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, 1996
[ ] 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 EmployerIdentification 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, 1996 - 6,284,346
<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
2
<PAGE>
NMR of America, Inc., and Subsidiaries
Consolidated Balance Sheets
June 30, March 31,
1996 1996
----------- -----------
(unaudited)
Assets
Current assets:
Cash and cash equivalents $ 2,072,925 $ 3,782,315
Marketable securities 289,125
Short-term investments 1,830,405 663,660
Due from affiliated physician
associations, net 14,946,978 14,182,008
Other current assets 1,301,461 1,442,394
----------- -----------
Total current assets 20,440,894 20,070,377
----------- -----------
Land, buildings and equipment 32,037,838 31,832,051
Less, accumulated depreciation
and amortization 18,030,369 17,381,581
----------- -----------
14,007,469 14,450,470
Long-term investments 192,000 192,000
Cost in excess of net assets
acquired 10,660,167 10,804,971
Deferred income taxes 109,000
Other assets 1,231,880 1,446,868
----------- -----------
Total assets $46,532,410 $47,073,686
=========== ===========
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,
1996 1996
----------- -----------
(unaudited)
Liabilities and shareholders' equity
Current liabilities:
Accounts payable and
accrued expenses $ 4,448,686 $ 4,276,846
Current installments on capital
lease obligations 604,644 612,985
Current installments on notes and
mortgage payable 4,591,221 4,911,031
----------- -----------
Total current liabilities 9,644,551 9,800,862
Deferred tax liability 90,000
Convertible subordinated debt, net 1,890,835 1,975,752
Obligations under capital leases,
less current installments 1,009,479 1,152,455
Notes and mortgage payable,
less current installments 10,012,109 11,028,647
Minority interest in limited
partnerships 2,237,382 2,126,708
Commitments and contingencies
Shareholders' equity:
Common stock, $.01 par value;
authorized 30,000,000 shares,
6,715,143 and 6,705,143 shares
issued and outstanding at
June 30, and March 31,
1996, respectively 67,151 67,051
Additional paid-in capital 17,072,790 17,027,890
Retained earnings 6,220,272 5,631,632
Less, 430,797 and 437,712 common
shares in Treasury at June 30,
and March 31, 1996 respectively ( 1,712,159) ( 1,737,311)
----------- -----------
Shareholders' equity 21,648,054 20,989,262
----------- -----------
Total liabilities and shareholders'
equity $46,532,410 $47,073,686
=========== ===========
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,
----------------------------
1996 1995*
----------- -----------
Revenue, net $ 7,263,367 $ 4,771,293
----------- -----------
Costs and expenses:
Payroll and related costs 1,788,463 1,439,737
Depreciation and amortization 796,530 653,414
Medical supplies and other
operating costs 2,776,614 1,828,170
Transaction costs 301,140
Other general and administrative 219,927 141,156
----------- -----------
5,882,674 4,062,477
----------- -----------
Operating income 1,380,693 708,816
Interest expense 447,048 372,589
Other income, net 39,810 82,075
----------- -----------
Income before minority
interest and income taxes 973,455 418,302
Minority interest in income of
limited partnerships 120,815 82,530
----------- -----------
Income before income taxes 852,640 335,772
Provision for income taxes:
Current 65,000 18,000
Deferred 199,000 80,000
----------- -----------
Net income $ 588,640 $ 237,772
=========== ===========
Per share data
Primary:
Primary net income per share $ .09 $ .05
=========== ===========
Fully diluted:
Fully diluted net income per share $ .09 $ .05
=========== ===========
* Reclassified to conform to current year presentation.
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,
- --------------------------------------------------------------------------------
1996 1995
- --------------------------------------------------------------------------------
Cash flows from operating activities:
Net income $ 588,640 $ 237,773
- --------------------------------------------------------------------------------
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation and amortization 796,530 653,414
Minority interest in income of
limited partnerships 120,815 82,530
Deferred income taxes 199,000 80,000
Equity in loss from
unconsolidated partnership 30,939
Gain on disposition of
center assets (62,443)
Changes in assets and liabilities:
Increase in amount due from
affiliated physician
associations, net (764,970) (332,300)
Decrease in other
current assets 140,933 1,245
Decrease (increase) in other assets 172,133 (65,912)
Increase (decrease) in accounts
payable and accrued expenses 196,992 (150,475)
- --------------------------------------------------------------------------------
Total adjustments 861,433 236,998
- --------------------------------------------------------------------------------
Net cash provided by operating
activities 1,450,073 474,771
- --------------------------------------------------------------------------------
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,
- --------------------------------------------------------------------------------
1996 1995
- --------------------------------------------------------------------------------
Cash flows from investing activities:
Purchase of equipment (205,787) (80,841)
Purchase of short-term investments (1,495,745) (213,000)
Purchase of marketable securities (289,125) (300,000)
Proceeds from sale of marketable
securities 1,030,000
Proceeds from sale of short-term
investments 329,000 183,375
Advance to unconsolidated partnership (48,000)
Other (2,716) (17,164)
- --------------------------------------------------------------------------------
Net cash (used in) provided by
investing activities (1,664,373) 554,370
- --------------------------------------------------------------------------------
Cash flows from financing activities:
Repayments of debt, including capital
lease obligations (1,487,665) (693,687)
Distributions to limited partners (7,425) (5,730)
- --------------------------------------------------------------------------------
Net cash used in
financing activities (1,495,090) (699,417)
- --------------------------------------------------------------------------------
Net (decrease) increase in cash
and cash equivalents (1,709,390) 329,724
Cash and cash equivalents
at April 1, 3,782,315 3,966,804
- --------------------------------------------------------------------------------
Cash and cash equivalents
at June 30, $2,072,925 $4,296,528
- --------------------------------------------------------------------------------
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 $ 26,925 $ 3,195
Interest $ 402,488 $ 329,249
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, 1996, as
well as the results of operations and cash flows for the three months ended June
30, 1996 and 1995 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
For consolidated centers which the Company developed, it 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 pays 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 and
9
<PAGE>
NMR of America, Inc., and Subsidiaries
Notes to Consolidated Financial Statements (continued)
other allowances 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, and March 31, 1996 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, 1996
Available-For-Sale:
U.S. Government obligations $ 298,125 $ --- $ 298,125
========== ========== ==========
Long-term investments
Long-term investments at June 30, and March 31, 1996 are stated at cost and
consist of certificates of deposit maturing in April and May 1997.
Shareholders' equity
On October 25, 1995, the Board of Directors authorized a common stock repurchase
program whereby the Company can purchase up to $1,000,000 of its outstanding
common stock from time to time in the open market. The shares will be held as
treasury shares for reissuance upon the exercise of employee stock options,
warrants and other convertible securities. The timing of purchases and the
number of shares purchased will depend upon prevailing market prices and market
10
<PAGE>
NMR of America, Inc., and Subsidiaries
Notes to Consolidated Financial Statements (continued)
conditions. As of June 30, 1996, the Company had repurchased 99,650 shares of
its outstanding common stock at an aggregate cost of $353,007 under this
program. As of June 30, 1996 the Company's cumulative stock purchases, net of
reissuance of 46,529 shares, amounted to 430,797 shares with an aggregate cost
of $1,712,159.
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 1,000,000 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 572,409 shares were
outstanding at June 30, 1996 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, 1996,
options with respect to 218,475 shares were exercisable. During the quarter
ended June 30, 1996, no 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 was closed during December 1995. The center
operated pursuant to a limited partnership agreement (the "Austin Partnership")
which was scheduled to expire on January 31, 1996, but was extended by the
governing board of the partnership for the purpose of liquidating and
distributing the remaining assets of the Austin Partnership. It is anticipated
that such liquidation will be completed during fiscal 1997 and will not have a
material impact on the results of operations of liquidity of the Company.
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 $910,000,
which includes the cost of related leasehold improvements, diagnostic imaging
equipment and related upgrades. The Company financed the equipment and related
leasehold improvements in the form of a five year note payable.
11
<PAGE>
NMR of America, Inc., and Subsidiaries
Notes to Consolidated Financial Statements (continued)
Acquisitions
Effective January 1, 1996, the Company completed its acquisition of
substantially all of the operating assets of Central Diversey MRI Center, Inc.
("CD MRI") which operates a magnetic resonance imaging center located in
Chicago, Illinois. As consideration for the acquisition, NMR paid $80,000 in
cash at closing to the selling shareholders and issued 10,000 unregistered
shares of NMR common stock which are subject to a two-year holding period
restriction. In conjunction with the transaction, NMR acquired substantially all
of CD MRI's operating assets, which consist primarily of magnetic resonance
imaging equipment, related leasehold improvements, office equipment and deposits
on the MRI related equipment aggregating $120,000 which are pledged as
collateral therefor. In addition, NMR assumed certain trade accounts payable of
Central Diversey aggregating $90,000 and MRI related equipment debt, subject to
existing collateral, totaling approximately $632,000 of outstanding principal as
of January 1, 1996. The acquisition has been accounted for as a purchase and,
accordingly, the acquired assets and liabilities were recorded at the fair value
at the date of acquisition. The Company recorded $429,333 of excess cost over
fair value of the assets which is being amortized over twenty years on a
straight line basis.
On March 13, 1995, the Company announced that its Board of Directors had
approved an agreement, providing for the acquisition of Morgan Medical Holdings,
Inc. ("Morgan"). A definitive merger agreement was executed on April 11, 1995.
The transaction was approved by the shareholders of Morgan and the Company on
September 14, 1995 and became effective September 15, 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. Pursuant to the terms of the acquisition,
Morgan shareholders received 1,195,848 shares of the Company's common stock in
the transaction. Under the terms of the merger agreement, the Company exercises
control over the voting rights of Morgan's largest shareholder for a period of
three years. The Company accounted for the transaction as a purchase and,
accordingly, the acquired assets and liabilities were recorded at their fair
values at the date of acquisition. In conjunction with the transaction, the
Company recorded $6,356,132 of costs in excess of fair value which will be
amortized over twenty years on a straight line basis.
12
<PAGE>
NMR of America, Inc., and Subsidiaries
Notes to Consolidated Financial Statements (continued)
On May 7, 1996, the Company announced that it was in negotiations regarding a
possible business combination with Medical Resources, Inc. ("Medical
Resources"). A definitive merger agreement was executed on May 20, 1996 which is
the subject to the merger conditions set forth below. Medical Resources provides
diagnostic imaging equipment, facilities and management services to physicians
through nineteen outpatient centers located in New York, New Jersey and Florida.
Pursuant to the terms of the acquisition, 0.6875 shares of Medical Resources
common stock would be issued for each outstanding share of NMR. The merger is
subject to certain conditions including shareholder and regulatory approval and
certain third party consents. Senior management of the combined company would be
composed of the current executives of Medical Resources with NMR's current
executive officers, Joseph G. Dasti and John P. O'Malley III serving as
consultants to the combined company. The closing of the merger is anticipated to
occur August 30, 1996, although there can be no assurance that the transactions
will be completed as contemplated or that it will occur when anticipated.
In June 1996, the Company entered into a line of credit agreement with a lender
for an amount up to $4,000,000. Borrowing under the line of credit will bear
interest at a rate of one and one-half percent over the lender's prime rate and
will be collateralized by the Company's receivables.
Item 2. Management's Discussion and Analysis or Plan of Operation
Results of Operations
Three months ended June 30, 1996 compared to three months ended June 30, 1995.
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, 1996, revenue, net was $7,263,367 versus
$4,771,293 for the quarter ended June 30, 1995 or a $2,492,074 (52.2%) increase.
The increase in revenue, net resulted primarily from the purchase of Morgan
Medical Holdings, Inc. ("Morgan") effective September 15, 1995 and Central
Diversey Center ("CD MRI") effective January 1, 1996. These centers generated
revenue, net totaling $2,242,987 for quarter ended June 30, 1996. Same center
revenue, net increased by $249,087 or 5.2% from $4,771,293 to $5,020,380 during
the quarter ended June 30, 1996 primarily due to the
13
<PAGE>
NMR of America, Inc., and Subsidiaries
Item 2. Management's Discussion and Analysis or Plan of Operation
(continued)
inclusion of revenue for the Company's Union, New Jersey center which was
temporarily shut down for the entire first fiscal quarter of fiscal 1996 for
equipment replacement and increased aggregate scan volume offset by additional
discounted business. 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, 1996 were $1,788,463
versus $1,439,737 for the quarter ended June 30, 1995, or an increase of
$348,726 (24.2%). This increase is due primarily to the acquisitions of Morgan
and CD MRI which incurred payroll and related costs totaling approximately
$246,913 during the quarter ended June 30, 1995. In addition, the Company's
clinical payroll and related costs increased due to the hiring of technical
personnel to accommodate increased patient flow at the Company's multi-modality
imaging centers, the hiring of managed care and marketing personnel and an
increase in the cost of providing health benefits to its employees. Although the
Company expects aggregate payroll and related expense to increase in fiscal 1997
due to the inclusion of Morgan and CD MRI for the entire period, it is
anticipated that payroll, as a percentage of revenue, net, will be relatively
unchanged.
Depreciation and amortization expense increased by $143,116 (21.9%) from
$653,414 for the quarter ended June 30, 1995 to $796,530 for the quarter ended
June 30, 1996. This increase was primarily attributable to the acquisition of
Morgan and CD MRI which resulted in goodwill amortization and equipment
depreciation aggregating $190,129 for the quarter ended June 30, 1996. This
increase was offset by an approximate $47,013 decrease in aggregate same center
depreciation expense on the Company's more mature centers. Although the Company
expects aggregate depreciation and amortization expense to increase in fiscal
1997 due to the inclusion of Morgan and CD MRI for the entire period, it is
anticipated that depreciation and amortization expense, as a percentage of
revenue, net, will decline slightly.
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 $948,444 (51.9%) from $1,828,170 for the quarter
ended June 30, 1995 to $2,776,614 for the quarter ended June 30, 1996. This
increase
14
<PAGE>
NMR of America, Inc., and Subsidiaries
Item 2. Management's Discussion and Analysis or Plan of Operation
(continued)
results, primarily, from the inclusion of Morgan and CD MRI centers which
generated medical supplies and other operating expenses totaling $533,782 during
the quarter ended June 30, 1996. In addition, medical supplies and operating
expenses increased by approximately $66,000 due to the inclusion of operating
rent paid for the equipment at Seabrook Radiological Center, $50,000 in
increased billing fees based upon higher levels of cash collections and $300,000
in increased medical and office supplies due to increased aggregate scan volume.
Although the Company expects aggregate medical and other operating costs to
increase in fiscal 1997, due to the inclusion of Morgan and CD MRI for the
entire period, it is anticipated that medical and other operating costs, as a
percentage of revenue, net, will be consistent with fiscal 1996.
Other general and administrative expenses for the quarter ended June 30, 1996,
were $219,927 versus $141,156 for the quarter ended June 30, 1995, or an
increase of $78,771 (55.8%). The increase during the quarter ended June 30, 1996
results primarily from increased advertising and promotional expenses relating
to marketing efforts at the Company's centers. Other general and administrative
expenses, as a percentage of revenue, net, were 3.0% and 2.96% for the quarters
ended June 30, 1995 and 1996, respectively. It is anticipated that expenditures
for general and administrative expenses will continue at these levels for the
remainder of fiscal 1997.
Interest expense for the quarter ended June 30, 1996 was $447,048 versus
$372,589 for the comparable prior quarter, or an increase of $74,459 (20.0%).
This increase results, primarily, from interest expense associated with the
acquisition and assumption of debt obligations relating to the Morgan and CD MRI
acquisitions, which generated interest expense totaling approximately $126,833
for the quarter ended June 30, 1996. In addition, aggregate same center interest
expense decreased due to scheduled reductions in outstanding principal balances
offset by increases in prevailing interest rates, which impact the Company's
variable rate debt obligations. Although the Company expects interest expense to
increase in fiscal 1997 due to the inclusion of Morgan and CD MRI for the entire
period, it is anticipated that interest expense, as a percentage of revenue,
net, will slightly decline due to the reductions in outstanding principal
balances.
Other income, net decreased by $42,265 from $82,075 for the quarter ended June
30, 1995 to $39,810 for the quarter ended June 30, 1996. During the quarter
ended June 30, 1995, 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. The decrease was
15
<PAGE>
NMR of America, Inc., and Subsidiaries
Item 2. Management's Discussion and Analysis or Plan of Operation
(continued)
offset by a $30,939 reduction in the Company's equity interest in the losses of
the Austin, Texas limited partnership which ceased operations in December 1995.
Minority interest in income of limited partnerships increased by $38,285 (46.4%)
from $82,530 for the quarter ended June 30, 1995 to $120,815 for the quarter
ended June 30, 1996. The increase is primarily due to the increase in minority
interest in the operation of the Union, New Jersey center which had been
temporarily closed during the first quarter of fiscal 1996.
The Company's current provision for income taxes of $65,000 for the quarter
ended June 30, 1996, consists of current state income and franchise taxes. The
Company's current federal tax provision for the first fiscal quarter of 1996 was
substantially offset through the utilization of net operating loss carryforwards
available from prior years. The Company has recorded a deferred tax provision of
$199,000 for the quarter ended June 30, 1996, to reflect the reduction in the
Company's net deferred tax asset during such period.
For the reasons described above, the Company's net income for the quarter ended
June 30, 1996 increased by $350,868 to $588,640 from $237,772 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 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.
16
<PAGE>
NMR of America, Inc., and Subsidiaries
Item 2. Management's Discussion and Analysis or Plan of Operation
(continued)
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 $588,640 for the fiscal quarter ended June 30,
1996 versus net income of $237,772 for the comparable prior fiscal quarter. At
June 30, 1996, the Company's working capital totaled $10,796,343 which includes
cash and cash equivalents totaling $2,702,925, marketable securities totaling
$289,125 and short-term investments totaling $1,830,405. The Company generated
$1,450,073 and $474,771 in net cash flow from operating activities during the
fiscal quarters ended June 30, 1996 and 1995, respectively, or an increase of
$975,302. Cash provided by operating activities during the fiscal quarter ended
June 30, 1996 resulted from operating cash flows of $1,704,985 offset by a
$254,912 net increase in the Company's current assets and liabilities. The
increase in operating cash flows and cash provided by operating activities
results primarily from the increase in the Company's net income during the first
quarter of fiscal 1997.
Investing activities used $1,664,373 in cash during fiscal 1997. The Company
purchased $205,787 of equipment and leasehold improvements primarily for the
Philadelphia and GOLF/DIC imaging centers. The Company 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 investments from
sales and purchases of short-term investments and marketable securities totaled
$1,455,870 during the quarter ended June 30, 1996. 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.
Financing activities used net cash totaling $1,495,090 which is comprised of
$1,487,665 utilized for the repayment of debt and capital lease obligations and
$7,425 of limited partnership distributions during the fiscal quarter ended June
30, 1996.
17
<PAGE>
NMR of America, Inc., and Subsidiaries
Item 2. Management's Discussion and Analysis or Plan of Operation
(continued)
At June 30, 1996, the Company had $1,614,123 in obligations under capital leases
compared to $1,765,440 at March 31, 1996. 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 $151,317 were
made during the quarter ended June 30, 1996.
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 1997 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.
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 Medical Resources,
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
18
<PAGE>
NMR of America, Inc., and Subsidiaries
Item 2. Management's Discussion and Analysis or Plan of Operation
(continued)
to the acquisition of additional centers at June 30, 1996. 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.
19
<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
b. Reports on Form 8-K
No reports on Form 8-K were filed during the quarter for which
this report is filed.
20
<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, 1996
21
NMR of America, Inc., and Subsidiaries
Exhibit 11. Computation of Shares Used For Earnings Per Share
Calculation.
Quarter ended June 30,
-----------------------
1996 1995
---------- ----------
Primary earnings per share information:
Net income per consolidated statements
of operations $ 588,640 $ 237,772
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 $ 588,640 $ 237,772
========== ==========
Weighted average number of
outstanding shares 6,273,917 5,052,372
Add: Incremental shares issuable
on conversion of outstanding
warrants and exercise of
stock options 265,995 208,297
---------- ----------
Weighted average number of shares
used to compute primary earnings
per share 6,539,912 5,260,669
========== ==========
Primary earnings per share:
Primary net income per share $ .09 $ .05
========== ==========
<PAGE>
NMR of America, Inc., and Subsidiaries
Exhibit 11. Computation of Shares Used For Earnings Per Share
Calculation.
Quarter ended June 30,
-----------------------
1996 1995
---------- ----------
Fully diluted earnings
per share information:
Net income per consolidated statements
of operations $ 588,640 $ 237,772
Add: Interest savings from proceeds
of conversion of outstanding
warrants and exercise of stock
options, net of minority
interest and income taxes 44,245 52,388
---------- ----------
Net income used to compute fully
diluted earnings per share $ 632,885 $ 290,160
========== ==========
Weighted average number of
outstanding shares 6,273,917 5,052,372
Add: Incremental shares issuable
on conversion of outstanding
warrants and exercise of
stock options 422,950 208,297
Incremental shares issuable on
conversion of convertible
subordinated debentures 444,222 481,556
---------- ----------
Weighted average number of shares
used to compute fully diluted
earnings per share 7,141,089 5,742,225
========== ==========
Fully diluted earnings per share:
Fully diluted net income per share $ .09 $ .05
========== ==========
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<S> <C>
<PERIOD-TYPE> 3-MOS
<PERIOD-END> JUN-30-1996
<FISCAL-YEAR-END> MAR-31-1996
<CASH> 2,072,925
<SECURITIES> 289,125
<RECEIVABLES> 14,946,978
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<CURRENT-ASSETS> 20,440,894
<PP&E> 32,037,838
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<COMMON> 67,151
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<TOTAL-LIABILITY-AND-EQUITY> 46,532,410
<SALES> 0
<TOTAL-REVENUES> 7,263,367
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