<PAGE>
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 FEBRUARY 29, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
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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
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The number of shares outstanding of each of the issuer's classes of common stock
as of February 29, 1996 was: 37,113,574
This document contains 13 pages and the Exhibit Index is on Page 12.
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VIVRA INCORPORATED
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION PAGE
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Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheet as of February 29,
1996 and November 30, 1995 3
Condensed Consolidated Statement of Earnings for the
Three Months Ended February 29, 1996 and February 28,
1995 4
Condensed Consolidated Statement of Cash Flows for the
Three Months Ended February 29, 1996 and February 28,
1995 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
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Item 6. Exhibits and Reports on Form 8-K 9
Signatures 10
Exhibit Index 11
Exhibit 11 Computation of Earnings Per Share 12
Page 2 of 11
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Vivra Incorporated
Condensed Consolidated Balance Sheet
(IN THOUSANDS)
<TABLE>
<CAPTION>
Feb. 29, Nov. 30
1996 1995
-----------------------
(NOTE A)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 62,689 $ 52,565
Short-term investments - held-to-maturity
and available-for-sale 43,600 43,616
Accounts receivable, less allowance for doubtful
accounts (2/29/96 - $13,298 and
11/30/95 - $12,865) 64,095 61,350
Inventories 10,675 8,822
Prepaid expenses and other current assets 2,359 1,949
Deferred income taxes 13,649 14,514
-----------------------
Total Current Assets 197,067 182,816
Marketable non-current investments -
held-to-maturity 24,024 22,510
Property, buildings and equipment - at cost,
less allowances for depreciation (2/29/96
- $41,119 and 11/30/95 - $39,396 78,326 75,107
Other Assets 7,118 8,456
Goodwill and other intangibles, less accumulated
amortization
(2/29/96 - $7,150 and 11/30/95 - $6,185) 114,842 113,812
=======================
$421,377 $402,701
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 11,543 $ 10,839
Accrued payroll and related benefits 20,866 22,344
Other accrued expenses 12,181 10,232
Income taxes 10,053 3,884
Current portion of deferred income taxes 3,217 3,532
Current maturities of long-term debt 1,087 958
-----------------------
Total Current Liabilities 58,947 51,789
Long-term debt - exclusive of current maturities 1,026 1,339
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 37.1 million shares in 1996
and 36.6 million in 1995 371 366
Additional paid-in capital 145,852 142,777
Retained earnings 205,707 194,955
Net unrealized gain on marketable securities,
less applicable income taxes 4,620 5,070
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Total Stockholders Equity 356,550 343,168
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$421,377 $402,701
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</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Page 3 of 11
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Vivra Incorporated
Condensed Consolidated Statement of Earnings
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
FEBRUARY 29/28,
1996 1995
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<S> <C> <C>
REVENUES
Operating revenues $102,602 $83,207
Other income 1,867 671
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Total Revenues 104,469 83,878
COSTS AND EXPENSES
Operating 73,589 55,520
General and administrative 9,980 11,776
Depreciation 3,073 2,387
Interest 17 182
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Total Costs and Expenses 86,659 69,865
Earnings from continuing operations, before
minority interest and income taxes 17,810 14,013
Minority interest (10) (22)
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Earnings from continuing operations, before income taxes 17,800 13,991
Income taxes 6,726 5,522
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NET EARNINGS $11,074 $8,469
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NET EARNINGS PER SHARE $.30 $.26
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AVERAGE NUMBER OF COMMON SHARES 36,851 31,988
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Page 4 of 11
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Vivra Incorporated
Condensed Consolidated Statement of Cash Flows
(IN THOUSANDS)
<TABLE>
<CAPTION>
Three Months Ended
February 29/28,
1996 1995
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<S> <C> <C>
OPERATING ACTIVITIES
Net earnings $11,074 $8,469
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 4,259 2,959
Loss (Gain) on sale of property and investments 327 (15)
Other (1,980) (713)
Changes in assets and liabilities:
Accounts receivable (1,877) (3,030)
Inventories (1,771) (567)
Prepaid expenses and other current assets (429) (179)
Deferred income taxes 867 (1,094)
Accounts payable 400 4,927
Accrued payroll and related benefits (1,355) (337)
Other accrued expenses 909 (3,438)
Income taxes 6,107 3,242
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Net cash flow from operations 16,531 10,224
FINANCING ACTIVITIES
Payments on long-term debt (121) (5,377)
Proceeds from Common Stock offering - 59,786
Proceeds from exercise of stock options and
related transactions 2,131 7,177
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Net cash flow from financing 2,010 61,586
INVESTING ACTIVITIES
Purchase of property, buildings and equipment (8,195) (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 (8,417) (20,031)
Net increase in cash and cash equivalents 10,124 51,779
Beginning cash and cash equivalents 52,565 79,509
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Ending cash and cash equivalents $62,689 $131,288
===================
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Page 5 of 11
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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, 1995.
The balance sheet at November 30, 1995 has been derived from the audited
financial statements at that date.
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.
The acquisition of two dialysis centers, three physician practices and the
orthopedics network have been accounted for as pooling of interests.
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.
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 6 of 11
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
RESULTS OF OPERATIONS
The Company consists of two operating units, Vivra Renal Care and Vivra
Specialty Partners. Vivra Renal Care consists of dialysis and specialty
pharmacy services. Vivra Specialty Partners provides specialty care through its
networks and practices in Asthma/Allergy, Cardiology, Diabetes, ENT, OB-
GYN and Orthopedics. During 1995, the Company sold and discontinued its Other
Services segment, which consisted of the ambulatory surgery, rehabilitation
therapy and primary care physician practice management businesses.
THREE MONTHS ENDED FEBRUARY 29, 1996
As compared to the three months ended February 28, 1995, revenues increased
$20.6 million, or 24.5%; costs and expenses $16.8 million, or 24.0%; and
earnings from continuing operations before taxes $3.8 million, or 27.2%. In
total, net earnings for the period increased $2.6 million to $11.1 million, or
30.8%.
Of the increase in revenues, operating revenues increased $19.4 million,
23.3%, to $102.6 million. Revenues from Vivra Renal Care increased $17.7
million to $87.5 million, or 25.4%; Vivra Specialty Partners increased $11.8
million to $15.1 million; and Other Services decreased $10.1 million. The
increase in revenues from Vivra Renal Care was attributable to the growth in the
number of treatments provided and growth in the administration of the drug
Erythropoietin ("EPO"), prescribed for dialysis patients suffering from anemia.
Treatments grew 30.2% from 331,948 to 432,326 as a result of the net addition of
47 centers. For the first quarter of 1996, revenues from EPO were $18.1
million, compared to $11.6 million in the prior year, a 55.4% increase. This
growth was due to an increase in the number of patients receiving EPO and in the
average size of dosages. The increase in revenues from Vivra Specialty Partners
was due to the addition of the OB/GYN, cardiology and orthopedics products after
the first quarter of 1995 and growth in the asthma/allergy product. The
decrease in Other Services revenues was a direct result of the sale and
discontinuation of the Company s ambulatory surgery center, rehabilitation
therapy and physician practice management businesses in 1995. Other income of
$1.8 million, included interest earned on tax-free marketable securities and a
gain from the sale of available-for-sale marketable investments.
Of the increase in costs and expenses, operating costs increased $18.1
million, or 32.5%, to $73.6 million. Vivra Renal Care operating costs increased
$14.0 million to $60.4 million, or 30.2%; Vivra Specialty Partners increased
$10.6 million to $13.2 million; and Other Services decreased $6.5 million. The
increase in Vivra Renal Care operating costs was due to the increased volume of
dialysis business, expenses associated with the operation of newly developed
dialysis centers and the cost of the administration of EPO. Vivra Specialty
Partners operating costs increased due to the addition of the OB/GYN, cardiology
and orthopedics products after the first quarter of 1995 and growth in the
asthma/allergy product. Operating costs of Other Services decreased as a
result of the sale of the ambulatory surgery, rehabilitation therapy and
physician practice management businesses in 1995. General and administrative
expenses decreased $1.8 million to $10.0 million, or a decrease of 15.3%.
General and administrative expenses decreased primarily as a result of sale and
discontinuation of the Other Services segment businesses. These businesses
incurred $3.4 million in general and administrative expenses during the first
quarter of 1995. Depreciation increased $0.7 million, or 28.7%, to $3.1
million, due to an increase in depreciable assets of the dialysis and
asthma/allergy businesses.
The effective tax rate for the period was 37.8% of earnings before income
taxes, compared with 39.5% a year earlier. This decrease 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.
Page 7 of 11
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LIQUIDITY AND CAPITAL RESOURCES
The Company requires capital for the acquisition and development of dialysis
facilities, including the purchase of property, plant and equipment, and the
acquisition and development of its new specialty products. Acquisition
expenditures were $18.7 million, consisting of $3.0 million in cash and 585,419
shares of the Company s Common Stock and $15.6 million in cash for the periods
ended February 29, 1996 and February 28, 1995, respectively. Routine capital
expenditures were $8.2 million and $4.5 million for the same periods,
respectively.
Cash flow from operations was $16.5 million and $10.2 million for the three
months ended February 29, 1996 and February 28, 1995, respectively. Cash flow
from financing activities decreased by $59.6 million to $2.0 million at February
29, 1996. This decrease was primarily the result of the Company s February 16,
1995 public offering in which the Company sold 2,992,500 shares of Common Stock
and received net proceeds of $59.6 million. The Company s working capital
increased by $7.1 million to $138.1 million at February 29, 1996, from $131.0
million at November 30, 1995.
For the remainder of fiscal 1996, the Company currently plans to continue
to acquire and develop new dialysis facilities and expand its specialty network
products. The Company expects that its capital and acquisition expenditures for
fiscal 1996 will exceed expenditures for fiscal 1995. To the extent the Company
is able to identify significant attractive investment opportunities, such
expenditures could exceed $150 million. The Company believes that cash
generated from operations together with available cash, the ability to issue
Common Stock for acquisitions and issue debt or equity capital will be adequate
to meet the Company s planned capital expenditure, acquisition and development
and liquidity needs for fiscal 1996.
INFLATION AND CHANGES IN PRICES
Approximately 71% and 70% of the Company s dialysis revenues were funded by
Medicare and Medicaid, at an average rate of $126 per dialysis treatment, before
ancillary services for the three months ended February 29, 1996 and February 28,
1995, respectively. Despite periods of significant inflation, the Medicare and
Medicaid reimbursement rate has remained relatively constant since 1983. The
balance of dialysis revenues, which are paid at rates significantly in excess of
Medicare and Medicaid, represented 29% of revenues in 1996 compared to 30% in
1995. The Company is unable to predict what, if any, future changes may occur
in the reimbursement rate or the ability of the Company to charge rates in
excess of those paid by Medicare and Medicaid. If any such changes occur, the
impact of such changes on the Company s revenues and profits could be material.
Intradialytic Parenteral Nutrition ("IDPN") therapy is a nutritional
supplement administered during dialysis to patients suffering from nutritional
deficiencies. In early 1993, HCFA designated four durable medical equipment
regional carriers (the "DMERCs") to process reimbursement claims for IDPN
therapy. To date these DMERCs have denied most claims and the Company is
currently appealing these denied claims. HCFA is currently reviewing the DMERCs
position with respect to medical policy and claims reimbursement. The final
outcome of this review is uncertain and may ultimately affect the number of
patients eligible to receive reimbursement for IDPN therapy. Patients receiving
IDPN therapy prior to the designation of the DMERCs are "grandfathered" under
the prior carriers medical policies and continue to be eligible for
reimbursement. Since May 1995 and based upon the continued uncertainty with
respect to reimbursement for services provided, the Company has limited
administration of this therapy to patients who have been "grandfathered" or have
private insurance.
Page 8 of 11
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PART II OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
See Exhibit 11 on Page 12
Exhibit 27 - Financial Data Schedule
b) Reports on Form 8-K
(1) Current Report of the Company on Form 8-K (File No. 1-10266)
dated December 21, 1995, reporting on Item 5, Other Events,
relating to the audit of the Burlington Dialysis Center and
filing the audited financials of the Burlington Dialysis
Center therewith.
(2) Current Report of the Company on Form 8-K (File No. 1-10266)
dated January 26, 1996, reporting on Item 7, Financial
Statements and Exhibits and filing as exhibits certain
acquisition agreements of the Company.
(3) Current Report of the Company on Form 8-K (File No. 1-10266)
dated February 15, 1996, reporting on Item 5, Other Events,
relating to the amendment of the Company s Amended and
Restated Rights Agreement.
Page 9 of 11
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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: April 12, 1996 /s/ LeAnne M. Zumwalt
-------------------- --------------------------------------------
LeAnne M. Zumwalt
Executive Vice President and
Secretary/Treasurer
Page 10 of 11
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VIVRA INCORPORATED
EXHIBIT INDEX
EXHIBIT NO. PAGE NO.
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11. Computation of Earnings Per Share
27. Financial Data Schedule
Page 11 of 11
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EXHIBIT 11
VIVRA INCORPORATED
COMPUTATION OF EARNINGS PER SHARE
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended
February 29/28,
1996 1995
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<S> <C> <C>
PRIMARY:
Average shares outstanding 36,851 31,988
Stock options granted to employees, based
on the treasury-stock method using
average market price 655 * 806 *
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Total 37,506 32,794
Net earnings $ 11,074 $ 8,469
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Net Earnings per share $ .30 $ .26
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FULLY DILUTED:
Average shares outstanding 36,851 31,988
Stock options granted to employees, based
on the treasury-stock method using
quarter end market price, if higher than
average market price 747 * 902 *
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Total 37,598 32,890
Net earnings $ 11,074 $ 8,469
======== =======
Net Earnings per share $ .30 $ .26
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</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
<PAGE>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> NOV-30-1995
<PERIOD-END> FEB-29-1996
<CASH> 62,689
<SECURITIES> 43,600
<RECEIVABLES> 77,393
<ALLOWANCES> 13,298
<INVENTORY> 10,675
<CURRENT-ASSETS> 197,067
<PP&E> 119,445
<DEPRECIATION> 41,119
<TOTAL-ASSETS> 421,377
<CURRENT-LIABILITIES> 58,947
<BONDS> 1,026
<COMMON> 371
0
0
<OTHER-SE> 356,179
<TOTAL-LIABILITY-AND-EQUITY> 421,377
<SALES> 102,602
<TOTAL-REVENUES> 104,469
<CGS> 73,589
<TOTAL-COSTS> 73,589
<OTHER-EXPENSES> 13,053
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 17
<INCOME-PRETAX> 17,810
<INCOME-TAX> 6,726
<INCOME-CONTINUING> 11,074
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,074
<EPS-PRIMARY> .30
<EPS-DILUTED> .30
</TABLE>
