<PAGE> 1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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 SEPTEMBER 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 OCTOBER 31, 1996
- --------------------------------------------- ---------------------------------------------
<S> <C>
COMMON STOCK, $0.01 PAR VALUE 28,221,596 SHARES
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
LINCARE HOLDINGS INC.
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996
INDEX
<TABLE>
<CAPTION>
PAGE
----
<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 Results of Operations and Financial
Condition...................................................................... 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............................................... 9
SIGNATURES.............................................................................. 9
</TABLE>
2
<PAGE> 3
LINCARE HOLDINGS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
------------- ------------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.......................................... $ 7,564 $ 1,009
Accounts and notes receivable...................................... 46,653 36,610
Income tax receivables............................................. -- 772
Inventories........................................................ 1,218 1,299
Prepaid expenses................................................... 535 674
-------- --------
Total current assets....................................... 55,970 40,364
-------- --------
Property and equipment............................................... 138,036 121,786
Less accumulated depreciation........................................ 51,320 48,534
-------- --------
Net property, plant and equipment............................... 86,716 73,252
-------- --------
Other assets:
Goodwill........................................................... 169,070 130,491
Intangible assets.................................................. 8,572 9,510
Covenants not to compete........................................... 4,939 6,370
Other.............................................................. 720 219
-------- --------
Total other assets......................................... 183,301 146,590
-------- --------
Total assets............................................... $325,987 $260,206
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current installments of long-term obligations...................... $ 7,956 $ 4,992
Accounts payable................................................... 10,791 10,214
Accrued expenses:
Compensation and benefits....................................... 9,676 7,028
Other........................................................... 2,136 1,620
Income taxes payable............................................... 1,960 --
-------- --------
Total current liabilities.................................. 32,519 23,854
Revolving credit loan................................................ 4,417 5,000
Long-term obligations, excluding current installments................ 1,101 2,383
Deferred income taxes................................................ 6,531 6,707
Minority interest.................................................... 856 879
Stockholders' equity:
Common stock....................................................... 282 277
Additional paid-in capital......................................... 95,218 86,049
Retained earnings.................................................. 185,063 135,057
-------- --------
Total stockholders' equity................................. 280,563 221,383
-------- --------
Total liabilities and stockholders' equity................. $325,987 $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 NINE MONTHS ENDED
----------------------------- -----------------------------
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1996 1995 1996 1995
------------- ------------- ------------- -------------
(IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C>
Net revenues................................ $ 89,633 $ 71,876 $ 254,375 $ 200,499
------------- ------------- ------------- -------------
Costs and expenses:
Costs of goods and services............... 13,928 10,606 39,246 29,686
Operating expense......................... 19,206 15,909 54,512 43,739
Selling, general and administrative
expense................................ 18,297 14,793 51,972 41,654
Bad debt expense.......................... 894 575 2,533 1,598
Depreciation expense...................... 5,255 4,224 15,020 12,264
Amortization expense...................... 3,266 3,199 9,586 8,438
Non-recurring expense..................... -- 1,921 -- 1,921
------------- ------------- ------------- -------------
60,846 51,227 172,869 139,300
------------- ------------- ------------- -------------
Operating income....................... 28,787 20,649 81,506 61,199
------------- ------------- ------------- -------------
Other income (expense):
Interest income........................... 33 36 120 251
Interest expense.......................... (117) (357) (281) (742)
Net gain (loss) on disposal of property
and equipment.......................... (26) 49 (37) 63
------------- ------------- ------------- -------------
(110) (272) (198) (428)
------------- ------------- ------------- -------------
Income before income taxes............. 28,677 20,377 81,308 60,771
Income taxes................................ 11,040 7,948 31,302 23,702
------------- ------------- ------------- -------------
Net income............................. $ 17,637 $ 12,429 $ 50,006 $ 37,069
========== ========== ========== ==========
Net income per common share................. $ 0.61 $ 0.43 $ 1.74 $ 1.30
========== ========== ========== ==========
Weighted average number of common shares and
common share equivalents outstanding...... 28,973,719 28,684,289 28,813,720 28,610,569
========== ========== ========== ==========
</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 NINE MONTHS ENDED
-------------------------------
SEPTEMBER 30, SEPTEMBER 30,
1996 1995
------------- -------------
(IN THOUSANDS)
<S> <C> <C>
Cash from operations.............................................. $ 80,615 $ 57,998
Investing activities:
Proceeds from sale of property and equipment.................... 218 883
Capital expenditures............................................ (26,393) (21,465)
(Increase) decrease in other assets............................. (501) 18
Business acquisitions, net of cash acquired..................... (43,789) (53,659)
------------- -------------
(70,465) (74,223)
------------- -------------
Financing activities:
Proceeds from revolving line of credit.......................... 25,000 37,000
Payment on revolving line of credit............................. (25,000) (22,000)
Proceeds from long-term obligations............................. -- 506
Payment of long-term obligations................................ (7,266) (10,918)
Decrease in minority interest................................... (226) (120)
Proceeds from issuance of common stock.......................... 3,897 2,779
------------- -------------
(3,595) 7,247
------------- -------------
Increase (decrease) in cash....................................... 6,555 (8,978)
Cash and cash equivalents, beginning of period.................... 1,009 16,023
------------- -------------
Cash and cash equivalents, end of period.......................... $ 7,564 $ 7,045
========== ==========
</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 September 30,
1996 and condensed statements of operations for the three months ended September
30, 1996 and 1995, and for the nine months ended September 30, 1996 and 1995 and
statement of cash flows for the nine months ended September 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 nine months ended September 30, 1996 the Company acquired, in
unrelated acquisitions, the stock of seven companies and certain assets of seven
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...................................................... $ 43,789
Deferred acquisition obligations.......................... 7,055
Assumption of liabilities................................. 358
--------------
$ 51,202
=============
</TABLE>
The aggregate purchase price was allocated as follows:
<TABLE>
<S> <C>
Current assets............................................ $ 4,315
Property and equipment.................................... 2,369
Intangible assets......................................... 4,246
Goodwill.................................................. 40,272
--------------
$ 51,202
=============
</TABLE>
Unaudited pro forma supplemental information on the results of operations
for the nine months ended September 30, 1996 and 1995 are provided below and
reflect the 14 acquisitions as if they had been combined at the beginning of
each respective period.
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
---------------------------------
SEPTEMBER 30, SEPTEMBER 30,
1996 1995
------------- -------------
(IN THOUSANDS EXCEPT SHARE AND
PER SHARE DATA)
<S> <C> <C>
Net revenues.................................................... $ 266,719 $ 224,907
========== ==========
Net income...................................................... $ 52,379 $ 41,896
========== ==========
Net income per common share..................................... $ 1.82 $ 1.46
========== ==========
</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
<PAGE> 7
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 NINE MONTHS ENDED
------------------------------- -------------------------------
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1996 1995 1996 1995
------------- ------------- ------------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Oxygen and other respiratory
therapy...................... $80,668 $65,196 $ 231,723 $ 182,546
Home medical equipment and
other........................ 8,965 6,680 22,652 17,953
------------- ------------- ------------- -------------
Total................ $89,633 $71,876 $ 254,375 $ 200,499
========== ========== ========== ==========
</TABLE>
Net revenues for the three months ended September 30, 1996 increased by
$17,757,000 (or 24.7%) compared with the three months ended September 30, 1995,
and for the nine months ended September 30, 1996 increased $53,876,000 (or
26.9%) compared with the nine months ended September 30, 1995. Approximately
$8,271,000 of the net revenue increase for the three months ended September 30,
1996 and $27,093,000 for the nine months ended September 30, 1996 is
attributable to acquisitions, while $9,486,000 for the three months ended
September 30, 1996 and $26,783,000 for the nine months ended September 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 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 15.5% for
the three months ended September 30, 1996 compared with 14.8% for the three
months ended September 30, 1995. Cost of goods and services as a percentage of
net revenues for the nine months ended September 30, 1996 was 15.4% compared
with 14.8% for the nine months ended September 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 21.4% for the three
months ended September 30, 1996 compared with 22.1% for the three months ended
September 30, 1995. Operating expenses as a percentage of net revenues for the
nine months ended September 30, 1996 was 21.4% compared with 21.8% for the nine
months ended September 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 September 30, 1996
compared with 20.6% for the three months ended September 30, 1995, and 20.4% for
the nine months ended September 30, 1996 compared with 20.8% for the nine months
ended September 30, 1995. The improvement is attributable to the Company's
continued ability to leverage its infrastructure, with selling, general and
administrative expenses increasing by 23.7% and 24.8% while revenues grew by
24.7% and 26.9%, respectively, for the three months ended September 30, 1996 and
for the nine months ended September 30, 1996.
Amortization expense for the three months ended September 30, 1996
increased to $3,266,000 compared with $3,199,000 for the three month period
ending September 30, 1995. Amortization expense increased to $9,586,000 for the
nine months ended September 30, 1996 compared with $8,438,000 for the nine
months ended September 30, 1995. This increase is attributable to the
amortization of intangible assets acquired during 1995 and the first nine months
of 1996.
7
<PAGE> 8
Operating income for the three months ended September 30, 1996, and nine
months ended September 30, 1996 increased to $28,787,000 and $81,506,000,
respectively, compared with $20,649,000 and $61,199,000 for the three months
ended September 30, 1995, and for the nine months ended September 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 $80,615,000 for the nine months ended September
30, 1996 compared with $57,998,000 for the nine months ended September 30, 1995.
Cash used in investing and financing activities was $74,060,000 for the
nine months ended September 30, 1996 compared with $66,976,000 for the nine
months ended September 30, 1995. Activity in the nine months ended September 30,
1996 included the Company's investment of $43,789,000 in business acquisitions,
investment in capital equipment of $26,393,000, the borrowing of $25,000,000
from its revolving line of credit, payments of $25,000,000 on the revolving line
of credit and payments of $7,266,000 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
ITEM 1 Legal Proceedings
In October 1996, the Company resolved with the United States Attorney for
the Middle District of Florida an investigation that had been pending since
1991. The United States Attorney had been investigating certain services
provided by the Company to a pharmacy that supplied medications to home
respiratory patients. Under its contracts with the pharmacy, the Company was
responsible for providing various marketing, field administration and patient
services to the pharmacy. The contracts were in effect from February 1989 to
April 1992, and generated less than 1% of the Company's revenue during such
period. Throughout the course of this investigation the Company consistently
contended that its performance under the contracts was entirely proper and in
compliance with applicable law. As part of its settlement with the United States
Attorney, the Company, without admitting any wrongdoing or liability, has agreed
to pay $1 million to the United States Government.
ITEMS 2-5 Not applicable
8
<PAGE> 9
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 September 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
November 12, 1996
/s/ JAMES M. EMANUEL
--------------------------------------
James M. Emanuel
Secretary, Chief Financial Officer and
Principal Accounting Officer
9
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED FINANCIAL STATEMENTS OF LINCARE HOLDINGS FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 7,564
<SECURITIES> 0
<RECEIVABLES> 52,067
<ALLOWANCES> 5,414
<INVENTORY> 1,218
<CURRENT-ASSETS> 55,970
<PP&E> 138,036
<DEPRECIATION> 51,320
<TOTAL-ASSETS> 325,987
<CURRENT-LIABILITIES> 32,519
<BONDS> 0
0
0
<COMMON> 282
<OTHER-SE> 280,281
<TOTAL-LIABILITY-AND-EQUITY> 325,987
<SALES> 254,375
<TOTAL-REVENUES> 254,375
<CGS> 39,246
<TOTAL-COSTS> 39,246
<OTHER-EXPENSES> 133,623
<LOSS-PROVISION> 2,533
<INTEREST-EXPENSE> 281
<INCOME-PRETAX> 81,308
<INCOME-TAX> 31,302
<INCOME-CONTINUING> 81,308
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 50,006
<EPS-PRIMARY> 1.74
<EPS-DILUTED> 1.74
</TABLE>
