SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
_X_ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1995
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 No. 0-9407
REHABILICARE INC.
(Exact name of small business issuer as specified in charter)
MINNESOTA 41-0985318
(State of Incorporation) (I.R.S. Employer Identification No.)
1811 Old Highway 8
NEW BRIGHTON, MINNESOTA 55112
(Address of Principal Executive Offices)
(612) 631-0590
(Issuer's telephone number)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act 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 for each of the Issuer's classes of common
stock as of September 30, 1995, was:
COMMON STOCK, $.10 PAR VALUE 4,629,415 SHARES
TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT (check one):
Yes ___ No _X_
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
REHABILICARE INC.
BALANCE SHEETS
(UNAUDITED)
SEPTEMBER 30, JUNE 30,
ASSETS 1995 1995
CURRENT ASSETS
Cash $ 28,521 $ 55,704
Receivables, less reserve for uncollectible
accounts of $650,644 and $599,311 5,469,013 5,205,285
Inventories:
Raw materials 493,535 408,154
Finished goods 1,522,346 1,528,101
Deferred income tax benefit 263,000 263,000
Income tax refund receivable 111,129 111,129
Prepaid expenses 185,684 172,682
Total current assets 8,073,228 7,744,055
PROPERTY AND EQUIPMENT 4,760,613 4,719,943
Less accumulated depreciation (2,347,083) (2,215,657)
Total property and equipment 2,413,530 2,504,286
$ 10,486,758 $ 10,248,341
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Note payable $ 675,000 $ 650,000
Current maturities of long-term obligations 88,489 88,489
Accounts payable 476,878 486,134
Accrued liabilities:
Payroll 118,131 110,806
Commissions 141,025 160,825
Warranty 61,900 61,900
Income taxes 63,661 --
Other 54,726 37,018
Total current liabilities 1,679,810 1,595,172
LONG-TERM OBLIGATIONS 1,884,053 1,904,211
Total liabilities 3,563,863 3,499,383
STOCKHOLDERS' EQUITY
Common stock 462,942 460,900
Additional paid-in capital 5,149,385 5,116,962
Retained earnings 1,310,568 1,171,096
Total stockholders' equity 6,922,895 6,748,958
$ 10,486,758 $ 10,248,341
The accompanying notes to financial statements are an integral part of these
balance sheets.
REHABILICARE INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended
September 30,
1995 1994
Net sales and rental revenue $ 2,343,122 $ 2,255,619
Cost of sales and rentals 750,584 694,431
Gross profit 1,592,538 1,561,188
Operating expenses:
Selling, general and administrative 1,206,559 1,250,282
Research and development 116,041 103,911
Total operating expenses 1,322,600 1,354,193
Operating income 269,938 206,995
Other income (expense):
Interest expense (53,626) (4,858)
Other 1,160 1,338
Income before income taxes 217,472 203,475
Provision for income taxes 78,000 73,200
Net income $ 139,472 $ 130,275
Net income per common share and
common share equivalents $ .03 $ .03
Weighted average number of common and
common share equivalents outstanding 4,853,141 4,674,973
The accompanying notes to financial statements are an integral part of these
financial statements.
REHABILICARE INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended September 30,
1995 1994
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 139,472 $ 130,275
Adjustments to reconcile net income to net cash used
in operating activities:
Depreciation 131,426 135,391
Deferred income taxes -- (14,061)
Change in current assets and liabilities:
Receivables (263,728) (325,823)
Inventories (95,102) 87,758
Prepaid expenses (13,002) (29,437)
Accounts payable (9,256) 62,192
Accrued liabilities 68,894 (159,542)
Net cash used in operating activities (41,296) (113,247)
INVESTING ACTIVITIES
Purchase of property and equipment (25,194) (30,226)
FINANCING ACTIVITIES
Principal payments on long-term obligations (20,158) (5,407)
Proceeds from line of credit, net 25,000 125,000
Proceeds from sale of common stock -- --
Proceeds from exercise of stock options 34,465 1,626
Net cash provided by financing activities 39,307 121,219
Net decrease in cash (27,183) (22,254)
CASH AT BEGINNING OF PERIOD 55,704 44,129
CASH AT END OF PERIOD $ 28,521 $ 21,875
SUPPLEMENTAL DISCLOSURES
Cash paid during the period for: $ 53,626 $ 4,858
Interest
Income taxes $ 14,339 $ 90,040
</TABLE>
The accompanying notes to financial statements are an integral part of these
financial statements.
REHABILICARE INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
Note A
The amounts set forth in the preceding financial statements are unaudited as of
and for the periods ended September 30, 1995 and 1994, but in the opinion of
management, reflect all adjustments (consisting only of normal recurring
accruals) necessary for a fair statement of the results for the periods
presented. Such results are not necessarily indicative of results for the full
year.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
RESULTS OF OPERATIONS
The following table sets forth information from the statements of operations as
a percentage of revenue for the periods indicated:
THREE MONTHS ENDED SEPTEMBER 30 1995 1994
Net sales and rental revenue 100.0% 100.0%
Cost of sales and rentals 32.0 30.8
Gross profit 68.0 69.2
Operating expenses -
Selling, general and administrative 51.5 55.4
Research and development 5.0 4.6
Total operating expenses 56.5 60.0
Operating income 11.5 9.2
Other expense 2.2 .2
Provision for income taxes 3.3 3.2
Net income 6.0 5.8
Revenue for the first quarter of fiscal 1996 was $2,343,000, a 4% increase from
$2,256,000 in the first quarter of fiscal 1995. The increase resulted from the
continued growth of international dealer business. Revenue from the Company's
traditional dealer business, including international, grew 41% to $707,000 from
$501,000 in the first quarter of fiscal 1995. Net sales and rental revenue from
direct sales decreased 7% in 1996 to $1,636,000 from $1,754,000 in the first
quarter of 1995. Those revenues accounted for approximately 70% of revenue
during the first quarter of fiscal 1996 compared to 78% during the first quarter
of fiscal 1995. The Company sold or rented its products to approximately 2,500
new patients during the first quarter of both fiscal 1996 and fiscal 1995. It
had relationships with approximately 1,600 clinics at September 30, 1995
compared with 1,100 at September 30, 1994. All changes were primarily
attributable to volume and product mix as selling prices and rental rates were
essentially the same during both years.
Gross profit for the first quarter of fiscal 1996 increased 2% to $1,593,000 or
68% of revenue, compared to $1,561,000 or 69% of revenue in the first quarter of
fiscal 1995. Margins on wholesale business were 49% compared to 45% in the first
quarter of fiscal 1995. This is a result of change in mix of products sold.
Margins on direct business were 76% for the first quarter of both fiscal 1996
and fiscal 1995. Overall, margins decreased slightly because lower margin
wholesale sales represented a larger percentage of revenue in the first quarter
of fiscal 1996.
Selling, general and administrative expenses decreased 4% to $1,207,000 in the
first quarter of fiscal 1996 from $1,250,000 in the first quarter of fiscal
1995. As a percent of revenue, those expenses declined 3% from 55% to 52%. The
Company added thirty-seven independent sales agents during the first quarter of
fiscal 1996, bringing the total number of sales representatives to 69 at
September 30, 1995. Expansion of the direct sales business has required
increased levels of support and the Company expects these expenses to continue
increasing at a rate slightly lower than the rate of increase in revenue.
Research and development expense was $116,000 in the first quarter of fiscal
1996 compared with $104,000 last year. Those expenses were essentially unchanged
as a percent of revenue and the Company anticipates they will remain relatively
constant as a percent of revenue in the future.
Operating income was $270,000 in the first quarter of fiscal 1996 compared with
$207,000 in the first quarter of fiscal 1995. The increase is the result of
increased revenue and the decrease in operating expenses as a percent of
revenue. Interest expense rose to $54,000 in the first quarter of fiscal 1996
from $5,000 in fiscal 1995. This is due to the new debt incurred in fiscal 1995
to finance new facilities, furniture and equipment. Net income was $139,000 in
the first quarter of fiscal 1996 compared with $130,000 in fiscal 1995. Net
income was 6% of revenue in both years.
The Company has recorded a deferred income tax benefit relating to the excess of
book over tax depreciation and bad debt expense. The Company believes that the
asset is realizable through future operations based on its history of profitable
results since changing its focus to direct sales and rentals.
FINANCIAL CONDITION, LIQUIDITY, AND CAPITAL RESOURCES
Operations have required significant amounts of cash since the Company
established its direct sales division in October 1991 and began offering its
products directly to patients. Cash was used to fund increases in receivables of
$264,000 in the first quarter of fiscal 1996 and $326,000 in the same quarter of
fiscal 1995. The increase in receivables in fiscal 1996 is attributable
primarily to international sales late in the quarter.
During the first quarter of fiscal 1996, the Company increased its reserve for
uncollectible accounts from $599,000 to $651,000. The reserve is based on
factors including historical trends, relationship and experience with insurance
companies or other third-party reimbursers and patient responsibility for
charges. Based on such factors, the Company believes that its current reserve
for uncollectible accounts is adequate. However, it will be necessary to
continue maintaining a significant reserve to cover instances where the extent
of insurance coverage cannot be verified prior to placing home units on
patients.
The Company used $95,000 in the first quarter of fiscal 1996 to increase
inventories of clinical units and consignment units for new territories.
Additional cash for inventories will be required in the current fiscal year to
continue supplying inventories to the expanded sales force. In the first quarter
of fiscal 1995, effective management of those inventories with minimal increase
in the number of sales representatives provided $88,000 in cash.
The cash needed to fund operations during fiscal 1996, over and above that
generated by operating activities, is being provided by the Company's revolving
bank line of credit. In December 1994, the Company entered into an agreement for
a revolving bank line of credit which provides for borrowing up to $2,000,000,
limited by eligible accounts receivable. The borrowing base limit was
approximately $1,276,000 at September 30, 1995. Borrowings bear interest at the
bank's prime rate. Interest is paid monthly. Borrowings under the line were
$675,000 at September 30, 1995 and $650,000 at June 30, 1995. The Company
anticipates that cash requirements during fiscal 1996 will be less than its
available credit facility.
PART II. OTHER INFORMATION
EXHIBITS AND REPORTS ON FORM 8-K.
Exh. 27 - Financial Data Schedule (For SEC use only)
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.
REHABILICARE INC.
/s/ David B. Kaysen
David B. Kaysen
President and Chief Executive Officer
/s/ W. Glen Winchell
W. Glen Winchell
Vice President of Finance
Date: November 3, 1995. (Principal Financial and Accounting Officer)
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<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 28,521
<SECURITIES> 0
<RECEIVABLES> 6,119,657
<ALLOWANCES> 650,644
<INVENTORY> 2,015,881
<CURRENT-ASSETS> 8,073,228
<PP&E> 4,760,613
<DEPRECIATION> 2,347,083
<TOTAL-ASSETS> 10,486,758
<CURRENT-LIABILITIES> 1,679,810
<BONDS> 1,884,053
<COMMON> 462,942
0
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<OTHER-SE> 5,149,385
<TOTAL-LIABILITY-AND-EQUITY> 10,486,758
<SALES> 2,343,122
<TOTAL-REVENUES> 2,343,122
<CGS> 750,584
<TOTAL-COSTS> 1,375,066
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 49,000
<INTEREST-EXPENSE> 53,626
<INCOME-PRETAX> 217,472
<INCOME-TAX> 78,000
<INCOME-CONTINUING> 217,472
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 139,472
<EPS-PRIMARY> 0.028
<EPS-DILUTED> 0.028
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