FORM 10-Q
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, 1997
--------------
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
-------
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: 6,300,280($.01 par value) at June 6,
1997.
BIO-REFERENCE, LABORATORIES, INC.
FORM 10-Q
APRIL, 30 1996
I N D E X
---------
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheet as of April 30, 1997 (unaudited)
and October 31, 1996 1
Statements of Operations for the
three months and six months ended April 30, 1997
and April 30, 1996 (unaudited) 3
Statements of Cash Flows for the
six months ended April 30, 1997 and April 30,
1996 (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 SHEETS
ASSETS
------
<TABLE>
<CAPTION>
<S> <C> <C>
CURRENT ASSETS:
- --------------
April 30, October 31,
1997 1996
---- ----
(Unaudited)
Cash $ 1,399,203 $ 1,401,474
Cash- Restricted 852,000 852,000
Accounts Receivable (Net) 13,373,523 12,019,761
Inventory 412,648 394,377
Other Current Assets 391,602 442,932
Certificates of Deposit- Restricted 3,556,250 3,556,250
----------- ---------
TOTAL CURRENT ASSETS $19,985,226 $ 18,666,794
-------------------- ----------- ---------
PROPERTY, PLANT AND EQUIPMENT $ 2,780,359 $ 2,577,130
-----------------------------
LESS: Accumulated Depreciation 1,464,671 1,265,836
- ---- ----------- ---------
TOTAL PROPERTY,
----------------
PLANT AND EQUIPMENT - NET $ 1,315,688 $ 1,311,294
------------------------- ----------- ---------
OTHER ASSETS:
- ------------
Certificates of Deposit- Restricted $ 123,750 $ --
Due from Related Party 224,518 234,918
Deposits 186,574 234,918
Goodwill (Net of Accumulated
Amortization of $1,157,565) 3,062,876 3,168,403
Deferred Charges (Net of Accumulated
Amortization of $1,689,953) 3,918,598 4,164,286
Other Assets 341,037 341,037
----------- -----------
TOTAL OTHER ASSETS $ 7,857,353 $ 8,252,648
------------------ ----------- ---------
TOTAL ASSETS $29,158,267 $ 28,230,736
------------ =========== ===========
</TABLE>
The Accompanying Notes are an Integral Part of These Financial Statements.
BIO-REFERENCE LABORATORIES, INC.
BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
April 30 October 31,
1997 1996
---- ----
(Unaudited)
CURRENT LIABILITIES:
- -------------------
Accounts Payable $ 2,582,625 $ 2,139,303
Salaries and Commissions Payable 966,288 878,996
Accrued Expenses 257,865 327,876
Current Portion of Long-Term Debt 691,181 730,374
Current Portion of Leases Payable 145,764 202,147
Current Portion of Subordinated Notes 168,829 243,829
Notes Payable 10,379,921 9,930,741
Taxes Payable 169,452 141,081
----------- -------
TOTAL CURRENT LIABILITIES $15,361,925 $ 14,594,347
------------------------- ----------- ----------
LONG-TERM LIABILITIES:
Long-Term Portion of Long-Term Debt 999,716 1,433,817
Long-Term Portion of Leases Payable 167,342 99,564
---------- ------
TOTAL LONG-TERM LIABILITIES $ 1,167,058 99,564
--------------------------- ---------- ------
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 and Outstanding 6,300,280
shares in April, 30, 1997 and
Issued and Outstanding 6,300,280
shares in October 31, 1996 63,003 63,003
Additional Paid-In Capital 22,493,705 22,493,705
Accumulated [Deficit] (9,907,984) (10,431,483)
------------ ----------
Totals $12,648,724 $ 12,125,225
Deferred Compensation (19,440) (22,217)
----------- ------
TOTAL SHAREHOLDERS' EQUITY $12,629,284 $ 12,103,008
-------------------------- ----------- ----------
TOTAL LIABILITIES AND
---------------------
SHAREHOLDERS' EQUITY $29,158,267 $ 28,230,736
-------------------- =========== ==========
</TABLE>
The Accompanying Notes are an Integral Part of These Financial Statements.
BIO-REFERENCE LABORATORIES, INC.
STATEMENTS OF OPERATIONS
[UNAUDITED]
<TABLE>
<CAPTION>
<S> <C> <C>
Three months ended
------------------
April 30,
--------
1 9 9 7 1 9 9 6
------- -------
NET REVENUES: $ 9,974,850 $ 8,861,569
- ------------ --------- ---------
COST OF SERVICES:
- ----------------
Depreciation $ 94,433 $ 91,289
Employee Related Expenses 2,149,693 2,133,413
Reagents and Lab Supplies 1,195,824 1,045,180
Other Cost of Services 1,384,966 1,155,110
--------- ---------
TOTAL COST OF SERVICES $ 4,824,916 $ 4,424,992
--------- ---------
GROSS PROFIT ON REVENUES $ 5,149,934 $ 4,436,577
- ------------------------
General and Administrative Expenses:
- -----------------------------------
Depreciation and Amortization $ 182,733 $ 157,086
Other General and Admin. Expenses 2,744,895 2,712,748
Bad Debt Expense 1,510,133 984,924
--------- ----------
TOTAL GENERAL AND ADMIN.
EXPENSES $ 4,437,761 $ 3,854,758
-------- --------- ---------
OPERATING INCOME $ 712,173 $ 581,819
----------------
OTHER (INCOME) EXPENSES:
- -----------------------
Interest Expense $ 281,031 $ 185,931
Interest Income (64,762) (71,193)
-------- --------
TOTAL OTHER EXPENSES -
NET $ 216,269 $ 114,738
--- ------- -------
INCOME BEFORE TAX $ 495,904 $ 467,081
- -----------------
Provision for Income Taxes (860) 47,237
----------- ---------
NET INCOME $ 496,764 $ 419,844
- ---------- ======= =======
NET INCOME PER SHARE $ .08 $ .07
-------------------- === ===
WEIGHTED AVERAGE NUMBER OF SHARES
----------------------------------
OUTSTANDING 6,300,280 6,094,259
----------- ========= =========
Six months ended
----------------
April 30
--------
1 9 9 7 1 9 9 6
------- -------
NET REVENUES: $ 19,249,995 $ 16,984,271
- ------------ ---------- ----------
COST OF SERVICES:
- ----------------
Depreciation $ 185,276 $ 182,087
Employee Related Expenses 4,337,734 4,232,813
Reagents and Lab Supplies 2,394,876 2,138,177
Other Cost of Services 2,711,532 2,297,016
-------- ---------
TOTAL COST OF SERVICES $ 9,629,418 $ 8,850,093
---------------------- --------- ---------
GROSS PROFIT ON REVENUES $ 9,620,577 $ 8,134,178
- ------------------------
General and Administrative Expenses:
- -----------------------------------
Depreciation and Amortization $ 364,776 $ 311,628
Other General and Admin. Expenses 5,653,334 5,317,177
Bad Debt Expense 2,647,282 2,129,033
-------- ----------
TOTAL GENERAL AND ADMIN.
EXPENSES $ 8,665,392 $ 7,757,838
-------- --------- ---------
OPERATING INCOME $ 955,185 $ 376,340
----------------
OTHER (INCOME) EXPENSES:
- -----------------------
Interest Expense $ 558,430 $ 389,369
Interest Income (133,527) (151,358)
-------- ---------
TOTAL OTHER EXPENSES -
NET $ 424,903 $ 238,011
--- ------- -------
INCOME BEFORE TAX $ 530,282 $ 138,329
- -----------------
Provision for Income Taxes 6,783 91,507
-------- ----------
NET INCOME $ 523,499 $ 46,822
- ---------- ======== ========
NET INCOME PER SHARE $ .08 $ .01
-------------------- === ===
WEIGHTED AVERAGE NUMBER OF SHARES
---------------------------------
OUTSTANDING 6,300,280 6,092,677
----------- ========= =========
</TABLE>
The Accompanying Notes are an Integral Part of These Financial
Statements. BIO-REFERENCE LABORATORIES, INC.
STATEMENTS OF CASH FLOWS
[UNAUDITED]
<TABLE>
<CAPTION>
<S> <C> <C>
Six months ended
----------------
April 30,
--------
1 9 9 7 1 9 9 6
------- -------
OPERATING ACTIVITIES:
- --------------------
Net Income $ 523,499 $ 46,822
Adjustments to Reconcile Net
Income to
Cash Provided by Operating Activities:
Deferred Compensation 2,777 8,750
Depreciation and Amortization 550,052 493,715
Provision for Bad Debts 2,647,282 2,129,033
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 (4,001,044) (3,592,880)
Other Assets 33,059 39,855
Prepaid Expenses and Other Current
Assets 44,080 109,868
Deferred Charges and Goodwill -- (182,954)
Increase (Decrease) in:
Accounts Payable and Accrued
Liabilities 488,974 (199,928)
---------- ------------
NET CASH - OPERATING
ACTIVITIES $ 288,679 $(1,127,535)
INVESTING ACTIVITIES:
- --------------------
Acquisition of Equipment and
Leasehold Improvements $ (90,368) $ (191,325)
Cash overdraft assumed in connection
with acquisition -- (3,797)
Investment in Certificate of Deposit -- (77,350)
---------- -----------
$ (90,368) $ (272,472)
FINANCING ACTIVITIES:
- --------------------
Proceeds from Sales of Marketable
Securities $ -- $ 501,893
Payments of Long-Term Debt (473,297) (1,251,307)
Increase in Long-Term Debt -- 109,918
Payments of Capital Lease
Obligations (101,465) (156,020)
Payments of Subordinated Notes
Payable (75,000) (7,920)
(Increase) Decrease in Restricted
Cash -- 1,107,646
Increase in Revolving Line of Credit 449,180 1,894,789
---------- -----------
NET CASH - FINANCING
---------------------
ACTIVITIES $ (200,582) $ 2,198,999
---------- ----------- -----------
NET INCREASE (DECREASE) IN CASH $ (2,271) $ 798,992
-------------------------------
CASH AT BEGINNING OF PERIODS 1,401,474 636,246
---------------------------- ---------- -----------
CASH AT END OF PERIODS $1,399,203 $ 1,435,238
---------------------- ========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
- -------------------------------------------------
Cash paid during the period for:
Interest $ 577,269 $ 387,018
Income Taxes $ 6,783 $ 91,507
</TABLE>
The Accompanying Notes are an Integral Part of These Financial
Statements.
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING
- --------------------------------------------------
ACTIVITIES:
- ----------
In December, 1995, the Company issued 4,745 shares of common
stock in payment of a $17,198.45 invoice due to a vendor.
In January, 1996, the Company issued debt in the amount of
$108,000 in connection with the acquisition of a customer list.
In April, 1996, management wrote-off an intangible asset with a
carrying value of $197,986 and related debt in the amount of
$168,528 in connection with an impaired contract.
In July, 1996, management wrote-off an intangible asset with a
carrying value of $90,700 in connection with an abandoned
acquisition.
In October, 1996, the Company incurred a capital lease obligation
of $69,812 in connection with the acquisition of medical
equipment.
In March, 1997, the Company incurred capital lease obligations
(2) of $112,861 in connection with the acquisition of medical
equipment.
The Accompanying Notes are an Integral Part of These Consolidated
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, 1997 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, 1996 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
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
$10,530,654 $8,340,329 $19,583,877 $15,128,850
</TABLE>
A number of proposals for legislation or regulation are under
discussion which could have the effect of substantially reducing
Medicare reimbursements for 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.
[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 $7,518,205 at April 30, 1997.
[6] Inventory, consisting primarily of purchased clinical
supplies, is valued at the lower of cost (first-in, first-out) or
market.
[7] Property and equipment are carried at cost. Depreciation is
computed by the straight-line method over the estimated useful
lives of the respective assets which range from 2 to 8 years.
Leasehold improvements are amortized over the life of the lease,
which is approximately five years. On sale or retirement, the
asset cost and related accumulated depreciation or amortization
are removed from the accounts, and any related gain or loss is
reflected in income. Repairs and maintenance are charged to
expense when incurred.
[8] The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
[9] Cash equivalents are comprised of certain highly liquid
investments with a maturity of three months or less when
purchased.
[10] Income per share is based on the weighted average number of
shares of common stock outstanding during each period.
[11] The Company, at times, issues shares of common stock in
payment for services rendered to the Company. The estimated fair
value of the shares issued approximates the value of the services
provided.
[12] At April 30, 1997, the Company had $4,532,000 of
restricted cash which represents collateral for two demand notes
issued pursuant to bank loans.
[13] At April 30, 1997, the Company had $5,931,203 in cash in
excess of the federally insured limits, however $4,532,000 of
this amount represents collateral for demand loans with the same
banks.
[14] 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,
1996 of approximately $8,900,000 which begin to expire in 1997.
As a result of these carryforwards, the Company has a deferred
tax asset of approximately $3,600,000 which has been offset by a
valuation account of $3,600,000, resulting in a net deferred
asset of $-0-.[15] 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, $2,500,000 was paid against the principal on this note.
The Company has $852,000 in a savings account with this bank
restricted as collateral for the loan.
[16] In March, 1995, the Company consummated a $6,500,000 line of
credit with PNC 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 July, 1996, this line of credit
was increased to $9,000,000. In March,1997, PNC Bank amended its
agreement with the Company to increase this line to $10,000,000.
[17] 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.
[18] 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 with CML's chief executive providing for an
annual salary of $60,000 contingent on revenue received from
specified draw stations. This acquisition was not significant to
the Company.
[19] 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 these assets.
[20] In May, 1996, the Company acquired certain assets and rights
of Advanced Medical Laboratory, Inc. ("AML") 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
twelve months preceding the acquisition. This acquisition was
not significant to the Company.
[21] On July 19, 1996, BRLI completed the purchase from
SmithKline Beecham Clinical Laboratories, Inc. ("SBCL") of
certain assets, rights and associated goodwill including the
Customer List related to SBCL's operation of its Renal Dialysis
Testing Business. The purchase price was $1,800,000 of which
$1,200,000 was paid at the Closing. The $600,000 balance was
payable in 24 consecutive monthly installments of $25,000
commencing January 1, 1997. Interest was imputed at the prime
rate. At April 30, 1997, the Outstanding debt balance as
reflected on Bio-Reference Laboratories, Inc.'s Balance Sheet was
$551,573. At the Closing, SBCL agreed for a three-year period
commencing no more than 120 days after the Closing, to cease
performing renal dialysis clinical laboratory testing services
for renal dialysis centers or other entities which provide
diagnosis and/or treatment to dialysis patients. Funding for the
$1,200,00 down payment made by BRLI at the Closing was provided
pursuant to its term loan and credit line facilities with
Midlantic Bank, N.A. The Company estimates that approximately
$1,000,000 in annual revenues could be generated by this
acquisition. (See Note 22).
[22] On December 30, 1996, the Company commenced a lawsuit
against SmithKline Beecham Clinical Laboratories ("SBCL")
alleging that SBCL materially and repeatedly breached its
obligations and its representations and warranties made in the
Asset Sale/Purchase Agreement and the Non-Competition Agreement
between the parties and claimed unspecified amounts of
compensatory and punitive damages and related costs. This
lawsuit is in its initial stages and no assurances can be given
at this time that it will be concluded in the Company's favor.
As a result of its allegations against SBCL, the Company has not
made any payments with respect to the $600,000 note payable
issued in connection with the purchase. 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 effect on the Company's financial position or
results of operations.Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
COMPARISON OF SECOND QUARTER 1997 VS SECOND QUARTER 1996
NET REVENUES:
- ------------
Net revenues for the three month period ended April 30, 1997 were
$9,974,850, as compared to $8,861,569 for the three month period
ended April 30, 1996; this represents a 13% increase in net
revenues.
The number of patients serviced during the quarter ended April
30, 1997 was 184,182 constituting an increase of 4% over the
prior comparable quarter. Net revenue per patient increased
during the quarter ended April 30, 1997 to $54.16 as compared to
net revenue per patient of $50.06 for the prior comparable
quarter, an increase in net revenue per patient of 8%. Part of
this increase in net revenues per patient may be attributable to
the Company's emphasis on specialty testing. Revenues in the
Company's Renal Reference (dialysis testing unit), Fertility
Reference Laboratory (a business unit specializing in male
fertility) and GenCare Biomedical Research (the Company's
oncology and tumor tissue testing unit) have all increased in
this quarter versus the corresponding quarter in the past fiscal
year. These units are all associated with higher net revenue per
patient than the rest of Bio-Reference's testing segments. In
particular, GenCare experienced an increase in net revenues per
patient; to $150.66 for the period ended April 30, 1997 from
$94.98 during the previous corresponding quarter. This
represents an increase of net revenue per patient for this
business unit of 59%. Management can not project if these
increases will continue, or if they do, at what rate.
COST OF SALES:
- -------------
Cost of Services increased from $4,424,992 for the three month
period ended April 30, 1996 to $4,824,916 for the quarter ended
April 30, 1997. This represents a 9% increase in direct
operating costs, which is in line with the 13% increase in net
revenues.
Gross profits on net revenues increased from $4,436,577 for the
period ended April 30, 1996 to $5,149,934 for the three month
period ended April 30, 1997; an increase of 16%. This increase
resulted from the 9% increase in direct expenses, as compared
with the net revenue increase of 13%.
GENERAL AND ADMINISTRATIVE EXPENSES:
- -----------------------------------
General and administrative expenses for the three month period
ending April 30, 1997 were $4,437,761 as compared to $3,854,758
for the quarter ending April 30, 1996, an increase of $583,003 or
15%.The Company adjusted upward its reserve for bad debts on its
professional accounts by an additional $300,000. Without this
adjustment, General and Administrative Expense would have
increased only 7%.
INTEREST EXPENSE:
- ----------------
Interest expense increased from $185,931 during the three month
period ending April 30, 1996 to $281,031 during the three month
period ending April 30, 1997 and is due to the Company's increase
in asset based borrowing.
INCOME (LOSS):
- -------------
The Company had net income of $496,764 for the three months ended
April 30, 1997 as compared to $419,844 for the three months ended
April 30, 1996.Management believes the increase in net income of
$76,920 for the period ended April 30, 1997 was attributable to
(1) the mild winter weather that the Northeast experienced during
February as compared to the prior year and (2) the cost reduction
program implemented during January of 1997.
SIX MONTHS 1997 COMPARED TO SIX MONTHS 1996
------------------------------------------
NET REVENUES:
- ------------
Net Revenues for the six month period ended April 30, 1996 were
$16,984,271 as compared to $19,249,995 for the current six month
period ended April 30, 1997; this represents an 13% increase in
net revenues.
The number of patients serviced during the six month period ended
April 30, 1997 was 355,526 which was an increase of 6% over the
prior comparable period. Net revenue per patient increased
during the period ended April 30, 1997 to $54.15 as compared to
net revenue per patient of $50.49 for the prior comparable
period, an increase in net revenue per patient of 8%. Part of
this increase in net revenues per patient may be attributable to
the Company's emphasis on specialty testing. Revenues in the
Company's Renal Reference (dialysis testing unit), Fertility
Reference Laboratory (a business unit specializing in male
fertility) and GenCare Biomedical Research (the Company's
oncology and tumor tissue testing unit) have all increased in the
current six month period versus the corresponding period in the
prior fiscal year. These units are all associated with higher
net revenue per patient than the rest of Bio-Reference's testing
segments. In particular, GenCare experienced an increase in net
revenues per patient; to $150.20 for the six month period ended
April 30, 1997 from $98.08 during the previous corresponding
period. This represents an increase of net revenue per patient
for this business unit of 53%. Management can not project if
these increases will continue, or if they do, at what rate.
COST OF SALES:
- -------------
Cost of Services increased from $8,850,093 for the six month
period ended April 30, 1996 to $9,629,418 for the six month
period ended April 30, 1997. This represents a 9% increase in
direct operating costs and is in line with the 13% increase in
net revenues.
Gross profits on net revenues increased from $8,134,178 for the
six month period ended April 30, 1996 to $9,620,577 for the six
month period ended April 30, 1997; an increase of $1,486,399
(18%). This increase resulted from an increase in net revenues
of 13%, while direct operating expenses increased by 9%.
GENERAL AND ADMINISTRATIVE EXPENSES:
- -----------------------------------
General and administrative expenses for the six month period
ending April 30, 1997 were $8,665,392 as compared to $7,757,838
for the period ending April 30, 1996, an increase of $906,554 or
12%. This increase is in line with the 11% increase in net
revenues. The Company adjusted upward its reserve for bad debts
on its professional accounts by an additional $300,000. Without
this adjustment, General and Administrative Expense would have
increased only 8%.
INTEREST EXPENSE:
- ----------------
Interest expense increased from $389,369 during the six month
period ending April 30, 1996 as compared to $558,430 during the
six month period ending April 30, 1997 and is the result of the
Company's increase in asset based borrowing.
INCOME:
- ------
The Company had net income of $523,499 for the six months ended
April 30, 1997 as compared to net income of $46,822 for the six
months ended April 30, 1996 an increase of $476,677. Management
believes the increase in net income of $ 476,677 for the period
ended April 30, 1997 was attributable to (1) the mild winter
weather that the Northeast experienced during December, January
and February and (2) the cost reduction program implemented
during January of 1997.
LIQUIDITY AND CAPITAL RESOURCES:
- -------------------------------
Working capital as of April 30, 1997 was $4,623,301 as compared
to $4,072,447 at October 31, 1996 an increase of $550,854.
The Company decreased its cash position by approximately $ 2,300
during the quarter ended April 30, 1997. Net cash provided by
operating activities was $288,679 for the period ended April 30,
1997. The Company borrowed $449,180 in short-term debt and
repaid $649,762 in existing debt.
The capital spending requirements for the Company during fiscal
1997 is expected not to exceed $575,000. To date, approximately
$90,400 has been spent on capital improvements and approximately
$112,900 in capital leases.
The Company had current liabilities of $15,361,925 at April 30,
1997. The three largest items in this category are notes payable
of $10,379,921, accounts payable of $2,582,625 and current
portion of long-term debt of $1,005,774.
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
then current level of 88% of the national median to 76% of the
national median. This proposed reduction was subsequently
adopted. 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 tock, and/or
combinations thereof. The Company has a credit facility with PNC
Bank, N.A. for $10,000,000. As of April 30, 1997, $9,527,921 of
this facility has been utilized. In addition, the Company has
verbally renegotiated the convertible debt due to certain former
owners of GenCare that were due and payable on January 4, 1997 in
the amount of approximately $235,729. These notes are now
expected to be paid in full during the first quarter of calendar
1999.
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. 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. Adoption of SFAS No. 121 is
not expected to have a material impact on the Company's financial
statements.
The FASB has also issued SFAS No. 125 "Accounting for Transfers
and Servicing of Financial Assets and Extinguishment of
Liabilities." SFAS No. 125 is effective for transfers and
servicing of financial assets and extinguishment of liabilities
occurring after December 31, 1996. Earlier application is not
allowed. The provisions of SFAS No. 125 must be applied
prospectively; retroactive application is prohibited. Adoption
on January 1, 1997 is not expected to have a material impact on
the Company. Some provisions of SFAS No. 125, which are unlikely
to apply to the Company, have been deferred by the FASB.
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, 1997.
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 13, 1996
<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-Q and is qualified in its entirety by reference to such (b) Report on
Form 10-Q.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> APR-30-1997
<CASH> 2,251,203
<SECURITIES> 0
<RECEIVABLES> 13,373,523
<ALLOWANCES> 7,518,205
<INVENTORY> 412,648
<CURRENT-ASSETS> 19,985,226
<PP&E> 2,780,359
<DEPRECIATION> 1,464,671
<TOTAL-ASSETS> 29,158,267
<CURRENT-LIABILITIES> 15,361,925
<BONDS> 12,552,753
0
0
<COMMON> 63,003
<OTHER-SE> 22,493,705
<TOTAL-LIABILITY-AND-EQUITY> 29,158,267
<SALES> 19,249,995
<TOTAL-REVENUES> 19,249,995
<CGS> 9,629,418
<TOTAL-COSTS> 18,294,810
<OTHER-EXPENSES> 523,499
<LOSS-PROVISION> 2,647,282
<INTEREST-EXPENSE> 558,430
<INCOME-PRETAX> 530,282
<INCOME-TAX> 6,783
<INCOME-CONTINUING> 523,499
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 523,499
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
