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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, 1997
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)
<TABLE>
<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
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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, 1997
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<S> <C>
Common Stock, $0.01 par value............................... 28,349,696 shares
</TABLE>
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LINCARE HOLDINGS INC.
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997
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,
1997 1996
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(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 3,682 $ 1,541
Accounts and notes receivable............................. 55,695 51,090
Income tax receivable..................................... -- 187
Inventories............................................... 1,829 1,689
Prepaid expenses.......................................... 546 466
-------- --------
Total current assets.............................. 61,752 54,973
-------- --------
Property and equipment...................................... 163,614 150,598
Less accumulated depreciation............................... 63,371 57,068
-------- --------
Net property and equipment........................ 100,243 93,530
-------- --------
Other assets:
Goodwill.................................................. 203,025 184,817
Intangible assets......................................... 8,893 8,867
Covenants not to compete.................................. 4,186 4,478
Other..................................................... 632 743
-------- --------
Total other assets................................ 216,736 198,905
-------- --------
Total assets................................. $378,731 $347,408
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current installments of long-term obligations............. $ 6,726 $ 5,783
Accounts payable.......................................... 9,883 16,958
Accrued expenses:
Compensation and benefits.............................. 7,021 6,895
Other.................................................. 2,092 1,704
Income taxes payable...................................... 10,353 --
-------- --------
Total current liabilities......................... 36,075 31,340
Revolving credit loan....................................... 12,200 7,500
Long-term obligations, excluding current installments....... 330 734
Deferred income taxes....................................... 7,669 7,681
Minority interest........................................... 720 905
Stockholders' equity:
Common stock.............................................. 283 282
Additional paid-in capital................................ 99,768 97,335
Retained earnings......................................... 221,686 201,631
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Total stockholders' equity........................ 321,737 299,248
-------- --------
Total liabilities and stockholders' equity... $378,731 $347,408
======== ========
</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,
1997 1996
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(IN THOUSANDS EXCEPT SHARE AND
PER SHARE DATA)
<S> <C> <C>
Net revenues................................................ $ 101,012 $ 79,772
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Costs and expenses:
Costs of goods and services............................... 15,417 12,258
Operating expenses........................................ 21,540 17,318
Selling, general and administrative expenses.............. 20,470 16,344
Bad debt expense.......................................... 1,005 798
Depreciation expense...................................... 6,315 4,785
Amortization expense...................................... 3,440 3,131
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68,187 54,634
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Operating income.................................. 32,825 25,138
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Other income (expense):
Interest income........................................... 28 32
Interest expense.......................................... (226) (85)
Net loss on disposal of property and equipment............ (19) (6)
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(217) (59)
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Income before income taxes........................ 32,608 25,079
Income taxes................................................ 12,553 9,655
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Net income........................................ $ 20,055 $ 15,424
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Income per common share..................................... $ 0.69 $ 0.54
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Weighted average number of common shares and common share
equivalents outstanding................................... 29,174,600 28,593,365
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</TABLE>
See accompanying notes to condensed consolidated financial statements.
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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,
1997 1996
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(IN THOUSANDS)
<S> <C> <C>
Cash from operations........................................ $ 31,407 $ 28,240
Investing activities:
Proceeds from sale of property and equipment.............. 6 170
Capital expenditures...................................... (11,915) (6,658)
Decrease (increase) in other assets....................... 111 (250)
Business acquisitions, net of cash acquired............... (21,165) (14,992)
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(32,963) (21,730)
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Financing activities:
Proceeds from revolving line of credit.................... 19,000 4,000
Payment on revolving line of credit....................... (14,000) (6,000)
Payment of long-term obligations.......................... (2,244) (2,003)
Decrease in minority interest............................. (244) (226)
Proceeds from issuance of common stock.................... 1,185 652
-------- --------
3,697 (3,577)
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Increase in cash............................................ 2,141 2,933
Cash and cash equivalents, beginning of period.............. 1,541 1,009
-------- --------
Cash and cash equivalents, end of period.................... $ 3,682 $ 3,942
======== ========
</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, 1997
and condensed statements of operations and cash flows for the three months ended
March 31, 1997 and 1996 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, 1996 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, 1997 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........................................................ $21,165
Deferred acquisition obligations............................ 2,150
Assumption of liabilities................................... 144
Other....................................................... 86
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$23,545
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The aggregate purchase price was allocated as follows:
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<S> <C>
Current assets.............................................. $ 1,327
Property and equipment...................................... 1,137
Intangible assets........................................... 1,899
Goodwill.................................................... 19,182
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$23,545
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</TABLE>
Unaudited pro forma supplemental information on the results of operations
for the three months ended March 31, 1997 and March 31, 1996 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,
---------------------------
1997 1996
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(IN THOUSANDS, EXCEPT
PER SHARE DATA)
<S> <C> <C>
Net revenues................................................ $103,922 $83,807
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Net income.................................................. $ 20,540 $16,112
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Income per common share..................................... $ .70 $ .56
======== =======
</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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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,
---------------------
1997 1996
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(IN THOUSANDS)
<S> <C> <C>
Oxygen and other respiratory therapy........................ $ 91,453 $73,194
Home medical equipment and other............................ 9,559 6,578
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Total............................................. $101,012 $79,772
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</TABLE>
Net revenues for the three months ended March 31, 1997 increased by
$21,240,000 (or 26.6%) compared with the three months ended March 31, 1996.
Approximately $11,219,000 of the net revenue increase is attributable to
acquisitions and the balance of approximately $10,021,000 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, 1997, of approximately 2.8% on Medicare products and
services. No additional impact from OBRA 93 is expected for 1997.
Cost of goods and services as a percentage of net revenues was 15.3% for
the three months ended March 31, 1997 compared with 15.4% for the three months
ended March 31, 1996.
Operating expenses as a percentage of net revenues was 21.3% for the three
months ended March 31, 1997 as compared to 21.7% for the three months ended
March 31, 1996. This improvement was primarily due to the Company's successful
integration of acquired businesses into its existing locations. The company has
been able to maintain a cost structure that, with increases in net revenues,
allows the Company to spread its overhead over the larger base of revenue,
resulting in improvements in operating income.
Selling, general and administrative expenses as a percentage of net
revenues decreased to 20.3% for the three months ended March 31, 1997 compared
with 20.5% for the three months ended March 31, 1996. The improvement is
attributable to the Company's ability to leverage its infrastructure, with
selling, general and administrative expenses increasing by 25.2% while revenues
grew by 26.6%.
Amortization expense for the three months ended March 31, 1997 increased to
$3,440,000 compared with $3,131,000 for the three month period ending March 31,
1996. The increase is attributable to the amortization of intangible assets
acquired in 1996 and the first quarter of 1997.
Operating income for the three months ended March 31, 1997 increased to
$32,825,000 compared with $25,138,000 for the three months ended March 31, 1996.
The increases in operating income are attributable to the continued revenue
growth and efforts to control costs.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided from operating activities was $31,407,000 for the three
months ended March 31, 1997 compared with $28,240,000 for the three months ended
March 31, 1996.
Net cash used in investing and financing activities was $29,266,000 for the
three months ended March 31, 1997 compared with $25,307,000 for the three months
ended March 31, 1996. First quarter activity included the Company's investment
of $21,165,000 in business acquisitions, investment in capital equipment of
$11,915,000, the borrowing of $19,000,000 from its revolving line of credit,
payments of $14,000,000 on its revolving line of credit and payments of
$2,244,000 related long-term to obligations.
7
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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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<S> <C> <C> <C>
27.0 -- Financial Data Schedule (for SEC Use Only)..................
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(b) The Company did not file a Current Report on Form 8-K during the three
months ended March 31, 1997.
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
--------------------------------------
James M. Emanuel
Secretary, Chief Financial Officer
and Principal Accounting Officer
May 12, 1997
8
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<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, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<EXCHANGE-RATE> 1
<CASH> 3,682
<SECURITIES> 0
<RECEIVABLES> 61,622
<ALLOWANCES> 5,927
<INVENTORY> 1,829
<CURRENT-ASSETS> 61,752
<PP&E> 163,614
<DEPRECIATION> 63,371
<TOTAL-ASSETS> 378,731
<CURRENT-LIABILITIES> 36,075
<BONDS> 0
0
0
<COMMON> 283
<OTHER-SE> 321,454
<TOTAL-LIABILITY-AND-EQUITY> 378,731
<SALES> 101,012
<TOTAL-REVENUES> 101,012
<CGS> 15,417
<TOTAL-COSTS> 15,417
<OTHER-EXPENSES> 52,770
<LOSS-PROVISION> 1,005
<INTEREST-EXPENSE> 226
<INCOME-PRETAX> 32,608
<INCOME-TAX> 12,553
<INCOME-CONTINUING> 20,055
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 20,055
<EPS-PRIMARY> 0.69
<EPS-DILUTED> 0.69
</TABLE>
