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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
COMMISSION FILE NUMBER 0-19946
LINCARE HOLDINGS INC.
(Exact name of registrant as specified in its charter)
DELAWARE 51-0331330
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
19337 US 19 NORTH, SUITE 500 34624
CLEARWATER, FLORIDA (Zip Code)
(Address of principal executive office)
Registrant's telephone number, including area code: (813) 530-7700
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: None
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
Title of Class
Common Stock, $.01 par value per share
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. X Yes No
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Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. / /
The aggregate market value of the registrant's common stock, $.01 par
value, held by non-affiliates of the registrant, based on the closing sale price
of the common stock on January 31, 1996, as reported in the NASDAQ National
Market System, was approximately $871,075,737.
As of February 29, 1996, there were 27,818,786 outstanding shares of the
registrant's common stock, par value $.01, which is the only class of common
stock of the registrant.
DOCUMENTS INCORPORATED BY REFERENCE
The information called for by Part III is incorporated by reference to the
definitive Proxy Statement for the 1996 Annual Meeting of Stockholders of
Lincare Holdings Inc. which will be filed with the Securities and Exchange
Commission not later than 120 days after December 31, 1996.
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PART I
ITEM 1. BUSINESS
GENERAL
Lincare Holdings Inc. and subsidiaries ("Lincare" or the "Company") is one
of the nation's largest providers of oxygen and other respiratory therapy
services to patients in the home. The Company's customers typically suffer from
chronic obstructive pulmonary disease, such as emphysema, chronic bronchitis or
asthma, and require supplemental oxygen or other respiratory therapy services in
order to alleviate the symptoms and discomfort of respiratory dysfunction.
Lincare currently serves over 85,000 customers in 36 states through 216
operating centers.
On November 30, 1990, the Company acquired the outstanding capital stock of
Lincare Inc. (the "Buyout"). The Company was formed by investment partnerships
affiliated with the venture capital firms of Welsh, Carson, Anderson & Stowe and
Summit Partners, by Dean Witter Capital Corporation, and by members of the
Company's current management for the purpose of effecting the Buyout.
THE HOME RESPIRATORY MARKET
The Company estimates that the home respiratory therapy market (including
home oxygen equipment and respiratory therapy services) had revenues of
approximately $3.0 billion in 1995, having grown by an estimated 8% to 10% per
year over the last five years. This growth reflects the significant increase in
the number of persons afflicted with chronic obstructive pulmonary disease,
which is attributable, to a large extent, to the increasing proportion of the
population over the age of 65.
BUSINESS STRATEGY
The Company's strategy is to increase its market share through internal
growth and acquisitions. Lincare will focus primarily on growth within its
existing geographic markets, which the Company believes is generally more
profitable than adding additional operating centers in new markets. In addition,
the Company will expand into new geographic markets on a selective basis, either
through acquisitions or by opening new operating centers, when it believes such
expansion will enhance its business. In 1995, Lincare acquired 22 local and
regional competitors with combined annual revenue of approximately $45.0
million. These acquisitions established Lincare in one new state and expanded
its presence in the states where the Company had existing locations.
Revenue growth will be dependent upon the overall growth rate of the home
respiratory care market, as well as on opportunities to increase market share
through effective marketing efforts and selective acquisitions of local or
regional competitors. The Company believes that the growing cost containment
efforts of government and private insurance reimbursement programs and an
increasingly competitive environment have accelerated consolidation trends
within the home health care industry.
The Company will continue to concentrate on providing oxygen and other
respiratory therapy services to patients in the home and to provide home medical
equipment and other services where it believes such services will enhance the
Company's primary business. In 1995, oxygen and other respiratory therapy
services accounted for over 90% of the Company's revenues.
PRODUCTS AND SERVICES OF LINCARE
Lincare primarily provides oxygen and other respiratory therapy services to
patients in the home. Lincare also provides a variety of infusion therapies in
certain geographic markets. When a patient is referred to one of the Company's
operating centers by a physician, hospital discharge planner or other source,
the Company's customer representative obtains the necessary medical and
insurance coverage information and coordinates the delivery of patient care. The
prescribed therapy is administered by one of the Company's representatives in
the customer's home, where instructions and training are given to the customer
and the customer's family regarding appropriate equipment use and maintenance
and the therapy to be administered. Following the
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initial setup, Company representatives make periodic visits to the customer's
home, the frequency of which is dictated by the type of therapy. The Company's
services are coordinated with the customer's physician. During the period that
the Company performs services for a customer, the customer remains under the
physician's care and medical supervision. The Company employs respiratory
therapists and nurses to perform certain training and other functions in
connection with the Company's services. The respiratory therapists and nurses
are licensed where required by applicable law.
HOME OXYGEN EQUIPMENT. The major types of oxygen delivery equipment are
liquid oxygen systems and oxygen concentrators. Each method of delivery has
different characteristics that make it more or less suitable to specific patient
applications.
Liquid oxygen systems are thermally insulated containers of liquid
oxygen, consisting of a stationary unit and a portable unit, which are most
commonly used by ambulatory patients.
Oxygen concentrators are stationary units that provide a continuous
flow of oxygen by filtering ordinary room air. Concentrators are most
commonly used by patients confined to the home or with only minimal
mobility.
OTHER RESPIRATORY THERAPY SERVICES. The other respiratory therapy services
of the Company consist primarily of:
Nebulizers and associated respiratory medications therapy provide
aerosol therapy;
Non-invasive ventilation provides nocturnal ventilatory support for
neuromuscular and chronic obstructive pulmonary disease patients. This
therapy improves daytime function and decreases incidents of acute illness;
and
Apnea monitors provide respiratory alarm systems for infants at risk
for sudden infant death syndrome;
Ventilators support respiratory function in severe cases of
respiratory failure where the patient can no longer sustain the mechanics
of breathing without the assistance of a machine.
Continuous positive airway pressure devices maintain open airways in
patients suffering from obstructive sleep apnea by providing airflow at
prescribed pressures during sleep;
Oximeters determine oxygen desaturation during exercise and sleep and
assess the effectiveness of oxygen and home respiratory modalities.
INFUSION THERAPY. Lincare provides a variety of infusion therapies
consisting primarily of:
Parenteral nutrition involves the intravenous feeding of
life-sustaining nutrients to patients with impaired or altered digestive
tracts or conditions that prohibit adequate oral nutritional support.
Intravenous antibiotic therapy is the infusion of anti-infective
medications into the patient's bloodstream for the treatment of a variety
of infectious diseases.
Enteral nutrition is administered to patients who cannot eat as a
result of an obstruction to the upper gastrointestinal tract or other
medical condition.
Chemotherapy is the administration of cytotoxic drugs to patients
suffering from various types of cancer.
Dobutamine infusions are provided to patients with chronic end stage
congestive heart failure that has not responded to standard drug therapy.
These patients require a long-term venous access device and frequent blood
chemistry monitoring.
Immune globulin (IVIG) therapy is utilized for a variety of immune
disorders such as B-cell and T-cell immune deficiency, acute infections,
post transplant immunodeficiency and burns.
Continuous pain management is the administration of analgesic drugs to
patients suffering from acute or chronic pain.
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Central catheter management provides monitoring and supplies to
patients requiring access via a peripherally inserted line into the
superior vena cava.
Through a limited number of operating centers, the Company provides home
sleep studies, prenatal care, and prosthetic care.
Lincare also supplies home medical equipment, such as hospital beds,
wheelchairs and other supplies that may be required by patients.
COMPANY OPERATIONS
Management. The Company is managed at the executive level as a portfolio
of local businesses. Decentralization of managerial decision-making enables the
Company's operating centers to respond promptly and effectively to local market
demands and opportunities. The Company believes that the personalized nature of
customer requirements and referral relationships characteristic of the home
health care business mandates the Company's localized operating structure.
Each of the Company's 216 operating centers is managed by a center manager
who has responsibility and accountability for the operating and financial
performance of the center. Service and marketing functions are performed at the
local operating level, while strategic development, financial control and
operating policies are administered at the executive level. Reporting mechanisms
are in place at the operating center level to monitor performance and ensure
field accountability.
A regional management layer consisting of 28 area managers directly
supervises individual operating center managers, serving as an additional
mechanism for assessing and improving performance of the Company's operations.
The Company's operating centers are served by eleven regional billing centers
which control all the Company's billing and reimbursement functions.
MIS Systems. The Company believes that the proprietary management
information systems developed by the Company are one of its key competitive
advantages and provide management with a critical asset in measuring and
evaluating performance levels throughout the Company. Management reviews monthly
reports containing information critical to the evaluation process, including
revenues and profitability by individual center, accounts receivable and cash
collection management, equipment controls and utilization, customer activity,
and manpower trends. The Company has a staff of nine full-time computer
programmers which permits the Company to continually enhance its computer
systems in order to provide timely financial and operational information and to
respond promptly to changes in reimbursement regulations and policies.
Accounts Receivable Management. The Company derives a majority of its
revenues from reimbursement by third party payors. The Company accepts
assignment of insurance benefits from customers and in most instances invoices
and collects payments directly from Medicare, Medicaid and private insurance
carriers, as well as directly from customers under co-insurance provisions. The
following table sets forth, for the period indicated, the Company's payor mix.
YEAR ENDED
DECEMBER 31,
PAYORS 1995
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Medicare and Medicaid programs............................... 60%
Private insurance............................................ 24
Direct payment and other (1)................................. 16
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100%
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(1) The direct payment category is comprised primarily of co-insurance amounts
received from beneficiaries of Medicare and private insurance coverage.
Reimbursement is a complicated process which involves submission of claims
to multiple payors, each having its own claims requirements. To operate
effectively in this environment, the Company has designed and implemented
proprietary computer systems to decrease the time required for the submission
and processing of
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third party payor claims. The Company's systems are capable of tailoring the
submission of claims to the specifications of the individual payors. The
Company's in-house MIS capability also enables it to adjust quickly to any
regulatory or reimbursement changes. These features serve to decrease the
processing time of claims by payors, resulting in a more rapid turnover of
accounts receivable. In addition, the Company is capable of submitting claims
electronically to any Medicare carrier or other third party payor that can
receive electronic claims submissions.
The Company's net accounts receivable in terms of days sales outstanding
was 44 days as of December 31, 1995 and 40 days as of December 31, 1994.
SALES AND MARKETING
Favorable trends affecting the U.S. population and home health care have
created an environment which should produce increasing demand for the services
provided by Lincare. The average age of Americans is increasing, and as a person
ages more health care services are required. The well-documented major
structural changes going on in health care are moving more services into the
home and out of institutions.
Sales activities are generally carried out by the Company's full-time sales
representatives located at the Company's operating centers with assistance from
the center managers. In addition to promoting the high quality of the Company's
services, the sales representatives are trained to provide information
concerning the advantages of home respiratory care. Sales representatives are
often licensed respiratory therapists who are highly knowledgeable in the
provision of supplemental oxygen.
The Company primarily acquires new customers through referrals. The
Company's principal sources of referrals are physicians, hospital discharge
planners, prepaid health plans, clinical case managers and nursing agencies. The
Company's sales representatives maintain continual contact with these medical
professionals in order to strengthen these relationships.
The Company's current base of referral sources provides a steady flow of
customers in recognition of the Company's reputation for providing high-quality
service to patients. While the Company views its referral sources as fundamental
to its business, no single referral source accounts for more than 1.0% of the
Company's revenues. The Company has more than 85,000 active customers, and the
loss of any single customer or group of customers would not materially impact
the Company's business.
Joint Commission on Accreditation of Healthcare Organizations,
("JCAHO"). The Company has received accreditation from the JCAHO, a private
not-for-profit organization that has established voluntary standards for the
provision of home health care services, for all its operating centers.
Accreditation by the JCAHO represents a marketing benefit to the Company's
operating centers and provides for a recognized quality assurance program
throughout the Company. The Company anticipates that referral sources may in the
future require accreditation as a prerequisite to referring patients to
individual home health care companies. Several proposals have been made to
require health care providers to be accredited or licensed by independent
agencies in order to participate in government reimbursement programs, and such
a requirement has been adopted by certain private payors.
RECENT ACQUISITIONS
In 1995, the Company acquired, in unrelated acquisitions, certain operating
assets of 10 local and regional competitors, the common stock of 10 companies
and, in two separate transactions, certain assets of two related companies and
substantially all of the assets of a single company and eight of its
wholly-owned subsidiaries. The operations acquired in 1995 had aggregate
annualized revenues of approximately $45.0 million at the time of acquisition.
These acquisitions resulted in the addition of 27 new operating centers.
In 1994, the Company acquired, in unrelated acquisitions, certain operating
assets of 16 local and regional competitors, the common stock of three companies
and, in a single transaction, certain assets of five related companies. The
operations acquired in 1994 had aggregate annualized revenues of approximately
$35.0 million at the time of acquisition. These acquisitions resulted in the
addition of 35 new operating centers.
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QUALITY CONTROL
The Company is committed to providing consistently high quality products
and services. The Company's quality control procedures are designed to promote
greater responsiveness and sensitivity in dealing with individual customer needs
and to provide the highest level of quality assurance and convenience to the
referring physician. Licensed respiratory therapists and registered nurses
provide professional health care support and assist in the Company's sales and
marketing efforts.
SUPPLIERS
The Company purchases its oxygen and equipment needs from a variety of
suppliers. The Company is not dependent upon any single supplier and believes
that its oxygen and equipment needs can be provided by several manufacturers.
COMPETITION
The home respiratory care market is a fragmented and highly competitive
market that is served by the Company and other national providers and, the
Company estimates, by over 2,000 regional and local companies.
The quality of service is the single most important competitive factor
within the home respiratory care market. The relationships between a home
respiratory care company and its customers and referral sources are highly
personal. There is no incentive for either the physician or the patient to alter
this relationship so long as the home respiratory care company is providing
responsive, professional and high-quality service. Other key competitive factors
are strength of local ties to the referral community and efficiency of
reimbursement and accounts receivable management systems.
Home respiratory care companies normally compete based on service.
Reimbursement levels are established by the fee schedules promulgated by
Medicare, Medicaid or by the individual determinations of private insurance
companies. Furthermore, marketing efforts by home respiratory care companies are
directed toward referral sources which do not share financial responsibility for
the payment of services provided to customers.
MEDICARE REIMBURSEMENT
As a supplier of home oxygen and other respiratory therapy services for the
home health care market, the Company participates in Medicare Part B, the
Supplementary Medical Insurance Program, which was established by the Social
Security Act of 1965. Suppliers of home oxygen and other respiratory therapy
services have historically been heavily dependent on Medicare reimbursement due
to the high proportion of elderly suffering from respiratory disease.
Congress enacted legislation passed as part of the 1987 Omnibus Budget
Reconciliation Act ("OBRA 1987") that significantly changed reimbursement for
home oxygen, respiratory therapy services and home medical equipment. This
legislation changed reimbursement from charge-based pricing by individual
suppliers to a single price for each item paid to all suppliers within each
Medicare carrier's jurisdiction. Under the provisions of OBRA 1987, home oxygen
equipment is generally reimbursed at a set single monthly payment amount,
regardless of the type of oxygen equipment provided. OBRA 1987 also defined
whether certain home medical equipment would be paid for on a rental or sale
basis and established a 15 month rental payment ceiling on certain home medical
equipment.
The 1990 Omnibus Budget Reconciliation Act ("OBRA 1990") provided that the
fee schedules established under OBRA 1987 were to be adjusted annually at a rate
equal to the change in the Consumer Price Index less 1 percent through December
31, 1992, and increased by the Consumer Price Index in 1993. OBRA 1990 also made
new changes to Medicare Part B reimbursement which were implemented in 1991.
These changes included a national standardization of Medicare rates for certain
equipment categories, as well as reductions in amounts paid for home medical
equipment rentals.
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On August 10, 1993, Congress passed the Omnibus Reconciliation Act of 1993
("OBRA 93") which required changes to be made effective January 1, 1994, in the
Medicare reimbursement of certain items of home medical equipment. The Company
estimates that these Medicare price changes resulted in a revenue reduction of
approximately $4,100,000 for the year ended December 31, 1994. The OBRA 93
legislation provided for a consumer price index update, effective January 1,
1995, which the company estimates increased 1995 revenue by $3,100,000.
Congress passed the Balanced Budget Act of 1995 (H.R. 2491) on November 30,
1995. The legislation included reductions in the rate of growth of Medicare and
Medicaid spending, along with significant tax reductions. The proposal included
a $2.5 billion reduction to the home oxygen benefit out of a total seven-year
program budget of $10.2 billion. President Clinton vetoed the bill on December
6, 1995 and offered an alternative seven-year balanced budget proposal.
Continuing efforts between Congress and the Administration to reach
agreement on a budget have produced lower proposed reductions in Medicare and
Medicaid spending. With respect to the home oxygen benefit, the Clinton
Administration and various congressional health care leaders have announced
support for program reductions of $1.4 billion over the seven-year period. At
this time, it is uncertain whether any budget agreement will be reached in 1996.
Federal and state budgetary and other cost-containment pressures will
continue to impact the home respiratory care industry. The Company cannot
predict what new federal and state budgetary proposals will be adopted and, if
adopted, what effect, if any, such proposals would have on the Company's
business.
Claims under the federal Medicare program are processed by private
insurance companies under contract arrangements with the Health Care Financing
Administration (HCFA). In 1993, the federal Medicare program began implementing
a plan to reduce the number of carriers administering Part B of the Medicare
program from approximately sixty carriers to four regional carriers. This
transition to regional carriers was completed in 1994.
GOVERNMENT REGULATION
The federal government and all states in which the Company currently
operates regulate various aspects of its business. In particular, the Company's
operating centers are subject to federal laws covering the repackaging and
dispensing of drugs (including oxygen) and regulating interstate motor-carrier
transportation. The Company's locations also are subject to state laws
governing, among other things, pharmacies, nursing services and certain types of
home health agency activities. Certain of the Company's employees are subject to
state laws and regulations governing the ethics and professional practice of
respiratory therapy, pharmacy and nursing.
As a supplier of services under the Medicare and Medicaid programs, the
Company is subject to the Medicare and Medicaid fraud and abuse laws. These
laws, among other things, prohibit any payment, kickback or rebate in return for
the referral of Medicare or Medicaid patients. Violations of these provisions
may result in civil and criminal penalties and exclusion from participation in
the Medicare and Medicaid programs.
Health care is an area of rapid regulatory change. Changes in the law or
new interpretations of existing laws can have an effect on permissible
activities, the relative costs associated with doing business, and the amount of
reimbursement by government and third party payors. The Company cannot predict
the future course of federal, state and local regulation or legislation,
including Medicare and Medicaid statutes and regulations, and of possible
changes in national health care policies, including those pertaining to managed
care organization, which are currently the focus of national political
discussion. Future legislative and regulatory changes could have an adverse
impact on the Company.
INSURANCE
The Company currently has in force general liability and product liability
insurance, each with a coverage limit of $10.0 million. In addition, the Company
has professional liability insurance with a coverage limit of
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$1.0 million per occurrence and $3.0 million in the aggregate. The Company's
product liability insurance provides coverage on a claims-made basis, while its
general and professional liability insurance are on an occurrence basis. All
policies are subject to annual renewal and the Company anticipates adequate
amounts of insurance coverage to be available at such renewal dates.
EMPLOYEES
As of February 29, 1996, the Company had approximately 2,200 employees.
None of the Company's employees are currently covered by collective bargaining
agreements. The Company believes that the relations between the Company's
management and its employees are good.
ENVIRONMENTAL MATTERS
Management believes that the Company is currently in compliance in all
material aspects with applicable federal, state and local statutes and
ordinances regulating the discharge of materials into the environment.
Management does not believe it will be required to expend any material amounts
in order to remain in compliance with these laws and regulations or that
compliance will materially affect its capital expenditures, earnings or
competitive position.
ITEM 2. PROPERTIES
All but one of the Company's 216 operating center locations are under third
party lease arrangements. Each operating center is a combination warehouse and
office, with warehouse space generally comprising approximately 50% of the
facility. Warehouse space is used for storage of adequate supplies of equipment
necessary to conduct the Company's business. The Company also leases a
headquarters facility and 10 of its 11 separate billing centers.
ITEM 3. LEGAL PROCEEDINGS
In January 1994, the Company was advised by the United States Attorney for
the Middle District of Florida that a grand jury has been investigating certain
services provided by the Company to a pharmacy that supplied medications to home
respiratory patients. Under its contracts with the pharmacy, the Company was
responsible for providing various marketing, field administration and patient
services to the pharmacy. The contracts were in effect from February 1989 to
April 1992, and accounted for less than one percent of the Company's revenues
during such period. The Company is cooperating with the investigation and
believes that it will be able to demonstrate that its services for the pharmacy
were provided in accordance with all applicable federal laws. However, no
assurance can be given that the matter will be resolved promptly or that the
United States Attorney will not seek penalties against the Company or its
officers.
The Company is also involved in certain other claims and legal actions
arising in the ordinary course of business. In the opinion of the Company, the
ultimate disposition of all matters will not have a material adverse impact on
the Company's financial position, results of operations or liquidity.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's stockholders during
the fourth quarter of 1995.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock is traded on the NASDAQ National Market System
under the symbol LNCR. The following table sets forth the high and low closing
sale prices as reported by NASDAQ for the periods indicated.
HIGH LOW
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1995
First quarter...................................................... $31.25 $24.25
Second quarter..................................................... 35.25 25.25
Third quarter...................................................... 35.25 23.25
Fourth quarter..................................................... 28.50 21.00
1994
First quarter...................................................... $25.50 $19.75
Second quarter..................................................... 23.00 18.75
Third quarter...................................................... 24.75 19.25
Fourth quarter..................................................... 29.00 23.00
There were approximately 284 holders of record of the common stock as of
February 29, 1996.
The Company has not paid any cash dividends on its capital stock and does
not anticipate paying cash dividends in the foreseeable future. It is the
present intention of the Company's Board of Directors to retain all earnings in
the Company in order to support the future growth of the Company's business.
ITEM 6. SELECTED FINANCIAL DATA
The selected consolidated financial data presented below under the caption
"Statements of Operations Data" for the years ended December 31, 1995, 1994,
1993, 1992, and 1991 are derived from the consolidated financial statements of
the Company, which consolidated financial statements have been audited by KPMG
Peat Marwick LLP, independent certified public accountants.
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The data set forth below are qualified by reference to, and should be read
in conjunction with, the consolidated financial statements and related notes
thereto and Management's Discussion and Analysis of Financial Condition and
Results of Operations included in this report.
YEAR ENDED DECEMBER 31,
----------------------------------------------------
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
STATEMENTS OF OPERATIONS DATA:
Net revenues....................... $274,800 $201,142 $154,506 $117,403 $ 88,634
Cost of goods and services......... 41,329 29,058 21,115 16,215 10,631
Operating expenses................. 60,272 44,347 34,388 28,475 23,746
Selling, general and administrative
expenses......................... 57,275 43,249 34,623 28,354 24,499
Bad debt expense................... 2,190 1,546 1,832 1,591 1,006
Depreciation expense............... 16,511 13,403 11,764 10,143 8,736
Amortization expense............... 11,099 7,281 4,695 5,125 10,572
Non-recurring expense(1)........... 1,921 -- -- -- --
-------- -------- -------- -------- --------
Operating income................... 84,203 62,258 46,089 27,500 9,444
Interest income.................... 294 434 611 465 327
Interest expense................... 892 473 387 1,242 4,902
Gain on disposal of property and
equipment........................ 68 101 233 16 58
-------- -------- -------- -------- --------
Income before income taxes and
extraordinary loss............... 83,673 62,320 46,546 26,739 4,927
Income tax expense................. 32,634 24,367 18,294 10,600 2,080
-------- -------- -------- -------- --------
Income before extraordinary loss... 51,039 37,953 28,252 16,139 2,847
Extraordinary loss, net of
taxes(2)......................... -- -- -- (1,000) --
-------- -------- -------- -------- --------
Net income available for common.... $ 51,039 $ 37,953 $ 28,252 $ 15,139 $ 2,847
======== ======== ======== ======== ========
Income per common share:
Income before extraordinary
loss.......................... $ 1.79 $ 1.34 $ 1.01 $ .64 $ .15
======== ======== ======== ======== ========
Net income....................... $ 1.79 $ 1.34 $ 1.01 $ .60 $ .15
======== ======== ======== ======== ========
Weighted average common and common
equivalent shares outstanding.... 28,576 28,307 27,911 25,334 18,713
======== ======== ======== ======== ========
Pro forma income (loss) per common
share:(3)
Income before extraordinary
loss.......................... $ .23
Extraordinary loss, net of
taxes......................... (.05)
--------
Net income....................... $ .18
========
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(1) Related to the abandoned merger between the Company and Coram Healthcare
Corporation, the Company recorded a non-recurring expense of $1,921,000
($1,172,000 or $0.04 per share after taxes). Such non-recurring expense is
comprised of (a) $1,448,000 or professional fees, (b) $199,000 of printing
and mailing expenses, (c) $153,000 filing fees, and (d) $121,000 of other
direct costs.
(2) Upon the prepayment of the Company's senior and subordinated debt with the
proceeds of the Company's March 1992 initial public offering, the Company
recorded an extraordinary loss, net of taxes, of $1,000,000, attributable
to (i) a prepayment premium ($300,000), (ii) unamortized loan origination
fees related to the senior debt ($990,000) and (iii) unamortized discount
on the subordinated debt ($357,000).
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(3) For purposes of the pro forma income (loss) per common share calculations,
the Company's March 1992 initial public offering and the application of the
proceeds therefrom is assumed to have been completed on January 1, 1991.
AT DECEMBER 31,
---------------------------------------------------
1995 1994 1993 1992 1991
-------- -------- -------- -------- -------
(IN THOUSANDS)
BALANCE SHEET DATA:
Working capital.............................. $ 16,510 $ 18,517 $ 35,642 $ 26,134 $10,105
Total assets................................. 260,206 195,778 147,084 108,024 84,277
Long-term obligations, excluding current
installments............................... 7,383 6,717 7,512 6,233 42,486
Redeemable preferred stock................... -- -- -- -- 12,076
Stockholders' equity......................... 221,383 162,088 117,058 82,435 6,721
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
The Company continues to pursue its strategy of focusing on increasing
market share within its existing geographical markets, through internal growth
and through selective acquisitions of regional or local competitors. In
addition, the Company will expand into new geographical markets on a selective
basis, either through acquisitions or by opening new operating centers, when the
Company believes it will enhance its business.
The Company's focus remains primarily on oxygen and other respiratory
therapy services, and it intends to expand its home infusion therapy services in
1996.
NET REVENUES
The following table sets forth for the periods indicated a summary of the
Company's net revenues by source:
YEAR ENDED DECEMBER 31,
------------------------------
1995 1994 1993
-------- -------- --------
(IN THOUSANDS)
Oxygen and other respiratory therapy................... $250,287 $184,927 $141,918
Home medical equipment and other....................... 24,513 16,215 12,588
-------- -------- --------
Total........................................ $274,800 $201,142 $154,506
======== ======== ========
Net revenues for the year ended December 31, 1995 increased by $73,658,000
(or 36.6%) over 1994. Net revenues for the year ended December 31, 1994
increased by $46,636,000 (or 30.2%) over 1993. The increases are attributable to
the Company's sales and marketing efforts that emphasize quality and customer
service, and the effect of the acquisitions completed by the Company. The
Company estimates that approximately $40,627,000 of the increase in revenues for
year ended December 31, 1995, and $29,948,000 of the increase in revenues for
the year ended December 31, 1994, were attributable to the acquired businesses.
Approximately $29,931,000 of the net revenue increase for the year ended
December 31, 1995 and $20,788,000 for the year ended December 31, 1994, was
attributable to volume growth in the Company's business.
On August 10, 1993, Congress passed the Omnibus Reconciliation Act of 1993
("OBRA 93") which required changes to be made effective January 1, 1994, in the
Medicare reimbursement of certain items of home medical equipment. The Company
estimates that these Medicare price changes resulted in a revenue reduction of
approximately $4,100,000 for the year ended December 31, 1994. The OBRA 93
legislation provided for a consumer price index update, effective January 1,
1995, which the company estimates increased 1995 revenue by $3,100,000.
10
12
Congress passed the Balanced Budget Act of 1995 (H.R. 2491) on November 30,
1995. The legislation included reductions in the rate of growth of Medicare and
Medicaid spending, along with significant tax reductions. The proposal included
a $2.5 billion reduction to the home oxygen benefit out of a total seven-year
program budget of $10.2 billion. President Clinton vetoed the bill on December
6, 1995 and offered an alternative seven-year balanced budget proposal.
Continuing efforts between Congress and the Administration to reach
agreement on a budget have produced lower proposed reductions in Medicare and
Medicaid spending. With respect to the home oxygen benefit, the Clinton
Administration and various congressional health care leaders have announced
support for program reductions of $1.4 billion over the seven-year period. At
this time, it is uncertain whether any budget agreement will be reached in 1996.
COST OF GOODS AND SERVICES
Cost of goods and services as a percentage of net revenues was 15.0% for
the year ended December 31, 1995 and was 14.4% and 13.7% for the years ended
December 31, 1994 and 1993, respectively. The increase in 1995 is attributable
to a change in the product mix related to acquisitions having higher levels of
home medical equipment and certain respiratory therapy products.
OPERATING AND OTHER EXPENSES
Operating expenses for the year ended December 31, 1995 decreased to 21.9%
of net revenues, compared to 22.0% and 22.3% for the years ended December 31,
1994 and 1993, respectively.
Selling, general and administrative expenses expressed as a percentage of
net revenues decreased to 20.8% for the year ended December 31, 1995 compared
with 21.5% and 22.4% for the years ended December 31, 1994 and 1993,
respectively. This improvement is primarily due to the Company's ability to
maintain a cost structure that, with increases in net revenues, has permitted
the Company to spread its overhead over a larger base of revenues, resulting in
improvement in operating income.
Bad debt expense as a percentage of net revenues was 0.8% for the years
ended December 31, 1995 and 1994, and 1.2% for the year ended December 31, 1993.
The Company's increased depreciation expense reflects increased capital
expenditures primarily for additional oxygen equipment to service the Company's
growing customer base. Depreciation expense as a percentage of net revenues
decreased to 6.0% for the year ended December 31, 1995 compared with 6.7% and
7.6% for the years ended December 31, 1994 and 1993, respectively.
AMORTIZATION EXPENSE
The Company's net intangible assets were $146,371,000 as of December 31,
1995. Of this total, $9,510,000 (consisting of the value assigned to customer
lists) is being amortized over a period of 10 to 36 months, $6,370,000
(consisting of various covenants not to compete) over a period of three to seven
years, and $130,491,000 (consisting of goodwill) over a period of 40 years.
During 1995, the Company amortized $11,099,000 of its intangible assets
(4.0% of net revenues) compared to $7,281,000 (3.6% of net revenues) in 1994 and
$4,695,000 (3.0% of net revenues) in 1993.
OPERATING INCOME
As shown in the table below, operating income before non-recurring expense
for the year ended December 31, 1995 increased by $23,866,000 over 1994: The
Company recognized a non-recurring charge of $1,921,000 related to the Company's
abandoned merger with Coram Healthcare Corporation. Operating income for the
year ended December 31, 1994 increased by $16,169,000 over 1993. The percentage
increases
11
13
in operating income are attributable to the Company's continued revenue growth,
while maintaining effective cost controls over expenses.
YEAR ENDED DECEMBER 31,
-------------------------------
1995 1994 1993
------- ------- -------
(IN THOUSANDS)
Operating income before non-recurring expense................. $86,124 $62,258 $46,089
Percentage of net revenues.................................... 31.3% 31.0% 29.8%
INTEREST EXPENSE
Interest expense for the year ended December 31, 1995 was $892,000,
compared to $473,000 and $387,000 for the years ended December 31, 1994 and
1993, respectively. The increase in 1995 is attributable to the Company's use of
its revolving line of credit during the year.
INCOME TAXES
The Company's effective income tax rate was 39.0% for the year ended
December 31, 1995, 39.1% for 1994 and 39.3% for 1993.
ACQUISITIONS
For a description of business combinations entered into by the Company
during 1995 and 1994, see "Business -- Recent Acquisitions" and Note 13 to the
Consolidated Financial Statements.
The intangible assets acquired in the Buyout resulted in amortization
expense of $443,000, $443,000 and $1,090,000 in 1995, 1994 and 1993,
respectively. Depreciation expense associated with the computer software
acquired in the Buyout was $1,344,000 in 1993. The computer software was fully
amortized in 1993.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1995, the Company's working capital was $16,510,000, as
compared to $18,517,000 at December 31, 1994, and $35,642,000 at December 31,
1993.
Net cash provided by operating activities was $79,523,000 for the year
ended December 31, 1995, compared with $66,018,000 for the year ended December
31, 1994, and $51,392,000 for the year ended December 31, 1993. A significant
portion of the Company's assets consists of accounts receivables from third
party payors that provide reimbursement for the services provided by the
Company. Because of the Company's ability to collect its accounts receivable on
a timely basis, the Company has not been required to obtain interim financing of
its accounts receivable to satisfy operating needs.
Net cash used in investing and financing activities amounted to
$94,537,000, $79,733,000 and $41,530,000 for the years ended December 31, 1995,
1994 and 1993, respectively. Activity in the year ended December 31, 1995
included the Company's investment of $58,590,000 in business acquisitions,
investment in capital equipment of $30,148,000, the borrowing of $44,000,000
from its revolving line of credit, payments of $41,000,000 on the revolving line
of credit and payments of $13,247,000 related long-term obligations.
As of December 31, 1995, the Company's principal sources of liquidity
consisted of $16,510,000 of working capital and $45,000,000 available under its
revolving line of credit. On February 10, 1995, the Company increased the amount
it may borrow under the revolving line of credit from $25,000,000 to
$50,000,000. The Company believes that internally generated funds, together with
funds that may be borrowed under such credit facility, will be sufficient to
meet the Company's anticipated capital requirements over the foreseeable future.
The Company anticipates that capital expenditures for 1996 will be
approximately $35,000,000 and that over the next several years its capital
expenditure requirements will grow no faster than the growth in the Company's
revenue. The Company believes that it will be able to generate sufficient funds
internally to meet its short-term and long-term capital expenditure
requirements.
12
14
The Company's future liquidity will continue to be dependent upon its
operating cash flow and management of accounts receivable. Additionally, the
Company is not aware of any impact on liquidity due to pending litigation
arising in the ordinary course of business.
INFLATION
The Company has not experienced large increases in either the cost of
supplies or operating expenses due to inflation. Because of restrictions on
reimbursement by government and private medical insurance programs and the
pressures to contain the growth in the costs of such programs, the Company bears
the risk that reimbursement rates set by such programs will not keep pace with
inflation.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements required by this item are listed in Item 14(1)(a)
and are submitted at the end of this Annual Report on Form 10-K. The
supplementary data required by this Item is included on page S-1. The financial
statements and supplementary data are herein incorporated by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The response to this item is included in the definitive proxy statement,
under "Information Regarding the Board of Directors" for the Annual Meeting of
Stockholders to be held May 13, 1996, and is herein incorporated by reference.
ITEM 11. EXECUTIVE COMPENSATION
The response to this item is included in the definitive proxy statement,
under "Executive Compensation" for the Annual Meeting of Stockholders to be held
May 13, 1996, and is herein incorporated by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The response to this item is included in the definitive proxy statement
under "Security Ownership of Principal Stockholders and Management" for the
Annual Meeting of Stockholders to be held May 13, 1996, and is herein
incorporated by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) (1) The following consolidated financial statements of Lincare Holdings
Inc. and subsidiaries are filed as part of this Form 10-K starting at page F-1:
Independent Auditors' Report
Consolidated Balance Sheets -- December 31, 1995 and 1994
Consolidated Statements of Operations -- Years ended December 31,
1995, 1994 and 1993.
13
15
Consolidated Statements of Stockholders' Equity -- Years ended
December 31, 1995, 1994 and 1993
Consolidated Statements of Cash Flows -- Years ended December 31,
1995, 1994 and 1993
Notes to Consolidated Financial Statements
(2) The following consolidated financial statement schedule of Lincare
Holdings Inc. and subsidiaries is included in this Form 10-K at page S-1:
Schedule VIII -- Valuation and Qualifying Accounts
All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are not
required under the related instructions or are inapplicable, and therefore
have been omitted.
(3) Exhibits included or incorporated herein:
See Exhibit Index.
(b) The Company did not file a Current Report on Form 8-K during the three
months ended December 31, 1995.
14
16
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
LINCARE HOLDINGS INC.
/s/ JAMES M. EMANUEL
--------------------------------------
James M. Emanuel
Secretary, Chief Financial and
Principal Accounting Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
SIGNATURE POSITION DATE
- ---------------------------------------- ----------------------------------- ---------------
/s/ JAMES T. KELLY Chairman of the Board, Chief March 27, 1996
- ---------------------------------------- Executive Officer and President
James T. Kelly
/s/ JAMES M. EMANUEL Director, Chief Financial and March 27, 1996
- ---------------------------------------- Principal Accounting Officer
James M. Emanuel
/s/ CHESTER B. BLACK Director March 27, 1996
- ----------------------------------------
Chester B. Black
/s/ FRANK T. CARY Director March 27, 1996
- ----------------------------------------
Frank T. Cary
/s/ HOWARD R. DEUTSCH Director March 27, 1996
- ----------------------------------------
Howard R. Deutsch
/s/ ANDREW M. PAUL Director March 27, 1996
- ----------------------------------------
Andrew M. Paul
/s/ THOMAS O. PYLE Director March 27, 1996
- ----------------------------------------
Thomas O. Pyle
15
17
INDEX OF EXHIBITS
Sequentially
Exhibit Numbered
Number Exhibit Page
- ------ ------- ----
+3.1- Amended and Restated Certificate of Incorporation of Lincare Holdings Inc. . . . .
+3.2- Amended and Restated By-Laws of Lincare Holdings Inc. . . . . . . . . . . . . . . .
+10.6- Purchase Agreement dated as of September 25, 1991 among the Registrant and the
several purchasers named therein . . . . . . . . . . . . . . . . . . . . . . . . .
+10.10- Non-Qualified Stock Option Plan of Registrant . . . . . . . . . . . . . . . . . . .
+10.11- Lincare Holdings Inc. 1991 Stock Plan . . . . . . . . . . . . . . . . . . . . . . .
+10.12- Non-Qualified Stock Option Agreements dated as of November 30, 1990, as amended,
between the Registrant and James T. Kelly . . . . . . . . . . . . . . . . . . . . .
+10.13- Non-Qualified Stock Option Agreements dated as of November 30, 1990, as amended,
between the Registrant and Howard R. Deutsch . . . . . . . . . . . . . . . . . . .
+10.14- Non-Qualified Stock Option Agreements dated as of November 30, 1990, as amended,
between the Registrant and James M. Emanuel . . . . . . . . . . . . . . . . . . . .
+10.15- Lincare Inc. 401(k) Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
+10.19- Asset Purchase Agreement dated as of September 25, 1991, between Lincare Inc. and
Glasrock Home Health Care, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . .
++10.20- Asset Purchase Agreement dated as of October 2, 1992, among Lincare Inc., Advance
Home Health Services, Inc. and Diversified Diagnostics Inc., Richard Levy and
Michael D. Moore . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
+++10.21- Amendment to Non-Qualified Stock Option Agreement dated December 2, 1992, between
the Registrant and James T. Kelly . . . . . . . . . . . . . . . . . . . . . . . . .
+++10.22- Amendment to Non-Qualified Stock Option Agreement dated December 2, 1992, between
the Registrant and Howard R. Deutsch . . . . . . . . . . . . . . . . . . . . . . .
24
18
Sequentially
Exhibit Numbered
Number Exhibit Page
- ------ ------- ----
+++10.23- Amendment to Non-Qualified Stock Option Agreement dated December 2, 1992,
between the Registrant and James M. Emanuel . . . . . . . . . . . . . . . . . . .
++++10.24- Asset Purchase Agreement effective March 31, 1993, between Lincare Inc. and T2
Medical, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
*10.26- Loan Agreement dated February 10, 1995, between Registrant and NationsBank of
Florida, N.A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
*10.27- Employment Agreement dated as of November 1, 1993 between Lincare Holdings Inc.
and James T. Kelly . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
*10.28- Employment Agreement dated as of November 1, 1993 between Lincare Holdings Inc.
and Howard R. Deutsch . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
*10.29- Employment Agreement dated as of November 1, 1993 between Lincare Holdings Inc.
and James M. Emanuel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
**10.30- Asset Purchase Agreement dated as of May 24, 1995 between Lincare Inc. and
PrimaCare Health Resources, Inc. . . . . . . . . . . . . . . . . . . . . . . . .
10.31 Non-Qualified Stock Option Agreements dated as of January 23, 1995, between
the Registrant and James T. Kelly . . . . . . . . . . . . . . . . . . . . . . . . 27
10.32- Non-Qualified Stock Option Agreements dated as of Janury 23, 1995, between
the Registrant and Howard R. Deutsch . . . . . . . . . . . . . . . . . . . . . . 28
10.33- Non-Qualified Stock Option Agreements dated as of January 23, 1995, between
the Registrant and James M. Emanuel . . . . . . . . . . . . . . . . . . . . . . . 29
+++++22.2- List of Subsidiaries of Lincare Holdings Inc. . . . . . . . . . . . . . . . . . .
23.5- Consent of KPMG Peat Marwick LLP . . . . . . . . . . . . . . . . . . . . . . . . 30
27 Financial Data Schedule (for SEC Use Only) . . . . . . . . . . . . . . . . . . .
- ---------------
+ Incorporated by reference to the corresponding exhibit to the
Registrant's Registration Statement on Form S-1 (No. 33-44672)
25
19
++ Incorporated by reference to Exhibit A to the Registrant's Form 8-K
dated October 14, 1992.
+++ Incorporated by reference to the corresponding exhibit to the
Registrant's Registration Statement on Form S-1 (No. 33-55260).
++++ Incorporated by reference to the Registrant's Form 8-K dated April 28,
1993.
+++++ Incorporated by reference to the Registrant's Form 10-K dated March
22, 1994.
* Incorporated by reference to the Registrant's Form 10-K dated
March 22, 1995.
** Incorporated by reference to the Registrant's Form 8-K dated May 24,
1995.
26
20
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Lincare Holdings Inc.:
We have audited the accompanying consolidated balance sheets of Lincare
Holdings Inc. and subsidiaries as of December 31, 1995 and 1994, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the years in the three-year period ended December 31, 1995. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Lincare
Holdings Inc. and subsidiaries as of December 31, 1995 and 1994, and the results
of their operations and their cash flows for each of the years in the three-year
period ended December 31, 1995, in conformity with generally accepted accounting
principles.
KPMG PEAT MARWICK LLP
St. Petersburg, Florida
January 19, 1996
F-1
21
LINCARE HOLDINGS INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
1995 1994
-------- --------
(DOLLARS IN
THOUSANDS)
ASSETS (NOTE 5)
Current assets:
Cash and cash equivalents.............................................. $ 1,009 $ 16,023
Accounts and notes receivable (note 2)................................. 36,610 23,629
Income taxes receivable................................................ 772 --
Inventories............................................................ 1,299 1,029
Prepaid expenses....................................................... 674 752
-------- --------
Total current assets........................................... 40,364 41,433
-------- --------
Property and equipment (notes 3 and 4)................................... 121,786 93,098
Less accumulated depreciation............................................ 48,534 37,014
-------- --------
Net property and equipment..................................... 73,252 56,084
-------- --------
Other assets:
Goodwill, less accumulated amortization of $6,920 in 1995 and $3,878 in
1994................................................................ 130,491 82,795
Intangible assets, less accumulated amortization of $27,229 in 1995 and
$21,249 in 1994..................................................... 9,510 9,205
Covenants not to compete, less accumulated amortization of $5,315 in
1995 and $3,238 in 1994............................................. 6,370 6,055
Other.................................................................. 219 206
-------- --------
Total other assets............................................. 146,590 98,261
======== ========
$260,206 $195,778
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current installments of long-term obligations (note 6)................. $ 4,992 $ 6,972
Accounts payable....................................................... 10,214 8,273
Accrued expenses:
Compensation and benefits........................................... 7,028 5,087
Other............................................................... 1,620 1,377
Income taxes payable................................................... - 1,207
-------- --------
Total current liabilities...................................... 23,854 22,916
Revolving credit loan (note 5)........................................... 5,000 2,000
Long-term obligations, excluding current installments (note 6)........... 2,383 4,717
Deferred income taxes (note 7)........................................... 6,707 3,255
Minority interest........................................................ 879 802
Stockholders' equity (notes 7, 8 and 9):
Common stock, $.01 par value. Authorized 100,000,000 shares; issued and
outstanding 27,686,834 shares in 1995 and 27,124,130 shares in
1994................................................................ 277 271
Additional paid-in capital............................................. 86,049 77,799
Retained earnings...................................................... 135,057 84,018
-------- --------
Total stockholders' equity..................................... 221,383 162,088
Commitments and contingencies (notes 4 and 14)...........................
-------- --------
$260,206 $195,778
======== ========
See accompanying notes to consolidated financial statements.
F-2
22
LINCARE HOLDINGS INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
1995 1994 1993
-------- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER
SHARE DATA)
Net revenues (note 10)................................. $274,800 $201,142 $154,506
-------- -------- --------
Costs and expenses:
Cost of goods and services........................... 41,329 29,058 21,115
Operating expenses................................... 60,272 44,347 34,388
Selling, general and administrative expenses......... 57,275 43,249 34,623
Bad debt expense..................................... 2,190 1,546 1,832
Depreciation expense................................. 16,511 13,403 11,764
Amortization expense................................. 11,099 7,281 4,695
Non-recurring expense (note 11)...................... 1,921 -- --
-------- -------- --------
190,597 138,884 108,417
-------- -------- --------
Operating income............................. 84,203 62,258 46,089
-------- -------- --------
Other income (expenses):
Interest income...................................... 294 434 611
Interest expense..................................... (892) (473) (387)
Net gain on disposal of property and equipment....... 68 101 233
-------- -------- --------
(530) 62 457
-------- -------- --------
Income before income taxes................... 83,673 62,320 46,546
Income tax expense (note 7)............................ 32,634 24,367 18,294
-------- -------- --------
Net income................................... $ 51,039 $ 37,953 $ 28,252
======== ======== ========
Income per common share................................ $ 1.79 $ 1.34 $ 1.01
======== ======== ========
Weighted average number of common shares and common
share equivalents outstanding (in thousands)......... 28,576 28,307 27,911
======== ======== ========
See accompanying notes to consolidated financial statements.
F-3
23
LINCARE HOLDINGS INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
ADDITIONAL TOTAL
COMMON PAID-IN RETAINED STOCKHOLDERS'
STOCK CAPITAL EARNINGS EQUITY
------ ---------- -------- -------------
(DOLLARS IN THOUSANDS)
Balances at December 31, 1992......................... $255 $ 64,367 $ 17,813 $ 82,435
Exercise of stock options (note 9).................... 9 412 -- 421
Adjustment of 1992 offering costs..................... -- 16 -- 16
Tax benefit related to exercise of employee stock
options (notes 7 and 9)............................. -- 5,934 -- 5,934
Net income............................................ -- -- 28,252 28,252
------ ---------- -------- -------------
Balances at December 31, 1993......................... 264 70,729 46,065 117,058
Exercise of stock options (note 9).................... 7 454 -- 461
Tax benefit related to exercise of employee stock
options (notes 7 and 9)............................. -- 6,616 -- 6,616
Net income............................................ -- -- 37,953 37,953
------ ---------- -------- -------------
Balances at December 31, 1994......................... 271 77,799 84,018 162,088
Exercise of stock options (note 9).................... 6 2,800 -- 2,806
Tax benefit related to exercise of employee stock
options (notes 7 and 9)............................. -- 5,450 -- 5,450
Net income............................................ -- -- 51,039 51,039
------ ---------- -------- -------------
Balances at December 31, 1995......................... $277 $ 86,049 $135,057 $ 221,383
====== ======= ======== =========
See accompanying notes to consolidated financial statements.
F-4
24
LINCARE HOLDINGS INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
1995 1994 1993
-------- -------- --------
(DOLLARS IN THOUSANDS)
Cash flows from operating activities:
Net income..................................................... $ 51,039 $ 37,953 $ 28,252
Adjustments to reconcile net income to net cash provided by
operating activities:
Decrease in provision for losses on accounts and notes
receivable.............................................. (1,989) (491) (167)
Depreciation expense...................................... 16,511 13,403 11,764
Gain on disposal of property and equipment................ (68) (101) (233)
Amortization expense...................................... 11,099 7,281 4,695
Amortization of imputed interest.......................... 130 219 258
Deferred income taxes..................................... 2,369 (2,979) (738)
Minority interest in net earnings of subsidiary........... 196 122 187
Change in operating assets and liabilities:
(Increase) decrease in accounts and notes receivable.... (5,524) 911 (2,995)
(Increase) decrease in inventories...................... (53) 177 140
Decrease (increase) in prepaid expenses................. 78 (301) 185
Increase in accounts payable............................ 336 1,282 474
Increase in accrued expenses............................ 1,927 1,154 1,294
Increase in income taxes................................ 3,472 7,388 8,276
-------- -------- --------
Net cash provided by operating activities............ 79,523 66,018 51,392
-------- -------- --------
Cash flows from investing activities:
Proceeds from sale of property and equipment................. 1,269 900 737
Capital expenditures......................................... (30,148) (22,614) (18,166)
Increase in other assets..................................... (13) (7) (27)
Business acquisitions, net of cash acquired (note 13)........ (58,590) (52,904) (10,362)
-------- -------- --------
Net cash used by investing activities................ (87,482) (74,625) (27,818)
-------- -------- --------
Cash flows from financing activities:
Proceeds from revolving credit loan.......................... 44,000 8,000 --
Payment of revolving credit loan............................. (41,000) (6,000) (50)
Proceeds from long-term obligations.......................... 506 -- --
Payment of long-term obligations............................. (13,247) (8,009) (14,151)
(Decrease) increase in minority interest..................... (120) 440 52
Proceeds from issuance of common stock....................... 2,806 461 421
Adjustment of offering costs................................. -- -- 16
-------- -------- --------
Net cash used by financing activities................ (7,055) (5,108) (13,712)
-------- -------- --------
Net (decrease) increase in cash...................... (15,014) (13,715) 9,862
Cash and cash equivalents, beginning of year................... 16,023 29,738 19,876
-------- -------- --------
Cash and cash equivalents, end of year......................... $ 1,009 $ 16,023 $ 29,738
======== ======== ========
See accompanying notes to consolidated financial statements.
F-5
25
LINCARE HOLDINGS INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994, AND 1993
(1) DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Description of Business
Lincare Holdings Inc. and subsidiaries (the "Company") provides oxygen and
respiratory therapy services to the home health care market and also supplies
home medical equipment, such as hospital beds, wheelchairs and other medical
supplies. The Company's customers are located in 36 states. The Company's
supplies are readily available and the Company is not dependent on a single
supplier or even a few suppliers.
(b) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reported
period. Significant estimates included in these financial statements are related
to the allowance for uncollectible accounts. Actual results could differ from
those estimates.
(c) Principles of Consolidation
The consolidated financial statements include the accounts of Lincare
Holdings Inc. and its subsidiaries. All significant intercompany balances and
transactions have been eliminated in consolidation.
(d) Financial Instruments
The Company believes the book value of their cash equivalents, accounts and
notes receivable, income taxes receivable, accounts payable, accrued expenses
and income taxes payable approximates their fair value due to their short-term
nature. The book value of the Company's revolving credit loan and long-term
obligations approximates their fair value as the current interest rates
approximate rates at which similar types of borrowing arrangements could be
currently obtained by the Company.
(e) Inventories
Inventories, consisting of equipment, supplies and replacement parts, are
stated at the lower of cost or market. Cost is determined using the first-in,
first-out (FIFO) method.
(f) Property and Equipment
Property and equipment is stated at cost. Depreciation on property and
equipment is calculated on the straight-line method over the estimated useful
lives of the assets as set forth in the table below.
Land improvements...................................................... 15 years
Buildings and improvements............................................. 5 to 40 years
Equipment and furniture................................................ 3 to 11 years
Leasehold improvements are amortized on the straight-line method over the
lesser of the lease term or estimated useful life of the asset. Amortization is
included with depreciation expense.
(g) Other Assets
Goodwill results from the excess of cost over net assets of acquired
businesses and is amortized on a straight-line basis over 40 years.
F-6
26
LINCARE HOLDINGS INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Intangible assets, consisting of customer base and assembled workforce, are
amortized on a straight-line basis over the estimated life of the asset, ten to
thirty-six months.
Covenants not to compete are amortized on a straight-line basis over the
life of the respective covenants, three to seven years.
The Company annually evaluates goodwill and other intangible assets by
utilizing an operating income realization test for the applicable businesses
acquired. In addition, the Company considers the effects of external changes to
the Company's business environment, including competitive pressures, market
changes and technological and regulatory changes.
(h) Income Taxes
Deferred income taxes are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. Deferred tax
assets and liabilities are measured using enacted tax rates expected to be
recovered or settled. The effect on deferred taxes of a change in tax rate is
recognized in income in the period that includes the enactment date.
(i) Pension Plan
The Company has a defined contribution pension plan covering substantially
all employees. The Company makes monthly contributions to the plan equal to the
amount accrued for pension expense. Employer contributions (net of applied
forfeitures) were approximately $1,271,000 in 1995, $1,015,000 in 1994 and
$750,000 in 1993.
(j) Statement of Cash Flows
For purposes of the statements of cash flows, the Company considers all
short-term investments with a purchased maturity of three months or less to be
cash equivalents.
(k) New Accounting Standards
The Company will be required to adopt Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation" in 1996. Statement
123 allows the Company to select either a fair value based method or it's
current intrinsic value based method of accounting for employee stock-based
compensation. Companies that select the intrinsic value based method will be
required to provide pro forma disclosures of net income and earnings per share
as if the fair value method was selected. The Company plans to retain it's
intrinsic value method of accounting and, therefore, adoption of this standard
is not expected to have a material effect on the Company's financial statements.
F-7
27
LINCARE HOLDINGS INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(2) ACCOUNTS AND NOTES RECEIVABLE
Accounts and notes receivable at December 31, 1995 and 1994 consist of:
1995 1994
------- -------
(IN THOUSANDS)
Trade.............................................................. $41,057 $28,271
Other.............................................................. 88 81
------- -------
41,145 28,352
Less allowance for uncollectible accounts.......................... 4,535 4,723
------- -------
$36,610 $23,629
======= =======
(3) PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1995 and 1994 consists of:
1995 1994
-------- -------
(IN THOUSANDS)
Land and improvements............................................. $ 85 $ 87
Building and improvements......................................... 1,125 1,412
Equipment and furniture........................................... 120,576 91,599
-------- -------
$121,786 $93,098
======== =======
Rental equipment of approximately $94,785,000 in 1995 and $71,324,000 in
1994 is included with equipment and furniture.
(4) LEASES
The Company has several noncancelable operating leases, primarily for
buildings, computer equipment and vehicles, that expire over the next five years
and provide for purchase or renewal options. Operating lease expense was
approximately $9,781,000 in 1995, $6,971,000 in 1994, and $5,469,000 in 1993.
Future minimum lease payments under noncancelable operating leases, net of
sublease income, as of December 31, 1995 are as follows:
(IN THOUSANDS)
1996........................................................ $ 8,668
1997........................................................ 6,754
1998........................................................ 4,338
1999........................................................ 1,900
2000........................................................ 556
--------------
Total minimum lease payments...................... $ 22,216
===========
(5) REVOLVING CREDIT LOAN
Under the revolving line of credit, the Company may borrow amounts up to
$50,000,000. The maturity date is sixty months from the date of the note. The
revolving line of credit bears interest at LIBOR plus 58 basis points (6.55% at
December 31, 1995). The line of credit is comprised of three distinct termed
loan periods. Each termed loan period commences on the date that is exactly 24,
36 and 48 months from the date of the loan (February 10, 1995). The principal
amount outstanding on the first day at each of the three termed loan periods is
repaid separately, based on a 60-month amortization plus interest monthly. The
unpaid
F-8
28
LINCARE HOLDINGS INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
principal on the maturity date (February 10, 2000) will be paid in one final
installment. Interest accrued on the outstanding principal balance that is not
termed for repayment is payable monthly. The Loan Agreement contains several
financial and other covenants and is secured by, effectively, all of the assets
of the Company. At December 31, 1995, $5,000,000 was outstanding under the
revolving line of credit. At December 31, 1994, $2,000,000 was outstanding under
the revolving line of credit.
Amortization of loan origination fees amounted to approximately $5,000 in
1995, $4,000 in 1994 and $1,000 in 1993.
(6) LONG-TERM OBLIGATIONS
Long-term obligations generally consist of unsecured, non-interest bearing
deferred acquisition obligations payable in varying installments through 1998.
Unamortized imputed interest at 5.75% to 8.25% was $45,000 in 1995, $47,000 in
1994 and $62,000 in 1993.
The aggregate maturities of long-term obligations for each of the five
years subsequent to December 31, 1995 are as follows:
(IN THOUSANDS)
1996........................................................... $4,992
1997........................................................... 1,701
1998........................................................... 682
-------
$7,375
===========
(7) INCOME TAXES
The tax effects of temporary differences that account for significant
portions of the deferred tax assets and deferred tax liabilities at December 31,
1995 and 1994 are presented below:
1995 1994
------- -------
(IN THOUSANDS)
Deferred tax assets:
Accounts receivable, principally due to allowance for
uncollectible
accounts...................................................... $(1,779) $(1,878)
Accrued expenses, principally due to deferral for income tax
reporting purposes............................................ (1,881) (1,140)
Intangible assets and covenants not to compete, principally due
to differences in amortization................................ (2,727) (2,777)
------- -------
Total gross deferred tax assets.......................... (6,387) (5,795)
------- -------
Deferred tax liabilities:
Property and equipment, principally due to differences in
depreciation.................................................. 7,054 7,182
Goodwill, principally due to differences in amortization......... 2,430 922
Other............................................................ 3,610 946
------- -------
Total gross deferred tax liabilities..................... 13,094 9,050
------- -------
Net deferred tax liability............................... $ 6,707 $ 3,255
======= =======
There was no valuation allowance for deferred tax assets as of January 1,
1995 or December 31, 1995. The Company expects the results of future operations
will generate sufficient taxable income to allow for the utilization of deferred
tax assets.
F-9
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LINCARE HOLDINGS INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Income tax expense attributable to operations consists of:
YEAR ENDED DECEMBER 31,
---------------------------
1995 1994 1993
------- ------- -------
(IN THOUSANDS)
Current:
Federal................................................. $27,164 $23,224 $15,549
State................................................... 3,102 4,147 3,483
------- ------- -------
Total current................................... 30,266 27,371 19,032
------- ------- -------
Deferred:
Federal................................................. 2,072 (2,606) (605)
State................................................... 296 (398) (133)
------- ------- -------
Total deferred.................................. 2,368 (3,004) (738)
------- ------- -------
$32,634 $24,367 $18,294
======= ======= =======
Total income tax expense was allocated:
Income from operations.................................. $32,634 $24,367 $18,294
Stockholders' equity for compensation expense for tax
purposes............................................. (5,450) (6,616) (5,934)
------- ------- -------
$27,184 $17,751 $12,360
======= ======= =======
Total income tax expense differs from the amounts computed by applying U.S.
federal income tax rates (35% in 1995, 1994 and 1993) to income before income
taxes as a result of the following:
YEAR ENDED DECEMBER 31,
---------------------------
1995 1994 1993
------- ------- -------
(IN THOUSANDS)
Computed "expected" tax expense........................... $29,286 $21,812 $16,291
State income taxes, net of federal income tax benefit..... 2,209 2,437 2,178
Other..................................................... 1,139 118 (175)
------- ------- -------
Total income tax expense........................ $32,634 $24,367 $18,294
======= ======= =======
(8) STOCKHOLDERS' EQUITY
The Company has 4,879,238 authorized and unissued shares of preferred
stock. The Board of Directors has the authority to issue up to such number of
shares of preferred stock in one or more series and to fix the rights,
preferences, privileges, qualifications, limitations and restrictions thereof
without any further vote or action by the stockholders.
(9) STOCK OPTIONS
The Company has reserved a total of 2,973,768 shares of common stock for
issuance under its Non-Qualified Stock Option Plan (the Plan). Of the options
outstanding under the Plan at December 31, 1995, 264,579 are exercisable as of
January 1, 1996. At December 31, 1995, there were 76,979 shares available for
issue under the Plan.
The Company has reserved a total of 1,600,000 shares of common stock for
issuance under its 1991 Stock Plan (the 1991 Plan). Options granted vest between
December 31, 1992 and December 1, 1998. Of the options outstanding under the
1991 Plan, 74,400 are exercisable as of December 31, 1995 and 334,000 are
exercisable between December 1, 1996 and 1998. At December 31, 1995 there were
42,400 shares available for issuance under the 1991 Plan.
F-10
30
LINCARE HOLDINGS INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company has reserved a total of 500,000 shares of common stock for
issuance under its 1994 Stock Plan (the 1994 Plan). Options granted vest between
December 1, 1997 and December 1, 1998. At December 31, 1995, there were 30,000
shares available for issue under the 1994 Plan.
Information related to the Plan is as follows:
NUMBER OF OPTION
OPTIONS PRICES
--------- -------------
Outstanding at December 31, 1993............................ 2,879,310 $ .25-$19.00
Exercised in 1994........................................... (724,248) $ .25-$19.00
--------- -------------
Outstanding at December 31, 1994............................ 2,155,062 $ .25-$19.00
Exercised in 1995........................................... (562,704) $ .25-$19.00
Surrendered in 1995......................................... (91,379) $ .25-$19.00
Options issued in 1995...................................... 542,000 $24.63-$28.50
--------- -------------
Outstanding at December 31, 1995............................ 2,042,979 $ .25-$28.50
======== ============
In connection with the exercise of certain stock options in 1995, 1994 and
1993, the Company receives a tax deduction for the difference between the fair
value of the common stock at the date of exercise and the exercise price. The
related income tax benefit of approximately $5,450,000 in 1995, $6,616,000 in
1994 and $5,934,000 in 1993 has been recorded as a reduction of income taxes
payable and an addition to additional paid-in capital.
(10) NET REVENUES
Included in the Company's net revenues is reimbursement from the federal
government under the Medicare and under Medicaid programs which aggregated
approximately 60% in 1995, 58% in 1994 and 57% in 1993.
(11) NON-RECURRING EXPENSE
Related to the abandoned merger between the Company and Coram Healthcare
Corporation, the Company recorded a nonrecurring expense of $1,921,000. Such
non-recurring expense is comprised of (a) $1,448,000 of professional fees, (b)
$199,000 of printing and mailing expenses, (c) $153,000 of filing fees, and (d)
$121,000 of other direct costs.
(12) SUPPLEMENTAL STATEMENTS OF CASH FLOWS INFORMATION
YEAR ENDED DECEMBER 31,
---------------------------
1995 1994 1993
------- ------- -------
(IN THOUSANDS)
Cash paid for:
Interest........................................................ $ 762 $ 254 $ 183
======= ======= =======
Income taxes.................................................... $25,036 $19,983 $11,609
======= ======= =======
(13) BUSINESS COMBINATIONS
During 1995, the Company acquired the outstanding stock or certain assets
of 22 businesses in 22 separate transactions. During 1994, the Company acquired
the outstanding stock or certain assets of 26 businesses in 20 separate
transactions. Consideration for the acquisitions generally included cash,
unsecured non-interest bearing obligations and the assumption of certain
liabilities.
F-11
31
LINCARE HOLDINGS INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
None of the businesses acquired were related to the Company prior to
acquisition. Each acquisition during 1995 and 1994 was accounted for as a
purchase. The results of operations of the acquired companies are included in
the accompanying consolidated statement of operations since the respective date
of acquisition. Each of the acquired companies conducted operations similar to
that of the Company.
The aggregate cost of the above acquisitions was as follows:
1995 1994
------- -------
(IN THOUSANDS)
Cash............................................................... $58,865 $52,904
Deferred acquisition obligations................................... 9,140 7,701
Assumption of liabilities.......................................... 2,929 947
------- -------
$70,934 $61,552
======= =======
The aggregate purchase price was allocated as follows:
1995 1994
------- -------
(IN THOUSANDS)
Current assets (including cash acquired of $275 in 1995)........... $ 8,097 $ 2,915
Property and equipment............................................. 4,731 4,024
Intangible assets.................................................. 12,056 11,613
Goodwill........................................................... 46,050 43,000
------- -------
$70,934 $61,552
======= =======
The following unaudited pro forma supplemental information on the results
of operations for the years ended December 31, 1995 and 1994 include the
acquisitions as if they had been combined at the beginning of the respective
years.
1995 1994
-------- --------
(IN THOUSANDS)
Net revenues..................................................... $291,100 $213,237
======== ========
Net income....................................................... $ 54,304 $ 40,106
======== ========
Net income per common share...................................... $ 1.90 $ 1.42
======== ========
The unaudited pro forma financial information is not necessarily indicative
of either the results of operations that would have occurred had the
transactions been effected at the beginning of the respective preceding years or
of future results of operations of the combined companies.
(14) CONTINGENCIES
In January 1994, the Company was advised by the United States Attorney for
the Middle District of Florida that a grand jury has been investigating certain
services provided by the Company to a pharmacy that supplied medications to home
respiratory patients. Under its contracts with the pharmacy, the Company was
responsible for providing various marketing, field administration and patient
services to the pharmacy. The contracts were in effect from February 1989 to
April 1992, and accounted for less than one percent of the Company's revenues
during such period. The Company is also involved in certain other claims and
legal actions arising in the ordinary cause of business. In the opinion of
management, the ultimate disposition of all matters will not have a material
adverse impact on the Company's financial position, results of operations or
liquidity.
F-12
32
LINCARE HOLDINGS INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(15) QUARTERLY FINANCIAL DATA (UNAUDITED)
The following is a summary of quarterly financial results for the years
ended December 31, 1995 and 1994:
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
1995:
Net revenues.................................... $61,223 $67,400 $71,876 $74,301
======= ======= ======= =======
Operating income(1)............................. $19,415 $21,135 $20,649 $23,004
======= ======= ======= =======
Net income(1)................................... $11,862 $12,778 $12,429 $13,970
======= ======= ======= =======
Income per common share(1)...................... $ .42 $ .45 $ .43 $ .49
======= ======= ======= =======
1994:
Net revenues.................................... $44,009 $49,267 $52,812 $55,054
======= ======= ======= =======
Operating income................................ $13,255 $14,922 $16,555 $17,526
======= ======= ======= =======
Net income...................................... $ 8,129 $ 9,022 $10,102 $10,700
======= ======= ======= =======
Income per common share(2)...................... $ 0.29 $ 0.32 $ 0.36 $ 0.38
======= ======= ======= =======
- ---------------
(1) The 1995 third quarter operating income included a nonrecurring expense of
$1,921,000 ($1,172,000 or $.04 per share after taxes) (see note 11).
(2) Based on the weighted average number of common shares and common share
equivalents outstanding for each quarter. The total of the four quarters do
not equal the annual amount as a result of the treasury stock method of
calculating weighted average number of common shares and common share
equivalents outstanding.
F-13
33
SCHEDULE VIII
LINCARE HOLDINGS INC.
AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
CHARGED TO
BALANCE AT CHARGED TO OTHER
BEGINNING COSTS AND ACCOUNTS DEDUCTIONS BALANCE AT
DESCRIPTION OF PERIOD EXPENSES DESCRIBE DESCRIBE END OF PERIOD
- -------------------------------------- ---------- ---------- ---------- ---------- -------------
(IN THOUSANDS)
YEAR ENDED DECEMBER 31, 1995
Deducted from asset accounts:
Allowance for uncollectible
accounts......................... $4,723 $2,190 $1,713(1) $4,091(2) $ 4,535
====== ====== ====== ====== ======
YEAR ENDED DECEMBER 31, 1994
Deducted from asset accounts:
Allowance for uncollectible
accounts......................... $4,596 $1,546 $ 617(1) $2,036(2) $ 4,723
====== ====== ====== ====== ======
YEAR ENDED DECEMBER 31, 1993
Deducted from asset accounts:
Allowance for uncollectible
accounts......................... $3,860 $1,832 $ 903(1) $1,999(2) $ 4,596
====== ====== ====== ====== ======
- ---------------
(1) To record allowance on business combinations
(2) To record write-offs
S-1