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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
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(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 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.
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 95-4559155
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(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION)
21540 PLUMMER STREET 91311
CHATSWORTH, CALIFORNIA ----------
---------------------------------------- (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (818) 773-2647
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FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR, IF CHANGED SINCE LAST
REPORT:
FORMER ADDRESS: 201 NORTH FIGUEROA STREET, SUITE 400, LOS ANGELES CALIFORNIA
90012
FORMER TELEPHONE NUMBER: (213) 250-5600
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 November 1, 1996, there were outstanding 4,582,000 shares of the
Registrant's Common Stock, par value $0.01.
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COHR INC. AND SUBSIDIARIES
TABLE OF CONTENTS
PAGE
NUMBER
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PART I FINANCIAL INFORMATION
Item 1 Financial Statements...................................................... 1
Consolidated Balance Sheets as of September 30, 1996 and March 31, 1996... 1
Consolidated Statements of Income for the three months ended September 30,
1996, and September 30, 1995 and the six months ended September 30, 1996
and September 30, 1995.................................................... 2
Consolidated Statements of Cash Flows for the six months ended September
30, 1996, and September 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......................................................... 8
Item 4 Submission of Matters to a Vote of Security-Holders....................... 8
Item 6 Exhibits and Reports on Form 8-K.......................................... 8
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PART I
ITEM 1. FINANCIAL STATEMENTS
COHR INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT NUMBER OF SHARES)
ASSETS
SEPTEMBER 30, MARCH 31,
1996 1996
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(UNAUDITED)
CURRENT ASSETS:
Cash............................................................... $ 9,498 $19,314
Accounts receivable, Trade, net of allowance for doubtful accounts
of $1,043 (September 30, 1996) and $835 (March 31, 1996)........ 17,988 12,644
Other........................................................... 218 1,233
Inventory.......................................................... 5,080 3,486
Prepaid expenses and other......................................... 808 620
Deferred income tax asset.......................................... 904 806
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Total Current assets....................................... 34,496 38,103
Equipment & Improvements, net........................................ 5,389 3,718
Intangible assets, net of accumulated amortization of $393 (September
30, 1996) and $280 (March 31, 1996)................................ 5,827 2,530
Other assets......................................................... 260 121
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TOTAL................................................................ $45,972 $44,472
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LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable -- trade.......................................... $ 2,072 $ 2,092
Accrued expenses................................................... 3,323 3,372
Accrued liabilities -- COHR MasterPlan............................. 2,285 4,498
Deferred Revenue................................................... 3,517 4,586
Income tax liability............................................... 369
Current portion of long-term debt.................................. 1,291 85
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Total Current liabilities.................................. 12,857 14,633
Deferred income tax liability........................................ 402 448
Long term debt....................................................... 1,423 276
STOCKHOLDERS' 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;
4,582,000 (September 30, 1996) and 4,562,000 (March 31, 1996)
shares issued and outstanding................................... 869 869
Additional paid in capital......................................... 22,284 22,104
Retained earnings.................................................. 8,137 6,142
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Total stockholders' equity................................. 31,290 29,115
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TOTAL................................................................ $45,972 $44,472
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COHR INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
THREE MONTHS ENDED SIX MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
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1996 1995 1996 1995
------- ------- ------- -------
Revenues............................................ $21,205 $15,465 $41,670 $30,834
Direct operating expenses........................... 15,272 11,236 29,992 22,311
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Gross margin........................................ 5,933 4,229 11,678 8,523
Selling, general and administrative expenses........ 4,208 3,391 8,625 6,951
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Operating income.................................... 1,725 838 3,053 1,572
Interest income..................................... 83 53 315 79
Interest expense.................................... 0 (34) (9) (34)
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Income before income taxes.......................... 1,808 857 3,359 1,617
Provision for income taxes.......................... 744 343 1,364 646
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Net Income.......................................... $ 1,064 $ 514 $ 1,995 $ 971
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Net Income Per Share................................ $ 0.22 $ 0.24 $ 0.41 $ 0.46
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Weighted Average Number of Common Stock and Common
Stock Equivalents Outstanding..................... 4,832 2,112 4,832 2,112
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COHR INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
SIX MONTHS ENDED
SEPTEMBER 30,
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1996 1995
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income............................................................... $ 1,995 $ 971
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Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization......................................... 462 436
Provision for losses on accounts receivable........................... 140 30
Deferred income tax asset -- current portion.......................... 0 (41)
Deferred income taxes payable, net.................................... (79) 10
Change in assets and liabilities, net of effect of acquisition of
certain assets:
Accounts receivable:
Trade............................................................... (4,475) 1,054
Other............................................................... 288 (58)
Inventory............................................................. (1,199) (700)
Prepaid expense and other............................................. (180) 110
Other assets.......................................................... (132) (59)
Accounts payable -- trade............................................. 83 (399)
Accrued expenses...................................................... 74 156
Accrued liabilities -- COHR MasterPlan................................ (2,213) (11)
Deferred revenue...................................................... (1,343) (1,959)
Income taxes payable.................................................. 323 (360)
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Total Adjustments..................................................... (8,251) (1,791)
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Net cash used in operating activities................................. (6,256) (820)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures..................................................... (1,291) (437)
Payment for acquisition of certain assets................................ (3,886)
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Net cash used in investing activities................................. (5,177) (437)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of dividends to parent company................................... (247)
Issuance of long-term debt............................................... 1,498
Payments and maturities on long-term debt................................ (61) (16)
Exercise of stock options................................................ 180
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Net cash provided by (used in) financing activities...................... 1,617 (263)
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NET DECREASE IN CASH AND CASH EQUIVALENTS.................................. (9,816) (1,520)
CASH AND CASH EQUIVALENTS, beginning of period............................. 19,314 4,453
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CASH AND CASH EQUIVALENTS, end of period................................... $ 9,498 $ 2,933
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SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION - Cash paid during the
period for:
Income taxes.......................................................... $ 1,010 $ 1,047
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Interest.............................................................. $ 9 $ 2
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DETAILS OF BUSINESSES OR ASSETS ACQUIRED AT FAIR VALUE ARE AS FOLLOWS:
Current assets........................................................ $ 1,988
Equipment............................................................. 905
Goodwill and other intangibles........................................ 3,410
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6,303
Liabilities assumed................................................... 2,417
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Net cash paid for acquisitions............................................. $ 3,886
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COHR INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS AND THE THREE MONTHS ENDED
SEPTEMBER 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 month and six month
periods ended September 30, 1996 and September 30, 1995 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 September 30, 1996, the Company acquired the business of a
company similar to that of COHR Inc. The acquisition included the purchase of
certain assets including inventory, equipment, and other assets, for a purchase
price of $160,000, of which $80,000 was paid in cash, with a short term note
issued for the remainder.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
The Company is a leading national outsourcing service organization
providing equipment servicing, group purchasing and other services to hospitals,
integrated health systems and alternate site providers. The Company operates 28
regional service and sales sites to support its equipment services operations
and nine regional sales and customer service sites to support its group
purchasing activities.
RESULTS OF OPERATIONS
SIX MONTHS ENDED SEPTEMBER 30, 1996 VERSUS SIX MONTHS ENDED SEPTEMBER 30, 1995
Revenues -- The Company's revenues for the six months ended September 30,
1996 totaled $41.7 million, an increase of $10.9 million or 35.1% over revenues
of $30.8 million for the six months ended September 30, 1995. Of the $10.9
million increase in revenues, $8.3 million resulted from growth in COHR
MasterPlan. The $8.3 million was primarily from increases in revenues from
growth generated internally. The Company acquired or opened 11 new service and
sales sites in the six months to September 30, 1996.
Direct Operating Expenses -- The Company's direct expenses for the six
months ended September 30, 1996 totaled $30.0 million which represented an
increase of $7.7 million or 34.4% over the six months ended September 30, 1995
total of $22.3 million. Direct operating expenses as a percentage of revenues
for the six months ended September 30, 1996 decreased to 72.0% from 72.4% for
the six months ended September 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 six months ended September
30, 1996 totaled $11.7 million, an increase of $3.2 million or 37.0% over the
six months ended September 30, 1995 total of $8.5 million. Gross margin as a
percentage of revenues increased to 28.0% for the six months ended September 30,
1996 from 27.6% for the six months ended September 30, 1995.
Selling, General and Administrative Expenses. The Company's selling,
general and administrative expenses for the six months ended September 30, 1996
totaled $8.6 million, an increase of $1.6 million or 24.1% over the six months
ended September 30, 1995 total of $7.0 million. As a percentage of revenues,
selling, general and administrative expenses decreased during the six months
ended September 30, 1996 to 20.7% from 22.5% during the six months ended
September 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 in 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 six months ended
September 30, 1996 totaled $3.1 million, an increase of $1.5 million or 94.2%
over the six months ended September 30 ,1995 total of $1.6 million. Operating
income as a percentage of revenues for the six months ended September 30, 1996
increased to 7.3% as compared to 5.1% for the six months ended September 30,
1995.
Provision for Income Taxes. The Company's provision for income taxes for
the six months ended September 30, 1996 totaled $1.4 million, an increase of
$0.8 million or 111.1% over the six months ended September 30, 1995 total of
$646,000, due to the increase in pre-tax income for the period. The Company's
effective tax rate for the six months ended September 30, 1996 was 40.6% as
compared to 40.0% for the six months ended September 30, 1995.
Net Income. The Company's net income for the six months ended September 30,
1996 totaled $2.0 million, an increase of $1.0 million or 105.5% over the six
months ended September 30, 1995 total of $971,000. As a percentage of revenues,
net income increased to 4.8% in the six months ended September 30, 1996 from
3.1% in the six months ended September 30, 1995.
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THREE MONTHS ENDED SEPTEMBER 30, 1996 VERSUS THREE MONTHS ENDED SEPTEMBER 30,
1995
Revenues -- The Company's revenues for the three months ended September 30,
1996 totaled $21.2 million, an increase of $5.7 million or 37.1% over revenues
of $15.5 million for the three months ended September 30, 1995. Of the $5.7
million increase in revenues, $4.5 million resulted from growth in COHR
MasterPlan. The $4.5 million was primarily from increases in revenues from
growth generated internally. The Company acquired or opened six new service and
sales sites in the three months to September 30, 1996.
Direct Operating Expenses -- The Company's direct expenses for the three
months ended September 30, 1996 totaled $15.3 million which represented an
increase of $4.1 million or 35.9% over the three months ended September 30, 1995
total of $11.2 million. Direct operating expenses as a percentage of revenues
for the three months ended September 30, 1996 decreased to 72.0% from 72.7% for
the three months ended September 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
September 30, 1996 totaled $5.9 million, an increase of $1.7 million or 40.3%
over the three months ended September 30, 1995 total of $4.2 million. Gross
margin as a percentage of revenues increased to 28.0% for the three months ended
September 30, 1996 from 27.3% for the three months ended September 30, 1995.
Selling, General and Administrative Expenses. The Company's selling,
general and administrative expenses for the three months ended September 30,
1996 totaled $4.2 million, an increase of $0.8 million or 24.1% over the three
months ended September 30, 1995 total of $3.4 million. As a percentage of
revenues, selling, general and administrative expenses decreased during the
three months ended September 30, 1996 to 19.8% from 21.9% during the three
months ended September 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
September 30, 1996 totaled $1.7 million, an increase of $900,000 or 105.8% over
the three months ended September 30, 1995 total of $0.8 million. Operating
income as a percentage of revenues for the three months ended September 30, 1996
increased to 8.1% as compared to 5.4% for the three months ended September 30,
1995.
Provision for Income Taxes. The Company's provision for income taxes for
the three months ended September 30, 1996 totaled $744,000, an increase of
$401,000 or 116.9% over the three months ended September 30, 1995 total of
$343,000, due to the increase in pre-tax income for the period. The Company's
effective tax rate for the three months ended September 30, 1996 was 41.2% as
compared to 40.0% for the three months ended September 30, 1995.
Net Income. The Company's net income for the three months ended September
30, 1996 totaled $1.1 million, an increase of $0.6 million or 107.0% over the
three months ended September 30, 1995 total of $0.5 million. As a percentage of
revenues, net income increased to 5.0% in the three months ended September 30,
1996 from 3.3% in the three months ended September 30, 1995.
LIQUIDITY AND CAPITAL RESOURCES
The Company had working capital of $21.6 million and $23.5 million as of
September 30, 1996 and March 31, 1996 respectively. The Company had cash and
cash equivalents of $9.5 million and $19.3 million for the same respective
periods.
Net cash used in operating activities was $6.3 million and $0.8 million for
the six months ended September 30, 1996 and 1995, respectively. The fluctuations
in cash used in operations is due primarily to changes in accounts receivable,
inventories, accounts payable, accrued liabilities and deferred revenue.
Net cash used in investing activities was $5.2 million and $0.4 million for
the six months ended September 30, 1996 and 1995 respectively. The principal
uses of this cash were for the purchase of businesses,
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customer lists and related assets. Capital expenditures during these periods
amounted to $1.3 million and $0.4 million respectively.
Cash flows provided by (used in) financing activities were due to exercise
of stock options and 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.
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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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
The annual meeting of stockholders of the Company was held on July 26,
1996. At the meeting, Paul Chopra and Lynn Reitnouer were nominated for election
as directors of the Company, each to hold office until the 1999 annual meeting
of stockholders, and there were no other nominations. There were present at the
meeting, in person or by proxy, holders of 3,692,929 shares of the Company, or
79.3% of the total shares outstanding. The votes cast for election of directors
was as follows:
NOMINEE VOTES FOR VOTES WITHHELD
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Paul Chopra........................................ 3,687,529 5,400
Lynn Reitnouer..................................... 3,687,429 5,500
There was no other action taken at the meeting. Following the meeting James D.
Barber, Michael I. Matsuura and Frederick C. Meyer continued to serve as
directors with the terms expiring at the 1997 annual meeting and Stephen W.
Gamble, Ronnie J. Messenger and Louis A. Simpson continued to serve as directors
with the terms expiring at the 1998 annual meeting.
ITEM 6. EXHIBITS & REPORTS ON FORM 8-K
(a) Exhibits included or incorporated herein:
See Index to Exhibits
(b) Reports on Form 8-K
Not applicable
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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.
COHR INC.
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(Registrant)
Date: November 13, 1996 /S/ PAUL CHOPRA
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Paul Chopra
Chairman, President and Chief
Executive Officer
(Principal Executive Officer)
Date: November 13, 1996 /S/ UMESH MALHOTRA
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Umesh Malhotra
Chief Financial Officer and Assistant
Secretary
(Principal Financial Officer)
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COHR INC.
INDEX TO EXHIBITS
ITEM (6)
(a) Exhibits
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
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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 June 11, 1996, together with Promissory Note, General
Security Agreement and Continuing Guarantee made by HASC.........
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..........................................
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* Previously filed as exhibits to Registrant's Registration Statement on Form
S-1, Registration No. 33-80635.
** Previously filed as exhibit to Registrant's Annual Report on Form 10-K for
the fiscal year ended March 31, 1996, Commission File No. 0-27506.
*** Previously filed as exhibit to Registrant's Registration Statement on Form
S-1, Registration No. 333-14979.
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