U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-QSB/A
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[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarter ended June 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-14189
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INTERWEST HOME MEDICAL, INC.
(Name of Small Business Issuer as specified in its charter)
UTAH 87-0402042
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(State or other jurisdiction of (I.R.S. employer
incorporation or organization identification No.)
235 East 6100 South, Salt Lake City, UT 84107
(Address of principal executive offices)
Registrant's telephone no., including area code: (801) 261-5100
Securities registered pursuant to Section 12(b) of the Exchange Act: None
Securities registered pursuant to Section 12(g) of the Exchange Act: No Par
Value Common Stock
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
.
Common Stock outstanding at June 30, 1997 - 3,401,109 shares of no par value
Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE: NONE
<PAGE>
FORM 10-QSB
FINANCIAL STATEMENTS AND SCHEDULES
INTERWEST HOME MEDICAL, INC.
For the Quarter Ended June 30, 1997
The following financial statements and schedules of the registrant and its
consolidated subsidiaries are submitted herewith:
PART I - FINANCIAL INFORMATION
Page of
Form 10-Q
Item 1. Financial Statements:
Condensed Consolidated Balance Sheet--June 30, 1997..... 3
Condensed Consolidated Statements of Income--for the nine months
and three months ended June 30, 1997 and 1996.......... 5
Condensed Consolidated Statements of Cash Flows--for the
nine months ended June 30, 1997 and 1996............... 6
Notes to Condensed Consolidated Financial Statements.... 8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations............................... 9
PART II - OTHER INFORMATION
Page
Item 1. Legal Proceedings 11
Item 2. Changes in Securities 11
Item 3. Defaults Upon Senior Securities 11
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 5. Other Information 11
Item 6(a)Exhibits 11
Item 6(b)Reports on Form 8-K 11
2
<PAGE>
INTERWEST HOME MEDICAL, INC.
Condensed Consolidated Balance Sheet
June 30, 1997
Assets 1997
Current assets:
Cash and cash equivalents $ 199,514
Marketable securities 47,700
Accounts receivable (net of allowance for
doubtful accounts of $407,796) 5,825,153
Current portion of long-term receivable 644,562
Accrued Interest 11,250
Inventory 3,042,740
Current deferred tax asset 96,000
Deposits and prepaid expenses 63,093
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Total current assets 9,930,012
Note receivable 352,136
Investment in undeveloped real estate 124,934
Investment in office buildings - net 454,021
Property and equipment - net 3,839,572
Intangible assets - net 5,148,816
Other assets 186,313
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$20,035,804
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3
<PAGE>
Liabilities and Stockholders' Equity 1997
Current liabilities:
Checks written in excess of cash in bank $ 622,652
Current portion of long-term debt 1,078,706
Notes payable 2,899,991
Accounts payable 1,746,485
Accrued expenses 415,660
Income taxes payable 88,056
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Total current liabilities 6,851,550
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Deferred income taxes 259,000
Long-term debt 5,581,469
Total liabilities 12,692,019
Commitments and contingencies -
Stockholders' equity:
Preferred stock, $.01 par value,
10,000,000 shares authorized, 300,000
shares issued and outstanding 3,000
Common stock, no par value, 50,000,000 shares
authorized, 3,401,109 shares issued
and outstanding 2,394,002
Additional paid-in capital 447,000
Retained earnings 4,499,783
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Total stockholders' equity 7,343,785
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$20,035,804
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4
<PAGE>
INTERWEST HOME MEDICAL, INC.
Condensed Consolidated Statement of Income
Nine months ended June 30,Three months ended June 30,
1997 1996 1997 1996
Revenue:
Net sales $9,976,205 9,029,866 3,554,209 3,316,449
Net rental income 6,852,898 5,471,434 2,445,348 1,932,704
----------- ---------- --------- ---------
Total revenue 16,829,103 14,501,300 5,999,557 5,249,153
Cost of sales and rental 6,895,157 5,919,965 2,439,285 2,219,387
--------- --------- --------- ---------
Gross profit 9,933,946 8,581,335 3,560,272 3,029,766
--------- --------- --------- ---------
Operating expenses 8,994,519 7,562,254 3,061,255 2,647,686
--------- --------- --------- ---------
Income from operations 939,427 1,019,081 499,017 382,080
Other income (expense):
Interest expense (556,579) (367,640) (211,723) (131,102)
Interest income 68,910 64,543 36,293 36,531
Other (14,858) (11,785) (13,942) 1,890
Gain on sale of asset 575,193 - 575,193 -
--------- ---------- ---------- -----------
Income before taxes 1,012,093 704,199 884,838 289,399
Income taxes 116,000 109,850 102,500 63,951
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Net income $ 896,093 594,349 782,338 225,448
========== ========= ======= =========
Net income per share $0.26 0.17 0.23 0.07
===== ==== ==== ====
Average number of shares
outstanding 3,350,000 3,406,000 3,400,000 3,406,000
========= ========= ========= =========
5
<PAGE>
INTERWEST HOME MEDICAL, INC.
Condensed Consolidated Statement of Cash Flows
Nine Months Ended June 30, 1997 and 1996
Cash flows from operating activities: 1997 1996
---- ----
Reconciliation of net income to net cash
provided by (used in) operating
activities:
Net income $896,093 594,349
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 981,645 578,017
Bad debt expense 51,176 31,929
Gain from sale of undevel.real estate (536,304) -
(Increase) decrease in:
Accounts receivable (967,434) (775,468)
Inventories (204,615) (623,614)
Prepaid expenses 11,194 (22,970)
Other assets (77,222) (26,154)
Intangible assets - 13,913
Accrued interest (11,250) (8,511)
Current portion of long term receiv. 136,952 -
Increase (decrease) in:
Checks written in excess of cash in bank 140,201 -
Accounts payable 261,580 20,490
Accrued expenses 82,599 (35,956)
Income tax payable 71,701 (64,310),
Net cash provided by
(used in ) operating activities 836,316 (318,285)
------- ---------
Cash flows from investment activities:
Collection of notes receivable - 1,631
Cash used in acquisition (300,068) (6,000)
Capital expenditures (837,643) (551,848)
Proceeds from sale of undeveloped real estate 188,605 420,000
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Net cash used in
investing activities (949,106) (136,217)
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6
<PAGE>
INTERWEST HOME MEDICAL, INC.
Condensed Consolidated Statement of Cash Flows - Continued
Nine Months Ended June 30, 1997 and 1996
1997 1996
---- ----
Cash flows from financing activities:
Net proceeds from notes payable 146,047 714,428
Issuance of common stock 500,000 -
Principal payments on long-term debt (873,007) (459,830)
--------- ---------
Net cash provided from
(Used in) financing activities (226,960) 254,598
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Net (decrease) increase
in cash (339,750) (199,904)
Cash, beginning of period 539,264 578,362
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Cash, end of period $ 199,514 378,458
========== =========
Supplemental schedule of non-cash investing and financing activities
During the nine months ended June 30, 1997, the Company acquired
certain assets and assumed certain liabilities from companies operating in Utah,
Colorado, Nevada and California. The assets purchased consisted of the
following:
Accounts receivable $ 204,399
Inventory 74,188
Capital equipment 748,791
Intangible assets 2,294,320
Capital leases (241,630)
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Net assets purchased 3,080,068
Less amount financed with debt 2,780,000
Net cash investment $ 300,068
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During the nine months ended June 30, 1997, the Company received a
$555,000 note receivable in connection with the sale of undeveloped real estate.
7
<PAGE>
INTERWEST HOME MEDICAL, INC.
Notes to Condensed Consolidated Financial Statements
(1) The consolidated unaudited financial statements include the accounts of
Interwest Home Medical, Inc. and include all adjustments (consisting of
normal recurring items) which are, in the opinion of management, necessary
to present fairly the financial position as of June 30, 1997 and the
results of operations and cash flows for the nine and three month periods
ended June 30, 1997 and 1996. The results of operations for the nine and
three months ended June 30, 1997 and 1996 are not necessarily indicative of
the results to be expected for the entire year.
(2) Income per common share is based on the weighted average number of shares
outstanding during the period. The earnings per share and fully diluted
earnings per share are the same for all periods presented.
8
<PAGE>
PART 1 - ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Interwest Home Medical, Inc. (IHOM) is primarily engaged in the business
of selling and renting medical equipment and supplies, primarily to the home
medical care market. IHOM currently employs over 250 individuals at twenty-four
(24) branch operations.
Financial Condition
The Company's primary needs for capital are to fund acquisitions, purchase
rental equipment, and cover debt service payments. Expansion into new geographic
markets resulted in increased accounts receivable, inventory and equipment
balances. For the nine months ended June 30, 1997, net cash provided by
operating activities was $836,316 as compared to cash used in operating
activities in the amount of $318,285 for the nine months ended June 30, 1996,
which is an increase of $1,154,601. The Company has sufficient capital for its
current operations but may be required to obtain additional capital for use in
future acquisitions. At June 30, 1997, the Company had total assets of
$20,035,804 and shareholders' equity of $7,343,785 compared to total assets of
$15,788,961 and shareholders' equity of $5,947,692 at September 30, 1996, the
Company's last fiscal year end. This 27% increase in assets is primarily the
result of increases in accounts receivable, capital and intangible assets from
acquisition activities. The 23% increase in shareholders' equity is primarily
the result of a private investor group exercising an option to purchase $500,000
of common stock at a price of $4.28 per share in addition to earnings of
$896,093 for the nine months ended June 30, 1997.
At June 30, 1997, the Company's working capital was $3,078,462 compared to
$2,453,014 at September 30, 1996, an increase of 25%. The increase is primarily
due to an increase in current notes receivable derived from real estate sales
and increases in accounts receivable resulting from continued strong revenue
growth from acquisition and continuing operations. At June 30, 1997, the Company
had total current assets of $9,930,012 and current liabilities of $6,851,550
compared to current assets of $8,607,996 and current liabilities of $6,154,982
at September 30, 1996.
The Company had capital expenditures of $837,643 for the nine months ended
June 30, 1997 compared to $551,848 for the same period ended June 30, 1996.
Capital expenditures are primarily for purchasing rental equipment used to
generate increased rental revenues and service customers from exclusive managed
care contracts.
During the last two years, IHOM has had a plan of operations which
included the acquisition of other companies which are engaged in similar lines
of business. The Company intends to continue with the acquisition plan.
Management continues to have acquisition discussions with several companies.
At June 30, 1997 the Company had outstanding long term and short term
loans payable in the amount of $9,560,166 compared to $7,265,496 at September
30, 1996. The 32% increase was primarily due to $2.8 million in new borrowing to
fund acquisitions partially offset by principal payments of notes payable.
At June 30, 1997, the Company had notes receivable of $996,698 compared to
$578,652 at September 30, 1996. Notes receivable originated from the sale of
undeveloped real estate and an apartment building. The $418,046 increase is
primarily due to a $555,000 note receivable from the sale of undeveloped real
estate during the three month period ended June 30, 1997.
The Company has sufficient capital for its current operations but may be
required to obtain additional capital for use in future acquisitions.
9
<PAGE>
Results of Operations
The Company's revenues are primarily attributed to the sale and rental of
medical equipment and products. The following results are a comparison of the
operations of IHOM for the nine and three month periods ended June 30, 1997 and
1996.
Sale and Rental Revenue. The Company's revenues are derived from both the
sale and rental of equipment and products. For the nine month period ended June
30, 1997, sales and rental revenues were 59% and 41%, respectively, of total
revenues. This compares to 62% and 38% for the nine month period ended June 30,
1996. Sales and rental revenues for the three month period ended June 30, 1997
were 59% and 41% compared with 63% and 37% for the three month period ended June
30, 1996. Total revenues for the nine and three month periods ended June 30,
1997 were $16,829,103 and $5,999,557, an increase of approximately 16% and 14%
over the nine and three month periods ended June 30, 1996. The increases were
primarily attributed to revenues generated by the companies acquired during 1996
and 1997 and continued strong same store growth. Continued growth in sales is
not indicative of future performance.
Costs of sales and rentals were approximately 41% of revenues for the nine
month periods ended June 30, 1997 and 1996. For the three month periods ended
June 30, 1997 and 1996, costs of sales and rentals were 41% and 42% of total
revenues. The decrease is primarily due to increased rental revenues which
provide increased margins.
Operating Expenses. Operating expenses during the nine month periods ended
June 30, 1997 and 1996 were 53% and 52% of total sales. Total operating expenses
increased from 50% to 51% of total revenue for the three month periods ended
June 30, 1997 and 1996. The Company incurred integration costs related to
relocation of acquired companies, closing duplicate offices and personnel costs.
For the nine month period ended June 30, 1997, total operating expenses,
including general and administrative expenses, were $8,994,519 as compared to
$7,562,254 for the nine months ended June 30, 1996. For the nine month period
ended June 30, 1997, total selling expenses were $1,232,576 (7% of total sales)
compared to $1,030,867 (7% of total sales) for the nine month period ended June
30, 1996.
Interest Expense. Total interest expense for the nine and three month
periods ended June 30, 1997 was $556,579 and $211,723 compared to $367,640 and
$131,102 for the nine and three month periods ended June 30, 1996. The increase
was attributed to increased bank debt to fund acquisitions effected during the
second calendar quarter of 1997.
Net Income. For the nine month period ended June 30, 1997, the Company had
net income of $896,093 compared to $594,349 for the nine month period ended June
30, 1996, an increase of approximately 51%. Net income for the three month
period ended June 30, 1997 was $782,338 compared to $225,448 for the three month
period ended June 30, 1996, an increase of 247%. The increase in 1997 is
primarily due to the gain on sale of undeveloped real estate.
From time to time, the Company may publish forward-looking statements
relating to such matters as anticipated financial performance, business
prospects, technological developments, new products, research and development
activities and similar matters. The private Securities Litigation Reform Act of
1995 provides a safe harbor for forward looking statements. In order to comply
with the terms of the safe harbor, the Company notes that a variety of factors
could cause the Company's actual results and experience to differ materially
from the anticipated results or other expectations expressed in any of the
Company's forward-looking statements. The risks and uncertainties that may
affect the operations, performance, development and results of the Company's
business include, but are not
10
<PAGE>
limited to, the following: (i) the failure to obtain additional capital for
acquisitions and expansion; (ii) adverse changes in federal and state laws,
rules and regulations relating to the home health care industry, to government
reimbursement policies, to private industry reimbursement policies and to other
matters affecting the Company's industry and business; and (iii) continued
consolidation by the Company's local, regional and national competitors
resulting in increased competition. Government and Regulatory
During July 1997, Congress passed a balanced budget agreement that
requires a 25% reduction in Medicare oxygen reimbursement effective January 1,
1998 and an additional 5% reduction on January 1, 1999.
Inflation
The Company's business and operations have not been materially affected by
inflation during the past year and the current fiscal year.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings. None.
Item 2. Changes in Securities. None.
Item 3. Defaults Upon Senior Securities. None.
Item 4. Submission of Matters to a Vote of Security Holders. None
Item 5. Other Information. None.
Item 6(a)Exhibits. None.
Item 6(b)Reports on Form 8-K. None.
11
<PAGE>
SIGNATURE
In accordance with the requirements of the Exchange Act, the Registrant has
caused this report to be signed on its behalf by the undersigned thereunto duly
authorized.
Dated: August 13, 1997
INTERWEST HOME MEDICAL, INC.
By /s/ James E. Robinson
James E. Robinson
President
Principal Executive Officer
By /s/ Que H Christensen
Que H. Christensen
Principal Financial Officer
12
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
INTERWEST HOME MEDICAL'S FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> 199,514
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> APR-1-1997
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
<CASH> 199,514
<SECURITIES> 47,700
<RECEIVABLES> 6,232,949
<ALLOWANCES> 407,796
<INVENTORY> 3,042,740
<CURRENT-ASSETS> 9,930,012
<PP&E> 3,839,572
<DEPRECIATION> 0
<TOTAL-ASSETS> 20,035,804
<CURRENT-LIABILITIES> 6,851,550
<BONDS> 0
0
3000
<COMMON> 2,394,002
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 20,035,804
<SALES> 9,976,205
<TOTAL-REVENUES> 16,829,103
<CGS> 6,895,157
<TOTAL-COSTS> 8,994,519
<OTHER-EXPENSES> 14,858
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 556,579
<INCOME-PRETAX> 1,012,093
<INCOME-TAX> 116,000
<INCOME-CONTINUING> 896,093
<DISCONTINUED> 0
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<NET-INCOME> 896,093
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