's net patient service revenues derived from the specified payor sources
indicated:
<TABLE>
<CAPTION>
Three Months Ended Year Ended
March 31, December 31,
1997 1996 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Medicare 81.0% 65.9% 73.2% 44.4%
Medicaid 0.6 5.5 0.9 2.3
Indemnity and other insurance providers 6.6 17.9 16.0 42.1
HMO 1.2 3.7 1.4 2.5
PPO 10.4 3.6 6.5 2.7
Other negotiated arrangements 0.2 3.4 2.0 6.0
----- ----- ----- -----
100.0% 100.0% 100.0% 100.0%
===== ===== ===== =====
</TABLE>
The increase in Medicare net revenues as a percentage of total net
revenues is primarily attributable to the addition of new facilities in the
early stages of operation. The Company historically experienced a trend toward
higher percentages of Medicare patients in the early months of operation. The
decrease in indemnity and other insurance net revenues as a percentage of total
net revenues corresponds to the net increase in Medicare revenues as noted
above.
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
Net Revenues. Net revenues for the three months ended March 31, 1997
were $12.4 million compared to $2.5 million for the comparable period in 1996.
The Company had ten operational sites at March 31, 1997 as compared to four
operational sites at March 31, 1996, two of which opened during the first
quarter of 1996.
Operating Expenses. Operating expenses for the three months ended
March 31, 1997 increased $7.9 million from the comparable period in 1996. This
increase is attributable to the increased number of operational sites at March
31, 1997 and the growth in business at each facility as it matures. As a
percentage of net revenues, operating expenses decreased from 104% to 84%. The
Company expects this percentage to continue to decline as its facilities
mature.
General and Administrative. General and administrative expenses for
the three months ended March 31, 1997 increased $360,000, or 55%, to $1.0
million from the comparable period in 1996. The increase in expenses was
primarily attributable to salaries, related payroll taxes, and employee
benefits relating to additional personnel retained to support the Company's
growth strategy. As a percentage of net revenues, general and administrative
expenses decreased from 26% to 8%. The Company expects that its general and
administrative expenses will continue to decrease as a percentage of net
revenues as the Company grows and achieves certain economies of scale.
Provision for Doubtful Accounts. The provision for doubtful
accounts for the three months ended March 31, 1997 increased $850,000, to
$860,000, from the comparable period in 1996. The increase is attributable to
the growth in net revenues. As a percentage of net revenues, the provision for
doubtful accounts increased from 1% to 7%. The Company expects this percentage
to stabilize as the Company matures.
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Depreciation and Amortization. Depreciation and amortization for the
three months ended March 31, 1997 increased $220,000, to $290,000, from the
comparable period in 1996. The increase relates to the acquisition of
additional property and equipment and the amortization of a computer software
license and organizational and pre-opening costs associated with the ten open
hospitals at March 31, 1997.
Income Taxes. The Company has paid minimal income taxes to date and
has approximately $4.7 million of net operating loss carryforwards for income
tax purposes, which, subject to limitations on use, if unused, will begin to
expire in the year 2009.
SELECTED QUARTERLY FINANCIAL RESULTS
The Company's quarterly financial position and results of operations
have fluctuated due to its emerging from the development stage status in March
1995, obtaining PPS-exempt status for its first facility in November 1995, the
opening of additional facilities in December 1995 and throughout 1996, and
obtaining exempt long-term care status for five additional facilities. The
following table presents unaudited quarterly operating results for each of the
nine quarters in the period from January 1, 1995 through March 31, 1996. The
Company believes that all necessary adjustments have been included in the
amounts stated below to present fairly the following selected quarterly
information when read in conjunction with the financial statements included
elsewhere in this Form 10-Q.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------
STATEMENT OF
OPERATIONS MAR 31, JUNE 30, SEPT 30, DEC 31, MAR 31, JUNE 30, SEPT 30, DEC 31, MAR 31,
DATA: 1995 1995 1995 1995 1996 1996 1996 1996 1997
--------------------------------------------------------------------------------------------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenues $--- $ 165 $ 459 $ 864 $ 2,509 $ 3,567 $4,663 $8,009 $12,400
Operating loss (572) (756) (839) (919) (834) (1,118) (1,623) (1,780) (227)
Net loss (504) (696) (772) (875) (729) (1,021) (1,597) (1,639) (86)
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
Through March 1997, the Company has financed its operations primarily
through proceeds from the sale of the Company's equity securities. Cash flows
from operations have not been sufficient to support ongoing operations
primarily due to the time required in obtaining new Medicare provider numbers
and the continuing development of new facilities in accordance with the
Company's growth strategy. On October 10, 1996, the Company completed its
initial public offering which, together with the underwriters' over-allotment
option, resulted in net proceeds to the Company of $15.3 million.
Cash flows used in investing activities have consisted primarily of
capital renovations, equipment purchases, and organizational and pre-opening
costs incurred prior to providing patient services at each new facility. In
addition to the sale of the Company's equity securities, financing activities
have included borrowings under capital leases and a sale-leaseback agreement.
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Capital expenditures totaled approximately $200,000 and $850,000
during the three months ended March 31, 1997 and 1996, respectively.
Additional equipment was acquired through capital leases, amounting to
approximately $260,000 and $90,000 for the three months ended March 31, 1997
and 1996, respectively.
During March 1996, the Company entered into a sale-leaseback agreement
with a third party to take advantage of favorable borrowing rates and maintain
liquidity. This third-party received warrants to purchase 15,950 shares of
common stock as a part of this transaction. The net book value of assets sold
and subsequently leased under this agreement totaled $342,244. Net proceeds
were $337,792, resulting in a net loss of $4,452. As part of this agreement,
the Company has an available line of credit to finance additional capital
expenditures (up to $1.0 million in the aggregate). Unutilized borrowing
capacity under the line of credit was approximately $200,000 at March 31, 1997.
Accounts receivable balances have increased $4.5 million since
December 31, 1996. The majority of the increase is a result of increased census
at the company's facilities and the time required in obtaining new Medicare
provider numbers from the Medicare intermediaries once a facility opens and
upon completing the qualification period. One provider number which was
obtained in March 1997 has resulted in approximately $1.1 million in
collections during April 1997.
Working capital at March 31, 1997 was $19.6 million, representing a
decrease of $0.1 million from December 31, 1996 which was primarily
attributable to the financing of current operations. The Company expects to
invest approximately $1.0 million per facility to fund capital renovations for
preopening costs and working capital requirements before a facility achieves
profitability.
The Company leases space from Host Hospitals under operating lease
agreements having initial terms of five or more years. The Company leases
corporate office space under a noncancellable operating lease which expires in
the year 2002. Minimum annual lease payments on noncancellable operating
leases with maturities in excess of one year are as follows: $4.1 million in
1997, $4.6 million in 1998, $4.6 million in 1999, $4.6 million in 2000, $4.2
million in 2001 and $3.9 million thereafter.
The Company believes that its current cash and cash equivalents and
short-term investments, together with existing or planned financing
commitments, will be sufficient to fund its continued development and meet
anticipated cash needs of the Company through at least 1997. However, there
can be no assurance that the Company will not be required to seek additional
capital.
HEALTH CARE LEGISLATION
In recent years, an increasing number of legislative proposals have
been introduced or proposed in Congress and in some state legislatures which
could affect major changes in the health care system. Several of these
legislative proposals have included provisions that affect long-term care
hospitals. Management cannot predict whether such proposed legislation will be
adopted or if adopted, what effect, if any, such proposed legislation would
have on the operations of the Company.
FORWARD LOOKING STATEMENTS
Certain of the statements made herein are forward looking statements,
as that term is defined under the Private Securities Litigation Reform Act of
1995 and releases by the Securities and Exchange Commission. The Company
cautions readers that actual results could be materially different as a result
of
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various possibilities and differences between anticipated and actual
developments. Factors that could cause actual results to differ from
anticipated results include, but are not limited to changes in health care
regulation and/or health care reform, changes in the regulation of
relationships among health care providers, difficulty in obtaining necessary
licenses or certifications, ability to collect accounts receivable, changes in
reimbursement policies or procedures, changes in payor mix, changes in referral
source practices, changes in relationships with Host Hospitals and/or the
leases with such Host Hospitals, competition, and the adequacy of professional
liability insurance. The Company undertakes no obligation to publicly release
the results of any revisions to any forward looking statements contained herein
which may be made to reflect events or circumstances after the date hereof or
to reflect the occurrence of unanticipated events.
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PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There are no reportable proceedings.
ITEM 2. CHANGE IN SECURITIES
(a) Not applicable.
(b) Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
(a) Not applicable.
(b) Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) See Exhibit Index for list of Exhibits.
(b) Not applicable.
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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.
INTENSIVA HEALTHCARE CORPORATION
Date: May 12, 1997 By /s/ John P. Keefe
-----------------------------------------
John P. Keefe, Chief Financial Officer
(Principal Financial and Accounting
Officer)
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EXHIBIT INDEX
Exhibit
Number Exhibit
------ -------
27.1 Financial Data Schedule
Page 13
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM INTENSIVA
HEALTHCARE CORPORATION'S CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE
THREE MONTHS ENDED MARCH 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 4,616,887
<SECURITIES> 7,675,857
<RECEIVABLES> 12,092,580
<ALLOWANCES> 2,034,063
<INVENTORY> 254,803
<CURRENT-ASSETS> 25,025,242
<PP&E> 3,701,805
<DEPRECIATION> 672,969
<TOTAL-ASSETS> 29,438,219
<CURRENT-LIABILITIES> 5,456,244
<BONDS> 0
0
0
<COMMON> 9,905
<OTHER-SE> 22,050,463
<TOTAL-LIABILITY-AND-EQUITY> 29,438,219
<SALES> 0
<TOTAL-REVENUES> 12,400,383
<CGS> 0
<TOTAL-COSTS> 10,458,384
<OTHER-EXPENSES> 1,012,723
<LOSS-PROVISION> 863,334
<INTEREST-EXPENSE> 61,009
<INCOME-PRETAX> (85,550)
<INCOME-TAX> 0
<INCOME-CONTINUING> (85,550)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (85,550)
<EPS-PRIMARY> (0.01)
<EPS-DILUTED> (0.01)
</TABLE>
