10-Q 1 g70233e10-q.txt LINCARE HOLDINGS INC. 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, 2001 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES ACT OF 1934 COMMISSION FILE NUMBER 0-19946 LINCARE HOLDINGS INC. (Exact name of registrant as specified in its charter) DELAWARE 51-0331330 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 19387 US 19 NORTH 33764 CLEARWATER, FL (Zip Code) (Address of principal executive offices)
Registrant's telephone number, including area code: (727) 530-7700 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 _ Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
CLASS OUTSTANDING AT JULY 20, 2001 ----- ----------------------------- Common Stock, $0.01 par value............................... 107,687,864 shares
-------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 2 LINCARE HOLDINGS INC. FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2001 INDEX
PAGE ---- PART I. FINANCIAL INFORMATION Item 1 Financial Statements (unaudited) Condensed consolidated balance sheets....................... 3 Condensed consolidated statements of operations............. 4 Condensed consolidated statements of cash flows............. 5 Notes to condensed consolidated financial statements........ 6 Item 2 Management's Discussion and Analysis of Results of Operations and Financial Condition.......................... 8 Item 3 Quantitative and Qualitative Disclosure Regarding Market Risk........................................................ 10 PART II. OTHER INFORMATION Item 1 Legal Proceedings........................................... 12 Item 2 Changes in Securities....................................... 12 Item 3 Defaults Upon Senior Securities............................. 12 Item 4 Submission of Matters to a Vote of the Security Holders..... 12 Item 5 Other Information........................................... 12 Item 6 Exhibits and Reports on Form 8-K............................ 12 Signature........................................................... 13
2 3 PART I. FINANCIAL STATEMENTS ITEM 1 -- FINANCIAL STATEMENTS (UNAUDITED) LINCARE HOLDINGS INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
JUNE 30, DECEMBER 31, 2001 2000 --------- ------------ (IN THOUSANDS) Current assets: Cash and cash equivalents................................. $ 734 $ 3,201 Accounts and notes receivable............................. 124,166 116,838 Income tax receivable..................................... -- 5,210 Inventories............................................... 2,693 3,882 Other..................................................... 4,486 7,121 -------- -------- Total current assets.............................. 132,079 136,252 -------- -------- Property and equipment...................................... 403,373 364,819 Less: accumulated depreciation.............................. 202,113 176,770 -------- -------- Net property and equipment........................ 201,260 188,049 -------- -------- Other assets: Goodwill.................................................. 596,666 540,637 Intangible assets......................................... 5,996 8,501 Covenants not to compete.................................. 1,016 1,153 Other..................................................... 2,602 3,003 -------- -------- Total other assets................................ 606,280 553,294 -------- -------- Total assets................................. $939,619 $877,595 ======== ======== Current liabilities: Current installments of long-term obligations............. $ 12,455 $ 6,328 Accounts payable.......................................... 19,343 19,812 Accrued expenses: Compensation and benefits.............................. 13,662 15,455 Other.................................................. 10,980 10,182 Income taxes payable................................... 6,595 -- -------- -------- Total current liabilities......................... 63,035 51,777 -------- -------- Long-term obligations, excluding current installments....... 164,900 204,024 Interest rate derivative financial instrument............... 3,596 1,961 Deferred income taxes....................................... 38,624 34,585 Minority interest........................................... 701 798 Stockholders' equity: Common stock.............................................. 1,209 1,200 Additional paid-in capital................................ 192,481 175,402 Retained earnings......................................... 651,543 584,693 Less: treasury stock...................................... 176,470 176,845 -------- -------- Total stockholders' equity........................ 668,763 584,450 -------- -------- Total liabilities and stockholders' equity... $939,619 $877,595 ======== ========
See accompanying notes to condensed consolidated financial statements. 3 4 LINCARE HOLDINGS INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS ENDED -------------------------- -------------------------- JUNE 30, JUNE 30, JUNE 30, JUNE 30, 2001 2000 2001 2000 ----------- ----------- ----------- ----------- (IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA) Net revenues.......................... $ 198,371 $ 167,621 $ 390,032 $ 327,118 ----------- ----------- ----------- ----------- Costs and expenses: Costs of goods and services......... 30,183 26,091 60,109 50,486 Operating expenses.................. 45,002 37,564 88,511 73,492 Selling, general and administrative expenses......................... 41,224 35,817 81,318 69,895 Bad debt expense.................... 2,976 2,515 5,851 4,907 Depreciation expense................ 13,395 11,950 26,395 23,275 Amortization expense................ 5,315 4,728 10,471 8,994 ----------- ----------- ----------- ----------- 138,095 118,665 272,655 231,049 ----------- ----------- ----------- ----------- Operating income............ 60,276 48,956 117,377 96,069 ----------- ----------- ----------- ----------- Other income (expense): Interest income..................... 108 109 219 189 Interest expense.................... (3,851) (3,519) (7,940) (6,824) Net gain (loss) on disposal of property and equipment.................... (23) 39 (22) (10) Unrealized gain (loss) on derivative financial instrument............. 561 -- (1,635) -- ----------- ----------- ----------- ----------- (3,205) (3,371) (9,378) (6,645) ----------- ----------- ----------- ----------- Income before income taxes..................... 57,071 45,585 107,999 89,424 Income taxes.......................... 21,745 17,368 41,149 34,071 ----------- ----------- ----------- ----------- Net income.................. $ 35,326 $ 28,217 $ 66,850 $ 55,353 =========== =========== =========== =========== Basic -- earnings per common share............................ $ 0.33 $ 0.26 $ 0.62 $ 0.52 =========== =========== =========== =========== Diluted -- earnings per common share............................ $ 0.32 $ 0.26 $ 0.61 $ 0.51 =========== =========== =========== =========== Weighted average number of common shares outstanding.................. 107,372,430 106,601,328 107,185,392 107,029,772 =========== =========== =========== =========== Weighted average number of common shares and common share equivalents outstanding......................... 110,056,314 108,526,324 109,847,081 108,977,498 =========== =========== =========== ===========
See accompanying notes to condensed consolidated financial statements. 4 5 LINCARE HOLDINGS INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE SIX MONTHS ENDED ------------------------ JUNE 30, JUNE 30, 2001 2000 ---------- ---------- (IN THOUSANDS) Cash from operations........................................ $123,530 $ 91,080 Investing activities: Proceeds from sale of property and equipment.............. 42 211 Capital expenditures...................................... (36,655) (30,704) Decrease in other assets.................................. 275 106 Business acquisitions, net of cash acquired............... (57,123) (150,238) -------- -------- (93,461) (180,625) -------- -------- Financing activities: Proceeds from long-term obligations....................... 51,267 168,000 Payment of long-term obligations.......................... (94,014) (55,171) Decrease in minority interest............................. (136) (128) Proceeds from issuance of common stock.................... 9,972 1,130 Proceeds from issuance of treasury stock.................. 375 539 Payment to acquire treasury stock......................... -- (21,676) -------- -------- (32,536) 92,694 -------- -------- Increase (decrease) in cash................................. (2,467) 3,149 Cash and cash equivalents, beginning of period.............. 3,201 3,699 -------- -------- Cash and cash equivalents, end of period.................... $ 734 $ 6,848 ======== ========
See accompanying notes to condensed consolidated financial statements. 5 6 LINCARE HOLDINGS INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 1 -- BASIS OF PRESENTATION The accompanying condensed consolidated balance sheet as of June 30, 2001, the condensed consolidated statements of operations for the three and six month periods ended June 30, 2001 and 2000 and the condensed consolidated statements of cash flows for the six months ended June 30, 2001 and 2000 are unaudited and have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10Q and should be read in conjunction with the consolidated financial statements and related notes of Lincare Holdings Inc. on Form 10K for the fiscal year ended December 31, 2000. In the opinion of management, all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the entire year. The accompanying condensed consolidated balance sheet as of December 31, 2000 is derived from the Lincare Holdings Inc. (the "Company") audited balance sheet as of that date. NOTE 2 -- BUSINESS COMBINATIONS During the six months ended June 30, 2001 the Company acquired, in unrelated acquisitions, certain assets of ten companies. Each acquisition was accounted for as a purchase. The results of the acquired companies are included in the accompanying condensed consolidated statements of operations since the respective dates of acquisition. The aggregate cost of these acquisitions was as follows:
(IN THOUSANDS) -------------- Cash........................................................ $57,123 Deferred acquisition obligations............................ 9,641 Assumption of liabilities................................... 328 ------- $67,092 =======
The aggregate purchase price was allocated as follows: Current assets.............................................. $ 739 Property and equipment...................................... 3,016 Intangible assets........................................... 100 Goodwill.................................................... 63,237 ------- $67,092 =======
6 7 Unaudited pro forma supplemental information on the results of operations for the six months ended June 30, 2001 and June 30, 2000 are provided below and reflect the acquisitions as if they had been combined at the beginning of each respective period.
FOR THE SIX MONTHS ENDED JUNE 30, ---------------------- 2001 2000 -------- -------- (IN THOUSANDS EXCEPT PER SHARE DATA) Net revenues................................................ $403,159 $347,304 ======== ======== Net income.................................................. $ 69,428 $ 59,296 ======== ======== Income per common share: Basic..................................................... $ 0.65 $ 0.55 ======== ======== Diluted................................................... $ 0.63 $ 0.54 ======== ========
The unaudited pro forma financial information is not necessarily indicative of either the results of operations that would have occurred had the transactions been effected at the beginning of the respective preceding periods or of future results of operations of the combined companies. 7 8 LINCARE HOLDINGS, INC. ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION OPERATING RESULTS The following table sets forth for the periods indicated a summary of the Company's net revenues by source:
FOR THE THREE MONTHS FOR THE SIX MONTHS ENDED ENDED JUNE 30, JUNE 30, -------------------- ------------------------ 2001 2000 2001 2000 -------- -------- ---------- ---------- (IN THOUSANDS) (IN THOUSANDS) Oxygen and other respiratory therapy.... $173,812 $145,843 340,611 287,807 Home medical equipment and other........ 24,559 21,778 49,421 39,311 -------- -------- -------- -------- Total......................... $198,371 $167,621 390,032 $327,118 ======== ======== ======== ========
Net revenues for the three months ended June 30, 2001 increased by $30,750,000 (or 18.3%) compared with the three months ended June 30, 2000, and for the six months ended June 30, 2001 increased $62,914,000 (or 19.2%) compared with the six months ended June 30, 2000. The increases in net revenues are attributed to underlying growth in the market for the Company's services, the Company's sales and marketing efforts that emphasize quality and customer service, and the effect of the acquisitions completed by the Company. Cost of goods and services as a percentage of net revenues were 15.2% for the three months ended June 30, 2001 compared with 15.6% for the three months ended June 30, 2000. Costs of goods and services as a percentage of net revenues were 15.4% for the six months ended June 30, 2001 compared with 15.4% for the six months ended June 30, 2000. The Company continues to maintain a cost structure that, with increases in net revenues, has permitted the Company to spread its fixed operating and overhead expenses over a larger base of revenues, resulting in improvement in operating income. Operating expenses expressed as a percentage of net revenues for the three and six month periods ended June 30, 2001 were 22.7% as compared to the three and six month periods ended June 30, 2000 which were 22.4% and 22.5%, respectively. Selling, general and administrative expenses as a percentage of net revenues for the three and six month periods ended June 30, 2001 were 20.8% as compared to the three and six month periods ended June 30, 2000 which were 21.4%. Amortization expense for the three and six months ended June 30, 2001 were $5,315,000 and $10,471,000 as compared with $4,728,000 and $8,994,000 for the three and six months ended June 30, 2000. The increase is attributable to the amortization of intangible assets associated with business combinations in 2000 and the first six months of 2001. Operating income for the three and six months ended June 30, 2001 increased to $60,276,000 and $117,377,000, respectively, compared with $48,956,000 and $96,069,000 for the three and six months ended June 30, 2000. The increases in operating income are attributable to the continued revenue growth and efforts to control costs. LIQUIDITY AND CAPITAL RESOURCES Net cash provided from operating activities was $123,530,000 for the six months ended June 30, 2001 compared with $91,080,000 for the six months ended June 30, 2000. Net cash used in investing and financing activities was $125,997,000 for the six months ended June 30, 2001. Activity during the six month period ended June 30, 2001 included the Company's investment of $57,123,000 in business acquisitions, investment in property and capital equipment of $36,655,000, proceeds of $51,267,000 from long-term obligations and payments of $94,014,000 related to long-term obligations. As of June 30, 2001, the Company's principal sources of liquidity consisted of $69,044,000 of working capital and $195,500,000 available under its $240,000,000 three year bank credit facility. The Company 8 9 believes that internally generated funds, together with funds that may be borrowed under its three year bank credit facility, will be sufficient to meet the Company's anticipated capital requirements and financial obligations for the foreseeable future. On June 11, 1999, the Company's Board of Directors authorized the Company to repurchase up to $200,000,000 of its outstanding common stock. Purchases are made through open market or privately negotiated transactions, subject to market conditions and trading restrictions. There were no repurchases made by the Company during the six month period ended June 30, 2001. As of June 30, 2001, $178,007,000 of common stock had been repurchased under this program. The total common stock held in treasury was $176,470,000 as of June 30, 2001. MEDICARE REIMBURSEMENT As a supplier of home oxygen and other respiratory therapy services for the home health care market, the Company participates in Medicare Part B, the Supplementary Medical Insurance Program, which was established by the Social Security Act of 1965. Suppliers of home oxygen and other respiratory therapy services have historically been heavily dependent on Medicare reimbursement due to the high proportion of elderly suffering from respiratory disease. On December 21, 2000, an approximately $35 billion Medicare "giveback" package was signed into law as part of H.R. 4577, the "Consolidated Appropriations Act, 2001." The appropriations act incorporates by reference the text of H.R. 5661, the Medicare, Medicaid and SCHIP Benefits Improvement and Protection Act of 2000 ("BIPA"), which includes sweeping reimbursement and other policy changes intended to mitigate the effects of reimbursement cuts contained in the Balanced Budget Act of 1997. Among other things, BIPA: (1) modifies payments for durable medical equipment ("DME") items. Specifically, for items provided in 2001, BIPA updates payments by the full increase in the consumer price index for urban consumers ("CPI-U") during the 12-month period ending June 2000. The DME payment update does not apply to oxygen and oxygen equipment. The update is implemented in two steps: for the period January 1, 2001 through June 30, 2001, DME payments will remain the same as were in effect before enactment of BIPA, and for the period of July 1, 2001 through December 31, 2001, DME items will receive the full CPI-U update increased by a "transitional allowance" of 3.28 percent. As provided under BIPA, the transitional allowance will not be taken into account in calculating payment amounts after 2001. No DME payment increase is authorized for 2002. (2) requires the U.S. General Accounting Office ("GAO") to study Medicare reimbursement for drugs and biologicals and for related services. The study, which the GAO is directed to complete within nine months of enactment of BIPA, must include specific recommendations for revised payment methodologies. The Department of Health and Human Services ("HHS") is required to revise the current payment methodologies based on the GAO's recommendations; however, total payments may not exceed the aggregate payments that would otherwise have been made under current law. BIPA imposes a temporary moratorium on reductions in Medicare reimbursement for drugs and biologicals until GAO submits its findings to Congress. On November 29, 1999, the Balanced Budget Refinement Act of 1999 ("BBA Refinement Act") was signed into law. This legislation was designed to mitigate the effects of the Balanced Budget Act of 1997 ("BBA") on health care providers. The BBA Refinement Act restores approximately $1.2 billion in funding in 2000 and $16 billion over five years, and affects a wide range of health care providers. With respect to the services provided by the Company, the BBA Refinement Act provides for temporary increases in Medicare payment rates for durable medical equipment (including oxygen equipment) of 0.3% in 2001 and 0.6% in 2002. Furthermore, the BBA Refinement Act temporarily prohibits HHS from exercising its inherent reasonableness authority to reduce payments for non-physician Part B services, including durable medical equipment, and excludes durable medical equipment from the home health consolidated billing requirements established in the BBA. 9 10 On August 5, 1997, the Balanced Budget Act of 1997 ("BBA") was signed into law. The legislation, among other things, was intended to reduce Medicare expenditures by $115 billion over five years. The BBA reduced Medicare reimbursement amounts for oxygen and oxygen equipment furnished after January 1, 1998, to 75 percent of the fee schedule amounts in effect during 1997. Reimbursement amounts for oxygen and oxygen equipment furnished after January 1, 1999, and each subsequent year thereafter, were reduced to 70 percent of the fee schedule amounts in effect during 1997. The BBA also reduced payment amounts for covered drugs and biologicals furnished after January 1, 1998 to 95 percent of the average wholesale price of such covered items. The BBA authorizes HHS to conduct up to five competitive bidding demonstration projects for the acquisition of durable medical equipment and requires that one such project be established for home oxygen equipment. Each demonstration project is to be operated over a three-year period and is to be conducted in not more than three competitive acquisition areas. The first demonstration project became effective in Polk County, Florida on October 1, 1999. A second demonstration site was established in the three counties surrounding San Antonio, Texas and became effective on February 1, 2001. Lincare is a participating supplier for home oxygen equipment in both competitive bidding demonstration sites. The BBA also includes provisions designated to reduce health care fraud and abuse including a surety bond requirement, which has not yet been implemented, for durable medical equipment providers. Federal and state budgetary and other cost-containment pressures will continue to impact the home respiratory care industry. The Company cannot predict whether new federal and state budgetary proposals will be adopted or the effect, if any, such proposals would have on the Company's business. NEW ACCOUNTING STANDARDS The Company will adopt Statement of Financial Accounting Standards ("SFAS") No. 141, "Business Combinations" and SFAS No. 142, "Goodwill and Other Intangible Assets". SFAS No. 141 requires that an entity account for business combinations using the purchase method and eliminates the pooling method. In addition, SFAS No. 141 provides guidance regarding the initial recognition and measurement of goodwill and other intangible assets. SFAS No. 142 requires that goodwill no longer be amortized and instead be tested annually for impairment. The provisions of SFAS No. 141 and SFAS No. 142 apply to all business combinations completed after June 30, 2001. SFAS No. 142 is effective January 1, 2002 for business combinations completed prior to June 30, 2001. The Company is evaluating the impact of adopting these statements. ITEM 3 -- QUANTITATIVE AND QUALITATIVE DISCLOSURE REGARDING MARKET RISK For the six months ended June 30, 2001, the Company recorded an unrealized loss of $1,635,000 ($0.01 per share after taxes) representing a non-cash valuation adjustment of a derivative financial instrument in accordance with Statement of Financial Accounting Standards (SFAS) No. 133. The non-cash valuation adjustment represents the change in market value of the Company's interest rate collar from December 31, 2000 to June 30, 2001. SFAS No. 133 requires financial statement recognition of the change in market value of derivative financial instruments. Accordingly, the Company expects to record a non-cash gain or loss each period to reflect the change in market value of the interest rate collar until maturity of the instrument. The Company has the option to terminate the interest rate collar at any time for cash settlement at fair market value. The fair value of the Company's long-term obligations and interest rate collar are subject to change as a result of changes in market prices or interest rates. The Company estimates potential changes in the fair value of interest rate sensitive financial instruments based on a hypothetical decrease (or increase) in interest rates. The Company's use of this methodology to quantify the market risk of such instruments should not be construed as an endorsement of its accuracy or the accuracy of the related assumptions. The quantitative information about market risk is necessarily limited because it does not take into account anticipated operating and financial transactions. 10 11 The following table sets forth the Company's estimated impact on the fair value of its long-term obligations and interest rate collar plus the impact on earnings resulting from a hypothetical 10% decrease in interest rates. Estimated fair value of financial instruments (in thousands):
(ASSUMING 10% DECREASE IN INTEREST RATES) --------------------------- HYPOTHETICAL CHANGE IN HYPOTHETICAL ANNUAL FACE CARRYING FAIR CHANGE IN INTEREST AMOUNT AMOUNT VALUE FAIR VALUE EXPENSE -------- -------- -------- ------------ ------------ June 30, 2001: Three year revolving bank credit agreement............................. $ 39,000 $ 39,000 $ 39,000 $ 0 $ (195) Senior secured notes..................... 125,000 125,000 126,169 421 0 Interest rate collar..................... 0 3,596 3,596 1,365 480 December 31, 2000: Three year revolving bank credit agreement............................. $ 78,000 $ 78,000 $ 78,000 $ 0 $ (624) Senior secured notes..................... 125,000 125,000 125,820 447 0 Interest rate collar..................... 0 1,961 1,961 1,717 635
FORWARD LOOKING STATEMENTS Statements contained herein that are not based on historical facts are forward-looking statements that are based on projections and estimates regarding the economy in general, the health care industry and other factors which impact the Company. These statements involve known and unknown risks, uncertainties and other factors that may cause the Company's actual results, levels of activity, performance or achievements to be materially different from any results, levels of activity, performance or achievements expressed or implied by any forward-looking statements. The estimates relate to reimbursement by government and third party payors for the Company's products and services, the costs associated with government regulation of the health care industry and the effects of competition and industry consolidation. In some cases, forward-looking statements that involve risks and uncertainties contain terminology such as "may," "will," "should," "could," "expects," "intends," "plans," "anticipates," "believes," "estimates," "predicts," "potential" or "continue" or variations of these terms or other comparable terminology. Key factors that have an impact on the Company's ability to attain these estimates include potential reductions in reimbursement rates by government and third party payors, changes in reimbursement policies, demand for the Company's products and services, the availability of appropriate acquisition candidates and the Company's ability to successfully complete acquisitions, efficient operations of the Company's existing and future operating facilities, regulation and/or regulatory action affecting the Company or its business, economic and competitive conditions and access to borrowed and/or equity capital on favorable terms. In developing its forward looking statements, the Company has made certain assumptions relating to reimbursement rates and policies, internal growth and acquisitions and the outcome of various legal and regulatory proceedings. If the assumptions used by the Company differ materially from what actually occurs, then actual results could vary significantly from the performance projected in the forward-looking statements. The Company is under no duty to update any of the forward-looking statements after the date of this Form 10-Q. 11 12 PART II. -- OTHER INFORMATION ITEM 1 -- LEGAL PROCEEDINGS From time to time, the Company receives inquiries from various government agencies requesting patient records and other documents. It has been Lincare's policy to cooperate with all such requests for information. The government has not instituted any proceedings or served Lincare with any complaints as a result of these inquiries. Private litigants may also make claims against the Company for violations of health care laws in actions known as qui tam suits. In these cases, the government has the opportunity to intervene in, and take control of, the litigation. The Company is a defendant in certain qui tam proceedings. The government has declined to intervene in all unsealed qui tam actions of which the Company is aware. Lincare intends to vigorously defend these suits should they proceed. As a health care provider, Lincare is subject to extensive government regulation, including numerous laws directed at preventing fraud and abuse and laws regulating reimbursement under various government programs. The marketing, billing, documentation and other practices of health care companies are all subject to government scrutiny. To ensure compliance with Medicare and other regulations, regional carriers often conduct audits and request patient records and other documents to support claims submitted by the Company for payment of services rendered to patients. Similarly, government agencies periodically open investigations and obtain information from health care providers pursuant to legal process. Violations of federal and state regulations can result in severe criminal, civic and administrative penalties and sanctions, including disqualification from Medicare and other reimbursement programs. ITEMS 2-3 -- NOT APPLICABLE. ITEM 4 -- SUBMISSION OF MATTERS TO A VOTE OF THE SECURITY HOLDERS The Annual Meeting of Shareholders of the Company was held on May 7, 2001. The following matters were voted on at the Annual Meeting, with the number of votes cast for, against or withheld, as applicable in each case, indicated next to each such matter. 1. Election of Directors
FOR WITHHELD ---------- --------- J.P. Byrnes.............................................. 39,514,907 8,516,963 C.B. Black............................................... 46,978,405 53,465 F.T. Cary................................................ 46,972,698 59,172 W.F. Miller, III......................................... 46,978,067 53,803 F.D. Byrne, M.D.......................................... 46,975,335 56,535
2. Ratification of selection of KPMG LLP as the Company's independent accountants for the fiscal year ending December 31, 2001: For: 46,933,945 Against: 92,606 Abstain: 5,319 3. Approval of the Company's 2001 Stock Plan: For: 44,473,273 Against: 2,519,181 Abstain: 39,416 ITEM 5 -- NOT APPLICABLE. ITEM 6 -- EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits included or incorporated herein: See Exhibit Index. (b) The Company did not file a Current Report on Form 8-K during the three months ended June 30, 2001. 12 13 SIGNATURE 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. Lincare Holdings Inc. -------------------------------------- Registrant /s/ PAUL G. GABOS -------------------------------------- Paul G. Gabos Secretary, Chief Financial Officer and Principal Accounting Officer August 1, 2001 13 14 INDEX OF EXHIBITS
SEQUENTIALLY EXHIBIT NUMBERED NUMBER EXHIBIT PAGE ------- ------- ------------ A 3.10 -- Amended and Restated Certificate of Incorporation of Lincare Holdings Inc................................................ B 3.11 -- Certificate of Amendment to the Amended and Restated Certificate of Incorporation of Lincare Holdings Inc........ A 3.20 -- Amended and Restated By-Laws of Lincare Holdings Inc........ A 10.20 -- Non-Qualified Stock Option Plan of Registrant............... A 10.21 -- Lincare Holdings Inc. 1991 Stock Plan....................... I 10.22 -- Lincare Holdings Inc. 1994 Stock Plan....................... I 10.23 -- Lincare Holdings Inc. 1996 Stock Plan....................... I 10.24 -- Lincare Holdings Inc. 1998 Stock Plan....................... I 10.25 -- Lincare Holdings Inc. 2000 Stock Plan....................... 10.26 Lincare Holdings Inc. 2001 Stock Plan....................... A 10.30 -- Lincare Inc. 401(k) Plan.................................... C 10.31 -- Employment Stock Purchase Plan.............................. C 10.40 -- Employment Agreement dated as of January 1, 1997 between Lincare Holdings Inc. and John P. Byrnes.................... C 10.41 -- Employment Agreement dated as of June 1, 1997 between Lincare Holdings Inc. and Paul G. Gabos..................... I 10.43 -- Employment Agreement dated as of January 1, 1998 between Lincare Holdings Inc. and Shawn S. Schabel.................. C 10.50 -- Form of Non-employee Director Stock Option Agreement........ C 10.51 -- Form of Non-qualified Stock Option Agreement................ G 10.52 -- Non-Qualified Stock Option Agreements dated as of January 23, 1995 between the Registrant and James M. Emanuel........ H 10.53 -- Non-Qualified Stock Option Agreements dated as of January 26, 1996 between the Registrant and John P. Byrnes.......... H 10.54 -- Non-Qualified Stock Option Agreements dated as of July 15, 1996 between the Registrant and John P. Byrnes.............. D 10.60 -- Three-Year Credit Agreement among Lincare Holdings Inc., as Borrower, Certain Subsidiaries of Borrower from time to time party thereto, as Guarantors, the several Lenders from time to time party thereto and Bank of America, N.A., as Agent... E 10.61 -- First Amendment to the Three-Year Credit Agreement dated June 20, 2000............................................... E 10.62 -- Second Amendment to the Three-Year Credit Agreement dated August 21, 2000............................................. E 10.70 -- Senior Secured Note Purchase Agreement among Lincare Holdings Inc., as Borrower, and several note holders with Bank of America, N.A., as Agent.............................
14 15
SEQUENTIALLY EXHIBIT NUMBERED NUMBER EXHIBIT PAGE ------- ------- ------------ E 10.71 -- Form of Series A Note....................................... E 10.72 -- Form of Series B Note....................................... E 10.73 -- Form of Series C Note....................................... F 22.10 -- List of Subsidiaries of Lincare Holdings Inc................
--------------- A Incorporate by reference to the corresponding exhibit to the Registrant's Registration Statement on Form S-1 (No. 33-44672) B Incorporated by reference to the Registrant's Form 10-Q dated August 12, 1998. C Incorporate by reference to the Registrant's Form 10-K dated March 26, 1998. D Incorporate by reference to the Registrant's Form 10-Q dated November 12, 1999. E Incorporate by reference to the Registrant's 10-Q dated November 13, 2000. F Incorporate by reference to the Registrant's Form 10-K dated March 22, 1994. G Incorporate by reference to the Registrant's Form 10-K dated March 27, 1996. H Incorporate by reference to the Registrant's Form 10-K dated March 25, 1997. I Incorporate by reference to the Registrant's Form 10-K dated March 29, 2001. 15