<PAGE>
FORM 8-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report: June 13, 1996
VIVRA INCORPORATED
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 1-10261 94-3096645
- --------------------------------------------------------------------------------
(State or other (Commission (IRS Employer
jurisdiction of File Number) Id. No.)
incorporation)
1850 Gateway Drive, Suite 500, San Mateo, CA 94404
- --------------------------------------------------------------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code: (415) 577-5700
-1-
<PAGE>
Item 5. Other Events. The Registrant acquired the all of the outstanding stock
----- ------
of Orthonet, Inc. on February 28, 1996, Brennan, Martell and Mirmelli, M.D.'s,
P.A. and Allergy & Asthma Institute of South Florida, P.A. on May 1, 1996 and
Kidney Centers of Charleston, Inc. (all four such entities collectively the
"Acquired Companies") on May 1, 1996 in exchange for stock of the Registrant.
These transactions have been accounted for under pooling-of-interests
accounting. Accordingly, the Registrant files herewith Supplemental
Consolidated Financial Statements which reflect the restatement of the
Registrant's historical financial statements as though the Registrant and the
Acquired Companies had been combined.
Item 7. Financial Statements and Exhibits.
--------- ---------- --- --------
(a) Financial Statements of Businesses Acquired or To Be Acquired.
(b) Pro forma financial information of the Registrant.
(c) Exhibits.
11.1 Supplemental Computation of Earnings Per Share.
23.1 Consent of Ernst & Young, LLP.
99.1 Audited Supplemental Consolidated Financial Statements of
Registrant and Subsidiaries for the year ended November 30, 1995.
99.2 Schedule 2 - Supplemental Valuation and Qualifying Accounts.
99.3 Unaudited Supplemental Consolidated Financial Statements of
Registrant and Subsidiaries for the Quarter Ended February 29,
1996.
-2-
<PAGE>
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 hereunto duly authorized.
Dated: June 12, 1996
VIVRA INCORPORATED
By /s/ LEANNE M. ZUMWALT
------------------------------------------
Leanne M. Zumwalt
Chief Financial Officer
-3-
<PAGE>
Exhibit 11.1 Statement Re:
Supplemental Computation of Per Share Earnings*
Vivra Incorporated and Subsidiaries
Three Years Ended November 30, 1995
<TABLE>
<CAPTION>
Year ended November 30
1995 1994 1993
-------------------------------------------
<S> <C> <C> <C>
Primary:
Weighted average shares outstanding* 36,474,000 32,111,000 30,282,000
(a) Stock options granted to employees, based
on the treasury-stock method using average
market price 678,000(1) 816,000(1) 940,000
-----------------------------------------
Total 37,152,000 32,927,000 31,222,000
=========================================
Net earnings from continuing operations $38,528,000 $29,947,000 $24,218,000
Earnings from discontinued operations less applicable taxes - - 554,000
Gain on sale of discontinued operations less applicable - 697,000 -
taxes -----------------------------------------
Net earnings $38,528,000 $30,644,000 $24,772,000
=========================================
Earnings per Share:
Net earnings from continuing operations $1.06 $.93 $.77
Earnings from discontinued operations - - .02
Gain on sale of discontinued operations - .02 -
-----------------------------------------
Net earnings $1.06 $.95 $.79
=========================================
Fully diluted:
Weighted average shares outstanding* 36,474,000 32,111,000 30,282,000
(a) Stock options granted to employees, based
on the treasury-stock method using the
year-end market price, if higher than
average market price 696,000(1) 843,000(1) 975,000
-----------------------------------------
Total 37,170,000 32,954,000 31,257,000
=========================================
Net earnings from continuing operations $38,528,000 $29,947,000 $24,218,000
Earnings from discontinued operations less applicable taxes - - 554,000
Gain on sale of discontinued operations less applicable - 697,000 -
taxes -----------------------------------------
Net earnings $38,528,000 $30,644,000 $24,772,000
=========================================
Earnings per Share:
Net earnings from continuing operations $1.06 $.93 $.77
Earnings from discontinued operations - - .02
Gain on sale of discontinued operations - .02 -
-----------------------------------------
Net earnings $1.06 $.95 $.79
=========================================
</TABLE>
* Adjusted to reflect three-for-two stock splits payable to shareholders of
record on November 22, 1995 and November 10, 1993, respectively, and the
issuance of 1,405,373 shares of Common Stock in connection with the pooling
of interests described in Note 1 to the Supplemental Consolidated Financial
Statements, reflected retroactively for all periods presented.
(1) 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 Supplemental Consolidated
Financial Statements.
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in Registration Statement No.
33-85736 on Form S-4 dated April 25, 1996; No. 33-60513 on Form S-8 dated
July 23, 1995; No. 33-98246 on Form S-8 dated August 17, 1994; and No. 33-80030
on form S-3 dated June 20, 1994 of our report dated June 7, 1996, with respect
to the supplemental consolidated financial statements and schedule of Vivra
Incorporated included in this Form 8-K.
ERNST & YOUNG LLP
Los Angeles, California
June 13, 1996
<PAGE>
REPORT OF INDEPENDENT AUDITORS
We have audited the accompanying supplemental consolidated balance sheets of
Vivra Incorporated (formed as a result of the consolidation of Vivra
Incorporated; Kidney Centers of Charleston, Inc.; Brennan, Martell, and
Mirmalli, M.D.s, P.A. and Allergy & Asthma Institute of South Florida, P.A.;
and Orthonet, Inc.) as of November 30, 1995 and 1994 and the related
supplemental consolidated statements of earnings, stockholders' equity, and
cash flows for each of the three years in the period ended November 30, 1995.
The supplemental consolidated financial statements give retroactive effect
to the merger of Vivra Incorporated and Kidney Centers of Charleston, Inc. on
May 1, 1996; Vivra Incorporated and Brennan, Martell and Mirmalli, M.D.s, P.A.
and Allergy & Asthma Institute of South Florida, P.A. on May 1, 1996; and Vivra
Incorporated and Orthonet, Inc., on February 28, 1996, all of which have been
accounted for using the pooling of interests method as described in the notes
to the supplemental consolidated financial statements. These supplemental
financial statements are the responsibility of the management of Vivra
Incorporated. Our responsibility is to express an opinion on those
supplemental financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the accompanying supplemental financial statements referred
to above present fairly, in all material respects, the consolidated financial
position of Vivra Incorporated at November 30, 1995 and 1994, and the
consolidated results of its operations and its cash flows for each of the
three years in the period ended November 30, 1995, after giving retroactive
effect to the merger of Kidney Centers of Charleston, Inc.; Brennan, Martell
and Mirmalli, M.D.s, P.A. and Allergy & Asthma Institute of South Florida,
P.A.; and Orthonet, Inc., as described in the notes to the supplemental
consolidated financial statements, in conformity with generally accepted
accounting principles.
ERNST & YOUNG LLP
Los Angeles, California
June 7, 1996
Vivra Incorporated and Subsidiaries
Supplemental Consolidated Balance Sheets
<TABLE>
<CAPTION>
NOVEMBER 30,
1995 1994
-----------------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 53,990 $ 80,620
Short-term investments - held-to-maturity and 43,616 -
available-for-sale (NOTE 4)
Accounts receivable, less allowance for doubtful
accounts (1995 - $13,279 and 1994 - $10,640) 64,004 53,650
Inventories 9,030 6,549
Prepaid expenses and other current assets 1,959 989
Deferred income taxes (NOTE 6) 14,514 10,674
--------------------
Total Current Assets 187,113 152,482
Marketable non-current investments - held-to-
maturity (NOTE 4) 22,510 -
Property, buildings and equipment - at cost, less
allowances for depreciation (NOTES 5 AND 7) 76,189 66,717
Other assets 8,479 5,353
Goodwill and other intangibles, less accumulated
amortization 113,935 56,173
(1995 - $6,727 and 1994 - $4,691) --------------------
$408,226 $280,725
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 11,004 $ 10,011
Accrued payroll and related benefits 22,693 23,231
Other accrued expenses 10,768 10,978
Income taxes (NOTE 6) 4,674 2,184
Current portion of deferred income taxes 3,791 283
Current maturities of long-term debt (NOTE 7) 1,477 7,388
--------------------
Total Current Liabilities 54,407 54,075
Long-term debt - exclusive of current maturities 1,840 5,403
(NOTE 7)
Deferred income taxes (NOTE 6) 6,643 6,184
Minority interest (238) 1,391
STOCKHOLDERS' EQUITY (NOTE 8):
Common stock, par value $.01 per share; authorized
80.0 million shares; issued 38.1 million 381 223
shares in 1995 and 32.6 million in 1994
Additional paid-in capital 142,762 54,876
Retained earnings 197,361 158,573
Net unrealized gain on marketable securities, 5,070 -
less applicable income taxes
--------------------
Total Stockholders' Equity 345,574 213,672
--------------------
$408,226 $280,725
</TABLE>
SEE NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
Vivra Incorporated and Subsidiaries
Supplemental Consolidated Statements of Earnings
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30
1995 1994 1993
---------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
REVENUES
Operating revenues $366,516 $297,399 $228,002
Other income 5,221 1,891 1,235
---------------------------------------
Total Revenues 371,737 299,290 229,237
COSTS AND EXPENSES
Operating 250,663 198,039 156,507
General and administrative 46,430 40,200 22,686
Depreciation 10,978 9,712 7,344
Interest 444 571 945
---------------------------------------
Total Costs and Expenses 308,515 248,522 187,482
---------------------------------------
Earnings from continuing operations,
before minority interest and
income taxes 63,222 50,768 41,755
Minority interest (95) (10) -
---------------------------------------
Earnings from continuing operations,
before income taxes 63,127 50,758 41,755
Income taxes (NOTE 6) 24,599 20,811 17,537
---------------------------------------
Net earnings from continuing operations 38,528 29,947 24,218
Earnings from discontinued operations,
less applicable taxes (NOTE 3) - - 554
Gain on sale of discontinued
operations, less applicable taxes - 697 -
(NOTE 3)
---------------------------------------
NET EARNINGS $ 38,528 $ 30,644 $ 24,772
=======================================
EARNINGS PER SHARE (PRIMARY AND FULLY
DILUTED):
Net earnings from continuing operations $ 1.06 $ .93 $ .77
Earnings from discontinued operations - - .02
Gain on sale of discontinued operations - .02 -
---------------------------------------
Net earnings $ 1.06 $ .95 $ .79
=======================================
AVERAGE NUMBER OF COMMON SHARES:
Primary 36,474 32,111 31,222
Fully diluted 36,474 32,111 31,257
=======================================
</TABLE>
_____________________
SEE NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
Vivra Incorporated and Subsidiaries
Supplemental Consolidated Statements of Stockholders' Equity
<TABLE>
<CAPTION>
Net Unrealized
Additional Treasury Stock Gain (Loss) on
Common Paid-In Retained ---------------- Marketable
Stock Capital Earnings Shares Amount Securities
-----------------------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 1, 1992 $139 $40,578 $102,593 42 $(1,198)
Common Stock split
effected by three-for-
two distribution (NOTE 8) 64 (103) 21
Cash paid in lieu of
issuance of fractional shares (12)
Exercise of employees'
stock options, net of
treasury stock
transactions (NOTE 8) 5 2,522 (63) 1,198
Income tax benefits
derived from employee
stock option transactions 2,776
Stock issued in connection
with acquisitions (NOTE 2) 7 6 533
Net earnings for year 24,772
-----------------------------------------------------------------------
BALANCE AT NOVEMBER 30, 1993 215 45,767 127,898 - - -
Exercise of employees'
stock options, net of
treasury stock
transactions (NOTE 8) 6 4,163
Income tax benefits
derived from employee
stock option transactions 3,514
Stock issued in connection
with acquisition (NOTE 2) 2 1,432 31
Net earnings for year 30,644
-----------------------------------------------------------------------
BALANCE AT NOVEMBER 30, 1994 223 54,876 158,573 - - -
Common stock split
affected by three-for-
two distribution (NOTE 8) 103 (103)
Cash paid in lieu to
issuance of fractional
shares (59)
Sale of Common Stock (NOTE 8) 30 59,562
Exercise of employees'
stock options, net of
treasury stock
transactions (NOTE 8) 14 13,800
Income tax benefits
derived from employee
stock option transactions 5,162
Stock issued in connection
with acquisition (NOTE 2) 11 9,524 260
Net earnings for year 38,528
Net unrealized gain on
marketable securities,
less applicable income
taxes (NOTE 6) $5,070
------------------------------------------------------------------------
BALANCE AT NOVEMBER 30, 1995 $381 $142,762 $197,361 - - $5,070
========================================================================
</TABLE>
SEE NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
Vivra Incorporated and Subsidiaries
Supplemental Consolidated Statements of Cash Flow
<TABLE>
YEAR ENDED NOVEMBER 30
1995 1994 1993
----------------------------
(IN THOUSANDS)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net earnings $38,528 $30,644 $24,772
Adjustments to reconcile net earnings to
net cash provided by operating
activities:
Depreciation and amortization 14,093 11,792 8,694
Assets held for sale - - (3,261)
Gain on sale of discontinued - (1,229) -
operations
Loss (Gain) on sale of property
and investments (1,565) 1,061 1
Other (6,159) (3,626) (533)
Changes in assets and liabilities:
Accounts receivable (16,249) (1,754) (4,057)
Inventories (2,431) (1,287) (510)
Prepaid expenses and other current
assets (1,652) 295 507
Deferred income taxes (3,841) (4,039) (2,094)
Accounts payable 5,312 (774) 25
Accrued payroll and related
benefits (369) 6,371 3,518
Other accrued expenses (3,279) 5,286 1,073
Income taxes 2,160 1,271 653
----------------------------
Net cash flow from operations 24,548 44,011 28,788
FINANCING ACTIVITIES
Payments on long-term debt (7,703) (3,652) (1,494)
Proceeds from Common Stock offering 59,592 - -
Proceeds from long-term borrowing 613 2,860 310
Proceeds from exercise of stock options
and related transactions 18,918 7,683 6,451
----------------------------
Net cash flow from financing 71,420 6,891 5,267
INVESTING ACTIVITIES
Purchase of property, buildings and
equipment (28,925) (20,761) (12,316)
Purchase of held-to-maturity investments (51,037) - -
Purchase of available-for-sale investments (4,985) - -
Proceeds from sale of property,
buildings and equipment 29,158 193 14
Proceeds from sale of discontinued
operations - 6,238 -
Proceeds from investments in partnerships 841 1,627 1,097
Minority interest investment (1,000) (1,500) -
Payment for business acquisitions, net
of cash acquired (66,650) (9,160) (9,885)
----------------------------
Net cash flow used in investing (122,598) (23,363) (21,090)
----------------------------
Net increase (decrease) in cash and cash
equivalents (26,630) 27,539 12,965
Beginning cash and cash equivalents 80,620 53,081 40,116
----------------------------
Ending cash and cash equivalents $53,990 $80,620 $53,081
============================
</TABLE>
SEE NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
Vivra Incorporated and Subsidiaries
Notes to Supplemental Consolidated Financial Statements
November 30, 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The supplemental consolidated financial statements include the accounts of the
Company and its subsidiaries. In December 1993, the Company sold its home
healthcare nursing business, Personal Care Health Services. The related gain on
the sale is shown separately in 1994 under discontinued operations. The 1993
results of operations for the home healthcare nursing business are shown
separately under discontinued operations, with the Supplemental Consolidated
Statement of Earnings restated for comparative purposes. All significant
intercompany transactions have been eliminated in the accompanying supplemental
consolidated financial statements. Certain amounts have been reclassified to
conform with 1995 presentations. As described more fully in Note 2, the Company
completed business combinations with Orthonet, Inc. on February 28, 1996,
Brennan, Martell and Mirmelli, M.D.'s, P.A. and Allergy & Asthma Institute of
South Florida, P.A. on May 1, 1996 and Kidney Centers of Charleston, Inc. on
May 1, 1996 in stock for stock exchanges or mergers with the Company. These
supplemental consolidated financial statements have been prepared following the
pooling-of-interests method of accounting and reflect the combined financial
position and operating results of the Company and these merged businesses for
all periods presented. Upon issuance of financial statements for the period
that includes the dates of the mergers, these supplemental consolidated
financial statements will become the historical financial statements of the
Company.
The Company's fiscal year end is November 30. These supplemental consolidated
financial statements combine the results of the Company for each of the three
years ended November 30, 1995 with Orthonet, Inc. and Kidney Centers of
Charleston, Inc. for the three years ended December 31, 1995, and
Brennan, Martell and Mirmelli, M.D.'s, P.A. and Allergy & Asthma Institute of
South Florida, P.A. for the fiscal years ended February 29, 1996, February 28,
1995 and 1994. The effect of combining results based on different fiscal year
conventions is not considered material to the Company's financial statements.
CASH EQUIVALENTS
The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.
FINANCIAL INSTRUMENTS
Effective December 1, 1994, the Company adopted Statement of Financial
Accounting Standards No. 115, ACCOUNTING FOR CERTAIN INVESTMENTS IN DEBT AND
EQUITY SECURITIES ("FAS 115"), which resulted in a change in the accounting for
debt and equity securities held for investment purposes. In accordance with FAS
115, the Company's debt and equity securities are now considered as either
held-to-maturity or available-for-sale. Held-to-maturity securities represent
those securities that the Company has both the positive intent and ability to
hold to maturity and are carried at amortized cost. Available-for-sale
securities represent those securities that do not meet the classification
of held-to-maturity or trading, and are carried at fair value. Unrealized
gains and losses on these securities are excluded from earnings and are
reported as a separate component of Stockholders' Equity. The
adoption of FAS 115 had no effect on the Company's reported earnings in fiscal
1995.
INVENTORIES
Inventories of supplies are stated at the lower of cost or market, with cost
being determined on a first-in, first-out basis.
PROPERTY, BUILDINGS AND EQUIPMENT
Depreciation is computed on the straight-line method based on the estimated
useful lives of buildings or items of equipment.
<PAGE>
PREOPENING COSTS
Costs incurred prior to the opening of new facilities are deferred and amortized
on a straight-line basis over a one to three year period.
GOODWILL AND OTHER INTANGIBLES
Goodwill resulting from acquisitions is being amortized on a straight-line basis
over 15 to 40 years. The Company reviews the performance of its operating units
periodically to determine if an impairment has occurred. If events or changes
in circumstances indicate that an impairment exists, the Company writes-down the
corresponding goodwill to fair value. Other intangible assets are being
amortized on a straight-line basis over 15 to 30 years.
INCOME TAXES
Effective December 1, 1993, the Company adopted the provisions of Financial
Accounting Standards Board Statement No. 109, ACCOUNTING FOR INCOME TAXES ("FAS
109"), which requires an asset and liability approach to financial accounting
and reporting for income taxes. Deferred income tax assets and liabilities are
computed for differences between the financial statement and tax bases of assets
and liabilities that will result in taxable or deductible amounts in the future
based on rates applicable to the period in which the differences are expected to
affect taxable income. Valuation allowances are established when necessary to
reduce deferred tax assets. The Company adopted FAS 109 prospectively. There
was no cumulative effect of the change in the method of accounting for income
taxes.
OPERATING REVENUES
Operating revenues include amounts for services reimbursable by Medicare,
Medicaid, certain Blue Cross and other third-party payers under reimbursement
formulas in effect. Operating revenues are recorded net of any related
contractual allowances. Medicare and Medicaid provided approximately 63% of the
Company's operating revenues in fiscal year 1995. The balance of revenues,
approximately 37%, was from insurance, private and other third-
party payers.
STOCK OPTIONS
Proceeds from the exercise of stock options are credited to Common Stock to the
extent of par value, and the balance to additional paid-in capital. No charges
or credits are made to earnings with respect to options granted or exercised.
Income tax benefits derived from the exercise of non-qualified stock options and
from sales of stock obtained from incentive stock options before the minimum
holding period are credited to additional paid-in capital.
EARNINGS PER SHARE
Earnings per share have been computed based upon the weighted average number of
shares of Common Stock outstanding during each year after adjusting for stock
splits and giving effect for Common Stock equivalents arising from stock
options.
<PAGE>
RECENT ACCOUNTING PRONOUNCEMENTS
Effective March 1995, the Financial Accounting Standards Board issued Statement
No. 121, ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR
LONG-LIVED ASSETS TO BE DISPOSED OF ("FAS 121"), which requires impairment
losses to be recorded on long-lived assets used in operations, or to be disposed
of, when such impairment has been determined. The Company will adopt FAS 121
in the first quarter of 1996 and, based on current circumstances, does not
believe the effect of adoption will be material.
2. MERGERS, ACQUISITIONS AND DISPOSITIONS
The Company completed business combinations with Orthonet, Inc. on
February 28, 1996, Brennan, Martell and Mirmelli, M.D.'s, P.A. and Allergy &
Asthma Institute of South Florida, P.A. on May 1, 1996 and Kidney Centers of
Charleston, Inc. on May 1, 1996 in stock for stock exchanges or mergers with
the Company. These transactions have been accounted for under the pooling-of-
interests method. Accordingly, the historical financial statements for periods
prior to the consummation of these combinations have been restated as though the
companies had been combined. The restated financial statements have been
adjusted to conform with differing accounting policies of the separate
companies. All fees and expenses related to these transactions have not been
reflected in the supplemental consolidated statements of income, but will be
reflected in the Company's consolidated statements of income for the quarter
ending May 31, 1996.
The calculation of net income per share for each period presented reflects the
issuance of 1,405,373 shares for the Orthonet, Inc. combination, the
Brennan, Martell and Mirmelli, M.D.'s, P.A. and Allergy & Asthma Institute of
South Florida, P.A. merger and the Kidney Centers of Charleston,
Inc. merger, as if such shares were issued on December 1, 1992.
Separate and combined results from the above transactions are as follows and
reflect income tax adjustments related to the Company's effective tax rate for
each fiscal year:
<TABLE>
<CAPTION>
Vivra Orthonet Brennan Charleston Combined
----- -------- ------- ---------- --------
<S> <C> <C> <C> <C> <C>
Year ended November 30,1995
Revenues................................. $355,647 $715 $8,156 $7,219 $371,737
Net Income............................... 37,940 187 121 280 38,528
Year ended November 30,1994
Revenues................................. $286,519 $274 $6,762 $5,735 $299,290
Net Income............................... 30,439 47 182 (24) 30,644
Year ended November 30,1993
Revenues................................. $217,981 --- $6,305 $4,951 $229,237
Net Income............................... 24,396 --- 198 179 24,772
</TABLE>
In 1995, the Company acquired twenty-eight dialysis centers. Total
consideration paid was $76.0 million, consisting of cash of $58.0 million and
848,391 shares of the Company's Common Stock, which exceeded the fair value of
net assets acquired by $59.7 million.
Also in 1995, the Company acquired seven physician businesses. Total cash
consideration was $9.9 million, which exceeded the fair value of net assets
acquired by $9.8 million.
The purchase price of 1995 acquisitions was allocated to $76.3 million of assets
acquired, less $1.2 million of cash, and $2.4 million of liabilities assumed.
The consideration included the Company's Common Stock and $66.7 million of cash.
During 1994, the Company acquired five dialysis centers. Total consideration
paid was $4.3 million, consisting of cash of $763,000 and 255,777 shares of the
Company's Common Stock, which exceeded the fair value of net assets acquired by
approximately $1.8 million.
<PAGE>
2. MERGERS, ACQUISITIONS AND DISPOSITIONS (CONTINUED)
Also during 1994, the Company acquired eight physician practice and related
businesses. Total consideration paid was $8.8 million, consisting of cash of
$6.6 million and 130,043 shares of the Company's Common Stock, which exceeded
the fair value of net assets acquired by approximately $6.2 million.
In November 1994, the Company purchased certain assets and liabilities in Asthma
and Allergy CareAmerica, Inc., a provider of outpatient asthma/allergy care.
Total consideration paid was $4.8 million, consisting of cash of $1.3 million
and 210,602 shares of the Company's Common Stock, which exceeded the fair value
of net assets acquired by approximately $2.1 million. The purchase agreement
entitles the selling shareholders to receive further consideration of up to
$14.3 million payable in cash or Common Stock of the Company, based upon meeting
predetermined earnings targets in the years 1995 through 1998. The 1995
earnings target was not met, therefore no earnout payment was made.
During 1993, the Company acquired six dialysis centers. Total consideration
paid was $17.9 million , consisting of cash of $9.9 million and 663,750 shares
of the Company's Common Stock, which exceeded the fair value of net assets
acquired by approximately $9.2 million.
The acquisitions of four dialysis centers in 1995, three dialysis centers in
1994, in addition to one physician practice, and two dialysis centers in 1993
have been accounted for under the pooling of interests method. Consolidated
Financial Statements for the periods prior to the exchanges have not been
restated as the effect of the poolings were not material to the Company.
The acquisitions of the remaining dialysis centers and related specialty
businesses have all been accounted for as purchases and, accordingly, have been
included in the statement of earnings since their dates of acquisition.
In June 1995, the Company completed the sale of the assets related to the
operation of its five ambulatory surgery centers. In connection with the sale,
the Company realized a pre-tax gain of $2.2 million.
In July 1995, the Company sold its 60% interest in South Coast Rehabilitation
Services ("SCRS"), a medical rehabilitation provider. In connection with the
sale, the Company realized a pre-tax gain of $2.0 million.
The following table presents the unaudited consolidated results of operations on
a pro forma basis as though the acquisitions made in 1995 had occurred on
December 1, 1993.
YEAR ENDED NOVEMBER 30
1995 1994
-------------------------------
(IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS)
Operating Revenues $398,608 $352,596
Net Earnings 39,750 32,533
Earnings per Share $1.09 $0.99
3. DISCONTINUED OPERATIONS
In December 1993, the Company sold its home healthcare nursing business,
Personal Care Health Services. The cash proceeds net of retained assets,
liabilities and taxes were approximately $5.9 million. Accordingly, the home
healthcare nursing business has been classified as a discontinued operation in
the accompanying Supplemental Consolidated Statement of Earnings.
<PAGE>
3. DISCONTINUED OPERATIONS (CONTINUED)
Net assets held for sale in the accompanying Supplemental Consolidated Balance
Sheet are composed of $3.2 million net current assets and $502,000 of net
noncurrent assets as of November 30, 1993. These amounts consist primarily of
accounts receivable, furniture and equipment and related liabilities.
The sale of the home healthcare nursing business resulted in a gain on the sale
of discontinued operations in the accompanying Supplemental Consolidated
Statement of Earnings of $697,000 net of applicable income tax of $505,000 in
1994.
Revenues applicable to discontinued operations were $17.7 million in 1993.
Earnings from discontinued operations in the accompanying Supplemental
Consolidated Statement of Earnings were $554,000 net of applicable income tax of
$402,000 in 1993.
4. INVESTMENTS
The amortized cost and estimated fair value of the Company's investments are as
follows:
<TABLE>
<CAPTION>
NOVEMBER 30, 1995
---------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED
COST GAINS LOSSES FAIR VALUE
---------------------------------------------------
(IN THOUSANDS)
<S> <C> <C> <S> <S>
Short-term investments:
Debt securities:
Due within 1 year $28,527 $ - $ - $28,527
Marketable equity 6,486 9,049 (446) 15,089
---------------------------------------------------
Subtotal 35,013 9,049 (446) 43,616
Noncurrent investments:
Debt securities:
Due after 1 year
through 5 years 22,510 - - 22,510
---------------------------------------------------
Total Investments $57,523 $9,049 $ (446) $66,126
===================================================
</TABLE>
The Company's debt securities are classified as held-to-maturity and marketable
equity securities are classified as available-for-sale.
5. PROPERTY, BUILDINGS AND EQUIPMENT
Property, buildings and equipment are summarized as follows:
NOVEMBER 30
1995 1994
---------------------
(IN THOUSANDS)
Land $ 4,734 $ 6,450
Buildings and improvements 37,538 38,591
Furniture, fixtures and equipment 70,625 65,119
Construction in progress (estimated
costs to complete at November 1995 -
$2,634,000) 4,067 1,006
--------------------
116,964 111,166
Less accumulated depreciation (40,775) (44,449)
--------------------
$ 76,189 $ 66,717
====================
<PAGE>
6. INCOME TAXES
Significant components of the Company's deferred tax assets and liabilities are
as follows:
YEAR ENDED NOVEMBER 30
1995 1994
----------------------
(IN THOUSANDS)
Deferred tax assets:
Allowance for doubtful accounts $ 5,484 $ 4,434
Accrued compensation and other benefits 3,147 2,250
Accrued workers compensation insurance 2,247 1,633
Accrued health care costs 577 1,062
Deferred income 2,882 -
Other assets 177 1,295
------------------
Total deferred tax assets 14,514 10,674
Deferred tax liabilities:
Net unrealized gain on marketable 3,791 283
securities, classified as current
Amortization of intangibles 4,428 3,241
Depreciation 2,271 2,086
Other liabilities (56) 857
------------------
Total deferred tax liabilities 10,434 6,467
------------------
Net deferred tax assets $ 4,080 $ 4,207
==================
The above deferred tax assets and liabilities included deferred tax assets
totaling $393,000 which were acquired as part of the Company's acquisitions in
1995.
Income tax expense from continuing operations consists of the following:
YEAR ENDED NOVEMBER 30
1995 1994 1993
-----------------------------
(IN THOUSANDS)
Current:
Federal $21,052 $19,031 $15,110
State 6,559 5,224 3,906
Deferred (credit) (3,012) (3,444) (1,479)
-----------------------------
$24,599 $20,811 $17,537
=============================
<PAGE>
6. INCOME TAXES (CONTINUED)
Deferred income taxes result from timing differences in the recognition of
certain revenues and expenses for tax and financial statement purposes. The tax
effects of these differences are:
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30
1995 1994 1993
----------------------------
(IN THOUSANDS)
<S> <C> <C> <C>
Amortization of intangibles $455 $1,786 $422
Provision for doubtful accounts
in excess of amounts written off (1,081) (1,537) -
Accrued compensation and
other benefits (612) (1,118) -
Accrued workers compensation insurance (640) (1,098) -
Health insurance reserves
in excess of claims paid 288 (129) (912)
Deferred income (2,509) - -
Other 1,087 (1,348) (989)
------------------------------
$(3,012) $(3,444) $(1,479)
==============================
</TABLE>
The differences between federal income taxes computed at the statutory rate and
the total provision are:
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30
1995 1994 1993
--------------------------------
(IN THOUSANDS)
<S> <C> <C> <C>
Federal income taxes at statutory rate $22,094 $17,765 $14,615
State taxes on income, net
of federal tax benefit 3,371 2,958 2,364
Miscellaneous items (866) 88 558
-------------------------------
$24,599 $20,811 $17,537
===============================
</TABLE>
The Company made income tax payments, net of refunds received, of $19,690,000,
$20,629,000, and $14,523,000 in 1995, 1994 and 1993, respectively.
<PAGE>
7. LONG-TERM DEBT
Long-term debt at November 30, 1995, consists of the following:
Principal
Due Installments
Within Due After
One Year One Year
-------------------------
(IN THOUSANDS)
Physician notes payable, collateralized
by deeds of trust on physician practice
assets with a cost of approximately
$3,414,000, interest ranging from
5-1/2% to 7%, due through 2000 $879 $1,285
Other notes payable, collateralized
by deeds of trust on land, buildings
and equipment with a cost of
approximately $1,517,000 598 555
------------------------
$1,477 $1,840
Interest paid was $585,000, $481,000 and $853,000 in 1995, 1994 and 1993,
respectively.
The approximate annual maturities of long-term debt at November 30, 1995, are as
follows:
Year ending November 30 (IN THOUSANDS)
1996 $ 1,477
1997 708
1998 532
1999 354
2000 189
<PAGE>
8. CAPITAL STOCK AND STOCK OPTIONS
The Company declared three-for-two stock splits, in the form of stock dividends,
for shareholders of record on October 25, 1995 and November 10, 1993 with shares
distributed on November 22, 1995 and November 29, 1993, respectively. The
number of shares and the earnings per share shown in the Supplemental
Consolidated Financial Statements, as well as information in this Note, Note 2
and Note 12, have been restated to reflect the stock splits.
In February 1995, the Company completed a registered public offering. In this
offering, the Company sold 2,992,500 shares of common stock and the Company
realized net proceeds of approximately $59.3 million.
The Company has eight stock option plans under which stock options may be
granted.
The Company's 1989 Stock Incentive Plan provides for the granting of options to
purchase Common Stock to officers and other employees. Options may be granted
at not less than 100% of fair market value at the date of grant, are exercisable
at various dates and expire no more than 10 years after the date of grant.
Options may be paid for in cash or by the return of previously acquired shares
of Common Stock. Shares acquired by the Company through option exercises were
116,067 in 1994, and 92,021 in 1993. These shares were included in treasury
stock and were valued at market at the date of exercise. Treasury shares issued
in lieu of Common Stock to effect stock option exercises were 116,067 in 1994
and 187,028 in 1993.
As of November 30, 1995, 6,083,096 options had been granted, of which 1,143,436
are exercisable. Additionally, 736,725 options remain available for grant.
A summary of activity under the plan during 1993, 1994 and 1995 is as follows:
<TABLE>
<CAPTION>
Number Aggregate
of Shares Per Share Option Price
---------------------------------------
(IN THOUSANDS, EXCEPT NUMBER OF SHARES
AND PER SHARE AMOUNTS)
<S> <C> <C> <C>
Options outstanding at December 1, 1992 2,950,208 $ 3.72-13.33 $24,852
Options granted 727,313 10.56-15.50 8,387
Options canceled and expired (33,870) 3.72-12.89 (377)
Common Stock issued on exercise (825,941) 3.72-12.44 (4,764)
--------------------------------------
Options outstanding at November 30, 1993 2,817,710 4.00-15.50 28,098
Options granted 680,213 13.33-18.92 11,759
Options canceled and expired (17,010) 4.00-11.72 (182)
Common Stock issued on exercise (675,530) 4.86-13.33 (4,384)
--------------------------------------
Options outstanding at November 30, 1994 2,805,383 4.54-18.92 35,291
Options granted 889,960 17.92-23.25 19,146
Options canceled and expired (285,141) 4.86-21.92 (4,173)
Common Stock issued on exercise (1,018,396) 4.86-18.50 (11,725)
======================================
Options outstanding at November 30, 1995 2,391,806 $ 4.54-23.25 $ 38,539
======================================
</TABLE>
<PAGE>
8. CAPITAL STOCK AND STOCK OPTIONS (CONTINUED)
The market value of the Company's Common Stock at the date the options were
exercised was $17.81-$23.63 for 1995, $13.08-$19.17 for 1994, and $10.22-
$15.78 for 1993.
The Company adopted the Transition Consultants Stock Option Plan in connection
with its spin-off from Community Psychiatric Centers on August 31, 1989. On
that date options were granted to purchase 1,316,250 shares of the Company's
Common Stock to four employees of Community Psychiatric Centers at $5.82, which
was the fair market value at that date. As of November 30, 1995, all
outstanding options are exercisable.
A summary of activity under the plan during 1993, 1994 and 1995 is as follows:
<TABLE>
<CAPTION>
Number Aggregate
of Option
Shares Per Share Price
--------------------------------------
(IN THOUSANDS, EXCEPT NUMBER OF SHARES
AND PER SHARE AMOUNTS)
<S> <C> <C> <C>
Options outstanding at December 1, 1992 839,813 $5.82 $4,888
Common Stock issued on exercise (52,313) 5.82 (305)
------------------------------
Options outstanding at November 30, 1993 787,500 5.82 4,583
Common Stock issued on exercise (278,400) 5.82 (1,620)
------------------------------
Options outstanding at November 30, 1994 509,100 5.82 2,963
Common Stock issued on exercise (359,100) 5.82 (2,090)
------------------------------
Options outstanding at November 30, 1995 150,000 $5.82 $ 873
</TABLE>
The market value of the Company's Common Stock at the date the options were
exercised was $20.33-$22.30 for 1995 and $14.67-$19.33 for 1994 and $12.22-
$14.55 for 1993.
During 1995, the Company established Stock Option Plans for the following
subsidiaries: Vivra Specialty Partners, Inc. (the "VSP Plan"), Vivra Heart
Services, Inc. (the "VHS Plan"), Vivra Asthma & Allergy CareAmerica, Inc. (the
"VAC Plan"), Vivra Health Advantage, Inc. (the "VHA Plan"), Vivra Orthopedic
Services, Inc. (the "VOR Plan") and Vivra OB-GYN Services, Inc. (the "VOG
Plan"), (collectively, the "1995 Stock Option Plans"). Each of the 1995 Stock
Option Plans has similar terms. The plans provide for the granting of options
to purchase common stock of the respective company to officers, employees,
advisors and certain related entities of the company or Vivra. Options may be
granted at not less than 100% of the fair market value at the date of grant,
are exercisable at various dates and expire no more than 10 years after the
date of grant. Options may be paid for in cash or by the return
of previously acquired shares. Subject to certain conditions, stockholders in
these companies are permitted to put shares at a defined date in the future to
the company at a price equal to the then fair market value of the stock. If the
employment or consulting agreement of any equity holder shall terminate, then
the companies have the right to repurchase such stockholder's shares at the then
fair market value. Additionally, the companies retain the right of first
refusal regarding the sale or transfer of any acquired shares.
<PAGE>
8. CAPITAL STOCK AND STOCK OPTIONS (CONTINUED)
During 1995, there was no activity related to the VAC and VOG Plans.
Information regarding activity in the other 1995 Stock Option Plans is
summarized in the tables below:
<TABLE>
<CAPTION>
VSP PLAN VHS PLAN
----------------------
<S> <C> <C>
Options outstanding at December 1, 1995 0 0
Options granted 845,000 782,000
----------------------
Options outstanding at November 30, 1995 845,000 782,500
======================
Number of subsidiary's fully diluted
common shares 18,845,000 6,782,500
Average option price per share at
November 30, 1995 $1.65 $0.50
======================
VHA PLAN VOR PLAN
----------------------
Options outstanding at December 1, 1995 0 0
Options granted 625,000 706,500
----------------------
Options outstanding at November 30, 1995 625,000 706,500
======================
Number of subsidiary's fully diluted
common shares 7,625,000 5,206,500
Average option price per share at
November 30, 1995 $0.79 $1.06
</TABLE>
As of November 30, 1995, no options are exercisable under the 1995 Stock Option
Plans.
During 1995, the Company sold the assets related to the operations of its
subsidiary, Surgical Partners of America, Inc. ("SPA"). All personnel formerly
employed by SPA were either transferred to another subsidiary or terminated.
Accordingly, there are no longer any participants in the SPA 1992 Stock Option
Plan. During the year, there were 178,823 options which were exercised and
551,503 options were forfeited and canceled.
9. PROFIT SHARING AND 401(K) PLAN
The Company's Profit Sharing Plan ("the Plan") is a noncontributory, trusteed
profit sharing plan. All regular non-union employees in the United States
(union employees are eligible if the collective bargaining agreement so
specifies) with at least 1,000 hours of service per annum, over 21 years of age,
and employed at fiscal year-end are eligible for participation in the Plan after
one year of employment. Contributions to the Plan are discretionary and are
determined annually by the Board of Directors. Effective February 1, 1993, the
Plan was amended to add a 401(k) provision. Employees may make voluntary
contributions of up to 10% of their before tax compensation under the 401(k)
provision of the Plan and may also contribute up to an additional 10% of their
after tax compensation in accordance with the original Plan provisions.
<PAGE>
9. PROFIT SHARING AND 401(K) PLAN (CONTINUED)
Contributions to the Plan by the Company were $940,000, $3.0 million and $1.6
million for 1995, 1994 and 1993, respectively.
10. BUSINESS SEGMENT INFORMATION
The Company has three principal business segments, Vivra Renal Care, Vivra
Specialty Partners and Other Services. Vivra Renal Care consists of dialysis
and specialty pharmacy services. Vivra Specialty Partners consists of
Asthma/Allergy, Diabetes, Cardiology, OB-GYN and ENT network services. Other
Services consists of the ambulatory surgery, rehabilitation therapy and primary
care physician practice management businesses which were sold in 1995.
The following tables have been prepared in accordance with the requirements of
FASB Statement No. 14. This information has been derived from the Company's
accounting records and represents the Company's estimates as to proper
allocation of certain expenses.
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30
1995 1994 1993
-------------------------------
(IN THOUSANDS)
<S> <C> <C> <C>
Operating revenues:
Vivra Renal Care $310,769 $259,988 $213,330
Vivra Specialty Partners 31,718 10,297 8,445
Other Services 24,029 27,114 6,227
-------------------------------
Total operating revenues $366,516 $297,399 $228,002
===============================
Operating profits:
Vivra Renal Care $64,766 $54,120 $44,403
Vivra Specialty Partners (1,258) 631 766
Other Services (16) (550) 199
-------------------------------
Total operating profits $63,492 $54,201 $45,368
Other income 5,221 1,891 1,235
Corporate expenses (5,047) (4,753) (3,903)
Interest expense (444) (571) (945)
-------------------------------
Earnings from continuing operations
before minority interest and income
taxes $63,222 $50,768 $41,755
===============================
</TABLE>
<PAGE>
10. BUSINESS SEGMENT INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30
1995 1994 1993
--------------------------------
(IN THOUSANDS)
<S> <C> <C> <C>
Identifiable assets:
Vivra Renal Care $252,099 $147,896 $137,139
Vivra Specialty Partners 27,088 16,226 2,077
Other Services 4,402 25,423 12,278
Asset held for sale/Home
Nursing Business - - 3,727
Corporate 124,637 91,180 56,083
--------------------------------
$408,226 $280,725 $211,304
================================
Depreciation expense:
Vivra Renal Care $9,822 $8,785 $6,818
Vivra Specialty Partners 323 86 76
Other Services 711 716 337
Corporate 122 125 113
--------------------------------
$10,978 $9,712 $7,344
================================
Capitalized expenditures for
property, buildings and
equipment: (1)
Vivra Renal Care $26,819 $14,927 $10,433
Vivra Specialty Partners 1,042 264 88
Other Services 1,000 5,514 1,661
Corporate 64 56 134
--------------------------------
$28,925 $20,761 $12,316
================================
</TABLE>
(1) Excludes assets acquired in business acquisitions of $4.3 million, $2.1
million and $1.5 million in 1995, 1994 and 1993, respectively.
<PAGE>
11. COMMITMENTS AND CONTINGENCIES
The Company rents office facilities under lease arrangements which are
classified for financial statement purposes as operating leases. The future
minimum rental commitments under noncancellable operating leases at November 30,
1995, are summarized below:
(IN THOUSANDS)
1996 $12,151
1997 9,989
1998 8,138
1999 6,742
2000 4,611
Total rent expense amounted to $11.4 million, $8.5 million, and $6.8 million in
1995, 1994, and 1993, respectively.
CONTINGENCIES
On May 20, 1992, in the Pennsylvania Court of Common Pleas in Delaware County, a
complaint was filed against the Company's subsidiary, Vivra Renal Care ("VRC").
In September 1993, the court determined that the suit could proceed as a class
action on behalf of 93 patients, subsequently reduced to 72, who were treated at
one of the VRC facilities, some of whom are alleged to have died or been injured
during the course of treatment. Unspecified compensatory and punitive damages
are being claimed. Since May 20, 1992, four other individual actions have been
filed asserting similar claims, one of which has been settled.
The Company's insurer has assumed defense of these actions, and the merit of the
claims and the extent of the damages are still under investigation. As the
investigation is not complete, management is unable to make an informed judgment
as to the ultimate resolution of such proceedings and their impact on the
results of operations; however, it believes insurance coverage is sufficient to
cover any losses likely to result from these actions and therefore any such
claims should not have a material adverse effect on the Company's financial
condition.
The Company is also subject to other claims and suits in the ordinary course of
business. Management believes that insurance is adequate to cover any such
claims and the outcome of such claims should not have a material adverse effect
on the Company's results of operations or financial condition.
<PAGE>
12. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The following is a tabulation of the unaudited quarterly data for the three
years ended November 30, 1995.
<TABLE>
<CAPTION>
Three months ended
-------------------------------------------------
February May August November
28/29 31 31 30
-------------------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE AND PRICE DATA)
<S> <C> <C> <C> <C>
1995
Total operating revenues $87,214 $92,536 $91,661 $95,105
Net earnings 8,686 9,983 10,596 9,263
Earnings per Share (Primary and
Fully Diluted):
Net earnings .26 .27 .28 .25
Stock prices:
High 21-7/8 23-7/8 22-1/8 23-7/8
Low 17-3/4 18-1/3 17-3/4 21-1/8
1994
Total operating revenues $66,659 $72,724 $77,140 $80,876
Earnings from continuing operations 6,880 7,442 7,741 7,884
Gain on sale of discontinued
operations 697 -- -- --
-------------------------------------------------
Net earnings 7,577 7,442 7,741 7,884
Earnings per Share (Primary and
Fully Diluted):
Continuing operations .22 .23 .24 .24
Gain on sale of discontinued
operations .02 -- -- --
-------------------------------------------------
Net earnings .24 .23 .24 .24
Stock prices:
High 17-1/3 17-3/4 17-1/8 19-2/3
Low 13-1/8 15-1/8 15-1/8 17
</TABLE>
<PAGE>
12. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
Three months ended
-----------------------------------------------
February May August November
28/29 31 31 30
-----------------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE AND PRICE DATA)
<S> <C> <C> <C> <C>
1993
Total operating revenues $51,504 $55,187 $58,926 $62,385
Earnings from continuing operations 5,297 5,854 6,552 6,515
Earnings from discontinued operations 84 163 151 156
-----------------------------------------------
Net earnings 5,381 6,017 6,703 6,671
Earnings per Share (Primary and
Fully Diluted):
Continuing operations .17 .20 .21 .20
Discontinued operations - .01 - .01
-----------------------------------------------
Net earnings .17 .21 .21(1) .21
Stock prices:
High 13-1/4 12-1/2 15-1/2 15-3/4
Low 10-1/8 9-7/8 12 12-5/8
</TABLE>
(1) As a result of rounding and the restatement of earnings from continuing
operations in 1993, year to date third quarter earnings per share from
continuing operations was $.58 rather than $.59.
13. SUBSEQUENT EVENTS
During the six months ended May 31, 1996, the Company consummated mergers
and acquisitions comprised of nineteen dialysis centers, twelve physician
practices and an orthopedics network. The mergers and acquisitions were
treated as pooling of interests or purchases. Total consideration paid was
$93.6 million, consisting of cash of $38.3 million and 2,003,033 shares of
the Company's Common Stock.
<PAGE>
Schedule II - Supplemental Valuation and Qualifying Accounts
Vivra Incorporated and Subsidiaries
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
- --------------------------------------------------------------------------------------------------------------------------
Additions
----------------------------------
(2)
Balance at Charged to (1)
Beginning of Charged to Costs Other Accounts - Deductions - Balance at End of
Description Period and Expenses Describe Describe Period
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts:
Year ended November 30, 1993 $ 6,400,000 $1,610,000 $1,743,000 (2) $(2,006,000) (1) $ 7,747,000
Year ended November 30, 1994 7,747,000 2,228,000 1,350,000 (3) (685,000) (1) 10,640,000
Year ended November 30, 1995 10,640,000 4,383,000 604,000 (2) (2,348,000) (1) 13,279,000
</TABLE>
(1) Write-offs, net of recoveries. Included in the 1993 amount is $243,000
which pertains to assets held for sale.
(2) Contingent rate adjustments charged to operating revenues.
(3) Allowance purchased as part of 1994 acquisitions.
<PAGE>
Vivra Incorporated
Condensed Supplemental Consolidated Balance Sheets
(IN THOUSANDS)
<TABLE>
<CAPTION>
Feb. 29, Nov. 30
1996 1995
---------------------
(UNAUDITED) (NOTE A)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 63,920 $ 53,990
Short-term investments - held-to-maturity and available-for-sale 43,600 43,616
Accounts receivable, less allowance for doubtful accounts (2/29/96 - $13,791 and
11/30/95 - $13,279) 67,184 64,004
Inventories 10,858 9,030
Prepaid expenses and other current assets 2,370 1,959
Deferred income taxes 13,649 14,514
--------------------
Total Current Assets 201,581 187,113
Marketable non-current investments - held-to-maturity 24,024 22,510
Property, buildings and equipment - at cost, less allowances for depreciation
(2/29/96 - $42,527 and 11/30/95 - $40,775 79,396 76,189
Other Assets 7,141 8,479
Goodwill and other intangibles, less accumulated amortization
(2/29/96 - $7,692 and 11/30/95 - $6,727) 114,965 113,935
--------------------
$427,107 $408,226
====================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 11,685 $ 11,004
Accrued payroll and related benefits 21,263 22,693
Other accrued expenses 12,708 10,768
Income taxes 10,929 4,674
Current portion of deferred income taxes 3,476 3,791
Current maturities of long-term debt 1,568 1,477
--------------------
Total Current Liabilities 61,629 54,407
Long-term debt - exclusive of current maturities 1,527 1,840
Deferred income taxes 5,123 6,643
Minority interest (269) (238)
STOCKHOLDERS' EQUITY:
Common stock, par value $.01 per share; authorized 80.0 million shares; issued 38.6
million shares in 1996 and 38.1 million in 1995 386 381
Additional paid-in capital 145,837 142,762
Retained earnings 208,254 197,361
Net unrealized gain on marketable securities, less applicable income taxes 4,620 5,070
--------------------
Total Stockholders' Equity 359,097 345,574
--------------------
$427,107 $408,226
====================
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED SUPPLEMENTAL CONSOLIDATED FINANCIAL
STATEMENTS
<PAGE>
Vivra Incorporated
Condensed Supplemental Consolidated Statements of Earnings
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Three Months Ended
February 29/28,
1996 1995
------------------
(UNAUDITED)
<S> <C> <C>
REVENUES
Operating revenues $106,613 $87,214
Other income 1,878 687
-----------------
Total Revenues 108,491 87,901
COSTS AND EXPENSES
Operating 76,665 58,503
General and administrative 10,627 12,501
Depreciation 3,122 2,440
Interest 42 203
-----------------
Total Costs and Expenses 90,456 73,647
Earnings from continuing operations, before
minority interest and income taxes 18,035 14,254
Minority interest (10) (22)
-----------------
Earnings from continuing operations, before income taxes 18,025 14,232
Income taxes 6,811 5,546
-----------------
NET EARNINGS $11,214 $8,686
=================
NET EARNINGS PER SHARE $.29 $.26
=================
AVERAGE NUMBER OF COMMON SHARES 38,256 33,394
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED SUPPLEMENTAL CONSOLIDATED FINANCIAL
STATEMENTS
<PAGE>
Vivra Incorporated
Condensed Supplemental Consolidated Statements of Cash Flows
(IN THOUSANDS)
<TABLE>
<CAPTION>
Three Months Ended
February 29/28,
1996 1995
-----------------
(UNAUDITED)
<S> <C> <C>
OPERATING ACTIVITIES
Net earnings $11,214 $8,686
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization 4,287 2,959
Loss (Gain) on sale of property and investments 327 (15)
Other (1,980) (713)
Changes in assets and liabilities:
Accounts receivable (2,312) (3,030)
Inventories (1,746) (567)
Prepaid expenses and other current assets (429) (179)
Deferred income taxes 867 (1,094)
Accounts payable 377 4,927
Accrued payroll and related benefits (1,306) (337)
Other accrued expenses 899 (3,438)
Income taxes 6,193 3,242
-----------------
Net cash flow from operations 16,391 10,441
FINANCING ACTIVITIES
Payments on long-term debt (158) (5,377)
Proceeds from Common Stock offering - 59,786
Proceeds from exercise of stock options and related transactions 2,131 7,177
-----------------
Net cash flow from financing 1,973 61,586
INVESTING ACTIVITIES
Purchase of property, buildings and equipment (8,212) (4,479)
Purchase of held-to-maturity investments (17,435) -
Redemption of held-to-maturity investments 10,070 -
Proceeds from sale of available-for-sale investments 5,911 -
Proceeds from sale of property, buildings and equipment 574 11
Proceeds from investments in partnerships 1,700 -
Payment for business acquisitions, net of cash acquired (1,042) (15,563)
-----------------
Net cash flow used in investing (8,434) (20,031)
-----------------
Net increase in cash and cash equivalents 9,930 51,996
Beginning cash and cash equivalents 53,990 80,620
-----------------
Ending cash and cash equivalents $63,920 $132,616
=================
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED SUPPLEMENTAL CONSOLIDATED FINANCIAL
STATEMENTS
<PAGE>
Vivra Incorporated
Notes to Condensed Supplemental Consolidated Financial Statements
February 29, 1996
A. BASIS OF PRESENTATION
The condensed supplemental 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
Company completed business combinations with Orthonet, Inc. on
February 28, 1996, Brennan, Martell and Mirmelli, M.D.'s, P.A. and Allergy &
Asthma Institute of South Florida, P.A. on May 1, 1996 and Kidney Centers of
Charleston, Inc. on May 1, 1996 in stock for stock exchanges or mergers with
the Company. These condensed supplemental consolidated financial statements
have been prepared following the pooling-of-interests method of accounting
and reflect the combined financial position and operating results of the
Company and these combined businesses for all periods presented. Upon
issuance of financial statements for the period that includes the date of
these mergers, these condensed supplemental consolidated financial statements
will become the historical financial statements of the Company.
The condensed supplemental consolidated financial statements should be read
in conjunction with the Company's November 30, 1995 consolidated supplemental
financial statements and the notes thereto included and filed herewith.
B. ACQUISITIONS
During the three months ended February 29, 1996, the Company acquired three
dialysis centers. Total consideration paid was $6.4 million, consisting of
cash of $2.5 million and 154,037 shares of the Company's common stock, which
exceeded the fair market value of net assets acquired by $2.4 million.
Also during the three months ended February 29, 1996, the Company acquired
four physician practices and an orthopedics network. Total consideration paid
was $12.3 million, consisting of cash of $0.5 million and 431,382 shares of
the Company's common stock, which exceeded the fair market value of net
assets acquired by $0.7 million.
C. RECENT ACCOUNTING PRONOUNCEMENTS
Effective March 1995, the Financial Accounting Standards Board issued
Statement No. 121, ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR
LONG-LIVED ASSETS TO BE DISPOSED OF ("FAS 121"), which requires impairment
losses to be recorded on long-lived assets used in operations, or to be
disposed of, when such impairment has been determined. On December 1, 1995,
the Company adopted FAS 121 and the impact of this adoption did not have a
material effect on the Company.
<PAGE>
VIVRA INCORPORATED
SUPPLEMENTAL COMPUTATION OF EARNINGS PER SHARE
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended
February 29/28,
1996 1995
------------------
<S> <C> <C>
PRIMARY:
Average shares outstanding* 38,256 33,394
Stock options granted to employees, based
on the treasury-stock method using
average market price 655(1) 806(1)
------- ------
Total 38,911 34,200
Net earnings $11,214 $8,686
======= ======
Net Earnings per share $.29 $.26
======= ======
FULLY DILUTED:
Average shares outstanding* 38,256 33,394
Stock options granted to employees, based
on the treasury-stock method using
quarter end market price, if higher than
average market price 747(1) 902(1)
------- -------
Total 39,003 34,296
Net earnings $11,214 $8,686
======= ======
Net Earnings per share $ .29 $ .26
======= ======
</TABLE>
_____________
* Adjusted to reflect three-for-two stock splits payable to shareholders of
record on November 22, 1995 and November 10, 1993, respectively, and the
issuance of 1,405,373 shares of Common Stock in connection with the pooling
of interests described in Note 1 to the Supplemental Consolidated Financial
Statements, reflected retroactively for all periods presented.
(1) As the dilutive Common Stock equivalents are less than 3% of the weighted
average outstanding shares, they have not been included in the completion
of earnings per share as shown in the Condensed Supplemental Consolidated
Financial Statements.
