<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
----------------------------------
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
-------------
Commission File No. 0-20440
-------
MEDICAL RESOURCES, INC.
(Exact Name of registrant as specified in its charter)
Delaware 13-3584552
- ----------------------- ----------
(State of Incorporation) (I.R.S. Employer
Identification No.)
2701 N. Rocky Point Drive, Suite 650, Tampa, FL 33607
and
155 State Street Hackensack, N.J. 07601
- --------------------------------------- -------
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (813) 281-0202
and
(201) 488-6230
Title of Each Class
-------------------
Common Stock (Par value $.01 per share)
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 registrant's
classes of common stock, as of the latest practicable date.
<TABLE>
Class Outstanding at August 1, 1996
----- -----------------------------
<S> <C>
Common stock, par value 8,866,491
$.01 per share
</TABLE>
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<PAGE> 2
MEDICAL RESOURCES, INC.
______________________________________________________________________________
INDEX
<TABLE>
PART I FINANCIAL INFORMATION PAGE NUMBER
-----------
<S> <C> <C>
Item 1 Consolidated Financial Statements (Unaudited):
Consolidated Balance Sheets at June 30,
1996 and December 31, 1995 3
Consolidated Statements of Operations for the
Three and Six Months Ended June 30, 1996 and 1995 4
Consolidated Statements of Cash Flows for the
Six Months Ended June 30, 1996 and 1995 5
Notes to Consolidated Financial Statements 6
Item 2
Management's Discussion and Analysis of
Financial Condition and Results of Operations 11
</TABLE>
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<PAGE> 3
MEDICAL RESOURCES, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
ASSETS 1996 1995
------ ------------- -------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 8,015,014 $ 3,934,677
Accounts receivable, net 18,645,348 13,837,637
Other receivables 784,569 477,062
Prepaid expenses 1,834,888 1,074,459
Deferred tax assets, net 1,871,397 1,871,397
----------- -----------
Total current assets 31,151,216 21,195,232
Medical diagnostic and office equipment, net 14,436,761 11,530,159
Goodwill, net 17,706,940 9,122,663
Other assets 2,294,347 1,497,207
Deferred tax assets, net 1,013,301 533,301
Value of venture contracts 212,419 257,261
----------- -----------
Total assets $66,814,984 $44,135,823
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Current portion of notes payable $ 1,835,322 $ 957,884
Current portion of obligations under capital leases 4,511,148 3,244,652
Line of credit 4,324,729 -
Accounts payable and accrued expenses 5,571,388 4,602,926
Other current liabilities 1,525,234 1,405,875
Income taxes payable 469,002 245,899
----------- -----------
Total current liabilities 18,236,823 10,457,236
Notes payable 4,869,686 4,448,974
Obligations under capital leases 8,454,988 6,707,650
Convertible debentures 7,260,000 4,350,000
Other long-term liabilities 1,097,405 1,205,627
----------- -----------
Total liabilities 39,918,902 27,169,487
----------- -----------
Stockholders' equity:
Common stock, $.01 par value, 20,000,000 shares
authorized, 9,131,491 issued and 8,866,491
outstanding at June 30, 1996 and 7,697,500
issued and 7,442,500 outstanding at
December 31, 1995 91,315 76,975
Common stock to be issued; 600,000 shares of
common stock 1,721,250 1,721,250
Additional paid-in capital 27,896,825 20,834,922
Retained deficit (1,394,550) (4,298,678)
Less 265,000 and 255,000 common shares in treasury,
at cost at June 30, 1996 and December 31, 1995 (1,418,758) (1,368,133)
----------- -----------
Total stockholders' equity 26,896,082 16,966,336
----------- -----------
Total liabilities and stockholders' equity $66,814,984 $44,135,823
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
3 of 15
<PAGE> 4
MEDICAL RESOURCES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
---------------------------------- ------------------------------
1996 1995 1996 1995
------------- -------------- ------------- ---------------
(Restated) (Restated)
<S> <C> <C> <C> <C>
Net service revenues $18,678,493 $12,738,723 $36,776,497 $24,878,521
----------- ----------- ----------- -----------
Operating costs, excluding interest,
depreciation and amortization 11,449,000 7,937,022 23,485,999 15,507,318
Provision for uncollectible accounts receivable 947,127 846,155 1,761,835 1,681,290
Corporate general and administrative 1,831,769 1,024,585 3,432,974 2,066,559
Depreciation and amortization 1,423,767 1,103,906 2,740,676 2,164,741
----------- ----------- ----------- -----------
Operating income 3,026,830 1,827,055 5,355,013 3,458,613
Interest expense 738,689 431,053 1,287,583 839,989
----------- ----------- ----------- -----------
Income from continuing operations before minority
interest and income taxes 2,288,141 1,396,002 4,067,430 2,618,624
Minority interest 20,591 30,971 64,282 64,808
----------- ----------- ----------- -----------
Income from continuing operations before
income taxes 2,267,550 1,365,031 4,003,148 2,553,816
Income taxes 661,200 387,132 1,099,020 807,124
----------- ----------- ----------- -----------
Income from continuing operations 1,606,350 977,899 2,904,128 1,746,692
Income (loss) from operations of
discontinued business, net of tax - 18,971 - (981,551)
----------- ----------- ----------- -----------
Net income $ 1,606,350 $ 996,870 $ 2,904,128 $ 765,141
=========== =========== =========== ===========
Per Share Data
Primary:
Net income per share $ 0.17 $ 0.13 $ 0.33 $ 0.11
=========== =========== =========== ===========
Fully diluted:
Net income per share $ 0.16 $ 0.13 $ 0.31 $ 0.11
=========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
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<PAGE> 5
MEDICAL RESOURCES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED JUNE 30,
-------------------------------
1996 1995
-------------------------------
(Restated)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 2,904,128 $ 765,141
----------- -----------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 2,740,676 2,164,741
Provision for uncollectible accounts receivable 1,761,835 1,681,290
Minority interest in losses of joint venture and limited
partnerships, net of distributions 64,282 64,808
Changes in operating assets and liabilities:
Accounts receivable (4,157,911) (2,836,251)
Other receivables (307,507) (202,364)
Prepaid expenses (713,714) (173,555)
Other assets (586,406) (1,399,123)
Deferred tax asset (480,000) 244,000
Accounts payable and accrued expenses 1,651,736 280,230
Other current liabilities (318,371) (815,684)
Income taxes payable 223,103 (283,303)
Other long-term liabilities (125,083) (60,459)
----------- -----------
Total adjustments (247,360) (1,335,670)
----------- -----------
Net cash provided by (used in) operating activities 2,656,768 (570,529)
----------- -----------
Cash flows from investing activities:
Proceeds from sale of short term investments - 599,736
Change in net assets of discontinued business - 1,043,775
Purchase of PCC, Inc. - (1,838,906)
Purchase of NurseCare Plus (1,263,992) -
Purchase of MRI-CT, Inc. (463,130) -
Purchase of Americare Imaging Centers, Inc. (1,500,000) -
Purchase of Access Imaging Center, Inc. (1,300,000) -
Purchase of WeCare - Allied Health Care, Inc. (1,049,618) -
Purchase of medical diagnostic and office equipment (825,454) (386,716)
----------- -----------
Net cash used in investing activities (6,402,194) (582,111)
----------- -----------
Cash flows from financing activities:
Stock issuance cost (237,140) -
Principal payments under capital lease obligations (2,092,048) (1,468,297)
Principal payments on notes payable (708,786) (538,772)
Borrowings on notes payable - -
Proceeds from convertible debentures 6,532,965 4,350,000
Purchase of treasury stock (50,625) -
Net borrowings on line of credit 4,324,729 -
Proceeds from exercise of options 56,668 -
----------- -----------
Net cash provided by financing activities 7,825,763 2,342,931
----------- -----------
Net increase in cash and cash equivalents 4,080,337 1,190,291
Cash and cash equivalents at beginning of period 3,934,677 3,941,120
----------- -----------
Cash and cash equivalents at end of period $ 8,015,014 $ 5,131,411
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
5 of 15
<PAGE> 6
MEDICAL RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - GENERAL:
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete consolidated financial statements. In the opinion of management,
all adjustments (consisting of normal recurring adjustments) considered
necessary for a fair presentation have been included. Operating results for
the interim periods are not necessarily indicative of the results that may be
expected for an entire year. These unaudited consolidated financial statements
should be read in conjunction with the audited consolidated financial
statements and notes thereto contained in Medical Resources, Inc.'s (the
Company) Annual Report for the year ended December 31, 1995.
The unaudited consolidated financial information for the periods ended
June 30, 1995 have been restated for the merger with Maternity Resources, Inc.
on February 24, 1995 that, as more fully described in the Company's Form 10-K
for the year ended December 31, 1995, was accounted for as a transfer between
entities under common control.
In the first quarter of 1996, the Company adopted Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-lived
Assets and for Long-Lived Assets to be Disposed of," ("FAS 121") which requires
impairment losses to be recorded on long-lived assets used in operation when
indicators of impairment are present and the undiscounted cash flows estimated
to be generated by those assets are less than the assets' carrying amount. No
adjustments were required pursuant to the adoption of FAS 121 by the Company.
On January 9, 1996, the Company consummated the acquisition (the
"Acquisition") of the business assets of MRI-CT, Inc., a New York corporation
based in New York, New York (the "Seller") comprised primarily of four
diagnostic imaging centers located at (i) 197 Third Avenue, New York, New York,
(ii) 6511 Ft. Hamilton Parkway, Brooklyn, New York, (iii) 1401 Ocean Avenue,
Brooklyn, New York and (iv) 1612 St. Peters Avenue, Bronx, New York. The
Acquisition was consummated pursuant to an Asset Purchase Agreement (the
"Agreement") dated as of December 21, 1995 by and among the Company and the
Seller. Pursuant to the Agreement, a wholly owned subsidiary of the Company
acquired substantially all of business assets of the Seller for a combination
of $700,000 cash, 194,113 shares of common stock and a $375,000 note payable at
prime due January 9, 2001.
6 of 15
<PAGE> 7
On January 12, 1996, the Company consummated the acquisition (the
"NurseCare Acquisition") of the common stock of NurseCare Plus, Inc. (the
"Corporation") a California corporation based in San Diego, California, which
provides supplemental healthcare staffing services for clients including
hospitals, clinics, and home health agencies in Southern California. The
NurseCare Acquisition was consummated pursuant to a Stock Purchase Agreement
(the "NurseCare Agreement") dated as of January 11, 1996 by and among StarMed
Staffing, Inc., the Company's wholly owned subsidiary ("StarMed") and LouAnn
Berg ("Berg"). Pursuant to the NurseCare Agreement, StarMed acquired from Berg
all of the common stock of the Corporation for $2,500,000, payable in
$1,250,000 cash and a prime plus one percent note payable for $1,250,000 due
January 12, 1999.
On April 19, 1996, the Company entered into an asset purchase agreement
with Americare Imaging Centers, Inc. and MRI Associates of Tarpon Springs, Inc.
("Americare"). Pursuant to the acquisition, the Company acquired certain of
the asset and liabilities of Americare for $1,500,000 cash and $1,500,000 of
the Company's common stock.
On April 30, 1996, the Company entered into an asset purchase agreement
with Access Imaging Center, Inc. ("Access"). Pursuant to the acquisition, the
Company acquired certain of the assets and liabilities of Access for $1,300,000
cash and $1,700,000 of the Company's common stock.
On June 28, 1996, the Company entered into an asset purchase agreement
with We Care - Allied Health Care, Inc. Pursuant to the agreement, the Company
acquired certain of the assets for $1,035,000 cash and a $731,000 note payable
at prime plus 1% due.
Each of the above acquisitions were accounted for under the purchase
method of accounting. The operations of these acquisitions are included in
these unaudited consolidated financial statements from the date of purchase.
The following consolidated pro forma data reflects the acquisitions as if they
occurred on January 1, 1995:
<TABLE>
<CAPTION>
Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
June 30, 1996 June 30, 1995 June 30, 1996 June 30, 1995
-------------- -------------- ------------- -------------
<S> <C> <C> <C> <C>
Total revenues $20,409,000 $16,875,000 $42,070,000 $35,417,000
Net income from
continuing operations 1,783,000 1,381,000 3,297,000 2,677,000
Net income 1,783,000 993,000 3,297,000 889,000
Net income per
common share .19 .13 .35 .11
</TABLE>
7 of 15
<PAGE> 8
Certain items in the 1995 unaudited consolidated financial statements have been
reclassified to conform to the 1996 presentation.
NOTE 2 - MERGER:
On May 20, 1996, the Company entered into a definitive merger agreement
with NMR of America ("NMR") pursuant to which NMR will merge into a wholly
owned subsidiary of the Company. In the merger, each share of NMR's common
stock issued and outstanding immediately prior to the effective date of the
merger would be exchanged for 0.6875 shares of the Company's common stock. On
July 30, 1996, the Company filed, with the Securities and Exchange Commission,
a Joint Proxy Statement/Prospectus on Form S-4 relating to this transaction.
The consumation of the transaction is contingent upon approval by the
shareholders of both the Company and NMR. NMR is engaged directly and through
limited partnerships in the operation of eighteen dignostic imaging centers.
NOTE 3 - SUPPLEMENTARY CASH FLOW INFORMATION:
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended Six Months Ended Six Months Ended
June 30, 1996 June 30, 1995 June 30, 1996 June 30, 1995
------------------ ------------------ ---------------- -----------------
<S> <C> <C> <C> <C>
Interest paid $ 421,000 $ 528,000 $ 813,000 $ 930,000
Income taxes paid 830,000 1,021,000 1,387,000 1,477,000
Noncash investing and
financing activities:
Acquisition financing 3,850,000 3,443,000 6,175,000 3,443,000
Equipment financing 62,000 128,000 130,000 196,000
</TABLE>
NOTE 4 -COMMITMENT AND CONTINGENCIES:
Litigation
In September 1992, an individual brought an action in the Supreme Court of
the State of New York, County of Bronx, against a number of physicians, a
hospital and North Bronx Resources, Inc., a wholly-owned subsidiary of the
Company ("North Bronx"), for damages in an unspecified amount resulting from an
alleged failure to diagnose a brain tumor at the time imaging services were
performed for the plaintiff. The complaint alleges that North Bronx was
negligent in its rendering of medical care and treatment to the plaintiff. In
December 1992, North Bronx answered, denying the substantive allegations of the
complaint, raising an affirmative defense that the plaintiff's action does not
state a claim against North Bronx for which relief can be granted, and cross
claimed against the other defendants in the action. The parties are engaged in
discovery. Pursuant to the terms of a management agreement with North Bronx,
one of the other defendants in the action, the interpreting physician, who is
responsible for the medical aspect of the center's operation, is required to and
does carry malpractice insurance.
8 of 15
<PAGE> 9
Government Regulation
The health care industry is highly regulated at the federal, state and
local levels. Current discussions within the Federal government regarding
national health care reform are emphasizing containment of health care costs as
well as expansion of the number of eligible parties. The implementation of
this reform could have a material effect on the consolidated financial results
of the Company by limiting reimbursement levels, requiring the Company to
obtain certificates of need in order to expand, limiting the types of contracts
which may be entered into with physicians who refer patients, increasing the
limitations on referrals by physicians to facilities in which they have an
investment or a compensation arrangement and other means.
NOTE 5 - CONVERTIBLE SUBORDINATED DEBENTURES
On May 30, 1995 the Company issued at par $4,350,000 11% Convertible
Subordinated Debentures due 2000 (the "Debentures"). The Debentures are
convertible into common stock of the Company at a conversion price of $4.00 per
share and are redeemable at par after two years. The debt issuance costs are
being amortized over five years. Interest is payable on May 31 and November 30
in each year. During the three and six months ended June 30, 1996 $1,780,000
and $2,430,000, respectively, of the Debentures were converted into 445,000
and 607,500, respectively, shares of the Company's common stock.
On February 7, 1996, the Company issued at par $6,533,000 10.5%
Convertible Subordinated Debentures due 2001 (the "1996 Debentures"). The 1996
Debentures are convertible into common stock of the Company at a conversion
price of $6.00 per share. The debt issuance costs are being amortized over
five years. Interest is payable on February 1 and August 1 in each year.
During the three months ended June 30 1996, $1,193,000 of the Debentures were
converted into 198,833 shares of the Company's common stock.
NOTE 6 - LINE OF CREDIT
In May 1996, the Company obtained two lines of credit from a third party
financing corporation. The lines of credit are comprised of an $8 million
revolving line of credit and a $7 million capital lease line of credit both of
which have two year terms. The revolving line of credit bears interest at
prime plus 1.5% and the capital lease line bears interest at the 30 day t-bill
rate plus 398 points. As of June 30, 1996, $4 million of the revolving line of
credit was used. The capital lease line was unused at June 30, 1996.
The Company has a $2 million secured line of credit from a bank which
bears interest at 1% over the bank's prime rate. At June 30, 1996, $325,000 of
the line was used.
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<PAGE> 10
NOTE 7 - EARNINGS PER SHARE
The computation of both primary and fully diluted earnings per share is
based on the weighted average number of shares of common stock and common stock
equivalents outstanding during the period. Common stock equivalents include in
the money stock options and warrants and 600,000 shares to be issued over a
period of 24 months in accordance with the Fort Myers Center's Asset Purchase
Agreement. The convertible subordinated debentures described in Note 4 did not
meet the test for treatment as a common stock equivalent. The inclusion of
additional shares for the fully diluted computation based upon the conversion
of the convertible subordinated debentures and prior to the second quarter of
1996 were not materially dilutive. The convertible subordinated debentures had
a dilutive effect on earnings per share beginning in the second quarter of
1996. The number of weighted average shares used in the computation of
earnings per share were as follows:
<TABLE>
<CAPTION>
Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
June 30, 1996 June 30, 1995 June 30, 1996 June 30, 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Primary 9,337,000 7,328,000 8,835,000 7,330,000
Fully
diluted 10,717,000 7,776,000 9,949,000 7,554,000
</TABLE>
NOTE 8 - SUBSEQUENT EVENTS
On July 8, 1996, the Company acquired a diagnostic imaging center located
in Centereach Long Island. Pursuant to the acquisition, the Company acquired
certain of the assets for $3.1 million in cash.
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<PAGE> 11
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATION
The following discussion and analysis provides information which
management believes is relevant to an assessment and understanding of the
Company's results of operations and financial condition. This discussion
should be read in conjunction with the unaudited Consolidated Financial
Statements appearing in Item 1.
The Company's net service revenues for the three months ended June 30,
1996 and 1995 were $18,678,000 and $12,739,000, respectively, representing an
increase of $5,939,000 or 47% in 1996. Net service revenue for the six months
ended June 30, 1996 and 1995 were $36,776,000 and $24,879,000, respectively,
representing an increase of $11,897,000 or 48% in 1996. The increase in 1996
for both the three and six month periods over the same periods in 1995 is due
primarily to additional revenues derived from the acquisitions of eight
diagnostic imaging centers, NurseCare Plus, We Care and the opening of 9 'per
diem' staffing offices in the prior 12 months.
Operating costs for the three months ended June 30, 1996 and 1995 were
$11,449,000 and $7,937,000, respectively, representing an increase of
$3,512,000 or 44% in 1996. Operating costs for the six months ended June 30,
1996 and 1995 were $23,486,000 and $15,507,000, respectively, an increase of
$7,979,000 or 51% in 1996. The increase in the operating costs in 1996
compared to the same periods in 1995 are due to increased operational costs
incurred at the diagnostic centers acquired over the prior twelve months and
the additional costs from the operations of NurseCare Plus, We Care and the 9
'per diem' offices opened over the last 12 months.
Provision for uncollectible accounts receivable for the three months ended
June 30, 1996 and 1995 was $947,000 and $846,000, respectively, representing an
increase of $101,000 or 12% in 1996. The provision for uncollectible accounts
receivable for the six months ended June 30, 1996 and 1995 were $1,762,000 and
$1,681,000, respectively, an increase of $81,000 or 5% in 1996. The increase
reflects the increased provision required on the additional diagnostic imaging
revenue over the prior year. The increase in the provision for uncollectible
accounts receivable as a percentage of net service revenues has decreased to
4.8% for the six months ended June 30, 1996 from 6.8% for the same period in
1995 due to additional charges in the first quarter of 1995 to increase the
reserve for bad debt for a certain accounts receivable payor class.
Corporate general and administrative expenses for the three months ended
June 30, 1996 and 1995 were $1,832,000 and $1,025,000, respectively,
representing an increase of $807,000, or 79% in 1996. Corporate general and
administrative expenses for the six months ended June 30, 1996 and 1995 were
$3,433,000 and $2,067,000, respectively, representing an increase of
$1,366,000, or 66% in 1996. The increase is due primarily to additional
overhead incurred to support the acquisition of the diagnostic centers,
NurseCare Plus, We Care and the opening of 9 'per diem' staffing offices in
the prior 12 months.
11 of 15
<PAGE> 12
Depreciation and amortization for the three months ended June 30, 1996 and
1995 was $1,424,000 and $1,104,000, respectively, representing an increase of
$320,000 or 29% in 1996. Depreciation and amortization for the six months ended
June 30, 1996 and 1995 was $2,741,000 and $2,165,000, respectively, representing
an increase of $576,000 or 27% in 1996. The increase in depreciation and
amortization for the periods ended June 30, 1996 was due primarily to additions
to medical diagnostic and office equipment and the goodwill that was a result of
the purchases of the new diagnostic centers.
As a result of the foregoing, operating income for the three months ended
June 30, 1996 and 1995 was $3,027,000 and $1,827,000, respectively, representing
an increase of $1,200,000 in 1996 or 66%. Operating income for the six months
ended June 30, 1996 and 1995 was $5,355,000 and $3,459,000, respectively, an
increase of $1,896,000 or 55% in 1996.
Interest expense for the three months ended June 30, 1996 and 1995 was
$739,000 and $431,000, respectively, representing an increase of $308,000 or 71%
in 1996. Interest expense for the six months ended June 30, 1996 and 1995 was
$1,288,000 and $840,000, respectively, representing an increase of $448,000 or
53% in 1996. The increase in interest expense for the three and six months
ended June 30, 1996 was due primarily to the interest on the convertible
debentures (see note 5) and the interest cost related to the capital leases on
the diagnostic centers acquired over the past twelve months partially offset by
decreased interest expense on the capital leases on the Company's existing
diagnostic centers.
The provision for income taxes for the three months ended June 30, 1996
and 1995 was $661,000 and $387,000, respectively, representing an effective tax
rate of 29% and 28%. The provision for income taxes for the six months ended
June 30, 1996 and 1995 was $1,099,000 and $807,000, respectively, representing
an effective tax rate of 27% and 32%. The corporate tax rate of approximately
39% was reduced by the reversal of the reserve of the deferred tax asset and
certain other tax related liabilities of $240,000 and $480,000 for the three
and six months ended June 30, 1996 and 1995, respectively. Based upon improved
operations and other pertinent factors, management has deemed the asset
recoverable and has accordingly reduced the reserve.
The income from operations from discontinued business of $19,000 for the
three months ended June 30, 1995 and the loss from operations from
discontinued business of ($982,000) for the six months ended June 30, 1995
represent the income/(loss) from operations of Maternity Resources, Inc.
("Maternity"). Maternity was disposed of by the Company in November 1995.
As a result of the foregoing, net income for the three months ended June
30, 1996 and 1995 was $1,606,000 and $997,000, respectively, representing an
increase of $609,000 or 61% in 1996. Net income for the six months ended June
30, 1996 and 1995 was $2,904,000 and $765,000, respectively, representing an
increase of $2,139,000 or 280% in 1996.
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<PAGE> 13
Liquidity and Capital Resources
The Company's cash balances at June 30, 1996 and December 31, 1995 were
$8,015,000 and $3,935,000, respectively, representing an increase of $4,080,000
or 104%, through the first six months of 1996. The Company's working capital
position at June 30, 1996 was $12,914,000 as compared to a December 31, 1995
balance of $10,738,000, representing an increase of $2,176,000 or 20% in the
six months ended June 30, 1996. The increase in working capital resulted
primarily from the proceeds from the issuance of the subordinated convertible
debentures (see note 4) and the increase in the Company's accounts receivable
offset by changes in the Company's other working capital accounts.
Required capital expenditures and planned operating expenses are
anticipated to be financed by a combination of operating cash flow, funds
available through working capital and third party credit facilities. On
February 7, 1996 the Company raised $6,533,000 through a private placement of
10.5% Convertible Subordinated Debentures due 2001 (see note 5). Funds
available from this debenture issuance together with cash flow generated by
operations and existing cash, should provide sufficient operating funds and
capital funds for at least the next twelve months. There may be circumstances,
however, such as an acquisition, that could accelerate the Company's use of
cash. If this occurs, the Company may incur, from time to time, additional
indebtedness and attempt to issue, in public or private transactions, equity
and debt securities.
13 of 15
<PAGE> 14
MEDICAL RESOURCES, INC.
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K:
(a) Exhibits
27 Financial Data Schedule (For SEC Use Only)
(b) Reports on Form 8-K
On April 30, 1996, the Company filed a Current Report on Form 8-K
reporting, under Item 5 thereof, that:
On April 19, 1996, the Company, through a wholly owned subsidiary, entered
into an asset purchase agreement relating to the purchase of three diagnostic
imaging centers located in the Tampa, Florida area.
On April 30, 1996, the Company, through a wholly owned subsidiary, entered
into an asset purchase agreement relating to the purchase of a diagnostic
imaging center located in Clearwater, Florida.
On May 20, 1996, the Company filed a Current Report on Form 8-K reporting,
under Item 5 thereof that the Company entered into an agreement and Plan of
Merger by and among the Company, MRI Sub, Inc., a Delaware corporation and
wholly owned subsidiary of the Company, NMR. In the merger, each share of
NMR's common stock issued and outstanding immediately prior to the effective
date of the merger would be exchanged for 0.6875 shares of the Company's common
stock.
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<PAGE> 15
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
MEDICAL RESOURCES, INC.
Dated: August 7, 1996 /s/ Robert J. Adamson
------------------------------
Robert J. Adamson
(Co-President and
Principal Accounting Officer)
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