<PAGE>
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 second quarter ended June 30, 1999
-------------
Commission file number 80-19878
--------
OPTION CARE, INC.
-----------------
(Exact name of registrant as specified in its charter)
DELAWARE 36-3791193
- ------------------------------------- ------------------------------------
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
100 Corporate North
Suite 212
Bannockburn, Illinois 60015
- ------------------------------------- ------------
(Address of principal executive office) (zip code)
Registrant's telephone number, including area code: (847) 615-1690
----------------
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 Issued and Outstanding as of July 31, 1999
----------------------------- --------------------------------------------
<S> <C>
Common Stock - .01 par value 11,340,354
</TABLE>
<PAGE>
INDEX
OPTION CARE, INC. & SUBSIDIARIES
<TABLE>
<CAPTION>
PART I FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS (Unaudited) PAGE NO.
<S> <C> <C>
Condensed Consolidated Balance Sheets - June 30, 1999
and December 31, 1998...................................... 3
Condensed Consolidated Statements of Operations -
Three and Six Months Ended June 30, 1999 and 1998 ......... 4
Condensed Consolidated Statements of Cash Flows -
Six Months Ended June 30, 1999 and 1998.................... 5
Notes to Condensed Consolidated Financial Statements....... 6
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.............. 7
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 11
PART II OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS.......................................... 11
Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.................. 11
Item 3. DEFAULTS UPON SENIOR SECURITIES............................ 11
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS........ 11
Item 5. OTHER INFORMATION.......................................... 12
Item 6(a). EXHIBITS .................................................. 12
Item 6(b). REPORTS ON FORM 8-K........................................ 12
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
OPTION CARE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
ASSETS
<TABLE>
<CAPTION>
June 30, Decmber 31,
-------- -----------
1999 1998
----- ----
(Unaudited) (Note 1)
----------- -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents..................... $ --- $ 3,665
Accounts receivable, net...................... 20,942 23,544
Inventories, net.............................. 1,637 2,097
Other current assets.......................... 3,919 3,042
--------- ---------
Total current assets................... 26,498 32,348
Equipment and other fixed assets, net........... 5,308 6,085
Goodwill, net................................... 20,394 19,025
Other assets.................................... 1,182 1,434
--------- ---------
Total assets........................... $53,382 $58,892
--------- ---------
--------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Cash overdraft................................ $ 1,100 $ ---
Trade accounts payable........................ 5,073 6,493
Other current liabilities..................... 7,418 6,059
--------- ---------
Total current liabilities................. 13,591 12,552
Long-term debt, excluding current portion....... 13,221 22,096
Other liabilities............................... 238 450
Minority interest............................... 89 55
--------- ---------
Total liabilities......................... 27,139 35,153
Stockholders' equity:
Common stock, $.01 par value, 30,000 shares
authorized, 11,125 and 11,006 shares
issued and outstanding, respectively........ 111 110
Common stock to be issued, 502 and 440 shares,
respectively................................ 1,681 1,227
Other stockholders' equity.................... 24,451 22,402
--------- ---------
Total stockholders' equity................ 26,243 23,739
--------- ---------
Total liabilities and stockholders'
equity............................... $53,382 $58,892
--------- ---------
--------- ---------
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
3
<PAGE>
OPTION CARE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1999 AND 1998
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
--------------------------- -------------------------
1999 1998 1999 1998
----- ----- ----- -----
<S> <C> <C> <C> <C>
Revenue.......................................... $ 29,447 $ 28,341 $58,351 $54,959
Cost of revenue.................................. 17,459 18,013 34,952 33,359
--------- -------- ------- -------
Gross profit................................ 11,988 10,328 23,399 21,600
Selling, general and
administrative expenses....................... 8,785 9,254 17,577 17,669
Provision for doubtful accounts.................. 755 1,290 1,406 1,778
Amortization of goodwill......................... 138 113 269 257
--------- -------- ------- -------
Total operating expenses.................... 9,678 10,657 19,252 19,704
--------- -------- ------- -------
Operating income (loss).......................... 2,310 (329) 4,147 1,896
Interest expense................................. (242) (470) (571) (1,086)
Other expense, net............................... (203) (89) (396) (113)
--------- -------- ------- -------
Income (loss) before income taxes................ 1,865 (888) 3,180 697
Income tax provision (benefit)................... 784 (303) 1,336 417
--------- -------- ------- -------
Net income (loss)................................ $ 1,081 $ (585) $ 1,844 $ 280
--------- -------- ------- -------
--------- -------- ------- -------
Net income (loss) per common share :
Basic......................................... $ 0.09 $ (0.05) $ 0.16 $ 0.03
--------- -------- ------- -------
--------- -------- ------- -------
Diluted....................................... $ 0.09 $ (0.05) $ 0.16 $ 0.03
--------- -------- ------- -------
--------- -------- ------- -------
Shares used in computing net income (loss) per
common share:
Basic......................................... 11,509 10,847 11,452 10,828
--------- -------- ------- -------
--------- -------- ------- -------
Diluted....................................... 11,867 10,847 11,784 10,863
--------- -------- ------- -------
--------- -------- ------- -------
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
4
<PAGE>
OPTION CARE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
-------------------------
1999 1998
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income............................................ $ 1,844 $ 280
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization....................... 1,295 1,341
Provision for doubtful accounts..................... 1,406 1,778
Change in current assets and current liabilities.... 733 1,079
-------- ---------
Net cash provided by operating activities................ 5,278 4,478
-------- ---------
Cash flows from investing activities:
Other assets, net..................................... (271) (1,182)
Purchases of equipment and other, net................. (164) (1,035)
Payments for acquisitions............................. (1,369) (1,584)
-------- ---------
Net cash used in investing activities.................... (1,804) (3,801)
-------- ---------
Cash flows from financing activities:
Cash overdraft................................. 1,100 ----
Retirement of previous debt facility.................. (21,800) ----
Net borrowings(payments) on revolving credit agreement 13,039 (1,100)
Net borrowings(payments) on capital leases............ (118) 287
Payments of other long-term debt...................... (20) (239)
Proceeds from issuance of stock....................... 660 230
-------- ---------
Net cash used by financing activities.................... (7,139) (677)
-------- ---------
Net decrease in cash and cash equivalents................ (3,665) ----
Cash and cash equivalents, beginning of period........... 3,665 ----
-------- ---------
Cash and cash equivalents, end of period $ ---- $ ----
-------- ---------
-------- ---------
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
5
<PAGE>
OPTION CARE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
JUNE 30, 1999
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-Q and
Article 16 of Regulation S-X. Accordingly, they do not include all information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three and six months ended June 30,
1999 are not necessarily indicative of the results that may be expected for the
year ending December 31, 1999. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1998.
2. RECLASSIFICATIONS
Certain prior year amounts in the condensed consolidated financial
statements have been reclassified to conform to the current year presentation.
3. LONG-TERM DEBT
On February 5, 1999, the Company entered into a $25 million Loan and
Security Agreement ("Agreement") with a bank that replaced the Company's former
existing facility. The Agreement provides for borrowings up to $25 million and
requires the Company to meet certain financial covenants including, but not
limited to: fixed charge coverage ratio; debt ratio; and limitation on annual
capital expenditures. The Agreement allowed the Company, among other things, to
meet working capital needs and to retire in its entirety the Company's former
facility. Under the Agreement, the Company is subject to an early termination
fee if the loan is terminated prior to its natural expiration of February 2002.
The Company paid a facility fee of $0.2 million at the time of signing of the
Agreement. The Agreement provides for an annual commitment fee paid by the
Company of 0.25% on the average daily unused amount of the facility. The
Agreement prohibits the Company from declaring any cash dividends on its common
stock. The Company may elect interest rates ranging from various LIBOR periods
plus a 2.125% margin, to the bank's reference rate. The average interest rate
for the second quarter of 1999 on outstanding borrowings under the facility was
7.3%.
Borrowing availability under the facility is related to a percentage of
the Company's net outstanding account receivable balances, less certain
ineligible amounts, as defined in the Agreement. The facility is secured by the
Company's assets and a pledge of the stock of the Company's subsidiaries. In
addition, the John N. Kapoor Trust, dated September 20, 1989, (the "Trust"), has
pledged an irrevocable letter of credit totaling $5 million in favor of the
lending bank to support borrowings, if any, that exceed the allowable collateral
base as defined in the Agreement. There were no borrowings supported by the
letter of credit as of June 30, 1999. Overall borrowings allowable under the
Agreement are limited to the lessor of $25 million or, the total allowable
collateral base plus amounts available that are supported by the letter of
credit. The Company has entered into an agreement with the Trust that provides
the payment of a monitoring fee monthly as well as all expenses related to the
establishment and maintenance of the letter of credit.
6
<PAGE>
In the case of a draw on the letter of credit pledged, the Company may
elect, at its option, to issue to the Trust a Convertible Note (the "Note") for
the amount of such draw. The Trust has the option, at any time up to and
including January 31, 2000 or until the Note has been paid in full, to convert
all or a portion of the unpaid amount of such Note into Common Stock of the
Company, at a price equal to the average closing price per share of the Common
Stock during the five days preceding the receipt of the Note.
4. EARNINGS PER SHARE DATA
The following table sets forth the computation of basic and diluted
earnings per share for the periods indicated.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1999 1998 1999 1998
----- ----- ----- -----
(In Thousands, except per share data)
<S> <C> <C> <C> <C>
Basic :
Net income(loss) $ 1,081 $ (585) $ 1,844 $ 280
Average shares outstanding 11,509 10,847 11,452 10,828
------------- ---------------- ---------------- ----------------
Basic EPS $ 0.09 $ (0.05) $ 0.16 $ 0.03
------------- ---------------- ---------------- ----------------
------------- ---------------- ---------------- ----------------
Diluted :
Net income $ 1,081 $ (585) $ 1,844 $ 280
------------- ---------------- ---------------- ----------------
------------- ---------------- ---------------- ----------------
Average shares outstanding 11,509 10,847 11,452 10,828
Net effect of dilutive stock
options - based on the
treasury stock method 358 ---- 332 35
------------- ---------------- ---------------- ----------------
Total 11,867 10,847 11,784 10,863
------------- ---------------- ---------------- ----------------
------------- ---------------- ---------------- ----------------
Diluted EPS $ 0.09 $ (0.05) $ 0.16 $ 0.03
------------- ---------------- ---------------- ----------------
------------- ---------------- ---------------- ----------------
</TABLE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
Company's Annual Report on Form 10-K for the year ended December 31, 1998. Any
forward looking statements in the following discussion relating to financial
results, performance, acquisitions, business development activities, competition
or future regulation, involve risks and uncertainties that could significantly
affect anticipated results in the future. These risks and uncertainties include,
but are not limited to, uncertainties relating to acquisitions and divestitures,
availability of capital to fund operations and acquisitions, sales and renewals
of franchisees, government and regulatory policies, general economic conditions
and change in the competitive environment in which the Company operates.
7
<PAGE>
DISCUSSION OF RESULTS OF OPERATIONS FOR THE SECOND QUARTER AND SIX MONTHS ENDED
JUNE 30, 1999
Revenue for the three months ended June 30, 1999 was $29.4 million, an
increase of $1.1 million or 3.9% from the $28.3 million reported for the three
months ended June 30, 1998. Revenue from patient care services increased $3.6
million to $26.7 million, product and network management revenue decreased by
$2.6 million to $0.7 million and royalty fee revenue remained at $2.0 million
for the quarter. The increase in patient care services is primarily attributable
to the 17.6% increase in same store sales for the quarter, which increase was
driven in part by a 57.4% increase in revenue from the Company's drug
replacement program. The decline in product and network management revenue is
due to management's decision, made in the fourth quarter of 1998, to discontinue
its participation under a capitated contact, representing $2.7 million of
revenue for the second quarter of 1998. Revenue for patient care services
through the company-owned locations for the quarter ended June 30, 1999,
represented 90.8% of total revenue, while royalty fees and product and network
management represented 6.8% and 2.4%, respectively, of total revenue.
Revenue for the six months ended June 30, 1999, was $58.4 million, an
increase of $3.4 million, or 6.2% over the same period in 1998. Revenue from
patient care services increased 13.2% to $53.0 million from $46.8 million in
1998 due to increases in same store sales. Product sales and network management
declined by $2.6 million from $4.0 million to $1.4 million, due to the
discontinuation of the capitation contract in the first half of 1998. Royalty
fees and other revenue declined by $0.2 million, from $4.2 to $4.0 million. For
the six months ended June 30, 1999, patient care services, royalty fees and
product and network management represented 90.8%, 6.8% and 2.4%, respectively,
of total revenue.
Gross profit as a percentage of revenue (gross margin) for the three
months ended June 30, 1999 was 40.7% compared to 36.4% for the three months
ended June 30, 1998. The increase in gross margin for the quarter is due
primarily to the management's decision to discontinue the capitation contract
due to significantly lower levels of margin realized under the contract.
Excluding the impacts of the contract, gross margin for the second quarter
increased 1% over the second quarter of 1998, due in part to improved pricing
received under certain purchase agreements with key vendors. Gross margin for
the six months ended June 30, 1999, was 40.1%, compared to 39.3% for the same
period in 1998. The increase was due to the discontinuation of the capitation
contract. Excluding the impacts of the contract, gross margin for the six months
ended June 30, 1999 was equal to the gross margin for the six months ended June
30, 1998.
During the first quarter of 1999, the Company changed its methodology
for determining gross profit. The Company determined that the change in
methodology was more appropriate and provided a better indication of the actual
gross profit provided by revenue. Amounts from 1998 for both the quarter and
year-to-date have been reclassified to conform to the 1999 presentation.
Total operating expenses for the three months ended June 30, 1999 were
$9.7 million, an decrease of $1.0 million or 9.3% from operating expenses of
$10.7 million for the three months ended June 30, 1998. Total operating expenses
as a percentage of revenue decreased to 32.9% for second quarter 1999 compared
to 37.6% for the comparable period in the prior year. The decline was largely
due to better productivity, which resulted in lower selling, general and
administrative expenses, which declined $0.5 million or 5.1%, and a $0.5 million
decline in provision for doubtful accounts as a result of the decrease
8
<PAGE>
in the Company's days sales outstanding from 97 to 65. The provision for
doubtful accounts for the second quarter of 1999 declined to 2.6% of revenue
compared to 4.6% for the second quarter of 1998. Total operating expenses of
$19.3 million for the six months ended June 30, 1999 declined from the $19.7
million for the first six months of 1998. Total operating expenses as a
percentage of revenue decreased to 33.0% for the six months ended June 30, 1999
compared to 35.9% for the comparable period in the prior year.
Interest expense decreased to $0.2 million for the three months ended
June 30, 1999 from $0.5 million for the corresponding period in the prior year,
as the amount of debt outstanding was reduced by 52.1% from $28.2 million at
June 30, 1998 to $13.5 million at June 30, 1999. Year-to-date interest expense
declined by $0.5 million.
The effective income tax rate for the second quarter of 1999 was 42.0%,
resulting in net income of $1.1 million, or $0.09 earnings per share (basic and
diluted). For the second quarter of 1998 the effective tax benefit rate was
34.1% and the net loss was $0.6 million or $0.05 loss per share. Year-to-date
for the first six months ended June 30, 1999, the effective tax rate was 42.0%,
resulting in net income of $1,844, or $0.16 earnings per share (basic and
diluted). For the first six months of 1998, the effective tax rate was 59.8%,
resulting in net income of $280, or $0.03 earnings per share (basic and
diluted).
LIQUIDITY AND CAPITAL RESOURCES
Net cash flow from operations of $5.3 million increased $0.8 million or
17.9% for the first six months of 1999 compared to the first six months of 1998,
due to increased cash collections of the Company's outstanding account
receivable balances and reduced inventory balances. Net cash flow used by
investing activities of $1.8 million decreased by $2.0 million for the first six
months of 1999 compared to the first six months of 1998, mainly due to
reductions in purchases of equipment. Net cash flow used by financing activities
of $7.1 million increased by $6.5 million in the first six months of 1999
compared to the same period in 1998, due to the retirement in its entirety of
the Company's former credit facility and reduced borrowings under the Company's
new facility.
As of June 30, 1999, the Company had no cash and cash equivalents,
compared to $3.7 million of cash and cash equivalents at December 31, 1998. The
decline in cash and cash equivalents is due to the Company's policy during 1999
of using excess cash balances to retire debt under its revolver agreement.
On February 5, 1999, the Company entered into a $25 million Loan and
Security Agreement ("Agreement") with a bank that replaced a previous facility.
The Agreement provides for borrowings up to $25 million and requires the Company
to meet certain financial covenants including, but not limited to: fixed charge
coverage ratio; debt ratio; and limitation on annual capital expenditures. The
Agreement provides for, among other things, the ability to meet working capital
needs and to retire in its entirety the Company's then existing facility. The
Company is subject to an early termination fee if the loan is terminated prior
to its natural expiration of February 2002. The Company paid a facility fee of
$0.2 million at the time of signing the Agreement. The Agreement provides for an
annual commitment fee paid by the Company of 0.25% on the average daily unused
amount of the facility. The Agreement prohibits the Company from declaring any
cash dividends on its common stock. The Company may elect interest rates ranging
from various LIBOR periods plus a 2.125% margin, to the bank's reference rate.
Availability under the facility is related to a percentage of the
Company's net outstanding account receivable balances, less certain ineligible
amounts, as defined in the Agreement. The facility is secured by the Company's
assets and a pledge of the stock of the Company's subsidiaries. In addition,
9
<PAGE>
the John N. Kapoor Trust, dated September 20, 1989, (the "Trust"), has pledged
an irrevocable letter of credit totaling $5 million in favor of the lending bank
to support borrowings, if any, that exceed the allowable collateral base as
defined in the Agreement. Overall borrowings allowable under the Agreement are
limited to the lessor of $25 million or, the total allowable collateral base
plus amounts available that are supported by the letter of credit. The Company
has entered into an agreement with the Trust which provides the monthly payment
of a monitoring fee as well as all expenses related to the establishment and
maintenance of the letter of credit.
In the case of a draw on the letter of credit pledged, the Company may
elect, at its option, to issue to the Trust a Convertible Note (the "Note") for
the amount of such draw. The Trust has the option, at any time up to and
including January 31, 2000 or until the Note has been paid in full, to convert
all or a portion of the unpaid amount of such Note into Common Stock of the
Company, at a price equal to the average closing price per share of the Common
Stock during the five days preceding the receipt of the Note.
Management believes that cash flow from operations, cash on hand and
availability under the Agreement, will be sufficient to meet the cash needs of
the business for the immediate future. In the event that additional capital is
required, management cannot assure that such capital can be obtained on terms
acceptable to the Company.
There are currently various proposals under development to enact
healthcare reform on a national, state and local level. It is not possible at
this time to predict the cash flow impact, if any, which any such changes may
have on providers of home healthcare services and on Option Care locations.
YEAR 2000 ISSUE
The Year 2000 issue is the result of computer programs being written
using two digits rather than four to define the applicable year. Computer
equipment, software and devices with imbedded technology that are time sensitive
may treat years as occurring between 1900 and the end of 1999 and may not
self-convert to reflect the upcoming change in the century. If not corrected,
this problem could result in system failures or miscalculations and erroneous
results by, or at, Year 2000.
Currently, the Company is continuing its program to understand the
nature and extent of the work required to make its systems Year 2000 compliant.
This program encompasses the Company's operating information and facilities
systems, and the readiness of customers, third-party payers, vendors and other
third parties with which the Company does business. The program includes the
following phases : awareness and inventory, detailed assessment and resolution,
testing, deployment and contingency plan development for all areas.
To date, the Company has completed an internal review of its computer
equipment and software systems and other equipment with imbedded technology, and
is in the final stages of completion of the other phases of its program,
including the implementation of remediation measures for certain identified
systems, ordinary course replacement of equipment and software with replacements
which are Year 2000 complaint, and a comprehensive review of customers, vendors
and other third parties to determine the extent to which interfaces with such
entities are vulnerable to Year 2000 issues. The Company's objective is to
become Year 2000 compliant with its critical systems prior to the end of the
third quarter of 1999, with substantial time for further testing, verification
and conversion of less important activities and systems.
The total cost of the Year 2000 project to date has not been material.
Based on the program to date, the Company does not expect that future costs
10
<PAGE>
of modifications will have a material adverse effect on the Company's financial
position or results of operations and that currently anticipated costs to be
incurred by the Company with respect to Year 2000 issues will be funded from
operating cash flows. However, if all Year 2000 issues are not properly
identified, or assessment, remediation and testing are not effected timely with
respect to Year 2000 problems that are identified, there can be no assurance
that the Year 2000 issue will not materially adversely impact the Company's
results of operations or adversely affect the Company's relationships with
customers, vendors, or others. Additionally, there can be no assurance that the
Year 2000 issues of other entities will not have a material adverse impact on
the Company's systems or results of operations.
Because the Company expects that its internal systems will become Year
2000 compliant in a timely manner, the Company believes that the most likely
worst case scenario would result from vendors or other third parties failing to
achieve Year 2000 compliance. Depending upon the number of third parties, their
identity and the nature of the noncompliance, the Year 2000 issue could have a
material adverse effect on the Company's financial position or results of
operations. The Company is in the process of developing contingency plans for
any critical problems which may occur in any of the assessment areas noted
above, and anticipates that such plans will be completed by September, 1999.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not Applicable.
PART II. OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS
Not Applicable.
ITEM 2 CHANGES IN SECURITIES AND USE OF PROCEEDS
Not Applicable.
ITEM 3 DEFAULTS UPON SENIOR SECURITIES
Not Applicable.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its 1999 Annual Meeting of Shareholders on May 5,
1999. At the Annual Meeting, the stockholders voted on and approved the election
of James G. Andress and Michael A. Rusnak as Directors to serve until the Annual
Meeting of 2002. In addition, the stockholders voted to approve and ratify
certain stock bonus awards made to certain officers of the Company for fiscal
1998. The votes cast at the Annual Meeting on such matters were as follows :
a. Election of Directors :
<TABLE>
<CAPTION>
For Against Abstain
--- ------- -------
<S> <C> <C> <C>
Mr. Andress 9,888,801 --- 62,353
Mr. Rusnak 9,888,771 --- 62,383
</TABLE>
b. Approval of 1998 Stock Bonus Awards :
<TABLE>
<S> <C> <C>
9,352,508 212,948 385,698
</TABLE>
11
<PAGE>
The terms of Directors John N. Kapoor, Ph.D. and Roger W. Stone expire at
the Annual Meeting in 2000 and for Jerome F. Sheldon at the Annual Meeting in
2001.
ITEM 5 OTHER INFORMATION
At the August 6, 1999 meeting of the Board of Directors, the Board
expanded the number of Directors from five(5) to six(6). In addition, the Board
elected James M. Hussey, President and Chief Executive Officer of NeoPharm
Pharmaceuticals, Inc. to serve on the Board until the 2000 Annual Meeting.
ITEM 6 (a) EXHIBITS
27 - Financial Data Schedule
ITEM 6 (b) REPORTS ON FORM 8-K
The Company did not file any reports on Form 8-K during the three
months ended June 30, 1999.
12
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
OPTION CARE, INC.
/s/ Michael A. Siri
-------------------
By : Michael A. Siri
Vice President and Chief
Financial Officer (Principal
Accounting Officer and
Principal Financial Officer)
Date: August 16, 1999
13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998
<PERIOD-START> APR-01-1999 JAN-01-1999
<PERIOD-END> JUN-30-1999 JUN-30-1999
<CASH> 0 0
<SECURITIES> 0 0
<RECEIVABLES> 20,942,000 0
<ALLOWANCES> 0 0
<INVENTORY> 1,637,000 0
<CURRENT-ASSETS> 26,498,000 0
<PP&E> 5,308,000 0
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 53,382,000 0
<CURRENT-LIABILITIES> 13,591,000 0
<BONDS> 0 0
0 0
0 0
<COMMON> 111,000 0
<OTHER-SE> 24,451,000 0
<TOTAL-LIABILITY-AND-EQUITY> 53,382,000 0
<SALES> 0 0
<TOTAL-REVENUES> 29,447,000 58,351,000
<CGS> 17,459,000 34,952,000
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 8,923,000 17,846,000
<LOSS-PROVISION> 755,000 1,406,000
<INTEREST-EXPENSE> 242,000 571,000
<INCOME-PRETAX> 1,865,000 3,180,000
<INCOME-TAX> 784,000 1,336,000
<INCOME-CONTINUING> 1,081,000 1,844,000
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 1,081,000 1,844,000
<EPS-BASIC> 0.09 0.16
<EPS-DILUTED> 0.09 0.16
</TABLE>
