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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM 10-Q
---------------------
<TABLE>
<S> <C>
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES ACT OF 1934
</TABLE>
COMMISSION FILE NUMBER 0-19946
LINCARE HOLDINGS INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 51-0331330
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
19337 US 19 NORTH, SUITE 500, 34624
CLEARWATER, FL (Zip Code)
(Address of principal executive offices)
</TABLE>
Registrant's telephone number, including area code: (813) 530-7700
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. /X/ Yes / / No
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
<TABLE>
<CAPTION>
CLASS OUTSTANDING AT JULY 31, 1996
- - --------------------------------------------- ---------------------------------------------
<S> <C>
COMMON STOCK, $0.01 PAR VALUE 27,991,596 SHARES
</TABLE>
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<PAGE> 2
LINCARE HOLDINGS INC.
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996
INDEX
<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1 Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets....................................... 3
Condensed Consolidated Statements of Operations............................. 4
Condensed Consolidated Statements of Cash Flows............................. 5
Notes to Condensed Consolidated Financial Statements........................ 6
Item 2 Management's Discussion and Analysis of Financial Condition and Results of
Operations..................................................................... 7
PART II. OTHER INFORMATION
Item 1 Legal Proceedings.............................................................. 8
Item 2 Changes in Securities.......................................................... 8
Item 3 Defaults Upon Senior Securities................................................ 8
Item 4 Submission of Matters to a Vote of Security Holders............................ 8
Item 5 Other Information.............................................................. 8
Item 6 Exhibits and Reports on Form 8-K............................................... 8
SIGNATURES.............................................................................. 8
</TABLE>
2
<PAGE> 3
LINCARE HOLDINGS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
------------ ------------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................................... $ 1,328 $ 1,009
Accounts and notes receivable....................................... 44,835 36,610
Income tax receivables.............................................. -- 772
Inventories......................................................... 1,328 1,299
Prepaid expenses.................................................... 711 674
--------- --------
Total current assets........................................ 48,202 40,364
--------- --------
Property and equipment................................................ 131,640 121,786
Less accumulated depreciation......................................... 50,657 48,534
--------- --------
Net property, plant and equipment................................ 80,983 73,252
--------- --------
Other assets:
Goodwill............................................................ 162,235 130,491
Intangible assets................................................... 9,368 9,510
Covenants not to compete............................................ 5,490 6,370
Other............................................................... 616 219
--------- --------
Total other assets.......................................... 177,709 146,590
--------- --------
Total assets................................................ $ 306,894 $260,206
========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current installments of long-term obligations....................... $ 9,639 $ 4,992
Accounts payable.................................................... 10,278 10,214
Accrued expenses:
Compensation and benefits........................................ 7,658 7,028
Other............................................................ 2,097 1,620
Income taxes payable................................................ 362 --
--------- --------
Total current liabilities................................... 30,034 23,854
Revolving credit loan................................................. 10,267 5,000
Long-term obligations, excluding current installments................. 1,106 2,383
Deferred income taxes................................................. 5,429 6,707
Minority interest..................................................... 791 879
Stockholders' equity:
Common stock........................................................ 280 277
Additional paid-in capital.......................................... 91,561 86,049
Retained earnings................................................... 167,426 135,057
--------- --------
Total stockholders' equity.................................. 259,267 221,383
--------- --------
Total liabilities and stockholders' equity.................. $ 306,894 $260,206
========= ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE> 4
LINCARE HOLDINGS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED FOR THE SIX MONTHS ENDED
------------------------- -------------------------
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1996 1995 1996 1995
----------- ----------- ----------- -----------
(IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C>
Net revenues................................ $ 84,970 $ 67,400 $ 164,742 $ 128,623
----------- ----------- ----------- -----------
Costs and expenses:
Costs of goods and services............... 13,060 9,968 25,318 19,080
Operating expenses........................ 17,988 14,623 35,306 27,830
Selling, general and administrative
expense................................ 17,331 14,197 33,675 26,861
Bad debt expense.......................... 841 534 1,639 1,023
Depreciation expense...................... 4,980 4,095 9,765 8,040
Amortization expense...................... 3,189 2,848 6,320 5,239
----------- ----------- ----------- -----------
57,389 46,265 112,023 88,073
----------- ----------- ----------- -----------
Operating income....................... 27,581 21,135 52,719 40,550
----------- ----------- ----------- -----------
Other income (expense):
Interest income........................... 55 81 87 215
Interest expense.......................... (79) (275) (164) (385)
Net gain (loss) on disposal of property
and equipment.......................... (5) 7 (11) 14
------------ ------------ ------------ ------------
(29) (187) (88) (156)
----------- ----------- ----------- -----------
Income before income taxes............. 27,552 20,948 52,631 40,394
Income taxes................................ 10,607 8,170 20,262 15,754
----------- ----------- ----------- -----------
Net income............................. $ 16,945 $ 12,778 $ 32,369 $ 24,640
=========== =========== =========== ===========
Net income per common share................. $ .59 $ 0.45 $ 1.13 $ 0.86
=========== =========== =========== ===========
Weighted average number of common shares and
common share equivalents outstanding...... 28,867,381 28,619,482 28,742,439 28,571,566
=========== =========== =========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE> 5
LINCARE HOLDINGS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED
---------------------
JUNE 30, JUNE 30,
1996 1995
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Cash from operations................................................... $ 47,724 $ 34,096
Investing activities:
Proceeds from sale of property and equipment......................... 185 488
Capital expenditures................................................. (15,722) (14,511)
(Increase) decrease in other assets.................................. (396) 48
Business acquisitions, net of cash acquired.......................... (36,226) (50,532)
-------- --------
(52,159) (64,507)
-------- --------
Financing activities:
Proceeds from revolving line of credit............................... 15,000 32,000
Payment on revolving line of credit.................................. (9,000) (13,000)
Proceeds from long-term obligations.................................. -- 506
Payment of long-term obligations..................................... (3,319) (5,504)
Decrease in minority interest........................................ (226) (118)
Proceeds from issuance of common stock............................... 2,299 1,419
-------- --------
4,754 15,302
-------- --------
Increase (decrease) in cash............................................ 319 (15,109)
Cash and cash equivalents, beginning of period......................... 1,009 16,023
-------- --------
Cash and cash equivalents, end of period............................... $ 1,328 $ 914
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE> 6
LINCARE HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- BASIS OF PRESENTATION
The accompanying condensed consolidated balance sheet as of June 30, 1996
and condensed statements of operations for the three months ended June 30, 1996
and 1995, and for the six months ended June 30, 1996 and 1995 and statement of
cash flows for the six months ended June 30, 1996 and 1995 are unaudited. In the
opinion of management, all adjustments, consisting of normal recurring accruals,
necessary for a fair presentation of the results of operations for the interim
periods presented have been reflected herein. The results of operations for
interim periods are not necessarily indicative of the results to be expected for
the entire year. The accompanying condensed consolidated balance sheet as of
December 31, 1995 is derived from the Company's audited balance sheet as of that
date.
NOTE 2 -- BUSINESS COMBINATIONS
During the six months ended June 30, 1996 the Company acquired, in
unrelated acquisitions, the stock of six companies and certain assets of six
companies. Each acquisition was accounted for as a purchase. The results of the
acquired companies are included in the accompanying consolidated statements of
operations since the respective date of acquisition.
The aggregate cost of these acquisitions was as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Cash...................................................... $ 36,226
Deferred acquisition obligations.......................... 5,655
Assumption of liabilities................................. 132
--------
$ 42,013
========
</TABLE>
The aggregate purchase price was allocated as follows:
<TABLE>
<S> <C>
Current assets............................................ $ 3,257
Property and equipment.................................... 1,971
Intangible assets......................................... 3,422
Goodwill.................................................. 33,363
--------
$ 42,013
========
</TABLE>
Unaudited pro forma supplemental information on the results of operations
for the six months ended June 30, 1996 and 1995 are provided below and reflect
the 12 acquisitions as if they had been combined at the beginning of each
respective period.
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED
-----------------------
JUNE 30, JUNE 30,
1996 1995
-------- --------
(IN THOUSANDS EXCEPT
SHARE AND PER SHARE
DATA)
<S> <C> <C>
Net revenues......................................................... $173,865 $142,585
======== ========
Net income........................................................... $ 34,062 $ 27,300
======== ========
Net income per common share.......................................... $ 1.18 $ .95
======== ========
</TABLE>
The unaudited pro forma financial information is not necessarily indicative
of either the results of operations that would have occurred had the
transactions been effected at the beginning of the respective preceding periods
or of future results of operations of the combined companies.
6
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LINCARE HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated a summary of the
Company's net revenues by source:
<TABLE>
<CAPTION>
FOR THE FOR THE
THREE MONTHS ENDED SIX MONTHS ENDED
--------------------- ---------------------
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1996 1995 1996 1995
-------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Oxygen and other respiratory therapy...... $ 77,861 $ 61,472 $151,055 $117,352
Home medical equipment and other.......... 7,109 5,928 13,687 11,271
-------- -------- -------- --------
Total........................... $ 84,970 $ 67,400 $164,742 $128,623
======== ======== ======== ========
</TABLE>
Net revenues for the three months ended June 30, 1996 increased by
$17,570,000 (or 26.1%) compared with the three months ended June 30, 1995, and
for the six months ended June 30, 1996 increased $36,119,000 (or 28.1%) compared
with the six months ended June 30, 1995. Approximately $9,062,000 of the net
revenue increase for the three months ended June 30, 1996 and $18,822,000 for
the six months ended June 30, 1996 is attributable to acquisitions, while
$8,508,000 for the three months ended June 30, 1996 and $17,297,000 for the six
months ended June 30, 1996 reflects internal growth.
On August 10, 1993, Congress passed the Omnibus Reconciliation Act of 1993
("OBRA 93"). The OBRA 93 legislation provided for a consumer price index update,
effective January 1, 1996, of approximately 3.0% on Medicare products and
services. No additional impact from OBRA 93 is expected for 1996.
Cost of goods and services as a percentage of net revenues was 15.4% for
the three months ended June 30, 1996 compared with 14.8% for the three months
ended June 30, 1995. Cost of goods and services as a percentage of net revenues
for the six months ended June 30, 1996 was 15.4% compared with 14.8% for the six
months ended June 30, 1995. The cost of sales increase as a percentage of
revenues is attributable to the increased home medical equipment product mix of
some of the acquisitions made in the last twelve months.
Operating expenses as a percentage of net revenues was 21.2% for the three
months ended June 30, 1996 compared with 21.7% for the three months ended June
30, 1995. Operating expenses as a percentage of net revenues for the six months
ended June 30, 1996 was 21.4% compared with 21.6% for the six months ended June
30, 1995. This improvement was primarily due to the Company's successful
integration of acquired businesses into its existing locations. Selling, general
and administrative expenses as a percentage of net revenues decreased to 20.4%
for the three months ended June 30, 1996 compared with 21.1% for the three
months ended June 30, 1995, and 20.4% for the six months ended June 30, 1996
compared with 20.9% for the six months ended June 30, 1995. The improvement is
attributable to the Company's continued ability to leverage its infrastructure,
with selling, general and administrative expenses increasing by 22.1% and 25.4%
while revenues grew by 26.1% and 28.1%, respectively, for the three months ended
June 30, 1996 and for the six months ended June 30, 1996.
Amortization expense for the three months ended June 30, 1996 increased to
$3,189,000 compared with $2,848,000 for the three month period ending June 30,
1995. Amortization expense increased to $6,320,000 for the six months ended June
30, 1996 compared with $5,239,000 for the six months ended June 30, 1995. This
increase is attributable to the amortization of intangible assets acquired
during 1995 and the first six months of 1996.
7
<PAGE> 8
Operating income for the three months ended June 30, 1996, and six months
ended June 30, 1996 increased to $27,581,000 and $52,719,000, respectively,
compared with $21,135,000 and $40,550,000 for the three months ended June 30,
1995, and for the six months ended June 30, 1995 respectively. The increases in
operating income are attributable to the continued internal and acquisition
revenue growth and efforts to control costs.
LIQUIDITY AND CAPITAL RESOURCES
Cash from operations was $47,724,000 for the six months ended June 30, 1996
compared with $34,096,000 for the six months ended June 30, 1995.
Cash used in investing and financing activities was $47,405,000 for the six
months ended June 30, 1996 compared with $49,205,000 for the six months ended
June 30, 1995. Activity in the six months ended June 30, 1996 included the
Company's investment of $36,226,000 in business acquisitions, investment in
capital equipment of $15,722,000, the borrowing of $15,000,000 from its
revolving line of credit, payments of $9,000,000 on the revolving line of credit
and payments of $3,319,000 related to deferred acquisition obligations.
FORWARD LOOKING STATEMENTS
Statements contained in this Form 10-Q that are not based on historical
facts are forward looking statements, subject to uncertainties and risks,
including, but not limited to, the constantly changing healthcare environment,
potential reductions in reimbursement by government and third party payors for
the Company's products and services, the demand for Company's products and
services, economic and competitive conditions, the availability of appropriate
acquisition candidates and the successful completion of acquisitions, access to
borrowed and/or equity capital on favorable terms, and other risks detailed in
the Company's Securities and Exchange Commission filings.
PART II. OTHER INFORMATION
ITEMS 1-5 Not applicable
ITEM 6 Exhibits and Reports on Form 8-K
(a) Exhibits:
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER EXHIBIT PAGE
- - ------ ----------------------------------------------------------------- ------------
<C> <S> <C>
27.0 Financial Data Schedule (for SEC use only).......................
</TABLE>
(b) The Company did not file a current report on Form 8-K during the three
months ended June 30, 1996.
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.
LINCARE HOLDINGS INC.
-----------------------------
Registrant
August 8, 1996
/s/ JAMES M. EMANUEL
-----------------------------
James M. Emanuel
Secretary, Chief Financial Officer and
Principal Accounting Officer
8
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF LINCARE HOLDINGS FOR THE SIX MONTHS ENDED DECEMBER 31,
1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 1,328
<SECURITIES> 0
<RECEIVABLES> 49,996
<ALLOWANCES> 5,161
<INVENTORY> 1,328
<CURRENT-ASSETS> 48,202
<PP&E> 131,640
<DEPRECIATION> 50,657
<TOTAL-ASSETS> 306,894
<CURRENT-LIABILITIES> 30,034
<BONDS> 0
0
0
<COMMON> 280
<OTHER-SE> 258,987
<TOTAL-LIABILITY-AND-EQUITY> 306,894
<SALES> 164,742
<TOTAL-REVENUES> 164,742
<CGS> 25,318
<TOTAL-COSTS> 25,318
<OTHER-EXPENSES> 86,705
<LOSS-PROVISION> 1,639
<INTEREST-EXPENSE> 164
<INCOME-PRETAX> 52,631
<INCOME-TAX> 20,262
<INCOME-CONTINUING> 52,631
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 32,369
<EPS-PRIMARY> 1.13
<EPS-DILUTED> 1.13
</TABLE>
