<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED MAY 31, 1995
OR
_____ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 1-10261
VIVRA INCORPORATED
DELAWARE I.R.S. EMPLOYER IDENTIFICATION NO. 94-3096645
400 PRIMROSE, #200
BURLINGAME, CALIFORNIA 94010
415-348-8200
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 ___
The number of shares outstanding of each of the issuer's classes of common
stock as of May 31, 1995 was: 23,933,825
This document contains 12 pages and the Exhibit Index is on Page 11.
Page 1 of 12
<PAGE> 2
VIVRA INCORPORATED
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
PART I. FINANCIAL INFORMATION PAGE
- ---------------------------------------- ----
Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets as of
May 31, 1995 and November 30, 1994 3
Condensed Consolidated Statements of Earnings for the
Three and Six Months Ended May 31, 1995 and
May 31, 1994 4
Condensed Consolidated Statements of Cash Flows for the
Six Months Ended May 31, 1995 and May 31, 1994 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition 7
PART II. OTHER INFORMATION
- ------------------------------------
Item 1. Legal Proceedings 9
Item 4. Submission of Matters to a Vote of Security Holders 9
Item 6. Exhibits and Reports on Form 8-K 9
Signatures 10
Exhibit Index 11
Exhibit 11 Computation of Earnings Per Share 12
</TABLE>
Page 2 of 12
<PAGE> 3
VIVRA INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
May 31, Nov. 30,
1995 1994
(Note A)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 71,970 $ 79,509
Short-term investments (Note B) 23,263 -
Accounts receivable, less allowance for doubtful accounts
(5/31/95 - $12,417 and 11/30/94 - $10,321) 59,915 51,353
Prepaid expenses and other current assets 26,962 7,348
Deferred income taxes 15,323 10,674
------------ ------------
Total Current Assets 197,433 148,884
NON-CURRENT ASSETS
Marketable non-current investments (Note B) 18,312 -
Property, buildings and equipment -- at cost less allowances
for depreciation (5/31/95 - $46,546 and 11/30/94 - $43,273) 67,006 65,972
Other assets 7,255 5,335
Goodwill 75,617 55,816
------------ ------------
$ 365,623 $ 276,007
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 13,517 $ 9,833
Accrued payroll and related benefits 22,795 23,073
Other accrued expenses 8,227 10,466
Income taxes 3,933 1,769
Current maturities on long-term debt 1,682 6,499
------------ ------------
Total Current Liabilities 50,154 51,640
Long-term debt -- exclusive of current maturities 1,770 4,938
Deferred income taxes 6,246 6,184
Minority interest 953 1,391
STOCKHOLDERS' EQUITY
Common stock, par value $.01 per share; authorized 80.0 million
shares; issued 23.9 million shares in 1995 and 20.8 million in 1994 239 208
Additional paid-in capital 131,023 54,891
Retained earnings 175,238 156,755
------------ ------------
Total Stockholders' Equity 306,500 211,854
------------ ------------
$ 365,623 $ 276,007
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements
Page 3 of 12
<PAGE> 4
VIVRA INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
May 31, May 31,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
REVENUES
Operating revenues $ 88,530 $ 69,602 $171,737 $133,139
Other income 3,533 435 4,204 759
-------- -------- -------- --------
Total Revenues 92,063 70,037 175,941 133,898
COSTS AND EXPENSES
Operating 59,485 44,652 115,005 87,387
General and administrative 13,517 10,328 25,293 17,347
Depreciation 2,671 2,477 5,058 4,762
Interest (principally on long-term debt) 110 125 292 277
-------- -------- -------- --------
Total Costs and Expenses 75,783 57,582 145,648 109,773
Earnings from continuing operations, before minority
interest and income taxes 16,280 12,455 30,293 24,125
Minority interest (164) 92 (186) 16
-------- -------- -------- --------
Earnings from continuing operations, before income taxes 16,116 12,547 30,107 24,141
Income taxes 6,196 5,144 11,718 9,898
-------- -------- -------- --------
Net earnings from continuing operations 9,920 7,403 18,389 14,243
Gain on sale of discontinued operations, less applicable
taxes - - - 697
-------- -------- -------- --------
NET EARNINGS $ 9,920 $ 7,403 $ 18,389 $ 14,940
======== ======== ======== ========
EARNINGS PER SHARE:
Net earnings from continuing operations $.42 $.36 $.82 $.70
Gain on sale of discontinued operations - - - .03
-------- -------- -------- --------
Net earnings $.42 $.36 $.82 $.73
======== ======== ======== ========
AVERAGE NUMBER OF COMMON SHARES 23,670 20,473 22,510 20,391
</TABLE>
See accompanying notes to condensed consolidated financial statements
Page 4 of 12
<PAGE> 5
VIVRA INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Six Months Ended
May 31,
1995 1994
<S> <C> <C>
OPERATING ACTIVITIES
Net earnings $ 18,389 $ 14,940
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 6,211 5,395
Gain on sale of discontinued operations - (1,229)
Gain on sale of property and investments (2,170) 30
Other (2,727) (1,954)
Changes in assets and liabilities:
Accounts receivable (9,549) 1,285
Prepaid expenses and other current assets (2,425) 1
Deferred income taxes (4,649) (1,092)
Accounts payable 7,586 2,246
Accrued payroll and related benefits (877) 1,228
Other accrued expenses (3,973) (469)
Income taxes 2,034 722
---------- ----------
Net cash flow from operations 7,850 21,103
FINANCING ACTIVITIES
Payments on long-term debt (5,547) (3,514)
Proceeds from common stock offering 59,597 -
Proceeds from exercise of stock options and related transactions 13,036 5,090
---------- ----------
Net cash flow from financing 67,086 1,576
INVESTING ACTIVITIES
Purchase of property, buildings and equipment (12,048) (8,148)
Purchase of marketable securities (41,575) -
Proceeds from sale of property, buildings and equipment 1,211 140
Proceeds from sale of discontinued operations - 6,238
Proceeds from investments in partnerships - 1,627
Minority interest investment - (1,500)
Payment for business acquisitions, net of cash acquired (30,063) (5,938)
---------- ----------
Net cash flow used in investing (82,475) (7,581)
---------- ----------
Net increase (decrease) in cash and cash equivalents (7,539) 15,098
Beginning cash and cash equivalents 79,509 52,535
---------- ----------
Ending cash and cash equivalents $ 71,970 $ 67,633
========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements
Page 5 of 12
<PAGE> 6
VIVRA INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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.
B. FINANCIAL INSTRUMENTS
Short-term investments consist of highly liquid investment grade securities
that mature between four and twelve months from the reporting date.
Marketable non-current investments consist of liquid investment grade
securities that mature between thirteen and thirty months from the
reporting date.
The Financial Accounting Standards Board ("FASB") issued Statement No. 115,
"Accounting for Certain Investments in Debt and Equity Securities",
effective December 1, 1994. This statement revises the balance sheet
classification of investments in debt and equity securities and requires
that certain investments are to be valued at market value while other
investments are to be valued at cost. The Company's investment grade
securities have been categorized as Held-to-Maturity Securities, and
are recorded at amortized cost which approximates market.
C. ACQUISITIONS
During the six months ended May 31, 1995, the Company acquired
sixteen dialysis centers. Total consideration paid was $40.8 million,
consisting of cash of $29.8 million and 333,488 shares of the Company's
common stock, which exceeded the fair market value of assets acquired by
$27.5 million.
The acquisition of three dialysis centers have been accounted for as
poolings of interest. Consolidated financial statements for the prior
periods to the exchanges have not been restated as the effect of the
poolings were not material to the Company. The remaining acquisitions
have been accounted for as purchases and, accordingly, have been included
in the statement of earnings since their dates of acquisition.
D. 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 $59.6 million.
Page 6 of 12
<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
RESULTS OF OPERATIONS
Three Months Ended May 31, 1995
As compared to the three months ended May 31, 1994, revenues increased $22.0
million, or 31.4%; costs and expenses $18.2 million, or 31.6%; and earnings
from continuing operations before taxes $3.6 million, or 28.4%. In total, net
earnings for the period increased $2.5 million, or 34.0%. The increase in
revenues and earnings from continuing operations was driven particularly by the
continued growth of the dialysis business.
Of the increase in revenues, operating revenues increased $18.9 million, or
27.2%, to $88.5 million for the three months ended May 31, 1995. Revenues from
Specialty Services, 90.0% of which was from dialysis services, increased $15.3
million to $78.6 million, or 24.2%. Revenues from Other Services increased
$3.6 million to $9.9 million, a 57.3% increase. The increase in Specialty
Services revenues was attributable to a 17.6% increase in the number of
dialysis treatments from 314,518 to 369,834 which resulted from the addition of
15 new centers, and the addition of the asthma and allergy care business
acquired on November 30, 1994. The increase in Other Services revenues
primarily reflects the growth of the rehabilitation therapy business. Other
income of $3.5 million, was comprised of a $2.2 million gain recorded on the
disposition of certain of the Company's ambulatory surgery centers and $1.3
million related to interest earned on tax-free marketable securities.
Of the increase in costs and expenses, operating costs increased $14.8 million,
or 33.2%, to $59.5 million for the three months ended May 31, 1995. Specialty
Services operating costs, of which dialysis represented 91.9%, increased $12.3
million to $52.6 million, or 30.5%, while operating costs of Other Services
increased $2.5 million to $6.9 million, or 59.1%. Specialty Services operating
costs increased due to the increased volume of dialysis business, expenses
associated with the operation of newly developed dialysis centers, higher labor
and supply costs, and the addition of the asthma and allergy care business.
Operating costs of Other Services increased as a result of the growth of the
rehabilitation therapy business. General and administrative expenses increased
$3.2 million to $13.5 million, or 30.9%. These expenses include $2.2 million of
non-recurring items consisting of a $1.1 million reserve taken for
intradialytic parenteral nutrition therapy (IDPN) accounts receivable, $940,000
for severance and compensation arrangements and $200,000 for other charges. In
addition, general and administrative expenses increased as a result of
continued investment in managed care products.
Six Months Ended May 31, 1995
As compared to the six months ended May 31, 1994, revenues increased $42.0
million, or 31.4%; costs and expenses $35.9 million, or 32.7%; earnings from
continuing operations before taxes $6.0 million, or 24.7%; and net earnings
from continuing operations, $4.1 million, or 29.1%. During the period ended
May 31, 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 $3.4 million, or 23.1%. The increase in revenues and
earnings was driven particularly by the continued growth of the dialysis
business.
Of the increase in revenues, operating revenues increased $38.6 million, or
29.0%, to $171.7 million for the six months ended May 31, 1995. Revenues from
Specialty Services, 90.4% of which was from dialysis services, increased $28.6
million, to $151.6 million, or 23.2%. Revenues from Other Services increased
$10.0 million to $20.1 million, a 99.0% increase. The increase in Specialty
Services revenues was attributable to a 14.1% increase in the number of
dialysis treatments from 615,181 to 701,782 which resulted from the addition of
32 new centers, improved patient census, and the addition of the asthma and
allergy care business acquired on November 30, 1994. The increase in Other
Services revenues primarily reflects the growth of the rehabilitation therapy
business. Other income of $4.2 million, was comprised of a $2.2 million gain
recorded in the disposition of certain of the Company's ambulatory surgery
centers and $2.0 million related to interest earned on tax-free marketable
securities.
Page 7 of 12
<PAGE> 8
Of the increase in costs and expenses, operating costs increased $27.6 million,
or 31.6%, to $115.0 million for the six months ended May 31, 1995. Specialty
Services operating costs, of which dialysis represented 91.0%, increased $20.7
million to $101.6 million, or 25.6%, while operating costs of Other Services
increased $6.9 million to $13.4 million, or 106.8%. Specialty Services
operating costs increased due to the increased volume of dialysis business,
expenses associated with the operation of newly developed dialysis centers,
higher labor and supply costs, the addition of the asthma and allergy care
business and growth in the diabetes management business. Operating costs of
Other Services increased as a result of the growth of the rehabilitation
therapy business. General and administrative expenses increased $7.9 million
to $25.2 million, or 45.8%. These expenses include $2.2 million of
non-recurring items consisting of a $1.1 million reserve taken for IDPN
accounts receivable, $940,000 for severance and compensation arrangements
and $200,000 for other charges. In addition, general and administrative
expenses increased as a result of the growth of the rehabilitation therapy
business and the development of new managed care products.
The effective tax rate for the period was 38.9% 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 tax-free marketable securities, 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 $42.1 million and $14.1 million for
the six months ended May 31, 1995 and 1994, respectively.
Cash flow from financing activities increased by $65.5 million to $67.1 million
at May 31, 1995. This increase was primarily the result of the Company's
February 16, 1995 public offering from which the Company received net proceeds
of $59.6 million.
Cash flow from operations was $7.9 million and $21.1 million for the six months
ended May 31, 1995 and 1994, respectively. The Company's working capital
increased by $50.0 million to $147.2 million at May 31, 1995, from $97.2
million at November 30, 1994.
For the remainder of fiscal 1995, the Company intends to continue to acquired
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 $70 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 of 12
<PAGE> 9
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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its Annual Meeting of Stockholders on May 9, 1995. The
vote with respect to each matter is set forth below:
A. Election of three directors to serve until the annual meeting in
1998 and until their successors are elected;
<TABLE>
<CAPTION>
Total Votes
Total Votes for Against/Withheld
Nominees Each Director from Each Director
------------------- ------------- ------------------
<S> <C> <C>
Stephen G. Pagliuca 19,653,532 119,351
Kent J. Thiry 19,653,870 119,013
LeAnne M. Zumwalt 19,654,822 118,061
</TABLE>
B. Approved the amendment and restatement of the Company's 1989 Stock
Incentive Plan, including the reservation of an additional 700,000
shares for issuance thereunder;
<TABLE>
<CAPTION>
Total Votes
Total Votes For Against/Withheld
--------------- ----------------
<S> <C>
15,494,759 4,278,124
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) 1. See Exhibit 11 on Page 12
2. Exhibit 27 - Financial Data Schedule
(b) The registrant was not required to file a report on Form 8-K during
the three months ended May 31, 1995.
Page 9 of 12
<PAGE> 10
SIGNATURES
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.
VIVRA INCORPORATED
----------------------------
(Registrant)
Date: July 7 , 1995 /s/ LeAnne M. Zumwalt
----------------------------
LeAnne M. Zumwalt
Vice President-Finance and
Secretary / Treasurer
Page 10 of 12
<PAGE> 11
VIVRA INCORPORATED
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. PAGE NO.
- ----------- --------
<S> <C>
11. Computation of Earnings Per Share 12
27. Financial Data Schedule
</TABLE>
Page 11 of 12
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EXHIBIT 11
VIVRA INCORPORATED
COMPUTATION OF EARNINGS PER SHARE
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
May 31, May 31,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Primary:
Average shares outstanding 23,670 20,473 22,510 20,391
Stock options granted to employees, based on
the treasury-stock method using average
market price 436* 500* 523* 516*
-------- --------- --------- ----------
Total 24,106 20,973 23,033 20,907
Earnings:
Continuing operations $9,920 $7,403 $18,389 $14,243
Gain on sale of discontinued operations - - - 697
-------- --------- --------- ----------
Net earnings $9,920 $7,403 $18,389 $14,940
Earnings per share:
Continuing operations $.42 $.36 $.82 $.70
Gain on sale of discontinued operations - - - .03
-------- --------- --------- ----------
Net earnings $.42 $.36 $.82 $.73
Fully diluted:
Average shares outstanding 23,670 20,473 22,510 20,391
Stock options granted to employees, based on
the treasury-stock method using quarter end
market price, if higher than average market
price 448* 500* 528* 490*
-------- --------- --------- ----------
Total 24,118 20,973 23,038 20,881
Earnings:
Continuing operations $9,920 $7,403 $18,389 $14,243
Gain on sale of discontinued operations - - - 697
-------- --------- --------- ----------
Net earnings $9,920 $7,403 $18,389 $14,940
Earnings per share:
Continuing operations $.42 $.36 $.82 $.70
Gain on sale of discontinued operations - - - .03
-------- --------- --------- ----------
Net earnings $.42 $.36 $.82 $.73
</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.
Page 12 of 12
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> NOV-30-1995
<PERIOD-END> MAY-31-1995
<CASH> 71,970
<SECURITIES> 23,263
<RECEIVABLES> 72,332
<ALLOWANCES> 12,417
<INVENTORY> 0
<CURRENT-ASSETS> 197,433
<PP&E> 113,552
<DEPRECIATION> 46,546
<TOTAL-ASSETS> 365,623
<CURRENT-LIABILITIES> 50,154
<BONDS> 1,770
<COMMON> 239
0
0
<OTHER-SE> 306,261
<TOTAL-LIABILITY-AND-EQUITY> 365,623
<SALES> 171,737
<TOTAL-REVENUES> 175,941
<CGS> 115,005
<TOTAL-COSTS> 115,005
<OTHER-EXPENSES> 30,351
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 292
<INCOME-PRETAX> 30,293
<INCOME-TAX> 11,718
<INCOME-CONTINUING> 18,389
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 18,389
<EPS-PRIMARY> .82
<EPS-DILUTED> .82
</TABLE>
