<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended February 28, 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 NUMBER: 1-10261
-----------------------------
VIVRA INCORPORATED
(Exact name of registrant as specified in charter)
DELAWARE
(State or other jurisdiction of
incorporation or organization)
400 PRIMROSE, #200,
BURLINGAME, CALIFORNIA
(Address of principal executive offices)
94-3096645
(IRS Employer Identification Number)
94010
(ZIP Code)
(415) 348-8200
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year if changed
since last report)
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, and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No
----- -----
The number of shares outstanding of each of the issuer's classes of Common Stock
was 23,320,982 as of February 28, 1995
================================================================================
Total number of pages: 12
Exhibit Index at page: 10
<PAGE> 2
VIVRA INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
February 28, November 30,
1995 1994 - (Note)
------------ ------------
(In Thousands)
<S> <C> <C>
Assets
Current Assets
Cash and cash equivalents $131,288 $ 79,509
Accounts receivable, less allowance
for doubtful accounts (2/28/95-
$10,974 and 11/30/94-$10,321) 54,383 51,353
Prepaid expenses and other
current assets 8,261 7,348
Deferred income taxes 11,768 10,674
-------- --------
Total Current Assets 205,700 148,884
Property, Buildings and Equipment
--at cost less allowances for
depreciation (2/28/95-$45,659
and 11/30/94-$43,273) 68,824 65,972
Other Assets 5,981 5,335
Goodwill 69,899 55,816
-------- --------
$350,404 $276,007
======== ========
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable 11,009 9,833
Accrued payroll and related benefits 22,735 23,073
Other accrued expenses 7,027 10,466
Income taxes 5,011 1,769
Current maturities on long-term debt 1,597 6,499
-------- --------
Total Current Liabilities 47,379 51,640
Long-Term Debt--exclusive of
current maturities 4,463 4,938
Deferred Income Taxes 6,571 6,184
Minority Interest 1,214 1,391
Stockholders' Equity:
Common Stock, par value $.01 per share;
authorized 80.0 million shares; issued
23.3 million shares in 1995 and
20.8 million in 1994 233 208
Additional paid-in capital 125,320 54,891
Retained earnings 165,224 156,755
-------- --------
290,777 211,854
-------- --------
$350,404 $276,007
======== ========
</TABLE>
See Notes to Condensed Consolidated Financial Statements
<PAGE> 3
VIVRA INCORPORATED
CONSOLIDATED STATEMENT OF EARNINGS
<TABLE>
<CAPTION>
Three months ended
February 28
1995 1994
-----------------------
(In thousands, except
per share amounts)
<S> <C> <C>
Revenues
Operating revenues $ 83,207 $ 63,537
Other income 671 324
-------- --------
83,878 63,861
Costs and Expenses
Operating 55,520 42,736
General and administrative 11,776 7,019
Depreciation 2,387 2,285
Interest (principally on long-term debt) 182 152
-------- --------
Total costs and expenses 69,865 52,192
-------- --------
Earnings from Continuing Operations
before Minority Interest and
Income Taxes 14,013 11,669
Minority Interest (22) (76)
-------- --------
Net Earnings from Continuing Operations
before Income Taxes 13,991 11,593
Income Taxes 5,522 4,753
-------- --------
Net Earnings from Continuing Operations 8,469 6,840
Gain on sale of Discontinued Operations,
less applicable taxes 697
-------- --------
Net Earnings $ 8,469 $ 7,537
======== ========
Earnings Per Share:
Continuing operations $ .40 $ .34
Gain on sale of
discontinued operations $ .03
-------- --------
Net Earnings $ .40 $ .37
======== ========
Average number of Common Shares: 21,325 20,307
</TABLE>
See Notes to Condensed Consolidated Financial Statements
<PAGE> 4
VIVRA INCORPORATED
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOW
<TABLE>
<CAPTION>
Three months ended February 28: 1995 1994
-----------------------
(In Thousands)
<S> <C> <C>
Operating Activities
Net Earnings $ 8,469 $ 7,537
Adjustments to reconcile net earnings
to net cash provided by
operating activities:
Depreciation and amortization 2,959 2,587
Gain on sale of discontinued
operations (1,229)
Loss (Gain) on sale of property
and investments (15) 115
Other (713) 47
Changes in assets and liabilities:
Accounts receivable (3,030) 3,500
Prepaid expenses and other
current assets (746) 150
Deferred income taxes (1,094) (489)
Accounts payable 4,927 2,894
Accrued payroll and related benefits (337) (951)
Other accrued expenses (3,438) (492)
Income taxes 3,242 3,633
--------- ---------
Net cash flow from operations 10,224 17,302
--------- ---------
Financing Activities
Payments on long-term debt (5,377) (3,500)
Proceeds from Common Stock offering 59,786
Proceeds from exercise of stock options
and related transactions 7,177 4,824
--------- ---------
Net cash flow from financing 61,586 1,324
Investing Activities
Purchase of property, buildings
and equipment (4,479) (2,653)
Proceeds from sale of property, buildings
and equipment 11
Proceeds from sale of discontinued operations 6,238
Proceeds from investments in partnerships 500
Payment for business acquisitions,
net of cash acquired (15,563) (4,521)
--------- ---------
Net cash flow used in investing (20,031) (436)
--------- ---------
Net increase in cash and cash equivalents 51,779 18,190
Beginning cash and cash equivalents 79,509 52,535
--------- ---------
Ending cash and cash equivalents 131,288 70,725
========= =========
</TABLE>
See Notes to Condensed Consolidated Financial Statements
<PAGE> 5
VIVRA INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
February 28, 1995
NOTE A - BASIS OF PRESENTATION
The condensed consolidated financial statements are unaudited pursuant to the
rules and regulations of the Securities and Exchange Commission. Accordingly,
certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. In the opinion of management, all adjustments
necessary for a fair presentation of the financial position, results of
operations and cash flows for the periods presented have been made and are of a
normal recurring nature.
The condensed consolidated financial statements should be read in conjunction
with the Company's consolidated financial statements and the notes thereto
included in the registrant's annual report on Form 10-K for the year ended
November 30, 1994.
The balance sheet at November 30, 1994 has been derived from the audited
financial statements at that date.
NOTE B - ACQUISITIONS
During the three months ended February 28, 1995, the Company acquired six
dialysis centers, two each in Alabama, California and Georgia and one physician
practice business in Georgia. Total consideration of $15.3 million was paid in
cash and exceeded the fair value of assets acquired by $14.3 million. These
acquisitions have been accounted for under the purchase method, accordingly, the
excess of the purchase price over assets acquired is being amortized using the
straight-line method.
NOTE C - COMMON STOCK OFFERING
In February 1995, the Company issued two million shares of its Common Stock in a
public offering. The net proceeds from this offering were approximately $59.8
million.
<PAGE> 6
VIVRA INCORPORATED
Management's Discussion and Analysis of Results
of Operations and Financial Condition
RESULTS OF OPERATIONS
THREE MONTHS ENDED FEBRUARY 28, 1995
As compared to the three months ended February 28, 1994, revenues increased
$20.0 million, or 31.3%; costs and expenses $17.7 million, or 33.9%; earnings
from continuing operations before taxes $2.4 million, or 20.7%, and net earnings
from continuing operations $1.6 million, or 23.8%. During the period ended
February 28, 1994, the Company had a gain of $697,000, after applicable taxes,
on the sale of its home healthcare nursing business. In total, net earnings for
the period increased $932,000, or 12.4%. The increase in revenues and earnings
from continuing operations was driven particularly by the continued growth of
the dialysis business.
Of the $19.7 million increase in operating revenues, revenues from Specialty
Services, 90.8% of which was from dialysis services, increased $13.3 million to
$73.1 million, or 22.3%. Revenues from Other Services increased $6.4 million to
$10.1 million, a 168.8% increase. The increase in Specialty Services revenues
was attributable to a 10.4% increase in the number of dialysis treatments from
300,663 to 331,948 which resulted from the addition of 19 new centers and
improved patient census. Revenues from the administration of the drug
Erythropoietin ("EPO"), prescribed for dialysis patients suffering from anemia,
and other ancillary services also contributed to the increase in dialysis
revenues. For the first three months of fiscal 1995, revenues from EPO were
$11.6 million, compared to $9.7 million in the prior year, a 20.1% increase, due
to an increase in the number of patients receiving EPO and in the average size
of dosages. The balance of Specialty Services revenues, 9.2% of the total, was
attributable to the addition of the asthma/allergy care business acquired on
November 30, 1994. The increase in Other Services revenues primarily reflects
the growth of the rehabilitation therapy and surgery center businesses and the
development of the physician practice management business. Other income from
interest earned on short-term investments, increased $347,000 to $671,000, or
107.1%, as a result of increased cash balances invested at slightly higher
interest rates.
Of the increase in costs and expenses, operating costs increased $12.8 million,
or 29.9%, to $55.5 million for the three months ended February 28, 1995.
Specialty Services operating costs, of which dialysis represented 90.0%,
increased $8.4 million to $49.0 million, or 20.7%, while operating costs of
Other Services increased $4.4 million to $6.6 million, or 201.1%. Dialysis
operating costs increased due to increased volume of business, expenses
associated with the operation of new dialysis centers, the cost of the
<PAGE> 7
administration of EPO and higher labor and supply costs. The balance of
Specialty Services operating costs, 10.0% of the total, was attributable to the
addition of the asthma/allergy care business and growth in the specialty
pharmacy services business. Operating costs of Other Services increased as a
result of the growth of the rehabilitation therapy and surgery center
businesses and the Company's continued investment in the physician practice
management business. General and administrative expenses increased $4.8 million
to $11.8 million or 67.8%, as a result of an increased volume of business, the
addition of the asthma/allergy care and physician practice management
businesses, growth of the rehabilitation therapy business, costs associated
with the growth of the ambulatory surgery and specialty pharmacy service
businesses, and the development of new managed care products.
As a result of revenues increasing less rapidly than costs and expenses and the
Company's investment in new businesses, earnings from continuing operations
before taxes as a percentage of revenues decreased to 16.7%, compared to 18.2%
in the prior year period. The effective tax rate for the period was 39.5% of
earnings before income taxes, compared to 41.0% a year earlier. This was due, in
large part, to the Company's cash assets being invested in short-term tax-free
instruments, which had the effect of lowering the overall tax rate.
LIQUIDITY AND CAPITAL RESOURCES
The Company requires capital primarily for the acquisition and development of
dialysis facilities, including the purchase of property, buildings and
equipment, as well as the acquisition and development of other businesses.
Capital and acquisition expenditures were $20.0 million and $7.2 million for the
three months ended February 28, 1995 and 1994, respectively.
Cash flow from financing activities increased by $60.3 million to $61.6 million
at February 28, 1995. This increase was primarily the result of the Company's
February 16, 1995 public offering from which the Company received net proceeds
of $59.8 million.
Cash flow from operations was $10.2 million and $17.3 million for the three
months ended February 28, 1995 and 1994, respectively. The Company's working
capital increased by $61.1 million to $158.3 million at February 28, 1995, from
$97.2 million at November 30, 1994.
For the remainder of fiscal 1995, the Company intends to continue to acquire and
develop new dialysis facilities. The Company is also evaluating acquisition and
development opportunities in other sectors of specialty health care services. To
the extent the Company is able to identify significant attractive investment
opportunities, such expenditures could exceed $50 million for fiscal 1995. The
Company believes that cash generated from operations together with available
cash and the proceeds from its Common Stock public offering will be adequate to
meet the Company's planned expenditure, acquisition, development and liquidity
needs for fiscal 1995.
<PAGE> 8
INFLATION AND PRICE CHANGES
Approximately 67% of the Company's dialysis revenues were funded by Medicare and
Medicaid, at fixed rates per dialysis treatment, before charges for ancillary
services. Since January 1, 1991, the Medicare and Medicaid reimbursement rate
has remained constant at $126 per treatment. The Company is unable to predict
what, if any, future changes may occur in the Medicare and Medicaid
reimbursement rates and, if made, whether such changes will help alleviate or
increase inflationary pressures on the Company's costs.
The balance of dialysis revenues are from non-government sources and are
generally at rates significantly in excess of Medicare and Medicaid. Any
restriction or reduction of the Company's ability to charge rates in excess of
those paid by Medicare and Medicaid would have a significant negative effect on
the company's revenues and earnings. It is expected that the growth of health
maintenance organizations and other managed care organizations will create a
more competitive environment which will require the Company over time to reduce
prices for some of its services. The company is investing in the development of
managed care products which are intended to offset the negative impact of such
reduced prices. If the new products are not successful, any reduction in prices
will result in significantly lower operating margins for the dialysis business.
<PAGE> 9
VIVRA INCORPORATED
February 28, 1995
PART II OTHER INFORMATION
Item 1: LEGAL PROCEEDINGS
See Part 1, Item 3, of the Company's report on Form 10-K for
the fiscal year ended November 30, 1994.
Item 6: EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibit is included herein:
Exhibit 11. Computation of Earnings per Share
(b) The registrant was not required to file a report on Form 8-K
during the three months ended February 28, 1995.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
VIVRA INCORPORATED
(Registrant)
Dated: April 14, 1995 /s/ LeAnne M Zumwalt
------------------------
LeAnne M. Zumwalt
Vice President - Finance
Secretary/Treasurer
<PAGE> 10
VIVRA INCORPORATED
<TABLE>
<CAPTION>
EXHIBIT INDEX
EXHIBIT PAGE NO.
- --------------------------------------------------------------------------------
<S> <C> <C>
11 Computation of Earnings per Share 11
27 Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 11
VIVRA INCORPORATED
COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
Quarter ended February 28: 1995 1994
---------------------
(In Thousands, except
per share data)
<S> <C> <C>
Primary:
Average shares outstanding 21,325 20,307
Stock options granted to employees,
based on the treasury-stock method
using average market price 537* 524*
------- -------
Total 21,862 20,831
Earnings:
Continuing Operations $ 8,469 $ 6,840
Gain on sale of Discontinued Operations 697
------- -------
Net Earnings $ 8,469 $ 7,537
Earnings per Share:
Continuing Operations $ .40 $ .34
Gain on sale of Discontinued Operations .03
------- -------
Net Earnings $ .40 $ .37
Fully Diluted:
Average shares outstanding 21,325 20,307
Stock options granted to employees,
based on the treasury-stock method
using quarter-end market price, if
higher than average market price 601* 556*
------- -------
Total 21,926 20,863
Earnings:
Continuing Operations $ 8,469 $ 6,840
Gain on sale of Discontinued Operations 697
------- -------
Net Earnings $ 8,469 $ 7,537
Earnings per Share:
Continuing Operations $ .40 $ .34
Gain on sale of Discontinued Operations .03
------- -------
Net Earnings $ .40 $ .37
</TABLE>
*As the dilutive Common Stock equivalents are less than 3% of the weighted
average outstanding shares, they have not been included in the computation of
earnings per share as shown in the condensed consolidated financial statements.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> NOV-30-1995
<PERIOD-END> FEB-28-1995
<CASH> 131,288
<SECURITIES> 0
<RECEIVABLES> 65,357
<ALLOWANCES> 10,974
<INVENTORY> 0
<CURRENT-ASSETS> 205,700
<PP&E> 114,483
<DEPRECIATION> 45,659
<TOTAL-ASSETS> 350,404
<CURRENT-LIABILITIES> 47,379
<BONDS> 4,463
<COMMON> 233
0
0
<OTHER-SE> 290,544
<TOTAL-LIABILITY-AND-EQUITY> 350,404
<SALES> 83,207
<TOTAL-REVENUES> 83,878
<CGS> 55,520
<TOTAL-COSTS> 55,520
<OTHER-EXPENSES> 14,163
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 182
<INCOME-PRETAX> 14,013
<INCOME-TAX> 5,522
<INCOME-CONTINUING> 8,469
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,469
<EPS-PRIMARY> .40
<EPS-DILUTED> .40
</TABLE>
