<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended June 30, 1995, or
[ ] Transition Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
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Commission File Number 0-12787
MEDICAL IMAGING CENTERS OF AMERICA, INC.
(Exact name of registrant as specified in its charter)
California 95-3643045
- --------------------------------------- ----------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
9444 Farnham St., Suite 100
San Diego, California 92123
- --------------------------------------- ----------------------------------
(Address of principal executive offices (Zip Code)
(619) 560-0110
---------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
------- -------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
12,290,893 shares of Common Stock as of August 7, 1995
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<PAGE> 2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
MEDICAL IMAGING CENTERS OF AMERICA, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(in thousands except share information) June 30, 1995 Dec 31, 1994
------------- ------------
<S> <C> <C>
ASSETS:
Current assets:
Cash and cash equivalents (includes restricted cash of $654 in
1995 and $832 in 1994) $ 6,573 $ 8,524
Trade and notes receivable, net of allowance for doubtful accounts
of $5,164 in 1995 and $5,554 in 1994 8,962 9,524
Prepaid expenses and other current assets 963 1,611
Net assets sold (July 1995) 73 159
-------- --------
Total current assets 16,571 19,818
Equipment and leasehold improvements, net of accumulated
depreciation and amortization of $29,394 in 1995 and
$28,962 in 1994 21,293 27,167
Equipment held for sale, net of accumulated depreciation
of $1,326 in 1995 and $1,137 in 1994 300 400
Investment in and advances to unconsolidated entities, net of allowance
for doubtful accounts of $1,788 in 1995 and 1994 1,800 2,069
Intangible assets, net of accumulated amortization of
$1,889 in 1995 and $1,606 in 1994 985 1,269
Other assets 1,224 1,259
-------- --------
$ 42,173 $ 51,982
======== ========
LIABILITIES AND NET CAPITAL DEFICIENCY:
Current liabilities:
Current portion long-term debt and capital lease obligations $ 10,129 $ 10,818
Current portion convertible subordinated debt 2,800 2,800
Accounts payable 2,223 2,062
Accrued payroll and related taxes 973 1,493
Other accrued liabilities 2,272 3,230
-------- --------
Total current liabilities 18,397 20,403
Long-term debt and capital lease obligations 18,469 24,642
Minority interest in consolidated partnerships 1,230 1,598
Convertible subordinated debt 5,400 8,200
Commitments
Net Capital Deficiency:
Preferred stock, no par value, 5,000,000 shares authorized;
Series B preferred shares, no par value, 300,000 shares
authorized, no shares issued or outstanding --- ---
Common stock, no par value, 30,000,000 shares authorized;
12,210,893 and 12,133,227 shares issued and outstanding at
June 30, 1995 and December 31, 1994, respectively 54,535 54,473
Accumulated deficit (55,858) (57,334)
-------- --------
Total Net Capital Deficiency (1,323) (2,861)
-------- --------
$ 42,173 $ 51,982
======== ========
</TABLE>
See accompanying notes.
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<PAGE> 3
MEDICAL IMAGING CENTERS OF AMERICA, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
(in thousands except per share information) 1995 1994 1995 1994
------- ------- ------- -------
<S> <C> <C> <C> <C>
REVENUES:
Medical services $11,634 $14,324 $23,773 $28,481
Equipment and medical suite sales 236 551 2,272 786
------- ------- ------- -------
Total revenues 11,870 14,875 26,045 29,267
COSTS AND EXPENSES:
Costs of medical services 7,283 8,972 14,956 18,339
Costs of equipment and medical suite sales 231 551 1,773 764
Marketing, general and administrative 710 1,254 1,493 2,403
Depreciation and amortization of equipment
and leasehold improvements 2,498 3,098 5,131 6,146
Amortization of intangibles and deferred costs 149 83 307 176
Equity in net income of unconsolidated entities (172) (150) (355) (277)
Interest expense 813 1,278 1,732 2,653
Interest income (106) (94) (260) (179)
------- ------- ------- -------
Total costs and expenses 11,406 14,992 24,777 30,025
------- ------- ------- -------
Income (loss) before minority interest 464 (117) 1,268 (758)
Minority interest in net (income) loss of
consolidated partnerships 87 (113) 207 (134)
------- ------- ------- -------
Net income (loss) $ 551 $ (230) $ 1,475 $ (892)
======= ======= ======= =======
Net income (loss) per common share $ .04 $ (.02) $ .11 $ (.07)
======= ======= ======= =======
Shares used in per share amounts 12,731 12,130 12,705 12,126
======= ======= ======= =======
</TABLE>
See accompanying notes.
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<PAGE> 4
MEDICAL IMAGING CENTERS OF AMERICA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended June 30,
-------------------------
(in thousands) 1995 1994
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<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $ 1,475 $ (892)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 5,438 6,322
Provision for bad debts 488 633
Equity in net income of unconsolidated entities (355) (277)
Minority interest in net income (loss) of consolidated partner (207) 134
Net value of equipment dispositions 1,881 975
Change in assets and liabilities:
(Increase) decrease in trade receivables (1) 1,197
Decrease in prepaid expenses and other current assets 694 99
Decrease in accounts payable and other accrued liabilities (738) (578)
Decrease in accrued payroll and related taxes (520) (612)
-------- -------
Net cash provided in operating activities 8,155 7,001
INVESTING ACTIVITIES:
Capital expenditures (449) (1,504)
Cost of acquisitions (60) ---
Investment in and advances to unconsolidated entities, net 649 312
Other, net (59) 274
-------- -------
Net cash used in investing activities 81 (918)
FINANCING ACTIVITIES:
Principal payments on long-term debt and capital
lease obligations (10,097) (5,841)
Distribution to minority interests (151) (345)
Other, net 61 (24)
-------- -------
Net cash used in financing activities (10,187) (6,210)
-------- -------
Net decrease in cash and cash equivalents (1,951) (127)
Cash and cash equivalents at beginning of period 8,524 8,182
-------- -------
Cash and cash equivalents at end of period $ 6,573 $ 8,055
======== =======
SUPPLEMENTAL CASH FLOW DATA:
Interest paid $ 1,760 $ 2,653
======== =======
Income taxes paid $ 98 $ 36
======== =======
SUPPLEMENTAL NON-CASH INVESTING AND FINANCING ACTIVITIES:
Additions to capital lease and long-term debt obligations $ 671 $ 3,238
======== =======
Retirement of debt and termination of capital lease obligations $ 639 $ 919
======== =======
</TABLE>
See accompanying notes.
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<PAGE> 5
MEDICAL IMAGING CENTERS OF AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The financial statements included herein have been prepared by the Company,
without audit, according 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, although the Company believes the disclosures that are made are
adequate to make the information presented not misleading. Further, the
financial statements reflect, in the opinion of management, all normal and
recurring adjustments necessary to state fairly the financial position and
results of operations as of and for the periods indicated.
It is suggested that these financial statements be read in conjunction with the
audited financial statements and the notes thereto for the year ended December
31, 1994, which are included in the Company's Form 10-K. The results of
operations for the six months ended June 30, 1995 are not necessarily
indicative of results to be expected for the full fiscal year ending December
31, 1995.
2. Primary net income (loss) per share is computed on the basis of weighted
average number of common shares outstanding and includes common stock
equivalents when their effect is dilutive. For the three and six months ended
June 30, 1994, common stock equivalents were excluded from the net loss
computation as their effect was antidilutive.
3. No income tax provisions have been recorded for the six months ended June
30, 1995 and 1994 due to net operating loss carryforwards available for income
tax purposes.
4. Certain 1994 amounts have been reclassified to conform with the June 30,
1995 presentation.
5. On July 31, 1995, the Company sold the assets (exclusive of accounts
receivable) of its Ultrasound and Nuclear Medicine Division based in Chicago,
Illinois (the "Division") to Diagnostic Health Services, Inc. for cash of $3.7
million and the assumption of certain liabilities totaling $5 million. The
sale of assets consists primarily of equipment. The following table summarizes
the net assets sold as of June 30, 1995:
<TABLE>
<S> <C>
Equipment, net $ 1,179
Liabilities assumed (1,106)
-------
Net assets sold $ 73
=======
</TABLE>
The net assets sold have been classified as a current asset in the accompanying
consolidated balance sheet as of June 30, 1995 because of the pending sale
which was completed on July 31, 1995.
Management estimates that the sale of assets will result in a net gain of
approximately $3.5 million to the Company after an accrual for alternative
minimum taxes due as a result of the sale.
The following table summarizes the results of operations of the Division for
the three and six months ended June 30, 1995:
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Medical services revenues $1,330 $1,429 $2,718 $2,863
Costs of medical services 864 952 1,813 1,896
Depreciation and amortization of
equipment and leashold Improvements 219 267 455 546
Interest expense 31 52 67 106
------ ------ ------ ------
Operating results $ 216 $ 158 $ 383 $ 315
====== ====== ====== ======
</TABLE>
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<PAGE> 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations:
BUSINESS Medical Imaging Centers of America, Inc. ("MICA" or the "Company") is
a California corporation organized in July 1981 which provides outpatient
services and medical equipment rentals to physicians, managed care providers
and hospitals. These services include magnetic resonance imaging ("MRI"),
computed tomography ("CT"), nuclear medicine and ultrasound. The Company's
operations include diagnostic medical centers ("DMC's"), diagnostic equipment
rentals, fee-for-service agreements (fixed and mobile), and management,
marketing and related support services.
RESULTS OF OPERATIONS
REVENUES FROM MEDICAL SERVICES Revenues for the second quarter declined from
$14.3 million in 1994 to $11.6 million in 1995. Revenues for the six months
ended June 30 decreased from $28.5 million in 1994 to $23.8 million in 1995.
The decline was primarily due to the Company's sale of underperforming assets
and termination of certain unprofitable leases and contracts used in its
fee-for-service business. As noted above, a number of factors exist that could
have an impact on the Company's future revenues, including declining prices and
an oversupply in the diagnostic equipment market, declining trends in
reimbursement and competition in the healthcare industry.
REVENUES FROM EQUIPMENT AND MEDICAL SUITE SALES Revenues from equipment and
medical suite sales for the second quarter decreased from $.6 million in 1994
to $.2 million in 1995. Revenues for the six months ended June 30 increased
from $.8 million in 1994 to $2.3 million in 1995. The increase in sales is due
to the quantity and type of equipment and medical suites sold and will vary
accordingly. The Company intends to sell equipment and its remaining inventory
of medical suites in the future, but such sales are subject to market
conditions and there can be no assurances that such sales will or will not
occur.
COSTS OF MEDICAL SERVICES Costs for the second quarter decreased from $9
million in 1994 to $7.3 million in 1995. For the six months ended June 30,
costs of medical services decreased from $18.3 million in 1994 to $15 million
in 1995. The decrease was primarily due to the Company's sales of
underperforming assets and termination of certain unprofitable leases and
contracts used in its fee-for-service business.
COSTS OF EQUIPMENT AND MEDICAL SUITE SALES Costs of equipment and medical
suite sales for the second quarter decreased from $.6 million in 1994 to $.2
million in 1995. For the six months ended June 30, costs of equipment and
medical suite sales increased from $.8 million in 1994 to $1.8 million in 1995.
The difference in costs is directly related to the quantity and type of
equipment and medical suites sold and will vary accordingly.
MARKETING, GENERAL AND ADMINISTRATIVE EXPENSES Marketing, general and
administrative expenses for the second quarter decreased from $1.3 million in
1994 to $.7 million in 1995. Expenses for the six months ended June 30
decreased from $2.4 million in 1994 to $1.5 million in 1995. The decrease in
costs resulted from spending reductions which took place throughout 1994 and
continued administrative cost reductions during 1995.
DEPRECIATION AND AMORTIZATION Depreciation and amortization of equipment and
leasehold improvements for the second quarter decreased from $3.2 million in
1994 to $2.6 million in 1995. For the six months ended June 30, depreciation
and amortization decreased from $6.3 million in 1994 to $5.4 million in 1995.
This decrease is primarily due to the sale of underperforming assets and
termination of certain unprofitable leases used in the fee-for-service
business.
INTEREST EXPENSE Interest expense for the second quarter decreased from $1.3
million in 1994 to $.8 million in 1995. Interest expense for the six months
ended June 30 decreased from $2.7 million in 1994 to $1.7 million in 1995.
This decrease resulted from the sale of underperforming assets and termination
of certain unprofitable leases used in the fee-for-service business.
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<PAGE> 7
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1995, the Company's cash and cash equivalents totalled $6.6 million
as compared to $8.5 million at December 31, 1994. The decrease of $1.9 million
primarily reflects the $2.8 million mandatory redemption payment made in April
of 1995 toward the Company's convertible subordinated debentures offset by cash
generated from operating activities.
The working capital deficit at June 30, 1995 totals $1.8 million which reflects
the $2.8 million payment made in April (as discussed above) as well as the
second $2.8 million mandatory redemption payment which is due within twelve
months (April of 1996).
During the first six months of 1995, cash flows from operating activities of
$8.2 million were offset by payments against long-term debt of $10.1 million
(which includes the $2.8 million paid in April 1995 toward the convertible
subordinated debentures).
The Company's ability to meet its current obligations is dependent on its
ability to maintain revenues from existing contracts while reducing related
costs. In addition, a number of factors exist that could have an impact on the
Company's future revenues: (i) declining prices and an oversupply in the
diagnostic equipment market; (ii) changes in healthcare legislation which has
limited reimbursement and prohibited referrals from physician investors; (iii)
healthcare initiatives which could reduce reimbursement to the Company; and
(iv) competition in the healthcare industry.
OPERATING TRENDS
Declining reimbursement continues to adversely impact revenues earned by the
Company, and MICA does not expect improvements in reimbursement trends in the
future. The Company's strategy is to offset the declining trends in
reimbursement by securing managed care contracts and developing strategic
alliances with hospitals or other healthcare providers to increase the extent
of its imaging services. By positioning itself to take advantage of managed
care contracts, management believes that it can maintain its DMC revenues. The
Company will continue to pursue opportunities in its fee-for-service business;
however, in view of the historical unprofitability and uncertainty regarding
fee-for- service arrangements, the Company expects to sell equipment used in
its fee-for-service business as the related hospital contracts expire.
The Company will continue to evaluate its operating costs and reduce spending
as appropriate; however, there can be no assurances that such actions will be
sufficient to provide adequate cash to sustain the operations of the Company.
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<PAGE> 8
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K:
(a) Exhibits:
None.
(b) Reports:
A Form 8-K will be filed by August 15, 1995 regarding the sale
of the assets of the Company's Ultrasound and Nuclear Medicine Divisions based
in Chicago, Illinois.
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<PAGE> 9
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.
MEDICAL IMAGING CENTERS OF AMERICA, INC.
Date: August 10, 1995 /s/ Robert S. Muehlberg
--------------------------------------
Robert S. Muehlberg
Chairman of the Board of Directors,
President and Chief Executive Officer
Date: August 10, 1995 /s/ Denise L. Sunseri
--------------------------------------
Denise L. Sunseri
Vice President and
Chief Financial Officer
9 of 9
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 6,573
<SECURITIES> 0
<RECEIVABLES> 14,126
<ALLOWANCES> 5,164
<INVENTORY> 0
<CURRENT-ASSETS> 16,571
<PP&E> 52,313
<DEPRECIATION> 30,720
<TOTAL-ASSETS> 42,173
<CURRENT-LIABILITIES> 18,397
<BONDS> 25,099
<COMMON> 54,535
0
0
<OTHER-SE> (55,858)
<TOTAL-LIABILITY-AND-EQUITY> 42,173
<SALES> 2,272
<TOTAL-REVENUES> 26,045
<CGS> 1,773
<TOTAL-COSTS> 16,241
<OTHER-EXPENSES> 5,438
<LOSS-PROVISION> 488
<INTEREST-EXPENSE> 1,732
<INCOME-PRETAX> 1,268
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,475
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,475
<EPS-PRIMARY> .11
<EPS-DILUTED> 0
</TABLE>
