SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act 1934
Date of Report: June 28, 1996
U.S. DIAGNOSTIC LABS INC.
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(Exact name of registrant as specified in charter)
DELAWARE
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(State of other jurisdiction of incorporation)
1-13392 11-3146389
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(Commission File Number) (IRS Employer Identification No.)
777 South Flagler Drive, Suite 1006, West Tower,
West Palm Beach, Florida 33401
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(Address of principal executive offices) (Zip Code)
Registrant's telephone no. including area code: (407) 832-0006
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Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
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(a) Audited Financial Statements for the year ended December 31, 1995
for the Allegheny Open MRI/CT Group.
(b) Pro Forma Financial Statements for the year ended December 31, 1995
were included in a Form 8-K/A-2 dated June 5, 1996.
(c) Pro Forma Financial Statements for the six months ended June 30,
1996 were included in the Company's 10-QSB for the six months ended
June 30, 1996.
-2-
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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 hereunto duly authorized.
U.S. DIAGNOSTIC LABS INC.
/s/ Jeffrey A. Goffman
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Jeffrey A. Goffman, Chairman
Dated: September 11, 1996
-3-
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ALLEGHENY OPEN MRI/CT GROUP
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REPORT
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FOR THE YEAR ENDED
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DECEMBER 31, 1995.
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INDEPENDENT AUDITOR'S REPORT
To the Stockholders and Board of Directors of
U.S. Diagnostic Labs Inc.
We have audited the accompanying combined balance sheet of
the Allegheny Open MRI/CT Group and its affiliates as of December 31, 1995,
and the related combined statements of operations, partners' capital, and cash
flows for each of the two years in the period ended December 31, 1995. These
combined financial statements are the responsibility of the Partnerships'
management. Our responsibility is to express an opinion on these combined
financial statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the combined financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the combined
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall combined financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the combined financial statements referred
to above present fairly, in all material respects, the combined financial
position of the Allegheny Open MRI/CT Group and its affiliates as of December
31, 1995, and the combined results of their operations and their cash flows
for each of the two years in the period ended December 31, 1995, in conformity
with generally accepted accounting principles.
MOORE STEPHENS, P.C.
Certified Public Accountants.
Cranford, New Jersey
April 19, 1996
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ALLEGHENY OPEN MRI/CT GROUP
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COMBINED BALANCE SHEET AS OF DECEMBER 31, 1995.
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ASSETS:
CURRENT ASSETS:
Cash and Cash Equivalents $ 286,052
Accounts Receivable [Net of Estimated
Uncollectibles of $661,678] 1,228,830
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TOTAL CURRENT ASSETS 1,514,882
PROPERTY, PLANT AND EQUIPMENT - NET 1,219,428
OTHER ASSETS 42,199
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TOTAL ASSETS $ 2,776,509
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LIABILITIES AND PARTNERS' CAPITAL:
CURRENT LIABILITIES:
Accounts Payable $ 232,048
Accrued Expenses 38,804
Current Portion of Long-Term Debt 241,671
Other Current Liabilities 16,621
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TOTAL CURRENT LIABILITIES 529,144
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LONG-TERM LIABILITIES:
Long-Term Debt - Net of Current Portion 233,329
Deferred Revenue 5,424
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TOTAL LONG-TERM LIABILITIES 238,753
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TOTAL LIABILITIES 767,897
COMMITMENTS AND CONTINGENCIES --
PARTNERS' CAPITAL 2,008,612
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TOTAL LIABILITIES AND PARTNERS' CAPITAL $ 2,776,509
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See Notes to Combined Financial Statements.
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ALLEGHENY OPEN MRI/CT GROUP
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COMBINED STATEMENTS OF OPERATIONS
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YEARS ENDED
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DECEMBER 31,
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1 9 9 5 1 9 9 4
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REVENUE - [NET OF ALLOWANCES] $ 8,581,126 $ 7,958,208
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OPERATING EXPENSES:
General and Administrative 4,722,772 4,215,041
Depreciation and Amortization 656,327 1,145,120
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TOTAL OPERATING EXPENSES 5,379,099 5,360,161
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INCOME FROM OPERATIONS 3,202,027 2,598,047
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OTHER INCOME [EXPENSE]:
Interest Income 7,044 14,142
Interest [Expense] (54,878) (73,398)
Other Income [Expense] 20,797 (14,657)
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TOTAL OTHER [EXPENSE] (27,037) (73,913)
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NET INCOME $ 3,174,990 $ 2,524,134
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PRO FORMA NET INCOME $ 1,904,994 $ 1,514,481
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See Notes to Combined Financial Statements
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ALLEGHENY OPEN MRI/CT GROUP
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COMBINED STATEMENTS OF PARTNERS' CAPITAL
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PARTNERS' EQUITY - JANUARY 1, 1994 $ 2,590,579
Net Income for the Period Ended
December 31, 1994 2,524,134
Less: Partners' Withdrawals (3,183,131)
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PARTNERS' EQUITY - DECEMBER 31, 1994 1,931,582
Net Income for the Period Ended
December 31, 1995 3,174,990
Less: Partners' Withdrawals (3,097,960)
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PARTNERS' EQUITY - DECEMBER 31, 1995 $ 2,008,612
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See Notes to Combined Financial Statements.
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ALLEGHENY OPEN MRI/CT GROUP
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COMBINED STATEMENTS OF CASH FLOWS
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YEARS ENDED
DECEMBER 31,
1 9 9 5 1 9 9 4
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OPERATING ACTIVITIES:
Net Income $ 3,174,990 $ 2,524,134
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Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities:
Depreciation and Amortization Expense 656,327 1,145,120
Loss on Sale of Medical Equipment 19,428 --
Changes in Assets and Liabilities:
[Increase] Decrease in:
Accounts Receivable (372,757) 139,633
Other Assets (4,844) 58
Increase [Decrease] in:
Accounts Payable 194,694 (19,040)
Accrued Expenses 32,868 (15)
Other Current Liabilities 16,621 --
Deferred Revenue (44,690) (68,864)
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Total Adjustments 497,647 1,196,892
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NET CASH - OPERATING ACTIVITIES 3,672,637 3,721,026
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INVESTING ACTIVITIES:
Proceeds from Sale of Medical Equipment 100,000 --
Equipment Purchases (206,787) (91,924)
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NET CASH - INVESTING ACTIVITIES (106,787) (91,924)
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FINANCING ACTIVITIES:
Partners' Withdrawals (3,097,960) (3,183,131)
Repayments of Long-Term Debt (383,334) (378,333)
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NET CASH - FINANCING ACTIVITIES (3,481,294) (3,561,464)
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NET INCREASE IN CASH AND CASH EQUIVALENTS 84,556 67,638
CASH AND CASH EQUIVALENTS - BEGINNING OF YEARS 201,496 133,858
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CASH AND CASH EQUIVALENTS - END OF YEARS $ 286,052 $ 201,496
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SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the years for:
Interest $ 57,692 $ 73,492
Taxes $ -- $ --
See Notes to Combined Financial Statements.
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ALLEGHENY OPEN MRI/CT GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS
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[1] DESCRIPTION OF THE COMPANY AND BASIS OF FINANCIAL STATEMENT PRESENTATION
DESCRIPTION OF THE COMPANY - Allegheny Open MRI/CT Group [the "Partnerships"]
is engaged in the ownership of medical services facilities. These facilities
are located in the Pittsburgh, Pennsylvania area and provide a variety of
medical diagnostic testing and evaluation services and procedures, including
magnetic resonance imaging and computerized tomography scanning.
COMBINATION POLICY - The accompanying combined financial statements include
the accounts of the Partnerships and its affiliates. Intercompany transactions
and balances have been eliminated in the combined financial statements. Listed
below are each of the partnerships included in the combined financial
statements:
Centre Common MRI, Ltd.
Jefferson MRI, Ltd.
Magnetic Resonance Imaging of West PA, Ltd.
South Hill Computerized Tomography Associates, Ltd.
Monroeville Imaging Center, Ltd.
Pittsburgh Computerized Tomography Associates, Ltd.
[2] SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH AND CASH EQUIVALENTS - Cash equivalents are comprised of certain highly
liquid investments with a maturity of three months or less when purchased. The
carrying amount of cash and cash equivalents approximates their fair value.
PROPERTY, PLANT AND EQUIPMENT AND DEPRECIATION - Property and equipment are
stated at cost. Depreciation is provided using the double-declining method
over the estimated useful lives of the related assets or the remaining lease
term. The equipment used by the Partnerships is technologically sophisticated
and subject to accelerated obsolescence in the event of significant
technological change.
NET PATIENT SERVICE REVENUE - Net revenues are reported at the estimated net
realizable amounts from patients, third-party payors and others for services
rendered including estimated prospectively determined adjustments under
reimbursement agreements with third-party payors. These adjustments are
accrued on an estimated basis in the period the related services are rendered
and adjusted in future periods as final settlements are determined. It is
management's policy not to require collateral as a condition for service.
For the years ended December 31, 1995 and 1994, contractual adjustments
amounted to approximately $4,620,606 and $4,285,189, respectively.
PRO FORMA [UNAUDITED] INCOME TAX EFFECT - The pro forma effects of income tax
expense as if the entity had been a C corporation are shown below. The pro
forma tax amounts have been computed based on an effective tax rate of 40% in
effect for the respective years ended December 31st.
1 9 9 5 1 9 9 4
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Income Before Income Taxes $ 3,174,990 $ 2,524,134
Pro Forma Income Tax Effect (1,269,996) (1,009,653)
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PRO FORMA NET INCOME $ 1,904,994 $ 1,514,481
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ALLEGHENY OPEN MRI/CT GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS, SHEET #2
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[2] SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [CONTINUED]
USE OF ESTIMATES - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.
[3] FAIR VALUE OF FINANCIAL INSTRUMENTS
Effective December 31, 1995, the Partnerships adopted Statement of Financial
Accounting Standards No. 107, which requires disclosing fair value to the
extent practicable for financial instruments which are recognized or
unrecognized in the balance sheet. The fair value of the financial instruments
is not necessarily representative of the amount that could be realized or
settled, nor does the fair value amount consider the tax consequences of
realization or settlement. The carrying amounts of cash and cash equivalents,
accounts receivable and accounts payable approximates the fair value due to
the short maturities of such investments. The carrying value of long-term debt
approximates its fair value because the borrowing rate approximates the
Partnership's cost of capital.
[4] PROPERTY, PLANT AND EQUIPMENT
The following is a summary of property and equipment as of December 31, 1995:
Estimated
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Useful Life
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Medical Equipment $ 3,604,333 5 Years
Furniture and Fixtures 159,045 7 Years
Office Equipment 78,265 5 Years
Leasehold Improvements 665,489 2-5 Years
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Total 4,507,132
Less: Accumulated Depreciation 3,287,704
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NET $ 1,219,428
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Depreciation expense amounted to $647,224 and $1,141,241 for the years ended
December 31, 1995 and 1994, respectively.
[5] LONG-TERM DEBT
Long-term debt at December 31, 1995 consists of the following:
8.5% notes payable to lending institutions bearing interest at the prime rate
due in monthly installments through October 1998.
Collateralized by medical equipment. $ 475,000
Less: Current Portion 241,671
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TOTAL $ 233,329
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Principal payments on long-term debt are as follows:
1996 $ 241,671
1997 140,000
1998 93,329
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TOTAL $ 475,000
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ALLEGHENY OPEN MRI/CT GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS, SHEET #3
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[6] RELATED PARTY TRANSACTIONS
The Partnerships have agreements with physicians who are limited partners of
the Partnerships to provide professional imaging services and to act as the
sole and exclusive manager and administrator of all business functions and
services at the facilities. The Partnerships paid approximately $2,011,000 in
1995 and $2,070,000 in 1994 for such services.
[7] COMMITMENTS
The Partnerships have noncancelable operating leases for use of their
facilities and a magnetic resonance imaging scanner. These leases may require
payment of various expenses as additional rent. Certain leases contain renewal
options and escalation clauses.
Minimum future rental payments under noncancelable operating leases having
remaining terms in excess of one year as of December 31, 1995 for each of the
next five years and in the aggregate are:
December 31, Amount
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1996 $ 430,417
1997 434,719
1998 414,811
1999 367,226
2000 234,362
Thereafter 32,700
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TOTAL $1,914,235
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Minimum obligations do not include future rental payments for one center which
is allocated a portion of the rent from a related party which is contractually
obligated. Such amounts would increase the minimum obligation by $67,500 for
each respective year from 1996 to 2000 and $32,700 thereafter. Rent expense
for the year ended December 31, 1995 and 1994 under various operating leases
amounted to $361,378 and $258,833, respectively.
The Partnerships have comprehensive maintenance contracts with its equipment
vendors for the magnetic resonance imaging, computerized tomography and other
diagnostic medical equipment. The terms of these contracts are between one and
five years, but may be canceled by the Partnerships under certain
circumstances.
[8] CONCENTRATIONS OF CREDIT RISK
The Partnerships' laboratories and imaging centers grant credit without
collateral to its patients, most of whom are residents of the laboratories'
respective area and are insured under third-party payor agreements. The
Partnerships routinely assesses the financial strength of its patients and
based upon factors surrounding the credit risk of its customers establishes an
allowance for doubtful accounts and, as a consequence, believes that its
accounts receivable credit risk exposure beyond such allowances is limited.
The mix of receivables from third-party payors and patients are as follows:
December 31,
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1995
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HMO/PPO 41%
Medicare 20
Blue Cross/Blue Shield 16
Other Third-Party Payors 14
Workers Compensation 9
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TOTAL 100%
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ALLEGHENY OPEN MRI/CT GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS, SHEET #4
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[8] CONCENTRATIONS OF CREDIT RISK [CONTINUED]
The Partnerships maintain cash balance at several institutions in the
Pittsburgh area. Accounts at each institution are insured by the Federal
Deposit Insurance Corporation up to $100,000. At December 31, 1995, the
Partnerships' uninsured cash balance totaled $263,413.
[9] PENSION PLAN
The Partnerships offer a Pension Plan [the "Plan"] to full-time employees who
have completed one year of service and have reached the age of 21. The Plan
consists solely of the Partnership contributions that are a percentage of the
participant's pay based upon the level of compensation. The Partnerships'
contributions to the Plan during the years ended December 31, 1995 and 1994
was $48,377 and $28,212, respectively.
[10] INCOME TAXES
Allegheny Open MRI/CT Group is exempt from income taxes under provisions of
federal and state income tax law. Under those provisions, the partners are
liable for individual federal and state income taxes on their respective share
of the Partnerships' taxable income. Therefore, no provision for federal and
state income taxes is reflected.
[11] LITIGATION
The Partnerships are subject to lawsuits arising in the ordinary course of
business. Management after review and consultation with counsel, believes it
has meritorious defenses and considers that any potential outcome from these
matters would not materially affect the financial position, results of
operations or cash flows of the Partnerships.
[12] SUBSEQUENT EVENT
On February 6, 1996, the Partnerships entered into a letter of intent for a
proposed sale of the assets and liabilities of the Partnerships to U.S.
Diagnostic Labs Inc. for an aggregate purchase price of approximately $17
million. The letter of intent is subject to the final negotiation and
execution of a definitive acquisition agreement between the Partnerships and
U.S. Diagnostic Labs Inc.
. . . . . . . . .
