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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
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(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES ACT OF 1934
COMMISSION FILE NUMBER 0-19946
LINCARE HOLDINGS INC.
(Exact name of registrant as specified in its charter)
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<S> <C>
DELAWARE 51-0331330
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
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. Yes X 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 APRIL 30, 1996
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<S> <C>
Common Stock, $0.01 par value........................................ 27,844,396 shares
</TABLE>
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LINCARE HOLDINGS INC.
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1996
INDEX
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<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
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LINCARE HOLDINGS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1996 1995
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(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents......................................... $ 3,942 $ 1,009
Accounts and notes receivable..................................... 39,259 36,610
Income tax receivable............................................. -- 772
Inventories....................................................... 1,287 1,299
Prepaid expenses.................................................. 821 674
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Total current assets...................................... 45,309 40,364
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Property and equipment.............................................. 124,729 121,786
Less accumulated depreciation....................................... 48,806 48,534
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Net property and equipment................................ 75,923 73,252
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Other assets:
Goodwill.......................................................... 143,612 130,491
Intangible assets................................................. 9,460 9,510
Covenants not to compete.......................................... 5,998 6,370
Other............................................................. 469 219
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Total other assets........................................ 159,539 146,590
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Total assets......................................... $ 280,771 $260,206
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current installments of long-term obligations..................... $ 6,219 $ 4,992
Accounts payable.................................................. 9,165 10,214
Accrued expenses:
Compensation and benefits...................................... 5,795 7,028
Other.......................................................... 1,839 1,620
Income taxes payable.............................................. 6,984 --
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Total current liabilities................................. 30,002 23,854
Revolving credit loan............................................... 3,000 5,000
Long-term obligations, excluding current installments............... 1,503 2,383
Deferred income taxes............................................... 6,735 6,707
Minority interest................................................... 733 879
Stockholders' equity:
Common stock...................................................... 278 277
Additional paid-in capital........................................ 88,039 86,049
Retained earnings................................................. 150,481 135,057
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Total stockholders' equity................................ 238,798 221,383
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Total liabilities and stockholders' equity........... $ 280,771 $260,206
========= ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
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LINCARE HOLDINGS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED
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MARCH 31, MARCH 31,
1996 1995
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(IN THOUSANDS EXCEPT
SHARE AND PER SHARE DATA)
<S> <C> <C>
Net revenues........................................................ $ 79,772 $ 61,223
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Costs and expenses:
Costs of goods and services....................................... 12,258 9,112
Operating expenses................................................ 17,318 13,207
Selling, general and administrative expenses...................... 16,344 12,664
Bad debt expense.................................................. 798 489
Depreciation expense.............................................. 4,785 3,945
Amortization expense.............................................. 3,131 2,391
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54,634 41,808
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Operating income.......................................... 25,138 19,415
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Other income (expense):
Interest income................................................... 32 134
Interest expense.................................................. (85) (110)
Net gain on disposal of property and equipment.................... (6) 7
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(59) 31
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Income before income taxes................................ 25,079 19,446
Income taxes........................................................ 9,655 7,584
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Net income................................................ $ 15,424 $ 11,862
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Income per common share............................................. $ 0.54 $ 0.42
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Weighted average number of common shares and common share
equivalents outstanding........................................... 28,593,365 28,525,960
========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
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LINCARE HOLDINGS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED
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MARCH 31, MARCH 31,
1996 1995
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(IN THOUSANDS)
<S> <C> <C>
Cash from operations................................................. $28,240 $20,088
Investing activities:
Proceeds from sale of property and equipment....................... 170 292
Capital expenditures............................................... (6,658) (7,336)
Decrease in other assets........................................... (250) 26
Business acquisitions, net of cash acquired........................ (14,992) (27,033)
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(21,730) (34,051)
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Financing activities:
Proceeds from revolving line of credit............................. 4,000 8,000
Payment on revolving line of credit................................ (6,000) --
Payment of long-term obligations................................... (2,003) (4,075)
Decrease in minority interest...................................... (226) (116)
Proceeds from issuance of common stock............................. 652 1,397
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(3,577) 5,206
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Increase (decrease) in cash.......................................... 2,933 (8,757)
Cash and cash equivalents, beginning of period....................... 1,009 16,023
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Cash and cash equivalents, end of period............................. $ 3,942 $ 7,266
======= =======
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
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LINCARE HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 -- BASIS OF PRESENTATION
The accompanying condensed consolidated balance sheet as of March 31, 1996
and condensed statements of operations and cash flows for the three months ended
March 31, 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 Lincare Holdings Inc. (the "Company") audited balance sheet as
of that date.
NOTE 2 -- BUSINESS COMBINATIONS
During the three months ended March 31, 1996 the Company acquired, in
unrelated acquisitions, the stock of three companies and certain assets of five
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:
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<CAPTION>
(IN THOUSANDS)
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<S> <C>
Cash................................................................... $ 14,992
Deferred acquisition obligations....................................... 2,130
Assumption of liabilities.............................................. 62
Other.................................................................. 11
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$ 17,195
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The aggregate purchase price was allocated as follows:
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<S> <C>
Current assets......................................................... $ 686
Property and equipment................................................. 975
Intangible assets...................................................... 1,822
Goodwill............................................................... 13,712
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$ 17,195
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</TABLE>
Unaudited pro forma supplemental information on the results of operations
for the three months ended March 31, 1996 and March 31, 1995 are provided below
and reflect the acquisitions as if they had been combined at the beginning of
each respective period.
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED MARCH 31,
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1996 1995
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(IN THOUSANDS, EXCEPT
PER SHARE DATA)
<S> <C> <C>
Net revenues................................................... $81,874 $64,133
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Net income..................................................... $15,880 $12,497
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Income per common share........................................ $ 0.56 $ 0.44
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</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.
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NOTE 3 -- NEW ACCOUNTING STANDARDS
Effective January 1, 1996, the Company adopted Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation." This standard
allows the Company to select either a fair value based method or its current
intrinsic value based method of accounting for employee stock-based
compensation. The Company retained its intrinsic value method of accounting and,
therefore, the adoption of this standard did not have a material affect on the
Company's financial statements.
LINCARE HOLDINGS INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
OPERATING RESULTS
The following table sets forth for the periods indicated a summary of the
Company's net revenues by source:
<TABLE>
<CAPTION>
FOR THE THREE
MONTHS ENDED MARCH
31,
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1996 1995
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(IN THOUSANDS)
<S> <C> <C>
Oxygen and other respiratory therapy............................. $73,194 $55,880
Home medical equipment and other................................. 6,578 5,343
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Total.................................................. $79,772 $61,223
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</TABLE>
Net revenues for the three months ended March 31, 1996 increased by
$18,549,000 (or 30.3%) compared with the three months ended March 31, 1995.
Approximately $9,751,000 of the net revenue increase is attributable to
acquisitions and the balance of approximately $8,798,000 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 March 31, 1996 compared with 14.9% for the three months
ended March 31, 1995. The increase is attributable to a change in the product
mix related to acquisitions having higher levels of home medical equipment and
certain respiratory therapy products.
Operating expenses as a percentage of net revenues was 21.7% for the three
months ended March 31, 1996 which is comparable with 21.6% for the three months
ended March 31, 1995.
Selling, general and administrative expenses as a percentage of net
revenues decreased to 20.5% for the three months ended March 31, 1996 compared
with 20.7% for the three months ended March 31, 1995. The improvement is
attributable to the Company's ability to leverage its infrastructure, with
selling, general and administrative expenses increasing by 29.1% while revenues
grew by 30.3%.
Amortization expense for the three months ended March 31, 1996 increased to
$3,131,000 compared with $2,391,000 for the three month period ending March 31,
1995. The increase is attributable to the amortization of intangible assets
acquired in 1995 and the first quarter of 1996.
Operating income for the three months ended March 31, 1996 increased to
$25,138,000 compared with $19,415,000 for the three months ended March 31, 1995.
The increases in operating income are attributable to the continued revenue
growth and efforts to control costs.
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LIQUIDITY AND CAPITAL RESOURCES
Net cash provided from operating activities was $28,240,000 for the three
months ended March 31, 1996 compared with $20,088,000 for the three months ended
March 31, 1995.
Net cash used in investing and financing activities was $25,307,000 for the
three months ended March 31, 1996 compared with $28,845,000 for the three months
ended March 31, 1995. First quarter activity included the Company's investment
of $14,992,000 in business acquisitions, investment in capital equipment of
$6,658,000, the borrowing of $4,000,000 from its revolving line of credit,
payments of $6,000,000 on its revolving line of credit and payments of
$2,003,000 related long-term 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:
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<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER EXHIBIT PAGE
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<C> <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 March 31, 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.
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Registrant
/s/ JAMES M. EMANUEL
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James M. Emanuel
Secretary, Chief Financial Officer
and Principal Accounting Officer
May 13, 1996
8
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF LINCARE HOLDINGS, INC. FOR THE THREE MONTHS ENDED MARCH
31, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 3,942
<SECURITIES> 0
<RECEIVABLES> 44,015
<ALLOWANCES> 4,756
<INVENTORY> 1,287
<CURRENT-ASSETS> 45,309
<PP&E> 124,729
<DEPRECIATION> 48,806
<TOTAL-ASSETS> 280,771
<CURRENT-LIABILITIES> 30,002
<BONDS> 0
0
0
<COMMON> 278
<OTHER-SE> 238,520
<TOTAL-LIABILITY-AND-EQUITY> 280,771
<SALES> 79,772
<TOTAL-REVENUES> 79,772
<CGS> 12,258
<TOTAL-COSTS> 12,258
<OTHER-EXPENSES> 42,376
<LOSS-PROVISION> 798
<INTEREST-EXPENSE> 85
<INCOME-PRETAX> 25,079
<INCOME-TAX> 9,655
<INCOME-CONTINUING> 25,079
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,424
<EPS-PRIMARY> .54
<EPS-DILUTED> .54
</TABLE>
