U.S. Securities and Exchange Commission
Washington, D. C. 20549
Form 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
-------------
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF
THE EXCHANGE ACT
For the transition period from to
-------- --------
Commission file number 1-9367
------
NMR of America, Inc.
--------------------
(Exact name of small business issuer as
specified in its charter)
Delaware 22-2468314
------------------------------- ---------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
430 Mountain Avenue Murray Hill, New Jersey 07974-2732
-----------------------------------------------------------
(address of principal executive offices)
(908) 665-9400
--------------
(Issuer's telephone number)
---------------------------------------------------------------
(Former name, former address and former fiscal year, if changed
since last report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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
------ ------
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required
to be filed by Section 12, 13 or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by court.
YES NO
------ ------
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: June 30, 1995 -
------------------
5,052,384
-----------
<PAGE>
NMR of America, Inc., and Subsidiaries
PART I. Financial Information
-------------------------------
Item 1. Financial Statements
--------------------
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis or Plan of
-----------------------------------------------
Operation
---------
PART II. Other Information
---------------------------
Item 6. Exhibits and reports on Form 8-K
--------------------------------
Exhibit 11. Computation of Shares Used For Earnings Per
Share Calculation
Exhibit 27. Financial data schedule
2
<PAGE>
NMR of America, Inc., and Subsidiaries
Consolidated Balance Sheets
---------------------------
June 30, March 31,
1995 1995
----------- ------------
(unaudited)
Assets
Current assets:
Cash and cash equivalents $ 4,296,528 $ 3,966,804
Marketable securities 398,735 1,125,643
Short-term investments 916,234 886,609
Due from affiliated physician
associations, net 9,830,568 9,498,268
Other current assets 929,128 903,373
----------- -----------
Total current assets 16,371,193 16,380,697
----------- -----------
Land, buildings and equipment 28,568,568 31,360,133
Less, accumulated depreciation
and amortization 16,471,024 19,580,504
----------- -----------
12,097,544 11,779,629
Cost in excess of net assets
acquired 4,467,009 4,497,974
Deferred income taxes 1,019,000 1,099,000
Other assets 1,591,356 1,571,547
----------- -----------
Total assets $35,546,102 $35,328,847
___________ ___________
----------- -----------
The accompanying notes are an integral part of the consolidated
financial statements.
3
<PAGE>
NMR of America, Inc., and Subsidiaries
Consolidated Balance Sheets
---------------------------
June 30, March 31,
1995 1995
------------- -----------
(unaudited)
Liabilities and shareholders' equity
Current liabilities:
Accounts payable and
accrued expenses $ 3,698,788 $ 3,098,931
Current installments on capital
lease obligations 267,047 286,263
Current installments on notes and
mortgage payable 2,831,648 2,769,098
----------- -----------
Total current liabilities 6,797,483 6,154,292
Convertible subordinated debt, net 2,067,001 2,056,417
Obligations under capital leases,
less current installments 413,130 481,518
Notes and mortgage payable,
less current installments 9,782,486 10,451,119
Minority interest in limited
partnerships 2,228,665 2,155,665
Commitments and contingencies
Shareholders' equity:
Common stock, $.01 par value;
authorized 30,000,000 shares,
5,416,967 shares
issued and outstanding at
June 30, and March 31,
1995, respectively 54,169 54,169
Additional paid-in capital 11,570,401 11,570,401
Unrealized gains and (losses) 3,092 14,208
Retained earnings 4,092,028 3,854,255
Less, 364,583 and 364,958 common
shares in Treasury at June 30,
and March 31, 1995 respectively ( 1,462,353) ( 1,463,197)
----------- -----------
Shareholders' equity 14,257,337 14,029,836
----------- -----------
Total liabilities and shareholders'
equity $35,546,102 $35,328,847
___________ ___________
----------- -----------
The accompanying notes are an integral part of the consolidated
financial statements.
4
<PAGE>
NMR of America, Inc., and Subsidiaries
Consolidated Statements of Operations (unaudited)
-------------------------------------
Quarter ended June 30,
-----------------------
1995 1994
----------- -----------
Revenue, net $ 4,771,293 $ 4,437,156
----------- -----------
Costs and expenses:
Payroll and related costs 1,439,737 1,142,536
Depreciation and amortization 653,414 717,273
Medical supplies and other
operating costs 1,828,170 1,358,254
Gain on disposition of center assets ( 62,443)
Other general and administrative 141,156 136,613
----------- -----------
4,000,034 3,354,676
----------- -----------
Operating income 771,259 1,082,480
Interest expense 372,589 262,008
Other income, net 19,632 22,259
----------- -----------
Income before minority
interest and income taxes 418,302 842,731
Minority interest in income of
limited partnerships 82,530 153,210
----------- -----------
Income before income taxes 335,772 689,521
Provision for income taxes:
Current 18,000 68,000
Deferred 80,000
----------- -----------
Net income $ 237,772 $ 621,521
___________ ___________
----------- -----------
Per share data
Primary:
Primary net income per share $ .05 $ .13
__________ __________
---------- ----------
Fully diluted:
Fully diluted net income per share $ .05 $ .13
__________ __________
---------- ----------
The accompanying notes are an integral part of the consolidated
financial statements.
5
<PAGE>
NMR of America, Inc., and Subsidiaries
Consolidated Statements of Cash Flows (unaudited)
-------------------------------------
Quarter ended June 30,
______________________________________________________________________
1995 1994
______________________________________________________________________
Cash flows from operating activities:
Net income $ 237,773 $ 621,521
______________________________________________________________________
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation and amortization 653,414 717,273
Minority interest in income of
limited partnerships 82,530 153,210
Deferred income taxes 80,000
Equity in loss from
unconsolidated partnership 30,939 23,455
Gain on disposition of
center assets ( 62,443)
Changes in assets and liabilities:
Increase in amount due from
affiliated physician
associations, net ( 332,300) ( 183,216)
(Increase) decrease in other
current assets 1,245 ( 23,981)
(Increase) decrease in other assets ( 65,912) 4,850
(Decrease) increase in accounts
payable and accrued expenses ( 150,475) ( 307,850)
______________________________________________________________________
Total adjustments 236,998 383,741
______________________________________________________________________
Net cash provided by operating
activities 474,771 1,005,262
______________________________________________________________________
The accompanying notes are an integral part of the consolidated
financial statements.
6
<PAGE>
NMR of America, Inc., and Subsidiaries
Consolidated Statements of Cash Flows (unaudited)
-------------------------------------
Quarter ended June 30,
______________________________________________________________________
1995 1994
______________________________________________________________________
Cash flows from investing activities:
Purchase of equipment ( 80,841) ( 345,572)
Purchase of short-term investments ( 213,000)
Purchase of marketable securities ( 300,000)
Purchase of limited partnership
interests ( 40,000)
Proceeds from sale of marketable
securities 1,030,000 206,434
Proceeds from sale of short-term
investments 183,375
Advance to unconsolidated partnership ( 48,000)
Other ( 17,164)
______________________________________________________________________
Net cash provided by (used in)
investing activities 554,370 ( 179,138)
______________________________________________________________________
Cash flows from financing activities:
Repayments of debt, including capital
lease obligations ( 693,687) ( 454,208)
Distributions to limited partners ( 5,730)
Proceeds from borrowings 197,625
----------------------------------------------------------------------
Net cash used in
financing activities ( 699,417) ( 256,583)
----------------------------------------------------------------------
Net increase (decrease) in cash
and cash equivalents 329,724 569,541
Cash and cash equivalents
at April 1, 3,966,804 3,718,978
----------------------------------------------------------------------
Cash and cash equivalents
at June 30, $4,296,528 $4,288,519
______________________________________________________________________
The accompanying notes are an integral part of the consolidated
financial statements.
7
<PAGE>
NMR of America, Inc., and Subsidiaries
Consolidated Statements of Cash Flows (unaudited)
-------------------------------------
Quarter ended June 30,
______________________________________________________________________
1995 1994
______________________________________________________________________
Supplemental Disclosure of Cash Flow Information:
Cash paid during the year for:
Income taxes $ 3,195 $ 14,007
Interest $ 329,249 $ 216,428
Supplemental Schedule of Noncash Activities:
Fixed asset additions
included in accounts payable
and accrued expenses $ 750,332 $ ---
Unrealized gain on marketable
securities available-for-sale $ 3,092 $ ---
The accompanying notes are an integral part of the consolidated
financial statements.
8
<PAGE>
NMR of America, Inc., and Subsidiaries
Notes to Consolidated Financial Statements (unaudited)
-------------------------------------------
Condensed Consolidated Financial Statements
-------------------------------------------
The condensed consolidated financial statements included herein have been
prepared by the Company, without audit, pursuant to the rules and regulations
of the Securities and Exchange Commission. 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 such rules and regulations since the Company believes that the
disclosures contained herein are adequate to make the information presented
not misleading. It is suggested that these condensed financial statements be
read in conjunction with the financial statements, and notes thereto included
in the Company's latest Annual Report on Form 10-KSB. In the opinion of the
Company, all adjustments, consisting only of normal recurring adjustments,
necessary to present fairly the financial position of the Company as of June
30, 1995, as well as the results of operations and cash flows for the three
months ended June 30, 1995 and 1994 have been included. The results of
operations for such interim periods are not necessarily indicative of the
results for the full year.
Due from affiliated physician associations
------------------------------------------
The Company has entered into agreements with physicians engaging in business
as professional associations ("Physicians") pursuant to which the Company
maintains and operates imaging systems in offices operated by the Physicians.
The agreements have terms of up to six years and are renewable at the option
of the Company. The Physicians' principal, Dr. David L. Bloom, is a director
of the Company. Under the agreements, Physicians has agreed to be obligated
to contract for radiological services at the centers and to sublease each
facility. The Company is obligated to make necessary leasehold improvements,
provide furniture and fixtures and perform certain administrative functions
relating to the provision of technical aspects of the centers operations for
which Physicians pay a quarterly fee composed of a fixed sum based on the
cost of the respective imaging system installed, including related financing
costs, a charge per invoice processed and a charge based upon system usage
for each Company-installed imaging system in operation. These fees, net of a
contractual allowance based upon Physicians ability to pay after Physicians
have fulfilled their obligations under facility subleases and radiological
service contracts as set forth above, constitute the Company's revenue, net
for developed sites.
For consolidated centers which the Company has acquired, subsidiaries of the
Company have entered into agreements with unaffiliated professional
corporations to provide radiological services under Dr. Bloom's
administration. Accordingly, revenue, net for acquired centers consists of
patient billings adjusted for contractual
9
<PAGE>
NMR of America, Inc., and Subsidiaries
Notes to Consolidated Financial Statements (continued)
-------------------------------------------
reductions which have been negotiated with various third-party payers. Fees
paid to radiologists at these centers are reflected as a component of medical
supplies and other operating expense in the accompanying statements of
operations.
Certain revenues are subject to audit and retroactive adjustment by third-
party payers. The Company is aware of no pending audits or proposed
adjustments and no provisions for estimated retroactive adjustments have been
provided.
Short-term investments
----------------------
Short-term investments at June 30, 1995 are stated at cost plus accrued
interest and consist of certificates of deposit having original maturities of
greater than three months but not in excess of one year.
Marketable securities
---------------------
Marketable securities classified as available-for-sale, held-to-maturity and
trading are as follows:
Gross Fair
unrealized market
Cost gains value
---------- ---------- ----------
June 30, 1995
Available-For-Sale:
U.S. Government obligations $ 395,643 $ 3,092 $ 398,735
========== ========== ==========
March 31, 1995
Available-For-Sale:
U.S. Government obligations $1,111,435 $ 14,208 $1,125,643
========== ========== ==========
There were no investments in debt or equity securities classified as trading
or held-to-maturity at June 30 and March 31, 1995
Shareholders' equity
--------------------
On February 6, 1991, the Board of Directors authorized a common stock
repurchase program whereby the Company may purchase not more than 1,000,000
shares of its outstanding common stock from time to time. The shares will be
held as treasury shares for reissuance upon the exercise of employee stock
options, warrants and other convertible securities. As of June 30, 1995, the
Company had repurchased 348,420 shares of common stock under this program.
10
<PAGE>
NMR of America, Inc., and Subsidiaries
Notes to Consolidated Financial Statements (continued)
-------------------------------------------
On April 9, 1986, the Company's Board of Directors adopted the 1986 Incentive
Stock Option and Non-Statutory Option Plan (the "Plan") for employees of the
Company. Under the Plan, up to 600,000 shares of the common stock of the
Company may be issued upon the exercise of options to be granted during the
ten-year term of the Plan. Options with respect to 364,625 shares were
outstanding at June 30, 1995 at an exercise price ranging from $2.25 to $6.38
per share for the terms of between five and ten years. As of June 30, 1994,
options with respect to 141,225 shares were exercisable. During the quarter
ended June 30, 1995, 375 options were exercised.
Commitments and contingencies
-----------------------------
The Company is from time to time involved in litigation incidental to the
conduct of its business. Management and its counsel believe that such
pending litigation will not have a material adverse effect on the Company's
results of operations or financial condition.
Imaging center matters
-----------------------
The Company's Austin, Texas center operates pursuant to a limited partnership
agreement (the "Austin Partnership") which expires on January 31, 1996. The
Company also receives a management fee based upon five percent of the
center's cash collections. No assurances can be given that the Austin
Partnership will be operated beyond its current expiration date, that the
Company will continue to manage the center or that the terms of any new or
extended management contract will be substantially similar to the Company's
existing management contract.
During the first quarter of fiscal 1996 the Company temporarily ceased
operations at its Union, New Jersey facility in order to replace the center's
existing magnetic resonance imaging equipment, which was installed in 1984.
The new system was installed during June 1995 and became operational in early
July 1995. The project was completed for an aggregate cost of approximately
$760,000, which includes the cost of related leasehold improvements and
diagnostic imaging equipment. The Company completed its clinical trials of
the equipment during July 1995 and, as such, has reflected the cost of the
foregoing improvements in property and equipment and has accrued such costs
as a component of accounts payable and accrued expenses as of June 30, 1995.
The Company intends to obtain financing for the equipment and related
leasehold improvements during the second quarter of fiscal 1996.
11
<PAGE>
NMR of America, Inc., and Subsidiaries
Notes to Consolidated Financial Statements (continued)
-------------------------------------------
Acquisitions
------------
On March 13, 1995, the Company announced that its Board of Directors had
approved an agreement, subject to certain conditions, providing for the
acquisition of Morgan Medical Holdings, Inc. ("Morgan"). A definitive
acquisition agreement was executed on April 11, 1995. Morgan provides
diagnostic imaging equipment, facilities and management services to
physicians through four outpatient centers located in the Florida cities of
Cape Coral, Naples, Sarasota and Titusville. In addition, Morgan operates
a physical therapy center in Albany, Georgia. Pursuant to the terms
of the acquisition, Morgan shareholders will receive approximately 1,220,000
shares of the Company's common stock in the transaction, which includes
approximately 100,000 shares reserved for issuance upon exercise of Morgan's
outstanding stock options and warrants. Pursuant to the merger agreement,
0.3330886 shares of the Company's common stock would be issued for each
outstanding share of Morgan. The merger is subject to conditions including
the sale of Morgan's physical therapy business and shareholder and regulatory
approval. On May 15, the Company filed a Joint Proxy/Prospectus with the
Securities and Exchange Commission ("SEC") relating to the transaction. Such
Joint Proxy/Prospectus was declared effective by the SEC on August 11, 1995.
Under the terms of the merger agreement, the Company will exercise control
over the voting rights of Morgan's largest shareholder for a period of three
years. As such, if this acquisition is consummated, the Company intends to
account for the transaction as a purchase and, accordingly, the acquired
assets and liabilities will be recorded at their fair values at the date of
acquisition. The Company currently estimates that approximately $5,558,000
of costs in excess of fair value will be recorded in conjunction with the
transaction which will be amortized over twenty years on a straight line
basis.
12
<PAGE>
NMR of America, Inc., and Subsidiaries
Item 2. Management's Discussion and Analysis or Plan of Operation
Results of Operations
---------------------
Three months ended June 30, 1995 compared to three months ended June 30,
------------------------------------------------------------------------
1994.
-----
Reference is made to Note 2 of the Company's consolidated financial
statements for a definition of revenue, net.
For the quarter ended June 30, 1995, revenue, net was $4,771,293 versus
$4,437,156 for the quarter ended June 30, 1994 or a $334,137
(7.5%) increase. The increase in revenue, net resulted primarily from the
purchases of Libertyville Imaging Center ("Libertyville") and Golf MRI and
Diagnostic Imaging Center ("Golf/DIC") which were effective January 1, 1995.
These centers generated revenue, net totaling $861,746 for quarter ended June
30, 1995. Same center revenue, net decreased by $527,609 or 11.9% from
$4,437,157 to $3,909,548 during the quarter ended June 30, 1995 due to the
temporary shut-down of the Company's Union, New Jersey center for the entire
first fiscal quarter and as a result of increased aggregate same center scan
volume offset by additional discounted business. Revenue, net at the
Company's Union, New Jersey center declined by approximately $233,000 during
the quarter ended June 30, 1995 in comparison to the comparable quarter of
the prior fiscal year. Due to the equipment replacement, the Company
believes that the Union center could generate revenue, net which is
comparable to, or in excess of, historical volume during the remainder of
fiscal 1996 and beyond. Patient volume and reimbursement sources both
significantly impact the Company's revenue, net. Patient medical costs are
paid by managed care organizations, such as HMO's, Blue Cross/Blue Shield,
Medicare and Medicaid, and private pay organizations, such as commercial
insurance carriers. By virtue of contractual allowances obtained by certain
of these reimbursement sources under contracts entered into with the Company,
shifts in the mix of patients and their related reimbursement sources will
impact revenue, net in the period in which they occur.
Payroll and related costs for the quarter ended June 30, 1995 were $1,439,737
versus $1,142,536 for the quarter ended June 30, 1994, or an increase of
$297,201 (26.0%). This increase is due to the acquisitions of Libertyville
and Golf/DIC which incurred payroll and related costs totaling approximately
$151,410 during the quarter ended June 30, 1995. In addition, the Company's
clinical payroll and related costs increased due to continued increases in
the aggregate number of procedures being performed in its centers and
administrative personnel costs have increased due to the hiring of certain
managed care and marketing personnel hired in response to increased
competition for managed care and other business. The Company has also
experienced an increase in the cost of providing health benefits to its
employees.
13
<PAGE>
NMR of America, Inc., and Subsidiaries
Item 2. Management's Discussion and Analysis or Plan of Operation
(continued)
Depreciation and amortization expense decreased by $63,859 (8.9%) from
$717,273 for the quarter ended June 30, 1994 to $653,414 for the quarter
ended June 30, 1995. This decrease was primarily attributable to an
approximately $154,000 decrease in aggregate same center depreciation expense
on the Company's more mature centers, which includes a $40,000 decrease in
quarterly depreciation due to the write-down of the Elgin, Illinois center's
fixed assets during the fourth quarter of fiscal 1995. This decrease was
offset by the acquisitions of Libertyville and Golf/DIC, which resulted in
goodwill amortization and equipment depreciation aggregating $90,919 for the
quarter ended June 30, 1995.
Medical supplies and other operating costs include the cost of equipment and
premises maintenance, medical supplies, radiology fees for acquired centers,
other center expenses, and patient billing fees. Medical supplies and other
operating costs increased by $469,916 (34.6%) from $1,358,253 for the quarter
ended June 30, 1994 to $1,828,170 for the quarter ended June 30, 1995. This
increase results, primarily, from the inclusion of Libertyville and Golf/DIC
centers which generated medical supplies and other operating expenses
totaling $425,068 during the quarter ended June 30, 1995. In addition,
medical supplies and operating expenses were significantly reduced during the
prior comparable quarter ending June 30, 1994 due to a $91,620 credit
received from a vendor as consideration for business lost during the
installation of an equipment upgrade. The foregoing factors contributing to
the increase in medical supplies and operating expenses were offset by
decreases in the cost of patient billing services ($29,000) and medical
supplies at the Company's other centers Various cost containment measures
previously enacted by the Company are intended to reduce operating expenses,
as a percentage of revenue, net during fiscal 1996 and beyond.
The Company realized a $62,443 non-cash gain on the sale of the magnetic
resonance imaging equipment formerly in use at its Union, New Jersey facility
with a book value of $64,557 at the time of disposition. In return for the
sale of the old equipment, the Company received $27,000 of cash consideration
(which was received July 1995) and a $100,000 credit towards the acquisition
cost of the new equipment which was purchased for the Union center during the
quarter ended June 30, 1995.
Other general and administrative expenses for the quarter ended June 30,
1995, were $141,156 versus $136,613 for the quarter ended June 30, 1994, or
an increase of $4,543 (3.3%). The increase during the quarter ended June 30,
1995 results primarily from increased advertising and promotional expenses
relating to marketing efforts at the Company's centers.
14
<PAGE>
NMR of America, Inc., and Subsidiaries
Item 2. Management's Discussion and Analysis or Plan of Operation
(continued)
Interest expense for the quarter ended June 30, 1995 was $372,589 versus
$262,008 for the comparable prior quarter, or an increase of $110,581
(42.2%). This increase results, primarily, from interest expense associated
with the acquisition and assumption of debt obligations relating to the
Libertyville and Golf/DIC acquisitions, which generated interest expense
totaling approximately $71,471 for the quarter ended June 30, 1995. In
addition, aggregate same center interest expense increased due to the
financing of additional hardware and software upgrades and from increases in
prevailing interest rates, which impact the Company's variable rate debt
obligations. These increases were offset by decreases in interest expense
relating to scheduled reductions in outstanding principal balances.
Other income and expense, net decreased by $2,627 from $22,259 for the
quarter ended June 30, 1994 to $19,632 for the quarter ended June 30, 1995.
The decrease for the quarter ended June 30, 1995, results primarily from a
$7,484 increase in the Company's equity interest in the losses of the Austin,
Texas limited partnership, offset by an increase in interest income earned on
invested cash.
Minority interest in income of limited partnerships decreased by $70,680
(46.1%) from $153,210 for the quarter ended June 30, 1994 to $82,530 for the
quarter ended June 30, 1995. The decrease is primarily due to a $96,000
reduction in aggregate same center minority interest due to a reduction in
pre-minority interest income on such centers offset by a $25,000 increase in
minority interest in income of the Golf/DIC limited partnerships, which were
acquired effective January 1, 1995.
The Company's current provision for income taxes of $18,000 for the quarter
ended June 30, 1995, consists of current state income and franchise taxes.
The Company's current federal tax provision for the first fiscal quarter of
1996 was offset through the utilization of net operating loss carryforwards
available from prior years. The Company has recorded a deferred tax
provision of $80,000 for the quarter ended June 30, 1995, to reflect the
reduction in the Company's net deferred tax assets during such period.
For the reasons described above, the Company's net income for the quarter
ended June 30, 1995 decreased by $383,749 to $237,772 from $621,521 for the
comparable prior fiscal quarter.
Federal legislation was enacted during the second quarter of fiscal 1994,
which prohibits, effective January 1, 1995, the referral of
Medicare or Medicaid patients to outpatient diagnostic imaging centers by
physicians possessing a financial interest in such centers. In addition,
certain states in which the Company operates have proposed
15
<PAGE>
NMR of America, Inc., and Subsidiaries
Item 2. Management's Discussion and Analysis or Plan of Operation
(continued)
or enacted similar legislation. As a result of this legislation, the
Company purchased limited partnership interests in certain of the Company's
imaging centers which were owned by physicians and other non-physician
limited partners. Although, to date, the Company does not believe it has
experienced any significant changes in its referral patterns resulting
from such acquisitions, the Company is unable to predict the long-term
effect of the foregoing legislation or the impact of the Company's
purchases of limited partner interests on referrals to the Company's
centers. The loss of referrals from former limited partners who refer
Medicare, Medicaid or other patients to the Company's centers would have
a material adverse impact on the Company's future net revenues, results of
operations and liquidity.
Inflation
---------
Inflation and changing prices have generally impacted the Company only in the
salary and benefit areas and have not been material to the Company's
operations. In the event of increased inflation, management believes that
the Company may not be able to raise the prices for its services by an amount
sufficient to offset the cost of inflation.
Management believes the Company is well positioned to counter the
impact of inflation on its operating margins given its mix of mature centers
with upgraded equipment, as well as newer facilities which offer the
increased efficiency and the high volume capacity of state of the art
diagnostic imaging equipment.
Liquidity
---------
The Company had net income of $237,772 for the fiscal quarter ended June 30,
1995 versus net income of $621,521 for the comparable prior fiscal quarter.
At June 30, 1995, the Company's working capital totaled $9,573,710 which
includes cash and cash equivalents totaling $4,296,528, marketable securities
totaling $398,735 and short-term investments totaling $916,234. The Company
generated $474,771 and $1,005,262 in net cash flow from operating activities
during the fiscal quarters ended June 30, 1995 and 1994, respectively, or a
decrease of $530,491. Cash provided by operating activities during the
fiscal quarter ended June 30, 1995 resulted from operating cash flows of
$1,022,213 offset by a $547,442 net increase in the Company's current assets
and liabilities. The decrease in operating cash flows and cash provided by
operating activities results primarily from the decrease in the Company's net
income during fiscal 1996.
Investing activities provided $554,370 in cash during fiscal 1996. The
Company purchased $80,841 of equipment and leasehold improvements primarily
for the Seabrook, Maryland imaging center. The Company
16
<PAGE>
NMR of America, Inc., and Subsidiaries
Item 2. Management's Discussion and Analysis or Plan of Operation
(continued)
intends to continue to evaluate hardware and software upgrades for imaging
equipment and expects to acquire such upgrades where deemed advisable. The
Company's net proceeds from sales and purchases of short-term investments and
marketable securities totaled $700,375 during the quarter ended June 30,
1995. The Company invests substantially all of its excess cash balances in
government securities, certificates of deposit and other fixed income
instruments with maturities of up to one year. Such maturities are scheduled
to coincide with the Company's anticipated capital needs. In addition, the
Company advanced $48,000 to its unconsolidated Austin, Texas limited
partnership to fund working capital requirements.
Financing activities used net cash totaling $699,417 which is comprised of
$693,687 utilized for the repayment of debt and capital lease obligations and
$5,730 of limited partnership distributions during the fiscal quarter ended
June 30, 1995.
At June 30, 1995, the Company had $680,177 in obligations under capital
leases compared to $767,781 at March 31, 1995. These obligations relate
primarily to the financing of imaging equipment at the Philadelphia,
Pennsylvania and OPEN MRI of Chicago centers.
Repayments under capital leases totaling $87,604 were made during the quarter
ended June 30, 1995.
During the fiscal year ended March 31, 1993, on the basis of declining
amounts of cash generated by operating activities, the Company adopted a
policy of reducing operating expenses and enhancing cash management.
Management reduced the size of the Company's staff and reorganized
administrative and imaging center personnel. Management intends to continue
to implement cost reductions throughout fiscal 1996 wherever possible.
Management of the Company believes that various medical cost containment
measures being implemented by Federal and state governments and third party
payers can be expected to place pressure
on both the amounts charged for MRI and other diagnostic imaging procedures
and the number of patient referrals from physicians. Management expects that
these efforts will put downward pressure on the Company's revenue, net and
cash generated by operating activities. Management is seeking to offset
these pressures by controlling the costs and expenses described above, by
increased marketing efforts and steps taken to enhance the Company's
professional medical representation in the communities where its centers are
located.
To date, the Company has been able to obtain financing for its diagnostic
imaging equipment through equipment vendors, equipment financing companies
and banks and the Company expects to be able to obtain additional financing,
as required, in the future. However, there can be no assurance that such
financing will be available from such lending sources or any other party on
terms that will be favorable to the Company.
17
<PAGE>
NMR of America, Inc., and Subsidiaries
Item 2. Management's Discussion and Analysis or Plan of Operation
(continued)
Capital Resources
-----------------
The Company believes that the existing cash and cash equivalents, short-term
investments and cash generated from operating activities will be sufficient
to meet the needs of its current operations, any acquisitions of additional
limited partnership interests in the Company's centers, anticipated capital
expenditures, scheduled debt repayments and limited partner distributions.
Management of the Company believes that there are and will continue to be
opportunities to acquire additional diagnostic imaging centers, as well as
companies which own multiple imaging centers. Other than the Morgan Medical
Holdings, Inc. transaction, which is described in the accompanying Notes to
the Consolidated Financial Statements, the Company is not a party to any
agreements or letters of intent relating to the acquisition of additional
centers at June 30, 1995. Management reviews proposals to acquire additional
centers and evaluates these opportunities on the basis of the price at which
it believes the centers can be acquired, relevant demographic
characteristics, competitive centers, physician referral patterns, location
and other factors. Management intends to pursue the acquisition of
additional centers if its analysis of these factors indicates the Company
would receive a favorable return from investing in these centers. Any
centers that are acquired can be expected to involve the payment of the
purchase price in either cash, notes or shares of common stock or a
combination thereof. No assurances can be given that additional centers will
be acquired or as to the terms thereof. In the event that the Company
engages in the acquisition of additional centers, it may be required to raise
additional long-term capital through the issuance of debt or equity
securities. No assurance can be given that such capital will be available on
terms acceptable to the Company. The unavailability of capital for this
purpose would adversely affect the Company's ability to acquire additional
centers.
18
<PAGE>
NMR of America, Inc., and Subsidiaries
Part II. Other Information
----------------------------
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
a. Exhibits
--------
Exhibit 11. Computation of Shares Used For Earnings Per
Share Calculation
Exhibit 27. Financial data schedule
b. Reports on Form 8-K
-------------------
(1) Report on Form 8-K dated July 31, 1995.
19
NMR of America, Inc., and Subsidiaries
Exhibit 11. Computation of Shares Used For Earnings Per Share Calculation.
Quarter ended June 30,
-----------------------
1995 1994
---------- ---------
Primary earnings per share information:
Net income per consolidated statements
of operations $ 237,772 $ 621,521
Add: Interest savings from proceeds
of conversion of outstanding
warrants and exercise of stock
options, net of minority
interest and income taxes
----------- ----------
Net income used to compute primary
earnings per share $ 237,772 $ 621,521
___________ __________
----------- ----------
Weighted average number of
outstanding shares 5,052,372 4,885,865
Add: Incremental shares issuable
on conversion of outstanding
warrants and exercise of
stock options 208,297 65,953
----------- ----------
Weighted average number of shares
used to compute primary earnings
per share 5,260,669 4,951,818
___________ __________
----------- ----------
Primary earnings per share:
---------------------------
Primary net income per share $ .05 $ .13
___________ __________
----------- ----------
20
<PAGE>
NMR of America, Inc., and Subsidiaries
Exhibit 11. Computation of Shares Used For Earnings Per Share Calculation.
Quarter ended June 30,
-----------------------
1995 1994
----------- ----------
Fully diluted earnings per share information:
Net income per consolidated statements
of operations $ 237,772 $ 621,521
Add: Interest savings from proceeds
of conversion of outstanding
warrants and exercise of stock
options, net of minority
interest and income taxes 52,388 60,762
--------- ---------
Net income used to compute fully
diluted earnings per share $ 290,160 $ 682,283
_________ _________
--------- ---------
Weighted average number of
outstanding shares 5,052,372 4,885,865
Add: Incremental shares issuable
on conversion of outstanding
warrants and exercise of
stock options 208,297 65,953
Incremental shares issuable on
conversion of convertible
subordinated debentures 481,556 506,444
--------- ----------
Weighted average number of shares
used to compute fully diluted
earnings per share 5,742,225 5,458,262
_________ _________
--------- ---------
Fully diluted earnings per share:
---------------------------------
Fully diluted net income per share $ .05 $ .13
__________ _________
---------- ---------
21
<PAGE>
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.
NMR of America, Inc.
By /s/ Joseph G. Dasti
_______________________
Joseph G. Dasti
President
(Chief Executive Officer)
By /s/ John P. O'Malley III
_________________________
John P. O'Malley III
Executive Vice President-Finance
(Chief Financial Officer)
Date: August 14, 1995
22
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> JUN-30-1995
<CASH> 4,296,528
<SECURITIES> 398,735
<RECEIVABLES> 9,830,568
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 16,371,193
<PP&E> 28,568,568
<DEPRECIATION> 16,471,024
<TOTAL-ASSETS> 35,546,102
<CURRENT-LIABILITIES> 6,797,483
<BONDS> 12,262,617
<COMMON> 54,169
0
0
<OTHER-SE> 14,203,168
<TOTAL-LIABILITY-AND-EQUITY> 35,546,102
<SALES> 0
<TOTAL-REVENUES> 4,771,293
<CGS> 0
<TOTAL-COSTS> 4,000,034
<OTHER-EXPENSES> 62,898
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 372,589
<INCOME-PRETAX> 335,772
<INCOME-TAX> 98,000
<INCOME-CONTINUING> 237,772
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 237,772
<EPS-PRIMARY> .05
<EPS-DILUTED> .05
</TABLE>
