<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended May 31, 1995
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Commission File Number 1-10814
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ReadiCare, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 95-3775814
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(State of other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
446 Oakmead Parkway, Sunnyvale, CA 94086
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(Address of principal executive offices) (zip code)
(408) 245-7707
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(Registrant's telephone number, including area 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 May 31, 1995, the number of shares outstanding of the issuer's class
of common stock was 8,205,199.
<PAGE>
READICARE, INC.
---------------
Index to Form 10-Q
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<TABLE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
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<S> <C>
Condensed Consolidated Balance Sheets:
May 31, 1995 and February 28, 1995 3
Condensed Consolidated Statements of Operations:
Three Months Ended May 31, 1995 and 1994 4
Condensed Consolidated Statements of Cash Flows:
Three Months Ended May 31, 1995 and 1994 5
Notes to Condensed Consolidated Financial
Statements 6
Item 2. Management's Discussion and Analysis of
- ------------------------------------------------
Financial Condition and Results of Operations 6
---------------------------------------------
PART II. OTHER INFORMATION 8
SIGNATURES 9
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
------------------------------
ITEM 1. FINANCIAL STATEMENTS
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READICARE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
May 31, 1995 February 28,
(Unaudited) 1995
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<S> <C> <C>
Current assets:
Cash $ 1,047,101 $ 426,315
Accounts receivable, net 6,517,480 6,531,800
Supplies 670,299 664,635
Other current assets 464,746 491,350
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Total current assets 8,699,626 8,114,100
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Equipment, property and improvements,
at cost:
Equipment 7,222,176 7,165,889
Property and improvements 7,683,714 7,677,635
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14,905,890 14,843,524
Less: accumulated depreciation (7,493,482) (7,164,586)
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7,412,408 7,678,938
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Acquired intangible assets, net 647,207 662,878
Other assets 387,911 404,552
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$ 17,147,152 $16,860,468
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 955,330 $ 939,370
Salaries and other accrued
employee benefits 1,144,842 947,267
Managed care provider payable 274,592 286,185
Other current liabilities 223,487 224,253
Notes payable to bank 450,000 700,000
Reserves for discontinued
activities 627,453 638,321
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Total current liabilities 3,675,704 3,735,396
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Total liabilities 3,675,704 3,735,396
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Stockholders' equity:
Preferred stock, $0.01 par value,
1,000,000 shares authorized and
unissued - -
Common stock, $0.01 par value
20,000,000 shares authorized,
8,205,199 shares issued and
outstanding 82,052 81,846
Additional paid-in capital 20,197,421 20,158,814
Accumulated deficit (6,808,025) (7,115,588)
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Total stockholders' equity 13,471,448 13,125,072
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$17,147,152 $ 16,860,468
============ ============
</TABLE>
See accompanying notes
3
<PAGE>
READICARE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended May 31,
--------------------------------
1995 1994
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<S> <C> <C>
Revenues $9,191,534 $9,021,411
Costs and expenses:
Center operating expenses 7,276,462 7,351,446
Marketing, general and
administrative expenses 1,207,288 977,424
Depreciation and amortization 343,813 344,026
Interest expense, net 14,409 31,860
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Income before taxes 349,562 316,655
Provision for income taxes 42,000 104,000
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Net income $ 307,562 $ 212,655
========== ==========
Per Share:
Net income $0.04 $0.03
========== ==========
Weighted average common shares
and equivalents 8,198,000 8,175,000
========== ==========
</TABLE>
See accompanying notes
4
<PAGE>
READICARE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended May 31,
--------------------------
1995 1994
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<S> <C> <C>
Cash flows from operating activities:
Net income $ 307,562 $ 212,655
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and amortization 343,813 344,026
Deferred income taxes - 69,000
Changes in operating assets and
liabilities:
Accounts receivable, net 14,321 (432,307)
Supplies and other current
assets 20,939 150,769
Accounts payable 15,960 (360,811)
Salaries and other accrued
employee benefits 185,982 161,468
Other current liabilities ( 44,958) (138,191)
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Net cash provided by
operating activities 843,619 6,609
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Cash flows from investing activities:
Additions to equipment ( 18,566) ( 65,957)
Additions to property
and improvements ( 4,533) ( 1,971)
Other assets 11,453 -
---------- ----------
Net cash used by investing
activities ( 11,646) ( 67,928)
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Cash flows from financing activities:
Payments under line of credit (250,000) (400,000)
Payments under term note - (208,333)
Issuance of common stock 38,813 -
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Net cash used by
financing activities (211,187) (608,333)
Increase(decrease) in cash 620,786 (669,652)
Cash at beginning of period 426,315 2,320,039
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Cash at end of period $1,047,101 $1,650,387
========== ==========
</TABLE>
See accompanying notes
5
<PAGE>
READICARE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
(1) The financial information included in this report has been prepared in
accordance with the accounting policies reflected in the Company's financial
statements filed with the Securities and Exchange Commission as part of its Form
10-K for the year ended February 28, 1995, except as noted below. In the
opinion of the Company, all adjustments, consisting only of normal recurring
adjustments, necessary for a fair statement of the results for the unaudited
three months ended May 31, 1995 have been made. The results for the quarter
ended May 31, 1995 are not necessarily indicative of the results to be expected
for the full fiscal year.
(2) Net income per common share is based on the weighted average number of
common shares outstanding for the respective periods and common share
equivalents, when dilutive, resulting from the assumed exercise of stock
options.
(3) Revenues include revenues derived from center operations, and from the
provision of managed care and other services.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
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CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
GENERAL.
ReadiCare, Inc., founded in 1982, is a physician practice management
company which specializes in the provision of workers' compensation medical and
general outpatient health care services. Medical services are provided at the
Company's network of conveniently located primary care medical and
rehabilitation centers in California and Washington state. The Company
contracts with the ReadiCare Medical Groups to make available fully-equipped
outpatient medical centers, to provide various management services, and to
license business names and trademarks. In return, the ReadiCare Medical Groups'
physicians provide medical services at ReadiCare locations.
6
<PAGE>
RESULTS OF OPERATIONS.
The following table presents selected financial information for the
periods indicated as a percentage of total revenue.
<TABLE>
<CAPTION>
Quarter Ended May 31,
----------------------
1995 1994
---- ----
<S> <C> <C>
Revenues 100% 100%
Costs and expenses:
Center operating expenses 79% 82%
Marketing, general and
administrative expenses 13% 11%
Depreciation and amortization 4% 4%
---- ----
Income before taxes 4% 3%
Provision for income taxes 1% 1%
---- ----
Net Income 3% 2%
==== ====
</TABLE>
QUARTER ENDED MAY 31, 1995 VS. QUARTER ENDED MAY 31, 1994.
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Revenues for the quarter ended May 31, 1995 increased by $170,000, or 2%,
compared to revenues for the quarter ended May 31, 1994. On a same-center basis,
revenues increased by 6%. The increase in revenues resulted primarily from
higher utilization levels at the Company's Seattle, Washington centers. Center
operating expenses decreased by $75,000, or 1%, as a result of reduced operating
costs at the Company's centers. Marketing, general and administrative expenses
increased by $230,000, or 24%, due primarily to higher employee fringe benefit
costs, and increased billing, collection and marketing expenditures. Interest
expense decreased $17,000, or 55%, due to reduced borrowing levels. For the
first quarter ended May 31, 1995, income before taxes increased $33,000 over the
prior year period primarily as a result of increased center revenues.
The provision for income taxes for the quarter ended May 31, 1995
was $42,000, or 12% of pretax income, compared to $104,000, or 33% of pretax
income for the prior year period. The decrease resulted primarily from the
utilization of deferred tax assets.
Net income increased $95,000, or 45%, primarily as a result of increased
center revenues and a lower income tax rate.
7
<PAGE>
LIQUIDITY, CAPITAL RESOURCES AND INFLATION.
The Company's primary source of liquidity is cash provided by operating
activities. Cash provided by operating activities is significantly higher than
net income due to the noncash expense relating to depreciation of fixed assets
and amortization of intangible assets, which amounted to $344,000 for the three
months ended May 31, 1995. In August 1994, the Company entered into a two year
$5.0 million revolving bank line of credit facility which is available for
working capital and general corporate purposes. Borrowings under the credit
facility bear interest, at the option of the Company, at either the bank's prime
lending rate, or the bank's Eurodollar base rate, plus 2%. The outstanding
balance on the line of credit as of May 31, 1995 was $450,000. The Company
anticipates that internally generated cash and borrowing capacity under its
credit facility will be sufficient to finance short and long-term internal
growth and capital expenditure requirements. There were no material capital
commitments outstanding as of May 31, 1995.
Generally, increases in the Company's operating costs approximate the rate
of inflation. In California, the Company's largest operating territory, state-
authorized reimbursement levels for workers' compensation outpatient medical
services have not been increased since July 1987. In March 1994, a revised fee
schedule was adopted by the Department of Workers' Compensation, however,
reimbursement levels were not increased. In Washington, state-authorized
workers' compensation medical reimbursement levels were increased by 6%
effective March 1, 1994, and by approximately 10% on May 1, 1995. Historically,
inadequate reimbursement levels have adversely affected operating margins at the
Company's California centers. Future operating results depend in part on the
effects of inflation and the extent to which reimbursement levels are adjusted
to keep pace with increases in the Company's operating costs.
PART II. OTHER INFORMATION
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Items 1-6. Not applicable.
8
<PAGE>
SIGNATURE
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.
READICARE, INC.:
Date: June 26, 1995 /s/ DENNIS G. DANKO
-------------------- -------------------------------
Dennis G. Danko
President and Chief Executive
Officer
Date: June 26, 1995 /s/ STEVE E. BUSBY
-------------------- -------------------------------
Steve E. Busby
Senior Vice President, Finance
and Principal Accounting
Officer
9
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
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27 Financial Data Schedule
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-29-1996
<PERIOD-START> MAR-01-1995
<PERIOD-END> MAY-31-1995
<CASH> 1,047,101
<SECURITIES> 0
<RECEIVABLES> 6,517,480
<ALLOWANCES> 0
<INVENTORY> 670,299
<CURRENT-ASSETS> 8,699,626
<PP&E> 14,905,890
<DEPRECIATION> 7,493,482
<TOTAL-ASSETS> 17,147,152
<CURRENT-LIABILITIES> 3,675,704
<BONDS> 0
<COMMON> 82,052
0
0
<OTHER-SE> 13,389,396
<TOTAL-LIABILITY-AND-EQUITY> 17,147,152
<SALES> 0
<TOTAL-REVENUES> 9,191,534
<CGS> 0
<TOTAL-COSTS> 7,276,462
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14,409
<INCOME-PRETAX> 349,562
<INCOME-TAX> 42,000
<INCOME-CONTINUING> 307,562
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 307,562
<EPS-PRIMARY> 0.04
<EPS-DILUTED> 0.04
</TABLE>
