<PAGE>
FORM 10-Q/A
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarter period ended January 31, 1995
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OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number
0-14003
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ROTECH MEDICAL CORPORATION
--------------------------
(Exact name of Registrant as specified on its Charter)
Florida 59-2115892
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(State or jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4506 L.B. McLeod Road, Suite F. Orlando, Florida 32811
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (407) 841-2115
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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 and 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 the number of shares outstanding of each class of issuer's classes
of common stock as of March 2, 1995: 9,660,400
<PAGE>
ROTECH MEDICAL CORPORATION AND SUBSIDIARIES
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Index
Page
Part I. Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance
Sheets, Interim at January 31, 1995
and Year End at July 31, 1994 1
Condensed Consolidated Interim
Statements of Income for the
Three Months and Six Months Ended
January 31, 1995 and 1994 2
Condensed Consolidated Interim
Statements of Shareholders' Equity
for the Six Months Ended
January 31, 1995 and 1994 3
Condensed Consolidated Interim
Statements of Cash Flows for the
Six Months Ended January 31, 1995
and 1994 4
Notes to Condensed Consolidated
Interim Financial Statements 5
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 10
Part II. Other Information 12
Signature 13
<PAGE>
ROTECH MEDICAL CORPORATION AND SUBSIDIARIES
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Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
January 31 July 31
1995 1994
----------- ----------
ASSETS (Unaudited)
<S> <C> <C>
Current Assets:
Cash $275,550 $331,681
Accounts Receivable:
Trade, less allowance for contractual
adjustments and doubtful accounts 35,437,490 29,568,314
Other 2,074,354 1,622,975
Inventories 9,681,682 5,918,437
Prepaid expenses 527,197 711,350
------------ -----------
Total Current Assets 47,996,273 38,152,757
Other Assets:
Intangible assets, less accumulated amortization 46,049,329 30,880,930
Investment in affiliated company 2,331,923 1,874,660
Other assets 195,602 134,570
------------ -----------
48,576,854 32,890,160
Property and equipment, less accumulated depreciation 30,388,729 23,389,838
------------ -----------
TOTAL ASSETS $126,961,856 $94,432,755
============ ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable, accrued expenses and
other liabilities $7,079,080 $5,521,033
Notes payable to banks 26,498,000 4,098,000
Income taxes payable 1,222,453 750,609
------------ -----------
Total Current Liabilities 34,799,533 10,369,642
Other Liabilities:
Deferred income taxes 840,100 742,650
Shareholders' Equity:
Common Stock, par value $.0002 per share,
50,000,000 shares authorized, 9,660,400 shares
at January 31, 1995, and 9,504,770 shares
at July 31, 1994 issued and outstanding 1,940 1,909
Treasury stock, at cost (814,535) (814,535)
Additional paid-in capital 66,726,303 64,520,077
Retained earnings 25,408,515 19,613,012
------------ -----------
91,322,223 83,320,463
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $126,961,856 $94,432,755
============ ===========
</TABLE>
Note: The consolidated balance sheet at July 31, 1994 has been condensed from
the audited financial statements at that date.
See notes to condensed consolidated interim financial statements.
1
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ROTECH MEDICAL CORPORATION AND SUBSIDIARIES
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Condensed Consolidated Interim Statements of Income
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
January 31 January 31 January 31 January 31
1995 1994 1995 1994
----------------------------- ---------------------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Operating revenue $32,581,640 $15,879,528 $59,304,735 $29,892,720
Cost and expenses:
Cost of revenue 8,996,663 4,039,020 16,394,082 7,612,203
Selling, general and administrative 16,331,445 7,990,184 29,534,029 15,326,405
Depreciation and amortization 2,087,476 1,035,374 3,860,751 1,931,760
Interest expense 231,616 19,630 310,370 3,772
------------- ------------- ------------- -------------
27,647,200 13,084,208 50,099,232 24,874,140
------------- ------------- ------------- -------------
Income before income taxes 4,934,440 2,795,320 9,205,503 5,018,580
Income tax expenses 1,830,000 996,000 3,410,000 1,797,000
------------- ------------- ------------- -------------
Net Income $3,104,440 $1,799,320 $5,795,503 $3,221,580
------------- ------------- ------------- -------------
Net Income Per Share $0.31 $0.24 $0.59 $0.44
============= ============= ============= =============
Weighted Average Number
of Shares Outstanding 9,897,285 7,477,616 9,879,648 7,405,603
</TABLE>
See notes to condensed consolidated interim financial statements.
2
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ROTECH MEDICAL CORPORATION AND SUBSIDIARIES
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Condensed Consolidated Interim Statements of Shareholders' Equity
<TABLE>
<CAPTION>
Common Stock
----------------------------- Treasury Paid-In Retained
Shares Amount Stock Capital Earnings
---------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Balance, August 1, 1993 7,242,825 $1,449 --- $24,695,107 $11,500,792
Issuance of Common Stock pursuant to
Employee Stock Compensation Plan 1,100 0 11,286
Issuance of Common Stock in acquisition
of subsidiaries 290,555 58 2,918,355
Net income for the six months
ended January 31, 1994 3,255,680
---------- ------ --------- ----------- -----------
Balance, January 31, 1994 7,534,480 $1,507 --- $27,624,748 $14,756,472
========== ====== ========= =========== ===========
Balance, August 1, 1994 9,504,770 $1,909 ($814,535) $64,520,077 $19,613,012
Issuance of Common Stock pursuant to
Employee Stock Compensation Plan 17,268 3 209,694
Issuance of Common Stock in acquisition
of subsidiaries 138,362 28 1,996,532
Net income for the six months
ended January 31, 1995 5,795,503
---------- ------ --------- ----------- -----------
Balance, January 31, 1995 9,660,400 $1,940 ($814,535) $66,726,303 $25,408,515
========== ====== ========= =========== ===========
</TABLE>
See notes to condensed consolidated interim financial statements.
3
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ROTECH MEDICAL CORPORATION AND SUBSIDIARIES
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Condensed Consolidated Interim Statements of Cash Flows
<TABLE>
<CAPTION>
Six Months Ended
January 31 January 31
1995 1994
------------------------
(Unaudited)
<S> <C> <C>
Net Cash Provided by (Used in) Operating Activities $4,313,022 ($741,876)
Investing Activities
Purchases of property and equipment (6,884,817) (2,479,094)
Proceeds from sale of property and equipment 15,160 9,253
Changes in advances and deposits (24,830) (129,575)
Payments for acquisition of net assets,
net of cash acquired (19,874,666) (3,419,707)
------------ -----------
Net Cash Used in Investing Activities (26,769,153) (6,019,123)
Financing Activities
Net proceeds from notes payable 22,400,000 4,649,000
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Net Cash Provided by Financing Activities 22,400,000 4,649,000
------------ -----------
Decrease in Cash (56,131) (2,111,999)
Cash at Beginning of Period 331,681 2,617,013
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Cash at End of Period $275,550 $505,014
============ ===========
</TABLE>
See notes to condensed consolidated interim financial statements.
4
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ROTECH MEDICAL CORPORATION AND SUBSIDIARIES
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Notes to Condensed Consolidated Interim Financial Statements
(Unaudited)
Note A - Basis of Reporting
The condensed consolidated interim balance sheet as of January 31, 1995 and
the condensed consolidated interim statements of income, shareholders' equity
and cash flows for the three months and six months ended January 31, 1995 and
1994 are unaudited. In the opinion of management, these statements have been
prepared on the same basis as the audited consolidated financial statements and
include all adjustments, consisting only of normal recurring accruals, necessary
for the fair statement of the results of the interim periods.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. These condensed consolidated financial
statements should be read in conjunction with the financial statements and notes
thereto included in the Company's consolidated audited financial statements as
of and for the year ended July 31, 1994. The results of operations for the
interim period are not necessarily indicative of the results which may be
expected for an entire year.
Note B - Pro Forma Condensed Combined Statements of Income
The pro forma condensed combined statement of income for the year ended
July 31, 1994 has been prepared to illustrate the estimated combined effects of
the various Agreements of Purchase and Sale (Agreements) upon RoTech Medical
Corporation (the Company) for those acquisition transactions consummated between
August 1, 1994 and March 1, 1995. The pro forma condensed combined statement of
income was derived by adjusting the historical statement for the year ended
July 31, 1994 of the Company and the unaudited historical statements of income
for the most recent fiscal year end of the unaudited acquired entities.
The pro forma condensed combined statement of income for the six months
ended January 31, 1995 was derived by adjusting the unaudited historical
statement of income for the six months ended January 31, 1995 of the Company and
the unaudited historical statements of income for the acquired entities for the
period prior to their respective inclusion in the unaudited historical statement
of income of the Company for the six months ended January 31, 1995. The entities
acquired prior to January 31, 1995 are included in the Company's balance sheet
as of January 31, 1995.
The operations of any entities acquired subsequent to January 31, 1995 are
not included in the Company's historical statement of income as presented
herein. The net assets of any entities acquired subsequent to January 31, 1995
are not included in the Company's balance sheet as of January 31, 1995.
5
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ROTECH MEDICAL CORPORATION AND SUBSIDIARIES
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Notes to Condensed Consolidated Interim Financial Statements
(Unaudited)-continued
The pro forma condensed combined statements of income were prepared as if
the purchases and sales had occurred on August 1, 1993. The pro forma condensed
combined statements of income presented are not necessarily indicative of the
results of operations that might have occurred had such transactions been
completed as of the date specified or of the results of operations of the
Company and its subsidiaries for any future period.
No changes in operating revenue and expenses have been made to reflect the
results of any modification to operations that might have been made had the
Agreements been consummated on the aforesaid assumed effective date for purposes
of presenting pro forma results. Certain supportable payroll costs attributable
to acquired entities' employees whose services would have been terminated upon
the effective date of purchase and sale have been eliminated. The acquisitions
have been accounted for in accordance with the purchase method of accounting.
The pro forma condensed combined statements of income include amortization of
goodwill as if the Agreements had been completed on the assumed effective date
referred to above.
The pro forma condensed combined statements of income should be read in
conjunction with the audited consolidated financial statements and related notes
thereto included elsewhere herein.
6
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ROTECH MEDICAL CORPORATION AND SUBSIDIARIES
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Notes to Condensed Consolidated Interim Financial Statements
(Unaudited) - continued
<TABLE>
<CAPTION>
For the Year Ended July 31, 1994
------------------------------------------------------------------
(Unaudited)
RoTech RoTech
Medical Medical
Corporation Corporation
Consolidated Combined Combined
Year Ended Acquired Pro Forma Pro Forma
July 31, 1994 Entities Adjustments Results
------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operating revenue $71,469,618 $17,137,347 $88,606,965
Cost and expenses:
Cost of revenue 17,408,548 5,797,135 23,205,683
Selling, general and administrative 35,879,483 8,202,991 (120,000) (a) 43,962,474
Depreciation and amortization 5,338,494 199,563 1,207,487 (b) 6,745,544
Interest expense 66,676 58,888 1,260,861 (c) 1,386,425
------------ ------------ -------------- ------------
58,693,201 14,258,577 2,348,348 75,300,126
------------ ------------ -------------- ------------
Income before income taxes 12,776,417 2,878,770 (2,348,348) 13,306,839
Income tax expense 4,664,197 1,075,254 (832,546) (d) 4,906,905
------------ ------------ -------------- ------------
Net Income $8,112,220 $1,803,516 ($1,515,802) $8,399,934
============ ============ ============== ============
Net Income Per Share $0.99 $1.01
============ ============
Weighted Average Number
of Shares Outstanding 8,147,144 138,362 (e) 8,285,506
</TABLE>
7
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ROTECH MEDICAL CORPORATION AND SUBSIDIARIES
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Notes to Condensed Consolidated Interim Financial Statements
(Unaudited) - continued
<TABLE>
<CAPTION>
For the Six Months Ended January 31, 1995
------------------------------------------------------------------
(Unaudited)
RoTech
Medical RoTech
Corporation Medical
Consolidated Corporation
Six Months Combined Combined
Ended Acquired Pro Forma Pro Forma
January 31, 1995 Entities Adjustments Results
---------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operating revenue $59,304,735 $4,045,265 $63,350,000
Cost and expenses:
Cost of revenue 16,394,082 1,583,686 17,977,768
Selling, general and administrative 29,534,029 1,848,354 (30,000)(a) 31,352,383
Depreciation and amortization 3,860,751 109,045 352,184 (b) 4,321,980
Interest 310,370 13,452 475,200 (c) 799,022
------------ ------------ -------------- ------------
50,099,232 3,554,537 797,384 54,451,153
------------ ------------ -------------- ------------
Income before income taxes 9,205,503 490,728 (797,384) 8,898,847
Income tax expense 3,410,000 160,070 (273,461)(d) 3,296,609
------------ ------------ -------------- ------------
Net Income $5,795,503 330,658 (523,923) $5,602,238
============ ============ ============== ============
Net Income Per Share $0.59 $0.56
============ ============
Weighted Average Number
of Shares Outstanding 9,879,648 136,380 (e) 10,016,028
</TABLE>
8
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ROTECH MEDICAL CORPORATION AND SUBSIDIARIES
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Notes to Condensed Consolidated Interim Financial Statements
(Unaudited)-continued
Note B - Pro Forma Condensed Combined Statements of Income-continued
(a) Supportable general and administrative expenses relating directly to the
payroll and related expenses of those terminated employees determined to be
duplicated by the Company's existing personnel and therefore would not be
needed after the acquisitions.
(b) Amortization on intangibles recorded in the combined acquisitions
(amortized over various lives from 5 to 25 years).
(c) Additional interest expense related to borrowings for cash paid to acquire
combined entities; assumed borrowed on August 1, 1993.
(d) Adjustment to income tax expense for the tax expense relating to the net
income as adjusted for the combined acquired entities. Income taxes are
calculated on the basis that operations of the consolidated company could
be combined as one company for federal income tax purposes at the actual
historical rate for the period. No assurance can be given that these tax
benefits will be realizable by the Company.
(e) Additional shares of the Company's Common Stock issued pursuant to the
Agreements; assumed issued on August 1, 1993.
9
<PAGE>
ROTECH MEDICAL CORPORATION AND SUBSIDIARIES
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Management's Discussion and Analysis of Financial Condition and Results of
Operations
Results of Operations
For the Three Months and Six Months Ended
January 31, 1995 and 1994
Operating revenue increased 105% to $32,582,000 for three months ended
January 31, 1995 from $15,880,000 for three months ended January 31, 1994.
Operating revenue increased 98% to $59,305,000 for the six months ended January
31, 1995 from $29,893,000 for the six months ended January 31, 1994. The
increase in operating revenue is attributable to acquisitions and expanded
product and service lines in existing areas of operation. The Company continues
to employ a single sales force to maintain and develop both the home respiratory
and other medical equipment and home infusion therapy and other pharmacy
related lines of business.
Operating revenue from home respiratory and other medical equipment
increased 122% to $20,837,000 for the three months ended January 31, 1995 from
$9,388,000 for the three months ended January 31, 1994. Operating revenue from
home respiratory and other medical equipment increased 124% to $38,658,000 for
the six months ended January 31, 1995 from $17,260,000 for the six months ended
January 31, 1994. The increase was due mainly to increases in patient bases
throughout the Company's locations and increased marketing efforts in certain
locations acquired during fiscal year 1994 and the first six months of fiscal
year 1995.
Operating revenue from home infusion therapy and pharmacy related services
increased 51% to $8,776,000 for the three months ended January 31, 1995 from
$5,803,000 for the three months ended January 31, 1994. Operating revenue from
home infusion therapy and pharmacy related services increased 35% to $15,700,000
for the six months ended January 31, 1995 from $11,601,000 for the six months
ended January 31, 1994. Growth in this line of business should continue as the
Company expands both its service areas and available products and services along
with coverage for certain home infusion therapies not previously paid for by the
Medicare program.
Operating revenue from physician practices represented 8% of total
operating revenue for the six month period ended January 31, 1995, compared to
less than 3% for the six month period ended January 31, 1994. The Company
currently owns 18 physician practices and employs 25 primary care physicians.
These practices are clustered in two rural marketplaces. Growth in this line of
business should continue as the Company continues to acquire primary care
physician practices.
Cost of revenue as a percentage of operating revenue increased to 28% for
the three months and the six months ended January 31, 1995 from 26% for the
three months and the six months ended January 31, 1994 due to changes in the
product mix in the last year. Selling, general and administrative expenses as a
percentage of operating revenue remained relatively stable at 51% for the six
months ended January 31, 1995 and January 31, 1994. Changes in the Company's
mix of business affect these categories, for example, physician practices have
no cost of revenue, all expenses are of a selling, general and administrative
nature.
10
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ROTECH MEDICAL CORPORATION AND SUBSIDIARIES
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Management's Discussion and Analysis of Financial Condition and Results of
Operations (continued)
Depreciation and amortization expense increased 102% to $2,087,000 for the
three months ended January 31, 1995 from $1,035,000 for the three months ended
January 31, 1994. Depreciation and amortization expense increased 99% to
$3,861,000 for the six months ended January 31, 1995 from $1,932,000 for the six
months ended January 31, 1994. Depreciation and amortization expense as a
percentage of operating revenue was 6.5% for the six months ended January 31,
1995 compared to 6.4% for the six months ended January 31, 1994. The increase
was attributable to the Company's purchase of fixed and intangible assets
resulting from various acquisitions and the fixed assets needed for the
increased rentals of equipment.
Interest expense, net of interest income, increased to $232,000 for the
three months ended January 31, 1995 from $20,000 for the three months ended
January 31, 1994. Net interest expense increased to $310,000 for the six months
ended January 31, 1995 from $4,000 for the six months ended January 31, 1994.
This increase resulted from the Company borrowing monies to fund certain
acquisitions.
Income tax expense was provided at a 37% effective rate, comparable to
actual rates experienced in prior periods. Net income for the six months ended
January 31, 1995 was $5,796,000, an 80% increase over the same period in fiscal
1994. Net income per share increased 34% to $0.59 for the six months ended
January 31, 1995 compared to $0.44 for the same period in fiscal 1994. The
weighted average number of shares increased 33% to 9,879,648 at January 31, 1995
from 7,405,603 at January 31, 1994, primarily as a result of the March 1994
public stock offering and shares issued in conjunction with certain
acquisitions.
Liquidity and Capital Resources
At January 31, 1995, total current assets were $47,996,000 and total
current liabilities were $34,800,000, resulting in working capital of
$13,196,000. The Company's current ratio was 1.38 to 1 at January 31, 1995
compared to 3.68 to 1 at July 31, 1994, as borrowings from banks have increased
to $26,498,000 from $4,098,000.
Net trade accounts receivable increased 19% or $5,869,000 to $35,437,000 in
the six months ended January 31, 1995. The Company's days revenue outstanding on
net accounts receivable were 100 days at January 31, 1995 compared to 107 days
at January 31, 1994. Acquired receivables with no corresponding revenue account
for approximately 10 days revenue outstanding on net accounts receivable at
January 31, 1995.
During the six months ended January 31, 1995, the Company generated cash of
$4,313,000 from operating activities, primarily as a result of net income of
$5,796,000 and the timing of purchases of and payments for operating items. As
of January 31, 1995, the Company had borrowed $26,498,000 on its working capital
line of credit of $50,000,000 to fund certain acquisitions. Management believes
the Company's credit capacity is sufficient for the projected growth of the
Company.
11
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ROTECH MEDICAL CORPORATION AND SUBSIDIARIES
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Part II. Other Information
Item 1. Legal proceedings
NOT APPLICABLE
Item 2. Changes in securities
NOT APPLICABLE
Item 3. Defaults upon senior securities
NOT APPLICABLE
Item 4. Submission of matters to a vote
of security holders
The annual meeting of shareholders was held
on December 10, 1994. William P. Kennedy,
William A. Walker II, Leonard E. Williams,
Stephen P. Griggs and Jack T. Weaver were
elected as directors.
Item 5. Other information
NOT APPLICABLE
12
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ROTECH MEDICAL CORPORATION AND SUBSIDIARIES
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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.
ROTECH MEDICAL CORPORATION
a Florida Corporation
Dated: March 2, 1995 By: /s/ Rebecca R. Irish
- --------------------- ----------------------
Rebecca R. Irish, Treasurer
and Chief Financial Officer
13
