-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, HpRQIdt3O698UsHe2Om+1mLGwGUjVl7uhT18WxC22xjAB+HkOQvgM3s67L1HnJUk GscVdbvM/imUSM5N3N84zw== 0000912057-95-001321.txt : 19950615 0000912057-95-001321.hdr.sgml : 19950615 ACCESSION NUMBER: 0000912057-95-001321 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950127 FILED AS OF DATE: 19950310 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: MMI MEDICAL INC CENTRAL INDEX KEY: 0000746072 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MISCELLANEOUS REPAIR SERVICES [7600] IRS NUMBER: 953619990 STATE OF INCORPORATION: CA FISCAL YEAR END: 0430 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-13608 FILM NUMBER: 95520034 BUSINESS ADDRESS: STREET 1: 1611 POMONA RD CITY: CORONA STATE: CA ZIP: 91720 BUSINESS PHONE: 9097364570 MAIL ADDRESS: STREET 1: 1611 POMONA RD CITY: CORONA STATE: CA ZIP: 91720 10-Q 1 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 For Quarterly Period Ended Commission File No. January 27, 1995 0-13608 MMI MEDICAL, INC. (Exact name of registrant as specified in its charter) California 95-3619990 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 1611 Pomona Road, Corona, California 91720 (Address of principal executive offices) (Zip Code) (909) 736-4570 (Registrant's telephone number including area code) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. YES X NO ----- ----- Shares of Registrant's common stock, $.01 par value, outstanding at March 8, 1995 - 5,059,395 The Exhibit Index appears on page 20 MMI MEDICAL, INC. FORM 10-Q January 27, 1995 TABLE OF CONTENTS Page Part I - Financial Information Item 1. Financial Statements (Unaudited) Condensed Consolidated Balance Sheets 3 Condensed Consolidated Statements of Operations 4 Consolidated Statements of Cash Flows 7 Notes to the Condensed Consolidated Financial Statements 9 Pro Forma Financial Information 12 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 15 Part II - Other Information Item 4. Submission of Matters to a Vote of Security Holders 18 Item 6. Exhibits and Reports on Form 8-K 18 Exhibit Index 20 Exhibit 11.1 - Statement of Computation of Per Share Earnings 21 2 MMI MEDICAL, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars in thousands)
January 27, 1995 April 29,1994 ---------------- ------------- (Unaudited) ASSETS Current assets Cash and cash equivalents $ 410 $ 1,316 Receivables 7,693 3,041 Inventory 10,075 5,547 Net assets of discontinued operation 1,662 1,683 Prepaid expenses 1,025 712 -------- -------- Total current assets 20,865 12,299 Equipment 34,978 29,745 Less accumulated depreciation (27,802) (23,711) -------- -------- Equipment, net 7,176 6,034 Deferred income taxes 904 62 Other assets 4,497 2,353 -------- -------- $ 33,442 $ 20,748 -------- -------- -------- -------- LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Accounts payable $ 2,978 $ 1,159 Accrued liabilities 3,453 2,477 Deferred revenues 1,851 1,712 Current portion of long-term debt 350 -- -------- -------- Total current liabilities 8,632 5,348 Long-term debt 4,332 -- Shareholders' equity Common stock, $.01 par value 10,000,000 shares authorized 5,051,895 shares issued and outstanding at January 27, 1995 (2,951,495 at April 29, 1994) 52 30 Paid-in capital 18,024 11,172 Retained earnings 2,402 4,198 -------- -------- Total shareholders' equity 20,478 15,400 -------- -------- $ 33,442 $ 20,748 -------- -------- -------- --------
See accompanying Notes to Condensed Consolidated Financial Statements. 3 MMI MEDICAL, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (Dollars in Thousands)
Three Months Ended January 27, 1995 January 28, 1994 ---------------- ---------------- Revenues Service $ 10,592 $ 6,903 Sale of equipment -- 866 -------- -------- Total revenues 10,592 7,769 Costs and expenses Cost of service 8,118 4,717 Cost of equipment sales -- 650 Depreciation 578 451 Selling and administrative 1,607 1,163 Interest expense (income) 115 (8) -------- -------- Total costs and expenses 10,418 6,973 Income from continuing operations before taxes 174 796 Provision for income taxes 69 319 -------- -------- Income from continuing operations 105 477 Income (loss) from discontinued operations, net of income tax expense (benefit) of $10 and $(38) in fiscal 1995 and 1994, respectively. 16 (56) -------- -------- Net income $ 121 $ 421 -------- -------- -------- -------- Earnings per share: Income from continuing operations $ 0.02 $ 0.16 Loss from discontinued operations -- (0.02) -------- -------- Net income $ 0.02 $ 0.14 -------- -------- -------- --------
See accompanying Notes to Condensed Consolidated Financial Statements. 4 MMI MEDICAL, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (Dollars in Thousands)
Nine Months Ended January 27, 1995 January 28, 1994 ----------------- ---------------- Revenues Service $ 27,390 $ 21,619 Sale of equipment 1,171 1,544 -------- -------- Total revenues 28,561 23,163 Costs and expenses Cost of service 22,268 15,466 Cost of equipment sales 989 976 Depreciation 1,646 1,331 Selling and administrative 4,859 3,620 Interest expense (income) 116 (24) -------- -------- Total costs and expenses 29,878 21,369 Income (loss) from continuing operations before taxes and cumulative effect of accounting change (1,317) 1,794 Provision (benefit) for income taxes (527) 718 -------- -------- Income (loss) from continuing operations before cumulative effect of accounting change (790) 1,076 Loss from discontinued operations, net of income tax (benefit) of $(103) and $(28) in fiscal 1995 and 1994, respectively. (237) (42) -------- -------- Income (loss) before cumulative effect of accounting change (1,027) 1,034 Cumulative effect of change in accounting for income taxes -- 505 -------- -------- Net income (loss) $ (1,027) $ 1,539 -------- -------- -------- -------- (continued on next page) 5 Earnings per share: Income (loss) from continuing operations before cumulative effect of accounting change $ (0.18) $ 0.35 Loss from discontinued operations (0.06) (0.01) ------ ------ Income (loss) before cumulative effect of accounting change (0.24) 0.34 Cumulative effect of accounting change for income taxes -- 0.17 ------ ------ Net income (loss) $ (0.24) $ 0.51 ------ ------ ------ ------
See accompanying Notes to Condensed Consolidated Financial Statements. 6 MMI MEDICAL, INC. CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited) (Dollars in thousands)
Nine Months Ended January 27, January 28 1995 1994 ------------- ------------- Cash flows from operating activities Continuing Operations: Income (loss) before cumulative effect of accounting change $ (790) $ 1,076 Adjustments to reconcile income (loss) to net cash flows from operations: Depreciation and amortization 1,646 1,331 Deferred income taxes (8) 9 Changes in assets and liabilities: Receivables (2,918) 69 Inventory 425 (611) Prepaid expenses (211) (418) Accounts payable 681 12 Accrued liabilities (1,395) (696) Deferred revenues 30 156 -------- -------- Net cash provided (used) by continuing operations (2,540) 928 Discontinued Operations: Net loss (237) (42) Adjustments to reconcile net income to net cash used in operation activities: Depreciation and amortization 83 54 Net change in net assets of discontinued operations (8) (309) -------- -------- Net cash used by discontinued operations (162) (297) -------- -------- Net cash provided (used) by operating activities (2,702) 631 Cash flows from investing activities Acquisition of business operations (296) -- Net book value of equipment sold 223 268 Purchase of equipment (254) (705) -------- -------- Net cash used in investing activities (327) (437) (continued on next page) 7 Cash flows from financing activities Borrowings from line of credit 4,005 -- Principal payments of long-term debt (1,333) -- Exercise of stock options 218 128 Payment of dividends (767) (353) -------- -------- Net cash provided by (used in) financing activities 2,123 (225) -------- -------- Decrease in cash (906) (31) Cash at beginning of period 1,316 1,064 -------- -------- Cash at end of period $ 410 $ 1,033 -------- -------- -------- --------
See accompanying Notes to Condensed Consolidated Financial Statements. 8 MMI MEDICAL, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS JANUARY 27, 1995 (Unaudited) 1. General The condensed consolidated financial statements included herein have been prepared by the Company without audit, include all adjustments which are, in the opinion of management, necessary for a fair presentation of the results of operations for the three and nine months ended January 27, 1995 and January 28, 1994, pursuant to the rules and regulations of the Securities and Exchange Commission, and include the accounts of the Company and its consolidated subsidiaries. All significant intercompany accounts and transactions have been eliminated. Any and all adjustments made are of a normal and recurring nature in accordance with Rule 10-01(b)(8). Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures in such financial statements are adequate to make the information presented not misleading. These condensed financial statements should be read in conjunction with Company's annual report on Form 10-K dated July 29, 1994, filed with the Securities and Exchange Commission. The results of operations for the three and nine months ended January 27, 1995 and January 28, 1994, are not necessarily indicative of the results for the full year. 2. Acquisition of MEDIQ Equipment and Maintenance Services, Inc. On August 3, 1994, the Company acquired (the "Acquisition") MEDIQ Equipment and Maintenance Services, Inc. ("MEMS"), a wholly owned subsidiary of MEDIQ Incorporated, as a result of the merger of MMI Acquisition Subsidiary, Inc., a wholly owned subsidiary of the Company incorporated to effect the Acquisition, with and into MEMS which became a wholly owned subsidiary of the Company. The transaction provided for the conversion of all shares of MEMS common stock into the right to receive 2,030,000 shares of MMI Medical, Inc. common stock and a warrant to purchase 325,000 shares thereof at an exercise price of $6.25 per share. An additional 20,000 shares of MMI Medical, Inc. common stock was issued to MEDIQ in connection with a noncompetition agreement which became effective as of the closing of the reorganization and merger. The transaction was accounted for as a purchase and is reflected in the consolidated financial statements of the Company. The estimated aggregate purchase price was $7,689,000. 9 MMI MEDICAL, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS JANUARY 27, 1995 (Unaudited) 3. Income Taxes The provisions for taxes for the three and nine months ended January 27, 1995 and January 28, 1994, are based on the estimated annual tax rates for fiscal 1995 and 1994, respectively, and include the benefit of various tax credits. The components of the provisions for taxes based on income for the three and nine months ended January 27, 1995 and January 28, 1994 are as follows (in thousands):
Three Months Ended Nine Months Ended ------------------ ----------------- January 27, January 28, January 27, January 28, 1995 1994 1995 1994 Current: Federal $ (11) $ 187 $ (196) $ 460 State. (10) 78 (197) 194 Deferred: Federal 70 16 (240) 36 State 20 0 106 0 ------ ------ ------ ------ $ 69 $ 281 $ (527) $ 690 ------ ------ ------ ------ ------ ------ ------ ------
4. Net Income Per Share Net income per share is based on the weighted average number of common and common share equivalents during each period, as follows:
Three Months Nine Months Ended Ended January 27, 1995 5,057,727 4,339,802 January 28, 1994 3,046,875 3,055,334
5. Bank Line of Credit The Company has a $5,000,000 line of credit with a bank, $4,005,000 of which was utilized at the end of the third quarter of fiscal 1995. The Company did not meet certain financial covenants required by such agreement at the end of the third quarter, however, the bank waived the Company's non-compliance with such covenants through the end of the third quarter of the current fiscal year. 10 MMI MEDICAL, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS JANUARY 27, 1995 (Unaudited) 6. Discontinued Operations On October 24, 1994 the Company's Board of Directors adopted a formal plan to dispose of the Company's Advanced Imaging Technologies, Inc. subsidiary ("AIT"). AIT distributes X-ray film and other radiological supplies and equipment, accessory systems used with CT scanners and other diagnostic imaging and general X-ray instruments, and provides maintenance services for general X-ray instruments in Kansas and portions of Missouri and Oklahoma. The Company is actively seeking a buyer and expects the sale to be completed prior to the end of the current fiscal year. The accompanying financial statements have been prepared as if the Company will sell the assets and liabilities of AIT. The financial statements present the Company as separate from AIT for all periods presented and have been prepared to reflect AIT as a discontinued operation. The Company anticipates the sale of AIT at or above the recorded net asset values shown below. The following summarizes the net assets of AIT (in thousands of dollars) which have been reflected as current assets in the accompanying Balance Sheets:
January 27, 1995 April 29, 1994 ---------------- ---------------- Current assets $ 1,967 $ 2,198 Current liabilities (435) (682) Equipment (net) 130 167 ------ ------ Total net assets $ 1,662 $ 1,683 ------ ------ ------ ------
7. Supplemental Cash Flow Disclosure Interest of $144,000 and $185,000 was paid in the three and nine month periods ended January 27, 1995 respectively. No interest was paid in the three and nine month periods ended January 28, 1994. No income taxes were paid during in the three and nine month periods ended January 27, 1995. Income taxes of $134,500 and $314,200 were paid in the three and nine month periods ended January 28, 1994 respectively. 11 Pro Forma Financial Information The following Pro Forma Consolidated Statements of Operations for the nine months ended January 27, 1995 and January 28, 1994 give effect to the acquisition (the "Acquisition") of MEDIQ Equipment and Maintenance Services, Inc. ("MEMS") by the Company, as if such transaction had occurred as of April 29, 1994 and April 30, 1993 respectively. The Acquisition has been accounted for pursuant to the purchase method of accounting. The Pro Forma Consolidated Statements of Operations for the nine months ended January 27, 1995 and January 28, 1994 are unaudited, but in the opinion of the Company include all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the results of operations for the periods presented. The adjustments shown in the Pro Forma consolidated Statement of Operations are based upon an estimated purchase price of $7,689,000 which is subject to future revision pursuant to the terms of the acquisition agreement. The historical data of the Company included in the Pro Forma Consolidated Statements of Operations is as of the periods presented. The historical data of MEMS included in Pro Forma Consolidated Statements of Operations for the nine months ended January 27, 1995 are for the three months ended August 2, 1994 (thereafter, the operations and accounts of MEMS were integrated with those of the Company). The historical data of MEMS included in Pro Forma Consolidated Statements of Operations for the nine months ended January 28, 1994 are for the nine months ended January 31, 1994. The Pro Forma Consolidated Statements of Operations present the Company as separate from AIT for all periods presented and have been prepared to reflect AIT as a discontinued operation (see Note 6 to Notes to Condensed Consolidated Financial Statements). The Pro Forma Consolidated Statements of Operations for the nine months ended January 27, 1995 and January 28, 1994 are not necessarily indicative of the results of operations that actually would have taken place had the Acquisition been consummated as of the date indicated, or that may be achieved in the future, and should be read in conjunction with the notes in such statements. 12 MMI MEDICAL, INC. PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (Dollars in Thousands)
Nine Months Ended January 27, 1995 Pro Forma Consolidated MMI MEMS (1) Adjustments (2) Total ----- ----- --------------- ---------- Revenues $ 28,561 $ 4,576 $ -- $ 33,137 Costs and expenses Costs of operations 23,257 4,018 (582) (2) 26,693 Depreciation and amortization 1,646 360 (60) (3) 1,946 Selling and administrative 4,859 500 (166) (4) 5,193 Interest expense (income), net 116 54 -- 170 ------ ------ ------ ------ Total costs and expenses 29,878 4,932 (808) 34,002 ------ ------ ------ ------ Loss before taxes (1,317) (356) 808 (865) Benefit for income taxes (527) (127) 308 (5) (346) ------ ------ ------ ------ Loss from continuing operations $ (790)$ (229) $ 500 $ (519) ------ ------ ------ ------ ------ ------ ------ ------ Net loss per share $ (0.18) N/A $ (0.10) Notes: (1) Historical data of MEMS for the three months ended August 2, 1994. (2) All adjustments have been prorated for the nine month period. (3) Reflects the elimination of certain duplicate positions, resulting in a reduction in cost of operations of approximately $482,000 in salaries and benefits for the period. Amortization of the spare parts inventory over a seven year period, consistent with that of MMI, is expected to result in reduced amortization expenses of $402,000 annually. (4) As a result of purchase accounting adjustments, depreciation and amortization expense will change. Depreciating the new basis over a five year period will result in a reduction to such expense of $385,000 annually. Amortization of the additional goodwill and covenant not to compete will result in increased amortization expense of $145,000 annually. (5) Reflects the elimination of certain duplicate positions, resulting in a reduction in selling and administrative expense of approximately $166,000 in salaries and benefits for the period. (6) Consolidated provision for income taxes is calculated at 40%.
13 MMI MEDICAL, INC. PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (Dollars in Thousands)
Nine Months Ended January 28, 1994 Pro Forma Consolidated MMI MEMS Adjustments (1) Total ----- ----- --------------- ---------- Revenues $ 23,163 $ 13,595 $ -- $ 36,758 Costs and expenses Costs of operations 16,442 11,152 (1,521) (2) 26,073 Depreciation and amortization 1,331 1,069 (180) (3) 2,220 Selling and administrative 3,620 1,807 (360) (4) 5,067 Interest expense (income), net (24) 188 -- 164 ------ ------ ------ ------ Total costs and expenses 21,369 14,216 (2,061) 33,524 ------ ------ ------ ------ Loss before taxes 1,794 (621) 2,061 3,234 Income tax expense 718 (211) 786 (5) 1,293 ------ ------ ------ ------ Income/loss from continuing operations $ 1,076 (410) $ 1,275 $ 1,941 ------ ------ ------ ------ ------ ------ ------ ------ Net loss per share $ 0.35 N/A $ 0.38 Notes: (1) All adjustments have been prorated for the nine month period. (2) Reflects the elimination of certain duplicate positions, resulting in a reduction in cost of operations of approximately $1,220,000 in salaries and benefits for the period. Amortization of the spare parts inventory over a seven year period, consistent with that of MMI, is expected to result in reduced amortization expenses of $402,000 annually. (3) As a result of purchase accounting adjustments, depreciation and amortization expense will change. Depreciating the new basis over a five year period will result in a reduction to such expense of $385,000 annually. Amortization of the additional goodwill and covenant not to compete will result in increased amortization expense of $145,000 annually. (4) Reflects the elimination of certain duplicate positions, resulting in a reduction in selling and administrative expense of approximately $360,000 in salaries and benefits for the period. (5) Consolidated provision for income taxes is calculated at 40%.
14 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS General On August 3, 1994, the Company acquired (the "Acquisition") MEDIQ Equipment and Maintenance Services, Inc. ("MEMS") and, as a result, MEMS became a wholly owned subsidiary of the Company. The Acquisition was accounted for as a purchase and the financial statements contained herein reflect the operating results of MEMS from the date of the closing of the Acquisition. The operations of MEMS were integrated with those of the Company's R Squared Scan Systems, Inc. subsidiary ("R Squared") during the second quarter and the combined service organization was named InnoServ Technologies, Inc. ("InnoServ"). On October 24, 1994 the Company's Board of Directors adopted a formal plan to dispose of the Company's Advanced Imaging Technologies, Inc. subsidiary ("AIT"). The financial statements contained herein (I) have been prepared as if the Company will sell the assets and liabilities of AIT, (ii) present the Company as separate from AIT for all periods presented and (iii) have been prepared so as to reflect AIT as a discontinued operation. The following discussion relates solely to the results from continuing operations. Results of Operations Third Quarter Fiscal 1995 Compared to Third Quarter Fiscal 1994 Consolidated revenues increased approximately $2,800,000 to $10,592,000 from $7,769,000 primarily as a result of the Acquisition offset by a decreased revenues at the Company's diagnostic imaging operation. Revenues at the Company's InnoServ subsidiary increased approximately $3,100,000 primarily as a result of the Acquisition. InnoServ added additional multi-vendor asset management service and Magnetic Resonance Imaging ("MRI") maintenance agreements during the third quarter of the current fiscal year but continued to experience a net decline in the number of Computed Tomography ("CT") maintenance agreements in effect primarily as a result of older equipment being upgraded (with attendant warranty service coverage) or removed from service. The Company expects this trend of upgrades and removals of older CT equipment to continue for the foreseeable future. The sales of parts, labor and x-ray tubes was up slightly in the current quarter over the same period in FY 1994 primarily as a result of the Acquisition but this increase was moderated as a result of the continuing decline in CT maintenance agreements in effect. InnoServ had no equipment sales in the third quarter compared with $866,000 of such sales in the third quarter of fiscal 1994. The timing of the sale of equipment is often dependent upon the ability of the buyer to accept delivery of the equipment. While InnoServ entered into agreements for the sale of equipment during the current third quarter, the inability of buyers to accept delivery and installation of such equipment resulted in no recordable revenues. The Company anticipates that sales of equipment at InnoServ in the fourth quarter of fiscal 1995 will include both anticipated sales for such quarter as well as those commitments received in the third quarter. 15 Revenues at the Company's diagnostic imaging operation decreased approximately $350,000 over the same period in the prior year as a result of a decrease in the number of units in the fleet and lower utilization of equipment. Income from continuing operations before taxes fell $622,000 from $796,000 in the third quarter of fiscal 1994 to $174,000 in the third quarter of fiscal 1995 primarily resulting from a decline in the profitability at the diagnostic imaging operation. While InnoServ returned to profitability during the third quarter, it experienced lower operating margins as a result of lower pricing for CT maintenance agreements and the lack of operating profits from equipment sales Net interest expense increased $123,000 in the third quarter of fiscal 1995 from income of $8,000 in the prior year to an expense of $115,000 in the current year as a result of borrowings from the Company's line of credit and long-term debt assumed in the Acquisition. The effective tax rate remained at 40% and the provision for income taxes decreased $250,000 from an expense of $319,000 in the third quarter of fiscal 1994 to $69,000 in fiscal 1995 as a result of lower operating profits. Nine Months Fiscal 1995 Compared to Nine Months Fiscal 1994 Consolidated revenues increased approximately $5,400,000 to $28,561,000 from $23,163,000 primarily as a result of additional CT, MRI and multi-vendor asset management maintenance service revenues associated with the Acquisition. While InnoServ experienced an overall increase in revenues of approximately $6,300,000 as a result of the Acquisition, during the first nine months of fiscal 1995, losses in the number of CT maintenance agreements continued to exceed additions as a result of older equipment currently covered under maintenance agreements being upgraded or removed from service. The Company expects this trend of upgrades and removals of older CT equipment to continue for the foreseeable future. Concurrent with the continuing net loss of CT maintenance agreements was an increase in revenues resulting from the addition of new MRI maintenance agreements and multi-vendor asset management service agreements. Revenues from the sale of equipment at InnoServ for the first nine months of fiscal 1995 declined as a result of no such sales being recorded in the current third quarter. Revenues at the Company's diagnostic imaging operation decreased approximately $860,000 over the same period in the prior year, as a result of decreased utilization of both CT and Cardiac Catheterization laboratories and fewer units in the CT fleet. Income from continuing operations before taxes fell approximately $3,100,000 from income of $1,794,000 in the first nine months of fiscal 1994 to a loss of $1,317,000 during the first nine months of fiscal 1995 primarily resulting from operating losses at InnoServ and the Company's diagnostic imaging operation. InnoServ experienced an operating loss in the first two quarters of the current fiscal year as a result of expenses associated with the Acquisition and integration of the R Squared and MEMS operations. Included in such costs was a charge of approximately $360,000 in the first quarter of the current fiscal year for severance expenses associated with the elimination of certain of the Company's personnel in duplicate administrative, operational and sales functions in conjunction with the Acquisition and the resignation of the Company's Chief Financial Officer. The integration of R Squared and MEMS to form InnoServ was substantially completed during the second quarter of the current fiscal year and InnoServ returned to profitability during the current third quarter. 16 Operating income at the diagnostic imaging operation decreased by approximately $1,300,000 over the same nine month period in the prior year primarily resulting from the reduction in revenues as well as increased maintenance costs on a per-unit basis. Net interest expense increased $140,000 to an expense of $116,000 in the first nine months of fiscal 1995 from income of $24,000 in the first nine months of prior year as a result of borrowings from the Company's line of credit and long- term debt assumed in the Acquisition. The effective tax rate remained at 40% and the provision for income taxes decreased $1,245,000 from an expense of $718,000 in the first nine months of fiscal 1994 to a benefit of $527,000 in the first nine months of fiscal 1995 as a result of the loss incurred. Liquidity and Capital Resources At January 27, 1995 the Company had net working capital of $12,233,000, an increase of $5,282,000 from April 29, 1994 primarily as a result of the Acquisition and borrowings under the Company's line of credit. The Company has a $5,000,000 line of credit with a bank, $4,005,000 of which was utilized at the end of the third quarter of fiscal 1995. The Company did not meet certain financial covenants required by such agreement at the end of the third quarter. The bank waived the Company's non-compliance with such covenants. Borrowings from the Company's line of credit were used during the second quarter of the current fiscal year to extinguish certain long term debt incurred in the Acquisition and fund operating losses in that quarter. During the third quarter, the Company utilized borrowings from its line of credit primarily to finance an increase in accounts receivable resulting from delays in invoicing associated with certain computer conversion problems relating to the Acquisition. Such problems were substantially corrected by the end of the third quarter and the Company expects to experience increased cash collections commencing in the fourth quarter. As a result of the foregoing, the Company's Board of Directors is expected to review the Company's current dividend policy. The Company believes that internally generated funds and its existing credit facility will provide sufficient capital resources to finance operations, fund planned capital expenditures, make interest payments on outstanding borrowings and fund dividends as declared. 17 PART II - OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders. None Item 6. Exhibits and Report on Form 8-K. None. 18 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant had duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. DATED: March 10, 1995 MMI MEDICAL, INC. (Registrant) By: /s/ Alan D. Margulis -------------------------- Alan D. Margulis President and Chief Executive Officer By: /s/ James P. Butler -------------------------- James P. Butler Vice President, Finance and Chief Financial Officer 19 EXHIBIT INDEX
Exhibit PAGE 11.1 Computation of Per Share Earnings 21
20 Exhibit 11.1 - Computation of Per Share Earnings (1)
Three Months Ended Nine Months Ended ----------------------- ----------------------- January 27, January 28, January 27, January 28, 1995 (2) 1994 (3) 1995 (2) 1994 (3) ---------- ---------- ---------- ---------- Primary Average Shares Outstanding 5,058 2,951 4,340 2,941 Net effect of dilutive stock options, based upon the treasury stock method using average market price -- 95 -- 114 ------ ------ ------ ------ Total 5,058 3,046 4,340 3,055 ------ ------ ------ ------ ------ ------ ------ ------ Net income (loss) $ 121 $ 421 $ (1,027) $ 1,539 ------ ------ ------ ------ ------ ------ ------ ------ Per share amount $ 0.02 $ 0.14 $ (0.24) $ 0.51 ------ ------ ------ ------ ------ ------ ------ ------ Fully Diluted Average Shares Outstanding 5,058 2,951 4,340 2,941 Net effect of dilutive stock options, based upon the treasury stock method using average market price -- 95 -- 114 ------ ------ ------ ------ Total 5,058 3,046 4,340 3,055 ------ ------ ------ ------ ------ ------ ------ ------ Net income (loss) $ 121 $ 421 $ (1,027) $ 1,539 ------ ------ ------ ------ ------ ------ ------ ------ Per share amount $ 0.02 $ 0.14 $ (0.24) $ 0.51 ------ ------ ------ ------ ------ ------ ------ ------ Notes: (1) Amounts in thousands, except per share data (2) Amounts shown include 2,050,000 shares issued in connection the acquisition of MEDIQ Equipment & Maintenance Services, Inc. on August 3, 1994. (3) All average shares outstanding and stock option amounts for the three and nine months ended January 28, 1994 have been restated to reflect a 10% stock dividend declared March 4, 1993 and distributed April 5, 1993.
21 EX-27 2 EXHIBIT 27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONDENSED CONSOLIDATED BALANCE SHEETS AND CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE PERIOD ENDING JANUARY 27, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000746072 MNI MEDICAL, INC. 1,000 9-MOS APR-30-1995 APR-30-1994 JAN-27-1995 410 0 11,691 (1,651) 10,075 20,865 34,978 (27,802) 33,442 8,632 0 52 0 0 20,426 33,442 4,615 28,561 2,537 24,497 0 309 116 (1,317) (527) (790) (237) 0 0 (1,027) (0.24) (0.24)
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