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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 March 31, 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 0-15416
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RESPONSE TECHNOLOGIES, INC.
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(Exact name of registrant as specified in its charter)
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Tennessee 62-1212264
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(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
1775 Moriah Woods Blvd., Memphis, TN 38117
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(Address of principal executive offices) (Zip Code)
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(901) 761-7000
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(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 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
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Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Common Stock, $.002 Par Value 34,922,615 shares as of May 9, 1995.
This filing consists of 9 sequentially numbered pages.
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INDEX
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Page
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets,
March 31, 1995 and December 31, 1994 3
Condensed Consolidated Statements
of Operations for the Three Months Ended
March 31, 1995 and 1994 4
Condensed Consolidated Statements of
Cash Flows for the Three Months Ended
March 31, 1995 and 1994 5
Notes to Condensed Consolidated
Financial Statements -- March 31, 1995 6
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 6
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 8
Signatures 9
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ITEM 1. FINANCIAL STATEMENTS
RESPONSE TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
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March 31, December 31,
1995 1994
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(Unaudited) (Note)
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ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 170,869 $ 2,922,266
Short-term investments 3,173,416 100,000
Accounts receivable, less allowances for doubtful accounts
of $4,280,765 and $3,934,794 13,301,928 12,399,569
Supplies 1,027,701 941,481
Prepaid expenses 281,040 324,637
Other current assets 259,653 97,878
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TOTAL CURRENT ASSETS 18,214,607 16,785,831
PROPERTY AND EQUIPMENT--at cost, less allowances for
depreciation and amortization of $5,019,745 and $4,651,829 3,961,511 4,020,799
OTHER ASSETS
Deferred charges, less allowances for amortization of $222,250 and $253,621 180,601 152,520
Other assets 75,324 77,565
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255,925 230,085
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TOTAL ASSETS $ 22,432,043 $ 21,036,715
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 3,857,666 $ 3,249,147
Accrued expenses and other liabilities 1,074,414 1,023,163
Notes payable 18,062 71,558
Capital lease obligations 124,878 157,030
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TOTAL CURRENT LIABILITIES 5,075,020 4,500,898
CAPITAL LEASE OBLIGATIONS --- 28,878
STOCKHOLDERS' EQUITY
Series A Convertible Preferred Stock, $1.00 par value, authorized 3,000,000
shares; issued and outstanding 27,833 and 28,333 shares, respectively;
liquidating preference $11.00 per share 27,833 28,333
Common Stock, $.002 par value, authorized 60,000,000 shares; issued
and outstanding 34,872,615 and 34,822,157 shares, respectively 69,745 69,644
Paid-in capital 59,058,761 59,036,487
Retained earnings (deficit) (41,799,316) (42,627,525)
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17,357,023 16,506,939
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 22,432,043 $ 21,036,715
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Note: The balance sheet at December 31, 1994 has been derived from the audited
financial statements at that date. See accompanying notes.
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RESPONSE TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
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Three Months Ended
March 31, 1995 March 31, 1994
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NET REVENUE $ 11,200,653 $ 8,488,666
OTHER INCOME--principally interest 50,714 64,601
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11,251,367 8,553,267
COSTS AND EXPENSES
Operating 8,218,471 7,280,418
General and administrative 1,244,190 1,037,455
Depreciation and amortization 411,544 551,997
Interest 3,850 55,581
Provision for doubtful accounts 545,103 600,230
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10,423,158 9,525,681
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NET EARNINGS (LOSS) $ 828,209 ($972,414)
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EARNINGS (LOSS) PER COMMON SHARE $ 0.02 ($0.03)
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WEIGHTED AVERAGE NUMBER
OF COMMON SHARES 34,833,810 34,674,234
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See accompanying notes.
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RESPONSE TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
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Three Months Ended
March 31, 1995 March 31, 1994
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NET CASH PROVIDED BY OPERATING ACTIVITIES $ 669,802 $ 64,256
INVESTING ACTIVITIES
Purchase of equipment (308,628) (136,282)
Purchase of short-term investments (3,073,416) ---
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NET CASH USED IN INVESTING ACTIVITIES (3,382,044) (136,282)
FINANCING ACTIVITIES
Proceeds from the exercise of stock options 21,875 7,125
Net payments on line of credit --- (1,097,432)
Principal payments on capital lease obligations (61,030) (113,939)
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NET CASH USED IN FINANCING ACTIVITIES (39,155) (1,204,246)
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DECREASE IN CASH AND CASH EQUIVALENTS (2,751,397) (1,276,272)
Cash and cash equivalents at beginning of period 2,922,266 3,100,631
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 170,869 $ 1,824,359
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See accompanying notes.
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Response Technologies, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
March 31, 1995
(Unaudited)
Note 1 - Basis of Presentation
The accompanying unaudited condensed 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
financial statements. In the opinion of Management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three month period ended March 31,
1995 are not necessarily indicative of the results that may be expected for the
year ending December 31, 1995. For further information, refer to the
consolidated financial statements and footnotes thereto included in Response
Technologies, Inc. and Subsidiaries' annual report on Form 10-K for the year
ended December 31, 1994.
Note 2 - Parent Company
Response Technologies, Inc. is a subsidiary of Seafield Capital Corporation
("Seafield").
On February 10, 1995, Seafield announced its retention of Alex. Brown and Sons
Incorporated as financial advisor to evaluate and recommend steps to enhance
the value of Seafield to its shareholders. Any transaction pursued by
Seafield will be likely to result in a significant change in the Company's
ownership.
Note 3 - Line of Credit
As of March 31, 1995, the Company had a $5,000,000 revolving bank line of
credit secured by eligible accounts receivable bearing interest at the bank's
prime rate plus one percent. On April 1, 1995, the line was renewed for a
one-year term in the amount of $2,500,000.
There were no borrowings outstanding under the line at March 31, 1995.
Note 4 - Commitments and Contingencies
With respect to professional and general liability risks, the Company currently
maintains an insurance policy that provides coverage during the policy period
ending August 1, 1995, on a claims-made basis, for $1,000,000 per claim in
excess of the Company retaining $25,000 per claim, and $3,000,000 in the
aggregate. Costs of defending claims are in addition to the limit of liability.
In addition, the Company maintains a $50,000,000 umbrella policy with respect to
potential general liability claims. Since inception, the Company has incurred
no professional or general liability losses and as of March 31, 1995, the
Company was not aware of any material pending professional or general liability
claims.
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The Company is a leading provider of advanced cancer treatments and
related services, principally on an outpatient basis, through treatment centers
owned or managed by the Company. The centers, known as IMPACT(R) (IMPlementing
Advanced Cancer Treatments) Centers, are staffed by experienced oncology nurses,
pharmacists, laboratory technologists, and other support personnel to deliver
outpatient services under the direction of private practicing oncologists. The
primary treatments provided by the Centers involve high-dose chemotherapy
coupled with support of the patient's immune
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system through the use of autologous peripheral blood stem cell infusion. The
Centers also provide home pharmacy and outpatient infusional services for their
patients.
Beginning in 1994, the Company began expanding its network of centers to
include hospital-affiliated centers. These centers may entail a management
agreement ("managed centers") or a jointly owned entity ("jointly owned
centers"). For managed centers, the Company provides technical and
administrative services, including treatment protocols and data management,
employee training and reimbursement support. Patient care and laboratory
services are provided and billed to third parties by the host hospital, with a
management fee paid to the Company.
For jointly owned centers, the Company and the host hospital contribute
cash and other forms of capital to establish an entity to provide outpatient and
inpatient services to its patients. These entities will purchase services from
the hospital to deliver and manage complex cancer treatments. The Company
contemplates that it will maintain management control of these jointly owned
programs, and accordingly plans to include the results of operations on a
consolidated basis.
As of March 31, 1995, the Company had twenty-eight IMPACT Centers and
seven managed centers located in nineteen states. Subsequent to quarter-end,
the Company announced the establishment of its first jointly owned center. The
Company anticipates continued nationwide expansion over the next few years,
primarily through the establishment of additional jointly owned centers.
Results of Operations
The Company reported net earnings for the first quarter of 1995 of $828,000, or
$.02 per share, compared to a net loss of $972,000, or ($.03) per share, for
the comparable period last year.
Net revenue for the first quarter of 1995 was $11,201,000, an increase of
$2,712,000, or 32%, when compared to the first quarter of 1994. The increase
is primarily attributable to increased patient referrals. Net revenue for the
current quarter also included approximately $270,000 related to the Company's
efforts to begin conducting pharmaceutical contract research in parallel with
its clinical trials data management activities.
Operating expenses increased $938,000 or 13% between the quarters ended March
31, 1995 and 1994. These expenses consist of payroll costs, pharmaceutical and
laboratory expenses, medical director fees, rent expense and other operational
expenses, and display a high degree of variability in proportion to patient
services revenue. Operating expenses as a percent of net revenue were 73%
compared to 86% for the comparable period of 1994. This decrease is primarily
attributable to operating efficiencies at higher levels of center activity and
certain fixed operating expenses being spread over a larger revenue base.
General and administrative costs increased $207,000 or 20% between the
quarters ended March 31, 1995 and 1994. This increase is primarily attributable
to increases in administrative payroll and related costs. As a percentage of net
revenue, general and administrative costs were 11% compared to 12% for the
comparable period of 1994.
Depreciation and amortization expense decreased by $140,000 or 25% when
compared to the first quarter of 1994. The decrease is primarily attributable
to the startup costs of many Centers being fully amortized after a two-year
operational period.
The provision for doubtful accounts decreased $55,000 or 9% between the
quarters ended March 31, 1995 and 1994. The provision as a percentage of net
revenue was 5% and 7% for the quarters ending March 31, 1995 and 1994,
respectively. The decrease is attributable to a higher proportion of contracted
patient accounts, improved collections performance and an increase in revenues
from physician sales, hospital management fees, and contract research for which
collection is more certain.
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Liquidity and Capital Resources
As of March 31, 1995, the Company's working capital was $13,140,000 with
current assets of $18,215,000 and current liabilities of $5,075,000. Cash and
cash equivalents and short-term investments represent $3,344,000 of the
Company's current assets.
As of March 31, 1995, the Company had a $5,000,000 revolving bank line of
credit secured by eligible accounts receivable bearing interest at the bank's
prime rate plus one percent. On April 1, 1995, the line was renewed for a
one-year term in the amount of $2,500,000. There were no borrowings outstanding
under the line at March 31, 1995.
On February 10, 1995, Seafield announced its retention of Alex. Brown and Sons
Incorporated as financial advisor to evaluate and recommend steps to enhance
the value of Seafield to its shareholders. Any transaction pursued by
Seafield will be likely to result in a significant change in the Company's
ownership.
Management believes that the Company's cash and capital resources, together
with available credit facilities, will be sufficient to finance current
operations and expansion of the Company's network of IMPACT Centers.
No material commitments for capital expenditures existed as of March 31, 1995.
New Accounting Standards
No recently issued accounting standards presently exist which will require
adoption in future periods by the Company.
PART II. - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
Exhibit 27 --- Financial Data Schedule for SEC use
only.
b. Reports on Form 8-K
On February 14, 1995, the Company filed a Form 8-K
with the Securities and Exchange Commission
regarding an announcement by Seafield Capital
Corporation ("Seafield"). Seafield announced its
retention of Alex. Brown and Sons Incorporated as
financial advisor to evaluate and recommend steps to
enhance the value of Seafield to its shareholders.
Any transaction pursued by Seafield will be likely
to result in a significant change in the Company's
ownership.
8
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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 thereunder duly authorized.
Response Technologies, Inc.
Date: May 12, 1995 By: /s/ Daryl P. Johnson
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Daryl P. Johnson
Chief Financial Officer
(signed on behalf of the
registrant and as principal
financial officer)
Date: May 12, 1995 By: /s/ Debbie K. Elliott
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Debbie K. Elliott
Controller
(principal accounting officer)
9
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<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FORM
10-Q FOR THE THREE MONTH PERIOD ENDED MARCH 31, 1995 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FORM 10-Q.
</LEGEND>
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<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 171
<SECURITIES> 3,173
<RECEIVABLES> 17,583
<ALLOWANCES> 4,281
<INVENTORY> 1,028
<CURRENT-ASSETS> 18,215
<PP&E> 8,981
<DEPRECIATION> 5,020
<TOTAL-ASSETS> 22,432
<CURRENT-LIABILITIES> 5,075
<BONDS> 0
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