<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
<TABLE>
<S> <C>
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1995
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
</TABLE>
For the transition period from to
Commission file number 1-11343
Coram Healthcare Corporation
(Exact name of registrant as specified in its charter)
---------------------
<TABLE>
<S> <C>
DELAWARE 33-0615337
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1125 SEVENTEENTH STREET
SUITE 1500
DENVER, CO 80202
Address of principal executive office) (Zip Code)
</TABLE>
Registrant's telephone number, including area code: (303) 292-4973
---------------------
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
----- -----
The number of shares outstanding of the Registrant's Common Stock, $.001
par value, as of May 8, 1995 was 39,682,277
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<PAGE> 2
PART I -- FINANCIAL INFORMATION
ITEM 1 -- FINANCIAL STATEMENTS
CORAM HEALTHCARE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1995 1994
--------- ------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents.......................................... $ 21,580 $ 20,046
Accounts receivable, net........................................... 106,419 109,087
Investment in available-for-sale securities........................ 15,499 16,546
Inventories........................................................ 11,250 11,864
Prepaid taxes...................................................... 9,739 11,510
Deferred income taxes, net......................................... 32,538 31,893
Other current assets............................................... 20,784 7,251
--------- ------------
Total current assets....................................... 217,809 208,197
PROPERTY AND EQUIPMENT, NET.......................................... 23,744 25,902
JOINT VENTURES AND OTHER ASSETS...................................... 18,073 8,546
DEFERRED INCOME TAXES NON-CURRENT.................................... 556 556
GOODWILL, NET........................................................ 337,269 333,238
--------- ------------
TOTAL ASSETS......................................................... $ 597,451 $576,439
--------- ------------
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable................................................... $ 32,553 $ 27,098
Current maturities of long-term debt............................... 5,562 5,911
Deferred income taxes.............................................. 5,818 5,788
Liabilities for securities sold under agreement to repurchase...... 7,365 7,430
Reserve for litigation............................................. 22,647 22,720
Accrued merger and restructuring................................... 35,958 43,594
Other accrued liabilities.......................................... 13,632 11,845
--------- ------------
Total current liabilities.................................. 123,535 124,386
REVOLVING LINES-OF-CREDIT............................................ 122,300 108,099
LONG-TERM DEBT....................................................... 10,801 11,627
MINORITY INTEREST IN CONSOLIDATED JOINT VENTURES..................... 4,729 6,599
OTHER LIABILITIES.................................................... 1,885 1,945
DEFERRED INCOME TAXES NON-CURRENT.................................... 1,522 1,522
STOCKHOLDERS' EQUITY:
Common stock par value $.001, authorized 75,000 shares, issued
39,454 in 1995 and 38,964 in 1994............................... 39 39
Additional paid-in capital......................................... 347,071 341,328
Unrealized loss on available-for-sale securities................... (193) (279)
Retained earnings (deficit)........................................ (14,238) (18,827)
--------- ------------
Total stockholders' equity................................. 332,679 322,261
--------- ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY........................... $ 597,451 $576,439
======== ==========
</TABLE>
See accompanying notes.
1
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CORAM HEALTHCARE CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------------------
1995 1994
-------- --------
<S> <C> <C>
NET REVENUE............................................................ $104,778 $113,065
COST OF SERVICE:
Drugs and supplies................................................... 37,227 34,650
Clinical services.................................................... 38,382 42,365
-------- --------
Total cost of service........................................ 75,609 77,015
-------- --------
Gross Profit......................................................... 29,169 36,050
OPERATING EXPENSES:
Selling, general and administrative expenses......................... 17,885 19,584
Provision for estimated uncollectible accounts....................... 4,013 4,732
Amortization of goodwill............................................. 2,790 2,135
Restructuring costs (benefit)........................................ (4,131) --
-------- --------
Total operating expenses..................................... 20,557 26,451
-------- --------
OPERATING INCOME....................................................... 8,612 9,599
OTHER INCOME (EXPENSE):
Interest income...................................................... 402 715
Interest expense..................................................... (3,436) (1,168)
Minority interest in net income of consolidated joint ventures....... (2,432) (2,391)
Other income......................................................... 338 151
-------- --------
INCOME BEFORE INCOME TAXES............................................. 3,484 6,906
PROVISION (BENEFIT) FOR INCOME TAXES................................... (1,105) 3,695
-------- --------
NET INCOME............................................................. $ 4,589 $ 3,211
======== ========
NET INCOME PER COMMON SHARE:
Primary.............................................................. $ 0.11 $ 0.08
======== ========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Primary.............................................................. 40,939 38,616
======== ========
</TABLE>
See accompanying notes.
2
<PAGE> 4
CORAM HEALTHCARE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------
1995 1994
-------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................................................ $ 4,589 $ 3,211
Adjustments to reconcile net income to net cash provided (used) by
operating activities:
Provision for estimated uncollectible accounts..................... 4,013 4,732
Depreciation and amortization...................................... 5,571 5,311
Merger/restructuring benefit....................................... (4,131) --
Deferred income taxes, net......................................... (615) 500
Minority interest in net income of consolidated joint ventures,
net............................................................... (493) 469
Equity in net income of unconsolidated joint ventures, net......... (11) 21
Other, net......................................................... (29) 43
Change in assets and liabilities, net of acquisitions and
dispositions:
Accounts receivable.............................................. (6,414) (9,355)
Prepaid expenses, inventories and other assets................... (6,910) (2,834)
Current and other liabilities and reserve for litigation......... 6,123 (8,435)
Accrued merger and restructuring................................. (7,218) --
-------- -------
Net cash provided (used) by operating activities.............. (5,525) (6,337)
-------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale and maturities of available-for-sale securities.... 1,133 4,956
Proceeds from sales of property and equipment......................... 62 393
Proceeds from sales of joint ventures................................. 100 --
Purchases of property and equipment................................... (1,251) (2,709)
Payments for acquisition of businesses, net of cash acquired.......... (11,638) (2,682)
Proceeds from sales of businesses..................................... 729 --
Capital contributions to unconsolidated joint ventures................ (556) (929)
-------- -------
Net cash used by investing activities......................... (11,421) (971)
-------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Sales of common stock, net of repurchases and issuance costs.......... -- 3,586
Borrowing (repayments) of lines of credit, net........................ 14,180 (14)
Securities sold under agreements to repurchase, net................... (65) --
Debt borrowings....................................................... 24 8,908
Repayment of debt..................................................... (1,020) (457)
Cash dividends paid................................................... -- (1,027)
Exercise of stock options............................................. 5,361 68
-------- -------
Net cash provided by financing activities..................... 18,480 11,064
-------- -------
NET INCREASE IN CASH.................................................... 1,534 3,756
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD.......................... 20,046 22,971
-------- -------
CASH AND CASH EQUIVALENTS, END OF PERIOD................................ $ 21,580 $26,727
======== =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid (received) during the period for:
Interest........................................................... $ 3,954 $ 1,066
======== =======
Income taxes....................................................... $ (2,412) $11,648
======== =======
</TABLE>
See accompanying notes.
3
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CORAM HEALTHCARE CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited condensed consolidated financial statements have
been prepared by Coram Healthcare Corporation (the "Company") pursuant to the
rules and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such regulations. The condensed consolidated
financial statements reflect all adjustments and disclosures which are, in the
opinion of management, necessary for a fair presentation. All such adjustments,
other than those relating to the merger, restructuring, special provision for
uncollectible accounts and litigation settlements, are of a normal recurring
nature. The results of operations for the interim periods are not necessarily
indicative of the results of the full fiscal year. Certain December 31, 1994
balance sheet amounts have been reclassified to conform with the March 31, 1995
presentation.
Business Activity. The operations of the Company commenced on July 8, 1994,
as a result of a merger (the "Merger") of T(2) Medical, Inc. ("T(2)"), Curaflex
Health Services, Inc. ("Curaflex"), HealthInfusion, Inc. ("HealthInfusion") and
Medisys, Inc. ("Medisys") (collectively, the "Merged Entities"). Each of those
companies became and are now wholly-owned subsidiaries of the Company. Each
outstanding share of the Merged Entities was converted, at varying exchange
rates, into shares of the Company's common stock, resulting in the issuance of
38.6 million shares of Coram common stock. The transaction was accounted for as
a pooling of interests. Accordingly, the accompanying financial information was
restated to include the accounts of the Merged Entities for all periods
presented.
The results of operations previously reported by the Merged Entities and
the combined amounts presented in the accompanying consolidated financial
statements are summarized below (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31, 1994
--------------
<S> <C>
Net Revenue
T(2)................................................................. $ 58,209
Curaflex............................................................. 24,974
Medisys.............................................................. 13,508
HealthInfusion....................................................... 16,374
--------------
Combined............................................................. $113,065
===========
Net Income (loss)
T(2)................................................................. $ 3,562
Curaflex............................................................. (1,590)
Medisys.............................................................. 277
HealthInfusion....................................................... 962
Coram Holding........................................................ --
--------------
Combined............................................................. $ 3,211
===========
</TABLE>
HMSS Acquisition. On September 12, 1994, the Company acquired all of the
capital stock of H.M.S.S., Inc. ("HMSS"), an alternate site infusion therapy
provider. The acquisition was accounted for by the purchase method of
accounting, and accordingly, the results of operations of HMSS have been
included in the accompanying consolidated financial statements subsequent to the
date of acquisition. The acquisition was not material to the Company's financial
position or results of operations.
Other Acquisitions. During the three months ended March 31, 1995, the
Company completed six acquisitions totaling $11.6 million, net of cash acquired,
which were accounted for as purchases. During 1994,
4
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CORAM HEALTHCARE CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
T(2) completed 55 acquisitions totaling $22.8 million which were accounted for
as purchases. Individually, the acquisitions were not considered material to the
Company's financial position or results of operations.
Merger and Restructuring. During September 1994, the Company initiated a
merger and restructuring plan (the "Coram Consolidation Plan") to reduce future
operating costs, improve productivity and gain efficiencies through
consolidation of redundant infusion centers and corporate offices, reduce
personnel, and eliminate or discontinue investments in certain joint ventures
and other non-infusion facilities. Additionally, upon the completion of the HMSS
acquisition, the Company extended the Coram Consolidation Plan to include the
consolidation of HMSS operations. Accordingly, the Company recorded estimated
restructuring costs of $3.2 million related to the HMSS transaction. The
estimated cost associated with each component of the Coram Consolidation Plan,
recorded in the third quarter of 1994, including the writedown of existing
assets to their estimated net realizable value, were as follows (in thousands):
<TABLE>
<CAPTION>
CASH NON-CASH
EXPENDITURES CHARGES TOTAL
------------ -------- -------
<S> <C> <C> <C>
Merger Costs......................................... $ 27,900 $ 600 $28,500
========= ======= =======
Personnel Reduction Costs............................ $ 26,200 $ 600 $26,800
Facility Reduction Costs............................. 15,600 16,300 31,900
Discontinuance Costs................................. 4,200 32,600 36,800
------------ -------- -------
Restructuring Costs.................................. $ 46,000 $49,500 $95,500
========= ======= =======
Change in Estimate, sale of Kid's Medical............ $(2,700) $(2,700)
======= =======
</TABLE>
Management believes these costs to be non-recurring; however, actual costs
may vary from the recorded charges as the Coram Consolidation Plan continues.
Implementation of the Coram Consolidation Plan began in September 1994. The
Coram Consolidation Plan provided for the elimination of approximately 100 of
the Company's home infusion branch facilities and the consolidation of corporate
administrative operations into one location, with a corresponding significant
reduction of branch and corporate personnel. The Company anticipates that the
branch and corporate consolidation portions of the Coram Consolidation Plan will
be substantially completed by July 31, 1995.
Through March 31, 1995, the Company had completed a significant portion of
the branch consolidation process, including the closure of 115 branch
facilities, 2 corporate facilities, and a reduction of approximately 650
employees. The Company has made total payments and total asset disposals through
March 31, 1995, as follows (in thousands):
<TABLE>
<CAPTION>
NON-CASH
--------------------------- TOTAL
ACCRUALS/ --------------------
CASH ASSET WRITEDOWN DISPOSALS RECORDED COMPLETED
------- --------------- --------- -------- ---------
<S> <C> <C> <C> <C> <C>
Merger Costs........................ $25,100 $ 600 $ 600 $ 25,700 $25,700
======= ======= ======= ======== =======
Personnel Reduction Costs........... $11,200 $ 600 $ 600 $ 11,800 $11,800
Facility Reduction Costs............ 3,800 16,300 9,600 20,100 13,400
Discontinuance Costs................ 100 32,600 12,300 32,700 12,400
------- ------- --------- -------- --------
Restructuring Costs................. $15,100 $49,500* $22,500* $ 64,600 $37,600
======= ======= ======= ======== =======
</TABLE>
- - - - ---------------
* The accompanying balance sheet reflects assets net of the $49,500 of
established accruals and reserves. Charges against those established reserves
pertaining to disposals completed through March 31, 1995 aggregate $22,500.
As a result of the Company's decision to implement standardized policies
for recognition of contractual and other allowances, de-emphasize certain
businesses and provide for the disruptions experienced during the merger and
post-merger transition process, the Company also recorded a special charge of
$17.3 million in
5
<PAGE> 7
CORAM HEALTHCARE CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
September 1994, for anticipated uncollectible accounts and other receivables. In
establishing this reserve, the Company evaluated the aging of trade receivables
since the merger process began and evaluated the impact of ending relationships
with certain centers.
Although subject to future adjustment, management of the Company believes
it had adequate reserves as of March 31, 1995, to complete the Coram
Consolidation Plan.
Per Share Data. Per share data have been computed by dividing net income or
loss by the weighted average number of common and common equivalent shares
outstanding during the period. The weighted average calculation also includes
common shares issuable. Common stock equivalents include dilutive stock options
and warrants. Fully diluted per share amounts are not presented in the financial
statements because the assumed conversions of convertible debt and any
additional incremental shares would be either antidilutive or cause de minimus
dilution.
2. LINES OF CREDIT
On October 17, 1994, the Company entered into a revolving line of credit
agreement to replace its prior borrowing facility. This agreement, which had a
maturity date of June 30, 1996 was amended effective December 31, 1994 on
February 10, 1995. Under this amendment the revolving line of credit was
increased to $150 million from $120 million. Under the credit agreement, the
Company could borrow at either (i) a base rate equal to a spread of zero to
1.25% over the greater of the prime rate or the Federal funds rate plus 0.5%; or
(ii) at the Floating London Interbank Offering Rate ("LIBOR") plus 0.875% to
2.25%.
At March 31, 1995, borrowings under the revolving credit agreement were
$122.3 million of which $108.0 million was outstanding under the LIBOR option at
an all-in rate of 8.375% and $14.3 million was outstanding under the base rate
option at an all-in rate of 10.25%.
On April 6, 1995, the Company entered into a Senior Credit Facility. Under
the terms of the Senior Credit Facility, the Company has (i) a $200 million term
loan facility (the "Term Loan Facility") with a maturity date of April 6, 2000,
and (ii) a $100 million revolving credit facility (the "Revolving Credit
Facility"), with a maturity date of April 6, 2000, of which up to $20 million is
available in the form of letters of credit. As of April 30, 1995, the available
borrowing base under the revolving credit facility was $100 million and the
amount borrowed under the term loan facility was $200 million. The loans under
the Senior Credit Facility bear interest at a rate equal to, at the Company's
option, (i) the Alternate Base Rate (as defined hereafter) for the respective
interest period plus the Applicable Margin (as defined hereafter) ("ABR Loans")
or (ii) the Eurodollar Rate (as defined hereafter) as determined by Chemical
Bank ("Chemical") for the respective interest period plus the Applicable Margin
("Eurodollar Loans"). "Applicable Margin" means a percentage per annum ranging
(a) in the case of ABR Loans, from 1.50% to 0.50%, and (b) in the case of
Eurodollar Loans, from 2.50% to 1.50%, in each case based upon the Company's
ability to maintain certain financial ratios determined as provided in the
Credit Agreement. "Alternate Base Rate" means with respect to an interest
period, an interest rate per annum equal to the highest of (i) the rate of
interest publicly announced by Chemical as its prime rate in effect at its
principal office in New York City, (ii) the secondary market rate for three
month certificates of deposit (adjusted for reserves and assessments) plus 1%
and (iii) the federal funds rate in effect from time to time plus 0.5%.
"Eurodollar Rate" means, with respect to an interest period, an interest rate
per annum equal to the product of (a) the LIBOR rate in effect for such interest
period and (b) Statutory Reserves (as defined in the Credit Agreement). The
Senior Credit Facility is secured by the stock of all of the Company's
subsidiaries and contains standard financial covenants and conditions limiting
the Company's ability to engage in certain activities. The proceeds of the loans
under the Senior Credit Facility were used to repay amounts outstanding under
the Former Credit Facility, to fund a portion of the cash purchase price for the
Caremark Business and to pay certain expenses in connection therewith.
6
<PAGE> 8
CORAM HEALTHCARE CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. INCOME TAXES
The Company recorded an income tax benefit of $1.1 million for the three
months ended March 31, 1995. The resulting effective income tax benefit rate is
primarily due to the ability to carry back a portion of the Company's current
period tax deductible loss to the prior year tax returns of the predecessor
companies.
4. LITIGATION
The Company has entered into a Stipulation of Settlement (the
"Stipulation") dated as of January 27, 1995 which sets forth the principal terms
of a proposed settlement of class action shareholder litigation which was
initiated against T(2) in 1992. The settlement provides for the Company to pay
the shareholder class $25 million in cash (of which approximately $7.8 million
will be contributed by the Company insurance carrier), and to issue warrants to
acquire an aggregate of 2.52 million shares of the Company Common Stock at an
exercise price of $20.25, subject to adjustment. The stipulation was approved by
the court on May 5, 1995; however, it is subject to certain other contingencies,
and there can be no assurance that the settlement will be consummated. If the
settlement is not consummated and the shareholder claims continue to be pressed,
the resulting distraction of management, the costs of defending such claims and
the payment of any settlement or damage award could have a material adverse
effect on the Company's results of operations and financial position.
During September, 1994, the Company also settled a dispute with the former
principals of a company acquired by T(2) in 1992 related to the valuation of
that acquisition transaction. The dispute was settled with the Company issuing
to the former principals warrants to acquire 500,000 shares of the Company's
common stock at an exercise price of $18, subject to adjustment. The Company is
obligated to make a cash payment of up to $4 million to the warrantholders at
the end of the five-year term of the warrants; provided, however, that the
payment will be reduced, dollar-for-dollar, to the extent of the aggregate
positive spread in excess of $16.00 per share on any warrant exercised prior to,
or exercisable at the end of, the five year term of the warrants.
The Company is involved in various legal proceedings incidental to the
normal course of business. While it is not possible to predict the outcome of
such proceedings with certainty, management is of the opinion that their
ultimate disposition will not have a material adverse effect on the Company's
consolidated financial position or results of operations.
5. SUBSEQUENT EVENTS
Caremark Acquisition. In April 1995, the Company acquired substantially all
of the assets used in the alternate site infusion health care business, the home
care management and utilization system business and women's health care business
(collectively "Caremark Business") of Caremark International, Inc. and its
wholly-owned subsidiary, Caremark Inc. ("Caremark"). The acquisition was
accounted for by the purchase method of accounting. It is estimated that the
purchase price of $309 million will exceed the fair market value of the assets
of Caremark by over $190 million and will be recorded as an increase to
goodwill. The results of operations of Caremark will be included with the
results of the Company from April 1, 1995.
Lincare Merger. On April 17, 1995, the Company and Lincare Holdings Inc.
("Lincare") entered into an Agreement and Plan of Merger pursuant to which all
of Lincare's outstanding common stock would be acquired by the Company in a
tax-free business combination intended to be accounted for as a pooling of
interests. Upon consummation of the merger, shareholders of Lincare will receive
1.5354 shares of the Company's common stock. Historical financial information
presented in reports following the merger will be restated to include Lincare.
7
<PAGE> 9
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
HISTORY
The operations of Coram Healthcare Corporation, a Delaware corporation
("Coram" or the "Company") commenced on July 8, 1994 as a result of a merger
(the "Four-Way Merger") of T(2) Medical, Inc. ("T(2)"), Curaflex Health
Services, Inc. ("Curaflex"), HealthInfusion, Inc. ("HealthInfusion"), and
Medisys, Inc. ("Medisys"), each of which was a publicly held national or
regional provider of alternate site infusion therapy and related services.
Pursuant to the Four-Way Merger, which was accounted for as a pooling of
interests, each of these companies became and is now a wholly-owned subsidiary
of the Company. On September 12, 1994, the Company acquired all of the capital
stock of H.M.S.S., Inc. ("HMSS"), a leading regional provider of home infusion
therapies, in a transaction accounted for as a purchase. On April 6, 1995, the
Company acquired substantially all of the assets used in the alternate site
infusion health care business, the home care management and utilization system
business and women's health care business collectively ("Caremark Business") of
Caremark International, Inc. and its wholly-owned subsidiary, Caremark Inc.
("Caremark"). Upon the consummation of the acquisition (the "Caremark
Transaction"), the Company became the largest provider of alternate site
infusion therapy services in the United States, with branches covering
geographic locations in which over 90% of the population of the United States
resides. The Company is led by a newly formed management team with extensive
background in the health care industry, including James M. Sweeney, Chairman
and Chief Executive Officer.
RECENT DEVELOPMENTS
On April 17, 1995, Coram entered into an agreement to merge with Lincare
Holdings Inc. ("Lincare"). Upon the consummation of the merger, the Company
believes it will become the largest provider of alternate site health care in
the United States based on pro forma 1994 net revenue. The combination of the
Company and Lincare is expected to accelerate revenue growth through the
expansion of Lincare's respiratory therapy business into existing Coram markets
and through cross-marketing activities involving Coram and Lincare customer
relationships. Lincare's financial performance is expected to enhance the
Company's financial position by providing additional revenue, earnings and cash
flow and by strengthening key financial ratios. No assurances can be made as to
the amount of revenue growth that can be realized or the level of financial
enhancement that will actually be realized, if any.
The Company is also in the process of soliciting offers for its
institutional pharmacy business known as Pharmcare, Inc. ("Pharmcare"), which
had revenues of approximately $20 million and contributed approximately $0.8
million to the Company's operating income in 1994. The Company expects the sale
of Pharmcare to be completed in the second quarter of 1995. The Company is
continuing to evaluate the strategic fit and short-term value of each of the
partnerships and businesses inherited from its predecessor entities, and
management will consider additional divestitures of other non-strategic
businesses during 1995. Coram does not anticipate that such divestitures will be
material to its business. As part of its strategy, the Company engages in
acquisition discussions from time to time with alternate site providers, some of
which acquisitions, if consummated, would be material to the Company.
IMPACT OF FOUR-WAY MERGER AND POST FOUR-WAY MERGER CONSOLIDATION
During the quarter ended September 30, 1994, the Company recorded a special
charge of $17.3 million to provide for anticipated uncollectible accounts and
other receivables as a result of the Company's decision to implement
standardized policies for recognition of contractual and other allowances and to
provide for the disruptions experienced before and during the Four-Way Merger
and post-Four-Way Merger transition process.
Coram also recorded charges of $23.2 million, representing the estimated
cash and non-cash costs of settling certain pre-Four-Way Merger litigation
matters, including an agreement in principle to settle the T(2) shareholders
litigation, the T(2) Office of Inspector General of the U.S. Department of
Health and Human
8
<PAGE> 10
Services ("OIG") Settlement and the settlement of a dispute with the former
principals of a company acquired by T(2) in 1992.
During the same quarter, the Company initiated a merger and restructuring
plan (the "Coram Consolidation Plan") to reduce future operating costs, improve
productivity and gain efficiencies through consolidation of redundant infusion
centers and corporate offices, reductions in personnel and elimination or
discontinuance of investments in certain joint ventures and other non-infusion
facilities. The Coram Consolidation Plan provides for the elimination of
approximately 100 of the Company's home infusion branch facilities and the
consolidation of corporate administrative operations into one location, with a
corresponding significant reduction of branch and corporate personnel. In
connection with the Coram Consolidation Plan, the Company recorded charges of
$28.5 million in estimated merger costs and $95.5 million in estimated
restructuring costs in the quarter ended September 30, 1994, including charges
to assimilate HMSS. Management believes these costs to be non-recurring;
however, actual costs may vary from the recorded charges as the Coram
Consolidation Plan continues. The Company anticipates that the branch and
corporate consolidation portions of the Coram Consolidation Plan are expected to
be substantially completed by the third quarter of 1995 and that the Coram
Consolidation Plan, when fully implemented, will generate annual cost savings of
approximately $70 million. The Company expects these savings will result from
reductions in personnel described above and related costs, facilities rent,
operating and depreciation costs, corporate overhead and procurement savings. In
the first half of 1995, these savings will be partially offset by the costs of
relocation, retention and retraining of personnel, currently expected to range
between $3.0 million and $5.0 million. No assurances can be given, however, as
to the aggregate cost savings to be achieved by the Company or the timing
thereof.
In the aggregate, the Company recorded non-recurring charges of
approximately $164.5 million in the second and third quarters of 1994 related to
the Four-Way Merger and the implementation of the Coram Consolidation Plan.
THE CAREMARK TRANSACTION
Effective as of April 1, 1995, Coram acquired the Caremark Business from
Caremark for $309 million, consisting of (i) $209 million in cash and (ii) $100
million principal amount of Junior Subordinated Payment-In-Kind ("PIK") Notes
payable to Caremark, consisting of a $75 million 7% Convertible Subordinated PIK
Note (the "Junior Convertible Subordinated PIK Note") and a $25 million 12%
Non-Convertible Subordinated PIK Note (the "Junior Non-Convertible Subordinated
PIK Note"). The Caremark Transaction was structured as an asset purchase.
Accordingly, the Company assumed only certain specified liabilities of the
Caremark Business, which, in particular, expressly exclude any liabilities
associated with the pending investigation of Caremark by the OIG.
In connection with the Caremark Transaction, the Company repaid all of its
$123.8 million indebtedness under its former credit facility with Toronto
Dominion (Texas) Inc. (the "Former Credit Facility"). The cash paid by the
Company in connection with the Caremark Transaction and the repayment of
indebtedness under the Former Credit Facility, together with related fees and
expenses, were financed through: (i) borrowings under a new credit facility (the
"Senior Credit Facility") with Chemical Bank ("Chemical"), as Agent, providing
for aggregate commitments of up to $300 million, including a $100 million
revolving credit facility, and (ii) $150 million from the issuance of Senior
Subordinated Bridge Notes (the "Bridge Notes").
Effective as of the Caremark Transaction, the Company has become highly
leveraged. The Company believes that its primary liquidity needs will be cost of
debt service, restructuring costs and working capital and that cash generated by
operations and amounts available under the revolving credit portion of the
Senior Credit Facility will be sufficient to meet its liquidity needs.
The Company believes that the combination of the Company and the Caremark
Business has created an entity which will be able to leverage its cost base more
efficiently through a reduction in branch facilities, and which is expected to
be able to benefit from significant economies of scale and operating synergies,
particularly with regard to procurement, regulatory compliance and patient
outcomes tracking. Substantial cost savings are expected to be realized from
elimination of geographically duplicative branches, the elimination of
duplicative
9
<PAGE> 11
corporate overhead expenses, procurement savings and the implementation of the
best demonstrated business practices of the Company's predecessor entities and
the Caremark Business throughout the combined entity. No assurances can be made
as to the amount of cost savings, if any, that actually will be realized. The
Company expects to record a charge against earnings in the second quarter of
1995 in connection with the Caremark consolidation plan.
IMPACT OF PRICING/VOLUME TRENDS
The Company has recently experienced pricing pressure from payors related
to its alternate site infusion therapy services. The Company believes, however,
that short-term pricing declines within individual payor groups have moderated
in late 1994 and the first quarter of 1995. Moreover, alternate site infusion
therapy patient volume has increased since the Four-Way Merger. No assurance can
be given, however, that such trends will continue. The increasing prevalence and
influence of managed care payors are expected to continue to apply pressure on
pricing for the Company's services. The Company believes that alternate site
health care providers will increasingly face lower operating margins as managed
care organizations constitute an increasing percentage of the mix of the
industry's revenues, and that maintaining growth in patient volumes will be
necessary to offset lower margins. In addition, there can be no assurance that
the Company's lithotripsy operations will not also experience pricing pressure
in the future. The Health Care Financing Administration ("HCFA") has issued a
proposed rule that would, if implemented, significantly reduce the amount
Medicare would reimburse its beneficiaries for the cost of lithotripsy
procedures performed in an ambulatory surgery center or on an out-patient basis
at a hospital. Such a proposal might result in similar efforts by other third-
party payors to limit reimbursement for lithotripsy procedures. The Company is
in the process of developing new revenue enhancing programs such as one-stop
shopping for managed care payors, physician practice management services and
disease-state carve-outs to offset future pricing declines.
THREE MONTHS ENDED MARCH 31, 1995 COMPARED TO THREE MONTHS ENDED MARCH 31, 1994
Net Revenue. Net revenue for the first quarter of 1995 decreased by $8.3
million or 7.3% to $104.8 million compared to the same period in 1994.
Management believes that the decrease was attributable to a variety of factors
including: (i) the industry pricing pressures discussed above, (ii) therapy and
payor mix shifts, (iii) the restructuring and in some cases termination of
physician relationships (including in-office infusion services) which were
potentially incompatible with new regulatory requirements and (iv) the
implementation of consistent company-wide policies for the recognition of
contractual and other allowances. Approximately $5.9 million, or 71% of the
decrease, was attributable to discontinued in-office infusion services
("Intra-Care"). From the first quarter of 1994 to the first quarter of 1995,
prices for infusion therapy services declined in the range of 11% to 12%, with
the majority of such decline occurring during the first and second quarters of
1994.
Gross Profit. Gross profit for the first quarter of 1995 decreased $6.9
million to $29.2 million, a decrease of 19.1%, as compared to the same period in
1994. Gross margin decreased to 27.8% in the first quarter of 1995 compared to
31.9% for the same period in 1994. The primary source of this decrease was
related to price reductions resulting from the industry pricing pressures
discussed above and other causes included therapy and payor mix shifts, the
implementation of consistent company-wide policies for the recognition of
contractual allowances and policies and procedures related to accounting for
inventory. Offsetting the gross profit decrease was a reduction in clinical
services expenses of $4.0 million resulting from the partial completion of the
Coram Consolidation Plan.
In the first quarter of 1995, the Company converted from five separate
decentralized accounts payable systems to a new centralized system. At the same
time, accounts payable accrual procedures were standardized, resulting in $1.7
million of drugs and supplies being expensed in the first quarter 1995 that were
utilized in prior periods. Adjusting for this charge, the gross margin for the
first quarter of 1995 was 29.5%.
Operating Expenses. Selling, general and administrative expenses decreased
$1.7 million or 8.7% for the first quarter of 1995 compared to the same period
in 1994. This decrease was primarily due to a $2.1 million credit pertaining to
an agreement by one of the Company's insurance carriers to pay for certain legal
fees incurred in conjunction with the T2 shareholder litigation. In addition, a
$1.1 million reduction in salaries
10
<PAGE> 12
resulted from the closure of two corporate offices and the elimination of 100
corporate staff positions and a $1.4 million reduction in general expenses was
realized in connection with the partial completion of the Coram Consolidation
Plan. These reductions were offset by temporary costs necessary to support the
restructuring activities which were not chargeable to restructuring reserves.
These costs included (i) training, (ii) travel, (iii) consulting fees, (iv)
system implementation costs and (v) additional audit and tax work. Additional
costs were incurred during the first quarter of 1995 associated with the
initiation and development of certain revenue enhancing programs.
A benefit of $4.1 million was recorded to restructuring costs in the first
quarter as a result of the sale of the Company's home pediatrics business
("Kid's Medical") which was originally expected to result in a loss. Kid's
Medical had historically accounted for approximately $5 million in quarterly
gross revenue. In total, operating expenses, including the benefit from the sale
of Kid's Medical, were $5.9 million less in the first quarter of 1995 than in
the same period in the prior year, a decrease of 22.3%.
Operating Income. Operating income for the first quarter of 1995 decreased
from the first quarter of 1994 by $1.0 million or 10.3% as a result of the $6.9
million decrease in gross profit, which was offset, in part, by the $5.9 million
reduction in operating expenses.
Other Income and Expenses. Interest expense increased by $2.3 million for
the first quarter of 1995 over the same period in the prior year primarily due
to increased borrowings by the Company in order to finance acquisitions, merger
costs and other working capital needs.
Provision (Benefit) for Income Taxes. During the first quarter of 1995,
the Company recorded a tax benefit in the amount of $1.1 million compared to a
$3.7 million expense in the same period in the prior year. The tax benefit was
the result of tax deductions from the continued consolidation activities of the
Company during the quarter. While no assurance can be given in this regard, it
is expected that these tax deductions will enable Coram to recover taxes that
have been paid in a prior year.
Net Income. Net income for the first quarter of 1995 increased $1.4
million to $4.6 million, an increase of 42.9% as compared to the same period in
1994. Major components of this increase include: (i) the $4.8 million favorable
tax variance, (ii) the $4.1 million benefit from the sale of Kid's Medical and
(iii) the $2.1 million benefit to operating expenses for the legal fees to be
paid by one of Coram's insurers in connection with the T(2) shareholders
litigation.
Restructuring costs. Restructuring costs reflect a $4.1 million gain on
the sale of Kid's Medical. The potential divestiture of additional non-strategic
businesses are currently being evaluated. Management monitors restructuring
costs on an ongoing basis and believes that the Coram Consolidation Plan will be
substantially completed by the third quarter of 1995. Currently, management
believes that remaining reserves as of March 31, 1995 are sufficient to provide
for remaining costs to be incurred to complete the Coram Consolidation Plan.
Through March 31, 1995, the Company had completed a significant portion of
the branch consolidation process, including the closure of 115 infusion branch
facilities, two corporate facilities, and a reduction of approximately 650
employees. The following table summarizes the utilization of restructuring
reserves through March 31, 1995 (in thousands):
<TABLE>
<CAPTION>
NON-CASH
--------------------------- TOTAL
ACCRUALS/ --------------------
CASH ASSET WRITEDOWN DISPOSALS RECORDED COMPLETED
------- --------------- --------- -------- ---------
<S> <C> <C> <C> <C> <C>
Merger Costs........................ $25,100 $ 600 $ 600 $ 25,700 $25,700
======= ======== ======== ======== =======
Personnel Reduction Costs........... $11,200 $ 600 $ 600 $ 11,800 $11,800
Facility Reduction Costs............ 3,800 16,300 9,600 20,100 13,400
Discontinuance Costs................ 100 32,600 12,300 32,700 12,400
------- -------- -------- -------- -------
Restructuring Costs................. $15,100 $49,500* $22,500* $ 64,600 $37,600
======= ======== ======== ======== =======
</TABLE>
- - - - ---------------
* The accompanying balance sheet reflects assets net of the $49,500 of
established accruals and reserves. Charges against those established reserves
pertaining to disposals completed through March 31, 1995 aggregate $22,500.
11
<PAGE> 13
CERTAIN TRENDS FROM PRIOR QUARTER
Management believes that comparisons of financial results between the first
quarter of 1995 and the first quarter of 1994 should be supplemented in the case
of Coram because, prior to July 8, 1994, the activities of the Company were
conducted separately by each of the predecessor entities. Accordingly, the
following discussion provides certain comparative information between the first
quarter of 1995 and the fourth quarter of 1994.
Net revenue decreased by $8.8 million or 7.7% from the fourth quarter of
1994. The major source of the decrease is the normal seasonality exhibited by
both the infusion and the lithotripsy businesses between the fourth and first
quarters. The restructuring and termination of physician contracts and the
closure of Intracare facilities represented the majority of the remainder. Price
and payor mix effects were partially offset by an increase in patient days.
Gross profit decreased $4.3 million to $29.2 million or 27.8% of revenue in the
first quarter of 1995 from $33.5 million or 29.5% of revenue in the fourth
quarter of 1994. The decrease is attributable to a $1.7 million one-time out of
period cost related to the standardization of accounts payable accrual
procedures in the first quarter of 1995. Total clinical services costs were
reduced by more than $3.9 million or 9.2% between the fourth quarter of 1994 and
the first quarter of 1995, 60% of which was due to a reduction in salaries as
non-sales field positions were eliminated through operation consolidation. The
remaining 40% arose from facility closures which reduced both general support
and lease costs.
Operating expenses, including the benefit from the sale of Kid's Medical,
decreased by $9.0 million from the fourth quarter of 1994 to the first quarter
of 1995. The balance of the decrease resulted from permanent reductions in
selling, general and administrative expenses due to the implementation of the
Coram Consolidation Plan, which was offset by a number of one-time or short-term
cost increases associated with establishing a single corporate headquarters and
with increases resulting from continuing merger and acquisition activity.
Partially offsetting both one-time and recurring benefits were one-time or
short-term costs and recurring costs associated with new programs. The Company
incurred short-term costs attributable to consolidation, restructuring, and
merger and acquisition activity totaling approximately $2.0 million to $3.0
million which were expensed in the first quarter of 1995. Selling, general and
administrative expenses were reduced by $4.5 million to $17.9 million from the
fourth quarter of 1994 to the first quarter of 1995. $2.1 million of this
reduction resulted from an insurance carrier's one-time payment of certain legal
fees incurred in connection with the T2 shareholder litigation. The remaining
$2.4 million resulted from the implementation of the Coram Consolidation Plan.
Operating income increased by $4.7 million to $8.6 million from the fourth
quarter of 1994 to the first quarter of 1995. This was achieved through the
continuing implementation of the Coram Consolidation Plan, as well as the
recording of one-time favorable transactions in operating expenses related to
legal expenses covered by an insurance carrier and the divestiture of Kid's
Medical, partially offset by short-term and other non-recurring costs described
above.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash, cash equivalents and marketable securities at March 31,
1995 was $37.1 million (including restricted cash of approximately $7.3
million), an increase of $0.5 million from December 31, 1994. The ratio of total
debt to equity was .44 to 1 at March 31, 1995 compared to .42 to 1 at December
31, 1994. The increase in the debt ratio is primarily attributable to borrowings
by the Company under the Former Credit Facility subsequent to the Four-Way
Merger. Working capital at March 31, 1995 was $94.3 million compared to $83.8
million at December 31, 1994. The principal reason for the increase in working
capital is the receivable related to the sale of Kid's Medical.
Under the Senior Credit Facility, the Company has (i) a $200 million term
loan facility (the "Term Loan Facility") with a maturity date of April 6, 2000,
and (ii) a $100 million revolving credit facility (the "Revolving Credit
Facility"), with a maturity date of April 6, 2000, of which up to $20 million is
available in the form of letters of credit. As of April 30, 1995, the available
borrowing base under the Revolving Credit Facility was $100 million and the
amount borrowed under the term loan facility was $200 million. The loans under
the Senior Credit Facility bear interest at a rate equal to, at the Company's
option, (i) the Alternate
12
<PAGE> 14
Base Rate (as defined hereafter) for the respective interest period plus the
Applicable Margin (as defined hereafter) ("ABR Loans") or (ii) the Eurodollar
Rate (as defined hereafter) as determined by Chemical for the respective
interest period plus the Applicable Margin ("Eurodollar Loans"). "Applicable
Margin" means a percentage per annum ranging (a) in the case of ABR Loans, from
1.50% to 0.50%, and (b) in the case of Eurodollar Loans, from 2.50% to 1.50%, in
each case based upon Coram's ability to maintain certain financial ratios
determined as provided in the Senior Credit Facility. "Alternate Base Rate"
means with respect to an interest period, an interest rate per annum equal to
the highest of (1) the rate of interest publicly announced by Chemical as its
prime rate in effect at its principal office in New York City, (2) the secondary
market rate for three month certificates of deposit (adjusted for reserves and
assessments) plus 1% and (3) the federal funds rate in effect from time to time
plus 0.5%. "Eurodollar Rate" means, with respect to an interest period, an
interest rate per annum equal to the product of (a) the LIBO rate in effect for
such interest period and (b) Statutory Reserves (as defined in the Senior Credit
Facility). The Senior Credit Facility is secured by the stock of all of the
Company's subsidiaries and contains standard financial covenants and conditions
limiting the Company's ability to engage in certain activities. The proceeds of
the loans under the Senior Credit Facility were used to repay amounts
outstanding under the Former Credit Facility, to fund a portion of the cash
purchase price for the Caremark Business and to pay certain expenses in
connection therewith.
Interest on the $75 million Junior Convertible Subordinated PIK Note is
payable semi-annually at the rate of 7% per annum. The Junior Convertible
Subordinated PIK Note will mature on the earlier to occur of October 1, 2005 or
an event of default. Prior to the second anniversary of the initial date of
issuance, interest is payable in cash or in additional Junior Convertible
Subordinated PIK Notes, at the election of the Company. Thereafter, interest
will be payable in cash, subject to the satisfaction of certain financial tests
set forth in the Senior Credit Facility. The Junior Convertible Subordinated PIK
Note may not be prepaid or redeemed for three years following the initial
issuance date without the written consent of the holder thereof. Thereafter, the
Junior Convertible Subordinated PIK Note is, at the option of Coram, redeemable,
in whole or in part, subject to normal redemption terms and conditions, and
subject to restrictions on optional redemption contained in the Senior Credit
Facility. The Junior Convertible Subordinated PIK Note will be convertible at
the Company's option at any time subsequent to one year following the date of
issuance, in whole or in part, into such number of shares of the Company Common
Stock determined by dividing the aggregate principal amount by the conversion
price in effect at the time of such conversion. The conversion price of the
Junior Convertible Subordinated PIK Note is $27 per share, subject to
adjustment. The Company is required to file, and to use its best efforts to
cause to become effective on or before the first anniversary of the initial date
of issuance of the Junior Convertible Subordinated PIK Note, a registration
statement covering the shares of the Company Common Stock issuable upon
conversion thereof. the Company is required to maintain the effectiveness of
such registration statement for a three-year period following the original
effective date of the registration statement. In the event that there is a
change in control (as defined) of Coram, the holder of the Junior Convertible
Subordinated PIK Note may require the Company to repurchase such note at a
purchase price equal to the principal amount thereof, plus accrued interest
thereon.
Interest on the $25 million Junior Non-Convertible Subordinated PIK Note is
payable semi-annually at the rate of 12% per annum. The Junior Non-Convertible
Subordinated PIK Note will mature on the earlier to occur of September 30, 2005
or an event of default. Prior to the second anniversary of the initial date of
issuance, interest will be payable in cash or in additional Junior
Non-Convertible Subordinated PIK Notes, at the election of the Company.
Thereafter, interest will be payable in cash, subject to satisfaction of certain
financial tests set forth in the Senior Credit Facility. The Junior
Non-Convertible Subordinated PIK Note may be prepaid or redeemed, in whole or in
part, at any time at Coram's option, without penalty or premium, and subject to
restrictions on optional redemption contained in the Senior Credit Facility. In
the event that there is a change in control of the Company, the holder of the
Junior Non-Convertible Subordinated PIK Note may require the Company to
repurchase such note at a purchase price equal to the principal amount thereof,
plus accrued interest thereon.
The Bridge Note was issued on April 6, 1995 to an affiliate of DLJ Bridge,
Inc., pursuant to a securities purchase agreement, as an unsecured obligation of
the Company, in a principal amount of $150 million. The Bridge Note initially
bears interest at an annual rate equal to the sum of (i) the rate of interest
publicly
13
<PAGE> 15
announced by The Bank of New York from time to time as its prime rate plus (ii)
3.00% plus (iii) an additional percentage amount, equal to 1.00% from and
including October 5, 1995 and increasing by an additional 0.50% from and
including each quarterly anniversary of such date for as long as the Bridge Note
remain outstanding. Such interest will be payable quarterly in arrears on the
30th day of March, June, September and December commencing on June 30, 1995. The
principal amount of the Bridge Note, together with any accrued and unpaid
interest thereon, will initially be due and payable in full on April 5, 1996.
Commencing on the six month anniversary of issuance, the Bridge Note will also
bear a duration fee, payable in arrears on October 5, 1995 and on the 5th day of
each January, April and July 1996, of 0.25% of the average aggregate principal
amount of the Bridge Note outstanding during the three-month period (or, in the
case of the payment due in October 1995, the six-month period) then ended. Coram
may, at its option, redeem (and does intend to redeem as soon as reasonably
practicable) the Bridge Note, upon ten days' notice to the holder of the Bridge
Note. The redemption price therefor will be 100% of the principal amount of the
Bridge Note plus accrued and unpaid interest thereon; provided that the funds
for such redemption are raised in a transaction in which Donaldson, Lufkin &
Jenrette Securities Corporation ("DLJ") or any of its affiliates has acted as
exclusive agent or sole underwriter. The agreement pursuant to which the Bridge
Note was issued contains customary covenants and events of default.
FUTURE HEALTH CARE PROPOSALS AND LEGISLATION
Political, economic and regulatory influences are subjecting the health
care industry in the United States to fundamental change. The Company
anticipates that Congress and state legislatures will continue to review and
assess alternative healthcare delivery systems and payment methodologies and
public debate of these issues will likely continue in the future. Due to
uncertainties regarding the ultimate features of reform initiatives and their
enactment and implementation, the Company cannot predict which, if any, of such
reform proposals will be adopted, when they may be adopted or what impact they
may have.
14
<PAGE> 16
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company has entered into a Stipulation of Settlement (the
"Stipulation") dated as of January 27, 1995 which sets forth the principal terms
of a proposed settlement of class action shareholder litigation which was
initiated against T(2) in 1992. The settlement provides for the Company to pay
the shareholder class $25 million in cash (of which approximately $7.8 million
will be contributed by the Company's insurance carrier), and to issue warrants
to acquire an aggregate of 2.52 million shares of the Company Common Stock at an
exercise price of $20.25, subject to adjustment. The Stipulation was approved by
the court, on May 5, 1995; however, it is subject to certain other
contingencies, and there can be no assurance that the settlement will be
consummated. If the settlement is not consummated and the shareholder claims
continue to be pressed, the resulting distraction of management, the costs of
defending such claims and the payment of any settlement or damage award could
have a material adverse effect on the Company's results of operations and
financial position.
The Company is subject to certain claims and lawsuits, the outcome of which
are not determinable at this time. In the opinion of management, any liability
that might be incurred by the Company upon the resolution of these claims and
lawsuits will not, in the aggregate, have a material adverse effect on the
consolidated financial condition or results of operations of the Company.
ITEM 2. CHANGES IN SECURITIES
Not applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
Not applicable
ITEM 5. OTHER INFORMATION
Not applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) Reports on Form 8-K
<TABLE>
<S> <C>
April 6, 1995 Reported Item 2
May 2, 1995 Reported Item 5
</TABLE>
(B)
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- - - - ----------- -----------
<S> <C>
11 -- Statement regarding Computation of Per Share Earnings *
27 -- Financial Data Schedules *
</TABLE>
- - - - ---------------
* Filed herewith
15
<PAGE> 17
SIGNATURES
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.
CORAM HEALTHCARE CORPORATION
By: /s/ JAMES M. SWEENEY
-------------------------
James M. Sweeney
Chairman and Chief
Executive Officer
(Duly Authorized Officer)
By: /s/ SAM R. LENO
-------------------------
Sam R. Leno
Chief Financial Officer
May 15, 1995
16
<PAGE> 18
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
------- ----------- -------------
<S> <C> <C>
11 -- Statement regarding Computation of Per Share Earnings
27 -- Financial Data Schedule
</TABLE>
<PAGE> 1
CORAM HEALTHCARE CORPORATION
EXHIBIT 11 -- COMPUTATION OF PER SHARE EARNINGS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------
1995 1994
------- -------
<S> <C> <C>
PRIMARY
Average common shares outstanding........................................ 39,184 38,245
Net effect of other dilutive securities.................................. 1,755 371
------- -------
Total.......................................................... 40,939 38,616
------- -------
Net income applicable to common stock.................................... $ 4,589 $ 3,211
Per share amounts:
Net income per common share............................................ $ 0.11 $ 0.08
======= =======
FULLY DILUTED
Average common shares outstanding........................................ 39,184 38,246
Net effect of other dilutive securities.................................. 2,676 441
------- -------
Total.......................................................... 41,860 38,687
------- -------
Net income applicable to common stock.................................... $ 4,589 $ 3,211
Per share amounts:
Net income per common share.................................... $ 0.11 $ 0.08
======= =======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 21,580
<SECURITIES> 15,499
<RECEIVABLES> 106,419
<ALLOWANCES> 0
<INVENTORY> 11,250
<CURRENT-ASSETS> 217,809
<PP&E> 23,744
<DEPRECIATION> 0
<TOTAL-ASSETS> 597,451
<CURRENT-LIABILITIES> 123,535
<BONDS> 133,101
<COMMON> 39
0
0
<OTHER-SE> 332,640
<TOTAL-LIABILITY-AND-EQUITY> 597,451
<SALES> 104,778
<TOTAL-REVENUES> 104,778
<CGS> 75,609
<TOTAL-COSTS> 75,609
<OTHER-EXPENSES> 20,557
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,436
<INCOME-PRETAX> 3,484
<INCOME-TAX> (1,105)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,589
<EPS-PRIMARY> 0.11
<EPS-DILUTED> 0
</TABLE>
