1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
------------------------
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NO. 0-27506
COHR INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
------------------------
DELAWARE 95-4559155
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION)
201 NORTH FIGUEROA STREET, SUITE 400
LOS ANGELES, CALIFORNIA 90012
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (213) 250-5600
------------------------
FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR,
IF CHANGED SINCE LAST REPORT: NONE
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
--- ---
As of August 9, 1996, there were outstanding 4,562,000 shares of the
Registrant's Common Stock, par value $0.01.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2
COHR INC. AND SUBSIDIARIES
TABLE OF CONTENTS
PAGE
NUMBER
------
PART I FINANCIAL INFORMATION
Item 1 Financial Statements...................................................... 1
Consolidated Balance Sheets as of June 30, 1996 and March 31, 1996........ 1
Consolidated Statements of Income for the three months ended June 30,
1996, and June 30, 1995................................................... 2
Consolidated Statements of Cash Flows for the three months ended June 30,
1996, and June 30, 1995................................................... 3
Notes to Financial Statements............................................. 4
Item 2 Management's Discussion and Analysis of Financial Condition and Results of
Operations................................................................ 5
General................................................................... 5
Results of Operations..................................................... 5
PART II OTHER INFORMATION
Item 1 Legal Proceedings......................................................... 7
Item 6 Exhibits and Reports on Form 8-K.......................................... 7
i
3
PART I
COHR INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT NUMBER OF SHARES)
ITEM 1. FINANCIAL STATEMENTS
ASSETS
JUNE 30, 1996 MARCH 31, 1996
------------- --------------
(UNAUDITED)
CURRENT ASSETS:
Cash........................................................... $13,181 $19,314
Accounts receivable, trade, net of allowance for doubtful
accounts of $1,027 (June 30, 1996) and $835 (March 31,
1996)....................................................... 14,491 12,644
Inventory...................................................... 4,273 3,486
Other current assets........................................... 3,506 2,659
------- -------
Total current assets................................... 35,451 38,103
Equipment & Improvements, net.................................... 4,607 3,718
Intangible assets, net........................................... 4,970 2,530
Other assets..................................................... 275 121
------- -------
TOTAL............................................................ $45,303 $44,472
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable -- trade...................................... $ 1,544 $ 2,092
Accrued expenses............................................... 4,162 3,457
Accrued liabilities -- COHR MasterPlan......................... 3,516 4,498
Deferred Revenue............................................... 3,755 4,586
------- -------
Total current liabilities.............................. 12,977 14,633
Deferred income tax liability.................................... 487 448
Long term debt................................................... 1,793 276
SHAREHOLDERS' EQUITY
Preferred Stock, $.01 par value; 2,000,000 shares authorized;
no shares issued and outstanding
Common Stock, $.01 par value; 20,000,000 shares authorized;
4,562,000 shares issued and outstanding..................... 869 869
Additional paid in capital..................................... 22,104 22,104
Retained earnings.............................................. 7,073 6,142
------- -------
Total shareholders' equity............................. 30,046 29,115
------- -------
TOTAL............................................................ $45,303 $44,472
======= =======
1
4
COHR INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
THREE MONTHS ENDED
JUNE 30
-------------------
1996 1995
------- -------
Revenues................................................................. $20,465 $15,369
Direct Operating Expenses................................................ 14,720 11,075
------- -------
Gross Margin............................................................. 5,745 4,294
Selling, General and Administrative Expenses............................. 4,417 3,578
------- -------
Operating Income......................................................... 1,328 716
Interest Income.......................................................... 232 44
Interest Expense......................................................... (9)
------- -------
Income Before Income Taxes............................................... 1,551 760
Provision For Income Taxes............................................... 620 304
------- -------
$ 931 $ 456
======= =======
Net Income Per Share..................................................... $ 0.20 $ 0.22
======= =======
Weighted Average Number of Common Stock and Common Stock Equivalents
outstanding during the period.......................................... 4,735 2,112
======= =======
2
5
COHR INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
THREE MONTHS ENDED
JUNE 30
------------------
1996 1995
------- ------
Cash Flows from Operating Activities:
Net income.............................................................. $ 931 $ 456
------- ------
Adjustments to reconcile net income to net cash
(used in) provided by operating activities:
Depreciation and amortization........................................ 251 214
Provision for losses on accounts receivable.......................... 62 18
Changes in assets and liabilities:
(Increase) decrease in:
Receivables..................................................... (1,055) 36
Inventories..................................................... (448) (554)
Other current assets............................................ (751) 97
Other assets.................................................... (154) 0
Increase (decrease) in:
Accounts payable -- trade....................................... (548) (742)
Accrued expenses................................................ (113) 680
Accrued liabilities -- COHR MasterPlan.......................... (982) (233)
Deferred revenue................................................ (831) (211)
Other........................................................... 0 3
------- ------
Total adjustments............................................... (4,569) (692)
------- ------
Net cash used in operating activities........................... (3,638) (236)
------- ------
Cash flows from investing activities:
Capital expenditures.................................................... (245) (141)
Acquisitions............................................................ (2,889)
------- ------
Net cash used in investing activities........................... (3,134) (141)
------- ------
Cash flows from financing activities:
Issuance of long-term debt.............................................. 1,050
Payments and current maturities of long-term debt....................... (411) (10)
------- ------
Net cash provided by (used in) financing activities............. 639 (10)
------- ------
Net Decrease in cash and cash equivalents................................. (6,133) (387)
Cash and cash equivalents, beginning of period............................ 19,314 4,453
------- ------
Cash and cash equivalents, end of period.................................. $13,181 $4,066
======= ======
3
6
COHR INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED JUNE 30, 1996
(UNAUDITED)
1. BASIS OF PRESENTATION
In the opinion of management, the accompanying consolidated financial
statements include all adjustments (which consist only of normal recurring
adjustments) necessary for a fair presentation of the financial position of COHR
Inc. ("COHR") and subsidiaries (collectively, the "Company"), and the results of
its operations and its cash flows for the interim periods presented. Although
COHR believes that the disclosures in these consolidated financial statements
are adequate to make the information presented not misleading, certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to the rules and regulations of the Securities and
Exchange Commission. Results of operations for the interim periods are not
necessarily indicative of results to be expected for any other interim period or
for the full year.
The consolidated financial statements for the three months ended June 30,
1995 and June 30, 1996 are unaudited and should be read in conjunction with the
consolidated financial statements and notes thereto included in COHR's Annual
Report on Form 10-K, for the year ended March 31, 1996.
Consolidation of Subsidiaries -- The Company's financial statements include
the activity of all of its wholly owned subsidiaries over which the Company has
direct or indirect unilateral and perpetual control. All intercompany
transactions have been eliminated in consolidation.
Net Income Per Common Share -- Net income per common share is computed
based on the weighted average number of shares outstanding, giving retroactive
effect to all stock splits, including a 20,000-for-1 Common Stock dividend
effective November 1, 1995.
2. SUBSEQUENT EVENTS
Subsequent to June 30, 1996, the Company acquired the businesses of two
companies similar to that of COHR Inc. One of the acquisitions included the
purchase of certain assets including inventory, equipment, and other assets, for
a purchase price of $445,869, of which $250,000 was paid in cash, with a short
term note issued for the remainder. The remaining acquisition was accomplished
by the purchase of common stock for a purchase price of $340,000, $240,000 of
which was paid in cash with the remaining $100,000 due July 1997.
4
7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
The Company is a national outsourcing service organization providing
equipment servicing, group purchasing and other services to hospitals,
integrated health systems and alternate site providers. The Company operates 24
regional service and sales sites to support its equipment services operations
and seven regional sales and customer service sites to support its group
purchasing activities.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1996 VERSUS THREE MONTHS ENDED JUNE 30, 1995
Revenues -- The Company's revenues for the three months ended June 30, 1996
totaled $20.5 million, an increase of $5.1 million or 33.1% over revenues of
$15.4 million for the three months ended June 30, 1995. Of the $5.1 million
increase in revenues, $3.8 million resulted from growth in COHR MasterPlan. The
$3.8 million was primarily from increases in revenues from growth generated
internally. The Company acquired or opened five new service and sales sites in
the three months to June 30, 1996.
Direct Operating Expenses -- The Company's direct expenses for the three
months ended June 30, 1996 totaled $14.7 million which represented an increase
of $3.6 million or 32.4% over the three months ended June 30, 1995 total of
$11.1 million. Direct operating expenses as a percentage of revenues for the
three months ended June 30, 1996 decreased to 71.7% from 72.1% for the three
months ended June 30, 1995. This decrease was a result of certain economies of
scale being achieved over the prior period.
Gross Margin. The Company's gross margin for the three months ended June
30, 1996 totaled $5.7 million, an increase of $1.4 million or 32.6% over the
three months ended June 30, 1995 total of $4.3 million. Gross margin as a
percentage of revenues decreased to 27.8% for the three months ended June 30,
1996 from 27.9% for the three months ended June 30, 1995.
Selling, General and Administrative Expenses. The Company's selling,
general and administrative expenses for the three months ended June 30, 1996
totaled $4.4 million, an increase of $0.8 million or 22.2% over the three months
ended June 30, 1995 total of $3.6 million. As a percentage of revenues, selling,
general and administrative expenses decreased during the three months ended June
30, 1996 to 21.5% from 23.4% during the three months ended June 30, 1995. The
absolute increase in expenses reflected the increase in costs necessary to
support the Company's expanded operations. The decrease in selling, general and
administrative expenses as a percentage of revenues reflected the growth of
revenues without a corresponding increase in administrative costs, as well as
other cost savings achieved through economies of scale.
Operating Income. The Company's operating income for the three months ended
June 30, 1996 totaled $1.3 million, an increase of $600,000 or 85.7% over the
three months ended June 30 ,1995 total of $700,000. Operating income as a
percentage of revenues for the three months ended June 30, 1996 increased to
6.3% as compared to 4.5% for the three months ended June 30, 1995.
Provision for Income Taxes. The Company's provision for income taxes for
the three months ended June 30, 1996 totaled $620,000, an increase of $316,000
or 103.9% over the three months ended June 30, 1995 total of $304,000, due to
the increase in pre-tax income for the period. The Company's effective tax rate
for the three months ended June 30, 1996 and June 30, 1995 was 40.0%.
Net Income. The Company's net income for the three months ended June 30,
1996 totaled $931,000, an increase of $475,000 or 104.2% over the three months
ended June 30, 1995 total of $456,000. As a percentage of revenues, net income
increased to 4.4% in the three months ended June 30, 1996 from 3.2% in the three
months ended June 30, 1995.
5
8
LIQUIDITY AND CAPITAL RESOURCES
The Company had working capital of $22.5 million and $23.5 million as of
June 30, 1996 and March 31, 1996 respectively. The Company had cash and cash
equivalents of $13.2 million and $19.3 million for the same respective periods.
Net cash used in operating activities was $3.6 million and $.2 million for
the three months ended June 30, 1996 and 1995, respectively. The fluctuations in
cash used in operations is due primarily to changes in accounts receivable,
inventories, accounts payable and current income tax liabilities.
Net cash used in investing activities was $3.1 million and $.1 million for
the three months ended June 30, 1996 and 1995 respectively. The principal uses
of this cash were for the purchase of businesses, customer lists and related
assets. Capital expenditures during these periods amounted to $.2 million and
$.1 million respectively.
Cash flows provided by financing activities were principally for acquiring
new debt.
INFLATION
The Company believes that its operations have not been materially adversely
affected by inflation. The Company expects that salary and wage increases for
its skilled staff will continue to be higher than average wage increases, as is
common in the company's industry.
6
9
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is involved from time to time in various legal proceedings
incidental to its business. In the opinion of the Company's management, no such
pending litigation is likely to have a material adverse effect on the Company's
business.
ITEM 6. EXHIBITS & REPORTS ON FORM 8-K
(a) Exhibits included or incorporated herein:
See Exhibit Index
(b) Reports on Form 8-K
Not applicable
7
10
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.
COHR INC.
--------------------------------------
(Registrant)
Date: August 14, 1996 /s/ PAUL CHOPRA
--------------------------------------
Paul Chopra
Chief Executive Officer
(Principal Executive Officer)
Date: August 14, 1996 /s/ UMESH MALHOTRA
--------------------------------------
Umesh Malhotra
Chief Financial Officer
(Principal Financial Officer)
8
11
COHR INC.
INDEX TO EXHIBITS
ITEM (a)3
(a) Exhibits
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
-------- ----------- ------------
1.1* Form of Underwriting Agreement...................................
3.1* Certificate of Incorporation of Registrant.......................
3.2* By-laws of Registrant............................................
4.1* Form of Warrant to be issued to the Representatives of the
Underwriters.....................................................
4.2* Form of Registration Rights Agreement between Registrant,
Healthcare Association of Southern California ("HASC") and
Hospital Council Coordinated Programs, Inc.......................
4.3* Specimen Stock Certificate.......................................
10.1* Form of Indemnity Agreement entered into between Registrant and
each of its executive officers and directors.....................
10.2* Employment Agreement between Registrant and Paul Chopra,
effective January 1, 1996........................................
10.3* Executive Long-Term Incentive Plan of Registrant.................
10.4* Form of 1995 Stock Option Plan of Registrant and Form of
Nonstatutory Option Grant Under the Plan.........................
10.5* Revolving Credit Agreement between Registrant and 1st Business
Bank, dated December 5, 1995, together with Promissory Note,
General Security Agreement and Continuing Guarantee made by
HASC.............................................................
10.6* Office Lease between First and Figueroa, Ltd. and Registrant as
successor to Council Shared Services, dated April 8, 1986........
10.7* Standard Industrial Lease between 6705 Valjean Associates, Ltd.
and Registrant, dated April 23, 1990, as amended.................
10.8* Consulting Agreement between Registrant and Stephen W. Gamble dba
Gamble's Victory Marine, dated August 1, 1994....................
10.9* Administrative Services Agreement between Registrant and
Healthcare Association of Southern California, dated January 1,
1996.............................................................
10.10** Office Lease between TCEP II properties and Registrant dated May
8, 1996..........................................................
11 Computation of Per Share Earnings................................
21.1* Subsidiaries of Registrant.......................................
27 Financial Data Schedule..........................................
- ---------------
* Previously filed as exhibits to Registrant's Registration Statement on Form
S-1, Commission File No. 33-80635.
** Previously filed as exhibit to Registrant's Registration Statement on Form
10-K for the fiscal year ended March 31, 1996, Commission File No. 0-27506.
9