SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
Current Report
Pursuant to Section 13 or 15(d) of
The Securities Act 1934
Date of Report (Date of earliest event reported) October 21, 1996
----------------
Respironics, Inc.
-----------------
(Exact name of registrant as specified in its charter)
Delaware 000-16723 25-1304989
- ----------------------------- ----------- ------------------
State or other jurisdiction Commission IRS Employer
of incorporation File Number Identification No.
1001 Murry Ridge Drive, Murrysville, PA 15668
- --------------------------------------- -----
(Address of principal executive officers) (Zip Code)
Registrant's telephone number, including area code (412) 733-0200
--------------
Item 1. Changes in Control of Registrant
None
Item 2. Acquisition or Disposition of Assets.
On October 21, 1996, Respironics, Inc. ("Respironics")
completed the acquisition of LIFECARE International, Inc.
("LCI") from its owners pursuant to the provisions of an
Agreement for Purchase and Sale of Stock dated as of
August 21, 1996. Respironics paid a cash purchase price
of $50,000,000.
LCI is a privately held developer, manufacturer and
marketer of respiratory therapy products and is based in
Westminster, Colorado. LCI's primary business focus is on
portable home ventilation therapy.
There are no material relationships between LCI and
Respironics or any of its affiliates, any director or officer
of Respironics, or any associate of such director or officer.
The acquisition was financed primarily with the proceeds
from a public offering of Respironics common stock that
was completed in April 1996. The remainder of the
purchase price was financed with accumulated cash and
short-term investment balances.
Item 3. Bankruptcy or Receivership.
None
Item 4. Changes in Registrant's Certifying Accountant.
None
Item 5. Other Events.
None
1
Item 6. Resignation of Registrant's Directors.
None
Item 7. Financial Statements and Exhibits.
(a) Financial statements of LCI for the periods specified in
Rule 3-05(b) of Regulation S-X (included as Attachment 1
hereto)
(b) It is impracticable at this time to provide the pro forma
financial information required pursuant to Article 11 of
Regulation S-X. This pro forma financial information will be
filed as soon as practicable and not later than 60 days after
the due date for this Report on Form 8-K.
(c) The Agreement for Purchase and Sale of Stock relative to
the acquisition of LCI was filed as Exhibit 10.25 to
Respironics' Annual Report on Form 10-K for the year ended June
30, 1996.
(d) Consent of Ernst & Young LLP, filed herewith as Exhibit 23.1
2
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
November 5, 1996 RESPIRONICS, INC.
/s/ James C. Woll
_____________________
James C. Woll
Treasurer
3
Attachment 1
Consolidated Financial Statements
LIFECARE(R) International, Inc.
Years ended March 31, 1996, 1995 and 1994
with Report of Independent Auditors
4
Report of Independent Auditors
Board of Directors
LIFECARE(R) International, Inc.
We have audited the accompanying consolidated balance sheets of LIFECARE(R)
International, Inc. as of March 31, 1996 and 1995, and the related consolidated
statements of income, stockholders' equity, and cash flows for each of the three
years in the period ended March 31, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these 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 financial statements referred to above present fairly, in
all material respects, the consolidated financial position of LIFECARE(R)
International, Inc. at March 31, 1996 and 1995, and the consolidated results of
their operations and their cash flows for each of the three years in the period
ended March 31, 1996, in conformity with generally accepted accounting
principles.
Ernst & Young LLP
Denver, Colorado
May 30, 1996
5
LIFECARE(R) International, Inc.
Consolidated Balance Sheets
(in thousands, except share and per share amounts)
March 31
1996 1995
------------------
Assets (Note 3)
Current assets:
Cash $ 558 $ 362
Securities in escrow (Note 3) 918 966
Trade accounts receivable, less
allowance for doubtful accounts
of $641 in 1996 and $918 in 1995 6,244 7,550
Inventories 5,982 6,110
Deferred income taxes (Note 7) 577 688
Income taxes receivable - 86
Net investment in sales-type
leases, current portion
(Note 2) 261 311
Prepaid expenses 71 88
-----------------
Total current assets 14,611 16,161
Rental equipment 11,466 10,851
Less accumulated depreciation 7,826 7,356
-----------------
3,640 3,495
Property and equipment:
Land 555 555
Building 3,550 3,508
Office furniture and equipment 3,819 3,488
Machinery and other 1,952 2,011
-----------------
9,876 9,562
Less accumulated depreciation 3,867 3,235
and amortization
-----------------
6,009 6,327
Other assets:
Net investment in sales-type
leases, net of current
portion (Note 2) 182 333
Deposits and other assets 146 261
-----------------
328 594
Intangibles:
Patents and trademarks, less
accumulated amortization of
$269 in 1996 and $197 in 1995 46 118
Goodwill, less accumulated
amortization of $241 in 1996
and $198 in 1995 615 658
-----------------
661 776
-----------------
Total assets $25,249 $27,353
=================
6
March 31
1996 1995
----------------
Liabilities and stockholders' equity
Current liabilities:
Notes payable (Note 3) $ 19 $ 1,254
Current maturities of long-term
debt (Note 3) 1,961 2,314
Accounts payable 1,151 2,280
Accrued expenses 1,966 1,258
Income taxes payable 365 62
----------------
Total current liabilities 5,462 7,168
Notes payable, less current maturities 99 3,209
(Note 3)
Long-term debt, less current maturities 10,158 8,634
(Note 3)
Deferred income taxes (Note 7) 674 569
Commitments and contingencies (Notes 3
and 6)
Stockholders' equity (Notes 3 and 4):
Common stock, par value $.10 per share:
Authorized shares - 500,000 28 27
Additional paid-in capital 429 217
Retained earnings 8,384 7,441
Equity adjustment from translation 15 88
----------------
Total stockholders' equity 8,856 7,773
Total liabilities and stockholders' ----------------
equity $25,249 $27,353
================
See accompanying notes.
7
LIFECARE(R) International, Inc.
Consolidated Statements of Income
(in thousands)
Year ended March 31
1996 1995 1994
---------------------------
Operating revenues:
Rental and maintenance income (Note 2) $15,337 $14,448 $14,969
Sales of equipment and parts 17,753 16,514 12,820
---------------------------
Net operating revenues 33,090 30,962 27,789
Costs and expenses:
Cost of rental equipment, maintenance
and repairs 5,323 5,625 5,180
Cost of sales of equipment and parts 9,641 10,615 7,465
Selling, general and administrative 13,033 12,024 11,034
Research and development 2,114 1,666 1,879
---------------------------
Total operating expenses 30,111 29,930 25,558
---------------------------
Operating income 2,979 1,032 2,231
Other income (expense):
Interest expense (1,121) (1,104) (706)
Other income 17 156 60
---------------------------
Total other expense (1,104) (948) (646)
---------------------------
Income before income taxes 1,875 84 1,585
Income taxes (Note 7) 772 6 568
---------------------------
Net income $ 1,103 $ 78 $ 1,017
===========================
See accompanying notes.
8
LIFECARE(R) International, Inc.
Consolidated Statements of Stockholders' Equity
(in thousands, except share and per share amounts)
Common Stock Additional Treasury Stock
--------------------- Paid-In Retained Transla- -----------------
Shares Amount Capital Earnings tion Shares Amount Total
--------------------------------------------------------------------------------------
Balance, March 31, 1993 293,086 $29 $ 717 $6,735 $ - (35,440) $(908) $6,573
Dividends on common stock,
$.05 per share - - - (12) - - - (12)
Exercise of stock options by
officers (Note 4) - - - (95) - 4,974 128 33
Shares purchased into treasury - - - - - (1,485) (64) (64)
Net income - - - 1,017 - - - 1,017
--------------------------------------------------------------------------------------
Balance, March 31, 1994 293,086 29 717 7,645 - (31,951) (844) 7,547
Dividends on common stock
$.05 per share - - - (13) - - - (13)
Exercise of stock options
by officers (Note 4) - - - (269) - 13,474 350 81
Shares purchased into treasury - - - - - (200) (8) (8)
Retirement of treasury shares (18,677) (2) (500) - - 18,677 502 -
Translation adjustment - - - - 88 - - 88
Net income - - - 78 - - - 78
--------------------------------------------------------------------------------------
Balance, March 31, 1995 274,409 27 217 7,441 88 - - 7,773
Dividends on common stock,
$.025 per share - - - (7) - - - (7)
Exercise of stock options by
officers (Note 4) 7,920 1 212 (153) - - - 60
Translation adjustment - - - - (73) - - (73)
Net income - - - 1,103 - - - 1,103
--------------------------------------------------------------------------------------
Balance, March 31, 1996 282,329 $28 $ 429 $8,384 $ 15 - $ - $8,856
======================================================================================
See accompanying notes.
9
LIFECARE(R) International, Inc.
Consolidated Statements of Cash Flows
(in thousands)
Year ended March 31
1996 1995 1994
-----------------------------
Operating activities
Net income $ 1,103 $ 78 $ 1,017
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 2,226 1,999 2,075
Gain on disposition of rental equipment
and property and equipment (38) (117) (288)
Changes in assets and liabilities:
Accounts receivable 1,306 90 (3,494)
Inventories (1,102) (1,069) (1,026)
Income taxes receivable 86 198 (101)
Prepaid expenses 17 7 (2)
Deposits and other assets 115 (203) (25)
Accounts payable (1,129) (282) 1,335
Accrued expenses 708 54 (464)
Income taxes payable 303 (29) (31)
Deferred income taxes 216 (321) 88
-----------------------------
Net cash provided by (used in) operating activities 3,811 405 (916)
Investing activities
Proceeds from sale of rental equipment and
property and equipment - 1,883 674
Purchases and transfers of rental equipment and
property and equipment (670) (5,431) (2,334)
Principal payments received on net investment in
sales-type leases 670 639 357
Increase in net investment in sales-type leases (469) (526) (801)
-----------------------------
Net cash used in investing activities (469) (3,435) (2,104)
Financing activities
Net borrowings (payments) on revolving line of credit (1,095) 599 2,690
Proceeds from long-term borrowings 230 5,667 2,210
Principal payments on long-term borrowings (2,261) (3,214) (1,978)
Purchase of common stock for the treasury - (8) (64)
Proceeds from sale of common and treasury stock 60 81 33
Cash dividends paid (7) (13) (12)
-----------------------------
Net cash provided by (used in) financing activities (3,073) 3,112 2,879
Adjustment from translation (73) 88 -
-----------------------------
Net increase (decrease) in cash 196 170 (141)
Cash at beginning of year 362 192 333
-----------------------------
Cash at end of year $ 558 $ 362 $ 192
=============================
See accompanying notes.
10
LIFECARE(R) International, Inc.
Notes to Consolidated Financial Statements
March 31, 1996
(in thousands, except share and per share amounts)
1. Nature of Business and Significant Accounting Policies
Nature of Business
LIFECARE(R) International, Inc. was incorporated in August 1968 in the state of
Colorado. The Company manufactures, rents, sells, and services respiratory
devices to customers in the health care industry on a worldwide basis. The
Company's business is conducted through eighteen district offices and the
corporate headquarters in the United States; its sales and service center in
Hong Kong; and a wholly-owned subsidiary, LIFECARE(R) Europe, GmbH, located
outside Munich, Germany.
Summary of Significant Accounting Policies
Principles of Consolidation
- ---------------------------
The consolidated financial statements include the accounts of LIFECARE(R)
International, Inc. and its wholly-owned subsidiary, LIFECARE(R) Europe, GmbH
(together, "the Company"). All material intercompany accounts and transactions
are eliminated in consolidation.
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 amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
Revenue Recognition
- -------------------
Revenue related to sales of equipment and parts is recorded at the time of
shipment. Revenue related to rental of equipment is recorded ratably over the
term of the lease agreement.
Trade Accounts Receivable and Net Investment in Sales-Type Leases
- -----------------------------------------------------------------
The Company performs periodic credit evaluations of its customers' financial
condition and generally does not require collateral. The Company maintains
reserves for potential credit losses, and such losses have been within
management's expectations. A significant concentration of credit risk at March
31, 1996 includes receivables from federal and state
11
LIFECARE(R) International, Inc.
Notes to Consolidated Financial Statements (continued)
1. Nature of Business and Significant Accounting Policies (continued)
sponsored agencies (Medicare, Medicaid, etc.) which comprise approximately 23%
of accounts receivable. At March 31, 1996, the Company has no other significant
concentrations of outstanding trade accounts receivable or sales-type leases.
Inventories
- -----------
Inventories are valued at the lower of cost (determined on the first-in, first-
out method) or market. Inventories consist primarily of parts, supplies (which
include parts used in the repair of rental equipment) and finished goods.
Rental Equipment, Property and Equipment
- ----------------------------------------
Purchased rental equipment, property and equipment is recorded at cost. Rental
equipment manufactured by the Company is capitalized based on manufacturing
cost. Depreciation of rental equipment, property and equipment, including the
improvements thereto, is computed using the straight-line method over the
respective estimated useful lives, generally between three and thirty years.
All equipment acquired under capital leases is treated as purchased equipment,
recorded at cost and depreciated over its economic life.
Long-Lived Assets
- -----------------
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to be Disposed Of ("SFAS No. 121"), which
requires impairment losses to be recorded on long-lived assets used in
operations when indications of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the assets'
carrying amount. SFAS No. 121 also addresses the accounting for long-lived
assets that are expected to be disposed of. The Company will adopt SFAS No. 121
in fiscal year 1997 and, based on current circumstances, does not believe
adoption will have a significant impact on the financial statements.
Intangible Assets
- -----------------
Intangible assets consist of patents, trademarks and goodwill and are amortized
using the straight-line method over estimated useful lives of 17, 10 and 20
years, respectively.
12
LIFECARE(R) International, Inc.
Notes to Consolidated Financial Statements (continued)
1. Nature of Business and Significant Accounting Policies (continued)
Research and Development
- ------------------------
Costs of research, new product development and product redesign are expensed as
incurred.
Foreign Currency Translation
- ----------------------------
Effects of foreign exchange rate fluctuations on the Company's net investment in
its foreign subsidiary and on the operations thereof are included in the equity
adjustment from translation account within stockholders' equity. Translation
and transaction gains and losses are reflected in the consolidated statement of
income.
Fair Value of Financial Instruments
- -----------------------------------
The carrying amounts reported in the balance sheet for cash and cash
equivalents, trade accounts receivable, notes payable and long-term debt
approximate the fair value of these financial instruments.
Reclassifications
- -----------------
Certain amounts in the fiscal year 1995 financial statements have been
reclassified to conform with the fiscal year 1996 presentation.
2. Sales-Type Leases
The Company's rental business consists principally of the leasing of respiratory
equipment. Most of the Company's leases provide for month-to-month rentals and
are classified as operating leases. Rental income is recognized as earned.
13
LIFECARE(R) International, Inc.
Notes to Consolidated Financial Statements (continued)
2. Sales-Type Leases (continued)
The Company's rental business also includes sales-type leases for certain
equipment. These leases expire over the next three years. The components of
the net investment in sales-type leases are as follows:
March 31
1996 1995
--------------
Total minimum lease payments
to be received* $478 $705
Less unearned income 35 61
--------------
Net investment in sales-type leases 443 644
Less current portion 261 311
--------------
$182 $333
==============
* At March 31, 1996, the minimum lease payments for each of the succeeding
fiscal years ending on March 31 are as follows: 1997--$280; 1998--$146;
1999--$52.
3. Notes Payable, Long-Term Debt and Pledged Assets
Notes Payable
Notes payable consist of obligations of the Company pursuant to financing
facilities. They are generally designed to finance working capital.
March 31
1996 1995
--------------
Bank line of credit not to exceed
$3,500, prime plus .5% (8.5% prime
at March 31, 1996), interest due
monthly, secured by all assets of
the Company, due July 1997 $ 99 $3,999
German bank line of credit not to
exceed $800, variable interest rate
(9.5% at March 31, 1996), secured
by all of the subsidiary's accounts
receivable, due on demand 19 464
--------------
$118 $4,463
===============
14
LIFECARE(R) International, Inc.
Notes to Consolidated Financial Statements (continued)
3. Notes Payable, Long-Term Debt and Pledged Assets (continued)
Aggregate maturities of notes payable at March 31, 1996 are as follows:
Year ending March 31 Amount
-------------------------------------------
1997 $ 19
1998 99
---------
$118
=========
Long-Term Debt
Long-term debt consists of the following:
March 31
1996 1995
----------------
Bank note, prime plus 1% (8.5% prime at
March 31, 1996), $125 principal plus
interest due monthly, secured by all
assets of the Company, due July 2000 $ 6,750 $ 5,000
Industrial Development Revenue Bond,
variable interest rate, interest paid
monthly, due November 2009 (see bond
description below) 4,880 5,000
Equipment lease financing, capital
lease obligation, variable rate
(8.1% at March 31, 1996), $15
principal plus accrued interest
payable monthly, secured by certain
equipment, due through January 1998 184 332
Equipment vendor, capital lease
obligation, 8.7%, $12 principal plus
accrued interest payable monthly,
secured by computer equipment, due
April 1998 255 152
Note, 10%, $10 principal plus interest
due monthly, due September 1996 (note
due to an employee) 50 100
German bank note, 9.8% interest due
quarterly, principal due in full in
May 1995, secured by a $347 letter of
credit - 364
----------------
12,119 10,948
Current maturities 1,961 2,314
----------------
Long-term debt, less current maturities $10,158 $ 8,634
================
15
LIFECARE(R) International, Inc.
Notes to Consolidated Financial Statements (continued)
3. Notes Payable, Long-Term Debt and Pledged Assets (continued)
Aggregate maturities of long-term debt at March 31, 1996 are as follows:
Year ending March 31 Amount
--------------------- ---------
1997 $ 1,961
1998 1,839
1999 1,669
2000 1,660
2001 910
Thereafter 4,080
-------
$12,119
=======
Under the terms of the above loan agreements the Company is required to maintain
certain financial covenants and cannot sell, lease, or otherwise dispose of a
substantial part of its assets or operations and cannot pay dividends in excess
of $25 annually.
Payments for interest approximated interest expense for the years ended March
31, 1996 and 1994. During 1995, the Company paid $1,166 in interest, of which
$62 was capitalized.
The 1994 Industrial Development Revenue Bond
In December 1994, the Company entered a long-term obligation under an Industrial
Development Revenue bond issued by the City of Westminster, Colorado, for a
principal amount of $5,000 ("the IRB"). The IRB is guaranteed with a letter of
credit from a financial institution ("the Financial Institution") in the amount
of $5,074.
Principal is due at maturity in November 2009; however, the loan agreement with
the Financial Institution requires the Company to make a $40 principal payment
quarterly, as authorized by the IRB's indenture. Interest is payable monthly
and is equal to the lesser of:
(i) 10% per annum, or
(ii) a floating rate, determined weekly by the remarketing agent for the IRB,
a subsidiary of the Financial Institution, as the minimum rate which
would be necessary to remarket the IRB in a secondary market transaction,
in the amount of the then outstanding principal. The floating rate was
3.9% at March 31, 1996.
16
LIFECARE(R) International, Inc.
Notes to Consolidated Financial Statements (continued)
3. Notes Payable, Long-Term Debt and Pledged Assets (continued)
The interest rate may be converted to a fixed rate at the option of the Company
at any time after June 1995.
The proceeds from the issuance of the IRB are held in escrow in a fund ("the
Project Fund") by the IRB's bond trustee ("the Trustee") and have been released
to the Company based on certified progress reports provided by the Company on
the construction of its new Westminster facilities. At March 31, 1996, $4,157
had been released to the Company. The balance of the Project Fund,
representing $842 of unreleased bond issuance proceeds and $75 of earned
interest income, is invested by the Trustee into qualifying securities in which
it is authorized to invest under the IRB's Indenture of Trust. These securities
are carried at fair value as determined by the Trustee based on the most recent
available quotations.
Amounts held in the Project Fund are available to the Company on a restricted
basis, to the extent it incurs qualifying expenditures for the equipment of its
main manufacturing facility. If the Company has not incurred sufficient
qualifying expenditures by October 1997, the then unreleased portion of the
Project Fund will be distributed by the Trustee to the holders of the IRB as a
principal payment.
4. Stockholders' Equity
Stockholders' Agreement
The stockholders have entered into an agreement with the Company whereby the
sale or transfer of the Company's common stock owned by stockholders to third
parties is subject to restrictions. The agreement provides, among other items,
that upon retirement, disability, death or termination of employment the Company
will repurchase such individuals' stock (including any shares acquired pursuant
to stock option agreements) at a formula price as specified in the agreement.
The March 31, 1996 formula price was $46.99 per share. The agreement may be
terminated upon approval of holders of all of the outstanding common stock, or
upon the approval of a sale of the Company by holders of 51% of the outstanding
common stock.
Stock Options
The Company has an Incentive Stock Option Plan ("the Plan"), which provides for
the granting of stock options to officers of the Company. The stock options are
intended to qualify as "incentive stock options" under Section 422 of the
Internal Revenue Code.
17
LIFECARE(R) International, Inc.
Notes to Consolidated Financial Statements (continued)
4. Stockholders' Equity (continued)
The Company reserved an aggregate of 100,000 common shares for issuance under
the Plan. Option grants may be exercised for a period of not more than five
years in the case of a 10% or greater stockholder, or ten years for a less than
10% stockholder. Options vest as determined by the Board of Directors at the
date of grant. The option price of any incentive stock option shall equal or
exceed the fair market value per share on the date of grant, or 110% of the fair
market value per share in the case of a 10% or greater stockholder.
Stock option transactions were as follows:
March 31
1996 1995 1994
-------------------------------
Outstanding options at beginning
of year 7,920 21,394 26,368
Options exercised during the year (7,920) (13,474) (4,974)
------------------------------
Outstanding options at end of year - 7,920 21,394
==============================
Exercise price per share $ 7.60 $ 7.60 $5.70 - $7.60
Shares acquired pursuant to the Incentive Stock Option Plan are subject to the
terms, conditions and repurchase provisions of the stockholders' agreement
described above.
5. Profit-Sharing Plan
The Company has a qualified contributory profit-sharing plan for all employees
over 18 years of age. The plan provides for contributions in such amounts as
the Board of Directors may annually determine. The Company's contributions to
the plan for the years ended March 31, 1996, 1995 and 1994 were $566, $-0-, and
$190, respectively.
6. Commitments and Contingencies
The Company is party to a legal dispute brought by a former employee of the
Company who was terminated during 1994. There are several claims for relief,
including economic and emotional distress damages. Although the outcome of this
dispute cannot currently be determined, management believes the ultimate outcome
of this case will not result in a material impact on the Company.
18
LIFECARE(R) International, Inc.
Notes to Consolidated Financial Statements (continued)
6. Commitments and Contingencies (continued)
Operating Leases
The Company leases its district office facilities and automobiles under
operating leases.
The minimum rentals due under noncancelable leases with recurring terms of one
year or more as of March 31, 1996 are as follows:
Year ending March 31 Amount
------------------------------
1997 $886
1998 669
1999 356
2000 66
2001 8
Total rent expense for the years ended March 31, 1996, 1995 and 1994 was $952,
$883 and $989, respectively.
7. Income Taxes
Deferred income taxes arise from the recognition of temporary differences
between income determined for financial reporting purposes and for income tax
purposes. Such temporary differences are principally related to allowance for
bad debts, accelerated tax depreciation, intercompany profit in inventory,
uniform capitalized costs for income taxes, and various allowances and reserves
which are not currently deductible for income tax purposes. These temporary
differences resulted in deferred tax assets and liabilities as follows:
March 31
1996 1995
--------------------
Deferred tax assets:
Current $ 577 $ 688
Noncurrent - 27
--------------------
$ 577 $ 715
====================
Deferred tax liabilities:
Current $ - $ -
Noncurrent 674 596
--------------------
$ 674 $ 596
====================
19
LIFECARE(R) International, Inc.
Notes to Consolidated Financial Statements (continued)
7. Income Taxes (continued)
The components of income tax expense for the years ended March 31 are as
follows:
1996 1995 1994
------------------------------
Current:
Federal $220 $165 $417
State 59 49 90
Foreign 417 113 (16)
Deferred:
Federal 63 (268) 64
State 13 (53) 13
------------------------------
$772 $ 6 $568
==============================
Income tax paid during the years ended March 31, 1996, 1995 and 1994 was $393,
$153 and $588, respectively.
20
Consolidated Condensed Financial Statements (Unaudited)
LIFECARE(R) International, Inc.
Three months ended June 30, 1996 and 1995
21
CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)
LIFECARE(R) INTERNATIONAL, INC.
(In thousands)
June 30
1996 1995
------- -------
ASSETS
CURRENT ASSETS
Cash and short-term investments $ 173 $ 476
Trade accounts receivable 7,741 7,271
Inventories 5,875 5,916
Other current assets 1,981 2,238
------- -------
TOTAL CURRENT ASSETS 15,770 15,901
RENTAL EQUIPMENT, PROPERTY AND
EQUIPMENT (NET) 9,636 9,565
OTHER ASSETS 407 324
COST IN EXCESS OF NET ASSETS OF
BUSINESS ACQUIRED 615 658
------- -------
$26,428 $26,448
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 3,501 $ 3,178
Income taxes 1,160 783
Current portion of long-term
obligations 2,156 3,305
------- -------
6,817 7,266
LONG-TERM OBLIGATIONS 10,356 11,378
SHAREHOLDERS' EQUITY 9,255 7,804
------- -------
$26,428 $26,448
======= =======
See notes to financial statements.
22
CONSOLIDATED CONDENSED STATEMENTS OF INCOME (UNAUDITED)
LIFECARE(R) INTERNATIONAL, INC.
(In thousands)
Three months ended June 30
1996 1995
-------- -------
Net operating revenues $8,858 $7,731
Cost of operating revenues 4,127 3,733
------ ------
4,731 3,998
Selling, general and administrative
expenses 3,306 3,145
Research and development expense 489 492
Interest expense 229 382
Other income (35) (40)
------ ------
3,989 3,979
------ ------
INCOME BEFORE INCOME TAXES 742 19
Income taxes 304 66
------ ------
NET INCOME (LOSS) $ 438 $ (47)
====== ======
See notes to financial statements.
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CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
LIFECARE(R) INTERNATIONAL, INC.
(In thousands)
Three months ended June 30
1996 1995
-------- -------
OPERATING ACTIVITIES
Net income (loss) $ 438 $ (47)
Adjustments to reconcile net income (loss)to net
cash (used) provided by operating activities:
Depreciation and amortization 395 260
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable (1,497) 279
Decrease in inventories 107 194
Increase in other current assets (154) (99)
(Increase) decrease in other assets (33) 388
Increase in accounts payable 479 66
Decrease in accrued expenses (95) (426)
Increase in accrued income taxes 121 152
------ ------
NET CASH (USED) PROVIDED BY
OPERATING ACTIVITIES (239) 767
INVESTING ACTIVITIES
Net increase in rental equipment, property,
and equipment (382) (3)
------ ------
NET CASH USED BY
INVESTING ACTIVITIES (382) (3)
FINANCING ACTIVITIES
Net increase (decrease) in long term obligations 275 (728)
Issuance of common stock 0 60
------ ------
NET CASH PROVIDED (USED) BY
FINANCING ACTIVITIES 275 (668)
ADJUSTMENT FROM TRANSLATION (39) 18
------ ------
(DECREASE) INCREASE IN CASH AND
SHORT-TERM INVESTMENTS (385) 114
Cash and short-term investments at beginning of period 558 362
------ ------
CASH AND SHORT-TERM INVESTMENTS AT END OF PERIOD $173 $ 476
====== ======
See notes to financial statements.
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NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
LIFECARE(R) INTERNATIONAL, INC.
June 30, 1996
NOTE A -- BASIS OF PRESENTATION
In August 1996, LIFECARE(R) International, Inc. entered into a stock purchase
agreement with Respironics, Inc. whereby Respironics, Inc. agreed to purchase
all of the capital stock of LIFECARE(R) International, Inc. for $50,000,000 in
cash. The accompanying condensed consolidated financial statements have been
prepared, without audit, in accordance with generally accepted accounting
principles and Securities and Exchange Commission rules for interim financial
information. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. Respironics, Inc. and LIFECARE(R) International, Inc.
believe that the disclosures pertaining to these financial statements are
adequate to make the information presented not misleading. It is suggested that
these interim financial statements be read in conjunction with LIFECARE(R)
International Inc.'s audited financial statements which are included in this
Report on Form 8-K.
25