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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly period Ended March 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
-------------- ----------------.
Commission File No. 0-9407
REHABILICARE INC.
(Exact name of registrant as specified in its charter)
MINNESOTA 41-0985318
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1811 OLD HIGHWAY 8
NEW BRIGHTON, MINNESOTA 55112
(Address of principal executive offices)
(651) 631-0590
(Registrant's telephone number, including area code)
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 each of the issuer's classes of common stock
as of May 10, 2000 was:
COMMON STOCK, $.10 PAR VALUE 10,569,630 SHARES
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Included herein is the following unaudited condensed
financial information:
Consolidated Balance Sheets as of March 31, 2000 and
June 30, 1999
Consolidated Statements of Operations for the three
months and nine months ended March 31, 2000 and 1999
Consolidated Statements of Cash Flows for the nine
months ended March 31, 2000 and 1999
Notes to Consolidated Financial Statements
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REHABILICARE INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
MARCH 31, JUNE 30,
2000 1999
------------- --------------
ASSETS
------
CURRENT ASSETS:
Cash and cash equivalents $ 2,432,991 $ 561,207
Receivables, less reserve for uncollectible accounts of $5,026,783
and $4,913,635 19,210,079 17,233,469
Inventories
Raw materials 1,453,427 1,825,487
Work in process 338,138 377,771
Finished goods 6,542,763 6,709,525
Deferred tax assets 2,587,686 2,587,686
Prepaid expenses 1,306,945 584,330
------------ ------------
Total current assets 33,872,029 29,879,475
PROPERTY, PLANT AND EQUIPMENT: 11,460,127 11,548,678
Less accumulated depreciation (6,186,248) (6,930,564)
------------ ------------
Net property, plant and equipment 5,273,879 4,618,114
Intangible assets, net 12,335,808 1,150,009
Deferred tax assets 224,952 40,121
Other assets 47,672 11,995
------------ ------------
$ 51,754,340 $ 35,699,714
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Note payable $ 3,000,000 $ 2,400,000
Current maturities of long-term debt 1,982,914 1,241,037
Accounts payable 1,957,403 2,038,732
Accrued liabilities
Payroll 344,372 575,426
Commissions 289,021 491,990
Other 2,053,033 1,560,297
Minority interest 10,733 24,681
------------ ------------
Total current liabilities 9,637,476 8,332,163
LONG-TERM LIABILITIES:
Long-term debt 14,319,536 4,066,914
Deferred tax liabilities 1,389,011 247,328
------------ ------------
Total liabilities 25,346,023 12,646,405
STOCKHOLDERS' EQUITY:
Common stock, $.10 par value: 25,000,000 shares authorized; 1,056,963 1,049,491
issued and outstanding 10,569,630 and 10,494,908 shares
Preferred stock, no par value; 5,000,000 shares authorized; none
issued and outstanding --- ---
Additional paid-in capital 20,875,527 20,740,650
Less note receivable from officer/stockholder (210,417) (237,500)
Accumulated other non-owner changes in equity (151,601) (1,637)
Retained earnings 4,837,845 1,502,305
------------ ------------
Total stockholders' equity 26,408,317 23,053,309
------------ ------------
$ 51,754,340 $ 35,699,714
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REHABILICARE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED
MARCH 31 MARCH 31
-------------------------------------- ---------------------------------------
2000 1999 2000 1999
----------------- ----------------- ----------------- ------------------
Net sales and rental revenue $13,949,721 $10,919,706 $42,604,077 $ 30,886,253
Cost of sales and rentals 4,141,278 3,107,808 12,847,569 8,770,646
----------------- ----------------- ----------------- ------------------
Gross profit 9,808,443 7,811,898 29,756,508 22,115,607
Operating expenses:
Selling, general and administrative 7,888,129 6,262,041 22,887,512 17,517,381
Research and development 340,244 268,158 947,123 713,461
Acquisition expense --- --- --- 79,107
----------------- ----------------- ----------------- ------------------
Total operating expenses 8,228,373 6,530,199 23,834,635 18,309,949
----------------- ----------------- ----------------- ------------------
Income from operations 1,580,070 1,281,699 5,921,873 3,805,658
Other income (expense):
Interest expense (410,628) (148,945) (1,165,330) (405,109)
Gain on sale of building --- --- 1,075,680 ---
Minority interest (3,850) (24,107) 13,948 (24,107)
Other (10,176) (1,913) (97,631) 8,478
----------------- ----------------- ----------------- ------------------
Income before income taxes 1,155,416 1,106,734 5,748,540 3,384,920
----------------- ----------------- ----------------- ------------------
Provision for income taxes 486,000 420,000 2,413,000 1,285,000
----------------- ----------------- ----------------- ------------------
Net income $ 669,416 $ 686,734 $ 3,335,540 $ 2,099,920
================= ================= ================= ==================
Net income per common and
common equivalent share
Basic $ 0.06 $ 0.07 $ 0.31 $ 0.20
================= ================= ================= ==================
Diluted $ 0.06 $ 0.07 $ 0.31 $ 0.20
================= ================= ================= ==================
Weighted average number of shares
outstanding
Basic
10,569,275 10,472,019 10,548,712 10,462,325
================= ================= ================= ==================
Diluted
10,612,967 10,532,783 10,635,278 10,501,956
================= ================= ================= ==================
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REHABILICARE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
NINE MONTHS ENDED
MARCH 31
----------------------------------------------------
2000 1999
------------------------ -------------------------
OPERATING ACTIVITIES:
Net income $ 3,335,540 $ 2,099,920
Adjustments to reconcile net income to net cash
provided by (used in) operating activities
Gain on sale of building (1,075,680) ---
Depreciation and amortization 1,568,382 611,111
Change in long-term portion of deferred taxes 85,655 ---
Minority interest (13,948) ---
Change in current assets and liabilities, excluding effects of
business combinations
Receivables 200,314 (2,404,871)
Inventories 2,115,807 (855,906)
Prepaid expenses (615,683) (423,367)
Accounts payable (1,757,582) 112,422
Accrued liabilities (1,061,835) (52,871)
--------------- -------------
Net cash provided by (used in) operating activities 2,780,970 (913,562)
INVESTING ACTIVITIES:
Purchases of property and equipment (1,314,374) (268,201)
Cash paid in asset acquisition, net of cash received (12,598,117) (3,650,000)
Proceeds from sale of building 1,726,930 ---
--------------- -------------
Net cash used in investing activities (12,185,561) (3,918,201)
FINANCING ACTIVITIES:
Proceeds from new financing 15,339,365 2,500,000
Principal payments on long-term obligations (3,403,203) (845,173)
Proceeds from line of credit, net 600,000 2,500,000
Payment of capital lease obligation (1,261,733) ---
Proceeds from exercise of stock options 39,059 3,895
Proceeds from employee stock purchase plan 103,290 53,194
--------------- -------------
Net cash provided by financing activities 11,416,778 4,211,886
Effect of exchange rates on cash and cash equivalents (140,403) ---
--------------- -------------
Net increase (decrease) in cash and cash equivalents 1,871,784 (619,877)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 561,207 919,765
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 2,432,991 $ 299,888
=============== =============
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid $ 1,118,156 $ 293,915
=============== =============
Income taxes paid $ 1,842,984 $ 1,022,859
=============== =============
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REHABILICARE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE NINE MONTH PERIOD ENDED MARCH 31, 2000
The Company used a term loan and a credit line to finance certain
business combinations accounted for under the purchase method during the
first nine months of fiscal 2000 and 1999. The fair value of the assets and
liabilities of acquired companies at the dates of the acquisitions are
presented as follows:
For the Nine Months Ended
March 31
---------------------------------------------
2000 1999
-------------------- --------------------
Accounts receivable $ 2,176,925 $ 1,710,651
Inventories 1,537,352 1,179,280
Prepaid expenses 514,493 ---
Property and equipment 828,728 623,814
Intangible assets 11,571,716 1,000,000
Other long-term assets 203,224 ---
Accounts payable (1,666,687) (606,971)
Accrued liabilities (1,707,466) (17,633)
Long-term liabilities (860,168) (239,141)
-------------------- --------------------
Net assets acquired $ 12,598,117 $ 3,650,000
==================== ====================
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REHABILICARE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
1. ACCOUNTING POLICIES
The amounts set forth in the preceding financial statements are unaudited as of
and for the periods ended March 31, 2000 and 1999 but, in the opinion of
management, reflect all adjustments (consisting only of normal recurring
adjustments) necessary for a fair statement of the results for the periods
presented. Such results are not necessarily indicative of results for the full
year. The significant accounting policies and certain financial information
which are normally included in financial statements prepared in accordance with
generally accepted accounting principles, but which are not required for interim
reporting purposes, have been omitted. The accompanying financial statements of
the Company should be read in conjunction with the audited consolidated
financial statements for the year ended June 30, 1999 included in the Company's
Annual Report on Form 10-KSB.
In June 1998, the FASB issued Statement of Financial Accounting Standards No.
133, "Accounting for Derivative Instruments and Hedging Activities." This
statement requires that all derivatives be recognized at fair value in the
balance sheet and all changes in fair value be recognized currently in earnings
or deferred as a component of other comprehensive income, depending on the
intended use of the derivative, its resulting designation and its effectiveness.
The Company does not believe that the implementation of this statement will have
an effect on the Company's results of operations, cash flows or financial
position.
2. BUSINESS COMBINATIONS
On July 19, 1999, the Company acquired all of the outstanding capital stock of
Compex SA, a Swiss-based medical products company, for cash of $10,747,967. The
acquisition was financed principally with debt and provides for additional
contingent consideration of up to $2,000,000 based on performance for the
calendar years 1999 and 2000. The initial purchase consideration exceeded the
net fair value of tangible assets by $9,721,566, of which $1,400,000 represented
the value of Compex's technology, $1,400,000 represented the value of its
workforce and the remaining $6,921,566 of which was assigned to goodwill. The
value of these intangible assets will be amortized over various periods from
five to twenty years. The allocations are preliminary, pending the outcome of
certain pre-acquisition tax contingencies. Additional consideration of
approximately $1,800,000 was earned for performance in calendar year 1999 and
was paid in March 2000. That amount was included in goodwill as of December 31,
1999 and, effective January 1, 2000, was amortized accordingly.
Proforma operating results as if Compex SA had been acquired at the beginning of
fiscal 1999 are as follows:
For the Three Months Ended For the Nine Months Ended
March 31, 1999 March 31, 1999
--------------------------------------- ---------------------------------------
Net sales $ 13,628,000 $ 37,702,000
Income before taxes 808,000 2,490,000
Net Income 471,000 1,454,000
Earnings per share -
Basic $ .04 $ .14
Diluted .04 .14
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On August 7, 1998, the Company acquired substantially all of the assets
(consisting primarily of finished goods inventory and receivables) of the
Homecare business unit of Henley Healthcare, Inc. ("Henley") for a purchase
price of $3,650,000 paid in cash at closing. The cash paid was obtained from
existing funds and borrowings under the Company's bank line of credit, including
a $2,500,000 term loan payable over three years.
3. NOTE PAYABLE AND LONG TERM DEBT
In conjunction with its acquisition of Compex SA, the Company entered into a new
$20,000,000 credit facility which provides for both term and revolving
borrowings at varying rates based either on the bank's prime rate or LIBOR. The
initial term loan of $15,000,000 was used to fund the acquisition and repay the
balance of a mortgage note and a revolving loan provided under a credit facility
with another bank.
Borrowings under the new facility are secured by substantially all assets of the
Company other than those pledged as collateral on existing lease or mortgage
obligations. The interest rate on the term loan was 8.76% at March 31, 2000 and
the weighted average rate on borrowings under the revolving line of credit was
8.88%.
The Company was in compliance with all financial covenants in its credit
agreement as of March 31, 2000 and for the period then ended.
4. SEGMENT INFORMATION
Rehabilicare and its consolidated subsidiaries operate their business in one
reportable segment, the manufacture and distribution of electromedical pain
management and rehabilitation products. The Company's chief operating decision
makers use consolidated results to make operating and strategic decisions. Net
revenue from United States and foreign sources (primarily Europe) was as
follows:
For the Nine Months Ended March 31
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2000 1999
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U.S. revenues $ 31,010,778 $ 30,257,423
Foreign revenues 11,593,299 628,830
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Total $ 42,604,077 $ 30,886,253
================ ============
Net revenue by product line was as follows:
For the Nine Months Ended March 31
--------------------------------------------------------------------
2000 1999
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Rehabilitation products $ 18,515,274 $ 8,070,198
Pain management 10,930,577 10,922,217
Accessories and supplies 13,158,226 11,893,838
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$ 42,604,077 $ 30,886,253
=============== ==============
No single customer represents over 10% of the Company's consolidated
revenues.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
REHABILICARE INC.
May 15, 2000 /s/ David B. Kaysen
- --------------------------- --------------------------------------------
Date David B. Kaysen
President and Chief Executive Officer
May 15, 2000 /s/ W. Glen Winchell
- --------------------------- --------------------------------------------
Date W. Glen Winchell
Vice President of Finance
(Principal Financial and Accounting Officer)
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