U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-QSB
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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 March 31, 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 March 31, 1997 - 3,403,427 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 March 31, 1997
The following financial statements and schedules of the registrant and its
consolidated subsidiaries are submitted herewith:
PART I - FINANCIAL INFORMATION
Item 1.Financial Statements:
Condensed Consolidated Balance Sheet-- March 31, 1997.............3
Condensed Consolidated Statements of Income--for the six and
three months ended March 31, 1997 and 1996.....................5
Condensed Consolidated Statements of Cash Flows--for the
six months ended March 31, 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
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
March 31, 1997
1997
Assets
Current assets:
Cash and cash equivalents $ 161,256
Marketable Securities 47,700
Accounts receivable (net of allowance for
doubtful accounts of $411,071) 5,569,840
Current portion of long-term receivable 2,179
Inventory 2,914,444
Current deferred tax asset 96,000
Deposits and prepaid expense 9,378
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Total current assets 8,800,797
Note receivable 495,126
Investment in undeveloped real estate 332,234
Investment in office buildings - net 459,091
Property and equipment - net 3,729,788
Intangible assets - net 5,175,294
Other assets 121,386
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$19,113,716
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3
<PAGE>
1997
Liabilities and Stockholders' Equity
Current liabilities:
Checks written in excess of cash in bank $ 447,984
Current portion of long-term debt 1,078,706
Notes payable 3,181,436
Accounts payable 1,380,599
Accrued expenses 285,995
Income taxes payable 29,855
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Total current liabilities 6,404,575
Deferred income taxes 259,000
Long-term debt 5,938,694
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Total liabilities 12,602,269
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, 3,403,427 shares issued
and outstanding 2,344,002
Additional paid-in capital 447,000
Retained earnings 3,717,445
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Total stockholders' equity 6,511,447
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$19,113,716
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4
<PAGE>
INTERWEST HOME MEDICAL, INC.
Condensed Consolidated Statement of Income
For the Periods Ended March 31, 1997 and 1996
Six months ended March 31, Three months March 31,
1997 1996 ended 1997 1996
Revenue:
Net sales $6,421,996 5,713,417 3,162,955 2,816,248
Net rental income 4,407,550 3,538,730 2,284,431 1,870,224
---------- ---------- ---------- ----------
Total revenue 10,829,546 9,252,147 5,447,386 4,686,472
Cost of sales and rental 4,455,872 3,700,578 2,260,864 1,854,926
---------- ---------- ---------- -----------
Gross profit 6,373,674 5,551,569 3,186,522 2,831,546
---------- ---------- ---------- ----------
Operating expenses 5,933,264 4,914,568 3,037,051 2,447,523
---------- ---------- ---------- ----------
Income from operations 440,410 637,001 149,471 384,023
Other income (expense):
Interest Expense (344,856) (236,538) (184,167) (154,856)
Interest income 32,617 28,013 24,345 16,356
(916) (13,675) 13,833 (13,200)
----------- ----------- ----------- ----------
Income before taxes 127,255 414,801 3,482 232,323
Income taxes 13,500 45,900 - 17,400
----------- ----------- ----------- ----------
Net income $ 113,755 368,901 3,482 214,923
=========== =========== =========== ==========
Net income per share $0.03 0.11 0.00 0.07
===== ==== ==== =====
Average number of shares
outstanding 3,325,000 3,301,000 3,360,000 3,301,000
========= ========= ========= ==========
5
<PAGE>
INTERWEST HOME MEDICAL, INC.
Condensed Consolidated Statement of Cash Flows
For the Six Months Ended March 31, 1997 and 1996
1997 1996
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Cash flows from operating activities:
Reconciliation of net income to net cash
provided by operating activities:
Net income 113,755 368,901
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 634,492 369,723
Bad debt expense 64,451 16,816
Loss from sale of equipment - -
(Increase) decrease in:
Accounts receivable (725,396) (684,507)
Inventories (76,319) (277,022)
Prepaid expenses 64,909 (42,620)
Other assets (12,295) (16,881)
Intangible assets - 1,808
Current portion of long-term receivable 380,132 420,000
Increase (decrease) in:
Checks written in excess of
cash in bank (34,468) 241,021
Accounts payable (104,306) (65,578)
Accrued expenses (47,067) 56,350
Income tax payable 13,500 (124,766)
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Net cash provided by
operating activities 271,388 263,245
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Cash flows from investment activities:
Collection of notes receivable - 1,084
Cash used in acquisition (300,068) (6,000)
Increase in long-term receivable (298,785) -
Capital expenditures (412,253) (365,656)
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Net cash used in
investing activities (1,011,106) (370,572)
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6
<PAGE>
INTERWEST HOME MEDICAL, INC.
Condensed Consolidated Statement of Cash Flows - Continued
For the Six Months Ended March 31, 1997 and 1996
1997 1996
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Cash flows from financing activities:
Net proceeds from notes payable 427,492 147,738
Issuance of common stock 450,000
Principal payments on long-term debt (515,782) (290,333)
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Net cash provided from
financing activities 361,710 (142,595)
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Net (decrease) increase
in cash (378,008) (249,922)
Cash, beginning of period 539,264 578,362
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Cash, end of period $ 161,256 328,440
========= ========
Supplemental schedule of non-cash investing and financing activities
During the six months ended March 31, 1997, the Company acquired
certain assets and assumed certain liabilities from companies operating in Utah,
Colorado, Nevada and California. The assets purchase 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 3,0800,68
Less amount financed with debt 2,780,000
Net cash investment $ 300,068
============
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 March 31, 1997 and the
results of operations and changes in financial position for the six and
three month periods ended March 31, 1997 and 1996. The results of
operations for the six and three month periods ended March 31, 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.
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 results in increased accounts receivable, inventory and equipment
balances. For the six months ended March 31, 1997, net cash provided by
operating activities was $271,388 as compared to $263,245 for the six months
ended March 31, 1996, as increase of $8,143 or 3%. The Company has sufficient
capital for its current operations but may be required to obtain additional
capital for use in future acquisitions. At March 31, 1997, the Company had total
assets of $19,113,716 and shareholders' equity of $6,511,447 compared to total
assets of $15,788,962 and shareholders' equity $5,947,692 at September 30,1996,
the Company's last fiscal year end. This 21% increase in assets is primarily the
result of increases in accounts receivable , capital assets and intangible
assets from acquisition activities. The 9.5% increase in shareholders' equity is
primarily the result of a private investor group exercising an option to
purchase $450,000 of common stock at a price of $4.28 a share.
At March 31, 1997, the Company's working capital was $2,396,222 compared
to $2,453,014 at September 30, 1996, a decrease of 2%. The decrease is primarily
due to cash used in funding acquisitions and increases in borrowing under the
Company's revolving line of credit to fund operations.
The Company had capital expenditures of $412,253 for the six months ended
March 31, 1997 compared to $365,65 for the same period ended March 31, 1996.
Capital expenditures are primarily for purchasing rental equipment used to
generate rental revenue.
During the last two years, IHOM has had a plan of operation which included
the acquisition of other companies which are engaged in similar lines of
business. The Company intends to continue with the acquisition plan. Its
management continues to have acquisition discussions with several companies.
At March 31, 1997, the Company had outstanding long term and short term
loans payable in the amount of $10,198,836 compared to $7,265,496 at September
31, 1996. This 40% increase was primarily due to $2.8 million in new borrowing
to fund acquisitions and capital leases assumed in an acquisition transaction.
The Company has sufficient capital for its current operations but may be
required to obtain additional capital for use in future acquisitions.
Results of Operations
The Company's revenues are primarily attributed to the sale and rental of
medical equipment and products. The following results of operations are
primarily a comparison of the operation of IHOM for the six and the three month
periods ended March 31, 1997 and 1996.
9
<PAGE>
Sale and Rental Revenue. The Company's revenue is comprised from both the
sale and rental of equipment and products. For the six month period ended March
31, 1997, sales and rental revenues were 60% and 40% , respectively, of total
revenues. This compares to 62% and 38% for the six month period ended March 31,
1996. Sales and rental revenue for the three month period ended March 31, 1997
were 59% and 41% compared with 60% and 40% for the three month period ended
March 31, 1996. Total revenues for the six and three month periods ended March
31, 1997 were $10,829,546 and $5,447,386, an increase of 17% and 16% over the
same six and three month periods ended March 31, 1996.
Costs of sales and rentals were approximately 41% and 40% for the six
month periods ended March 31, 1997 and 1996. This increase is primarily due to
continued pressure on costs of products sold and rented.
Operating Expenses. Operating expenses, including general and
administrative expenses, for the six and three month periods ended March 31,
1997 and 1996 were 55% and 53% of total sales. The increase was primarily due to
cost incurred integrating acquired offices and personnel into existing
locations. The Company incurred integration costs related to relocation of
acquired companies, closing duplicate office and personnel costs. Cost related
to a startup location also contributed to increased operating expenses.
For the six month period ended March 31, 1997, total operating expenses,
including general and administrative expenses, were $5,933,264 as compared to
$4,914,568 for the six month period ended March 31, 1996. For the six month
period ended March 31, 1997, total selling expenses were $791,086 (7% of total
sales) as compared to $658,475 (7% of total sales) for the six month period
ended March 31, 1996.
Interest Expense. Total interest expense for the six month period ended
March 31, 1997 was $344,856 compared to $236,538 for the six month period ended
March 31, 1996. The increase was attributed to increased bank debt to fund
acquisitions effected during 1996.
Net Income. For the six month period ended March 31, 1997, the Company had
net income of $113,755 compared to $368,901 for the six month period ended March
31, 1996, a decrease of approximately 69%. Net income for the three month period
ended March 31, 1997 was $3,482 compared to $214,923 for the three month period
ended March 31, 1996, a decrease of 98%. The decrease is primarily due to
integration costs of acquisitions completed during the first quarter of fiscal
1997.
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 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 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.
Inflation
The Company's business and operations have not been materially affected by
inflation during the past year and the current fiscal year.
10
<PAGE>
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. On March 27,
1997, the Company held its Annual Shareholders Meeting. The following proposals
were considered and ratified:
1. Election of the Board of Directors
Nominees For Against Abstain
a. James E. Robinson 2,283,956 8,064 293,118
b. Dr. Jeffrey F. Poore 2,283,956 8,064 293,118
c. Jerald L. Nelson 2,278,863 13,157 293,118
d. James U. Jensen 2,283,413 8,607 293,118
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: May 15, 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
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTS FROM
INTERWEST HOME MEDICAL, INC.'S FINANCIAL STATEMENTS AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> 161,256
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<EXCHANGE-RATE> 1
<CASH> 161,256
<SECURITIES> 47,700
<RECEIVABLES> 5,569,840
<ALLOWANCES> 411,071
<INVENTORY> 2,914,444
<CURRENT-ASSETS> 8,800,797
<PP&E> 3,729,788
<DEPRECIATION> 634,492
<TOTAL-ASSETS> 8,800,797
<CURRENT-LIABILITIES> 6,404,575
<BONDS> 0
0
3,000
<COMMON> 2,344,002
<OTHER-SE> 6,511,447
<TOTAL-LIABILITY-AND-EQUITY> 6,511,447
<SALES> 6,421,996
<TOTAL-REVENUES> 10,829,546
<CGS> 4,455,872
<TOTAL-COSTS> 1,380,599
<OTHER-EXPENSES> 285,995
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (344,856)
<INCOME-PRETAX> 127,255
<INCOME-TAX> 13,500
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 113,755
<EPS-PRIMARY> .01
<EPS-DILUTED> 0
</TABLE>
