FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT
OF 1934.
For the quarterly period ended April 30, 1996
--------------
AND
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
--------------- ---------------
Commission File Number 0-15266
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BIO-REFERENCE LABORATORIES, INC.
(Exact name of registrant as specified in its charter)
NEW JERSEY 22-2405059
- ------------------------------- -------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
481 Edward H. Ross Drive, Elmwood Park, NJ 07407
- -----------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code)
(201) 791-2600
- --------------
(Former name, former address and former fiscal year, if changed
since last report)
Check whether the issuer (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934
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 Securities and Exchange
Act of 1934 after the distribution of securities under a plan confirmed by a
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: 6,117,870 ($.01
par value) at June 1, 1996.
BIO-REFERENCE, LABORATORIES, INC.
---------------------------------
FORM 10-QSB
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APRIL, 30 1996
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I N D E X
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Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheet as of April 30, 1996 (unaudited) 1
Statements of Operations for the
three months and six months ended April 30, 1996
and April 30, 1995 (unaudited) 3
Statements of Cash Flows for the
six months ended April 30, 1996 and April 30,
1995 (unaudited) 4
Notes to financial statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
PART II. OTHER INFORMATION 10
Item 6. Exhibits and Reports on Form 8-K 10
Signatures 11
BIO-REFERENCE LABORATORIES, INC.
--------------------------------
BALANCE SHEET
-------------
As of April 30, 1996
--------------------
(Unaudited)
-----------
ASSETS
------
<TABLE>
<CAPTION>
<S> <C>
CURRENT ASSETS:
- --------------
Cash $ 1,435,238
Cash- Restricted 1,352,000
Accounts Receivable (Net) 10,096,984
Inventory 435,104
Other Current Assets 343,878
Certificates of Deposit 180,000
Certificates of Deposit- Restricted 3,500,000
------------
TOTAL CURRENT ASSETS $ 17,343,204
-------------------- ------------
PROPERTY, PLANT AND EQUIPMENT 2,330,596
-----------------------------
LESS: Accumulated Depreciation 1,119,994
- ---- -----------
TOTAL PROPERTY,
PLANT AND EQUIPMENT - NET $ 1,210,602
------------------------- -----------
OTHER ASSETS:
- ------------
Due from Related Party $ 245,518
Deposits 248,745
Goodwill (Net of Accumulated
Amortization of $947,527) 3,233,343
Deferred Charges (Net of Accumulated
Amortization of $1,219,284) 2,439,190
Other Assets 280,604
----------
TOTAL OTHER ASSETS $ 6,447,400
------------------ -------------
TOTAL ASSETS $ 25,001,206
------------ =============
</TABLE>
The Accompanying Notes are an Integral Part of These Financial Statements.
BIO-REFERENCE LABORATORIES, INC.
--------------------------------
BALANCE SHEET
-------------
As of April 30, 1996
--------------------
(Unaudited)
-----------
LIABILITIES AND SHAREHOLDERS' EQUITY [DEFICIT]
----------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
CURRENT LIABILITIES:
- -------------------
Accounts Payable $ 2,079,763
Salaries and Commissions Payable 865,950
Accrued Expenses 425,090
Current Portion of Long-Term Debt 1,778,409
Current Portion of Leases Payable 209,651
Current Portion of Subordinated Notes 127,444
Note Payable 7,286,085
Taxes Payable 164,584
-----------
TOTAL CURRENT LIABILITIES $12,936,976
------------------------- -----------
LONG-TERM LIABILITIES:
- ---------------------
Long-Term Portion of Long-Term Debt 339,308
Long-Term Portion of Leases Payable 103,970
Long-Term Portion of Subordinated Notes 116,385
-----------
TOTAL LONG-TERM LIABILITIES $ 559,663
--------------------------- -----------
SHAREHOLDERS' EQUITY:
- --------------------
Preferred Stock $.10 Par Value;
Authorized 1,062,589 shares,
None Issued $ --
Senior Preferred Stock, $.10 Par Value;
Authorized 604,078 shares,
Issued and Outstanding 604,078 shares --
Common Stock, $.01 Par Value;
Authorized 18,333,333 shares,
Issued 6,300,280. shares and Outstanding
6,117,870 shares 61,179
Additional Paid-In Capital 22,428,757
Accumulated [Deficit] (10,976,619)
------------
Totals $11,513,317
Deferred Compensation (8,750)
------------
TOTAL SHAREHOLDERS' EQUITY $11,504,567
-------------------------- -----------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $25,001,206
-------------------- ===========
</TABLE>
The Accompanying Notes are an Integral Part of These Financial Statements.
BIO-REFERENCE LABORATORIES, INC.
--------------------------------
STATEMENTS OF OPERATIONS
------------------------
[UNAUDITED]
---------
<TABLE>
<CAPTION>
Three months ended Six months ended
------------------ ----------------
April 30 April 30
-------- --------
1 9 9 6 1 9 9 5 1 9 9 6 1 9 9 5
------- ------- ------- -------
<S> <C> <C> <C> <C>
NET REVENUES: $8,861,569 $7,690,359 $16,984,271 $15,332,779
- ------------ ---------- --------- ----------- -----------
COST OF SERVICES:
- ----------------
Depreciation $ 91,289 $ 81,978 $ 182,087 $ 158,754
Employee Related
Expenses 2,133,413 1,767,207 4,232,813 3,516,461
Reagents and
Lab Supplies 1,045,180 850,053 2,138,177 1,747,580
Other Cost of Services 1,155,110 967,090 2,297,016 1,773,849
---------- ---------- ---------- ---------
TOTAL COST OF SERVICES $4,424,992 $3,666,328 $8,850,093 $7,196,644
---------------------- ---------- ---------- ---------- ----------
GROSS PROFIT ON REVENUES $4,436,577 $4,024,031 $8,134,178 $8,136,135
- ------------------------
General and
Administrative Expenses:
- --------------------------
Depreciation and
Amortization $ 157,086 $ 172,940 $ 311,628 $ 326,707
Other General and
Admin. Expenses 2,712,748 2,447,077 5,317,177 4,975,938
Bad Debt Expense 984,924 940,803 2,129,033 1,928,311
---------- ---------- ---------- ----------
TOTAL GENERAL AND
ADMIN. EXPENSES $3,854,758 $3,560,820 $7,757,838 $7,230,956
----------------- ---------- ---------- ---------- ----------
OPERATING INCOME $ 581,819 $ 463,211 $ 376,340 $ 905,179
----------------
OTHER (INCOME) EXPENSES:
- -----------------------
Interest Expense $ 185,931 $ 143,052 $ 389,369 $ 262,197
Interest Income (71,193) (63,189) (151,358) (105,898)
-------- --------- ---------- ----------
TOTAL OTHER EXPENSES
- NET $ 114,738 $ 79,863 $ 238,011 $ 156,299
- ------------------- --------- --------- ---------- ---------
INCOME BEFORE TAX $ 467,081 $ 383,348 $ 138,329 $ 748,880
- ------------------------
Provision for Income
Taxes 47,237 -- 91,507 --
--------- --------- --------- ---------
NET INCOME $ 419,844 $ 383,348 $ 46,822 $ 748,880
- ----------------- ========= ========= ========== =========
NET INCOME
PER SHARE $ .07 $ .06 $ .01 $ .12
----------------- ========= ========= ========== =========
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING 6,094,259 6,057,514 6,092,677 5,951,763
----------------------- ========= ========= ========= =========
</TABLE>
The Accompanying Notes are an Integral Part of These Financial Statements.
BIO-REFERENCE LABORATORIES, INC.
--------------------------------
STATEMENTS OF CASH FLOWS
------------------------
[UNAUDITED]
---------
<TABLE>
<CAPTION>
Six months ended
April 30,
--------
1 9 9 6 1 9 9 5
------- -------
<S> <C> <C>
OPERATING ACTIVITIES:
- --------------------
Net Income $ 46,822 $ 748,880
Adjustments to Reconcile Net Income to
Cash Provided by Operating Activities:
Deferred Compensation 8,750 38,885
Depreciation and Amortization 493,715 485,461
Provision for Bad Debts 2,129,033 1,928,311
Gain on Sale of Marketable Securities (9,274) --
Write-down of Impaired Assets 29,458 --
Change in Assets and Liabilities, net of
effects of acquisitions
(Increase) Decrease in:
Accounts Receivable (3,592,880) (3,629,494)
Other Assets 39,855 26,279
Prepaid Expenses and Other Current Assets 109,868 (223,080)
Deferred Charges and Goodwill 182,954) (506,089)
Increase (Decrease) in:
Accounts Payable and Accrued Liabilities (199,928) 374,165
------------ -----------
NET CASH - OPERATING ACTIVITIES $(1,127,535) $ (756,682)
-------------------------------
INVESTING ACTIVITIES:
- --------------------
Acquisition of Equipment and
Leasehold Improvements $ (191,325) $ (264,835)
Cash overdraft assumed in connection
with acquisition (3,797) --
Investment in Certificate of Deposit (77,350) --
----------- -----------
$ (272,472) $ (264,835)
FINANCING ACTIVITIES:
- --------------------
Proceeds from Exercise of Warrants $ -- $ 3,150
Proceeds from Sales of
Marketable Securities 501,893 --
Payments of Long-Term Debt (1,251,307) (1,501,243)
Increase in Long-Term Debt 109,918 451,513
Payments of Capital Lease Obligations (156,020) (122,493)
Payments of Subordinated Notes Payable (7,920) (25,039)
(Increase) Decrease in Restricted Cash 1,107,646 (2,500,000)
Increase in Revolving Line of Credit 1,894,789 3,707,000
----------- -----------
NET CASH - FINANCING ACTIVITIES $ 2,198,999 $ 12,888
------------------------------- ----------- -----------
NET INCREASE (DECREASE) IN CASH $ 798,992 $(1,008,629)
-------------------------------
CASH AT BEGINNING OF PERIODS 636,246 1,395,973
---------------------------- ----------- -----------
CASH AT END OF PERIODS $ 1,435,238 $ 387,344
---------------------- =========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
- -------------------------------------------------
Cash paid during the period for:
Interest $ 387,018 $ 181,002
Income Taxes $ 91,507 $ 901
</TABLE>
The Accompanying Notes are an Integral Part of These Financial Statements.
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
- --------------------------------------------------------------------
In December, 1994, the Company incurred capital lease obligations
of $13,713 in connection with the acquisition of office furniture and $12,130
in connection with the acquisition of leasehold improvements.
In January, 1995, the Company incurred capital lease obligations of $58,668 in
connection with the acquisition of computerized imaging systems.
In January, 1995, the Company issued 444,585 shares of common stock for all of
the issued and outstanding common and preferred stock of GenCare Biomedical
Research Corporation ("GenCare"). An aggregate 133,333 shares are to be held
in escrow pending certain required collections from GenCare customers. The
fair market value of the 311,252 non-escrowed shares issued at the closing was
$1,634,073 on such date. In addition, the Company incurred capital lease
obligations of $32,266 in connection with the acquisition of 4 automobiles.
In February, 1995, $37,621 of a GenCare related trade accounts payable was
settled by conversion of the entire amount into a two year debt agreement.
In April, 1995, the Company issued 12,000 shares of common stock in payment of
a $25,500 fee to a public relations firm pursuant to a one year contract
(renewable annually).
In October, 1995, the Company incurred a capital lease obligation in connection
with the acquisition of medical equipment.
In December, 1995, the Company issued 4,745 shares of common stock in payment
of a $17,198.45 invoice due to a vendor.
The Accompanying Notes are an Integral part of These Financial Statements.
BIO-REFERENCE LABORATORIES, INC.
--------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
[1] In the opinion of management, the accompanying unaudited condensed
financial statements reflect all adjustments [consisting only of normal
adjustments and recurring accruals] which are necessary to present a fair
statement of the results for the interim periods presented.
[2] The results of operations for the six month period ended April 30, 1996 are
not necessarily indicative of the results to be expected for the entire year.
[3] The financial statements and notes thereto should be read in conjunction
with the financial statements and notes for the year ended October 31, 1995 as
filed with the Securities and Exchange Commission in the Company's Annual
Report on Form 10-KSB.
[4] Revenues are recognized at the time the services are performed. Revenues
on the statement of operations is net of the following amounts for allowances
and discounts.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
April 30 April 30
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
$8,340,329 $ 6,140,452 $15,128,850 $ 11,530,708
</TABLE.
[5] An allowance for contractual credits and uncollectible accounts is
determined based upon a review of the reimbursement policies and subsequent
collections for the different types of receivables. This allowance, which is
net against accounts receivable was $3,658,184 at April 30, 1996.
[6] Inventory, consisting primarily of purchased clinical supplies, is valued
at the lower of cost (first-in, first-out) or market.
[7] At April 30, 1996, the Company had $4,852,000 of restricted cash which
represents collateral for two demand notes issued pursuant to bank loans.
[8] At April 30, 1996, the Company had $5,746,203 in cash in excess of the
federally insured limits, however $4,852,000 of this amount represents
collateral for demand loans with the same banks.
[9] Effective November 1, 1993, the Company adopted FAS 109 "Accounting for
Income Taxes." The effect of the adoption is not material to the financial
statements. The Company elected not to restate prior financial statements.
The Company had net operating loss carryforwards at October 31, 1995 of
approximately $9,100,000 which begin to expire in 2002. As a result of these
carryforwards, the Company has a deferred tax asset of approximately $3,700,000
which has been offset by a valuation account of $3,700,000, resulting in a net
deferred asset of $-0-.
[10] In January, 1994, $3,352,000 was received for a demand note payable to
Gotham Bank of New York. Interest is due at three percent above the bank's
corporate savings account rate. The Company deposited a similar sum in a
savings account with this bank as collateral for the loan. As of January 31,
1996, $1,500,000 was paid against the principal on this note.
The Company has $1,852,000 in a savings account with this bank restricted as
collateral for the loan.
[11] In November, 1994, the Company purchased a customer list and two leased
draw stations from a clinical laboratory. As consideration, the Company
assumed the seller's obligations under the leases and entered into an
agreement to pay up to $600,000 over a five and one-half year period based on
cash collected on customer list revenues. The minimum liability for these
payments is $120,000, of which $30,000 was paid at the closing. No goodwill
was recognized on this transaction. In addition, the Company entered into a
five year employment agreement with a senior marketing representative
providing for an annual base salary of $40,000 plus commissions based on sales.
[12] In January, 1995, the Company acquired GenCare Biomedical
Research Corporation ["GenCare'] in a business combination accounted for
under the purchase method of accounting. GenCare provides clinical testing
services for the detection, differentiation and staging of cancer, genetic and
infectious diseases. Their customers include hospitals, medical centers,
reference laboratories and large medical practices. All of the issued and
outstanding common and preferred stock of GenCare was acquired for an
aggregate 444,585 shares of the Company's common stock [subject to possible
increase in the event of a future decrease in the market price of the common
stock]. An aggregate 133,333 shares are to be held in escrow pending certain
required collections from GenCare customers. The fair market value of the
311,252 non-escrowed shares issued at the closing was $1,634,073 on such date.
The total cost of the acquisition was $1,634,073 which exceeded the fair
value of the net assets of GenCare by $2,203,492. The excess is being amortized
using the straight-line method over 20 years. In addition, if the specified
collection levels are achieved, the 133,333 shares in escrow will be recorded
as an additional cost of the acquisition at the fair market value of the
shares at the time they are issued. In addition, the Company assumed a bank
loan in the amount of $293,333. This loan was fully paid in March, 1995. In
February, 1995, $37,621 of a GenCare trade accounts payable was settled by
conversion of the entire amount into a two year debt agreement.
[13] In March, 1995, the Company consummated a $6,500,000 line of credit with
Midlantic Bank, N.A.- Asset Based Lending Department. The credit line is
secured by the Company's accounts receivable, is for a two-year term and may be
extended for annual periods by mutual consents, thereafter. In January, 1996,
this line of credit was increased to $7,500,000.
[14] In November, 1995, the Company acquired Oncodec Labs, Inc. All of the
issued and outstanding common stock of Oncodec Labs, Inc. was acquired for a
maximum of 40,000 shares of the Company's common stock. At the closing, the
stockholders of Oncodec Labs, Inc. received 10,000 shares and the additional
30,000 shares will be issued contingent upon receipts obtained through December
31, 1998. This acquisition was not significant to the Company.
[15] In November, 1995, the Company acquired Community Medical Laboratories
("CML"). All of the issued and outstanding common stock of CML was acquired
for an aggregate 72,688 shares of the Company's common stock. In addition,
certain CML noteholders delivered CML promissory notes totaling an aggregate
$399,958 in indebtedness including accrued interest through October 31, 1995 in
exchange for an aggregate $200,174 in principal amount of the Company's
debentures. The 72,688 shares of the Company's stock will be held in escrow
pending certain required collections from CML customers. In addition, the
Company entered into a five year employment agreement for an annual salary of
$60,000 contingent on revenue received from specified draw stations. This
acquisition was not significant to the Company.
[16] Management of the Company evaluates the period of amortization for its
intangible assets to determine whether later events and circumstances warrant
revised estimates of useful lives. On a quarterly basis, management evaluates
whether the carrying value of these intangible assets has become impaired.
This evaluation is done by comparing the carrying value of these intangible
assets to the value of projected discounted net cash flow from related
operations. Impairment is recognized if the carrying value of these intangible
assets is greater than the projected discounted net cash flow from related
operations. In the quarter ended April 30, 1996, certain intangible assets
were deemed to be impaired. As a result, a charge of $29,458 was recorded for
the write-down of this asset.
[17] In April 1994, Town Clinical Laboratory, Ltd. ["TCL"], a clinical testing
laboratory with principal offices in Nassau County, New York, filed a complaint
in the New York State Supreme Court, Nassau County against the Company and its
principal executive officer. The complaint alleges unfair competition and
conspiracy between the Company, its principal executive officer and a former
TCL employee to destroy TCL's business. The complaint, which contains four
causes of action, requests that preliminary and permanent injunctions be issued
and further requests actual damages to be determined at trial plus punitive
damages in the amount of $2,000,000 in each of the four causes of action. The
Company and its principal executive officer have filed an answer denying the
material allegations of the complaint and requesting judgment dismissing TCL's
complaint. In accordance with the terms of a settlement which was reached in
December 1995, the Company will pay $30,000 to the former shareholders of TCL.
In August 1994, the Company and various of its officers and directors were
named as a defendant in an action commenced by a former employee in the
Superior Court of New Jersey. The complaint alleges that an employment
agreement between the Company and the former employee was breached, and
demands an unspecified amount of compensatory and punitive damages. The
Company and the other defendants have denied the material allegations and have
filed a counterclaim against the former employee based upon his alleged breach
of the employment agreement by his lack of performance thereunder. The Company
intends to vigorously defend its position in this action.
In the normal course of its business, the Company is exposed to a number of
other asserted and unasserted potential claims. In the opinion of management,
the resolution of these matters will not have a material adverse affect on the
Company's financial position or results of operations.
[18] The following subsequent event occurred after April 30, 1996, but prior to
the submission of the 10-QSB.
In May, 1996, the Company acquired certain assets and rights of Advanced
Medical Laboratory, Inc. () for a maximum amount of $612,000, of which
$180,000 was paid at closing. The remaining maximum balance of $432,000 is
payable over a three-year period. AML had revenues of approximately $900,000
in the most recent fiscal year.
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS
------------------------------------
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
------------------------------------------------
RESULTS OF OPERATIONS
---------------------
COMPARISON OF SECOND QUARTER 1996 VS SECOND QUARTER 1995
--------------------------------------------------------
NET REVENUES:
- ------------
Net Revenues for the three month period ended April 30, 1996 were $8,861,569 as
compared to $7,690,359 for the prior period ended April 30, 1995; this
represents a 15% increase in net revenues. The number of patients processed
during the period ended April 30, 1996 increased 22% over the prior comparable
quarter. However, net revenue per patient decreased from $52.94 for the period
ended April 30, 1995 to $50.06 for the period ended April 30, 1996. This
represents a 5% reduction in reimbursement levels from third party payors.
Management cannot project if these decreases will continue, or if they do, at
what rate.
COST OF SALES:
- -------------
Cost of services increased from $3,666,328 for the quarter ended April 30, 1995
to $4,424,992 for the period ended April 30, 1996. This represents a 21%
increase in direct operating costs. Employee related expenses increased by
21%. Staff increased by 22 employees during this period. Reagents and
laboratory supplies increased 23% over the prior comparable period. This cost
component increased in tandem with the increase in the number of patients
processed, as expected. Other cost of services increased 19%, which is down
from the rate of increase experienced during the first quarter of this fiscal
year of 42%.
Gross profits on net revenues increased from $4,024,031 for the period ended
April 30, 1995 to $4,436,577 for the three month period ended April 30, 1996;
an increase of 10%. This increase was caused by an increase in net revenues.
The Company's gross profit margin decreased to 50% for the three month period
ended April 30, 1996 compared to 52% for the three month period ended April 30,
1995. This decrease in gross profit margin resulted from an increase in net
revenues of 15% while direct costs increased by 21%.
GENERAL AND ADMINISTRATIVE EXPENSES:
- -----------------------------------
General and administrative expenses for the three month period ending April 30,
1996 were $3,854,758 as compared to $3,560,820 for the quarter ending April 30,
1995, an increase of $293,938 or 8%. This increase is favorable in respect to
the 15% increase in net revenues.
INTEREST EXPENSE:
- ----------------
Interest expense increased from $143,052 during the three month period ending
April 30, 1995 as compared to $185,931 during the three month period ending
April 30, 1996 and is due to the Companys increase in asset based borrowing.
INCOME:
- ------
The Company had net income of $46,822 for the six months ended April 30, 1996
as compared to net income of $748,880 for the six months ended April 30, 1995 a
decrease of $702,058. Management believes the relatively small income of
$46,822 for the period ended April 30, 1996 was attributable to the extreme
winter weather and record snowfall that the Northeast experienced during
December, January and February. If not for the severe winter weather, the
Company believes it would have shown a significant profit despite the average
decrease in net revenue per patient of approximately 7%.
LIQUIDITY AND CAPITAL RESOURCES:
- -------------------------------
Working capital as of April 30, 1996 was $4,406,228 as compared to $4,551,855
at October 31, 1995 a decrease of $145,627 during the six month period. The
Company increased its cash position by approximately $799,000 during the
current quarter. The Company utilized $1,127,535 in cash for operating
activities. To offset this use of cash the Company raised $109,918 in
long-term debt, $1,894,789 in credit line borrowings and sold $501,893 in
marketable securities and repaid approximately $1,415,247 in existing debt.
The capital spending requirements for the Company during 1995 is expected not
to exceed $550,000. To date, approximately $191,325 has been spent on capital
improvements.
The Company had current liabilities of $12,936,976 at April 30, 1996. The
three largest items in this category are note payable of $7,286,085, accounts
payable of $2,079,763 and current portion of long-term debt of $1,778,409.
Containment of health-care costs, including reimbursement for clinical
laboratory services, has been a focus of ongoing governmental activity.
Omnibus budget reconciliation legislation, designed to "reconcile" existing
laws with reductions and reimbursement required by enactment of a Congressional
budget can adversely affect clinical laboratories by reducing Medicare
reimbursement for laboratory services. In each of the omnibus budget
reconciliation laws enacted in 1987, 1989 and 1990, Medicare reimbursement of
clinical laboratories was reduced from previously authorized levels. None of
the reductions enacted to date has had a material adverse effect on the
Company. For many of the tests performed for Medicare beneficiaries or
Medicaid recipients, laboratories are required to bill Medicare or Medicaid
directly, and to accept Medicare or Medicaid reimbursement as payment in full.
A number of proposals for legislation or regulation are under discussion which
could have the effect of substantially reducing Medicare reimbursements to
clinical laboratories. For example, the House Energy and Commerce Subcommittee
on Oversight and Investigation introduced legislation in 1987 and 1989 that
would require clinical laboratories to charge Medicare the lowest prices
charged to any client. In October 1990, the Office of the Inspector General
("OIG") of the Department of Health and Human Services ("HHS") proposed a
so-called "laboratory roll-in" reimbursement methodology, whereby physicians
would be reimbursed a flat fee per office visit for clinical laboratory
testing, thereby forcing clinical laboratories to bid to provide those services
to physicians. The administration's budget package for fiscal 1993 recommended
adoption of a proposal of the U.S. General Accounting Office issued in
connection with a study of clinical laboratory costs made in June 1991
calling for a reduction in the Medicare national limitation amounts, from the
current level of 88% of the national median to 76% of the national median. The
Health Care Financing Administration ("HCFA") has announced that it is
developing a proposal to provide for reimbursement of clinical laboratories on
a competitive bid basis. In addition, a number of states, HHS and Medicare
carriers (insurance companies that administer Medicare) have imposed reductions
and other limitations on Medicare and Medicaid reimbursement for laboratory
testing and one state has imposed, and other states are considering, new taxes
on health care providers, including clinical laboratories. Depending upon the
nature of regulatory action, if any, which is taken and the content of
legislation, if any, which is adopted, the Company could experience a
significant decrease in revenues from Medicare and Medicaid, which could have a
material adverse effect on the Company. The Company is unable to predict,
however, the extent to which such actions will be taken.
The Company intends to capitalize on the current trend of consolidation in the
clinical laboratory industry through acquisitions of other laboratories in its
geographical region with significant customer lists. Purchase prices to
acquire other laboratories may involve cash, notes, Common Stock, and/or
combinations thereof.
Cash on hand, equity financing and additional borrowing capabilities are
expected to be sufficient to meet anticipated operating requirements, debt
repayments and provide funds for capital expenditures, excluding acquisitions
for the foreseeable future.
Impact of Inflation
- -------------------
To date, inflation has not had a material effect on the Company's operations.
New Authoritative Pronouncements
- --------------------------------
The Financial Accounting Standards Board ["FASB"] issued Statement of Financial
Accounting Standards ["SFAS"] No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," in March 1995
and SFAS No. 114, "Accounting by Creditors for Impairment of a Loan," in May
1993. SFAS No. 121 establishes accounting standards for the impairment of
long-lived assets, certain identifiable intangibles, and goodwill related to
those assets to be held and used, and for long-lived assets and certain
identifiable intangibles to be disposed of. SFAS No. 121 is effective for
financial statements issued for fiscal years beginning after December 15, 1995.
SFAS No. 114 establishes accounting standards for the impairment of certain
loans. SFAS No. 114 applies to financial statements for fiscal years beginning
after December 15, 1994. Adoption of SFAS No. 121 and SFAS No. 114 is not
expected to have a material impact on the Company's financial statements.
The FASB issued SFAS No. 123, "Accounting for Stock-Based Compensation," in
October 1995. SFAS No. 123 uses a fair value based method of accounting for
stock options and similar equity instruments as contrasted to the intrinsic
value based method of accounting prescribed by Accounting Principles Board
[APB] Opinion No. 25, "Accounting for Stock Issued to Employees." The Company
has not decided if it will adopt SFAS No. 123 or continue to apply APB Opinion
No. 25 for financing reporting purposes. SFAS No. 123 will have to be adopted
for financial note disclosure purposes in any event. The accounting
requirements of SFAS No. 123 are effective for transactions entered into in
fiscal years that begin after December 15, 1995; the disclosure requirements of
SFAS No. 123 are effective for financial statements for fiscal years beginning
after December 15, 1995.
In December 1994, the American Institute of Certified Public Accountants issued
Statement of Position [SOP] 94-6, "Disclosure of Certain Significant Risks and
Uncertainties," the provisions of which are effective for financial statements
issued for fiscal years ending after December 15, 1995. In general, SOP 94-6
requires disclosures about the nature of a company's operations and the use of
estimates in the preparation of financial statements. The Company does not
anticipate a significant expansion of its financial statement note disclosure
as a result of SOP 94-6.
PART II
Item 6
EXHIBITS AND REPORTS ON FORM 8-K
- --------------------------------
No reports on Form 8-K have been filed during the quarter ended April 30, 1996.
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.
BIO-REFERENCE LABORATORIES, INC.
(Registrant)
/S/ Marc D. Grodman
- -------------------
Marc D. Grodman, M.D.
President
/S/ Sam Singer
- --------------
Sam Singer
Chief Financial and Accounting Officer
Date: June 14, 1996
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Schedule contains summary financial information extracted from (a) the
Balance Sheet and Statement of Operations filed as part of the Quarterly Report
on Form 10-QSB and is qualified in its entirety by reference to such (b) Report
on Form 10-QSB.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-START> NOV-01-1995
<PERIOD-END> APR-30-1996
<CASH> 6,467,238
<SECURITIES> 0
<RECEIVABLES> 10,096,984
<ALLOWANCES> 3,658,184
<INVENTORY> 435,104
<CURRENT-ASSETS> 17,343,204
<PP&E> 2,330,596
<DEPRECIATION> 1,119,994
<TOTAL-ASSETS> 25,001,206
<CURRENT-LIABILITIES> 12,936,976
<BONDS> 9,961,252
0
0
<COMMON> 61,179
<OTHER-SE> 22,428,757
<TOTAL-LIABILITY-AND-EQUITY> 25,001,206
<SALES> 16,984,271
<TOTAL-REVENUES> 16,984,271
<CGS> 8,850,093
<TOTAL-COSTS> 16,607,931
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 2,129,033
<INTEREST-EXPENSE> 389,369
<INCOME-PRETAX> 138,329
<INCOME-TAX> 91,507
<INCOME-CONTINUING> 46,822
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 46,822
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
